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                                                                     EXHIBIT 4.1

                            VERSO TECHNOLOGIES, INC.
                            1999 STOCK INCENTIVE PLAN

                         (AS AMENDED NOVEMBER 16, 2001)

1.       PURPOSE OF PLAN

         The purpose of the Verso Technologies, Inc. 1999 Stock Incentive Plan
(the "Plan") is to advance the interests of Verso Technologies, Inc. (the
"Company") and its shareholders by enabling the Company and its Subsidiaries to
attract and retain persons of ability to perform services for the Company and
its Subsidiaries by providing an incentive to such individuals through equity
participation in the Company and by rewarding such individuals who contribute to
the achievement by the Company of its economic objectives.

2.       DEFINITIONS

         The following terms will have the meanings set forth below, unless the
context clearly otherwise requires:

         2.1      "BOARD" means the Board of Directors of the Company.

         2.2      "BROKER EXERCISE NOTICE" means a written notice pursuant to
                  which a Participant, upon exercise of an Option, irrevocably
                  instructs a broker or dealer to sell a sufficient number of
                  shares or loan a sufficient amount of money to pay all or a
                  portion of the exercise price of the Option and/or any related
                  withholding tax obligations and remit such sums to the Company
                  and directs the Company to deliver stock certificates to be
                  issued upon such exercise directly to such broker or dealer.

         2.3      "CHANGE IN CONTROL" means an event described in Section 11.1
                  of the Plan.

         2.4      "CODE" means the Internal Revenue Code of 1986, as amended.

         2.5      "COMMITTEE" means the group of individuals administering the
                  Plan, as provided in Section 3 of the Plan.

         2.6      "COMMON STOCK" means the common stock of the Company, par
                  value $.01 per share, or the number and kind of shares of
                  stock or other securities into which such Common Stock may be
                  changed in accordance with Section 4.5 of the Plan.

         2.7      "COMPANY" means Verso Technologies, Inc., a Minnesota
                  corporation.

         2.8      "DISABILITY" means the disability of the Participant such as
                  would entitle the Participant to receive disability income
                  benefits pursuant to the long-term disability plan of the
                  Company or Subsidiary then covering the Participant or, if

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                  no such plan exists or is applicable to the Participant, the
                  permanent and total disability of the Participant within the
                  meaning of Section 22(e)(3) of the Code.

         2.9      "ELIGIBLE RECIPIENTS" means all employees of the Company or
                  any Subsidiary and any non-employee directors, consultants and
                  independent contractors of the Company or any Subsidiary. An
                  Incentive Award may be granted to an employee, in connection
                  with hiring, retention or otherwise, prior to the date the
                  employee first performs services for the Company or the
                  Subsidiaries, provided that such Incentive Awards shall not
                  become vested prior to the date the employee first performs
                  such services.

         2.10     "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
                  amended.

         2.11     "FAIR MARKET VALUE" means, with respect to the Common Stock,
                  as of any date (or, if no shares were traded or quoted on such
                  date, as of the next preceding date on which there was such a
                  trade or quote) (a) the mean between the reported high and low
                  sale prices of the Common Stock if the Common Stock is listed,
                  admitted to unlisted trading privileges or reported on any
                  national securities exchange or on the Nasdaq National Market;
                  (b) if the Common Stock is not so listed, admitted to unlisted
                  trading privileges or reported on any national securities
                  exchange or on the Nasdaq National Market, the closing bid
                  price as reported by the Nasdaq SmallCap Market, OTC Bulletin
                  Board or the National Quotation Bureau, Inc. or other
                  comparable service; or (c) if the Common Stock is not so
                  listed or reported, such price as the Committee determines in
                  good faith in the exercise of its reasonable discretion. If
                  determined by the Committee, such determination will be final,
                  conclusive and binding for all purposes and on all persons,
                  including, without limitation, the Company, the shareholders
                  of the Company, the Participants and their respective
                  successors-in-interest. No member of the Committee will be
                  liable for any determination regarding the fair market value
                  of the Common Stock that is made in good faith.

         2.12     "INCENTIVE AWARD" means an Option, Restricted Stock Award or
                  Stock Bonus granted to an Eligible Recipient pursuant to the
                  Plan.

         2.13     "INCENTIVE STOCK OPTION" means a right to purchase Common
                  Stock granted to an Eligible Recipient pursuant to Section 6
                  of the Plan that qualifies as an "incentive stock option"
                  within the meaning of Section 422 of the Code.

         2.14     "NON-STATUTORY STOCK OPTION" means a right to purchase Common
                  Stock granted to an Eligible Recipient pursuant to Section 6
                  of the Plan that does not qualify as an Incentive Stock
                  Option.

         2.15     "OPTION" means an Incentive Stock Option or a Non-Statutory
                  Stock Option.

         2.16     "PARTICIPANT" means an Eligible Recipient who receives one or
                  more Incentive Awards under the Plan.

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         2.17     "PREVIOUSLY ACQUIRED SHARES" means shares of Common Stock that
                  are already owned by the Participant or, with respect to any
                  Incentive Award, that are to be issued upon the grant,
                  exercise or vesting of such Incentive Award.

         2.18     "PRIOR PLANS" means the Company's 1995 Stock Incentive Plan,
                  1997 Stock Incentive Plan, and 1998 Stock Incentive Plan.

         2.19     "RESTRICTED STOCK AWARD" means an award of Common Stock
                  granted to an Eligible Recipient pursuant to Section 7 of the
                  Plan that is subject to the restrictions on transferability
                  and the risk of forfeiture imposed by the provisions of such
                  Section 7.

         2.20     "RETIREMENT" means termination of employment or service
                  pursuant to and in accordance with the regular (or, if
                  approved by the Board for purposes of the Plan, early)
                  retirement/pension plan or practice of the Company or
                  Subsidiary then covering the Participant, provided that if the
                  Participant is not covered by any such plan or practice, the
                  Participant will be deemed to be overed by the Company's plan
                  or practice for purposes of this determination.

         2.21     "SECURITIES ACT" means the Securities Act of 1933, as amended.

         2.22     "STOCK BONUS" means an award of Common Stock granted to an
                  Eligible Recipient pursuant to Section 8 of the Plan.

         2.23     "SUBSIDIARY" means any entity that is directly or indirectly
                  controlled by the Company or any entity in which the Company
                  has a significant equity interest, as determined by the
                  Committee.

         2.24     "TAX DATE" means the date any withholding tax obligation
                  arises under the Code for a Participant with respect to an
                  Incentive Award.

3.       PLAN ADMINISTRATION

         3.1      THE COMMITTEE. The Plan will be administered by the Board or
                  by a committee of the Board. So long as the Company has a
                  class of its equity securities registered under Section 12 of
                  the Exchange Act, any committee administering the Plan will
                  consist solely of two or more members of the Board who are
                  "non-employee directors" within the meaning of Rule 16b-3
                  under the Exchange Act and, if the Board so determines in its
                  sole discretion, who are "outside directors" within the
                  meaning of Section 162(m) of the Code. Such a committee, if
                  established, will act by majority approval of the members
                  (including written consent of a majority of the members), and
                  a majority of the members of such a committee will constitute
                  a quorum. As used in the Plan, "Committee" will refer to the
                  Board or to such a committee, if established. To the extent
                  consistent with corporate law, the Committee may delegate to
                  any officers of the Company the duties, power and authority of
                  the Committee under the Plan pursuant to such conditions or
                  limitations as the Committee may establish; provided, however,
                  that only the Committee may exercise such duties, power and

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                  authority with respect to Eligible Recipients who are subject
                  to Section 16 of the Exchange Act. The Committee may exercise
                  its duties, power and authority under the Plan in its sole and
                  absolute discretion without the consent of any Participant or
                  other party, unless the Plan specifically provides otherwise.
                  Each determination, interpretation or other action made or
                  taken by the Committee pursuant to the provisions of the Plan
                  will be conclusive and binding for all purposes and on all
                  persons, and no member of the Committee will be liable for any
                  action or determination made in good faith with respect to the
                  Plan or any Incentive Award granted under the Plan.

3.2      AUTHORITY OF THE COMMITTEE.

         (a)      In accordance with and subject to the provisions of the Plan,
                  the Committee will have the authority to determine all
                  provisions of Incentive Awards as the Committee may deem
                  necessary or desirable and as consistent with the terms of the
                  Plan, including, without limitation, the following: (i) the
                  Eligible Recipients to be selected as Participants; (ii) the
                  nature and extent of the Incentive Awards to be made to each
                  Participant including the number of shares of Common Stock to
                  be subject to each Incentive Award, any exercise price, the
                  manner in which Incentive Awards will vest or become
                  exercisable and whether Incentive Awards will be granted in
                  tandem with other Incentive Awards) and the form of written
                  agreement, if any, evidencing such Incentive Award; (iii) the
                  time or times when Incentive Awards will be granted; (iv) the
                  duration of each Incentive Award; and (v) the restrictions and
                  other conditions to which the payment or vesting of Incentive
                  Awards may be subject. In addition, the Committee will have
                  the authority under the Plan in its sole discretion to pay the
                  economic value of any Incentive Award in the form of cash,
                  Common Stock or any combination of both.

         (b)      The Committee will have the authority under the Plan to amend
                  or modify the terms of any outstanding Incentive Award in any
                  manner, including, without limitation, the authority to modify
                  the number of shares or other terms and conditions of an
                  Incentive Award, extend the term of an Incentive Award,
                  accelerate the exercisability or vesting or otherwise
                  terminate any restrictions relating to an Incentive Award,
                  accept the surrender of any outstanding Incentive Award or, to
                  the extent not previously exercised or vested, authorize the
                  grant of new Incentive Awards in substitution for surrendered
                  Incentive Awards; provided, however that the amended or
                  modified terms are permitted by the Plan as then in effect and
                  that any Participant adversely affected by such amended or
                  modified terms has consented to such amendment or
                  modification. No amendment or modification to an Incentive
                  Award, however, whether pursuant to this Section 3.2 or any
                  other provisions of the Plan, will be deemed to be a regrant
                  of such Incentive Award for purposes of this Plan.

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         (c)      In the event of (i) any reorganization, merger, consolidation,
                  recapitalization, liquidation, reclassification, stock
                  dividend, stock split, combination of shares, rights offering,
                  extraordinary dividend or divestiture (including a spin-off)
                  or any other change in corporate structure or shares, (ii) any
                  purchase, acquisition, sale or disposition of a significant
                  amount of assets or a significant business, (iii) any change
                  in accounting principles or practices, or (iv) any other
                  similar change, in each case with respect to the Company or
                  any other entity whose performance is relevant to the grant or
                  vesting of an Incentive Award, the Committee (or, if the
                  Company is not the surviving corporation in any such
                  transaction, the board of directors of the surviving
                  corporation) may, without the consent of any affected
                  Participant, amend or modify the vesting criteria of any
                  outstanding Incentive Award that is based in whole or in part
                  on the financial performance of the Company (or any Subsidiary
                  or division thereof) or such other entity so as equitably to
                  reflect such event, with the desired result that the criteria
                  for evaluating such financial performance of the Company or
                  such other entity will be substantially the same (in the sole
                  discretion of the Committee or the board of directors of the
                  surviving corporation) following such event as prior to such
                  event; provided, that the amended or modified terms are
                  permitted by the Plan as then in effect.

4.       SHARES AVAILABLE FOR ISSUANCE

         4.1      MAXIMUM NUMBER OF SHARES AVAILABLE. Subject to adjustment as
                  provided in Section 4.5 of the Plan, the maximum number of
                  shares of Common Stock that will be available for issuance
                  under the Plan will be 15,000,000 shares of Common Stock less
                  the number of shares of Common Stock issued pursuant to the
                  Prior Plans. Notwithstanding any other provisions of the Plan
                  to the contrary other than Section 6.7, no Participant in the
                  Plan may be granted any Options or any other Incentive Awards
                  with a value based solely on an increase in the value of the
                  Common Stock after the date of grant, relating to more than
                  300,000 shares of Common Stock in the aggregate in any fiscal
                  year of the Company (subject to adjustment as provided in
                  Section 4.5 of the Plan); provided, however, that a
                  Participant who is first appointed or elected as an officer,
                  hired as an employee or retained as a consultant by the
                  Company or who receives a promotion that results in an
                  increase in responsibilities or duties may be granted, during
                  the fiscal year of such appointment, election, hiring,
                  retention or promotion Options or such other Incentive Awards
                  relating to up to 500,000 shares of Common Stock (subject to
                  adjustment as provided in Section 4.5 of the Plan).

         4.2      ACCOUNTING FOR INCENTIVE AWARDS. Shares of Common Stock that
                  are issued under the Plan or that are subject to outstanding
                  Incentive Awards will be applied to reduce the maximum number
                  of shares of Common Stock remaining available for issuance
                  under the Plan. Any shares of Common Stock that are subject to
                  an Incentive Award that lapses, expires, is forfeited or for
                  any reason is terminated unexercised or unvested and any
                  shares of Common Stock that are subject to an Incentive Award
                  that is settled or paid in cash or any form other than shares
                  of Common Stock, or used to satisfy the applicable tax
                  withholding

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                  obligation will automatically again become available for
                  issuance under the Plan. Any shares of Common Stock that
                  constitute the forfeited portion of a Restricted Stock Award,
                  however, will not become available for further issuance under
                  the Plan.

         4.3      GENERAL RESTRICTIONS. Delivery of shares of Common Stock or
                  other amounts under the Plan shall be subject to the
                  following:

                  (a)      Notwithstanding any other provision of the Plan, the
                           Company shall have no liability to deliver any shares
                           of Common Stock under the Plan or make any other
                           distribution of benefits under the Plan unless such
                           delivery or distribution would comply with all
                           applicable laws (including, without limitation, the
                           requirements of the Securities Act of 1933), and the
                           applicable requirements of any securities exchange or
                           similar entity.

                  (b)      To the extent that the Plan provides for issuance of
                           stock certificates to reflect the issuance of shares
                           of Common Stock, the issuance may be reflected on a
                           non-certificated basis, to the extent not prohibited
                           by applicable law or the applicable rules of any
                           securities exchange or similar entity.

         4.4      SHARES OF COMMON STOCK ISSUED PURSUANT TO INCENTIVE STOCK
                  OPTIONS. Subject to Section 4.5, the maximum number of shares
                  of Common Stock that may be issued by Options intended to be
                  Incentive Stock Options pursuant to the Plan shall be
                  15,000,000 less the number of shares of Common Stock issued
                  pursuant to the Prior Plans

         4.5      ADJUSTMENTS TO SHARES AND INCENTIVE AWARDS. In the event of
                  any reorganization, merger, consolidation, recapitalization,
                  reclassification, stock dividend, stock split, of shares,
                  rights offering, divestiture or extraordinary dividend
                  (including a spin-off) or any other change in the corporate
                  structure or shares of the Company, the Committee (or, if the
                  Company is not the surviving corporation in any such
                  transaction, the board of directors of the surviving
                  corporation) will make appropriate adjustment (which
                  determination will be conclusive) as to the number and kind of
                  securities or other property (including cash) available for
                  issuance or payment under the Plan and, in order to prevent
                  dilution or enlargement of the rights of Participants, (a) the
                  number and kind of securities or other property (including
                  cash) to outstanding Options, and (b) the exercise price of
                  outstanding Options.

5.       PARTICIPATION

         Participants in the Plan will be those Eligible Recipients who, in the
judgment of the Committee, have contributed, are contributing or are expected to
contribute to the achievement of economic objectives of the Company or its
Subsidiaries. Eligible Recipients may be granted from time to time one or more
Incentive Awards, singly or in combination or in tandem with other Incentive
Awards, as may be determined by the Committee in its sole discretion. Incentive

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Awards will be deemed to be granted as of the date specified in the grant
resolution of the Committee, which date will be the date of any related
agreement with the Participant.

6.       OPTIONS

         6.1      GRANT. An Eligible Recipient may be granted one or more
                  Options under the Plan, and such Options will be subject to
                  such terms and conditions, consistent with the other
                  provisions of the Plan, may be determined by the Committee in
                  its sole discretion. Committee may designate whether an Option
                  is to be considered an Incentive Stock Option or a
                  Non-Statutory Stock Option. To the extent that any Incentive
                  Stock Option granted under the Plan ceases for any reason to
                  qualify as an "incentive stock option" purposes of Section 422
                  of the Code, such Incentive Stock Option will continue to be
                  outstanding for purposes of the Plan but will thereafter be
                  deemed to be a Non-Statutory Stock Option.

         6.2      EXERCISE PRICE. The per share price to be paid by a
                  Participant upon exercise of an Option will be determined by
                  the Committee in its discretion at the time of the Option
                  grant, provided that price will not be less than 100% of the
                  Fair Market Value of one share of Common Stock on the date of
                  grant with respect to an Incentive Stock Option (110% of the
                  Fair Market Value if, at the time the Incentive Stock Option
                  is granted, the Participant owns, or indirectly, more than 10%
                  of the total combined voting power of all classes of stock of
                  the Company or any parent or subsidiary corporation of the
                  Company).

         6.3      EXERCISABILITY AND DURATION. An Option will become exercisable
                  at such times and in such installments as may be determined by
                  the Committee in its sole discretion at the time of grant;,
                  however, that no Option may be exercisable after 10 years from
                  its date of grant or, in the case of an Eligible Participant
                  who owns, directly or indirectly (as determined pursuant to
                  Section 424(d) of the Code), more than 10% of the combined
                  voting power of all classes of stock of the Company or any
                  subsidiary or parent corporation of the Company (within the
                  meaning of Sections 424(f) and 424(e), respectively, of the
                  Code), five years from its date of grant. Notwithstanding the
                  foregoing, each Option granted to a participant shall vest at
                  a rate of at least 20% per year over 5 years from the date the
                  Option is granted.

         6.4      PAYMENT OF EXERCISE PRICE. The total purchase price of the
                  shares to be purchased upon exercise of an Option will be paid
                  entirely in cash (including check, bank draft or money
                  order);, however, that the Committee, in its sole discretion
                  and upon terms and conditions established by the Committee,
                  may allow such payments to be made, in whole or in part, by
                  tender of a Broker Exercise Notice, Previously Acquired
                  Shares, by tender of a promissory note (on terms acceptable to
                  the Committee in its sole discretion) or by a combination of
                  such methods.

         6.5      MANNER OF EXERCISE. An Option may be exercised by a
                  Participant in whole or in part from time to time, subject to
                  the conditions contained in the Plan

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                  and in the agreement evidencing such Option, by delivery in
                  person, by facsimile or electronic transmission or through the
                  mail of written notice of exercise to the Company (Attention:
                  Chief Financial Officer) at its office at 400 Galleria
                  Parkway, Suite 300, Atlanta, Georgia 30339 (or such other
                  office as the Company may designate), and by paying in full
                  the total exercise price for the shares of Common Stock to be
                  purchased in accordance with Section 6.4 of the Plan.

         6.6      AGGREGATE LIMITATION OF COMMON STOCK SUBJECT TO INCENTIVE
                  STOCK OPTIONS. To the extent that the aggregate Fair Market
                  Value (determined as of the date an Incentive Stock Option is
                  granted) the shares of Common Stock with respect to which
                  Incentive Stock Options are exercisable for the first time by
                  a Participant during any calendar year (under the Plan and any
                  other incentive stock option plans of the Company, any
                  subsidiary or any parent corporation of the Company (within
                  the meaning of Sections 424(f) 424(e), respectively, of the
                  Code)) exceeds $100,000 (or such other amount as may be
                  prescribed by the Code from time to time), excess Incentive
                  Stock Options shall be treated as Non-Statutory Stock Options.
                  The determination shall be made by taking Incentive Stock
                  Options into account in the order in which they were granted.
                  If such excess only applies to a portion of an Incentive Stock
                  Option, the Committee, in its discretion, designate which
                  shares shall be treated as shares to be acquired upon exercise
                  of an Incentive Stock Option.

         6.7      OPTIONS TO PURCHASE STOCK OF ACQUIRED COMPANIES. After any
                  reorganization, merger or consolidation involving the Company
                  or a subsidiary of the Company, the Committee may grant
                  Options in substitution of options issued under a plan of
                  another party to the reorganization, merger or consolidation,
                  where such party's stock may no longer be outstanding
                  following such transaction. to Section 424(a) of the Code, the
                  Committee shall have sole discretion to determine all terms
                  and conditions of Options issued under this Section 6.7,
                  including, but not limited to, exercise price and expiration
                  date.

7.       RESTRICTED STOCK AWARDS

         7.1      GRANT. An Eligible Recipient may be granted one or more
                  Restricted Stock Awards under the Plan, and such Restricted
                  Stock Awards will be subject to such terms and conditions,
                  consistent with the other provisions of the Plan, as may be
                  determined by the Committee in its sole discretion. The
                  Committee may impose such restrictions or conditions, not
                  inconsistent with the provisions of the Plan, to the vesting
                  of such Restricted Stock Awards as it deems appropriate,
                  including, without limitation, the Participant remain in the
                  continuous employ or service of the Company or a Subsidiary
                  for a certain period or that the Participant or the Company
                  (or any Subsidiary or division thereof) satisfy certain
                  performance goals or criteria.

         7.2      RIGHTS AS A SHAREHOLDER; TRANSFERABILITY. Except as provided
                  in Sections 7.1, 7.3 and 12.3 of the Plan, a Participant will
                  have all voting, dividend, liquidation and other rights with
                  respect to shares of Common Stock issued to the

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                  Participant as a Restricted Stock Award under this Section 7
                  upon the Participant becoming the holder of record of such
                  shares as if such Participant were a holder of record of
                  shares of unrestricted Common Stock.

         7.3      DIVIDENDS AND DISTRIBUTIONS. Unless the Committee determines
                  otherwise in its sole discretion (either in the agreement
                  evidencing the Restricted Stock Award at the time of grant or
                  at any time after the grant of the Restricted Stock Award),
                  any dividends or distributions (including regular quarterly
                  cash dividends) paid with respect to shares of Common Stock
                  subject to the unvested portion of a Restricted Stock Award
                  will be subject to the same restrictions as the shares to
                  which such dividends or distributions relate. In the event the
                  Committee determines not to pay such dividends or
                  distributions currently, the Committee will determine in its
                  sole discretion whether any interest will be paid on such
                  dividends or distributions. In addition, the Committee in its
                  sole discretion may require such dividends and distributions
                  to be reinvested (and in such case the Participants consent to
                  such reinvestment) in shares of Common Stock that will be
                  subject to the same restrictions as the shares to which such
                  dividends or distributions relate.

         7.4      ENFORCEMENT OF RESTRICTIONS. To enforce the restrictions
                  referred to in this Section 7, the Committee may place a
                  legend on the stock certificates referring to such
                  restrictions and may require the Participant, until the
                  restrictions have lapsed, to keep the stock certificates,
                  together with duly endorsed stock powers, in the custody of
                  the Company or its transfer agent or to maintain evidence of
                  stock ownership, together with duly endorsed stock powers, in
                  a certificateless book-entry stock account with the Company's
                  transfer agent.

8.       STOCK BONUSES

         An Eligible Recipient may be granted one or more Stock Bonuses under
the Plan, and such Stock Bonuses will be subject to such terms and conditions,
consistent with the other provisions of the Plan, as may be determined by the
Committee. The Participant will have all voting, dividend, liquidation and other
rights with respect to the shares of Common Stock issued to a Participant as a
Stock Bonus under this Section 10 upon the Participant becoming the holder of
record of such shares; provided, however, that the Committee may impose such
restrictions on the assignment or transfer of a Stock Bonus as it deems
appropriate.

9.       EFFECT OF TERMINATION OF EMPLOYMENT OR OTHER SERVICE

         9.1      TERMINATION DUE TO DEATH, DISABILITY OR RETIREMENT. In the
                  event a Participant's employment or other service with the
                  Company and all Subsidiaries is terminated by reason of death,
                  Disability or Retirement:

                  (a)      All outstanding Options then held by the Participant
                           will become immediately exercisable in full and will
                           remain exercisable for a period of one year after
                           such termination (but in no event after the
                           expiration date of any such Option);

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                  (b)      All Restricted Stock Awards then held by the
                           Participant will become fully vested; and

                  (c)      All Stock Bonuses then held by the Participant will
                           vest and/or continue to vest in the manner determined
                           by the Committee and set forth in the agreement
                           evidencing such Stock Bonuses.

         9.2      TERMINATION FOR REASONS OTHER THAN DEATH, DISABILITY OR
                  RETIREMENT.

                  (a)      Subject to the second sentence of this Section
                           9.2(a), in the event a Participant's employment or
                           other service is terminated with the Company and all
                           Subsidiaries for any reason other than death,
                           Disability or Retirement, or a Participant is in the
                           employ or service of a Subsidiary and the Subsidiary
                           ceases to be a Subsidiary of the Company (unless the
                           Participant continues in the employ or service of the
                           Company or another Subsidiary), all rights of the
                           Participant under the Plan and any agreements
                           evidencing an Incentive Award will immediately
                           terminate without notice of any kind, and no Options
                           then held by the Participant will thereafter be
                           exercisable, Restricted Stock Awards then held by the
                           Participant that have not vested will be terminated
                           and forfeited, all Stock Bonuses then held by the
                           Participant will vest and/or continue to vest in the
                           manner determined by the Committee and set forth in
                           the agreement evidencing such Stock Bonuses. However,
                           (i) if such termination is due to any reason other
                           than termination by the Company or any Subsidiary for
                           "cause," all outstanding Options or Stock
                           Appreciation Rights then held by such Participant
                           will remain exercisable to the extent exercisable as
                           of such termination for a period of three months
                           after such termination (but in no event after the
                           expiration date of any such Option), and (ii) if such
                           termination is due to termination by the Company or
                           any Subsidiary for "cause", outstanding Options then
                           held by such Participant will remain exercisable as
                           of such termination for a period of one month after
                           such termination (but in no event after the
                           expiration date of any such Option).

                  (b)      For purposes of this Section 9.2, "cause" (as
                           determined by the Committee) will be as defined in
                           any employment or other agreement or policy
                           applicable to the Participant or, if no such
                           agreement or policy exists, will mean (i), fraud,
                           misrepresentation, embezzlement or deliberate injury
                           or attempted injury, in each case related to the
                           Company or any Subsidiary, (ii) any unlawful or
                           criminal activity of a serious nature, (iii) any
                           intentional and deliberate breach of a duty or duties
                           that, individually or in the aggregate, are material
                           in relation to the Participant's overall duties, or
                           (iv) any material breach of any employment, service,
                           or noncompete agreement entered into with the Company
                           or any Subsidiary.

         9.3      MODIFICATION OF RIGHTS UPON TERMINATION. Notwithstanding the
                  other provisions of this Section 9, upon a Participant's
                  termination of employment

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                  or other service with the Company and all Subsidiaries, the
                  Committee may, in its sole discretion (which may be exercised
                  at any time on or after the date of grant, including following
                  such termination), cause Options and Stock Appreciation Rights
                  (or any part thereof) then held by such Participant to become
                  or continue to become exercisable and/or remain exercisable
                  following such termination of employment or service and
                  Restricted Stock Awards, Performance Units and Stock Bonuses
                  then held by such Participant to vest and/or continue to vest
                  or become free of transfer restrictions, as the case may be,
                  such termination of employment or service, in each case in the
                  manner determined by the Committee; provided, however, no
                  Option or Stock Appreciation Right may remain exercisable
                  beyond its expiration date.

         9.4      BREACH OF CONFIDENTIALITY OR NONCOMPETE AGREEMENTS.
                  Notwithstanding anything in the Plan to the contrary, in the
                  event that a Participant materially breaches the terms of any
                  confidentiality or noncompete agreement entered into with the
                  Company or any Subsidiary, such breach occurs before or after
                  termination of such Participant's employment or other service
                  with the Company or any Subsidiary, the Committee in its sole
                  discretion may immediately terminate all rights of the
                  Participant under the Plan and any agreements evidencing an
                  Incentive Award then held by the Participant without notice of
                  any kind.

         9.5      DATE OF TERMINATION OF EMPLOYMENT OR OTHER SERVICE. Unless the
                  Committee otherwise determines in its sole discretion, a
                  Participant's employment or other service will, for purposes
                  of the Plan, be deemed to have terminated on the date recorded
                  on the personnel or other records of the Company or the
                  Subsidiary for which the Participant provides employment or
                  other service, determined by the Committee in its sole
                  discretion based upon such records.

10.      PAYMENT OF WITHHOLDING TAXES

         10.1     GENERAL RULES. The Company is entitled to (a) withhold and
                  deduct from future wages of the Participant (or from other
                  amounts that may be due and owing to the Participant from the
                  Company or a Subsidiary), or make other arrangements for the
                  collection of, all legally required amounts necessary to
                  satisfy any and all federal, state and local withholding and
                  employment-related tax requirements attributable to an
                  Incentive Award, including, without limitation, the grant,
                  exercise or vesting of, or payment of dividends with respect
                  to, an Incentive Award or a disqualifying disposition of stock
                  received upon exercise of an Incentive Stock Option, or (b)
                  require the Participant promptly to remit the amount of such
                  withholding to the Company before taking any action, including
                  issuing any shares of Common Stock, with respect to an
                  Incentive Award.

         10.2     SPECIAL RULES. The Committee may, in its sole discretion and
                  upon terms and conditions established by the Committee, permit
                  or require a Participant to satisfy, in whole or in part, any
                  withholding or employment-related tax obligation described in
                  Section 10 of the Plan by electing to tender Previously
                  Acquired

                                      -11-
<PAGE>

                  Shares, a Broker Exercise Notice or a promissory note (on
                  terms acceptable to the Committee in its sole discretion), or
                  by a combination of such methods.

11.      CHANGE IN CONTROL

         11.1     CHANGE IN CONTROL. For purposes of this Section 11, a "Change
                  in Control" of the Company will mean the following:

                  (a)      the sale, lease, exchange or other transfer, directly
                           or indirectly, of substantially all of the assets of
                           the Company (in one transaction or in a series of
                           related transactions) to a person or entity that is
                           not controlled by the Company;

                  (b)      the approval by the shareholders of the Company of
                           any plan or proposal for the liquidation or
                           dissolution of the Company;

                  (c)      any person becomes after the effective date of the
                           Plan the "beneficial owner" (as defined in Rule 13d-3
                           under the Exchange Act), directly or indirectly, of
                           (A) 20% or more, but less than 50%, of the combined
                           voting power of the Company's outstanding securities
                           ordinarily having the right to vote at elections of
                           directors, unless the transaction resulting in such
                           ownership has been approved in advance by the
                           Incumbent Directors, or (B) 50% or more of the
                           combined voting power of the Company's outstanding
                           securities ordinarily having the right to vote at
                           elections of directors (regardless of any approval by
                           the Incumbent Directors);

                  (d)      a merger or consolidation to which the Company is a
                           party if the shareholders of the Company immediately
                           prior to effective date of such merger or
                           consolidation have "beneficial ownership" (as defined
                           in Rule 13d-3 under the Exchange Act), immediately
                           following the effective date of such merger or
                           consolidation, of securities of the surviving
                           corporation representing (i) more than 50%, but less
                           than 80%, of the combined voting power of the
                           surviving corporation's then outstanding securities
                           ordinarily having the right to vote at elections of
                           directors, unless such merger or consolidation has
                           been approved in advance by the Incumbent Directors
                           (as defined in Section 11.2 below), or (ii) 50% or
                           less of the combined voting power of the surviving
                           corporation's then outstanding securities ordinarily
                           having the right to vote at elections of directors
                           (regardless of any approval by the Incumbent
                           Directors);

                  (e)      the Incumbent Directors cease for any reason to
                           constitute at least a majority of the Board; or

                  (f)      any other change in control of the Company of a
                           nature that would be required to be reported pursuant
                           to Section 13 or 15(d) of the Exchange Act, whether
                           or not the Company is then subject to such reporting
                           requirements.

                                      -12-
<PAGE>

         11.2     INCUMBENT DIRECTORS. For purposes of this Section 11,
                  "Incumbent Directors" of the Company will mean any individuals
                  who are members of the Board on the effective date of the Plan
                  and any individual who subsequently becomes a member of the
                  Board whose election, or nomination for election by the
                  Company's shareholders, was approved by a vote of at least a
                  majority of the Incumbent Directors (either by specific vote
                  or by approval of the Company's proxy statement in which such
                  individual is named as a nominee for director without
                  objection to such nomination).

         11.3     ACCELERATION OF VESTING. Without limiting the authority of the
                  Committee under Sections 3.2 and 4.5 of the Plan, if a Change
                  in Control of the Company occurs, then, unless otherwise
                  provided by the Committee in its sole discretion either in the
                  agreement evidencing an Incentive Award at the time of grant
                  or at any time after the grant of an Incentive Award, (a) all
                  outstanding Options will become immediately exercisable in
                  full and will remain exercisable for the remainder of their
                  terms, regardless of whether the Participant to whom such
                  Options have been granted remains in the employ or service of
                  the Company or any Subsidiary; (b) all outstanding Restricted
                  Stock Awards will become immediately fully vested and
                  non-forfeitable; and (c) all outstanding Stock Bonuses then
                  held by the Participant will vest and/or continue to vest in
                  the manner determined by the Committee and set forth in the
                  agreement evidencing such Stock Bonuses.

         11.4     CASH PAYMENT FOR OPTIONS. If a Change in Control of the
                  Company occurs, then the Committee, if approved by the
                  Committee in its sole discretion either in an agreement
                  evidencing an Incentive Award at the time of grant or at any
                  time after the grant of an Incentive Award, and without the
                  consent of any Participant effected thereby, may determine
                  that some or all Participants holding outstanding Options will
                  receive, with respect to some or all of the shares of Common
                  Stock subject to such Options, as of the effective date of any
                  such Change in Control of the Company, cash in an amount equal
                  to the excess of the Fair Market Value of such shares
                  immediately prior to the effective date of such Change in
                  Control of the Company over the exercise price per share of
                  such Options.

         11.5     LIMITATION ON CHANGE IN CONTROL PAYMENTS. Notwithstanding
                  anything in Section 11.3 or 11.4 of the Plan to the contrary,
                  if, respect to a Participant, the acceleration of the vesting
                  of an Incentive Award as provided in Section 11.3 or the
                  payment of cash in exchange for all or part of an Incentive
                  Award as provided in Section 11.4 (which acceleration or
                  payment could be deemed a "payment" within the meaning of
                  Section 280G(b)(2) of the Code), together with any other
                  "payments" which such Participant has the right to receive
                  from the Company or any corporation that is a member of an
                  "affiliated group" (as defined in Section 1504(a) of the Code
                  without regard to Section 1504(b) the Code) of which the
                  Company is a member, would constitute a "parachute payment"
                  (as defined in Section 280G(b)(2) of the Code), then the
                  "payments" to such Participant pursuant to Section 11.3 or
                  11.4 of the Plan will be reduced to the

                                      -13-
<PAGE>

                  largest amount as will result in no portion of such "payments"
                  being subject to the excise tax imposed by Section 4999 of the
                  Code;, however, that if a Participant is subject to a separate
                  agreement with the Company or a Subsidiary that expressly
                  addresses the potential application of Sections 280G or 4999
                  of the Code (including, without limitation, that "payments"
                  under such agreement or otherwise will be reduced, that such
                  "payments" not be reduced or that the Participant will have
                  the discretion to determine which "payments" will be reduced),
                  then this Section 11.5 will not apply, and any "payments" to a
                  Participant pursuant to Section 11.3 or 11.4 of the Plan will
                  be treated as "payments" arising under such separate
                  agreement.

12.      RIGHTS OF ELIGIBLE RECIPIENTS AND PARTICIPANTS; TRANSFERABILITY.

         12.1     EMPLOYMENT OR SERVICE. Nothing in the Plan will interfere with
                  or limit in any way the right of the Company or any Subsidiary
                  to terminate the employment or service of any Eligible
                  Recipient or Participant at any time, nor confer upon any
                  Eligible Recipient or Participant any right to continue in the
                  employ or service of the Company or any Subsidiary.

         12.2     RIGHTS AS A SHAREHOLDER. As a holder of Incentive Awards
                  (other than Restricted Stock Awards and Stock Bonuses), a
                  Participant will have no rights as a shareholder unless and
                  until such Incentive Awards are exercised for, or paid in the
                  form of, of Common Stock and the Participant becomes the
                  holder of record of such shares. Except as otherwise provided
                  in the Plan, adjustment will be made for dividends or
                  distributions with respect to such Incentive Awards as to
                  which there is a record date preceding the date the
                  Participant becomes the holder of record of such shares,
                  except as the Committee may determine in its discretion.

         12.3     RESTRICTIONS ON TRANSFER. Except as otherwise provided in this
                  Section 12.3, a Participant's rights and interest under the
                  Plan may not be assigned or transferred other than by will or
                  the laws of descent and distribution, or pursuant to the terms
                  of a domestic relations order, as defined in Section
                  414(p)(1)(B) of the Code, which satisfies the requirements of
                  Section 414(p)(1)(A) of the Code (a "Qualified Domestic
                  Relations Order"). During the lifetime of a Participant, only
                  the Participant personally (or the Participant's personal
                  representative or attorney-in-fact) or the alternate payee
                  named in a Qualified Domestic Relations Order may exercise the
                  Participant's rights under the Plan. The Participant's
                  Beneficiary may exercise a Participant's rights to the extent
                  they are exercisable under the Plan following the death of the
                  Participant. Notwithstanding the foregoing, or any other
                  provision of this Plan, a Participant who holds Non-Qualified
                  Stock Options may transfer such Options to his or her spouse,
                  ascendants, lineal descendants, or to a duly established trust
                  for the benefit of one or more of these individuals. Options
                  so transferred may thereafter be transferred only to the
                  Participant who originally received the Options or to an
                  individual or trust to whom the Participant could have
                  initially transferred the Option pursuant to this Section
                  12.3. Options which are transferred pursuant to this Section
                  12.3

                                      -14-
<PAGE>

                  shall be exercisable by the transferee according to the same
                  terms and conditions as applied to the Participant.

         12.4     NON-EXCLUSIVITY OF THE PLAN. Nothing contained in the Plan is
                  intended to modify or rescind any previously approved
                  compensation plans or programs of the Company or create any
                  limitations on the power or authority of the Board to adopt
                  such additional or other compensation arrangements as the
                  Board may deem necessary or desirable.

13.      SECURITIES LAW AND OTHER RESTRICTIONS

         Notwithstanding any other provision of the Plan or any agreements
entered into pursuant to the Plan, the Company will not be required to issue any
shares of Common Stock under this Plan, and a Participant may not sell, assign,
transfer or otherwise dispose of shares of Common Stock issued pursuant to
Incentive Awards granted under the Plan, unless (a) there is in effect with
respect to such shares a registration statement under the Securities Act and any
applicable state securities laws or an exemption from such registration under
the Securities Act and applicable state securities laws, and (b) there has been
obtained any other consent, approval or permit from any other regulatory body
which the Committee, in its sole discretion, deems necessary or advisable. The
Company may condition such issuance, sale or transfer upon the receipt of any
representations or agreements from the parties involved, and the placement of
any legends on certificates representing shares of Common Stock, as may be
deemed necessary or advisable by the Company in order to comply with such
securities law or other restrictions.

14.      PLAN AMENDMENT, MODIFICATION AND TERMINATION

         The Board may suspend or terminate the Plan or any portion thereof at
any time, and may amend the Plan from time to time in such respects as the Board
may deem advisable in order that Incentive Awards under the Plan will conform to
any change in applicable laws or regulations or in any other respect the Board
may deem to be in the best interests of the Company; provided, however, that no
amendments to the Plan will be effective without approval of the shareholders of
the Company if shareholder approval of the amendment is then required pursuant
to Section 422 of the Code or the rules of any stock exchange or Nasdaq. No
termination, suspension or amendment of the Plan may adversely affect any
outstanding Incentive Award without the consent of the affected Participant;
provided, however, that this sentence will not impair the right of the Committee
to take whatever action it deems appropriate under Sections 3.2, 4.5 and 13 of
the Plan.

15.      EFFECTIVE DATE AND DURATION OF THE PLAN

         The Plan is effective as of June 24, 1999, the date it was adopted by
the Board and the shareholders. The Plan will terminate at midnight on June 23,
2009, and may be terminated prior to such time to by Board action, and no
Incentive Award will be granted after such termination. Incentive Awards
outstanding upon termination of the Plan may continue to be exercised, or become
free of restrictions, in accordance with their terms.

                                      -15-
<PAGE>

16.      MISCELLANEOUS

         16.1     GOVERNING LAW. The validity, construction, interpretation, and
                  effect of the Plan and any rules, regulations and actions
                  relating to the Plan will be governed by and construed
                  exclusively in accordance with the laws of the State of
                  Minnesota, notwithstanding the conflicts of laws principles of
                  any jurisdictions.

         16.2     SUCCESSORS AND ASSIGNS. The Plan will be binding upon and
                  inure to the benefit of the successors and permitted assigns
                  of the Company and the Participants.

         16.3     ANNUAL REPORT. Each year the Company will provide a copy of
                  its Annual Report to Shareholders on Form 10-K (or Form
                  10-KSB, as applicable) to all Participants.

                                      -16-BAM! ENTERTAINMENT, INC.

 

Exhibit 4.2

Award Number: ___________

BAY AREA MULTIMEDIA, INC. 2000 STOCK INCENTIVE PLAN

FORM OF STOCK OPTION AWARD AGREEMENT

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

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

     2. Exercise of Option.

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

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

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

 

 

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

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

          (a) cash;

          (b) check;

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

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

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

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

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

 

 

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

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

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

     11. Company’s Right of First Refusal.

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

               (i) The Holder’s intention to transfer;

               (ii) The name of the proposed transferee;

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

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

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

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

 

 

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

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

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

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

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

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

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

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

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

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

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

 

 

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

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

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

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

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

     15. Lock-Up Agreement.

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

 

 

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

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

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

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

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

 

 

EXHIBIT A

BAY AREA MULTIMEDIA, INC. 2000 STOCK INCENTIVE PLAN

EXERCISE NOTICE

Bay Area Multimedia, Inc.

333 W. Santa Clara Street, Suite 930

San Jose, CA 95113

Attention: Secretary

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

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

     3. Rights as Shareholder. Until the stock certificate evidencing such
Shares is issued (as evidenced by the appropriate entry on the books of the
Company or of a duly authorized transfer agent of the Company), no right to
vote or receive dividends or any other rights as a shareholder shall exist with
respect to the Shares, notwithstanding the exercise of the Option. The Company
shall issue (or cause to be issued) such stock certificate promptly after the
Option is exercised. No adjustment will be made for a dividend or other right
for which the record date is prior to the date the stock certificate is issued,
except as provided in Section 11(a) of the Plan.

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

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

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

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

 

 

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

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

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

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

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

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

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

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

 

 

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

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

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

[Signature Page Follows]

 

 

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

By:
	 	 	

	

(Signature)	 	
Title:
	 	 	

	Address:	 	
Address:
	
	
	
	

	
	
	
	

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

San Jose, CA 95113

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

	 	_______________________________ 

Spouse of Grantee

 

 

EXHIBIT B

BAY AREA MULTIMEDIA, INC. 2000 STOCK INCENTIVE PLAN

INVESTMENT REPRESENTATION STATEMENT

	 	 	 
	GRANTEE:
	 	

	 
	 	

	COMPANY:
	 	
BAY AREA MULTIMEDIA, INC.

	SECURITY:
	 	
COMMON STOCK

	AMOUNT:
	 	

	 
	 	

	DATE:
	 	

	 
	 	

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

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

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

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

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

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

 

 

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

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

	 	Signature of Grantee:

	 	__________________________________ 

Date: ,   ____________________, _______

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