EXHIBIT 4.2
LION, INC.
STOCK OPTION AGREEMENT
NEITHER THIS OPTION NOR THE UNDERLYING SHARES OF COMMON STOCK HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED ("SECURITIES ACT"). THIS
OPTION OR THE UNDERLYING COMMON SHARES MAY NOT BE SOLD OR TRANSFERRED UNLESS:
(I) THERE IS AN EFFECTIVE REGISTRATION COVERING THE OPTION OR SHARES, AS THE
CASE MAY BE, UNDER THE SECURITIES ACT AND APPLICABLE STATES SECURITIES LAWS;
(II) THE COMPANY FIRST RECEIVES A LETTER FROM AN ATTORNEY, ACCEPTABLE TO THE
BOARD OF DIRECTORS OR ITS AGENTS, STATING THAT IN THE OPINION OF THE ATTORNEY
THE PROPOSED TRANSFER IS EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT AND
APPLICABLE STATES SECURITIES LAWS; OR, (III) THE TRANSFER IS MADE PURSUANT TO
RULE 144 UNDER THE SECURITIES ACT.
BETWEEN:
("Optionee")
AND
LION, Inc. ("Company")
a Washington corporation
1.0 RECITALS
1.1 The Company has adopted the 1998 Stock Option Plan ("Plan"),
incorporated herein by reference, that provides for the grant of options to
purchase shares of Common Stock ("Shares") of the Company. Unless otherwise
defined in this Agreement, the terms defined in the Plan shall have the same
defined meanings in this Agreement.
2.0 NOTICE OF GRANT
2.1 Optionee has been granted an option to purchase Shares of the
Company, subject to the terms and conditions of the Plan and this Option
Agreement, as follows:
GRANT NUMBER: _________________________
DATE OF GRANT: _________________________
VESTING COMMENCEMENT DATE: _________________________
EXERCISE PRICE PER SHARE: _________________________
TOTAL NUMBER OF SHARES GRANTED: _________________________
TOTAL EXERCISE PRICE: $________________________
TYPE OF OPTION: ___ Incentive Stock Option
___ Nonqualified Stock Option
EXPIRATION DATE: _________________________
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VESTING SCHEDULE: This Option may be exercised, in whole or in part, in
accordance with the following schedule: 25% of the Shares subject to the Option
shall immediately vest and be exercisable after two (2) years following the date
of grant, 50% of the Shares subject to the Option shall be fully vested and be
exercisable after three (3) years following the date of grant, 75% of the Shares
subject to the Option shall be fully vested and be exercisable after four (4)
years following the date of grant, and 100% of the Shares subject to the Option
shall be fully vested and be exercisable after five (5) years following the date
of grant.
TERMINATION PERIOD: This Option may be exercised for 30 days after
Optionee ceases to be a Service Provider. Upon the death or Disability of the
Optionee, this Option may be exercised for such longer period as provided in the
Plan. In no event shall this Option be exercised later than the Expiration Date
as provided above.
3.0 GRANT OF OPTION
3.1 Subject to the terms and conditions of the Plan and of this
Agreement, the Plan Administrators of the Company grant to the Optionee named
above an option ("Option") to purchase the number of Shares, as set forth above
in Section 2.0 entitled "Notice of Grant", at the exercise price per share set
forth above in Notice of Grant ("Exercise Price"). Subject to any mutual
amendments of the Plan, in the event of a conflict between the terms and
conditions of the Plan and the terms and conditions of this Agreement, the terms
and conditions of the Plan shall prevail.
3.2 If designated in the Notice of Grant as an Incentive Stock
Option ("ISO"), this Option is intended to qualify as an Incentive Stock Option
under Section 422 of the Code. However, if this Option is intended to be an
Incentive Stock Option, to the extent that it exceeds the $100,000 rule of Code
Section 422(d) it shall be treated as a Nonqualified Stock Option ("NQO").
4.0 EXERCISE OF OPTION
4.1 RIGHT TO EXERCISE. This Option is exercisable during its term
in accordance with the Vesting Schedule set forth above in the Notice of Grant
and the applicable provisions of the Plan and this Option Agreement.
4.2 METHOD OF EXERCISE. This Option is exercisable by delivery of
an exercise notice, in the form attached as Exhibit A ("Exercise Notice"), which
shall state the election to exercise the Option, the number of Shares in respect
of which the Option is being exercised ("Exercised Shares"), and such other
representations and agreements as may be required by the Company pursuant to the
provisions of the Plan. The Exercise Notice shall be completed by the Optionee
and delivered to the Company. The Exercise Notice shall be accompanied by
payment of the aggregate Exercise Price as to all Exercised Shares. This Option
shall be deemed to be exercised upon receipt by the Company of the fully
executed Exercise Notice accompanied by the aggregate Exercise Price.
5.0 COMPLIANCE WITH APPLICABLE LAW
5.1 No Shares shall be issued pursuant to the exercise of this
Option unless such issuance and exercise complies with applicable state or
federal law, including securities laws, corporate laws, the Code or any stock
exchange or quotation system. If the Plan Administrators at
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any time determine that registration or qualification of the Shares or the
Option under state or federal law, or the consent approval of any governmental
regulatory body is necessary or desirable, then the Option may not be exercised,
in whole or in part, until such registration, qualification, consent, or
approval shall have been effected or obtained free of any conditions not
acceptable to the Plan Administrators. Assuming compliance, for income tax
purposes the Exercised Shares shall be considered transferred to the Optionee on
the date the Option is exercised with respect to such Exercised Shares.
5.2 If required by the Company at the time of any exercise of the
Option in order to comply with federal or state securities laws, as a condition
to such exercise, the Employee shall enter into an agreement with the Company in
form satisfactory to counsel for the Company by which the Employee: (i) shall
represent that the Shares are being acquired for the Employee's own account for
investment and not with a view to, or for sale in connection with, any resale or
distribution of such Shares; and, (ii) shall agree that if the Employee should
decide to sell, transfer, or otherwise dispose of any such Shares, the Employee
may do so only if the Shares are registered under the Securities Act and the
relevant state securities law, unless, in the opinion of counsel for the
Company, such registration is not required, or the transfer is pursuant to the
Securities and Exchange Commission Rule 144.
6.0 METHOD OF PAYMENT
6.1 Payment of the aggregate Exercise Price shall be by any of the
following, or a combination thereof, at the election of the Optionee:
(a) cash;
(b) certified or cashier's check;
(c) consideration received by the Company under a cashless
exercise program implemented by the Company in connection with the Plan;
(d) with the Plan Administrator's consent, surrender of other
Shares which (i) in the case of Shares acquired upon exercise of an option, have
been owned by the Optionee for more than six (6) months on the date of
surrender, and (ii) have a Fair Market Value on the date of surrender equal to
the aggregate Exercise Price of the Exercised Shares; or
(e) with the Plan Administrator's consent, delivery of Optionee's
promissory note (the "Note") in the form approved by Plan Administrators, in the
amount of the aggregate Exercise Price of the Exercised Shares and any
associated withholding taxes incurred in connection with the exercise, together
with the execution and delivery by the Optionee of a Security Agreement in the
form approved by Plan Administrators. The Note shall bear interest at the
"applicable federal rate" prescribed under the Code and its regulations at time
of purchase, and shall be secured by a pledge of the Shares purchased by the
Note pursuant to the Security Agreement.
7.0 NON-TRANSFERABILITY OF OPTION
7.1 This Option may not be transferred in any manner otherwise
than by will or by the laws of descent or distribution and may be exercised
during the lifetime of Optionee only by the Optionee. The terms of the Plan and
this Agreement shall be binding upon the executors, administrators, heirs,
successors and assigns of Optionee.
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8.0 TERM OF OPTION
8.1 This Option may be exercised only within the term set forth
above in the Notice of Grant, and may be exercised during that term only in
accordance with the Plan and the terms of this Option Agreement.
9.0 TAX CONSEQUENCES
Some of the federal tax consequences relating to this Option, as of the
date of this Option, are set forth below. THIS SUMMARY IS INCOMPLETE, AND THE
TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE. THE OPTIONEE SHOULD CONSULT A
TAX ADVISER BEFORE EXERCISING THIS OPTION OR DISPOSING OF THE SHARES.
9.1 EXERCISING THE OPTION.
9.1.1 NONQUALIFIED STOCK OPTION. The Optionee may incur regular
federal income tax liability upon exercise of a NQO. The Optionee 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 Exercised
Shares on the date of exercise over their aggregate Exercise Price. If the
Optionee is an Employee or a former Employee, the Company will be required to
withhold from his or her compensation or collect from Optionee 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 these withholding amounts are not
delivered at the time of exercise.
9.1.2 INCENTIVE STOCK OPTION. If this Option qualifies as an ISO,
the Optionee will have no regular federal income tax liability upon its
exercise, although the excess, if any, of the Fair Market Value of the Exercised
Shares on the date of exercise over their aggregate Exercise Price will be
treated as an adjustment to alternative minimum taxable income for federal tax
purposes and may subject the Optionee to alternative minimum tax in the year of
exercise. In the event that the Optionee ceases to be an Employee but remains a
Service Provider, any Incentive Stock Option of the Optionee that remains
unexercised shall cease to qualify as an Incentive Stock Option and will be
treated for tax purposes as a Nonqualified Stock Option on the date three (3)
months and one (1) day following this change of status.
9.2 DISPOSITION OF SHARES.
9.2.1 NQO. If the Optionee holds NQO Shares for at least one year,
except for that portion treated as compensation income at the time of exercise,
any gain realized on disposition of the Shares will be treated as long-term
capital gain for federal income tax purposes.
9.2.2 ISO. If the Optionee holds ISO Shares for at least one year
after exercise and two years after the grant date, any gain realized on
disposition of the Shares will be treated as long-term capital gain for federal
income tax purposes. If the Optionee disposes of ISO Shares within one year
after exercise or two years after the grant date, any gain realized on such
disposition will be treated as compensation income (taxable at ordinary income
rates) to the extent of the excess, if any, of the lesser of (i) the difference
between the Fair Market Value of the Shares acquired on the date of exercise and
the aggregate Exercise Price, or (ii) the difference between the sale price of
such Shares and the aggregate Exercise Price. Any additional gain will be taxed
as capital gain, short-term or long-term depending on the period that the ISO
Shares were held.
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9.3 NOTICE OF DISQUALIFYING DISPOSITION OF ISO SHARES. If the
Optionee sells or otherwise disposes of any of the Shares acquired pursuant to
an ISO on or before the later of (i) two years after the grant date, or (ii) one
year after the exercise date, the Optionee shall immediately notify the Company
in writing of the disposition. The Optionee agrees that he or she may be subject
to income tax withholding by the Company on the compensation income recognized
from such early disposition of ISO Shares by payment in cash or out of the
current earnings paid to the Optionee.
10.0 RESALE RESTRICTIONS
10.1 Optionee acknowledges and agrees that Optionee, together with
Optionee's affiliates and donees, will not sell or otherwise transfer or dispose
of Shares of the Company issued upon exercise of this Option in an amount which
shall exceed 250,000 Shares during any three-month period. Shares which are bona
fide pledged, when sold by the pledgee, or by a purchaser, after a default in
the obligation secured by the pledge shall be deemed to be excluded from this
limitation.
10.2 Optionee acknowledges and agrees that whatever period
determined appropriate by the Company, underwriter, or federal and state
regulatory officials including, but not limited to, the Securities and Exchange
Commission, National Association of Securities Dealers and NASDAQ, following the
effective date of a registration statement of the Company covering common stock
(or other securities) of the Company to be sold on its behalf in an
underwriting, Optionee will not sell or otherwise transfer or dispose of (other
than to donees who agree to be similarly bound) Shares of the Company held by
Optionee at any time during such period except securities included in that
registration.
10.3 Optionee acknowledges and agrees that if for purposes of a
registration statement of the Company the underwriter or federal or state
regulatory officials fix a specific Common Stock or Option lockup period, such
fixed lockup period shall apply to Optionee under this Agreement.
11.0 NO GUARANTEE OF CONTINUED SERVICE
11.1 Optionee acknowledges and agrees that the vesting of shares
pursuant to the vesting schedule set forth in this Agreement is earned only by
continuing as a Service Provider at the will of the Company, and not through the
act of being hired, being granted an option or purchasing shares under this
Agreement. Optionee further acknowledges and agrees that this Agreement, the
transactions contemplated and the vesting schedule set forth in it do not
constitute an express or implied promise of continued engagement as a Service
Provider for the vesting period, for any period, or at all, and shall not
interfere with Optionee's right or the Company's right to terminate Optionee's
relationship as a Service Provider at any time, with or without cause.
12.0 SIGNATURES
Dated , 20
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LION, INC.
By:
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Authorized Representative
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Optionee acknowledges and represents that he or she has received a copy of the
Plan, has reviewed the Plan and this Agreement in their entirety, is familiar
with its and fully understands its terms and provisions. Optionee accepts this
Option subject to all the terms and provisions of the Plan and this Agreement.
Optionee has had an opportunity to obtain the advice of counsel prior to
executing this Agreement. Optionee agrees to accept as binding, conclusive and
final all decisions or interpretations of the Plan Administrators upon any
questions arising under the Plan and Agreement. Optionee further agrees to
notify the Company upon any change in the residence address indicated on the
first page of this Agreement.
Dated: ,
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OPTIONEE:
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Signature
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Print Name
CONSENT OF SPOUSE
The undersigned spouse of Optionee has read and approves the terms and
conditions of the Plan and this Agreement. In consideration of the Company's
granting his or her spouse the right to purchase Shares as set forth in the Plan
and this Agreement, the undersigned agrees to be irrevocably bound by the terms
and conditions of the Plan and this Option Agreement and further agrees that any
community property interest shall be similarly bound. The undersigned hereby
appoints the undersigned's spouse as attorney-in-fact for the undersigned with
respect to any amendment or exercise of rights under the Plan or this Agreement.
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Spouse of Optionee
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EXHIBIT A
1998 STOCK PLAN
EXERCISE NOTICE
TO: LION, INC.
Attention: Corporate Secretary
1.0 EXERCISE OF OPTION. Effective as of today, ________________,
20___, the undersigned ("Purchaser") hereby elects to purchase ______________
shares ("Shares") of the Common Stock of LION, Inc.("Company") pursuant to the
1998 Stock Option Plan ("Plan") and the Stock Option Agreement dated
________________,("Agreement"). Purchaser herewith delivers to the Company the
full purchase price for the Shares of $_____________, as required by the
Agreement.
2.0 REPRESENTATIONS OF PURCHASER. Purchaser acknowledges that
Purchaser has received, read and understood the Plan and the Agreement and
agrees to abide by and be bound by their terms and conditions.
3.0 RIGHTS AS SHAREHOLDER. Until the issuance (as evidenced by the
appropriate entry on the books of the Company or of a duly authorized transfer
agent of the Company) of the Shares, 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 Shares shall be issued to the
Optionee as soon as practicable after exercise of the Option. No adjustment will
be made for a dividend or other right for which the record date is prior to the
date of issuance, except as provided in the Plan.
4.0 TAX CONSULTATION. Purchaser understands that Purchaser may
suffer adverse tax consequences as a result of Purchaser's purchase or
disposition of the Shares. Purchaser represents that Purchaser has consulted
with any tax consultants Purchaser deems advisable in connection with the
purchase or disposition of the Shares and that Purchaser is not relying on the
Company for any tax advice.
Submitted by: Accepted by:
PURCHASER: LION, INC.
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Signature By
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Print Name Its
Address: Address:
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Date Received:
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