EXHIBIT 4.6
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT ("Agreement") is entered into as of __________
__, ____, 2002, between ____________ (the "Optionee") and In Store Media
Systems, Inc., a Nevada corporation ("Company"), in connection with the
following facts:
A. The Purchase Agreement (the "Purchase Agreement") dated as of the date
even herewith, by and between the Company and the Optionee, provides that the
Company issue certain shares (the "Shares") of common stock of the Company, par
value $.001 per share (the "Common Stock"), certain options to purchase Common
Stock and certain royalty payments upon the payment of the purchase price
specified in the Purchase Agreement (the "Purchase Price").
B. The Optionee and the Company have entered into this Agreement to effect
the grant of the options set forth in the Purchase Agreement, subject to the
terms and conditions as provided herein.
NOW, THEREFORE, IN CONSIDERATION OF the foregoing facts and the mutual
promises set forth herein, and other good and valuable consideration, receipt of
which is hereby acknowledged, the parties hereto agree as follows:
1. Grant of Option. The Company hereby grants to the Optionee, as of the
date of this Agreement (the "Grant Date"), an irrevocable option (the "Option")
to purchase _______ shares of Common Stock of the Company, the number of which
is calculated pursuant to this paragraph (the "Shares"), at the exercise
price(s) per share as set forth in paragraph 3, subject to the terms and
conditions set forth herein. The number of Shares in the preceding sentence
shall be equal to the quotient obtained by dividing _______ by 90% of the Market
Price of the Common Stock. For purposes of this Agreement, "Market Price" means
(a) the average of the daily per share closing prices of the Common Stock as
reported on the National Association of Securities Dealers Automated Quotation
System for the National Market, ("NASDAQ") or, if such security is not listed or
admitted to trading on the NASDAQ, on the principal national security exchange
or quotation system on which such security is quoted or listed or admitted to
trading, in each case for the five (5) trading days immediately preceding the
date of this Agreement; or (ii) if the Common Stock is not quoted or listed or
admitted to trading on any national securities exchange or quotation system, the
average of the closing bid price of such security on the over-the-counter market
as reported by the National Association of Security Dealers, Inc., or a similar
generally accepted reporting service, as the case may be, for the five (5)
trading days immediately preceding the date of this Agreement. For purposes of
clause (a) above, the closing price shall be the last reported sale price or, in
the case no such reported sale takes place on such day, the average of the
reported closing bid and asked prices. For purposes of clause (b) above, the bid
price shall be the lowest bid price as reported in the "pink sheets" published
by the National Quotation Bureau, Incorporated. This Option shall expire on the
date that is five (5) months from the date of this Agreement (the "Expiration
Date")
2. Purchase Price. As of the Grant Date, in consideration for the Options,
among other things specified in the Purchase Agreement, the Optionee shall pay
to the Company the Purchase Price pursuant to the terms set forth in the
Purchase Agreement.
3. Period of Exercisability; Exercise Price; Exercise of Option.
(a) The Option will be exercisable for a period beginning on the Grant
Date and expiring on the Expiration Date, subject to the provisions hereof.
The right to exercise this Option by the Optionee shall vest as of the
Grant Date and shall be exercisable by the Optionee prior to the Expiration
Date, from time to time, in whole or in part, up to the number of
unexercised Shares; provided, however, that any partial exercise by the
Optionee shall be made in increments of 100 Shares (unless fewer than 100
Shares are then exercisable by the Optionee), and shall be for whole Shares
only.
(b) The Option will be exercisable at the exercise prices of $___ per
share, subject to adjustment as set forth herein.
(c) The Option or any portion thereof (as specified herein) may be
exercised by delivery by the Optionee of written notice to the Company
stating the number of Shares with respect to which the Option is being
exercised, the exercise price or prices of such Shares, together with full
payment of the purchase price therefor and a letter to the Company
substantially in the form attached hereto as Exhibit A. Payment shall be
made in cash or certified funds and shall be acceptable to Company.
4. Adjustments in Option Price. In the event that the outstanding shares of
Common Stock subject to the Option are changed into or exchanged for a different
number or kind of shares of the Company or other securities of the Company by
reason of merger, consolidation, recapitalization, reclassification, stock
split, stock dividend or combination of shares, the Company shall make an
appropriate and equitable adjustment in the number and kind of shares as to
which the Option, or portions thereof then unexercised, shall be exercisable, to
the end that after such event the Optionee's proportionate interest shall be
maintained as close as possible to the Optionee's interest before the occurrence
of such event. Such adjustment in the Option shall be made without change in the
total price applicable to the unexercised portion of the Option (except for any
change in the aggregate price resulting from rounding-off of share quantities or
prices) and with any necessary corresponding adjustment in the Option exercise
price per share. Any such adjustment made by the Company shall be final and
binding upon the Optionee, the Company and all other interested persons.
5. Registration Rights.
(a) Definitions. As used in this paragraph, the following terms have
the respective meanings set forth below:
"Registrable Securities" means (a) Shares; and (b) any Common Stock issued
as a dividend or other distribution with respect to or in exchange for or in
replacement of the Shares referenced in (a) above; provided, however, that
"Registrable Securities" shall not include any shares of Common Stock which have
previously been registered or which have been sold to the public.
"Registration Expenses" means all expenses incurred in effecting any
registration pursuant to this Option, including, without limitation, all
registration, qualification, and filing fees, printing expenses, escrow fees,
fees and disbursements of counsel for the Company, blue sky fees and expenses of
any regular or special audits incident to or required by any such registration,
but shall not include selling expenses and fees and disbursements of counsel for
the Holder.
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(b) Piggyback Registration Rights. If at any time the Company shall
determine to register any of its shares of Common Stock under the
Securities Act of 1933, as amended (the "Securities Act"), for the account
of any of its shareholders, other than a registration statement relating
solely to employee benefit plans, a registration statement on Form S-4
pertaining to an acquisition transaction or a registration on a
registration form that does not permit secondary sales, the Company will:
(i) promptly give to Holder written notice thereof;
(ii) use its best efforts to include in such registration (and
any related qualification under the blue sky laws or other
compliance), except as set forth in paragraph 5.2 below, all of the
Registrable Securities specified in a written request or requests,
made by the Holder within twenty (20) days after the written notice
from the Company described in the previous clause (a) is given. Such
request may specify all or a part of Holder's Registrable Securities;
and
(iii) pay all Registration Expenses, other than the selling
expenses of Holder's Registrable Securities.
(b) Underwriting. If the Registration is for a registered public
offering involving an underwriting, the Company shall so advise the Holder
as a part of the written notice given pursuant to this paragraph. In such
event, the rights of the Holder hereunder are conditioned upon Holder's
participation in such underwriting and the inclusion of the Holder's
Registrable Securities in the underwriting to the extent provided herein.
To the extent that the Holder proposes to distribute its securities through
such underwriting, the Holder shall (together with the Company and any
other securityholders of the Company distributing their securities through
such underwriting) enter into an underwriting agreement in customary form
with the underwriter or underwriters selected for such underwriting by the
Company.
(c) Exclusion of Registrable Securities. Notwithstanding any other
provision of this paragraph, if the managing underwriter of the
underwriting determines that marketing factors require a limitation of the
number of shares to be offered in connection with such underwriting, the
managing underwriter may limit the number of Registrable Securities to be
included in the Registration and underwriting. The Company shall so advise
any of its other securityholders who are distributing their securities
through such underwriting pursuant to their respective piggyback
registration rights, and the number of shares of Registrable Securities and
other securities that may be included in the registration and underwriting
shall be allocated first to the Company for securities being sold for its
own account and thereafter to the Holder, pro rata with any other holders
of Common Stock having registration rights at the time of the filing of the
registration statement. If the Holder disapproves of the terms of any such
underwriting, it may elect to withdraw therefrom by written notice to the
Company. Any Registrable Securities so excluded or withdrawn from such
underwriting shall be withdrawn from such Registration. If Registrable
Securities are so withdrawn from the registration or if the number of
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shares of Registrable Securities to be included in such registration was
previously reduced as a result of marketing factors, the Company shall then
offer to all persons who have retained the right to include securities in
the registration the right to include additional securities in the
registration in an aggregate amount equal to the number of shares so
withdrawn, with such shares to be allocated among the persons requesting
additional inclusion pro rata amongst those persons requesting inclusion.
(d) Registration Procedures. In the case of each registration effected
by the Company pursuant to this paragraph 5, the Company will keep Holder
advised in writing as to the initiation of each registration and as to the
completion thereof, at its expense, the Company will use its best efforts
to:
(i) Keep such registration effective for a period of one hundred
twenty (120) days or until the Holder has completed the distribution
described in the registration statement relating thereto, whichever
first occurs; provided, however, that (i) such 120-days period shall
be extended for a period of time equal to the period the Holder
refrains from selling any securities included in such registration at
the request of an underwriter of Common Stock (or other securities) of
the Company; and (ii) in the case of any registration of Registrable
Securities on Form S-3 which are intended to be offered on a
continuous or delayed basis, such 120-day period shall be extended, if
necessary, to keep the registration statement effective until all such
Registrable Securities are sold, provided that Rule 145 promulgated
under the Securities Act, or any successor rule under the Securities
Act, permits an offering on a continuous or delayed basis, and
provided further that applicable rules under the Securities Act
governing the obligation to file a post-effective amendment permit, in
lieu of filing a post-effective amendment that (1) includes any
prospectus required by Section 10(a)(3) of the Securities Act or (2)
reflects facts or events representing a material or fundamental change
in the information set forth in the registration statement, the
incorporation by reference of information required to be included in
(1) and (2) above to be contained in periodic reports filed pursuant
to Section 13 or 15(d) of the Securities Exchange Act of 1934, as
amended, in the registration statement;
(ii) Prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection with such registration statement as may be necessary to
comply with the provisions of the Securities Act with respect to the
disposition of all securities covered by such registration statement;
(iii) Furnish such number of prospectuses and other documents
incident thereto, including any amendment of or supplement to the
prospectus, as the Holder from time to time may reasonably request;
(iv) Notify the Holder at any time when a prospectus relating
thereto is required to be delivered under the Securities Act of the
happening of any event as a result of which the prospectus included in
such registration statement, as then in effect, includes an untrue
statement of a material fact or omits to state a material fact
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required to be stated therein or necessary to make the statements
therein not misleading or incomplete in the light of the circumstances
then existing, and at the request of the Holder, prepare and furnish
to the Holder, a reasonable number of copies of a supplement to or an
amendment of such prospectus as may be necessary so that, as
thereafter delivered to the purchasers of such shares, such prospectus
shall not include an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to
make the statements therein not misleading or incomplete in the light
of the circumstances then existing;
(v) Cause all such Registrable Securities registered pursuant
hereunder to be listed on each securities exchange on which similar
securities issued by the Company are then listed;
(vi) Provide a transfer agent and registrar for all Registrable
Securities registered pursuant to such registration statement and a
CUSIP number for all such Registrable Securities, in each case not
later than the effective date of such registration; and
(vii) Otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission, and make available
to its security holders, as soon as reasonably practicable, an
earnings statement covering the period of at least twelve months, but
not more than eighteen months, beginning with the first month after
the effective date of the Registration Statement, which earnings
statement shall satisfy the provisions of Section 11(a) of the
Securities Act.
6. Reserved Shares. The Company has duly reserved for issuance a number of
authorized but unissued shares adequate to fulfill its obligations under this
Agreement. During the term of this Agreement, the Company shall take such action
as may be necessary to maintain at all times an adequate number of shares
reserved for issuance or treasury shares to fulfill its obligations hereunder.
7. Assignment or Transfer. This Option may not be assigned or transferred.
This Option shall be exercisable only by the Optionee until the Expiration Date.
8. Restricted Transfer. If a buy-sell agreement, right of first refusal
agreement or other agreement restricting transfer of Common Stock is in effect
when this Option is exercised and such agreement covers all shares of Common
Stock of the Company outstanding immediately prior to such exercise, then the
Optionee shall become a party to such agreement as a condition to the exercise
of this Option as to the Optionee.
10. Compliance with Law. This Option shall not be exercised, and no Shares
shall be issued in respect hereof, unless such exercise is done by the Optionee
in compliance with federal and applicable state securities laws.
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11. Legends. The certificates evidencing Shares purchased pursuant to this
Option shall bear any legends deemed necessary by the Company for compliance
with applicable law or otherwise.
12. Representations of Optionee. As a condition to the exercise of this
Option, the Optionee will deliver to the Company such signed representations as
may be necessary, in the opinion of counsel satisfactory to the Company, for
compliance with applicable federal and state securities laws.
13. Resale. The ability of an Optionee to transfer Shares purchased
pursuant to this Option or securities acquired in lieu thereof or in exchange
therefor may be restricted under federal or state securities laws. An Optionee
shall not resell or offer for resale such Shares or securities unless they have
been registered or qualified for resale under all applicable federal and state
securities laws or an exemption from such registration or qualification is
available in the opinion of counsel satisfactory to the Company.
14. Notice. All notices or other communications desired or required to be
given hereunder shall be in writing and shall be deemed to have been duly given
upon receipt, if personally delivered, or on the third business day following
mailing by United States first class mail, postage prepaid, and addressed as
follows:
If to Company: In Store Media Systems, Inc.
15423 E. Batavia Drive
Aurora, Colorado 80011
Attention: Robert L. Cohen, Vice President
and Chief Financial Officer
Tel: (303) 364-6550
Fax: (303) 364-6564
If to the Optionee:
or to such other address as either party shall give to the other in the manner
set forth above.
15. Tax Treatment and Advice. The Optionee acknowledges that the tax
treatment of this Option, Shares subject to this Option or any events or
transactions with respect thereto may be dependent upon various factors or
events which are not determined by this Agreement. The Company makes no
representations with respect to and hereby disclaims all responsibility as to
such tax treatment or any other advice with respect to the Optionee.
16. Miscellaneous. References herein to a date on or as of which an
expiration, termination or lapse shall occur shall be deemed to refer to
Mountain Time, on such date.
17. Securities Exemption and Qualification. The securities represented by
this Agreement have not been registered under the Securities Act or any state
securities laws. The securities may not be offered for sale, sold, assigned,
offered, transferred or otherwise distributed for value except (a) pursuant to
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an effective registration statement under the Securities Act or any state
securities laws or (b) pursuant to an exemption from registration or prospectus
delivery requirements under the Securities Act or any state securities laws in
respect of which the Company has received an opinion of counsel reasonably
satisfactory to the Company to such effect. Any sale, assignment, offer,
transfer or other distribution of the securities represented by this Agreement
will be further restricted by a legend placed on the certificate(s) representing
the securities containing substantially the following language:
"The securities represented by this certificate have not been registered
under the Securities Act of 1933, as amended, or under applicable state
securities laws. No transfer of such shares or any interest therein may be made
except pursuant to registration under said laws, unless the company has received
an opinion of counsel acceptable to the company stating that such transfer does
not require registration under said laws."
18. Modification and Waiver. This Agreement may be modified, supplemented
or amended or the provisions hereof waived only with the prior written consent
of the Company and the Optionee.
19. Severability. Wherever possible, each provision of this Agreement shall
be interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement shall be prohibited by or invalid under
applicable law, such provision shall be ineffective to the extent of such
prohibition or invalidity, without invalidating the remainder of such provision
or the remaining provisions of this Agreement.
20. Headings. The headings used in this Agreement are for the convenience
of reference only and shall not, for any purpose, be deemed a part of this
Agreement.
21. Governing Law. This Agreement shall be governed by the laws of the
State of Colorado, without regard to the provisions thereof relating to conflict
of laws.
22. Counterparts; Facsimile. This Agreement may be executed in any number
of counterparts and by different parties on separate counterparts, each of
which, when executed and delivered, shall be deemed to be an original, and all
of which, when taken together, shall constitute but one and the same instrument.
Delivery of an executed counterpart of this Agreement by facsimile shall be
equally as effective as delivery of an original executed counterpart of this
Agreement. Any party delivering an executed counterpart of this Agreement by
facsimile shall also deliver an original executed counterpart of this Agreement
but the failure to deliver an original executed counterpart shall not affect the
validity, enforceability and binding effect of this Agreement.
[EXECUTION PAGE FOLLOWS]
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IN WITNESS WHEREOF, the parties hereto have executed this Option Agreement
effective as of the date first set forth above.
COMPANY:
IN STORE MEDIA SYSTEMS, INC.,
a Nevada corporation
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
OPTIONEE:
-----------------------------------
[Name]
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EXHIBIT A
In Store Media Systems, Inc.
15423 E. Batavia Drive
Aurora, Colorado 80011
Ladies and Gentlemen:
This will confirm my understanding with respect to the shares to be
issued (or reissued) to me by reason of my exercise on this date of certain
stock option rights granted to me by IN STORE MEDIA SYSTEMS, INC. for the
purchase of _________ (________) shares of Common Stock at an exercise price of
$0.50 per share (the "Shares"), as follows:
1. I am acquiring the Shares for my own account for investment with no present
intention of dividing my interest with others or of reselling or otherwise
disposing of any of the Shares.
2. The Shares are being issued without registration under the Securities Act
of 1933 (the "Act") in reliance upon the private offering exemption
contained in Section 4(2) of the Act, and such reliance is based in part on
the above representation.
3. The certificate for the Shares of stock to be issued to me will bear the
following legend:
The shares represented by this certificate have not
been registered under the Securities Act of 1933 (the
"Act") and are "restricted securities" as that term is
defined in Rule 144 under the Act. The shares may not
be offered for sale, sold or otherwise transferred
except pursuant to an effective registration statement
under the Act or pursuant to an exemption from
registration under the Act, the availability of which
is to be established to the satisfaction of the
Company.
Appropriate stop transfer instructions will be issued by the Company to its
transfer agent.
4. Since the Shares have not been registered under the Act, they must be held
indefinitely until an exemption from the registration requirements of the
Act is available or they are subsequently registered.
5. These understandings shall not preclude a sale in compliance with Rule 144
under the Act, as such rule may be amended and in effect at the time. Sales
of the shares made in reliance upon Rule 144 may only be made if the Rule
is then available and then only in limited amounts in accordance with the
terms and conditions of the Rule as in effect at the time of said sales. I
agree to furnish you, prior to any such sale, an executed copy of the
related Form 144, written confirmation of compliance with the Rule by
myself and the broker executing the sale, an opinion of counsel
satisfactory to you that the sale does not require registration under the
Act, and such other evidence as you shall request of compliance under the
Rule.
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6. In Store Media Systems, Inc. is not obligated to comply with the
registration requirements of the Act or with the requirements for an
exemption under Regulation A under the Act for my benefit.
7. The undersigned is acquiring these shares subject to the Stock Option
Agreement between the undersigned and the Company dated as of February __,
2002 (the "Stock Option Agreement"), and hereby warrants and represents
that it will continue to comply with and be bound by the terms, conditions
and covenants provided in the Stock Option Agreement
By:
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Date:
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Printed Name:
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SSN:
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