<PAGE> 1
As filed with the Securities and Exchange Commission on February 4, 2000
Registration No. 333-_______________
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-8
REGISTRATION STATEMENT
Under
The Securities Act of 1933
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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)
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CISCO SYSTEMS, INC.
1996 STOCK INCENTIVE PLAN
---------------------
(Full title of the Plans)
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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)
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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 Price Fee
---------- ------------------ ----------- ------------------ -------------
<S> <C> <C> <C> <C>
1996 Stock Incentive Plan
Common Stock 161,753,279 shares $104.8125(2) $16,953,765,555.19(2) $4,475,794.11
==============================================================================================================
</TABLE>
(1) This Registration Statement shall also cover any additional shares of
Registrant's Common Stock which become issuable under the 1996 Stock
Incentive 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 average of the
high and low selling prices per share of Common Stock of Cisco Systems,
Inc. on January 31, 2000, as reported by the Nasdaq National Market.
<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 31, 1999, filed with the Commission on September 28,
1999, as amended on Form 10-K405/A filed with the Commission on
February 3, 2000, 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 August 13, 1999, as amended on Form 8-K/A filed
with the Commission on August 13, 1999, August 26, 1999,
September 27, 1999, October 20, 1999, November 4, 1999, November
17, 1999, December 15, 1999, as amended on Form 8-K/A filed with
the Commission on February 3, 2000, and December 22, 1999;
(c) The Registrant's Quarterly Report on Form 10-Q for the fiscal
quarter ended October 30, 1999, filed with the Commission on
December 14, 1999, as amended on Form 10-Q/A filed with the
Commission on February 3, 2000;
(d) The Registrant's Registration Statement No. 000-18225 on Form 8-A
filed with the 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, and;
(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.
With respect to securities to be offered to employees of the
Registrant's or Registrant's Israeli subsidiary, Cisco Systems Israel Limited,
which are subject to the securities laws of the State of Israel, the following
legend shall apply:
"THE SECURITIES AUTHORITY OF THE STATE OF ISRAEL HAS EXEMPTED CISCO SYSTEMS,
INC. FROM THE REQUIREMENT UNDER ISRAELI LAW TO OBTAIN A PERMIT WITH REGARD TO
THIS FORM S-8. NOTHING IN THE EXEMPTION GRANTED SHALL BE CONSTRUED AS
AUTHENTICATING THE MATTERS CONTAINED IN THIS FORM S-8 OR AN APPROVAL OF THEIR
RELIABILITY OR ACCURACY OR AN EXPRESSION OF AN OPINION AS TO THE QUALITY OF THE
SECURITIES OFFERED HEREBY."
II-1
<PAGE> 3
Item 5. Interests of Named Experts and Counsel
Not Applicable.
Item 6. Indemnification of Directors and Officers
Section 317 of the California Corporations Code authorizes a
court to award, or a corporation's Board of Directors to grant indemnity to
directors and officers in terms sufficiently broad to permit indemnification
(including reimbursement of expenses incurred) under certain circumstances for
liabilities arising under the Securities Act of 1933, as amended, (the "1933
Act"). The Registrant's Restated Articles of Incorporation, as amended, and
Amended and Restated Bylaws provide for indemnification of its directors,
officers, employees and other agents to the maximum extent permitted by the
California Corporations Code. In addition, the Registrant has entered into
Indemnification Agreements with each of its directors and officers.
Item 7. Exemption from Registration Claimed
Not Applicable.
Item 8. Exhibits
<TABLE>
<CAPTION>
Exhibit Number Exhibit
- -------------- -------
0<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-4 of this
Registration Statement.
99.1 Cisco Systems, Inc. 1996 Stock Incentive Plan.
99.2* Form of Notice of Grant.
99.3* Form of Stock Option Agreement.
99.4* Form of Notice of Grant of Automatic Stock Option --
Initial.
99.5* Form of Notice of Grant of Automatic Stock Option --
Annual.
99.6* Form of Automatic Stock Option Agreement.
</TABLE>
* Exhibits 99.2 through 99.6 are incorporated herein by reference to Exhibits
99.1 through 99.6, respectively, of Registrant's Registration Statement No.
333-42249 on Form S-8, filed with the Commission on December 15, 1997.
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 the 1996 Stock
Incentive Plan.
II-2
<PAGE> 4
B. The undersigned Registrant hereby undertakes that, for
purposes of determining any liability under the 1933 Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
1934 Act that is incorporated by reference into 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-3
<PAGE> 5
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
4th day of February 2000.
CISCO SYSTEMS, INC.
By: /s/ JOHN T. CHAMBERS
-------------------------------------
John T. Chambers
President, Chief Executive Officer
and Director
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 February 4, 2000
- --------------------------------- Officer and Director
John T. Chambers (Principal Executive Officer)
/s/ LARRY R. CARTER Senior Vice President, Finance February 4, 2000
- --------------------------------- and Administration, Chief Financial
Larry R. Carter Officer and Secretary
(Principal Financial and Accounting
Officer)
/s/ JOHN P. MORGRIDGE Chairman of the Board and February 4, 2000
- --------------------------------- Director
John P. Morgridge
/s/ DONALD T. VALENTINE Vice Chairman of the Board and February 4, 2000
- --------------------------------- Director
Donald T. Valentine
</TABLE>
II-4
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<TABLE>
<S> <C> <C>
/s/ JAMES F. GIBBONS Director February 4, 2000
- ---------------------------------
James F. Gibbons
/s/ STEVEN M. WEST Director February 4, 2000
- ---------------------------------
Steven M. West
/s/ EDWARD R. KOZEL Director February 4, 2000
- ---------------------------------
Edward R. Kozel
/s/ CAROL A. BARTZ Director February 4, 2000
- ---------------------------------
Carol A. Bartz
/s/ JAMES C. MORGAN Director February 4, 2000
- ---------------------------------
James C. Morgan
/s/ MARY CIRILLO Director February 4, 2000
- ---------------------------------
Mary Cirillo
/s/ ARUN SARIN Director February 4, 2000
- ---------------------------------
Arun Sarin
</TABLE>
II-5
<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-4 of this
Registration Statement.
99.1 Cisco Systems, Inc. 1996 Stock Incentive Plan.
99.2* Form of Notice of Grant.
99.3* Form of Stock Option Agreement.
99.4* Form of Notice of Grant of Automatic Stock Option --
Initial.
99.5* Form of Notice of Grant of Automatic Stock Option --
Annual.
99.6* Form of Automatic Stock Option Agreement.
</TABLE>
* Exhibits 99.1 through 99.6 are incorporated herein by reference to Exhibits
99.1 through 99.6, respectively, of Registrant's Registration Statement No.
333-42249 on Form S-8, filed with the Commission on December 15, 1997.
<PAGE> 1
EXHIBIT 5
OPINION AND CONSENT OF BROBECK, PHLEGER & HARRISON LLP
February 4, 1999
Cisco Systems, Inc.
170 West Tasman Drive
San Jose, California 95134-1706
Re: Cisco Systems, Inc. - Registration Statement for Offering of
161,753,279 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
161,753,279 shares of common stock (the "Shares") and related stock options
under the Company's 1996 Stock Incentive Plan (the "Incentive 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 establishment
and amendment of the Incentive Plan. 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) in accordance with the Incentive 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 Incentive Plan, or the Shares issuable under the Incentive Plan.
Very truly yours,
/s/ BROBECK, PHLEGER & HARRISON LLP
-----------------------------------
BROBECK, PHLEGER & HARRISON LLP
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this Registration
Statement on Form S-8 of Cisco Systems, Inc. of our report dated August 10,
1999 relating to the consolidated financial statements, which appears in Cisco
Systems, Inc.'s 1999 Annual Report to Shareholders, which is incorporated by
reference in its Annual Report on Form 10-K/A for the year ended July 31, 1999.
We also consent to the incorporation by reference of our report dated August
10, 19999 relating to the financial statement schedule, which appears in such
Annual Report on Form 10-K/A. We also consent to the incorporation by reference
of our report dated August 10, 1999, except as to the pooling of interest
transactions as described in Note 3b which is as of November 24, 1999, relating
to the supplementary consolidated financial statements of Cisco Systems, Inc.
which appears in the Current Report on Form 8-K/A dated February 3, 2000.
/s/ PricewaterhouseCoopers LLP
San Jose, California
February 3, 2000
<PAGE> 1
EXHIBIT 99.1
1996 STOCK INCENTIVE PLAN
<PAGE> 2
CISCO SYSTEMS, INC.
1996 STOCK INCENTIVE PLAN
AS AMENDED AND RESTATED EFFECTIVE JULY 8, 1999
ARTICLE ONE
GENERAL PROVISIONS
I. PURPOSE OF THE PLAN
This 1996 Stock Incentive Plan is intended to promote the
interests of Cisco Systems, Inc., a California corporation, by providing
eligible persons with the opportunity to acquire a proprietary interest, or
otherwise increase their proprietary interest, in the Corporation as an
incentive for them to remain in the service of the Corporation.
Capitalized terms shall have the meanings assigned to such terms
in the attached Appendix.
All share numbers in this July 8, 1999 restatement reflect all
splits of the Common Stock effected through June 21, 1999, including (i) the
three (3)-for-two (2) split of Common Stock effected on December 16, 1997, (ii)
the three (3)-for-two (2) split of Common Stock effected on September 15, 1998
and (iii) the two (2)-for-one (1) spilt of Common Stock effected on June 21,
1999.
II. STRUCTURE OF THE PLAN
A. The Plan shall be divided into two separate equity programs:
(i) the Discretionary Option Grant Program under
which eligible persons may, at the discretion of the Plan Administrator,
be granted options to purchase shares of Common Stock, and
(ii) the Automatic Option Grant Program under which
eligible non-employee Board members shall automatically receive option
grants at periodic intervals to purchase shares of Common Stock.
B. The provisions of Articles One and Four shall apply to all
equity programs under the Plan and shall govern the interests of all persons
under the Plan.
III. ADMINISTRATION OF THE PLAN
A. The Primary Committee shall have sole and exclusive authority
to administer the Discretionary Option Grant Program with respect to Section 16
Insiders.
<PAGE> 3
B. Administration of the Discretionary Option Grant Program with
respect to all other persons eligible to participate in that program may, at the
Board's discretion, be vested in the Primary Committee or a Secondary Committee,
or the Board may retain the power to administer that program with respect to all
such persons. The members of the Secondary Committee may be Board members who
are Employees eligible to receive discretionary option grants under the Plan or
any other stock option, stock appreciation, stock bonus or other stock plan of
the Corporation (or any Parent or Subsidiary).
C. Members of the Primary Committee or any Secondary Committee
shall serve for such period of time as the Board may determine and may be
removed by the Board at any time. The Board may also at any time terminate the
functions of any Secondary Committee and reassume all powers and authority
previously delegated to such committee.
D. Each Plan Administrator shall, within the scope of its
administrative functions under the Plan, have full power and authority (subject
to the provisions of the Plan) to establish such rules and regulations as it may
deem appropriate for proper administration of the Discretionary Option Grant
Program and to make such determinations under, and issue such interpretations
of, the provisions of such programs and any outstanding options thereunder as it
may deem necessary or advisable. Decisions of the Plan Administrator within the
scope of its administrative functions under the Plan shall be final and binding
on all parties who have an interest in the Discretionary Option Grant Program
under its jurisdiction or any option or stock issuance thereunder.
E. Service on the Primary Committee or the Secondary Committee
shall constitute service as a Board member, and members of each such committee
shall accordingly be entitled to full indemnification and reimbursement as Board
members for their service on such committee. No member of the Primary Committee
or the Secondary Committee shall be liable for any act or omission made in good
faith with respect to the Plan or any option grants under the Plan.
F. Administration of the Automatic Option Grant Program shall be
self-executing in accordance with the terms of that program, and no Plan
Administrator shall exercise any discretionary functions with respect to any
option grants made under that program.
IV. ELIGIBILITY
A. The persons eligible to participate in the Discretionary
Option Grant Program are as follows:
(i) Employees,
(ii) non-employee members of the Board or the board
of directors of any Parent or Subsidiary, and
(iii) consultants and other independent advisors
who provide services to the Corporation (or any Parent or Subsidiary).
2.
<PAGE> 4
B. Each Plan Administrator shall, within the scope of its
administrative jurisdiction under the Plan, have full authority to determine
which eligible persons are to receive option grants under the Discretionary
Option Grant Program, the time or times when such option grants are to be made,
the number of shares to be covered by each such grant, the status of the granted
option as either an Incentive Option or a Non-Statutory Option, the time or
times when each option is to become exercisable, the vesting schedule (if any)
applicable to the option shares and the maximum term for which the option is to
remain outstanding.
C. The individuals who shall be eligible to participate in the
Automatic Option Grant Program shall be limited to (i) those individuals serving
as non-employee Board members on the Plan Effective Date, (ii) those individuals
who first become non-employee Board members on or after the Plan Effective Date,
whether through appointment by the Board or election by the Corporation's
shareholders, and (iii) those individuals who continue to serve as non-employee
Board members at one or more Annual Shareholders Meetings held after the Plan
Effective Date. A non-employee Board member who has previously been in the
employ of the Corporation (or any Parent or Subsidiary) shall not be eligible to
receive an option grant under the Automatic Option Grant Program at the time he
or she first becomes a non-employee Board member, but shall be eligible to
receive periodic option grants under the Automatic Option Grant Program while he
or she continues to serve as a non-employee Board member.
V. STOCK SUBJECT TO THE PLAN
A. The stock issuable under the Plan shall be shares of
authorized but unissued or reacquired Common Stock, including shares repurchased
by the Corporation on the open market. The maximum number of shares of Common
Stock reserved for issuance over the term of the Plan shall not exceed
906,866,843 shares, subject to the automatic share increases described in
Paragraph V.B. below. Such share reserve consists of the number of shares of
Common Stock transferred from the Predecessor Plan, as of the Plan Effective
Date (309,762,450), plus the number of shares added to the reserve in the
automatic share increases that occurred in December 1996, December 1997,
December 1998 and December 1999 (597,104,393 shares).
B. The number of shares of Common Stock available for issuance
under the Plan shall automatically increase on the first trading day of fiscal
December each calendar year, beginning with fiscal December in calendar year
1996 and continuing through fiscal December in calendar year 2001, by a number
of shares equal to four and three-quarters percent (4.75%) of the total number
of shares of Common Stock outstanding on the last trading day in the immediately
preceding fiscal November, but in no event shall any such annual increase exceed
240,000,000 shares.
C. No one person participating in the Plan may receive stock
options or separately exercisable stock appreciation rights for more than
9,000,000 shares of Common Stock in the aggregate per calendar year.
3.
<PAGE> 5
D. Shares of Common Stock subject to outstanding options
(including options incorporated into this Plan from the Predecessor Plan) shall
be available for subsequent issuance under the Plan to the extent those options
expire or terminate for any reason prior to exercise in full. Unvested shares
issued under the Plan and subsequently cancelled or repurchased by the
Corporation, at the original issue price paid per share, pursuant to the
Corporation's repurchase rights under the Plan shall be added back to the number
of shares of Common Stock reserved for issuance under the Plan and shall
accordingly be available for reissuance through one or more subsequent option
grants under the Plan. However, should the exercise price of an option under the
Plan be paid with shares of Common Stock or should shares of Common Stock
otherwise issuable under the Plan be withheld by the Corporation in satisfaction
of the withholding taxes incurred in connection with the exercise of an option
or the vesting of a stock issuance under the Plan, then the number of shares of
Common Stock available for issuance under the Plan shall be reduced by the gross
number of shares for which the option is exercised or which vest under the stock
issuance, and not by the net number of shares of Common Stock issued to the
holder of such option or stock issuance. Shares of Common Stock underlying one
or more stock appreciation rights exercised under Section IV of Article Two of
the Plan shall NOT be available for subsequent issuance under the Plan.
E. If any change is made to the Common Stock by reason of any
stock split, stock dividend, recapitalization, combination of shares, exchange
of shares or other change affecting the outstanding Common Stock as a class
without the Corporation's receipt of consideration, appropriate adjustments
shall be made to (i) the maximum number and/or class of securities issuable
under the Plan, (ii) the maximum number and/or class of securities for which any
one person may be granted stock options or separately exercisable stock
appreciation rights in the aggregate under the Plan per calendar year, (iii) the
number and/or class of securities for which grants are subsequently to be made
under the Automatic Option Grant Program to new and continuing non-employee
Board members, unless the Plan Administrator determines otherwise, (iv) the
number and/or class of securities and the exercise price per share in effect
under each outstanding option under the Plan and (v) the number and/or class of
securities and price per share in effect under each outstanding option
incorporated into this Plan from the Predecessor Plan. Such adjustments to the
outstanding options are to be effected in a manner which shall preclude the
enlargement or dilution of rights and benefits under such options. The
adjustments determined by the Plan Administrator shall be final, binding and
conclusive.
4.
<PAGE> 6
ARTICLE TWO
DISCRETIONARY OPTION GRANT PROGRAM
I. OPTION TERMS
Each option shall be evidenced by one or more documents in the
form approved by the Plan Administrator; provided, however, that each such
document shall comply with the terms specified below. Each document evidencing
an Incentive Option shall, in addition, be subject to the provisions of the Plan
applicable to such options.
A. EXERCISE PRICE.
1. The exercise price per share shall be fixed by the Plan
Administrator but shall not be less than one hundred percent (100%) of the Fair
Market Value per share of Common Stock on the option grant date.
2. The exercise price shall become immediately due upon
exercise of the option and shall, subject to the provisions of Section I of
Article Four and the documents evidencing the option, be payable in one or more
of the forms specified below:
(i) cash or check made payable to the Corporation,
(ii) shares of Common Stock held for the requisite
period necessary to avoid a charge to the Corporation's earnings for
financial reporting purposes and valued at Fair Market Value on the
Exercise Date, or
(iii) to the extent the option is exercised for
vested shares, through a special sale and remittance procedure pursuant
to which the Optionee shall concurrently provide irrevocable
instructions to (a) a Corporation-designated brokerage firm to effect
the immediate sale of the purchased shares and remit to the Corporation,
out of the sale proceeds available on the settlement date, sufficient
funds to cover the aggregate exercise price payable for the purchased
shares plus all applicable Federal, state and local income and
employment taxes required to be withheld by the Corporation by reason of
such exercise and (b) the Corporation to deliver the certificates for
the purchased shares directly to such brokerage firm in order to
complete the sale.
Except to the extent such sale and remittance procedure is
utilized, payment of the exercise price for the purchased shares must be made on
the Exercise Date.
5.
<PAGE> 7
B. EXERCISE AND TERM OF OPTIONS. Each option shall be exercisable
at such time or times, during such period and for such number of shares as shall
be determined by the Plan Administrator and set forth in the documents
evidencing the option. However, no option shall have a term in excess of nine
(9) years measured from the option grant date.
C. EFFECT OF TERMINATION OF SERVICE.
1. The following provisions shall govern the exercise of
any options held by the Optionee at the time of cessation of Service or death:
(i) Any option outstanding at the time of the
Optionee's cessation of Service for any reason shall remain exercisable
for such period of time thereafter as shall be determined by the Plan
Administrator and set forth in the documents evidencing the option, but
no such option shall be exercisable after the expiration of the option
term.
(ii) Any option exercisable in whole or in part by
the Optionee at the time of death may be subsequently exercised by the
personal representative of the Optionee's estate or by the person or
persons to whom the option is transferred pursuant to the Optionee's
will or in accordance with the laws of descent and distribution.
(iii) Should the Optionee's Service be terminated
for Misconduct, then all outstanding options held by the Optionee shall
terminate immediately and cease to be outstanding.
(iv) During the applicable post-Service exercise
period, the option may not be exercised in the aggregate for more than
the number of vested shares for which the option is exercisable on the
date of the Optionee's cessation of Service. Upon the expiration of the
applicable exercise period or (if earlier) upon the expiration of the
option term, the option shall terminate and cease to be outstanding for
any vested shares for which the option has not been exercised. However,
the option shall, immediately upon the Optionee's cessation of Service,
terminate and cease to be outstanding to the extent the option is not
otherwise at that time exercisable for vested shares.
D. The Plan Administrator shall have complete discretion,
exercisable either at the time an option is granted or at any time while the
option remains outstanding, to:
(i) extend the period of time for which the option
is to remain exercisable following the Optionee's cessation of Service
from the limited exercise period otherwise in effect for that option to
such greater period of time as the Plan Administrator shall deem
appropriate, but in no event beyond the expiration of the option term,
and/or
6.
<PAGE> 8
(ii) permit the option to be exercised, during the
applicable post-Service exercise period, not only with respect to the
number of vested shares of Common Stock for which such option is
exercisable at the time of the Optionee's cessation of Service but also
with respect to one or more additional installments in which the
Optionee would have vested had the Optionee continued in Service.
E. SHAREHOLDER RIGHTS. The holder of an option shall have no
shareholder rights with respect to the shares subject to the option until such
person shall have exercised the option, paid the exercise price and become a
holder of record of the purchased shares.
F. REPURCHASE RIGHTS. The Plan Administrator shall have the
discretion to grant options which are exercisable for unvested shares of Common
Stock. Should the Optionee cease Service while holding such unvested shares, the
Corporation shall have the right to repurchase, at the exercise price paid per
share, any or all of those unvested shares. The terms upon which such repurchase
right shall be exercisable (including the period and procedure for exercise and
the appropriate vesting schedule for the purchased shares) shall be established
by the Plan Administrator and set forth in the document evidencing such
repurchase right.
G. LIMITED TRANSFERABILITY OF OPTIONS. During the lifetime of the
Optionee, Incentive Options shall be exercisable only by the Optionee and shall
not be assignable or transferable other than by will or by the laws of
inheritance following the Optionee's death. However, a Non-Statutory Option may
be assigned in whole or in part during the Optionee's lifetime to one or more
members of the Optionee's immediate family or to a trust established exclusively
for one or more such family members or to one or more individuals, to the extent
such assignment is in connection with the Optionee's estate plan or pursuant to
a domestic relations order. The assigned portion may only be exercised by the
person or persons who acquire a proprietary interest in the option pursuant to
the assignment. The terms applicable to the assigned portion shall be the same
as those in effect for the option immediately prior to such assignment and shall
be set forth in such documents issued to the assignee as the Plan Administrator
may deem appropriate.
II. INCENTIVE OPTIONS
The terms specified below shall be applicable to all Incentive
Options. Except as modified by the provisions of this Section II, all the
provisions of Articles One, Two and Four shall be applicable to Incentive
Options. Options designated as Non-Statutory Options when issued under the Plan
shall not be subject to the terms of this Section II.
A. ELIGIBILITY. Incentive Options may only be granted to
Employees.
7.
<PAGE> 9
B. DOLLAR LIMITATION. The aggregate Fair Market Value of the
shares of Common Stock (determined as of the respective date or dates of grant)
for which one or more options granted to any Employee under the Plan (or any
other option plan of the Corporation or any Parent or Subsidiary) may for the
first time become exercisable as Incentive Options during any one calendar year
shall not exceed the sum of One Hundred Thousand Dollars ($100,000). To the
extent the Employee holds two (2) or more such options which become exercisable
for the first time in the same calendar year, the foregoing limitation on the
exercisability of such options as Incentive Options shall be applied on the
basis of the order in which such options are granted.
C. 10% SHAREHOLDER. If any Employee to whom an Incentive Option
is granted is a 10% Shareholder, then the exercise price per share shall not be
less than one hundred ten percent (110%) of the Fair Market Value per share of
Common Stock on the option grant date, and the option term shall not exceed five
(5) years measured from the option grant date.
III. CORPORATE TRANSACTION/CHANGE IN CONTROL
A. In the event of any Corporate Transaction, each outstanding
option shall automatically accelerate so that each such option shall,
immediately prior to the effective date of the Corporate Transaction, become
exercisable for all of the shares of Common Stock at the time subject to such
option and may be exercised for any or all of those shares as fully-vested
shares of Common Stock. However, an outstanding option shall not so accelerate
if and to the extent: (i) such option is, in connection with the Corporate
Transaction, either to be assumed by the successor corporation (or parent
thereof) or to be replaced with a comparable option to purchase shares of the
capital stock of the successor corporation (or parent thereof), (ii) such option
is to be replaced with a cash incentive program of the successor corporation
which preserves the spread existing on the unvested option shares at the time of
the Corporate Transaction and provides for subsequent payout in accordance with
the same vesting schedule applicable to those option shares or (iii) the
acceleration of such option is subject to other limitations imposed by the Plan
Administrator at the time of the option grant. The determination of option
comparability under clause (i) above shall be made by the Plan Administrator,
and its determination shall be final, binding and conclusive.
B. All outstanding repurchase rights shall also terminate
automatically, and the shares of Common Stock subject to those terminated rights
shall immediately vest in full, in the event of any Corporate Transaction,
except to the extent: (i) those repurchase rights are to be assigned to the
successor corporation (or parent thereof) in connection with such Corporate
Transaction or (ii) such accelerated vesting is precluded by other limitations
imposed by the Plan Administrator at the time the repurchase right is issued.
C. Immediately following the consummation of the Corporate
Transaction, all outstanding options shall terminate and cease to be
outstanding, except to the extent assumed by the successor corporation (or
parent thereof).
8.
<PAGE> 10
D. Each option which is assumed in connection with a Corporate
Transaction shall be appropriately adjusted, immediately after such Corporate
Transaction, to apply to the number and class of securities which would have
been issuable to the Optionee in consummation of such Corporate Transaction had
the option been exercised immediately prior to such Corporate Transaction.
Appropriate adjustments to reflect such Corporate Transaction shall also be made
to (i) the exercise price payable per share under each outstanding option,
provided the aggregate exercise price payable for such securities shall remain
the same, (ii) the maximum number and/or class of securities available for
issuance over the remaining term of the Plan and (iii) the maximum number and/or
class of securities for which any one person may be granted stock options or
separately exercisable stock appreciation rights under the Plan per calendar
year.
E. The Plan Administrator shall have full power and authority to
grant options under the Discretionary Option Grant Program which will
automatically accelerate in the event the Optionee's Service subsequently
terminates by reason of an Involuntary Termination within a designated period
(not to exceed eighteen (18) months) following the effective date of any
Corporate Transaction in which those options are assumed or replaced and do not
otherwise accelerate. Any options so accelerated shall remain exercisable for
fully-vested shares until the expiration or sooner termination of the option
term. In addition, the Plan Administrator may provide that one or more of the
Corporation's outstanding repurchase rights with respect to shares held by the
Optionee at the time of such Involuntary Termination shall immediately
terminate, and the shares subject to those terminated repurchase rights shall
accordingly vest in full.
F. The Plan Administrator shall have full power and authority to
grant options under the Discretionary Option Grant Program which will
automatically accelerate in the event the Optionee's Service subsequently
terminates by reason of an Involuntary Termination within a designated period
(not to exceed eighteen (18) months) following the effective date of any Change
in Control. Each option so accelerated shall remain exercisable for fully-vested
shares until the expiration or sooner termination of the option term. In
addition, the Plan Administrator may provide that one or more of the
Corporation's outstanding repurchase rights with respect to shares held by the
Optionee at the time of such Involuntary Termination shall immediately
terminate, and the shares subject to those terminated repurchase rights shall
accordingly vest in full.
G. The portion of any Incentive Option accelerated in connection
with a Corporate Transaction or Change in Control shall remain exercisable as an
Incentive Option only to the extent the applicable One Hundred Thousand Dollar
limitation is not exceeded. To the extent such dollar limitation is exceeded,
the accelerated portion of such option shall be exercisable as a Non-Statutory
Option under the Federal tax laws.
9.
<PAGE> 11
H. The outstanding options shall in no way affect the right of
the Corporation to adjust, reclassify, reorganize or otherwise change its
capital or business structure or to merge, consolidate, dissolve, liquidate or
sell or transfer all or any part of its business or assets.
IV. STOCK APPRECIATION RIGHTS
A. The Plan Administrator shall have full power and authority,
exercisable in its sole discretion, to grant to selected Optionees or other
individuals eligible to receive option grants under the Discretionary Option
Grant Program stock appreciation rights.
B. Three types of stock appreciation rights shall be authorized
for issuance under the Plan: (i) tandem stock appreciation rights ("Tandem
Rights"), (ii) stand-alone stock appreciation rights ("Stand-alone Rights") and
(iii) limited stock appreciation rights ("Limited Rights").
C. The following terms and conditions shall govern the grant and
exercise of Tandem Rights under this Article Two.
1. One or more Optionees may be granted a Tandem Right,
exercisable upon such terms and conditions as the Plan Administrator may
establish, to elect between the exercise of the underlying Article Two stock
option for shares of Common Stock or the surrender of that option in exchange
for a distribution from the Corporation in an amount equal to the excess of (i)
the Fair Market Value (on the option surrender date) of the number of shares in
which the Optionee is at the time vested under the surrendered option (or
surrendered portion thereof) over (ii) the aggregate exercise price payable for
such vested shares.
2. No such option surrender shall be effective unless it
is approved by the Plan Administrator, either at the time of the actual option
surrender or at any earlier time. If the surrender is so approved, then the
distribution to which the Optionee shall accordingly become entitled under this
Section V may be made in shares of Common Stock valued at Fair Market Value on
the option surrender date, in cash, or partly in shares and partly in cash, as
the Plan Administrator shall in its sole discretion deem appropriate.
3. If the surrender of an option is not approved by the
Plan Administrator, then the Optionee shall retain whatever rights the Optionee
had under the surrendered option (or surrendered portion thereof) on the option
surrender date and may exercise such rights at any time prior to the later of
(i) five (5) business days after the receipt of the rejection notice or (ii) the
last day on which the option is otherwise exercisable in accordance with the
terms of the instrument evidencing such option, but in no event may such rights
be exercised more than nine (9) years after the date of the option grant.
D. The following terms and conditions shall govern the grant and
exercise of Stand-alone Rights under this Article Two:
10.
<PAGE> 12
1. One or more individuals eligible to participate in the
Discretionary Option Grant Program may be granted a Stand-alone Right not tied
to any underlying option under this Discretionary Option Grant Program. The
Stand-alone Right shall cover a specified number of underlying shares of Common
Stock and shall be exercisable upon such terms and conditions as the Plan
Administrator may establish. Upon exercise of the Stand-alone Right, the holder
shall be entitled to receive a distribution from the Corporation in an amount
equal to the excess of (i) the aggregate Fair Market Value (on the exercise
date) of the shares of Common Stock underlying the exercised right over (ii) the
aggregate base price in effect for those shares.
2. The number of shares of Common Stock underlying each
Stand-alone Right and the base price in effect for those shares shall be
determined by the Plan Administrator in its sole discretion at the time the
Stand-alone Right is granted. In no event, however, may the base price per share
be less than the Fair Market Value per underlying share of Common Stock on the
grant date.
3. The distribution with respect to an exercised
Stand-alone Right may be made in shares of Common Stock valued at Fair Market
Value on the exercise date, in cash, or partly in shares and partly in cash, as
the Plan Administrator shall in its sole discretion deem appropriate.
E. The following terms and conditions shall govern the grant and
exercise of Limited Rights under this Article Two:
1. One or more Section 16 Insiders may, in the Plan
Administrator's sole discretion, be granted Limited Rights with respect to their
outstanding options under this Article Two.
2. Upon the occurrence of a Hostile Take-Over, the Section
16 Insider shall have the unconditional right (exercisable for a thirty (30)-day
period following such Hostile Take-Over) to surrender each option with such a
Limited Right to the Corporation, to the extent the option is at the time
exercisable for fully vested shares of Common Stock. The Section 16 Insider
shall in return be entitled to a cash distribution from the Corporation in an
amount equal to the excess of (i) the Take-Over Price of the vested shares of
Common Stock at the time subject to each surrendered option (or surrendered
portion of such option) over (ii) the aggregate exercise price payable for such
vested shares. Such cash distribution shall be made within five (5) days
following the option surrender date.
3. The Plan Administrator shall pre-approve, at the time
such Limited Right is granted, the subsequent exercise of that right in
accordance with the terms of the grant and the provisions of this Section IV. No
additional approval of the Plan Administrator or the Board shall be required at
the time of the actual option surrender and cash distribution. Any unsurrendered
portion of the option shall continue to remain outstanding and become
exercisable in accordance with the terms of the instrument evidencing such
grant.
F. The shares of Common Stock underlying any stock appreciation
rights exercised under this Section IV shall NOT be available for subsequent
issuance under the Plan.
11.
<PAGE> 13
ARTICLE THREE
AUTOMATIC OPTION GRANT PROGRAM
The following terms and provisions reflect the amendment to the
Automatic Option Grant Program authorized by the Board on July 8, 1999, subject
to shareholder approval at the 1999 Annual Meeting. Accordingly, such terms and
provisions shall only become effective upon such shareholder approval, and if
such shareholder approval is not obtained, the terms and provisions of the
Automatic Option Grant Program as in effect immediately prior to the July 8,
1999 amendment shall automatically be reinstated.
I. OPTION TERMS
A. GRANT DATES. Option grants under this Article Three shall be
made on the dates specified below:
1. Each individual who is first elected or appointed as a
non-employee Board member on or after the date of the 1999 Annual Shareholders
Meeting shall automatically be granted, on the date of such initial election or
appointment, a Non-Statutory Option to purchase 30,000 shares of Common Stock1,
provided that individual has not previously been in the employ of the
Corporation or any Parent or Subsidiary.
2. On the date of each Annual Shareholders Meeting,
beginning with the 1999 Annual Shareholders Meeting, each individual who is
re-elected to serve as an Eligible Director shall automatically be granted a
Non-Statutory Option to purchase 15,000 shares of Common Stock2, provided such
individual has served as a non-employee Board member for at least six (6)
months. There shall be no limit on the number of such 30,000-share option grants
any one Eligible Director may receive over his or her period of Board service,
and non-employee Board members who have previously been in the employ of the
Corporation (or any Parent or Subsidiary) shall be eligible to receive one or
more such annual option grants over their period of continued Board service.
B. EXERCISE PRICE.
1. The exercise price per share shall be equal to one
hundred percent (100%) of the Fair Market Value per share of Common Stock on the
option grant date.
- --------
1 Prior to this July 8, 1999 restatement, the number of shares of Common Stock
for which an initial option grant was to be made to each newly elected or
appointed non-employee Board member was set at 20,000 shares.
2 Prior to this July 8, 1999 restatement, the number of shares of Common Stock
for which a continuing non-employee Board member was to be granted an option
at each annual shareholders meeting at which he or she was re-elected to the
Board was set at 10,000 shares.
12.
<PAGE> 14
The exercise price shall be payable in one or more of the
alternative forms authorized under the Discretionary Option Grant Program.
Except to the extent the sale and remittance procedure specified thereunder is
utilized, payment of the exercise price for the purchased shares must be made on
the Exercise Date.
C. OPTION TERM. Each option shall have a maximum term equal to
the lesser of (i) nine (9) years measured from the option grant date or (ii)
twelve (12) months following termination of Board service.
D. EXERCISE AND VESTING OF OPTIONS. Each option shall be
immediately exercisable for any or all of the option shares. However, any shares
purchased under the option shall be subject to repurchase by the Corporation, at
the exercise price paid per share, upon the Optionee's cessation of Board
service prior to vesting in those shares. Each initial 30,000-share grant shall
vest, and the Corporation's repurchase right with respect to those shares shall
lapse, in four (4) successive equal annual installments over the Optionee's
period of Board service, with the first such installment to vest upon the
completion of one (1) year of Board service measured from the automatic grant
date. Each annual 15,000-share grant shall vest, and the Corporation's
repurchase right with respect to those shares shall lapse, in two (2) successive
equal annual installments over the optionee's period of Board service measured
from the automatic grant date.
E. TERMINATION OF BOARD SERVICE. The following provisions shall
govern the exercise of any options held by the Optionee upon his or her
cessation of Board service:
(i) The Optionee (or, in the event of Optionee's
death, the personal representative of the Optionee's estate or the
person or persons to whom the option is transferred pursuant to the
Optionee's will or the laws of inheritance) shall have a twelve
(12)-month period following the date of such cessation of Board service
in which to exercise each such option.
(ii) During the twelve (12)-month exercise period,
the option may not be exercised in the aggregate for more than the
number of vested shares of Common Stock for which the option is
exercisable at the time of the Optionee's cessation of Board service.
(iii) Should the Optionee cease to serve as a Board
member by reason of death or Permanent Disability, then all shares at
the time subject to the option shall immediately vest so that such
option may, during the twelve (12)-month exercise period following such
cessation of Board service, be exercised for all or any portion of those
shares as fully-vested shares of Common Stock.
(iv) In no event shall the option remain
exercisable after the expiration of the option term. Upon the expiration
of the twelve (12)-month exercise period or (if earlier) upon the
expiration of the option term, the option shall terminate and cease to
be outstanding for any vested shares for which the option has not been
exercised. However, the option shall, immediately upon the
13.
<PAGE> 15
Optionee's cessation of Board service for any reason other than death or
Permanent Disability, terminate and cease to be outstanding to the
extent the option is not otherwise at that time exercisable for vested
shares.
II. CORPORATE TRANSACTION/CHANGE IN CONTROL/HOSTILE TAKE-OVER
A. In the event of any Corporate Transaction, the shares of
Common Stock at the time subject to each outstanding option but not otherwise
vested shall automatically vest in full so that each such option shall,
immediately prior to the effective date of the Corporate Transaction, become
exercisable for all of the shares of Common Stock at the time subject to such
option and may be exercised for any or all of those shares as fully-vested
shares of Common Stock. Immediately following the consummation of the Corporate
Transaction, each automatic option grant shall terminate and cease to be
outstanding, except to the extent assumed by the successor corporation (or
parent thereof).
B. In connection with any Change in Control, the shares of Common
Stock at the time subject to each outstanding option but not otherwise vested
shall automatically vest in full so that each such option shall, immediately
prior to the effective date of the Change in Control, become exercisable for all
of the shares of Common Stock at the time subject to such option and may be
exercised for any or all of those shares as fully-vested shares of Common Stock.
Each such option shall remain exercisable for such fully-vested option shares
until the expiration or sooner termination of the option term or the surrender
of the option in connection with a Hostile Take-Over.
C. Upon the occurrence of a Hostile Take-Over, the Optionee shall
have a thirty (30)-day period in which to surrender to the Corporation each of
his or her outstanding automatic option grants. The Optionee shall in return be
entitled to a cash distribution from the Corporation in an amount equal to the
excess of (i) the Take-Over Price of the shares of Common Stock at the time
subject to each surrendered option (whether or not the Optionee is otherwise at
the time vested in those shares) over (ii) the aggregate exercise price payable
for such shares. Such cash distribution shall be paid within five (5) days
following the surrender of the option to the Corporation. Shareholder approval
of this July 8, 1999 restatement shall also constitute pre-approval of each
option grant with such a cash surrender right made under the Automatic Option
Grant Program on or after the date of the 1999 Annual Meeting and the subsequent
exercise of that right in accordance with the provisions of this Section II.C,
and no additional approval of the Board or any Plan Administrator shall
accordingly be required at the time of the actual option surrender and cash
distribution.
D. Each option which is assumed in connection with a Corporate
Transaction shall be appropriately adjusted, immediately after such Corporate
Transaction, to apply to the number and class of securities which would have
been issuable to the Optionee in consummation of such Corporate Transaction had
the option been exercised immediately prior to such Corporate Transaction.
Appropriate adjustments shall also be made to the exercise price payable per
share under each outstanding option, provided the aggregate exercise price
payable for such securities shall remain the same.
14.
<PAGE> 16
E. The grant of options under the Automatic Option Grant Program
shall in no way affect the right of the Corporation to adjust, reclassify,
reorganize or otherwise change its capital or business structure or to merge,
consolidate, dissolve, liquidate or sell or transfer all or any part of its
business or assets.
III. REMAINING TERMS
The remaining terms of each option granted under the Automatic
Option Grant Program shall be the same as the terms in effect for option grants
made under the Discretionary Option Grant Program.
15.
<PAGE> 17
ARTICLE FOUR
MISCELLANEOUS
I. FINANCING
The Plan Administrator may permit any Optionee to pay the option
exercise price under the Discretionary Option Grant Program by delivering a
full-recourse, interest bearing promissory note payable in one or more
installments. The terms of any such promissory note (including the interest rate
and the terms of repayment) shall be established by the Plan Administrator in
its sole discretion. In no event may the maximum credit available to the
Optionee exceed the sum of (i) the aggregate option exercise price payable for
the purchased shares plus (ii) any Federal, state and local income and
employment tax liability incurred by the Optionee in connection with the option
exercise or share purchase.
II. TAX WITHHOLDING
A. The Corporation's obligation to deliver shares of Common Stock
upon the exercise of options under the Plan shall be subject to the satisfaction
of all applicable Federal, state and local income and employment tax withholding
requirements.
B. The Plan Administrator may, in its discretion, provide any or
all holders of Non-Statutory Options under the Discretionary Option Grant
Program with the right to use shares of Common Stock in satisfaction of all or
part of the Withholding Taxes to which such holders may become subject in
connection with the exercise of their options. Such right may be provided to any
such holder in either or both of the following formats:
Stock Withholding: The election to have the Corporation
withhold, from the shares of Common Stock otherwise issuable upon
the exercise of such Non-Statutory Option, a portion of those
shares with an aggregate Fair Market Value equal to the
percentage of the Withholding Taxes (not to exceed one hundred
percent (100%)) designated by the holder.
Stock Delivery: The election to deliver to the
Corporation, at the time the Non-Statutory Option is exercised,
one or more shares of Common Stock previously acquired by such
holder (other than in connection with the option exercise
triggering the Withholding Taxes) with an aggregate Fair Market
Value equal to the percentage of the Withholding Taxes (not to
exceed one hundred percent (100%)) designated by the holder.
16.
<PAGE> 18
III. EFFECTIVE DATE AND TERM OF THE PLAN
A. The Plan and each of the equity incentive programs thereunder
shall become effective immediately upon the approval of the Corporation's
shareholders at the 1996 Annual Meeting. Options may be granted under the Plan
at any time on or after the date of such shareholder approval. If such
shareholder approval is not obtained, then this Plan shall not become effective,
and no options shall be granted and no shares shall be issued under the Plan.
B. The Plan shall serve as the successor to the Predecessor Plan,
and no further option grants shall be made under the Predecessor Plan after this
Plan is approved by the shareholders at the 1996 Annual Meeting. All options
outstanding under the Predecessor Plan at the time of such shareholder approval
shall be incorporated into the Plan at that time and shall be treated as
outstanding options under the Plan. However, each outstanding option so
incorporated shall continue to be governed solely by the terms of the documents
evidencing such option, and no provision of the Plan shall be deemed to affect
or otherwise modify the rights or obligations of the holders of such
incorporated options with respect to their acquisition of shares of Common
Stock.
C. One or more provisions of the Plan, including (without
limitation) the option/vesting acceleration provisions of Article Two relating
to Corporate Transactions and Changes in Control, may, in the Plan
Administrator's discretion, be extended to one or more options incorporated from
the Predecessor Plan which do not otherwise contain such provisions.
D. The Plan shall terminate upon the earliest of (i) December 31,
2006, (ii) the date on which all shares available for issuance under the Plan
shall have been issued as fully-vested shares or (iii) the termination of all
outstanding options in connection with a Corporate Transaction. Upon such plan
termination, all outstanding option grants shall thereafter continue to have
force and effect in accordance with the provisions of the documents evidencing
such grants.
IV. AMENDMENT OF THE PLAN
A. The Board shall have complete and exclusive power and
authority to amend or modify the Plan in any or all respects. However, no such
amendment or modification shall adversely affect the rights and obligations with
respect to stock options at the time outstanding under the Plan unless the
Optionee consents to such amendment or modification. In addition, certain
amendments may require shareholder approval in accordance with applicable laws
and regulations.
B. The Plan was amended by the Board on July 29, 1998 and
approved by the Shareholders at the 1998 Annual Shareholders Meeting, in order
to extend the automatic share increase provisions of the Plan for an additional
three (3)-year through fiscal December in calendar year 2001. The Automatic
Option Grant Program in effect under the Plan was amended by the Board on July
8, 1999 in order to increase the number of shares of Common Stock for
17.
<PAGE> 19
which newly elected or appointed non-employee Board members and continuing
non-employee Board members may be granted stock options under such program. Such
amendment, however, is subject to shareholder approval at the 1999 Annual
Meeting and will not be implemented unless such shareholder approval is
obtained.
C. Options to purchase shares of Common Stock may be granted
under the Discretionary Option Grant Program that are in excess of the number of
shares then available for issuance under the Plan, provided any excess shares
actually issued under that program shall be held in escrow until there is
obtained shareholder approval of an amendment sufficiently increasing the number
of shares of Common Stock available for issuance under the Plan. If such
shareholder approval is not obtained within twelve (12) months after the date
the first such excess issuances are made, then (i) any unexercised options
granted on the basis of such excess shares shall terminate and cease to be
outstanding and (ii) the Corporation shall promptly refund to the Optionees the
exercise or purchase price paid for any excess shares issued under the Plan and
held in escrow, together with interest (at the applicable Short Term Federal
Rate) for the period the shares were held in escrow, and such shares shall
thereupon be automatically cancelled and cease to be outstanding.
V. USE OF PROCEEDS
Any cash proceeds received by the Corporation from the sale of
shares of Common Stock under the Plan shall be used for general corporate
purposes.
VI. REGULATORY APPROVALS
A. The implementation of the Plan, the granting of any stock
option under the Plan and the issuance of any shares of Common Stock upon the
exercise of any granted option shall be subject to the Corporation's procurement
of all approvals and permits required by regulatory authorities having
jurisdiction over the Plan, the stock options granted under it and the shares of
Common Stock issued pursuant to it.
B. No shares of Common Stock or other assets shall be issued or
delivered under the Plan unless and until there shall have been compliance with
all applicable requirements of Federal and state securities laws, including the
filing and effectiveness of the Form S-8 registration statement for the shares
of Common Stock issuable under the Plan, and all applicable listing requirements
of any stock exchange (or the Nasdaq National Market, if applicable) on which
Common Stock is then listed for trading.
VII. NO EMPLOYMENT/SERVICE RIGHTS
Nothing in the Plan shall confer upon the Optionee any right to
continue in Service for any period of specific duration or interfere with or
otherwise restrict in any way the rights of the Corporation (or any Parent or
Subsidiary employing or retaining such person) or of the Optionee, which rights
are hereby expressly reserved by each, to terminate such person's Service at any
time for any reason, with or without cause.
18.
<PAGE> 20
APPENDIX
The following definitions shall be in effect under the Plan:
A. AUTOMATIC OPTION GRANT PROGRAM shall mean the automatic option
grant program in effect under Article Three of the Plan.
B. BOARD shall mean the Corporation's Board of Directors.
C. CHANGE IN CONTROL shall mean a change in ownership or control
of the Corporation effected through either of the following transactions:
(i) the acquisition, directly or indirectly by any
person or related group of persons (other than the Corporation or a
person that directly or indirectly controls, is controlled by, or is
under common control with, the Corporation), of beneficial ownership
(within the meaning of Rule 13d-3 of the 1934 Act) of securities
possessing more than thirty-five percent (35%) of the total combined
voting power of the Corporation's outstanding securities pursuant to a
tender or exchange offer made directly to the Corporation's shareholders
which the Board does not recommend such shareholders to accept, or
(ii) a change in the composition of the Board over
a period of thirty-six (36) consecutive months or less such that a
majority of the Board members ceases, by reason of one or more contested
elections for Board membership, to be comprised of individuals who
either (A) have been Board members continuously since the beginning of
such period or (B) have been elected or nominated for election as Board
members during such period by at least a majority of the Board members
described in clause (A) who were still in office at the time the Board
approved such election or nomination.
D. CODE shall mean the Internal Revenue Code of 1986, as amended.
E. COMMON STOCK shall mean the Corporation's common stock.
F. CORPORATE TRANSACTION shall mean either of the following
shareholder-approved transactions to which the Corporation is a party:
(i) a merger or consolidation in which securities
possessing more than fifty percent (50%) of the total combined voting
power of the Corporation's outstanding securities are transferred to a
person or persons different from the persons holding those securities
immediately prior to such transaction, or
(ii) the sale, transfer or other disposition of all
or substantially all of the Corporation's assets in complete liquidation
or dissolution of the Corporation.
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G. CORPORATION shall mean Cisco Systems, Inc., a California
corporation, and its successors.
H. DISCRETIONARY OPTION GRANT PROGRAM shall mean the
discretionary option grant program in effect under Article Two of the Plan.
I. ELIGIBLE DIRECTOR shall mean a non-employee Board member
eligible to participate in the Automatic Option Grant Program in accordance with
the eligibility provisions of Article One.
J. EMPLOYEE shall mean an individual who is in the employ of the
Corporation (or any Parent or Subsidiary), subject to the control and direction
of the employer entity as to both the work to be performed and the manner and
method of performance.
K. EXERCISE DATE shall mean the date on which the Corporation
shall have received written notice of the option exercise.
L. FAIR MARKET VALUE per share of Common Stock on any relevant
date shall be determined in accordance with the following provisions:
(i) If the Common Stock is at the time traded on
the Nasdaq National Market, then the Fair Market Value shall be deemed
equal to the closing selling price per share of Common Stock on the date
in question, as such price is reported on the Nasdaq National Market. If
there is no closing selling price for the Common Stock on the date in
question, then the Fair Market Value shall be the closing selling price
on the last preceding date for which such quotation exists.
(ii) If the Common Stock is at the time listed on
any Stock Exchange, then the Fair Market Value shall be deemed equal to
the closing selling price per share of Common Stock on the date in
question on the Stock Exchange determined by the Plan Administrator to
be the primary market for the Common Stock, as such price is officially
quoted in the composite tape of transactions on such exchange. If there
is no closing selling price for the Common Stock on the date in
question, then the Fair Market Value shall be the closing selling price
on the last preceding date for which such quotation exists.
M. HOSTILE TAKE-OVER shall mean the acquisition, directly or
indirectly, by any person or related group of persons (other than the
Corporation or a person that directly or indirectly controls, is controlled by,
or is under common control with, the Corporation) of beneficial ownership
(within the meaning of Rule 13d-3 of the 1934 Act) of securities possessing more
than thirty-five percent (35%) of the total combined voting power of the
Corporation's outstanding securities pursuant to a tender or exchange offer made
directly to the Corporation's shareholders which the Board does not recommend
such shareholders to accept.
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N. INCENTIVE OPTION shall mean an option which satisfies the
requirements of Code Section 422.
O. INVOLUNTARY TERMINATION shall mean the termination of the
Service of any individual which occurs by reason of:
(i) such individual's involuntary dismissal or
discharge by the Corporation for reasons other than Misconduct, or
(ii) such individual's voluntary resignation
following (A) a change in his or her position with the Corporation which
materially reduces his or her level of responsibility, (B) a reduction
in his or her level of compensation (including base salary, fringe
benefits and target bonuses under any corporate-performance based bonus
or incentive programs) by more than fifteen percent (15%) or (C) a
relocation of such individual's place of employment by more than fifty
(50) miles, provided and only if such change, reduction or relocation is
effected without the individual's consent.
P. MISCONDUCT shall mean the commission of any act of fraud,
embezzlement or dishonesty by the Optionee, any unauthorized use or disclosure
by such person of confidential information or trade secrets of the Corporation
(or any Parent or Subsidiary), or any other intentional misconduct by such
person adversely affecting the business or affairs of the Corporation (or any
Parent or Subsidiary) in a material manner. The foregoing definition shall not
be deemed to be inclusive of all the acts or omissions which the Corporation (or
any Parent or Subsidiary) may consider as grounds for the dismissal or discharge
of any Optionee or other person in the Service of the Corporation (or any Parent
or Subsidiary).
Q. 1934 ACT shall mean the Securities Exchange Act of 1934, as
amended.
R. NON-STATUTORY OPTION shall mean an option not intended to
satisfy the requirements of Code Section 422.
S. OPTIONEE shall mean any person to whom an option is granted
under the Discretionary Option Grant or Automatic Option Grant Program.
T. PARENT shall mean any corporation (other than the Corporation)
in an unbroken chain of corporations ending with the Corporation, provided each
corporation in the unbroken chain (other than the Corporation) owns, at the time
of the determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.
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U. PERMANENT DISABILITY OR PERMANENTLY DISABLED shall mean the
inability of the Optionee to engage in any substantial gainful activity by
reason of any medically determinable physical or mental impairment expected to
result in death or to be of continuous duration of twelve (12) months or more.
However, solely for purposes of the Automatic Option Grant Program, Permanent
Disability or Permanently Disabled shall mean the inability of the non-employee
Board member to perform his or her usual duties as a Board member by reason of
any medically determinable physical or mental impairment expected to result in
death or to be of continuous duration of twelve (12) months or more.
V. PLAN shall mean the Corporation's 1996 Stock Incentive Plan,
as set forth in this document.
W. PLAN ADMINISTRATOR shall mean the particular entity, whether
the Primary Committee, the Board or the Secondary Committee, which is authorized
to administer the Discretionary Option Grant Program with respect to one or more
classes of eligible persons, to the extent such entity is carrying out its
administrative functions under those programs with respect to the persons under
its jurisdiction.
X. PREDECESSOR PLAN shall mean the Corporation's pre-existing
1987 Stock Option Plan in effect immediately prior to the Plan Effective Date
hereunder.
Y. PRIMARY COMMITTEE shall mean the committee of two (2) or more
non-employee Board members appointed by the Board to administer the
Discretionary Option Grant Program with respect to Section 16 Insiders.
Z. SECONDARY COMMITTEE shall mean a committee of two (2) or more
Board members appointed by the Board to administer the Discretionary Option
Grant Program with respect to eligible persons other than Section 16 Insiders.
AA. SECTION 16 INSIDER shall mean an officer or director of the
Corporation subject to the short-swing profit liabilities of Section 16 of the
1934 Act.
BB. SERVICE shall mean the performance of services for the
Corporation (or any Parent or Subsidiary) by a person in the capacity of an
Employee, a non-employee member of the board of directors or a consultant or
independent advisor, except to the extent otherwise specifically provided in the
documents evidencing the option grant or stock issuance.
CC. STOCK EXCHANGE shall mean either the American Stock Exchange
or the New York Stock Exchange.
DD. SUBSIDIARY shall mean any corporation (other than the
Corporation) in an unbroken chain of corporations beginning with the
Corporation, provided each corporation (other than the last corporation) in the
unbroken chain owns, at the time of the determination, stock possessing fifty
percent (50%) or more of the total combined voting power of all classes of stock
in one of the other corporations in such chain.
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EE. TAKE-OVER PRICE shall mean the greater of (i) the Fair Market
Value per share of Common Stock on the date the option is surrendered to the
Corporation in connection with a Hostile Take-Over or (ii) the highest reported
price per share of Common Stock paid by the tender offeror in effecting such
Hostile Take-Over. However, if the surrendered option is an Incentive Option,
the Take-Over Price shall not exceed the clause (i) price per share.
FF. 10% SHAREHOLDER shall mean the owner of stock (as determined
under Code Section 424(d)) possessing more than ten percent (10%) of the total
combined voting power of all classes of stock of the Corporation (or any Parent
or Subsidiary).
GG. WITHHOLDING TAXES shall mean the Federal, state and local
income and employment withholding taxes to which the holder of Non-Statutory
Options or unvested shares of Common Stock may become subject in connection with
the exercise of those options or the vesting of those shares.
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