EXHIBIT C
STORM TECHNOLOGY, INC.
IMMEDIATELY EXERCISABLE
INCENTIVE STOCK OPTION AGREEMENT
[Subsequent Grant]
THIS IMMEDIATELY EXERCISABLE INCENTIVE STOCK OPTION AGREEMENT (the "Option
Agreement") is made and entered into as of January 15, 1998, by and between
Storm Technology, Inc. and L. Xxxxxxx Xxxxxx (the "Optionee").
The Company has granted to the Optionee an option to purchase certain
shares of Stock, upon the terms and conditions set forth in this Option
Agreement (the "Option").
1. Definitions and Construction.
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1.1 Definitions. Whenever used herein, the following terms shall
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have their respective meanings set forth below:
(a) "Date of Option Grant" means January 15, 1998.
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(b) "Number of Option Shares" means 50,000 shares of Stock, as
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adjusted from time to time pursuant to Section 9.
(c) "Exercise Price" means $2.688 per share of Stock, as
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adjusted from time-to time pursuant to Section 9.
(d) "Initial Exercise Date" means the Date of Option Grant.
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(e) "Initial Vesting Date" means the Date of Option Grant.
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(f) "Vested Ratio" means, on any relevant date, the ratio
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determined as follows:
Vested Ratio
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Prior to Initial Vesting Date 0
On Initial Vesting Date 1/48
Plus
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For each full month of the Optionee's continuous Service from the 1/48
Initial Vesting Date until the Vested Ratio equals 1/1, an additional
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(g) "Option Expiration Date" means the date ten (10) years after
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the Date of Option Grant.
(h) "Board" means the Board of Directors of the Company. If one
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or more Committees have been appointed by the Board to administer the Plan,
"Board" shall also mean such Committee(s).
(i) "Code" means the Internal Revenue Code of 1986, as amended,
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and any applicable regulations promulgated thereunder.
(j) "Committee" means the Compensation Committee or other
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committee of the Board duly appointed to administer the Plan and having such
powers as shall be specified by the Board. Unless the powers of the Committee
have been specifically limited, the Committee shall have all of the powers of
the Board granted in the Plan, including, without limitation, the power to amend
or terminate the Plan at any time, subject to the terms of the Plan and any
applicable limitations imposed by law.
(k) "Company" means Storm Technology, Inc., a Delaware
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corporation, or any successor corporation thereto.
(l) "Consultant" means any person, including an advisor, engaged
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by a Participating Company to render services other than as an Employee or a
Director.
(m) "Director" means a member of the Board or of the board of
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directors of any other Participating Company.
(n) "Disability" means the permanent and total disability of the
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optionee within the meaning of Section 22(e)(3) of the Code.
(o) "Employee" means any person treated as an employee
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(including an officer or a Director who is also treated as an employee) in the
records of a Participating Company; provided, however, that neither service as a
Director nor payment of a director's fee shall be sufficient to constitute
employment for this purpose.
(p) "Exchange Act" means the Securities Exchange Act of 1934, as
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amended.
(q) "Fair Market Value" means, as of any date, the value of a
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share of stock or other property as determined by the Board, in its sole
discretion, or by the Company, in its sole discretion, if such determination is
expressly allocated to the Company herein.
(r) "Insider" means an officer or a Director of the Company or
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any other person whose transactions in Stock are subject to Section 16 of the
Exchange Act.
(s) "Parent Corporation" means any present or future "parent
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corporation" of the Company, as defined in Section 424(e) of the Code.
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(t) "Participating Company" means the Company or any Parent
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Corporation or Subsidiary Corporation.
(u) "Participating Company Group" means, at any point in time,
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all corporations collectively which are then Participating Companies.
(v) "Plan" means the Storm Technology, Inc. Amended and Restated
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Stock Option Plan.
(w) "Rule 16b-3" means Rule 16b-3 under the Exchange Act, as
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amended from time to time, or any successor rule or regulation.
(x) "Securities Act" means the Securities Act of 1933, as
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amended.
(y) "Service" means the Optionee's employment or service with
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the Participating Company Group, whether in the capacity of an Employee, a
Director or a Consultant. The Optionee's Service shall not be deemed to have
terminated merely because of a change in the capacity in which the Optionee
renders Service to the Participating Company Group or a change in the
Participating Company for which the Optionee renders such Service, provided that
there is no interruption or termination of the Optionee's Service. The
Optionee's Service shall be deemed to have terminated either upon an actual
termination of Service or upon the corporation for which the Optionee performs
Service ceasing to be a Participating Company. Subject to the foregoing, the
Company, in its sole discretion, shall determine whether the Optionee's Service
has terminated and the effective date of such termination. (NOTE: If the Option
is exercised more than three (3) months after the date on which the Optionee
ceased to be an Employee (other than by reason of death or a permanent and total
disability as defined in Section 22(e)(3) of the Code), the Option will be
treated as a nonstatutory stock option and not as an incentive stock option to
the extent required by Section 422 of the Code.)
(z) "Stock" means the common stock of the Company, as adjusted
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from time to time in accordance with Section 9.
(aa) "Subsidiary Corporation" means any present or future
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"subsidiary corporation" of the Company, as defined in Section 424(f) of the
Code.
1.2 Construction. Captions and titles contained herein are for
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convenience only and shall not affect the meaning or interpretation of any
provision of this Option Agreement. Except when otherwise indicated by the
context, the singular shall include the plural, the plural shall include the
singular, and the term "or" shall include the conjunctive as well as the
disjunctive.
2. Tax Consequences.
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2.1 Tax Status of Option. This Option is intended to be an incentive
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stock option within the meaning of Section 422(b) of the Code (an "Incentive
Stock Option"), but the Company does not represent or warrant that this Option
qualifies as such. The Optionee should consult with the Optionee's own tax
advisor regarding the tax effects of this Option and the requirements necessary
to obtain favorable income tax treatment under Section 422 of the Code,
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including, but not limited to, holding period requirements. (NOTE: If the
aggregate Exercise Price of the Option (that is, the Exercise Price multiplied
by the Number of Option Shares) plus the aggregate exercise price of any other
Incentive Stock Options held by the Optionee (whether granted pursuant to the
Plan or any other stock option plan of the Participating Company Group) is
greater than One Hundred Thousand Dollars ($100,000), the Optionee should
contact the Chief Financial Officer of the Company to ascertain whether the
entire Option qualifies as an Incentive Stock Option.)
2.2 Election Under Section 83(b) of the Code. If the Optionee
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exercises this Option to purchase shares of Stock that are both nontransferable
and subject to a substantial risk of forfeiture, the Optionee understands that
the Optionee should consult with the Optionee's tax advisor regarding the
advisability of filing with the Internal Revenue Service an election under
Section 83(b) of the Code, which must be filed no later than thirty (30) days
after the date on which the Optionee exercises the Option. Shares acquired upon
exercise of the Option are nontransferable and subject to a substantial risk of
forfeiture if, for example, (a) they are unvested and are subject to a right of
the Company to repurchase such shares at the Optionee's original purchase price
if the Optionee's Service terminates, (b) the Optionee is an Insider and
exercises the Option within six (6) months of the Date of Option Grant (if a
class of equity security of the Company is registered under Section 12 of the
Exchange Act), or (c) the Optionee is subject to a restriction on transfer to
comply with "Pooling-of-Interests Accounting" rules. Failure to file an election
under Section 83(b), if appropriate, may result in adverse tax consequences to
the Optionee. The Optionee acknowledges that the Optionee has been advised to
consult with a tax advisor prior to the exercise of the Option regarding the tax
consequences to the Optionee of the exercise of the Option. AN ELECTION UNDER
SECTION 83(b) MUST BE FILED WITHIN 30 DAYS AFTER THE DATE ON WHICH THE OPTIONEE
PURCHASES SHARES. THIS TIME PERIOD CANNOT BE EXTENDED. THE OPTIONEE ACKNOWLEDGES
THAT TIMELY FILING OF A SECTION 83(b) ELECTION IS THE OPTIONEE'S SOLE
RESPONSIBILITY, EVEN IF THE OPTIONEE REQUESTS THE COMPANY OR ITS REPRESENTATIVE
TO FILE SUCH ELECTION ON HIS OR HER BEHALF.
3. Administration. All questions of interpretation concerning this Option
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Agreement shall be determined by the Board, including any duly appointed
Committee of the Board. All determinations by the Board shall be final and
binding upon all persons having an interest in the Option. Any officer of a
Participating Company shall have the authority to act on behalf of the Company
with respect to any matter, right, obligation, or election which is the
responsibility of or which is allocated to the Company herein, provided the
officer has apparent authority with respect to such matter, right, obligation,
or election.
4. Exercise of the Option.
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4.1 Right to Exercise.
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(a) Except as otherwise provided herein, the Option shall be
exercisable on and after the Initial Exercise Date and prior to the termination
of the Option (as provided in Section 6) in an amount not to exceed the Number
of Option Shares less the number of shares previously acquired upon exercise of
the Option, subject to the Optionee's agreement
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that any shares purchased upon exercise are subject to the Company's repurchase
rights set forth in Section 11. Notwithstanding the foregoing, except as
provided in Section 4.1(b), the aggregate Fair Market Value of the shares of
Stock with respect to which the Optionee may exercise the Option for the first
time during any calendar year, when added to the aggregate Fair Market Value of
the shares subject to any other options designated as Incentive Stock Options
granted to the Optionee under all stock option plans of the Participating
Company Group prior to the Date of Option Grant with respect to which such
options are exercisable for the first time during the same calendar year, shall
not exceed One Hundred Thousand Dollars ($100,000). For purposes of the
preceding sentence, options designated as Incentive Stock Options shall be taken
into account in the order in which they were granted, and the Fair Market Value
of shares of stock shall be determined as of the time the option with respect to
such shares is granted. Such limitation on exercise shall be referred to in this
Option Agreement as the "ISO Exercise Limitation." If Section 422 of the Code is
amended to provide for a different limitation from that set forth in this
Section 4.1(a), the ISO Exercise Limitation shall be deemed amended effective as
of the date required or permitted by such amendment to the Code. The ISO
Exercise Limitation shall terminate upon the earlier of (i) the Optionee's
termination of Service, (ii) the day immediately prior to the effective date of
a Transfer of Control in which the Option is not assumed or substituted for by
the Acquiring Corporation as provided in Section 8, or (iii) the day ten (10)
days prior to the Option Expiration Date. Upon such termination of the ISO
Exercise Limitation, the Option shall be deemed a nonstatutory stock option to
the extent of the number of shares subject to the Option which would otherwise
exceed the ISO Exercise Limitation.
(b) Notwithstanding any other provision of this Option
Agreement, if compliance with the ISO Exercise Limitation as set forth in
Section 4.1(a) will result in the exercisability of any Vested Shares (as
defined in Section 11.2) being delayed more than thirty (30) days beyond the
date such shares become Vested Shares (the "Vesting Date"), the Option shall be
deemed to be two (2) options. The first option shall be for the maximum portion
of the Number of Option Shares that can comply with the ISO Exercise Limitation
without causing the Option to be unexercisable in the aggregate as to Vested
Shares on the Vesting Date for such shares. The second option, which shall not
be treated as an Incentive Stock Option as described in section 422(b) of the
Code, shall be for the balance of the Number of Option Shares; that is, those
such shares which, on the respective Vesting Date for such shares, would be
unexercisable if included in the first option and thereby made subject to the
ISO Exercise Limitation. Shares treated as subject to the second option shall be
exercisable on the same terms and at the same time as set forth in this Option
Agreement; provided, however, that (i) the second sentence of Section 4.1(a)
shall not apply to the second option and (ii) each such share shall become a
Vested Share on the Vesting Date on which such share must first be allocated to
the second option pursuant to the preceding sentence. Unless the Optionee
specifically elects to the contrary in the Optionee's written notice of
exercise, the first option shall be deemed to be exercised first to the maximum
possible extent and then the second option shall be deemed to be exercised.
(c) In addition to the foregoing, in the event that the adoption
of the Plan or any amendment of the Plan is subject to the approval of the
Company's stockholders in order for the Plan or the grant of the Option to
comply with the requirements of Rule 16b-3, the Option shall not be exercisable
prior to such stockholder approval if the Optionee is an Insider,
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unless the Board, in its sole discretion, approves the exercise of the Option
prior to such stockholder approval.
4.2 Method of Exercise. Exercise of the Option shall be by written
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notice to the Company which must state the election to exercise the Option, the
number of whole shares of Stock for which the Option is being exercised and such
other representations and agreements as to the Optionee's investment intent with
respect to such shares as may be required pursuant to the provisions of this
Option Agreement. The written notice must be signed by the Optionee and must be
delivered in person, by certified or registered mail, return receipt requested,
by confirmed facsimile transmission, or by such other means as the Company may
permit, to the Chief Financial Officer of the Company, or other authorized
representative of the Participating Company Group, prior to the termination of
the Option as set forth in Section 6, accompanied by (i) full payment of the
aggregate Exercise Price for the number of shares of Stock being purchased and
(ii) an executed copy, if required herein, of the then current forms of escrow
and security agreement referenced below. The Option shall be deemed to be
exercised upon receipt by the Company of such written notice, the aggregate
Exercise Price, and, if required by the Company, such executed agreements.
4.3 Payment of Exercise Price.
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(a) Forms of Consideration Authorized. Except as otherwise
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provided below, payment of the aggregate Exercise Price for the number of shares
of Stock for which the Option is being exercised shall be made (i) in cash, by
check, or cash equivalent, (ii) by tender to the Company of whole shares of
Stock owned by the Optionee having a Fair Market Value (as determined by the
Company without regard to any restrictions on transferability applicable to such
stock by reason of federal or state securities laws or agreements with an
underwriter for the Company) not less than the aggregate Exercise Price, (iii)
by means of a Cashless Exercise, as defined in Section 4.3(c), or (iv) by any
combination of the foregoing.
(b) Tender of Stock. Notwithstanding the foregoing, the Option
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may not be exercised by tender to the Company of shares of Stock to the extent
such tender of Stock would constitute a violation of the provisions of any law,
regulation or agreement restricting the redemption of the Company's stock. The
Option may not be exercised by tender to the Company of shares of Stock unless
such shares either have been owned by the Optionee for more than six (6) months
or were not acquired, directly or indirectly, from the Company.
(c) Cashless Exercise. A "Cashless Exercise" means the
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assignment in a form acceptable to the Company of the proceeds of a sale or loan
with respect to some or all of the shares of Stock acquired upon the exercise of
the Option pursuant to a program or procedure approved by the Company
(including, without limitation, through an exercise complying with the
provisions of Regulation T as promulgated from time to time by the Board of
Governors of the Federal Reserve System). The Company reserves, at any and all
times, the right, in the Company's sole and absolute discretion, to decline to
approve or terminate any such program or procedure.
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4.4 Tax Withholding. At the time the Option is exercised, in whole or
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in part, or at any time thereafter as requested by the Company, the Optionee
hereby authorizes withholding from payroll and any other amounts payable to the
Optionee, and otherwise agrees to make adequate provision for (including by
means of a Cashless Exercise to the extent permitted by the Company), any sums
required to satisfy the federal, state, local and foreign tax withholding
obligations of the Participating Company Group, if any, which arise in
connection with the Option, including, without limitation, obligations arising
upon (i) the exercise, in whole or in part, of the Option, (ii) the transfer, in
whole or in part, of any shares acquired upon exercise of the Option, (iii) the
operation of any law or regulation providing for the imputation of interest, or
(iv) the lapsing of any restriction with respect to any shares acquired upon
exercise of the Option. The Optionee is cautioned that the Option is not
exercisable unless the tax withholding obligations of the Participating Company
Group are satisfied. Accordingly, the Optionee may not be able to exercise the
Option when desired even though the Option is vested, and the Company shall have
no obligation to issue a certificate for such shares or release such shares from
any escrow provided for herein.
4.5 Certificate Registration. Except in the event the Exercise Price
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is paid by means of a Cashless Exercise, the certificate for the shares as to
which the Option is exercised shall be registered in the name of the Optionee,
or, if applicable, in the names of the heirs of the Optionee.
4.6 Restrictions on Grant of the Option and Issuance of Shares. The
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grant of the Option and the issuance of shares of Stock upon exercise of the
Option shall be subject to compliance with all applicable requirements of
federal, state or foreign law with respect to such securities. The Option may
not be exercised if the issuance of shares of Stock upon exercise would
constitute a violation of any applicable federal, state or foreign securities
laws or other law or regulations or the requirements of any stock exchange or
market system upon which the Stock may then be listed. In addition, the Option
may not be exercised unless (i) a registration statement under the Securities
Act shall at the time of exercise of the Option be in effect with respect to the
shares issuable upon exercise of the Option or (ii) in the opinion of legal
counsel to the Company, the shares issuable upon exercise of the Option may be
issued in accordance with the terms of an applicable exemption from the
registration requirements of the Securities Act. THE OPTIONEE IS CAUTIONED THAT
THE OPTION MAY NOT BE EXERCISED UNLESS THE FOREGOING CONDITIONS ARE SATISFIED.
ACCORDINGLY, THE OPTIONEE MAY NOT BE ABLE TO EXERCISE THE OPTION WHEN DESIRED
EVEN THOUGH THE OPTION IS VESTED. Questions concerning this restriction should
be directed to the Chief Financial Officer of the Company. The inability of the
Company to obtain from any regulatory body having jurisdiction the authority, if
any, deemed by the Company's legal counsel to be necessary to the lawful
issuance and sale of any shares subject to the Option shall relieve the Company
of any liability in respect of the failure to issue or sell such shares as to
which such requisite authority shall not have been obtained. As a condition to
the exercise of the Option, the Company may require the Optionee to satisfy any
qualifications that may be necessary or appropriate, to evidence compliance with
any applicable law or regulation and to make any representation or warranty with
respect thereto as may be requested by the Company.
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4.7 Fractional Shares. The Company shall not be required to issue
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fractional shares upon the exercise of the Option.
5. Nontransferability of the Option. The Option may be exercised during
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the lifetime of the Optionee only by the Optionee or the Optionee's guardian or
legal representative and may not be assigned or transferred in any manner except
by will or by the laws of descent and distribution. Following the death of the
Optionee, the Option, to the extent provided in Section 7, may be exercised by
the Optionee's legal representative or by any person empowered to do so under
the deceased Optionee's will or under the then applicable laws of descent and
distribution.
6. Termination of the Option. The Option shall terminate and may no
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longer be exercised on the first to occur of (a) the Option Expiration Date, (b)
the last date for exercising the Option following termination of the Optionee's
Service as described in Section 7, or (c) a Transfer of Control to the extent
provided in Section 8.
7. Effect of Termination of Service.
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7.1 Option Exercisability.
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(a) Disability. If the Optionee's Service with the Participating
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Company Group is terminated because of the Disability of the Optionee, the
Option, to the extent unexercised and exercisable on the date on which the
Optionee's Service terminated, may be exercised by the Optionee (or the
Optionee's guardian or legal representative) at any time prior to the expiration
of twelve (12) months after the date on which the Optionee's Service terminated,
but in any event no later than the Option Expiration Date.
(b) Death. If the Optionee's Service with the Participating
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Company Group is terminated because of the death of the Optionee, the Option, to
the extent unexercised and exercisable on the date on which the Optionee's
Service terminated, may be exercised by the Optionee's legal representative or
other person who acquired the right to exercise the Option by reason of the
Optionee's death at any time prior to the expiration of twelve (12) months after
the date on which the Optionee's Service terminated, but in any event no later
than the Option Expiration Date. The Optionee's Service shall be deemed to have
terminated on account of death if the Optionee dies within thirty (30) days
after the Optionee's termination of Service other than upon "Termination For
Cause".
(c) Termination After Transfer of Control. If the Optionee's
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Service with the Participating Company Group is terminated because of a
Termination After Transfer of Control (as defined below), (i) the Option, to the
extent unexercised and exercisable on the date on which the Optionee's Service
terminated, may be exercised by the Optionee (or the Optionee's guardian or
legal representative) at any time prior to the expiration of six (6) months
after the date on which the Optionee's Service terminated, but in any event no
later than the Option Expiration Date, and (ii) the Vested Ratio shall be deemed
to be 1/1 as of the date on which the Optionee's Service terminated.
Notwithstanding the foregoing, no acceleration of vesting pursuant to this
Section 7.1(c) shall occur if such acceleration of vesting would make "pooling
of interests" accounting treatment unavailable in connection with the Transfer
of Control (as defined below),
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as determined by the Board. The Company makes no representation as to the tax
consequences if the Option is exercised more than three (3) months after the
date on which the Optionee's Service as an Employee terminated. The Optionee
should consult with the Optionee's own tax advisor as to the tax consequences to
the Optionee of any such delayed exercise.
(d) Other Termination of Service. If the Optionee's Service with
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the Participating Company Group terminates for any reason except Disability,
death or Termination After Transfer of Control, the Option, to the extent
unexercised and exercisable by the Optionee on the date on which the Optionee's
Service terminated, may be exercised by the Optionee within thirty (30) days (or
such other longer period of time as determined by the Board, in its sole
discretion) after the date on which the Optionee's Service terminated, but in
any event no later than the Option Expiration Date.
7.2 Certain Definitions.
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(a) "Termination After Transfer of Control" shall mean either of
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the following events occurring within twelve (12) months after a Transfer of
Control (as defined in Section 8.1(b) below):
(i) termination by the Participating Company Group of the
Optionee's Service with the Participating Company Group for any reason other
than a Termination For Cause; or
(ii) the Optionee's resignation from Service with the
Participating Company Group within a reasonable period of time following any
Constructive Termination (as defined below).
Notwithstanding any provision herein to the contrary, Termination After Transfer
of Control shall not include any termination of the Optionee's Service with the
Participating Company Group which (1) is a Termination For Cause; (2) is a
result of the Optionee's death or Disability; (3) is a result of the Optionee's
voluntary termination of Service other than upon Constructive Termination (as
defined below); or (4) occurs prior to the effectiveness of a Transfer of
Control.
(b) "Termination For Cause" shall mean termination by the
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Participating Company Group of the Optionee's Service with the Participating
Company Group for any of the following reasons: (i) theft, dishonesty, or
falsification of any Participating Company records; (ii) improper use or
disclosure of a Participating Company's confidential or proprietary information;
(iii) any action by the Optionee which has a detrimental effect on a
Participating Company's reputation or business; (iv) the Optionee's failure or
inability to perform any reasonable assigned duties after written notice from
the Participating Company Group of, and a reasonable opportunity to cure, such
failure or inability; (v) any material breach by the Optionee of any employment
agreement between the Optionee and the Participating Company Group, which breach
is not cured pursuant to the terms of such agreement; or (vi) the Optionee's
conviction of any criminal act which impairs the Optionee's ability to perform
his or her duties with the Participating Company Group.
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(c) "Constructive Termination" shall mean any one or more of the
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following:
(i) without the Optionee's express written consent, the
assignment to the Optionee of any duties, or any limitation of the Optionee's
responsibilities, substantially inconsistent with the Optionee's positions,
duties, responsibilities and status with the Participating Company Group
immediately prior to the date of the Transfer of Control;
(ii) without the Optionee's express written consent, the
relocation of the principal place of the Optionee's employment to a location
that is more than fifty (50) miles from the Optionee's principal place of
employment immediately prior to the date of the Transfer of Control, or the
imposition of travel requirements substantially more demanding of the Optionee
than such travel requirements existing immediately prior to the date of the
Transfer of Control;
(iii) any failure by the Participating Company Group to pay,
or any material reduction by the Participating Company Group of, (1) the
Optionee's base salary in effect immediately prior to the date of the Transfer
of Control (unless reductions comparable in amount and duration are concurrently
made for all other employees of the Participating Company Group with
responsibilities, organizational level and title comparable to the Optionee's),
or (2) the Optionee's bonus compensation, if any, in effect immediately prior to
the date of the Transfer of Control (subject to applicable performance
requirements with respect to the actual amount of bonus compensation earned by
the Optionee); or
(iv) any failure by the Participating Company Group to (1)
continue to provide the Optionee with the opportunity to participate, on terms
no less favorable than those in effect for the benefit of any employee group
which customarily includes a person holding the employment position or a
comparable position with the Participating Company Group then held by the
Optionee, in any benefit or compensation plans and programs, including, but not
limited to, the Participating Company Group's life, disability, health, dental,
medical, savings, profit sharing, stock purchase and retirement plans, if any,
in which the Optionee was participating immediately prior to the date of the
Transfer of Control, or their equivalent, or (2) provide the Optionee with all
other fringe benefits (or their equivalent) from time to time in effect for the
benefit of any employee group which customarily includes a person holding the
employment position or a comparable position with the Participating Company
Group then held by the Optionee.
7.3 Additional Limitation on Option Exercise. Notwithstanding the
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provisions of Section 7.1, the Option may not be exercised after the Optionee's
termination of Service to the extent that the shares to be acquired upon
exercise of the Option would be subject to the Unvested Share Repurchase Option
as provided in Section 11.
7.4 Extension if Exercise Prevented by Law. Notwithstanding the
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foregoing, if the exercise of the Option within the applicable time periods set
forth in Section 7.1 is prevented by the provisions of Section 4.6, the Option
shall remain exercisable until three (3) months after the date the Optionee is
notified by the Company that the Option is exercisable, but in any event
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no later than the Option Expiration Date. The Company makes no representation as
to the tax consequences of any such delayed exercise. The Optionee should
consult with the Optionee's own tax advisor as to the tax consequences to the
Optionee of any such delayed exercise.
7.5 Extension if Optionee Subject to Section 16(b). Notwithstanding
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the foregoing, if a sale within the applicable time periods set forth in Section
7.1 of shares acquired upon the exercise of the Option would subject the
Optionee to suit under Section 16(b) of the Exchange Act, the Option shall
remain exercisable until the earliest to occur of (i) the tenth (10th) day
following the date on which a sale of such shares by the Optionee would no
longer be subject to such suit, (ii) the one hundred and ninetieth (190th) day
after the Optionee's termination of Service, or (iii) the Option Expiration
Date. The Company makes no representation as to the tax consequences of any such
delayed exercise. The Optionee should consult with the Optionee's own tax
advisors as to the tax consequences to the Optionee of any such delayed
exercise.
7.6 Leave of Absence. For purposes of Section 7.1, the Optionee's
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Service with the Participating Company Group shall not be deemed to terminate if
the Optionee takes any military leave, sick leave, or other bona fide leave of
absence approved by the Company of ninety (90) days or less. In the event of a
leave of absence in excess of ninety (90) days, the Optionee's Service shall be
deemed to terminate on the ninety-first (91st) day of such leave unless the
Optionee's right to return to Service with the Participating Company Group
remains guaranteed by statute or contract. Notwithstanding the foregoing, unless
otherwise designated by the Company (or required by law), a leave of absence
shall not be treated as Service for purposes of determining the Optionee's
Vested Ratio.
8. Transfer of Control.
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8.1 Definitions.
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(a) An "Ownership Change Event" shall be deemed to have occurred
if any of the following occurs with respect to the Company:
(i) the direct or indirect sale or exchange in a single
or series of related transactions by the stockholders of the Company of more
than fifty percent (50%) of the voting stock of the Company;
(ii) a merger or consolidation in which the Company is a
party;
(iii) the sale, exchange, or transfer of all or
substantially all of the assets of the Company; or
(iv) a liquidation or dissolution of the Company.
(b) A "Transfer of Control" shall mean an Ownership Change Event
or a series of related Ownership Change Events (collectively, the "Transaction")
wherein the stockholders of the Company immediately before the Transaction do
not retain immediately after the Transaction, in substantially the same
proportions as their ownership of shares of the Company's voting stock
immediately before the Transaction, direct or indirect beneficial
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ownership of more than fifty percent (50%) of the total combined voting power of
the outstanding voting stock of the Company or the corporation or corporations
to which the assets of the Company were transferred (the "Transferee
Corporation(s)"), as the case may be. For purposes of the preceding sentence,
indirect beneficial ownership shall include, without limitation, an interest
resulting from ownership of the voting stock of one or more corporations which,
as a result of the Transaction, own the Company or the Transferee
Corporation(s), as the case may be, either directly or through one or more
subsidiary corporations. The Board shall have the right to determine whether
multiple sales or exchanges of the voting stock of the Company or multiple
Ownership Change Events are related, and its determination shall be final,
binding and conclusive.
8.2 Effect of Transfer of Control on Option. In the event of a
---------------------------------------
Transfer of Control, the surviving, continuing, successor, or purchasing
corporation or parent corporation thereof, as the case may be (the "Acquiring
Corporation"), may either assume the Company's rights and obligations under the
Option or substitute for the Option a substantially equivalent option for the
Acquiring Corporation's stock. The Option shall terminate and cease to be
outstanding effective as of the date of the Transfer of Control to the extent
that the Option is neither assumed or substituted for by the Acquiring
Corporation in connection with the Transfer of Control nor exercised as of the
date of the Transfer of Control. Notwithstanding the foregoing, shares acquired
upon exercise of the Option prior to the Transfer of Control and any
consideration received pursuant to the Transfer of Control with respect to such
shares shall continue to be subject to all applicable provisions of this Option
Agreement except as otherwise provided herein. Furthermore, notwithstanding the
foregoing, if the corporation the stock of which is subject to the Option
immediately prior to an Ownership Change Event described in Section 8.1(a)(i)
constituting a Transfer of Control is the surviving or continuing corporation
and immediately after such Ownership Change Event less than fifty percent (50%)
of the total combined voting power of its voting stock is held by another
corporation or by other corporations that are members of an affiliated group
within the meaning of Section 1504(a) of the Code without regard to the
provisions of Section 1504(b) of the Code, the Option shall not terminate unless
the Board otherwise provides in its sole discretion.
9. Adjustments for Changes in Capital Structure. In the event of any
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stock dividend, stock split, reverse stock split, recapitalization, combination,
reclassification, or similar change in the capital structure of the Company,
appropriate adjustments shall be made in the number, Exercise Price and class of
shares of stock subject to the Option. If a majority of the shares which are of
the same class as the shares that are subject to the Option are exchanged for,
converted into, or otherwise become (whether or not pursuant to an Ownership
Change Event) shares of another corporation (the "New Shares"), the Board may
unilaterally amend the Option to provide that the Option is exercisable for New
Shares. In the event of any such amendment, the Number of Option Shares and the
Exercise Price shall be adjusted in a fair and equitable manner, as determined
by the Board, in its sole discretion. Notwithstanding the foregoing, any
fractional share resulting from an adjustment pursuant to this Section 9 shall
be rounded up or down to the nearest whole number, as determined by the Board,
and in no event may the Exercise Price be decreased to an amount less than the
par value, if any, of the stock subject to the Option. The adjustments
determined by the Board pursuant to this Section 9 shall be final, binding and
conclusive.
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10. Rights as a Stockholder, Employee or Consultant. The Optionee shall
-----------------------------------------------
have no rights as a stockholder with respect to any shares covered by the Option
until the date of the issuance of a certificate for the shares for which the
Option has been exercised (as evidenced by the appropriate entry on the books of
the Company or of a duly authorized transfer agent of the Company). No
adjustment shall be made for dividends, distributions or other rights for which
the record date is prior to the date such certificate is issued, except as
provided in Section 9. Nothing in this Option Agreement shall confer upon the
Optionee any right to continue in the Service of a Participating Company or
interfere in any way with any right of the Participating Company Group to
terminate the Optionee's Service as an Employee or Consultant, as the case may
be, at any time.
11. Unvested Share Repurchase Option.
--------------------------------
11.1 Grant of Unvested Share Repurchase Option. In the event the
-----------------------------------------
Optionee's Service with the Participating Company Group is terminated for any
reason or no reason, with or without cause, or if the Optionee, the Optionee's
legal representative, or other holder of shares acquired upon exercise of the
Option attempts to sell, exchange, transfer, pledge, or otherwise dispose of
(other than pursuant to an Ownership Change Event) any shares acquired upon
exercise of the Option which exceed the Vested Shares as defined in Section 11.2
below (the "Unvested Shares"), the Company shall have the right to repurchase
the Unvested Shares under the terms and subject to the conditions set forth in
this Section 11 (the "Unvested Share Repurchase Option").
11.2 Vested Shares and Unvested Shares Defined. The "Vested Shares"
-----------------------------------------
shall mean, on any given date, a number of shares of Stock equal to the Number
of Option Shares multiplied by the Vested Ratio determined as of such date and
rounded down to the nearest whole share. On such given date, the "Unvested
Shares" shall mean the number of shares of Stock acquired upon exercise of the
Option which exceed the Vested Shares determined as of such date.
11.3 Exercise of Unvested Share Repurchase Option. The Company may
--------------------------------------------
exercise the Unvested Share Repurchase Option by written notice delivered
personally or forwarded by first class mail to the Optionee within sixty (60)
days after (a) termination of the Optionee's Service (or exercise of the Option,
if later) or (b) the Company has received notice of the attempted disposition of
Unvested Shares. If the Company fails to give notice within such sixty (60) day
period, the Unvested Share Repurchase Option shall terminate unless the Company
and the Optionee have extended the time for the exercise of the Unvested Share
Repurchase Option. The Unvested Share Repurchase Option must be exercised, if at
all, for all of the Unvested Shares, except as the Company and the Optionee
otherwise agree.
11.4 Payment for Shares and Return of Shares to Company. The purchase
--------------------------------------------------
price per share being repurchased by the Company shall be an amount equal to the
Optionee's original cost per share, as adjusted pursuant to Section 9 (the
"Repurchase Price"). The Company shall pay the aggregate Repurchase Price to the
Optionee in cash within thirty (30) days after the date of personal delivery or
mailing of the written notice of the Company's exercise of the Unvested Share
Repurchase Option. For purposes of the foregoing, cancellation of any
indebtedness of the Optionee to any Participating Company shall be treated as
payment to the Optionee in cash to the
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extent of the unpaid principal and any accrued interest canceled. The shares
being repurchased shall be delivered to the Company by the Optionee at the same
time as the delivery of the Repurchase Price to the Optionee.
11.5 Assignment of Unvested Share Repurchase Option. The Company
----------------------------------------------
shall have the right to assign the Unvested Share Repurchase Option at any time,
whether or not such option is then exercisable, to one or more persons as may be
selected by the Company.
11.6 Ownership Change Event. Upon the occurrence of an Ownership
----------------------
Change Event, any and all new, substituted or additional securities or other
property to which the Optionee is entitled by reason of the Optionee's ownership
of Unvested Shares shall be immediately subject to the Unvested Share Repurchase
Option and included in the terms "Stock" and "Unvested Shares" for all purposes
of the Unvested Share Repurchase Option with the same force and effect as the
Unvested Shares immediately prior to the Ownership Change Event. While the
aggregate Repurchase Price shall remain the same after such Ownership Change
Event, the Repurchase Price per Unvested Share upon exercise of the Unvested
Share Repurchase Option following such Ownership Change Event shall be adjusted
as appropriate. For purposes of determining the Vested Ratio following an
Ownership Change Event, credited Service shall include all Service with any
corporation which is a Participating Company at the time the Service is
rendered, whether or not such corporation is a Participating Company both before
and after the Ownership Change Event.
12. Escrow.
------
12.1 Establishment of Escrow. To ensure that shares subject to the
----------------------
Unvested Share Repurchase Option will be available for repurchase, the Company
may require the Optionee to deposit the certificate evidencing the shares which
the Optionee purchases upon exercise of the Option with an escrow agent
designated by the Company under the terms and conditions of an escrow agreement
approved by the Company. If the Company does not require such deposit as a
condition of exercise of the Option, the Company reserves the right at any time
to require the Optionee to so deposit the certificate in escrow. Upon the
occurrence of an Ownership Change Event or a change, as described in Section 9,
in the character or amount of any of the outstanding stock of the corporation
the stock of which is subject to the provisions of this Option Agreement, any
and all new, substituted or additional securities or other property to which the
Optionee is entitled by reason of the Optionee's ownership of shares of Stock
acquired upon exercise of the Option that remain, following such Ownership
Change Event or change described in Section 9, subject to the Unvested Share
Repurchase Option shall be immediately subject to the escrow to the same extent
as such shares of Stock immediately before such event. The Company shall bear
the expenses of the escrow.
12.2 Delivery of Shares to Optionee. As soon as practicable after the
------------------------------
expiration of the Unvested Share Repurchase Option, but not more frequently than
twice each calendar year, the escrow agent shall deliver to the Optionee the
shares and any other property no longer subject to such restrictions.
14
12.3 Notices and Payments. In the event the shares and any other
--------------------
property held in escrow are subject to the Company's exercise of the Unvested
Share Repurchase Option, the notices required to be given to the Optionee shall
be given to the escrow agent, and any payment required to be given to the
Optionee shall be given to the escrow agent. Within thirty (30) days after
payment by the Company, the escrow agent shall deliver the shares and any other
property which the Company has purchased to the Company and shall deliver the
payment received from the Company to the Optionee.
13. Stock Distributions Subject to Option Agreement. If, from time to
-----------------------------------------------
time, there is any stock dividend, stock split or other change, as described in
Section 9, in the character or amount of any of the outstanding stock of the
corporation the stock of which is subject to the provisions of this Option
Agreement, then in such event any and all new, substituted or additional
securities to which the Optionee is entitled by reason of the Optionee's
ownership of the shares acquired upon exercise of the Option shall be
immediately subject to the Unvested Share Repurchase Option and with the same
force and effect as the shares subject to the Unvested Share Repurchase Option
immediately before such event.
14. Notice of Sales Upon Disqualifying Disposition. The Optionee shall
----------------------------------------------
dispose of the shares acquired pursuant to the Option only in accordance with
the provisions of this Option Agreement. In addition, the Optionee shall
promptly notify the Chief Financial Officer of the Company if the Optionee
disposes of any of the shares acquired pursuant to the Option within one (1)
year after the date the Optionee exercises all or part of the Option or within
two (2) years after the Date of Option Grant. Until such time as the Optionee
disposes of such shares in a manner consistent with the provisions of this
Option Agreement, unless otherwise expressly authorized by the Company, the
Optionee shall hold all shares acquired pursuant to the Option in the Optionee's
name (and not in the name. of any nominee) for the one-year period immediately
after the exercise of the Option and the two-year period immediately after Date
of Option Grant. At any time during the one-year or two-year periods set forth
above, the Company may place a legend on any certificate representing shares
acquired pursuant to the Option requesting the transfer agent for the Company's
stock to notify the Company of any such transfers. The obligation of the
Optionee to notify the Company of any such transfer shall continue
notwithstanding that a legend has been placed on the certificate pursuant to the
preceding sentence.
15. Legends. The Company may at any time place legends referencing the
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Unvested Share Repurchase Option and any applicable federal, state or foreign
securities law restrictions on all certificates representing shares of stock
subject to the provisions of this Option Agreement. The Optionee shall, at the
request of the Company, promptly present to the Company any and all certificates
representing shares acquired pursuant to the Option in the possession of the
Optionee in order to carry out the provisions of this Section.
16. Binding Effect. Subject to the restrictions on transfer set forth
--------------
herein, this Option Agreement shall inure to the benefit of and be binding upon
the parties hereto and their respective heirs, executors, administrators,
successors and assigns.
15
17. Termination or Amendment. The Board may terminate or amend the Plan
------------------------
or the Option at any time; provided, however, that except as provided in Section
8.2 in connection with a Transfer of Control, no such termination or amendment
may adversely affect the Option or any unexercised portion hereof without the
consent of the Optionee unless such termination or amendment is necessary to
comply with any applicable law or government regulation or is required to enable
the Option to qualify as an Incentive Stock Option. No amendment or addition to
this Option Agreement shall be effective unless in writing.
18. Integrated Agreement. This Option Agreement constitutes the entire
--------------------
understanding and agreement of the Optionee and the Participating Company Group
with respect to the subject matter contained herein, and there are no
agreements, understandings, restrictions, representations, or warranties among
the Optionee and the Participating Company Group with respect to such subject
matter other than those as set forth or provided for herein. To the extent
contemplated herein, the provisions of this Option Agreement shall survive any
exercise of the Option and shall remain in full force and effect.
19. Applicable Law. This Option Agreement shall be governed by the laws
--------------
of the State of California as such laws are applied to agreements between
California residents entered into and to be performed entirely within the State
of California.
STORM TECHNOLOGY, INC.
By: /s/ Xxxx XxXxxxxxx
--------------------------
Title: Chief Financial Officer
The Optionee represents that the Optionee is familiar with the terms and
provisions of this Option Agreement, including the Unvested Share Repurchase
Option set forth in Section 11, and hereby accepts the Option subject to all of
the terms and provisions thereof. The Optionee hereby agrees to accept as
binding, conclusive and final all decisions or interpretations of the Board upon
any questions arising under this Option Agreement.
OPTIONEE
Date: February 11, 1998 /s/ L. Xxxxxxx Xxxxxx
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