Exhibit 4.2
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STATUTORY INCENTIVE STOCK OPTION AGREEMENT AND GRANT
PURSUANT TO
SONIC AUTOMOTIVE, INC. 1997 STOCK OPTION PLAN
This Statutory Incentive Stock Option Agreement and Grant is entered into
as of this _____ day of _____, 199__ between Sonic Automotive, Inc., a Delaware
corporation (the "Company"), and _____________________________ (the "Optionee").
WHEREAS, the Company and its stockholders have approved the Sonic
Automotive, Inc. 1997 Stock Option Plan (the "Plan") pursuant to which the
Company may, from time to time, make awards of Options (as defined below) and
enter into Statutory Incentive Stock Option Agreements with eligible employees
of the Company or of any Subsidiary (as defined below);
WHEREAS, pursuant to the Plan, the Company has determined to grant to the
Optionee an Option to purchase Common Stock (as defined below) of the Company,
which Option shall be subject to the terms and conditions of this Statutory
Incentive Stock Option Agreement and Grant;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements hereinafter set forth, the parties hereby agree as follows:
1. DEFINITIONS.
For purposes of this Statutory Incentive Stock Option Agreement and Grant,
the following terms shall have the meanings indicated:
(1) "ACT" shall mean the Securities Act of 1933, as amended.
(2) "BOARD" shall mean the Board of Directors of the Company.
(3) "CAUSE" shall mean any act, action or series of acts or actions
or any omission, omissions, or series of omissions which result in, or which
have the effect of resulting in, (i) the commission of a crime by the Optionee
involving moral turpitude, which crime has a material adverse impact on the
Company or any Subsidiary, (ii) gross negligence or willful misconduct which is
continuous and results in material damage to the Company or any Subsidiary, or
(iii) the continuous, willful failure of the person in question to follow the
reasonable directives of the Board of Directors.
(4) "CODE" shall mean the Internal Revenue Code of 1986, as amended,
any successor revenue laws of the United States and the rules and regulations
promulgated thereunder.
(5) "COMMITTEE" shall mean the committee of members of the Board
that is designated by the Board to administer the Plan. In the event that no
such Committee exists or is appointed, "COMMITTEE" shall mean the Board.
(6) "COMMON STOCK" shall mean the Class A Common Stock, par value
$.01 per share, of the Company.
(7) "DISABILITY" shall mean the inability or failure of a person to
perform those duties for the Company or any Subsidiary traditionally assigned to
and performed by such person because of the person=s then-existing physical or
mental condition, impairment or incapacity. The fact of disability shall be
determined by the Committee, which may consider such evidence as it considers
desirable under the circumstances, the determination of which shall be final and
binding upon all parties.
(8) "EXERCISE DATE" shall mean the business day, during the Option
Period, upon which the Optionee delivers to the Company the written notice and
consideration contemplated by Section 5(c) of the Plan.
(9) "FAIR MARKET VALUE" shall mean, with respect to the Common Stock
on any day, its market value determined as provided in Section 5(c) of the Plan.
(10) "INVOLUNTARY TERMINATION WITHOUT CAUSE" shall mean either (i)
the dismissal of, or the request for the resignation of, a person, by court
order, order of any court-appointed liquidator or trustee of the Company, or the
order or request of any creditors' committee of the Company constituted under
the federal bankruptcy laws, provided that such order or request contains no
specific reference to Cause; or (ii) the dismissal of, or the request for the
resignation of, a person, by a duly constituted corporate officer of the Company
or any Subsidiary, or by the Board, for any reason other than for Cause.
(11) "NOTICE" shall have the meaning indicated in paragraph 3 below.
(12) "OPTION" shall mean the option to purchase shares of Common
Stock granted to the Optionee pursuant to this Option Agreement.
(13) "OPTION AGREEMENT" shall mean this Statutory Incentive Stock
Option Agreement and Grant between the Company and the Optionee by which the
Option is granted to the Optionee pursuant to the Plan.
(14) "OPTION PERIOD" shall mean the period commencing one year from
the date of this Option Agreement and ending at the close of business ten years
from the date of this Option Agreement (or five years in the case of an
individual owning, directly or by attribution as provided in Section 424(d) of
the Code, on the date of grant, stock possessing more than 10% of the total
combined voting power of all classes of stock of the Company or any Subsidiary)
or such earlier date as when this Option Agreement may be terminated by its
terms.
(15) "OPTION SHARES" shall mean the shares of Common Stock purchased
upon exercise of the Option.
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(16) "OPTIONEE" shall mean the individual executing this Option
Agreement and, as applicable, the estate, personal representative or beneficiary
to whom this Option may be transferred pursuant to this Option Agreement by will
or by the laws of descent and distribution.
(17) "PLAN" shall mean the Sonic Automotive, Inc. 1997 Stock Option
Plan and any amendments thereto.
(18) "RETIREMENT" shall mean, with respect to the Optionee,
retirement from the Company and any Subsidiary in accordance with the Company's
and/or Subsidiary's retirement policy as may be in effect from time to time.
(19) "SUBSIDIARY" shall mean any subsidiary corporation of Sonic
Automotive, Inc. as defined in Sections 424(f) and 424(g) of the Code.
(20) "TERMINATION" shall mean the cessation, for any reason, of the
employer-employee relationship between the Company and any Subsidiary and the
Optionee.
(21) "TOTAL OPTION PRICE" shall mean the consideration payable to
the Company by the Optionee upon exercise of the Option pursuant to Section 5(c)
of the Plan.
2. GRANT OF OPTION. Effective upon the date hereof, and subject to the
terms and conditions set forth herein, the Company hereby grants to the Optionee
the Option to purchase from the Company, at an exercise price equal to the
closing price for the Common Stock as last reported on the Composite
Transactions Tape of the New York Stock Exchange immediately preceding the date
of issuance of this Option Agreement, which is $_________ (or, in the case of an
individual owning, directly or by attribution as provided in Section 424(d) of
the Code, on the date of grant, stock possessing more than 10% of the total
combined voting power of all classes of stock of the Company or any Subsidiary,
at an exercise price equal to 110% of the closing price for the Common Stock as
last reported on the Composite Transactions Tape of the New York Stock Exchange
immediately preceding the date of issuance of this Option Agreement, which is
$__________), up to but not exceeding in the aggregate _______________ shares
of Common Stock.
3. EXERCISE OF OPTION. The Option granted in paragraph 2 above may be
exercised as follows:
(1) The Option shall be exercisable during the Option Period in
three equal annual installments, with one-third of the total number of shares
covered by the Option becoming exercisable one year from the date hereof,
another one-third of the total number of shares covered by the Option becoming
exercisable two years from the date hereof, and the final one-third of the total
number of shares covered by the Option becoming exercisable three years from the
date hereof; provided however, that in the first calendar year of the Option
Period, the Option shall become exercisable only to the extent of that number of
shares of Common Stock having an aggregate fair market value of $100,000 based
on the per share value of the Common Stock at the time of the effectiveness of
the grant of the Option (this per share value being equal to the price at which
the Common Stock is offered to the public in the Company's initial public
offering). In each subsequent calendar year of the Option Period, the Option
shall become exercisable to the extent of an additional number of shares of
Common Stock having an aggregate fair market value of $100,000 determined
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as provided in the preceding sentence. The Option shall terminate on the
expiration of the Option Period, if not earlier terminated; provided that, in
the event of the Optionee's Retirement, the Committee in its sole and absolute
discretion may accelerate the Exercise Date, which acceleration may, in the sole
discretion of the Committee, be subject to further terms and conditions mandated
by the Committee;
(2) No less than 100 shares of Common Stock may be purchased on any
Exercise Date unless the number of shares purchased at such time is the total
number of shares in respect of which the Option is then exercisable.
(3) If at any time and for any reason the Option covers a fraction
of a share, then, upon exercise of the Option, the Optionee shall receive the
Fair Market Value of such fractional share in cash.
(4) The Option shall be exercised by the Optionee in accordance with
the terms and conditions of Section 5(c) of the Plan.
(5) Within 15 days after the Exercise Date, subject to the receipt
of payment of the Total Option Price and of any payment in cash of federal,
state or local income tax withholding or other employment tax that may be due
upon the issuance of the Option Shares as determined and computed by the Company
pursuant to paragraph 6 below, the Company shall issue to the Optionee the
number of shares with respect to which such Option shall be so exercised and
shall deliver to the Optionee a certificate or certificates therefor.
(6) The Option is not transferable by the Optionee otherwise than by
will or the laws of descent and distribution. No assignment or transfer of this
Option, or of the rights represented thereby, whether voluntary or involuntary,
by operation of law or otherwise, except by will or the laws of descent and
distribution, shall vest in the assignee or transferee any interest or right
herein whatsoever; but immediately upon any attempt to assign or transfer this
Option, except as expressly permitted herein, the same shall terminate and be of
no force or effect.
(7) The Optionee agrees to maintain the status of the entire Option
as an "incentive stock option" as defined under Section 422 of the Code.
4. TERMINATION. The Option granted hereby shall terminate and be of
no force or effect upon and following the occurrence of any of the following
events:
(1) The expiration of the Option Period.
(2) The Termination of the Optionee's employment for any reason
other than the Optionee's death, Disability or Involuntary Termination Without
Cause.
(3) The expiration of three months after the date of the Optionee's
Involuntary Termination Without Cause. During such three-month period, the
Optionee shall have the right to exercise the Option hereby granted in
accordance with the terms of this Option Agreement, but only to the extent the
Option was exercisable on the date of the Termination of the Optionee's
employment.
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(4) The expiration of twelve months after Termination of the
Optionee's employment with the Company and any Subsidiary as a result of the
Optionee's Disability. During such twelve-month period, the Optionee shall have
the right to exercise the Option hereby granted in accordance with the terms of
this Option Agreement, but only to the extent the Option was exercisable on the
date of the Termination of the Optionee's employment.
(5) In the event of the death of the Optionee while in the employ of
the Company or any Subsidiary or, in the event of the death of the Optionee
after Termination described in subparagraph (c) or (d), above, but within the
three-month or twelve-month period described in subparagraph (c) or (d), above,
upon the expiration of twelve months following the Optionee's death. During such
extended period, the Option may be exercised by the person or persons to whom
the deceased Optionee's rights under the Option Agreement shall pass by will or
by the laws of descent and distribution, but only to the extent the Option was
exercisable on the date of the Termination of the Optionee's employment.
(6) To the extent set forth in paragraph 7 below, upon the
dissolution, liquidation, consolidation or merger of the Company, and, to the
extent set forth in subparagraph 3(f), above, upon an attempted assignment or
transfer of the Option otherwise than as expressly permitted herein.
Any determination made by the Committee with respect to any matter
referred to in this paragraph 4 shall be final and conclusive on all persons
affected thereby.
5. RIGHTS AS STOCKHOLDER. An Optionee shall have no rights as a
stockholder of the Company with respect to any shares underlying the Option
until the day of the issuance of a stock certificate to him or her for those
shares upon payment of the exercise price in accordance with the terms and
provisions hereof. Subject to paragraph 7 below, no adjustments shall be made
for dividends (ordinary or extraordinary, whether in cash, securities or other
property) or distributions or other rights for which the record date is prior to
the date such stock certificate is issued.
6. PAYMENT OF WITHHOLDING TAXES. Upon the Optionee's exercise of his or
her Option with respect to any of the Option Shares in accordance with the
provisions of paragraph 3 above, the Optionee shall pay to the Company upon
exercise of the Option the amount of any federal, state or local income tax
withholding or other employment tax that may be due upon such exercise. The
determination of the amount of any such federal, state or local income tax
withholding or other employment tax due in such event shall be made by the
Company and shall be binding upon the Optionee.
7. RECAPITALIZATION; REORGANIZATION. The shares underlying this Option are
shares of Common Stock as constituted on the date of this Agreement, but if,
during the Option Period and prior to the delivery by the Company of all of the
shares of Common Stock with respect to which this Option is granted, the Company
shall effect a subdivision or consolidation of shares or other capital
readjustment, the payment of a stock dividend or some other increase or decrease
in the number of shares of Common Stock outstanding, without receiving
compensation therefor in money, services or property, then, (a) in the event of
any increase in the number of such shares outstanding, the number of shares of
Common Stock then remaining subject to this Option shall be proportionately
increased (except that any fraction of a share resulting from any such
adjustment
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shall be excluded from the operation of this Option Agreement), and the exercise
price per share shall be proportionately reduced, and, (b) in the event of a
reduction in the number of such shares outstanding, the number of shares of
Common Stock then remaining subject to this Option shall be proportionately
reduced (except that any fractional share resulting from any such adjustment
shall be excluded from the operation of this Option Agreement), and the exercise
price per share shall be proportionately increased.
In the event of a merger of one or more corporations into the Company with
respect to which the Company shall be the surviving or resulting corporation,
the Optionee shall, at no additional cost, be entitled upon any exercise of this
Option to receive (subject to any required action by shareholders), in lieu of
the number of shares as to which this Option shall then be so exercised, the
number and class of shares of stock or other securities to which the Optionee
would have been entitled pursuant to the terms of the agreement of merger if,
immediately prior to such merger, the Optionee had been the holder of record of
a number of shares of Common Stock of the Company equal to the number of shares
as to which such Option shall be so exercised; provided, however, that, anything
herein contained to the contrary notwithstanding, upon the occurrence of any
event described in Section 5(g) of the Plan, this Option shall be subject to
acceleration as provided in such Section 5(g).
In the event of a change in the Common Stock as presently constituted,
which change is limited to a change of all of the authorized shares with par
value into the same number of shares with a different par value or without par
value, the shares resulting from any such change shall be deemed to be the
Common Stock within the meaning of the Plan.
The existence of this Option shall not affect in any way the right or
power of the Company or its shareholders to make or authorize any or all
adjustments, dividends, stock dividends, recapitalization, reorganizations or
other changes in the Company's capital structure or its business, or any merger
or consolidation of the Company, or any issue of bonds, debentures, preferred or
other stocks with preference ahead of or convertible into, or otherwise
affecting, the Common Stock or the rights thereof, or the dissolution or
liquidation of the Company, or any sale or transfer of all or any part of its
assets or business, or any other corporate act or proceeding, whether of a
similar character or otherwise.
8. NO REGISTRATION RIGHTS. Anything in this Option Agreement to the
contrary notwithstanding, if, at any time specified herein for the issuance of
Option Shares, any law, regulation or requirements of any governmental authority
having jurisdiction in the premises shall require either the Company or the
Optionee, in the opinion of the Company's counsel, to take any action in
connection with the shares then to be issued, the issue of such shares shall be
deferred until such action shall have been taken. Nothing in this Option
Agreement shall be construed to obligate the Company at any time to file or
maintain the effectiveness of a registration statement under the Act, or under
the securities laws of any state or other jurisdiction, or to take or cause to
be taken any action which may be necessary in order to provide an exemption from
the registration requirements of the Act under Rule 144 or any other exemption
with respect to the Option Shares or otherwise for resale or other transfer by
the Optionee (or by the executor or administrator of such Optionee's estate or a
person who acquired the Option or any Option Shares or other rights by bequest
or inheritance or by reason of the death of the Optionee) as a result of the
exercise of an Option granted pursuant to this Option Agreement.
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9. RESOLUTION OF DISPUTES. Any dispute or disagreement that arises under,
or as a result of, or pursuant to, this Option Agreement shall be determined by
the Committee in its absolute and uncontrolled discretion, and any such
determination or other determination by the Committee under or pursuant to this
Option Agreement, and any interpretation by the Committee of the terms of this
Option Agreement, shall be final, binding and conclusive on all parties affected
thereby.
10. COMPLIANCE WITH THE ACT. Notwithstanding any provision herein to the
contrary or in the Plan, the Company shall be under no obligation to issue any
shares of Common Stock to the Optionee upon exercise of the Option granted
hereby unless and until the Company has determined that such issuance is either
exempt from registration, or is registered, under the Act and is either exempt
from registration and qualification, or is registered or qualified, as
applicable, under all applicable state securities or "blue sky" laws.
11. MISCELLANEOUS.
(1) BINDING ON SUCCESSORS AND REPRESENTATIVES. This Option Agreement
shall be binding not only upon the parties, but also upon their heirs,
executors, administrators, personal representatives, successors and assigns
(including any transferee of a party to this Agreement); and the parties agree,
for themselves and their successors, assigns and representatives, to execute any
instrument which may be necessary legally to effect the terms and conditions of
this Option Agreement.
(2) ENTIRE AGREEMENT. This Option Agreement, together with the Plan,
constitutes the entire agreement of the parties with respect to the Option and
supersedes any previous agreement, whether written or oral, with respect
thereto. This Option Agreement has been entered into in compliance with the
terms of the Plan; wherever a conflict may arise between the terms of this
Option Agreement and the terms of the Plan, the terms of the Plan shall control.
(3) AMENDMENT. Neither this Option Agreement nor any of the terms
and conditions herein set forth may be altered or amended orally, and any such
alteration or amendment shall be effective only when reduced to writing and
signed by each of the parties or their respective successors and assigns.
(4) CONSTRUCTION OF TERMS. Any reference herein to the singular or
plural shall be construed as plural or singular whenever the context requires.
(5) NOTICES. All notices, requests and amendments under this Option
Agreement shall be in writing, and notices shall be deemed to have been given
when personally delivered or sent prepaid registered mail:
(1) if to the Company, at the following address:
Sonic Automotive, Inc.
0000 Xxxx Xxxxxxxxxxxx Xxxxxxxxx
P.O. Box 18747
Xxxxxxxxx, Xxxxx Xxxxxxxx 00000
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Attention: Chief Financial Officer
or at such other address as the Company shall designate by notice.
(2) if to the Optionee, to the Optionee's address appearing
in the Company's employment records, or at such other
address as the Optionee shall designate by notice.
(6) GOVERNING LAW. This Option Agreement shall be governed by, and
construed in accordance with, the laws of the State of North Carolina (excluding
the principles of conflict of laws thereof).
(7) SEVERABILITY. The invalidity or unenforceability of any
particular provision of this Option Agreement shall not affect the other
provisions hereof, and this Agreement shall be construed in all respects as if
such invalid or unenforceable provisions were omitted.
(8) AN INCENTIVE STOCK OPTION. The Option granted hereunder is
intended to be an "Incentive Stock Option" under Section 422 of the Code.
IN WITNESS WHEREOF, the parties hereto have executed this Option Agreement
as of the day and year first written above.
SONIC AUTOMOTIVE, INC.
By:___________________________________
OPTIONEE: [NAME]
_______________________________ (SEAL)
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