Document:

Exhibit
10.53

 

Execution
Version

 

WARRANT
REPURCHASE AGREEMENT

THIS WARRANT REPURCHASE AGREEMENT (this “Agreement”),
dated as of April 20, 2005, is among Warner Music Group Corp., a Delaware
corporation formerly known as WMG Parent Corp. (the “Company”), and
Historic TW Inc., a Delaware corporation (“Historic TW”).

 

WHEREAS, the Company, WMG Holdings Corp., a Delaware
corporation and a wholly owned subsidiary of the Company, and Historic TW are
parties to the Warrant Agreement (Three-Year Warrants), dated February 29, 2004
(the “Warrant Agreement”).

 

WHEREAS, the Company has agreed to purchase and
Historic TW has agreed to sell all of the Warrants (the “Repurchase”),
in each case in accordance with the terms set forth below.

 

NOW, THEREFORE, in consideration of the premises and
the mutual agreements herein set forth, the parties hereto agree as follows:

 

Section 1.  Definitions.

 

(a)  For
purposes of this Agreement, the following terms and any other terms defined
herein shall have the meanings set forth herein:

 

“Effective Time” means the time of closing of
the Initial Public Offering.

 

“Initial Public Offering” means the initial
public offering of the common stock pursuant to the Company’s registration
statement on Form S-1, Registration No. 333-123249.

 

“Net Per Share Price” means the initial public
offering price per share pursuant to the Initial Public Offering, net of
underwriters’ discounts.

 

“Purchase Price” means a cash amount equal to
(1) the total number of shares of common stock of the Company into which all of
the Warrants are exercisable immediately preceding the Effective Time (based on
an exercise of the Warrants on a net basis pursuant to the second sentence of
Section 5(c) of the Warrant Agreement) multiplied by the Net Per Share Price plus
(2) $16,000,000.00 (of which $15,076,523.31 represents the amount due pursuant
to Section 9(a) of the Warrant Agreement and the remainder represents an
additional payment).  The total number of
shares of common stock of the Company into which the Warrants are exercisable,
the Exercise Price, the Dilution Credits and the Floor Debits shall be
determined after taking into account all events occurring prior to or at the
Effective Time that require any adjustment to any of the foregoing pursuant to
Section 9 or 10, or any other provision, of the Warrant Agreement; provided
that, (x) any dividend or distribution by any Purchaser Entity with respect to
any Component which is declared prior to or at the Effective Time (and still
pending and unpaid immediately prior to or at the Effective Time) shall be
deemed to have been paid and received by the Investors, to the extent entitled
to such dividend or distribution, immediately prior to the Effective Time and
(y) any redemption or repurchase of any Investor Shares by any Purchaser

 

 

Entity (excluding any redemption or repurchase of any
Investor Shares effected in connection with the Initial Public Offering so long
as the redemption price or purchase price per share of common stock of the
Company does not exceed the Net Per Share Price) which is pursuant to the terms
of any agreement which has been entered into prior to or at the Effective Time
(and still pending and not consummated immediately prior to or at the Effective
Time) shall be deemed to have been consummated immediately prior to the
Effective Time.  For purposes of the
second sentence of Section 5(c) of the Warrant Agreement (including calculation
of the Exercise Price), the Fair Market Value per share of common stock of the
Company shall be assumed to be equal to the initial public offering price per
share pursuant to the Initial Public Offering.

 

(b)  Capitalized
terms used in this Agreement that are defined in the Warrant Agreement and not
defined herein shall have the meaning assigned to such terms in the Warrant
Agreement.

 

Section 2.  Repurchase.

 

(a)  Upon the
terms and subject to the conditions of this Agreement, (i) at the Effective
Time, Historic TW shall deliver to the Company (or, if the Company so requests,
to the offices of Simpson Thacher & Bartlett at which the closing of the
Initial Public Offering is planned to occur) for cancellation all of the
Warrants and transfer forms attached thereto, endorsed in blank or in favor of
the Company, duly executed by Historic TW and (ii) within one business day after
the Effective Time, the Company shall pay the Purchase Price to Historic TW by
wire transfer of immediately available funds.

 

(b)  Subject to
the satisfaction or waiver of the conditions set forth in Section 6, Historic
TW acknowledges and agrees that, at the Effective Time, (i) the Warrants shall
be cancelled (and, for the avoidance of doubt, Historic TW shall have no
further rights under and shall not be able to exercise any of the Warrants,
which shall be deemed expired), (ii) the Warrants shall be deemed to have been
exercised for purposes of the MMT Warrants (and, for the avoidance of doubt,
Historic TW shall have no further rights under and shall not be able to
exercise any of the MMT Warrants, which shall be deemed expired) and (iii)
Historic TW shall cease to be a party to, and have any rights under, the
Stockholders Agreement (including the right to request that any shares of
common stock of the Company that it may have been entitled to upon exercise of
the Warrants be included in any registration statement, but excluding Historic
TW’s rights under Section 6.4 of the Stockholders Agreement which shall
survive), and shall, as of the date hereof, be deemed to have withdrawn its
request, dated March 29, 2005, to have any such shares included in the registration
statement relating to the Initial Public Offering.

 

(c)  Prior to
and after the closing of the Initial Public Offering, each of the parties shall
use its reasonable efforts to take, or cause to be taken, all appropriate
action, do or cause to be done all things necessary, proper or advisable, and
to execute and deliver such documents and other papers, as may be reasonably
requested by the other party hereto in order to consummate and evidence the
Repurchase and the expiration and cancellation of the MMT Warrants.

 

Section 3.  Representations
and Warranties of the Company.  The
Company hereby represents and warrants, on the date hereof and on the date that
the Initial Public Offering is consummated, as follows:

 

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(a)  The Company
is validly existing and in good standing under the laws of the State of
Delaware and has the requisite power and authority to execute and deliver this
Agreement and to perform its obligations under this Agreement.

 

(b)  The
execution and delivery by the Company of this Agreement and the performance by
the Company of its obligations hereunder have been duly authorized by all
necessary corporate or similar action.

 

(c)  This
Agreement has been duly executed and delivered by the Company and constitutes a
legal, valid, binding and enforceable obligation of the Company, except to the
extent limited by (i) applicable bankruptcy, insolvency, reorganization,
moratorium and similar laws of general application related to the enforcement
of creditor’s rights generally and (ii) general principles of equity.

 

(d)  The
execution, delivery and performance by the Company of this Agreement do not and
will not (i) violate, conflict with or result in the breach of any provision of
the certificate of incorporation or bylaws or any resolution adopted by the
board of directors or stockholders of the Company, (ii) conflict with or
violate any law, regulation, order, writ, judgment, injunction, decree or other
stipulation or award applicable to the Company or any of its assets or
properties or (iii) conflict with, result in any breach of, constitute a
default (or event which with the giving of notice or lapse of time, or both,
would become a default) under, require any consent or the giving of any notice
under, or give to others any right to purchase or sell assets or securities or
to exercise any remedy or modify any obligation under, or any rights of
termination, amendment or acceleration of, or result in the creation of any
lien or encumbrance on any of the assets or properties of the Company pursuant
to, any agreement, contract or other instrument binding upon the Company or by
which or any of its assets or properties is bound or affected except, in the
case of clauses (ii) and (iii), for any such consent that has been obtained or
will be obtained prior to the closing of the Initial Public Offering and for
any such conflict, violation, breach, default, right of termination, amendment
or acceleration or lien or encumbrance as has not had and could not reasonably
be expected to have, in each case, individually or in the aggregate, a material
adverse effect on the condition (financial or otherwise), business, assets or
results of operations of the Company and its subsidiaries, taken as a whole.

 

(e)  The Company
has not, directly or indirectly, dealt with any person acting in the capacity
of a finder or broker, nor has the Company incurred any obligation for any
finder’s or broker’s fee or commission, in connection with the transactions
contemplated by this Agreement.

 

Section 4.  Representations
and Warranties of Historic TW. 
Historic TW hereby represents and warrants, on the date hereof and on
the date that the Initial Public Offering is consummated, as follows:

 

(a)  Historic TW
is validly existing and in good standing under the laws of its state of
incorporation and has the requisite power and authority to execute and deliver
this Agreement and to perform its obligations under this Agreement.

 

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(b)  The
execution and delivery by Historic TW of this Agreement and the performance by
Historic TW of its obligations hereunder have been duly authorized by all
necessary corporate or similar action.

 

(c)  This
Agreement has been duly executed and delivered by Historic TW and constitutes a
legal, valid, binding and enforceable obligation of Historic TW, except to the
extent limited by (i) applicable bankruptcy, insolvency, reorganization,
moratorium and similar laws of general application related to the enforcement
of creditor’s rights generally and (ii) general principles of equity.

 

(d)  The
execution, delivery and performance by Historic TW of this Agreement do not and
will not (i) violate, conflict with or result in the breach of any provision of
the certificate of incorporation or bylaws or any resolution adopted by the
board of directors or stockholders of Historic TW, (ii) conflict with or
violate any law, regulation, order, writ, judgment, injunction, decree or other
stipulation or award applicable to Historic TW or any of its assets or
properties or (iii) conflict with, result in any breach of, constitute a
default (or event which with the giving of notice or lapse of time, or both,
would become a default) under, require any consent or the giving of any notice
under, or give to others any right to purchase or sell assets or securities or
to exercise any remedy or modify any obligation under, or any rights of
termination, amendment or acceleration of, or result in the creation of any
lien or encumbrance on any of the assets or properties of Historic TW pursuant
to, any agreement, contract or other instrument binding upon Historic TW or by
which or any of its assets or properties is bound or affected except, in the
case of clauses (ii) and (iii), for any such conflict, violation, breach,
default, right of termination, amendment or acceleration or lien or encumbrance
as has not had and could not reasonably be expected to have, in each case,
individually or in the aggregate, a material adverse effect on the condition
(financial or otherwise), business, assets or results of operations of Historic
TW and its subsidiaries, taken as a whole.

 

(e)  Historic TW
has good and marketable title to, and is the sole registered and beneficial
owner of, all of the Warrants, free and clear of all liens, claims, options,
proxies, voting agreements, security interests, charges and encumbrances (other
than the Warrant Agreement and the Stockholders Agreement), and has the
complete and unrestricted power to transfer, assign and deliver the Warrants to
the Company, and upon the transfer of the Warrants to the Company as provided
herein, the Company will acquire the Warrants, free and clear of all liens,
claims, options, proxies, voting agreements, security interests, charges and
encumbrances (other than the Stockholders Agreement).  The Warrants have not been exercised, in
whole or in part.  Historic TW further
agrees that, unless this Agreement has been terminated, the Warrants will not
and may not be transferred (other than to the Company pursuant to this
Agreement) or exercised, in whole or in part, and that any such attempted
transfer or exercise shall be null and void ab initio.

 

(f)  Historic TW
has good and marketable title to, and is the sole registered and beneficial
owner of, all of the MMT Warrants, free and clear of all liens, claims,
options, proxies, voting agreements, security interests, charges and
encumbrances (other than the Stockholders Agreement), and has the complete and
unrestricted power to acknowledge and agree that, upon the Effective Time, the
MMT Warrants are no longer exercisable and are null and void.  Historic TW further agrees that, unless this
Agreement has been terminated, the MMT

 

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Warrants will not and may not be transferred, in whole
or in part, and that any such attempted transfer shall be null and void ab initio.

 

(g)  Historic TW
and its representatives have been given the opportunity to ask questions of,
and to receive answers from, the Company and its representatives concerning the
business affairs, financial condition and other information relating to the
Company and to obtain any additional information which Historic TW or its
representatives deem necessary.

 

(h)  Historic TW
has not, directly or indirectly, dealt with any person acting in the capacity
of a finder or broker, nor has Historic TW incurred any obligation for any
finder’s or broker’s fee or commission, in connection with the transactions
contemplated by this Agreement.

 

Section 5.  Termination.  This Agreement may be terminated by either
party, upon written notice to the other, if the Initial Public Offering shall
not have been consummated by 120 days of the date of this Agreement.

 

Section 6.  Conditions
to Closing.  The respective obligations
of the parties to effect the Repurchase are subject to the prior satisfaction
of, in addition to any other condition set forth herein, (i) the closing of the
Initial Public Offering,  (ii) the
condition that the representations and warranties of the other party set forth
in this Agreement shall be true and correct and (iii) the condition that at the
Effective Time the common stock of the Company is the sole Component.

 

Section 7.  Notices.  Unless otherwise provided, any notice
required or permitted by this Agreement shall be in writing and shall be deemed
sufficient upon delivery, when delivered personally or by overnight courier or
sent by telegram or fax, or forty-eight hours after being deposited in the U.S.
mail, as certified or registered mail, with postage prepaid, and addressed to
the party to be notified at such party’s address or fax number as set forth
below or as subsequently modified by written notice.

 

	
   

  	
  (a) If to the Company :

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Warner Music Group Corp.

  	
   

  
	
   

  	
   

  	
  75 Rockefeller Plaza

  	
   

  
	
   

  	
   

  	
  New York, NY 10019

  	
   

  
	
   

  	
   

  	
  Fax: (212)-275-3601

  	
   

  
	
   

  	
   

  	
  Attention: General Counsel

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  with a copy to:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Ropes & Gray LLP

  	
   

  
	
   

  	
   

  	
  One International Place

  	
   

  
	
   

  	
   

  	
  Boston, MA 02110

  	
   

  
	
   

  	
   

  	
  Fax: (617)-951-7050

  	
   

  
	
   

  	
   

  	
  Attention: Alfred Rose, Esq.

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  and to:

  	
   

  

 

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  Simpson Thacher & Bartlett LLP

  	
   

  
	
   

  	
   

  	
  425 Lexington Avenue

  	
   

  
	
   

  	
   

  	
  New York, NY 10017

  	
   

  
	
   

  	
   

  	
  Fax: (212)-455-2502

  	
   

  
	
   

  	
   

  	
  Attention:

  	
  John G. Finley, Esq.

  
	
   

  	
   

  	
   

  	
  Ed Chung, Esq.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (b) If to Historic TW:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  c/o Time Warner Inc.

  	
   

  
	
   

  	
   

  	
  One Time Warner Center

  	
   

  
	
   

  	
   

  	
  New York, NY 10019

  	
   

  
	
   

  	
   

  	
  Fax: (212) 484-7278

  	
   

  
	
   

  	
   

  	
  Attention: Deputy General Counsel

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  with a copy to:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Cravath Swaine & Moore LLP

  	
   

  
	
   

  	
   

  	
  825 Eighth Avenue

  	
   

  
	
   

  	
   

  	
  New York, NY 10019

  	
   

  
	
   

  	
   

  	
  Fax: (212)-474-3700

  	
   

  
	
   

  	
   

  	
  Attention: Richard Hall, Esq.

  	
   

  
					

 

Section 8.  Specific
Performance.  The parties hereto
agree that irreparable damage would occur if any provision of this Agreement
were not performed in accordance with the terms hereof and that the parties
shall be entitled to an injunction or injunctions to prevent breaches of this
Agreement or to enforce specifically the performance of the terms and
provisions hereof.

 

Section 9.  Entire
Agreement; Amendments.  This
Agreement constitutes the entire agreement of the parties hereto with respect
to the subject matter hereof and supersedes all other prior agreements and
understandings (whether oral or written) among the parties with respect to the
subject matter hereof.  This Agreement
may not be amended without the written consent of each party hereto.

 

Section 10.  Successors;
Assignment.  The terms and conditions
of this Agreement shall inure to the benefit of and be binding upon the
respective successors and permitted assigns of the parties hereto.  Neither this Agreement nor any of the rights,
interests or obligations under this Agreement shall be assigned by any party
without the prior written consent of the other party.

 

Section 11.  Governing
Law.  This Agreement shall be
governed by, and construed in accordance with, the laws of the State of
New York, regardless of the laws that might otherwise govern under
applicable principles of conflicts of law thereof.

 

6

 

Section 12.  Counterparts.  This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each
of the parties and delivered to the other parties.

 

[Signature Pages Follow]

 

7

 

IN WITNESS WHEREOF, the parties hereto have caused
this Agreement to be duly executed, as of the day and year first above written.

 

	
   

  	
  WARNER MUSIC GROUP CORP.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  by

  
	
   

  	
   

  	
  /s/ Michael D. Fleisher

  
	
   

  	
   

  	
  Name: Michael D. Fleisher

  
	
   

  	
   

  	
  Title: EVP and CFO

  
					

 

	
   

  	
  HISTORIC TW INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  by

  
	
   

  	
   

  	
  /s/ Spencer B. Hays

  
	
   

  	
   

  	
  Name: Spencer B. Hays

  
	
   

  	
   

  	
  Title: Senior Vice President

  
					

 

8Exhibit
10.1

 

Stock option plan 2001

 

 

UNANIMOUS WRITTEN CONSENT OF THE

BOARD OF DIRECTORS
OF BIDZ.COM,
INC.

 

A California Corporation

 

The undersigned, being all of the directors of Bidz.com, Inc., a
California corporation (the “Corporation”), acting by unanimous written consent
in lieu of a meeting pursuant to their authority to do so in the Bylaws of the
Corporation and in Section 307 of the California Corporation Code, hereby
adopt the following resolutions:

 

RESOLVED, that the executive officers of the
Corporation are hereby authorized and directed to execute all documents and
take all action which they deem necessary or appropriate in order to cause the
Corporation to adopt the Bidz.com, Inc. 2001 Stock Option Plan for Directors,
Officers, Employees and Key Consultants (the “Plan”), a copy of which is
attached to these resolutions as Exhibit A, and the Plan is hereby adopted,
subject to shareholder ratification on or before January 24, 2002.

 

RESOLVED FURTHER,
that the Plan authorize the issuance of up to 900,000 shares of the Corporation’s
Common Stock pursuant to the grant and exercise of up to 900,000 stock options.

 

RESOLVED FURTHER, that the
Plan contain the other terms and conditions set forth in the Plan attached to
these resolutions as Exhibit A.

 

RESOLVED FURTHER, that stock
options under the Plan may be granted to persons and on terms determined by the
Company’s Board of Directors or Chief Executive Officer from time to time in
accordance with the Plan, provided that the Board of Directors must approve the
grant of any stock options to the Chief Executive Officer of the Corporation.

 

RESOLVED FURTHER, that the Chief Executive Officer of the Corporation is hereby
authorized and directed to execute all documents and to take all action which
he deems necessary or appropriate in order to issue up to 900,000 warrants to
purchase up to 900,000 shares of the Company’s common stock from time to time
as incentive compensation for consultants and employees of the Company, other
than the Chief Executive Officer, or for other valid purposes determined by the
Chief Executive Officer in his business judgment, on such terms and conditions
as the Chief Executive Officer may determine.

 

 

This Unanimous Written Consent of the Board of Directors of Bidz.com,
Inc. is hereby executed and is effective as of January 24, 2001.

 

 

	
   

  	
   

  	
  /s/ David Zinberg

  	
   

  
	
   

  	
   

  	
  David
  Zinberg, Chairman of the

  Board of Directors

  
	
   

  	
   

  

 

2

 

Bidz.com, Inc.

Stock Option Plan

for Directors, Executive Officers, and Employees of

and Key Consultants to
Bidz.com, Inc.

 

1.                                      Purpose.  The
purpose of this Stock Option Plan is to promote the interests of Bidz.com, Inc.
(“Company”) and its shareholders by enabling it to offer stock options to
better attract, retain, and reward directors, executive officers, and employees
of and key consultants to the Company and any other future subsidiaries that
may qualify under the terms of this Plan.  The goal is to strengthen the mutuality of
interests between those persons and the shareholders of the Company by
providing those persons with a proprietary interest in pursuing the Company’s
long-term growth and financial success.

 

2.                                      Definitions.  For
purposes of this Plan, the following terms shall have the meanings set forth below.

 

(a)                                  “Board” means the Board of Directors of
Bidz.com, Inc.

 

(b)                                 “Code” 
means the Internal Revenue Code of 1986, as amended.  Reference to any specific section of the
Code shall be deemed to be a reference to any successor provision of the Code.

 

(c)                                  “Committee” means the administrative
committee of this Plan that is provided in Section 1 below.

 

(d)                                 “Common Stock” means the common stock of the
Company or any security issued in substitution, exchange, or in lieu thereof.

 

(e)                                  “Company” means Bidz.com, Inc., a California
corporation, or any successor corporation.  Except where the context indicates otherwise,
the term “Company” shall include its Parent and Subsidiaries.

 

(f)                                    “Director” means any person who serves as a
member of the Board of Directors of Bidz.com, Inc. “Outside Director” means any
person who serves as a member of the Board of Directors of Bidz.com, Inc. and
is not a full-time employee of Bidz.com, Inc. or its subsidiaries.

 

(g)                                 “Disabled” means permanent and total
disability, as defined in Code Section 22(e)(3).

 

(h)                                 “Employee” means any person who is employed
by Bidz.com, Inc. or any Subsidiary or Parent of the Company on a full or
part-time basis, so that they have income taxes withheld and are eligible to
participate in employee benefits programs.  Such person 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 days,
unless re-employment upon expiration of such leave is guaranteed by statute or
contract. If employment upon expiration of leave of absence approved by the
Company is not so guaranteed, on the 181st day of such leave any Incentive Stock Option
held

 

1

 

by the Optionee shall
cease to be treated as an Incentive Stock Option and shall be treated for tax purposes as a Non-Qualified Stock
Option.  Neither service as a Director
nor payment of a director’s fee by the Company shall be sufficient to
constitute “employment” by the Company.

 

(i)                                     “Exchange
Act” means the Securities Exchange Act of 1934.

 

(j)                                     “Fair
Market Value” per share means, on any given date:

 

(1)                                  The
last sale price of the Common Stock on the National Association of Securities
Dealers Automated Quotation National Market System (“NMS”) or in case no such
reported sale takes place, the average of the closing bid and ask prices on such
date; or

 

(2)                                  If
not quoted on the NMS, the average of the closing bid and ask prices of the
Common Stock on the National Association of Securities Dealers Automated
Quotation System (“NASDAQ”) or any comparable system; or

 

(3)                                  If
not quoted on any system, the fair market value indicated by the last appraisal
of the Company by a professional appraiser or certified public accounting firm;
or

 

(4)                                  If
not quoted on any system or valued by appraisal, the fair market value
determined by the Company’s Board of Directors in good faith.

 

(k)                                  “Incentive
Stock Option” means an option to purchase shares of Common Stock that is
intended to be an incentive stock option within the meaning of Section 422
of the Code.

 

(l)                                     “Insider”
means a person who is subject to the provisions of Section 16 of the
Exchange Act.

 

(m)                               “Key
Consultant” means a person who is engaged by Bidz.com, Inc. or its Subsidiaries
as a non-employee to perform tasks on a contractual basis over a sufficient
period of time that he or she satisfies the eligibility criteria set forth by
the Securities and Exchange Commission for a non-employee to participate in a
registered stock option plan.

 

(n)                                 “Non-Qualified
Stock Option” means any option to purchase shares of Common Stock that is not
an Incentive Stock Option.

 

(o)                                 “Officer”
is an employee of Bidz.com, Inc. or its Subsidiaries who is granted the
authority to commit the corporation to binding agreements and to function as
one of the executives of Bidz.com, Inc. or its Subsidiaries.

 

(p)                                 “Option”
means an Incentive Stock Option or a Non-Qualified Stock Option.

 

(q)                                 “Parent”
shall mean any corporation (other than the Company) in an unbroken chain of
corporations ending with the Company if each of the corporations (other than
the Company) owns stock possessing fifty percent (50%) or more of the total
combined voting

 

2

 

power
of all classes of stock in one of the other corporations in the chain, as
determined in accordance with the rules of Section 424(e) of the Code.

 

(r)                                    “Participant” means a person who has been
granted an Option.

 

(s)                                  “Plan” means this Bidz.com, Inc. Stock Option
Plan for Directors, Executive Officers, and Employees of and Key Consultants to
Bidz.com, Inc. and its Subsidiaries, as it may be amended from time to time.

 

(t)                                    “Securities Act” means the Securities Act of
1933, as amended.

 

(u)                                 “Severance” means, with respect to a
Participant, the termination of the Participant’s provision of services to the
Company as an employee and officer and director and consultant, as the case may
be, whether by reason of death, disability, or any other reason. A Participant
who is on a leave of absence that exceeds ninety (90) days will be considered
to have incurred a Severance on the ninety-first (91st) day of the leave of
absence, unless the Participant’s rights to reemployment or reappointment are
guaranteed by statute or contract.

 

(v)                                 “Subsidiary” means any corporation or entity
in which the Company, directly or indirectly, controls fifty percent (50%) or more
of the total voting power of all classes of its stock having voting power, as
determined in accordance with the rules of Code Section 424(f).

 

(w)                               “Ten Percent Shareholder” means any person
who owns (after taking into account the constructive ownership rules of Section 424(d)
of the Code) more than ten percent (10%) of the stock of the Company.

 

3.                                      Administration.

 

(a)                                  This Plan shall be administered by a
Committee appointed by the Board.  The
Board may remove members from, or add members to, the Committee at any time.

 

(b)                                 The Committee shall be composed of the
members of the Compensation Committee of the Company’s Board of Directors and
any other members that the Board of Directors sees fit to appoint.

 

(c)                                  The Committee may conduct its meetings in person
or by telephone.  A majority of the
members of the Committee shall constitute a quorum, and any action shall constitute
action of the Committee if it is authorized by:

 

(i)                                     A majority of the members present at any
meeting; or

 

(ii)                                  The unanimous consent of all of the members
in writing without a meeting.

 

(d)                                 The Committee is authorized to interpret this
Plan and to adopt rules and procedures relating to the administration of this
Plan.  All actions of the Committee in
connection with the interpretation and administration of this Plan shall be
binding upon all parties.

 

(e)                                  The Committee may designate persons other
than members of the Committee to carry out its responsibilities under such
conditions and limitations as it may

 

3

 

prescribe,
except that the Committee may not delegate its authority with regard to the
granting of Options to Insiders.

 

(f)                                    Subject to the limitations of Section 13
below, the Committee is expressly authorized to make such modifications to this
Plan as are necessary to effectuate the intent of this Plan as a result of any
changes in the tax, accounting, or securities laws treatment of Participants
and the Plan.

 

4.                                      Duration of Plan.

 

(a)                                  This Plan shall be effective as of January 24,
2001, the date of its adoption by the Board, provided this Plan is approved by
the majority of the Company’s shareholders, in accordance with the provisions
of Code Section 422, on or prior to twelve (12) months after its
adoption.  In the event that this Plan is
not so approved, this Plan shall terminate and any Options granted under this
Plan shall be void and have no further effect.

 

(b)                                 This Plan shall terminate on January 24,
2011, except with respect to Options then outstanding.

 

5.                                      Number of Shares.

 

(a)                                  The aggregate number of shares of Common
Stock which may be issued pursuant to this Plan shall be nine hundred thousand
(900,000) shares of Common Stock.  This aggregate
number may be adjusted from time to time as set forth in Section 13 of
this Plan.

 

(b)                                 Upon the expiration or termination of an
outstanding Option which shall not have been exercised in full, any shares of
Common Stock remaining unissued shall again become available for the granting
of additional Options.

 

6.                                      Eligibility. 
Persons eligible for Options under this Plan shall be limited to the directors,
executive officers, and employees of and key consultants to Bidz.com, Inc. and
its Subsidiaries.

 

7.                                      Form of Options. 
Options granted under this Plan may be Incentive Stock Options or Non-Qualified
Stock Options.  Options shall be subject
to the following terms and conditions:

 

(a)                                  Options may be granted under this Plan on
such terms and in such form as the Committee may approve, including by not
limited to the right to exercise Options on a cashless basis, which conditions
shall not be inconsistent with the provisions of this Plan.

 

(b)                                 The exercise price per share of Common Stock
purchasable under an Option shall be set forth in the Option.  The exercise price of an option, determined on
the date of the grant, shall be no less than:

 

(i)                                     One hundred ten percent (110%) of the Fair
Market Value of the Common Stock in the case of a Ten Percent Shareholder; or

 

(ii)                                  One hundred percent (100%) of the Fair Market
Value of the Common Stock in the case of any other employee.

 

4

 

(c)                                  An
Option shall be exercisable at such time or times and be subject to such terms
and conditions as may be set forth in the Option.  Except in the case of Options granted to
Officers, Directors, and Consultants. Options shall become exercisable at a
rate of no less than 20% per year over five (5) years from the date the Options
are granted.

 

(d)                                 The
Committee may modify an existing Option, including the right to:

(i)                                     Accelerate
the right to exercise it;

 

(ii)                                  Extend
or renew it; or

 

(iii)                               Cancel
it and issue a new Option.

 

(e)                                  No
modification may be made pursuant to Paragraph (d) above to an Option that
would impair the rights of the Participant holding the Option without his or
her consent.  Whether a modification of
an existing Incentive Stock Option will be treated as the issuance of a new
Incentive Stock Option will be determined in accordance with the rules of Section 424(h)
of the Code.

 

(f)                                    The
aggregate Fair Market Value (determined as of the date of grant) of the number
of shares of Common Stock with respect to which Incentive Stock Options are exercisable
for the first time by a Participant during any calendar year shall not exceed
one hundred thousand dollars ($100,000) or such other limit as may be required
by Code Section 422. Should anyone exercise Incentive Stock Options that
exceed this limit, such options will be treated as non-qualified stock options
for tax purposes.

 

8.                                      Issuance of Options.

 

Stock Options will be
granted from time to time in the future on the terms and conditions recommended
by the Committee and approved by the Company’s Board of Directors.  Each Option shall be evidenced by a written
stock option agreement, in form satisfactory to the Committee, executed by the
Company and the person to whom such Option is granted.  The stock option agreement shall specify
whether each Option it evidences is a Non-Qualified Stock Option or an
Incentive Stock Option.

 

9.                                      Vesting Requirement and
Performance Threshold.

 

The vesting requirements,
performance thresholds and other terms and conditions of Options which may be
granted under this Plan from time to time, if any, will be determined and
approved by the Committee and the Board of Directors; provided, that in all
cases unvested Options will automatically expire and be canceled on the date of
the Severance of an Employee or Insider who holds such Options except as
otherwise specifically provided in future amendments to the Plan, or in
specific stock option agreements approved by the Board of Directors on a case by case basis.

 

5

 

10.                               Termination of Options.

 

(a)                                  Except to the extent the terms of an Option
require its prior termination, each Option shall terminate on the earliest of
the following dates.

 

(i)                                     The date which is ten (10) years from the
date on which the Option is granted or five (5) years from the date of grant in
the case of an Incentive Stock Option granted to a Ten Percent Shareholder.

 

(ii)                                  If the Participant was Disabled at the time
of Severance, the date of the Severance of the Participant to whom the Option
was granted, with respect to unvested Options, and the date which is one (1)
year from the date of the Severance, with respect to vested Options.

 

(iii)                               The date of Severance of the Participant to whom the Option was
granted, with respect to unvested Options, and the date which is ninety (90)
days from the date of the Severance of the Participant to whom the Option was
granted, with respect to vested Options.

 

(iv)                              The date which is ninety (90) days after the death of the Participant,
with respect to vested Options, and the date of death of the Participant, in
the case of unvested Options.

 

(v)                                 In the case of any Severance other than one
described in Subparagraphs (ii) or (iii) above, the date of the Participant’s
Severance, with respect to unvested Options, and the date that is ninety (90)
days from the date of the Participant’s Severance, with respect to vested
Options.

 

11.                               Non-transferability of
Options.

 

(a)                                  During the lifetime of the Participant, each
Option is exercisable only by the Participant.

 

(b)                                 No Option under this Plan shall be assignable
or transferable, except by will or the laws of descent and distribution.

 

12.                               Adjustments.

 

(a)                                  In the event of any change in the
capitalization of the Company affecting its Common Stock (e.g., a stock split,
reverse stock split, stock dividend, combination, recapitalization, or
reclassification), the Committee shall authorize such adjustments as it may
deem appropriate with respect to:

 

(i)                                     The aggregate number of shares of Common
Stock for which Options may be granted under this Plan;

 

6

 

(ii)                                  The
number of shares of Common Stock covered by each outstanding Option; and

 

(iii)                               The
exercise price per share in respect of each outstanding Option.

 

(b)                                 The
Committee may also make such adjustments in the event of a spin-off or other
distribution (other than normal cash dividends) of Company assets to shareholders.

 

13.                               Amendment
and Termination.  The Board may
at any time amend or terminate this Plan. 
The Board may not, however, without the approval of the
majority-in-interest of the shareholders of the Company, amend the provisions
of this Plan regarding:

 

(a)                                  The
class of individuals entitled to receive Incentive Stock Options.

 

(b)                                 The
aggregate number of shares of Common Stock that may be issued under the Plan,
except as provided in Section 12 of this Plan.

 

(c)                                  To
the extent necessary to comply with Rule 16(b) under the Exchange Act, the Board
may not make any amendment without approval of the majority-in-interest of the
shareholders of the Company that would:

 

(i)                                     Materially
increase the aggregate number of shares of Common Stock which may be issued to
Insiders (except for adjustments under Section 12 of this Plan);

 

(ii)                                  Materially
modify the requirements as to the eligibility of Insiders to participate; or

 

(iii)                               Materially
increase the benefits accruing to Insiders under this Plan.

 

14.                               Tax
Withholding.

 

(a)                                  The
Company shall have the right to take such actions as may be necessary to
satisfy its tax withholding obligations relating to the operation of this Plan.

 

(b)                                 If
Common Stock is used to satisfy the Company’s tax withholding obligations, the
stock shall be valued based on its Fair Market Value when the tax withholding
is required to be made.

 

15.                               No Additional Rights.

 

(a)                                  The
existence of this Plan and the Options granted hereunder shall not affect or
restrict in any way the power of the Company to undertake any corporate action otherwise
permitted under applicable law.

 

(b)                                 Neither
the adoption of this Plan nor the granting of any Option shall confer upon any
Participant the right to continue performing services for the Company, nor shall
it interfere in any way with the right of the Company to terminate the services
of any Participant at any time, with or without cause.

 

7

 

(c)                                  No Participant shall have any rights as a
shareholder with respect to any shares covered by an Option until the date a
certificate for such shares has been issued to the Participant following the
exercise of the Option.

 

16.                               Securities Law Restrictions.

 

(a)                                  No shares of Common Stock shall be issued
under this Plan unless the Committee shall be satisfied that the issuance will
be in compliance with applicable federal and state securities laws.

 

(b)                                 The Committee may require certain investment
or other representations and undertakings by the Participant (or other person
acquiring the right to exercise the Option by reason of the death of the
Participant) in order to comply with applicable law,

 

(c)                                  Certificates for shares of Common Stock
delivered under this Plan may be subject to such restrictions as the Committee
may deem advisable.  The Committee may cause
a legend to be placed on the certificates to refer to these restrictions.

 

17.                               Employment or Consulting Relationship.  Nothing
in the Plan or any Option granted hereunder shall interfere with or limit in
any way the right of the Company or any of its Parents or Subsidiaries to
terminate any Participant’s employment or consulting at any time, nor confer
upon any Participant any right to continue in the employ of, or consult with,
the Company or any of its Parents or Subsidiaries.

 

18.                               Market Standoff.  Each
Participant, if so requested by the Company or any representative of the
underwriters in connection with any registration of the offering of any
securities of the Company under the Securities Act, shall not sell or otherwise
transfer any shares of Common Stock acquired upon exercise of Options during a
specified period following the effective date of a registration statement of
the Company filed under the Securities Act not to exceed six months; provided,
however, that such restriction shall apply only to the first registration
statement of the Company to become effective under the Securities Act after the
date of adoption of the Plan which includes securities to be sold on behalf of
the Company to the public in an underwritten public offering under the
Securities Act.  The Company may impose
stop-transfer instructions with respect to securities subject to the foregoing
restriction until the end of such six month period.

 

19.                               Special Vesting Provisions.  Notwithstanding anything else in the Plan to
the contrary, all outstanding Options granted to any officer, director, or
employee of or key consultant to the Company which have not vested will
accelerate to a date at least ten (10) business days prior to the closing date
of a sale by the Company of all or substantially all of its assets, a merger of
the Company with another company, the sale or issuance of more than 50% of the
total issued and outstanding voting stock of the Company to another party or
parties in a single transaction or in a series of related transactions,
resulting in a change of control of the Company, or a similar business
combination or extraordinary transaction involving the Company.  The exercise of Options the vesting of which
has accelerated pursuant to this Amendment shall not be effective until the
closing date of an above-referenced extraordinary transaction or business
combination.  Vested Options under this
Amendment shall terminate on the date of the closing of the event causing the
vesting of the Options to accelerate.  The
vesting of the Options is conditioned upon the closing of the transaction that
causes the vesting of the Options to accelerate.  If said transaction does not close within 30
days from the

 

8

 

acceleration
date, than the vesting of the accelerated Options will not be effective, and the
Options shall revert to their original vesting schedule, subject to
acceleration again in accordance with this Amendment if another extraordinary
transaction or business combination is proposed and closes.

 

20.                               Shareholder’s Agreement.  Each
Participant who acquires Common Stock through the exercise of Options, if so
requested by the Company, shall execute
a Shareholder’s Agreement which provides for the disposition of the
Common Stock in the event the Participant seeks to dispose of his Common Stock
or incurs a Severance.

 

21.                               Indemnification.  To
the maximum extent permitted by law, the Company shall Indemnify each member of
the Board and of the Committee,
as well as any other Employee of or Key Consultant to the Company with duties
under this Plan, against expenses (including any amount paid in settlement)
reasonably incurred by him or her in connection with any claims against him or
her by reason of the performance of his or her duties under this Plan, unless
the losses are due to the individual’s gross negligence or lack of good faith.

 

22.                               Governing Law.  This
Plan and all actions taken thereunder shall be governed by and construed in
accordance with the laws of the State of California.  The venue for any legal proceeding under this
Plan will be in the appropriate forum in the County of Los Angeles, State of
California.

 

 

	
  Date:
  January 24, 2001

  	
   

  	
  Bidz.com, Inc.

  a California
  Corporation

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/
  David Zinberg

  
	
   

  	
   

  	
   

  	
  David
  Zinberg, Chief Executive Officer,

  President and Chairman of the Board of

  Directors

  
	
   

  	
   

  
	
   

  	
   

  
					

 

9

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