EXHIBIT 99.1
1998 Stock Option Plan
[LOGO]
ENCAD, INC.
1998 STOCK OPTION PLAN
ARTICLE ONE
PROVISIONS
I. PURPOSE OF THE PLAN
This 1998 Stock Option Plan ("the Plan") is intended to promote the
interests of ENCAD, Inc., ("the Corporation") a Delaware corporation, by
authorizing shares of the Corporation's Common Stock for issuance through
option grants to be made from time to time to (i) Employees, including
Officers, in the Service of the Corporation (or any Parent or Subsidiary),
(ii) independent consultants and advisors in the Service of the Corporation
(or any Parent or Subsidiary), and (iii) Directors of the Corporation (or
any Parent or Subsidiary).
II. GENERAL
A. The Plan was adopted by the Board on March 9, 1998 and shall
become effective immediately upon approval by the stockholders of the
Corporation on June 9, 1998.
B. The Plan is independent of any of the Corporation's other
stock option plans, and option shares issued under the Plan shall not reduce
or otherwise affect the number of shares of the Corporation's Common Stock
available for issuance under any of the Corporation's other plans. In
addition, option shares issued under any of the Corporation's other plans
shall not reduce or otherwise affect the number of shares of the
Corporation's Common Stock available for issuance under the Plan.
C. Capitalized terms shall have the meanings assigned to
such terms in the attached Appendix.
D. An Optionee under the Plan shall have none of the rights
of a stockholder of the Corporation with respect to any option shares issued
under the Plan until such Optionee has exercised the option, paid the
exercise price for the purchased shares, and been issued such shares.
E. Neither the grant of options nor the issuance of any shares
pursuant to the Plan shall in no 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.
III. STRUCTURE OF THE PLAN
A. The Plan shall be divided into four separate components: the
Discretionary Option Grant Program specified in Article Two, the Automatic
Option Grant Program specified in Article Three, the Salary Reduction Option
Grant Program specified in Article Four and the Director Fee Option Grant
Program specified in Article Five ("the Programs").
B. The provisions of Articles One and Six of the Plan, except as
otherwise expressly provided, shall apply to each of the Programs and shall
accordingly govern the interests of all Optionees in the Plan.
IV. ELIGIBILITY
A. The individuals eligible to participate in the Programs
shall be limited to those Employees, including Officers, independent
consultants and advisors in the Service of the Corporation (or any Parent or
Subsidiary), and Directors of the Corporation (or any Parent or Subsidiary)
at the time of grant.
B. The individuals eligible to participate in the Automatic
Option Grant Program shall be limited to Directors who are (i) first elected
or appointed as Directors on or after the Effective Date of the Plan,
whether through appointment by the Board or election by the Corporation's
stockholders, provided they have not otherwise been Employees of the
Corporation (or any Parent or Subsidiary), or (ii) re-elected as Directors
at one or more annual stockholder meetings held after the Effective Date,
whether or not such individuals are otherwise serving as Directors on the
Effective Date.
C. Only Directors shall be eligible to participate in the
Director Fee Option Grant Program.
V. ADMINISTRATION OF THE PLAN
A. The Plan Administrator shall mean the Board, the Primary
Committee or one or more Secondary Committees responsible for administering
the Plan as set forth in this Article One, Section V.
B. The Primary Committee shall have the sole and exclusive
authority to administer the Discretionary Option Grant Program with respect
to Officers and to select the individuals who are to participate in the
Salary Reduction Option Grant Program. However, all grants under the Salary
Reduction Option Grant Program shall be made in accordance with the express
provisions of that Program.
C. Except to the extent that the Primary Committee is granted
sole and exclusive authority under one or more specific provisions of the
Plan, administration of the Discretionary Option Grant Program with respect
to all other Optionees may, at the Board's discretion, be delegated to the
Primary Committee or the Secondary Committee, or the Board may retain the
power to administer these programs with respect to such persons. The members
of the Secondary Committee may be Employees.
D. Members of the Primary Committee or any Secondary Committee
shall serve for such period of time as the Board may determine and may be
removed from service on a committee by the Board at any time. The Board may
also at any time, terminate the functions of any Secondary Committee and
reassume all powers and authority previously delegated to any Secondary
Committee.
E. Service on the Primary Committee or the Secondary Committee
shall constitute service as a member of the Board, and members of each
committee shall accordingly be entitled to full indemnification and
reimbursement as Board Members for their service on any such committee. No
member of the Primary Committee or the Secondary Committee shall be liable
for any act or omission made in good faith with respect to the Plan or any
options granted under the Plan.
F. Each Plan Administrator shall, within the scope of its
administrative functions under the Plan, have full power and authority
(subject to the provisions of the Plan) to establish such rules and
regulations as it may deem appropriate for proper administration of the
Discretionary Option Grant Program and to make such determinations under, and
issue such interpretations of, the provisions of such Program and any
outstanding options thereunder as it may deem necessary or advisable.
Decisions of the Plan Administrator within the scope of its administrative
functions under the Plan shall be final and binding on all persons who have
an interest in the Discretionary Option Grant Program or any option
thereunder.
G. Each Plan Administrator shall have full authority, within the
scope of its administrative jurisdiction, to determine which individuals are
eligible to receive options under the Discretionary Option Grant Program, the
time or times when such grants are to be made, the type of option granted,
the number of shares to be covered by each such grant, the time or times when
each granted option is to become exercisable and the maximum term for which
the option may remain outstanding.
H. Notwithstanding the above, the administration of the Automatic
Option Grant and Director Fee Option Grant Programs shall be self-executing
in accordance with the terms and conditions thereof, and no Plan
Administrator shall exercise any discretionary functions in respect to
matters governed by those programs.
VI. STOCK SUBJECT TO THE PLAN
A. Shares of Common Stock shall be available for issuance under
the Plan and shall be drawn from either the Corporation's authorized but
unissued shares of Common Stock or from reacquired shares of Common Stock,
including shares repurchased by the Corporation on the open market. The
maximum number of shares of Common Stock reserved for issuance over the term
of the Plan shall be limited to 575,000 shares, subject to adjustment from
time to time in accordance with the provisions of this Article One, Section
VI. However, no one person participating in the Plan may receive options for
more than 175,000 shares of Common Stock per calendar year, beginning with
the 1998 calendar year.
B. Unvested shares issued under the Plan and subsequently
cancelled or repurchased by the Corporation at the option exercise or direct
issue price paid per share pursuant to the Corporation's repurchase rights
under the Plan shall also be available for subsequent issuance under the Plan.
C. Should the exercise price of an outstanding option under the
Plan be paid with shares of Common Stock or should the shares of Common Stock
otherwise issuable pursuant to the exercise of an outstanding option under
the Plan be withheld by the Corporation to satisfy any applicable federal and
state income and employment taxes incurred in connection with such exercise,
then the number of shares of Common Stock available for issuance under the
Plan shall be reduced by the gross number of shares for which the option is
exercised, and not by the net number of shares of Common Stock actually
issued to the Optionee.
D. Should any change be made to the Common Stock issuable under
the Plan 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, then appropriate adjustments shall be made to (i) the maximum
number and/or class of securities issuable under the Plan (ii) the maximum
number of shares for which stock options may be granted to any one person per
calendar year, (iii) the number and/or class of securities for which grants
are subsequently to be made under the Automatic Option Grant Program to new
and continuing Directors and (iv) the number and/or class of securities and
price per share in effect under each option outstanding under the Plan. Such
adjustments to the outstanding options are to be effected in a manner which
shall preclude the enlargement or dilution of rights and benefits under such
options. The adjustments determined by the Plan Administrator shall be
final, binding and conclusive.
ARTICLE TWO
DISCRETIONARY OPTION GRANT PROGRAM
I. OPTION TERMS
Options granted under this Article Two shall be authorized by
action of the Plan Administrator and shall be evidenced by one or more
documents in the form approved by the Plan Administrator; PROVIDED, however,
that each such document shall comply with the terms and conditions specified
below. Options granted under this Article Two shall be Incentive Stock
Options or Non-Statutory Options, as determined by the Plan Administrator.
A. GRANT DATE Options granted to eligible participants under
this Article Two at such time or times as shall be determined by the Plan
Administrator.
B. EXERCISE PRICE The exercise price per share shall be fixed by
the Plan Administrator at one hundred percent (100%) of the Fair Market Value
per share of Common Stock on the grant date.
C. PAYMENT
1. Full payment of the exercise price and any applicable
federal and state income and employment taxes shall become immediately due upon
exercise of the option and shall be payable in one or more of the forms
specified below:
a. cash or check made payable to the Corporation's order,
b. shares of Common Stock held 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,
c. a combination of such shares, and cash or check made
payable to the Corporation's order, or
d. full payment effected through a "same-day sale"
and remittance procedure pursuant to which the Optionee (a) shall
concurrently provide irrevocable instructions 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 Option Price payable for the purchased shares plus any
applicable federal and state income and employment taxes required to
be withheld by the Corporation by reason of such purchase and
(b) shall provide directives to the Corporation to deliver the
purchased shares directly to such brokerage firm in order to complete
the sale transaction.
2. Except to the extent such sale and remittance procedure is
utilized, payment of the exercise price for the purchased shares must be made
on the Exercise Date.
D. VESTING Each option shall become exercisable at such time or
times, during such period and for such number of shares as shall be determined
by the Plan Administrator and set forth in the documents evidencing such
option.
E. OPTION TERM No option shall have a maximum term in excess of
ten (10) years measured from the grant date.
F. TRANSFERABILITY During the lifetime of the Optionee, except
as provided in this Paragraph F of Article Two, options shall be exercisable
only by the Optionee and shall not be assignable or transferable other than by
will or by the laws of descent and distribution following the Optionee's death.
However,
the Plan Administrator may permit, in connection with the Optionee's estate
plan, Non-Statutory Options to be assigned in whole or in part during the
Optionee's lifetime to one or more members of the Optionee's immediate family
or to a trust established exclusively for one or more such family members.
The assigned portion may only be exercised by the person or persons who
acquire a proprietary interest in the option pursuant to the assignment. The
terms applicable to the assigned portion shall be the same as those in effect
for the option immediately prior to such assignment and shall be set forth in
such documents issued to the assignee as the Plan Administrator may deem
appropriate.
G. TERMINATION OF SERVICE
1. The following provisions shall govern the exercise of any
options held by the Optionee at the time of cessation of Service or death:
a. Any option outstanding at the time of the
Optionee's cessation of Service for any reason shall remain
exercisable for such limited period of time thereafter as shall be
determined by the Plan Administrator and set forth in the documents
evidencing the option, but no such option shall be exercisable after
the expiration of the option term.
b. Any option exercisable in whole or in part by the
Optionee at the time of death may be subsequently exercised by the
personal representative of the Optionee's estate or by the person or
persons to whom the option is transferred pursuant to the Optionee's
will or in accordance with the laws of descent and distribution.
c. During the applicable post-Service exercise
period, the option may not be exercised in the aggregate for more
than the number of shares for which the option is exercisable on the
date of the Optionee's cessation of Service. Upon the expiration of
the applicable post-Service exercise period or (if earlier) upon the
expiration of the option term, the option shall terminate and cease
to be outstanding for any otherwise exercisable shares for which the
option has not been exercised. However, the option shall,
immediately upon the Optionee's cessation of Service, terminate and
cease to be outstanding for any and all shares for which the option
is not otherwise at that time exercisable.
d. Should the Optionee's Service be terminated for
Misconduct, then all outstanding options held by the Optionee shall
terminate immediately and cease to be outstanding.
2. The Plan Administrator shall have the discretion,
exercisable either at the time an option is granted or at any time while the
option remains outstanding, to:
a. extend the period of time for which the option is
to remain exercisable following Optionee's cessation of Service or
death from the limited period otherwise in effect for that option to
such greater period of time as the Plan Administrator shall deem
appropriate, but in no event beyond the expiration of the option
term, and/or
b. permit the option to be exercised, during the
applicable post-Service exercise period, not only with respect to the
number of shares of Common Stock for which such option is exercisable
at the time of the Optionee's cessation of Service but also with respect
to one or more additional installments for which the option would have
become exercisable had the Optionee continued in Service.
II. INCENTIVE STOCK OPTIONS
The terms and conditions specified below shall be applicable to all
Incentive Stock Options granted under this Article Two, Section II.
Incentive Stock Options may only be granted to individuals who are Employees
of the Corporation. Options which are specifically designated as
Non-Statutory Options when issued under the Plan shall NOT be subject to such
terms and conditions.
A. OPTION PRICE AND TERM The option price per share of any
share of Common Stock subject to an Incentive Stock Option shall in no event
be less than one hundred percent (100%) of the Fair Market Value of such
share of Common Stock on the grant date, provided that the option price per
share of any option granted to a ten percent (10%) or more stockholder shall
not be less than one hundred ten percent (110%) of the Fair Market Value. The
term of grant of any option to any ten percent (10%) or more stockholder
shall not be more than five (5) years.
B. DOLLAR LIMITATION The aggregate Fair Market Value
(determined on the date or dates of grant) of the Common Stock for which one
or more options granted under the Plan (or any other option plan of the
Corporation or any Parent or Subsidiary) may for the first time become
exercisable as Incentive Stock Options under the Federal tax laws during any
one calendar year shall not exceed the sum of One Hundred Thousand Dollars
($100,000). To the extent the Employee holds two or more such options which
become exercisable for the first time in the same calendar year, the
foregoing limitation on the exercisability of such options as Incentive Stock
Options under the Federal tax laws shall be applied on the basis of the order
in which such options are granted.
C. Except as modified by the preceding provisions of this Section
II, the provisions of Articles One, Two and Six of the Plan shall apply to
all Incentive Stock Options granted hereunder.
D. During the lifetime of the Optionee, Incentive Stock Options
shall be exercisable only by the Optionee and shall not be assignable or
transferable other than by will or by the laws of descent and distribution
following the Optionee's death.
III. CORPORATE TRANSACTION/CHANGE IN CONTROL
A. In the event of any Corporate Transaction, each option
outstanding at the time but not otherwise fully exercisable shall
automatically accelerate so that each such option shall, immediately prior to
the effective date of the Corporate Transaction, become exercisable for all
of the shares of Common Stock at the time subject to such option and may be
exercised for any or all of those shares as fully-vested shares of Common
Stock. However, an outstanding option shall not become exercisable on such
an accelerated basis if and to the extent: (i) such option is, in connection
with the Corporate Transaction, either to be continued by the Corporation (in
the event that it is the surviving parent corporation in the Corporate
Transaction) or is assumed by the successor corporation (or parent thereof),
or (ii) such 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 shares for which the option is not otherwise at
that time exercisable (the excess of the Fair Market Value of those shares
over the exercise price payable for such shares) and provides for subsequent
payout in accordance with the same exercise/vesting schedule applicable to
those option shares or (iii) the acceleration of such option is subject to
other limitations imposed by the Plan Administrator at the time of the option
grant.
B. Immediately following the consummation of the Corporate
Transaction, all outstanding options shall terminate and cease to be
outstanding, except to the extent assumed by the successor corporation (or
parent thereof).
C. Each option which is assumed in connection with a Corporate
Transaction shall be appropriately adjusted, immediately after such Corporate
Transaction, to apply to the number and class of securities which would have
been issuable to the Optionee in consummation of such Corporate Transaction
had the option been exercised immediately prior to such Corporate
Transaction. Appropriate adjustments to reflect such Corporate Transaction
shall also be made to (i) the number and/or class of securities available for
issuance under the Plan on an
aggregate and per participant basis following the consummation of such
Corporate Transaction and (ii) the exercise price payable per share under
each outstanding option, PROVIDED the aggregate exercise price payable for
such securities shall remain the same.
D. The Plan Administrator shall have full power and authority to
grant options under the Plan which will automatically accelerate in the event
the Optionee's Service subsequently terminates by reason of an Involuntary
Termination within a designated period (not to exceed eighteen (18) months)
following the effective date of any Corporate Transaction in which those
options are assumed and do not otherwise accelerate. Any options so
accelerated shall remain exercisable for fully-vested shares until the
EARLIER of (i) the expiration of the option term or (ii) the expiration of
the one (1)-year period measured from the effective date of the Involuntary
Termination.
E. The Plan Administrator shall have the discretion, exercisable
either at the time the option is granted or at any time while the option
remains outstanding, to provide for the automatic acceleration of one or more
outstanding options in connection with a Change in Control so that each such
option shall, immediately prior to the effective date of the Change in
Control, become exercisable for all of the shares of Common Stock at the time
subject to such option and may be exercised for any or all of those shares as
fully-vested shares of Common Stock. The accelerated option shall remain
exercisable for fully-vested shares until the expiration or sooner
termination of the option term. Alternatively, the Plan Administrator may
condition such option acceleration upon the termination of the Optionee's
Service by reason of an Involuntary Termination within a designated period
(not to exceed eighteen (18) months) following the effective date of the
Change in Control. Each option so accelerated shall remain exercisable for
fully-vested shares until the EARLIER of (i) the expiration of the option
term or (ii) the expiration of the one (1)-year period measured from the
effective date of the Involuntary Termination.
ARTICLE THREE
AUTOMATIC OPTION GRANT PROGRAM
I. OPTION TERMS
Options granted under the Automatic Option Grant Program shall be
evidenced by one or more instruments in the form approved by the Plan
Administrator; PROVIDED, however, that each such instrument shall comply with
the terms and conditions specified below. All options granted under the
Automatic Option Grant Program shall be Non-Statutory Options. Stockholder
approval of the Plan at the 1998 Annual Meeting of Stockholders will also
constitute pre-approval of each option granted on or after the date of that
meeting pursuant to the express provisions of this Article Three and the
subsequent exercise of that option in accordance with its terms.
A. GRANT DATE
1. Options granted under this Article Three shall be made on
the dates specified below:
a. Each individual who first becomes a Director on
or after the Effective Date of the Plan, whether through election by
the Corporation's stockholders or appointment by the Board, and who
has not otherwise been in the prior employ of the Corporation shall
automatically be granted, at the time of such initial election or
appointment, an option to purchase 15,000 shares Common Stock.
b. Each individual re-elected as a Director at one
or more annual stockholder meetings, beginning with the 1998 Annual
Meeting of Stockholders, shall automatically be granted, at each such
meeting at which he or she is so re-elected, an option to purchase
5,000 shares of Common Stock. There shall be no limit on the number
of option grants any one Director may receive over the period of
service on the Board, and Directors who have previously been in the
Corporation's employ shall be eligible to receive one or more such
annual option grants over their period of continued Board service.
2. The Automatic Option Grant Program under the Plan shall
supersede and replace the automatic option grant program currently in effect
for Directors under the Corporation's 1993 Stock Option/Stock Issuance Plan.
Accordingly, upon stockholder approval of the Plan at the 1998 Annual Meeting
of Stockholders, that program shall immediately terminate, and no further
option grants shall be made to Directors under that program. All options
granted to Directors on or after the date of the 1998 Annual Meeting of
Stockholders, whether upon their initial election or appointment to the Board
upon their re-election at one or more of the Corporation's subsequent annual
meetings of stockholders, shall be effected solely and exclusively in
accordance with the terms and provisions of this Article Three. Should
stockholder approval of the Plan not be obtained at the 1998 Annual Meeting
of Stockholders, then the automatic option grant program under the
Corporation's 1993 Stock Option/Stock Issuance Plan shall remain in full
force and effect, and option grants shall be made under that program to all
Directors re-elected at the 1998 Annual Meeting of Stockholders.
B. EXERCISE PRICE The exercise price per share shall be
equal to one hundred percent (100%) of the Fair Market Value per share of
Common Stock on the grant date.
C. PAYMENT
1. Full payment of the exercise price shall become immediately
due upon exercise of the option and shall be payable in one or more of the
forms specified below:
a. cash or check made payable to the Corporation's
order,
b. shares of Common Stock held 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,
c. a combination of such shares, and cash or check
made payable to the Corporation's order, or
d. full payment effected through a "same-day sale"
and remittance procedure pursuant to which the Optionee (a) shall
concurrently provide irrevocable instructions 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 Option Price payable for the purchased shares plus any
applicable federal and state income and employment taxes required to
be withheld by the Corporation by reason of such purchase and
(b) shall provide directives to the Corporation to deliver the
purchased shares directly to such brokerage firm in order to complete
the sale transaction.
2. Except to the extent such sale and remittance procedure is
utilized, payment of the exercise price for the purchased shares must be made
on the Exercise Date.
D. VESTING Each option shall become exercisable in a
series of three (3) successive equal annual installments over the Optionee's
period of service on the Board, with the first such installment to become
exercisable one (1) year after the grant date. The option shall not become
exercisable for any additional option shares following the Optionee's
cessation of service on the Board for any reason. Notwithstanding the
foregoing, all options shall become fully vested in the event that the
Optionee ceases to provide service on the Board as a result of death or
Permanent Disability.
E. OPTION TERM Each option shall have a maximum term of ten
(10) years measured from the grant date.
F. TRANSFERABILITY During the lifetime of the Optionee,
except as provided in this Paragraph F of Article Three, options shall be
exercisable only by the Optionee and shall not be assignable or transferable
other than by will or by the laws of descent and distribution following the
Optionee's death. However, the Optionee may, in connection with the
Optionee's estate plan, assign an option under this Article Three in whole or
in part during the Optionee's lifetime to one or more members of the
Optionee's immediate family or to a trust established exclusively for one or
more such family members. The assigned portion may only be exercised by the
person or persons who acquire a proprietary interest in the option pursuant
to the assignment. The terms applicable to the assigned portion shall be the
same as those in effect for the option immediately prior to such assignment
and shall be set forth in such documents issued to the assignee as the
Corporation may deem appropriate.
G. TERMINATION OF SERVICE
1. Should the Optionee cease to serve on the Board for any
reason (other than death) while holding one or more options under this
Article Three, then such Optionee shall have a six (6) month period following
the date of such cessation of service on the Board in which to exercise each
such option for any or all of the shares of Common Stock for which the option
is exercisable at the time of such cessation of service. Each such option
shall immediately terminate and cease to be outstanding, at the time of such
cessation of service, with respect to any shares for which the option is not
otherwise at that time exercisable.
2. Should the Optionee die while serving as a member of the
Board or within six (6) months after cessation of service on the Board, then
each outstanding option held by the Optionee at the time of death may
subsequently be exercised, for any or all of the shares of Common Stock for
which the option is exercisable at the time of the Optionee's cessation of
service (less any option shares subsequently purchased by the Optionee prior
to death), by the personal representative of the Optionee's estate or by the
person or persons to whom the option is transferred pursuant to the
Optionee's will or in accordance with the laws of descent and distribution.
Any such exercise must occur within twelve (12) months after the date of the
Optionee's death. However, each such
option shall immediately terminate and cease to be outstanding, at the time
of the Optionee's cessation of service, with respect to any option shares for
which it is not otherwise at such time exercisable.
3. In no event shall any option under this Article Three
remain exercisable after the specified expiration date of the ten (10) year
option term. Upon the expiration of the applicable exercise period in
accordance with the subparagraphs above or (if earlier) upon the expiration
of the ten (10) year option term, the option shall terminate and cease to be
outstanding for any unexercised shares for which the option was exercisable
at the time of the Optionee's cessation of service on the Board.
II. CORPORATE TRANSACTION/CHANGE IN CONTROL
A. In the event of any Corporate Transaction or Change in
Control, each option outstanding at the time under this Article Three but not
otherwise fully exercisable shall automatically accelerate so that each such
option shall, immediately prior to the effective date of the Corporate
Transaction or Change in Control, become exercisable for all of the shares of
Common Stock at the time subject to such option and may be exercised for any
or all of those shares as fully-vested shares of Common Stock.
B. Immediately following the consummation of the Corporate
Transaction, all outstanding options shall terminate and cease to be
outstanding, except to the extent assumed by the successor corporation (or
parent thereof). Options accelerated in connection with a Change in Control
shall remain outstanding until the expiration or sooner termination of the
option term.
C. Each option which is assumed in connection with a Corporate
Transaction shall be appropriately adjusted, immediately after such Corporate
Transaction, to apply to the number and class of securities which would have
been issuable to the Optionee in consummation of such Corporate Transaction
had the option been exercised immediately prior to such Corporate
Transaction. Appropriate adjustments to reflect such Corporate Transaction
shall also be made to the exercise price payable per share under each
outstanding option, PROVIDED the aggregate exercise price payable for such
securities shall remain the same.
ARTICLE FOUR
SALARY REDUCTION OPTION GRANT PROGRAM
I. OPTION GRANTS
The Primary Committee shall have the sole and exclusive
authority to determine the calendar year or years (if any) for which the
Salary Reduction Option Grant Program is to be in effect and to select the
Employees eligible to participate in the Salary Reduction Option Grant
Program for those calendar years. Only Employees who are Officers may
participate in the Salary Reduction Option Grant Program, and each selected
Officer who elects to participate in the Salary Reduction Option Grant
Program must, prior to the start of each calendar year of participation, file
with the Plan Administrator (or its designate) an irrevocable authorization
directing the Corporation to reduce his or her base salary for that calendar
year by a designated multiple of one percent (1%). However, the minimum
amount of such salary reduction must be not less than the GREATER of (i) five
percent (5%) of his or her rate of base salary for the calendar year or (ii)
Ten Thousand Dollars ($10,000.00) and must not be more than the LESSER of (i)
twenty five percent (25%) of his or her rate of base salary for the calendar
year or (ii) Seventy Five Thousand Dollars ($75,000.00). Each individual who
files a proper salary reduction authorization shall automatically be granted
an option under this Salary Reduction Option Grant Program on the first
trading day in January of the calendar year for which that salary reduction
is to be in effect. Stockholder approval of the Plan at the 1998 Annual
Meeting of Stockholders will constitute pre-approval of each option
subsequently granted pursuant to the express terms of this Salary Reduction
Option Grant Program and the subsequent exercise of that option in accordance
with its terms.
II. OPTION TERMS
Options granted under this Article Four, Section II shall be
evidenced by one or more documents in the form approved by the Plan
Administrator; PROVIDED, however, that each such document shall comply with
the terms and conditions specified below. All options granted under this
Article Four , Section II shall be Non-Statutory Options.
A. EXERCISE PRICE
1. The exercise price per share shall be thirty-three and
one-third percent (33-1/3%) of the Fair Market Value per share of Common
Stock on the grant date.
2. The exercise price shall become immediately due upon
exercise of the option and shall be payable in one or more of the alternative
forms authorized under the Discretionary Option Grant Program. Except to the
extent the "same-day sale" and remittance procedure specified thereunder is
utilized, payment of the exercise price for the purchased shares must be made
on the Exercise Date.
B. NUMBER OF OPTION SHARES The number of shares of Common Stock
subject to the option shall be determined pursuant to the following formula
(rounded down to the nearest whole number):
X - A DIVIDED BY (B x 66-2/3%), where
X is the number of option shares,
A is the dollar amount by which the Optionee's base salary is to
be reduced for the calendar year, and
B is the Fair Market Value per share of Common Stock on the
grant date.
C. VESTING AND OPTION TERM Each option shall become exercisable
in a series of twelve (12) successive equal monthly installments upon the
Optionee's completion of each calendar month of Service in the calendar year
for which the salary reduction is in effect. Each option shall have a
maximum term of ten (10) years
measured from the grant date.
D. TERMINATION OF SERVICE Should the Optionee cease to be in
Service for any reason while holding one or more options under this Article
Four, then each such option shall remain exercisable, for any or all of the
shares for which the option is exercisable at the time of such cessation of
Service, until the EARLIER of (i) the expiration of the ten (10) year option
term or (ii) the expiration of the three (3) year period measured from the
date of such cessation of Service. Should Optionee die while holding one or
more options under this Article Four, then each such option may be exercised,
for any or all of the shares for which the option is exercisable at the time
of the Optionee's cessation of Service (less any shares subsequently
purchased by Optionee prior to death), by the personal representative of the
Optionee's estate or by the person or persons to whom the option is
transferred pursuant to the Optionee's will or in accordance with the laws of
descent and distribution. Such right of exercise shall lapse, and the option
shall terminate, upon the EARLIER of (i) the expiration of the ten (10) year
option term or (ii) the three (3) year period measured from the date of the
Optionee's cessation of Service. However, the option shall, immediately upon
the Optionee's cessation of Service for any reason, terminate and cease to
remain outstanding with respect to any and all shares of Common Stock for
which the option is not otherwise at that time exercisable.
III. CORPORATE TRANSACTION/CHANGE IN CONTROL
A. In the event of any Corporate Transaction while the Optionee
remains in Service, each outstanding option held by such Optionee under this
Salary Reduction Option Grant Program shall automatically accelerate so that
each such option shall, immediately prior to the effective date of the
Corporate Transaction, become fully exercisable with respect to the total
number of shares of Common Stock at the time subject to such option and may
be exercised for any or all of those shares as fully-vested shares of Common
Stock. Each such outstanding option shall be assumed by the successor
corporation (or parent thereof) in the Corporate Transaction and shall remain
exercisable for the fully-vested shares until the EARLIER of (i) the
expiration of the ten (10) year option term or (ii) the expiration of the
three (3) year period measured from the date of the Optionee's cessation of
Service.
B. In the event of a Change in Control while the Optionee remains
in Service, each outstanding option held by such Optionee under this Salary
Reduction Option Grant Program shall automatically accelerate so that such
option shall immediately become fully exercisable with respect to the total
number of shares of Common Stock at the time subject to such option and may
be exercised for any or all of those shares as fully-vested shares of Common
Stock. The option shall remain so exercisable until the EARLIER of (i) the
expiration of the ten (10) year option term or (ii) the expiration of the
three (3) year period measured from the date of the Optionee's cessation of
Service.
C. The options granted under the Salary Reduction Option Grant
Program shall in no 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.
V. REMAINING TERMS
The remaining terms of each option granted under this Salary
Reduction Option Grant Program shall be the same as the terms in effect for
options granted under the Discretionary Option Grant Program.
ARTICLE FIVE
DIRECTOR FEE OPTION GRANT PROGRAM
I. OPTION GRANTS
Each Director may elect to apply all or any portion of the annual
retainer fee otherwise payable in cash for his or her service on the Board to
the acquisition of a special option grant under this Director Fee Option
Grant Program. Such election must be filed with the Corporation's Chief
Financial Officer prior to the start of calendar year for which the annual
retainer fee which is the subject of that election is otherwise payable.
Each Director who files such a timely election shall automatically be
granted an option under this Director Fee Option Grant Program on the first
trading day in January in the calendar year for which the annual retainer fee
which is the subject of that election would otherwise be payable. Stockholder
approval of the Plan at the 1998 Annual Meeting of Stockholders will
constitute pre-approval of each option subsequently granted pursuant to the
express terms of this Director Fee Option Grant Program and the subsequent
exercise of that option in accordance with its terms.
II. OPTION TERMS
Options granted under this Article Five, Section II shall be
evidenced by one or more documents in the form approved by the Plan
Administrator; PROVIDED, however, that each such document shall comply with
the terms and conditions specified below. All options granted under this
Article Five, Section II shall be Non-Statutory Options.
A. EXERCISE PRICE
1. The exercise price per share shall be thirty-three and one-
third percent (33-1/3%) of the Fair Market Value per share of Common Stock on
the grant date.
2. The exercise price shall become immediately due upon
exercise of the option and shall be payable in one or more of the alternative
forms authorized under the Discretionary Option Grant Program. Except to the
extent the "same-day sale" and remittance procedure specified thereunder is
utilized, payment of the exercise price for the purchased shares must be made
on the Exercise Date.
B. NUMBER OF OPTION SHARES The number of shares of Common Stock
subject to the option shall be determined pursuant to the following formula
(rounded down to the nearest whole number):
X - A DIVIDED BY (B x 66-2/3%), where
X is the number of option shares,
A is the portion of the annual retainer fee subject to the
Director's election, and
B is the Fair Market Value per share of Common Stock on the
grant date.
C. VESTING AND OPTION TERM Each option shall become exercisable
in a series of twelve (12) successive equal monthly installments upon the
Optionee's completion of each calendar month of Board service in the calendar
year for which the annual retainer fee which is the subject of his or her
election under this Article Five would otherwise be payable. Each option
shall have a maximum term of ten (10) years measured from the option grant
date.
D. TERMINATION OF SERVICE Should the Optionee cease service on
the Board for any
reason (other than death or Permanent Disability) while holding one or more
options under this Article Five, then each such option shall remain
exercisable, for any or all of the shares for which the option is exercisable
at the time of such cessation of Board service, until the EARLIER of (i) the
expiration of the ten (10) year option term or (ii) the expiration of the
three (3) year period measured from the date of such cessation of service on
the Board. However, each option held by the Optionee under this Article Five
at the time of such cessation of service on the Board shall immediately
terminate and cease to remain outstanding with respect to any and all shares
of Common Stock for which the option is not otherwise at that time
exercisable.
E. DEATH OR PERMANENT DISABILITY Should the Optionee's service on
the Board cease by reason of death or Permanent Disability, then each option
held by such Optionee under this Article Five shall immediately become
exercisable for all the shares of Common Stock at the time subject to that
option, and the option may, during the three(3) year period following such
cessation of service on the Board, be exercised for any or all of those
shares as fully-vested shares.
Should the Optionee die while holding one or more options under
this Article Five, then each such option may be exercised, for any or all of
the shares for which the option is exercisable at the time of the Optionee's
cessation of service on the Board (less any shares subsequently purchased by
Optionee prior to death), by the personal representative of the Optionee's
estate or by the person or persons to whom the option is transferred pursuant
to the Optionee's will or in accordance with the laws of descent and
distribution. Such right of exercise shall lapse, and the option shall
terminate, upon the EARLIER of (i) the expiration of the ten (10) year option
term or (ii) the three (3) year period measured from the date of the
Optionee's cessation of service on the Board.
III. CORPORATE TRANSACTION/CHANGE IN CONTROL
A. In the event of any Corporate Transaction while the Optionee
remains a Director, each outstanding option held by such Optionee under this
Director Fee Option Grant Program shall automatically accelerate so that each
such option shall, immediately prior to the effective date of the Corporate
Transaction, become fully exercisable with respect to the total number of
shares of Common Stock at the time subject to such option and may be
exercised for any or all of those shares as fully-vested shares of Common
Stock. Each such outstanding option shall be assumed by the successor
corporation (or parent thereof) in the Corporate Transaction and shall remain
exercisable for the fully-vested shares until the EARLIER of (i) the
expiration of the ten (10) year option term or (ii) the expiration of the
three (3) year period measured from the date of the Optionee's cessation of
service on the Board.
B. In the event of a Change in Control while the Optionee remains
in service on the Board, each outstanding option held by such Optionee under
the Director Fee Option Grant Program shall automatically accelerate so that
each such option shall immediately become fully exercisable with respect to
the total number of shares of Common Stock at the time subject to such option
and may be exercised for any or all o those shares as fully-vested shares of
Common Stock. The option shall remain so exercisable until the EARLIER of
(i) the expiration of the ten (10) year option term of (ii) the expiration of
the three (3) year period measured from the date of the Optionee's cessation
of service on the Board.
C. The options granted under the Director Fee Option Grant
Program shall in no 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.
IV. REMAINING TERMS
The remaining terms of each option granted under the Director Fee
Option Grant Program shall be the same as the terms in effect for options
granted under the Discretionary Option Grant Program.
ARTICLE SIX
MISCELLANEOUS
I. FINANCING
A. The Plan Administrator may permit any Optionee under the
Discretionary Option Grant Program to pay the option exercise price by
delivering a promissory note payable to the Corporation (or any Parent or
Subsidiary) in one or more installments. The terms of any such promissory
note (including the interest rate and the terms of repayment) shall be
established by the Plan Administrator in its sole discretion. Promissory
notes may be authorized with or without security or collateral. In all
events, the maximum credit available to the Optionee may not exceed the sum
of (i) the aggregate option exercise price payable for the purchased shares
plus (ii) any federal and state income and employment tax liability incurred
by the Optionee in connection with the option exercise.
B. The Plan Administrator may, in its discretion, determine that
one or more such promissory notes shall be subject to forgiveness by the
Corporation in whole or in part upon such terms as the Plan Administrator may
deem appropriate.
II. AMENDMENT OF THE PLAN
A. The Board shall have complete and exclusive power and
authority to amend or modify the Plan in any or all respects. However, no
such amendment or modification shall adversely affect the rights and
obligations with respect to options at the time outstanding under the Plan,
unless the affected Optionees consent to such amendment or modification. In
addition, certain amendments may require stockholder approval pursuant to
applicable laws or regulations or if stockholder approval is required by the
Board.
B. Options to purchase shares of Common Stock may be granted
under the Plan, which are in excess of the number of shares then available
for issuance under the Plan, provided that any excess shares actually issued
under the Plan are held in escrow until stockholder approval is obtained for
a sufficient increase in the number of shares available for issuance under
the Plan. If such stockholder approval is not obtained within twelve (12)
months after the date the first such excess options are granted, then (i) any
unexercised excess options shall terminate and cease to be exercisable and
(ii) the Corporation shall promptly refund the purchase price paid for any
excess shares actually issued under the Plan and held in escrow, together
with interest (at a rate to be determined by the Plan Administrator) for the
period the shares were held in escrow.
III. TAX WITHHOLDING
A. The Corporation's obligation to deliver shares of Common
Stock upon the exercise of options under the Plan shall be subject to the
satisfaction of all applicable federal and state income and employment tax
withholding requirements.
B. The Plan Administrator may, in its discretion and upon
such terms and conditions as it may deem appropriate, provide Optionees with
the election to have the Corporation withhold, from the shares of Common
Stock otherwise issuable upon the exercise of options under the Plan, a
portion of such shares with an aggregate Fair Market Value equal to the
designated percentage (up to 100% as specified by the Optionee) of any
federal and state income and employment taxes incurred in connection with the
acquisition of such shares. In lieu of such direct withholding, Optionees may
also be granted the right to deliver shares of Common Stock to the Company in
satisfaction of such taxes. The withheld or delivered shares shall be valued
at Fair Market Value on the exercise date.
IV. EFFECTIVE DATE AND TERM OF PLAN
A. The Plan shall become effective immediately upon approval by
the Corporation's stockholders at the Corporation's Annual Meeting of
Stockholders on June 9, 1998. If such stockholder approval is not obtained,
then any options granted under the Plan after the date on which the Plan was
adopted by the Board but before the date of the Annual Meeting of
Stockholders shall terminate and any shares issued hereunder shall be
repurchased by the Corporation at the purchase price paid, together with
interest (at a rate to be determined by the Plan Administrator).
B. The Plan shall terminate upon the EARLIEST of (i) June 9,
2008, (ii) the date on which all shares available for issuance under the Plan
shall have been issued as fully-vested shares pursuant to the exercise of
options under the Plan, or (iii) the termination of all outstanding options
in connection with a Corporate Transaction. If the date of termination is
determined under clause (i) above, then all option grants outstanding on such
date shall thereafter continue to have force and effect in accordance with
the provisions of the instruments evidencing those grants.
V. USE OF PROCEEDS
Any cash proceeds received by the Corporation from the sale of shares
pursuant to options granted under the Plan shall be used for general
corporate purposes.
VI. REGULATORY APPROVALS
A. The implementation of the Plan, the granting of any option
under the Plan, and the issuance of Common Stock upon the exercise of any
options granted hereunder shall be subject to the Corporation's procurement
of all approvals and permits required by regulatory authorities having
jurisdiction over the Plan, the stock options granted under it and the Common
Stock issued pursuant to it.
B. No shares of Common Stock or other assets shall be issued or
delivered under the Plan unless and until there has been compliance with all
applicable requirements of federal and state securities laws, including the
filing and effectiveness of the Form S-8 registration statement for the
shares of Common Stock issuable under the Plan, and all applicable listing
requirements of any securities exchange on which the Common Stock is then
listed for trading.
VII. NO EMPLOYMENT/SERVICE RIGHTS
Nothing in the Plan shall confer upon the Optionee any right to
continue in Service for any period of specific duration or interfere with or
otherwise restrict in any way the rights of the Corporation (or any Parent or
Subsidiary employing or retaining such person) or of the Optionee, which
rights are hereby expressly reserved by each, to terminate such Optionee's
Service at any time for any reason, with or without cause.
APPENDIX
The following definitions shall be in effect under the Plan:
A. BOARD shall mean the Corporation's Board of Directors.
B. CHANGE IN CONTROL shall mean a change in ownership or control of
the Corporation effected through either of the following transactions:
1. The acquisition, directly or indirectly, by any person or
related group of persons (other than 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, or
2. A change in the composition of the Board over a period of
twenty-four (24) consecutive months or less such that a majority of the
Board, by reason of one or more contested elections for Board membership,
ceases to be comprised of individuals who either (A) have been Directors
continuously since the beginning of such period or (B) have been elected or
nominated for election as Directors during such period by at least a majority
of the Directors described in clause (A) who were still in office at the time
the Board approved such election or nomination.
C. CODE shall mean the Internal Revenue Code of 1986, as amended.
D. COMMON STOCK shall mean the Corporation's common stock.
E. CORPORATE TRANSACTION shall mean either of the following
stockholder-approved transactions to which the Corporation is a party:
1. 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
2. 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 ENCAD, Inc., a Delaware corporation,
and any corporate successor to all or substantially all of the assets or
voting stock of ENCAD, Inc. which shall by appropriate action adopt the Plan.
G. DIRECTOR shall mean any non-employee member of the Board.
H. 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 Corporation as to both the work to be performed and the
manner and method of performance.
I. EXERCISE DATE shall mean the date on which the Corporation shall
have received written notice of the option exercise and full payment of the
Option Price.
J. FAIR MARKET VALUE per share of Common Stock on any relevant
date shall be determined in accordance with the following provisions:
1. 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 such 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.
2. 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.
K. INCENTIVE STOCK OPTION shall mean any option granted under the
Plan, intended to satisfy the requirements of Internal Revenue Code Section
422.
L. INVOLUNTARY TERMINATION shall mean the termination of the Service of
any individual which occurs by reason of:
1. Such individual's involuntary dismissal or discharge by the
Corporation for reasons other than Misconduct, or
2. Such individual's voluntary resignation following (A) a change
in his or her position with the Corporation which materially reduces his or
her duties and responsibilities or the level of management to which he or she
reports, (B) a reduction in his or her level of compensation (including base
salary, fringe benefits and target bonus under any corporate-performance
based bonus or incentive programs) by more than fifteen percent (15%) or (C)
a relocation of such individual's place of employment by more than fifty (50)
miles, provided and only if such change, reduction or relocation is effected
by the Corporation without the individual's consent.
M. MISCONDUCT shall mean the commission of any act of fraud,
embezzlement or dishonesty by the Optionee, any unauthorized use or
disclosure by the Optionee of confidential information or trade secrets of
the Corporation (or any Parent or Subsidiary), or any other intentional
misconduct by the 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 any Optionee or other person in the
Service of the Corporation (or any Parent or Subsidiary).
N. NON-STATUTORY OPTION shall mean any option granted under the Plan
which is not intended to satisfy the requirements of Internal Revenue Code
Section 422.
O. OFFICER shall mean any Employee who is deemed an Insider of the
Corporation pursuant to the provisions of Section 16.
P. OPTIONEE shall mean any person to whom an option is granted under
the Plan.
Q. 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.
R. PERMANENT DISABILITY OR PERMANENTLY DISABLED shall mean the
inability of the Optionee to engage in any substantial gainful activity by
reason of any medically determinable physical or mental impairment expected
to result in death or to be of continuous duration of twelve (12) months or
more. However, solely for purposes of the Automatic Option Grant and
Director Fee Option Grant Programs, Permanent Disability or Permanently
Disabled shall mean the inability of the Director to perform his or her
usual duties as a Director by reason of any medically determinable physical
or mental impairment expected to result in death or to be of continuous
duration of twelve (12) months or more.
S. PLAN shall mean the Corporation's 1998 Stock Option Plan, as set
forth in this document.
T. PLAN ADMINISTRATOR shall mean either the Board or a committee or
designee(s) of the Board acting in its administrative capacity under the Plan.
U. PLAN EFFECTIVE DATE shall mean June 9, 1998, the date on which the
Plan was adopted by the Corporation's stockholders.
V. PRIMARY COMMITTEE shall mean the committee of two (2) or more
Directors appointed by the Board to administer the Discretionary Option Grant
Program with respect to Officers.
W. SECONDARY COMMITTEE shall mean a committee of one (1) or more
Directors appointed by the Board to administer the Discretionary Option Grant
Program with respect to individuals other than Officers.
X. SERVICE shall mean the performance of services to the Corporation
(or any Parent or Subsidiary) by any person in the capacity of an Employee or
an independent consultant or advisor, except to the extent otherwise
specifically provided in the applicable option agreement.
Y. STOCK EXCHANGE shall mean either 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.