EXHIBIT 99.5
Form of Non-Statutory Stock Option Agreement
[LOGO]
ENCAD, INC.
NON-STATUTORY
STOCK OPTION AGREEMENT
(NON-PLAN OPTION)
THIS STOCK OPTION AGREEMENT (the "Option Agreement") dated April 20,
1998 between ENCAD, Inc., a Delaware corporation (the "Company"), and Michael
J. T. Steep ("Optionee").
RECITALS
A. The Board of Directors ("the Board") of the Company believes that it
is in the best interests of the Company to provide its employees with the
opportunity to acquire an equity interest in the Company as a means of
attracting and retaining the services of selected key employees (including
officers) and consultants and other independent contractors who contribute to
the financial success of the Company or its parent or subsidiary corporations.
B. Optionee is an individual who will be employed as an officer of the
Company and whose successful efforts will contribute to the financial success
of the Company.
NOW, THEREFORE, it is hereby agreed as follows:
1. GRANT OF OPTION. Subject to and upon the terms and conditions set
forth in this Agreement, the Company hereby grants to Optionee, as of the
date of this Agreement (the "Grant Date"), an Option (the "Option") to
purchase up to seventy-five thousand (75,000) shares of the Company's Common
Stock (the "Option Shares"). The Option Shares shall be purchasable from
time to time during the Option Term (as set forth in Paragraph 2 below) at
Thirteen Dollars and Eight and Three-Quarter Cents ($13.875) per share (the
"Option Price").
2. OPTION TERM. The Option shall have a maximum term of ten (10)
years measured from the Grant Date unless sooner terminated in accordance
with Paragraph 5 or 6 (the "Option Term"). The date which is ten (10) years
from the Grant Date is hereinafter referred to as the "Expiration Date."
3. LIMITED TRANSFERABILITY. This Option shall be neither transferable
nor assignable by Optionee other than by will or by the laws of descent and
distribution following the Optionee's death and may be exercised, during
Optionee's lifetime, only by Optionee.
4. EXERCISABILITY. This Option shall become exercisable in sixteen
(16) successive equal quarterly installments upon Optionee's completion of
each additional quarter of Service over the sixteen (16) quarters measured
from the Grant Date, provided that the Option shall not become exercisable
for any additional Option Shares after the Optionee's cessation of Service.
As the Option becomes exercisable for the Option Shares in one or more such
installments, those installments shall accumulate and the Option shall remain
exercisable for the accumulated installments throughout the Option Term.
5. TERMINATION OF SERVICE. The Option Term specified in Paragraph 2 shall
terminate (and this Option shall cease to be exercisable) prior to the
Expiration Date should one of the following provisions become applicable:
(i) Except to the extent otherwise provided in subparagraphs (ii)
through (iii) below, should Optionee cease to remain in the Service of the
Company at any time during the Option Term, then this Option shall not
remain exercisable for more than a three (3)-month period commencing with
the date of such cessation of Service. Upon the expiration of such three
(3)-month period or (if earlier) upon the specified Expiration Date of the
Option Term, this Option shall terminate and cease to be outstanding.
(ii) Should Optionee die while in Service or within the three (3)-
month period following his or her cessation of Service, then the personal
representative of the Optionee's estate or the person or persons to whom
this Option is transferred pursuant to the Optionee's will or in
accordance with the law of descent and distribution shall have the right
to exercise this Option. Such right shall lapse, and this Option shall
terminate and cease to remain exercisable, upon the EARLIER of (A) the
expiration of the twelve (12)-month period measured from the date of
Optionee's death or (B) the Expiration Date.
(iii) Should Optionee become permanently disabled and cease by
reason thereof to remain in Service at any time during the Option Term,
then this Option shall not remain exercisable for more than a twelve (12)
month period commencing with the date of such cessation of Service. Upon
the expiration of such limited period of exercisability or (if earlier)
upon the Expiration Date, this Option shall terminate and cease to be
outstanding.
(iv) In no event shall this Option be exercisable at any time after
the specified Expiration Date of the Option Term.
(v) During the limited post-Service period of exercisability
determined in accordance with subparagraphs (i) through (iii) above, this
Option may not be exercised for more than the number of Option Shares (if
any) for which this Option is, at the time of the Optionee's cessation of
Service, exercisable in accordance with either the normal exercise
provisions specified in Paragraph 4 or the special acceleration provisions
of Paragraph 6 of this Agreement. However, the number of Option Shares
purchasable after the Optionee's death shall be reduced for any Option
Shares purchased by the Optionee after his or her cessation of Service but
prior to death.
(vi) For purposes of this Paragraph 5 and for all other purposes
under this Agreement, the following definitional provisions shall be in
effect:
A. The Optionee shall be deemed to remain in Service for so
long as the Optionee continues to render periodic services to the Company
or any parent or subsidiary corporation, whether as an Employee, a non-
employee member of the Company's Board or an independent consultant or
advisor.
B. The Optionee shall be deemed to be an Employee and to
continue in the Company's employ for so long as the Optionee remains in
the employ of the Company or one or more of its parent or subsidiary
corporations, subject to the control and direction of the employer entity
as to both the work to be performed and the manner and method of
performance.
C. The Optionee shall be deemed to be permanently disabled if
the Optionee is, by reason of any medically determinable physical or
mental impairment expected to result in death or to be of continuous
duration of not less than twelve (12) consecutive months or more, unable
to perform his or her usual duties for the Company or the parent or
subsidiary corporation retaining his or her services.
D. A corporation shall be considered to be a subsidiary
corporation of the Company if it is a member of an unbroken chain of
corporations beginning with the Company, provided each such corporation in
the chain (other than the last corporation) owns, at the time of
determination, stock possessing 50% or more of the total combined voting
power of all classes of stock in one of the other corporations in such
chain.
E. A corporation shall be considered to be a parent
corporation of the Company if it is a member of an unbroken chain ending
with the Company, provided each such corporation in the chain (other than
the Company) owns, at the time of determination, stock possessing 50% or
more of the total combined voting power of all classes of stock in one of
the other corporations in such chain.
6. CORPORATE TRANSACTION.
A. For purposes of this Paragraph 6, a "Corporate Transaction"
shall be one or more of the following stockholder-approved transactions:
(i) a merger or consolidation in which the Company is not the
surviving entity, except for a transaction the principal purpose of which
is to change the State of the Company's incorporation,
(ii) the sale, transfer or other disposition of all or
substantially all of the assets of the Company in liquidation or
dissolution of the Company, or
(iii) any reverse merger in which the Company is the surviving
entity but in which securities possessing more than fifty percent (50%) of
the total combined voting power of the Company's outstanding securities
are transferred to holders different from those who held such securities
immediately prior to such merger.
B. If this Option is to be assumed in connection with the
Corporate Transaction or is otherwise to continue in effect, then it shall be
appropriately adjusted, immediately after such Corporate Transaction, to
apply and pertain to the number and class of securities which would have been
issuable, in consummation of such Corporate Transaction, to an actual holder
of the same number of shares of Common Stock as are subject to such Option
immediately prior to such Corporate Transaction. Appropriate adjustments
shall also be made to the Option Price, provided that the aggregate Option
price payable for such securities shall remain the same.
C. If in the event of any Corporate Transaction this Option is
not assumed or continued in accordance with Paragraph 6.B, the exercisability
of this Option shall automatically accelerate so that, immediately prior to
the specified effective date for the Corporate Transaction, this Option shall
become fully exercisable with respect to all of the Option Shares.
D. This Option, to the extent not previously exercised, shall
terminate upon the consummation of the Corporate Transaction and cease to be
exercisable, unless it is expressly assumed or continued by the successor
corporation or parent thereof.
E. This Agreement shall not in any way affect the right of the
Company to adjust, reclassify, reorganize or otherwise make changes in its
capital or business structure or to merge, consolidate, dissolve, liquidate
or sell or transfer all or any part of its business or assets.
7. CHANGE IN CONTROL. Upon the occurrence of any Change in Control of
the Company, the exercisability of this Option shall automatically accelerate
so that such Option shall, immediately prior to the specified effective date
for the Change in Control, become fully exercisable with respect to the total
number of shares of Common Stock at the time subject to such Option and may be
exercised for all or any portion of such shares. Similarly, all unvested
shares of this Option shall automatically vest immediately prior to the
specified effective date of the Change in Control. For purposes of this
Paragraph 7, a Change in Control shall be deemed to occur in the event:
(i) any person or related group of persons (other than the
Company or a person that directly or indirectly controls, is
controlled by, or is under common control with, the Company) directly
or indirectly acquires beneficial ownership (within the meaning of
Rule 13d-3 of the Securities Exchange Act of 1934, as amended) of
securities possessing more than fifty percent (50%) of the total
combined voting power of the Company's outstanding securities
pursuant to a tender or exchange offer made directly to the Company's
stockholders which the Board does not recommend such stockholders to
accept; or
(ii) there is a change in the composition of the Board
over a period of twenty-four (24) consecutive months or less such
that a majority of the Board members (rounded up to the next whole
number) cease, by reason of one or more proxy contests for the
election of Board members, to be comprised of individuals who either
(A) have been Board members continuously since the beginning of such
period or (B) have been elected or nominated for election as Board
members during such period by at least a majority of the Board
members described in clause (A) who were still in office at the time
such election or nomination was approved by the Board.
8. ADJUSTMENT IN OPTION SHARES.
A. In the event any change is made to the Common Stock issuable
under the Option by reason of any stock split, stock dividend,
recapitalization, combination of shares, exchange of shares, conversion or
other change affecting the outstanding Common Stock as a class without the
Company's receipt of consideration, then appropriate adjustments shall be made
to (i) the total number of Option Shares subject to this Option and (ii) the
Option Price in order to reflect such change and thereby preclude a dilution or
enlargement of benefits hereunder.
B. If this Option is to be assumed in connection with a Corporate
Transaction or is otherwise to continue in effect, then this Option shall,
immediately after such Corporate Transaction, be appropriately adjusted to
apply and pertain to the number and class of securities which would have been
issued to the Optionee in the consummation of such Corporate Transaction had
the Option been exercised immediately prior to such Corporate Transaction.
Appropriate adjustments shall also be made to the Option Price, PROVIDED the
aggregate Option Price payable hereunder shall remain the same.
9. PRIVILEGE OF STOCK OWNERSHIP. The holder of this Option shall not
have any of the rights of a stockholder with respect to the Option Shares until
such individual shall have exercised the Option, paid the Option Price for the
purchased shares and been issued such shares.
10. MANNER OF EXERCISING OPTION.
A. In order to exercise this Option with respect to all or any part
of the Option Shares for which this Option is at the time exercisable, Optionee
(or in the case of exercise after Optionee's death, the Optionee's executor,
administrator, heir or legatee, as the case may be) must take the following
actions:
(i) Execute and deliver to the Secretary of the Company (a) a
written notice of exercise (the "Exercise Notice"), in substantially the
form of EXHIBIT I attached hereto, in which there is specified the number
of Option Shares for which the Option is exercised.
(ii) Pay the aggregate Option Price for the purchased shares
in one or more of the
following alternative forms:
1. full payment in cash or check drawn to the Company's
order;
2. full payment in shares of Common Stock of the Company
held by the Optionee for the requisite period necessary to permit the
Company to avoid recognizing a charge for compensation for financial
accounting purposes and valued at Fair Market Value on the Exercise Date
(as such terms are defined below);
3. full payment in a combination of shares of Common
Stock of the Company held by the Optionee for the requisite period
necessary to permit the Company to avoid recognizing a charge for
compensation for financial accounting purposes valued at Fair Market Value
on the Exercise Date and cash or check drawn to the Company's order;
4. full payment effected through a broker-dealer sale
and remittance procedure pursuant to which the Optionee (I) shall provide
irrevocable written instructions to a designated brokerage firm to effect
the immediate sale of the purchased shares and remit to the Company, out
of the sale proceeds available on the settlement date, sufficient funds to
cover the aggregate Option Price payable for the purchased shares plus all
applicable Federal and State income and employment taxes required to be
withheld by the Company by reason of such purchase and (II) shall provide
written directives to the Company to deliver the purchased shares directly
to such brokerage firm in order to complete the sale transaction; or
5. full payment in any other form which the Company may,
in its discretion, approve at the time of exercise in accordance with the
provisions of Paragraph 16 of this Agreement.
(iii) Furnish to the Company appropriate documentation that the
person or persons exercising the Option (if other than the Optionee) have
the right to exercise this Option.
B. For purposes of this Agreement, the Fair Market Value of a
share of Common Stock on any relevant date shall be determined in accordance
with subparagraphs (i) and (ii) below, and the Exercise Date shall be the
date on which the executed Exercise Notice is delivered to the Company.
Except to the extent the sale and remittance procedure specified above is
utilized for the exercise of the Option, payment of the Option Price for the
purchased shares must accompany the Exercise Notice. The procedure for
measuring Fair Market Value shall be as follows:
(i) If the Common Stock is not at the time listed or admitted
to trading on any national stock exchange but is traded on the NASDAQ
National Market System, Fair Market Value shall be the closing selling
price per share of Common Stock on the date in question, as such price is
reported by the National Association of Securities Dealers through the
NASDAQ National Market System or any successor system. If there is no
reported closing selling price for the Common Stock on the date in
question, then the closing selling price on the last preceding date for
which such quotation exists shall be determinative of Fair Market Value.
(ii) If the Common Stock is at the time listed or admitted to
trading on any national stock exchange, then the Fair Market Value shall
be the closing selling price per share of Common Stock on the date in
question on the stock exchange determined by the Company to be the primary
market for the Common Stock, as such price is officially quoted in the
composite tape of transactions on such exchange. If there is no reported
sale of Common Stock on such exchange on the date in question, then the
Fair Market Value shall be the closing selling price on the exchange on
the last preceding date for which such quotation exists.
(iii) If shares of the series of Common Stock to be valued at
the time are neither listed nor admitted to trading on any stock exchange
nor traded in the over-the-counter market, then the fair
market value shall be determined by the Company after taking into account
such factors as the Company shall deem appropriate, including one or more
independent professional appraisals, in a manner consistent with the
provisions of Section 260.140.50 of the Rules of the California
Corporations Commissioner.
C. As soon after the Exercise Date as practical, the Company
shall deliver to or on behalf of the Optionee (or to any other person or
persons exercising this Option) the purchased shares.
D. In no event may this Option be exercised for any fractional
shares.
11. COMPLIANCE WITH LAWS AND REGULATIONS.
A. The exercise of this Option and the issuance of the Option
Shares upon such exercise shall be subject to compliance by the Company and
the Optionee with all applicable requirements of law relating thereto and
with all applicable regulations of any stock exchange on which shares of the
Option Shares may be listed at the time of such exercise and issuance.
B. In connection with the exercise of this Option, Optionee shall
execute and deliver to the Company such representations in writing as may be
requested by the Company in order for it to comply with the applicable
requirements of Federal and State securities laws.
12. SUCCESSORS AND ASSIGNS. Except to the extent otherwise provided in
Paragraph 3 or 6, the provisions of this Agreement shall inure to the benefit
of, and be binding upon, the successors, administrators, heirs, legal
representatives and assigns of Optionee and the successors and assigns of the
Company.
13. LIABILITY OF COMPANY. The inability of the Company to obtain
approval from any regulatory body having authority deemed by the Company to
be necessary to the lawful issuance and sale of any Common Stock pursuant to
this Option shall relieve the Company of any liability with respect to the
non-issuance or sale of the Common Stock as to which such approval shall not
have been obtained. The Company, however, shall use its best efforts to
obtain all such approvals.
14. NO EMPLOYMENT OR SERVICE CONTRACT. Nothing in this Agreement shall
confer upon the Optionee any right to continue in the Service of the Company
(or any parent or subsidiary corporation of the Company employing or
retaining Optionee) for any period of specific duration or interfere with or
otherwise restrict in any way the rights of the Company (or any parent or
subsidiary corporation of the Company employing or retaining Optionee) or the
Optionee, which rights are hereby expressly reserved by each, to terminate
the Optionee's Service at any time for any reason whatsoever, with or without
cause.
15. NOTICES. Any notice required to be given or delivered to the
Company under the terms of this Agreement shall be in writing and addressed
to the Company in care of the Corporate Secretary at the Company's principal
corporate offices. Any notice required to be given or delivered to Optionee
shall be in writing and addressed to Optionee at the address indicated below
Optionee's signature line hereto. All notices shall be deemed to have been
given or delivered upon personal delivery or upon deposit in the U.S. mail,
postage prepaid and properly addressed to the party to be notified.
16. LOANS. The Company may, in its absolute discretion and without any
obligation to do so, assist the Optionee in the exercise of this Option by
(i) authorizing the extension of a loan to the Optionee from the Company or
(ii) permitting the Optionee to pay the Option Price for the purchased Common
Stock in installments for a specified period. The terms of any loan or
installment method of payment (including the interest rate, the collateral
requirements and terms of repayment) shall be established by the Company in
its sole discretion.
17. GOVERNING LAW. The interpretation, performance, and enforcement of
this Agreement shall be governed by the laws of the State of Delaware without
resort to that State's conflict-of-laws rules.
18. WITHHOLDING. Optionee hereby agrees to make appropriate
arrangements with the Company or parent or subsidiary corporation employing
Optionee for the satisfaction of any Federal, State or local income tax
withholding requirements and Federal social security or other employee tax
requirements applicable to the exercise of this Option.
ENCAD, INC.
/s/
Xxxxxxx X. Xxxxxx
President
/s/
Michael J. T. Steep
Address:_______________________________
_______________________________________
Social Security #:_____________________
Dated: April 20, 1998
EXHIBIT I
[LOGO] NOTICE TO EXERCISE STOCK OPTIONS
I hereby notify ENCAD, Inc. that I elect to exercise _________________ shares
pursuant to stock option (the "Option") granted to me on ____________________
to purchase up to __________ shares of ENCAD Common Stock at an option price
of $___________ per share (the "Option Price").
Concurrently with the delivery of this Notice to Exercise I shall pay to
ENCAD the Option Price for the exercised shares in accordance with the
provisions of my agreement with ENCAD evidencing the Option and shall deliver
whatever additional documents may be required by such agreement as a
condition for exercise.
Optionee Name:________________________________________________________________
Street Address:_______________________________________________________________
City/State/Zip Code:__________________________________________________________
Social Security Number:_____________________ Telephone Number/Extension:______
Method of exercise
(check one): Cashless / / Stock Swap / / No.
Cash/check Exercise and hold / / used in swap _____
No._____ Attestation form
Exercise and sell / / attached / /
No._____ Certificate
attached / /
DELIVERY Name:_____________________________________________________
INSTRUCTIONS:
Address:__________________________________________________
DTC #:____________________________________________________
Broker: Name:_____________________________________________________
Address:__________________________________________________
Phone #:__________________________________________________
Account #:________________________________________________
Optionee Signature:__________________________ Date:_______________________
Exercise Procedures:
1. Complete, sign and return the Notice to Exercise form to Xxxxx
Xxxxxxx or Xxx Xxxxx.
2. For cash transactions, a personal check, money order or cashier's
check must be provided before the exercise will be processed.
3. For stock swaps, the stock certificate(s) used in exchange for the
options shares must be duly executed by a bank participating in the
Medallion program.
4. If exercising through a brokerage firm, submit the Notice to
Exercise prior to contracting the broker to avoid a delay in
processing.
5. Exercises are processed the same day payment is received. Fair
Market Value will be established by the closing price (last trade)
of ENCAD common stock on the day of exercise. Allow approximately
five business days for delivery of your certificate.
6. The Notice to Exercise is valid for 30 days only. If transaction
does not take place within 30 days a new form must be completed.
FINANCE USE ONLY
Date verified with broker:___________ Date entered into system:______________
Date payment received:_______________ Date sent to transfer agent:___________
FMV/Date:____________________________ Date confirmation sent to
optionee:______________________________
Comments:____________________________
