Document:

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                            SONIC INNOVATIONS, INC.
                                                                     Exhibit 4.1

                       2000 EMPLOYEE STOCK PURCHASE PLAN

     The following constitute the provisions of the 2000 Employee Stock Purchase
Plan of Sonic Innovations, Inc. (the "Plan").

     1.  Purpose.  The purpose of the Plan is to provide employees of the
Company and its Designated Subsidiaries with an opportunity to purchase Common
Stock of the Company through accumulated payroll deductions. It is the intention
of the Company to have the Plan qualify as an "employee stock purchase plan"
under Section 423 of the Internal Revenue Code of 1986, as amended. The
provisions of the Plan, shall be construed so as to extend and limit
participation in a manner consistent with the requirements of that section of
the Code.

     2.  Definitions.

         (a)  "Board" means the Board of Directors of the Company or any
committee thereof designated by the Board of Directors of the Company in
accordance with Section 14 of the Plan.

         (b)  "Code" means the Internal Revenue Code of 1986, as amended.

         (c)  "Common Stock" means the common stock of the Company.

         (d)  "Company" means Sonic Innovations, Inc. and any Designated
Subsidiary of the Company.

         (e)  "Compensation" means all gross earnings including commissions,
overtime, shift premium, incentive compensation, bonuses and other compensation.

         (f)  "Designated Subsidiary" means any subsidiary of the Company that
has been designated by the Board as eligible to participate in the Plan.

         (g)  "Employee" means any individual who is an employee of the Company
for tax purposes. For purposes of the Plan, the employment relationship shall be
treated as continuing intact while the individual is on sick leave or other
leave of absence approved by the Company. Where the period of leave exceeds 90
days and the individual's right to reemployment is not guaranteed either by
statute or by contract, the employment relationship shall be deemed to have
terminated on the 91st day of such leave.

         (h)  "Enrollment Date" means the first Trading Day of each Offering
Period.

         (i)  "Exercise Date" means the last Trading Day of each Purchase
Period.

         (j)  "Fair Market Value" means, as of any date, the value of Common
Stock determined as follows:

              (i)  If the Common Stock is listed on any established stock
exchange or a national market system, its Fair Market Value shall be the closing
sales price for such stock (or the closing bid, if no sales were reported) as
quoted on such exchange or system for the last market trading day prior to the
date of determination.
<PAGE>

              (ii)  If the Common Stock is regularly quoted by a recognized
securities dealer but selling prices are not reported, its Fair Market Value
shall be the mean of the closing bid and asked prices for the Common Stock prior
to the date of determination.

              (iii) In the absence of an established market for the Common
Stock, the Fair Market Value thereof shall be determined in good faith by the
Board; or

              (iv)  For purposes of the Enrollment Date of the first Offering
Period under the Plan, the Fair Market Value shall be the initial price to the
public as set forth in the final prospectus included within the registration
statement on Form S-1 filed with the Securities and Exchange Commission (the
"SEC") for the initial public offering of the Company's Common Stock (the
"Registration Statement").

         (k)  "Offering Periods" means the periods of approximately 24 months
during which an option granted pursuant to the Plan may be exercised, commencing
on the first Trading Day on or after May 1st and November 1st of each year and
terminating on the last Trading Day in the periods ending twenty-four months
later; provided, however, that the first Offering Period under the Plan shall
commence with the first Trading Day on or after the date on which the SEC
declares the Company's Registration Statement effective and ending on the last
Trading Day on or before April 30, 2002 The duration and timing of Offering
Periods may be changed pursuant to Section 4 of this Plan.

         (l)  "Plan" means this 2000 Employee Stock Purchase Plan.

         (m)  "Purchase Period" means the approximately six month period
commencing after one Exercise Date and ending with the next Exercise Date.

         (n)  "Purchase Price" means 85% of the Fair Market Value of a share of
Common Stock on the Enrollment Date or on the Exercise Date, whichever is lower;
provided however, that the Purchase Price may be adjusted by the Board pursuant
to Section 20.

         (o)  "Trading Day" means a day on which national stock exchanges are
open for trading.

     3.  Eligibility.

         (a)  Any Employee who shall be employed by the Company on a given
Enrollment Date shall be eligible to participate in the Plan.

         (b)  Any provisions of the Plan to the contrary notwithstanding, no
Employee shall be granted an option under the Plan (i) to the extent that,
immediately after the grant, such Employee (or any other person whose stock
would be attributed to such Employee pursuant to Section 424(d) of the Code)
would own capital stock of the Company and/or hold outstanding options to
purchase such stock possessing five percent (5%) or more of the total combined
voting power or value of all classes of capital stock of the Company or any
subsidiary; or (ii) to the extent that his or her rights to purchase stock under
all employee stock purchase plans of the Company and its subsidiaries accrues at
a rate which exceeds Twenty Five Thousand Dollars ($25,000) worth of stock
(determined at the fair market value of the shares at the time such option is
granted) for each calendar year in which such option is outstanding at any time.

     4.  Offering Periods.  The Plan shall be implemented by consecutive,
overlapping Offering Periods with a new Offering Period commencing on the first
Trading Day on or after May 1st and November 1st each year, or on such other
date as the Board shall determine; provided, however, that the first Offering
Period shall commence with the first Trading Day on or after the date on which
the SEC declares the Company's Registration Statement effective and ending on
the last Trading Day on or before April 30, 2002.
<PAGE>

The Board shall have the power to change the commencement dates and duration of
Offering Periods with respect to future offerings without shareholder approval
if such change is announced at least five (5) days prior to the scheduled
beginning of the first Offering Period to be affected thereafter.

     5.  Participation.

         (a)  An eligible Employee may become a participant in the Plan by
completing an agreement authorizing payroll deductions in the form of Exhibit A
and filing it with the Company's human resources department prior to the
applicable Enrollment Date.

         (b)  Payroll deductions for a participant shall commence on the first
payroll following the Enrollment Date and shall end on the last payroll in the
Offering Period to which such authorization is applicable, unless sooner
terminated by the participant as provided in Section 10 hereof.

     6.  Payroll Deductions.

         (a)  At the time a participant files his or her subscription agreement,
he or she shall elect to have payroll deductions made on each pay day during the
Offering Period in an amount not exceeding ten percent (10%) of the Compensation
which he or she receives on each pay day during the Offering Period.

         (b)  All payroll deductions made for a participant shall be credited to
his or her account under the Plan and shall be withheld in whole percentages
only. A participant may not make any additional payments into such account.

         (c)  A participant may discontinue his or her participation in the Plan
as provided in Section 10 hereof, or may increase or decrease the rate of his or
her payroll deductions during the Offering Period by filing with the Company a
new agreement authorizing a change in payroll deduction rate. A participant's
agreement shall remain in effect for successive Offering Periods unless
terminated as provided in Section 10 hereof.

         (d)  Notwithstanding the foregoing, to the extent necessary to comply
with Section 423(b)(8) of the Code and Section 3(b) hereof, a participant's
payroll deductions may be decreased by the Company at any time during a Purchase
Period. Payroll deductions shall recommence at the rate provided in such
participant's agreement at the beginning of the first Purchase Period which is
scheduled to end in the following calendar year.

         (e)  At the time the Company's Common Stock issued under the Plan is
disposed of, the participant must make adequate provision for the Company's
federal, state, or other tax withholding obligations, if any, which arise upon
the disposition of the Common Stock. The Company may, but shall not be obligated
to, withhold from the participant's compensation the amount necessary for the
Company to meet applicable withholding obligations.

     7.  Grant of Option.  On the Enrollment Date of each Offering Period, each
participating Employee shall be granted an option to purchase on each Exercise
Date up to a number of shares of the Company's Common Stock determined by
dividing such Employee's payroll deductions accumulated prior to such Exercise
Date and retained in the Participant's account as of the Exercise Date by the
applicable Purchase Price; provided that in no event shall an Employee be
permitted to purchase during each Purchase Period more than 5,263 shares of the
Company's Common Stock (subject to any adjustment pursuant to Section 19), and
provided further that such purchase shall be subject to the limitations set
forth in Sections 3(b) and 13 hereof.  The Board may, for future Offering
Periods, increase or decrease, in its absolute discretion, the maximum number of
shares of the Company's Common Stock an Employee may purchase
<PAGE>

during each Purchase Period of such Offering Period. Exercise of the option
shall occur as provided in Section 8 hereof, unless the participant has
withdrawn pursuant to Section 10 hereof. The option shall expire on the last day
of the Offering Period.

     8.  Exercise of Option.

         (a)  Unless a participant withdraws from the Plan as provided in
Section 10 hereof, his or her option for the purchase of shares shall be
exercised automatically on the Exercise Date, and the maximum number of full
shares subject to option shall be purchased for such participant at the
applicable Purchase Price with the accumulated payroll deductions in his or her
account. No fractional shares shall be purchased; any payroll deductions
accumulated in a participant's account which are not sufficient to purchase a
full share shall be retained in the participant's account for the subsequent
Purchase Period.

         (b)  If the Board determines that, on a given Exercise Date, the number
of shares with respect to which options are to be exercised may exceed the
number of shares of Common Stock that were authorized under the Plan, the Board
may in its sole discretion provide that the Company shall make a pro rata
allocation of the shares of Common Stock available for purchase on such Exercise
Date, and (i) continue all Offering Periods then in effect, or (ii) terminate
any or all Offering Periods then in effect pursuant to Section 20 hereof.

     9.  Delivery.  As promptly as practicable after each Exercise Date on which
a purchase of shares occurs, the Company shall arrange the delivery to each
participant, as appropriate, of a certificate representing the shares purchased
upon exercise of his or her option.

     10. Withdrawal.  A participant may withdraw all but not less than all the
payroll deductions credited to his or her account and not yet used to exercise
his or her option under the Plan at any time by giving written notice to the
Company in the form of Exhibit B.  All of the participant's payroll deductions
credited to his or her account shall be paid to such participant promptly after
receipt of notice of withdrawal and such participant's option for all Offering
Periods then in progress shall be automatically terminated, and no further
payroll deductions for the purchase of shares shall be made for such Offering
Periods.  Payroll deductions shall not resume at the beginning of the succeeding
Offering Period unless the participant delivers to the Company a new agreement.

     11. Termination of Employment.

         Upon a participant's ceasing to be an Employee for any reason, he or
she shall be deemed to have elected to withdraw from the Plan and the payroll
deductions credited to such participant's account during the Purchase Period but
not yet used to exercise the option shall be returned to such participant or, in
the case of his or her death, to the person or persons entitled thereto under
Section 15 hereof, and such participant's option shall be automatically
terminated.

     12. Interest.  No interest shall accrue on the payroll deductions of a
participant in the Plan.

     13. Stock.

         (a)  Subject to adjustment upon changes in capitalization of the
Company as provided in Section 19 hereof, the maximum number of shares of the
Company's Common Stock which shall be made available for sale under the Plan
shall be 313,158 shares plus an annual increase to be added on each January 1st
equal to the lesser of (i) 105,263 shares, (ii) 1% of the outstanding shares on
such date, or (iii) a lesser amount determined by the Board.
<PAGE>

         (b)  The participant shall have no interest or voting right in shares
covered by his option until such option has been exercised.

         (c)  Shares to be delivered to a participant under the Plan shall be
registered in the name of the participant or in the name of the participant and
his or her spouse.

     14. Administration.  The Plan shall be administered by the Board or a
committee of members of the Board appointed by the Board. The Board or its
committee shall have full and exclusive discretionary authority to construe,
interpret and apply the terms of the Plan, to determine eligibility and to
adjudicate all disputed claims filed under the Plan. Every finding, decision and
determination made by the Board or its committee shall, to the full extent
permitted by law, be final and binding upon all parties.

     15. Designation of Beneficiary.  A participant may file a written
designation of a beneficiary who is to receive any shares and cash from the
participant's account under the Plan in the event of such participant's death.
If a participant is married and the designated beneficiary is not the spouse,
spousal consent shall be required for such designation to be effective. Such
designation of beneficiary may be changed by the participant at any time by
written notice. In the event of the death of a participant and in the absence of
a valid beneficiary, the Company shall deliver such shares and cash to the
executor or administrator of the estate of the participant.

     16. Transferability.  Neither payroll deductions credited to a
participant's account nor any rights with regard to the exercise of an option to
receive shares under the Plan may be assigned, transferred, pledged or otherwise
disposed of in any way (other than by will, the laws of descent and
distribution, or as provided in Section 15 hereof) by the participant. Any such
attempt at assignment, transfer, pledge or other disposition shall be without
effect.

     17. Use of Funds.  All payroll deductions received or held by the Company
under the Plan may be used by the Company for any corporate purpose, and the
Company shall not be obligated to segregate such payroll deductions.

     18. Reports.  Individual accounts shall be maintained for each participant
in the Plan. Statements of account shall be given to participating Employees at
least annually, which statements shall set forth the amounts of payroll
deductions, the Purchase Price, the number of shares purchased and the remaining
cash balance, if any.

     19. Adjustments Upon Changes in Capitalization, Dissolution, Liquidation,
Merger or Asset Sale.

         (a)  Changes in Capitalization. Subject to any required action by the
shareholders of the Company, the shares authorized and remaining under the Plan,
the maximum number of shares each participant may purchase each Purchase Period,
the price per share and the number of shares of Common Stock covered by each
option under the Plan which has not yet been exercised shall be proportionately
adjusted for any increase or decrease in the number of issued shares of Common
Stock resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other increase or
decrease in the number of shares of Common Stock effected without receipt of
consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Such adjustment shall be made by the Board,
whose determination in that respect shall be final, binding and conclusive.
Except as expressly provided herein, no issuance by the Company of shares of
stock of any class, or securities convertible into shares of stock of any class,
shall affect, and no adjustment by reason thereof shall be made with respect to,
the number or price of shares of Common Stock subject to an option.
<PAGE>

         (b)  Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, the Offering Period then in progress
shall be shortened by setting a new Exercise Date (the "New Exercise Date"). The
Board shall notify each participant in writing, at least ten (10) business days
prior to the New Exercise Date, that the Exercise Date for the participant's
option has been changed to the New Exercise Date.

         (c)  Merger or Asset Sale. In the event of a proposed sale of all or
substantially all of the assets of the Company, or the merger of the Company
with or into another corporation, each outstanding option shall be assumed or an
equivalent option substituted by the successor corporation. In the event that
the successor corporation refuses to assume or substitute for the option, any
Purchase Periods then in progress shall be shortened by setting a new Exercise
Date (the "New Exercise Date") and any Offering Periods then in progress shall
end on the New Exercise Date. The Board shall notify each participant in
writing, at least ten (10) business days prior to the New Exercise Date, that
the Exercise Date for the participant's option has been changed to the New
Exercise Date.

     20. Amendment or Termination.

         (a)  The Board of Directors of the Company may at any time and for any
reason terminate or amend the Plan. Except as provided in Section 20 hereof, no
such termination can affect options previously granted, provided that an
Offering Period may be terminated by the Board of Directors on any Exercise Date
if the Board determines that the termination of the Offering Period or the Plan
is in the best interests of the Company and its shareholders. Except as provided
in Section 19 and this Section 20 hereof, no amendment may make any change in
any option theretofore granted which adversely affects the rights of any
participant. To the extent necessary to comply with Section 423 of the Code (or
any successor rule or provision or any other applicable law, regulation or stock
exchange rule), the Company shall obtain shareholder approval in such a manner
and to such a degree as required.

         (b)  Without shareholder consent and without regard to whether any
participant rights may be considered to have been "adversely affected," the
Board (or its committee) shall be entitled to change the Offering Periods, limit
the frequency and/or number of changes in the amount withheld during an Offering
Period, establish the exchange ratio applicable to amounts withheld in a
currency other than U.S. dollars, permit payroll withholding in excess of the
amount designated by a participant in order to adjust for delays or mistakes in
the Company's processing of properly completed withholding elections, establish
reasonable waiting and adjustment periods and/or accounting and crediting
procedures to ensure that amounts applied toward the purchase of Common Stock
for each participant properly correspond with amounts withheld from the
participant's Compensation, and establish such other limitations or procedures
as the Board (or its committee) determines in its sole discretion advisable
which are consistent with the Plan.

         (c)  In the event the Board determines that the ongoing operation of
the Plan may result in unfavorable financial consequences, the Board may, in its
discretion and, to the extent necessary or desirable, modify or amend the Plan
to reduce or eliminate such financial consequences including, but not limited
to: (i) altering the Purchase Price for any Offering Period including an
Offering Period underway; (ii) shortening any Offering Period so that Offering
Period ends on a new Exercise Date, including an Offering Period underway; and
(iii) allocating shares. Such modifications or amendments shall not require
shareholder approval or the consent of any Plan participants.

     21. Notices.  All notices or other communications by a participant to the
Company in connection with the Plan shall be deemed to have been duly given when
received in the form specified by the Company at the location, or by the person,
designated by the Company for the receipt thereof.
<PAGE>

     22. Conditions Upon Issuance of Shares.  Shares shall not be issued with
respect to an option unless the exercise of such option and the issuance and
delivery of such shares pursuant thereto shall comply with all applicable
provisions of law, domestic or foreign, including, without limitation, the
Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as
amended, and the requirements of any stock exchange upon which the shares may
then be listed.

         As a condition to the exercise of an option, the Company may require
the person exercising such option to represent and warrant at the time of any
such exercise that the shares are being purchased only for investment and
without any present intent to sell or distribute such shares if, in the opinion
of counsel for the Company, such a representation is required by any of the
aforementioned applicable provisions of law.

     23. Term of Plan.  The Plan shall become effective upon of its adoption by
the Board of Directors and approval by the shareholders of the Company. It shall
continue in effect for a term of 10 years unless sooner terminated under Section
20 hereof.

     24. Automatic Transfer to Low Price Offering Period.  To the extent
permitted by any applicable laws, regulations, or stock exchange rules, if the
Fair Market Value of the Common Stock on any Exercise Date in an Offering Period
is lower than the Fair Market Value of the Common Stock on the Enrollment Date
of such Offering Period, then all participants in such Offering Period shall be
automatically withdrawn from such Offering Period immediately after the exercise
of their option on such Exercise Date and automatically re-enrolled in the
immediately following Offering Period as of the first day thereof.
<PAGE>

                            SONIC INNOVATIONS, INC.
                       2000 EMPLOYEE STOCK PURCHASE PLAN
                                   AGREEMENT

_____ Original Application                          Enrollment Date:___________
_____ Change in Payroll Deduction Rate
_____ Change of Beneficiary
1.   I hereby elect to participate in the 2000 Employee Stock Purchase Plan (the
     "ESPP") and to purchase shares of the Company's Common Stock in accordance
     with this Agreement and the ESPP.

2.   I hereby authorize payroll deductions from each paycheck in the amount of
     ____% of my Compensation on each payday (from 0 to 10% in whole
     percentages) during the Offering Period.

3.   I understand that if I do not withdraw from an Offering Period, my
     accumulated payroll deductions will be used to automatically exercise my
     option to purchase shares of Common Stock at the applicable Purchase Price.

4.   I have received a copy of the complete ESPP.  I understand that my
     participation in the ESPP is in all respects subject to the terms of the
     ESPP and I hereby agree to be bound by the terms of the ESPP.

5.   My shares purchased under the ESPP should be issued in the name(s) of:
     ___________________________________________________________________________
     (Employee or Employee and Spouse only).

6.   I understand that if I dispose of any shares received by me pursuant to the
     ESPP within one year after the Exercise Date, I will be treated for federal
     income tax purposes as having received ordinary income at the time of such
     disposition in an amount equal to the excess of the fair market value of
     the shares at the time such shares were purchased by me over the price
     which I paid for the shares. I hereby agree to notify the Company in
     writing within 30 days after the date of any disposition of my shares and I
     will make adequate provision for Federal, state or other tax withholding
     obligations, if any, which arise upon the disposition of the shares. The
     Company may, but will not be obligated to, withhold from my compensation
     the amount necessary to meet any applicable withholding obligation.

7.   In the event of my death, I hereby designate the following as my
     beneficiary(ies) to receive all payments and shares due me under the ESPP:

     ________________________________________________________________________
     (Name)              (Social Security Number)              (Relationship)

I UNDERSTAND THAT THIS AGREEMENT SHALL REMAIN IN EFFECT THROUGHOUT SUCCESSIVE
OFFERING PERIODS UNLESS TERMINATED BY ME.

Dated: ___________________  _________________________________________________
                            Signature of Employee      Social Security Number

                            _________________________________________________
                            Spouse's Signature
                            (If beneficiary other than spouse)
<PAGE>

                            SONIC INNOVATIONS, INC.
                       2000 EMPLOYEE STOCK PURCHASE PLAN
                             NOTICE OF WITHDRAWAL

[  ]      I hereby withdraw form the 2000 Employee Stock Purchase Plan (the
          "ESPP") effective immediately and direct the Company to pay me as
          promptly as practicable all the payroll deductions credited to my
          account with respect to the ESPP.

[  ]      I hereby withdraw from the 2000 ESPP effective after the end of the
          current Purchase Period.

          I understand that my options for the Offering Period(s) in progress
          will be automatically terminated and no further payroll deductions
          will be made for the purchase of shares as of my withdrawal date.  I
          Understand that I shall be eligible to participate in succeeding
          Offering Periods only by delivering to the Company a new 2000 ESPP
          Agreement.

                                      _______________________________________
                                      Name

                                      _______________________________________
                                      Social Security Number

                                      _______________________________________
                                      Signature

                                      _______________________________________
                                      Date<PAGE>

                                                                     Exhibit 4.2

                            SONIC INNOVATIONS, INC.

                           -------------------------

                                2000 STOCK PLAN

                           -------------------------

     This Prospectus relates to shares of Common Stock (the "Common Stock") of
Sonic Innovations, Inc., (the "Company") offered to employees of the Company
pursuant to options, stock appreciation rights and stock awards granted under
the Company's 2000 Stock Plan (the "Plan").  The terms and conditions of grants
made pursuant to the Plan, including the prices of the shares of Common Stock,
are governed by the provisions of the Plan and the agreements thereunder.

                           -------------------------

            THIS DOCUMENT CONSTITUTES PART OF A PROSPECTUS COVERING
                   SECURITIES THAT HAVE BEEN REGISTERED UNDER
                    THE SECURITIES ACT OF 1933, AS AMENDED.

     The Company's executive offices are located at 2795 East Cottonwood
Parkway, Suite 660, Salt Lake City, Utah 84121, and its telephone number at that
location is (801) 365-2800.
<PAGE>

     This Prospectus contains information concerning the Company and the Plan
but does not contain all the information set forth in the Registration Statement
on Form S-8 for the Plan, which the Company has filed with the Securities and
Exchange Commission under the Securities Act of 1933, as amended (the
"Securities Act").  The Registration Statement, including the exhibits thereto,
may be inspected at the Commission's office in Washington, D.C.  In addition,
the Commission maintains a Web site that contains reports, proxy and information
statements and other information regarding registrants that file electronically
with the Commission.  The address of the Commissions Web site is
http:\\www.sec.gov.

     The Company will provide without charge to each person to whom a copy of
this Prospectus is delivered, upon written or oral request of any such person,
(i) a copy of any and all of the information that has been or may be
incorporated by reference in this Prospectus, other than exhibits to such
documents, and (ii) a copy of any other documents required to be delivered to
optionees or holders of rights under the Plan pursuant to Rule 428(b) under the
Securities Act, including the Company's most recent Annual Report to
Shareholders, proxy statement and other communications distributed to its
shareholders generally.  Requests for such copies and requests for additional
information about the Plan and its Administrator should be directed to Stephen
L. Wilson, Chief Financial Officer of the Company at 2795 East Cottonwood
Parkway, Suite 660, Salt Lake City, Utah 84121.  The telephone number at which
Mr. Wilson may be reached is (801) 365-2800.

     Except for written information provided by the person set forth in the
foregoing paragraph, the Company has not authorized any information or
representations, other than those contained in this Prospectus, to be given or
made in connection with the Plan.  If given or made, such information or
representations must not be relied upon as having been authorized by the
Company.  This Prospectus does not constitute an offering in any state in which
such offering may not lawfully be made.
<PAGE>

             QUESTIONS AND ANSWERS ABOUT THE SONIC INNOVATIONS, INC

                                2000 STOCK PLAN

What is the Plan?

     The Company's 2000 Stock Plan (the "Plan") was adopted by the Board of
Directors and approved by stockholders to enable employees to own Common Stock
of the Company and take advantage of the tax benefits allowed to employer stock
plans by the Internal Revenue Code of 1986, as amended (the "Code").

     The Plan is not a qualified deferred compensation plan under 401(a) of the
Code, nor is it subject to the provisions of the Employee Retirement Income
Security Act of 1974.  The Plan automatically terminates in May 1, 2010 unless
terminated earlier by the board of directors of the Company.

How Many Shares of Stock are Reserved for Issuance Under the Plan?

     The maximum aggregate number of shares of the Company's Common Stock that
may be sold under the Plan is 2,226,488 plus an annual increase to be added on
each January 1st equal to the lesser of (i) 789,474 shares, (ii) 5% of the
outstanding shares on that date or (ii) a lesser amount determined by the
Company's Board of Directors (the "Board").

     No service provider may be granted options for more than 500,000 shares of
the Company's Common Stock in one fiscal year, other than a one-time additional
grant of up to 500,000 shares to newly-hired employees.

Who Administers the Plan?

     The Board of Directors of the Company or the Compensation Committee
appointed by the Board (the "Administrator") administers the Plan.  The
Committee is currently composed of two non-employee directors of the Company.
Members of the Board of Directors generally are elected for three-year terms but
can be removed from office upon a sufficient vote of the stockholders.

     The members of the Committee are chosen by the Board so that grants made
under the Plan to officers and directors of the Company who are subject to
liability under Section 16 of the Securities Exchange Act of 1934 ("Section 16
Insiders"), and other transactions by such persons, qualify for the maximum
exemption from Section 16 liability provided by Rule 16b-3.

     The Administrator has final authority to interpret any provision of the
Plan or any grant made under the Plan.
<PAGE>

Who is Eligible to Participate in the Plan?

     Employees of, directors of or provider of service to the Company or any
parent, affiliate or subsidiary are eligible to receive nonstatutory stock
options ("NSOs") and stock purchase rights ("SPRs").

     Only employees of the Company or any parent or subsidiary of the Company
are eligible to receive incentive stock options ("ISOs").

What Kinds of Grants are Permitted Under the Plan?

     The Plan permits the Company to grant ISOs, NSOs and SPRs ("Awards").  Each
of these grants is described below.  The "Tax Information" section summarizes
the U.S. tax treatment of each of these grants.

Who Selects the Persons Who Receive Grants?

     Only the Administrator can select the employees who receive Awards under
the Plan, and, subject to the provisions of the Plan, determine the terms of
each Award and the number of shares subject to each Award.

What is a Stock Option?

     An option is a right to buy stock at a fixed price for a certain period of
time.  ISOs are options that qualify for preferred tax treatment under Section
422 of the U.S. Tax Code.  ISOs can only be granted to U.S. employees.  NSOs are
options that do not qualify as ISOs.

     Subject to the terms of the Plan, the Administrator determines the term of
each option, the number of shares subject to each option, and the time each
option may be exercised.  However, the term of an ISO may not exceed ten years
from the date of grant.  Under certain circumstances, the term of an ISO may not
exceed five years from the date of grant.

     The Administrator also determines the option exercise price.  However, the
exercise price of an ISO may not be less than the fair market value of the
Common Stock on the date of grant.  Under certain circumstances, the  exercise
price of an ISO may not be less than 110% of the fair market value on the date
of grant.

     If an optionee's employment relationship, directorship and/or consulting
relationship terminates for any reason, his or her option may be exercised to
the extent it was exercisable on the date of such termination for a period of
time determined by the Administrator at the time the option is granted.  In the
case of a termination other than for disability or death, the period for
exercise of an option following termination generally will be three months.  In
the case of a termination for disability or death, the period for exercise
following termination generally will be twelve months.  In no event may an
option be exercised after the expiration of the original term of the option.
<PAGE>

     The Administrator determines how an optionee may pay the exercise price of
an option.  The Plan specifically states that the following are acceptable forms
of consideration:  cash, check, promissory note, certain other shares of Common
Stock, "cashless exercise," a reduction in the amount of any Company liability
to the optionee, any other form of consideration permitted by applicable law or
any combination thereof.  Subject to the Administrator's discretion, an optionee
who incurs a tax liability upon the exercise of an option may satisfy any
withholding obligation by electing to have the Company retain a sufficient
number of shares to cover the withholding obligation.

     The Administrator may at any time offer to buy out any outstanding option,
based on such terms and conditions as the Administrator shall establish and
communicate to the optionee at the time such offer is made.

What is the Term of an Option?

     The Committee determines the term of each option and the time each option
may be exercised.  In the case of ISOs, the term may not exceed ten years from
the date of grant.

How is the Exercise Price of an Option Determined?

     The Committee determines the option exercise price.  However, the exercise
price may not be less than 100% of the fair market value of the Common Stock on
the date of grant.

What is "Fair Market Value"?

     The "fair market value" of a Company's stock is the price that a reasonable
person could be expected to pay for the stock.  For purposes of the Plan, the
fair market value is determined by taking the closing sales price for the Common
Stock on the last market trading day prior to the grant date of the option.

What is Vesting?

     Vesting refers to the process of an option becoming exercisable and is
typically tied to continued employment with the Company.  Thus, as the Option
vest, the optionee may (but is not required to) exercise the vested portion of
the Option.

What Does the Term "Exercise" Mean?

     When an option is exercised, the optionee essentially purchases the stock
from the Company at the "option" or "exercise" price.
<PAGE>

How is an Option Exercised?

     The Committee determines how an optionee may pay the exercise price of an
option and lists the alternatives in the optionee's Option agreement.  The Plan
specifically states that the following are acceptable forms of consideration:
cash, check, promissory note, certain other shares of Common Stock, or delivery
of irrevocable instructions to a broker to deliver to the Company the
appropriate amount of proceeds from the sale of the shares exercised (often
referred to as a "cashless exercise").

What Happens to an Option Upon Termination of Employment?

     If an optionee terminates his or her employment as a result of the
optionee's total and permanent disability, the optionee may exercise the option
within the period of time specified in the option agreement, but only to the
extent that the option is vested (which shall be three months following the
optionee's termination in the absence of a specified time in the option
agreement).

     If the optionee dies while a service provider, the optionee's estate or a
person who acquires the right to exercise the option by bequest or inheritance
may exercise the option within the period of time specified in the option
agreement, but only to the extent that the option is vested.

     If an optionee ceases to be a service provider, other than upon death or
disability, the optionee may exercise the option within the period of time
specified in the option agreement, but only to the extent that the option is
vested.

What is an SPR?

     An SPR is a right to buy Common Stock of the Company.  The terms and
conditions under which stock may be purchased pursuant to an SPR are determined
by the Administrator.  Upon the grant of an SPR, the Company will generally
retain the right to repurchase the Common Stock at its original purchase price
if the employment relationship, directorship and/or consulting relationship of
the grantee is terminated.  The repurchase right lapses each year according to a
schedule that is determined by the Administrator.

What Terms Apply to All Awards?

     Written Agreements.  Awards granted under the Plan are evidenced by a
written agreement, delivered either manually or electronically, between the
Company and the employee, director or consultant to whom the award is granted.

     Non-transferability of Options and Rights.  Subject to the discretion of
the Administrator, awards granted under the Plan are generally non-transferable
by the participant, other than by will or the laws of descent and distribution,
and may generally be exercised during the lifetime of the participant only by
him or her.
<PAGE>

     Adjustment on Changes in Capitalization.  In the event any change, such as
a stock split or dividend, is made in the Company's capitalization which results
in an increase or decrease in the number of issued shares of Common Stock
without receipt of consideration by the Company, an appropriate adjustment will
be made in the price of each option and right and in the number of shares
subject to each option and right.

     Effect of Dissolution or Liquidation of the Company.  In the event of a
proposed dissolution or liquidation of the Company, the Administrator may, in
its discretion, provide that all outstanding options and rights will become
vested and exercisable as to all shares subject to options and rights, including
shares as to which the options and rights would not otherwise be vested or
exercisable.

     Effect of Acquisition of the Company.  In the event of the merger of the
Company with or into another corporation, or the sale of all or substantially
all of the Company's assets, each outstanding option and right shall be assumed
or substituted for by the successor corporation (or a parent or subsidiary or
such successor corporation).  If the successor corporation refuses to assume or
substitute for the outstanding options or rights, such options or rights will
become vested and exercisable as to all shares subject to the option or right,
including shares as to which the options or rights would not otherwise be vested
or exercisable.

     Amendment and Termination.  The Board may amend, alter, suspend or
discontinue the Plan at any time, but such amendment, alteration, suspension or
discontinuation may not adversely affect any outstanding option or stock
issuance without the consent of the holder.  To the extent necessary and
desirable to comply with applicable law, the Company must obtain stockholder
approval of certain amendments to the Plan in the manner and to the degree
required by such laws and regulations.

Additional Considerations for "Affiliates" of the Company.

     Certain officers and directors of the Company are considered "affiliates"
of the Company, as that term is defined in Rule 144(a) under the Securities Act.
Affiliates may resell Common Stock subject to the restrictions of Rule 144 or
pursuant to an effective registration statement.  Rule 144 requires that resales
by affiliates satisfy the following conditions:  (i) the resale must be made
through a broker in an unsolicited "broker's transaction" or in a direct
transaction with a "market maker," as those terms are defined under the
Securities Exchange Act of 1934, as amended (the "Exchange Act");  (ii) certain
information about the Company must be publicly available; (iii) the amount of
Common Stock sold in any three-month period must not exceed the greater of (A)
one percent of the Common Stock outstanding as shown by the Company's most
recent published report or statement, or (B) the average weekly reported volume
of trading in the Common Stock on the Nasdaq National Market during the four
calendar weeks preceding such sale; and, (iv) if applicable, a Form 144 must be
timely filed with the Securities and Exchange Commission.  If the resale is by
an affiliate pursuant to a registration statement, it may not be made in
reliance on the registration statement on Form S-8 filed in connection with the
issuance of the shares described in this Prospectus.
<PAGE>

                                TAX INFORMATION

     The following is a brief summary of the effect of U.S. federal income tax
laws upon options and rights to purchase stock granted under the Plan based on
U.S. federal income tax laws in effect as of the date of this Prospectus.

     This summary is not intended to be exhaustive and does not discuss the tax
consequences of your death or the provisions of any income tax laws of any
municipality, state or foreign country in which you may reside.  You should
consult your own tax advisor regarding the taxation of these options and rights
to purchase stock.

     Incentive Stock Options.  You recognize no taxable income upon the grant or
exercise of an incentive stock option (unless the alternative minimum tax rules
apply).  If shares are issued to you pursuant to the exercise of an incentive
stock option, and if no disqualifying disposition of the shares is made by you
within two years after the date of grant or within one year after the issuance
of such shares to you, then:

     .  upon the resale of such shares, any amount realized by you in excess of
        the option exercise price will be treated as a long-term capital gain
        and any loss sustained will be a long-term capital loss, and

     .  we will not be allowed any deduction for federal income tax purposes.

     If you dispose of shares acquired upon the exercise of an incentive stock
option before the expiration of either holding period described above,
generally:

     .  you will recognize ordinary income in the year of disposition in an
        amount equal to the excess (if any) of the fair market value of the
        shares at exercise (or, if less, the amount realized on the disposition
        of the shares) over the option exercise price paid for such shares, and

     .  we will be entitled to a tax deduction in the same amount.

Any further gain or loss realized by you will be taxed as short-term or long-
term capital gain or loss, as the case may be, and will not result in any
deduction by us.

     If an option designated as an incentive stock option first becomes
exercisable in any calendar year for shares in which the aggregate fair market
value exceeds $100,000, the exercise of such excess shares will be treated for
income tax purposes as having been acquired by you pursuant to an nonstatutory
stock option.  For purposes of this rule:

     .  all incentive stock options we have granted to you are aggregated,

     .  the fair market value of an option share is its value on the date of
        grant of the option, and
<PAGE>

     .  options are taken into account in the order in which they are granted.

     Nonstatutory Stock Options.  With respect to nonstatutory stock options, no
income is recognized by you at the time the option is granted.  Generally, at
exercise, ordinary income is recognized by you in an amount equal to the
difference between the option exercise price paid for the shares and the fair
market value of the shares on the date of exercise, and we are entitled to a tax
deduction in the same amount.  Upon disposition of the shares by you, any gain
or loss is treated as capital gain or loss.  If you were an employee at the time
of grant, any income recognized upon exercise of a nonstatutory stock option
will constitute wages for which withholding will be required.

     Stock Purchase Rights.  Generally, no income will be recognized by you in
connection with the grant of an stock purchase right or the exercise of the
right for unvested stock, unless an election under Section 83(b) of the Code is
filed with the Internal Revenue Service within thirty (30) days of the date of
exercise of the stock purchase right.  Otherwise, as our repurchase option
lapses, you will recognize compensation income in an amount equal to the
difference between the fair market value of the stock at the time our repurchase
option lapses and the amount paid for the stock, if any.  Upon your disposition
of the shares, any gain or loss is treated as capital gain or loss.  If you are
also an employee, any amount treated as compensation will be subject to tax
withholding by us, and we will be entitled to a tax deduction in that amount at
the time you recognize ordinary income with respect to a stock purchase right.

     Capital Gain.  Capital gains are grouped and netted by holding periods.
Net capital gain on assets held for twelve (12) months or less is taxed
currently at your highest marginal income tax rate.  Net capital gain on assets
held for more than twelve (12) months is taxed currently at a maximum federal
rate of twenty percent (20%).  Capital losses are first allowed in full against
capital gains and then up to $3,000 against other income.

     Alternative Minimum Tax.  The exercise of an incentive stock option granted
under the Plan may subject you to the alternative minimum tax under Section 55
of the Code.  In computing alternative minimum taxable income, shares purchased
upon exercise of an incentive stock option are treated as if you had acquired
them pursuant to a nonstatutory stock option.  This may be particularly
significant for shares which we have a repurchase option are purchased upon
exercise of an incentive stock option.  See "Nonstatutory Stock Options," above.

     Under certain circumstances, you may affect the timing and measurement of
alternative minimum tax by filing an election with the Internal Revenue Service
under Section 83(b) of the Code within thirty (30) days after the date of
exercise of an incentive stock option.  Accordingly, you should consult your own
tax advisor prior to exercising an incentive stock option concerning the
advisability of filing an election under Section 83(b) of the Code for
alternative minimum tax purposes.
<PAGE>

     If you pay alternative minimum in excess of your regular tax liability, the
amount of such alternative minimum relating to incentive stock options may be
carried forward as a credit against any subsequent years' regular tax in excess
of the alternative minimum tax.

          ADDITIONAL CONSIDERATIONS APPLICABLE TO SECTION 16 INSIDERS

     In certain circumstances, where the participant is an officer (as that term
is used in Section 16 of the Exchange Act), director or beneficial owner of more
than 10% of the Common Stock of the Company, the date upon which tax liability
is incurred with respect to grants under the Plan may be deferred unless the
awardee files an election with the Internal Revenue Service under Section 83(b)
of the Code.  All Section 16 Insiders are advised to consult with their personal
tax advisors regarding the tax consequences of exercising options or other
awards under the Plan and the advisability of filing an election under Section
83(b) of the Code.  In addition, all Section 16 Insiders are advised to consult
with the Company's Chief Financial Officer and with their own personal advisors
regarding reporting and liability under Section 16 with respect to their
transactions under the Plan.

                    INCORPORATION OF DOCUMENTS BY REFERENCE

     The following documents and information heretofore filed by Sonic
Innovations, Inc. (the "Company") with the Securities and Exchange Commission
are hereby incorporated by reference:

     (1) The Company's Prospectus dated May 1, 2000 filed pursuant to Rule
424(b) under the Securities Act of 1933, as amended.  This Prospectus contains
audited financial statements for the fiscal year ended December 31, 1999.

     (2) All other reports filed by the Company pursuant to Section 13(a) or
15(d) of the Securities Exchange Act of 1934 (the "Exchange Act") since the end
of the fiscal year covered by the Prospectus referred to in (1) above.

     (3) Any description of any securities of the Registrant which is contained
in any registration statement filed after the date hereof under Section 12 of
the Exchange Act, including any amendment or report filed for the purpose of
updating any such description.

     All documents filed by the Company pursuant to Sections 13(a), 13(c), 14
and 15(d) of the Exchange Act after the date of this Prospectus and prior to the
filing of a post-effective amendment which indicates 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 Prospectus and to be part
hereof from date of filing such documents.

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