<PAGE> 1
As filed with the Securities and Exchange Commission on June 1, 1999
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 registrant 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)
FIBEX SYSTEMS 1997 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>
1997 STOCK OPTION PLAN
Common Stock 184,991 shares $17.78 $3,289,139.98 $914.38
====================================================================================================
</TABLE>
(1) This Registration Statement shall also cover any additional shares of
Registrant's Common Stock which become issuable under the Fibex Systems
1997 Stock Option Plan by reason of any stock dividend, stock split,
recapitalization or other similar transaction effected without the
Registrant's 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 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, as amended (the "1934 Act").
(b) The Registrant's Current Reports on Form 8-K filed with the
Commission on October 13, 1998, (for period date September 30,
1998), November 20, 1998 (for period date November 2, 1998) and
November 20, 1998 (for period date November 4, 1998) and May 14,
1999 (for period date May 11, 1999).
(c) The Registrant's Quarterly Reports on Form 10-Q filed with the
Commission on December 8, 1998 for the fiscal quarter ended
October 24, 1998 and filed on March 9, 1999, as amended on May
14, 1999, for the fiscal quarter ended January 23, 1999.
(d) The Registrant's Registration Statement No. 000-18225 on Form
8-A filed with Commission on January 11, 1990, together with
Amendment No.1 on Form 8-A/A filed with the Commission on
February 15, 1990, and including any other amendments or reports
filed for the purpose of updating such description, in which
there is described the terms, rights and provisions applicable
to the Registrant's Common Stock.
(e) The Registrant's Registration Statement No. 000-18225 on Form
8-A filed with the Commission on June 11, 1998, including any
amendments or reports filed for the purpose of updating such
description, in which there is described the terms, rights and
provisions applicable to the Registrant's Preferred Stock
Purchase Rights.
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 de-registers 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
II-1
<PAGE> 3
other agents to the maximum extent permitted by the California Corporations
Code. In addition, the Registrant has entered into Indemnification Agreements
with each of its directors and officers. Item 7. Exemption from Registration
Claimed
Not Applicable.
Item 8. Exhibits
<TABLE>
<CAPTION>
Exhibit Number Exhibit
- -------------- -------
<S> <C>
4 Instruments Defining the Rights of Stockholders. Reference is
made to Registrant's Registration Statements No. 000-18225 on
Form 8-A, together with the amendments and exhibits thereto,
which are incorporated herein by reference pursuant to Items
3(d) and 3(e).
5 Opinion and consent of Brobeck, Phleger & Harrison LLP.
23.1 Consent of PricewaterhouseCoopers LLP, Independent Accountants.
23.2 Consent of Brobeck, Phleger & Harrison LLP is contained in
Exhibit 5.
24 Power of Attorney. Reference is made to page II-3 of this
Registration Statement.
99.1 Fibex Systems 1997 Stock Option Plan.
99.2 Form of Notice of Stock Option Grant-Installment Option.
99.3 Form of Stock Option Agreement-Installment Option.
99.4 Form of Stock Option Agreement-Immediately Exercisable Option.
99.5 Form of Exercise Notice and Restricted Stock Purchase
Agreement-Installment Option.
99.6 Form of Stock Option Exercise Agreement-Immediately Exercisable
Option.
99.7 Form of Stock Option Assumption Agreement.
</TABLE>
Item 9. Undertakings
A. The undersigned Registrant hereby undertakes: (1) to file,
during any period in which offers or sales are being made, a post-effective
amendment to this Registration Statement: (i) to include any prospectus required
by Section 10(a)(3) of the 1933 Act, (ii) to reflect in the prospectus any facts
or events arising after the effective date of this 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 this
Registration Statement and (iii) to include any material information with
respect to the plan of distribution not previously disclosed in this
Registration Statement or any material change to such information in this
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 clauses 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 this 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 Fibex Systems 1997
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 this 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 indemnification provisions summarized in Item 6 or
otherwise, the Registrant has been advised that, in the opinion of the
Commission, such indemnification is against public policy as expressed in the
1933 Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer, or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the 1933 Act and
will be governed by the final adjudication of such issue.
II-2
<PAGE> 4
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, the Registrant certifies that it has reasonable grounds to believe that
it meets all of the requirements for filing on Form S-8, and has duly caused
this Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of San Jose, State of California on this
1st day of June, 1999.
CISCO SYSTEMS, INC.
By: /s/ John T. Chambers
---------------------------------
John T. Chambers
President and Chief Executive
Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose
signature appears below constitutes and appoints John T. Chambers and Larry R.
Carter, and each of them, as such person's true and lawful attorneys-in-fact and
agents, with full power of substitution and resubstitution, for such person and
in such person's name, place and stead, 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 lawfully 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 below by the following
persons on behalf of the Registrant and in the capacities and on the dates
indicated:
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ John T. Chambers
- ------------------------ President, Chief Executive June 1, 1999
John T. Chambers Office and Director
(Principal Executive Officer)
/s/ Larry R. Carter
- ------------------------ Senior Vice President, Finance June 1, 1999
Larry R. Carter and Administration, Chief Financial
Officer and Secretary
(Principal Financial and Accounting
Officer)
/s/ John P. Morgridge
- ------------------------ Chairman of the Board and June 1, 1999
John P. Morgridge Director
/s/ Donald T. Valentine
- ------------------------ Vice Chairman of the Board and June 1, 1999
Donald T. Valentine Director
</TABLE>
II-3
<PAGE> 5
<TABLE>
<S> <C> <C>
/s/ James F. Gibbons
- ------------------------ Director June 1, 1999
James F. Gibbons
/s/ Robert L. Puette
- ------------------------ Director June 1, 1999
Robert L. Puette
- ------------------------ Director June --, 1999
Masayoshi Son
/s/ Steven M. West
- ------------------------ Director June 1, 1999
Steven M. West
/s/ Edward R. Kozel
- ------------------------ Director June 1, 1999
Edward R. Kozel
- ------------------------ Director June --, 1999
Carol A. Bartz
/s/ James C. Morgan
- ------------------------ Director June 1, 1999
James C. Morgan
/s/ Mary Cirillo
- ------------------------ Director June 1, 1999
Mary Cirillo
/s/ Arun Sarin
- ------------------------ Director June 1, 1999
Arun Sarin
</TABLE>
II-4
<PAGE> 6
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
EXHIBITS
TO
FORM S-8
UNDER
SECURITIES ACT OF 1933
CISCO SYSTEMS, INC.
<PAGE> 7
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Number Exhibit
- -------------- -------
<S> <C>
4 Instruments Defining the Rights of Stockholders. Reference is
made to Registrant's Registration Statements No. 000-18225 on
Form 8-A, together with the amendments and exhibits thereto,
which are incorporated herein by reference pursuant to Items
3(d) and 3(e).
5 Opinion and consent of Brobeck, Phleger & Harrison LLP.
23.1 Consent of PricewaterhouseCoopers LLP, Independent Accountants.
23.2 Consent of Brobeck, Phleger & Harrison LLP is contained in
Exhibit 5.
24 Power of Attorney. Reference is made to page II-3 of this
Registration Statement.
99.1 Fibex Systems 1997 Stock Option Plan.
99.2 Form of Notice of Stock Option Grant-Installment Option.
99.3 Form of Stock Option Agreement-Installment Option.
99.4 Form of Stock Option Agreement-Immediately Exercisable Option.
99.5 Form of Exercise Notice and Restricted Stock Purchase
Agreement-Installment Option.
99.6 Form of Stock Option Exercise Agreement-Immediately Exercisable
Option.
99.7 Form of Stock Option Assumption Agreement.
</TABLE>
<PAGE> 1
EXHIBIT 5
OPINION AND CONSENT OF BROBECK, PHLEGER & HARRISON LLP
June 1, 1999
Cisco Systems, Inc.
170 West Tasman Drive
San Jose, California 95134-1706
Re: Cisco Systems, Inc. - Registration Statement for
Offering of 184,991 Shares of Common Stock
Dear Ladies and Gentlemen:
We have acted as counsel to Cisco Systems, Inc., a California
corporation (the "Company"), in connection with the registration on Form S-8
(the "Registration Statement") under the Securities Act of 1933, as amended, of
184,991 shares of common stock (the "Shares") and related stock options under
Fibex Systems 1997 Stock Option Plan (the "Plan").
This opinion is being furnished in accordance with the
requirements of Item 8 of Form S-8 and Item 601(b)(5)(i) of Regulation S-K.
We have reviewed the Company's charter documents and the
corporate proceedings taken by the Company in connection with the assumption of
the Plan and the options outstanding thereunder. Based on such review, we are of
the opinion that if, as and when the Shares are issued and sold (and the
consideration therefor received) pursuant to the provisions of option agreements
duly authorized under the Plan and in accordance with the Registration
Statement, such Shares will be duly authorized, legally issued, fully paid and
nonassessable.
We consent to the filing of this opinion letter as Exhibit 5 to
the Registration Statement.
This opinion letter is rendered as of the date first written
above and we disclaim any obligation to advise you of facts, circumstances,
events or developments which hereafter may be brought to our attention and which
may alter, affect or modify the opinion expressed herein. Our opinion is
expressly limited to the matters set forth above and we render no opinion,
whether by implication or otherwise, as to any other matters relating to the
Company, the Plan or the Shares.
Very truly yours,
/s/ BROBECK, PHLEGER & HARRISON LLP
-----------------------------------
BROBECK, PHLEGER & HARRISON LLP
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this Registration
Statement on Form S-8 (to register Fibex options) of our report dated August 4,
1998, relating to the financial statements, which appears in the Cisco
Systems, Inc.'s Annual Report on Form 10-K for the year ended July 25, 1998. We
also consent to the incorporation by reference of our report dated August 4,
1998 relating to the financial statement schedule, which appears in such Annual
Report on Form 10-K.
/s/ PricewaterhouseCoopers LLP
------------------------------
PricewaterhouseCoopers LLP
San Jose, California
May 28, 1999
<PAGE> 1
EXHIBIT 99.1
FIBEX SYSTEMS 1997 STOCK OPTION PLAN
<PAGE> 2
FIBEX SYSTEMS
1997 STOCK OPTION PLAN
AS ADOPTED MAY 23, 1997
1. PURPOSE. The purpose of this Plan is to provide incentives to
attract, retain and motivate eligible persons whose present and potential
contributions are important to the success of the Company, its Parent and
Subsidiaries, by offering them an opportunity to participate in the Company's
future performance through awards of Options. Capitalized terms not defined in
the text are defined in Section 21. This Plan is intended to be a written
compensatory benefit plan within the meaning of Rule 701 promulgated under the
Securities Act.
2. SHARES SUBJECT TO THE PLAN.
2.1 Number of Shares Available. Subject to Sections 2.2 and 16,
the total number of Shares reserved and available for grant and issuance
pursuant to this Plan will be 3,050,000 Shares or such lesser number of Shares
as permitted under Section 260.140.45 of Title 10 of the California Code of
Regulations. Subject to Sections 2.2 and 16, Shares will again be available for
grant and issuance in connection with future Options under this Plan that are
subject to issuance upon exercise of an Option but cease to be subject to such
Option for any reason other than exercise of such Option. At all times the
Company will reserve and keep available a sufficient number of Shares as will be
required to satisfy the requirements of all outstanding Options granted under
this Plan.
2.2 Adjustment of Shares. In the event that the number of
outstanding shares of the Company's Common Stock is changed by a stock dividend,
recapitalization, stock split, reverse stock split, subdivision, combination,
reclassification or similar change in the capital structure of the Company
without consideration, then (a) the number of Shares reserved for issuance under
this Plan and (b) the Exercise Prices of and number of Shares subject to
outstanding Options, will be proportionately adjusted, subject to any required
action by the Board or the stockholders of the Company and compliance with
applicable securities laws; provided, however, that fractions of a Share will
not be issued but will either be paid in cash at the Fair Market Value of such
fraction of a Share or will be rounded down to the nearest whole Share, as
determined by the Committee; and provided, further, that the Exercise Price of
any Option may not be decreased to below the par value of the Shares.
3. ELIGIBILITY. ISOs (as defined in Section 5 below) may be granted only
to employees (including officers and directors who are also employees) of the
Company or of a Parent or Subsidiary of the Company. Nonqualified Stock Options
(as defined in Section 5 below) may be granted to employees, officers, directors
and consultants of the Company or of any Parent or Subsidiary of the Company;
provided such consultants render bona fide services not in connection with the
offer and sale of securities in a capital-raising transaction. A person may be
granted more than one Option under this Plan.
<PAGE> 3
4. ADMINISTRATION.
4.1 Committee Authority. This Plan will be administered by the
Committee or the Board acting as the Committee. Subject to the general purposes,
terms and conditions of this Plan, and to the direction of the Board, the
Committee will have full power to implement and carry out this Plan. Without
limitation, the Committee will have the authority to:
(a) construe and interpret this Plan, any Stock Option
Agreement (as defined in Section 5 below) and any other
agreement or document executed pursuant to this Plan;
(b) prescribe, amend and rescind rules and regulations
relating to this Plan;
(c) select persons to receive Options;
(d) determine the form and terms of Options;
(e) determine the number of Shares or other consideration
subject to Options;
(f) determine whether Options will be granted singly, in
combination with, in tandem with, in replacement of, or
as alternatives to, any other incentive or compensation
plan of the Company or any Parent or Subsidiary of the
Company;
(g) grant waivers of Plan or Option conditions;
(h) determine the vesting and exercisability of Options;
(i) correct any defect, supply any omission, or reconcile
any inconsistency in this Plan, any Option, any Stock
Option Agreement (as defined in Section 5 below) or any
Exercise Agreement (as defined in Section 5 below);
(j) determine whether an Option has been earned; and
(k) make all other determinations necessary or advisable for
the administration of this Plan.
4.2 Committee Discretion. Any determination made by the
Committee with respect to any Option will be made in its sole discretion at the
time of grant of the Option or, unless in contravention of any express term of
this Plan or Option, and subject to Section 5.9, at any later time, and such
determination will be final and binding on the Company and on all persons having
an interest in any Option under this Plan. The Committee may delegate to one or
more officers of the Company the authority to grant Options under this Plan.
5. OPTIONS. The Committee may grant Options to eligible persons and will
determine whether such Options will be Incentive Stock Options within the
meaning of the Code ("ISOS") or Nonqualified Stock Options ("NQSOS"), the number
of Shares subject to the Option,
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<PAGE> 4
the Exercise Price of the Option, the period during which the Option may be
exercised, and all other terms and conditions of the Option, subject to the
following:
5.1 Form of Option Grant. Each Option granted under this Plan
will be evidenced by an Agreement which will expressly identify the Option as an
ISO or an NQSO ("STOCK OPTION AGREEMENT"), and will be in such form and contain
such provisions (which need not be the same for each Participant) as the
Committee may from time to time approve, and which will comply with and be
subject to the terms and conditions of this Plan.
5.2 Date of Grant. The date of grant of an Option will be the
date on which the Committee makes the determination to grant such Option, unless
otherwise specified by the Committee. The Stock Option Agreement and a copy of
this Plan will be delivered to the Participant within a reasonable time after
the granting of the Option.
5.3 Exercise Period. Options may be exercisable immediately
(subject to repurchase pursuant to Section 10 of this Plan) or may be
exercisable within the times or upon the events determined by the Committee as
set forth in the Stock Option Agreement governing such Option; provided,
however, that no Option will be exercisable after the expiration of ten (10)
years from the date the Option is granted; and provided further that no ISO
granted to a person who directly or by attribution owns more than ten percent
(10%) of the total combined voting power of all classes of stock of the Company
or of any Parent or Subsidiary of the Company ("TEN PERCENT STOCKHOLDER") will
be exercisable after the expiration of five (5) years from the date the ISO is
granted. The Committee also may provide for Options to become exercisable at one
time or from time to time, periodically or otherwise, in such number of Shares
or percentage of Shares as the Committee determines. Subject to earlier
termination of the Option as provided herein, each Participant who is not an
officer, director or consultant of the Company or of a Parent or Subsidiary of
the Company shall have the right to exercise an Option granted hereunder at the
rate of at least twenty percent (20%) per year over five (5) years from the date
such Option is granted.
5.4 Exercise Price. The Exercise Price of an Option will be
determined by the Committee when the Option is granted and may not be less than
85% of the Fair Market Value of the Shares on the date of grant; provided that
(i) the Exercise Price of an ISO will not be less than 100% of the Fair Market
Value of the Shares on the date of grant and (ii) the Exercise Price of any
Option granted to a Ten Percent Stockholder will not be less than 110% of the
Fair Market Value of the Shares on the date of grant. Payment for the Shares
purchased must be made in accordance with Section 6 of this Plan.
5.5 Method of Exercise. Options may be exercised only by
delivery to the Company of a written stock option exercise agreement (the
"EXERCISE AGREEMENT") in a form approved by the Committee (which need not be the
same for each Participant), stating the number of Shares being purchased, the
restrictions imposed on the Shares purchased under such Exercise Agreement, if
any, and such representations and agreements regarding Participant's investment
intent and access to information and other matters, if any, as may be required
or
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<PAGE> 5
desirable by the Company to comply with applicable securities laws, together
with payment in full of the Exercise Price, and any applicable taxes, for the
number of Shares being purchased.
5.6 Termination. Subject to earlier termination pursuant to
Sections 16 or 17 and notwithstanding the exercise periods set forth in the
Stock Option Agreement, exercise of an Option will always be subject to the
following:
(a) If the Participant is Terminated for any reason
except death, Disability or Cause, then the
Participant may exercise such Participant's
Options, only to the extent that such Options
are exercisable upon the Termination Date and
such Options must be exercised by the
Participant within three (3) months after the
Termination Date (or within such shorter time
period, not less than thirty (30) days after the
Termination Date) or within such longer time
period not exceeding five (5) years after the
Termination Date as may be determined by the
Committee) with any exercise beyond three (3)
months after the Termination Date deemed to be
an NQSO, but in any event, no later than the
expiration date of the Options.
(b) If the Participant is Terminated because of
Participant's death or Disability (or the
Participant dies within three (3) months after a
Termination other than because of Participant's
Disability or for Cause), then Participant's
Options may be exercised, only to the extent
that such Options are exercisable by Participant
on the Termination Date and must be exercised by
Participant (or Participant's legal
representative or authorized assignee), within
twelve (12) months after the Termination Date
(or within such shorter time period, not less
than six (6) months after the Termination Date)
or within such longer time period not exceeding
five (5) years after the Termination Date as may
be determined by the Committee with any exercise
beyond (a) three (3) months after the
Termination Date when the Termination is for any
reason other than the Participant's death or
disability, within the meaning of Section
22(e)(3) of the Code, or (b) twelve (12) months
after the Termination Date when the Termination
is because of Participant's death or disability,
within the meaning of Section 22(e)(3) of the
Code, deemed to be an NQSO, but in any event no
later than the expiration date of the Options.
(c) If the Participant is terminated for Cause, then
Participant's Options shall expire on such
Participant's Termination Date, or at such later
time and on such conditions as are determined by
the Committee.
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<PAGE> 6
5.7 Limitations on Exercise. The Committee may specify a
reasonable minimum number of Shares that may be purchased on exercise of an
Option, provided that such minimum number will not prevent Participant from
exercising the Option for the full number of Shares for which it is then
exercisable.
5.8 Limitations on ISOs. The aggregate Fair Market Value
(determined as of the date of grant) of Shares with respect to which ISOs are
exercisable for the first time by a Participant during any calendar year (under
this Plan or under any other incentive stock option plan of the Company or any
Parent or Subsidiary of the Company) will not exceed $100,000. If the Fair
Market Value of Shares on the date of grant with respect to which ISOs are
exercisable for the first time by a Participant during any calendar year exceeds
$100,000, then the Options for the first $100,000 worth of Shares to become
exercisable in such calendar year will be ISOs and the Options for the amount in
excess of $100,000 that become exercisable in that calendar year will be NQSOs.
In the event that the Code or the regulations promulgated thereunder are amended
after the Effective Date (as defined in Section 17 below) to provide for a
different limit on the Fair Market Value of Shares permitted to be subject to
ISOs, then such different limit will be automatically incorporated herein and
will apply to any Options granted after the effective date of such amendment.
5.9 Modification, Extension or Renewal. The Committee may
modify, extend or renew outstanding Options and authorize the grant of new
Options in substitution therefor, provided that any such action may not, without
the written consent of a Participant, impair any of such Participant's rights
under any Option previously granted. Any outstanding ISO that is modified,
extended, renewed or otherwise altered will be treated in accordance with
Section 424(h) of the Code. The Committee may reduce the Exercise Price of
outstanding Options without the consent of Participants affected by a written
notice to them; provided, however, that the Exercise Price may not be reduced
below the minimum Exercise Price that would be permitted under Section 5.4 of
this Plan for Options granted on the date the action is taken to reduce the
Exercise Price; provided, further, that the Exercise Price will not be reduced
below the par value of the Shares, if any.
5.10 No Disqualification. Notwithstanding any other provision in
this Plan, no term of this Plan relating to ISOs will be interpreted, amended or
altered, nor will any discretion or authority granted under this Plan be
exercised, so as to disqualify this Plan under Section 422 of the Code or,
without the consent of the Participant affected, to disqualify any ISO under
Section 422 of the Code.
6. PAYMENT FOR SHARE PURCHASES.
6.1 Payment. Payment for Shares purchased pursuant to this Plan may be
made in cash (by check) or, where expressly approved for the Participant by the
Committee and where permitted by law:
(a) by cancellation of indebtedness of the Company to the
Participant;
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<PAGE> 7
(b) by surrender of shares that either: (1) have been owned
by the Participant for more than six (6) months and have
been paid for within the meaning of SEC Rule 144 (and,
if such shares were purchased from the Company by use of
a promissory note, such note has been fully paid with
respect to such shares); or (2) were obtained by the
Participant in the public market;
(c) by tender of a full recourse promissory note having such
terms as may be approved by the Committee and bearing
interest at a rate sufficient to avoid imputation of
income under Sections 483 and 1274 of the Code;
provided, however, that Participants who are not
employees or directors of the Company will not be
entitled to purchase Shares with a promissory note
unless the note is adequately secured by collateral
other than the Shares; provided, further, that the
portion of the Exercise Price equal to the par value of
the Shares must be paid in cash or other legal
consideration permitted by the Delaware General
Corporation Law.
(d) by waiver of compensation due or accrued to the
Participant for services rendered;
(e) provided that a public market for the Company's stock
exists:
(1) through a "same day sale" commitment from the
Participant and a broker-dealer that is a member
of the National Association of Securities
Dealers (an "NASD DEALER") whereby the
Participant irrevocably elects to exercise the
Option and to sell a portion of the Shares so
purchased to pay for the Exercise Price, and
whereby the NASD Dealer irrevocably commits upon
receipt of such Shares to forward the Exercise
Price directly to the Company; or
(2) through a "margin" commitment from the
Participant and an NASD Dealer whereby the
Participant irrevocably elects to exercise the
Option and to pledge the Shares so purchased to
the NASD Dealer in a margin account as security
for a loan from the NASD Dealer in the amount of
the Exercise Price, and whereby the NASD Dealer
irrevocably commits upon receipt of such Shares
to forward the Exercise Price directly to the
Company; or
(f) by any combination of the foregoing.
6.2 Loan Guarantees. The Committee may help the Participant pay
for Shares purchased under this Plan by authorizing a guarantee by the Company
of a third-party loan to the Participant.
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<PAGE> 8
7. WITHHOLDING TAXES.
7.1 Withholding Generally. Whenever Shares are to be issued in
satisfaction of Options granted under this Plan, the Company may require the
Participant to remit to the Company an amount sufficient to satisfy federal,
state and local withholding tax requirements prior to the delivery of any
certificate or certificates for such Shares. Whenever, under this Plan, payments
in satisfaction of Options are to be made in cash, such payment will be net of
an amount sufficient to satisfy federal, state, and local withholding tax
requirements.
7.2 Stock Withholding. When, under applicable tax laws, a
Participant incurs tax liability in connection with the exercise or vesting of
any Option that is subject to tax withholding and the Participant is obligated
to pay the Company the amount required to be withheld, the Committee may in its
sole discretion allow the Participant to satisfy the minimum withholding tax
obligation by electing to have the Company withhold from the Shares to be issued
that number of Shares having a Fair Market Value equal to the minimum amount
required to be withheld, determined on the date that the amount of tax to be
withheld is to be determined. All elections by a Participant to have Shares
withheld for this purpose will be made in accordance with the requirements
established by the Committee and be in writing in a form acceptable to the
Committee.
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<PAGE> 9
8. PRIVILEGES OF STOCK OWNERSHIP.
8.1 Voting and Dividends. No Participant will have any of the
rights of a stockholder with respect to any Shares until the Shares are issued
to the Participant. After Shares are issued to the Participant, the Participant
will be a stockholder and have all the rights of a stockholder with respect to
such Shares, including the right to vote and receive all dividends or other
distributions made or paid with respect to such Shares; provided, that the
Participant will have no right to retain such stock dividends or stock
distributions with respect to Unvested Shares that are repurchased pursuant to
Section 10. The Company will comply with Section 260.140.1 of Title 10 of the
California Code of Regulations with respect to the voting rights of Common
Stock.
8.2 Financial Statements. The Company will provide financial
statements to each Participant prior to such Participant's purchase of Shares
under this Plan, and to each Participant annually during the period such
Participant has Options outstanding, or as otherwise required or permitted under
Section 260.140.46 of Title 10 of the California Code of Regulations.
Notwithstanding the foregoing, the Company will not be required to provide such
financial statements to Participants whose services in connection with the
Company assure them access to equivalent information.
9. TRANSFERABILITY. Options granted under this Plan, and any interest
therein, will not be transferable or assignable by Participant, and may not be
made subject to execution, attachment or similar process, otherwise than by will
or by the laws of descent and distribution. During the lifetime of the
Participant an Option will be exercisable only by the Participant, and any
elections with respect to an Option, may be made only by the Participant.
10. RESTRICTIONS ON SHARES. At the discretion of the Committee, the
Company may reserve to itself and/or its assignee(s) in the Stock Option
Agreement (a) a right of first refusal to purchase all Shares that a Participant
(or a subsequent transferee) may propose to transfer to a third party, unless
otherwise not permitted by Section 25102(o) of the California Corporations Code,
provided, that such right of first refusal terminates upon the Company's initial
public offering of Common Stock pursuant to an effective registration statement
filed under the Securities Act and/or (b) a right to repurchase Unvested Shares
held by a Participant following such Participant's Termination at any time
within ninety (90) days after Participant's Termination Date (or in the case of
securities issued upon exercise of an Option after the Participant's Termination
Date, within 90 days after the date of such exercise) for cash and/or
cancellation of purchase money indebtedness, at the Participant's Exercise
Price, provided, that to the extent the Participant is not an officer, director
or consultant of the Company or of a Parent or Subsidiary of the Company such
right of repurchase lapses at the rate of at least twenty percent (20%) per year
over five (5) years from the date of grant of the Option.
11. CERTIFICATES. All certificates for Shares or other securities
delivered under this Plan will be subject to such stock transfer orders, legends
and other restrictions as the Committee may deem necessary or advisable,
including restrictions under any applicable federal,
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<PAGE> 10
state or foreign securities law, or any rules, regulations and other
requirements of the SEC or any stock exchange or automated quotation system upon
which the Shares may be listed or quoted.
12. ESCROW; PLEDGE OF SHARES. To enforce any restrictions on a
Participant's Shares, the Committee may require the Participant to deposit all
certificates representing Shares, together with stock powers or other
instruments of transfer approved by the Committee, appropriately endorsed in
blank, with the Company or an agent designated by the Company to hold in escrow
until such restrictions have lapsed or terminated, and the Committee may cause a
legend or legends referencing such restrictions to be placed on the
certificates. Any Participant who is permitted to execute a promissory note as
partial or full consideration for the purchase of Shares under this Plan will be
required to pledge and deposit with the Company all or part of the Shares so
purchased as collateral to secure the payment of Participant's obligation to the
Company under the promissory note; provided, however, that the Committee may
require or accept other or additional forms of collateral to secure the payment
of such obligation and, in any event, the Company will have full recourse
against the Participant under the promissory note notwithstanding any pledge of
the Participant's Shares or other collateral. In connection with any pledge of
the Shares, Participant will be required to execute and deliver a written pledge
agreement in such form as the Committee will from time to time approve. The
Shares purchased with the promissory note may be released from the pledge on a
pro rata basis as the promissory note is paid.
13. EXCHANGE AND BUYOUT OF OPTIONS. The Committee may, at any time or
from time to time, authorize the Company, with the consent of the respective
Participants, to issue new Options in exchange for the surrender and
cancellation of any or all outstanding Options. The Committee may at any time
buy from a Participant an Option previously granted with payment in cash, shares
of Common Stock of the Company (including restricted stock) or other
consideration, based on such terms and conditions as the Committee and the
Participant may agree.
14. SECURITIES LAW AND OTHER REGULATORY COMPLIANCE. This Plan is
intended to comply with Section 25102(o) of the California Corporations Code.
Any provision of this Plan which is inconsistent with Section 25102(o) shall,
without further act or amendment by the Company or the Board, be reformed to
comply with the requirements of Section 25102(o). An Option will not be
effective unless such Option is in compliance with all applicable federal and
state securities laws, rules and regulations of any governmental body, and the
requirements of any stock exchange or automated quotation system upon which the
Shares may then be listed or quoted, as they are in effect on the date of grant
of the Option and also on the date of exercise or other issuance.
Notwithstanding any other provision in this Plan, the Company will have no
obligation to issue or deliver certificates for Shares under this Plan prior to
(a) obtaining any approvals from governmental agencies that the Company
determines are necessary or advisable, and/or (b) compliance with any exemption,
completion of any registration or other qualification of such Shares under any
state or federal law or ruling of any governmental body that the Company
determines to be necessary or advisable. The Company will be under no obligation
to register the Shares with the SEC or to effect compliance with the exemption,
registration, qualification or listing requirements of any state securities
laws, stock
-9-
<PAGE> 11
exchange or automated quotation system, and the Company will have no liability
for any inability or failure to do so.
15. NO OBLIGATION TO EMPLOY. Nothing in this Plan or any Option granted
under this Plan will confer or be deemed to confer on any Participant any right
to continue in the employ of, or to continue any other relationship with, the
Company or any Parent or Subsidiary of the Company or limit in any way the right
of the Company or any Parent or Subsidiary of the Company to terminate
Participant's employment or other relationship at any time, with or without
cause.
16. CORPORATE TRANSACTIONS.
16.1 Assumption or Replacement of Options by Successor. In the
event of (a) a dissolution or liquidation of the Company, (b) a merger or
consolidation in which the Company is not the surviving corporation (other than
a merger or consolidation with a wholly-owned subsidiary, a reincorporation of
the Company in a different jurisdiction, or other transaction in which there is
no substantial change in the stockholders of the Company or their relative stock
holdings and the Options granted under this Plan are assumed, converted or
replaced by the successor corporation, which assumption conversion or
replacement will be binding on all Participants), (c) a merger in which the
Company is the surviving corporation but after which the stockholders of the
Company immediately prior to such merger (other than any stockholder which
merges with the Company in such Merger, or which owns or controls another
corporation which merges, with the Company in such merger) cease to own their
shares or other equity interests in the Company, or (d) the sale of all or
substantially all of the assets of the Company, any or all outstanding Options
may be assumed, converted or replaced by the successor corporation (if any),
which assumption, conversion or replacement will be binding on all Participants.
In the alternative, the successor corporation may substitute equivalent Options
or provide substantially similar consideration to Participants as was provided
to stockholders (after taking into account the existing provisions of the
Options). The successor corporation may also issue, in place of outstanding
Shares of the Company held by the Participant, substantially similar shares or
other property subject to repurchase restrictions and other provisions no less
favorable to the Participant than those which applied to such outstanding Shares
immediately prior to such transaction described in this Subsection 16.1. In the
event such successor corporation (if any) does not assume or substitute Options,
as provided above, pursuant to a transaction described in this Subsection 16.1,
then notwithstanding any other provision in this Plan to the contrary, such
Options will expire on such transaction at such time and on such conditions as
the Board will determine.
16.2 Other Treatment of Options. Subject to any greater rights
granted to Participants under the foregoing provisions of this Section 16, in
the event of the occurrence of any transaction described in Section 16.1, any
outstanding Options will be treated as provided in the applicable agreement or
plan of merger, consolidation, dissolution, liquidation or sale of assets.
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<PAGE> 12
16.3 Assumption of Options by the Company. The Company, from
time to time, also may substitute or assume outstanding options granted by
another company, whether in connection with an acquisition of such other company
or otherwise, by either (a) granting an Option under this Plan in substitution
of such other company's option, or (b) assuming such option as if it had been
granted under this Plan if the terms of such assumed option could be applied to
an Option granted under this Plan. Such substitution or assumption will be
permissible if the holder of the substituted or assumed option would have been
eligible to be granted an Option under this Plan if the other company had
applied the rules of this Plan to such grant. In the event the Company assumes
an option granted by another company, the terms and conditions of such option
will remain unchanged (except that the exercise price and the number and nature
of shares issuable upon exercise of any such option will be adjusted
appropriately pursuant to Section 424(a) of the Code). In the event the Company
elects to grant a new Option rather than assuming an existing option, such new
Option may be granted with a similarly adjusted Exercise Price.
17. ADOPTION AND STOCKHOLDER APPROVAL. This Plan will become effective
on the date that it is adopted by the Board (the "EFFECTIVE DATE"). This Plan
will be approved by the stockholders of the Company (excluding Shares issued
pursuant to this Plan), consistent with applicable laws, within twelve (12)
months before or after the Effective Date. Upon the Effective Date, the Board
may grant Options pursuant to this Plan; provided, however, that no Option may
be exercised prior to stockholder approval of this Plan.
18. TERM OF PLAN/GOVERNING LAW. Unless earlier terminated as provided
herein, this Plan will terminate ten (10) years from the Effective Date or, if
earlier, the date of stockholder approval. This Plan and all agreements
hereunder shall be governed by and construed in accordance with the laws of the
State of California.
19. AMENDMENT OR TERMINATION OF PLAN. Subject to Section 5.9, the Board
may at any time terminate or amend this Plan in any respect, including without
limitation amendment of any form of Stock Option Agreement or instrument to be
executed pursuant to this Plan; provided, however, that the Board will not,
without the approval of the stockholders of the Company, amend this Plan in any
manner that requires such stockholder approval pursuant to the Code or the
regulations promulgated thereunder as such provisions apply to ISO plans.
20. NONEXCLUSIVITY OF THE PLAN. Neither the adoption of this Plan by the
Board, the submission of this Plan to the stockholders of the Company for
approval, nor any provision of this Plan will be construed as creating any
limitations on the power of the Board to adopt such additional compensation
arrangements as it may deem desirable, including, without limitation, the
granting of stock options and other equity awards otherwise than under this
Plan, and such arrangements may be either generally applicable or applicable
only in specific cases.
21. DEFINITIONS. As used in this Plan, the following terms will have the
following meanings:
"BOARD" means the Board of Directors of the Company.
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<PAGE> 13
"CAUSE" means Termination because of (i) any willful material
violation by the Participant of any law or regulation applicable to the business
of the Company or a Parent or Subsidiary of the Company, the Participant's
conviction for or guilty plea to, a felony or a crime involving moral turpitude
or any willful perpetration by the Participant of a common law fraud, (ii) the
Participant's commission of an act of personal dishonesty which involves a
personal profit in connection with the Company or any other entity having a
business relationship with the Company, (iii) any material breach by the
Participant of any material provision of any agreement or understanding between
the Company and the Participant regarding the terms of the Participant's service
as an employee, director or consultant to the Company or a Parent or Subsidiary
of the Company, including without limitation, the willful and continued failure
or refusal of the Participant to perform the material duties required of such
Participant as an employee, director or consultant of the Company or a Parent or
Subsidiary of the Company, other than as a result of having a Disability, or a
breach of any applicable invention assignment and confidentiality agreement or
similar agreement between the Company or a Parent or Subsidiary of the Company
and the Participant, (iv) Participant's intentional disregard of the policies of
the Company or a Parent or Subsidiary of the Company so as to cause loss, damage
or injury to the property, reputation or employees of the Company or a Parent or
Subsidiary of the Company, or (v) any other misconduct by the Participant which
is materially injurious to the financial condition or business reputation of, or
is otherwise materially injurious to, the Company or a Parent or Subsidiary of
the Company.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMMITTEE" means the committee appointed by the Board to
administer this Plan, or if no committee is appointed, the Board.
"COMPANY" means Fibex Systems or any successor corporation.
"DISABILITY" means a disability, whether temporary or permanent,
partial or total, as determined by the Committee.
"EXERCISE PRICE" means the price at which a holder of an Option
may purchase the Shares issuable upon exercise of the Option.
"FAIR MARKET VALUE" means, as of any date, the value of a share
of the Company's Common Stock determined as follows:
(a) if such Common Stock is then quoted on the Nasdaq
National Market, its closing price on the Nasdaq
National Market on the date of determination as reported
in The Wall Street Journal;
(b) if such Common Stock is publicly traded and is then
listed on a national securities exchange, its closing
price on the date of determination on the principal
national securities exchange on which the Common Stock
is listed or admitted to trading as reported in The Wall
Street Journal;
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<PAGE> 14
(c) if such Common Stock is publicly traded but is not
quoted on the Nasdaq National Market nor listed or
admitted to trading on a national securities exchange,
the average of the closing bid and asked prices on the
date of determination as reported by The Wall Street
Journal (or, if not so reported, as otherwise reported
by any newspaper or other source as the Board may
determine); or
(d) if none of the foregoing is applicable, by the Committee
in good faith.
"OPTION" means an award of an option to purchase Shares pursuant
to Section 5.
"PARENT" means any corporation (other than the Company) in an
unbroken chain of corporations ending with the Company if each of such
corporations other than the Company owns stock possessing 50% or more of the
total combined voting power of all classes of stock in one of the other
corporations in such chain.
"PARTICIPANT" means a person who receives an Option under this
Plan.
"PLAN" means this Fibex Systems 1997 Stock Option Plan, as
amended from time to time.
"SEC" means the Securities and Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SHARES" means shares of the Company's Common Stock, par value
$0.0001 per share reserved for issuance under this Plan, as adjusted pursuant to
Sections 2 and 16, and any successor security.
"SUBSIDIARY" means any corporation (other than the Company) in
an unbroken chain of corporations beginning with the Company if each of the
corporations other than the last corporation in the unbroken chain owns stock
possessing 50% or more of the total combined voting power of all classes of
stock in one of the other corporations in such chain.
"TERMINATION" or "TERMINATED" means, for purposes of this Plan
with respect to a Participant, that the Participant has for any reason ceased to
provide services as an employee, officer, director or consultant to the Company
or a Parent or Subsidiary of the Company. Participant will not be deemed to have
ceased to provide services in the case of (i) sick leave, (ii) military leave,
or (iii) any other leave of absence approved by the Committee, provided that
such leave is for a period of not more than 90 days unless reinstatement (or
reemployment in the case of an employee with an ISO) upon the expiration of such
leave is guaranteed by contract or statute, or unless provided otherwise
pursuant to formal policy adopted from time to time by the Company and issued
and promulgated in writing. In the case of any Participant on (i) sick leave,
(ii) military leave or (iii) an approved leave of absence, the Committee may
make such provisions respecting suspension of vesting of the Option while on
leave from the Company or a Subsidiary as it may deem appropriate, except that
in no event may an Option be exercised after
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<PAGE> 15
the expiration of the term set forth in the Stock Option Agreement. The
Committee will have sole discretion to determine whether a Participant has
ceased to provide services and the effective date on which the Participant
ceased to provide services (the "Termination Date").
"UNVESTED SHARES" means "Unvested Shares" as defined in Section
2.2 of the Stock Option Agreement.
"VESTED SHARES" means "Vested Shares" as defined in Section 2.2
of the Stock Option Agreement.
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<PAGE> 1
EXHIBIT 99.2
FORM OF NOTICE OF STOCK OPTION GRANT-INSTALLMENT OPTION
<PAGE> 2
FIBEX SYSTEMS
1997 STOCK OPTION PLAN
NOTICE OF STOCK OPTION GRANT
Optionee:
<<Optionee>>
You have been granted an option to purchase Common Stock "Common Stock"
of Fibex Systems Corporation (the "Company") as follows:
<TABLE>
<S> <C>
Board Approval Date: <<BoardApprovalDate>>
Date of Grant: <<GrantDate>>
Vesting Commencement Date: <<VestingCommenceDate>>
Exercise Price per Share: $<<ExercisePrice>>
Total Number of Shares Granted: <<NoofShares>>
Total Exercise Price: $<<TotalExercisePrice>>
Type of Option: <<Type>>
Term/Expiration Date: <<ExpirDate>>
Vesting Schedule: This Option may be exercised, in whole or in part,
in accordance with the following schedule:
<<VestingSchedule>>
Termination Period: This Option may be exercised for 60 days after
termination of employment or consulting
relationship except as set out in Sections 6 and 7
of the Stock Option Agreement (but in no event
later than the Expiration Date).
</TABLE>
-1-
<PAGE> 3
By your signature and the signature of the Company's representative
below, you and the Company agree that this Option is granted under and governed
by the terms and conditions of the 1997 Stock Option Plan and the Stock Option
Agreement, both of which are attached and made a part of this document.
OPTIONEE: COMPANY: FIBEX SYSTEMS
__________________________________ By:_________________________________
<<Optionee>> Richard E. Hejmanowski, President
and Chief Executive Officer
-2-
<PAGE> 1
EXHIBIT 99.3
FORM OF STOCK OPTION AGREEMENT-INSTALLMENT OPTION
<PAGE> 2
FIBEX SYSTEMS
1997 STOCK OPTION PLAN
STOCK OPTION AGREEMENT
1. GRANT OF OPTION. Fibex Systems, a California corporation (the
"Company"), hereby grants to <<Optionee>> ("Optionee"), an option (the "Option")
to purchase a total number of shares of Common Stock (the "Shares") set forth in
the Notice of Stock Option Grant, at the exercise price per share set forth in
the Notice of Stock Option Grant (the "Exercise Price") subject to the terms,
definitions and provisions of the Fibex Systems 1997 Stock Option Plan (the
"Plan") adopted by the Company, which is incorporated herein by reference.
Unless otherwise defined herein, the terms defined in the Plan shall have the
same defined meanings in this Option.
If designated an Incentive Stock Option, this Option is intended to
qualify as an Incentive Stock Option as defined in Section 422 of the Code.
2. EXERCISE OF OPTION. This Option shall be exercisable during its Term
in accordance with the Vesting Schedule set out in the Notice of Stock Option
Grant and with the provisions of Section 9 of the Plan as follows:
(a) RIGHT TO EXERCISE.
(i) This Option may not be exercised for a fraction of a
share.
(ii) In the event of Optionee's death, disability or other
termination of employment, the exercisability of the Option is governed by
Sections 5, 6 and 7 below, subject to the limitation contained in Section
2(a)(i).
(iii) In no event may this Option be exercised after the
Expiration Date of this Option as set forth in the Notice of Stock Option Grant.
(b) METHOD OF EXERCISE. This Option shall be exercisable by
execution and delivery of the Exercise Notice and Restricted Stock Purchase
Agreement attached hereto as Exhibit A (the "Exercise Agreement") or of any
other form of written notice approved for such purpose by the Company which
shall state the election to exercise the Option, the number of Shares in respect
of which the Option is being exercised, and such other representations and
agreements as to the holder's investment intent with respect to such shares of
Common Stock as may be required by the Company pursuant to the provisions of the
Plan. Such written notice shall be signed by Optionee and shall be delivered in
person or by certified mail to the Secretary of the Company. The written notice
shall be accompanied by payment of the Exercise Price. This Option shall be
deemed to be exercised upon receipt by the Company of such written notice
accompanied by the Exercise Price.
No Shares will be issued pursuant to the exercise of an Option unless
such issuance and such exercise shall comply with all relevant provisions of
applicable law and the requirements of
<PAGE> 3
any stock exchange upon which the Shares may then be listed. Assuming such
compliance, for income tax purposes the Shares shall be considered transferred
to Optionee on the date on which the Option is exercised with respect to such
Shares.
3. METHOD OF PAYMENT. Payment of the Exercise Price shall be by any of
the following, or a combination thereof, at the election of Optionee:
(a) cash;
(b) check;
(c) surrender of other shares of Common Stock of the Company
which (i) in the case of Shares acquired pursuant to the exercise of a Company
option, have been owned by Optionee for more than six months on the date of
surrender, and (ii) have a Fair Market Value on the date of surrender equal to
the Exercise Price of the Shares as to which the Option is being exercised; or
(d) if there is a public market for the Shares and they are
registered under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), delivery of a properly executed exercise notice together with irrevocable
instructions to a broker to deliver promptly to the Company the amount of sale
or loan proceeds required to pay the Exercise Price.
4. RESTRICTIONS ON EXERCISE. This Option may not be exercised until such
time as the Plan has been approved by the stockholders of the Company, or if the
issuance of such Shares upon such exercise or the method of payment of
consideration for such shares would constitute a violation of any applicable
federal or state securities or other law or regulation, including any rule under
Part 207 of Title 12 of the Code of Federal Regulations as promulgated by the
Federal Reserve Board. As a condition to the exercise of this Option, the
Company may require Optionee to make any representation and warranty to the
Company as may be required by any applicable law or regulation.
5. TERMINATION OF RELATIONSHIP. In the event of termination of
Optionee's Continuous Status as an Employee or Consultant, Optionee may, to the
extent otherwise so entitled at the date of such termination (the "Termination
Date"), exercise this Option during the Termination Period set forth in the
Notice of Stock Option Grant. To the extent that Optionee was not entitled to
exercise this Option at such Termination Date, or if Optionee does not exercise
this Option within the Termination Period, the Option shall terminate.
6. DISABILITY OF OPTIONEE.
(a) Notwithstanding the provisions of Section 5 above, in the
event of termination of Optionee's Continuous Status as an Employee or
Consultant as a result of Optionee's total and permanent disability (as defined
in Section 22(e)(3) of the Code), Optionee may, but only within twelve months
from the Termination Date (but in no event later than the Expiration Date set
forth in the Notice of Stock Option Grant), exercise this Option to the extent
Optionee was entitled to exercise it as of such Termination Date. To the extent
that Optionee was not entitled to exercise the Option as of the Termination
Date, or if Optionee does not
2
<PAGE> 4
exercise such Option (to the extent so entitled) within the time specified in
this Section 6(a), the Option shall terminate.
(b) Notwithstanding the provisions of Section 5 above, in the
event of termination of Optionee's consulting relationship or Continuous Status
as an Employee as a result of disability not constituting a total and permanent
disability (as set forth in Section 22(e)(3) of the Code), Optionee may, but
only within six months from the Termination Date (but in no event later than the
Expiration Date set forth in the Notice of Stock Option Grant), exercise the
Option to the extent Optionee was entitled to exercise it as of such Termination
Date; provided, however, that if this is an Incentive Stock Option and Optionee
fails to exercise this Incentive Stock Option within three months from the
Termination Date, this Option will cease to qualify as an Incentive Stock Option
(as defined in Section 422 of the Code) and Optionee will be treated for federal
income tax purposes as having received ordinary income at the time of such
exercise in an amount generally measured by the difference between the Exercise
Price for the Shares and the Fair Market Value of the Shares on the date of
exercise. To the extent that Optionee was not entitled to exercise the Option at
the Termination Date, or if Optionee does not exercise such Option to the extent
so entitled within the time specified in this Section 6(b), the Option shall
terminate.
7. DEATH OF OPTIONEE. In the event of the death of Optionee (a) during
the Term of this Option and while an Employee or Consultant of the Company and
having been in Continuous Status as an Employee or Consultant since the date of
grant of the Option, or (b) within 30 days after Optionee's Termination Date,
the Option may be exercised at any time within six months following the date of
death (but in no event later than the Expiration Date set forth in the Notice of
Stock Option Grant), by Optionee's estate or by a person who acquired the right
to exercise the Option by bequest or inheritance, but only to the extent of the
right to exercise that had accrued at the Termination Date.
8. NON-TRANSFERABILITY OF OPTION. This Option may not be transferred in
any manner otherwise than by will or by the laws of descent or distribution and
may be exercised during the lifetime of Optionee only by him or her. The terms
of this Option shall be binding upon the executors, administrators, heirs,
successors and assigns of Optionee.
9. TERM OF OPTION. This Option may be exercised only within the Term set
forth in the Notice of Stock Option Grant, subject to the limitations set forth
in Section 7 of the Plan.
10. TAX CONSEQUENCES. Set forth below is a brief summary as of the date
of this Option of certain of the federal and California tax consequences of
exercise of this Option and disposition of the Shares under the laws in effect
as of the Date of Grant. THIS SUMMARY IS NECESSARILY INCOMPLETE, AND THE TAX
LAWS AND REGULATIONS ARE SUBJECT TO CHANGE. OPTIONEE SHOULD CONSULT A TAX
ADVISER BEFORE EXERCISING THIS OPTION OR DISPOSING OF THE SHARES.
(a) EXERCISE OF INCENTIVE STOCK OPTION. If this Option qualifies
as an Incentive Stock Option, there will be no regular federal or California
income tax liability upon the exercise of the Option, although the excess, if
any, of the Fair Market Value of the Shares on the date of exercise over the
Exercise Price will be treated as an adjustment to the alternative
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<PAGE> 5
minimum tax for federal tax purposes and may subject Optionee to the alternative
minimum tax in the year of exercise.
(b) EXERCISE OF NONSTATUTORY STOCK OPTION. If this Option does
not qualify as an Incentive Stock Option, there may be a regular federal income
tax liability and a California income tax liability upon the exercise of the
Option. Optionee will be treated as having received compensation income (taxable
at ordinary income tax rates) equal to the excess, if any, of the Fair Market
Value of the Shares on the date of exercise over the Exercise Price. If Optionee
is an employee, the Company will be required to withhold from Optionee's
compensation or collect from Optionee and pay to the applicable taxing
authorities an amount equal to a percentage of this compensation income at the
time of exercise.
(c) DISPOSITION OF SHARES. In the case of a Nonstatutory Stock
Option, if Shares are held for at least one year, any gain realized on
disposition of the Shares will be treated as long-term capital gain for federal
and California income tax purposes. In the case of an Incentive Stock Option, if
Shares transferred pursuant to the Option are held for at least one year after
exercise and are disposed of at least two years after the Date of Grant, any
gain realized on disposition of the Shares will also be treated as long-term
capital gain for federal and California income tax purposes. In either case, the
long-term capital gain will be taxed for federal income tax and alternative
minimum tax purposes at a maximum rate of 28% if the Shares are held more than
one year but less than 18 months after exercise and at 20% if the Shares are
held more than 18 months after exercise. If Shares purchased under an Incentive
Stock Option are disposed of within one year after exercise or within two years
after the Date of Grant, any gain realized on such disposition will be treated
as compensation income (taxable at ordinary income rates) to the extent of the
difference between the Exercise Price and the lesser of (i) the fair market
value of the Shares on the date of exercise, or (ii) the sale price of the
Shares.
(d) NOTICE OF DISQUALIFYING DISPOSITION OF INCENTIVE STOCK OPTION
SHARES. If the Option granted to Optionee herein is an Incentive Stock Option,
and if Optionee sells or otherwise disposes of any of the Shares acquired
pursuant to the Incentive Stock Option on or before the later of (i) the date
two years after the Date of Grant, or (ii) the date one year after the date of
exercise, Optionee shall immediately notify the Company in writing of such
disposition. Optionee acknowledges and agrees that he or she may be subject to
income tax withholding by the Company on the compensation income recognized by
Optionee from the early disposition by payment in cash or out of the current
earnings paid to Optionee.
11. WITHHOLDING TAX OBLIGATIONS. Optionee understands that, upon
exercising a Nonstatutory Stock Option, he or she will recognize income for tax
purposes in an amount equal to the excess of the then Fair Market Value of the
Shares over the Exercise Price. However, the timing of this income recognition
may be deferred for up to six months if Optionee is subject to Section 16 of the
Exchange Act. If Optionee is an employee, the Company will be required to
withhold from Optionee's compensation, or collect from Optionee and pay to the
applicable taxing authorities an amount equal to a percentage of this
compensation income. Additionally, Optionee may at some point be required to
satisfy tax withholding obligations with respect to the disqualifying
disposition of an Incentive Stock Option. Optionee shall satisfy his or her tax
withholding obligation arising upon the exercise of this Option by one or some
combination of the following methods: (a) by cash payment, (b) out of Optionee's
current compensation, (c) if
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<PAGE> 6
permitted by the Administrator, in its discretion, by surrendering to the
Company Shares which (i) in the case of Shares previously acquired from the
Company, have been owned by Optionee for more than six months on the date of
surrender, and (ii) have a Fair Market Value on the date of surrender equal to
or greater than Optionee's marginal tax rate times the ordinary income
recognized, or (d) by electing to have the Company withhold from the Shares to
be issued upon exercise of the Option that number of Shares having a Fair Market
Value equal to the amount required to be withheld. For this purpose, the Fair
Market Value of the Shares to be withheld shall be determined on the date that
the amount of tax to be withheld is to be determined (the "Tax Date").
If Optionee is subject to Section 16 of the Exchange Act (an "Insider"),
any surrender of previously owned Shares to satisfy tax withholding obligations
arising upon exercise of this Option must comply with the applicable provisions
of Rule 16b-3 promulgated under the Exchange Act ("Rule 16b-3").
All elections by Optionee to have Shares withheld to satisfy tax
withholding obligations shall be made in writing in a form acceptable to the
Administrator and shall be subject to the following restrictions:
(a) the election must be made on or prior to the applicable Tax
Date;
(b) once made, the election shall be irrevocable as to the
particular Shares of the Option as to which the election is made; and
(c) all elections shall be subject to the consent or disapproval
of the Administrator.
12. MARKET STANDOFF AGREEMENT. In connection with the initial public
offering of the Company's securities and upon request of the Company or the
underwriters managing such underwritten offering of the Company's securities,
Optionee hereby agrees not to sell, make any short sale of, loan, grant any
option for the purchase of, or otherwise dispose of any Shares (other than those
included in the registration) without the prior written consent of the Company
or such underwriters, as the case may be, for such period of time (not to exceed
180 days) from the effective date of such registration as may be requested by
the Company or such managing underwriters and to execute an agreement reflecting
the foregoing as may be requested by the underwriters at the time of the
Company's initial public offering.
[Signature Page Follows]
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<PAGE> 7
This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original and all of which together shall constitute one
document.
Fibex Systems
By: ____________________________________
Richard E. Hejmanowski, President
and Chief Executive Officer
OPTIONEE ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES PURSUANT TO
THE OPTION HEREOF IS EARNED ONLY BY CONTINUING EMPLOYMENT OR CONSULTANCY AT THE
WILL OF THE COMPANY (NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED THIS
OPTION OR ACQUIRING SHARES HEREUNDER). OPTIONEE FURTHER ACKNOWLEDGES AND AGREES
THAT NOTHING IN THIS AGREEMENT, NOR IN THE COMPANY'S STOCK PLAN WHICH IS
INCORPORATED HEREIN BY REFERENCE, SHALL CONFER UPON OPTIONEE ANY RIGHT WITH
RESPECT TO CONTINUATION OF EMPLOYMENT OR CONSULTANCY BY THE COMPANY, NOR SHALL
IT INTERFERE IN ANY WAY WITH OPTIONEE'S RIGHT OR THE COMPANY'S RIGHT TO
TERMINATE OPTIONEE'S EMPLOYMENT OR CONSULTANCY AT ANY TIME, WITH OR WITHOUT
CAUSE.
Optionee acknowledges receipt of a copy of the Plan and represents that
he or she is familiar with the terms and provisions thereof, and hereby accepts
this Option subject to all of the terms and provisions thereof. Optionee has
reviewed the Plan and this Option in their entirety, has had an opportunity to
obtain the advice of counsel prior to executing this Option and fully
understands all provisions of the Option. Optionee hereby agrees to accept as
binding, conclusive and final all decisions or interpretations of the
Administrator upon any questions arising under the Plan or this Option.
Dated: ________________________ ______________________________
<<Optionee>>
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<PAGE> 1
EXHIBIT 99.4
FORM OF STOCK OPTION AGREEMENT-IMMEDIATELY EXERCISABLE OPTION
<PAGE> 2
FIBEX SYSTEMS
1997 STOCK OPTION PLAN
STOCK OPTION AGREEMENT
(IMMEDIATELY EXERCISABLE OPTION)
This Stock Option Agreement (this "AGREEMENT") is made and
entered into as of the date of grant set forth below (the "DATE OF GRANT") by
and between Fibex Systems, a California corporation (the "COMPANY"), and the
participant named below ("PARTICIPANT"). Capitalized terms not defined herein
shall have the meaning ascribed to them in the Company's 1997 Stock Option Plan
(the "PLAN").
PARTICIPANT:
TOTAL OPTION SHARES:
EXERCISE PRICE PER SHARE: $
DATE OF GRANT: <<GRANT_DATE>>
FIRST VESTING DATE: <<VESTING_DATE>>
EXPIRATION DATE: <<EXPRTN_DATE>>
(UNLESS EARLIER TERMINATED UNDER SECTION 3 BELOW)
TYPE OF STOCK OPTION:
1. GRANT OF OPTION. The Company hereby grants to Participant an
option (this "OPTION") to purchase the total number of shares of Common Stock of
the Company set forth above (the "SHARES") at the Exercise Price Per Share set
forth above (the "EXERCISE PRICE"), subject to all of the terms and conditions
of this Agreement and the Plan. If designated as an Incentive Stock Option
above, this Option is intended to qualify as an "incentive stock option" ("ISO")
within the meaning of Section 422 of the Internal Revenue Code of 1986, as
amended (the "CODE").
<PAGE> 3
2. EXERCISE PERIOD.
2.1 Exercise Period of Option. This Option is immediately
exercisable although the Shares issued upon exercise of this Option will be
subject to the restrictions on transfer and Repurchase Options set forth in
Sections 8 and 9 below. For so long as Participant continues to provide services
to the Company or to any Parent or Subsidiary of the Company, the Shares
issuable upon exercise of this Option will become vested with respect to
twenty-five percent (25%) of the Shares the First Vesting Date set forth above
(the "FIRST VESTING DATE") and thereafter each month on the same day of the
month as the First Vesting Date an additional 2.0833333% of the Shares will
become vested until the Shares are vested with respect to 100% of the Shares,
provided that if application of the vesting percentage causes a fractional
share, such share shall be rounded down to the nearest whole share.
Notwithstanding any provision in the Plan or this Agreement to the contrary,
Options for Unvested Shares (as defined in Section 2.2 of this Agreement) will
not be exercisable on or after Participant's Termination Date.
2.2 Vesting of Options. Shares that are vested pursuant to
the schedule set forth in Section 2.1 are "VESTED SHARES." Shares that are not
vested pursuant to the schedule set forth in Section 2.1 are "UNVESTED SHARES."
Unvested Shares may not be sold or otherwise transferred by Participant without
the Company's prior written consent.
2.3 Expiration. this Option shall expire on the Expiration
Date set forth above or earlier as provided in Section 3 below and must be
exercised, if at all, on or before the Expiration Date.
3. TERMINATION.
3.1 Termination for Any Reason Except Death, Disability or
for Cause. If Participant is Terminated for any reason, except death, Disability
or for Cause, this Option may be exercised by Participant no later than three
(3) months after the Termination Date, but in any event no later than the
Expiration Date as to all or some of the Vested Shares calculated as of the
Termination Date.
3.2 Termination Because of Death or Disability. If
Participant is Terminated because of death or Disability of Participant (or the
Participant dies within three (3) months after Termination other than because of
Participant's Termination for Disability or for Cause) this Option may be
exercised by Participant (or Participant's legal representative) as to all or
some of the Vested Shares, calculated as of the Termination Date, no later than
twelve (12) months after the Termination Date, but in any event no later than
the Expiration Date. Any exercise beyond (a) three (3) months after the
Termination Date when the Termination is for any reason other than the
Participant's death or disability, within the meaning of Code Section 22(e)(3);
or (b) twelve (12) months after the Termination Date when the termination is for
Participant's disability, within the meaning of Code Section 22(e)(3), is deemed
to be an NQSO.
3.3 Termination for Cause. If Participant is Terminated
for Cause, then this Option will expire on Participant's Termination Date, or at
such later time and on such conditions as are determined by the Committee.
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<PAGE> 4
3.4 No Obligation to Employ. Nothing in the Plan or this
Agreement shall confer on Participant any right to continue in the employ of, or
other relationship with, the Company or any Parent or Subsidiary of the Company,
or limit in any way the right of the Company or any Parent or Subsidiary of the
Company to terminate Participant's employment or other relationship at any time,
with or without Cause.
4. MANNER OF EXERCISE.
4.1 Stock Option Exercise Agreement. To exercise this
Option, Participant (or in the case of exercise after Participant's death or
incapacity, Participant's executor, administrator, heir or legatee, as the case
may be) must deliver to the Company an executed stock option exercise agreement
in the form attached hereto as Exhibit A, or in such other form as may be
approved by the Company from time to time (the "EXERCISE AGREEMENT"), which
shall set forth, inter alia, Participant's election to exercise this Option, the
number of Shares being purchased, any restrictions imposed on the Shares and any
representations, warranties and agreements regarding Participant's investment
intent and access to information as may be required by the Company to comply
with applicable securities laws. If someone other than Participant exercises
this Option, then such person must submit documentation reasonably acceptable to
the Company that such person has the right to exercise this Option.
4.2 Limitations on Exercise. This Option may not be
exercised unless such exercise is in compliance with all applicable federal and
state securities laws, as they are in effect on the date of exercise. This
Option may not be exercised as to fewer than one hundred (100) Shares unless it
is exercised as to all Shares as to which this Option is then exercisable.
4.3 Payment. The Exercise Agreement shall be accompanied
by full payment of the Exercise Price for the shares being purchased in cash (by
check), or where permitted by law:
(a) by cancellation of indebtedness of the Company to the
Participant;
(b) by surrender of shares of the Company's Common Stock that:
(1) (A) either have been owned by Participant for more than
six (6) months and have been paid for within the meaning of
SEC Rule 144 (and, if such shares were purchased from the
Company by use of a promissory note, such note has been
fully paid with respect to such shares); or (B) were
obtained by Participant in the open public market; and (2)
are clear of all liens, claims, encumbrances or security
interests;
(c) by tender of a full recourse promissory note having such
terms as may be approved by the Committee and bearing
interest at a rate sufficient to avoid imputation of income
under Sections 483 and 1274 of the Code; provided, however,
that Participants who are not employees or directors of the
Company shall not be entitled to purchase Shares with a
promissory
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<PAGE> 5
note unless the note is adequately secured by collateral
other than the Shares;
(d) by waiver of compensation due or accrued to Participant for
services rendered;
(e) provided that a public market for the Company's stock
exists, (1) through a "same day sale" commitment from
Participant and a broker-dealer that is a member of the
National Association of Securities Dealers (an "NASD
DEALER") whereby Participant irrevocably elects to exercise
this Option and to sell a portion of the Shares so
purchased to pay for the Exercise Price and whereby the
NASD Dealer irrevocably commits upon receipt of such Shares
to forward the Exercise Price directly to the Company, or
(2) through a "margin" commitment -- from Participant and
an NASD Dealer whereby Participant irrevocably elects to
exercise this Option and to pledge the Shares so purchased
to the NASD Dealer in a margin account as security for a
loan from the NASD Dealer in the amount of the Exercise
Price, and whereby the NASD Dealer irrevocably commits upon
receipt of such Shares to forward the Exercise Price
directly to the Company; or
(f) by any combination of the foregoing.
4.4 Tax Withholding. Prior to the issuance of the Shares
upon exercise of this Option, Participant must pay or provide for any applicable
federal, state and local withholding obligations of the Company. If the
Committee permits, Participant may provide for payment of withholding taxes upon
exercise of this Option by requesting that the Company retain Shares with a Fair
Market Value equal to the minimum amount of taxes required to be withheld. In
such case, the Company shall issue the net number of Shares to the Participant
by deducting the Shares retained from the Shares issuable upon exercise.
4.5 Issuance of Shares. Provided that the Exercise
Agreement and payment are in form and substance satisfactory to counsel for the
Company, the Company shall issue the Shares registered in the name of
Participant, Participant's authorized assignee, or Participant's legal
representative, and shall deliver certificates representing the Shares with the
appropriate legends affixed thereto.
5. NOTICE OF DISQUALIFYING DISPOSITION OF ISO SHARES. If this
Option is an ISO, and if Participant sells or otherwise disposes of any of the
Shares acquired pursuant to the ISO on or before the later of (a) the date two
(2) years after the Date of Grant, and (b) the date one (1) year after transfer
of such Shares to Participant upon exercise of this Option, Participant shall
immediately notify the Company in writing of such disposition. Participant
agrees that Participant may be subject to income tax withholding by the Company
on the compensation income recognized by Participant from the early disposition
by payment in cash or out of the current wages or other compensation payable to
Participant.
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<PAGE> 6
6. COMPLIANCE WITH LAWS AND REGULATIONS. The Plan and this
Agreement are intended to comply with Section 25102(o) of the California
Corporations Code. Any provision of this Agreement which is inconsistent with
Section 25102(o) shall, without further act or amendment by the Company or the
Board, be reformed to comply with the requirements of Section 25102(o). The
exercise of this Option and the issuance and transfer of Shares shall be subject
to compliance by the Company and Participant with all applicable requirements of
federal and state securities laws and with all applicable requirements of any
stock exchange on which the Company's Common Stock may be listed at the time of
such issuance or transfer. Participant understands that the Company is under no
obligation to register or qualify the Shares with the SEC, any state securities
commission or any stock exchange to effect such compliance.
7. NONTRANSFERABILITY OF OPTION. This Option may not be transferred
in any manner other than by will or by the laws of descent and distribution and
may be exercised during the lifetime of Participant only by Participant or in
the event of Participant's incapacity, by Participant's executor, administrator,
heir or legatee. The terms of this Option shall be binding upon the executors,
administrators, successors and assigns of Participant.
8. COMPANY'S REPURCHASE OPTION FOR UNVESTED SHARES. The Company, or
its assignee, shall have the option to repurchase Participant's Unvested Shares
(as defined in Section 2.2 of this Agreement) on the terms and conditions set
forth in the Exercise Agreement attached hereto as Exhibit A (the "REPURCHASE
OPTION FOR UNVESTED SHARES") if Participant is Terminated (as defined in the
Plan) for any reason, or no reason, including without limitation Participant's
death, Disability (as defined in the Plan), voluntary resignation or termination
by the Company with or without Cause.
9. COMPANY'S RIGHT OF FIRST REFUSAL. Unvested Shares may not be
sold or otherwise transferred by Participant without the Company's prior written
consent. Before any Vested Shares held by Participant or any transferee of such
Vested Shares may be sold or otherwise transferred (including without limitation
a transfer by gift or operation of law), the Company and/or its assignee(s)
shall have an assignable right of first refusal to purchase the Vested Shares to
be sold or transferred on the terms and conditions set forth in the Exercise
Agreement attached hereto as Exhibit A (the "RIGHT OF FIRST REFUSAL"). The
Company's Right of First Refusal will terminate when the Company's securities
become publicly traded.
10. TAX CONSEQUENCES. Set forth below is a brief summary as of
January 22, 1998 of some of the federal and California tax consequences of
exercise of this Option and disposition of the Shares. THIS SUMMARY IS
NECESSARILY INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE.
PARTICIPANT SHOULD CONSULT A TAX ADVISER BEFORE EXERCISING THE OPTION OR
DISPOSING OF THE SHARES.
10.1 Exercise of ISO. If this Option qualifies as an ISO,
there will be no regular federal or California income tax liability upon the
exercise of this Option, although the excess, if any, of the Fair Market Value
of the Shares on the date of exercise over the Exercise Price will be treated as
a tax preference item for federal alternative minimum tax purposes and may
subject the Participant to the alternative minimum tax in the year of exercise.
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<PAGE> 7
10.2 Exercise of Nonqualified Stock Option. If this Option
does not qualify as an ISO, there may be a regular federal and California income
tax liability upon the exercise of this Option. Participant will be treated as
having received compensation income (taxable at ordinary income tax rates) equal
to the excess, if any, of the Fair Market Value of the Shares on the date of
exercise over the Exercise Price. If Participant is a current or former employee
of the Company, the Company will be required to withhold from Participant's
compensation or collect from Participant and pay to the applicable taxing
authorities an amount equal to a percentage of this compensation income at the
time of exercise.
10.3 Disposition of Shares. If the Shares are held for more
than one year after the date of the transfer of the Shares pursuant to the
exercise of this Option as to Vested Shares (or for more than one year after the
date of the transfer of the Shares pursuant to the exercise of this Option as to
Unvested Shares for which a Section 83(b) election has been made), and, in the
case of an ISO, are disposed of more than two years after the Date of Grant, any
gain realized on disposition of the Shares will be treated as long term capital
gain for federal and California income tax purposes. The long-term capital gain
will be taxed for federal income tax and alternative minimum tax purposes at a
maximum rate of 28% if the Shares are held more than one year but less than 18
months after exercise and at 20% if the Shares are held more than 18 months
after exercise. If Shares purchased under an ISO are disposed of within the
applicable one year or two year period, any gain realized on such disposition
will be treated as compensation income (taxable at ordinary income rates) to the
extent of the excess, if any, of the Fair Market Value of the Shares on the date
of exercise over the Exercise Price. The Company may be required to withhold
from Participant's compensation or collect from Participant and pay to the
applicable taxing authorities an amount equal to a percentage of this
compensation income at the time of exercise.
10.4 Section 83(b) Election for Unvested Shares. With
respect to Unvested Shares, which are subject to the Repurchase Option, unless
an election is filed by the Participant with the Internal Revenue Service (and,
if necessary, the proper state taxing authorities), within 30 days of the
purchase of the Unvested Shares, electing pursuant to Section 83(b) of the
Internal Revenue Code (and similar state tax provisions, if applicable) to be
taxed currently on any difference between the Exercise Price of the Unvested
Shares and their Fair Market Value on the date of exercise, there may be a
recognition of taxable income (including, where applicable, alternative minimum
taxable income) to the Participant, measured by the excess, if any, of the Fair
Market Value of the Unvested Shares at the time they cease to be Unvested
Shares, over the Exercise Price of the Unvested Shares.
11. PRIVILEGES OF STOCK OWNERSHIP. Participant shall not have any of
the rights of a Shareholder with respect to any Shares until the Shares are
issued to Participant.
12. INTERPRETATION. Any dispute regarding the interpretation of this
Agreement shall be submitted by Participant or the Company to the Committee for
review. The resolution of such a dispute by the Committee shall be final and
binding on the Company and Participant.
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<PAGE> 8
13. ENTIRE AGREEMENT. The Plan is incorporated herein by reference.
This Agreement and the Plan constitute the entire agreement of the parties and
supersede all prior undertakings and agreements with respect to the subject
matter hereof.
14. NOTICES. Any notice required to be given or delivered to the
Company under the terms of this Agreement shall be in writing and addressed to
the Corporate Secretary of the Company at its principal corporate offices. Any
notice required to be given or delivered to Participant shall be in writing and
addressed to Participant at the address indicated above or to such other address
as such party may designate in writing from time to time to the Company. All
notices shall be deemed to have been given or delivered upon: personal delivery;
three (3) days after deposit in the United States mail by certified or
registered mail (return receipt requested); one (1) business day after deposit
with any return receipt express courier (prepaid); or one (1) business day after
transmission by facsimile, rapifax or telecopier.
15. SUCCESSORS AND ASSIGNS. The Company may assign any of its rights
under this Agreement including its rights to repurchase Shares under the
Repurchase Option for Unvested Shares and the Right of First Refusal. This
Agreement shall be binding upon and inure to the benefit of the successors and
assigns of the Company. Subject to the restrictions on transfer set forth
herein, this Agreement shall be binding upon Participant and Participant's
heirs, executors, administrators, legal representatives, successors and assigns.
16. GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of California as such laws are applied
to agreements between California residents entered into and to be performed
entirely within California. If any provision of this Agreement is determined by
a court of law to be illegal or unenforceable, then such provision will be
enforced to the maximum extent possible and the other provisions will remain
fully effective and enforceable.
17. ACCEPTANCE. Participant hereby acknowledges receipt of a copy of
the Plan and this Agreement. Participant has read and understands the terms and
provisions thereof, and accepts this Option subject to all the terms and
conditions of the Plan and this Agreement. Participant acknowledges that there
may be adverse tax consequences upon exercise of this Option or disposition of
the Shares and that Participant should consult a tax adviser prior to such
exercise or disposition.
18. COUNTERPARTS. This Agreement may be executed in two
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
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<PAGE> 9
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed in duplicate by its duly authorized representative and Participant has
executed this Agreement in duplicate as of the Date of Grant.
FIBEX SYSTEMS PARTICIPANT
By:
-------------------------------- -----------------------------------
(Signature)
Richard E. Hejmanowski
- ----------------------------------- -----------------------------------
(Please print name)
President & C.E.O.
- -----------------------------------
[SIGNATURE PAGE TO STOCK OPTION AGREEMENT UNDER FIBEX SYSTEMS 1997 STOCK OPTION
PLAN BETWEEN FIBEX SYSTEMS AND PARTICIPANT.]
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<PAGE> 1
EXHIBIT 99.5
FORM OF EXERCISE NOTICE AND
RESTRICTED STOCK PURCHASE AGREEMENT-INSTALLMENT OPTION
<PAGE> 2
EXHIBIT A
FIBEX SYSTEMS
1997 STOCK OPTION PLAN
EXERCISE NOTICE AND RESTRICTED STOCK PURCHASE AGREEMENT
This Agreement ("Agreement") is made as of ______________, by and
between Fibex Systems, a California corporation (the "Company"), and
<<Optionee>> ("Purchaser"). To the extent any capitalized terms used in this
Agreement are not defined, they shall have the meaning ascribed to them in the
1997 Stock Option Plan.
1. EXERCISE OF OPTION. Subject to the terms and conditions hereof,
Purchaser hereby elects to exercise his or her option to purchase __________
shares of the Common Stock (the "Shares") of the Company under and pursuant to
the Company's 1997 Stock Option Plan (the "Plan") and the Stock Option Agreement
granted <<GrantDate>> (the "Option Agreement"). The purchase price for the
Shares shall be $<<ExercisePrice>> per Share for a total purchase price of
$_______________. The term "Shares" refers to the purchased Shares and all
securities received in replacement of the Shares or as stock dividends or
splits, all securities received in replacement of the Shares in a
recapitalization, merger, reorganization, exchange or the like, and all new,
substituted or additional securities or other properties to which Purchaser is
entitled by reason of Purchaser's ownership of the Shares.
2. TIME AND PLACE OF EXERCISE. The purchase and sale of the Shares under
this Agreement shall occur at the principal office of the Company simultaneously
with the execution and delivery of this Agreement in accordance with the
provisions of Section 2(b) of the Option Agreement. On such date, the Company
will deliver to Purchaser a certificate representing the Shares to be purchased
by Purchaser (which shall be issued in Purchaser's name) against payment of the
exercise price therefor by Purchaser by (a) check made payable to the Company,
(b) cancellation of indebtedness of the Company to Purchaser, (c) delivery of
shares of the Common Stock of the Company in accordance with Section 3 of the
Option Agreement, or (d) a combination of the foregoing.
3. LIMITATIONS ON TRANSFER. In addition to any other limitation on
transfer created by applicable securities laws, Purchaser shall not assign,
encumber or dispose of any interest in the Shares except in compliance with the
provisions below and applicable securities laws.
(a) RIGHT OF FIRST REFUSAL. Before any Shares held by Purchaser
or any transferee of Purchaser (either being sometimes referred to herein as the
"Holder") may be sold or otherwise transferred (including transfer by gift or
operation of law), the Company or its assignee(s) shall have a right of first
refusal to purchase the Shares on the terms and conditions set forth in this
Section 3(a) (the "Right of First Refusal").
(i) NOTICE OF PROPOSED TRANSFER. The Holder of the Shares
shall deliver to the Company a written notice (the "Notice") stating: (i) the
Holder's bona fide intention to sell or otherwise transfer such Shares; (ii) the
name of each proposed purchaser or other transferee ("Proposed Transferee");
(iii) the number of Shares to be transferred to each
<PAGE> 3
Proposed Transferee; and (iv) the terms and conditions of each proposed sale or
transfer. The Holder shall offer the Shares at the same price (the "Offered
Price") and upon the same terms (or terms as similar as reasonably possible) to
the Company or its assignee(s).
(ii) EXERCISE OF RIGHT OF FIRST REFUSAL. At any time
within 30 days after receipt of the Notice, the Company and/or its assignee(s)
may, by giving written notice to the Holder, elect to purchase all, but not less
than all, of the Shares proposed to be transferred to any one or more of the
Proposed Transferees, at the purchase price determined in accordance with
subsection (iii) below.
(iii) PURCHASE PRICE. The purchase price ("Purchase
Price") for the Shares purchased by the Company or its assignee(s) under this
Section 3(a) shall be the Offered Price. If the Offered Price includes
consideration other than cash, the cash equivalent value of the non-cash
consideration shall be determined by the Board of Directors of the Company in
good faith.
(iv) PAYMENT. Payment of the Purchase Price shall be made,
at the option of the Company or its assignee(s), in cash (by check), by
cancellation of all or a portion of any outstanding indebtedness of the Holder
to the Company (or, in the case of repurchase by an assignee, to the assignee),
or by any combination thereof within 30 days after receipt of the Notice or in
the manner and at the times set forth in the Notice.
(v) HOLDER'S RIGHT TO TRANSFER. If all of the Shares
proposed in the Notice to be transferred to a given Proposed Transferee are not
purchased by the Company and/or its assignee(s) as provided in this Section
3(a), then the Holder may sell or otherwise transfer such Shares to that
Proposed Transferee at the Offered Price or at a higher price, provided that
such sale or other transfer is consummated within 60 days after the date of the
Notice and provided further that any such sale or other transfer is effected in
accordance with any applicable securities laws and the Proposed Transferee
agrees in writing that the provisions of this Section 3 shall continue to apply
to the Shares in the hands of such Proposed Transferee. If the Shares described
in the Notice are not transferred to the Proposed Transferee within such period,
or if the Holder proposes to change the price or other terms to make them more
favorable to the Proposed Transferee, a new Notice shall be given to the
Company, and the Company and/or its assignees shall again be offered the Right
of First Refusal before any Shares held by the Holder may be sold or otherwise
transferred.
(vi) EXCEPTION FOR CERTAIN FAMILY TRANSFERS. Anything to
the contrary contained in this Section 3(a) notwithstanding, the transfer of any
or all of the Shares during Purchaser's lifetime or on Purchaser's death by will
or intestacy to Purchaser's Immediate Family (as defined below) or a trust for
the benefit of Purchaser's Immediate Family shall be exempt from the provisions
of this Section 3(a). "Immediate Family" as used herein shall mean spouse,
lineal descendant or antecedent, father, mother, brother or sister. In such
case, the transferee or other recipient shall receive and hold the Shares so
transferred subject to the provisions of this Section, and there shall be no
further transfer of such Shares except in accordance with the terms of this
Section 3.
2
<PAGE> 4
(b) INVOLUNTARY TRANSFER.
(i) COMPANY'S RIGHT TO PURCHASE UPON INVOLUNTARY TRANSFER.
In the event, at any time after the date of this Agreement, of any transfer by
operation of law or other involuntary transfer (including divorce or death, but
excluding, in the event of death, a transfer to Immediate Family as set forth in
Section 3(a)(vi) above) of all or a portion of the Shares by the record holder
thereof, the Company shall have the right to purchase all of the Shares
transferred at the greater of the purchase price paid by Purchaser pursuant to
this Agreement or the Fair Market Value of the Shares on the date of transfer.
Upon such a transfer, the person acquiring the Shares shall promptly notify the
Secretary of the Company of such transfer. The right to purchase such Shares
shall be provided to the Company for a period of 30 days following receipt by
the Company of written notice by the person acquiring the Shares.
(ii) PRICE FOR INVOLUNTARY TRANSFER. With respect to any
stock to be transferred pursuant to Section 3(b)(i), the price per Share shall
be a price set by the Board of Directors of the Company that will reflect the
current value of the stock in terms of present earnings and future prospects of
the Company. The Company shall notify Purchaser or his or her executor of the
price so determined within 30 days after receipt by it of written notice of the
transfer or proposed transfer of Shares. However, if the Purchaser does not
agree with the valuation as determined by the Board of Directors of the Company,
the Purchaser shall be entitled to have the valuation determined by an
independent appraiser to be mutually agreed upon by the Company and the
Purchaser and whose fees shall be borne equally by the Company and the
Purchaser.
(c) ASSIGNMENT. The right of the Company to purchase any part of
the Shares may be assigned in whole or in part to any stockholder or
stockholders of the Company or other persons or organizations; provided,
however, that an assignee, other than a corporation that is the Parent or a 100%
owned Subsidiary of the Company, must pay the Company, upon assignment of such
right, cash equal to the difference between the original purchase price and Fair
Market Value, if the original purchase price is less than the Fair Market Value
of the Shares subject to the assignment.
(d) RESTRICTIONS BINDING ON TRANSFEREES. All transferees of
Shares or any interest therein will receive and hold such Shares or interest
subject to the provisions of this Agreement. Any sale or transfer of the Shares
shall be void unless the provisions of this Agreement are satisfied.
(e) TERMINATION OF RIGHTS. The Right of First Refusal and the
Company's right to repurchase the Shares in the event of an involuntary transfer
pursuant to Section 3(b) above shall terminate upon the first sale of Common
Stock of the Company to the general public pursuant to a registration statement
filed with and declared effective by the Securities and Exchange Commission
under the Securities Act of 1933, as amended (the "Securities Act"). Upon
termination of the Right of First Refusal, a new certificate or certificates
representing the Shares not repurchased shall be issued, on request, without the
legend referred to in Section 5(a)(ii) below and delivered to Purchaser.
3
<PAGE> 5
4. INVESTMENT AND TAXATION REPRESENTATIONS. In connection with the
purchase of the Shares, Purchaser represents to the Company the following:
(a) Purchaser is aware of the Company's business affairs and
financial condition and has acquired sufficient information about the Company to
reach an informed and knowledgeable decision to acquire the Shares. Purchaser is
purchasing the Shares for investment for his or her own account only and not
with a view to, or for resale in connection with, any "distribution" thereof
within the meaning of the Securities Act.
(b) Purchaser understands that the Shares have not been
registered under the Securities Act by reason of a specific exemption therefrom,
which exemption depends upon, among other things, the bona fide nature of
Purchaser's investment intent as expressed herein.
(c) Purchaser understands that the Shares are "restricted
securities" under applicable U.S. federal and state securities laws and that,
pursuant to these laws, Purchaser must hold the Shares indefinitely unless they
are registered with the Securities and Exchange Commission and qualified by
state authorities, or an exemption from such registration and qualification
requirements is available. Purchaser acknowledges that the Company has no
obligation to register or qualify the Shares for resale. Purchaser further
acknowledges that if an exemption from registration or qualification is
available, it may be conditioned on various requirements including, but not
limited to, the time and manner of sale, the holding period for the Shares, and
requirements relating to the Company which are outside of the Purchaser's
control, and which the Company is under no obligation and may not be able to
satisfy.
(d) Purchaser understands that Purchaser may suffer adverse tax
consequences as a result of Purchaser's purchase or disposition of the Shares.
Purchaser represents that Purchaser has consulted any tax consultants Purchaser
deems advisable in connection with the purchase or disposition of the Shares and
that Purchaser is not relying on the Company for any tax advice.
5. RESTRICTIVE LEGENDS AND STOP-TRANSFER ORDERS.
(a) LEGENDS. The certificate or certificates representing the
Shares shall bear the following legends (as well as any legends required by
applicable state and federal corporate and securities laws):
(i) THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AND HAVE
BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR
IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO
SUCH SALE OR DISTRIBUTION MAY BE EFFECTED WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN
OPINION OF COUNSEL IN A FORM SATISFACTORY TO FOR THE
COMPANY
4
<PAGE> 6
THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE
SECURITIES ACT OF 1933.
(ii) THE SHARES REPRESENTED BY THIS CERTIFICATE MAY BE
TRANSFERRED ONLY IN ACCORDANCE WITH THE TERMS OF AN
AGREEMENT BETWEEN THE COMPANY AND THE STOCKHOLDER, A
COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE
COMPANY.
Purchaser understands that transfer of the Shares may be restricted by
Section 260.141.11 of the Rules of the California Corporations Commissioner, a
copy of which is attached to this Agreement.
(b) STOP-TRANSFER NOTICES. Purchaser agrees that, in order to
ensure compliance with the restrictions referred to herein, the Company may
issue appropriate "stop transfer" instructions to its transfer agent, if any,
and that, if the Company transfers its own securities, it may make appropriate
notations to the same effect in its own records.
(c) REFUSAL TO TRANSFER. The Company shall not be required (i) to
transfer on its books any Shares that have been sold or otherwise transferred in
violation of any of the provisions of this Agreement or (ii) to treat as owner
of such Shares or to accord the right to vote or pay dividends to any purchaser
or other transferee to whom such Shares shall have been so transferred.
6. NO EMPLOYMENT RIGHTS. Nothing in this Agreement shall affect in any
manner whatsoever the right or power of the Company, or a Parent or Subsidiary
of the Company, to terminate Purchaser's employment or consulting relationship,
for any reason, with or without cause.
7. MARKET STAND-OFF AGREEMENT. In connection with the initial public
offering of the Company's securities and upon request of the Company or the
underwriters managing such underwritten offering of the Company's securities,
Purchaser agrees not to sell, make any short sale of, loan, grant any option for
the purchase of, or otherwise dispose of any Shares (other than those included
in the registration) without the prior written consent of the Company or such
underwriters, as the case may be, for such period of time (not to exceed 180
days) from the effective date of such registration as may be requested by the
Company or such managing underwriters and to execute an agreement reflecting the
foregoing as may be requested by the underwriters at the time of the Company's
initial public offering.
8. MISCELLANEOUS.
(a) GOVERNING LAW. This Agreement and all acts and transactions
pursuant hereto and the rights and obligations of the parties hereto shall be
governed, construed and interpreted in accordance with the laws of the State of
California, without giving effect to principles of conflicts of law.
5
<PAGE> 7
(b) ENTIRE AGREEMENT; ENFORCEMENT OF RIGHTS. This Agreement sets
forth the entire agreement and understanding of the parties relating to the
subject matter herein and merges all prior discussions between them. No
modification of or amendment to this Agreement, nor any waiver of any rights
under this Agreement, shall be effective unless in writing signed by the parties
to this Agreement. The failure by either party to enforce any rights under this
Agreement shall not be construed as a waiver of any rights of such party.
(c) SEVERABILITY. If one or more provisions of this Agreement are
held to be unenforceable under applicable law, the parties agree to renegotiate
such provision in good faith. In the event that the parties cannot reach a
mutually agreeable and enforceable replacement for such provision, then (i) such
provision shall be excluded from this Agreement, (ii) the balance of the
Agreement shall be interpreted as if such provision were so excluded and (iii)
the balance of the Agreement shall be enforceable in accordance with its terms.
(d) CONSTRUCTION. This Agreement is the result of negotiations
between and has been reviewed by each of the parties hereto and their respective
counsel, if any; accordingly, this Agreement shall be deemed to be the product
of all of the parties hereto, and no ambiguity shall be construed in favor of or
against any one of the parties hereto.
(e) NOTICES. Any notice required or permitted by this Agreement
shall be in writing and shall be deemed sufficient when delivered personally or
sent by telegram or fax or 48 hours after being deposited in the U.S. mail, as
certified or registered mail, with postage prepaid, and addressed to the party
to be notified at such party's address as set forth below or as subsequently
modified by written notice.
(f) COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute one instrument.
(g) SUCCESSORS AND ASSIGNS. The rights and benefits of this
Agreement shall inure to the benefit of, and be enforceable by the Company's
successors and assigns. The rights and obligations of Purchaser under this
Agreement may only be assigned with the prior written consent of the Company.
(h) CALIFORNIA CORPORATE SECURITIES LAW. THE SALE OF THE
SECURITIES WHICH ARE THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH
THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF
THE SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION
THEREFOR PRIOR TO THE QUALIFICATION IS UNLAWFUL, UNLESS THE SALE OF SECURITIES
IS EXEMPT FROM QUALIFICATION BY SECTION 25100, 25102 OR 25105 OF THE CALIFORNIA
CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY
CONDITIONED UPON THE QUALIFICATION BEING OBTAINED, UNLESS THE SALE IS SO EXEMPT.
[Signature Page Follows]
6
<PAGE> 8
The parties have executed this Exercise Notice and Restricted Stock
Purchase Agreement as of the date first set forth above.
COMPANY:
FIBEX SYSTEMS
By:
-------------------------------------
Name:
-----------------------------------
(print)
Title:
----------------------------------
PURCHASER:
<<OPTIONEE>>
----------------------------------------
(Signature)
Address:
----------------------------------------
----------------------------------------
I, ______________________, spouse of <<Optionee>>, have read and hereby approve
the foregoing Agreement. In consideration of the Company's granting my spouse
the right to purchase the Shares as set forth in the Agreement, I hereby agree
to be bound irrevocably by the Agreement and further agree that any community
property or similar interest that I may have in the Shares shall hereby be
similarly bound by the Agreement. I hereby appoint my spouse as my
attorney-in-fact with respect to any amendment or exercise of any rights under
the Agreement.
----------------------------------------
Spouse of <<Optionee>>
7
<PAGE> 1
EXHIBIT 99.6
FORM OF STOCK OPTION EXERCISE AGREEMENT-IMMEDIATELY EXERCISABLE OPTION
<PAGE> 2
FIBEX SYSTEMS
1997 STOCK OPTION PLAN
STOCK OPTION EXERCISE AGREEMENT
(IMMEDIATELY EXERCISABLE OPTION)
This Exercise Agreement (this "EXERCISE AGREEMENT") is made and
entered into as of _____________, 1998 (the "EFFECTIVE DATE") by and between
Fibex Systems, a California corporation (the "COMPANY"), and the purchaser named
below (the "PURCHASER"). Capitalized terms not defined herein shall have the
meaning ascribed to them in the Company's 1997 Stock Option Plan (the "PLAN").
PURCHASER: <<FIRSTNAME>> <<LASTNAme>>
SOCIAL SECURITY NUMBER: ____________________________________
ADDRESS: ____________________________________
____________________________________
TOTAL NUMBER OF SHARES: ____________________________________
EXERCISE PRICE PER SHARE: $<<EXPRICE>>
TOTAL EXERCISE PRICE: ____________________________________
DATE OF GRANT: <<GRANT_DATE>>
TYPE OF OPTION:
1. EXERCISE OF OPTION.
1.1 Exercise. Pursuant to exercise of that certain option
("OPTION") granted to Purchaser under the Plan and subject to the terms and
conditions of this Exercise Agreement, Purchaser hereby purchases from the
Company, and the Company hereby sells to Purchaser, the Total Number of Shares
set forth above ("SHARES") of the Company's Common Stock at the Exercise Price
Per Share set forth above ("EXERCISE PRICE"). As used in this Agreement, the
term "SHARES" refers to the Shares purchased under this Exercise Agreement and
includes all securities received (a) in replacement of the Shares, (b) as a
result of stock dividends or stock splits with respect to the Shares, and (c)
all securities received in replacement of the Shares in a merger,
recapitalization, reorganization or similar corporate transaction.
1.2 Title to Shares. The exact spelling of the name(s)
under which Purchaser will take title to the Shares is:
___________________________________________________________________
___________________________________________________________________
Purchaser desires to take title to the Shares as follows:
[ ] Individual, as separate property
[ ] Husband and wife, as community property
[ ] Joint Tenants
[ ] Alone or with spouse as trustee(s) of the following trust
(including date):
_______________________________________________________________
_______________________________________________________________
[ ] Other; please specify:_________________________________________
_______________________________________________________________
1.3 Payment. Purchaser hereby delivers payment of the
Exercise Price in the manner permitted in the Stock Option Agreement as follows
(check and complete as appropriate):
[ ] in cash in the amount of $____________, receipt of which is
acknowledged by the Company;
<PAGE> 3
[ ] by cancellation of indebtedness of the Company to Purchaser in
the amount of $__________;
[ ] by delivery of _________ fully-paid, nonassessable and vested
shares of the Common Stock of the Company owned by Purchaser
for at least six (6) months prior to the date hereof which have
been paid for within the meaning of SEC Rule 144, (if purchased
by use of a promissory note, such note has been fully paid with
respect to such vested shares), or obtained by Purchaser in the
open public market, and owned free and clear of all liens,
claims, encumbrances or security interests, valued at the
current Fair Market Value of $___________ per share;
[ ] by tender of a Full Recourse Promissory Note in the principal
amount of $__________, having such terms as may be approved by
the Committee and bearing interest at a rate sufficient to
avoid imputation of income under Sections 483 and 1274 of the
Code and secured by a Pledge Agreement herewith; provided,
however, that Participants who are not employees or directors
of the Company shall not be entitled to purchase Shares with a
promissory note unless the note is adequately secured by
collateral other than the Shares;
[ ] by the waiver hereby of compensation due or accrued for
services rendered in the amount of $_________.
2. DELIVERY.
2.1 Deliveries by Purchaser. Purchaser hereby delivers to
the Company (i) this Exercise Agreement, (ii) two (2) copies of a blank Stock
Power and Assignment Separate from Stock Certificate in the form of Exhibit 1
attached hereto (the "STOCK POWERS"), both executed by Purchaser (and
Purchaser's spouse, if any), (iii) if Purchaser is married, a Consent of Spouse
in the form of Exhibit 2 attached hereto (the "SPOUSE CONSENT") executed by
Purchaser's spouse, and (iv) the Exercise Price together with a promissory note
and pledge agreement ("PLEDGE AGREEMENT"), if applicable, in the forms of
Exhibits 3 and 5 attached hereto, respectively, and (v) provision for any
required tax withholding by cash, check or an agreement by Purchaser (in a form
acceptable to the Company) to a reduction of Purchaser's future compensation to
pay for any required tax withholding.
2.2 Deliveries by the Company. Upon its receipt of the
Exercise Price and all the documents to be executed and delivered by Purchaser
to the Company under Section 2.1, the Company will issue a duly executed stock
certificate evidencing the Shares in the name of Purchaser, to be placed in
escrow as provided in Section 11 until expiration or termination of the
Company's Repurchase Option for Unvested Shares described in Section 8.
3. REPRESENTATIONS AND WARRANTIES OF PURCHASER. Purchaser
represents and warrants to the Company that:
3.1 Agrees to Terms of the Plan. Purchaser has received a
copy of the Plan and the Stock Option Agreement, has read and understands the
terms of the Plan, the Stock Option Agreement and this Exercise Agreement, and
agrees to be bound by their terms and conditions. Purchaser acknowledges that
there may be adverse tax consequences upon exercise of the Option or disposition
of the Shares, and that Purchaser should consult a tax adviser prior to such
exercise or disposition.
3.2 Purchase for Own Account for Investment. Purchaser is
purchasing the Shares for Purchaser's own account for investment purposes only
and not with a view to, or for sale in connection with, a distribution of the
Shares within the meaning of the Securities Act of 1933, as amended (the
"SECURITIES ACT"). Purchaser has no present intention of selling or otherwise
disposing of all or any portion of the Shares and no one other than Purchaser
(and his or her spouse, if any) has any beneficial ownership of any of the
Shares.
3.3 Access to Information. Purchaser has had access to all
information regarding the Company and its present and prospective business,
assets, liabilities and financial condition that Purchaser
-2-
<PAGE> 4
reasonably considers important in making the decision to purchase the Shares,
and Purchaser has had ample opportunity to ask questions of the Company's
representatives concerning such matters and this investment.
3.4 Understanding of Risks. Purchaser is fully aware of:
(i) the highly speculative nature of the investment in the Shares; (ii) the
financial hazards involved; (iii) the lack of liquidity of the Shares and the
restrictions on transferability of the Shares (e.g., that Purchaser may not be
able to sell or dispose of the Shares or use them as collateral for loans); (iv)
the qualifications and backgrounds of the management of the Company; and (v) the
tax consequences of investment in the Shares. Purchaser is capable of evaluating
the merits and risks of this investment, has the ability to protect Purchaser's
own interests in this transaction and is financially capable of bearing a total
loss of this investment.
3.5 No General Solicitation. At no time was Purchaser
presented with or solicited by any publicly issued or circulated newspaper,
mail, radio, television or other form of general advertising or solicitation in
connection with the offer, sale and purchase of the Shares.
4. COMPLIANCE WITH SECURITIES LAWS.
4.1 Compliance with Federal Securities Laws. Purchaser
understands and acknowledges that the Shares have not been registered with the
SEC under the Securities Act and that, notwithstanding any other provision of
the Stock Option Agreement to the contrary, the exercise of any rights to
purchase any Shares is expressly conditioned upon compliance with the Securities
Act and all applicable state securities laws. Purchaser agrees to cooperate with
the Company to ensure compliance with such laws. The Shares are being issued
under the Securities Act pursuant to the exemption provided by SEC Rule 701.
4.2 Compliance with California Securities Laws. The Plan,
The stock option agreement, and this EXERCISE Agreement are intended to comply
with Section 25102(o) of the California Corporations Code. Any provision of this
exercise Agreement which is inconsistent with Section 25102(o) shall, without
further act or amendment by the Company or the Board, be reformed to comply with
the requirements of Section 25102(o). THE SALE OF THE SECURITIES THAT ARE THE
SUBJECT OF THIS EXERCISE AGREEMENT, IF NOT YET QUALIFIED WITH THE CALIFORNIA
COMMISSIONER OF CORPORATIONS AND NOT EXEMPT FROM SUCH QUALIFICATION, IS SUBJECT
TO SUCH QUALIFICATION, AND THE ISSUANCE OF SUCH SECURITIES, AND THE RECEIPT OF
ANY PART OF THE CONSIDERATION THEREFOR PRIOR TO SUCH QUALIFICATION IS UNLAWFUL
UNLESS THE SALE IS EXEMPT. THE RIGHTS OF THE PARTIES TO THIS EXERCISE AGREEMENT
ARE EXPRESSLY CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED OR AN EXEMPTION
BEING AVAILABLE.
5. RESTRICTED SECURITIES.
5.1 No Transfer Unless Registered or Exempt. Purchaser
understands that Purchaser may not transfer any Shares unless such Shares are
registered under the Securities Act or qualified under applicable state
securities laws or unless, in the opinion of counsel to the Company, exemptions
from such registration and qualification requirements are available. Purchaser
understands that only the Company may file a registration statement with the SEC
and that the Company is under no obligation to do so with respect to the Shares.
Purchaser has also been advised that exemptions from registration and
qualification may not be available or may not permit Purchaser to transfer all
or any of the Shares in the amounts or at the times proposed by Purchaser.
5.2 SEC Rule 144. In addition, Purchaser has been advised
that SEC Rule 144 promulgated under the Securities Act, which permits certain
limited sales of unregistered securities, is not presently available with
respect to the Shares and, in any event, requires that the Shares be held for a
minimum of two years, and in certain cases three years, after they have been
purchased and paid for (within the meaning of Rule 144). Purchaser understands
that Shares paid for with a Note may not be deemed to be fully "paid for" within
the meaning of Rule 144 unless certain conditions are met and that, accordingly,
the Rule 144 holding period of such Shares may not begin to run until such
Shares are fully paid for within the meaning of Rule 144. Purchaser understands
that
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<PAGE> 5
Rule 144 may indefinitely restrict transfer of the Shares so long as Purchaser
remains an "affiliate" of the Company or if "current public information" about
the Company (as defined in Rule 144) is not publicly available.
5.3 SEC Rule 701. The Shares are issued pursuant to SEC
Rule 701 promulgated under the Securities Act and may become freely tradeable by
non-affiliates (under limited conditions regarding the method of sale) 90 days
after the first sale of Common Stock of the Company to the general public
pursuant to a registration statement filed with and declared effective by the
SEC, subject to the lengthier market standoff agreement contained in Section 7
of this Exercise Agreement or any other agreement entered into by Purchaser.
Affiliates must comply with the provisions (other than the holding period
requirements) of Rule 144.
6. RESTRICTIONS ON TRANSFERS.
6.1 Disposition of Shares. Purchaser hereby agrees that
Purchaser shall make no disposition of the Shares (other than as permitted by
this Agreement) unless and until:
(a) Purchaser shall have notified the Company of the
proposed disposition and provided a written summary of the terms and conditions
of the proposed disposition;
(b) Purchaser shall have complied with all
requirements of this Exercise Agreement applicable to the disposition of the
Shares;
(c) Purchaser shall have provided the Company with
written assurances, in form and substance satisfactory to counsel for the
Company, that (i) the proposed disposition does not require registration of the
Shares under the Securities Act or (ii) all appropriate action necessary for
compliance with the registration requirements of the Securities Act or of any
exemption from registration available under the Securities Act (including Rule
144) has been taken; and
(d) Purchaser shall have provided the Company with
written assurances, in form and substance satisfactory to the Company, that the
proposed disposition will not result in the contravention of any transfer
restrictions applicable to the Shares pursuant to the provisions of the
Commissioner Rules identified in Section 4.2.
6.2 Restriction on Transfer. Purchaser shall not transfer,
assign, grant a lien or security interest in, pledge, hypothecate, encumber or
otherwise dispose of any of the Shares which are subject to the Company's
Repurchase Option for Unvested Shares or the Company's Right of First Refusal,
except as permitted by this Exercise Agreement.
6.3 Transferee Obligations. Each person (other than the
Company) to whom the Shares are transferred by means of one of the permitted
transfers specified in this Exercise Agreement must, as a condition precedent to
the validity of such transfer, acknowledge in writing to the Company that such
person is bound by the provisions of this Exercise Agreement and that the
transferred Shares are subject to (i) both the Company's Repurchase Option for
Unvested Shares and the Company's Right of First Refusal granted hereunder and
(ii) the market stand-off provisions of Section 7, to the same extent such
Shares would be so subject if retained by the Purchaser.
7. MARKET STANDOFF AGREEMENT. Purchaser agrees in connection with
any registration of the Company's securities that, upon the request of the
Company or the underwriters managing any public offering of the Company's
securities, Purchaser will not sell or otherwise dispose of any Shares without
the prior written consent of the Company or such underwriters, as the case may
be, for such period of time (not to exceed 180 days) after the effective date of
such registration requested by such managing underwriters and subject to all
restrictions as the Company or the underwriters may specify. Purchaser further
agrees to enter into any agreement reasonably required by the underwriters to
implement the foregoing.
8. COMPANY'S REPURCHASE OPTION FOR UNVESTED SHARES. The Company or
its assignee, shall have the option to repurchase Purchaser's Unvested Shares
(as defined in Section 2.2 of the Stock Option Agreement) on the terms and
conditions set forth in this Section (the "REPURCHASE OPTION FOR UNVESTED
SHARES") if
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<PAGE> 6
Purchaser is Terminated (as defined in the Plan) for any reason, or no reason,
including without limitation Purchaser's death, Disability (as defined in the
Plan), voluntary resignation or termination by the Company with or without
Cause. Notwithstanding the foregoing, the Company shall retain the Repurchase
Option for Unvested Shares only as to that number of Unvested Shares (whether or
not exercised) that exceeds the number of shares which remain exercisable.
8.1 Termination and Termination Date. In case of any
dispute as to whether Purchaser is Terminated, the Committee shall have
discretion to determine whether Purchaser has been Terminated and the effective
date of such Termination (the "TERMINATION DATE").
8.2 Exercise of Repurchase Option for Unvested Shares. At
any time within ninety (90) days after the Purchaser's Termination Date, the
Company, or its assignee, may elect to repurchase the Purchaser's Unvested
Shares by giving Purchaser written notice of exercise of the Repurchase Option
for Unvested Shares.
8.3 Calculation of Repurchase Price for Unvested Shares.
The Company or its assignee shall have the option to repurchase from Purchaser
(or from Purchaser's personal representative as the case may be) the Unvested
Shares at the Purchaser's Exercise Price, proportionately adjusted for any stock
split or similar change in the capital structure of the Company as set forth in
Section 2.2 of the Plan.
8.4 Payment of Repurchase Price. The repurchase price shall
be payable, at the option of the Company or its assignee, by check or by
cancellation of all or a portion of any outstanding indebtedness of Purchaser to
the Company or such assignee, or by any combination thereof. The repurchase
price shall be paid without interest within sixty (60) days after exercise of
the Repurchase Option for Unvested Shares.
8.5 Right of Termination Unaffected. Nothing in this
Exercise Agreement shall be construed to limit or otherwise affect in any manner
whatsoever the right or power of the Company (or any Parent or Subsidiary of the
Company) to terminate Purchaser's employment or other relationship with the
Company (or the Parent or Subsidiary of the Company) at any time, for any reason
or no reason, with or without cause.
9. COMPANY'S RIGHT OF FIRST REFUSAL. Unvested Shares may not be
sold or otherwise transferred by Purchaser without the Company's prior written
consent. Before any Vested Shares held by Purchaser or any transferee of such
Vested Shares (either being sometimes referred to herein as the "HOLDER") may be
sold or otherwise transferred (including without limitation a transfer by gift
or operation of law), the Company and/or its assignee(s) shall have an
assignable right of first refusal to purchase the Vested Shares to be sold or
transferred (the "OFFERED SHARES") on the terms and conditions set forth in this
Section (the "RIGHT OF FIRST REFUSAL").
9.1 Notice of Proposed Transfer. The Holder of the Offered
Shares shall deliver to the Company a written notice (the "Notice") stating: (i)
the Holder's bona fide intention to sell or otherwise transfer the Offered
Shares; (ii) the name of each proposed bona fide purchaser or other transferee
("PROPOSED TRANSFEREE"); (iii) the number of Offered Shares to be transferred to
each Proposed Transferee; (iv) the bona fide cash price or other consideration
for which the Holder proposes to transfer the Offered Shares (the "OFFERED
PRICE"); and (v) that the Holder will offer to sell the Offered Shares to the
Company and/or its assignee(s) at the Offered Price as provided in this Section.
9.2 Exercise of Right of First Refusal. At any time within
thirty (30) days after the date of the Notice, the Company and/or its
assignee(s) may, by giving written notice to the Holder, elect to purchase the
Offered Shares proposed to be transferred to any one or more of the Proposed
Transferees named in the Notice, at the purchase price determined as specified
below.
9.3 Purchase Price. The purchase price for the Offered
Shares purchased under this Section will be the Offered Price. If the Offered
Price includes consideration other than cash, then the cash equivalent value of
the non-cash consideration shall conclusively be deemed to be the value of such
non-cash consideration as determined in good faith by the Company's Board of
Directors.
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<PAGE> 7
9.4 Payment. Payment of the purchase price for Offered
Shares will be payable, at the option of the Company and/or its assignee(s) (as
applicable), by check or by cancellation of all or a portion of any outstanding
indebtedness of the Holder to the Company (or to such assignee, in the case of a
purchase of Offered Shares by such assignee) or by any combination thereof. The
purchase price will be paid without interest within sixty (60) days after the
Company's receipt of the Notice, or, at the option of the Company and/or its
assignee(s), in the manner and at the time(s) set forth in the Notice.
9.5 Holder's Right to Transfer. If all of the Offered
Shares proposed in the Notice to be transferred to a given Proposed Transferee
are not purchased by the Company and/or its assignee(s) as provided in this
Section, then the Holder may sell or otherwise transfer such Offered Shares to
that Proposed Transferee at the Offered Price or at a higher price, provided
that such sale or other transfer is consummated within 120 days after the date
of the Notice, and provided further, that (i) any such sale or other transfer is
effected in compliance with all applicable securities laws and (ii) the Proposed
Transferee agrees in writing that the provisions of this Section will continue
to apply to the Offered Shares in the hands of such Proposed Transferee. If the
Offered Shares described in the Notice are not transferred to the Proposed
Transferee within such 120 day period, then a new Notice must be given to the
Company, and the Company will again be offered the Right of First Refusal before
any Shares held by the Holder may be sold or otherwise transferred.
9.6 Exempt Transfers. Notwithstanding anything to the
contrary in this Section, the following transfers of Vested Shares will be
exempt from the Right of First Refusal: (i) the transfer of any or all of the
Vested Shares during Purchaser's lifetime by gift or on Purchaser's death by
will or intestacy to Purchaser's "immediate family" (as defined below) or to a
trust for the benefit of Purchaser or Purchaser's immediate family, provided
that each transferee or other recipient agrees in a writing satisfactory to the
Company that the provisions of this Section will continue to apply to the
transferred Vested Shares in the hands of such transferee or other recipient;
(ii) any transfer of Shares made pursuant to a statutory merger or statutory
consolidation of the Company with or into another corporation or corporations
(except that the Right of First Refusal and Repurchase Option for Unvested
Shares will continue to apply thereafter to such Shares, in which case the
surviving corporation of such merger or consolidation shall succeed to the
rights of the Company under this Section unless the agreement of merger or
consolidation expressly otherwise provides); or (iii) any transfer of Vested
Shares pursuant to the winding up and dissolution of the Company. As used
herein, the term "immediate family" will mean Purchaser's spouse, the lineal
descendant or antecedent, father, mother, brother or sister, adopted child,
grandchild or adopted grandchild of the Purchaser or the Purchaser's spouse, or
the spouse of any child, adopted child, grandchild or adopted grandchild of
Purchaser or the Purchaser's spouse.
9.7 Termination of Right of First Refusal. The Company's
Right of First Refusal will terminate when the Company's securities become
publicly traded.
10. RIGHTS AS SHAREHOLDER. Subject to the terms and conditions of
this Exercise Agreement from and after the date that Purchaser delivers payment
of the Exercise Price until such time as Purchaser disposes of the Shares or the
Company and/or its assignee(s) exercise(s) the Repurchase Option for Unvested
Shares or Right of First Refusal, Purchaser will have all of the rights of a
shareholder of the Company with respect to the Shares. Upon an exercise of the
Repurchase Option for Unvested Shares or the Right of First Refusal, Purchase
will have no further rights as a holder of the Shares so purchased upon such
exercise, except the right to receive payment for the Shares so purchased in
accordance with the provisions of this Exercise Agreement, and Purchase will
promptly surrender the stock certificate(s) evidencing the Shares so purchased
to the Company for transfer or cancellation.
11. ESCROW. As security for Purchaser's faithful performance of
this Exercise Agreement and the Pledge Agreement, if applicable, Purchaser
agrees, immediately upon receipt of the stock certificate(s) evidencing the
Shares, to deliver such certificate(s), together with the Stock Powers executed
by Purchaser and by Purchaser's spouse, if any (with the date and number of
Shares left blank), to the Secretary of the Company or other designee of the
Company ("ESCROW HOLDER"), who is hereby appointed to hold such certificate(s)
and Stock Powers in escrow and to take all such actions and to effectuate all
such transfers and/or releases of such Shares as are in accordance with the
terms of this Exercise Agreement. Purchaser and the Company agree that Escrow
Holder will not be liable to any party to this Exercise Agreement (or to any
other party) for any actions or omissions unless Escrow Holder is grossly
negligent or intentionally fraudulent in carrying out the duties of Escrow
Holder under this Exercise Agreement. Escrow Holder may rely upon any letter,
notice or other document executed by any signature
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<PAGE> 8
purported to be genuine and may rely on the advice of counsel and obey any order
of any court with respect to the transactions contemplated by this Exercise
Agreement. The Shares will be released from escrow upon termination of the
Repurchase Option for Unvested Shares provided, however, that the Shares will be
retained in escrow so long as they are subject to the Pledge Agreement.
12. RESTRICTIVE LEGENDS AND STOP-TRANSFER ORDERS.
11.1 Legends. Purchaser understands and agrees that the
Company will place the legends set forth below or similar legends on any stock
certificate(s) evidencing the Shares, together with any other legends that may
be required by state or federal securities laws, the Company's Articles of
Incorporation or Bylaws, any other agreement between Purchaser and the Company
or any agreement between Purchaser and any third party:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR
UNDER THE SECURITIES LAWS OF CERTAIN STATES. THESE SECURITIES ARE
SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT
BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE SECURITIES
ACT AND APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION
OR EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE THAT THEY MAY BE
REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN
INDEFINITE PERIOD OF TIME. THE ISSUER OF THESE SECURITIES MAY
REQUIRE AN OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO
THE ISSUER TO THE EFFECT THAT ANY PROPOSED TRANSFER OR RESALE IS IN
COMPLIANCE WITH THE SECURITIES ACT AND ANY APPLICABLE STATE
SECURITIES LAWS.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
RESTRICTIONS ON PUBLIC RESALE, TRANSFER, RIGHT OF REPURCHASE AND
RIGHT OF FIRST REFUSAL OPTIONS HELD BY THE ISSUER AND/OR ITS
ASSIGNEE(S) AS SET FORTH IN A STOCK OPTION EXERCISE AGREEMENT
BETWEEN THE ISSUER AND THE ORIGINAL HOLDER OF THESE SHARES, A COPY
OF WHICH MAY BE OBTAINED AT THE PRINCIPAL OFFICE OF THE ISSUER.
SUCH PUBLIC SALE AND TRANSFER RESTRICTIONS AND THE RIGHT OF
REPURCHASE AND RIGHT OF FIRST REFUSAL ARE BINDING ON TRANSFEREES OF
THESE SHARES.
12.2 Stop-Transfer Instructions. Purchaser agrees that, to
ensure compliance with the restrictions imposed by this Exercise Agreement, the
Company may issue appropriate "stop-transfer" instructions to its transfer
agent, if any, and if the Company transfers its own securities, it may make
appropriate notations to the same effect in its own records.
12.3 Refusal to Transfer. The Company will not be required
(i) to transfer on its books any Shares that have been sold or otherwise
transferred in violation of any of the provisions of this Exercise Agreement or
(ii) to treat as owner of such Shares, or to accord the right to vote or pay
dividends to any purchaser or other transferee to whom such Shares have been so
transferred.
13. TAX CONSEQUENCES. PURCHASER UNDERSTANDS THAT PURCHASER MAY
SUFFER ADVERSE TAX CONSEQUENCES AS A RESULT OF PURCHASER'S PURCHASE OR
DISPOSITION OF THE SHARES. PURCHASER REPRESENTS THAT PURCHASER HAS CONSULTED
WITH ANY TAX ADVISER PURCHASER DEEMS ADVISABLE IN CONNECTION WITH THE PURCHASE
OR DISPOSITION OF THE SHARES AND THAT PURCHASER IS NOT RELYING ON THE COMPANY
FOR ANY TAX ADVICE. IN PARTICULAR, IF UNVESTED SHARES ARE SUBJECT TO REPURCHASE
BY THE COMPANY, PURCHASER REPRESENTS THAT PURCHASER HAS CONSULTED WITH
PURCHASER'S TAX ADVISER CONCERNING THE ADVISABILITY OF FILING AN 83(b) ELECTION
WITH THE INTERNAL REVENUE SERVICE. Set forth below is a brief summary as of
January 22, 1998 of some of the federal and California tax consequences of
exercise of the Option and disposition of the Shares. THIS SUMMARY IS
NECESSARILY INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO
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<PAGE> 9
CHANGE. PURCHASER SHOULD CONSULT A TAX ADVISER BEFORE EXECUTING THIS OPTION OR
DISPOSING OF THE SHARES.
13.1 Exercise of Incentive Stock Option. If the Option
qualifies as an incentive stock option, there will be no regular federal income
tax liability or California income tax liability upon the exercise of the
Option, although the excess, if any, of the Fair Market Value of the Shares on
the date of exercise over the Exercise Price will be treated as a tax preference
item for federal alternative minimum income tax purposes and may subject
Purchaser to the alternative minimum tax in the year of exercise.
13.2 Exercise of Nonqualified Stock Option. If the Option
does not qualify as an ISO, there may be a regular federal income tax liability
and a California income tax liability upon the exercise of the Option. Purchaser
will be treated as having received compensation income (taxable at ordinary
income tax rates) equal to the excess, if any, of the Fair Market Value of the
Shares on the date of exercise over the Exercise Price. If Purchaser is a
current or former employee of the Company, the Company will be required to
withhold from Purchaser's compensation or collect from Purchaser and pay to the
applicable taxing authorities an amount equal to a percentage of this
compensation income at the time of exercise.
13.3 Disposition of Shares. If the Shares are held for more
than one year after the date of the acquisition of the Shares pursuant to the
exercise of the Option as to Vested Shares (or for more than one year after the
date of transfer of the Shares pursuant to the exercise of an Option as to
Unvested Shares for which a Section 83(b) election has been made), and, in the
case of an ISO, are disposed of more than two years after the Date of Grant, any
gain realized on disposition of the Shares will be treated as long term capital
gain for federal and California income tax purposes. The long-term capital gain
will be taxed for federal income tax and alternative minimum tax purposes at a
maximum rate of 28% if the Shares are held more than one year but less than 18
months after exercise and at 20% if the Shares are held more than 18 months
after exercise. If shares purchased under an ISO are disposed of within the
applicable one year or two year period, any gain realized on such disposition
will be treated as compensation income (taxable at ordinary income rates) to the
extent of the excess, if any, of the Fair Market Value of the Shares on the date
of exercise over the Exercise Price. The Company may be required to withhold
from Purchaser's compensation or collect from Purchaser and pay to the
applicable taxing authorities an amount equal to a percentage of this
compensation income at the time of exercise.
13.4 Section 83(b) Election for Unvested Shares. With
respect to Unvested Shares, which are subject to the Repurchase Option for
Unvested Shares, unless an election is filed by the Purchaser with the Internal
Revenue Service (and, if necessary, the proper state taxing authorities), within
30 days of the purchase of the Unvested Shares, electing pursuant to Section
83(b) of the Internal Revenue Code (and similar state tax provisions, if
applicable) to be taxed currently on any difference between the Exercise Price
of the Unvested Shares and their Fair Market Value on the date of purchase,
there may be a recognition of taxable income (including, where applicable,
alternative minimum taxable income) to the Purchaser, measured by the excess, if
any, of the Fair Market Value of the Unvested Shares at the time they cease to
be Unvested Shares, over the Exercise Price of the Unvested Shares.
14. COMPLIANCE WITH LAWS AND REGULATIONS. The issuance and transfer
of the Shares will be subject to and conditioned upon compliance by the Company
and Purchaser with all applicable state and federal laws and regulations and
with all applicable requirements of any stock exchange or automated quotation
system on which the Company's Common Stock may be listed or quoted at the time
of such issuance or transfer.
15. SUCCESSORS AND ASSIGNS. The Company may assign any of its
rights under this Exercise Agreement, including its rights to repurchase Shares
under the Repurchase Option for Unvested Shares and the Right of First Refusal.
This Exercise Agreement shall be binding upon and inure to the benefit of the
successors and assigns of the Company. Subject to the restrictions on transfer
herein set forth, this Exercise Agreement will be binding upon Purchaser and
Purchaser's heirs, executors, administrators, legal representatives, successors
and assigns.
16. GOVERNING LAW; SEVERABILITY. This Exercise Agreement shall be
governed by and construed in accordance with the internal laws of the State of
California as such laws are applied to agreements between California residents
entered into and to be performed entirely within California. If any provision of
this
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<PAGE> 10
Exercise Agreement is determined by a court of law to be illegal or
unenforceable, then such provision will be enforced to the maximum extent
possible and the other provisions will remain fully effective and enforceable.
17. NOTICES. Any notice required to be given or delivered to the
Company shall be in writing and addressed to the Corporate Secretary of the
Company at its principal corporate offices. Any notice required to be given or
delivered to Purchaser shall be in writing and addressed to Purchaser at the
address indicated above or to such other address as Purchaser may designate in
writing from time to time to the Company. All notices shall be deemed
effectively given upon personal delivery, three (3) days after deposit in the
United States mail by certified or registered mail (return receipt requested),
one (1) business day after its deposit with any return receipt express courier
(prepaid), or one (1) business day after transmission by rapifax or telecopier.
18. FURTHER INSTRUMENTS. The parties agree to execute such further
instruments and to take such further action as may be reasonably necessary to
carry out the purposes and intent of this Exercise Agreement.
19. HEADINGS. The captions and headings of this Exercise Agreement
are included for ease of reference only and will be disregarded in interpreting
or construing this Exercise Agreement. All references herein to Sections will
refer to Sections of this Exercise Agreement.
20. ENTIRE AGREEMENT. The Plan, the Stock Option Agreement and this
Exercise Agreement, together with all its Exhibits, constitute the entire
agreement and understanding of the parties with respect to the subject matter of
this Exercise Agreement, and supersede all prior understandings and agreements,
whether oral or written, between the parties hereto with respect to the specific
subject matter hereof.
21. COUNTERPARTS This Exercise Agreement may be executed in two
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the Company has caused this Exercise Agreement
to be executed in duplicate by its duly authorized representative and Purchaser
has executed this Exercise Agreement in duplicate as of the Effective Date.
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<PAGE> 11
FIBEX SYSTEMS PURCHASER
By:
-------------------------------- -----------------------------------
(Signature)
- -----------------------------------
(Please print Name) -----------------------------------
(Please print name)
- -----------------------------------
(Please print title)
SIGNATURE PAGE TO FIBEX SYSTEMS STOCK OPTION EXERCISE AGREEMENT BETWEEN FIBEX
SYSTEMS AND PURCHASER UNDER FIBEX SYSTEMS' 1997 STOCK OPTION PLAN
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<PAGE> 12
LIST OF EXHIBITS
Exhibit 1: Stock Power and Assignment Separate from Stock Certificate
Exhibit 2: Spouse Consent
Exhibit 3: Copy of Purchaser's Check and/or Secured Full Recourse Promissory
Note
Exhibit 4: Section 83(b) Election and Acknowledgment and Statement of Decision
Regarding Section 83(b) Election
Exhibit 5: Stock Pledge Agreement
<PAGE> 13
STOCK POWER AND ASSIGNMENT
SEPARATE FROM STOCK CERTIFICATE
FOR VALUE RECEIVED and pursuant to that certain Stock Option
Exercise Agreement No. ___ dated as of _______________, 19___, (the "EXERCISE
AGREEMENT"), the undersigned hereby sells, assigns and transfers unto
_______________________________, shares of the Common Stock of Fibex Systems, a
California corporation (the "COMPANY"), standing in the undersigned's name on
the books of the Company represented by Certificate No(s). ______ delivered
herewith, and does hereby irrevocably constitute and appoint the Secretary of
the Company as the undersigned's attorney-in-fact, with full power of
substitution, to transfer said stock on the books of the Company. THIS
ASSIGNMENT MAY ONLY BE USED AS AUTHORIZED BY THE AGREEMENT AND ANY EXHIBITS
THERETO.
Dated: _______________, 19____
PURCHASER
-----------------------------------
(Signature)
-----------------------------------
(Please Print Name)
-----------------------------------
(Spouse's Signature, if any)
-----------------------------------
(Please Print Spouse's Name)
INSTRUCTIONS: Please do not fill in any blanks other than the signature line.
The purpose of this Stock Power and Assignment is to enable the Company to
acquire the shares upon exercise of its Repurchase Option for Unvested Shares
set forth in the Exercise Agreement or pursuant to the Pledge Agreement without
requiring additional signatures on the part of the Purchaser or Purchaser's
Spouse.
<PAGE> 14
SPOUSE CONSENT
The undersigned spouse of Purchaser has read, understands, and
hereby approves the Stock Option Exercise Agreement between Purchaser and the
Company (the "Agreement"). In consideration of the Company's granting my spouse
the right to purchase the Shares as set forth in the Agreement, the undersigned
hereby agrees to be irrevocably bound by the Agreement and further agrees that
any community property interest shall similarly be bound by the Agreement. The
undersigned hereby appoints Purchaser as my attorney-in-fact with respect to any
amendment or exercise of any rights under the Agreement.
Date:
-------------------- -----------------------------------
Signature of Purchaser's Spouse
Address:
-----------------------------------
-----------------------------------
<PAGE> 15
SECURED FULL RECOURSE PROMISSORY NOTE
Petaluma, California
$__________________ __________________, 1998
1. OBLIGATION. In exchange for the issuance to the undersigned
("Purchaser") of ______________ shares (the "SHARES") of the Common Stock of
Fibex Systems, a California corporation (the "COMPANY"), receipt of which is
hereby acknowledged, Purchaser hereby promises to pay to the order of the
Company on or before _______________, 2003, at the Company's principal place of
business at Fibex Systems, 5350 Old Redwood Highway, Petaluma, California 94954,
or at such other place as the Company may direct, the principal sum of
________________________ Dollars ($__________) together with interest compounded
semi-annually on the unpaid principal at the rate of _________ percent (___%),
which rate is not less than the minimum rate established pursuant to Section
1274(d) of the Internal Revenue Code of 1986, as amended, on the earliest date
on which there was a binding contract in writing for the purchase of the Shares;
provided, however, that the rate at which interest will accrue on unpaid
principal under this Note will not exceed the highest rate permitted by
applicable law.
2. SECURITY. Payment of this Note is secured by a security interest
in the Shares granted to the Company by Purchaser under a Stock Pledge Agreement
dated of even date herewith between the Company and Purchaser (the "Pledge
Agreement"). This Note is being tendered by Purchaser to the Company as the
Exercise Price of the Shares pursuant to that certain Stock Option Exercise
Agreement between Purchaser and the Company dated of even date with this Note
(the "Purchase Agreement").
3. DEFAULT; ACCELERATION OF OBLIGATION. Purchaser will be deemed to
be in default under this Note and the principal sum of this Note, together with
all interest accrued thereon, will immediately become due and payable in full:
(a) upon Purchaser's failure to make any payment when due under this Note; (b)
in the event Purchaser is Terminated (as defined in the Company's 1997 Stock
Option Plan) for any reason; (c) upon any transfer of any of the Shares (except
a transfer to the Company); (d) upon the filing by or against Purchaser of any
voluntary or involuntary petition in bankruptcy or any petition for relief under
the federal bankruptcy code or any other state or federal law for the relief of
debtors; or (e) upon the execution by Purchaser of an assignment for the benefit
of creditors or the appointment of a receiver, custodian, trustee or similar
party to take possession of Purchaser's assets or property.
4. REMEDIES ON DEFAULT. Upon any default of Purchaser under this
Note, the Company will have, in addition to its rights and remedies under this
Note and the Pledge Agreement, full recourse against any real, personal,
tangible or intangible assets of Purchaser, and may pursue any legal or
equitable remedies that are available to it.
5. PREPAYMENT. Prepayment of principal and/or interest due under
this Note may be made at any time without penalty. Unless otherwise agreed in
writing by the Company, all payments will be made in lawful tender of the United
States and will be applied first to the payment of accrued interest, and the
remaining balance of such payment, if any, will then be applied to the payment
of principal. If Purchaser prepays all or a portion of the principal amount of
this Note, the Shares paid for by the portion of principal so paid will continue
to be held in pledge under the Pledge Agreement to serve as independent
collateral for the outstanding portion of this Note for the purpose of
commencing the holding period under Rule 144(d) of the Securities and Exchange
Commission with respect to other Shares purchased with this Note unless
Purchaser notifies the Company in writing otherwise and the Company consents to
release of the Shares from the Pledge Agreement.
6. GOVERNING LAW; WAIVER. The validity, construction and
performance of this Note will be governed by the internal laws of the State of
California, excluding that body of law pertaining to conflicts of law. Purchaser
hereby waives presentment, notice of non-payment, notice of dishonor, protest,
demand and diligence.
<PAGE> 16
7. ATTORNEYS' FEES. If suit is brought for collection of this Note,
Purchaser agrees to pay all reasonable expenses, including attorneys' fees,
incurred by the holder in connection therewith whether or not such suit is
prosecuted to judgment.
8. RULE 144 HOLDING PERIOD. PURCHASER UNDERSTANDS THAT THE HOLDING
PERIOD SPECIFIED UNDER RULE 144(d) OF THE SECURITIES AND EXCHANGE COMMISSION
WILL NOT BEGIN TO RUN WITH RESPECT TO SHARES PURCHASED WITH THIS NOTE UNTIL
EITHER (A) THE EXERCISE PRICE OF SUCH SHARES IS PAID IN FULL IN CASH OR BY OTHER
PROPERTY ACCEPTED BY THE COMPANY, OR (B) THIS NOTE IS SECURED BY COLLATERAL,
OTHER THAN THE SHARES THAT HAVE NOT BEEN FULLY PAID FOR IN CASH, HAVING A FAIR
MARKET VALUE AT LEAST EQUAL TO THE AMOUNT OF PURCHASER'S THEN OUTSTANDING
OBLIGATION UNDER THIS NOTE (INCLUDING ACCRUED INTEREST).
IN WITNESS WHEREOF, Purchaser has executed this Note as of the date
and year first above written.
- ----------------------------------- -----------------------------------
Purchaser's Name [type or print] Purchaser's Signature
SIGNATURE PAGE TO FIBEX SYSTEMS SECURED FULL
RECOURSE PROMISSORY NOTE
-2-
<PAGE> 17
ELECTION UNDER SECTION 83(b) OF THE
INTERNAL REVENUE CODE
The undersigned Taxpayer hereby elects, pursuant to Section 83(b) of the
Internal Revenue Code of 1986, as amended, to include the excess, if any, of the
fair market value of the property described below at the time of transfer over
the amount paid for such property, as compensation for services in the
calculation of: (1) regular gross income; (2) alternative minimum taxable income
or (3) disqualifying disposition gross income, as the case may be:
1. TAXPAYER'S NAME: _____________________________________________
TAXPAYER'S ADDRESS: _____________________________________________
_____________________________________________
SOCIAL SECURITY NUMBER: _____________________________________________
2. The property with respect to which the election is made is described as
follows: ___________ shares of Common Stock of Fibex Systems, a
California corporation which were transferred upon exercise of an option
(the "COMPANY"), which is Taxpayer's employer or the corporation for
whom the Taxpayer performs services.
3. The date on which the shares were transferred pursuant to the exercise
of the option was __________, 199___ and this election is made for
calendar year 199___.
4. The shares received upon exercise of the option are subject to the
following restrictions: The Company may repurchase all or a portion of
the shares at the Taxpayer's original purchase price under certain
conditions at the time of Taxpayer's termination of employment or
services.
5. The fair market value of the shares (without regard to restrictions
other than restrictions which by their terms will never lapse) was
$_____ per share at the time of exercise of the option.
6. The amount paid for such shares upon exercise of the option was $____
per share.
7. The Taxpayer has submitted a copy of this statement to the Company.
THIS ELECTION MUST BE FILED WITH THE INTERNAL REVENUE SERVICE ("IRS"), AT THE
OFFICE WHERE THE TAXPAYER FILES ANNUAL INCOME TAX RETURNS, WITHIN 30 DAYS AFTER
THE DATE OF TRANSFER OF THE SHRES, AND MUST ALSO BE FILED WITH THE TAXPAYER'S
INCOME TAX RETURNS FOR THE CALENDAR YEAR. THE ELECTION CANNOT BE REVOKED WITHOUT
THE CONSENT OF THE IRS.
Dated: _______________ ___________________________________
Taxpayer's Signature
Dated: _______________ ___________________________________
Taxpayer's Spouse Signature
<PAGE> 18
ACKNOWLEDGMENT AND STATEMENT OF DECISION
REGARDING SECTION 83(b) ELECTION
The undersigned (which term includes the undersigned's spouse), a
purchaser of ___________ shares of Common Stock of Fibex Systems, a California
corporation (the "Company") by exercise of an option (the "Option") granted
pursuant to the Company's 1997 Stock Option Plan (the "Plan"), hereby states as
follows:
1. The undersigned acknowledges receipt of a copy of the Plan relating
to the offering of such shares. The undersigned has carefully reviewed the Plan
and the option agreement pursuant to which the Option was granted.
2. The undersigned either [check and complete as applicable]:
(a) ____ has consulted, and has been fully advised by, the
undersigned's own tax advisor, _________________________________,
whose business address is ______________________________,
regarding the federal, state and local tax consequences of
purchasing shares under the Plan, and particularly regarding the
advisability of making elections pursuant to Section 83(b) of the
Internal Revenue Code of 1986, as amended (the "Code") and
pursuant to the corresponding provisions, if any, of applicable
state law; or
(b) ____ has knowingly chosen not to consult such a tax advisor.
3. The undersigned hereby states that the undersigned has decided [check
as applicable]:
(a) ____ to make an election pursuant to Section 83(b) of the Code,
and is submitting to the Company, together with the undersigned's
executed Stock Option Exercise Agreement and related documents,
an executed form entitled "Election Under Section 83(b) of the
Internal Revenue Code of 1986"; or
(b) ____ not to make an election pursuant to Section 83(b) of the Code.
4. Neither the Company nor any subsidiary or representative of the
Company has made any warranty or representation to the
undersigned with respect to the tax consequences of the
undersigned's purchase of shares under the Plan or of the making
or failure to make an election pursuant to Section 83(b) of the
Code or the corresponding provisions, if any, of applicable state
law.
Dated: _______________ ___________________________________
Taxpayer
Dated: _______________ ___________________________________
Spouse of Taxpayer
<PAGE> 19
STOCK PLEDGE AGREEMENT
This Agreement is made and entered into as of ___________, 1998, between
Fibex Systems, a California corporation (the "COMPANY"), and
_________________________ ("Pledgor").
R E C I T A L S
A. In exchange for Pledgor's Secured Full Recourse Promissory Note
to the Company of even date herewith (the "Note"), the Company has issued and
sold to Pledgor __________ shares of its Common Stock (the "SHARES") pursuant to
the terms and conditions of that Stock Option Exercise Agreement between the
Company and Pledgor of even date herewith (the "PURCHASE AGREEMENT").
B. Pledgor has agreed that repayment of the Note will be secured by
the pledge of the Shares pursuant to this Exercise Agreement.
NOW, THEREFORE, the parties agree as follows:
1. CREATION OF SECURITY INTEREST. Pursuant to the provisions of the
California Commercial Code, Pledgor hereby grants to the Company, and the
Company hereby accepts, a first and present security interest in the Shares as
collateral to secure the payment of Pledgor's obligation to the Company under
the Note. Pledgor herewith delivers to the Company Common Stock certificate(s)
No(s). _________, representing all the Shares, together with one stock power for
each certificate in the form attached as an Exhibit to the Purchase Agreement,
duly executed (with the date and number of shares left blank) by Pledgor and
Pledgor's spouse, if any. For purposes of this Exercise Agreement, the Shares
pledged to the Company hereby, together with any additional collateral pledged
pursuant to Sections 5 and 6 hereof, will hereinafter be collectively referred
to as the "COLLATERAL." Pledgor agrees that the Collateral pledged to the
Company will be deposited with and held by the Escrow Holder (as defined in the
Purchase Agreement) and that, notwithstanding anything to the contrary in the
Purchase Agreement, for purposes of carrying out the provisions of this Exercise
Agreement, Escrow Holder will act solely for the Company as its agent.
2. REPRESENTATIONS AND WARRANTIES. Pledgor hereby represents and
warrants to the Company that Pledgor has good title (both record and beneficial)
to the Collateral, free and clear of all claims, pledges, security interests,
liens or encumbrances of every nature whatsoever, and that Pledgor has the right
to pledge and grant the Company the security interest in the Collateral granted
under this Exercise Agreement. Pledgor further agrees that, until the entire
principal sum and all accrued interest due under the Note has been paid in full,
Purchaser will not, without the Company's prior written consent, (i) sell,
assign or transfer, or attempt to sell, assign or transfer, any of the
Collateral, or (ii) grant or create, or attempt to grant or create, any security
interest, lien, pledge, claim or other encumbrance with respect to any of the
Collateral.
3. RIGHTS ON DEFAULT. In the event of default (as defined in the
Note) by Pledgor under the Note, the Company will have full power to sell,
assign and deliver the whole or any part of the Collateral at any broker's
exchange or elsewhere, at public or private sale, at the option of the Company,
in order to satisfy any part of the obligations of Pledgor now existing or
hereinafter arising under the Note. On any such sale, the Company or its assigns
may purchase all or any part of the Collateral. In addition, at its sole option,
the Company may elect to retain all the Collateral in full satisfaction of
Pledgor's obligation under the Note, in accordance with the provisions and
procedures set forth in the California Commercial Code.
4. ADDITIONAL REMEDIES. The rights and remedies granted to the
Company herein upon default under the Note will be in addition to all the
rights, powers and remedies of the Company under the California Commercial Code
and applicable law and such rights, powers and remedies will be exercisable by
the Company with respect to all of the Collateral. Pledgor agrees that the
Company's reasonable expenses of holding the Collateral, preparing it for resale
or other disposition, and selling or otherwise disposing of the Collateral,
including attorneys' fees and other legal expenses, will be deducted from the
proceeds of any sale or other disposition and will be included in the amounts
Pledgor must tender to redeem the Collateral. All rights, powers and remedies of
the Company will be cumulative and not alternative. Any forbearance or failure
or delay by the Company in exercising
<PAGE> 20
any right, power or remedy hereunder will not be deemed to be a waiver of any
such right, power or remedy and any single or partial exercise of any such
right, power or remedy hereunder will not preclude the further exercise thereof.
5. DIVIDENDS; VOTING. All dividends hereinafter declared on or
payable with respect to the Collateral during the term of this pledge (excluding
only ordinary cash dividends, which will be payable to Pledgor so long as
Pledgor is not in default under the Note) will be immediately delivered to the
Company to be held in pledge under this Exercise Agreement. Notwithstanding this
Exercise Agreement, so long as Pledgor owns the Shares and is not in default
under the Note, Pledgor will be entitled to vote any shares comprising the
Collateral, subject to any proxies granted by Pledgor.
6. ADJUSTMENTS. In the event that during the term of this pledge,
any stock dividend, reclassification, readjustment, stock split or other change
is declared or made with respect to the Collateral, or if warrants or any other
rights, options or securities are issued in respect of the Collateral, then all
new, substituted and/or additional shares or other securities issued by reason
of such change or by reason of the exercise of such warrants, rights, options or
securities, will be immediately pledged to the Company to be held under the
terms of this Agreement in the same manner as the Collateral is held hereunder.
7. RIGHTS UNDER PURCHASE AGREEMENT. Pledgor understands and agrees
that the Company's rights to repurchase the Collateral under the Purchase
Agreement, if any, will continue for the periods and on the terms and conditions
specified in the Purchase Agreement, whether or not the Note has been paid
during such period of time, and that to the extent that the Note is not paid
during such period of time, the repurchase by the Company of the Collateral may
be made by way of cancellation of all or any part of Pledgor's indebtedness
under the Note.
8. REDELIVERY OF COLLATERAL. Upon payment in full of the entire
principal sum and all accrued interest due under the Note, and subject to the
terms and conditions of the Purchase Agreement, the Company will immediately
redeliver the Collateral to Pledgor and this Exercise Agreement will terminate;
provided, however, that all rights of the Company to retain possession of the
Shares pursuant to the Purchase Agreement will survive termination of this
Exercise Agreement.
9. SUCCESSORS AND ASSIGNS. This Exercise Agreement will inure to
the benefit of the respective heirs, personal representatives, successors and
assigns of the parties hereto.
10. GOVERNING LAW; SEVERABILITY. This Exercise Agreement will be
governed by and construed in accordance with the internal laws of the State of
California, excluding that body of law relating to conflicts of law. Should one
or more of the provisions of this Exercise Agreement be determined by a court of
law to be illegal or unenforceable, the other provisions nevertheless will
remain effective and will be enforceable.
11. MODIFICATION; ENTIRE AGREEMENT. This Exercise Agreement will
not be amended without the written consent of both parties hereto. This Exercise
Agreement constitutes the entire agreement of the parties hereto with respect to
the subject matter hereof and supersedes all prior agreements and understandings
related to such subject matter.
<PAGE> 21
IN WITNESS WHEREOF, the parties hereto have executed this Exercise
Agreement as of the date and year first above written.
FIBEX SYSTEMS PLEDGOR
By:________________________________ ___________________________________
(Signature)
___________________________________ ___________________________________
(Please print name) (Please print name)
___________________________________
(Please print title)
SIGNATURE PAGE TO FIBEX SYSTEMS STOCK PLEDGE AGREEMENT
<PAGE> 1
EXHIBIT 99.7
CISCO SYSTEMS, INC.
STOCK OPTION ASSUMPTION AGREEMENT
FIBEX SYSTEMS 1997 STOCK OPTION PLAN
OPTIONEE: Employee
STOCK OPTION ASSUMPTION AGREEMENT effective as of the 17th day of May, 1999
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 Fibex Systems, a
California corporation ("Fibex"), which were granted to Optionee either directly
by Fibex independent of an option plan, or under the Fibex 1997 Stock Option
Plan ( the "Plan") and are each evidenced by a Stock Option Agreement (the
"Option Agreement").
WHEREAS, Fibex has been acquired by Cisco through the merger of Fibex with
and into Cisco (the "Merger") pursuant to the Agreement and Plan of
Reorganization, by and between Cisco and Fibex (the "Reorganization Agreement").
WHEREAS, the provisions of the Reorganization Agreement require Cisco to
assume all obligations of Fibex 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 Reorganization Agreement, the
exchange ratio (the "Exchange Ratio") in effect for the Merger is 0.197847369 of
a share of Cisco common stock ("Cisco Stock") for each outstanding share of
Fibex common stock ("Fibex Stock").
WHEREAS, this Agreement became effective immediately upon the consummation
of the Merger (the "Effective Time") in order to reflect certain adjustments to
Optionee's outstanding options which have become necessary by reason of the
assumption of those options by Cisco in connection with the Merger.
NOW, THEREFORE, it is hereby agreed as follows:
1. The number of shares of Fibex Stock subject to the options held by
Optionee immediately prior to the Effective Time (the "Fibex Options") and the
exercise price payable per share are set forth in Exhibit(s) A hereto. Cisco
hereby assumes, as of the Effective Time, all the duties and obligations of
Fibex under each of the Fibex Options. In connection with such assumption, the
number of shares of Cisco Stock purchasable under each Fibex 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 Fibex Option hereby assumed shall be as specified for that option in
attached Exhibit(s) A, and the adjusted
<PAGE> 2
exercise price payable per share of Cisco Stock under the assumed Fibex Option
shall also be as indicated for that option in attached Exhibit(s) A.
2. The intent of the foregoing adjustments to each assumed Fibex 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 Fibex Stock subject to the Fibex Option and the aggregate exercise price in
effect at such time under the 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 Fibex Option immediately prior to the Merger.
3. The following provisions shall govern each Fibex Option hereby assumed
by Cisco:
(a) Unless the context otherwise requires, all references in each
Option Agreement and, if applicable, in the Plan (as incorporated into such
Option Agreement) (i) to the "Company" shall mean Cisco, (ii) to "Shares"
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 Fibex
Option and all other provisions which govern either the exercise or the
termination of the assumed Fibex Option shall remain the same as set forth
in the Option Agreement applicable to that option, and the provisions of
the Option Agreement shall accordingly govern and control Optionee's rights
under this Agreement to purchase Cisco Stock.
(c) Pursuant to the terms of the Option Agreement, none of your
options assumed by Cisco in connection with the transaction will terminate
and cease to outstanding upon the consummation of the Merger. Each Fibex
Option shall be assumed by Cisco as of the Effective Time. Each such
assumed Fibex Option shall thereafter continue to vest for any remaining
unvested shares of Cisco Stock subject to that option in accordance with
the same installment vesting schedule in effect under the applicable 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) For purposes of applying any and all provisions of the Option
Agreement and/or the Plan relating to Optionee's status as an employee or a
consultant of Fibex, 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 Option Agreement governing
the termination of the assumed
2
<PAGE> 3
Fibex Options upon Optionee's cessation of service as an employee or a
consultant of Fibex shall hereafter be applied on the basis of Optionee's
cessation of employee or consultant status with Cisco and its subsidiaries,
and each assumed Fibex Option shall accordingly terminate, within the
designated time period in effect under the Option Agreement for that
option, following such cessation of service as an employee or a consultant
of Cisco and its subsidiaries.
(e) The adjusted exercise price payable for the Cisco Stock subject
to each assumed Fibex Option shall be payable in any of the forms
authorized under the Option Agreement applicable to that option. For
purposes of determining the holding period of any shares of Cisco Stock
delivered in payment of such adjusted exercise price, the period for which
such shares were held as Fibex Stock prior to the Merger shall be taken
into account.
(f) In order to exercise each assumed Fibex Option, Optionee must
deliver to Cisco a written notice of exercise in which the number of shares
of Cisco Stock to be purchased thereunder must be indicated. The exercise
notice must be accompanied by payment of the adjusted exercise price
payable for the purchased shares of Cisco Stock and should be delivered to
Cisco at the following address:
Cisco Systems, Inc.
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 Option Agreement as in effect
immediately prior to the Merger shall continue in full force and effect and
shall not in any way be amended, revised or otherwise affected by this Stock
Option Assumption Agreement.
3
<PAGE> 4
IN WITNESS WHEREOF, Cisco Systems, Inc. has caused this Stock Option
Assumption Agreement to be executed on its behalf by its duly-authorized officer
as of the 28th day of May, 1999.
CISCO SYSTEMS, INC.
By:
--------------------------------
Larry R. Carter
Corporate Secretary
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 Fibex Options hereby assumed by Cisco are as set
forth in the Option Agreement, the Plan, as applicable, and such Stock Option
Assumption Agreement.
-----------------------------------
Employee, OPTIONEE
DATED: __________________, 1999
4
