-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, RjM/IM498LZe4ZTiufiCbrbaD5tyhMqRI2TS9OzI4tM98kUDk1tR+bBO+ZkTqVPx 9K0VqvMHeEkhh+GEQO7W1g== 0000930661-01-501316.txt : 20010730 0000930661-01-501316.hdr.sgml : 20010730 ACCESSION NUMBER: 0000930661-01-501316 CONFORMED SUBMISSION TYPE: S-8 PUBLIC DOCUMENT COUNT: 7 FILED AS OF DATE: 20010727 EFFECTIVENESS DATE: 20010727 FILER: COMPANY DATA: COMPANY CONFORMED NAME: DIGITAL GENERATION SYSTEMS INC CENTRAL INDEX KEY: 0000934448 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-ADVERTISING AGENCIES [7311] IRS NUMBER: 943140772 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-8 SEC ACT: SEC FILE NUMBER: 333-65978 FILM NUMBER: 1690154 BUSINESS ADDRESS: STREET 1: 5221 NORTH OCONNOR BLVD CITY: IRVING STATE: TX ZIP: 75039 BUSINESS PHONE: 4155466600 MAIL ADDRESS: STREET 1: 5221 NORTH OCONNOR BLVD CITY: IRVING STATE: TX ZIP: 75039 S-8 1 ds8.txt FORM S-8 As filed with the Securities and Exchange Commission on July 26, 2001 Registration No. 333-_______ UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form S-8 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 DIGITAL GENERATION SYSTEMS, INC. (Exact name of registrant as specified in its charter) Delaware 94-3140772 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 5221 North O'Connor Boulevard, Suite 950, Irving, Texas 75039 (Address of registrant's principal executive offices) DIGITAL GENERATION SYSTEMS, INC. 1992 STOCK OPTION PLAN DIGITAL GENERATION SYSTEMS, INC. 1995 DIRECTOR OPTION PLAN STARGUIDE DIGITAL NETWORKS, INC. 1996 STOCK OPTION PLAN STARGUIDE DIGITAL NETWORKS, INC. 1999 EQUITY INCENTIVE PLAN (Full title of plan) Omar A. Choucair Copy to: David R. Earhart, Esq. Chief Financial Officer Gardere Wynne Sewell LLP Digital Generation Systems, Inc. 1601 Elm Street 5221 North O'Connor Blvd., Suite 950 Suite 3000 Irving, Texas 75039 Dallas, Texas 75201 (972) 402-4800 (214) 999-4645 (Name and address, including zip code, and telephone number, including area code, of registrant's agent for service) CALCULATION OF REGISTRATION FEE
======================================================================================================================== Proposed maximum Title of each class Proposed maximum aggregate of securities to be Amount to be offering price per offering Amount of registered registered (1) share (2) price registration fee - ------------------------------------------------------------------------------------------------------------------------ Common Stock, $0.001 par value: 1992 Stock Option Plan: - --shares subject to outstanding 3,899,096 $ 4.30 $ 16,766,112.80 $ 4,191.53 options - --shares available for future 8,200,106 $ 3.84 $ 31,488,407.04 $ 7,872.02 grant 1995 Director Option Plan: - --shares subject to outstanding 125,000 $ 3.68 $ 460,000.00 $ 115.00 options - --shares available for future 575,000 $ 3.84 $ 2,208,000.00 $ 552.00 grant 1996 Stock Option Plan: - --shares subject to outstanding 2,663,770 $ 1.46 $ 3,889,104.20 $ 972.28 options 1999 Equity Incentive Plan: - --shares subject to outstanding 2,134,436 $ 2.34 $ 4,994,580.24 $ 1,248.65 options - ------------------------------------------------------------------------------------------------------------------------ TOTAL: 17,597,408 $ 59,806,204.28 $ 14,951.48 ========================================================================================================================
(1) Pursuant to Rule 416(c) under the Securities Act of 1933, shares issuable upon any stock split, stock dividend or similar transaction with respect to these shares are also being registered hereunder. (2) Estimated solely for the purpose of calculating the registration fee, which has been computed in accordance with Rule 457(h) [based on the prices at which outstanding options may be exercised (as to 8,822,302 shares) and the average of the high and low prices for the Common Stock on July 23, 2001, as reported on the Nasdaq National Market System (as to 8,775,106 shares for which the exercise price is not known)]. Shares of Common Stock of the registrant for issuance upon exercise of employee and director stock options have been heretofore registered under the registrant's registration statements on Form S-8, File Nos. 333-4676, 333-25701 and 333-60611. These shares of Common Stock and the options are described in the Section 10(a) prospectus for this registration statement in accordance with Rule 429 of the General Rules and Regulations under the Securities Act of 1933, as amended. By Registration Statement on Form S-8 filed with the Securities and Exchange Commission on May 3, 1996, Registration File No. 333-4676 (the "Initial Registration Statement"), Digital Generation Systems, Inc., a Delaware corporation (the "Registrant"), registered 1,650,798 shares of common stock, $0.001 par value per share (the "Common Stock"), under the Digital Generation Systems, Inc. 1992 Stock Option Plan (the "1992 Plan"), 500,000 shares of Common Stock under the Digital Generation Systems, Inc. 1995 Employee Stock Purchase Plan (the "1995 Purchase Plan") and 75,000 shares of Common Stock under the Digital Generation Systems, Inc. 1995 Director Option Plan (the "1995 Director Plan"). By Registration Statement on Form S-8 filed with the Securities and Exchange Commission on April 23, 1997, Registration File No. 333-25701. Registrant registered an additional 700,000 shares of Common Stock under the 1992 Plan and 25,000 shares of Common Stock under the 1995 Director Plan. By Registration Statement on Form S-8 filed with the Securities and Exchange Commission on August 4, 1998, Registration File No. 333-60611, Registrant registered an additional 500,000 shares of Common Stock under the 1992 Plan. By Post-Effective Amendment to the Initial Registration Statement, Registrant corrected the name of the 1995 Purchase Plan and reduced the number of shares registered under the 1995 Purchase Plan to 200,000 shares of Common Stock. By this Registration Statement, the Registrant is registering an additional 12,099,202 shares of Common Stock under the 1992 Plan, an additional 700,000 shares of Common Stock under the 1995 Director Plan, 2,663,770 shares of Common Stock under the StarGuide Digital Networks, Inc. 1996 Stock Option Plan (the "1996 StarGuide Plan") and 2,134,436 shares of Common Stock under the StarGuide Digital Networks, Inc. 1999 Equity Incentive Plan (the "1999 StarGuide Plan"). StarGuide Digital Networks, Inc., a Nevada corporation ("StarGuide"), is a wholly owned subsidiary of Registrant. The Registrant assumed the options under the 1996 StarGuide Plan and the 1999 StarGuide Plan in connection with the merger of SG Nevada Merger Sub Inc., a Nevada corporation and wholly owned subsidiary of Registrant, with and into StarGuide on January 17, 2001. PART II Item 3. Incorporation of Documents by Reference The Registrant is allowed to "incorporate by reference" the information that is filed with the Securities and Exchange Commission, which means that the Registrant can disclose important information by referring to those documents. The information incorporated by reference is considered to be part of this registration statement, and later information filed with the Securities and Exchange Commission will update and supersede information filed earlier. The documents listed below, and any future filings made by the Registrant with the Securities and Exchange Commission under Sections 13(a), 13(c), 14, or 15(d) of the Securities Exchange Act of 1934, as amended, are incorporated by reference: (a) Quarterly Report on Form 10-Q for the three months ended March 31, 2001, as filed on May 15, 2001. (b) Amended Annual Report on Form 10-K/A for the fiscal year ended December 31, 2000, as filed on April 30, 2001. (c) Annual Report on Form 10-K for the fiscal year ended December 31, 2000, as filed on March 30, 2001. (d) Current Report on Form 8-K/A, as filed on March 30, 2001. (e) Current Report on Form 8-K, as filed on January 18, 2001. (f) Amended Registration Statement on Form S-4/A, as filed on October 16, 2000. Item 6. Indemnification of Directors and Officers The Registrant's Certificate of Incorporation provides that no director of the Registrant will be personally liable to the Registrant or any of its stockholders for monetary damages arising from the director's breach of fiduciary duty as a director, with certain limited exceptions. Part II - Page 1 Pursuant to the provisions of Section 145 of the Delaware General Corporation Law ("DGCL"), every Delaware corporation has the power to indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding (other than an action by or in the right of the corporation) by reason of the fact that such person is or was a director, officer, employee or agent of the corporation or is or was serving in such a capacity at the request of the corporation for another corporation, partnership, joint venture, trust or other enterprise, against any and all expenses, judgments, fines and amounts paid in settlement and reasonably incurred in connection with such action, suit or proceeding. The power to indemnify applies only if such person acted in good faith and in a manner such person reasonably believed to be in the best interests, or not opposed to the best interests, of the corporation and, with respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful. The power to indemnify applies to actions brought by or in the right of the corporation as well, but only to the extent of defense and settlement expenses and not to any satisfaction of a judgment or settlement of the claim itself, and with the further limitation that in such actions no indemnification shall be made in the event of any adjudication of negligence or misconduct unless the court, in its discretion, believes that in light of all the circumstances indemnification should apply. The Registrant's Certificate of Incorporation contains provisions authorizing it to indemnify its officers and directors to the fullest extent permitted by the DGCL. Item 8. Exhibits In addition to the exhibits filed or incorporated by reference into the Initial Registration Statement or subsequent registration statements, the following documents are filed as Exhibits to this Registration Statement: 4.1 Digital Generation Systems, Inc. 1992 Stock Option Plan, as amended and restated as of November 21, 2000 4.2 Digital Generation Systems, Inc. 1995 Director Option Plan, as amended and restated as of June 14, 2001 4.3 StarGuide Digital Networks, Inc. 1996 Stock Option Plan 4.4 StarGuide Digital Networks, Inc. 1999 Equity Incentive Plan 5.1 Opinion of Gardere Wynne Sewell LLP 23.1 Consent of Independent Public Accountants 23.2 Consent of Gardere Wynne Sewell LLP (included in Exhibit 5.1) 24.1 Power of Attorney (set forth on the signature page of this Registration Statement) Item 9. Undertakings Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions or otherwise, the registrant has been advised that in the opinion of the Commission such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses Part II - Page 2 incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question of whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue. The undersigned registrant hereby undertakes: (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement: (i) To include any prospectus required by Section 10(a)(3) of the Act; (ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20 percent change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement; and (iii) To include any material information with respect to the Plan of Distribution not previously disclosed in the registration statement or any material change to such information in the registration statement; (2) That, for the purpose of determining any liability under the Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. The undersigned registrant hereby undertakes that, for purposes of determining any liability under the Securities Act of 1933, each filing of the registrant's annual report pursuant to Section 13(a) or Section 15(d) of the Exchange Act of 1934 (and, where applicable, each filing of an employee benefit plan's annual report pursuant to Section 15(d) of the Exchange Act of 1934) that is incorporated by reference in this registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. Part II - Page 3 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-8 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Irving, and the State of Texas, on July 25, 2001. DIGITAL GENERATION SYSTEMS, INC. By: /s/ Matthew E. Devine ----------------------------------------- Matthew E. Devine Chief Executive Officer POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Scott K. Ginsburg and Matthew E. Devine, and each of them, his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him in his name, place and stead, in any and all capacities, to sign any or all amendments to this registration statement and additional registration statements relating to the same offering, and to file the same, with all exhibits thereto, and all other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in- fact and agents, or any of them, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue thereof. Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated.
Name Title Date ---- ----- ---- /s/ Scott K. Ginsburg - ------------------------------- Chairman of the Board of July 25, 2001 Scott K. Ginsburg Directors /s/ Matthew E. Devine - ------------------------------- Director and July 25, 2001 Matthew E. Devine Chief Executive Officer (Principal Executive Officer) /s/ Omar A. Choucair - ------------------------------- Director and July 25, 2001 Omar A. Choucair Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) /s/ Lawrence D. Lenihan, Jr. - ------------------------------- Director July 25, 2001 Lawrence D. Lenihan, Jr.
Signature Page /s/ David M. Kantor July 25, 2001 - ------------------------------- Director David M. Kantor /s/ Cappy R. McGarr - ------------------------------- Director July 25, 2001 Cappy R. McGarrr /s/ Robert J. Schlegel - ------------------------------- Director July 25, 2001 Robert J. Schlegel /s/ Kevin C. Howe - ------------------------------- Director July 25, 2001 Kevin C. Howe /s/ Jeffrey A. Dankworth - ------------------------------- Director July 25, 2001 Jeffrey A. Dankworth /s/ Eric L. Bernthal - ------------------------------- Director July 25, 2001 Eric L. Bernthal
Signature Page INDEX TO EXHIBITS EXHIBIT DESCRIPTION ------- ----------- 4.1 Digital Generation Systems, Inc. 1992 Stock Option Plan, as amended and restated as of November 21, 2000 4.2 Digital Generation Systems, Inc. 1995 Director Option Plan, as amended and restated as of June 14, 2001 4.3 StarGuide Digital Networks, Inc. 1996 Stock Option Plan 4.4 StarGuide Digital Networks, Inc. 1999 Equity Incentive Plan 5.1 Opinion of Gardere Wynne Sewell LLP 23.1 Consent of KPMG LLP 23.2 Consent of Gardere Wynne Sewell LLP (included in Exhibit 5.1) 24.1 Power of Attorney (included on signature page) EX-4.1 2 dex41.txt 1992 STOCK OPTION PLAN EXHIBIT 4.1 DIGITAL GENERATION SYSTEMS, INC. 1992 STOCK OPTION PLAN (AS AMENDED NOVEMBER 21, 2000) 1. PURPOSES OF THE PLAN. The purposes of this Stock Option Plan are to -------------------- attract and retain the best available personnel for positions of substantial responsibility, to provide additional incentive to the Employees and Consultants of the Company and to promote the success of the Company's business. Options granted hereunder may either be Incentive Stock Options or Nonstatutory Stock Options, at the discretion of the Board and as reflected in the terms of the written option agreement. 2. DEFINITIONS. As used herein, the following definitions shall apply: ----------- (a) "Board" shall mean the Committee, if one has been appointed, or ----- the Board of Directors of the Company, if no Committee is appointed. (b) "Code" means the Internal Revenue Code of 1986, as amended. ---- (c) "Committee" shall mean the Committee appointed by the Board of --------- Directors in appointed. (d) "Common Stock" shall mean the Common Stock of the Company. ------------ (e) "Company" shall mean Digital Generation Systems, Inc., a ------- California corporation. (f) "Consultant" shall mean (i) any person who is engaged by the ---------- Company or any Parent or Subsidiary to render consulting services and is compensated for such consulting services and (ii) any director of the Company whether compensated for such services or not. (g) "Continuous Status as an Employee or Consultant" shall mean the ---------------------------------------------- absence of any interruption or termination of service as an Employee or Consultant. Continuous Status as an Employee or Consultant shall not be considered interrupted in the case of sick leave, military leave or any other leave of absence approved by the Board; provided that such leave is for a period of not more than 90 days or reemployment upon the expiration of such leave is guaranteed by contract or statute. (h) "Employee" shall mean any person, including officers and -------- directors, employed by the Company or any Parent or Subsidiary of the Company. The payment of a director's fee by the Company shall not be sufficient to constitute "employment" by the Company. (i) "Executive Officer" shall mean an officer of the Company at or ----------------- above the level of vice president. (j) "Incentive Stock Option" shall mean an Option intended to ---------------------- qualify as an incentive stock option within the meaning of Section 422A of the Code. (k) "Nonstatutory Stock Option" shall mean an Option not intended to ------------------------- qualify as an Incentive Stock Option. (l) "Option" shall mean a stock option granted pursuant to the Plan. ------ Exhibit 4.1 - Page 1 (m) "Optioned Stock" shall mean the Common Stock subject to an -------------- Option. (n) "Optionee" shall mean an Employee or Consultant who receives an -------- Option. (o) "Parent" shall mean a "parent corporation," whether now or ------ hereafter existing, as defined in Section 424(e) of the Code. (p) "Plan" shall mean this 1992 Stock Option Plan. ---- (q) "Share" shall mean a share of the Common Stock, as adjusted in ----- accordance with Section 11 of the Plan. (r) "Subsidiary" shall mean a "subsidiary corporation," whether now ---------- or hereafter existing, as defined in Section 424(f) of the Code. 3. STOCK SUBJECT TO PLAN. Subject to the provisions of Section 11 of --------------------- the Plan, the maximum aggregate number of shares that may be optioned and sold under the Plan is 14,950,000 shares of Common Stock. The Shares may be authorized, but unissued, or reacquired Common Stock. If an Option should expire or become unexercisable for any reason without having been exercised in full, the unpurchased Shares which were subject thereto shall, unless the Plan shall have been terminated, become available for future grant under the Plan. Notwithstanding any other provision of the Plan, shares issued under the Plan and later repurchased by the Company shall not become available for future grant or sale under the Plan. 4. ADMINISTRATION OF THE PLAN. -------------------------- (a) Procedure. --------- (i) Multiple Administrative Bodies. The Plan may be ------------------------------ administered by different Committees with respect to different groups of Employees and Consultants. (ii) Section 162(m). To the extent that the Board determines -------------- it to be desirable to qualify Options granted hereunder as "performance-based compensation" within the meaning of Section 162(m) of the Code, the Plan shall be administered by a Committee of two or more "outside directors" within the meaning of Section 162(m) of the Code. (iii) Rule 16b-3. To the extent desirable to qualify ---------- transactions hereunder as exempt under Rule 16b-3, the transactions contemplated hereunder shall be structured to satisfy the requirements for exemption under Rule 16b-3. (iv) Other Administration. Other than as provided above, the -------------------- Plan shall be administered by (A) the Board of (B) a Committee, which committee shall be constituted to satisfy applicable laws. (b) Powers of the Board. Subject to the provisions of the Plan, the ------------------- Board shall have the authority, in its discretion: (i) to grant Incentive Stock Options or Nonstatutory Stock Options; (ii) to determine, upon review of relevant information, the Fair Market Value of the Common Stock; (iii) to determine the exercise price per share of Options to be granted, which exercise price shall be determined in accordance with Section 8 of the Plan; (iv) to determine the Employees or Consultants to whom, and the time or times at which, Options shall be granted and the number of shares to be represented by each Option; (v) to interpret the Plan; (vi) to prescribe, amend and rescind rules and regulations relating to the Plan; (vii) to determine the terms and provisions of each Option granted (which need not be identical) and, with the consent of the holder thereof, modify or amend each Option; (viii) to accelerate or defer (with the consent of the Optionee) the exercise date of any Option, consistent with the provisions of Section 5 of the Plan; (ix) to authorize any person to execute on behalf of the Company any instrument required to effectuate the grant of an Option previously granted by the Board; (x) to reduce the exercise price of any Option to the then current Fair Market Value if the Fair Market Value of the Common Stock covered by such Option Exhibit 4.1 Page 2 shall have declined since the date the Option was granted; (xi) to allow Optionees to satisfy withholding tax obligations by electing to have the Company withhold from the Shares to be issued upon exercise of an Option that number of Shares having a Fair Market Value equal to the amount required to be withheld; and (xii) to make all other determinations deemed necessary or advisable for the administration of the Plan. The Fair Market Value of the Shares to be withheld pursuant to clause (xi) hereof shall be determined on the date that the amount of tax to be withheld is to be determined. All elections by an Optionee to have Shares withheld for this purpose shall be made in such form and under such conditions as the Board may deem necessary or advisable. (c) Effect of Board's Decision. All decisions, determinations and -------------------------- interpretations of the Board shall be final and binding on all Optionees and any other holds of any Options granted under the Plan. 5. ELIGIBILITY; LIMITATIONS. ------------------------ (a) Nonstatutory Stock Options may be granted only to Employees and Consultants. Incentive Stock Options may be granted only to Employees. An Employee or Consultant who has been granted an Option may, if he is otherwise eligible, be granted an additional Option or Options. (b) No Incentive Stock Option may be granted to an Employee which, when aggregated with all other incentive stock options granted to such Employee by the Company or any Parent or Subsidiary, would result in Shares having an aggregate Fair Market Value (determined for each Share as of the date of grant of the Option covering such Share) in excess of $100,000 becoming first available for purchase upon exercise of one or more incentive stock options during any calendar year. (c) Section 5(b) of the Plan shall apply only to an Incentive Stock Option evidenced by an "Incentive Stock Option Agreement" which sets forth the intention of the Company and the Optionee that such Option shall qualify as an incentive stock option. Section 5(b) of the Plan shall not apply to any Option evidenced by a "Nonstatutory Stock Option Agreement" which sets forth the intention of the Company and the Optionee that such Option shall be a Nonstatutory Stock Option. (d) The Plan shall not confer upon any Optionee any right with respect to continuation of employment or consulting relationship with the Company, nor shall it interfere in any way with his right or the Company's right to terminate his employment or consulting relationship at any time, with or without cause. (e) The following limitations shall apply to grants of Options: (i) No Employee or Consultant shall be granted, in any fiscal year of the Company, Options to purchase more than 1,000,000 Shares. (ii) In connection with his or her initial service, an Employee or Consultant may be granted Options to purchase up to an additional 500,000 Shares that shall not count against the limit set forth in subsection (i) above. (iii) The foregoing limitations shall be adjusted proportionately in connection with any change in the Company's capitalization as described in Section 11(a). (iv) If an Option is cancelled in the same fiscal year of the Company in which it was granted (other than in connection with a transaction described in Section 11(a)), the cancelled Option will be counted against the limits set forth in subsections (i) and (ii) above. For this purpose, if the exercise price of an Option is reduced, the transaction will be treated as a cancellation of the Option and the grant of a new Option. 6. TERM OF PLAN. The Plan shall become effective upon the earlier to ------------ occur of its adoption by the Board of Directors or its approval by the shareholders of the Company as described in Section 17 of the Plan. It shall continue in effect until July 31, 2009 unless sooner terminated under Section 13 of the Plan. Exhibit 4.1 - Page 3 7. TERMS OF OPTION. The term of each Incentive Stock Option shall be --------------- ten (10) years from the date of grant thereof or such shorter term as may be provided in the Incentive Stock Option Agreement. The term of each Nonstatutory Stock Option shall be ten (10) years and one (1) day from the date of grant thereof or such shorter term as may be provided in the Nonstatutory Stock Option Agreement. However, in the case of an Option granted to an Optionee who, at the time the Option is granted, owns stock representing more than ten percent (10%) of the voting power of all classes of stock of the Company or any Parent or Subsidiary, (a) if the Option is an Incentive Stock Option, the term of the Option shall be five (5) years from the date of grant thereof or such shorter term as may be provided in the Incentive Stock Option Agreement or (b) if the Option is a Nonstatutory Stock Option, the term of the Option shall be five (5) year and one (1) day from the date of grant thereof or such shorter term as may be provided in the Nonstatutory Stock Option Agreement. 8. EXERCISE PRICE AND CONSIDERATION. -------------------------------- (a) The per Share exercise price for the Shares to be issued pursuant to exercise of an Option shall be such price as is determined by the Board but shall be subject to the following: (i) In the case of an Incentive Stock Option (A) granted to an Employee who, at the time of the grant of such Incentive Stock Option, owns stock representing more than ten percent (10%) of the voting power of all classes of stock of the Company or any Parent or Subsidiary, the per Share exercise price shall be no less than 110% of the Fair Market Value per Share on the date of grant. (B) granted to any Employee, the per Share exercise price shall be no less than 100% of the Fair Market Value per Share on the date of grant. (ii) In the case of a Nonstatutory Stock Option (A) In the case of a Nonstatutory Stock Option, the per Share exercise price shall be determined by the Board. In the case of a Nonstatutory Stock Option intended to qualify as "performance-based compensation" within the meaning of Section 162(m) of the Code, the per Share exercise price shall be no less than 100% of the Fair Market Value per Share on the date of grant. (B) Notwithstanding the foregoing, Options may be granted with a per Share exercise price of less than 100% of the Fair Market Value per Share on the date of grant pursuant to a merger or other corporate transaction. (b) The fair market value of the Common Stock (the "Fair Market Value") shall be determined by the Board as follows: (i) If the Common Stock is listed on any established stock exchange or a national market system, including without limitation the Nasdaq National Market or the Nasdaq SmallCap Market of The Nasdaq Stock Market, its Fair Market Value shall be the closing sales price for such stock (or the closing bid, if no sales were reported) as quoted on such exchange or system for the last market trading day prior to the time of determination, as reported in The Wall Street Journal or such other source as the Board deems reliable; (ii) If the Common Stock is regularly quoted by a recognized securities dealer but selling prices are not reported, the Fair Market Value of a Share of Common Stock shall be the mean between the high bid and low asked prices for the Common Stock on the last market trading day prior to the day of determination, as reported in The Wall Street Journal or such other source as the Board deems reliable; or Exhibit 4.1 - Page 4 (iii) In the absence of an established market for the Common Stock, the Fair Market Value shall be determined in good faith by the Board. (c) Form of Consideration. The Board shall determine the acceptable --------------------- form of consideration for exercising an Option, including the method of payment. In the case of an Incentive Stock Option, the Board shall determine the acceptable form of consideration at the time of grant. Such consideration may consist entirely of: (i) cash; (ii) check; (iii) promissory note; (iv) other Shares which (A) in the case of Shares acquired upon exercise of an option, have been owned by the Optionee for more than six months on the date of surrender and (B) have a Fair Market Value on the date of surrender equal to the aggregate exercise price of the Shares as to which said Option shall be exercised; (v) consideration received by the Company under a cashless exercise program implemented by the Company in connection with the Plan; (vi) a reduction in the amount of any Company liability to the Optionee, including any liability attributable to the Optionee's participation in any Company-sponsored deferred compensation program or arrangement; (vii) any combination of the foregoing methods of payment; or (viii) such other consideration and method of payment for the issuance of Shares to the extent permitted by applicable laws. 9. EXERCISE OF OPTION. ------------------ (a) Procedure for Exercise; Rights as a Stockholder. Any Option ----------------------------------------------- granted hereunder shall be exercisable at such times and under such conditions as determined by the Board, including performance criteria with respect to the Company and/or the Optionee, and as shall be permissible under the terms of the Plan. An Option may not be exercised for a fraction of a Share. An Option shall be deemed to be exercised when written notice of such exercise has been given to the Company in accordance with the terms of the Option by the person entitled to exercise the Option and full payment for the Shares with respect to which the Option is exercised has been received by the Company. Full payment may, as authorized by the Board, consist of any consideration and method of payment allowable under Section 8 of the Plan. Until the issuance (as evidenced by the appropriate entry on the books of the Company) of the stock certificate evidencing such Shares, no right to vote or any other rights as a shareholder shall exist with respect to the Optioned Stock, notwithstanding the exercise of the Option. The Company shall issue (or cause to be issued) such stock certificate promptly upon exercise of the Option. No adjustment will be made for a dividend or other right for which the record date is prior to the date the stock certificate is issued, except as provided in Section 11 of the Plan. Exercise of an Option in any manner shall result in a decrease in the number of Shares which thereafter may be available, both for purposes of the Plan and for sale under the Option, by the number of Shares as to which the Option is exercised. Exhibit 4.1 - Page 5 (b) Termination of Status as an Employee or Consultant. In the -------------------------------------------------- event of termination of an Optionee's Continuous Status as an Employee or Consultant (as the case may be), Optionee may, but only within thirty (30) days (or such other period of time, not exceeding three (3) months in the case of an Incentive Stock Option or six (6) months in the case of a Nonstatutory Stock Option, as is determined by the Board, with such determination in the case of an Incentive Stock Option being made at the time of grant of the Option) after the date of such termination (but in no event later than the date of expiration of the term of such Option as set forth in the Option Agreement), exercise his Option to the extent that he was entitled to exercise it at the date of such termination. To the extent that he was not entitled to exercise the Option at the date of such termination, or if he does not exercise such Option (which he was entitled to exercise) within the time specified herein, the Option shall terminate. (c) Disability of Optionee. Notwithstanding the provisions of ---------------------- Section 9(b) above, in the event of termination of an Optionee's Continuous Status as an Employee or Consultant as a result of his total and permanent disability (as defined in Section 22(e)(3) of the Code), he may, but only within six (6) months (or such other period of time not exceeding twelve (12) months as is determined by the Board, with such determination in the case of an Incentive Stock Option being made at the time of grant of the Option) from the date of such termination (but in no event later than the date of expiration of the term of such Option as set forth in the Option Agreement), exercise his Option to the extent he was entitled to exercise it at the date of such termination. To the extent that he was not entitled to exercise such Option (which he was entitled to exercise) within the time specified herein, the Option shall terminate. (d) Death of Optionee. In the event of the death of an Optionee: ----------------- (i) during the term of the Option who is at the time of his death an Employee or Consultant of the Company and who shall have been in Continuous Status as an Employee or Consultant since the date of grant of the Option, the Option may be exercised, at any time within six (6) months following the date of death (but in no event later than the date of expiration of the term of such Option as set forth in the Option Agreement), by the Optionee's estate or by a person who acquired the right to exercise the Option by bequest or inheritance, but only to the extent of the right to exercise that would have accrued had the Optionee continued living and remained in Continuous Status as an Employee or consultant six (6) months after the date of death, subject to the limitations set forth in Section 5(b); or (ii) within thirty (30) days (or such other period of time not exceeding three (3) months as is determined by the Board, with such determination in the case of an Incentive Stock Option being made at the time of grant of the Option) after the termination of Continuous Status as an Employee or Consultant, the Option may be exercised, at any time within six (6) months following the date of death (but in no event later than the date of expiration of the term of such Option as set forth in the Option Agreement), by the Optionee's estate or by a person who acquired the right to exercise the Option by bequest or inheritance, but only to the extent of the right to exercise that had accrued at the date of termination. 10. NON-TRANSFERABILITY OF OPTIONS. Unless determined otherwise by the ------------------------------ Board, an Option may not be sold, pledged, assigned, hypothecated, transferred or disposed of in any manner other than by will or by the laws of descent or distribution and may be exercised, during the life time of the Optionee, only by the Optionee. If the Board makes an Option transferable, such Option shall contain such additional terms and conditions as the Board deems appropriate. 11. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION, DISSOLUTION, LIQUIDATION, --------------------------------------------------------------------- MERGER, ASSET SALE OR CHANGE IN CONTROL. - --------------------------------------- (a) Changes in Capitalization. Subject to any required action by the ------------------------- shareholders of the Company, the number of shares of Common Stock covered by each outstanding Option, and the number of shares of Common Stock which have been authorized for issuance under the Plan but as to which no Options have yet been granted or which have been returned to the Plan upon cancellation or expiration of an Option, as well as the price per share of Common Stock covered by each such outstanding Option, shall be proportionately adjusted for any increase or decrease in the number of issued shares of Common Stock resulting from a stock split, reverse stock split, stock dividend, combination or reclassification of the Common Stock, or any other increase or decrease in the Exhibit 4.1 - Page 6 number of issued shares of Common Stock effected without receipt of consideration by the Company; provided, however, that conversion of any convertible securities of the Company shall not be deemed to have been "effected without receipt of consideration". Such adjustment shall be made by the Board, whose determination in that respect shall be final, binding and conclusive. Except as expressly provided herein, no issuance by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, shall affect, and no adjustment by reason thereof shall be made with respect to, the number or price of shares of Common Stock subject to an Option. (b) Dissolution or Liquidation. In the event of the proposed -------------------------- dissolution or liquidation of the Company, the Board shall notify the Optionee at least fifteen (15) days prior to such proposed action. To the extent an Option has not been previously exercised, such Option shall terminate prior to consummation of such proposed dissolution or liquidation. (c) Merger or Asset Sale. Subject to the provisions of Section -------------------- 11(d) hereof, in the event of a merger of the Company with or into another corporation, or the sale of substantially all of the assets of the Company, each outstanding Option shall be assumed or an equivalent option substituted by the successor corporation or a Parent or Subsidiary of the successor corporation. In the event that the successor corporation refuses to assume or substitute for the Option, the Board shall notify the Optionee that the Option shall be exercisable to the extent that the Optionee is otherwise entitled to exercise the Option for a period of fifteen (15) days from the date of such notice, and the Option shall terminate upon the expiration of such period. For the purposes of this paragraph, the Option shall be considered assumed if, following the merger or sale of assets, the Option confers the right to purchase or receive, for each Share of Optioned Stock subject to the Option immediately prior to the merger or sale of assets by holders of Common Stock for each Share held on the effective date of the transaction (and if holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding Shares); provided, however, that if such consideration received in the merger or sale of assets was not solely common stock of the successor corporation or its Parent, the Board may, with the consent of the successor corporation, provide for the consideration to be received upon the exercise of the Option, to be solely common stock of the successor corporation or its Parent equal in fair market value to the per share consideration received by holders of Common Stock in the merger or sale of assets. (d) Change in Control. In the event of a "Change in Control" of the ----------------- Company, as defined in Subsection (e) below, then the following provisions shall apply: (i) For each Optionee who is an Executive Officer and has any Option outstanding on the date of such Change in Control which is not yet fully exercisable and fully vested as of the date of such Change in Control, such Option shall become exercisable and vested on the date of such Change in Control with respect to fifty percent (50%) of the Shares covered by such Option which are not exercisable or vested on the date of such Change in control without reference to this subsection (an "Outstanding Option"); (ii) Each Outstanding Option held by an Executive Officer which is vested and exercisable on the date of such Change in Control shall be assumed by the successor corporation (if any) or by a Parent or Subsidiary of the successor corporation (if any); (iii) Each Outstanding Option held by an Executive Officer which is vested and exercisable on the date of such Change in Control shall remain exercisable by the Optionee for a period of at least fifteen (15) days from the date of the Change in Control; and (iv) Each Optionee who is an Executive Officer with an Outstanding Option which is vested and exercisable on the date of such Change in Control shall be provided with written notice of the period of exercisability provided for in subsection (d)(iii) above promptly after the date of the Change in Control by the Company or by the entity surviving after the Change in Control. (e) Definition of "Change in Control". For purposes of this Section --------------------------------- 11, a "Change in Control" means the happening of any of the following: Exhibit 4.1 - Page 7 (i) when any "person or "group" of persons, as such terms are used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act") (other than the Company, a Subsidiary or a Company employee benefit plan, including any trustee of such plan acting as trustee) is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing more than fifty percent (50%) of the combined voting power of the Company's then outstanding securities entitled to vote generally in the election of directors; provided that "person" shall not include any person (or any person acting as a group) which, as of the date of the adoption of this 1992 Stock Option Plan, is the "beneficial owner" of securities of the Company representing more than fifty percent (50%) of the combined voting power of the Company's outstanding securities entitled to vote generally in the election of directors; (ii) a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least fifty percent (50%) of the total voting power represented by the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation; or (iii) a change in the composition of the Board of Directors of the Company, during any twenty-four month period, as a result of which fewer than a majority of the directors are Incumbent Directors. "Incumbent Directors" shall mean directors who either (A) are directors of the Company as of the date the Plan is approved by the shareholders or (B) are elected, or nominated for election, to the Board of Directors of the Company with the affirmative votes of at least a majority of the Incumbent Directors at the time of such election or nomination (but shall not include an individual not otherwise an Incumbent Director whose election or nomination is in connection with an actual or threatened proxy contest relating to the election of directors to the Company). 12. TIME OF GRANTING OPTIONS. The date of grant of an Option shall, for ------------------------ all purposes, be the date on which the Board makes the determination granting such Option. Notice of the determination shall be given to each Employee or Consultant to whom an Option is so granted within a reasonable time after the date of such grant. 13. AMENDMENT AND TERMINATION OF THE PLAN. ------------------------------------- (a) Amendment and Termination. The Board may amend or terminate the ------------------------- Plan from time to time in such respects as the Board may deem advisable; provided that, the following revisions or amendments shall require approval of the shareholders of the Company in the manner described in Section 17 of the Plan: (i) any increase in the number of Shares subject to the Plan, other than in connection with an adjustment under Section 11 of the Plan; or (ii) any change in the designation of the class of persons eligible to be granted Options. (b) Shareholder Approval. If any amendment requiring shareholder -------------------- approval under Section 13(a) of the Plan is made subsequent to the first registration of any class of equity securities by the Company under Section 12 of the Exchange Act, such shareholder approval shall be solicited as described in Section 17 of the Plan. (c) Effect of Amendment or Termination. Any such amendment or ---------------------------------- termination of the Plan shall not affect Options already granted and such Options shall remain in full force and effect as if the Plan had not been amended or terminated, unless mutually agreed otherwise between the Optionee and the Board, which agreement must be in writing and signed by the Optionee and the Company. 14. CONDITIONS UPON ISSUANCE OF SHARES. Shares shall not be issued ---------------------------------- pursuant to the exercise of an Option unless the exercise of such Option and the issuance and delivery of such Shares pursuant thereto shall comply with all relevant provisions of law, including, without limitation, the Securities Act of 1933, as amended, the Exchange Act, the rules and regulations promulgated thereunder and the requirements of any stock Exhibit 4.1 - Page 8 exchange upon which the Shares may then be listed, and shall be further subject to the approval of counsel for the Company with respect to such compliance. As a condition to the exercise of an Option, the Company may require the person exercising such Option to represent and warrant at the time of any such exercise that the Shares are being purchased only for investment and without any present intention to sell or distribute such Shares if, in the opinion of counsel for the Company, such a representation is required by any of the aforementioned relevant provisions of law 15. RESERVATION OF SHARES. The Company, during the term of this Plan, --------------------- will at all times reserve and keep available such number of Shares as shall be sufficient to satisfy the requirements of the Plan. The inability of the Company to obtain authority from any regulatory body having jurisdiction, which authority is deemed by the Company's counsel to be necessary to the lawful issuance and sale of any Shares hereunder, shall relieve the Company 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. 16. OPTION AGREEMENT. Options shall be evidenced by written option ---------------- agreements in such form as the Board shall approve. 17. SHAREHOLDER APPROVAL. -------------------- (a) Continuance of the Plan shall be subject to approval by the shareholders of the Company within twelve (12) months before or after the date the Plan is adopted. (b) If and in the event that the Company registers any class of equity securities pursuant to Section 12 of the Exchange Act, any required approval of the shareholders of the Company obtained after such registration shall be solicited substantially in accordance with Section 14(a) of the Exchange Act and the rules and regulations promulgated thereunder. (c) If any required approval by the shareholders of the Plan itself or of any amendment thereto is solicited at anytime otherwise than in the manner described in Section 17(b) hereof, then the Company shall, at or prior to the first annual meeting of shareholders held subsequent to the later of (1) the first registration of any class of equity securities of the Company under Section 12 of the Exchange Act or (2) the granting of an Option hereunder to an officer or director after such registration, do the following: (i) furnish in writing to the holders entitled to vote for the Plan substantially the same information which would be required (if proxies to be voted with respect to approval or disapproval of the Plan or amendment were then being solicited) by the rules and regulations in effect under Section 14(a) of the Exchange Act at the time such information is furnished; and (ii) file with, or mail for filing to, the Securities and Exchange Commission four copies of the written information referred to in subsection (i) hereof not later than the date on which such information is first sent or given to shareholders. 18. INFORMATION TO OPTIONEES. The Company shall provide to each Optionee, ------------------------ during the period for which such Optionee has one or more Options outstanding, copies of all annual reports and other information that are provided to all shareholders of the Company. The Company shall not be required to provide such information if the issuance of Options under the Plan is limited to key employees whose duties in connection with the Company assure their access to equivalent information. Exhibit 4.1 - Page 9 EX-4.2 3 dex42.txt 1995 DIRECTOR OPTION PLAN EXHIBIT 4.2 DIGITAL GENERATION SYSTEMS, INC. AMENDED AND RESTATED 1995 DIRECTOR OPTION PLAN (AS AMENDED JUNE 14, 2001) 1. PURPOSES OF THE PLAN. The purposes of this 1995 Director Option Plan -------------------- are to attract and retain the best available personnel for service as Outside Directors (as defined herein) of the Company, to provide additional incentive to the Outside Directors of the Company to serve as Directors, and to encourage their continued service on the Board. All options granted hereunder shall be nonstatutory stock options that are not intended to meet the requirements of Section 422 of the Code. 2. DEFINITIONS. As used herein, the following definitions shall apply: ----------- (a) "Board" means the Board of Directors of the Company. ----- (b) "Code" means the Internal Revenue Code of 1986, as amended. ---- (c) "Common Stock" means the Common Stock, $0.001 par value, of the ------------ Company. (d) "Company" means Digital Generation Systems, Inc., a California ------- corporation. (e) "Continuous Status as a Director" means the absence of any ------------------------------- interruption or termination of service as a Director. (f) "Director" means a member of the Board. -------- (g) "Employee" means any person, including officers and Directors, -------- employed, within the meaning of Section 3401 of the Code, by the Company or any Parent or Subsidiary of the Company. The payment of a Director's fee by the Company shall not be sufficient in and of itself to constitute "employment" by the Company. (h) "Exchange Act" means the Securities Exchange Act of 1934, as ------------ amended. (i) "Fair Market Value" means, as of any date, the value of Common ----------------- Stock determined as follows: (i) If the Common Stock is listed on any established stock exchange or a national market system, including without limitation the Nasdaq National Market of the National Association of Securities Dealers, Inc. Automated Quotation ("NASDAQ") System, the Fair Market Value of a Share of Common Stock shall be the closing sales price for such stock (or the closing bid, if no sales were reported) as quoted on such system or exchange (or the exchange with the greatest volume of trading in Common Stock) on the date of determination, as reported in The Wall Street Journal or such other source as the Board deems reliable; Exhibit 4.2-Page 1 (ii) If the Common Stock is quoted on the NASDAQ System (but not on the National Market thereof) or regularly quoted by a recognized securities dealer but selling prices are not reported, the Fair Market Value of a Share of Common Stock shall be the mean between the high bid and low asked prices for the Common Stock on the date of determination, as reported in The Wall Street Journal or such other source as the Board deems reliable, or; (iii) In the absence of an established market for the Common Stock, the Fair Market Value thereof shall be determined in good faith by the Board. (j) "Option" means a stock option granted pursuant to the Plan. ------ (k) "Option Agreement" means the written agreement evidencing the ---------------- grant of an Option executed by the Company and the Optionee, including any amendments thereto. (l) "Optioned Stock" means the Common Stock subject to an Option. -------------- (m) "Optionee" means an Outside Director who receives an Option. -------- (n) "Outside Director" means a Director who is not an Employee. ---------------- (o) "Parent" means a "parent corporation," whether now or hereafter ------ existing, as defined in Section 424(e) of the Code. (p) "Plan" means this Amended and Restated 1995 Director Option Plan. ---- (q) "Share" means a share of the Common Stock, as adjusted in ----- accordance with Section 10 of the Plan. (r) "Subsidiary" means a "subsidiary corporation," whether now or ---------- hereafter existing, as defined in Section 424(f) of the Internal Revenue Code of 1986. 3. STOCK SUBJECT TO PLAN. Subject to the provisions of Section 10 of the --------------------- Plan, the maximum aggregate number of Shares that may be optioned and sold under the Plan is 800,000 Shares of Common Stock. The Shares may be authorized, but unissued, or reacquired Common Stock. If an Option expires or becomes unexercisable without having been exercised in full, the unpurchased Shares which were subject thereto shall become available for future grant or sale under the Plan (unless the Plan has terminated); provided, however, that Shares that have actually been issued under the Plan shall not be returned to the Plan and shall not become available for future distribution under the Plan. 4. ELIGIBILITY. Options may be granted only to Outside Directors. The ----------- Board in its sole discretion shall select the Outside Directors to whom Options will be granted under the Plan and all Options shall be granted in accordance with the provisions of the Plan. An Outside Director may be granted more than one Option under the Plan, and Options may be granted at any time or times during the term of the Plan. The grant of an Option to an Outside Director shall not be deemed either to entitle that individual to, or disqualify that individual from, participation in any other grant of Options under the Plan. The Plan shall not confer upon any Optionee any right with respect to continuation of service as a Director or nomination to serve as Exhibit 4.2-Page 2 a Director, nor shall it interfere in any way with any rights which the Director or the Company may have to terminate his or her directorship at any time. 5. TERMS AND CONDITIONS OF OPTIONS. The Board shall determine the ------------------------------- provisions, terms and conditions of each Option including, but not limited to, the vesting schedule, the number of shares of Common Stock subject to the Option, the exercise price of the Option, the period during which the Option may be exercised, the methods of payment, and all other terms and conditions of the Option, subject to the following: (a) Form of Option Grant. Each Option granted under the Plan shall -------------------- be evidenced by a written Option Agreement in such form (which need not be the same for each Optionee) as the Board, from time to time approves, but which is not inconsistent with the Plan. (b) Date of Grant. The date of grant of an Option will be the date ------------- on which the Board makes the determination to grant such Option unless otherwise specified by the Board. The Option Agreement evidencing the Option will be delivered to the Optionee with a copy of the Plan within a reasonable time after the date of grant. (c) Exercise Price. The exercise price of an Option shall be the -------------- Fair Market Value of the shares of Common Stock on the date of grant of the Option. (d) Exercise Period. Options shall be exercisable within the time --------------- or times or upon the event or events determined by the Committee and set forth in the Option Agreement; provided, however, that no Option shall be exercisable after the expiration of ten (10) years from the date of grant of the Option, and provided further, that an Option shall be exercisable only while the Optionee remains a Director, except as provided in Section 7 hereof. (e) Transferability of Options. Except as provided otherwise by the -------------------------- Board in an Option Agreement, Options granted under the Plan, and any interest therein, shall not be transferable or assignable by the Optionee, and may not be made subject to execution, attachment or similar process, otherwise than by will or by the laws of descent and distribution, and shall be exercisable during the lifetime of the Optionee only by the Optionee; provided, that the Optionee may, however, designate persons who or which may exercise his Options following his death. 6. EFFECTIVE DATE AND TERM OF PLAN. The amendment and restatement of ------------------------------- Plan as set forth herein shall become effective upon its adoption by the Board. It shall continue in effect for a term of ten (10) years from September ___, 1995, the original effective date of the Plan, unless sooner terminated by action of the Board. Subject to the terms and conditions of the Plan, as amended and restated herein, and applicable laws, Options may be granted under the Plan upon its adoption. 7. EXERCISE OF OPTIONS. ------------------- (a) Procedure for Exercise; Rights as a Stockholder. Any Option ----------------------------------------------- granted hereunder shall be exercisable at such times as are set forth in Section 5 hereof; provided, however, that no Options shall be exercisable until stockholder approval of the Plan, if applicable, in accordance with Section 12 hereof has been obtained. An Option may not be Exhibit 4.2-Page 3 exercised for a fraction of a Share. An Option shall be deemed to be exercised when written notice of such exercise has been given to the Company in accordance with the terms of the Option and Section 7(b) hereof by the person entitled to exercise the Option and full payment for the Shares with respect to which the Option is exercised has been received by the Company. Full payment may consist of any consideration and method of payment allowable under Section 7(c) hereof. A share certificate for the number of Shares so acquired shall be issued to the Optionee as soon as practicable after exercise of the Option. No Optionee will have any of the rights of a shareholder with respect to any Shares of Common Stock subject to an Option until such Option is properly exercised and the purchased shares are issued and delivered to the Optionee, as evidenced by an appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company. No adjustment shall be made for a dividend or other right for which the record date is prior to the date the stock certificate is issued, except as provided in Section 8 of the Plan. Exercise of an Option in any manner shall result in a decrease in the number of Shares which thereafter may be available, both for purposes of the Plan and for sale under the Option, by the number of Shares as to which the Option is exercised. (b) Notice. Options may be exercised only by delivery to the Company ------ of a written exercise agreement approved by the Board (which need not be the same for each Optionee), stating the number of shares of Common Stock being purchased, the restrictions imposed on the shares of Common Stock, if any, and such representations and agreements regarding the Optionee's investment intent and access to information and other matters, if any, as may be required by the Company to comply with applicable securities laws, or as may be deemed appropriate by the Company in connection with the issuance of shares of Common Stock upon exercise of the Option, together with payment in full of the exercise price for the number of shares of Common Stock being purchased. Such exercise agreement may be part of an Optionee's Option Agreement. (c) Payment. Payment for the Shares of Common Stock to be purchased ------- upon exercise of an Option may be made (i) in cash (by check); (ii) by surrender for cancellation of other Shares which (A) in the case of Shares acquired upon exercise of an Option, have been owned by the Optionee for more than six (6) months on the date of surrender, and (B) have a Fair Market Value on the date of surrender equal to the aggregate exercise price of the Shares as to which said Option shall be exercised (provided that such surrender does not result in an accounting charge for the Company); (iii) if a public market for the Common Stock exists, through a "same day sale" commitment from the Optionee and a broker-dealer that is a member of the National Association of Securities Dealers, Inc. (an "NASD Dealer") whereby the Optionee irrevocably elects to ----------- exercise the Option and to sell a portion of the Shares of Common Stock so purchased to pay for the exercise price and whereby the NASD Dealer irrevocably commits upon receipt of such Shares of Common Stock to forward the exercise price directly to the Company; (iv) if a public market for the Common Stock exists, through a "margin" commitment from the Optionee and an NASD Dealer whereby the Optionee irrevocably elects to exercise the Option and to pledge the Shares of Common Stock so purchased to the NASD Dealer in a margin account as security for a loan from the NASD Dealer in the amount of the exercise price, and whereby the NASD Dealer irrevocably commits upon receipt of such shares of Common Stock to forward the exercise price directly to the Company; (v) by any combination of the foregoing. No shares of Common Stock may be issued until full payment of the purchase price therefor has been made. Exhibit 4.2-Page 4 (d) Termination of Continuous Status as a Director. In the event an ---------------------------------------------- Optionee's Continuous Status as a Director terminates (other than upon the Optionee's death or total and permanent disability (as defined in Section 22(e)(3) of the Code)), the Optionee may exercise his or her Option, but only within three (3) months following the date of such termination, and only to the extent that the Optionee was entitled to exercise it on the date of such termination (but in no event later than the expiration of its ten (10) year term). To the extent that the Optionee was not entitled to exercise an Option on the date of such termination, and to the extent that the Optionee does not exercise such Option (to the extent otherwise so entitled) within the time specified herein, the Option shall terminate. (e) Disability of Optionee. In the event Optionee's Continuous ---------------------- Status as a Director terminates as a result of total and permanent disability (as defined in Section 22(e)(3) of the Code), the Optionee may exercise his or her Option but only within twelve (12) months following the date of such termination, and only to the extent that the Optionee was entitled to exercise it on the date of such termination (but in no event later than the expiration of its ten (10) year term). To the extent that the Optionee was not entitled to exercise an Option on the date of termination, or if he or she does not exercise such Option (to the extent otherwise so entitled) within the time specified herein, the Option shall terminate. (f) Death of Optionee. In the event of an Optionee's death, the ----------------- Optionee's estate or a person who acquired the right to exercise the Option by bequest or inheritance may exercise the Option, but only within twelve (12) months following the date of death, and only to the extent that the Optionee was entitled to exercise it on the date of death (but in no event later than the expiration of its ten (10) year term). To the extent that the Optionee was not entitled to exercise an Option on the date of death, and to the extent that the Optionee's estate or a person who acquired the right to exercise such Option does not exercise such Option (to the extent otherwise so entitled) within the time specified herein, the Option shall terminate. 8. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION, DISSOLUTION, MERGER, ASSET ---------------------------------------------------------------------- SALE OR CHANGE OF CONTROL. - ------------------------- (a) Changes in Capitalization. Subject to any required action by the ------------------------- shareholders of the Company, the number of Shares covered by each outstanding Option, the number of Shares which have been authorized for issuance under the Plan but as to which no Options have yet been granted or which have been returned to the Plan upon cancellation or expiration of an Option, as well as the price per Share covered by each such outstanding Option, shall be proportionately adjusted for any increase or decrease in the number of issued Shares resulting from a stock split, reverse stock split, stock dividend, combination or reclassification of the Common Stock, or any other increase or decrease in the number of issued Shares effected without receipt of consideration by the Company; provided, however, that conversion of any convertible securities of the Company shall not be deemed to have been "effected without receipt of consideration". Except as expressly provided herein, no issuance by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, shall affect, and no adjustment by reason thereof shall be made with respect to, the number or price of Shares subject to an Option. Exhibit 4.2-Page 5 (b) Dissolution or Liquidation. In the event of the proposed -------------------------- dissolution or liquidation of the Company, to the extent that an Option has not been previously exercised, it shall terminate immediately prior to the consummation of such proposed action. (c) Merger or Asset Sale. In the event of a merger of the Company -------------------- with or into another corporation, or the sale of substantially all of the assets of the Company, each outstanding Option may be assumed or an equivalent option may be substituted by the successor corporation or a Parent or Subsidiary of the successor corporation. In the event that the successor corporation does not agree to assume the Option or to substitute an equivalent option, each outstanding Option shall become fully vested and exercisable, including as to Shares as to which it would not otherwise be exercisable. If an Option becomes fully vested and exercisable in the event of a merger or sale of assets, the Board shall notify the Optionee that the Option shall be fully exercisable for a period of thirty (30) days from the date of such notice, and the Option shall terminate upon the expiration of such period. For the purposes of this paragraph, the Option shall be considered assumed if, following the merger or sale of assets, the Option confers the right to purchase, for each share of Optioned Stock subject to the Option immediately prior to the merger or sale of assets, the consideration (whether stock, cash, or other securities or property) received in the merger or sale of assets by holders of Common Stock for each Share held on the effective date of the transaction (and if holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding Shares). 9. AMENDMENT OR TERMINATION OF PLAN. The Board in its discretion may, at -------------------------------- any time or from time to time after the date of adoption of the Plan, terminate or amend the Plan in any respect, including amendment of any form of Option Agreement or instrument to be executed pursuant to the Plan; provided, however, to the extent necessary to comply with the Code, other applicable laws, or the applicable requirements of any stock exchange or national market system, the Company shall obtain stockholder approval of any Plan amendment in such manner and to such a degree as required. No Option may be granted after termination of the Plan. Any amendment or termination of the Plan shall not affect Options previously granted, and such Options shall remain in full force and effect as if the Plan had not been amended or terminated, unless mutually agreed otherwise in a writing (including an Option Agreement) signed by the Optionee and the Company. 10. CONDITIONS UPON ISSUANCE OF SHARES. Shares shall not be issued ---------------------------------- pursuant to the exercise of an Option unless the exercise of such Option and the issuance and delivery of such Shares pursuant thereto shall comply with all relevant provisions of law, including, without limitation, the Securities Act of 1933, as amended, the Exchange Act, the rules and regulations promulgated thereunder, state securities laws, and the requirements of any stock exchange upon which the Shares may then be listed, and shall be further subject to the approval of counsel for the Company with respect to such compliance. As a condition to the exercise of an Option, the Company may require the person exercising such Option to represent and warrant at the time of any such exercise that the Shares are being purchased only for investment and without any present intention to sell or distribute such Shares, if, in the opinion of counsel for the Company, such a representation is required by any of the aforementioned relevant provisions of law. Inability of the Company to obtain authority from any regulatory body having jurisdiction, which authority is deemed by the Company's counsel to be necessary Exhibit 4.2-Page 6 to the lawful issuance and sale of any Shares hereunder, shall relieve the Company 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. 11. RESERVATION OF SHARES. The Company, during the term of this Plan, --------------------- will at all times reserve and keep available such number of Shares as shall be sufficient to satisfy the requirements of the Plan. 12. STOCKHOLDER APPROVAL. The Company shall obtain the approval of the -------------------- Plan by the Company's stockholders to the extent required to satisfy or comply with any applicable laws or the rules of any stock exchange or national market system on which the Common Stock may be listed or quoted. No Option that is issued as a result of any increase in the number of shares of Common Stock authorized to be issued under the Plan may be exercised prior to the time such increase has been approved by the stockholders of the Company, and all such Options granted pursuant to such increase will similarly terminate if such stockholder approval is not obtained. 13. ADMINISTRATION. This Plan shall be administered by the Board. The -------------- Board shall interpret the Plan and any Options granted pursuant to the Plan and shall prescribe such rules and regulations in connection with the operation of the Plan as it determines to be advisable for the administration of the Plan. The Board may rescind and amend its rules and regulations from time to time. The interpretation by the Board of any of the provisions of this Plan or any Options granted under this Plan shall be final and binding upon the Company and all persons having an interest in any Option. 14. SEVERABILITY AND REFORMATION. The Company intends all provisions of ---------------------------- the Plan to be enforced to the fullest extent permitted by law. Accordingly, should a court of competent jurisdiction determine that the scope of any provision of the Plan is too broad to be enforced as written, the court should reform the provision to such narrower scope as it determines to be enforceable. If, however, any provision of the Plan is held to be wholly illegal, invalid, or unenforceable under present or future law, such provision shall be fully severable and severed, and the Plan shall be construed and enforced as if such illegal, invalid, or unenforceable provision were never a part hereof, and the remaining provisions of the Plan shall remain in full force and effect and shall not be affected by the illegal, invalid, or unenforceable provision or by its severance. 15. GOVERNING LAW. The Plan shall be construed and interpreted in ------------- accordance with the laws of the State of Texas. Exhibit 4.2-Page 7 EX-4.3 4 dex43.txt 1996 STOCK OPTION PLAN EXHIBIT 4.3 StarGuide Digital Networks, Inc. 1996 Stock Option Plan Section 1. Purpose. The purpose of the Plan is to provide a means whereby the Company may, through the grant of Options (including Incentive Stock Options), attract and retain individuals of exceptional ability and motivate such individuals to exert their best efforts on behalf of the Company. Section 2. Definitions. Board: The Board of Directors of the Company. Class B Common Stock: The Class B Common Stock, $.001 par value, of the Company or such other class of shares or other securities as may be applicable pursuant to the provisions of Section 7. Company: StarGuide Digital Networks, Inc., a Nevada corporation, and any successor thereto. Fair Market Value: The fair market value of Class B Common Stock shall be determined by the Board at the time the Option is granted, and, in the case of Incentive Stock Options, shall not be less than the fair market value (but in no event less than the par value) of the Class B Common Stock on the date on which the Option is granted. If Class B Common Stock is actively traded or quoted in an established market (such as a national securities exchange or the National Association of Securities Dealers Automated Quotation System) the fair market value of Class B Common Stock shall not be less than the price of Class B Common Stock as of the close of the date on which the Option is granted. Incentive Stock Option: As defined in Section 422 of the Internal Revenue Code of 1986, as amended. Key Individual: An individual approved by the Board for participation in the Plan on the basis of his or her ability to contribute significantly to the growth and profitability of the Company; provided that Incentive Stock Options may be granted only to Key Individuals who are employees of the Company. Option: An option to purchase shares of Class B Common Stock granted to a Key Individual pursuant to Section 5. Plan: The StarGuide Digital Networks, Inc. 1996 Stock Option Plan, as amended from time to time. Exhibit 4.3-Page 1 Section 3. Administration. The Plan shall be administered by the Board. The Board shall have the authority to approve Key Individuals for participation; to construe and interpret the Plan; to establish, amend or waive rules and regulations for its administration; to establish guidelines for the grant of Options; and to determine the form of any grant as Incentive Stock Options, nonqualified options or any combination thereof, the number of shares subject to the grant, the time and conditions of vesting or exercise and under which vesting or exercise may be accelerated, and all other terms and conditions of the grant. Options may be amended by the Board from time to time; provided that no such amendment may adversely affect the rights of an Option holder without such holder's consent. The Board may employ such legal counsel, consultants and agents as it may deem desirable for the administration of the 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 member or former member of the Board shall be liable for any action or determination made in good faith with respect to the Plan or any Option. To the maximum extent permitted by applicable law, each member or former member of the Board shall be indemnified and held harmless by the Company against any cost or expense (including legal 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 the Plan unless arising out of such member's or former member's own fraud or bad faith. Such indemnification shall be in addition to any rights of indemnification the members or former members may have as directors or under the by-laws of the Company. Section 4. Common Stock Subject to Plan. Subject to Section 7, the aggregate shares of Class B Common Stock that may be issued under the Plan shall not exceed 2,000,000. The shares issued upon exercise of Options may be authorized and unissued shares or shares held by the Company in its treasury, or both. In the event of a lapse, expiration, termination, forfeiture or cancellation of any Option granted under the Plan without the issuance of shares or payment of cash, the Class B Common Stock subject to or reserved for such Option may be used again for a new Option hereunder; provided that in no event may the number of shares of Class B Common Stock issued hereunder exceed the total number of shares reserved for issuance. Any shares of Class B Common Stock withheld or surrendered to pay withholding taxes pursuant to Section 10(d) or withheld or surrendered in full or partial payment of the exercise price of an Option pursuant to Section 5(f) shall be added to the aggregate shares of Class B Common Stock available for issuance. Section 5. Options. (a) Agreement. Each Option shall b evidenced by an agreement in a form --------- approved by the Board. (b) Price. The exercise price per share shall be not less than the Fair ----- Market Value on the grant date. Exhibit 4.3-Page 2 (c) Limitations. The exercise price of Incentive Stock Options ----------- exercisable for the first time by a Key Individual during any calendar year shall not exceed $100,000. No Incentive Stock Options may be granted after April 3, 2006. (d) Duration. Each Option shall expire at such time as the Board may -------- determine at the time of grant and as specified in the Option agreement, provided that Incentive Stock Options must expire not later than ten years from the grant date. (e) Exercise of Option. No part of any Option may be exercised until ------------------ the holder shall have satisfied the conditions (i.e., such as remaining in the ---- employ of the Company for a certain period of time) as the Board may specify in the Option agreement. (f) Payment. The exercise price of an Option shall be paid in full at ------- the time of exercise in cash, through the delivery, surrender or withholding of Class B Common Stock, including shares of Class B Common Stock subject to the Option be exercised, having a Fair Market Value equal to the exercise price or by a combination of the foregoing. Section 6. Termination of Employment. (a) Forfeiture of Options Upon Termination of Employment. All unvested ---------------------------------------------------- Options shall be forfeited upon termination of employment for any reason other than death unless the terms of the Option provide otherwise. The Board, in its sole discretion, may waive this automatic forfeiture provision at any time for any Option. The vested portion of any Option also shall terminate immediately upon the termination of the Key Individual's employment for reasons of dishonesty; conviction for, or plea of nolo contendere to, a felony or crime involving moral turpitude; commission of an act involving self-dealing, fraud or personal profit that is injurious to the Company or any affiliated company; or gross negligence in the conduct of the grantee's duties for the Company. Notwithstanding the foregoing, all unvested Options shall become fully vested upon the Option holder's death while employed. (b) Treatment of Options Following Termination. ------------------------------------------ (i) Termination Due to Death. Any Options held by a Key ------------------------ Individual who dies while employed by the Company shall be exercisable by the Key Individual's estate not later than the earlier of one year after the date of death or the expiration of the term of the Options. (ii) Termination for Other Reasons. Upon termination of ----------------------------- employment for any other reason, any Options vested prior to such termination may be exercised by a Key Individual not later than the earlier of one year after the date of termination or the expiration of the term of the Options. Section 7. Adjustment Provisions. If during the term of this Plan there shall be any change in Class B Common Stock through a merger, consolidation, reorganization, recapitalization or otherwise, or if there shall be a dividend on Class B Common Stock payable in Class B Common Stock, or if there shall be a stock split, combination or other change in Class B Common Stock, the shares of Class B Exhibit 4.3-Page 3 Common Stock available under this Plan shall be increased or decreased proportionately to give effect to such change in Class B Common Stock and the shares of Class B Common Stock subject to then existing Options shall be proportionately adjusted so that upon the issuance of Class B Common Stock pursuant to the exercise of such Options, the person receiving such Class B Common Stock will receive the securities which would have been received if the issuance of Class B Common Stock pursuant to the Options had occurred immediately prior to such merger, consolidation, reorganization, recapitalization, dividend, stock split, combination or other change. Each such Option shall be adjusted to nearest whole share, rounding downwards. In no event shall any fractional share become subject to an Option issued hereunder. Section 8. Compliance with Other Laws and Regulations. The Plan, the grant and exercise of Options, and the obligation of the Company to sell and deliver shares of Class B Common Stock under such Options, shall be subject to all applicable Federal and state laws, rules and regulations and to such approvals by any government or regulatory agency as may be required. If at any time the Board shall determine in its discretion that the listing, registration or qualification of the Class B Common Stock covered by the Plan upon any national 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 sale or purchase of Class B Common Stock under the Plan, no Class B Common Stock will be delivered unless and until such listing, registration, qualification, consent or approval shall have been effected or obtained, or otherwise provided for, free of any conditions not acceptable to the Board. If Class B Common Stock is not required to be registered, but is exempt from registration, upon exercising all or any portion of an Option, the Company may require each holder to represent that the Class B Common Stock is being acquired for investment only and not with a view to their sale or distribution and to make such other representations deemed appropriate by counsel to the Company. Class B Common Stock certificates evidencing unregistered Class B Common Stock acquired upon exercise of Options shall bear any legend required by applicable state securities laws and a restrictive legend substantially as follows: The voluntary or involuntary encumbering, transfer or other disposition (including, without limitation, any disposition pursuant to the laws of bankruptcy, insolvency, intestacy, descent and distribution or succession) of the shares of stock evidenced by this certificate is restricted under the terms of a Stockholders Agreement, dated effective as of January 5, 1996, to which the holder of this certificate is a party, a copy of which agreement is on file at the principal office of the Corporation. Upon written request of any stockholder of the Corporation, the Corporation shall furnish, without charge to such stockholder, a copy of such agreement. The securities represented hereby have not been registered under the Securities Act of 1933, as amended, and may not be offered, sold or otherwise transferred, pledged or hypothecated unless and until registered under said Act or, in the opinion of counsel Exhibit 4.3-Page 4 reasonably acceptable to the issuer of these securities, such offer, sale, transfer, pledge or hypothecation does not violate the provisions thereof or unless sold pursuant to Rule 144 or Rule 144A under said Act. Section 9. Term. The Plan shall be deemed adopted and shall become effective on the date it is approved by the stockholders of the Company and shall continue until terminated by the Board or no Class B Common Stock remains available for issuance under Section 4, whichever occurs first. Section 10. General Provisions. (a) Employment. Nothing contained in this Plan or any Option shall be ---------- construed as a contract of employment between the Company and any Key Individual, or as a right of any Key Individual to be continued in the employment of the Company or as a limitation of the Company's right to discharge any Key Individual with or without cause. Except as expressly provided in this Plan, nothing contained herein or in any Option agreement shall be construed as a term or condition of any Key Individual's employment and, in particular, neither this Plan nor any Option shall confer additional rights or privileges upon any Key Individual over his or her existing terms and conditions of employment nor shall they entitle any Key Individual to additional compensation or damages upon termination of employment. (b) Ownership of Class B Common Stock Allocated to Plan. No Key --------------------------------------------------- Individual (individually or as a member of a group), and no beneficiary or other person claiming under or through such Key Individual, shall have any right, title or interest in or to any Class B Common Stock allocated or reserved for purposes of the Plan or subject to any Option except as to shares of Class B Common Stock, if any, as shall have been issued to such Key Individual. (c) Governing Law. The Plan, and all agreements hereunder, shall be ------------- construed in accordance with and governed by the laws of the State of Nevada. (d) Withholding of Taxes. The Company may withhold, or allow an Option -------------------- holder to remit to the Company, any Federal, state or local taxes applicable to any grant, exercise, vesting or other event giving rise to income tax liability with respect to an Option. An Option holder may elect to surrender previously acquired Class B Common Stock or to have the Company withhold Class B Common Stock that would otherwise have been issued pursuant to the exercise of an Option or in connection with any other Option, the number of shares of such withheld or surrendered Class B Common Stock to be sufficient to satisfy all or a portion of the income tax liability that arises upon the exercise, vesting or other event giving rise to income tax liability with respect to an Option. (e) Non-transferability; Exceptions. Except as provided in this Section ------------------------------- 9(c), no Option may be assigned or subjected to any encumbrance, pledge or charge of any nature. Under such rules and procedures as the Board may establish, the holder of an Option may transfer such Option to members of the holder's immediate family (i.e., children, grandchildren and spouse) or to one or more trusts for the benefit of such family members or to partnerships in which such family members are the only partners, provided that (i) the agreement, if any, with respect to Exhibit 4.3-Page 5 such Options, expressly so permits or is amended to so permit, (ii) the holder does not receive any consideration for such transfer, and (iii) the holder provides such documentation or information concerning any such transfer or transferee as the Board may reasonably request. Any Options held by any transferees shall be subject to the same terms and conditions that applied immediately prior to their transfer. Any Option not granted pursuant to any agreement expressly permitting its transfer or amended expressly to permit its transfer shall not be transferable. Such transfer rights shall in no event apply to any Incentive Stock Option. Section 11. Amendment or Discontinuance of the Plan. (a) Amendment or Discontinuance. The Plan may be amended or --------------------------- discontinued by the Board from time to time, provided that without the approval of stockholders, no amendment shall be made which (i) amends Section 4 to increase the aggregate Class B Common Stock that may be issued pursuant to Options, (ii) permits any person who is not a Key Individual to be granted an Option, or (iii) amends this Section 11. (b) Effect of Amendment or Discontinuance on Options. No amendment or ------------------------------------------------ discontinuance of the Plan by the Board or the stockholders of the Company shall adversely affect any Option theretofore granted without the consent of the holder. Exhibit 4.3-Page 6 EX-4.4 5 dex44.txt 1999 EQUITY INCENTIVE PLAN Exhibit 4.4 STARGUIDE DIGITAL NETWORKS, INC. 1999 EQUITY INCENTIVE PLAN 1. Purposes of the Plan. The purposes of the StarGuide Digital Networks, -------------------- Inc. 1999 Equity Incentive Plan are to attract and retain the best available personnel for positions of substantial responsibility, to provide additional incentive to Employees, Directors and Consultants and to promote the success of the Company's business. Options granted under the Plan may be Incentive Stock Options or Non-Qualified Stock Options, as determined by the Administrator at, the time of grant. Stock Purchase Rights may also be granted under the Plan. 2. Definitions. As used herein, the following definitions shall apply: ----------- (a) "Acquisition" means (i) any consolidation or merger of the Company ----------- with or into any other corporation or other entity, or person in which the stockholders of the Company prior to such consolidation or merger own less than fifty percent (50%) of the Company's voting power immediately after such consolidation or merger, excluding any consolidation or merger effected exclusively to change the domicile of the Company; or (ii) a sale of all or substantially all of the assets of the Company. (b) "Administrator" means the Board or the Committee responsible for ------------- conducting the general administration of the Plan, as applicable, in accordance with Section 4 hereof. (c) "Applicable Laws" means the requirements relating to the --------------- administration of stock option plans under U.S. state corporate laws, U.S. federal and state securities laws, the Code, any stock exchange or quotation system on which the Common Stock is listed or quoted and the applicable laws of any foreign country or jurisdiction where Options or Stock Purchase Rights are granted under the Plan. (d) "Board" means the Board of Directors of the Company. ----- (e) "Code" means the Internal Revenue Code of 1986, as amended. ---- (f) "Committee" means a committee appointed by the Board in accordance --------- with Section 4 hereof. (g) "Common Stock" means the Class B Common Stock of the Company, par ------------ value $0.001 per share. (h) "Company" means StarGuide Digital Networks, Inc., a Nevada ------- corporation. (i) "Consultant" means any consultant or adviser if: (i) the consultant or adviser renders bona fide services to the Company; (ii) the services rendered by the consultant or adviser are not in connection with the offer or sale of securities in a capital-raising transaction and do not directly or indirectly promote or maintain a market for the Company's securities. and (iii) the consultant or adviser is a natural person who has contracted directly with the Company to render such services. Exhibit 4.4 - Page 1 (j) "Director" means a member of the Board. -------- (k) "Employee" means any person, including an Officer or Director, who is -------- an employee (as defined in accordance with Section 3401 (c) of the Code) of the Company or any Parent or Subsidiary of the Company. A Service Provider shall not cease to be an Employee in the case of (i) any leave of absence approved by the Company or (ii) transfers between locations of the Company or between the Company, its Parent, any Subsidiary, or any successor. For purposes of Incentive Stock Options, no such leave may exceed ninety (90) days, unless reemployment upon expiration of such leave is guaranteed by statute or contract. Neither service as a Director nor payment of a director's fee by the Company shall be sufficient, by itself, to constitute "employment" by the Company. (l) "Exchange Act" means the Securities Exchange Act of 1934, as amended. ------------ (m) "Fair Market Value" means, as of any date, the value of a share of ----------------- Common Stock determined as follows: (i) If the Common Stock is listed on any established stock exchange or a national market system, including, without limitation, the Nasdaq National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its Fair Market Value shall be the closing sales price for a share of such stock (or the closing bid, if no sales were reported) as quoted on such exchange or system for the last market trading day prior to the time of determination, as reported in The Wall Street Journal or such other source as the Administrator deems reliable; (ii) If the Common Stock is regularly quoted by a recognized securities dealer but selling prices are not reported, its Fair Market Value shall be the mean between the high bid and low asked prices for a share of the Common Stock on the last market trading day prior to the day of determination; or (iii)In the absence of an established market for the Common Stock, the Fair Market Value thereof shall be determined in good faith by the Administrator. (n) "Holder" means a person who has been granted or awarded an Option or ------ Stock Purchase Right or who holds Shares acquired pursuant to the exercise of an Option or Stock Purchase Right. (o) "Incentive Stock Option" means an Option intended to qualify as an ---------------------- incentive stock option within the meaning of Section 422 of the Code and which is designated as an Incentive Stock Option by the Administrator. (p) "Independent Director" means a Director who is not an Employee of the -------------------- Company. (q) "Non-Qualified Stock Option" means an Option (or portion thereof that -------------------------- is not designated as an Incentive Stock Option by the Administrator, or which is designated as an Incentive Stock Option by the Administrator but fails to qualify as an incentive stock option within the meaning of Section 422 of the Code. Exhibit 4.4 - Page 2 (r) "Officer" means a person who is an officer of the Company within the ------- meaning of Section 16 of the Exchange Act and the rules and regulations promulgated thereunder. (s) "Option" means a stock option granted pursuant to the Plan. ------ (t) "Option Agreement" means a written agreement between the Company and a ---------------- Holder evidencing the terms and conditions of an individual Option grant. The Option Agreement is subject to the terms and conditions of the Plan. (u) "Parent" means a "parent corporation," whether now or hereafter ------ existing, as defined in Section 424(e) of the Code. (v) "Plan" means the StarGuide Digital Networks, Inc. 2000 Equity ---- Incentive Plan. (w) "Public Trading Date" means the first date upon which Common Stock of ------------------- the Company is listed (or approved for listing) upon notice of issuance on any securities exchange or designated (or approved for designation) upon notice of issuance as a national market security on an interdealer quotation system. (x) "Restricted Stock" means Shares acquired pursuant to the exercise of ---------------- an unvested Option in accordance with Section 10(h) below or pursuant to a Stock Purchase Right granted under Section 12 below. (y) "Rule 16b-3)" means that certain Rule 16b-3 under the Exchange Act, as ----------- such Rule may be amended from time to time. (z) "Section 16(b)" means Section 16(b) of the Exchange Act. ------------- (aa) "Securities Act" means the Securities Act of 1933, as amended. -------------- (bb) "Service Provider" means an Employee, Director or Consultant. ---------------- (cc) "Share" means a share of Common Stock, as adjusted in accordance with ----- Section 13 below. (dd) "Stock Purchase Right" means a right to purchase Common Stock pursuant -------------------- to Section 12 below. (ee) "Subsidiary" means a "subsidiary corporation," whether now or ---------- hereafter existing, as defined in Section 424(t) of the Code. 3. Stock Subject to the Plan. Subject to the provisions of Section 13 of the ------------------------- Plan, the shares of stock subject to Options or Stock Purchase Rights shall be Common Stock, initially shares of the Company's Class B Common Stock, par value $0.001 per share. Subject to the provisions of Section 13 of the Plan, the maximum aggregate number of Shares which may be issued upon exercise of such Options or Stock Purchase Rights is 3,000.000 Shares. Shares Exhibit 4.4 - Page 3 issued upon exercise of Options or Stock Purchase Rights may be authorized but unissued, or reacquired Shares. If an Option or Stock Purchase Right expires or becomes unexercisable without having been exercised in full, the unpurchased Shares which are subject thereto shall become available for future grant or sale under the Plan (unless the Plan has terminated). Shares which are delivered by the Holder or withheld by the Company upon the exercise of an Option or Stock Purchase Right under the Plan, in payment of the exercise price thereof or tax withholding thereon, may again be optioned, granted or awarded hereunder, subject to the limitations of this Section 3. If Shares of Restricted Stock are repurchased by the Company at their original purchase price, such Shares shall become available for future grant under the Plan. Notwithstanding the provisions of this Section 3, no Shares may again be optioned, granted or awarded if such action would cause an Incentive Stock Option to fail to qualify as an Incentive Stock Option under Code Section 422. 4. Administration of the Plan. -------------------------- (a) Administrator. Unless and until the Board delegates administration to ------------- a Committee as set forth below, the Plan shall be administered by the Board. The Board may delegate administration of the Plan to a Committee or Committees of one or more members of the Board, and the term "Committee" shall apply to any person or persons to whom such authority has been delegated. If administration is delegated to a Committee, the Committee shall have, in connection with the administration of the Plan, the powers theretofore possessed by the Board, including the power to delegate to a subcommittee any of the administrative powers the Committee is authorized to exercise (and references in this Plan to the Board shall thereafter be to the Committee or subcommittee). subject, however, to such resolutions, not inconsistent with the provisions of the Plan, as may be adopted from time to time by the Board. Notwithstanding the foregoing, however, from and after the Public Trading Date, a Committee of the Board shall administer the Plan and the Committee shall consist solely of two or more Independent Directors each of whom is both an "outside director," within the meaning of Section 162(m) of the Code, and a "non-employee director" within the meaning of Rule 16b-3. Within the scope of such authority, the Board or the Committee may (i) delegate to a committee of one or more members of the Board who are not Independent Directors the authority to grant awards under the Plan to eligible persons who are either (A) not then "covered employees," within the meaning of Section 162(m) of the Code and are not expected to be "covered employees" at the time of recognition of income resulting from such award or (B) not persons with respect to whom the Company wishes to comply with Section 162(m) of the Code and/or (ii) delegate to a committee of one or more members of the Board who are not "non-employee directors," within the meaning of Rule 16b- 3, the authority to grant awards under the Plan to eligible persons who are not then subject to Section 16 of the Exchange Act. The Board may abolish the Committee at any time and revest in the Board the administration of the Plan. Appointment of Committee members shall be effective upon acceptance of appointment. Committee members may resign at any time by delivering written notice to the Board. Vacancies in the Committee may only be filled by the Board. (b) To the maximum extent permitted by Applicable Law, each member or former member of the Board shall be indemnified and held harmless by the Company against any cost or expense (including legal fees) or liability (including any sum paid in settlement of a claim with the approval of the Board) arising out of any act or omission to act in connection with Exhibit 4.4 - Page 4 the Plan, unless arising out of such member's or former member's own fraud or bad faith. Such indemnification shall be in addition to any rights of indemnification the members or former members may have as directors or under the by-laws of the Company. (c) Powers of the Administrator. Subject to the provisions of the Plan and --------------------------- the specific duties delegated by the Board to such Committee, and subject to the approval of any relevant authorities, the Administrator shall have the authority in its discretion to: (i) Determine the Fair Market Value; (ii) Select the Service Providers to whom Options and Stock Purchase Rights may from time to time be granted hereunder; (iii) Determine the number of Shares to be covered by each such award granted hereunder; (iv) Approve forms of agreement for use under the Plan; (v) Determine the terms and conditions of any Option or Stock Purchase Right granted hereunder (such terms and conditions include, but are not limited to, the exercise price, the time or times when Options or Stock Purchase Rights may vest or be exercised (which may be based on performance criteria), any vesting acceleration or waiver of forfeiture restrictions, and any restriction or limitation regarding any Option or Stock Purchase Right or the Common Stock relating thereto, based in each case on such factors as the Administrator, in its sole discretion, shall determine); (vi) Determine whether to offer to buyout a previously granted Option as provided in subsection 10(i) and to determine the terms and conditions of such offer and buyout (including whether payment is to be made in cash or Shares); (vii) Prescribe, amend and rescind rules and regulations relating to the Plan. including rules and regulations relating to sub-plans established for the purpose of qualifying for preferred tax treatment under foreign tax laws; (viii)Allow Holders to satisfy withholding tax obligations by electing to have the Company withhold from the Shares to be issued upon exercise of an Option or Stock Purchase Right that number of Shares having a Fair Market Value equal to the minimum amount required to be withheld based on the statutory withholding rates for federal and state tax purposes that apply to supplemental taxable income. The Fair Market Value of the Shares to be withheld shall be determined on the date that the amount of tax to be withheld is to be determined. All elections by Holders to have Shares withheld for this purpose shall be made in such form and under such conditions as the Administrator may deem necessary or advisable; (ix) Amend the Plan or any Option or Stock Purchase Right granted under the Plan as provided in Section 15; and (x) Construe and interpret the terms of the Plan and awards granted pursuant to the Plan and to exercise such powers and perform such acts as the Administrator Exhibit 4.4 - Page 5 deems necessary or desirable to promote the best interests of the Company which are not in conflict with the provisions of the Plan. (d) Effect of Administrator's Decision. All decisions, determinations and ---------------------------------- interpretations of the Administrator shall be final and binding on all Holders. 5. Eligibility. Non-Qualified Stock Options and Stock Purchase Rights may be ----------- granted to Service Providers. Incentive Stock Options may be granted only to Employees. If otherwise eligible, an Employee or Consultant who has been granted an Option or Stock Purchase Right may be granted additional Options or Stock Purchase Rights. 6. Limitations. ----------- (a) Each Option shall be designated by the Administrator in the Option Agreement as either an Incentive Stock Option or a Non-Qualified Stock Option. However, notwithstanding such designations, to the extent that the aggregate Fair Market Value of Shares subject to a Holder's Incentive Stock Options and other incentive stock options granted by the Company, any Parent or Subsidiary. which become exercisable for the first time during any calendar ),ear (under all plans of the Company or any Parent or Subsidiary) exceeds $100,000, such excess Options or other options shall be treated as Non-Qualified Stock Options. For purposes of this Section 6(a). Incentive Stock Options shall be taken into account in the order in which they were granted, and the Fair Market Value of the Shares shall be determined as of the time of grant. (b) Neither the Plan, any Option nor any Stock Purchase Right shall confer upon a Holder any right with respect to continuing the Holder's employment or consulting relationship with the Company, nor shall they interfere in any way with the Holder's right or the Company's right to terminate such employment or consulting relationship at any time, with or without cause. (c) No Service Provider shall be granted, in any calendar year, Options or Stock Purchase Rights to purchase more than 3,000,000 Shares; provided, however, that the foregoing limitation shall not apply prior to the Public Trading Date and. following the Public Trading Date, the foregoing limitation shall not apply until the earliest of: (i) the first material modification of the Plan (including an), increase in the number of shares reserved for issuance under the Plan in accordance with Section 3); (ii) the issuance of all of the shares of Common Stock reserved for issuance under the Plan; (iii) the expiration of the Plan; (iv) the first meeting of stockholders at which Directors of the Company are to be elected that occurs after the close of the third calendar year following the calendar year in which occurred the first registration of an equity security of the Company under Section 12 of the Exchange Act; or (v) such other date required by Section 162(m) of the Code and the rules and regulations promulgated thereunder. The foregoing limitation shall be adjusted proportionately in connection with any change in the Company's capitalization as described in Section 13. For purposes of this Section 6(c), if an Option is canceled in the same calendar year it was granted (other than in connection with a transaction described in Section 13), the canceled Option will be counted against the limit set forth in this Section 6(c). For this purpose, if the exercise price of an Option is reduced, the transaction shall be treated as a cancellation of the Option and the grant of a new Option. Exhibit 4.4 - Page 6 7. Term of Plan. The Plan shall become effective upon its initial adoption by ------------ the Board and shall continue in effect until it is terminated under Section 15 of the Plan. No Options or Stock Purchase Rights may be issued under the Plan after the tenth (10th) anniversary of the earlier of (a) the date upon which the Plan is adopted by the Board or (b) the date the Plan is approved by the stockholders. 8. Term of Option. The term of each Option shall be stated in the Option -------------- Agreement; provided however, that the term shall be no more than ten (10) years from the date of grant thereof. In the case of an Incentive Stock Option granted to a Holder who, at the time the Option is granted, owns (or is treated as owner under Code Section 424) stock representing more than ten percent (10%) of the voting power of all classes of stock of the Company or any Parent or Subsidiary, the term of the Option shall be five (5) years from the date of grant or such shorter term as may be provided in the Option Agreement. 9. Option Exercise Price and Consideration. --------------------------------------- (a) The per share exercise price for the Shares to be issued upon exercise of an Option shall be such price as is determined by the Administrator, provided, that in the case of all Incentive Stock Option (i) granted to an Employee who, at the time of grant of such Option, owns (or is treated as owning under Code Section 424) stock representing more than ten percent (10%) of the voting power of all classes of stock of the Company or any Parent or Subsidiary, the per Share exercise price shall be no less than one hundred ten percent (110%) of the Fair Market Value per Share on the date of grant, and (ii) granted to any other Employee, the per Share exercise price shall be no less than one hundred percent (100%) of the Fair Market Value per Share on the date of grant. Notwithstanding the foregoing subsections (i) and (ii), Options may be granted with a per Share exercise price other than as required above pursuant to a merger or other corporate transaction. (b) The consideration to be paid for the Shares to be issued upon exercise of an Option, including the method of payment shall be determined by the Administrator (and, in the case of an Incentive Stock Option. shall be determined at the time of grant). Such consideration may consist of (i) cash, (ii) check, (iii) with the consent of the Administrator, a full recourse promissory note bearing interest (at no less than such rate as shall then preclude the imputation of interest under the Code) and payable upon such terms as may be prescribed by the Administrator, (iv) with the consent of the Administrator, other Shares which (A) in the case of Shares acquired from the Company, have been owned by the Holder for more than six (6) months on the date of surrender, and (B) have a Fair Market Value on the date of surrender equal to the aggregate exercise price of the Shares as to which such Option shall be exercised, (v) with the consent of the Administrator, surrendered Shares then issuable upon exercise of the Option having a Fair Market Value on the date of exercise equal to the aggregate exercise price of the Option or exercised portion thereof, (vi) property of any kind which constitutes good and valuable consideration, (vii) with the consent of the Administrator, delivery of a notice that the Holder has placed a market sell order with a broker with respect to Shares then issuable upon exercise of the Options and that the broker has been directed to pay a sufficient portion of the net proceeds of the sale to the Company in satisfaction of the Option exercise price, provided, that payment of such proceeds is then made to the Company upon settlement of such sale, or (viii) with the consent of the Administrator, any combination of the foregoing methods of payment. Exhibit 4.4 - Page 7 10. Exercise of Option. ------------------ (a) Vesting; Fractional Exercises. Options granted hereunder shall be ----------------------------- vested and exercisable according to the terms hereof at such times and under such conditions as determined by the Administrator and set forth in the Option Agreement. An Option may not be exercised for a fraction of a Share. (b) Deliveries upon Exercise. All or a portion of an exercisable Option ------------------------ shall be deemed exercised upon delivery of all of the following to the Secretary of the Company or his or her office: (i) A written or electronic notice complying with the applicable rules established by the Administrator stating that the Option, or a portion thereof, is exercised. The notice shall be signed by the Holder or other person then entitled to exercise the Option or such portion of the Option; (ii) Such representations and documents as the Administrator, in its absolute discretion, deems necessary or advisable to effect compliance with Applicable Laws. The Administrator may, in its absolute discretion, also take whatever additional actions it deems appropriate to effect such compliance, including, without limitation, placing legends on share certificates and issuing stop transfer notices to agents and registrars; (iii)Upon the exercise of all or a portion of an unvested Option pursuant to Section 10(h), a Restricted Stock purchase agreement in a form determined by the Administrator and signed by the Holder or other person then entitled to exercise the Option or such portion of the Option; and (iv) In the event that the Option shall be exercised pursuant to Section 10(f) by any person or persons other than the Holder, appropriate proof of the right of such person or persons to exercise the Option. (c) Conditions to Delivery of Share Certificates. The Company shall not -------------------------------------------- be required to issue or deliver any certificate or certificates for Shares purchased upon the exercise of any Option or portion thereof prior to fulfillment of all of the following conditions: (i) The admission of such Shares to listing on all stock exchanges on which such class of stock is then listed. (ii) The completion of any registration or other qualification of such Shares under any state or federal law, or under the rulings or regulations of the Securities and Exchange Commission or any other governmental regulatory body which the Administrator shall, in its absolute discretion, deem necessary or advisable; (iii)The obtaining of any approval or other clearance from any state or federal governmental agency which the Administrator shall, in its absolute discretion, determine to be necessary or advisable; Exhibit 4.4 - Page 8 (iv) The lapse of such reasonable period of time following the exercise of the Option as the Administrator may establish from time to time for reasons of administrative convenience; and (v) The receipt by the Company, of full payment for such Shares, including payment of any applicable withholding tax, which in the discretion of the Administrator may be in the form of consideration used by the Holder to pay for such Shares under Section 9(b). (d) Termination of Relationship as a Service Provider. If a Holder ------------------------------------------------- ceases to be a Service Provider other than by reason of the Holder's disability or death, such Holder may exercise his or her Option within such period of time as is specified in the Option Agreement to the extent that the Option is vested on the date of termination (but in no event later than the expiration of the term of the Option as set forth in the Option Agreement). In the absence of a specified time in the Option Agreement, the Option shall remain exercisable for three (3) months following the Holder's termination. If, on the date of termination, the Holder is not vested as to his or her entire Option, the Shares covered by the unvested portion of the Option immediately cease to be issuable under the Option and shall again become available for issuance under the Plan. If, after termination, the Holder does not exercise his or her Option within the time period specified herein, the Option shall terminate, and the Shares covered by such Option shall again become available for issuance under the Plan. (e) Disability of Holder. If a Holder ceases to be a Service -------------------- Provider as a result of the Holder's disability, the Holder may exercise his or her Option within such period of time as is specified in the Option Agreement to the extent the Option is vested on the date of termination (but in no event later than the expiration of the term of such Option as set forth in the Option Agreement). In the absence of a specified time in the Option Agreement, the Option shall remain exercisable for twelve (12) months following the Holder's termination. If such disability is not a "disability" as such term is defined in Section 22(e)(3) of the Code, in the case of an Incentive Stock Option such Incentive Stock Option shall automatically cease to be treated as an Incentive Stock Option and shall be treated for tax purposes as a Non-Qualified Stock Option from and after the day which is three (3) months and one (1) day following such termination. If, on the date of termination, the Holder is not vested as to his or her entire Option, the Shares covered by the unvested portion of the Option shall immediately cease to be issuable under the Option and shall again become available for issuance under the Plan. If, after termination, the Holder does not exercise his or her Option within the time specified herein, the Option shall terminate, and the Shares covered by such Option shall again become available for issuance under the Plan. (f) Death of Holder. If a Holder dies while a Service Provider, the --------------- Option may be exercised within such period of time as is specified in the Option Agreement (but in no event later than the expiration of the term of the Option as set forth in the Option Agreement), by the Holder's estate or by a person who acquires the right to exercise the Option by bequest or inheritance, but only to the extent that the Option is vested on the date of death. In the absence of a specified time in the Option Agreement, the Option shall remain exercisable for twelve (12) months following the Holder's termination. If, at the time of death, the Holder is not vested as to his or her entire Option, the Shares covered by the unvested portion of the Option shall Exhibit 4.4-Page 9 immediately cease to be issuable under the Option and shall again become available for issuance under the Plan. The Option may be exercised by the executor or administrator of the Holder's if none, by the person(s) entitled to exercise the Option under the Holder's will or the estate or, laws of descent or distribution. If the Option is not so exercised within the time specified herein, the Option shall terminate, and the Shares covered by such Option shall again become available for issuance under the Plan. (g) Regulatory Extension. A Holder's Option Agreement may provide -------------------- that if the exercise of the Option following the termination of the Holder's status as a Service Provider (other than upon the Holder's death or Disability) would be prohibited at any time solely because the issuance of shares would violate the registration requirements under the Securities Act, then the Option shall terminate on the earlier of (i) the expiration of the term of the Option set forth in Section 8 or (ii) the expiration of a period of three (3) months after the termination of the Holder's status as a Service Provider during which the exercise of the Option would not be in violation of such registration requirements. (h) Early Exercisability. The Administrator may provide in the -------------------- terms of a Holder's Option Agreement that the Holder may, at any time before the Holder's status as a Service Provider terminates, exercise the Option in whole or in part prior to the full vesting of the Option; provided however, that subject to Section 20, Shares acquired upon exercise of an Option which has not fully vested may be subject to any forfeiture, transfer or other restrictions as the Administrator may determine in its sole discretion. (i) Buyout Provisions. The Administrator may at any time offer to ----------------- buyout for a payment in cash or Shares, an Option previously granted, based on such terms and conditions as the Administrator shall establish and communicate to the Holder at the time that such offer is made. 11. Non-Transferability of Options and Stock Purchase Rights. Except as -------------------------------------------------------- otherwise provided in this Section 11, Options and Stock Purchase Rights may not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any manner other than by will or by the laws of descent or distribution and may be exercised, during the lifetime of the Holder, only by the Holder. Notwithstanding the foregoing sentence, the Administrator, in its sole discretion, may determine to permit a Holder to transfer a Non-Qualified Stock Option to any one or more Permitted Transferees (as defined below), subject to the following terms and conditions: (i) a Non-Qualified Stock Option transferred to a Permitted Transferee shall not be assignable or transferable by the Permitted Transferee other than by will or the laws of descent and distribution; (ii) any Non-Qualified Stock Option which is transferred to a Permitted Transferee shall continue to be subject to all the terms and conditions of the Non-Qualified Stock Option as applicable to the original Holder (other than the ability to further transfer the Non-Qualified Stock Option); and (iii) the Holder and the Permitted Transferee shall execute any and all documents requested by the Administrator, including, without limitation documents to (A) confirm the status of the transferee as a Permitted Transferee, (B) satisfy any requirements for an exemption for the transfer under applicable federal and state securities laws and (C) evidence the transfer. For purposes of this Section 11.1(b), "Permitted Transferee" shall mean, with respect to a Holder, any child, stepchild, grandchild, parent, stepparent, grandparent, spouse, former spouse, sibling, niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law, Exhibit 4.4-Page 10 brother-in-law, or sister-in-law, including adoptive relationships, any person sharing the Holder's household (other than a tenant or employee), a trust in which these persons have more than fifty percent of the beneficial interest, a foundation in which these persons (or the Holder) control the management of assets, and any other entity in which these persons (or the Holder) own more than fifty percent of the voting interests, or any other transferee specifically approved by the Committee after taking into account any state or federal tax or securities laws applicable to transferable Non-Qualified Stock Options. 12. Stock Purchase Rights. --------------------- (a) Rights to Purchase. Stock Purchase Rights may be issued ------------------ either alone, in addition to, or in tandem with Options granted under the Plan and/or cash awards made outside of the Plan. After the Administrator determines that it will offer Stock Purchase Rights under the Plan, it shall advise the offeree in writing of the terms, conditions and restrictions related to the offer, including the number of Shares that such person shall be entitled to purchase, the price to be paid, and the time within which such person must accept such offer. The offer shall be accepted by execution of a Restricted Stock purchase agreement in the form determined by the Administrator. (b) Repurchase Right. Unless the Administrator determines ---------------- otherwise, the Restricted Stock purchase agreement shall grant the Company the right to repurchase Shares acquired upon exercise of a Stock Purchase Right upon the termination of the purchaser's status as a Service Provider for any reason. Subject to Section 20, the purchase price for Shares repurchased by the Company pursuant to such repurchase right and the rate at with such repurchase right shall lapse shall be determined by the Administrator in its sole discretion, and shall be set forth in the Restricted Stock purchase agreement. (c) Other Provisions. The Restricted Stock purchase agreement ---------------- shall contain such other terms, provisions and conditions not inconsistent with the Plan as may be determined by the Administrator in its sole discretion. (d) Rights as a Shareholder. Once the Stock Purchase Right is ----------------------- exercised, the purchaser shall have rights equivalent to those of a shareholder and shall be a shareholder when his or her purchase is entered upon the records of the duly authorized transfer agent of the Company. No adjustment shall be made for a dividend or other right for which the record date is prior to the date the Stock Purchase Right is exercised, except as provided in Section 13 of the Plan. 13. Adjustments upon Changes in Capitalization, Merger or Asset Sale. ---------------------------------------------------------------- (a) In the event that the Administrator determines that any dividend or other distribution (whether in the form of cash, Common Stock, other securities. or other property), recapitalization, reclassification, stock split, reverse stock split, reorganization, merger, consolidation, split-up. split-off, combination, repurchase, liquidation, dissolution, or sale, transfer, exchange or other disposition of all or substantially all of the assets of the Company, or exchange of Common Stock or other securities of the Company, issuance of warrants or other rights to purchase Common Stock or other securities of the Company, or other similar corporate Exhibit 4.4-Page 11 transaction or event, in the Administrator's sole discretion, affects the Common Stock such that an adjustment is determined by the Administrator to be appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan or with respect to any Option, Stock Purchase Right or Restricted Stock, then the Administrator shall, in such manner as it may deem equitable, adjust any or all of: (i) The number and kind of shares of Common Stock (or other securities or property) with respect to which Options or Stock Purchase Rights may be granted or awarded (including, but not limited to, adjustments of the limitations in Section 3 on the maximum number and kind of shares which may be issued and adjustments of the maximum number of Shares that may be purchased by any Holder in any calendar year pursuant to Section 6(c)); (ii) The number and kind of shares of Common Stock (or other securities or property) subject to outstanding Options, Stock Purchase Rights or Restricted Stock; and (iii) The grant or exercise price with respect to any Option or Stock Purchase Right. (b) In the event of any transaction or event described in Section 13(a), the Administrator, in its sole and absolute discretion, and on such terms and conditions as it deems appropriate, either by the terms of the Option, Stock Purchase Right or Restricted Stock or by action taken prior to the occurrence of such transaction or event and either automatically or upon the Holder's request, is hereby authorized to take any one or more of the following actions whenever the Administrator determines that such action is appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan or with respect to any Option, Stock Purchase Right or Restricted Stock granted or issued under the Plan or to facilitate such transaction or event: (i) To provide for either the purchase of any such Option, Stock Purchase Right or Restricted Stock for an amount of cash equal to the amount that could have been obtained upon the exercise of such Option or Stock Purchase Right or realization of the Holder's rights had such Option, Stock Purchase Right or Restricted Stock been currently exercisable or payable or fully vested or the replacement of such Option, Stock Purchase Right or Restricted Stock with other rights or property selected by the Administrator in its sole discretion; (ii) To provide that such Option or Stock Purchase Right shall be exercisable as to all shares covered thereby, notwithstanding anything to the contrary in the Plan or the provisions of such Option or Stock Purchase Right: (iii) To provide that such Option, Stock Purchase Right or Restricted Stock be assumed by the successor or survivor corporation, or a parent or subsidiary thereof, or shall be substituted for by similar options, rights or awards covering the stock of the successor or survivor corporation, or a parent or subsidiary thereof, with appropriate adjustments as to the number and kind of shares and prices; Exhibit 4.4-Page 12 (iv) To make adjustments in the number and type of shares of Common Stock (or other securities or property subject to outstanding Options and Stock Purchase Rights, and/or in the terms and conditions of (including the grant or exercise price), and the criteria included in, outstanding Options, Stock Purchase Rights or Restricted Stock or Options, Stock Purchase Rights or Restricted Stock which may be granted in the future; and (v) To provide that immediately upon the consummation of such event, such Option or Stock Purchase Right shall not be exercisable and shall terminate; provided, that for a specified period of time prior to such event, such Option or Stock Purchase Right shall be exercisable as to all Shares covered thereby, and the restrictions imposed under an Option Agreement or Restricted Stock purchase agreement upon some or all Shares may be terminated and, in the case of Restricted Stock, some or all shares of such Restricted Stock may cease to be subject to repurchase, notwithstanding anything to the contrary in the Plan or the provisions of such Option, Stock Purchase Right or Restricted Stock purchase agreement. (c) Subject to Section 3, the Administrator may, in its discretion, include such further provisions and limitations in any Option, Stock Purchase Right, Restricted Stock agreement or certificate, as it may deem equitable and in the best interests of the Company. (d) If the Company undergoes an Acquisition, then any surviving corporation or entity or acquiring corporation or entity, or affiliate of such corporation or entity, may assume any Options, Stock Purchase Rights or Restricted Stock outstanding under the Plan or may substitute similar stock awards (including an award to acquire the same consideration paid to the stockholders in the transaction described in this subsection 13(d) for those outstanding under the Plan. In the event any surviving corporation or entity or acquiring corporation or entity in an Acquisition does not assume such Options, Stock Purchase Rights or Restricted Stock or does not substitute similar stock awards for those outstanding under the Plan, then with respect to (i) Options, Stock Purchase Rights or Restricted Stock held by participants in the Plan whose status as a Service Provider has not terminated prior to such event, the vesting of such Options, Stock Purchase Rights or Restricted Stock (and, if applicable. the time during which such awards may be exercised) shall be accelerated and made fully exercisable and all restrictions thereon shall lapse at least ten (10) days prior to the closing of the Acquisition (and the Options or Stock Purchase Rights terminated if not exercised prior to the closing of such Acquisition), and (ii) any other Options or Stock Purchase Rights outstanding under the Plan, such Options or Stock Purchase rights shall be terminated if not exercised prior to the closing of the Acquisition. (e) Notwithstanding the foregoing, in the event that the Company becomes a party to a transaction that is intended to qualify for "pooling of interests" accounting treatment and, but for one or more of the provisions of this Plan or any Option Agreement or any Restricted Stock purchase agreement would so quality, then this Plan and any such agreement shall be interpreted so as to preserve such accounting treatment, and to the extent that any provision of the Plan or any such agreement would disqualify the transaction from pooling of interests accounting treatment (including, if applicable, an entire Option Agreement or Restricted Stock purchase agreement), then such provision shall be null and void. All determinations to be made in connection with the preceding sentence shall be made by the independent accounting firm whose opinion with respect to "pooling of interests" treatment is required as a condition to the Company's consummation of such transaction. Exhibit 4.4-Page 13 (f) The existence of the Plan, any Option Agreement or Restricted Stock purchase agreement and the Options or Stock Purchase Rights granted hereunder shall not affect or restrict in any way the right or power of the Company or the stockholders of the Company to make or authorize any adjustment, recapitalization, reorganization or other change in the Company's capital structure or its business, any merger or consolidation of the Company, any issue of stock or of options, warrants or rights to purchase stock or of bonds, debentures, preferred or prior preference stocks whose rights are superior to or affect the Common Stock or the rights thereof or which are convertible into or exchangeable for Common Stock, or the dissolution or liquidation of the Company, or any sale or transfer of all or any part of its assets or business, or any other corporate act or proceeding, whether of a similar character or otherwise. 14. Time of Granting Options and Stock Purchase Rights. The date of grant -------------------------------------------------- of an Option or Stock Purchase Right shall, for all purposes, be the date on which the Administrator makes the determination granting such Option or Stock Purchase Right, or such other date as is determined by the Administrator. Notice of the determination shall be given to each Employee or Consultant to whom an Option or Stock Purchase Right is so granted within a reasonable time after the date of such grant. 15. Amendment and Termination of the Plan. ------------------------------------- (a) Amendment and Termination. The Board may at any time wholly or ------------------------- partially amend, alter, suspend or terminate the Plan. However, without approval of the Company's stockholders given within twelve (12) months before or after the action by the Board, no action of the Board may, except as provided in Section 13, increase the limits imposed in Section 3 on the maximum number of Shares which may be issued under the Plan or extend the term of the Plan under Section 7. (b) Stockholder Approval. The Board shall obtain stockholder -------------------- approval of any Plan amendment to the extent necessary and desirable to comply with Applicable Laws. (c) Effect of Amendment or Termination. No amendment, alteration, ---------------------------------- suspension or termination of the Plan shall impair the rights of any Holder, unless mutually agreed otherwise between the Holder and the Administrator, which agreement must be in writing and signed by the Holder and the Company. Termination of the Plan shall not affect the Administrator's ability to exercise the powers granted to it hereunder with respect to Options, Stock Purchase Rights or Restricted Stock granted or awarded under the Plan prior to the date of such termination. 16. Stockholder Approval. The Plan will be submitted for the approval of -------------------- the Company's stockholders within twelve (12) months after the date of the Board's initial adoption of the Plan. Options, Stock Purchase Rights or Restricted Stock may be granted or awarded prior to such stockholder approval, provided that such Options, Stock Purchase Rights and Restricted Stock shall not be exercisable, shall not vest and the restrictions thereon shall not lapse prior to the time when the Plan is approved by the stockholders, and provided further that if such approval has not been obtained at the end of said twelve- month period, all Options, Stock Purchase Rights and Restricted Stock previously granted or awarded under the Plan shall thereupon be canceled and become null and void. Exhibit 4.4-Page 14 17. Inability to Obtain Authority. The inability of the Company to obtain ----------------------------- authority from any regulatory body having jurisdiction, which authority is deemed by the Company's counsel to be necessary to the lawful issuance and sale of any Shares hereunder, shall relieve the Company 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. 18. Reservation of Shares. The Company, during the term of this Plan, --------------------- shall at all times reserve and keep available such number of Shares as shall be sufficient to satisfy the requirements of the Plan. 19. Information to Holders and Purchasers. To the extent required by any -------------------------- Applicable Laws, the Company shall provide to each Holder and to each individual who acquires Shares pursuant to the Plan, not less frequently than annually during the period such Holder or purchaser has one or more Options or Stock Purchase Rights outstanding, and, in the case of an individual who acquires Shares pursuant to the Plan, during the period such individual owns such Shares, copies of annual financial statements. Notwithstanding the preceding sentence, the Company shall not be required to provide such statements to key employees whose duties in connection with the Company assure their access to equivalent information. 20. Repurchase Provisions. The Administrator in its discretion may --------------------- provide that the Company may repurchase Shares acquired upon exercise of an Option or Stock Purchase Right upon a Holder's termination as a Service Provider, provided, that any such repurchase right shall be set forth in the applicable Option Agreement or Restricted Stock purchase agreement or in another agreement referred to in such agreement. 21. Investment Intent. The Company may require a Plan participant, as a ----------------- condition of exercising or acquiring stock under any Option or Stock Purchase Right, (i) to give written assurances satisfactory to the Company as to the participant's knowledge and experience in financial and business matters and/or to employ a purchaser representative reasonably satisfactory to the Company who is knowledgeable and experienced in financial and business matters and that he or she is capable of evaluating, alone or together with the purchaser representative, the merits and risks of exercising the Option or Stock Purchase Right; and (ii) to give written assurances satisfactory to the Company stating that the participant is acquiring the stock subject to the Option or Stock Purchase Right for the participants own account and not with any present intention of selling or otherwise distributing the stock. The foregoing requirements, and any assurances given pursuant to such requirements, shall be inoperative if (A) the issuance of the shares upon the exercise or acquisition of stock under the applicable Option or Stock Purchase Right has been registered under a then currently effective registration statement under the Securities Act or (B) as to any particular requirement, a determination is made by counsel for the Company that such requirement need not be met in the circumstances under the then applicable securities laws. The Company may, upon advice of counsel to the Company, place legends on stock certificates issued under the Plan as such counsel deems necessary or appropriate in order to comply with applicable securities laws, including, but not limited to, legends restricting the transfer of the stock. Exhibit 4.4-Page 15 22. Governing Law. The validity and enforceability of this Plan shall be ------------- governed by and construed in accordance with the laws of the State of Nevada without regard to otherwise governing principles of conflicts of law. 23. Stockholders Agreement. As a condition precedent to the award of any ---------------------- Option or Stock Purchase Right under the Plan, or the exercise or delivery of certificates for shares issued pursuant thereto, the Administrator may require any Holder (or the Holder's successor, as applicable) to enter into or become a party to a Stockholders Agreement or a Voting Trust Agreement in such form(s) as the Administrator may determine from time to time. Exhibit 4.4-Page 16 EX-5.1 6 dex51.txt OPINION OF GARDERE & WYNNE SEWELL LLP EXHIBIT 5.1 OPINION OF GARDERE WYNNE SEWELL LLP July 26, 2001 Digital Generation Systems, Inc. 5221 North O'Connor Boulevard Suite 950 Irving, Texas 75039 Ladies and Gentlemen: We have acted as counsel to Digital Generation Systems, Inc., a Delaware corporation (the "Company"), in connection with the preparation and filing of a Registration Statement on Form S-8 (the "Registration Statement") with the Securities and Exchange Commission for the purpose of registering 17,597,408 shares of the Company's common stock, $0.001 par value (the "Common Stock"), under the Securities Act of 1933, as amended. The Registration Statement relates to shares of Common Stock to be issued or transferred in connection with the exercise of options granted or which may be granted by the Company under the Digital Generation Systems, Inc. 1992 Stock Option Plan, the Digital Generation Systems, Inc. 1995 Director Option Plan, the StarGuide Digital Networks, Inc. 1996 Stock Option Plan and the StarGuide Digital Networks, Inc. 1999 Equity Incentive Plan (collectively, the "Plans"). In connection with this opinion, we have reviewed and are familiar with the Company's Certificate of Incorporation and By-laws and such other records and agreements of the Company, certificates or public officials, certificates of officers or other representatives of the Company, and other documents, certificates and records as we have deemed necessary or appropriate as a basis for the opinion set forth herein. In our examination, we have assumed the genuineness of all signatures, the legal capacity of natural persons, the authenticity of all documents submitted to us as originals, the conformity to original documents of all documents submitted to us as copies and the authenticity of the originals of such copies. As to various facts material to this opinion letter, we have relied upon statements and representations of the Company and its officers and other representatives and of public officials, set forth in certificates delivered to us, without independently verifying the accuracy of the information contained therein. Based upon the foregoing, we are of the opinion that the 17,597,408 shares of Common Stock of the Company which from time to time may be issued or transferred upon the exercise of options granted under the Plans, in accordance with appropriate proceedings of the Board of Directors of the Company or a committee thereof, when so issued and sold at prices in excess of the par value of the Common Stock, in accordance with the provisions of the Plans and related agreements entered into by the Company, will be duly and validly authorized and issued by the Company and fully paid and nonassessable. The opinion herein is also subject to the following exceptions, limitations and qualifications: A. The opinion expressed herein is limited to the corporate laws of the State of Delaware, and we assume no responsibility as to the applicability or the effect of any other laws or regulations. The lawyers in this Firm involved in the representation of the Company are members only of the State Bar of Texas. The opinion expressed above is based solely on our review, as Texas lawyers, of the Delaware General Corporation Law. We have not reviewed any other laws or regulations of the State of Delaware (including, without limitation, any interpretations of the Delaware General Corporation Law) or retained or relied on any opinion or advice of Delaware counsel, and our opinions are limited to the application of the Delaware General Corporation Law. B. This opinion letter is as of the date hereof, and we undertake no obligation, and expressly disclaim any obligation, to advise the Company or any other person or entity of any change in any matter set forth herein. C. This opinion letter is limited to the matters expressly stated, and no opinion other than upon the matters so expressly stated is implied or may be inferred. This opinion is delivered to the Company solely for use in connection with the Registration Statement and may not be used or relied upon for any other purpose. Accordingly, we assume no professional responsibility to any other person whatsoever, and the opinion expressed herein may not be relied upon, circulated, quoted in whole or in part, or otherwise referred to in any report or document, or furnished to any other person or entity, without our prior written consent. We hereby consent to the use of this opinion as an exhibit to the Registration Statement. In giving this consent, we do not thereby admit that we come within the category of persons whose consent is required under Section 7 of the Securities Act of 1933, as amended, or the Rules and Regulations of the Securities and Exchange Commission promulgated thereunder. Respectfully submitted, GARDERE WYNNE SEWELL LLP By: /s/ David R. Earhart ------------------------------ David R. Earhart, Partner Exhibit 5.1 - Page 2 EX-23.1 7 dex231.txt CONSENT OF KPMG LLP EXHIBIT 23.1 CONSENT OF KPMG LLP We consent to the use of our reports incorporated herein by reference. KPMG LLP Dallas, Texas July 24, 2001 Exhibit 23.1 - Page 1 -----END PRIVACY-ENHANCED MESSAGE-----