EXHIBIT 99.3
Form of Stock Option Agreement
[LOGO OF ENCAD, INC.]
EXHIBIT A
ENCAD, INC.
1998 STOCK OPTION PLAN
STOCK OPTION AGREEMENT FOR
NON-STATUTORY OPTIONS GRANTED UNDER ARTICLE TWO
RECITALS
I. The Corporation has implemented a discretionary option grant program
under the Plan to provide meaningful incentive to selected Employees,
independent consultants and advisors to continue in the Service of the
Corporation (or any Parent or Subsidiary).
II. The Optionee is selected as an Employee considered to render valuable
services to the Corporation (or a Parent or Subsidiary).
III. This Agreement is executed pursuant to, and is intended to carry out
the purposes of, the Plan in connection with the grant of a Non-Statutory Stock
Option to the Optionee.
IV. 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:
X. XXXXX OF OPTION The Corporation hereby grants to the Optionee,
as of the Grant Date, this option to purchase up to the number of Option Shares
specified in the Notice of Grant. The Option Shares shall be purchasable from
time to time during the Option Term specified in Paragraph B at the Exercise
Price specified in the Notice of Grant.
B. 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 E or F.
C. LIMITED TRANSFERABILITY This option may, in connection with the
Optionee's estate plan, be assigned in whole or in part during the Optionee's
lifetime to one or more members of the Optionee's immediate family or to a
trust established exclusively for one or more such family members. The assigned
portion may only be exercised by the person or persons who acquire a
proprietary interest in the option pursuant to the assignment. The terms
applicable to the assigned portion shall be the same as those in effect for the
option immediately prior to such assignment. Should the Optionee die while
holding this option, then this option shall be transferred in accordance with
Optionee's will or the laws of descent and distribution.
D. DATES OF EXERCISE This option shall become exercisable for the
Option Shares in one or more installments as specified in the Notice of Grant.
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 expiration of the Option Term
under Paragraph E or F.
E. TERMINATION OF SERVICE The Option Term specified in Paragraph B
shall expire (and this option shall cease to be outstanding) prior to the
Expiration Date should any of the following provisions become applicable:
1. Should the Optionee's Service terminate for any reason
(other than death, Permanent Disability or Misconduct) while this option
is outstanding, then the period during which this option may be exercised
shall be limited to the ninety (90)-day period measured from the date of
termination.
2. Should the Optionee die while then the personal
representative of the Optionee's estate or the person or persons to
whom this option is transferred pursuant to the Optionee's will or in
accordance with the laws of descent and distribution, shall have a
twelve (12) month period (commencing with the date of the Optionee's
death) during which to exercise this option for any or all of the
Option Shares exercisable at the time of death.
3. Should the Optionee's Service terminate by reason of
Permanent Disability while this option is outstanding, then the period
during which this option may be exercised shall be limited to the twelve
(12)-month period measured from the date of termination.
4. During the applicable post-Service exercise period, this
option may not be exercised in the aggregate for more than the number of
Option Shares for which this option is exercisable on the date of the
Optionee's termination of Service. Upon the expiration of the applicable
post-Service exercise period or (if earlier) upon the expiration of the
Option Term, this option shall terminate and cease to be outstanding for
any otherwise exercisable Option Shares for which this option has not been
exercised. However, this option shall, immediately upon the Optionee's
termination of Service, terminate and cease to be outstanding for any and
all Option Shares for which this option is not otherwise at that time
exercisable.
5. Should the Optionee's Service be terminated for Misconduct,
then this option shall terminate immediately and cease to be outstanding.
6. In no event shall this option be exercisable after the
expiration of the Option Term.
F. SPECIAL ACCELERATION OF OPTION
1. In the event of any Corporate Transaction, 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 all of the Option Shares at the time subject to this
option and may be exercised for any or all of the Option Shares as fully-
vested shares of Common Stock. However, this option shall not become
exercisable on such an accelerated basis if and to the extent: (i) this
option is, in connection with the Corporate Transaction, either to be
continued by the Corporation (in the event that it is the surviving parent
corporation in the Corporate Transaction) or is 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 shares over the exercise
price payable for such shares) and provides for subsequent payout in
accordance with the same exercise/vesting schedule applicable to those
Option Shares as set forth in the Notice of Grant.
2. Immediately following the consummation of a 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.
3. In the event 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 the 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 that the
aggregate Exercise Price shall remain the same.
4. 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.
G. 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 any dilution or
enlargement of benefits hereunder.
H. STOCKHOLDER RIGHTS The Optionee shall not have any rights as a
stockholder with respect to the Option Shares until the Optionee has exercised
this option, paid the Exercise Price and been issued such shares.
I. MANNER OF EXERCISING OPTION
1. 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, the Optionee (or any other person or persons exercising the
option) must take the following actions:
a. Execute and deliver to the Corporation a Notice
to Exercise (attached to this Agreement as Exhibit I).
b. Pay the aggregate Exercise Price and any federal,
state and local income and employment withholding taxes required upon
exercise of the purchased Option Shares in one or more of the
following forms:
(i) cash or check payable to the Corporation's
order;
(ii) shares of Common Stock held by the 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
(iii) a combination of such shares, and cash or
check payable to the Corporation's order; or
(iv) a "same-day sale" and remittance
procedure pursuant to which the Optionee (or any other
person or persons exercising the option) shall concurrently
provide irrevocable instructions to a Corporation-
designated brokerage firm to effect the immediate sale of
the purchased Option 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 any applicable
federal, state and local income and employment taxes
required to be withheld by the Corporation by reason of
such exercise, and to the Corporation to deliver the
purchased Option Shares directly to such brokerage firm in
order to complete the sale transaction.
c. Except to the extent that a "same-day sale" and
remittance procedure is utilized in connection with the
exercise, full payment of the aggregate Exercise Price must
accompany the Notice to Exercise and delivered to the
Corporation in order to effect the exercise of the Option
Shares.
d. Furnish to the Corporation appropriate
documentation that the person or persons exercising the Option
Shares (if other than the Optionee) have the right to exercise
this option.
2. As soon as practical after the Exercise Date the
Corporation shall issue to, or on behalf of, the Optionee (or any other
authorized person or persons exercising this option) the purchased Option
Shares.
3. In no event may this option be exercised for any fractional
shares.
J. COMPLIANCE WITH LAWS AND REGULATIONS
1. The exercise of this option and the issuance of the Option
Shares upon such exercise shall be subject to compliance by the
Corporation and the 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.
2. 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.
K. SUCCESSORS AND ASSIGNS Except to the extent otherwise provided
in Paragraphs C and F, the provisions of this Agreement shall inure to the
benefit of, and be binding upon, the Corporation and its successors and assigns
and the Optionee, the Optionee's assigns and the legal representatives, heirs
and legatees of the Optionee's estate.
L. 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 Plan Administrator at the Corporation's principal office. Any notice
required to be given or delivered to the Optionee shall be in writing and
addressed to the Optionee at the address indicated on the Notice of Grant. 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.
M. 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.
N. 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.
EXHIBIT I
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NOTICE TO EXERCISE STOCK OPTIONS
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I hereby notify ENCAD, Inc. that I elect to exercise __________ shares
pursuant from the stock option (the "Option") granted to me on
____________________ to purchase up to __________ shares of ENCAD Common
Stock at an option price of $__________ per share (the "Option Price").
Concurrently with the delivery of this Notice to Exercise I shall pay to
ENCAD the Option Price for the exercised shares in accordance with the
provisions of my agreement with ENCAD evidencing the Option and shall deliver
whatever additional documents may be required by such agreement as a
condition for exercise. I shall also make appropriate arrangements for the
satisfaction of the federal, state and local income and employment tax
withholding requirements applicable to my option exercise.
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Optionee Name:
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Mailing Address:
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City/State/Zip Code:
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Social Security Number: Telephone Number/Extension:
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Method of exercise (check one):
Cash/check / /
Cashless: / /
Exercise and hold / / Number of shares____
Exercise and sell / / Number of shares____
Stock / / Number of shares____ Attestation form attached
/ / Certificate attached / /
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Delivery
Name:_____________________________________________________________________
Instructions:
Address:__________________________________________________________________
DTC
#:________________________________________________________________
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Broker: Name:_______________________________________________________________
Address:____________________________________________________________
Phone #:____________________________________________________________
Account #:__________________________________________________________
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Optionee Signature: Date:
______________________________________________ ________________________________
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Exercise Procedures:
1. Complete, sign and return the Notice to Exercise form to Xxxxx Xxxxxxx.
2. For cash transactions, a personal check or cashier's check must be provided
before the exercise will be processed.
3. For stock swaps, the stock certificate(s) used in exchange for the options
shares must be duly executed by a bank participating in the Medallion
program.
4. If exercising through a brokerage firm, submit the Notice to Exercise prior
to contacting the broker to avoid a delay in processing.
5. Cash exercises are processed the same day payment is received. Fair Market
Value will be established by the closing price (last trade) of ENCAD Common
Stock on the day of exercise or, to the extent you engage in a same-day
sale of the shares, the gross selling price of those shares. Allow
approximately five business days for delivery of your certificate.
Note: This Notice to Exercise is valid for 30 days only. If a transaction
does not take place within 30 days, a new form must be completed.
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PLAN ADMINISTRATION USE ONLY
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Date verified with broker: Date entered into system:
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Date payment received: Date sent to transfer agent:
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FMV Date: Date confirmation sent to Optionee:
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Comments:
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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 the Corporation's common stock.
D. CORPORATE TRANSACTION shall mean either of the following stockholder-
approved transactions to which the Corporation is a party:
1. 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
2. The sale, transfer or other disposition of all or substantially
all of the Corporation's assets in complete liquidation or dissolution of
the Corporation.
E. CORPORATION shall mean ENCAD, Inc., a Delaware corporation.
F. 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 Corporation as to both the work to be performed and the manner and
method of performance.
G. EXERCISE DATE shall mean the date on which the option shall have been
exercised in accordance with Paragraph I of the Agreement.
H. EXERCISE PRICE shall mean the exercise price per share as specified
in the Notice of Grant.
I. EXPIRATION DATE shall mean the date on which the option expires as
specified in the Notice of Grant.
J. FAIR MARKET VALUE per share of Common Stock on any relevant date shall
be determined in accordance with the following provisions:
1. If the Common Stock is at the time traded on 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 such 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.
2. 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.
X. XXXXX DATE shall mean the date of grant of the option as specified in
the Notice of Grant.
L. MISCONDUCT shall mean the commission of any act of fraud,
embezzlement or dishonesty by the Optionee, any unauthorized use or disclosure
by the Optionee of confidential information or trade secrets of the Corporation
(or any Parent or Subsidiary), or any other intentional misconduct by the
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 the Optionee or other
person in the Service of the Corporation (or any Parent or Subsidiary).
M. NON-STATUTORY STOCK OPTION shall mean an option not intended to
satisfy the requirements of Internal Revenue Code Section 422.
N. NOTICE TO EXERCISE shall mean the Notice to Exercise attached hereto
as Exhibit I.
O. NOTICE OF GRANT shall mean the Notice of Grant of Stock Options
accompanying this Agreement, pursuant to which the Optionee has been informed
of the basic terms of the option evidenced hereby.
P. OPTION SHARES shall mean the number of shares of Common Stock subject
to the option as specified in the Notice of Grant.
Q. OPTION TERM shall mean the term of the option as specified in the
Notice of Grant.
R. OPTIONEE shall mean the person to whom the option is granted as
specified in the Notice of Grant.
S. 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.
T. PERMANENT DISABILITY shall mean the inability of the Optionee to
engage in any substantial gainful activity by reason of any medically
determinable physical or mental impairment expected to result in death or to be
of continuous duration of twelve (12) months or more.
U. PLAN shall mean the Corporation's 1998 Stock Option Plan.
V. PLAN ADMINISTRATOR shall mean either the Board or a committee or
designee(s) of the Board acting in its administrative capacity under the Plan.
W. SERVICE shall mean the Optionee's performance of services for the
Corporation (or any Parent or Subsidiary) in the capacity of an Employee.
X. STOCK EXCHANGE shall mean either the New York Stock Exchange or the
American Stock Exchange.
Y. 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.
