<PAGE> 1
As filed with the Securities and Exchange Commission on October 19, 1998
Registration No. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
CISCO SYSTEMS, INC.
(Exact name of issuer as specified in its charter)
CALIFORNIA 77-0059951
(State or other jurisdiction (IRS Employer Identification No.)
of incorporation or organization)
170 WEST TASMAN DRIVE, SAN JOSE, CALIFORNIA 95134-1706
(Address of principal executive offices) (Zip Code)
AMERICAN INTERNET CORPORATION
THIRD AMENDED 1996 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>
American Internet Corporation
Third Amended 1996 Stock Option Plan
Common Stock 94,809 shares $ 2.35 $ 222,801.15 $ 65.73
</TABLE>
================================================================================
(1) This Registration Statement shall also cover any additional shares of
Common Stock which become issuable under the American Internet
Corporation Third Amended 1996 Stock Option Plan by reason of any stock
dividend, stock split, recapitalization or other similar transaction
effected without the receipt of consideration which results in an
increase in the number of the Registrant's outstanding shares of Common
Stock.
(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 25,1998 filed with the Commission on September 25,
1998, pursuant to Section 13 of the Securities Exchange Act of
1934 (the "1934 Act").
(b) 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.
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.
1.
<PAGE> 3
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, including the exhibits thereto, which are incorporated
herein by reference pursuant to Item 3(b).
5.0 Opinion of Brobeck, Phleger & Harrison LLP.
23.1 Consent of Independent Accountants - PricewaterhouseCoopers
LLP
23.2 Consent of Brobeck, Phleger & Harrison LLP is contained in
Exhibit 5.
24.0 Power of Attorney. Reference is made to page II-5 of this
Registration Statement.
99.1 American Internet Corporation Third Amended 1996 Stock Option
Plan.
99.2 Form of Incentive Stock Option Agreement in connection with
the American Internet Corporation Third Amended 1996 Stock
Option Plan.
99.3 Form of Non-Qualified Stock Option Agreement in connection
with the American Internet Corporation Third Amended 1996
Stock Option Plan.
99.4 Form of Acceleration Waiver Letter.
99.5 Form of 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 American Internet Corporation Third
Amended 1996 Stock Option Plan.
B. The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the 1933 Act, each filing of the Registrant's
annual report pursuant to Section 13(a) or Section 15(d) of the 1934 Act that is
incorporated by reference into the Registration Statement shall be deemed to be
a new Registration Statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
C. Insofar as indemnification for liabilities arising under the 1933 Act
may be permitted to directors, officers or controlling persons of the Registrant
pursuant to the indemnity provisions summarized in Item 6 or otherwise, the
Registrant has been informed that, in the opinion of the Commission, such
indemnification is against public policy as expressed in the 1933 Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the 1933 Act and will be governed by the final
adjudication of such issue.
2.
<PAGE> 4
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 19th day of October , 1998.
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> <C>
/s/ John T. Chambers President, Chief Executive October 19, 1998
- ----------------------------- Officer and Director (Principal
John T. Chambers Executive Officer)
/s/ Larry R. Carter Senior Vice President, Finance and October 19, 1998
- ----------------------------- Administration, Chief Financial
Larry R. Carter Officer and Secretary
(Principal Financial and Accounting Officer)
Chairman of the Board October , 1998
- ---------------------------- and Director
John P. Morgridge
</TABLE>
3.
<PAGE> 5
<TABLE>
<CAPTION>
Signatures Title Date
- ---------- ----- ----
<S> <C> <C>
/s/ Donald T. Valentine Director October 19, 1998
- ----------------------------
Donald T. Valentine
/s/ James F. Gibbons Director October 19, 1998
- ----------------------------
James F. Gibbons
/s/ Robert L. Puette Director October 19, 1998
- ----------------------------
Robert L. Puette
/s/ Masayoshi Son Director October 19, 1998
- ----------------------------
Masayoshi Son
/s/ Steven M. West Director October 19, 1998
- ----------------------------
Steven M. West
/s/ Edward Kozel Director October 19, 1998
- ----------------------------
Edward Kozel
/s/ Arun Sarin Director October 19, 1998
- ----------------------------
Arun Sarin
/s/ Carol Bartz Director October 19, 1998
- ----------------------------
Carol Bartz
/s/ Mary Cirillo Director October 19, 1998
- ----------------------------
Mary Cirillo
/s/ James C. Morgan Director October 19, 1998
- ----------------------------
James C. Morgan
</TABLE>
4.
<PAGE> 6
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
EXHIBITS
TO
FORM S-8
UNDER
SECURITIES ACT OF 1933
CISCO SYSTEMS, INC.
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, including the exhibits thereto, which are incorporated
herein by reference pursuant to Item 3(b).
5.0 Opinion of Brobeck, Phleger & Harrison LLP.
23.1 Consent of Independent Accountants - PricewaterhouseCoopers
LLP
23.2 Consent of Brobeck, Phleger & Harrison LLP is contained in
Exhibit 5.
24.0 Power of Attorney. Reference is made to page II-5 of this
Registration Statement.
99.1 American Internet Corporation Third Amended 1996 Stock Option
Plan.
99.2 Form of Incentive Stock Option Agreement in connection with
the American Internet Corporation Third Amended 1996 Stock
Option Plan.
99.3 Form of Non-Qualified Stock Option Agreement in connection
with the American Internet Corporation Third Amended 1996
Stock Option Plan.
99.4 Form of Acceleration Waiver Letter.
99.5 Form of Option Assumption Agreement.
</TABLE>
<PAGE> 1
October 19, 1998
Cisco Systems, Inc.
170 West Tasman Drive
San Jose, CA 95134-1706
Re: Cisco Systems, Inc. Registration Statement for
Offering of 94,809 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 94,809 shares of the common
stock ("Common Stock") of Cisco Systems, Inc. (the "Company") issuable under the
American Internet Corporation Third Amended 1996 Stock Option Plan (the "Plan")
as assumed by the Company. We advise you that, in our opinion, when such shares
have been issued and sold pursuant to the applicable provisions of the Plan and
in accordance with the Registration Statement, such shares will be validly
issued, fully paid and nonassessable shares of Common Stock.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement.
Very truly yours,
/s/ Brobeck, Phleger & Harrison LLP
BROBECK, PHLEGER & HARRISON LLP
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the Registration Statement on
Form S-8 of Cisco Systems, Inc. for the registration of 94,809 common shares
pursuant to the acquisition of American Internet Corporation, of our reports
dated August 4, 1998, on our audits of the consolidated financial statements and
financial statement schedule of Cisco Systems, Inc. as of July 25, 1998 and July
26, 1997, and the three (3) years ended July 25, 1998 which reports are included
in the Company's 1998 Annual Report on Form 10-K, filed with the Securities and
Exchange Commission.
/s/ PricewaterhouseCoopers LLP
San Jose, California
October 19, 1998
<PAGE> 1
EXHIBIT 99.1
AMERICAN INTERNET CORPORATION THIRD AMENDED 1996 STOCK OPTION PLAN
<PAGE> 2
AMERICAN INTERNET CORPORATION
THIRD AMENDED 1996 STOCK PLAN
1. PURPOSE. The purpose of the American Internet Corporation 1996 Stock
Plan (the "Plan") is to encourage key employees of American Internet Corporation
(the "Company") and of any present or future parent or subsidiary of the Company
(collectively, "Related Corporations") and other individuals who render services
to the Company or a Related Corporation, by providing opportunities to
participate in the ownership of the Company and its future growth through (a)
the grant of options which qualify as "incentive stock options" ("ISOs") under
Section 422(b) of the Internal Revenue Code of 1986, as amended (the "Code");
(b) the grant of options which do not qualify as ISOs ("Non-Qualified Options");
(c) awards of stock in the Company ("Awards"); and (d) opportunities to make
direct purchases of stock in the Company ("Purchases"). Both ISOs and
Non-Qualified Options are referred to hereafter individually as an "Option" and
collectively as "Options." Options, Awards and authorizations to make Purchases
are referred to hereafter collectively as "Stock Rights." As used herein, the
terms "parent" and "subsidiary" mean "parent corporation" and "subsidiary
corporation," respectively, as those terms are defined in Section 424 of the
Code.
2. ADMINISTRATION OF THE PLAN.
A. BOARD OR COMMITTEE ADMINISTRATION. The Plan shall be administered
by the Board of Directors of the Company (the "Board") or by a committee
appointed by the Board (the "Committee"); provided that the Plan shall be
administered: (i) to the extent required by applicable regulations under Section
162(m) of the Code, by two or more "outside directors" (as defined in applicable
regulations thereunder) and (ii) to the extent required by Rule 16b-3
promulgated under the Securities Exchange Act of 1934 or any successor provision
("Rule 16b-3"), by a disinterested administrator or administrators within the
meaning of Rule 16b-3. Hereinafter, all references in this Plan to the
"Committee" shall mean the Board if no Committee has been appointed. Subject to
ratification of the grant or authorization of each Stock Right by the Board (if
so required by applicable state law), and subject to the terms of the Plan, the
Committee shall have the authority to (i) determine to whom (from among the
class of employees eligible under paragraph 3 to receive ISOs) ISOs shall be
granted, and to whom (from among the class of individuals and entities eligible
under paragraph 3 to receive Non-Qualified Options and Awards and to make
Purchases) Non-Qualified Options, Awards and authorizations to make Purchases
may be granted; (ii) determine the time or times at which Options or Awards
shall be granted or Purchases made; (iii) determine the purchase price of shares
subject to each Option or Purchase, which prices shall not be less than the
minimum price specified in paragraph 6; (iv) determine whether each Option
granted shall be an ISO or a Non-Qualified Option; (v) determine (subject to
paragraph 7) the time or times when each Option shall become exercisable and the
duration of the exercise period; (vi) extend
<PAGE> 3
the period during which outstanding Options may be exercised; (vii) determine
whether restrictions such as repurchase options are to be imposed on shares
subject to Options, Awards and Purchases and the nature of such restrictions, if
any, and (viii) interpret the Plan and prescribe and rescind rules and
regulations relating to it. If the Committee determines to issue a Non-Qualified
Option, it shall take whatever actions it deems necessary, under Section 422 of
the Code and the regulations promulgated thereunder, to ensure that such Option
is not treated as an ISO. The interpretation and construction by the Committee
of any provisions of the Plan or of any Stock Right granted under it shall be
final unless otherwise determined by the Board. The Committee may from time to
time adopt such rules and regulations for carrying out the Plan as it may deem
advisable. No member of the Board or the Committee shall be liable for any
action or determination made in good faith with respect to the Plan or any Stock
Right granted under it.
B. COMMITTEE ACTIONS. The Committee may select one of its members as
its chairman, and shall hold meetings at such time and places as it may
determine. A majority of the Committee shall constitute a quorum and acts of a
majority of the members of the Committee at a meeting at which a quorum is
present, or acts reduced to or approved in writing by all the members of the
Committee (if consistent with applicable state law), shall be the valid acts of
the Committee. From time to time the Board may increase the size of the
Committee and appoint additional members thereof, remove members (with or
without cause) and appoint new members in substitution therefor, fill vacancies
however caused, or remove all members of the Committee and thereafter directly
administer the Plan.
C. GRANT OF STOCK RIGHTS TO BOARD MEMBERS. Subject to the provisions
of the first sentence of paragraph 2(A) above, if applicable, Stock Rights may
be granted to members of the Board. All grants of Stock Rights to members of the
Board shall in all other respects be made in accordance with the provisions of
this Plan applicable to other eligible persons. Consistent with the provisions
of the first sentence of Paragraph 2(A) above, members of the Board who either
(i) are eligible to receive grants of Stock Rights pursuant to the Plan or (ii)
have been granted Stock Rights may vote on any matters affecting the
administration of the Plan or the grant of any Stock Rights pursuant to the
Plan, except that no such member shall act upon the granting to himself or
herself of Stock Rights, but any such member may be counted in determining the
existence of a quorum at any meeting of the Board during which action is taken
with respect to the granting to such member of Stock Rights.
3. ELIGIBLE EMPLOYEES AND OTHERS. ISOs may be granted only to employees
of the Company or any Related Corporation. Non-Qualified Options, Awards and
authorizations to make Purchases may be granted to any employee, officer or
director (whether or not also an employee) or consultant of the Company or any
Related Corporation. The Committee may take into consideration a recipient's
individual circumstances in determining whether to grant a Stock Right. The
granting of any Stock Right to any individual or entity shall neither entitle
that individual or entity to, nor disqualify such individual or entity from,
participation in any other grant of Stock Rights.
2
<PAGE> 4
4. STOCK. The stock subject to Stock Rights shall be authorized but
unissued shares of Common Stock of the Company, par value $.0001 per share (the
"Common Stock"), or shares of Common Stock reacquired by the Company in any
manner. The aggregate number of shares which may be issued pursuant to the Plan
is 2,446,250, subject to adjustment as provided in paragraph 13. If any Stock
Right granted under the Plan shall expire or terminate for any reason without
having been exercised in full or shall cease for any reason to be exercisable in
whole or in part or shall be repurchased by the Company, the shares of Common
Stock subject to such Stock Right shall again be available for grants of Stock
Rights under the Plan.
No employee of the Company or any Related Corporation may be granted
Options to acquire, in the aggregate, more than 500,000 shares of Common Stock
under the Plan during any fiscal year. If any Option granted under the Plan
shall expire or terminate for any reason without having been exercised in full
or shall cease for any reason to be exercisable in whole or in part or shall be
repurchased by the Company, the shares subject to such Option shall be included
in the determination of the aggregate number of shares of Common Stock deemed to
have been granted to such employee under the Plan.
5. GRANTING OF STOCK RIGHTS. Stock Rights may be granted under the Plan
at any time on or after February 5, 1996 and prior to February 5, 2006. The date
of grant of a Stock Right under the Plan will be the date specified by the
Committee at the time it grants the Stock Right; provided, however, that such
date shall not be prior to the date on which the Committee acts to approve the
grant.
6. MINIMUM OPTION PRICE; ISO LIMITATIONS.
A. PRICE FOR NON-QUALIFIED OPTIONS, AWARDS AND PURCHASES. The
exercise price per share specified in the agreement relating to each
Non-Qualified Option granted, and the purchase price per share of stock granted
in any Award or authorized as a Purchase, under the Plan shall in no event be
less than the minimum legal consideration required therefor under the laws of
any jurisdiction in which the Company or its successors in interest may be
organized.
B. PRICE FOR ISOS. The exercise price per share specified in the
agreement relating to each ISO granted under the Plan shall not be less than the
fair market value per share of Common Stock on the date of such grant. In the
case of an ISO to be granted to an employee owning stock possessing more than
ten percent (10%) of the total combined voting power of all classes of stock of
the Company or any Related Corporation, the price per share specified in the
agreement relating to such ISO shall not be less than one hundred ten percent
(110%) of the fair market value per share of Common Stock on the date of grant.
For purposes of determining stock ownership under this paragraph, the rules of
Section 424(d) of the Code shall apply.
3
<PAGE> 5
C. $100,000 ANNUAL LIMITATION ON ISO VESTING. Each eligible employee
may be granted Options treated as ISOs only to the extent that, in the aggregate
under this Plan and all incentive stock option plans of the Company and any
Related Corporation, ISOs do not become exercisable for the first time by such
employee during any calendar year with respect to stock having a fair market
value (determined at the time the ISOs were granted) in excess of $100,000. The
Company intends to designate any Options granted in excess of such limitation as
Non-Qualified Options.
D. DETERMINATION OF FAIR MARKET VALUE. If, at the time an Option is
granted under the Plan, the Company's Common Stock is publicly traded, "fair
market value" shall be determined as of the date of grant or, if the prices or
quotes discussed in this sentence are unavailable for such date, the last
business day for which such prices or quotes are available prior to the date of
grant and shall mean (i) the average (on that date) of the high and low prices
of the Common Stock on the principal national securities exchange on which the
Common Stock is traded, if the Common Stock is then traded on a national
securities exchange; or (ii) the last reported sale price (on that date) of the
Common Stock on the Nasdaq National Market, if the Common Stock is not then
traded on a national securities exchange; or (iii) the closing bid price (or
average of bid prices) last quoted (on that date) by an established quotation
service for over-the-counter securities, if the Common Stock is not reported on
the Nasdaq National Market. If the Common Stock is not publicly traded at the
time an Option is granted under the Plan, "fair market value" shall mean the
fair value of the Common Stock as determined by the Committee after taking into
consideration all factors which it deems appropriate, including, without
limitation, recent sale and offer prices of the Common Stock in private
transactions negotiated at arm's length.
7. OPTION DURATION. Subject to earlier termination as provided in
paragraphs 9 and 10 or in the agreement relating to such Option, each Option
shall expire on the date specified by the Committee, but not more than (i) ten
years from the date of grant in the case of Options generally and (ii) five
years from the date of grant in the case of ISOs granted to an employee owning
stock possessing more than ten percent (10%) of the total combined voting power
of all classes of stock of the Company or any Related Corporation, as determined
under paragraph 6(B). Subject to earlier termination as provided in paragraphs 9
and 10, the term of each ISO shall be the term set forth in the original
instrument granting such ISO, except with respect to any part of such ISO that
is converted into a Non-Qualified Option pursuant to paragraph 16.
8. EXERCISE OF OPTION. Subject to the provisions of paragraphs 9 through
12, each Option granted under the Plan shall be exercisable as follows:
A. VESTING. The Option shall either be fully exercisable on the date
of grant or shall become exercisable thereafter in such installments as the
Committee may specify.
4
<PAGE> 6
B. FULL VESTING OF INSTALLMENTS. Once an installment becomes
exercisable it shall remain exercisable until expiration or termination of the
Option, unless otherwise specified by the Committee.
C. PARTIAL EXERCISE. Each Option or installment may be exercised at
any time or from time to time, in whole or in part, for up to the total number
of shares with respect to which it is then exercisable.
D. ACCELERATION OF VESTING. The Committee shall have the right to
accelerate the date that any installment of any Option becomes exercisable;
provided that the Committee shall not, without the consent of an optionee,
accelerate the permitted exercise date of any installment of any Option granted
to any employee as an ISO (and not previously converted into a Non-Qualified
Option pursuant to paragraph 16) if such acceleration would violate the annual
vesting limitation contained in Section 422(d) of the Code, as described in
paragraph 6(C).
9. TERMINATION OF EMPLOYMENT. Unless otherwise specified in the
agreement relating to such ISO, if an ISO optionee ceases to be employed by the
Company and all Related Corporations other than by reason of death or disability
as defined in paragraph 10, no further installments of his or her ISOs shall
become exercisable, and his or her ISOs shall terminate on the earlier of (a)
ninety (90) days after the date of termination of his or her employment, or (b)
their specified expiration dates, except to the extent that such ISOs (or
unexercised installments thereof) have been converted into Non-Qualified Options
pursuant to paragraph 16. For purposes of this paragraph 9, employment shall be
considered as continuing uninterrupted during any bona fide leave of absence
(such as those attributable to illness, military obligations or governmental
service) provided that the period of such leave does not exceed 90 days or, if
longer, any period during which such optionee's right to reemployment is
guaranteed by statute. Notwithstanding the preceding sentence, a bona fide leave
of absence in excess of 90 days shall not be considered an interruption of
employment, provided that the optionee obtains the written approval of the
Committee for such leave of absence, and provided further, that such written
approval contractually obligates the Company or any Related Corporation to
continue the employment of the optionee after the approved leave of absence.
ISOs granted under the Plan shall not be affected by any change of employment
within or among the Company and Related Corporations, so long as the optionee
continues to be an employee of the Company or any Related Corporation. Nothing
in the Plan shall be deemed to give any grantee of any Stock Right the right to
be retained in employment or other service by the Company or any Related
Corporation for any period of time.
10. DEATH; DISABILITY.
A. DEATH. If an ISO optionee ceases to be employed by the Company and
all Related Corporations by reason of his or her death, any ISO owned by such
optionee may be exercised, to the extent otherwise exercisable on the date of
death, by the
5
<PAGE> 7
estate, personal representative or beneficiary who has acquired the ISO by will
or by the laws of descent and distribution, until the earlier of (i) the
specified expiration date of the ISO or (ii) 365 days from the date of the
optionee's death.
B. DISABILITY. If an ISO optionee ceases to be employed by the
Company and all Related Corporations by reason of his or her disability, such
optionee shall have the right to exercise any ISO held by him or her on the date
of termination of employment, for the number of shares for which he or she could
have exercised it on that date, until the earlier of (i) the specified
expiration date of the ISO or (ii) 180 days from the date of the termination of
the optionee's employment. For the purposes of the Plan, the term "disability"
shall mean "permanent and total disability" as defined in Section 22(e)(3) of
the Code or any successor statute.
11. ASSIGNABILITY. No Stock Right shall be assignable or transferable by
the grantee except by will, by the laws of descent and distribution or, in the
case of Non-Qualified Options only, pursuant to a valid domestic relations
order. Except as set forth in the previous sentence, during the lifetime of a
grantee each Stock Right shall be exercisable only by such grantee.
12. TERMS AND CONDITIONS OF OPTIONS. Options shall be evidenced by
instruments (which need not be identical) in such forms as the Committee may
from time to time approve. Such instruments shall conform to the terms and
conditions set forth in paragraphs 6 through 11 hereof and may contain such
other provisions as the Committee deems advisable which are not inconsistent
with the Plan, including restrictions applicable to shares of Common Stock
issuable upon exercise of Options. The Committee may specify that any
Non-Qualified Option shall be subject to the restrictions set forth herein with
respect to ISOs, or to such other termination and cancellation provisions as the
Committee may determine. The Committee may from time to time confer authority
and responsibility on one or more of its own members and/or one or more officers
of the Company to execute and deliver such instruments. The proper officers of
the Company are authorized and directed to take any and all action necessary or
advisable from time to time to carry out the terms of such instruments.
13. ADJUSTMENTS. Upon the occurrence of any of the following events, an
optionee's rights with respect to Options granted to such optionee hereunder
shall be adjusted as hereinafter provided, unless otherwise specifically
provided in the written agreement between the optionee and the Company relating
to such Option:
A. STOCK DIVIDENDS AND STOCK SPLITS. If the shares of Common Stock
shall be subdivided or combined into a greater or smaller number of shares or if
the Company shall issue any shares of Common Stock as a stock dividend on its
outstanding Common Stock, the number of shares of Common Stock deliverable upon
the exercise of Options shall be appropriately increased or decreased
proportionately, and appropriate adjustments shall be made in the purchase price
per share to reflect such subdivision, combination or stock dividend.
6
<PAGE> 8
B. CONSOLIDATIONS OR MERGERS. (i) If the Company is to be
consolidated with or acquired by another entity in a merger or other
reorganization in which the holders of the outstanding voting stock of the
Company immediately preceding the consummation of such event, shall, immediately
following such event, hold, as a group, directly or indirectly, less than a
majority of the voting securities of the surviving or successor entity, or in
the event of a sale of all or substantially all of the Company's assets or
otherwise (each, an "Acquisition"), the Committee or the board of directors of
any entity assuming the obligations of the Company hereunder (the "Successor
Board"), shall, as to outstanding Options, make appropriate provision for the
continuation of such Options by substituting on an equitable basis for the
shares then subject to such Options either (a) the consideration payable with
respect to the outstanding shares of Common Stock in connection with the
Acquisition, (b) shares of stock of the surviving or successor corporation or
its direct or indirect parent corporation or (c) such other securities as the
Successor Board deems appropriate, the fair market value of which shall not
materially exceed the fair market value of the shares of Common Stock subject to
such Options immediately preceding the Acquisition.
(ii) Notwithstanding the foregoing, upon an Acquisition, fifty
percent (50%) of the unvested portion of any Option held by the Optionee on the
day prior to the consummation of the Acquisition shall become fully vested and
exercisable immediately prior to the consummation of the Acquisition.
(iii) Following any acceleration of vesting pursuant to the
preceding paragraph, the remaining unvested portion of any Option shall continue
to vest according to the vesting schedule contained in the option agreement
relating to such option; provided that notwithstanding anything to the contrary
contained herein, in the event that an Optionee is terminated without cause
within the twelve months period following the date of the Acquisition, 100% of
the remaining unvested portion of any Option held by such Optionee shall become
fully vested and exercisable on the date of such termination. For the purposes
hereof, "cause" shall mean: (a) the commission by the Optionee of an act of
fraud, embezzlement or any other action with the intent to injure materially the
successor or surviving corporation or it's direct or indirect parent corporation
or (b) the commission by the Optionee of a felony.
(iv) Paragraph 13 B (ii) was amended on August 16, 1996 to read as
it currently reads. Prior to such amendment such paragraph read as follows:
"Notwithstanding the foregoing, upon an Acquisition, the unvested portion of any
Option held by any Optionee which would otherwise vest within the twelve month
period following the date of the Acquisition shall become fully vested and
exercisable immediately prior to the consummation of the Acquisition." If an
Acquisition is intended to be accounted for as a pooling of interests for
financial accounting purposes and if adoption of the August 16, 1996 amendment
to this Plan would preclude accounting for an Acquisition as a pooling of
interests for financial accounting purposes then such
7
<PAGE> 9
amendment shall be rescinded and the pre-amendment language of Paragraph 13 B
(ii) shall govern.
C. RECAPITALIZATION OR REORGANIZATION. In the event of a
recapitalization or reorganization of the Company (other than a transaction
described in subparagraph B above) pursuant to which securities of the Company
or of another corporation are issued with respect to the outstanding shares of
Common Stock, an optionee upon exercising an Option shall be entitled to receive
for the purchase price paid upon such exercise the securities he or she would
have received if he or she had exercised such Option prior to such
recapitalization or reorganization.
D. MODIFICATION OF ISOS. Notwithstanding the foregoing, any
adjustments made pursuant to subparagraphs A, B or C with respect to ISOs shall
be made only after the Committee, after consulting with counsel for the Company,
determines whether such adjustments would constitute a "modification" of such
ISOs (as that term is defined in Section 424 of the Code) or would cause any
adverse tax consequences for the holders of such ISOs. If the Committee
determines that such adjustments made with respect to ISOs would constitute a
modification of such ISOs or would cause adverse tax consequences to the
holders, it may refrain from making such adjustments.
E. DISSOLUTION OR LIQUIDATION. In the event of the proposed
dissolution or liquidation of the Company, each Option will terminate
immediately prior to the consummation of such proposed action or at such other
time and subject to such other conditions as shall be determined by the
Committee.
F. ISSUANCES OF SECURITIES. Except as expressly provided herein, no
issuance by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall affect, and no adjustment
by reason thereof shall be made with respect to, the number or price of shares
subject to Options. No adjustments shall be made for dividends paid in cash or
in property other than securities of the Company.
G. FRACTIONAL SHARES. No fractional shares shall be issued under the
Plan and the optionee shall receive from the Company cash in lieu of such
fractional shares.
H. ADJUSTMENTS. Upon the happening of any of the events described in
subparagraphs A, B or C above, the class and aggregate number of shares set
forth in paragraph 4 hereof that are subject to Stock Rights which previously
have been or subsequently may be granted under the Plan shall also be
appropriately adjusted to reflect the events described in such subparagraphs.
The Committee or the Successor Board shall determine the specific adjustments to
be made under this paragraph 13 and, subject to paragraph 2, its determination
shall be conclusive.
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<PAGE> 10
14. MEANS OF EXERCISING OPTIONS. An Option (or any part or installment
thereof) shall be exercised by giving written notice to the Company at its
principal office address, or to such transfer agent as the Company shall
designate. Such notice shall identify the Option being exercised and specify the
number of shares as to which such Option is being exercised, accompanied by full
payment of the purchase price therefor either (a) in United States dollars in
cash or by check, (b) at the discretion of the Committee, through delivery of
shares of Common Stock having a fair market value equal as of the date of the
exercise to the cash exercise price of the Option, (c) at the discretion of the
Committee, by delivery of the grantee's personal recourse note bearing interest
payable not less than annually at no less than 100% of the lowest applicable
Federal rate, as defined in Section 1274(d) of the Code, (d) at the discretion
of the Committee and consistent with applicable law, through the delivery of an
assignment to the Company of a sufficient amount of the proceeds from the sale
of the Common Stock acquired upon exercise of the Option and an authorization to
the broker or selling agent to pay that amount to the Company, which sale shall
be at the participant's direction at the time of exercise, or (e) at the
discretion of the Committee, by any combination of (a), (b), (c) and (d) above.
If the Committee exercises its discretion to permit payment of the exercise
price of an ISO by means of the methods set forth in clauses (b), (c), (d) or
(e) of the preceding sentence, such discretion shall be exercised in writing at
the time of the grant of the ISO in question. The holder of an Option shall not
have the rights of a shareholder with respect to the shares covered by such
Option until the date of issuance of a stock certificate to such holder for such
shares. Except as expressly provided above in paragraph 13 with respect to
changes in capitalization and stock dividends, no adjustment shall be made for
dividends or similar rights for which the record date is before the date such
stock certificate is issued.
15. TERM AND AMENDMENT OF PLAN. This Plan was adopted by the Board on
February 5, 1996, subject, with respect to the validation of ISOs granted under
the Plan, to approval of the Plan by the stockholders of the Company at the next
Meeting of Stockholders or, in lieu thereof, by written consent. If the approval
of stockholders is not obtained prior to February 5, 1997, any grants of ISOs
under the Plan made prior to that date will be rescinded. The Plan shall expire
at the end of the day on February 4, 2006 (except as to Options outstanding on
that date). Subject to the provisions of paragraph 5 above, Options may be
granted under the Plan prior to the date of stockholder approval of the Plan.
The Board may terminate or amend the Plan in any respect at any time, except
that, without the approval of the stockholders obtained within 12 months before
or after the Board adopts a resolution authorizing any of the following actions:
(a) the total number of shares that may be issued under the Plan may not be
increased (except by adjustment pursuant to paragraph 13); (b) the benefits
accruing to participants under the Plan may not be materially increased; (c) the
requirements as to eligibility for participation in the Plan may not be
materially modified; (d) the provisions of paragraph 3 regarding eligibility for
grants of ISOs may not be modified; (e) the provisions of paragraph 6(B)
regarding the exercise price at which shares may be offered pursuant to ISOs may
not be modified (except by adjustment pursuant to paragraph 13);
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<PAGE> 11
(f) the expiration date of the Plan may not be extended; and (g) the Board may
not take any action which would cause the Plan to fail to comply with Rule
16b-3. Except as otherwise provided in this paragraph 15, in no event may action
of the Board or stockholders alter or impair the rights of a grantee, without
such grantee's consent, under any Option previously granted to such grantee.
16. CONVERSION OF ISOS INTO NON-QUALIFIED OPTIONS. The Committee, at the
written request or with the written consent of any optionee, may in its
discretion take such actions as may be necessary to convert such optionee's ISOs
(or any installments or portions of installments thereof) that have not been
exercised on the date of conversion into Non-Qualified Options at any time prior
to the expiration of such ISOs, regardless of whether the optionee is an
employee of the Company or a Related Corporation at the time of such conversion.
Such actions may include, but shall not be limited to, extending the exercise
period or reducing the exercise price of the appropriate installments of such
ISOs. At the time of such conversion, the Committee (with the consent of the
optionee) may impose such conditions on the exercise of the resulting
Non-Qualified Options as the Committee in its discretion may determine, provided
that such conditions shall not be inconsistent with this Plan. Nothing in the
Plan shall be deemed to give any optionee the right to have such optionee's ISOs
converted into Non-Qualified Options, and no such conversion shall occur until
and unless the Committee takes appropriate action.
17. APPLICATION OF FUNDS. The proceeds received by the Company from the
sale of shares pursuant to Options granted and Purchases authorized under the
Plan shall be used for general corporate purposes.
18. NOTICE TO COMPANY OF DISQUALIFYING DISPOSITION. By accepting an ISO
granted under the Plan, each optionee agrees to notify the Company in writing
immediately after such optionee makes a Disqualifying Disposition (as described
in Sections 421, 422 and 424 of the Code and regulations thereunder) of any
stock acquired pursuant to the exercise of ISOs granted under the Plan. A
Disqualifying Disposition is generally any disposition occurring on or before
the later of (a) the date two years following the date the ISO was granted or
(b) the date one year following the date the ISO was exercised.
19. WITHHOLDING OF ADDITIONAL INCOME TAXES. Upon the exercise of a
Non-Qualified Option, the grant of an Award, the making of a Purchase of Common
Stock for less than its fair market value, the making of a Disqualifying
Disposition (as defined in paragraph 18), the vesting or transfer of restricted
stock or securities acquired on the exercise of an Option hereunder, or the
making of a distribution or other payment with respect to such stock or
securities, the Company may withhold taxes in respect of amounts that constitute
compensation includible in gross income. The Committee in its discretion may
condition (i) the exercise of an Option, (ii) the grant of an Award, (iii) the
making of a Purchase of Common Stock for less than its fair market value, or
(iv) the vesting or transferability of restricted stock or securities acquired
by exercising an Option, on the grantee's making satisfactory arrangement for
such withholding. Such
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<PAGE> 12
arrangement may include payment by the grantee in cash or by check of the amount
of the withholding taxes or, at the discretion of the Committee, by the
grantee's delivery of previously held shares of Common Stock or the withholding
from the shares of Common Stock otherwise deliverable upon exercise of a Option
shares having an aggregate fair market value equal to the amount of such
withholding taxes.
20. GOVERNMENTAL REGULATION. The Company's obligation to sell and
deliver shares of the Common Stock under this Plan is subject to the approval of
any governmental authority required in connection with the authorization,
issuance or sale of such shares.
Government regulations may impose reporting or other obligations on the
Company with respect to the Plan. For example, the Company may be required to
send tax information statements to employees and former employees that exercise
ISOs under the Plan, and the Company may be required to file tax information
returns reporting the income received by grantees of Options in connection with
the Plan.
21. GOVERNING LAW. The validity and construction of the Plan and the
instruments evidencing Options shall be governed by the laws of the State of
Delaware, or the laws of any jurisdiction in which the Company or its successors
in interest may be organized.
Date Approved by Board of Directors of the Company: August 16, 1996.
Date Approved by Stockholders of the Company: August 16, 1996.
Date Second Amendment Approved by Board of Directors of the Company:
August 21, 1997.
Date Second Amendment Approved by Stockholders of the Company: August
21, 1997.
Date Third Amendment Approved by Board of Directors of the Company:
July 15, 1998.
Date Third Amendment Approved by Stockholders of the Company: July 15,
1998.
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<PAGE> 1
EXHIBIT 99.2
FORM OF INCENTIVE STOCK OPTION AGREEMENT IN CONNECTION WITH THE
AMERICAN INTERNET CORPORATION THIRD AMENDED 1996 STOCK OPTION PLAN
<PAGE> 2
AMERICAN INTERNET CORPORATION
INCENTIVE STOCK OPTION AGREEMENT
American Internet Corporation, a Delaware corporation (the
"Company"), hereby grants as of the <<Grant Day>> day of <<Month Year>> to
<<Full-Name>> (the "Employee"), an option to purchase a maximum of <<Shares
Granted>> shares (the "Option Shares") of its Common Stock, $.0001 par value
("Common Stock"), at the price of <<Option Price>> per share, on the following
terms and conditions:
1. GRANT UNDER AMERICAN INTERNET CORPORATION 1996 STOCK PLAN. This
option is granted pursuant to and is governed by the Company's 1996 Third
Amended Stock Plan (the "Plan") and, unless the context otherwise requires,
terms used herein shall have the same meaning as in the Plan. Determinations
made in connection with this option pursuant to the Plan shall be governed by
the Plan as it exists on this date.
2. GRANT AS INCENTIVE STOCK OPTION; OTHER OPTIONS. This option is
intended to qualify as an incentive stock option under Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"). Notwithstanding the
preceding, this option shall be treated as a Non-Qualified Option if the Plan is
not approved by the Company's stockholders on or before February 5, 1997. This
option is in addition to any other options heretofore or hereafter granted to
the Employee by the Company or any Related Corporation (as defined in the Plan),
but a duplicate original of this instrument shall not effect the grant of
another option.
3. VESTING OF OPTION IF EMPLOYMENT CONTINUES. If the Employee has
continued to be employed by the Company or any Related Corporation on the
following dates, the Employee may exercise this option for the percentage of
shares of Common Stock subject to this option set opposite the applicable date:
Less than one year from -
the date hereof
One year from the date hereof -
At the end of each three month -
period thereafter until 48 months
from the date hereof
The foregoing rights are cumulative and, while the Employee continues to be
employed by the Company or any Related Corporation, may be exercised on or
before the date which is ten years from the date this option is granted. All of
the foregoing rights are subject to Sections 4 and 5, as appropriate, if the
Employee ceases to be employed by the Company and all Related Corporations.
<PAGE> 3
4. TERMINATION OF EMPLOYMENT.
(a) TERMINATION OTHER THAN FOR CAUSE: If the Employee ceases to be
employed by the Company and all Related Corporations, other than by reason of
death or disability as defined in Section 5 or termination for Cause as defined
in Section 4(c), no further installments of this option shall become
exercisable, and this option shall terminate after the passage of three months
from the Employee's last day of employment (as determined pursuant to Paragraph
9 of the Plan), but in no event later than the scheduled expiration date. In
such a case, the Employee's only rights hereunder shall be those which are
properly exercised before the termination of this option.
(b) TERMINATION FOR CAUSE: If the employment of the Employee is
terminated for Cause (as defined in Section 4(c)), this option shall terminate
upon the Employee's receipt of written notice of such termination and shall
thereafter not be exercisable to any extent whatsoever.
(c) DEFINITION OF CAUSE: "Cause" shall mean conduct involving one or
more of the following: (i) the substantial and continuing failure of the
Employee, after notice thereof, to render services to the Company or Related
Corporation in accordance with the terms or requirements of his or her
employment; (ii) disloyalty, gross negligence, willful misconduct, dishonesty or
breach of fiduciary duty to the Company or Related Corporation; (iii) the
commission of an act of embezzlement or fraud; (iv) deliberate disregard of the
rules or policies of the Company or Related Corporation which results in direct
or indirect loss, damage or injury to the Company or Related Corporation; (v)
the unauthorized disclosure of any trade secret or confidential information of
the Company or Related Corporation; or (vi) the commission of an act which
constitutes unfair competition with the Company or Related Corporation or which
induces any customer or supplier to breach a contract with the Company or
Related Corporation.
5. DEATH; DISABILITY.
(a) DEATH: If the Employee dies while in the employ of the Company or
any Related Corporation, this option may be exercised, to the extent otherwise
exercisable on the date of his or her death, by the Employee's estate, personal
representative or beneficiary to whom this option has been assigned pursuant to
Section 9, at any time within 365 days after the date of death, but not later
than the scheduled expiration date.
(b) DISABILITY: If the Employee ceases to be employed by the Company
and all Related Corporations by reason of his or her disability (as defined in
the Plan), this option may be exercised, to the extent otherwise exercisable on
the date of the termination of his or her employment, at any time within 180
days after such termination, but not later than the scheduled expiration date.
(c) EFFECT OF TERMINATION: At the expiration of the 180-day period
provided in paragraph (a) or (b) of this Section 5 or the scheduled expiration
date, whichever is earlier, this option shall terminate and the only rights
hereunder shall be those as to which the option was properly exercised before
such termination.
2
<PAGE> 4
6. PARTIAL EXERCISE. This option may be exercised in part at any time
and from time to time within the above limits, except that this option may not
be exercised for a fraction of a share unless such exercise is with respect to
the final installment of stock subject to this option and cash in lieu of a
fractional share must be paid, in accordance with Paragraph 13(G) of the Plan,
to permit the Employee to exercise completely such final installment. Any
fractional share with respect to which an installment of this option cannot be
exercised because of the limitation contained in the preceding sentence shall
remain subject to this option and shall be available for later purchase by the
Employee in accordance with the terms hereof.
7. PAYMENT OF PRICE.
(a) FORM OF PAYMENT: The option price shall be paid in the following
manner:
(i) in cash or by check;
(ii) subject to paragraph 7(b) below, by delivery of shares of the
Company's Common Stock having a fair market value (as
determined by the Committee) equal as of the date of exercise
to the option price;
(iii) by delivery of an assignment satisfactory in form and
substance to the Company of a sufficient amount of the
proceeds from the sale of the Option Shares and an
instruction to the broker or selling agent to pay that
amount to the Company; or
(iv) by any combination of the foregoing.
(b) LIMITATIONS ON PAYMENT BY DELIVERY OF COMMON STOCK: If the
Employee delivers Common Stock held by the Employee ("Old Stock") to the Company
in full or partial payment of the option price, and the Old Stock so delivered
is subject to restrictions or limitations imposed by agreement between the
Employee and the Company, an equivalent number of Option Shares shall be subject
to all restrictions and limitations applicable to the Old Stock to the extent
that the Employee paid for the Option Shares by delivery of Old Stock, in
addition to any restrictions or limitations imposed by this Agreement.
(c) PERMITTED PAYMENT BY RECOURSE NOTE: In addition, if this
paragraph is initialed below by the person signing this Agreement on behalf of
the Company, the option price may be paid by delivery of the Employee's
three-year personal recourse promissory note bearing interest payable not less
often than annually at the applicable Federal rate, as defined in Section
1274(d) of the Code.
----------
(initials)
8. STOCK RESTRICTION AGREEMENT. As a condition to the exercise of all or
any part of this option, the Employee, the Company and certain other parties
shall enter into a Stock Restriction Agreement in the Form attached hereto as
Exhibit 1, (the "Stock Restriction
3
<PAGE> 5
Agreement"), which imposes certain obligations on the Employee, including
restrictions on the Employee's ability to transfer Option Shares.
9. METHOD OF EXERCISING OPTION. Subject to the terms and conditions of
this Agreement, this option may be exercised by written notice to the Company,
at its principal executive office or to such transfer agent as the Company shall
designate. Such notice shall state the election to exercise this option and the
number of Option Shares for which it is being exercised and shall be signed by
the person or persons so exercising this option. Such notice shall be
accompanied by (i) payment of the full purchase price of such shares (as
provided in Section 7 hereof) and (ii) in the case of the first exercise of an
option by the Employee, a counterpart of the Stock Restriction Agreement, signed
by the person or persons so exercising this option. The Company shall deliver a
certificate or certificates representing the shares issued upon such exercise as
soon as practicable after the notice and Stock Restriction Agreement shall be
received. Such certificate or certificates shall be registered in the name of
the person or persons so exercising this option (or, if this option shall be
exercised by the Employee and if the Employee shall so request in the notice
exercising this option, shall be registered in the name of the Employee and
another person jointly, with right of survivorship). In the event this option
shall be exercised, pursuant to Section 5 hereof, by any person or persons other
than the Employee, such notice shall be accompanied by appropriate proof of the
right of such person or persons to exercise this option.
10. OPTION NOT TRANSFERABLE. This option is not transferable or
assignable except by will or by the laws of descent and distribution. During the
Employee's lifetime only the Employee can exercise this option.
11. NO OBLIGATION TO EXERCISE OPTION. The grant and acceptance of this
option imposes no obligation on the Employee to exercise it.
12. NO OBLIGATION TO CONTINUE EMPLOYMENT. Neither the Plan, this
Agreement, nor the grant of this option imposes any obligation on the Company or
any Related Corporation to continue the employment of the Employee.
13. NO RIGHTS AS STOCKHOLDER UNTIL EXERCISE. The Employee shall have no
rights as a stockholder with respect to the Option Shares until such time as the
Employee has exercised this option by delivering a notice of exercise and has
paid in full the purchase price for the shares for which this option is to be so
exercised in accordance with Section 9. Except as is expressly provided in the
Plan with respect to certain changes in the capitalization of the Company, no
adjustment shall be made for dividends or similar rights for which the record
date is prior to such date of exercise.
14. CAPITAL CHANGES AND BUSINESS SUCCESSIONS. The Plan contains
provisions covering the treatment of options in a number of contingencies such
as stock splits and mergers. Provisions in the Plan for adjustment with respect
to stock subject to options and the related provisions with respect to
successors to the business of the Company are hereby made applicable hereunder
and are incorporated herein by reference.
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<PAGE> 6
15. EARLY DISPOSITION. In accordance with Paragraph 18 of the Plan, the
Employee agrees to notify the Company in writing immediately after the Employee
transfers any Option Shares, if such transfer occurs on or before the later of
(a) the date two years after the date of this Agreement or (b) the date one year
after the date the Employee acquired such Option Shares. The Employee also
agrees to provide the Company with any information concerning any such transfer
required by the Company for tax purposes.
16. WITHHOLDING TAXES. If the Company or any Related Corporation in its
discretion determines that it is obligated to withhold any tax in connection
with the exercise of this option, or in connection with the transfer of, or the
lapse of restrictions on, any Common Stock or other property acquired pursuant
to this option, the Employee hereby agrees that the Company or any Related
Corporation may withhold from the Employee's wages or other remuneration the
appropriate amount of tax. At the discretion of the Company or Related
Corporation, the amount required to be withheld may be withheld in cash from
such wages or other remuneration or in kind from the Common Stock or other
property otherwise deliverable to the Employee on exercise of this option. The
Employee further agrees that, if the Company or Related Corporation does not
withhold an amount from the Employee's wages or other remuneration sufficient to
satisfy the withholding obligation of the Company or any Related Corporation,
the Employee will make reimbursement on demand, in cash, for the amount
underwithheld.
17. PROVISION OF DOCUMENTATION TO EMPLOYEE. By signing this Agreement
the Employee acknowledges receipt of a copy of this Agreement and a copy of the
Plan.
18. MISCELLANEOUS.
(a) NOTICES: All notices hereunder shall be in writing and shall be
deemed given when sent by certified or registered mail, postage prepaid, return
receipt requested, to the address set forth below. The addresses for such
notices may be changed from time to time by written notice given in the manner
provided for herein.
(b) ENTIRE AGREEMENT; MODIFICATION: This Agreement constitutes the
entire agreement between the parties relative to the subject matter hereof, and
supersedes all proposals, written or oral, and all other communications between
the parties relating to the subject matter of this Agreement. This Agreement may
be modified, amended or rescinded only by a written agreement executed by all
parties hereto.
(c) SEVERABILITY: The invalidity, illegality or unenforceability of
any provision of this Agreement shall in no way affect the validity, legality or
enforceability of any other provision.
(d) SUCCESSORS AND ASSIGNS: This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns, subject to the limitations set forth in Section 9 hereof.
(e) GOVERNING LAW: This Agreement shall be governed by and
interpreted in accordance with the laws of the State of Delaware, without giving
effect to the principles of the conflicts of laws thereof. The preceding choice
of law provision shall apply to all claims, under any theory whatsoever, arising
out of the relationship of the parties contemplated herein.
5
<PAGE> 7
(f) SPECIFIC PERFORMANCE: The rights of the parties under this
Agreement are unique and, accordingly, the parties shall have the right, in
addition to such other remedies as may be available to any of them at law or in
equity, to enforce their rights hereunder by actions for specific performance in
addition to any other legal or equitable remedies they might have to the extent
permitted by law.
(g) WAIVERS, OTHER: Any of the provisions of this Agreement may be
waived by an instrument in writing with the consent of the party or parties
whose rights are being waived and in the event the rights of the Investors are
being waived, with the consent of the holders of a majority in interest of the
Converted Shares. Any waiver of a breach of any provision of this Agreement
shall not operate or be construed as a waiver of any subsequent breach of that
provision or of any other provision hereof. Each of the parties hereto agrees to
execute all such further instruments and documents and to take all such further
action as any other party may reasonably require in order to effectuate the
terms and purposes of this Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
6
<PAGE> 8
IN WITNESS WHEREOF, the undersigned have caused this instrument to be
executed as of the date first above written.
AMERICAN INTERNET CORPORATION
Four Preston Court
Bedford, MA 01730
- -------------------------------------
<<Full Name>>
By:
- ------------------------------------- -----------------------------------
Street Address
- ------------------------------------- --------------------------------------
City State Zip Code Title
7
<PAGE> 9
Exhibit 1
STOCK RESTRICTION AGREEMENT
Agreement made this <<Grant - Day>> day of <<Month-Year>>, by and
among American Internet Corporation, a Delaware corporation (the "Company"),
<<Full Name>> (the "Employee") and the persons and entities listed on Schedule I
attached hereto (each, an "Investor" and collectively, the "Investors").
WHEREAS, the Employee owns or has the right to acquire shares of
Common Stock, $.0001 par value per share (the "Common Stock") of the Company;
WHEREAS, as of the date hereof the Investors collectively own a
majority of the issued and outstanding shares of Series A Convertible Preferred
Stock, $.01 par value per share, of the Company, Series B Convertible Preferred
Stock, $.01 par value per share, of the Company and Series C Convertible
Preferred Stock, $.01 par value per share, of the Company (collectively, the
"Preferred Shares"); and
WHEREAS, in connection with the issuance and sale of the Series C
Convertible Preferred Stock of the Company to the Investors pursuant to that
certain Series C Convertible Preferred Stock Purchase Agreement dated as of July
14, 1997 (the "Purchase Agreement"), the Company agreed to require each employee
acquiring Common Stock to enter into this Agreement as a condition to such
acquisition.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained and other good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, the Company, the Employee and the Investors
agree as follows:
1. Definitions. The shares of Common Stock issued or issuable upon
conversion of any Preferred Shares shall be referred to as the "Converted
Shares". "Shares" shall mean and include all shares of Preferred Stock and
Common Stock of the Company owned by the Employee or an Investor, as the case
may be, whether presently held or hereafter acquired.
2. Prohibited Transfers. The Employee shall not sell, assign, transfer,
pledge, hypothecate, mortgage, encumber or dispose of all or any of his Shares,
except in compliance with this Agreement. Notwithstanding the foregoing, the
Employee may transfer all or any of his Shares (a) by way of gift to any member
of his family or to any trust for the benefit of any such family member of such
Employee, provided that any such transferee shall agree in writing with the
Company, as a condition precedent to such transfer, to be bound by all of the
provisions of this Agreement to the same extent as if such transferee were the
Employee, or (b) by will or the laws of descent and distribution, in which event
each such transferee shall be bound by all of the provisions of this Agreement
to the same extent as if such transferee were the Employee (any such transfer, a
"Permitted Transfer"). As used herein, the word "family" shall include any
spouse, lineal ancestor or descendant, brother or sister.
3. Right of Refusal on Dispositions. Except for Permitted Transfers in
accordance with Section 2 above, if at any time the Employee wishes to sell,
assign, transfer or otherwise
<PAGE> 10
dispose of any Shares owned by him pursuant to the terms of a bona fide offer
received from a third party, he shall submit a written offer to sell such Shares
(the "Offered Shares") to the Company and each of the Investors in accordance
with the notice provisions below on terms and conditions, including price, not
less favorable than those on which it proposes to sell such Shares to such third
party (the "Offer"), which Offer by its terms shall remain open and irrevocable
for a period of forty-five (45) days (the "Offering Period"). The Offer shall
disclose the identity of the proposed purchaser or transferee, the Offered
Shares proposed to be sold or transferred, the agreed terms of the sale or
transfer and any other material facts relating to the sale or transfer. Under
any such Offer, the Company shall have a priority right to purchase all of the
Offered Shares. Within fifteen (15) days of the effective date of the Offer, the
Company shall notify the Employee and the Investors of its acceptance or
rejection of the Offer. If the Company rejects the Offer or does not act on the
Offer within the 15-day period, the Investors shall have the right to purchase
all, but not less than all of the Offered Shares.
Notice of the Company's intention to accept an Offer made
hereunder shall be evidenced by a writing signed by the Company and delivered to
the Employee prior to the end of such 15-day period.
Each Investor shall have an option, to purchase, on a pro rata
basis according to the number of Converted Shares owned by such Investor, the
Offered Shares for the consideration per share and on the terms and conditions
set forth in the Offer. Such option shall be exercised by delivery of written
notice to the Secretary of the Company prior to the termination of the Offering
Period. Each Investor may within the same period, notify the Secretary of the
Company of its desire to participate in the sale of its Shares pursuant to
Section 4 below on the terms set forth in the Offer, and the number of Shares it
wishes to sell.
In the event options to purchase have been exercised by the
Investors with respect to some but not all of the Offered Shares, those
Investors who have exercised their options within the Offering Period shall have
an additional option, for a period of five days next succeeding the expiration
of the Offering Period (the "Additional Period"), to purchase all or any part of
the balance of such Offered Shares on the terms and conditions set forth in the
Offer, which option shall be exercised by the delivery of written notice to the
Secretary of the Company. In the event there are two or more such Investors that
choose to exercise the last-mentioned option for a total number of Offered
Shares in excess of the number available, the Offered Shares available for each
such Investor's option shall be allocated to such Investor pro rata based on the
number of Converted Shares owned by the Investors so electing.
If the options to purchase the Offered Shares are exercised in
full by the Investors, the Secretary of the Company shall immediately notify all
of the exercising Investors of that fact. The closing of the purchase of the
Offered Shares shall take place at the offices of the Company no later than ten
days after the date of such notice to the Investors.
In the event that neither the Company nor the Investors purchase
the Offered Shares offered by the Employee pursuant to the Offer, then, subject
to Section 4 hereof, all, but not less than all such Shares may be sold by the
Employee at any time within sixty (60) days after the expiration of the Offering
Period. Any such sale shall be at not less than the price and upon other terms
and conditions, if any, not more favorable to the purchaser than those specified
2
<PAGE> 11
in the Offer. Any Shares not sold within such 60-day period shall continue to be
subject to the requirements of this Section. In the event that Shares are sold
to any purchaser pursuant to this Section 3, said Shares shall be entitled to
the benefits conferred by, and subject to the restrictions imposed by, this
Agreement and the purchaser of said Shares shall agree in writing to abide by
the provisions of this Agreement.
4. Right of Participation in Sales by the Employee. If at any time the
Employee wishes to sell, or otherwise dispose of any Shares owned by him to any
person (the "Purchaser") pursuant to the terms of a bona fide offer and the
Company and the Investors have not purchased all such Shares under Section 3
hereof, then each Investor shall be entitled to sell Converted Shares in the
transaction to the Purchaser (a "Participating Investor") pursuant to this
Section. The Secretary of the Company shall promptly, on expiration of the
Offering Period and the Additional Period, if any, notify the Employee of the
aggregate number of Converted Shares the Participating Investors wish to sell.
The Employee shall use his best efforts to interest the Purchaser in purchasing,
in addition to the Offered Shares, the Converted Shares the Participating
Investors wish to sell. If the Offeror does not wish to purchase all of the
shares made available by the Employee and the Participating Investors, then each
Participating Investor and the Employee shall be entitled to sell, at the price
and on the terms and conditions set forth in the Offer, a portion of the shares
being sold to the Purchaser, in the same proportion as such Employee's ownership
of Shares or Participating Investor's ownership of Converted Shares, as the case
may be, bears to the total number of Shares owned by the Employee plus the
Converted Shares owned by the Participating Investors. The sale to the Purchaser
shall be consummated not later than 60 days after the expiration of the Offering
Period.
5. Lock-Up Agreement. The Employee hereby agrees not to sell, make any
short sale of, loan, grant an option for the purchase of, or otherwise dispose
of any Common Stock now owned or hereafter acquired by him for one hundred and
eighty (180) days after the effective date of a public offering of the Company's
securities without the prior written consent of the Company or the principal
underwriter managing any such offering and, that, if requested by the Company or
such underwriter, he shall enter into an agreement not to sell, make any short
sale of, loan, grant an option for the purchase of or otherwise dispose of any
Common Stock now owned or hereafter acquired by him for one hundred and eighty
(180) days, without the prior written consent of the Company or such
underwriter, as the case may be.
6. Termination. This Agreement, and the respective rights and
obligations of the parties hereto shall terminate upon the earliest to occur of
the following: (i) the completion of the Company's Qualified Public Offering (as
defined in the Purchase Agreement) or (ii) the Investors holding no Converted
Shares or Preferred Shares.
7. Notices. Any notice or communication hereunder shall be in writing
and shall be deemed to have been sufficiently given or served for all purposes
three days after being sent by first class mail, postage and charges prepaid,
hand delivery, or Federal Express or similar courier service (or by facsimile
transmission), to the following addresses: if to the Company, at American
Internet Corporation, 4 Preston Court, Bedford, MA 01730, Facsimile Number:
(617) 275-4930, attention President, or at any other address or facsimile number
designated by the Company to the Employee and the Investor in writing; if to the
Employee, ________________, Facsimile Number: _____________, or at any other
address or facsimile
3
<PAGE> 12
number designated by the Employee to the Company and the Investor in
writing; if to an Investor at the address set forth on Schedule I hereto, or at
any other address or facsimile number designated by such Investor to the Company
and the Employee in writing; and if to an assignee of an Investor, to its
address or facsimile number as designated to the Company and the Employee in
writing. Any notice given by facsimile pursuant to this Section shall be
followed by written notice delivered by Federal Express or similar courier
service.
8. Specific Performance. The rights of the parties under this Agreement
are unique and, accordingly, the parties shall have the right, in addition to
such other remedies as may be available to any of them at law or in equity, to
enforce their rights hereunder by actions for specific performance in addition
to any other legal or equitable remedies they might have to the extent permitted
by law.
9. Continuation of Employment. Nothing in this Agreement shall create an
obligation on the Company to continue the Employee's employment with the
Company.
10. Legend. Any certificates representing shares of capital stock
subject to this Agreement shall bear on their face a legend indicating the
existence of the restrictions imposed hereby.
11. Waivers and Further Agreements. Any of the provisions of this
Agreement may be waived by an instrument in writing with the consent of the
party or parties whose rights are being waived and in the event the rights of
the Investor are being waived, with the consent of the holders of a majority in
interest of the Converted Shares. Any waiver of a breach of any provision of
this Agreement shall not operate or be construed as a waiver of any subsequent
breach of that provision or of any other provision hereof. Each of the parties
hereto agrees to execute all such further instruments and documents and to take
all such further action as any other party may reasonably require in order to
effectuate the terms and purposes of this Agreement.
12. Amendments. This Agreement may be amended by and shall be effective
upon the receipt of the written consent, which consent may not be unreasonably
withheld, of: (i) the Company, (ii) the holders of a majority in interest of the
Converted Shares and (iii) the Employee.
13. Assignment; Successors and Assigns. This Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and their respective
heirs, executors, legal representatives, successors and permitted transferees,
except as may be expressly provided otherwise herein.
14. Severability. In case any one or more of the provisions contained in
this Agreement shall for any reason be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provision of this Agreement and such invalid, illegal
and unenforceable provision shall be reformed and construed so that it will be
valid, legal, and enforceable to the maximum extent permitted by law.
4
<PAGE> 13
15. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
16. Section Headings. The headings contained in this Agreement are for
reference purposes only and shall not in any way affect the meaning or
interpretation of this Agreement.
17. Governing Law. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the Commonwealth of Massachusetts.
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5
<PAGE> 14
IN WITNESS WHEREOF, the undersigned have executed this Agreement
as of the day and year first above written.
AMERICAN INTERNET CORPORATION
By:
----------------------------------------
Title:
-------------------------------------
INVESTORS:
COMMONWEALTH CAPITAL
VENTURES L.P.,
By: Commonwealth Venture Partners L.P.,
its General Partner
By: *
----------------------------------------
Jeffrey M. Hurst,
General Partner
CHARLES RIVER PARTNERSHIP VII
A LIMITED PARTNERSHIP
By: Charles River VII GP Limited
Partnership, as General Partner
By: *
----------------------------------------
Title: General Partner
MATRIX PARTNERS IV, L.P.
By: *
----------------------------------------
Timothy A. Barrows,
General Partner
MATRIX IV ENTREPRENEURS
FUND L.P.
By: *
----------------------------------------
Timothy A. Barrows,
General Partner
*
----------------------------------------
Alexander D'Arbeloff
6
<PAGE> 15
*
----------------------------------------
Steve Finn
*
----------------------------------------
Gardner Hendrie
*
----------------------------------------
James P. Masciarelli
EMPLOYEE:
----------------------------------------
<<Full Name>>
*By:
----------------------------------------
Robert T. Brennan/Frederic D. Shea
Attorney-in-fact
7
<PAGE> 16
Schedule I
SCHEDULE OF INVESTORS
Commonwealth Capital Ventures, L.P.
20 Williams Street
Wellesley, MA 02181
FAX: (617) 235-8627
Matrix Partners IV, L.P.
Bay Colony Corporate Center
1000 Winter Street
Suite 4500
Waltham, MA 02154
FAX: (617) 890-2288
Matrix IV Entrepreneurs Fund, L.P.
Bay Colony Corporate Center
1000 Winter Street
Suite 4500
Waltham, MA 02154
FAX: (617) 890-2288
Charles River Partnership VII, a Limited Partnership
Bay Colony Corporate Center
1000 Winter Street
Suite 3300
Waltham, MA 02154
FAX: (617) 487-7065
Steven Finn
2 Barry Drive
Framingham, MA 01701
FAX: (617) 422-2910
James P. Masciarelli
Archer Consulting
57 Main Street
Gloucester, MA 01930
FAX: (508) 283-9388
<PAGE> 17
Gardner Hendrie
Sigma Partners
300 Commercial Street
Suite 705
Boston, MA 02109
FAX: (508) 303-3779
2
<PAGE> 1
EXHIBIT 99.3
FORM OF NON-QUALIFIED STOCK OPTION AGREEMENT IN CONNECTION WITH THE
AMERICAN INTERNET CORPORATION THIRD AMENDED 1996 STOCK OPTION PLAN
<PAGE> 2
AMERICAN INTERNET CORPORATION
NON-QUALIFIED STOCK OPTION AGREEMENT
American Internet Corporation, a Delaware corporation (the
"Company"), hereby grants as of the <<Grant Day>> day of <<Month Year>> to
<<Full-Name>> (the "Optionee"), an option to purchase a maximum of <<Shares
Granted>> shares (the "Option Shares") of its Common Stock, $.0001 par value
("Common Stock"), at the price of <<Option Price>> per share, on the following
terms and conditions:
1. GRANT UNDER AMERICAN INTERNET CORPORATION 1996 STOCK PLAN. This
option is granted pursuant to and is governed by the Company's 1996 Stock Plan
(the "Plan") and, unless the context otherwise requires, terms used herein shall
have the same meaning as in the Plan. Determinations made in connection with
this option pursuant to the Plan shall be governed by the Plan as it exists on
this date.
2. GRANT AS NON-QUALIFIED OPTION; OTHER OPTIONS. This option shall be
treated for federal income tax purposes as a Non-Qualified Option (rather than
an incentive stock option as defined in Section 422 of the Code). This option is
in addition to any other options heretofore or hereafter granted to the Optionee
by the Company or any Related Corporation (as defined in the Plan), but a
duplicate original of this instrument shall not effect the grant of another
option.
3. VESTING OF OPTION IF BUSINESS RELATIONSHIP CONTINUES. If the Optionee
has continued to serve the Company or any Related Corporation in the capacity of
an employee, officer, director or consultant (such service is described herein
as maintaining or being involved in a "Business Relationship with the Company")
on the following dates, the Optionee may exercise this option for the percentage
of shares of Common Stock subject to this option set opposite the applicable
date:
Less than one year from -
the date hereof
One year from the date hereof -
At the end of each three month -
period thereafter until 48 months
from the date hereof
The foregoing rights are cumulative and, while the Optionee continues to
maintain a Business Relationship with the Company or any Related Corporation,
may be exercised up to and including the date which is ten years from the date
this option is granted. All of the foregoing rights are subject to Sections 4
and 5, as appropriate, if the Optionee ceases to maintain a Business
Relationship with the Company and all Related Corporations or dies, becomes
disabled or undergoes dissolution while involved in a Business Relationship with
the Company.
<PAGE> 3
4. TERMINATION OF BUSINESS RELATIONSHIP.
(a) TERMINATION OTHER THAN FOR CAUSE: If the Optionee's Business
Relationship with the Company and all Related Corporations is terminated, other
than by reason of death, disability or dissolution as defined in Section 5 or
termination for Cause as defined in Section 4(c), no further installments of
this option shall become exercisable, and this option shall terminate after the
passage of three months from the date the Business Relationship ceases, but in
no event later than the scheduled expiration date. In such a case, the
Optionee's only rights hereunder shall be those which are properly exercised
before the termination of this option.
(b) TERMINATION FOR CAUSE: If the Optionee's Business Relationship
with the Company is terminated for Cause (as defined in Section 4(c)), this
option shall terminate upon the Optionee's receipt of written notice of such
termination and shall thereafter not be exercisable to any extent whatsoever.
(c) DEFINITION OF CAUSE: "Cause" shall mean conduct involving one or
more of the following: (i) the substantial and continuing failure of the
Optionee, after notice thereof, to render services to the Company or Related
Corporation in accordance with the terms or requirements of the Optionee's
Business Relationship with the Company; (ii) disloyalty, gross negligence,
willful misconduct, dishonesty or breach of fiduciary duty to the Company or
Related Corporation; (iii) the commission of an act of embezzlement or fraud;
(iv) deliberate disregard of the rules or policies of the Company or Related
Corporation which results in direct or indirect loss, damage or injury to the
Company or Related Corporation; (v) the unauthorized disclosure of any trade
secret or confidential information of the Company or Related Corporation; or
(vi) the commission of an act which constitutes unfair competition with the
Company or Related Corporation or which induces any customer or supplier to
breach a contract with the Company or Related Corporation.
5. DEATH; DISABILITY; DISSOLUTION.
(a) DEATH: If the Optionee is a natural person who dies while
involved in a Business Relationship with the Company, this option may be
exercised, to the extent otherwise exercisable on the date of his or her death,
by the Optionee's estate, personal representative or beneficiary to whom this
option has been assigned pursuant to Section 9, at any time within 365 days
after the date of death, but not later than the scheduled expiration date.
(b) DISABILITY: If the Optionee is a natural person whose Business
Relationship with the Company is terminated by reason of his or her disability
(as defined in the Plan), this option may be exercised, to the extent otherwise
exercisable on the date the Business Relationship with the Company was
terminated, at any time within 180 days after such termination, but not later
than the scheduled expiration date.
(c) EFFECT OF TERMINATION: At the expiration of such 180-day period
provided in paragraph (a) or (b) of this Section 5 or the scheduled expiration
date, whichever is earlier, this option shall terminate and the only rights
hereunder shall be those as to which the option was properly exercised before
such termination.
2
<PAGE> 4
(d) DISSOLUTION: If the Optionee is a corporation, partnership, trust
or other entity that is dissolved, is liquidated, becomes insolvent or enters
into a merger or acquisition with respect to which the Optionee is not the
surviving entity, at a time when the Optionee is involved in a Business
Relationship with the Company, this option shall immediately terminate as of the
date of such event, and the only rights hereunder shall be those as to which
this option was properly exercised before such dissolution or other event.
6. PARTIAL EXERCISE. This option may be exercised in part at any time
and from time to time within the above limits, except that this option may not
be exercised for a fraction of a share unless such exercise is with respect to
the final installment of stock subject to this option and cash in lieu of a
fractional share must be paid, in accordance with Paragraph 13(G) of the Plan,
to permit the Optionee to exercise completely such final installment. Any
fractional share with respect to which an installment of this option cannot be
exercised because of the limitation contained in the preceding sentence shall
remain subject to this option and shall be available for later purchase by the
Optionee in accordance with the terms hereof.
7. PAYMENT OF PRICE.
(a) FORM OF PAYMENT: The option price shall be paid in the following
manner:
(i) in cash or by check;
(ii) subject to paragraph 7(b) below, by delivery of shares of
the Company's Common Stock having a fair market value (as
determined by the Committee) equal as of the date of
exercise to the option price;
(iii) by delivery of an assignment satisfactory in form and
substance to the Company of a sufficient amount of the
proceeds from the sale of the Option Shares and an
instruction to the broker or selling agent to pay that
amount to the Company; or
(iv) by any combination of the foregoing.
(b) LIMITATIONS ON PAYMENT BY DELIVERY OF COMMON STOCK: If the
Optionee delivers Common Stock held by the Optionee ("Old Stock") to the Company
in full or partial payment of the option price, and the Old Stock so delivered
is subject to restrictions or limitations imposed by agreement between the
Optionee and the Company, an equivalent number of Option Shares shall be subject
to all restrictions and limitations applicable to the Old Stock to the extent
that the Optionee paid for the Option Shares by delivery of Old Stock, in
addition to any restrictions or limitations imposed by this Agreement.
3
<PAGE> 5
(c) PERMITTED PAYMENT BY RECOURSE NOTE: In addition, if this
paragraph is initialed below by the person signing this Agreement on behalf of
the Company, the option price may be paid by delivery of the Optionee's
three-year personal recourse promissory note bearing interest payable not less
often than annually at the applicable Federal rate, as defined in Section
1274(d) of the Code.
----------
(initials)
8. STOCK RESTRICTION AGREEMENT. As a condition to the exercise of all or
any part of this option, the Employee, the Company and certain other parties
shall enter into a Stock Restriction Agreement in the Form attached hereto as
Exhibit 1, (the "Stock Restriction Agreement"), which imposes certain
obligations on the Employee, including restrictions on the Employee's ability to
transfer Option Shares.
9. METHOD OF EXERCISING OPTION. Subject to the terms and conditions of
this Agreement, this option may be exercised by written notice to the Company,
at its principal executive office or to such transfer agent as the Company shall
designate. Such notice shall state the election to exercise this option and the
number of Option Shares for which it is being exercised and shall be signed by
the person or persons so exercising this option. Such notice shall be
accompanied by (i) payment of the full purchase price of such shares (as
provided in Section 7 hereof) and (ii) in the case of the first exercise of an
option by the Employee, a counterpart of the Stock Restriction Agreement, signed
by the person or persons so exercising this option. The Company shall deliver a
certificate or certificates representing the shares issued upon such exercise as
soon as practicable after the notice and Stock Restriction Agreement shall be
received. Such certificate or certificates shall be registered in the name of
the person or persons so exercising this option (or, if this option shall be
exercised by the Optionee and if the Optionee shall so request in the notice
exercising this option, shall be registered in the name of the Optionee and
another person jointly, with right of survivorship). In the event this option
shall be exercised, pursuant to Section 5 hereof, by any person or persons other
than the Optionee, such notice shall be accompanied by appropriate proof of the
right of such person or persons to exercise this option.
10. OPTION NOT TRANSFERABLE. This option is not transferable or
assignable except by will or by the laws of descent and distribution. During the
Optionee's lifetime, only the Optionee can exercise this option.
11. NO OBLIGATION TO EXERCISE OPTION. The grant and acceptance of this
option imposes no obligation on the Optionee to exercise it.
12. NO OBLIGATION TO CONTINUE BUSINESS RELATIONSHIP. Neither the Plan,
this Agreement, nor the grant of this option imposes any obligation on the
Company or any Related Corporation to continue to maintain a Business
Relationship with the Optionee.
13. NO RIGHTS AS STOCKHOLDER UNTIL EXERCISE. The Optionee shall have no
rights as a stockholder with respect to the Option Shares until such time as the
Optionee has exercised this option by delivering a notice of exercise and has
paid in full the purchase price for the number of
4
<PAGE> 6
shares for which this option is to be so exercised in accordance with Section 9.
Except as is expressly provided in the Plan with respect to certain changes in
the capitalization of the Company, no adjustment shall be made for dividends or
similar rights for which the record date is prior to such date of exercise.
14. CAPITAL CHANGES AND BUSINESS SUCCESSIONS. The Plan contains
provisions covering the treatment of options in a number of contingencies such
as stock splits and mergers. Provisions in the Plan for adjustment with respect
to stock subject to options and the related provisions with respect to
successors to the business of the Company are hereby made applicable hereunder
and are incorporated herein by reference.
15. WITHHOLDING TAXES. If the Company or any Related Corporation in its
discretion determines that it is obligated to withhold any tax in connection
with the exercise of this option, or in connection with the transfer of, or the
lapse of restrictions on, any Common Stock or other property acquired pursuant
to this option, the Optionee hereby agrees that the Company or any Related
Corporation may withhold from the Optionee's wages or other remuneration the
appropriate amount of tax. At the discretion of the Company or Related
Corporation, the amount required to be withheld may be withheld in cash from
such wages or other remuneration or in kind from the Common Stock or other
property otherwise deliverable to the Optionee on exercise of this option. The
Optionee further agrees that, if the Company or Related Corporation does not
withhold an amount from the Optionee's wages or other remuneration sufficient to
satisfy the withholding obligation of the Company or Related Corporation, the
Optionee will make reimbursement on demand, in cash, for the amount
underwithheld.
16. PROVISION OF DOCUMENTATION TO OPTIONEE. By signing this Agreement
the Optionee acknowledges receipt of a copy of this Agreement and a copy of the
Plan.
17. MISCELLANEOUS.
(a) NOTICES: All notices hereunder shall be in writing and shall be
deemed given when sent by certified or registered mail, postage prepaid, return
receipt requested, to the address set forth below. The addresses for such
notices may be changed from time to time by written notice given in the manner
provided for herein.
(b) ENTIRE AGREEMENT; MODIFICATION: This Agreement constitutes the
entire agreement between the parties relative to the subject matter hereof, and
supersedes all proposals, written or oral, and all other communications between
the parties relating to the subject matter of this Agreement. This Agreement may
be modified, amended or rescinded only by a written agreement executed by all
parties hereto
(c) SEVERABILITY: The invalidity, illegality or unenforceability of
any provision of this Agreement shall in no way affect the validity, legality or
enforceability of any other provision.
(d) SUCCESSORS AND ASSIGNS: This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns, subject to the limitations set forth in Section 9 hereof.
5
<PAGE> 7
(e) GOVERNING LAW: This Agreement shall be governed by and
interpreted in accordance with the laws of the State of Delaware, without giving
effect to the principles of the conflicts of laws thereof. The preceding choice
of law provision shall apply to all claims, under any theory whatsoever, arising
out of the relationship of the parties contemplated herein.
(f) SPECIFIC PERFORMANCE: The rights of the parties under this
Agreement are unique and, accordingly, the parties shall have the right, in
addition to such other remedies as may be available to any of them at law or in
equity, to enforce their rights hereunder by actions for specific performance in
addition to any other legal or equitable remedies they might have to the extent
permitted by law.
(g) WAIVERS, OTHER: Any of the provisions of this Agreement may be
waived by an instrument in writing with the consent of the party or parties
whose rights are being waived and in the event the rights of the Investors are
being waived, with the consent of the holders of a majority in interest of the
Converted Shares. Any waiver of a breach of any provision of this Agreement
shall not operate or be construed as a waiver of any subsequent breach of that
provision or of any other provision hereof. Each of the parties hereto agrees to
execute all such further instruments and documents and to take all such further
action as any other party may reasonably require in order to effectuate the
terms and purposes of this Agreement.
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6
<PAGE> 8
IN WITNESS WHEREOF, the undersigned have caused this instrument to
be executed as of the date first above written.
AMERICAN INTERNET CORPORATION
Four Preston Court
- --------------------------------- Bedford, MA 01730
Optionee
By:
- --------------------------------- ---------------------------------------
Print Name of Optionee
- --------------------------------- ------------------------------------------
Street Address Title
City State Zip Code
- ---------------------------------
7
<PAGE> 9
Exhibit 1
STOCK RESTRICTION AGREEMENT
Agreement made this <<Grant - Day>> day of <<Month-Year>>, by and
among American Internet Corporation, a Delaware corporation (the "Company"),
<<Full Name>> (the "Employee") and the persons and entities listed on Schedule I
attached hereto (each, an "Investor" and collectively, the "Investors").
WHEREAS, the Employee owns or has the right to acquire shares of
Common Stock, $.0001 par value per share (the "Common Stock") of the Company;
WHEREAS, as of the date hereof the Investors collectively own a
majority of the issued and outstanding shares of Series A Convertible Preferred
Stock, $.01 par value per share, of the Company, Series B Convertible Preferred
Stock, $.01 par value per share, of the Company and Series C Convertible
Preferred Stock, $.01 par value per share, of the Company (collectively, the
"Preferred Shares"); and
WHEREAS, in connection with the issuance and sale of the Series C
Convertible Preferred Stock of the Company to the Investors pursuant to that
certain Series C Convertible Preferred Stock Purchase Agreement dated as of July
14, 1997 (the "Purchase Agreement"), the Company agreed to require each employee
acquiring Common Stock to enter into this Agreement as a condition to such
acquisition.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained and other good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, the Company, the Employee and the Investors
agree as follows:
1. Definitions. The shares of Common Stock issued or issuable upon
conversion of any Preferred Shares shall be referred to as the "Converted
Shares". "Shares" shall mean and include all shares of Preferred Stock and
Common Stock of the Company owned by the Employee or an Investor, as the case
may be, whether presently held or hereafter acquired.
2. Prohibited Transfers. The Employee shall not sell, assign, transfer,
pledge, hypothecate, mortgage, encumber or dispose of all or any of his Shares,
except in compliance with this Agreement. Notwithstanding the foregoing, the
Employee may transfer all or any of his Shares (a) by way of gift to any member
of his family or to any trust for the benefit of any such family member of such
Employee, provided that any such transferee shall agree in writing with the
Company, as a condition precedent to such transfer, to be bound by all of the
provisions of this Agreement to the same extent as if such transferee were the
Employee, or (b) by will or the laws of descent and distribution, in which event
each such transferee shall be bound by all of the provisions of this Agreement
to the same extent as if such transferee were the Employee (any such transfer, a
"Permitted Transfer"). As used herein, the word "family" shall include any
spouse, lineal ancestor or descendant, brother or sister.
3. Right of Refusal on Dispositions. Except for Permitted Transfers in
accordance with Section 2 above, if at any time the Employee wishes to sell,
assign, transfer or otherwise
<PAGE> 10
dispose of any Shares owned by him pursuant to the terms of a bona fide offer
received from a third party, he shall submit a written offer to sell such Shares
(the "Offered Shares") to the Company and each of the Investors in accordance
with the notice provisions below on terms and conditions, including price, not
less favorable than those on which it proposes to sell such Shares to such third
party (the "Offer"), which Offer by its terms shall remain open and irrevocable
for a period of forty-five (45) days (the "Offering Period"). The Offer shall
disclose the identity of the proposed purchaser or transferee, the Offered
Shares proposed to be sold or transferred, the agreed terms of the sale or
transfer and any other material facts relating to the sale or transfer. Under
any such Offer, the Company shall have a priority right to purchase all of the
Offered Shares. Within fifteen (I 5) days of the effective date of the Offer,
the Company shall notify the Employee and the Investors of its acceptance or
rejection of the Offer. If the Company rejects the Offer or does not act on the
Offer within the 15-day period, the Investors shall have the right to purchase
all, but not less than all of the Offered Shares.
Notice of the Company's intention to accept an Offer made hereunder
shall be evidenced by a writing signed by the Company and delivered to the
Employee prior to the end of such 15-day period.
Each Investor shall have an option, to purchase, on a pro rata basis
according to the number of Converted Shares owned by such Investor, the Offered
Shares for the consideration per share and on the terms and conditions set forth
in the Offer. Such option shall be exercised by delivery of written notice to
the Secretary of the Company prior to the termination of the Offering Period.
Each Investor may within the same period, notify the Secretary of the Company of
its desire to participate in the sale of its Shares pursuant to Section 4 below
on the terms set forth in the Offer, and the number of Shares it wishes to sell.
In the event options to purchase have been exercised by the
Investors with respect to some but not all of the Offered Shares, those
Investors who have exercised their options within the Offering Period shall have
an additional option, for a period of five days next succeeding the expiration
of the Offering Period (the "Additional Period"), to purchase all or any part of
the balance of such Offered Shares on the terms and conditions set forth in the
Offer, which option shall be exercised by the delivery of written notice to the
Secretary of the Company. In the event there are two or more such Investors that
choose to exercise the last-mentioned option for a total number of Offered
Shares in excess of the number available, the Offered Shares available for each
such Investor's option shall be allocated to such Investor pro rata based on the
number of Converted Shares owned by the Investors so electing.
If the options to purchase the Offered Shares are exercised in full
by the Investors, the Secretary of the Company shall immediately notify all of
the exercising Investors of that fact. The closing of the purchase of the
Offered Shares shall take place at the offices of the Company no later than ten
days after the date of such notice to the Investors.
In the event that neither the Company nor the Investors purchase the
Offered Shares offered by the Employee pursuant to the Offer, then, subject to
Section 4 hereof, all, but not less than all such Shares may be sold by the
Employee at any time within sixty (60) days after the expiration of the Offering
Period. Any such sale shall be at not less than the price and upon other terms
and conditions, if any, not more favorable to the purchaser than those specified
2
<PAGE> 11
in the Offer. Any Shares not sold within such 60-day period shall continue to be
subject to the requirements of this Section. In the event that Shares are sold
to any purchaser pursuant to this Section 3, said Shares shall be entitled to
the benefits conferred by, and subject to the restrictions imposed by, this
Agreement and the purchaser of said Shares shall agree in writing to abide by
the provisions of this Agreement.
4. Right of Participation in Sales by the Employee. If at any time the
Employee wishes to sell, or otherwise dispose of any Shares owned by him to any
person (the "Purchaser") pursuant to the terms of a bona fide offer and the
Company and the Investors have not purchased all such Shares under Section 3
hereof, then each Investor shall be entitled to sell Converted Shares in the
transaction to the Purchaser (a "Participating Investor") pursuant to this
Section. The Secretary of the Company shall promptly, on expiration of the
Offering Period and the Additional Period, if any, notify the Employee of the
aggregate number of Converted Shares the Participating Investors wish to sell.
The Employee shall use his best efforts to interest the Purchaser in purchasing,
in addition to the Offered Shares, the Converted Shares the Participating
Investors wish to sell. If the Offeror does not wish to purchase all of the
shares made available by the Employee and the Participating Investors, then each
Participating Investor and the Employee shall be entitled to sell, at the price
and on the terms and conditions set forth in the Offer, a portion of the shares
being sold to the Purchaser, in the same proportion as such Employee's ownership
of Shares or Participating Investor's ownership of Converted Shares, as the case
may be, bears to the total number of Shares owned by the Employee plus the
Converted Shares owned by the Participating Investors. The sale to the Purchaser
shall be consummated not later than 60 days after the expiration of the Offering
Period.
5. Lock-Up Agreement. The Employee hereby agrees not to sell, make any
short sale of, loan, grant an option for the purchase of, or otherwise dispose
of any Common Stock now owned or hereafter acquired by him for one hundred and
eighty (180) days after the effective date of a public offering of the Company's
securities without the prior written consent of the Company or the principal
underwriter managing any such offering and, that, if requested by the Company or
such underwriter, he shall enter into an agreement not to sell, make any short
sale of, loan, grant an option for the purchase of or otherwise dispose of any
Common Stock now owned or hereafter acquired by him for one hundred and eighty
(180) days, without the prior written consent of the Company or such
underwriter, as the case may be.
6. Termination. This Agreement, and the respective rights and
obligations of the parties hereto shall terminate upon the earliest to occur of
the following: (i) the completion of the Company's Qualified Public Offering (as
defined in the Purchase Agreement) or (ii) the Investors holding no Converted
Shares or Preferred Shares.
7. Notices. Any notice or communication hereunder shall be in writing
and shall be deemed to have been sufficiently given or served for all purposes
three days after being sent by first class mail, postage and charges prepaid,
hand delivery, or Federal Express or similar courier service (or by facsimile
transmission), to the following addresses: if to the Company, at American
Internet Corporation, 4 Preston Court, Bedford, MA 01730, Facsimile Number:
(617) 275-4930, attention President, or at any other address or facsimile number
designated by the Company to the Employee and the Investor in writing; if to the
Employee, ________________, Facsimile Number: _____________, or at any other
address or facsimile
3
<PAGE> 12
number designated by the Employee to the Company and the Investor in writing; if
to an Investor at the address set forth on Schedule I hereto, or at any other
address or facsimile number designated by such Investor to the Company and the
Employee in writing; and if to an assignee of an Investor, to its address or
facsimile number as designated to the Company and the Employee in writing. Any
notice given by facsimile pursuant to this Section shall be followed by written
notice delivered by Federal Express or similar courier service.
8. Specific Performance. The rights of the parties under this Agreement
are unique and, accordingly, the parties shall have the right, in addition to
such other remedies as may be available to any of them at law or in equity, to
enforce their rights hereunder by actions for specific performance in addition
to any other legal or equitable remedies they might have to the extent permitted
by law.
9. Continuation of Employment. Nothing in this Agreement shall create an
obligation on the Company to continue the Employee's employment with the
Company.
10. Legend. Any certificates representing shares of capital stock
subject to this Agreement shall bear on their face a legend indicating the
existence of the restrictions imposed hereby.
11. Waivers and Further Agreements. Any of the provisions of this
Agreement may be waived by an instrument in writing with the consent of the
party or parties whose rights are being waived and in the event the rights of
the Investor are being waived, with the consent of the holders of a majority in
interest of the Converted Shares. Any waiver of a breach of any provision of
this Agreement shall not operate or be construed as a waiver of any subsequent
breach of that provision or of any other provision hereof. Each of the parties
hereto agrees to execute all such further instruments and documents and to take
all such further action as any other party may reasonably require in order to
effectuate the terms and purposes of this Agreement.
12. Amendments. This Agreement may be amended by and shall be effective
upon the receipt of the written consent, which consent may not be unreasonably
withheld, of: (i) the Company, (ii) the holders of a majority in interest of the
Converted Shares and (iii) the Employee.
13. Assignment; Successors and Assigns. This Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and their respective
heirs, executors, legal representatives, successors and permitted transferees,
except as may be expressly provided otherwise herein.
14. Severability. In case any one or more of the provisions contained in
this Agreement shall for any reason be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provision of this Agreement and such invalid, illegal
and unenforceable provision shall be reformed and construed so that it will be
valid, legal, and enforceable to the maximum extent permitted by law.
4
<PAGE> 13
15. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
16. Section Headings. The headings contained in this Agreement are for
reference purposes only and shall not in any way affect the meaning or
interpretation of this Agreement.
17. Governing Law. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the Commonwealth of Massachusetts.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
5
<PAGE> 14
IN WITNESS WHEREOF, the undersigned have executed this Agreement as
of the day and year first above written.
AMERICAN INTERNET CORPORATION
By:
---------------------------------------
Title:
------------------------------------
INVESTORS:
COMMONWEALTH CAPITAL
VENTURES L.P.,
By: Commonwealth Venture Partners L.P.,
its General Partner
By: *
---------------------------------------
Jeffrey M. Hurst,
General Partner
CHARLES RIVER PARTNERSHIP VII
A LIMITED PARTNERSHIP
By: Charles River VII GP Limited
Partnership, as General Partner
By: *
---------------------------------------
Title: General Partner
MATRIX PARTNERS IV, L.P.
By: *
---------------------------------------
Timothy A. Barrows,
General Partner
MATRIX IV ENTREPRENEURS
FUND L.P.
By: *
---------------------------------------
Timothy A. Barrows,
General Partner
*
---------------------------------------
Alexander D'Arbeloff
6
<PAGE> 15
*
---------------------------------------
Steve Finn
*
---------------------------------------
Gardner Hendrie
*
---------------------------------------
James P. Masciarelli
EMPLOYEE:
---------------------------------------
<<Full Name>>
*By:
----------------------------
Robert T. Brennan/Frederic D. Shea
Attorney-in-fact
7
<PAGE> 16
Schedule I
SCHEDULE OF INVESTORS
Commonwealth Capital Ventures, L.P.
20 Williams Street
Wellesley, MA 02181
FAX: (617) 235-8627
Matrix Partners IV, L.P.
Bay Colony Corporate Center
1000 Winter Street
Suite 4500
Waltham, MA 02154
FAX: (617) 890-2288
Matrix IV Entrepreneurs Fund, L.P.
Bay Colony Corporate Center
I 000 Winter Street
Suite 4500
Waltham, MA 02154
FAX: (617) 890-2288
Charles River Partnership VII, a Limited Partnership
Bay Colony Corporate Center
1000 Winter Street
Suite 3300
Waltham, MA 02154
FAX: (617) 487-7065
Steven Finn
2 Barry Drive
Framingham, MA 01701
FAX: (617) 422-2910
James P. Masciarelli
Archer Consulting
57 Main Street
Gloucester, MA 01930
FAX: (508) 283-9388
8
<PAGE> 17
Gardner Hendrie
Sigma Partners
300 Commercial Street
Suite 705
Boston, MA 02109
FAX: (508) 303-3779
2
<PAGE> 1
EXHIBIT 99.4
FORM OF ACCELERATION WAIVER LETTER
<PAGE> 2
September 10, 1998
<<Full_Name>>
c/o American Internet Corporation
Four Preston Court
Bedford, MA 01730
Dear <<Familiar_Name>>:
As you know, Cisco Systems, Inc. ("Cisco") is in the process of
acquiring American Internet Corporation (the "Company"). Under the terms of the
acquisition (the "Acquisition"), Cisco has agreed to assume the outstanding
options held by certain employees of the Company. However, in order to
facilitate the completion of this Acquisition, the vesting acceleration
provisions currently in effect for those options need to be revised prior the
Acquisition so that those options do not accelerate upon the Acquisition.
You currently (as of 9/30/98) hold the following stock option(s)
(collectively the "Options") to acquire shares of the Company's common stock
under the Company's Third Amended 1996 Stock Plan (the "Option Plan"):
<TABLE>
<CAPTION>
Number of
Remaining Unvested
Grant Date Exercise Price Option Shares
---------- -------------- ------------------
<S> <C> <C>
Grant_Date_1 Grant_Price_1 Unvested_1
Grant_Date_2 Grant_Price_1 Unvested_2
Grant_Date_3 Grant_Price_3 Unvested_3
Grant_Date_4 Grant_Price_4 Unvested_4
</TABLE>
In order for the Company to complete the Acquisition, the vesting
acceleration provisions of your existing Options must be amended so that those
Options will NOT, at the time of the Acquisition, vest on an accelerated basis
as to fifty percent (50%) of any otherwise unvested option shares, and only
twenty-five percent (25%) of the unvested option shares will become vested and
exercisable on an accelerated basis upon consummation of the Acquisition. That
amendment to your Options will be referred to in this letter as "Amendment I."
Each of your Options currently becomes exercisable for the option
shares as follows: (i) 25% upon your completion of one year of employment
measured from the grant date, and (ii) an additional 6.25% of the option shares
upon your completion of each three (3)-month period of employment measured from
the first anniversary of the grant date. Accordingly, if your Option were to be
exercisable for 31.25% of the option shares immediately before the Acquisition
(based on 15 months of employment following the grant
<PAGE> 3
date), then an additional 17.1875% of the option shares (25% of the remaining
68.75% of the shares) will vest upon the assumption of your Option by Cisco in
the Acquisition by reason of Amendment I, and the assumed Option will become
exercisable for the remaining shares in a series of successive equal quarterly
installments upon your completion of each three (3) month period of continued
employment following the Acquisition.
Amendment I to each of your Options will be effected by an
amendment to Section 13B of the Option Plan, which has been incorporated into
the stock option agreement (the "Option Agreement") for each of your Options.
Accordingly, as a condition to closing the Acquisition, you must agree to the
following amendment to Section 13B of the Option Plan and to the incorporation
of that amended provision into each of your Option Agreements so that your
Options will vest on an accelerated basis as to only 25% of the unvested shares
outstanding under the Options at the time of the Acquisition.
AMENDMENT TO SECTION 13B
TO BE EFFECTIVE IMMEDIATELY
FOR EACH OF YOUR OPTIONS
"Upon a merger of the Company, other than a merger into a
wholly-owned subsidiary, in which the Company is not the surviving
entity (including the merger effected by the Acquisition), the vesting
schedule applicable to all outstanding Options under the Plan at that
time shall partially accelerate so that the Option shall vest and become
exercisable for twenty-five percent (25%) of any option shares for which
the Option is not otherwise at that time vested and exercisable.
Accordingly, to the extent the Option is not otherwise fully exercisable
at the time of such merger or Acquisition, the Option shall become
immediately exercisable for that number of additional option shares
obtained by multiplying the number of shares for which the Option is not
otherwise at that time vested and exercisable (in accordance with the
normal installment vesting schedule in effect immediately prior to the
merger or Acquisition) by twenty-five percent (25%) and may be exercised
for all or any portion of those shares as fully-vested shares of Stock
upon the consummation of such merger. The Option shall become
exercisable for any remaining unvested shares of Stock subject to that
option in accordance with the same installment exercise schedule in
effect for that option immediately prior to the merger (or Acquisition).
In addition, the existing provisions of Section 13B under which
all unvested options are to vest upon the termination of an optionee's
employment without cause (as defined therein) within twelve (12) months of an
"acquisition" (as defined in Section 13B) are hereby eliminated in their
entirety, effective immediately prior to the Acquisition, and rendered null and
void. In lieu of such accelerated vesting, you are hereby entitled to receive,
at the time of your termination from the Company or Cisco without "Cause" within
twelve (12) months following the Acquisition, a cash payment for any remaining
unvested portion, as of the time of such termination of employment, of those
shares subject to your Options which did not vest on an accelerated basis at the
time of the Acquisition by reason of Amendment I (the number of any such shares
determined on a post-Acquisition basis) . For each such unvested share (if any),
you will be entitled to receive an amount of cash equal to the excess of (i) the
closing selling price per share of Cisco common stock on the
<PAGE> 4
closing date of the Acquisition over (ii) the exercise price payable per share.
For this purpose, a termination for "Cause" shall mean a termination for any of
the following reasons: (i) engaging in misconduct that is injurious to Cisco or
the Company; (ii) being convicted of a felony; (iii) committing an act of fraud
against, or the misappropriation of property belonging to, Cisco or the Company;
or (iv) a material breach of this agreement or any confidentiality or
proprietary information agreement between you and Cisco or the Company.
Further, you agree that you will not exercise any of your Options
during the period between the date of this letter agreement and the effective
date of the Acquisition (or such earlier date on which it is announced that the
Acquisition will not be consummated). The Acquisition is expected to become
effective in approximately 30 to 45 days following the date of this letter, but
the actual effective date cannot be determined at this time.
To indicate your agreement with (i) Amendment I which will limit
the accelerated vesting you will receive under your Options at the time the
Acquisition closes to only 25% of any option shares for which the Options are
not otherwise at that time vested and exercisable, (ii) the elimination of the
vesting acceleration provisions tied to your termination of employment and the
replacement of those provisions with a cash-out right with respect to the
balance of that 25% of the option shares which did not vest at the time of the
Acquisition because of Amendment I and (iii) the suspended exercise period for
your Options, please sign and date the Acknowledgement section below. For your
records, you should attach a copy of this letter to each of your Option
Agreement(s) in order to evidence the revision to the acceleration provisions of
your Option(s) effected by this letter agreement.
Very truly yours,
Robert T. Brennan
President and CEO
ACKNOWLEDGEMENT
In order to facilitate the closing of the Acquisition, I hereby
knowingly and freely agree to (i) the foregoing amendment to Section 13B of the
Option Plan, as such provision has been incorporated into the Option Agreement
for each of my Options, (ii) the elimination of all vesting acceleration
provisions tied to my termination of employment and the suspension of the
exercise period of my Options.
Signature:
-----------------------------
<<Full_Name>>
<PAGE> 1
EXHIBIT 99.5
FORM OF OPTION ASSUMPTION LETTER
<PAGE> 2
CISCO SYSTEMS, INC.
STOCK OPTION ASSUMPTION AGREEMENT
AMERICAN INTERNET CORPORATION
THIRD AMENDED 1996 STOCK PLAN
OPTIONEE: <<1>>
STOCK OPTION ASSUMPTION AGREEMENT issued as of the 30th day of
September, 1998 by Cisco Systems, Inc., a California corporation ("Cisco").
WHEREAS, the undersigned individual ("Optionee") holds one or
more outstanding options to purchase shares of the common stock of American
Internet Corporation, a Delaware corporation ("AIC"), which were granted to
Optionee under the American Internet Corporation Third Amended 1996 Stock Plan
(the "Plan") and are each evidenced by the following agreements between AIC and
Optionee: (i) a Stock Option Agreement (the "Option Agreement") and (ii) that
certain letter agreement dated September 10, 1998 (the "Letter Agreement")
amending the Option Agreement. The Option Agreement shall be referred to in this
document as the "Amended Option Agreement."
WHEREAS, AIC has this day been acquired by Cisco through the
merger of AIC with and into Cisco (the "Merger") pursuant to the Agreement of
Merger dated September 30, 1998, by and between Cisco and AIC (the "Merger
Agreement").
WHEREAS, the provisions of the Merger Agreement require Cisco to
assume all obligations of AIC under all outstanding options under the Plan at
the consummation of the Merger and to issue to the holder of each outstanding
option an agreement evidencing the assumption of such option.
WHEREAS, pursuant to the provisions of the Merger Agreement, the
exchange ratio (the "Exchange Ratio") in effect for the Merger is .06257019 of a
share of Cisco common stock ("Cisco Stock") for each outstanding share of AIC
common stock ("AIC Stock").
WHEREAS, this Agreement is to become effective immediately upon
the consummation of the Merger (the "Effective Time") in order to reflect
certain adjustments to Optionee's outstanding options under the Plan which have
become necessary by reason of the assumption of those options by Cisco in
connection with the Merger.
<PAGE> 3
NOW, THEREFORE, it is hereby agreed as follows:
1. The number of shares of AIC Stock subject to the options held
by Optionee immediately prior to the Effective Time (the "AIC Options") and the
exercise price payable per share are set forth in Exhibit A hereto. Cisco hereby
assumes, as of the Effective Time, all the duties and obligations of AIC under
each of the AIC Options. In connection with such assumption, the number of
shares of Cisco Stock purchasable under each AIC Option hereby assumed and the
exercise price payable thereunder have been adjusted to reflect the Exchange
Ratio. Accordingly, the number of shares of Cisco Stock subject to each AIC
Option hereby assumed shall be as specified for that option in attached Exhibit
A, and the adjusted exercise price payable per share of Cisco Stock under the
assumed AIC Option shall also be as indicated for that option in attached
Exhibit A.
2. The intent of the foregoing adjustments to each assumed AIC
Option is to assure that the spread between the aggregate fair market value of
the shares of Cisco Stock purchasable under each such option and the aggregate
exercise price as adjusted pursuant to this Agreement will, immediately after
the consummation of the Merger, be not less than the spread which existed,
immediately prior to the Merger, between the then aggregate fair market value of
the AIC Stock subject to the AIC Option and the aggregate exercise price in
effect at such time under the Amended Option Agreement. Such adjustments are
also intended to preserve, immediately after the Merger, on a per share basis,
the same ratio of exercise price per option share to fair market value per share
which existed under the AIC Option immediately prior to the Merger.
3. The following provisions shall govern each AIC Option hereby
assumed by Cisco:
(a) Unless the context otherwise requires, all references in
each Amended Option Agreement and in the Plan (as incorporated
into such Amended Option Agreement) (i) to the "Company" shall
mean Cisco, (ii) to "Common Stock" shall mean shares of Cisco
Stock, (iii) to the "Board" shall mean the Board of Directors of
Cisco and (iv) to the "Committee" shall mean the Compensation
Committee of the Cisco Board of Directors.
(b) The grant date and the expiration date of each assumed
AIC Option and all other provisions which govern either the
exercise or the termination of the assumed AIC Option shall
remain the same as set forth in the Amended Option Agreement
applicable to that option, and the provisions of the Amended
Option Agreement shall accordingly govern and control Optionee's
rights under this Agreement to purchase Cisco Stock.
(c) Pursuant to the terms of the Amended Option Agreement,
only twenty-five percent (25%) of the otherwise unvested AIC
Options shall vest and become exercisable on an accelerated basis
upon the consummation of the
2.
<PAGE> 4
Merger. Each AIC Option, as so accelerated and as adjusted in
accordance with the provisions of paragraph 1 above, shall be
assumed by Cisco as of the Effective Time. Each such assumed AIC
Option shall thereafter continue to vest and become exercisable
for any remaining unvested shares of Cisco Stock subject to that
option in accordance with the same installment exercise schedule
in effect under the applicable Amended Option Agreement
immediately prior to the Effective Time; provided, however, that
the number of shares subject to each such installment shall be
adjusted to reflect the Exchange Ratio.
(d) Pursuant to the terms of the Amended Option Agreement,
upon termination of Optionee's employment without cause (as
defined in the Amended Option Agreement) within twelve (12)
months of the Merger, Optionee shall be entitled to receive a
cash payment for any remaining unvested portion of those shares
subject to each assumed AIC Option which did not vest on an
accelerated basis at the time of the Merger by reason of the
Letter Agreement. The cash payment shall be equal to the excess
of (i) the closing selling price per share of Cisco common stock
on the closing date of the Merger over (ii) the exercise price
payable per share.
(e) For purposes of applying any and all provisions of the
Amended Option Agreement and the Plan relating to Optionee's
status as an employee or a consultant of AIC, Optionee shall be
deemed to continue in such status as an employee or a consultant
for so long as Optionee renders services as an employee or a
consultant to Cisco or any present or future Cisco subsidiary.
Accordingly, the provisions of the Amended Option Agreement
governing the termination of the assumed AIC Options upon
Optionee's cessation of service as an employee or a consultant of
AIC shall hereafter be applied on the basis of Optionee's
cessation of employee or consultant status with Cisco and its
subsidiaries, and each assumed AIC Option shall accordingly
terminate, within the designated time period in effect under the
Amended Option Agreement for that option, following such
cessation of service as an employee or a consultant of Cisco and
its subsidiaries.
(f) The adjusted exercise price payable for the Cisco Stock
subject to each assumed AIC Option shall be payable in any of the
forms authorized under the Amended Option Agreement applicable to
that option. For purposes of determining the holding period of
any shares of Cisco Stock delivered in payment of such adjusted
exercise price, the period for which such shares were held as AIC
Stock prior to the Merger shall be taken into account.
(g) In order to exercise each assumed AIC Option, Optionee
must deliver to Cisco a written notice of exercise in which the
number of shares of Cisco Stock to be purchased thereunder must
be indicated. The exercise notice must be accompanied by payment
of the adjusted exercise price payable for the purchased
3.
<PAGE> 5
shares of Cisco Stock and should be delivered to Cisco at the
following address:
Cisco Systems, Inc.
255 West Tasman Drive, Building J
San Jose, CA 95134
Attention: Option Plan Administrator
4. Except to the extent specifically modified by this Option
Assumption Agreement, all of the terms and conditions of each Amended 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.
4.
<PAGE> 6
IN WITNESS WHEREOF, Cisco Systems, Inc. has caused this Stock
Option Assumption Agreement to be executed on its behalf by its duly-authorized
officer as of the ___day of , ________________1998.
CISCO SYSTEMS, INC.
By:
-------------------------------------
ACKNOWLEDGMENT
The undersigned acknowledges receipt of the foregoing Stock
Option Assumption Agreement and understands that all rights and liabilities with
respect to each of his or her AIC Options hereby assumed by Cisco are as set
forth in the Amended Option Agreement, the Plan and such Stock Option Assumption
Agreement.
-------------------------------------
1, OPTIONEE
DATED: __________________, 1998
5.
<PAGE> 7
EXHIBIT A
Optionee's Outstanding Options to Purchase Shares
of American Internet Corporation
Common Stock (Pre-Merger)
and
Optionee's Outstanding Options to Purchase Shares
of Cisco Systems, Inc.
Common Stock (Post-Merger)
