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
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
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Optionee
-------------------------------------
Address:
-----------------------------
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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:
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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 ▇▇▇▇ ▇▇▇) 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.
▇. ▇▇▇▇▇ 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 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 ▇▇▇▇ ▇▇▇) 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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