<PAGE>
As filed with the Securities and Exchange Commission on August 13, 1999
Registration No. 333-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 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 of (I.R.S. Employer Identification No.)
incorporation or organization)
--------------------
6059 CORNERSTONE COURT WEST
SAN DIEGO, CALIFORNIA 92121
(Address of principal executive offices) (Zip Code)
--------------------
1999 STOCK OPTION/STOCK ISSUANCE PLAN
(Full title of the Plan)
--------------------
DAVID A. PURCELL
CHAIRMAN OF THE BOARD, PRESIDENT AND CHIEF EXECUTIVE OFFICER
ENCAD, INC.
6059 CORNERSTONE COURT WEST,
SAN DIEGO, CALIFORNIA 92121
(Name and address of agent for service)
(858) 452-0882
(Telephone number, including area code, of agent for service)
---------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- ------------------------------- ---------------- --------------------------- ---------------------------- -------------------
TITLE OF SECURITIES TO BE AMOUNT TO BE PROPOSED MAXIMUM OFFERING PROPOSED MAXIMUM AGGREGATE AMOUNT OF
REGISTERED REGISTERED (1) PRICE PER SHARE (2) OFFERING PRICE (2) REGISTRATION FEE
- ------------------------------- ---------------- --------------------------- ---------------------------- -------------------
<S> <C> <C> <C> <C>
Common Stock, $0.0001 par value 580,000 shares $7.1563 $4,150,654.00 $1,153.88
- ------------------------------- ---------------- --------------------------- ---------------------------- -------------------
</TABLE>
(1) This Registration Statement shall also cover any additional shares of
Registrant's Common Stock which become issuable under the 1999 Stock
Option/Stock Issuance Plan by reason of any stock dividend, stock split,
recapitalization or other similar transaction effected without the
Registrant's receipt of consideration which results in an increase in the
number of the outstanding shares of the Registrant's Common Stock.
(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 the Registrant's Common Stock on August
10, 1999 as reported on the Nasdaq National Market.
<PAGE>
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
Item 3. INCORPORATION OF CERTAIN 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 "Commission"):
(a) The Registrant's Annual Report on Form 10-K for the
fiscal year ended December 31, 1998 filed with the
Commission on March 30, 1999, pursuant to Section 13
of the Securities Exchange Act of 1934, as amended
(the "1934 Act");
(b) The Registrant's Quarterly Report on Form 10-Q for
the fiscal quarter ended March 31, 1999 filed with
the Commission on May 14, 1999; and
(c) The Registrant's Registration Statements on Form 8-A
filed with the Commission on December 6, 1993, in
which there is described the terms, rights and
provisions applicable to the Registrant's
outstanding Common Stock.
All reports and definitive proxy or information statements filed
pursuant to Section 13(a), 13(c), 14 or 15(d) of 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 is also 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 serving
as 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
II-1
<PAGE>
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.
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 for (i) any breach of the
director's duty of loyalty to the Registrant or its stockholders, (ii) any acts
or omissions not in good faith or involving intentional misconduct, (iii) any
knowing violations of law, (iv) any actions leading to improper personal benefit
to the director, and (v) any 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 their capacity as a director or
officer.
Item 7. EXEMPTION FROM REGISTRATION CLAIMED
Not Applicable.
Item 8. EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NUMBER EXHIBIT
- -------------- -------
<S> <C>
4 Instruments Defining Rights of Stockholders. Reference is made to Registrant's
Registration Statements on Form 8-A, including the exhibits thereto, incorporated herein
by reference pursuant to Item 3(c) of this Registration Statement.
5 Opinion of Brobeck, Phleger & Harrison LLP.
23.1 Consent of Deloitte & Touche LLP, Independent Auditors.
23.2 Consent of Brobeck, Phleger & Harrison LLP is contained in Exhibit 5.1.
24.1 Power of Attorney. Reference is made to page II-4 of this Registration Statement.
99.1 Encad, Inc. 1999 Stock Option/Stock Issuance Plan.
99.2 Form of Notice of Grant of Stock Option.
99.3 Form of Stock Option Agreement.
99.4 Form of Addendum to Stock Option Agreement - Involuntary Termination Following Corporate
Transaction/Change in Control
99.5 Form of Addendum to Stock Option Agreement - Limited Stock Appreciation Right
99.6 Form of Stock Issuance Agreement
99.7 Form of Addendum to Stock Issuance Agreement - Involuntary Termination Following
Corporate Transaction/Change in Control.
99.8 Form of Notice of Grant of Non-Employee Director - Initial
99.9 Form of Notice of Grant of Non-Employee Director - Annual
99.10 Form of Automatic Stock Option Agreement
</TABLE>
II-2
<PAGE>
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 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 at the termination of the 1999 Stock Option /Stock Issuance 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 in 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.
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
Commission 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.
II-3
<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 this 13th day of August, 1999.
ENCAD, INC.
By: /s/ David A. Purcell
----------------------------------
David A. Purcell
Chairman of the Board, President and
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS:
That the undersigned officers and directors of Encad, Inc., a
Delaware corporation, do hereby constitute and appoint David A. Purcell and
Todd W. Schmidt 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 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 regulations 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
thereof, and each of the undersigned hereby ratifies and confirms all that
said attorneys and agents 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 of the Board, President and Chief August 13, 1999
David A. Purcell Executive Officer (Principal Executive Officer)
/s/ Todd W. Schmidt Vice President, Chief Financial Officer August 13, 1999
- -------------------------- (Principal Financial Officer and Accounting
Todd W. Schmidt Officer)
II-4
<PAGE>
/s/ Robert V. Adams
- -------------------------- Director August 13, 1999
Robert V. Adams
/s/ Craig S. Andrews
- -------------------------- Director August 13, 1999
Craig S. Andrews
/s/ Ronald J. Hall
- -------------------------- Director August 13, 1999
Ronald J. Hall
/s/ Howard L. Jenkins
- -------------------------- Director August 13, 1999
Howard L. Jenkins
/s/ Charles E. Volpe
- -------------------------- Director August 13, 1999
Charles E. Volpe
</TABLE>
II-5
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
EXHIBITS
TO
FORM S-8
UNDER
SECURITIES ACT OF 1933
ENCAD, INC.
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NUMBER EXHIBIT
- -------------- -------
<S> <C>
4 Instruments Defining Rights of Stockholders. Reference is made to Registrant's
Registration Statements on Form 8-A, including the exhibits thereto, incorporated herein
by reference pursuant to Item 3(c) of this Registration Statement.
5 Opinion of Brobeck, Phleger & Harrison LLP.
23.1 Consent of Deloitte & Touche LLP, Independent Auditors.
23.2 Consent of Brobeck, Phleger & Harrison LLP is contained in Exhibit 5.
24.1 Power of Attorney. Reference is made to page II-4 of this Registration Statement.
99.1 Encad, Inc. 1999 Stock Option/Stock Issuance Plan.
99.2 Form of Notice of Grant of Stock Option.
99.3 Form of Stock Option Agreement.
99.4 Form of Addendum to Stock Option Agreement - Involuntary Termination Following Corporate
Transaction/Change in Control
99.5 Form of Addendum to Stock Option Agreement - Limited Stock Appreciation Right
99.6 Form of Stock Issuance Agreement
99.7 Form of Addendum to Stock Issuance Agreement - Involuntary Termination Following
Corporate Transaction/Change in Control.
99.8 Form of Notice of Grant of Non-Employee Director - Initial
99.9 Form of Notice of Grant of Non-Employee Director - Annual
99.10 Form of Automatic Stock Option Agreement
</TABLE>
<PAGE>
EXHIBIT 5
OPINION OF BROBECK, PHLEGER & HARRISON LLP
August 13, 1999
Encad, Inc.
6059 Cornerstone Court West
San Diego, CA 92121
Re: Encad, Inc. (the "Company")
Registration Statement for Offering of 580,000 Shares of Common Stock
Ladies and Gentlemen:
We have acted as counsel to Encad, Inc., a Delaware corporation (the
"Company"), in connection with the registration on Form S-8 (the "Registration
Statement") under the Securities Act of 1933, as amended, of 580,000 shares of
common stock (the "Shares") for issuance under the Company's 1999 Stock
Option/Stock Issuance Plan (the "Plan").
This opinion is being furnished in accordance with the requirements of
Item 8 of Form S-8 and Item 601(b)(5)(i) of Regulation S-K.
We have reviewed the Company's charter documents and the corporate
proceedings taken by the Company in connection with the establishment of the
Plan. Based on such review, we are of the opinion that, if, as an when the
Shares are issued and sold (and the consideration therefor received) pursuant to
(i) the provisions of option agreements duly authorized under the Plan and in
accordance with the Registration Statement or (ii) direct stock issuances duly
authorized under the Plan and in accordance with the Registration Statement,
such Shares will be duly authorized, legally issued, fully paid and
nonassessable.
We consent to the filing of this opinion letter as Exhibit 5 to the
Registration Statement.
This opinion letter is rendered as of the date first written above and
we disclaim any obligation to advise you of facts, circumstances, events or
developments which hereafter may be brought to our attention and which may
alter, affect or modify the opinion expressed herein. Our opinion is expressly
limited to the matters set forth above and we render no opinion, whether by
implication or otherwise, as to any other matters relating to the Company, the
Plan or the Shares.
Very truly yours,
/s/ BROBECK, PHLEGER & HARRISON LLP
BROBECK, PHLEGER & HARRISON LLP
<PAGE>
EXHIBIT 23.1
CONSENT INDEPENDENT AUDITORS
To the Board of Directors and Stockholders of ENCAD, Inc.
We consent to the incorporation by reference in Registration Statement on
Form S-8 of Encad, Inc. for the registration of 580,000 shares of common
stock of our report dated February 12, 1999, appearing in this Annual report
on Form 10-K of Encad, Inc. for the year ended December 31, 1998.
/s/ Deloitte & Touche LLP
Deloitte & Touche LLP
San Diego, California
August 13, 1999
<PAGE>
Exhibit 99.1
ENCAD, INC.
1999 STOCK OPTION/STOCK ISSUANCE PLAN
ARTICLE ONE
GENERAL PROVISIONS
------------------
I. PURPOSE OF THE PLAN
This 1999 Stock Option/Stock Issuance Plan is intended to
promote the interests of ENCAD, Inc., a Delaware corporation, by providing
eligible persons with the opportunity to acquire a proprietary interest, or
otherwise increase their proprietary interest, in the Corporation as an
incentive for them to remain in the service of the Corporation.
Capitalized terms shall have the meanings assigned to such
terms in the attached Appendix.
II. STRUCTURE OF THE PLAN
A. The Plan shall be divided into four separate equity
programs:
(i) the Discretionary Grant Program under which
eligible persons may, at the discretion of the Plan
Administrator, be granted options to purchase shares of
Common Stock or special stock appreciation rights with
respect to such shares,
(ii) the Automatic Option Grant Program under which
eligible non-employee Board members shall automatically
receive option grants at periodic intervals to purchase
shares of Common Stock,
(iii) the Stock Issuance Program under which eligible
persons may, at the discretion of the Plan Administrator,
be issued shares of Common Stock directly, either through
the immediate purchase of such shares or as a bonus for
services rendered the Corporation (or any Parent or
Subsidiary), and
(iv) the Reload Option Grant Program under which
eligible persons may, at the discretion of the Plan
Administrator, be granted options which will, upon the
payment of the exercise price of those options with shares
of Common Stock, automatically entitle them to new options
for the same number of shares of Common Stock delivered in
payment of the exercise price.
B. The provisions of Articles One and Six shall apply to
all equity programs under the Plan and shall govern the interests of all
persons under the Plan.
<PAGE>
III. ADMINISTRATION OF THE PLAN
A. The Primary Committee shall have sole and exclusive
authority to administer the Discretionary Grant and Stock Issuance Programs
with respect to Section 16 Insiders. Administration of the Discretionary
Grant and Stock Issuance Programs with respect to all other persons eligible
to participate in those programs may, at the Board's discretion, be vested in
the Primary Committee or a Secondary Committee, or the Board may retain the
power to administer those programs with respect to all such persons. However,
any discretionary grants or stock issuances for members of the Primary
Committee shall require the approval of a disinterested majority of the Board.
B. 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 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 such committee.
C. 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 Grant and Stock Issuance Programs and to make such
determinations under, and issue such interpretations of, the provisions of
such programs and any outstanding options or stock issuances 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 parties who have an interest in the Discretionary Grant and
Stock Issuance Programs under its jurisdiction or any option grant or stock
issuance thereunder.
D. The Primary Committee shall have the sole and exclusive
authority to administer the Reload Option Grant Program for all persons
eligible to participate in that program. As such Plan Administrator, the
Primary Committee shall 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 Reload 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 Primary Committee under the
Reload Option Grant Program shall be final and binding on all parties who
have an interest in such program or any option grant thereunder.
E. Service on the Primary Committee or the Secondary
Committee shall constitute service as a Board member, and members of each
such committee shall accordingly be entitled to full indemnification and
reimbursement as Board members for their service on 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 option
grants or stock issuances under the Plan.
F. Administration of the Automatic Option Grant Program
shall be self-executing in accordance with the terms of that program, and no
Plan Administrator shall exercise any discretionary functions with respect to
any option grants made under that program.
2
<PAGE>
IV. ELIGIBILITY
A. The persons eligible to participate in the
Discretionary Grant, Stock Issuance and Reload Option Grant Programs are as
follows:
(i) Employees,
(ii) non-employee members of the Board or the board
of directors of any Parent or Subsidiary, and
(iii) consultants and other independent advisors who
provide services to the Corporation (or any Parent or
Subsidiary).
B. Each Plan Administrator shall, within the scope of its
administrative jurisdiction under the Plan, have full authority to determine,
(i) with respect to the grants made under the Discretionary Grant Program,
which eligible persons are to receive such grants, the time or times when
those grants are to be made, the number of shares to be covered by each such
grant, the status of any granted stock option as either an Incentive Option
or a Non-Statutory Option, the time or times when each stock option or stock
appreciation right is to become exercisable, the vesting schedule (if any)
applicable to the option shares and the maximum term for which the stock
option or stock appreciation right is to remain outstanding and (ii) with
respect to stock issuances made under the Stock Issuance Program, which
eligible persons are to receive such issuances, the time or times when those
issuances are to be made, the number of shares to be issued to each
Participant, the vesting schedule (if any) applicable to the issued shares
and the consideration for such shares.
C. The Plan Administrator shall have the absolute
discretion either to grant stock options or stock appreciation rights in
accordance with the Discretionary Grant Program or to effect stock issuances
in accordance with the Stock Issuance Program.
D. The individuals who shall be eligible to participate in
the Automatic Option Grant Program shall be limited to (i) those individuals
serving as non-employee Board members on the Plan Effective Date, (ii) those
individuals who first become non-employee Board members on or after the Plan
Effective Date, whether through appointment by the Board or election by the
Corporation's shareholders, and (iii) those individuals who continue to serve
as non-employee Board members at one or more Annual Shareholders Meetings
held after the Plan Effective Date. A non-employee Board member who has
previously been in the employ of the Corporation (or any Parent or
Subsidiary) shall not be eligible to receive an option grant under the
Automatic Option Grant Program at the time he or she first becomes a
non-employee Board member, but shall be eligible to receive periodic option
grants under the Automatic Option Grant Program while he or she continues to
serve as a non-employee Board member.
3
<PAGE>
V. STOCK SUBJECT TO THE PLAN
A. The stock issuable under the Plan shall be shares of
authorized but unissued or reacquired 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
not exceed 580,000 shares.
B. No one person participating in the Plan may receive
stock options, separately exercisable stock appreciation rights and direct
stock issuances for more than 250,000 shares of Common Stock in the aggregate
per calendar year.
C. Shares of Common Stock subject to outstanding options
shall be available for subsequent issuance under the Plan to the extent those
options expire or terminate for any reason prior to exercise in full.
Unvested shares issued under the Plan and subsequently cancelled or
repurchased by the Corporation, at the original issue price paid per share,
pursuant to the Corporation's repurchase rights under the Plan shall be added
back to the number of shares of Common Stock reserved for issuance under the
Plan and shall accordingly be available for reissuance through one or more
subsequent option grants under the Plan. However, should the exercise price
of an option under the Plan be paid with shares of Common Stock or should
shares of Common Stock otherwise issuable under the Plan be withheld by the
Corporation in satisfaction of the withholding taxes incurred in connection
with the exercise of an option or the vesting of a stock issuance under the
Plan, 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 or which vest under the stock issuance, and not by the net
number of shares of Common Stock issued to the holder of such option or stock
issuance. Shares of Common Stock underlying one or more stock appreciation
rights exercised under Section IV of Article Two or Section II of Article
Three shall NOT be available for subsequent issuance under the Plan.
4
<PAGE>
D. If any change is 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 maximum number and/or class of
securities issuable under the Plan, (ii) number and/or class of securities
for which any one person may be granted stock options, separately exercisable
stock appreciation rights and direct stock issuances in the aggregate per
calendar year, (iii) the number and/or class of securities for which option
grants are subsequently to be made under the Automatic Option Grant Program
to new and continuing non-employee Board members, and (iv) the number and/or
class of securities and the exercise price per share in effect under each
outstanding option 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.
5
<PAGE>
ARTICLE TWO
DISCRETIONARY GRANT PROGRAM
I. OPTION TERMS
Each stock option granted under this Article Two 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 specified below. Each document evidencing an Incentive Option
shall, in addition, be subject to the provisions of the Plan applicable to
such 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 option grant date.
2. The exercise price shall become immediately due
upon exercise of the option and shall, subject to the provisions of Section I
of Article Four and the documents evidencing the option, be payable in one or
more of the forms specified below:
(i) cash or check made payable to the Corporation,
(ii) 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, or
(iii) to the extent the option is exercised for vested
shares, through a special sale and remittance procedure
pursuant to which the Optionee shall concurrently provide
irrevocable instructions to (a) a Corporation-designated
brokerage firm to effect the immediate sale of the purchased
shares and remit to the Corporation, out of the sale proceeds
available on the settlement date, sufficient funds to cover
the aggregate exercise price payable for the purchased shares
plus all applicable Federal, state and local income and
employment taxes required to be withheld by the Corporation
by reason of such exercise and (b) the Corporation to deliver
the certificates for the purchased shares directly to such
brokerage firm in order to complete the sale.
Except to the extent such sale and remittance procedure is
utilized, payment of the exercise price for the purchased shares must be made on
the Exercise Date.
6
<PAGE>
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 the option. However, no option shall have a term in
excess of ten (10) years measured from the option grant date.
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:
(i) Any option outstanding at the time of the
Optionee's cessation of Service for any reason shall remain
exercisable for such 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.
(ii) Any option held by the Optionee at the time of
death and exercisable in whole or in part at that 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 or by the
Optionee's designated beneficiary or beneficiaries of that
option.
(iii) 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.
(iv) During the applicable post-Service exercise
period, the option may not be exercised in the aggregate for
more than the number of vested shares for which the option is
exercisable on the date of the Optionee's cessation of Service.
Upon the expiration of the applicable exercise period or (if
earlier) upon the expiration of the option term, the option
shall terminate and cease to be outstanding for any vested
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 to the extent the
option is not otherwise at that time exercisable for vested
shares.
D. The Plan Administrator shall have complete discretion,
exercisable either at the time an option is granted or at any time while the
option remains outstanding, to:
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(i) extend the period of time for which the option is
to remain exercisable following the Optionee's cessation of
Service from the limited exercise 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
(ii) permit the option to be exercised, during the
applicable post-Service exercise period, not only with respect
to the number of vested 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 in which the Optionee would have vested had the
Optionee continued in Service.
E. SHAREHOLDER RIGHTS. The holder of an option shall have no
shareholder rights with respect to the shares subject to the option until
such person shall have exercised the option, paid the exercise price and
become a holder of record of the purchased shares.
F. REPURCHASE RIGHTS. The Plan Administrator shall have the
discretion to grant options which are exercisable for unvested shares of
Common Stock. Should the Optionee cease Service while holding such unvested
shares, the Corporation shall have the right to repurchase, at the exercise
price paid per share, any or all of those unvested shares. The terms upon
which such repurchase right shall be exercisable (including the period and
procedure for exercise and the appropriate vesting schedule for the purchased
shares) shall be established by the Plan Administrator and set forth in the
document evidencing such repurchase right.
G. LIMITED TRANSFERABILITY OF OPTIONS. During the lifetime of
the Optionee, Incentive 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, a
Non-Statutory 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 and shall be set forth in such documents
issued to the assignee as the Plan Administrator may deem appropriate.
Notwithstanding the foregoing, the Optionee may also designate one or more
persons as the beneficiary or beneficiaries of his or her outstanding options
under this Article Two, and those options shall, in accordance with such
designation, automatically be transferred to such beneficiary or
beneficiaries upon the Optionee's death while holding those options. Such
beneficiary or beneficiaries shall take the transferred options subject to
all the terms and conditions of the applicable agreement evidencing each such
transferred option, including (without limitation) the limited time period
during which the option may be exercised following the Optionee's death.
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II. INCENTIVE OPTIONS
The terms specified below shall be applicable to all
Incentive Options. Except as modified by the provisions of this Section II,
all the provisions of Articles One, Two and Six shall be applicable to
Incentive Options. Options designated as Non-Statutory Options when issued
under the Plan shall not be subject to the terms of this Section II.
A. ELIGIBILITY. Incentive Options may only be granted to
Employees.
B. DOLLAR LIMITATION. The aggregate Fair Market Value of
the shares of Common Stock (determined as of the respective date or dates of
grant) for which one or more options granted to any Employee 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 Options during any one
calendar year shall not exceed the sum of One Hundred Thousand Dollars
($100,000). To the extent the Employee holds two (2) 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
Options shall be applied on the basis of the order in which such options are
granted.
C. 10% SHAREHOLDER. If any Employee to whom an Incentive
Option is granted is a 10% Shareholder, then the exercise price per share
shall not be less than one hundred ten percent (110%) of the Fair Market
Value per share of Common Stock on the option grant date, and the option term
shall not exceed five (5) years measured from the option grant date.
III. CORPORATE TRANSACTION/CHANGE IN CONTROL
A. In the event of any Corporate Transaction, each
outstanding option shall automatically accelerate so that each such option
shall, immediately prior to the effective date of the Corporate Transaction,
become fully exercisable for 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. 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, 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 any shares for which the option is not otherwise at that time
exercisable 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. All outstanding repurchase rights shall automatically
terminate, and the shares of Common Stock subject to those terminated rights
shall immediately vest in full, in the event of any Corporate Transaction,
except to the extent: (i) those repurchase rights are to be assigned to the
successor corporation (or parent thereof) in connection with such Corporate
Transaction or (ii) such accelerated vesting is precluded by other
limitations imposed by the Plan Administrator at the time the repurchase
right is issued.
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C. 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).
D. 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 exercise price payable per share under each
outstanding option, PROVIDED the aggregate exercise price payable for such
securities shall remain the same, (ii) the maximum number and/or class of
securities available for issuance over the remaining term of the Plan, (iii)
the maximum number and/or class of securities by which the share reserve is
to increase automatically each calendar year and (iv) the maximum number
and/or class of securities for which any one person may be granted stock
options, separately exercisable stock appreciation rights and direct stock
issuances under the Plan per calendar year.
E. The Plan Administrator shall have the discretionary
authority to structure one or more outstanding options under the
Discretionary Grant Program so that those options shall, immediately prior to
the effect date of such Corporate Transaction, become fully exercisable for
the total number of shares of Common Stock at the time subject to those
options and may be exercised for any or all of those shares as fully vested
shares of Common Stock, whether or not those options are to be assumed in the
Corporate Transaction. In addition, the Plan Administrator shall have the
discretionary authority to structure one or more of the Corporation's
repurchase rights under the Discretionary Grant Program so that those rights
shall not be assignable in connection with such Corporate Transaction and
shall accordingly terminate upon the consummation of such Corporate
Transaction, and the shares subject to those terminated rights shall
thereupon vest in full.
F. The Plan Administrator shall have full power and
authority to structure one or more outstanding options under the
Discretionary Option Grant Program so that those options shall become fully
exercisable for the total number of shares of Common Stock at the time
subject to those options in the event the Optionee's Service is subsequently
terminated 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. In addition, the Plan Administrator may structure one or more of
the Corporation's repurchase rights so that those rights shall immediately
terminate with respect to any shares held by the Optionee at the time of his
or her Involuntary Termination, and the shares subject to those terminated
repurchase rights shall accordingly vest in full at that time.
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G. The Plan Administrator shall have the discretionary
authority to structure one or more outstanding options under the
Discretionary Option Grant Program so that those options shall, immediately
prior to the effect date of a Change in Control, become fully exercisable for
the total number of shares of Common Stock at the time subject to those
options and may be exercised for any or all of those shares as fully vested
shares of Common Stock. In addition, the Plan Administrator shall have the
discretionary authority to structure one or more of the Corporation's
repurchase rights under the Discretionary Grant Program so that those rights
shall terminate automatically upon the consummation of such Change in
Control, and the shares subject to those terminated rights shall thereupon
vest in full. Alternatively, the Plan Administrator may condition the
automatic acceleration of one or more outstanding options under the
Discretionary Grant Program and the termination of one or more of the
Corporation's outstanding repurchase rights under such program upon the
subsequent 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 such Change in Control.
H. The portion of any Incentive Option accelerated in
connection with a Corporate Transaction or Change in Control shall remain
exercisable as an Incentive Option only to the extent the applicable One
Hundred Thousand Dollar ($100,000) limitation is not exceeded. To the extent
such dollar limitation is exceeded, the accelerated portion of such option
shall be exercisable as a Nonstatutory Option under the Federal tax laws.
I. The outstanding options 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. STOCK APPRECIATION RIGHTS
A. The Plan Administrator shall have full power and
authority, exercisable in its sole discretion, to grant special stock
appreciation rights to selected Optionees or other individuals eligible to
receive such grants under the Discretionary Grant Program.
B. Three types of stock appreciation rights shall be
authorized for issuance under the Plan: (i) tandem stock appreciation rights
("Tandem Rights"), (ii) stand-alone stock appreciation rights ("Stand-alone
Rights") and (iii) limited stock appreciation rights ("Limited Rights").
C. The following terms and conditions shall govern the grant
and exercise of Tandem Rights under this Article Two.
1. One or more Optionees may be granted a Tandem Right,
exercisable upon such terms and conditions as the Plan Administrator may
establish, to elect between the exercise of the underlying Article Two stock
option for shares of Common Stock or the surrender of that option in exchange
for a distribution from the Corporation in an amount equal to the excess of
(i) the Fair Market Value (on the option surrender date) of the number of
shares in which the Optionee is at the time vested under the surrendered
option (or surrendered portion thereof) over (ii) the aggregate exercise
price payable for such vested shares.
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2. No such option surrender shall be effective unless it
is approved by the Plan Administrator, either at the time of the actual
option surrender or at any earlier time. If the surrender is so approved,
then the distribution to which the Optionee shall accordingly become entitled
under this Section IV may be made in shares of Common Stock valued at Fair
Market Value on the option surrender date, in cash, or partly in shares and
partly in cash, as the Plan Administrator shall in its sole discretion deem
appropriate.
3. If the surrender of an option is not approved by the
Plan Administrator, then the Optionee shall retain whatever rights the
Optionee had under the surrendered option (or surrendered portion thereof) on
the option surrender date and may exercise such rights at any time prior to
the LATER of (i) five (5) business days after the receipt of the rejection
notice or (ii) the last day on which the option is otherwise exercisable in
accordance with the terms of the instrument evidencing such option, but in no
event may such rights be exercised more than ten (10) years after the date of
the option grant.
D. The following terms and conditions shall govern the grant
and exercise of Stand-alone Rights under this Article Two:
1. One or more individuals eligible to participate in the
Discretionary Grant Program may be granted a Stand-alone Right not tied to
any underlying option under the Discretionary Grant Program. The Stand-alone
Right shall cover a specified number of underlying shares of Common Stock and
shall be exercisable upon such terms and conditions as the Plan Administrator
may establish. Upon exercise of the Stand-alone Right, the holder shall be
entitled to receive a distribution from the Corporation in an amount equal to
the excess of (i) the aggregate Fair Market Value (on the exercise date) of
the shares of Common Stock underlying the exercised right over (ii) the
aggregate base price in effect for those shares.
2. The number of shares of Common Stock underlying each
Stand-alone Right and the base price in effect for those shares shall be
determined by the Plan Administrator in its sole discretion at the time the
Stand-alone Right is granted. In no event, however, may the base price per
share be less than the Fair Market Value per underlying share of Common Stock
on the grant date.
3. The distribution with respect to an exercised
Stand-alone Right may be made in shares of Common Stock valued at Fair Market
Value on the exercise date, in cash, or partly in shares and partly in cash,
as the Plan Administrator shall in its sole discretion deem appropriate.
E. The following terms and conditions shall govern the grant
and exercise of Limited Rights under this Article Two:
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<PAGE>
1. One or more Section 16 Insiders may, in the Plan
Administrator's sole discretion, be granted Limited Rights with respect to
their outstanding options under this Article Two.
2. Each individual holding one or more options with such a
Limited Right shall have the unconditional right, exercisable for a thirty
(30)-day period immediately following a Hostile Take-Over, to surrender each
such option to the Corporation for a cash distribution in an amount equal to
the excess of (A) the Take-Over Price of the shares of Common Stock which are
at the time subject to each surrendered option (whether or not the option is
otherwise vested and exercisable for those shares) over (B) the aggregate
exercise price payable for such shares. Such cash distribution shall be paid
within five (5) days following the option surrender date.
3. At the time such Limited Right is granted, the Plan
Administrator shall automatically pre-approve any subsequent exercise of that
right in accordance with the terms of this Paragraph E. Accordingly, no
further approval of the Plan Administrator or the Board shall be required at
the time of the actual option surrender and cash distribution.
4. The balance of the option (if any) shall remain
outstanding and exercisable in accordance with the documents evidencing such
option.
F. The shares of Common Stock underlying any stock
appreciation rights exercised under this Section IV shall NOT be available
for subsequent issuance under the Plan.
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ARTICLE THREE
AUTOMATIC OPTION GRANT PROGRAM
I. OPTION TERMS
A. GRANT DATES. Option grants shall be made on the dates
specified below:
1. Each individual who is first elected or appointed
as a non-employee Board member on or after the date of the 1999 Annual
Shareholders Meeting shall automatically be granted, on the date of such
initial election or appointment, a Non-Statutory Option to purchase 18,000
shares of Common Stock, provided that individual has not previously been in
the employ of the Corporation or any Parent or Subsidiary.
2. On the date of each Annual Shareholders Meeting,
beginning with the 1998 Annual Shareholders Meeting, each individual who is
re-elected to serve as an Eligible Director shall automatically be granted a
Non-Statutory Option to purchase 7,000 shares of Common Stock, provided such
individual has served as a non-employee Board member for at least six (6)
months. There shall be no limit on the number of such 7,000-share option
grants any one Eligible Director may receive over his or her period of Board
service, and non-employee Board members who have previously been in the
employ of the Corporation (or any Parent or Subsidiary) shall be eligible to
receive one or more such annual option grants over their period of continued
Board service.
3. Shareholder approval of this Plan at the 1999
Annual Shareholders Meeting shall constitute pre-approval of each option
grant made under this Automatic Option Grant Program on or after the date of
such Annual Meeting and the subsequent exercise of that option in accordance
with the terms and conditions of this Article Three and the stock option
agreement evidencing such grant.
4. The Automatic Option Grant Program under this Plan
shall supersede and replace the automatic option grant program currently in
effect for the non-employee Board members under the Corporation's 1998 Stock
Option Plan. Accordingly, upon shareholder approval of the Plan at the 1999
Annual Meeting, that program shall immediately terminate, and no further
option grants shall be made to the non-employee Board members under that
program. All options granted to the non-employee Board members on or after
the date of the 1999 Annual Shareholders Meeting, whether upon their initial
election or appointment to the Board upon their re-election at one or more of
the Corporation's subsequent annual stockholder meetings, shall be effected
solely and exclusively in accordance with the terms and provisions of this
Article Three. Should shareholder approval of the Plan not be obtained at the
1999 Annual Meeting, then the automatic option grant program under the
Corporation's 1998 Stock Option Plan shall remain in full force and effect,
and option grants shall be made under that program to all non-employee Board
members who will continue to serve on the Board at and after the 1999 Annual
Meeting.
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B. EXERCISE PRICE.
1. 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 option grant date.
2. The exercise price shall be payable in one or more
of the alternative forms authorized under the Discretionary Grant Program.
Except to the extent the sale and remittance procedure specified thereunder
is utilized, payment of the exercise price for the purchased shares must be
made on the Exercise Date.
C. OPTION TERM. Each option shall have a maximum term the
LESSER of (i) ten (10) years measured from the option grant date or (ii)
twelve (12) months following termination of Board service.
D. EXERCISE AND VESTING OF OPTIONS. Each 18,000-share
option shall be immediately exercisable for any or all of the option shares.
However, any shares purchased under the option shall be subject to repurchase
by the Corporation, at the exercise price paid per share, upon the Optionee's
cessation of Board service prior to vesting in those shares. Each such
18,000-share option shall vest, and the Corporation's repurchase right shall
lapse in two (2) successive equal annual installments over the Optionee's
period of Board service, with the first such installment to vest upon the
completion of one (1) year of Board service measured from the automatic grant
date. Each 7,000-share option shall be immediately exercisable for any or all
of the option shares as fully-vested shares.
E. LIMITED TRANSFERABILITY OF OPTIONS. Each option under
this Article Three 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 and shall be set forth in such documents
issued to the assignee as the Plan Administrator may deem appropriate. The
Optionee may also designate one or more persons as the beneficiary or
beneficiaries of his or her outstanding options under this Article Three, and
those options shall, in accordance with such designation, automatically be
transferred to such beneficiary or beneficiaries upon the Optionee's death
while holding those options. Such beneficiary or beneficiaries shall take the
transferred options subject to all the terms and conditions of the applicable
agreement evidencing each such transferred option, including (without
limitation) the limited time period during which the option may be exercised
following the Optionee's death.
F. TERMINATION OF BOARD SERVICE. The following provisions
shall govern the exercise of any options held by the Optionee at the time of
his or her cessation of Board service:
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(i) The Optionee (or, in the event of Optionee's
death, the personal representative of the Optionee's estate or
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 or the designated beneficiary or
beneficiaries of such option) shall have a twelve (12)-month
period following the date of such cessation of Board service
in which to exercise each such option.
(ii) During the twelve (12)-month exercise period,
the option may not be exercised in the aggregate for more than the
number of vested shares of Common Stock for which the option is
exercisable at the time of the Optionee's cessation of Board service.
(iii) Should the Optionee cease to serve as a Board
member by reason of death or Permanent Disability, then all shares
at the time subject to the option shall immediately vest so that
such option may, during the twelve (12)-month exercise period
following such cessation of Board service, be exercised for all or
any portion of those shares as fully-vested shares of Common Stock.
(iv) In no event shall the option remain exercisable
after the expiration of the option term. Upon the expiration of the
twelve (12)-month exercise period or (if earlier) upon the
expiration of the option term, the option shall terminate and cease
to be outstanding for any vested shares for which the option has not
been exercised. However, the option shall, immediately upon the
Optionee's cessation of Board service for any reason other than
death or Permanent Disability, terminate and cease to be outstanding
to the extent the option is not otherwise at that time exercisable
for vested shares.
II. CORPORATE TRANSACTION/CHANGE IN CONTROL/
HOSTILE TAKE-OVER
A. In the event of any Corporate Transaction, the shares of
Common Stock at the time subject to each outstanding option but not otherwise
vested shall automatically vest in full so that each such option shall,
immediately prior to the effective date of the Corporate Transaction, become
fully exercisable for all of the shares of Common Stock at the time subject
to such option and may be exercised for all or any portion of those shares as
fully-vested shares of Common Stock. Immediately following the consummation
of the Corporate Transaction, each automatic option grant shall terminate and
cease to be outstanding, except to the extent assumed by the successor
corporation (or parent thereof).
B. In connection with any Change in Control, the shares of
Common Stock at the time subject to each outstanding option but not otherwise
vested shall automatically vest in full so that each such option shall,
immediately prior to the effective date of the Change in Control, become
fully exercisable for all of the shares of Common Stock at the time subject to
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<PAGE>
such option and may be exercised for all or any portion of those shares as
fully-vested shares of Common Stock. Each such option shall remain
exercisable for such fully-vested option shares until the expiration or
sooner termination of the option term or the surrender of the option in
connection with a Hostile Take-Over.
C. All outstanding repurchase rights under this Article
Three shall automatically terminate, and the shares of Common Stock subject
to those terminated rights shall immediately vest in full, in the event of
any Corporate Transaction or Change in Control.
D. Upon the occurrence of a Hostile Take-Over, the Optionee
shall have a thirty (30)-day period in which to surrender to the Corporation
each of his or her outstanding automatic option grants. The Optionee shall in
return be entitled to a cash distribution from the Corporation in an amount
equal to the excess of (i) the Take-Over Price of the shares of Common Stock
at the time subject to each surrendered option (whether or not the Optionee
is otherwise at the time vested in those shares) over (ii) the aggregate
exercise price payable for such shares. Such cash distribution shall be paid
within five (5) days following the surrender of the option to the
Corporation. Stockholder approval of the Plan shall constitute pre-approval
of the grant of each such limited cash-out right and the subsequent exercise
of that right in accordance with the terms of this Paragraph D. Accordingly,
no approval or consent of the Board or any Plan Administrator shall be
required at the time of the actual option surrender and cash distribution.
E. 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 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.
F. The grant of options under the Automatic 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.
III. REMAINING TERMS
The remaining terms of each option granted under the
Automatic Option Grant Program shall be the same as the terms in effect for
option grants made under the Discretionary Grant Program.
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ARTICLE FOUR
STOCK ISSUANCE PROGRAM
I. STOCK ISSUANCE TERMS
Shares of Common Stock may be issued under the Stock
Issuance Program through direct and immediate issuances without any
intervening options. Shares of Common Stock may also be issued under the
Stock Issuance Program pursuant to share right awards which entitle the
recipients to receive those shares upon the attainment of designated
performance goals or Service requirements. Each such award shall be evidenced
by one or more documents which comply with the terms specified below.
A. PURCHASE PRICE.
1. The purchase price per share of Common Stock subject
to direct issuance shall be fixed by the Plan Administrator.
2. Subject to the provisions of Section II of Article
Six, shares of Common Stock may be issued under the Stock Issuance Program
for any of the following items of consideration which the Plan Administrator
may deem appropriate in each individual instance:
(i) cash or check made payable to the
Corporation, or
(ii) past services rendered to the Corporation (or
any Parent or Subsidiary).
B. VESTING/ISSUANCE PROVISIONS.
1. The Plan Administrator may issue shares of Common Stock
which are fully and immediately vested upon issuance as a stock bonus for
past services rendered the Corporation (or any Parent or Subsidiary) or which
are to vest in one or more installments over the Participant's period of
Service or upon attainment of specified performance objectives.
Alternatively, the Plan Administrator may issue share right awards which
shall entitle the recipient to receive a specified number of vested shares of
Common Stock upon the attainment of one or more performance goals or Service
requirements established by the Plan Administrator.
2. Any new, substituted or additional securities or other
property (including money paid other than as a regular cash dividend) which
the Participant may have the right to receive with respect to his or her
unvested shares of Common Stock by reason of any stock dividend, stock split,
recapitalization, combination of shares, exchange of shares or other change
affecting the outstanding Common Stock as a class without the Corporation's
receipt of
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<PAGE>
consideration shall be issued subject to (i) the same vesting requirements
applicable to the Participant's unvested shares of Common Stock and (ii) such
escrow arrangements as the Plan Administrator shall deem appropriate.
3. The Participant shall have full stockholder rights with
respect to the issued shares of Common Stock, whether or not the
Participant's interest in those shares is vested. Accordingly, the
Participant shall have the right to vote such shares and to receive any
regular cash dividends paid on such shares.
4. Should the Participant cease to remain in Service while
holding one or more unvested shares of Common Stock, or should the
performance objectives not be attained with respect to one or more such
unvested shares of Common Stock, then those shares shall be immediately
surrendered to the Corporation for cancellation, and the Participant shall
have no further stockholder rights with respect to those shares. To the
extent the surrendered shares were previously issued to the Participant for
consideration paid in cash or cash equivalent (including the Participant's
purchase-money indebtedness), the Corporation shall repay to the Participant
the cash consideration paid for the surrendered shares and shall cancel the
unpaid principal balance of any outstanding purchase-money note of the
Participant attributable to the surrendered shares.
5. The Plan Administrator may waive the surrender and
cancellation of one or more unvested shares of Common Stock (or other assets
attributable thereto) which would otherwise occur upon the cessation of the
Participant's Service or the non-attainment of the performance objectives
applicable to those shares. Such waiver shall result in the immediate vesting
of the Participant's interest in the shares of Common Stock as to which the
waiver applies. Such waiver may be effected at any time, whether before or
after the Participant's cessation of Service or the attainment or
non-attainment of the applicable performance objectives.
6. Outstanding share right awards shall automatically
terminate, and no shares of Common Stock shall actually be issued in
satisfaction of those awards, if the performance goals or Service
requirements established for such awards are not attained. The Plan
Administrator, however, shall have the authority to issue shares of Common
Stock in satisfaction of one or more outstanding share right awards as to
which the designated performance goals or Service requirements are not
attained.
II. CHANGE IN CONTROL/HOSTILE TAKE-OVER
A. All of the Corporation's outstanding repurchase rights
shall terminate automatically, and all the shares of Common Stock subject to
those terminated rights shall immediately vest in full, in the event of any
Change in Control, except to the extent (i) those repurchase rights are
assigned to the successor corporation (or parent thereof) or otherwise
continue in full force and effect pursuant to the terms of the Change in
Control or (ii) such accelerated vesting is precluded by other limitations
imposed by the Plan Administrator at the time the repurchase right is issued.
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B. The Plan Administrator shall have the discretionary
authority to structure one or more of the Corporation's repurchase rights
under the Stock Issuance Program so that those rights shall automatically
terminate in whole or in part, and the shares of Common Stock subject to
those terminated rights shall immediately vest, in the event the
Participant's Service should subsequently terminate 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 repurchase rights are assigned to the successor corporation (or
parent thereof).
C. The Plan Administrator shall also have the discretionary
authority to structure one or more of the Corporation's repurchase rights
under the Stock Issuance Program so that those rights shall automatically
terminate in whole or in part, and the shares of Common Stock subject to
those terminated rights shall immediately vest, in the event the
Participant's Service should subsequently terminate by reason of an
Involuntary Termination within a designated period (not to exceed eighteen
(18) months) following the effective date of any Change in Control.
III. SHARE ESCROW/LEGENDS
Unvested shares may, in the Plan Administrator's
discretion, be held in escrow by the Corporation until the Participant's
interest in such shares vests or may be issued directly to the Participant
with restrictive legends on the certificates evidencing those unvested shares.
20
<PAGE>
ARTICLE FIVE
RELOAD OPTION GRANT PROGRAM
I. TERMS AND CONDITIONS
A. The Primary Committee shall have full power and
authority, exercisable in its sole discretion either at the time a stock
option is granted under the Discretionary Grant Program or at any time while
such option remains outstanding, to incorporate a reload feature into that
option. To the extent an option with such a reload feature is subsequently
exercised through the delivery of previously-acquired shares of Common Stock
in payment of the exercise price for the shares purchased under that option,
the Optionee shall automatically be granted, at the time of such exercise, a
new option (the "Reload Option") to purchase the number of shares of Common
Stock so delivered. For purposes of this Article Five, the underlying option
with such a reload feature shall be referred to as the "Original Option."
B. The Primary Committee may, in its sole discretion,
provide in the instrument evidencing the reload feature that no Reload Option
shall be granted in the event the Original Option with such feature is
exercised before a specified period of time has elapsed after the grant date
of that Original Option.
C. The reload feature and each Reload Option shall each be
evidenced by instruments in such form as the Primary Committee shall from
time to time deem appropriate. However, the terms and provisions of each
Reload Option shall be exactly the same as the terms and provisions of the
Original Option to which such Reload Option relates, except to the extent
otherwise indicated below.
D. Unless the Primary Committee specifies otherwise in the
instrument evidencing the reload feature, the exercise price per share of the
Common Stock purchasable under the Reload Option shall be equal to the Fair
Market Value per share of Common Stock on the Reload Grant Date. The Primary
Committee shall specify in the instrument evidencing the reload feature the
period of time which must elapse following the exercise of the Original
Option before the Reload Option shall become exercisable. Once the period
specified by the Primary Committee has elapsed, the Reload Option shall
become immediately exercisable for all of the shares of Common Stock at the
time subject to that Reload Option.
E. The exercise price shall become immediately due upon
exercise of the Reload Option and shall be payable in the same form or forms
in which the exercise price may be paid under the Original Option.
21
<PAGE>
F. In no event shall any additional Reload Option be
granted in connection with the subsequent exercise of the Reload Option
granted with respect to the Original Option, whether or not shares of Common
Stock are delivered in payment of the exercise price of that Reload Option.
G. The Reload Option shall have the same maximum option
term and expiration date as the Original Option to which it relates, subject
to earlier termination at the same time the Original Option may so terminate.
H. The holder of the Reload Option shall have none of the
rights of a shareholder with respect to the shares covered by the Reload
Option until such individual shall have exercised the Reload Option, paid the
exercise price for the purchased shares and become the holder of record of
those shares.
22
<PAGE>
ARTICLE SIX
MISCELLANEOUS
I. FINANCING
The Plan Administrator may permit any Optionee to pay the
option exercise price under the Discretionary Grant Program by delivering a
full-recourse, interest bearing 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. In no event may the maximum credit
available to the Optionee 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 or share purchase.
II. 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, state and local income and
employment tax withholding requirements.
B. The Plan Administrator may, in its discretion, provide
any or all holders of Non-Statutory Options or unvested shares of Common
Stock under the Plan (other than the options granted or the shares issued
under the Automatic Option Grant Program) with the right to use shares of
Common Stock in satisfaction of all or part of the Taxes incurred by such
holders in connection with the exercise of their options or the vesting of
their shares. Such right may be provided to any such holder in either or both
of the following formats:
STOCK WITHHOLDING: The election to have the Corporation
withhold, from the shares of Common Stock otherwise issuable upon the
exercise of such Non-Statutory Option or the vesting of such shares, a
portion of those shares with an aggregate Fair Market Value equal to the
percentage of the Taxes (not to exceed one hundred percent (100%)) designated
by the holder.
STOCK DELIVERY: The election to deliver to the
Corporation, at the time the Non-Statutory Option is exercised or the shares
vest, one or more shares of Common Stock previously acquired by such holder
(other than in connection with the option exercise or share vesting
triggering the Taxes) with an aggregate Fair Market Value equal to the
percentage of the Taxes (not to exceed one hundred percent (100%)) designated
by the holder.
II. EFFECTIVE DATE AND TERM OF THE PLAN
A. The Plan and each of the equity incentive programs
thereunder shall become effective immediately upon the approval of the
Corporation's shareholders at the 1999 Annual Meeting. Options may be granted
under the Plan at any time on or after the date of such
23
<PAGE>
shareholder approval. If such shareholder approval is not obtained, then this
Plan shall not become effective, and no options shall be granted and no
shares shall be issued under the Plan.
B. The Plan shall terminate upon the EARLIEST of (i)
February 10, 2009, (ii) the date on which all shares available for issuance
under the Plan shall have been issued as fully-vested shares or (iii) the
termination of all outstanding options in connection with a Corporate
Transaction. Upon such plan termination, all outstanding option grants shall
thereafter continue to have force and effect in accordance with the
provisions of the documents evidencing such grants.
III. 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 stock options at the time outstanding under the
Plan unless the Optionee consents to such amendment or modification. In
addition, certain amendments may require shareholder approval in accordance
with applicable laws and regulations.
B. Options to purchase shares of Common Stock may be
granted under the Discretionary Option Grant Program that are in excess of
the number of shares then available for issuance under the Plan, provided any
excess shares actually issued under that program shall be held in escrow
until there is obtained shareholder approval of an amendment sufficiently
increasing the number of shares of Common Stock available for issuance under
the Plan. If such shareholder approval is not obtained within twelve (12)
months after the date the first such excess issuances are made, then (i) any
unexercised options granted on the basis of such excess shares shall
terminate and cease to be outstanding and (ii) the Corporation shall promptly
refund to the Optionees the exercise or purchase price paid for any excess
shares issued under the Plan and held in escrow, together with interest (at
the applicable Short Term Federal Rate) for the period the shares were held
in escrow, and such shares shall thereupon be automatically cancelled and
cease to be outstanding.
IV. USE OF PROCEEDS
Any cash proceeds received by the Corporation from the sale
of shares of Common Stock under the Plan shall be used for general corporate
purposes.
V. REGULATORY APPROVALS
A. The implementation of the Plan, the granting of any
stock option under the Plan and the issuance of any shares of Common Stock
upon the exercise of any granted option 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
shares of Common Stock issued pursuant to it.
24
<PAGE>
B. No shares of Common Stock or other assets shall be
issued or delivered under the 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 stock exchange (or the Nasdaq National
Market, if applicable) on which Common Stock is then listed for trading.
VI. 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.
25
<PAGE>
APPENDIX
The following definitions shall be in effect under the Plan:
A. AUTOMATIC OPTION GRANT PROGRAM shall mean the automatic
option grant program in effect under Article Three of the Plan.
B. BOARD shall mean the Corporation's Board of Directors.
C. CHANGE IN CONTROL shall mean a change in ownership or
control of the Corporation effected through either of the following
transactions:
(i) 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 thirty-five percent (35%) 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, or
(ii) a change in the composition of the Board
over a period of thirty-six (36) 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.
D. CODE shall mean the Internal Revenue Code of 1986, as
amended.
E. COMMON STOCK shall mean the Corporation's common stock.
F. CORPORATE TRANSACTION shall mean either of the following
shareholder-approved transactions to which the Corporation is a party:
(i) a merger or consolidation in which securities
possessing more than fifty percent (50%) of the total
combined voting power of the Corporation's outstanding
securities are transferred to a person or persons different
from the persons holding those securities immediately prior
to such transaction, or
A-1.
<PAGE>
(ii) the sale, transfer or other disposition of
all or substantially all of the Corporation's assets in
complete liquidation or dissolution of the Corporation.
G. 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. its successors.
H. DISCRETIONARY GRANT PROGRAM shall mean the discretionary
grant program in effect under Article Two of the Plan.
I. ELIGIBLE DIRECTOR shall mean a non-employee Board member
eligible to participate in the Automatic Option Grant Program in accordance
with the eligibility provisions of Article One.
J. 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.
K. EXERCISE DATE shall mean the date on which the
Corporation shall have received written notice of the option exercise.
L. FAIR MARKET VALUE per share of Common Stock on any
relevant date shall be determined in accordance with the following provisions:
(i) If the Common Stock is at the time traded on
the Nasdaq National Market, then the Fair Market Value
shall be deemed equal to the closing selling price per
share of Common Stock on the date in question, as such
price is reported 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.
(ii) If the Common Stock is at the time listed on
any Stock Exchange, then the Fair Market Value shall be
deemed equal to 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.
M. HOSTILE TAKE-OVER shall mean 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
A-2.
<PAGE>
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.
N. INCENTIVE OPTION shall mean an option which satisfies
the requirements of Code Section 422.
O. INVOLUNTARY TERMINATION shall mean the termination of
the Service of any individual which occurs by reason of:
(i) such individual's involuntary dismissal or
discharge by the Corporation for reasons other than
Misconduct, or
(ii) 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.
P. MISCONDUCT shall mean the commission of any act of
fraud, embezzlement or dishonesty by the Optionee, any unauthorized use or
disclosure by such person of confidential information or trade secrets of the
Corporation (or any Parent or Subsidiary), or any other intentional
misconduct by such person 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).
Q. 1934 ACT shall mean the Securities Exchange Act of 1934,
as amended.
R. NON-STATUTORY OPTION shall mean an option not intended
to satisfy the requirements of Code Section 422.
S. OPTIONEE shall mean any person to whom an option is
granted under the Discretionary Option Grant or Automatic Option Grant
Program.
T. 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.
A-3.
<PAGE>
U. 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
Program, Permanent Disability or Permanently Disabled shall mean the
inability of the non-employee Board member to perform his or her usual duties
as a Board member 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.
V. PLAN shall mean the Corporation's 1999 Stock
Option/Stock Issuance Plan, as set forth in this document.
W. PLAN ADMINISTRATOR shall mean the particular entity,
whether the Primary Committee, the Board or the Secondary Committee, which is
authorized to administer the Discretionary Grant and Stock Issuance Programs
with respect to one or more classes of eligible persons, to the extent such
entity is carrying out its administrative functions under those programs with
respect to the persons under its jurisdiction.
X. PLAN EFFECTIVE DATE shall mean February 10, 1999, the
date the Plan was adopted by the Board.
Y. PRIMARY COMMITTEE shall mean the committee of two (2)
or more non-employee Board members appointed by the Board to administer the
Discretionary Grant and Stock Issuance Programs with respect to Section 16
Insiders.
Z. RELOAD OPTION GRANT PROGRAM shall mean the special
option grant program in effect under Article Five of the Plan.
AA. SECONDARY COMMITTEE shall mean a committee of one (1)
or more Board members appointed by the Board to administer the Discretionary
Grant and Stock Issuance Programs with respect to eligible persons other than
Section 16 Insiders.
BB. SECTION 16 INSIDER shall mean an officer or director
of the Corporation subject to the short-swing profit liabilities of
Section 16 of the 1934 Act.
CC. SERVICE shall mean the performance of services for the
Corporation (or any Parent or Subsidiary) by a person in the capacity of an
Employee, a non-employee member of the board of directors or a consultant or
independent advisor, except to the extent otherwise specifically provided in
the documents evidencing the option grant or stock issuance.
DD. STOCK EXCHANGE shall mean either the American Stock
Exchange or the New York Stock Exchange.
EE. STOCK ISSUANCE AGREEMENT shall mean the agreement
entered into by the Corporation and the Participant at the time of
issuance of shares of Common Stock under the Stock Issuance Program.
A-4.
<PAGE>
FF. STOCK ISSUANCE PROGRAM shall mean the stock issuance
program in effect under Article Four of the Plan.
GG. 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.
HH. TAKE-OVER PRICE shall mean the greater of (i) the Fair
Market Value per share of Common Stock on the date the option is surrendered
to the Corporation in connection with a Hostile Take-Over or (ii) the highest
reported price per share of Common Stock paid by the tender offeror in
effecting such Hostile Take-Over. However, if the surrendered option is an
Incentive Option, the Take-Over Price shall not exceed the clause (i) price
per share.
II. TAXES shall mean the Federal, state and local income
and employment withholding taxes to which the holder of Non-Statutory Options
or unvested shares of Common Stock may become subject in connection with the
exercise of those options or the vesting of those shares.
JJ. 10% SHAREHOLDER shall mean the owner of stock (as
determined under Code Section 424(d)) possessing more than ten percent
(10%) of the total combined voting power of all classes of stock of the
Corporation (or any Parent or Subsidiary).
A-5.
<PAGE>
Exhibit 99.2
ENCAD, INC.
NOTICE OF GRANT OF STOCK OPTION
Notice is hereby given of the following option grant (the
"Option") to purchase shares of the Common Stock of ENCAD, Inc. (the
"Corporation"):
Optionee:
------------------------------------------------------------
Grant Date:
------------------------------------------------------------
Vesting Commencement Date:
------------------------------------------------------------
Exercise Price: $ per share
------------------------------------------------------------
Number of Option Shares: shares
------------------------------------------------------------
Expiration Date:
------------------------------------------------------------
Type of Option: Incentive Stock Option
-----------
Non-Statutory Stock Option
-----------
EXERCISE SCHEDULE: The Option shall become exercisable for
twenty-five percent (25%) of the Option Shares upon Optionee's
completion of one (1) year of Service measured from the
Vesting Commencement Date and shall become exercisable for the
balance of the Option Shares in a series of thirty-six (36)
successive equal monthly installments upon Optionee's
completion of each additional month of Service over the
thirty-six (36) month period measured from the first
anniversary of the Vesting Commencement Date. In no event
shall the Option become exercisable for any additional Option
Shares after Optionee's cessation of Service.
Optionee understands and agrees that the Option is granted
subject to and in accordance with the terms of the ENCAD, Inc. 1999 Stock
Option/Stock Issuance Plan (the "Plan"). Optionee further agrees to be bound
by the terms of the Plan and the terms of the Option as set forth in the
Stock Option Agreement attached hereto as EXHIBIT A. Optionee hereby
acknowledges the receipt of a copy of the official prospectus for the Plan in
the form attached hereto as EXHIBIT B. A copy of the Plan is available upon
request made to the Corporate Secretary at the Corporation's principal
offices.
<PAGE>
EMPLOYMENT AT WILL. Nothing in this Notice or in the
attached Stock Option Agreement or in the Plan shall confer upon 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 Optionee, which
rights are hereby expressly reserved by each, to terminate Optionee's Service
at any time for any reason, with or without cause.
DEFINITIONS. All capitalized terms in this Notice shall
have the meaning assigned to them in this Notice or in the attached Stock
Option Agreement.
DATED:
---------------------------
ENCAD, INC.
By:
-----------------------------------
Title:
--------------------------------
--------------------------------------
OPTIONEE
Address:
------------------------------
-----------------------------------
ATTACHMENTS
EXHIBIT A - STOCK OPTION AGREEMENT
EXHIBIT B - PLAN SUMMARY AND PROSPECTUS
2
<PAGE>
Exhibit 99.3
ENCAD, INC.
STOCK OPTION AGREEMENT
RECITALS
A. The Board has adopted the Plan for the purpose of
retaining the services of selected Employees, non-employee members of the
Board or of the board of directors of any Parent or Subsidiary and
consultants and other independent advisors who provide services to the
Corporation (or any Parent or Subsidiary).
B. Optionee is to render valuable services to the
Corporation (or a Parent or Subsidiary), and this Agreement is executed
pursuant to, and is intended to carry out the purposes of, the Plan in
connection with the Corporation's grant of an option to Optionee.
C. All capitalized terms in this Agreement shall have the
meaning assigned to them in the attached Appendix.
NOW, THEREFORE, it is hereby agreed as follows:
1. GRANT OF OPTION. The Corporation hereby grants to
Optionee, as of the Grant Date, an option to purchase up to the number of
Option Shares specified in the Grant Notice. The Option Shares shall be
purchasable from time to time during the option term specified in Paragraph 2
at the Exercise Price.
2. OPTION TERM. This option shall have a 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 5 or 6.
3. LIMITED TRANSFERABILITY.
(a) This option shall be neither transferable nor
assignable by Optionee other than by will or the laws of inheritance
following Optionee's death and may be exercised, during Optionee's lifetime,
only by Optionee. However, Optionee may designate one or more persons as the
beneficiary or beneficiaries of this option, and this option shall, in
accordance with such designation, automatically be transferred to such
beneficiary or beneficiaries upon the Optionee's death while holding such
option. Such beneficiary or beneficiaries shall take the transferred option
subject to all the terms and conditions of this Agreement, including (without
limitation) the limited time period during which this option may, pursuant to
Paragraph 5, be exercised following Optionee's death.
(b) If this option is designated a Non-Statutory Option
in the Grant Notice, then this option may, in connection with the Optionee's
estate plan, be assigned in whole or in part during Optionee's lifetime to
one or more members of Optionee's immediate family or to a trust established
for the exclusive benefit of one or more such family members. The assigned
portion shall be exercisable only by the person or persons who acquire a
proprietary interest in the option pursuant to such assignment. The terms
applicable to the assigned portion shall be the same as those in effect for
this option immediately prior to such assignment.
<PAGE>
4. DATES OF EXERCISE. This option shall become exercisable
for the Option Shares in one or more installments as specified in the Grant
Notice. As the option becomes exercisable for such installments, those
installments shall accumulate, and the option shall remain exercisable for
the accumulated installments until the Expiration Date or sooner termination
of the option term under Paragraph 5 or 6.
5. CESSATION OF SERVICE. The option term specified in
Paragraph 2 shall terminate (and this option shall cease to be outstanding)
prior to the Expiration Date should any of the following provisions become
applicable:
(a) Should Optionee cease to remain in Service for any
reason (other than death, Permanent Disability or Misconduct) while holding
this option, then Optionee shall have a period of three (3) months
(commencing with the date of such cessation of Service) during which to
exercise this option, but in no event shall this option be exercisable at any
time after the Expiration Date.
(b) Should Optionee die while holding this option, then
the personal representative of Optionee's estate or the person or persons to
whom the option is transferred pursuant to Optionee's will or the laws of
inheritance shall have the right to exercise this option. However, if
Optionee has designated one or more beneficiaries of this option, then those
persons shall have the exclusive right to exercise this option following
Optionee's death. Any such right to exercise this option shall lapse, and
this option shall cease to be outstanding, upon the earlier of (i) the
expiration of the twelve (12)-month period measured from the date of
Optionee's death or (ii) the Expiration Date.
(c) Should Optionee cease Service by reason of Permanent
Disability while holding this option, then Optionee shall have a period of
twelve (12) months (commencing with the date of such cessation of Service)
during which to exercise this option. In no event shall this option be
exercisable at any time after the Expiration Date.
(d) During the limited period of post-Service
exercisability, this option may not be exercised in the aggregate for more
than the number of Option Shares for which the option is exercisable at the
time of Optionee's cessation of Service. Upon the expiration of such limited
exercise period or (if earlier) upon the Expiration Date, this option shall
terminate and cease to be outstanding for any exercisable Option Shares for
which the option has not been exercised. However, this option shall,
immediately upon Optionee's cessation of Service for any reason, terminate
and cease to be outstanding with respect to any Option Shares for which this
option is not otherwise at that time exercisable.
(e) Should Optionee's Service be terminated for
Misconduct, then this option shall terminate immediately and cease to remain
outstanding.
2
<PAGE>
6. SPECIAL ACCELERATION OF OPTION.
(a) This option, to the extent outstanding at the time
of a Corporate Transaction but not otherwise fully exercisable, shall
automatically accelerate so that this option shall, immediately prior to the
effective date of such 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 those Option Shares as fully vested shares of Common Stock. No
such acceleration of this option shall occur, however, if and to the extent:
(i) this option is, in connection with the Corporate Transaction, to be
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 Option Shares over
the aggregate Exercise Price payable for such shares) and provides for
subsequent payout in accordance with the same option exercise/vesting
schedule set forth in the Grant Notice.
(b) Immediately following the 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.
(c) If this option is assumed in connection with a
Corporate Transaction, then this option shall be appropriately adjusted,
immediately after such Corporate Transaction, to apply to the number and
class of securities which would have been issuable to Optionee in
consummation of such Corporate Transaction had the option been exercised
immediately prior to such Corporate Transaction, and appropriate adjustments
shall also be made to the Exercise Price, PROVIDED the aggregate Exercise
Price shall remain the same.
(d) This Agreement shall not in any way affect the right
of the Corporation to adjust, reclassify, reorganize or otherwise change its
capital or business structure or to merge, consolidate, dissolve, liquidate
or sell or transfer all or any part of its business or assets.
7. ADJUSTMENT IN OPTION SHARES. Should any change be made to
the Common Stock by reason of any stock split, stock dividend,
recapitalization, combination of shares, exchange of shares or other change
affecting the outstanding Common Stock as a class without the Corporation's
receipt of consideration, appropriate adjustments shall be made to (i) the
total number and/or class of securities subject to this option and (ii) the
Exercise Price in order to reflect such change and thereby preclude a
dilution or enlargement of benefits hereunder.
8. STOCKHOLDER RIGHTS. The holder of this option shall not have
any stockholder rights with respect to the Option Shares until such person
shall have exercised the option, paid the Exercise Price and become a holder
of record of the purchased shares.
3
<PAGE>
9. MANNER OF EXERCISING OPTION.
(a) In order to exercise this option for any or all of the
Option Shares for which this option is at the time exercisable, Optionee (or
any other person or persons exercising the option) must take the following
actions:
(i) Execute and deliver to the Corporation a Notice
of Exercise for the Option Shares for which the option is exercised.
(ii) Pay the aggregate Exercise Price for the purchased
shares in one or more of the following forms:
(A) cash or check made payable to the Corporation;
(B) a promissory note payable to the Corporation,
but only to the xtent authorized by the Plan Administrator in
accordance with Paragraph 13;
(C) shares of Common Stock held by Optionee (or any
other person or persons exercising the option) for the
requisite period necessary to avoid a charge to the
Corporation's earnings for financial reporting purposes and
valued at Fair Market Value on the Exercise Date; or
(D) through a special sale and remittance procedure
pursuant to which Optionee (or any other person or persons
exercising the option) shall concurrently provide irrevocable
instructions (i) to a Corporation-designated brokerage firm to
effect the immediate sale of the purchased shares and remit to
the Corporation, out of the sale proceeds available on the
settlement date, sufficient funds to cover the aggregate
Exercise Price payable for the purchased shares plus all
applicable Federal, state and local income and employment taxes
required to be withheld by the Corporation by reason of such
exercise and (ii) to the Corporation to deliver the
certificates for the purchased shares directly to such
brokerage firm in order to complete the sale.
Except to the extent the sale and remittance
procedure is utilized in connection with the option exercise,
payment of the Exercise Price must accompany the Notice of
Exercise delivered to the Corporation in connection with the
option exercise.
(iii) Furnish to the Corporation appropriate documentation
that the person or persons exercising the option (if other than
Optionee) have the right to exercise this option.
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<PAGE>
(iv) Make appropriate arrangements with the Corporation
(or Parent or Subsidiary employing or retaining Optionee) for the
satisfaction of all Federal, state and local income and employment
tax withholding requirements applicable to the option exercise.
(b) As soon as practical after the Exercise Date, the
Corporation shall issue to or on behalf of Optionee (or any other person or
persons exercising this option) a certificate for the purchased Option
Shares, with the appropriate legends affixed thereto.
(c) In no event may this option be exercised for any fractional
shares.
10. COMPLIANCE WITH LAWS AND REGULATIONS.
(a) The exercise of this option and the issuance of the
Option Shares upon such exercise shall be subject to compliance by the
Corporation and Optionee with all applicable requirements of law relating
thereto and with all applicable regulations of any stock exchange (or the
Nasdaq National Market, if applicable) on which the Common Stock may be
listed for trading at the time of such exercise and issuance.
(b) The inability of the Corporation to obtain approval from
any regulatory body having authority deemed by the Corporation to be
necessary to the lawful issuance and sale of any Common Stock pursuant to
this option shall relieve the Corporation of any liability with respect to
the non-issuance or sale of the Common Stock as to which such approval shall
not have been obtained. The Corporation, however, shall use its best efforts
to obtain all such approvals.
11. SUCCESSORS AND ASSIGNS. Except to the extent otherwise provided
in Paragraphs 3 and 6, the provisions of this Agreement shall inure to the
benefit of, and be binding upon, the Corporation and its successors and
assigns and Optionee, Optionee's assigns, the legal representatives, heirs
and legatees of Optionee's estate and any beneficiaries of this option
designated by Optionee.
12. NOTICES. Any notice required to be given or delivered to the
Corporation under the terms of this Agreement shall be in writing and
addressed to the Corporation at its principal corporate offices. Any notice
required to be given or delivered to Optionee shall be in writing and
addressed to Optionee at the address indicated below Optionee's signature
line on the Grant Notice. All notices shall be deemed effective upon personal
delivery or upon deposit in the U.S. mail, postage prepaid and properly
addressed to the party to be notified.
13. FINANCING. The Plan Administrator may, in its absolute
discretion and without any obligation to do so, permit Optionee to pay the
Exercise Price for the purchased Option Shares by delivering a full-recourse
promissory note payable to the Corporation. The terms of any such promissory
note (including the interest rate, the requirements for collateral and the
terms of repayment) shall be established by the Plan Administrator in its
sole discretion.
5
<PAGE>
14. CONSTRUCTION. This Agreement and the option evidenced hereby are
made and granted pursuant to the Plan and are in all respects limited by and
subject to the terms of the Plan. All decisions of the Plan Administrator
with respect to any question or issue arising under the Plan or this
Agreement shall be conclusive and binding on all persons having an interest
in this option.
15. GOVERNING LAW. The interpretation, performance and enforcement
of this Agreement shall be governed by the laws of the State of California
without resort to that State's conflict-of-laws rules.
16. EXCESS SHARES. If the Option Shares covered by this Agreement
exceed, as of the Grant Date, the number of shares of Common Stock which may
without stockholder approval be issued under the Plan, then this option shall
be void with respect to those excess shares, unless stockholder approval of
an amendment sufficiently increasing the number of shares of Common Stock
issuable under the Plan is obtained in accordance with the provisions of the
Plan.
17. ADDITIONAL TERMS APPLICABLE TO AN INCENTIVE OPTION. In the event
this option is designated an Incentive Option in the Grant Notice, the
following terms and conditions shall also apply to the grant:
(a) This option shall cease to qualify for favorable tax
treatment as an Incentive Option if (and to the extent) this option is
exercised for one or more Option Shares: (A) more than three (3) months after
the date Optionee ceases to be an Employee for any reason other than death or
Permanent Disability or (B) more than twelve (12) months after the date
Optionee ceases to be an Employee by reason of Permanent Disability.
(b) No installment under this option shall qualify for
favorable tax treatment as an Incentive Option if (and to the extent) the
aggregate Fair Market Value (determined at the Grant Date) of the Common
Stock for which such installment first becomes exercisable hereunder would,
when added to the aggregate value (determined as of the respective date or
dates of grant) of the Common Stock or other securities for which this option
or any other Incentive Options granted to Optionee prior to the Grant Date
(whether under the Plan or any other option plan of the Corporation or any
Parent or Subsidiary) first become exercisable during the same calendar year,
exceed One Hundred Thousand Dollars ($100,000) in the aggregate. Should such
One Hundred Thousand Dollar ($100,000) limitation be exceeded in any calendar
year, this option shall nevertheless become exercisable for the excess shares
in such calendar year as a Non-Statutory Option.
(c) Should the exercisability of this option be accelerated
upon a Corporate Transaction, then this option shall qualify for favorable
tax treatment as an Incentive Option only to the extent the aggregate Fair
Market Value (determined at the Grant Date) of the Common Stock for which
this option first becomes exercisable in the calendar year in which the
Corporate Transaction occurs does not, when added to the aggregate value
(determined as of the respective date or dates of grant) of the Common Stock
or other securities for which this option
6
<PAGE>
or one or more other Incentive Options granted to Optionee prior to the
Grant Date (whether under the Plan or any other option plan of the
Corporation or any Parent or Subsidiary) first become exercisable during the
same calendar year, exceed One Hundred Thousand Dollars ($100,000) in the
aggregate. Should the applicable One Hundred Thousand Dollar ($100,000)
limitation be exceeded in the calendar year of such Corporate Transaction,
the option may nevertheless be exercised for the excess shares in such
calendar year as a Non-Statutory Option.
(d) Should Optionee hold, in addition to this option, one or
more other options to purchase Common Stock which become exercisable for the
first time in the same calendar year as this option, then the foregoing
limitations on the exercisability of such options as Incentive Options shall
be applied on the basis of the order in which such options are granted.
7
<PAGE>
EXHIBIT I
NOTICE OF EXERCISE
I hereby notify ENCAD, Inc. (the "Corporation") that I
elect to purchase ______________ shares of the Corporation's Common Stock
(the "Purchased Shares") at the option exercise price of $_____________ per
share (the "Exercise Price") pursuant to that certain option (the "Option")
granted to me under the Corporation's 1999 Stock Option/Stock Issuance Plan
on ____________________, _______.
Concurrently with the delivery of this Exercise Notice to
the Corporation, I shall hereby pay to the Corporation the Exercise Price for
the Purchased Shares in accordance with the provisions of my agreement with
the Corporation (or other documents) evidencing the Option and shall deliver
whatever additional documents may be required by such agreement as a
condition for exercise. Alternatively, I may utilize the special
broker-dealer sale and remittance procedure specified in my agreement to
effect payment of the Exercise Price.
Date ,
------------------------------ -------
-------------------------------------
Optionee
Address:
-----------------------------
-------------------------------------
Print name in exact manner it is to
appear on the stock certificate:
-------------------------------------
Address to which certificate is to be
sent, if different from address above:
-------------------------------------
-------------------------------------
Social Security Number:
-------------------------------------
<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 shares of the Corporation's common stock.
D. CODE shall mean the Internal Revenue Code of 1986, as amended.
E. CORPORATE TRANSACTION shall mean either of the following
stockholder-approved transactions to which the Corporation is a party:
(i) a merger or consolidation in which securities
possessing more than fifty percent (50%) of the total combined
voting power of the Corporation's outstanding securities are
transferred to a person or persons different from the persons
holding those securities immediately prior to such transaction, or
(ii) the sale, transfer or other disposition of all or
substantially all of the Corporation's assets in complete
liquidation or dissolution of the Corporation.
F. CORPORATION shall mean ENCAD, Inc., a Delaware corporation, and
any successor corporation 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 option shall have
been exercised in accordance with Paragraph 9 of the Agreement.
I. EXERCISE PRICE shall mean the exercise price per Option Share as
specified in the Grant Notice.
J. EXPIRATION DATE shall mean the date on which the option expires
as specified in the Grant Notice.
K. FAIR MARKET VALUE per share of Common Stock on any relevant date
shall be determined in accordance with the following provisions:
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<PAGE>
(i) If the Common Stock is at the time traded on the
Nasdaq National Market, then the Fair Market Value shall be deemed
equal to the closing selling price per share of Common Stock on the
date in question, as the price is reported by the National Association
of Securities Dealers on the Nasdaq 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, or
(ii) If the Common Stock is at the time listed on any
Stock Exchange, then the Fair Market Value shall be deemed equal to
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.
L. GRANT DATE shall mean the date of grant of the option as
specified in the Grant Notice.
M. GRANT NOTICE shall mean the Notice of Grant of Stock Option
accompanying the Agreement, pursuant to which Optionee has been informed of
the basic terms of the option evidenced hereby.
N. INCENTIVE OPTION shall mean an option which satisfies the
requirements of Code Section 422.
O. MISCONDUCT shall mean the commission of any act of fraud,
embezzlement or dishonesty by Optionee, any unauthorized use or disclosure by
Optionee of confidential information or trade secrets of the Corporation (or
any Parent or Subsidiary), or any other intentional misconduct by Optionee
adversely affecting the business or affairs of the Corporation (or any Parent
or Subsidiary) in a material manner. The foregoing definition shall not be
deemed to be inclusive of all the acts or omissions which the Corporation (or
any Parent or Subsidiary) may consider as grounds for the dismissal or
discharge of Optionee or any other individual in the Service of the
Corporation (or any Parent or Subsidiary).
P. NON-STATUTORY OPTION shall mean an option not intended to satisfy
the requirements of Code Section 422.
Q. NOTICE OF EXERCISE shall mean the notice of exercise in the form
attached hereto as Exhibit I.
R. OPTION SHARES shall mean the number of shares of Common Stock
subject to the option as specified in the Grant Notice.
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<PAGE>
S. OPTIONEE shall mean the person to whom the option is granted as
specified in the Grant Notice.
T. 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.
U. PERMANENT DISABILITY shall mean the inability of Optionee to
engage in any substantial gainful activity by reason of any medically
determinable physical or mental impairment which is expected to result in
death or has lasted or can be expected to last for a continuous period of
twelve (12) months or more.
V. PLAN shall mean the Corporation's 1999 Stock Option/Stock
Issuance Plan.
W. PLAN ADMINISTRATOR shall mean either the Board or a committee of
the Board acting in its capacity as administrator of the Plan.
X. SERVICE shall mean the Optionee's performance of services for the
Corporation (or any Parent or Subsidiary) in the capacity of an Employee, a
non-employee member of the board of directors or a consultant or independent
advisor.
Y. STOCK EXCHANGE shall mean 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.
A-3
<PAGE>
Exhibit 99.4
ADDENDUM
TO
STOCK OPTION AGREEMENT
The following provisions are hereby incorporated into, and
are hereby made a part of, that certain Stock Option Agreement (the "Option
Agreement") by and between ENCAD, Inc. (the "Corporation") and
____________________________________ ("Optionee") evidencing the stock option
(the "Option") granted this day to Optionee under the terms of the
Corporation's 1999 Stock Option/Stock Issuance Plan, and such provisions are
effective immediately. All capitalized terms in this Addendum, to the extent
not otherwise defined herein, shall have the meanings assigned to them in the
Option Agreement.
INVOLUNTARY TERMINATION FOLLOWING
CORPORATE TRANSACTION/CHANGE IN CONTROL
1. To the extent the Option is, in connection with a Corporate
Transaction, to be assumed in accordance with Paragraph 6 of the Option
Agreement, the Option shall not accelerate upon the occurrence of that
Corporate Transaction, and the Option shall accordingly continue, over
Optionee's period of Service after the Corporate Transaction, to become
exercisable for the Option Shares in one or more installments in accordance
with the provisions of the Option Agreement. However, immediately upon an
Involuntary Termination of Optionee's Service within eighteen (18) months
following such Corporate Transaction, the assumed Option, to the extent
outstanding at the time but not otherwise fully exercisable, shall
automatically accelerate so that the Option shall become immediately
exercisable for all the Option Shares at the time subject to the Option and
may be exercised for any or all of those Option Shares as fully vested shares.
2. The Option shall not accelerate upon the occurrence of a
Change in Control, and the Option shall, over Optionee's period of Service
following such Change in Control, continue to become exercisable for the
Option Shares in one or more installments in accordance with the provisions
of the Option Agreement. However, immediately upon an Involuntary Termination
of Optionee's Service within eighteen (18) months following the Change in
Control, the Option, to the extent outstanding at the time but not otherwise
fully exercisable, shall automatically accelerate so that the Option shall
become immediately exercisable for all the Option Shares at the time subject
to the Option and may be exercised for any or all of those Option Shares as
fully vested shares.
3. The Option as accelerated pursuant to this Addendum shall
remain so exercisable until the earlier of (i) the Expiration Date or (ii)
the expiration of the one (1)-year period measured from the date of the
Optionee's Involuntary Termination.
<PAGE>
4. For purposes of this Addendum the following definitions
shall be in effect:
(i) An INVOLUNTARY TERMINATION shall mean the termination
of Optionee's Service by reason of:
(A) Optionee's involuntary dismissal or discharge by
the Corporation for reasons other than Misconduct, or
(B) Optionee's voluntary resignation following (A) a
change in Optionee's position with the Corporation (or Parent or
Subsidiary employing Optionee) which materially reduces Optionee's
duties and responsibilities or the level of management to which
Optionee reports, (B) a reduction in Optionee's 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
Optionee's place of employment by more than fifty (50) miles,
provided and only if such change, reduction or relocation is
effected by the Corporation without Optionee's consent.
(ii) A CHANGE IN CONTROL shall be deemed to occur in the
event of a change in ownership or control of the Corporation
effected through either of the following transactions:
(A) 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 Securities Exchange Act of
1934, as amended) of securities possessing more than thirty-five
percent (35%) 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
(B) a change in the composition of the Board over a
period of thirty-six (36) 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 (i) have been Board members continuously
since the beginning of such period or (ii) 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 (i) who
were still in office at the time the Board approved such election or
nomination.
5. The provisions of Paragraph 1 of this Addendum shall govern
the period for which the Option is to remain exercisable following the
Involuntary Termination of Optionee's Service within eighteen (18) months
after the Corporate Transaction or Change in Control and shall supersede any
provisions to the contrary in Paragraph 5 of the Option Agreement.
<PAGE>
IN WITNESS WHEREOF, ENCAD, Inc. has caused this Addendum
to be executed by its duly-authorized officer as of the Effective Date
specified below.
ENCAD, INC.
By:
----------------------------------------
Title:
-------------------------------------
EFFECTIVE DATE:
--------------------------
<PAGE>
Exhibit 99.5
ADDENDUM
TO
STOCK OPTION AGREEMENT
The following provisions are hereby incorporated into, and
are hereby made a part of, that certain Stock Option Agreement (the "Option
Agreement") by and between ENCAD, Inc. (the "Corporation") and
________________________________________ ("Optionee") evidencing the stock
option (the "Option") granted this day to Optionee under the terms of the
Corporation's 1999 Stock Option/Stock Issuance Plan, and such provisions are
effective immediately. All capitalized terms in this Addendum, to the extent
not otherwise defined herein, shall have the meanings assigned to them in the
Option Agreement.
LIMITED STOCK APPRECIATION RIGHT
1. Optionee is hereby granted a limited stock appreciation
right exercisable upon the following terms and conditions:
(a) Optionee shall have the unconditional right,
exercisable at any time during the thirty (30)-day period
immediately following a Hostile Take-Over, to surrender the Option
to the Corporation. In return for the surrendered Option, Optionee
shall receive a cash distribution from the Corporation in an amount
equal to the excess of (A) the Take-Over Price of the shares of
Common Stock which are the time subject to the surrendered option
(whether or not the Option is otherwise at the time exercisable for
those shares) over (B) the aggregate Exercise Price payable for such
shares.
(b) To exercise this limited stock appreciation
right, Optionee must, during the applicable thirty (30)-day exercise
period, provide the Corporation with written notice of the option
surrender in which there is specified the number of Option Shares as
to which the Option is being surrendered. Such notice must be
accompanied by the return of Optionee's copy of the Option
Agreement, together with any written amendments to such Agreement.
The cash distribution shall be paid to Optionee within five (5)
business days following such delivery date. The exercise of the
limited stock appreciation right in accordance with the terms of
this Addendum is hereby pre-approved by the Plan Administrator in
advance of such exercise, and no further approval of the Plan
Administrator or the Board shall be required at the time of the
actual option surrender and cash distribution. Upon receipt of such
cash distribution, the Option shall be cancelled with respect to the
Option Shares for which the Option has been surrendered, and
Optionee shall cease to have any further right to acquire those
Option Shares under the Option Agreement. The Option shall, however,
remain outstanding for the balance of the Option Shares (if any) in
accordance with the terms of the Option Agreement, and the
Corporation shall issue a replacement stock option agreement
(substantially in the same form of the surrendered Option Agreement)
for those remaining Option Shares.
<PAGE>
(c) In no event may this limited stock appreciation right
be exercised when there is not a positive spread between the Fair
Market Value of the Option Shares subject to the surrendered option
and the aggregate Exercise Price payable for such shares. This
limited stock appreciation right shall in all events terminate upon
the expiration or sooner termination of the option term and may not
be assigned or transferred by Optionee, except to the extent the
Option is transferable in accordance with the provisions of the
Option Agreement.
2. For purposes of this Addendum, the following definitions
shall be in effect:
(a) A HOSTILE TAKE-OVER shall be deemed to occur upon
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 Securities Exchange Act of
1934, as amended) 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 which the Board does not
recommend such stockholders to accept.
(b) The TAKE-OVER PRICE per share shall be deemed to
be equal to the greater of (A) the Fair Market Value per Option
Share on the option surrender date or (B) the highest reported price
per share of Common Stock paid by the tender offeror in effecting
the Hostile Take-Over. However, if the surrendered Option is
designated as an Incentive Option in the Grant Notice, then the
Take-Over Price shall not exceed the clause (A) price per share.
IN WITNESS WHEREOF, ENCAD, Inc. has caused this Addendum
to be executed by its duly-authorized officer.
ENCAD, INC.
By:
-------------------------------------
Title:
----------------------------------
EFFECTIVE DATE:
--------------------------------------
<PAGE>
Exhibit 99.6
ENCAD, INC.
STOCK ISSUANCE AGREEMENT
AGREEMENT made this _______ day of ______________, by and
between ENCAD, Inc., a Delaware corporation, and
_________________________________, a Participant in the Corporation's 1999
Stock Option/Stock Issuance Plan.
All capitalized terms in this Agreement shall have the
meaning assigned to them in this Agreement or in the attached Appendix.
A. PURCHASE OF SHARES
1. PURCHASE. Participant hereby purchases shares of
Common Stock (the "Purchased Shares") pursuant to the provisions of the Stock
Issuance Program at the purchase price of $______ per share (the "Purchase
Price").
2. PAYMENT. Concurrently with the delivery of this Agreement to
the Corporation, Participant shall pay the Purchase Price for the Purchased
Shares in cash or check payable to the Corporation and shall deliver a
duly-executed blank Assignment Separate from Certificate (in the form
attached hereto as Exhibit I) with respect to the Purchased Shares.
3. STOCKHOLDER RIGHTS. Until such time as the Corporation
exercises the Repurchase Right, Participant (or any successor in interest)
shall have all the rights of a stockholder (including voting, dividend and
liquidation rights) with respect to the Purchased Shares, subject, however,
to the transfer restrictions of this Agreement.
4. ESCROW. The Corporation shall have the right to hold the
Purchased Shares in escrow until those shares have vested in accordance with
the Vesting Schedule.
5. COMPLIANCE WITH LAW. Under no circumstances shall shares of
Common Stock or other assets be issued or delivered to Participant pursuant
to the provisions of this Agreement unless, in the opinion of counsel for the
Corporation or its successors, there shall have been compliance with all
applicable requirements of Federal and state securities laws, all applicable
listing requirements of any stock exchange (or the Nasdaq National Market, if
applicable) on which the Common Stock is at the time listed for trading and
all other requirements of law or of any regulatory bodies having jurisdiction
over such issuance and delivery.
B. TRANSFER RESTRICTIONS
1. RESTRICTION ON TRANSFER. Except for any Permitted Transfer,
Participant shall not transfer, assign, encumber or otherwise dispose of any
of the Purchased Shares which are subject to the Repurchase Right.
<PAGE>
2. RESTRICTIVE LEGEND. The stock certificate for the
Purchased Shares shall be endorsed with the following restrictive legend:
"The shares represented by this certificate are unvested and
subject to certain repurchase rights granted to the Corporation and
accordingly may not be sold, assigned, transferred, encumbered, or in
any manner disposed of except in conformity with the terms of a written
agreement dated _________________, ______ between the Corporation and
the registered holder of the shares (or the predecessor in interest to
the shares). A copy of such agreement is maintained at the
Corporation's principal corporate offices."
3. TRANSFEREE OBLIGATIONS. Each person (other than the
Corporation) to whom the Purchased Shares are transferred by means of a
Permitted Transfer must, as a condition precedent to the validity of such
transfer, acknowledge in writing to the Corporation that such person is bound
by the provisions of this Agreement and that the transferred shares are
subject to the Repurchase Right to the same extent such shares would be so
subject if retained by Participant.
C. REPURCHASE RIGHT
1. GRANT. The Corporation is hereby granted the right (the
"Repurchase Right"), exercisable at any time during the ninety (90)-day
period following the date Participant ceases for any reason to remain in
Service, to repurchase at the Purchase Price any or all of the Purchased
Shares in which Participant is not, at the time of his or her cessation of
Service, vested in accordance with the Vesting Schedule set forth in
Paragraph C.3 of this Agreement or the special vesting acceleration
provisions of Paragraph C.5 of this Agreement (such shares to be hereinafter
referred to as the "Unvested Shares").
2. EXERCISE OF THE REPURCHASE RIGHT. The Repurchase Right shall
be exercisable by written notice delivered to each Owner of the Unvested
Shares prior to the expiration of the ninety (90)-day exercise period. The
notice shall indicate the number of Unvested Shares to be repurchased and the
date on which the repurchase is to be effected, such date to be not more than
thirty (30) days after the date of such notice. The certificates representing
the Unvested Shares to be repurchased shall be delivered to the Corporation
on or before the close of business on the date specified for the repurchase.
Concurrently with the receipt of such stock certificates, the Corporation
shall pay to Owner, in cash or cash equivalent (including the cancellation of
any purchase-money indebtedness), an amount equal to the Purchase Price
previously paid for the Unvested Shares to be repurchased from Owner.
3. TERMINATION OF THE REPURCHASE RIGHT. The Repurchase Right
shall terminate with respect to any Unvested Shares for which it is not
timely exercised under Paragraph C.2. In addition, the Repurchase Right shall
terminate and cease to be exercisable with respect to any and all Purchased
Shares in which Participant vests in accordance with the following Vesting
Schedule:
2
<PAGE>
(i) Upon Participant's completion of one (1) year of
Service measured from ______________, _______, Participant shall
acquire a vested interest in, and the Repurchase Right shall lapse
with respect to, twenty-five percent (25%) of the Purchased Shares.
(ii) Participant shall acquire a vested interest in,
and the Repurchase Right shall lapse with respect to, the remaining
Purchased Shares in a series of thirty-six (36) successive equal
monthly installments upon Participant's completion of each
additional month of Service over the thirty-six (36)-month period
measured from the initial vesting date under subparagraph (i) above.
4. RECAPITALIZATION. Any new, substituted or additional
securities or other property (including cash paid other than as a regular
cash dividend) which is by reason of any Recapitalization distributed with
respect to the Purchased Shares shall be immediately subject to the
Repurchase Right and any escrow requirements hereunder, but only to the
extent the Purchased Shares are at the time covered by such right or escrow
requirements. Appropriate adjustments to reflect such distribution shall be
made to the number and/or class of securities subject to this Agreement and
to the price per share to be paid upon the exercise of the Repurchase Right
in order to reflect the effect of any such Recapitalization upon the
Corporation's capital structure; PROVIDED, however, that the aggregate
purchase price shall remain the same.
5. CORPORATE TRANSACTION.
(a) Immediately prior to the consummation of any Corporate
Transaction, the Repurchase Right shall automatically lapse in its entirety
and the Purchased Shares shall vest in full, except to the extent the
Repurchase Right is to be assigned to the successor corporation (or parent
thereof) in connection with the Corporate Transaction.
(b) To the extent the Repurchase Right remains in effect
following a Corporate Transaction, such right shall apply to the new capital
stock or other property (including any cash payments) received in exchange
for the Purchased Shares in consummation of the Corporate Transaction, but
only to the extent the Purchased Shares are at the time covered by such
right. Appropriate adjustments shall be made to the price per share payable
upon exercise of the Repurchase Right to reflect the effect of the Corporate
Transaction upon the Corporation's capital structure; PROVIDED, however, that
the aggregate purchase price shall remain the same. The new securities or
other property (including cash payments) issued or distributed with respect
to the Purchased Shares in consummation of the Corporate Transaction shall
immediately be deposited in escrow with the Corporation (or the successor
entity) and shall not be released from escrow until Participant vests in such
securities or other property in accordance with the same Vesting Schedule in
effect for the Purchased Shares.
3
<PAGE>
D. SPECIAL TAX ELECTION
1. SECTION 83(B) ELECTION. Under Code Section 83, the
excess of the fair market value of the Purchased Shares on the date any
forfeiture restrictions applicable to such shares lapse over the Purchase
Price paid for such shares will be reportable as ordinary income on the lapse
date. For this purpose, the term "forfeiture restrictions" includes the right
of the Corporation to repurchase the Purchased Shares pursuant to the
Repurchase Right. Participant may elect under Code Section 83(b) to be taxed
at the time the Purchased Shares are acquired, rather than when and as such
Purchased Shares cease to be subject to such forfeiture restrictions. Such
election must be filed with the Internal Revenue Service within thirty (30)
days after the date of this Agreement. Even if the fair market value of the
Purchased Shares on the date of this Agreement equals the Purchase Price paid
(and thus no tax is payable), the election must be made to avoid adverse tax
consequences in the future. THE FORM FOR MAKING THIS ELECTION IS ATTACHED AS
EXHIBIT II HERETO. PARTICIPANT UNDERSTANDS THAT FAILURE TO MAKE THIS FILING
WITHIN THE APPLICABLE THIRTY (30)-DAY PERIOD WILL RESULT IN THE RECOGNITION
OF ORDINARY INCOME AS THE FORFEITURE RESTRICTIONS LAPSE.
2. FILING RESPONSIBILITY. PARTICIPANT ACKNOWLEDGES THAT IT
IS PARTICIPANT'S SOLE RESPONSIBILITY, AND NOT THE CORPORATION'S, TO FILE A
TIMELY ELECTION UNDER CODE SECTION 83(B), EVEN IF PARTICIPANT REQUESTS THE
CORPORATION OR ITS REPRESENTATIVES TO MAKE THIS FILING ON HIS OR HER BEHALF.
E. GENERAL PROVISIONS
1. ASSIGNMENT. The Corporation may assign the
Repurchase Right to any person or entity selected by the Board, including
(without limitation) one or more stockholders of the Corporation.
2. AT WILL EMPLOYMENT. Nothing in this Agreement or in
the Plan shall confer upon Participant 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 Participant) or of Participant, which rights are hereby
expressly reserved by each, to terminate Participant's Service at any time
for any reason, with or without cause.
3. NOTICES. Any notice required to be given under this
Agreement shall be in writing and shall be deemed effective upon personal
delivery or upon deposit in the U.S. mail, registered or certified, postage
prepaid and properly addressed to the party entitled to such notice at the
address indicated below such party's signature line on this Agreement or at
such other address as such party may designate by ten (10) days advance
written notice under this paragraph to all other parties to this Agreement.
4
<PAGE>
4. NO WAIVER. The failure of the Corporation in any
instance to exercise the Repurchase Right shall not constitute a waiver of
any other repurchase rights that may subsequently arise under the provisions
of this Agreement or any other agreement between the Corporation and
Participant. No waiver of any breach or condition of this Agreement shall be
deemed to be a waiver of any other or subsequent breach or condition, whether
of like or different nature.
5. CANCELLATION OF SHARES. If the Corporation shall make
available, at the time and place and in the amount and form provided in this
Agreement, the consideration for the Purchased Shares to be repurchased in
accordance with the provisions of this Agreement, then from and after such
time, the person from whom such shares are to be repurchased shall no longer
have any rights as a holder of such shares (other than the right to receive
payment of such consideration in accordance with this Agreement). Such shares
shall be deemed purchased in accordance with the applicable provisions
hereof, and the Corporation shall be deemed the owner and holder of such
shares, whether or not the certificates therefor have been delivered as
required by this Agreement.
6. PARTICIPANT UNDERTAKING. Participant hereby agrees to
take whatever additional action and execute whatever additional documents the
Corporation may deem necessary or advisable in order to carry out or effect
one or more of the obligations or restrictions imposed on either Participant
or the Purchased Shares pursuant to the provisions of this Agreement.
7. AGREEMENT IS ENTIRE CONTRACT. This Agreement
constitutes the entire contract between the parties hereto with regard to the
subject matter hereof. This Agreement is made pursuant to the provisions of
the Plan and shall in all respects be construed in conformity with the terms
of the Plan.
8. GOVERNING LAW. This Agreement shall be governed by,
and construed in accordance with, the laws of the State of California without
resort to that State's conflict-of-laws rules.
9. COUNTERPARTS. This Agreement may be executed in
counterparts, each of which shall be deemed to be an original, but all of
which together shall constitute one and the same instrument.
10. SUCCESSORS AND ASSIGNS. The provisions of this
Agreement shall inure to the benefit of, and be binding upon, the Corporation
and its successors and assigns and upon Participant, Participant's assigns
and the legal representatives, heirs and legatees of Participant's estate,
whether or not any such person shall have become a party to this Agreement
and have agreed in writing to join herein and be bound by the terms hereof.
5
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement
on the day and year first indicated above.
ENCAD, INC.
By:
-------------------------------------
Title:
----------------------------------
Address:
--------------------------------
----------------------------------------
PARTICIPANT
---------------------------------------
Signature
Address:
-------------------------------
---------------------------------------
6
<PAGE>
SPOUSAL ACKNOWLEDGMENT
The undersigned spouse of the Participant has read and
hereby approves the foregoing Stock Issuance Agreement. In consideration of
the Corporation's granting the Participant the right to acquire the Purchased
Shares in accordance with the terms of such Agreement, the undersigned hereby
agrees to be irrevocably bound by all the terms of such Agreement, including
(without limitation) the right of the Corporation (or its assigns) to
purchase any Purchased Shares in which the Participant is not vested at the
time of his or her termination of Service.
--------------------------------------
PARTICIPANT'S SPOUSE
Address:
------------------------------
--------------------------------------
<PAGE>
EXHIBIT I
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED ______ hereby sell(s), assign(s) and
transfer(s) unto ENCAD, Inc. (the "Corporation"), ____________ (______)
shares of the Common Stock of the Corporation standing in his or her name on
the books of the Corporation represented by Certificate No. ______ herewith
and do(es) hereby irrevocably constitute and appoint ________________________
Attorney to transfer the said stock on the books of the Corporation with full
power of substitution in the premises.
Dated: , .
------------------ ------
Signature
----------------------------------
INSTRUCTION: Please do not fill in any blanks other than the signature line.
Please sign exactly as you would like your name to appear on the issued stock
certificate. The purpose of this assignment is to enable the Corporation to
exercise the Repurchase Right without requiring additional signatures on the
part of Participant.
<PAGE>
EXHIBIT II
SECTION 83(B) TAX ELECTION
This statement is being made under Section 83(b) of the Internal Revenue
Code, pursuant to Treas. Reg. Section 1.83-2.
(1) The taxpayer who performed the services is:
Name:
Address:
Taxpayer Ident. No.:
(2) The property with respect to which the election is being made is
___________ shares of the common stock of ENCAD, Inc.
(3) The property was issued on _________________, _________.
(4) The taxable year in which the election is being made is the calendar
year _________.
(5) The shares are to a repurchase right pursuant to which the issuer has
the right to acquire the shares at the original purchase price if for
any reason taxpayer's service with the issuer terminates. The issuer's
repurchase right will lapse with respect to twenty-five percent (25%)
of the shares on ______________, ________ and will lapse with respect
to the balance of the shares in a series of successive equal monthly
installments over a thirty-six (36)-month period ending on
_______________________________.
(6) The fair market value at the time of transfer (determined without
regard to any restriction other than a restriction which by its terms
will never lapse) is $______ per share.
(7) The amount paid for such property is $ _____________ per share.
(8) A copy of this statement was furnished to ENCAD, Inc. for whom taxpayer
rendered the services underlying the transfer of property.
(9) This statement is executed on ________________________, _______.
- -------------------------------------------------------------------------------
Spouse (if any) Taxpayer
THIS ELECTION MUST BE FILED WITH THE INTERNAL REVENUE SERVICE CENTER
WITH WHICH TAXPAYER FILES HIS OR HER FEDERAL INCOME TAX RETURNS AND MUST BE
MADE WITHIN THIRTY (30) DAYS AFTER THE EXECUTION DATE OF THE STOCK ISSUANCE
AGREEMENT. THIS FILING SHOULD BE MADE BY REGISTERED OR CERTIFIED MAIL, RETURN
RECEIPT REQUESTED. PARTICIPANT MUST RETAIN TWO (2) COPIES OF THE COMPLETED
FORM FOR FILING WITH HIS OR HER FEDERAL AND STATE TAX RETURNS FOR THE CURRENT
TAX YEAR AND AN ADDITIONAL COPY FOR HIS OR HER RECORDS.
<PAGE>
APPENDIX
The following definitions shall be in effect under the
Agreement:
A. AGREEMENT shall mean this Stock Issuance Agreement.
B. BOARD shall mean the Corporation's Board of Directors.
C. COMMON STOCK shall mean shares of the Corporation's common
stock.
D. CODE shall mean the Internal Revenue Code of 1986, as
amended.
E. CORPORATE TRANSACTION shall mean either of the following
stockholder-approved transactions:
(i) a merger or consolidation in which securities
possessing more than fifty percent (50%) of the total combined
voting power of the Corporation's outstanding securities are
transferred to a person or persons different from the persons
holding those securities immediately prior to such transaction, or
(ii) the sale, transfer or other disposition of all
or substantially all of the Corporation's assets in complete
liquidation or dissolution of the Corporation.
F. CORPORATION shall mean ENCAD, Inc., a Delaware
corporation, and any successor corporation to all or substantially all of the
assets or voting stock of ENCAD, Inc.
G. OWNER shall mean Participant and all subsequent holders
of the Purchased Shares who derive their chain of ownership through a
Permitted Transfer from Participant.
H. 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.
I. PARTICIPANT shall mean the person to whom the Purchased
Shares are issued under the Stock Issuance Program.
J. PERMITTED TRANSFER shall mean (i) a gratuitous transfer
of the Purchased Shares, PROVIDED AND ONLY IF Participant obtains the
Corporation's prior written consent to such transfer, (ii) a transfer of
title to the Purchased Shares effected pursuant to Participant's will or
A-1
<PAGE>
the laws of intestate succession following Participant's death or (iii) a
transfer to the Corporation in pledge as security for any purchase-money
indebtedness incurred by Participant in connection with the acquisition of
the Purchased Shares.
K. PLAN shall mean the Corporation's 1999 Stock
Option/Stock Issuance Plan.
L. PLAN ADMINISTRATOR shall mean either the Board or a
committee of the Board acting in its administrative capacity under the Plan.
M. PURCHASE PRICE shall have the meaning assigned to such
term in Paragraph A.1.
N. PURCHASED SHARES shall have the meaning assigned to such
term in Paragraph A.1.
O. RECAPITALIZATION shall mean any stock split, stock
dividend, recapitalization, combination of shares, exchange of shares or
other change affecting the Corporation's outstanding Common Stock as a class
without the Corporation's receipt of consideration.
P. REPURCHASE RIGHT shall mean the right to repurchase the
Unvested Shares issued under the Agreement which is granted to the
Corporation in accordance with Article C.
Q. SERVICE shall mean the Participant's performance of
services for the Corporation (or any Parent or Subsidiary) in the capacity of
an employee, 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, a
non-employee member of the board of directors or an independent consultant.
R. STOCK ISSUANCE PROGRAM shall mean the Stock Issuance
Program under the Plan.
S. 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.
T. VESTING SCHEDULE shall mean the vesting schedule
specified in Paragraph C.3, pursuant to which the Purchased Shares are to
vest in a series of installments over Participant's period of Service.
A-2
<PAGE>
U. UNVESTED SHARES shall have the meaning assigned to such
term in Paragraph C.1.
A-3
<PAGE>
Exhibit 99.7
ADDENDUM
TO
STOCK ISSUANCE AGREEMENT
The following provisions are hereby incorporated into, and
are hereby made a part of, that certain Stock Issuance Agreement (the
"Issuance Agreement") by and between ENCAD, Inc. (the "Corporation") and
____________________________________ ("Participant") evidencing the stock
issuance made this day to Participant under the terms of the Corporation's
1999 Stock Option/Stock Issuance Plan, and such provisions are effective
immediately. All capitalized terms in this Addendum, to the extent not
otherwise defined herein, shall have the meanings assigned to such terms in
the Issuance Agreement.
INVOLUNTARY TERMINATION FOLLOWING
CORPORATE TRANSACTION/CHANGE IN CONTROL
1. To the extent the Repurchase Right is assigned to the successor
corporation (or parent thereof) in connection with a Corporate Transaction,
no accelerated vesting of the Purchased Shares shall occur upon such
Corporate Transaction, and the Repurchase Right shall continue to remain in
full force and effect in accordance with the provisions of the Issuance
Agreement. The Participant shall, over Participant's period of Service
following the Corporate Transaction, continue to vest in the Purchased Shares
in one or more installments in accordance with the provisions of the Issuance
Agreement.
2. No accelerated vesting of the Purchased Shares shall occur upon a
Change in Control, and the Repurchase Right shall continue to remain in full
force and effect in accordance with the provisions of the Issuance Agreement
and shall be assigned to any successor entity in the Change in Control
transaction. The Participant shall, over Participant's period of Service
following the Change in Control, continue to vest in the Purchased Shares in
one or more installments in accordance with the provisions of the Issuance
Agreement.
3. Immediately upon an Involuntary Termination of Participant's
Service within eighteen (18) months following the Corporate Transaction or
Change in Control, the Repurchase Right shall terminate automatically, and
all the Purchased Shares shall vest in full at that time. Any unvested cash
escrow maintained on the Participant's behalf pursuant to Paragraph C.5 of
the Issuance Agreement shall also vest at the time of such Involuntary
Termination and shall be paid to the Participant promptly thereafter.
4. For purposes of this Addendum, the following definitions shall be
in effect:
An INVOLUNTARY TERMINATION shall mean the termination of
Participant's Service by reason of:
(i) Participant's involuntary dismissal or discharge
by the Corporation for reasons other than Misconduct, or
<PAGE>
(ii) Participant's voluntary resignation following (A)
a change in Participant's position with the Corporation (or Parent
or Subsidiary employing Participant) which materially reduces
Participant's duties and responsibilities or the level of management
to which Participant reports, (B) a reduction in Participant's 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
Participant'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 Participant's consent.
A CHANGE IN CONTROL shall be deemed to occur in the event of a
change in ownership or control of the Corporation effected through either of the
following transactions:
(i) 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 Securities Exchange Act of
1934, as amended) of securities possessing more than thirty-five
percent (35%) 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
(ii) a change in the composition of the Board over a
period of thirty-six (36) 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.
MISCONDUCT shall mean the commission of any act of fraud,
embezzlement or dishonesty by the Participant, any unauthorized use or
disclosure by the Participant of confidential information or trade secrets of
the Corporation (or any Parent or Subsidiary), or any other intentional
misconduct by the Participant adversely affecting the business or affairs of
the Corporation (or any Parent or Subsidiary) in a material manner. The
foregoing definition shall not be deemed to be inclusive of all the acts or
omissions which the Corporation (or any Parent or Subsidiary) may consider as
grounds for the dismissal or discharge of the Participant or other person in
the Service of the Corporation (or any Parent or Subsidiary).
2
<PAGE>
IN WITNESS WHEREOF, ENCAD, Inc. has caused this Addendum
to be executed by its duly-authorized officer, effective as of the Effective
Date specified below.
ENCAD, INC.
By:
--------------------------------------
Title:
------------------------------------
EFFECTIVE DATE:
------------------------------------
3
<PAGE>
Exhibit 99.8
INITIAL GRANT
ENCAD, INC.
NOTICE OF GRANT OF NON-EMPLOYEE DIRECTOR
AUTOMATIC STOCK OPTION
Notice is hereby given of the following option grant (the
"Option") to purchase shares of the Common Stock of ENCAD,
Inc. (the "Corporation"):
Optionee:
-------------------------------------------------------------
Grant Date:
-------------------------------------------------------------
Exercise Price: $ per share
-------------------------------------------------------------
Number of Option Shares: 18,000 shares
-------------------------------------------------------------
Expiration Date:
-------------------------------------------------------------
Type of Option: Non-Statutory Stock Option
-------------------------------------------------------------
Date Exercisable: Immediately Exercisable
-------------------------------------------------------------
VESTING SCHEDULE: The Option Shares shall initially be
unvested and subject to repurchase by the Corporation at the
Exercise Price paid per share. Optionee shall acquire a vested
interest in, and the Corporation's repurchase right shall
accordingly lapse with respect to, the Option Shares in two
(2) successive equal annual installments upon Optionee's
completion of each year of service as a member of the
Corporation's Board of Directors (the "Board") over the two
(2) year period measured from the Grant Date. In no event
shall any additional Option Shares vest after Optionee's
cessation of Board service.
Optionee understands and agrees that the Option is granted
subject to and in accordance with the terms of the automatic option grant
program under the ENCAD, Inc. 1999 Stock Option/Stock Issuance Plan (the
"Plan"). Optionee further agrees to be bound by the terms of the Plan and the
terms of the Option as set forth in the Automatic Stock Option Agreement
attached hereto as EXHIBIT A. Optionee hereby acknowledges receipt of a copy
of the official prospectus for the Plan in the form attached hereto as
EXHIBIT B. A copy of the Plan is available upon request made to the Corporate
Secretary at the Corporation's principal offices.
REPURCHASE RIGHT. OPTIONEE HEREBY AGREES THAT ALL UNVESTED
OPTION SHARES ACQUIRED UPON THE EXERCISE OF THE OPTION SHALL BE SUBJECT TO A
REPURCHASE RIGHT EXERCISABLE BY THE CORPORATION AND ITS ASSIGNS. THE TERMS OF
SUCH RIGHT SHALL BE SPECIFIED IN A STOCK PURCHASE AGREEMENT, IN FORM AND
SUBSTANCE SATISFACTORY TO THE CORPORATION, EXECUTED BY OPTIONEE AT THE TIME
OF THE OPTION EXERCISE.
<PAGE>
NO IMPAIRMENT OF RIGHTS. Nothing in this Notice or the
attached Automatic Stock Option Agreement or in the Plan shall interfere with
or otherwise restrict in any way the rights of the Corporation and the
Corporation's stockholders to remove Optionee from the Board at any time in
accordance with the provisions of applicable law.
DEFINITIONS. All capitalized terms in this Notice shall
have the meaning assigned to them in this Notice or in the attached Automatic
Stock Option Agreement.
DATED:
-------------------, ------
ENCAD, INC.
By:
---------------------------------------
Title:
-------------------------------------
------------------------------------------
OPTIONEE
Address:
----------------------------------
------------------------------------------
ATTACHMENTS
EXHIBIT A - AUTOMATIC STOCK OPTION AGREEMENT
EXHIBIT B - PLAN SUMMARY AND PROSPECTUS
2
<PAGE>
Exhibit 99.9
ANNUAL GRANT
ENCAD, INC.
NOTICE OF GRANT OF NON-EMPLOYEE DIRECTOR
AUTOMATIC STOCK OPTION
Notice is hereby given of the following option grant (the
"Option") to purchase shares of the Common Stock of ENCAD,
Inc. (the "Corporation"):
Optionee:
-------------------------------------------------------------
Grant Date:
-------------------------------------------------------------
Exercise Price: $ per share
-------------------------------------------------------------
Number of Option Shares: 7,000 shares
------------------------
Expiration Date:
-------------------------------------------------------------
Type of Option: Non-Statutory Stock Option
---------------
Date Exercisable: Immediately Exercisable
-----------------
Vesting Schedule: The Option Shares are fully vested as of
----------------- the Grant Date.
Optionee understands and agrees that the Option is granted
subject to and in accordance with the terms of the automatic option grant
program under the ENCAD, Inc. 1999 Stock Option/Stock Issuance Plan (the
"Plan"). Optionee further agrees to be bound by the terms of the Plan and the
terms of the Option as set forth in the Automatic Stock Option Agreement
attached hereto as EXHIBIT A. Optionee hereby acknowledges receipt of a copy
of the official prospectus for the Plan in the form attached hereto as
EXHIBIT B. A copy of the Plan is available upon request made to the Corporate
Secretary at the Corporation's principal offices.
NO IMPAIRMENT OF RIGHTS. Nothing in this Notice or the
attached Automatic Stock Option Agreement or in the Plan shall interfere with
or otherwise restrict in any way the rights of the Corporation and the
Corporation's stockholders to remove Optionee from the Board at any time in
accordance with the provisions of applicable law.
<PAGE>
DEFINITIONS. All capitalized terms in this Notice shall
have the meaning assigned to them in this Notice or in the attached Automatic
Stock Option Agreement.
DATED:
--------------------, ------
ENCAD, INC.
By:
-----------------------------------
Title:
--------------------------------
-----------------------------------
OPTIONEE
Address:
------------------------------
-----------------------------------
ATTACHMENTS
EXHIBIT A - AUTOMATIC STOCK OPTION AGREEMENT
EXHIBIT B - PLAN SUMMARY AND PROSPECTUS
2
<PAGE>
Exhibit 99.10
ENCAD, INC.
AUTOMATIC STOCK OPTION AGREEMENT
RECITALS
A. The Corporation has implemented an automatic option
grant program under the Plan pursuant to which eligible non-employee members
of the Board will automatically receive special option grants at periodic
intervals over their period of Board service in order to provide such
individuals with a meaningful incentive to continue to serve as members of
the Board.
B. Optionee is an eligible non-employee Board member, and
this Agreement is executed pursuant to, and is intended to carry out the
purposes of, the Plan in connection with the automatic grant of an option to
purchase shares of Common Stock under the Plan.
C. All capitalized terms in this Agreement shall have the
meaning assigned to them in the attached Appendix.
NOW, THEREFORE, it is hereby agreed as follows:
1. GRANT OF OPTION. The Corporation hereby grants to
Optionee, as of the Grant Date, a Non-Statutory Option to purchase up to the
number of Option Shares specified in the Grant Notice. The Option Shares
shall be purchasable from time to time during the option term specified in
Paragraph 2 at the Exercise Price.
2. OPTION TERM. This option shall have a term of ten (10)
years measured from the Grant Date and shall accordingly expire at the close
of business on the Expiration Date, unless sooner terminated in accordance
with Paragraph 5, 6 or 7.
3. LIMITED TRANSFERABILITY.
(a) This option may, in connection with the Optionee's
estate plan, be assigned in whole or in part during Optionee's lifetime to
one or more members of the Optionee's immediate family or to a trust
established for the exclusive benefit of one or more such family members. The
assigned portion shall be exercisable only by the person or persons who
acquire a proprietary interest in the option pursuant to such assignment. The
terms applicable to the assigned portion shall be the same as those in effect
for this option immediately prior to such assignment.
(b) Should the Optionee die while holding this
option, then this option shall be transferred in accordance with Optionee's
will or the laws of inheritance. However, Optionee may designate one or more
persons as the beneficiary or beneficiaries of this option, and this option
shall, in accordance with such designation, automatically be transferred to
such beneficiary or beneficiaries upon the Optionee's death while holding
such option. Such
<PAGE>
beneficiary or beneficiaries shall take the transferred option subject
to all the terms and conditions of this Agreement, including (without
limitation) the limited time period during which this option may, pursuant to
Paragraph 5, be exercised following Optionee's death. or by the Optionee's
designated beneficiary or beneficiaries of that option.
4. EXERCISABILITY/VESTING.
(a) This option shall be immediately exercisable for any or
all of the Option Shares, whether or not the Option Shares are at the time
vested in accordance with the Vesting Schedule, and shall remain so
exercisable until the Expiration Date or sooner termination of the option
term under Paragraph 5, 6 or 7.
(b) Optionee shall, in accordance with the Vesting Schedule
set forth in the Grant Notice, vest in the Option Shares in one or more
installments over his or her period of Board service. Vesting in the Option
Shares may be accelerated pursuant to the provisions of Paragraph 5, 6 or 7.
In no event, however, shall any additional Option Shares vest following
Optionee's cessation of service as a Board member.
5. CESSATION OF BOARD SERVICE. Should Optionee's service as a Board
member cease while this option remains outstanding, then the option term
specified in Paragraph 2 shall terminate (and this option shall cease to be
outstanding) prior to the Expiration Date in accordance with the following
provisions:
(a) Should Optionee cease to serve as a Board member for
any reason (other than death or Permanent Disability) while this option is
outstanding, then the period during which this option may be exercised shall
be reduced to a twelve (12)-month period measured from the date of such
cessation of Board service, but in no event shall this option be exercisable
at any time after the Expiration Date. During such limited period of
exercisability, this option may not be exercised in the aggregate for more
than the number of Option Shares (if any) in which Optionee is vested on the
date of his or her cessation of Board service. Upon the earlier of (i) the
expiration of such twelve (12)-month period or (ii) the specified Expiration
Date, the option shall terminate and cease to be exercisable with respect to
any vested Option Shares for which the option has not been exercised.
(b) Should Optionee die during the twelve (12)-month period
following his or her cessation of Board service and hold this option, at the
time of his or her death, then the personal representative of Optionee's
estate or the person or persons to whom the option is transferred pursuant to
Optionee's will or the laws of inheritance or the designated beneficiary or
beneficiaries of this option (as the case may be) shall have the right to
exercise this option for any or all of the Option Shares in which Optionee is
vested at the time of Optionee's cessation of Board service (less any Option
Shares purchased by Optionee after such cessation of Board service but prior
to death). Any such right to exercise this option shall terminate, and this
option shall accordingly cease to be exercisable for such vested Option
Shares, upon the earlier of (i) the expiration of the twelve (12)-month
period measured from the date of Optionee's cessation of Board service or
(ii) the specified Expiration Date.
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(c) Should Optionee cease service as a Board member by
reason of death or Permanent Disability, then all Option Shares at the time
subject to this option but not otherwise vested shall vest in full so that
this option may be exercised for any or all of the Option Shares as fully
vested shares of Common Stock at any time prior to the EARLIER of (i) the
expiration of the twelve (12)-month period measured from the date of
Optionee's cessation of Board service or (ii) the specified Expiration Date,
whereupon this option shall terminate and cease to be outstanding.
(d) Upon Optionee's cessation of Board service for any
reason other than death or Permanent Disability, this option shall
immediately terminate and cease to be outstanding with respect to any and all
Option Shares in which Optionee is not otherwise at that time vested in
accordance with the normal Vesting Schedule or the special vesting
acceleration provisions of Paragraphs 6 and 7 below.
6. CORPORATE TRANSACTION.
(a) In the event of a Corporate Transaction, all the Option
Shares at the time subject to this option but not otherwise vested shall
automatically vest so that this option shall, immediately prior to the
specified effective date for the Corporate Transaction, become exercisable
for all of the Option Shares as fully-vested shares of Common Stock and may
be exercised for all or any portion of those vested shares. Immediately
following the consummation of the Corporate Transaction, this option shall
terminate and cease to be outstanding, except to the extent assumed by the
successor corporation or its parent company.
(b) If this option is assumed in connection with a
Corporate Transaction, then this option shall be appropriately adjusted,
immediately after such Corporate Transaction, to apply to the number and
class of securities which would have been issuable to Optionee in
consummation of such Corporate Transaction had the option been exercised
immediately prior to such Corporate Transaction, and appropriate adjustments
shall also be made to the Exercise Price, PROVIDED the aggregate Exercise
Price shall remain the same.
7. CHANGE IN CONTROL/HOSTILE TAKE-OVER.
(a) All the Option Shares subject to this option at the
time of a Change in Control but not otherwise vested shall automatically vest
so that this option shall, immediately prior to the effective date of such
Change in Control, become exercisable for all of the Option Shares as
fully-vested shares of Common Stock and may be exercised for all or any
portion of those vested shares. This option shall remain exercisable for such
fully-vested Option Shares until the EARLIEST to occur of (i) the specified
Expiration Date, (ii) the sooner termination of this option in accordance
with Paragraph 5 or 6 or (iii) the surrender of this option under Paragraph
7(b).
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(b) Optionee shall have an unconditional right,
exercisable at the time during the thirty (30)-day period immediately
following the consummation of a Hostile Take-Over to surrender this option to
the Corporation in exchange for a cash distribution from the Corporation in
an amount equal to the excess of (i) the Take-Over Price of the Option Shares
at the time subject to the surrendered option (whether or not those Option
Shares are otherwise at the time vested) over (ii) the aggregate Exercise
Price payable for such shares. This Paragraph 7(b) limited stock appreciation
right shall in all events terminate upon the expiration or sooner termination
of the option term and may not be assigned or transferred by Optionee, except
to the extent the option is transferred in accordance with the provisions of
this Agreement.
(c) To exercise the Paragraph 7(b) limited stock
appreciation right, Optionee must, during the applicable thirty (30)-day
exercise period, provide the Corporation with written notice of the option
surrender in which there is specified the number of Option Shares as to which
the option is being surrendered. Such notice must be accompanied by the
return of Optionee's copy of this Agreement, together with any written
amendments to such Agreement. The cash distribution shall be paid to Optionee
within five (5) business days following such delivery date. The exercise of
such limited stock appreciation right in accordance with the terms of this
Paragraph 7 has been pre-approved pursuant to the express provisions of the
Automatic Option Grant Program, and neither the approval of the Plan
Administrator nor the consent of the Board shall be required at the time of
the actual option surrender and cash distribution. Upon receipt of the cash
distribution, this option shall be cancelled with respect to the shares
subject to the surrendered option (or the surrendered portion), and Optionee
shall cease to have any further right to acquire those Option Shares under
this Agreement. The option shall, however, remain outstanding for the balance
of the Option Shares (if any) in accordance with the terms and provisions of
this Agreement, and the Corporation shall accordingly issue a replacement
stock option agreement (substantially in the same form as this Agreement) for
those remaining Option Shares.
8. ADJUSTMENT IN OPTION SHARES. Should any change be made to the
Common Stock by reason of any stock split, stock dividend, recapitalization,
combination of shares, exchange of shares or other change affecting the
outstanding Common Stock as a class without the Corporation's receipt of
consideration, appropriate adjustments shall be made to (i) the total number
and/or class of securities subject to this option and (ii) the Exercise Price
in order to reflect such change and thereby preclude a dilution or
enlargement of benefits hereunder.
9. STOCKHOLDER RIGHTS. The holder of this option shall not
have any stockholder rights with respect to the Option Shares until such
person shall have exercised the option, paid the Exercise Price and become a
holder of record of the purchased shares.
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 any other person or persons exercising the option)
must take the following actions:
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(i) To the extent the option is exercised for vested
Option Shares, execute and deliver to the Corporation a Notice of
Exercise for the Option Shares for which the option is exercised. To
the extent this option is exercised for unvested Option Shares,
execute and deliver to the Corporation a Purchase Agreement for
those unvested Option Shares.
(ii) Pay the aggregate Exercise Price for the purchased
shares in one or more of the following forms:
(A) cash or check made payable to the Corporation,
(B) shares of Common Stock held by Optionee
(or any other person or persons exercising the option) for
the requisite period necessary to avoid a charge to the
Corporation's earnings for financial reporting purposes and
valued at Fair Market Value on the Exercise Date, or
(C) to the extent the option is exercised for
vested Option Shares, through a special sale and remittance
procedure pursuant to which Optionee (or any other person
or persons exercising the option) shall concurrently
provide irrevocable instructions (I) to a
Corporation-designated brokerage firm to effect the
immediate sale of the purchased shares and remit to the
Corporation, out of the sale proceeds available on the
settlement date, sufficient funds to cover the aggregate
Exercise Price payable for the purchased shares plus all
applicable Federal, state and local income and employment
taxes required to be withheld by the Corporation by reason
of such exercise and (II) to the Corporation to deliver the
certificates for the purchased shares directly to such
brokerage firm in order to complete the sale.
(iii) Furnish to the Corporation appropriate
documentation that the person or persons exercising the option (if
other than Optionee) have the right to exercise this option.
(b) Except to the extent the sale and remittance procedure
is utilized in connection with the option exercise, payment of the Exercise
Price must accompany the Notice of Exercise (or the Purchase Agreement)
delivered to the Corporation in connection with the option exercise.
(c) As soon after the Exercise Date as practical, the
Corporation shall issue to or on behalf of Optionee (or any other person or
persons exercising this option) a certificate for the purchased Option
Shares, with the appropriate legends affixed thereto. To the extent any such
Option Shares are unvested, the certificates for those Option Shares shall be
endorsed with an appropriate legend evidencing the Corporation's repurchase
rights and may be held in escrow with the Corporation until such shares vest.
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(d) In no event may this option be exercised for any
fractional shares.
11. NO IMPAIRMENT OF RIGHTS. This Agreement shall not in any way
affect the right of the Corporation 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. In addition, this Agreement shall not in any way be
construed or interpreted so as to affect adversely or otherwise impair the
right of the Corporation or the stockholders to remove Optionee from the
Board at any time in accordance with the provisions of applicable law.
12. COMPLIANCE WITH LAWS AND REGULATIONS.
(a) The exercise of this option and the issuance of the
Option Shares upon such exercise shall be subject to compliance by the
Corporation and Optionee with all applicable requirements of law relating
thereto and with all applicable regulations of any stock exchange (or the
Nasdaq National Market, if applicable) on which the Common Stock may be
listed for trading at the time of such exercise and issuance.
(b) The inability of the Corporation to obtain approval from
any regulatory body having authority deemed by the Corporation to be
necessary to the lawful issuance and sale of any Common Stock pursuant to
this option shall relieve the Corporation of any liability with respect to
the non-issuance or sale of the Common Stock as to which such approval shall
not have been obtained. The Corporation, however, shall use its best efforts
to obtain all such approvals.
13. 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 Corporation and its successors and
assigns and Optionee, Optionee's assigns, the legal representatives, heirs
and legatees of Optionee's estate and any beneficiaries of this option
designated by Optionee.
14. NOTICES. Any notice required to be given or delivered to the
Corporation under the terms of this Agreement shall be in writing and
addressed to the Corporation at its principal corporate offices. Any notice
required to be given or delivered to Optionee shall be in writing and
addressed to Optionee at the address indicated below Optionee's signature
line on the Grant Notice. All notices shall be deemed effective upon personal
delivery or upon deposit in the U.S. mail, postage prepaid and properly
addressed to the party to be notified.
15. 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.
16. 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.
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EXHIBIT I
NOTICE OF EXERCISE
I hereby notify ENCAD, Inc. (the "Corporation") that I
elect to purchase _____________ shares of the Corporation's Common Stock (the
"Purchased Shares") at the option exercise price of $ per share (the
"Exercise Price") pursuant to that certain option (the "Option") granted to
me under the Corporation's 1999 Stock Option/Stock Issuance Plan on
_________________, ________.
Concurrently with the delivery of this Exercise Notice to
the Corporation, I shall hereby pay to the Corporation the Exercise Price for
the Purchased Shares in accordance with the provisions of my agreement with
the Corporation (or other documents) evidencing the Option and shall deliver
whatever additional documents may be required by such agreement as a
condition for exercise. Alternatively, I may utilize the special
broker-dealer sale and remittance procedure specified in my agreement to
effect payment of the Exercise Price for any Purchased Shares in which I am
vested at the time of exercise of the Option.
- -------------------------, --------
Date
-------------------------------------
Optionee
-------------------------------------
Address:
-----------------------------
-------------------------------------
Print name in exact manner
it is to appear on the
stock certificate: --------------------------------------
Address to which certificate
is to be sent, if different
from address above: ---------------------------------------
-------------------------------------
Social Security Number:
-------------------------------------
-------------------------------------
<PAGE>
APPENDIX
The following definitions shall be in effect under the
Agreement:
A. AGREEMENT shall mean this Automatic Stock Option
Agreement.
B. BOARD shall mean the Corporation's Board of Directors.
C. CHANGE IN CONTROL shall mean a change in ownership or
control of the Corporation effected through either of the following
transactions:
(i) 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 stockholders, or
(ii) a change in the composition of the Board over a
period of thirty-six (36) 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.
D. COMMON STOCK shall mean shares of the Corporation's common
stock.
E. CODE shall mean the Internal Revenue Code of 1986, as
amended.
F. CORPORATE TRANSACTION shall mean either of the following
stockholder-approved transactions to which the Corporation is a party:
(i) a merger or consolidation in which securities
possessing more than fifty percent (50%) of the total combined voting
power of the Corporation's outstanding securities are transferred to a
person or persons different from the persons holding those securities
immediately prior to such transaction, or
(ii) the sale, transfer or other disposition of all
or substantially all of the Corporation's assets in complete
liquidation or dissolution of the Corporation.
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G. CORPORATION shall mean ENCAD, Inc., a Delaware
corporation, and any successor corporation to all or substantially all of the
assets or voting stock of ENCAD, Inc. which shall by appropriate action adopt
the Plan.
H. EXERCISE DATE shall mean the date on which the option
shall have been exercised in accordance with Paragraph 10 of the Agreement.
I. EXERCISE PRICE shall mean the exercise price
per share as specified in the Grant Notice.
J. EXPIRATION DATE shall mean the date on which the
option expires as specified in the Grant Notice.
K. FAIR MARKET VALUE per share of Common Stock on any
relevant date shall be determined in accordance with the following provisions:
(i) If the Common Stock is at the time traded on the
Nasdaq National Market, then the Fair Market Value shall be the closing
selling price per share of Common Stock on the date in question, as the
price is reported by the National Association of Securities Dealers on
the Nasdaq 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.
(ii) If the Common Stock is at the time listed on any
Stock Exchange, then the Fair Market Value shall be the closing selling
price per share of Common Stock on the date in question on the Stock
Exchange which serves as 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.
L. GRANT DATE shall mean the date of grant of the option as
specified in the Grant Notice.
M. GRANT NOTICE shall mean the Notice of Grant of Automatic
Stock Option accompanying the Agreement, pursuant to which Optionee has been
informed of the basic terms of the option evidenced hereby.
N. HOSTILE TAKEOVER shall mean 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 stockholders which the Board does not
recommend such stockholders to accept.
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O. 1934 ACT shall mean the Securities Exchange Act of
1934, as amended.
P. NON-STATUTORY OPTION shall mean an option not intended
to satisfy the requirements of Code Section 422.
Q. NOTICE OF EXERCISE shall mean the notice of exercise in
the form of Exhibit I.
R. OPTION SHARES shall mean the number of shares of Common
Stock subject to the option.
S. OPTIONEE shall mean the person to whom the option
is granted as specified in the Grant Notice.
T. PERMANENT DISABILITY shall mean the inability of
Optionee to perform his or her usual duties as a member of the Board by
reason of any medically determinable physical or mental impairment which is
expected to result in death or has lasted or can be expected to last for a
continuous period of twelve (12) months or more.
U. PLAN shall mean the Corporation's 1999 Stock
Option/Stock Issuance Plan.
V. PURCHASE AGREEMENT shall mean the stock purchase
agreement (in form and substance satisfactory to the Corporation) which
grants the Corporation the right to repurchase, at the Exercise Price, any
and all unvested Option Shares held by Optionee at the time of Optionee's
cessation of Board service and which precludes the sale, transfer or other
disposition of any purchased Option Shares while those shares are unvested
and subject to such repurchase right.
W. STOCK EXCHANGE shall mean the American Stock Exchange or
the New York Stock Exchange.
X. TAKE-OVER PRICE shall mean the GREATER of (i) the Fair
Market Value per share of Common Stock on the date the option is surrendered
to the Corporation in connection with a Hostile Take-Over or (ii) the highest
reported price per share of Common Stock paid by the tender offeror in
effecting the Hostile Take-Over.
Y. VESTING SCHEDULE shall mean the vesting schedule
specified in the Grant Notice, pursuant to which the Option Shares will vest
in one or more installments over the Optionee's period of Board service,
subject to acceleration in accordance with the provisions of the Agreement.
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