1
EXHIBIT 99.6
TOUCHSTONE SOFTWARE CORPORATION
AUTOMATIC STOCK OPTION AGREEMENT
RECITALS
A. The Corporation has implemented an automatic option grant
program under the Corporation's 1997 Stock Incentive Plan pursuant to which
eligible non-employee members of the Board will automatically receive special
option grants at designated intervals over their period of Board service in
order to provide such individuals with a meaningful incentive to continue to
serve as a member 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 a stock option to
purchase shares of the Corporation's Common Stock under the Plan.
C. The granted option is intended to be a non-statutory option
which does not meet the requirements of Section 422 of the Internal Revenue
Code.
D. All capitalized terms in this Agreement, to the extent not
otherwise defined in the 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 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, 6 or 7.
3. LIMITED TRANSFERABILITY. 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 and shall
be set forth in such documents issued to the assignee as the Corporation may
deem appropriate. Should the Optionee die while holding this option, then this
2
option shall be transferred in accordance with Optionee's will or the laws of
descent and distribution.
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
vested in accordance with the Vesting Schedule set forth in the Grant Notice,
and shall remain so exercisable until the Expiration Date or the 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 a
series of 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:
(i) Should Optionee cease to serve as a
Board member for any reason (other than death or Permanent Disability)
while holding this option, then the period for exercising this option
shall be reduced to a twelve (12)-month period commencing with 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.
(ii) Should Optionee die during the
twelve (12)-month period following his or her cessation of Board
service, 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 in accordance with the laws of descent and
distribution 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). Such right of exercise 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 of the option
term.
2.
3
(iii) 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 immediately vest in full so that Optionee (or the
personal representative of Optionee's estate or the person or persons
to whom the option is transferred upon Optionee's death) shall have
the right to exercise this option 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.
(iv) 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 set forth in the Grant Notice or the special vesting
acceleration provisions of Paragraph 6 or 7 below.
6. CORPORATE TRANSACTION.
(a) In the event of a Corporate Transaction, all
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 fully
exercisable for all of the Option Shares at the time subject to this option and
may be exercised for all or any portion of such shares as fully-vested shares
of Common Stock. 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 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 fully exercisable for all of the Option Shares at the
time subject to this option and may be exercised for all or any portion of such
shares as fully-vested shares of Common Stock. 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).
3.
4
(b) Optionee shall have an unconditional right
(exercisable 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.
(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. Such option surrender and cash
distribution has been pre-approved by the Corporation's stockholders in
connection with their approval of the Plan, and no additional 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, 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 new 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
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; provided, however, that the aggregate
Exercise Price shall remain the same.
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 for all or
any part of the Option Shares for which the option is at the time exercisable,
Optionee or, in the case of exercise after Optionee's death, Optionee's
executor, administrator, heir or legatee, as the case may be, must take the
following actions:
4.
5
(i) To the extent the option is
exercised for vested Option Shares, the Secretary of the Corporation
shall be provided with written notice of the option exercise (the
"Exercise Notice") in substantially the form of Exhibit I attached
hereto, in which there is specified the number of vested Option Shares
to be purchased under the exercised option. To the extent that the
option is exercised for one or more unvested Option Shares, Optionee
(or other person exercising the option) shall deliver to the Secretary
of the Corporation a Purchase Agreement for those unvested Option
Shares.
(ii) The Exercise Price for the
purchased shares shall be paid in one or more of the following
alternative forms:
- cash or check made payable to
the Corporation's order; or
- 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
- to the extent the option is
exercised for vested Option Shares, through a special sale and
remittance procedure pursuant to which Optionee shall provide
irrevocable written instructions (A) to a
Corporation-designated brokerage firm to effect the immediate
sale of the vested shares purchased under the option 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 those shares plus the applicable
Federal, state and local income taxes required to be withheld
by the Corporation by reason of such exercise and (B) to the
Corporation to deliver the certificates for the purchased
shares directly to such brokerage firm in order to complete
the sale.
(iii) Appropriate documentation
evidencing the right to exercise this option shall be furnished the
Corporation if the person or persons exercising the option is other
than Optionee.
(iv) Appropriate arrangement must
be made with the Corporation for the satisfaction of all Federal,
state and local income tax withholding requirements applicable to the
option exercise.
(b) Except to the extent the sale and remittance
procedure specified above is utilized in connection with the exercise of the
option for vested Option Shares, payment
5.
6
of the Exercise Price for the purchased shares must accompany the Exercise
Notice or Purchase Agreement delivered to the Corporation in connection with
the option exercise.
(c) 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 or certificates representing the
purchased Option Shares. 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.
(d) In no event may this option be exercised for
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, nothing in this Agreement shall 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. However, the Corporation shall use its best efforts to
obtain all such applicable 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 and the legal
representatives, heirs and legatees of Optionee's estate.
14. CONSTRUCTION/GOVERNING LAW. This Agreement and the
option evidenced hereby are made and granted pursuant to the automatic option
grant program in effect under the Plan and are in all respects limited by and
subject to the express terms and provisions of that
6.
7
program. 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.
15. 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.
7.
8
EXHIBIT I
NOTICE OF EXERCISE
I hereby notify TouchStone Software Corporation (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 pursuant to the automatic option grant program
under the Corporation's 1997 Stock Incentive Plan on ____________________,
199___.
Concurrently with the delivery of this Exercise Notice to the
Secretary of 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 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.
_______________________, 199___
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: _____________________________
9
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 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 which the Board does not recommend such stockholders to
accept, 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
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
A-1.
10
(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 TouchStone Software Corporation, a
Delaware corporation.
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 payable per share
as specified in the Grant Notice.
J. EXPIRATION DATE shall mean the date on which the option term
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 or any successor
system. If there is no closing selling price for the Common Stock on
the date in question, then the Fair Market Value shall be determined
by reference to the most recent bid price as reported on the Nasdaq
National Market or any successor system.
(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 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.
▇. ▇▇▇▇▇ DATE shall mean the date of grant of the option as
specified in the Grant Notice.
▇. ▇▇▇▇▇ NOTICE shall mean the Notice of Grant of Automatic Stock
Option accompanying this Agreement, pursuant to which Optionee has been
informed of the basic terms of the option evidenced hereby.
A-2.
11
N. 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 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.
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. OPTION SHARES shall mean the number of shares of Common Stock
subject to the option.
R. OPTIONEE shall mean the person to whom the option is granted
as specified in the Grant Notice.
S. PERMANENT DISABILITY shall mean the inability of Optionee to
perform his or her usual duties as a Board member 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.
T. PLAN shall mean the Corporation's 1997 Stock Incentive Plan.
U. PURCHASE AGREEMENT shall mean the stock purchase agreement (in
form and substance satisfactory to the Corporation) which must be executed at
the time the option is exercised for unvested Option Shares and which will
accordingly (i) grant the Corporation the right to repurchase, at the Exercise
Price, any and all of those Option Shares in which Optionee is not otherwise
vested at the time of his or her cessation of service as a Board member and
(ii) preclude the sale, transfer or other disposition of any of the Option
Shares purchased under such agreement while those Option Shares remain subject
to the repurchase right.
V. STOCK EXCHANGE shall mean the American Stock Exchange or the
New York Stock Exchange.
W. 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.
X. VESTING SCHEDULE shall mean the vesting schedule specified in
the Grant Notice, pursuant to which Optionee will vest in the Option Shares in
one or more installments over his
A-3.
12
or her period of Board service, subject to acceleration in accordance with the
provisions of the Agreement.
A-4.
