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EXHIBIT 99.2
[Ditech Communications Corporation Letterhead]
August ___, 2000
Dear __________:
You previously were granted an option to purchase shares of common
stock of Atmosphere Networks, Inc. ("Atmosphere") under the Atmosphere
Networks, Inc. 1997 Stock Plan (hereinafter, your "Atmosphere Option").
Effective July 25, 2000, Atmosphere was acquired by Ditech Communications
Corporation ("Ditech") in a transaction involving the merger of Oxygen
Acquisition Corporation, a wholly-owned subsidiary of Ditech, with and into
Atmosphere (the "Merger"). The Merger was carried out under terms and
conditions agreed to by the parties in an Agreement and Plan of Merger and
Reorganization, dated June 21, 2000 (the "Merger Agreement"). This letter
provides you with information regarding what happens to your Atmosphere
Option.
1. NUMBER OF SHARES AND EXERCISE PRICE. As originally granted, your
Atmosphere Option, dated __________, included the following terms:
Number of Atmosphere shares: _____
Exercise price per share: _____
As a result of the Merger and in accordance with the terms of the Atmosphere
Networks, Inc. 1997 Stock Plan (the "Atmosphere Plan"), each unexpired and
unexercised Atmosphere Option was assumed by Ditech and automatically
converted into an option to purchase shares of Ditech common stock. No action
was required of you.
To reflect the difference between the relative values of Atmosphere
common stock prior to the Merger and the Ditech common stock now subject to
your Atmosphere Option, a proportional adjustment to the number of shares and
exercise price under your Atmosphere Option has also been made. The Merger
Agreement specifies a formula for determining a ratio, referred to as the
"Exchange Ratio," which will apply for purposes of making these adjustments.
The Exchange Ratio equals _____ (_____).
Specifically, the number of Atmosphere shares subject to your
Atmosphere Option immediately prior to the Merger was divided by a number,
_____ (_____), which reflects the Exchange Ratio, to determine the number of
Ditech shares subject to your assumed Atmosphere Option after the Merger.
Under the terms of the Merger Agreement and IRS income tax regulations, the
adjusted number of shares was rounded to the next whole share. The per share
exercise price of your Atmosphere Option prior to the Merger was also
multiplied by a number, _____ (_____), to determine the new per share
exercise price of your assumed Atmosphere Option rounded up to the nearest
penny.
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Accordingly, your adjusted Atmosphere Option, dated __________, now
has the following terms:
Number of Ditech shares: _____
Exercise price per share: _____
Please note that, except for rounding differences, the total
exercise price under your Atmosphere Option (the exercise price per share
times the whole number of shares) has remained the same.
2. VESTING. Your adjusted Atmosphere Option continues to vest according to
its original terms, except, however, as a result of the Merger, your adjusted
Atmosphere Option will be credited with an additional one year of vesting.
You have not lost any vesting credit for the period you rendered services to
Atmosphere, and you will continue to vest in your assumed Atmosphere option
for so long as you render services to Ditech.
3. OTHER TERMS AND CONDITIONS. All of the other terms and conditions of your
Atmosphere Option will remain the same.
You will not be issued a new option agreement for your assumed
Atmosphere Option, which already has been assumed and converted as described
above. We simply request that you sign this letter to acknowledge that you
have received this information about the terms of your Atmosphere Option, as
assumed by Ditech.
Please be aware that neither the assumption of your Atmosphere
Option nor this letter is intended to constitute a promise or agreement of
employment, and neither should be interpreted to prohibit either you or
Ditech from terminating your employment or services at any time, with or
without cause.
We believe that the Merger presents an exciting opportunity for both
companies. The conversion of Atmosphere Option to purchase shares of Ditech
common stock allows you to participate in the financial rewards of this new
joint enterprise. If you have any questions regarding the conversion of
Atmosphere Options, please contact Kimberly Canigiula at (650) 623-1357. We
would appreciate if you would confirm receipt of this letter by signing and
returning the enclosed copy of this letter to Kimberly Canigiula at Ditech by
__________, 2000.
Sincerely,
DITECH COMMUNICATIONS CORPORATION
______________________________________
Received and Acknowledged:
______________________________________
__________, Optionee
