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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------------------
NETWORK GENERAL CORPORATION
------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 77-0115204
------------------------------- ------------------------------------
(State or other jurisdiction (I.R.S. employer identification no.)
of incorporation or organization)
4200 BOHANNON DRIVE
MENLO PARK, CALIFORNIA 94025
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(Address of principal executive offices) (Zip code)
NETWORK GENERAL CORPORATION
1989 STOCK OPTION PLAN
1989 EMPLOYEE STOCK PURCHASE PLAN
CINCO NETWORKS, INC. 1997 STOCK OPTION PLAN
--------------------------------------------
(Full title of the plan)
SCOTT C. NEELY
VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY
NETWORK GENERAL CORPORATION
4200 BOHANNON DRIVE
MENLO PARK, CALIFORNIA 94025
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(Name and address of agent for service)
Telephone number, including area code, of agent for service: 650/473-2000
This registration statement shall hereafter become effective in accordance with
Rule 462 promulgated under the Securities Act of 1933, as amended.
The Exhibit Index is on page II-6 of this Registration Statement.
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CALCULATION OF REGISTRATION FEE
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Proposed Proposed
Title of maximum maximum
securities Amount offering aggregate Amount of
to be to be price per offering registration
Registered Registered Share (1) Price (1) Fee
- --------------------------------------------------------------------------------
NETWORK GENERAL CORPORATION 1989 STOCK OPTION PLAN
Common Stock,
Par value $0.01 1,500,000 $16.437500 $24,656,250.00 $7,471.59
NETWORK GENERAL CORPORATION 1989 EMPLOYEE STOCK PURCHASE PLAN
Common Stock,
Par Value $0.01 500,000 $13.971875 $6,985,937.50 $2,116.95
CINCO NETWORKS, INC. 1997 STOCK OPTION PLAN
Common Stock
Par Value $0.01 69,402 $0.410000 $28,454.82 $8.62
--------- ---------- -------------- --------
TOTAL 2,069,402 $15.304248 $31,670,642.32 $9,597.16
- -------------------------
(1) Estimated pursuant to Rule 457 solely for purposes of calculating the
registration fee. As to the shares issuable under the Network General
Corporation 1989 Stock Option Plan, the price is based upon the average of the
high and low prices of the Common Stock on August 29, 1997 as reported on the
National Association of Securities Dealers National Market System. The Network
General Corporation 1989 Employee Stock Purchase Plan establishes a purchase
price equal to 85% of the fair market value of the Company's Common Stock and,
therefore, the price for purchase rights under this plan is based upon 85% of
the average of the high and low prices of the Common Stock on August 29, 1997,
as reported on the National Association of Securities Dealers National Market
System. As to the shares issuable under the Cinco Networks, Inc. 1997 Stock
Option Plan, the price is based on the average exercise price of the outstanding
options.
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PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
ITEM 3. INCORPORATION OF DOCUMENTS BY REFERENCE
Network General Corporation (the "Company") hereby incorporates by
reference in this registration statement the following documents:
(a) The Company's latest annual report on Form 10-K filed pursuant to
Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), containing audited financial statements for the Company's
latest fiscal year ended March 31, 1997, as filed June 27, 1997.
(b) All other reports filed pursuant to Section 13(a) or 15(d) of the
Exchange Act since the end of the fiscal year covered by the annual report
referred to in (a) above.
(c) The description of the Company's Common Stock contained in the
Company's Registration Statement on Form S-1 (No. 33-36134, effective August 2,
1989) filed under the Securities Act of 1933, as amended (the "Securities Act"),
including any amendment or report filed for the purpose of updating such
description.
All documents subsequently filed by the Company pursuant to Sections 13(a),
13(c), 14 and 15(d) of the Exchange Act, prior to the filing of a post-effective
amendment to this registration statement which indicates that all securities
offered hereby have been sold or which deregisters all securities remaining
unsold, shall be deemed to be incorporated by reference in this registration
statement and to be a part hereof from the date of filing of such documents.
ITEM 4. DESCRIPTION OF SECURITIES
The class of securities offered is registered under Section 12 of the
Exchange Act.
ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL
LEGAL OPINION. The validity of the shares of Common Stock to be offered
hereunder has been passed upon for the Company by Scott C. Neely, the Company's
Vice President, General Counsel and Secretary. As of August 29, 1997, Mr. Neely
owns no shares of the Company's securities and holds options to purchase less
than 1% of the outstanding shares of the Company's common stock.
ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Delaware law authorizes corporations to eliminate the personal liability
of directors to corporations and their stockholders for monetary damages for
breach or alleged breach of the directors' fiduciary "duty of care." While
the relevant statute does not change directors' duty of care, it enables
corporations to limit available relief to equitable remedies such as
injunction or rescission. The statute has no effect on directors' duty of
loyalty, acts or omissions not in good faith and involving intentional
misconduct or knowing violations of law, illegal payment of dividends and
approval of any transactions from which a director derives an improper
personal benefit.
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The Company has adopted provisions in its Certificate of Incorporation
which eliminate the personal liability of its directors to the Company and
its stockholders for monetary damages for breach or alleged breach of their
duty of care. The By-laws of the Company provide for indemnification of its
directors, officers, employees and agents to the full extent permitted by the
General Corporation Law of the State of Delaware, the Company's state of
incorporation, including those circumstances in which indemnification would
otherwise be discretionary under Delaware law. In addition, the Company has
entered into separate indemnification agreements with its directors, officers
and certain employees which require the Company, among other things, to
indemnify them against certain liabilities which may arise by reason of their
status or service (other than liabilities arising from willful misconduct of
a culpable nature) and to obtain directors' and officers' insurance, if
available on reasonable terms. Section 145 of the General Corporation Law of
the State of Delaware provides for indemnification in terms sufficiently
broad to indemnify such individuals, under certain circumstances, for
liabilities (including reimbursement of expenses incurred) arising under the
Securities Act.
ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED
Inapplicable.
ITEM 8. EXHIBITS
See Exhibit Index.
ITEM 9. UNDERTAKINGS
(a) RULE 415 OFFERING
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;
(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)(l)(ii) do not apply if the
registration statement is on Form S-3 or Form S-8, and 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 Section 15(d)
of the Exchange Act that are incorporated by reference in the registration
statement.
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(2) That, for the purpose of determining any liability under the
Securities Act of 1933, 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) FILING INCORPORATING SUBSEQUENT EXCHANGE ACT DOCUMENTS BY REFERENCE
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Exchange Act (and, where applicable, each filing of an employee benefit plan's
annual report pursuant to Section 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.
(h) REQUEST FOR ACCELERATION OF EFFECTIVE DATE OR FILING OF REGISTRATION
STATEMENT ON FORM S-8
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing provisions,
or otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the 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 Act and will be governed by the final
adjudication of such issue.
SIGNATURE
Pursuant to the requirements of the Securities Act of 1933, as amended,
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 Menlo Park, State of California, on
September 3, 1997.
Network General Corporation
By: /s/ James T. Richardson
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James T. Richardson, Senior Vice President
and Chief Financial Officer
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POWER OF ATTORNEY
The officers and directors of Network General Corporation whose
signatures appear below, hereby constitute and appoint Leslie G. Denend,
James T. Richardson and Scott C. Neely, and each of them, their true and
lawful attorneys and agents, with full power of substitution, each with power
to act alone, to sign and execute on behalf of the undersigned any amendment
or amendments to this registration statement on Form S-8, and do ratify and
confirm all that each of said attorney and agent, or their or his
substitutes, shall do or cause to be done by virtue hereof. Pursuant to the
requirements of the Securities Act, this registration statement has been
signed by the following in the capacities indicated on September 3, 1997.
Signature Title
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/s/ Leslie G. Denend President and Chief Executive Officer
- ------------------------- (Principal Executive Officer)
Leslie G. Denend
/s/ James T. Richardson Senior Vice President and Chief Financial Officer
- ------------------------- (Principal Financial Officer)
James T. Richardson
/s/ Charles J. Abbe Director
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Charles J. Abbe
/s/ Douglas C. Chance Director
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Douglas C. Chance
Director
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Howard Frank
/s/ Gregory M. Gallo Director
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Gregory M. Gallo
/s/ Laurence R. Hootnick Director
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Laurence R. Hootnick
/s/ Janet L. Hyland Director
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Janet L. Hyland
/s/ Harry Saal Director
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Harry Saal
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/s/ Michael Cully Vice President and Controller
- ------------------------- (Principal Accounting Officer)
Michael Cully
II-5
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EXHIBIT INDEX
4.1. Third Restated Certificate of Incorporation of the Company - incorporated
by reference to Exhibit 4.1 of the Registration Statement on Form S-8
(Registration No. 333-12187) filed with the SEC on September 17, 1996.
4.2. Amended and Restated Bylaws of the Company - incorporated by reference
to Exhibit 3.2 of the Company's Quarterly report on Form 10-Q for the
quarter ended September 30, 1995.
4.3. Rights Agreement between the Company and The First National Bank of
Boston (as successor trustee) dated June 26, 1992, as amended -
incorporated by reference to Exhibit 10.3 of the Company's Annual Report
on Form 10-K for the year ended March 31, 1991.
5 Opinion re legality
23.1 Consent of Counsel (included in Exhibit 5)
23.2 Consent of Arthur Andersen LLP
24 Power of Attorney (included in signature pages to this registration
statement)
99.1 Network General Corporation 1989 Stock Option Plan, as amended through
August 8, 1997, and related documentation.
99.2 Network General Corporation 1989 Employee Stock Purchase Plan, as amended
through August 8, 1997, and related documentation.
99.3 Cinco Networks, Inc. 1997 Stock Option Plan, and related documentation.
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EXHIBIT 5
[NETWORK GENERAL CORPORATION LETTERHEAD]
September 3, 1997
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Ladies and Gentlemen:
As General Counsel for Network General Corporation, a Delaware
corporation (the "Company"), I am rendering this opinion in connection with
the registration under the Securities Act of 1933, as amended, of up to
2,069,402 shares of the Common Stock, $0.01 par value, of the Company which
may be issued pursuant to the exercise of options and purchase rights granted
under the Network General Corporation 1989 Stock Option Plan, the Network
General Corporation 1989 Employee Stock Purchase Plan and the Cinco Networks,
Inc. 1997 Stock Option Plan (the "Plans").
I have examined all instruments, documents and records which I deemed
relevant and necessary for the basis of my opinion expressed below. In such
examination, I have assumed the genuineness of all signatures and the
authenticity of all documents submitted to me as originals and the conformity
to the originals of all documents submitted to me as copies. I am admitted
to practice only in the State of California and express no opinion concerning
any law other than the law of the State of California, the corporation laws
of the State of Delaware and the federal law of the United States. As to
matters of Delaware corporation law, I have based our opinion solely upon our
examination of such laws and the rules and regulations of the authorities
administering such laws, all as reported in standard, unofficial
compilations. I have not obtained opinions of counsel licensed to practice
in jurisdictions other than the State of California.
Based on such examination, I am of the opinion that the 2,069,402 shares
of Common Stock which may be issued upon exercise of options and purchase
rights granted under the Plans are duly authorized shares of the Company's
Common Stock, and, when issued against receipt of the consideration therefor
in accordance with the provisions of the Plans, will be validly issued, fully
paid and nonassessable. I hereby consent to the filing of this opinion as an
exhibit to the Registration Statement referred to above and the use of my
name wherever it appears in the Registration Statement.
Very truly yours,
/s/ Scott C. Neely
Scott C. Neely
Vice President and General Counsel
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EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement of our report dated April 18, 1997
included in Network General Corporation's Form 10-K for the year ended March
31, 1997.
/s/ Arthur Andersen LLP
San Jose, California
September 3, 1997
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EXHIBIT 99.1
NETWORK GENERAL CORPORATION
1989 STOCK OPTION PLAN
(As Amended Through August 8, 1997)
1. PURPOSE. The Network General Corporation 1989 Stock Option Plan
(the "Plan") is established to create additional incentive for key employees,
directors and consultants of Network General Corporation and any successor
corporation thereto (collectively referred to as the "Company"), and any
present or future parent and/or subsidiary corporations of such corporation
(all of whom along with the Company being individually referred to as a
"Participating Company" and collectively referred to as the "Participating
Company Group"), to promote the financial success and progress of the
Participating Company Group. For purposes of the Plan, a parent corporation
and a subsidiary corporation shall be as defined in sections 424(e) and
424(f) of the Internal Revenue Code of 1986, as amended (the "Code").
2. ADMINISTRATION.
(a) ADMINISTRATION BY BOARD AND/OR COMMITTEE. The Plan shall be
administered by the Board of Directors of the Company (the "Board") and/or by
a duly appointed committee of the Board having such powers as shall be
specified by the Board. Any subsequent references herein to the Board shall
also mean the committee if such committee has been appointed and, unless the
powers of the committee have been specifically limited, the committee shall
have all of the powers of the Board granted herein, including, without
limitation, the power to terminate or amend the Plan at any time, subject to
the terms of the Plan and any applicable limitations imposed by law. All
questions of interpretation of the Plan or of any options granted under the
Plan (an "Option") shall be determined by the Board, and such determinations
shall be final and binding upon all persons having an interest in the Plan
and/or any Option.
(b) OPTIONS AUTHORIZED. Options may be either incentive stock
options as defined in section 422 of the Code ("Incentive Stock Options") or
nonqualified stock options.
(c) AUTHORITY OF OFFICERS. Any officer of a Participating Company
shall have the authority to act on behalf of the Company with respect to any
matter, right, obligation, or election which is the responsibility of or
which is allocated to the Company herein, provided the officer has apparent
authority with respect to such matter, right, obligation, or election.
(d) DISINTERESTED ADMINISTRATION. With respect to the
participation in the Plan of officers or directors of the Company subject to
Section 16 of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), the Plan shall be administered by the Board in compliance with the
"disinterested administration" requirement of Rule 16b-3, as promulgated
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under the Exchange Act and amended from time to time or any successor rule or
regulation ("Rule 16b-3").
(e) COMPLIANCE WITH SECTION 162(m) OF THE CODE. In the event a
Participating Company is a "publicly held corporation" as defined in
paragraph (2) of section 162(m) of the Code, as amended by the Revenue
Reconciliation Act of 1993 (P.L. 103-66), and the regulations promulgated
thereunder ("Section 162(m)"), the Company may establish a committee of
outside directors meeting the requirements of paragraph 4(C)(i) of Section
162(m) to approve the grant of Options which might reasonably be anticipated
to result in the payment of employee remuneration that would otherwise exceed
the limit on employee remuneration deductible for income tax purposes
pursuant to Section 162(m).
3. ELIGIBILITY. The Options may be granted only to employees
(including officers and directors who are also employees) of the
Participating Company Group or to individuals who are rendering services as
consultants or other independent contractors to the Participating Company
Group. The Board shall, in the Board's sole discretion, determine which
persons shall be granted Options (an "Optionee"). An individual who is
rendering services as a consultant or other independent contractor shall be
eligible to be granted only a nonqualified stock option. An Optionee may, if
otherwise eligible, be granted additional Options.
4. SHARES SUBJECT TO OPTION. Options shall be for the purchase of
shares of the authorized but unissued common stock or treasury shares of
common stock of the Company (the "Stock"), subject to adjustment as provided
in paragraph 9 below. The maximum number of shares of Stock which may be
issued under the Plan shall be Seventeen Million Five Hundred Thousand
(17,500,000) shares. Subject to adjustment as provided in paragraph 9 below,
at any such time as a Participating Company is a "publicly held corporation"
as defined in paragraph 2 of Section 162(m), no person shall be granted
within any fiscal year of the Company Options which in the aggregate cover
more than Six Hundred Thousand (600,000) shares; provided, however, that the
foregoing limit shall be One Miilion Two Hundred Thousand (1,200,000) shares
with respect to Options granted to any person during the first fiscal year of
such person's employment with the Company (the "Per Optionee Limit"). In the
event that any outstanding Option for any reason expires or is terminated or
canceled and/or shares of Stock subject to repurchase are repurchased by the
Company, the shares allocable to the unexercised portion of such Option, or
such repurchased shares, may again be subject to an Option grant.
Notwithstanding the foregoing, any such shares shall be made subject to a new
Option only if the grant of such new Option and the issuance of such shares
pursuant to such new Option would not cause the Plan or any Option granted
under the Plan to contravene Rule 16b-3.
5. TIME FOR GRANTING OPTIONS. All Options shall be granted, if at all,
within ten (10) years from the earlier of the date the Plan is adopted by the
Board or the date the Plan is duly approved by the shareholders of the
Company.
6. TERMS, CONDITIONS AND FORM OF OPTIONS. Subject to the provisions of
the Plan, the Board shall determine for each Option (which need not be
identical) the number of shares of
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Stock for which the Option shall be granted, the option price of the Option,
the exercisability of the Option, whether the Option is to be treated as an
Incentive Stock Option or as a nonqualified stock option and all other terms
and conditions of the Option not inconsistent with the Plan. Options granted
pursuant to the Plan shall be evidenced by written agreements specifying the
number of shares of Stock covered thereby, in such form as the Board shall
from time to time establish, and shall comply with and be subject to the
following terms and conditions:
(a) EXERCISE PRICE. The exercise price for each Option shall be
established in the sole discretion of the Board; provided, however, that (i)
the exercise price per share for an Option shall be not less than the fair
market value, as determined by the Board, of a share of Stock on the date of
the granting of the Option, and (ii) no Option granted to an Optionee who at
the time the Option is granted owns stock possessing more than ten percent
(10%) of the total combined voting power of all classes of stock of a
Participating Company within the meaning of section 422(b)(6) of the Code
and/or ten percent (10%) of the total combined value of all classes of stock
of a Participating Company (a "Ten Percent Owner Optionee") shall have an
exercise price per share less than one hundred ten percent (110%) of the fair
market value of a share of Stock on the date the Option is granted.
Notwithstanding the foregoing, an Option (whether an Incentive Stock Option
or a nonqualified stock option) may be granted with an exercise price lower
than the minimum exercise price set forth above if such Option is granted
pursuant to an assumption or substitution for another option in a manner
qualifying with the provisions of section 424(a) of the Code.
(b) EXERCISE PERIOD OF OPTIONS. The Board shall have the power to
set the time or times within which each Option shall be exercisable or the
event or events upon the occurrence of which all or a portion of each Option
shall be exercisable and the term of each Option; provided, however, that (I)
no Option shall be exercisable after the expiration of ten (10) years after
the date such Option is granted and (ii) no Option granted to a Ten Percent
Owner Optionee shall be exercisable after the expiration of five (5) years
after the date such Option is granted.
(c) PAYMENT OF EXERCISE PRICE. Payment of the exercise price for the
number of shares of Stock being purchased pursuant to any Option shall be made
(i) in cash, by check, or cash equivalent, (ii) by tender to the Company of
shares of the Company's stock owned by the Optionee having a value, as
determined by the Board (but without regard to any restrictions on
transferability applicable to such stock by reason of federal or state
securities laws or agreements with an underwriter for the Company), not less
than the exercise price, (iii) by the Optionee's recourse promissory note, (iv)
by the assignment of the proceeds of a sale of some or all of the shares being
acquired upon the exercise of an Option (including, without limitation, through
an exercise complying with the provisions of Regulation T as promulgated from
time to time by the Board of Governors of the Federal Reserve System), or (v) by
any combination thereof. The Board may at any time or from time to time, by
adoption of or by amendment to the form of Standard Option Agreement described
in paragraph 7 below, or by other means, grant Options which do not permit all
of the foregoing forms of consideration to be used in payment of the exercise
price and/or which otherwise restrict one (1) or more forms of consideration.
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Notwithstanding the foregoing, an Option may not be exercised by tender to
the Company of shares of the Company's stock to the extent such tender of
stock would constitute a violation of the provisions of any law, regulation
and/or agreement restricting the redemption of the Company's stock.
Furthermore, no promissory note shall be permitted if an exercise using a
promissory note would be a violation of any law. Any permitted promissory
note shall be due and payable not more than five (5) years after the Option
is exercised and interest shall be payable at least annually and be at least
equal to the minimum interest rate necessary to avoid imputed interest
pursuant to all applicable sections of the Code. The Board shall have the
authority to permit or require the Optionee to secure any promissory note
used to exercise an Option with the shares of Stock acquired on exercise of
the Option and/or with other collateral acceptable to the Company.
(x) Unless otherwise provided by the Board, an Option may not be
exercised by tender to the Company of shares of the Company's stock unless such
shares of the Company's stock either have been owned by the Optionee for more
than six (6) months or were not acquired, directly or indirectly, from the
Company.
(y) Unless otherwise provided by the Board, in the event the
Company at any time is subject to the regulations promulgated by the Board of
Governors of the Federal Reserve System or any other governmental entity
affecting the extension of credit in connection with the Company's securities,
any promissory note shall comply with such applicable regulations, and the
Optionee shall pay the unpaid principal and accrued interest, if any, to the
extent necessary to comply with such applicable regulations.
(z) The Company reserves, at any and all times, the right, in
the Company's sole and absolute discretion, to establish, decline to approve
and/or terminate any program and/or procedures for the exercise of Options by
means of an assignment of the proceeds of a sale of some or all of the shares of
Stock to be acquired upon such exercise.
7. STANDARD FORM OF STOCK OPTION AGREEMENT. Unless otherwise provided
for by the Board at the time an Option is granted or as otherwise provided
for by this paragraph 7, all Options shall comply with and be subject to the
terms and conditions set forth in the stock option agreement attached hereto
as Exhibit A and incorporated herein by reference (the "Standard Option
Agreement").
(a) MODIFICATIONS FOR INCENTIVE STOCK OPTIONS. In the event the
Option is designated as an Incentive Stock Option, the Standard Option
Agreement for such Option shall be the Standard Option Agreement attached
hereto as Exhibit A as modified as set forth below unless otherwise specified
by the Board:
(i) The title and paragraph 2 of the Standard Option Agreement
shall reflect the Option's status as an Incentive Stock Option.
(ii) Paragraph 7(f) of the Standard Option Agreement, regarding
an
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Optionee who is a director or consultant but not an employee of the Company,
shall be deleted and shall not apply to the Option.
(iii) A new paragraph 13 shall be added to the Standard Option
Agreement providing, among other things, that the Optionee give the Company
notice of sales upon disqualifying dispositions of shares of Stock acquired
pursuant to the exercise of Incentive Stock Options as follows:
13. NOTICE OF SALES UPON DISQUALIFYING DISPOSITION. The Optionee
shall dispose of the shares acquired pursuant to the Option only in
accordance with the provisions of this Option Agreement. In addition,
the Optionee shall promptly notify the Chief Financial Officer of the
Company if the Optionee disposes of any of the shares acquired pursuant
to the Option within one (1) year from the date the Optionee exercises
all or part of the Option or within two (2) years of the date of grant
of the Option. Until such time as the Optionee disposes of such shares
in a manner consistent with the provisions of this Option Agreement, the
Optionee shall hold all shares acquired pursuant to the Option in the
Optionee's name (and not in the name of any nominee) for the one-year
period immediately after exercise of the Option and the two-year period
immediately after grant of the Option. At any time during the one-year
or two-year periods set forth above, the Company may place a legend or
legends on any certificate or certificates representing shares acquired
pursuant to the Option requesting the transfer agent for the Company's
stock to notify the Company of any such transfers. The obligation of
the Optionee to notify the Company of any such transfer shall continue
notwithstanding that a legend has been placed on the certificate or
certificates pursuant to the preceding sentence.
(iv) Paragraph 13 of the Standard Option Agreement shall be
renumbered as paragraph 14 and a new paragraph 14(a) shall be added to the
Standard Option Agreement providing for a legend regarding Incentive Stock
Options to be placed on each certificate representing shares of Stock
acquired pursuant to the Option as follows:
(a) "THE SHARES EVIDENCED BY THIS CERTIFICATE WERE ISSUED BY THE
CORPORATION TO THE REGISTERED HOLDER UPON EXERCISE OF AN INCENTIVE STOCK
OPTION AS DEFINED IN SECTION 422 OF THE INTERNAL REVENUE CODE OF 1986,
AS AMENDED. THE TRANSFER AGENT FOR THE SHARES EVIDENCED HEREBY SHALL
NOTIFY THE CORPORATION IMMEDIATELY OF ANY TRANSFER OF THE SHARES BY
THE REGISTERED HOLDER HEREOF MADE ON OR BEFORE _______________. THE
REGISTERED HOLDER SHALL HOLD ALL SHARES PURCHASED UNDER THE OPTION IN
THE REGISTERED HOLDER'S NAME (AND NOT IN THE NAME OF ANY NOMINEE) PRIOR
TO THIS DATE."
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(v) Paragraph 15 of the Standard Option Agreement shall be
renumbered as paragraph 16 and shall be modified to provide that amendments
to the Standard Option Agreement may be made without the Optionee's consent
if such amendments are required to enable an Option designated as an
Incentive Stock Option to qualify as an Incentive Stock Option.
(vi) The remaining paragraphs of such modified Standard Option
Agreement for Incentive Stock Options shall be renumbered accordingly.
(b) STANDARD TERM FOR OPTIONS. Unless otherwise provided for by
the Board in the grant of an Option, any Option granted hereunder shall be
exercisable for a term of ten (10) years.
8. AUTHORITY TO VARY TERMS. The Board shall have the authority from
time to time to vary the terms of the Standard Option Agreement either in
connection with the grant of an individual Option or in connection with the
authorization of a new standard form or forms; provided, however, that the
terms and conditions of such revised or amended standard form or forms of
stock option agreement shall be in accordance with the terms of the Plan.
Such authority shall include, but not by way of limitation, the authority to
grant Options which are immediately exercisable subject to the Company's
right to repurchase any unvested shares of Stock acquired by an Optionee on
exercise of an Option in the event such Optionee's employment with the
Participating Company Group is terminated for any reason, with or without
cause.
9. EFFECT OF CHANGE IN STOCK SUBJECT TO PLAN. Appropriate adjustments
shall be made in the number and class of shares of Stock subject to the Plan,
to the Per Optionee Limit set forth in paragraph 4 above, and to any
outstanding Options and in the exercise price of any outstanding Options in
the event of a stock dividend, stock split, reverse stock split,
recapitalization, combination, reclassification, or like change in the
capital structure of the Company.
10. TRANSFER OF CONTROL. A "Transfer of Control" shall be deemed to
have occurred in the event any of the following occurs with respect to the
Control Company. For purposes of applying this paragraph 10, the "Control
Company" shall mean the Participating Company whose stock is subject to the
Option.
(a) the direct or indirect sale or exchange by the stockholders of
the Control Company of all or substantially all of the stock of the Control
Company where the stockholders of the Control Company before such sale or
exchange do not retain, directly or indirectly, at least a majority of the
beneficial interest in the voting stock of the Control Company;
(b) a merger in which the stockholders of the Control Company
before such merger do not retain, directly or indirectly, at least a majority
of the beneficial interest in the voting stock of the Control Company; or
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<PAGE>
(c) the sale, exchange, or transfer (including, without limitation,
pursuant to a liquidation or dissolution) of all or substantially all of the
Control Company's assets (other than a sale, exchange, or transfer to one (1)
or more corporations where the stockholders of the Control Company before
such sale, exchange, or transfer retain, directly or indirectly, at least a
majority of the beneficial interest in the voting stock of the corporation(s)
to which the assets were transferred).
In the event of a Transfer of Control, the surviving, continuing,
successor, or purchasing corporation, as the case may be (the "Acquiring
Corporation"), shall either assume the Company's rights and obligations under
outstanding stock option agreements or substitute options for the Acquiring
Corporation's stock for such outstanding Options. In the event the Acquiring
Corporation elects not to assume or substitute for such outstanding Options
in connection with a merger described in (B) above or a sale of assets
described in (C) above, the Board shall provide that any unexercisable and/or
unvested portion of the outstanding Options shall be immediately exercisable
and vested as of a date prior to the Transfer of Control, as the Board so
determines. The exercise and/or vesting of any Option that was permissible
solely by reason of this paragraph 10 shall be conditioned upon the
consummation of the Transfer of Control. Any Options which are neither
assumed by the Acquiring Corporation nor exercised as of the date of the
Transfer of Control shall terminate effective as of the date of the Transfer
of Control.
11. PROVISION OF INFORMATION. Each Optionee shall be given access to
information concerning the Company equivalent to that information generally
made available to the Company's common stockholders.
12. OPTIONS NON-TRANSFERABLE. During the lifetime of the Optionee, the
Option shall be exercisable only by the Optionee. No Option shall be
assignable or transferable by the Optionee, except by will or by the laws of
descent and distribution.
13. TRANSFER OF COMPANY'S RIGHTS. In the event any Participating
Company assigns, other than by operation of law, to a third person, other
than another Participating Company, any of the Participating Company's rights
to repurchase any shares of Stock acquired on the exercise of an Option, the
assignee shall pay to the assigning Participating Company the value of such
right as determined by the Company in the Company's sole discretion. Such
consideration shall be paid in cash. In the event such repurchase right is
exercisable at the time of such assignment, the value of such right shall be
not less than the fair market value of the shares of Stock which may be
repurchased under such right (as determined by the Company) minus the
repurchase price of such shares. The requirements of this paragraph 13
regarding the minimum consideration to be received by the assigning
Participating Company shall not inure to the benefit of the Optionee whose
shares of Stock are being repurchased. Failure of a Participating Company to
comply with the provisions of this paragraph 13 shall not constitute a
defense or otherwise prevent the exercise of the repurchase right by the
assignee of such right.
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<PAGE>
14. TERMINATION OR AMENDMENT OF PLAN OR OPTIONS. The Board, including
any duly appointed committee of the Board, may terminate or amend the Plan or
any Option at any time; provided, however, that without the approval of the
Company's stockholders, there shall be (a) no increase in the total number of
shares of Stock covered by the Plan (except by operation of the provisions of
paragraph 9 above), (b) no change in the class of persons eligible to receive
Incentive Stock Options and (c) no expansion in the class of persons eligible
to receive nonqualified stock options. In addition to the foregoing, the
approval of the Company's stockholders shall be sought for any amendment to
the Plan or an Option for which the Board deems stockholder approval
necessary in order to comply with Rule 16b-3. In any event, no amendment may
adversely affect any then outstanding Option or any unexercised portion
thereof, without the consent of the Optionee, unless such amendment is
required to enable an Option designated as an Incentive Stock Option to
qualify as an Incentive Stock Option.
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<PAGE>
NETWORK GENERAL CORPORATION
NONQUALIFIED STOCK OPTION AGREEMENT
(INITIAL OPTION)
Network General Corporation (the "Company") granted to the individual
named below an option to purchase certain shares of common stock of the
Company, in the manner and subject to the provisions of this Option Agreement.
1. DEFINITIONS:
(a) "Optionee" shall mean _________.
(b) "Date of Option Grant" shall mean _______________.
(c) "Number of Option Shares" shall mean __________ shares of
common stock of the Company as adjusted from time to time pursuant to
paragraph 9 below.
(d) "Exercise Price" shall mean $________ per share as adjusted
from time to time pursuant to paragraph 9 below.
(e) "Initial Exercise Date" shall be the date occurring one (1)
[YEAR/MONTH] after the Date of Option Grant.
(f) "Initial Vesting Date" shall be the date occurring one (1)
[YEAR/MONTH] after the Date of Option Grant.
(g) Determination of "Vested Ratio":
VESTED RATIO
Prior to Initial Vesting Date 0
On Initial Vesting Date, [1/4 OR 1/48]
provided the Optionee is
continuously employed by
a Participating Company from
the Date of Option Grant until
the Initial Vesting Date
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PLUS
For each full month 1/48
of the Optionee's
continuous employment by a
Participating Company from the
Initial Vesting Date
In no event shall the Vested
Ratio exceed 1/1.
(h) "Option Term Date" shall mean the date ten (10) years after the
Date of Option Grant.
(i) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(j) "Company" shall mean Network General Corporation, a Delaware
corporation, and any successor corporation thereto.
(k) "Participating Company" shall mean (i) the Company and (ii) any
present or future parent and/or subsidiary corporation of the Company while
such corporation is a parent or subsidiary of the Company. For purposes of
this Option Agreement, a parent corporation and a subsidiary corporation
shall be as defined in sections 424(e) and 424(f) of the Code.
(l) "Participating Company Group" shall mean at any point in time
all corporations collectively which are then a Participating Company.
(m) "Plan" shall mean the Network General Corporation 1989 Stock
Option Plan.
2. STATUS OF THE OPTION. This Option is intended to be a nonqualified
stock option and shall not be treated as an incentive stock option as
described in section 422(b) of the Code.
3. ADMINISTRATION. All questions of interpretation concerning this
Option Agreement shall be determined by the Board of Directors of the Company
(the "Board") and/or by a duly appointed committee of the Board having such
powers as shall be specified by the Board. Any subsequent references herein
to the Board shall also mean the committee if such committee has been
appointed and, unless the powers of the committee have been specifically
limited, the committee shall have all of the powers of the Board granted in
the Plan, including, without limitation, the power to terminate or amend the
Plan at any time, subject to the terms of the Plan and any applicable
limitations imposed by law. All determinations by the Board shall be final
and binding upon all persons having an interest in the Option. Any officer
of a Participating Company shall have the authority to act on behalf of the
Company with respect to any matter, right, obligation, or election which is
the responsibility of or which is allocated to the Company
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<PAGE>
herein, provided the officer has apparent authority with respect to such
matter, right, obligation, or election.
4. EXERCISE OF THE OPTION.
(a) RIGHT TO EXERCISE. Except as provided in paragraph 4(f) below,
the Option shall first become exercisable on the Initial Exercise Date. The
Option shall be exercisable on and after the Initial Exercise Date and prior
to the termination of the Option in the amount equal to the Number of Option
Shares multiplied by the Vested Ratio as set forth in paragraph 1 above less
the number of shares previously acquired upon exercise of the Option. In no
event shall the Option be exercisable for more shares than the Number of
Option Shares. Notwithstanding the foregoing, the Option may not be exercised
more frequently than twice in any continuous twelve (12) month period;
provided, however, that the foregoing restriction shall not apply so as to
prevent an exercise (i) following the Optionee's termination of employment as
set forth in paragraph 7 below or (ii) during the thirty (30) day periods
immediately preceding and following an Ownership Change as defined in
paragraph 8 below.
(b) METHOD OF EXERCISE. The Option shall be exercisable by written
notice to the Company which shall state the election to exercise the Option,
the number of shares for which the Option is being exercised and such other
representations and agreements as to the Optionee's investment intent with
respect to such shares as may be required pursuant to the provisions of this
Option Agreement. Such written notice shall be signed by the Optionee and
shall be delivered in person or by certified or registered mail, return
receipt requested, to the Chief Financial Officer of the Company, or other
authorized representative of the Participating Company Group, prior to the
termination of the Option as set forth in paragraph 6 below, accompanied by
(i) full payment of the exercise price for the number of shares being
purchased and (ii) an executed copy, if required herein, of the then current
form of joint escrow instructions referenced below.
(c) FORM OF PAYMENT OF OPTION PRICE. Such payment shall be made
(i) in cash, by check, or cash equivalent, (ii) by tender to the Company of
shares of the Company's common stock owned by the Optionee having a value not
less than the option price, which either have been owned by the Optionee for
more than six (6) months or were not acquired, directly or indirectly, from
the Company, (iii) by cash for a portion of the option price and the
Optionee's promissory note for the balance of the option price, (iv) by
Immediate Sales Proceeds, as defined below, or (v) by any combination of the
foregoing. Notwithstanding the foregoing, the Option may not be exercised by
tender to the Company of shares of the Company's common stock to the extent
such tender of stock would constitute a violation of the provisions of any
law, regulation and/or agreement restricting the redemption of the Company's
common stock. Unless otherwise specified by the Board at the time the Option
is granted, the promissory note permitted in clause (iii) above shall not
exceed the amount permitted by law to be paid by a promissory note and shall
be a full recourse note in a form satisfactory to the Company, with principal
payable in equal annual installments with the last installment due four (4)
years from the date the Option is exercised. Interest on the principal
balance of the promissory note shall be payable in annual
11
<PAGE>
installments at the minimum interest rate necessary to avoid imputed interest
pursuant to all applicable sections of the Code. Such recourse promissory
note shall be secured by the shares of stock acquired pursuant to the then
current form of security agreement as approved by the Company. In the event
the Company at any time is subject to the regulations promulgated by the
Board of Governors of the Federal Reserve System or any other governmental
entity affecting the extension of credit in connection with the Company's
securities, any promissory note shall comply with such applicable
regulations, and the Optionee shall pay the unpaid principal and accrued
interest, if any, to the extent necessary to comply with such applicable
regulations. Except as the Company in its sole discretion shall determine,
the Optionee shall pay the unpaid principal balance of the promissory note
and any accrued interest thereon upon termination of the Optionee's
employment with the Participating Company Group for any reason, with or
without cause. "Immediate Sales Proceeds" shall mean the assignment in form
acceptable to the Company of the proceeds of a sale of some or all of the
shares acquired upon the exercise of the Option pursuant to a program and/or
procedure approved by the Company (including, without limitation, through an
exercise complying with the provisions of Regulation T as promulgated from
time to time by the Board of Governors of the Federal Reserve System). The
Company reserves, at any and all times, the right, in the Company's sole and
absolute discretion, to decline to approve any such program and/or procedure.
(d) WITHHOLDING. At the time the Option is exercised, in whole or
in part, or at any time thereafter as requested by the Company, the Optionee
shall make adequate provision for foreign, federal and state tax withholding
obligations of the Company, if any, which arise in connection with the
Option, including, without limitation, obligations arising upon (i) the
exercise, in whole or in part, of the Option, (ii) the transfer, in whole or
in part, of any shares acquired on exercise of the Option, (iii) the
operation of any law or regulation providing for the imputation of interest,
or (iv) the lapsing of any restriction with respect to any shares acquired on
exercise of the Option.
(e) CERTIFICATE REGISTRATION. The certificate or certificates for
the shares as to which the Option shall be exercised shall be registered in
the name of the Optionee, or, if applicable, the heirs of the Optionee.
(f) RESTRICTIONS ON GRANT OF THE OPTION AND ISSUANCE OF SHARES.
The grant of the Option and the issuance of the shares upon exercise of the
Option shall be subject to compliance with all applicable requirements of
federal or state law with respect to such securities. The Option may not be
exercised if the issuance of shares upon such exercise would constitute a
violation of any applicable federal or state securities laws or other law or
regulations. In addition, no Option may be exercised unless (i) a
registration statement under the Securities Act of 1933, as amended (the
"Securities Act"), shall at the time of exercise of the Option be in effect
with respect to the shares issuable upon exercise of the Option or (ii) in
the opinion of legal counsel to the Company, the shares issuable upon
exercise of the Option may be issued in accordance with the terms of an
applicable exemption from the registration requirements of the Securities
Act. As a condition to the exercise of the Option, the Company may require
the Optionee to satisfy any qualifications that may be necessary or
appropriate, to evidence
12
<PAGE>
compliance with any applicable law or regulation and to make any
representation or warranty with respect thereto as may be requested by the
Company.
(g) FRACTIONAL SHARES. The Company shall not be required to issue
fractional shares upon the exercise of the Option.
5. NON-TRANSFERABILITY OF THE OPTION. The Option may be exercised during
the lifetime of the Optionee only by the Optionee and may not be assigned or
transferred in any manner except by will or by the laws of descent and
distribution.
6. TERMINATION OF THE OPTION. The Option shall terminate and may no
longer be exercised on the first to occur of (a) the Option Term Date as
defined above, (b) the last date for exercising the Option following
termination of employment as described in paragraph 7 below, or (c) upon a
Transfer of Control as described in paragraph 8 below.
7. TERMINATION OF EMPLOYMENT.
(a) TERMINATION OF THE OPTION. If the Optionee ceases to be an
employee of the Participating Company Group for any reason except death or
disability within the meaning of section 422(c) of the Code, the Option, to
the extent unexercised and exercisable by the Optionee on the date on which
the Optionee ceased to be an employee, may be exercised by the Optionee
within three (3) months after the date on which the Optionee's employment
terminates, but in any event no later than the Option Term Date. If the
Optionee's employment with the Company is terminated because of the death of
the Optionee or disability of the Optionee within the meaning of section
422(c) of the Code, the Option may be exercised by the Optionee (or the
Optionee's legal representative) at any time prior to the expiration of
twelve (12) months from the date the Optionee's employment terminated, but in
any event no later than the Option Term Date. The Optionee's employment
shall be deemed to have terminated on account of death if the Optionee dies
within one (1) month after the Optionee's termination of employment. Except
as the Company and the Optionee otherwise agree, exercise of the Option
pursuant to this paragraph 7(a) may not be made by delivery of a promissory
note as provided in paragraph 4(c)(iii) above.
(b) TERMINATION OF EMPLOYMENT DEFINED. For purposes of this
paragraph 7, the Optionee's employment shall be deemed to have terminated
either upon an actual termination of employment or upon the Optionee's
employer ceasing to be a Participating Company.
(c) EXERCISE PREVENTED BY LAW. Except as provided in this
paragraph 7, the Option shall terminate and may not be exercised after the
Optionee's employment with the Participating Company Group terminates unless
the exercise of the Option in accordance with this paragraph 7 is prevented
by the provisions of paragraph 4(f) above. If the exercise of the Option is
so prevented, the Option shall remain exercisable until three (3) months
after the date the Optionee is notified by the Company that the Option is
exercisable, but in any event no later than the Option Term Date.
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<PAGE>
(d) OPTIONEE SUBJECT TO SECTION 16(b). Notwithstanding the
foregoing, if the exercise of the Option within the applicable time periods
set forth above would subject the Optionee to suit under Section 16(b) of the
Securities Exchange Act of 1934, as amended, the Option shall remain
exercisable until the earliest to occur of (i) the tenth (l0th) day following
the date on which the Optionee would no longer be subject to such suit, (ii)
the one hundred and ninetieth (l90th) day after the Optionee's termination of
employment, or (iii) the Option Term Date.
(e) LEAVE OF ABSENCE. For purposes hereof, the Optionee's
employment with the Participating Company Group shall not be deemed to
terminate if the Optionee takes any military leave, sick leave, or other bona
fide leave of absence approved by the Company of ninety (90) days or less.
In the event of a leave in excess of ninety (90) days, the Optionee's
employment shall be deemed to terminate on the ninety-first (91st) day of the
leave unless the Optionee's right to reemployment with the Participating
Company Group remains guaranteed by statute or contract. Notwithstanding the
foregoing, however, a leave of absence shall be treated as employment for
purposes of determining the Optionee's Vested Ratio if and only if the leave
of absence is designated by the Company as (or required by law to be) a leave
for which vesting credit is given.
(f) APPLICATION TO DIRECTORS AND CONSULTANTS. For purposes of this
Option Agreement, in the event the Optionee is a director or consultant but
not an employee of a Participating Company at the time the Option is granted,
termination of the Optionee's status as a director or consultant of the
Participating Company shall be deemed to be termination of the Optionee's
employment.
8. OWNERSHIP CHANGE AND TRANSFER OF CONTROL. For purposes hereof, the
"Control Company" shall mean the Participating Company whose stock is subject
to the Option. An "Ownership Change" shall be deemed to have occurred in the
event any of the following occurs with respect to the Control Company:
(a) the direct or indirect sale or exchange by the shareholders of
the Control Company of all or substantially all of the stock of the Control
Company;
(b) a merger in which the Control Company is a party; or
(c) the sale, exchange, or transfer (including, without limitation,
pursuant to a liquidation or dissolution) of all or substantially all of the
Control Company's assets (other than a sale, exchange, or transfer to one (1)
or more corporations where the shareholders of the Control Company before
such sale, exchange, or transfer retain, directly or indirectly, at least a
majority of the beneficial interest in the voting stock of the corporation(s)
to which the assets were transferred).
A "Transfer of Control" shall mean an Ownership Change in which the
shareholders of the Control Company before such Ownership Change do not
retain, directly or indirectly, at least
14
<PAGE>
a majority of the beneficial interest in the voting stock of the Control
Company.
In the event of a Transfer of Control, the surviving, continuing,
successor, or purchasing corporation, as the case may be (the "Acquiring
Corporation"), shall assume the Company's rights and obligations under this
Option Agreement or substitute an option for the Acquiring Corporation's
stock for the Option. In the event the Acquiring Corporation elects not to
assume the Company's rights and obligations under this Option Agreement or
substitute for the Option in connection with a Transfer of Control involving
an Ownership Change described in (b) or (c) above, the Board shall provide
that any unexercised portion of the Option shall be fully exercisable as of a
date prior to the Transfer of Control, as the Board so determines. The
Option shall terminate effective as of the date of the Transfer of Control to
the extent that the Option is neither assumed by the Acquiring Corporation
nor exercised as of the date of the Transfer of Control.
9. EFFECT OF CHANGE IN STOCK SUBJECT TO THE OPTION. Appropriate
adjustments shall be made in the number, exercise price and class of shares
of stock subject to the Option in the event of a stock dividend, stock split,
reverse stock split, combination, reclassification, or like change in the
capita1 structure of the Company. In the event a majority of the shares
which are of the same class as the shares that are subject to the Option are
exchanged for, converted into, or otherwise become (whether or not pursuant
to an Ownership Change) shares of another corporation (the "New Shares"), the
Company may unilaterally amend the Option to provide that the Option is
exercisable for New Shares. In the event of any such amendment, the number
of shares and the exercise price shall be adjusted in a fair and equitable
manner.
10. RIGHTS AS A SHAREHOLDER OR EMPLOYEE. The Optionee shall have no
rights as a shareholder with respect to any shares covered by the Option
until the date of the issuance of a certificate or certificates for the
shares for which the Option has been exercised. No adjustment shall be made
for dividends or distributions or other rights for which the record date is
prior to the date such certificate or certificates are issued, except as
provided in paragraph 9 above. Nothing in the Option shall confer upon the
Optionee any right to continue in the employ of a Participating Company or
interfere in any way with any right of the Participating Company Group to
terminate the Optionee's employment at any time.
11. ESCROW.
(a) ESTABLISHMENT OF ESCROW. To insure shares which are security
for any promissory note will be available for repurchase, the Company may
require the Optionee to deposit the certificate or certificates evidencing
the shares which the Optionee purchases upon exercise of the Option with an
agent designated by the Company under the terms and conditions of a security
agreement approved by the Company. If the Company does not require such
deposit as a condition of exercise of the Option, the Company reserves the
right at any time to require the Optionee to so deposit the certificate or
certificates in escrow. The Company shall bear the expenses of the escrow.
(b) DELIVERY OF SHARES TO OPTIONEE. As soon as practicable after
full
15
<PAGE>
repayment on any promissory note secured by the shares in escrow, but not
more frequently than twice each year, the agent shall deliver to the Optionee
the shares no longer security for any promissory note.
12. STOCK DIVIDENDS SUBJECT TO OPTION AGREEMENT. If, from time to time,
there is any stock dividend, stock split, or other change in the character or
amount of any of the outstanding stock of the corporation the stock of which
is subject to the provisions of this Option Agreement, then in such event any
and all new substituted or additional securities to which the Optionee is
entitled by reason of the Optionee's ownership of the shares acquired upon
exercise of the Option shall be immediately subject to any security interest
held by the Company with the same force and effect as the shares subject to
such security interest immediately before such event.
13. LEGENDS. The Company may at any time place legends referencing any
applicable federal or state securities law restrictions on all certificates
representing shares of stock subject to the provisions of this Option
Agreement. The Optionee shall, at the request of the Company, promptly
present to the Company any and all certificates representing shares acquired
pursuant to the Option in the possession of the Optionee in order to
effectuate the provisions of this paragraph.
14. BINDING EFFECT. This Option Agreement shall inure to the benefit of
and be binding upon the parties hereto and their respective heirs, executors,
administrators, successors and assigns.
15. TERMINATION OR AMENDMENT. The Board, including any duly appointed
committee of the Board, may terminate or amend the Plan and/or the Option at
any time; provided, however, that no such termination or amendment may
adversely affect the Option or any unexercised portion hereof without the
consent of the Optionee.
16. INTEGRATED AGREEMENT. This Option Agreement constitutes the entire
understanding and agreement of the Optionee and the Participating Company
Group with respect to the subject matter contained herein, and there are no
agreements, understandings, restrictions, representations, or warranties
among the Optionee and the Company other than those as set forth or provided
for herein. To the extent contemplated herein, the provisions of this Option
Agreement shall survive any exercise of the Option and shall remain in full
force and effect.
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17. APPLICABLE LAW. This Option Agreement shall be governed by the laws
of the State of California as such laws are applied to agreements between
California residents entered into and to be performed entirely within the
State of California.
NETWORK GENERAL CORP.
----------------------------
By:
Title:
The Optionee represents that the Optionee is familiar with the terms and
provisions of this Option Agreement, and hereby accepts the Option subject to
all of the terms and provisions thereof. The Optionee hereby agrees to
accept as binding, conclusive and final all decisions or interpretations of
the Board upon any questions arising under this Option Agreement.
- ------------------------- ----------------------------------
Date Optionee
17
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EXHIBIT 99.2
NETWORK GENERAL CORPORATION
1989 EMPLOYEE STOCK PURCHASE PLAN
(As Amended Through August 8, 1997)
A. PURPOSE. The Network General Corporation 1989 Employee Stock
Purchase Plan (the "Plan") is established to provide eligible employees of
Network General Corporation, a Delaware corporation ("Network General"), and
any current or future parent or subsidiary corporations of Network General
which the Board of Directors of Network General (the "Board") determines
should be included in the Plan (collectively referred to as the "Company"),
with an opportunity to acquire a proprietary interest in the Company by the
purchase of the common stock of Network General. (Network General and any
parent or subsidiary corporation designated by the Board as a participating
corporation shall be individually referred to herein as a "Participating
Company." For purposes of the Plan, a parent corporation and a subsidiary
corporation shall be as defined in sections 424(e) and 424(f) of the Internal
Revenue Code of 1986, as amended. (the "Code").)
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It is intended that the Plan shall qualify as an "employee stock purchase
plan" under section 423 of the Code (including any future amendments or
replacements of such section), and the Plan shall be so construed. Any term
not expressly defined in the Plan but defined for purposes of section 423 of
the Code shall have the same definition herein.
An employee participating in the Plan (a "Participant") may withdraw such
Participant's accumulated payroll deductions (if any) therein at any time
during an Offering Period (as defined below). Accordingly, each Participant
is, in effect, granted an option pursuant to the Plan (a "Purchase Right")
which may or may not be exercised at the end of an Offering Period and which
is intended to qualify as an option described in section 423 of the Code.
B. ADMINISTRATION. The Plan shall be administered by the Board and/or
by a duly appointed committee of the Board having such powers as shall be
specified by the Board. Any subsequent references to the Board shall also
mean the committee if a committee has been appointed. The Board shall have
the sole and absolute discretion to determine from time to time what parent
corporations and/or subsidiary corporations shall be Participating Companies.
All questions of interpretation of the Plan or of any Purchase Right shall
be determined by the Board and shall be final and binding upon all persons
having an interest in the Plan and/or any Purchase Right. Subject to the
provisions of the Plan, the Board shall determine all of the relevant terms
and conditions of Purchase Rights granted pursuant to the Plan; provided,
however, that all Participants granted Purchase Rights pursuant to the Plan
shall have the same rights and privileges within the meaning of section
423(b)(5) of the Code. All expenses incurred in connection with the
administration of the Plan shall be paid by the Company.
C. SHARE RESERVE. The maximum number of shares which may be issued
under the Plan shall be 2,000,000 shares of Network General's authorized but
unissued common stock or treasury shares of common stock (the "Shares"). In
the event that any Purchase Right for any reason expires or is cancelled or
terminated, the Shares allocable to the unexercised portion of such Purchase
Right may again be subjected to a Purchase Right.
D. ELIGIBILITY. Any employee of a Participating Company is eligible to
participate in the Plan except the following:
employees who have not completed one (1) month of continuous
employment with the Company as of the commencement of an Offering Period;
employees who are customarily employed by the Company for less
than twenty (20) hours a week;
employees whose customary employment is for not more than five
(5) months in any calendar year; and
employees who own or hold options to purchase or who, as a
result of participation in this Plan, would own or hold options to purchase,
stock of the Company possessing five percent (5%) or more of the total
combined voting power or value of all classes
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of stock of the Company within the meaning of section 423(b)(3) of the Code.
E. OFFERING DATES.
OFFERING PERIODS. Except as otherwise set forth below, the
Plan shall be implemented by sequential offerings (individually an
"Offering") of six (6) months duration (an "Offering Period"). Prior to
August 1, 1992, an Offering Period shall commence on the first day of January
and end on the last day of June of the same year. An Offering Period shall
also commence on the first day of July of each year and end on the last day
of December of the same year. The first Offering Period shall commence on
the effective date of a registration statement on Form S-1 under the
Securities Act of 1933, as amended, which covers the common stock of Network
General, whether or not such registration statement covers some or all of the
Shares issuable under the Plan. Effective as of August 1, 1992 and in lieu of
the foregoing, an Offering Period shall commence on the first day of February
of each year and end on the last day of July of the same year. An Offering
Period shall also commence on the first day of August of each year and end on
the last day of January of the succeeding year. Notwithstanding the
foregoing, the Board may establish a different term for one or more Offerings
and/or different commencing and/or ending dates for such Offerings. An
employee who becomes eligible to participate in the Plan after an Offering
Period has commenced shall not be eligible to participate in such Offering
but may participate in any subsequent Offering provided such employee is
still eligible to participate in the Plan as of the commencement of any such
subsequent Offering. The first day of an Offering Period shall be the
"Offering Date" for such Offering Period. In the event the first and/or last
day of an Offering Period is not a business day, the Company shall specify
the business day that will be deemed the first or last day, as the case may
be, of the Offering Period.
GOVERNMENTAL APPROVAL; STOCKHOLDER APPROVAL. Notwithstanding
any other provision of the Plan to the contrary, any Purchase Right granted
pursuant to the Plan shall be subject to (i) obtaining all necessary
governmental approvals and/or qualifications of the sale and/or issuance of
the Purchase Rights and/or the Shares, and (ii) obtaining stockholder
approval of the Plan. Notwithstanding the foregoing, stockholder approval
shall not be necessary in order to grant any Purchase Right granted on the
Offering Date of either of the Plan's first Offering Period; provided,
however, that the exercise of any such Purchase Right shall be subject to
obtaining stockholder approval of the Plan.
F. PARTICIPATION IN THE PLAN.
INITIAL PARTICIPATION. An eligible employee shall become a
participant in the Plan (a "Participant") on the first Offering Date after
satisfying the eligibility requirements and delivering to the Company not
later than the close of business on the last business day before such
Offering Date (the "Subscription Date") a subscription agreement indicating
the employee's election to participate in the Plan and authorizing payroll
deductions. An eligible employee who does not deliver a subscription
agreement to the Company on or before the Subscription Date shall not
participate in the Plan for that Offering Period or for any subsequent
Offering Period unless such eligible employee subsequently enrolls in the
Plan by complying with the provisions of paragraph 4 and by filing a
subscription agreement with the Company on or before the Subscription Date
for such subsequent Offering Period. The Company may, from time to time,
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change the Subscription Date as deemed advisable by the Company in its sole
discretion for proper administration of the Plan.
CONTINUED PARTICIPATION. Participation in the Plan shall
continue until (i) the Participant ceases to be eligible as provided in
paragraph 4, (ii) the Participant withdraws from the Plan pursuant to
paragraph 11, or (iii) the Participant terminates employment as provided in
paragraph 12. At the end of an Offering Period, each Participant in such
terminating Offering Period shall automatically participate in the first
subsequent Offering Period according to the same elections contained in the
Participant's subscription agreement effective for the Offering Period which
has just ended, provided such Participant is still eligible to participate in
the Plan as provided in paragraph 4. However, a Participant may file a
subscription agreement with respect to such subsequent Offering Period if the
Participant desires to change any of the Participant's elections contained in
the Participant's then effective subscription agreement.
G. RIGHT TO PURCHASE SHARES. During an Offering Period each
Participant in such Offering Period shall have a Purchase Right consisting of
the right to purchase five thousand (5,000) Shares.
H. PURCHASE PRICE. The purchase price at which Shares may be acquired
at the end of an Offering pursuant to the exercise of all or any portion of a
Purchase Right granted under the Plan (the "Offering Exercise Price") shall
be set by the Board; provided, however, that the purchase price shall not be
less than eighty-five percent (85%) of the lesser of (a) the fair market
value of the Shares on the Offering Date of such Offering Period, or (b) the
fair market value of the Shares at the time of exercise of all or any portion
of the Purchase Right. Unless otherwise provided by the Board prior to the
commencement of an Offering Period, the Offering Exercise Price shall be
eighty-five percent (85%) of the lesser of (a) the fair market value of the
Shares on the Offering Date of such Offering Period or (b) the fair market
value of the Shares at the time of exercise of all or any portion of the
Purchase Right. The fair market value of the Shares on the Offering Date or
on the date of exercise will be the closing price quoted on the National
Association of Securities Dealers Automated Quotation System on such date;
however the fair market value of the Shares on the first Offering Date will
be the offering price for the common stock of Network General as registered
on the Form S-1 filed with the Securities and Exchange Commission.
I. PAYMENT OF PURCHASE PRICE. Shares which are acquired pursuant to
the exercise of all or any portion of a Purchase Right for a given Offering
Period may be paid for only by means of payroll deductions from the
Participant's Compensation accumulated during the Offering Period. For
purposes of the Plan, a Participant's "Compensation" with respect to an
Offering shall include all amounts paid in cash and includable as "wages"
subject to tax under section 3101(a) of the Code without applying the dollar
limitation of section 3121(a) of the Code. Accordingly, Compensation shall
include, without limitation, salaries, commissions, bonuses, overtime, and
salary deferrals under section 401(k) of the Code. Notwithstanding the
foregoing, Compensation shall not include reimbursements of expenses,
allowances, or any amount deemed received without the actual transfer of cash
or any amounts directly or indirectly paid pursuant to the Plan or any other
stock purchase or stock option plan. Except as set forth below. the amount
of Compensation to be withheld from a Participant's Compensation during each
pay period shall
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be determined by the Participant's subscription agreement.
ELECTION TO DECREASE WITHHOLDING. During an Offering Period, a
Participant may elect to decrease the amount withheld from his or her
Compensation by filing an amended subscription agreement with the Company on
or before the Change Notice Date. The "Change Notice Date" shall initially
be the seventh (7th) day prior to the end of the first pay period for which
such election is to be effective; however, the Company may change such Change
Notice Date from time to time. A Participant may not elect to increase the
amount withheld from the Participant's Compensation during an Offering Period.
LIMITATIONS ON PAYROLL WITHHOLDING. The amount of payroll
withholding with respect to the Plan for any Participant during any pay
period shall not exceed ten percent (10%) of the Participant's Compensation
for such pay period. Amounts shall be withheld in whole percentages only and
shall be reduced by any amounts contributed by the Participant and applied to
the purchase of Company stock pursuant to any other employee stock purchase
plan qualifying under section 423 of the Code.
PAYROLL WITHHOLDING. Payroll deductions shall commence on the
first payday following the Offering Date and shall continue to the end of the
Offering Period unless sooner altered or terminated as provided in the Plan.
PARTICIPANT ACCOUNTS. Individual accounts shall be maintained
for each Participant. All payroll deductions from a Participant's
Compensation shall be credited to such account and shall be deposited with
the general funds of the Company. All payroll deductions received or held by
the Company may be used by the Company for any corporate purpose.
NO INTEREST PAID. Interest shall not be paid on sums withheld
from a Participant's Compensation.
EXERCISE OF PURCHASE RIGHT. On the last day of an Offering
Period, each Participant who has not withdrawn from the Offering or whose
participation in the Offering has not terminated on or before such last day
shall automatically acquire pursuant to the exercise of the Participant's
Purchase Right the number of whole Shares arrived at by dividing the total
amount of the Participant's accumulated payroll deductions for the Offering
Period by the Offering Exercise Price; provided, however, in no event shall
the number of Shares purchased by the Participant exceed the number of Shares
subject to the Participant's Purchase Right. No Shares shall be purchased on
behalf of a Participant whose participation in the Offering or the Plan has
terminated on or before the date of such exercise.
RETURN OF CASH BALANCE. Any cash balance remaining in the
Participant's account shall be refunded to the Participant as soon as
practical after the last day of the Offering Period. In the event the cash
to be returned to a Participant pursuant to the preceding sentence is an
amount less than the amount necessary to purchase a whole Share, the Company
may establish procedures whereby such cash is maintained in the Participant's
account and applied toward the purchase of Shares in the subsequent Offering
Period.
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WITHHOLDING. At the time the Purchase Right is exercised, in
whole or in part, or at the time some or all of the Shares are disposed of,
the Participant shall make adequate provision for foreign, federal and state
tax withholding obligations of the Company, if any, which arise upon exercise
of the Purchase Right and/or upon disposition of Shares. The Company may,
but shall not be obligated to, withhold from the Participant's Compensation
the amount necessary to meet such withholding obligations.
COMPANY ESTABLISHED PROCEDURES. The Company may, from time to
time, establish (i) a minimum required withholding amount for participation
in any Offering, (ii) limitations on the frequency and/or number of changes
in the amount withheld during an Offering, (iii) an exchange ratio applicable
to amounts withheld in a currency other than U.S. dollars, (iv) payroll
withholding in excess of or less than the amount designated by a Participant
in order to adjust for delays or mistakes in the Company's processing of
subscription agreements, and/or (v) such other limitations or procedures as
deemed advisable by the Company in the Company's sole discretion which are
consistent with the Plan and section 423 of the Code.
EXPIRATION OF PURCHASE RIGHT. Any portion of a Participant's
Purchase Right remaining unexercised after the end of the Offering Period to
which such Purchase Right relates shall expire immediately upon the end of
such Offering Period.
J. LIMITATIONS ON PURCHASE OF SHARES; RIGHTS AS A STOCKHOLDER.
FAIR MARKET VALUE LIMITATION. Notwithstanding any other
provision of the Plan, no Participant shall be entitled to purchase Shares
under the Plan (and any other employee stock purchase plan sponsored by
Network General or a parent or subsidiary corporation of Network General) at
a rate which exceeds $25,000 in fair market value, determined as of the
Offering Date for each Offering Period (or such other limit as may be imposed
by the Code), for each calendar year in which the Participant participates in
the Plan (and any other employee stock purchase plan sponsored by Network
General or a parent or subsidiary corporation of Network General).
ALLOCATION OF SHARES. In the event the number of Shares which
might be purchased by all Participants in the Plan exceeds the number of
Shares available in the Plan, the Company shall make a pro rata allocation of
the remaining Shares in as uniform a manner as shall be practicable and as
the Company shall determine to be equitable.
RIGHTS AS A STOCKHOLDER AND EMPLOYEE. A Participant shall have
no rights as a stockholder by virtue of the Participant's participation in
the Plan until the date of the issuance of a stock certificate(s) for the
Shares being purchased pursuant to the exercise of the Participant's Purchase
Right. No adjustment shall be made for cash dividends or distributions or
other rights for which the record date is prior to the date such stock
certificate(s) are issued. Nothing herein shall confer upon a Participant
any right to continue in the employ of the Company or interfere in any way
with any right of the Company to terminate the Participant's employment at
any time.
K. WITHDRAWAL.
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WITHDRAWAL FROM AN OFFERING. A Participant may withdraw from
an Offering by signing a written notice of withdrawal on a form provided by
the Company for such purpose and delivering such notice to the Company at any
time prior to the end of an Offering Period. Unless otherwise indicated by
the Participant, withdrawal from an Offering shall not result in a withdrawal
from the Plan or any succeeding Offering therein. A Participant is
prohibited from again participating in an Offering upon withdrawal from such
Offering. The Company may, from time to time, impose a requirement that the
notice of withdrawal be on file with the Company for a reasonable period
prior to the effectiveness of the Participant's withdrawal from an Offering.
WITHDRAWAL FROM THE PLAN. A Participant may withdraw from the
Plan by signing a written notice of withdrawal on a form provided by the
Company for such purpose and delivering such notice to the Company. In the
event a Participant voluntarily elects to withdraw from the Plan, the
Participant may not resume participation in the Plan during the same Offering
Period, but may participate in any subsequent Offering under the Plan by
again satisfying the requirements of paragraph 6. The Company may impose,
from time to time, a requirement that the notice of withdrawal be on file
with the Company for a reasonable period prior to the effectiveness of the
Participant's withdrawal from the Plan.
LIMITATION FOLLOWING CESSATION OF PARTICIPATION BY CERTAIN
EMPLOYEES. Notwithstanding any provision herein to the contrary, an employee
shall be prohibited from again participating in the Plan for at least six
months after the date on which such employee is deemed to "cease
participation" in the Plan (as defined below) if such employee is:
(1) an officer or director of Network General subject to
Section 16 of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"); and
(2) deemed to have "ceased participation" in the Plan within
the meaning of Rule 16b-3, promulgated under the Exchange Act, as amended
from time to time or any successor rule or regulation ("Rule 16b-3") as a
consequence of such employee's election to (i) withdraw from an Offering
pursuant to paragraph 11(a) above, (ii) withdraw from the Plan pursuant to
paragraph 11(b) above, or (iii) stop or decrease to a nominal level the
amount withheld from such employee's Compensation pursuant to paragraph 9(a)
above.
WAIVER OF WITHDRAWAL RIGHT. The Company may, from time to
time, establish a procedure pursuant to which a Participant may elect (an
"Irrevocable Election"), at least six (6) months prior to the last day of an
Offering Period, to have all payroll deductions accumulated in such
Participant's Plan account as of such date applied to purchase shares under
the Plan, and (1) to waive such Participant's right to withdraw from the
Offering or the Plan and (2) to waive such Participant's right to increase,
decrease, or cease payroll deductions under the Plan from such Participant's
Compensation during the Offering Period ending on such date. An Irrevocable
Election shall be made in writing on a form provided by the Company for such
purpose and must be delivered to the Company not later than the close of
business on the day preceding the date which is six (6) months before the
last day of the Offering Period for which
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such election is to be first effective.
L. TERMINATION OF EMPLOYMENT. Termination of a Participant's
employment with the Company on account of either death or disability shall
terminate the Participant's participation in the Plan at the end of the
Offering Period in which the Participant's death or disability occurs.
Termination of a Participant's employment with the Company for any reason
other than death or disability, including the failure of a Participant to
remain an employee eligible to participate in the Plan, shall terminate the
Participant's participation in the Plan at the end of thirty (30) days after
such termination of employment. A Participant whose participation has been
so terminated may again become eligible to participate in the Plan by again
satisfying the requirements of paragraphs 4 and 6.
In the event of termination of a Participant's employment on account of
the Participant's death, the Participant's legal representative shall have
the right to withdraw from the Plan according to the terms of paragraph 11
prior to the time the deceased Participant's participation in the Plan
terminates.
M. REPAYMENT OF PAYROLL DEDUCTIONS. In the event a Participant's
interest in the Plan or any Offering therein is terminated for any reason,
the balance held in the Participant's account shall be returned as soon as
practicable after such termination to the Participant (or, in the case of the
Participant's death, to the Participant's legal representative) and all of
the Participant's rights under the Plan shall terminate. Such account
balance may not be applied to any other Offering under the Plan. No interest
shall be paid on sums returned to a Participant pursuant to this paragraph 13.
N. TRANSFER OF CONTROL. A "Transfer of Control" shall be deemed to
have occurred in the event any of the following occurs with respect to the
Control Company. For purposes of applying this paragraph 14, the "Control
Company" shall mean Network General.
the direct or indirect sale or exchange by the stockholders of
the Control Company of all or substantially all of the stock of the Control
Company where the stockholders of the Control Company before such sale or
exchange do not retain, directly or indirectly, at least a majority of the
beneficial interest in the voting stock of the Control Company;
a merger in which the stockholders of the Control Company
before such merger do not retain, directly or indirectly, at least a majority
of the beneficial interest in the voting stock of the Control Company; or
the sale, exchange, or transfer of all or substantially all of
the Control Company's assets (other than a sale, exchange, or transfer to one
(1) or more corporations where the stockholders of the Control Company before
such sale, exchange, or transfer retain, directly or indirectly, at least a
majority of the beneficial interest in the voting stock of the corporation(s)
to which the assets were transferred).
In the event of a Transfer of Control, the Board, in its sole discretion,
shall either (i)
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provide that Purchase Rights granted under the Plan shall be fully
exercisable to the extent of each Participant's account balance for the
Offering Period as of a date prior to the Transfer of Control, as the Board
so determines, or (ii) arrange with the surviving, continuing, successor, or
purchasing corporation, as the case may be, that such corporation assume the
Company's rights and obligations under the Plan. All Purchase Rights shall
terminate effective as of the date of the Transfer of Control to the extent
that the Purchase Right is neither exercised as of the date of the Transfer
of Control nor assumed by the surviving, continuing, successor, or purchasing
corporation, as the case may be.
O. CAPITAL CHANGES. In the event of changes in the common stock of the
Company due to a stock split, reverse stock split, stock dividend,
combination, reclassification, or like change in the Company's
capitalization, or in the event of any merger, sale or other reorganization,
appropriate adjustments shall be made by the Company in the Plan's share
reserve, the number of Shares subject to a Purchase Right and in the purchase
price per share.
P. NON-TRANSFERABILITY. A Purchase Right may not be transferred in any
manner otherwise than by will or the laws of descent and distribution and
shall be exercisable during the lifetime of the Participant only by the
Participant.
Q. REPORTS. Each Participant who exercised all or part of the
Participant's Purchase Right for an Offering Period shall receive as soon as
practicable after the last day of such Offering Period a report of such
Participant's account setting forth the total payroll deductions accumulated,
the number of Shares purchased and the remaining cash balance to be refunded
or retained in the Participant's account pursuant to paragraph 9(g), if any.
R. PLAN TERM. This Plan shall continue until terminated by the Board
or until all of the Shares reserved for issuance under the Plan have been
issued, whichever shall first occur.
S. RESTRICTION ON ISSUANCE OF SHARES. The issuance of shares pursuant
to the Purchase Right shall be subject to compliance with all applicable
requirements of federal or state law with respect to such securities. The
Purchase Right may not be exercised if the issuance of shares upon such
exercise would constitute a violation of any applicable federal or state
securities laws or other law or regulations. In addition, no Purchase Right
may be exercised unless (i) a registration statement under the Securities Act
of 1933, as amended, shall at the time of exercise of the Purchase Right be
in effect with respect to the shares issuable upon exercise of the Purchase
Right, or (ii) in the opinion of legal counsel to the Company, the shares
issuable upon exercise of the Purchase Right may be issued in accordance with
the terms of an applicable exemption from the registration requirements of
said Act. As a condition to the exercise of the Purchase Right, the Company
may require the Participant to satisfy any qualifications that may be
necessary or appropriate, to evidence compliance with any applicable law or
regulation, and to make any representation or warranty with respect thereto
as may be requested by the Company.
T. LEGENDS. The Company may at any time place legends or other
identifying symbols referencing any applicable federal and/or state
securities restrictions and any provision convenient in the administration of
the Plan on some or all of the certificates representing shares of stock
issued under the Plan. The Participant shall, at the request of the Company,
promptly
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present to the Company any and all certificates representing shares acquired
pursuant to a Purchase Right in the possession of the Participant in order to
carry out the provisions of this paragraph. Unless otherwise specified by
the Company, legends placed on such certificates may include but shall not be
limited to the following:
"THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD,
TRANSFERRED, ASSIGNED OR HYPOTHECATED UNLESS THERE IS AN EFFECTIVE
REGISTRATION STATEMENT UNDER SUCH ACT COVERING SUCH SECURITIES, THE SALE IS
MADE IN ACCORDANCE WITH RULE 144 UNDER THE ACT, OR THE COMPANY RECEIVES AN
OPINION OF COUNSEL FOR THE HOLDER OF THESE SECURITIES REASONABLY SATISFACTORY
TO THE COMPANY, STATING THAT SUCH SALE, TRANSFER, ASSIGNMENT OR HYPOTHECATION
IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SUCH
ACT."
Any legend required to be placed thereon by the California
Commissioner of Corporations.
U. NOTIFICATION OF SALE OF SHARES. The Company may require the
participant to give the Company prompt notice of any disposition of Shares
acquired by exercise of a Purchase Right within two years from the date of
granting such Purchase Right or one year from the date of exercise of such
Purchase Right. The Company may direct that the certificates evidencing
shares acquired by exercise of a Purchase Right refer to such requirement to
give prompt notice of disposition.
V. AMENDMENT OR TERMINATION OF THE PLAN. The Board may at any time
amend or terminate the Plan, except that such termination shall not affect
Purchase Rights previously granted under the Plan, nor may any amendment make
any change in a Purchase Right previously granted under the Plan which would
adversely affect the right of any Participant (except as may be necessary to
qualify the Plan as an employee stock purchase plan pursuant to section 423
of the Code). In addition, an amendment to the Plan must be approved by the
stockholders of the Company, within the meaning of section 423 of the Code,
within twelve (12) months of the adoption of such amendment if such amendment
would authorize the sale of more shares than are authorized for issuance
under the Plan or would change the definition of the corporations that may be
designated by the Board as a corporation the employees of which are eligible
to participate in the Plan. Furthermore, the approval of the Company's
stockholders shall be sought for any amendment to the Plan for which the
Board deems stockholder approval necessary in order to comply with Rule 16b-3.
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NETWORK GENERAL CORPORATION
EMPLOYEE STOCK PURCHASE PLAN
SUBSCRIPTION AGREEMENT
___ Original Application
___ Change in Percentage of Payroll Deductions
I hereby elect to participate in the 1989 Employee Stock Purchase Plan
(the "Stock Purchase Plan") of Network General Corporation (the "Company")
and subscribe to purchase shares of the Company's common stock as determined
in accordance with the terms of the Stock Purchase Plan.
I hereby authorize payroll deductions in the amount of $_____ or ____
percent of my compensation (fill in one only) from each paycheck throughout
the "Offering Period" (as defined in the Stock Purchase Plan) in accordance
with the terms of the Stock Purchase Plan. (I understand that the amount
deducted each pay period cannot be more than 10% of my compensation.) I
understand that these payroll deductions will be accumulated for the purchase
of shares of common stock of the Company at the applicable purchase price
determined in accordance with the Stock Purchase Plan. I further understand
that, except as otherwise set forth in the Stock Purchase Plan, shares will
be purchased for me automatically on the last day of the Offering Period
unless I withdraw from the Stock Purchase Plan or from the Offering by giving
written notice to the Company or unless I terminate employment.
I further understand that I will automatically participate in each
subsequent Offering under the Plan and have the same percentage of my
compensation withheld as I have designated in this agreement until such time
as I file with the Company a notice of withdrawal from the Stock Purchase
Plan on such form as may be established from time to time by the Company or I
terminate employment.
Shares purchased for me under the Stock Purchase Plan should be issued in
the name set forth below. I understand that Shares may be issued either in
my name alone or together with my spouse as community property or in joint
tenancy.)
NAME: ___________________________
ADDRESS: ___________________________
___________________________
___________________________
MY SOCIAL SECURITY NUMBER: ________________
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I am familiar with the terms and provisions of the Stock Purchase Plan
and hereby agree to participate in the Stock Purchase Plan subject to all of
the terms and provisions thereof. I understand that the Board reserves the
right to amend the Stock Purchase Plan and my right to purchase stock under
the Stock Purchase Plan as may be necessary to qualify the Plan as an
employee stock purchase plan as defined in section 423 of the Internal
Revenue Code of 1986, as amended. I understand that the effectiveness of
this subscription agreement is dependent upon my eligibility to participate
in the Stock Purchase Plan.
Date: _____________ Signature: ________________________
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NETWORK GENERAL CORPORATION
EMPLOYEE STOCK PURCHASE PLAN
NOTICE OF WITHDRAWAL
I hereby elect to withdraw from the current offering (the "Offering") of
the common stock of Network General Corporation (the "Company") under the
Network General Corporation 1989 Employee Stock Purchase Plan (the "Stock
Purchase Plan"), and hereby request that all payroll deductions credited to
my account under the Stock Purchase Plan with respect to the Offering (if
any), and not previously used to purchase shares of common stock of the
Company under the Stock Purchase Plan, be paid to me as soon as is practical.
I understand that this Notice of Withdrawal automatically terminates my
interest in the Offering.
As to participation in future offerings of stock under the Stock
Purchase Plan, I elect as follows:
___ I elect to participate in future offerings under the Stock
Purchase Plan.
I understand that by making the election set forth above I shall
participate in all sequential offerings under the Stock Purchase Plan
commencing subsequent to the Offering until such time as I elect to withdraw
from the Stock Purchase Plan or any such subsequent offering. (However, if I
am subject to Section 16 of the Securities Exchange Act of 1934, I understand
that I may be prohibited from again participating in future Offerings for at
least six months from the date of my withdrawal. See applicable provisions
of the Plan.)
___ I elect NOT to participate in future offerings under the Stock
Purchase Plan.
I understand that by making the election set forth above I terminate my
interest in the Stock Purchase Plan and that no further payroll deductions
will be made unless I elect in accordance with the Stock Purchase Plan to
become a participant in another offering under the Stock Purchase Plan.
I understand that if no election is made as to participation in future
offerings under the Stock Purchase Plan, I will be deemed to have elected to
participate in such future offerings.
Date: _____________ Signature: ________________________
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NETWORK GENERAL CORPORATION
1989 EMPLOYEE STOCK PURCHASE PLAN
IRREVOCABLE ELECTION BY OFFICER
I, _______________________________, am a participant in the Network
General Corporation 1989 Employee Stock Purchase Plan (the "Plan"). In order
to exempt my future purchase(s) of common stock under the Plan from the
"short-swing" profit recovery provisions of Section 16(b) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), I declare as follows:
1. TERM.
(a) The Term of this Election (the "Term") will commence either
immediately or on the first day of the offering period under the Plan
beginning on or after the date of this Election and ending at least six (6)
months after the date of this Election, as indicated below. The Term will
end six (6) months after the date on which I deliver to the Company a written
revocation of this Election on a form approved by the Company.
Check one:
___ The Term will commence on the first day of the offering period
beginning:
__________________________
(Enter Date)
___ The Term will commence immediately.
(b) I understand that any purchase I make under the Plan less than six
(6) months after the date of this Election or at any other time that this
Election is not in force may not be exempt from Section 16(b) of the Exchange
Act. I understand that any such purchase will be exempt from Section 16(b)
only if I hold the shares I acquire in such purchase for at least six months
after the date of purchase.
2. ELECTION. I IRREVOCABLY ELECT, for the duration of the Term, to
have all payroll deductions accumulated in my account under the Plan as of
each purchase date applied to purchase whole shares of common stock in
accordance with the terms of the Plan and my current subscription agreement.
Furthermore, I waive any and all rights I may have under the Plan or my
subscription agreement to increase or decrease the rate of payroll deductions
set forth in my current subscription agreement, to voluntarily cease such
payroll deductions, or to withdraw from the Plan or any offering period under
the Plan.
3. INDEMNIFICATION. The Company will not be required to carry out any
instruction I may give to the Company, purporting to be effective at any time
during the Term, which is
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contrary to this Election. Notwithstanding the foregoing, the Company shall
have no liability to me, and I hereby agree to indemnify and hold the Company
harmless with respect to, any consequence arising from the Company's
compliance with any instruction that I may give, including, without
limitation, any cost, liability or penalty I may incur pursuant to any
federal or state income tax or securities law or regulation.
Date:
_______________________________________
(Signature)
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NETWORK GENERAL CORPORATION
1989 EMPLOYEE STOCK PURCHASE PLAN
REVOCATION OF
ELECTION BY OFFICER
I, ___________________________ hereby revoke my Election, dated
________________ 199__, with respect to my participation in the Network
General Corporation 1989 Employee Stock Purchase Plan. I understand that
this Revocation will become effective six (6) months after the date on which
this Revocation is delivered to the authorized representative of the Company.
Date: _________________________
________________________________
(Signature)
RECEIVED BY:
NETWORK GENERAL CORPORATION
AUTHORIZED REPRESENTATIVE
Date: _________________________ _________________________________
(Signature)
_________________________________
(Name Printed)
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CINCO NETWORKS, INC. EXHIBIT 99.3
1997 STOCK OPTION PLAN
1. PURPOSES OF THE PLAN. The purposes of this Stock Option Plan are to
attract and retain the best available personnel for positions of substantial
responsibility, to provide additional incentive to employees and Consultants
of the Company and its Subsidiaries and to promote the success of the
Company's business. Options granted under the Plan may be incentive stock
options (as defined under Section 422 of the Code) or nonstatutory stock
options, as determined by the Administrator at the time of grant of an option
and subject to the applicable provisions of Section 422 of the Code, as
amended, and the regulations promulgated thereunder.
2. DEFINITIONS. As used herein, the following definitions shall apply:
(a) "Administrator" means the Board or any of its Committees appointed
pursuant to Section 4 of the Plan.
(b) "Board" means the Board of Directors of the Company.
(c) "Code" means the Internal Revenue Code of 1986, as amended.
(d) "Committee" means a Committee appointed by the Board of Directors in
accordance with Section 4 of the Plan.
(e) "Common Stock" means the Common Stock of the Company
(f) "Company" means the CINCO NETWORKS, INC., a California Corporation.
(g) "Consultant" means any person, including an advisor, who is engaged
by the Company or any Parent or Subsidiary to render services and is
compensated for such services, and any director of the company whether
compensated for such services or not provided that if and in the event the
Company registers any class of any equity security pursuant to the Exchange
Act, the term Consultant shall not include directors who are not compensated
for their services or are paid only a director's fee by the Company.
(h) "Continuous Status as an Employee or Consultant" means that the
employment or consulting relationship is not interrupted or terminated by the
Company, any Parent or Subsidiary. Continuous Status as an Employee or
Consultant shall not be considered interrupted in the case of: (i) any leave
of absence approved by the Company, including sick leave, military leave, or
any other personal leave; provided, however, that for purposes of Incentive
Stock Options, any such leave may not exceed ninety (90) days, unless
reemployment upon the expiration of such leave is guaranteed by contract
(including certain Company policies) or statute; or (ii) transfers between
locations of the Company or between the Company, its parent, its Subsidiaries
or its successor.
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(i) "Employee" means any person, including officers and directors,
employed by the Company or any Parent or Subsidiary of the Company. The
payment of a director's fee by the Company shall not be sufficient to
constitute "employment" by the Company.
(j) "Exchange Act" means the Securities Exchange Act of 1934, as amended.
(k) "Fair Market Value" means, as of any date, the value of Common Stock
determined as follows:
(i) If the Common Stock is listed on any established stock exchange
or a national market system including without limitation the National Market
System of the National Association of Securities Dealers, Inc., Automated
Quotation ("NASDAQ") System, its Fair Market Value shall be the closing sales
price for such stock (or the closing bid, if no sales were reported, as
quoted on such exchange or system for the last market trading day prior to
the time of determination) as reported in The Wall Street Journal or such
other source as the Administrator deems reliable;
(ii) If the Common Stock is quoted on the NASDAQ System (but not on
the National Market System thereof) or regularly quoted by a recognized
securities dealer but selling prices are not reported, its Fair Market Value
shall be the mean between the high bid and low asked prices for the Common
Stock or;
(iii) In the absence of an established market for the Common Stock,
the Fair Market Value thereof shall be determined in good faith by the
Administrator.
(l) "Incentive Stock Option" means an Option intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code.
(m) "Nonstatutory Stock Option" means an Option not intended to qualify
as an Incentive Stock Option.
(n) "Option" means a stock option granted pursuant to the Plan.
(o) "Optioned Stock" means the Common Stock subject to an Option.
(p) "Optionee" means an Employee or Consultant who receives an Option.
(q) "Parent" means a "parent corporation", whether now or hereafter
existing, as defined in Section 424(e) of the Code.
(r) "Plan" means this 1997 Stock Option Plan.
(s) "Share" means a share of the Common Stock, as adjusted in accordance
with Section 11 below.
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(t) "Subsidiary" means a "subsidiary corporation", whether now or
hereafter existing, as defined in Section 424(f) of the Code.
3. STOCK SUBJECT TO THE PLAN. Subject to the provisions of Section 11 of
the Plan, the maximum aggregate number of shares which may be optioned and
sold under the Plan is 1,500,000 shares of common Stock. The shares may be
authorized, but unissued, or reacquired Common Stock.
If an Option should expire or become unexercisable for any reason
without having been exercised in full, the unpurchased Shares which were
subject thereto shall, unless the Plan shall have been terminated, become
available for future grant under the Plan.
4. ADMINISTRATION OF THE PLAN.
(a) Initial Plan Procedure. Prior to the date, if any, upon which the
Company becomes subject to the Exchange Act, the Plan shall be administered
by the Board or a committee appointed by the Board.
(b) Plan Procedure After the Date, if any, Upon Which the Company
Becomes Subject to the Exchange Act.
(i) Administration With Respect to Directors and Officers. With
respect to grants of Options to Employees who are also officers or directors
of the Company, the Plan shall be administered by (A) the Board if the Board
may administer the Plan in compliance with Rule 16b-3 promulgated under the
Exchange Act or any successor thereto ("Rule 16b-3") with respect to a plan
intended to qualify thereunder as a discretionary plan, or (B) a committee
designated by the Board to administer the Plan, which committee shall be
constituted in such a manner as to permit the Plan to comply with Rule 16b-3
with respect to a plan intended to qualify thereunder as a discretionary
plan. Once appointed, such Committee shall continue to serve in its
designated capacity until otherwise directed by the Board. From time to time
the Board may increase the size of the Committee and appoint additional
members thereof, remove members (with or without cause) and appoint new
members in substitution therefor, fill vacancies, however caused, and remove
all members of the Committee and thereafter directly administer the Plan, all
to the extent permitted by Rule 16b-3 with respect to a plan intended to
qualify thereunder as a discretionary plan.
(ii) Multiple Administrative Bodies. If permitted by Rule 16b-3, the
Plan may be administered by different bodies with respect to directors,
non-director officers and Employees who are neither directors nor officers.
(iii) Administration With Respect to Consultants and Other Employees.
With respect to grants of Options to Employees or Consultants who are neither
directors nor officers of the Company. the Plan shall be administered by (A)
the Board or (B) a committee designated by the Board, which committee shall
be constituted in such a manner as to satisfy the legal requirements relating
to the administration of incentive stock option plans, if any, of California
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corporate and securities laws, of the Code, and of any applicable stock
exchange (the "Applicable Laws"). Once appointed, such Committee shall
continue to serve in its designated capacity until otherwise directed by the
Board. From time to time the Board may increase the size of the Committee and
appoint additional members thereof, remove members (with or without cause)
and appoint new members in substitution therefor, fill vacancies, however
caused, and remove all members of the Committee and thereafter directly
administer the Plan, all to the extent permitted by the Applicable Laws.
(c) Powers of the Administrator. Subject to the provisions of the Plan
and in the case of a Committee, the specific duties delegated to the Board to
such Committee, and subject tot he approval of any relevant authorities,
including the approval, if required, of any stock exchange upon which the
Common Stock is listed, the Administrator shall have the authority, in its
discretion:
(i) to determine the Fair Market Value of the Common Stock, in
accordance with Section 2(k) of the Plan;
hereunder;
(ii) to select the Consultants and Employees to whom Option may from
time to time be granted hereunder;
(iii) to determine whether and to what extent Option are granted
(iv) to determine the number of shares of Common Stock to be covered
by each such award granted hereunder;
(v) to approve forms of agreement for use under the Plan;
(vi) to determine the terms and conditions, not inconsistent with
the terms of the Plan, of any award granted hereunder;
(vii) to determine whether and under what circumstances an Option may
be settled in cash under subsection 9(f) instead of Common Stock;
(viii) to reduce the exercise price of any Option to the then current
Fair Market Value if the Fair Market Value of the Common Stock covered by
such Option shall have declined since the date the Option was granted; and
(ix) to construe and interpret the terms of the Plan and awards
granted pursuant to the Plan.
(d) Effect of Administrator's Decision. All decisions, determinations and
interpretations of the Administrator shall be final and binding on all
Optionees and any other holders of any Options.
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5. ELIGIBILITY.
(a) Nonstatutory Stock Option may be granted to Employees and
Consultants. Incentive Stock Options may be granted only to Employees. An
Employee or Consultant who has been granted Option may, if otherwise
eligible, be granted additional Options.
(b) Each Option shall be designated in the written option agreement as
either an Incentive Stock Option or a Nonstatutory Stock Option. However,
notwithstanding such designation, to the extent that the aggregate Fair
Market Value of the Shares with respect to which Options designated as
Incentive Stock Options are exercisable for the first time by any Optionee
during any calendar year (under all plans of the Company or any Parent or
Subsidiary) exceeds $100,000, such excess Options shall be treated as
Nonstatutory Stock Options.
(c) For purposes of Section 5(b), Incentive Stock Options shall be taken
into account in the order in which they were granted, and the Fair Market
Value of the Shares shall be determined as of the time the Option with
respect to such Shares is granted.
(d) The Plan shall not confer upon any Optionee any right with respect
to continuation of employment or consulting relationship with the Company,
nor shall it interfere in any way with his or her right or the Company's
right to terminate his or her employment or consulting relationship at any
time, with or without cause.
6. TERM OF PLAN. The Plan shall become effective upon the earlier to
occur of its adoption by the Board of Directors or its approval by the
shareholders of the Company as described in Section 17 of the Plan. It shall
continue in effect for a term of ten (10) year unless sooner terminated under
Section 13 of the Plan.
7. TERM OF OPTION. The Term of each Option shall be the term stated in
the Option Agreement; provided, however, that the term shall be no more than
ten (10) years from the date of grant thereof. However, in the case of an
Incentive Stock Option granted to an Optionee who, at the time the Option is
granted, owns stock representing more than ten percent (10%) of the voting
power of all classes of stock of the Company or any Parent or Subsidiary, the
term of the Option shall be five (5) years from the date of grant thereof or
such shorter term as may be provided in the Option Agreement.
8. OPTION EXERCISE PRICE AND CONSIDERATION.
(a) The per share exercise price for the Shares to be issued pursuant to
exercise of an Option shall be such price as is determined by the Board, but
shall be subject to the following:
(i) IN THE CASE OF AN INCENTIVE STOCK OPTION
(A) granted to an Employee who, at the time of the grant of
such Incentive Stock Option, owns stock representing more than ten (10%) of
the voting power of all classes of
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stock of the Company or any Parent or Subsidiary, the per Share exercise
price shall be no less than 100% of the Fair Market Value per Share on the
date of grant.
(B) granted to any Employee, the per Share exercise price
shall be no less than 100% of the Fair Market Value per Share on the date of
grant.
(ii) IN THE CASE OF A NONSTATUTORY OPTION
(A) granted to a person who, at the time of the grant of such
Option, owns stock representing more then ten percent (10%) of the voting
power of all classes of stock of the Company or any Parent or Subsidiary, the
per Share exercise price shall be no less than 100% of the Fair Market Value
per Share on the date of the grant.
(B) granted to any person, the per Share exercise price shall
be no less then 85% of the Fair Market Value per Share on the date of the
grant.
(b) The consideration to be paid for the shares to be issued upon
exercise of an Option, including the method of payment, shall be determined
by the Administrator (and, in the case of an Incentive Stock Option, shall be
determined at the time of grant) and may consist entirely of (1) cash, (2)
check, (3) promissory note, (4) other Shares which (x) in the case of Shares
acquired upon exercise of an Option either have been owned by the Optionee
for more than six months on the date of surrender or were not acquired,
directly or indirectly, from the Company, and (y) have a Fair Market Value on
the date of surrender equal to the aggregate exercise price of the shares as
to which said Option shall be exercised, (5) delivery of a properly executed
exercise notice together with such other documentation as the Administrator
and the broker, if applicable, shall require to effect an exercise of the
Option and delivery to the Company of the sale or loan proceeds required to
pay the exercise price, or (6) any combination of the foregoing methods of
payment. IN making its determination as to the type of consideration to
accept, the Board shall consider if acceptance of such consideration may be
reasonably expected to benefit the Company.
9. EXERCISE OF OPTION.
(a) Procedure for Exercise; Rights as a Shareholder. Any Option granted
hereunder shall be exercisable at such times and under such conditions as
determined by the Board, including performance criteria with resect to the
Company and/or the Optionee, and as shall be permissible under the terms of
the Plan. An Option may not be exercised for a fraction of a Share. An Option
shall be deemed to be exercised when written notice of such exercise has been
given to the Company ~n accordance with the terms of the Option by the person
entitled to exercise the Option and full payment for the shares with respect
to which the Option is exercised has been received by the Company. Full
payment may, as authorized by the Board, consist of any consideration and
method of payment allowable under Section 8(b) of the Plan. Until the
issuance (as evidenced by the appropriate entry on the books of the Company
or of a duly authorized transfer agent of the Company) of the stock
certificate evidencing such Shares, no right to vote or receive dividends or
any other rights as a shareholder shall exist with respect to
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the Optioned Stock, notwithstanding the exercise of the Option The Company
shall issue (or cause to be issued) such stock certificate promptly upon
exercise of the Option. No adjustment will be made for a dividend or other
right for which the record date is prior to the date the stock certificate is
issued, except as provided in Section 11 of the Plan. Exercise of an Option
in any manner shall result in a decrease in the number of Shares which
thereafter may be available, both for purposes of the Plan and for sale under
the Option, by the number of Shares as to which the Option is exercised.
(b) Termination of Employment. In the event of termination of an
Optionee's Continuous Status as an Employee or Consultant with the Company,
such Optionee may, but only within such period of time as is determined by
the Administrator, of at least thirty (30) days, with such determination in
the case of an Incentive Stock Option not exceeding three (3) months after
the date of such termination (but in no event later than the expiration date
of the term of such Option as set forth in the Option Agreement), exercise
his or her Option to the extent that Optionee was entitled to exercise it at
the date of such termination. To the extent that Optionee was not entitled to
exercise the Option at the date of such termination, or if Optionee does not
exercise such Option to the extent so entitled within the time specified
herein, the Option shall terminate.
(c) Disability of Optionee. Notwithstanding the provisions of Section
9(b) above, in the event of termination of an Optionee's Continuous Status as
an Employee or Consultant as a result of his disability (as defined in
section 22(e)(3) of the code), Optionee may, but only within twelve (12)
months from the date of such termination (but in no event later than the
expiration date of the term of such Option as set forth in the Option
Agreement), exercise the Option to the extent otherwise entitled to exercise
it at the date of such termination. To the extent that Optionee was not
entitled to exercise the Option at the date of termination, or if Optionee
does not exercise such Option to the extent so entitled within the time
specified herein, the Option shall terminate.
(d) Death of Optionee. In the event of termination of an Optionee's
Continuous Status as an Employee or Consultant as a result of the death of an
Optionee, the Option may be exercised, at any time within twelve (12) months
following the date of death (but in not event later than the expiration date
of the term of such Option as set forth in the Option Agreement), by the
Optionee's estate or by a person who acquired the right to exercise the
Option by bequest or inheritance, but only to the extent the Optionee was
entitled to exercise the Option at the date of death. To the extent that
Optionee was not entitled to exercise the Option at the date of death, or if
Optionee does no exercise such Option to the extent so entitled within the
time specified herein, the Option shall terminate.
(e) Rule 16b-3. Options granted to persons subject to section 16(b) of
the Exchange Act must comply with Rule 16b-3 and shall contain such
additional conditions or restrictions as may be required thereunder to
qualify for the maximum exemption from Section 16 of the Exchange Act with
respect to Plan transactions.
(f) Buyout Provisions. The Administrator may at any time offer to buy
out for a payment in cash or shares, an Option previously granted, based on
such terms and conditions as the
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Administrator shall establish and communicate to the Optionee at the time
that such offer is made.
10. NON-TRANSFERABILITV OF OPTIONS. Options may not be sold, pledged,
assigned, hypothecated, transferred, or disposed of in any manner other than
by will or by the laws of descent or distribution and may be exercised,
during the lifetime of the Optionee, only by the Optionee.
11. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION OR MERGER.
(a) Changes in Capitalization. Subject to any required action by the
shareholders of the company, the number of shares of Common Stock covered by
each outstanding Option, and the number of shares of Common Stock which have
been authorized for issuance under the Plan but as to which no Options have
yet been granted or which have been returned to the Plan upon cancellation or
expiration of an Option, as well as the price per share of Common Stock
covered by each such outstanding Option, shall be proportionately adjusted
for any increase or decrease in the number of issued shared of Common Stock
resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the common Stock, or any other increase or
decrease in the number of issued shares of Common Stock effected without
receipt of consideration by the Company; provided, however, that conversion
of any convertible securities of the Company shall not be deemed to have been
"effected without receipt of consideration." Such adjustment shall be made by
the Board, whose determination in that respect shall be final, binding and
conclusive. Except as expressly provided herein, no issuance by the company
of shares of stock of any class, or securities convertible into shares of
stock of any class, shall affect, and no adjustment by reason thereof shall
be made with respect to, the number or price of shares of Common Stock
subject to an Option.
(b) Dissolution or Liquidation. In the event of the proposed dissolution
or liquidation of the Company, the board shall notify the Optionee at least
fifteen (15) days prior to such proposed action. To the extent it has not
been previously exercised, the Option will terminate immediately prior to the
consummation of such proposed action.
(c) Merger. In the event of a merger of the Company with or into another
corporation, the Option shall be assumed or an equivalent option shall be
substituted by such successor corporation or a parent or subsidiary of such
successor corporation. If, in such event, the Option is not assumed or
substituted, the Option shall terminate as of the date of the closing of the
merger. For the purposes of this paragraph, the Option shall be considered
assumed if, following the merger, the option confers the right to purchase,
for each Share of Optioned Stock subject to the Option immediately prior to
the merger, the consideration (whether stock, cash, or other securities or
property) received in the merger by holders of Common Stock for each Share
held on the effective date of the transaction (and if holders were offered a
choice of consideration, the type of consideration chosen by the holders of a
majority of the outstanding Shares); provided, however, that if such
consideration received in the merger was not solely common stock of the
successor corporation or its Parent, the Administrator may, with the consent
of the successor corporation and the participant, provide for the
consideration to be received upon the exercise of
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the Option, for each Share of Optioned Stock subject to the Option, to be
solely common stock of the successor corporation or its Parent equal in fair
market value to the per share consideration received by holders of Common
Stock in the merger.
12. TIME OF GRANTING OPTIONS. The date of grant of an Option shall, for
all purposes, be the date on which the Administrator makes the determination
granting such Option, or such other date as is determined by the Board.
Notice of the determination shall be given to each Employee or Consultant to
whom an Option is so granted within a reasonable time after the date of such
grant.
13. AMENDMENT AND TERMINATION OF THE PLAN..
(a) Amendment and Termination. The Board may at any time amend, alter,
suspend or discontinue the Plan, but no amendment, alteration, suspension or
discontinuation shall be made which would impair the rights of any Optionee
under any grant theretofore made, without his or her consent. In addition, to
the extent necessary and desirable to comply with Rule 16b-3 under the
Exchange Act or with Section 422 of the Code (or any other applicable law or
regulation, including the requirements of the NASD or an established stock
exchange), the Company shall obtain shareholder approval of any Plan
amendment in such a manner and to such a degree as required.
(b) Effect of Amendment or Termination. Any such amendment or
termination of the Plan shall not affect Options already granted and such
Options shall remain in full force and effect as if this Plan had not been
amended or terminated, unless mutually agreed otherwise between the Optionee
and the Board, which agreement must be in writing and signed by the Optionee
and the Company
14. CONDITIONS UPON ISSUANCE OF SHARES. Shares shall not be unissued
pursuant to the exercise of an Option unless the exercise of such Option and
the issuance and delivery of such Shares pursuant thereto shall comply with
all relevant provisions of law, including, without limitation, the Securities
Act of 1933, as amended, the Exchange Act, the rules and regulations
promulgated thereunder, and the requirements of any stock exchange upon which
the Shares may then be listed, and shall be further subject to the approval
of counsel for the Company with respect to such compliance. As a condition to
the exercise of an Option, the Company may require the person exercising such
Option to represent and warrant at the time of any such exercise that the
Shares are being purchased only for investment and without any present
intention to sell or distribute such Shares if, in the opinion of counsel for
the Company, such a representation is required by any of the aforementioned
relevant provisions of law.
15. RESERVATION OF SHARES. The Company, during the term of this Plan,
will at all times reserve and keep available such number of Shares as shall
be sufficient to satisfy the requirements of the Plan. The inability of the
Company to obtain authority from any regulatory body having jurisdiction,
which authority is deemed by the Company's counsel to be necessary to the
lawful issuance and sale of any Shares hereunder, shall relieve the Company
of any liability
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in respect of the failure to issue or sell such Shares as to which such
requisite authority shall not have been obtained.
16. AGREEMENTS. Options shall be evidenced by written agreements in such
form as the Board shall approve from time to time.
17. SHAREHOLDER APPROVAL. Continuance of the Plan shall be subject to
approval by the shareholders of the Company within twelve (12) months before
or after the date the Plan is adopted. Such shareholder approval shall be
obtained in the degree and manner required under applicable state and federal
law and the rules of any stock exchange upon which the Common Stock is listed.
18. INFORMATION TO OPTIONEES AND PURCHASERS. The Company shall provide
to each Optionee and to each individual who acquired Shares pursuant to the
Plan, during the period such Optionee or purchaser has one or more Options
outstanding, and, in the case of an individual who acquired Shares pursuant
to the Plan, during the period such individual owns such Shares, copies of
annual financial statements. The Company shall not be required to provide
such statements to key employees whose duties in connection with the Company
assure their access to equivalent information.
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CINCO NETWORKS, INC.
1997 STOCK OPTION PLAN
STOCK OPTION AGREEMENT
Unless otherwise defined herein, the terms defined in the Plan shall
have the same defined meanings in this Option Agreement.
I. NOTICE OF STOCK OPTION GRANT
[Optionee's Name and Address]
You have been granted an option to purchase Common Stock of the company,
subject to the terms and conditions of the Plan and this Option Agreement, as
follows:
Grant Number
Date of Grant
Vesting Commencement Date Exercise Price per Share Total Number of Shares
Granted
Total Exercise Price
Type of Option:
Term/Expiration Date:
____ Incentive Stock Option
____ Nonstatutory Stock Option
VESTING SCHEDULE:
This Option may be exercised, in whole or in part, in accordance with
the following schedule: 25% of the Shares subject to the Option shall vest 12
months after the Vesting Commencement Date, and 2.08% of the Shares subject
to the Option shall vest each one month(s) thereafter. If this Vesting
Schedule results in a fractional shares, amounts shall be rounded down to
eliminate said fractional shares. On the final vesting date, all remaining
Shares may be exercised.
TERMINATION PERIOD:
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This Option may be exercised for 30 days after termination of employment
or consulting relationship, or such longer period as may be applicable upon
death or disability of Optionee as provided in the Plan, but in no event
later than the Term/Expiration Date as provided above.
II. AGREEMENT
1. Grant of Option. Cinco Networks, Inc., a California corporation (the
"Company"), hereby grants to the Optionee named in the Notice of Grant (he
"Optionee"), an option (the "Option") to purchase a total number of shares of
Common Stock (the "Shares") set forth in the Notice of Grant, at the exercise
price per share set forth in the Notice of Grant (the "Exercise Price")
subject to the terms, definitions and provisions of the 1997 Stock Option
Plan (the "Plan") adopted by the Company, which is incorporated herein by
reference. Unless otherwise defined herein, the terms defined in the Plan
shall have the same defined meanings in this Option.
If designated in the Notice of Grant as an Incentive Stock Option, this
Option is intended to qualify as an Incentive Stock Option as defined in
Section 422 of the Code.
2. EXERCISE OF OPTION. This Option shall be exercisable during its term
in accordance with the Exercise Schedule set out in the Notice of Grant and
with the provisions of Section 9 of the Plan as follows:
(i) RIGHT TO EXERCISE.
(a) This Option may not be exercised for a fraction of a share.
(b) In the event of Optionee's death, disability or other
termination of employment, the exercisability of the Option is governed by
Sections 6,7 and 8 below, subject to the limitation contained in subsection
2(i)(c).
(c) In no event may this Option be exercised after the date of
expiration of the term of this Option as set forth in the Notice of Grant.
(ii) METHOD OF EXERCISE. This Option shall be exercisable by written
notice (in the form attached as Exhibit A) which shall state the election to
exercise the Option, the number of Shares in respect of which the option is
being exercised, and such other representations and agreements as to the
holder's investment intent with respect to such shares of Common Stock as may
be required by the Company pursuant to the provisions of the Plan. Such
written notice shall be signed by the Optionee and shall be delivered in
person or by certified mail to the Secretary of the company. The written
notice shall be accompanied by payment of the Exercise Price. This Option
shall be deemed to be exercised upon receipt by the company of such written
notice accompanied by the Exercise Price.
No Shares will be issued pursuant to the exercise of an Option
unless such issuance and such exercise shall comply with all relevant
provisions of law and requirements of
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any stock exchange upon which the Shares may then be listed. Assuming such
compliance, for income tax purposes the shares shall be considered
transferred to the Optionee on the date on which the Option is exercised with
respect to such Shares.
3. OPTIONEE'S REPRESENTATIONS. In the event the Shares purchasable
pursuant to the exercise of this Option have not been registered under the
Securities Act of 1933, as amended, at the time this Option is exercised,
Optionee shall, if required by the Company, concurrently with the exercise of
all or any portion of this Option, deliver to the Company his Investment
Representation Statement in the form attached hereto as Exhibit B, and shall
read the applicable rules of the Commissioner of Corporations attached to
such Investment Representation Statement.
4. METHOD OF PAYMENT. Payment of the Exercise Price shall be by any of
the following, or a combination thereof, at the election of the Optionee:
(i) cash; or
(ii) check; or
(iii) surrender of other shares of Common Stock of the Company which
(A) in the case of shares acquired pursuant to the exercise of a Company
option, have been owned by the Optionee for more than six (6) months on the
date of surrender, and (B) have a fair market value on the date of surrender
equal to the Exercise Price of the Shares as to which the Option is being
exercised; or
(iv) delivery of a properly executed exercise notice together with
such other documentation as the Administrator and the broker, if applicable,
shall require to effect an exercise of the Option and delivery to the Company
of the sale or loan proceeds required to pay the exercise price.
5. RESTRICTIONS ON EXERCISE. This Option may not be exercised until such
time as the Plan has been approved by the shareholders of the Company, or if
the issuance of such Shares upon such exercise or the method of payment of
consideration for such shares would constitute a violation of any applicable
federal or state securities or other law or regulation, including any rule
under Part 207 of Title 12 of the Code of Federal Regulations ("Regulation
G") as promulgated by the Federal Reserve Board. As a condition to the
exercise of this Option, the Company may require Optionee to make any
representation and warranty to the company as may be required by any
applicable law or regulation.
6. TERMINATION OF RELATIONSHIP. In the event of termination of
Optionee's Continuous Status as an Employee or consultant, Optionee may, to
the extent otherwise so entitled at the date of such termination (the
"Termination Date"), exercise this Option during the termination Period set
out in the Notice of Grant. To the extent that Optionee was not entitled to
exercise this Option at the date of such termination, or if Optionee does not
exercise this Option within the time specified herein, the Option shall
terminate.
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<PAGE>
7. DISABILITY OF OPTIONEE. Notwithstanding the provisions of section 6
above, in the event of termination of Optionee's Continuous Status as an
Employee or consultant as a result of disability (as defined Section 22(e)(3)
of the Code), Optionee may, but only within twelve (12) months from the date
of termination of employment (but in no event later than the date of
expiration of the term of this Option as set forth in section 10 below),
exercise the Option to the extent otherwise so entitled at the date of such
termination. To the extent that Optionee was not entitled to exercise the
Option at the date of termination, or if Optionee does not exercise such
Option (to the extent otherwise so entitled) within the time specified
herein, the Option shall terminate.
8. DEATH OF OPTIONEE. In the event of termination of Optionee's
continuous Status as an Employee or consultant as a result of the death of
Optionee, the Option may be exercised at any time within twelve (12) months
following the date of death (but in no event later than the date of
expiration of the term of this Option as set forth in Section 10 below), buy
Optionee's estate or by a person who acquired the right to exercise the
Option by bequest or inheritance, but only to the extent the Optionee could
exercise the Option at the date of death.
9. NON-TRANSFERABILITY OF OPTION. This Option may not be transferred in
any manner otherwise than by will or by the laws of descent or distribution
and may be exercised during the lifetime of Optionee only by him. The terms
of this Option shall be binding upon the executors, administrators, heirs,
successors and assigns of the Optionee.
10. TERM OF OPTION. This Option may be exercised only within the term
set out in the Notice of Grant, and may be exercised during such term only in
accordance with the Plan and the terms of this option. The limitations set
out in Section 7 of the Plan regarding Options designated as Incentive Stock
Options and Options granted to more than ten percent (10%) shareholders shall
apply to this Option.
11. TAXATION UPON EXERCISE OF OPTION. Optionee understands that, upon
exercising a nonstatutory Option, he or she will recognize income for tax
purposes in an amount equal to the excess of the then fair market value of
the hares over the exercise price. However, the timing of this income
recognition may be deferred for up to six months if Optionee is subject to
Section 16 of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"). If the Optionee is an employee, the Company will be required to
withhold from Optionee's compensation, or collect from Optionee and pay to
the applicable taxing authorities an amount equal to a percentage of this
compensation income. Additionally, the Optionee may at some point be required
to satisfy tax withholding obligations with respect to the disqualifying
disposition of the Incentive Stock Option. The Optionee shall satisfy his or
her tax withholding obligation arising upon the exercise of this Option out
of Optionee's compensation or by payment to the Company.
12. TAX CONSEQUENCES. Set forth below is a brief summary as of the date
of this Option of some of the federal and California tax consequences of
exercise of this Option and disposition of the Shares. THIS SUMMARY IS
NECESSARILY INCOMPLETE, AND THE TAX LAWS
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<PAGE>
AND REGULATIONS ARE SUBJECT TO CHANGE. OPTIONEE SHOULD CONSULT A TAX ADVISER
BEFORE EXERCISING THIS OPTION OR DISPOSING OF THE SHARES.
(i) EXERCISE OF ISO. If this Option qualifies as an ISO, there will
be no regular federal income tax liability or California income tax liability
upon the exercise of the Option, although the excess, if any, of the fair
market value of the Shares on the date of exercise over the Exercise Price
will be treated as an adjustment to the alternative minimum tax for federal
tax purposes and may subject the Optionee to the alternative minimum tax in
the year of exercise.
(ii) EXERCISE OF NONSTATUTORY STOCK OPTION. If this Option does not
qualify as an ISO, there may be a regular federal income tax liability and
California income tax liability upon the exercise of the Option. The Optionee
will be treated as having received compensation income (taxable at ordinary
income tax rates) equal to the excess, if any, of the fair market value of
the Shares on the date of exercise over the Exercise Price. If Optionee is an
employee, the Company will be required to withhold from Optionee's
compensation or collect from Optionee and pay to the applicable taxing
authorities an amount equal to a percentage of this compensation income at
the time of exercise.
(iii) DISPOSITION OF SHARES. In the case of an NSO, if Shares are
held for at least one year, any gain realized on disposition of the Shares
will be treated as long-term capital gain for federal and California income
tax purposes. In the case of an ISO, if Shares transferred pursuant to the
Option are held for at least one year after exercise and are disposed of at
least two years after the Date of Grant, any gain realized on disposition of
the shares will also be treated as long-term capital gain for federal and
California income tax purposes. If Shares purchased under an ISO are disposed
of within such one-year period or within two years after the Date of Grant,
any gain realized on such disposition will be treated as compensation income
(taxable at ordinary income rates) to the extent of the difference between
the Exercise Price and the lesser of (1) the fair market value of the Shares
on the date of exercise, or (2) the sale price of the Shares.
(iv) NOTICE OF DISQUALIFYING DISPOSITION OF ISO SHARES. If the
Option granted to Optionee herein is an ISO, and if Optionee sells or
otherwise disposes of any of the Shares acquired pursuant to the ISO on or
before the later of (1) the date two years after the Date of Grant, or (2)
the date one year after the date of exercise, the Optionee shall immediately
notify the Company in writing of such disposition. Optionee agrees that
Optionee may be subject to income tax withholding by the Company on the
compensation income recognized by the Optionee.
CINCO NETWORKS, INC. a California corporation
By: ________________________________
OPTIONEE ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES PURSUANT TO THE
OPTION HEREOF IS EARNED ONLY BY CONTINUING CONSULTANCY OR EMPLOYMENT AT THE
WILL OF THE COMPANY (NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED THIS
OPTION OR
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<PAGE>
ACQUIRING SHARES HEREUNDER). OPTIONEE FURTHER ACKNOWLEDGES AND AGREES THAT
NOTHING IN THIS AGREEMENT, NOR IN THE COMPANY'S STOCK OPTION PLAN WHICH IS
INCORPORATED HEREIN BY REFERENCE, SHALL CONFER UPON OPTIONEE ANY RIGHT WITH
RESPECT TO CONTINUATION OF EMPLOYMENT OR CONSULTANCY BY THE COMPANY, NOR
SHALL IT INTERFERE IN ANY WY WITH HIS RIGHT OR THE COMPANY'S RIGHT TO
TERMINATE HIS EMPLOYMENT OR CONSULTANCY AT ANY TIME, WITH OR WITHOUT CAUSE.
Optionee acknowledges receipt of a copy of the Plan and represents that
he is familiar with the terms and provisions thereof, and hereby accepts this
Option subject to all of the terms and provisions thereof. Optionee has
reviewed the Plan and this Option in their entirety, has had an opportunity
to obtain the advice of counsel prior to executing this Option and fully
understands all provisions of the Option. Optionee hereby agrees to accept as
binding, conclusive and final all decisions or interpretations of the
administrator upon any questions arising under the Plan or this Option.
Dated:
______________________________
Optionee
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<PAGE>
CINCO NETWORKS, INC.
1997 STOCK OPTION PLAN
EXERCISE NOTICE
CINCO NETWORKS, INC.
6601 Koll Center Parkway, Suite 140
Pleasanton, CA 94566
Attention: Chief Financial Officer
1. EXERCISE OF OPTION. Effective as of today, , 19 . the
undersigned ("Optionee") hereby elects to exercise Optionee's option to
purchase ________ shares of the Common Stock (the "Shares") of Cinco
Networks, Inc., (the "Company") under and pursuant to the 1997 Stock Option
Plan (the "Plan") and the [ ] Incentive [ ] Nonstatutory Stock Option
Agreement dated (the "OPTION AGREEMENT").
2. REPRESENTATIONS OF OPTIONEE. Optionee acknowledges that Optionee has
received, read and understood the Plan and the Option Agreement and agrees to
abide by and be bound by their terms and conditions.
3. RIGHTS AS SHAREHOLDER. Until the stock certificate evidencing such
Shares is issued (as evidenced by the appropriate entry on the books of the
Company or of a duly authorized transfer agent of the company), no right to
vote or receive dividends or any other rights as a shareholder shall exist
with respect to the optioned Stock, notwithstanding the exercise of the
Option. The Company shall issue (or cause to be issued) such stock
certificate promptly after the Option is exercised. No adjustment will be
made for a dividend or other right for which the record date is prior to the
date the stock certificate is issued, except as provided in Section 12 of the
Plan.
Optionee shall enjoy rights as a shareholder until such time as Optionee
disposes of the Shares or the Company and/or its assignee(s) exercises the
right of First Refusal hereunder. Upon such exercise, Optionee shall have no
further rights as a holder of the Shares so purchased except the right to
receive payment for the Shares so purchased in accordance with the provisions
of this Agreement, and Optionee shall forthwith cause the certificate(s)
evidencing the Shares so purchased to be surrendered to the company for
transfer or cancellation.
4. COMPANY'S RIGHT OF FIRST REFUSAL. Before any Shares held by Optionee
or any transferee (either being sometimes referred to herein as the "Holder")
may be sold or otherwise transferred (including transfer by gift or operation
of law), the Company or its assignee(s) shall have a right of first refusal
to purchase the Shares on the terms and conditions set forth in this section
(the "Right of First Refusal").
(a) NOTICE OF PROPOSED TRANSFER. The Holder of the shares shall
deliver to the company a written notice (the "Notice") stating: (i) the
Holder's bona fide intention to sell or otherwise transfer such Shares; (ii)
the name of each proposed purchaser or other transferee
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<PAGE>
("Proposed Transferee"); (iii) the number of Shares to be transferred to each
Proposed Transferee: and (iv) the bona fide cash price or other consideration
for which the Holder proposes to transfer the Shares (the "Offered Price"),
and the Holder shall offer the Shares at the Offered Price to the Company or
its assignee(s).
(b) EXERCISE OF RIGHT OF FIRST REFUSAL. At any time within thirty
(30) days after receipt of the Notice, the Company and/or its assignee(s)
may, be giving written notice to the Holder, elect to purchase all but not
less than all, of the Shares proposed to be transferred to any one or more of
the Proposed Transferees, at the purchase price determined in accordance with
subsection (c) below.
(c) PURCHASE PRICE. The purchase price ("Purchase Price") for the
Shares purchased by the Company or its assignees(s) under this Section shall
be the Offered Price. If the Offered Price includes consideration other than
cash, the cash equivalent value of the non-cash consideration shall be
determined by the Board of Directors of the Company in good faith.
(d) PAYMENT. Payment of the Purchase Price shall be made, at the
option of the Company or its assignee(s), in cash (by check), by cancellation
of all or a portion of any outstanding indebtedness of the Holder to the
Company (or, in the case of repurchase by an assignee, to the assignee), or
by any combination thereof within 30 days after receipt of the Notice or in
the manner and at the times set forth in the Notice.
(e) HOLDER'S RIGHT TO TRANSFER. If all of the Shares proposed in
the Notice to be transferred to a given Proposed Transferee are not purchased
by the Company and/or its assignee(s) as provided in this Section, then the
Holder may sell or otherwise transfer such Shares to that Proposed Transferee
at the Offered Price or at a higher price, provided that such sale or other
transfer is consummated within 120 days after the date of the Notice and
provided further that any such sale or other transfer is effected in
accordance with any applicable securities laws and the Proposed Transferee
agrees in writing that the provisions of this Section shall continue to apply
to the Shares in the hands of such Proposed Transferee. If the Shares
described in the Notice are not transferred to the Proposed Transferee within
such period, a new Notice shall be given to the company, and the Company
and/or its assignees shall again be offered the Right of First Refusal before
any Shares held by the Holder may be sold or otherwise transferred.
(f) EXCEPTION FOR CERTAIN FAMILY TRANSFERS. Anything to the
contrary contained in this Section notwithstanding, the transfer of any or
all of the Share during the Optionee's lifetime or on the Optionee's death by
will or intestacy to the Optionee's immediate family or a trust for the
benefit of the Optionee's immediate family shall be exempt from the
Provisions of this Section. "Immediate Family" as used herein shall mean
spouse, lineal descendant or antecedent, father, mother, brother or sister.
In such case, the transferee or other recipient shall receive and hold the
Shares so transferred subject to the provision of this Section, and there
shall be no further transfer of such Shares except in accordance with the
terms of this Section.
(g) TERMINATION OF RIGHT OF FIRST REFUSAL. The Right of First
Refusal shall terminate as to any Shares 90 days after the first sale of
Common Stock of the Company to the
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<PAGE>
general public pursuant to a registration statement filed with and declared
effective by the Securities and Exchange Commission under the 1933 Act.
5. TAX CONSULTATION. Optionee understands that Optionee may suffer
adverse tax consequences as a result of Optionee's purchase or disposition of
the Shares. Optionee represents that Optionee has consulted with any tax
consultants Optionee deems advisable in connection with the purchase or
disposition of the Shares and that Optionee is not relying on the Company for
any tax advice.
6. RESTRICTIVE LEGENDS AND STOP-TRANSFER ORDERS.
(a) LEGENDS. Optionee understands and agrees that the Company shall
cause the legends set forth below or legends substantially equivalent
thereto, to be placed upon any certificate(s) evidencing ownership of the
Shares together with any other legends that may be required by state or
federal securities laws:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED
UNDER THE ACT OR, IN THE OPINION OF COUNSEL IN FORM AND SUBSTANCE
SATISFACTORY TO THE ISSUER OF THESE SECURITIES, SUCH OFFER, SALE OR TRANSFER,
PLEDGE OR HYPOTHECATION IS IN COMPLIANCE THEREWITH.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
RESTRICTIONS ON TRANSFER AND RIGHT OF FIRST REFUSAL OPTIONS HELD BY THE
ISSUER OR ITS ASSIGNEE(S) AS SET FORTH IN THE EXERCISE NOTICE BETWEEN THE
ISSUER AND THE ORIGINAL HOLDER OF THESE SHARES, A COPY OF WHICH MAY BE
OBTAINED AT THE PRINCIPAL OFFICE OF THE ISSUER. SUCH TRANSFER RESTRICTIONS
AND RIGHT OF FIRST REFUSAL ARE BINDING ON TRANSFEREES OF THESE SHARE.
IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS SECURITY OR
ANY INTEREST THEREIN, OR TO RECEIVE ANY CONSIDERATION THEREFOR, WITHOUT THE
PRIOR WRITTEN CONSENT OF THE COMMISSIONER OF CORPORATIONS OF THE STATE OF
CALIFORNIA, EXCEPT AS PERMITTED IN THE COMMISSIONER'S RULES. Optionee
understands that transfer of the Shares may be restricted by Section
260.141.11 of the Rules of the California Corporations Commissioner, a copy
of which is attached to Exhibit B, the Investment Representation Statement.
(b) Stop-Transfer Notices. Optionee agrees that, in order to ensure
compliance with the restrictions referred to herein, the Company may issue
appropriate "stop transfer" instruction to is transfer agent, if any, and
that, if the Company transfers its own securities, it may make appropriate
notations to the same effect in its own records.
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<PAGE>
(c) Refusal to Transfer. The company shall not be required (i) to
transfer on its books any Shares that have been sold or otherwise transferred
in violation of any of the provisions of this Agreement or (ii) to treat as
owner of such Shares or to accord the right to vote or pay dividends to any
purchaser or other transferee to whom such Shares shall have been so
transferred.
7. SUCCESSORS AND ASSIGNS. The Company may assign any of its rights
under this Agreement to single or multiple assignees, and this Agreement
shall inure to the benefit of the successors and assigns of the Company.
Subject to the restrictions on transfer herein set forth, this Agreement
shall be binding upon Optionee and his or her heirs, executors,
administrators, successors and assigns.
8. INTERPRETATION. Any dispute regarding the interpretation of this
Agreement shall be submitted by Optionee or by the Company forthwith to the
Company's Board of Directors or the committee thereof that administers the
Plan, which shall review such dispute at its next regular meeting. The
resolution of such a dispute by the Board or committee shall be final and
binding on the Company and on Optionee.
9. GOVERNING LAW; SEVERABILITY. This Agreement shall be governed by and
construed in accordance with the laws of the State of California excluding
that body of law pertaining to conflict of law. Should any provision of this
Agreement be determined by a court of law to be illegal or unenforceable, the
other provisions shall nevertheless remain effective and shall remain
enforceable.
10. NOTICES. Any notice required or permitted hereunder shall be given in
writing and shall be deemed effectively given upon personal delivery or upon
deposit in the United States mail by certified mail, with postage and fees
prepaid, addressed to the other party at its address as shown below beneath
its signature, or to such other address as such party may designate in
writing from time to time to the party.
11. FURTHER INSTRUMENTS. The parties agree to execute such further
instruments and to take such further action as may be reasonably necessary to
carry out the purposes and intent of this Agreement.
12. DELIVERY OF PAYMENT. Optionee herewith delivers to the Company the
full Exercise Price for the Shares.
13. ENTIRE AGREEMENT. The Plan and Notice of Grant/Option Agreement are
incorporated herein by reference. This Agreement, the Plan, the Option
Agreement and the Investment Representation Statement constitute the entire
agreement of the parties and supersede in their entirety all prior
undertakings and agreements of the Company and Optionee with respect to the
subject matter hereof, and is governed by California law except for that body
of law pertaining to conflict of laws.
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<PAGE>
Submitted by:
OPTIONEE:
Address: ____________________________
____________________________
____________________________
Accepted by:
CINCO NETWORKS, INC.
By: ________________________________
Title:
ADDRESS:
6601 Koll Center Parkway, Suite 140
Pleasanton, CA 94566
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<PAGE>
CINCO NETWORKS, INC.
1997 STOCK OPTION PLAN
INVESTMENT REPRESENTATION STATEMENT
OPTIONEE:
COMPANY:
SECURITY:
AMOUNT: $
DATE:
CINCO NETWORKS. INC.
COMMON STOCK
In connection with the purchase of the above-listed securities, the
undersigned Optionee represents to the Company the following:
(a) Optionee is aware of the Company's business affairs and financial
condition and has acquired sufficient information about the Company to reach
an informed and knowledgeable decision to acquire the securities. Optionee is
acquiring these securities for investment for Optionee's own account only and
not with a view to, or for resale in connection with, any "distribution"
thereof within the meaning of the Securities Act of 1933, as amended (the
"Securities Act").
(b) Optionee acknowledges and understands that the securities constitute
"restricted securities" under the Securities Act and have not been registered
under the Securities Act in reliance upon a specific exemption therefrom,
which exemption depends upon, among other things, the bona fide nature of
Optionee's investment intent as expressed herein. In this connection,
Optionee understands that, in the view of the Securities and Exchange
Commission, the statutory basis for such exemption may be unavailable if
Optionee's representation was predicated solely upon a present intention to
hold these Securities for the minimum capital gains period specified under
tax statutes, for a deferred sale, for or until an increase or decrease in
the market price of the Securities, or for a period of one year or any other
fixed period in the future. Optionee further understands that the Securities
must be held indefinitely unless they are subsequently registered under the
Securities act or an exemption from such registration is available. Optionee
further acknowledges and understands that the Company is under no obligation
to register the securities. Optionee understands that the certificate
evidencing the securities will be imprinted with a legend which prohibits the
transfer of the Securities unless they are registered or such registration is
not required in the opinion of counsel satisfactory to the Company, a legend
prohibiting their transfer without the consent of the Commissioner of
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<PAGE>
Corporations of the State of California and any other legend required under
applicable state securities laws.
(c) Optionee is familiar with the provisions of Rule 701 and Rule 144,
each promulgated under the Securities Act, which, in substance, permit
limited public resale of "restricted securities" acquired, directly or
indirectly from the issuer thereof, in a non-public offering subject to the
satisfaction of certain conditions. Rule 701 provides that if the issuer
qualifies under Rule 701 at the time of the grant of the Option to the
Optionee, the exercise will be exempt from registration under the Securities
Act. In the event the Company becomes subject to the reporting requirements
of Section 13 or 15(d) of the Securities Exchange Act of 1934, ninety (90)
days thereafter (or such longer period as any market stand-off agreement may
require) the securities exempt under Rule 701 may be resold, subject to the
satisfaction of certain of the conditions specified by Rule 144, including:
(1) the resale being make through a broker in an unsolicited "broker's
transaction" or in transactions directly with a market maker (as said term is
defined under the Securities Exchange Act of 1934); and, in the case of an
affiliate, (2) the availability of certain public information about the
Company, (3) the amount of securities being sold during any three month
period not exceeding the limitations specified in Rule 144(e), and (4) the
timely filing of a Form 144, if applicable.
In the event that the Company does not qualify under Rule 701 at the
time of grant of the Option, then the securities may be resold in certain
limited circumstances subject to the provisions of rule 144, which requires
the resale to occur not less than two years after the party has purchased,
and made full payment for, within the meaning of Rule 144, the securities to
be sold; and, in the case of an affiliate, or of a non-affiliate who has held
the securities less than three years, the satisfaction of the conditions set
forth in sections (1), (2), (3) and (4) of the paragraph immediately above.
(d) Optionee hereby agrees that if so requested by the Company or any
representative of the underwriters in connection with any registration of the
offering of any securities of the Company under the 1933 Act, the Optionee
shall not sell or otherwise transfer any Shares or other securities of the
Company during the 180-day period following the effective date of a
registration statement of the Company filed under the 1933 Act; provided,
however, that such restriction shall only apply to the first registration
statement of the Company to become effective under the 1933 Act which include
securities to be sold on behalf of the Company to the public in an
underwritten public offering under the 1933 Act. The Company may impose
stop-transfer instructions with respect to securities subject to the
foregoing restrictions until the end of such 180-day period.
(e) Optionee further understand that in the event all of the applicable
requirements of Rule 701 or 144 are not satisfied, registration under the
Securities Act, compliance with Regulation A, or some other registration
exemption will be required; and that, notwithstanding the fact the Rules 144
and 701 are not exclusive, the Staff of the Securities and exchange
Commission has expressed its opinion that persons proposing to sell private
placement securities other than in a registered offering and otherwise than
pursuant to Rules 144 or 701 will have a substantial burden of proof in
establishing that an exemption from registration is available for
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<PAGE>
such offers or sales, and that such persons and their respective brokers who
participate in such transactions do so at their own risk. Optionee
understands that no assurances can be given that any such other registration
exemption will be available in such event.
(f) Optionee understands that the certificate evidencing the Securities
will be imprinted with a legend which prohibits the transfer of the
Securities without the consent of the Commissioner of Corporations of
California. Optionee has read the applicable Commissioner's Rules with
respect to such restriction, a copy of which is attached.
Signature of Optionee:
Dated:
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