1
EXHIBIT 99.2
STRATACOM, INC.
1994 STOCK OPTION PLAN
STOCK OPTION AGREEMENT - GENERAL TERMS AND CONDITIONS
1. Nature of the Option. If designated an Incentive Stock Option in
the Notice of Grant, this Option is intended to qualify as an Incentive Stock
Option as defined in Section 422 of the Code. If shareholder approval of the
Plan is not obtained within twelve (12) months of adoption by the Company, this
Option will be treated as a Nonstatutory Stock Option.
2. Exercise of Option. This Option shall be exercisable during its
term in accordance with the Exercise Schedule set out in Section 2(i) below and
in accordance with the provisions of Sections 9 and 10 of the Plan as follows:
(i) Right to Exercise.
(a) Subject to subsections 2(i) (b), (c), (d) and (e), below,
this Option shall be exercisable cumulatively to the extent of 25% of the Shares
subject to the Option for each year which has expired after the Vesting
Commencement Date. This Option may be exercised for a period of 30 days after
termination of employment or consulting relationship except as set out in
Sections 7 and 8 of this Stock Option Agreement (but in no event later than the
Expiration Date).
(b) This Option may not be exercised for a fraction of a
share.
(c) In the event of Optionee's death, disability or other
termination of employment, the exercisability of the Option is governed by
Sections 6, 7 and 8 below and subject to the limitation contained in section 2
(i) (d) and (e).
(d) In no event may this Option be exercised after the date
of expiration of the term of this Option as set forth in Section 10 of this
Agreement (the "Expiration Date").
(e) If designated an Incentive Stock Option in the Notice of
Grant, in the event that this Option becomes exercisable at a time or times
which, when this Option is aggregated with all other incentive stock options
granted to Optionee by the Company or any Parent or Subsidiary, would result in
Shares having aggregate fair market value (determined for each Share as of the
Date of Grant of the option covering such Share) in excess of $100,000 becoming
first available for purchase upon exercise of one or more incentive stock
options during any calendar year, the number of shares in excess of $100,000
shall be treated as subject to an option which is a Nonstatutory Stock Option,
pursuant to Section 5 of the Plan.
2
(ii) Method of Exercise.
(a) The Option shall be exercisable by written notice stating
the election to exercise the Option, the number of Shares in respect of which
the Option is being exercised, and such other representations and agreements as
to the holder's investment intent with respect to such shares of Common Stock as
may be required by the Company pursuant to the provisions of the Plan. Such
written notice shall be signed by the Optionee and shall be delivered in person
or by certified mail to the Secretary of the Company. The written notice shall
be accompanied by payment of the exercise price for all the shares being
purchased. This Option shall be deemed to be exercised upon receipt by the
Company of said written notice accompanied by said exercise price.
(b) As a condition to the exercise of this Option, the
Optionee agrees to make adequate provisions for federal, state or other tax
withholding obligations, if any, which arise upon the exercise of the Option or
disposition of Shares, whether by withholding, direct payment to the Company, or
otherwise.
(c) No Shares will be issued pursuant to the exercise of an
Option unless such issuance and such exercise shall comply with all relevant
provisions of law and the requirements of any stock exchange upon which the
Shares may then be listed. Assuming such compliance, for income tax purposes the
Shares shall be considered transferred to the Optionee on the date on which the
Option is exercised with respect to such shares.
3. Optionee's Representations. In the event the Shares purchasable
pursuant to the exercise of this Option have not been registered under the
Securities Act of 1933, as amended, at the time this Option is exercised,
Optionee shall, if required by the Company, concurrently with the exercise of
all or any portion of this Option, deliver to the Company an investment
representation statement in customary form, a copy of which is available for
Optionee's review from the Company upon request.
4. Method of Payment. Payment of the Exercise Price shall be by any
of the following, or a combination of the following, at the election of the
Optionee: (i) cash; or (ii) check.
5. Restrictions on Exercise. This Option may not be exercised if the
issuance of the Shares upon such exercise or the method of payment of
consideration for such shares would constitute a violation of any applicable
federal or state securities or other law or regulation, including any rule under
Part 207 of Title 12 of the Code of Federal regulations ("Regulation G") as
promulgated by the Federal Reserve Board. As a condition to the exercise of this
Option, the Company may require Optionee to make any representation and warranty
to the Company as may be required by any applicable law or regulation.
2
3
6. Termination of Relationship. In the event of termination of
Optionee's Continuous Status as an Employee or Consultant, Optionee may, to the
extent otherwise so entitled at the date of such termination (the "Termination
Date"), exercise this Option during the termination Period set out in the Notice
of Grant. To the extent that Optionee was not entitled to exercise this Option
at the date of such termination, or if Optionee does not exercise this Option
within the time specified in the Notice of Grant, the Option shall terminate.
7. Disability of Optionee. Notwithstanding the provisions of Section
6 above, in the event of termination of Optionee's Continuous Status as an
Employee (or Consultant in the case of a Nonstatutory Stock Option) as a result
of total and permanent disability (as defined in Section 22(e)(3) of the Code),
Optionee may, but only within six (6) months from the date of termination of
employment (but in no event later than the date of expiration of the term of
this Option as set forth in Section 10 below), exercise the Option to the extent
otherwise so entitled at the date of such termination. To the extent that
Optionee was not entitled to exercise the Option at the date of termination, or
if Optionee does not exercise such Option (to the extent otherwise so entitled)
within the time specified in this Agreement, the Option shall terminate.
8. Death of Optionee. In the event of death of Optionee:
(i) during the term of this Option and while an employee (or
Consultant in the case of a Nonstatutory Stock Option) of the Company and having
been in Continuous Status as an Employee (or Consultant) since the date of Grant
of the Option, the Option may be exercised, at any time within three (3) months
following the date of death (but in no event later than the date of expiration
of the term of this Option as set forth in Section 10 below), by Optionee's
estate or by a person who acquired the right to exercise the Option by bequest
or inheritance, but only to the extent of the right to exercise that would have
accrued had the Optionee continued living and remained in Continuous Status as
an Employee or Consultant three (3) months after the date of death; or
(ii) within thirty (30) days after the termination of Optionee's
Continuous Status as an Employee (or Consultant), the Option may be exercised,
at any time within three (3) months following the date of death (but in no event
later than the date of expiration of the term of this Option as set forth in
Section 10 below), by Optionee's estate or by person who acquired the right to
exercise the Option by bequest or inheritance, but only to the extent of the
right to exercise that had accrued at the date of termination.
9. Non-Transferability of Option. This Option may not be transferred
in any manner otherwise than by will or by laws of descent or distribution. The
designation of a beneficiary does not constitute a transfer. An Option may be
exercised during the lifetime of Optionee only by the Optionee or a transferee
permitted by this section. The terms of this Option shall be binding upon the
executors, administrators, heirs, successors and assigns of the Optionee.
3
4
10. Term of Option. This Option may be exercised only within five
years of the Vesting Commencement Date set forth on the cover sheet of this
Agreement, and may be exercised during such term only in accordance with the
Plan and the terms of this Option.
11. No Additional Employment Rights. Optionee understands and agrees
that the vesting of Shares pursuant to the Exercise Schedule is earned only by
continuing as an Employee or Consultant at the will of the Company (not through
the act of being hired, being granted this Option or acquiring Shares under this
Agreement). Optionee further acknowledges and agrees that nothing in this
Agreement nor in the Plan which is incorporated in this Agreement by reference
shall confer upon Optionee any right with respect to continuation as an Employee
(or Consultant) with the Company, nor shall it interfere in any way with his or
her right or the Company's right to terminate his or her employment or
consulting relationship at any time, with or without cause.
12. Tax Consequences. Set forth below is a brief summary as of the
date of this Option of some of the federal tax consequences of exercise of this
Option and disposition of the Shares. THIS SUMMARY IS NECESSARILY INCOMPLETE,
AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE. OPTIONEE SHOULD CONSULT
A TAX ADVISER BEFORE EXERCISING THIS OPTION OR DISPOSING OF THE SHARES.
(i) Exercise of Incentive Stock Option. If this Option
qualifies as an Incentive Stock Option, there will be no regular federal income
tax liability upon the exercise of the Option, although the excess, if any, of
the fair market value of the Shares on the date of exercise over the Exercise
Price will be treated as an adjustment to the alternative minimum tax for
federal tax purposes and may subject the Optionee to the alternative minimum tax
in the year of exercise.
(ii) Exercise of Nonqualified Stock Option. If this Option does
not qualify as an Incentive Stock Option, there may be a regular federal income
tax liability upon the exercise of the Option. The Optionee will be treated as
having received compensation income (taxable at ordinary income tax rates) equal
to the excess, if any, of the fair market value of the Shares on the date of
exercise over the Exercise Price. In addition, the Company will be required to
withhold from Optionee's compensation or collect from Optionee and pay to the
applicable taxing authorities an amount equal to a percentage of this
compensation income at the time of exercise.
(iii) Disposition of Shares. In the case of a Nonqualified Stock
Option, if Shares are held for at least one year, any gain realized on
disposition of the Shares will be treated as long-term capital gain for federal
income tax purposes. In the case of an Incentive Stock Option, if Shares
transferred pursuant to the Option are held for at least one year after exercise
and are disposed of at least two years after the Date of Grant, any gain
realized on the disposition of the Shares will also be treated as long-term
capital gain for federal income tax purposes. If Shares purchased under an
Incentive Stock Option are disposed of within such one-year period or within two
years after the Date of Grant, any gain realized on such disposition will be
treated
4
5
as compensation income (taxable at ordinary income rates) to the extent of the
excess, if any, of the lesser of (1) fair market value of the Shares on the date
of exercise, or (2) the sales proceeds, over the Exercise Price.
(iv) Notice of Disqualifying Disposition of Incentive Stock Option
Shares. If the Option granted to Optionee in this Agreement is an Incentive
Stock Option and if Optionee sells or otherwise disposes of any of the Shares
acquired pursuant to the Incentive Stock Option on or before the later of (1)
the date two years after the Date of Grant, or (2) the date one year after
transfer of such Shares to the Optionee upon exercise of the Incentive Stock
Option, the Optionee shall notify the Company in writing within thirty (30) days
after the date of any such disposition. Optionee agrees that Optionee may be
subject to income tax withholding by the Company on the compensation income
recognized by the Optionee from the early disposition by payment in cash or out
of the current earnings paid to the Optionee.
13. Signature. This Stock Option Agreement shall be deemed executed
by the Company and the Optionee upon execution by such parties of the Notice of
Grant and the Cover Sheet attached to this Stock Option Agreement.
5