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EXHIBIT 99.7
CISCO SYSTEMS, INC.
STOCK OPTION ASSUMPTION AGREEMENT
ARROWPOINT COMMUNICATIONS, INC.
1997 STOCK INCENTIVE PLAN
OPTIONEE: <<FIRST_NAME>> <<LAST_NAME>>,
STOCK OPTION ASSUMPTION AGREEMENT effective as of the 23rd day of June,
2000 (the "Effective Date") 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 ArrowPoint
Communications, Inc., a Delaware corporation ("ArrowPoint"), which were granted
to Optionee pursuant to the ArrowPoint 1997 Stock Incentive Plan (the "Plan")
and are each evidenced by a Stock Option Agreement (the "Option Agreement") with
any shares purchased under such options to be subject to the terms and
conditions therein.
WHEREAS, ArrowPoint has been acquired by Cisco (the "Merger") pursuant to
the Agreement and Plan of Merger and Reorganization, by and between Cisco and
ArrowPoint (the "Merger Agreement").
WHEREAS, the provisions of the Merger Agreement require Cisco to assume all
obligations of ArrowPoint under each outstanding option under the Plan at the
consummation of the Merger, and to issue to the holder of each such outstanding
option an agreement evidencing the assumption of such option.
WHEREAS, pursuant to the provisions of the Merger Agreement, the exchange
ratio (the "Exchange Ratio") in effect for the Merger is 2.1218 shares of Cisco
common stock, par value $0.001 ("Cisco Stock"), for each outstanding share of
ArrowPoint common stock ("ArrowPoint Stock").
WHEREAS, the purpose of this Agreement is to evidence the assumption by
Cisco of the outstanding options held by Optionee at the time of the
consummation of the Merger (the "Effective Time") and to reflect certain
adjustments to Optionee's outstanding options which have become necessary in
connection with their assumption by Cisco.
NOW, THEREFORE, it is hereby agreed as follows:
1. The number of shares of ArrowPoint Stock subject to the options held
by Optionee immediately prior to the Effective Time (the "ArrowPoint Options")
and the exercise price payable per share are set forth below. Cisco hereby
assumes, as of the Effective Time, all the duties and obligations of ArrowPoint
under each of the ArrowPoint Options. In connection with such assumption, the
number of shares of Cisco Stock purchasable under each ArrowPoint Option hereby
assumed and the exercise price payable thereunder have been adjusted to reflect
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the Exchange Ratio. Accordingly, the number of shares of Cisco Stock subject to
each ArrowPoint Option hereby assumed shall be as specified for that option
below, and the adjusted exercise price payable per share of Cisco Stock under
the assumed ArrowPoint Option shall also be as indicated for that option below.
<TABLE>
<CAPTION>
--------------------------------------------- ---------------------------------------------
ARROWPOINT STOCK OPTIONS CISCO ASSUMED OPTIONS
--------------------------------------------- ---------------------------------------------
Number of Shares of Exercise Price Number of Shares of Adjusted Exercise Price
ArrowPoint Common Stock per Share Cisco Common Stock per Share
----------------------- --------------------- --------------------- -----------------------
<S> <C> <C> <C>
<<Arrowpoint_Shares>> $<<Arrowpoint_Price>> <<Cisco_Shares>> $<<Cisco_Price>>
----------------------- --------------------- --------------------- -----------------------
</TABLE>
2. The intent of the foregoing adjustments to each assumed ArrowPoint
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 substantially the same as (and in no event
greater than) than the spread which existed, immediately prior to the Merger,
between the then aggregate fair market value of the ArrowPoint Stock subject to
the ArrowPoint 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
ArrowPoint Option immediately prior to the Merger.
3. The following provisions shall govern each ArrowPoint Option hereby
assumed by Cisco:
(a) Unless the context otherwise requires, all references in the
Option Agreements and the Plan shall be adjusted as follows; (i) all
references to the "Company" shall mean Cisco, (ii) all references to "Plan"
shall mean the ArrowPoint Communications, Inc. 1997 Stock Incentive Plan
assumed pursuant to the Merger Agreement and this Assumption Agreement,
(iii) all references to "Common Stock" or "Shares" shall mean the common
stock of Cisco, par value $0.001, (iv) all references to "Board" shall mean
the Board of Directors of Cisco, and (v) all references to the "Committee"
shall mean the Compensation Committee of the Cisco Board of Directors.
(b) The grant date and the expiration date of each assumed ArrowPoint
Option and all other provisions which govern either the exercise or the
termination of the assumed ArrowPoint Option shall remain the same as set
forth in the Option Agreement applicable to that option, and the provisions
of the Plan and the Option Agreement shall accordingly govern and control
Optionee's rights to purchase Cisco Stock under the assumed ArrowPoint
Option.
(c) Pursuant to the terms of the Option Agreement and the Plan, fifty
percent (50%) of the outstanding ArrowPoint Options which were not
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vested as of the Effective Date became fully vested and exercisable on the
Effective Date. The remaining fifty percent (50%) of the outstanding
unvested ArrowPoint Options shall continue to vest and become exercisable
in accordance with the same installment vesting schedule in effect under
the applicable Option Agreement immediately prior to the Effective Time;
provided, however, the number of shares vesting on each vesting date shall
be one-half that which would otherwise have become vested. The number of
Cisco shares subject to each installment shall also be adjusted to reflect
the Exchange Ratio.
(d) Your options assumed by Cisco which were originally designated on
your ArrowPoint Incentive Stock Option Agreement as Incentive Options shall
remain Incentive Stock Options to the maximum extent allowed by law.
However, you should note that the partial acceleration of your option as a
result of the Merger may have caused you to lose Incentive Stock Option
status with respect to a portion of your options.
(e) For purposes of applying any and all provisions of the Option
Agreement and/or the Plan relating to Optionee's status as an employee of
ArrowPoint, Optionee shall be deemed to continue in such status as an
employee for so long as Optionee renders services as an employee to Cisco
or any present or future majority-owned Cisco subsidiary. Accordingly, the
provisions of the Option Agreements governing the termination of the
assumed ArrowPoint Options or the exercise of Cisco's repurchase rights
with respect to any unvested Cisco Stock purchased under such options and
unvested at the time of Optionee's cessation of service as an employee of
ArrowPoint shall hereafter be applied on the basis of Optionee's cessation
of employee status with Cisco and its majority-owned subsidiaries. Each
assumed ArrowPoint Option shall accordingly terminate, within the
designated time period in effect under the Option Agreements for that
option following such cessation of service as an employee of Cisco and its
majority-owned subsidiaries.
(f) The adjusted exercise price payable for the Cisco Stock subject
to each assumed ArrowPoint 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 ArrowPoint Stock prior to the Merger shall be
taken into account.
(g) In order to exercise each assumed ArrowPoint 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:
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Cisco Systems, Inc.
170 West Tasman Drive
MS 11-3
San Jose, CA 95134
Attention: Stock Administration
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.
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 23rd day of June, 2000.
CISCO SYSTEMS, INC.
By: /s/ LARRY R. CARTER
-------------------
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 ArrowPoint Options hereby assumed by Cisco are as
set forth in the Option Agreement, the Plan, as applicable, and such Stock
Option Assumption Agreement.
--------------------------------------
<<FIRST_NAME>> <<LAST_NAME>>, OPTIONEE
DATED: __________________, 2000
