Exhibit 4.6
FOCUS ENHANCEMENTS, INC.
Key Officer Non-Qualified Stock Option Agreement
FOCUS ENHANCEMENTS, INC., a Delaware Corporation (the "Company") hereby
grants to Xxxxxx X. Xxxxxx (the "Optionee") a Key Officer Non-Qualified Stock
Option to purchase 500,000 shares (the"Option Shares") of Common Stock, $0.01
par value (the "Common Stock"), at the price of $1.88 per share.
1. Grant as Non-Qualified Option; Other Options. This Option is intended to be a
Non- Qualified Option (rather than an incentive stock option), and the Board of
Directors intends to take appropriate action, if necessary, to achieve this
result. This Option is in addition to any other options heretofore or hereafter
granted to the Optionee by the Company, but a duplicate original of this
instrument shall not affect the grant on another option.
2. Extent of Option if Business Relationship Continues. If the Optionee has
continued to serve the Company in the capacity of any employee, officer,
director, agent, advisor or consultant, including services as a member of the
board of Advisors of the Company (such service is described herein as
maintaining or being involved in a "Business Relationship" with the Company), on
the following dates, the Optionee may exercise this Option for the number of
Option Shares set opposite the applicable date:
Number of Option Shares
for which Option will
Period be exercisable
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One year but less than 166,667
two years from March 19, 1997
Two years but less than 166,667
three years from March 19, 1997
Three years from March 19, 1997 166,666
thru the term of the Option
The foregoing notwithstanding, this Option shall become immediately
exercisable with respect to all the Option Shares purchasable hereunder if while
the Optionee continues to maintain a Business Relationship with the Company any
one or more of the following events occurs: (i) the death or disability of the
Optionee as that term is defined in Section 4 hereof; (ii) the Optionee's
employment with the Company is terminated by the Company without "Cause" as that
term is defined in Section 15 hereof; or (iii) a change in control of the
Company. For purposes of this Agreement a "change in control" shall mean: (x) a
merger or consolidation of the Company with or into, or the acquisition of the
Company by, another entity or (y) the sale of all or substantially all of the
stock or assets of the Company in a transaction or series of related
transactions such that the stockholders of the Company immediately prior to such
event do not immediately after giving effect to such event beneficially own
voting securities representing in the aggregate more than 75% of the combined
voting power of the voting securities of the surviving entity or the entity
purchasing such stock or assets (the "Surviving Entity") or the members of the
Board of Directors of the Company immediately prior to such event do not
immediately after giving effect to such event constitute a majority of the Board
of Directors of the Surviving Entity.
The foregoing rights are cumulative and, while the Optionee continues
to maintain a Business Relationship with the Company, may be exercised up to and
including the date which is ten years from the date this Option is granted. All
of the foregoing rights are subject to Sections 3, 4 and 15 as appropriate, if
the Optionee ceases to maintain a Business Relationship with the Company, or
dies or becomes disabled while involved in a Business Relationship with the
Company.
3. Termination of Business Relationship. If the Optionee ceases to maintain a
Business Relationship with the Company (or any affiliated corporation) for any
reason other than death or disability, termination without Cause or termination
due to a change in control of the Company, no further installments of this
Option shall become exercisable and this Option shall terminate 90 days after
the date the Business Relationship ceases, but in no event later than the
scheduled expiration date. In such a case, the Optionee's only rights to
exercise options hereunder shall be those which are properly exercisable before
the termination of this Option, and the Optionee may exercise this Option for
the number of Option Shares which have vested and become exercisable prior to
the date of termination.
4. Death: Disability. If the Optionee dies while involved in a Business
Relationship with the Company (or any affiliated corporation), this Option may
be exercised, to the extent of the number of Option Shares with respect to which
the Optionee could have exercised it on the date of his or her death, by his or
her estate, personal representative or beneficiary to whom this Option has been
assigned pursuant to Section 9, at any time within 180 days after the date of
death, but not later than the scheduled expiration date. If the Optionee's
Business Relationship with the Company is terminated by reason of his
disability, this Option may be exercised, to the extent of the number of Option
Shares with respect to which the Optionee could have exercised it on the date
the Business Relationship was terminated, at any time within 180 days after the
date of such termination, but not later than the scheduled expiration date. At
the expiration of such 180-day period or the scheduled expiration date,
whichever is the earlier, this Option shall terminate and the only rights
hereunder shall be those as to which the Option was properly exercised before
such termination. For the purposes of this Option, the term "disability" shall
mean "permanent and total disability" as defined in Section 22(e)(3) of the
Internal Revenue Code or successor statute.
5. Partial Exercise. Exercise of this Option up to the extent above stated may
be made in part at any time and from time to time within the above limits,
except that this Option may not be exercised for a fraction of a share unless
such exercise is with respect to the final installment of Option Shares subject
to this Option and a fractional share (or cash in lieu thereof) must be issued
to permit the Optionee to exercise completely such final installment. Any
fractional share with respect to which an installment of this Option cannot be
exercised because of the limitation contained in the preceding sentence shall
remain subject to this Option and shall be available for later purchase by the
Optionee in accordance with the terms hereof.
6. Payment of Price. The Option price is payable in United States dollars only
and must be paid:
a. in cash or by personal check, or any combination of the foregoing,
equal in amount to the Option price; or
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b. in the discretion of the Board of Directors, in cash, by personal
check, by delivery of shares of the Company's Common Stock having a fair market
value (as determined by the Board of Directors) equal as of the date of exercise
to the Option price, by delivery of a personal recourse promissory note, through
the delivery of an assignment to the Company of a sufficient amount of the
proceeds from the sale of the Common Stock acquired upon exercise of the Option
and an authorization to the broker or selling agent to pay that amount to the
Company, which sale shall be at the Optionee's direction at the time of
exercise, or by any combination of the foregoing, equal in amount to the Option
Price.
If the Optionee delivers shares of Common Stock held by the Optionee
(the "Old Stock") to the Company in full or partial payment of the option price,
and the Old Stock so delivered is subject to restrictions or limitations imposed
by agreement between the Optionee and the Company, the Common Stock received by
the Optionee on the exercise of this Option shall be subject to all restrictions
and limitations applicable to the Old Stock to the extent that the Optionee paid
for such Commons Stock or Preferred Stock by delivery of Old Stock, in addition
to any restrictions or limitations imposed by this Agreement.
7. Agreement to Purchase for Investment. By acceptance of this Option, the
Optionee agrees that a purchase of Option Shares under this Option will not be
made with a view to their distribution, as that term is used in the Securities
Act of 1933, as amended (the "Securities Act"), unless in the opinion of counsel
to the Company such distribution is in compliance with or exempt from the
registration and prospectus requirements of the Securities Act and applicable
state securities laws, and the Optionee agrees to sign a certificate to such
effect at the time of exercising this Option and agrees that the certificate for
the Option Shares so purchased may be inscribed with a legend to ensure
compliance with the Securities Act and applicable state securities laws.
8. Method of Exercising Option. Subject to the terms and conditions of this
Agreement, this Option may be exercised by written notice to the address of the
Company, at its Sudbury, Massachusetts office, in the form attached hereto as
Exhibit A. Such notice shall state the election to exercise this Option and the
number of Option Shares in respect of which it is being exercised and shall be
signed by the person or persons so exercising this Option. Such notice shall be
accompanied by payment of the full purchase price of such Option Shares, and the
Company or its transfer agent shall deliver a certificate or certificates
representing such Option Shares as soon as practicable after the notice shall be
received. The certificate or certificates for the Option shares as to which this
Option shall have been so exercised shall be registered in the name of the
person or persons so exercising this Option (or, if this Option shall be
exercised by the Optionee and if the Optionee shall so request in the notice
exercising this Option, shall be registered in the name of the Optionee and
another person jointly, with right of survivorship) and shall be delivered as
provided above to or upon the written order of the person or persons exercising
this Option. In the event this Option shall be exercised, pursuant to Section 4
hereof, by any person or persons other than the Optionee, such notice shall be
accompanied by appropriate proof of the right of such person or persons to
exercise this Option. All Option Shares that shall be purchased upon the
exercise of this Option as provided herein shall be fully paid and
nonassessable.
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9. Option Not Transferable.
a. This Option is not transferable or assignable except by will or by
the laws of descent and distribution. During the Optionee's lifetime only the
Optionee can exercise this Option.
b. In the event the Option Shares shall be community property, and in
the event of a divorce between the Optionee and said Optionee's spouse, then any
transfer of the Option Shares (whether to said Optionee's spouse or otherwise),
shall be a prohibited transfer.
10. No Obligation to Exercise Option. The grant and acceptance of this Option
imposes no obligation on the Optionee to exercise it.
11. No Obligation to Continue Business Relationship. The Company and any
affiliated corporations are not, as a result of the grant and acceptance of this
Option, obligated in any manner to continue to maintain a Business Relationship
with the Optionee.
12. No Rights as Stockholder until Exercise. The Optionee shall have no rights
as a stockholder with respect to the Option Shares subject to this Agreement
until a stock certificate therefor has been issued to the Optionee and is fully
paid for by the Optionee. No adjustment shall be made, except adjustments for
changes in capitalization pursuant to Section 13 hereof, for dividends (whether
in cash, securities or other property) or distributions or other similar rights
for which the record date is prior this date such stock certificate is issued.
13. Capital Changes and Business Successions. It is the purpose of this Option
to encourage the Optionee to work for the best interests of the Company and its
stockholders. Because, for example, that might require the issuance of a stock
dividend or a merger with another corporation, the purpose of this Option would
not be served if such a stock dividend, stock split, merger or similar
occurrence would cause the Optionee's rights hereunder to be diluted or
terminated and thus be contrary to the Optionee's interest. Therefore, if the
Company is to be consolidated with or acquired by another entity in a merger,
sale of all or substantially all of the Company's assets or otherwise (an
"Acquisition"), the Board or the board of directors of any entity assuming the
obligations of the Company hereunder (the "Successor Board"), may, as to
outstanding Options, take one or more of the following actions: (i) make
appropriate provision for the continuation of such Options by substituting on an
equitable basis for the shares then subject to such Options the consideration
payable with respect to the outstanding shares of Common Stock in connection
with the Acquisition; or (ii) make appropriate provision for the continuation of
such Options by substituting on an equitable basis for the shares then subject
to such Options any equity securities of the successor corporation; or (iii)
upon written notice to the Optionee, provide that all Options must be exercised,
to the extent than exercisable, within a specified number of days of the date of
such notice, at the end of which period the Options shall terminate; or (iv)
terminate all Options in exchange for a cash payment equal to the excess of the
fair market value of the shares subject to such Options (to the extent then
exercisable) over the exercise price thereof; or (v) terminate all Options in
exchange for the right to participate in any stock option or other employee
benefit plan
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of any successor corporation (giving proper credit to any Optionee for that
portion of any Option which has otherwise vested and become exercisable prior to
the Acquisition).
14. Withholding Taxes. The Optionee hereby agrees that the Company may withhold
from the Optionee's wages or other remuneration the appropriate amount of
federal, state and local taxes attributable to the Optionee's exercise of any
installment of this Option. At the Company's discretion, the amount required to
be withheld may be withheld in cash from such wages or other remuneration, or in
kind from the Common Stock otherwise deliverable to the Optionee on exercise of
this Option. The Optionee further agrees that, if the Company does not withhold
an amount from the Optionee's wages or other remuneration sufficient to satisfy
the Company's withholding obligation, the Optionee will reimburse the Company on
demand, in cash, for the amount underwithheld.
15. No Exercise of Option if Engagement or Employment Terminated for Cause. If
the employment or engagement of the Optionee is terminated for "Cause," this
Option shall terminate on the date of such termination and this Option shall
thereupon not be exercisable to any extent whatsoever. "Cause" is conduct, as
determined by the Board of Directors, involving one or more of the following:
(i) gross misconduct by the Optionee which is materially injurious to the
Company; or (ii) the commission of an act of embezzlement, fraud or deliberate
disregard of the rules or polices of the Company which results in material
economic loss, damage or injury to the Company; or (iii) the unauthorized
disclosure of any trade secret or confidential information of the Company or any
third party who has a business relationship with the Company or a violation of
any noncompetition covenant or assignment of inventions obligation with the
Company; or (iv) the commission of an act which induces any customer or
prospective customer of the Company to break a contract with the Company or to
decline to do business with the Company; or (v) the conviction of the Optionee
of a felony involving any financial impropriety or which would materially
interfere with the Optionee's ability to perform his or her services or
otherwise be injurious to the Company; or (vi) the failure of the Optionee to
perform in a material respect his or her employment of engagement obligations
without proper cause. In making such determination, the Board of Directors shall
act fairly and in good faith.
16. Stock Certificate Legend. Because the Optionee is an "affiliate" of the
Company (as defined in Rule 144 promulgated under the Securities Act of 1933),
all stock certificates representing shares of Common Stock issued pursuant to
the Option shall have affixed thereto legends substantially in the following
form:
"The shares represented by this certificate have not been
registered under the Securities Act of 1933, as amended (the
"Act"), and may not be sold, transferred or assigned unless
such shares are registered under the Act or an opinion of
counsel, satisfactory to the corporation, is obtained to the
effect that such sale, transfer or assignment is exempt from
the registration requirements of the Act."
17. Governing Law. This Agreement shall be governed by and interpreted in
accordance with the internal laws of the State of Delaware.
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18. Miscellaneous.
a. Notices. Any notices or communication provided for herein shall be
given in writing by first class mail, electronic facsimile transmission, or
overnight courier service, which shall be in the case of the Optionee to his or
her residence, or to such other address as may be designated by such Optionee.
b. Amendment of Agreement. The provisions of this Agreement may be
waived, altered, amended, or repealed, in whole or in part, only on the written
consent of all parties to this Agreement.
c. Severability. In the event that any provisions of this Agreement
shall be held to be invalid, the remaining Paragraphs shall remain in full force
and effect.
d. Attorney's Fees. In the event of any dispute, claim, arbitration or
legal proceeding arising out of this Agreement, the successful or prevailing
party shall be entitled to reimbursement from the other of all costs, expenses
and attorney's fees.
e. Necessary Acts. Each party agrees to perform any further acts and
execute and deliver any documents which may be reasonably necessary to carry out
provisions of this Agreement.
f. Persons Bound. This Agreement shall be binding upon the parties
hereto, their respective spouses, heirs, legatees, executors, administrators,
permitted transferees and legal successors. This Agreement shall also be binding
upon the distribution of any estate or trust which may be a Optionee. At the
request of the Company, any such transferees, distributees, assignees, or
successors in interest who shall be personally bound by this Agreement shall
execute a counterpart of this Agreement.
IN WITNESS WHEREOF the Company and the Optionee have caused this
instrument to be executed, as of March 19, 1997, and the Optionee whose
signature appears below acknowledges receipt of a copy of the 10A Prospectus and
acceptance of an original copy of this Agreement.
/s/ Xxxxxx X. Xxxxxx FOCUS ENHANCEMENT, INC.
Xxxxxx X. Xxxxxx
____________________________ By: /s/ Xxxxx X. Xxxxx
Name Xxxxx X. Xxxxx
President
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Xxxxxx Xxxxxxx
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Xxxx, Xxxxx Zip Code
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Exhibit A to Key Officer
Nonqualified Stock
Option Agreement
FOCUS Enhancements, Inc.
000 Xxxxx Xxxx
Xxxxxxx , Xxxxxxxxxxxxx 00000
RE: Exercise of Non-Qualified Option Pursuant to Key Officer Non-Qualified
Stock Option Agreement
Gentlemen:
The undersigned hereby elects to exercise the stock option granted to
Xxxxxx X. Xxxxxx on March 19, 1997 by and to the extent of purchasing shares of
the Common Stock of FOCUS Enhancements, Inc. for the price of $1.88 per share,
subject to the terms and conditions of the Key Officer Nonqualified Stock Option
Agreement between Xxxxxx X. Xxxxxx and FOCUS Enhancements, Inc. dated as of
March 19, 1997 (the "Agreement").
The undersigned encloses herewith payment, in cash or in such other
property as is permitted under the Agreement, of the purchase price for said
shares. If the undersigned is making payment of any part of the purchase price
by delivery of shares of stock of FOCUS Enhancements, Inc., he hereby confirms
that he has investigated and considered the possible income tax consequences to
him of making such payments in that form.
The undersigned hereby agrees to provide to FOCUS Enhancements, Inc. an
amount sufficient to satisfy any obligation to withhold taxes, in accordance
with the Agreement.
The undersigned hereby specifically confirms to FOCUS Enhancements, Inc.
that he is acquiring the shares for investment and not with a view to their sale
or distribution, and that the shares shall be held subject to all of the terms
and conditions of the Agreement.
Very truly yours,
Date (Signed by
or other party duly exercising
option)
