EXHIBIT 4.2
Standard
AUDIOLOGIC, INC.
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT is issued to _____________________
(the "Optionee"), pursuant to the 1992 Stock Option Plan (the "Plan")
of AudioLogic, Inc., a Colorado corporation (the "Corporation").
1. OPTIONEE: BASIC TERMS. The Optionee is hereby granted
an option to purchase the number of fully paid and non-assessable
shares of the Common Stock, $.01 par value, of the Corporation at the
option price set forth below, subject to the following additional
terms and conditions:
(a) DEFINITIONS.
(i) "Code" shall mean the Internal Revenue
Code of 1986, as amended from time to time.
(ii) "Incentive Stock Option" shall mean an
option described in Section 422 of the Code. To qualify for
favorable tax treatment provided by an Incentive Stock Option,
the shares purchased upon exercise must be held for a period of
two (2) years from the date of the option grant and for a period
of one (1) year after the shares are transferred to Optionee.
(iii) "Non-Statutory Option" shall mean
an option other than an Incentive Stock Option, the exercise of
which generally results in an immediate taxable event.
(iv) Unless otherwise indicated, all
capitalized terms set forth in this Agreement shall have the
meaning provided to them under the Plan, a copy of which Optionee
acknowledges having received.
(b) GRANT OF OPTIONS.
(i) The Corporation hereby grants to the
Optionee an option (the "Option") to purchase ________ shares of
the Common Stock of the Corporation, upon the terms and
conditions set forth below. The date of grant of the Option is
___________________ (the "Grant Date").
(ii) This Option is intended to be a(n):
Incentive Stock Option (to be
received only by employees of the Corporation).
Non-Statutory Option.
(iii) The Optionee is a(n) (if
applicable, check more than one):
Employee Officer
Consultant Director
(c) DURATION OF OPTION
(i) EXPIRATION OF OPTION.
This Option shall expire ten (10) years from the Grant Date;
provided, however, for any Optionee who owns more than ten
percent (10%) of the total combined voting power or value of all
classes of stock of the Corporation, the duration of an Incentive
Stock Option shall be five (5) years.
(ii) NON-STATUTORY OPTION. If this Option
is a Non-Statutory Stock Option, as set forth above, it shall expire
five (5) years after the Grant Date.
(iii)TERMINATION FOR CAUSE.
Notwithstanding any of the foregoing, if the Optionee is
terminated "for cause" (as such term is defined in Section 7 (c)
of the Plan), this Option shall terminate immediately upon such
termination and the holder in such event shall have no right
after such termination to exercise any unexercised Option he or
she might have exercised on or prior to the termination.
(d) EXERCISE PRICE. The purchase price for the
shares subject to the Option shall be $_______ per share, which
is either: (a) equal to at least eighty-five percent (85%) of the
Fair Market Value if the Option is a Non-Statutory Stock Option,
(b) equal to at least one-hundred percent (100%) of the Fair
Market Value if the Option is an Incentive Stock Option, or (c)
equal to at least one-hundred ten percent (110%) of the Fair
Market Value if the Option is an Incentive Stock Option and
Optionee holds more than ten percent (10%) of the total combined
voting power or value of all classes of stock of the Corporation.
2. EXERCISABILITY.
Subject to the provisions relating to termination of employment,
death or permanent disability as set forth in the Plan and
paragraph 7 hereof, this Option shall become exercisable in one
or more installments, in the percentages and on and after the
dates set forth below:
Period of Time After % of Option
Grant Date Shares Exercisable
Twelve (12) Months 28%
Each calendar month thereafter 2%
Under these provisions, the Option is fully exercisable
approximately four years after the Grant Date. Twenty-eight
percent (28%) of the Option becomes exercisable one year after
the Grant Date and the remainder becomes exercisable on a monthly
basis over the following three years.
3. LIMIT ON EXERCISE OF OPTION. This Option may be
exercised as to exercisable Shares at any time or from time to
time during the term of this Agreement. Except on termination of
employment, death or permanent disability as set forth in the
Plan, the Option may not be exercised at any time unless the
Optionee shall have maintained Continuous Status as an Employee
of the Corporation or of its Parent or of one or more of its
Subsidiaries, from the date hereof to the date of the exercise of
the Option, except as otherwise provided by the Board pursuant to
Section 7 of the Plan with respect to an Option granted to a
Consultant. The holder of the Option shall not have any of the
rights of a shareholder with respect to the Shares covered by the
Option except to the extent that one or more certificates for
such Shares shall be delivered to him or her upon the due
exercise of the Option.
4. METHOD OF EXERCISING OPTION.
(a) Subject to the terms and conditions of this
Option Agreement, the Option may be exercised by written notice
to the Corporation, at its principal office, in the form of
Exhibit A attached hereto. Such notice shall be accompanied by
payment of the full purchase price of such shares, and the
Corporation shall deliver a certificate or certificates
representing such shares as soon as practicable after the notice
is received. Payment of such purchase price shall, in either
case, be made in any of the following methods, as may be elected
by the Optionee, except for those PROHIBITED methods indicated by
a check mark within any of the boxes below (a check mark means
the method is prohibited):
in cash or by check payable to the order of
the Corporation;
in Common Stock of the Corporation already
owned by the Optionee, valued as of the date
of exercise of the Option at Fair Market
Value and subject to such terms and
conditions as are prescribed by the Board; or
in Shares being acquired upon exercise of the
Option, valued as of the date of exercise of
the Option at Fair Market Value and subject
to such terms and conditions as are
prescribed by the Board.
(b) Optionee agrees to have withheld from any
remuneration payable to him by the Corporation and/or to pay to
the Corporation, at the time of exercise of the Option, an amount
which is required to be withheld or paid pursuant to any Federal,
State or local tax or revenue laws or regulations, as may be
determined by the Corporation. The Optionee may satisfy such tax
withholding by instructing the Corporation to withhold such
number of option shares exercised which, when valued at Fair
Market Value on the date of exercise, equal the total tax
obligations required to be withheld.
(c) The certificate or certificates for the
shares as to which the Option shall have been exercised shall be
registered in the name of the person or persons exercising the
Option. In the event the Option shall be exercised pursuant to
the Plan by any person or persons other than the Optionee, such
notice shall be accompanied by appropriate proof of the right of
such person or persons to exercise the Option. All shares that
shall be purchased upon the exercise of the Option as provided
herein shall be fully paid and nonassessable.
5. NONTRANSERABILITY. The Option shall not be
transferable otherwise than by will or the laws of descent and
distribution, and the Option may be exercised, during the
lifetime of the Optionee, only by the Optionee or his or her
legal representative. The Option shall be null and void and
without effect upon any attempted assignment or transfer, except
as hereinabove provided, including without limitation, any
purported assignment, whether voluntary or by operation of law,
pledge, hypothecation or other disposition contrary to the
provisions hereof, or levy of execution, attachment, trustee
process or similar process, whether legal or equitable, upon the
Option.
6. DISCLOSURE AND RISK. The Optionee represents and
warrants to the Corporation as follows:
(a) This Option and the Shares will be acquired
by the Optionee for Optionee's own account, for investment and
not with a view to, or for resale in connection with, any
distribution or public offering thereof within the meaning of the
Securities Act of 1933, as amended (the "Securities Act").
(b) The Optionee understands that: (i) at time
of grant and exercise, the Option and the Shares have not been and
probably will not have been registered under the Securities Act
by reason of their issuance in a transaction exempt from the
registration and prospectus delivery requirements of the
Securities Act, and that they must be held by the Optionee
indefinitely; (ii) that the Optionee must therefore bear the
economic risk of such investment indefinitely, unless a
subsequent disposition thereof is registered under the Securities
Act or is exempt from registration; (iii) that Rule 144, the
usual exemption from registration, is only available after the
satisfaction of certain holding periods and in the presence of a
public market for the Shares, that there is no certainty that a
public market for the Shares will exist, and that otherwise it
will be necessary that the Shares be sold pursuant to another
exemption from registration which may be difficult to satisfy.
(c) That because of Optionee's position with
the Corporation and as a result of inquiries made by Optionee and
information furnished to Optionee by the Corporation, Optionee
has as of the date of grant and will have as of the date of
exercise, reviewed all information necessary to make an informed
investment decision.
(d) The Optionee understands that, under
certain conditions, disposition of the Shares subject to this Option
Agreement could result in adverse tax consequences because of
failure to meet prescribed holding period requirements. Optionee
hereby agrees to notify the Corporation in writing within thirty
(30) days after the date of any such disposition.
(e) That Optionee understands that each
certificate representing the Shares shall be endorsed with the
following legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE
HAVE NOT BEEN REGISTERED OR QUALIFIED UNDER
ANY FEDERAL OR STATE SECURITIES LAWS. THE
SHARES MAY NOT BE OFFERED FOR SALE, SOLD,
PLEDGED, OR OTHERWISE TRANSFERRED UNLESS SO
REGISTERED OR QUALIFIED, OR UNLESS AN
EXEMPTION FROM REGISTRATION OR QUALIFICATION
EXISTS. THE AVAILABILITY OF ANY EXEMPTION
FROM REGISTRATION OR QUALIFICATION MUST BE
ESTABLISHED BY AN OPINION OF COUNSEL FOR THE
SHAREHOLDER, WHICH OPINION AND COUNSEL MUST
BE REASONABLY SATISFACTORY TO THE COMPANY."
The Corporation need not register a transfer of any of the Shares
unless one of the conditions specified in the foregoing legend is
satisfied.
7. RIGHT OF FIRST REFUSAL. Before any Shares issued
upon exercise of this Option may be sold or transferred
(including transfer by operation of law) such shares (the
"Offered Shares") shall first be offered to the Corporation.
(a) The Optionee shall deliver a notice
("Notice") to the Corporation stating (i) his or her bona fide
intention to sell or transfer the Offered Shares, (ii) the number
of the Offered Shares to be sold or transferred, (iii) the cash
price for which he or she proposes to sell or transfer the
Offered Shares, and (iv) the name of the proposed purchaser or
transferee.
(b) Within thirty (30) days after receipt of
the Notice, the Corporation or its assignee shall serve notice to the
Optionee of whether it intends to purchase any or all of the
Offered Shares at the price per share and on the terms specified
in the Notice.
(c) If all the Offered Shares to which the
Notice refers are not elected to be purchased, as provided in Section
7(b) hereof, the Optionee may sell the remaining Offered Shares
to any person named in the Notice at the price and on the terms
specified in the Notice, so long as such sale or transfer is
consummated within three (3) months of the date of said Notice to
the Corporation, and is materially in accordance with all the
terms and conditions hereof; provided, however, that Optionee may
not sell, assign or otherwise transfer any Shares to any
competitor of the Company or to any other person or entity if, in
the reasonable opinion of the Board of Directors, the ownership
of the Shares by such person would materially and adversely
affect the Corporation's business and operations. Any Shares not
sold or transferred within such three-month period will be
subject to the provisions of this Section 8 upon any subsequent
transfer.
(d) Optionee's obligations under this Section 7
shall terminate immediately prior to and effective upon (i) the
merger, reorganization, or consolidation of the Corporation in
which the holders of the outstanding voting securities of the
Corporation immediately prior to such merger, reorganization or
consolidation do not hold a majority of the voting securities of
the surviving entity outstanding immediately after such merger,
reorganization or consolidation, (ii) the sale of all or
substantially all of the Corporation's assets, or (iii) the
initial public offering of the Corporation's Common Stock
pursuant to a registration statement filed with and declared
effective by the Securities and Exchange Commission under the
Securities Act of 1933, as amended.
(e) The provisions of Sections 7(a), 7(b) and
7(c) shall not apply to a transfer of any shares of Stock by
Optionee during his lifetime to his ancestors, descendants or
spouse, or any custodian or trustee for the account of Optionee
or Optionee's ancestors, descendants or spouse; provided, in each
such case the transferee shall receive and hold such shares
subject to the provisions of this Section 7 and there shall be no
further transfer of such shares except in accordance herewith.
(f) Optionee understands that each certificate
representing the Shares shall be endorsed with the following
legend, unless this Section 7 has terminated prior to the
issuance of such Shares:
THE SHARES REPRESENTED BY THIS
CERTIFICATE ARE SUBJECT TO A RIGHT OF FIRST
REFUSAL OBLIGATION IN FAVOR OF THE
CORPORATION OR ITS ASSIGNEE, AS SET FORTH IN
AN AGREEMENT BETWEEN THE CORPORATION AND THE
REGISTERED HOLDER, OR HIS PREDECESSOR IN
INTEREST, A COPY OF WHICH IS ON FILE AT THE
PRINCIPAL OFFICE OF THIS CORPORATION.
8. NOTIFICATION UPON TRANSFER OF ISO SHARES. If this
Option is an Incentive Stock Option, the Optionee hereby agrees
to notify the Corporation in writing within three (3) days after
any sale, transfer or other disposition of shares acquired upon
the exercise of this Option which occurs within either twelve
(12) months following the date of exercise or twenty-four (24)
months following the Grant Date.
IN WITNESS WHEREOF, the Corporation has caused this
Option Agreement to be duly executed by its officers thereunto
duly authorized, and the Optionee has executed this Agreement,
all as of the Grant Date set forth in paragraph 1(b) (i) above.
AUDIOLOGIC, INC.
By:
Title:
Optionee
Optionee acknowledges receipt of a copy of the Plan, a
copy of which is annexed hereto, and represents that Optionee is
familiar with the terms and provisions thereof, and hereby
accepts this Option subject to all of the terms and provisions
thereof. Optionee hereby agrees to accept as binding, conclusive
and final all decisions or interpretations of the Corporation's
Board of Directors upon any questions arising under the Plan.
Dated: __________________.
EXHIBIT A
AUDIOLOGIC, INC.
NOTICE OF EXERCISE OF OPTION
I, __________________, hereby give notice to
AudioLogic, Inc. (the "Company"), of my intent to exercise my
right and option to purchase ___________ shares of the Company's
common stock under the Company's 1992 Stock Option Plan (the
"Plan"), and granted to me pursuant to a Stock Option Agreement
dated _________________________ 19____ ("Option Agreement").
I hereby specifically reaffirm the representations,
warranties, and acknowledgments contained in paragraph 6 of the
Option Agreement.
IN WITNESS WHEREOF, I have executed this Notice this
_______ day of ________________, 19____.
(Signature)
(Name Printed)