Exhibit 99.3
Form of Stock Option Agreement
(Discretionary Option Grant Program)
EXHIBIT 99.3
ATL PRODUCTS, 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 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 this option is
outstanding, then the period for exercising this option shall be limited to
three (3) months commencing with the date of such cessation of Service, 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 this option is outstanding, then the period for exercising
this option shall be limited to a period of twelve (12) months commencing
with the date of such cessation of Service. In no event, however, 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 vested 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 vested 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 in which
Optionee is not otherwise at that time vested or for which this option is
not otherwise at that time exercisable.
2
(e) Should Optionee's Service be terminated for Misconduct, then
this option shall terminate immediately and cease to remain outstanding.
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 Class A 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.
---------------------------
(a) Should any change be made to the Class A Common Stock by reason of
any stock split, stock dividend, recapitalization, combination of shares,
exchange of shares or other change affecting the outstanding Class A Common
Stock as a class without the
3
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.
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 Class A 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
4
to be withheld by the Corporation by reason of such exercise and (II)
to the Corporation to deliver the certificates for the purchased
shares directly to such brokerage firm in order to complete the sale.
Except to the extent the sale and remittance procedure is
utilized in connection with the option exercise, payment of the
Exercise Price must accompany the Notice of Exercise delivered to the
Corporation in connection with the option exercise.
(iii) Furnish to the Corporation appropriate documentation
that the person or persons exercising the option (if other than Optionee)
have the right to exercise this option.
(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 Class A 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 Class A Common Stock pursuant to this option
shall relieve the Corporation of any liability with respect to the non-issuance
or sale of the Class A 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.
5
12. NOTICES. Any notice required to be given or delivered to the Corporation
-------
under the terms of this Agreement shall be in writing and addressed to the
Corporation at its principal corporate offices. Any notice required to be given
or delivered to Optionee shall be in writing and addressed to Optionee at the
address indicated below Optionee's signature line on the Grant Notice. All
notices shall be deemed effective upon personal delivery or upon deposit in the
U.S. mail, postage prepaid and properly addressed to the party to be notified.
13. FINANCING. The Plan Administrator may, in its absolute discretion and
---------
without any obligation to do so, permit Optionee to pay the Exercise Price for
the purchased Option Shares by delivering a full-recourse promissory note
payable to the Corporation. The terms of any such promissory note (including
the interest rate, the requirements for collateral and the terms of repayment)
shall be established by the Plan Administrator in its sole discretion.
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 Class A 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 Class A 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.
6
(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 Class A 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 Class A Common Stock or other securities for which
this option or any other Incentive Options granted to Optionee prior to the
Grant Date (whether under the Plan or any other option plan of the
Corporation or any Parent or Subsidiary) first become exercisable during
the same calendar year, exceed One Hundred Thousand Dollars ($100,000) in
the aggregate. Should such One Hundred Thousand Dollar ($100,000)
limitation be exceeded in any calendar year, this option shall nevertheless
become exercisable for the excess shares in such calendar year as a Non-
Statutory Option.
(c) Should the exercisability of this option be accelerated upon
a Corporate Transaction, then this option shall qualify for favorable tax
treatment as an Incentive Option only to the extent the aggregate Fair
Market Value (determined at the Grant Date) of the Class A 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 Class
A 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 Class A Common Stock which become exercisable for
the first time in the same calendar year as this option, then the foregoing
limitations on the exercisability of such options as Incentive Options
shall be applied on the basis of the order in which such options are
granted.
7
EXHIBIT I
NOTICE OF EXERCISE
I hereby notify ATL Products, Inc. (the "Corporation") that I elect to
purchase ____________ shares of the Corporation's Class A 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 1997 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: _____________________________________________
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. CLASS A COMMON STOCK shall mean shares of the Corporation's Class A 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 ATL Products, Inc., a Delaware corporation.
-----------
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 Class A Common Stock on any relevant date
-----------------
shall be determined in accordance with the following provisions:
A-1
(i) If the Class A 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 Class A 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 Class A 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 Class A 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 Class A Common Stock on the date in question on
the Stock Exchange determined by the Plan Administrator to be the primary
market for the Class A 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 Class A 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.
A-2
R. OPTION SHARES shall mean the number of shares of Class A 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 1997 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 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.
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