<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 24, 1998
REGISTRATION NO. 333-
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-----------------
ENCAD, INC.
(Exact name of Registrant as specified in its charter)
-----------------
DELAWARE 95-3672088
(State or other jurisdiction (IRS Employer Identification No.)
of incorporation or organization)
6059 CORNERSTONE COURT WEST
SAN DIEGO, CALIFORNIA 92121
(Address of principal executive offices) (Zip code)
-----------------
1998 STOCK OPTION PLAN
1997 SUPPLEMENTAL STOCK OPTION PLAN, AS AMENDED
NON-STATUTORY STOCK OPTION AGREEMENT
(Full title of the Plan)
-----------------
DAVID A. PURCELL
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
ENCAD, INC.
6059 CORNERSTONE COURT WEST, SAN DIEGO, CALIFORNIA 92121
(619) 452-0882
(Telephone number, including area code, of agent for service)
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
- -----------------------------------------------------------------------------------------
PROPOSED PROPOSED
TITLE OF MAXIMUM MAXIMUM
SECURITIES AMOUNT OFFERING AGGREGATE AMOUNT OF
TO BE TO BE PRICE OFFERING REGISTRATION
REGISTERED REGISTERED(1) PER SHARE PRICE FEE
<S> <C> <C> <C> <C>
1998 STOCK OPTION PLAN
Common Stock,
$0.001 par value 575,000 shares $14.25(2) $8,193,750.00(2) $2,458.12
1997 SUPPLEMENTAL
STOCK OPTION PLAN,
AS AMENDED
Common Stock,
$0.001 par value 115,000 shares $14.25(2) $1,638,750.00(2) $ 491.62
NON-STATUTORY STOCK
OPTION AGREEMENT
Common Stock,
$0.001 par value 75,000 shares $14.25(2) $1,068,750.00(2) $ 320.63
Aggregate Filing Fee $3,270.37
- -----------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------
</TABLE>
(1) This Registration Statement shall also cover any additional shares of
Common Stock which become issuable under the 1998 Stock Option Plan, the 1997
Supplemental Stock Option Plan, as amended, or the Non-Statutory Stock Option
Agreement by reason of any stock dividend, stock split, recapitalization or
any other similar transaction without receipt of consideration which results
in an increase in the number of outstanding shares of Common Stock of ENCAD,
Inc.
(2) Calculated solely for purposes of this offering under Rule 457(h) of the
Securities Act of 1933, as amended, on the basis of the average of the high
and low selling prices per share of Common Stock of ENCAD, Inc. on July 20,
1998 as reported on the Nasdaq National Market.
<PAGE>
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
ITEM 3. INCORPORATION OF DOCUMENTS BY REFERENCE
ENCAD, Inc. (the "Registrant") hereby incorporates by reference into
this Registration Statement the following documents previously filed with the
Securities and Exchange Commission (the "SEC"):
(a) The Registrant's Annual Report on Form 10-K for the fiscal year ended
December 31, 1997, filed with the SEC on March 31, 1998;
(b) The Registrant's Quarterly Report on Form 10-Q for the fiscal quarter
ended March 31, 1998, filed with the SEC on May 15, 1998; and
(c) The Registrant's Registration Statement No. 001-12652 on Form 8-A filed
with the SEC on December 6, 1993 in which the terms, rights and provisions
applicable to the Registrant's Common Stock are described.
All reports and definitive proxy or information statements filed pursuant
to Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934 (the
"1934 Act") after the date of this Registration Statement and prior to the
filing of a post-effective amendment which indicates that all securities offered
hereby have been sold or which deregisters all securities then remaining unsold
shall be deemed to be incorporated by reference into this Registration Statement
and to be a part hereof from the date of filing of such documents. Any statement
contained in a document incorporated or deemed to be incorporated by reference
herein shall be deemed to be modified or superseded for purposes of this
Registration Statement to the extent that a statement contained herein or in any
subsequently filed document which also is deemed to be incorporated by reference
herein modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Registration Statement.
ITEM 4. DESCRIPTION OF SECURITIES
Not applicable.
ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL
Not applicable.
ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Registrant's Bylaws (the "Bylaws") provide that the Registrant
shall, to the fullest extent authorized by Delaware law, indemnify any
director who is made, or is threatened to be made, a party to an action or
proceeding, whether civil or criminal, administrative or investigative, by
reason of being a director of the Registrant or a predecessor corporation of
the Registrant, or is or was serving at the request of the Registrant as a
director or officer of another corporation; provided, however, that the
Registrant shall indemnify any such agent in connection with a proceeding
initiated by such agent only if such proceeding was authorized by the
Registrant's Board of Directors (the "Board"). The Bylaws further provide
that such indemnification provisions shall: (i) not be deemed to be exclusive
of any other rights to which those indemnified may be entitled under any
bylaw, agreement or vote of stockholder or disinterested directors or
otherwise, both as to action in their official capacities and as to action in
another capacity while holding such office, (ii) continue as to a person who
has ceased to be a director, and (iii) inure to the benefit of the heirs,
executors and administrators of such a person. The Bylaws provide that the
Registrant's obligation to provide indemnification shall be offset to the
extent of any other source of indemnification or any otherwise applicable
insurance coverage under a policy maintained by the Registrant or any other
person. The Bylaws further provide that the Board in its discretion shall
have the power to indemnify any person, other than a director, made a party
to any action, suit or proceeding by reason of the fact that he, his testator
or intestate, is or was an officer or employee of the corporation.
<PAGE>
In addition, the Registrant's Certificate of Incorporation (the
"Certificate of Incorporation") provides that, pursuant to Delaware law, its
directors shall not be personally liable for monetary damages for breach of
fiduciary duty as a director, except for liability (i) for any breach of the
director's duty of loyalty to the Registrant or its stockholders, (ii) for
acts or omissions not in good faith or involving intentional misconduct,
(iii) for knowing violations of law, (iv) for actions leading to improper
personal benefit to the director, and (iv) for unlawful payments of dividends
or unlawful stock repurchases or redemptions as provided in Section 174 of
Delaware General Corporation Law.
The Registrant maintains a directors' and officers' liability insurance
policy that, subject to certain limitations, terms and conditions, will
insure the directors and officers of the Registrant against losses arising
from wrongful acts (as defined by the policy) in his or her capacity as a
director or officer.
ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED
Not applicable.
ITEM 8. EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT
<S> <C>
4 Instruments Defining Rights of Stockholders. Reference is made to
Registrant's Registration Statement No. 001-12652 on Form 8-A,
which is incorporated herein by reference pursuant to Item 3(d)
of this Registration Statement.
5 Opinion and Consent of Brobeck, Phleger & Harrison LLP.
23.1 Consent of Deloitte & Touche, LLP, Independent Public
Accountants.
23.2 Consent of Brobeck, Phleger & Harrison LLP is contained in
Exhibit 5.
24 Power of Attorney. Reference is made to page II-5 of this
Registration Statement.
99.1 1998 Stock Option Plan.
99.2 Form of Notice of Grant of Stock Option.
99.3 Form of Stock Option Agreement.
99.4 1997 Supplemental Stock Option Plan, as amended.
99.5 Form of Non-Statutory Stock Option Agreement.
</TABLE>
ITEM 9. UNDERTAKINGS
A. The undersigned Registrant hereby undertakes: (1) to file, during any
period in which offers or sales are being made, a post-effective amendment to
this Registration Statement (i) to include any prospectus required by Section
10(a)(3) of the Securities Act of 1933, as amended (the "1933 Act"), (ii) to
reflect in the prospectus any facts or events arising after the effective
date of this Registration Statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate, represent a
fundamental change in the information set forth in this Registration
Statement, and (iii) to include any material information with respect to the
plan of distribution not previously disclosed in this Registration Statement
or any material change to such information in this Registration Statement;
PROVIDED, however, that clauses (1)(i) and (1)(ii) shall not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the Registrant pursuant
to Section 13 or Section 15(d) of the 1934 Act that are incorporated by
reference into this Registration Statement; (2) that for the purpose of
determining any liability under the 1933 Act, each such post-effective
amendment shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof; and (3) to
remove from registration by means of a post-effective amendment any of the
securities being registered which remain unsold upon the termination of the
Registrant's 1998 Stock Option Plan or the Registrant's 1997 Supplemental
Stock Option Plan.
B. The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the 1933 Act, each filing of the Registrant's
annual report pursuant to Section 13(a) or Section 15(d) of the 1934 Act that is
incorporated by reference into this Registration Statement shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
<PAGE>
C. Insofar as indemnification for liabilities arising under the 1933 Act
may be permitted to directors, officers or controlling persons of the Registrant
pursuant to the indemnity provisions summarized in Item 6 or otherwise, the
Registrant has been informed that in the opinion of the SEC such indemnification
is against public policy as expressed in the 1933 Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the 1933 Act and will be governed by the final
adjudication of such issue.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-8 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of San Diego, State of California on July 22, 1998.
ENCAD, INC.
By: /s/ DAVID A PURCELL
------------------------------------
David A. Purcell
Chairman and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That the undersigned officers and directors of ENCAD, Inc., a
Delaware corporation, do hereby constitute and appoint David A. Purcell and
Richard A. Plante and each of them, the lawful attorneys-in-fact and agents,
with full power and authority to do any and all acts and things and to
execute any and all instruments which said attorneys and agents, or either
one of them, determine may be necessary or advisable or required to enable
said corporation to comply with the Securities Act of 1933, as amended, and
any rules or regulation or requirements of the Securities and Exchange
Commission in connection with this Registration Statement. Without limiting
the generality of the foregoing power and authority, the powers granted
include the power and authority to sign the names of the undersigned officers
and directors in the capacities indicated below to this Registration
Statement, to any and all amendments, both pre-effective and post-effective,
and supplements to this Registration Statement and to any and all instruments
or documents filed as part of or in conjunction with this Registration
Statement or amendments or supplements thereto, and each of the undersigned
hereby ratifies and confirms all that said attorneys and agents, or either
one of them, shall do or cause to be done by virtue hereof. This Power of
Attorney may be signed in several counterparts.
IN WITNESS WHEREOF, each of the undersigned has executed this
Power of Attorney as of the date indicated.
Pursuant to the requirements of the Securities Act of 1933, as
amended, this Registration Statement has been signed below by the following
persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
<S> <C> <C>
/s/DAVID A PURCELL Chairman and
- --------------------------- Chief Executive Officer July 22, 1998
David A. Purcell (Principal Executive Officer)
/s/RICHARD A PLANTE President and July 22, 1998
- --------------------------- Chief Operating Officer
Richard A. Plante
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
<S> <C> <C>
/s/TODD W. SCHMIDT Vice President and July 22, 1998
- --------------------------- Chief Financial Officer
Todd W. Schmidt (Principal Financial and
Accounting Officer)
/s/ROBERT V. ADAMS Director July 22, 1998
- ---------------------------
Robert V. Adams
/s/CRAIG S. ANDREWS Director July 22, 1998
- ---------------------------
Craig S. Andrews
/s/RONALD J. HALL Director July 22, 1998
- ---------------------------
Ronald J. Hall
/s/HOWARD L. JENKINS Director July 22, 1998
- ---------------------------
Howard L. Jenkins
/s/CHARLES E. VOLPE Director July 22, 1998
- ---------------------------
Charles E. Volpe
</TABLE>
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
EXHIBITS
TO
FORM S-8
UNDER
SECURITIES ACT OF 1933
<PAGE>
ENCAD, INC.
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. EXHIBIT
<S> <C>
4 Instruments Defining Rights of Stockholders. Reference is made to
Registrant's Registration Statement No. 00-112652 on Form 8-A, which
is incorporated herein by reference pursuant to Item 3(d) of this
Registration Statement.
5 Opinion and Consent of Brobeck, Phleger & Harrison LLP.
23.1 Consent of Deloitte & Touche LLP, Independent Public Accountants.
23.2 Consent of Brobeck, Phleger & Harrison LLP is contained in Exhibit 5.
24 Power of Attorney. Reference is made to page II-5 of this Registration
Statement.
99.1 1998 Stock Option Plan.
99.2 Form of Notice of Grant of Stock Option.
99.3 Form of Stock Option Agreement.
99.4 1997 Supplemental Stock Option Plan, as amended.
99.5 Form of Non-Statutory Stock Option Agreement.
</TABLE>
<PAGE>
EXHIBIT 5
Opinion and Consent of Brobeck, Phleger & Harrison LLP
July 21, 1998
ENCAD, Inc.
6059 Cornerstone Court West
San Diego, CA 92121
Re: ENCAD, Inc. (the "Company")
Registration Statement for Registration
of 765,000 Shares of Common Stock
Ladies and Gentlemen:
In connection with your registration on Form S-8 (the "Registration
Statement") under the Securities Act of 1933, as amended, of (i) 575,000 shares
of Common Stock of ENCAD, Inc. (the "Company") under the Company's 1998 Stock
Option Plan ("1998 Plan"), (ii) 115,000 shares of Common Stock of the Company
under the Company's 1997 Supplemental Stock Option Plan, as amended ("1997
Supplemental Plan"), and (iii) 75,000 shares of Common Stock of the Company
under a Non-Statutory Stock Option Agreement ("Option Agreement"), we advise you
that, in our opinion, if and when such shares have been issued and sold (and the
consideration therefore received) pursuant to the provisions of the 1998 Plan,
the 1997 Supplemental Plan or the Option Agreement, respectively, and in
accordance with the Registration Statement, such shares will be duly-authorized,
validly-issued, fully-paid and non-assessable shares of the Company's Common
Stock.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement.
Very truly yours,
/s/
BROBECK, PHLEGER & HARRISON LLP
<PAGE>
EXHIBIT 23.1
Consent of Deloitte & Touche LLP, Independent Public Accountants
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration
Statement of ENCAD, Inc. on Form S-8 of our report dated January 30, 1998 (March
19, 1998 as to the last paragraph of Note 8), appearing in the Annual Report on
Form 10-K of ENCAD, Inc. for the year ended December 31, 1997.
/s/
DELOITTE & TOUCHE LLP
San Diego, California
July 21, 1998
<PAGE>
EXHIBIT 99.1
1998 Stock Option Plan
[LOGO]
ENCAD, INC.
1998 STOCK OPTION PLAN
ARTICLE ONE
PROVISIONS
I. PURPOSE OF THE PLAN
This 1998 Stock Option Plan ("the Plan") is intended to promote the
interests of ENCAD, Inc., ("the Corporation") a Delaware corporation, by
authorizing shares of the Corporation's Common Stock for issuance through
option grants to be made from time to time to (i) Employees, including
Officers, in the Service of the Corporation (or any Parent or Subsidiary),
(ii) independent consultants and advisors in the Service of the Corporation
(or any Parent or Subsidiary), and (iii) Directors of the Corporation (or
any Parent or Subsidiary).
II. GENERAL
A. The Plan was adopted by the Board on March 9, 1998 and shall
become effective immediately upon approval by the stockholders of the
Corporation on June 9, 1998.
B. The Plan is independent of any of the Corporation's other
stock option plans, and option shares issued under the Plan shall not reduce
or otherwise affect the number of shares of the Corporation's Common Stock
available for issuance under any of the Corporation's other plans. In
addition, option shares issued under any of the Corporation's other plans
shall not reduce or otherwise affect the number of shares of the
Corporation's Common Stock available for issuance under the Plan.
C. Capitalized terms shall have the meanings assigned to
such terms in the attached Appendix.
D. An Optionee under the Plan shall have none of the rights
of a stockholder of the Corporation with respect to any option shares issued
under the Plan until such Optionee has exercised the option, paid the
exercise price for the purchased shares, and been issued such shares.
E. Neither the grant of options nor the issuance of any shares
pursuant to the Plan shall in no 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.
III. STRUCTURE OF THE PLAN
<PAGE>
A. The Plan shall be divided into four separate components: the
Discretionary Option Grant Program specified in Article Two, the Automatic
Option Grant Program specified in Article Three, the Salary Reduction Option
Grant Program specified in Article Four and the Director Fee Option Grant
Program specified in Article Five ("the Programs").
B. The provisions of Articles One and Six of the Plan, except as
otherwise expressly provided, shall apply to each of the Programs and shall
accordingly govern the interests of all Optionees in the Plan.
IV. ELIGIBILITY
A. The individuals eligible to participate in the Programs
shall be limited to those Employees, including Officers, independent
consultants and advisors in the Service of the Corporation (or any Parent or
Subsidiary), and Directors of the Corporation (or any Parent or Subsidiary)
at the time of grant.
B. The individuals eligible to participate in the Automatic
Option Grant Program shall be limited to Directors who are (i) first elected
or appointed as Directors on or after the Effective Date of the Plan,
whether through appointment by the Board or election by the Corporation's
stockholders, provided they have not otherwise been Employees of the
Corporation (or any Parent or Subsidiary), or (ii) re-elected as Directors
at one or more annual stockholder meetings held after the Effective Date,
whether or not such individuals are otherwise serving as Directors on the
Effective Date.
C. Only Directors shall be eligible to participate in the
Director Fee Option Grant Program.
V. ADMINISTRATION OF THE PLAN
A. The Plan Administrator shall mean the Board, the Primary
Committee or one or more Secondary Committees responsible for administering
the Plan as set forth in this Article One, Section V.
B. The Primary Committee shall have the sole and exclusive
authority to administer the Discretionary Option Grant Program with respect
to Officers and to select the individuals who are to participate in the
Salary Reduction Option Grant Program. However, all grants under the Salary
Reduction Option Grant Program shall be made in accordance with the express
provisions of that Program.
C. Except to the extent that the Primary Committee is granted
sole and exclusive authority under one or more specific provisions of the
Plan, administration of the Discretionary Option Grant Program with respect
to all other Optionees may, at the Board's discretion, be delegated to the
Primary Committee or the Secondary Committee, or the Board may retain the
power to administer these programs with respect to such persons. The members
of the Secondary Committee may be Employees.
D. Members of the Primary Committee or any Secondary Committee
shall serve for such period of time as the Board may determine and may be
removed from service on a committee by the Board at any time. The Board may
also at any time, terminate the functions of any Secondary Committee and
reassume all powers and authority previously delegated to any Secondary
Committee.
E. Service on the Primary Committee or the Secondary Committee
shall constitute service as a member of the Board, and members of each
committee shall accordingly be entitled to full indemnification and
reimbursement as Board Members for their service on any such committee. No
member of the Primary Committee or the Secondary Committee shall be liable
for any act or omission made in good faith with respect to the Plan or any
options granted under the Plan.
<PAGE>
F. Each Plan Administrator shall, within the scope of its
administrative functions under the Plan, have full power and authority
(subject to the provisions of the Plan) to establish such rules and
regulations as it may deem appropriate for proper administration of the
Discretionary Option Grant Program and to make such determinations under, and
issue such interpretations of, the provisions of such Program and any
outstanding options thereunder as it may deem necessary or advisable.
Decisions of the Plan Administrator within the scope of its administrative
functions under the Plan shall be final and binding on all persons who have
an interest in the Discretionary Option Grant Program or any option
thereunder.
G. Each Plan Administrator shall have full authority, within the
scope of its administrative jurisdiction, to determine which individuals are
eligible to receive options under the Discretionary Option Grant Program, the
time or times when such grants are to be made, the type of option granted,
the number of shares to be covered by each such grant, the time or times when
each granted option is to become exercisable and the maximum term for which
the option may remain outstanding.
H. Notwithstanding the above, the administration of the Automatic
Option Grant and Director Fee Option Grant Programs shall be self-executing
in accordance with the terms and conditions thereof, and no Plan
Administrator shall exercise any discretionary functions in respect to
matters governed by those programs.
VI. STOCK SUBJECT TO THE PLAN
A. Shares of Common Stock shall be available for issuance under
the Plan and shall be drawn from either the Corporation's authorized but
unissued shares of Common Stock or from reacquired shares of Common Stock,
including shares repurchased by the Corporation on the open market. The
maximum number of shares of Common Stock reserved for issuance over the term
of the Plan shall be limited to 575,000 shares, subject to adjustment from
time to time in accordance with the provisions of this Article One, Section
VI. However, no one person participating in the Plan may receive options for
more than 175,000 shares of Common Stock per calendar year, beginning with
the 1998 calendar year.
B. Unvested shares issued under the Plan and subsequently
cancelled or repurchased by the Corporation at the option exercise or direct
issue price paid per share pursuant to the Corporation's repurchase rights
under the Plan shall also be available for subsequent issuance under the Plan.
C. Should the exercise price of an outstanding option under the
Plan be paid with shares of Common Stock or should the shares of Common Stock
otherwise issuable pursuant to the exercise of an outstanding option under
the Plan be withheld by the Corporation to satisfy any applicable federal and
state income and employment taxes incurred in connection with such exercise,
then the number of shares of Common Stock available for issuance under the
Plan shall be reduced by the gross number of shares for which the option is
exercised, and not by the net number of shares of Common Stock actually
issued to the Optionee.
D. Should any change be made to the Common Stock issuable under
the Plan 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, then appropriate adjustments shall be made to (i) the maximum
number and/or class of securities issuable under the Plan (ii) the maximum
number of shares for which stock options may be granted to any one person per
calendar year, (iii) the number and/or class of securities for which grants
are subsequently to be made under the Automatic Option Grant Program to new
and continuing Directors and (iv) the number and/or class of securities and
price per share in effect under each option outstanding under the Plan. Such
adjustments to the outstanding options are to be effected in a manner which
shall preclude the enlargement or dilution of rights and benefits under such
options. The adjustments determined by the Plan Administrator shall be
final, binding and conclusive.
<PAGE>
ARTICLE TWO
DISCRETIONARY OPTION GRANT PROGRAM
I. OPTION TERMS
Options granted under this Article Two shall be authorized by
action of the Plan Administrator and shall be evidenced by one or more
documents in the form approved by the Plan Administrator; PROVIDED, however,
that each such document shall comply with the terms and conditions specified
below. Options granted under this Article Two shall be Incentive Stock
Options or Non-Statutory Options, as determined by the Plan Administrator.
A. GRANT DATE Options granted to eligible participants under
this Article Two at such time or times as shall be determined by the Plan
Administrator.
B. EXERCISE PRICE The exercise price per share shall be fixed by
the Plan Administrator at one hundred percent (100%) of the Fair Market Value
per share of Common Stock on the grant date.
C. PAYMENT
1. Full payment of the exercise price and any applicable
federal and state income and employment taxes shall become immediately due upon
exercise of the option and shall be payable in one or more of the forms
specified below:
a. cash or check made payable to the Corporation's order,
b. shares of Common Stock held 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,
c. a combination of such shares, and cash or check made
payable to the Corporation's order, or
d. full payment effected through a "same-day sale"
and remittance procedure pursuant to which the Optionee (a) shall
concurrently provide irrevocable instructions 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 Option Price payable for the purchased shares plus any
applicable federal and state income and employment taxes required to
be withheld by the Corporation by reason of such purchase and
(b) shall provide directives to the Corporation to deliver the
purchased shares directly to such brokerage firm in order to complete
the sale transaction.
2. Except to the extent such sale and remittance procedure is
utilized, payment of the exercise price for the purchased shares must be made
on the Exercise Date.
D. VESTING Each option shall become exercisable at such time or
times, during such period and for such number of shares as shall be determined
by the Plan Administrator and set forth in the documents evidencing such
option.
E. OPTION TERM No option shall have a maximum term in excess of
ten (10) years measured from the grant date.
F. TRANSFERABILITY During the lifetime of the Optionee, except
as provided in this Paragraph F of Article Two, options shall be exercisable
only by the Optionee and shall not be assignable or transferable other than by
will or by the laws of descent and distribution following the Optionee's death.
However,
<PAGE>
the Plan Administrator may permit, in connection with the Optionee's estate
plan, Non-Statutory Options to 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 and shall be set forth in
such documents issued to the assignee as the Plan Administrator may deem
appropriate.
G. TERMINATION OF SERVICE
1. The following provisions shall govern the exercise of any
options held by the Optionee at the time of cessation of Service or death:
a. Any option outstanding at the time of the
Optionee's cessation of Service for any reason shall remain
exercisable for such limited period of time thereafter as shall be
determined by the Plan Administrator and set forth in the documents
evidencing the option, but no such option shall be exercisable after
the expiration of the option term.
b. Any option exercisable in whole or in part by the
Optionee at the time of death may be subsequently exercised by the
personal representative of the Optionee's estate or by the person or
persons to whom the option is transferred pursuant to the Optionee's
will or in accordance with the laws of descent and distribution.
c. During the applicable post-Service exercise
period, the option may not be exercised in the aggregate for more
than the number of shares for which the option is exercisable on the
date of the Optionee's cessation of Service. Upon the expiration of
the applicable post-Service exercise period or (if earlier) upon the
expiration of the option term, the option shall terminate and cease
to be outstanding for any otherwise exercisable shares for which the
option has not been exercised. However, the option shall,
immediately upon the Optionee's cessation of Service, terminate and
cease to be outstanding for any and all shares for which the option
is not otherwise at that time exercisable.
d. Should the Optionee's Service be terminated for
Misconduct, then all outstanding options held by the Optionee shall
terminate immediately and cease to be outstanding.
2. The Plan Administrator shall have the discretion,
exercisable either at the time an option is granted or at any time while the
option remains outstanding, to:
a. extend the period of time for which the option is
to remain exercisable following Optionee's cessation of Service or
death from the limited period otherwise in effect for that option to
such greater period of time as the Plan Administrator shall deem
appropriate, but in no event beyond the expiration of the option
term, and/or
b. permit the option to be exercised, during the
applicable post-Service exercise period, not only with respect to the
number of shares of Common Stock for which such option is exercisable
at the time of the Optionee's cessation of Service but also with respect
to one or more additional installments for which the option would have
become exercisable had the Optionee continued in Service.
<PAGE>
II. INCENTIVE STOCK OPTIONS
The terms and conditions specified below shall be applicable to all
Incentive Stock Options granted under this Article Two, Section II.
Incentive Stock Options may only be granted to individuals who are Employees
of the Corporation. Options which are specifically designated as
Non-Statutory Options when issued under the Plan shall NOT be subject to such
terms and conditions.
A. OPTION PRICE AND TERM The option price per share of any
share of Common Stock subject to an Incentive Stock Option shall in no event
be less than one hundred percent (100%) of the Fair Market Value of such
share of Common Stock on the grant date, provided that the option price per
share of any option granted to a ten percent (10%) or more stockholder shall
not be less than one hundred ten percent (110%) of the Fair Market Value. The
term of grant of any option to any ten percent (10%) or more stockholder
shall not be more than five (5) years.
B. DOLLAR LIMITATION The aggregate Fair Market Value
(determined on the date or dates of grant) of the Common Stock for which one
or more options granted under the Plan (or any other option plan of the
Corporation or any Parent or Subsidiary) may for the first time become
exercisable as Incentive Stock Options under the Federal tax laws during any
one calendar year shall not exceed the sum of One Hundred Thousand Dollars
($100,000). To the extent the Employee holds two or more such options which
become exercisable for the first time in the same calendar year, the
foregoing limitation on the exercisability of such options as Incentive Stock
Options under the Federal tax laws shall be applied on the basis of the order
in which such options are granted.
C. Except as modified by the preceding provisions of this Section
II, the provisions of Articles One, Two and Six of the Plan shall apply to
all Incentive Stock Options granted hereunder.
D. During the lifetime of the Optionee, Incentive Stock Options
shall be exercisable only by the Optionee and shall not be assignable or
transferable other than by will or by the laws of descent and distribution
following the Optionee's death.
III. CORPORATE TRANSACTION/CHANGE IN CONTROL
A. In the event of any Corporate Transaction, each option
outstanding at the time but not otherwise fully exercisable shall
automatically accelerate so that each such option shall, immediately prior to
the effective date of the Corporate Transaction, become exercisable for all
of the shares of Common Stock at the time subject to such option and may be
exercised for any or all of those shares as fully-vested shares of Common
Stock. However, an outstanding option shall not become exercisable on such
an accelerated basis if and to the extent: (i) such 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) such 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 shares for which the 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 or (iii) the acceleration of such option is subject to
other limitations imposed by the Plan Administrator at the time of the option
grant.
B. Immediately following the consummation of the Corporate
Transaction, all outstanding options shall terminate and cease to be
outstanding, except to the extent assumed by the successor corporation (or
parent thereof).
C. Each option which is assumed in connection with a Corporate
Transaction 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. Appropriate adjustments to reflect such Corporate Transaction
shall also be made to (i) the number and/or class of securities available for
issuance under the Plan on an
<PAGE>
aggregate and per participant basis following the consummation of such
Corporate Transaction and (ii) the exercise price payable per share under
each outstanding option, PROVIDED the aggregate exercise price payable for
such securities shall remain the same.
D. The Plan Administrator shall have full power and authority to
grant options under the Plan which will automatically accelerate in the event
the Optionee's Service subsequently terminates by reason of an Involuntary
Termination within a designated period (not to exceed eighteen (18) months)
following the effective date of any Corporate Transaction in which those
options are assumed and do not otherwise accelerate. Any options so
accelerated shall remain exercisable for fully-vested shares until the
EARLIER of (i) the expiration of the option term or (ii) the expiration of
the one (1)-year period measured from the effective date of the Involuntary
Termination.
E. The Plan Administrator shall have the discretion, exercisable
either at the time the option is granted or at any time while the option
remains outstanding, to provide for the automatic acceleration of one or more
outstanding options in connection with a Change in Control so that each such
option shall, immediately prior to the effective date of the Change in
Control, become exercisable for all of the shares of Common Stock at the time
subject to such option and may be exercised for any or all of those shares as
fully-vested shares of Common Stock. The accelerated option shall remain
exercisable for fully-vested shares until the expiration or sooner
termination of the option term. Alternatively, the Plan Administrator may
condition such option acceleration upon the termination of the Optionee's
Service by reason of an Involuntary Termination within a designated period
(not to exceed eighteen (18) months) following the effective date of the
Change in Control. Each option so accelerated shall remain exercisable for
fully-vested shares until the EARLIER of (i) the expiration of the option
term or (ii) the expiration of the one (1)-year period measured from the
effective date of the Involuntary Termination.
<PAGE>
ARTICLE THREE
AUTOMATIC OPTION GRANT PROGRAM
I. OPTION TERMS
Options granted under the Automatic Option Grant Program shall be
evidenced by one or more instruments in the form approved by the Plan
Administrator; PROVIDED, however, that each such instrument shall comply with
the terms and conditions specified below. All options granted under the
Automatic Option Grant Program shall be Non-Statutory Options. Stockholder
approval of the Plan at the 1998 Annual Meeting of Stockholders will also
constitute pre-approval of each option granted on or after the date of that
meeting pursuant to the express provisions of this Article Three and the
subsequent exercise of that option in accordance with its terms.
A. GRANT DATE
1. Options granted under this Article Three shall be made on
the dates specified below:
a. Each individual who first becomes a Director on
or after the Effective Date of the Plan, whether through election by
the Corporation's stockholders or appointment by the Board, and who
has not otherwise been in the prior employ of the Corporation shall
automatically be granted, at the time of such initial election or
appointment, an option to purchase 15,000 shares Common Stock.
b. Each individual re-elected as a Director at one
or more annual stockholder meetings, beginning with the 1998 Annual
Meeting of Stockholders, shall automatically be granted, at each such
meeting at which he or she is so re-elected, an option to purchase
5,000 shares of Common Stock. There shall be no limit on the number
of option grants any one Director may receive over the period of
service on the Board, and Directors who have previously been in the
Corporation's employ shall be eligible to receive one or more such
annual option grants over their period of continued Board service.
2. The Automatic Option Grant Program under the Plan shall
supersede and replace the automatic option grant program currently in effect
for Directors under the Corporation's 1993 Stock Option/Stock Issuance Plan.
Accordingly, upon stockholder approval of the Plan at the 1998 Annual Meeting
of Stockholders, that program shall immediately terminate, and no further
option grants shall be made to Directors under that program. All options
granted to Directors on or after the date of the 1998 Annual Meeting of
Stockholders, whether upon their initial election or appointment to the Board
upon their re-election at one or more of the Corporation's subsequent annual
meetings of stockholders, shall be effected solely and exclusively in
accordance with the terms and provisions of this Article Three. Should
stockholder approval of the Plan not be obtained at the 1998 Annual Meeting
of Stockholders, then the automatic option grant program under the
Corporation's 1993 Stock Option/Stock Issuance Plan shall remain in full
force and effect, and option grants shall be made under that program to all
Directors re-elected at the 1998 Annual Meeting of Stockholders.
B. EXERCISE PRICE The exercise price per share shall be
equal to one hundred percent (100%) of the Fair Market Value per share of
Common Stock on the grant date.
C. PAYMENT
1. Full payment of the exercise price shall become immediately
due upon exercise of the option and shall be payable in one or more of the
forms specified below:
a. cash or check made payable to the Corporation's
order,
<PAGE>
b. shares of Common Stock held 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,
c. a combination of such shares, and cash or check
made payable to the Corporation's order, or
d. full payment effected through a "same-day sale"
and remittance procedure pursuant to which the Optionee (a) shall
concurrently provide irrevocable instructions 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 Option Price payable for the purchased shares plus any
applicable federal and state income and employment taxes required to
be withheld by the Corporation by reason of such purchase and
(b) shall provide directives to the Corporation to deliver the
purchased shares directly to such brokerage firm in order to complete
the sale transaction.
2. Except to the extent such sale and remittance procedure is
utilized, payment of the exercise price for the purchased shares must be made
on the Exercise Date.
D. VESTING Each option shall become exercisable in a
series of three (3) successive equal annual installments over the Optionee's
period of service on the Board, with the first such installment to become
exercisable one (1) year after the grant date. The option shall not become
exercisable for any additional option shares following the Optionee's
cessation of service on the Board for any reason. Notwithstanding the
foregoing, all options shall become fully vested in the event that the
Optionee ceases to provide service on the Board as a result of death or
Permanent Disability.
E. OPTION TERM Each option shall have a maximum term of ten
(10) years measured from the grant date.
F. TRANSFERABILITY During the lifetime of the Optionee,
except as provided in this Paragraph F of Article Three, options shall be
exercisable only by the Optionee and shall not be assignable or transferable
other than by will or by the laws of descent and distribution following the
Optionee's death. However, the Optionee may, in connection with the
Optionee's estate plan, assign an option under this Article Three 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
and shall be set forth in such documents issued to the assignee as the
Corporation may deem appropriate.
G. TERMINATION OF SERVICE
1. Should the Optionee cease to serve on the Board for any
reason (other than death) while holding one or more options under this
Article Three, then such Optionee shall have a six (6) month period following
the date of such cessation of service on the Board in which to exercise each
such option for any or all of the shares of Common Stock for which the option
is exercisable at the time of such cessation of service. Each such option
shall immediately terminate and cease to be outstanding, at the time of such
cessation of service, with respect to any shares for which the option is not
otherwise at that time exercisable.
2. Should the Optionee die while serving as a member of the
Board or within six (6) months after cessation of service on the Board, then
each outstanding option held by the Optionee at the time of death may
subsequently be exercised, for any or all of the shares of Common Stock for
which the option is exercisable at the time of the Optionee's cessation of
service (less any option shares subsequently purchased by the Optionee prior
to death), by the personal representative of the Optionee's estate or by the
person or persons to whom the option is transferred pursuant to the
Optionee's will or in accordance with the laws of descent and distribution.
Any such exercise must occur within twelve (12) months after the date of the
Optionee's death. However, each such
<PAGE>
option shall immediately terminate and cease to be outstanding, at the time
of the Optionee's cessation of service, with respect to any option shares for
which it is not otherwise at such time exercisable.
3. In no event shall any option under this Article Three
remain exercisable after the specified expiration date of the ten (10) year
option term. Upon the expiration of the applicable exercise period in
accordance with the subparagraphs above or (if earlier) upon the expiration
of the ten (10) year option term, the option shall terminate and cease to be
outstanding for any unexercised shares for which the option was exercisable
at the time of the Optionee's cessation of service on the Board.
II. CORPORATE TRANSACTION/CHANGE IN CONTROL
A. In the event of any Corporate Transaction or Change in
Control, each option outstanding at the time under this Article Three but not
otherwise fully exercisable shall automatically accelerate so that each such
option shall, immediately prior to the effective date of the Corporate
Transaction or Change in Control, become exercisable for all of the shares of
Common Stock at the time subject to such option and may be exercised for any
or all of those shares as fully-vested shares of Common Stock.
B. Immediately following the consummation of the Corporate
Transaction, all outstanding options shall terminate and cease to be
outstanding, except to the extent assumed by the successor corporation (or
parent thereof). Options accelerated in connection with a Change in Control
shall remain outstanding until the expiration or sooner termination of the
option term.
C. Each option which is assumed in connection with a Corporate
Transaction 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. Appropriate adjustments to reflect such Corporate Transaction
shall also be made to the exercise price payable per share under each
outstanding option, PROVIDED the aggregate exercise price payable for such
securities shall remain the same.
<PAGE>
ARTICLE FOUR
SALARY REDUCTION OPTION GRANT PROGRAM
I. OPTION GRANTS
The Primary Committee shall have the sole and exclusive
authority to determine the calendar year or years (if any) for which the
Salary Reduction Option Grant Program is to be in effect and to select the
Employees eligible to participate in the Salary Reduction Option Grant
Program for those calendar years. Only Employees who are Officers may
participate in the Salary Reduction Option Grant Program, and each selected
Officer who elects to participate in the Salary Reduction Option Grant
Program must, prior to the start of each calendar year of participation, file
with the Plan Administrator (or its designate) an irrevocable authorization
directing the Corporation to reduce his or her base salary for that calendar
year by a designated multiple of one percent (1%). However, the minimum
amount of such salary reduction must be not less than the GREATER of (i) five
percent (5%) of his or her rate of base salary for the calendar year or (ii)
Ten Thousand Dollars ($10,000.00) and must not be more than the LESSER of (i)
twenty five percent (25%) of his or her rate of base salary for the calendar
year or (ii) Seventy Five Thousand Dollars ($75,000.00). Each individual who
files a proper salary reduction authorization shall automatically be granted
an option under this Salary Reduction Option Grant Program on the first
trading day in January of the calendar year for which that salary reduction
is to be in effect. Stockholder approval of the Plan at the 1998 Annual
Meeting of Stockholders will constitute pre-approval of each option
subsequently granted pursuant to the express terms of this Salary Reduction
Option Grant Program and the subsequent exercise of that option in accordance
with its terms.
II. OPTION TERMS
Options granted under this Article Four, Section II shall be
evidenced by one or more documents in the form approved by the Plan
Administrator; PROVIDED, however, that each such document shall comply with
the terms and conditions specified below. All options granted under this
Article Four , Section II shall be Non-Statutory Options.
A. EXERCISE PRICE
1. The exercise price per share shall be thirty-three and
one-third percent (33-1/3%) of the Fair Market Value per share of Common
Stock on the grant date.
2. The exercise price shall become immediately due upon
exercise of the option and shall be payable in one or more of the alternative
forms authorized under the Discretionary Option Grant Program. Except to the
extent the "same-day sale" and remittance procedure specified thereunder is
utilized, payment of the exercise price for the purchased shares must be made
on the Exercise Date.
B. NUMBER OF OPTION SHARES The number of shares of Common Stock
subject to the option shall be determined pursuant to the following formula
(rounded down to the nearest whole number):
X - A DIVIDED BY (B x 66-2/3%), where
X is the number of option shares,
A is the dollar amount by which the Optionee's base salary is to
be reduced for the calendar year, and
B is the Fair Market Value per share of Common Stock on the
grant date.
C. VESTING AND OPTION TERM Each option shall become exercisable
in a series of twelve (12) successive equal monthly installments upon the
Optionee's completion of each calendar month of Service in the calendar year
for which the salary reduction is in effect. Each option shall have a
maximum term of ten (10) years
<PAGE>
measured from the grant date.
D. TERMINATION OF SERVICE Should the Optionee cease to be in
Service for any reason while holding one or more options under this Article
Four, then each such option shall remain exercisable, for any or all of the
shares for which the option is exercisable at the time of such cessation of
Service, until the EARLIER of (i) the expiration of the ten (10) year option
term or (ii) the expiration of the three (3) year period measured from the
date of such cessation of Service. Should Optionee die while holding one or
more options under this Article Four, then each such option may be exercised,
for any or all of the shares for which the option is exercisable at the time
of the Optionee's cessation of Service (less any shares subsequently
purchased by Optionee prior to death), by the personal representative of the
Optionee's estate or by the person or persons to whom the option is
transferred pursuant to the Optionee's will or in accordance with the laws of
descent and distribution. Such right of exercise shall lapse, and the option
shall terminate, upon the EARLIER of (i) the expiration of the ten (10) year
option term or (ii) the three (3) year period measured from the date of the
Optionee's cessation of Service. However, the option shall, immediately upon
the Optionee's cessation of Service for any reason, terminate and cease to
remain outstanding with respect to any and all shares of Common Stock for
which the option is not otherwise at that time exercisable.
III. CORPORATE TRANSACTION/CHANGE IN CONTROL
A. In the event of any Corporate Transaction while the Optionee
remains in Service, each outstanding option held by such Optionee under this
Salary Reduction Option Grant Program shall automatically accelerate so that
each such option shall, immediately prior to the effective date of the
Corporate Transaction, become fully exercisable with respect to the total
number of shares of Common Stock at the time subject to such option and may
be exercised for any or all of those shares as fully-vested shares of Common
Stock. Each such outstanding option shall be assumed by the successor
corporation (or parent thereof) in the Corporate Transaction and shall remain
exercisable for the fully-vested shares until the EARLIER of (i) the
expiration of the ten (10) year option term or (ii) the expiration of the
three (3) year period measured from the date of the Optionee's cessation of
Service.
B. In the event of a Change in Control while the Optionee remains
in Service, each outstanding option held by such Optionee under this Salary
Reduction Option Grant Program shall automatically accelerate so that such
option shall immediately become fully exercisable with respect to the total
number of shares of Common Stock at the time subject to such option and may
be exercised for any or all of those shares as fully-vested shares of Common
Stock. The option shall remain so exercisable until the EARLIER of (i) the
expiration of the ten (10) year option term or (ii) the expiration of the
three (3) year period measured from the date of the Optionee's cessation of
Service.
C. The options granted under the Salary Reduction Option Grant
Program shall in no 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.
V. REMAINING TERMS
The remaining terms of each option granted under this Salary
Reduction Option Grant Program shall be the same as the terms in effect for
options granted under the Discretionary Option Grant Program.
<PAGE>
ARTICLE FIVE
DIRECTOR FEE OPTION GRANT PROGRAM
I. OPTION GRANTS
Each Director may elect to apply all or any portion of the annual
retainer fee otherwise payable in cash for his or her service on the Board to
the acquisition of a special option grant under this Director Fee Option
Grant Program. Such election must be filed with the Corporation's Chief
Financial Officer prior to the start of calendar year for which the annual
retainer fee which is the subject of that election is otherwise payable.
Each Director who files such a timely election shall automatically be
granted an option under this Director Fee Option Grant Program on the first
trading day in January in the calendar year for which the annual retainer fee
which is the subject of that election would otherwise be payable. Stockholder
approval of the Plan at the 1998 Annual Meeting of Stockholders will
constitute pre-approval of each option subsequently granted pursuant to the
express terms of this Director Fee Option Grant Program and the subsequent
exercise of that option in accordance with its terms.
II. OPTION TERMS
Options granted under this Article Five, Section II shall be
evidenced by one or more documents in the form approved by the Plan
Administrator; PROVIDED, however, that each such document shall comply with
the terms and conditions specified below. All options granted under this
Article Five, Section II shall be Non-Statutory Options.
A. EXERCISE PRICE
1. The exercise price per share shall be thirty-three and one-
third percent (33-1/3%) of the Fair Market Value per share of Common Stock on
the grant date.
2. The exercise price shall become immediately due upon
exercise of the option and shall be payable in one or more of the alternative
forms authorized under the Discretionary Option Grant Program. Except to the
extent the "same-day sale" and remittance procedure specified thereunder is
utilized, payment of the exercise price for the purchased shares must be made
on the Exercise Date.
B. NUMBER OF OPTION SHARES The number of shares of Common Stock
subject to the option shall be determined pursuant to the following formula
(rounded down to the nearest whole number):
X - A DIVIDED BY (B x 66-2/3%), where
X is the number of option shares,
A is the portion of the annual retainer fee subject to the
Director's election, and
B is the Fair Market Value per share of Common Stock on the
grant date.
C. VESTING AND OPTION TERM Each option shall become exercisable
in a series of twelve (12) successive equal monthly installments upon the
Optionee's completion of each calendar month of Board service in the calendar
year for which the annual retainer fee which is the subject of his or her
election under this Article Five would otherwise be payable. Each option
shall have a maximum term of ten (10) years measured from the option grant
date.
D. TERMINATION OF SERVICE Should the Optionee cease service on
the Board for any
<PAGE>
reason (other than death or Permanent Disability) while holding one or more
options under this Article Five, then each such option shall remain
exercisable, for any or all of the shares for which the option is exercisable
at the time of such cessation of Board service, until the EARLIER of (i) the
expiration of the ten (10) year option term or (ii) the expiration of the
three (3) year period measured from the date of such cessation of service on
the Board. However, each option held by the Optionee under this Article Five
at the time of such cessation of service on the Board shall immediately
terminate and cease to remain outstanding with respect to any and all shares
of Common Stock for which the option is not otherwise at that time
exercisable.
E. DEATH OR PERMANENT DISABILITY Should the Optionee's service on
the Board cease by reason of death or Permanent Disability, then each option
held by such Optionee under this Article Five shall immediately become
exercisable for all the shares of Common Stock at the time subject to that
option, and the option may, during the three(3) year period following such
cessation of service on the Board, be exercised for any or all of those
shares as fully-vested shares.
Should the Optionee die while holding one or more options under
this Article Five, then each such option may be exercised, for any or all of
the shares for which the option is exercisable at the time of the Optionee's
cessation of service on the Board (less any shares subsequently purchased by
Optionee prior to death), by the personal representative of the Optionee's
estate or by the person or persons to whom the option is transferred pursuant
to the Optionee's will or in accordance with the laws of descent and
distribution. Such right of exercise shall lapse, and the option shall
terminate, upon the EARLIER of (i) the expiration of the ten (10) year option
term or (ii) the three (3) year period measured from the date of the
Optionee's cessation of service on the Board.
III. CORPORATE TRANSACTION/CHANGE IN CONTROL
A. In the event of any Corporate Transaction while the Optionee
remains a Director, each outstanding option held by such Optionee under this
Director Fee Option Grant Program shall automatically accelerate so that each
such option shall, immediately prior to the effective date of the Corporate
Transaction, become fully exercisable with respect to the total number of
shares of Common Stock at the time subject to such option and may be
exercised for any or all of those shares as fully-vested shares of Common
Stock. Each such outstanding option shall be assumed by the successor
corporation (or parent thereof) in the Corporate Transaction and shall remain
exercisable for the fully-vested shares until the EARLIER of (i) the
expiration of the ten (10) year option term or (ii) the expiration of the
three (3) year period measured from the date of the Optionee's cessation of
service on the Board.
B. In the event of a Change in Control while the Optionee remains
in service on the Board, each outstanding option held by such Optionee under
the Director Fee Option Grant Program shall automatically accelerate so that
each such option shall immediately become fully exercisable with respect to
the total number of shares of Common Stock at the time subject to such option
and may be exercised for any or all o those shares as fully-vested shares of
Common Stock. The option shall remain so exercisable until the EARLIER of
(i) the expiration of the ten (10) year option term of (ii) the expiration of
the three (3) year period measured from the date of the Optionee's cessation
of service on the Board.
C. The options granted under the Director Fee Option Grant
Program shall in no 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.
IV. REMAINING TERMS
The remaining terms of each option granted under the Director Fee
Option Grant Program shall be the same as the terms in effect for options
granted under the Discretionary Option Grant Program.
<PAGE>
ARTICLE SIX
MISCELLANEOUS
I. FINANCING
A. The Plan Administrator may permit any Optionee under the
Discretionary Option Grant Program to pay the option exercise price by
delivering a promissory note payable to the Corporation (or any Parent or
Subsidiary) in one or more installments. The terms of any such promissory
note (including the interest rate and the terms of repayment) shall be
established by the Plan Administrator in its sole discretion. Promissory
notes may be authorized with or without security or collateral. In all
events, the maximum credit available to the Optionee may not exceed the sum
of (i) the aggregate option exercise price payable for the purchased shares
plus (ii) any federal and state income and employment tax liability incurred
by the Optionee in connection with the option exercise.
B. The Plan Administrator may, in its discretion, determine that
one or more such promissory notes shall be subject to forgiveness by the
Corporation in whole or in part upon such terms as the Plan Administrator may
deem appropriate.
II. AMENDMENT OF THE PLAN
A. The Board shall have complete and exclusive power and
authority to amend or modify the Plan in any or all respects. However, no
such amendment or modification shall adversely affect the rights and
obligations with respect to options at the time outstanding under the Plan,
unless the affected Optionees consent to such amendment or modification. In
addition, certain amendments may require stockholder approval pursuant to
applicable laws or regulations or if stockholder approval is required by the
Board.
B. Options to purchase shares of Common Stock may be granted
under the Plan, which are in excess of the number of shares then available
for issuance under the Plan, provided that any excess shares actually issued
under the Plan are held in escrow until stockholder approval is obtained for
a sufficient increase in the number of shares available for issuance under
the Plan. If such stockholder approval is not obtained within twelve (12)
months after the date the first such excess options are granted, then (i) any
unexercised excess options shall terminate and cease to be exercisable and
(ii) the Corporation shall promptly refund the purchase price paid for any
excess shares actually issued under the Plan and held in escrow, together
with interest (at a rate to be determined by the Plan Administrator) for the
period the shares were held in escrow.
III. TAX WITHHOLDING
A. The Corporation's obligation to deliver shares of Common
Stock upon the exercise of options under the Plan shall be subject to the
satisfaction of all applicable federal and state income and employment tax
withholding requirements.
B. The Plan Administrator may, in its discretion and upon
such terms and conditions as it may deem appropriate, provide Optionees with
the election to have the Corporation withhold, from the shares of Common
Stock otherwise issuable upon the exercise of options under the Plan, a
portion of such shares with an aggregate Fair Market Value equal to the
designated percentage (up to 100% as specified by the Optionee) of any
federal and state income and employment taxes incurred in connection with the
acquisition of such shares. In lieu of such direct withholding, Optionees may
also be granted the right to deliver shares of Common Stock to the Company in
satisfaction of such taxes. The withheld or delivered shares shall be valued
at Fair Market Value on the exercise date.
<PAGE>
IV. EFFECTIVE DATE AND TERM OF PLAN
A. The Plan shall become effective immediately upon approval by
the Corporation's stockholders at the Corporation's Annual Meeting of
Stockholders on June 9, 1998. If such stockholder approval is not obtained,
then any options granted under the Plan after the date on which the Plan was
adopted by the Board but before the date of the Annual Meeting of
Stockholders shall terminate and any shares issued hereunder shall be
repurchased by the Corporation at the purchase price paid, together with
interest (at a rate to be determined by the Plan Administrator).
B. The Plan shall terminate upon the EARLIEST of (i) June 9,
2008, (ii) the date on which all shares available for issuance under the Plan
shall have been issued as fully-vested shares pursuant to the exercise of
options under the Plan, or (iii) the termination of all outstanding options
in connection with a Corporate Transaction. If the date of termination is
determined under clause (i) above, then all option grants outstanding on such
date shall thereafter continue to have force and effect in accordance with
the provisions of the instruments evidencing those grants.
V. USE OF PROCEEDS
Any cash proceeds received by the Corporation from the sale of shares
pursuant to options granted under the Plan shall be used for general
corporate purposes.
VI. REGULATORY APPROVALS
A. The implementation of the Plan, the granting of any option
under the Plan, and the issuance of Common Stock upon the exercise of any
options granted hereunder shall be subject to the Corporation's procurement
of all approvals and permits required by regulatory authorities having
jurisdiction over the Plan, the stock options granted under it and the Common
Stock issued pursuant to it.
B. No shares of Common Stock or other assets shall be issued or
delivered under the Plan unless and until there has been compliance with all
applicable requirements of federal and state securities laws, including the
filing and effectiveness of the Form S-8 registration statement for the
shares of Common Stock issuable under the Plan, and all applicable listing
requirements of any securities exchange on which the Common Stock is then
listed for trading.
VII. NO EMPLOYMENT/SERVICE RIGHTS
Nothing in the Plan shall confer upon the Optionee any right to
continue in Service for any period of specific duration or interfere with or
otherwise restrict in any way the rights of the Corporation (or any Parent or
Subsidiary employing or retaining such person) or of the Optionee, which
rights are hereby expressly reserved by each, to terminate such Optionee's
Service at any time for any reason, with or without cause.
APPENDIX
The following definitions shall be in effect under the Plan:
A. BOARD shall mean the Corporation's Board of Directors.
B. CHANGE IN CONTROL shall mean a change in ownership or control of
the Corporation effected through either of the following transactions:
1. The acquisition, directly or indirectly, by any person or
related group of persons (other than the
<PAGE>
Corporation), of beneficial ownership (within the meaning of Rule 13d-3 of
the 1934 Act) of securities possessing more than fifty percent (50%) of the
total combined voting power of the Corporation's outstanding securities
pursuant to a tender or exchange offer made directly to the Corporation's
stockholders, or
2. A change in the composition of the Board over a period of
twenty-four (24) consecutive months or less such that a majority of the
Board, by reason of one or more contested elections for Board membership,
ceases to be comprised of individuals who either (A) have been Directors
continuously since the beginning of such period or (B) have been elected or
nominated for election as Directors during such period by at least a majority
of the Directors described in clause (A) who were still in office at the time
the Board approved such election or nomination.
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:
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.
F. CORPORATION shall mean ENCAD, Inc., a Delaware corporation,
and any corporate successor to all or substantially all of the assets or
voting stock of ENCAD, Inc. which shall by appropriate action adopt the Plan.
G. DIRECTOR shall mean any non-employee member of the Board.
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 Corporation 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 Corporation shall
have received written notice of the option exercise and full payment of the
Option Price.
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.
K. INCENTIVE STOCK OPTION shall mean any option granted under the
Plan, intended to satisfy the requirements of Internal Revenue Code Section
422.
L. INVOLUNTARY TERMINATION shall mean the termination of the Service of
any individual which occurs by reason of:
<PAGE>
1. Such individual's involuntary dismissal or discharge by the
Corporation for reasons other than Misconduct, or
2. Such individual's voluntary resignation following (A) a change
in his or her position with the Corporation which materially reduces his or
her duties and responsibilities or the level of management to which he or she
reports, (B) a reduction in his or her level of compensation (including base
salary, fringe benefits and target bonus under any corporate-performance
based bonus or incentive programs) by more than fifteen percent (15%) or (C)
a relocation of such individual'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 the individual's consent.
M. 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 any Optionee or other person in the
Service of the Corporation (or any Parent or Subsidiary).
N. NON-STATUTORY OPTION shall mean any option granted under the Plan
which is not intended to satisfy the requirements of Internal Revenue Code
Section 422.
O. OFFICER shall mean any Employee who is deemed an Insider of the
Corporation pursuant to the provisions of Section 16.
P. OPTIONEE shall mean any person to whom an option is granted under
the Plan.
Q. 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.
R. PERMANENT DISABILITY OR PERMANENTLY DISABLED 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. However, solely for purposes of the Automatic Option Grant and
Director Fee Option Grant Programs, Permanent Disability or Permanently
Disabled shall mean the inability of the Director to perform his or her
usual duties as a Director 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.
S. PLAN shall mean the Corporation's 1998 Stock Option Plan, as set
forth in this document.
T. PLAN ADMINISTRATOR shall mean either the Board or a committee or
designee(s) of the Board acting in its administrative capacity under the Plan.
U. PLAN EFFECTIVE DATE shall mean June 9, 1998, the date on which the
Plan was adopted by the Corporation's stockholders.
V. PRIMARY COMMITTEE shall mean the committee of two (2) or more
Directors appointed by the Board to administer the Discretionary Option Grant
Program with respect to Officers.
W. SECONDARY COMMITTEE shall mean a committee of one (1) or more
Directors appointed by the Board to administer the Discretionary Option Grant
Program with respect to individuals other than Officers.
X. SERVICE shall mean the performance of services to the Corporation
(or any Parent or Subsidiary) by any person in the capacity of an Employee or
an independent consultant or advisor, except to the extent otherwise
specifically provided in the applicable option agreement.
<PAGE>
Y. STOCK EXCHANGE shall mean either 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.
<PAGE>
EXHIBIT 99.2
[LOGO OF ENCAD, INC]
ENCAD, INC.
1998 STOCK OPTION PLAN
NOTICE OF GRANT OF STOCK OPTION
Notice is hereby given of the following option to purchase shares of the
Common Stock of ENCAD, Inc. All capitalized terms in this Notice of Grant
shall have the meaning assigned to them herein or in the attached Stock
Option Agreement.
OPTIONEE: _______________________
GRANT DATE: _______________________
EXERCISE PRICE: $____________ per share
NUMBER OF OPTION SHARES: ________________ shares
EXPIRATION DATE: _______________________
TYPE OF OPTION: Non-Statutory Stock Option
VESTING SCHEDULE: This option shall become exercisable
for the Option Shares in a series of
sixteen (16) successive equal quarterly
installments upon Optionee's completion
of each quarter of Service over the
four (4)-year period measured from the
Grant Date.
The Optionee understands and agrees that this option is granted subject
to, and in accordance with, the terms of the ENCAD, Inc. 1998 Stock Option
Plan. Further, the Optionee agrees to be bound by the terms of the Plan and
by the terms of this option as set forth in the Stock Option Agreement
attached hereto as Exhibit A. The Optionee hereby acknowledges receipt of a
copy of the official Plan Summary and Prospectus in the attached hereto as
Exhibit B. A copy of the Plan is available upon request made to the Plan
Administrator at the Corporation's principal office.
NO EMPLOYMENT OR SERVICE CONTRACT Nothing in this Notice of Grant or in
the attached Stock Option Agreement or in the Plan shall confer upon the
Optionee any right to continue in Service for any period of specific duration
or interfere with or otherwise restrict in any way the rights of the
Corporation (or any Parent or Subsidiary employing or retaining Optionee) or
of the Optionee, which rights are hereby expressly reserved by each, to
terminate the Optionee's Service at any time for any reason, with or without
cause.
ENCAD, INC. OPTIONEE
By: __________________________________ By: __________________________________
Address: _____________________________
Dated:________________________________ ______________________________________
ATTACHMENTS SOCIAL SECURITY #:____________________
EXHIBIT A - STOCK OPTION AGREEMENT
EXHIBIT B- PLAN SUMMARY AND PROSPECTUS
<PAGE>
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:
A. GRANT 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.
<PAGE>
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).
<PAGE>
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.
<PAGE>
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
- -------------------------------------------------------------------------------
NOTICE TO EXERCISE STOCK OPTIONS
- -------------------------------------------------------------------------------
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.
- -------------------------------------------------------------------------------
Optionee Name:
- -------------------------------------------------------------------------------
Mailing Address:
- -------------------------------------------------------------------------------
City/State/Zip Code:
- -------------------------------------------------------------------------------
Social Security Number: Telephone Number/Extension:
- -------------------------------------------------------------------------------
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 / /
- -------------------------------------------------------------------------------
<PAGE>
Delivery
Name:_____________________________________________________________________
Instructions:
Address:__________________________________________________________________
DTC
#:________________________________________________________________
- -------------------------------------------------------------------------------
Broker: Name:_______________________________________________________________
Address:____________________________________________________________
Phone #:____________________________________________________________
Account #:__________________________________________________________
- -------------------------------------------------------------------------------
Optionee Signature: Date:
______________________________________________ ________________________________
- -------------------------------------------------------------------------------
Exercise Procedures:
1. Complete, sign and return the Notice to Exercise form to Karen Patchen.
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.
- -------------------------------------------------------------------------------
PLAN ADMINISTRATION USE ONLY
- -------------------------------------------------------------------------------
Date verified with broker: Date entered into system:
- -------------------------------------------------------------------------------
Date payment received: Date sent to transfer agent:
- -------------------------------------------------------------------------------
FMV Date: Date confirmation sent to Optionee:
- -------------------------------------------------------------------------------
Comments:
- -------------------------------------------------------------------------------
<PAGE>
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.
K. GRANT 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
<PAGE>
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.
<PAGE>
EXHIBIT 99.4
1997 Supplemental Stock Option Plan, as amended
[LOGO]
ENCAD, INC.
1997 SUPPLEMENTAL STOCK OPTION PLAN
AS AMENDED JUNE 9, 1998
ARTICLE ONE
GENERAL
I. PURPOSE OF THE PLAN
A. This 1997 Supplemental Stock Option Plan ("the Plan") is
intended to promote the interests of ENCAD, Inc., ("the Corporation") a
California corporation, by authorizing shares of the Corporation's Common
Stock for issuance through long-term option grants to be made from time to
time to individuals in the employ or service of the Corporation (or any
Parent or Subsidiary) who are neither officers of the Corporation nor members
of the Board and who are not otherwise Section 16 Insiders.
B. The Plan shall become effective immediately upon adoption by
the Board on October 13, 1997.
C. This Plan is independent of the Corporation's 1993 Stock
Option/Stock Issuance Plan, and share issuances under this Plan shall not
reduce or otherwise affect the number of shares of the Corporation's Common
Stock available for issuance under the 1993 Stock Option/Stock Issuance Plan.
In addition, share issuances under the 1993 Stock Option/Stock Issuance Plan
shall not reduce or otherwise affect the number of shares of the
Corporation's Common stock available for issuance under this Plan.
D. Capitalized terms shall have the meanings assigned to such
terms in the attached Appendix.
II. ADMINISTRATION OF THE PLAN
A. The Plan Administrator shall have full power and discretion
(subject to the express provisions of the Plan) to establish such rules and
regulations as it may deem appropriate for the proper administration of the
Plan and to make such determinations under, and issue such interpretations
of, the provisions of the Plan and any outstanding option grants thereunder
as it may deem necessary or advisable. Decisions of the Plan Administrator
shall be final and binding on all parties who have an interest in the Plan or
any outstanding option thereunder.
B. The individual serving as Plan Administrator shall serve
for such period as the Board may determine and shall be subject to removal by
the Board at any time.
C. Service as Plan Administrator shall constitute service as a
Board member, and each Board member serving as Plan Administrator shall
accordingly be entitled to full indemnification and reimbursement as a Board
member for such service. No individual serving as Plan Administrator shall
be liable for any act or omission made in good faith with respect to the Plan
or any option granted under the Plan.
<PAGE>
III. ELIGIBILITY
A. The persons eligible to participate in the Plan shall be
limited to those Employees, independent consultants and advisors in the
service of the Corporation (or any Parent or Subsidiary) who are neither
officers of the Corporation nor members of the Board and who are not
otherwise Section 16 Insiders at the time of the option grant.
B. The Plan Administrator shall have full authority to determine
which eligible individuals are to receive option grants under the Plan, the
time or times when such grants are to be made, the number of shares to be
covered by each such grant, the time or times when each granted option is to
become exercisable and the maximum term for which the option may remain
outstanding. All options granted under the Plan shall be Non-Statutory
Options.
IV. STOCK SUBJECT TO THE PLAN
A. Shares of Common Stock shall be available for issuance under
the Plan and shall be drawn from either the Corporation's authorized but
unissued shares of Common Stock or from reacquired shares of Common Stock,
including shares repurchased by the Corporation on the open market. The
maximum number of shares of Common Stock reserved for issuance over the term
of the Plan shall be limited to 255,000 shares, subject to adjustment from
time to time in accordance with the provisions of this Section IV.
B. Should one or more outstanding options under this Plan expire
or terminate for any reason prior to exercise in full, then the shares
subject to the portion of each option not so exercised shall be available for
subsequent issuance under the Plan. Should the exercise price of an
outstanding option under the Plan be paid with shares of Common Stock, then
the number of shares of Common Stock available for issuance under the Plan
shall be reduced by the gross number of shares for which the option is
exercised, and not by the net number of shares of Common Stock actually
issued to the holder of such option.
C. Should any change be made to the Common Stock issuable under
the Plan 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, then appropriate adjustments shall be made to (i) the maximum
number and/or class of securities issuable under the Plan and (ii) the number
and/or class of securities and price per share in effect under each option
outstanding under the Plan. Such adjustments to the outstanding options are
to be effected in a manner which shall preclude the enlargement or dilution
of rights and benefits under such options. The adjustments determined by the
Plan Administrator shall be final, binding and conclusive.
ARTICLE TWO
OPTION GRANT PROGRAM
I. OPTION TERMS
Options granted under the Plan shall be authorized by action of the
Plan Administrator and shall be evidenced by one or more instruments in the
form approved by the Plan Administrator; PROVIDED, however, that each such
instrument shall comply with the terms and conditions specified below. All
such granted options shall be Non-Statutory Options.
A. EXERCISE PRICE.
1. The exercise price per share shall be fixed by the Plan
Administrator but shall not be less than one hundred percent (100%) of the
Fair Market Value per share of Common Stock on the grant date.
2. Full payment of the exercise price shall become immediately
due upon exercise of
<PAGE>
the option and shall be payable in one or more of the forms specified below:
a. cash or check made payable to the Corporation's order,
b. shares of Common Stock held 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,
c. a combination of such shares, and cash or check made
payable to the Corporation's order, or
d. full payment effected through a broker-dealer sale and
remittance procedure pursuant to which the optionee (a) shall concurrently
provide irrevocable written instructions to a 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 Option Price payable for the
purchased shares plus all applicable Federal and State income and employment
taxes required to be withheld by the Corporation by reason of such purchase
and (b) shall provide written directives to the Corporation to deliver the
purchased shares directly to such brokerage firm in order to complete the
sale transaction..
Except to the extent such sale and remittance procedure is
utilized, payment of the exercise price for the purchased shares must be made
on the Exercise Date.
B. EXERCISE AND TERM OF OPTIONS. Each option shall be
exercisable at such time or times, during such period and for such number of
shares as shall be determined by the Plan Administrator and set forth in the
documents evidencing such option. No option shall have a maximum term in
excess of ten (10) years. During the lifetime of the Optionee, the option
shall be exercisable only by the Optionee and shall not be assignable or
transferable except for a transfer of the option effected by will or by the
laws of decent and distribution following the Optionee's death.
C. EFFECT OF TERMINATION OF SERVICE.
1. The following provisions shall govern the exercise of any
options held by the Optionee at the time of cessation of Service or death:
a. Any option outstanding at the time of the
Optionee's cessation of Service for any reason shall remain
exercisable for such limited period of time thereafter as shall be
determined by the Plan Administrator and set forth in the documents
evidencing the option, but no such option shall be exercisable after
the expiration of the option term.
b. Any option exercisable in whole or in part by the
Optionee at the time of death may be subsequently exercised by the
personal representative of the Optionee's estate or by the person or
persons to whom the option is transferred pursuant to the Optionee's
will or in accordance with the laws of descent and distribution.
c. During the applicable post-Service exercise
period, the option may not be exercised in the aggregate for more
than the number of shares for which the option is exercisable on the
date of the Optionee's cessation of Service. Upon the expiration of
the applicable post-Service exercise period or (if earlier) upon the
expiration of the option term, the option shall terminate and cease
to be outstanding for any otherwise exercisable shares for which the
option has not been exercised. However, the option shall,
immediately upon the Optionee's cessation of Service, terminate and
cease to be outstanding for any and all shares for which the option
is not otherwise at that time exercisable.
<PAGE>
d. Should the Optionee's Service be terminated for
Misconduct, then all outstanding options held by the Optionee shall
terminate immediately and cease to be outstanding.
2. The Plan Administrator shall have the discretion,
exercisable either at the time an option is granted or at any time while the
option remains outstanding, to:
a. extend the period of time for which the option is
to remain exercisable following Optionee's cessation of Service or
death from the limited period otherwise in effect for that option to
such greater period of time as the Plan Administrator shall deem
appropriate, but in no event beyond the expiration of the option
term, and/or
b. permit the option to be exercised, during the
applicable post-Service exercise period, not only with respect to the
number of shares of Common Stock for which such option is exercisable
at the time of the Optionee's cessation of Service but also with
respect to one or more additional installments for which the option
would have become exercisable had the Optionee continued in Service.
D. SHAREHOLDER RIGHTS. An Optionee shall have none of the rights
of a shareholder with respect to any option shares until such person shall have
exercised the option and paid the exercise price for the purchased shares.
II. CORPORATE TRANSACTION/CHANGE IN CONTROL
A. In the event of any Corporate Transaction, each option
outstanding at the time but not otherwise fully exercisable shall
automatically accelerate so that each such option shall, immediately prior to
the effective date of the Corporate Transaction, become exercisable for all
of the shares of Common Stock at the time subject to such option and may be
exercised for any or all of those shares as fully-vested shares of Common
Stock. However, an outstanding option shall not become exercisable on such
an accelerated basis if and to the extent: (i) such option is, in connection
with the Corporate Transaction, either to be assumed by the successor
corporation (or parent thereof) or (ii) such 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 shares for
which the 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 or (iii) the
acceleration of such option is subject to other limitations imposed by the
Plan Administrator at the time of the option grant.
B. Immediately following the consummation of the Corporate
Transaction, all outstanding options shall terminate and cease to be
outstanding, except to the extent assumed by the successor corporation (or
parent thereof).
C. Each option which is assumed in connection with a Corporate
Transaction 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. Appropriate adjustments to reflect such Corporate Transaction
shall also be made to (i) the number and/or class of securities available for
issuance under the Plan following the consummation of such Corporate
Transaction and (ii) the exercise price payable per share under each
outstanding option, PROVIDED the aggregate exercise price payable for such
securities shall remain the same.
D. The Plan Administrator shall have full power and authority to
grant options under the Plan which will automatically accelerate in the event
the Optionee's Service subsequently terminates by reason of an Involuntary
Termination within a designated period (not to exceed eighteen (18) months)
following the effective date of any Corporate Transaction in which those
options are assumed and do not otherwise accelerate. Any options so
accelerated shall remain exercisable for fully-vested shares until the
EARLIER of (i) the expiration of the option term or (ii) the expiration of
the one (1)-year period measured from the effective date of the Involuntary
Termination.
<PAGE>
E. The Plan Administrator shall have the discretion, exercisable
either at the time the option is granted or at any time while the option
remains outstanding, to provide for the automatic acceleration of one or more
outstanding options in connection with a Change in Control so that each such
option shall, immediately prior to the effective date of the Change in
Control, become exercisable for all of the shares of Common Stock at the time
subject to such option and may be exercised for any or all of those shares as
fully-vested shares of Common Stock. The accelerated option shall remain
exercisable for fully-vested shares until the expiration or sooner
termination of the option term. Alternatively, the Plan Administrator may
condition such option acceleration upon the termination of the Optionee's
Service by reason of an Involuntary Termination within a designated period
(not to exceed eighteen (18) months) following the effective date of the
Change in Control. Each option so accelerated shall remain exercisable for
fully-vested shares until the EARLIER of (i) the expiration of the option
term or (ii) the expiration of the one (1)-year period measured from the
effective date of the Involuntary Termination.
F. The grant of options under the Plan shall in no 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.
ARTICLE THREE
MISCELLANEOUS
I. FINANCING
A. The Plan Administrator may permit any Optionee to pay the
option exercise price under the Plan by delivering a promissory note payable
in one or more installments. The terms of any such promissory note
(including the interest rate and the terms of repayment) shall be established
by the Plan Administrator in its sole discretion. Promissory notes may be
authorized with or without security or collateral. In all events, the
maximum credit available to the Optionee may not exceed the sum of (i) the
aggregate option exercise price payable for the purchased shares plus (ii)
any Federal, state and local income and employment tax liability incurred by
the Optionee in connection with the option exercise.
B. The Plan Administrator may, in its discretion, determine that
one or more such promissory notes shall be subject to forgiveness by the
Corporation in whole or in part upon such terms as the Plan Administrator may
deem appropriate.
II. AMENDMENT OF THE PLAN
The Board has complete and exclusive power and authority to amend
or modify the Plan in any or all respects whatsoever. However, no such
amendment or modification shall adversely affect rights and obligations with
respect to stock options at the time outstanding under the Plan, unless the
affected Optionees consent to such amendment.
III. TAX WITHHOLDING
The Corporation's obligation to deliver shares of Common Stock
upon the exercise of stock options under the Plan shall be subject to the
satisfaction of all applicable Federal, state and local income tax and
employment tax withholding requirements.
IV. EFFECTIVE DATE AND TERM OF PLAN
A. This Plan shall become effective immediately upon approval by
the Board at the October 13, 1997 Board meeting and shall not be subject to
shareholder approval.
<PAGE>
B. The Plan shall terminate upon the EARLIEST of (i) October 12,
2007, (ii) the date on which all shares available for issuance under the Plan
shall have been issued pursuant to the exercise of options under the Plan or
(iii) the termination of all outstanding options in connection with a
Corporate Transaction. If the date of termination is determined under clause
(i) above, then all option grants outstanding on such date shall thereafter
continue to have force and effect in accordance with the provisions of the
instruments evidencing those grants.
V. USE OF PROCEEDS
Any cash proceeds received by the Corporation from the sale of
shares pursuant to option grants under the Plan shall be used for general
corporate purposes.
VI. REGULATORY APPROVALS
A. The implementation of the Plan, the granting of any option
under the Plan, and the issuance of Common Stock upon the exercise of the
stock options granted hereunder shall be subject to the Corporation's
procurement of all approvals and permits required by regulatory authorities
having jurisdiction over the Plan, the stock options granted under it and the
Common Stock issued pursuant to it.
B. No shares of Common Stock or other assets shall be issued or
delivered under this Plan unless and until there shall have been compliance
with all applicable requirements of Federal and state securities laws,
including the filing and effectiveness of the Form S-8 registration statement
for the shares of Common Stock issuable under the Plan, and all applicable
listing requirements of any securities exchange on which the Common Stock is
then listed for trading.
VII. NO EMPLOYMENT/SERVICE RIGHTS
Nothing in the Plan shall confer upon the Optionee any right to
continue in Service for any period of specific duration or interfere with or
otherwise restrict in any way the rights of the Corporation (or any Parent or
Subsidiary employing or retaining such person) or of the Optionee, which
rights are hereby expressly reserved by each, to terminate such person's
Service at any time for any reason, with or without cause.
<PAGE>
APPENDIX
The following definitions shall be in effect under the Plan:
A. BOARD shall mean the Corporation's Board of Directors.
B. CHANGE IN CONTROL shall mean a change in ownership or control of
the Corporation effected through either of the following transactions:
- the acquisition, directly or indirectly, by any person or
related group of persons (other than the Corporation or a person that
directly or indirectly controls, is controlled by, or is under common
control with, the Corporation), of beneficial ownership (within the
meaning of Rule 13d-3 of the 1934 Act) of securities possessing more
than fifty percent (50%) of the total combined voting power of the
Corporation's outstanding securities pursuant to a tender or exchange
offer made directly to the Corporation's shareholders which the Board
does not recommend such shareholders to accept, or
- a change in the composition of the Board over a period of
twenty -four (24) consecutive months or less such that a majority of
the Board members ceases, by reason of one or more contested
elections for Board membership, to be comprised of individuals who
either (A) have been Board members continuously since the beginning
of such period or (B) have been elected or nominated for election as
Board members during such period by at least a majority of the Board
members described in clause (A) who were still in office at the time
the Board approved such election or nomination.
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 shareholder-
approved transactions to which the Corporation is a party:
- 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
- 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 corporation, in the process of
being reincorporated into the state of Delaware, and any corporate successor 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 Corporation shall have
received written notice of the option exercise and full payment of the Option
Price.
I. FAIR MARKET VALUE per share of Common Stock on any relevant date
shall be determined in accordance with the following provisions:
<PAGE>
- 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.
- 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.
J. INVOLUNTARY TERMINATION shall mean the termination of the Service of
any individual which occurs by reason of:
- such individual's involuntary dismissal or discharge by the
Corporation for reasons other than Misconduct, or
- such individual's voluntary resignation following (A) a
change in his or her position with the Corporation which materially
reduces his or her duties and responsibilities or the level of
management to which he or she reports, (B) a reduction in his or her
level of compensation (including base salary, fringe benefits and
target bonus under any corporate-performance based bonus or incentive
programs) by more than fifteen percent (15%) or (C) a relocation of
such individual'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 the individual's consent.
K. 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 any Optionee or other person in the
Service of the Corporation (or any Parent or Subsidiary).
L. NON-STATUTORY OPTION shall mean an option not intended to satisfy
the requirements of Code Section 422.
M. OPTIONEE shall mean any person to whom an option is granted under
the Plan.
N. 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.
O. PERMANENT DISABILITY OR PERMANENTLY DISABLED 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.
P. PLAN shall mean the Corporation's 1997 Supplemental Stock Option
Plan, as set forth in this document.
<PAGE>
Q. PLAN ADMINISTRATOR shall mean either the Board or a committee or
designee(s) of the Board acting in its administrative capacity under the Plan.
R. PLAN EFFECTIVE DATE shall mean October 13, 1997, the date on which
the Plan was adopted by the Board.
S. SECTION 16 INSIDER shall mean an officer or director of the
Corporation subject to the short-swing profit restrictions and reporting
obligations under Section 16 of the 1934 Act.
T. SERVICE shall mean the performance of services to the Corporation
(or any Parent or Subsidiary) by any person in the capacity of an Employee or
an independent consultant or advisor, except to the extent otherwise
specifically provided in the applicable stock option agreement.
U. STOCK EXCHANGE shall mean either the American Stock Exchange or the
New York Stock Exchange.
V. 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.
<PAGE>
EXHIBIT 99.5
Form of Non-Statutory Stock Option Agreement
[LOGO]
ENCAD, INC.
NON-STATUTORY
STOCK OPTION AGREEMENT
(NON-PLAN OPTION)
THIS STOCK OPTION AGREEMENT (the "Option Agreement") dated April 20,
1998 between ENCAD, Inc., a Delaware corporation (the "Company"), and Michael
J. T. Steep ("Optionee").
RECITALS
A. The Board of Directors ("the Board") of the Company believes that it
is in the best interests of the Company to provide its employees with the
opportunity to acquire an equity interest in the Company as a means of
attracting and retaining the services of selected key employees (including
officers) and consultants and other independent contractors who contribute to
the financial success of the Company or its parent or subsidiary corporations.
B. Optionee is an individual who will be employed as an officer of the
Company and whose successful efforts will contribute to the financial success
of the Company.
NOW, THEREFORE, it is hereby agreed as follows:
1. GRANT OF OPTION. Subject to and upon the terms and conditions set
forth in this Agreement, the Company hereby grants to Optionee, as of the
date of this Agreement (the "Grant Date"), an Option (the "Option") to
purchase up to seventy-five thousand (75,000) shares of the Company's Common
Stock (the "Option Shares"). The Option Shares shall be purchasable from
time to time during the Option Term (as set forth in Paragraph 2 below) at
Thirteen Dollars and Eight and Three-Quarter Cents ($13.875) per share (the
"Option Price").
2. OPTION TERM. The Option shall have a maximum term of ten (10)
years measured from the Grant Date unless sooner terminated in accordance
with Paragraph 5 or 6 (the "Option Term"). The date which is ten (10) years
from the Grant Date is hereinafter referred to as the "Expiration Date."
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 the Optionee's death and may be exercised, during
Optionee's lifetime, only by Optionee.
4. EXERCISABILITY. This Option shall become exercisable in sixteen
(16) successive equal quarterly installments upon Optionee's completion of
each additional quarter of Service over the sixteen (16) quarters measured
from the Grant Date, provided that the Option shall not become exercisable
for any additional Option Shares after the Optionee's cessation of Service.
As the Option becomes exercisable for the Option Shares in one or more such
installments, those installments shall accumulate and the Option shall remain
exercisable for the accumulated installments throughout the Option Term.
<PAGE>
5. TERMINATION OF SERVICE. The Option Term specified in Paragraph 2 shall
terminate (and this Option shall cease to be exercisable) prior to the
Expiration Date should one of the following provisions become applicable:
(i) Except to the extent otherwise provided in subparagraphs (ii)
through (iii) below, should Optionee cease to remain in the Service of the
Company at any time during the Option Term, then this Option shall not
remain exercisable for more than a three (3)-month period commencing with
the date of such cessation of Service. Upon the expiration of such three
(3)-month period or (if earlier) upon the specified Expiration Date of the
Option Term, this Option shall terminate and cease to be outstanding.
(ii) Should Optionee die while in Service or within the three (3)-
month period following his or her cessation of Service, 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 law of descent and distribution shall have the right
to exercise this Option. Such right shall lapse, and this Option shall
terminate and cease to remain exercisable, upon the EARLIER of (A) the
expiration of the twelve (12)-month period measured from the date of
Optionee's death or (B) the Expiration Date.
(iii) Should Optionee become permanently disabled and cease by
reason thereof to remain in Service at any time during the Option Term,
then this Option shall not remain exercisable for more than a twelve (12)
month period commencing with the date of such cessation of Service. Upon
the expiration of such limited period of exercisability or (if earlier)
upon the Expiration Date, this Option shall terminate and cease to be
outstanding.
(iv) In no event shall this Option be exercisable at any time after
the specified Expiration Date of the Option Term.
(v) During the limited post-Service period of exercisability
determined in accordance with subparagraphs (i) through (iii) above, this
Option may not be exercised for more than the number of Option Shares (if
any) for which this Option is, at the time of the Optionee's cessation of
Service, exercisable in accordance with either the normal exercise
provisions specified in Paragraph 4 or the special acceleration provisions
of Paragraph 6 of this Agreement. However, the number of Option Shares
purchasable after the Optionee's death shall be reduced for any Option
Shares purchased by the Optionee after his or her cessation of Service but
prior to death.
(vi) For purposes of this Paragraph 5 and for all other purposes
under this Agreement, the following definitional provisions shall be in
effect:
A. The Optionee shall be deemed to remain in Service for so
long as the Optionee continues to render periodic services to the Company
or any parent or subsidiary corporation, whether as an Employee, a non-
employee member of the Company's Board or an independent consultant or
advisor.
B. The Optionee shall be deemed to be an Employee and to
continue in the Company's employ for so long as the Optionee remains in
the employ of the Company or one or more of its parent or subsidiary
corporations, 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.
C. The Optionee shall be deemed to be permanently disabled if
the Optionee is, by reason of any medically determinable physical or
mental impairment expected to result in death or to be of continuous
duration of not less than twelve (12) consecutive months or more, unable
to perform his or her usual duties for the Company or the parent or
subsidiary corporation retaining his or her services.
<PAGE>
D. A corporation shall be considered to be a subsidiary
corporation of the Company if it is a member of an unbroken chain of
corporations beginning with the Company, provided each such corporation in
the chain (other than the last corporation) owns, at the time of
determination, stock possessing 50% or more of the total combined voting
power of all classes of stock in one of the other corporations in such
chain.
E. A corporation shall be considered to be a parent
corporation of the Company if it is a member of an unbroken chain ending
with the Company, provided each such corporation in the chain (other than
the Company) owns, at the time of determination, stock possessing 50% or
more of the total combined voting power of all classes of stock in one of
the other corporations in such chain.
6. CORPORATE TRANSACTION.
A. For purposes of this Paragraph 6, a "Corporate Transaction"
shall be one or more of the following stockholder-approved transactions:
(i) a merger or consolidation in which the Company is not the
surviving entity, except for a transaction the principal purpose of which
is to change the State of the Company's incorporation,
(ii) the sale, transfer or other disposition of all or
substantially all of the assets of the Company in liquidation or
dissolution of the Company, or
(iii) any reverse merger in which the Company is the surviving
entity but in which securities possessing more than fifty percent (50%) of
the total combined voting power of the Company's outstanding securities
are transferred to holders different from those who held such securities
immediately prior to such merger.
B. If this Option is to be assumed in connection with the
Corporate Transaction or is otherwise to continue in effect, then it shall be
appropriately adjusted, immediately after such Corporate Transaction, to
apply and pertain to the number and class of securities which would have been
issuable, in consummation of such Corporate Transaction, to an actual holder
of the same number of shares of Common Stock as are subject to such Option
immediately prior to such Corporate Transaction. Appropriate adjustments
shall also be made to the Option Price, provided that the aggregate Option
price payable for such securities shall remain the same.
C. If in the event of any Corporate Transaction this Option is
not assumed or continued in accordance with Paragraph 6.B, the exercisability
of this Option shall automatically accelerate so that, immediately prior to
the specified effective date for the Corporate Transaction, this Option shall
become fully exercisable with respect to all of the Option Shares.
D. This Option, to the extent not previously exercised, shall
terminate upon the consummation of the Corporate Transaction and cease to be
exercisable, unless it is expressly assumed or continued by the successor
corporation or parent thereof.
E. This Agreement shall not in any way affect the right of the
Company to adjust, reclassify, reorganize or otherwise make changes in its
capital or business structure or to merge, consolidate, dissolve, liquidate
or sell or transfer all or any part of its business or assets.
<PAGE>
7. CHANGE IN CONTROL. Upon the occurrence of any Change in Control of
the Company, the exercisability of this Option shall automatically accelerate
so that such Option shall, immediately prior to the specified effective date
for the Change in Control, become fully exercisable with respect to the total
number of shares of Common Stock at the time subject to such Option and may be
exercised for all or any portion of such shares. Similarly, all unvested
shares of this Option shall automatically vest immediately prior to the
specified effective date of the Change in Control. For purposes of this
Paragraph 7, a Change in Control shall be deemed to occur in the event:
(i) any person or related group of persons (other than the
Company or a person that directly or indirectly controls, is
controlled by, or is under common control with, the Company) directly
or indirectly acquires beneficial ownership (within the meaning of
Rule 13d-3 of the Securities Exchange Act of 1934, as amended) of
securities possessing more than fifty percent (50%) of the total
combined voting power of the Company's outstanding securities
pursuant to a tender or exchange offer made directly to the Company's
stockholders which the Board does not recommend such stockholders to
accept; or
(ii) there is a change in the composition of the Board
over a period of twenty-four (24) consecutive months or less such
that a majority of the Board members (rounded up to the next whole
number) cease, by reason of one or more proxy contests for the
election of Board members, to be comprised of individuals who either
(A) have been Board members continuously since the beginning of such
period or (B) have been elected or nominated for election as Board
members during such period by at least a majority of the Board
members described in clause (A) who were still in office at the time
such election or nomination was approved by the Board.
8. ADJUSTMENT IN OPTION SHARES.
A. In the event any change is made to the Common Stock issuable
under the Option by reason of any stock split, stock dividend,
recapitalization, combination of shares, exchange of shares, conversion or
other change affecting the outstanding Common Stock as a class without the
Company's receipt of consideration, then appropriate adjustments shall be made
to (i) the total number of Option Shares subject to this Option and (ii) the
Option Price in order to reflect such change and thereby preclude a dilution or
enlargement of benefits hereunder.
B. If this Option is to be assumed in connection with a Corporate
Transaction or is otherwise to continue in effect, then this Option shall,
immediately after such Corporate Transaction, be appropriately adjusted to
apply and pertain to the number and class of securities which would have been
issued to the Optionee in the consummation of such Corporate Transaction had
the Option been exercised immediately prior to such Corporate Transaction.
Appropriate adjustments shall also be made to the Option Price, PROVIDED the
aggregate Option Price payable hereunder shall remain the same.
9. PRIVILEGE OF STOCK OWNERSHIP. The holder of this Option shall not
have any of the rights of a stockholder with respect to the Option Shares until
such individual shall have exercised the Option, paid the Option Price for the
purchased shares and been issued such shares.
10. 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 in the case of exercise after Optionee's death, the Optionee's executor,
administrator, heir or legatee, as the case may be) must take the following
actions:
(i) Execute and deliver to the Secretary of the Company (a) a
written notice of exercise (the "Exercise Notice"), in substantially the
form of EXHIBIT I attached hereto, in which there is specified the number
of Option Shares for which the Option is exercised.
(ii) Pay the aggregate Option Price for the purchased shares
in one or more of the
<PAGE>
following alternative forms:
1. full payment in cash or check drawn to the Company's
order;
2. full payment in shares of Common Stock of the Company
held by the Optionee for the requisite period necessary to permit the
Company to avoid recognizing a charge for compensation for financial
accounting purposes and valued at Fair Market Value on the Exercise Date
(as such terms are defined below);
3. full payment in a combination of shares of Common
Stock of the Company held by the Optionee for the requisite period
necessary to permit the Company to avoid recognizing a charge for
compensation for financial accounting purposes valued at Fair Market Value
on the Exercise Date and cash or check drawn to the Company's order;
4. full payment effected through a broker-dealer sale
and remittance procedure pursuant to which the Optionee (I) shall provide
irrevocable written instructions to a designated brokerage firm to effect
the immediate sale of the purchased shares and remit to the Company, out
of the sale proceeds available on the settlement date, sufficient funds to
cover the aggregate Option Price payable for the purchased shares plus all
applicable Federal and State income and employment taxes required to be
withheld by the Company by reason of such purchase and (II) shall provide
written directives to the Company to deliver the purchased shares directly
to such brokerage firm in order to complete the sale transaction; or
5. full payment in any other form which the Company may,
in its discretion, approve at the time of exercise in accordance with the
provisions of Paragraph 16 of this Agreement.
(iii) Furnish to the Company appropriate documentation that the
person or persons exercising the Option (if other than the Optionee) have
the right to exercise this Option.
B. For purposes of this Agreement, the Fair Market Value of a
share of Common Stock on any relevant date shall be determined in accordance
with subparagraphs (i) and (ii) below, and the Exercise Date shall be the
date on which the executed Exercise Notice is delivered to the Company.
Except to the extent the sale and remittance procedure specified above is
utilized for the exercise of the Option, payment of the Option Price for the
purchased shares must accompany the Exercise Notice. The procedure for
measuring Fair Market Value shall be as follows:
(i) If the Common Stock is not at the time listed or admitted
to trading on any national stock exchange but is traded on the NASDAQ
National Market System, 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 through the
NASDAQ National Market System or any successor system. If there is no
reported closing selling price for the Common Stock on the date in
question, then the closing selling price on the last preceding date for
which such quotation exists shall be determinative of Fair Market Value.
(ii) If the Common Stock is at the time listed or admitted to
trading on any national 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 Company 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 reported
sale of Common Stock on such exchange on the date in question, then the
Fair Market Value shall be the closing selling price on the exchange on
the last preceding date for which such quotation exists.
(iii) If shares of the series of Common Stock to be valued at
the time are neither listed nor admitted to trading on any stock exchange
nor traded in the over-the-counter market, then the fair
<PAGE>
market value shall be determined by the Company after taking into account
such factors as the Company shall deem appropriate, including one or more
independent professional appraisals, in a manner consistent with the
provisions of Section 260.140.50 of the Rules of the California
Corporations Commissioner.
C. As soon after the Exercise Date as practical, the Company
shall deliver to or on behalf of the Optionee (or to any other person or
persons exercising this Option) the purchased shares.
D. In no event may this Option be exercised for any fractional
shares.
11. 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 Company and
the Optionee with all applicable requirements of law relating thereto and
with all applicable regulations of any stock exchange on which shares of the
Option Shares may be listed at the time of such exercise and issuance.
B. In connection with the exercise of this Option, Optionee shall
execute and deliver to the Company such representations in writing as may be
requested by the Company in order for it to comply with the applicable
requirements of Federal and State securities laws.
12. SUCCESSORS AND ASSIGNS. Except to the extent otherwise provided in
Paragraph 3 or 6, the provisions of this Agreement shall inure to the benefit
of, and be binding upon, the successors, administrators, heirs, legal
representatives and assigns of Optionee and the successors and assigns of the
Company.
13. LIABILITY OF COMPANY. The inability of the Company to obtain
approval from any regulatory body having authority deemed by the Company to
be necessary to the lawful issuance and sale of any Common Stock pursuant to
this Option shall relieve the Company 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 Company, however, shall use its best efforts to
obtain all such approvals.
14. NO EMPLOYMENT OR SERVICE CONTRACT. Nothing in this Agreement shall
confer upon the Optionee any right to continue in the Service of the Company
(or any parent or subsidiary corporation of the Company employing or
retaining Optionee) for any period of specific duration or interfere with or
otherwise restrict in any way the rights of the Company (or any parent or
subsidiary corporation of the Company employing or retaining Optionee) or the
Optionee, which rights are hereby expressly reserved by each, to terminate
the Optionee's Service at any time for any reason whatsoever, with or without
cause.
15. NOTICES. Any notice required to be given or delivered to the
Company under the terms of this Agreement shall be in writing and addressed
to the Company in care of the Corporate Secretary at the Company's 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 hereto. All notices shall be deemed to have been
given or delivered upon personal delivery or upon deposit in the U.S. mail,
postage prepaid and properly addressed to the party to be notified.
16. LOANS. The Company may, in its absolute discretion and without any
obligation to do so, assist the Optionee in the exercise of this Option by
(i) authorizing the extension of a loan to the Optionee from the Company or
(ii) permitting the Optionee to pay the Option Price for the purchased Common
Stock in installments for a specified period. The terms of any loan or
installment method of payment (including the interest rate, the collateral
requirements and terms of repayment) shall be established by the Company in
its sole discretion.
17. GOVERNING LAW. The interpretation, performance, and enforcement of
this Agreement shall be governed by the laws of the State of Delaware without
resort to that State's conflict-of-laws rules.
<PAGE>
18. WITHHOLDING. Optionee hereby agrees to make appropriate
arrangements with the Company or parent or subsidiary corporation employing
Optionee for the satisfaction of any Federal, State or local income tax
withholding requirements and Federal social security or other employee tax
requirements applicable to the exercise of this Option.
ENCAD, INC.
/s/
Richard A. Plante
President
/s/
Michael J. T. Steep
Address:_______________________________
_______________________________________
Social Security #:_____________________
Dated: April 20, 1998
<PAGE>
EXHIBIT I
[LOGO] NOTICE TO EXERCISE STOCK OPTIONS
I hereby notify ENCAD, Inc. that I elect to exercise _________________ shares
pursuant to 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.
Optionee Name:________________________________________________________________
Street Address:_______________________________________________________________
City/State/Zip Code:__________________________________________________________
Social Security Number:_____________________ Telephone Number/Extension:______
Method of exercise
(check one): Cashless / / Stock Swap / / No.
Cash/check Exercise and hold / / used in swap _____
No._____ Attestation form
Exercise and sell / / attached / /
No._____ Certificate
attached / /
DELIVERY Name:_____________________________________________________
INSTRUCTIONS:
Address:__________________________________________________
DTC #:____________________________________________________
Broker: Name:_____________________________________________________
Address:__________________________________________________
Phone #:__________________________________________________
Account #:________________________________________________
Optionee Signature:__________________________ Date:_______________________
Exercise Procedures:
1. Complete, sign and return the Notice to Exercise form to Karen
Patchen or Ann White.
2. For cash transactions, a personal check, money order 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 contracting the broker to avoid a delay in
processing.
5. 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. Allow approximately
five business days for delivery of your certificate.
6. The Notice to Exercise is valid for 30 days only. If transaction
does not take place within 30 days a new form must be completed.
FINANCE USE ONLY
Date verified with broker:___________ Date entered into system:______________
Date payment received:_______________ Date sent to transfer agent:___________
FMV/Date:____________________________ Date confirmation sent to
optionee:______________________________
Comments:____________________________