<PAGE> 1
As filed with the Securities and Exchange Commission on September 17, 1997
Registration No. 333-________________
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________________
FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
_______________________
CISCO SYSTEMS, INC.
(Exact name of issuer as specified in its charter)
CALIFORNIA 77-0059951
(State or other jurisdiction (IRS Employer Identification No.)
of incorporation or organization)
170 WEST TASMAN DRIVE, SAN JOSE, CALIFORNIA 95134-1706
(Address of principal executive offices) (Zip Code)
________________________
OPTIONS TO PURCHASE SHARES OF COMMON
STOCK OF DAGAZ TECHNOLOGIES, INC.
ORIGINALLY GRANTED UNDER EITHER THE
INTEGRATED NETWORK CORPORATION
1996 STOCK OPTION PLAN
OR 1986 STOCK OPTION PLAN
(Full title of the plan)
_______________________
JOHN T. CHAMBERS
PRESIDENT, CHIEF EXECUTIVE OFFICER AND DIRECTOR
CISCO SYSTEMS, INC.
170 WEST TASMAN DRIVE, SAN JOSE, CALIFORNIA 95134-1706
(Name and address of agent for service)
(408) 526-4000
(Telephone number, including area code, of agent for service)
________________________
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
============================================================================================================
Proposed Proposed
Title of Maximum Maximum
Securities Amount Offering Aggregate Amount of
to be to be Price Offering Registration
Registered Registered(1) per Share(2) Price(2) Fee
- ---------- ------------- ------------ -------- ---
<S> <C> <C> <C> <C>
Certain Options Originally
Granted Under The
Integrated Network Corporation
1996 Stock Option Plan
Common Stock 244,684 $12.07 $2,953,336 $895
============================================================================================================
</TABLE>
(1) This Registration Statement shall also cover any additional shares of
Common Stock which become issuable under the Integrated Network
Corporation 1996 Stock Option Plan by reason of any stock dividend,
stock split, recapitalization or other similar transaction effected
without the receipt of consideration which results in an increase in
the number of the Registrant's outstanding shares of Common Stock.
<PAGE> 2
(2) Calculated solely for purposes of this offering under Rule 457(h) of
the Securities Act of 1933, as amended, on the basis of the weighted
average exercise price of the outstanding options.
<PAGE> 3
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
Item 3. Incorporation of Certain Documents by Reference
Cisco Systems, Inc. (the "Registrant") hereby incorporates by reference
into this Registration Statement the following documents previously filed with
the Securities and Exchange Commission (the "Commission"):
(a) The Registrant's Annual Report on Form 10-K for the fiscal
year ended July 28, 1996 filed with the Commission on October
25, 1996, pursuant to Section 13 of the Securities Exchange
Act of 1934 (the "1934 Act").
(b) The Registrant's Quarterly Reports on Form 10-Q for the fiscal
quarters ended October 26, 1996, January 25, 1997 and April
26, 1997, filed with the Commission on December 10, 1996,
March 10, 1997 and June 10, 1997, respectively, and any
amendments thereto.
(c) The Registrant's reports on Form 8-K filed with the Commission
on October 1, 1996 and January 22, 1997, respectively.
(d) The Registrant's Registration Statement No. 0-18225 on Form
8-A filed with the Commission on January 11, 1990, together
with Amendment No. 1 on Form 8-A filed with the Commission on
February 15, 1990, in which there is described the terms,
rights and provisions applicable to the Registrant's
outstanding Common Stock.
All reports and definitive proxy or information statements filed
pursuant to Section 13(a), 13(c), 14 or 15(d) of the 1934 Act after the date of
this Registration Statement and prior to the filing of a post-effective
amendment which indicates that all securities offered hereby have been sold or
which deregisters all securities then remaining unsold shall be deemed to be
incorporated by reference into this Registration Statement and to be a part
hereof from the date of filing of such documents. Any statement contained in a
document incorporated or deemed to be incorporated by reference herein shall be
deemed to be modified or superseded for purposes of this Registration Statement
to the extent that a statement contained herein or in any subsequently filed
document which also is deemed to be incorporated by reference herein modifies
or supersedes such statement. Any such statement so modified or superseded
shall not be deemed, except as so modified or superseded, to constitute a part
of this Registration Statement.
Item 4. Description of Securities
Not Applicable.
Item 5. Interests of Named Experts and Counsel
Not Applicable.
II-1.
<PAGE> 4
Item 6. Indemnification of Directors and Officers
Section 317 of the California Corporations Code authorizes a court to
award, or a corporation's Board of Directors to grant, indemnity to directors
and officers in terms sufficiently broad to permit indemnification (including
reimbursement of expenses incurred) under certain circumstances for liabilities
arising under the Securities Act of 1933, as amended, (the "1933 Act"). The
Registrant's Restated Articles of Incorporation, as amended, and Amended and
Restated Bylaws provide for indemnification of its directors, officers,
employees and other agents to the maximum extent permitted by the California
Corporations Code. In addition, the Registrant has entered into
Indemnification Agreements with each of its directors and officers.
Item 7. Exemption from Registration Claimed
Not Applicable.
Item 8. Exhibits
Exhibit Number Exhibit
4.0 Instruments Defining Rights of Shareholders. Reference is
made to Registrant's Registration Statement No. 0-18225 on
Form 8-A which is incorporated herein by reference pursuant
to Item 3(d).
5.0 Opinion of Brobeck, Phleger & Harrison LLP.
23.1 Consent of Independent Accountants - Coopers & Lybrand
L.L.P.
23.2 Consent of Brobeck, Phleger & Harrison LLP is contained in
Exhibit 5.
24.0 Power of Attorney. Reference is made to page II-4 of this
Registration Statement.
99.1 Integrated Network Corporation 1996 Stock Option Plan.
99.2 Form of Non-Qualified Stock Option Agreement in connection
with the Integrated Network Corporation 1996 Stock Option
Plan.
99.3 Form of Stock Option Assumption Agreement Between Dagaz
Technologies, Inc. and Integrated Network Corporation
Optionees.
99.4 Memorandum re: Assumption of Stock Options (Group #1)
99.5 Stock Option Assumption Agreement Between Cisco Systems,
Inc. and Dagaz Technologies, Inc. (Group #1).
99.6 Memorandum re: Assumption of Stock Options (Group #2)
99.7 Stock Option Assumption Agreement Between Cisco Systems,
Inc. and Dagaz Technologies, Inc. (Group #2).
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 1933 Act, (ii) to reflect in the
prospectus any facts or events arising after the effective date of the
Registration Statement (or the most recent post-effective amendment thereof)
which, individually or in the aggregate, represent a fundamental change in the
information set forth in the Registration Statement, 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 clauses
(1)(i) and (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
1934 Act that are incorporated by reference into the Registration Statement;
(2) that for the purpose
II-2.
<PAGE> 5
of determining any liability under the 1933 Act each such post-effective
amendment shall be deemed to be a new Registration Statement relating to the
securities offered therein and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof; and (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 Integrated
Network Corporation 1996 Stock Option Plan.
B. The undersigned Registrant hereby undertakes that, for
purposes of determining any liability under the 1933 Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
1934 Act that is incorporated by reference into 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 1933 Act may be permitted to directors, officers or controlling persons of
the Registrant pursuant to the indemnity provisions summarized in Item 6 or
otherwise, the Registrant has been informed that, in the opinion of the
Commission, such indemnification is against public policy as expressed in the
1933 Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the 1933
Act and will be governed by the final adjudication of such issue.
II-3.
<PAGE> 6
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of San Jose,
State of California, on this 16th day of September, 1997.
CISCO SYSTEMS, INC.
By /s/ JOHN T. CHAMBERS
-----------------------------------
John T. Chambers
President and Chief Executive Officer
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below
constitutes and appoints John T. Chambers and Larry R. Carter and each of them
acting individually, as such person's true and lawful attorneys-in-fact and
agents, each with full power of substitution, for such person, in any and all
capacities, to sign any and all amendments (including post-effective
amendments) to this Registration Statement, and to file 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, and each
of them, full power and authority to do and perform each and every act and
thing requisite and necessary to be done in connection therewith, as fully to
all intents and purposes as such person might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or any of
them, or their or his or her substitutes, may do or cause to be done by virtue
thereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons on behalf
of the Registrant and in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
Signatures Title Date
- ---------- ----- ----
<S> <C>
/s/ JOHN T. CHAMBERS President, Chief Executive September 16, 1997
- --------------------------------- Officer and Director (Principal
John T. Chambers Executive Officer)
/s/ LARRY R. CARTER Senior Vice President, Finance and September 16, 1997
- --------------------------------- Administration, Chief Financial
Larry R. Carter Officer and Secretary
(Principal Financial and Accounting Officer)
/s/ JOHN P. MORGRIDGE Chairman of the Board September 16, 1997
- --------------------------------- and Director
John P. Morgridge
</TABLE>
II-4.
<PAGE> 7
<TABLE>
<CAPTION>
Signatures Title Date
- ---------- ----- ----
<S> <C> <C>
/s/ Donald T. Valentine Director September 16, 1997
- ---------------------------------
Donald T. Valentine
/s/ James F. Gibbons Director September 16, 1997
- ---------------------------------
James F. Gibbons
/s/ Robert L. Puette Director September 16, 1997
- ---------------------------------
Robert L. Puette
Director September __, 1997
- ---------------------------------
Masayoshi Son
/s/ Steven M. West Director September 16, 1997
- ---------------------------------
Steven M. West
/s/ Richard M. Moley Director September 16, 1997
- ---------------------------------
Richard M. Moley
/s/ Edward Kozel Director September 16, 1997
- ---------------------------------
Edward Kozel
/s/ Carol Bartz Director September 16, 1997
- ---------------------------------
Carol Bartz
</TABLE>
II-5.
<PAGE> 8
EXHIBIT INDEX
Exhibit Number Exhibit
4.0 Instruments Defining Rights of Shareholders. Reference is
made to Registrant's Registration Statement No. 0-18225 on
Form 8-A which is incorporated herein by reference pursuant
to Item 3(d).
5.0 Opinion of Brobeck, Phleger & Harrison LLP.
23.1 Consent of Independent Accountants - Coopers & Lybrand
L.L.P.
23.2 Consent of Brobeck, Phleger & Harrison LLP is contained in
Exhibit 5.
24.0 Power of Attorney. Reference is made to page II-4 of this
Registration Statement.
99.1 Integrated Network Corporation 1996 Stock Option Plan.
99.2 Form of Non-Qualified Stock Option Agreement in connection
with the Integrated Network Corporation 1996 Stock Option
Plan.
99.3 Form of Stock Option Assumption Agreement Between Dagaz
Technologies, Inc. and Integrated Network Corporation
Optionees.
99.4 Memorandum re: Assumption of Stock Options (Group #1)
99.5 Stock Option Assumption Agreement Between Cisco Systems,
Inc. and Dagaz Technologies, Inc. (Group #1).
99.6 Memorandum re: Assumption of Stock Options (Group #2)
99.7 Stock Option Assumption Agreement Between Cisco Systems,
Inc. and Dagaz Technologies, Inc. (Group #2).
<PAGE> 1
EXHIBIT 5
September 17, 1997
Cisco Systems, Inc.
170 West Tasman Drive
San Jose, CA 95134-1706
Re: Cisco Systems, Inc. Registration Statement for
Offering of 244,684 shares of Common Stock
Ladies and Gentlemen:
We refer to your registration on Form S-8 (the "Registration
Statement") under the Securities Act of 1933, as amended, of 244,684 shares of
the common stock ("Common Stock") of Cisco Systems, Inc. (the "Company")
originally issuable under the Integrated Network Corporation 1996 Stock Option
Plan (the "Plan") and assumed by Dagaz Technologies, as assumed by the Company.
We advise you that, in our opinion, when such shares have been issued and sold
pursuant to the applicable provisions of the Plan and in accordance with the
Registration Statement, such shares will be validly issued, fully paid and
nonassessable shares of Common Stock.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement.
Very truly yours,
/s/ Brobeck, Phleger & Harrison LLP
BROBECK, PHLEGER & HARRISON LLP
<PAGE> 1
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the Registration Statement on
Form S-8 of Cisco Systems, Inc. for the registration of 244,684 shares of its
common stock of our reports dated August 13, 1996, except for Note 3 for which
the date is October 14, 1996, on our audits of the consolidated financial
statements and financial statement schedule of Cisco Systems, Inc. as of July
28, 1996 and July 30, 1995, and for the years ended July 28, 1996, July 30,
1995 and July 31, 1994 appearing in Cisco Systems, Inc.'s 1996 Annual Report on
Form 10-K filed with the Securities and Exchange Commission pursuant to the
Securities Act of 1934.
/s/ Coopers & Lybrand L.L.P.
San Jose, California
September 16, 1997
<PAGE> 1
EXHIBIT 99.1
INTEGRATED NETWORK CORPORATION
1996 STOCK OPTION PLAN
1. PURPOSE. The purpose of this 1996 Stock Option Plan
(the "Plan") is to encourage employees, officers, directors and consultants of
Integrated Network Corporation (the "Company') and of any present or future
parent or subsidiary of the Company (collectively, "Related Corporations"), and
other individuals who render services to the Company a Related Corporation, by
providing opportunities to purchase stock in the Company pursuant to options
granted hereunder which qualify as "incentive stock options" ("ISOs") under
Section 422(b) of the Internal Revenue Code of 1986, as amended (the "Code"),
in the case of employees (including officers and directors who are also
employees), and options which do not qualify as ISOs ("Non-Qualified Options"),
in the case of employees, officers, directors and consultants. Both ISOs and
Non-Qualified Options are referred to hereafter individually as an "Option" and
collectively as "Options." As used herein, the terms "parent" and "subsidiary"
mean "parent corporation" and "subsidiary corporation," respectively, as those
terms are defined in Section 424 of the Code.
2. ADMINISTRATION OF THE PLAN.
A. BOARD OR COMMITTEE ADMINISTRATION. The Plan shall be
administered by the Board of Directors of the Company (the "Board") or by a
committee appointed by the Board (the "Committee"); provided that the Plan
shall be administered to the extent required by Rule 16b-3 promulgated under
the Securities Exchange Act of 1934 or any successor provision ("Rule 16b-3"),
with respect to specific grants of Options, by a disinterested administrator or
administrators within the meaning of Rule 16b-3. Hereinafter, all references
in this Plan to the "Committee" shall mean the Board if no Committee has been
appointed. Subject to ratification of the grant or authorization of each
Option by the Board (if so required by applicable state law), and subject to
the terms of the Plan, the Committee shall have the authority to (i) determine
to whom (from among the class of employees eligible under paragraph 3 to
receive ISOs) ISOs shall be granted, and to whom (from among the class of
individuals and entities eligible under paragraph 3 to receive Non-Qualified
Options) Non-Qualified Options may be granted; (ii) determine the time or times
at which Options shall be granted; (iii) determine the exercise price of shares
subject to each Option, which price shall not be less than the minimum price
specified in paragraph 6; (iv) determine whether each Option granted shall be
an ISO or a Non- Qualified Option; (v) determine (subject to paragraph 7) the
time or times when each Option shall become exercisable and the duration of the
exercise period; (vi) extend the period during which outstanding Options may be
exercised; (vii) determine whether restrictions such as repurchase options are
to be imposed on shares subject to Options and the nature of such restrictions,
if any; and (viii) interpret the Plan and prescribe and rescind rules and
regulations relating to it. If the Committee determines to issue a
Non-Qualified Option, it shall take whatever actions it deems necessary, under
Section 422 of the Code and the regulations promulgated thereunder, to ensure
that
<PAGE> 2
such Option is not treated as an ISO. The interpretation and construction by
the Committee of any provisions of the Plan or of any Option granted under it
shall be final unless otherwise determined by the Board. The Committee may
from time to time adopt such rules and regulations for carrying out the Plan as
it may deem advisable. 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 granted under it.
B. COMMITTEE ACTIONS. The Committee may select one of
its members as its chairman, and shall hold meetings at such time and places as
it may determine. A majority of the Committee shall constitute a quorum and
acts by a majority of the members of the Committee at a meeting at which a
quorum is present, or acts reduced to or approved in writing by a majority of
the members of the Committee (if consistent with applicable state law), shall
constitute the valid acts of the Committee. From time to time the Board may
increase the size of the Committee and appoint additional members thereof,
remove members (with or without cause) and appoint new members in substitution
therefor, fill vacancies however caused, or remove all members of the Committee
and thereafter directly administer the Plan.
C. GRANT OF OPTIONS TO BOARD MEMBERS. Subject to the
provisions of the first sentence of paragraph 2(A) above, if applicable,
Options may be granted to members of the Board. All grants of Options to
members of the Board shall in all other respects be made in accordance with the
provisions of this Plan applicable to other eligible persons. Consistent with
the provisions of the first sentence of paragraph 2(A) above, members of the
Board who either (i) are eligible to receive grants of Options pursuant to the
Plan or (ii) have been granted Options may vote on any matters affecting the
administration of the Plan or the grant of any Options pursuant to the Plan,
except that no such member shall act upon the granting to himself or herself of
Options, but any such member may be counted in determining the existence of a
quorum at any meeting of the Board during which action is taken with respect to
the granting to such member of Options.
3. ELIGIBLE EMPLOYEES AND OTHERS. ISOs may be granted
only to employees of the Company or any Related Corporation. Non- Qualified
Options may be granted to any employee, officer or director (whether or not
also an employee) or consultant of the Company or any Related Corporation. The
Committee may take into consideration a recipient's individual circumstances in
determining whether to grant an ISO or a Non-Qualified Option. The granting of
any Option to any individual or entity shall neither entitle that individual or
entity to, nor disqualify such individual or entity from, participation in any
other grants of Options.
4. STOCK. The stock subject to Options shall be
authorized but unissued shares of Common Stock of the Company, par value $.01
per share (the "Common Stock"), or shares of Common Stock reacquired by the
Company in any manner. The aggregate number of shares which may be issued
pursuant to the Plan is 3,750,000 less the aggregate number of shares that are
or have been issued from time to time under the 1985 Employee Incentive
2.
<PAGE> 3
Stock Option Plan and the 1986 Stock Option Plan, subject to adjustment as
provided in paragraph 13. If any Option granted under the Plan shall expire or
terminate for any reason, or shall be assumed by another entity other than a
Related Corporation, without having been exercised in full or shall cease for
any reason to be exercisable in whole or in part or shall be repurchased by the
Company, the shares subject to such Option shall again be available for grants
of Options under the Plan.
5. GRANTING OF OPTIONS. Options may be granted under
the Plan at any time after July 19, 1996 and prior to July 19, 2006. The date
of grant of an Option under the Plan will be the date specified by the
Committee at the time it grants the Option; provided, however, that such date
shall not be prior to the date on which the Committee acts to approve the
grant.
6. MINIMUM OPTION PRICE; ISO LIMITATIONS.
A. PRICE FOR NON-QUALIFIED OPTIONS. The exercise price
per share specified in the agreement relating to each Non- Qualified Option
granted under the Plan shall in no event be less than the minimum legal
consideration required therefor under the laws of any jurisdiction in which the
Company or its successors in interest may be organized.
B. PRICE FOR ISOS. The exercise price per share
specified in the agreement relating to each ISO granted under the Plan shall
not be less than the fair market value per share of Common Stock on the date of
such grant. In the case of an ISO to be granted to an employee owning stock
possessing more than ten percent (10%) of the total combined voting power of
all classes of stock of the Company or any Related Corporation, the price per
share specified in the agreement relating to such ISO shall not be less than
one hundred ten percent (110%) of the fair market value per share of Common
Stock on the date of grant. For purposes of determining stock ownership under
this paragraph, the rules of Section 424(d) of the Code shall apply.
C. $100,000 ANNUAL LIMITATION ON ISO VESTING. Each
eligible employee may be granted Options treated as ISOs only to the extent
that, in the aggregate under this Plan and all incentive stock option plans of
the Company and any Related Corporation, ISOs do not become exercisable for the
first time by such employee during any calendar year with respect to stock
having a fair market value (determined at the time the ISOs were granted) in
excess of $100,000. The Company intends to designate any Options granted in
excess of such limitation as Non-Qualified Options.
D. DETERMINATION OF FAIR MARKET VALUE. If, at the time
an Option is granted under the Plan, the Company's Common Stock is publicly
traded, "fair market value" shall be determined as of the date of grant or, if
the prices or quotes discussed in this sentence are unavailable for such date,
the last business day for which such prices or quotes are available prior to
the date of grant and shall mean (i) the average (on that date) of the high and
low prices of the Common Stock on the principal national securities exchange on
which
3.
<PAGE> 4
the Common Stock is traded, if the Common Stock is then traded on a national
securities exchange; or (ii) the last reported sale price (on that date) of the
Common Stock on the Nasdaq National Market, if the Common Stock is not then
traded on a national securities exchange; or (iii) the closing bid price (or
average of bid prices) last quoted (on that date) by an established quotation
service for over-the-counter securities, if the Common Stock is not reported on
the Nasdaq National Market. If the Common Stock is not publicly traded at the
time an Option is granted under the Plan, "fair market value" shall be deemed
to be the fair value of the Common Stock as determined by the Committee after
taking into consideration all factors which it deems appropriate, including,
without limitation, recent sale and offer prices of the Common Stock in private
transactions negotiated at arm's length.
7. OPTION DURATION. Subject to earlier termination as
provided in paragraphs 9 and 10 or in the agreement relating to such Option,
each Option shall expire on the date specified by the Committee, but not more
than (i) ten years from the date of grant in the case of Options generally and
(ii) five years from the date of grant in the case of ISOs granted to an
employee owning stock possessing more than ten percent (10%) of the total
combined voting power of all classes of stock of the Company or any Related
Corporation, as determined under paragraph 6(B). Subject to earlier
termination as provided in paragraphs 9 and 10, the term of each ISO shall be
the term set forth in the original instrument granting such ISO, except with
respect to any part of such ISO that is converted into a Non-Qualified Option
pursuant to paragraph 16.
8. EXERCISE OF OPTION. Subject to the provisions of
paragraphs 9 through 12, each Option granted under the Plan shall be
exercisable as follows:
A. VESTING. The Option shall either be fully
exercisable on the date of grant or shall become exercisable thereafter in such
installments as the Committee may specify.
B. FULL VESTING OF INSTALLMENTS. Once an installment
becomes exercisable it shall remain exercisable until expiration or termination
of the Option, unless otherwise specified by the Committee.
C. PARTIAL EXERCISE. Each Option or installment may be
exercised at any time or from time to time, in whole or in part, for up to the
total number of shares with respect to which it is then exercisable.
D. ACCELERATION OF VESTING. The Committee shall have
the right to accelerate the date on which any installment of any Option becomes
exercisable; provided that the Committee shall not, without the consent of an
optionee, accelerate the permitted exercise date of any installment of any
Option granted to any employee as an ISO (and not previously converted into a
Non-Qualified Option pursuant to paragraph 16) if such acceleration would
violate the annual vesting limitation contained in Section 422(d) of the Code,
as described in paragraph 6(C).
4.
<PAGE> 5
9. TERMINATION OF EMPLOYMENT. Unless otherwise
specified in the agreement relating to such ISO, if an ISO optionee ceases to
be employed by the Company and all Related Corporations other than by reason of
death or disability as defined in paragraph 10, no further installments of his
or her ISOs shall become exercisable, and his or her ISOs shall terminate after
the passage of three months from the date of termination of his or her
employment, but in no event later than on their specified expiration dates,
except to the extent that such ISOs (or unexercised installments thereof) have
been converted into Non-Qualified Options pursuant to paragraph 16. For
purposes of this paragraph 9, employment shall be considered as continuing
uninterrupted during any bona fide leave of absence (such as those attributable
to illness, military obligations or governmental service) provided that the
period of such leave does not exceed 90 days or, if longer, any period during
which such optionee's right to reemployment is guaranteed by statute. A bona
fide leave of absence with the written approval of the Committee shall not be
considered an interruption of employment under this paragraph 9, provided that
such written approval contractually obligates the Company or any Related
Corporation to continue the employment of the optionee after the approved
period of absence. ISOs granted under the Plan shall not be affected by any
change of employment within or among the Company and Related Corporations, so
long as the optionee continues to be an employee of the Company or any Related
Corporation. Nothing in the Plan shall be deemed to give any optionee the
right to be retained in employment or other service by the Company or any
Related Corporation for any period of time.
10. DEATH; DISABILITY.
A. DEATH. If an ISO optionee ceases to be employed by
the Company and all Related Corporations by reason of his or her death, any ISO
owned by such optionee may be exercised, to the extent otherwise exercisable on
the date of death, by the estate, personal representative or beneficiary who
has acquired the ISO by will or by the laws of descent and distribution, until
the earlier of (i) the specified expiration date of the ISO or (ii) 180 days
from the date of the optionee's death.
B. DISABILITY. If an ISO optionee ceases to be employed
by the Company and all Related Corporations by reason of his or her disability,
such optionee shall have the right to exercise any ISO held by him or her on
the date of termination of employment, to the extent of the number of shares
with respect to which he or she could have exercised it on that date, until the
earlier of (i) the specified expiration date of the ISO or (ii) 180 days from
the date of the termination of the optionee's employment. For the purposes of
the Plan, the term "disability" shall mean "permanent and total disability" as
defined in Section 22(e)(3) of the Code or any successor statute.
11. ASSIGNABILITY. No Option shall be assignable or
transferable by the optionee except by will, by the laws of descent and
distribution or, in the case of Non-Qualified Options only, pursuant to a valid
domestic relations order. Except as set forth in the preceding sentence,
during the lifetime of an optionee each Option shall be exercisable only by
such optionee.
5.
<PAGE> 6
12. TERMS AND CONDITIONS OF OPTIONS. Options shall be
evidenced by instruments (which need not be identical) in such forms as the
Committee may from time to time approve. Such instruments shall conform to the
terms and conditions set forth in paragraphs 6 through 11 hereof and may
contain such other provisions as the Committee deems advisable which are not
inconsistent with the Plan, including restrictions applicable to shares of
Common Stock issuable upon exercise of Options. The Committee may specify that
any Non-Qualified Option shall be subject to the restrictions set forth herein
with respect to ISOs, or to such other termination and cancellation provisions
as the Committee may determine. The Committee may from time to time confer
authority and responsibility on one or more of its own members and/or one or
more officers of the Company to execute and deliver such instruments. The
proper officers of the Company are authorized and directed to take any and all
action necessary or advisable from time to time to carry out the terms of such
instruments.
13. ADJUSTMENTS. Upon the occurrence of any of the
following events, an optionee's rights with respect to Options granted to such
optionee hereunder shall be adjusted as hereinafter provided, unless otherwise
specifically provided in the written agreement between the optionee and the
Company relating to such Option:
A. STOCK DIVIDENDS AND STOCK SPLITS. If the shares of
Common Stock shall be subdivided or combined into a greater or smaller number
of shares or if the Company shall issue any shares of Common Stock as a stock
dividend on its outstanding Common Stock, the number of shares of Common Stock
deliverable upon the exercise of Options shall be appropriately increased or
decreased proportionately, and appropriate adjustments shall be made in the
purchase price per share to reflect such subdivision, combination or stock
dividend.
B. CONSOLIDATIONS OR MERGERS. If the Company is to be
consolidated with or acquired by another entity in a merger or other
reorganization in which the holders of the outstanding voting stock of the
Company immediately preceding the consummation of such event, shall,
immediately following such event, hold, as a group, less than a majority of the
voting securities of the surviving or successor entity, or in the event of a
sale of all or substantially all of the Company's assets or otherwise (each, an
"Acquisition"), the Committee or the board of directors of any entity assuming
the obligations of the Company hereunder (the "Successor Board"), shall, as to
outstanding Options, either (i) make appropriate provision for the continuation
of such Options by substituting on an equitable basis for the shares then
subject to such Options either (a) the consideration payable with respect to
the outstanding shares of Common Stock in connection with the Acquisition, (b)
shares of stock of the surviving or successor corporation or (c) such other
securities as the Successor Board deems appropriate, the fair market value of
which shall not materially exceed the fair market value of the shares of Common
Stock subject to such Options immediately preceding the Acquisition; or (ii)
upon written notice to the optionees, provide that all Options must be
exercised, to the extent then exercisable or to be exercisable as a result of
the Acquisition, within a specified number of days of the date of such notice,
at the end of which period the
6.
<PAGE> 7
Options shall terminate; or (iii) terminate all Options in exchange for a cash
payment equal to the excess of the fair market value of the shares subject to
such Options (to the extent then exercisable or to be exercisable as a result
of the Acquisition) over the exercise price thereof.
C. RECAPITALIZATION OR REORGANIZATION. In the event of
a recapitalization or reorganization of the Company (other than a transaction
described in subparagraph B above) pursuant to which securities of the Company
or of another corporation are issued with respect to the outstanding shares of
Common Stock, an optionee upon exercising an Option shall be entitled to
receive for the purchase price paid upon such exercise the securities he or she
would have received if he or she had exercised such Option prior to such
recapitalization or reorganization.
D. MODIFICATION OF ISOS. Notwithstanding the foregoing,
any adjustments made pursuant to subparagraphs A, B or C with respect to ISOs
shall be made only after the Committee, after consulting with counsel for the
Company, determines whether such adjustments would constitute a "modification"
of such ISOs (as that term is defined in Section 424 of the Code) or would
cause any adverse tax consequences for the holders of such ISOs. If the
Committee determines that such adjustments made with respect to ISOs would
constitute a modification of such ISOs or would cause adverse tax consequences
to the holders, it may refrain from making such adjustments.
E. DISSOLUTION OR LIQUIDATION. In the event of the
proposed dissolution or liquidation of the Company, each Option will terminate
immediately prior to the consummation of such proposed action or at such other
time and subject to such other conditions as shall be determined by the
Committee.
F. ISSUANCES OF SECURITIES. Except as expressly
provided herein, no issuance by the Company of shares of stock of any class, or
securities convertible into shares of stock of any class, shall affect, and no
adjustment by reason thereof shall be made with respect to, the number or price
of shares subject to Options. No adjustments shall be made for dividends paid
in cash or in property other than securities of the Company.
G. FRACTIONAL SHARES. No fractional shares shall be
issued under the Plan and the optionee shall receive from the Company cash in
lieu of such fractional shares.
H. ADJUSTMENTS. Upon the happening of any of the events
described in subparagraphs A, B or C above, the class and aggregate number of
shares set forth in paragraph 4 hereof that are subject to Options which
previously have been or subsequently may be granted under the Plan shall also
be appropriately adjusted to reflect the events described in such
subparagraphs. The Committee or the Successor Board shall determine the
specific adjustments to be made under this paragraph 13 and, subject to
paragraph 2, its determination shall be conclusive.
7.
<PAGE> 8
14. MEANS OF EXERCISING OPTIONS. An Option (or any part
or installment thereof) shall be exercised by giving written notice to the
Company at its principal office address, or to such transfer agent as the
Company shall designate. Such notice shall identify the Option being exercised
and specify the number of shares as to which such Option is being exercised,
accompanied by full payment of the purchase price therefor either (a) in United
States dollars in cash or by check, (b) at the discretion of the Committee,
through delivery of shares of Common Stock having a fair market value equal as
of the date of the exercise to the cash exercise price of the Option, (c) at
the discretion of the Committee, by delivery of the optionee's personal
recourse note bearing interest payable not less than annually at no less than
100% of the lowest applicable Federal rate, as defined in Section 1274(d) of
the Code, (d) at the discretion of the Committee and consistent with applicable
law, through the delivery of an assignment to the Company of a sufficient
amount of the proceeds from the sale of the Common Stock acquired upon exercise
of the Option and an authorization to the broker or selling agent to pay that
amount to the Company, which sale shall be at the participant's direction at
the time of exercise, or (e) at the discretion of the Committee, by any
combination of (a), (b), (c) and (d) above. If the Committee exercises its
discretion to permit payment of the exercise price of an ISO by means of the
methods set forth in clauses (b), (c), (d) or (e) of the preceding sentence,
such discretion shall be exercised in writing at the time of the grant of the
ISO in question. The holder of an Option shall not have the rights of a
shareholder with respect to the shares covered by his Option until the date of
issuance of a stock certificate to such holder for such shares. Except as
expressly provided above in paragraph 13 with respect to changes in
capitalization and stock dividends, no adjustment shall be made for dividends
or similar rights for which the record date is before the date is before the
date such stock certificate is issued.
15. TERM AND AMENDMENT OF PLAN. This Plan was adopted by
the Board on July 19, 1996, subject, with respect to the validation of ISOs
granted under the Plan, to approval of the Plan by the stockholders of the
Company at the next Meeting of Stockholders or, in lieu thereof, by written
consent. If the approval of stockholders is not obtained prior to July 19,
1997, any grants of ISOs under the Plan made prior to that date will be
rescinded. The Plan shall expire at the end of the day on July 18, 2006
(except as to Options outstanding on that date). Subject to the provisions of
paragraph 5 above, Options may be granted under the Plan prior to the date of
stockholder approval of the Plan. The Board may terminate or amend the Plan in
any respect at any time, except that, without the approval of the stockholders
obtained within twelve (12) months before or after the Board adopts a
resolution authorizing any of the following actions: (a) the total number of
shares that may be issued under the Plan may not be increased (except by
adjustment pursuant to paragraph 13); (b) the benefits accruing to participants
under the Plan may not be materially increased; (c) the requirements as to
eligibility for participation in the Plan may not be materially modified; (d)
the provisions of paragraph 3 regarding eligibility for grants of ISOs may not
be modified; (e) the provisions of paragraph 6(B) regarding the exercise price
at which shares may be offered pursuant to ISOs may not be modified (except by
adjustment pursuant to paragraph 13); (f) the expiration date of the Plan may
not be extended; and (g) the Board may not take any action which would cause
the Plan to fail to comply with Rule 16b-3. Except as
8.
<PAGE> 9
otherwise provided in this paragraph 15, in no event may action of the Board or
stockholders alter or impair the rights of an optionee, without such optionee's
consent, under any Option previously granted to such optionee.
16. CONVERSION OF ISOs INTO NON-QUALIFIED OPTIONS. The
Committee, at the written request or with the written consent of any optionee,
may in its discretion take such actions as may be necessary to convert such
optionee's ISOs (or any installments or portions of installments thereof) that
have not been exercised on the date of conversion into Non-Qualified Options at
any time prior to the expiration of such ISOs, regardless of whether the
optionee is an employee of the Company or a Related Corporation at the time of
such conversion. Such actions may include, but shall not be limited to,
extending the exercise period or reducing the exercise price of the appropriate
installments of such ISOs. At the time of such conversion, the Committee (with
the consent of the optionee) may impose such conditions on the exercise of the
resulting Non-Qualified Options as the Committee in its discretion may
determine, provided that such conditions shall not be inconsistent with this
Plan. Nothing in the Plan shall be deemed to give any optionee the right to
have such optionee's ISOs converted into Non-Qualified Options, and no such
conversion shall occur until and unless the Committee takes appropriate action.
17. APPLICATION OF FUNDS. The proceeds received by the
Company from the sale of shares pursuant to Options granted under the Plan
shall be used for general corporate purposes.
18. NOTICE TO COMPANY OF DISQUALIFYING DISPOSITION. By
accepting an ISO granted under the Plan, each optionee agrees to notify the
Company in writing immediately after such optionee makes a Disqualifying
Disposition (as described in Sections 421, 422 and 424 of the Code and
regulations thereunder) of any stock acquired pursuant to the exercise of ISOs
granted under the Plan. A Disqualifying Disposition is generally any
disposition occurring on or before the later of (a) the date two years
following the date the ISO was granted or (b) the date one year following the
date the ISO was exercised.
19. WITHHOLDING OF ADDITIONAL INCOME TAXES. Upon the
exercise of a Non-Qualified Option, the making of a Disqualifying Disposition
(as defined in paragraph 18), the vesting or transfer of restricted stock or
securities acquired on the exercise of an Option hereunder, or the making of a
distribution or other payment with respect to such stock or securities, the
Company may withhold taxes in respect of amounts that constitute compensation
includible in gross income. The Committee in its discretion may condition (i)
the exercise of an Option, or (ii) the vesting or transferability of restricted
stock or securities acquired by exercising an Option, on the optionee's making
satisfactory arrangement for such withholding. Such arrangement may include
payment by the optionee in cash or by check of the amount of the withholding
taxes or, at the discretion of the Committee, by the optionee's delivery of
previously held shares of Common Stock or the withholding from the
9.
<PAGE> 10
shares of Common Stock otherwise deliverable upon exercise of an Option shares
having an aggregate fair market value equal to the amount of such withholding
taxes.
20. GOVERNMENTAL REGULATION. The Company's obligation to
sell and deliver shares of the Common Stock under this Plan is subject to the
approval of any governmental authority required in connection with the
authorization, issuance or sale of such shares.
Government regulations may impose reporting or other
obligations on the Company with respect to the Plan. For example, the Company
may be required to send tax information statements to employees and former
employees that exercise ISOs under the Plan, and the Company may be required to
file tax information returns reporting the income received by optionees in
connection with the Plan.
21. GOVERNING LAW. The validity and construction of the
Plan and the instruments evidencing Options shall be governed by the laws of
Delaware, or the laws of any jurisdiction in which the Company or its
successors in interest may be organized.
10.
<PAGE> 1
EXHBIT 99.2
INTEGRATED NETWORK CORPORATION
NON-QUALIFIED STOCK OPTION AGREEMENT
Integrated Network Corporation, a Delaware corporation (the
"Company"), hereby grants this 31st day of January, 1997, to __________ (the
"Optionee"), an option to purchase a maximum of __________ shares of its Common
Stock, $.01 par value, at the price of $__________ per share, on the following
terms and conditions:
1. Grant Under 1996 Stock Option Plan. This option is
granted pursuant to and is governed by the Company's 1996 Stock Option Plan
(the "Plan") and, unless the context otherwise requires, terms used herein
shall have the same meanings as in the Plan. Determinations made in connection
with this option pursuant to the Plan shall be governed by the Plan as it
exists on this date. Notwithstanding anything to the contrary contained in
this Agreement, this option (a) shall be void if the Plan is not approved by
the stockholders of the Company before July 19, 1997, and (b) may not be
exercised in whole or in part prior to such stockholder approval.
2. Grant as Non-Qualified Option; Other Options. This
option is intended to be a non-qualified option (rather than an incentive stock
option), and the Company intends to take appropriate action, if necessary, to
achieve this result. This option is in addition to any other options
heretofore or hereafter granted to the Optionee by the Company, but a duplicate
original of this instrument shall not effect the grant of another option.
3. Extent of Option if Business Relationship Continues.
If on the date hereof the Optionee is serving the Company or any Related
Corporation in the capacity of an employee, director or consultant (such
service is described herein as maintaining or being involved in a "Business
Relationship" with the Company) and has continued to serve the Company or any
Related Corporation in such capacity on the following dates, the Optionee may
exercise this option for the number of shares set opposite the applicable date:
April 16, 1997 -
On the 16th day of each -
succeeding month for the next 47
months
The foregoing rights are cumulative and, while the Optionee continues to
maintain a Business Relationship with the Company, may be exercised up to and
including the date which is ten years from the date this option is granted.
All of the foregoing rights are subject to Articles 4 and 5, as appropriate, if
the Optionee ceases to maintain a Business Relationship with the Company or
dies, becomes disabled or undergoes dissolution, liquidation, a bankruptcy
proceeding, receivership or merger or acquisition while involved in a Business
Relationship
<PAGE> 2
with the Company. If on the date hereof the Optionee does not have a Business
Relationship with the Company, the Optionee may exercise this option for the
maximum number of shares set forth above at any time up to and including the
date which is ten years from the date this option is granted.
4. Termination of Business Relationship. If the
Optionee ceases to maintain a Business Relationship with the Company, other
than by reason of death or disability as defined in Article 5, no further
installments of this option shall become exercisable and this option shall
terminate after the passage of sixty (60) days from the date the Business
Relationship ceases, but in no event later than the scheduled expiration date.
In such a case, the Optionee's only rights hereunder shall be those which are
properly exercised before the termination of this option. This Article 4 does
not affect the rights of an Optionee who did not have a Business Relationship
with the Company at the date hereof.
5. Death; Disability; Dissolution. If the Optionee is a
natural person who dies while involved in a Business Relationship with the
Company, this option may be exercised, to the extent of the number of shares
with respect to which the Optionee could have exercised it on the date of his
death, by his estate, personal representative or beneficiary to whom this
option has been assigned pursuant to Article 10, at any time within 180 days
after the date of death, but not later than the scheduled expiration date. If
the Optionee is a natural person whose Business Relationship with the Company
is terminated by reason of his disability (as defined in the Plan), this option
may be exercised, to the extent of the number of shares with respect to which
the Optionee could have exercised it on the date the Business Relationship was
terminated, at any time within 180 days after the date of termination, but not
later than the scheduled expiration date. At the expiration of such 180-day
period or the scheduled expiration date, whichever is the earlier, this option
shall terminate and the only rights hereunder shall be those as to which the
option was properly exercised before such termination. If the Optionee is a
corporation, partnership, trust or other entity that is dissolved, liquidated,
becomes subject to a voluntary or involuntary bankruptcy proceeding, has a
receiver appointed for all or a substantial portion of its property or enters
into a merger or acquisition with respect to which such optionee is not the
surviving entity at the time when such entity is involved in a Business
Relationship with the Company, this Option shall immediately terminate as of
the date of such event, and the only rights hereunder shall be those as to
which this option was properly exercised before such dissolution or other
event. This Article 5 does not affect the rights of an Optionee who did not
have a Business Relationship with the Company at the date hereof.
6. Partial Exercise. Exercise of this option up to the
extent above stated may be made in part at any time and from time to time
within the above limits, except that this option may not be exercised for a
fraction of a share unless such exercise is with respect to the final
installment of stock subject to this option and a fractional share (or cash in
lieu thereof) must be issued to permit the Optionee to exercise completely such
final installment. Any fractional share with respect to which any installment
of this option cannot be exercised because of the limitation contained in the
preceding sentence shall remain subject to this
2.
<PAGE> 3
option and shall be available for later purchase by the Optionee in accordance
with the terms hereof.
7. Payment of Price. The option price is payable in
United States dollars and may be paid in cash or by check, or any combination
of the foregoing, equal in amount to the option price.
8. Agreement to Purchase for Investment. By acceptance
of this option, the Optionee agrees that a purchase of shares under this option
will not be made with a view to their distribution, as that term is used in the
Securities Act of 1933, as amended, unless in the opinion of counsel to the
Company such distribution is in compliance with or exempt from the registration
and prospectus requirements of that Act, and the Optionee agrees to sign a
certificate to such effect at the time of exercising this option and agrees
that the certificate for the shares so purchased may be inscribed with a legend
to ensure compliance with that Act.
9. Method of Exercising Option. Subject to the terms
and conditions of this Agreement, this option may be exercised by written
notice to the Company, at the principal executive office of the Company, or to
such transfer agent as the Company shall designate. Such notice shall state
the election to exercise this option and the number of shares in respect of
which it is being exercised and shall be signed by the person or persons so
exercising this option. Such notice shall be accompanied by payment of the
full purchase price of such shares, and the Company shall deliver a certificate
or certificates representing such shares as soon as practicable after the
notice shall be received. The certificate or certificates for the shares as to
which this Option shall have been so exercised shall be registered in the name
of the person or persons so exercising this option (or, if this option shall be
exercised by the Optionee and if the Optionee shall so request in the notice
exercising this option, shall be registered in the name of the Optionee and
another person jointly, with right of survivorship) and shall be delivered as
provided above to or upon the written order of the person or persons exercising
this option. In the event this option shall be exercised, pursuant to Article
5 hereof, by any person or persons other than the Optionee, such notice shall
be accompanied by appropriate proof of the right of such person or persons to
exercise this option. All shares that shall be purchased upon the exercise of
this option as provided herein shall be fully paid and non-assessable.
10. Option Not Transferable. This option is not
transferable or assignable except by will or by the laws of descent and
distribution. During the Optionee's lifetime only the Optionee can exercise
this option.
11. No Obligation to Exercise Option. The grant and
acceptance of this option imposes no obligation on the Optionee to exercise it.
3.
<PAGE> 4
12. No Obligation to Continue Business Relationship. The
Company and any Related Corporations are not by the Plan or this option
obligated to continue to maintain a Business Relationship with the Optionee.
13. No Rights as Stockholder until Exercise. The
Optionee shall have no rights as a stockholder with respect to shares subject
to this Agreement until a stock certificate therefor has been issued to the
Optionee and is fully paid for. Except as is expressly provided in the Plan
with respect to certain changes in the capitalization of the Company, no
adjustment shall be made for dividends or similar rights for which the record
date is prior to the date such stock certificate is issued.
14. Capital Changes and Business Successions. It is the
purpose of this option to encourage the Optionee to work for the best interests
of the Company and its stockholders. Since, for example, that might require
the issuance of a stock dividend or a merger with another corporation, the
purpose of this option would not be served if such a stock dividend, merger or
similar occurrence would cause the Optionee's rights hereunder to be diluted or
terminated and thus be contrary to the Optionee's interest. The Plan contains
extensive provisions designed to preserve options at full value in a number of
contingencies. Therefore, provisions in the Plan for adjustment with respect
to stock subject to options and the related provisions with respect to
successors to the business of the Company are hereby made applicable hereunder
and are incorporated herein by reference. In particular, without affecting the
generality of the foregoing, it is understood that for the purposes of Articles
3 and 5 hereof, both inclusive, maintaining or being involved in a Business
Relationship with the Company includes maintaining or being involved in a
Business Relationship with a Related Corporation as defined in the Plan.
15. Withholding Taxes. The Optionee hereby agrees that
the Company may withhold from the Optionee's wages or other remuneration the
appropriate amount of federal, state and local taxes attributable to the
Optionee's exercise of any installment of this option. At the Company's
discretion, the amount required to be withheld may be withheld in cash from
such wages or other remuneration, or in kind from the Common Stock otherwise
deliverable to the Optionee on exercise of this option. The Optionee further
agrees that, if the Company does not withhold an amount from the Optionee's
wages or other remuneration sufficient to satisfy the Company's withholding
obligation, the Optionee will reimburse the Company on demand, in cash, for the
amount underwithheld.
16. Governing Law. This Agreement shall be governed by
and interpreted in accordance with the internal laws of the State of Delaware.
17. Existence of Business Relationship. On the date
hereof the Optionee has a Business Relationship with the Company.
18. Provision of Documentation to Optionee. By signing
this Agreement the Optionee acknowledges receipt of a copy of this Agreement
and a copy of the Plan.
4.
<PAGE> 5
IN WITNESS WHEREOF, the Company and the Optionee have caused
this instrument to be executed, and the Optionee whose signature appears below
acknowledges receipt of a copy of the Plan and acceptance of an original copy
of this Agreement.
INTEGRATED NETWORK CORPORATION
By:
-------------------------------
Title:
----------------------------
----------------------------------
Optionee
5.
<PAGE> 1
EXHIBIT 99.3
DAGAZ TECHNOLOGIES, INC.
STOCK OPTION ASSUMPTION AGREEMENT
DESIGNATED OPTIONS UNDER
INTEGRATED NETWORK CORPORATION
1986 STOCK OPTION PLAN OR 1996 STOCK OPTION PLAN
OPTIONEE:
STOCK OPTION ASSUMPTION AGREEMENT issued as of the 2nd day of
September, 1997 by Dagaz Technologies, Inc., a Delaware corporation ("Dagaz")
and a wholly-owned subsidiary of Integrated Network Corporation, Delaware
corporation ("INC").
WHEREAS, the undersigned individual ("Optionee") holds one or
more outstanding non-qualified stock options to purchase shares of INC common
stock ("INC Stock") which were originally granted to Optionee under either the
INC 1986 Stock Option Plan or the INC 1996 Stock Option Plan (individually, the
"Plan," and together, the "Plans") and are evidenced by a Non-Qualified Stock
Option Agreement (the "Option Agreement") originally between INC and Optionee.
WHEREAS, INC has this day contributed all of the properties,
assets, rights and obligations of INC related to certain INC technology (the
"Contribution") pursuant to the Acquisition Agreement dated July 27, 1997, by
and between Cisco Systems, Inc., a California corporation, and INC (the
"Acquisition Agreement").
WHEREAS, the provisions of the Acquisition Agreement require
Dagaz to assume all obligations of INC under designated outstanding options
under the Plans at the consummation of the Contribution and to issue to the
holder of each such option an agreement evidencing the assumption of that
option.
WHEREAS, pursuant to the provisions of the Acquisition
Agreement, the assumption ratio in effect for purposes of the option assumption
is 1.7143 shares of Dagaz common stock (the "Dagaz Stock") for each outstanding
share of INC Stock subject to the INC Options (the "Assumption Ratio").
WHEREAS, this Agreement is to become effective immediately
upon the consummation of the Contribution (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
Dagaz in connection with the Contribution.
<PAGE> 2
NOW, THEREFORE, it is hereby agreed as follows:
1. The number of shares of INC Stock subject to the
stock options held by Optionee under the applicable Plan immediately prior to
the Effective Time (the "INC Options") and the exercise price payable per share
are set forth in Exhibit A hereto. Dagaz hereby assumes, as of the Effective
Time, all the duties and obligations of INC under each of the INC Options. In
connection with such assumption, the number of shares of Dagaz Stock
purchasable under each INC Option hereby assumed and the exercise price payable
thereunder have been adjusted to reflect the Assumption Ratio. Accordingly,
the number of shares of Dagaz Stock subject to each INC Option hereby assumed
shall be as specified for that option in attached Exhibit A, and the adjusted
exercise price payable per share of Dagaz Stock under the assumed INC Option
shall be as indicated for that option in attached Exhibit A.
2. The intent of the foregoing adjustments to each
assumed INC Option is to assure that the spread between the aggregate fair
market value of the shares of Dagaz Stock purchasable under each such option
and the aggregate exercise price as adjusted pursuant to this Agreement will,
immediately after the consummation of the Contribution, be substantially equal
(except for the effects of rounding) to the spread which existed, immediately
prior to the Contribution, between the then aggregate fair market value of the
INC Stock subject to the INC Option and the aggregate exercise price in effect
at such time under the Option Agreement. Such adjustments are also designed to
preserve, immediately after the Contribution, on a per share basis, the same
ratio of exercise price per option share to fair market value per share which
existed under the INC Option immediately prior to the Contribution.
3. The following provisions shall govern each INC Option
hereby assumed by Dagaz:
(a) Unless the context otherwise
requires, all references to the "Company" in each Option
Agreement and in the applicable Plan (as incorporated into
such Option Agreement) shall mean Dagaz, all references to
"Common Stock" shall mean shares of Dagaz Stock, all
references to the "Board of Directors" shall mean the Board of
Directors of Dagaz, and all references to the "Committee"
shall mean the Compensation Committee of the Dagaz Board of
Directors.
(b) The grant date and the expiration
date of each assumed INC Option and all other provisions which
govern either the exercisability or the termination of the
assumed INC 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 Dagaz Stock.
(c) Each assumed INC 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 Dagaz Stock subject to each such installment
adjusted to
2.
<PAGE> 3
reflect the Assumption Ratio. Accordingly, no accelerated
vesting of the INC Options shall be deemed to automatically
occur by reason of the Contribution.
(d) For purposes of applying any and all
provisions of the Option Agreement relating to Optionee's
status as an employee, consultant or director of INC, Optionee
shall be deemed to continue in such status as an employee,
consultant or director for so long as Optionee renders
services as such to Dagaz (or any present or future parent or
subsidiary of Dagaz). Accordingly, the provisions of the
Option Agreement governing the termination of the assumed INC
Options upon Optionee's cessation of service as an employee,
consultant or director of INC shall hereafter be applied on
the basis of Optionee's cessation of employee, consultant or
director status with Dagaz (or any Dagaz parent or
subsidiary), and each assumed INC Option shall accordingly
terminate, within the designated time period in effect under
the Option Agreement for that option, following such cessation
of service as an employee, consultant or director of Dagaz (or
any Dagaz parent or subsidiary). In accordance with the Option
Agreement, a change in the status of service provided to Dagaz
(i.e., as either an employee, consultant or director) will not
constitute an interruption of continuous status as an
employee, consultant or director.
(e) The adjusted exercise price payable
for the Dagaz Stock subject to each assumed INC 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 Dagaz Stock
delivered in payment of such adjusted exercise price, the
period for which such shares were held as INC Stock prior to
the Contribution shall be taken into account.
(f) In order to exercise each assumed
INC Option, Optionee must deliver to Dagaz a written notice of
exercise in which the number of shares of Dagaz Stock to be
purchased thereunder must be indicated. The exercise notice
must be accompanied by payment of the adjusted exercise price
payable for the purchased shares of Dagaz Stock and should be
delivered to Dagaz at the following address:
Dagaz Technologies, Inc.
170 West Tasman Drive
San Jose, CA 95134
Attention: Stock Plan Administrator
4. Except to the extent specifically modified by this
Stock 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.
3.
<PAGE> 4
IN WITNESS WHEREOF, Dagaz Technologies, Inc. has caused this
Stock Option Assumption Agreement to be executed on its behalf by its
duly-authorized officer as of the _____ day of _______________________, 1997.
DAGAZ TECHNOLOGIES, INC.
By:
------------------------------------
ACKNOWLEDGMENT
The undersigned acknowledges receipt of the foregoing Stock
Option Assumption Agreement and understands that all rights and liabilities
with respect to each of his or her INC Options hereby assumed by Dagaz
Technologies, Inc. are as set forth in the Option Agreement, the applicable
Plan and such Stock Option Assumption Agreement.
------------------------------------
OPTIONEE
DATED: __________________, 199_
4.
<PAGE> 5
EXHIBIT A
Optionee's Outstanding Options to Purchase Shares of
Integrated Network Corporation Common Stock (Pre-Merger)
and
Optionee's Outstanding Options to Purchase Shares of
Dagaz Technologies, Inc. Common Stock (Post-Merger)
<PAGE> 1
EXHIBIT 99.4
MEMORANDUM
TO: Holders of Integrated Network Corporation Options
FROM: Cisco Systems, Inc.
DATE: September _____, 1997
RE: Assumption of Stock Options
- --------------------------------------------------------------------------------
As you know, Integrated Network Corporation ("INC") recently
sold a portion of its business to Cisco Systems, Inc. ("Cisco") through an
acquisition effected on September 2, 1997. In order to accomplish the
transaction, INC contributed those assets related to the development of the
Jera and Thurisa products to a wholly-owned subsidiary, Dagaz Technologies,
Inc. ("Dagaz"), and Cisco then acquired Dagaz immediately after such asset
contribution. As a result of the acquisition, Dagaz has become a division of
the Cisco organization.
As part of the acquisition, Cisco has assumed the outstanding
INC stock options held by those former employees of INC, such as yourself, who
have agreed to transfer employment to Cisco. Accordingly, your INC options now
cover shares of Cisco common stock.
Several additional changes to your options were made as part
of the assumption process, which was accomplished in two steps: Dagaz first
assumed your options from INC as part of the asset contribution by INC to
Dagaz, then Cisco immediately assumed those options from Dagaz as part of the
acquisition by Cisco of Dagaz. Accordingly, the changes to your options are
set forth in two Stock Option Assumption Agreements attached hereto (each one
representing a step in the option assumption), and the effect of those changes
may be summarized as follows:
1. The number of shares of Cisco common stock subject to
each of your options has been adjusted to reflect (i) the ratio of the
fair market value of all INC assets prior to the asset contribution to
the fair market value at such time of the INC assets to be contributed
to Dagaz (the "Assumption Ratio") and (ii) the ratio of the fair
market value per share of Dagaz Stock immediately prior to the
acquisition to the last reported sales price per share of Cisco Stock
on July 25, 1997 (the "Exchange Ratio"). The Assumption Ratio was
1.7143 shares of Dagaz common stock for each share of INC common
stock, and the Exchange Ratio was 0.1236 share of Cisco common stock
for each share of Dagaz common stock. Accordingly, the number of
Dagaz shares that was subject to your option immediately prior to the
asset contribution was equal to the number of INC shares
<PAGE> 2
subject to your option at such time, multiplied by 1.7143 and rounded
down to the next whole share. The number of Cisco shares now subject
to your option is equal to the number of Dagaz shares subject to your
option immediately prior to the acquisition (as determined above),
multiplied by 0.1236 and rounded down to the next whole share.
2. The aggregate exercise price under your Cisco options
for all of your new shares is substantially the same as the aggregate
price that previously existed for the shares purchasable under your
INC option. However, the exercise price per share has been adjusted
to reflect the Assumption Ratio and the Exchange Ratio. Accordingly,
the exercise price per share in effect under your INC option
immediately before the asset contribution was divided by 1.7143 and
rounded up to the next whole cent, and the resulting exercise price
per share that was in effect under your Dagaz option immediately
before the acquisition was divided by 0.1236 and rounded up to the
next whole cent to establish the current exercise price per share
payable for the Cisco common stock.
3. No change has been made to the vesting schedule in
effect for your options. You will continue to vest in the shares of
Cisco common stock subject to your option on the same installment
basis as under your INC option, with the number of Cisco shares
subject to each such installment adjusted to reflect the exchange
ratios. Since you have transferred employment to Cisco, you will now
earn vesting credit for any period of employment or service you
complete with Cisco or any Cisco subsidiary. Please note, however,
that each INC option held by you which was granted on either July 18,
1997 or July 26, 1997 will not become exercisable unless and until you
fulfill your obligation to relocate to Boston, Massachusetts, in
accordance with the terms of the Acquisition Agreement dated July 27,
1997 between Cisco and INC.
Attached are two copies of each of the Stock Option Assumption
Agreements pursuant to which Cisco has assumed your INC options with the
adjustments discussed above. Please review the agreement carefully so that you
understand your rights to acquire Cisco shares. You should contact Robert
Turner at Cisco at (408) 527-2098 if you have any questions. After you have
reviewed the agreement, please sign one copy and return it to Mr. Turner in the
pre-addressed envelope enclosed.
The other copy of each Stock Option Assumption Agreement
should be attached to your existing option agreement so that you will have a
complete record of all the terms and provisions applicable to your option as
now assumed by Cisco.
2.
<PAGE> 1
EXHIBIT 99.5
CISCO SYSTEMS, INC.
STOCK OPTION ASSUMPTION AGREEMENT
DESIGNATED OPTIONS UNDER
INTEGRATED NETWORK CORPORATION
1986 STOCK OPTION PLAN OR 1996 STOCK OPTION PLAN
OPTIONEE:
STOCK OPTION ASSUMPTION AGREEMENT issued as of the 2nd day of
September, 1997 by Cisco Systems, Inc., a California corporation ("Cisco") and
Dagaz Technologies, Inc., a Delaware corporation ("Dagaz") and a wholly-owned
subsidiary of Integrated Network Corporation ("INC").
WHEREAS, the undersigned individual ("Optionee") holds one or
more outstanding non-qualified stock options to purchase shares of Dagaz common
stock which were originally granted to Optionee under either the INC 1986 Stock
Option Plan or the INC 1996 Stock Option Plan (individually, the "Plan," and
together, the "Plans") and are evidenced by a Non-Qualified Stock Option
Agreement (the "Option Agreement") originally between INC and Optionee.
WHEREAS, upon the contribution by INC to Dagaz of all of the
properties, assets, rights and obligations related to certain INC technology
which occurred on this date but prior to the effectiveness of this Agreement
(the "Contribution"), Dagaz assumed all obligations of INC under certain
outstanding options under the Plans and issued to the holder of each such
specified option an agreement evidencing the assumption of that option by Dagaz
(the "Dagaz Assumption Agreement").
WHEREAS, Dagaz has this day been acquired by Cisco through the
purchase by Cisco of all the outstanding shares of Dagaz common stock (the
"Acquisition") pursuant to the Acquisition Agreement dated July 27, 1997, by
and between Cisco and INC (the "Acquisition Agreement").
WHEREAS, the provisions of the Acquisition Agreement require
Cisco to assume all obligations of Dagaz under designated outstanding options
under the Plans at the consummation of the Acquisition and to issue to the
holder of each such assumed option an agreement evidencing the assumption that
option.
<PAGE> 2
WHEREAS, pursuant to the provisions of the Acquisition
Agreement, the exchange ratio in effect for purposes of such option assumption
is 0.1236 share of Cisco common stock ("Cisco Stock") for each outstanding
share of Dagaz common stock ("Dagaz Stock") subject to the assumed options (the
"Assumption Ratio").
WHEREAS, this Agreement is to become effective immediately
following the Contribution and upon the consummation of the Acquisition (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 Cisco in connection with the Acquisition.
NOW, THEREFORE, it is hereby agreed as follows:
1. The number of shares of Dagaz Stock subject to the
stock options held by Optionee under the applicable Plan immediately prior to
the Effective Time (the "Dagaz Options") and the exercise price payable per
share are set forth in Exhibit A hereto. Cisco hereby assumes, as of the
Effective Time, all the duties and obligations of Dagaz under each of the Dagaz
Options. In connection with such assumption, the number of shares of Cisco
Stock purchasable under each Dagaz Option hereby assumed and the exercise price
payable thereunder have been adjusted to reflect the Exchange Ratio.
Accordingly, the number of shares of Cisco Stock subject to each Dagaz Option
hereby assumed shall be as specified for that option in attached Exhibit A, and
the adjusted exercise price payable per share of Cisco Stock under the assumed
Dagaz Option shall be as indicated for that option in attached Exhibit A.
2. The intent of the foregoing adjustments to each
assumed Dagaz Option is to assure that the spread between the aggregate fair
market value of the shares of Cisco Stock purchasable under each such option
and the aggregate exercise price as adjusted pursuant to this Agreement will,
immediately after the Effective Time, be substantially equal (except for the
effects of rounding) to the spread which existed, immediately prior to the
Effective Time, between the then aggregate fair market value of the Dagaz Stock
subject to the Dagaz Option and the aggregate exercise price in effect at such
time under the Option Agreement, as modified by the Dagaz Assumption Agreement.
Such adjustments are also designed to preserve, immediately after the Effective
Time, on a per share basis, the same ratio of exercise price per option share
to fair market value per share which existed under the Option Agreement, as
modified by the Dagaz Assumption Agreement, immediately prior to the Effective
Time.
3. The following provisions shall govern each Dagaz
Option hereby assumed by Cisco, and each such provision shall apply to (a) the
Option Agreement, (b) the Dagaz Assumption Agreement and (c) the applicable
Plan, as incorporated into the Option Agreement (the "Option Documents"), where
applicable:
(a) Unless the context otherwise
requires, all references to the "Company" in the Option
Documents shall mean Cisco, all references to "Common Stock"
shall mean shares of Cisco Stock, all references to the "Board
of Directors"
2.
<PAGE> 3
shall mean the Board of Directors of Cisco, and all references
to the "Committee" shall mean the Compensation Committee of
the Cisco Board of Directors.
(b) The grant date and the expiration
date of each assumed Dagaz Option and all other provisions
which govern either the exercise or the termination of the
assumed Dagaz Option shall remain the same as set forth in the
applicable Option Documents and shall accordingly govern and
control Optionee's rights under this Agreement to purchase
Cisco Stock.
(c) Consistent with the terms of the
applicable Option Documents, no accelerated vesting of any
Dagaz Option shall be deemed to automatically occur by reason
of the Acquisition and each assumed Dagaz Option shall remain
exercisable in accordance with the same installment exercise
schedule in effect under the applicable Option Documents
immediately prior to the Effective Time; provided, however,
that each assumed Dagaz Option which was granted to Optionee
on either July 18, 1997 or July 26, 1997 shall not become
exercisable unless and until Optionee fulfills his or her
obligation to relocate to Boston, Massachusetts, in accordance
with the terms of the Acquisition Agreement dated July 27,
1997 between Cisco and INC. In addition, the number of shares
of Cisco Stock subject to each installment under the
installment exercise schedule applicable to each of the
assumed Dagaz Options shall be adjusted to reflect the
Exchange Ratio.
(d) For purposes of applying any and all
provisions of the applicable Option Documents relating to
Optionee's status as an employee, consultant or director of
Dagaz, Optionee shall be deemed to continue in such status as
an employee, consultant or director for so long as Optionee
renders services as such to Cisco (or any present or future
Cisco subsidiary). Accordingly, the provisions of the
applicable Option Documents governing the termination of the
assumed Dagaz Options upon Optionee's cessation of service as
an employee, consultant or director of Dagaz shall hereafter
be applied on the basis of Optionee's cessation of employee,
consultant or director status with Cisco (or any Cisco
subsidiary), and each assumed Dagaz Option shall accordingly
terminate, within the designated time period in effect under
the applicable Option Documents, following such cessation of
service as an employee, consultant or director of Cisco (or
any Cisco subsidiary). In accordance with the applicable
Option Documents, a change in the status of Optionee's service
with Cisco (i.e., as an employee, consultant or director) will
not constitute an interruption of continuous status as an
employee, consultant or director.
(e) The adjusted exercise price payable
for the Cisco Stock subject to each assumed Dagaz Option shall
be payable in any of the forms authorized under the applicable
Option Documents. For purposes of determining the holding
period of any shares of Cisco Stock delivered in payment of
such
3.
<PAGE> 4
adjusted exercise price, the period for which such shares were
held as Dagaz Stock prior to the Effective Time shall be taken
into account.
(f) In order to exercise each assumed
Dagaz Option, Optionee must deliver to Cisco a written notice
of exercise in which the number of shares of Cisco Stock to be
purchased thereunder must be indicated. The exercise notice
must be accompanied by payment of the adjusted exercise price
payable for the purchased shares of Cisco Stock and should be
delivered to Cisco at the following address:
Cisco Systems, Inc.
170 West Tasman Drive
San Jose, CA 95134
Attention: Option Plan Administrator
4. Except to the extent specifically modified by this
Stock Option Assumption Agreement, all of the terms and conditions of each
Option Agreement as in effect immediately prior to the Effective Time (as
modified by the applicable Dagaz Assumption Agreement) 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.
4.
<PAGE> 5
IN WITNESS WHEREOF, Cisco 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 ____________________, 1997.
CISCO SYSTEMS, INC.
By:
------------------------------------
ACKNOWLEDGMENT
The undersigned acknowledges receipt of the foregoing Stock
Option Assumption Agreement and understands that all rights and liabilities
with respect to each of his or her Dagaz Options hereby assumed by Cisco
Systems, Inc. are as set forth in the Option Agreement, the Dagaz Assumption
Agreement, the applicable Plan and such Stock Option Assumption Agreement.
------------------------------------
OPTIONEE
DATED: __________________, 199_
5.
<PAGE> 6
EXHIBIT A
Optionee's Outstanding Options to Purchase Shares of Dagaz
Technologies, Inc. Common Stock (Pre-Merger)
and
Optionee's Outstanding Options to Purchase Shares of
Cisco Systems, Inc. Common Stock (Post-Merger)
<PAGE> 1
EXHIBIT 99.6
MEMORANDUM
TO: Holders of Integrated Network Corporation Options
FROM: Cisco Systems, Inc.
DATE: September _____, 1997
RE: Assumption of Stock Options
- --------------------------------------------------------------------------------
As you know, Integrated Network Corporation ("INC") recently
sold a portion of its business to Cisco Systems, Inc. ("Cisco") through an
acquisition effected on September 2, 1997. In order to accomplish the
transaction, INC contributed certain INC assets related to the development of
the Jera and Thurisa products to a wholly-owned subsidiary, Dagaz Technologies,
Inc. ("Dagaz"), and Cisco then acquired Dagaz immediately after such asset
contribution. As a result of the acquisition, Dagaz has become a division of
the Cisco organization.
As part of the acquisition, Cisco has assumed the outstanding
INC stock options held by those former employees of INC, such as yourself, who
have agreed to transfer employment to Cisco. Accordingly, your INC options now
cover shares of Cisco common stock.
Several additional changes to your options were made as part
of the assumption process, which was accomplished in two steps: Dagaz first
assumed your options from INC as part of the asset contribution by INC to
Dagaz, then Cisco immediately assumed those options from Dagaz as part of the
acquisition by Cisco of Dagaz. Accordingly, the changes to your options are
set forth in two Stock Option Assumption Agreements attached hereto (each one
representing a step in the option assumption), and the effect of those changes
may be summarized as follows:
1. The number of shares of Cisco common stock subject to
each of your options has been adjusted to reflect (i) the ratio of the
fair market value of all INC assets prior to the asset contribution to
the fair market value at suc time of the INC assets to be contributed
to Dagaz (the "Assumption Ratio") and (ii) the ratio of the fair
market value per share of Dagaz Stock immediately prior to the
acquisition to the last reported sales price per share of Cisco Stock
on July 25, 1997 (the "Exchange Ratio"). The Assumption Ratio was
1.7143 shares of Dagaz common stock for each share of INC common
stock, and the Exchange Ratio was 0.1236 share of Cisco common stock
for each share of Dagaz common stock. Accordingly, the number of
Dagaz shares that was subject to your option immediately prior to the
asset contribution was equal to the number of INC shares
<PAGE> 2
subject to your option at such time, multiplied by 1.7143 and rounded
down to the next whole share. The number of Cisco shares now subject
to your option is equal to the number of Dagaz shares subject to your
option immediately prior to the acquisition (as determined above),
multiplied by 0.1236 and rounded down to the next whole share.
2. The aggregate exercise price under your Cisco options
for all of your new shares is substantially the same as the aggregate
price that previously existed for the shares purchasable under your
INC option. However, the exercise price per share has been adjusted
to reflect the Assumption Ratio and the Exchange Ratio. Accordingly,
the exercise price per share in effect under your INC option
immediately before the asset contribution was divided by 1.7143 and
rounded up to the next whole cent, and the resulting exercise price
per share that was in effect under your Dagaz option immediately
before the acquisition was divided by 0.1236 and rounded up to the
next whole cent to establish the current exercise price per share
payable for the Cisco common stock.
3. No change has been made to the vesting schedule in
effect for your options. You will continue to vest in the shares of
Cisco common stock subject to your option on the same installment
basis as under your INC option, with the number of Cisco shares
subject to each such installment adjusted to reflect the exchange
ratios. Since you have transferred employment to Cisco, you will now
earn vesting credit for any period of employment or service you
complete with Cisco or any Cisco subsidiary.
Attached are two copies of each of the Stock Option Assumption
Agreements pursuant to which Cisco has assumed your INC options with the
adjustments discussed above. Please review the agreement carefully so that you
understand your rights to acquire Cisco shares. You should contact Robert
Turner at Cisco at (408) 527-2098 if you have any questions. After you have
reviewed the agreement, please sign one copy and return it to Mr. Turner in the
pre-addressed envelope enclosed.
The other copy of each Stock Option Assumption Agreement
should be attached to your existing option agreement so that you will have a
complete record of all the terms and provisions applicable to your option as
now assumed by Cisco.
2.
<PAGE> 1
EXHIBIT 99.7
CISCO SYSTEMS, INC.
STOCK OPTION ASSUMPTION AGREEMENT
DESIGNATED OPTIONS UNDER
INTEGRATED NETWORK CORPORATION
1986 STOCK OPTION PLAN OR 1996 STOCK OPTION PLAN
OPTIONEE:
STOCK OPTION ASSUMPTION AGREEMENT issued as of the 2nd day of
September, 1997 by Cisco Systems, Inc., a California corporation ("Cisco") and
Dagaz Technologies, Inc., a Delaware corporation ("Dagaz") and a wholly-owned
subsidiary of Integrated Network Corporation ("INC").
WHEREAS, the undersigned individual ("Optionee") holds one or
more outstanding non-qualified stock options to purchase shares of Dagaz common
stock which were originally granted to Optionee under either the INC 1986 Stock
Option Plan or the INC 1996 Stock Option Plan (individually, the "Plan," and
together, the "Plans") and are evidenced by a Non-Qualified Stock Option
Agreement (the "Option Agreement") originally between INC and Optionee.
WHEREAS, upon the contribution by INC to Dagaz of all of the
properties, assets, rights and obligations related to certain INC technology
which occurred on this date but prior to the effectiveness of this Agreement
(the "Contribution"), Dagaz assumed all obligations of INC under certain
outstanding options under the Plans and issued to the holder of each such
specified option an agreement evidencing the assumption of that option by Dagaz
(the "Dagaz Assumption Agreement").
WHEREAS, Dagaz has this day been acquired by Cisco through the
purchase by Cisco of all the outstanding shares of Dagaz common stock (the
"Acquisition") pursuant to the Acquisition Agreement dated July 27, 1997, by
and between Cisco and INC (the "Acquisition Agreement").
WHEREAS, the provisions of the Acquisition Agreement require
Cisco to assume all obligations of Dagaz under designated outstanding options
under the Plans at the consummation of the Acquisition and to issue to the
holder of each such assumed option an agreement evidencing the assumption that
option.
WHEREAS, pursuant to the provisions of the Acquisition
Agreement, the exchange ratio in effect for purposes of such option assumption
is 0.1236 share of Cisco common stock ("Cisco Stock") for each outstanding
share of Dagaz common stock ("Dagaz Stock") subject to the assumed options (the
"Assumption Ratio").
<PAGE> 2
WHEREAS, this Agreement is to become effective immediately
following the Contribution and upon the consummation of the Acquisition (the
"Effective Time") in order to reflect certain adjustments to Optionee's
outstanding options under the applicable Plan which have become necessary by
reason of the assumption of those options by Cisco in connection with the
Acquisition.
NOW, THEREFORE, it is hereby agreed as follows:
1. The number of shares of Dagaz Stock subject to the
stock options held by Optionee under the applicable Plan immediately prior to
the Effective Time (the "Dagaz Options") and the exercise price payable per
share are set forth in Exhibit A hereto. Cisco hereby assumes, as of the
Effective Time, all the duties and obligations of Dagaz under each of the Dagaz
Options. In connection with such assumption, the number of shares of Cisco
Stock purchasable under each Dagaz Option hereby assumed and the exercise price
payable thereunder have been adjusted to reflect the Exchange Ratio.
Accordingly, the number of shares of Cisco Stock subject to each Dagaz Option
hereby assumed shall be as specified for that option in attached Exhibit A, and
the adjusted exercise price payable per share of Cisco Stock under the assumed
Dagaz Option shall be as indicated for that option in attached Exhibit A.
2. The intent of the foregoing adjustments to each
assumed Dagaz Option is to assure that the spread between the aggregate fair
market value of the shares of Cisco Stock purchasable under each such option
and the aggregate exercise price as adjusted pursuant to this Agreement will,
immediately after the Effective Time, be substantially equal (except for the
effects of rounding) to the spread which existed, immediately prior to the
Effective Time, between the then aggregate fair market value of the Dagaz Stock
subject to the Dagaz Option and the aggregate exercise price in effect at such
time under the Option Agreement, as modified by the Dagaz Assumption Agreement.
Such adjustments are also designed to preserve, immediately after the Effective
Time, on a per share basis, the same ratio of exercise price per option share
to fair market value per share which existed under the Option Agreement, as
modified by the Dagaz Assumption Agreement, immediately prior to the Effective
Time.
3. The following provisions shall govern each Dagaz
Option hereby assumed by Cisco, and each such provision shall apply to (a) the
Option Agreement, (b) the Dagaz Assumption Agreement and (c) the applicable
Plan, as incorporated into the Option Agreement (the "Option Documents"), where
applicable:
(a) Unless the context otherwise
requires, all references to the "Company" in the Option
Documents shall mean Cisco, all references to "Common Stock"
shall mean shares of Cisco Stock, all references to the "Board
of Directors" shall mean the Board of Directors of Cisco, and
all references to the "Committee" shall mean the Compensation
Committee of the Cisco Board of Directors.
(b) The grant date and the expiration
date of each assumed Dagaz Option and all other provisions
which govern either the exercise or the
2.
<PAGE> 3
termination of the assumed Dagaz Option shall remain the same
as set forth in the applicable Option Documents and shall
accordingly govern and control Optionee's rights under this
Agreement to purchase Cisco Stock.
(c) Consistent with the terms of the
applicable Option Documents, no accelerated vesting of any
Dagaz Option shall be deemed to automatically occur by reason
of the Acquisition and each assumed Dagaz Option shall remain
exercisable in accordance with the same installment exercise
schedule in effect under the applicable Option Documents
immediately prior to the Effective Time, except that the
number of shares of Cisco Stock subject to each such
installment shall be adjusted to reflect the Exchange Ratio.
(d) For purposes of applying any and all
provisions of the applicable Option Documents relating to
Optionee's status as an employee, consultant or director of
Dagaz, Optionee shall be deemed to continue in such status as
an employee, consultant or director for so long as Optionee
renders services as such to Cisco (or any present or future
Cisco subsidiary). Accordingly, the provisions of the
applicable Option Documents governing the termination of the
assumed Dagaz Options upon Optionee's cessation of service as
an employee, consultant or director of Dagaz shall hereafter
be applied on the basis of Optionee's cessation of employee,
consultant or director status with Cisco (or any Cisco
subsidiary), and each assumed Dagaz Option shall accordingly
terminate, within the designated time period in effect under
the applicable Option Documents, following such cessation of
service as an employee, consultant or director of Cisco (or
any Cisco subsidiary). In accordance with the applicable
Option Documents, a change in the status of Optionee's service
with Cisco (i.e., as an employee, consultant or director) will
not constitute an interruption of continuous status as an
employee, consultant or director.
(e) The adjusted exercise price payable
for the Cisco Stock subject to each assumed Dagaz Option shall
be payable in any of the forms authorized under the applicable
Option Documents. For purposes of determining the holding
period of any shares of Cisco Stock delivered in payment of
such adjusted exercise price, the period for which such shares
were held as Dagaz Stock prior to the Effective Time shall be
taken into account.
3.
<PAGE> 4
(f) In order to exercise each assumed
Dagaz Option, Optionee must deliver to Cisco a written notice
of exercise in which the number of shares of Cisco Stock to be
purchased thereunder must be indicated. The exercise notice
must be accompanied by payment of the adjusted exercise price
payable for the purchased shares of Cisco Stock and should be
delivered to Cisco at the following address:
Cisco Systems, Inc.
170 West Tasman Drive
San Jose, CA 95134
Attention: Option Plan Administrator
4. Except to the extent specifically modified by this
Stock Option Assumption Agreement, all of the terms and conditions of each
Option Agreement as in effect immediately prior to the Effective Time (as
modified by the applicable Dagaz Assumption Agreement) 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.
4.
<PAGE> 5
IN WITNESS WHEREOF, Cisco 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 ____________________, 1997.
CISCO SYSTEMS, INC.
By:
------------------------------------
ACKNOWLEDGMENT
The undersigned acknowledges receipt of the foregoing Stock
Option Assumption Agreement and understands that all rights and liabilities
with respect to each of his or her Dagaz Options hereby assumed by Cisco
Systems, Inc. are as set forth in the Option Agreement, the Dagaz Assumption
Agreement, the applicable Plan and such Stock Option Assumption Agreement.
------------------------------------
OPTIONEE
DATED: __________________, 199_
5.
<PAGE> 6
EXHIBIT A
Optionee's Outstanding Options to Purchase Shares of Dagaz
Technologies, Inc. Common Stock (Pre-Merger)
and
Optionee's Outstanding Options to Purchase Shares of
Cisco Systems, Inc. Common Stock (Post-Merger)
