Exhibit 99.3
ENCAD, INC.
STOCK OPTION AGREEMENT
RECITALS
A. The Board has adopted the Plan for the purpose of
retaining the services of selected Employees, non-employee members of the
Board or of the board of directors of any Parent or Subsidiary and
consultants and other independent advisors who provide services to the
Corporation (or any Parent or Subsidiary).
B. Optionee is to render valuable services to the
Corporation (or a Parent or Subsidiary), and this Agreement is executed
pursuant to, and is intended to carry out the purposes of, the Plan in
connection with the Corporation's grant of an option to Optionee.
C. All capitalized terms in this Agreement shall have the
meaning assigned to them in the attached Appendix.
NOW, THEREFORE, it is hereby agreed as follows:
1. GRANT OF OPTION. The Corporation hereby grants to
Optionee, as of the Grant Date, an option to purchase up to the number of
Option Shares specified in the Grant Notice. The Option Shares shall be
purchasable from time to time during the option term specified in Paragraph 2
at the Exercise Price.
2. OPTION TERM. This option shall have a maximum term of
ten (10) years measured from the Grant Date and shall accordingly expire at
the close of business on the Expiration Date, unless sooner terminated in
accordance with Paragraph 5 or 6.
3. LIMITED TRANSFERABILITY.
(a) This option shall be neither transferable nor
assignable by Optionee other than by will or the laws of inheritance
following Optionee's death and may be exercised, during Optionee's lifetime,
only by Optionee. However, Optionee may designate one or more persons as the
beneficiary or beneficiaries of this option, and this option shall, in
accordance with such designation, automatically be transferred to such
beneficiary or beneficiaries upon the Optionee's death while holding such
option. Such beneficiary or beneficiaries shall take the transferred option
subject to all the terms and conditions of this Agreement, including (without
limitation) the limited time period during which this option may, pursuant to
Paragraph 5, be exercised following Optionee's death.
(b) If this option is designated a Non-Statutory Option
in the Grant Notice, then this option may, in connection with the Optionee's
estate plan, be assigned in whole or in part during Optionee's lifetime to
one or more members of Optionee's immediate family or to a trust established
for the exclusive benefit of one or more such family members. The assigned
portion shall be exercisable only by the person or persons who acquire a
proprietary interest in the option pursuant to such assignment. The terms
applicable to the assigned portion shall be the same as those in effect for
this option immediately prior to such assignment.
4. DATES OF EXERCISE. This option shall become exercisable
for the Option Shares in one or more installments as specified in the Grant
Notice. As the option becomes exercisable for such installments, those
installments shall accumulate, and the option shall remain exercisable for
the accumulated installments until the Expiration Date or sooner termination
of the option term under Paragraph 5 or 6.
5. CESSATION OF SERVICE. The option term specified in
Paragraph 2 shall terminate (and this option shall cease to be outstanding)
prior to the Expiration Date should any of the following provisions become
applicable:
(a) Should Optionee cease to remain in Service for any
reason (other than death, Permanent Disability or Misconduct) while holding
this option, then Optionee shall have a period of three (3) months
(commencing with the date of such cessation of Service) during which to
exercise this option, but in no event shall this option be exercisable at any
time after the Expiration Date.
(b) Should Optionee die while holding this option, then
the personal representative of Optionee's estate or the person or persons to
whom the option is transferred pursuant to Optionee's will or the laws of
inheritance shall have the right to exercise this option. However, if
Optionee has designated one or more beneficiaries of this option, then those
persons shall have the exclusive right to exercise this option following
Optionee's death. Any such right to exercise this option shall lapse, and
this option shall cease to be outstanding, upon the earlier of (i) the
expiration of the twelve (12)-month period measured from the date of
Optionee's death or (ii) the Expiration Date.
(c) Should Optionee cease Service by reason of Permanent
Disability while holding this option, then Optionee shall have a period of
twelve (12) months (commencing with the date of such cessation of Service)
during which to exercise this option. In no event shall this option be
exercisable at any time after the Expiration Date.
(d) During the limited period of post-Service
exercisability, this option may not be exercised in the aggregate for more
than the number of Option Shares for which the option is exercisable at the
time of Optionee's cessation of Service. Upon the expiration of such limited
exercise period or (if earlier) upon the Expiration Date, this option shall
terminate and cease to be outstanding for any exercisable Option Shares for
which the option has not been exercised. However, this option shall,
immediately upon Optionee's cessation of Service for any reason, terminate
and cease to be outstanding with respect to any Option Shares for which this
option is not otherwise at that time exercisable.
(e) Should Optionee's Service be terminated for
Misconduct, then this option shall terminate immediately and cease to remain
outstanding.
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6. SPECIAL ACCELERATION OF OPTION.
(a) This option, to the extent outstanding at the time
of a Corporate Transaction but not otherwise fully exercisable, shall
automatically accelerate so that this option shall, immediately prior to the
effective date of such Corporate Transaction, become exercisable for all of
the Option Shares at the time subject to this option and may be exercised for
any or all of those Option Shares as fully vested shares of Common Stock. No
such acceleration of this option shall occur, however, if and to the extent:
(i) this option is, in connection with the Corporate Transaction, to be
assumed by the successor corporation (or parent thereof) or (ii) this option
is to be replaced with a cash incentive program of the successor corporation
which preserves the spread existing at the time of the Corporate Transaction
on the Option Shares for which this option is not otherwise at that time
exercisable (the excess of the Fair Market Value of those Option Shares over
the aggregate Exercise Price payable for such shares) and provides for
subsequent payout in accordance with the same option exercise/vesting
schedule set forth in the Grant Notice.
(b) Immediately following the Corporate Transaction,
this option shall terminate and cease to be outstanding, except to the extent
assumed by the successor corporation (or parent thereof) in connection with
the Corporate Transaction.
(c) If this option is assumed in connection with a
Corporate Transaction, then this option shall be appropriately adjusted,
immediately after such Corporate Transaction, to apply to the number and
class of securities which would have been issuable to Optionee in
consummation of such Corporate Transaction had the option been exercised
immediately prior to such Corporate Transaction, and appropriate adjustments
shall also be made to the Exercise Price, PROVIDED the aggregate Exercise
Price shall remain the same.
(d) This Agreement shall not in any way affect the right
of the Corporation to adjust, reclassify, reorganize or otherwise change its
capital or business structure or to merge, consolidate, dissolve, liquidate
or sell or transfer all or any part of its business or assets.
7. ADJUSTMENT IN OPTION SHARES. Should any change be made to
the Common Stock by reason of any stock split, stock dividend,
recapitalization, combination of shares, exchange of shares or other change
affecting the outstanding Common Stock as a class without the Corporation's
receipt of consideration, appropriate adjustments shall be made to (i) the
total number and/or class of securities subject to this option and (ii) the
Exercise Price in order to reflect such change and thereby preclude a
dilution or enlargement of benefits hereunder.
8. STOCKHOLDER RIGHTS. The holder of this option shall not have
any stockholder rights with respect to the Option Shares until such person
shall have exercised the option, paid the Exercise Price and become a holder
of record of the purchased shares.
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9. MANNER OF EXERCISING OPTION.
(a) In order to exercise this option for any or all of the
Option Shares for which this option is at the time exercisable, Optionee (or
any other person or persons exercising the option) must take the following
actions:
(i) Execute and deliver to the Corporation a Notice
of Exercise for the Option Shares for which the option is exercised.
(ii) Pay the aggregate Exercise Price for the purchased
shares in one or more of the following forms:
(A) cash or check made payable to the Corporation;
(B) a promissory note payable to the Corporation,
but only to the xtent authorized by the Plan Administrator in
accordance with Paragraph 13;
(C) shares of Common Stock held by Optionee (or any
other person or persons exercising the option) for the
requisite period necessary to avoid a charge to the
Corporation's earnings for financial reporting purposes and
valued at Fair Market Value on the Exercise Date; or
(D) through a special sale and remittance procedure
pursuant to which Optionee (or any other person or persons
exercising the option) shall concurrently provide irrevocable
instructions (i) to a Corporation-designated brokerage firm to
effect the immediate sale of the purchased shares and remit to
the Corporation, out of the sale proceeds available on the
settlement date, sufficient funds to cover the aggregate
Exercise Price payable for the purchased shares plus all
applicable Federal, state and local income and employment taxes
required to be withheld by the Corporation by reason of such
exercise and (ii) to the Corporation to deliver the
certificates for the purchased shares directly to such
brokerage firm in order to complete the sale.
Except to the extent the sale and remittance
procedure is utilized in connection with the option exercise,
payment of the Exercise Price must accompany the Notice of
Exercise delivered to the Corporation in connection with the
option exercise.
(iii) Furnish to the Corporation appropriate documentation
that the person or persons exercising the option (if other than
Optionee) have the right to exercise this option.
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(iv) Make appropriate arrangements with the Corporation
(or Parent or Subsidiary employing or retaining Optionee) for the
satisfaction of all Federal, state and local income and employment
tax withholding requirements applicable to the option exercise.
(b) As soon as practical after the Exercise Date, the
Corporation shall issue to or on behalf of Optionee (or any other person or
persons exercising this option) a certificate for the purchased Option
Shares, with the appropriate legends affixed thereto.
(c) In no event may this option be exercised for any fractional
shares.
10. COMPLIANCE WITH LAWS AND REGULATIONS.
(a) The exercise of this option and the issuance of the
Option Shares upon such exercise shall be subject to compliance by the
Corporation and Optionee with all applicable requirements of law relating
thereto and with all applicable regulations of any stock exchange (or the
Nasdaq National Market, if applicable) on which the Common Stock may be
listed for trading at the time of such exercise and issuance.
(b) The inability of the Corporation to obtain approval from
any regulatory body having authority deemed by the Corporation to be
necessary to the lawful issuance and sale of any Common Stock pursuant to
this option shall relieve the Corporation of any liability with respect to
the non-issuance or sale of the Common Stock as to which such approval shall
not have been obtained. The Corporation, however, shall use its best efforts
to obtain all such approvals.
11. SUCCESSORS AND ASSIGNS. Except to the extent otherwise provided
in Paragraphs 3 and 6, the provisions of this Agreement shall inure to the
benefit of, and be binding upon, the Corporation and its successors and
assigns and Optionee, Optionee's assigns, the legal representatives, heirs
and legatees of Optionee's estate and any beneficiaries of this option
designated by Optionee.
12. NOTICES. Any notice required to be given or delivered to the
Corporation under the terms of this Agreement shall be in writing and
addressed to the Corporation at its principal corporate offices. Any notice
required to be given or delivered to Optionee shall be in writing and
addressed to Optionee at the address indicated below Optionee's signature
line on the Grant Notice. All notices shall be deemed effective upon personal
delivery or upon deposit in the U.S. mail, postage prepaid and properly
addressed to the party to be notified.
13. FINANCING. The Plan Administrator may, in its absolute
discretion and without any obligation to do so, permit Optionee to pay the
Exercise Price for the purchased Option Shares by delivering a full-recourse
promissory note payable to the Corporation. The terms of any such promissory
note (including the interest rate, the requirements for collateral and the
terms of repayment) shall be established by the Plan Administrator in its
sole discretion.
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14. CONSTRUCTION. This Agreement and the option evidenced hereby are
made and granted pursuant to the Plan and are in all respects limited by and
subject to the terms of the Plan. All decisions of the Plan Administrator
with respect to any question or issue arising under the Plan or this
Agreement shall be conclusive and binding on all persons having an interest
in this option.
15. GOVERNING LAW. The interpretation, performance and enforcement
of this Agreement shall be governed by the laws of the State of California
without resort to that State's conflict-of-laws rules.
16. EXCESS SHARES. If the Option Shares covered by this Agreement
exceed, as of the Grant Date, the number of shares of Common Stock which may
without stockholder approval be issued under the Plan, then this option shall
be void with respect to those excess shares, unless stockholder approval of
an amendment sufficiently increasing the number of shares of Common Stock
issuable under the Plan is obtained in accordance with the provisions of the
Plan.
17. ADDITIONAL TERMS APPLICABLE TO AN INCENTIVE OPTION. In the event
this option is designated an Incentive Option in the Grant Notice, the
following terms and conditions shall also apply to the grant:
(a) This option shall cease to qualify for favorable tax
treatment as an Incentive Option if (and to the extent) this option is
exercised for one or more Option Shares: (A) more than three (3) months after
the date Optionee ceases to be an Employee for any reason other than death or
Permanent Disability or (B) more than twelve (12) months after the date
Optionee ceases to be an Employee by reason of Permanent Disability.
(b) No installment under this option shall qualify for
favorable tax treatment as an Incentive Option if (and to the extent) the
aggregate Fair Market Value (determined at the Grant Date) of the Common
Stock for which such installment first becomes exercisable hereunder would,
when added to the aggregate value (determined as of the respective date or
dates of grant) of the Common Stock or other securities for which this option
or any other Incentive Options granted to Optionee prior to the Grant Date
(whether under the Plan or any other option plan of the Corporation or any
Parent or Subsidiary) first become exercisable during the same calendar year,
exceed One Hundred Thousand Dollars ($100,000) in the aggregate. Should such
One Hundred Thousand Dollar ($100,000) limitation be exceeded in any calendar
year, this option shall nevertheless become exercisable for the excess shares
in such calendar year as a Non-Statutory Option.
(c) Should the exercisability of this option be accelerated
upon a Corporate Transaction, then this option shall qualify for favorable
tax treatment as an Incentive Option only to the extent the aggregate Fair
Market Value (determined at the Grant Date) of the Common Stock for which
this option first becomes exercisable in the calendar year in which the
Corporate Transaction occurs does not, when added to the aggregate value
(determined as of the respective date or dates of grant) of the Common Stock
or other securities for which this option
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or one or more other Incentive Options granted to Optionee prior to the
Grant Date (whether under the Plan or any other option plan of the
Corporation or any Parent or Subsidiary) first become exercisable during the
same calendar year, exceed One Hundred Thousand Dollars ($100,000) in the
aggregate. Should the applicable One Hundred Thousand Dollar ($100,000)
limitation be exceeded in the calendar year of such Corporate Transaction,
the option may nevertheless be exercised for the excess shares in such
calendar year as a Non-Statutory Option.
(d) Should Optionee hold, in addition to this option, one or
more other options to purchase Common Stock which become exercisable for the
first time in the same calendar year as this option, then the foregoing
limitations on the exercisability of such options as Incentive Options shall
be applied on the basis of the order in which such options are granted.
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EXHIBIT I
NOTICE OF EXERCISE
I hereby notify ENCAD, Inc. (the "Corporation") that I
elect to purchase ______________ shares of the Corporation's Common Stock
(the "Purchased Shares") at the option exercise price of $_____________ per
share (the "Exercise Price") pursuant to that certain option (the "Option")
granted to me under the Corporation's 1999 Stock Option/Stock Issuance Plan
on ____________________, _______.
Concurrently with the delivery of this Exercise Notice to
the Corporation, I shall hereby pay to the Corporation the Exercise Price for
the Purchased Shares in accordance with the provisions of my agreement with
the Corporation (or other documents) evidencing the Option and shall deliver
whatever additional documents may be required by such agreement as a
condition for exercise. Alternatively, I may utilize the special
broker-dealer sale and remittance procedure specified in my agreement to
effect payment of the Exercise Price.
Date ,
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Optionee
Address:
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Print name in exact manner it is to
appear on the stock certificate:
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Address to which certificate is to be
sent, if different from address above:
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Social Security Number:
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APPENDIX
The following definitions shall be in effect under the
Agreement:
A. AGREEMENT shall mean this Stock Option Agreement.
B. BOARD shall mean the Corporation's Board of Directors.
C. COMMON STOCK shall mean shares of the Corporation's common stock.
D. CODE shall mean the Internal Revenue Code of 1986, as amended.
E. CORPORATE TRANSACTION shall mean either of the following
stockholder-approved transactions to which the Corporation is a party:
(i) a merger or consolidation in which securities
possessing more than fifty percent (50%) of the total combined
voting power of the Corporation's outstanding securities are
transferred to a person or persons different from the persons
holding those securities immediately prior to such transaction, or
(ii) the sale, transfer or other disposition of all or
substantially all of the Corporation's assets in complete
liquidation or dissolution of the Corporation.
F. CORPORATION shall mean ENCAD, Inc., a Delaware corporation, and
any successor corporation to all or substantially all of the assets or voting
stock of ENCAD, Inc. which shall by appropriate action adopt the Plan.
G. EMPLOYEE shall mean an individual who is in the employ of the
Corporation (or any Parent or Subsidiary), subject to the control and
direction of the employer entity as to both the work to be performed and the
manner and method of performance.
H. EXERCISE DATE shall mean the date on which the option shall have
been exercised in accordance with Paragraph 9 of the Agreement.
I. EXERCISE PRICE shall mean the exercise price per Option Share as
specified in the Grant Notice.
J. EXPIRATION DATE shall mean the date on which the option expires
as specified in the Grant Notice.
K. FAIR MARKET VALUE per share of Common Stock on any relevant date
shall be determined in accordance with the following provisions:
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(i) If the Common Stock is at the time traded on the
Nasdaq National Market, then the Fair Market Value shall be deemed
equal to the closing selling price per share of Common Stock on the
date in question, as the price is reported by the National Association
of Securities Dealers on the Nasdaq National Market. If there is no
closing selling price for the Common Stock on the date in question,
then the Fair Market Value shall be the closing selling price on the
last preceding date for which such quotation exists, or
(ii) If the Common Stock is at the time listed on any
Stock Exchange, then the Fair Market Value shall be deemed equal to
the closing selling price per share of Common Stock on the date in
question on the Stock Exchange determined by the Plan Administrator
to be the primary market for the Common Stock, as such price is
officially quoted in the composite tape of transactions on such
exchange. If there is no closing selling price for the Common Stock
on the date in question, then the Fair Market Value shall be the
closing selling price on the last preceding date for which such
quotation exists.
X. XXXXX DATE shall mean the date of grant of the option as
specified in the Grant Notice.
X. XXXXX NOTICE shall mean the Notice of Grant of Stock Option
accompanying the Agreement, pursuant to which Optionee has been informed of
the basic terms of the option evidenced hereby.
N. INCENTIVE OPTION shall mean an option which satisfies the
requirements of Code Section 422.
O. MISCONDUCT shall mean the commission of any act of fraud,
embezzlement or dishonesty by Optionee, any unauthorized use or disclosure by
Optionee of confidential information or trade secrets of the Corporation (or
any Parent or Subsidiary), or any other intentional misconduct by Optionee
adversely affecting the business or affairs of the Corporation (or any Parent
or Subsidiary) in a material manner. The foregoing definition shall not be
deemed to be inclusive of all the acts or omissions which the Corporation (or
any Parent or Subsidiary) may consider as grounds for the dismissal or
discharge of Optionee or any other individual in the Service of the
Corporation (or any Parent or Subsidiary).
P. NON-STATUTORY OPTION shall mean an option not intended to satisfy
the requirements of Code Section 422.
Q. NOTICE OF EXERCISE shall mean the notice of exercise in the form
attached hereto as Exhibit I.
R. OPTION SHARES shall mean the number of shares of Common Stock
subject to the option as specified in the Grant Notice.
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S. OPTIONEE shall mean the person to whom the option is granted as
specified in the Grant Notice.
T. PARENT shall mean any corporation (other than the Corporation) in
an unbroken chain of corporations ending with the Corporation, provided each
corporation in the unbroken chain (other than the Corporation) owns, at the
time of the determination, stock possessing fifty percent (50%) or more of
the total combined voting power of all classes of stock in one of the other
corporations in such chain.
U. PERMANENT DISABILITY shall mean the inability of Optionee to
engage in any substantial gainful activity by reason of any medically
determinable physical or mental impairment which is expected to result in
death or has lasted or can be expected to last for a continuous period of
twelve (12) months or more.
V. PLAN shall mean the Corporation's 1999 Stock Option/Stock
Issuance Plan.
W. PLAN ADMINISTRATOR shall mean either the Board or a committee of
the Board acting in its capacity as administrator of the Plan.
X. SERVICE shall mean the Optionee's performance of services for the
Corporation (or any Parent or Subsidiary) in the capacity of an Employee, a
non-employee member of the board of directors or a consultant or independent
advisor.
Y. STOCK EXCHANGE shall mean the American Stock Exchange or the New
York Stock Exchange.
Z. SUBSIDIARY shall mean any corporation (other than the
Corporation) in an unbroken chain of corporations beginning with the
Corporation, provided each corporation (other than the last corporation) in
the unbroken chain owns, at the time of the determination, stock possessing
fifty percent (50%) or more of the total combined voting power of all classes
of stock in one of the other corporations in such chain.
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