EXHIBIT 10.11
DIGITAL THEATER SYSTEMS, INC.
INCENTIVE STOCK OPTION AGREEMENT
THIS INCENTIVE STOCK OPTION AGREEMENT ("Agreement"), is made as of the
________ day of ________, 200_ by and between Digital Theater Systems, Inc., a
Delaware corporation (the "Company"), and ("Optionee").
R E C I T A L
Pursuant to the 2002 Stock Option Plan (the "Plan") of the Company, the
Board of Directors of the Company or a committee to which administration of the
Plan is delegated by the Board of Directors (in either case, the
"Administrator") has authorized the granting to Optionee of an incentive stock
option to purchase the number of shares of common stock of the Company specified
in Section 1 hereof, at the price specified therein, such option to be for the
term and upon the terms and conditions hereinafter stated. Capitalized terms
used in this Agreement and not defined shall have the meanings given such terms
in the Plan.
A G R E E M E N T
NOW, THEREFORE, in consideration of the promises and of the
undertakings of the parties hereto contained herein, it is hereby agreed as
follows:
1. Number of Shares; Option Price. Pursuant to said action of the
Administrator, the Company hereby grants to Optionee the option ("Option") to
purchase, upon and subject to the terms and conditions of the Plan, ________
shares of common stock of the Company ("Shares") at the price of $________ per
share.
2. Term. This Option shall expire on the day before the tenth
(10th) [or fifth (5th) for ten percent shareholders] anniversary of the date of
grant of the Option (the "Expiration Date"), unless such Option shall have been
terminated prior to that date in accordance with the provisions of the Plan or
this Agreement.
3. Shares Subject to Exercise. This Option shall be exercisable
in equal installments of twenty-five percent (25%) of the Shares on and after
each of the first four anniversaries of the date hereof; provided, however, that
an installment shall not become exercisable if the Optionee is not in the employ
of the Company, or its Affiliate, as of such vesting date (except as otherwise
provided for in Section 6 hereof). Once exercisable, the Option shall thereafter
remain exercisable as to such Shares for the term specified in Section 2 hereof,
unless Optionee's employment is terminated pursuant to Section 6 hereof or the
Option is terminated pursuant to a Corporate Transaction. The Administrator may
condition the exercise of the Option on the Optionee's entering into a
stockholders agreement with the Company and/or other stockholders which will
restrict the transferability of the Shares and contain other customary
provisions including right of repurchase or first refusal on the part of the
Company and may include "drag-along" rights.
4. Method and Time of Exercise. The Option may be exercised by
written notice delivered to the Company at its principal executive office
stating (i) that Optionee is in compliance with the non-compete provisions of
Section 16 hereof, (ii) that Optionee has no plan to violate Section 16 in the
future, (iii) that Optionee agrees to notify the Company within ten (10) days of
a violation of Section 16 hereof, and (iv) the number of shares with respect to
which the Option is being exercised, together with:
(A) a check or money order made payable to the Company in
the amount of the exercise price and any withholding tax, as provided under
Section 5 hereof; or
(B) if expressly authorized in writing by the
Administrator, in its sole discretion, at the time of the Option exercise, the
tender to the Company of shares of the Company's common stock owned by Optionee
having a fair market value not less than the exercise price, plus the amount of
applicable federal, state and local withholding taxes; or
(C) if expressly authorized in writing by the
Administrator, in its sole discretion, at the time of the Option exercise, the
Optionee's full recourse promissory note in a form approved by the Company; or
(D) if any other method such as cashless exercise is
expressly authorized in writing by the Administrator, in its sole discretion, at
the time of the Option exercise, the tender of such consideration having a fair
market value not less than the exercise price, plus the amount of applicable
federal, state and local withholding taxes.
Only whole shares may be purchased.
5. Tax Withholding. As a condition to exercise of this Option,
the Company may require Optionee to pay over to the Company all applicable
federal, state and local taxes which the Company is required to withhold with
respect to the exercise of this Option. At the discretion of the Administrator
and upon the request of Optionee, the minimum statutory withholding tax
requirements may be satisfied by the withholding of Shares otherwise issuable to
Optionee upon the exercise of this Option.
6. Exercise on Termination of Employment. If for any reason other
than death or permanent and total disability or retirement past the age of 60,
Optionee ceases to be employed by the Company or any of its Affiliates (such
event being called a "Termination"), other than For Cause (as such term is
defined below), this Option (to the extent then exercisable) may be exercised in
whole or in part at any time within three months of the date of such
Termination, or such other period after the date of such Termination as is
specified in an amendment hereto (but in no event after the earlier of the
Expiration Date or a Corporate Transaction which terminates this Option);
provided, however, that if such exercise of this Option would result in
liability for the Optionee under Section 16(b) of the Exchange Act, then such
three-month period automatically shall be extended until the tenth day following
the last date upon which Optionee has any liability under Section 16(b) (but in
no event after the earlier of the Expiration Date and a Corporate Transaction
which terminates this Option). If Optionee dies or becomes permanently and
totally disabled (within the meaning of Section 22(e)(3) of the Code) while
employed by the Company or an Affiliate or within the period that this Option
remains
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exercisable after Termination, this Option (to the extent then exercisable) may
be exercised, in whole or in part, by the Optionee, by the Optionee's personal
representative or by the person to whom this Option is transferred by devise or
the laws of descent and distribution, at any time within six months after the
death or six months after the permanent and total disability of the Optionee or
any longer period specified in an amendment hereto (but in no event after the
earlier of the Expiration Date or a Corporate Transaction which terminates this
Option). If the Optionee retires past the age of 60 while employed by the
Company or an Affiliate, this Option (to the extent then exercisable) may be
exercised, in whole or in part, by the Optionee at any time prior to the earlier
of the Expiration Date and a Corporate Transaction which terminates this Option.
Further, upon such retirement, this Option shall continue to vest in accordance
with its terms as if the Optionee remained employed by the Company. In the event
this Option is treated as a non-qualified stock option, then and to that extent,
"employment" would include service as an employee, director, consultant or
adviser. For purposes of this Agreement, Optionee's employment shall not be
deemed to terminate by reason of a transfer to or from the Company or an
Affiliate or among such entities, or sick leave, military leave or other leave
of absence approved by the Administrator, if the period of any such leave does
not exceed ninety (90) days or, if longer, if Optionee's right to reemployment
by the Company or any Affiliate is guaranteed either contractually or by
statute. For purposes of this Agreement, "For Cause" shall mean Optionee's loss
of employment by the Company or any of its Affiliates due to Optionee's (a)
willful breach or habitual failure to perform Optionee's required duties, (b)
commission of acts of dishonesty, fraud, misrepresentation or other acts of
moral turpitude as would prevent the effective performance of Optionee's duties
or (c) termination for cause under any employment agreement between the Company
and Optionee (as defined therein). In the event Optionee's employment by the
Company or any of its Affiliates is Terminated For Cause, then the Option shall
cease to be exercisable as of the date of such Termination.
7. Non-Transferability. This Option may not be assigned or
transferred except by will or by the laws of descent and distribution, and may
be exercised only by Optionee during the Optionee's lifetime and after the
Optionee's death, by the Optionee's personal representative or by the person
entitled thereto under the Optionee's will or the laws of intestate succession.
8. Optionee Not a Stockholder. Optionee shall have no rights as a
stockholder with respect to the Shares covered by this Option until the date of
issuance of a stock certificate or stock certificates to the Optionee upon
exercise of this Option. No adjustment will be made for dividends or other
rights for which the record date is prior to the date such stock certificate or
certificates are issued.
9. No Right to Employment. Nothing in the Option granted hereby
shall interfere with or limit in any way the right of the Company or of any of
its Affiliates to terminate Optionee's employment, consulting or advising
relationship with the Company or any of its Affiliates at any time, nor confer
upon Optionee any right to continue in the employ of the Company or any of its
Affiliates, or continue to consult or advise the Company or any of its
Affiliates.
10. Modification and Termination. The rights of Optionee are
subject to modification and termination in certain events as provided in
Sections 6.1 and 6.3 of the Plan.
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11. Restrictions on Sale of Shares. Optionee represents and agrees
that upon the Optionee's exercise of this Option, in whole or in part, unless
there is in effect at that time under the Securities Act of 1933 a registration
statement relating to the Shares issued to the Optionee, the Optionee will
acquire the Shares issuable upon exercise of this Option for the purpose of
investment and not with a view to their resale or further distribution, and that
upon such exercise thereof the Optionee will furnish to the Company a written
statement to such effect, satisfactory to the Company in form and substance.
Optionee agrees that any certificates issued upon exercise of this Option may
bear a legend indicating that their transferability is restricted in accordance
with applicable state and federal securities law. Any person or persons entitled
to exercise this Option under the provisions of Sections 6 and 7 hereof shall,
upon each exercise of this Option under circumstances in which Optionee would be
required to furnish such a written statement, also furnish to the Company a
written statement to the same effect, satisfactory to the Company in form and
substance.
12. Plan Governs. This Agreement and the Option evidenced hereby
are made and granted pursuant to the Plan and are in all respects limited by and
subject to the express terms and provisions of the Plan, as it may be construed
by the Administrator. It is intended that this Option shall qualify as an
incentive stock option as defined by Section 422 of the Code, and this Agreement
shall be construed in a manner which will enable this Option to be so qualified.
Optionee hereby acknowledges receipt of a copy of the Plan.
13. Notices. All notices to the Company shall be addressed to the
Corporate Secretary at the principal executive office of the Company at Digital
Theater Systems, Inc., 0000 Xxxxxxxx Xx., Xxxxxx Xxxxx, Xxxxxxxxxx 00000, and
all notices to Optionee shall be addressed to Optionee at the address of
Optionee on file with the Company, or to such other address as either may
designate to the other in writing. A notice shall be deemed to be duly given if
and when enclosed in a properly addressed sealed envelope deposited, postage
prepaid, with the United States Postal Service. In lieu of giving notice by mail
as aforesaid, written notices under this Agreement may be given by personal
delivery to Optionee or to the Corporate Secretary (as the case may be).
14. Sale or Other Disposition. Optionee understands that, under
current law, beneficial tax treatment resulting from the exercise of this Option
will be available only if certain requirements of the Code are satisfied,
including without limitation, the requirement that no disposition of Shares
acquired pursuant to exercise of this Option be made within two (2) years from
the grant date or within one (1) year after the transfer of Shares to the
Optionee. If Optionee at any time contemplates the disposition (whether by sale,
gift, exchange, or other form of transfer) of any such Shares, the Optionee
shall first notify the Company in writing of such proposed disposition and
cooperate with the Company in complying with all applicable requirements of law,
which, in the judgment of the Company, must be satisfied prior to such
disposition. In addition to the foregoing, Optionee hereby agrees that before
Optionee disposes (whether by sale, exchange, gift, or otherwise) of any Shares
acquired by exercise of this Option within two (2) years of the grant date or
within one (1) year after the transfer of such Shares to Optionee upon exercise
of this Option, Optionee shall promptly notify the Company in writing of the
date and terms of the proposed disposition and shall provide such other
information regarding the Option as the Company may reasonably require
immediately before such disposition. Said
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written notice shall state the date of such proposed disposition, and the type
and amount of the consideration to be received for such Share or Shares by
Optionee in connection therewith. In the event of any such disposition, the
Company shall have the right to require Optionee to immediately pay the Company
the amount of taxes (if any) which the Company is required to withhold under
federal and/or state law as a result of the granting or exercise of the Option
and the disposition of the Shares. The terms and conditions of this Agreement
shall be binding on any Permitted Transferee of this Option or any Shares
acquired upon exercise of this Option. "Permitted Transferee" means Optionee's
estate, spouse, heirs, ancestors, lineal descendants, legatees and legal
representatives, the trustee of any bona fide trust of which one or more of the
foregoing are the sole beneficiaries or the grantors thereof and any person in
which any of the foregoing, individually or collectively, beneficially owns all
of the capital stock, provided that in each such case the transferee enters into
an agreement with the Company acknowledging the Company's repurchase rights
under Paragraph 15.
15. Repurchase of Stock by Company. In the event of a Termination
of Optionee such that Optionee is no longer a director, officer, employee or
consultant of the Company or any of its Affiliates (other than a Termination as
a result of Optionee's death, permanent and total disability, or retirement past
the age of 60), the Company shall have the right, upon such Termination and for
a period of 120 days thereafter (the "Repurchase Period"), to repurchase all or
any part of the Shares acquired or to be acquired by Optionee upon exercise of
this Option and held or to be held of record by Optionee at a price equal to the
greater of (A) the fair market value of the Shares as of the date of Termination
and (B) the exercise price paid by Optionee for such Shares. The Company shall
exercise the foregoing repurchase right by delivering a notice to Optionee
during the Repurchase Period indicating the total number of Shares the Company
is repurchasing, together with a check in an amount equal to the repurchase
price per share multiplied by the number of shares to be repurchased (reduced by
the amount of taxes (if any) which the Company is required to withhold under
federal and/or state law with respect to such Shares). The determination by the
Administrator of the repurchase price shall be conclusive. Upon delivery of such
notice and payment of the repurchase price, Optionee shall promptly surrender
the certificate(s) representing the Shares repurchased by the Company. Whether
or not Optionee surrenders such certificates, upon payment in full by the
Company of the repurchase price for the Shares on or prior to the last day of
the Repurchase Period, all Shares subject to the foregoing repurchase notice
shall automatically be cancelled on the books and records of the Company without
any further action by the Company or Optionee. Stock certificates issued
pursuant to the exercise of this Option shall bear a legend indicating the
foregoing right of the Company to repurchase the Shares held by Optionee which
legend shall state:
The shares evidenced by this certificate are subject to the right of
Digital Theater Systems, Inc. (the "Issuer") under certain
circumstances to repurchase all or any part of such shares upon notice
by Digital Theater Systems, Inc. to the holder of this certificate as
set forth in that certain Digital Theater Systems, Inc. Incentive Stock
Option Agreement, a copy of which is on file at the offices of the
Issuer.
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16. Forfeiture of Shares. Notwithstanding anything to the contrary
provided herein, as a condition to the receipt of Shares pursuant to the
exercise of this Option, at any time during which this Option is outstanding and
for six (6) months after any exercise of this Option or the receipt of Shares
pursuant to the exercise of this Option, Optionee agrees that Optionee's Option
and the exercise or issuance of Shares hereunder shall be rescinded, forfeited
and repaid to the Company within ten (10) days of notification by the Company,
if Optionee directly or indirectly, as agent, employee, consultant, stockholder,
partner or in any other capacity, owns, operates, manages, controls, engages in,
invests in or participates in any manner in, acts as a consultant or advisor to,
renders services for (alone or in association with any person, firm, corporation
or entity), or otherwise assists, for compensation or otherwise, any person or
entity that engages in or owns, invests in, operates, manages or controls, any
venture or enterprise that engages in any activity, involving the research,
development, licensing or sale of multi-channel (surround sound) digital audio
encoding technology for consumer applications, or involving the research,
development, licensing, manufacture or sale of multi-channel (surround sound)
digital audio coding equipment for theatrical applications (any of the
foregoing, a "Restricted Business"). The foregoing shall not apply, however, in
the event that the Optionee's responsibilities as an employee or consultant do
not involve any aspects of a Restricted Business, even if the entity itself is
engaged in a Restricted Business. Nothing contained herein shall be construed to
result in a rescinding, forfeiture or repayment of Optionee's Option or the
exercise or issuance of Shares hereunder upon Optionee's investing in the stock
of any corporation listed on a national securities exchange or traded in the
over-the-counter market that is engaged in a Restrictive Business, but only if
Optionee's responsibilities at such corporation as an employee or consultant do
not involve any aspects of a Restricted Business and if Optionee (together with
Optionee's spouse, parents, siblings, and children) does not own more than an
aggregate of five percent (5%) of the stock of such corporation. Optionee agrees
to notify the Company within ten (10) days of any action by Optionee falling
within this Section 16. The Administrator may, in its sole and absolute
discretion, waive the provisions of this Section 16.
17. Automatic Acceleration Upon Corporate Transaction. This Option
shall be subject to termination immediately prior to the consummation of a
Corporate Transaction as provided for in Section 6.1.2 of the Plan. However,
immediately prior to a Corporate Transaction this option shall immediately vest
in full and the Optionee shall have the right to exercise all or any portion of
this Option prior to such termination.
18. Employment Agreement. Any provisions of this Option Agreement
may be amended pursuant to a written employment agreement entered into between
the Company and the Optionee, so long as such employment agreement is approved
by the Administrator and is not inconsistent with any provisions of the Plan.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date and year first above written.
DIGITAL THEATER SYSTEMS, INC.
By:_________________________________
Name:_________________________
Title:
OPTIONEE:
By:_________________________________
Address:
____________________________________
____________________________________
____________________________________
____________________________________
Social Security Number
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