<PAGE> 1
As filed with the Securities and Exchange Commission on April 8, 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)
<TABLE>
<S> <C>
CALIFORNIA 77-0059951
(State or other jurisdiction (IRS Employer Identification No.)
of incorporation or organization)
</TABLE>
170 WEST TASMAN DRIVE, SAN JOSE, CALIFORNIA 95134-1706
(Address of principal executive offices) (Zip Code)
________________________
TELESEND, INC.
1995 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>
1995 Stock Option Plan
- ----------------------
Options to Purchase Common Stock 33,444 N/A N/A N/A
Common Stock 33,444 $5.98 $199,995.12 $61
</TABLE>
================================================================================
(1) This Registration Statement shall also cover any additional shares of
Common Stock which become issuable under the Telesend, Inc. 1995
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.
(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> 2
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 and January 25, 1997, filed
with the Commission on December 10, 1996 and March 10, 1997,
respectively.
(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.
<PAGE> 3
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
<TABLE>
<CAPTION>
Exhibit Number Exhibit
-------------- -------
<S> <C>
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(c).
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 Telesend, Inc. 1995 Stock Option Plan.
99.2 Form of Incentive Stock Option Agreement.
99.3 Form of Non-Statutory Stock Option Agreement.
99.4 Memorandum re Assumption of Stock Options under the Telesend,
Inc. 1995 Stock Option Plan and Stock Option Assumption
Agreement.
</TABLE>
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 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 Telesend, Inc. 1995 Stock Option Plan.
II-2.
<PAGE> 4
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> 5
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 4th day of April, 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 April 4, 1997
- --------------------------------- Officer and Director (Principal
John T. Chambers Executive Officer)
/s/ Larry R. Carter Vice President, Finance and April 4, 1997
- --------------------------------- Administration, Chief Financial
Larry R. Carter Officer and Secretary
(Principal Financial and Accounting Officer)
/s/ John P. Morgridge Chairman of the Board April 4, 1997
- --------------------------------- and Director
John P. Morgridge
</TABLE>
II-4.
<PAGE> 6
<TABLE>
<CAPTION>
Signatures Title Date
- ---------- ----- ----
<S> <C> <C>
/s/ Donald T. Valentine Director April 4, 1997
- ---------------------------------
Donald T. Valentine
/s/ James F. Gibbons Director April 4, 1997
- ---------------------------------
James F. Gibbons
/s/ Robert L. Puette Director April 4, 1997
- ---------------------------------
Robert L. Puette
Director April , 1997
- ---------------------------------
Masayoshi Son
/s/ Steven M. West Director April 4, 1997
- ---------------------------------
Steven M. West
/s/ Richard M. Moley Director April 4, 1997
- ---------------------------------
Richard M. Moley
/s/ Edward Kozel Director April 4, 1997
- ---------------------------------
Edward Kozel
/s/ Carol Bartz Director April 4, 1997
- ---------------------------------
Carol Bartz
</TABLE>
II-5.
<PAGE> 7
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Number Exhibit
-------------- -------
<S> <C>
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(c).
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 Telesend, Inc. 1995 Stock Option Plan.
99.2 Form of Incentive Stock Option Agreement.
99.3 Form of Non-Statutory Stock Option Agreement.
99.4 Memorandum re Assumption of Stock Options under the Telesend,
Inc. 1995 Stock Option Plan and Stock Option Assumption
Agreement.
</TABLE>
<PAGE> 1
EXHIBIT 5
April 8, 1997
Cisco Systems, Inc.
170 West Tasman Drive
San Jose, CA 95134-1706
Re: Cisco Systems, Inc. Registration Statement for
Offering of 33,444 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 33,444 shares of
the common stock ("Common Stock") of Cisco Systems, Inc. (the "Company")
issuable under the Telesend, Inc. 1995 Stock Option Plan (the "Plan"). 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 of
Cisco Systems, Inc. on Form S-8 for the registration of 33,444 shares of its
common stock and 33,444 options to acquire 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, whichreports
are included in the Company's 1996 Annual Report on Form 10-K, filed with the
Securities and Exchange Commission.
/s/ Coopers & Lybrand L.L.P.
San Jose, California
April 8, 1997
<PAGE> 1
EXHIBIT 99.1
TELESEND, INC.
1995 STOCK OPTION PLAN
1. ESTABLISHMENT, PURPOSE AND TERM OF PLAN.
1.1 ESTABLISHMENT. The Telesend, Inc. 1995 Stock Option
Plan (the "PLAN") is hereby established effective as of December ____, 1995
(the "EFFECTIVE DATE").
1.2 PURPOSE. The purpose of the Plan is to advance the
interests of the Participating Company Group and its shareholders by providing
an incentive to attract, retain and reward persons performing services for the
Participating Company Group and by motivating such persons to contribute to the
growth and profitability of the Participating Company Group.
1.3 TERM OF PLAN. The Plan shall continue in effect
until the earlier of its termination by the Board or the date on which all of
the shares of Stock available for issuance under the Plan have been issued and
all restrictions on such shares under the terms of the Plan and the agreements
evidencing Options granted under the Plan have lapsed. However, all Options
shall be granted, if at all, within ten (10) years from the earlier of the date
the Plan is adopted by the Board or the date the Plan is duly approved by the
shareholders of the Company. Notwithstanding the foregoing, if the maximum
number of shares of Stock issuable pursuant to the Plan as provided in Section
4.1 has been increased at any time, all Options shall be granted, if at all, no
later than the last day preceding the tenth (10th) anniversary of the earlier
of (a) the date on which the latest such increase in the maximum number of
shares of Stock issuable under the Plan was approved by the shareholders of the
Company or (b) the date such amendment was adopted by the Board.
2. DEFINITIONS AND CONSTRUCTION.
2.1 DEFINITIONS. Whenever used herein, the following
terms shall have their respective meanings set forth below:
(a) "BOARD" means the Board of Directors of the
Company. If one or more Committees have been appointed by the Board to
administer the Plan, "Board" also means such Committee(s).
(b) "CODE" means the Internal Revenue Code of
1986, as amended, and any applicable regulations promulgated thereunder.
(c) "COMMITTEE" means the Compensation Committee
or other committee of the Board duly appointed to administer the Plan and
having such powers as shall be specified by the Board. Unless the powers of
the Committee have been specifically limited, the Committee shall have all of
the powers of the Board granted herein, including, without limitation, the
power to amend or terminate the Plan at any time, subject to the terms of the
Plan and any applicable limitations imposed by law.
1
<PAGE> 2
(d) "COMPANY" means Telesend, Inc., a California
corporation, or any successor corporation thereto.
(e) "CONSULTANT" means any person, including an
advisor, engaged by a Participating Company to render services other than as an
Employee or a Director.
(f) "DIRECTOR" means a member of the Board or of
the board of directors of any other Participating Company.
(g) "EMPLOYEE" means any person treated as an
employee (including an officer or a Director who is also treated as an
employee) in the records of a Participating Company; provided, however, that
neither service as a Director nor payment of a director's fee shall be
sufficient to constitute employment for purposes of the Plan.
(h) "EXCHANGE ACT" means the Securities Exchange
Act of 1934, as amended.
(i) "FAIR MARKET VALUE" means, as of any date,
the value of a share of stock or other property as determined by the Board, in
its sole discretion, or by the Company, in its sole discretion, if such
determination is expressly allocated to the Company herein.
(j) "INCENTIVE STOCK OPTION" means an Option
intended to be (as set forth in the Option Agreement) and which qualifies as an
incentive stock option within the meaning of Section 422(b) of the Code.
(k) "INSIDER" means an officer or a Director of
the Company or any other person whose transactions in Stock are subject to
Section 16 of the Exchange Act.
(l) "NONSTATUTORY STOCK OPTION" means an Option
not intended to be (as set forth in the Option Agreement) or which does not
qualify as an Incentive Stock Option.
(m) "OPTION" means a right to purchase Stock
(subject to adjustment as provided in Section 4.2) pursuant to the terms and
conditions of the Plan. An Option may be either an Incentive Stock Option or a
Nonstatutory Stock Option.
(n) "OPTION AGREEMENT" means a written agreement
between the Company and an Optionee setting forth the terms, conditions and
restrictions of the Option granted to the Optionee and any shares acquired upon
the exercise thereof.
(o) "OPTIONEE" means a person who has been
granted one or more Options.
(p) "PARENT CORPORATION" means any present or
future "parent corporation" of the Company, as defined in Section 424(e) of the
Code.
2
<PAGE> 3
(q) "PARTICIPATING COMPANY" means the Company or
any Parent Corporation or Subsidiary Corporation.
(r) "PARTICIPATING COMPANY GROUP" means, at any
point in time, all corporations collectively which are then Participating
Companies.
(s) "RULE 16B-3" means Rule 16b-3 under the
Exchange Act, as amended from time to time, or any successor rule or
regulation.
(t) "STOCK" means the common stock of the
Company, as adjusted from time to time in accordance with Section 4.2.
(u) "SUBSIDIARY CORPORATION" means any present or
future "subsidiary corporation" of the Company, as defined in Section 424(f) of
the Code.
(v) "TEN PERCENT OWNER OPTIONEE" means an
Optionee who, at the time an Option is granted to the Optionee, owns stock
possessing more than ten percent (10%) of the total combined voting power of
all classes of stock of a Participating Company within the meaning of Section
422(b)(6) of the Code.
2.2 CONSTRUCTION. Captions and titles contained herein
are for convenience only and shall not affect the meaning or interpretation of
any provision of the Plan. Except when otherwise indicated by the context, the
singular shall include the plural, the plural shall include the singular, and
the term "or" shall include the conjunctive as well as the disjunctive.
3. ADMINISTRATION.
3.1 ADMINISTRATION BY THE BOARD. The Plan shall be
administered by the Board, including any duly appointed Committee of the Board.
All questions of interpretation of the Plan or of any Option shall be
determined by the Board, and such determinations shall be final and binding
upon all persons having an interest in the Plan or such Option. Any officer of
a Participating Company shall have the authority to act on behalf of the
Company with respect to any matter, right, obligation, determination or
election which is the responsibility of or which is allocated to the Company
herein, provided the officer has apparent authority with respect to such
matter, right, obligation, determination or election.
3.2 POWERS OF THE BOARD. In addition to any other powers
set forth in the Plan and subject to the provisions of the Plan, the Board
shall have the full and final power and authority, in its sole discretion:
(a) to determine the persons to whom, and the
time or times at which, Options shall be granted and the number of shares of
Stock to be subject to each Option;
(b) to designate Options as Incentive Stock
Options or Nonstatutory Stock Options;
3
<PAGE> 4
(c) to determine the Fair Market Value of shares
of Stock or other property;
(d) to determine the terms, conditions and
restrictions applicable to each Option (which need not be identical) and any
shares acquired upon the exercise thereof, including, without limitation, (i)
the exercise price of the Option, (ii) the method of payment for shares
purchased upon the exercise of the Option, (iii) the method for satisfaction of
any tax withholding obligation arising in connection with the Option or such
shares, including by the withholding or delivery of shares of stock, (iv) the
timing, terms and conditions of the exercisability of the Option or the vesting
of any shares acquired upon the exercise thereof, (v) the time of the
expiration of the Option, (vi) the effect of the Optionee's termination of
employment or service with the Participating Company Group on any of the
foregoing, and (vii) all other terms, conditions and restrictions applicable to
the Option or such shares not inconsistent with the terms of the Plan;
(e) to approve one or more forms of Option
Agreement;
(f) to amend, modify, extend, or renew, or grant
a new Option in substitution for, any Option or to waive any restrictions or
conditions applicable to any Option or any shares acquired upon the exercise
thereof;
(g) to amend the exercisability of any Option or
the vesting of any shares acquired upon the exercise thereof, including with
respect to the period following an Optionee's termination of employment or
service with the Participating Company Group;
(h) to prescribe, amend or rescind rules,
guidelines and policies relating to the Plan, or to adopt supplements to, or
alternative versions of, the Plan, including, without limitation, as the Board
deems necessary or desirable to comply with the laws of, or to accommodate the
tax policy or custom of, foreign jurisdictions whose citizens may be granted
Options; and
(i) to correct any defect, supply any omission or
reconcile any inconsistency in the Plan or any Option Agreement and to make all
other determinations and take such other actions with respect to the Plan or
any Option as the Board may deem advisable to the extent consistent with the
Plan and applicable law.
4
<PAGE> 5
3.3 DISINTERESTED ADMINISTRATION. With respect to
participation by Insiders in the Plan, at any time that any class of equity
security of the Company is registered pursuant to Section 12 of the Exchange
Act, the Plan shall be administered in compliance with the "disinterested
administration" requirements of Rule 16b-3.
4. SHARES SUBJECT TO PLAN.
4.1 MAXIMUM NUMBER OF SHARES ISSUABLE. Subject to
adjustment as provided in Section 4.2, the maximum aggregate number of shares
of Stock that may be issued under the Plan shall be three hundred thousand
(300,000) and shall consist of authorized but unissued or reacquired shares of
Stock or any combination thereof. If an outstanding Option for any reason
expires or is terminated or canceled or shares of Stock acquired, subject to
repurchase, upon the exercise of an Option are repurchased by the Company, the
shares of Stock allocable to the unexercised portion of such Option, or such
repurchased shares of Stock, shall again be available for issuance under the
Plan.
4.2 ADJUSTMENTS FOR CHANGES IN CAPITAL STRUCTURE. In the
event of any stock dividend, stock split, reverse stock split,
recapitalization, combination, reclassification or similar change in the
capital structure of the Company, appropriate adjustments shall be made in the
number and class of shares subject to the Plan and to any outstanding Options
and in the exercise price per share of any outstanding Options. If a majority
of the shares which are of the same class as the shares that are subject to
outstanding Options are exchanged for, converted into, or otherwise become
(whether or not pursuant to an Ownership Change Event, as defined in Section
8.1) shares of another corporation (the "NEW SHARES"), the Board may
unilaterally amend the outstanding Options to provide that such Options are
exercisable for New Shares. In the event of any such amendment, the number of
shares subject to, and the exercise price per share of, the outstanding Options
shall be adjusted in a fair and equitable manner as determined by the Board, in
its sole discretion. Notwithstanding the foregoing, any fractional share
resulting from an adjustment pursuant to this Section 4.2 shall be rounded up
or down to the nearest whole number, as determined by the Board, and in no
event may the exercise price of any Option be decreased to an amount less than
the par value, if any, of the stock subject to the Option. The adjustments
determined by the Board pursuant to this Section 4.2 shall be final, binding
and conclusive.
5. ELIGIBILITY AND OPTION LIMITATIONS.
5.1 PERSONS ELIGIBLE FOR OPTIONS. Options may be granted
only to Employees, Consultants, and Directors. For purposes of the foregoing
sentence, "Employees" shall include prospective Employees to whom Options are
granted in connection with written offers of employment with the Participating
Company Group, and "Consultants" shall include prospective Consultants to whom
Options are granted in connection with written offers of engagement with the
Participating Company Group. Eligible persons may be granted more than one (1)
Option.
5.2 DIRECTORS SERVING ON COMMITTEE. At any time that any
class of equity security of the Company is registered pursuant to Section 12 of
the Exchange Act, no member of a Committee established to administer the Plan
in compliance with the
5
<PAGE> 6
"disinterested administration" requirements of Rule 16b-3, while a member,
shall be eligible to be granted an Option.
5.3 OPTION GRANT RESTRICTIONS. Any person who is not an
Employee on the effective date of the grant of an Option to such person may be
granted only a Nonstatutory Stock Option. An Incentive Stock Option granted to
a prospective Employee upon the condition that such person become an Employee
shall be deemed granted effective on the date such person commences service
with a Participating Company, with an exercise price determined as of such date
in accordance with Section 6.1.
5.4 FAIR MARKET VALUE LIMITATION. To the extent that the
aggregate Fair Market Value of stock with respect to which options designated
as Incentive Stock Options are exercisable by an Optionee for the first time
during any calendar year (under all stock option plans of the Participating
Company Group, including the Plan) exceeds One Hundred Thousand Dollars
($100,000), the portion of such options which exceeds such amount shall be
treated as Nonstatutory Stock Options. For purposes of this Section 5.4,
options designated as Incentive Stock Options shall be taken into account in
the order in which they were granted, and the Fair Market Value of stock shall
be determined as of the time the option with respect to such stock is granted.
If the Code is amended to provide for a different limitation from that set
forth in this Section 5.4, such different limitation shall be deemed
incorporated herein effective as of the date and with respect to such Options
as required or permitted by such amendment to the Code. If an Option is
treated as an Incentive Stock Option in part and as a Nonstatutory Stock Option
in part by reason of the limitation set forth in this Section 5.4, the Optionee
may designate which portion of such Option the Optionee is exercising and may
request that separate certificates representing each such portion be issued
upon the exercise of the Option. In the absence of such designation, the
Optionee shall be deemed to have exercised the Incentive Stock Option portion
of the Option first.
6. TERMS AND CONDITIONS OF OPTIONS. Options shall be evidenced
by Option Agreements specifying the number of shares of Stock covered thereby,
in such form as the Board shall from time to time establish. Option Agreements
may incorporate all or any of the terms of the Plan by reference and shall
comply with and be subject to the following terms and conditions:
6.1 EXERCISE PRICE. The exercise price for each Option
shall be established in the sole discretion of the Board; provided, however,
that (a) the exercise price per share for an Incentive Stock Option shall be
not less than the Fair Market Value of a share of Stock on the effective date
of grant of the Option, (b) the exercise price per share for a Nonstatutory
Stock Option shall be not less than eighty-five percent (85%) of the Fair
Market Value of a share of Stock on the effective date of grant of the Option,
and (c) no Option granted to a Ten Percent Owner Optionee shall have an
exercise price per share less than one hundred ten percent (110%) of the Fair
Market Value of a share of Stock on the effective date of grant of the Option.
Notwithstanding the foregoing, an Option (whether an Incentive Stock Option or
a Nonstatutory Stock Option) may be granted with an exercise price lower than
the minimum exercise price set forth above if such Option is granted pursuant
to an assumption or substitution for
6
<PAGE> 7
another option in a manner qualifying under the provisions of Section 424(a) of
the Code.
6.2 EXERCISE PERIOD. Options shall be exercisable at
such time or times, or upon such event or events, and subject to such terms,
conditions, performance criteria, and restrictions as shall be determined by
the Board and set forth in the Option Agreement evidencing such Option;
provided, however, that (a) no Option shall be exercisable after the expiration
of ten (10) years after the effective date of grant of such Option, (b) no
Incentive Stock Option granted to a Ten Percent Owner Optionee shall be
exercisable after the expiration of five (5) years after the effective date of
grant of such Option, and (c) no Option granted to a prospective Employee or
prospective Consultant may become exercisable prior to the date on which such
person commences service with a Participating Company.
6.3 PAYMENT OF EXERCISE PRICE.
(a) FORMS OF CONSIDERATION AUTHORIZED. Except as
otherwise provided below, payment of the exercise price for the number of
shares of Stock being purchased pursuant to any Option shall be made (i) in
cash, by check, or cash equivalent, (ii) by tender to the Company of shares of
Stock owned by the Optionee having a Fair Market Value (as determined by the
Company without regard to any restrictions on transferability applicable to
such stock by reason of federal or state securities laws or agreements with an
underwriter for the Company) not less than the exercise price, (iii) by the
assignment of the proceeds of a sale or loan with respect to some or all of the
shares being acquired upon the exercise of the Option (including, without
limitation, through an exercise complying with the provisions of Regulation T
as promulgated from time to time by the Board of Governors of the Federal
Reserve System) (a "CASHLESS EXERCISE"), (iv) by the Optionee's promissory note
in a form approved by the Company, (v) by such other consideration as may be
approved by the Board from time to time to the extent permitted by applicable
law, or (vi) by any combination thereof. The Board may at any time or from
time to time, by adoption of or by amendment to the standard forms of Option
Agreement described in Section 7, or by other means, grant Options which do not
permit all of the foregoing forms of consideration to be used in payment of the
exercise price or which otherwise restrict one or more forms of consideration.
(b) TENDER OF STOCK. Notwithstanding the
foregoing, an Option may not be exercised by tender to the Company of shares of
Stock to the extent such tender of Stock would constitute a violation of the
provisions of any law, regulation or agreement restricting the redemption of
the Company's stock. Unless otherwise provided by the Board, an Option may not
be exercised by tender to the Company of shares of Stock unless such shares
either have been owned by the Optionee for more than six (6) months or were not
acquired, directly or indirectly, from the Company.
(c) CASHLESS EXERCISE. The Company reserves, at
any and all times, the right, in the Company's sole and absolute discretion, to
establish, decline to approve or terminate any program or procedures for the
exercise of Options by means of a Cashless Exercise.
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<PAGE> 8
(d) PAYMENT BY PROMISSORY NOTE. No promissory
note shall be permitted if the exercise of an Option using a promissory note
would be a violation of any law. Any permitted promissory note shall be on
such terms as the Board shall determine at the time the Option is granted. The
Board shall have the authority to permit or require the Optionee to secure any
promissory note used to exercise an Option with the shares of Stock acquired
upon the exercise of the Option or with other collateral acceptable to the
Company. Unless otherwise provided by the Board, if the Company at any time is
subject to the regulations promulgated by the Board of Governors of the Federal
Reserve System or any other governmental entity affecting the extension of
credit in connection with the Company's securities, any promissory note shall
comply with such applicable regulations, and the Optionee shall pay the unpaid
principal and accrued interest, if any, to the extent necessary to comply with
such applicable regulations.
6.4 TAX WITHHOLDING. The Company shall have the right,
but not the obligation, to deduct from the shares of Stock issuable upon the
exercise of an Option, or to accept from the Optionee the tender of, a number
of whole shares of Stock having a Fair Market Value, as determined by the
Company, equal to all or any part of the federal, state, local and foreign
taxes, if any, required by law to be withheld by the Participating Company
Group with respect to such Option or the shares acquired upon the exercise
thereof. Alternatively or in addition, in its sole discretion, the Company
shall have the right to require the Optionee, through payroll withholding, cash
payment or otherwise, including by means of a Cashless Exercise, to make
adequate provision for any such tax withholding obligations of the
Participating Company Group arising in connection with the Option or the shares
acquired upon the exercise thereof. The Company shall have no obligation to
deliver shares of Stock or to release shares of Stock from an escrow
established pursuant to the Option Agreement until the Participating Company
Group's tax withholding obligations have been satisfied by the Optionee.
6.5 REPURCHASE RIGHTS. Shares issued under the Plan may
be subject to a right of first refusal, one or more repurchase options, or
other conditions and restrictions as determined by the Board in its sole
discretion at the time the Option is granted. The Company shall have the right
to assign at any time any repurchase right it may have, whether or not such
right is then exercisable, to one or more persons as may be selected by the
Company. Upon request by the Company, each Optionee shall execute any
agreement evidencing such transfer restrictions prior to the receipt of shares
of Stock hereunder and shall promptly present to the Company any and all
certificates representing shares of Stock acquired hereunder for the placement
on such certificates of appropriate legends evidencing any such transfer
restrictions.
7. STANDARD FORMS OF OPTION AGREEMENT.
7.1 INCENTIVE STOCK OPTIONS. Unless otherwise provided
by the Board at the time the Option is granted, an Option designated as an
"Incentive Stock Option" shall comply with and be subject to the terms and
conditions set forth in the form of Incentive Stock Option Agreement adopted by
the Board concurrently with its adoption of the Plan and as amended from time
to time.
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<PAGE> 9
7.2 NONSTATUTORY STOCK OPTIONS. Unless otherwise
provided by the Board at the time the Option is granted, an Option designated
as a "Nonstatutory Stock Option" shall comply with and be subject to the terms
and conditions set forth in the form of Nonstatutory Stock Option Agreement
adopted by the Board concurrently with its adoption of the Plan and as amended
from time to time.
7.3 STANDARD TERM OF OPTIONS. Except as otherwise
provided in Section 6.2 or by the Board in the grant of an Option, any Option
granted hereunder shall have a term of ten (10) years from the effective date
of grant of the Option.
7.4 AUTHORITY TO VARY TERMS. The Board shall have the
authority from time to time to vary the terms of any of the standard forms of
Option Agreement described in this Section 7 either in connection with the
grant or amendment of an individual Option or in connection with the
authorization of a new standard form or forms; provided, however, that the
terms and conditions of any such new, revised or amended standard form or forms
of Option Agreement shall be in accordance with the terms of the Plan. Such
authority shall include, but not by way of limitation, the authority to grant
Options which are immediately exercisable subject to the Company's right to
repurchase any unvested shares of Stock acquired by an Optionee upon the
exercise of an Option in the event such Optionee's employment or service with
the Participating Company Group is terminated for any reason, with or without
cause.
8. TRANSFER OF CONTROL.
8.1 DEFINITIONS.
(a) An "OWNERSHIP CHANGE EVENT" shall be deemed
to have occurred if any of the following occurs with respect to the Company:
(i) the direct or indirect sale or
exchange in a single or series of related transactions by the shareholders of
the Company of more than fifty percent (50%) of the voting stock of the
Company;
(ii) a merger or consolidation in which
the Company is a party;
(iii) the sale, exchange, or transfer of
all or substantially all of the assets of the Company; or
(iv) a liquidation or dissolution of the
Company.
(b) A "TRANSFER OF CONTROL" shall mean an
Ownership Change Event or a series of related Ownership Change Events
(collectively, the "TRANSACTION") wherein the shareholders of the Company
immediately before the Transaction do not retain immediately after the
Transaction, in substantially the same proportions as their ownership of shares
of the Company's voting stock immediately before the Transaction, direct or
indirect beneficial ownership of more than fifty percent (50%) of the total
combined voting power of the outstanding voting stock of the Company or the
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<PAGE> 10
corporation or corporations to which the assets of the Company were transferred
(the "TRANSFEREE CORPORATION(S)"), as the case may be. For purposes of the
preceding sentence, indirect beneficial ownership shall include, without
limitation, an interest resulting from ownership of the voting stock of one or
more corporations which, as a result of the Transaction, own the Company or the
Transferee Corporation(s), as the case may be, either directly or through one
or more subsidiary corporations. The Board shall have the right to determine
whether multiple sales or exchanges of the voting stock of the Company or
multiple Ownership Change Events are related, and its determination shall be
final, binding and conclusive.
8.2 EFFECT OF TRANSFER OF CONTROL ON OPTIONS. In the
event of a Transfer of Control, the surviving, continuing, successor, or
purchasing corporation or parent corporation thereof, as the case may be (the
"ACQUIRING CORPORATION"), may either assume the Company's rights and
obligations under outstanding Options or substitute for outstanding Options
substantially equivalent options for the Acquiring Corporation's stock. In the
event the Acquiring Corporation elects not to assume or substitute for
outstanding Options in connection with a Transfer of Control, any unexercisable
or unvested portion of the outstanding Options shall be immediately exercisable
and vested in full as of the date ten (10) days prior to the date of the
Transfer of Control. The exercise or vesting of any Option that was
permissible solely by reason of this Section 8.2 shall be conditioned upon the
consummation of the Transfer of Control. Any Options which are neither assumed
or substituted for by the Acquiring Corporation in connection with the Transfer
of Control nor exercised as of the date of the Transfer of Control shall
terminate and cease to be outstanding effective as of the date of the Transfer
of Control. Notwithstanding the foregoing, shares acquired upon exercise of an
Option prior to the Transfer of Control and any consideration received pursuant
to the Transfer of Control with respect to such shares shall continue to be
subject to all applicable provisions of the Option Agreement evidencing such
Option except as otherwise provided in such Option Agreement. Furthermore,
notwithstanding the foregoing, if the corporation the stock of which is subject
to the outstanding Options immediately prior to an Ownership Change Event
described in Section 8.1(a)(i) constituting a Transfer of Control is the
surviving or continuing corporation and immediately after such Ownership Change
Event less than fifty percent (50%) of the total combined voting power of its
voting stock is held by another corporation or by other corporations that are
members of an affiliated group within the meaning of Section 1504(a) of the
Code without regard to the provisions of Section 1504(b) of the Code, the
outstanding Options shall not terminate unless the Board otherwise provides in
its sole discretion.
9. PROVISION OF INFORMATION. At least annually, copies of the
Company's balance sheet and income statement for the just completed fiscal year
shall be made available to each Optionee and purchaser of shares of Stock upon
the exercise of an Option. The Company shall not be required to provide such
information to persons whose duties in connection with the Company assure them
access to equivalent information.
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<PAGE> 11
10. NONTRANSFERABILITY OF OPTIONS. During the lifetime of the
Optionee, an Option shall be exercisable only by the Optionee or the Optionee's
guardian or legal representative. No Option shall be assignable or
transferable by the Optionee, except by will or by the laws of descent and
distribution.
11. TRANSFER OF COMPANY'S RIGHTS. In the event any Participating
Company assigns, other than by operation of law, to a third person, other than
another Participating Company, any of the Participating Company's rights to
repurchase any shares of Stock acquired upon the exercise of an Option, the
assignee shall pay to the assigning Participating Company the value of such
right as determined by the Company in the Company's sole discretion. Such
consideration shall be paid in cash. In the event such repurchase right is
exercisable at the time of such assignment, the value of such right shall be
not less than the Fair Market Value of the shares of Stock which may be
repurchased under such right (as determined by the Company) minus the
repurchase price of such shares. The requirements of this Section 11 regarding
the minimum consideration to be received by the assigning Participating Company
shall not inure to the benefit of the Optionee whose shares of Stock are being
repurchased. Failure of a Participating Company to comply with the provisions
of this Section 11 shall not constitute a defense or otherwise prevent the
exercise of the repurchase right by the assignee of such right.
12. INDEMNIFICATION. In addition to such other rights of
indemnification as they may have as members of the Board or officers or
employees of the Participating Company Group, members of the Board and any
officers or employees of the Participating Company Group to whom authority to
act for the Board is delegated shall be indemnified by the Company against all
reasonable expenses, including attorneys' fees, actually and necessarily
incurred in connection with the defense of any action, suit or proceeding, or
in connection with any appeal therein, to which they or any of them may be a
party by reason of any action taken or failure to act under or in connection
with the Plan, or any right granted hereunder, and against all amounts paid by
them in settlement thereof (provided such settlement is approved by independent
legal counsel selected by the Company) or paid by them in satisfaction of a
judgment in any such action, suit or proceeding, except in relation to matters
as to which it shall be adjudged in such action, suit or proceeding that such
person is liable for gross negligence, bad faith or intentional misconduct in
duties; provided, however, that within sixty (60) days after the institution of
such action, suit or proceeding, such person shall offer to the Company, in
writing, the opportunity at its own expense to handle and defend the same.
13. TERMINATION OR AMENDMENT OF PLAN. The Board may terminate or
amend the Plan at any time. However, subject to changes in the law or other
legal requirements that would permit otherwise, without the approval of the
Company's shareholders, there shall be (a) no increase in the maximum aggregate
number of shares of Stock that may be issued under the Plan (except by
operation of the provisions of Section 4.2), (b) no change in the class of
persons eligible to receive Incentive Stock Options, and (c) no expansion in
the class of persons eligible to receive Nonstatutory Stock Options. In any
event, no termination or amendment of the Plan may adversely affect any then
outstanding Option or any unexercised portion thereof, without the consent of
the
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<PAGE> 12
Optionee, unless such termination or amendment is required to enable an Option
designated as an Incentive Stock Option to qualify as an Incentive Stock Option
or is necessary to comply with any applicable law or government regulation.
14. SHAREHOLDER APPROVAL. The Plan or any increase in the maximum
number of shares of Stock issuable thereunder as provided in Section 4.1 (the
"MAXIMUM SHARES") shall be approved by the shareholders of the Company within
twelve (12) months of the date of adoption thereof by the Board. Options
granted prior to shareholder approval of the Plan or in excess of the Maximum
Shares previously approved by the shareholders shall become exercisable no
earlier than the date of shareholder approval of the Plan or such increase in
the Maximum Shares, as the case may be.
IN WITNESS WHEREOF, the undersigned Secretary of the Company certifies
that the foregoing Telesend, Inc. 1995 Stock Option Plan was duly adopted by
the Board on December ____, 1995.
-----------------------------------
Secretary
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<PAGE> 13
PLAN HISTORY
December ____, 1995 Board adopts Plan, with an initial reserve of
300,000 shares.
December ____, 1995 Shareholders approve Plan, with an initial
reserve of 300,000 shares.
13
<PAGE> 1
EXHIBIT 99.2
THE SECURITY REPRESENTED BY THIS CERTIFICATE HAS BEEN ACQUIRED FOR INVESTMENT
AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION
THEREOF. NO SUCH SALE OR DISPOSITION MAY BE EFFECTED WITHOUT AN EFFECTIVE
REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL SATISFACTORY TO
THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF
1933.
TELESEND, INC.
INCENTIVE STOCK OPTION AGREEMENT
THIS INCENTIVE STOCK OPTION AGREEMENT (the "OPTION AGREEMENT") is made
and entered into as of ________________, 199____, by and between Telesend, Inc.
and ____________________________ (the "OPTIONEE").
The Company has granted to the Optionee an option to purchase certain
shares of Stock, upon the terms and conditions set forth in this Option
Agreement (the "OPTION"). The Option shall in all respects be subject to the
terms and conditions of the Telesend, Inc. 1995 Stock Option Plan (the "PLAN"),
the provisions of which are incorporated herein by reference.
1. DEFINITIONS AND CONSTRUCTION.
1.1 DEFINITIONS. Unless otherwise defined herein,
capitalized terms shall have the meanings assigned to such terms in the Plan.
Whenever used herein, the following terms shall have their respective meanings
set forth below:
(a) "DATE OF OPTION GRANT" means ________________________ , 199_.
(b) "NUMBER OF OPTION SHARES" means
___________________ shares of Stock, as adjusted from time to time pursuant to
Section 9.
(c) "EXERCISE PRICE" means $ ____________ per
share of Stock, as adjusted from time to time pursuant to Section 9.
(d) "INITIAL EXERCISE DATE" means the Initial
Vesting Date.
(e) "INITIAL VESTING DATE" means the date
occurring one (1) year after (check one):
___ the Date of Option Grant.
___ __________________ , 199_, the date
the Optionee's Service commenced.
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<PAGE> 2
(f) "VESTED RATIO" means, on any relevant date,
the ratio determined as follows:
<TABLE>
<CAPTION>
Vested Ratio
------------
<S> <C>
Prior to Initial Vesting Date 0
On Initial Vesting Date, provided the 1/4
Optionee's Service is continuous from the
Date of Option Grant until the Initial
Vesting Date
Plus
----
For each full month of the Optionee's 1/48
continuous Service from the Initial
Vesting Date until the Vested Ratio equals
1/1, an additional
</TABLE>
(g) "OPTION EXPIRATION DATE" means the date ten
(10) years after the Date of Option Grant.
(h) "COMPANY" means Telesend, Inc., a California
corporation, or any successor corporation thereto.
(i) "DISABILITY" means the inability of the
Optionee, in the opinion of a qualified physician acceptable to the Company, to
perform the major duties of the Optionee's position with the Participating
Company Group because of the sickness or injury of the Optionee.
(j) "SECURITIES ACT" means the Securities Act of
1933, as amended.
(k) "SERVICE" means the Optionee's employment or
service with the Participating Company Group, whether in the capacity of an
Employee, a Director or a Consultant. The Optionee's Service shall not be
deemed to have terminated merely because of a change in the capacity in which
the Optionee renders Service to the Participating Company Group or a change in
the Participating Company for which the Optionee renders such Service, provided
that there is no interruption or termination of the Optionee's Service. The
Optionee's Service shall be deemed to have terminated either upon an actual
termination of Service or upon the corporation for which the Optionee performs
Service ceasing to be a Participating Company. Subject to the foregoing, the
Company, in its sole discretion, shall determine whether the Optionee's Service
has terminated and the effective date of such termination. (NOTE: If the
Option is exercised more than three (3) months after the date on which the
Optionee ceased to be an Employee (other than by reason of death or a permanent
and total
2
<PAGE> 3
disability as defined in Section 22(e)(3) of the Code), the Option will be
treated as a Nonstatutory Stock Option and not as an Incentive Stock Option to
the extent required by Section 422 of the Code.)
1.2 CONSTRUCTION. Captions and titles contained herein
are for convenience only and shall not affect the meaning or interpretation of
any provision of this Option Agreement. Except when otherwise indicated by the
context, the singular shall include the plural, the plural shall include the
singular, and the term "or" shall include the conjunctive as well as the
disjunctive.
2. TAX CONSEQUENCES. This Option is intended to be an Incentive
Stock Option within the meaning of Section 422(b) of the Code, but the Company
does not represent or warrant that this Option qualifies as such. The Optionee
should consult with the Optionee's own tax advisor regarding the tax effects of
this Option and the requirements necessary to obtain favorable income tax
treatment under Section 422 of the Code, including, but not limited to, holding
period requirements. (NOTE: If the aggregate Exercise Price of the Option
(that is, the Exercise Price multiplied by the Number of Option Shares) plus
the aggregate exercise price of any other Incentive Stock Options held by the
Optionee (whether granted pursuant to the Plan or any other stock option plan
of the Participating Company Group) is greater than One Hundred Thousand
Dollars ($100,000), the Optionee should contact the Chief Financial Officer of
the Company to ascertain whether the entire Option qualifies as an Incentive
Stock Option.)
3. ADMINISTRATION. All questions of interpretation concerning
this Option Agreement shall be determined by the Board, including any duly
appointed Committee of the Board. All determinations by the Board shall be
final and binding upon all persons having an interest in the Option. Any
officer of a Participating Company shall have the authority to act on behalf of
the Company with respect to any matter, right, obligation, or election which is
the responsibility of or which is allocated to the Company herein, provided the
officer has apparent authority with respect to such matter, right, obligation,
or election.
4. EXERCISE OF THE OPTION.
4.1 RIGHT TO EXERCISE. Except as otherwise provided
herein, the Option shall be exercisable on and after the Initial Exercise Date
and prior to the termination of the Option (as provided in Section 6) in an
amount not to exceed the Number of Option Shares multiplied by the Vested Ratio
less the number of shares previously acquired upon exercise of the Option,
subject to the Optionee's agreement that any shares purchased upon exercise are
subject to the Company's repurchase rights set forth in Section 11. In no
event shall the Option be exercisable for more shares than the Number of Option
Shares.
4.2 METHOD OF EXERCISE. Exercise of the Option shall be
by written notice to the Company which must state the election to exercise the
Option, the number of whole shares of Stock for which the Option is being
exercised and such other representations and agreements as to the Optionee's
investment intent with respect to
3
<PAGE> 4
such shares as may be required pursuant to the provisions of this Option
Agreement. The written notice must be signed by the Optionee and must be
delivered in person, by certified or registered mail, return receipt requested,
by confirmed facsimile transmission, or by such other means as the Company may
permit, to the Chief Financial Officer of the Company, or other authorized
representative of the Participating Company Group, prior to the termination of
the Option as set forth in Section 6, accompanied by (i) full payment of the
aggregate Exercise Price for the number of shares of Stock being purchased and
(ii) an executed copy, if required herein, of the then current forms of escrow
and security agreement referenced below. The Option shall be deemed to be
exercised upon receipt by the Company of such written notice, the aggregate
Exercise Price, and, if required by the Company, such executed agreements.
4.3 PAYMENT OF EXERCISE PRICE.
(a) FORMS OF CONSIDERATION AUTHORIZED. Except as
otherwise provided below, payment of the aggregate Exercise Price for the
number of shares of Stock for which the Option is being exercised shall be made
(i) in cash, by check, or cash equivalent, (ii) by tender to the Company of
whole shares of Stock owned by the Optionee having a Fair Market Value (as
determined by the Company without regard to any restrictions on transferability
applicable to such stock by reason of federal or state securities laws or
agreements with an underwriter for the Company) not less than the aggregate
Exercise Price, (iii) by means of a Cashless Exercise, as defined in Section
4.3(c), (iv) in the Company's sole discretion at the time the Option is
exercised, by the Optionee's promissory note for the aggregate Exercise Price,
or (v) by any combination of the foregoing.
(b) TENDER OF STOCK. Notwithstanding the
foregoing, the Option may not be exercised by tender to the Company of shares
of Stock to the extent such tender of Stock would constitute a violation of the
provisions of any law, regulation or agreement restricting the redemption of
the Company's stock. The Option may not be exercised by tender to the Company
of shares of Stock unless such shares either have been owned by the Optionee
for more than six (6) months or were not acquired, directly or indirectly, from
the Company.
(c) CASHLESS EXERCISE. A "CASHLESS EXERCISE"
means the assignment in a form acceptable to the Company of the proceeds of a
sale or loan with respect to some or all of the shares of Stock acquired upon
the exercise of the Option pursuant to a program or procedure approved by the
Company (including, without limitation, through an exercise complying with the
provisions of Regulation T as promulgated from time to time by the Board of
Governors of the Federal Reserve System). The Company reserves, at any and all
times, the right, in the Company's sole and absolute discretion, to decline to
approve or terminate any such program or procedure.
(d) PAYMENT BY PROMISSORY NOTE. No promissory
note shall be permitted if an exercise of the Option using a promissory note
would be a violation of any law. Unless otherwise specified by the Board at
the time the Option is granted, the promissory note permitted in clause (iv) of
Section 4.3(a) shall be a full recourse note in
4
<PAGE> 5
a form satisfactory to the Company, with principal payable four (4) years after
the date the Option is exercised. Interest on the principal balance of the
promissory note shall be payable in annual installments at the minimum interest
rate necessary to avoid imputed interest pursuant to all applicable sections of
the Code. Such recourse promissory note shall be secured by the shares of
Stock acquired pursuant to the then current form of security agreement as
approved by the Company. At any time the Company is subject to the regulations
promulgated by the Board of Governors of the Federal Reserve System or any
other governmental entity affecting the extension of credit in connection with
the Company's securities, any promissory note shall comply with such applicable
regulations, and the Optionee shall pay the unpaid principal and accrued
interest, if any, to the extent necessary to comply with such applicable
regulations. Except as the Company in its sole discretion shall determine, the
Optionee shall pay the unpaid principal balance of the promissory note and any
accrued interest thereon upon termination of the Optionee's Service with the
Participating Company Group for any reason, with or without cause.
4.4 TAX WITHHOLDING. At the time the Option is
exercised, in whole or in part, or at any time thereafter as requested by the
Company, the Optionee hereby authorizes withholding from payroll and any other
amounts payable to the Optionee, and otherwise agrees to make adequate
provision for (including by means of a Cashless Exercise to the extent
permitted by the Company), any sums required to satisfy the federal, state,
local and foreign tax withholding obligations of the Participating Company
Group, if any, which arise in connection with the Option, including, without
limitation, obligations arising upon (i) the exercise, in whole or in part, of
the Option, (ii) the transfer, in whole or in part, of any shares acquired upon
exercise of the Option, (iii) the operation of any law or regulation providing
for the imputation of interest, or (iv) the lapsing of any restriction with
respect to any shares acquired upon exercise of the Option. The Optionee is
cautioned that the Option is not exercisable unless the tax withholding
obligations of the Participating Company Group are satisfied. Accordingly, the
Optionee may not be able to exercise the Option when desired even though the
Option is vested, and the Company shall have no obligation to issue a
certificate for such shares or release such shares from any escrow provided for
herein.
4.5 CERTIFICATE REGISTRATION. Except in the event the
Exercise Price is paid by means of a Cashless Exercise, the certificate for the
shares as to which the Option is exercised shall be registered in the name of
the Optionee, or, if applicable, in the names of the heirs of the Optionee.
4.6 RESTRICTIONS ON GRANT OF THE OPTION AND ISSUANCE OF
SHARES. The grant of the Option and the issuance of shares of Stock upon
exercise of the Option shall be subject to compliance with all applicable
requirements of federal, state or foreign law with respect to such securities.
The Option may not be exercised if the issuance of shares of Stock upon
exercise would constitute a violation of any applicable federal, state or
foreign securities laws or other law or regulations or the requirements of any
stock exchange or market system upon which the Stock may then be listed. In
addition, the Option may not be exercised unless (i) a registration statement
under the Securities Act shall at the time of exercise of the Option be in
effect with respect to the shares issuable upon exercise of the Option or (ii)
in the opinion of legal counsel to the Company, the shares issuable upon
exercise of the Option may be issued in accordance with the terms
5
<PAGE> 6
of an applicable exemption from the registration requirements of the Securities
Act. THE OPTIONEE IS CAUTIONED THAT THE OPTION MAY NOT BE EXERCISED UNLESS THE
FOREGOING CONDITIONS ARE SATISFIED. ACCORDINGLY, THE OPTIONEE MAY NOT BE ABLE
TO EXERCISE THE OPTION WHEN DESIRED EVEN THOUGH THE OPTION IS VESTED. The
inability of the Company to obtain from any regulatory body having jurisdiction
the authority, if any, deemed by the Company's legal counsel to be necessary to
the lawful issuance and sale of any shares subject to the Option shall relieve
the Company of any liability in respect of the failure to issue or sell such
shares as to which such requisite authority shall not have been obtained. As a
condition to the exercise of the Option, the Company may require the Optionee
to satisfy any qualifications that may be necessary or appropriate, to evidence
compliance with any applicable law or regulation and to make any representation
or warranty with respect thereto as may be requested by the Company.
4.7 FRACTIONAL SHARES. The Company shall not be required
to issue fractional shares upon the exercise of the Option.
5. NONTRANSFERABILITY OF THE OPTION. The Option may be exercised
during the lifetime of the Optionee only by the Optionee or the Optionee's
guardian or legal representative and may not be assigned or transferred in any
manner except by will or by the laws of descent and distribution. Following
the death of the Optionee, the Option, to the extent provided in Section 7, may
be exercised by the Optionee's legal representative or by any person empowered
to do so under the deceased Optionee's will or under the then applicable laws
of descent and distribution.
6. TERMINATION OF THE OPTION. The Option shall terminate and may
no longer be exercised on the first to occur of (a) the Option Expiration Date,
(b) the last date for exercising the Option following termination of the
Optionee's Service as described in Section 7, or (c) a Transfer of Control to
the extent provided in Section 8.
7. EFFECT OF TERMINATION OF SERVICE.
7.1 OPTION EXERCISABILITY.
(a) DISABILITY. If the Optionee's Service with
the Participating Company Group is terminated because of the Disability of the
Optionee, the Option, to the extent unexercised and exercisable on the date on
which the Optionee's Service terminated, may be exercised by the Optionee (or
the Optionee's guardian or legal representative) at any time prior to the
expiration of twelve (12) months after the date on which the Optionee's Service
terminated, but in any event no later than the Option Expiration Date. (NOTE:
If the Option is exercised more than three (3) months after the date on which
the Optionee's Service as an Employee terminated as a result of a Disability
other than a permanent and total disability as defined in Section 22(e)(3) of
the Code, the Option will be treated as a Nonstatutory Stock Option and not as
an Incentive Stock Option to the extent required by Section 422 of the Code.)
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(b) DEATH. If the Optionee's Service with the
Participating Company Group is terminated because of the death of the Optionee,
the Option, to the extent unexercised and exercisable on the date on which the
Optionee's Service terminated, may be exercised by the Optionee (or the
Optionee's legal representative, or other person who acquired the right to
exercise the Option by reason of the Optionee's death) at any time prior to the
expiration of twelve (12) months after the date on which the Optionee's Service
terminated, but in any event no later than the Option Expiration Date. The
Optionee's Service shall be deemed to have terminated on account of death if
the Optionee dies within three (3) months after the Optionee's termination of
Service.
(c) OTHER TERMINATION OF SERVICE. If the
Optionee's Service with the Participating Company Group terminates for any
reason, except Disability or death, the Option, to the extent unexercised and
exercisable by the Optionee on the date on which the Optionee's Service
terminated, may be exercised by the Optionee within three (3) months (or such
other longer period of time as determined by the Board, in its sole discretion)
after the date on which the Optionee's Service terminated, but in any event no
later than the Option Expiration Date.
7.2 ADDITIONAL LIMITATION ON OPTION EXERCISE. Except as
the Company and the Optionee otherwise agree, exercise of the Option pursuant
to Section 7.1 following termination of the Optionee's Service may not be made
by delivery of a promissory note as provided in Section 4.3(a).
7.3 EXTENSION IF EXERCISE PREVENTED BY LAW.
Notwithstanding the foregoing, if the exercise of the Option within the
applicable time periods set forth in Section 7.1 is prevented by the provisions
of Section 4.6, the Option shall remain exercisable until three (3) months
after the date the Optionee is notified by the Company that the Option is
exercisable, but in any event no later than the Option Expiration Date. The
Company makes no representation as to the tax consequences of any such delayed
exercise. The Optionee should consult with the Optionee's own tax advisor as
to the tax consequences of any such delayed exercise.
7.4 EXTENSION IF OPTIONEE SUBJECT TO SECTION 16(B).
Notwithstanding the foregoing, if a sale within the applicable time periods set
forth in Section 7.1 of shares acquired upon the exercise of the Option would
subject the Optionee to suit under Section 16(b) of the Exchange Act, the
Option shall remain exercisable until the earliest to occur of (i) the tenth
(10th) day following the date on which a sale of such shares by the Optionee
would no longer be subject to such suit, (ii) the one hundred and ninetieth
(190th) day after the Optionee's termination of Service, or (iii) the Option
Expiration Date. The Company makes no representation as to the tax
consequences of any such delayed exercise. The Optionee should consult with
the Optionee's own tax advisor as to the tax consequences of any such delayed
exercise.
7.5 LEAVE OF ABSENCE. For purposes of Section 7.1, the
Optionee's Service with the Participating Company Group shall not be deemed to
terminate if the Optionee takes any military leave, sick leave, or other bona
fide leave of absence approved by the Company of ninety (90) days or less. In
the event of a leave of absence in excess of ninety (90) days, the Optionee's
Service shall be deemed to terminate on the
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<PAGE> 8
ninety-first (91st) day of such leave unless the Optionee's right to
reemployment with the Participating Company Group remains guaranteed by statute
or contract. Notwithstanding the foregoing, unless otherwise designated by the
Company (or required by law), a leave of absence shall not be treated as
Service for purposes of determining the Optionee's Vested Ratio.
8. TRANSFER OF CONTROL.
8.1 DEFINITIONS.
(a) An "OWNERSHIP CHANGE EVENT" shall be deemed
to have occurred if any of the following occurs with respect to the Company:
(i) the direct or indirect sale or
exchange in a single or series of related transactions by the shareholders of
the Company of more than fifty percent (50%) of the voting stock of the
Company;
(ii) a merger or consolidation in which
the Company is a party;
(iii) the sale, exchange, or transfer of
all or substantially all of the assets of the Company; or
(iv) a liquidation or dissolution of the
Company.
(b) A "TRANSFER OF CONTROL" shall mean an
Ownership Change Event or a series of related Ownership Change Events
(collectively, the "TRANSACTION") wherein the shareholders of the Company
immediately before the Transaction do not retain immediately after the
Transaction, in substantially the same proportions as their ownership of shares
of the Company's voting stock immediately before the Transaction, direct or
indirect beneficial ownership of more than fifty percent (50%) of the total
combined voting power of the outstanding voting stock of the Company or the
corporation or corporations to which the assets of the Company were transferred
(the "TRANSFEREE CORPORATION(S)"), as the case may be. For purposes of the
preceding sentence, indirect beneficial ownership shall include, without
limitation, an interest resulting from ownership of the voting stock of one or
more corporations which, as a result of the Transaction, own the Company or the
Transferee Corporation(s), as the case may be, either directly or through one
or more subsidiary corporations. The Board shall have the right to determine
whether multiple sales or exchanges of the voting stock of the Company or
multiple Ownership Change Events are related, and its determination shall be
final, binding and conclusive.
8.2 EFFECT OF TRANSFER OF CONTROL ON OPTION. In the
event of a Transfer of Control, the surviving, continuing, successor, or
purchasing corporation or parent corporation thereof, as the case may be (the
"Acquiring Corporation"), may either assume the Company's rights and
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<PAGE> 9
obligations under the Option or substitute for the Option a substantially
equivalent option for the Acquiring Corporation's stock. In the event the
Acquiring Corporation elects not to assume the Company's rights and obligations
under the Option or substitute for the Option in connection with the Transfer
of Control, all shares acquired upon exercise of the Option shall become Vested
Shares for purposes of Section 11 as of the date ten (10) days prior to the
date of the Transfer of Control. Any vesting of the Option that was permissible
solely by reason of this Section 8.2 shall be conditioned upon the consummation
of the Transfer of Control. The Option shall terminate and cease to be
outstanding effective as of the date of the Transfer of Control to the extent
that the Option is neither assumed or substituted for by the Acquiring
Corporation in connection with the Transfer of Control nor exercised as of the
date of the Transfer of Control. Notwithstanding the foregoing, shares acquired
upon exercise of the Option prior to the Transfer of Control and any
consideration received pursuant to the Transfer of Control with respect to such
shares shall continue to be subject to all applicable provisions of this Option
Agreement except as otherwise provided herein. Furthermore, notwithstanding the
foregoing, if the corporation the stock of which is subject to the Option
immediately prior to an Ownership Change Event described in Section 8.1(a)(i)
constituting a Transfer of Control is the surviving or continuing corporation
and immediately after such Ownership Change Event less than fifty percent (50%)
of the total combined voting power of its voting stock is held by another
corporation or by other corporations that are members of an affiliated group
within the meaning of Section 1504(a) of the Code without regard to the
provisions of Section 1504(b) of the Code, the Option shall not terminate
unless the Board otherwise provides in its sole discretion.
9. ADJUSTMENTS FOR CHANGES IN CAPITAL STRUCTURE. In the event of
any stock dividend, stock split, reverse stock split, recapitalization,
combination, reclassification, or similar change in the capital structure of
the Company, appropriate adjustments shall be made in the number, Exercise
Price and class of shares of stock subject to the Option. If a majority of the
shares which are of the same class as the shares that are subject to the Option
are exchanged for, converted into, or otherwise become (whether or not pursuant
to an Ownership Change Event) shares of another corporation (the "NEW SHARES"),
the Board may unilaterally amend the Option to provide that the Option is
exercisable for New Shares. In the event of any such amendment, the Number of
Option Shares and the Exercise Price shall be adjusted in a fair and equitable
manner, as determined by the Board, in its sole discretion. Notwithstanding
the foregoing, any fractional share resulting from an adjustment pursuant to
this Section 9 shall be rounded up or down to the nearest whole number, as
determined by the Board, and in no event may the Exercise Price be decreased to
an amount less than the par value, if any, of the stock subject to the Option.
The adjustments determined by the Board pursuant to this Section 9 shall be
final, binding and conclusive.
10. RIGHTS AS A SHAREHOLDER, EMPLOYEE OR CONSULTANT. The Optionee
shall have no rights as a shareholder with respect to any shares covered by the
Option until the date of the issuance of a certificate for the shares for which
the Option has been exercised (as evidenced by the appropriate entry on the
books of the Company or of a duly authorized transfer agent of the Company).
No adjustment shall be made for dividends, distributions or other rights for
which the record date is prior to the date such certificate is issued, except
as provided in Section 9. Nothing in this Option Agreement shall confer upon
the Optionee any right to continue in the Service of a Participating Company or
interfere in any way with any right of the Participating Company Group to
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<PAGE> 10
terminate the Optionee's Service as an Employee or Consultant, as the case may
be, at any time.
11. RIGHT OF FIRST REFUSAL.
11.1 GRANT OF RIGHT OF FIRST REFUSAL. Except as provided
in Section 11.7 below, in the event the Optionee, the Optionee's legal
representative, or other holder of shares acquired upon exercise of the Option
proposes to sell, exchange, transfer, pledge, or otherwise dispose of any
shares acquired upon exercise of the Option (the "TRANSFER SHARES") to any
person or entity, including, without limitation, any shareholder of the
Participating Company Group, the Company shall have the right to repurchase the
Transfer Shares under the terms and subject to the conditions set forth in this
Section 11 (the "RIGHT OF FIRST REFUSAL").
11.2 NOTICE OF PROPOSED TRANSFER. Prior to any proposed
transfer of the Transfer Shares, the Optionee shall give a written notice (the
"TRANSFER NOTICE") to the Company describing fully the proposed transfer,
including the number of Transfer Shares, the name and address of the proposed
transferee (the "PROPOSED TRANSFEREE") and, if the transfer is voluntary, the
proposed transfer price, and containing such information necessary to show the
bona fide nature of the proposed transfer. In the event of a bona fide gift or
involuntary transfer, the proposed transfer price shall be deemed to be the
Fair Market Value of the Transfer Shares, as determined by the Board in good
faith. If the Optionee proposes to transfer any Transfer Shares to more than
one Proposed Transferee, the Optionee shall provide a separate Transfer Notice
for the proposed transfer to each Proposed Transferee. The Transfer Notice
shall be signed by both the Optionee and the Proposed Transferee and must
constitute a binding commitment of the Optionee and the Proposed Transferee for
the transfer of the Transfer Shares to the Proposed Transferee subject only to
the Right of First Refusal.
11.3 BONA FIDE TRANSFER. If the Company determines that
the information provided by the Optionee in the Transfer Notice is insufficient
to establish the bona fide nature of a proposed voluntary transfer, the Company
shall give the Optionee written notice of the Optionee's failure to comply with
the procedure described in this Section 11, and the Optionee shall have no
right to transfer the Transfer Shares without first complying with the
procedure described in this Section 11. The Optionee shall not be permitted to
transfer the Transfer Shares if the proposed transfer is not bona fide.
11.4 EXERCISE OF RIGHT OF FIRST REFUSAL. If the Company
determines the proposed transfer to be bona fide, the Company shall have the
right to purchase all, but not less than all, of the Transfer Shares (except as
the Company and the Optionee otherwise agree) at the purchase price and on the
terms set forth in the Transfer Notice by delivery to the Optionee of a notice
of exercise of the Right of First Refusal within thirty (30) days after the
date the Transfer Notice is delivered to the Company. The Company's exercise
or failure to exercise the Right of First Refusal with respect to any proposed
transfer described in a Transfer Notice shall not affect the Company's right to
exercise the Right of First Refusal with respect to any proposed transfer
described in any other Transfer Notice, whether or not such other Transfer
Notice is issued by the
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<PAGE> 11
Optionee or issued by a person other than the Optionee with respect to a
proposed transfer to the same Proposed Transferee. If the Company exercises
the Right of First Refusal, the Company and the Optionee shall thereupon
consummate the sale of the Transfer Shares to the Company on the terms set
forth in the Transfer Notice within sixty (60) days after the date the Transfer
Notice is delivered to the Company (unless a longer period is offered by the
Proposed Transferee); provided, however, that in the event the Transfer Notice
provides for the payment for the Transfer Shares other than in cash, the
Company shall have the option of paying for the Transfer Shares by the present
value cash equivalent of the consideration described in the Transfer Notice as
reasonably determined by the Company. For purposes of the foregoing,
cancellation of any indebtedness of the Optionee to any Participating Company
shall be treated as payment to the Optionee in cash to the extent of the unpaid
principal and any accrued interest canceled.
11.5 FAILURE TO EXERCISE RIGHT OF FIRST REFUSAL. If the
Company fails to exercise the Right of First Refusal in full (or to such lesser
extent as the Company and the Optionee otherwise agree) within the period
specified in Section 11.4 above, the Optionee may conclude a transfer to the
Proposed Transferee of the Transfer Shares on the terms and conditions
described in the Transfer Notice, provided such transfer occurs not later than
ninety (90) days following delivery to the Company of the Transfer Notice. The
Company shall have the right to demand further assurances from the Optionee and
the Proposed Transferee (in a form satisfactory to the Company) that the
transfer of the Transfer Shares was actually carried out on the terms and
conditions described in the Transfer Notice. No Transfer Shares shall be
transferred on the books of the Company until the Company has received such
assurances, if so demanded, and has approved the proposed transfer as bona
fide. Any proposed transfer on terms and conditions different from those
described in the Transfer Notice, as well as any subsequent proposed transfer
by the Optionee, shall again be subject to the Right of First Refusal and shall
require compliance by the Optionee with the procedure described in this Section
11.
11.6 TRANSFEREES OF TRANSFER SHARES. All transferees of
the Transfer Shares or any interest therein, other than the Company, shall be
required as a condition of such transfer to agree in writing (in a form
satisfactory to the Company) that such transferee shall receive and hold such
Transfer Shares or interest therein subject to all of the terms and conditions
of this Option Agreement, including this Section 11 providing for the Right of
First Refusal with respect to any subsequent transfer. Any sale or transfer of
any shares acquired upon exercise of the Option shall be void unless the
provisions of this Section 11 are met.
11.7 TRANSFERS NOT SUBJECT TO RIGHT OF FIRST REFUSAL. The
Right of First Refusal shall not apply to any transfer or exchange of the
shares acquired upon exercise of the Option if such transfer or exchange is in
connection with an Ownership Change Event. If the consideration received
pursuant to such transfer or exchange consists of stock of a Participating
Company, such consideration shall remain subject to the Right of First Refusal
unless the provisions of Section 11.9 below result in a termination of the
Right of First Refusal.
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11.8 ASSIGNMENT OF RIGHT OF FIRST REFUSAL. The Company
shall have the right to assign the Right of First Refusal at any time, whether
or not there has been an attempted transfer, to one or more persons as may be
selected by the Company.
11.9 EARLY TERMINATION OF RIGHT OF FIRST REFUSAL. The
other provisions of this Option Agreement notwithstanding, the Right of First
Refusal shall terminate and be of no further force and effect upon (a) the
occurrence of a Transfer of Control, unless the Acquiring Corporation assumes
the Company's rights and obligations under the Option or substitutes a
substantially equivalent option for the Acquiring Corporation's stock for the
Option, or (b) the existence of a public market for the class of shares subject
to the Right of First Refusal. A "PUBLIC MARKET" shall be deemed to exist if
(i) such stock is listed on a national securities exchange (as that term is
used in the Exchange Act) or (ii) such stock is traded on the over-the-counter
market and prices therefor are published daily on business days in a recognized
financial journal.
12. ESCROW.
12.1 ESTABLISHMENT OF ESCROW. To ensure that shares
subject to the Right of First Refusal or securing any promissory note will be
available for repurchase, the Company may require the Optionee to deposit the
certificate evidencing the shares which the Optionee purchases upon exercise of
the Option with an agent designated by the Company under the terms and
conditions of escrow and security agreements approved by the Company. If the
Company does not require such deposit as a condition of exercise of the Option,
the Company reserves the right at any time to require the Optionee to so
deposit the certificate in escrow. Upon the occurrence of an Ownership Change
Event or a change, as described in Section 9, in the character or amount of any
of the outstanding stock of the corporation the stock of which is subject to
the provisions of this Option Agreement, any and all new, substituted or
additional securities or other property to which the Optionee is entitled by
reason of the Optionee's ownership of shares of Stock acquired upon exercise of
the Option that remain, following such Ownership Change Event or change
described in Section 9, subject to the Right of First Refusal or any security
interest held by the Company shall be immediately subject to the escrow to the
same extent as such shares of Stock immediately before such event. The Company
shall bear the expenses of the escrow.
12.2 DELIVERY OF SHARES TO OPTIONEE. As soon as
practicable after the expiration of the Right of First Refusal and after full
repayment of any promissory note secured by the shares or other property in
escrow, but not more frequently than once each calendar year, the escrow agent
shall deliver to the Optionee the shares and any other property no longer
subject to such restrictions and no longer securing any promissory note.
12.3 NOTICES AND PAYMENTS. In the event the shares and
any other property held in escrow are subject to the Company's exercise of the
Right of First Refusal, the notices required to be given to the Optionee shall
be given to the escrow agent, and any payment required to be given to the
Optionee shall be given to the escrow agent. Within thirty (30) days after
payment by the Company, the escrow agent
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shall deliver the shares and any other property which the Company has purchased
to the Company and shall deliver the payment received from the Company to the
Optionee.
13. STOCK DISTRIBUTIONS SUBJECT TO OPTION AGREEMENT. If, from
time to time, there is any stock dividend, stock split or other change, as
described in Section 9, in the character or amount of any of the outstanding
stock of the corporation the stock of which is subject to the provisions of
this Option Agreement, then in such event any and all new, substituted or
additional securities to which the Optionee is entitled by reason of the
Optionee's ownership of the shares acquired upon exercise of the Option shall
be immediately subject to the Right of First Refusal and any security interest
held by the Company with the same force and effect as the shares subject to the
Right of First Refusal and such security interest immediately before such
event.
14. NOTICE OF SALES UPON DISQUALIFYING DISPOSITION. The Optionee
shall dispose of the shares acquired pursuant to the Option only in accordance
with the provisions of this Option Agreement. In addition, the Optionee shall
promptly notify the Chief Financial Officer of the Company if the Optionee
disposes of any of the shares acquired pursuant to the Option within one (1)
year after the date the Optionee exercises all or part of the Option or within
two (2) years after the Date of Option Grant. Until such time as the Optionee
disposes of such shares in a manner consistent with the provisions of this
Option Agreement, unless otherwise expressly authorized by the Company, the
Optionee shall hold all shares acquired pursuant to the Option in the
Optionee's name (and not in the name of any nominee) for the one-year period
immediately after the exercise of the Option and the two-year period
immediately after Date of Option Grant. At any time during the one-year or
two-year periods set forth above, the Company may place a legend on any
certificate representing shares acquired pursuant to the Option requesting the
transfer agent for the Company's stock to notify the Company of any such
transfers. The obligation of the Optionee to notify the Company of any such
transfer shall continue notwithstanding that a legend has been placed on the
certificate pursuant to the preceding sentence.
15. REPRESENTATIONS AND WARRANTIES. In connection with the receipt
of the Option and any acquisition of shares upon the exercise thereof, the
Optionee hereby agrees, represents and warrants as follows:
15.1 The Optionee is acquiring the Option and will acquire
any shares of Stock upon exercise of the Option for the Optionee's own account,
and not on behalf of any other person or as a nominee, for investment and not
with a view to, or sale in connection with, any distribution of the Option or
such shares.
15.2 The Optionee was not presented with or solicited by
any form of general solicitation or general advertising, including, but not
limited to, any advertisement, article, notice, or other communication
published in any newspaper, magazine, or similar media, or broadcast over
television, radio or similar communications media, or presented at any seminar
or meeting whose attendees have been invited by any general solicitation or
general advertising.
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15.3 The Optionee has either (a) a preexisting personal or
business relationship with the Company or any of its officers, directors, or
controlling persons, consisting of personal or business contacts of a nature
and duration to enable the Optionee to be aware of the character, business
acumen and general business and financial circumstances of the person with whom
such relationship exists, or (b) such knowledge and experience in financial and
business matters (or has relied on the financial and business knowledge and
experience of the Optionee's professional advisor who is unaffiliated with and
who is not, directly or indirectly, compensated by the Company or any affiliate
or selling agent of the Company) as to make the Optionee capable of evaluating
the merits and risks of the Option and any investment in shares acquired
pursuant to the Option and to protect the Optionee's own interests in the
transaction, or (c) both such relationship and such knowledge and experience.
15.4 The Optionee understands that the Option and any
shares acquired upon exercise of the Option have not been qualified under the
Corporate Securities Law of 1968, as amended, of the State of California by
reason of a specific exemption therefrom, which exemption depends upon, among
other things, the bona fide nature of the Optionee's representations as
expressed herein. The Optionee understands that the Company is relying on the
Optionee's representations and warrants that the Company is entitled to rely on
such representations and that such reliance is reasonable.
16. LEGENDS. The Company may at any time place legends
referencing the Right of First Refusal and any applicable federal, state or
foreign securities law restrictions on all certificates representing shares of
stock subject to the provisions of this Option Agreement. The Optionee shall,
at the request of the Company, promptly present to the Company any and all
certificates representing shares acquired pursuant to the Option in the
possession of the Optionee in order to carry out the provisions of this
Section. Unless otherwise specified by the Company, legends placed on such
certificates may include, but shall not be limited to, the following:
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<PAGE> 15
16.1 "THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT
BE SOLD, TRANSFERRED, ASSIGNED OR HYPOTHECATED UNLESS THERE IS AN EFFECTIVE
REGISTRATION STATEMENT UNDER SUCH ACT COVERING SUCH SECURITIES, THE SALE IS
MADE IN ACCORDANCE WITH RULE 144 OR RULE 701 UNDER THE ACT, OR THE COMPANY
RECEIVES AN OPINION OF COUNSEL FOR THE HOLDER OF THESE SECURITIES REASONABLY
SATISFACTORY TO THE COMPANY, STATING THAT SUCH SALE, TRANSFER, ASSIGNMENT OR
HYPOTHECATION IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY
REQUIREMENTS OF SUCH ACT."
16.2 Any legend required to be placed thereon by the
Commissioner of Corporations of the State of California.
16.3 "THE SHARES REPRESENTED BY THIS CERTIFICATE ARE
SUBJECT TO A RIGHT OF FIRST REFUSAL OPTION IN FAVOR OF THE CORPORATION OR ITS
ASSIGNEE SET FORTH IN AN AGREEMENT BETWEEN THE CORPORATION AND THE REGISTERED
HOLDER, OR SUCH HOLDER'S PREDECESSOR IN INTEREST, A COPY OF WHICH IS ON FILE AT
THE PRINCIPAL OFFICE OF THIS CORPORATION."
16.4 "THE SHARES EVIDENCED BY THIS CERTIFICATE WERE ISSUED
BY THE CORPORATION TO THE REGISTERED HOLDER UPON EXERCISE OF AN INCENTIVE STOCK
OPTION AS DEFINED IN SECTION 422 OF THE INTERNAL REVENUE CODE OF 1986, AS
AMENDED ("ISO"). IN ORDER TO OBTAIN THE PREFERENTIAL TAX TREATMENT AFFORDED TO
ISOs, THE SHARES SHOULD NOT BE TRANSFERRED PRIOR TO
____________________________. SHOULD THE REGISTERED HOLDER ELECT TO TRANSFER
ANY OF THE SHARES PRIOR TO THIS DATE AND FOREGO ISO TAX TREATMENT, THE TRANSFER
AGENT FOR THE SHARES SHALL NOTIFY THE CORPORATION IMMEDIATELY. THE REGISTERED
HOLDER SHALL HOLD ALL SHARES PURCHASED UNDER THE INCENTIVE STOCK OPTION IN THE
REGISTERED HOLDER'S NAME (AND NOT IN THE NAME OF ANY NOMINEE) PRIOR TO THIS
DATE OR UNTIL TRANSFERRED AS DESCRIBED ABOVE."
17. PUBLIC OFFERING. The Optionee hereby agrees that in the event
of any underwritten public offering of stock, including an initial public
offering of stock, made by the Company pursuant to an effective registration
statement filed under the Securities Act, the Optionee shall not offer, sell,
contract to sell, pledge, hypothecate, grant any option to purchase or make any
short sale of, or otherwise dispose of any shares of stock of the Company or
any rights to acquire stock of the Company for such period of time from and
after the effective date of such registration statement as may be established
by the underwriter for such initial public offering; provided, however, that
such period of time shall not exceed one hundred eighty (180) days from the
effective date of the registration statement to be filed in connection with
such initial public offering. The foregoing limitation shall not apply to
shares registered in the initial public offering
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under the Securities Act. The foregoing limitation shall remain in effect for
the two (2) year period immediately following the effective date of the
Company's initial public offering and shall thereafter terminate and cease to
have any force or effect. The Optionee shall be subject to this Section
provided and only if the officers and directors of the Company are also subject
to similar arrangements.
18. BINDING EFFECT. Subject to the restrictions on transfer set
forth herein, this Option Agreement shall inure to the benefit of and be
binding upon the parties hereto and their respective heirs, executors,
administrators, successors and assigns.
19. TERMINATION OR AMENDMENT. The Board may terminate or amend
the Plan or the Option at any time; provided, however, that except as provided
in Section 8.2 in connection with a Transfer of Control, no such termination or
amendment may adversely affect the Option or any unexercised portion hereof
without the consent of the Optionee unless such termination or amendment is
necessary to comply with any applicable law or government regulation or is
required to enable the Option to qualify as an Incentive Stock Option. No
amendment or addition to this Option Agreement shall be effective unless in
writing.
20. INTEGRATED AGREEMENT. This Option Agreement constitutes the
entire understanding and agreement of the Optionee and the Participating
Company Group with respect to the subject matter contained herein and there are
no agreements, understandings, restrictions, representations, or warranties
among the Optionee and the Participating Company Group with respect to such
subject matter other than those as set forth or provided for herein or therein.
To the extent contemplated herein or therein, the provisions of this Option
Agreement shall survive any exercise of the Option and shall remain in full
force and effect.
21. APPLICABLE LAW. This Option Agreement shall be governed by
the laws of the State of California as such laws are applied to agreements
between California residents entered into and to be performed entirely within
the State of California.
TELESEND, INC.
By:
---------------------------------
Title:
---------------------------------
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The Optionee represents that the Optionee is familiar with the terms
and provisions of this Option Agreement, including the Right of First Refusal
set forth in Section 11 and hereby accepts the Option subject to all of the
terms and provisions thereof. The Optionee hereby agrees to accept as binding,
conclusive and final all decisions or interpretations of the Board upon any
questions arising under this Option Agreement. The undersigned acknowledges
receipt of a copy of the Plan.
OPTIONEE
Date:
--------------------------------- -------------------------------
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EXHIBIT 99.3
THE SECURITY REPRESENTED BY THIS CERTIFICATE HAS BEEN ACQUIRED FOR INVESTMENT
AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION
THEREOF. NO SUCH SALE OR DISPOSITION MAY BE EFFECTED WITHOUT AN EFFECTIVE
REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL SATISFACTORY TO
THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF
1933.
TELESEND, INC.
NONSTATUTORY STOCK OPTION AGREEMENT
THIS NONSTATUTORY STOCK OPTION AGREEMENT (the "OPTION AGREEMENT") is
made and entered into as of ________________, 199____, by and between Telesend,
Inc. and ____________________________ (the "OPTIONEE").
The Company has granted to the Optionee an option to purchase certain
shares of Stock, upon the terms and conditions set forth in this Option
Agreement (the "OPTION"). The Option shall in all respects be subject to the
terms and conditions of the Telesend, Inc. 1995 Stock Option Plan (the "PLAN"),
the provisions of which are incorporated herein by reference.
1. DEFINITIONS AND CONSTRUCTION.
1.1 DEFINITIONS. Unless otherwise defined herein,
capitalized terms shall have the meanings assigned to such terms in the Plan.
Whenever used herein, the following terms shall have their respective meanings
set forth below:
(a) "DATE OF OPTION GRANT" means
________________________ , 199_.
(b) "NUMBER OF OPTION SHARES" means
___________________ shares of Stock, as adjusted from time to time pursuant to
Section 9.
(c) "EXERCISE PRICE" means $ ____________ per
share of Stock, as adjusted from time to time pursuant to Section 9.
(d) "INITIAL EXERCISE DATE" means the Initial
Vesting Date.
(e) "INITIAL VESTING DATE" means the date
occurring one (1) year after
(check one):
___ the Date of Option Grant.
___ __________________ , 199_, the date
the Optionee's Service commenced.
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(f) "VESTED RATIO" means, on any relevant date,
the ratio determined as follows:
<TABLE>
<CAPTION>
Vested Ratio
------------
<S> <C>
Prior to Initial Vesting Date 0
On Initial Vesting Date, provided the 1/4
Optionee's Service is continuous from the
later of the Date of Option Grant or the
Optionee's Service commencement date until
the Initial Vesting Date
Plus
----
For each full month of the Optionee's 1/48
continuous Service from the Initial
Vesting Date until the Vested Ratio equals
1/1, an additional
</TABLE>
(g) "OPTION EXPIRATION DATE" means the date ten
(10) years after the Date of Option Grant.
(h) "COMPANY" means Telesend, Inc., a California
corporation, or any successor corporation thereto.
(i) "DISABILITY" means the inability of the
Optionee, in the opinion of a qualified physician acceptable to the Company, to
perform the major duties of the Optionee's position with the Participating
Company Group because of the sickness or injury of the Optionee.
(j) "SECURITIES ACT" means the Securities Act of
1933, as amended.
(k) "SERVICE" means the Optionee's employment or
service with the Participating Company Group, whether in the capacity of an
Employee, a Director or a Consultant. The Optionee's Service shall not be
deemed to have terminated merely because of a change in the capacity in which
the Optionee renders Service to the Participating Company Group or a change in
the Participating Company for which the Optionee renders such Service, provided
that there is no interruption or termination of the Optionee's Service. The
Optionee's Service shall be deemed to have terminated either upon an actual
termination of Service or upon the corporation for which the Optionee performs
Service ceasing to be a Participating Company. Subject to the foregoing, the
Company, in its sole discretion, shall determine whether the Optionee's Service
has terminated and the effective date of such termination.
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1.2 CONSTRUCTION. Captions and titles contained herein
are for convenience only and shall not affect the meaning or interpretation of
any provision of this Option Agreement. Except when otherwise indicated by the
context, the singular shall include the plural, the plural shall include the
singular, and the term "or" shall include the conjunctive as well as the
disjunctive.
2. TAX CONSEQUENCES. This Option is intended to be a
Nonstatutory Stock Option and shall not be treated as an Incentive Stock Option
within the meaning of Section 422(b) of the Code.
3. ADMINISTRATION. All questions of interpretation concerning
this Option Agreement shall be determined by the Board, including any duly
appointed Committee of the Board. All determinations by the Board shall be
final and binding upon all persons having an interest in the Option. Any
officer of a Participating Company shall have the authority to act on behalf of
the Company with respect to any matter, right, obligation, or election which is
the responsibility of or which is allocated to the Company herein, provided the
officer has apparent authority with respect to such matter, right, obligation,
or election.
4. EXERCISE OF THE OPTION.
4.1 RIGHT TO EXERCISE. Except as otherwise provided
herein, the Option shall be exercisable on and after the Initial Exercise Date
and prior to the termination of the Option (as provided in Section 6) in an
amount not to exceed the Number of Option Shares multiplied by the Vested Ratio
less the number of shares previously acquired upon exercise of the Option,
subject to the Optionee's agreement that any shares purchased upon exercise are
subject to the Company's repurchase rights set forth in Section 11. In no
event shall the Option be exercisable for more shares than the Number of Option
Shares.
4.2 METHOD OF EXERCISE. Exercise of the Option shall be
by written notice to the Company which must state the election to exercise the
Option, the number of whole shares of Stock for which the Option is being
exercised and such other representations and agreements as to the Optionee's
investment intent with respect to such shares as may be required pursuant to
the provisions of this Option Agreement. The written notice must be signed by
the Optionee and must be delivered in person, by certified or registered mail,
return receipt requested, by confirmed facsimile transmission, or by such other
means as the Company may permit, to the Chief Financial Officer of the Company,
or other authorized representative of the Participating Company Group, prior to
the termination of the Option as set forth in Section 6, accompanied by (i)
full payment of the aggregate Exercise Price for the number of shares of Stock
being purchased and (ii) an executed copy, if required herein, of the then
current forms of escrow and security agreement referenced below. The Option
shall be deemed to be exercised upon receipt by the Company of such written
notice, the aggregate Exercise Price, and, if required by the Company, such
executed agreements.
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4.3 PAYMENT OF EXERCISE PRICE.
(a) FORMS OF CONSIDERATION AUTHORIZED. Except as
otherwise provided below, payment of the aggregate Exercise Price for the
number of shares of Stock for which the Option is being exercised shall be made
(i) in cash, by check, or cash equivalent, (ii) by tender to the Company of
whole shares of Stock owned by the Optionee having a Fair Market Value (as
determined by the Company without regard to any restrictions on transferability
applicable to such stock by reason of federal or state securities laws or
agreements with an underwriter for the Company) not less than the aggregate
Exercise Price, (iii) by means of a Cashless Exercise, as defined in Section
4.3(c), (iv) in the Company's sole discretion at the time the Option is
exercised, by the Optionee's promissory note for the aggregate Exercise Price,
or (v) by any combination of the foregoing.
(b) TENDER OF STOCK. Notwithstanding the
foregoing, the Option may not be exercised by tender to the Company of shares
of Stock to the extent such tender of Stock would constitute a violation of the
provisions of any law, regulation or agreement restricting the redemption of
the Company's stock. The Option may not be exercised by tender to the Company
of shares of Stock unless such shares either have been owned by the Optionee
for more than six (6) months or were not acquired, directly or indirectly, from
the Company.
(c) CASHLESS EXERCISE. A "CASHLESS EXERCISE"
means the assignment in a form acceptable to the Company of the proceeds of a
sale or loan with respect to some or all of the shares of Stock acquired upon
the exercise of the Option pursuant to a program or procedure approved by the
Company (including, without limitation, through an exercise complying with the
provisions of Regulation T as promulgated from time to time by the Board of
Governors of the Federal Reserve System). The Company reserves, at any and all
times, the right, in the Company's sole and absolute discretion, to decline to
approve or terminate any such program or procedure.
(d) PAYMENT BY PROMISSORY NOTE. No promissory
note shall be permitted if an exercise of the Option using a promissory note
would be a violation of any law. Unless otherwise specified by the Board at
the time the Option is granted, the promissory note permitted in clause (iv) of
Section 4.3(a) shall be a full recourse note in a form satisfactory to the
Company, with principal payable four (4) years after the date the Option is
exercised. Interest on the principal balance of the promissory note shall be
payable in annual installments at the minimum interest rate necessary to avoid
imputed interest pursuant to all applicable sections of the Code. Such
recourse promissory note shall be secured by the shares of Stock acquired
pursuant to the then current form of security agreement as approved by the
Company. At any time the Company is subject to the regulations promulgated by
the Board of Governors of the Federal Reserve System or any other governmental
entity affecting the extension of credit in connection with the Company's
securities, any promissory note shall comply with such applicable regulations,
and the Optionee shall pay the unpaid principal and accrued interest, if any,
to the extent necessary to comply with such applicable regulations. Except as
the Company in its sole discretion shall determine, the Optionee shall pay the
unpaid principal balance of
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the promissory note and any accrued interest thereon upon termination of the
Optionee's Service with the Participating Company Group for any reason, with or
without cause.
4.4 TAX WITHHOLDING. At the time the Option is
exercised, in whole or in part, or at any time thereafter as requested by the
Company, the Optionee hereby authorizes withholding from payroll and any other
amounts payable to the Optionee, and otherwise agrees to make adequate
provision for (including by means of a Cashless Exercise to the extent
permitted by the Company), any sums required to satisfy the federal, state,
local and foreign tax withholding obligations of the Participating Company
Group, if any, which arise in connection with the Option, including, without
limitation, obligations arising upon (i) the exercise, in whole or in part, of
the Option, (ii) the transfer, in whole or in part, of any shares acquired upon
exercise of the Option, (iii) the operation of any law or regulation providing
for the imputation of interest, or (iv) the lapsing of any restriction with
respect to any shares acquired upon exercise of the Option. The Optionee is
cautioned that the Option is not exercisable unless the tax withholding
obligations of the Participating Company Group are satisfied. Accordingly, the
Optionee may not be able to exercise the Option when desired even though the
Option is vested, and the Company shall have no obligation to issue a
certificate for such shares or release such shares from any escrow provided for
herein.
4.5 CERTIFICATE REGISTRATION. Except in the event the
Exercise Price is paid by means of a Cashless Exercise, the certificate for the
shares as to which the Option is exercised shall be registered in the name of
the Optionee, or, if applicable, in the names of the heirs of the Optionee.
4.6 RESTRICTIONS ON GRANT OF THE OPTION AND ISSUANCE OF
SHARES. The grant of the Option and the issuance of shares of Stock upon
exercise of the Option shall be subject to compliance with all applicable
requirements of federal, state or foreign law with respect to such securities.
The Option may not be exercised if the issuance of shares of Stock upon
exercise would constitute a violation of any applicable federal, state or
foreign securities laws or other law or regulations or the requirements of any
stock exchange or market system upon which the Stock may then be listed. In
addition, the Option may not be exercised unless (i) a registration statement
under the Securities Act shall at the time of exercise of the Option be in
effect with respect to the shares issuable upon exercise of the Option or (ii)
in the opinion of legal counsel to the Company, the shares issuable upon
exercise of the Option may be issued in accordance with the terms of an
applicable exemption from the registration requirements of the Securities Act.
THE OPTIONEE IS CAUTIONED THAT THE OPTION MAY NOT BE EXERCISED UNLESS THE
FOREGOING CONDITIONS ARE SATISFIED. ACCORDINGLY, THE OPTIONEE MAY NOT BE ABLE
TO EXERCISE THE OPTION WHEN DESIRED EVEN THOUGH THE OPTION IS VESTED. The
inability of the Company to obtain from any regulatory body having jurisdiction
the authority, if any, deemed by the Company's legal counsel to be necessary to
the lawful issuance and sale of any shares subject to the Option shall relieve
the Company of any liability in respect of the failure to issue or sell such
shares as to which such requisite authority shall not have been obtained. As a
condition to the exercise of the Option, the Company may require the Optionee
to satisfy any qualifications that may be necessary or appropriate, to evidence
compliance with any applicable law or regulation and to make
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any representation or warranty with respect thereto as may be requested by the
Company.
4.7 FRACTIONAL SHARES. The Company shall not be required
to issue fractional shares upon the exercise of the Option.
5. NONTRANSFERABILITY OF THE OPTION. The Option may be exercised
during the lifetime of the Optionee only by the Optionee or the Optionee's
guardian or legal representative and may not be assigned or transferred in any
manner except by will or by the laws of descent and distribution. Following
the death of the Optionee, the Option, to the extent provided in Section 7, may
be exercised by the Optionee's legal representative or by any person empowered
to do so under the deceased Optionee's will or under the then applicable laws
of descent and distribution.
6. TERMINATION OF THE OPTION. The Option shall terminate and may
no longer be exercised on the first to occur of (a) the Option Expiration Date,
(b) the last date for exercising the Option following termination of the
Optionee's Service as described in Section 7, or (c) a Transfer of Control to
the extent provided in Section 8.
7. EFFECT OF TERMINATION OF SERVICE.
7.1 OPTION EXERCISABILITY.
(a) DISABILITY. If the Optionee's Service with
the Participating Company Group is terminated because of the Disability of the
Optionee, the Option, to the extent unexercised and exercisable on the date on
which the Optionee's Service terminated, may be exercised by the Optionee (or
the Optionee's guardian or legal representative) at any time prior to the
expiration of twelve (12) months after the date on which the Optionee's Service
terminated, but in any event no later than the Option Expiration Date.
(b) DEATH. If the Optionee's Service with the
Participating Company Group is terminated because of the death of the Optionee,
the Option, to the extent unexercised and exercisable on the date on which the
Optionee's Service terminated, may be exercised by the Optionee (or the
Optionee's legal representative, or other person who acquired the right to
exercise the Option by reason of the Optionee's death) at any time prior to the
expiration of twelve (12) months after the date on which the Optionee's Service
terminated, but in any event no later than the Option Expiration Date. The
Optionee's Service shall be deemed to have terminated on account of death if
the Optionee dies within three (3) months after the Optionee's termination of
Service.
(c) OTHER TERMINATION OF SERVICE. If the
Optionee's Service with the Participating Company Group terminates for any
reason, except Disability or death, the Option, to the extent unexercised and
exercisable by the Optionee on the date on which the Optionee's Service
terminated, may be exercised by the Optionee within three (3) months (or such
other longer period of time as determined by the Board, in its sole discretion)
after the date on which the Optionee's Service terminated, but in any event no
later than the Option Expiration Date.
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7.2 ADDITIONAL LIMITATION ON OPTION EXERCISE. Except as
the Company and the Optionee otherwise agree, exercise of the Option pursuant
to Section 7.1 following termination of the Optionee's Service may not be made
by delivery of a promissory note as provided in Section 4.3(a).
7.3 EXTENSION IF EXERCISE PREVENTED BY LAW.
Notwithstanding the foregoing, if the exercise of the Option within the
applicable time periods set forth in Section 7.1 is prevented by the provisions
of Section 4.6, the Option shall remain exercisable until three (3) months
after the date the Optionee is notified by the Company that the Option is
exercisable, but in any event no later than the Option Expiration Date.
7.4 EXTENSION IF OPTIONEE SUBJECT TO SECTION 16(B).
Notwithstanding the foregoing, if a sale within the applicable time periods set
forth in Section 7.1 of shares acquired upon the exercise of the Option would
subject the Optionee to suit under Section 16(b) of the Exchange Act, the
Option shall remain exercisable until the earliest to occur of (i) the tenth
(10th) day following the date on which a sale of such shares by the Optionee
would no longer be subject to such suit, (ii) the one hundred and ninetieth
(190th) day after the Optionee's termination of Service, or (iii) the Option
Expiration Date.
7.5 LEAVE OF ABSENCE. For purposes of Section 7.1, the
Optionee's Service with the Participating Company Group shall not be deemed to
terminate if the Optionee takes any military leave, sick leave, or other bona
fide leave of absence approved by the Company of ninety (90) days or less. In
the event of a leave of absence in excess of ninety (90) days, the Optionee's
Service shall be deemed to terminate on the ninety-first (91st) day of such
leave unless the Optionee's right to reemployment with the Participating
Company Group remains guaranteed by statute or contract. Notwithstanding the
foregoing, unless otherwise designated by the Company (or required by law), a
leave of absence shall not be treated as Service for purposes of determining
the Optionee's Vested Ratio.
8. TRANSFER OF CONTROL.
8.1 DEFINITIONS.
(a) An "OWNERSHIP CHANGE EVENT" shall be deemed
to have occurred if any of the following occurs with respect to the Company:
(i) the direct or indirect sale or
exchange in a single or series of related transactions by the shareholders of
the Company of more than fifty percent (50%) of the voting stock of the
Company;
(ii) a merger or consolidation in which
the Company is a party;
(iii) the sale, exchange, or transfer of all
or substantially all of the assets of the Company; or
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(iv) a liquidation or dissolution of the
Company.
(b) A "TRANSFER OF CONTROL" shall mean an
Ownership Change Event or a series of related Ownership Change Events
(collectively, the "TRANSACTION") wherein the shareholders of the Company
immediately before the Transaction do not retain immediately after the
Transaction, in substantially the same proportions as their ownership of shares
of the Company's voting stock immediately before the Transaction, direct or
indirect beneficial ownership of more than fifty percent (50%) of the total
combined voting power of the outstanding voting stock of the Company or the
corporation or corporations to which the assets of the Company were transferred
(the "TRANSFEREE CORPORATION(S)"), as the case may be. For purposes of the
preceding sentence, indirect beneficial ownership shall include, without
limitation, an interest resulting from ownership of the voting stock of one or
more corporations which, as a result of the Transaction, own the Company or the
Transferee Corporation(s), as the case may be, either directly or through one
or more subsidiary corporations. The Board shall have the right to determine
whether multiple sales or exchanges of the voting stock of the Company or
multiple Ownership Change Events are related, and its determination shall be
final, binding and conclusive.
8.2 EFFECT OF TRANSFER OF CONTROL ON OPTION. In the
event of a Transfer of Control, the surviving, continuing, successor, or
purchasing corporation or parent corporation thereof, as the case may be (the
"ACQUIRING CORPORATION"), may either assume the Company's rights and
obligations under the Option or substitute for the Option a substantially
equivalent option for the Acquiring Corporation's stock. In the event the
Acquiring Corporation elects not to assume the Company's rights and obligations
under the Option or substitute for the Option in connection with the Transfer
of Control, all shares acquired upon exercise of the Option shall become Vested
Shares for purposes of Section 11 as of the date ten (10) days prior to the
date of the Transfer of Control. Any vesting of the Option that was permissible
solely by reason of this Section 8.2 shall be conditioned upon the consummation
of the Transfer of Control. The Option shall terminate and cease to be
outstanding effective as of the date of the Transfer of Control to the extent
that the Option is neither assumed or substituted for by the Acquiring
Corporation in connection with the Transfer of Control nor exercised as of the
date of the Transfer of Control. Notwithstanding the foregoing, shares
acquired upon exercise of the Option prior to the Transfer of Control and any
consideration received pursuant to the Transfer of Control with respect to such
shares shall continue to be subject to all applicable provisions of this Option
Agreement except as otherwise provided herein. Furthermore, notwithstanding the
foregoing, if the corporation the stock of which is subject to the Option
immediately prior to an Ownership Change Event described in Section 8.1(a)(i)
constituting a Transfer of Control is the surviving or continuing corporation
and immediately after such Ownership Change Event less than fifty percent (50%)
of the total combined voting power of its voting stock is held by another
corporation or by other corporations that are members of an affiliated group
within the meaning of Section 1504(a) of the Code without regard to the
provisions of Section 1504(b) of the Code, the Option shall not terminate
unless the Board otherwise provides in its sole discretion.
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9. ADJUSTMENTS FOR CHANGES IN CAPITAL STRUCTURE. In the event of
any stock dividend, stock split, reverse stock split, recapitalization,
combination, reclassification, or similar change in the capital structure of
the Company, appropriate adjustments shall be made in the number, Exercise
Price and class of shares of stock subject to the Option. If a majority of the
shares which are of the same class as the shares that are subject to the Option
are exchanged for, converted into, or otherwise become (whether or not pursuant
to an Ownership Change Event) shares of another corporation (the "NEW SHARES"),
the Board may unilaterally amend the Option to provide that the Option is
exercisable for New Shares. In the event of any such amendment, the Number of
Option Shares and the Exercise Price shall be adjusted in a fair and equitable
manner, as determined by the Board, in its sole discretion. Notwithstanding
the foregoing, any fractional share resulting from an adjustment pursuant to
this Section 9 shall be rounded up or down to the nearest whole number, as
determined by the Board, and in no event may the Exercise Price be decreased to
an amount less than the par value, if any, of the stock subject to the Option.
The adjustments determined by the Board pursuant to this Section 9 shall be
final, binding and conclusive.
10. RIGHTS AS A SHAREHOLDER, EMPLOYEE OR CONSULTANT. The Optionee
shall have no rights as a shareholder with respect to any shares covered by the
Option until the date of the issuance of a certificate for the shares for which
the Option has been exercised (as evidenced by the appropriate entry on the
books of the Company or of a duly authorized transfer agent of the Company).
No adjustment shall be made for dividends, distributions or other rights for
which the record date is prior to the date such certificate is issued, except
as provided in Section 9. Nothing in this Option Agreement shall confer upon
the Optionee any right to continue in the Service of a Participating Company or
interfere in any way with any right of the Participating Company Group to
terminate the Optionee's Service as an Employee or Consultant, as the case may
be, at any time.
11. RIGHT OF FIRST REFUSAL.
11.1 GRANT OF RIGHT OF FIRST REFUSAL. Except as provided
in Section 11.7 below, in the event the Optionee, the Optionee's legal
representative, or other holder of shares acquired upon exercise of the Option
proposes to sell, exchange, transfer, pledge, or otherwise dispose of any
shares acquired upon exercise of the Option (the "TRANSFER SHARES") to any
person or entity, including, without limitation, any shareholder of the
Participating Company Group, the Company shall have the right to repurchase the
Transfer Shares under the terms and subject to the conditions set forth in this
Section 11 (the "RIGHT OF FIRST REFUSAL").
11.2 NOTICE OF PROPOSED TRANSFER. Prior to any proposed
transfer of the Transfer Shares, the Optionee shall give a written notice (the
"TRANSFER NOTICE") to the Company describing fully the proposed transfer,
including the number of Transfer Shares, the name and address of the proposed
transferee (the "PROPOSED TRANSFEREE") and, if the transfer is voluntary, the
proposed transfer price, and containing such information necessary to show the
bona fide nature of the proposed transfer. In the event of a bona fide gift or
involuntary transfer, the proposed transfer price shall be deemed to be the
Fair Market Value of the Transfer Shares, as determined by the Board
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in good faith. If the Optionee proposes to transfer any Transfer Shares to
more than one Proposed Transferee, the Optionee shall provide a separate
Transfer Notice for the proposed transfer to each Proposed Transferee. The
Transfer Notice shall be signed by both the Optionee and the Proposed
Transferee and must constitute a binding commitment of the Optionee and the
Proposed Transferee for the transfer of the Transfer Shares to the Proposed
Transferee subject only to the Right of First Refusal.
11.3 BONA FIDE TRANSFER. If the Company determines that
the information provided by the Optionee in the Transfer Notice is insufficient
to establish the bona fide nature of a proposed voluntary transfer, the Company
shall give the Optionee written notice of the Optionee's failure to comply with
the procedure described in this Section 11, and the Optionee shall have no
right to transfer the Transfer Shares without first complying with the
procedure described in this Section 11. The Optionee shall not be permitted to
transfer the Transfer Shares if the proposed transfer is not bona fide.
11.4 EXERCISE OF RIGHT OF FIRST REFUSAL. If the Company
determines the proposed transfer to be bona fide, the Company shall have the
right to purchase all, but not less than all, of the Transfer Shares (except as
the Company and the Optionee otherwise agree) at the purchase price and on the
terms set forth in the Transfer Notice by delivery to the Optionee of a notice
of exercise of the Right of First Refusal within thirty (30) days after the
date the Transfer Notice is delivered to the Company. The Company's exercise
or failure to exercise the Right of First Refusal with respect to any proposed
transfer described in a Transfer Notice shall not affect the Company's right to
exercise the Right of First Refusal with respect to any proposed transfer
described in any other Transfer Notice, whether or not such other Transfer
Notice is issued by the Optionee or issued by a person other than the Optionee
with respect to a proposed transfer to the same Proposed Transferee. If the
Company exercises the Right of First Refusal, the Company and the Optionee
shall thereupon consummate the sale of the Transfer Shares to the Company on
the terms set forth in the Transfer Notice within sixty (60) days after the
date the Transfer Notice is delivered to the Company (unless a longer period is
offered by the Proposed Transferee); provided, however, that in the event the
Transfer Notice provides for the payment for the Transfer Shares other than in
cash, the Company shall have the option of paying for the Transfer Shares by
the present value cash equivalent of the consideration described in the
Transfer Notice as reasonably determined by the Company. For purposes of the
foregoing, cancellation of any indebtedness of the Optionee to any
Participating Company shall be treated as payment to the Optionee in cash to
the extent of the unpaid principal and any accrued interest canceled.
11.5 FAILURE TO EXERCISE RIGHT OF FIRST REFUSAL. If the
Company fails to exercise the Right of First Refusal in full (or to such lesser
extent as the Company and the Optionee otherwise agree) within the period
specified in Section 11.4 above, the Optionee may conclude a transfer to the
Proposed Transferee of the Transfer Shares on the terms and conditions
described in the Transfer Notice, provided such transfer occurs not later than
ninety (90) days following delivery to the Company of the Transfer Notice. The
Company shall have the right to demand further assurances from the Optionee and
the Proposed Transferee (in a form satisfactory to the Company) that the
transfer of the
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Transfer Shares was actually carried out on the terms and conditions described
in the Transfer Notice. No Transfer Shares shall be transferred on the books
of the Company until the Company has received such assurances, if so demanded,
and has approved the proposed transfer as bona fide. Any proposed transfer on
terms and conditions different from those described in the Transfer Notice, as
well as any subsequent proposed transfer by the Optionee, shall again be
subject to the Right of First Refusal and shall require compliance by the
Optionee with the procedure described in this Section 11.
11.6 TRANSFEREES OF TRANSFER SHARES. All transferees of
the Transfer Shares or any interest therein, other than the Company, shall be
required as a condition of such transfer to agree in writing (in a form
satisfactory to the Company) that such transferee shall receive and hold such
Transfer Shares or interest therein subject to all of the terms and conditions
of this Option Agreement, including this Section 11 providing for the Right of
First Refusal with respect to any subsequent transfer. Any sale or transfer of
any shares acquired upon exercise of the Option shall be void unless the
provisions of this Section 11 are met.
11.7 TRANSFERS NOT SUBJECT TO RIGHT OF FIRST REFUSAL. The
Right of First Refusal shall not apply to any transfer or exchange of the
shares acquired upon exercise of the Option if such transfer or exchange is in
connection with an Ownership Change Event. If the consideration received
pursuant to such transfer or exchange consists of stock of a Participating
Company, such consideration shall remain subject to the Right of First Refusal
unless the provisions of Section 11.9 below result in a termination of the
Right of First Refusal.
11.8 ASSIGNMENT OF RIGHT OF FIRST REFUSAL. The Company
shall have the right to assign the Right of First Refusal at any time, whether
or not there has been an attempted transfer, to one or more persons as may be
selected by the Company.
11.9 EARLY TERMINATION OF RIGHT OF FIRST REFUSAL. The
other provisions of this Option Agreement notwithstanding, the Right of First
Refusal shall terminate and be of no further force and effect upon (a) the
occurrence of a Transfer of Control, unless the Acquiring Corporation assumes
the Company's rights and obligations under the Option or substitutes a
substantially equivalent option for the Acquiring Corporation's stock for the
Option, or (b) the existence of a public market for the class of shares subject
to the Right of First Refusal. A "PUBLIC MARKET" shall be deemed to exist if
(i) such stock is listed on a national securities exchange (as that term is
used in the Exchange Act) or (ii) such stock is traded on the over-the-counter
market and prices therefor are published daily on business days in a recognized
financial journal.
12. ESCROW.
12.1 ESTABLISHMENT OF ESCROW. To ensure that shares
subject to the Right of First Refusal or securing any promissory note will be
available for repurchase, the Company may require the Optionee to deposit the
certificate evidencing the shares which the Optionee purchases upon exercise of
the Option with an agent designated by the Company under the terms and
conditions of escrow and security agreements approved by the Company. If the
Company does not require such deposit as a condition
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<PAGE> 12
of exercise of the Option, the Company reserves the right at any time to
require the Optionee to so deposit the certificate in escrow. Upon the
occurrence of an Ownership Change Event or a change, as described in Section 9,
in the character or amount of any of the outstanding stock of the corporation
the stock of which is subject to the provisions of this Option Agreement, any
and all new, substituted or additional securities or other property to which
the Optionee is entitled by reason of the Optionee's ownership of shares of
Stock acquired upon exercise of the Option that remain, following such
Ownership Change Event or change described in Section 9, subject to the Right
of First Refusal, or any security interest held by the Company shall be
immediately subject to the escrow to the same extent as such shares of Stock
immediately before such event. The Company shall bear the expenses of the
escrow.
12.2 DELIVERY OF SHARES TO OPTIONEE. As soon as
practicable after the expiration of the Right of First Refusal and after full
repayment of any promissory note secured by the shares or other property in
escrow, but not more frequently than once each calendar year, the escrow agent
shall deliver to the Optionee the shares and any other property no longer
subject to such restrictions and no longer securing any promissory note.
12.3 NOTICES AND PAYMENTS. In the event the shares and
any other property held in escrow are subject to the Company's exercise of the
Right of First Refusal, the notices required to be given to the Optionee shall
be given to the escrow agent, and any payment required to be given to the
Optionee shall be given to the escrow agent. Within thirty (30) days after
payment by the Company, the escrow agent shall deliver the shares and any other
property which the Company has purchased to the Company and shall deliver the
payment received from the Company to the Optionee.
13. STOCK DISTRIBUTIONS SUBJECT TO OPTION AGREEMENT. If, from
time to time, there is any stock dividend, stock split or other change, as
described in Section 9, in the character or amount of any of the outstanding
stock of the corporation the stock of which is subject to the provisions of
this Option Agreement, then in such event any and all new, substituted or
additional securities to which the Optionee is entitled by reason of the
Optionee's ownership of the shares acquired upon exercise of the Option shall
be immediately subject to the Right of First Refusal and any security interest
held by the Company with the same force and effect as the shares subject to the
Right of First Refusal and such security interest immediately before such
event.
14. REPRESENTATIONS AND WARRANTIES. In connection with the receipt
of the Option and any acquisition of shares upon the exercise thereof, the
Optionee hereby agrees, represents and warrants as follows:
14.1 The Optionee is acquiring the Option and will acquire
any shares of Stock upon exercise of the Option for the Optionee's own account,
and not on behalf of any other person or as a nominee, for investment and not
with a view to, or sale in connection with, any distribution of the Option or
such shares.
14.2 The Optionee was not presented with or solicited by
any form of general solicitation or general advertising, including, but not
limited to, any
12
<PAGE> 13
advertisement, article, notice, or other communication published in any
newspaper, magazine, or similar media, or broadcast over television, radio or
similar communications media, or presented at any seminar or meeting whose
attendees have been invited by any general solicitation or general advertising.
14.3 The Optionee has either (a) a preexisting personal or
business relationship with the Company or any of its officers, directors, or
controlling persons, consisting of personal or business contacts of a nature
and duration to enable the Optionee to be aware of the character, business
acumen and general business and financial circumstances of the person with whom
such relationship exists, or (b) such knowledge and experience in financial and
business matters (or has relied on the financial and business knowledge and
experience of the Optionee's professional advisor who is unaffiliated with and
who is not, directly or indirectly, compensated by the Company or any affiliate
or selling agent of the Company) as to make the Optionee capable of evaluating
the merits and risks of the Option and any investment in shares acquired
pursuant to the Option and to protect the Optionee's own interests in the
transaction, or (c) both such relationship and such knowledge and experience.
14.4 The Optionee understands that the Option and any
shares acquired upon exercise of the Option have not been qualified under the
Corporate Securities Law of 1968, as amended, of the State of California by
reason of a specific exemption therefrom, which exemption depends upon, among
other things, the bona fide nature of the Optionee's representations as
expressed herein. The Optionee understands that the Company is relying on the
Optionee's representations and warrants that the Company is entitled to rely on
such representations and that such reliance is reasonable.
15. LEGENDS. The Company may at any time place legends
referencing the Right of First Refusal and any applicable federal, state or
foreign securities law restrictions on all certificates representing shares of
stock subject to the provisions of this Option Agreement. The Optionee shall,
at the request of the Company, promptly present to the Company any and all
certificates representing shares acquired pursuant to the Option in the
possession of the Optionee in order to carry out the provisions of this
Section. Unless otherwise specified by the Company, legends placed on such
certificates may include, but shall not be limited to, the following:
15.1 "THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT
BE SOLD, TRANSFERRED, ASSIGNED OR HYPOTHECATED UNLESS THERE IS AN EFFECTIVE
REGISTRATION STATEMENT UNDER SUCH ACT COVERING SUCH SECURITIES, THE SALE IS
MADE IN ACCORDANCE WITH RULE 144 OR RULE 701 UNDER THE ACT, OR THE COMPANY
RECEIVES AN OPINION OF COUNSEL FOR THE HOLDER OF THESE SECURITIES REASONABLY
SATISFACTORY TO THE COMPANY, STATING THAT SUCH SALE, TRANSFER, ASSIGNMENT OR
HYPOTHECATION IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY
REQUIREMENTS OF SUCH ACT."
13
<PAGE> 14
15.2 Any legend required to be placed thereon by the
Commissioner of Corporations of the State of California.
15.3 "THE SHARES REPRESENTED BY THIS CERTIFICATE ARE
SUBJECT TO A RIGHT OF FIRST REFUSAL OPTION IN FAVOR OF THE CORPORATION OR ITS
ASSIGNEE SET FORTH IN AN AGREEMENT BETWEEN THE CORPORATION AND THE REGISTERED
HOLDER, OR SUCH HOLDER'S PREDECESSOR IN INTEREST, A COPY OF WHICH IS ON FILE AT
THE PRINCIPAL OFFICE OF THIS CORPORATION."
16. PUBLIC OFFERING. The Optionee hereby agrees that in the event
of any underwritten public offering of stock, including an initial public
offering of stock, made by the Company pursuant to an effective registration
statement filed under the Securities Act, the Optionee shall not offer, sell,
contract to sell, pledge, hypothecate, grant any option to purchase or make any
short sale of, or otherwise dispose of any shares of stock of the Company or
any rights to acquire stock of the Company for such period of time from and
after the effective date of such registration statement as may be established
by the underwriter for such initial public offering; provided, however, that
such period of time shall not exceed one hundred eighty (180) days from the
effective date of the registration statement to be filed in connection with
such initial public offering. The foregoing limitation shall not apply to
shares registered in the initial public offering under the Securities Act. The
foregoing limitation shall remain in effect for the two (2) year period
immediately following the effective date of the Company's initial public
offering and shall thereafter terminate and cease to have any force or effect.
The Optionee shall be subject to this Section provided and only if the officers
and directors of the Company are also subject to similar arrangements.
17. BINDING EFFECT. Subject to the restrictions on transfer set
forth herein, this Option Agreement shall inure to the benefit of and be
binding upon the parties hereto and their respective heirs, executors,
administrators, successors and assigns.
18. TERMINATION OR AMENDMENT. The Board may terminate or amend
the Plan or the Option at any time; provided, however, that except as provided
in Section 8.2 in connection with a Transfer of Control, no such termination or
amendment may adversely affect the Option or any unexercised portion hereof
without the consent of the Optionee unless such termination or amendment is
necessary to comply with any applicable law or government regulation. No
amendment or addition to this Option Agreement shall be effective unless in
writing.
19. INTEGRATED AGREEMENT. This Option Agreement constitutes the
entire understanding and agreement of the Optionee and the Participating
Company Group with respect to the subject matter contained herein and there are
no agreements, understandings, restrictions, representations, or warranties
among the Optionee and the Participating Company Group with respect to such
subject matter other than those as set forth or provided for herein or therein.
To the extent contemplated herein or therein, the provisions of this Option
Agreement shall survive any exercise of the Option and shall remain in full
force and effect.
14
<PAGE> 15
20. APPLICABLE LAW. This Option Agreement shall be governed by
the laws of the State of California as such laws are applied to agreements
between California residents entered into and to be performed entirely within
the State of California.
TELESEND, INC.
By:_______________________________
Title: ___________________________
The Optionee represents that the Optionee is familiar with the terms
and provisions of this Option Agreement, including the Right of First Refusal
set forth in Section 11 and hereby accepts the Option subject to all of the
terms and provisions thereof. The Optionee hereby agrees to accept as binding,
conclusive and final all decisions or interpretations of the Board upon any
questions arising under this Option Agreement. The undersigned acknowledges
receipt of a copy of the Plan.
OPTIONEE
Date:__________________________ __________________________________
15
<PAGE> 1
EXHIBIT 99.4
MEMORANDUM
TO: Holders of Telesend, Inc. Stock Options
FROM: Cisco Systems, Inc.
DATE: March 3, 1997
RE: Assumption of Stock Options
_________________________________________________________________
As you know, Telesend, Inc. ("Telesend") was recently acquired
by Cisco Systems, Inc. ("Cisco") through a merger effected on March 3, 1997
(the "Merger").
In connection with this transaction, Cisco has assumed all of
your outstanding Telesend stock options so that those options now cover shares
of Cisco common stock. Several additional changes to your options were also
made as part of the assumption process. These changes are set forth in the
Stock Option Assumption Agreement attached hereto and may be summarized as
follows:
1. The number of shares of Cisco common stock subject to
your option has been adjusted to reflect the ratio at which your
shares of Telesend common stock were exchanged for shares of Cisco
common stock in the merger. The ratio was 0.066894 of a share of
Cisco common stock for each Telesend share (the "Exchange Ratio"). As
a result, the number of Cisco shares now subject to your option is
equal to the number of Telesend shares that were subject to your
option immediately before the Merger, multiplied by the Exchange Ratio
and rounded down to the next whole share.
2. The aggregate exercise price payable for the shares
of Cisco common stock now subject to your option is the same as the
price that was in effect for the shares of Telesend common stock
purchasable under your option immediately prior to the Merger.
However, the exercise price per share has been adjusted to reflect the
Exchange Ratio. Accordingly, the exercise price per share in effect
under your option immediately before the Merger has been divided by
0.066894 to establish the price per share payable for the Cisco common
stock.
<PAGE> 2
3. No change has been made to the vesting schedule in
effect for your option. Your Cisco option will continue to vest in
accordance with the same installment vesting schedule in effect under
your Telesend option, with the number of Cisco shares subject to each
such installment adjusted to reflect the Exchange Ratio. However, you
will now earn vesting credit not only for the period you continue in
employment or service with Telesend after the Merger but also for any
period of service you may complete with Cisco or any other Cisco
subsidiary should you subsequently transfer within the Cisco
organization.
Attached are two (2) copies of the Stock Option Assumption
Agreement pursuant to which Cisco has assumed your Telesend options with the
adjustments discussed above. Please review the agreement carefully so that you
understand your rights to acquire Cisco shares. You should contact David
Martin of Cisco at (408) 526-4000 if you have any questions. After you have
reviewed the agreement, please sign one copy and return it to Mr. Martin in the
pre-addressed envelope enclosed.
The other copy of the Stock Option Assumption Agreement should
be attached to your existing option documentation 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> 3
STOCK OPTION ASSUMPTION AGREEMENT
OPTIONEE: 1~
NUMBER OF TELESEND SHARES: 2~
GRANT DATE: 4~
ORIGINAL EXERCISE PRICE PER SHARE: $ 0.40
STOCK OPTION ASSUMPTION AGREEMENT issued as of the 3rd day of
March 1997 by Cisco Systems, Inc., a California corporation ("Cisco").
WHEREAS, the undersigned Optionee was previously granted the
stock option described above (the "Option") to purchase shares of the common
stock of Telesend, Inc., a California corporation ("Telesend"), pursuant to the
Telesend 1995 Stock Option Plan (the "Plan"), and such option is evidenced by a
Stock Option Agreement (the "Option Agreement") between Telesend and Optionee.
WHEREAS, Telesend has been acquired by Cisco (the "Merger"),
pursuant to (i) the Agreement and Plan of Reorganization dated as of February
18, 1997, by and among Cisco and Telesend and (ii) the Agreement of Merger
between Cisco and Telesend dated as of March 3, 1997 (collectively the "Merger
Agreements").
WHEREAS, the provisions of the Merger Agreements require Cisco
to assume all obligations of Telesend under all options outstanding under the
Plan at the consummation of the Merger and to issue the holder of each
outstanding option an agreement evidencing the assumption of such option.
WHEREAS, pursuant to the provisions of the Merger Agreements,
the exchange ratio in effect for the Merger is 0.066894 of a share of Cisco
common stock ("Cisco Stock") for each outstanding share of Telesend common
stock (the "Exchange Ratio").
WHEREAS, this Agreement is to become effective immediately
upon the consummation of the Merger (the "Effective Time") in order to reflect
certain adjustments to the Optionee's outstanding options under the Plan which
have become necessary by reason of the assumption of those options by Cisco in
connection with the Merger.
NOW, THEREFORE, it is hereby agreed as follows:
1. Cisco hereby assumes, as of the Effective Time, all
the duties and obligations of Telesend under the Option and hereby agrees to
issue up to the number of shares of Cisco common stock indicated below upon (i)
the exercise of that Option in accordance with the provisions of the Option
Agreement (as supplemented hereby) and (ii) the payment of the adjusted
exercise price per share set forth below.
3.
<PAGE> 4
<TABLE>
<CAPTION>
TELESEND CISCO
STOCK OPTION ASSUMED OPTION
# OF SHARES # SHARES
TELESEND EXERCISE CISCO ADJUSTED EXERCISE
COMMON STOCK PRICE/SHARE COMMON STOCK PRICE/SHARE
------------ ----------- ------------ -----------
<S> <C> <C> <C>
2~ $ 0.40 3~ $
</TABLE>
2. The number of shares of Cisco Stock purchasable under
the Option hereby assumed (the "Assumed Option") and the exercise price per
share payable thereunder have been adjusted to reflect the Exchange Ratio at
which the outstanding shares of Telesend common stock have been converted into
shares of Cisco Stock on the consummation of the Merger. The intent of such
adjustments is to assure that spread between the aggregate fair market value of
the shares of Cisco Stock purchasable under the Assumed Option and the
aggregate exercise price as adjusted hereunder payable for such shares will,
immediately after the Merger, substantially equal the spread which existed
immediately prior to the Merger between the then aggregate fair market value of
the Telesend common stock subject to the Option as hereby assumed and the
aggregate exercise price in effect at such time under the Option. Such
adjustments are also designed to preserve, on a per share basis immediately
after the Merger, the same ratio of fair market value per option share to
exercise price per share which existed under the Option immediately prior to
the Merger.
3. All references to the "Company" in the Option
Agreement and in the Plan (as incorporated into such Option Agreement) shall be
deemed to refer to Cisco, all references to "Stock" shall be deemed to refer to
the shares of Cisco Stock, and all references to the "Committee" and "Board"
shall mean the Compensation Committee of the Cisco Board of Directors, and the
Cisco Board of Directors, respectively. For purposes of determining the
holding period of any shares of Cisco common stock delivered in payment of the
exercise price of the Assumed Option, the period for which such shares were
held as Telesend common stock prior to the Merger shall be taken into account.
4. The Assumed Option shall continue to have a maximum
ten (10)-year term measured from the original grant date of the Option, and all
references to the "Date of Option Grant" in the Option Agreement shall continue
to relate to that original grant date. The Assumed Option, however, shall be
subject to earlier termination in accordance with Paragraph 7 of the Option
Agreement should the Optionee's Service with Cisco terminate. However, for all
purposes of the Option Agreement, the Optionee shall be deemed to continue in
"Service" status for so long as such individual continues in the service
4.
<PAGE> 5
of Cisco or any Cisco parent or subsidiary corporation now or hereafter
existing, including (without limitation) Telesend, as an employee, non-
employee member of the board of directors or independent consultant or advisor.
5. All notices to the Company required or permitted to
be given to the Company pursuant to the provisions of the Option Agreement
shall be given to Cisco at the following address:
Cisco Systems, Inc.
170 West Tasman Drive
San Jose, CA 95134
Attention: Mr. David Martin
6. Except to the extent specifically modified by this
Stock Option Assumption Agreement, all of the terms and conditions of the
Option Agreement as in effect immediately prior to the Merger shall continue in
full force and effect and shall not in any way be amended, revised or otherwise
affected by this Stock Option Assumption Agreement.
IN WITNESS WHEREOF, Cisco has caused this Stock Option
Assumption Agreement to be executed on its behalf by its duly- authorized
officer as of the 3rd day of March 1997.
CISCO SYSTEMS, INC.
By: ________________________________
Title: _____________________________
5.
<PAGE> 6
ACKNOWLEDGMENT
The undersigned acknowledges receipt of the foregoing Stock
Option Assumption Agreement and understands that all rights and liabilities
with respect to the Option as assumed by Cisco Systems, Inc. are as set forth
in the Option Agreement, the Plan and such Stock Option Assumption Agreement.
______________________________
OPTIONEE
Dated: __________________
6.
