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Exhibit 10.4
VISUAL NETWORKS, INC.
2000 STOCK INCENTIVE PLAN
1. ESTABLISHMENT, PURPOSE AND TYPES OF AWARDS
Visual Networks, Inc., a Delaware corporation (the "Company"), hereby
establishes the VISUAL NETWORKS, INC. 2000 STOCK INCENTIVE PLAN (the "Plan").
The purpose of the Plan is to promote the long-term growth and profitability of
the Company by (i) providing key people with incentives to improve stockholder
value and to contribute to the growth and financial success of the Company, and
(ii) enabling the Company to attract, retain and reward the best-available
persons.
The Plan permits the granting of stock options (including incentive stock
options qualifying under Code section 422 and nonqualified stock options), stock
appreciation rights, restricted or unrestricted stock awards, phantom stock,
performance awards, other stock-based awards, or any combination of the
foregoing. The Plan also provides a formula for granting certain stock options
to directors of the Company who are not employees of the Company or any
Affiliate.
2. DEFINITIONS
Under this Plan, except where the context otherwise indicates, the
following definitions apply:
(a) "Affiliate" shall mean any entity, whether now or hereafter existing,
which controls, is controlled by, or is under common control with, the Company
(including, but not limited to, joint ventures, limited liability companies, and
partnerships). For this purpose, "control" shall mean ownership of 50% or more
of the total combined voting power or value of all classes of stock or interests
of the entity.
(b) "Award" shall mean any stock option, stock appreciation right, stock
award, phantom stock award, performance award, or other stock-based award.
(c) "Board" shall mean the Board of Directors of the Company.
(d) "Code" shall mean the Internal Revenue Code of 1986, as amended, and
any regulations promulgated thereunder.
(e) "Common Stock" shall mean shares of common stock of the Company, par
value of one cent ($0.01) per share.
(f) "Eligible Director" shall mean a director of the Company who is not an
employee of the Company or any Affiliate.
(g) "Fair Market Value" shall mean, with respect to a share of the
Company's Common Stock for any purpose on a particular date, the value
determined by the Administrator in good faith. However, if the Common Stock is
registered under Section 12(b) or 12(g) of the Securities Exchange Act of 1934,
as amended, and listed for trading on a national exchange or market, "Fair
Market Value" shall mean, as applicable, (i) either the closing price or the
average of the high and low sale price on the relevant date, as determined in
the Administrator's discretion, quoted on the New York Stock Exchange, the
American Stock Exchange, or the Nasdaq National Market; (ii) the last sale price
on the relevant date
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quoted on the Nasdaq Small Cap Market; (iii) the average of the high bid and low
asked prices on the relevant date quoted on the Nasdaq OTC Bulletin Board
Service or by the National Quotation Bureau, Inc. or a comparable service as
determined in the Administrator's discretion; or (iv) if the Common Stock is not
quoted by any of the above, the average of the closing bid and asked prices on
the relevant date furnished by a professional market maker for the Common Stock,
or by such other source, selected by the Administrator. If no public trading of
the Common Stock occurs on the relevant date, then Fair Market Value shall be
determined as of the next preceding date on which trading of the Common Stock
does occur. For all purposes under this Plan, the term "relevant date" as used
in this Section 2.1(g) shall mean either the date as of which Fair Market Value
is to be determined or the next preceding date on which public trading of the
Common Stock occurs, as determined in the Administrator's discretion.
(h) "Grant Agreement" shall mean a written document memorializing the
terms and conditions of an Award granted pursuant to the Plan and shall
incorporate the terms of the Plan.
3. ADMINISTRATION
(a) Administration of the Plan. The Plan shall be administered by the
Board or by such committee or committees as may be appointed by the Board from
time to time (the Board, committee or committees hereinafter referred to as the
"Administrator").
(b) Powers of the Administrator. The Administrator shall have all the
powers vested in it by the terms of the Plan, such powers to include authority,
in its sole and absolute discretion, to grant Awards under the Plan, prescribe
Grant Agreements evidencing such Awards and establish programs for granting
Awards.
The Administrator shall have full power and authority to take all other
actions necessary to carry out the purpose and intent of the Plan, including,
but not limited to, the authority to: (i) determine the eligible persons to
whom, and the time or times at which Awards shall be granted; (ii) determine the
types of Awards to be granted; (iii) determine the number of shares to be
covered by or used for reference purposes for each Award; (iv) impose such
terms, limitations, restrictions and conditions upon any such Award as the
Administrator shall deem appropriate; (v) modify, amend, extend or renew
outstanding Awards, or accept the surrender of outstanding Awards and substitute
new Awards (provided however, that, except as provided in Section 7(d) of the
Plan, any modification that would materially adversely affect any outstanding
Award shall not be made without the consent of the holder); and (vi) establish
objectives and conditions, if any, for earning Awards and determining whether
Awards will be paid after the end of a performance period.
The Administrator shall have full power and authority, in its sole and
absolute discretion, to administer and interpret the Plan and to adopt and
interpret such rules, regulations, agreements, guidelines and instruments for
the administration of the Plan and for the conduct of its business as the
Administrator deems necessary or advisable.
Awards to Eligible Directors as provided in Section 6(a)(ii) shall be
automatic and nondiscretionary to the extent provided in Section 6(a)(ii).
(c) Non-Uniform Determinations. With the exception of Awards to Eligible
Directors pursuant to Section 6(a)(ii), the Administrator's determinations under
the Plan (including without limitation, determinations of the persons to receive
Awards, the form, amount and timing of such Awards, the terms and provisions of
such Awards and the Grant Agreements evidencing such Awards) need not be
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uniform and may be made by the Administrator selectively among persons who
receive, or are eligible to receive, Awards under the Plan, whether or not such
persons are similarly situated.
(d) Limited Liability. To the maximum extent permitted by law, no member
of the Administrator shall be liable for any action taken or decision made in
good faith relating to the Plan or any Award thereunder.
(e) Indemnification. To the maximum extent permitted by law and by the
Company's charter and by-laws, the members of the Administrator shall be
indemnified by the Company in respect of all their activities under the Plan.
(f) Effect of Administrator's Decision. All actions taken and decisions
and determinations made by the Administrator on all matters relating to the Plan
pursuant to the powers vested in it hereunder shall be in the Administrator's
sole and absolute discretion and shall be conclusive and binding on all parties
concerned, including the Company, its stockholders, any participants in the Plan
and any other employee, consultant, or director of the Company, and their
respective successors in interest.
4. SHARES AVAILABLE FOR THE PLAN; MAXIMUM AWARDS
Subject to adjustments as provided in Section 7(d) of the Plan, the shares
of Common Stock that may be issued with respect to Awards granted under the Plan
shall not exceed an aggregate of 7,000,000 shares of Common Stock. The Company
shall reserve such number of shares for Awards under the Plan, subject to
adjustments as provided in Section 7(d) of the Plan. If any Award, or portion of
an Award, under the Plan expires or terminates unexercised, becomes
unexercisable or is forfeited or otherwise terminated, surrendered or canceled
as to any shares, or if any shares of Common Stock are surrendered to the
Company in connection with any Award (whether or not such surrendered shares
were acquired pursuant to any Award), or if any shares are withheld by the
Company, the shares subject to such Award and the surrendered and withheld
shares shall thereafter be available for further Awards under the Plan;
provided, however, that any such shares that are surrendered to or withheld by
the Company in connection with any Award or that are otherwise forfeited after
issuance shall not be available for purchase pursuant to incentive stock options
intended to qualify under Code section 422.
Subject to adjustments as provided in Section 7(d) of the Plan, the
maximum number of shares of Common Stock subject to Awards of any combination
that may be granted during any one fiscal year of the Company to any one
individual under this Plan shall be limited to 500,000. Such per-individual
limit shall not be adjusted to effect a restoration of shares of Common Stock
with respect to which the related Award is terminated, surrendered or canceled.
5. PARTICIPATION
Participation in the Plan shall be open to all employees, officers, and
directors of, and other individuals providing bona fide services to or for, the
Company, or of any Affiliate of the Company, as may be selected by the
Administrator from time to time.
6. AWARDS
The Administrator, in its sole discretion, establishes the terms of all
Awards granted under the Plan. Awards may be granted individually or in tandem
with other types of Awards. All Awards are subject to the terms and conditions
provided in the Grant Agreement. The Administrator may permit or
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require a recipient of an Award to defer such individual's receipt of the
payment of cash or the delivery of Common Stock that would otherwise be due to
such individual by virtue of the exercise of, payment of, or lapse or waiver of
restrictions respecting, any Award. If any such payment deferral is required or
permitted, the Administrator shall, in its sole discretion, establish rules and
procedures for such payment deferrals.
(a) Stock Options. (i) The Administrator may from time to time grant to
eligible participants Awards of incentive stock options as that term is defined
in Code section 422 or nonqualified stock options; provided, however, that
Awards of incentive stock options shall be limited to employees of the Company
or of any current or hereafter existing "parent corporation" or "subsidiary
corporation," as defined in Code sections 424(e) and (f), respectively, of the
Company. Options intended to qualify as incentive stock options under Code
section 422 must have an exercise price at least equal to Fair Market Value as
of the date of grant, but nonqualified stock options may be granted with an
exercise price less than Fair Market Value. In addition, no Option granted under
the Plan shall have an exercise price which is less than Fair Market Value as of
the date of grant, provided, however, an Option may be granted with an exercise
price equal to or greater than 85% of the Fair Market Value on the date of grant
if such discount is expressly given in lieu of a reasonable amount of salary or
cash bonus. No stock option shall be an incentive stock option unless so
designated by the Administrator at the time of grant or in the Grant Agreement
evidencing such stock option.
(ii) Notwithstanding anything in the Plan to the contrary, at such
time and to the extent there is an insufficient number of shares remaining for
Awards under the 1997 Directors' Stock Option Plan, options shall be granted
automatically under this Plan to Eligible Directors as follows: (A) each person
who becomes an Eligible Director after the effective date of the Plan shall be
granted an option to purchase 24,000 shares of Common Stock (the "Initial
Grant") on the close of business on the date of his or her initial election or
appointment to the Board; and (B) each Eligible Director shall be granted an
additional option to purchase 6,000 shares of Common Stock (an "Annual Grant")
on the date of each annual stockholders' meeting, including the meeting at which
such Eligible Director is initially elected, provided he or she is serving as an
Eligible Director immediately after such meeting. The exercise price per share
for each option granted under the this Section 6(a)(ii) shall be the closing
price per share of the Company's Common Stock on the Nasdaq National Market, or
the principal exchange on which the Common Stock is then listed, on the date of
grant, and if no such price is reported on such date, such price as reported on
the nearest preceding date on which such price is reported.
Each Initial Grant shall become vested and exercisable with respect
to one-fourth of the shares upon the first anniversary of the date on which such
option was granted, and the remaining three-fourths shall vest in 36 equal,
monthly installments thereafter. Each Annual Grant shall become vested and
exercisable with respect to one-twelfth of the shares on a monthly basis and
shall be fully vested and exercisable no later than the date of the annual
meeting of stockholders next following the grant date. No option granted to an
Eligible Director under this Section 6(a)(ii) shall become vested and
exercisable with respect to any shares of Common Stock after the date on which
such Eligible Director ceases to serve as a member of the Board. To the extent
vested and exercisable, an option granted to an Eligible Director under this
Section 6(a)(ii) may be exercised from time to time, in whole or in part, prior
to the earlier of (x) 60 days after a grantee ceases to serve as a Director (180
days if the grantee ceased to serve because of his or her death or permanent
disability) or (y) the seventh anniversary of the date of grant.
In the event of a "Change in Control of the Company" (as defined
below), any outstanding options granted pursuant to this Section 6(a)(ii) prior
to the date of such Change in Control of the Company shall be 100% vested and be
exercisable on the date of such Change in Control of the
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Company. For purposes of this Section 6(a)(ii), a "Change in Control of the
Company" shall occur or be deemed to have occurred only if:
(1) any "person," as such term is used in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934 (the "Exchange Act") (other
than the Company, any trustee or other fiduciary holding securities under
an employee benefit plan of the Company, or any corporation owned directly
or indirectly by the stockholders of the Company in substantially the same
proportion as their ownership of stock of the Company), is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of the Company representing 50% or
more of the combined voting power of the Company's then outstanding
securities;
(2) during any period of two consecutive years ending during
the term of the Plan, individuals who at the beginning of such period
constitute the Board of Directors of the Company, and any new director
(other than a director designated by a person who has entered into an
agreement with the Company to effect any transaction described in clause
(1), (3) or (4) of this Section 6(a)(ii)) whose election by the Board of
Directors or nomination for election by the Company's stockholders was
approved by a vote of at least two-thirds of the directors then still in
office who were either directors at the beginning of the period or whose
election or whose nomination for election was previously so approved
(collectively, the "Disinterested Directors"), cease for any reason to
constitute a majority of the Board of Directors;
(3) the stockholders of the Company approve a merger or
consolidation of the Company with any other corporation, other than (i) a
merger or consolidation which would result in the voting securities of the
Company outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into voting
securities of the surviving entity) more than 50% of the combined voting
power of the voting securities of the Company or such surviving entity
outstanding immediately after such merger or consolidation or (ii) a
merger or consolidation effected to implement a recapitalization of the
Company (or similar transaction) in which no "person" (as herein above
defined) acquires more than 50% of the combined voting power of the
Company's then outstanding securities; or
(4) the stockholders of the Company approve a plan of complete
liquidation of the Company or the sale of all or substantially all of the
Company's assets which, in either case, has not previously been approved
by a majority of the Disinterested Directors.
Options granted under this Section 6(a)(ii) may be exercised only by
written notice (in a form prescribed by or acceptable to the Company) to the
Company at its principal office. Payment of the exercise price may be made by
delivery of cash or check to the order of the Company in an amount equal to the
exercise price, or to the extent permitted by the Company, by delivery to the
Company of shares of Common Stock of the Company already owned and held by the
grantee for at least six months and having a Fair Market Value equal in amount
to the exercise price of the option being exercised.
(iii) Notwithstanding anything in the Plan to the contrary, the
Administrator may, only reprice or exchange any outstanding Awards if the
following conditions are met: (1) the repricing or exchange is authorized by a
committee of the Board composed entirely of independent directors and such
committee determines that such repricing or exchange fulfills a legitimate
corporate purpose, including but not limited to the retention of a key employee;
(2) the repricing or exchange is used only to maintain the value of an Award
which may be affected due to extreme circumstances beyond the control of the
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Company; and (3) that no more than 10% of the shares reserved for grant under
the Plan shall be subject to such repricing or exchange.
(b) Stock Appreciation Rights. The Administrator may from time to time
grant to eligible participants Awards of Stock Appreciation Rights ("SAR"). An
SAR entitles the grantee to receive, subject to the provisions of the Plan and
the Grant Agreement, a payment having an aggregate value equal to the product of
(i) the excess of (A) the Fair Market Value on the exercise date of one share of
Common Stock over (B) the base price per share specified in the Grant Agreement,
times (ii) the number of shares specified by the SAR, or portion thereof, which
is exercised. Payment by the Company of the amount receivable upon any exercise
of an SAR may be made by the delivery of Common Stock or cash, or any
combination of Common Stock and cash, as determined in the sole discretion of
the Administrator. If upon settlement of the exercise of an SAR a grantee is to
receive a portion of such payment in shares of Common Stock, the number of
shares shall be determined by dividing such portion by the Fair Market Value of
a share of Common Stock on the exercise date. No fractional shares shall be used
for such payment and the Administrator shall determine whether cash shall be
given in lieu of such fractional shares or whether such fractional shares shall
be eliminated.
(c) Stock Awards. The Administrator may from time to time grant restricted
or unrestricted stock Awards to eligible participants in such amounts, on such
terms and conditions, and for such consideration, including no consideration or
such minimum consideration as may be required by law, as it shall determine. A
stock Award may be paid in Common Stock, in cash, or in a combination of Common
Stock and cash, as determined in the sole discretion of the Administrator. Any
restriction period on restricted stock Awards under the Plan shall be at least
three years in duration, provided, however, that a restricted stock Award may
have a restriction period of less than three years, but no less than one year,
if the vesting of such Award is performance based. All stock Awards under this
Section 6(c) granted to Eligible Directors and officers of the Company shall be
identified as being granted in lieu of salary or a cash bonus, and the number of
shares underlying such grants shall be reasonable.
(d) Phantom Stock. The Administrator may from time to time grant Awards to
eligible participants denominated in stock-equivalent units ("phantom stock") in
such amounts and on such terms and conditions as it shall determine. Phantom
stock units granted to a participant shall be credited to a bookkeeping reserve
account solely for accounting purposes and shall not require a segregation of
any of the Company's assets. An Award of phantom stock may be settled in Common
Stock, in cash, or in a combination of Common Stock and cash, as determined in
the sole discretion of the Administrator. Except as otherwise provided in the
applicable Grant Agreement, the grantee shall not have the rights of a
stockholder with respect to any shares of Common Stock represented by a phantom
stock unit solely as a result of the grant of a phantom stock unit to the
grantee.
(e) Performance Awards. The Administrator may, in its discretion, grant
performance awards which become payable on account of attainment of one or more
performance goals established by the Administrator. Performance awards may be
paid by the delivery of Common Stock or cash, or any combination of Common Stock
and cash, as determined in the sole discretion of the Administrator. Performance
goals established by the Administrator may be based on the Company's or an
Affiliate's operating income or one or more other business criteria selected by
the Administrator that apply to an individual or group of individuals, a
business unit, or the Company or an Affiliate as a whole, over such performance
period as the Administrator may designate.
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(f) Other Stock-Based Awards. The Administrator may from time to time
grant other stock-based awards to eligible participants in such amounts, on such
terms and conditions, and for such consideration, including no consideration or
such minimum consideration as may be required by law, as it shall determine.
Other stock-based awards may be denominated in cash, in Common Stock or other
securities, in stock-equivalent units, in stock appreciation units, in
securities or debentures convertible into Common Stock, or in any combination of
the foregoing and may be paid in Common Stock or other securities, in cash, or
in a combination of Common Stock or other securities and cash, all as determined
in the sole discretion of the Administrator.
7. MISCELLANEOUS
(a) Withholding of Taxes. Grantees and holders of Awards shall pay to the
Company or its Affiliate, or make provision satisfactory to the Administrator
for payment of, any taxes required to be withheld in respect of Awards under the
Plan no later than the date of the event creating the tax liability. The Company
or its Affiliate may, to the extent permitted by law, deduct any such tax
obligations from any payment of any kind otherwise due to the grantee or holder
of an Award. In the event that payment to the Company or its Affiliate of such
tax obligations is made in shares of Common Stock, such shares shall be valued
at Fair Market Value on the applicable date for such purposes.
(b) Loans. The Company or its Affiliate may make or guarantee loans to
grantees to assist grantees in exercising Awards (other than Awards granted to
Eligible Directors under Section 6(a)(ii)) and satisfying any withholding tax
obligations.
(c) Transferability. Except as otherwise determined by the Administrator,
and in any event in the case of an incentive stock option or a stock
appreciation right granted with respect to an incentive stock option, no Award
granted under the Plan shall be transferable by a grantee otherwise than by will
or the laws of descent and distribution. However, Eligible Directors may
transfer Awards granted under Section 6(a)(ii) to family members, to trusts
established for the benefit of family members or to partnerships or corporations
owned by family members. Unless otherwise determined by the Administrator in
accord with the provisions of the immediately preceding sentence, an Award may
be exercised during the lifetime of the grantee, only by the grantee or, during
the period the grantee is under a legal disability, by the grantee's guardian or
legal representative.
(d) Adjustments; Business Combinations. In the event of changes in the
Common Stock of the Company by reason of any stock dividend, split-up,
recapitalization, merger, consolidation, business combination or exchange of
shares and the like, (1) the Administrator shall make appropriate adjustments to
the maximum number and kind of shares reserved for issuance or with respect to
which Awards may be granted under the Plan as provided in Section 4 of the Plan,
the maximum number of shares subject to Awards which may be granted to any
individual in any one fiscal year under the Plan as provided in Section 4 of the
Plan, and the number, kind and price of shares covered by Awards to be granted
to Eligible Directors pursuant to Section 6(a)(ii) of the Plan, and (2) the
Administrator, in its discretion and without the consent of holders of Awards,
may make any other adjustments in Awards or in any other matters which relate to
Awards as the Administrator, shall, in its sole discretion, determine to be
necessary or appropriate.
Notwithstanding anything in the Plan to the contrary and without the
consent of holders of Awards, the Administrator, in its sole discretion, may
make any modifications to any Awards, including but not limited to cancellation,
forfeiture, surrender or other termination of the Awards, in whole or in part
regardless of the vested status of the Award, in order to facilitate any
business combination that is
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authorized by the Board to comply with requirements for treatment as a pooling
of interests transaction for accounting purposes under generally accepted
accounting principles.
The Administrator is authorized to make, in its discretion and without the
consent of holders of Awards, adjustments in the terms and conditions of, and
the criteria included in, Awards in recognition of unusual or nonrecurring
events affecting the Company, or the financial statements of the Company or any
Affiliate, or of changes in applicable laws, regulations, or accounting
principles, whenever the Administrator determines that such adjustments are
appropriate in order to prevent dilution or enlargement of the benefits or
potential benefits intended to be made available under the Plan.
(e) Substitution of Awards in Mergers and Acquisitions. Awards may be
granted under the Plan from time to time in substitution for Awards held by
employees, officers, consultants or directors of entities who become or are
about to become employees, officers, consultants or directors of the Company or
an Affiliate as the result of a merger or consolidation of the employing entity
with the Company or an Affiliate, or the acquisition by the Company or an
Affiliate of the assets or stock of the employing entity. The terms and
conditions of any substitute Awards so granted may vary from the terms and
conditions set forth herein to the extent that the Administrator deems
appropriate at the time of grant to conform the substitute Awards to the
provisions of the awards for which they are substituted.
(f) Termination, Amendment and Modification of the Plan. The Board may
terminate, amend or modify the Plan or any portion thereof at any time, however,
any material amendment to the Plan shall not become effective without
shareholder approval thereof.
(g) Non-Guarantee of Employment or Service. Nothing in the Plan or in any
Grant Agreement thereunder shall confer any right on an individual to continue
in the service of the Company or shall interfere in any way with the right of
the Company to terminate such service at any time with or without cause or
notice.
(h) No Trust or Fund Created. Neither the Plan nor any Award shall create
or be construed to create a trust or separate fund of any kind or a fiduciary
relationship between the Company and a grantee or any other person. To the
extent that any grantee or other person acquires a right to receive payments
from the Company pursuant to an Award, such right shall be no greater than the
right of any unsecured general creditor of the Company.
(i) Governing Law. The validity, construction and effect of the Plan, of
Grant Agreements entered into pursuant to the Plan, and of any rules,
regulations, determinations or decisions made by the Administrator relating to
the Plan or such Grant Agreements, and the rights of any and all persons having
or claiming to have any interest therein or thereunder, shall be determined
exclusively in accordance with applicable federal laws and the laws of the State
of Delaware, without regard to its conflict of laws principles.
(j) Effective Date; Termination Date. The Plan is effective as of the date
on which the Plan is adopted by the Board, subject to approval of the
stockholders within twelve months before or after such date. No Award shall be
granted under the Plan after the close of business on the day immediately
preceding the tenth anniversary of the effective date of the Plan, or if
earlier, the tenth anniversary of the date this Plan is approved by the
stockholders. Subject to other applicable provisions of the Plan, all Awards
made under the Plan prior to such termination of the Plan shall remain in effect
until such Awards have been satisfied or terminated in accordance with the Plan
and the terms of such Awards.
Date Approved by the Stockholders: May 24, 2000.
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