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EXHIBIT 99.3
STRATACOM, INC.
1986 INCENTIVE STOCK OPTION PLAN
1. Purposes of the Plan. The purposes of this Stock Option Plan
are to attract and retain the best available personnel for positions of
substantial responsibility, to provide additional incentive to the Employees and
Consultants of the Company, and to promote the success of the Company's
business.
Options granted hereunder may be either Incentive Stock Options or
Nonstatutory Stock Options, at the discretion of the Administrator and as
reflected in the terms of the written option agreement.
2. Definitions. As used herein, the following definitions shall
apply:
(a) "Administrator" shall mean the Board or any of its
Committees appointed pursuant to Section 4 of the Plan.
(b) "Applicable Laws" shall have the meaning set forth in
Section 4(a) below.
(c) "Board" shall mean the Board of Directors of the
Company.
(d) "Code" shall mean the Internal Revenue Code of 1986,
as amended.
(e) "Common Stock" shall mean the Common Stock of the
Company.
(f) "Committee" shall mean the Committee appointed by the
Board of Directors in accordance with Section 4(a) below, if one is appointed.
(g) "Company" shall mean STRATACOM, INC., a Delaware
corporation.
(h) "Consultant" shall mean (i) any person who is engaged
by the Company or any subsidiary to render consulting services and its
compensated for such consulting services, and (ii) any director of the Company
whether compensated for such services or not; provided, however, that if the
Company registers any class of any equity security pursuant to Section 12 of the
Securities Exchange Act of 1934, as amended, the term Consultant shall
thereafter not include directors who are not compensated for their services or
who are paid only a director's fee by the Company.
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(i) "Continuous Status as an Employee or Consultant"
shall mean the absence of any interruption or termination of service as an
Employee or Consultant. Continuous Status as an Employee or Consultant shall not
be considered interrupted in the case of sick leave, military leave, or any
other leave of absence approved by the Administrator; provided, however, either
that such leave must be for a period of not more than ninety (90) days or that
re-employment upon the expiration of such leave must be guaranteed by contract
or by statute.
(j) "Employee" shall mean any person, including officers
and directors, employed by the Company or any Parent or Subsidiary of the
Company. The payment of a director's fee by the Company shall not be sufficient
to constitute "employment" by the Company.
(k) "Fair Market Value" means, as of any date, the value
of Common Stock determined as follows:
(i) If the Common Stock is listed on any
established stock exchange or a national market system including without
limitation the National Market System of the National Association of Securities
Dealers, Inc. Automated Quotation ("NASDAQ") System, its Fair Market Value shall
be the average of the closing sales prices for such stock as quoted on such
system for the last five trading days before the date of determination (if for a
given day no sales were reported, the closing bid on that day shall be used), as
such prices are reported in The Wall Street Journal or such other source as the
Administrator deems reliable;
(ii) If the Common Stock is quoted on the NASDAQ
System (but not on the National Market System thereof) or regularly quoted by a
recognized securities dealer but selling prices are not reported, its Fair
Market Value shall be the average of the mean between the bid and asked prices
for the Common Stock for the last five days before the date of determination; or
(iii) In the absence of an established market for
the Common Stock, the Fair Market Value thereof shall be determined in good
faith by the Administrator.
(l) "Incentive Stock Option" shall mean an Option
intended to qualify as an incentive stock option within the meaning of Section
422 of the Code.
(m) "Nonstatutory Stock Option" shall mean an Option not
intended to qualify as an Incentive Stock Option.
(n) "Option" shall mean a stock option granted pursuant
to the Plan.
(o) "Optioned Stock" shall mean the Common Stock subject
to an
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Option.
(p) "Optionee" shall mean an Employee or Consultant who
receives an Option.
(q) "Parent" shall mean a "parent corporation," whether
now or hereafter existing, as defined in Section 424(e) of the Code
(r) "Plan" shall mean this 1986 Incentive Stock Option
Plan.
(s) "Share" shall mean a share of Common Stock, adjusted
in accordance with Section 11 below.
(t) "Subsidiary" shall mean a "subsidiary corporation,"
whether now or hereafter existing, as defined in Section 424(f) of the Code.
3. Stock Subject to the Plan. Subject to the provisions of
Section 11 below, the maximum aggregate number of shares that may be optioned
and sold under the Plan is 4,730,000 shares of Common Stock. The Shares may be
authorized, but unissued, or reacquired Common Stock.
If an Option should expire or become unexercisable for any reason
without having been exercised in full, then the unpurchased Shares that were
subject to the Option shall, unless the Plan has been terminated, become
available for future grant under the Plan.
Notwithstanding any other provision of the Plan, shares issued under
the Plan and later repurchased by the Company shall not become available for
future grant or sale under the Plan.
4. Administration of the Plan.
(a) Composition of Administrator.
(i) Multiple Administrative Bodies. If permitted
by Rule 16b-3 promulgated under the Exchange Act or any successor rule thereto,
as in effect at the time that discretion is being exercised with respect to the
Plan ("Rule 16b-3"), and by the legal requirements relating to the
administration of incentive stock option plans, if any, of applicable securities
laws and the Code (collectively, the "Applicable Laws"), the Plan may (but need
not) be administered by different administrative bodies with respect to
directors, officers who are not directors and Employees who are neither
directors nor officers.
(ii) Administration with respect to Directors and
Officers. With respect to grants of Options to Employees or Consultants who are
also officers or directors of the Company, the Plan shall be administered by (A)
the Board, if the Board may
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administer the Plan in compliance with Rule 16b-3 as it applies to a plan
intended to qualify thereunder as a discretionary plan, or (B) a Committee
designated by the Board to administer the Plan, which Committee shall be
constituted (I) in such a manner as to permit the Plan to comply with Rule 16b-3
as it applies to a plan intended to qualify thereunder as a discretionary plan
and (II) in such a manner as to satisfy the Applicable Laws.
(iii) Administration with respect to Other
Persons. With respect to grants of Options to Employees or Consultants who are
neither directors nor officers of the Company, the Plan shall be administered by
(A) the Board or (B) a Committee designated by the Board, which Committee shall
be constituted in such a manner as to satisfy the Applicable Laws.
(iv) General. Once a Committee has been appointed
pursuant to subsection (ii) or (iii) of this Section 4(a), such Committee shall
continue to serve in its designated capacity until otherwise directed by the
Board. From time to time the Board may increase the size of any Committee and
appoint additional members thereof, remove members (with or without cause) and
appoint new members in substitution therefor, fill vacancies (however caused)
and remove all members of a Committee and thereafter directly administer the
Plan, all to the extent permitted by the Applicable Laws and, in the case of a
Committee appointed under subsection (ii), to the extent permitted by Rule 16b-3
as it applies to a plan intended to qualify thereunder as a discretionary plan.
(b) Powers of the Administrator. Subject to the
provisions of the Plan and in the case of a Committee, the specific duties
delegated by the Board to such Committee, the Administrator shall have the
authority, in its discretion:
(i) to determine the Fair Market Value of the
Common Stock, in accordance with Section 2(l) of the Plan;
(ii) to select the officers, Consultants and
Employees to whom Options may from time to time be granted hereunder;
(iii) to determine whether and to what extent
Options are granted hereunder;
(iv) to determine the number of shares of Common
Stock to be covered by each such award granted hereunder;
(v) to approve forms of agreement for use under
the Plan;
(vi) to determine the terms and conditions, not
inconsistent with the terms of the Plan, of any award granted hereunder
(including, but not limited to, the share price and any restriction or
limitation, or any vesting acceleration or waiver of forfeiture restrictions
regarding any Option and/or the shares of Common Stock relating thereto, based
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in each case on such factors as the Administrator shall determine, in its sole
discretion);
(vii) to determine whether, to what extent and
under what circumstances Common Stock and other amounts payable with respect to
an award under this Plan shall be deferred either automatically or at the
election of the participant (including providing for and determining the amount,
if any, of any deemed earnings on any deferred amount during any deferral
period); and
(viii) to reduce the exercise price of any Option
to the then current Fair Market Value if the Fair Market Value of the Common
Stock covered by such Option shall have declined since the date the Option was
granted.
(c) Effect of Administrator's Decision. All decisions,
determinations and interpretations of the Administrator shall be final and
binding on all Optionees and any other holders of any Options.
5. Eligibility.
(a) Options may be granted only to Employees and
Consultants. Incentive Stock Options may be granted only to Employees. An
Employee or Consultant who has been granted an Option may, if he or she is
otherwise eligible, be granted an additional Option or Options.
(b) Each Option shall be designated in the written option
agreement as either an Incentive Stock Option or a Nonstatutory Stock Option.
However, notwithstanding such designations, to the extent that the aggregate
Fair Market Value of Stock Options are exercisable for the first time by an
Optionee during any calendar year (under all plans of the Company or any Parent
or Subsidiary) exceeds $100,000, such excess Options shall be treated as
Nonstatutory Stock Options.
(c) For purposes of Section 5(b), Incentive Stock Options
shall be taken into account in the order in which they were granted, and the
Fair Market Value of the Shares shall be determined as of the time the Option
with respect to such Shares is granted.
(d) The Plan shall not confer upon any Optionee any right
with respect to continuation of employment or consulting relationship 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.
6. Term of Plan. The Plan shall become effective upon the earlier
to occur of its adoption by the Board of Directors or its approval by the
stockholders of the Company as described in Section 18 below. It shall continue
in effect for a term of ten (10) years unless sooner terminated under Section 13
below.
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7. Term of Option. The term of each Incentive Stock Option shall
be ten (10) years from the date of grant thereof or such shorter term as may be
provided in the Stock Option Agreement. The term of each Option that is not an
Incentive Stock Option shall be ten (10) years and one (1) day from the date of
grant thereof or such shorter term as may be provided in the Stock Option
Agreement. However, in the case of an Option granted to an Optionee who, at the
time the Option is granted, owns stock representing more than ten percent (10%)
of the voting power of all classes of stock of the Company or any Parent or
Subsidiary, (a) if the Option is an Incentive Stock Option, the term of the
Option shall be five (5) years from the date of grant thereof or such shorter
time as may be provided in the Stock Option Agreement, or (b) if the Option is
not an Incentive Stock Option, the term of the Option shall be five (5) years
and one (1) day from the date of grant thereof or such shorter term as may be
provided in the Stock Option Agreement.
8. Exercise Price and Consideration.
(a) The per Share exercise price for the Shares to be
issued pursuant to exercise of an Option shall be such price as is determined by
the Administrator, but shall be subject to the following:
(i) In the case of an Incentive Stock Option
(A) granted to an Employee who, at the
time of the grant of such Incentive Stock Option, owns stock representing more
than ten percent (10%) of the voting power of all classes of stock of the
Company or any Parent or Subsidiary, the per Share exercise price shall be no
less than one hundred ten percent (110%) of the Fair Market Value per Share on
the date of grant.
(B) granted to any other Employee, the
per Share exercise price shall be no less than one hundred percent (100%) of the
Fair Market Value per Share on the date of grant.
(ii) In the case of any Option, the per Share
exercise price shall be no less than eighty-five percent (85%) of the Fair
Market Value per Share on the date of grant.
(b) The Administrator shall determine the acceptable form
of consideration for exercising an Option, including the method of payment. In
the case of an Incentive Stock Option, the Administrator shall determine the
acceptable form of consideration at the time of grant. Such consideration may
consist entirely of:
(i) cash;
(ii) check;
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(iii) promissory note;
(iv) other Shares which (A) in the case of Shares
acquired upon exercise of an option, have been owned by the Optionee for more
than six months on the date of surrender, and (B) have a Fair Market Value on
the date of surrender equal to the aggregate exercise price of the Shares as to
which said Option shall be exercised;
(v) delivery of a properly executed exercise
notice together with such other documentation as the Administrator and the
broker, if applicable, shall require to effect an exercise of the Option and
delivery to the Company of the sale or loan proceeds required to pay the
exercise price;
(vi) any combination of the foregoing methods of
payment; or
(vii) such other consideration and method of
payment for the issuance of Shares to the extent permitted by Applicable Law.
9. Exercise of Option
(a) Procedure for Exercise; Rights as a Stockholder. Any
Option granted hereunder shall be exercisable at such times and under such
conditions as determined by the Administrator, including performance criteria
with respect to the Company and/or the Optionee, and shall be permissible under
the terms of the Plan; provided, however, than an Incentive Stock Option granted
prior to January 1, 1987 shall not be exercisable while there is outstanding any
incentive stock option which was granted, before the granting of such Incentive
Stock Option, to the same Optionee to purchase stock of the Company, any Parent
or Subsidiary, or any predecessor corporation of such corporations. For purposes
of this provision, an incentive stock option shall be treated as outstanding
until such option is exercised in full or expires by reason of lapse of time.
An Option may not be exercised for a fraction of a share.
An Option shall be deemed to be exercised when written notice of such
exercise has been given to the Company in accordance with the terms of the
Option by the person entitled to exercise the Option and full payment for the
Shares with respect to which the Option is exercised has been received by the
Company. Full payment may, as authorized by the Administrator, consist of any
consideration and method of payment allowable under Section 8(b) above. Until
the issuance (as evidenced by the appropriate entry on the books of the Company
or of a duly authorized transfer agent of the Company) of the stock certificates
evidencing such shares, no right to vote or receive dividends or any other
rights as a stockholder shall exist with respect to the Optioned Stock,
notwithstanding the exercise of the Option. No adjustment shall be made for a
dividend or other right for which the record date is prior to the date the stock
certificate is issued, except as provided in Section 11 below.
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Exercise of an Option in any manner shall result in a decrease in the
number of Shares which thereafter may be available, both for purposes of the
Plan and for sale under the Option, by the number of Shares as to which the
Option is exercised.
(b) Termination of Status as an Employee or Consultant.
If an Employee or Consultant ceases to serve as an Employee or Consultant, then
he or she may, but only within thirty (30) days (or such other period of time
not exceeding three (3) months as is determined by the Administrator, with such
determination in the case of an Incentive Stock Option being made at the time of
the grant of the Option) after the date he or she ceases to be an Employee or
Consultant of the Company (but in no event later than the date of expiration of
the term of such Option as set forth in the Option Agreement, exercise his or
her Option to the extent that he or she was entitled to exercise it at the date
of such termination. To the extent that he or she was not entitled to exercise
the Option at the date of such termination, or if he or she does not exercise
such Option (which he or she was entitled to exercise) within the time specified
herein, the Option shall terminate.
(c) Disability of Optionee. Notwithstanding the
provisions of Section 9(b) above, if an Employee or Consultant is unable to
continue his or her employment or consulting relationship with the Company as a
result of his or her total and permanent disability (as defined in Section
22(e)(3) of the Code), then he or she may, but only within six (6) months (or
such other period of time not exceeding twelve (12) months as is determined by
the Administrator, with such determination in the case of an Incentive Stock
Option being made at the time of the grant of the Option) from the date of
termination (but in no event later than the date of expiration of the term of
such Option as set forth in the Option Agreement), exercise his or her Option to
the extent he or she was entitled to exercise it at the date of termination of
employment or consulting. To the extent that he or she was not entitled to
exercise the Option at the date of termination, or if he or she does not
exercise such Option (which he or she was entitled to exercise) within the time
specified herein, the Option shall terminate.
(d) Death of Optionee. In the event of the death of an
Optionee:
(i) during the term of the Option who is at the
time of his or her death an Employee or Consultant of the Company and who shall
have 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 such Option as set forth in the Option Agreement), by
the 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 one (1) month (or such other period
of time not exceeding three (3) months as is determined by the Administrator,
with such determination in
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the case of an Incentive Stock Option being made at the time of grant of the
Option) after the termination of 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
such Option as set forth in the Option Agreement), by the 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 had accrued at
the date of termination.
(e) Rule 16b-3. Options granted to persons subject to
Section 16(b) of the Exchange Act must comply with Rule 16b-3 and shall contain
such additional conditions or restrictions as may be required thereunder to
qualify for the maximum exemption from Section 16 of the Exchange Act with
respect to Plan transactions.
10. Non-Transferability of Options. The Option may not be sold,
pledged, assigned, hypothecated, transferred or disposed of in any manner other
than by will or by the laws of descent or distribution. The designation of a
beneficiary by an Optionee does not constitute a transfer. An Option may be
exercised, during the lifetime of the Optionee, only by the Optionee.
11. Adjustments Upon Changes in Capitalization or Merger. Subject
to any required action by the stockholders of the Company, the number of shares
of Common Stock covered by each outstanding Option, and the number of shares of
Common Stock which have been authorized for issuance under the Plan but as to
which no Options have yet been granted or which have been returned to the Plan
upon cancellation or expiration of an Option, as well as the price per share of
Common Stock covered by each such outstanding Option, shall be proportionately
adjusted for any increase or decrease in the number of issued shares of Common
Stock resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other increase or
decrease in the number of issued shares of Common Stock effected without receipt
of consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Such adjustment shall be made by the
Administrator, whose determination in that respect shall be final, binding, and
conclusive. Except as expressly provided herein, no issuance by the Company of
shares of stock of any class, or securities convertible into shares of stock of
any class, shall affect, and no adjustment by reason thereof shall be made with
respect to, the number or price of shares of Common Stock subject to an Option.
In the event of the proposed dissolution or liquidation of the Company,
the Administrator shall notify the Optionee at least fifteen (15) days prior to
such proposed action. To the extent it has not been previously exercised, the
Option shall terminate immediately prior to the consummation of such proposed
action. In the event of a merger of the Company with or into another
corporation, the Option shall be assumed or an equivalent option shall be
substituted by such successor corporation or a parent or subsidiary of such
successor corporation, unless the Administrator determines, in the exercise of
its sole
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discretion and in lieu of such assumption or substitution, that the Optionee
shall have the right to exercise the Option as to all of the Optioned Stock,
including Shares as to which the Option would not otherwise be exercisable. If
the Administrator makes an Option fully exercisable in lieu of assumption or
substitution in the event of a merger, then the Administrator shall notify the
Optionee that the Option shall be fully exercisable for a period of thirty (30)
days from the date of such notice, and the Option shall terminate upon the
expiration of such period.
12. Time of Granting Options. The date of grant of an Option
shall, for all purposes, be the date on which the Administrator makes the
determination granting such Option or such other date as is determined by the
Administrator. Notice of the determination shall be given to each Employee or
Consultant to whom an Option is so granted within a reasonable time after the
date of such grant.
13. Amendment and Termination of the Plan.
(a) Amendment and Termination. The Board may amend or
terminate the Plan from time to time in such respects as the Board may deem
advisable; provided, however, that the following revisions or amendments shall
require approval of the stockholders of the Company in the manner described in
Section 18 of the Plan:
(i) any increase in the number of Shares subject
to the Plan, other than in connection with an adjustment under Section 11 above;
(ii) any change in the designation of the class
of persons eligible to be granted Options; or
(iii) if the Company has a class of equity
security registered under Section 12 of the Exchange Act at the time of such
revision or amendment, any material increase in the benefits accruing to
participants under the Plan.
(b) Stockholder Approval. If any amendment requiring
stockholder approval under Section 13(a) above is made subsequent to the first
registration of any class of equity security by the Company under Section 12 of
the Exchange Act, then such stockholder approval shall be solicited as described
in Section 18 below.
(c) Effect of Amendment or Termination. Any such
amendment or termination of the Plan shall not affect Options already granted
and such Options shall remain in full force and effect as if this Plan had not
been amended or terminated, unless mutually agreed otherwise between the
Optionee and the Board, which agreement must be in writing and signed by the
Optionee and the Company.
14. Conditions Upon Issuance of Shares. Shares shall not be issued
pursuant to the exercise of an Option unless the exercise of such Option and the
issuance and
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delivery of such Shares pursuant thereto complies with all relevant provisions
of law, including, without limitation, the Securities Act of 1933, as amended,
the Exchange Act, the rules and regulations promulgated thereunder, and the
requirements of any stock exchange upon which the Shares may then be listed. The
exercise of such Option and the issuance and delivery of such Shares pursuant
thereto shall be further subject to the approval of counsel for the Company with
respect to such compliance.
As a condition to the exercise of an Option, the Company may require
the person exercising such Option to represent and warrant at the time of any
such exercise that the Shares are being purchased only for investment and
without any present intention to sell or distribute such Shares if, in the
opinion of counsel for the Company, such a representation is required by any of
the aforementioned relevant provisions of law.
15. Reservation of Shares. The Company, during the term of this
Plan, will at all times reserve and keep available such number of Shares as
shall be sufficient to satisfy the requirements of the Plan.
Inability of the Company to obtain authority from any regulatory body
having jurisdiction, which authority is deemed by the Company's counsel to be
necessary to the lawful issuance and sale of any Shares hereunder, shall relieve
the Company of any liability in respect of the failure to issue or sell such
Shares as to which such requisite authority shall not have been obtained.
16. Option Agreement. Options shall be evidenced by written option
agreements in such form as the Administrator shall approve.
17. Annual Report to Optionees. The Board of Directors shall cause
an annual report to be sent to the Optionees not later than one hundred twenty
(120) days after the close of the fiscal year adopted by the corporation. Such
report shall be sent at least fifteen (15) days (or, if sent by third-class
mail, thirty-five (35) days) before the annual meeting of stockholders to be
held during the next fiscal year. The annual report shall contain (i) a balance
sheet as of the end of the fiscal year, (ii) an income statement, (iii) a
statement of changes in financial position for the fiscal year, and (iv) any
report of independent accountants or, if there is not such report, the
certificate of an authorized officer of the corporation that the statements were
prepared without audit from the books and records of the corporation.
18. Stockholder Approval.
(a) Continuance of the Plan shall be subject to approval
by the stockholders of the Company within twelve (12) months before or after the
date of the Plan is adopted.
(b) If and in the event that the Company registers any
class of
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equity securities pursuant to Section 12 of the Exchange Act, any required
approval of the stockholders of the Company obtained after such registration
shall be solicited substantially in accordance with Section 14(a) of the
Exchange Act and the rules and regulations promulgated thereunder.
(c) If any required approval by the stockholders of the
Plan itself or of any amendment thereto is solicited at any time otherwise than
in the manner described in Section 18(b) hereof, then the Company shall, at or
prior to the first annual meeting of stockholders held subsequent to the later
of (1) the first registration of any class of equity securities of the Company
under Section 12 of the Exchange Act or (2) the granting of an Option hereunder
to an officer or director after such registration, do the following:
(i) furnish in writing to the holders entitled
to vote for the Plan substantially the same information which would be required
(if proxies to be voted with respect to approval or disapproval of the Plan or
amendment were then being solicited) by the rules and regulations in effect
under Section 14(a) of the Exchange Act at the time such information is
furnished; and
(ii) file with, or mail for filing to, the
Securities and Exchange Commission four copies of the written information
referred to in subsection (i) hereof not later than the date on which such
information is first sent or given to stockholders.
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