NETWORK EQUIPMENT TECHNOLOGIES, INC.
1993 STOCK OPTION PLAN
TABLE OF CONTENTS
ARTICLE ONE....................................................................2
GENERAL PROVISIONS.............................................................2
I. PURPOSES OF PLAN....................................................2
II. ADMINISTRATION OF PLAN..............................................2
III. STOCK SUBJECT TO PLAN...............................................3
ARTICLE TWO....................................................................5
DISCRETIONARY OPTION GRANTS....................................................5
I. ELIGIBILITY FOR OPTION GRANTS.......................................5
II. TERMS AND CONDITIONS OF OPTIONS.....................................5
III. INCENTIVE OPTIONS...................................................8
IV. CORPORATE TRANSACTION...............................................9
V. CANCELLATION AND REGRANT OF OPTIONS................................10
VI. STOCK APPRECIATION RIGHTS; HOSTILE TAKE-OVER;
CHANGE IN CONTROL..................................................10
ARTICLE THREE.................................................................13
AUTOMATIC OPTION GRANT PROGRAM................................................13
I. ELIGIBILITY........................................................13
II. TERMS AND CONDITIONS OF AUTOMATIC OPTION GRANTS....................13
III. CORPORATE TRANSACTION/CHANGE IN CONTROL/
HOSTILE TAKE-OVER..................................................16
ARTICLE FOUR..................................................................17
MISCELLANEOUS.................................................................17
I. AMENDMENT OF PLAN..................................................17
II. TAX WITHHOLDING....................................................17
III. TERM OF PLAN.......................................................17
IV. USE OF PROCEEDS....................................................18
V. REGULATORY APPROVALS...............................................18
VI. NO EMPLOYMENT/SERVICE RIGHTS.......................................18
VII. MISCELLANEOUS PROVISIONS...........................................18
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N.E.T. 1993 SOP As Amended August 12, 1997
NETWORK EQUIPMENT TECHNOLOGIES, INC.
1993 STOCK OPTION PLAN
ARTICLE ONE
GENERAL PROVISIONS
I. PURPOSES OF PLAN
A. This 1993 Stock Option Plan (the "Plan") is adopted as of August 11,
1993 (the "Effective Date") to promote the interests of Network Equipment
Technologies, Inc., a Delaware corporation (the "Corporation"), by allowing
eligible individuals to acquire or increase proprietary interests in the
Corporation as an incentive to remain in the service of the Corporation (or its
"parent" or "subsidiary" corporations, as defined in Section 424 of the Internal
Revenue Code).
B. This Plan is the successor to the Network Equipment Technologies, Inc.
1983 Stock Option Plan (the "1983 Plan"). No options shall be granted under the
1983 Plan from and after the Effective Date. The terms and conditions of options
granted under the 1983 Plan before the Effective Date are not affected by the
adoption of this Plan.
II. ADMINISTRATION OF PLAN
A. This Plan shall be administered by a committee (the "Plan Administrator"
or "Committee") of two or more non-employee Directors appointed by the
Corporation's Board of Directors (the "Board"). Committee members shall serve
for such periods as the Board may determine and may be removed by the Board at
any time.
B. The Plan Administrator shall have full authority (subject to the
provisions of this Plan) to establish such rules and regulations as it deems
appropriate for the proper administration of this Plan and to make such
determinations and interpretations concerning this Plan and options granted
under this Plan as it deems necessary or advisable. Decisions of the Plan
Administrator shall be final and binding upon all parties.
C. The Plan Administrator shall have full authority to grant options
pursuant to Article Two of this Plan and to determine in its sole discretion
which eligible individuals are to receive such options, the number of shares to
be covered by each
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N.E.T. 1993 SOP As Amended August 12, 1997
such option, whether each option is to be an incentive stock option intended to
satisfy the requirements of Section 422 of the Internal Revenue Code ("Incentive
Option") or a non-statutory option not intended to satisfy those requirements,
the time(s) at which each option is to become exercisable, and the maximum term
for which each option is to be outstanding.
III. STOCK SUBJECT TO PLAN
A. An aggregate of 9,406,415 shares of the Corporation's common stock, par
value $0.01 per share ("Common Stock") is available for issuance under this
Plan, and the predecessor 1983 Plan, subject to adjustment from time to time in
accordance with this Section III. These shares may be authorized but unissued
shares of Common Stock or reacquired shares of Common Stock, including shares
repurchased by the Corporation on the open market. The number of shares of
Common Stock available for issuance under this Plan shall be reduced,
share-for-share, by the number of shares issued with respect to options granted
under the 1983 Plan that are outstanding at the Effective Date and are
subsequently exercised.
B. To the extent that an option granted under this Plan or the 1983 Plan
expires or terminates for any reason before exercise in full (including any
option canceled in accordance with the cancellation-regrant provisions of
Section V of Article Two of this Plan), the shares then subject to the option
shall again be available for option grants under this Plan. Shares subject to
any option or portion thereof surrendered or canceled in accordance with Section
VI of Article Two and Section III of Article Three, and shares repurchased by
the Corporation pursuant to any repurchase rights available under this Plan,
shall not again become available for option grants under this Plan. If the
exercise price of an option granted under this Plan (or the 1983 Plan) is paid
with shares of Common Stock, or if shares of Common Stock otherwise issuable
under this Plan are withheld by the Corporation in satisfaction of withholding
taxes incurred upon the exercise of an option, then the number of shares
available for issuance under this Plan shall be reduced by the gross number of
shares for which the option is exercised and not by the net number of shares
issued to the option holder.
C. If a change is made to the Common Stock by reason of any stock split,
stock dividend, recapitalization, combination of shares, or other similar
change, then appropriate adjustments shall be made to (i) the number and/or
class of shares issuable under this Plan, (ii) the number and/or class of shares
and price per share in effect under each then-outstanding option granted under
this Plan (or the 1983 Plan), and (iii) the number of shares of Common Stock to
be made the subject of each subsequent automatic option grant under Article
Three of this Plan. The purpose of adjustments to outstanding options shall be
to preclude
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N.E.T. 1993 SOP As Amended August 12, 1997
the enlargement or dilution of rights and benefits under such options. The
adjustments determined by the Plan Administrator shall be final, binding, and
conclusive.
D. The Corporation may not issue stock options covering in the aggregate
more than 350,000 shares of Common Stock (subject to adjustments as required
under this Plan) to any one participant in any one-year period.
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N.E.T. 1993 SOP As Amended August 12, 1997
ARTICLE TWO
DISCRETIONARY OPTION GRANTS
I. ELIGIBILITY FOR OPTION GRANTS
The following persons are eligible to participate in the Discretionary
Option Grant Program of this Plan:
A. Officers and other key employees of the Corporation (or its parent or
subsidiary corporations) whose services contribute to the management, growth,
and financial success of the Corporation (or its parent or subsidiary
corporations), and
B. Those consultants and independent contractors who provide valuable
services to the Corporation (or its parent or subsidiary corporations).
II. TERMS AND CONDITIONS OF OPTIONS
Options granted pursuant to this Article Two may, at the Plan
Administrator's discretion, be either Incentive Options or non-statutory
options. Individuals who are not employees may be granted only non-statutory
options. Each option shall be evidenced by one or more written instruments in a
form approved by the Plan Administrator. Each such instrument shall comply with
the terms and conditions specified below. Each instrument evidencing an
Incentive Option shall also be subject to Section III of this Article Two.
Failure to issue, or (if agreement is required) to agree to, an instrument
evidencing an option shall not invalidate the option grant; however, the option
shall not be exercisable until a written instrument has been issued and (if
required) agreed to.
A. Option Price.
1. The option price per share shall be fixed by the Plan Administrator, but
shall not be less than the "fair market value" (defined below) per share of
Common Stock on the date of the option grant.
2. The option price shall, subject to Section III below, be immediately due
upon exercise of the option and shall be payable in one or a combination of the
following forms:
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N.E.T. 1993 SOP As Amended August 12, 1997
(a) cash or check payable to the Corporation;
(b) shares of Common Stock held by the optionee for the 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
(c) a broker-dealer sale-and-remittance procedure pursuant to which
the optionee shall provide irrevocable written instructions (i) to a
designated brokerage firm to effect the immediate sale of the option shares
and remit to the Corporation, from the sale proceeds available on the
settlement date, sufficient funds to cover the aggregate option price plus
all income and employment taxes required to be withheld by the Corporation
in connection with the exercise, and (ii) to the Corporation to deliver the
certificates for the purchased shares directly to the brokerage firm to
complete the transaction.
3. The Plan Administrator may assist any optionee (including any Officer)
in the exercise of any option granted under this Article Two and the
satisfaction of any federal and state income and employment tax obligations
arising therefrom, by (a) authorizing a loan to the optionee by the Corporation,
or (b) permitting the optionee to pay the option price in installments over a
period of months or years. The terms of any loan or installment method of
payment (including the interest rate and terms of repayment) will be established
by the Plan Administrator in its sole discretion. Loans and installment payments
may be allowed with or without security or collateral (other than to optionees
who are consultants or independent contractors, who must adequately secure any
loan by collateral other than the purchased shares), but the maximum credit
available to the optionee shall not exceed the sum of (i) the aggregate option
price (less par value) of the purchased shares, plus (ii) any federal and state
income and employment tax liability incurred by the optionee in connection with
the exercise of the option.
4. The "fair market value" per share of Common Stock on any relevant date
shall be determined as follows:
(a) If the Common Stock is listed or admitted to trading on any
national stock exchange, then the fair market value shall be 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 officially quoted on the composite tape of
transactions on that exchange. If there is no reported sale of Common Stock
on that exchange on the date in question, the fair market value shall be
the closing selling price on the exchange on the next preceding date for
which a closing selling price is quoted.
(b) If the Common Stock is not listed or admitted to trading on any
national stock exchange, but is traded
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N.E.T. 1993 SOP As Amended August 12, 1997
on the NASDAQ National Market System, the fair market value shall be the
closing selling price per share of Common Stock on the date in question as
reported on that system. 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 for the next preceding date for which a closing
selling price is quoted.
B. Term and Exercise of Options.
1. Each option granted under this Article Two shall be exercisable at such
time(s), during such period, and for such number of shares as shall be
determined by the Plan Administrator and set forth in the written instrument
evidencing the option. No option granted under this Article Two shall have a
term in excess of ten (10) years after the grant date.
2. During the lifetime of the optionee, the option shall be exercisable
only by the optionee and shall not be assignable or transferable by the optionee
otherwise than by will or by the laws of descent and distribution following the
optionee's death.
3. Exercise of an option shall be effected by delivery to the Corporation
of a written notice in a form approved by the Plan Administrator specifying the
number of shares as to which the option is being exercised, accompanied by
payment of the exercise price (or provision for payment acceptable to the Plan
Administrator), and containing such other provisions as the Plan Administrator
approves from time to time.
C. Termination of Service.
1. Except as otherwise approved by the Plan Administrator, if the
optionee's service to the Corporation is terminated:
(a) for cause, each then-outstanding option held by the optionee shall
terminate immediately;
(b) for any reason other than cause, death, or permanent disability,
each then-outstanding option held by the optionee shall expire no later
than three (3) months after the termination date;
(c) by reason of permanent disability (as defined in Section 22(e)(3)
of the Internal Revenue Code), each then-outstanding option held by the
optionee shall expire no later than twelve (12) months after the
termination date; or
(d) by reason of the optionee's death, or if the optionee dies during
the three (3) months following termination of his or her employment other
than for cause or by reason of permanent disability, each then-outstanding
option held
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N.E.T. 1993 SOP As Amended August 12, 1997
by the optionee shall expire no later than twelve (12) months following the
termination date. Following the optionee's death, the option may be
exercised by the personal representative of the optionee's estate or by the
person(s) to whom the option is transferred pursuant to the optionee's will
or in accordance with the laws of descent and distribution.
2. Under no circumstances shall any option be exercisable after the
specified expiration date of the option term.
3. Following termination of the optionee's service, an option shall not be
exercisable to any greater extent than on the termination date; provided,
however, that the Plan Administrator shall have complete discretion, at any time
while the option remains outstanding, to permit the option to be exercised, not
only with respect to the number of shares for which the option is exercisable at
the time of the termination, but also with respect to one or more subsequent
installments of purchasable shares for which the option would otherwise have
become exercisable had termination not occurred.
4. For purposes of this Plan:
(a) An optionee shall be deemed to remain in service to the
Corporation for so long as he or she renders (or in the case of consultants
or advisors, has agreed to render) services on a periodic basis to the
Corporation (or any parent or subsidiary) as an employee, a non-employee
Director, or an independent consultant or advisor.
(b) An optionee shall be considered to be an employee for so long as
he or she remains in the employ of the Corporation (or any parent or
subsidiary), subject to the control and direction of the employer entity as
to the work to be performed and the manner and method of performance.
D. Stockholder Rights.
An optionee shall have no stockholder rights with respect to any option
shares until he or she has exercised the option and paid (or made arrangements
satisfactory to the Plan Administrator to pay) the option price for the
purchased shares.
III. INCENTIVE OPTIONS
In addition to other application terms and conditions of this Plan, the
following provisions shall apply:
A. Incentive Options may be granted only to employees. Options specifically
designated as "non-statutory" options when issued shall not be subject to this
Section III.
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N.E.T. 1993 SOP As Amended August 12, 1997
B. If any individual to whom an Incentive Option is granted is the owner of
stock (as determined under Section 424(d) of the Internal Revenue Code)
possessing 10% or more of the total combined voting power of all classes of
stock of the Corporation or any of its parent or subsidiary corporations ("10%
Stockholder"), then the option price per share shall not be less than 110% of
the fair market value per share of Common Stock on the grant date, and the
option term shall not exceed five (5) years from the grant date.
IV. CORPORATE TRANSACTION
A. In the event of any of the following stockholder-approved transactions
(a "Corporate Transaction"):
(i) a merger or consolidation in which the Corporation is not the
surviving entity, except for a transaction whose principal purpose is to
change the State of the Corporation's incorporation,
(ii) the sale, transfer, or other disposition of all or substantially
all of the assets of the Corporation in liquidation or dissolution, or
(iii) any "reverse" merger in which the Corporation is the surviving
entity, but in which securities possessing more than 50% of the total
combined voting power of the Corporation's outstanding securities are
transferred to holders other than those who owned such voting power
immediately before the merger,
then immediately before the Effective Date of the Corporate Transaction, each
option granted under this Article Two shall become fully exercisable
("accelerate") with respect to the total number of shares of Common Stock then
subject to the option. However, an option shall not accelerate if and to the
extent: (i) the option is, in connection with the Corporate Transaction, either
to be assumed by the successor corporation or parent thereof or to be replaced
by an equivalent option to purchase shares of the capital stock of the successor
corporation or parent thereof, or (ii) acceleration of the option is subject to
other limitations imposed by the Plan Administrator at the time of grant. The
determination of equivalence under clause (i) above shall be made by the Plan
Administrator and shall be final, binding, and conclusive.
B. Upon the consummation of the Corporate Transaction, all options granted
under this Article Two shall terminate and cease to be outstanding, except to
the extent assumed by the successor (or surviving) corporation or its parent
company.
C. Each option granted under this Article Two that is replaced by an
equivalent option in a Corporate Transaction, or
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N.E.T. 1993 SOP As Amended August 12, 1997
that otherwise continues in effect, shall be appropriately adjusted, immediately
after the Corporate Transaction, to apply to the number and class of securities
that would have been issued in the Corporate Transaction to an actual holder of
the number of shares of Common Stock that were subject to the option immediately
before the Corporate Transaction. Appropriate adjustment shall also be made to
the option price payable per share, provided the aggregate option price payable
for such securities shall remain the same. In addition, the class and number of
securities available for issuance under this Plan following the consummation of
the Corporate Transaction shall be appropriately adjusted.
D. The grant of options under this Article Two shall not 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.
V. CANCELLATION AND REGRANT OF OPTIONS
The Plan Administrator may, at any time and from time to time, with the
consent of the affected optionees, cancel any or all outstanding options granted
under this Article Two and grant in substitution new options covering the same
or different numbers of shares of Common Stock but having an option price per
share not less than the fair market value of the Common Stock on the new grant
date (or 110% of fair market value in the case of an Incentive Option granted to
a 10% Stockholder).
VI. STOCK APPRECIATION RIGHTS; HOSTILE TAKE-OVER; CHANGE IN CONTROL
A. As determined by the Plan Administrator in its sole discretion, one or
more optionees may be granted the right, exercisable upon such terms and
conditions as the Plan Administrator may establish, to surrender all or part of
an unexercised option granted under this Article Two in exchange for a payment
by the Corporation of 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 part thereof), over (ii) the
aggregate option price payable for those shares.
B. No surrender of an option shall be effective hereunder unless it is
approved by the Plan Administrator. If the surrender is approved, then the
payment to the optionee under this Section VI 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 determines in its
sole discretion.
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N.E.T. 1993 SOP As Amended August 12, 1997
C. If the surrender of an option is rejected by the Plan Administrator,
then the optionee shall retain whatever rights he or she had under the
surrendered option (or surrendered portion thereof) on the option surrender date
and may exercise such rights at any time before the later of (i) five (5)
business days after receipt of the rejection notice, or (ii) the last day on
which the option is otherwise exercisable in accordance with its terms, but in
no event more than ten (10) years after the date of the option grant.
D. Each Officer of the Corporation subject to the short-swing profit
restrictions of the Federal securities laws shall have the following limited
stock appreciation rights in tandem with each option received under this Article
Two. Upon the occurrence of a Hostile Take-Over (defined below), each option
with a limited stock appreciation right in effect for at least six (6) months
shall automatically be canceled and the optionee shall be entitled to a cash
payment by the Corporation in the amount of the excess of (i) the Take-Over
Price (defined below) of the shares of Common Stock subject to the canceled
option (whether or not the option is otherwise exercisable for such shares),
over (ii) the aggregate exercise price payable for such shares. The payment
shall be made within five (5) days after consummation of the Hostile Take-Over.
Neither the approval of the Plan Administrator nor the consent of the Board
shall be required in connection with such option cancellation and cash payment.
E. A "Hostile Take-Over" shall be deemed to occur if (i) 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) directly or indirectly acquires beneficial ownership (within the
meaning of Rule 13d-3 of the Exchange Act) of securities possessing more than
50% of the total combined voting power of the Corporation's outstanding
securities pursuant to a tender or exchange offer that the Board does not
recommend that the Corporation's stockholders accept, and (ii) more than 50% of
the securities so acquired are accepted from holders other than Officers and
Directors of the Corporation subject to Section 16 of the Exchange Act. The
"Take-Over Price" per share shall be the greater of (a) the fair market value
per share on the date of cancellation, as determined pursuant to the valuation
provisions of Section II.A.4 of this Article Two, or (b) the highest reported
price per share paid in effecting such Hostile Take-Over. However, if the
canceled option is an Incentive Option, the Take-Over Price shall not exceed the
clause (a) price per share.
F. The Plan Administrator shall have full discretionary authority,
exercisable either in advance of, or at the time of, a Change in Control
(defined below), to provide for the automatic acceleration of options granted
under this Article Two upon the occurrence of the Change in Control. The Plan
Administrator shall also have full discretionary authority to
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N.E.T. 1993 SOP As Amended August 12, 1997
condition any such acceleration upon the subsequent termination of the
optionee's service to the Corporation (or a parent or subsidiary) within a
specified period after the Change in Control. The Plan Administrator hereby
exercises such discretion to accelerate vesting of all outstanding options held
by Officers of the Corporation whose employment is terminated in conjunction
with, or within a year of, a Change in Control or Corporate Transaction. Any
option accelerated in connection with the Change in Control shall remain fully
exercisable until the expiration of the option term. For all purposes of this
Plan, a "Change in Control" shall mean a change in control of the Corporation of
a nature that would be required to be reported in response to Item 6(e) of
Schedule 14A of Regulation 14A promulgated under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), whether or not the Corporation is then
subject to such reporting requirement, other than a Corporate Transaction;
provided that, without limitation, a Change in Control shall be deemed to have
occurred if:
1. any individual, partnership, firm, corporation, association, trust,
unincorporated organization or other entity, or any syndicate or group
deemed to be a "person" under Section 14(d)(2) of the Exchange Act, is or
becomes the "beneficial owner" (as defined in Rule 13d-3 of the General
Rules and Regulations under the Exchange Act), directly or indirectly, of
securities of the Corporation representing 40% or more of the combined
voting power of the Corporation's then-outstanding securities entitled to
vote in the election of Directors of the Corporation, pursuant to a tender
or exchange offer that the Board does not recommend that the Corporation's
stockholders accept; or
2. during any period of two (2) consecutive years, individuals who, at
the beginning of such period, constituted the Board and any new members of
the Board, whose election by the Board or nomination for election by the
Corporation's stockholders was approved by a vote of at least
three-quarters (3/4) of the Directors then in office who either were
Directors at the beginning of the period or whose election or nomination
for election was previously so approved, cease for any reason to constitute
a majority thereof.
G. The shares of Common Stock subject to any option surrendered or canceled
for an appreciation distribution pursuant to this Section VI shall not be
available for subsequent option grant under the Plan.
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N.E.T. 1993 SOP As Amended August 12, 1997
ARTICLE THREE
AUTOMATIC OPTION GRANT PROGRAM
I. ELIGIBILITY
A. Eligible Optionees. The individuals eligible to receive automatic option
grants pursuant to this Article Three shall be limited to (i) Directors who are
first elected or appointed as non-employee Directors on or after the Effective
Date, whether through appointment by the Board or election by the Corporation's
stockholders, and who have not previously been employees of the Corporation (or
any parent or subsidiary corporation), and (ii) Directors who continue to serve
as non-employee Directors at one or more annual stockholders meetings held while
this Automatic Grant Program remains in effect, commencing with the 1994 annual
meeting.
B. Limitation. Except for the option grants to be made pursuant to this
Article Three (and any automatic grants made under the corresponding provisions
of the 1983 Plan), non-employee Directors shall not be eligible to receive
option grants or stock issuances under this Plan or any other stock plan of the
Corporation (or its parent or subsidiaries).
II. TERMS AND CONDITIONS OF AUTOMATIC OPTION GRANTS
A. Grant Dates. Option grants will be made under this Article Three on the
dates specified below:
1. Each individual who first becomes a non-employee Director at any
time after the Effective Date, whether through election at an annual
stockholder meeting or through appointment by the Board, shall
automatically be granted upon the terms and conditions of this Article
Three, at the time of such initial election or appointment, a non-statutory
stock option to purchase the lesser of (a) 12,000 shares of Common Stock,
or (b) a number of shares of Common Stock equal to 12,000 multiplied by a
fraction, the numerator of which is the number of partial or whole calendar
months remaining between such election or appointment and the next
scheduled annual stockholder meeting at which such Director's term will
expire and the denominator of which is 36.
2. Each non-employee Director who first becomes a member of an active
standing committee of the Board at any time after the Effective Date shall
automatically be granted, upon the terms and conditions of this Article
Three, at the time of such initial appointment, a non-statutory stock
option to purchase the lesser of (a) 4,000 shares of Common Stock, or (b) a
number of
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N.E.T. 1993 SOP As Amended August 12, 1997
shares of Common Stock equal to 4,000 multiplied by a fraction, the
numerator of which is the number of partial or whole calendar months
remaining between such appointment and the next scheduled annual
stockholder meeting and the denominator of which is 12.
3. Each non-employee Director who first becomes chairman of an active
standing committee of the Board at any time after the Effective Date shall
automatically be granted upon the terms and conditions of this Article
Three, at the time of such initial appointment, a non-statutory stock
option to purchase the lesser of (a) 4,000 shares of Common Stock, or (b) a
number of shares of Common Stock equal to 4,000 multiplied by a fraction,
the numerator of which is the number of partial or whole calendar months
remaining between such appointment and the next scheduled annual
stockholder meeting and the denominator of which is 12.
4. On the date of each annual stockholder meeting held after the
Effective Date, beginning with the 1994 annual stockholder meeting, each
non-employee Director who is at the time standing for reelection as a
non-employee Director shall automatically be granted a non-statutory stock
option under this Article Three to purchase 12,000 shares of Common Stock.
5. On the date of each annual stockholder meeting held after the
Effective Date, beginning with the 1994 annual stockholder meeting, each
non-employee Director shall automatically be granted, whether or not he or
she is standing for re-election as a Director at that time, a non-statutory
stock option under this Article Three to purchase 4,000 shares of Common
Stock for each active standing committee on which he or she serves as a
member, plus an additional 4,000 shares for each committee on which he or
she serves as chairman.
The 12,000-share limitation on the initial and periodic automatic option
grants and the 4,000-share limitation on committee grants to be made to each
non-employee Director shall be subject to adjustment pursuant to Section III.C
of Article One. For purposes of this Article Three, a committee shall be deemed
to be an active standing committee if so designated by the Board and if it has
met or transacted business within the twelve (12) months preceding the date of
grant of an automatic option.
B. Exercise Price. The exercise price per share shall be equal to 100% of
the fair market value per share of Common Stock on the automatic grant date.
C. Payment. The option price shall become immediately due upon exercise of
the option and shall be payable as provided in Section II.A of Article Two.
D. Option Term. Each option granted under this Article Three shall have a
maximum term of ten (10) years measured from the grant date.
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N.E.T. 1993 SOP As Amended August 12, 1997
E. Exercisability.
1. Each option granted under this Article Three shall be come exercisable
for one-third (1/3) of the option shares one year after the date of grant and
for the balance of the option shares in a series of twenty-four (24) equal
monthly installments beginning one month thereafter, provided the optionee
remains a Director through each such date.
2. Each option granted under this Article Three shall also become fully
exercisable upon the date of the optionee's cessation of Board service by reason
of death or retirement, provided the option has been outstanding for at least
one year, and the optionee has served on the Board for at least three (3) years,
at the time of cessation of Board service. A Director shall be deemed to have
ceased Board service by reason of retirement if he or she has attained the age
of 65 at the time of the cessation.
3. Each option shall remain exercisable until the expiration or sooner
termination of the option term.
F. Non-Transferability. During the optionee's lifetime, an option granted
under this Article Three (together with the limited stock appreciation right
pertaining to the option) shall be exercisable only by the optionee and shall
not be assignable or transferable by the optionee other than by will or by the
laws of descent and distribution following his or her death.
G. Effect of Termination of Board Membership.
1. If a Director ceases to be a Board member for any reason (other than
death) while holding an option granted under this Article Three, he or she shall
have three (3) months following the date of cessation of Board membership in
which to exercise the option for any or all of the shares of Common Stock for
which the option is exercisable at the time of the cessation.
2. If a Director dies while serving as a Board member or during the three
(3) months following his or her cessation of Board service, an option granted
under this Article Three may be exercised, for any or all of the shares of
Common Stock for which the option is exercisable at the time of cessation of
Board membership, by the personal representative of his or her estate or by the
person(s) to whom the option is transferred pursuant to the Director's will or
in accordance with the laws of descent and distribution. Any such exercise must,
however, occur within twelve (12) months after the date of the Director's death.
3. In no event shall any option granted under this Article Three remain
exercisable after the specified expiration date of its ten (10)-year term. Upon
the expiration of
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N.E.T. 1993 SOP As Amended August 12, 1997
the applicable exercise period in accordance with subparagraphs 1 and 2 above or
(if earlier) upon the expiration of the ten (10)-year option term, the option
shall terminate and cease to be exercisable.
H. Stockholder Rights. The holder of an option granted under this Article
Three shall have no stockholder rights with respect to any option shares until
he or she has exercised the option and paid (or made arrangement satisfactory to
the Plan Administrator to pay) the exercise price for the purchased shares.
I. Remaining Terms. The remaining terms and conditions of each option grant
under this Article Three shall be as set forth in the form of Director Automatic
Grant Agreement attached as Exhibit A to this Plan.
III. CORPORATE TRANSACTION/CHANGE IN CONTROL/ HOSTILE TAKE-OVER
A. Each option granted under this Article Three that is outstanding at the
time of a Corporate Transaction or a Change in Control shall, immediately before
the specified Effective Date for the Corporation Transaction or Change in
Control, become fully exercisable with respect to the total number of shares of
Common Stock then subject to the option. Upon the consummation of the
Corporation transaction, all options granted under this Article Three shall
terminate.
B. Upon the occurrence of a Hostile Take-Over, each option that has been
outstanding under this Article Three for at least six (6) months shall
automatically be canceled and the optionee shall be entitled to a cash payment
by the Corporation calculated in accordance with Section VI.D. of Article Two
and payable at the time and manner set forth in Section VI.E of Article Two.
Neither the approval of the Plan Administrator nor the consent of the Board
shall be required in connection with such option cancellation and cash payment.
C. The automatic option grants under this Article Three 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.
D. The shares of Common Stock subject to each option canceled in connection
with a Hostile Take-Over shall not be available for subsequent issuance under
this Plan.
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N.E.T. 1993 SOP As Amended August 12, 1997
ARTICLE FOUR
MISCELLANEOUS
I. AMENDMENT OF PLAN
The Board shall have complete and exclusive authority to amend or modify
this Plan in any or all respects whatsoever. However, no such amendment or
modification shall, without the consent of the optionees, adversely affect
rights and obligations with respect to options at the time outstanding under the
Plan. No amendment shall require stockholder approval except when (i) required
by Section 422 of the Internal Revenue Code for incentive stock options; (ii)
required by other applicable laws, regulations or rules (including rules of the
New York Stock Exchange); or (iii) otherwise deemed advisable by the Board.
II. TAX WITHHOLDING
A. The Corporation's obligation to deliver shares or cash upon exercise of
options or stock appreciation rights granted under this Plan shall be subject to
the satisfaction of all federal, state, and local income and employment tax
withholding requirements.
B. The Plan Administrator may, in its discretion and upon such terms and
conditions as it deems appropriate, provide any or all optionees under Article
Two with the election to have the Corporation withhold, from the shares of
Common Stock otherwise issuable upon the exercise of options, one or more shares
with an aggregate fair market value equal to a designated percentage (any whole
multiple of 5% specified by the optionee) of the federal and state income taxes
("Taxes") incurred in connection with the acquisition of such shares. In lieu of
direct withholding, optionees may be granted the right to deliver shares of
Common Stock to the Corporation in satisfaction of such Taxes. The withheld or
delivered shares shall be valued at the fair market value on the applicable
determination date for such Taxes.
III. TERM OF PLAN
A. This Plan shall terminate upon the earlier of (i) August 10, 2003, or
(ii) the date on which all shares available for issuance under this Plan have
been issued pursuant to the exercise of options granted under this Plan and (to
the extent outstanding on the Effective Date) the 1983 Plan. If the date of
termination is determined under clause (i) above, then no options outstanding on
such date shall be affected by the termination of this Plan.
B. Options may be granted under this Plan to purchase shares of Common
Stock in excess of the number of shares then available for issuance under this
Plan, provided each option granted is not to become exercisable, in whole or in
part, at any time before stockholder approval of an amendment authorizing a
sufficient increase in the number of shares issuable under the Plan.
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N.E.T. 1993 SOP As Amended August 12, 1997
IV. USE OF PROCEEDS
Any cash proceeds received by the Corporation from the sale of shares
pursuant to options granted under this Plan may be used for general corporate
purposes.
V. REGULATORY APPROVALS
A. The implementation of this Plan, the granting of any option hereunder,
and the issuance of stock upon the exercise or surrender of any such option
shall be subject to the procurement by the Corporation of all approvals and
permits required by regulatory authorities having jurisdiction over this Plan,
the options granted under it, and the stock issued pursuant to it.
B. No shares of Common Stock or other assets shall be issued or delivered
under this 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 a Form S-8 registration statement for the shares of
Common Stock issuable under this Plan, and all applicable listing requirements
of any securities exchange on which stock of the same class is then listed.
VI. NO EMPLOYMENT/SERVICE RIGHTS
Neither the action of the Corporation in establishing this Plan, nor any
action taken by the Plan Administrator hereunder, nor any provision of the Plan,
shall be construed so as to grant any individual the right to remain in the
employ or service of the Corporation (or any parent or subsidiary corporation)
for any period, and the Corporation (or any parent or subsidiary corporation
retaining the services of such individual) may terminate such individual's
employment or service at any time and for any reason, with or without cause.
VII. MISCELLANEOUS PROVISIONS
A. Except as otherwise provided in this Plan, the right to acquire Common
Stock or other assets under this Plan may not be assigned, encumbered, or
otherwise transferred by any optionee.
B. The provisions of this Plan shall be governed by the laws of the State
of California, as such laws are applied to contracts entered into and performed
in that State.
C. The provisions of this Plan shall inure to the benefit of, and be
binding upon, the Corporation and its successors or assigns, and the optionees,
the legal representatives of their respective estates, their respective heirs or
legatees, and their permitted assignees.
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N.E.T. 1993 SOP As Amended August 12, 1997