BAM! ENTERTAINMENT, INC.



 





Exhibit 4.2


Award Number: ___________


BAY AREA MULTIMEDIA, INC. 2000 STOCK INCENTIVE PLAN


FORM OF STOCK OPTION AWARD AGREEMENT


     1. Grant of Option. Bay Area Multimedia, Inc., a California corporation
(the “Company”), hereby grants to the Grantee (the “Grantee”) named in the
Notice of Stock Option Award (the “Notice”), an option (the “Option”) to
purchase the Total Number of Shares of Common Stock subject to the Option (the
“Shares”) set forth in the Notice, at the Exercise Price per Share set forth in
the Notice (the “Exercise Price”) subject to the terms and provisions of the
Notice, this Stock Option Award Agreement (the “Option Agreement”) and the
Company’s 2000 Stock Incentive Plan, as amended from time to time (the “Plan”),
which are incorporated herein by reference. Unless otherwise defined herein,
the terms defined in the Plan shall have the same defined meanings in this
Option Agreement.


     If designated in the Notice as an Incentive Stock Option, the Option is
intended to qualify as an Incentive Stock Option as defined in Section 422 of
the Code. However, notwithstanding such designation, to the extent that the
aggregate Fair Market Value of Shares subject to Options designated as
Incentive Stock Options which become exercisable for the first time by the
Grantee during any calendar year (under all plans of the Company or any Parent
or Subsidiary) exceeds $100,000, such excess Options, to the extent of the
Shares covered thereby in excess of the foregoing limitation, shall be treated
as Non-Qualified Stock Options. For this purpose, 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 date the Option
with respect to such Shares is awarded.


     2. Exercise of Option.


          (a) Right to Exercise. The Option shall be exercisable during its term in
accordance with the Vesting Schedule set out in the Notice and with the
applicable provisions of the Plan and this Option Agreement. The Option shall
be subject to the provisions of Section 11(b) of the Plan relating to the
exercisability or termination of the Option in the event of a Corporate
Transaction. No partial exercise of the Option may be for less than the lesser
of five percent (5%) of the total number of Shares subject to the Option or the
remaining number of Shares subject to the Option. In no event shall the
Company issue fractional Shares.



          (b) Method of Exercise. The Option shall be exercisable only by delivery
of an Exercise Notice (attached as Exhibit A) which shall state the election to
exercise the Option, the whole number of Shares in respect of which the Option
is being exercised, and such other provisions as may be required by the
Administrator. The Exercise Notice shall be signed by the Grantee and shall be
delivered in person, by certified mail, or by such other method as determined
from time to time by the Administrator to the Company accompanied by payment of
the Exercise Price. The Option shall be deemed to be exercised upon receipt by
the Company of such written notice accompanied by the Exercise Price, which, to
the extent selected, shall be deemed to be satisfied by use of the
broker-dealer sale and remittance procedure to pay the Exercise Price provided
in Section 4(d), below.



          (c) Taxes. No Shares will be delivered to the Grantee or other person
pursuant to the exercise of the Option until the Grantee or other person has
made arrangements acceptable to the Administrator for the satisfaction of
applicable income tax, employment tax, and social security tax withholding
obligations, including, without limitation, obligations incident to the receipt
of Shares or the disqualifying disposition of Shares received on exercise of an
Incentive Stock Option. Upon exercise of the Option, the Company or the
Grantee’s employer may offset or withhold (from any amount owed by the Company
or the Grantee’s employer to the Grantee) or collect from the Grantee or other
person an amount sufficient to satisfy such tax obligations and/or the
employer’s withholding obligations.

 








 




     3. Grantee’s Representations. The Grantee understands that neither the
Option nor the Shares exercisable pursuant to the Option have been registered
under the Securities Act of 1933, as amended or any United States securities
laws. In the event the Shares purchasable pursuant to the exercise of the
Option have not been registered under the Securities Act of 1933, as amended,
at the time the Option is exercised, the Grantee shall, if requested by the
Company, concurrently with the exercise of all or any portion of the Option,
deliver to the Company his or her Investment Representation Statement in the
form attached hereto as Exhibit B.


     4. Method of Payment. Payment of the Exercise Price shall be made by any
of the following, or a combination thereof, at the election of the Grantee;
provided, however, that such exercise method does not then violate any
Applicable Law:


          (a) cash;



          (b) check;



          (c) if the exercise occurs on or after the Registration Date, surrender of
Shares or delivery of a properly executed form of attestation of ownership of
Shares as the Administrator may require (including withholding of Shares
otherwise deliverable upon exercise of the Option) which have a Fair Market
Value on the date of surrender or attestation equal to the aggregate Exercise
Price of the Shares as to which the Option is being exercised (but only to the
extent that such exercise of the Option would not result in an accounting
compensation charge with respect to the Shares used to pay the exercise price);
or



          (d) if the exercise occurs on or after the Registration Date, payment
through a broker-dealer sale and remittance procedure pursuant to which the
Grantee (i) shall provide written instructions to a Company designated
brokerage firm to effect the immediate sale of some or all of the purchased
Shares and remit to the Company, out of the sale proceeds available on the
settlement date, sufficient funds to cover the aggregate exercise price payable
for the purchased Shares and (ii) shall provide written directives to the
Company to deliver the certificates for the purchased Shares directly to such
brokerage firm in order to complete the sale transaction.



     5. Restrictions on Exercise. The Option may not be exercised if the
issuance of the Shares subject to the Option upon such exercise would
constitute a violation of any Applicable Laws. In addition, the Option may not
be exercised until such time as the Plan has been approved by the shareholders
of the Company.


     6. Termination or Change of Continuous Service. In the event the
Grantee’s Continuous Service terminates, the Grantee may, to the extent
otherwise so entitled at the date of such termination (the “Termination Date”),
exercise the Option during the Post-Termination Exercise Period. In no event
shall the Option be exercised later than the Expiration Date set forth in the
Notice. In the event of the Grantee’s change in status from Employee, Director
or Consultant to any other status of Employee, Director or Consultant, the
Option shall remain in effect and, except to the extent otherwise determined by
the Administrator, continue to vest; provided, however, with respect to any
Incentive Stock Option that shall remain in effect after a change in status
from Employee to Director or Consultant, such Incentive Stock Option shall
cease to be treated as an Incentive Stock Option and shall be treated as a
Non-Qualified Stock Option on the day three (3) months and one (1) day
following such change in status. Except as provided in Sections 7 and 8 below,
to the extent that the Grantee is not entitled to exercise the Option on the
Termination Date, or if the Grantee does not exercise the Option within the
Post-Termination Exercise Period, the Option shall terminate.


     7. Disability of Grantee. In the event the Grantee’s Continuous Service
terminates as a result of his or her Disability, the Grantee may, but only
within twelve (12) months from the Termination Date (and in no event later than
the Expiration Date), exercise the Option to the extent he or she was otherwise
entitled to exercise it on the Termination Date; provided, however, that if
such Disability is not a “disability” as such term is defined in Section
22(e)(3) of the Code and the Option is an Incentive Stock Option, such
Incentive Stock Option shall cease to be treated as an Incentive Stock Option
and shall be treated as a Non-Qualified Stock Option on the day three (3)
months and one (1) day following the Termination Date. To the extent that the
Grantee is not entitled to exercise the Option on the Termination Date, or if
the Grantee does not exercise the Option to the extent so entitled within the
time specified herein, the Option shall terminate.


 








 


     8. Death of Grantee. In the event of the termination of the Grantee’s
Continuous Service as a result of his or her death, or in the event of the
Grantee’s death during the Post-Termination Exercise Period or during the
twelve (12) month period following the Grantee’s Termination of Continuous
Service as a result of his or her Disability, the Grantee’s estate, or a person
who acquired the right to exercise the Option by bequest or inheritance, may
exercise the Option, but only to the extent the Grantee could exercise the
Option at the date of termination, within twelve (12) months from the date of
death (but in no event later than the Expiration Date). To the extent that the
Grantee is not entitled to exercise the Option on the date of death, or if the
Option is not exercised to the extent so entitled within the time specified
herein, the Option shall terminate.


     9. Transferability of Option. The Option, if an Incentive Stock Option,
may not be transferred in any manner other than by will or by the laws of
descent and distribution and may be exercised during the lifetime of the
Grantee only by the Grantee. The Option, if a Non-Qualified Stock Option may
be transferred by will, by the laws of descent and distribution, and to the
extent and in the manner authorized by the Administrator, to members of the
Grantee’s immediate family (as determined by the Administrator) or pursuant to
a domestic relations order. The terms of the Option shall be binding upon the
executors, administrators, heirs and successors of the Grantee.


     10. Term of Option. The Option may be exercised no later than the
Expiration Date set forth in the Notice or such earlier date as otherwise
provided herein.


     11. Company’s Right of First Refusal.


          (a) Transfer Notice. Neither the Grantee nor a transferee (either being
sometimes referred to herein as the “Holder”) shall sell, hypothecate, encumber
or otherwise transfer any Shares or any right or interest therein without first
complying with the provisions of this Section 11 or obtaining the prior written
consent of the Company. In the event the Holder desires to accept a bona fide
third-party offer for any or all of the Shares, the Holder shall provide the
Company with written notice (the “Transfer Notice”) of:



               (i) The Holder’s intention to transfer;



               (ii) The name of the proposed transferee;



               (iii) The number of Shares to be transferred; and



               (iv) The proposed transfer price or value and terms thereof.



          (b) First Refusal Exercise Notice. The Company shall have the right to
purchase (the “Right of First Refusal”) all but not less than all, of the
Shares which are described in the Transfer Notice (the “Offered Shares”) at any
time during the period commencing upon receipt of the Transfer Notice and
ending forty-five (45) days after the first date on which the Company
determines that the Right of First Refusal may be exercised without incurring
an accounting expense with respect to such exercise (the “Option Period”) at
the per share price or value and in accordance with the terms stated in the
Transfer Notice, which Right of First Refusal shall be exercised by written
notice (the “First Refusal Exercise Notice”) to the Holder. During the Option
Period and the 120-day period following the expiration of the Option Period,
the Company also may exercise its Repurchase Right in lieu or in addition to
its Right of First Refusal if the Repurchase Right is or becomes exercisable
during the Option Period or such 120-day period.



          (c) Payment Terms. The Company shall consummate the purchase of the
Offered Shares on the terms set forth in the Transfer Notice within 15 days
after delivery of the First Refusal Exercise Notice; provided, however, that in
the event the Transfer Notice provides for the payment for the Offered Shares
other than in cash, the Company and/or its assigns shall have the right to pay
for the Offered Shares by the discounted cash equivalent of the consideration
described in the Transfer Notice as reasonably determined by the Administrator.
Upon payment for the Offered Shares to the Holder or into escrow for the
benefit of the Holder, the Company or its assigns shall become the legal and
beneficial owner of the Offered Shares and all rights and interest therein or
related thereto, and the Company shall have the right to transfer the Offered
Shares to its own name or its assigns without further action by the Holder.

 








 



           (d) Assignment. Whenever the Company shall have the right to purchase
Shares under this Right of First Refusal, the Company may designate and assign
one or more employees, officers, directors or shareholders of the Company or
other persons or organizations, to exercise all or a part of the Company’s
Right of First Refusal.



          (e) Non-Exercise. If the Company and/or its assigns do not collectively
elect to exercise the Right of First Refusal within the Option Period or such
earlier time if the Company and/or its assigns notifies the Holder that it will
not exercise the Right of First Refusal, then the Holder may transfer the
Shares upon the terms and conditions stated in the Transfer Notice, provided
that:



               (i) The transfer is made within 120 days of the expiration of the Option
Period; and



               (ii) The transferee agrees in writing that such Shares shall be held
subject to the provisions of this Option Agreement.



          (f) Expiration of Transfer Period. Following such 120-day period, no
transfer of the Offered Shares and no change in the terms of the transfer as
stated in the Transfer Notice (including the name of the proposed transferee)
shall be permitted without a new written Transfer Notice prepared and submitted
in accordance with the requirements of this Right of First Refusal.



          (g) Exception for Certain Family Transfers. Anything to the contrary
contained in this section notwithstanding, the transfer of any or all of the
Shares during the Grantee’s lifetime or on the Grantee’s death by will or
intestacy to the Grantee’s Immediate Family or a trust for the benefit of the
Grantee or the Grantee’s Immediate Family shall be exempt from the provisions
of this Right of First Refusal (a “Permitted Transfer”); provided, however,
that (i) the transferee or other recipient shall receive and hold the Shares so
transferred subject to the provisions of this Option Agreement, and there shall
be no further transfer of such Shares except in accordance with the terms of
this Option Agreement and (ii) prior to any such transfer, each transferee
shall execute an agreement pursuant to which such transferee shall agree to
receive and hold such Shares subject to the provisions of this Option
Agreement. “Immediate Family” as used herein shall mean spouse, domestic
partner (as determined by the Administrator), child, lineal descendant or
antecedent, father, mother, brother or sister and the lineal descendants of
such individuals.



          (h) Termination of Right of First Refusal. The provisions of this Right
of First Refusal shall terminate as to all Shares upon the Registration Date.



          (i) Additional Shares or Substituted Securities. In the event of any
transaction described in Section 11 of the Plan, any new, substituted or
additional securities or other property which is by reason of any such
transaction distributed with respect to the Shares shall be immediately subject
to the Right of First Refusal, but only to the extent the Shares are at the
time covered by such right.



          (j) Corporate Transaction. Immediately prior to the consummation of a
Corporate Transaction, the Right of First Refusal shall automatically lapse in
its entirety, except to the extent this Option Agreement is assumed by the
successor corporation (or its Parent) in connection with such Corporate
Transaction, in which case the Right of First Refusal shall apply to the new
capital stock or other property received in exchange for the Shares in
consummation of the Corporate Transaction, but only to the extent the Shares
are at the time covered by such right.



     12. Stop-Transfer Notices. In order to ensure compliance with the
restrictions on transfer set forth in this Option Agreement, the Notice or the
Plan, the Company may issue appropriate “stop transfer” instructions to its
transfer agent, if any, and, if the Company transfers its own securities, it
may make appropriate notations to the same effect in its own records.


     13. Refusal to Transfer. The Company shall not be required (i) to
transfer on its books any Shares that have been sold or otherwise transferred
in violation of any of the provisions of this Option Agreement or (ii) to treat
as owner of such Shares or to accord the right to vote or pay dividends to any
purchaser or other transferee to whom such Shares shall have been so
transferred.


 








 


     14. Tax Consequences. Set forth below is a brief summary as of the date
of this Option Agreement of some of the federal tax consequences of exercise of
the Option and disposition of the Shares. THIS SUMMARY IS NECESSARILY
INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE. THE
GRANTEE SHOULD CONSULT A TAX ADVISER BEFORE EXERCISING THE OPTION OR DISPOSING
OF THE SHARES.


          (a) Exercise of Incentive Stock Option. If the Option qualifies as an
Incentive Stock Option, there will be no regular federal income tax liability
upon the exercise of the Option, although the excess, if any, of the Fair
Market Value of the Shares on the date of exercise over the Exercise Price will
be treated as income for purposes of the alternative minimum tax for federal
tax purposes and may subject the Grantee to the alternative minimum tax in the
year of exercise.



          (b) Exercise of Incentive Stock Option Following Disability. If the
Grantee’s Continuous Service terminates as a result of Disability that is not
total and permanent disability as defined in Section 22(e)(3) of the Code, to
the extent permitted on the date of termination, the Grantee must exercise an
Incentive Stock Option within three (3) months of such termination for the
Incentive Stock Option to be qualified as an Incentive Stock Option.



          (c) Exercise of Non-Qualified Stock Option. On exercise of a
Non-Qualified Stock Option, the Grantee will be treated as having received
compensation income (taxable at ordinary income tax rates) equal to the excess,
if any, of the Fair Market Value of the Shares on the date of exercise over the
Exercise Price. If the Grantee is an Employee or a former Employee, the
Company will be required to withhold from the Grantee’s compensation or collect
from the Grantee and pay to the applicable taxing authorities an amount in cash
equal to a percentage of this compensation income at the time of exercise, and
may refuse to honor the exercise and refuse to deliver Shares if such
withholding amounts are not delivered at the time of exercise.



          (d) Disposition of Shares. In the case of a Non-Qualified Stock Option,
if Shares are held for more than one year, any gain realized on disposition of
the Shares will be treated as long-term capital gain for federal income tax
purposes and subject to tax at a maximum rate of 20%. In the case of an
Incentive Stock Option, if Shares transferred pursuant to the Option are held
for more than one year after receipt of the Shares and are disposed more than
two years after the Date of Award, any gain realized on disposition of the
Shares also will be treated as capital gain for federal income tax purposes and
subject to the same tax rates and holding periods that apply to Shares acquired
upon exercise of a Non-Qualified Stock Option. If Shares purchased under an
Incentive Stock Option are disposed of prior to the expiration of such
one-year or two-year periods, any gain realized on such disposition will be
treated as compensation income (taxable at ordinary income rates) to the extent
of the difference between the Exercise Price and the lesser of (i) the Fair
Market Value of the Shares on the date of exercise, or (ii) the sale price of
the Shares.



     15. Lock-Up Agreement.


          (a) Agreement. The Grantee, if requested by the Company and the lead
underwriter of any public offering of the Common Stock or other securities of
the Company (the “Lead Underwriter”), hereby irrevocably agrees not to sell,
contract to sell, grant any option to purchase, transfer the economic risk of
ownership in, make any short sale of, pledge or otherwise transfer or dispose
of any interest in any Common Stock or any securities convertible into or
exchangeable or exercisable for or any other rights to purchase or acquire
Common Stock (except Common Stock included in such public offering or acquired
on the public market after such offering) during the 180-day period following
the effective date of a registration statement of the Company filed under the
Securities Act of 1933, as amended, or such shorter period of time as the Lead
Underwriter shall specify. The Grantee further agrees to sign such documents
as may be requested by the Lead Underwriter to effect the foregoing and agrees
that the Company may impose stop-transfer instructions with respect to such
Common Stock subject until the end of such period. The Company and the Grantee
acknowledge that each Lead Underwriter of a public offering of the Company’s
stock, during the period of such offering and for the 180-day period
thereafter, is an intended beneficiary of this Section 15.

 








 



           (b) No Amendment Without Consent of Underwriter. During the period from
identification as a Lead Underwriter in connection with any public offering of
the Company’s Common Stock until the earlier of (i) the expiration of the
lock-up period specified in Section 16(a) in connection with such offering or
(ii) the abandonment of such offering by the Company and the Lead Underwriter,
the provisions of this Section 15 may not be amended or waived except with the
consent of the Lead Underwriter.



     16. Entire Agreement: Governing Law. The Notice, the Plan and this Option
Agreement constitute the entire agreement of the parties with respect to the
subject matter hereof and supersede in their entirety all prior undertakings
and agreements of the Company and the Grantee with respect to the subject
matter hereof, and may not be modified adversely to the Grantee’s interest
except by means of a writing signed by the Company and the Grantee. Nothing in
the Notice, the Plan and this Option Agreement (except as expressly provided
therein) is intended to confer any rights or remedies on any persons other than
the parties. The Notice, the Plan and this Option Agreement are to be
construed in accordance with and governed by the internal laws of the State of
California (as permitted by Section 1646.5 of the California Civil Code, or any
similar successor provision) without giving effect to any choice of law rule
that would cause the application of the laws of any jurisdiction other than the
internal laws of the State of California to the rights and duties of the
parties. Should any provision of the Notice, the Plan or this Option Agreement
be determined by a court of law to be illegal or unenforceable, such provision
shall be enforced to the fullest extent allowed by law and the other provisions
shall nevertheless remain effective and shall remain enforceable.


     17. Headings. The captions used in the Notice and this Option Agreement
are inserted for convenience and shall not be deemed a part of the Option for
construction or interpretation.


     18. Dispute Resolution The provisions of this Section 18 shall be the
exclusive means of resolving disputes arising out of or relating to the Notice,
the Plan and this Option Agreement. The Company, the Grantee, and the
Grantee’s assignees (the “parties”) shall attempt in good faith to resolve any
disputes arising out of or relating to the Notice, the Plan and this Option
Agreement by negotiation between individuals who have authority to settle the
controversy. Negotiations shall be commenced by either party by notice of a
written statement of the party’s position and the name and title of the
individual who will represent the party. Within thirty (30) days of the
written notification, the parties shall meet at a mutually acceptable time and
place, and thereafter as often as they reasonably deem necessary, to resolve
the dispute. If the dispute has not been resolved by negotiation, the parties
agree that any suit, action, or proceeding arising out of or relating to the
Notice, the Plan or this Option Agreement shall be brought in the United States
District Court for the Northern District of California (or should such court
lack jurisdiction to hear such action, suit or proceeding, in a California
state court in the County of Santa Clara) and that the parties shall submit to
the jurisdiction of such court. The parties irrevocably waive, to the fullest
extent permitted by law, any objection the party may have to the laying of
venue for any such suit, action or proceeding brought in such court. THE
PARTIES ALSO EXPRESSLY WAIVE ANY RIGHT THEY HAVE OR MAY HAVE TO A JURY TRIAL OF
ANY SUCH SUIT, ACTION OR PROCEEDING. If any one or more provisions of this
Section 18 shall for any reason be held invalid or unenforceable, it is the
specific intent of the parties that such provisions shall be modified to the
minimum extent necessary to make it or its application valid and enforceable.


     19. Notices. Any notice required or permitted hereunder shall be given in
writing and shall be deemed effectively given upon personal delivery or upon
deposit in the United States mail by certified mail (if the parties are within
the United States) or upon deposit for delivery by an internationally
recognized express mail courier service (for international delivery of notice),
with postage and fees prepaid, addressed to the other party at its address as
shown beneath its signature in the Notice, or to such other address as such
party may designate in writing from time to time to the other party.


 








 


EXHIBIT A


BAY AREA MULTIMEDIA, INC. 2000 STOCK INCENTIVE PLAN


EXERCISE NOTICE


Bay Area Multimedia, Inc.

333 W. Santa Clara Street, Suite 930

San Jose, CA 95113


Attention: Secretary


     1. Exercise of
Option. Effective as of today, ______________ , ___ the
undersigned (the “Grantee”) hereby elects to exercise the Grantee’s option to
purchase _____ shares of the Common Stock (the “Shares”) of Bay Area
Multimedia, Inc. (the “Company”) under and pursuant to the Company’s 2000 Stock
Incentive Plan, as amended from time to time (the “Plan”) and the [ ]
Incentive [ ] Non-Qualified Stock Option Award Agreement (the “Option
Agreement”) and Notice of Stock Option Award (the “Notice”) dated
______________ , ___ . Unless otherwise defined herein, the terms defined
in the Plan shall have the same defined meanings in this Exercise Notice.


     2. Representations of the Grantee. The Grantee acknowledges that the
Grantee has received, read and understood the Notice, the Plan and the Option
Agreement and agrees to abide by and be bound by their terms and conditions.


     3. Rights as Shareholder. Until the stock certificate evidencing such
Shares is issued (as evidenced by the appropriate entry on the books of the
Company or of a duly authorized transfer agent of the Company), no right to
vote or receive dividends or any other rights as a shareholder shall exist with
respect to the Shares, notwithstanding the exercise of the Option. The Company
shall issue (or cause to be issued) such stock certificate promptly after the
Option is exercised. 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(a) of the Plan.


     The Grantee shall enjoy rights as a shareholder until such time as the
Grantee disposes of the Shares or the Company and/or its assignee(s) exercises
the Right of First Refusal. Upon such exercise, the Grantee shall have no
further rights as a holder of the Shares so purchased except the right to
receive payment for the Shares so purchased in accordance with the provisions
of the Option Agreement, and the Grantee shall forthwith cause the
certificate(s) evidencing the Shares so purchased to be surrendered to the
Company for transfer or cancellation.


     4. Delivery of Payment. The Grantee herewith delivers to the Company the
full Exercise Price for the Shares, which, to the extent selected, shall be
deemed to be satisfied by use of the broker-dealer sale and remittance
procedure to pay the Exercise Price provided in Section 4(d) of the Option
Agreement.


     5. Tax Consultation. The Grantee understands that the Grantee may suffer
adverse tax consequences as a result of the Grantee’s purchase or disposition
of the Shares. The Grantee represents that the Grantee has consulted with any
tax consultants the Grantee deems advisable in connection with the purchase or
disposition of the Shares and that the Grantee is not relying on the Company
for any tax advice.


     6. Taxes. The Grantee agrees to satisfy all applicable federal, state and
local income and employment tax withholding obligations and herewith delivers
to the Company the full amount of such obligations or has made arrangements
acceptable to the Company to satisfy such obligations. In the case of an
Incentive Stock Option, the Grantee also agrees, as partial consideration for
the designation of the Option as an Incentive Stock Option, to notify the
Company in writing within thirty (30) days of any disposition of any shares
acquired by exercise of the Option if such disposition occurs within two (2)
years from the Award Date or within one (1) year from the date the Shares were
transferred to the Grantee. If the Company is required to satisfy any federal,
state or local income or employment tax withholding obligations as a result of
such an early disposition, the Grantee agrees to satisfy the amount of such
withholding in a manner that the Administrator prescribes.


 








 


     7. Restrictive Legends. The Grantee understands and agrees that the
Company shall cause the legends set forth below or legends substantially
equivalent thereto, to be placed upon any certificate(s) evidencing ownership
of the Shares together with any other legends that may be required by the
Company or by state or federal securities laws:



	       	  	  	(a)  Securities Law Restrictions:
	 
	       	 	  	THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE
“ACT”) OR ANY STATE SECURITIES LAWS AND MAY NOT BE
OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR
HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER THE ACT
OR, IN THE OPINION OF COUNSEL SATISFACTORY TO THE
ISSUER OF THESE SECURITIES, SUCH OFFER, SALE OR
TRANSFER, PLEDGE OR HYPOTHECATION IS IN COMPLIANCE
THEREWITH.
	 
	       	  	  	(b)  Option Agreement Restrictions:
	 
	       	 	  	THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT
TO CERTAIN RESTRICTIONS ON TRANSFER, A RIGHT OF FIRST
REFUSAL HELD BY THE ISSUER OR ITS ASSIGNEE(S) AS SET
FORTH IN THE OPTION AGREEMENT BETWEEN THE ISSUER AND
THE ORIGINAL HOLDER OF THESE SHARES, A COPY OF WHICH
MAY BE OBTAINED AT THE PRINCIPAL OFFICE OF THE ISSUER.
SUCH TRANSFER RESTRICTIONS, RIGHT OF FIRST REFUSAL
ARE BINDING ON TRANSFEREES OF THESE SHARES.



          (c) Removal of Legend. When all of the following events have occurred,
the Shares then held by Grantee will no longer be subject to the legend
referred to in Section 7(b): (i) the expiration or termination of the Lock-up
Agreement of Section 15 of the Option Agreement (and of any agreement entered
pursuant to Section 15); and (ii) the expiration or exercise in full of the
Right of First Refusal. After such time, and upon Grantee’s request, a new
certificate or certificates representing the Shares not repurchased shall be
issued without the legend referred to in Section 7(b), and delivered to
Grantee.



     8. Successors and Assigns. The Company may assign any of its rights under
this Exercise Notice to single or multiple assignees, and this agreement shall
inure to the benefit of the successors and assigns of the Company. Subject to
the restrictions on transfer herein set forth, this Exercise Notice shall be
binding upon the Grantee and his or her heirs, executors, administrators,
successors and assigns.


     9. Headings. The captions used in this Exercise Notice are inserted for
convenience and shall not be deemed a part of this agreement for construction
or interpretation.


     10. Dispute Resolution. The provisions of Section 18 of the Option
Agreement shall be the exclusive means of resolving disputes arising out of or
relating to this Exercise Notice.


     11. Governing Law; Severability. This Exercise Notice is to be construed
in accordance with and governed by the internal laws of the State of California
(as permitted by Section 1646.5 of the California Civil Code, or any similar
successor provision) without giving effect to any choice of law rule that would
cause the application of the laws of any jurisdiction other than the internal
laws of the State of California to the rights and duties of the parties.
Should any provision of this Exercise Notice be determined by a court of law to
be illegal or unenforceable, such provision shall be enforced to the fullest
extent allowed by law and the other provisions shall nevertheless remain
effective and shall remain enforceable.


     12. Notices. Any notice required or permitted hereunder shall be given in
writing and shall be deemed effectively given upon personal delivery or upon
deposit in the United States mail by certified mail (if the parties are


 








 



within the United States) or upon deposit for delivery by an internationally
recognized express mail courier service (for international delivery of notice),
with postage and fees prepaid, addressed to the other party at its address as
shown below beneath its signature, or to such other address as such party may
designate in writing from time to time to the other party.


     13. Further Instruments. The parties agree to execute such further
instruments and to take such further action as may be reasonably necessary to
carry out the purposes and intent of this agreement.


     14. Entire Agreement. The Notice, the Plan and the Option Agreement are
incorporated herein by reference and together with this Exercise Notice
constitute the entire agreement of the parties with respect to the subject
matter hereof and supersede in their entirety all prior undertakings and
agreements of the Company and the Grantee with respect to the subject matter
hereof, and may not be modified adversely to the Grantee’s interest except by
means of a writing signed by the Company and the Grantee. Nothing in the
Notice, the Plan, the Option Agreement and this Exercise Notice (except as
expressly provided therein) is intended to confer any rights or remedies on any
persons other than the parties.


[Signature Page Follows]


 








 



	 	 	 
	Submitted by:	 	
Accepted by:
	GRANTEE:	 	
BAY AREA MULTIMEDIA, INC.

By:
	 	 	


	

(Signature)	 	
Title:
	 	 	


	Address:	 	
Address:
	
	
	
	

	
	
	
	


	
	 	
Bay Area Multimedia, Inc.
	
	 	
333 W. Santa Clara Street, Suite 930

San Jose, CA 95113



I, __________________________ , spouse of the Grantee, have read and hereby approve
the foregoing Exercise Notice. In consideration of the Company’s granting my
spouse the right to purchase the Shares as set forth in the Exercise Notice, I
hereby agree to be bound irrevocably by the Agreement and further agree that
any community property or similar interest that I may have in the Shares shall
hereby be similarly bound by the Exercise Notice. I hereby appoint my spouse
as my attorney-in-fact with respect to any amendment or exercise of any rights
under the Exercise Notice.



	 	_______________________________ 

Spouse of Grantee



 








 


EXHIBIT B


BAY AREA MULTIMEDIA, INC. 2000 STOCK INCENTIVE PLAN


INVESTMENT REPRESENTATION STATEMENT



	 	 	 
	GRANTEE:
	 	

	 
	 	



	COMPANY:
	 	
BAY AREA MULTIMEDIA, INC.

	SECURITY:
	 	
COMMON STOCK

	AMOUNT:
	 	

	 
	 	



	DATE:
	 	

	 
	 	






In connection with the purchase of the above-listed Securities, the undersigned
Grantee represents to the Company the following:


     (a)  Grantee is aware of the Company’s business affairs and financial
condition and has acquired sufficient information about the Company to reach an
informed and knowledgeable decision to acquire the Securities. Grantee is
acquiring these Securities for investment for Grantee’s own account only and
not with a view to, or for resale in connection with, any “distribution”
thereof within the meaning of the Securities Act of 1933, as amended (the
“Securities Act”).


     (b)  Grantee acknowledges and understands that the Securities constitute
“restricted securities” under the Securities Act and have not been registered
under the Securities Act in reliance upon a specific exemption therefrom, which
exemption depends upon among other things, the bona fide nature of Grantee’s
investment intent as expressed herein. Grantee further understands that the
Securities must be held indefinitely unless they are subsequently registered
under the Securities Act or an exemption from such registration is available.
Grantee further acknowledges and understands that the Company is under no
obligation to register the Securities. Grantee understands that the
certificate evidencing the Securities will be imprinted with a legend which
prohibits the transfer of the Securities unless they are registered or such
registration is not required in the opinion of counsel satisfactory to the
Company.


     (c)  Grantee is familiar with the provisions of Rule 701 and Rule 144, each
promulgated under the Securities Act, which, in substance, permit limited
public resale of “restricted securities” acquired, directly or indirectly from
the issuer thereof, in a non-public offering subject to the satisfaction of
certain conditions. Rule 701 provides that if the issuer qualifies under Rule
701 at the time of the grant of the Option to the Grantee, the exercise will be
exempt from registration under the Securities Act. In the event the Company
becomes subject to the reporting requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, ninety (90) days thereafter (or such longer
period as any market stand-off agreement may require) the Securities exempt
under Rule 701 may be resold, subject to the satisfaction of certain of the
conditions specified by Rule 144, including: (1) the resale being made through
a broker in an unsolicited “broker’s transaction” or in transactions directly
with a market maker (as said term is defined under the Securities Exchange Act
of 1934); and, in the case of an affiliate, (2) the availability of certain
public information about the Company, (3) the amount of Securities being sold
during any three month period not exceeding the limitations specified in Rule
144(e), and (4) the timely filing of a Form 144, if applicable.


     In the event that the Company does not qualify under Rule 701 at the time
of grant of the Option, then the Securities may be resold in certain limited
circumstances subject to the provisions of Rule 144, which requires the resale
to occur not less than one year after the later of the date the Securities were
sold by the Company or the date the Securities were sold by an affiliate of the
Company, within the meaning of Rule 144; and, in the case of acquisition of the
Securities by an affiliate, or by a non-affiliate who subsequently holds the
Securities less than two years, the satisfaction of the conditions set forth in
sections (1), (2), (3) and (4) of the paragraph immediately above.


     (d)  Grantee further understands that in the event all of the applicable
requirements of Rule 701 or 144 are not satisfied, registration under the
Securities Act, compliance with Regulation A, or some other registration
exemption will be required; and that, notwithstanding the fact that Rules 144
and 701 are not exclusive, the Staff of the Securities and Exchange Commission
has expressed its opinion that persons proposing to sell private placement


 








 



securities other than in a registered offering and otherwise than pursuant to
Rules 144 or 701 will have a substantial burden of proof in establishing that
an exemption from registration is available for such offers or sales, and that
such persons and their respective brokers who participate in such transactions
do so at their own risk. Grantee understands that no assurances can be given
that any such other registration exemption will be available in such event.


     (e)  Grantee represents that he is a resident of the state of California.



	 	Signature of Grantee:




	 	__________________________________ 


Date: ,   ____________________, _______