EXHIBIT 99.1
NETWORK APPLIANCE, INC.
1999 STOCK OPTION PLAN
AS AMENDED AND RESTATED THROUGH OCTOBER 18, 2001
ARTICLE ONE
GENERAL PROVISIONS
I. PURPOSE OF THE PLAN
This 1999 Stock Option Plan is intended to promote the interests
of Network Appliance, 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 document reflect (i) the 2-for-1 split
of the Common Stock effected on December 20, 1999 and (ii) the 2-for-1 split of
the Common Stock effected on March 22, 2000.
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
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 accordingly 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. Administration of the Discretionary Option Grant Program with respect
to all other eligible persons 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.
B. 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.
C. Each Plan Administrator shall, within the scope of its
administrative functions under the Plan, have full power and authority 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 stock option thereunder.
D. 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.
E. 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 option
grants made thereunder.
IV. ELIGIBILITY
A. The persons eligible to participate in the Discretionary
Option Grant Program are as follows:
(i) Employees, and
(ii) consultants and other independent advisors who
provide services to the Corporation (or any Parent or Subsidiary).
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B. Each Plan Administrator shall, within the scope of its
administrative jurisdiction under the Plan, have full authority (subject to the
provisions of the Plan) 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. Only non-employee Board members shall be eligible to
participate in the Automatic Option Grant Program.
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 which may be issued over the term of the Plan shall not exceed 41,600,000
shares. Such authorized share reserve is comprised of (i) the 13,200,000 shares
of Common Stock initially authorized for issuance under the Plan, (ii) an
additional increase of 15,000,000 shares authorized by the Board on August 17,
2000 and approved by the shareholders at the 2000 Annual Meeting, plus (iii) an
additional increase of 13,400,000 shares authorized by the Board on August 9,
2001 and approved by the shareholders at the 2001 Annual Meeting. Such
authorized share reserve shall be in addition to the number of shares of Common
Stock reserved for issuance under the Corporation's 1995 Stock Incentive Plan
and the Corporation's Special Non-Officer Stock Option Plan, and share issuances
under this Plan shall not reduce or otherwise affect the number of shares of
Common Stock available for issuance under the 1995 Stock Incentive Plan or the
Special Non-Officer Stock Option Plan. In addition, share issuances under such
plans shall not reduce or otherwise affect the number of shares of Common Stock
available for issuance under this Plan.
B. No one person participating in the Plan may receive stock
options under the Plan for more than 3,000,000 shares of Common Stock in the
aggregate per calendar year.
C. Shares of Common Stock subject to outstanding options shall be
available for subsequent issuance under the Plan to the extent (i) the options
expire or terminate for any reason prior to exercise in full or (ii) the options
are cancelled in accordance with the cancellation/regrant provisions of Article
Two. In addition, any unvested shares issued under the Plan and subsequently
repurchased by the Corporation, at the option exercise 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. 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
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vesting of exercised option shares 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 the gross number of
exercised option shares which vest, and not by the net number of shares of
Common Stock issued to the holder of such option or exercised option shares.
D. Should any change be 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 per calendar year, (iii) the number
and/or class of securities for which automatic option grants are to be made
subsequently under the Automatic Option Grant Program and (iv) the number and/or
class of securities and the exercise price per share in effect under each
outstanding option in order to prevent the dilution or enlargement of benefits
thereunder. The adjustments determined by the Plan Administrator shall be final,
binding and conclusive.
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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 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 transaction.
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.
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 ten
(10) years measured from the option grant date.
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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 exercised subsequently 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) 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.
(iv) 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.
2. The Plan Administrator shall have the 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 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
(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 under the option had the Optionee continued
in Service.
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D. 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.
E. 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.
F. 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, Non-Statutory Options may
be assigned in whole or in part during the Optionee's lifetime to one or more
members of the Optionee's family or to a trust established exclusively for one
or more such family members or the Optionee's former spouse, to the extent such
assignment is in connection with the Optionee's estate plan, or to the
Optionee's former spouse 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 which are specifically 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.
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 (1) 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.
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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. Each option, to the extent outstanding under the Plan at the
time of a Corporate Transaction but not otherwise exercisable for all the option
shares, 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 become
exercisable on such an accelerated basis if and to the extent: (i) such option
is, in connection with the Corporate Transaction, to be assumed by the successor
corporation (or parent thereof) or 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).
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 under
the Plan per calendar year.
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E. The Plan Administrator shall have full power and authority to
grant options under the Plan which will automatically accelerate in whole or in
part in the event the Optionee's Service subsequently terminates by reason of an
Involuntary Termination within a designated period (not to exceed twelve (12)
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 earlier
of (i) the expiration of the option term or (ii) the expiration of the one
(1)-year period measured from the effective date of the Involuntary Termination.
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
in whole or in part, and the shares subject to those terminated rights shall
accordingly vest at that time.
F. The Plan Administrator shall have full power and authority to
grant options under the Plan which will automatically accelerate in whole or in
part in the event the Optionee's Service subsequently terminates by reason of an
Involuntary Termination within a designated period (not to exceed twelve (12)
months) following the effective date of any Change in Control. Each option so
accelerated shall remain exercisable for fully-vested shares until the earlier
of (i) the expiration of the option term or (ii) the expiration of the one
(1)-year period measured from the effective date of the Involuntary Termination.
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
in whole or in part, and the shares subject to those terminated rights shall
accordingly vest at that time.
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-Qualified
Option under the Federal tax laws.
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. CANCELLATION AND REGRANT OF OPTIONS
The Plan Administrator shall have the authority to effect, at any
time and from time to time, with the consent of the affected option holders, the
cancellation of any or all outstanding options under the Plan and to grant in
substitution new options covering the same or different number of shares of
Common Stock but with an exercise price per share based on the Fair Market Value
per share of Common Stock on the new grant date. However, any such option
cancellation/regrant program shall be subject to the following two limitations:
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(i) only options held by Employees who are neither
executive officers of the Corporation nor members of the Board may be so
cancelled and regranted; and
(ii) the total number of shares subject to options
which are so cancelled and regranted from time to time pursuant to this
Section IV shall not in the aggregate exceed ten percent (10%) of the
total number of shares of Common Stock authorized for issuance under the
Plan.
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ARTICLE THREE
AUTOMATIC OPTION GRANT PROGRAM
On August 17, 2000, the Board approved the following changes to
the Automatic Option Grant Program which became effective when approved by the
shareholders at the 2000 Annual Meeting: (i) reduced the number of shares of
Common Stock for which option grants are to be made to new non-employee Board
members under the Automatic Option Grant Program from 160,000 shares (as
adjusted to reflect the two splits of the Common Stock which have occurred since
the implementation of the Plan) to 40,000 shares and (ii) reduced the number of
shares of Common Stock for which option grants are to be made to continuing
non-employee Board members under the Automatic Option Grant Program from 40,000
shares (as adjusted to reflect the two splits of the Common Stock which have
occurred since the implementation of the Plan) to 15,000 shares.
On August 9, 2001, the Board approved the following changes to
the Automatic Option Grant Program which became effective with shareholder
approval at the 2001 Annual Meeting: (i) increase the number of shares of Common
Stock for which option grants are to be made to new non-employee Board members
under the Automatic Option Grant Program from 40,000 shares to 55,000 shares and
(ii) modify the vesting schedule applicable to each such option grants from four
(4) successive equal annual installments to the vesting of 25,000 shares after
one (1) year of Board service and the balance in three (3) successive equal
annual installments thereafter.
I. OPTION TERMS
A. GRANT DATES. Option grants 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 2000 Annual Shareholders
Meeting and prior to the date of the 2001 Annual Shareholders Meeting shall
automatically be granted, on the date of such initial election or appointment, a
Non-Statutory Option to purchase 40,000 shares of Common Stock, provided such
individual has not previously been in the employ of the Corporation (or any
Parent or Subsidiary). Each individual who is first elected or appointed as a
non-employee Board member at any time on or after the date of the 2001 Annual
Shareholders Meeting shall automatically be granted, on the date of such initial
election or appointment, a Non-Statutory Option to purchase 55,000 shares of
Common Stock, provided such 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 2000 Annual Meeting, each individual who is to continue to
serve as a non-employee Board member shall automatically be granted a
Non-Statutory Option to purchase 15,000 shares of Common Stock, 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 15,000-share option grants
any one non-employee Board member may receive over his or her period of Board
service.
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3. Shareholder approval of the 2001 Restatement shall
constitute pre-approval of each option grant made under this Automatic Option
Grant Program on or after the date of the 2001 Annual Meeting and the subsequent
exercise of that option in accordance with the terms and conditions of this
Article Three and the stock option agreement evidencing such grant.
4. The Automatic Option Grant Program under this Plan
supersedes and replaces the Automatic Option Grant Program previously in effect
for the non-employee Board members under the Corporation's 1995 Stock Incentive
Plan. That latter program terminated upon shareholder approval of the Plan at
the 1999 Annual Shareholders Meeting, and no further option grants shall be made
to the non-employee Board members under that program. All options granted to the
non-employee Board members on or after the date of the 1999 Annual Shareholders
Meeting, whether upon their initial election or appointment to the Board or upon
their re-election at one or more of the Corporation's subsequent Annual
Shareholder Meetings, shall be effected solely and exclusively in accordance
with the terms and provisions of this Article Three, as in effect from time to
time.
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.
2. 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 term of ten (10) years
measured from the option grant date.
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.
1. The shares subject to each 40,000-share grant made to a
newly elected or appointed non-employee Board member on or after the date of the
2000 Annual Shareholders Meeting and prior to the date of the 2001 Annual
Shareholders Meeting shall vest, and the Corporation's repurchase right with
respect to those shares shall lapse, in a series of four (4) successive equal
annual installments over the Optionee's period of continued service as a Board
member, with the first such installment to vest upon the Optionee's completion
of one (1) year of Board service measured from the option grant date.
2. The shares subject to each 55,000-share grant made to a
newly elected or appointed non-employee Board member on or after the date of the
2001 Annual Shareholders Meeting shall vest, and the Corporation's repurchase
right with respect to those
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shares shall lapse, as follows: (x) 25,000 shares shall vest upon the Optionee's
completion of one (1) year of Board service measured from the option grant date,
and (y) the balance of the shares shall vest in a series of three (3) successive
equal annual installments upon the Optionee's completion of each additional year
of Board service over the three (3) year-period measured from the first
anniversary of the option grant date.
3. The shares subject to each annual 15,000-share grant
shall vest, and the Corporation's repurchase right with respect to those shares
shall lapse, upon the Optionee's continuation in Board service through the day
immediately preceding the date of the next Annual Shareholders Meeting following
the option grant date.
E. EFFECT OF TERMINATION OF BOARD SERVICE. The following
provisions shall govern the exercise of any options held by the Optionee at the
time the Optionee ceases to serve as a Board member:
(i) The Optionee (or, in the event of the
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 in accordance with the laws of descent and
distribution) 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 shares of Common Stock in which the Optionee is vested at the
time of his or her 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 Optionee's
cessation of Board service for any reason other than death or Permanent
Disability, terminate and cease to be outstanding with respect to any
and all shares in which the Optionee is not otherwise at that time
vested.
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II. CORPORATE TRANSACTION/CHANGE IN CONTROL
A. The shares of Common Stock subject to each outstanding option
at the time of a Corporate Transaction but not otherwise vested shall
automatically vest in full so that each such option shall, immediately prior to
the effective date of that Corporate Transaction, become fully exercisable for
all of the shares of Common Stock at the time subject to such option and may be
exercised for all or any portion 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. The shares of Common Stock subject to each outstanding option
at the time of a Change in Control but not otherwise vested shall automatically
vest in full so that each such option shall, immediately prior to the effective
date of that Change in Control, become fully exercisable for all of the shares
of Common Stock at the time subject to such option and may be exercised for all
or any portion 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.
C. All repurchase rights of the Corporation outstanding under the
Automatic Option Grant Program at the time of a Corporate Transaction or Change
in Control shall automatically terminate at that time, and the shares of Common
Stock subject to those terminated rights shall immediately vest.
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.
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.
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ARTICLE FOUR
MISCELLANEOUS
I. TAX WITHHOLDING
A. The Corporation's obligation to deliver shares of Common Stock
upon the exercise of stock options or the issuance or vesting of such shares
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 or unvested shares of Common Stock under
the Plan (other than the options granted or the shares issued under the
Automatic 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
become subject in connection with the exercise of their options or the vesting
of their shares. Such right may be provided to any such holder in either or both
of the following formats:
(i) 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 or the vesting of such
shares, 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.
(ii) Stock Delivery: The election to deliver to the
Corporation, at the time the Non-Statutory Option is exercised or the
shares vest, one or more shares of Common Stock previously acquired by
such holder (other than in connection with the option exercise or share
vesting 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.
II. EFFECTIVE DATE AND TERM OF THE PLAN
The Plan became effective on the Plan Effective Date and shall
remain in effect until the earliest of (i) August 16, 2009, (ii) the date on
which all shares available for issuance under the Plan shall have been issued as
fully-vested shares pursuant to option exercises under the Plan or (iii) the
termination of all outstanding options in connection with a Corporate
Transaction. Upon such Plan termination, all outstanding stock options and
unvested stock issuances made pursuant to option exercises shall continue to
have force and effect in accordance with the provisions of the documents
evidencing such options or issuances.
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III. 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, subject to any
shareholder approval which may be required pursuant to applicable laws or
regulations, provided, however, that the Board may not, without shareholder
approval, (i) increase the number of shares of Common Stock authorized for
issuance under the Plan, or (ii) materially increase the benefits offered to
participants under the 1999 Plan. No amendment or modification shall adversely
affect any rights and obligations with respect to options or unvested shares of
Common Stock at the time outstanding under the Plan unless the Optionee or
holder of such unvested shares consents to such amendment or modification.
B. The Plan was amended on August 17, 2000 to increase the number
of shares of Common Stock authorized for issuance under the Plan by an
additional 15,000,000 shares. The amendment was approved by the shareholders at
the 2000 Annual Meeting, and no option grants were made on the basis of the
15,000,000-share increase, until such shareholder approval was obtained.
C. The Plan was amended on August 9, 2001 to: (i) increase the
number of shares of Common Stock authorized for issuance under the Plan by an
additional 13,400,000 shares, (ii) increase the number of shares of Common Stock
for which option grants are to be made to newly elected or appointed
non-employee Board members under the Automatic Option Grant Program from 40,000
shares to 55,000 shares and (iii) modify the vesting schedule applicable to such
option grants from four (4) successive equal annual installments to the vesting
of 25,000 shares after one (1) year of Board service and the balance in three
(3) successive equal annual installments. Such amendment was approved by the
shareholders at the 2001 Annual Meeting, and no options grants were made on the
basis of the 13,400,000-share increase or the amendments to the Automatic Option
Grant Program until such shareholder approval was obtained.
D. Options to purchase shares of Common Stock may be granted
under the Discretionary Option Grant Program in excess of the number of shares
then available for issuance under the Plan, provided any excess shares actually
issued under such program are 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 grants
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 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.
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IV. REGULATORY APPROVALS
A. The implementation of the Plan, the granting of any option
under the Plan and the issuance of any shares of Common Stock upon the exercise
of such option shall be subject to the Corporation's procurement of all
approvals and permits required by regulatory authorities having jurisdiction
over the Plan, the 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.
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. 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.
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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 fifty percent (50%) 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, 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 Network Appliance, Inc., a California
corporation, and any corporate successor to all or substantially all of the
assets or voting stock of Network Appliance, Inc. which shall by appropriate
action adopt the Plan.
H. DISCRETIONARY OPTION GRANT PROGRAM shall mean the
discretionary option grant program in effect under Article Two of the Plan.
I. 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.
J. EXERCISE DATE shall mean the date on which the Corporation
shall have received written notice of the option exercise.
K. 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 the closing
selling price per share of Common Stock on the date in question, as such
price is reported by the National Association of Securities Dealers on
the Nasdaq National Market and published in The Wall Street Journal. 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 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 and published in The
Wall Street Journal. 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.
L. INCENTIVE OPTION shall mean an option which satisfies the
requirements of Code Section 422.
M. 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
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(including base salary, fringe benefits and participation in
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 by the Corporation without
the individual's consent.
N. 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).
O. 1934 ACT shall mean the Securities Exchange Act of 1934, as
amended.
P. NON-STATUTORY OPTION shall mean an option not intended to
satisfy the requirements of Code Section 422.
Q. OPTIONEE shall mean any person to whom an option is granted
under the Plan.
R. 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.
S. PERMANENT DISABILITY OR PERMANENTLY DISABLED shall mean the
inability of the Optionee or the Participant 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 the 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.
T. PLAN shall mean the Corporation's 1999 Stock Option Plan, as
set forth in this document.
U. 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 such program with respect to the persons under
its jurisdiction.
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V. PLAN EFFECTIVE DATE shall mean August 17, 1999, the date on
which the Board adopted the Plan.
W. 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.
X. 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.
Y. 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.
Z. SERVICE shall mean the provision of services to 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.
AA. STOCK EXCHANGE shall mean either the American Stock Exchange
or the New York Stock Exchange.
BB. 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.
CC. 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).
DD. 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 becomes subject in connection with
the exercise of those options or the vesting of those shares.
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