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EXHIBIT 4.2
INCENTIVE STOCK OPTION
THIS INCENTIVE STOCK OPTION, granted this ____ day of _______,
19___, by Wells-Gardner Electronics Corporation, an Illinois corporation
(the "Company"), to ______ (the "Optionee").
WITNESSETH:
WHEREAS, the Board of Directors of the Company is of the
opinion that the interests of the Company will be advanced by encouraging and
enabling those employees of the Company upon whose judgment, initiative and
efforts the Company is largely dependent for the successful conduct of the
business of the Company, to acquire or increase their proprietary interest in
the Company, thus providing them with a more direct stake in its welfare and
assuring a closer identification of their interests with those of the Company;
and
WHEREAS, the Board believes that the acquisition of such an
interest in the Company will stimulate such employees and strengthen their
desire to remain with the Company;
NOW, THEREFORE, in consideration of the premises and of the
services to be performed by the Optionee under paragraph 2 hereunder, the
Company hereby grants this incentive stock option to the Optionee on the terms
hereinafter expressed.
1. Option Grant. The Company hereby grants to the Optionee an option
to purchase a total of _______ shares of Common Stock of the Company at an
option exercise price of $ ______ per share, being not less than 100% of the
Fair Market Value of a share of Common Stock on the date of grant hereof. This
option is intended to qualify as an incentive stock option within the meaning
of Section 422 of the Internal Revenue Code of 1986.
2. Time of Exercise. This option may be exercised (in the manner
provided in paragraph 3 hereof) in whole or in part, and from time to time
after the date hereof, subject to the following limitations:
(a) This option may not be exercised during the first six
months from the date hereof. Thereafter, it may be exercised to a
maximum extent of 25% of the total shares covered by the option after
six months from the date hereof, 50% of the total shares after one
year from the date hereof, 75% of the total shares after two years
from the date hereof, and 100% of the total shares after three years
form the date hereof.
(b) This option may not be exercised:
(i) more than three months after the termination of
the Optionee's employment with the Company for any reason
other than death or a termination by the Company for Cause
(and then only to the extent the Optionee could have
exercised this option on the date of termination); or
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(ii) more than one year after the death of the
Optionee if the Optionee dies while in the employ of the
Company (and then only to the extent the Optionee could have
exercised this option on the date of his death); or
(iii) more than 10 years from the date hereof;
whichever shall first occur.
3. Method of Exercise. This option may be exercised only by notice in
writing delivered to the Treasurer of the Company and accompanied by:
(a) The full purchase price of the shares purchased payable
by a certified or cashier's check payable to the order of the Company
and/or certificates of Common Stock of the Company equal in value
(based on their Fair Market Value on the date of surrender) to such
purchase price or the portion thereof so paid; provided, however, that
payment of the exercise price by delivery of shares of Common Stock of
the Company then owned by the Optionee may be made only if such
payment does not result in a charge to earnings for financial
accounting purposes as determined by the Company; and
(b) Such other documents or representations (including
without limitation representations as to the intention of the
Optionee, or the purchaser under paragraph 4 below, to acquire the
shares for investment) as the Company may reasonably request in order
to comply with securities, tax or other laws then applicable to the
exercise of the option.
In the discretion of the Company, payment may also be made by delivering a
properly executed exercise notice to the Company together with a copy of
irrevocable instructions to a broker to promptly deliver to the Company the
amount of sale or loan proceeds to pay the exercise price. To facilitate the
foregoing, the Company may enter into agreements for coordinated procedures
with one or more brokerage firms.
4. Non-Transferability, Death. This option is not transferable by the
Optionee otherwise than by will or the laws of descent and distribution and is
exercisable during the Optionee's lifetime only by him. If the Optionee dies
while in the employ of the Company, this option may be exercised during the
period described in paragraph 2(b)(iii) (but not later than 10 years from the
date hereof) by his estate or the person to whom the option passes by will or
the laws of descent and distribution, but only to the extent that the Optionee
could have exercised this option on the date of his death.
5. Registration. The Company shall not be required to issue or deliver
any certificate for its Common Stock purchased upon the exercise of this option
prior to the admission of such shares to listing on any stock exchange on which
shares may at that time be listed. In the event of the exercise of this option
with respect to any shares subject hereto, the Company shall make prompt
application for such listing. If at any time during the option period the
Company shall be advised by its counsel that shares deliverable upon exercise
of the option are required to be registered under the Federal Securities Act of
1933, as amended, or that delivery of the shares must be accompanied or
preceded by a prospectus meeting the
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requirements of the Act, the Company will use its best efforts to effect such
registration or provide such prospectus not later than a reasonable time
following each exercise of this option, but delivery of shares by the Company
may be deferred until registration is effected or a prospectus available. The
Optionee shall have no interest in shares covered by the option until
certificates for the shares are listed.
6. Adjustments. In the event that there is any increase in the number
of issued shares of Common Stock of the Company without new consideration to
the Company therefor, by reason of stock dividends, stock split-ups or like
recapitalizations, the number of shares which may thereafter be purchased under
this option shall be increased in the same proportion as said increase in
issued shares of Common Stock. In such event, the per share purchase price
specified in paragraph 1 above shall be reduced so that the total consideration
payable to the Company for the increased number of shares of Common Stock
remaining subject to this option shall not be changed by reason of such
increase in number of shares.
In the case of any sale of assets, merger consolidation, combination
or other corporate reorganization or restructuring of the Company with or into
another corporation which results in the outstanding Common Stock being
converted into or exchanged for different securities, cash or other property,
or any combination thereof (an "Acquisition"), the Optionee shall have the
right thereafter and during the term of this option, to receive upon exercise
thereof the Acquisition Consideration (as defined below) receivable upon the
Acquisition by a holder of the number of shares of Common Stock which might
have been obtained upon exercise of the option or portion thereof, as the case
may be, immediately prior to the Acquisition.
The term "Acquisition Consideration" shall mean the kind and amount of
securities, cash or other property or any combination thereof receivable in
respect of Common Stock, upon consummation of an Acquisition.
If during the term of this option the shares of Common Stock of the
Company shall be combined or be changed into the same or another kind of stock
of the Company or into securities of another corporation, whether through
recapitalization, reorganization, sale, merger, consolidation, etc., the
Company shall cause adequate provision to be made whereby the Optionee shall
thereafter be entitled to receive, upon the due exercise of any then
unexercised portion of this option, the securities which he would have been
entitled to receive for shares of Common Stock acquired through exercise of
such portion of the option (regardless of whether or to what extent the option
would then have been exercisable) immediately prior to the effective date of
such recapitalization, reorganization, sale, merger, consolidation, etc.
7. Subject to Plan. This option is subject to all of the terms and
conditions set forth in the Company's Amended and Restated Incentive Stock Plan
(the "Plan"). Any capitalized terms not defined herein shall be subject to the
definitions set forth in the Plan.
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IN WITNESS WHEREOF, the Company has caused this incentive stock option
to be executed on the date first above written.
WELLS-GARDNER ELECTRONICS CORPORATION
By:
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By:
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Accepted
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