<PAGE>
As filed with the Securities and Exchange Commission on September 25, 1998
File No. 333-_____
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------
FORM S-8 REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
----------
CABLETRON SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
Delaware 04-2797263
-------- ----------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
35 Industrial Way
Rochester, New Hampshire 03867
-----------------------------------------------
(Address of principal executive offices, including zip code)
NETVANTAGE, INC. EQUITY INCENTIVE PLAN; NETVANTAGE, INC. 1996 INCENTIVE STOCK
PLAN; NETVANTAGE, INC. 1994 INCENTIVE AND NONSTATUTORY STOCK OPTION PLAN; and
NETVANTAGE, INC. 1992 INCENTIVE AND NONSTATUTORY STOCK OPTION PLAN
------------------------------------------------------------------
(Full title of the plans)
David J. Kirkpatrick
Director of Finance and
Chief Financial Officer
Cabletron Systems, Inc.
35 Industrial Way
Rochester, New Hampshire 03867
(603) 332-9400
-----------------------------------------------------------
(Name, address and telephone number of agent for service)
CALCULATION OF REGISTRATION FEE
- --------------------------------------------------------------------------------
Title of Amount Proposed Proposed Amount of
Securities to be maximum maximum registration
to be registered offering aggregate fee
registered price per offering
share/(1)/ price/(1)/
- --------------------------------------------------------------------------------
Common Stock, 1,434,900 $6.24 $8,953,776 $2,650
par value $0.01 shares
________________________________________________________________________________
/(1)/The offering price for the shares of Cabletron Systems, Inc. common stock,
par value $0.01 (the "Shares") subject to options on the date hereof is the
average per share exercise price of such options. The average per share exercise
price is equal to the aggregate exercise price for NetVantage, Inc.
("NetVantage") Class A, Class B and Class E Common Stock purchasable pursuant to
all options under the NetVantage, Inc. Equity Incentive Plan; NetVantage, Inc.
1996 Incentive Stock Plan; NetVantage, Inc. 1994 Incentive and Nonstatutory
Stock Option Plan; and NetVantage, Inc. 1992 Incentive and Nonstatutory Stock
Option Plan (collectively, the "NetVantage Stock Option Plans") divided by the
number of shares purchasable pursuant to all such NetVantage options and rounded
to the nearest whole cent.
Exhibit Index on page 7
<PAGE>
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
Item 3. Incorporation of Documents by Reference.
---------------------------------------
Cabletron Systems, Inc. (the "Registrant" or the "Company") hereby incorporates
the following documents herein by reference:
(a) The Registrant's Annual Report on Form 10-K for the fiscal year ended
February 29, 1998 (which incorporates by reference certain information from
the Registrant's Proxy Statement relating to the 1998 Annual Meeting of
Shareholders) (File No. 1-10288).
(b) The Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended
May 31, 1998 (File No.01-10228).
(c) The Registrant's Current Report on Form 8-K filed on September 10, 1998
(File No. 1-10228).
(d) The Registrant's Current Report on Form 8-K filed on July 31, 1998 (File
No. 1-10228).
(e) The Registrant's Current Report on Form 8-K filed on March 31, 1998 (File
No. 1-10228).
(f) The Registrant's Current Report on Form 8-K/A filed on March 4, 1998 (File
No. 1-10228).
(g) All other reports filed by the Registrant with the Commission pursuant to
Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 (the
"Exchange Act") since the end of the fiscal year covered by the
Registrant's Annual Report referred to above.
(h) The description of the common stock of the Registrant contained in the
Registrant's Registration Statement on Form 8-A (File No. 1-10288) filed
with the Commission under Section 12 of the Exchange Act on April 9, 1989,
including all amendments and reports filed for the purpose of updating such
description.
All documents subsequently filed by the Registrant pursuant to Section
13(a), Section 13(c), Section 14 and Section 15(d) of the Exchange Act prior to
the filing of a post-effective amendment to this registration statement that
indicates that all securities offered have been sold or which deregisters all
securities then remaining unsold, shall be deemed incorporated herein by
reference from the date of filing of such documents.
Item 4. Description of Securities.
-------------------------
Not required.
Item 5. Interests of Named Experts and Counsel.
--------------------------------------
No material interests.
Item 6. Indemnification of Directors and Officers.
-----------------------------------------
Section 145 of the Delaware General Corporation Law, as amended, provides
that a corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal or investigative (other than an
action by or in the right of the corporation) by reason of the fact that he is
or was a director, officer, employee or agent of the
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corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful.
Section 145 further provides that a corporation similarly may indemnify any such
person serving in any such capacity who was or is a party or is threatened to be
made a party to any threatened, pending or completed action or suit by or in the
right of the corporation to procure a judgment in its favor, against expenses
actually and reasonably incurred in connection with the defense or settlement of
such action or suit if he acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the corporation and
except that no indemnification shall be made in respect of any claim, issue or
matter as to which such person shall have been adjudged to be liable to the
corporation unless and only to the extent that the Delaware Court of Chancery or
such other court in which such action or suit was brought shall determine upon
application that, despite the adjudication of liability but in view of all the
circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the Court of Chancery or such other court
shall deem proper.
Section 102(b)(7) of the Delaware General Corporation Law, as amended,
permits a corporation to include in its certificate of incorporation a provision
eliminating or limiting the personal liability of a director to the corporation
or its stockholders for monetary damages for breach of fiduciary duty as a
director, provided that such provision shall not eliminate or limit the
liability of a director (i) for any breach of the director's duty of loyalty to
the corporation or its stockholders, (ii) for acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of law,
(ii) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) under Section 174 of the
Delaware General Corporation Law (relating to unlawful payment of dividends and
unlawful stock purchase and redemption), or (iv) for any transaction from which
the director derived an improper personal benefit.
The Registrant's Restated Certificate of Incorporation, as amended,
provides that the Company's Directors shall not be liable to the Registrant or
its stockholders for monetary damages for breach of fiduciary duty as a
director, except to the extent that exculpation from liabilities is not
permitted under the Delaware General Corporation Law as in effect at the time
such liability is determined. The Restated Certificate of Incorporation, as
amended, further provides that the Registrant shall indemnify its directors and
officers to the full extent permitted by the law of the State of Delaware.
Item 7. Exemption From Registration Claimed.
-----------------------------------
Not applicable.
Item 8. Exhibits.
--------
Exhibit
4.1. Specimen stock certificate representing Cabletron Common Stock which
is incorporated by reference to Exhibit 4.1 of Cabletron's
Registration Statement on Form S-1 (File No. 33-28055).
4.2. NetVantage, Inc. Equity Incentive Plan.
4.3. NetVantage, Inc. 1996 Incentive Stock Plan.
4.4. NetVantage, Inc. 1994 Incentive and Nonstatutory Stock Option Plan.
4.5. NetVantage, Inc. 1992 Incentive and Nonstatutory Stock Option Plan.
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<PAGE>
4.6. Form of Stock Option Assumption Agreement used in connection with the
NetVantage, Inc. Equity Incentive Plan; NetVantage, Inc. 1996 Incentive Stock
Plan; NetVantage, Inc. 1994 Incentive and Nonstatutory Stock Option Plan; and
NetVantage, Inc. 1992 Incentive and Nonstatutory Stock Option Plan.
5. Opinion of Ropes & Gray.
23.1. Consent of KPMG Peat Marwick LLP.
23.2. Consent of PricewaterhouseCoopers LLP.
23.3. Consent of Ropes & Gray (contained in the opinion filed as Exhibit 5
to this Registration Statement).
24. Powers of Attorney (included in Part II of this registration statement
under the caption "Signatures").
Item 9. Undertakings.
------------
(a) The undersigned Registrant hereby undertakes:
(1) to file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement: (i) to include any
prospectus required by Section 10(a)(3) of the Securities Act of 1933; (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; and (iii) to include
any material information with respect to the plan of distribution not previously
disclosed in the registration statement or any material change to such
information in the registration statement; provided, however, that paragraphs
-------- -------
(a)(1)(i) and (a)(1)(ii) shall not apply if the information required to be
included in a post-effective amendment by those paragraphs is contained in
periodic reports filed by the Registrant pursuant to Section 13 or Section 15(d)
of the Exchange Act that are incorporated by reference in the registration
statement;
(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 herein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof;
(3) to remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining 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.
(c) 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 Securities Act of 1933 and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the Registrant of expenses incurred or paid by a
director, officer or controlling person of the Registrant in the successful
defense of any action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act of 1933 and will
be governed by the final adjudication of such issue.
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[THIS PAGE LEFT INTENTIONALLY BLANK]
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-8 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Rochester, State of New Hampshire on
September 25, 1998.
By: /s/ David J. Kirkpatrick
-------------------------------
David J. Kirkpatrick
Executive Vice-President of
Finance and Chief
Financial Officer
Each person whose signature appears below constitutes and appoints Craig R.
Benson and David J. Kirkpatrick, and each of them individually, his true and
lawful attorney-in-fact and agent with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all amendments (including post-effective amendments)
to this registration statement on Form S-8 to be filed by Cabletron Systems,
Inc., and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorneys-in-fact and agents full power and authority to be done in and
about the premises, as fully to all intents and purposes as he might or could do
in person, hereby ratifying and confirming all that said attorneys-in-fact and
agents, or their substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement on Form S-8 has been signed below by the following
persons in the capacities shown on the date indicated.
Signature Capacity Date
- --------- -------- ----
/s/ Craig R. Benson Chairman, President, Chief September 25, 1998
- --------------------------- Executive Officer, Treasurer
Craig R. Benson and Director (principal
executive officer)
/s/ David J. Kirkpatrick Executive Vice-President of September 25, 1998
- --------------------------- Finance and Chief Financial
David J. Kirkpatrick Officer (principal financial and
accounting officer)
/s/ Michael D. Myerow Secretary and Director September 25, 1998
- ---------------------------
Michael D. Myerow
/s/ Paul R. Duncan Director September 25, 1998
- ---------------------------
Paul R. Duncan
/s/ Donald F. McGuinness Director September 25, 1998
- ---------------------------
Donald F. McGuinness
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EXHIBIT INDEX
Exhibit
Number Title of Exhibit Page
- ------- ---------------- ----
4.1. Specimen stock certificate representing Cabletron
Common Stock which is incorporated by reference
to Exhibit 4.1 of Cabletron's Registration Statement
on Form S-1 (File No. 33-28055).
4.2. NetVantage, Inc. Equity Incentive Plan.
4.3. NetVantage, Inc. 1996 Incentive Stock Plan.
4.4. NetVantage, Inc. 1994 Incentive and Nonstatutory
Stock Option Plan.
4.5. NetVantage, Inc. 1992 Incentive and Nonstatutory
Stock Option Plan.
4.6. Form of Stock Option Assumption Agreement used
in connection with the NetVantage, Inc. Equity
Incentive Plan; NetVantage, Inc. 1996 Incentive
Stock Plan; NetVantage, Inc. 1994 Incentive and
Nonstatutory Stock Option Plan; and NetVantage,
Inc. 1992 Incentive and Nonstatutory Stock Option
Plan.
5. Opinion of Ropes & Gray.
23.1. Consent of KPMG Peat Marwick LLP.
23.2. Consent of PricewaterhouseCoopers LLP.
23.3. Consent of Ropes & Gray (contained in the opinion
filed as Exhibit 5 to this Registration Statement).
24. Powers of Attorney (included in Part II of this
registration statement under the caption
"Signatures").
<PAGE>
EXHIBIT 4.2
NETVANTAGE, INC.
EQUITY INCENTIVE PLAN
---------------------
SECTION 1. PURPOSE; DEFINITIONS.
(a) Purpose. The purpose of the Plan is to provide the directors and
-------
selected eligible employees of, and consultants to, NetVantage, Inc., a Delaware
corporation, its subsidiaries and affiliates an opportunity to participate in
the Company's future by offering them an opportunity to acquire stock in the
Company so as to retain, attract and motivate them.
(b) Definitions. For purposes of the Plan, the following terms have the
-----------
following meanings:
(i) "Award" means any award under the Plan, including any Option,
-----
Restricted Stock, Stock Purchase Right or Performance Share Award.
(ii) "Award Agreement" means, with respect to each Award, the signed
---------------
written agreement between the Company and the Plan participant setting forth the
terms and conditions of the Award.
(iii) "Board" means the Board of Directors of the Company.
-----
(iv) "Change in Control" has the meaning set forth in Section 9(a).
-----------------
(v) "Change in Control Price" has the meaning set forth in Section
-----------------------
9(c).
(vi) "Code" means the Internal Revenue Code of 1986, as amended from
----
time to time, and any successor statute.
(vii) "Commission" means the Securities and Exchange Commission and
----------
any successor agency.
(viii) "Committee" means the Committee referred to in Section 2, or
---------
the Board in its capacity as administrator of the Plan in accordance with
Section 2.
(ix) "Company" means NetVantage, Inc., a Delaware corporation.
-------
(x) "Disability" means permanent and total disability as determined
----------
by the Committee for purposes of the Plan.
(xi) "Exchange Act" means the Securities Exchange Act of 1934, as
------------
amended from time to time, and any successor statute.
(xii) "Fair Market Value" means as of any given date (a) if the Stock
-----------------
is listed on any established stock exchange or a national market system, either
the closing sale price for the Stock or the closing bid if no sales were
reported, or the average of the bid and ask prices, as selected by the Committee
in its discretion, as quoted on such system or exchange, as reported in
<PAGE>
The Wall Street Journal; or (b) in the absence of an established market for the
- --- ---- ------ -------
Stock, the fair market value of the Stock as determined by the Committee in good
faith.
(xiii) "Incentive Stock Option" means any Option intended to be and
----------------------
designated as an "incentive stock option" within the meaning of Section 422 of
the Code.
(xiv) "Nonqualified Stock Option" means any Option that is not an
-------------------------
Incentive Stock Option.
(xv) "Option" means an option granted under Section 5.
------
(xvi) "Performance Period" means the period determined by the
------------------
Committee under Section 8(a).
(xvii) "Performance Share" means a share of Stock granted pursuant to
-----------------
a Performance Share Award.
(xviii) "Performance Share Award" means an Award under Section 8.
-----------------------
(xix) "Plan" means this NetVantage, Inc. Equity Incentive Plan, as
----
amended from time to time.
(xx) "Restricted Stock" means an Award of Stock subject to
----------------
restrictions, as more fully described in Section 6.
(xxi) "Restriction Period" means the period determined by the
------------------
Committee under Section 6(b).
(xxii) "Rule 16b-3" means Rule 16b-3 under Section 16(b) of the
----------
Exchange Act, as amended from time to time, and any successor rule.
(xxiii) "Stock" means the Class A Common Stock of the Company, and any
-----
successor security.
(xxiv) "Stock Purchase Right" means an Award granted under Section 7.
--------------------
(xxv) "Subsidiary" has the meaning set forth in Section 424 of the
----------
Code.
(xxvi) "Tax Date" means the date defined in Section 10(f).
--------
(xxvii) "Termination" means, for purposes of the Plan, with respect to
-----------
a participant, that (a) if the participant is a director of the Company, he or
she has ceased to be, for any reason, a director and (b) if the participant is
an employee of or consultant to the Company, he or she has ceased to be, for any
reason, employed by, or consulting to, the Company, a subsidiary or an
affiliate; provided, that for purposes of this definition, if so determined by
the Committee, Termination shall not include a change in status from an employee
of, to a consultant to the Company or any subsidiary or affiliate, or vice
versa.
2
<PAGE>
SECTION 2. ADMINISTRATION.
(a) Committee. The Plan shall be administered by the Board or, upon
---------
delegation by the Board, by a committee of the Board that will satisfy Rule 16b-
3 and Section 162(m) of the Code, as in effect with respect to the Company from
time to time. In connection with the administration of the Plan, the Committee
shall have the powers possessed by the Board. The Committee may act only by a
majority of its members, except that the Committee may from time to time select
another committee or one or more other persons to be responsible for any matters
so long as the selection comports with the requirements of Section 162(m) of the
Code and Rule 16b-3. The Board at any time may abolish the Committee and revest
in the Board the administration of the Plan.
(b) Authority. The Committee shall grant Awards to directors, eligible
---------
employees and consultants. In particular and without limitation, the Committee,
subject to the terms of the Plan, shall:
(i) select the directors, officers, other key employees and
consultants to whom Awards may be granted;
(ii) determine whether and to what extent Awards are to be granted
under the Plan;
(iii) determine the number of shares to be covered by each Award
granted under the Plan;
(iv) determine the terms and conditions of any Award granted under the
Plan and any related loans to be made by the Company, based upon factors
determined by the Committee; and
(v) determine to what extent and under what circumstances any Award
payments may be deferred by a participant.
(c) Committee Determinations Binding. The Committee may adopt, alter and
--------------------------------
repeal administrative rules, guidelines and practices governing the Plan as it
from time to time shall deem advisable, may interpret the terms and provisions
of the Plan, any Award and any Award Agreement and may otherwise supervise the
administration of the Plan. Any determination made by the Committee pursuant to
the provisions of the Plan with respect to any Award shall be made in its sole
discretion at the time of the grant of the Award or, unless in contravention of
any express term of the Plan or Award, at any later time. All decisions made by
the Committee under the Plan shall be binding on all persons, including the
Company and Plan participants.
SECTION 3. STOCK SUBJECT TO PLAN.
(a) Number of Shares. The total number of shares of Stock reserved and
----------------
available for issuance pursuant to Awards under this Plan shall be 800,000
shares. Such shares may consist, in whole or in part, of authorized and unissued
shares or treasury shares or shares reacquired in
3
<PAGE>
private transactions or open market purchases, but all shares issued under the
Plan, regardless of source, shall be counted against the 800,000 share
limitation. If any Option terminates or expires without being exercised in full
or if any shares of Stock subject to an Award are forfeited, or if an Award
otherwise terminates without a payment being made to the participant in the form
of Stock, the shares issuable under such Option or Award shall again be
available for issuance in connection with Awards. Any Award under this Plan
shall be governed by the terms of the Plan and any applicable Award Agreement.
(b) Adjustments. In the event of any merger, reorganization,
-----------
consolidation, recapitalization, stock dividend, stock split or other change in
corporate structure affecting the Stock, such substitution or adjustments shall
be made in the aggregate number of shares of Stock reserved for issuance under
the Plan, in the number and exercise price of shares subject to outstanding
Options, and in the number of shares subject to other outstanding Awards, as may
be determined to be appropriate by the Committee, in its sole discretion;
provided, however, that the number of shares subject to any Award shall always
be a whole number.
SECTION 4. ELIGIBILITY.
Awards may be granted to directors, officers and other key employees of,
and consultants to, the Company, its subsidiaries and affiliates.
SECTION 5. STOCK OPTIONS.
(a) Types. Any Option granted under the Plan shall be in such form as the
-----
Committee may from time to time approve. The Committee shall have the authority
to grant to any participant Incentive Stock Options, Nonqualified Stock Options
or both types of Options. Incentive Stock Options may be granted only to
employees of the Company, its parent (within the meaning of Section 424(e) of
the Code) or Subsidiaries. Any portion of an Option that is not designated as,
or does not qualify as, an Incentive Stock Option shall constitute a
Nonqualified Stock Option.
(b) Terms and Conditions. Options granted under the Plan shall be subject
--------------------
to the following terms and conditions:
(i) Option Term. The term of each Option shall be fixed by the
-----------
Committee, but no Incentive Stock Option shall be exercisable more than ten
years after the date the Option is granted, and no Nonqualified Stock Option
shall be exercisable more than 15 years after the date the Option is granted.
If, at the time the Company grants an Incentive Stock Option, the optionee owns
directly or by attribution stock possessing more than 10 percent of the total
combined voting power of all classes of stock of the Company, or any parent or
Subsidiary of the Company, the Incentive Stock Option shall not be exercisable
more than five years after the date of grant.
(ii) Grant Date. The Company may grant Options under the Plan at any
----------
time and from time to time before the Plan terminates. The Committee shall
specify the date of grant or, if it fails to, the date of grant shall be the
date of action taken by the Committee to grant the
4
<PAGE>
Option. However, if an Option is approved in anticipation of employment, the
date of grant shall be the date the intended optionee is first treated as an
employee for payroll purposes.
(iii) Exercise Price. The exercise price per share of Stock
--------------
purchasable under an Option shall be equal to at least 85 percent of the Fair
Market Value on the date of grant, and in the case of Incentive Stock Options
shall be equal to at least the Fair Market Value on the date of grant; provided,
however, that if, at the time the Company grants an Incentive Stock Option, the
optionee owns directly or by attribution stock possessing more than 10 percent
of the total combined voting power of all classes of stock of the Company, or
any parent or Subsidiary of the Company, then the exercise price shall be not
less than 110 percent of the Fair Market Value on the date the Incentive Stock
Option is granted.
(iv) Exercisability. Subject to the other provisions of the Plan, an
--------------
Option shall be exercisable in its entirety at grant or at such times and in
such amounts as are specified in the Award Agreement evidencing the Option. The
Committee, in its absolute discretion, at any time may waive any limitations
respecting the time at which an Option first becomes exercisable, in whole or in
part, including acceleration in connection with a reorganization of the Company
if there is no adverse consequences to the Company therefrom.
(v) Method of Exercise; Payment. To the extent the right to purchase
---------------------------
shares has accrued, Options may be exercised, in whole or in part, from time to
time, by written notice from the optionee to the Company stating the number of
shares being purchased, accompanied by payment of the exercise price for the
shares.
SECTION 6. RESTRICTED STOCK.
(a) Price. The Committee may grant to a participant Restricted Stock. The
-----
grantee shall pay no consideration therefor.
(b) Restrictions. Subject to the provisions of the Plan and the Award
------------
Agreement, during the Restriction Period set by the Committee, commencing with,
and not exceeding ten years from, the date of such Award, the participant shall
not be permitted to sell, assign, transfer, pledge or otherwise encumber shares
of Restricted Stock. Within these limits, the Committee may provide for the
lapse of such restrictions in installments and may accelerate or waive such
restrictions, in whole or in part, based on service, performance or such other
factors or criteria as the Committee may determine.
(c) Dividends. Unless otherwise determined by the Committee, with respect
---------
to dividends on shares of Restricted Stock, dividends payable in cash shall be
automatically reinvested in additional Restricted Stock, and dividends payable
in Stock shall be paid in the form of Restricted Stock.
(d) Termination. Except to the extent otherwise provided in the Award
-----------
Agreement and pursuant to Section 6(b), in the event of a Termination during the
Restriction Period, all shares still subject to restriction shall be forfeited
by the participant.
5
<PAGE>
SECTION 7. STOCK PURCHASE RIGHTS.
(a) Price. The Committee may grant Stock Purchase Rights which shall
-----
enable the recipient to purchase Stock at a price equal to not less than 85
percent of its Fair Market Value on the date of grant.
(b) Exercisability. Stock Purchase Rights shall be exercisable for a
--------------
period determined by the Committee not exceeding 30 days from the date of the
grant.
SECTION 8. PERFORMANCE SHARES.
(a) Awards. The Committee shall determine the nature, length and starting
------
date of the Performance Period for each Performance Share Award, which period
shall be at least one year and not more than six years. The consideration
payable by a participant with respect to a Performance Share Award shall be an
amount determined by the Committee in the exercise of the Committee's discretion
at the time of the Award; provided, that the amount of consideration may be zero
and may in no event exceed 50 percent of the Fair Market Value at the time of
grant. The Committee shall determine the performance objectives to be used in
awarding Performance Shares and the extent to which such Performance Shares have
been earned. Performance Periods may overlap and participants may participate
simultaneously with respect to Performance Share Awards that are subject to
different Performance Periods and different performance factors and criteria. At
the beginning of each Performance Period, the Committee shall determine for each
Performance Share Award subject to such Performance Period the number of shares
of Stock (which may consist of Restricted Stock) to be awarded to the
participant at the end of the Performance Period if and to the extent that the
relevant measures of performance for such Performance Share Award are met. Such
number of shares of Stock may be fixed or may vary in accordance with such
performance or other criteria as may be determined by the Committee. The
Committee may provide that (i) amounts equivalent to interest at such rates as
the Committee may determine, or (ii) amounts equivalent to dividends paid by the
Company upon outstanding Stock shall be payable with respect to Performance
Share Awards.
(b) Termination. Except as otherwise provided in the Award Agreement or
-----------
determined by the Committee, in the event of a Termination during a Performance
Period, the participant shall not be entitled to any payment with respect to the
Performance Shares subject to the Performance Period.
(c) Form of Payment. Payment shall be made in the form of cash or whole
---------------
shares of Stock, as the Committee, in its discretion, shall determine.
SECTION 9. CHANGE IN CONTROL.
(a) Definition of "Change in Control". For purposes of Section 9(b), a
---------------------------------
"Change in Control" means the occurrence of any one of the following:
6
<PAGE>
(i) Any "person," as such term is used in Sections 13(d) and 14(d) of
the Exchange Act (other than the Company, a subsidiary, an affiliate, or a
Company employee benefit plan, including any trustee of such plan acting as
trustee) is or becomes the "beneficial owner" (as defined in Rule 13d-3 under
the Exchange Act), directly or indirectly, of securities of the Company
representing 35 percent or more of the combined voting power of the Company's
then outstanding securities;
(ii) The solicitation of proxies (within the meaning of Rule 14a-1(k)
under the Exchange Act and any successor rule) with respect to the election of
any director of the Company where such solicitation is for any candidate who is
not a candidate proposed by a majority of the Board in office prior to the time
of such election; or
(iii) The dissolution or liquidation (partial or total) of the Company
or a sale of assets involving 30 percent or more of the assets of the Company,
any merger or reorganization of the Company whether or not another entity is the
survivor, a transaction pursuant to which the holders, as a group, of all of the
shares of the Company outstanding prior to the transaction hold, as a group,
less than 70 percent of the shares of the Company outstanding after the
transaction, or any other event which the Board determines, in its discretion,
would materially alter the structure of the Company or its ownership.
(b) Impact of Event. In the event of a "Change in Control" as defined in
---------------
Section 9(a), but only if and to the extent so specifically determined by the
Board in its discretion, which determination may be amended or reversed only by
the affirmative vote of a majority of the persons who were directors at the time
such determination was made, acceleration and valuation provisions no more
favorable to participants than the following may apply:
(i) Any Options outstanding as of the date such Change in Control is
determined to have occurred and not then exercisable and vested shall become
fully exercisable and vested.
(ii) The restrictions and limitations applicable to any Restricted
Stock and Stock Purchase Rights shall lapse, and such Restricted Stock shall
become fully vested.
(iii) The value (net of any exercise price) of all outstanding
Options, Restricted Stock and Stock Purchase Rights, unless otherwise determined
by the Committee at or after grant and subject to Rule 16b-3, shall be cashed
out on the basis of the "Change in Control Price," as defined in Section 9(c),
as of the date such Change in Control is determined to have occurred or such
other date as the Board may determine prior to the Change in Control.
(iv) Any outstanding Performance Share Awards shall be vested and paid
in full as if all performance criteria had been met.
(c) Change in Control Price. For purposes of this Section 9, "Change in
-----------------------
Control Price" means the highest price per share paid in any transaction
reported on the National Market System of the National Association of Securities
Dealers, Inc. Automated Quotation System or paid or offered in any bona fide
transaction related to a potential or actual Change in Control of
7
<PAGE>
the Company at any time during the preceding 60-day period as determined by the
Board, except that, in the case of Incentive Stock Options, such price shall be
based only on transactions reported for the date on which the Board decides to
cash out such Options.
SECTION 10. GENERAL PROVISIONS.
(a) Award Grants. Any Award may be granted either alone or in addition to
------------
other Awards granted under the Plan. Subject to the terms and restrictions set
forth elsewhere in the Plan, the Committee shall determine the consideration, if
any, payable by the participant for any Award and, in addition to those set
forth in the Plan, any other terms and conditions of the Awards. The Committee
may condition the grant or payment of any Award upon the attainment of specified
performance goals or such other factors or criteria, including vesting based on
continued service on the Board, employment or consulting, as the Committee shall
determine. Performance objectives may vary from participant to participant and
among groups of participants and shall be based upon such Company, subsidiary,
group or division factors or criteria as the Committee may deem appropriate,
including, but not limited to, earnings per share or return on equity. The other
provisions of Awards also need not be the same with respect to each recipient.
Unless specified otherwise in the Plan or by the Committee, the date of grant of
an Award shall be the date of action by the Committee to grant the Award. The
Committee may also substitute new Options for previously granted Options,
including previously granted Options having higher exercise prices.
(b) Award Agreement. As soon as practicable after the date of an Award
---------------
grant, the Company and the participant shall enter into a written Award
Agreement identifying the date of grant, and specifying the terms and conditions
of the Award. Options are not exercisable until after execution of the Award
Agreement by the Company and the Plan participant, but a delay in execution of
the Award Agreement shall not affect the validity of the Option grant.
(c) Certificates. All certificates for shares of Stock or other securities
------------
delivered under the Plan shall be subject to such stock transfer orders, legends
and other restrictions as the Committee may deem advisable under the rules,
regulations and other requirements of the Commission, any market in which the
Stock is then traded and any applicable federal, state or foreign securities
law.
(d) Termination. Unless otherwise provided in the applicable Award
-----------
Agreement or by the Committee, in the event of Termination for any reason other
than death, retirement or Disability, Awards held at the date of Termination
(and only to the extent then exercisable or payable, as the case may be) may be
exercised in whole or in part at any time within three months after the date of
Termination, or such lesser period specified in the Award Agreement (but in no
event after the expiration date of the Award), but not thereafter. If
Termination is due to retirement or to death or Disability, Awards held at the
date of Termination (and only to the extent then exercisable or payable, as the
case may be) may be exercised in whole or in part by the participant in the case
of retirement or Disability, by the participant's guardian or legal
representative or by the person to whom the Award is transferred by will or the
laws of descent and distribution, at
8
<PAGE>
any time within one year from the date of Termination or any lesser period
specified in the Award Agreement (but in no event after the expiration of the
Award).
(e) Delivery of Purchase Price. If and only to the extent authorized by
--------------------------
the Committee, participants may make all or any portion of any payment due to
the Company
(i) with respect to the consideration payable for an Award,
(ii) upon exercise of an Award, or
(iii) with respect to federal, state, local or foreign tax payable in
connection with an Award, by delivery of (x) cash, (y) check, or (z) any
property other than cash (including a promissory note of the participant or
shares of Stock or securities) so long as, if applicable, such property
constitutes valid consideration for the Stock under, and otherwise complies
with, applicable law. No promissory note under the Plan shall have a term
(including extensions) of more than five years or shall be of a principal amount
exceeding 90 percent of the purchase price paid by the borrower.
(f) Tax Withholding. Unless the Committee permits otherwise, the
---------------
participant shall pay to the Company in cash, promptly when the amount of such
obligations becomes determinable (the "Tax Date"), all applicable federal,
state, local and foreign withholding taxes that the Committee in its discretion
determines to result, (i) from the lapse of restrictions imposed upon an Award,
(ii) upon exercise of an Award, or (iii) from a transfer or other disposition of
shares acquired upon exercise or payment of an Award, or otherwise related to
the Award or the shares acquired in connection with an Award.
A participant who has received an Award or payment under an Award may, to
the extent, if any, authorized by the Committee in its discretion, make an
election to (x) deliver to the Company a promissory note of the participant on
the terms set forth in Section 10(e), or (y) tender any such securities to the
Company to pay the amount of tax that the Committee in its discretion determines
to be required to be withheld by the Company; provided, however, that such
election shall be subject to the disapproval of the Committee.
Any shares or other securities so withheld or tendered shall be valued by
the Committee as of the date they are withheld or tendered; provided, however,
that Stock shall be valued at Fair Market Value on such date. The value of the
shares withheld or tendered may not exceed the required federal, state, local
and foreign withholding tax obligations as computed by the Company.
(g) No Transferability. No Award shall be assignable or otherwise
------------------
transferable by the participant other than by will or by the laws of descent and
distribution. During the life of a participant, an Award shall be exercisable,
and any elections with respect to an Award may be made, only by the participant
or participant's guardian or legal representative.
(h) Adjustment of Awards; Waivers. The Committee may adjust the
-----------------------------
performance goals and measurements applicable to Awards (i) to take into account
changes in law and accounting and tax rules, (ii) to make such adjustments as
the Committee deems necessary or
9
<PAGE>
appropriate to reflect the inclusion or exclusion of the impact of extraordinary
or unusual items, events or circumstances in order to avoid windfalls or
hardships, and (iii) to make such adjustments as the Committee deems necessary
or appropriate to reflect any material changes in business conditions. In the
event of hardship or other special circumstances of a participant and otherwise
in its discretion, the Committee may waive in whole or in part any or all
restrictions, conditions, vesting, or forfeiture with respect to any Award
granted to such participant.
(i) Non-Competition. The Committee may condition its discretionary waiver
---------------
of a forfeiture, the acceleration of vesting at the time of Termination of a
participant holding any unexercised or unearned Award, the waiver of
restrictions on any Award, or the extension of the expiration period to a period
not longer than that provided by the Plan upon such participant's agreement (and
compliance with such agreement) (i) not to engage in any business or activity
competitive with any business or activity conducted by the Company and (ii) to
be available for consultations at the request of the Company's management, all
on such terms and conditions (including conditions in addition to (i) and (ii))
as the Committee may determine.
(j) Dividends. The reinvestment of dividends in additional Stock or
---------
Restricted Stock at the time of any dividend payment pursuant to Section 6(c)
shall only be permissible if sufficient shares of Stock are available under
Section 3 for such reinvestment (taking into account then outstanding Awards).
(k) Regulatory Compliance. Each Award under the Plan shall be subject to
---------------------
the condition that, if at any time the Committee shall determine that (i) the
listing, registration or qualification of the shares of Stock upon any
securities exchange or for trading in any securities market or under any state
or federal law, (ii) the consent or approval of any government or regulatory
body or (iii) an agreement by the participant with respect thereto, is necessary
or desirable, then such Award shall not be consummated in whole or in part
unless such listing, registration, qualification, consent, approval or agreement
shall have been effected or obtained free of any conditions not acceptable to
the Committee.
(l) Rights as Shareholder. Unless the Plan or the Committee expressly
---------------------
specifies otherwise, an optionee shall have no rights as a shareholder with
respect to any shares covered by an Award until the stock certificates
representing the shares are actually delivered to the optionee. Subject to
Sections 3(b) and 6(c), no adjustment shall be made for dividends or other
rights for which the record date is prior to the date the certificates are
delivered.
(m) Beneficiary Designation. The Committee, in its discretion, may
-----------------------
establish procedures for a participant to designate a beneficiary to whom any
amounts payable in the event of the participant's death are to be paid.
(n) Additional Plans. Nothing contained in the Plan shall prevent the
----------------
Company, a subsidiary or an affiliate from adopting other or additional
compensation arrangements for its directors, employees and consultants.
(o) No Employment Rights; No Right to Directorship. Neither the adoption
----------------------------------------------
of this Plan nor the grant of any Award hereunder shall (i) confer upon any
employee any right to continued
10
<PAGE>
employment nor shall it interfere in any way with the right of the Company, a
subsidiary or an affiliate to terminate the employment of any employee at any
time; or (ii) confer upon any participant any right with respect to continuation
of the participant's membership on the Board or shall interfere in any way with
provisions in the Company's Articles of Incorporation and Bylaws relating to the
election, appointment, terms of office, and removal of members of the Board.
(p) Rule 16b-3. With respect to persons subject to Section 16 of the
----------
Exchange Act, transactions under this Plan are intended to comply with the
applicable conditions of Rule 16b-3 under the Exchange Act. To the extent any
provision of this Plan or action by the Committee fails to so comply, it shall
be adjusted to comply with Rule 16b-3, to the extent permitted by law and deemed
advisable by the Committee. It shall be the responsibility of persons subject to
Section 16 of the Exchange Act, not of the Company or the Committee, to comply
with the requirements of Section 16 of the Exchange Act; and neither the Company
nor the Committee shall be liable if this Plan or any transaction under this
Plan fails to comply with the applicable conditions of Rule 16b-3, or if any
such person incurs any liability under Section 16 of the Exchange Act.
(q) Governing Law. The Plan and all Awards shall be governed by and
-------------
construed in accordance with the laws of the State of California.
(r) Use of Proceeds. All cash proceeds to the Company under the Plan shall
---------------
constitute general funds of the Company.
(s) Unfunded Status of Plan. The Plan shall constitute an "unfunded" plan
-----------------------
for incentive and deferred compensation. The Committee may authorize the
creation of trusts or arrangements to meet the obligations created under the
Plan to deliver Stock or make payments; provided, however, that unless the
Committee otherwise determines, the existence of such trusts or other
arrangements shall be consistent with the "unfunded" status of the Plan.
(t) Assumption by Successor. The obligations of the Company under the Plan
-----------------------
and under any outstanding Award may be assumed by any successor corporation,
which for purposes of the Plan shall be included within the meaning of
"Company".
(u) Limitation on Award Grants. The Company may not grant Awards under the
--------------------------
Plan for more than 500,000 shares to any one participant over the life of the
Plan.
SECTION 11. AMENDMENTS AND TERMINATION.
The Board may amend, alter or discontinue the Plan or any Award, but no
amendment, alteration or discontinuance shall be made which would impair the
rights of a participant under an outstanding Award without the participant's
consent. No amendment, alteration or discontinuance shall require shareholder
approval except:
(a) an increase in the total number of shares reserved for issuance
pursuant to Awards under the Plan, or
11
<PAGE>
(b) with respect to provisions solely as they relate to Incentive Stock
Options, to the extent required for the Plan to comply with Section 422 of the
Code, or
(c) to the extent required by other applicable laws, rules or regulations,
or
(d) to the extent the Board otherwise concludes that shareholder approval
is advisable.
SECTION 12. EFFECTIVE DATE OF PLAN.
The Plan shall be effective as of May 1, 1997, but all Awards shall be
conditioned upon approval of the Plan (a) at a duly held shareholders' meeting
by the affirmative vote of the holders of a majority of the voting power of the
shares of the Company represented in person or by proxy at the meeting and
entitled to vote thereon, or (b) by an action by written consent of the holders
of a majority of the voting power of the shares of the Company entitled to vote.
SECTION 13. TERM OF PLAN.
No Award shall be granted on or after May 1, 2007, but Awards granted prior
to May 1, 2007 may extend beyond that date.
12
<PAGE>
EXHIBIT 4.3
NETVANTAGE, INC.
1996 INCENTIVE STOCK PLAN
-------------------------
1. OBJECTIVES.
The NETVANTAGE, INC. 1996 Incentive Stock Plan (the "Plan") is designed to
retain directors, executives and selected employees and consultants and reward
them for making major contributions to the success of the Company. These
objectives are accomplished by making long-term incentive awards under the Plan
thereby providing Participants with a proprietary interest in the growth and
performance of the Company.
2. DEFINITIONS.
(a) "Board" - The Board of Directors of the Company.
-----
(b) "California Securities Rules" - Chapter 3, Subchapter 2, Subarticle 4
---------------------------
of Article 4 of Title 10 of the Corporate Securities Rules of the Commissioner
of Corporations of the State of California.
(c) "Code" - The Internal Revenue Code of 1986, as amended from time to
----
time.
(d) "Committee" - The Executive Compensation Committee of the Company's
---------
Board, or such other committee of the Board that is designated by the Board to
administer the Plan, composed of not less than two members of the Board all of
whom are disinterested persons, as contemplated by Rule 16b-3 ("Rule 16b-3")
promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange
Act").
(e) "Company" - NETVANTAGE, INC. and its subsidiaries including
-------
subsidiaries of subsidiaries.
(f) "Exchange Act" - The Securities Exchange Act of 1934, as amended from
------------
time to time.
(g) "Fair Market Value" - The fair market value of the Company's issued and
-----------------
outstanding Stock as determined in good faith by the Board or Committee.
(h) "Grant" - The grant of any form of stock option, stock award, or stock
-----
purchase offer, whether granted singly, in combination or in tandem, to a
Participant pursuant to such terms, conditions and limitations as the Committee
may establish in order to fulfill the objectives of the Plan.
(i) "Grant Agreement" - An agreement between the Company and a Participant
---------------
that sets forth the terms, conditions and limitations applicable to a Grant.
<PAGE>
(j) "Option" - Either an Incentive Stock Option, in accordance with Section
------
422 of Code, or a Nonstatutory Option, to purchase the Company's Stock that may
be awarded to a Participant under the Plan. A Participant who receives an award
of an Option shall be referred to as an "Optionee."
(k) "Participant" - A director, officer, employee or consultant of the
-----------
Company to whom an Award has been made under the Plan.
(l) "Restricted Stock Purchase Offer" - A Grant of the right to purchase a
-------------------------------
specified number of shares of Stock pursuant to a written agreement issued under
the Plan.
(m) "Securities Act" - The Securities Act of 1933, as amended from time to
--------------
time.
(n) "Stock" - Authorized and issued or unissued shares of Class A Common
-----
Stock of the Company.
(o) "Stock Award" - A Grant made under the Plan in stock or denominated in
-----------
units of stock for which the Participant is not obligated to pay additional
consideration.
3. ADMINISTRATION
The Plan shall be administered by the Board, provided however, that the
Board may delegate such administration to the Committee. Subject to the
provisions of the Plan, the Board and/or the Committee shall have authority to
(a) grant, in its discretion, Incentive Stock Options in accordance with Section
422 of the Code, or Nonstatutory Options, Stock Awards or Restricted Stock
Purchase Offers; (b) determine in good faith the fair market value of the Stock
covered by any Grant; (c) determine which eligible persons shall receive Grants
and the number of shares, restrictions, terms and conditions to be included in
such Grants; (d) construe and interpret the Plan; (e) promulgate, amend and
rescind rules and regulations relating to its administration, and correct
defects, omissions and inconsistencies in the Plan or any Grant; (f) consistent
with the Plan and with the consent of the Participant, as appropriate, amend any
outstanding Grant or amend the exercise date or dates thereof; (g) determine the
duration and purpose of leaves of absence which may be granted to Participants
without constituting termination of their employment for the purpose of the Plan
or any Grant; and (h) make all other determinations necessary or advisable for
the Plan's administration. The interpretation and construction by the Board of
any provisions of the Plan or selection of Participants shall be conclusive and
final. No member of the Board or the Committee shall be liable for any action or
determination made in good faith with respect to the Plan or any Grant made
thereunder.
4. ELIGIBILITY
(a) General: The persons who shall be eligible to receive Grants shall be
-------
directors, officers, employees or consultants to the Company. The term
consultant shall mean any
2
<PAGE>
person, other than an employee, who is engaged by the Company to render services
and is compensated for such services. An Optionee may hold more than one Option.
Any issuance of a Grant to an officer or director of the Company subsequent to
the first registration of any of the securities of the Company under the
Exchange Act shall comply with the requirements of Rule 16b-3.
(b) Incentive Stock Options: Incentive Stock Options may only be issued to
-----------------------
employees of the Company. Incentive Stock Options may be granted to officers,
whether or not they are directors, provided they are also employees of the
Company. Payment of a director's fee shall not be sufficient to constitute
employment by the Company.
The Company shall not grant an Incentive Stock Option under the Plan to any
employee if such Grant would result in such employee holding the right to
exercise for the first time in any one calendar year, under all Incentive Stock
Options granted under the Plan or any other plan maintained by the Company, with
respect to shares of Stock having an aggregate fair market value, determined as
of the date of the Option is granted, in excess of $100,000. Should it be
determined that an Incentive Stock Option granted under the Plan exceeds such
maximum for any reason other than a failure in good faith to value the Stock
subject to such option, the excess portion of such option shall be considered a
Nonstatutory Option. To the extent the employee holds two (2) or more such
Options which become exercisable for the first time in the same calendar year,
the foregoing limitation on the exercisability of such Option as Incentive Stock
Options under the Federal tax laws shall be applied on the basis of the order in
which such Options are granted. If, for any reason, an entire Option does not
qualify as an Incentive Stock Option by reason of exceeding such maximum, such
Option shall be considered a Nonstatutory Option.
(c) Nonstatutory Option: The provisions of the foregoing Section 4(b)
-------------------
shall not apply to any Option designated as a "Nonstatutory Option" or which
sets forth the intention of the parties that the Option be a Nonstatutory
Option.
(d) Stock Awards and Restricted Stock Purchase Offers: The provisions of
-------------------------------------------------
this Section 4 shall not apply to any Stock Award or Restricted Stock Purchase
Offer under the Plan.
5. STOCK
(a) Authorized Stock: Stock subject to Grants may be either unissued or
----------------
reacquired Stock.
(b) Number of Shares: Subject to adjustment as provided in Section 6(i) of the
----------------
Plan, the total number of shares of Stock which may be purchased or granted
directly by Options, Stock Awards or Restricted Stock Purchase Offers, or
purchased indirectly through exercise of Options granted under the Plan shall
not exceed 800,000. If any Grant shall for any reason terminate or expire, any
shares allocated thereto but remaining unpurchased upon such expiration or
termination shall again be available for Grants with respect thereto under the
Plan as though no
3
<PAGE>
Grant had previously occurred with respect to such shares. Any shares of Stock
issued pursuant to a Grant and repurchased pursuant to the terms thereof shall
be available for future Grants as though not previously covered by a Grant.
(c) Reservation of Shares: The Company shall reserve and keep available at
---------------------
all times during the term of the Plan such number of shares as shall be
sufficient to satisfy the requirements of the Plan. If, after reasonable
efforts, which efforts shall not include the registration of the Plan or Grants
under the Securities Act, the Company is unable to obtain authority from any
applicable regulatory body, which authorization is deemed necessary by legal
counsel for the Company for the lawful issuance of shares hereunder, the Company
shall be relieved of any liability with respect to its failure to issue and sell
the shares for which such requisite authority was so deemed necessary unless and
until such authority is obtained.
(d) Application of Funds. The proceeds received by the Company from the
--------------------
sale of common Stock pursuant to the exercise of Options or rights under Stock
Purchase Agreements will be used for general corporate purposes.
(e) No Obligation to Exercise. The issuance of a Grant shall impose
-------------------------
no obligation upon the Participant to exercise any rights under such Grant.
6. TERMS AND CONDITIONS OF OPTIONS
Options granted hereunder shall be evidenced by agreements between the
Company and the respective Optionees, in such form and substance as the Board or
Committee shall from time to time approve. The form of Incentive Stock Option
Agreement attached hereto as Exhibit "A" and the three forms of a Nonstatutory
Stock Option Agreement for employees, for directors and for consultants,
attached hereto as Exhibits "B-1," "B-2" and "B3," respectively, shall be deemed
to be approved by the Board. Option agreements need not be identical, and in
each case may include such provisions as the Board or Committee may determine,
but all such agreements shall be subject to and limited by the following terms
and conditions:
(a) Number of Shares: Each Option shall state the number of shares to
----------------
which it pertains.
(b) Exercise Price: Each Option shall state the exercise price, which
--------------
shall be determined as follows:
(i) Any Option granted to a person who at the time the Option is
granted owns (or is deemed to own pursuant to Section 424(d) of the Code) stock
possessing more than ten percent (10%) of the total combined voting power or
value of all classes of stock of the Company, ("Ten Percent Holder") shall have
an exercise price of no less than 110% of the Fair Market Value of the Stock as
of the date of grant; and
4
<PAGE>
(ii) Incentive Stock Options granted to a person who at the time the
Option is granted is not a Ten Percent Holder shall have an exercise price of no
less than 100% of the Fair Market Value of the Class A Common Stock as of the
date of grant.
(iii) Nonstatutory Options granted to a person who at the time the
Option is granted is not a Ten Percent Holder shall have an exercise price of no
less than 85 % of the Fair Market Value of the Stock as of the date of grant.
For the purposes of this Section 6(b), the Fair Market Value per share shall
be the average of the bid and asked prices (or may be the closing price if such
stock is listed on the Nasdaq National Market System or Small Cap Issue Market)
on the date of grant of the Option, or if listed on a stock exchange, the
closing price on such exchange on such date of grant; provided however, that if
there is no public market for such Stock, the Fair Market Value shall be as
determined by the Board in good faith, which determination shall be conclusive
and binding.
(c) Medium and Time of Payment: The exercise price shall become immediately
--------------------------
due upon exercise of the Option and shall be paid in cash or check made payable
to the Company. Should the Company's outstanding Stock be registered under
Section 12(g) of the Exchange Act at the time the Option is exercised, then the
exercise price may also be paid as follows:
(i) in shares of the Company's Stock held by the Optionee for the
requisite period necessary to avoid a charge to the Company's earnings for
financial reporting purposes and valued at Fair Market Value on the exercise
date, or
(ii) through a special sale and remittance procedure pursuant to which
the Optionee shall concurrently provide irrevocable written instructions (a) to
a Company designated brokerage firm to effect the immediate sale of the
purchased shares and remit to the Company, out of the sale proceeds available on
the settlement date, sufficient funds to cover the aggregate exercise price
payable for the purchased shares plus all applicable Federal, state and local
income and employment taxes required to be withheld by the Company by reason of
such purchase and (b) to the Company to deliver the certificates for the
purchased shares directly to such brokerage firm in order to complete the sale
transaction.
At the discretion of the Board, exercisable either at the time of Option
grant or of Option exercise, the exercise price may also be paid (i) by
Optionee's delivery of a promissory note in form and substance satisfactory to
the Company and permissible under the California Securities Rules and bearing
interest at a rate determined by the Board in its sole discretion, but in no
event less than the minimum rate of interest required to avoid the imputation of
compensation income to the Optionee under the Federal tax laws, or (ii) in such
other form of consideration permitted by the California Corporations Code as may
be acceptable to the Board.
5
<PAGE>
(d) Term and Exercise of Options: Any Option granted to an employee of the
----------------------------
Company shall become exercisable over a period of no longer than five (5) years,
and no less than twenty percent (20%) of the shares covered thereby shall become
exercisable annually. No Option shall be exercisable, in whole or in part, prior
to one (1) year from the date it is granted unless the Board shall specifically
determine otherwise, as provided herein. In no event shall any Option be
exercisable after the expiration of ten (10) years from the date it is granted,
and no Incentive Stock Option granted to a Ten Percent Holder shall, by its
terms, be exercisable after the expiration of five (5) years from the date of
the Option. Unless otherwise specified by the Board or the Committee in the
resolution authorizing such option, the date of grant of an Option shall be
deemed to be the date upon which the Board or the Committee authorizes the
granting of such Option.
Each Option shall be exercisable to the nearest whole share, in
installments or otherwise, as the respective Option agreements may provide.
During the lifetime of an Optionee, the Option shall be exercisable only by the
Optionee and shall not be assignable or transferable by the Optionee, and no
other person shall acquire any rights therein. To the extent not exercised,
installments (if more than one) shall accumulate, but shall be exercisable, in
whole or in part, only during the period for exercise as stated in the Option
agreement, whether or not other installments are then exercisable.
(e) Termination of Status as Employee, Consultant or Director: If
---------------------------------------------------------
Optionee's status as an employee shall terminate for any reason other than
Optionee's disability or death, then the Optionee (or if the Optionee shall die
after such termination, but prior to exercise, Optionee's personal
representative or the person entitled to succeed to the Option) shall have the
right to exercise the portions of any of Optionee's Incentive Stock Options
which were exercisable as of the date of such termination, in whole or in part,
not less than 30 days nor more than three (3) months after such termination (or,
in the event of "termination for cause" as that term is defined in Section 2922
of the California Labor Code and case law related thereto, or by the terms of
the Plan or the Option Agreement or an employment agreement, the Option shall
automatically terminate as of the termination of employment as to all shares
covered by the Option).
With respect to Nonstatutory Options granted to employees, directors or
consultants, the Board may specify such period for exercise, not less than 30
days (except that in the case of "termination for cause" or termination of a
director pursuant to Section 302 or 304 of the California Corporations Code, the
Option shall automatically terminate as of the termination of employment or
services as to shares covered by the Option), following termination of
employment or services as the Board deems reasonable and appropriate. The Option
may be exercised only with respect to installments that the Optionee could have
exercised at the date of termination of employment or services. Nothing
contained herein or in any Option granted pursuant hereto shall be construed to
affect or restrict in any way the right of the Company to terminate the
employment or services of an Optionee with or without cause.
(f) Disability of Optionee: If an Optionee is disabled (within the meaning
----------------------
of Section 22(e)(3) of the Code) at the time of termination, the three (3) month
period set forth in
6
<PAGE>
Section 6(e) shall be a period, as determined by the Board and set forth in the
Option, of not less than six months nor more than one year after such
termination.
(g) Death of Optionee: If an Optionee dies while employed by, engaged as a
-----------------
consultant to, or serving as a Director of the Company, the portion of such
Optionee's Option which was exercisable at the date of death may be exercised,
in whole or in part, by the estate of the decedent or by a person succeeding to
the right to exercise such Option at any time within (i) a period, as determined
by the Board and set forth in the Option, of not less than six (6) months nor
more than one (1) year after Optionee's death, which period shall not be more,
in the case of a Nonstatutory Option, than the period for exercise following
termination of employment or services, or (ii) during the remaining term of the
Option, whichever is the lesser. The Option may be so exercised only with
respect to installments exercisable at the time of Optionee's death and not
previously exercised by the Optionee.
(h) Nontransferability of Option: No Option shall be transferable by the
----------------------------
Optionee, except by will or by the laws of descent and distribution.
(i) Recapitalization: Subject to any required action of shareholders, the
----------------
number of shares of Stock covered by each outstanding Option, and the Exercise
price per share thereof set forth in each such Option, shall be proportionately
adjusted for any increase or decrease in the number of issued shares of Stock of
the Company resulting from a subdivision or consolidation of shares or the
payment of a stock dividend, or any other increase or decrease in the number of
such shares affected without receipt of consideration by the Company; provided,
however, the conversion of any convertible securities of the Company shall not
be deemed to have been "effected" without receipt of consideration by the
Company.
In the event of a proposed dissolution or liquidation of the Company, a
merger or consolidation in which the Company is not the surviving entity, or a
sale of all or substantially all of the assets or capital stock of the Company
(collectively, a "Reorganization"), unless otherwise provided by the Board, this
Option shall terminate immediately prior to such date as is determined by the
Board, which date shall be no later than the consummation of such
Reorganization. In such event, if the entity which shall be the surviving entity
does not tender to Optionee an offer, for which it has no obligation to do so,
to substitute for any unexercised Option a stock option or capital stock of such
surviving of such surviving entity, as applicable, which on an equitable basis
shall provide the Optionee with substantially the same economic benefit as such
unexercised Option, then the Board may grant to such Optionee, in its sole and
absolute discretion and without obligation, the right for a period commencing
thirty (30) days prior to and ending immediately prior to the date determined by
the Board pursuant hereto for termination of the Option or during the remaining
term of the Option, whichever is the lesser, to exercise any unexpired Option or
Options without regard to the installment provisions of Paragraph 6(d) of the
Plan; provided, that any such right granted shall be granted to all Optionees
not receiving an offer to receive substitute options on a consistent basis, and
provided further, that any such exercise shall be subject to the consummation of
such Reorganization.
7
<PAGE>
Subject to any required action of shareholders, if the Company shall be
the surviving entity in any merger or consolidation, each outstanding Option
thereafter shall pertain to and apply to the securities to which a holder of
shares of Class A Common Stock equal to the shares subject to the Option would
have been entitled by reason of such merger or consolidation.
In the event of a change in the Class A Common Stock of the Company as
presently constituted, which is limited to a change of all of its authorized
shares without par value into the same number of shares with a par value, the
shares resulting from any such change shall be deemed to be the Stock within the
meaning of the Plan.
To the extent that the foregoing adjustments relate to stock or securities
of the Company, such adjustments shall be made by the Board, whose determination
in that respect shall be final, binding and conclusive. Except as expressly
provided in this Section 6(i), the Optionee shall have no rights by reason of
any subdivision or consolidation of shares of stock of any class or the payment
of any stock dividend or any other increase or decrease in the number of shares
of stock of any class, and the number or price of shares of Stock subject to any
Option shall not be affected by, and no adjustment shall be made by reason of,
any dissolution, liquidation, merger, consolidation or sale of assets or capital
stock, or any issue by the Company of shares of stock of any class or securities
convertible into shares of stock of any class.
The grant of an Option pursuant to the Plan shall not affect in any way
the right or power of the Company to make any adjustments, reclassifications,
reorganizations or changes in its capital or business structure or to merge,
consolidate, dissolve, or liquidate or to sell or transfer all or any part of
its business or assets.
(j) Rights as a Shareholder: An Optionee shall have no rights as a
-----------------------
shareholder with respect to any shares covered by an Option until the effective
date of the issuance of the shares following exercise of such Option by
Optionee. No adjustment shall be made for dividends (ordinary or extraordinary,
whether in cash, securities or other property) or distributions or other rights
for which the record date is prior to the date such stock certificate is issued,
except as expressly provided in Section 6(i) hereof.
(k) Modification, Acceleration, Extension, and Renewal of Options: Subject
-------------------------------------------------------------
to the terms and conditions and within the limitations of the Plan, the Board
may modify an Option, or, once an Option is exercisable, accelerate the rate at
which it may be exercised, and may extend or renew outstanding Options granted
under the Plan or accept the surrender of outstanding Options (to the extent not
theretofore exercised) and authorize the granting of new Options in substitution
for such Options, provided such action is permissible under Section 422 of the
Code and the California Securities Rules. Notwithstanding the provisions of this
Section 6(k), however, no modification of an Option shall, without the consent
of the Optionee, alter to the Optionee's detriment or impair any rights or
obligations under any Option theretofore granted under the Plan.
(l) Exercise Before Exercise Date: At the discretion of the Board, the
-----------------------------
Option may, but need not, include a provision whereby the Optionee may elect to
exercise all or any
8
<PAGE>
portion of the Option prior to the stated exercise date of the Option or any
installment thereof. Any shares so purchased prior to the stated exercise date
shall be subject to repurchase by the Company upon termination of Optionee's
employment as contemplated by Section 6(n) hereof prior to the exercise date
stated in the Option and such other restrictions and conditions as the Board or
Committee may deem advisable.
(m) Other Provisions: The Option agreements authorized under the Plan
----------------
shall contain such other provisions, including, without limitation, restrictions
upon the exercise of the Options, as the Board or the Committee shall deem
advisable. Shares shall not be issued pursuant to the exercise of an Option, if
the exercise of such Option or the issuance of shares thereunder would violate,
in the opinion of legal counsel for the Company, the provisions of any
applicable law or the rules or regulations of any applicable governmental or
administrative agency or body, such as the Code, the Securities Act, the
Exchange Act, the California Securities Rules, California Corporations Code, and
the rules promulgated under the foregoing or the rules and regulations of any
exchange upon which the shares of the Company are listed. Without limiting the
generality of the foregoing, the exercise of each Option shall be subject to the
condition that if at any time the Company shall determine that (i) the
satisfaction of withholding tax or other similar liabilities, or (ii) the
listing, registration or qualification of any shares covered by such exercise
upon any securities exchange or under any state or federal law, or (iii) the
consent or approval of any regulatory body, or (iv) the perfection of any
exemption from any such withholding, listing, registration, qualification,
consent or approval is necessary or desirable in connection with such exercise
or the issuance of shares thereunder, then in any such event, such exercise
shall not be effective unless such withholding, listing registration,
qualification, consent, approval or exemption shall have been effected, obtained
or perfected free of any conditions not acceptable to the Corporation.
(n) Repurchase Agreement: The Board may, in its discretion, require as a
--------------------
condition to the grant of an Option hereunder, that an Optionee execute an
agreement with the Company, in form and substance satisfactory to the Board in
its discretion ("Repurchase Agreement"), (i) restricting the Optionee's right to
transfer shares purchased under such Option without first offering such shares
to the Company or another shareholder of the Company upon the same terms and
conditions as provided therein; and (ii) providing that upon termination of
Optionee's employment with the Company, for any reason, the Company (or another
shareholder of the Company, as provided in the Repurchase Agreement) shall have
the right at its discretion (or the discretion of such other shareholders) to
purchase and/or redeem all such shares owned by the Optionee on the date of
termination of his or her employment at a price equal to (A) the fair value of
such shares as of such date of termination, or (B) if such repurchase right
lapses at 20% of the number of shares per year, the original purchase price of
such shares, and upon terms of payment permissible under the California
Securities Rules; provided that in the case of Options or Stock Awards granted
to officers, directors, consultants or affiliates of the Company, such
repurchase provisions may be subject to additional or greater restrictions as
determined by the Board or Committee.
9
<PAGE>
7. STOCK AWARDS AND RESTRICTED STOCK PURCHASE OFFERS
(a) Types of Grants.
---------------
(i) Stock Award. All or part of any Stock Award under the Plan may be
-----------
subject to conditions established by the Board or the Committee, and set forth
in the Stock Award Agreement, which may include, but are not limited to,
continuous service with the Company, achievement of specific business
objectives, increases in specified indices, attaining growth rates and other
comparable measurements of Company performance. Such Awards may be based on Fair
Market Value or other specified valuation. All Stock Awards will be made
pursuant to the execution of a Stock Award Agreement substantially in the form
attached hereto as Exhibit "C".
(ii) Restricted Stock Purchase Offer. A Grant of a Restricted Stock
-------------------------------
Purchase Offer under the Plan shall be subject to such (i) vesting contingencies
related to the Participant's continued association with the Company for a
specified time and (ii) other specified conditions as the Board or Committee
shall determine, in their sole discretion, consistent with the provisions of the
Plan. All Restricted Stock Purchase Offers shall be made pursuant to a
Restricted Stock Purchase Offer substantially in the form attached hereto as
Exhibit "D".
(b) Conditions and Restrictions. Shares of Stock which Participants may
---------------------------
receive as a Stock Award under a Stock Award Agreement or Restricted Stock
Purchase Offer under a Restricted Stock Purchase Offer may include such
restrictions as the Board or Committee, as applicable, shall determine,
including restrictions on transfer, repurchase rights, right of first refusal,
and forfeiture provisions. When transfer of Stock is so restricted or subject to
forfeiture provisions it is referred to as "Restricted Stock". Further, with
Board or Committee approval, Stock Awards or Restricted Stock Purchase Offers
may be deferred, either in the form of installments or a future lump sum
distribution. The Board or Committee may permit selected Participants to elect
to defer distributions of Stock Awards or Restricted Stock Purchase Offers in
accordance with procedures established by the Board or Committee to assure that
such deferrals comply with applicable requirements of the Code including, at the
choice of Participants, the capability to make further deferrals for
distribution after retirement. Any deferred distribution, whether elected by the
Participant or specified by the Stock Award Agreement, Restricted Stock Purchase
Offers or by the Board or Committee, may require the payment be forfeited in
accordance with the provisions of Section 7(c). Dividends or dividend equivalent
rights may be extended to and made part of any Stock Award or Restricted Stock
Purchase Offers denominated in Stock or units of Stock, subject to such terms,
conditions and restrictions as the Board or Committee may establish.
(c) Cancellation and Rescission of Grants. Unless the Stock Award
-------------------------------------
Agreement or Restricted Stock Purchase Offer specifies otherwise, the Board or
Committee, as applicable, may cancel any unexpired, unpaid, or deferred Grants
at any time if the Participant is not in compliance
10
<PAGE>
with all other applicable provisions of the Stock Award Agreement or Restricted
Stock Purchase Offer, the Plan and with the following conditions:
(i) A Participant shall not render services for any organization or
engage directly or indirectly in any business which, in the judgment of the
chief executive officer of the Company or other senior officer designated by the
Board or Committee, is or becomes competitive with the Company, or which
organization or business, or the rendering of services to such organization or
business, is or becomes otherwise prejudicial to or in conflict with the
interests of the Company. For Participants whose employment has terminated, the
judgment of the chief executive officer shall be based on the Participant's
position and responsibilities while employed by the Company, the Participant's
post-employment responsibilities and position with the other organization or
business, the extent of past, current and potential competition or conflict
between the Company and the other organization or business, the effect on the
Company's customers, suppliers and competitors and such other considerations as
are deemed relevant given the applicable facts and circumstances. A Participant
who has retired shall be free, however, to purchase as an investment or
otherwise, stock or other securities of such organization or business so long as
they are listed upon a recognized securities exchange or traded over-the-
counter, and such investment does not represent a substantial investment to the
Participant or a greater than 10 percent equity interest in the organization or
business.
(ii) A Participant shall not, without prior written authorization from
the Company, disclose to anyone outside the Company, or use in other than the
Company's business, any confidential information or material, as defined in the
Company's Proprietary Information and Invention Agreement or similar agreement
regarding confidential information and intellectual property, relating to the
business of the Company, acquired by the Participant either during or after
employment with the Company.
(iii) A Participant, pursuant to the Company's Proprietary Information
and Invention Agreement, shall disclose promptly and assign to the Company all
right, title and interest in any invention or idea, patentable or not, made or
conceived by the Participant during employment by the Company, relating in any
manner to the actual or anticipated business, research or development work of
the Company and shall do anything reasonably necessary to enable the Company to
secure a patent where appropriate in the United States and in foreign countries.
(iv) Upon exercise, payment or delivery pursuant to a Grant, the
Participant shall certify on a form acceptable to the Committee that he or she
is in compliance with the terms and conditions of the Plan. Failure to comply
with all of the provisions of this Section 7(c) prior to, or during the six
months after, any exercise, payment or delivery pursuant to a Grant shall cause
such exercise, payment or delivery to be rescinded. The Company shall notify the
Participant in writing of any such rescission within two years after such
exercise, payment or delivery. Within ten days after receiving such a notice
from the Company, the Participant shall pay to the Company the amount of
11
<PAGE>
any gain realized or payment received as a result of the rescinded exercise,
payment or delivery pursuant to a Grant. Such payment shall be made either in
cash or by returning to the Company the number of shares of Stock that the
Participant received in connection with the rescinded exercise, payment or
delivery.
(d) Nonassignability.
----------------
(i) Except pursuant to Section 7(e)(iii) and except as set forth in
Section 7(d)(ii), no Grant or any other benefit under the Plan shall be
assignable or transferable, or payable to or exercisable by, anyone other than
the Participant to whom it was granted.
(ii) Where a Participant terminates employment and retains a Grant
pursuant to Section 7(e)(ii) in order to assume a position with a governmental,
charitable or educational institution, the Board or Committee, in its discretion
and to the extent permitted by law, may authorize a third party (including but
not limited to the trustee of a "blind" trust), acceptable to the applicable
governmental or institutional authorities, the Participant and the Board or
Committee, to act on behalf of the Participant with regard to such Awards.
(e) Termination of Employment. If the employment or service to the Company of
-------------------------
a Participant terminates, other than pursuant to any of the following provisions
under this Section 7(e), all unexercised, deferred and unpaid Stock Awards or
Restricted Stock Purchase Offers shall be cancelled immediately, unless the
Stock Award Agreement or Restricted Stock Purchase Offer provides otherwise:
(i) Retirement Under a Company Retirement Plan. When a Participant's
------------------------------------------
employment terminates as a result of retirement in accordance with the terms of
a Company retirement plan, the Board or Committee may permit Stock Awards or
Restricted Stock Purchase Offers to continue in effect beyond the date of
retirement in accordance with the applicable Grant Agreement and the
exercisability and vesting of any such Grants may be accelerated.
(ii) Resignation in the Best Interests of the Company. When a
------------------------------------------------
Participant resigns from the Company and, in the judgment of the Board or
Committee, the acceleration and/or continuation of outstanding Stock Awards or
Restricted Stock Purchase Offers would be in the best interests of the Company,
the Board or Committee may (i) authorize, where appropriate, the acceleration
and/or continuation of all or any part of Grants issued prior to such
termination and (ii) permit the exercise, vesting and payment of such Grants for
such period as may be set forth in the applicable Grant Agreement, subject to
earlier cancellation pursuant to Section 10 or at such time as the Board or
Committee shall deem the continuation of all or any part of the Participant's
Grants are not in the Company's best interest.
12
<PAGE>
(iii) Death or Disability of a Participant.
------------------------------------
(1) In the event of a Participant's death, the Participant's
estate or beneficiaries shall have a period up to the expiration date specified
in the Grant Agreement within which to receive or exercise any outstanding Grant
held by the Participant under such terms as may be specified in the applicable
Grant Agreement. Rights to any such outstanding Grants shall pass by will or the
laws of descent and distribution in the following order: (a) to beneficiaries so
designated by the Participant; if none, then (b) to a legal representative of
the Participant; if none, then (c) to the persons entitled thereto as determined
by a court of competent jurisdiction. Grants so passing shall be made at such
times and in such manner as if the Participant were living.
(2) In the event a Participant is deemed by the Board or
Committee, to be unable to perform his or her usual duties by reason of mental
disorder or medical condition which does not result from facts which would be
grounds for termination for cause, Grants and rights to any such Grants may be
paid to or exercised by the Participant, if legally competent, or a committee or
other legally designated guardian or representative if the Participant is
legally incompetent by virtue of such disability.
(3) After the death or disability of a Participant, the Board or
Committee may in its sole discretion at any time (A) terminate restrictions in
Grant Agreements; (B) accelerate any or all installments and rights; and (C)
instruct the Company to pay the total of any accelerated payments in a lump sum
to the Participant, the Participant's estate, beneficiaries or representative -
notwithstanding that, in the absence of such termination of restrictions or
acceleration of payments, any or all of the payments due under the Grant might
ultimately have become payable to other beneficiaries.
(4) In the event of uncertainty as to interpretation of or
controversies concerning this Section 7, the determinations of the Board or
Committee, as applicable, shall be binding and conclusive.
8. INVESTMENT INTENT
All Grants under the Plan are intended to be exempt from registration under
the Securities Act provided by Rule 701 thereunder. Unless and until the
granting of Options or sale and issuance of Stock subject to the Plan are
registered under the Securities Act or shall be exempt pursuant to the rules
promulgated thereunder, each Grant under the Plan shall provide that the
purchases or other acquisitions of Stock thereunder shall be for investment
purposes and not with a view to, or for resale in connection with, any
distribution thereof. Further, unless the issuance and sale of the Stock have
been registered under the Securities Act, each Grant shall provide that no
shares shall be purchased upon the exercise of the rights under such Grant
unless and until (i) all then applicable requirements of state and federal laws
and regulatory agencies shall have been fully complied with to the satisfaction
of the Company and its counsel, and (ii) if requested to do so by the Company,
the person exercising the rights under the Grant shall (A) give written
assurances as
13
<PAGE>
to knowledge and experience of such person (or a representative employed by such
person) in financial and business matters and the ability of such person (or
representative) to evaluate the merits and risks of exercising the Option, and
(B) execute and deliver to the Company a letter of investment intent and/or such
other form related to applicable exemptions from registration, all in such form
and substance as the Company may require. If shares are issued upon exercise of
any rights under a Grant without registration under the Securities Act,
subsequent registration of such shares shall relieve the purchaser thereof of
any investment restrictions or representations made upon the exercise of such
rights.
9. AMENDMENT, MODIFICATION, SUSPENSION OR DISCONTINUANCE OF THE PLAN.
The Board may, insofar as permitted by law, from time to time, with
respect to any shares at the time not subject to outstanding Grants, suspend or
terminate the Plan or revise or amend it in any respect whatsoever, except that
without the approval of the shareholders of the Company, no such revision or
amendment shall (i) increase the number of shares subject to the Plan, (ii)
decrease the price at which Grants may be granted, (iii) materially increase the
benefits to Participants, or (iv) change the class of persons eligible to
receive Grants under the Plan; provided, however, no such action shall alter or
impair the rights and obligations under any Option, or Stock Award, or
Restricted Stock Purchase Offer outstanding as of the date thereof without the
written consent of the Participant thereunder. No Grant may be issued while the
Plan is suspended or after it is terminated, but the rights and obligations
under any Grant issued while the Plan is in effect shall not be impaired by
suspension or termination of the Plan.
In the event of any change in the outstanding Stock by reason of a stock
split, stock dividend, combination or reclassification of shares,
recapitalization, merger, or similar event, the Board or the Committee may
adjust proportionally (a) the number of shares of Stock (i) reserved under the
Plan, (ii) available for Incentive Stock Options and Nonstatutory Options and
(iii) covered by outstanding Stock Awards or Restricted Stock Purchase Offers;
(b) the Stock prices related to outstanding Grants; and (c) the appropriate Fair
Market Value and other price determinations for such Grants. In the event of any
other change affecting the Stock or any distribution (other than normal cash
dividends) to holders of Stock, such adjustments as may be deemed equitable by
the Committee, including adjustments to avoid fractional shares, shall be made
to give proper effect to such event. In the event of a corporate merger,
consolidation, acquisition of property or stock, separation, reorganization or
liquidation, the Committee shall be authorized to issue or assume stock options,
whether or not in a transaction to which Section 424(a) of the Code applies, and
other Grants by means of substitution of new Grant Agreements for previously
issued Grants or an assumption of previously issued Grants.
10. TAX WITHHOLDING.
The Company shall have the right to deduct applicable taxes from any
Grant payment and withhold, at the time of delivery or exercise of Options,
Stock Awards or Restricted Stock Purchase Offers or vesting of shares under such
Grants, an appropriate number of shares for payment of taxes required by law or
to take such other action as may be necessary in the opinion of
14
<PAGE>
the Company to satisfy all obligations for withholding of such taxes. If Stock
is used to satisfy tax withholding, such stock shall be valued based on the Fair
Market Value when the tax withholding is required to be made.
11. AVAILABILITY OF INFORMATION.
During the term of the Plan and any additional period during which a Grant
granted pursuant to the Plan shall be exercisable, the Company shall make
available, not later than one hundred and twenty (120) days following the close
of each of its fiscal years, such financial and other information regarding the
Company as is required by the bylaws of the Company and applicable law to be
furnished in an annual report to the shareholders of the Company.
12. NOTICE.
Any written notice to the Company required by any of the provisions of the
Plan shall be addressed to the chief personnel officer or to the chief executive
officer of the Company, and shall become effective when it is received by the
office of the chief personnel officer or the chief executive officer.
13. UNFUNDED PLAN.
Insofar as it provides for Grants, the Plan shall be unfunded. Although
bookkeeping accounts may be established with respect to Participants who are
entitled to Grants or rights thereto under the Plan, any such accounts shall be
used merely as a bookkeeping convenience. The Company shall not be required to
segregate any assets that may at any time be represented by Grants or rights
thereto, nor shall the Plan be construed as providing for such segregation, nor
shall the Company nor the Board nor the Committee be deemed to be a trustee of
any Grants or rights thereto to be granted under the Plan. Any liability of the
Company to any Participant with respect to a grant of Stock or rights thereto
under the Plan shall be based solely upon any contractual obligations that may
be created by the Plan and any Grant Agreement; no such obligation of the
Company shall be deemed to be secured by any pledge or other encumbrance on any
property of the Company. Neither the Company nor the Board nor the Committee
shall be required to give any security or bond for the performance of any
obligation that may be created by the Plan.
15
<PAGE>
14. INDEMNIFICATION OF BOARD.
In addition to such other rights or indemnifications as they may have as
directors or otherwise, and to the extent allowed by applicable law, the members
of the Board and the Committee shall be indemnified by the Company against the
reasonable expenses, including attorneys' fees, actually and necessarily
incurred in connection with the defense of any claim, action, suit or
proceeding, or in connection with any appeal thereof, to which they or any of
them may be a party by reason of any action taken, or failure to act, under or
in connection with the Plan or any Grant granted thereunder, and against all
amounts paid by them in settlement thereof (provided such settlement is approved
by independent legal counsel selected by the Company) or paid by them in
satisfaction of a judgment in any such claim, action, suit or proceeding, except
in any case in relation to matters as to which it shall be adjudged in such
claim, action, suit or proceeding that such Board or Committee member is liable
for negligence or misconduct in the performance of his or her duties; provided
that within sixty (60) days after institution of any such action, suit or Board
proceeding the member involved shall offer the Company, in writing, the
opportunity, at its own expense, to handle and defend the same.
15. GOVERNING LAW.
The Plan and all determinations made and actions taken pursuant hereto, to the
extent not otherwise governed by the Code or the securities laws of the United
States, shall be governed by the law of the State of California and construed
accordingly.
16. EFFECTIVE AND TERMINATION DATES.
The Plan shall become effective on the date it is approved by the holders of a
majority of the shares of Stock then outstanding (which date was June 6, 1996).
The Plan shall terminate ten years later, subject to earlier termination by the
Board pursuant to Section 9.
16
<PAGE>
EXHIBIT 4.4
NETVANTAGE, INC.
1994 INCENTIVE AND NONSTATUTORY STOCK OPTION PLAN
-------------------------------------------------
1. Purpose
-------
This Incentive and Nonstatutory Stock Option Plan (the "Plan") is intended
to further the growth and financial success of NETVANTAGE, INC., a Delaware
corporation (the "Corporation") by providing additional incentives to selected
employees of and consultants to the Corporation or parent corporation or
subsidiary corporation of the Corporation as those terms are defined in Sections
424(e) and 424(f) of the Internal Revenue Code of 1986, as amended (the "Code")
(such parent corporations and subsidiary corporations hereinafter collectively
referred to as "Affiliates") so that such employees may acquire or increase
their proprietary interest in the Corporation. Stock options granted under the
Plan (hereinafter "Options") may be either "Incentive Stock Options", as defined
in Section 422 of the Code and any regulations promulgated under said Section,
or "Nonstatutory Options" at the discretion of the Board of Directors of the
Corporation (the "Board") and as reflected in the respective written stock
option agreements granted pursuant hereto.
2. Administration
--------------
The Plan shall be administered by the Board; provided however, that the
Board may delegate such administration to a committee of not fewer than two (2)
members (the "Committee"), each of whom is a member of the Board and all of whom
are disinterested persons, as contemplated by Rule 16b-3 promulgated under the
Securities Exchange Act of 1934, as amended ("Rule 16b-3"); and provided
further, that the foregoing requirement for disinterested administration shall
not apply prior to the date of the first registration of any of the securities
of the Corporation under Securities Act of 1933, as amended.
Subject to the provisions of the Plan, the Board and/or the Committee shall
have authority to (a) grant, in its discretion, Incentive Stock Options in
accordance with Section 422 of the Code or Nonstatutory Options; (b) determine
in good faith the fair market value of the stock covered by an Option; (c)
determine which eligible persons shall be granted Options and the number of
shares to be covered thereby and the term thereof; (d) construe and interpret
the Plan; (e) promulgate, amend and rescind rules and regulations relating to
its administration, and correct defects, omissions and inconsistencies in the
Plan or any Option; (f) consistent with the Plan and with the consent of the
optionee, as appropriate, amend any outstanding Option or amend the exercise
date or dates thereof; (g) determine the duration and purpose of leaves of
absence which may be granted to optionholders without constituting termination
of their employment for the purpose of the Plan; and (h) make all other
determinations necessary or advisable for the Plan's administration. The
interpretation and construction by the Board of any provisions of the Plan or of
any Option shall be conclusive and final. No member of the Board or the
Committee shall be liable for any action or determination made in good faith
with respect to the Plan or any Option.
<PAGE>
3. Eligibility
-----------
The persons who shall be eligible to receive Options shall be key employees
of or consultants to the Corporation or any of its Affiliate ("Optionees"). The
term consultant shall mean any person who is engaged by the Corporation to
render services and is compensated for such services, and any director of the
Corporation whether or not compensated for such services; provided that, if the
Corporation registers any of its securities pursuant to the Securities Exchange
Act of 1934, the term consultant shall thereafter not include directors who are
not compensated for their services or are paid only a director fee by the
Corporation.
(a) Incentive Stock Options. Incentive Stock Options may only be
-----------------------
issued to employees of the Corporation or its Affiliates. Incentive Stock
Options may be granted to officers, whether or not they are directors, but a
director shall not be granted an Incentive Stock Option unless such director is
also an employee of the Corporation. Payment of a director fee shall not be
sufficient to constitute employment by the Corporation. Any grant of option to
an officer or director of the Corporation subsequent to the first registration
of any of the securities of the Corporation under Securities Act of 1933, as
amended, shall comply with the requirements of Rule 16b-3. An optionee may hold
more than one Option.
The Corporation shall not grant an Incentive Stock Option under the
Plan to any employee if such grant would result in such employee holding the
right to exercise for the first time in any one calendar year, under all options
granted to such employee under the Plan or any other stock option plan
maintained by the Corporation or any Affiliate, with respect to shares of stock
having an aggregate fair market value, determined as of the date of the Option
is granted, in excess of $100,000. Should it be determined that an Incentive
Stock Option granted under the Plan exceeds such maximum for any reason other
than a failure in good faith to value the stock subject to such option, the
excess portion of such option shall be considered a Nonstatutory Option. To the
extent the employee holds two (2) or more such options which become exercisable
for the first time in the same calendar year, the foregoing limitation on the
exercise of such option as incentive stock options under the Federal tax laws
shall be applied on the basis of the order in which such options are granted.
If, for any reason, an entire option does not qualify as an Incentive Stock
Option by reason of exceeding such maximum, such option shall be considered a
Nonstatutory Option.
(b) Nonstatutory Option. The provisions of the foregoing Section 3(a)
-------------------
shall not apply to any option designated as a "Nonstatutory Stock Option
Agreement" or which sets forth the intention of the parties that the option be a
Nonstatutory Option.
4. Stock
-----
The stock subject to Options shall be shares of the Corporation's
authorized but unissued or reacquired Class A Common Stock (the "Stock").
(a) Number of Shares. Subject to adjustment as provided in Paragraph
----------------
5(i) of this Plan, the total number of shares of Stock which may be purchased
through exercise of Options granted under this Plan shall not exceed Three
Hundred Twenty-Five Thousand (325,000) shares. If any
2
<PAGE>
Option shall for any reason terminate or expire, any shares allocated thereto
but remaining unpurchased upon such expiration or termination shall again be
available for the grant of Options with respect thereto under this Plan as
though no Option had been granted with respect to such shares.
(b) Reservation of Shares. The Corporation shall reserve and keep
---------------------
available at all times during the term of the Plan such number of shares as
shall be sufficient to satisfy the requirements of the Plan. If, after
reasonable efforts, which efforts shall not include the registration of the Plan
or Options under the Securities Act of 1933, the Corporation is unable to obtain
authority from any applicable regulatory body, which authorization is deemed
necessary by legal counsel for the Corporation for the lawful issuance of shares
hereunder, the Corporation shall be relieved of any liability with respect to
its failure to issue and sell the shares for which such requisite authority was
so deemed necessary unless and until such authority is obtained.
5. Terms and Conditions of Options
-------------------------------
Options granted hereunder shall be evidenced by agreements between the
Corporation and the respective Optionees, in such form and substance as the
Board or Committee shall from time to time approve. Such agreements need not be
identical, and in each case may include such provisions as the Board or
Committee may determine, but all such agreements shall be subject to and limited
by the following terms and conditions:
(a) Number of Shares: Each Option shall state the number of shares to
----------------
which it pertains.
(b) Option Price: Each Option shall state the Option Price, which
------------
shall be determined as follows:
(i) Any Option granted to a person who at the time the Option is
granted owns (or is deemed to own pursuant to Section 424(d) of the Code)
stock possessing more than ten percent (10%) of the total combined voting
power or value of all classes of stock of the Corporation, or of any
Affiliate, ("Ten Percent Holder") shall have an Option Price of no less
than 110% of the fair market value of the Stock as of the date of grant.
(ii) Incentive Stock Options granted to a person who at the time
the Option is granted is not a Ten Percent Holder shall have an Option
Price of no less than 100% of the fair market value of the Stock as of the
date of grant.
(iii) Nonstatutory Options granted to a person who at the time
the Option is granted is not a Ten Percent Holder shall have an Option
Price of no less than 85% of the fair market value of the Stock as of the
date of grant.
For the purposes of this Paragraph 5(b), the fair market value shall
be as determined by the Board, in good faith, which determination shall be
conclusive and binding; provided however, that if there is a public market for
the such Stock, the fair market value per share shall be the average of the bid
and asked prices (or may be the closing price if such Stock is listed on the
Nasdaq National Market System) on the date of grant of the Option, or if listed
on a stock exchange, the closing price on such exchange on such date of grant.
3
<PAGE>
(c) Medium and Time of Payment: The Option exercise price shall
--------------------------
become immediately due upon exercise of the Option and shall be paid in cash or
check made payable to the Corporation. Should the Corporation's outstanding
Stock be registered under Section 12(g) of the Securities Exchange Act of 1934
at the time the Option is exercised, then the exercise price may also be paid as
follows:
(i) in shares of the Corporation's Stock held by the Optionee
for the requisite period necessary to avoid a charge to the Corporation's
earnings for financial reporting purposes and valued at fair market value
on the exercise date, or
(ii) through a special sale and remittance procedure pursuant to
which the Optionee shall concurrently provide irrevocable written
instructions (a) to a Corporation designated brokerage firm to effect the
immediate sale of the purchased shares and remit to the Corporation, out of
the sale proceeds available on the settlement date, sufficient funds to
cover the aggregate exercise price payable for the purchased shares plus
all applicable Federal, state and local income and employment taxes
required to be withheld by the Corporation by reason of such purchase and
(b) to the Corporation to deliver the certificates for the purchased shares
directly to such brokerage firm in order to complete the sale transaction.
At the discretion of the Board, exercisable either at the time of
Option grant or of Option exercise, the exercise price may also be paid (i) by
Optionee's delivery of a promissory note in form and substance satisfactory to
the Corporation and permissible under the California Securities Regulations and
bearing interest at a rate determined by the Board in its sole discretion, but
in no event less than the minimum rate of interest required to avoid the
imputation of compensation income to the Optionee under the Federal tax laws, or
(ii) in such other form of consideration permitted by the California
Corporations Code as may be acceptable to the Board.
(d) Term and Exercise of Options: Any Option granted to an Employee
----------------------------
of the Corporation shall become exercisable over a period of no longer than five
(5) years, and no less than twenty percent (20%) of the shares covered thereby
shall become exercisable annually. No Option shall be exercisable, in whole or
in part, prior to one (1) year from the date it is granted unless the Board
shall specifically determine otherwise, as provided herein. In no event shall
any Option be exercisable after the expiration of ten (10) years from the date
it is granted, and no Incentive Stock Option granted to a Ten Percent Holder
shall, by its terms, be exercisable after the expiration of five (5) years from
the date of the Option. Unless otherwise specified by the Board or the
Committee in the resolution authorizing such option, the date of grant of an
Option shall be deemed to be the date upon which the Board or the Committee
authorizes the granting of such Option.
Each Option shall be exercisable to the nearest whole share, in
installments or otherwise, as the respective option agreements may provide.
During the lifetime of an Optionee, the Option shall be exercisable only by the
Optionee and shall not be assignable or transferable by the Optionee, and no
other person shall acquire any rights therein. To the extent not exercised,
installments (if more than one) shall accumulate, but shall be exercisable, in
whole or in part, only during the period for exercise as stated in the option
agreement, whether or not other installments are then exercisable.
4
<PAGE>
(e) Termination of Status as Employee or Consultant: If Optionee's
-----------------------------------------------
status as an employee or consultant shall terminate for any reason other than
Optionee's disability or death, then the Optionee (or if the Optionee shall die
after such termination, but prior to exercise, Optionee's personal
representative or the person entitled to succeed to the Option) shall have the
right to exercise the portions of any of Optionee's Options which were
exercisable as of the date of such termination, in whole or in part, at any time
within three (3) months after such termination (or in the event of "termination
for good cause" as that term is defined under the California Labor Code and case
law related thereto, such shorter period as the option agreement may specify,
but not less than 30 days) or the remaining term of the Option, whichever is the
lesser; provided, however, that with respect to Nonstatutory Options, the Board
may specify such longer period, not to exceed six (6) months, for exercise
following termination as the Board deems reasonable and appropriate. The Option
may be exercised only with respect to installments that the Optionee could have
exercised at the date of termination of employment. Nothing contained herein or
in any Option granted pursuant hereto shall be construed to affect or restrict
in any way the right of the Corporation to terminate the employment of an
Optionee with or without cause.
(f) Disability of Optionee: If an Optionee is disabled (within the
----------------------
meaning of Section 22(e)(3) of the Code) at the time of termination, the three
(3) month period set forth in Paragraph 5(e) shall be a period, as determined by
the Board and set forth in the Option, of not less than six months nor more than
one year.
(g) Death of Optionee: If an Optionee dies while employed or engaged
-----------------
as a consultant by the Corporation or an Affiliate, the portion of such
Optionee's Option or Options which were exercisable at the date of death may be
exercised, in whole or in part, by the estate of the decedent or by a person
succeeding to the right to exercise such Option or Options, at any time within
(i) a period, as determined by the Board and set forth in the Option, of not
less than six (6) months nor more than one (1) year after Optionee's death,
which period shall not be less, in the case of a Nonstatutory Option, than the
period for exercise following termination, or (ii) during the remaining term of
the Option, whichever is the lesser. The Option may be so exercised only with
respect to installments exercisable at the time of Optionee's death and not
previously exercised by the Optionee.
(h) Nontransferability of Option: No Option shall be transferable by
----------------------------
the Optionee, except by will or by the laws of descent and distribution.
(i) Recapitalization: Subject to any required action by the
----------------
stockholders, the number of shares of Stock covered by each outstanding Option,
and the price per share thereof set forth in each such Option, shall be
proportionately adjusted for any increase or decrease in the number of issued
shares of Stock of the Corporation resulting from a subdivision or consolidation
of shares or the payment of a stock dividend, or any other increase or decrease
in the number of such shares affected without receipt of consideration by the
Corporation.
Subject to any required action by the stockholders, if the Corporation
shall be the surviving entity in any merger or consolidation, each outstanding
Option thereafter shall pertain to and apply to the securities to which a holder
of shares of Stock equal to the shares subject to the Option would have been
entitled by reason of such merger or consolidation. A dissolution or
liquidation of the Corporation or a merger or consolidation in which the
Corporation is not the
5
<PAGE>
surviving entity shall cause each outstanding Option to terminate on the
effective date of such dissolution, liquidation, merger or consolidation. In
such event, if the entity which shall be the surviving entity does not tender to
Optionee an offer, for which it has no obligation to do so, to substitute for
any unexercised Option a stock option or capital stock of such surviving entity,
as applicable, which on an equitable basis shall provide the Optionee with
substantially the same economic benefit as such unexercised Option, then the
Board may grant to such Optionee, but shall not be obligated to do so, the right
for a period commencing thirty (30) days prior to and ending immediately prior
to such dissolution, liquidation, merger or consolidation or during the
remaining term of the Option, whichever is the lesser, to exercise any unexpired
Option or Options, without regard to the installment provisions of Paragraph
5(d) of this Plan; provided, that any such right granted shall be granted to all
Optionees not receiving an offer to substitute on a consistent basis, and
provided further, that any such exercise shall be subject to the consummation of
such dissolution, liquidation, merger or consolidation.
In the event of a change in the Stock of the Corporation as presently
constituted, which is limited to a change of all of its authorized shares
without par value into the same number of shares with a par value, the shares
resulting from any such change shall be deemed to be the Stock within the
meaning of this Plan.
To the extent that the foregoing adjustments relate to stock or
securities of the Corporation, such adjustments shall be made by the Board,
whose determination in that respect shall be final, binding and conclusive.
Except as expressly provided in this Paragraph 5(i), the Optionee shall have no
rights by reason of any subdivision or consolidation of shares of stock of any
class or the payment of any stock dividend or any other increase or decrease in
the number of shares of stock of any class, and the number or price of shares of
Stock subject to any Option shall not be affected by, and no adjustment shall be
made by reason of, any dissolution, liquidation, merger or consolidation, or any
issue by the Corporation of shares of stock of any class or securities
convertible into shares of stock of any class.
The grant of an Option pursuant to the Plan shall not affect in any
way the right or power of the Corporation to make any adjustments,
reclassifications, reorganizations or changes in its capital or business
structure or to merge, consolidate, dissolve, or liquidate or to sell or
transfer all or any part of its business or assets.
(j) Rights as a Stockholder: An Optionee shall have no rights as a
-----------------------
stockholder with respect to any shares covered by an Option until the effective
date of issuance of the shares following exercise of this Option by Optionee.
No adjustment shall be made for dividends (ordinary or extraordinary, whether in
cash, securities or other property) or distributions or other rights for which
the record date is prior to the date such stock certificate is issued, except as
expressly provided in Paragraph 5(i) hereof.
(k) Modification, Acceleration, Extension and Renewal of Options:
------------------------------------------------------------
Subject to the terms and conditions and within the limitations of the Plan, the
Board may modify an Option, or once an Option is exercisable, accelerate the
rate at which it may be exercised, and may extend or renew outstanding Options
granted under the Plan or accept the surrender of outstanding Options (to the
6
<PAGE>
extent not theretofore exercised) and authorize the granting of new Options in
substitution for such Options, provided such action is permissible under Section
422 of the Code.
Notwithstanding the foregoing provisions of this Paragraph 5(k),
however, no modification of an Option shall, without the consent of the
Optionee, alter to the Optionee's detriment or impair any rights or obligations
under any Option theretofore granted under the Plan.
(l) Investment Intent: Unless and until the issuance and sale of the
-----------------
shares subject to the Plan are registered under the Securities Act of 1933, as
amended (the "Act") or shall be exempt pursuant to the rules promulgated
thereunder, each Option under the Plan shall provide that the purchases of Stock
thereunder shall be for investment purposes and not with a view to, or for
resale in connection with, any distribution thereof. Further, unless the
issuance and sale of the Stock have been registered under the Act, each Option
shall provide that no shares shall be purchased upon the exercise of such Option
unless and until (i) any then applicable requirements of state and federal laws
and regulatory agencies shall have been fully complied with to the satisfaction
of the Corporation and its counsel, and (ii) if requested to do so by the
Corporation, the person exercising the Option shall (i) give written assurances
as to knowledge and experience of such person (or a representative employed by
such person) in financial and business matters and the ability of such person
(or representative) to evaluate the merits and risks of exercising the Option,
and (ii) execute and deliver to the Corporation a letter of investment intent
and/or such other form related to applicable exemptions from registration, all
in such form and substance as the Corporation may require. If shares are issued
upon exercise of an Option without registration under the Act, subsequent
registration of such shares shall relieve the purchaser thereof of any
investment restrictions or representations made upon the exercise of such
Options.
(m) Exercise Before Exercise Date: At the discretion of the Board,
-----------------------------
the Option may, but need not, include a provision whereby the Optionee may elect
to exercise all or any portion of the Option prior to the stated exercise date
of the Option or any installment thereof. Any shares so purchased prior to the
stated exercise date shall be subject to repurchase by the Corporation upon
termination of Optionee's employment as contemplated by Paragraphs 5(e), 5(f)
and 5(g) hereof prior to the exercise date stated in the Option and such other
restrictions and conditions as the Board or Committee may deem advisable.
(n) Other Provisions: The Option agreements authorized under this
----------------
Plan shall contain such other provisions, including, without limitation,
restrictions upon the exercise of the Options, as the Board or the Committee
shall deem advisable. Shares shall not be issued pursuant to the exercise of an
Option, if the exercise of such Option or the issuance of shares thereunder
would violate, in the opinion of legal counsel for the Corporation, the
provisions of any applicable law or the rules or regulations of any applicable
governmental or administrative agency or body, such as the Act, the Securities
Exchange Act of 1934, the rules promulgated under the foregoing or the rules and
regulations of any exchange upon which the shares of the Corporation are listed.
6. Availability of Information
---------------------------
During the term of the Plan and any additional period during which an
Option granted pursuant to the Plan shall be exercisable, the Corporation shall
make available, upon request, not
7
<PAGE>
later than one hundred and twenty (120) days following the close of each of its
fiscal years such financial and other information regarding the Corporation as
is required by the bylaws of the Corporation and applicable law to be furnished
in an annual report to the stockholders of the Corporation.
7. Effectiveness of Plan; Expiration
---------------------------------
Subject to approval by the stockholders of the Corporation, this Plan shall
be deemed effective as of the date it is adopted by the Board. The Plan shall
expire on April 30, 2002, but such expiration shall not affect the validity of
outstanding Options.
8. Amendment and Termination of the Plan
-------------------------------------
The Board may, insofar as permitted by law, from time to time, with respect
to any shares at the time not subject to Options, suspend or terminate the Plan
or revise or amend it in any respect whatsoever, except that without the
approval of the stockholders of the Corporation, no such revision or amendment
shall (i) increase the number of shares subject to the Plan, (ii) decrease the
price at which Options may be granted, (iii) materially increase the benefits to
Optionees, or (iv) change the class of persons eligible to receive Options under
this Plan; provided, however, no such action shall alter or impair the rights
and obligations under any Option outstanding as of the date thereof without the
written consent of the Optionee thereunder. No Option may be granted while the
Plan is suspended or after it is terminated, but the rights and obligations
under any Option granted while the Plan is in effect shall not be impaired by
suspension or termination of the Plan.
9. Indemnification of Board
------------------------
In addition to such other rights or indemnifications as they may have as
directors or otherwise, and to the extent allowed by applicable law, the members
of the Board and the Committee shall be indemnified by the Corporation against
the reasonable expenses, including attorneys' fees, actually and necessarily
incurred in connection with the defense of any claim, action, suit or
proceeding, or in connection with any appeal thereof, to which they or any of
them may be a party by reason of any action taken, or failure to act, under or
in connection with the Plan or any Option granted thereunder, and against all
amounts paid by them in settlement thereof (provided such settlement is approved
by independent legal counsel selected by the Corporation) or paid by them in
satisfaction of a judgment in any such claim, action, suit or proceeding, except
in any case in relation to matters as to which it shall be adjudged in such
claim, action, suit or proceeding that such Board member is liable for
negligence or misconduct in the performance of his or her duties; provided that
within sixty (60) days after institution of any such action, suit or Board
proceeding the member involved shall offer the Corporation, in writing, the
opportunity, at its own expense, to handle and defend the same.
10. Application of Funds
--------------------
The proceeds received by the Corporation from the sale of Stock pursuant to
the exercise of Options will be used for general corporate purposes.
8
<PAGE>
11. No Obligation to Exercise Option
--------------------------------
The granting of an Option shall impose no obligation upon the Optionee to
exercise such Option.
12. Notices
-------
All notice, requests, demands, and other communications pursuant this Plan
shall be in writing and shall be deemed to have been duly given on the date of
service if served personally on the party to whom notice is to be given, or on
the third day following the mailing thereof to the party to whom notice is to be
given, by first class mail, registered or certified, postage prepaid.
* * * * *
The foregoing 1994 Incentive and Nonstatutory Stock Option Plan (the
"Plan") was duly adopted and approved by the Board of Directors of NetVantage, a
California corporation and the Corporation's predecessor, on October 7, 1994,
and approved by the shareholders of NetVantage on October 21, 1994. The Plan
was assumed by the Corporation in connection with a duly approved merger of
NetVantage into the Corporation on December 12, 1994. The Plan was duly
amended, to increase the authorized number of shares under Paragraph 4(a) to a
total of 325,000 shares, by the Board of Directors of the Corporation on June
22, 1995, which amendment was duly approved by the stockholders of the
Corporation on October 24, 1995. The foregoing Plan has been restated to
generally reflect the terms and conditions of the merger and the 1995 amendment.
--------------------------------------
Thomas G. Iwanski, Secretary
9
<PAGE>
EXHIBIT 4.5
NETVANTAGE, INC.
1992 INCENTIVE AND NONSTATUTORY STOCK OPTION PLAN
-------------------------------------------------
1. Purpose
-------
This Incentive and Nonstatutory Stock Option Plan (the "Plan") is intended
to further the growth and financial success of NETVANTAGE, INC. (the
"Corporation") by providing additional incentives to selected employees of and
consultants to the Corporation or parent corporation or subsidiary corporation
of the Corporation as those terms are defined in Sections 425(e) and 425(f) of
the Internal Revenue Code of 1986, as amended (the "Code") (such parent
corporations and subsidiary corporations hereinafter collectively referred to as
"Affiliates") so that such employees may acquire or increase their proprietary
interest in the Corporation. Stock options granted under the Plan (hereinafter
"Options") may be either "Incentive Stock Options", as defined in Section 422A
of the Code and any regulations promulgated under said Section, or "Nonstatutory
Options" at the discretion of the Board of Directors of the Corporation (the
"Board") and as reflected in the respective written stock option agreements
granted pursuant hereto.
2. Administration
--------------
The Plan shall be administered by the Board; provided however, that the
Board may delegate such administration to a committee of not fewer than three
(3) members (the "Committee"), at least two (2) of whom are members of the Board
and all of whom are disinterested administrators, as contemplated by Rule 16b-3
promulgated under the Securities Exchange Act of 1934, as amended ("Rule 16b-
3"); and provided further, that the foregoing requirement for disinterested
administrators shall not apply prior to the date of the first registration of
any of the securities of the Corporation under Securities Act of 1933, as
amended.
Subject to the provisions of the Plan, the Board and/or the Committee shall
have authority to (a) grant, in its discretion, Incentive Stock Options in
accordance with Section 422A of the Code or Nonstatutory Options; (b) determine
in good faith the fair market value of the stock covered by an Option; (c)
determine which eligible persons shall be granted Options and the number of
shares to be covered thereby and the term thereof; (d) construe and interpret
the Plan; (e) promulgate, amend and rescind rules and regulations relating to
its administration, and correct defects, omissions and, inconsistencies in the
Plan or any Option; (f) consistent with the Plan and with the consent of the
optionee, as appropriate, amend any outstanding Option or amend the exercise
date or dates thereof; (g) determine the duration and purpose of leaves of
absence which may be granted to optionholders without constituting termination
of their employment for the purpose of the Plan; and (h) make all other
determinations necessary or advisable for the Plan's administration. The
interpretation and construction by the Board of any provisions of the Plan or of
any Option shall be conclusive and final. No member of the Board or the
Committee shall be liable for any action or determination made in good faith
with respect to the Plan or any Option.
<PAGE>
3. Eligibility
-----------
The persons who shall be eligible to receive Options shall be key employees
of or consultants to the Corporation or any of its Affiliate ("Optionees"). The
term consultant shall mean any person who is engaged by the Corporation to
render services and is compensated for such services, and any director of the
Corporation whether or not compensated for such services; provided that, if the
Corporation registers any of its securities pursuant to the Securities Exchange
Act of 1934, the term consultant shall thereafter not include directors who are
not compensated for their services or are paid only a director fee by the
Corporation.
(a) Incentive Stock Options. Incentive Stock Options may only be
-----------------------
issued to employees of the Corporation or its Affiliates. Incentive Stock
Options may be granted to officers, whether or not they are directors, but a
director shall not be granted an Incentive Stock Option unless such director is
also an employee of the Corporation. Payment of a director fee shall not be
sufficient to constitute employment by the Corporation. Any grant of option to
an officer or director of the Corporation subsequent to the first registration
of any of the securities of the Corporation under Securities Act of 1933, as
amended, shall comply with the requirements of Rule 16b-3. An optionee may hold
more than one Option.
The Corporation shall not grant an Incentive Stock Option under the
Plan to any employee if such grant would result in such employee holding the
right to exercise for the first time in any one calendar year, under all options
granted to such employee under the Plan or any other stock option plan
maintained by the Corporation or any Affiliate, with respect to shares of stock
having an aggregate fair market value, determined as of the date of the Option
is granted, in excess of $100,000. Should it be determined that an Incentive
Stock Option granted under the Plan exceeds such maximum for any reason other
than a failure in good faith to value the stock subject to such option, the
excess portion of such option shall be considered a Nonstatutory Option. If,
for any reason, an entire option does not qualify as an Incentive Stock Option
by reason of exceeding such maximum, such option shall be considered a
Nonstatutory Option.
(b) Nonstatutory Option. The provisions of the foregoing Section
-------------------
3(a) shall not apply to any option designated as a "Nonstatutory Stock Option
Agreement" or which sets forth the intention of the parties that the option be a
Nonstatutory Option.
4. Stock
-----
The stock subject to Options shall be shares of the Corporation's
authorized but unissued or reacquired Class B and Class E Common Stock (the
"Stock").
(a) Number of Shares. Subject to adjustment as provided in Paragraph
----------------
5(i) of this Plan, the total number of shares of Stock which may be purchased
through exercise of Options granted under this Plan shall not exceed Two Hundred
Thousand (200,000). If any Option shall for any reason terminate or expire, any
shares allocated thereto but remaining unpurchased upon such expiration or
termination shall again be available for the grant of Options with respect
thereto under this Plan as though no Option had been granted with respect to
such shares.
2
<PAGE>
(b) Reservation of Shares. The Corporation shall reserve and keep
---------------------
available at all times during the term of the Plan such number of shares as
shall be sufficient to satisfy the requirements of the Plan. If, after
reasonable efforts, which efforts shall not include the registration of the Plan
or Options under the Securities Act of 1933, the Corporation is unable to obtain
authority from any applicable regulatory body, which authorization is deemed
necessary by legal counsel for the Corporation for the lawful issuance of shares
hereunder, the Corporation shall be relieved of any liability with respect to
its failure to issue and sell the shares for which such requisite authority was
so deemed necessary unless and until such authority is obtained.
5. Terms and Conditions of Options
-------------------------------
Options granted hereunder shall be evidenced by agreements between the
Corporation and the respective Optionees, in such form and substance as the
Board or Committee shall from time to time approve. Such agreements need not be
identical, and in each case may include such provisions as the Board or
Committee may determine, but all such agreements shall be subject to and limited
by the following terms and conditions:
(a) Number of Shares: Each Option shall state the number of shares to
----------------
which it pertains.
(b) Option Price: Each Option shall state the Option Price, which
------------
shall be determined as follows:
(i) Any Option granted to a person who at the time the Option is
granted owns (or is deemed to own pursuant to Section 425(d) of the Code)
stock possessing more than ten percent (10%) of the total combined voting
power or value of all classes of stock of the Corporation, or of any
Affiliate, ("Ten Percent Holder") shall have an Option Price of no less
than 110% of the fair market value of the Stock as of the date of grant.
(ii) Incentive Stock Options granted to a person who at the time
the Option is granted is not a Ten Percent Holder shall have an Option
Price of no less than 100% of the fair market value of the Stock as of the
date of grant.
(iii) Nonstatutory Options granted to a person who at the time
the Option is granted is not a Ten Percent Holder shall have an Option
Price of no less than 85% of the fair market value of the Stock as of the
date of grant.
For the purposes of this Paragraph 5(b), the fair market value shall
be as determined by the Board, in good faith, which determination shall be
conclusive and binding; provided however, that if there is a public market for
the such Stock, the fair market value per share shall be the average of the bid
and asked prices (or may be the closing price if such Stock is listed on the
Nasdaq National Market System) on the date of grant of the Option, or if listed
on a stock exchange, the closing price on such exchange on such date of grant.
(c) Medium and Time of Payment: To the extent permissible by
--------------------------
applicable law, the Option price shall be paid, at the discretion of the Board,
at either the time of grant or the time of exercise of the Option (i) in cash or
by check, (ii) by delivery of other common stock of the
3
<PAGE>
Corporation, provided such tendered stock was not acquired directly or
indirectly from the Corporation, or, if acquired from the Corporation, has been
held by the Optionee for more than six (6) months, (iii) by the Optionee's
promissory note in a form satisfactory to the Corporation and bearing interest
at a rate determined by the Board, in its sole discretion, but in no event less
than 6% per annum, or (iv) such other form of legal consideration permitted by
the California Corporations Code as may be acceptable to the Board.
(d) Term and Exercise of Options: Any Option granted to an Employee of
----------------------------
the Corporation shall become exercisable over a period of no longer than five
(5) years, and no less than twenty percent (20%) of the shares covered thereby
shall become exercisable annually. No Option shall be exercisable, in whole or
in part, prior to one (1) year from the date it is granted unless the Board
shall specifically determine otherwise, as provided herein. In no event shall
any Option be exercisable after the expiration of ten (10) years from the date
it is granted, and no Incentive Stock Option granted to a Ten Percent Holder
shall, by its terms, be exercisable after the expiration of five (5) years from
the date of the Option. Unless otherwise specified by the Board or the
Committee in the resolution authorizing such option, the date of grant of an
Option shall be deemed to be the date upon which the Board or the Committee
authorizes the granting of such Option.
Each Option shall be exercisable to the nearest whole share, in
installments or otherwise, as the respective option agreements may provide.
During the lifetime of an Optionee, the Option shall be exercisable only by the
Optionee and shall not be assignable or transferable by the Optionee, and no
other person shall acquire any rights therein. To the extent not exercised,
installments (if more than one) shall accumulate, but shall be exercisable, in
whole or in part, only during the period for exercise as stated in the option
agreement, whether or not other installments are then exercisable.
(e) Termination of Status as Employee or Consultant: If Optionee's
-----------------------------------------------
status as an employee or consultant shall terminate for any reason other than
Optionee's disability or death, then the Optionee (or if the Optionee shall die
after such termination, but prior to exercise, Optionee's personal
representative or the person entitled to succeed to the Option) shall have the
right to exercise the portions of any of Optionee's Options which were
exercisable as of the date of such termination, in whole or in part, at any time
within three (3) months after such termination (or in the event of "termination
for good cause" as that term is defined under the California Labor Code and case
law related thereto, such shorter period as the option agreement may specify,
but not less than 30 days) or the remaining term of the Option, whichever is the
lesser; provided, however, that with respect to Nonstatutory Options, the Board
may specify such longer period, not to exceed six (6) months, for exercise
following termination as the Board deems reasonable and appropriate. The Option
may be exercised only with respect to installments that the Optionee could have
exercised at the date of termination of employment. Nothing contained herein or
in any Option granted pursuant hereto shall be construed to affect or restrict
in any way the right of the Corporation to terminate the employment of an
Optionee with or without cause.
(f) Disability of Optionee: If an Optionee is disabled (within the
----------------------
meaning of Section 22(e)(3) of the Code) at the time of termination, the three
(3) month period set forth in Paragraph 5(e) shall be a period, as determined by
the Board and set forth in the Option, of not less than six months nor more than
one year.
4
<PAGE>
(g) Death of Optionee: If an Optionee dies while employed or engaged
-----------------
as a consultant by the Corporation or an Affiliate, the portion of such
Optionee's Option or Options which were exercisable at the date of death may be
exercised, in whole or in part, by the estate of the decedent or by a person
succeeding to the right to exercise such Option or Options, at any time within
(i) a period, as determined by the Board and set forth in the Option, of not
less than six (6) months nor more than one (1) year after Optionee's death,
which period shall not be less, in the case of a Nonstatutory Option, than the
period for exercise following termination, or (ii) during the remaining term of
the Option, whichever is the lesser. The Option may be so exercised only with
respect to installments exercisable at the time of Optionee's death and not
previously exercised by the Optionee.
(h) Nontransferability of Option: No Option shall be transferable by
----------------------------
the Optionee, except by will or by the laws of descent and distribution.
(i) Recapitalization: Subject to any required action by the
----------------
stockholders, the number of shares of Stock covered by each outstanding Option,
and the price per share thereof set forth in each such Option, shall be
proportionately adjusted for any increase or decrease in the number of issued
shares of Stock of the Corporation resulting from a subdivision or consolidation
of shares or the payment of a stock dividend, or any other increase or decrease
in the number of such shares affected without receipt of consideration by the
Corporation.
Subject to any required action by the stockholders, if the Corporation
shall be the surviving entity in any merger or consolidation, each outstanding
Option thereafter shall pertain to and apply to the securities to which a holder
of shares of Stock equal to the shares subject to the Option would have been
entitled by reason of such merger or consolidation. A dissolution or
liquidation of the Corporation or a merger or consolidation in which the
Corporation is not the surviving entity shall cause each outstanding Option to
terminate on the effective date of such dissolution, liquidation, merger or
consolidation. In such event, if the entity which shall be the surviving entity
does not tender to Optionee an offer, for which it has no obligation to do so,
to substitute for any unexercised Option a stock option or capital stock of such
surviving entity, as applicable, which on an equitable basis shall provide the
Optionee with substantially the same economic benefit as such unexercised
Option, then the Board may grant to such Optionee, but shall not be obligated to
do so, the right for a period commencing thirty (30) days prior to and ending
immediately prior to such dissolution, liquidation, merger or consolidation or
during the remaining term of the Option, whichever is the lesser, to exercise
any unexpired Option or Options, without regard to the installment provisions of
Paragraph 5(d) of this Plan; provided, that any such right granted shall be
granted to all Optionees not receiving an offer to substitute on a consistent
basis, and provided further, that any such exercise shall be subject to the
consummation of such dissolution, liquidation, merger or consolidation.
In the event of a change in the Stock of the Corporation as presently
constituted, which is limited to a change of all of its authorized shares
without par value into the same number of shares with a par value, the shares
resulting from any such change shall be deemed to be the Stock within the
meaning of this Plan.
To the extent that the foregoing adjustments relate to stock or
securities of the Corporation, such adjustments shall be made by the Board,
whose determination in that respect
5
<PAGE>
shall be final, binding and conclusive. Except as expressly provided in this
Paragraph 5(i), the Optionee shall have no rights by reason of any subdivision
or consolidation of shares of stock of any class or the payment of any stock
dividend or any other increase or decrease in the number of shares of stock of
any class, and the number or price of shares of Stock subject to any Option
shall not be affected by, and no adjustment shall be made by reason of, any
dissolution, liquidation, merger or consolidation, or any issue by the
Corporation of shares of stock of any class or securities convertible into
shares of stock of any class.
The grant of an Option pursuant to the Plan shall not affect in any
way the right or power of the Corporation to make any adjustments,
reclassifications, reorganizations or changes in its capital or business
structure or to merge, consolidate, dissolve, or liquidate or to sell or
transfer all or any part of its business or assets.
(j) Rights as a Stockholder: An Optionee shall have no rights as a
-----------------------
stockholder with respect to any shares covered by an Option until the date of
the issuance of a stock certificate to Optionee for such shares. No adjustment
shall be made for dividends (ordinary or extraordinary, whether in cash,
securities or other property) or distributions or other rights for which the
record date is prior to the date such stock certificate is issued, except as
expressly provided in Paragraph 5(i) hereof.
(k) Modification, Acceleration, Extension, and Renewal of Options:
-------------------------------------------------------------
Subject to the terms and conditions and within the limitations of the Plan, the
Board may modify an Option, or once an Option is exercisable, accelerate the
rate at which it may be exercised, and may extend or renew outstanding Options
granted under the Plan or accept the surrender of outstanding Options (to the
extent not theretofore exercised) and authorize the granting of new Options in
substitution for such Options, provided such action is permissible under Section
422A of the Code.
Notwithstanding the foregoing provisions of this Paragraph 5(k),
however, no modification of an Option shall, without the consent of the
Optionee, alter to the Optionee's detriment or impair any rights or obligations
under any Option theretofore granted under the Plan.
(l) Investment Intent: Unless and until the issuance and sale of the
-----------------
shares subject to the Plan are registered under the Securities Act of 1933, as
amended (the "Act"), each Option under the Plan shall provide that the purchases
of Stock thereunder shall be for investment purposes and not with a view to, or
for resale in connection with, any distribution thereof. Further, unless the
issuance and sale of the Stock have been registered under the Act, each Option
shall provide that no shares shall be purchased upon the exercise of such Option
unless and until (i) any then applicable requirements of state and federal laws
and regulatory agencies shall have been fully complied with to the satisfaction
of the Corporation and its counsel, and (ii) if requested to do so by the
Corporation, the person exercising the Option shall (i) give written assurances
as to knowledge and experience of such person (or a representative employed by
such person) in financial and business matters and the ability of such person
(or representative) to evaluate the merits and risks of exercising the Option,
and (ii) execute and deliver to the Corporation a letter of investment intent,
all in such form and substance as the Corporation may require. If shares are
issued upon exercise of an Option without registration under the Act, subsequent
registration of such shares shall relieve the purchaser thereof of any
investment restrictions or representations made upon the exercise of such
Options.
6
<PAGE>
(m) Exercise Before Exercise Date: At the discretion of the Board, the
-----------------------------
Option may, but need not, include a provision whereby the Optionee may elect to
exercise all or any portion of the Option prior to the stated exercise date of
the Option or any installment thereof. Any shares so purchased prior to the
stated exercise date shall be subject to repurchase by the Corporation upon
termination of Optionee's employment as contemplated by Paragraphs 5(e), 5(f)
and 5(g) hereof prior to the exercise date stated in the Option and such other
restrictions and conditions as the Board or Committee may deem advisable.
(n) Other Provisions: The Option agreements authorized under this Plan
----------------
shall contain such other provisions, including, without limitation, restrictions
upon the exercise of the Options, as the Board or the Committee shall deem
advisable. Shares shall not be issued pursuant to the exercise of an Option, if
the exercise of such Option or the issuance of shares thereunder would violate,
in the opinion of legal counsel for the Corporation, the provisions of any
applicable law or the rules or regulations of any applicable governmental or
administrative agency or body, such as the Act, the Securities Exchange Act of
1934, the rules promulgated under the foregoing or the rules and regulations of
any exchange upon which the shares of the Corporation are listed.
6. Availability of Information
---------------------------
During the term of the Plan and any additional period during which an
Option granted pursuant to the Plan shall be exercisable, the Corporation shall
make available, upon request, not later than one hundred and twenty (120) days
following the close of each of its fiscal years such financial and other
information regarding the Corporation as is required by the bylaws of the
Corporation and applicable law to be furnished in an annual report to the
stockholders of the Corporation.
7. Effectiveness of Plan; Expiration
---------------------------------
Subject to approval by the stockholders of the Corporation, this Plan shall
be deemed effective as of the date it is adopted by the Board. The Plan shall
expire on April 30, 2002, but such expiration shall not affect the validity of
outstanding Options.
8. Amendment and Termination of the Plan
-------------------------------------
The Board may, insofar as permitted by law, from time to time, with respect
to any shares at the time not subject to Options, suspend or terminate the Plan
or revise or amend it in any respect whatsoever, except that without the
approval of the stockholders of the Corporation, no such revision or amendment
shall (i) increase the number of shares subject to the Plan, (ii) decrease the
price at which Options may be granted, (iii) materially increase the benefits to
Optionees, or (iv) change the class of persons eligible to receive Options under
this Plan; provided, however, no such action shall alter or impair the rights
and obligations under any Option outstanding as of the date thereof without the
written consent of the Optionee thereunder. No Option may be granted while the
Plan is suspended or after it is terminated, but the rights and obligations
under any Option granted while the Plan is in effect shall not be impaired by
suspension or termination of the Plan.
7
<PAGE>
9. Indemnification of Board
------------------------
In addition to such other rights or indemnifications as they may have as
directors or otherwise, and to the extent allowed by applicable law, the members
of the Board and the Committee shall be indemnified by the Corporation against
the reasonable expenses, including attorneys' fees, actually and necessarily
incurred in connection with the defense of any claim, action, suit or
proceeding, or in connection with any appeal thereof, to which they or any of
them may be a party by reason of any action taken, or failure to act, under or
in connection with the Plan or any Option granted thereunder, and against all
amounts paid by them in settlement thereof (provided such settlement is approved
by independent legal counsel selected by the Corporation) or paid by them in
satisfaction of a judgment in any such claim, action, suit or proceeding, except
in any case in relation to matters as to which it shall be adjudged in such
claim, action, suit or proceeding that such Board member is liable for
negligence or misconduct in the performance of his or her duties; provided that
within sixty (60) days after institution of any such action, suit or Board
proceeding the member involved shall offer the Corporation, in writing, the
opportunity, at its own expense, to handle and defend the same.
10. Application of Funds
--------------------
The proceeds received by the Corporation from the sale of Stock pursuant to
the exercise of Options will be used for general corporate purposes.
11. No Obligation to Exercise Option
--------------------------------
The granting of an Option shall impose no obligation upon the Optionee to
exercise such Option.
12. Notices
-------
All notice, requests, demands, and other communications pursuant this Plan
shall be in writing and shall be deemed to have been duly given on the date of
service if served personally on the party to whom notice is to be given, or on
the third day following the mailing thereof to the party to whom notice is to be
given, by first class mail, registered or certified, postage prepaid.
* * * * *
The foregoing 1992 Incentive and Nonstatutory Stock Option Plan (the
"Plan") was duly adopted and approved by the Board of Directors of NetVantage, a
California corporation and the Corporation's predecessor, on June 15, 1992, and
approved by the shareholders of NetVantage on June 30, 1992. The Plan was
assumed by the Corporation in connection with a duly approved merger of
NetVantage into the Corporation on December 12, 1994. The foregoing Plan has
been restated to generally reflect the terms and conditions of the merger.
_____________________________________
Thomas G. Iwanski, Secretary
8
<PAGE>
EXHIBIT 4.6
Form of Stock Option Assumption Agreement used in connection
with the NetVantage, Inc. Equity Incentive Plan, NetVantage, Inc. 1996 Incentive
Stock Plan, NetVantage, Inc. 1994 Incentive and Nonstatutory Stock Option Plan,
and NetVantage, Inc. 1992 Incentive and Nonstatutory Stock Option Plan
NETVANTAGE, INC. EQUITY INCENTIVE PLAN
NETVANTAGE, INC. 1996 INCENTIVE STOCK PLAN
NETVANTAGE, INC. 1994 INCENTIVE AND NONSTATUTORY STOCK OPTION PLAN
NETVANTAGE, INC. 1992 INCENTIVE AND NONSTATUTORY STOCK OPTION PLAN
CABLETRON SYSTEMS, INC.
STOCK OPTION ASSUMPTION AGREEMENT
---------------------------------
OPTIONEE:
STOCK OPTION ASSUMPTION AGREEMENT issued as of the 25th day of September,
1998 by Cabletron Systems, Inc., a Delaware corporation ("Cabletron").
WHEREAS, _____________ ("Optionee") holds one or more outstanding options
to purchase shares of the common stock of NetVantage, Inc., a Delaware
corporation ("NetVantage"), which were granted to Optionee under the NetVantage,
Inc. Equity Incentive Plan, NetVantage, Inc. 1996 Incentive Stock Plan,
NetVantage, Inc. 1994 Incentive and Nonstatutory Stock Option Plan and/or
NetVantage, Inc. 1992 Incentive and Nonstatutory Stock Option Plan (the "Plans")
and are evidenced by a Plan agreement (the "Option Agreement") between
NetVantage and Optionee.
WHEREAS, NetVantage has this day been acquired by Cabletron through merger
of a wholly-owned Cabletron subsidiary, Tempest Acquisition, Inc. ("Acquisition
Corporation"), with and into NetVantage (the "Merger") pursuant to the Agreement
and Plan of Merger dated as of June 22, 1998 by and among Cabletron, NetVantage
and Acquisition Corporation (the "Merger Agreement").
WHEREAS, the provisions of the Merger Agreement require Cabletron to assume
all obligations of NetVantage under all options outstanding under the Plans at
the consummation of the Merger and to issue to the holder of each outstanding
option a notice setting forth such holder's rights after consummation of the
Merger.
WHEREAS, pursuant to the provisions of the Merger Agreement, the exchange
ratio (the "Exchange Ratio") in effect for the Merger is 8/13 of a share of
Cabletron common stock ("Cabletron Stock") for each share of Class A Common
Stock of NetVantage, together with the rights attached thereto, each share of
Class B Common Stock of NetVantage, and each ten
<PAGE>
shares of Class E Common Stock of NetVantage (collectively, the "NetVantage
Common Stock").
WHEREAS, this Agreement is to become effective immediately upon the
consummation of the Merger (the "Effective Time") in order to reflect certain
adjustments to Optionee's outstanding options under the Plans which have become
necessary by reason of the assumption of those options by Cabletron in
connection with the Merger.
NOW, THEREFORE, it is hereby agreed as follows:
1. The number of shares of NetVantage Common Stock subject to the stock
options held by Optionee under the Plans immediately prior to the Effective Time
(the "NetVantage Options") and the exercise price payable per share are set
forth in Exhibit A hereto. Cabletron hereby assumes, as of the Effective Time,
all the duties and obligations of NetVantage under each of the NetVantage
Options. In connection with such assumption, the number of shares of Cabletron
Stock purchasable under each NetVantage Option hereby assumed and the exercise
price payable thereunder have been adjusted to reflect the Exchange Ratio at
which shares of NetVantage Common Stock were converted into shares of Cabletron
Stock by virtue of the Merger. Accordingly, the number of shares of Cabletron
Stock subject to each NetVantage Option hereby assumed, and the adjusted
exercise price payable per share of Cabletron Stock under the assumed NetVantage
Option, shall be as indicated for that option in attached Exhibit B.
2. The intent of the foregoing adjustments to each assumed NetVantage
Option is to assure that the spread between the aggregate fair market value of
the shares of Cabletron Stock purchasable under that option and the aggregate
exercise price as adjusted hereunder will equal, immediately after the
consummation of the Merger, the spread which existed, immediately prior to the
Merger, between the then aggregate fair market value of the NetVantage Common
Stock subject to the NetVantage Option and the aggregate exercise price in
effect at such time under the Option Agreement. Such adjustments are also
designed to preserve, on a per share basis immediately after the Merger, the
same ratio of exercise price per option share to fair market value per share
which existed under the NetVantage Option immediately prior to the Merger.
3. The following provisions shall govern each NetVantage Option hereby
assumed by Cabletron:
- Unless the context otherwise requires, all references to the "Company"
in each Option Agreement and in the Plans (as incorporated into such Option
Agreement) shall mean Cabletron, all references to the NetVantage Common Stock
shall mean shares of Cabletron Stock, and all references to the "Committee"
shall mean the Incentive Compensation Committee of the Board of Directors of
Cabletron.
-2-
<PAGE>
- The grant date and the expiration date of each assumed NetVantage Option
and all other provisions which govern either the exercisability or the
termination of the assumed NetVantage Option shall remain the same as set forth
in the Option Agreement applicable to that option and shall accordingly govern
and control Optionee's rights under this Agreement to purchase Cabletron Stock.
- Each assumed NetVantage Option shall remain exercisable in accordance
with the same installment exercise schedule in effect under the applicable
Option Agreement immediately prior to the Effective Time, with the number of
shares of Cabletron Stock subject to each such installment adjusted to reflect
the Exchange Ratio. Accordingly, no accelerated vesting of the NetVantage
Options, other than vesting already provided for in the Option Agreement, shall
be deemed to occur by reason of the Merger, and the grant date for each assumed
NetVantage Option shall accordingly remain the same as in effect under the
applicable Option Agreement immediately prior to the Merger.
- For purposes of applying any and all provisions of the Option Agreement
relating to Optionee's status as an employee or consultant with the Company,
Optionee shall be deemed to continue in such employee or consultant status for
so long as Optionee renders services as an employee or consultant to Cabletron
or any present or future Cabletron subsidiary, including (without limitation)
NetVantage. Accordingly, the provisions of the Option Agreement governing the
termination of the assumed NetVantage Option upon the Optionee's cessation of
employee or consultant status with NetVantage shall hereafter be applied on the
basis of the Optionee's cessation of employee or consultant status with
Cabletron and its subsidiaries, and each assumed NetVantage Option shall
accordingly terminate, within the designated time period in effect under the
Option Agreement for that option, following such cessation of employment or
consulting status with Cabletron and its subsidiaries.
- The adjusted exercise price payable for the Cabletron Stock subject to
each assumed NetVantage Option shall be payable in any of the forms authorized
under the Option Agreement applicable to that option. For purposes of
determining the holding period of any shares of Cabletron Stock delivered in
payment of such adjusted exercise price, the period for which such shares were
held as NetVantage Common Stock prior to the Merger shall be taken into account.
- In order to exercise each assumed NetVantage Option, Optionee must
deliver to Cabletron a written notice of exercise in which the number of shares
of Cabletron Stock to be purchased thereunder must be indicated. The exercise
notice should be delivered to Cabletron at the following address:
Cabletron Systems, Inc.
35 Industrial Way
Rochester, New Hampshire 03867
Attention: Edward Cortes, phone: (603) 332-9400
-3-
<PAGE>
4. Except to the extent specifically modified by this Option Assumption
Agreement, all of the terms and conditions of each Option Agreement as in effect
immediately prior to the Merger shall continue in full force and effect and
shall not in any way be amended, revised or otherwise affected by this Stock
Option Assumption Agreement.
IN WITNESS WHEREOF, Cabletron Systems, Inc. has caused this Stock Option
Assumption Agreement to be executed on its behalf by its duly-authorized officer
as of the ___ day of _________, 1998.
CABLETRON SYSTEMS, INC.
By:______________________________
-4-
<PAGE>
EXHIBIT A
Optionee's Outstanding Options to Purchase Shares of NetVantage, Inc.
Common Stock (Pre-Merger)
-5-
<PAGE>
EXHIBIT B
Optionee's Outstanding Options to Purchase Shares of Cabletron Systems, Inc.
Common Stock (Post-Merger)
-6-
<PAGE>
Exhibit 5
September 25, 1998
Cabletron Systems, Inc.
35 Industrial Way
Rochester, NH 03867
Ladies and Gentlemen:
This opinion is furnished to you in connection with a registration
statement on Form S-8 (the "Registration Statement") to be filed with the
Securities and Exchange Commission (the "Commission") under the Securities Act
of 1933, as amended, for the registration of 1,434,900 shares of common stock,
$0.01 par value per share (the "Shares"), of Cabletron Systems, Inc., a Delaware
corporation (the "Company"), issuable upon exercise of options assumed by the
Company (the "Options") that had previously been issued under the NetVantage,
Inc. Equity Incentive Plan; the NetVantage, Inc. 1996 Incentive Stock Plan; the
NetVantage, Inc. 1994 Incentive and Nonstatutory Stock Option Plan; and the
NetVantage, Inc. 1992 Incentive and Nonstatutory Stock Option Plan (the
"Plans").
We have acted as counsel for the Company in connection with the assumption
of the Options and are familiar with the actions taken by the Company in
connection therewith. For purposes of this opinion we have examined the
Registration Statement, the Plans and such other documents as we have deemed
appropriate.
Based upon the foregoing, we are of the opinion that (i) the Shares have
been duly authorized and (ii) the Shares, when issued and sold in accordance
with the terms of the Options and Plans, will have been validly issued and will
be fully paid and non-assessable.
We hereby consent to your filing this opinion as an exhibit to the
Registration Statement.
Very truly yours,
/s/ Ropes & Gray
Ropes & Gray
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
Cabletron Systems, Inc.:
We consent to the use of our reports incorporated herein by reference.
/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
Boston, Massachusetts
September 25, 1998
<PAGE>
Exhibit 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statement
of Cabletron Systems, Inc. ("Cabletron") on Form S-8 (as filed on September 25,
1998) of our report, which includes an explanatory paragraph, dated February 19,
1998, on our audit of the Statement of Assets Sold and Statement of Revenue and
Direct Operating Expenses (the "Statements") of the Network Products Business of
Digital Equipment Corporation (the "Business"), which report is included in the
report on Form 8-K/A. The explanatory paragraph states that the Statements were
prepared to present the assets sold by the Business to Cabletron and the revenue
and direct operating expenses of the Business and are not intended to be a
complete presentation of the Business' financial position or results of
operations.
/s/ PricewaterhouseCoopers LLP
Boston, Massachusetts
September 25, 1998
