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As filed with the Securities and Exchange Commission on February 27, 2007
Registration No. 333-                    
 
 
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM S-8
REGISTRATION STATEMENT
Under
The Securities Act of 1933
 
HARMONIC INC.
(Exact name of registrant as specified in its charter)
 
     
DELAWARE   77-0201147
(State of incorporation)   (I.R.S. Employer
    Identification Number)
549 Baltic Way
Sunnyvale, California 94089
(Address of principal executive offices)

 
ENTONE TECHNOLOGIES, INC. 2003 STOCK PLAN

(Full title of the plan)
 
Robin N. Dickson
Chief Financial Officer
Harmonic Inc.
549 Baltic Way
Sunnyvale, California 94089
(Name and address of agent for service)
(408) 542-2500
(Telephone number, including area code, of agent for service)
 
Copy to:
Robert G. Day, Esq.
Wilson Sonsini Goodrich & Rosati
Professional Corporation
650 Page Mill Road
Palo Alto, California 94304-1050
 
CALCULATION OF REGISTRATION FEE
                             
 
              Proposed     Proposed        
              Maximum     Maximum     Amount of  
        Amount to be     Offering Price     Aggregate     Registration  
  Title of Securities to be Registered     Registered(2)     Per Share(3)     Offering Price(4)     Fee  
 
Harmonic Inc. Common Stock (par value $0.001 per share) issuable under the Entone Technologies, Inc. 2003 Stock Plan, as amended (1)
    175,342     $0.49     $85,918     $2.64  
 
 
(1)   Each share of Common Stock (the “Common Stock”) of Harmonic Inc., a Delaware corporation (the “Registrant”), includes a right to purchase one one-thousandth of a share of the Registrant’s Series A Participating Preferred Stock.
 
(2)   Pursuant to Rule 416(a) under the Securities Act of 1933, as amended (the “Securities Act”), this registration statement also covers any additional shares of the Registrant’s Common Stock that become issuable pursuant to the stock options assumed by the Registrant under the Entone Technologies, Inc. 2003 Stock Plan, as amended (the “Entone Plan”) by reason of any shares being offered or issued to prevent dilution resulting from any stock splits, stock dividends or other similar transactions.
 
(3)   Estimated in accordance with 457(h) solely for the purpose of calculating the registration fee. Such number of shares of the Registrant’s Common Stock (the “Shares”) represents the aggregate number of Shares subject to outstanding options pursuant to the Entone Plan, which outstanding options were assumed by Registrant in connection with the merger of Edinburgh Acquisition Corporation, a Delaware corporation and a wholly-owned subsidiary of Registrant (“Edinburgh”), with and into Entone Technologies, Inc., a Delware corporation (“Entone”), effective as of December 8, 2006 (the “Merger”). The number of Shares subject to outstanding options under the Entone Plan as of the closing of the Merger and registered hereunder and the applicable exercise price have been calculated pursuant to the exchange ratio set forth in the Agreement and Plan of Merger, dated as of August 21, 2006, and amended as of November 29, 2006, by and among the Registrant, Edinburgh, Entone, Entone, Inc., a Delaware corporation and a wholly-owned subsidiary of Entone, Entone Technologies (HK) Limited, a company organized under the laws of Hong Kong and an indirect wholly-owned subsidiary of Entone, Jim Jones, as stockholders’ representative, and U.S. Bank, National Association, as escrow agent. The Shares registered hereby consist of outstanding options to purchase up to 175,342 Shares under the Entone Plan, with a weighted average exercise price of $0.49.
 
(4)   Estimated solely for the purpose of calculating the amount of the registration fee pursuant to Rule 457(h) under the Securities Act. The proposed maximum offering price per share is based on the weighted-average per share exercise price (rounded to the nearest cent) of the stock options assumed by the Registrant under the Entone Plan.
 
 

 


TABLE OF CONTENTS

PART II
Item 3. Incorporation of Documents by Reference
Item 4. Description of Securities
Item 5. Interest of Named Experts and Counsel
Item 6. Indemnification of Directors and Officers
Item 7. Exemption from Registration Claimed
Item 8. Exhibits
Item 9. Undertakings
SIGNATURES
INDEX TO EXHIBITS
EXHIBIT 4.1
EXHIBIT 4.2
EXHIBIT 4.3
EXHIBIT 4.4
EXHIBIT 5.1
EXHIBIT 23.1
EXHIBIT 23.2


Table of Contents

HARMONIC INC.
REGISTRATION STATEMENT ON FORM S-8
PART II
INFORMATION REQUIRED IN REGISTRATION STATEMENT
Item 3. Incorporation of Documents by Reference.
     The following documents previously filed by Harmonic Inc. (the “Registrant”) with the Securities and Exchange Commission (the “SEC” or the “Commission”) are hereby incorporated by reference in this registration statement on Form S-8 (other than information in a report on Form 8-K that is “furnished” and not “filed” pursuant to Form 8-K, and, except as may be noted in any such Form 8-K, exhibits filed on such form that are related to such information):
  A.   The Registrant’s Annual Report on Form 10-K for the year ended December 31, 2005, filed with the SEC on March 14, 2006;
 
  B.   The Registrant’s Amendment No. 1 to the Annual Report on Form 10-K/A for the year ended December 31, 2005, filed with the SEC on April 26, 2006;
 
  C.   The Registrant’s Current Report on Form 8-K, filed with the SEC on January 12, 2006;
 
  D.   The Registrant’s Current Report on Form 8-K, filed with the SEC on April 11, 2006;
 
  E.   The Registrant’s Current Report on Form 8-K, filed with the SEC on May 8, 2006;
 
  F.   The Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2006, filed with the SEC on May 10, 2006;
 
  G.   The Registrant’s Current Report on Form 8-K, filed with the SEC on May 11, 2006;
 
  H.   The Registrant’s Definitive Proxy Statement on Form 14A, filed with the SEC on May 24, 2006;
 
  I.   The Registrant’s Current Report on Form 8-K, filed with the SEC on May 31, 2006;
 
  J.   The Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2006, filed with the SEC on August 9, 2006;
 
  K.   The Registrant’s Current Report on Form 8-K, filed with the SEC on August 25, 2006;
 
  L.   The Registrant’s Current Report on Form 8-K, filed with the SEC on November 7, 2006;
 
  M.   The Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended September 29, 2006, filed with the SEC on November 8, 2006;
 
  N.   The Registrant’s Current Report on Form 8-K, filed with the SEC on December 4, 2006;
 
  O.   The Registrant’s Current Report on Form 8-K, filed with the SEC on December 13, 2006;
 
  P.   The Registrant’s Current Report on Form 8-K, filed with the SEC on December 21, 2006;
 
  Q.   The Registrant’s Current Report on Form 8-K, filed with the SEC on February 5, 2007; and
 
  R.   The Registrant’s Current Report on Form 8-K/A, filed with the SEC on February 22, 2007.

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In addition, the Registrant hereby incorporates by reference into this registration statement on Form S-8 (the “Registration Statement”) the description of the Registrant’s common stock, par value $0.001 per share (the “Common Stock”), contained in the Registrant’s registration statement on Form 8-A, dated April 6, 1995, as filed with the SEC pursuant to Section 12 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), including any amendment or report filed for the purpose of updating such description.
     All documents filed with the SEC by the Registrant pursuant to Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act after the date of this Registration Statement and prior to the filing of a post-effective amendment indicating that all securities offered have been sold or which deregisters all securities then remaining unsold, shall be deemed to be incorporated by reference in this Registration Statement and to be part hereof from the date of filing such documents. Any statement contained in a document incorporated or deemed to be incorporated by reference herein shall be deemed to be modified or superseded for purposes of this Registration Statement to the extent that a statement contained herein or in any other subsequently filed document which also is or is deemed to be incorporated by reference herein modifies or supersedes such statement. Any statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Registration Statement.
Item 4.   Description of Securities.
     Not applicable.
Item 5.   Interest of Named Experts and Counsel.
     The validity of the issuance of the shares of the Registrant’s Common Stock offered hereby has been passed upon by Wilson Sonsini Goodrich & Rosati, P.C. (“WSGR”). Certain members and employees of WSGR beneficially own shares of the Registrant’s Common Stock. Jeffrey D. Saper, a member of WSGR, owns 6,484 shares of the Registrant’s Common Stock.
Item 6.   Indemnification of Directors and Officers.
     Reference is made to Section 102(b)(7) of the Delaware General Corporation Law (the “DGCL”), which enables a corporation in its original certificate of incorporation or an amendment to its certificate of incorporation to eliminate or limit the personal liability of a director for monetary damages for violations of the director’s fiduciary duty, except (1) for any breach of a director’s duty of loyalty to the corporation or its stockholders, (2) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (3) pursuant to Section 174 of the DGCL, providing for liability of directors for unlawful payment of dividends or unlawful stock purchases or redemption, or (4) for any transaction from which a director derived an improper personal benefit.
     Reference is also made to Section 145 of the DGCL which provides that a corporation may indemnify any persons, including officers and directors, who are, or are threatened to be made, parties to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, other than an action by or in the right of the corporation, by reason of the fact that the person was an officer, director, employee or agent of the corporation, or is or was serving at the request of the corporation or other enterprise. The indemnity may include expenses, including attorneys’ fees, judgments, fines and amounts paid in settlement actually and reasonably incurred by the person in connection with the action, suit or proceeding, provided the officer, director, employee or agent acted in good faith and in a manner he reasonably believed to be in or not opposed to the corporation’s best interests and, for a criminal proceeding, had no reasonable cause to believe that his conduct was unlawful. A Delaware corporation may indemnify officers and directors in an action by or in the right of the corporation under the same conditions, except that no indemnification is permitted without judicial approval if the officer or director is adjudged to be liable to the corporation. Where an officer or director is successful on the merits or otherwise in the defense of any action referred to above, the corporation must indemnify him against the expenses, including attorneys’ fees, which the officer or director actually and reasonably incurred.
     The Amended and Restated Certificate of Incorporation of the Registrant and the Amended and Restated Bylaws of the Registrant provide for the indemnification of officers and directors to the fullest extent permitted by applicable law.

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     In addition, the Registrant has entered into agreements with its officers and directors that provide for their indemnification with respect to certain matters, in addition to indemnification provided for in its Amended and Restated Bylaws. These agreements, among other things, indemnify the Registrant’s officers and directors for certain expenses (including attorneys’ fees), judgments, fines and settlement amounts incurred by any such person in any action or proceeding, including any action by or in the right of the Registrant, arising out of such person’s services as an officer or director of the Registrant, any subsidiary of the Registrant or any other company or enterprise to which the person provides services at the Registrant’s request. The Registrant also maintains an insurance policy insuring the Registrant’s officers and directors against liability for certain acts and omissions while acting in their official capacities.
Item 7.   Exemption from Registration Claimed.
     Not applicable.
Item 8.   Exhibits.
     
Exhibit    
Number   Description
4.1
  Entone Technologies, Inc. 2003 Stock Plan
 
   
4.2
  First Amendment to Entone Technologies, Inc. 2003 Stock Plan
 
   
4.3
  Entone Technologies, Inc. 2003 Stock Plan Form of Stock Purchase Agreement
 
   
4.4
  Entone Technologies, Inc. 2003 Stock Plan Form of Stock Option Agreement
 
   
5.1
  Opinion of Wilson Sonsini Goodrich & Rosati, P.C., as to the legality of the securities being registered
 
   
23.1
  Consent of PricewaterhouseCoopers LLP, Independent Registered Public Accounting Firm
 
   
23.2
  Consent of Deloitte & Touche LLP, Independent Auditors
 
   
23.3
  Consent of Wilson Sonsini Goodrich & Rosati, P.C. (included in Exhibit 5.1)
 
   
24.1
  Power of Attorney (included on signature page to this Registration Statement)
Item 9. Undertakings.
  A.   The undersigned Registrant hereby undertakes:
     (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this Registration Statement:
     (i) To include any prospectus required by Section 10(a)(3) of the Securities Act;
     (ii) To reflect in the prospectus any facts or events arising after the effective date of the Registration Statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the Registration Statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20 percent change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective Registration Statement;

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     (iii) To include any material information with respect to the plan of distribution not previously disclosed in the Registration Statement or any material change to such information in the Registration Statement;
     provided, however, that paragraphs (A)(1)(i) and (A)(1)(ii) do not apply if the information required to be included in a post-effective amendment by those paragraphs is contained in reports filed with or furnished to the Commission by the Registrant pursuant to Section 13 or Section 15(d) of the Exchange Act that are incorporated by reference in the Registration Statement.
     (2) That, for the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
     (3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.
     B. The undersigned Registrant hereby undertakes that, for purposes of determining any liability under the Securities Act, each filing of the Registrant’s annual report pursuant to Section 13(a) or Section 15(d) of the Exchange Act (and, where applicable, each filing of an employee benefit plan’s annual report pursuant to Section 15(d) of the Exchange Act) that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
     C. Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the Company pursuant to the foregoing provisions, or otherwise, the Company has been advised that in the opinion of the Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Company in successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered hereunder, the Company will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question of whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.

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SIGNATURES
     Pursuant to the requirements of the Securities Act of 1933, as amended, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-8 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Sunnyvale, State of California, on February 27, 2007.
         
  HARMONIC INC.
 
 
  By:   /s/ Robin N. Dickson    
    Robin N. Dickson   
    Chief Financial Officer   
 
POWER OF ATTORNEY
     KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Patrick J. Harshman and Robin N. Dickson, jointly and severally, his attorneys-in-fact, each with the power of substitution, for him in any and all capacities, to sign any and all amendments to this Registration Statement on Form S-8 (including post-effective amendments), and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that each of said attorneys-in-fact, or his substitute or substitutes, may do or cause to be done by virtue hereof.
     Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated:
         
Signature   Title   Date
 
 
/s/ Patrick J. Harshman
  Chief Executive Officer    
 
(Patrick J. Harshman)
   (Principal Executive Officer)   February 27, 2007
 
       
/s/ Robin N. Dickson
  Chief Financial Officer
(Principal Financial and
   
 
(Robin N. Dickson)
   Accounting Officer)   February 27, 2007
 
       
/s/ Anthony J. Ley
       
 
(Anthony J. Ley)
   Chairman of the Board   February 27, 2007
 
       
/s/ Floyd Kvamme
       
 
(E. Floyd Kvamme)
   Director   February 27, 2007
 
       
/s/ William Reddersen
       
 
(William Reddersen)
   Director   February 27, 2007
 
       
/s/ Lewis Solomon
       
 
(Lewis Solomon)
   Director   February 27, 2007
 
       
/s/ Michel L. Vaillaud
       
 
(Michel L. Vaillaud)
   Director   February 27, 2007
 
       
/s/ David Van Valkenburg
       
 
(David Van Valkenburg)
   Director   February 27, 2007

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INDEX TO EXHIBITS
     
Exhibit    
Number   Description
4.1
  Entone Technologies, Inc. 2003 Stock Plan
 
   
4.2
  First Amendment to Entone Technologies, Inc. 2003 Stock Plan
 
   
4.3
  Entone Technologies, Inc. 2003 Stock Plan Form of Stock Purchase Agreement
 
   
4.4
  Entone Technologies, Inc. 2003 Stock Plan Form of Stock Option Agreement
 
   
5.1
  Opinion of Wilson Sonsini Goodrich & Rosati, P.C., as to the legality of the securities being registered
 
   
23.1
  Consent of PricewaterhouseCoopers LLP, Independent Registered Public Accounting Firm
 
   
23.2
  Consent of Deloitte & Touche LLP, Independent Auditors
 
   
23.3
  Consent of Wilson Sonsini Goodrich & Rosati, P.C. (included in Exhibit 5.1)
 
   
24.1
  Power of Attorney (included on signature page to this Registration Statement)

exv4w1
 

Exhibit 4.1
Entone Technologies, Inc.
2003 Stock Plan
Adopted on October 10, 2003

 


 

TABLE OF CONTENTS
             
SECTION 1. ESTABLISHMENT AND PURPOSE     1  
 
           
SECTION 2. ADMINISTRATION     1  
 
           
 
  (a)          Committees of the Board of Directors     1  
 
           
 
  (b)          Authority of the Board of Directors     1  
 
           
SECTION 3. ELIGIBILITY     1  
 
           
 
  (a)          General Rule     1  
 
           
 
  (b)          Ten-Percent Stockholders     1  
 
           
SECTION 4. STOCK SUBJECT TO PLAN     1  
 
           
 
  (a)          Basic Limitation     1  
 
           
 
  (b)          Additional Shares     1  
 
           
SECTION 5. TERMS AND CONDITIONS OF AWARDS OR SALES     2  
 
           
 
  (a)          Stock Purchase Agreement     2  
 
           
 
  (b)          Duration of Offers and Nontransferability of Rights     2  
 
           
 
  (c)          Purchase Price     2  
 
           
 
  (d)          Withholding Taxes     2  
 
           
 
  (e)          Restrictions on Transfer of Shares and Minimum Vesting     2  
 
           
 
  (f)          Change in Control     2  
 
           
SECTION 6. TERMS AND CONDITIONS OF OPTIONS     2  
 
           
 
  (a)          Stock Option Agreement     2  
 
           
 
  (b)          Number of Shares     3  
 
           
 
  (c)          Exercise Price     3  
 
           
 
  (d)          Exercisability     3  
 
           
 
  (e)          Change in Control     3  
 
           
 
  (f)          Basic Term     3  
 
           
 
  (g)          Termination of Service (Except by Death)     3  
 
           
 
  (h)          Leaves of Absence     4  
 
           
 
  (i)          Death of Optionee     4  
 
           
 
  (j)          Restrictions on Transfer of Shares and Minimum Vesting     4  
 
           
 
  (k)          Transferability of Options     4  
 
           
 
  (l)          Withholding Taxes     4  
 
           
 
  (m)          No Rights as a Stockholder     5  
 
           
 
  (n)          Modification, Extension and Assumption of Options     5  
 
           
SECTION 7. PAYMENT FOR SHARES     5  
 
           
 
  (a)          General Rule     5  
 
           
 
  (b)          Surrender of Stock     5  

 


 

             
 
  (c)          Services Rendered     5  
 
           
 
  (d)          Promissory Note     5  
 
           
 
  (e)          Exercise/Sale     5  
 
           
 
  (f)          Exercise/Pledge     5  
 
           
 
  (g)          Stock Exchange     5  
 
           
SECTION 8. ADJUSTMENT OF SHARES     6  
 
           
 
  (a)          General     6  
 
           
 
  (b)          Repurchase of Shares Upon Termination of Service     6  
 
           
 
  (c)          Reservation of Rights     6  
 
           
SECTION 9. SECURITIES LAW REQUIREMENTS     6  
 
           
 
  (a)          General     6  
 
           
 
  (b)          Financial Reports     6  
 
           
SECTION 10. NO RETENTION RIGHTS     6  
 
           
SECTION 11. DURATION AND AMENDMENTS     6  
 
           
 
  (a)          Term of the Plan     6  
 
           
 
  (b)          Right to Amend or Terminate the Plan     7  
 
           
 
  (c)          Effect of Amendment or Termination     7  
 
           
SECTION 12. DEFINITIONS     7  

 


 

Entone Technologies, Inc. 2003 Stock Plan
SECTION 1. ESTABLISHMENT AND PURPOSE.
          The purpose of the Plan is to offer selected persons an opportunity to acquire a proprietary interest in the success of the Company, or to increase such interest, by purchasing Shares of the Company’s Stock. The Plan provides both for the direct award or sale of Shares and for the grant of Options to purchase Shares. Options granted under the Plan may include Nonstatutory Options as well as ISOs intended to qualify under Section 422 of the Code.
          Capitalized terms are defined in Section 12.
SECTION 2. ADMINISTRATION.
          (a) Committees of the Board of Directors. The Plan may be administered by one or more Committees. Each Committee shall consist of one or more members of the Board of Directors who have been appointed by the Board of Directors. Each Committee shall have such authority and be responsible for such functions as the Board of Directors has assigned to it. If no Committee has been appointed, the entire Board of Directors shall administer the Plan. Any reference to the Board of Directors in the Plan shall be construed as a reference to the Committee (if any) to whom the Board of Directors has assigned a particular function.
          (b) Authority of the Board of Directors. Subject to the provisions of the Plan, the Board of Directors shall have full authority and discretion to take any actions it deems necessary or advisable for the administration of the Plan. All decisions, interpretations and other actions of the Board of Directors shall be final and binding on all Purchasers, all Optionees and all persons deriving their rights from a Purchaser or Optionee.
SECTION 3. ELIGIBILITY.
          (a) General Rule. Only Employees, Outside Directors and Consultants shall be eligible for the grant of Nonstatutory Options or the direct award or sale of Shares. Only Employees shall be eligible for the grant of ISOs.
          (b) Ten-Percent Stockholders. A person who owns more than 10% of the total combined voting power of all classes of outstanding stock of the Company, its Parent or any of its Subsidiaries shall not be eligible for designation as an Optionee or Purchaser unless (i) the Exercise Price is at least 110% of the Fair Market Value of a Share on the date of grant, (ii) the Purchase Price (if any) is at least 100% of the Fair Market Value of a Share and (iii) in the case of an ISO, such ISO by its terms is not exercisable after the expiration of five years from the date of grant. For purposes of this Subsection (b), in determining stock ownership, the attribution rules of Section 424(d) of the Code shall be applied.
SECTION 4. STOCK SUBJECT TO PLAN.
          (a) Basic Limitation. Not more than 2,920,000 Shares may be issued under the Plan (subject to Subsection (b) below and Section 8). The number of Shares that are subject to Options or other rights outstanding at any time under the Plan shall not exceed the number of Shares that then remain available for issuance under the Plan. The Company, during the term of the Plan, shall at all times reserve and keep available sufficient Shares to satisfy the requirements of the Plan. Shares offered under the Plan may be authorized but unissued Shares or treasury Shares.
          (b) Additional Shares. In the event that Shares previously issued under the Plan are reacquired by the Company pursuant to a forfeiture provision, right of repurchase or right of first refusal, such Shares shall be added to the number of Shares then available for issuance under the Plan. However, the aggregate

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number of Shares issued upon the exercise of ISOs (including Shares reacquired by the Company) shall in no event exceed 200% of the number specified in Subsection (a) above. In the event that an outstanding Option or other right for any reason expires or is canceled, the Shares allocable to the unexercised portion of such Option or other right shall not reduce the number of Shares available for issuance under the Plan.
SECTION 5. TERMS AND CONDITIONS OF AWARDS OR SALES.
          (a) Stock Purchase Agreement. Each award or sale of Shares under the Plan (other than upon exercise of an Option) shall be evidenced by a Stock Purchase Agreement between the Purchaser and the Company. Such award or sale shall be subject to all applicable terms and conditions of the Plan and may be subject to any other terms and conditions which are not inconsistent with the Plan and which the Board of Directors deems appropriate for inclusion in a Stock Purchase Agreement. The provisions of the various Stock Purchase Agreements entered into under the Plan need not be identical.
          (b) Duration of Offers and Nontransferability of Rights. Any right to acquire Shares under the Plan (other than an Option) shall automatically expire if not exercised by the Purchaser within 30 days after the grant of such right was communicated to the Purchaser by the Company. Such right shall not be transferable and shall be exercisable only by the Purchaser to whom such right was granted.
          (c) Purchase Price. Subject to Section 3(b), the Purchase Price of each Share to be offered under the Plan shall not be less than the lesser of (i) an amount equal to 85% of the Fair Market Value of a Share of the Company’s Common Stock at the time the right is granted, or (ii) an amount which, under the terms of the grant, may not be less than 85% of the Fair Market Value of a Share of the Company’s Common Stock at the time the right is exercised. Otherwise, the Board of Directors shall determine the Purchase Price at its sole discretion. The Purchase Price shall be payable in a form described in Section 7.
          (d) Withholding Taxes. As a condition to the purchase of Shares, the Purchaser shall make such arrangements as the Board of Directors may require for the satisfaction of any federal, state, local or foreign withholding tax obligations that may arise in connection with such purchase.
          (e) Restrictions on Transfer of Shares and Minimum Vesting. Any Shares awarded or sold under the Plan shall be subject to such special forfeiture conditions, rights of repurchase, rights of first refusal and other transfer restrictions as the Board of Directors may determine. Such restrictions shall be set forth in the applicable Stock Purchase Agreement and shall apply in addition to any restrictions that may apply to holders of Shares generally. In the case of a Purchaser who is not an officer of the Company, an Outside Director or a Consultant:
     (i) Any right to repurchase the Purchaser’s Shares at the original Purchase Price (if any) upon termination of the Purchaser’s Service shall lapse at least as rapidly as 20% per year over the five-year period commencing on the date of the award or sale of the Shares;
     (ii) Any such right may be exercised only for cash or for cancellation of indebtedness incurred in purchasing the Shares; and
     (iii) Any such right may be exercised only within 90 days after the termination of the Purchaser’s Service.
          (f) Change in Control. The Change in Control provisions for the award or sale of Shares are set forth in the Stock Purchase Agreements.
SECTION 6. TERMS AND CONDITIONS OF OPTIONS.
          (a) Stock Option Agreement. Each grant of an Option under the Plan shall be evidenced by a Stock Option Agreement between the Optionee and the Company. The Option shall be subject to all

2


 

applicable terms and conditions of the Plan and may be subject to any other terms and conditions which are not inconsistent with the Plan and which the Board of Directors deems appropriate for inclusion in a Stock Option Agreement. The provisions of the various Stock Option Agreements entered into under the Plan need not be identical.
          (b) Number of Shares. Each Stock Option Agreement shall specify the number of Shares that are subject to the Option and shall provide for the adjustment of such number in accordance with Section 8. The Stock Option Agreement shall also specify whether the Option is an ISO or a Nonstatutory Option.
          (c) Exercise Price. Each Stock Option Agreement shall specify the Exercise Price. The Exercise Price of an ISO shall not be less than 100% of the Fair Market Value of a Share on the date of grant, and a higher percentage may be required by Section 3(b). The Exercise Price of a Nonstatutory Option shall not be less than 85% of the Fair Market Value of a Share on the date of grant, and a higher percentage may be required by Section 3(b). Subject to the preceding two sentences, the Exercise Price under any Option shall be determined by the Board of Directors at its sole discretion. The Exercise Price shall be payable in a form described in Section 7.
          (d) Exercisability. Each Stock Option Agreement shall specify the date when all or any installment of the Option is to become exercisable. No Option shall be exercisable unless the Optionee has delivered an executed copy of the Stock Option Agreement to the Company. In the case of an Optionee who is not an officer of the Company, an Outside Director or a Consultant, an Option shall become exercisable at least as rapidly as 20% per year over the five-year period commencing on the date of grant. Subject to the preceding sentence, the Board of Directors shall determine the exercisability provisions of the Stock Option Agreement at its sole discretion.
          (e) Change in Control. If the Company undergoes a Change in Control, then all unvested shares not assumed by the continuing or surviving entity shall accelerate and become vested shares as of the date such Change in Control is consummated.
          (f) Basic Term. The Stock Option Agreement shall specify the term of the Option. The term shall not exceed 10 years from the date of grant, and a shorter term may be required by Section 3(b). Subject to the preceding sentence, the Board of Directors at its sole discretion shall determine when an Option is to expire.
          (g) Termination of Service (Except by Death). If an Optionee’s Service terminates for any reason other than the Optionee’s death, then the Optionee’s Options shall expire on the earliest of the following occasions:
     (i) The expiration date determined pursuant to Subsection (f) above;
     (ii) The date three months after the termination of the Optionee’s Service for any reason other than Disability, or such later date as the Board of Directors may determine; or
     (iii) The date six months after the termination of the Optionee’s Service by reason of Disability, or such later date as the Board of Directors may determine.
The Optionee may exercise all or part of the Optionee’s Options at any time before the expiration of such Options under the preceding sentence, but only to the extent that such Options had become exercisable before the Optionee’s Service terminated (or became exercisable as a result of the termination) and the underlying Shares had vested before the Optionee’s Service terminated (or vested as a result of the termination). The balance of such Options shall lapse when the Optionee’s Service terminates. In the event that the Optionee dies after the termination of the Optionee’s Service but before the expiration of the Optionee’s Options, all or part of such Options may be exercised (prior to expiration) by the executors or administrators of the Optionee’s estate or by any person who has acquired such Options directly from the Optionee by beneficiary designation, bequest or inheritance, but only to the extent that such Options had become exercisable before the Optionee’s Service terminated (or became exercisable as a

3


 

result of the termination) and the underlying Shares had vested before the Optionee’s Service terminated (or vested as a result of the termination).
          (h) Leaves of Absence. For purposes of Subsection (g) above, Service shall be deemed to continue while the Optionee is on a bona fide leave of absence, if such leave was approved by the Company in writing and if continued crediting of Service for this purpose is expressly required by the terms of such leave or by applicable law (as determined by the Company).
          (i) Death of Optionee. If an Optionee dies while the Optionee is in Service, then the Optionee’s Options shall expire on the earlier of the following dates:
     (i) The expiration date determined pursuant to Subsection (f) above; or
     (ii) The date 12 months after the Optionee’s death, or such later date as the Board of Directors may determine.
All or part of the Optionee’s Options may be exercised at any time before the expiration of such Options under the preceding sentence by the executors or administrators of the Optionee’s estate or by any person who has acquired such Options directly from the Optionee by beneficiary designation, bequest or inheritance, but only to the extent that such Options had become exercisable before the Optionee’s death (or became exercisable as a result of the death) and the underlying Shares had vested before the Optionee’s death (or vested as a result of the Optionee’s death). The balance of such Options shall lapse when the Optionee dies.
          (j) Restrictions on Transfer of Shares and Minimum Vesting. Any Shares issued upon exercise of an Option shall be subject to such special forfeiture conditions, rights of repurchase, rights of first refusal and other transfer restrictions as the Board of Directors may determine. Such restrictions shall be set forth in the applicable Stock Option Agreement and shall apply in addition to any restrictions that may apply to holders of Shares generally. In the case of an Optionee who is not an officer of the Company, an Outside Director or a Consultant:
     (i) Any right to repurchase the Optionee’s Shares at the original Exercise Price upon termination of the Optionee’s Service shall lapse at least as rapidly as 20% per year over the five-year period commencing on the date of the option grant;
     (ii) Any such right may be exercised only for cash or for cancellation of indebtedness incurred in purchasing the Shares; and
     (iii) Any such right may be exercised only within 90 days after the later of (A) the termination of the Optionee’s Service or (B) the date of the option exercise.
          (k) Transferability of Options. An Option shall be transferable by the Optionee only by (i) a beneficiary designation, (ii) a will or (iii) the laws of descent and distribution, except as provided in the next sentence. If the applicable Stock Option Agreement so provides, an NSO shall also be transferable by the Optionee by (i) a gift to a member of the Optionee’s Immediate Family or (ii) a gift to an inter vivos or testamentary trust in which members of the Optionee’s Immediate Family have a beneficial interest of more than 50% and which provides that such NSO is to be transferred to the beneficiaries upon the Optionee’s death. An ISO may be exercised during the lifetime of the Optionee only by the Optionee or by the Optionee’s guardian or legal representative.
          (l) Withholding Taxes. As a condition to the exercise of an Option, the Optionee shall make such arrangements as the Board of Directors may require for the satisfaction of any federal, state, local or foreign withholding tax obligations that may arise in connection with such exercise. The Optionee shall also make such arrangements as the Board of Directors may require for the satisfaction of any federal, state, local or foreign withholding tax obligations that may arise in connection with the disposition of Shares acquired by exercising an Option.

4


 

          (m) No Rights as a Stockholder. An Optionee, or a transferee of an Optionee, shall have no rights as a stockholder with respect to any Shares covered by the Optionee’s Option until such person becomes entitled to receive such Shares by filing a notice of exercise and paying the Exercise Price pursuant to the terms of such Option.
          (n) Modification, Extension and Assumption of Options. Within the limitations of the Plan, the Board of Directors may modify, extend or assume outstanding Options or may accept the cancellation of outstanding Options (whether granted by the Company or another issuer) in return for the grant of new Options for the same or a different number of Shares and at the same or a different Exercise Price. The foregoing notwithstanding, no modification of an Option shall, without the consent of the Optionee, impair the Optionee’s rights or increase the Optionee’s obligations under such Option.
SECTION 7. PAYMENT FOR SHARES.
          (a) General Rule. The entire Purchase Price or Exercise Price of Shares issued under the Plan shall be payable in cash or cash equivalents at the time when such Shares are purchased, except as otherwise provided in this Section 7.
          (b) Surrender of Stock. To the extent that a Stock Option Agreement so provides, all or any part of the Exercise Price may be paid by surrendering, or attesting to the ownership of, Shares that are already owned by the Optionee. Such Shares shall be surrendered to the Company in good form for transfer and shall be valued at their Fair Market Value on the date when the Option is exercised. The Optionee shall not surrender, or attest to the ownership of, Shares in payment of the Exercise Price if such action would cause the Company to recognize compensation expense (or additional compensation expense) with respect to the Option for financial reporting purposes.
          (c) Services Rendered. At the discretion of the Board of Directors, Shares may be awarded under the Plan in consideration of services rendered to the Company, a Parent or a Subsidiary prior to the award.
          (d) Promissory Note. To the extent that a Stock Option Agreement or Stock Purchase Agreement so provides, all or a portion of the Exercise Price or Purchase Price (as the case may be) of Shares issued under the Plan may be paid with a full-recourse promissory note. However, the par value of the Shares, if newly issued, shall be paid in cash or cash equivalents. The Shares shall be pledged as security for payment of the principal amount of the promissory note and interest thereon. The interest rate payable under the terms of the promissory note shall not be less than the minimum rate (if any) required to avoid the imputation of additional interest under the Code. Subject to the foregoing, the Board of Directors (at its sole discretion) shall specify the term, interest rate, amortization requirements (if any) and other provisions of such note.
          (e) Exercise/Sale. To the extent that a Stock Option Agreement so provides, and if Stock is publicly traded, payment may be made all or in part by the delivery (on a form prescribed by the Company) of an irrevocable direction to a securities broker approved by the Company to sell Shares and to deliver all or part of the sales proceeds to the Company in payment of all or part of the Exercise Price and any withholding taxes.
          (f) Exercise/Pledge. To the extent that a Stock Option Agreement so provides, and if Stock is publicly traded, payment may be made all or in part by the delivery (on a form prescribed by the Company) of an irrevocable direction to pledge Shares to a securities broker or lender approved by the Company, as security for a loan, and to deliver all or part of the loan proceeds to the Company in payment of all or part of the Exercise Price and any withholding taxes.
          (g) Stock Exchange. At the discretion of the Board of Directors, Shares may be awarded under the Plan in exchange for securities of other entities.

5


 

SECTION 8. ADJUSTMENT OF SHARES.
          (a) General. In the event of a subdivision of the outstanding Stock, a declaration of a dividend payable in Shares, a declaration of an extraordinary dividend payable in a form other than Shares in an amount that has a material effect on the Fair Market Value of the Stock, a combination or consolidation of the outstanding Stock into a lesser number of Shares, a recapitalization, a spin-off, a reclassification or a similar occurrence, the Board of Directors shall make appropriate adjustments in one or more of (i) the number of Shares available for future grants under Section 4, (ii) the number of Shares covered by each outstanding Option or (iii) the Exercise Price under each outstanding Option.
          (b) Repurchase of Shares Upon Termination of Service. Except as expressly provided in the Stock Purchase Agreement or Notice of Stock Option Grant (each, a “Share Agreement”) governing a specific stock or option grant under the Plan, Shares which have not vested shall be deemed “Restricted Shares” and shall be subject to repurchase (in whole or in part) by the Company at cost in the event the holder’s Service with the Company terminates for any reason. The terms of such repurchase right shall be set forth in the applicable Share Agreement.
          (c) Reservation of Rights. Except as provided in this Section 8, an Optionee or Purchaser shall have no rights by reason of (i) any subdivision or consolidation of shares of stock of any class, (ii) the payment of any dividend or (iii) any other increase or decrease in the number of shares of stock of any class. Any issuance by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, shall not affect, and no adjustment by reason thereof shall be made with respect to, the number or Exercise Price of Shares subject to an Option. The grant of an Option pursuant to the Plan shall not affect in any way the right or power of the Company to make adjustments, reclassifications, reorganizations or changes of its capital or business structure, to merge or consolidate or to dissolve, liquidate, sell or transfer all or any part of its business or assets.
SECTION 9. SECURITIES LAW REQUIREMENTS.
          (a) General. Shares shall not be issued under the Plan unless the issuance and delivery of such Shares comply with (or are exempt from) all applicable requirements of law, including (without limitation) the Securities Act of 1933, as amended, the rules and regulations promulgated thereunder, state securities laws and regulations, and the regulations of any stock exchange or other securities market on which the Company’s securities may then be traded.
          (b) Financial Reports. The Company each year shall furnish to Optionees, Purchasers and stockholders who have received Stock under the Plan its balance sheet and income statement, unless such Optionees, Purchasers or stockholders are key Employees whose duties with the Company assure them access to equivalent information. Such balance sheet and income statement need not be audited.
SECTION 10. NO RETENTION RIGHTS.
          Nothing in the Plan or in any right or Option granted under the Plan shall confer upon the Purchaser or Optionee any right to continue in Service for any period of specific duration or interfere with or otherwise restrict in any way the rights of the Company (or any Parent or Subsidiary employing or retaining the Purchaser or Optionee) or of the Purchaser or Optionee, which rights are hereby expressly reserved by each, to terminate his or her Service at any time and for any reason, with or without cause.
SECTION 11. DURATION AND AMENDMENTS.
          (a) Term of the Plan. The Plan, as set forth herein, shall become effective on the date of its adoption by the Board of Directors, subject to the approval of the Company’s stockholders. If the stockholders fail to approve the Plan within 12 months after its adoption by the Board of Directors, then any grants, exercises or sales that have already occurred under the Plan shall be rescinded and no additional grants, exercises or sales shall

6


 

thereafter be made under the Plan. The Plan shall terminate automatically 10 years after the later of (i) its adoption by the Board of Directors or (ii) the most recent increase in the number of Shares reserved under Section 4 that was approved by the Company’s stockholders. The Plan may be terminated on any earlier date pursuant to Subsection (b) below.
          (b) Right to Amend or Terminate the Plan. The Board of Directors may amend, suspend or terminate the Plan at any time and for any reason; provided, however, that any amendment of the Plan shall be subject to the approval of the Company’s stockholders if it (i) increases the number of Shares available for issuance under the Plan (except as provided in Section 8) or (ii) materially changes the class of persons who are eligible for the grant of ISOs. Stockholder approval shall not be required for any other amendment of the Plan. If the stockholders fail to approve an increase in the number of Shares reserved under Section 4 within 12 months after its adoption by the Board of Directors, then any grants, exercises or sales that have already occurred in reliance on such increase shall be rescinded and no additional grants, exercises or sales shall thereafter be made in reliance on such increase.
          (c) Effect of Amendment or Termination. No Shares shall be issued or sold under the Plan after the termination thereof, except upon exercise of an Option granted prior to such termination. The termination of the Plan, or any amendment thereof, shall not affect any Share previously issued or any Option previously granted under the Plan.
SECTION 12. DEFINITIONS.
          (a) “Board of Directors” shall mean the Board of Directors of the Company, as constituted from time to time.
          (b) “Change in Control” shall mean:
     (i) The consummation of a merger or consolidation of the Company with or into another entity or any other corporate reorganization, if persons who were not stockholders of the Company immediately prior to such merger, consolidation or other reorganization own immediately after such merger, consolidation or other reorganization 50% or more of the voting power of the outstanding securities of each of (A) the continuing or surviving entity and (B) any direct or indirect parent corporation of such continuing or surviving entity; or
     (ii) The sale, transfer or other disposition of all or substantially all of the Company’s assets.
A transaction shall not constitute a Change in Control if its sole purpose is to change the state of the Company’s incorporation or to create a holding company that will be owned in substantially the same proportions by the persons who held the Company’s securities immediately before such transaction.
          (c) “Code” shall mean the Internal Revenue Code of 1986, as amended.
          (d) “Committee” shall mean a committee of the Board of Directors, as described in Section 2(a).
          (e) “Company” shall mean Entone Technologies, Inc., a Delaware corporation.
          (f) “Consultant” shall mean a person who performs bona fide services for the Company, a Parent or a Subsidiary as a consultant or advisor, excluding Employees and Outside Directors.
          (g) “Disability” shall mean that the Optionee is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment.

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          (h) “Employee” shall mean any individual who is a common-law employee of the Company, a Parent or a Subsidiary.
          (i) “Exercise Price” shall mean the amount for which one Share may be purchased upon exercise of an Option, as specified by the Board of Directors in the applicable Stock Option Agreement.
          (j) “Fair Market Value” shall mean the fair market value of a Share, as determined by the Board of Directors in good faith. Such determination shall be conclusive and binding on all persons.
          (k) “Immediate Family” shall mean any child, stepchild, grandchild, parent, stepparent, grandparent, spouse, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law or sister-in-law and shall include adoptive relationships.
          (l) “ISO” shall mean an employee incentive stock option described in Section 422(b) of the Code.
          (m) “Nonstatutory Option” shall mean a stock option not described in Sections 422(b) or 423(b) of the Code.
          (n) “Option” shall mean an ISO or Nonstatutory Option granted under the Plan and entitling the holder to purchase Shares.
          (o) “Optionee” shall mean a person who holds an Option.
          (p) “Outside Director” shall mean a member of the Board of Directors who is not an Employee.
          (q) “Parent” shall mean any corporation (other than the Company) in an unbroken chain of corporations ending with the Company, if each of the corporations other than the Company owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in such chain. A corporation that attains the status of a Parent on a date after the adoption of the Plan shall be considered a Parent commencing as of such date.
          (r) “Plan” shall mean this Entone Technologies, Inc. 2003 Stock Plan.
          (s) “Purchase Price” shall mean the consideration for which one Share may be acquired under the Plan (other than upon exercise of an Option), as specified by the Board of Directors.
          (t) “Purchaser” shall mean a person to whom the Board of Directors has offered the right to acquire Shares under the Plan (other than upon exercise of an Option).
          (u) “Service” shall mean service as an Employee, Outside Director or Consultant.
          (v) “Share” shall mean one share of Stock, as adjusted in accordance with Section 8 (if applicable).
          (w) “Stock” shall mean the Common Stock of the Company, with a par value of $0.001 per Share.
          (x) “Stock Option Agreement” shall mean the agreement between the Company and an Optionee that contains the terms, conditions and restrictions pertaining to the Optionee’s Option.
          (y) “Stock Purchase Agreement” shall mean the agreement between the Company and a Purchaser who acquires Shares under the Plan that contains the terms, conditions and restrictions pertaining to the acquisition of such Shares.

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          (z) “Subsidiary” shall mean any corporation (other than the Company) in an unbroken chain of corporations beginning with the Company, if each of the corporations other than the last corporation in the unbroken chain owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in such chain. A corporation that attains the status of a Subsidiary on a date after the adoption of the Plan shall be considered a Subsidiary commencing as of such date.

9

exv4w2
 

Exhibit 4.2
FIRST AMENDMENT TO
ENTONE TECHNOLOGIES, INC.
2003 STOCK PLAN
     This Amendment is adopted with respect to that certain Entone Technologies, Inc. 2003 Stock Plan (the “Plan”), as adopted by the Board of Directors of Entone Technologies, Inc., a Delaware corporation (the “Company”), on October 10, 2003, and provides as follows:
     1. Effective Date. The Effective Date of this Amendment is June 1, 2006.
     2. Amendment. Section 6(e) of the Plan is amended to read as follows:
Change in Control. If the Company undergoes a Change in Control, then except as may be otherwise provided in the Stock Option Agreement as approved by the Board of Directors, to the extent the Option is not yet exercisable and is not assumed by the continuing or surviving entity, it shall become exercisable in full as of the date such Change in Control is consummated.”
     3. Continuing Effect. Except as provided in Section 2 above, all terms and conditions of the Plan shall remain in full force and effect.
     IN WITNESS WHEREOF, the undersigned Assistant Secretary of the Company certifies that the foregoing Amendment was duly adopted by the Board of Directors of the Company on June 1, 2006.
     
 
  /s/ Terence M. Kelly
 
   
 
  TERENCE M. KELLY, Assistant Secretary

1

exv4w3
 

Exhibit 4.3
ENTONE TECHNOLOGIES, INC.
2003 STOCK PLAN
SUMMARY OF STOCK PURCHASE
     By your signature and the signature of the Company’s representative below, you and the Company agree that you are purchasing shares subject to the terms and conditions of the Entone Technologies, Inc. 2003 Stock Plan and the Stock Purchase Agreement, both of which are attached to and made a part of this document.
                     
 
  Name of Purchaser:                
 
                   
 
                   
 
  Total Number of Purchased Shares:                
 
                   
 
                   
 
  Purchase Price Per Share:     $          
 
                   
 
                   
 
  Date of Offer:                
 
                   
 
                   
 
  Date of Purchase:                
 
                   
 
                   
 
  Vesting Commencement Date:                
 
                   
 
                   
    Vesting Schedule:           The Right of Repurchase shall lapse with respect to the first twenty five percent (25%) of the Purchased Shares when the Purchaser completes twelve (12) months of continuous Service after the Vesting Commencement Date. The Right of Repurchase shall lapse with respect to an additional 2.08333% of the Purchased Shares when the Purchaser completes each month of continuous Service thereafter. Notwithstanding the foregoing, this vesting schedule shall accelerate so that all unvested shares shall become vested shares upon a Change in Control (as defined in the Entone Technologies, Inc. 2003 Stock Plan) followed by the termination of Purchaser’s Service with the Company without cause (as defined in the Stock Purchase Agreement) within six (6) months following a Change in Control.
The Purchase Price must be paid on or before the date of purchase set forth above. If you fail to pay on time, this offer automatically terminates.
                 
PURCHASER:       ENTONE TECHNOLOGIES,    
 
               
 
      By        
 
         
 
   
 
               
 
      Title:        
 
               

 


 

ENTONE TECHNOLOGIES, INC.
2003 STOCK PLAN:
STOCK PURCHASE AGREEMENT
SECTION 1. ACQUISITION OF SHARES.
          (a) Transfer. On the terms and conditions set forth in the Summary of Stock Purchase and this Agreement, the Company agrees to transfer to the Purchaser the number of Shares set forth in the Summary of Stock Purchase. The transfer shall occur at the offices of the Company on the date of purchase set forth in the Summary of Stock Purchase or at such other place and time as the parties may agree.
          (b) Consideration. The Purchaser agrees to pay the Purchase Price set forth in the Summary of Stock Purchase for each Purchased Share. The Purchase Price is agreed to be at least 100% of the Fair Market Value of the Purchased Shares. Payment shall be made in cash or cash equivalents on the date of purchase set forth in the Summary of Stock Purchase.
          (c) Stock Plan and Defined Terms. The transfer of the Purchased Shares is subject to the Plan, a copy of which the Purchaser acknowledges having received. The provisions of the Plan are incorporated into this Agreement by this reference. Capitalized terms are defined in Section 12 of this Agreement.
SECTION 2. RIGHT OF REPURCHASE.
          (a) Scope of Repurchase Right. Until they vest in accordance with the Summary of Stock Purchase and Subsection (b) below, the Purchased Shares shall be Restricted Shares and shall be subject to the Company’s Right of Repurchase. The Right of Repurchase may be exercised automatically under Subsection (d) below. If the Right of Repurchase is exercised, the Company shall pay the Purchaser an amount equal to the Purchase Price for each of the Restricted Shares being repurchased.
          (b) Lapse of Repurchase Right. The Right of Repurchase shall lapse with respect to the Restricted Shares in accordance with the vesting schedule set forth in the Summary of Stock Purchase.
          (c) Escrow. Upon issuance, the certificate(s) for Purchased Shares shall be deposited in escrow with the Company to be held in accordance with the provisions of this Agreement. Any additional or exchanged securities or other property described in Subsection (f) below shall immediately be delivered to the Company to be held in escrow. All ordinary cash dividends on Purchased Shares (or on other securities held in escrow) shall be paid directly to the Purchaser and shall not be held in escrow. Purchased Shares, together with any other assets held in escrow under this Agreement, shall be (i) surrendered to the Company for repurchase upon exercise of the Right of Repurchase or the Right of First Refusal or (ii) released to the Purchaser upon his or her request to the extent that the Shares have ceased to be Restricted Shares and the Company’s Right of First Refusal has lapsed (but not more frequently than once every six (6) months). In any event, all Purchased Shares that have ceased to be Restricted Shares, together with any other vested assets held in escrow under this Agreement, shall be released within ninety (90) days after the earlier of (1) the termination of the Purchaser’s Service or (2) the lapse of the Right of First Refusal.
          (d) Exercise of Repurchase Right. The Company shall be deemed to have exercised its Right of Repurchase automatically for all Restricted Shares as of the commencement of the Repurchase Period, unless the Company during the Repurchase Period notifies the holder of the Restricted Shares pursuant to Section 9 that it will not exercise its Right of Repurchase for some or all of the Restricted Shares. During the Repurchase Period, the Company shall pay to the holder of the Restricted Shares the purchase price determined under Subsection (a) above for the Restricted Shares being repurchased. Payment shall be made in cash or cash equivalents and/or by canceling indebtedness to the Company incurred by the Purchaser in the purchase of the

 


 

Restricted Shares. The certificate(s) representing the Restricted Shares being repurchased shall be delivered to the Company properly endorsed for transfer.
          (e) Termination of Rights as Stockholder. If the Right of Repurchase is exercised in accordance with this Section 2 and the Company makes available the consideration for the Restricted Shares being repurchased, then the person from whom the Restricted Shares are repurchased shall no longer have any rights as a holder of the Restricted Shares (other than the right to receive payment of such consideration). Such Restricted Shares shall be deemed to have been repurchased pursuant to this Section 2, whether or not the certificate(s) for such Restricted Shares have been delivered to the Company or the consideration for such Restricted Shares has been accepted.
          (f) Additional or Exchanged Securities and Property. In the event of a merger or consolidation of the Company with or into another entity, any other corporate reorganization, a stock split, the declaration of a stock dividend, the declaration of an extraordinary dividend payable in a form other than stock, a spin-off, an adjustment in conversion ratio, a recapitalization or a similar transaction affecting the Company’s outstanding securities, any securities or other property (including cash or cash equivalents) that are by reason of such transaction exchanged for, or distributed with respect to, any Restricted Shares shall immediately be subject to the Right of Repurchase. Appropriate adjustments to reflect the exchange or distribution of such securities or property shall be made to the number and/or class of the Restricted Shares. Appropriate adjustments shall also be made to the price per share to be paid upon the exercise of the Right of Repurchase, provided that the aggregate purchase price payable for the Restricted Shares shall remain the same. In the event of a merger or consolidation of the Company with or into another entity or any other corporate reorganization, the Right of Repurchase may be exercised by the Company’s successor.
          (g) Transfer of Restricted Shares. The Purchaser shall not transfer, assign, encumber or otherwise dispose of any Restricted Shares without the Company’s written consent, except as provided in the following sentence. The Purchaser may transfer Restricted Shares to one or more members of the Purchaser’s Immediate Family or to a trust established by the Purchaser for the benefit of the Purchaser and/or one or more members of the Purchaser’s Immediate Family, provided in either case that the Transferee agrees in writing on a form prescribed by the Company to be bound by all provisions of this Agreement. If the Purchaser transfers any Restricted Shares, then this Agreement shall apply to the Transferee to the same extent as to the Purchaser.
          (h) Acceleration of Vesting The vesting schedule set forth in the Summary of Stock Purchase shall accelerate so that all unvested shares shall become vested shares upon (i) a Change in Control (as defined in the Plan) followed by (ii) the termination of Purchaser’s Service with the Company without cause within six (6) months following a Change in Control. “Cause” as used herein means the occurrence of any of the following events, as determined in the reasonable good faith judgment of the Board: (a) disregard or neglect by Purchaser of his duties, provided, however, that the Purchaser shall have received notice of such disregard or neglect and reasonable time and opportunity to resolve such issues; (b) insubordination having a material adverse effect; (c) the conviction of Purchaser of a felony with moral turpitude or other criminal conduct involving fraud, dishonesty, theft or misappropriation; (d) a breach by Purchaser of any applicable duty of loyalty to the Company; (e) unauthorized use by Purchaser of any material tangible or intangible Company asset, which use has an adverse impact on the Company; (f) gross negligence by Purchaser that has an adverse impact on the Company; (g) a material breach of this Agreement by Purchaser; or (h) any breach of Purchaser’s obligations of confidentiality under this Agreement or the Company’s Proprietary Information and Inventions Agreement.
SECTION 3. RIGHT OF FIRST REFUSAL.
          (a) Right of First Refusal. In the event that the Purchaser proposes to sell, pledge or otherwise transfer to a third party any Purchased Shares, or any interest in Purchased Shares, the Company shall have the Right of First Refusal with respect to all (and not less than all) of such Purchased Shares. If the Purchaser desires to transfer Purchased Shares, the Purchaser shall give a written Transfer Notice to the Company describing fully the proposed transfer, including the number of Purchased Shares proposed to be transferred, the proposed transfer price, the name and address of the proposed Transferee and proof satisfactory to the Company that the proposed sale or transfer will not violate any applicable federal or state securities laws. The Transfer Notice shall be

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signed both by the Purchaser and by the proposed Transferee and must constitute a binding commitment of both parties to the transfer of the Purchased Shares. The Company shall have the right to purchase all, and not less than all, of the Purchased Shares on the terms of the proposal described in the Transfer Notice (subject, however, to any change in such terms permitted under Subsection (b) below) by delivery of a notice of exercise of the Right of First Refusal within thirty (30) days after the date when the Transfer Notice was received by the Company. The Company’s rights under this Subsection (a) shall be freely assignable, in whole or in part.
          (b) Transfer of Shares. If the Company fails to exercise its Right of First Refusal within thirty (30) days after receiving the Transfer Notice, the Purchaser may, not later than ninety (90) days after the Company received the Transfer Notice, conclude a transfer of the Purchased Shares subject to the Transfer Notice on the terms and conditions described in the Transfer Notice, provided that any such sale is made in compliance with applicable federal and state securities laws and not in violation of any other contractual restrictions to which the Purchaser is bound. Any proposed transfer on terms and conditions different from those described in the Transfer Notice, as well as any subsequent proposed transfer by the Purchaser, shall again be subject to the Right of First Refusal and shall require compliance with the procedure described in Subsection (a) above. If the Company exercises its Right of First Refusal, the parties shall consummate the sale of the Purchased Shares on the terms set forth in the Transfer Notice within sixty (60) days after the Company received the Transfer Notice (or within such longer period as may have been specified in the Transfer Notice); provided, however, that in the event the Transfer Notice provided that payment for the Purchased Shares was to be made in a form other than cash or cash equivalents paid at the time of transfer, the Company shall have the option of paying for the Purchased Shares with cash or cash equivalents equal to the present value of the consideration described in the Transfer Notice.
          (c) Additional or Exchanged Securities and Property. In the event of a merger or consolidation of the Company with or into another entity, any other corporate reorganization, a stock split, the declaration of a stock dividend, the declaration of an extraordinary dividend payable in a form other than stock, a spin-off, an adjustment in conversion ratio, a recapitalization or a similar transaction affecting the Company’s outstanding securities, any securities or other property (including cash or cash equivalents) that are by reason of such transaction exchanged for, or distributed with respect to, any Purchased Shares subject to this Section 3 shall immediately be subject to the Right of First Refusal. Appropriate adjustments to reflect the exchange or distribution of such securities or property shall be made to the number and/or class of the Purchased Shares subject to this Section 3.
          (d) Termination of Right of First Refusal. Any other provision of this Section 3 notwithstanding, in the event that the Stock is readily tradable on an established securities market when the Purchaser desires to transfer Purchased Shares, the Company shall have no Right of First Refusal, and the Purchaser shall have no obligation to comply with the procedures prescribed by Subsections (a) and (b) above.
          (e) Permitted Transfers. This Section 3 shall not apply to (i) a transfer by beneficiary designation, will or intestate succession or (ii) a transfer to one or more members of the Purchaser’s Immediate Family or to a trust established by the Purchaser for the benefit of the Purchaser and/or one or more members of the Purchaser’s Immediate Family, provided in either case that the Transferee agrees in writing on a form prescribed by the Company to be bound by all provisions of this Agreement. If the Purchaser transfers any Purchased Shares, either under this Subsection (e) or after the Company has failed to exercise the Right of First Refusal, then this Agreement shall apply to the Transferee to the same extent as to the Purchaser.
          (f) Termination of Rights as Stockholder. If the Company makes available, at the time and place and in the amount and form provided in this Agreement, the consideration for the Shares to be purchased in accordance with this Section 3, then after such time the person from whom such Shares are to be purchased shall no longer have any rights as a holder of such Shares (other than the right to receive payment of such consideration in accordance with this Agreement). Such Shares shall be deemed to have been purchased in accordance with the applicable provisions hereof, whether or not the certificate(s) therefor have been delivered as required by this Agreement.

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SECTION 4. OTHER RESTRICTIONS ON TRANSFER.
          (a) Purchaser Representations. In connection with the issuance and acquisition of Shares under this Agreement, the Purchaser hereby represents and warrants to the Company as follows:
          (i) The Purchaser is acquiring and will hold the Purchased Shares for investment for his or her account only and not with a view to, or for resale in connection with, any “distribution” thereof within the meaning of the Securities Act.
          (ii) The Purchaser understands that the Purchased Shares have not been registered under the Securities Act by reason of a specific exemption therefrom and that the Purchased Shares must be held indefinitely, unless they are subsequently registered under the Securities Act or the Purchaser obtains an opinion of counsel, in form and substance satisfactory to the Company and its counsel, that such registration is not required. The Purchaser further acknowledges and understands that the Company is under no obligation to register the Purchased Shares.
          (iii) The Purchaser is aware of the adoption of Rule 144 by the Securities and Exchange Commission under the Securities Act, which permits limited public resales of securities acquired in a non-public offering, subject to the satisfaction of certain conditions, including (without limitation) the availability of certain current public information about the issuer, the resale occurring only after the holding period required by Rule 144 has been satisfied, the sale occurring through an unsolicited “broker’s transaction,” and the amount of securities being sold during any three (3)-month period not exceeding specified limitations. The Purchaser acknowledges and understands that the conditions for resale set forth in Rule 144 have not been satisfied and that the Company has no plans to satisfy these conditions in the foreseeable future.
          (iv) The Purchaser will not sell, transfer or otherwise dispose of the Purchased Shares in violation of the Securities Act, the Securities Exchange Act of 1934, or the rules promulgated thereunder, including Rule 144 under the Securities Act. The Purchaser agrees that he or she will not dispose of the Purchased Shares unless and until he or she has complied with all requirements of this Agreement applicable to the disposition of Purchased Shares and he or she has provided the Company with written assurances, in substance and form satisfactory to the Company, that (A) the proposed disposition does not require registration of the Purchased Shares under the Securities Act or all appropriate action necessary for compliance with the registration requirements of the Securities Act or with any exemption from registration available under the Securities Act (including Rule 144) has been taken and (B) the proposed disposition will not result in the contravention of any transfer restrictions applicable to the Purchased Shares under the securities laws or regulations of any State.
          (v) The Purchaser has been furnished with, and has had access to, such information as he or she considers necessary or appropriate for deciding whether to invest in the Purchased Shares, and the Purchaser has had an opportunity to ask questions and receive answers from the Company regarding the terms and conditions of the issuance of the Purchased Shares.
          (vi) The Purchaser is aware that his or her investment in the Company is a speculative investment that has limited liquidity and is subject to the risk of complete loss. The Purchaser is able, without impairing his or her financial condition, to hold the Purchased Shares for an indefinite period and to suffer a complete loss of his or her investment in the Purchased Shares.
          (b) Securities Law Restrictions. Regardless of whether the offering and sale of Shares under the Plan have been registered under the Securities Act or have been registered or qualified under the securities laws of any state, the Company at its discretion may impose restrictions upon the sale, pledge or other transfer of the Purchased Shares (including the placement of appropriate legends on stock certificates or the imposition of stop-transfer instructions) if, in the judgment of the Company, such restrictions are necessary or desirable in order to achieve compliance with the Securities Act, the securities laws of any state or any other law.

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          (c) Market Stand-Off. In connection with any underwritten public offering by the Company of its equity securities pursuant to an effective registration statement filed under the Securities Act, including the Company’s initial public offering, the Purchaser shall not directly or indirectly sell, make any short sale of, loan, hypothecate, pledge, offer, grant or sell any option or other contract for the purchase of, purchase any option or other contract for the sale of, or otherwise dispose of or transfer, or agree to engage in any of the foregoing transactions with respect to, any Purchased Shares without the prior written consent of the Company or its underwriters. Such restriction (the “Market Stand-Off”) shall be in effect for such period of time following the date of the final prospectus for the offering as may be requested by the Company or such underwriters. In no event, however, shall such period exceed one hundred eighty (180) days. The Market Stand-Off shall in any event terminate two (2) years after the date of the Company’s initial public offering. In the event of the declaration of a stock dividend, a spin-off, a stock split, an adjustment in conversion ratio, a recapitalization or a similar transaction affecting the Company’s outstanding securities without receipt of consideration, any new, substituted or additional securities which are by reason of such transaction distributed with respect to any Shares subject to the Market Stand-Off, or into which such Shares thereby become convertible, shall immediately be subject to the Market Stand-Off. In order to enforce the Market Stand-Off, the Company may impose stop-transfer instructions with respect to the Purchased Shares until the end of the applicable stand-off period. The Company’s underwriters shall be beneficiaries of the agreement set forth in this Subsection (c). This Subsection (c) shall not apply to Shares registered in the public offering under the Securities Act, and the Purchaser shall be subject to this Subsection (c) only if the directors and officers of the Company are subject to similar arrangements.
          (d) Rights of the Company. The Company shall not be required to (i) transfer on its books any Purchased Shares that have been sold or transferred in contravention of this Agreement or (ii) treat as the owner of Purchased Shares, or otherwise to accord voting, dividend or liquidation rights to, any transferee to whom Purchased Shares have been transferred in contravention of this Agreement.
SECTION 5. SUCCESSORS AND ASSIGNS.
          Except as otherwise expressly provided to the contrary, the provisions of this Agreement shall inure to the benefit of, and be binding upon, the Company and its successors and assigns and be binding upon the Purchaser and the Purchaser’s legal representatives, heirs, legatees, distributees, assigns and transferees by operation of law, whether or not any such person has become a party to this Agreement or has agreed in writing to join herein and to be bound by the terms, conditions and restrictions hereof.
SECTION 6. NO RETENTION RIGHTS.
          Nothing in this Agreement or in the Plan shall confer upon the Purchaser any right to continue in Service for any period of specific duration or interfere with or otherwise restrict in any way the rights of the Company (or any Parent or Subsidiary employing or retaining the Purchaser) or of the Purchaser, which rights are hereby expressly reserved by each, to terminate his or her Service at any time and for any reason, with or without cause.
SECTION 7. TAX ELECTION.
          The acquisition of the Purchased Shares may result in adverse tax consequences that may be avoided or mitigated by filing an election under Code Section 83(b). Such election may be filed only within thirty (30) days after the date of purchase set forth in the Summary of Stock Purchase. The form for making the Code Section 83(b) election is attached to this Agreement as an Exhibit. The Purchaser should consult with his or her tax advisor to determine the tax consequences of acquiring the Purchased Shares and the advantages and disadvantages of filing the Code Section 83(b) election. The Purchaser acknowledges that it is his or her sole responsibility, and not the Company’s, to file a timely election under Code Section 83(b), even if the Purchaser requests the Company or its representatives to make this filing on his or her behalf.

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SECTION 8. LEGENDS.
All certificates evidencing Purchased Shares shall bear the following legends:
“THE SHARES REPRESENTED HEREBY MAY NOT BE SOLD, ASSIGNED, TRANSFERRED, ENCUMBERED OR IN ANY MANNER DISPOSED OF, EXCEPT IN COMPLIANCE WITH THE TERMS OF A WRITTEN AGREEMENT BETWEEN THE COMPANY AND THE REGISTERED HOLDER OF THE SHARES (OR THE PREDECESSOR IN INTEREST TO THE SHARES). SUCH AGREEMENT GRANTS TO THE COMPANY CERTAIN RIGHTS OF FIRST REFUSAL UPON AN ATTEMPTED TRANSFER OF THE SHARES AND CERTAIN REPURCHASE RIGHTS UPON TERMINATION OF SERVICE WITH THE COMPANY. THE SECRETARY OF THE COMPANY WILL UPON WRITTEN REQUEST FURNISH A COPY OF SUCH AGREEMENT TO THE HOLDER HEREOF WITHOUT CHARGE.”
“THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED, OR OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT OR AN OPINION OF COUNSEL, SATISFACTORY TO THE COMPANY AND ITS COUNSEL, THAT SUCH REGISTRATION IS NOT REQUIRED.”
If required by the authorities of any state in connection with the issuance of the Purchased Shares, the legend or legends required by such state authorities shall also be endorsed on all such certificates.
SECTION 9. NOTICE.
          Any notice required by the terms of this Agreement shall be given in writing. It shall be deemed effective upon (i) personal delivery, (ii) deposit with the United States Postal Service, by registered or certified mail, with postage and fees prepaid or (iii) deposit with Federal Express Corporation, with shipping charges prepaid. Notice shall be addressed to the Company at its principal executive office and to the Purchaser at the address that he or she most recently provided to the Company in accordance with this Section 9.
SECTION 10. ENTIRE AGREEMENT.
          The Summary of Stock Purchase, this Agreement and the Plan constitute the entire contract between the parties hereto with regard to the subject matter hereof. They supersede any other agreements, representations or understandings (whether oral or written and whether express or implied) which relate to the subject matter hereof.
SECTION 11. CHOICE OF LAW.
          This Agreement shall be governed by, and construed in accordance with, the laws of the State of California, as such laws are applied to contracts entered into and performed in such State.
SECTION 12. DEFINITIONS.
          (a) “Agreement” shall mean this Stock Purchase Agreement.
          (b) “Board of Directors” shall mean the Board of Directors of the Company, as constituted from time to time or, if a Committee has been appointed, such Committee.

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          (c) “Code” shall mean the Internal Revenue Code of 1986, as amended.
          (d) “Committee” shall mean a committee of the Board of Directors, as described in Section 2 of the Plan.
          (e) “Company” shall mean Entone Technologies, Inc., a Delaware corporation.
          (f) “Consultant” shall mean a person who performs bona fide services for the Company, a Parent or a Subsidiary as a consultant or advisor, excluding Employees and Outside Directors.
          (g) “Employee” shall mean any individual who is a common-law employee of the Company, a Parent or a Subsidiary.
          (h) “Fair Market Value” shall mean the fair market value of a Share, as determined by the Board of Directors in good faith. Such determination shall be conclusive and binding on all persons.
          (i) “Immediate Family” shall mean any child, stepchild, grandchild, parent, stepparent, grandparent, spouse, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law or sister-in-law and shall include adoptive relationships.
          (j) “Outside Director” shall mean a member of the Board of Directors who is not an Employee.
          (k) “Parent” shall mean any corporation (other than the Company) in an unbroken chain of corporations ending with the Company, if each of the corporations other than the Company owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in such chain.
          (l) “Plan” shall mean the Entone Technologies, Inc. 2003 Stock Plan, as amended.
          (m) “Purchased Shares” shall mean the Shares purchased by the Purchaser pursuant to this Agreement.
          (n) “Purchase Price” shall mean the amount for which one Share may be purchased pursuant to this Agreement, as specified in the Summary of Stock Purchase.
          (o) “Purchaser” shall mean the person named in the Summary of Stock Purchase.
          (p) “Repurchase Period” shall mean a period of ninety (90) consecutive days commencing on the date when the Purchaser’s Service terminates for any reason, including (without limitation) death or disability.
          (q) “Restricted Share” shall mean a Purchased Share that is subject to the Right of Repurchase.
          (r) “Right of First Refusal” shall mean the Company’s right of first refusal described in Section 3.
          (s) “Right of Repurchase” shall mean the Company’s right of repurchase described in Section 2.
          (t) “Securities Act” shall mean the Securities Act of 1933, as amended.

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          (u) “Service” shall mean service as an Employee, Outside Director or Consultant.
          (v) “Share” shall mean one share of Stock, as adjusted in accordance with Section 8 of the Plan (if applicable).
          (w) “Stock” shall mean the Common Stock of the Company.
          (x) “Subsidiary” shall mean any corporation (other than the Company) in an unbroken chain of corporations beginning with the Company, if each of the corporations other than the last corporation in the unbroken chain owns stock possessing fifty percent (50%) or more of the total combined voting power of all classes of stock in one of the other corporations in such chain.
          (y) “Summary of Stock Purchase” shall mean the document so entitled to which this Agreement is attached.
          (z) “Transferee” shall mean any person to whom the Purchaser has directly or indirectly transferred any Purchased Share.
          (aa) “Transfer Notice” shall mean the notice of a proposed transfer of Purchased Shares described in Section 3.

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EXHIBIT 1
SECTION 83(b) ELECTION
This statement is made under Section 83(b) of the Internal Revenue Code of 1986, as amended, pursuant to Treasury Regulations
Section 1.83-2.
     1. The taxpayer who performed the services is:
             
 
  Name:        
 
     
 
   
 
           
 
  Address:        
 
     
 
   
 
           
 
     
 
   
 
           
 
  Social Security No.:        
 
     
 
   
     2. The property with respect to which the election is made is                       shares of the common stock of Entone Technologies, Inc.
     3. The property was transferred on                                          ___,                      .
     4. The taxable year for which the election is made is the calendar year                     .
     5. The property is subject to a repurchase right pursuant to which the issuer has the right to acquire the property at the original purchase price if for any reason taxpayer’s service with the issuer terminates. The issuer’s repurchase right lapses in a series of installments over a                      -year period ending on                                            ___,                      .
     6. The fair market value of such property at the time of transfer (determined without regard to any restriction other than a restriction which by its terms will never lapse) is $                      per share.
     7. The amount paid for such property is $                     per share.
     8. A copy of this statement was furnished to Entone Technologies, Inc., for whom taxpayer rendered the services underlying the transfer of such property.
     9.  This statement is executed on                                             ___,                      .
             
 
Signature of Spouse (if any)
     
 
Signature of Taxpayer
   
Within thirty (30) days after the date of purchase, this election must be filed with the Internal Revenue Service Center where the Purchaser files his or her federal income tax returns. The filing should be made by registered or certified mail, return receipt requested. The Purchaser must (a) file a copy of the completed form with his or her federal tax return for the current tax year and (b) deliver an additional copy to the Company.

 

exv4w4
 

Exhibit 4.4
ENTONE TECHNOLOGIES, INC.
2003 STOCK PLAN
NOTICE OF STOCK OPTION GRANT
     You have been granted the following option to purchase shares of the Common Stock of Entone Technologies, Inc. (the “Company”):
     
Name of Optionee:
                                                              
 
   
Total Number of Shares:
                                          
 
   
Type of Option:
                                                              
 
   
Exercise Price Per Share:
  $                                         
 
   
Date of Grant:
                                                              
 
   
Date Exercisable:
  This option may be exercised at any time after the Date of Grant for all or any part of the shares subject to this option (the “Shares”).
 
   
Vesting Commencement Date:
                                                              
 
   
Vesting Schedule:
  *Alt. 1 (use for 1st option granted to any individual): None of the Shares shall vest until the Optionee completes twelve (12) months of continuous Service after the Vesting Commencement Date, whereupon twenty five percent (25%) of the Shares shall vest (and any Repurchase Right relating to such Shares shall terminate). Thereafter, an additional 2.08333% of the Shares shall vest each time the Optionee completes a month of continuous Service with the Company. Upon a Change of Control, if the Optionee has not completed twelve (12) months of continuous Service, the Shares shall be deemed vested for the completed months of continuous Service after the Vesting Commencement Date.
 
   
 
  *Alt. 2 (use for subsequent option granted to any individual) : 2.08333% of the Shares shall vest each time the Optionee completes a month of continuous Service with the Company after the Vesting Commencement Date. [Also remove the accelerated vesting clause from Section 7(b)]
 
   
Expiration Date:
                                          . This option expires earlier if the Optionee’s Service terminates earlier, as provided in Section 6 of the Stock Option Agreement.
By your signature and the signature of the Company’s representative below, you and the Company agree that this option is granted under and governed by the terms and conditions of the 2003 Stock Plan and the Stock Option Agreement, both of which are attached to and made a part of this document.
         
OPTIONEE:
  ENTONE TECHNOLOGIES, INC.    
 
       
 
       
 
 
 
   
 
       
 
 
 
   


 

THE OPTION GRANTED PURSUANT TO THIS AGREEMENT AND THE SHARES ISSUABLE UPON THE EXERCISE THEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED, OR OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT OR AN OPINION OF COUNSEL, SATISFACTORY TO THE COMPANY AND ITS COUNSEL, THAT SUCH REGISTRATION IS NOT REQUIRED.
ENTONE TECHNOLOGIES, INC.
2003 STOCK PLAN:
STOCK OPTION AGREEMENT
SECTION 1. GRANT OF OPTION.
          (a) Option. On the terms and conditions set forth in the Notice of Stock Option Grant and this Agreement, the Company grants to the Optionee on the Date of Grant the option to purchase at the Exercise Price the number of Shares set forth in the Notice of Stock Option Grant. The Exercise Price is agreed to be at least 100% of the Fair Market Value per Share on the Date of Grant (110% of Fair Market Value if Section 3(b) of the Plan applies). This option is intended to be an ISO or an NSO, as provided in the Notice of Stock Option Grant.
          (b) $100,000 Limitation. Even if this option is designated as an ISO in the Notice of Stock Option Grant, it shall be deemed to be an NSO to the extent (and only to the extent) required by the $100,000 annual limitation under Section 422(d) of the Code.
          (c) Stock Plan and Defined Terms. This option is granted pursuant to the Plan, a copy of which the Optionee acknowledges having received. The provisions of the Plan are incorporated into this Agreement by this reference. Capitalized terms are defined in Section 14 of this Agreement.
SECTION 2. RIGHT TO EXERCISE.
          (a) Exercisability. Subject to Subsection (b) below and the other conditions set forth in this Agreement, all or part of this option may be exercised prior to its expiration at the time or times set forth in the Notice of Stock Option Grant. Shares purchased by exercising this option may be subject to the Right of Repurchase under Section 7.
          (b) Stockholder Approval. Any other provision of this Agreement notwithstanding, no portion of this option shall be exercisable at any time prior to the approval of the Plan by the Company’s stockholders.
SECTION 3. TRANSFER OR ASSIGNMENT OF OPTION.
          Except as otherwise provided in this Agreement, this option and the rights and privileges conferred hereby shall not be sold, pledged or otherwise transferred (whether by operation of law or otherwise) and shall not be subject to sale under execution, attachment, levy or similar process.
     SECTION 4. EXERCISE PROCEDURES.
          (a) Notice of Exercise. The Optionee or the Optionee’s representative may exercise this option by giving written notice to the Company pursuant to Section 13(c). The notice shall specify the election to exercise this option, the number of Shares for which it is being exercised and the form of payment. The person exercising this option shall sign the notice. In the event that this option is being exercised by the representative of the Optionee, the notice shall be accompanied by proof (satisfactory to the Company) of the representative’s right to

 


 

exercise this option. The Optionee or the Optionee’s representative shall deliver to the Company, at the time of giving the notice, payment in a form permissible under Section 5 for the full amount of the Purchase Price.
          (b) Issuance of Shares. After receiving a proper notice of exercise, the Company shall cause to be issued one or more certificates evidencing the Shares for which this option has been exercised and such certificates shall be deposited in escrow under Section 7(c). Such Shares shall be registered (i) in the name of the person exercising this option, (ii) in the names of such person and his or her spouse as community property or as joint tenants with the right of survivorship or (iii) with the Company’s consent, in the name of a revocable trust.
          (c) Withholding Taxes. In the event that the Company determines that it is required to withhold any tax as a result of the exercise of this option, the Optionee, as a condition to the exercise of this option, shall make arrangements satisfactory to the Company to enable it to satisfy all withholding requirements. The Optionee shall also make arrangements satisfactory to the Company to enable it to satisfy any withholding requirements that may arise in connection with the vesting or disposition of Shares purchased by exercising this option.
SECTION 5. PAYMENT FOR STOCK.
          (a) Cash. All or part of the Purchase Price may be paid in cash or cash equivalents.
          (b) Surrender of Stock. All or any part of the Purchase Price may be paid by surrendering, or attesting to the ownership of, Shares that are already owned by the Optionee. Such Shares shall be surrendered to the Company in good form for transfer and shall be valued at their Fair Market Value on the date when this option is exercised. The Optionee shall not surrender, or attest to the ownership of, Shares in payment of the Purchase Price if such action would cause the Company to recognize compensation expense (or additional compensation expense) with respect to this option for financial reporting purposes.
          (c) Exercise/Sale. If Stock is publicly traded, all or part of the Purchase Price and any withholding taxes may be paid by the delivery (on a form prescribed by the Company) of an irrevocable direction to a securities broker approved by the Company to sell Shares and to deliver all or part of the sales proceeds to the Company.
          (d) Exercise/Pledge. If Stock is publicly traded, all or part of the Purchase Price and any withholding taxes may be paid by the delivery (on a form prescribed by the Company) of an irrevocable direction to pledge Shares to a securities broker or lender approved by the Company, as security for a loan, and to deliver all or part of the loan proceeds to the Company.
SECTION 6. TERM AND EXPIRATION.
          (a) Basic Term. This option shall in any event expire on the expiration date set forth in the Notice of Stock Option Grant, which date is ten (10) years after the Date of Grant (five (5) years after the Date of Grant if this option is designated as an ISO in the Notice of Stock Option Grant and Section 3(b) of the Plan applies).
          (b) Termination of Service (Except by Death). If the Optionee’s Service terminates for any reason other than death, then this option shall expire on the earliest of the following occasions:
               (i) The expiration date determined pursuant to Subsection (a) above;
               (ii) The date three (3) months after the termination of the Optionee’s Service for any reason other than Disability; or

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               (iii) The date six (6) months after the termination of the Optionee’s Service by reason of Disability.
The Optionee may exercise all or part of this option at any time before its expiration under the preceding sentence, but only to the extent that this option is exercisable for vested Shares on or before the date when the Optionee’s Service terminates. When the Optionee’s Service terminates, this option shall expire immediately with respect to the number of Shares for which this option is not yet exercisable and with respect to any Restricted Shares. In the event that the Optionee dies after termination of Service but before the expiration of this option, all or part of this option may be exercised (prior to expiration) by the executors or administrators of the Optionee’s estate or by any person who has acquired this option directly from the Optionee by beneficiary designation, bequest or inheritance, but only to the extent that this option was exercisable for vested Shares on or before the date when the Optionee’s Service terminated.
          (c) Death of the Optionee. If the Optionee dies while in Service, then this option shall expire on the earlier of the following dates:
               (i) The expiration date determined pursuant to Subsection (a) above; or
               (ii) The date twelve (12) months after the Optionee’s death.
All or part of this option may be exercised at any time before its expiration under the preceding sentence by the executors or administrators of the Optionee’s estate or by any person who has acquired this option directly from the Optionee by beneficiary designation, bequest or inheritance, but only to the extent that this option is exercisable for vested Shares on or before the Optionee’s death. When the Optionee dies, this option shall expire immediately with respect to the number of Shares for which this option is not yet exercisable and with respect to any Restricted Shares.
          (d) Leaves of Absence. For any purpose under this Agreement, Service shall be deemed to continue while the Optionee is on a bona fide leave of absence, if such leave was approved by the Company in writing and if continued crediting of Service for such purpose is expressly required by the terms of such leave or by applicable law (as determined by the Company).
          (e) Notice Concerning ISO Treatment. Even if this option is designated as an ISO in the Notice of Stock Option Grant, it ceases to qualify for favorable tax treatment as an ISO to the extent that it is exercised:
               (i) More than three (3) months after the date when the Optionee ceases to be an Employee for any reason other than death or permanent and total disability (as defined in Section 22(e)(3) of the Code);
               (ii) More than twelve (12) months after the date when the Optionee ceases to be an Employee by reason of permanent and total disability (as defined in Section 22(e)(3) of the Code); or
               (iii) More than three months after the date when the Optionee has been on a leave of absence for ninety (90) days, unless the Optionee’s reemployment rights following such leave were guaranteed by statute or by contract.
SECTION 7. RIGHT OF REPURCHASE.
          (a) Scope of Repurchase Right. Until they vest in accordance with the Notice of Stock Option Grant and Subsection (b) below, the Shares acquired under this Agreement shall be “Restricted Shares” and shall be subject to repurchase (in whole or in part) by the Company through payment of an amount equal to the Exercise Price for each of the Restricted Shares being repurchased in the event the Optionee’s Service with the Company terminates for any reason (the “Repurchase Right”). The Company may exercise the Repurchase Right

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only during a period of ninety (90) consecutive days commencing on the date when the Optionee’s Service terminates (the “Repurchase Period”).
          (b) Lapse of Repurchase Right. The Right of Repurchase shall lapse with respect to the Restricted Shares in accordance with the vesting schedule set forth in the Notice of Stock Option Grant. Notwithstanding the foregoing, upon a Change of Control, if the Optionee has not completed twelve (12) months of continuous Service, the Shares shall be deemed vested for the completed months of continuous Service after the Vesting Commencement Date.
          (c) Escrow. Upon issuance, the certificate(s) for Shares shall be deposited in escrow with the Company to be held in accordance with the provisions of this Agreement. Any additional or exchanged securities or other property described in Subsection (f) below shall immediately be delivered to the Company to be held in escrow. All ordinary cash dividends on Shares (or on other securities held in escrow) shall be paid directly to the Optionee and shall not be held in escrow. Shares, together with any other assets held in escrow under this Agreement, shall be (i) surrendered to the Company for repurchase upon exercise of the Right of Repurchase or the Right of First Refusal or (ii) released to the Optionee upon his or her request to the extent that the Shares have ceased to be Restricted Shares and the Company’s Right of First Refusal has lapsed (but not more frequently than once every six (6) months). In any event, all Shares that have ceased to be Restricted Shares, together with any other vested assets held in escrow under this Agreement, shall be released within ninety (90) days after the earlier of (i) the termination of the Optionee’s Service or (ii) the lapse of the Right of First Refusal.
          (d) Exercise of Repurchase Right. The Company shall be deemed to have exercised its Right of Repurchase automatically for all Restricted Shares as of the commencement of the Repurchase Period, unless the Company during the Repurchase Period notifies the holder of the Restricted Shares pursuant to Section 13(c) that it will not exercise its Right of Repurchase for some or all of the Restricted Shares. During the Repurchase Period, the Company shall pay to the holder of the Restricted Shares the purchase price determined under Subsection (a) above for the Restricted Shares being repurchased. Payment shall be made in cash or cash equivalents and/or by canceling indebtedness to the Company incurred by the Optionee in the purchase of the Restricted Shares. The certificate(s) representing the Restricted Shares being repurchased shall be delivered to the Company properly endorsed for transfer.
          (e) Termination of Rights as Stockholder. If the Right of Repurchase is exercised in accordance with this Section 7 and the Company makes available the consideration for the Restricted Shares being repurchased, then the person from whom the Restricted Shares are repurchased shall no longer have any rights as a holder of the Restricted Shares (other than the right to receive payment of such consideration). Such Restricted Shares shall be deemed to have been repurchased pursuant to this Section 7, whether or not the certificate(s) for such Restricted Shares have been delivered to the Company or the consideration for such Restricted Shares has been accepted.
          (f) Additional or Exchanged Securities and Property. In the event of a merger or consolidation of the Company with or into another entity, any other corporate reorganization, a stock split, the declaration of a stock dividend, the declaration of an extraordinary dividend payable in a form other than stock, a spin-off, an adjustment in conversion ratio, a recapitalization or a similar transaction affecting the Company’s outstanding securities, any securities or other property (including cash or cash equivalents) that are by reason of such transaction exchanged for, or distributed with respect to, any Restricted Shares shall immediately be subject to the Right of Repurchase. Appropriate adjustments to reflect the exchange or distribution of such securities or property shall be made to the number and/or class of the Restricted Shares. Appropriate adjustments shall also be made to the price per share to be paid upon the exercise of the Right of Repurchase, provided that the aggregate purchase price payable for the Restricted Shares shall remain the same. In the event of a merger or consolidation of the Company with or into another entity or any other corporate reorganization, the Right of Repurchase may be exercised by the Company’s successor.
          (g) Transfer of Restricted Shares. The Optionee shall not transfer, assign, encumber or otherwise dispose of any Restricted Shares without the Company’s written consent, except as provided in the following sentence. The Optionee may transfer Restricted Shares to one or more members of the Optionee’s

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Immediate Family or to a trust established by the Optionee for the benefit of the Optionee and/or one or more members of the Optionee’s Immediate Family, provided in either case that the Transferee agrees in writing on a form prescribed by the Company to be bound by all provisions of this Agreement. If the Optionee transfers any Restricted Shares, then this Agreement shall apply to the Transferee to the same extent as to the Optionee.
          (h) Assignment of Repurchase Right. The Company’s Right of Repurchase shall be freely assignable, in whole or in part. Any person who accepts an assignment of the Right of Repurchase from the Company shall assume all of the Company’s rights and obligations under this Section 7.
SECTION 8. RIGHT OF FIRST REFUSAL.
          (a) Right of First Refusal. In the event that the Optionee proposes to sell, pledge or otherwise transfer to a third party any Shares acquired under this Agreement, or any interest in such Shares, the Company shall have the Right of First Refusal with respect to all (and not less than all) of such Shares. If the Optionee desires to transfer Shares acquired under this Agreement, the Optionee shall give a written Transfer Notice to the Company describing fully the proposed transfer, including the number of Shares proposed to be transferred, the proposed transfer price, the name and address of the proposed Transferee and proof satisfactory to the Company that the proposed sale or transfer will not violate any applicable federal or state securities laws. The Transfer Notice shall be signed both by the Optionee and by the proposed Transferee and must constitute a binding commitment of both parties to the transfer of the Shares. The Company shall have the right to purchase all, and not less than all, of the Shares on the terms of the proposal described in the Transfer Notice (subject, however, to any change in such terms permitted under Subsection (b) below) by delivery of a notice of exercise of the Right of First Refusal within thirty (30) days after the date when the Transfer Notice was received by the Company.
          (b) Transfer of Shares. If the Company fails to exercise its Right of First Refusal within thirty (30) days after the date when it received the Transfer Notice, the Optionee may, not later than ninety (90) days following receipt of the Transfer Notice by the Company, conclude a transfer of the Shares subject to the Transfer Notice on the terms and conditions described in the Transfer Notice, provided that any such sale is made in compliance with applicable federal and state securities laws and not in violation of any other contractual restrictions to which the Optionee is bound. Any proposed transfer on terms and conditions different from those described in the Transfer Notice, as well as any subsequent proposed transfer by the Optionee, shall again be subject to the Right of First Refusal and shall require compliance with the procedure described in Subsection (a) above. If the Company exercises its Right of First Refusal, the parties shall consummate the sale of the Shares on the terms set forth in the Transfer Notice within sixty (60) days after the date when the Company received the Transfer Notice (or within such longer period as may have been specified in the Transfer Notice); provided, however, that in the event the Transfer Notice provided that payment for the Shares was to be made in a form other than cash or cash equivalents paid at the time of transfer, the Company shall have the option of paying for the Shares with cash or cash equivalents equal to the present value of the consideration described in the Transfer Notice.
          (c) Additional or Exchanged Securities and Property. In the event of a merger or consolidation of the Company with or into another entity, any other corporate reorganization, a stock split, the declaration of a stock dividend, the declaration of an extraordinary dividend payable in a form other than stock, a spin-off, an adjustment in conversion ratio, a recapitalization or a similar transaction affecting the Company’s outstanding securities, any securities or other property (including cash or cash equivalents) that are by reason of such transaction exchanged for, or distributed with respect to, any Shares subject to this Section 8 shall immediately be subject to the Right of First Refusal. Appropriate adjustments to reflect the exchange or distribution of such securities or property shall be made to the number and/or class of the Shares subject to this Section 8.
          (d) Termination of Right of First Refusal. Any other provision of this Section 8 notwithstanding, in the event that the Stock is readily tradable on an established securities market when the Optionee desires to transfer Shares, the Company shall have no Right of First Refusal, and the Optionee shall have no obligation to comply with the procedures prescribed by Subsections (a) and (b) above.

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          (e) Permitted Transfers. This Section 8 shall not apply to (i) a transfer by beneficiary designation, will or intestate succession or (ii) a transfer to one or more members of the Optionee’s Immediate Family or to a trust established by the Optionee for the benefit of the Optionee and/or one or more members of the Optionee’s Immediate Family, provided in either case that the Transferee agrees in writing on a form prescribed by the Company to be bound by all provisions of this Agreement. If the Optionee transfers any Shares acquired under this Agreement, either under this Subsection (e) or after the Company has failed to exercise the Right of First Refusal, then this Agreement shall apply to the Transferee to the same extent as to the Optionee.
          (f) Termination of Rights as Stockholder. If the Company makes available, at the time and place and in the amount and form provided in this Agreement, the consideration for the Shares to be purchased in accordance with this Section 8, then after such time the person from whom such Shares are to be purchased shall no longer have any rights as a holder of such Shares (other than the right to receive payment of such consideration in accordance with this Agreement). Such Shares shall be deemed to have been purchased in accordance with the applicable provisions hereof, whether or not the certificate(s) therefor have been delivered as required by this Agreement.
          (g) Assignment of Right of First Refusal. The Company’s Right of First Refusal shall be freely assignable, in whole or in part. Any person who accepts an assignment of the Right of First Refusal from the Company shall assume all of the Company’s rights and obligations under this Section 8.
SECTION 9. LEGALITY OF INITIAL ISSUANCE.
          No Shares shall be issued upon the exercise of this option unless and until the Company has determined that:
               (i) It and the Optionee have taken any actions required to register the Shares under the Securities Act or to perfect an exemption from the registration requirements thereof;
               (ii) Any applicable listing requirement of any stock exchange or other securities market on which Stock is listed has been satisfied; and
               (iii) Any other applicable provision of federal, state or foreign law has been satisfied.
SECTION 10. NO REGISTRATION RIGHTS.
          The Company may, but shall not be obligated to, register or qualify the sale of Shares under the Securities Act or any other applicable law. The Company shall not be obligated to take any affirmative action in order to cause the sale of Shares under this Agreement to comply with any law.
SECTION 11. RESTRICTIONS ON TRANSFER.
          (a) Securities Law Restrictions. Regardless of whether the offering and sale of Shares under the Plan have been registered under the Securities Act or have been registered or qualified under the securities laws of any state, the Company at its discretion may impose restrictions upon the sale, pledge or other transfer of such Shares (including the placement of appropriate legends on stock certificates or the imposition of stop-transfer instructions) if, in the judgment of the Company, such restrictions are necessary or desirable in order to achieve compliance with the Securities Act, the securities laws of any state or any other law.
          (b) Market Stand-Off. In connection with any underwritten public offering by the Company of its equity securities pursuant to an effective registration statement filed under the Securities Act, including the Company’s initial public offering, the Optionee or a Transferee shall not directly or indirectly sell, make any short sale of, loan, hypothecate, pledge, offer, grant or sell any option or other contract for the purchase of, purchase any option or other contract for the sale of, or otherwise dispose of or transfer, or agree to engage in any of the foregoing transactions with respect to, any Shares acquired under this Agreement without the prior written

-6-


 

consent of the Company or its underwriters. Such restriction (the “Market Stand-Off”) shall be in effect for such period of time following the date of the final prospectus for the offering as may be requested by the Company or such underwriters. In no event, however, shall such period exceed one hundred eighty (180) days. The Market Stand-Off shall in any event terminate two years after the date of the Company’s initial public offering. In the event of the declaration of a stock dividend, a spin-off, a stock split, an adjustment in conversion ratio, a recapitalization or a similar transaction affecting the Company’s outstanding securities without receipt of consideration, any new, substituted or additional securities which are by reason of such transaction distributed with respect to any Shares subject to the Market Stand-Off, or into which such Shares thereby become convertible, shall immediately be subject to the Market Stand-Off. In order to enforce the Market Stand-Off, the Company may impose stop-transfer instructions with respect to the Shares acquired under this Agreement until the end of the applicable stand-off period. The Company’s underwriters shall be beneficiaries of the agreement set forth in this Subsection (b). This Subsection (b) shall not apply to Shares registered in the public offering under the Securities Act, and the Optionee or a Transferee shall be subject to this Subsection (b) only if the directors and officers of the Company are subject to similar arrangements.
          (c) Investment Intent at Grant. The Optionee represents and agrees that the Shares to be acquired upon exercising this option will be acquired for investment, and not with a view to the sale or distribution thereof.
          (d) Investment Intent at Exercise. In the event that the sale of Shares under the Plan is not registered under the Securities Act but an exemption is available which requires an investment representation or other representation, the Optionee shall represent and agree at the time of exercise that the Shares being acquired upon exercising this option are being acquired for investment, and not with a view to the sale or distribution thereof, and shall make such other representations as are deemed necessary or appropriate by the Company and its counsel.
          (e) Legends. All certificates evidencing Shares purchased under this Agreement shall bear the following legend:
“THE SHARES REPRESENTED HEREBY MAY NOT BE SOLD, ASSIGNED, TRANSFERRED, ENCUMBERED OR IN ANY MANNER DISPOSED OF, EXCEPT IN COMPLIANCE WITH THE TERMS OF A WRITTEN AGREEMENT BETWEEN THE COMPANY AND THE REGISTERED HOLDER OF THE SHARES (OR THE PREDECESSOR IN INTEREST TO THE SHARES). SUCH AGREEMENT GRANTS TO THE COMPANY CERTAIN RIGHTS OF FIRST REFUSAL UPON AN ATTEMPTED TRANSFER OF THE SHARES AND CERTAIN REPURCHASE RIGHTS UPON TERMINATION OF SERVICE WITH THE COMPANY. THE SECRETARY OF THE COMPANY WILL UPON WRITTEN REQUEST FURNISH A COPY OF SUCH AGREEMENT TO THE HOLDER HEREOF WITHOUT CHARGE.”
All certificates evidencing Shares purchased under this Agreement in an unregistered transaction shall bear the following legend (and such other restrictive legends as are required or deemed advisable under the provisions of any applicable law):
“THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED, OR OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT OR AN OPINION OF COUNSEL, SATISFACTORY TO THE COMPANY AND ITS COUNSEL, THAT SUCH REGISTRATION IS NOT REQUIRED.”
          (f) Removal of Legends. If, in the opinion of the Company and its counsel, any legend placed on a stock certificate representing Shares sold under this Agreement is no longer required, the holder of such certificate shall be entitled to exchange such certificate for a certificate representing the same number of Shares but without such legend.

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          (g) Administration. Any determination by the Company and its counsel in connection with any of the matters set forth in this Section 11 shall be conclusive and binding on the Optionee and all other persons.
SECTION 12. ADJUSTMENT OF SHARES.
          In the event of any transaction described in Section 8(a) of the Plan, the terms of this option (including, without limitation, the number and kind of Shares subject to this option and the Exercise Price) shall be adjusted as set forth in Section 8(a) of the Plan. In the event that the Company is a party to a merger or consolidation, this option shall be subject to the agreement of merger or consolidation, as provided in Section 8(b) of the Plan.
SECTION 13. MISCELLANEOUS PROVISIONS.
          (a) Rights as a Stockholder. Neither the Optionee nor the Optionee’s representative shall have any rights as a stockholder with respect to any Shares subject to this option until the Optionee or the Optionee’s representative becomes entitled to receive such Shares by filing a notice of exercise and paying the Purchase Price pursuant to Sections 4 and 5.
          (b) No Retention Rights. Nothing in this option or in the Plan shall confer upon the Optionee any right to continue in Service for any period of specific duration or interfere with or otherwise restrict in any way the rights of the Company (or any Parent or Subsidiary employing or retaining the Optionee) or of the Optionee, which rights are hereby expressly reserved by each, to terminate his or her Service at any time and for any reason, with or without cause.
          (c) Notice. Any notice required by the terms of this Agreement shall be given in writing. It shall be deemed effective upon (i) personal delivery, (ii) deposit with the United States Postal Service, by registered or certified mail, with postage and fees prepaid or (iii) deposit with Federal Express Corporation, with shipping charges prepaid. Notice shall be addressed to the Company at its principal executive office and to the Optionee at the address that he or she most recently provided to the Company in accordance with this Subsection (c).
          (d) Entire Agreement. The Notice of Stock Option Grant, this Agreement and the Plan constitute the entire contract between the parties hereto with regard to the subject matter hereof. They supersede any other agreements, representations or understandings (whether oral or written and whether express or implied) which relate to the subject matter hereof.
          (e) Choice of Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of California, as such laws are applied to contracts entered into and performed in such State.
SECTION 14. DEFINITIONS.
          (a) “Agreement” shall mean this Stock Option Agreement.
          (b) “Board of Directors” shall mean the Board of Directors of the Company, as constituted from time to time or, if a Committee has been appointed, such Committee.
          (c) “Code” shall mean the Internal Revenue Code of 1986, as amended.
          (d) “Committee” shall mean a committee of the Board of Directors, as described in Section 2 of the Plan.
          (e) “Company” shall mean Entone Technologies, Inc., a Delaware corporation.

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          (f) “Consultant” shall mean a person who performs bona fide services for the Company, a Parent or a Subsidiary as a consultant or advisor, excluding Employees and Outside Directors.
          (g) “Date of Grant” shall mean the date specified in the Notice of Stock Option Grant, which date shall be the later of (i) the date on which the Board of Directors resolved to grant this option or (ii) the first day of the Optionee’s Service.
          (h) “Disability” shall mean that the Optionee is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment.
          (i) “Employee” shall mean any individual who is a common-law employee of the Company, a Parent or a Subsidiary.
          (j) “Exercise Price” shall mean the amount for which one Share may be purchased upon exercise of this option, as specified in the Notice of Stock Option Grant.
          (k) “Fair Market Value” shall mean the fair market value of a Share, as determined by the Board of Directors in good faith. Such determination shall be conclusive and binding on all persons.
          (l) “Immediate Family” shall mean any child, stepchild, grandchild, parent, stepparent, grandparent, spouse, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law or sister-in-law and shall include adoptive relationships.
          (m) “IRS” means the United States Internal Revenue Service.
          (n) “ISO” shall mean an employee incentive stock option described in Section 422(b) of the Code.
          (o) “Notice of Stock Option Grant” shall mean the document so entitled to which this Agreement is attached.
          (p) “NSO” shall mean a stock option not described in Sections 422(b) or 423(b) of the Code.
          (q) “Optionee” shall mean the person named in the Notice of Stock Option Grant.
          (r) “Outside Director” shall mean a member of the Board of Directors who is not an Employee.
          (s) “Parent” shall mean any corporation (other than the Company) in an unbroken chain of corporations ending with the Company, if each of the corporations other than the Company owns stock possessing fifty percent (50%) or more of the total combined voting power of all classes of stock in one of the other corporations in such chain.
          (t) “Plan” shall mean the Entone Technologies, Inc. 2003 Stock Plan, as in effect on the Date of Grant.
          (u) “Purchase Price” shall mean the Exercise Price multiplied by the number of Shares with respect to which this option is being exercised.
          (v) “Repurchase Period” shall have the meaning given to such term in Section 7.
          (w) “Restricted Share” shall mean a Share that is subject to the Right of Repurchase.

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          (x) “Right of First Refusal” shall mean the Company’s right of first refusal described in Section 8.
          (y) “Right of Repurchase” shall mean the Company’s right of repurchase described in Section 7.
          (z) “Securities Act” shall mean the Securities Act of 1933, as amended.
          (aa) “Service” shall mean service as an Employee, Outside Director or Consultant.
          (bb) “Share” shall mean one share of Stock, as adjusted in accordance with Section 8 of the Plan (if applicable).
          (cc) “Stock” shall mean the Common Stock of the Company, with a par value of $0.001 per Share.
          (dd) “Subsidiary” shall mean any corporation (other than the Company) in an unbroken chain of corporations beginning with the Company, if each of the corporations other than the last corporation in the unbroken chain owns stock possessing fifty percent (50%) or more of the total combined voting power of all classes of stock in one of the other corporations in such chain.
          (ee) “Transferee” shall mean any person to whom the Optionee has directly or indirectly transferred any Share acquired under this Agreement.
          (ff) “Transfer Notice” shall mean the notice of a proposed transfer of Shares described in Section 8.

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exv5w1
 

Exhibit 5.1
February 27, 2007
Harmonic Inc.
549 Baltic Way
Sunnyvale, CA 94089
     RE:       REGISTRATION STATEMENT ON FORM S-8
Ladies and Gentlemen:
     We have acted as counsel to Harmonic Inc., a Delaware corporation (the “Company” or “you”), and have examined the Registration Statement on Form S-8 to be filed by you with the Securities and Exchange Commission on or about February 27, 2007 (the “Registration Statement”), in connection with the registration under the Securities Act of 1933, as amended, of 175,342 shares of the Company’s common stock, par value $0.001 per share (the “Shares”), reserved for issuance under the Entone Technologies, Inc. 2003 Stock Plan, as amended (the “Plan”).
     It is our opinion that, when issued and sold in the manner described in the Plan and pursuant to agreements which accompany each grant under the Plan, the Shares will be legally and validly issued, fully paid and non-assessable.
     We consent to the use of this opinion as an exhibit to the Registration Statement and further consent to the use of our name wherever appearing in the Registration Statement and any amendments thereto.
     
 
  Very truly yours,
 
   
 
  WILSON SONSINI GOODRICH & ROSATI
 
  Professional Corporation
 
   
 
  /s/ Wilson Sonsini Goodrich & Rosati

 

exv23w1
 

Exhibit 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We hereby consent to the incorporation by reference in this Registration Statement on Form S-8 of our report dated March 13, 2006 relating to the financial statements, management’s assessment of the effectiveness of internal control over financial reporting and the effectiveness of internal control over financial reporting, of Harmonic Inc., which appears in Harmonic Inc.’s Annual Report on Form 10-K for the year ended December 31, 2005.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
San Jose, California
February 27, 2007

 

exv23w2
 

Exhibit 23.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in this Registration Statement on Form S-8 of our report dated November 22, 2006 relating to the consolidated financial statements of Entone Technologies, Inc. and subsidiaries, appearing in the Current Report on Form 8-K/A of Harmonic Inc. filed on February 22, 2007.
/s/ Deloitte & Touche LLP
San Jose, California
February 27, 2007