Document:

Exhibit
10.19

 

INCENTIVE STOCK OPTION AGREEMENT

OF

MARQUEE HOLDINGS INC.

 

THIS AGREEMENT (the “Agreement”) is
entered into as of December 23, 2004 (the “Grant Date”) by and between Marquee
Holdings Inc., a Delaware corporation (the “Company”) and [name], an
Employee of the Company (or one of its Plan Subsidiaries), hereinafter referred
to as the “Optionee.”

 

WHEREAS, the Company wishes to afford the
Optionee the opportunity to purchase shares of its common stock, par value
$0.01 per share (“Common Stock”); and

 

WHEREAS, the Company wishes to carry out the
2004 Stock Option Plan of Marquee Holdings Inc. (as it may be amended from time
to time, the “Plan”), the terms of which are hereby incorporated by
reference and made a part of this Agreement; and

 

WHEREAS, the Committee appointed to
administer the Plan pursuant to Section 6.1 of the Plan (the “Committee”)
has determined that it would be to the advantage and best interest of the
Company and its shareholders to grant the Incentive Stock Option provided for
herein to the Optionee as an inducement to enter into or remain in the service
of the Company (or one of its Plan Subsidiaries) and as an incentive for
increased efforts during such service, and has advised the Company thereof and
instructed the undersigned officers to issue said Option;

 

NOW, THEREFORE, in consideration of the
mutual covenants herein contained and other good and valuable consideration,
receipt of which is hereby acknowledged, the parties hereto do hereby agree as
follows:

 

ARTICLE I.

DEFINITIONS

 

Whenever the following terms are used in this
Agreement, they shall have the meaning specified below unless the context
clearly indicates to the contrary. 
Capitalized terms used in this Agreement and not defined below shall
have the meaning given such terms in the Plan. 
The singular pronoun shall include the plural, where the context so
indicates.

 

Section 1.1             “Cause”
shall have the meaning given such term in the service agreement between the
Company (or a Plan Subsidiary) and the Optionee, if any, and in the event there
is no such agreement in effect shall mean the Optionee’s (i) willful or
negligent failure to substantially perform his duties with the Company or any
Plan Subsidiary; (ii) willful or negligent failure to carry out, or comply
with, in any material respect, any lawful and reasonable directive of the
Company or any Plan Subsidiary; (iii) commission at any time of any act or
omission that results in, or that may reasonably be expected to result in, a
conviction, plea of no contest or imposition of unadjudicated probation for any
felony or crime involving moral turpitude; (iv) unlawful use (including
being under the influence) or possession of illegal drugs on the Company’s or
any Plan Subsidiary’s premises or while performing any duties or
responsibilities with the Company or any Plan Subsidiary; or (v) commission at
any time of any act of fraud,
embezzlement, misappropriation, material misconduct, or breach of fiduciary
duty against the Company or any Plan Subsidiary (or any predecessor thereto or
successor thereof).

 

 

Section
1.2             “Change of Control” shall
mean the occurrence of, after the Effective Date, any of the following events:

 

(a)           any “person” or “group” as such terms are used in
Sections 13(d) and 14(d) of the Exchange Act other than one or more Permitted
Holders is or becomes the “beneficial owner” (as defined in Rules 13d-3 and
13d-5 under the Exchange Act, except that such person or group shall be deemed
to have “beneficial ownership” of all shares that any such person or group has
the right to acquire, whether such right is exercisable immediately or only
after the passage of time), directly or indirectly, by way of merger,
consolidation or other business combination or purchase of 50% or more of the
total voting power of the Voting Stock of the Company or of AMCE (for purposes
of calculating the total voting power of the Voting Stock held by a group
solely in the context of a merger, consolidation or other business combination
with a Person engaged in a line of business similar to that of the Company or
of AMCE and its Subsidiaries on August 18, 2004, the voting power beneficially
owned by the Permitted Holders or by Permitted Co-Investors, to the extent such
voting power of the Voting Stock was acquired by such Permitted Co-Investors on
or before January 31, 2005 in transactions that satisfy the definition of
Permitted Co-Investor, shall be excluded in an amount equal to the lesser of
the total voting power of the Voting Stock beneficially owned by such Permitted
Co-Investors on (x) January 31, 2005 or (y) the date of such merger,
consolidation or other business combination);

 

(b)           the adoption of a plan relating to the liquidation or
dissolution of the Company or AMCE;

 

(c)           the sale, lease, transfer or other conveyance, in one
or a series of related transactions, of all or substantially all of the assets
of the Company or of AMCE and its Subsidiaries, taken as a whole, to any Person
other than one or more Permitted Holders; or

 

(d)           a change of control under the indentures relating to
the 91/2% Senior Subordinated Notes due 2011 (the “2011
Notes”), the 97/8% Senior
Subordinated Notes due 2012 or the 8% Senior Subordinated Notes due 2014 issued
by AMCE (other than a change of control under the indenture relating to the
2011 Notes resulting from the Transactions);

 

provided, however, that for the avoidance of doubt, the closing of the
Merger of Marquee Inc. with and into AMCE as of the Effective Date shall not
constitute and shall not be deemed to cause or result in a Change of Control
hereunder.

 

Section
1.3             “Grant Date” shall have the
meaning set forth in the Recitals hereto.

 

Section
1.4             “Management Stockholders
Agreement” shall mean that certain Management Stockholders Agreement dated
December 23, 2004 by and among the Company, the Principal Investors and certain
management stockholders which contains terms applicable to Options, the shares
of Common Stock acquired upon Option exercise and other shares of Common Stock,
if any, held by the Optionee during the term of such agreement, and attached hereto
as Exhibit A, as the same may be amended from time to time.  As a condition to the grant of the Option,
the Optionee shall become a party to the Management Stockholders Agreement.

 

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Section
1.5             “Option” shall mean the
Incentive Stock Option to purchase Common Stock granted under this Agreement.

 

Section
1.6             “Plan” shall have the meaning
set forth in the Recitals hereto.

 

Section
1.7             “Transactions” shall mean the
transactions set forth in the Agreement and Plan of Merger by and among the
Company, Marquee Inc. and AMCE, dated as of July 22, 2004 and the transactions
related thereto.

 

ARTICLE II.

GRANT OF OPTION

 

Section 2.1             Grant
of Option.  In consideration of the
Optionee’s agreement to enter into or remain in the employ of the Company or
one of its Plan Subsidiaries, and for other good and valuable consideration, as
of the Grant Date, the Company irrevocably grants to the Optionee the Option to
purchase any part or all of an aggregate of five hundred (500) shares of Common
Stock upon the terms and conditions set forth in the Plan and this Agreement.

 

Section 2.2             Option
Subject to Plan.  The Option granted
hereunder is subject to the terms and provisions of the Plan, including without
limitation, Article V and Sections 7.1, 7.2 and 7.3 thereof.

 

Section 2.3             Option
Price.  The purchase price of the
shares of Common Stock covered by the Option shall be $1,000.00 per share
(without commission or other charge), which is the Fair Market Value as of the
Grant Date.

 

Section 2.4             Adjustments
to Options.  The Committee shall make
adjustments with respect to the Option in accordance with the provisions of
Section 7.1 of the Plan; provided, however,
that each such adjustment shall be made in such manner as not to constitute a “modification”
within the meaning of Section 424(h)(3) of the Code, unless the Optionee
consents to an adjustment which would constitute such a “modification.”

 

ARTICLE III.

EXERCISABILITY

 

Section 3.1             Commencement
of Exercisability

 

(a)           Subject to subsections (b) and (c) and Section 3.3,
the Option shall become exercisable in five equal and cumulative installments
provided that the Optionee remains continuously employed in active service by
the Company from the Grant Date through such date as follows:

 

(i)            The first
installment shall consist of 20% of the shares covered by the Option and shall
become exercisable on the first anniversary of the Grant Date;

 

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(ii)           The second
installment shall consist of 20% of the shares covered by the Option and shall
become exercisable on the second anniversary of the Grant Date;

 

(iii)          The
third installment shall consist of 20% of the shares covered by the Option and
shall become exercisable on the third anniversary of the Grant Date;

 

(iv)          The fourth
installment shall consist of 20% of the shares covered by the Option and shall
become exercisable on the fourth anniversary of the Grant Date; and.

 

(v)           The fifth
installment shall consist of 20% of the shares covered by the Option and shall
become exercisable on the fifth anniversary of the Grant Date.

 

(b)           No portion
of the Option which is unexercisable at Termination of Employment shall
thereafter become exercisable.

 

(c)           All
unexercised and outstanding Options shall accelerate and become exercisable
immediately prior to a Change of Control.

 

Section 3.2             Duration
of Exercisability.  The installments
provided for in Section 3.1 are cumulative. 
Each such installment which becomes exercisable pursuant to Section 3.1
shall remain exercisable until it becomes unexercisable.

 

Section 3.3             Expiration
of Option.  The Option may not be
exercised to any extent by anyone after the first to occur of the following
events:

 

(a)           The tenth
anniversary of the Grant Date; or

 

(b)           If the
Optionee owned (within the meaning of Section 424(d) of the Code), at the time
the Option was granted, more than ten percent of the total combined voting
power of all classes of stock of the Company or any Subsidiary or parent
corporation thereof (within the meaning of Section 422 of the Code), the fifth
anniversary of the Grant Date; or

 

(c)           Except as
the Committee may otherwise approve, the date that is six (6) months following
the date of the Optionee’s Termination of Employment for any reason other than
(i) termination by the Company for Cause; or (ii) the Optionee’s death or
disability (as defined in Section 22(e)(3) of the Code); or

 

(d)           Except as
the Committee may otherwise approve, the date of the Optionee’s Termination of
Employment by reason of termination by the Company for Cause; or

 

(e)           In the
case of an Optionee whose Termination of Employment is by reason of his or her
death or disability (within the meaning of Section 22(e)(3) of the Code), the
expiration of 12 months from the date of the Optionee’s Termination of
Employment.

 

Section 3.4             Partial
Exercise.  Any exercisable portion of
the Option or the entire Option, if then wholly exercisable, may be exercised
in whole or in part at any time prior to the time when the Option or portion
thereof becomes unexercisable; provided, however, that each partial exercise
shall be for not less than one (1) share.

 

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Section 3.5             Exercise
of Option.  The exercise of the
Option shall be governed by the terms of this Agreement and the terms of the
Plan, including, without limitation, the provisions of Article V of the Plan.

 

Section 3.6             Special
Tax Consequences.  The Optionee
acknowledges that, to the extent that the aggregate Fair Market Value of Common
Stock with respect to which “incentive stock options” (within the meaning of
Section 422 of the Code, but without regard to Section 422(d) of the Code),
including the Option, are exercisable for the first time by the Optionee during
any calendar year (under the Plan and all other incentive stock option plans of
the Company, any Subsidiary and any parent corporation thereof (within the
meaning of Section 422 of the Code)) exceeds $100,000, such options shall be
treated as Non-Qualified Options to the extent required by Section 422 of the
Code.  The Optionee further acknowledges
that the rule set forth in the preceding sentence shall be applied by taking
options into account in the order in which they were granted.  For purposes of these rules, the Fair Market
Value of Common Stock shall be determined as of the time the option with
respect to such Common Stock is granted.

 

ARTICLE IV.

OTHER PROVISIONS

 

Section 4.1             Not
a Contract of Employment.  Nothing in
this Agreement or in the Plan shall confer upon the Optionee any right to
continue in the employ of the Company or any of its Subsidiaries or shall
interfere with or restrict in any way the rights of the Company or its
Subsidiaries, which are hereby expressly reserved, to discharge the Optionee at
any time for any reason whatsoever, with or without Cause, except as may
otherwise be provided by any written agreement entered into by and between the
Company and the Optionee.

 

Section 4.2             Shares
Subject to Plan and Management Stockholders Agreement.  The Optionee acknowledges that any shares
acquired upon exercise of the Option are subject to the terms of the Plan and
the Management Stockholders Agreement including, without limitation, the
restrictions set forth in Section 5.6 of the Plan.  The Optionee further acknowledges that the
Option is subject to the terms of the Management Stockholders Agreement
including, without limitation, the “Call Rights” and the “Exit Sale” contained
in Sections 2 and 3 of the Management Stockholders Agreement.

 

Section 4.3             Construction.  This Agreement shall be administered,
interpreted and enforced under the laws of the state of Delaware.

 

Section 4.4             Notification
of Disposition.  The Optionee shall
give prompt notice to the Company of any disposition or other transfer of any
shares of Common Stock acquired under this Agreement if such disposition or
transfer is made (a) within two years from the Grant Date or (b) within one
year after the transfer of such shares to him. 
Such notice shall specify the date of such disposition or other transfer
and the amount realized, in cash, other property, assumption of indebtedness or
other consideration, by the Optionee in such disposition or other transfer.

 

Section 4.5             Conformity
to Securities Laws.  The Optionee
acknowledges that the Plan is intended to conform to the extent necessary with
all provisions of the Securities Act and the Exchange Act and any and all
regulations and rules promulgated thereunder by the Securities and

 

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Exchange Commission,
including without limitation Rule 16b-3. 
Notwithstanding anything herein to the contrary, the Plan shall be
administered, and the Option is granted and may be exercised, only in such a
manner as to conform to such laws, rules and regulations.  To the extent permitted by applicable law,
the Plan and this Agreement shall be deemed amended to the extent necessary to
conform to such laws, rules and regulations.

 

Section 4.6             Amendment,
Suspension and Termination.  The
Option may be wholly or partially amended or otherwise modified, suspended or
terminated at any time or from time to time by the Committee or the Board,
provided that, except as provided by Section 7.1 of the Plan, neither the
amendment, suspension nor termination of this Agreement shall, without the
consent of the Optionee, materially and adversely alter or impair any rights or
obligations under the Option.

 

[signature page follows]

 

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IN WITNESS WHEREOF, this Agreement has been
executed and delivered by the parties hereto.

 

	
   

  	
  MARQUEE HOLDINGS INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
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  Name

  
	
   

  	
   

  
	
   

  	
  Residence Address:

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Optionee’s
  Social Security Number: 

  	
   

  	
   

  
						

 

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EXHIBIT A

 

MANAGEMENT STOCKHOLDERS AGREEMENTExhibit
10.32(a)

 

ADOPTED 12/22/04

 

2004
STOCK OPTION PLAN

OF

MARQUEE
HOLDINGS INC.

 

Marquee
Holdings Inc., a Delaware corporation (the “Company”), hereby adopts
this 2004 Stock Option Plan of Marquee Holdings Inc.  The purposes of this Plan are as follows:

 

(1)                                  To
further the growth, development and financial success of the Company and its Plan
Subsidiaries (as defined herein), by providing additional incentives to
Employees, Consultants and Non-Employee Directors (as such terms are defined
below) of the Company and its Plan Subsidiaries who have been or will be given
responsibility for the management or administration of the Company’s (or one of
its Plan Subsidiaries’) business affairs, by assisting them to become owners of
Common Stock, thereby benefiting directly from the growth, development and
financial success of the Company and its Plan Subsidiaries.

 

(2)                                  To
enable the Company (and its Plan Subsidiaries) to obtain and retain the
services of the type of professional, technical and managerial Employees,
Consultants and Non-Employee Directors considered essential to the long-range
success of the Company (and its Plan Subsidiaries) by providing and offering
them an opportunity to become owners of Common Stock under Options, including,
in the case of certain employees, Options that are intended to qualify as “incentive
stock options” under Section 422 of the Code (as defined herein).

 

ARTICLE I.

DEFINITIONS

 

Whenever the
following terms are used in this Plan, they shall have the meaning specified
below unless the context clearly indicates to the contrary.  The singular pronoun shall include the plural
where the context so indicates.

 

Section 1.1                                      “Affiliate”
shall mean, with respect to any specified Person:

 

(a)                                  any
other Person directly or indirectly controlling or controlled by or under
direct or indirect common control with such specified Person; or

 

(b)                                 any
other Person that owns, directly or indirectly, 10% or more of such Person’s
Capital Stock or any officer or director of any such Person or other Person or
with respect to any natural Person, any person having a relationship with such
Person by blood, marriage or adoption not more remote than first cousin.

 

For the
purposes of this definition, “control” when used with respect to any specified
Person means the power to direct the management and policies of such Person,
directly or indirectly, whether through the ownership of voting securities, by
contract or otherwise; and the terms “controlling” and “controlled” have
meanings correlative to the foregoing.

 

Section 1.2                                      “AMCE”
shall mean AMC Entertainment Inc., a Delaware corporation.

 

Section 1.3                                      “Apollo”
shall mean Apollo Management V, L.P., a Delaware limited partnership.

 

 

Section 1.4                                      “Apollo
Group” shall mean (i) Apollo; (ii) the Apollo Holders; and (iii) any
Affiliate of Apollo (including the Apollo Holders).

 

Section 1.5                                      “Apollo
Holders” shall mean Apollo Investment Fund V, L.P. (“AIF V”), Apollo
Overseas Partners V, L.P. (“AOP V”), Apollo Netherlands Partners V (A), L.P. (“Apollo
Netherlands A”), Apollo Netherlands Partners V (B), L.P. (“Apollo Netherlands B”),
and Apollo German Partners V GmbH & Co KG (“Apollo German Partners”) and
any other partnership or entity affiliated with and managed by Apollo or its
Affiliates to which AIF V, AOP V, Apollo Netherlands A, Apollo Netherlands B,
or Apollo German Partners assigns any of their respective interests in the
Company.

 

Section 1.6                                      “Apollo
Investors” shall mean, collectively, AIF V, AOP V, Apollo Netherlands A,
Apollo Netherlands B and Apollo German Partners.

 

Section 1.7                                      “Board”
shall mean the Board of Directors of the Company.

 

Section 1.8                                      “Capital
Stock” of any Person shall mean any and all shares, interest,
participations or other equivalents (however designated) of such Person’s
capital stock, including preferred stock, any rights (other than debt
securities convertible into capital stock), warrants or options to acquire such
capital stock, whether outstanding as of the Effective Time or issued
thereafter.

 

Section 1.9                                      “Change
of Control” shall mean the occurrence of, after the Effective Date, any of
the following events:

 

(a)                                  any
“person” or “group” as such terms are used in Sections 13(d) and 14(d) of the
Exchange Act other than one or more Permitted Holders is or becomes the “beneficial
owner” (as defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that
such person or group shall be deemed to have “beneficial ownership” of all
shares that any such person or group has the right to acquire, whether such
right is exercisable immediately or only after the passage of time), directly
or indirectly, by way of merger, consolidation or other business combination or
purchase of 50% or more of the total voting power of the Voting Stock of the
Company or of AMCE (for purposes of calculating the total voting power of the
Voting Stock held by a group solely in the context of a merger, consolidation
or other business combination with a Person engaged in a line of business
similar to that of the Company or of AMCE and its Subsidiaries on August 18,
2004, the voting power beneficially owned by the Permitted Holders or by
Permitted Co-Investors, to the extent such voting power of the Voting Stock was
acquired by such Permitted Co-Investors on or before January 31, 2005 in
transactions that satisfy the definition of Permitted Co-Investor, shall be
excluded in an amount equal to the lesser of the total voting power of the
Voting Stock beneficially owned by such Permitted Co-Investors on (x) January 31,
2005 or (y) the date of such merger, consolidation or other business
combination);

 

(b)                                 the
adoption of a plan relating to the liquidation or dissolution of the Company or
AMCE;

 

(c)                                  the
sale, lease, transfer or other conveyance, in one or a series of related
transactions, of all or substantially all of the assets of the Company or of
AMCE and its Subsidiaries, taken as a whole, to any Person other than one or
more Permitted Holders; or

 

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(d)                                 a
change of control under the indentures relating to the 9 1⁄2% Senior Subordinated
Notes due 2011 (the “2011 Notes”), the 9 7/8 % Senior
Subordinated Notes due 2012 or the 8% Senior Subordinated Notes due 2014 issued
by AMCE (other than a change of control under the indenture relating to the
2011 Notes resulting from the Transactions);

 

provided,
however, that for the avoidance of doubt, the closing of the Merger of
Marquee Inc. with and into AMCE as of the Effective Date shall not constitute
and shall not be deemed to cause or result in a Change of Control hereunder.

 

Section 1.10                                “Code”
shall mean the Internal Revenue Code of 1986, as amended.

 

Section 1.11                                “Committee”
shall mean the Committee appointed as provided in Section 6.1.

 

Section 1.12                                “Common
Stock” shall mean the common stock of the Company, par value $0.01 per
share.

 

Section 1.13                                “Company”
shall mean Marquee Holdings Inc., a Delaware corporation.  In addition, “Company” shall mean any
corporation assuming, or issuing new employee stock options in substitution
for, Incentive Stock Options outstanding under the Plan in a transaction to
which Section 424(a) of the Code applies.

 

Section 1.14                                “Consultant”
shall mean any consultant or adviser if:

 

(a)                                  The
consultant or adviser renders bona  fide services to the Company
or a Plan Subsidiary;

 

(b)                                 The
services rendered by the consultant or adviser are not in connection with the
offer or sale of securities in a capital-raising transaction and do not
directly or indirectly promote or maintain a market for the Company’s
securities; and

 

(c)                                  The
consultant or adviser is a natural person who has contracted directly with the
Company or a Plan Subsidiary to render such services.

 

Section 1.15                                “Convertible
Securities” shall mean any evidence of indebtedness, shares of stock or
other securities (other than Investor Options or Warrants) which are directly
or indirectly convertible into or exchangeable or exercisable for shares of
Stock.

 

Section 1.16                                “Corporate
Event” shall mean, as determined by the Committee (or by the Board, in the
case of Options granted to Non-Employee Directors) in its sole discretion, any
transaction or event described in Section 7.1(a) or any unusual or
nonrecurring transaction or event affecting the Company, any Affiliate of the
Company, or the financial statements of the Company or any Affiliate of the
Company, or any change in applicable laws, regulations, or accounting
principles.

 

Section 1.17                                “Director”
shall mean a member of the Board.

 

Section 1.18                                “Effective
Date” shall mean the later to occur of (i) the date of the closing of the
merger of Marquee Inc. with and into AMCE pursuant to the Agreement and Plan of
Merger by

 

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and among Holdings, Marquee
Inc. and AMCE, dated as of July 22, 2004 and (ii) the date on which occurs
the Effective Time.

 

Section 1.19                                “Effective
Time” shall mean the date and time of the filing (or if another date and
time is specified in such filing, such specified date or time) of a certificate
of merger relating to the Merger with the Secretary of the State of Delaware
pursuant to Section 1.2 of the Merger Agreement.

 

Section 1.20                                “Eligible
Representative” for an Optionee shall mean such Optionee’s personal
representative or such other person as is empowered under the deceased Optionee’s
will or the then applicable laws of descent and distribution to represent the
Optionee hereunder.

 

Section 1.21                                “Employee”
shall mean, with respect to any entity, any employee of such entity (as defined
in accordance with the regulations and revenue rulings then applicable under Section 3401(c)
of the Code).

 

Section 1.22                                “Equivalent
Shares” shall mean, at any date of determination, (a) as to any outstanding
shares of Stock, such number of shares of Stock, (b) as to any outstanding
Investor Options, Warrants or Convertible Securities, the maximum number of
shares of Stock for which or into which such Investor Options, Warrants or
Convertible Securities may at the time be exercised, converted or exchanged (or
which will become exercisable, convertible or exchangeable on or prior to, or
by reason of, the transaction or circumstances in connection with which the
number of Equivalent Shares is to be determined) and (c) in respect of any
Subsidiary of the Company, (i) as to any outstanding shares of stock of any
Subsidiary of the Company, such number of shares of stock or (ii) as to any
outstanding options, warrants or convertible securities, the maximum number of
shares of stock of any Subsidiary of the Company for which or into which such
options, warrants or convertible securities may at the time be exercised, converted
or exchanged (or which will become exercisable, convertible or exchangeable on
or prior to, or by reason of, the transaction or circumstances in connection
with which the number of Equivalent Shares is to be determined).  For purposes of the definition of “Equivalent
Share,” “Subsidiary” or “Subsidiaries” of any Person means any corporation,
partnership, joint venture or other legal entity of which such Person (either
alone or through or together with any other Person), owns, directly or
indirectly, 50% or more of the stock or other equity interests which are
generally entitled to vote for the election of the board of directors or other
governing body of such corporation or other legal entity.

 

Section 1.23                                “Exchange
Act” shall mean the Securities Exchange Act of 1934, as amended.

 

Section 1.24                                “Fair
Market Value” of a share of Common Stock as of a given date shall be:

 

(a)                                  the
closing price of a share of Common Stock on the principal exchange on which
such shares are then trading, if any (or as reported on any composite index
which includes such principal exchange), on the most recent trading day prior
to such determination date; or

 

(b)                                 if
Common Stock is not traded on an exchange, the mean between the closing
representative bid and asked prices for a share of Common Stock on the most
recent trading day prior to such determination date as reported by Nasdaq or,
if Nasdaq is not then in existence, by its successor quotation system; or

 

4

 

(c)                                  if
Common Stock is not publicly traded on an exchange and not quoted on Nasdaq or
a successor quotation system, the fair market value of a share of Common Stock
as determined in good faith by the Board or the Committee.

 

Section 1.25                                “Incentive
Stock Option” shall mean an Option that conforms to the applicable
provisions of Section 422 of the Code and that is designated as an
Incentive Stock Option by the Committee.

 

Section 1.26                                “Initial
Investor Shares” shall mean that number of Shares held by an Investor
immediately following the Effective Time, as the same may be adjusted for stock
splits, stock dividends, recapitalizations or similar events.

 

Section 1.27                                “Initial
Public Offering” shall mean the first issuance by the Company of any class
of common equity securities that is required to be registered (other than on a
Form S-8) under Section 12 of the Exchange Act.

 

Section 1.28                                “Investor” or “Investors” shall
mean each of the JPMP Investors, the Apollo Investors and the other entities
listed on Schedule 1 attached to the Investor Stockholders Agreement and,
upon the unanimous approval of each of the JPMP Investors and the Apollo
Investors, any other subsequent holder of Shares who agrees to be bound by the
terms of the Investor Stockholders Agreement.

 

Section 1.29                                “Investor
Options” shall mean any options to subscribe for, purchase or otherwise
directly acquire Stock, other than any such option held by the Company or any
right to purchase shares pursuant to the Investor Stockholders Agreement.

 

Section 1.30                                “Investor
Stockholders Agreement” shall mean that certain Stockholders Agreement by
and among the Company, the JPMP Investors, the Apollo Investors and certain
other stockholder parties thereto dated as of October 29, 2004, as amended.

 

Section 1.31                                “J.P.
Morgan Partners Group” shall mean (i) J.P. Morgan Partners, LLC and (ii)
any Affiliates of J.P. Morgan Partners, LLC.

 

Section 1.32                                “JPMP Investors” shall mean,
collectively, J.P. Morgan Partners (BHCA), L.P. (“JPMP BHCA”), J.P. Morgan
Global Investors (Cayman), L.P., JP. Morgan Partners Global Investors (Cayman)
II, L.P., and any other affiliated entities designated by JPMP BHCA to the
Company in writing prior to the Effective Time.

 

Section 1.33                                “Management
Stockholders Agreement” shall mean that certain Management Stockholders
Agreement dated December 23, 2004 by and among the Company, the Principal
Investors and certain management stockholders which contains terms applicable
to Options, the shares of Common Stock acquired upon Option exercise and other
shares of Common Stock, if any, held by the Optionee during the term of such
agreement.

 

Section 1.34                                “Merger”
shall mean the merger of Marquee Inc. with and into AMCE pursuant to the Merger
Agreement.

 

5

 

Section 1.35                                “Merger
Agreement” shall mean the Agreement and Plan of Merger by and among the
Company, Marquee Inc. and AMCE, dated as of July 22, 2004.

 

Section 1.36                                “Non-Employee
Director” shall mean a Director who is not an Employee of the Company or
any of its Plan Subsidiaries, and may include, without limitation, a
non-Employee Director designated by a member of the J.P. Morgan Partners Group
or of the Apollo Group.

 

Section 1.37                                “Non-Qualified
Stock Option” shall mean an Option which is not an “incentive stock option”
within the meaning of Section 422 of the Code.

 

Section 1.38                                “Officer”
shall mean an officer of the Company, as defined in Rule 16a-l(f) under the
Exchange Act, as such Rule may be amended from time to time.

 

Section 1.39                                “Option”
shall mean an option granted under the Plan to purchase Common Stock.  An Option shall, as determined by the
Committee, be either an Incentive Stock Option or a Non-Qualified Stock Option;
provided, however, that any
Option granted to an individual who is not an Employee of the Company or one of
its Plan Subsidiaries shall be a Non-Qualified Stock Option.

 

Section 1.40                                “Optionee”
shall mean an Employee, Consultant or Non-Employee Director to whom an Option
is granted under the Plan.

 

Section 1.41                                “Permitted
Co-Investor” shall mean an Investor (other than the Principal Investors) as
of the Effective Time and any one or more institutional investors and their
respective Affiliates to which any Permitted Holder transfers in the aggregate
up to, but no more than, 35% of (a) its equity commitments to the Transactions
or (b) its equity securities of the Company or AMCE, in each case on or before January 31,
2005 (all transfers to any Affiliates of such institutional investor shall be
included in such percentage calculation).

 

Section 1.42                                “Permitted
Holder” shall mean:

 

(a)                                  any
member of the Apollo Group;

 

(b)                                 any
member of the J.P. Morgan Partners Group; and

 

(c)                                  any
Subsidiary, any employee stock purchase plan, stock option plan or other stock
incentive plan or program, retirement plan or automatic reinvestment plan or
any substantially similar plan of AMCE or the Company or any Subsidiary of the
Company or any Person holding securities of AMCE or the Company for or pursuant
to the terms of any such employee benefit plan; provided that if any lender or
other Person shall foreclose on or otherwise realize upon or exercise any
remedy with respect to any security interest in or lien on any securities of
AMCE or the Company held by any Person listed in this clause (c), then such
securities shall no longer be deemed to be held by a Permitted Holder.

 

Section 1.43                                “Permitted Transfer” shall mean:  (i) a Transfer approved by each Principal
Investor so long as there are any Principal Investors, (ii) a Transfer to
an Affiliate of such Investor; provided such transferee remains an Affiliate
of such transferor following the Transfer; (iii) following an Initial
Public Offering, a Transfer by an Investor made as part of a distribution

 

6

 

by an Investor to its
respective general or limited partners or members in accordance with such
Investor’s fund documents, as the case may be; (iv) a Transfer made by a JPMP
Investor pursuant to and in accordance with the Regulatory Sideletter; or (v) a
Transfer made pursuant to the registration rights as set forth in Section 7
of the Investor Stockholders Agreement; provided that such transferee,
in the case of clauses (i), (ii), (iii) and (iv) above shall agree in writing
with the parties to the Investor Stockholders Agreement to be bound by, and to
comply with, all applicable provisions of and to be deemed to be an Investor
for purposes of the Investor Stockholders Agreement.

 

Section 1.44                                “Permitted
Transferee” shall mean any Person who acquires Shares pursuant to clauses
(i), (ii) and (iii) of the definition of “Permitted Transfer”.

 

Section 1.45                                “Person”
shall mean any individual, corporation, partnership, limited liability company,
joint venture, association, joint stock company, trust, estate, unincorporated
organization or government or any agency or political subdivision thereof.

 

Section 1.46                                “Plan
Subsidiary” of any entity shall mean any corporation in an unbroken chain
of corporations beginning with such entity if each of the corporations other
than the last corporation in the unbroken chain then owns stock possessing 50%
or more of the total combined voting power of all classes of stock in one of
the other corporations in such chain.

 

Section 1.47                                “Plan”
shall mean this 2004 Stock Option Plan of Marquee Holdings Inc., as amended
from time to time.

 

Section 1.48                                “Principal
Investors” shall mean (i) the JPMP Investors, so long as the JPMP
Investors, together with their Permitted Transferees, collectively own Shares
representing at least 33% of the Initial Investor Shares owned by the JPMP
Investors; provided, that the JPMP Investors shall not be deemed to be a
Principal Investor at any time that they do not, together with their Permitted
Transferees, collectively own Shares representing at least 33% of the Initial Investor
Shares owned by the JPMP Investors, and (ii) the Apollo Investors, so long as
the Apollo Investors, together with their Permitted Transferees, collectively
own Shares representing at least 33% of the Initial Investor Shares owned by
the Apollo Investors; provided, that the Apollo Investors shall not be
deemed to be a Principal Investor at any time that they do not, together with
their Permitted Transferees, collectively own Shares representing at least 33%
of the Initial Investor Shares owned by the Apollo Investors (in each case, as
may be adjusted for stock splits, stock dividends, recapitalizations or similar
events).  For the avoidance of doubt, so
long as there are two Principal Investors, references in this Agreement to “Principal
Investors” shall mean both Principal Investors, and if at any time there is
only one Principal Investor, references in this Agreement to “the Principal
Investors” or “each Principal Investor” shall mean that sole Principal Investor
then remaining.

 

Section 1.49                                “Regulatory
Sideletter” shall mean that certain letter agreement between the Company and
the JPMP Investors, a copy of which is attached to the Investor Stockholders
Agreement as Exhibit B.

 

Section 1.50                                “Rule
16b-3” shall mean that certain Rule 16b-3 promulgated under the Exchange
Act, as such Rule may be amended from time to time.

 

7

 

Section 1.51                                “Securities
Act” shall mean the Securities Act of 1933, as amended.

 

Section 1.52                                “Shares”
shall mean (a) all shares of Stock, whenever issued, including all shares of
Stock issued upon the exercise, conversion or exchange of any Investor Options,
Warrants or Convertible Securities and (b) all Investor Options, Warrants and
Convertible Securities (treating such Investor Options, Warrants and
Convertible Securities as a number of Shares equal to the number of Equivalent
Shares represented by such Investor Options, Warrants and Convertible
Securities for all purposes of this Agreement except as otherwise specifically
set forth herein).

 

Section 1.53                                “Stock”
shall mean Common Stock, together with any other classes or series of equity
securities of the Company.

 

Section 1.54                                “Stock
Option Agreement” shall have the meaning set forth in Section 4.1

 

Section 1.55                                “Subsidiary” of a Person
shall mean: (i) any corporation of which more than 50% of the outstanding
shares of Capital Stock having ordinary voting power for the election of
directors is owned directly or indirectly by such Person; and (ii) any
partnership, limited liability company, association, joint venture or other
entity in which such Person, directly or indirectly, has a more than 50% equity
interest.

 

Section 1.56                                “Termination
of Consultancy” shall mean the time when the engagement of an Optionee as a
Consultant to the Company or a Plan Subsidiary is terminated for any reason,
with or without cause, including, but not by way of limitation, by resignation,
discharge, death or retirement, but excluding a termination where there is a
simultaneous commencement of employment with the Company or any Plan Subsidiary.  The Committee, in its sole discretion, shall
determine the effect of all matters and questions relating to Termination of
Consultancy.

 

Section 1.57                                “Termination
of Directorship” shall mean the time when an Optionee who is an
Non-Employee Director ceases to be a Director for any reason, including but not
by way of limitation, a termination by resignation, failure to be elected or
appointed, death or retirement.  The
Board, in its sole discretion, shall determine the effect of all matters and
questions relating to Termination of Directorship.

 

Section 1.58                                “Termination
of Employment” shall mean the time when the employee-employer relationship
between an Optionee and the Company (or one of its Plan Subsidiaries) is terminated
for any reason, with or without cause, including, but not by way of limitation,
a termination by resignation, discharge, death or retirement, but excluding a
termination where there is a simultaneous reemployment by the Company (or one
of its Plan Subsidiaries).  The Committee
shall determine the effect of all matters and questions relating to Termination
of Employment, including, but not by way of limitation, the question of whether
a Termination of Employment resulted from a discharge for cause, and all
questions of whether a particular leave of absence constitutes a Termination of
Employment; provided, however,
that, with respect to Incentive Stock Options, a leave of absence shall
constitute a Termination of Employment if, and to the extent that, such leave
of absence interrupts employment for the purposes of Section 422(a)(2) of
the Code and the then applicable regulations and revenue rulings under Section 442(a)(2)
of the Code.

 

8

 

Section 1.59                                “Transactions”
shall mean the transactions set forth in the Agreement and Plan of Merger by
and among the Company, Marquee Inc., and AMCE, dated as of July 22, 2004
and the transactions related thereto.

 

Section 1.60                                “Transfer”
shall mean a transfer, sale, assignment, pledge, hypothecation or other
disposition or exchange, including any Transfer of a voting or economic
interest in securities or other property; and “Transferring” or “Transferred”
have correlative meanings.

 

Section 1.61                                “Voting
Stock” of a Person shall mean all classes of Capital Stock or other
interests (including partnership interests) of such Person then outstanding and
normally entitled (without regard to the occurrence of any contingency) to vote
in the election of directors, managers or trustees thereof.

 

Section 1.62                                “Warrants”
shall mean any warrants to subscribe for, purchase or otherwise directly
acquire Stock or Convertible Securities.

 

ARTICLE II.

SHARES
SUBJECT TO PLAN

 

Section 2.1                                      Shares
Subject to Plan.  The shares of stock
subject to Options shall be shares of Common Stock. Subject to Section 7.1,
the aggregate number of such shares which may be issued upon exercise of
Options shall not exceed forty-nine thousand one hundred seven and forty-four
thousand six hundred eighty-one hundred thousandths (49,107.44681) shares of
Common Stock.

 

Section 2.2                                      Unexercised
Options.  If any Option (or portion
thereof) expires or is canceled without having been fully exercised, the number
of shares subject to such Option (or portion thereof) but as to which such
Option was not exercised prior to its expiration or cancellation may again be
optioned hereunder, subject to the limitations of Section 2.1.

 

ARTICLE III.

GRANTING
OF OPTIONS

 

Section 3.1                                      Eligibility.  Subject to Section 3.2, any (a) Employee
of the Company or one of its Plan Subsidiaries; (b) Consultant; or (c)
Non-Employee Director shall be eligible to be granted Options.

 

Section 3.2                                      Qualification
of Incentive Stock Options. 
Notwithstanding Section 3.1, no Incentive Stock Option shall be
granted to any person who is not an Employee of the Company or one of its Plan
Subsidiaries.

 

Section 3.3                                      Granting
of Options to Employees and Consultants.

 

(a)                                  The
Committee shall from time to time:

 

(i)                                     Select
from among the Employees and Consultants of the Company and any of its Plan
Subsidiaries (including those to whom Options have been previously granted
under the Plan) such of them as in its opinion should be granted Options;

 

9

 

(ii)                                  Determine
the number of shares to be subject to such Options granted to such Employees
and Consultants and, subject to Section 3.2, determine whether such
Options are to be Incentive Stock Options or Non-Qualified Stock Options; and

 

(iii)                               Determine
the terms and conditions of such Options, consistent with the Plan.

 

(b)                                 Upon
the selection of an Employee or Consultant of the Company or any of its Plan
Subsidiaries to be granted an Option pursuant to Section 3.3(a), the
Committee shall instruct the corporate secretary or another authorized Officer
of the Company to issue such Option and may impose such conditions on the grant
of such Option as it deems appropriate. 
Without limiting the generality of the preceding sentence, the Committee
may require as a condition to the grant of an Option to such an Employee or
Consultant that such Employee or Consultant surrender for cancellation some or
all of the unexercised Options which have been previously granted to him or
her.  An Option the grant of which is
conditioned upon such surrender may have an Option price lower (or higher) than
the Option price of the surrendered Option, may cover the same (or a lesser or
greater) number of shares as the surrendered Option, may contain such other
terms as the Committee deems appropriate and shall be exercisable in accordance
with its terms, without regard to the number of shares, price, period of
exercisability or any other term or condition of the surrendered Option.

 

Section 3.4                                      Granting
of Option to Non-Employee Directors

 

(a)                                  The
Board shall from time to time:

 

(i)                                     Select
from among the Non-Employee Directors (including those to whom Options have
previously been granted under the Plan) such of them as in its opinion should
be granted Options;

 

(ii)                                  Determine
the number of shares to be subject to such Options granted to such selected
Non-Employee Directors; and

 

(iii)                               Determine
the terms and conditions of such Options, consistent with the Plan; provided, however, that all Options
granted to Non-Employee Directors shall be Non-Qualified Stock Options.

 

(b)                                 Upon
the selection of an Non-Employee Director to be granted an Option pursuant to Section 3.4(a),
the Board shall instruct the corporate secretary or another authorized Officer
of the Company to issue such Option and may impose such conditions on the grant
of such Option as it deems appropriate. 
Without limiting the generality of the preceding sentence, the Board may
require as a condition to the grant of an Option to an Non-Employee Director
that the Non-Employee Director surrender for cancellation some or all of the
unexercised Options which have been previously granted to him or her.  An Option the grant of which is conditioned
upon such surrender may have an Option price lower (or higher) than the Option
price of the surrendered Option, may cover the same (or a lesser or greater)
number of shares as the surrendered Option, may contain such other terms as the
Board deems appropriate and shall be exercisable in accordance with its terms,
without regard to the number of shares, price, period of exercisability or any
other term or condition of the surrendered Option.

 

10

 

ARTICLE IV.

TERMS OF
OPTIONS

 

Section 4.1                                      Stock
Option Agreement.  Each Option shall
be evidenced by a written Stock Option Agreement, which shall be executed by
the Optionee and an authorized Officer of the Company and which shall contain
such terms and conditions as the Committee (or the Board, in the case of
Options granted to Non-Employee Directors) shall determine, consistent with the
Plan.  Stock Option Agreements evidencing
Incentive Stock Options shall contain such terms and conditions as may be
necessary to qualify such Options as “incentive stock options” within the
meaning of Section 422 of the Code. 
Each Option shall also be subject to the Management Stockholders
Agreement, and as a condition of the grant of an Option, the Optionee shall
become a party to the Management Stockholders Agreement.

 

Section 4.2                                      Exercisability
of Options

 

(a)                                  Subject
to section 4.2 (b) and Section 4.4, and unless otherwise specified in
any Stock Option Agreement, each Option shall vest and become exercisable in
five equal and cumulative installments provided that the Optionee remains
continuously employed (or providing services as a Director or Consultant) by or
to the Company from the date of grant through such date as follows:

 

(i)                                     The
first installment shall consist of 20% of the shares of Common Stock covered by
such Option and shall become exercisable on the first anniversary of the date of
grant;

 

(ii)                                  The
second installment shall consist of 20% of the shares of Common Stock covered
by such Option and shall become exercisable on the second anniversary of the
date of grant;

 

(iii)                               The
third installment shall consist of 20% of the shares of Common Stock covered by
such Option and shall become exercisable on the third anniversary of the date
of grant;

 

(iv)                              The
fourth installment shall consist of 20% of the shares of Common Stock covered
by such Option and shall become exercisable on the fourth anniversary of the
date of grant; and

 

(v)                                 The
fifth installment shall consist of 20% of the shares of Common Stock covered by
such Option and shall become exercisable on the fifth anniversary of the date
of grant

 

(b)                                 Except
as otherwise provided in the applicable Stock Option Agreement (or by action of
the Board or Committee), no portion of an Option which is unexercisable at
Termination of Employment, Termination of Consultancy or Termination of
Directorship, as applicable, shall thereafter become exercisable.

 

(c)                                  To
the extent that the aggregate Fair Market Value of stock with respect to which “incentive
stock options” (within the meaning of Section 422 of the Code, but without
regard to

 

11

 

Section 422(d) of the
Code) are exercisable for the first time by an Optionee during any calendar
year (under the Plan and all other incentive stock option plans of the Company
or any Plan Subsidiary thereof) exceeds $100,000, such options shall be treated
and taxable as Non-Qualified Stock Options. 
The rule set forth in the preceding sentence shall be applied by taking
options into account in the order in which they were granted, and the stock
issued upon exercise of options shall designate whether such stock was acquired
upon exercise of an Incentive Stock Option. 
For purposes of these rules, the Fair Market Value of stock shall be
determined as of the date of grant of the Option granted with respect to such
stock.

 

Section 4.3                                      Option
Price  The price of the shares
subject to each Option shall be set by the Committee (or the Board, in the case
of Options granted to Non-Employee Directors); provided,
however, that in the case of an Incentive Stock Option, the price
per share shall be not less than 100% of the Fair Market Value of such shares
on the date such Option is granted; and provided,
further, that in the case of an individual then owning (within the
meaning of Section 424(d) of the Code) more than 10% of the total combined
voting power of all classes of stock of the Company, the price per share shall
not be less than 110% of the Fair Market Value of such shares on the date such
Incentive Stock Option is granted.

 

Section 4.4                                      Expiration
of Options.  No Option may be
exercised to any extent by anyone after the first to occur of the following
events:

 

(a)                                  The
expiration of ten years from the date the Option was granted; or

 

(b)                                 With
respect to an Incentive Stock Option in the case of an Optionee owning (within
the meaning of Section 424(d) of the Code), at the time the Incentive
Stock Option was granted, more than 10% of the total combined voting power of
all classes of stock of the Company or any Plan Subsidiary, the expiration of
five years from the date the Incentive Stock Option was granted.

 

Section 4.5                                      At-Will
Employment.  Nothing in the Plan or
in any Stock Option Agreement hereunder shall confer upon any Optionee any
right to continue in the employ of, or as a Consultant for or Director of, the
Company or any Plan Subsidiary, or shall interfere with or restrict in any way
the rights of the Company and any Plan Subsidiary, which are hereby expressly
reserved, to discharge any Optionee at any time for any reason whatsoever, with
or without cause, except to the extent expressly provided otherwise in a
written agreement between the Optionee and the Company or any Plan Subsidiary.

 

ARTICLE V.

EXERCISE
OF OPTIONS

 

Section 5.1                                      Person
Eligible to Exercise.  During the
lifetime of the Optionee, only he or she may exercise an Option (or any portion
thereof); provided, however, that
the Optionee’s Eligible Representative may exercise his or her Option during
the period of the Optionee’s disability (as defined in Section 22(e)(3) of
the Code) notwithstanding that an Option so exercised may not qualify as an
Incentive Stock Option.  After the death
of the Optionee, any exercisable portion of an Option may, prior to the time
when such portion becomes unexercisable under the Plan or the applicable Stock
Option Agreement, be exercised by his or her Eligible Representative.

 

12

 

Section 5.2                                      Partial
Exercise.  At any time and from time
to time prior to the time when the Option becomes unexercisable under the Plan
or the applicable Stock Option Agreement, the exercisable portion of an Option
may be exercised in whole or in part; provided,
however, that the Company shall not be required to issue fractional
shares and the Committee (or the Board, in the case of Options granted to
Non-Employee Directors) may, by the terms of the Option, require any partial
exercise to exceed a specified minimum number of shares.

 

Section 5.3                                      Manner
of Exercise.  An exercisable Option,
or any exercisable portion thereof, may be exercised solely by delivery to the
corporate secretary of all of the following prior to the time when such Option
or such portion becomes unexercisable under the Plan or the applicable Stock
Option Agreement:

 

(a)                                  Notice
in writing signed by the Optionee or his or her Eligible Representative,
stating that such Option or portion is exercised, and specifically stating the
number of shares with respect to which the Option is being exercised;

 

(b)                                 Full
payment for the shares with respect to which such Option or portion is thereby
exercised:

 

(i)                                     In
cash or by personal, certified, or bank cashier check; or

 

(ii)                                  With
the consent of the Committee (or the Board, in the case of Options to
Non-Employee Directors), (A) shares of Common Stock which have been owned by
the Optionee for at least six months duly endorsed for transfer to the Company
with a Fair Market Value on the date of delivery equal to the aggregate
exercise price of the Option or exercised portion thereof; (B) except with
respect to Incentive Stock Options, shares of the Common Stock issuable to the
Optionee upon exercise of the Option, with a Fair Market Value on the date of
Option exercise equal to the aggregate Option price of the shares with respect
to which such Option or portion is thereby exercised; (C) following an Initial
Public Offering, delivery of a notice that the Optionee has placed a market
sell order with a broker with respect to shares of Common Stock then issuable
upon exercise of the Option, and that the broker has been directed to pay a
sufficient portion of the net proceeds of the sale to the Company in satisfaction
of the Option exercise price; or (D) any combination of the consideration
listed in this subsection (c);

 

(c)                                  The
payment to the Company (in cash or by personal, certified or bank cashier or by
any other means of payment approved by the Committee) of all amounts necessary
to satisfy any and all federal, state and local tax withholding requirements
arising in connection with the exercise of the Option;

 

(d)                                 Such
representations and documents as the Committee (or the Board, in the case of
Options granted to Non-Employee Directors) deems necessary or advisable to
effect compliance with all applicable provisions of the Securities Act,
Exchange Act and any other federal or state securities laws or
regulations.  The Committee (or the
Board, in the case of Options granted to Non-Employee Directors) may, in its
sole discretion, also take whatever additional actions it deems appropriate to
effect such compliance including, without limitation,

 

13

 

placing legends on share
certificates and issuing stop-transfer orders to transfer agents and
registrars; and

 

(e)                                  In
the event that the Option or portion thereof shall be exercised pursuant to Section 5.1
by any person or persons other than the Optionee, appropriate proof of the
right of such person or persons to exercise the Option or portion thereof.

 

Section 5.4                                      Conditions
to Issuance of Stock Certificates. 
The shares of stock issuable and deliverable upon the exercise of an
Option, or any portion thereof, may be either previously authorized but
unissued shares or issued shares which have then been reacquired by the
Company.  A certificate of shares will be
delivered to the Optionee at the Company’s principal place of business within
thirty days of receipt by the Company of the written notice and payment, unless
an earlier date is agreed upon. 
Notwithstanding the above, the Company shall not be required to issue or
deliver any certificate or certificates for shares of stock purchased upon the
exercise of any Option or portion thereof prior to fulfillment of all of the
following conditions:

 

(a)                                  The
admission of such shares to listing on any and all stock exchanges on which
such class of stock is then listed;

 

(b)                                 The
completion of any registration or other qualification of such shares under any
state or federal law or under the rulings or regulations of the Securities and
Exchange Commission or any other governmental regulatory body, which the
Committee (or the Board, in the case of Options granted to Non-Employee
Directors) shall, in its sole discretion, deem necessary or advisable;

 

(c)                                  The
obtaining of any approval or other clearance from any state or federal
governmental agency which the Committee (or the Board, in the case of Options
granted to Non-Employee Directors) shall, in its sole discretion, determine to
be necessary or advisable; and

 

(d)                                 The
payment to the Company (in cash or by personal, certified or bank cashier or by
any other means of payment approved by the Committee) of all amounts necessary
to satisfy any and all federal, state and local tax withholding requirements
arising in connection with the exercise of the Option.

 

Section 5.5                                      Rights
as Stockholders.  The holder of an
Option shall not be, nor have any of the rights or privileges of, a stockholder
of the Company in respect of any shares purchasable upon the exercise of any
part of an Option unless and until certificates representing such shares have
been issued by the Company to such holder.

 

Section 5.6                                      Transfer
Restrictions.  Shares acquired upon
exercise of an Option shall be subject to the terms and conditions of the Management
Stockholders Agreement.  In addition, the
Committee (or the Board, in the case of Options granted to Non-Employee
Directors), in its sole discretion, may impose further restrictions on the
transferability of the shares purchasable upon the exercise of an Option as it
deems appropriate.  Any such restriction
shall be set forth in the respective Stock Option Agreement and may be referred
to on the certificates evidencing such shares. 
The Committee may require the Employee to give the Company prompt notice
of any disposition of shares of stock, acquired by exercise of an Incentive
Stock Option, within two

 

14

 

years from the date of granting
such Option or one year after the transfer of such shares to such
Employee.  The Committee may direct that
the certificates evidencing shares acquired by exercise of an Incentive Stock
Option refer to such requirement.

 

ARTICLE VI.

ADMINISTRATION

 

Section 6.1                                      Committee.  Prior to an Initial Public Offering, the
Committee shall be the Compensation Committee of the Board.  Following an Initial Public Offering, if any,
the full Board shall administer the Plan unless and until there is appointed a
Compensation Committee (or another committee or a subcommittee of the Board
assuming the functions of the Committee under the Plan) that shall consist
solely of two or more Non-Employee Directors appointed by and holding office at
the pleasure of the Board, each of whom is both a “non-employee director” as
defined by Rule 16b-3 and an “outside director” for purposes of Section 162(m)
of the Code.  Appointment of Committee
members shall be effective upon acceptance of appointment.  Committee members may resign at any time by
delivering written notice to the Board. 
Vacancies in the Committee may be filled by the Board in its sole
discretion.  Any action required or
permitted to be taken by the Committee hereunder or under any Stock Option
Agreement may be taken by the Board.

 

Section 6.2                                      Delegation
of Authority.  The Committee may, but
need not, from time to time delegate some or all of its authority to grant
Options under the Plan to a committee or subcommittee consisting of one or more
members of the Committee or of one or more Officers of the Company; provided, however, that the Committee may not delegate its
authority to grant Options to individuals (a) who are subject on the date of
the grant to the reporting rules under Section 16(a) of the Exchange Act,
(b) whose compensation the Committee determines is, or may become, subject to
the deduction limitations set forth in Section 162(m) of the Code or (c)
who are Officers of the Company who are delegated authority by the Committee
hereunder. Any delegation hereunder shall be subject to the restrictions and
limits that the Committee specifies at the time of such delegation, and the
Committee may at any time rescind the authority so delegated or appoint a new
delegatee. At all times, the delegatee appointed under this Section 6.2
shall serve in such capacity at the pleasure of the Committee.

 

Section 6.3                                      Duties
and Powers of the Committee.  It
shall be the duty of the Committee to conduct the general administration of the
Plan in accordance with its provisions. 
The Committee shall have the power to interpret the Plan and the Options
and to adopt such rules for the administration, interpretation and application
of the Plan as are consistent therewith and to interpret, amend or revoke any
such rules.  Notwithstanding the
foregoing, the full Board, acting by a majority of its members in office, shall
conduct the general administration of the Plan with respect to Options granted
to Non-Employee Directors.  Any such
interpretations and rules adopted by the Committee in regard to Incentive Stock
Options shall be consistent with the terms and conditions applicable to “incentive
stock options” within the meaning of Section 422 of the Code.  All determinations and decisions made by the
Committee under any provision of the Plan or of any Option granted thereunder
shall be final, conclusive and binding on all persons.

 

Section 6.4                                      Compensation,
Professional Assistance, Good Faith Actions.  The members of the Committee shall receive
such compensation, if any, for their services hereunder as may be

 

15

 

determined by the Board.  All expenses and liabilities incurred by the
members of the Committee or the Board in connection with the administration of
the Plan shall be borne by the Company. 
The Committee or the Board may employ attorneys, consultants,
accountants, appraisers, brokers or other persons.  The Committee, the Company and its Officers
and Directors shall be entitled to rely upon the advice, opinions or valuations
of any such persons.  All actions taken
and all interpretations and determinations made by the Committee and the Board
in good faith shall be final and binding upon all Optionees, the Company and
all other interested persons.  No member
of the Board shall be personally liable for any action, determination or
interpretation made in good faith with respect to the Plan or the Options, and
all members of the Board shall be fully protected by the Company in respect to
any such action, determination or interpretation.

 

ARTICLE VII.

OTHER
PROVISIONS

 

Section 7.1                                      Changes
in Common Stock; Disposition of Assets and Corporate Events

 

(a)                                  Subject
to Section 7.1(d), in the event that the Committee (or the Board, in the
case of Options granted to Non-Employee Directors) determines that any dividend
or other distribution (whether in the form of cash, Common Stock, other
securities, or other property), recapitalization, reclassification, stock
split, reverse stock split, reorganization, merger, Change of Control,
consolidation, split-up, spin-off, combination, repurchase, liquidation,
dissolution, or sale, transfer, exchange or other disposition of all or
substantially all of the assets of the Company, or exchange of Common Stock or
other securities of the Company, issuance of warrants or other rights to
purchase Common Stock or other securities of the Company, or other similar
corporate transaction or event, in the Committee’s sole discretion (or in the
case of Options granted to Non-Employee Directors, the Board’s sole
discretion), affects the Common Stock such that an adjustment is determined by
the Committee (or the Board, in the case of Options granted to Non-Employee
Directors) to be appropriate in order to prevent dilution or enlargement of the
benefits or potential benefits intended to be made available under the Plan or
with respect to an Option, then the Committee (or the Board, in the case of
Options granted to Non-Employee Directors) shall, in such manner as it may deem
equitable, adjust any or all of:

 

(i)                                     The
number and kind of shares of Common Stock (or other securities or property)
with respect to which Options may be granted under the Plan (including, but not
limited to, adjustments of the limitations in Section 2.1 on the maximum
number and kind of shares which may be issued);

 

(ii)                                  The
number and kind of shares of Common Stock (or other securities or property)
subject to outstanding Options;

 

(iii)                               The
exercise price with respect to any Option; and

 

(iv)                              The
financial or other “targets” specified in each Stock Option Agreement for
determining the exercisability of Options.

 

(b)                                 Subject
to Section 7.1(d) and the terms of outstanding Stock Option Agreements,
upon the occurrence of a Corporate Event, the Committee (or the Board, in the
case of options granted to Non-Employee Directors), in its sole discretion, is
hereby authorized to take any one

 

16

 

or more of the following
actions whenever the Committee (or the Board, in the case of Options granted to
Non-Employee Directors) determines that such action is appropriate in order to
prevent dilution or enlargement of the benefits or potential benefits intended
to be made available under the Plan or with respect to any Option under this
Plan, to facilitate such Corporate Event or to give effect to such changes in
laws, regulations or principles:

 

(i)                                     In
its sole discretion, and on such terms and conditions as it deems appropriate,
the Committee (or the Board, in the case of Options granted to Non-Employee
Directors) may provide, either by the terms of the applicable Stock Option
Agreement or by action taken prior to the occurrence of such Corporate Event
and either automatically or upon the Optionee’s request, for either the
purchase of any such Option for an amount of cash, securities, or other
property equal to the amount that could have been attained upon the exercise of
the vested portion of such Option (and such additional portion of the Option as
the Board or Committee may determine) immediately prior to the occurrence of
such transaction or event, or the replacement of such vested (and other)
portion of such Option with cash, other rights or property selected by the
Committee (or the Board, in the case of Options granted to Non-Employee
Directors) in its sole discretion;

 

(ii)                                  In
its sole discretion, the Committee (or the Board, in the case of Options
granted to Non-Employee Directors) may provide, either by the terms of the
applicable Stock Option Agreement or by action taken prior to the occurrence of
such Corporate Event, that the Option (or any portion thereof) cannot be
exercised after such event;

 

(iii)                               In
its sole discretion, and on such terms and conditions as it deems appropriate,
the Committee (or the Board, in the case of Options granted to Non-Employee
Directors) may provide, either by the terms of the applicable Stock Option
Agreement or by action taken prior to the occurrence of such Corporate Event,
that for a specified period of time prior to such Corporate Event, such Option
shall be exercisable as to all shares covered thereby or a specified portion of
such shares, notwithstanding anything to the contrary in this Plan or the
applicable Stock Option Agreement;

 

(iv)                              In
its sole discretion, and on such terms and conditions as it deems appropriate,
the Committee (or the Board, in the case of Options granted to Non-Employee
Directors) may provide, either by the terms of the applicable Stock Option
Agreement or by action taken prior to the occurrence of such Corporate Event,
that upon such event, such Option (or any portion thereof) be assumed by the
successor or survivor corporation, or a parent or Plan Subsidiary thereof
(including without limitation any common parent of the Company and any other
company or companies), or shall be substituted for by similar options, rights or
awards covering the stock of the successor or survivor corporation, or a parent
or Plan Subsidiary thereof (including without limitation any common parent of
the Company and any other company or companies), with appropriate adjustments
as to the number and kind of shares and prices; and

 

(v)                                 In
its sole discretion, and on such terms and conditions as it deems appropriate,
the Committee (or the Board, in the case of Options granted to Non-Employee
Directors) may make adjustments in the number and type of shares of

 

17

 

Common Stock (or other securities or property) subject to outstanding
Options (or any portion thereof) and/or in the terms and conditions of
(including the exercise price), and the criteria included in, outstanding
Options and Options which may be granted in the future.

 

(c)                                  Subject
to Section 7.1(d), the Committee (or the Board, in the case of Options
granted to Non-Employee Directors) may, in its sole discretion, include such
further provisions and limitations in any Stock Option Agreement as it may deem
equitable and in the best interests of the Company and its Affiliates.

 

(d)                                 With
respect to Incentive Stock Options, no adjustment or action described in this Section 7.1
or in any other provision of the Plan shall be authorized to the extent that
such adjustment or action would cause the Plan to violate Section 422(b)(1)
of the Code or any successor provisions thereto, unless the Committee
determines that the Plan and/or the Options are not to comply with Section 422(b)(1)
of the Code.

 

Section 7.2                                      Options
Not Transferable.  No Option or
interest or right therein or part thereof shall be liable for the debts,
contracts or engagements of the Optionee or his or her successors in interest
or shall be subject to disposition by transfer, alienation, anticipation,
pledge, encumbrance, assignment or any other means whether such disposition be
voluntary or involuntary or by operation of law, by judgment, levy, attachment,
garnishment or any other legal or equitable proceedings (including bankruptcy),
and any attempted disposition thereof shall be null and void and of no effect; provided, however, that nothing in this Section 7.2
shall prevent transfers by will or by the applicable laws of descent and distribution.

 

Section 7.3                                      Amendment,
Suspension or Termination of the Plan. 
The Plan may be wholly or partially amended or otherwise modified,
suspended or terminated at any time or from time to time by the Board or the
Committee.  However, without stockholder
approval within 12 months before or after such action no action of the Board or
the Committee may, except as provided in Section 7.1, increase any limit
imposed in Section 2.1 on the maximum number of shares which may be issued
on exercise of Options, reduce the minimum Option price requirements of Section 4.3(a),
or extend the limit imposed in this Section 7.3 on the period during which
options may be granted.  Except as
provided by Section 7.1, neither the amendment, suspension nor termination
of the Plan shall, without the consent of the holder of the Option, materially
and adversely alter or impair any rights or obligations under any Option
theretofore granted.  No Option may be
granted during any period of suspension nor after termination of the Plan, and
in no event may any Option be granted under this Plan after the expiration of
ten years from the date the Plan is adopted by the Board.

 

Section 7.4                                      Effect
of Plan Upon Other Option and Compensation Plans.  The adoption of this Plan shall not affect any
other compensation or incentive plans in effect for the Company or any
Affiliate.  Nothing in this Plan shall be
construed to limit the right of the Company or any Affiliate (a) to establish
any other forms of incentives or compensation for directors or employees of the
Company (or any Affiliate); or (b) to grant or assume options otherwise than
under this Plan in connection with any proper corporate purpose, including, but
not by way of limitation, the grant or assumption of options in connection with
the acquisition by purchase,

 

18

 

lease, merger, consolidation or
otherwise, of the business, stock or assets of any corporation, firm or
association.

 

Section 7.5                                      Approval
of Plan by Stockholders.  This Plan
will be submitted for the approval of the Company’s stockholders within 12
months after the date of the Board’s initial adoption of this Plan.  No Option may be exercised to any extent by
anyone unless and until the Plan is so approved by the stockholders, and if
such approval has not been obtained by the end of said 12-month period, the
Plan and all Options theretofore granted shall thereupon be canceled and become
null and void.

 

Section 7.6                                      Titles.  Titles are provided herein for convenience
only and are not to serve as a basis for interpretation or construction of the
Plan.

 

Section 7.7                                      Conformity
to Securities Laws.  The Plan is
intended to conform to the extent necessary with all provisions of the
Securities Act and the Exchange Act and any and all regulations and rules
promulgated by the Securities and Exchange Commission thereunder to the extent
the Company or any Optionee is subject to the provisions thereof.  Notwithstanding anything herein to the
contrary, the Plan shall be administered, and Options shall be granted and may
be exercised, only in such a manner as to conform to such laws, rules and
regulations.  To the extent permitted by
applicable law, the Plan and Options granted hereunder shall be deemed amended
to the extent necessary to conform to such laws, rules and regulations.

 

Section 7.8                                      Governing
Law.  To the extent not preempted by
federal law, the Plan shall be construed in accordance with and governed by the
laws of the state of Delaware.

 

Section 7.9                                      Severability.  In the event any portion of the Plan or any
action taken pursuant thereto shall be held illegal or invalid for any reason,
the illegality or invalidity shall not affect the remaining parts of the Plan,
and the Plan shall be construed and enforced as if the illegal or invalid
provisions had not been included, and the illegal or invalid action shall be
null and void.

 

19

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