Document:

04102001 S8 PLAN

EXHIBIT 4.1

 

AMERICAN CHAMPION ENTERTAINMENT, INC.

2000 STOCK INCENTIVE PLAN

 

ARTICLE 1. 

PURPOSE AND ADOPTION OF THE PLAN 

1.1. Purpose. The purpose of the American Champion Entertainment,
Inc. 2000 Stock Incentive Plan (hereinafter referred to as the "Plan") is to assist in attracting
and retaining highly competent key employees, non-employee directors and consultants and to act as
an incentive in motivating key employees, non-employee directors, legal counsel and consultants of
American Champion Entertainment, Inc. and its Subsidiaries (as defined below) to achieve long-term
corporate objectives. 

1.2. Adoption and Term. The Plan has been approved by the Board
of Directors (hereinafter referred to as the "Board") of American Champion Entertainment, Inc.
(hereinafter referred to as the "Company"), to be effective as of January 10, 2000 (the "Effective
Date"). The Plan is intended to be a broad based plan which all employees of the Company are
eligible for, and grants to be made to management personnel and members of the board of directors
shall not exceed 50% of the total number of shares issuable under the Plan. Therefore the Plan does
not require shareholder approval pursuant to applicable rules and regulations of the Nasdaq Stock
Market. The Plan shall remain in effect until terminated by action of the Board.

 

ARTICLE II. 

DEFINITIONS 

For the purposes of this Plan, capitalized terms shall have the following
meanings: 

2. 1. Award means any grant to a Participant of one or more of
a combination of Restricted Shares described in Article VII and Performance Awards described in
Article VIII. 

2.2. Award Agreement means a written agreement between the
Company and a Participant or a written notice from the Company to a Participant specifically setting
forth the terms and conditions of an Award granted under the Plan. 

2.3. Award Period means, with respect to an Award, the period
of time set forth in the Award Agreement during which specified target performance goals must be
achieved or other conditions set forth in the Award Agreement must be satisfied. 

2.4. Beneficiary means an individual, trust or estate who or
which, by a written designation of the Participant filed with the Company or by operation of law,
succeeds to the rights and obligations of the Participant under the Plan and an Award Agreement upon
the Participant's death. 

2.5. Board means the Board of Directors of the Company. 

2.6. Change in Control means, and shall be deemed to have
occurred upon the occurrence of, any one of the following events: 

(a) The acquisition in one or more transactions by any individual, entity
or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) (a "Person") of
beneficial ownership (within the meaning of Rule l3d-3 promulgated under the Exchange Act) of shares
or other securities (as defined in Section 3(a)(10) of the Exchange Act) representing 30% or more of
either (i) the Outstanding Common Stock or (ii) the Company Voting Securities; provided, however,
that a Change in Control as defined in this clause (a) shall not be deemed to occur in connection
with any acquisition by the Company, an employee benefit plan of the Company or any Person who
immediately prior to the Effective Date is a holder of Outstanding Common Stock or Company Voting
Securities (a "Current Stockholder") so long as such acquisition does not result in any Person other
than the Company, such employee benefit plan or such Current Stockholder beneficially owning shares
or securities representing 30% or more of either the Outstanding Common Stock or Company Voting
Securities; or 

(b) Any election has occurred of persons as directors of the Company that
causes two-thirds or more of the Board to consist of persons other than (i) persons who, were
members of the Board on the Effective Date and (ii) persons who were nominated by the Board for
election as members of the Board at a time when at least two-thirds of the Board consisted of
persons who were members of the Board on the Effective Date; provided, however, that any person
nominated for election by the Board when at least two-thirds of the members of the Board are persons
described in subclause (i) or (ii) and persons who were themselves previously nominated in
accordance with this clause (b) shall, for this purpose, be deemed to have been nominated by a Board
composed of persons described in subclause (ii); or 

(c) Approval by the stockholders of the Company of a reorganization,
merger, consolidation or similar transaction (a "Reorganization Transaction"), in each case, unless,
immediately following such Reorganization Transaction, more than 50% of, respectively, the
outstanding shares of common stock (or similar equity security) of the corporation or other entity
resulting from or surviving such Reorganization Transaction and the combined voting power of the
securities of such corporation or other entity entitled to vote generally in the election of
directors, is then beneficially owned, directly or indirectly, by the individuals and entities who
were the respective beneficial owners of the Outstanding Common Stock and the Company Voting
Securities immediately prior to such Reorganization Transaction in substantially the same
proportions as their ownership of the Outstanding Common Stock and Company Voting Securities
immediately prior to such Reorganization Transaction; or 

(d) Approval by the stockholders of the Company of (i) a complete
liquidation or dissolution of the Company or (ii) the sale or other disposition of all or
substantially all of the assets of the Company to a corporation or other entity, unless, with
respect to such corporation or other entity, immediately following such sale or other disposition
more than 50% of, respectively, the outstanding shares of common stock (or similar equity security)
of such corporation or other entity and the combined voting power of the securities of such
corporation or other entity entitled to vote generally in the election of directors, is then
beneficially owned, directly or indirectly, by the individuals and entities who were the respective
beneficial owners of the Outstanding Common Stock and the Company Voting Securities immediately
prior to such sale or disposition in substantially the same proportions as their ownership of the
Outstanding Common Stock and Company Voting Securities immediately prior to such sale or
disposition. 

2.7 Code means the Internal Revenue Code of 1986, as amended.
References to a section of the Code include that section and any comparable section or sections of
any future legislation that amends, supplements or supersedes said section. 

2.8 Committee means the committee established in accordance
with Section 3.1. 

2. 9. Company means American Champion Entertainment, Inc., a
Delaware corporation, and its successors. 

2.10 Common Stock means Common Stock of the Company, par value
$0.0001 per share. 

2.11. Company Voting Securities means the combined voting power
of all outstanding securities of the Company entitled to vote generally in the election of directors
of the Company. 

2.12. Date of Grant means the date designated by the Committee
as the date as of which it grants an Award, which shall not be earlier than the date on which the
Committee approves the granting of such Award. 

2.13. Effective Date shall have the meaning given to such term
in Section 1.2.

2.14. Exchange Act means the Securities Exchange Act of 1934,
as amended. 

2.15. Merger means any merger, reorganization, consolidation,
share exchange, transfer of assets or other transaction having similar effect involving the Company.

2.16. Non-Employee Director means a member of the Board who (i)
is not currently an officer or otherwise employed by the Company or a parent or a subsidiary of the
Company, (ii) does not receive compensation directly or indirectly from the Company or a parent or a
subsidiary of the Company for services rendered as a consultant or in any capacity other than as a
director, except for an amount for which disclosure would not be required pursuant to Item 404(a) of
Regulation S-K, (iii) does not possess an interest in any other transaction for which disclosure
would be required pursuant to Item 404(a) of Regulation S-K, and (iv) is not engaged in a business
relationship for which disclosure would be required pursuant to Item 404(b) of Regulation S-K. 

2.17. Outstanding Common Stock means, at any time, the issued
and outstanding shares of Common Stock. 

2.18. Participant means a person designated to receive an Award
under the Plan in accordance with Section 5. 1. 

2.19. Performance Awards means Awards granted in accordance
with Article VIII. 

2.20. Plan means the American Champion Entertainment, Inc.
2000, Stock Incentive Plan as described herein, as the same may be amended from time to time. 

2.21 Restricted Shares means Common Stock subject to
restrictions imposed in connection with Awards granted under Article VII. 

2.22. Retirement means early or normal retirement under a
pension plan or arrangement of the Company or one of its Subsidiaries in which the Participant
participates. 

2.23. Subsidiary means a subsidiary of the Company within the
meaning of Section 424(f) of the Code. 

2.24. Termination of Employment means the voluntary or
involuntary termination of a Participant's employment with the Company or a Subsidiary for any
reason, including death, disability, retirement or as the result of the divestiture of the
Participant's employer or any similar transaction in which the Participant's employer ceases to be
the Company or one of its Subsidiaries. Whether entering military or other government service shall
constitute Termination of Employment, or whether a Termination of Employment shall occur as a result
of disability, shall be determined in each case by the Committee in its sole discretion. In the case
of a consultant who is not an employee of the Company or a Subsidiary, Termination of Employment
shall mean voluntary or involuntary termination of the consulting relationship for any reason. In
the case of a Non-Employee Director, Termination of Employment shall mean voluntary or involuntary
termination, non-election, removal or other act which results in such Non-Employee Director no
longer serving in such capacity. 

 

ARTICLE III.

ADMINISTRATION 

3.1. Committee. The Plan shall be administered by a committee
of the Board (the "Committee") comprised of at least one person. The Committee shall have exclusive
and final authority in each determination, interpretation or other action affecting the Plan and its
Participants. The Committee shall have the sole discretionary authority to interpret the Plan, to
establish and modify administrative rules for the Plan, to impose such conditions and restrictions
on Awards as it determines appropriate, and to take such steps in connection with the Plan and
Awards granted hereunder as it may deem necessary or advisable. The Committee may, subject to
compliance with applicable legal requirements, with respect to Participants who are not subject to
Section 16(b) of the Exchange Act, delegate such of its powers and authority under the Plan as it
deems appropriate to designated officers or employees of the Company. In addition, the Board may
exercise any of the authority conferred upon the Committee hereunder. In the event of any such
delegation of authority or exercise of authority by the Board, references in the Plan to the
Committee shall be deemed to refer to the delegate of the Committee or the Board, as the case may
be. 

 

ARTICLE IV.

SHARES 

4.1. Number of Shares Issuable. The total number of shares
initially authorized to be issued under the Plan shall be 1,500,000 shares of Common Stock. The
number of shares available for issuance under the Plan shall be subject to adjustment in accordance
with Section 9.7. The shares to be offered under the Plan shall be authorized and unissued shares of
Common Stock, or issued shares of Common Stock which will have been reacquired by the Company. 

 

4.2. Increase in the Number of Shares Issuable. The total
number of shares has been increased by approval of the Board of Directors on December 27, 2000 to
4,000,000 shares.

 

 

ARTICLE V. 

PARTICIPATION 

5.1. Eligible Participants. Participants in the Plan shall be such
key employees, consultants, legal counsel and non-employee directors of the Company and its
Subsidiaries, whether or not members of the Board, as the Committee, in its sole discretion, may
designate from time to time. The Committee's designation of a Participant in any year shall not
require the Committee to designate such person to receive Awards in any other year. The designation
of a Participant to receive an Award under one portion of the Plan does not require the Committee to
include such Participant under other portions of the Plan. The Committee shall consider such factors
as it deems pertinent in selecting Participants and in determining the types and amounts of their
respective Awards. Subject to adjustment in accordance with Section 9.7, during any fiscal year no
Participant shall be granted Awards in respect of more than 500,000 shares of Common Stock.

 

ARTICLE VI. 

INTENTIONALLY LEFT BLANK

 

 

ARTICLE VII. 

RESTRICTED SHARES 

7.1. Restricted Share Awards. The Committee may grant to any
Participant an Award of such number of shares of Common Stock on such terms, conditions and
restrictions, whether based on performance standards, periods of service, retention by the
Participant of ownership of purchased or designated shares of Common Stock or other criteria, as the
Committee shall establish. It is not a criteria of the Plan that the Restricted Shares be issued
pursuant to any specific criteria. With respect to performance-based Awards of Restricted Shares
intended to qualify for deductibility under Section 162(m) of the Code, performance targets will
include specified levels of one or more of operating income, return or investment, return on
stockholders' equity, earnings before interest, taxes, depreciation and amortization and/or earnings
per share. The terms of any Restricted Share Award granted under this Plan shall be set forth in an
Award Agreement which shall contain provisions determined by the Committee and not inconsistent with
this Plan. 

(a) Issuance of Restricted Shares. As soon as practicable after
the Date of Grant of a Restricted Share Award by the Committee, the Company shall cause to be
transferred on the books of the Company or its agent, shares of Common Stock, registered on behalf
of the Participant, evidencing the Restricted Shares covered by the Award, subject to forfeiture to
the Company as of the Date of Grant if an Award Agreement with respect to the Restricted Shares
covered by the Award is not duly executed by the Participant and timely returned to the Company. All
shares of Common Stock covered by Awards under this Article VII shall be subject to the
restrictions, terms and conditions contained in the Plan and the applicable Award Agreements entered
into by the appropriate Participants. Until the lapse or release of all restrictions applicable to
an Award of Restricted Shares the share certificates representing such Restricted Shares may be held
in custody by the Company, its designee, or, if the certificates bear a restrictive legend, by the
Participant. Upon the lapse or release of all restrictions with respect to an Award as described in
Section 7.1 (d), one or more share certificates, registered in the name of the Participant, for an
appropriate number of shares as provided in Section 7.1 (d), free of any restrictions set forth in
the Plan and the related Award Agreement (however subject to any restrictions that may be imposed by
law) shall be delivered to the Participant. 

(b) Stockholder Rights. Beginning on the Date of Grant of a
Restricted Share Award and subject to execution of the related Award Agreement as provided in
Section 7.1 (a), and except as otherwise provided in such Award Agreement, the Participant shall
become a stockholder of the Company with respect to all shares subject to the Award Agreement and
shall have all of the rights of a stockholder, including, but not limited to, the right to vote such
shares and the right to receive dividends; provided, however, that any shares of Common Stock
distributed as a dividend or otherwise with respect to any Restricted Shares as to which the
restrictions have not yet lapsed, shall be subject to the same restrictions as such Restricted
Shares and held or restricted as provided in Section 7.1 (a). 

(c) Registration of Shares. None of the Restricted Shares
may be sold, assigned, pledged, hypothecated or transferred without Registration under the
Securities Act of 1933 as amended or exemption there from. It is anticipated that at the time of
issuance the Company will have in effect a Registration Statement on Form S-8 or such other
comparable form such that the Restricted Shares will be registered for resale upon issuance. 

(d) Delivery of Shares Upon Vesting. Upon expiration or
earlier termination of the forfeiture period without a forfeiture and the satisfaction of or release
from any other conditions prescribed by the Committee, or at such earlier time as provided under the
provisions of Section 7.3, the restrictions applicable to the Restricted Shares shall lapse. As
promptly as administratively feasible thereafter, subject to the requirements of Section 9.5, the
Company shall deliver to the Participant or, in case of the Participant's death, to the
Participant's Beneficiary, one or more share certificates for the appropriate number of shares of
Common Stock, free of all such restrictions, except for any restrictions that may be imposed by law.

7.2. Terms of Restricted Shares. 

(a) Forfeiture of Restricted Shares. Subject to Sections
7.2(b) and 7.3, Restricted Shares shall be forfeited and returned to the Company and all rights of
the Participant with respect to such Restricted Shares shall terminate unless the Participant
continues in the service of the Company or a Subsidiary as an employee until the expiration of the
forfeiture period for such Restricted Shares and satisfies any and all other conditions set forth in
the Award Agreement. The Committee shall determine the forfeiture period (which may, but need not,
lapse in installments) and any other terms and conditions applicable with respect to any Restricted
Share Award. 

(b) Waiver of Forfeiture Period. Notwithstanding anything
contained in this Article VII to the contrary, the Committee may, in its sole discretion, waive the
forfeiture period and any other conditions set forth in any Award Agreement under appropriate
circumstances (including the death, disability or Retirement of the Participant or a material change
in circumstances arising after the date of an Award) and subject to such terms and conditions
(including forfeiture of a proportionate number of the Restricted Shares) as the Committee shall
deem appropriate. 

7.3. Change in Control. Unless otherwise provided by the
Committee in the applicable Award Agreement, in the event of a Change in Control, all restrictions
applicable to the Restricted Share Award shall terminate fully and the Participant shall immediately
have the right to the delivery of share certificates for such shares in accordance with Section 7.1
(d). 

 

ARTICLE VIII. 

PERFORMANCE AWARDS 

8.1. Performance Awards. 

(a) Award Periods and Calculations of Potential Incentive Amounts.
The Committee may grant Performance Awards to Participants. A Performance Award shall consist of
the right to receive a payment (measured by the Fair Market Value of a specified number of shares of
Common Stock, increases in such Fair Market Value during the Award Period and/or a fixed cash
amount) contingent upon the extent to which certain predetermined performance targets have been met
during an Award Period. Performance Awards may be made in conjunction with, or in addition to,
Restricted Share Awards made under Article VII. The Award Period shall be two or more fiscal or
calendar years as determined by the Committee. The Committee, in its discretion and under such terms
as it deems appropriate, may permit newly eligible employees, such as those who are promoted or
newly hired, to receive Performance Awards after an Award Period has commenced. 

(b) Performance Targets. The performance targets may
include such goals related to the performance of the Company and/or the performance of a Participant
as may be established by the Committee in its discretion. In the case of Performance Awards intended
to qualify for deductibility under Section 162(m) of the Code, the targets will include specified
levels of one or more of operating income, return on investment, return on stockholders' equity,
earnings before interest, taxes, depreciation and amortization and/or earnings per share. The
performance targets established by the Committee may vary for different Award Periods and need not
be the same for each Participant receiving a Performance Award in an Award Period. Except to the
extent inconsistent with the performance-based compensation exception under Section 162(m) of the
Code, in the case of Performance Awards granted to employees to whom such section is applicable, the
Committee, in its discretion, but only under extraordinary circumstances as determined by the
Committee, may change any prior determination of performance targets for any Award Period at any
time prior to the final determination of the value of a related Performance Award when events or
transactions occur to cause such performance targets to be an inappropriate measure of achievement.

(c) Earning Performance Awards. The Committee, on or as
soon as practicable after the Date of Grant, shall prescribe a formula to determine the percentage
of the applicable Performance Award to be earned based upon the degree of attainment of performance
targets. 

(d) Payment of Earned Performance Awards. Payments of
earned Performance Awards shall be made in cash or shares of Common Stock or a combination of cash
and shares of Common Stock, in the discretion of the Committee. The Committee, in its sole
discretion, may provide such terms and conditions with respect to the payment of earned Performance
Awards as it may deem desirable. 

8.2. Terms of Performance Awards. 

(a) Termination of Employment. Unless otherwise provided below or
in Section 8.3, in the case of a Participant's Termination of Employment prior to the end of an
Award Period, the Participant will not have earned any Performance Awards for that Award Period.

(b) Retirement. If a Participant's Termination of
Employment is because of Retirement prior to the end of an Award Period, the Participant will not be
paid any Performance Award, unless the Committee, in its sole and exclusive discretion, determines
that an Award should be paid. In such a case, the Participant shall be entitled to receive a pro-
rata portion of his or her Award as determined under subsection (d) of this Section 8.2. 

(c) Death or Disability. If a Participant's Termination of
Employment is due to death or to disability (as determined in the sole and exclusive discretion of
the Committee) prior to the end of an Award Period, the Participant or the Participant's personal
representative shall be entitled to receive a pro-rata share of his or her Award as determined under
subsection (d) of this Section 8.2. 

(d) Pro-Rata Payment. The amount of any payment to be made
to a participant whose employment is terminated by Retirement, death or disability (under the
circumstances described in subsections (b) and (c)) will be the amount determined by multiplying (i)
the amount of the Performance Award that would have been earned through the end of the Award Period
had such employment not been terminated by (ii) a fraction, the numerator of which is the number of
whole months such Participant was employed during the Award Period, and the denominator of which is
the total number of months of the Award Period. Any such payment made to a Participant whose
employment is terminated prior to the end of an Award Period shall be made at the end of such Award
Period, unless otherwise determined by the Committee in its sole discretion. Any partial payment
previously made or credited to a deferred account for the benefit of a Participant in accordance
with Section 8. 1 (d) of the Plan shall be subtracted from the amount otherwise determined as
payable as provided in this Section 8.2(d). 

(e) Other Events. Notwithstanding anything to the contrary
in this Article VIII, the Committee may, in its sole and exclusive discretion, determine to pay all
or any portion of a Performance Award to a Participant who has terminated employment prior to the
end of an Award Period under certain circumstances (including the death, disability or Retirement of
the Participant or a material change in circumstances arising after the Date of Grant), subject to
such terms and conditions as the Committee shall deem appropriate. 

8.3. Change in Control. Unless otherwise provided by the
Committee in the applicable Award Agreement, in the event of a Change in Control, all Performance
Awards for all Award Periods shall immediately become fully payable to all Participants and shall be
paid to Participants within thirty (30) days after such Change in Control. 

 

ARTICLE IX. 

TERMS APPLICABLE TO ALL AWARDS GRANTED UNDER THE PLAN 

9.1. Plan Provisions Control Award Terms. The terms of the Plan
shall govern all Awards granted under the Plan, and in no event shall the Committee have the power
to grant any Award under the Plan the terms of which are contrary to any of the provisions of the
Plan. In the event any provision of any Award granted under the Plan shall conflict with any term in
the Plan as constituted on the Date of Grant of such Award, the term in the Plan as constituted on
the Date of Grant of such Award shall control. Except as provided in Section 9.3 and Section 9.7,
the terms of any Award granted under the Plan may not be changed after the Date of Grant of such
Award so as to materially decrease the value of the Award without the express written approval of
the holder. 

9.2. Award Agreement. No person shall have any rights under any
Award granted under the Plan unless and until the Company and the Participant to whom such Award
shall have been granted shall have executed and delivered an Award Agreement or the Participant
shall have received and acknowledged notice of the Award authorized by the Committee expressly
granting the Award to such person and containing provisions setting forth the terms of the Award.

9.3. Modification of Award After Grant. No Award granted under
the Plan to a Participant may be modified (unless such modification does not materially decrease the
value of that Award) after its Date of Grant except by express written agreement between the Company
and such Participant, provided that any such change (a) may not be inconsistent with the terms of
the Plan, and (b) shall be approved by the Committee. 

9. 4. Limitation on Transfer. Except as provided in Section
7.1(c) in the case of Restricted Shares, a Participant's rights and interest under the Plan may not
be assigned or transferred other than by will or the laws of descent and distribution and, during
the lifetime of a Participant, only the Participant personally (or the Participant's personal
representative) may exercise rights under the Plan. The Participant's Beneficiary may exercise the
Participant's rights to the extent they are exercisable under the Plan following the death of the
Participant. 

9. 5. Taxes. The Company shall be entitled, if the Committee
deems it necessary or desirable, to withhold (or secure payment from the Participant in lieu of
withholding) the amount of any withholding or other tax required by law to be withheld or paid by
the Company with respect to any amount payable and/or shares issuable under such Participant's Award
and the Company may defer payment of cash or issuance of shares upon exercise or vesting of an Award
unless indemnified to its satisfaction against any liability for any such tax. The amount of such
withholding or tax payment shall be determined by the Committee and shall be payable by the
Participant at such time as the Committee determines in accordance with the following rules: 

(a) The Participant shall have the right to elect to meet his or her
withholding requirement (i) by having withheld from such Award at the appropriate time that number
of shares of Common Stock, rounded up to the next whole share, the Fair Market Value of which is
equal to the amount of withholding taxes due, (ii) by direct payment to the Company in cash of the
amount of any taxes required to be withheld with respect to such Award or (iii) by a combination of
withholding such shares and paying cash. 

(b) The Committee shall have the discretion as to any Award to cause the
Company to pay to tax authorities for the benefit of the applicable Participant, or to reimburse
such Participant for, the individual taxes which are due on the grant, exercise or vesting of any
Award or the lapse of any restriction on any Award (whether by reason of such Participant's filing
of an election under Section 83(b) of the Code or otherwise), including, but not limited to, Federal
income tax, state income tax, local income tax and excise tax under Section 4999 of the Code, as
well as for any such taxes as may be imposed upon such tax payment or reimbursement. 

(c) In the case of Participants who are subject to Section 16 of the
Exchange Act, the Committee may impose such limitations and restrictions as it deems necessary or
appropriate with respect to the delivery or withholding of shares of Common Stock to meet tax
withholding obligations. 

9. 6. Surrender of Awards. Any Award granted under the Plan may
be surrendered to the Company for cancellation on such terms as the Committee and the Participant
approve. 

9. 7 Adjustments to Reflect Capital Changes. 

(a) Recapitalization. The number and kind of shares subject to
outstanding Awards, the Purchase Price or Exercise Price for such shares, the number and kind of
shares available for Awards subsequently granted under the Plan and the maximum number of shares in
respect of which Awards can be made to any Participant in any calendar year shall be appropriately
adjusted to reflect any stock dividend, stock split, combination or exchange of shares, merger,
consolidation or other change in capitalization with a similar substantive effect upon the Plan or
the Awards granted under the Plan. The Committee shall have the power and sole discretion to
determine the amount of the adjustment to be made in each case. 

(b) Merger. After any Merger in which the Company is the surviving
corporation, each Participant shall, at no additional cost, be entitled upon any exercise of an
Option or receipt of any other Award to receive (subject to any required action by stockholders), in
lieu of the number of shares of Common Stock receivable or exercisable pursuant to such Award prior
to such Merger, the number and class of shares or other securities to which such Participant would
have been entitled pursuant to the terms of the Merger if, at the time of the Merger, such
Participant had been the holder of record of a number of shares of Common Stock equal to the number
of shares of Common Stock receivable or exercisable pursuant to such Award. Comparable rights shall
accrue to each Participant in the event of successive Mergers of the character described above. In
the event of a Merger in which the Company is not the surviving corporation, the surviving,
continuing, successor or purchasing corporation, as the case may be (the "Acquiring Corporation),
will either assume the Company's rights and obligations under outstanding Award Agreements or
substitute awards in respect of the Acquiring Corporation's stock for outstanding Awards, provided,
however, that if the Acquiring Corporation does not assume or substitute for such outstanding
Awards, the Board shall provide prior to the Merger that any unexercisable and/or unvested portion
of the outstanding Awards shall be immediately exercisable and vested as of a date prior to such
merger or consolidation, as the Board so determines. The exercise and/or vesting of any Award that
was permissible solely by reason of this Section 9.7(b) shall be conditioned upon the consummation
of the Merger. Any Options which are neither assumed by the Acquiring Corporation not exercised as
of the date of the Merger shall terminate effective as of the effective date of the Merger. 

(c) Options to Purchase Shares or Stock of Acquired Companies.
After any merger in which the Company or a Subsidiary shall be a surviving corporation, the
Committee may grant substituted options under the provisions of the Plan, pursuant to Section 424 of
the Code, replacing old options granted under a plan of another party to the merger whose shares of
stock subject to the old options may no longer be issued following the merger. The manner of
application of the foregoing provisions to such options and any appropriate adjustments shall be
determined by the Committee in its sole discretion. Any such adjustments may provide for the
elimination of any fractional shares which might otherwise become subject to any Options. 

9.8 No Right to Employment. No employee or other person shall
have any claim of right to be granted an Award under the Plan. Neither the Plan nor any action taken
hereunder shall be construed as giving any employee any right to be retained in the employ of the
Company or any of its Subsidiaries. 

9.9. Awards Not Includable for Benefit Purposes. Payments
received by a Participant pursuant to the provisions of the Plan shall not be included in the
determination of benefits under any pension, group insurance or other benefit plan applicable to the
Participant which is maintained by the Company or any of its Subsidiaries, except as may be provided
under the terms of such plans or determined by the Board. 

9.10. Governing Law. All determinations made and actions taken
pursuant to the Plan shall be governed by the laws of the State of Delaware and construed in
accordance therewith. 

9.11. No Strict Construction. No rule of strict construction
shall be implied against the Company, the Committee or any other person in the interpretation of any
of the terms of the Plan, any Award granted under the Plan or any rule or procedure established by
the Committee.

9.12. Captions. The captions (i.e., all Section headings) used
in the Plan are for convenience only, do not constitute a part of the Plan, and shall not be deemed
to limit, characterize or affect in any way any provisions of the Plan, and all provisions of the
Plan shall be construed as if no captions had been used in the Plan. 

9.13. Severability. Whenever possible, each provision in the
Plan and every Award at any time granted under the Plan shall be interpreted in such manner as to be
effective and valid under applicable law, but if any provision of the Plan or any Award at any time
granted under the Plan shall be held to be prohibited by or invalid under applicable law, then (a)
such provision shall be deemed amended to accomplish the objectives of the provision as originally
written to the fullest extent permitted by law and (b) all other provisions of the Plan, such Award
and every other Award at any time granted under the Plan shall remain in full force and effect. 

9.14. Amendment and Termination. 

(a) Amendment. The Board shall have complete power and
authority to amend the Plan at any time without the authorization or approval of the Company's
stockholders, unless the amendment (i) materially increases the benefits accruing to Participants
under the Plan, (ii) materially increases the aggregate number of securities that may be issued
under the Plan or (iii) materially modifies the requirements as to eligibility for participation in
the Plan, but in each case only to the extent then required by the Code or applicable law, or deemed
necessary or advisable by the Board. No termination or amendment of the Plan may, without the
consent of the Participant to whom any Award shall theretofore have been granted under the Plan,
materially adversely affect the right of such individual under such Award. 

(b) Termination. The Board shall have the right and the
power to terminate the Plan at any time. No Award shall be granted under the Plan after the
termination of the Plan, but the termination of the Plan shall not have any other effect and any
Award outstanding at the time of the termination of the Plan may be exercised after termination of
the Plan at any time prior to the expiration date of such Award to the same extent such Award would
have been exercisable had the Plan not been terminated.04102001 S8 AGREEMENT

 

EXHIBIT 4.2

STOCK GRANT AGREEMENT

                      Pursuant to

                  American Champion Entertainment, Inc.

                  2000 Stock Incentive Plan

 

This Stock Grant Agreement (the "Agreement"), dated , 2000, is made by and
between American Champion Entertainment, Inc., a Delaware corporation (the "Company"), and
_______________________________________________ (the "Grantee").

The Grantee is a ____________________________________________________ of the Company.

For Grantee's service to the Company including __________________________________________________________________,
the Compensation Committee (the "Committee") of the Board of Directors has determined that it is
in the best interests of the Company to issue to the Grantee restricted common stock of the Company
as compensation for said services that the Grantee has rendered and will continue to render to the
Company, on the terms and conditions set forth herein.

In consideration of the premises and the mutual agreements set forth below, the parties hereto
agree as follows:

1.Grant of Stock. Pursuant to the terms and conditions set forth herein, the Company hereby
grants and issues to the Grantee (the "Grant") as of the date hereof (the "Grant Date"), up to an
aggregate of  shares (the "Shares") of common stock, par value $.0001 per share,
of the Company (the "Common Stock") as hereinafter provided.

2.Non-transferability. Until the Shares hereunder shall vest in accordance with Section 3
hereof, the Shares and any other rights granted hereunder shall not be transferable or assignable by
the Grantee (whether by operation of law or otherwise) except by will or the laws of descent and
distribution or, if then permitted under Rule 16b-3, pursuant to a qualified domestic relations
order as defined under the Code or Title I of the Employee Retirement Income Security Act of 1974,
as amended, or the rules thereunder.

3.Vesting of Shares. Subject to the other terms set forth herein, the Shares will vest with
the Grantee in full on , 2000.

4.Taxes. The Company or any Subsidiary or Affiliate is authorized to withhold from any
distribution of Shares amounts of withholding and other taxes due in connection with any transaction
involving the Grant, and to take such other action as the Committee may deem advisable to enable the
Company or such Subsidiary or Affiliate and the Grantee to satisfy obligations for the payment of
withholding taxes and other tax obligations relating to the Grant, if any. This authority shall
include authority to withhold or receive Shares or other property and to make cash payments in
respect thereof in satisfaction of the Grantee's tax obligations.

5.Termination of Employment. Upon termination of Grantee's employment for any reason,
including the breach by the Grantee of the employment agreement among the Grantee and the Company or
its subsidiaries, if any, any Shares not already vested in accordance with Section 3 hereof, shall
be subject to immediate forfeiture in all respects and Grantee shall have no right or claim to any
such unvested Shares.

6.Adjustments. In the event that the Committee shall determine, in its sole discretion, that
any dividend or other distribution (whether in the form of cash, shares of Common Stock or other
property), recapitalization, stock split, reverse split, any reorganization, merger, consolidation,
spin-off, combination, repurchase, share exchange, license arrangement, strategic alliance or other
similar corporate transaction or event affects the Shares such that an adjustment is appropriate to
prevent dilution or enlargement of the rights of the Grantee, then the Committee shall make such
equitable changes or adjustments as it deems necessary or appropriate to any or all of the number
and kind of Shares which may thereafter be issued in connection herewith.

7.No Rights as Stockholder. The Grantee shall have no rights as a stockholder with respect to
any Shares subject to the Grant prior to the date on which such Shares shall vest in accordance with
Section 3 hereof.

8.Representations of the Company.

a. Organization and Standing. The Company is a corporation duly organized,

validly existing and in good standing under the laws of the State of Delaware.

b. Corporate Power. The Company has all necessary corporate power and

authority to execute, deliver and perform this Agreement and the transactions contemplated
hereby, and has all requisite corporate power and authority to issue the Shares hereunder and to
carry out the transactions contemplated hereby.

c. Shares. Upon issuance, the Shares will be duly authorized, validly issued, fully paid and
nonassessable, and issued in accordance with applicable laws.

9. Representations of the Grantee.

a. Authority. The Grantee has duly executed and delivered this Agreement to the Company, and its
obligations hereunder are the legal, valid and binding obligations of the Grantee and are
enforceable in accordance with their terms.

b. Restriction on Transfer; Risk of Forfeiture. The Grantee hereby acknowledges and agrees that
the Shares have not been registered under the Securities Act of 1933, as amended (the "Act"), or
qualified with the securities regulatory agency of any state and may not be resold or otherwise
disposed of unless registered under the Act or qualified with the securities regulatory agency of
any state which has jurisdiction over any such transfer or unless an exemption from such
registration or qualification is available. The Grantee will transfer the Shares only in accordance
with the applicable requirements of all federal and state securities laws. The Grantee acknowledges
that the certificate(s) evidencing the Shares will bear a legend regarding restriction on transfer.
The Grantee further acknowledges that the Shares are subject to a substantial risk of forfeiture as
set forth in Section 5 hereof.

c. Investment. The Grantee is receiving the Shares for its own account, for investment purposes
only, and not for the account of any other person, and not with a view to, or for offer or sale in
connection with, any distribution, assignment or resale to others or to fractionalization in whole
or in part.

10.No Rights to Continued Employment. Nothing in the Grant or this Agreement shall confer
upon the Grantee the right to continue in service or be entitled to any remuneration or benefits not
set forth in this Agreement or to interfere with or limit in any way the right of the Company or any
Subsidiary or Affiliate to terminate the Grantee's service as an officer of the Company or any
Subsidiary or Affiliate.

11.Compliance with Legal and Exchange Requirements. The granting, issuance

and delivery of the Shares pursuant to the terms of this Agreement and the other obligations of
the Company hereunder shall be subject to all applicable federal and state laws, rules and
regulations, and to such approvals by any regulatory or governmental agency as may be required. The
Company, in its discretion, may postpone the issuance or delivery of Shares hereunder until
completion of such stock exchange listing or registration or qualification of such Shares or other
required action under any state, federal or foreign law, rule or regulation as the Company may
consider appropriate, and may require the Grantee to make such

representations and furnish such information as it may consider appropriate in connection with
the issuance or delivery of Shares in compliance with applicable laws, rules and regulations.

12.Change in Control Provisions. In the event of a Change in Control, as defined in the 2000
Stock Incentive Plan (the "Plan"), the Shares shall become fully vested, whether or not theretofore
vested as forth herein, as more fully described within the Plan.

13.Notices. All notices or any other communications hereunder shall be in writing and
delivered personally or by registered or certified mail or overnight courier, addressed, if to the
Company, to American Champion Entertainment, Inc., 1694 The Alameda, Suite 100, San Jose, California
95126, Attention: Secretary; and if to the Grantee, at the address set forth on the signature page
hereof, subject to the right of either party to designate at any time hereafter in writing some
other address.

14.Governing Law. This Agreement shall be governed by and construed in accordance with the
laws of the State of California without giving effect to the conflict of laws principles
thereof.

15.No Assignment. Neither this Agreement nor any of the rights or obligations of the Grantee
hereunder may be transferred or assigned by the Grantee except as set forth in paragraph 2
hereof.

16.Benefits. This Agreement shall be binding upon and inure to the benefit of the parties
hereto. This Agreement is for the sole benefit of the parties hereto and not for the benefit of any
other party.

17.Severability. If any provision of this Agreement shall be determined to be illegal and
unenforceable by any court of law, the remaining provisions shall be severable and enforceable in
accordance with their terms.

18.Amendments. No modification, amendment or waiver or any provision of this Agreement shall
be effective unless it is in writing and signed by the parties hereto.

19.Counterparts. This Agreement may be executed in counterparts, each of which shall
constitute one and the same instrument.

 

IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by the Chief Executive
Officer, and Grantee has executed this Agreement, both as of the day and year first above
written.

 

AMERICAN CHAMPION ENTERTAINMENT, INC.

 

 

By: ________________________________________

Anthony K. Chan, President & CEO

 

GRANTEE

 

 

By: ________________________________________

Name in print: ________________________________

Address: _____________________________________

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