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EXHIBIT 99.3
COM21, 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. This option shall be
neither transferable nor assignable by Optionee other than by will or by the
laws of descent and distribution following Optionee's death and may be
exercised, during Optionee's lifetime, only by Optionee. However, 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 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.
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
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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 in accordance with the laws of
inheritance shall have the right to exercise this option. Such right
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.
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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.
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9. 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:
(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 extent 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.
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(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.
(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 and the legal
representatives, heirs and legatees of Optionee's estate.
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.
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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.
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
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($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 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.
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EXHIBIT I
NOTICE OF EXERCISE
I hereby notify Com21, 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 1998 Stock
Incentive Plan on ______________________________, 199___.
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.
_____________________________, 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: ___________________________________________
___________________________________________
Employee Number: ___________________________________________
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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 Com21, Inc., a Delaware corporation,
and its successors.
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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(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.
(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.
▇. ▇▇▇▇▇ DATE shall mean the date of grant of the option as
specified in the Grant Notice.
▇. ▇▇▇▇▇ 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.
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R. OPTION SHARES shall mean the number of shares of Common Stock
subject to the option as specified in the Grant Notice.
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 1998 Stock Incentive 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.