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Exhibit 10.3
CISCO SYSTEMS, INC.
1997 SUPPLEMENTAL STOCK INCENTIVE PLAN
ARTICLE ONE
GENERAL
A. This 1997 Supplemental Stock Incentive Plan is intended to
promote the interests of Cisco Systems, Inc., a California corporation, by
authorizing an additional reserve of shares of the Corporation's common stock
for issuance through long-term option grants or direct stock issuances to
individuals in the employ of the Corporation (or any Parent or Subsidiary) who
are neither officers of the Corporation nor members of the Board and who are not
otherwise Section 16 Insiders.
B. The Plan shall become effective immediately upon adoption by
the Board on July 31, 1997.
C. The Plan shall supplement the authorized share reserve under
the Corporation's 1996 Stock Incentive Plan, and share issuances under this Plan
shall not reduce or otherwise affect the number of shares of the Corporation's
common stock available for issuance under the 1996 Stock Incentive Plan. In
addition, share issuances under the 1996 Stock Incentive Plan shall not reduce
or otherwise affect the number of shares of the Corporation's common stock
available for issuance under this Plan.
Capitalized terms shall have the meanings assigned to such terms
in the attached Appendix.
I. STRUCTURE OF THE PLAN
A. The Plan shall be divided into two (2) separate equity
programs:
(i) the 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 Stock Issuance Program under which eligible persons
may, at the discretion of the Plan Administrator, be issued shares of
Common Stock directly, either through the immediate purchase of such
shares or as a bonus for services rendered the Corporation (or any
Parent or Subsidiary) or the attainment of designated performance goals.
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II. ADMINISTRATION OF THE PLAN
A. The Plan Administrator shall have full power and discretion
(subject to the express provisions of the Plan) to establish such rules and
regulations as it may deem appropriate for the proper administration of the Plan
and to make such determinations under, and issue such interpretations of, the
provisions of the Plan and any outstanding option grants or unvested stock
issuances thereunder as it may deem necessary or advisable. Decisions of the
Plan Administrator shall be final and binding on all parties who have an
interest in the Plan or any outstanding stock option or stock issuance
thereunder.
B. The individuals serving as Plan Administrator shall serve for
such period as the Board may determine and shall be subject to removal by the
Board at any time.
C. Service as Plan Administrator shall constitute service as a
Board member, and each Board member serving as Plan Administrator shall
accordingly be entitled to full indemnification and reimbursement as a Board
member for such service. No individual serving as Plan Administrator shall be
liable for any act or omission made in good faith with respect to the Plan or
any option grant or stock issuance made under the Plan.
III. ELIGIBILITY
A. The persons eligible to participate in the Plan shall be
limited to those Employees who are neither officers of the Corporation nor
members of the Board and who are not otherwise Section 16 Insiders.
B. The Plan Administrator shall have full authority to determine
(i) with respect to the Option Grant Program, which eligible Employees are to
receive option grants under the Plan, the time or times when the grants are to
be made, the number of shares subject to each such grant, the time or times when
each granted option is to become exercisable and the maximum term for which the
option may remain outstanding and (ii) with respect to stock issuances under the
Stock Issuance Program, which eligible persons are to receive stock issuances,
the time or times when such issuances are to be made, the number of shares to be
issued to each Participant, the vesting schedule (if any) applicable to the
issued shares and the consideration for such shares. All options granted under
the Plan shall be Non-Statutory Options.
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IV. STOCK SUBJECT TO THE PLAN
A. Shares of Common Stock shall be available for issuance under
the Plan and shall be drawn from either the Corporation's authorized but
unissued shares of Common Stock or from reacquired shares of Common Stock,
including shares repurchased by the Corporation on the open market. The maximum
number of shares of Common Stock reserved for issuance over the term of the Plan
shall be limited to 1,000,000 shares, subject to adjustment from time to time in
accordance with the provisions of Section IV.C.
B. Should one or more outstanding options under this Plan expire
or terminate for any reason prior to exercise in full, then the shares subject
to the portion of each option not so exercised shall be available for subsequent
issuance under the Plan. Unvested shares issued under the Plan and subsequently
cancelled or repurchased by the Corporation, at the original issue 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 or direct stock issuances under the Plan. Should
the exercise price of an outstanding option under the Plan be paid with shares
of Common Stock, 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, and not by the net number of shares of Common Stock
actually issued to the holder of such option.
C. Should any change be made to the Common Stock issuable under
the Plan 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, then appropriate adjustments shall be made to (i) the maximum
number and/or class of securities issuable under the Plan, and (ii) the number
and/or class of securities and price per share in effect under each option
outstanding under the Plan. Such adjustments to the outstanding securities are
to be effected in a manner which shall preclude the enlargement or dilution of
rights and benefits under such options. The adjustments determined by the Plan
Administrator shall be final, binding and conclusive.
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ARTICLE TWO
OPTION GRANT PROGRAM
I. OPTION TERMS
Options granted under the Plan shall be authorized by action of
the Plan Administrator and shall be evidenced by one or more instruments in the
form approved by the Plan Administrator; provided, however, that each such
instrument shall comply with the terms and conditions specified below. All such
granted options shall be Non-Statutory 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 grant date.
2. Full payment of 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) 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 in
connection with such purchase and to (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.
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B. Term and Exercise 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 such option. No option shall have a maximum term in excess
of nine (9) years measured from the option grant date. During the lifetime of
the Optionee, the option shall be exercisable only by the Optionee and shall not
be assignable or transferable except for a transfer of the option effected by
will or by the laws of inheritance following the Optionee's death.
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 subsequently exercised 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) 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.
(iv) During the applicable post-Service exercise period,
the option may not be exercised in the aggregate for more than the
number of shares for which the option is exercisable on the date of
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 otherwise
exercisable shares for which the option has not been exercised. However,
the option shall, immediately upon Optionee's cessation of Service for
any reason, terminate and cease to be outstanding with respect to any
and all option shares for which the option is not otherwise at the time
exercisable.
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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 Optionee's cessation of Service or death
from the limited 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 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 for which the option would have
become exercisable had the Optionee continued in Service.
D. Shareholder Rights. No Optionee shall have any shareholder
rights with respect to any option shares until such person shall have exercised
the option and paid the exercise price for the purchased shares.
II. CORPORATE TRANSACTION/CHANGE IN CONTROL
A. Each option outstanding under the Plan at the time of a
Corporate Transaction shall automatically accelerate so that each such option
shall, immediately prior to the specified effective date for such Corporate
Transaction, become fully exercisable with respect to the total number of shares
of Common Stock at the time subject to that option and may be exercised for all
or any portion of those shares as fully-vested shares. However, an outstanding
option under the Plan 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
(ii) such option is to be replaced with a cash incentive program of the
successor corporation which preserves the spread existing at the time of the
Corporate Transaction on the shares for which the option is not otherwise at
that time exercisable and provides for subsequent payout in accordance with the
same exercise/vesting schedule applicable to those shares.
B. The Plan Administrator shall have the discretionary authority
to structure one or more options under the Plan so that those options shall
immediately accelerate upon an Involuntary Termination of the Optionee's Service
within a designated period (not to exceed eighteen (18) months) following the
effective date of a Corporate Transaction in which those options are assumed by
the successor corporation and accordingly do not accelerate at the time of such
Corporate Transaction.
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C. Immediately following the consummation of the Corporate
Transaction, all outstanding options under the Plan shall terminate and cease to
remain outstanding, except to the extent assumed by the successor corporation or
its parent company.
D. Each outstanding option which is assumed in connection with
the Corporate Transaction shall be appropriately adjusted, immediately after
such Corporate Transaction, to apply and pertain to the number and class of
securities which would have been issued to the Optionee, in consummation of the
Corporate Transaction, had such person exercised the option immediately prior to
the Corporate Transaction. Appropriate adjustments shall also be made to the
exercise price payable per share, provided the aggregate exercise price payable
for such securities shall remain the same. In addition, the class and number of
securities available for issuance under the Plan following the consummation of
the Corporate Transaction shall be appropriately adjusted.
E. The Plan Administrator shall also have full power and
authority to grant options under the Plan which will automatically accelerate
upon an Involuntary Termination of Optionee's Service within a designated period
(not to exceed eighteen (18) months) following the effective date of any Change
in Control.
F. The grant of options under the Plan 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.
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ARTICLE THREE
STOCK ISSUANCE PROGRAM
I. STOCK ISSUANCE TERMS
Shares of Common Stock may be issued under the Stock Issuance
Program through direct and immediate issuances without any intervening option
grants. Each such stock issuance shall be evidenced by a Stock Issuance
Agreement which complies with the terms specified below. Shares of Common Stock
may also be issued under the Stock Issuance Program pursuant to share right
awards which entitle the recipients to receive those shares upon the attainment
of designated performance goals.
A. PURCHASE PRICE.
1. The purchase price per share of Common Stock subject to
direct issuance 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 issuance date.
2. Shares of Common Stock may be issued under the Stock
Issuance Program for any of the following items of consideration which the Plan
Administrator may deem appropriate in each individual instance:
(i) cash or check made payable to the Corporation, or
(ii) past services rendered to the Corporation (or any
Parent or Subsidiary).
B. VESTING/ISSUANCE PROVISIONS.
1. Shares of Common Stock issued under the Stock Issuance
Program may, in the discretion of the Plan Administrator, be fully and
immediately vested upon issuance or may vest in one or more installments over
the Participant's period of Service or upon attainment of specified performance
objectives. Alternatively, the Plan Administrator may issue share right awards
under the Stock Issuance Program which shall entitle the recipient to receive a
specified number of shares of Common Stock upon the attainment of one or more
performance goals established by the Plan Administrator. Upon the attainment of
such performance goals, fully-vested shares of Common Stock shall be issued in
satisfaction of those share right awards.
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2. Any new, substituted or additional securities or other
property (including money paid other than as a regular cash dividend) which the
Participant may have the right to receive with respect to his or her unvested
shares of Common Stock by reason of any stock dividend, stock split,
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 shall be issued subject to (i) the same vesting
requirements applicable to the Participant's unvested shares of Common Stock and
(ii) such escrow arrangements as the Plan Administrator shall deem appropriate.
3. The Participant shall have full stockholder rights with
respect to any shares of Common Stock issued to the Participant under the Stock
Issuance Program, whether or not the Participant's interest in those shares is
vested. Accordingly, the Participant shall have the right to vote such shares
and to receive any regular cash dividends paid on such shares.
4. Should the Participant cease to remain in Service while
holding one or more unvested shares of Common Stock issued under the Stock
Issuance Program or should the performance objectives not be attained with
respect to one or more such unvested shares of Common Stock, then those shares
shall be immediately surrendered to the Corporation for cancellation, and the
Participant shall have no further stockholder rights with respect to those
shares. To the extent the surrendered shares were previously issued to the
Participant for cash consideration, the Corporation shall repay that
consideration to the Participant at the time the shares are surrendered.
5. The Plan Administrator may in its discretion waive the
surrender and cancellation of one or more unvested shares of Common Stock (or
other assets attributable thereto) which would otherwise occur upon the
cessation of the Participant's Service or the nonattainment of the performance
objectives applicable to those shares. Such waiver shall result in the immediate
vesting of the Participant's interest in the shares of Common Stock as to which
the waiver applies. Such waiver may be effected at any time, whether before or
after the Participant's cessation of Service or the attainment or non-attainment
of the applicable performance objectives.
6. Outstanding share right awards under the Stock Issuance
Program shall automatically terminate, and no shares of Common Stock shall
actually be issued in satisfaction of those awards, if the performance goals
established for such awards are not attained. The Plan Administrator, however,
shall have the discretionary authority to issue shares of Common Stock under one
or more outstanding share right awards as to which the designated performance
goals have not been attained.
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II. CORPORATE TRANSACTION/CHANGE IN CONTROL
A. All of the Corporation's outstanding repurchase rights under
the Stock Issuance Program shall terminate automatically, and all 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 those repurchase
rights are to be assigned to the successor corporation (or parent thereof) in
connection with such Corporate Transaction.
B. The Plan Administrator shall have the discretionary authority,
exercisable either at the time the unvested shares are issued or any time while
the Corporation's repurchase rights remain outstanding under the Stock Issuance
Program, to provide that those rights shall automatically terminate in whole or
in part, and the shares of Common Stock subject to those terminated rights shall
immediately vest, in the event the Participant's Service should subsequently
terminate by reason of an Involuntary Termination within a designated period
(not to exceed eighteen (18) months) following the effective date of any
Corporate Transaction in which those repurchase rights are assigned to the
successor corporation (or parent thereof).
C. The Plan Administrator shall have the discretionary authority,
exercisable either at the time the unvested shares are issued or any time while
the Corporation's repurchase rights remain outstanding under the Stock Issuance
Program, to provide that those rights shall automatically terminate in whole or
in part, and the shares of Common Stock subject to those terminated rights shall
immediately vest, in the event the Participant's Service should subsequently
terminate by reason of an Involuntary Termination within a designated period
(not to exceed eighteen (18) months) following the effective date of any Change
in Control.
III. SHARE ESCROW/LEGENDS
Unvested shares may, in the Plan Administrator's discretion, be
held in escrow by the Corporation until the Participant's interest in such
shares vests or may be issued directly to the Participant with restrictive
legends on the certificates evidencing those unvested shares.
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ARTICLE FOUR
MISCELLANEOUS
I. EFFECTIVE DATE AND TERM OF PLAN
A. This Plan became effective upon approval by the Board at the
July 31, 1997 Board meeting and shall not be subject to shareholder approval.
B. The Plan shall terminate upon the earlier of (i) December 31,
2007 or (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 or
direct stock issuances under the Plan or (iii) the termination of all
outstanding options in connection with a Corporate Transaction. If the date of
termination is determined under clause (i) above, then all option grants or
unvested stock issuances outstanding on such date shall thereafter continue to
have force and effect in accordance with the provisions of the instruments
evidencing those grants or issuances.
II. AMENDMENT OF THE PLAN
The Board has complete and exclusive power and authority to amend
or modify the Plan in any or all respects whatsoever. However, no such amendment
or modification shall adversely affect rights and obligations with respect to
stock options or unvested stock issuances at the time outstanding under the
Plan, unless the affected Optionees or Participants consent to such amendment.
III. USE OF PROCEEDS
Any cash proceeds received by the Corporation from the sale of
shares pursuant to option grants or direct stock issuances under the Plan shall
be used for general corporate purposes.
IV. REGULATORY APPROVALS
A. The implementation of the Plan, the granting of any option
under the Plan, and the issuance of Common Stock either upon the exercise of the
stock options granted hereunder or pursuant to the Stock Issuance Program shall
be subject to the Corporation's procurement of all approvals and permits
required by regulatory authorities having jurisdiction over the Plan, the stock
options granted under it and the Common Stock issued pursuant to it.
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B. No shares of Common Stock or other assets shall be issued or
delivered under this Plan unless and until there shall have been compliance with
all applicable requirements of Federal and state securities laws, including the
filing and effectiveness of 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
the Common Stock is then listed for trading.
V. NO EMPLOYMENT/SERVICE RIGHTS
Neither the action of the Corporation in establishing the Plan,
nor any action taken by the Plan Administrator hereunder, nor any provision of
the Plan shall be construed so as to grant any individual the right to remain in
Service for any period of specific duration, and the Corporation (or any Parent
or Subsidiary employing such individual) may terminate such individual's Service
at any time and for any reason, with or without cause.
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APPENDIX
The following definitions shall be in effect under the Plan:
A. BOARD shall mean the Corporation's Board of Directors.
B. 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.
C. CODE shall mean the Internal Revenue Code of 1986, as amended.
D. COMMON STOCK shall mean the Corporation's common stock.
E. CORPORATE TRANSACTION shall mean either of the following
shareholder-approved transactions to which the Corporation is a party:
- 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
- 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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F. CORPORATION shall mean Cisco Systems, Inc., a California
corporation, and its successors.
G. 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.
H. EXERCISE DATE shall mean the date on which the Corporation shall
have received written notice of the option exercise.
I. FAIR MARKET VALUE per share of Common Stock on any relevant date
shall be determined in accordance with the following provisions:
- 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 on the Nasdaq National Market or any successor system. If
there is no closing selling price for the Common Stock on the date in
question, then the Fair Market Value shall be the closing selling price
on the last preceding date for which such quotation exists.
- 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 that 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. 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.
J. INVOLUNTARY TERMINATION shall mean the termination of the Service
of any individual which occurs by reason of:
- such individual's involuntary dismissal or discharge by the
Corporation for reasons other than Misconduct, or
- such individual's voluntary resignation following (A) a change
in his or her position with the Corporation which materially reduces his
or her duties or responsibilities or the level of management to which he
or she reports, (B) a reduction in his or her level of compensation
(including base salary, fringe benefits and target bonuses under
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
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if such change, reduction or relocation is effected by the Corporation
without the individual's consent.
K. MISCONDUCT shall mean the commission of any act of fraud,
embezzlement or dishonesty by the Optionee or Participant, 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, Participant or other person in the
Service of the Corporation (or any Parent or Subsidiary).
L. 1934 ACT shall mean the Securities Exchange Act of 1934, as
amended.
M. NON-STATUTORY OPTION shall mean an option not intended to satisfy
the requirements of Code Section 422.
N. OPTION GRANT PROGRAM shall mean the option grant program in
effect under the Plan.
O. OPTIONEE shall mean any person to whom an option is granted under
the Plan.
P. 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.
Q. PARTICIPANT shall mean any person who is issued shares of Common
Stock under the Stock Issuance Program.
R. PERMANENT DISABILITY OR PERMANENTLY DISABLED shall mean the
inability of an individual 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.
S. PLAN shall mean the Corporation's 1997 Supplemental Stock
Incentive Plan, as set forth in this document.
T. PLAN ADMINISTRATOR shall mean the committee comprised of one or
more Board members appointed by the Board to administer the Plan.
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U. SECTION 16 INSIDER shall mean an officer or director of the
Corporation subject to the short-swing profit restrictions of Section 16 of the
1934 Act.
V. SERVICE shall mean the provision of services on a periodic basis
to the Corporation (or any Parent or Subsidiary) in the capacity of an Employee
or an independent consultant or advisor, except to the extent otherwise
specifically provided in the applicable stock option agreement.
W. STOCK EXCHANGE shall mean either the American Stock Exchange or
the New York Stock Exchange.
X. STOCK ISSUANCE AGREEMENT shall mean the agreement entered into by
the Corporation and the Participant at the time of issuance of shares of Common
Stock under the Stock Issuance Program.
Y. STOCK ISSUANCE PROGRAM shall mean the stock issuance program in
effect under the Plan.
Z. 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.
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CISCO SYSTEMS, INC.
1997 SUPPLEMENTAL PLAN STOCK OPTION AGREEMENT
RECITALS
A. The Board has adopted the Plan for the purpose of providing
additional incentive to selected Employees, consultants and other independent
advisors to continue in the Service of the Corporation (or any Parent or
Subsidiary).
B. Optionee is to render valuable services to the Corporation (or a
Parent or Subsidiary), and this Agreement is executed pursuant to, and is
intended to carry out the purposes of, the Plan in connection with the
Corporation's grant of an option to Optionee.
C. All capitalized terms in this Agreement shall have the meaning
assigned to them in the attached Appendix.
NOW, THEREFORE, it is hereby agreed as follows:
1. GRANT OF OPTION. The Corporation hereby grants to Optionee, as
of the Grant Date, an option to purchase up to the number of Option Shares
specified in the Grant Notice. The option is a Non-Statutory Option, and the
Option Shares shall be purchasable under such option from time to time during
the option term specified in Paragraph 2 at the Exercise Price.
2. OPTION TERM. This option shall have a term of nine (9) years
measured from the Grant Date and shall accordingly expire at the close of
business on the Expiration Date, unless sooner terminated in accordance with
Paragraph 5 or 6.
3. LIMITED TRANSFERABILITY. During the lifetime of the Optionee,
the option 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.
4. DATES OF EXERCISE. This option shall become exercisable for
the Option Shares in one or more installments as specified in the Grant Notice.
As the option becomes exercisable for such installments, those installments
shall accumulate and the option shall remain exercisable for the accumulated
installments until the Expiration Date or sooner termination of the option term
under Paragraph 5 or 6.
5. CESSATION OF SERVICE. The option term specified in Paragraph 2
shall terminate (and this option shall cease to be outstanding) prior to the
Expiration Date should any of the following provisions become applicable:
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(a) Should Optionee cease to remain in Service for any
reason (other than death, Permanent Disability or Misconduct) while this
option is outstanding, then Optionee shall have a period of three (3)
months (commencing with the date of such cessation of Service) during
which to exercise this option, but in no event shall this option be
exercisable at any time after the Expiration Date.
(b) Should Optionee die while this option is outstanding,
then the personal representative of Optionee's estate or the person or
persons to whom the option is transferred pursuant to Optionee's will or
in accordance with the laws of inheritance shall have the right to
exercise this option. Such right shall lapse, and this option shall
cease to be outstanding, upon the earlier of (i) the expiration of the
twelve (12)-month period measured from the date of Optionee's death or
(ii) the Expiration Date.
(c) Should Optionee cease Service by reason of Permanent
Disability while this option is outstanding, then Optionee shall have a
period of twelve (12) months (commencing with the date of such cessation
of Service) during which to exercise this option. In no event shall this
option be exercisable at any time after the Expiration Date.
(d) Should Optionee's Service be terminated for Misconduct,
then this option shall terminate immediately and cease to remain
outstanding.
6. SPECIAL ACCELERATION OF OPTION.
(a) This option, to the extent outstanding at the time of a
Corporate Transaction but not otherwise fully exercisable, shall automatically
accelerate so that this option shall, immediately prior to the effective date of
the Corporate Transaction, become exercisable with respect to the total number
of shares of Common Stock at the time subject to that option and may be
exercised for all or any portion of those shares as fully-vested shares.
However, an outstanding option under the Plan shall NOT so accelerate 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 (ii) such option is
to be replaced with a cash incentive program of the successor corporation which
preserves the option spread existing at the time of the Corporate Transaction
(the excess of the Fair Market Value of the Option Shares for which the option
is not otherwise at that time exercisable over the aggregate Exercise Price
payable for those Option Shares) and provides for subsequent payout in
accordance with the same exercise/vesting schedule applicable to such option.
(b) Immediately following the Corporate Transaction, this
option shall terminate and cease to be outstanding, except to the extent assumed
by the successor corporation (or parent thereof) in connection with the
Corporate Transaction.
2.
19
(c) If this option is assumed in connection with a Corporate
Transaction, then this option shall be appropriately adjusted, immediately after
such Corporate Transaction, to apply to the number and class of securities which
would have been issuable to Optionee in consummation of the Corporate
Transaction had the option been exercised immediately prior to such Corporate
Transaction, and appropriate adjustments shall also be made to the Exercise
Price, provided the aggregate Exercise Price shall remain the same.
(d) This Agreement shall not in any 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.
7. ADJUSTMENT IN OPTION SHARES. 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 total number
and/or class of securities subject to this option and (ii) the Exercise Price in
order to reflect such change and thereby preclude any dilution or enlargement of
benefits hereunder.
8. SHAREHOLDER RIGHTS. The holder of this option shall not have
any shareholder rights with respect to the Option Shares until such person shall
have exercised the option, paid the Exercise Price and become a holder of record
of the purchased shares.
9. MANNER OF EXERCISING OPTION.
(a) In order to exercise this option with respect to all or
any part of the Option Shares for which this option is at the time exercisable,
Optionee (or any other person or persons exercising the option) must take the
following actions:
(i) Execute and deliver to the Corporation a Notice of
Exercise for the Option Shares for which the option is exercised.
(ii) Pay the aggregate Exercise Price for the purchased
shares in one or more of the following forms:
(A) cash or check made payable to the Corporation;
(B) shares of Common Stock held by Optionee (or
any other person or persons exercising the option) 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
3.
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(C) through a special sale and remittance
procedure pursuant to which Optionee (or any other person or
persons exercising the option) shall concurrently provide
irrevocable instructions (I) to 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 (II) to 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 the sale and remittance procedure is
utilized in connection with the option exercise, payment of the
Exercise Price must accompany the Notice of Exercise delivered to
the Corporation in connection with the option exercise.
(iii) Furnish to the Corporation appropriate
documentation that the person or persons exercising the option (if other
than Optionee) have the right to exercise this option.
(iv) Make appropriate arrangements with the Corporation
(or Parent or Subsidiary employing or retaining Optionee) for the
satisfaction of all Federal, state and local income and employment tax
withholding requirements applicable to the option exercise.
(b) As soon as practical after the Exercise Date, the
Corporation shall issue to or on behalf of Optionee (or any other person or
persons exercising this option) a certificate for the purchased Option Shares,
with the appropriate legends affixed thereto.
(c) In no event may this option be exercised for any
fractional shares.
10. COMPLIANCE WITH LAWS AND REGULATIONS.
(a) The exercise of this option and the issuance of the
Option Shares upon such exercise shall be subject to compliance by the
Corporation and Optionee with all applicable requirements of law relating
thereto and with all applicable regulations of any stock exchange (or the Nasdaq
National Market, if applicable) on which the Common Stock may be listed for
trading at the time of such exercise and issuance.
(b) The inability of the Corporation to obtain approval from
any regulatory body having authority deemed by the Corporation to be necessary
to the lawful issuance and sale of any Common Stock pursuant to this option
shall relieve the Corporation of any liability with respect to the non-issuance
or sale of the Common Stock as to which such
4.
21
approval shall not have been obtained. The Corporation, however, shall use its
best efforts to obtain all such approvals.
11. SUCCESSORS AND ASSIGNS. Except to the extent otherwise
provided in Paragraphs 3 and 6, the provisions of this Agreement shall inure to
the benefit of, and be binding upon, the Corporation and its successors and
assigns and Optionee, Optionee's assigns and the legal representatives, heirs
and legatees of Optionee's estate.
12. NOTICES. Any notice required to be given or delivered to the
Corporation under the terms of this Agreement shall be in writing and addressed
to the Corporation at its principal corporate offices. Any notice required to be
given or delivered to Optionee shall be in writing and addressed to Optionee at
the address indicated below Optionee's signature line on the Grant Notice. All
notices shall be deemed effective upon personal delivery or upon deposit in the
U.S. mail, postage prepaid and properly addressed to the party to be notified.
13. CONSTRUCTION. This Agreement and the option evidenced hereby
are made and granted pursuant to the Plan and are in all respects limited by and
subject to the terms of the Plan. All decisions of the Plan Administrator with
respect to any question or issue arising under the Plan or this Agreement shall
be conclusive and binding on all persons having an interest in this option.
14. GOVERNING LAW. The interpretation, performance and
enforcement of this Agreement shall be governed by the laws of the State of
California without resort to that State's conflict-of-laws rules.
15. LEAVE OF ABSENCE. The following provisions shall apply upon
the Optionee's commencement of an authorized leave of absence:
(a) The exercise schedule in effect under the Grant Notice
shall be frozen as of the first day of the authorized leave, and the
option shall not become exercisable for any additional installments of
the Option Shares during the period Optionee remains on such leave.
(b) Should Optionee resume active Employee status within
sixty (60) days after the start date of the authorized leave, Optionee
shall, for purposes of the exercise schedule set forth in the Grant
Notice, receive Service credit for the entire period of such leave. If
Optionee does not resume active Employee status within such sixty
(60)-day period, then no Service credit shall be given for the period of
the leave.
(c) In no event shall this option become exercisable for any
additional Option Shares or otherwise remain outstanding if Optionee
does not resume Employee status prior to the Expiration Date of the
option term.
5.
22
EXHIBIT I
NOTICE OF EXERCISE
I hereby notify Cisco Systems, Inc. (the "Corporation") that I elect
to purchase ________shares of the Corporation's Common Stock (the "Purchased
Shares") at the option exercise price of $________ per share (the "Exercise
Price") pursuant to that certain option (the "Option") granted to me under the
Corporation's 1997 Supplemental Stock Incentive Plan on ______________________,
199__.
Concurrently with the delivery of this Exercise Notice to the
Corporation, I shall hereby pay to the Corporation the Exercise Price for the
Purchased Shares in accordance with the provisions of my agreement with the
Corporation (or other documents) evidencing the Option and shall deliver
whatever additional documents may be required by such agreement as a condition
for exercise. Alternatively, I may utilize the special broker-dealer sale and
remittance procedure specified in my agreement to effect payment of the Exercise
Price.
_____________________________, 199
Date
--------------------------------------------
Optionee
Address:
------------------------------------
--------------------------------------------
Print name in exact manner
it is to appear on the
stock certificate:
--------------------------------------------
Address to which certificate
is to be sent, if different
from address above:
--------------------------------------------
--------------------------------------------
Social Security Number:
--------------------------------------------
Employee Number:
--------------------------------------------
23
APPENDIX
The following definitions shall be in effect under the Agreement:
A. AGREEMENT shall mean this 1997 Supplemental Stock Option
Agreement.
B. BOARD shall mean the Corporation's Board of Directors.
C. CODE shall mean the Internal Revenue Code of 1986, as amended.
D. COMMON STOCK shall mean the Corporation's common stock.
E. 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.
F. CORPORATION shall mean Cisco Systems, Inc., a California
corporation.
G. 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.
H. EXERCISE DATE shall mean the date on which the option shall have
been exercised in accordance with Paragraph 9 of the Agreement.
I. EXERCISE PRICE shall mean the exercise price per share as
specified in the Grant Notice.
J. EXPIRATION DATE shall mean the date on which the option expires
as specified in the Grant Notice.
A-1.
24
K. FAIR MARKET VALUE per share of Common Stock on any relevant date
shall determined in accordance with the following provisions:
- 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 or any successor system. If there is no closing
selling price for the Common Stock on the date in question, then the
Fair Market Value shall be the closing selling price on the last
preceding date for which such quotation exists.
- If the Common Stock is at the time listed on any national
securities exchange, then the Fair Market Value shall be the closing
selling price per share of Common Stock on the date in question on that
exchange, as such price is officially quoted in the composite tape of
transactions on such exchange. 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. GRANT DATE shall mean the date of grant of the option as
specified in the Grant Notice.
M. GRANT NOTICE shall mean the Notice of Grant of 1997 Supplemental
Plan Stock Option accompanying the Agreement, pursuant to which Optionee has
been informed of the basic terms of the option evidenced hereby.
N. MISCONDUCT shall mean the commission of any act of fraud,
embezzlement or dishonesty by Optionee, any unauthorized use or disclosure by
Optionee of confidential information or trade secrets of the Corporation (or any
Parent or Subsidiary), or any other intentional misconduct by Optionee 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
Optionee or any other individual in the Service of the Corporation (or any
Parent or Subsidiary).
O. NON-STATUTORY OPTION shall mean an option not intended to satisfy
the requirements of Code Section 422.
P. NOTICE OF EXERCISE shall mean the notice of exercise in the form
attached hereto as Exhibit I.
Q. OPTION SHARES shall mean the number of shares of Common Stock
subject to the option as specified in the Grant Notice.
A-2.
25
R. OPTIONEE shall mean the person to whom the option is granted as
specified in the Grant Notice.
S. 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.
T. PERMANENT DISABILITY OR PERMANENTLY DISABLED shall mean the
inability of Optionee to engage in any substantial gainful activity by reason of
any medically determinable physical or mental impairment which is expected to
result in death or has lasted or can be expected to last for a continuous period
of twelve (12) months or more.
U. PLAN shall mean the Corporation's 1997 Supplemental Stock
Incentive Plan.
V. PLAN ADMINISTRATOR shall mean the committee of one or more Board
members appointed by the Board to administer the Plan.
W. SERVICE shall mean the Optionee's performance of services on a
periodic basis to the Corporation (or any Parent or Subsidiary) in the capacity
of an Employee or a consultant or other independent advisor.
X. 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.
A-3.