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EXHIBIT 99.3
Form of Stock Option Agreement
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LEGACY SOFTWARE, 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 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 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. This option shall be neither
transferable nor assignable by Optionee other than by will or by the laws of
descent and distribution following Optionee's death and may be exercised, during
Optionee's lifetime, only by Optionee. However, if this option is designated a
Non-Statutory Option in the Grant Notice, then this option may also be assigned
in whole or in part during Optionee's lifetime in accordance with the terms of a
Qualified Domestic Relations Order. The assigned portion shall be exercisable
only by the person or persons who acquire a proprietary interest in the option
pursuant to such Qualified Domestic Relations Order. The terms applicable to the
assigned portion shall be the same as those in effect for this option
immediately prior to such assignment and shall be set forth in such documents
issued to the assignee as the Plan Administrator may deem appropriate.
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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:
(i) Should Optionee cease to remain in
Service for any reason (other than death, Permanent Disability, or
Misconduct) while this option is outstanding, 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.
(ii) Should Optionee die while this option is
outstanding, 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 in accordance with the laws of descent and
distribution shall have the right to exercise this option. Such right
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.
(iii) Should Optionee cease Service by
reason of Permanent Disability while this option is outstanding, 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.
(iv) Should Optionee's Service be terminated
for Misconduct, then this option shall terminate immediately and cease
to remain outstanding.
(v) During the limited period of post-
Service exercisability, this option may not be exercised in the
aggregate for more than the number of vested 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 vested Option Shares for which the
option has not been exercised. To the extent Optionee is not vested in
the Option Shares at the time of Optionee's cessation of Service, this
option
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shall immediately terminate and cease to be outstanding with respect to
those shares.
(vi) In the event of a Corporate Transaction,
the provisions of Paragraph 6 shall govern the period for which this
option is to remain exercisable following Optionee's cessation of
Service and shall supersede any provisions to the contrary in this
paragraph.
6. SPECIAL ACCELERATION OF OPTION.
(a) In the event of a Corporate Transaction, the
exercisability of this option, to the extent outstanding at such time but not
otherwise fully exercisable, shall automatically accelerate so that this option
shall, immediately prior to the effective date of the Corporate Transaction,
become exercisable for any or all of the Option Shares at the time subject to
this option as fully-vested shares of Common Stock. No such acceleration of this
option, however, shall occur if and to the extent: (i) this option is, in
connection with the Corporate Transaction, either to be assumed by the successor
corporation (or parent thereof) or to be replaced with a comparable option to
purchase shares of the capital stock of 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 on the Option
Shares for which this option is not exercisable at the time of the Corporate
Transaction (the excess of the Fair Market Value of such Option Shares over the
aggregate Exercise Price payable for such shares) and provides for subsequent
pay-out in accordance with the same exercise schedule in effect for the option
pursuant to the option exercise schedule set forth in the Grant Notice. The
determination of option comparability under clause (i) shall be made by the Plan
Administrator, and such determination shall be final, binding and conclusive.
(b) Immediately following the Corporate
Transaction, this option, to the extent not previously exercised, 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) Upon an Involuntary Termination of
Optionee's Service within twelve (12) months following a Corporate Transaction
in which this option is assumed or replaced, the exercisability of this option,
to the extent outstanding at such time but not
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otherwise fully exercisable, shall automatically accelerate so that this option
shall immediately become fully exercisable for all the Option Shares at the time
subject to this option and may be exercised for any or all of those shares as
fully-vested shares of Common Stock at any time prior to the earlier of (i) the
Expiration Date or (ii) the expiration of the one (1)-year period measured from
the effective date of the Involuntary Termination.
(e) 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.
9. MANNER OF EXERCISING OPTION.
(a) In order to exercise this option with
respect to all or any part 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) To the extent the Common
Stock is registered under Section 12(g) of the 1934 Act at the time
this option is exercised, execute and deliver to the Corporation a
Notice of Exercise for the Option Shares for which the option is
exercised. To the extent the Common Stock is not registered under
Section 12(g) of the 1934 Act at the time this option is exercised,
execute and deliver to the Corporation a Purchase Agreement.
(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; or
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(B) a promissory note payable
to the Corporation, but only to the extent authorized by the
Plan Administrator in accordance with Paragraph 13.
Should the Common Stock be registered under Section
12(g) of the 1934 Act at the time this option is exercised,
then the Exercise Price may also be paid as follows:
(C) in 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 written 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 (or the Purchase Agreement) 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.
(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.
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(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
Small Cap 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 and the legal representatives,
heirs and legatees of Optionee's estate.
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 promissory
note. The terms of any such promissory note
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(including the interest rate, the requirements for collateral and the terms of
repayment) shall be established by the Plan Administrator in its sole
discretion.1
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 such 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:
(i) 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: (i)
more than three (3) months after the date Optionee ceases to be an
Employee for any reason other than death or Permanent Disability or
(ii) more than twelve (12) months after the date Optionee ceases to be
an Employee by reason of Permanent Disability.
(ii) 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 any earlier
installments of the Common Stock and any other securities for which
this option or any other Incentive
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(1) Authorization of payment of the Exercise Price by a promissory note may,
under currently proposed Treasury Regulations, result in the loss of incentive
stock option treatment under the Federal tax laws.
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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.
(iii) 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 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.
(iv) 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 Legacy Software, 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 1995 Stock Option/Stock Issuance Plan on _____________ ,
199__ .
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.
_____________________________, 199__
Date
____________________________________
Optionee
Address:____________________________
Print name in exact manner
it is to appear on the ____________________________________
stock certificate:
____________________________________
Address to which certificate
is to be sent, if different
from address above: ____________________________________
Social Security Number: ____________________________________
Employee 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. CODE shall mean the Internal Revenue Code of 1986, as amended.
D. COMMON STOCK shall mean the Corporation's common stock.
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 Legacy Software, Inc., a Delaware
corporation, and any corporate successor to all or substantially all of the
assets or voting stock of Legacy Software, Inc. which shall by appropriate
action adopt the Plan.
G. DOMESTIC RELATIONS ORDER shall mean any judgment, decree or
order (including approval of a property settlement agreement) which provides or
otherwise conveys, pursuant to applicable State domestic relations laws
(including community property laws), marital property rights to any spouse or
former spouse of the Optionee.
H. 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.
I. EXERCISE DATE shall mean the date on which the option shall
have been exercised in accordance with Paragraph 9 of the Agreement.
J. EXERCISE PRICE shall mean the exercise price per share as
specified in the Grant Notice.
K. EXPIRATION DATE shall mean the date on which the option
expires as specified in the Grant Notice.
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L. FAIR MARKET VALUE per share of Common Stock on any relevant
date shall be determined in accordance with the following provisions:
(i) If the Common Stock is at the time traded on the
Nasdaq SmallCap (or the Nasdaq National Market), then the Fair Market
Value shall be 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 SmallCap or the Nasdaq
National Market (or any successor system). 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.
(ii) If the Common Stock is at the time listed on any
Stock Exchange, then the Fair Market Value shall be 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.
(iii) If the Fair Market Value is to be determined at
a time when the Common Stock is not traded on any Stock Exchange or the
Nasdaq Small Cap (or the Nasdaq National Market), then the Fair Market
Value shall be determined by the Plan Administrator after taking into
account such factors as the Plan Administrator shall deem appropriate.
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.
O. INCENTIVE OPTION shall mean an option which satisfies the
requirements of Code Section 422.
P. INVOLUNTARY TERMINATION shall mean the termination of
Optionee's Service which occurs by reason of:
(i) Optionee's dismissal or discharge by the
Corporation for reasons other than Misconduct, or
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(ii) Optionee's voluntary resignation following
(A) a change in Optionee's position with the Corporation (or Parent or
Subsidiary employing Optionee) which materially reduces Optionee's
level of responsibility, (B) a reduction in Optionee's level of
compensation (including base salary, fringe benefits and participation
in corporate-performance based bonus or incentive programs) by more
than fifteen percent (15%) or (C) a relocation of Optionee's place of
employment by more than fifty (50) miles, provided and only if such
change, reduction or relocation is effected by the Corporation without
Optionee's consent.
Q. 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).
R. 1934 ACT shall mean the Securities Exchange Act of 1934, as
amended.
S. NON-STATUTORY OPTION shall mean an option not intended to satisfy
the requirements of Code Section 422.
T. NOTICE OF EXERCISE shall mean the notice of exercise in the
form attached hereto as Exhibit I.
U. OPTION SHARES shall mean the number of shares of Common Stock
subject to the option as specified in the Grant Notice.
V. OPTIONEE shall mean the person to whom the option is granted
as specified in the Grant Notice.
W. 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.
X. 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.
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Y. PLAN shall mean the Corporation's 1995 Stock Option/Stock
Issuance Plan.
Z. PLAN ADMINISTRATOR shall mean either the Board or a committee of
Board members, to the extent the committee is at the time responsible for the
administration of the Plan.
AA. PURCHASE AGREEMENT shall mean the stock purchase agreement (in
form and substance satisfactory to the Corporation) which grants the
Corporation, prior to the registration of its shares of Common Stock under
Section 12(g) of the 1934 Act, certain rights, including a right of first
refusal and a market stand-off right.
AB. QUALIFIED DOMESTIC RELATIONS ORDER shall mean a Domestic
Relations Order which substantially complies with the requirements of Code
Section 414(p). The Plan Administrator shall have the sole discretion to
determine whether a Domestic Relations Order is a Qualified Domestic Relations
Order.
AC. 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.
AD. STOCK EXCHANGE shall mean the American Stock Exchange or the
New York Stock Exchange.
AE. 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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