EXHIBIT 4.6
FORM OF STOCK OPTION ASSUMPTION AGREEMENT
ODS NETWORKS, INC.
STOCK OPTION ASSUMPTION AGREEMENT
ESSENTIAL COMMUNICATION CORPORATION
1996 STOCK OPTION PLAN
OPTIONEE: (1)
STOCK OPTION ASSUMPTION AGREEMENT issued as of the 7th day of May,
1998 by ODS Networks, Inc., a Delaware corporation ("ODSN").
WHEREAS, the undersigned individual ("Optionee") holds one or more
outstanding options to purchase shares of the common stock of Essential
Communication Corporation ("Essential") which were granted to Optionee under the
Essential 1996 Stock Option Plan (the "Plan") and are evidenced by an agreement
(the "Option Agreement") between Essential and Optionee.
WHEREAS, Essential has this day been acquired by ODSN through the
merger of ECC Acquisition Corp., a wholly owned subsidiary of ODSN with and into
Essential (the "Merger") pursuant to the Agreement of Merger dated April 30,
1998, by and between ODSN, ECC Acquisition Corp. and Essential (the "Merger
Agreement").
WHEREAS, the provisions of the Merger Agreement require ODSN to assume
all obligations of Essential under all outstanding options under the Plan at the
consummation of the Merger and to issue to the holder of each outstanding option
an agreement evidencing the assumption of such option.
WHEREAS, Essential has issued a letter on May 1, 1998 to Optionee
describing Optionee's right to elect between two alternative treatments of the
assumed options with respect to the consideration to be received upon exercise
of the assumed options following the Merger.
WHEREAS, Optionee has elected to receive only ODSN common stock ("ODSN
Stock") upon exercise of the assumed options.
WHEREAS, pursuant to the provisions of the Merger Agreement, the
exchange ratio (the "Exchange Ratio") in effect for the options that are to be
exercisable only for ODSN stock is 0.39967576 of a share of ODSN Stock for each
share of Essential common stock ("Essential Stock") subject to that option.
WHEREAS, this Agreement is effective as of the consummation of the
Merger (the "Effective Time") in order to reflect certain adjustments to
Optionee's outstanding options under the Plan which have become necessary by
reason of the assumption of those options by ODSN in connection with the Merger.
20.
NOW, THEREFORE, it is hereby agreed as follows:
1. The number of shares of Essential Stock subject to the options
held by Optionee under the Plan immediately prior to the Effective Time (the
"Essential Options") and the exercise price payable per share are set forth in
EXHIBIT A hereto. ODSN hereby assumes, as of the Effective Time, all the duties
and obligations of Essential under each of the Essential Options. In connection
with such assumption, the number of shares of ODSN Stock purchasable under each
Essential Option hereby assumed and the exercise price payable thereunder have
been adjusted to reflect the Exchange Ratio. Accordingly, the number of shares
of ODSN Stock subject to each Essential Option hereby assumed and the adjusted
exercise price payable per share of ODSN Stock under the assumed Essential
Option shall be as indicated for that option in attached EXHIBIT A.
2. The following provisions shall govern each Essential Option
hereby assumed by ODSN:
(a) Unless the context otherwise requires, all references
in each Option Agreement and in the Plan (as incorporated into such
Option Agreement) (i) to the "Company" shall mean ODSN, (ii) to
"Common Stock" shall mean shares of ODSN Stock, (iii) to the "Board"
shall mean the Board of Directors of ODSN and (iv) to the "Committee"
shall mean the Compensation Committee of the ODSN Board of Directors.
(b) The date of grant and the Expiration Date of each
assumed Essential Option and all other provisions which govern either
the exercisability or the termination of the assumed Essential Option
shall remain the same as set forth in the Option Agreement applicable
to that option and shall accordingly govern and control Optionee's
rights under this Agreement to purchase ODSN Stock.
(c) The shares subject to each assumed Essential Option
shall continue to vest in accordance with the same installment vesting
schedule in effect under the applicable Option Agreement immediately
prior to the Effective Time, with the number of shares of ODSN Stock
subject to each such installment adjusted to reflect the Exchange
Rate. Accordingly, no acceleration of vesting under the Essential
Options shall be deemed to occur by reason of the Merger, and the
vesting dates under each applicable Option Agreement shall remain the
same following the Merger.
(d) Each assumed Essential Option (whether or not such
option was an incentive stock option pursuant to Section 422 of the
Internal Revenue Code prior to the Merger) shall be a non-qualified
option, not subject to Section 422 of the Internal Revenue Code.
Accordingly, upon exercise of an assumed Essential Option, Optionee
shall recognize ordinary income in an amount equal to the excess of
(i) the fair market value of the acquired ODSN Stock on the option
exercise date over (ii) the price paid for those shares; such income
shall be subject to all applicable income and employment taxes.
(e) For purposes of applying any and all provisions of the
Option Agreement relating to Optionee's status as an employee of
Essential, Optionee shall be deemed to continue in such status as an
employee for so long as Optionee renders services as an employee to
ODSN or any present or future ODSN subsidiary, including Essential.
Accordingly, the provisions of the Option Agreement governing the
termination of the assumed Essential Options upon Optionee's cessation
of service as an employee of Essential shall hereafter be applied on
the basis of Optionee's cessation of employee status with ODSN and its
subsidiaries, and each assumed Essential Option shall accordingly
terminate, within the designated time period in effect under the
Option Agreement for that option, following such cessation of service
as an employee of ODSN and its subsidiaries.
(f) The adjusted exercise price payable for the ODSN Stock
subject to each
21.
assumed Essential Option shall be payable in any of the forms
authorized under the Option Agreement applicable to that option.
For purposes of determining the holding period of any shares of ODSN
Stock delivered in payment of such adjusted exercise price, the
period for which such shares were held as Essential Stock prior to
the Merger shall be taken into account.
(g) In order to exercise each assumed Essential Option,
Optionee must deliver to ODSN a written notice of exercise in which
the number of shares of ODSN Stock to be purchased thereunder must be
indicated. The exercise notice must be accompanied by payment of the
adjusted exercise price payable for the purchased shares of ODSN Stock
and should be delivered to ODSN at the following address:
ODS Networks, Inc.
0000 X. Xxxxxxx Xxxx
Xxxxxxxxxx, Xxxxx 00000
Attention: Xxx Xxxxxxx
3. Except to the extent specifically modified by this Stock Option
Assumption Agreement, all of the terms and conditions of each Option Agreement
as in effect immediately prior to the Merger shall continue in full force and
effect and shall not in any way be amended, revised or otherwise affected by
this Stock Option Assumption Agreement.
22.
IN WITNESS WHEREOF, ODS Networks, Inc. has caused this Stock Option
Assumption Agreement to be executed on its behalf by its duly-authorized officer
as of the 7th day of May, 1998.
ODS NETWORKS, INC.
By:
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ACKNOWLEDGMENT
The undersigned acknowledges receipt of the foregoing Stock Option
Assumption Agreement and understands that all rights and liabilities with
respect to each of his or her Essential Options hereby assumed by ODSN are as
set forth in the Option Agreement, the Plan and such Stock Option Assumption
Agreement.
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(1), OPTIONEE
DATED: , 1998
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23.
EXHIBIT A
Optionee's Outstanding Options to Purchase Shares
of Essential Communication Corporation
Common Stock (Pre-Merger)
and
Optionee's Outstanding Options to Purchase Shares
of ODS Networks, Inc.
Common Stock (Post-Merger)
