As filed with the Securities and Exchange Commission on April 10, 1998
Registration No. 333-____
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-8
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
NETWORK EQUIPMENT TECHNOLOGIES, INC.
(Exact name of Registrant as specified in its charter)
Delaware 94-2904044
(State or other jurisdiction of (I.R.S. employer identification No.)
incorporation or organization)
800 Saginaw Drive, Redwood City, CA 94063 (650) 366-4400
(Address, including zip code, and telephone number,
including area code, of principal executive offices)
1998 Employee Stock Purchase Plan
N.E.T. Stock Option Program
1993 Stock Option Plan
(Full title of the plan)
James B. De Golia, Esq.
Vice President and General Counsel
800 Saginaw Drive
Redwood City, CA 94063
(Name and address of agent for service)
(650) 366-4400
(Telephone number, including area code, of agent for service)
With copies of all notices and communications to:
Stephen C. Ferruolo, Esq.
Heller Ehrman White & McAuliffe
525 University Avenue
Palo Alto, CA 94301
Telephone: (650) 324-7000
Facsimile: (650) 324-0638
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
====================================================================================================================================
Title of securities Amount Proposed maximum Proposed maximum Amount of
to be registered to be offering price per aggregate offering price registration fee
registered share (1) (1)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock $.001 par value 3,600,000 $17.50 $63,000,000 $18,585.00
====================================================================================================================================
</TABLE>
(1) Estimated solely for the purpose of computing the amount of the
registration fee pursuant to Rule 457(c) under the Securities Act of 1933,
as amended based on the average of the high and low prices reported of the
Registrant's Common Stock on the New York Stock Exchange on April 6, 1998.
<PAGE>
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
Item 3. Incorporation of Documents by Reference
The following documents, which have been filed by Network Equipment
Technologies, Inc. (the "Registrant") with the Securities and Exchange
Commission (the "Commission"), are hereby incorporated by reference in this
Registration Statement:
(a) The Registrant's Annual Report on Form 10-K for the fiscal year ended
March 31, 1997;
(b) The Registrant's quarterly reports on Form 10-Q for the fiscal
quarters ended June 29, 1997, September 28, 1997 and December 28,
1997;
(c) The Registrant's current report on Form 8-K filed with the Commission
on April 9, 1998; and
(d) The description of the Registrant's Common Stock contained in its
registration statement filed with the Commission under the Securities
and Exchange Act of 1934, as amended ("Exchange Act"), including any
amendment or reports filed for the purpose of updating such
description.
All documents subsequently filed by the Registrant pursuant to Section
13(a), 13(c), 14 or 15(d) of the Exchange Act and prior to the termination of
the offering of the securities offered hereby shall be deemed to be incorporated
by reference into this registration statement and to be a part hereof from the
respective dates of filing of such documents. Any statement contained in a
document incorporated or deemed to be incorporated by reference herein shall be
deemed to be modified or superseded for purposes of this registration statement
to the extent that a statement contained herein, or in any other subsequently
filed document that also is or is deemed to be incorporated by reference herein,
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this registration statement.
Item 4. Description of Securities
Not applicable.
Item 5. Interests of Named Experts and Counsel
Not applicable.
2
<PAGE>
Item 6. Indemnification of Directors and Officers
The Registrant has the power to indemnify its officers and directors
against liability for certain acts pursuant to Section 145 of the General
Corporation Law of the State of Delaware. Section 6 of Article VII of the
Registrant's By-Laws provides:
"INDEMNIFICATION OF OFFICERS AND DIRECTORS
(a) Indemnification in Actions Other Than Those Brought by the
Corporation. The corporation shall indemnify and hold harmless,
to the fullest extent permitted by the Delaware General
Corporation Law, as the same exists or may hereafter be amended
(but, in the case of such amendment, only to the extent that such
amendment permits the corporation to provide broader
indemnification rights than such law permitted the corporation to
provide prior to such amendment), any person who was or is a
party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action
by or in the right of the corporation) by reason of the fact that
he or she is or was a director or officer of the corporation, or
is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation
against expenses (including attorneys' fees), judgments, fines
and amounts paid in settlement actually and reasonably incurred
by him or her in connection with such action, suit or proceeding.
Except as provided in paragraph (d) of this Section 6, the
corporation shall be required to indemnify a person in connection
with a proceeding (or part thereof) initiated by such person only
if the proceeding (or part thereof) was authorized by the Board
of Directors of the corporation.
(b) Indemnification in Actions Brought By or on Behalf of the
Corporation. The corporation shall indemnify and hold harmless,
to the fullest extent permitted by the Delaware General
Corporation Law, as the same exists or may hereafter be amended,
any person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action or suit by
or in the right of the corporation to procure a judgment in its
favor by reason of the fact that he or she is or was a director
or officer of the corporation, or is or was serving at the
request of the corporation as a director, officer, employee or
agent of another corporation, against expenses (including
attorneys' fees) actually and reasonably incurred by him or her
in connection with the defense or settlement of such action or
suit.
(c) Expenses; Prepayment. The corporation shall pay the expenses
(including attorneys' fees) incurred by a director or officer who
has been successful on the merits or otherwise in defending any
action, suit or proceeding referenced in paragraphs (a) and (b)
of
3
<PAGE>
this Section 6 and shall pay such expenses in advance of the
final disposition of such matter upon receipt of an undertaking
by the director or officer to repay all amounts advanced if it
should be ultimately determined that the director or officer is
not entitled to be indemnified under this Article or otherwise.
(d) Indemnification Procedure; Claims. Any indemnification under
paragraphs (a) and (b) of this Section 6 (unless ordered by a
court) shall be made by the corporation only as authorized in the
specific case upon a determination that indemnification of the
director of office is proper in the circumstances because he or
she has met the applicable standard of conduct set forth in
paragraphs (a) and (b). If a claim for indemnification or payment
of expenses under Section 6 of this Article is not paid in full
within sixty days after a written claim therefor has been
received by the corporation, the claimant may file suit to
recover the unpaid amount of such claim and, if successful in
whole or in part, shall be entitled to be paid the expense of
prosecuting such claim.
(e) Indemnification of Others. The Board of Directors, in its
discretion, shall have the power on behalf of the corporation to
indemnify any person, other than a director or officer, made a
party to any action, suit or proceeding by reason of the fact
that he or she, or his or her testator or intestate, is or was an
employee or agent of the corporation and to pay the expenses
incurred by any such person in defending such action, suit or
proceeding in advance of its final disposition.
(f) Non-exclusivity of Rights. The indemnification and advancement of
expenses provided by or granted pursuant to Section 6 of this
Article VII shall not be deemed exclusive of any other rights to
which those seeking indemnification or advancement of expenses
may be entitled under any bylaw, agreement, vote of stockholders,
or disinterested directors or otherwise, both as to action in his
or her official capacity and as to action in another capacity
while holding such office.
(g) Other Indemnification. The corporation's obligation, if any, to
indemnify any person who was or is serving at its request as a
director, officer, employee or agent of another corporation,
partnership, joint venture, trust, enterprise or nonprofit entity
shall be reduced by any amount such person may collect as
indemnification from such other corporation, partnership, joint
venture, trust, enterprise or nonprofit enterprise.
(h) Insurance. The corporation shall have the power to purchase and
maintain insurance on behalf of any person who is or was a
director, officer, employee or agent of the corporation or is or
was serving at the request of the corporation as a director,
officer, employee or agent of another corporation against any
liability
4
<PAGE>
asserted against him or her and incurred by him or her in such
capacity, or arising out of his or her status as such, whether or
not the corporation would have the power to indemnify him or her
against such liability under the provisions of this Section 6.
(i) Successor Entities. For purposes of Section 6 of this Article
VII, references to "the corporation" shall include, in addition
to the resulting corporation, any constituent corporation
(including any constituent of a constituent) absorbed in a
consolidation or merger which, if its separate existence had
continued, would have had power and authority to indemnify its
directors, officers, employees and agents so that any person who
is or was a director, officer, employee or agent of such
constituent corporation, or is or was serving at the request of
such constituent corporation as a director, officer, employee or
agent of another corporation shall stand in the same position
under the provisions of this Section 6 of Article VII with
respect to the resulting or surviving corporation as he or she
would have with respect to such constituent corporation if its
separate existence had continued.
(j) Survival of Rights; Amendment or Repeal. The indemnification and
advancement of expenses provided by or granted pursuant to this
Article VII shall, unless otherwise provided when authorized or
ratified, continue as a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such a person. Any repeal
or modification of the foregoing provisions of Section 6 of this
Article VII shall not adversely affect any right or protection
hereunder of any person in respect of any act or omission
occurring prior to the time of such repeal or modification.
In addition, the Article IX of the Registrant's Restated Certificate of
Incorporation provides as follows:
"A director of the corporation shall not be personally liable to the
corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director, except for liability (i) for any breach
of the director's duty of loyalty to the corporation or its
stockholders, (ii) for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law, (iii)
under Section 174 of the Delaware General Corporation Law, or (iv) for
any transaction from which the director derived any improper personal
benefit. If the Delaware General Corporation Law is hereafter amended
to authorize, with the approval of a corporation's stockholders,
further reductions in the liability of the corporation's directors for
breach of fiduciary duty, then a director of the corporation shall not
be liable for any such breach to the fullest extent permitted by the
Delaware General Corporation Law as so amended. Any repeal or
modification of the foregoing provisions of this Article IX by the
stockholders of the corporation shall
5
<PAGE>
not adversely affect any right or protection of a director of the
corporation existing at the time of such repeal or modification."
Item 7. Exemption from Registration Claimed
Not applicable.
Item 8. Exhibits
5 Opinion of Heller Ehrman White & McAuliffe
23.1 Independent Auditors' Consent
23.2 Consent of Heller Ehrman White & McAuliffe (filed as part of
Exhibit 5)
24 Power of Attorney (see page 8)
99.1 1998 Employee Stock Purchase Plan
99.2 N.E.T. Stock Option Program
99.3 1993 Stock Option Plan
Item 9. Undertakings
A. The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this registration
statement;
(i) To include any prospectus required by Section 10(a)(3)
of the Securities Act of 1933, as amended (the
"Securities Act");
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the registration
statement (or the most recent post-effective amendment
thereof) which, individually or in the aggregate,
represent a fundamental change in the information set
forth in the registration statement;
(iii) To include any material information with respect to
the plan of distribution not previously disclosed in
the registration statement or any material change to
such information in the registration statement;
provided, however, that paragraphs A(1)(i) and A(1)(ii) do not
apply if the information required to be included in a
post-effective amendment by those paragraphs is contained in
periodic reports filed by the Registrant pursuant to Section 13
or 15(d) of the Exchange Act that are incorporated by reference
in the registration statement.
6
<PAGE>
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be
deemed to be a new registration statement relating to the
securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial
bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which
remain unsold at the termination of the offering.
B. The undersigned Registrant hereby undertakes that, for purposes
of determining liability under the Securities Act, each filing of
the Registrant's annual report pursuant to Section 13(a) or 15(d)
of the Exchange Act that is incorporated by reference in the
registration statement shall be deemed to be a new registration
statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
C. Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the provisions
described in Item 6, or otherwise, the Registrant has been
advised that in the opinion of the Commission, such
indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other
than the payment by the Registrant of expenses incurred or paid
by a director, officer or controlling person of the Registrant in
the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant
will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in
the Securities Act and will be governed by the final adjudication
of such issue.
7
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-8 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the city of Redwood City, state of California, on April 10, 1998.
NETWORK EQUIPMENT
TECHNOLOGIES, INC.
By: /s/ Joseph J. Francesconi
--------------------------------------
Joseph J. Francesconi
Chief Executive Officer and Director
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints Joseph
J. Francesconi and Craig M. Gentner his true and lawful attorneys-in-fact and
agents, each acting alone, with full power of substitution and resubstitution,
for him and in his name, place and stead, in any and all capacities, to sign any
or all amendments (including post-effective amendments) to the Registration
Statement, and to sign any registration statement for the same offering covered
by this Registration Statement that is to be effective upon filing pursuant to
Rule 462(b) under the Securities Act of 1933, as amended, and all post-effective
amendments thereto, and to file the same, with all exhibits thereto, and all
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, each acting alone, or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Joseph J. Francesconi Chief Executive Officer and Director April 10, 1998
- -------------------------------- (Principal Executive Officer)
Joseph J. Francesconi
8
<PAGE>
/s/ Craig M. Gentner Senior Vice President, Chief April 10, 1998
- -------------------------------- Financial Officer and Corporate
Craig M. Gentner Secretary (Principal Financial and
Accounting Officer)
/s/ Dixon R. Doll Director April 10, 1998
- --------------------------------
Dixon R. Doll
/s/ James K. Dutton Director April 10, 1998
- --------------------------------
James K. Dutton
/s/ Walter J. Gill Director April 10, 1998
- --------------------------------
Walter J. Gill
/s/ George M. Scalise Director April 10, 1998
- --------------------------------
George M. Scalise
/s/ Hans A. Wolf Director April 10, 1998
- --------------------------------
Hans A. Wolf
</TABLE>
9
<PAGE>
INDEX TO EXHIBITS
Item No. Description of Item Page
- -------- -------------------------------------------------------------- ----
5 Opinion of Heller Ehrman White & McAuliffe........................
23.1 Independent Auditors' Consent.....................................
23.2 Consent of Heller Ehrman White & McAuliffe (filed as part
of Exhibit 5)...................................................
24 Power of Attorney (see page 8)....................................
99.1 1998 Employee Stock Purchase Plan.................................
99.2 N.E.T. Stock Option Program.......................................
99.3 1993 Stock Option Plan............................................
10
April 10, 1998
16308-0003
Network Equipment Technologies, Inc.
800 Saginaw Drive
Redwood City, California 94063
Registration Statement on Form S-8
Ladies and Gentlemen:
We have acted as counsel to Network Equipment Technologies, Inc., a
Delaware corporation (the "Company"), in connection with the Registration
Statement on Form S-8 (the "Registration Statement") which the Company proposes
to file with the Securities and Exchange Commission on April 10, 1998 for the
purpose of registering under the Securities Act of 1933, as amended, 3,600,000
shares of its Common Stock, par value $.001 (the "Shares"). 2,000,000 of the
Shares are issuable under the Company's 1993 Stock Option Plan (the "Option
Plan"), 1,000,000 of the Shares are issuable under the N.E.T. Stock Option
Program (the "Program") and 600,000 of the Shares are issuable under the
Company's Employee Stock Purchase Plan, as amended (the "1998 Stock Purchase
Plan").
We have assumed the authenticity of all records, documents and instruments
submitted to us as originals, the genuineness of all signatures, the legal
capacity of natural persons and the conformity to the originals of all records,
documents and instruments submitted to us as copies.
In rendering our opinion, we have examined the following records, documents
and instruments:
(a) The Certificate of Incorporation of the Company, certified by the
Delaware Secretary of State as of April 6, 1998, and certified to us
by an officer of the Company as being complete and in full force as of
the date of this opinion;
(b) The Bylaws of the Company certified to us by an officer of the Company
as being complete and in full force and effect as of the date of this
opinion;
(c) A Certificate of an officer of the Company (i) attaching records
certified to us as constituting all records of proceedings and actions
of the Board of Directors, including any committee thereof, and
stockholders of the Company relating to the Shares, and the
Registration Statement and (ii) certifying as to certain factual
matters;
<PAGE>
(d) The Registration Statement;
(e) The Option Plan, the Program and the 1998 Stock Purchase Plan
(together, the "Plans"); and
(f) A letter from the Bank of Boston, the Company's transfer agent, dated
April 8, 1998, as to the number of shares of the Company's Common
Stock that were outstanding on April 7, 1998.
This opinion is limited to the federal law of the United States of America
and the General Corporation Law of the State of Delaware, and we disclaim any
opinion as to the laws of any other jurisdiction. We further disclaim any
opinion as to any other statute, rule, regulation, ordinance, order or other
promulgation of any other jurisdiction or any regional or local governmental
body or as to any related judicial or administrative opinion.
Based upon the foregoing and our examination of such questions of law as we
have deemed necessary or appropriate for the purpose of this opinion, and
assuming that (i) the Registration Statement becomes and remains effective
during the period when the Shares are offered and issued, (ii) the full
consideration stated in the Plans is paid for each Share and that such
consideration in respect of each Share includes payment of cash or other lawful
consideration at least equal to the par value thereof, (iii) appropriate
certificates evidencing the Shares are executed and delivered by the Company,
and (iv) all applicable securities laws are complied with, it is our opinion
that when issued and sold by the Company, after payment therefore in the manner
provided in the applicable Plan and the Registration Statement, the Shares will
be legally issued, fully paid and nonassessable.
This opinion is rendered to you in connection with the Registration
Statement and is solely for your benefit. This opinion may not be relied upon by
you for any other purpose, or relied upon by any other person, firm, corporation
or other entity for any purpose, without our prior written consent. We disclaim
any obligation to advise you of any change of law that occurs, or any facts of
which we may become aware, after the date of this opinion.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement.
Very truly yours,
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement of
Network Equipment Technologies, Inc. on Form S-8 of our reports dated April 16,
1997, appearing and incorporated by reference in the Annual Report on Form 10-K
of Network Equipment Technologies, Inc. for the year ended March 31, 1997.
DELOITTE & TOUCHE LLP
San Jose, California
April 8, 1998
NETWORK EQUIPMENT TECHNOLOGIES, INC.
1998 EMPLOYEE STOCK PURCHASE PLAN
1. PURPOSE. The Network Equipment Technologies Employee Stock Purchase Plan
(the "Plan") is designed to foster continued employee retention and cordial
employee relations, to encourage and assist employees of Network Equipment
Technologies, Inc. (the "Company") and its designated subsidiaries, to
acquire stock in the Company, and to help them provide for their future
financial security. This Plan is the successor to the Company's 1990
Employee Stock Purchase Plan ("1990 Plan").
2. SHARES SUBJECT TO PLAN.
(a) Number of Shares: The Company has reserved for purchase under the Plan
a total of 600,000 shares of its Common Stock (the "Shares") plus
shares remaining under the 1990 Plan after April 30, 1998
(collectively "share limitation"). Shares sold under the Plan may be
newly or previously issued shares, but all shares issued under the
Plan, regardless of source, shall be counted against the share
limitation.
(b) Adjustments: In the event of any reorganization, recapitalization,
stock split, reserve stock split, stock dividend, combination of
shares, merger, consolidation, offering of rights or other similar
change in the structure of the capital stock of the Company, the
Company may make such adjustment, if any, as it may deem appropriate
in the number, kind, and subscription price of the securities
available for purchase under the Plan and in the maximum number of
securities that a member is entitled to purchase. The Company may also
make further adjustments to cause the Plan to qualify under Section
423 or any successor provision of the Internal Revenue Code of 1986,
as amended (the "Code"), if and to the extent that it deems such
qualification necessary or desirable.
3. ADMINISTRATION. The Plan shall be administered by such officers and
employees of the Company or other persons as the Company's Board of
Directors from time to time may select (the "Plan Committee"). All costs
and expenses incurred in administering the Plan shall be paid by the
Company, provided that any taxes applicable to a member's participation in
the Plan may be charged to the member by the Company.
The Plan Committee may make such rules and regulations as it deems
necessary to administer the Plan and to interpret the provisions of the
Plan. Any determination, decision, or action of the Plan Committee in
connection with the construction, interpretation, administration, or
application of the Plan or any right granted under the Plan shall be final,
conclusive, and
1
<PAGE>
binding upon all persons. No member of the Plan Committee shall be liable
for any determination, decision, or action made. The Plan Committee may
delegate the administration of the Plan to Corporate Officers and their
designees.
The Plan Committee may set date or dates of each "Offering Period", not to
exceed 24 months for each such period, under this Plan. Offering Periods
may have multiple "Purchase Periods" as set by the Plan Committee. Subject
to stockholder approval of this Plan, the initial Offering Period is
scheduled to commence on May 1, 1998 and to end on April 30, 1999 and to
have three Purchase Periods of four months each.
4. ELIGIBILITY. Any "employee" (as defined below) who regularly is engaged in
the rendition of personal services to the Company or its designated
subsidiaries 20 hours per week or more and five months or more in any
calendar year (except any employee who would own, directly or indirectly,
five percent or more of the total combined voting power or value of all
classes of stock of the Company or any of its subsidiaries immediately
after Shares are purchased under the Plan) shall be an "employee" and
eligible to become a member of and to participate in the Plan beginning on
the first Enrollment Date following his or her employment with the Company
or a designated subsidiary. Employees who participated under the 1990 Plan
and who are employees as defined in this section of this Plan are eligible
to participate under this Plan. Individuals who are classified by the
Company as independent contractors shall not be eligible to be members
unless and until such individuals are reclassified as common law employees
for federal income and federal employment tax purposes.
For purposes of the Plan: "employee" shall mean any individual carried as
an "employee" on the payroll records of the Company or a designated
subsidiary at the relevant time or times; "subsidiary" shall mean any
corporation in an unbroken chain of corporations beginning with the Company
if, as of a given Enrollment Date, each of the corporations other than the
last corporation in the chain owns stock possessing 50 percent or more of
the total combined voting power of all classes of stock in one of the other
corporations in the chain. Employees who participate under the Plan are
referred to herein as "members".
5. PARTICIPATION.
(a) Enrollment: Any eligible employee may enroll in the Plan as of the
first trading day of each Offering Period or Purchase Period or such
other date or dates chosen by the Plan Committee (each such date is an
"Enrollment Date"). Enrollment during any Offering Period may be
subject to limitations or conditions set by the Plan Committee. To
enroll, an eligible employee must deliver to the Company a completed
and signed Employee Stock Purchase Plan Subscription Agreement,
2
<PAGE>
substantially in the form provided by the Company, indicating the
employee's acceptance of the Plan and agreement to participate in the
Plan. Forms must be received by the Company no later than an
Enrollment Date and shall be effective as of such Enrollment Date.
Participation in the Plan is entirely voluntary.
(b) Re-enrollment upon Expiration of Offering Period: At the end of a
then-current Offering Period, each member automatically shall be
enrolled in the next succeeding Offering Period (a "Re-enrollment")
unless, in a manner and at a time specified by the Company, but in no
event later than the day before the first day of such succeeding
Offering Period, a member notifies the Company in writing of the
member's desire not to be so enrolled. Re-enrollment shall be at the
same percentage of contributions as the member's prior participation
unless the member by timely written notice changes the percentage of
contribution. No member shall be automatically re-enrolled whose
participation terminates by operation of Section 9 or who, during the
preceding Offering Period, has eliminated his or her percentage of
contribution or has notified the Company in writing of his or her
withdrawal from participation in the Plan.
(c) Automatic Re-enrollment on Lower Price Enrollment Date: If the fair
market value of the Company's Common Stock is lower on any Enrollment
Date (the "Lower Price Enrollment Date") than it was on the Enrollment
Date on which a participating member last enrolled in the Plan, the
member shall be deemed to have re-enrolled in the Plan on such Lower
Price Enrollment Date for the next succeeding Purchase Period.
6. MEMBER'S CONTRIBUTIONS. Each member shall make contributions by payroll
deduction of any whole percentage up to a "maximum rate" of fifteen percent
(15%) of the member's gross pay per pay period ("gross pay"), as designated
by the member. Gross pay shall include the regular basic earnings paid to a
member by the Company or a subsidiary. There shall be excluded from the
calculation of gross pay (a) all overtime payments, bonuses, commissions,
profit-sharing distributions and other incentive-type payments, and (b) all
contributions made by the Company or its corporate affiliates for the
member's benefit under any employee benefit or welfare plan now or
hereafter established. Contributions shall not be made other than in
accordance with this Section 6.
At any time, a member may elect in writing to stop making contributions
under the Plan. An election to stop contributions will take effect on the
soonest practicable payroll date following receipt by the Company of the
written election. Any election by a member to stop his or her payroll
deductions shall be deemed to be an election to withdraw from the Plan
3
<PAGE>
effective immediately following the purchase of Shares on the next Purchase
Date. Such member may not re-enroll until the commencement of a new
Offering Period.
At any time prior to the start of a new Purchase Period, a member may elect
in writing to increase (up to the maximum rate) or decrease (down to 1%)
his or her rate of contribution by any whole percentage, for such
subsequent Purchase Period or Periods.
Notwithstanding any other provision of the Plan, no member may receive a
right to acquire Shares under the Plan (and all other employee stock
purchase plans of the Company and its subsidiaries that are qualified or
intended to be qualified under Section 423 or any successor provision of
the Code) that accrues at a rate in excess of $25,000 of fair market value
of such Shares for any calendar year (determined as of the Enrollment
Date).
Employee contributions may be commingled with other Company funds free of
any obligation of the Company to pay interest on such funds, but shall be
credited to each member as soon as practicable after each withholding.
7. PURCHASE RIGHTS.
(a) Grant of Purchase Rights. Enrollment or Re-enrollment of a member in
the Plan on an Enrollment Date will constitute the grant by the
Company to the member of limited rights to purchase Shares under the
Plan. Upon enrollment, unless otherwise determined by the Plan
Committee, a member will become eligible for the grant of purchase
rights for up to the maximum permitted by Section 423 or such smaller
number as authorized by the Plan Committee or by operation of this
Plan, before the Enrollment Date.
(b) Terms and Conditions of Purchase Rights. Each purchase right granted
under the Plan shall have the following terms:
(i) whether or not Shares have been purchased thereunder, the
purchase right will expire on the earliest to occur of (A) the
completion of the purchase of Shares on the last Purchase Date
occurring within 24 months after the Enrollment Date on which
such purchase right was granted, or such shorter period as may be
established by the Board of Directors from time to time before an
Enrollment Date for all purchase rights to be granted on such
Enrollment Date, or (B) the date on which participation of such
member in the Plan terminates for any reason;
(ii) payment for Shares purchased under the purchase rights will be
made only through payroll deduction in accordance with Section 6;
4
<PAGE>
(iii) purchase of Shares upon exercise of the purchase rights will be
accomplished only in installments in accordance with Section 8;
(iv) the purchase price per Share under the purchase rights will be
determined as provided in Section 8; and
(v) the purchase rights will in all respects be subject to the terms
and conditions of the Plan, as interpreted by the Plan Committee
from time to time.
8. ISSUANCE OF SHARES. On the last day of trading of each Purchase Period
during an Offering Period (each a "Purchase Date"), so long as the Plan
shall remain in effect, the Company shall apply the funds then credited to
each member's account to the purchase of whole Shares. The cost or charge
to each member's account shall be the lower of 85 percent of the fair
market value of one share of the Company's Common Stock on the applicable
Enrollment Date or on the Purchase Date, which date shall be the last day
on which the Company's stock is traded during a Purchase Period, as
determined in good faith by the Plan Committee, multiplied by the number of
Shares purchased.
On each Purchase Date, if funds are still credited to a member after the
purchase of Shares, then (a) if such funds exceed the purchase price of a
whole share under the Plan, there shall be refunded to the member an amount
equal to the purchase price of the maximum number of whole shares such
funds would cover under the Plan, and (b) any remaining funds shall be held
for purchases on the next succeeding Purchase Date. Upon the effective date
of a member's written election to withdraw from participation in the Plan
for the then-current Offering Period, any funds then credited to the member
shall be refunded to the member. The Company shall, promptly after each
Purchase Date so long as the Plan is in effect, issue to the member
entitled thereto the Shares purchased by the member under the Plan.
9. TERMINATION OF MEMBERSHIP. A member's participation in the Plan shall
terminate, and no Shares may thereafter be purchased by such member under
the Plan, (a) when the member ceases to be employed by the Company and its
subsidiaries for any reason whatsoever, (b) when the member dies, or (c) 90
days after the member ceases to receive any compensation from the Company
and its subsidiaries unless, in the case of (c) above, (i) such cessation
is due to a leave of absence in accordance with policies of the Company or
approved by the person or persons appointed by the Plan Committee, and (ii)
the member's right to reemployment is guaranteed by statute or contract.
10. WITHDRAWAL OF FUNDS. Except as otherwise provided under this Plan, a member
may not withdraw all or part of the funds credited to him or her under the
Plan at any time before the funds are used to purchase Shares.
5
<PAGE>
11. BENEFICIARY. Each member may designate in writing one or more beneficiaries
and may, in such member's sole discretion, change such designation from
time to time. Any such designation shall be effective only after receipt by
the Company and shall be controlling over any disposition by will or
otherwise.
Upon the death of a member, amounts credited to the member shall be paid in
cash to the beneficiary or beneficiaries designated by the member or, in
the absence of such designation, to the executor, administrator, or other
legal representative of the member's estate. Such payment shall relieve the
Company of further liability under the Plan on account of the member. If
more than one beneficiary is designated, each beneficiary shall receive an
equal portion of the account unless the member gave contrary instructions
in such designation.
12. MODIFICATION, TERMINATION. The Company expects to continue this Plan until
such time as all of the Shares reserved for purchase under the Plan have
been purchased. However, the Company reserves the right to amend, alter, or
terminate the Plan at any time. No amendment shall require stockholder
approval, except:
(a) for an increase in the number of shares reserved for purchase under
the Plan;
(b) to the extent required for the Plan to comply with Section 423 of the
Code;
(c) to the extent required by other applicable laws, regulations or rules;
or
(d) to the extent the Board otherwise concludes that stockholder approval
is advisable.
The Board of Directors may elect to terminate any or all outstanding
enrollments at any time. If the Plan is terminated, the Board may also
elect to terminate enrollments before, or upon completion of, the purchase
of Shares on the next Purchase Date, or to permit enrollments to expire in
accordance with their terms (and participation to continue through such
expiration dates). If enrollments are terminated before expiration, any
funds contributed to the Plan that have not been used to purchase Shares
shall be returned to the members as soon as administratively feasible.
If at any time the Shares available under the Plan are over-enrolled,
enrollments shall be reduced proportionately to eliminate the
over-enrollment. Any funds that cannot be applied to the purchase of whole
Shares due to over-enrollment shall be refunded to members as soon as
administratively feasible. Further, if additional shares of Common Stock
are added to the Plan, the Company may, in its discretion, adjust the
purchase
6
<PAGE>
price of those shares or have such shares available, in whole or in part,
only for purchase rights granted subsequent to stockholder approval of such
additional shares.
13. ASSIGNABILITY OF RIGHTS; CREATION OF LIENS. No rights of any member under
the Plan shall be assignable by the member, by operation of law or
otherwise, and no person may create a lien on any funds, securities or any
other property, except to the extent that there has been a designation of a
beneficiary or beneficiaries in accordance with the Plan, and except to the
extent permitted by the laws of descent and distribution if such
beneficiary is not designated. Prior to the purchase of any Shares under
the Plan, each member shall be required to sign a statement to the
foregoing effect. A member's right to purchase Shares under the Plan shall
be exercisable only during the member's lifetime and only by the member.
14. PARTICIPATION IN OTHER PLANS. The Plan shall not affect an employee's right
to participate in and receive benefits under the then-current provisions of
any pension, insurance or other employee benefit plan or program of the
Company or a subsidiary.
15. REPORTS. The Company shall make available to members copies of all
communications with holders of Common Stock, including annual and interim
reports. In connection with the issuance of Shares under the Plan, the
Company shall provide each member with a summary of such member's total
contributions during the preceding Offering Period, and the number of
Shares purchased, purchase price and the balance of funds, if any, in the
member's account.
16. EQUAL RIGHTS AND PRIVILEGES. It is intended that, except as may be
determined by the Board of Directors, members shall have equal rights and
privileges with respect to the Plan.
17. APPLICABLE LAW. The interpretation, performance and enforcement of the Plan
shall be governed by the laws of the State of California.
18. APPROVAL. The Plan was approved by the Board of Directors on January 13,
1998 and by the stockholders of the Company on March 10, 1998.
7
N.E.T. STOCK OPTION PROGRAM
TABLE OF CONTENTS
ARTICLE ONE....................................................................2
GENERAL PROVISIONS.............................................................2
I. PURPOSES OF PROGRAM.................................................2
II. ADMINISTRATION OF PROGRAM...........................................2
III. STOCK SUBJECT TO PROGRAM............................................3
ARTICLE TWO....................................................................4
DISCRETIONARY OPTION GRANTS....................................................4
I. ELIGIBILITY FOR OPTION GRANTS.......................................4
II. TERMS AND CONDITIONS OF OPTIONS.....................................4
III. CORPORATE TRANSACTION...............................................7
IV. CANCELLATION AND REGRANT OF OPTIONS.................................9
V. STOCK APPRECIATION RIGHTS; HOSTILE TAKE-OVER;
CHANGE IN CONTROL...................................................9
ARTICLE THREE.................................................................12
MISCELLANEOUS.................................................................12
I. AMENDMENT OF PROGRAM...............................................12
II. TAX WITHHOLDING....................................................12
III. TERM OF PROGRAM....................................................12
IV. USE OF PROCEEDS....................................................13
V. REGULATORY APPROVALS...............................................13
VI. NO EMPLOYMENT/SERVICE RIGHTS.......................................13
VII. MISCELLANEOUS PROVISIONS...........................................13
1
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N.E.T. STOCK OPTION PROGRAM
ARTICLE ONE
GENERAL PROVISIONS
I. PURPOSES OF PROGRAM
A. This N.E.T. Stock Option Program (the "Program") is adopted by the Board
of Directors ("Board") of Network Equipment Technologies, Inc. ("N.E.T." or the
"Corporation") as of April 1, 1997 (the "Effective Date") to promote the
interests of Network Equipment Technologies, Inc., a Delaware corporation (the
"Corporation"), by allowing eligible individuals to acquire or increase
proprietary interests in the Corporation as an incentive to remain in the
service of the Corporation (or its "parent" or "subsidiary" corporations, as
defined in Section 424 of the Internal Revenue Code).
B. This Program is intended to provide for the granting of options to
employees and consultants who are not Officers or Directors of the Corporation
on substantively the same terms and conditions as the Network Equipment
Technologies, Inc. 1993 Stock Option Plan.
II. ADMINISTRATION OF PROGRAM
A. This Program shall be administered by a committee (the "Program
Administrator" or "Committee") of two (2) or more non-employee Directors
appointed by the Corporation's Board. Committee members shall serve for such
periods as the Board may determine and may be removed by the Board at any time.
As of the Effective Date, the Compensation Committee of the Board is the Program
Administrator.
B. The Program Administrator shall have full authority (subject to the
provisions of this Program) to establish such rules and regulations as it deems
appropriate for the proper administration of this Program and to make such
determinations and interpretations concerning this Program and options granted
under this Program as it deems necessary or advisable. Decisions of the Program
Administrator shall be final and binding upon all parties.
C. The Program Administrator shall have full authority to grant options
pursuant to this Program and to determine in its sole discretion which eligible
individuals are to receive such options, the number of shares to be covered by
each such option, the time(s) at which each option is to become exercisable, and
the maximum term for which each option is to be outstanding. Only
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N.E.T. STOCK OPTION PROGRAM Effective April 1, 1997
<PAGE>
non-statutory options ("Non-qualified Options") will be issuable under this
Program.
III. STOCK SUBJECT TO PROGRAM
A. An aggregate of 1,000,000 shares of the Corporation's common stock, par
value $0.01 per share ("Common Stock") is available for issuance under this
Program. These shares may be authorized but unissued shares of Common Stock or
reacquired shares of Common Stock, including shares repurchased by the
Corporation on the open market. The Program Administrator shall periodically
recommend to the Board the shares to be issued pursuant to this Program and the
Board shall authorize such issuance as it deems to be in the best interests of
the Corporation.
B. To the extent that an option granted under this Program expires or
terminates for any reason before exercise in full (including any option canceled
in accordance with the cancellation-regrant provisions of this Program), the
shares then subject to the option shall again be available for option grants
under this Program. Shares repurchased by the Corporation pursuant to any
repurchase rights available under this Program, shall not again become available
for option grants under this Program. If the exercise price of an option granted
under this Program is paid with shares of Common Stock, or if shares of Common
Stock otherwise issuable under this Program are withheld by the Corporation in
satisfaction of withholding taxes incurred upon the exercise of an option, then
the number of shares available for issuance under this Program shall be reduced
by the gross number of shares for which the option is exercised and not by the
net number of shares issued to the option holder.
C. If a change is made to the Common Stock by reason of any stock split,
stock dividend, recapitalization, combination of shares, or other similar
change, then appropriate adjustments shall be made to [(i) the number and/or
class of shares issuable under this Program, and (ii)] the number and/or class
of shares and price per share in effect under each then-outstanding option
granted under this Program. The purpose of adjustments to outstanding options
shall be to preclude the enlargement or dilution of rights and benefits under
such options. The adjustments determined by the Program Administrator shall be
final, binding, and conclusive.
D. The Corporation may not issue stock options covering in the aggregate
more than 100,000 shares of Common Stock (subject to adjustments as required
above) to any one participant in any one-year period.
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N.E.T. STOCK OPTION PROGRAM Effective April 1, 1997
<PAGE>
ARTICLE TWO
DISCRETIONARY OPTION GRANTS
I. ELIGIBILITY FOR OPTION GRANTS
The following persons are eligible to participate in this Program:
A. Key employees of the Corporation (or its parent or subsidiary
corporations) whose services contribute to the management, growth, and financial
success of the Corporation (or its parent or subsidiary corporations), and
B. Those consultants and independent contractors who provide valuable
services to the Corporation (or its parent or subsidiary corporations).
C. Notwithstanding the foregoing, members of the Board of Directors and
Officers of the Corporation shall not be eligible to participate in this
Program.
II. TERMS AND CONDITIONS OF OPTIONS
Options granted pursuant to this Program may only be Non-qualified Options.
Each option shall be evidenced by one or more written instruments in a form
approved by the Program Administrator. Each such instrument shall comply with
the terms and conditions specified below. Failure to issue, or (if agreement is
required) to agree to, an instrument evidencing an option shall not invalidate
the option grant; however, the option shall not be exercisable until a written
instrument has been issued and (if required) agreed to.
A. Option Price.
1. The option price per share shall be fixed by the Program Administrator,
but shall not be less than the "fair market value" (defined below) per share of
Common Stock on the date of the option grant.
2. The option price shall, subject to Section III below, be immediately due
upon exercise of the option and shall be payable in one or a combination of the
following forms:
(a) cash or check payable to the Corporation;
4
N.E.T. STOCK OPTION PROGRAM Effective April 1, 1997
<PAGE>
(b) shares of Common Stock held by the optionee for the period
necessary to avoid a charge to the Corporation's earnings for financial
reporting purposes and valued at "fair market value" on the exercise date;
or
(c) a broker-dealer sale-and-remittance procedure pursuant to which
the optionee shall provide irrevocable written instructions (i) to a
designated brokerage firm to effect the immediate sale of the option shares
and remit to the Corporation, from the sale proceeds available on the
settlement date, sufficient funds to cover the aggregate option price plus
all income and employment taxes required to be withheld by the Corporation
in connection with the exercise, and (ii) to the Corporation to deliver the
certificates for the purchased shares directly to the brokerage firm to
complete the transaction.
3. The Program Administrator may assist any optionee in the exercise of any
option granted under this Program and the satisfaction of any federal and state
income and employment tax obligations arising therefrom by (a) authorizing a
loan to the optionee by the Corporation, or (b) permitting the optionee to pay
the option price in installments over a period of months or years. The terms of
any loan or installment method of payment (including the interest rate and terms
of repayment) will be established by the Program Administrator in its sole
discretion. Loans and installment payments may be allowed with or without
security or collateral (other than to optionees who are consultants or
independent contractors, who must adequately secure any loan by collateral other
than the purchased shares), but the maximum credit available to the optionee
shall not exceed the sum of (i) the aggregate option price (less par value) of
the purchased shares, plus (ii) any federal and state income and employment tax
liability incurred by the optionee in connection with the exercise of the
option.
4. The "fair market value" per share of Common Stock on any relevant date
shall be determined as follows:
(a) If the Common Stock is listed or admitted to trading on any
national 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 Program Administrator to be the primary
market for the Common Stock, as officially quoted on the composite tape of
transactions on that exchange. If there is no reported sale of Common Stock
on that exchange on the date in question, the fair market value shall be
the closing selling price on the exchange on the next preceding date for
which a closing selling price is quoted.
(b) If the Common Stock is not listed or admitted to trading on any
national stock exchange, but is traded on the NASDAQ National Market
System, the fair market value shall be the closing selling price per share
of Common Stock on the date
5
N.E.T. STOCK OPTION PROGRAM Effective April 1, 1997
<PAGE>
in question as reported on that system. 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 for the next preceding date for which a closing
selling price is quoted.
B. Term and Exercise of Options.
1. Each option granted under this Program shall be exercisable at such
time(s), during such period, and for such number of shares as shall be
determined by the Program Administrator and set forth in the written instrument
evidencing the option. No option granted under this Program shall have a term in
excess of ten (10) years after the grant date.
2. During the lifetime of the optionee, the option shall be exercisable
only by the optionee and shall not be assignable or transferable by the optionee
other than by will or by the laws of descent and distribution following the
optionee's death.
3. Exercise of an option shall be effected by delivery to the Corporation
of a written notice in a form approved by the Program Administrator specifying
the number of shares as to which the option is being exercised, accompanied by
payment of the exercise price (or provision for payment acceptable to the
Program Administrator), and containing such other provisions as the Program
Administrator approves from time to time.
C. Termination of Service.
1. Except as otherwise approved by the Program Administrator, if the
optionee's service to the Corporation is terminated:
(a) for cause, each then-outstanding option held by the optionee shall
terminate immediately;
(b) for any reason other than cause, death, or permanent disability,
each then-outstanding option held by the optionee shall expire no later
than three (3) months after the termination date;
(c) by reason of permanent disability (as defined in Section 22(e)(3)
of the Internal Revenue Code), each then-outstanding option held by the
optionee shall expire no later than twelve (12) months after the
termination date; or
(d) by reason of the optionee's death, or if the optionee dies during
the three (3) months following termination of his or her employment other
than for cause or by reason of permanent disability, each then-outstanding
option held by the optionee shall expire no later than twelve (12) months
following the termination date. Following the optionee's death,
6
N.E.T. STOCK OPTION PROGRAM Effective April 1, 1997
<PAGE>
the option may be exercised by the personal representative of the
optionee's estate or by the person(s) to whom the option is transferred
pursuant to the optionee's will or in accordance with the laws of descent
and distribution.
2. Under no circumstances shall any option be exercisable after the
specified expiration date of the option term.
3. Following termination of the optionee's service, an option shall not be
exercisable to any greater extent than on the termination date; provided,
however, that the Program Administrator shall have complete discretion, at any
time while the option remains outstanding, to permit the option to be exercised,
not only with respect to the number of shares for which the option is
exercisable at the time of the termination, but also with respect to one or more
subsequent installments of purchasable shares for which the option would
otherwise have become exercisable had termination not occurred.
4. For purposes of this Program:
(a) An optionee shall be deemed to remain in service to the
Corporation for so long as he or she renders (or in the case of consultants
or advisors, has agreed to render) services on a periodic basis to the
Corporation (or any parent or subsidiary) as an employee or an independent
consultant or advisor.
(b) An optionee shall be considered to be an employee for so long as
he or she remains in the employ of the Corporation (or any parent or
subsidiary), subject to the control and direction of the employer entity as
to the work to be performed and the manner and method of performance.
D. Stockholder Rights.
An optionee shall have no stockholder rights with respect to any option
shares until he or she has exercised the option and paid (or made arrangements
satisfactory to the Program Administrator to pay) the option price for the
purchased shares.
III. CORPORATE TRANSACTION
A. In the event of any of the following stockholder-approved transactions
(a "Corporate Transaction"):
1. a merger or consolidation in which the Corporation is not the
surviving entity, except for a transaction whose principal purpose is to
change the state of the Corporation's incorporation,
7
N.E.T. STOCK OPTION PROGRAM Effective April 1, 1997
<PAGE>
2. the sale, transfer, or other disposition of all or substantially all of
the assets of the Corporation in liquidation or dissolution, or
3. any "reverse" merger in which the Corporation is the surviving entity,
but in which securities possessing more than 50% of the total combined voting
power of the Corporation's outstanding securities are transferred to holders
other than those who owned such voting power immediately before the merger, then
immediately before the Effective Date of the Corporate Transaction, each option
granted under this Program shall become fully exercisable ("accelerate") with
respect to the total number of shares of Common Stock then subject to the
option. However, an option shall not accelerate if and to the extent: (i) the
option is, in connection with the Corporate Transaction, either to be assumed by
the successor corporation or parent thereof or to be replaced by an equivalent
option to purchase shares of the capital stock of the successor corporation or
parent thereof, or (ii) acceleration of the option is subject to other
limitations imposed by the Program Administrator at the time of grant. The
determination of equivalence under clause (i) above shall be made by the Program
Administrator and shall be final, binding, and conclusive.
B. Upon the consummation of the Corporate Transaction, all options granted
under this Program shall terminate and cease to be outstanding, except to the
extent assumed by the successor (or surviving) corporation or its parent
company.
C. Each option granted under this Program that is replaced by an equivalent
option in a Corporate Transaction, or that otherwise continues in effect, shall
be appropriately adjusted, immediately after the Corporate Transaction, to apply
to the number and class of securities that would have been issued in the
Corporate Transaction to an actual holder of the number of shares of Common
Stock that were subject to the option immediately before the Corporate
Transaction. Appropriate adjustment shall also be made to the option price
payable per share, provided the aggregate option price payable for such
securities shall remain the same. In addition, the class and number of
securities available for issuance under this Program following the consummation
of the Corporate Transaction shall be appropriately adjusted.
D. The grant of options under this Program shall not 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.
8
N.E.T. STOCK OPTION PROGRAM Effective April 1, 1997
<PAGE>
IV. CANCELLATION AND REGRANT OF OPTIONS
The Program Administrator may, at any time and from time to time, with the
consent of the affected optionees, cancel any or all outstanding options granted
under this Program and grant in substitution new options covering the same or
different numbers of shares of Common Stock but having an option price per share
not less than the fair market value of the Common Stock on the new grant date.
V. STOCK APPRECIATION RIGHTS; HOSTILE TAKE-OVER; CHANGE IN CONTROL
A. As determined by the Program Administrator in its sole discretion, one
or more optionees may be granted the right, exercisable upon such terms and
conditions as the Program Administrator may establish, to surrender all or part
of an unexercised option granted under this Program in exchange for a payment by
the Corporation of an amount equal to the excess of (i) the fair market value
(on the option surrender date) of the number of shares in which the optionee is
at the time vested under the surrendered option (or part thereof), over (ii) the
aggregate option price payable for those shares.
B. No surrender of an option shall be effective hereunder unless it is
approved by the Program Administrator. If the surrender is approved, then the
payment to the optionee under this Section V may be made in shares of Common
Stock valued at fair market value on the option surrender date, in cash, or
partly in shares and partly in cash, as the Program Administrator determines in
its sole discretion.
C. If the surrender of an option is rejected by the Program Administrator,
then the optionee shall retain whatever rights he or she had under the
surrendered option (or surrendered portion thereof) on the option surrender date
and may exercise such rights at any time before the later of (i) five (5)
business days after receipt of the rejection notice, or (ii) the last day on
which the option is otherwise exercisable in accordance with its terms, but in
no event more than ten (10) years after the date of the option grant.
D. In the event that an individual optionee under this Program thereafter
becomes a member of the Board of Directors or a Corporate Officer of the
Corporation and is subject to the short-swing profit restrictions of the federal
securities laws, then that individual shall have the following limited stock
appreciation rights in tandem with each option received under this Program. Upon
the occurrence of a Hostile Take-Over (defined below), each option with such a
limited stock appreciation right in effect for at least six (6) months shall
automatically be canceled and the optionee shall be entitled to a cash payment
by
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N.E.T. STOCK OPTION PROGRAM Effective April 1, 1997
<PAGE>
the Corporation in the amount of the excess of (i) the Take-Over Price (defined
below) of the shares of Common Stock subject to the canceled option (whether or
not the option is otherwise exercisable for such shares), over (ii) the
aggregate exercise price payable for such shares. The payment shall be made
within five (5) days after consummation of the Hostile Take-Over. Neither the
approval of the Plan Administrator nor the consent of the Board shall be
required in connection with such option cancellation and cash payment.
E. A "Hostile Take-Over" shall be deemed to occur if (i) any person or
related group of persons (other than the Corporation or a person that directly
or indirectly controls, is controlled by, or is under common control with, the
Corporation) directly or indirectly acquires beneficial ownership (within the
meaning of Rule 13d-3 of the Securities Exchange Act of 1934, as amended [the
"Exchange Act"]) of securities possessing more than 50% of the total combined
voting power of the Corporation's outstanding securities pursuant to a tender or
exchange offer that the Board does not recommend that the Corporation's
stockholders accept, and (ii) more than 50% of the securities so acquired are
accepted from holders other than Officers and Directors of the Corporation
subject to Section 16 of the Exchange Act. The "Take-Over Price" per share shall
be the greater of (a) the fair market value per share on the date of
cancellation, as determined pursuant to the valuation provisions of Section
II.A.4 of this Program, or (b) the highest reported price per share paid in
effecting such Hostile Take-Over.
F. The Program Administrator shall have full discretionary authority,
exercisable either in advance of, or at the time of, a Change in Control
(defined below), to provide for the automatic acceleration of options granted
under this Program upon the occurrence of the Change in Control. The Program
Administrator shall also have full discretionary authority to condition any such
acceleration upon the subsequent termination of the optionee's service to the
Corporation (or a parent or subsidiary) within a specified period after the
Change in Control. The Program Administrator hereby exercises such discretion to
accelerate vesting of all outstanding options held by Officers of the
Corporation whose employment is terminated in conjunction with, or within a year
of, a Change in Control or Corporate Transaction. Any option accelerated in
connection with the Change in Control shall remain fully exercisable until the
expiration of the option term. For all purposes of this Program, a "Change in
Control" shall mean a change in control of the Corporation of a nature that
would be required to be reported in response to Item 6(e) of Schedule 14A of
Regulation 14A promulgated under the Exchange Act, whether or not the
Corporation is then subject to such reporting requirement, other than a
Corporate Transaction; provided that, without limitation, a Change in Control
shall be deemed to have occurred if:
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N.E.T. STOCK OPTION PROGRAM Effective April 1, 1997
<PAGE>
1. any individual, partnership, firm, corporation, association, trust,
unincorporated organization or other entity, or any syndicate or group
deemed to be a "person" under Section 14(d)(2) of the Exchange Act, is or
becomes the "beneficial owner" (as defined in Rule 13d-3 of the General
Rules and Regulations under the Exchange Act), directly or indirectly, of
securities of the Corporation representing 40% or more of the combined
voting power of the Corporation's then-outstanding securities entitled to
vote in the election of Directors of the Corporation, pursuant to a tender
or exchange offer that the Board does not recommend that the Corporation's
stockholders accept; or
2. during any period of two (2) consecutive years, individuals who, at
the beginning of such period, constituted the Board and any new members of
the Board, whose election by the Board or nomination for election by the
Corporation's stockholders was approved by a vote of at least
three-quarters (3/4) of the Directors then in office who either were
Directors at the beginning of the period or whose election or nomination
for election was previously so approved, cease for any reason to constitute
a majority thereof.
G. The shares of Common Stock subject to any option surrendered or canceled
for an appreciation distribution pursuant to this Section V shall not be
available for subsequent option grant under this Program.
11
N.E.T. STOCK OPTION PROGRAM Effective April 1, 1997
<PAGE>
ARTICLE THREE
MISCELLANEOUS
I. AMENDMENT OF PROGRAM
The Board shall have complete and exclusive authority to amend or modify
this Program in any or all respects whatsoever. However, no such amendment or
modification shall, without the consent of the optionees, adversely affect
rights and obligations with respect to options at the time outstanding under
this Program.
II. TAX WITHHOLDING
A. The Corporation's obligation to deliver shares or cash upon exercise of
options or stock appreciation rights granted under this Program shall be subject
to the satisfaction of all federal, state, and local income and employment tax
withholding requirements.
B. The Program Administrator may, in its discretion and upon such terms and
conditions as it deems appropriate, provide any or all optionees under this
Program with the election to have the Corporation withhold, from the shares of
Common Stock otherwise issuable upon the exercise of options, one or more
share(s) with an aggregate fair market value equal to a designated percentage
(any whole multiple of 5% specified by the optionee) of the federal and state
income taxes ("Taxes") incurred in connection with the acquisition of such
shares. In lieu of direct withholding, optionees may be granted the right to
deliver shares of Common Stock to the Corporation in satisfaction of such Taxes.
The withheld or delivered shares shall be valued at the fair market value on the
applicable determination date for such Taxes.
III. TERM OF PROGRAM
A. This Program shall terminate on (i) August 10, 2003, or (ii) the date on
which all shares available for issuance under this Program have been issued
pursuant to the exercise of options granted under this Program. If the date of
termination is determined under clause (i) above, then no options outstanding on
such date shall be affected by the termination of this Program.
B. Options may be granted under this Program to purchase shares of Common
Stock in excess of the number of shares then available for issuance under this
Program, provided each
12
N.E.T. STOCK OPTION PROGRAM Effective April 1, 1997
<PAGE>
option granted is not to become exercisable, in whole or in part, at any time
before Board approval of issuance of a sufficient increase in the number of
shares issuable under this Program.
IV. USE OF PROCEEDS
Any cash proceeds received by the Corporation from the sale of shares
pursuant to options granted under this Program may be used for general corporate
purposes.
V. REGULATORY APPROVALS
A. The implementation of this Program, the granting of any option
hereunder, and the issuance of stock upon the exercise or surrender of any such
option shall be subject to the procurement by the Corporation of all approvals
and permits required by regulatory authorities having jurisdiction over this
Program, the options granted under it, and the stock issued pursuant to it.
B. No shares of Common Stock or other assets shall be issued or delivered
under this Program unless and until there shall have been compliance with all
applicable requirements of federal and state securities laws, including the
filing and effectiveness of a Form S-8 registration statement for the shares of
Common Stock issuable under this Program, and all applicable listing
requirements of any securities exchange on which stock of the same class is then
listed.
VI. NO EMPLOYMENT/SERVICE RIGHTS
Neither the action of the Corporation in establishing this Program, nor any
action taken by the Program Administrator hereunder, nor any provision of the
Program, shall be construed so as to grant any individual the right to remain in
the employ or service of the Corporation (or any parent or subsidiary
corporation) for any period, and the Corporation (or any parent or subsidiary
corporation retaining the services of such individual) may terminate such
individual's employment or service at any time and for any reason, with or
without cause.
VII. MISCELLANEOUS PROVISIONS
A. Except as otherwise provided in this Program, the right to acquire
Common Stock or other assets under this Program may not be assigned, encumbered,
or otherwise transferred by any optionee.
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N.E.T. STOCK OPTION PROGRAM Effective April 1, 1997
<PAGE>
B. The provisions of this Program shall be governed by the laws of the
State of California, as such laws are applied to contracts entered into and
performed in that state.
C. The provisions of this Program shall inure to the benefit of, and be
binding upon, the Corporation and its successors or assigns, and the optionees,
the legal representatives of their respective estates, their respective heirs or
legatees, and their permitted assignees.
14
N.E.T. STOCK OPTION PROGRAM Effective April 1, 1997
NETWORK EQUIPMENT TECHNOLOGIES, INC.
1993 STOCK OPTION PLAN
TABLE OF CONTENTS
ARTICLE ONE....................................................................2
GENERAL PROVISIONS.............................................................2
I. PURPOSES OF PLAN....................................................2
II. ADMINISTRATION OF PLAN..............................................2
III. STOCK SUBJECT TO PLAN...............................................3
ARTICLE TWO....................................................................5
DISCRETIONARY OPTION GRANTS....................................................5
I. ELIGIBILITY FOR OPTION GRANTS.......................................5
II. TERMS AND CONDITIONS OF OPTIONS.....................................5
III. INCENTIVE OPTIONS...................................................8
IV. CORPORATE TRANSACTION...............................................9
V. CANCELLATION AND REGRANT OF OPTIONS................................10
VI. STOCK APPRECIATION RIGHTS; HOSTILE TAKE-OVER;
CHANGE IN CONTROL..................................................10
ARTICLE THREE.................................................................13
AUTOMATIC OPTION GRANT PROGRAM................................................13
I. ELIGIBILITY........................................................13
II. TERMS AND CONDITIONS OF AUTOMATIC OPTION GRANTS....................13
III. CORPORATE TRANSACTION/CHANGE IN CONTROL/
HOSTILE TAKE-OVER..................................................16
ARTICLE FOUR..................................................................17
MISCELLANEOUS.................................................................17
I. AMENDMENT OF PLAN..................................................17
II. TAX WITHHOLDING....................................................17
III. TERM OF PLAN.......................................................17
IV. USE OF PROCEEDS....................................................18
V. REGULATORY APPROVALS...............................................18
VI. NO EMPLOYMENT/SERVICE RIGHTS.......................................18
VII. MISCELLANEOUS PROVISIONS...........................................18
1
N.E.T. 1993 SOP As Amended August 12, 1997
<PAGE>
NETWORK EQUIPMENT TECHNOLOGIES, INC.
1993 STOCK OPTION PLAN
ARTICLE ONE
GENERAL PROVISIONS
I. PURPOSES OF PLAN
A. This 1993 Stock Option Plan (the "Plan") is adopted as of August 11,
1993 (the "Effective Date") to promote the interests of Network Equipment
Technologies, Inc., a Delaware corporation (the "Corporation"), by allowing
eligible individuals to acquire or increase proprietary interests in the
Corporation as an incentive to remain in the service of the Corporation (or its
"parent" or "subsidiary" corporations, as defined in Section 424 of the Internal
Revenue Code).
B. This Plan is the successor to the Network Equipment Technologies, Inc.
1983 Stock Option Plan (the "1983 Plan"). No options shall be granted under the
1983 Plan from and after the Effective Date. The terms and conditions of options
granted under the 1983 Plan before the Effective Date are not affected by the
adoption of this Plan.
II. ADMINISTRATION OF PLAN
A. This Plan shall be administered by a committee (the "Plan Administrator"
or "Committee") of two or more non-employee Directors appointed by the
Corporation's Board of Directors (the "Board"). Committee members shall serve
for such periods as the Board may determine and may be removed by the Board at
any time.
B. The Plan Administrator shall have full authority (subject to the
provisions of this Plan) to establish such rules and regulations as it deems
appropriate for the proper administration of this Plan and to make such
determinations and interpretations concerning this Plan and options granted
under this Plan as it deems necessary or advisable. Decisions of the Plan
Administrator shall be final and binding upon all parties.
C. The Plan Administrator shall have full authority to grant options
pursuant to Article Two of this Plan and to determine in its sole discretion
which eligible individuals are to receive such options, the number of shares to
be covered by each
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N.E.T. 1993 SOP As Amended August 12, 1997
<PAGE>
such option, whether each option is to be an incentive stock option intended to
satisfy the requirements of Section 422 of the Internal Revenue Code ("Incentive
Option") or a non-statutory option not intended to satisfy those requirements,
the time(s) at which each option is to become exercisable, and the maximum term
for which each option is to be outstanding.
III. STOCK SUBJECT TO PLAN
A. An aggregate of 9,406,415 shares of the Corporation's common stock, par
value $0.01 per share ("Common Stock") is available for issuance under this
Plan, and the predecessor 1983 Plan, subject to adjustment from time to time in
accordance with this Section III. These shares may be authorized but unissued
shares of Common Stock or reacquired shares of Common Stock, including shares
repurchased by the Corporation on the open market. The number of shares of
Common Stock available for issuance under this Plan shall be reduced,
share-for-share, by the number of shares issued with respect to options granted
under the 1983 Plan that are outstanding at the Effective Date and are
subsequently exercised.
B. To the extent that an option granted under this Plan or the 1983 Plan
expires or terminates for any reason before exercise in full (including any
option canceled in accordance with the cancellation-regrant provisions of
Section V of Article Two of this Plan), the shares then subject to the option
shall again be available for option grants under this Plan. Shares subject to
any option or portion thereof surrendered or canceled in accordance with Section
VI of Article Two and Section III of Article Three, and shares repurchased by
the Corporation pursuant to any repurchase rights available under this Plan,
shall not again become available for option grants under this Plan. If the
exercise price of an option granted under this Plan (or the 1983 Plan) is paid
with shares of Common Stock, or if shares of Common Stock otherwise issuable
under this Plan are withheld by the Corporation in satisfaction of withholding
taxes incurred upon the exercise of an option, then the number of shares
available for issuance under this Plan shall be reduced by the gross number of
shares for which the option is exercised and not by the net number of shares
issued to the option holder.
C. If a change is made to the Common Stock by reason of any stock split,
stock dividend, recapitalization, combination of shares, or other similar
change, then appropriate adjustments shall be made to (i) the number and/or
class of shares issuable under this Plan, (ii) the number and/or class of shares
and price per share in effect under each then-outstanding option granted under
this Plan (or the 1983 Plan), and (iii) the number of shares of Common Stock to
be made the subject of each subsequent automatic option grant under Article
Three of this Plan. The purpose of adjustments to outstanding options shall be
to preclude
3
N.E.T. 1993 SOP As Amended August 12, 1997
<PAGE>
the enlargement or dilution of rights and benefits under such options. The
adjustments determined by the Plan Administrator shall be final, binding, and
conclusive.
D. The Corporation may not issue stock options covering in the aggregate
more than 350,000 shares of Common Stock (subject to adjustments as required
under this Plan) to any one participant in any one-year period.
4
N.E.T. 1993 SOP As Amended August 12, 1997
<PAGE>
ARTICLE TWO
DISCRETIONARY OPTION GRANTS
I. ELIGIBILITY FOR OPTION GRANTS
The following persons are eligible to participate in the Discretionary
Option Grant Program of this Plan:
A. Officers and other key employees of the Corporation (or its parent or
subsidiary corporations) whose services contribute to the management, growth,
and financial success of the Corporation (or its parent or subsidiary
corporations), and
B. Those consultants and independent contractors who provide valuable
services to the Corporation (or its parent or subsidiary corporations).
II. TERMS AND CONDITIONS OF OPTIONS
Options granted pursuant to this Article Two may, at the Plan
Administrator's discretion, be either Incentive Options or non-statutory
options. Individuals who are not employees may be granted only non-statutory
options. Each option shall be evidenced by one or more written instruments in a
form approved by the Plan Administrator. Each such instrument shall comply with
the terms and conditions specified below. Each instrument evidencing an
Incentive Option shall also be subject to Section III of this Article Two.
Failure to issue, or (if agreement is required) to agree to, an instrument
evidencing an option shall not invalidate the option grant; however, the option
shall not be exercisable until a written instrument has been issued and (if
required) agreed to.
A. Option Price.
1. The option price per share shall be fixed by the Plan Administrator, but
shall not be less than the "fair market value" (defined below) per share of
Common Stock on the date of the option grant.
2. The option price shall, subject to Section III below, be immediately due
upon exercise of the option and shall be payable in one or a combination of the
following forms:
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N.E.T. 1993 SOP As Amended August 12, 1997
<PAGE>
(a) cash or check payable to the Corporation;
(b) shares of Common Stock held by the optionee for the period
necessary to avoid a charge to the Corporation's earnings for financial
reporting purposes and valued at "fair market value" on the exercise date;
or
(c) a broker-dealer sale-and-remittance procedure pursuant to which
the optionee shall provide irrevocable written instructions (i) to a
designated brokerage firm to effect the immediate sale of the option shares
and remit to the Corporation, from the sale proceeds available on the
settlement date, sufficient funds to cover the aggregate option price plus
all income and employment taxes required to be withheld by the Corporation
in connection with the exercise, and (ii) to the Corporation to deliver the
certificates for the purchased shares directly to the brokerage firm to
complete the transaction.
3. The Plan Administrator may assist any optionee (including any Officer)
in the exercise of any option granted under this Article Two and the
satisfaction of any federal and state income and employment tax obligations
arising therefrom, by (a) authorizing a loan to the optionee by the Corporation,
or (b) permitting the optionee to pay the option price in installments over a
period of months or years. The terms of any loan or installment method of
payment (including the interest rate and terms of repayment) will be established
by the Plan Administrator in its sole discretion. Loans and installment payments
may be allowed with or without security or collateral (other than to optionees
who are consultants or independent contractors, who must adequately secure any
loan by collateral other than the purchased shares), but the maximum credit
available to the optionee shall not exceed the sum of (i) the aggregate option
price (less par value) of the purchased shares, plus (ii) any federal and state
income and employment tax liability incurred by the optionee in connection with
the exercise of the option.
4. The "fair market value" per share of Common Stock on any relevant date
shall be determined as follows:
(a) If the Common Stock is listed or admitted to trading on any
national 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 officially quoted on the composite tape of
transactions on that exchange. If there is no reported sale of Common Stock
on that exchange on the date in question, the fair market value shall be
the closing selling price on the exchange on the next preceding date for
which a closing selling price is quoted.
(b) If the Common Stock is not listed or admitted to trading on any
national stock exchange, but is traded
6
N.E.T. 1993 SOP As Amended August 12, 1997
<PAGE>
on the NASDAQ National Market System, the fair market value shall be the
closing selling price per share of Common Stock on the date in question as
reported on that system. 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 for the next preceding date for which a closing
selling price is quoted.
B. Term and Exercise of Options.
1. Each option granted under this Article Two shall be exercisable at such
time(s), during such period, and for such number of shares as shall be
determined by the Plan Administrator and set forth in the written instrument
evidencing the option. No option granted under this Article Two shall have a
term in excess of ten (10) years after the grant date.
2. During the lifetime of the optionee, the option shall be exercisable
only by the optionee and shall not be assignable or transferable by the optionee
otherwise than by will or by the laws of descent and distribution following the
optionee's death.
3. Exercise of an option shall be effected by delivery to the Corporation
of a written notice in a form approved by the Plan Administrator specifying the
number of shares as to which the option is being exercised, accompanied by
payment of the exercise price (or provision for payment acceptable to the Plan
Administrator), and containing such other provisions as the Plan Administrator
approves from time to time.
C. Termination of Service.
1. Except as otherwise approved by the Plan Administrator, if the
optionee's service to the Corporation is terminated:
(a) for cause, each then-outstanding option held by the optionee shall
terminate immediately;
(b) for any reason other than cause, death, or permanent disability,
each then-outstanding option held by the optionee shall expire no later
than three (3) months after the termination date;
(c) by reason of permanent disability (as defined in Section 22(e)(3)
of the Internal Revenue Code), each then-outstanding option held by the
optionee shall expire no later than twelve (12) months after the
termination date; or
(d) by reason of the optionee's death, or if the optionee dies during
the three (3) months following termination of his or her employment other
than for cause or by reason of permanent disability, each then-outstanding
option held
7
N.E.T. 1993 SOP As Amended August 12, 1997
<PAGE>
by the optionee shall expire no later than twelve (12) months following the
termination date. Following the optionee's death, the option may be
exercised by the personal representative of the optionee's estate or by the
person(s) to whom the option is transferred pursuant to the optionee's will
or in accordance with the laws of descent and distribution.
2. Under no circumstances shall any option be exercisable after the
specified expiration date of the option term.
3. Following termination of the optionee's service, an option shall not be
exercisable to any greater extent than on the termination date; provided,
however, that the Plan Administrator shall have complete discretion, at any time
while the option remains outstanding, to permit the option to be exercised, not
only with respect to the number of shares for which the option is exercisable at
the time of the termination, but also with respect to one or more subsequent
installments of purchasable shares for which the option would otherwise have
become exercisable had termination not occurred.
4. For purposes of this Plan:
(a) An optionee shall be deemed to remain in service to the
Corporation for so long as he or she renders (or in the case of consultants
or advisors, has agreed to render) services on a periodic basis to the
Corporation (or any parent or subsidiary) as an employee, a non-employee
Director, or an independent consultant or advisor.
(b) An optionee shall be considered to be an employee for so long as
he or she remains in the employ of the Corporation (or any parent or
subsidiary), subject to the control and direction of the employer entity as
to the work to be performed and the manner and method of performance.
D. Stockholder Rights.
An optionee shall have no stockholder rights with respect to any option
shares until he or she has exercised the option and paid (or made arrangements
satisfactory to the Plan Administrator to pay) the option price for the
purchased shares.
III. INCENTIVE OPTIONS
In addition to other application terms and conditions of this Plan, the
following provisions shall apply:
A. Incentive Options may be granted only to employees. Options specifically
designated as "non-statutory" options when issued shall not be subject to this
Section III.
8
N.E.T. 1993 SOP As Amended August 12, 1997
<PAGE>
B. If any individual to whom an Incentive Option is granted is the owner of
stock (as determined under Section 424(d) of the Internal Revenue Code)
possessing 10% or more of the total combined voting power of all classes of
stock of the Corporation or any of its parent or subsidiary corporations ("10%
Stockholder"), then the option price per share shall not be less than 110% of
the fair market value per share of Common Stock on the grant date, and the
option term shall not exceed five (5) years from the grant date.
IV. CORPORATE TRANSACTION
A. In the event of any of the following stockholder-approved transactions
(a "Corporate Transaction"):
(i) a merger or consolidation in which the Corporation is not the
surviving entity, except for a transaction whose principal purpose is to
change the State of the Corporation's incorporation,
(ii) the sale, transfer, or other disposition of all or substantially
all of the assets of the Corporation in liquidation or dissolution, or
(iii) any "reverse" merger in which the Corporation is the surviving
entity, but in which securities possessing more than 50% of the total
combined voting power of the Corporation's outstanding securities are
transferred to holders other than those who owned such voting power
immediately before the merger,
then immediately before the Effective Date of the Corporate Transaction, each
option granted under this Article Two shall become fully exercisable
("accelerate") with respect to the total number of shares of Common Stock then
subject to the option. However, an option shall not accelerate if and to the
extent: (i) the option is, in connection with the Corporate Transaction, either
to be assumed by the successor corporation or parent thereof or to be replaced
by an equivalent option to purchase shares of the capital stock of the successor
corporation or parent thereof, or (ii) acceleration of the option is subject to
other limitations imposed by the Plan Administrator at the time of grant. The
determination of equivalence under clause (i) above shall be made by the Plan
Administrator and shall be final, binding, and conclusive.
B. Upon the consummation of the Corporate Transaction, all options granted
under this Article Two shall terminate and cease to be outstanding, except to
the extent assumed by the successor (or surviving) corporation or its parent
company.
C. Each option granted under this Article Two that is replaced by an
equivalent option in a Corporate Transaction, or
9
N.E.T. 1993 SOP As Amended August 12, 1997
<PAGE>
that otherwise continues in effect, shall be appropriately adjusted, immediately
after the Corporate Transaction, to apply to the number and class of securities
that would have been issued in the Corporate Transaction to an actual holder of
the number of shares of Common Stock that were subject to the option immediately
before the Corporate Transaction. Appropriate adjustment shall also be made to
the option price payable per share, provided the aggregate option price payable
for such securities shall remain the same. In addition, the class and number of
securities available for issuance under this Plan following the consummation of
the Corporate Transaction shall be appropriately adjusted.
D. The grant of options under this Article Two shall not 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. CANCELLATION AND REGRANT OF OPTIONS
The Plan Administrator may, at any time and from time to time, with the
consent of the affected optionees, cancel any or all outstanding options granted
under this Article Two and grant in substitution new options covering the same
or different numbers of shares of Common Stock but having an option price per
share not less than the fair market value of the Common Stock on the new grant
date (or 110% of fair market value in the case of an Incentive Option granted to
a 10% Stockholder).
VI. STOCK APPRECIATION RIGHTS; HOSTILE TAKE-OVER; CHANGE IN CONTROL
A. As determined by the Plan Administrator in its sole discretion, one or
more optionees may be granted the right, exercisable upon such terms and
conditions as the Plan Administrator may establish, to surrender all or part of
an unexercised option granted under this Article Two in exchange for a payment
by the Corporation of an amount equal to the excess of (i) the fair market value
(on the option surrender date) of the number of shares in which the optionee is
at the time vested under the surrendered option (or part thereof), over (ii) the
aggregate option price payable for those shares.
B. No surrender of an option shall be effective hereunder unless it is
approved by the Plan Administrator. If the surrender is approved, then the
payment to the optionee under this Section VI may be made in shares of Common
Stock valued at fair market value on the option surrender date, in cash, or
partly in shares and partly in cash, as the Plan Administrator determines in its
sole discretion.
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N.E.T. 1993 SOP As Amended August 12, 1997
<PAGE>
C. If the surrender of an option is rejected by the Plan Administrator,
then the optionee shall retain whatever rights he or she had under the
surrendered option (or surrendered portion thereof) on the option surrender date
and may exercise such rights at any time before the later of (i) five (5)
business days after receipt of the rejection notice, or (ii) the last day on
which the option is otherwise exercisable in accordance with its terms, but in
no event more than ten (10) years after the date of the option grant.
D. Each Officer of the Corporation subject to the short-swing profit
restrictions of the Federal securities laws shall have the following limited
stock appreciation rights in tandem with each option received under this Article
Two. Upon the occurrence of a Hostile Take-Over (defined below), each option
with a limited stock appreciation right in effect for at least six (6) months
shall automatically be canceled and the optionee shall be entitled to a cash
payment by the Corporation in the amount of the excess of (i) the Take-Over
Price (defined below) of the shares of Common Stock subject to the canceled
option (whether or not the option is otherwise exercisable for such shares),
over (ii) the aggregate exercise price payable for such shares. The payment
shall be made within five (5) days after consummation of the Hostile Take-Over.
Neither the approval of the Plan Administrator nor the consent of the Board
shall be required in connection with such option cancellation and cash payment.
E. A "Hostile Take-Over" shall be deemed to occur if (i) any person or
related group of persons (other than the Corporation or a person that directly
or indirectly controls, is controlled by, or is under common control with, the
Corporation) directly or indirectly acquires beneficial ownership (within the
meaning of Rule 13d-3 of the Exchange Act) of securities possessing more than
50% of the total combined voting power of the Corporation's outstanding
securities pursuant to a tender or exchange offer that the Board does not
recommend that the Corporation's stockholders accept, and (ii) more than 50% of
the securities so acquired are accepted from holders other than Officers and
Directors of the Corporation subject to Section 16 of the Exchange Act. The
"Take-Over Price" per share shall be the greater of (a) the fair market value
per share on the date of cancellation, as determined pursuant to the valuation
provisions of Section II.A.4 of this Article Two, or (b) the highest reported
price per share paid in effecting such Hostile Take-Over. However, if the
canceled option is an Incentive Option, the Take-Over Price shall not exceed the
clause (a) price per share.
F. The Plan Administrator shall have full discretionary authority,
exercisable either in advance of, or at the time of, a Change in Control
(defined below), to provide for the automatic acceleration of options granted
under this Article Two upon the occurrence of the Change in Control. The Plan
Administrator shall also have full discretionary authority to
11
N.E.T. 1993 SOP As Amended August 12, 1997
<PAGE>
condition any such acceleration upon the subsequent termination of the
optionee's service to the Corporation (or a parent or subsidiary) within a
specified period after the Change in Control. The Plan Administrator hereby
exercises such discretion to accelerate vesting of all outstanding options held
by Officers of the Corporation whose employment is terminated in conjunction
with, or within a year of, a Change in Control or Corporate Transaction. Any
option accelerated in connection with the Change in Control shall remain fully
exercisable until the expiration of the option term. For all purposes of this
Plan, a "Change in Control" shall mean a change in control of the Corporation of
a nature that would be required to be reported in response to Item 6(e) of
Schedule 14A of Regulation 14A promulgated under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), whether or not the Corporation is then
subject to such reporting requirement, other than a Corporate Transaction;
provided that, without limitation, a Change in Control shall be deemed to have
occurred if:
1. any individual, partnership, firm, corporation, association, trust,
unincorporated organization or other entity, or any syndicate or group
deemed to be a "person" under Section 14(d)(2) of the Exchange Act, is or
becomes the "beneficial owner" (as defined in Rule 13d-3 of the General
Rules and Regulations under the Exchange Act), directly or indirectly, of
securities of the Corporation representing 40% or more of the combined
voting power of the Corporation's then-outstanding securities entitled to
vote in the election of Directors of the Corporation, pursuant to a tender
or exchange offer that the Board does not recommend that the Corporation's
stockholders accept; or
2. during any period of two (2) consecutive years, individuals who, at
the beginning of such period, constituted the Board and any new members of
the Board, whose election by the Board or nomination for election by the
Corporation's stockholders was approved by a vote of at least
three-quarters (3/4) of the Directors then in office who either were
Directors at the beginning of the period or whose election or nomination
for election was previously so approved, cease for any reason to constitute
a majority thereof.
G. The shares of Common Stock subject to any option surrendered or canceled
for an appreciation distribution pursuant to this Section VI shall not be
available for subsequent option grant under the Plan.
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N.E.T. 1993 SOP As Amended August 12, 1997
<PAGE>
ARTICLE THREE
AUTOMATIC OPTION GRANT PROGRAM
I. ELIGIBILITY
A. Eligible Optionees. The individuals eligible to receive automatic option
grants pursuant to this Article Three shall be limited to (i) Directors who are
first elected or appointed as non-employee Directors on or after the Effective
Date, whether through appointment by the Board or election by the Corporation's
stockholders, and who have not previously been employees of the Corporation (or
any parent or subsidiary corporation), and (ii) Directors who continue to serve
as non-employee Directors at one or more annual stockholders meetings held while
this Automatic Grant Program remains in effect, commencing with the 1994 annual
meeting.
B. Limitation. Except for the option grants to be made pursuant to this
Article Three (and any automatic grants made under the corresponding provisions
of the 1983 Plan), non-employee Directors shall not be eligible to receive
option grants or stock issuances under this Plan or any other stock plan of the
Corporation (or its parent or subsidiaries).
II. TERMS AND CONDITIONS OF AUTOMATIC OPTION GRANTS
A. Grant Dates. Option grants will be made under this Article Three on the
dates specified below:
1. Each individual who first becomes a non-employee Director at any
time after the Effective Date, whether through election at an annual
stockholder meeting or through appointment by the Board, shall
automatically be granted upon the terms and conditions of this Article
Three, at the time of such initial election or appointment, a non-statutory
stock option to purchase the lesser of (a) 12,000 shares of Common Stock,
or (b) a number of shares of Common Stock equal to 12,000 multiplied by a
fraction, the numerator of which is the number of partial or whole calendar
months remaining between such election or appointment and the next
scheduled annual stockholder meeting at which such Director's term will
expire and the denominator of which is 36.
2. Each non-employee Director who first becomes a member of an active
standing committee of the Board at any time after the Effective Date shall
automatically be granted, upon the terms and conditions of this Article
Three, at the time of such initial appointment, a non-statutory stock
option to purchase the lesser of (a) 4,000 shares of Common Stock, or (b) a
number of
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shares of Common Stock equal to 4,000 multiplied by a fraction, the
numerator of which is the number of partial or whole calendar months
remaining between such appointment and the next scheduled annual
stockholder meeting and the denominator of which is 12.
3. Each non-employee Director who first becomes chairman of an active
standing committee of the Board at any time after the Effective Date shall
automatically be granted upon the terms and conditions of this Article
Three, at the time of such initial appointment, a non-statutory stock
option to purchase the lesser of (a) 4,000 shares of Common Stock, or (b) a
number of shares of Common Stock equal to 4,000 multiplied by a fraction,
the numerator of which is the number of partial or whole calendar months
remaining between such appointment and the next scheduled annual
stockholder meeting and the denominator of which is 12.
4. On the date of each annual stockholder meeting held after the
Effective Date, beginning with the 1994 annual stockholder meeting, each
non-employee Director who is at the time standing for reelection as a
non-employee Director shall automatically be granted a non-statutory stock
option under this Article Three to purchase 12,000 shares of Common Stock.
5. On the date of each annual stockholder meeting held after the
Effective Date, beginning with the 1994 annual stockholder meeting, each
non-employee Director shall automatically be granted, whether or not he or
she is standing for re-election as a Director at that time, a non-statutory
stock option under this Article Three to purchase 4,000 shares of Common
Stock for each active standing committee on which he or she serves as a
member, plus an additional 4,000 shares for each committee on which he or
she serves as chairman.
The 12,000-share limitation on the initial and periodic automatic option
grants and the 4,000-share limitation on committee grants to be made to each
non-employee Director shall be subject to adjustment pursuant to Section III.C
of Article One. For purposes of this Article Three, a committee shall be deemed
to be an active standing committee if so designated by the Board and if it has
met or transacted business within the twelve (12) months preceding the date of
grant of an automatic option.
B. Exercise Price. The exercise price per share shall be equal to 100% of
the fair market value per share of Common Stock on the automatic grant date.
C. Payment. The option price shall become immediately due upon exercise of
the option and shall be payable as provided in Section II.A of Article Two.
D. Option Term. Each option granted under this Article Three shall have a
maximum term of ten (10) years measured from the grant date.
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E. Exercisability.
1. Each option granted under this Article Three shall be come exercisable
for one-third (1/3) of the option shares one year after the date of grant and
for the balance of the option shares in a series of twenty-four (24) equal
monthly installments beginning one month thereafter, provided the optionee
remains a Director through each such date.
2. Each option granted under this Article Three shall also become fully
exercisable upon the date of the optionee's cessation of Board service by reason
of death or retirement, provided the option has been outstanding for at least
one year, and the optionee has served on the Board for at least three (3) years,
at the time of cessation of Board service. A Director shall be deemed to have
ceased Board service by reason of retirement if he or she has attained the age
of 65 at the time of the cessation.
3. Each option shall remain exercisable until the expiration or sooner
termination of the option term.
F. Non-Transferability. During the optionee's lifetime, an option granted
under this Article Three (together with the limited stock appreciation right
pertaining to the option) shall be exercisable only by the optionee and shall
not be assignable or transferable by the optionee other than by will or by the
laws of descent and distribution following his or her death.
G. Effect of Termination of Board Membership.
1. If a Director ceases to be a Board member for any reason (other than
death) while holding an option granted under this Article Three, he or she shall
have three (3) months following the date of cessation of Board membership in
which to exercise the option for any or all of the shares of Common Stock for
which the option is exercisable at the time of the cessation.
2. If a Director dies while serving as a Board member or during the three
(3) months following his or her cessation of Board service, an option granted
under this Article Three may be exercised, for any or all of the shares of
Common Stock for which the option is exercisable at the time of cessation of
Board membership, by the personal representative of his or her estate or by the
person(s) to whom the option is transferred pursuant to the Director's will or
in accordance with the laws of descent and distribution. Any such exercise must,
however, occur within twelve (12) months after the date of the Director's death.
3. In no event shall any option granted under this Article Three remain
exercisable after the specified expiration date of its ten (10)-year term. Upon
the expiration of
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the applicable exercise period in accordance with subparagraphs 1 and 2 above or
(if earlier) upon the expiration of the ten (10)-year option term, the option
shall terminate and cease to be exercisable.
H. Stockholder Rights. The holder of an option granted under this Article
Three shall have no stockholder rights with respect to any option shares until
he or she has exercised the option and paid (or made arrangement satisfactory to
the Plan Administrator to pay) the exercise price for the purchased shares.
I. Remaining Terms. The remaining terms and conditions of each option grant
under this Article Three shall be as set forth in the form of Director Automatic
Grant Agreement attached as Exhibit A to this Plan.
III. CORPORATE TRANSACTION/CHANGE IN CONTROL/ HOSTILE TAKE-OVER
A. Each option granted under this Article Three that is outstanding at the
time of a Corporate Transaction or a Change in Control shall, immediately before
the specified Effective Date for the Corporation Transaction or Change in
Control, become fully exercisable with respect to the total number of shares of
Common Stock then subject to the option. Upon the consummation of the
Corporation transaction, all options granted under this Article Three shall
terminate.
B. Upon the occurrence of a Hostile Take-Over, each option that has been
outstanding under this Article Three for at least six (6) months shall
automatically be canceled and the optionee shall be entitled to a cash payment
by the Corporation calculated in accordance with Section VI.D. of Article Two
and payable at the time and manner set forth in Section VI.E of Article Two.
Neither the approval of the Plan Administrator nor the consent of the Board
shall be required in connection with such option cancellation and cash payment.
C. The automatic option grants under this Article Three 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.
D. The shares of Common Stock subject to each option canceled in connection
with a Hostile Take-Over shall not be available for subsequent issuance under
this Plan.
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ARTICLE FOUR
MISCELLANEOUS
I. AMENDMENT OF PLAN
The Board shall have complete and exclusive authority to amend or modify
this Plan in any or all respects whatsoever. However, no such amendment or
modification shall, without the consent of the optionees, adversely affect
rights and obligations with respect to options at the time outstanding under the
Plan. No amendment shall require stockholder approval except when (i) required
by Section 422 of the Internal Revenue Code for incentive stock options; (ii)
required by other applicable laws, regulations or rules (including rules of the
New York Stock Exchange); or (iii) otherwise deemed advisable by the Board.
II. TAX WITHHOLDING
A. The Corporation's obligation to deliver shares or cash upon exercise of
options or stock appreciation rights granted under this Plan shall be subject to
the satisfaction of all federal, state, and local income and employment tax
withholding requirements.
B. The Plan Administrator may, in its discretion and upon such terms and
conditions as it deems appropriate, provide any or all optionees under Article
Two with the election to have the Corporation withhold, from the shares of
Common Stock otherwise issuable upon the exercise of options, one or more shares
with an aggregate fair market value equal to a designated percentage (any whole
multiple of 5% specified by the optionee) of the federal and state income taxes
("Taxes") incurred in connection with the acquisition of such shares. In lieu of
direct withholding, optionees may be granted the right to deliver shares of
Common Stock to the Corporation in satisfaction of such Taxes. The withheld or
delivered shares shall be valued at the fair market value on the applicable
determination date for such Taxes.
III. TERM OF PLAN
A. This Plan shall terminate upon the earlier of (i) August 10, 2003, or
(ii) the date on which all shares available for issuance under this Plan have
been issued pursuant to the exercise of options granted under this Plan and (to
the extent outstanding on the Effective Date) the 1983 Plan. If the date of
termination is determined under clause (i) above, then no options outstanding on
such date shall be affected by the termination of this Plan.
B. Options may be granted under this Plan to purchase shares of Common
Stock in excess of the number of shares then available for issuance under this
Plan, provided each option granted is not to become exercisable, in whole or in
part, at any time before stockholder approval of an amendment authorizing a
sufficient increase in the number of shares issuable under the Plan.
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IV. USE OF PROCEEDS
Any cash proceeds received by the Corporation from the sale of shares
pursuant to options granted under this Plan may be used for general corporate
purposes.
V. REGULATORY APPROVALS
A. The implementation of this Plan, the granting of any option hereunder,
and the issuance of stock upon the exercise or surrender of any such option
shall be subject to the procurement by the Corporation of all approvals and
permits required by regulatory authorities having jurisdiction over this Plan,
the options granted under it, and the stock issued pursuant to it.
B. No shares of Common Stock or other assets shall be issued or delivered
under this Plan unless and until there shall have been compliance with all
applicable requirements of federal and state securities laws, including the
filing and effectiveness of a Form S-8 registration statement for the shares of
Common Stock issuable under this Plan, and all applicable listing requirements
of any securities exchange on which stock of the same class is then listed.
VI. NO EMPLOYMENT/SERVICE RIGHTS
Neither the action of the Corporation in establishing this Plan, nor any
action taken by the Plan Administrator hereunder, nor any provision of the Plan,
shall be construed so as to grant any individual the right to remain in the
employ or service of the Corporation (or any parent or subsidiary corporation)
for any period, and the Corporation (or any parent or subsidiary corporation
retaining the services of such individual) may terminate such individual's
employment or service at any time and for any reason, with or without cause.
VII. MISCELLANEOUS PROVISIONS
A. Except as otherwise provided in this Plan, the right to acquire Common
Stock or other assets under this Plan may not be assigned, encumbered, or
otherwise transferred by any optionee.
B. The provisions of this Plan shall be governed by the laws of the State
of California, as such laws are applied to contracts entered into and performed
in that State.
C. The provisions of this Plan shall inure to the benefit of, and be
binding upon, the Corporation and its successors or assigns, and the optionees,
the legal representatives of their respective estates, their respective heirs or
legatees, and their permitted assignees.
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