SC TO-I

As filed with the Securities and Exchange Commission on June 23, 2003

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

SCHEDULE TO

(Rule 13e-4)

TENDER OFFER STATEMENT UNDER SECTION 14(d)(1) OR 13(e)(1)
OF THE SECURITIES EXCHANGE ACT OF 1934

STRATEX NETWORKS, INC.

(Name of Subject Company (Issuer))

STRATEX NETWORKS, INC.

(Name of Filing Persons (Offeror))

Certain Options Under the Digital Microwave Corporation 1994 Stock Incentive Plan,
the Digital Microwave Corporation 1996 Non-Officer Employee Stock Option Plan,
the Digital Microwave Corporation 1998 Non-Officer Employee Stock Option Plan,
the DMC Stratex Networks, Inc. 1999 Stock Incentive Plan
and the Stratex Networks, Inc. 2002 Stock Incentive Plan
(Title of Classes of Securities)

86279T 10 9
(CUSIP Number of Class of Securities)
(Underlying Common Stock)

Carl A. Thomsen
Senior Vice President, Chief Financial Officer
and Secretary
Stratex Networks, Inc.
120 Rose Orchard Way
San Jose, California 95134
(408) 943-0777
(Name, Address and Telephone Number of Person Authorized to
Receive Notices and Communications on Behalf of Filing Persons)

Copies to:

Stratex Networks, Inc.
120 Rose Orchard Way
San Jose, California 95134
(408) 943-0777 MORRISON & FOERSTER LLP
755 Page Mill Road
Palo Alto, California 94304
(650) 813-5600
Attn: Justian Bastian

Calculation of Filing Fee

Transaction Valuation*	Amount of Filing Fee
$5,204,699		$422.00

*Calculated solely for purposes of determining the filing fee. This amount assumes that options to purchase 3,561,236 shares of common stock of Stratex Networks, Inc. having an aggregate value of $5,204,699 as of June 30, 2003 will be exchanged pursuant to this offer. The aggregate value of such options was calculated based on the Black-Scholes option-pricing model. The amount of the filing fee, calculated in accordance with Rule 0-11 of the Securities Exchange Act of 1934, equals $80.90 per $1,000,000 of the value of the transaction.

     [  ] Check the box if any part of the fee is offset as provided by Rule 0-11(a)(2) and identify the filing with which the offsetting fee was previously paid. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

Amount Previously Paid:	Not applicable.
Form or Registration No.:	Not applicable.
Filing party:	Not applicable.
Date filed:	Not applicable.

     [  ] Check the box if the filing relates solely to preliminary communications made before the commencement of a tender offer.

     Check the appropriate boxes below to designate any transactions to which the statement relates:

[  ] third party tender offer subject to Rule 14d-1.

[x] issuer tender offer subject to Rule 13e-4.

[  ] going-private transaction subject to Rule 13e-3.

[  ] amendment to Schedule 13D under Rule 13d-2.

     Check the following box if the filing is a final amendment reporting the results of the tender offer: [  ]

TABLE OF CONTENTS

	Item 1. Summary Term Sheet
	Item 2. Subject Company Information
	Item 3. Identity and Background of Filing Person
	Item 4. Terms of the Transaction
	Item 5. Past Contacts, Transactions, Negotiations and Arrangements
	Item 6. Purposes of the Transaction and Plans or Proposals
	Item 7. Source and Amount of Funds or Other Consideration
	Item 8. Interest in Securities of the Subject Company
	Item 9. Person/Assets, Retained, Employed, Compensated or Used
	Item 10. Financial Statements
	Item 11. Additional Information
	Item 12. Exhibits
	Item 13. Information Required by Schedule 13E-3
SIGNATURE
INDEX TO EXHIBITS
EXHIBIT (A)(1)
EXHIBIT (A)(2)
EXHIBIT (A)(3)
EXHIBIT (A)(4)
EXHIBIT (A)(5)
EXHIBIT (A)(6)
EXHIBIT (A)(7)
EXHIBIT (A)(8)
EXHIBIT (A)(9)
EXHIBIT (D)(1)
EXHIBIT (D)(2)
EXHIBIT (D)(3)
EXHIBIT (D)(4)
EXHIBIT (D)(5)
EXHIBIT (D)(6)
EXHIBIT (D)(7)
EXHIBIT (D)(8)
EXHIBIT (D)(9)
EXHIBIT (D)(10)
EXHIBIT (D)(11)

Item 1. Summary Term Sheet.

     The information set forth under “Summary of Terms” in the Offer to Exchange, dated June 23, 2003 (the “Offer to Exchange”), attached hereto as Exhibit (a)(1), is incorporated herein by reference.

Item 2. Subject Company Information.

     (a)     The name of the issuer is Stratex Networks, Inc., a Delaware corporation (the “Company”). The address of its principal executive offices is Stratex Networks, Inc., 120 Rose Orchard Way, San Jose, California 95134, and the telephone number is (408) 943-0777. The information set forth in the Offer to Exchange under Section 9 (“Information About Stratex Networks, Inc.”) is incorporated herein by reference.

     (b)     This Tender Offer Statement on Schedule TO relates to an offer by the Company to Eligible Employees to exchange certain options outstanding under the Digital Microwave Corporation 1994 Stock Incentive Plan (the “1994 Plan”), the Digital Microwave Corporation 1996 Non-Officer Employee Stock Option Plan (the “1996 Plan”), the Digital Microwave Corporation 1998 Non-Officer Employee Stock Option Plan (the “1998 Plan”), the DMC Stratex Networks, Inc. 1999 Stock Incentive Plan (the “1999 Plan”), the Stratex Networks, Inc. 2002 Stock Incentive Plan (the “2002 Plan”) and all other stock option or incentive plans assumed by the Company in connection with a merger, acquisition or other similar transaction (the “Legacy Plans”), to purchase shares of the Company’s common stock, par value $0.001 per share (the “Common Stock”), having an exercise price per share of more than $6.00 (with certain exceptions) and granted after July 1, 1995 (the “Options”) for new options (the “Replacement Options”) to purchase shares of Common Stock to be granted pursuant to the same stock incentive plan under which the tendered options were originally granted upon the terms and subject to the conditions described in the Offer to Exchange, attached hereto as Exhibit (a)(1). Notwithstanding the foregoing, Replacement Options intended to replace options issued under Legacy Plans shall be granted under the 2002 Plan. The information set forth in the Offer to Exchange under Section 2 (“Number of Options; Expiration Date”), Section 6 (“Acceptance of Options for Exchange and Issuance of Replacement Options”) and Section 8 (“Source and Amount of Consideration; Terms of Replacement Options”) is incorporated herein by reference.

     (c)     The information set forth in the Offer to Exchange under Section 7 (“Price Range of Common Stock Underlying the Options”) is incorporated herein by reference.

Item 3. Identity and Background of Filing Person.

     Stratex Networks, Inc. is the filing person. The information set forth under Item 2(a) above is incorporated herein by reference. The name and address of each executive officer, director and controlling person of Stratex Networks, Inc. is set forth in Schedule B of the Offer to Exchange, which is incorporated herein by reference.

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Item 4. Terms of the Transaction.

     (a)     The information set forth in the Offer to Exchange under “Summary of Terms,” Section 1 (“Eligible Employees”), Section 2 (“Number of Options; Expiration Date”), Section 4 (“Procedures for Participating in the Offer”), Section 5 (“Withdrawal Rights”), Section 6 (“Acceptance of Options for Exchange and Issuance of Replacement Options”), Section 8 (“Source and Amount of Consideration; Terms of Replacement Options”), Section 11 (“Status of Options Acquired by Us in this Offer; Accounting Consequences of this Offer”), Section 12 (“Legal Matters; Regulatory Approvals”), Section 13 (“Material U.S. Federal Income Tax Consequences”), Section 18 (“Extension of Offer; Termination; Amendment”), and Schedule A (“Conditions of this Offer”) is incorporated herein by reference.

     (b)     The information set forth in the Offer to Exchange under Section 10 (“Interests of Directors and Executive Officers; Transactions and Arrangements Concerning the Current Options and Our Common Stock”) is incorporated herein by reference.

Item 5. Past Contacts, Transactions, Negotiations and Arrangements.

     The information set forth in the Offer to Exchange under Section 10 (“Interests of Directors and Executive Officers; Transactions and Arrangements Concerning the Current Options and Our Common Stock”) is incorporated herein by reference.

Item 6. Purposes of the Transaction and Plans or Proposals.

     (a)     The information set forth in the Offer to Exchange under Section 3 (“Purpose of this Offer”) is incorporated herein by reference.

     (b)     The information set forth in the Offer to Exchange under Section 6 (“Acceptance of Options for Exchange and Issuance of Replacement Options”) and Section 11 (“Status of Options Acquired by Us in the Offer; Accounting Consequences of the Offer”) is incorporated herein by reference.

     (c)     The information set forth in the Offer to Exchange under Section 3 (“Purpose of the Offer”) is incorporated herein by reference.

Item 7. Source and Amount of Funds or Other Consideration.

     (a)     The information set forth in the Offer to Exchange under Section 8 (“Source and Amount of Consideration; Terms of Replacement Options”) and Section 19 (“Fees and Expenses”) is incorporated herein by reference.

     (b)     The information set forth in the Offer to Exchange under Schedule A (“Conditions of this Offer”) is incorporated herein by reference.

     (d)     Not applicable.

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Item 8. Interest in Securities of the Subject Company.

     The information set forth in the Offer to Exchange under Section 10 (“Interests of Directors and Executive Officers; Transactions and Arrangements Concerning the Current Options and Our Common Stock”) is incorporated herein by reference.

Item 9. Person/Assets, Retained, Employed, Compensated or Used.

     Not applicable.

Item 10. Financial Statements.

     The information set forth in the Offer to Exchange under Section 9 (“Information About Stratex Networks, Inc.”) and Section 20 (“Additional Information”), and on pages 18 through 49 of Exhibit 13.1 of the Company’s Annual Report on Form 10-K for the year ended March 31, 2003.

Item 11. Additional Information.

     (a)     The information set forth in the Offer to Exchange under Section 10 (“Interests of Directors and Executive Officers; Transactions and Arrangements Concerning the Current Options and Our Common Stock”) and Section 12 (“Legal Matters; Regulatory Approvals”) is incorporated herein by reference.

     (b)     The information set forth in the Offer to Exchange under Section 21 (“Additional Information”) is incorporated herein by reference.

Item 12. Exhibits.

(a)	(1	)	Offer to Exchange, dated June 23, 2003
	(2	)	Form of Letter of Transmittal
	(3	)	Form of Announcement Regarding Fiscal Year 2004 Compensation Program
	(4	)	Form of Email to Eligible Option Holders
	(5	)	Form of Letter of Withdrawal
	(6	)	Form of Confirmation of Receipt of Letter of Transmittal
	(7	)	Form of Reminder of Approaching Expiration of Option Period
	(8	)	Form of Email to Tendering Option Holders Reporting Results of Option Exchange Program

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(9)	Question and Answer Document for Employees of Stratex Networks, Inc.
(10)	Stratex Networks, Inc. Definitive Proxy Statement for its Annual Meeting of Stockholders held July 15, 2003, filed with the Securities and Exchange Commission on June 10, 2003 and incorporated herein by reference
(11)	Stratex Networks, Inc. Annual Report on Form 10-K for its fiscal year ended March 31, 2003, filed with the Securities and Exchange Commission on May 19, 2003 and incorporated herein by reference (Commission File No. 0-15895)

(b) Not applicable.

(d)	(1	)	Digital Microwave Corporation 1994 Stock Incentive Plan
	(2	)	Form of Option Agreement Pursuant to the Digital Microwave Corporation 1994 Stock Incentive Plan
	(3	)	Digital Microwave Corporation 1996 Non-Officer Employee Stock Option Plan
	(4	)	Form of Option Agreement Pursuant to the Digital Microwave Corporation 1996 Non-Officer Employee Stock Option Plan
	(5	)	Digital Microwave Corporation 1998 Non-Officer Employee Stock Option Plan
	(6	)	Form of Option Agreement Pursuant to the Digital Microwave Corporation 1998 Non-Officer Employee Stock Option Plan
	(7	)	DMC Stratex Networks, Inc. 1999 Stock Incentive Plan
	(8	)	Form of Option Agreement Pursuant to the DMC Stratex Networks, Inc. 1999 Stock Incentive Plan
	(9	)	Stratex Networks, Inc. 2002 Stock Incentive Plan
	(10	)	Form of Option Agreement Pursuant to the Stratex Networks, Inc. 2002 Stock Incentive Plan
	(11	)	New Zealand Tax Implications for Stock Option Grants

(g) Not applicable.

(h) Not applicable.

Item 13. Information Required by Schedule 13E-3.

     Not applicable.

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SIGNATURE

     After due inquiry and to the best of my knowledge and belief, I certify that the information set forth in this Schedule TO is true, complete and correct.

STRATEX NETWORKS, INC.
By:	/s/ Carl A. Thomsen
	Senior Vice President, Chief Financial Officer and Secretary

Date: June 23, 2003

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INDEX TO EXHIBITS

Exhibit
Number	Description
(a)(1)	Offer to Exchange, dated June 23, 2003
(a)(2)	Form of Letter of Transmittal
(a)(3)	Form of Announcement Regarding Fiscal Year 2004 Compensation Program
(a)(4)	Form of Email to Eligible Option Holders
(a)(5)	Form of Letter of Withdrawal
(a)(6)	Form of Confirmation of Receipt of Letter of Transmittal
(a)(7)	Form of Reminder of Approaching Expiration of Option Period
(a)(8)	Form of Email to Tendering Option Holders Reporting Results of Option Exchange Program
(a)(9)	Question and Answer Document for Employees of Stratex Networks, Inc.
(a)(10)	Stratex Networks, Inc. Definitive Proxy Statement for its Annual Meeting of Stockholders to be held July 15, 2003, filed with the Securities and Exchange Commission on June 10, 2003 and incorporated herein by reference
(a)(11)	Stratex Networks, Inc. Annual Report on Form 10-K for its fiscal year ended March 31, 2003, filed with the Securities and Exchange Commission on May 19, 2003 and incorporated herein by reference (Commission File No. 0-15895)
(d)(1)	Digital Microwave Corporation 1994 Stock Incentive Plan
(d)(2)	Form of Option Agreement Pursuant to the Digital Microwave Corporation 1994 Stock Incentive Plan
(d)(3)	Digital Microwave Corporation 1996 Non-Officer Employee Stock Option Plan
(d)(4)	Form of Option Agreement Pursuant to the Digital Microwave Corporation 1996 Non-Officer Employee Stock Option Plan
(d)(5)	Digital Microwave Corporation 1998 Non-Officer Employee Stock Option Plan

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(d)(6)	Form of Option Agreement Pursuant to the Digital Microwave Corporation 1998 Non-Officer Employee Stock Option Plan
(d)(7)	DMC Stratex Networks, Inc. 1999 Stock Incentive Plan
(d)(8)	Form of Option Agreement Pursuant to the DMC Stratex Networks, Inc. 1999 Stock Incentive Plan
(d)(9)	Stratex Networks, Inc. 2002 Stock Incentive Plan
(d)(10)	Form of Option Agreement Pursuant to the Stratex Networks, Inc. 2002 Stock Incentive Plan
(d)(11)	New Zealand Tax Implications for Stock Option Grants

7 EX-99.(A)(1) 3 f90816toexv99wxayx1y.htm EXHIBIT (A)(1)

Exhibit (a)(1)

STRATEX NETWORKS, INC.

OFFER TO EXCHANGE
CERTAIN OUTSTANDING OPTIONS
UNDER THE STRATEX NETWORKS, INC.
1994 STOCK INCENTIVE PLAN,
1996 NON-OFFICER EMPLOYEE STOCK OPTION PLAN,
1998 NON-OFFICER EMPLOYEE STOCK OPTION PLAN,
1999 STOCK INCENTIVE PLAN AND
2002 STOCK INCENTIVE PLAN

Any questions or requests for assistance or additional copies of any documents referred to in the Offer to Exchange may be directed to Stratex Networks, Inc. Attention: Stock Administration Department, 120 Rose Orchard Way, San Jose, California 95134, and the telephone number is (408) 943-0777, e-mail stock_administrator@stratexnet.com.

June 23, 2003

Exhibit (a)(1)

STRATEX NETWORKS, INC.

OPTION EXCHANGE PROGRAM
TENDER OFFER STATEMENT
“OFFER TO EXCHANGE”

Offer to exchange certain options issued under the 1994 Stock Incentive Plan,
1996 Non-Officer Employee Stock Option Plan, 1998 Non-Officer Employee Stock
Option Plan, 1999 Stock Incentive Plan and 2002 Stock Incentive Plan for a
lesser number of new options to be granted at least six months and one day from
the cancellation of the surrendered options (the “Offer”)

The Offer and withdrawal rights expire at 5:00 p.m. Pacific Time on Friday,
July 25, 2003, unless this Offer is extended by Stratex Networks, Inc. (the
“Expiration Date”)

Offer. Subject to stockholder approval, Stratex Networks, Inc. (referred to herein as “Stratex,” “we,” “us” or the “Company”) is offering eligible employees the opportunity to make a one-time election to cancel certain outstanding grants of stock options (the “Current Options”) issued after July 1, 1995 under the Digital Microwave Corporation 1994 Stock Incentive Plan (the “1994 Plan”), the Digital Microwave Corporation 1996 Non-Officer Employee Stock Option Plan (the “1996 Plan”), the Digital Microwave Corporation 1998 Non-Officer Employee Stock Option Plan (the “1998 Plan”), the DMC Stratex Networks, Inc. 1999 Stock Incentive Plan (the “1999 Plan”), the Stratex Networks, Inc. 2002 Stock Incentive Plan (the “2002 Plan”) and all other stock option or incentive plans assumed by the Company in connection with a merger, acquisition or other similar transaction (the “Legacy Plans”) for a lesser number of new options (the “Replacement Options”) to be granted at least six months and one day from the cancellation of the Current Options. We are making this Offer upon the terms and subject to the conditions described in this Option Exchange Program Tender Offer Statement (the “Offer to Exchange”). We currently expect to grant the Replacement Options no earlier than January 29, 2004. Participation in the Offer is voluntary. To participate in the Offer, an Eligible Employee (as defined below) must properly tender Current Options prior to 5:00 p.m. Pacific Time on Friday, July 25, 2003, unless we extend the period of time the Offer is open (the “Expiration Date”).

This Offer is subject to and contingent upon obtaining stockholder approval of the Offer at the 2003 Annual Meeting of Stockholders on July 15, 2003. If the stockholders of the Company do not approve the Offer at the 2003 Annual Meeting of Stockholders on July 15, 2003, the Offer will be deemed automatically withdrawn. In addition, the contingent tender of any options will be automatically cancelled and such options will continue to be subject to their original terms.

Eligible Employees. The Offer is open to all of the Company’s existing employees and the employees of its subsidiaries who hold eligible stock options except for (1) corporate officers of the Company, (2) senior executives reporting to the Chief Executive Officer, (3) employees hired

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after December 19, 2002 and (4) employees located in non-U.S. jurisdictions where the Company determines that the application of local rules and regulations make the grant of Replacement Options impractical (the “Eligible Employees”). Members of our Board of Directors are not eligible to participate in the Offer. As of June 1, 2003, we had non-U.S. employees with eligible options in New Zealand, the United Kingdom, South Africa and Singapore (the “Participating Subsidiaries”).

To participate, an employee must be employed by Stratex or one of its Participating Subsidiaries on the date the Replacement Options are granted.

Termination of Employment. Eligible Employees who terminate employment for any reason, whether voluntarily or involuntarily, after the Expiration Date of the Offer and prior to the date on which Replacement Options are granted will not receive a grant of Replacement Options or any other consideration or payment for the cancellation of their Current Options.

Exchange Ratios. On June 2, 2003, we selected various option exchange ratios based on the average market value of our common stock, which was defined for purposes of establishing the ratios as the average closing price of our common stock over the twenty (20) trading days preceding June 2, 2003 (the “Average Market Value”). The Average Market Value of our common stock on June 2, 2003 was $3.00.

The exchange ratios were determined in a manner designed to reduce stockholder dilution. We will not issue any Replacement Options exercisable for fractional shares. Instead, if the exchange ratio yields a fractional number of shares, we will round down to the nearest whole share on a grant-by-grant basis. Except with respect to the exchange of options granted less than six months and one day prior to the commencement of the Offering Period (as defined below) (“Six Months Prior Options”), the table below shows the number of shares of our common stock subject to the Current Option that an Eligible Employee must exchange to receive a Replacement Option to purchase one share of common stock, based on the exercise price of the Current Option:

			Exchange Ratios based on
			a Common Stock Average
	Exercise Price of Current		Market Value per Share of
Tier	Options		$3.00 :
0	$6.00 or Less			N/A
1	$	6.01 - $8.00		1.00 : 1.40
2	$	8.01 - $15.00		1.00 : 2.00
3	$15.01 or Higher			1.00 : 2.50

If an Eligible Employee is exchanging Six Months Prior Options, the Six Months Prior Options will be replaced at a 1:00 to 1:25 exchange ratio.

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Offering Period. Eligible Employees will be given at least twenty (20) U.S. business days in which to accept the Offer (the “Offering Period”). The Offering Period begins on June 23, 2003 and we currently expect it to end at 5:00 p.m. Pacific Time on Friday, July 25, 2003.

Current Options Eligible for Exchange. To be eligible for the Offer, Current Options must (1) have been issued after July 1, 1995, (2) be held by an Eligible Employee and (3) except in the case of Six Months Prior Options, have an exercise price greater than $6.00 per share. Six Months Prior Options (i.e., those granted after December 20, 2002) must be exchanged, regardless of their exercise price, if an Eligible Employee wishes to exchange any other eligible options.

Tender of Options. Eligible Employees may select the Tier (or Tiers) in which they will voluntarily exchange options. Once an Eligible Employee has selected the Tier (or Tiers) in which he or she will voluntarily exchange options, the Eligible Employee will automatically be deemed to have tendered all eligible outstanding options (a) in the lowest Tier selected and (b) in all Tiers above the lowest Tier selected. An Eligible Employee may not partially cancel an outstanding option grant or cancel only certain options within a Tier. In other words, if an Eligible Employee chooses to exchange options within a Tier, all unexercised options within that Tier will be exchanged and cancelled. In addition, all eligible outstanding options in all Tiers above the lowest Tier selected will automatically be deemed to have been tendered for exchange.

Cancellation Date. If an Eligible Employee accepts this Offer and properly tenders some or all of his or her eligible Current Options for exchange, the Eligible Employee’s tendered Current Options will be cancelled after the expiration of the Offering Period on the Expiration Date (the “Cancellation Date”). The Offering Period is presently scheduled to expire on Friday, July 25, 2003 at 5:00 p.m. Pacific Time, and we expect the Cancellation Date to also be July 25, 2003.

Grant Date. The Replacement Options will be granted on a date that is at least six months and one day after the Cancellation Date (the “Grant Date”). Assuming we do not extend the Expiration Date, we presently expect the Grant Date to be no earlier than January 29, 2004.

Exercise Price of Replacement Options. All Replacement Options will be granted with an exercise price equal to the closing price of our common stock on the Grant Date, which will be at least six months and one day from the Cancellation Date.

Vesting of Replacement Options. Except with respect to Six Months Prior Options, the Replacement Options will vest over a two-year period with one half of the shares vesting on the first anniversary of the Grant Date and an additional 1/12th of the remaining shares vesting on each monthly anniversary of the Grant Date thereafter. Six Months Prior Options will vest over a four-year period with one quarter of the shares vesting on the first anniversary of the Grant Date and an additional 1/36th of the remaining shares vesting on each monthly anniversary of the Grant Date thereafter. This means that all Replacement Options will be unvested at the time of grant, regardless of whether the Current Options exchanged were partially or wholly vested.

Term of Replacement Options. Except with respect to Six Months Prior Options, each Replacement Option will have a term equal to the lesser of the original term of the option and five years, provided, however, that the term of the Replacement Option will be no less than four

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years. With respect to Six Month Prior Options, each Replacement Option will have a term of seven years.

Other Terms and Conditions of Replacement Options. Except as set forth herein, the Replacement Options will be granted under and governed by the terms and conditions of the same stock incentive plan under which the tendered options were originally granted. Notwithstanding the foregoing, Replacement Options intended to replace options issued under Legacy Plans shall be granted under the 2002 Plan.

All Replacement Options will be granted as non-qualified stock options.

Certain countries other than the United States have tax rules that require the exercise price to be determined in a manner other than the manner prescribed by the stock incentive plan under which the tendered options were originally granted. Also, in certain countries other than the United States, the Replacement Options may for legal and administrative reasons be subject to different rules than the rules applicable to related Current Options. See “The Offer,” Sections 14-17.

No Recommendation. Although our Board of Directors has approved the Offer, neither we nor our Board of Directors make any recommendation as to whether you should participate in the Offer. You must make your own decision. We cannot guarantee that the Replacement Options will have a lower exercise price than the Current Options.

Recent Trading Price. Our common stock is traded on the Nasdaq National Market under the symbol “STXN.” On June 16, 2003, the closing sale price of our common stock as reported by the Nasdaq National Market was $3.58. We recommend that you obtain current market quotations for our common stock before deciding whether to tender your Current Options. See “The Offer,” Section 7.

How to Obtain More Information. You should direct questions about the Offer or requests for assistance to the Company’s Stock Administration Department, via e-mail, at stock_administrator@stratexnet.com or by telephone at (408) 943-0777. Please note that the Stock Administration Department, in conjunction with Human Resources, will be conducting employee meetings regarding the Offer during the months of June and July. These meetings are intended to answer any outstanding questions you may have about the Offer or these materials.

This Offer is not conditioned upon a minimum aggregate number of options being tendered for exchange. This Offer is subject to certain terms and conditions set forth in this Offer to Exchange.

This Offer is subject to and contingent upon obtaining stockholder approval of the Offer at the 2003 Annual Meeting of Stockholders on July 15, 2003. If the stockholders of the Company do not approve the Offer at the 2003 Annual Meeting of Stockholders on July 15, 2003, the Offer will be deemed automatically withdrawn. In addition, the contingent tender of any options will be automatically cancelled and such options will continue to be subject to their original terms.

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This transaction has not been approved or disapproved by the Securities and Exchange Commission or any state securities commission nor has the Securities Exchange Commission or any state securities commission passed upon the fairness or merits of such transaction or upon the accuracy or adequacy of the information contained in this Offer to Exchange. Any representation to the contrary is a criminal offense.

IMPORTANT

If you wish to tender your Current Options for exchange, you must complete and sign the letter of transmittal in accordance with its instructions, and mail, fax or otherwise deliver it and any other required documents to us at Stratex Networks, Inc., 120 Rose Orchard Way, San Jose, California 95134, Attn: Stock Administration Department, facsimile no. (408) 944-1701. Note that delivery by electronic mail will not be accepted. We must receive all of the required documents by 5:00 p.m. Pacific Time on Friday, July 25, 2003, unless the Offer is extended. Late forms will not be accepted — no exceptions.

The decision to participate in the Offer is an individual one that should be based on a variety of factors, and you should consult with your own personal advisors if you have any questions about your financial or tax situation.

We have not authorized any person to make any recommendation on our behalf as to whether you should participate in the Offer. You should rely only on the information contained in this document or other information to which we have referred you and the information provided by representatives of the Human Resources Department. We have not authorized anyone to give you any information or to make any representation in connection with this Offer other than the information and representations contained in this document or other information to which we have referred you and the information provided by representatives of the Human Resources Department. If any other person makes any recommendation or representation to you or gives you any information, you must not rely upon that recommendation, representation or information as having been authorized by us.

Nothing in this document shall be construed to give any person the right to remain in the employ of Stratex Networks, Inc. or one of our subsidiaries or to affect our right to terminate the employment of any person at any time with or without cause to the extent permitted under law, including prior to the Grant Date of the Replacement Options. Nothing in this document should be considered as a contract or guarantee of wages or compensation.

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TABLE OF CONTENTS

SUMMARY OF TERMS			1
The Offer			14
	1.	Eligible Employees.	14
	2.	Number of Options; Expiration Date.	14
	3.	Purpose of this Offer.	16
	4.	Procedures for Participating in the Offer.	18
	5.	Withdrawal Rights.	19
	6.	Acceptance of Options for Exchange and Issuance of Replacement Options.	21
	7.	Price Range of Common Stock Underlying the Options.	22
	8.	Source and Amount of Consideration; Terms of Replacement Options.	22
	9.	Information About Stratex Networks, Inc.	26
	10.	Interests of Directors and Executive Officers: Transactions and Arrangements Concerning the Current Options and Our Common Stock.	26
	11.	Status of Options Acquired by Us in this Offer; Accounting Consequences of this Offer.	27
	12.	Legal Matters; Regulatory Approvals.	28
	13.	Material U.S. Federal Income Tax Consequences.	28
	14.	A Guide to Issues in New Zealand.	32
	15.	A Guide to Issues in the United Kingdom.	34
	16.	A Guide to Issues in South Africa.	35
	17.	A Guide to Issues in Singapore.	37
	18.	Extension of Offer; Termination; Amendment.	40
	19.	Fees and Expenses.	42
	20.	Additional Information.	42
	21.	Certain Risks of Participating in the Offer.	43
	22.	Miscellaneous.	45

Schedule A - Conditions of this Offer

Schedule B - Information Concerning the Directors and Executive Officers of Stratex Networks, Inc.

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SUMMARY OF TERMS

     The following are answers to some of the questions that you may have about the Offer. We urge you to read carefully the remainder of this Offer to Exchange because the information in this summary is not complete, and additional important information is contained in the remainder of this Offer to Exchange. We have included section references to the remainder of this Offer to Exchange where you can find a more complete description of the topics in this summary. We also urge you to review the information in our annual report on Form 10-K for the year ended March 31, 2003, our quarterly reports on Form 10-Q for 2003, and the proxy statement distributed in connection with our Annual Stockholders Meeting that will be held on July 15, 2003, as these documents contain important financial information and other relevant information about us. All of these documents may be obtained without charge from us or from the Securities and Exchange Commission. See “The Offer: Section 21, Additional Information” below.

Index to Summary of Terms

Questions About the Program

1.	What is the Option Exchange Program?	3
2.	Why are We Implementing the Program?	3
3.	Do I Have to Participate in the Program?	3
4.	Who is Eligible to Participate?	4
5.	Are Employees Located Outside the United States Eligible to Participate?	4
6.	What Securities are We Offering to Exchange?	4
7.	Will All of My Outstanding Options Under the 1994 Plan, the 1996 Plan, the 1998 Plan, the 1999 Plan, the 2002 Plan and Legacy Plans be Eligible for Exchange?	4
8.	If I Elect to Participate, Must I Exchange All of My Eligible Outstanding Options?	5
9.	May I Tender Options that I Have Already Exercised?	5
11.	How Can I Find Out the Details of My Options that are Eligible for this Offer?	5
12.	What if I Quit or am Terminated Prior to the End of the Offering Period?	5
13.	What if I Tender My Current Options, but Am Not an Employee of Stratex or One of its Participating Subsidiaries When the Replacement Options Are Granted?	6
14.	What if I Tender My Current Options, But Die After the Expiration Date and Prior to the Grant Date?	6

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15.	What if I Am on a Leave of Absence During the Offering Period or Any Time Prior to the Time That the Replacement Options Are Granted?	6
16.	What if I Change My Country of Residence During the Offering Period or Prior to the Time That the Replacement Options Are Granted?	6
17.	How Will You Determine the Number of Replacement Options That I Receive in Exchange for My Current Options?	7
18.	How Were the Exchange Ratios Determined?	8
19.	What Happens if I Choose Not to Participate in the Offer?	8
21.	Why Won’t I Receive My Replacement Options Immediately After the Current Options Are Cancelled?	9
22.	What Will the Exercise price of the Replacement Options Be?	9
23.	When Will the Replacement Options Vest?	9
24.	When Will the Replacement Options Expire?	10
25.	What Is a “Six Months Prior Option”?	10
26.	How Will My Participation in the Program Be Affected if I Have a Six Months Prior Option?	10
27.	What if the Stock Price Increases Greatly After I’ve Elected to Participate in the Offer? Can I Change My Mind and Keep My Current Options?	10
28.	Why Can’t You Just Reprice My Current Options?	10
29.	Why Can’t Stratex Just Grant Me More Options Without My Current Options Being Cancelled?	11
30.	Will I Have to Pay Taxes if I Exchange My Current Options?	11
31.	What Happens if Stratex Merges Into or Is Acquired By Another Company?	11
32.	When Does the Offer Expire? Can the Offer Be Extended and, If So, How Will I Be Notified if It Is Extended?	12
33.	What Do I Need to Do If I Want to Participate In the Offer?	12
34.	Can I Change My Election (i.e., Withdraw Options That I’ve Previously Elected to Exchange)?	13
35.	Who Should I Contact if I Have Additional Questions?	13

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Questions About the Program

1. What is the Option Exchange Program?

     The Option Exchange Program (referred to herein as the “Offer”) is a voluntary program that, subject to stockholder approval, offers eligible employees the opportunity to make a one-time election to cancel certain outstanding grants of stock options (the “Current Options”) under the Digital Microwave Corporation 1994 Stock Incentive Plan (the “1994 Plan”), the Digital Microwave Corporation 1996 Non-Officer Employee Stock Option Plan (the “1996 Plan”), the Digital Microwave Corporation 1998 Non-Officer Employee Stock Option Plan (the “1998 Plan”), the DMC Stratex Networks, Inc. 1999 Stock Incentive Plan (the “1999 Plan”), the Stratex Networks, Inc. 2002 Stock Incentive Plan (the “2002 Plan”) and all other stock option or incentive plans assumed by the Company in connection with a merger, acquisition or other similar transaction (the “Legacy Plans”) and exchange them for a lesser number of new options (the “Replacement Options”) at a new exercise price. The Replacement Options will be granted as non-qualified stock options regardless of whether the tendered Current Options are incentive stock options. The Replacement Options will have a new vesting schedule, thus requiring employees to continue their employment with us (or one of our subsidiaries) to realize any benefit from the Replacement Options. The offer to participate in the program (the “Offering Period”) will open on June 23, 2003, and will close at 5:00 p.m. Pacific Time on July 25, 2003 (the “Expiration Date”), unless the Offering Period is extended. If you decide to participate in the Offer, your Current Options tendered for exchange will be cancelled on the first business day following the Expiration Date (the “Cancellation Date”). The Replacement Options will be granted on a date that is at least six months and one day after the Cancellation Date (the “Grant Date”). Assuming we do not extend the Expiration Date, we currently expect the Grant Date to be no earlier than January 29, 2004.

     This Offer is subject to and contingent upon obtaining stockholder approval of the Offer at the 2003 Annual Meeting of Stockholders on July 15, 2003. If the stockholders of the Company do not approve the Offer at the 2003 Annual Meeting of Stockholders on July 15, 2003, the Offer will be deemed automatically withdrawn. In addition, the contingent tender of any options will be automatically cancelled and such options will continue to be subject to their original terms.

2. Why are We Implementing the Program?

     Our Board of Directors approved this program to increase the motivational and retention value of our stock option program and to decrease the potentially dilutive effect of the large number of options held by employees that have exercise prices substantially above the current market price of our common stock.

3. Do I Have to Participate in the Program?

     No, the program is strictly voluntary. Eligible employees have a window of at least twenty (20) U.S. business days in which to decide whether to participate in the Offer. The Offering Period begins on June 23, 2003, and we currently anticipate that it will close at 5:00

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p.m. Pacific Time on Friday, July 25, 2003, assuming the stockholders of the Company approve the Offer at the 2003 Annual Meeting of Stockholders on July 15, 2003.

4. Who is Eligible to Participate?

     We are offering the Option Exchange Program to all of our existing employees and the employees of our subsidiaries worldwide who, as of the start of the Offering Period, hold eligible stock options, except for (1) corporate officers of the Company, (2) senior executives reporting to the Chief Executive Officer, (3) employees hired after December 19, 2002 and (4) employees located in non-U.S. jurisdictions where the Company determines that the application of local rules and regulations make the grant of Replacement Options impractical (“Eligible Employees”). Members of our Board of Directors are not eligible to participate in the Offer. As of June 16, 2003, we had non-U.S. employees with eligible options in New Zealand, the United Kingdom, South Africa and Singapore (“Participating Subsidiaries”).

     Additionally, an employee who tenders his or her options for exchange will only receive Replacement Options in exchange if he or she is employed by us (or one of our Participating Subsidiaries) on the date that the Replacement Options are granted.

5. Are Employees Located Outside the United States Eligible to Participate?

     All Eligible Employees, including Eligible Employees located in New Zealand, the United Kingdom, South Africa and Singapore, may participate in the Offer, although special considerations may apply to Eligible Employees located in New Zealand, the United Kingdom, South Africa and Singapore. In some countries, the application of local rules may have important consequences to Eligible Employees. We have included in these materials short summaries of some of these consequences with respect to countries where our non-U.S. Eligible Employees are located. If you are an Eligible Employee located in New Zealand, the United Kingdom, South Africa or Singapore, you should review these summaries and consult your individual tax, legal and investment advisors. See Sections 14-17 of “The Offer” herein.

6. What Securities are We Offering to Exchange?

     We are offering to exchange any outstanding, unexercised options to purchase shares of our common stock granted under the 1994 Plan, the 1996 Plan, the 1998 Plan, the 1999 Plan, the 2002 Plan and Legacy Plans, held by Eligible Employees, that were issued after July 1, 1995 and have an exercise price greater than $6.00. Eligible Employees who elect to participate in the Option Exchange Program will automatically be deemed to also have tendered for exchange any stock options granted to them after December 20, 2002 (i.e., during the six month period preceding the Offer), regardless of exercise price.

7.      Will All of My Outstanding Options Under the 1994 Plan, the 1996 Plan, the 1998 Plan, the 1999 Plan, the 2002 Plan and Legacy Plans be Eligible for Exchange?

     Not necessarily. To be eligible for exchange, your options must have an exercise price greater than $6.00. The only exception to this rule is for options that were granted less than six months and one day prior to the commencement of the Offering Period (i.e., after December 20,

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2002). Those options, which we refer to herein as “Six Months Prior Options,” must be exchanged, regardless of the exercise price, if you elect to exchange other eligible options. Please see Questions 25 and 26 for more details about Six Months Prior Options.

8. If I Elect to Participate, Must I Exchange All of My Eligible Outstanding Options?

     Not necessarily. Eligible Employees may select the Tier (or Tiers) in which they will voluntarily exchange options. Once you have selected the Tier (or Tiers) in which you will voluntarily exchange options, you will automatically be deemed to have tendered all eligible outstanding options (a) in the lowest Tier you selected and (b) in all Tiers above the lowest Tier you selected. Please see the table under Question 17 for a list of the Tiers. You may not partially cancel an outstanding option grant or cancel only certain options within a Tier. In other words, if you choose to exchange options within a Tier, all unexercised options within that Tier will be exchanged and cancelled. In addition, all eligible outstanding options in all Tiers above the lowest Tier you selected will automatically be deemed to have been tendered for exchange.

     Please note that there is an important exception to this rule. Any Eligible Employee who has a Six Months Prior Option (i.e., anyone who received a grant after December 20, 2002) must exchange that grant, regardless of the exercise price, if she or he wishes to participate in the program. This is because Stratex would incur adverse accounting consequences by allowing participating employees to keep those grants, which could, in turn, negatively affect our stock performance. Please see Questions 25 and 26 for more details about Six Months Prior Options.

9. May I Tender Options that I Have Already Exercised?

     No. The Offer only pertains to unexercised, outstanding options and does not in any way apply to shares purchased, whether upon the exercise of options or otherwise (such as purchase under an employee stock purchase plan). If you have exercised an option in its entirety, that option is no longer outstanding and is therefore not subject to the Offer. If you have exercised a Current Option in part, the remaining unexercised portion of that option is outstanding and may be tendered for exchange pursuant to the Offer.

11. How Can I Find Out the Details of My Options that are Eligible for this Offer?

     If you haven’t already, you will soon receive a personal stock option statement from the Stock Administration Department detailing your outstanding options that are eligible for the Option Exchange Program. You can also view your option grant history on the Stock Administration website, located at www.benefitaccess.com. If you have never logged on before, you will need to create a password prior to accessing your account.

12. What if I Quit or am Terminated Prior to the End of the Offering Period?

     If you are not employed by Stratex or a Participating Subsidiary on the Expiration Date, you will not be an Eligible Employee and, as a result, you will not be eligible to participate in the Offer. If you tender your Current Options prior to the effective date of your termination (but prior to the end of the Offering Period), your tender will be automatically withdrawn. In the event your tendered Current Options are automatically withdrawn (a) the options previously

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tendered for exchange will continue to be subject to their original terms (with some possible change in tax treatment if the tendered options are incentive stock options, see Question 19 and Section 13 of “The Offer” for more details) and (b) you will not receive any Replacement Options in exchange for your Current Options. You may exercise your Current Options in accordance with their terms to the extent they are vested.

13. What if I Tender My Current Options, but Am Not an Employee of Stratex or One of its Participating Subsidiaries When the Replacement Options Are Granted?

     If you do not remain an employee of Stratex or one of its Participating Subsidiaries from the date you tender your Current Options through the date your Replacement Options are granted, you will not receive any Replacement Options or any other payment or consideration in exchange for your tendered Current Options that have been accepted for exchange and cancelled. This rule applies regardless of the reason for your termination of employment — i.e., whether it is a result of voluntary resignation, involuntary termination, death or disability.

14. What if I Tender My Current Options, But Die After the Expiration Date and Prior to the Grant Date?

     Once your Current Options are cancelled, should you die prior to the Grant Date of the Replacement Options, neither you nor your estate or heirs will receive any Replacement Options or any other payment or consideration in exchange for your tendered Current Options.

15. What if I Am on a Leave of Absence During the Offering Period or Any Time Prior to the Time That the Replacement Options Are Granted?

     Employees who are on authorized leaves of absence will have the same opportunity to participate in the Offer as other employees. (An authorized leave of absence is a leave of absence that has been approved in accordance with policy or practice by Stratex or the Participating Subsidiary that employs you, at the end of which it is expected that you will return to active employment with Stratex or one of its Participating Subsidiaries. By way of example, authorized leaves include approved family leave, jury duty leave, and military leave.) However, if you are on a leave at any point in the process, you will need to keep Human Resources informed as to how best to contact you (e.g., e-mail, U.S. mail, etc.) so that notices regarding the Offer will reach you in a timely fashion. Please note that if you elect to participate in the Offer and your employment terminates at any time after the end of the Offering Period, you will forfeit any options that you sought to exchange and you will not receive Replacement Options. Generally speaking, you will have the standard three months following termination of employment to exercise any vested options that you did not elect to exchange.

16. What if I Change My Country of Residence During the Offering Period or Prior to the Time That the Replacement Options Are Granted?

     If, during the Offering Period, you change your place of residence to a country where the Company does not operate a Participating Subsidiary, your tender will automatically be withdrawn if the Company determines that the application of local rules would prohibit or make impractical the grant of Replacement Options. In the event your tendered Current Options are

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automatically withdrawn (a) the options previously tendered for exchange will continue to be subject to their original terms (with some possible change in tax treatment if the tendered options are incentive stock options, see Question 19 and Section 13 of “The Offer” for more details) and (b) you will not receive any Replacement Options in exchange for your Current Options.

     If, after the expiration of the Offering Period but prior to the grant of the Replacement Options, you change your place of residence to a country where the Company does not operate a Participating Subsidiary, you may not have a right to any Replacement Options that would have been granted to you on the Grant Date and you may not have a right to any stock options that were previously cancelled. In some countries where the Company does not operate a Participating Subsidiary, the application of local rules may prohibit or make impractical the grant of Replacement Options.

17. How Will You Determine the Number of Replacement Options That I Receive in Exchange for My Current Options?

     The number of Current Options that an employee must surrender to obtain a Replacement Option is called the exchange ratio. For example, an exchange ratio of 1.00 : 3.00 means that an employee must surrender three Current Options to receive one Replacement Option.

     On June 2, 2003, we selected various option exchange ratios based on the average market value of our common stock, which was defined for purposes of establishing the ratios as the average closing price of our common stock over the twenty (20) trading days preceding June 2, 2003 (the “Average Market Value”). The Average Market Value of our common stock on June 2, 2003 was $3.00.

     Except with respect to the exchange of options granted less than six months and one day prior to the commencement of the Offering Period, the table below shows the number of shares of our common stock subject to the Current Option that an Eligible Employee must exchange to receive a Replacement Option to purchase one share of common stock, based on the exercise price of the Current Option:

			Exchange Ratios based on
			a Common Stock Average
	Exercise Price of Current		Market Value per Share of
Tier	Options		$3.00:
0	$6.00 or Less			N/A
1	$	6.01 - $8.00		1.00:1.40
2	$	8.01 - $15.00		1.00:2.00
3	$15.01 or Higher			1.00:2.50

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     If an Eligible Employee is exchanging Six Months Prior Options, the Six Months Prior Options will be replaced at a 1.00 : 1.25 exchange ratio. See Question 26 for more details.

     We will not issue any Replacement Options exercisable for fractional shares. Instead, if the exchange ratio yields a fractional number of shares, we will round down to the nearest whole share on a grant-by-grant basis.

EXAMPLE

     To illustrate how the exchange ratios work, let’s assume that you have three Current Options for 1,000 shares each. The exercise prices of these three Current Options are $6.10, $13.875 and $30.625. Under these facts, the table below shows the number of shares subject to each Replacement Option that you would receive were you to participate in the Offer.

					Shares of Common
Exercise Price of	Shares of Common Stock		Exchange		Stock Subject to
Current Option	Subject to Current Option		Ratios		Replacement Option
$    6.10		1,000		1.00:1.40		714
$13.875		1,000		1.00:2.00		500
$30.625		1,000		1.00:2.50		400

18. How Were the Exchange Ratios Determined?

     The exchange ratios were determined in a manner designed to reduce stockholder dilution using the Black-Scholes valuation model. The Black-Scholes valuation model is a widely recognized and accepted method to determine the value of a stock option. The Black-Scholes valuation model takes into account a number of variables, including stock price, exercise price, stock volatility, risk-free rate of return, historical dividend yield and the remaining term of the options being valued. The exchange ratios as determined by the Black-Scholes valuation model have been increased by approximately 0.25 per share, which effectively requires participating Eligible Employees to tender more shares than would be required with exchange ratios determined solely based on the Black-Scholes valuation model. We selected various option exchange ratios based on the exercise price of the option.

19. What Happens if I Choose Not to Participate in the Offer?

     If you choose not to tender any of your Current Options for exchange, your Current Options will remain outstanding and retain their current exercise prices and other current terms.

     However, if the Current Options which you do not tender are vested incentive stock options, a portion of your incentive stock options may cease to qualify as incentive stock options. This is because all your vested incentive stock options will be treated as becoming newly granted and exercisable as of the date of the Offer, (even if your incentive stock options became exercisable in prior years). To the extent that the fair market value of the stock underlying your vested incentive stock options exceeds $100,000 (such amount reduced by the value of any other incentive stock options that become exercisable this year prior to the date of this offer), the excess value will have to be treated as non-qualified stock options. Thus, if you currently have

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vested incentive stock options and you choose not to participate in the Offer, some of your incentive stock options could automatically be converted to non-qualified stock options. Because incentive stock options that are not tendered are treated as becoming newly granted as of the date of the Offer, your incentive stock options will be subject to new holding periods in order to attain long-term capital gain or loss treatment. Thus, you will have to hold stock for more than two years from the date of the offer and more than one year from the date on which the shares are transferred to you upon exercise of the incentive stock option in order for any gain or loss on a disposition of such stock to be deemed long term capital gain or loss.

20. When Will I Receive My Replacement Options?

     We will grant the Replacement Options at least six months and one day after the date we cancel the Current Options accepted for exchange. Under no circumstances will we grant the Replacement Options earlier. If we cancel the tendered Current Options on July 28, 2003, which is the date we currently anticipate, the Replacement Options will be granted on or after January 29, 2004. You must continue to be an employee of Stratex or one of its Participating Subsidiaries on the Grant Date to be eligible to receive the Replacement Options.

21. Why Won’t I Receive My Replacement Options Immediately After the Current Options Are Cancelled?

     Assuming that the Offering Period ends on July 25, 2003, and the Current Options that are accepted for exchange are cancelled on July 28, 2003, the Replacement Options cannot be granted until at least January 29, 2004 due to accounting rules which require that, to avoid negative accounting treatment, no Replacement Options can be granted to Eligible Employees until six months and one day after the surrendered options have been cancelled.

22. What Will the Exercise price of the Replacement Options Be?

     The Replacement Options will have an exercise price equal to the closing price of our common stock on the Grant Date. Because the Replacement Options will be granted at least six months and one day following the date the Current Options are cancelled, we cannot predict the exercise price of the Replacement Options. Accordingly, the Replacement Options may have a higher exercise price than some or all of your Current Options that are cancelled.

23. When Will the Replacement Options Vest?

     Except with respect to Six Months Prior Options, the Replacement Options will vest over a two-year period, subject to continued employment, with one half of the shares vesting on the first anniversary of the Grant Date and an additional 1/12th of the remaining shares vesting on each one-month anniversary of the Grant Date thereafter. Six Months Prior Options will vest over a four-year period with one quarter of the shares vesting on the first anniversary of the Grant Date and an additional 1/36th of the remaining shares vesting on each monthly anniversary of the Grant Date thereafter. This means that all Replacement Options will be unvested at the time of grant, regardless of whether the options exchanged were partially or wholly vested.

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24. When Will the Replacement Options Expire?

     The expiration date, or term, of an option is the length of time during which it may be exercised. Except with respect to Six Months Prior Options, each Replacement Option will have a term equal to the lesser of the original term of the option and five years, provided, however, that the term of the Replacement Option will be no less than four years. Replacement Options intended to replace Six Months Prior Options will have a term of seven years. Please see Questions 25 and 26 for more details about Six Months Prior Options.

25. What Is a “Six Months Prior Option”?

     A Six Months Prior Option is any stock option that was granted during the six month and one day period prior to the beginning of the Offering Period. Assuming that our Offering Period begins on June 23, 2003, a Six Months Prior Option is any option granted after December 20, 2002.

26. How Will My Participation in the Program Be Affected if I Have a Six Months Prior Option?

     If you received a Six Months Prior Option, you must exchange that option if you wish to participate in the Option Exchange Program. This is because Stratex would incur adverse accounting charges by allowing participating employees to keep any option grants awarded less than six months and one day prior to the beginning of the Offering Period. The following conditions will apply to Six Months Prior Options, except to the extent necessary to comply with non-U.S. laws or to be eligible for favorable non-U.S. tax treatment: (1) the options will be replaced at a 1.00 : 1.25 exchange ratio; (2) the options will vest over a four-year period, subject to continued employment, with one quarter of the shares vesting on the first anniversary of the Grant Date and an additional 1/36th of the remaining shares vesting on each monthly anniversary of the Grant Date thereafter; and (3) the options will have a term of seven years.

     Please note that Six Months Prior Options also have a different exchange ratio than other exchanged options. Six Months Prior Option will be replaced at a 1.00 : 1.25 exchange ratio.

27. What if the Stock Price Increases Greatly After I’ve Elected to Participate in the Offer? Can I Change My Mind and Keep My Current Options?

     Although you may withdraw your election form prior to the close of the Offering Period (see Question 34), once the Offering Period closes (which we currently anticipate will occur on July 25, 2003) your election to participate is irrevocable, no matter what happens to the stock price. In other words, even if the stock price increases greatly between the time that the Offering Period ends and the Replacement Options are granted, you cannot cancel your election to exchange. It is important to realize that you will bear some possibly significant market risk by choosing to participate in the program.

28. Why Can’t You Just Reprice My Current Options?

     Repricing outstanding options would require us under applicable accounting rules to recognize significant charges in our financial statements that would reduce our reported earnings

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for each fiscal quarter that the repriced options remain outstanding. This could have a negative impact on our stock price.

29. Why Can’t Stratex Just Grant Me More Options Without My Current Options Being Cancelled?

     We strive to balance the need for a competitive compensation package for our employees with the interests of our stockholders. Because of the number of options that we have currently outstanding, a large grant of new options would be dilutive to our stockholders and could have a dilutive effect on our earnings per share.

30. Will I Have to Pay Taxes if I Exchange My Current Options?

     If you exchange your Current Options for Replacement Options, you will not be required under current U.S. law to recognize income for U.S. Federal income tax purposes at the time of the tender or upon our acceptance and cancellation of the Current Options. We believe that the exchange will be treated as a non-taxable exchange for U.S. Federal income tax purposes. Further, at the date of grant of the Replacement Options, we believe that you will not be required under current U.S. law to recognize income for U.S. Federal income tax purposes.

     Included as part of this Offer to Exchange are short summaries of the general tax consequences of the Option Exchange Program in countries other than the United States. See “The Offer,” Sections 14-17. If you are located outside of the United States, you should review these summaries carefully.

     All Eligible Employees, including those subject to taxation in a non-U.S. jurisdiction, whether by reason of their nationality, residence or otherwise, should consult with their own personal tax advisor regarding your personal situation before deciding whether to participate in the Option Exchange Program.

31. What Happens if Stratex Merges Into or Is Acquired By Another Company?

     We are not currently engaged in discussions that would lead to a merger or similar transaction that could result in a change of control of our Company. However, if we merge into or are acquired by another company prior to the end of the Offering Period, you may withdraw your tendered Current Options and have all the rights afforded you to acquire our common stock under the existing agreements evidencing those options.

     If we are merged into another entity after your tendered Current Options are accepted for exchange and cancelled, but before the Replacement Options are granted, the Board of Directors will make it a condition of the transaction that, if a participant’s service as an employee is not interrupted from the date of the transaction through the date the Replacement Options were scheduled to be granted, the successor entity will either (a) grant the participant reasonably equivalent options to acquire stock of the successor entity or its parent on the date the Replacement Options would have been granted or (b) provide the participant with participation in a reasonably equivalent or more favorable cash incentive program.

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     However, the successor entity may, as part of the merger, decide to terminate some or all of our employees prior to the grant of Replacement Options under the Stock Option Exchange Program. In the event the successor entity terminates your employment before the Replacement Options are granted, you will not receive Replacement Options, nor will you receive any other consideration for your Current Options that were cancelled.

     If a merger or similar agreement is effective after the grant of the Replacement Options, the Replacement Options will be subject to the change of control provisions of the stock incentive plan under which the Replacement Options were granted.

     Additionally, a merger or a similar transaction could have substantial effects on our stock price, including potentially substantial appreciation in the price of our common stock. Depending on the structure of such a transaction, tendering option holders might be deprived of any further price appreciation in the common stock associated with the Replacement Options. For example, if our stock was acquired in a cash merger, the fair market value of our stock, and hence the price at which we grant the Replacement Options, would likely be a price at or near the cash price being paid for the common stock in the transaction. As a result of such a transaction, it is possible that the exercise price of the Replacement Options may be more than you might otherwise anticipate. In addition, in the event of an acquisition of our Company for stock, tendering option holders might receive options to purchase shares of a different company.

32. When Does the Offer Expire? Can the Offer Be Extended and, If So, How Will I Be Notified if It Is Extended?

     We currently expect the Offering Period to expire on Friday, July 25, 2003, at 5:00 p.m., Pacific Time, unless we extend the Offering Period. Although we do not currently intend to do so, we may, in our discretion, extend the Offering Period at any time. If the Offering Period is extended, we will make an announcement of the extension no later than 9:00 a.m., Pacific Time, on the business day immediately following the previously scheduled Expiration Date. If the Offering Period is extended, then the Cancellation Date for tendered Current Options accepted for exchange and the Grant Date of the Replacement Options may be extended if necessary to avoid the possibility that we would have to recognize any charges in our financial statements that would reduce our reported earnings. Under the accounting rules applicable to us, the Replacement Options must be granted at least six months and one day following the date tendered Current Options are cancelled.

33. What Do I Need to Do If I Want to Participate In the Offer?

     To participate in the Offer, you must properly complete, duly execute and deliver to us the letter of transmittal, or a facsimile thereof, along with any other required documents. We must receive all of the required documents at Stratex Networks, Inc., 120 Rose Orchard Way, San Jose, California 95134, Attn: Stock Administration Department by 5:00 p.m. Pacific Time on Friday, July 25, 2003. Absolutely no late forms will be accepted — no exceptions.

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     THE METHOD OF DELIVERY OF ALL DOCUMENTS IS AT THE ELECTION AND RISK OF THE TENDERING OPTION HOLDER. IF DELIVERY IS BY MAIL, WE RECOMMEND THAT YOU USE REGISTERED MAIL WITH RETURN RECEIPT REQUESTED. SINCE THE LETTER OF TRANSMITTAL NEEDS TO BE DULY EXECUTED, ONLY FACSIMILE, MAIL OR HAND DELIVERY, BUT NOT ELECTRONIC MAIL, WILL BE CONSIDERED PROPER DELIVERY. IN ALL CASES, YOU SHOULD ALLOW SUFFICIENT TIME TO ENSURE TIMELY DELIVERY. THE REQUIRED DOCUMENTS MUST BE RECEIVED BY THE EXPIRATION DATE. A POSTMARK PRIOR TO THE EXPIRATION DATE WILL NOT ENSURE TIMELY DELIVERY.

     We will strictly enforce the Offer Period. We reserve the right to reject any or all options tendered for exchange that we determine are not in appropriate form or that we determine are unlawful to accept. Subject to our rights to extend, terminate, or amend this Offer, we currently expect that we will accept and subsequently cancel all options properly tendered for exchange.

34. Can I Change My Election (i.e., Withdraw Options That I’ve Previously Elected to Exchange)?

     You can withdraw options that you previously tendered for exchange at any time before 5:00 p.m. Pacific Time on Friday, July 25, 2003, provided, however, that you must withdraw all tendered options within the same Tier. If we extend the Offering Period beyond that time, you can withdraw your options elected for exchange at any time until the extended Expiration Date.

     To withdraw options elected for exchange, you must deliver to us a written notice of withdrawal, or a facsimile thereof, with the required information. The notice of withdrawal must specify the name of the option holder who tendered the options to be withdrawn and the Tiers from which all options will be withdrawn. Once you have selected the highest Tier from which you wish to withdraw, you will automatically be deemed to have withdrawn all previously tendered options (a) from the Tier you selected and (b) from all Tiers below the Tier you selected. We must receive the notice of withdrawal at Stratex Networks, Inc., 120 Rose Orchard Way, San Jose, California 95134, Attn: Stock Administration Department before the Expiration Date.

     Once you have withdrawn options, you can re-elect to exchange options only by again following the delivery procedure described in Question 33.

35. Who Should I Contact if I Have Additional Questions?

     We will be conducting meetings with Eligible Employees to answer your questions about the Option Exchange Program and address your concerns. The schedule of meetings to occur in your area will be announced at a later date.

     Otherwise, please direct any questions or requests for additional copies of documents referred to in these materials to the Stock Administration Department at stock_administrator@stratexnet.com or by calling the Stock Administration Department at (408) 944-1727. Please note, however, that nobody at Stratex, including the Stock Administration Department and Human Resources Department, can provide you with any advice regarding whether you should participate in the Option Exchange Program.

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THE OFFER

1. Eligible Employees.

     Employees are “Eligible Employees” only if they: (i) are employed by Stratex or a Participating Subsidiary on the date the Offering Period begins and ends; (ii) hold at least one eligible option on the date the Offering Period begins; and (iii) remain an employee of Stratex or a Participating Subsidiary through the Grant Date of the Replacement Options. Even if the preceding criteria are met, the following people are not “Eligible Employees”: (1) the Company’s corporate officers; (2) senior executives reporting to the Chief Executive Officer, (3) employees hired after December 19, 2002 and (4) employees located in non-U.S. jurisdictions where the Company determines that the application of local rules and regulations make the grant of Replacement Options impractical. In addition, members of the Company’s Board of Directors are not eligible to participate in the program.

2. Number of Options; Expiration Date.

     Options granted under the 1994 Plan, the 1996 Plan, the 1998 Plan, the 1999 Plan, the 2002 Plan and Legacy Plans are eligible to be exchanged in the Option Exchange Program. Subject to stockholder approval and the terms and conditions of this Offer to Exchange, we will exchange certain outstanding options held by Eligible Employees under the 1994 Plan, the 1996 Plan, the 1998 Plan, the 1999 Plan, the 2002 Plan and Legacy Plans for Replacement Options to purchase common stock issued under to the same stock incentive plan under which the tendered options were originally granted. Notwithstanding the foregoing, Replacement Options intended to replace options issued under Legacy Plans shall be granted under the 2002 Plan.

     This Offer is subject to and contingent upon obtaining stockholder approval of the Offer at the 2003 Annual Meeting of Stockholders on July 15, 2003. If the stockholders of the Company do not approve the Offer at the 2003 Annual Meeting of Stockholders on July 15, 2003, the Offer will be deemed automatically withdrawn. In addition, the contingent tender of any options will be automatically cancelled and such options will continue to be subject to their original terms.

     If you are eligible and choose to participate, you may select the Tier (or Tiers) in which you will voluntarily exchange options. Outstanding options have been separated into four separate Tiers based on exercise price as set forth in the table below. Only options (the terms “option” or “options” refer to an entire option grant) that were granted after July 1, 1995 and have an exercise price greater than $6.00 per share are eligible for exchange. Once you have selected the Tier (or Tiers) in which you will voluntarily exchange options, you will automatically be deemed to have tendered all eligible outstanding options (a) in the lowest Tier you selected and (b) in all Tiers above the lowest Tier you selected. You may not partially cancel an outstanding option grant or cancel only certain options within a Tier. In other words, if you choose to exchange options with a Tier, all unexercised options within that Tier will be exchanged and cancelled. In addition, all eligible outstanding options in all Tiers above the lowest Tier you selected will automatically be deemed to have been tendered for exchange. If you so elect to participate, you also will automatically be deemed to have elected to tender for

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exchange all options granted to you after December 20, 2002, which we refer to herein as “Six Months Prior Options,” regardless of exercise price.

     The Replacement Options will be granted on a date that is at least six months and one day after the Cancellation Date. Assuming we do not extend the Expiration Date, we presently expect the Grant Date of the Replacement Options to be no earlier than January 29, 2004.

     The Offer is subject to the terms and conditions described in this Offer to Exchange. We will only accept tendered options that are properly exchanged and not validly withdrawn in accordance with Section 5 of this Offer to Exchange before the Offering Period expires on the Expiration Date.

     Your participation in the Option Exchange Program is voluntary. If you properly tender your eligible options and such tendered options are accepted for exchange, the tendered options will be cancelled and, subject to the terms of this Offer, you will be entitled to receive that number of Replacement Options determined as follows, subject to adjustments for any future stock splits, stock dividends and similar events, in accordance with the terms of the stock incentive plan under which the tendered options were originally granted.

     On June 2, 2003, we selected various option exchange ratios based on the average market value of our common stock, which was defined for purposes of establishing the ratios as the average closing price of our common stock over the twenty (20) trading days preceding June 2, 2003 (the “Average Market Value”). The Average Market Value of our common stock on June 2, 2003 was $3.00.

     Except with respect to the exchange of options granted less than six months and one day prior to the commencement of the Offering Period, the table below shows the number of shares of our common stock subject to the Current Option that an Eligible Employee must exchange to receive a Replacement Option to purchase one share of common stock, based on the exercise price of the Current Option:

			Exchange Ratios based on
			a Common Stock Average
	Exercise Price of Current		Market Value per Share of
Tier	Options		$3.00:
0	$	6.00 or Less		N/A
1	$	6.01 - $8.00		1.00:1.40
2	$	8.01 - $15.00		1.00:2.00
3	$15.01 or Higher			1.00:2.50

     If an Eligible Employee is exchanging Six Months Prior Options, the Six Months Prior Options will be replaced at a 1.00 : 1.25 exchange ratio.

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     We will not issue any Replacement Options exercisable for fractional shares. Instead, if the exchange ratio yields a fractional number of shares, we will round down to the nearest whole share on a grant-by-grant basis.

     The Replacement Options will be issued under the same stock incentive plan under which the tendered options were originally granted. Notwithstanding the foregoing, Replacement Options intended to replace options issued under Legacy Plans will be granted under the 2002 Plan. The terms and conditions of a Replacement Option will be similar to the tendered option it replaces, except that the Replacement Option will generally have a new exercise price, grant date, vesting schedule and term, and will cover a fewer number of shares of our common stock. Also, in certain countries other than the United States, the Replacement Options may be subject to different terms and conditions than the tendered options they replace. See “The Offer,” sections 14-29.

     The term “Expiration Date” means 5:00 p.m. Pacific Time on Friday, July 25, 2003, unless and until we, in our discretion, extend the Offering Period, in which event the term “Expiration Date” refers to the latest time and date at which this Offer, as so extended, expires. See Section 18 of “The Offer” for a description of our rights to extend, delay, terminate and amend this Offer.

     If we decide to take any of the following actions, we will publish notice or otherwise notify you of such action in writing after the date of such action:

     (a)  we increase or decrease the amount of consideration offered for the options;

     (b)  we decrease the number of options eligible to be tendered for exchange in this Offer; or

     (c)  we increase the number of options eligible to be tendered for exchange in this Offer by an amount that exceeds 2% of the shares of common stock issuable upon exercise of the options that are subject to this Offer immediately prior to the increase.

     For purposes of this Offer, a “business day” means any day other than Saturday, Sunday or a U.S. federal holiday and consists of the time period from 12:01 a.m. through 12:00 midnight, Pacific Time.

     As of June 9, 2003, options to purchase an aggregate of 3,561,236 shares of our common stock were eligible for exchange under this Offer.

3. Purpose of this Offer.

     We issued the options outstanding under the 1994 Plan, the 1996 Plan, the 1998 Plan, the 1999 Plan and the 2002 Plan to motivate and reward our employees and to encourage them to continue their employment with us. As a result of the extreme volatility in our industry and a steep decline in our stock price in 2001 and 2002, we have many stock options outstanding with exercise prices significantly higher than the current stock price. We believe these options are unlikely to be exercised in the foreseeable future and therefore are no longer effectively

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providing the employee motivation and retention that they were intended to provide. By making this Offer to exchange outstanding options for Replacement Options that will have an exercise price equal to the market value of our common stock on the replacement grant date, we intend to provide our Eligible Employees with the benefit of owning options that over time may have a greater potential to increase in value. In addition, we hope to create better performance incentives for our Eligible Employees and thereby maximize stockholder value.

     Although we anticipate that the Replacement Options will have a lower exercise price than the Current Options, we cannot guarantee that this will be the case. Because there will be at least six months and one day between the date Current Options are cancelled and Replacement Options are granted, you are subject to the risk that the market price of our stock will increase such that your Replacement Options could have a higher exercise price than your Current Options.

     We may engage in transactions in the future that could significantly change our structure, ownership, organization or management or the make-up of our Board of Directors and that could significantly affect the price of our stock. If we engage in such a transaction or transactions prior to the date we grant the Replacement Options, our stock price could increase (or decrease) and the exercise price of the Replacement Options could be higher (or lower) than the exercise price of the eligible options you elect to have cancelled as part of this Offer. The exercise price of any Replacement Options granted to you in return for options you elect to exchange will be the fair market value of our common stock on the Grant Date. You will be at risk of any increase in our stock price during the period prior to the Grant Date for these and other reasons.

     We are not currently engaged in any discussions that would lead to a merger or similar transaction that could result in a change of control of our Company. If we are merged into another entity after your tendered Current Options are accepted for exchange and cancelled, but before the Replacement Options are granted, the Board of Directors will make it a condition of the transaction that, if a participant’s service as an employee with Stratex or a Participating Subsidiary is not interrupted from the date of the transaction through the date the Replacement Options were scheduled to be granted, the successor entity will either (a) grant the participant reasonably equivalent options to acquire stock of the successor entity or its parent on the date the Replacement Options would have been granted or (b) provide the participant with participation in a reasonably equivalent or more favorable cash incentive program.

     Subject to the foregoing, and except as otherwise disclosed in this Offer to Exchange or in our filings with the Securities and Exchange Commission, as of the date hereof, we have no plans, proposals or negotiations that relate to or would result in:

     (a)     any extraordinary transaction, such as a merger, reorganization or liquidation, involving us;

     (b)       any purchase, sale or transfer of a material amount of our assets;

     (c)       any material change in our present dividend rate or policy, or our indebtedness or capitalization;

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     (d)       any change in our present Board of Directors or management (other than the Board of Directors’ ongoing process of actively seeking to identify qualified independent director candidates for appointment to the Board), including, but not limited to, any plans or proposals to change the number or the term of directors or to fill any existing board vacancies or to change any material term of the employment contract of any executive officer;

     (e)     any other material change in our corporate structure or business;

     (f)       our common stock being delisted from any national securities exchange or ceasing to be authorized for quotation in an automated quotation system operated by a national securities association;

     (g)       our common stock becoming eligible for termination of registration pursuant to Section 12(g)(4) of the Securities Exchange Act;

     (h)       the suspension of our obligation to file reports pursuant to Section 15(d) of the Securities Exchange Act;

     (i)       the acquisition by any person of a material number of our securities or the disposition of a material number of our securities, other than shares of our common stock that we may repurchase pursuant to our Stock Repurchase Program; or

     (j)       any change in our certificate of incorporation or bylaws, or any actions which could impede the acquisition of control of us by any person.

     Neither we nor our Board of Directors make any recommendation as to whether you should elect to exchange your options, nor have we authorized any person to make any such recommendation. You are urged to evaluate carefully all of the information in this Offer to Exchange and to consult your own investment and tax advisors. You must make your own decision whether to elect to exchange your options.

4. Procedures for Participating in the Offer.

     Proper Tender of Options. To validly tender your options pursuant to this Offer, you must, in accordance with the terms of the letter of transmittal, properly complete, duly execute and deliver to us the letter of transmittal, or a facsimile thereof, along with any other required documents. We must receive all of the required documents at Stratex Networks, Inc., 120 Rose Orchard Way, San Jose, California 95134, Attention: Stock Administration Department by 5:00 p.m. Pacific Time on July 25, 2003. Absolutely no late forms will be accepted — no exceptions.

     If you do not submit your election form to us by 5:00 p.m. Pacific Time on July 25, 2003, then you will not participate in the option exchange, and all stock options currently held by you will remain intact at their original price and will continue to be subject to their original terms (with some possible change in tax treatment if your options are incentive stock options, see Section 13 of “The Offer” for more details).

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     THE METHOD OF DELIVERY OF ALL DOCUMENTS, INCLUDING LETTERS OF TRANSMITTAL AND ANY OTHER REQUIRED DOCUMENTS, IS AT THE ELECTION AND RISK OF THE TENDERING OPTION HOLDER. IF DELIVERY IS BY MAIL, WE RECOMMEND THAT YOU USE REGISTERED MAIL WITH RETURN RECEIPT REQUESTED. SINCE THE LETTER OF TRANSMITTAL NEEDS TO BE DULY EXECUTED, ONLY FACSIMILE, MAIL OR HAND DELIVERY, BUT NOT ELECTRONIC MAIL, WILL BE CONSIDERED PROPER DELIVERY. IN ALL CASES, YOU SHOULD ALLOW SUFFICIENT TIME TO ENSURE TIMELY DELIVERY. THE REQUIRED DOCUMENTS MUST BE RECEIVED BY THE EXPIRATION DATE. A POSTMARK PRIOR TO THE EXPIRATION DATE WILL NOT ENSURE TIMELY DELIVERY.

     All employees can view their stock options at www.benefitaccess.com, the on-line tool that affords employees the ability to view their stock options 24 hours a day.

     Determination of Validity; Rejection of Options; Waiver of Defects; No Obligation to Give Notice of Defects. We will determine, in our discretion, all questions as to the validity, form, eligibility (including time of receipt), and acceptance of any documentation relating to the tender of options for exchange. Our determination of these matters will be final and binding on all parties. We reserve the right to reject any or all elections to exchange options that we determine are not in appropriate form or that we determine are unlawful to accept or not timely made. We also reserve the right to waive any of the conditions of this Offer or any defect or irregularity in any election form. No election to exchange options will be deemed to have been properly made until all defects or irregularities have been cured by the electing option holder or waived by us. Neither we nor any other person is obligated to give notice of any defects or irregularities in elections, nor will anyone incur any liability for failure to give any such notice.

     Our Acceptance Constitutes an Agreement. Your election to tender options for exchange pursuant to the procedures described above constitutes your acceptance of the terms and conditions of this Offer and will be controlling, absolute and final, subject to (a) stockholder approval of the Offer at the 2003 Annual Meeting of stockholders on July 15, 2003, (b) your withdrawal rights under Section 5 below (c) and our acceptance of your tendered options in accordance with Section 6 below. Our acceptance of the options that you elect to tender for exchange pursuant to this Offer will constitute a binding agreement between us and you upon the terms and subject to the conditions of this Offer to Exchange.

     Subject to our rights to extend, terminate and amend this Offer, we currently expect that we will accept promptly after the Expiration Date all properly elected options that have not been validly withdrawn.

5. Withdrawal Rights.

     Once you have elected to exchange any or all of your eligible Current Options, you can only withdraw your tendered options in accordance with the provisions of this Section 5.

     You can withdraw your tendered options at any time before 5:00 p.m. Pacific Time on Friday, July 25, 2003 (the “Expiration Date”). If the Expiration Date is extended by us beyond

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that time, you can withdraw your elected options at any time until the extended expiration of this Offer.

     If your employment with us terminates prior to the Expiration Date, your tender will automatically be withdrawn. Since your tendered Current Options will automatically be withdrawn, you will not receive any Replacement Options in exchange for your Current Options and your Current Options will continue to be subject to their original terms (with some possible change in tax treatment if the tendered options are incentive stock options, see Section 13 of “The Offer” for more details). You may exercise the vested portion of any Current Options that you had tendered for exchange in accordance with their terms. The vested portion of your Current Options will generally be exercisable for three months following your last day of employment.

     To validly withdraw tendered options, an option holder must deliver to us a written notice of withdrawal, or a facsimile thereof, with the required information, while the option holder still has the right to withdraw the tendered options. The notice of withdrawal must be submitted to us at Stratex Networks, Inc., 120 Rose Orchard Way, San Jose, California 95134, Attention: Stock Administration Department. The notice of withdrawal must specify the name of the option holder who tendered the options to be withdrawn and the Tiers from which all options will be withdrawn. Once you have selected the highest Tier from which you wish to withdraw, you will automatically be deemed to have withdrawn all previously tendered options (a) from the Tier you selected and (b) from all Tiers below the Tier you selected. Except as described in the following sentence, the notice of withdrawal must be executed by the option holder who tendered the options to be withdrawn exactly as such option holder’s name appears on the option agreement or agreements evidencing such options. If the signature is by a trustee, executor, administrator, guardian, attorney-in-fact, officer of a corporation or another person acting in a fiduciary or representative capacity, the signer’s full title and proper evidence of the authority of such person to act in such capacity must be indicated on the notice of withdrawal.

     You may not rescind any withdrawal, and any options you withdraw will thereafter be deemed not properly tendered for purposes of the Offer, unless you properly re-tender those options before the Expiration Date by following the procedures described in Sections 2 and 4.

     Neither Stratex nor any other person is obligated to give notice of any defects or irregularities in any notice of withdrawal, nor will anyone incur any liability for failure to give any such notice. We will determine, in our discretion, all questions as to the form and validity, including time of receipt, of notices of withdrawal. Our determination of these matters will be final and binding.

     THE METHOD OF DELIVERY OF ALL DOCUMENTS, INCLUDING A NOTICE OF WITHDRAWAL AND ANY OTHER REQUIRED DOCUMENTS, IS AT THE ELECTION AND RISK OF THE TENDERING OPTION HOLDER. IF DELIVERY IS BY MAIL, WE RECOMMEND THAT YOU USE REGISTERED MAIL WITH RETURN RECEIPT REQUESTED. SINCE THE LETTER OF TRANSMITTAL NEEDS TO BE DULY EXECUTED, ONLY FACSIMILE, MAIL OR HAND DELIVERY, BUT NOT ELECTRONIC MAIL, WILL BE CONSIDERED PROPER DELIVERY. IN ALL CASES, YOU SHOULD ALLOW SUFFICIENT TIME TO ENSURE TIMELY DELIVERY. THE REQUIRED DOCUMENTS MUST BE RECEIVED BY THE EXPIRATION DATE. A POSTMARK PRIOR TO THE EXPIRATION DATE WILL NOT ENSURE TIMELY DELIVERY.

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6. Acceptance of Options for Exchange and Issuance of Replacement Options.

     Upon the terms and subject to the conditions of this Offer, and as promptly as practicable following the expiration of the Offering Period, we will accept for exchange and cancel options properly tendered for exchange and not validly withdrawn before the Expiration Date. Shortly after your options have been accepted for exchange, you will receive a letter confirming that your options have been accepted for exchange and cancelled and summarizing your rights as a participant in the exchange program, including the number of shares of our common stock your Replacement Options will entitle you to purchase.

     Replacement Options will be granted at least six months and one day from the date we cancel the options accepted for exchange. We currently expect the Grant Date to be no earlier than January 29, 2004.

     If we accept options that you tender for exchange in this Offer, you will be ineligible until after the replacement Grant Date to receive any additional stock option grants for which you may have otherwise been eligible. We believe that this restriction will allow us to avoid incurring a compensation expense against our earnings because of accounting rules that could apply to these interim option grants. We do not anticipate making any Company-wide option grants until after the replacement Grant Date.

     If you are not an Eligible Employee from the date we accept and cancel the options you elected for exchange through the date we grant the Replacement Options, you will not receive any Replacement Options in exchange for your options that have been accepted for exchange and you will not receive any other consideration for your surrendered options, even if the options that you elected to exchange were fully or partially vested.

     Therefore, if you leave Stratex voluntarily, involuntarily, or for any other reason after the cancellation of the options you tendered for exchange and before your Replacement Options are granted, you will not have a right to any stock options that were previously cancelled and you will not have a right to the options that would have been granted on the replacement Grant Date. Also, if you change your place of residence to a country where the Company does not operate a Participating Subsidiary, you may not have a right to any stock options that were previously cancelled and you may not have a right to any Replacement Options that would have been granted on the Grant Date.

     For purposes of this Offer, we will be deemed to have accepted for exchange options that are validly tendered for exchange and not properly withdrawn, when we cancel such options. We will provide a notice to you following the cancellation of your validly tendered options. Subject to our rights to extend, terminate and amend this Offer, we currently expect that you will receive your Replacement Options, as well as the new option agreements related thereto, within three (3) weeks of the replacement Grant Date.

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7. Price Range of Common Stock Underlying the Options.

     Our common stock is quoted on the Nasdaq Stock Market’s National Market under the symbol “STXN”. The following table sets forth, for the periods indicated, the high and low sales prices for the Company’s common stock as reported by the Nasdaq National Market:

		High		Low
2004 Fiscal Year
Quarter Ended June 30, 2003		$	3.09	$	2.90
	(through June 9, 2003)
2003 Fiscal Year
Quarter Ended March 31, 2003		$	2.41	$	2.07
Quarter Ended December 31, 2002		$	2.38	$	2.16
Quarter Ended September 30, 2002		$	1.42	$	1.15
Quarter Ended June 30, 2002		$	2.33	$	1.94

	High		Low
2002 Fiscal Year
Quarter Ended March 31, 2002	$	5.68	$	5.20
Quarter Ended December 31, 2001	$	8.08	$	7.69
Quarter Ended September 30, 2001	$	5.79	$	5.15
Quarter Ended June 30, 2001	$	10.70	$	7.34

     As of June 9, 2003, the closing price of our common stock, as reported by the Nasdaq National Market, was $2.95 per share.

     We recommend that you obtain current market quotations for our common stock before deciding whether to elect to tender your options for exchange.

8. Source and Amount of Consideration; Terms of Replacement Options.

     Consideration. In exchange for the eligible Current Options properly tendered and cancelled in the Offer by us, we will issue Replacement Options to purchase common stock, subject to the terms set forth in this Offer to Exchange. The Replacement Options will be issued under the same stock incentive plan under which the tendered options were originally granted. Notwithstanding the foregoing, Replacement Options intended to replace options issued under Legacy Plans shall be granted under the 2002 Plan.

     The number of Replacement Options to be granted in exchange for tendered Current Options that are accepted for exchange and cancelled will be determined as follows, subject to

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adjustments for any future stock splits, stock dividends and similar events. Except with respect to the exchange of options granted less than six months and one day prior to the commencement of the Offering Period, the table below shows the number of shares of our common stock subject to the Current Option that an Eligible Employee must exchange to receive a Replacement Option to purchase one share of common stock, based on the exercise price of the Current Option:

			Exchange Ratios based on
			a Common Stock Average
	Exercise Price of Current		Market Value per Share of
Tier	Options		$3.00:
0	$	6.00 or Less		N/A
1	$	6.01 - $8.00		1.00 : 1.40
2	$	8.01 - $15.00		1.00 : 2.00
3	$15.01 or Higher			1.00 : 2.50

     If you are exchanging Six Months Prior Options, the Six Months Prior Options will be replaced at a 1.00 : 1.25 exchange ratio.

     We will not issue any Replacement Options exercisable for fractional shares. Instead, if the exchange ratio yields a fractional number of shares, we will round down to the nearest whole share on a grant-by-grant basis.

     The issuance of Replacement Options under this Offer will not create any contractual or other right of the recipients to receive any future grants of stock options or benefits instead of stock options or any right of continued employment.

     Terms of Replacement Options. As a condition to the issuance of the Replacement Options we will enter into new option agreements with each option holder who has elected to exchange options in this Offer. The Replacement Options will be subject to the terms of the same stock incentive plan under which the tendered options were originally granted. Notwithstanding the foregoing, Replacement Options intended to replace options issued under Legacy Plans shall be granted under the 2002 Plan.

     The terms of the Replacement Options are expected to be similar to the related Current Options cancelled in the exchange, except that (i) the Replacement Options will be granted on a date that is at least six months and one day after the date the tendered options are cancelled; (ii) the Replacement Options will be granted as non-qualified stock options regardless of whether the tendered Current Options are incentive stock options, (iii) with the exception of Replacement Options granted as a replacement for Six Months Prior Options, the Replacement Options shall vest over a two-year period with one half of the shares vesting on the first anniversary of the Grant Date and an additional 1/12th of the remaining shares vesting on each monthly anniversary of the Grant Date thereafter; (iv) the exercise price of the Replacement

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Options will be the closing price of our common stock on the Grant Date; (v) with the exception of Replacement Options granted as a replacement for Six Months Prior Options, the Replacement Options will have a term equal to the lesser of the original term of the option and five years, provided, however, that the term of the Replacement Option will be no less than four years; and (vi) the number of shares underlying the Replacement Options will be determined as described above. Also, in certain countries other than the United States, the Replacement Options may be subject to different terms and conditions than the tendered options they replace. See “The Offer,” sections 14-17.

     The following terms will apply to Six Months Prior Options, except to the extent necessary to comply with non-U.S. laws or to be eligible for favorable non-U.S. tax treatment: (1) the options shall vest over a four-year period with one quarter of the shares vesting on the first anniversary of the Grant Date and an additional 1/36th of the remaining shares vesting on each monthly anniversary of the Grant Date thereafter; and (2) the options will have a seven year term.

     The terms and conditions of your Current Options are set forth in the applicable stock option plan and the stock option agreement you entered into in connection with each grant. The description of the Replacement Options set forth herein is only a general summary of some of the material provisions but is not complete. These descriptions are subject to, and qualified in their entirety by reference to, the actual provisions of the 1994 Plan, the 1996 Plan, the 1998 Plan, the 1999 Plan and the 2002 Plan.

     Information regarding the 1994 Plan, the 1996 Plan, the 1998 Plan, the 1999 Plan and the 2002 Plan may be found in the S-8 Registration Statement and related prospectus prepared by us in connection with each of the 1994 Plan, the 1996 Plan, the 1998 Plan, the 1999 Plan and the 2002 Plan. You can obtain a copies of the 1994 Plan, the 1996 Plan, the 1998 Plan, the 1999 Plan and the 2002 Plan and the related prospectus for each plan on the Stock Administration website at www.benefitaccess.com.

     Exercise. Except with respect to Six Months Prior Options, you may exercise the vested portion of your Replacement Options at any time after the Grant Date but prior to the date the Replacement Option expires. Generally speaking, you will have three (3) months from the effective date of your termination of employment to exercise any vested portion of your Replacement Options, as set forth the stock option agreement related thereto. If your employment with Stratex or its subsidiaries terminates due to death or disability, you (or your estate in the event of your death) will have at least twelve (12) months from the effective date of your termination to exercise any vested portion of your Replacement Options, as set forth in the stock option agreement related thereto.

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     Payment of Exercise Price. You may exercise your options, in whole or in part, by delivery of a written notice to us on any business day at our principal office addressed to the attention of the Stock Administrator, which specifies the number of shares for which the option is being exercised and which is accompanied by payment in full of the applicable exercise price. The permissible methods of payment of the option exercise price generally are the following:

• delivery of cash or a check payable to us;

• tender to us of shares of our common stock, which, if acquired from us, have been owned by the option holder for no less than six months, having a fair market value on the date of exercise equal to the aggregate exercise price;

• delivery of a properly executed exercise notice together with irrevocable instructions to a broker to deliver promptly to the Company the amount of sale proceeds required to pay the exercise price; or

• a combination of the foregoing methods.

     Corporate Transaction. In the event of a merger of the Company with or into another corporation (a “Corporate Transaction”), all of shares subject to each outstanding option under the 1994 Plan, the 1996 Plan, the 1998 Plan, the 1999 Plan and the 2002 Plan shall become vested and exercisable. Notwithstanding the foregoing, the shares shall not become fully vested and exercisable if, in connection with the Corporate Transaction, the outstanding options are assumed by the successor corporation or parent thereof or replaced with a comparable option to purchase shares of the capital stock of the successor corporation or parent thereof.

     Tax Consequences of Options. You should refer to Section 13 for a discussion of U.S. federal tax consequences of accepting or rejecting this Offer to tender certain Current Options in exchange for Replacement Options. You should refer to the relevant tax disclosure discussion under Sections 14-17 for a discussion of the tax consequences of participating in this Offer if your country of residence is not the United States.

     We recommend that you consult your own tax advisor with respect to the tax consequences of participating in this Offer under the laws of the country or countries in which you are a taxpayer.

     Registration of Option Shares. All shares of common stock issuable upon exercise of options under the 1994 Plan, the 1996 Plan, the 1998 Plan, the 1999 Plan, the 2002 Plan and Legacy Plans, including the shares that will be issuable upon exercise of all Replacement Options, have been registered under the Securities Act of 1933 on one or more registration statements on Form S-8 filed with the SEC. Unless you are considered an “affiliate” of Stratex Networks, Inc., you will be able to sell your option shares free of any transfer restrictions under applicable securities laws.

     Important note: the statements in this Offer to Exchange concerning the 1994 Plan, the 1996 Plan, the 1998 Plan, the 1999 Plan, the 2002 Plan and the Replacement Options are merely summaries and do not purport to be complete. The statements are subject to, and are qualified in their entirety by reference to, all provisions of the 1994 Plan, the 1996 Plan, the 1998 Plan, the 1999 Plan, the 2002 Plan and the applicable form of stock option agreement under the plan. Please access the stock administration website to receive a copy of the 1994 Plan, the 1996 Plan, the 1998 Plan, the 1999 Plan, the 2002 Plan, the applicable prospectus or form of stock option agreement applicable to the country in which you are employed.

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9. Information About Stratex Networks, Inc.

     With headquarters in San Jose, California, Stratex Networks, Inc. is one of the world’s foremost wireless transmission solutions providers for worldwide mobile and broadband access communications networks. Since it was founded in 1984, Stratex Networks has achieved international recognition for quality, innovation, and technical superiority in delivering data, voice, and video communication systems, including comprehensive service and support. Stratex Networks, with its broad product offering and worldwide sales and support organization, is strategically positioned to serve its customers’ needs in wireless high-capacity transmission technology. Additional information is available at www.stratexnet.com.

     Stratex common stock is traded on The Nasdaq Stock Market under the symbol STXN. the Company’s website is located at www.stratexnet.com.

     Stratex Networks, Inc. was founded in 1984 and incorporated in the state of Delaware in 1987. Our principal executive offices are located at 120 Rose Orchard Way, San Jose, California 95134, and the telephone number is (408) 943-0777.

     The financial information included in our Annual Report on Form 10-K for the year ended March 31, 2003 is incorporated herein by reference. See “Additional Information” under Section 21 for instructions on how you can obtain copies of our SEC reports that contain our audited financial statements and unaudited financial data.

10. Interests of Directors and Executive Officers: Transactions and Arrangements Concerning the Current Options and Our Common Stock.

     A list of our directors and executive officers is attached to this Offer to Exchange as Schedule B.

     As of June 9, 2003, our executive officers and directors as a group (fourteen (14) persons) beneficially owned options outstanding under the 1994 Plan, the 1996 Plan, the 1998 Plan, the 1999 Plan, the 2002 Plan and Legacy Plans to purchase a total of 3,414,782 shares of our common stock, which represented approximately 28% of the shares subject to all options outstanding as of that date. The options held by our non-employee directors and our executive officers are not eligible to be tendered in the Offer.

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     The following table sets forth the beneficial ownership of our executive officers and directors of options outstanding as of June 9, 2003.

Name	Number of Options to Purchase Common Stock
Charles D. Kissner		1,858,601
Richard C. Alberding		58,000
John W. Combs		62,000
William A. Hasler		30,000
James D. Meindl		67,000
V. Frank Mendicino		20,500
Edward F. Thompson		30,000
Carl A. Thomsen		457,554
Paul A. Kennard		381,127
Ryan R. Panos		202,000
Robert J. Schlaefli		248,000

     The following is a list of the stock and stock option transactions involving our executive officers and directors during the sixty (60) days prior to and including June 9, 2003:

Ryan R. Panos Purchase of 500 shares of STXN Common Stock through the 1999 Stratex Networks, Inc. Employee Stock Purchase Plan on April 30, 2003

11. Status of Options Acquired by Us in this Offer; Accounting Consequences of this Offer.

     Options we acquire pursuant to this Offer will be cancelled on the first business day following the Expiration Date, and the shares of common stock subject to those options will be returned to the pool of shares available for the grant of new options and for issuance of shares upon the exercise of new options under their respective option plan. To the extent such shares are not fully reserved for issuance upon exercise of the Replacement Options to be granted in connection with this Offer, the shares will be available for future awards to directors, employees and other eligible plan participants without further stockholder action, except as required by applicable law or the rules of the Nasdaq Stock Market or any other securities quotation system or stock exchange on which our common stock is then quoted or listed.

     We believe that Stratex will not incur any compensation expense solely as a result of the transactions contemplated by this Offer because:

          •     we will not grant any Replacement Options for at least six months and one day after the date that we accept and cancel options elected for exchange; and

          •     the exercise price of all Replacement Options will equal the market value of the common stock on the date we grant the Replacement Options (or as modified to comply with local tax laws for options granted in certain countries other than the United States).

     If we were to grant any options to any option holder who elects to participate in the Offer before the scheduled replacement Grant Date, our grant of those additional options to the electing option holder would be treated for financial reporting purposes as a variable award to the extent that the number of shares subject to such additional options is equal to or less than the number of the option holder’s Current Options elected for exchange and to the extent the per share exercise price of such options is less than the per share exercise price of the options elected

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for exchange by such holder. In this event, we would be required to record as a compensation expense the amount by which the market value of the shares subject to the additional options exceeds the exercise price of those shares. Similarly, we would be required to reverse such compensation expense by the amount (if any) by which the market value of the shares subject to the additional options decreases. This compensation expense would accrue as a variable accounting charge to our earnings over the period when the additional options are outstanding. Accordingly, we would have to adjust this compensation expense periodically during the option term based on increases or decreases in the market value of the shares subject to the additional options.

12. Legal Matters; Regulatory Approvals.

     We are not a party to any material legal proceedings relating to or affecting this Offer. We are not aware of any license or regulatory permit that appears to be material to our business that might be adversely affected by our cancellation of Current Options and issuance of Replacement Options as contemplated by this Offer to Exchange, or of any approval or other action by any government or governmental, administrative or regulatory authority or agency, domestic or foreign, that would be required for the acquisition or ownership of our options as contemplated herein. Should any such approval or other action be required, we presently contemplate that we will undertake commercially reasonable steps to seek such approval or take such other action. We are unable to predict whether we may in the future determine that we are required to delay the acceptance of options for exchange pending the outcome of any such matter. We cannot assure you that any such approval or other action, if needed, would be obtained or would be obtained without substantial conditions or that the failure to obtain any such approval or other action might not result in adverse consequences to our business. Our obligation under this Offer to accept options tendered for exchange and to issue Replacement Options for options tendered for exchange is subject to conditions, including the conditions described in Schedule A.

     If we are prohibited by applicable laws or regulations from granting Replacement Options on a specified date that is at least six months and one day from the date that we cancel the eligible options accepted for exchange, in which period we currently expect to grant the Replacement Options, we will not grant any Replacement Options. We are unaware of any such prohibition at this time, and we believe that the probability of Stratex being prohibited from issuing the Replacement Options pursuant to the Offer is highly unlikely. Examples of what would prohibit us from issuing the Replacement Options would be bankruptcy, losing the privilege of trading our shares on the U.S. Stock Exchanges or laws of the countries where we have employees that would prohibit us from issuing stock option grants to employees of a particular country. We will use reasonable efforts to effect the grant, but if the grant is prohibited we will not grant any Replacement Options and you will not receive any other consideration for the options that you tendered for exchange.

13. Material U.S. Federal Income Tax Consequences.

     The following is a general summary of the material U.S. federal income tax consequences of the exchange of options under the Offer. This discussion is based on the Internal Revenue Code, its legislative history, Treasury Regulations and administrative and judicial

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interpretations as of the date of this Offer to Exchange, all of which may change, possibly on a retroactive basis. This summary does not discuss all of the tax consequences that may be relevant to you in light of your particular circumstances, nor is it intended to apply in all respects to all categories of option holders.

     If you exchange Current Options for Replacement Options, you will not be required to recognize income for federal income tax purposes at the time of the exchange. We believe that the exchange will be treated as a non-taxable exchange.

     At the date of grant of the Replacement Options, you will not be required to recognize additional income for federal income tax purposes. The Replacement Options will be granted as non-qualified stock options regardless of whether the tendered Current Options are incentive stock options.

     We recommend that you consult your own tax advisor with respect to the federal, state and local tax consequences of participating in this Offer.

     If you choose not to exchange all of your Current Options, we also recommend that you consult with your own tax advisor to determine the tax consequences attributable to the exercise of the Current Options you do not exchange and to the subsequent sale of common stock purchased under these options.

     If you reside outside the United States, the information contained in this summary may not be applicable to you. You are advised to review the country specific disclosures below and to consult with an appropriate professional advisor as to how the tax or other laws of your country of residence apply to your specific situation.

     U.S. Federal Income Tax Consequences for Outstanding Incentive Stock Options. You will not be subject to any current income tax if you elect to exchange your incentive stock options for Replacement Options. As previously discussed, your Replacement Options will be granted as non-qualified stock options.

     The Offer will constitute a “modification” of any eligible incentive stock options that you do not tender in the Offer. The effect of a modification on your incentive stock options depends on whether the exercise price of your incentive stock options is equal to, higher or lower than the price of our stock on June 23, 2003. If the exercise price per share of the incentive stock option is equal to or higher than the price of our common stock on June 23, 2003, the Offer would extend the period you would have to hold the shares purchased under those options in order to qualify all of the gain on a subsequent sale of those shares as long-term capital gain. That extended holding period for long-term capital gain would require that any taxable sale or other disposition of the shares not take place until the later of (i) two years from the date of the deemed modification of your incentive stock options or (ii) one year from the date you exercise those shares. If the exercise price for your eligible incentive stock options is lower than the price of our common stock on June 23, 2003, your option would cease to qualify as an incentive stock option. Therefore, if the price of our common stock on June 23, 2003 is greater than $6.00, all of your eligible incentive stock options with an exercise price less than the price of our common stock on June 23, 2003 will be automatically be converted to non-qualified stock options.

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     In addition, if the eligible incentive stock options that you do not tender are partially or fully vested, a portion of your incentive stock options may cease to qualify as incentive stock options. This is because all your vested incentive stock options will be treated as becoming newly granted and exercisable as of the date of the Offer, (even if your incentive stock options became exercisable in prior years). To the extent that the fair market value of the stock underlying your vested incentive stock options exceeds $100,000 (such amount reduced by the value of any other incentive stock options that become exercisable in 2003 prior to the date of this Offer), the excess value will have to be treated as non-qualified stock options. For any given calendar year, the shares of Company stock that may become exercisable for the first time (i.e. vested) by an employee under an incentive stock option may not exceed a total value of $100,000. The valuation of the Company stock is based upon the aggregate fair market value of the stock on the date the incentive stock option is granted. Any incentive stock options that first become vested in excess of the $100,000 limitation in a calendar year are treated as non-qualified stock options rather than an incentive stock options. Thus, if you currently have vested incentive stock options and you choose not to participate in this exchange offer, some of your incentive stock options could automatically be converted to non-qualified options.

     While the exchange and cancellation of your incentive stock options will not give rise to any tax consequences, you should refer to the tax discussion below regarding “U.S. Federal Income Tax Consequences of Non-qualified Stock Options,” because your Replacement Options will be granted as non-qualified stock options.

     For income tax purposes, you did not realize taxable income when the incentive stock options were granted to you under the option plans. In addition, you generally will not realize taxable income when you exercise an incentive stock option. However, your alternative minimum taxable income will be increased by the amount that the aggregate fair market value of the shares you may purchase under the option, which is generally determined as of the date you exercise the option, exceeds the aggregate exercise price of the option. In order to avoid the application of alternative minimum tax with respect to incentive stock options, you must sell the shares within the same calendar year in which the incentive stock options were exercised. However, such a sale of shares within the same year of exercise will constitute a disqualifying disposition, as described below.

     Except in certain circumstances that are described in the option plans and your option agreement, such as your death or disability, if an option is exercised more than three months after your employment is terminated, the option will not be treated as an incentive stock option and is subject to taxation under the rules applicable to non-qualified stock options that are discussed below.

     Under current law, upon the exercise of an incentive stock option you are not subject to withholding for income taxes or the employee’s portion of FICA tax, and we do not have any FICA or FUTA liabilities. However, the IRS issued proposed regulations which, if adopted, would impose additional withholding and reporting requirements on employers in connection with the exercise of incentive stock options. The proposed rules and regulations would subject both employees and employers to withholding for FICA and FUTA taxes (not including federal income tax) at the time an incentive stock option is exercised based upon the excess, if any, of

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the fair market value of the incentive stock option shares on the date of exercise over the exercise price of the incentive stock option. The proposed rules and regulations will not become effective unless published as final regulations in the Federal Register, and will only apply to the exercise of an incentive stock option that occurs two years after the final regulations are published.

     If you dispose of common stock that you acquired by exercising an incentive stock option, the tax consequences of the disposition depend on whether the disposition is “qualifying” or “disqualifying.” The disposition of the common stock is qualifying if it is made after the later of: (a) more than two years from the date the incentive stock option was granted or (b) more than one year after the date the incentive stock option was exercised.

     If the disposition of the common stock you received when you exercised incentive stock options is qualifying, any excess of the sale price over the exercise price of the option will be treated as long-term capital gain taxable to you at the time of the sale. If the disposition is not qualifying, which we refer to as a “disqualifying disposition,” the lesser of (i) the difference between the amount realized on the disposition and the exercise price, or (ii) the difference between the fair market value of the stock on the exercise date and the exercise price will be ordinary income for income tax purposes. Any gain in excess of the amount taxed as ordinary income will be treated as long or short-term capital gain, depending on whether or not the common stock was sold more than one year after the option was exercised.

     If you sell common stock you received when you exercised an incentive stock option in a qualifying disposition, we will not be entitled to a deduction equal to the gain you realize when you completed that sale. However, if you sell, in a disqualifying disposition, common stock you received when you exercised an incentive stock option, we will be entitled to a deduction equal to the amount of ordinary income taxable to you.

     U.S. Federal Income Tax Consequences of Non-qualified Stock Options. Under current law, you will not realize taxable income upon the grant of a non-incentive or non-qualified stock option. However, when you exercise the option, the difference between the exercise price of the option and the fair market value of the shares subject to the option on the date of exercise will be treated as taxable compensation income to you, and you will be subject to withholding of income and employment taxes at that time. We will be entitled to a deduction equal to the amount of compensation income taxable to you.

     If you exchange shares in payment of part or all of the exercise price of a non-qualified stock option, no gain or loss will be recognized with respect to the shares exchanged, and you will be treated as receiving an equivalent number of shares pursuant to the exercise of the option in a nontaxable exchange. The tax basis of the shares exchanged will be treated as the substituted tax basis for an equivalent number of shares received, and the new shares will be treated as having been held for the same holding period as the holding period that expired with respect to the transferred shares. The difference between the aggregate exercise price and the aggregate fair market value of the shares received pursuant to the exercise of the option will be taxed as ordinary income, just as if you had paid the exercise price in cash.

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     The subsequent sale of the shares acquired pursuant to the exercise of a non-qualified stock option generally will give rise to capital gain or loss equal to the difference between the sale price and the sum of the exercise price paid for the shares plus the ordinary income recognized with respect to the shares, and these capital gains or losses will be treated as long term capital gains or losses if you held the shares for more than one year following exercise of the option.

14. A Guide to Issues in New Zealand.

     The following is a summary of the tax consequences of the cancellation of eligible options in exchange for the grant of Replacement Options for individuals subject to tax in New Zealand. This summary is general in nature and does not discuss all of the tax consequences that may be relevant to you in light of your particular circumstances, nor is it intended to be applicable in all respects to all categories of participants. Please note that tax laws change frequently and occasionally on a retroactive basis. If you are a citizen or resident of another country for local law purposes, the information contained in this summary may not be applicable to you.

     This summary also includes other country specific requirements that may affect your participation in the Option Exchange Program.

     You are advised to seek appropriate professional advice as to how the tax and other laws in your country apply to your specific situation.

Securities Information

     You will receive certain information regarding the granting of Replacement Options in general, the specific Option Exchange Program discussed in this Offer and possible tax implications in compliance with New Zealand securities laws.

Option Exchange

     You will not be subject to tax as a result of the exchange of eligible options for Replacement Options.

Grant of Replacement Option

     You will not be subject to tax when the Replacement Option is granted to you.

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Exercise of Replacement Option

     You will be subject to income tax when you exercise your Replacement Option on the difference between the fair market value of the shares and the exercise price. Accident Compensation Corporation (ACC) premiums will not, however, be payable on this amount.

Sale of Shares

     Because there is no general capital gains tax in New Zealand, you likely will not be subject to tax when you sell the shares acquired pursuant to the exercise of your Replacement Option (assuming you are not in the business of dealing in shares). However, tax is imposed on gains from the sale of shares where the shares were purchased for the purpose of selling or otherwise disposing of them (even if you are not in the business of dealing in shares). If you sell the shares within a short period of time after exercising your Replacement Option, you may be subject to tax on any gain realized. On the other hand, if you hold the shares for a year or more, you are more likely to successfully assert that you had an investment motive in acquiring the shares and should not be subject to tax on any gain realized. While there is some uncertainty regarding exactly how any taxable gain is measured for tax purposes, it is likely that the gain will be measured as the difference between the sale proceeds and the fair market value of the shares at exercise.

Withholding and Reporting

     Your employer is not required to withhold or report income tax or ACC contributions when you exercise your Replacement Option or when you sell shares. It is your responsibility to report and pay all applicable taxes.

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15. A Guide to Issues in the United Kingdom.

     The following is a summary of the tax consequences of the cancellation of eligible options in exchange for the grant of Replacement Options for individuals subject to tax in the United Kingdom. This summary is general in nature and does not discuss all of the tax consequences that may be relevant to you in light of your particular circumstances, nor is it intended to be applicable in all respects to all categories of participants. Please note that tax laws change frequently and occasionally on a retroactive basis. If you are a citizen or resident of another country for local law purposes, the information contained in this summary may not be applicable to you.

     This summary also includes other country specific requirements that may affect your participation in the Option Exchange Program.

     You are advised to seek appropriate professional advice as to how the tax and other laws in your country apply to your specific situation.

Option Exchange

     You will not be subject to tax or National Insurance Contributions (“NICs”) as a result of the exchange of an eligible option for the grant of a Replacement Option.

Grant of Replacement Option

     You will not be subject to tax or NICs when the Replacement Option is granted to you.

Exercise of Replacement Option

     You will be subject to tax when you exercise your Replacement Option. Income tax will be charged on the difference between the fair market value of the stock on the date of exercise and the exercise price (the “Spread”). Your employer will be responsible for tax withholding under the Pay As You Earn system in relation to the tax due on the gain realized on exercise of your Replacement Option and, therefore, for paying the income tax withheld to the UK Inland Revenue on your behalf. Your employer will inform you of how it intends to recoup the income tax that it pays on your behalf. If you fail to pay to your employer the income tax due within 90 days of the date of exercise of your Replacement Option, you will be deemed to have received a further taxable benefit equal to the amount of income tax due. This will give rise to a further income tax charge.

     Subject to comments in the next paragraph, you will also be subject to the employees’ portion of NICs on the Spread at exercise of your Replacement Option. With effect from April 6, 2003 employees’ NICs are payable at the rate of 11% up to the upper earnings limit set for employees’ NICs purposes and, in addition, 1% NICs will apply on earnings in excess of the upper earnings limit.

     If you were granted eligible options prior to May 19, 2000, you may be exempt (either entirely or in part) from NICs liability on the exercise of your Replacement Option. You should

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consult your tax advisor regarding whether favorable NICs treatment will apply to your Replacement Option.

Sale of Shares

     When you sell your shares, you will be subject to capital gains tax. For shares acquired after April 10, 2003, your taxable gain upon sale of shares will be calculated as the difference between the sale proceeds and the fair market value of the shares at exercise.

     Please note that an annual exemption is available to set against total gains of £7,700 for the tax year April 6, 2002 to April 5, 2003 and you may also be able to benefit from taper relief to reduce your chargeable gain. The rate of taper relief is dependant upon the number of years that the shares are held and whether the shares qualify as business assets (which in turn depends on whether you continue to be employed by a Stratex group company).

Withholding and Reporting

     Your employer is required to withhold and report income tax and NICs on the Spread at exercise. If the amount withheld is not sufficient to cover your actual liability, you will be responsible for paying the deficiency. In addition, you will be responsible for paying any taxes owed as a result of the sale of the shares.

     You will also be required to report the exercise of your Replacement Option and the subsequent disposal of your shares on your annual UK Tax Return.

Additional Reporting Requirements

     If you are a director or shadow director of a UK subsidiary of Stratex and the UK subsidiary is not wholly owned by Stratex, you are subject to certain notification requirements under the Companies Act 1985. Specifically, you must notify the UK subsidiary in writing of your interest in Stratex and the number and class of shares or rights to which the interest relates. You must also notify the UK subsidiary when you exercise your Replacement Option or sell shares acquired through exercise of your Replacement Option. This disclosure requirement also applies to any rights or shares acquired by your spouse or child (under the age of 18).

16. A Guide to Issues in South Africa.

     The following is a summary of the tax consequences of the cancellation of eligible options in exchange for the grant of Replacement Options for individuals subject to tax in South Africa. This summary is general in nature and does not discuss all of the tax consequences that may be relevant to you in light of your particular circumstances, nor is it intended to be applicable in all respects to all categories of participants. Please note that tax laws change frequently and occasionally on a retroactive basis. If you are a citizen or resident of another country for local law purposes, the information contained in this summary may not be applicable to you.

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     This summary also includes other country specific requirements that may affect your participation in the Option Exchange Program.

     You are advised to seek appropriate professional advice as to how the tax and other laws in your country apply to your specific situation.

Option Exchange

     We do not believe that you will be subject to tax as a result of the exchange of an eligible option for a Replacement Option.

Grant of Replacement Option

     You will not be subject to tax when the Replacement Option is granted to you.

Exercise of Replacement Option

     When you exercise the Replacement Option, you will be subject to income tax on the difference between the fair market value of the shares on the date of exercise and the exercise price.

Sale of Shares

     You will likely be subject to tax when you subsequently sell the shares. The taxable amount will be the difference between the sale proceeds and the fair market value of the shares on the date of exercise and such amount will be added to your taxable income. If you can demonstrate to the satisfaction of the South African Revenue Service (the “SARS”) that you acquired your shares with a view to holding the shares as a capital asset rather than a profit-making scheme, you will be subject to capital gains tax and then only 25% of the gain will be added to your taxable income. In addition, regardless of whether the shares are held as a capital asset, you will not be taxed on the first ZAR 10,000 of your annual aggregated capital gains.

Withholding and Reporting

     Your employer is required to withhold and report income tax and social insurance contributions when you exercise your Replacement Option. It is your responsibility to notify your employer of the amount of your gain upon exercise immediately after exercising your Replacement Option. Once the notification is made, your employer will obtain a directive from the SARS as to the correct amount of the tax to be withheld. If you fail to advise your employer of any gain you receive, you may be liable for a fine. You will be responsible for paying any difference between the actual tax liability and the amount withheld. It is also your responsibility to pay any tax liability that arises at the sale of shares and on any dividends received.

Exchange Control Information

     You must comply with exchange control regulations in South Africa. The Exchange Control Department of the South African Reserve Bank (the “Exchange Control”) requires that

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approval be sought for the participation by South African residents in foreign share incentive schemes. Stratex may obtain the approval of the Exchange Control to operate its foreign share incentive scheme in South Africa. However, if Stratex does not obtain this approval, it is your responsibility to obtain the necessary approval. If such approval is obtained, it is likely that the terms of the approval will permit you to invest a maximum of ZAR 750,000 in foreign investments.

     Because the exchange control regulations change frequently and without notice, you should consult your legal advisor prior to the purchase or sale of shares to ensure compliance with current regulations. It is your responsibility to comply with South African exchange control laws, and neither Stratex nor your employer will be liable for any resulting fines or penalties.

17. A Guide to Issues in Singapore.

     The following is a summary of the tax consequences of the cancellation of eligible options in exchange for the grant of Replacement Options for individuals subject to tax in Singapore. This summary is general in nature and does not discuss all of the tax consequences that may be relevant to you in light of your particular circumstances, nor is it intended to be applicable in all respects to all categories of participants. Please note that tax laws change frequently and occasionally on a retroactive basis. If you are a citizen or resident of another country for local law purposes, the information contained in this summary may not be applicable to you.

     This summary also includes other country specific requirements that may affect your participation in the Option Exchange Program.

     You are advised to seek appropriate professional advice as to how the tax and other laws in your country apply to your specific situation.

Option Exchange

     You may be subject to tax as a result of the exchange of an eligible option for the right to a Replacement Option as the Inland Revenue Authority of Singapore (the “IRAS”) may view the exchange as a taxable “release” of an existing right. In practice, the IRAS is likely to disregard the “release” of the options and simply tax the Replacement Options when you exercise them. However, this result is not certain.

Grant of Replacement Option

     You will not be subject to tax when the Replacement Option is granted to you.

Exercise of Replacement Option

     Assuming you are not taxed when the eligible options are cancelled, when you exercise the Replacement Option, you will likely be subject to income tax on the difference between the fair market value of the shares on the date of exercise and the exercise price (the “Spread”)

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unless you are eligible for an exemption or deferral as discussed below. You will not likely be subject to Central Provident Fund contributions.

Company Employee Equity-Based Remuneration Scheme (“CEEBR Scheme”)¹

     You may be able to claim a tax exemption on the first S$2,000 of Spread per year and 25% of the remaining Spread per year subject to a total exemption of S$1 million over a 10-year period beginning in the year you exercise your options. To take advantage of this tax exemption, the vesting provisions of your options must be as follows:

     (a)     where the exercise price is equal to at least the fair market value of the underlying shares on the date of grant, the option may not be exercised within one year of the grant of the option; and

     (b)     where the exercise price is less than the fair market value of the underlying shares on the date of grant (i.e., discounted option), the option may not be exercised within two years of the grant of the option.

     In addition, the CEEBR Scheme must be offered to at least 50% of the Singapore company’s employees.

     You should consult your tax advisor to determine if you qualify for this exemption in whole or in part (i.e., the portion, if any, of the Replacement Option vesting one year or more after the new grant date).

Qualified Employee Equity-Based Remuneration (“QEEBR Scheme”)²

     You may also be able, in certain circumstances, to defer the tax due at exercise under the QEEBR Scheme on the portion of the Spread that was not exempt, if any, from tax under the CEEBR Scheme. You should consult with a tax adviser to determine if you qualify for this deferral. If you think that you qualify, you should apply to the to the IRAS for the deferral. If you qualify for deferral under the QEEBR Scheme, you will accrue interest on the deferred tax as explained below.

     To qualify for tax deferral under the QEEBR Scheme, you would have to satisfy the following conditions:

     (a)     you are employed in Singapore at the time the option is exercised;

     (b)     the Replacement Option was granted to you by the company for whom you are working at the time of exercise of the Replacement Option or an associated company of that company;

¹ Formerly called the “Company Stock Option Scheme”

² Formerly called the “Qualified Employee Stock Option Plan Scheme”

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     (c)     the tax payable on the QEEBR gains is not borne by your employer; and

     (d)     the minimum vesting periods that are applicable to CEEBR Schemes (discussed above) must be met.

     You will not qualify for the QEEBR Scheme if:

     (a)     you are an undischarged bankrupt;

     (b)     IRAS records show that you are a delinquent taxpayer; or

     (c)     the tax deferred under the QEEBR Scheme is less than S$200.

     You should consult your tax advisor to determine if you qualify for the QEEBR Scheme in whole or in part (i.e., the portion, if any, of the Replacement Option vesting one year or more after the new grant date).

     If you are a qualifying employee, you may apply to the IRAS for tax deferral at the time of filing your income tax return for the Year of Assessment (“YOA”) (i.e., the year in which option is exercised and the Spread would be subject to tax unless deferred). You would have to submit to the IRAS the Application Form for Deferment of Tax on Gains from the QEEBR, together with your employer’s certification on the Application Form that the QEEBR is properly qualified and your tax returns.

     The maximum deferral period is five years starting from January 1 after the YOA. Subject to the maximum of five years, an employee can choose to defer the payment of the tax on the QEEBR gains for any period of time.

     The interest charge on the deferred tax will commence one month after the date of assessment (i.e., the date you exercise the option). The interest rate chargeable will be pegged to the average prime rate of the Big Three Banks offered on April 15 of each year and interest will be computed annually based on said rate using the simple interest method. The tax deferred and the corresponding amount of interest would be due on the expiration of the deferral period. You may settle the deferred tax earlier in one lump sum.

     Tax payment deferral will cease and payment of the tax plus the corresponding interest will become due immediately:

     (a)       in the case of a foreign employee (including a Singapore PR), when you

(i)	terminate your employment in Singapore and leave Singapore;
(ii)	are posted overseas; or
(iii)	leave Singapore for any period exceeding three months;

     (b)       when you become bankrupt; and

     (c)       when you die (the deferred tax would be recovered from your estate).

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Sale of Shares

     If you acquire shares at exercise, you will not be subject to tax when you subsequently sell the shares provided you are not in the business of buying and selling securities.

Withholding and Reporting

     Your employer is not required to withhold income tax or Central Provident Fund contributions with respect to the exchange, grant of Replacement Options, exercise of Replacement Options or upon the sale of shares. However, if you are not a Singaporean citizen or permanent resident of Singapore and you are about to cease employment or leave Singapore, special withholding rules will apply to you and you should consult with your tax advisor.

     Even though your employer is not generally required to withhold taxes, your employer will prepare a Form IR8A each year stating the salary or benefits paid to you during the year. This will include the value of the shares which you acquire pursuant to exercise. Your employer will provide this Form IR8A to you. It is then your responsibility to report and pay all applicable taxes due.

Additional Reporting Requirements

     If you are a director, associate director or shadow director of a Singapore affiliate of Stratex, you are subject to certain notification requirements under the Singapore Companies Act. Among these requirements is an obligation to notify the Singapore affiliate in writing when you receive an interest (e.g., options, shares) in Stratex or any related companies. Please contact Stratex to obtain a copy of the notification form. You must also notify the Singapore affiliate when you sell shares of Stratex or any related company (including when you sell shares acquired under the exchange program) or if you participate in the Option Exchange Program. These notifications must be made within two days of acquiring or disposing of any interest in Stratex or any related company. In addition, a notification must be made of your interests in Stratex or any related company within two days of becoming a director.

18. Extension of Offer; Termination; Amendment.

     We expressly reserve the right, in our discretion, at any time and from time to time, and regardless of whether any event set forth in the attached Schedule A has occurred or is deemed by us to have occurred, to extend the period of time during which this Offer is open, and thereby delay the acceptance for exchange of any options, by giving oral or written notice of such extension to the option holders eligible to participate in the exchange.

     This Offer is subject to and contingent upon obtaining stockholder approval of the Offer at the 2003 Annual Meeting of Stockholders on July 15, 2003. If the stockholders of the Company do not approve the Offer at the 2003 Annual Meeting of Stockholders on July 15, 2003, the Offer will be deemed automatically withdrawn. In addition, the contingent tender of any options will be automatically cancelled and such options will continue to be subject to their original terms.

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     We also expressly reserve the right, in our judgment, prior to the Expiration Date, to terminate or amend this Offer and to postpone our acceptance and cancellation of any options elected for exchange upon the occurrence of any of the conditions specified in Schedule A by giving oral or written notice of such termination, amendment or postponement to the option holders eligible to participate in the exchange. In the event such termination or withdrawal of the Offer occurs prior to the Expiration Date, we will release the options tendered for exchange promptly after termination or withdrawal of the Offer and the options you previously tendered for exchange will continue to be subject to their original terms (with some possible change in tax treatment if the tendered options are incentive stock options, see Section 13 of “The Offer” for more details).

     Subject to compliance with applicable law, we further reserve the right, in our discretion, and regardless of whether any event set forth in Schedule A has occurred or is deemed by us to have occurred, to amend this Offer in any respect, including, without limitation, by decreasing or increasing the consideration offered in this Offer to option holders or by decreasing or increasing the number of options being sought in this Offer.

     Amendments to this Offer may be made at any time and from time to time. In the case of an extension, the amendment must be issued no later than 9:00 a.m. Pacific Time on the next business day after the last previously scheduled or announced Expiration Date. Notice of any amendment to this Offer will be disseminated promptly to option holders in a manner reasonably designed to inform option holders of such change.

     If we materially change the terms of this Offer or the information concerning this Offer, or if we waive a material condition of this Offer, we will extend this Offer. Except for a change in the consideration offered for the options or a change in the number of options eligible for exchange in this Offer, the amount of time by which we will extend this Offer following a material change in the terms of this Offer or information concerning this Offer will depend on the facts and circumstances, including the relative materiality of such terms or information. If we decide to take any of the following actions, we will notify you of such action in writing after the date of such notice:

     (a)     we increase or decrease the amount of consideration offered for the options;

     (b)     we decrease the number of options eligible to be elected for exchange in this Offer; or

     (c)     we increase the number of options eligible to be elected for exchange in this Offer by an amount that exceeds 2% of the shares of common stock issuable upon exercise of the options that are subject to this Offer immediately prior to the increase.

     If this Offer is scheduled to expire at any time earlier than the expiration of a period ending on the tenth business day from, and including, the date that notice of such increase or decrease is first sent or given in the manner specified in Section 18 of this Offer to Exchange, we will extend the Offer so that the Offer is open at least 10 business days following the sending or giving of notice.

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19. Fees and Expenses.

     We will not pay any fees or commissions to any broker, dealer or other person for soliciting elections to exchange options pursuant to this Offer to Exchange.

20. Additional Information.

     We have filed with the SEC a Tender Offer Statement on Schedule TO, of which this Offer to Exchange is a part. This Offer to Exchange does not contain all of the information contained in the Schedule TO and the exhibits to the Schedule TO. We recommend that, in addition to this Offer to Exchange and the on-line election form, you review the following materials that we have filed with the SEC before making a decision on whether to elect to exchange your options:

     (a)     Stratex Networks, Inc.’s Annual Report on Form 10-K for the year ended March 31, 2003, filed with the SEC on May 19, 2003 (Commission File No. 0-15895).

     (b)     Stratex Networks, Inc.’s definitive Proxy Statement for our 2003 Annual Meeting of Stockholders, filed with the SEC on April 16, 2003.

     (c)     Stratex Networks, Inc.’s Registration Statements on Form S-8 (File No. 333-94438) (registering shares to be issued under the 1994 Stock Incentive Plan), filed with the SEC on July 10, 1995.

     (d)     Stratex Networks, Inc.’s Registration Statements on Form S-8 (File No. 333-11387) (registering shares to be issued under the 1996 Non-Officer Employee Stock Option Plan), filed with the SEC on September 4, 1996.

     (e)     Stratex Networks, Inc.’s Registration Statements on Form S-8 (File No. 333-48535) (registering shares to be issued under the 1998 Non-Officer Employee Stock Option Plan), filed with the SEC on March 24, 1998.

     (f)     Stratex Networks, Inc.’s Registration Statements on Form S-8 (File No. 333-85135) (registering shares to be issued under the 1999 Stock Incentive Plan), filed with the SEC on August 13, 1999.

     (g)     Stratex Networks, Inc.’s Registration Statements on Form S-8 (File No. 33398735) (registering shares to be issued under the 2002 Stock Incentive Plan), filed with the SEC on August 26, 2002.

     (e)     The description of Stratex Networks, Inc.’s common stock, par value $.001 per share, set forth in Stratex Networks, Inc.’s registration statements filed pursuant to Section 12 of the Securities Exchange Act of 1934, and any amendment or report filed for the purpose of updating such descriptions.

     We hereby incorporate by reference additional documents that we may file with the SEC between the date of this Offer and the Expiration Date of the Offer. These include periodic

42

reports, such as quarterly reports on Form 10-Q and current reports on Form 8-K, as well as proxy statements.

     These filings, our other annual, quarterly and current reports, our proxy statements and our other SEC filings may be examined, and copies may be obtained, at the SEC’s public reference rooms at 450 Fifth Street, N.W. Room 1024 Washington, D.C. 20549. You may obtain information on the operation of the public reference rooms by calling the SEC at (800) SEC-0330.

     Our SEC filings are also available to the public on the SEC’s internet site at http://www.sec.gov.

     Our common stock is quoted on the Nasdaq National Market under the symbol “STXN” and our SEC filings can be read at the following Nasdaq address:

     Nasdaq Operations, 1735 K Street, N.W., Washington, D.C. 20006

     We will also provide, without charge, to each person to whom a copy of this Offer to Exchange is delivered, upon the written or oral request of any such person, a copy of any or all of the documents to which we have referred you, other than exhibits to such documents (unless such exhibits are specifically incorporated by reference into such documents). Requests should be directed to: Stratex Networks, Inc., Attention: Corporate Secretary, 120 Rose Orchard Way, San Jose, California 95134, or by telephoning us at (408) 943-0777 between the hours of 8:00 a.m. and 5:00 p.m. Pacific Time. The materials are also available on our website at www.stratexnet.com.

     As you read the foregoing documents, you may find some inconsistencies in information from one document to another. If you find inconsistencies between the documents, or between a document and this Offer to Exchange, you should rely on the statements made in the most recent document.

     The information contained in this Offer to Exchange about Stratex Networks, Inc. should be read together with the information contained in the documents to which we have referred you.

21. Certain Risks of Participating in the Offer.

     Participation in the Offer involves a number of potential risks, including those described below. This section briefly highlights some of the risks and is necessarily incomplete. Eligible Employees should carefully consider these and other risks and are encouraged to speak with an investment and tax advisor as necessary before deciding to participate in the Offer. In addition, we strongly urge you to read this Offer to Exchange carefully before deciding to participate in the Offer. The list of risks does not include certain risks that may apply to Eligible Employees who live and work outside of the United States. We urge those employees to read the sections in this Offer to Exchange discussing tax consequences in various countries, as well as the other documents listed above, and to consult with an investment and tax advisor as necessary before deciding to participate in this Offer.

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     If our stock price increases after the date your tendered Current Options are cancelled, your cancelled Current Options might have been worth more than the Replacement Options that you will receive in exchange for them.

     For example, if you cancel a Current Option with a $6.50 exercise price, and the Company’s common stock appreciates to $8.00 per share when the Replacement Options are granted, your Replacement Option will have a higher exercise price than your Current Option and represent the right to purchase fewer shares of common stock than your Current Option.

     If Stratex is acquired by or merges with another company, your cancelled Current Options might have been worth more than the Replacement Options that you will receive in exchange for them.

     These types of transactions could have substantial effects on the price of our common stock, including potentially substantial appreciation in the price of our stock. Depending on the structure of this type of transaction, tendering Eligible Employees might be deprived of any further price appreciation in the stock associated with the Replacement Options. In addition, in the event of an acquisition of our Company for stock, tendering Eligible Employees might receive Replacement Options to purchase shares of a successor to our Company, where the exercise price of the Replacement Options would be equal to the fair market value of such acquirer’s stock on the Grant Date. Eligible Employees who do not tender in the Offer will have their outstanding Current Options treated in accordance with the terms of the applicable stock option plan and if their Current Options are assumed by the successor to our Company, those options would be priced in accordance with the terms of the transaction. This could potentially result in a greater financial benefit for those Eligible Employees who opted not to participate in this Offer and who instead retained their Current Options.

     If your employment terminates after we cancel options tendered for exchange but prior to the grant of the Replacement Options, you will receive neither the Replacement Options nor the return of your cancelled Current Options.

     Once your Current Options are cancelled, you will no longer have any rights with respect to these options. Accordingly, if your employment terminates for any reason prior to the grant of the Replacement Options, you will not have the benefit of either the cancelled Current Options or the Replacement Options.

     If your employment terminates as part of a reduction-in-force that occurs after we cancel options elected for exchange but prior to the grant of the Replacement Options, you will receive neither the Replacement Options nor the return of your cancelled Current Options.

     If the economic conditions in the United States remain stagnant or worsen or if a wider or global economic slowdown occurs, our business, operating results, and financial condition may be materially adversely impacted and we may undertake various measures to reduce our expenses including, but not limited to, reductions-in-force of certain of our employees or those of our Participating Subsidiaries.

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     If your employment terminates as a result of an acquisition or merger of Stratex that occurs after we cancel options elected for exchange but prior to the grant of the Replacement Options, you will receive neither the Replacement Options nor the return of your cancelled Current Options.

     If another company acquires Stratex, that company may, as part of the transaction or otherwise, decide to terminate some or all of our employees prior to the grant of Replacement Options under the Stock Option Exchange Program. Termination for this, or any other, reason before the Replacement Options are granted means that you will not receive the Replacement Options, nor will you receive any other consideration for your Current Options that were cancelled.

     Tax-Related Risks for Non-U. S. Residents. If you are an Eligible Employee residing outside of the U.S. and you take advantage of this Offer, you may be liable for tax and social insurance contributions on the fair market value of the Replacement Options. Additionally, you may lose the ability to claim preferential tax treatment in connection with your Replacement Options. In addition, you may have exchange control reporting obligations associated with the transfer of funds in connection with the Replacement Options or the ownership of foreign shares of stock. The summaries of the tax implications of the option exchange set forth in this Offer to Exchange are general in nature and necessarily incomplete and may not apply to your specific circumstances. In addition, tax consequences change frequently and occasionally on a retroactive basis. We therefore strongly recommend you consult with a tax advisor in your own country as to the tax consequences of participating in the Offer. If you are eligible for the Offer because you live or work in one country but are also subject to the tax laws in another country, you should be aware that there may be other tax and social insurance consequences which may apply to you. You should consult your own tax advisor to discuss these consequences.

     Business-Related Risks. The risk factors relating to the Company’s business and prospects included on pages 11 to 23 of our Annual Report on Form 10-K for the year ended March 31, 2003 are incorporated herein by reference. See “Additional Information” under Section 21 for instructions on how you can obtain copies of our SEC reports.

22. Miscellaneous.

     This Offer to Exchange and our SEC reports referred to above contain forward-looking statements, which are generally written in the future tense and/or are preceded by words such as “will,” “may,” “should,” “could,” “expect,” “suggest,” “believe,” “anticipate,” “intend,” “plan,” or other similar words. Forward-looking statements include statements regarding (1) our gross margins and factors that affect gross margins, such as the costs of raw materials, our ability to absorb manufacturing costs, trends in selling prices, and the sale of previously reserved inventory; (2) our research and development efforts; (3) the commercial success of our new products; (4) trends in future sales; (5) the availability of cash to finance operations; (6) our ability to hold our fixed income investments until maturity; and (7) future economic conditions.

     Forward-looking statements are not guarantees of future performance and involve risks and uncertainties. The forward-looking statements contained in this Offer to Exchange and our

45

     SEC reports referred to above are based on information available to us as of the date of such documents and expectations and assumptions that we deem reasonable at the time the statements were made. We do not undertake any obligation to update any forward-looking statements in this Offer to Exchange or in any of our other communications, except as required by law. All such forward-looking statements should be read as of the time the statements were made and with the recognition that these forward-looking statements may not be complete or accurate at a later date.

     The safe harbor provided in the Private Securities Litigation Reform Act of 1995, by its terms, does not apply to statements made in connection with this tender offer.

     Many factors may cause actual results to differ materially from those expressed or implied by the forward-looking statements contained in this Offer to Exchange.

     We have not authorized any person to make any recommendation on our behalf as to whether you should elect to exchange or refrain from exchanging your options pursuant to this Offer. You should rely only on the information contained in this document, in the related election form or other information to which we have referred you and the information provided by representatives of the Human Resources Department. We have not authorized anyone to give you any information or to make any representations in connection with this Offer other than the information and representations contained in this document, in the related election form or other information to which we have referred you and the information provided by representatives of the Stock Administration and Finance Departments. If any other person makes any recommendation or representation to you or gives you any information, you must not rely upon that recommendation, representation or information as having been authorized by us.

Stratex Networks, Inc.
June 23, 2003

46

SCHEDULE A
CONDITIONS OF THIS OFFER

     Notwithstanding any other provision of this Offer, we will not be required to accept any options tendered for exchange, and we may terminate or amend this Offer, or postpone our acceptance and cancellation of any options tendered for exchange, in each case subject to certain limitations, if at any time on or after June 23, 2003 and prior to the Expiration Date, any of the following events has occurred or has been determined by us to have occurred, regardless of the circumstances giving rise thereto:

     (a)     the stockholders of the Company do not approve the Offer at the 2003 Annual Meeting of Stockholders on July 15, 2003;

     (b)     there shall have been threatened or instituted or be pending any action or proceeding by any government or governmental, regulatory or administrative agency, authority or tribunal or any other person, domestic or foreign, before any court, authority, agency or tribunal that directly or indirectly challenges the making of this Offer, the acquisition of some or all of the options elected for exchange pursuant to this Offer or the issuance of Replacement Options, or otherwise relates in any manner to the Offer or that, in our reasonable judgment, could materially and adversely affect the business, condition (financial or other), income, operations or prospects of Stratex or our subsidiaries or affiliates, or otherwise materially impair in any way the contemplated future conduct of our business or the business of any of our subsidiaries or affiliates or materially impair the contemplated benefits of the Offer to us;

     (c)     there shall have been any action threatened, pending or taken, or approval withheld, or any statute, rule, regulation, judgment, order or injunction threatened, proposed, sought, promulgated, enacted, entered, amended, enforced or deemed to be applicable to this Offer or us, by any court or any authority, agency or tribunal that would or might directly or indirectly:

               (i)     make the acceptance for exchange of, or issuance of Replacement Options for, some or all of the options tendered for exchange illegal or otherwise restrict or prohibit consummation of this Offer;

               (ii)     delay or restrict our ability, or render us unable, to accept for exchange or issue Replacement Options for some or all of the options tendered for exchange; or

               (iii)     materially and adversely affect the business, condition (financial or other), income, operations or prospects of Stratex or our subsidiaries or affiliates, or otherwise materially impair in any way the contemplated future conduct of our business or the business of any of our subsidiaries or affiliates or materially impair the contemplated benefits of the Offer to us;

     (d)     there shall have occurred:

               (i)     any general suspension of trading in, or limitation on prices for, securities

47

on any national securities exchange or in the over-the-counter market;

               (ii)     the declaration of a banking moratorium or any suspension payments in respect of banks in the United States, whether or not mandatory;

               (iii)     the commencement or escalation of a war, armed hostilities or other international or national crisis directly or indirectly involving the United States;

               (iv)     any limitation, whether or not mandatory, by any governmental, regulatory or administrative agency or authority on, or any event that might affect, the extension of credit by banks or other lending institutions in the United States;

               (v)     any decrease of greater than 50% of the market price of the shares of our common stock or any change in the general political, market, economic or financial conditions in the United States or abroad that could have a material adverse effect on the business, condition (financial or other), operations or prospects of Stratex Networks, Inc. or on the trading in our common stock;

               (vi)     any change in the general political, market, economic or financial conditions in the United States or abroad that could have a material adverse effect on the business, condition (financial or other), operations or prospects of our subsidiaries or affiliates or that, in our reasonable judgment, makes it inadvisable to proceed with the Offer;

               (vii)     in the case of any of the foregoing existing at the time of the commencement of this Offer, a material acceleration or worsening thereof; or

               (viii)     any decline in either the Dow Jones Industrial Average or the Standard and Poor’s Index of 500 Companies by an amount in excess of 10% measured during any time period after the close of business on June 23, 2003;

     (e)     there shall have occurred:

               (i)     any change in generally accepted accounting standards which could or would require us for financial reporting purposes to record compensation expense against our earnings in connection with this Offer; or

               (ii)     any other change in generally accepted accounting standards that would materially impair the contemplated benefits of this Offer to us;

     (f)     a tender or exchange offer with respect to some or all of our common stock, or a merger or acquisition proposal for us, shall have been proposed, announced or made by another person or entity or shall have been publicly disclosed, or we shall have learned that:

               (i)     any person, entity or group within the meaning of Section 13(d)(3) of the Securities Exchange Act, shall have acquired or proposed to acquire beneficial ownership of more than 5% of the outstanding shares of our common stock, or any new group shall have been

48

formed that beneficially owns more than 5% of the outstanding shares of our common stock, other than any such person, entity or group that has filed a Schedule 13D or Schedule 13G with the SEC on or before June 23, 2003;

          (ii)     any such person, entity or group that has filed a Schedule 13D or Schedule 13G with the SEC on or before June 23, 2003 shall have acquired or proposed to acquire beneficial ownership of an additional 2% or more of the outstanding shares of our common stock; or

          (iii)     any person, entity or group shall have filed a Notification and Report Form under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, or made a public announcement reflecting an intent to acquire us or any of the assets or securities of us; or

     (g)     any change or changes shall have occurred in the business, condition (financial or other), assets, income, operations, prospects or stock ownership of Stratex Networks, Inc. or our subsidiaries or affiliates that, in our reasonable judgment, is or may be material to Stratex Networks, Inc. or our subsidiaries or affiliates.

     The conditions to this Offer are for our benefit. We may assert them in our discretion regardless of the circumstances giving rise to them prior to the expiration time. We may waive them, in whole or in part, at any time and from time to time prior to the Expiration Date, in our discretion, whether or not we waive any other condition to this Offer. Our failure at any time to exercise any of these rights will not be deemed a waiver of any such rights. The waiver of any of these rights with respect to particular facts and circumstances will not be deemed a waiver with respect to any other facts and circumstances. Any determination we make concerning the events described in this Schedule A will be final and binding upon all persons.

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SCHEDULE B

INFORMATION CONCERNING THE DIRECTORS AND EXECUTIVE OFFICERS OF
STRATEX NETWORKS, INC.

     The directors and executive officers of Stratex Networks, Inc. and their positions and offices as of June 9, 2003 are set forth in the following table:

NAME	POSITION WITH THE COMPANY
Charles D. Kissner	Chairman and Chief Executive Officer
Richard C. Alberding	Outside Director
John W. Combs	Outside Director
William A. Hasler	Outside Director
James D. Meindl	Outside Director
V. Frank Mendicino	Outside Director
Edward F. Thompson	Outside Director
Carl A. Thomsen	Senior Vice President, Chief Financial Officer and Corporate Secretary
Paul A. Kennard	Vice President, Product Development and Chief Technical Officer
Ryan R. Panos	Vice President Worldwide Sales and Service
Robert J. Schlaefli	Vice President Global Operations

     The address of each director and executive officer is: c/o Stratex Networks, Inc., 120 Rose Orchard Way, San Jose, California 95134.

EX-99.(A)(2) 4 f90816toexv99wxayx2y.htm EXHIBIT (A)(2)

Exhibit (a)(2)

LETTER OF TRANSMITTAL

PURSUANT TO THE OFFER TO EXCHANGE DATED JUNE 23, 2003

TO TENDER CERTAIN OPTIONS

TO PURCHASE SHARES OF COMMON STOCK

FOR REPLACEMENT OPTIONS

THE OFFER AND WITHDRAWAL RIGHTS EXPIRE AT

5:00 P.M., PACIFIC TIME, ON FRIDAY, JULY 25, 2003,

UNLESS THE OFFER IS EXTENDED.

To:	Stock Administrator
	Stratex Networks, Inc.
	120 Rose Orchard Way
	San Jose, California 95134
	Telephone: (408) 943-0777
	Facsimile: (408) 944-1701

DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS
OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION VIA FACSIMILE
TO A NUMBER OTHER THAN AS SET FORTH ABOVE
WILL NOT CONSTITUTE A VALID DELIVERY.

     To Stratex Networks, Inc.:

     Upon the terms and subject to the conditions set forth in the Offer to Exchange dated June 23, 2003 (the “Offer to Exchange”), my receipt of which I hereby acknowledge, and in this

Letter of Transmittal (this “Letter” which, together with the Offer to Exchange, as they may be amended from time to time, constitutes the “Offer”), I, the undersigned, hereby tender to Stratex Networks, Inc., a Delaware corporation (the “Company”), the options to purchase shares (“Option Shares”) of common stock, par value $.001 per share, of the Company (the “Common Stock”) within one or more Tiers specified in the table below (the “Options”) in exchange for a lesser number of “Replacement Options” to purchase shares of Common Stock issued under Company’s the 1994 Stock Incentive Plan, 1996 Non-Officer Employee Stock Option Plan, 1998 Non-Officer Employee Stock Option Plan, 1999 Stock Incentive Plan and/or 2002 Stock Incentive Plan.

     In return for the Options I elect to exchange, the table below shows the number of shares of common stock subject to the Options that will be exchanged for each share of common stock subject to the Replacement Option, based on the exercise price of the Option:

			Exchange Ratios based on
			a Common Stock Average Market
	Exercise Price of Current		Value per Share of
Tier	Options		$3.00:
0	$	6.00 or Less		N/A
1	$	6.01 - $8.00		1.00 : 1.40
2	$	8.01 - $15.00		1.00 : 2.00
3	$	15.01 or Higher		1.00 : 2.50

     Options issued to me after December 20, 2002 (the “Six Month Prior Options”) will be replaced at a 1.00 : 1.25 exchange ratio.

     In the table below, I have selected the lowest Tier in which I intend to voluntarily exchange options by initialing ONLY ONE of the three choices in the table below. I agree that once I have selected the lowest Tier in which I will voluntarily exchange options, I will automatically be deemed to have tendered all eligible outstanding options (a) in the Tier that I have selected and (b) in all Tiers above the Tier that I have selected. In addition, I will automatically be deemed to have tendered for exchange any Six Months Prior Options, regardless of exercise price.

     Prior to selecting the lowest Tier in which you intend to voluntarily exchange options, you should reference your personal option statement at www.benefitaccess.com to determine which options will be tendered under each of the following three Tier selections.

			Please Initial the
			Lowest Tier in
	Exercise Price of		Which You Will
Tier	Current Options	Description of Selection	Participate (1)
1	$6.01 — $8.00	By initialing the box corresponding to Tier 1, I agree to exchange all my eligible options in Tier 1, Tier 2 and Tier 3.
2	$8.01 — $15.00	By initialing the box corresponding to Tier 2, I agree to exchange all my eligible options in Tier 2 and Tier 3. My eligible options in Tier 1 (if any) will not be exchanged
3	$15.01 or Higher	By initialing the box corresponding to Tier 3, I agree to exchange all my eligible options in Tier 3. My eligible options in Tier 1 (if any) and Tier 2 (if any) will not be exchanged

     (1)     IMPORTANT: Please select and initial the lowest Tier in which you will voluntarily exchange options. You may select only one Tier from the above table. Once you have selected the lowest Tier in which you will voluntarily exchange options, you will automatically be deemed to have tendered all eligible outstanding options (a) in the Tier you selected and (b) in all Tiers above the Tier you selected. In addition, you will automatically be deemed to have tendered for exchange any Six Months Prior Options, regardless of exercise price.

     Subject to, and effective upon, the Company’s acceptance for exchange of the Options tendered herewith in accordance with the terms and subject to the conditions of the Offer (including, if the Offer is extended or amended, the terms and conditions of any such extension or amendment), I hereby sell, assign and transfer to, or upon the order of, the Company all right, title and interest in and to all of the Options that I am tendering hereby. I acknowledge that the Company has advised me to consult with my own advisors as to the consequences of participating or not participating in the Offer. Subject to and contingent upon stockholder approval of the Offer at the 2003 Annual Meeting of stockholders on July 15, 2003, I agree that

this Letter is an amendment to the option agreement or agreements to which the Options I am tendering hereby are subject,

     I hereby represent and warrant that I have full power and authority to tender the Options tendered hereby and that, when and to the extent such Options are accepted for exchange by the Company, such Options will be free and clear of all security interests, liens, restrictions, charges, encumbrances, conditional sales agreements or other obligations relating to the sale or transfer thereof, other than pursuant to the applicable option agreement, and such Options will not be subject to any adverse claims. Upon request, I will execute and deliver any additional documents deemed by the Company to be necessary or desirable to complete the exchange of the Options I am tendering hereby.

     All authority herein conferred or agreed to be conferred shall not be affected by, and shall survive, my death or incapacity, and all of my obligations hereunder shall be binding upon my heirs, personal representatives, successors and assigns. Except as stated in the Offer, this tender is irrevocable.

     By execution hereof, I understand that tenders of Options pursuant to the procedure described in Section 4 of the Offer to Exchange and in the instructions to this Letter will constitute my acceptance of the terms and conditions of the Offer. The Company’s acceptance for exchange of Options tendered pursuant to the Offer will constitute a binding agreement between the Company and me upon the terms and subject to the conditions of the Offer.

     I acknowledge that the Replacement Options that I will receive (1) will not be granted until on or about the first business day that is at least six months and one day after the date the Options tendered hereby are accepted for exchange and canceled and (2) will be subject to the terms and conditions set forth in a new option agreement between the Company and me that will be forwarded to me after the grant of the Replacement Options. I also acknowledge that I must be an employee of the Company or one of its Participating Subsidiaries from the date I tender Options through the date the Replacement Options are granted and otherwise be eligible under the terms of the applicable stock incentive plan on the date the Replacement Options are granted in order to receive Replacement Options. I further acknowledge that, if I do not remain such an employee, I will not receive any Replacement Options or any other consideration for the Options that I tender and that are accepted for exchange pursuant to the Offer.

     The name of the registered holder of the Options tendered hereby appears below exactly as it appears on the option agreement or agreements representing such Options. By selecting the lowest Tier in which I will voluntarily exchange options from the table above, I agree that I will automatically be deemed to have tendered all eligible outstanding Options (a) in the Tier that I have selected and (b) in all Tiers above the Tier that I have selected. I am tendering all options received under grants to me issued after December 20, 2002, regardless of the exercise price of such options. I also understand that all of such Options properly tendered prior to the “Expiration Date” (as defined in the following sentence) and not properly withdrawn will be exchanged for Replacement Options, upon the terms and subject to the conditions of the Offer,

including the conditions described in Section 2 and Schedule A of the Offer to Exchange. The term “Expiration Date” means 5:00 P.M., Pacific time, on July 25, 2003, unless and until the Company, in its discretion, has extended the period of time during which the Offer will remain open, in which event the term “Expiration Date” refers to the latest time and date at which the Offer, as so extended, expires.

     I recognize that, under certain circumstances set forth in the Offer to Exchange, the Company may terminate or amend the Offer and postpone its acceptance and cancellation of any Options tendered for exchange. In any such event, I understand that the Options delivered herewith but not accepted for exchange will be returned to me at the address indicated below.

     THE OFFER IS NOT BEING MADE TO (NOR WILL TENDERS OF OPTIONS BE ACCEPTED FROM OR ON BEHALF OF) HOLDERS IN ANY JURISDICTION IN WHICH THE MAKING OR ACCEPTANCE OF THE OFFER WOULD NOT BE IN COMPLIANCE WITH THE LAWS OF SUCH JURISDICTION.

     All capitalized terms used in this Letter but not defined shall have the meaning ascribed to them in the Offer to Exchange.

     THIS OFFER IS SUBJECT TO AND CONTINGENT UPON OBTAINING STOCKHOLDER APPROVAL OF THE OFFER AT THE 2003 ANNUAL MEETING OF STOCKHOLDERS ON JULY 15, 2003. IF THE STOCKHOLDERS OF THE COMPANY DO NOT APPROVE THE OFFER AT THE 2003 ANNUAL MEETING OF STOCKHOLDERS ON JULY 15, 2003, I UNDERSTAND THAT THE OFFER WILL BE DEEMED AUTOMATICALLY WITHDRAWN. IN ADDITION, MY CONTINGENT TENDER OF ANY OPTIONS PURSUANT TO THIS LETTER WILL BE AUTOMATICALLY CANCELLED AND MY OPTOINS WILL CONTINUE TO BE SUBJECT TO THEIR ORIGINAL TERMS.

     I have read, understand and agree to all of the terms and conditions of the Offer.

HOLDER PLEASE SIGN HERE

(See Instructions 1 and 3)

     You must complete and sign the following exactly as your name appears on the option agreement or agreements evidencing the Options you are tendering. If the signature is by a trustee, executor, administrator, guardian, attorney-in-fact, officer of a corporation or another person acting in a fiduciary or representative capacity, please set forth the signer’s full title and include with this Letter proper evidence of the authority of such person to act in such capacity.

SIGNATURE OF OWNER
X
(Signature of Holder or Authorized Signatory)
Date:                ,      , 2003
Name:
	(Please Print)
Address:
(Please include ZIP code)
Telephone No. (with area code):

INSTRUCTIONS

FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER

     1.     Delivery of Letter of Transmittal. A properly completed and duly executed original of this Letter (or a facsimile thereof), and any other documents required by this Letter, must be received by the Company at its address set forth on the front cover of this Letter on or before the Expiration Date.

     THE METHOD BY WHICH YOU DELIVER ANY REQUIRED DOCUMENTS IS AT YOUR OPTION AND RISK, AND THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE COMPANY. IF YOU ELECT TO DELIVER YOUR DOCUMENTS BY MAIL, THE COMPANY RECOMMENDS THAT YOU USE REGISTERED MAIL WITH RETURN RECEIPT REQUESTED. SINCE THE LETTER OF TRANSMITTAL NEEDS TO BE DULY EXECUTED, ONLY FACSIMILE, MAIL OR HAND DELIVERY, BUT NOT ELECTRONIC MAIL, WILL BE CONSIDERED PROPER DELIVERY. IN ALL CASES, YOU SHOULD ALLOW SUFFICIENT TIME TO ENSURE TIMELY DELIVERY. THE REQUIRED DOCUMENTS MUST BE RECEIVED BY THE EXPIRATION DATE. A POSTMARK PRIOR TO THE EXPIRATION DATE WILL NOT ENSURE TIMELY DELIVERY.

     Tenders of Options made pursuant to the Offer may be withdrawn at any time prior to the Expiration Date. If the Offer is extended by the Company beyond that time, you may withdraw your tendered options at any time until the extended expiration of the Offer. To withdraw tendered Options you must deliver a written notice of withdrawal, or a facsimile thereof, with the required information to the Company while you still have the right to withdraw the tendered Options. Withdrawals may not be rescinded and any Options withdrawn will thereafter be deemed not properly tendered for purposes of the Offer unless such withdrawn Options are properly re-tendered prior to the Expiration Date by following the procedures described above.

     The Company will not accept any alternative tenders or tenders that impose conditions or contingencies in addition to those already provided in this Offer. All tendering Option Holders, by execution of this Letter (or a facsimile of it), waive any right to receive any notice of the acceptance of their tender, except as provided for in the Offer to Exchange.

     2.          Tenders. If you intend to tender options pursuant to the Offer, you must select the lowest Tier in which you intend to participate from the table on page 1 of this Letter by initialing the box corresponding to the selected Tier. You may only tender eligible options with an exercise price of more than $6.00 per share for all or none of the shares of common stock subject to each of your eligible option agreements. If you are tendering any Option Shares, you must tender all Option Shares issued to you since December 20, 2002, regardless of the exercise price of such Option Shares. Once you have selected the lowest Tier in which you will voluntarily

exchange options, you will automatically be deemed to have tendered all eligible outstanding options (a) in the Tier you selected and (b) in all Tiers above the Tier you selected. In addition, you will automatically be deemed to have tendered for exchange any Six Months Prior Options, regardless of exercise price.

     3.     Signatures on This Letter of Transmittal. If this Letter is signed by the holder of the Options, the signature must correspond with the name as written on the face of the option agreement or agreements to which the Options are subject without alteration, enlargement or any change whatsoever.

     If this Letter is signed by a trustee, executor, administrator, guardian, attorney-in-fact, officer of a corporation or other person acting in a fiduciary or representative capacity, such person should so indicate when signing, and proper evidence satisfactory to the Company of the authority of such person so to act must be submitted with this Letter.

     4.     Requests for Assistance or Additional Copies. Any questions or requests for assistance, as well as requests for additional copies of the Offer to Exchange or this Letter may be directed to Stratex Networks, Inc., Attn: Stock Administrator, at the address and telephone number given on the front cover of this Letter. Copies will be furnished promptly at the Company’s expense.

     5.     Irregularities. All questions as to the number of Option Shares subject to Options to be accepted for exchange, and the validity, form, eligibility (including time of receipt) and acceptance for exchange of any tender of Options will be determined by the Company in its discretion, which determinations shall be final and binding on all parties. The Company reserves the right to reject any or all tenders of Options the Company determines not to be in proper form or the acceptance of which may, in the opinion of the Company’s counsel, be unlawful. The Company also reserves the right to waive any of the conditions of the Offer and any defect or irregularity in the tender of any particular Options, and the Company’s interpretation of the terms of the Offer (including these instructions) will be final and binding on all parties. No tender of Options will be deemed to be properly made until all defects and irregularities have been cured or waived. Unless waived, any defects or irregularities in connection with tenders must be cured within such time as the Company shall determine.

     Neither the Company nor any other person is or will be obligated to give notice of any defects or irregularities in tenders, and no person will incur any liability for failure to give any such notice.

     IMPORTANT: THIS LETTER (OR A FACSIMILE COPY THEREOF) TOGETHER WITH ALL OTHER REQUIRED DOCUMENTS MUST BE RECEIVED BY THE COMPANY, ON OR PRIOR TO THE EXPIRATION DATE. PLEASE NOTE THAT THESE INSTRUCTIONS NEED NOT BE SUBMITTED TO THE COMPANY.

     6.     Important Tax Information. You should refer to Sections 13 through 17 of the Offer to Exchange, which contains important tax information.

EX-99.(A)(3) 5 f90816toexv99wxayx3y.htm EXHIBIT (A)(3)

Exhibit (a)(3)

STRATEX ANNOUNCEMENT

TO:	All Employees
FROM:	Chuck Kissner, CEO
DATE:	June 23, 2003
SUBJECT:	Fiscal Year 2004 Compensation Program

     The purpose of this memo is to announce several aspects of the Stratex Networks FY04 Compensation Program.

     The prolonged weak economy has proven difficult for everyone, especially for telecom. We’ve seen our company downsized, forgone raises and bonuses, and many employee stock option grants are “underwater,” meaning the exercise price for each share is higher than its current market value. Despite the difficulties, we’ve accomplished many of our goals over the past year through the hard work and dedication of a great team of employees.

     As I’m sure you are aware, most projections are for continued weakness in the telecommunications market. Despite these economic challenges, we’re intent on rewarding employees for accomplishments. It is our desire to offer a program that is fair, consistent, performance driven, market focused and financially prudent.

     Here are the basic elements:

Equity Compensation: To address the issue of “underwater stock options,” we have asked our stockholders to approve a Stock Option Exchange Program that will allow employees to voluntarily cancel most of their “underwater” stock option grants in exchange for a new stock option grant. The new option grant is designed to satisfy current SEC and accounting regulations and as a result will be issued and priced six months and one day after the original options are cancelled. We anticipate approval of this program at the Annual Meeting on July 15, 2003, and will provide instructions to those eligible.

Base Compensation: Employees who are not eligible to participate in the stock option exchange program will be eligible for a salary merit increase based on performance. Officers of the Company and senior executives reporting to me will not be eligible to participate in either the Base Compensation program or the Equity Compensation program or the Stock Option Exchange program.

Benefits: We reviewed our worldwide benefit programs to ensure that each component meets the needs of employees and is competitive within each local market. As a result, we adjusted some programs to be more competitive in certain geographies. Specific program enhancements will be announced to the affected employees shortly.

Other Items: The program for employees affected by sales incentive programs has already been announced. We are continuing to explore other ways of rewarding employees for meeting their goals, as conditions permit.

     I’m pleased that we are able to provide these programs during these difficult economic times. Supporting the strategic principle of “Clarity of Expectations and Rewards” is vital to the personal success of each individual, as well as the success of our company as a whole. Thank you again for your efforts and achievements!

EX-99.(A)(4) 6 f90816toexv99wxayx4y.htm EXHIBIT (A)(4)

Exhibit (a)(4)

EMAIL COMMUNICATION TO ELIGIBLE OPTION HOLDERS

STRATEX NETWORKS

Date:	June 23, 2003
To:	Stratex Stock Option Holder
Re:	Stock Option Exchange Program

     In his letter of today to all Stratex Networks employees, our Chairman and Chief Executive Officer, Chuck Kissner announced that the Company plans to offer eligible employees an opportunity to exchange their “underwater” stock option grants for a promise to receive a new stock option grant in the future. Under this program all eligible Stratex Networks employees, except executive officers and directors, will be able to exchange certain existing stock options for new stock options with prices that more accurately reflect current market conditions. This program is closely regulated with very specific rules. The purpose of this memorandum is to give you an overview of the program and explain the steps you must take if you wish to participate in the Program:

•	The Stratex Stock Option Exchange Program is subject to and contingent upon obtaining stockholder approval of the Option Exchange Program at the 2003 Annual Meeting of Stockholders on July 15, 2003.
	If the stockholders of the Company do not approve the Stratex Stock Option Exchange Program at the 2003 Annual Meeting of Stockholders on July 15, 2003, the Exchange Program will be deemed automatically withdrawn. In addition, the contingent tender of any options will be automatically cancelled and such options will continue to be subject to their original terms.
•	The stock option exchange program allows Stratex Networks employees (other than executive officers and directors) to cancel stock option grants with exercise prices of more than $6.00 in exchange for the promise of new stock option grants, for a lesser number of options, approximately six months later.
•	If some of your stock options have an exercise price of more than $6.00 and some have exercise prices of $6.00 or less, you can participate in the program with only those stock options priced over $6.00. Employees who take part in the exchange will not be eligible to receive replacement option grants for at least six months after canceling their existing

stock options.

• The program is completely voluntary, every eligible Stratex Networks employee can choose whether or not he/she wants to participate.

• In general, each replacement stock option will vest over a two-year period with one half of the shares vesting on the first anniversary of the grant date and an additional 1/12th of the remaining shares vesting on each monthly anniversary of the grant date thereafter.

• Replacement options will be priced at the Nasdaq closing sale price of Stratex Networks Common Stock on the date the replacement options are granted. The date of the grant of the new stock options is expected to be no earlier than January 29, 2004.

     I know there will be many questions regarding this program and we will try to answer each and every one of them. Attached to this email inviting you to participate in the Stratex Networks Stock Option Exchange Program are the following documents:

• Letter of Transmittal (Election Form) that includes a summary of all of your stock options eligible for Exchange

• Q & A Summary / Instructions for Completing the Letter of Transmittal

     Please read the information carefully. The program is complex, and there are many factors to consider when making a decision to exchange your stock options. We urge you to read the entire “Offer to Exchange” because the information in the brief Q & A summary is an overview of the program. You can find the “Offer to Exchange” by going to the Stratex Networks Public Folders at: All Public Folders/Corporate/HR/Stock Exchange Program.

     If you would like a paper copy of any of the above documents to be delivered to you, please contact the Stock Administrator by telephone at 408-944-1727 or by e-mail at stock_administrator@stratexnet.com.

     If you decide to take part in the program, you must fill out and sign the attached Letter of Transmittal (Election Form) included in this package. Hard copies of the forms must be received by the Stock Administration Department in the San Jose office by 5:00 p.m. Pacific (California) time on or before July 25, 2003 by facsimile at 408-944-1701 or by regular mail. E-mailed copies of the form will not be accepted. If the proper forms are not received by the deadline you will not be able to participate in this program.

     We are pleased to be able to offer this one-time opportunity to exchange your “underwater” stock option grants for a future new stock option grant.

     Sincerely Yours,

     Edward T. Gardner

     Vice President, Human Resources and Administration

EX-99.(A)(5) 7 f90816toexv99wxayx5y.htm EXHIBIT (A)(5)

Exhibit (a)(5)

LETTER OF WITHDRAWAL OF OPTIONS PREVIOUSLY TENDERED

PURSUANT TO THE OFFER TO EXCHANGE DATED JUNE 23, 2003

THE OFFER AND WITHDRAWAL RIGHTS EXPIRE AT

5:00 P.M., PACIFIC TIME, ON JULY 25, 2003,

UNLESS THE OFFER IS EXTENDED.

To:	Stock Administrator
	Stratex Networks, Inc.
	120 Rose Orchard Way
	San Jose, California 95134
	Telephone: (408) 943-0777
	Facsimile: (408) 944-1701

DELIVERY OF THIS LETTER OF WITHDRAWAL TO AN ADDRESS

OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION VIA FACSIMILE

TO A NUMBER OTHER THAN AS SET FORTH ABOVE

WILL NOT CONSTITUTE A VALID DELIVERY.

     Pursuant to the terms and subject to the conditions of the Offer to Exchange dated June 23, 2003 (the “Offer to Exchange”) and this Letter of Withdrawal, I hereby withdraw my previous tender for cancellation of the options to purchase shares of Stratex Networks, Inc. common stock, par value $0.001 per share (“Option Shares”) within the following one or more Tiers (to validly withdraw the previous tender of Option Shares for cancellation you must complete the following table):

			Please Initial the
			Highest Tier from
	Exercise Price of	Description of	Which You Wish to
Tier	Current Options	Withdrawal	Withdraw (1)
1	$6.01 — $8.00	By initialing the box corresponding to Tier 1, I am withdrawing from Tier 1 and I understand that only my previously tendered options in Tier 1 will be withdrawn.
2	$8.01 — $15.00	By initialing the box corresponding to Tier 2, I

1

		am withdrawing from Tier 2 and I understand that my previously tendered options in Tier 1 (if any) and Tier 2 will be withdrawn.
3	$15.01 or Higher	By initialing the box corresponding to Tier 3, I am withdrawing from Tier 3 and I understand that all my previously tendered options in Tier 1 (if any), Tier 2 (if any) and Tier 3 will be withdrawn.

     (1)       IMPORTANT: Please select and initial the highest Tier from which you wish to withdraw. You may select only one Tier from the above table. Once you have selected the highest Tier from which you wish to withdraw, you will automatically be deemed to have withdrawn all previously tendered options (a) from the Tier you selected and (b) from all Tiers below the Tier you selected. If you withdraw all of your previously tendered options from all of the Tiers, you will automatically be deemed to have withdrawn any previously tendered Option Shares that were granted after to December 20, 2002.

To Stratex Networks, Inc.:

     Upon the terms and subject to the conditions set forth in the Offer to Exchange, my receipt of which I hereby acknowledge, and in this Letter of Withdrawal, I, the undersigned, hereby withdraw my previous tender to Stratex Networks, Inc., a Delaware corporation (the “Company”), of the Option Shares within one or more Tiers as specified in the table on page 1 of this Letter of Withdrawal (the “Withdrawn Options”). I understand that by withdrawing my previous tender of such Option Shares, the tender with respect to such Option Shares will no longer be effective and if I later choose to have the Withdrawn Options tendered in the Offer to Exchange I must re-tender those Withdrawn Options in accordance with the terms of the Offer to Exchange prior to the Expiration Date. The term “Expiration Date” means 5:00 P.M., Pacific time, on July 25, 2003, unless and until the Company, in its discretion, has extended the period of time during which the Offer to Exchange will remain open, in which event the term “Expiration Date” refers to the latest time and date at which the Offer to Exchange, as so extended, expires.

     I acknowledge that the Company has advised me to consult with my own advisors as to the consequences of participating or not participating in the Offer to Exchange and withdrawing my tendered Option Shares. All authority herein conferred or agreed to be conferred shall not be affected by, and shall survive, my death or incapacity, and all of my obligations hereunder shall

2

be binding upon my heirs, personal representatives, successors and assigns. Except as stated in the Offer to Exchange, this withdrawal is irrevocable.

     The name of the registered holder of the Withdrawn Options hereby appears below exactly as it appears on the option agreement or agreements representing such Withdrawn Options. By selecting the highest Tier from which I wish to withdraw on page 1 of this Letter of Withdrawal, I will automatically be deemed to have withdrawn all previously tendered options (a) from the Tier that I selected and (b) from all Tiers below the Tier that I selected.

     I understand that I may not withdraw any previously tendered Option Shares that were granted after to December 20, 2002 unless I withdraw all of my previously tendered options from all of the Tiers.

     I understand that this Letter of Withdrawal must be received by the Company prior to the Expiration Date in order to be effective.

     All capitalized terms used in this Letter of Withdrawal but not defined shall have the meaning ascribed to them in the Offer to Exchange.

     I have read, understand and agree to all of the terms and conditions of the Offer to Exchange.

3

HOLDER PLEASE SIGN HERE

     You must complete and sign the following exactly as your name appears on the option agreement or agreements evidencing the Option Shares you previously tendered in the Letter of Transmittal. If the signature is by a trustee, executor, administrator, guardian, attorney-in-fact, officer of a corporation or another person acting in a fiduciary or representative capacity, please set forth the signer’s full title and include with this Letter of Withdrawal proper evidence of the authority of such person to act in such capacity.

SIGNATURE OF OWNER

X
	(Signature of Holder or Authorized Signatory)

Date:                  ,            , 2003

Name:

                                     (Please Print)

Address:

                            (Please include ZIP code)

Telephone No. (with area code):

4 EX-99.(A)(6) 8 f90816toexv99wxayx6y.htm EXHIBIT (A)(6)

Exhibit (a)(6)

FORM OF EMAIL CONFIRMATION OF RECEIPT OF LETTER OF TRANSMITTAL

To:	[Name of Tendering Option Holder]
Date:	[June][July]   , 2003
Re:	Confirmation of Receipt of Letter of Transmittal

     This email confirms our receipt of your Letter of Transmittal, which sets forth your election to tender one or more of your eligible options for cancellation and corresponding grant of replacement options pursuant to the stock option exchange program. This email does not serve as formal acceptance by Stratex of the options designated on your Letter of Transmittal for exchange, per the terms of the Offer to Exchange previously given to you and filed with the Securities and Exchange Commission. A formal notice of the acceptance or rejection of your tendered options will be sent to you promptly after the expiration of the Offer to Exchange, which is currently scheduled to occur at 5:00 p.m., Pacific Time, on Friday, July 25, 2003. You may withdraw your election to exchange your options at any time prior to the expiration of the Offer to Exchange. If you wish to withdraw your tendered options, you must deliver your notice of withdrawal according to the procedures set forth in the Offer to Exchange. If you have any questions, please contact the Stock Administrator at (408) 944-1727.

EX-99.(A)(7) 9 f90816toexv99wxayx7y.htm EXHIBIT (A)(7)

Exhibit (a)(7)

EMAIL COMMUNICATION TO ELIGIBLE OPTION HOLDERS

     Re: IMPORTANT REMINDER: Stratex Stock Option Exchange Offer

     As you know, on June 23, 2003 we announced the Stratex stock option exchange program. There is only a short period of time left for you to elect to exchange your eligible options under the stock option exchange program. If you would like to exchange your eligible options for replacement options to be granted approximately six months after the expiration of the offer, as described in the Offer to Exchange that we delivered to you, you must deliver your Letter of Transmittal to the Stock Administration Department no later than 5:00 p.m., Pacific time, on Friday, July 25, 2003.

     If you have already delivered the Letter of Transmittal to the Stock Administration Department, you should have received an email confirmation of receipt. If you have not received the email confirmation, please contact the Stock Administrator at the number below.

     If you do not wish to tender any of your eligible options for exchange, then no action is required on your part.

     If you have any questions, or if you would like a paper copy of any of the documents delivered to you in connection with the stock option exchange program, please contact the Stock Administrator at (408) 944-1727, email: stock_administrator@stratexnet.com.

EX-99.(A)(8) 10 f90816toexv99wxayx8y.htm EXHIBIT (A)(8)

Exhibit (a)(8)

EMAIL COMMUNICATION REPORTING RESULTS TO TENDERING
OPTIONHOLDERS

     Dear Optionholder:

     On behalf of Stratex Networks, Inc. (the “Company”), I am writing to provide you with the results of the Company’s recent offer to exchange (the “Offer”) outstanding options (the “Options”) granted under the Digital Microwave Corporation 1994 Stock Incentive Plan (the “1994 Plan”), the Digital Microwave Corporation 1996 Non-Officer Employee Stock Option Plan (the “1996 Plan”), the Digital Microwave Corporation 1998 Non-Officer Employee Stock Option Plan (the “1998 Plan”), the DMC Stratex Networks, Inc. 1999 Stock Incentive Plan (the “1999 Plan”), the Stratex Networks, Inc. 2002 Stock Incentive Plan (the “2002 Plan”) and all other stock option or incentive plans assumed by the Company in connection with a merger, acquisition or other similar transaction (the “Legacy Plans”) for replacement options the Company will grant under same stock incentive plan under which the tendered options were originally granted (the “Replacement Options”). Notwithstanding the foregoing, Replacement Options intended to replace options issued under Legacy Plans shall be granted under the 2002 Plan. All capitalized terms used in this letter which are not defined herein have the meanings given to those terms in the letter of transmittal (the “Letter of Transmittal”) accompanying the Company’s offer to exchange dated June 23, 2003 (the “Offer of Exchange”).

     The Offer expired at 5:00 p.m., Pacific time, on July 25, 2003. Promptly following the expiration of the Offer and pursuant to the terms and conditions of the Offer, the Company accepted for exchange Options tendered to it for a total of           shares of Common Stock and canceled all such Options.

     The Company has accepted for exchange and canceled the number of Options tendered by you equal to the number of Option Shares set forth on Attachment A to this letter.

     In accordance with the terms and subject to the conditions of the Offer, you will have the right to receive a Replacement Option under the Plan for a lesser number of shares of Common Stock determined in accordance with the exchange ratios set forth in the Offer, as adjusted for any stock splits, stock dividends and similar events. The terms and conditions of the Replacement Option are described in the Offer and include the following:

• The per share exercise price under the Replacement Option will equal the last reported sale price of the Common Stock on the Nasdaq National Market on the

	date the Company grants the Replacement Option;
•	Both vested and unvested options under the cancelled options will be subject to vesting under the Replacement Options. With the exception of a Replacement Option that replaces a Six Months Prior Option, the Replacement Option will vest over a two-year period with one half of the shares vesting on the first anniversary of the grant date and an additional 1/12th of the remaining shares vesting on each monthly anniversary of the grant date thereafter. A Replacement Option that replaces a Six Months Prior Option will vest over a four-year period with one quarter of the shares vesting on the first anniversary of the grant date and an additional 1/36th of the remaining shares vesting on each monthly anniversary of the grant date thereafter; and
•	With the exception of a Replacement Option that replaces a Six Months Prior Option, the Replacement Option will have a term equal to the lesser of the original term of the option and five years; provided, however, that the term of the Replacement Option will be no less than four years. A Replacement Option that replaces a Six Months Prior Option will have a term of seven years.

     In accordance with the terms of the Offer, the Company will grant you the Replacement Option on a date determined by the board of directors, anticipated to be no earlier than January 29, 2004. At that time, as described in the Offer to Exchange, you will receive a Replacement Option agreement executed by the Company.

     In accordance with the terms of the Offer, you must be an employee of the Company or one of its Participating Subsidiaries from the date you tendered options through the Replacement Option grant date in order to receive your Replacement Option. If you do not remain an employee, you will not receive a Replacement Option or any other consideration for the Options tendered by you and canceled by the Company.

     If you have any questions about your rights in connection with the grant of a Replacement Option, please call the Stock Administrator, at (408) 944-1727.

     Attachment

2

Attachment

Option Grant Date No. of Option Shares

3 EX-99.(A)(9) 11 f90816toexv99wxayx9y.htm EXHIBIT (A)(9)

Exhibit (a)(9)

[Question and Answer Document for Employees of Stratex Networks, Inc.]

EX-99.(D)(1) 12 f90816toexv99wxdyx1y.htm EXHIBIT (D)(1)

Exhibit (d)(1)

DIGITAL MICROWAVE CORPORATION
1994 STOCK INCENTIVE PLAN

(As Amended and Restated Effective August 8, 1996; August 5, 1997; March 23,
1998; August 4, 1998; and November 12, 1999)

ARTICLE ONE

GENERAL

I. PURPOSE OF THE PLAN

          A.     This 1994 Stock Incentive Plan (the “Plan”) is intended to promote the interests of Digital Microwave Corporation, a Delaware corporation (the “Corporation”), by providing (i) key employees (including officers) of the Corporation (or its Parent or Subsidiary corporations) who are responsible for the management, growth and financial success of the Corporation, (ii) the non-employee members of the Corporation’s Board of Directors (the “Board”) or the board of directors of any Parent or Subsidiary corporation and (iii) those consultants and other independent contractors who provide valuable services to the Corporation (or its Parent or Subsidiary corporations) with the opportunity to acquire a proprietary interest, or otherwise increase their proprietary interest, in the Corporation as an incentive for them to remain in the service of the Corporation (or its Parent or Subsidiary corporations).

          B.     The Plan became effective upon approval by the Corporation’s stockholders at the 1994 Annual Meeting held on July 27, 1994. Such date is hereby designated as the Effective Date of the Plan.

II. STRUCTURE OF THE PLAN

     A.     Stock Programs. The Plan shall be divided into five separate components:

     –     The Discretionary Option Grant Program under which eligible individuals may, at the discretion of the Plan Administrator, be granted options to purchase shares of Common Stock in accordance with the provisions of Article Two.

     –     The Automatic Option Grant Program under which non-employee Board members shall automatically receive special option grants at periodic intervals to purchase shares of Common Stock in accordance with the provisions of Article Three.

     –     The Stock Fee Program under which the non-employee Board members may elect to apply all or a portion of their annual cash retainer fee and meeting fees to the acquisition of shares of Common Stock in accordance with the provisions of Article Four.

     –     The Salary Reduction Grant Program under which eligible individuals may, pursuant to the provisions of Article Five, elect to have a portion of their base salary

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reduced each year in return for options to purchase shares of Common Stock at an aggregate discount from the Fair Market Value of the option shares on the grant date equal to the salary reduction amount.

     –  The Stock Issuance Program under which eligible individuals may, pursuant to the provisions of Article Six, be issued shares of Common Stock directly, through the immediate purchase of such shares at a price not less than eighty-five percent (85%) of their Fair Market Value at the time of issuance, as a bonus tied to the performance of services or the Corporation’s attainment of financial objectives, or pursuant to the individual’s election to receive such shares in lieu of base salary.

          B.     General Provisions. Unless the context clearly indicates otherwise, the provisions of Articles One and Seven shall apply to the Discretionary Option Grant, Automatic Option Grant, Salary Reduction Grant, Stock Issuance and Stock Fee Programs and shall accordingly govern the interests of all individuals under the Plan.

          C.     Glossary. Capitalized terms shall, except as otherwise specifically defined within the provisions of the Plan, have the meanings assigned to such terms in the Glossary.

III. ADMINISTRATION OF THE PLAN

          A.     The Committee shall have sole and exclusive authority to administer each program established under the Plan. Members of the Committee shall serve for such period as the Board may determine and shall be subject to removal by the Board at any time.

          B.     The Committee as 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 each program established under the Plan and to make such determinations under, and issue such interpretations of, the provisions of each such program and any outstanding option grants or 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 those programs or any outstanding option or stock issuance thereunder.

          C.     Service on the Committee shall constitute service as a Board member, and members of the Committee shall accordingly be entitled to full indemnification and reimbursement as Board members for their service on the Committee. No member of the Committee shall be liable for any act or omission made in good faith with respect to the Plan or any option grants or share issuances under the Plan.

          D.     Notwithstanding the foregoing provisions of this Part III, the Subcommittee shall have sole and exclusive authority to administer the participation of Covered Employees in the Discretionary Option Grant, Salary Deduction Grant and Stock Issuance Programs to the extent necessary to qualify the grants under such programs as “performance-based compensation” under Section 162(m) of the Code. In the case of such grants to Covered Employees, references to the “Plan Administrator” shall be deemed to be references to the Subcommittee.

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IV. ELIGIBILITY

          A.     The persons eligible to participate in the Discretionary Option Grant, Salary Reduction Grant and Stock Issuance Programs are as follows:

     –     officers and other key employees of the Corporation (or any Parent or Subsidiary) who render services which contribute to the management, growth and financial success of the Corporation; and

     –     those consultants or other independent contractors who provide valuable services to the Corporation (or any Parent or Subsidiary).

          B.     Non-employee Board members shall not be eligible to participate in the Discretionary Option Grant, Salary Reduction Grant or Stock Issuance Program or in any other stock option, stock purchase, stock bonus or other stock plan of the Corporation (or its Subsidiaries). Such non-employee Board members shall, however, be eligible to participate in the Automatic Option Grant and Stock Fee Programs.

          C.     The Plan Administrator shall have full authority to determine, (i) with respect to grants made under the Discretionary Option Grant and Salary Reduction Grant Programs, which eligible individuals are to receive such grants, the number of shares to be covered by each such grant, the status of any granted option as either an Incentive Option or a Non-Statutory Option, the time or times at which 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 individuals are to be selected for participation, the number of shares to be issued to each selected individual, the vesting schedule (if any) to be applicable to the issued shares and the consideration to be paid for such shares.

V. 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 number of shares of Common Stock reserved for issuance over the term of the Plan shall be fixed at 7,166,660 shares, subject to adjustment as provided below.

          B.     The number of shares of Common Stock available for issuance under the Plan shall automatically increase on the first trading day of each calendar year during each of the first five years of the term of the Plan, beginning with the 1995 calendar year, by an amount equal to one percent (1%) of the shares of Common Stock outstanding on December 31 of the immediately preceding calendar year; but in no event shall any such annual increase exceed 300,000 shares (as adjusted to reflect the two-for-one stock split effected in November 1997). None of the additional shares resulting from such annual increases may be made the subject of Incentive Options granted under the Plan.

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          C.     No one individual participating in the Plan may be granted stock options, separately exercisable stock appreciation rights and receive direct stock issuances for more than 750,000 shares in any fiscal year of the Company (subject to adjustment as provided below). In connection with his or her initial commencement of Service, an individual participating in the Plan may be granted stock options, separately exercisable stock appreciation rights or receive direct stock issuances for up to an additional 750,000 shares (subject to adjustment as provided below) which shall not count against the limit set forth in the previous sentence. To the extent required by Section 162(m) of the Code or the regulations thereunder, in applying the foregoing limitations, if any stock option or stock appreciation right is cancelled, the cancelled stock option or stock appreciation right shall continue to count against the maximum number of shares any individual may acquire. For this purpose, the repricing of a stock option (or in the case of a stock appreciation right, the reduction of the base amount on which the stock appreciation is calculated) shall be treated as the cancellation of the existing stock option or stock appreciation right and the grant of a new stock option or stock appreciation right.

          D.     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. Shares subject to any stock appreciation rights exercised under the Plan and all share issuances under the Plan (other than issuances in payment of exercised stock appreciation rights), whether or not the issued shares are subsequently repurchased by the Corporation pursuant to its repurchase rights under the Plan, shall reduce on a share-for-share basis the number of shares of Common Stock available for subsequent issuance under the Plan. In addition, should the exercise price of an outstanding option under the Plan be paid with shares of Common Stock or should shares of Common Stock otherwise issuable under the Plan be withheld by the Corporation in satisfaction of the withholding taxes incurred in connection with the exercise of an outstanding option under the Plan or the vesting of a share issuance under the Plan, then the number of shares of Common Stock available for issuance under the Plan shall be reduced by the gross number of shares for which the option is exercised or which vest under the share issuance, and not by the net number of shares of Common Stock actually issued to the holder of such option or share issuance.

          E.     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, (ii) the maximum number and/or class of securities for which the share reserve is to increase automatically each year over the first five years of the term of the Plan, (iii) the maximum number and/or class of securities for which any one individual participating in the Plan may be granted stock options, separately exercisable stock appreciation rights and direct stock issuances in the aggregate over the term of the Plan, (iv) the number and/or class of securities for which automatic option grants are to be subsequently made to each newly elected or continuing non-employee Board member under the Automatic Option Grant Program and (v) 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 options are to be effected in a manner which shall preclude the enlargement or

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dilution of rights and benefits under those options. The adjustments determined by the Plan Administrator shall be final, binding and conclusive.

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ARTICLE TWO

DISCRETIONARY OPTION GRANT PROGRAM

I. TERMS AND CONDITIONS OF OPTIONS

          Options granted pursuant to the Discretionary Grant Program shall be authorized by action of the Plan Administrator and may, at the Plan Administrator’s discretion, be either Incentive Options or Non-Statutory Options. Individuals who are not Employees may only be granted Non-Statutory Options. Each granted option 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. Each instrument evidencing an Incentive Option shall, in addition, be subject to the provisions of the Plan applicable to such grants.

          A.     Exercise Price.

          1.     The exercise price per share shall be fixed by the Plan Administrator in accordance with the following provisions:

     The exercise price per share of Common Stock subject to an Incentive Option shall in no event be less than one hundred percent (100%) of the Fair Market Value of such Common Stock on the grant date.

     The exercise price per share of Common Stock subject to a Non-Statutory Option shall in no event be less than one hundred percent (100%) of the Fair Market Value of such Common Stock on the grant date.

          2.     The exercise price shall become immediately due upon exercise of the option and shall be payable in one of the alternative forms specified below:

               (i)     full payment in cash or check made payable to the Corporation’s order,

               (ii)     full payment in 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 date the option is exercised,

               (iii)     full payment in a combination of 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 date the option is exercised and cash or check made payable to the Corporation’s order, or

               (iv)     to the extent the option is exercised for vested shares, full payment through a broker-dealer sale and remittance procedure pursuant to which the Optionee shall provide concurrent irrevocable written 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

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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 (II) to the Corporation to deliver the certificates for the purchased shares directly to such brokerage firm in order to complete the sale transaction.

          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 instrument evidencing such option. No option shall, however, have a maximum term in excess of ten (10) years.

          During the lifetime of the Optionee, each Incentive Option, together with any stock appreciation rights pertaining to such 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 descent and distribution following the Optionee’s death. Any Non-Statutory Option shall be assignable or transferable to the extent determined by the Plan Administrator and provided in the agreement evidencing such option. However, any assignee or transferee shall be entitled to exercise any such Non-Statutory Option or any related Tandem Rights or Limited Rights in the same manner and only to the same extent as the Optionee or right holder would have been entitled to exercise such option or such related rights had it not been transferred and shall be subject to the same restrictions, repurchase rights, and other limitations that bound the Optionee or right holder, unless otherwise determined by the Plan Administrator.

          C.     Termination of Service.

          1.     Except to the extent otherwise expressly authorized by the Plan Administrator, no Optionee shall have more than a thirty-six (36)-month period measured from the date of such individual’s cessation of Service in which to exercise his or her outstanding options under the Plan.

          2.     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. However, no such option shall remain exercisable for more than thirty-six (36) months after the date of the Optionee’s death.

          3.     Under no circumstances shall any such option be exercisable after the specified expiration date of the option term.

          4.     Except to the extent otherwise expressly authorized by the Plan Administrator, during the applicable post-Service exercise period, the option may not be exercised in the aggregate for more than the number of shares (if any) in which the Optionee is vested at the time of his or her cessation of Service. Upon the expiration of the limited post-Service exercise period or (if earlier) upon the specified expiration date of the option term, each such option shall terminate and cease to remain outstanding with respect to any vested shares for which the option has not otherwise been exercised. However, each outstanding option shall immediately terminate and cease to remain outstanding, at the time of the Optionee’s cessation of Service, with respect to any shares for which the option is not otherwise at that time

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exercisable or in which the Optionee is not otherwise vested, except to the extent otherwise expressly authorized by the Plan Administrator.

          5.     Should the Optionee’s Service be terminated for Misconduct, all outstanding options held by that individual shall terminate immediately and cease to remain outstanding.

          6.     The Plan Administrator shall have complete discretion, exercisable either at the time the option is granted or at any time while the option remains outstanding:

         –        to permit one or more options to be exercised not only with respect to the number of vested shares of Common Stock for which each such option is exercisable at the time of the Optionee’s cessation of Service but also with respect to one or more subsequent installments of vested shares for which the option would otherwise have become exercisable had such cessation of Service not occurred;

         –     to extend the period of time for which the option is to remain exercisable following the 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 specified expiration date of the option term.

          D.     Stockholder Rights. An Optionee shall have none of the rights of a stockholder with respect to any option shares until such individual shall have exercised the option and paid the exercise price for the purchased shares.

          E.     Repurchase Rights. The shares of Common Stock acquired under this Discretionary Grant Program may be subject to repurchase by the Corporation in accordance with the following provisions:

          1.     The Plan Administrator shall have the discretion to grant options which are exercisable for unvested shares of Common Stock. Should the Optionee cease Service while holding any unvested shares purchased under such options, then the Corporation shall have the right to repurchase any or all of those unvested shares at the exercise price paid per share. The terms and conditions upon which such repurchase right shall be exercisable (including the period and procedure for exercise and the appropriate vesting schedule for the purchased shares) shall be established by the Plan Administrator and set forth in the instrument evidencing such repurchase right.

          2.     All of the Corporation’s outstanding repurchase rights shall automatically terminate, and all shares subject to such terminated rights shall immediately vest in full, upon the occurrence of a Corporate Transaction, except to the extent: (i) any such repurchase right is expressly assigned to the successor corporation (or parent thereof) in connection with the Corporate Transaction or (ii) such accelerated vesting is precluded by other limitations imposed by the Plan Administrator at the time the repurchase right is issued.

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          3.     The Plan Administrator shall have the discretionary authority, exercisable either before or after the Optionee’s cessation of Service, to cancel the Corporation’s outstanding repurchase rights with respect to one or more shares purchased or purchasable by the Optionee under the Plan and thereby accelerate the vesting of such shares in whole or in part at any time.

II. INCENTIVE OPTIONS

          The terms and conditions specified below shall be applicable to all Incentive Options granted under the Plan. Incentive Options may only be granted to individuals who are Employees. Options which are specifically designated as Non-Statutory Options when issued under the Plan shall not be subject to such terms and conditions.

          A.     Dollar Limitation. The aggregate Fair Market Value (determined as of the respective date or dates of grant) of the Common Stock for which one or more options granted to any Employee under this Plan (or any other option plan of the Corporation or its Subsidiaries or Parents) may for the first time become exercisable as incentive stock options under the Federal tax laws during any one calendar year shall not exceed the sum of One Hundred Thousand Dollars ($100,000). To the extent the Employee holds two (2) or more such options which become exercisable for the first time in the same calendar year, the foregoing limitation on the exercisability of such options as incentive stock options under the Federal tax laws shall be applied on the basis of the order in which such options are granted. Should the number of shares of Common Stock for which any Incentive Option first becomes exercisable in any calendar year exceed the applicable One Hundred Thousand Dollar ($100,000) limitation, then the option may nevertheless be exercised in that calendar year for the excess number of shares as a Non-Statutory Option under the Federal tax laws.

          B.     10% Stockholder. If any individual to whom an Incentive Option is granted is the owner of stock (as determined under Section 424(d) of the Code) possessing ten percent (10%) or more of the total combined voting power of all classes of stock of the Corporation or any one of its Subsidiaries or Parents, then the exercise price per share shall not be less than one hundred ten percent (110%) of the Fair Market Value per share of Common Stock on the grant date and the option term shall not exceed five (5) years measured from the grant date.

III. CORPORATE TRANSACTIONS/CHANGES IN CONTROL

          A.     In the event of any Corporate Transaction, each outstanding option 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 such option and may be exercised for all or any portion of such shares. However, an outstanding option shall not so accelerate if and to the extent: (i) such option is, in connection with the Corporate Transaction, either to be assumed by the successor corporation or parent thereof or to be replaced with a comparable option to purchase shares of the capital stock of the successor corporation or parent thereof, (ii) such option is to be replaced with a cash incentive program of the successor corporation which preserves the option spread existing at the time of the Corporate Transaction and provides for subsequent payout in accordance with the same vesting schedule applicable to such option or

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(iii)  the acceleration of such option is subject to other limitations imposed by the Plan Administrator at the time of the option grant. The determination of option comparability under clause (i) above shall be made by the Plan Administrator, and its determination shall be final, binding and conclusive.

          B.     The Plan Administrator shall have the discretionary authority, exercisable either at the time the option is granted or at any time while the option remains outstanding, to provide for the automatic acceleration of one or more outstanding options upon the occurrence of a Corporate Transaction, whether or not those options are to be assumed or replaced in the Corporate Transaction. Alternatively, the Plan Administrator shall have the authority to provide for the subsequent acceleration of any outstanding options which do not otherwise accelerate at the time of the Corporate Transaction, or the subsequent termination of any of the Corporation’s outstanding repurchase rights which do not otherwise terminate at the time of the Corporate Transaction, should the Optionee’s Service terminate through an Involuntary Termination effected within a designated period following the effective date of such Corporate Transaction.

          C.     Immediately following the consummation of the Corporate Transaction, all outstanding options shall terminate, except to the extent assumed by the successor corporation or its parent company.

          D.     Each outstanding option under this Discretionary Grant Program that is assumed in connection with the Corporate Transaction or is otherwise to continue in effect 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 option holder, in consummation of such Corporate Transaction, had such person exercised the option immediately prior to such 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 on both an aggregate and per individual basis following the consummation of the Corporate Transaction shall be appropriately adjusted.

          E.     The Plan Administrator shall have the discretionary authority, exercisable either at the time the option is granted or at any time while the option remains outstanding, to provide for the automatic acceleration of one or more outstanding options (and the termination of one or more of the Corporation’s outstanding repurchase rights) upon the occurrence of a Change in Control. The Plan Administrator shall also have full power and authority to condition any such option acceleration (and the termination of any outstanding repurchase rights) upon the subsequent termination of the Optionee’s Service through an Involuntary Termination effected within a specified period following the Change in Control.

          F.     Any options accelerated in connection with the Change in Control shall remain fully exercisable until the expiration or sooner termination of the option term.

          G.     The grant of options shall in no way affect the right of the Corporation to adjust, reclassify, reorganize or otherwise change its capital or business structure or to merge, consolidate, dissolve, liquidate or sell or transfer all or any part of its business or assets.

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          H.     The portion of any Incentive Option accelerated in connection with a Corporate Transaction or Change in Control shall remain exercisable as an incentive stock option under the Federal tax laws only to the extent the applicable One Hundred Thousand Dollar limitation is not exceeded. To the extent such dollar limitation is exceeded, the accelerated portion of such option shall be exercisable as a Non-Statutory Option under the Federal tax laws.

IV. STOCK APPRECIATION RIGHTS/HOSTILE TAKE-OVER

          A.     The Plan Administrator shall have full power and authority, exercisable in its sole discretion, to grant to selected Optionees: (i) Tandem Stock Appreciation Rights (“Tandem Rights”) and/or Limited Stock Appreciation Rights (“Limited Rights”).

          B.     The following terms and conditions shall govern the grant and exercise of Tandem Rights:

     1.     One or more Optionees may be granted the Tandem Right, exercisable upon such terms and conditions as the Plan Administrator may establish, to elect between the exercise of the underlying stock option for shares of Common Stock and the surrender of that option in exchange for a distribution from the Corporation in an amount equal to the excess of (i) the Fair Market Value (on the option surrender date) of the number of shares in which the Optionee is at the time vested under the surrendered option (or surrendered portion thereof) over (ii) the aggregate exercise price payable for such vested shares.

     2.     No such option surrender shall be effective unless it is approved by the Plan Administrator. If the surrender is so approved, then the distribution to which the Optionee shall accordingly become entitled may be made in shares of Common Stock valued at Fair Market Value on the option surrender date, in cash, or partly in shares and partly in cash, as the Plan Administrator shall in its sole discretion deem appropriate.

     3.     If the surrender of an option is rejected by the Plan Administrator, then the Optionee shall retain whatever rights the Optionee had under the surrendered option (or surrendered portion thereof) on the option surrender date and may exercise such rights at any time prior to the later of (i) five (5) business days after the receipt of the rejection notice or (ii) the last day on which the option is otherwise exercisable in accordance with the terms of the instrument evidencing such option, but in no event may such rights be exercised more than ten (10) years after the date of the option grant.

          C.     The following terms and conditions shall govern the grant and exercise of Limited Rights:

     1.     One or more officers of the Corporation subject to the short-swing profit restrictions of the federal securities laws may, in the Plan

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     Administrator’s sole discretion, be granted Limited Rights with respect to their outstanding options.

     2.     Upon the occurrence of a Hostile Take-Over, each such officer holding one or more options with such a Limited Right shall have the unconditional right (exercisable for a thirty (30)-day period following such Hostile Take-Over) to surrender each such option to the Corporation, to the extent the option is at the time exercisable for fully vested shares of Common Stock. The officer shall in return be entitled to a cash distribution from the Corporation in an amount equal to the excess of (i) the Take-Over Price of the vested shares of Common Stock at the time subject to each surrendered option (or surrendered portion of such option) over (ii) the aggregate exercise price payable for such vested shares. Such cash distribution shall be made within five (5) days following the option surrender date.

     3.     Neither the approval of the Plan Administrator nor the consent of the Board shall be required in connection with such option surrender and cash distribution. Any unsurrendered portion of the option shall continue to remain outstanding and become exercisable in accordance with the terms of the instrument evidencing such grant.

ARTICLE THREE

AUTOMATIC OPTION GRANT PROGRAM

I. ELIGIBILITY

          The individuals eligible to receive automatic option grants pursuant to the provisions of this Automatic Grant Program shall be limited to (i) those individuals who are first elected as non-employee Board members at the 1994 Annual Meeting of Stockholders, (ii) those individuals who are first elected or appointed as non-employee Board members after the date of such Annual Meeting, whether through appointment by the Board or election by the Corporation’s stockholders, and (iii) those individuals who are reelected to serve as non-employee Board members at one or more Annual Stockholder Meetings beginning with the 1995 Annual Meeting. Only individuals who have not been in the prior Service of the Corporation (or any Parent or Subsidiary) may receive an automatic option grant under clause (i) or (ii) above. Any non-employee Board member eligible to participate in the Automatic Grant Program pursuant to the foregoing criteria is hereby designated an Eligible Director for purposes of such program.

II. TERM OF AUTOMATIC OPTION GRANTS PROGRAM

          The Automatic Option Grant Program shall terminate on November 12, 1999. All option grants under the Automatic Option Grant Program that are outstanding on such date shall thereafter continue to have force and effect in accordance with the provisions of the instruments evidencing such grants.

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III. TERMS AND CONDITIONS OF AUTOMATIC OPTION GRANTS

          A.     Grant Dates. Option grants shall be made on the dates specified below:

          1.     Each individual first elected as an Eligible Director at the 1994 Annual Stockholders Meeting shall automatically be granted on the date of such Meeting a Non-Statutory Option to purchase 30,000 shares of Common Stock (as adjusted to reflect the two-for-one stock split effected in November 1997).

          2.     Each individual who first becomes an Eligible Director after the date of the 1994 Annual Stockholders Meeting but before the date of the 1997 Annual Stockholders Meeting, whether through election by the Corporation’s stockholders or appointment by the Board, shall automatically be granted, at the time of such initial election or appointment, a Non-Statutory Option to purchase 30,000 shares of Common Stock (as adjusted to reflect the two-for-one stock split effected in November 1997).

          3.     Each individual who first becomes an Eligible Director on or after the date of the 1997 Annual Stockholders Meeting, whether through election by the Corporation’s stockholders or appointment by the Board, but before November 12, 1999, shall automatically be granted, at the time of such initial election or appointment, a Non-Statutory Option to purchase 42,000 shares of Common Stock (as adjusted to reflect the two-for-one stock split effected in November 1997).

          4.     On the date of the 1995 Annual Stockholders Meeting, each individual who is at that time re-elected as a non-employee Board member and who has not otherwise received any prior automatic option grants during the two preceding calendar years shall automatically be granted a Non-Statutory Option to purchase an additional 10,000 shares of Common Stock (as adjusted to reflect the two-for-one stock split effected in November 1997), provided such individual has served as a Board member for at least twelve (12) months. On the date of the 1996 Annual Stockholders Meeting, each such individual who is at that time re-elected as a non-employee Board member shall automatically be granted a Non-Statutory option to purchase an additional 10,000 shares of Common Stock (as adjusted to reflect the two-for-one stock split effected in November 1997).

          5.     On the date of each Annual Stockholders Meeting, beginning with the 1997 Annual Meeting, that occurs prior to November 12, 1999, each individual who is at that time re-elected as a non-employee Board member and who has served on the Board for three years shall automatically be granted each year thereafter a Non-Statutory Option to purchase an additional 14,000 shares of Common Stock (as adjusted to reflect the two-for-one stock split effected in November 1997).

          B.     No Limitation. There shall be no limit on the number of such 14,000-share (as adjusted to reflect the two-for-one stock split effected in November 1997) annual option grants any one Eligible Director may receive over his or her period of Board service prior to the termination of the Automatic Option Grant Program on November 12, 1999.

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          C.     Exercise Price. The exercise price per share of Common Stock of each automatic option grant shall be equal to one hundred percent (100%) of the Fair Market Value per share of Common Stock on the automatic grant date.

          D.     Payment. The exercise price shall be payable in any of the alternative forms authorized under the Discretionary Option Grant Program. To the extent the option is exercised for any unvested shares, the Optionee must execute and deliver to the Corporation a stock purchase agreement for those unvested shares which provides the Corporation with the right to repurchase, at the exercise price paid per share, any unvested shares held by the Optionee at the time of cessation of Board service and which precludes the sale, transfer or other disposition of the purchased shares at any time while those shares remain subject to such repurchase right.

          E.     Option Term. Each automatic grant shall have a maximum term of ten (10) years measured from the grant date.

          F.     Exercisability/Vesting. Each automatic grant shall be immediately exercisable for any or all of the option shares. However, any shares purchased under the option shall be subject to repurchase by the Corporation, at the exercise price paid per share, upon the Optionee’s cessation of Board service prior to vesting in those shares. Each automatic grant shall vest, and the Corporation’s repurchase right shall lapse, in a series of three (3) equal and successive annual installments over the Optionee’s period of continued service as a Board member, with the first such installment to vest upon Optionee’s completion of one (1) year of Board service measured from the automatic grant date.

          G.     Transferability. The automatic option grant, together with the limited stock appreciation right pertaining to such option, shall be fully assignable and transferable notwithstanding any contrary provision of the agreement evidencing such option and related stock appreciation right; provided, however, that any assignee or transferee shall be entitled to exercise such option and any related stock appreciation right in the same manner and only to the same extent as the Optionee would have been entitled to exercise such option and the related stock appreciation right had it not been transferred and shall be subject to the same restrictions, repurchase rights, and other limitations that bound the Optionee, unless otherwise determined by the Plan Administrator.

          H.     Termination of Board Service.

          1.     Should the Optionee cease to serve as a Board member for any reason (other than death or Permanent Disability) while holding one or more automatic option grants, then such individual shall have a six (6)-month period following the date of such cessation of Board service in which to exercise each such option for any or all of the option shares in which the Optionee is vested at the time of such cessation of Board service. However, each such option shall immediately terminate and cease to remain outstanding, at the time of such cessation of Board service, with respect to any option shares in which the Optionee is not otherwise at that time vested under such option.

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          2.     Should the Optionee die within six (6) months after cessation of Board service, then any automatic option grant held by the Optionee at the time of death may subsequently be exercised, for any or all of the option shares in which the Optionee is vested at the time of his or her cessation of Board service (less any option shares subsequently purchased by the Optionee prior to death), 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. The right to exercise each such option shall lapse upon the expiration of the twelve (12)-month period measured from the date of the Optionee’s death.

          3.     Upon the Optionee’s death or Permanent Disability while serving as a Board member, the shares of Common Stock at the time subject to each automatic option grant held by the Optionee shall immediately vest in full (and the Corporation’s repurchase right with respect to such shares shall terminate), and the Optionee (or the representative of the Optionee’s estate or the person or persons to whom the option is transferred upon the Optionee’s death) shall have a twelve (12)-month period following the date of such cessation of Board service in which to exercise such option for any or all of those vested shares of Common Stock.

          4.     In no event shall any automatic grant remain exercisable after the expiration date of the ten (10)-year option term. Upon the expiration of the applicable post-service exercise period provided above or (if earlier) upon the expiration of the ten (10)-year option term, the automatic grant shall terminate and cease to be outstanding for any option shares in which the Optionee was vested at the time of his or her cessation of Board service but for which such option was not otherwise exercised.

          I.     Stockholder Rights. The holder of an automatic option grant under this Automatic Grant Program shall have none of the rights of a stockholder with respect to any shares subject to that option until such individual shall have exercised the option and paid the exercise price for the purchased shares.

IV. CORPORATE TRANSACTION/CHANGE IN CONTROL/HOSTILE TAKE-OVER

          A.     The shares of Common Stock subject to each automatic option grant outstanding at the time of any Corporate Transaction but not otherwise vested shall automatically vest in full and the Corporation’s repurchase right with respect to those shares shall terminate, so that each such option shall, immediately prior to the specified effective date for the Corporate Transaction, become fully exercisable for all of the shares of Common Stock at the time subject to that option and may be exercised for all or any portion of such shares as fully vested shares of Common Stock. Immediately following the consummation of the Corporate Transaction, all automatic option grants shall terminate and cease to remain outstanding, except to the extent assumed by the successor entity or its parent corporation.

          B.     The shares of Common Stock subject to each automatic option grant outstanding at the time of any Change in Control but not otherwise vested shall automatically vest in full and the Corporation’s repurchase right with respect to those shares shall terminate, so that each such option shall, immediately prior to the specified effective date for the Change in

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Control, become fully exercisable for all of the shares of Common Stock at the time subject to that option and may be exercised for all or any portion of such shares as fully vested shares of Common Stock. Each option shall remain so exercisable for all the option shares following the Change in Control until the expiration or sooner termination of the option term.

          C.     Upon the occurrence of a Hostile Take-Over, the Optionee shall also have a thirty (30) day period in which to surrender to the Corporation each automatic option grant held by him or her. The Optionee shall in return be entitled to a cash distribution from the Corporation in an amount equal to the excess of (i) the Take-Over Price of the shares of Common Stock at the time subject to the surrendered option over (ii) the aggregate exercise price payable for such shares. Such cash distribution shall be paid within five (5) days following the surrender of the option to the Corporation. Neither the approval of the Plan Administrator nor the consent of the Board shall be required in connection with such option surrender and cash distribution. The shares of Common Stock subject to each option surrendered in connection with the Hostile Take-Over shall not be available for subsequent issuance under the Plan.

          D.     The automatic option grants outstanding 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.

ARTICLE FOUR

STOCK FEE PROGRAM

I. ELIGIBILITY

          Each individual serving as a non-employee Board member shall be eligible to elect to apply all or any portion of the annual retainer fee and meeting fees otherwise payable to such individual in cash on or before December 31, 1999 to the acquisition of shares of Common Stock upon the terms and conditions of this Stock Fee Program.

II. TERM OF STOCK FEE PROGRAM

          The Stock Fee Program shall terminate on December 31, 1999, and no portion of the annual retainer fee or meeting fees payable to a non-employee Board member after that date shall be used for the acquisition of shares of Common Stock under the Stock Fee Program.

III. ELECTION PROCEDURE

          A.     Filing. The non-employee Board member must make the stock-in-lieu-of-fee election prior to the start of the calendar year for which the election is to be effective. The first calendar year for which any such election may be filed shall be the 1995 calendar year and the last year for which any such election may be filed shall be the 1999 calendar year. The election, once filed, shall be irrevocable. The election for any upcoming calendar year may be

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filed at any time prior to the start of that year, but in no event later than December 31 of the immediately preceding calendar year. The non-employee Board member may file a standing election to be in effect for two (2) or more consecutive calendar years or to remain in effect indefinitely until revoked by written instrument filed with the Plan Administrator at least six (6) months prior to the start of the first calendar year for which such standing election is no longer to remain in effect.

          B.     Election Form. The election must be filed with the Plan Administrator on the appropriate form provided for this purpose. On the election form, the non-employee Board member must indicate the percentage or dollar amount of his or her annual retainer fee and/or his or her meeting fees to be applied to the acquisition of shares.

IV. SHARE ISSUANCE

          A.     Issue Date for Annual Retainer Fee Shares. On the first trading day in January of the calendar year for which the election is effective, the portion of the annual retainer fee subject to such election shall automatically be applied to the acquisition of shares of Common Stock by dividing the elected dollar amount by the Fair Market Value per share of Common Stock on that trading day. The number of issuable shares shall be rounded down to the next whole share, and the issued shares shall be held in escrow by the Secretary of the Corporation as partly-paid shares until the non-employee Board member vests in those shares. The non-employee Board member shall have full shareholder rights, including voting, dividend and liquidation rights, with respect to all issued shares held in escrow on his or her behalf, but such shares shall not be assignable or transferable while they remain unvested.

          B.     Vesting of Annual Retainer Fee Shares. Upon completion of each calendar month of Board service during the year for which the election applicable to the annual retainer fee is in effect, the non-employee Board member shall vest in one-twelfth (1/12) of the issued shares, and the stock certificate for those shares shall be released from escrow. Immediate vesting in all the issued shares shall occur in the event (i) the non-employee Board member should die or become Permanently Disabled during his or her period of Board service or (ii) there should occur a Corporate Transaction or Change in Control while such individual remains in Board service. Should such individual cease Board service prior to vesting in one or more monthly installments of the issued shares, then those unvested shares shall be canceled by the Corporation, and the non-employee Board member shall not be entitled to any cash payment or other consideration from the Corporation with respect to the canceled shares and shall have no further shareholder rights with respect to such shares.

          C.     Issue Date for Meeting Fee Shares. On the first trading day following any meeting, in a calendar year for which the election is effective, the portion of the meeting fee subject to such election shall automatically be applied to the acquisition of shares of Common Stock by dividing the elected dollar amount by the Fair Market Value per share of Common Stock on that trading day. The number of issuable shares shall be rounded down to the next whole share, and the shares shall be issued as soon as practicable to the non-employee Board member.

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ARTICLE FIVE

SALARY REDUCTION GRANT PROGRAM

I. ELIGIBILITY

          The Plan Administrator shall have plenary authority to select, prior to the start of each calendar year, the particular key employees who shall be eligible for participation in the Salary Reduction Grant Program for that calendar year. In order to participate for a particular calendar year, each selected individual must, prior to the start of that calendar year, file with the Plan Administrator (or its designate) an irrevocable authorization directing the Corporation to reduce his or her base salary for that calendar year by a designated multiple of one percent (1%), but in no event less than five percent (5%).

          The Plan Administrator shall review the filed authorizations and determine whether to approve, in whole or in part, one or more of those authorizations. To the extent the Plan Administrator approves one or more authorizations, the individuals who filed those authorizations shall be granted options under this Salary Reduction Grant Program. Options granted under the Salary Reduction Grant Program shall be Non-Statutory Options evidenced by instruments in such form as the Plan Administrator shall from time to time approve; provided, however, that each such instrument shall comply with and incorporate the terms and conditions specified below.

II. TERMS AND CONDITIONS OF OPTION

          A.     Exercise Price.

          1.     The exercise price per share shall be thirty-three and one-third percent (33-1/3%) of the Fair Market Value per share of Common Stock on the grant date.

          2.     The exercise price shall become immediately due upon exercise of the option and shall be payable in any of the alternative forms authorized under the Discretionary Grant Program.

          B.     Number of Option Shares. The number of shares of Common Stock for which each grant is to be made to a selected Optionee shall be determined pursuant to the following formula (rounded down to the nearest whole number):

X = A ÷ (B x 66-2/3%), where

X is the number of option shares,

A is the dollar amount of the approved reduction in the Optionee’s base salary for the calendar year, and

B is the Fair Market Value per share of Common Stock on the date of the grant.

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          C.     Term and Exercise of Options.

          1.     Each option shall have a maximum term of ten (10) years measured from the grant date. Provided the Optionee continues in Service, the option shall become exercisable for (i) fifty percent (50%) of the option shares on the last day of June in the calendar year for which the option is granted and for (ii) the balance of the option shares in a series of six (6) successive equal monthly installments on the last day of each of the next six (6) calendar months.

          2.     The option shall be assignable or transferable to the extent determined by the Plan Administrator and provided in the agreement evidencing such option. However, any assignee or transferee shall be entitled to exercise the option in the same manner and only to the same extent as the Optionee would have been entitled to exercise the option had it not been transferred and shall be subject to the same restrictions, repurchase rights, and other limitations that bound the Optionee or right holder, unless otherwise determined by the Plan Administrator.

          D.     Effect of Termination of Service.

          1.     Should an Optionee cease Service for any reason after his or her outstanding option has become exercisable in whole or in part, then that option shall remain exercisable, for any or all of the shares for which the option is exercisable on the date of such cessation of Service, until the expiration of the ten (10) year option term or any sooner termination in connection with a Corporate Transaction. Following the Optionee’s death, such option may be exercised, for any or all of the shares for which the option is exercisable at the time of the Optionee’s death, 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. Such right of exercise shall lapse, and the option shall terminate, upon the expiration of the ten (10)-year option term or any sooner termination in connection with a Corporate Transaction.

          2.     Should the Optionee die before his or her outstanding option becomes exercisable for any of the option shares, then the personal representative of the Optionee’s estate or the person or persons to whom the option is transferred pursuant to the Optionee’s will or in accordance with the laws of descent and distribution shall nevertheless have the right to exercise such option for up to that number of option shares equal to (i) one-twelfth (1/12) of the total number of option shares multiplied by (ii) the number of full calendar months which have elapsed between the first day of the calendar year for which the option is granted and the last day of the calendar month during which the Optionee ceases Service. Such right of exercise shall lapse, and the option shall terminate, upon the earliest to occur of (i) the specified expiration date of the option term, (ii) the termination of the option in connection with a Corporate Transaction or (iii) the third anniversary of the date of the Optionee’s death. However, the option shall, with respect to any and all option shares for which it is not exercisable at the time of the Optionee’s cessation of Service, terminate immediately upon such cessation of Service and shall cease to remain outstanding with respect to those option shares.

          3.     Should the Optionee become Permanently Disabled and cease by reason thereof to remain in Service before his or her outstanding option becomes exercisable for any of

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the option shares, then the Optionee shall nevertheless have the right to exercise such option for up to that number of option shares equal to (i) one-twelfth (1/12) of the total number of option shares multiplied by (ii) the number of full calendar months which elapse between the first day of the calendar year for which the option is granted and the last day of the calendar month during which the Optionee ceases Service. Such right of exercise shall lapse, and the option shall terminate, upon the expiration of the ten (10)-year option term or any sooner termination in connection with a Corporate Transaction. However, the option shall, with respect to any and all option shares for which it is not exercisable at the time of the Optionee’s cessation of Service, terminate immediately upon such cessation of Service and shall cease to remain outstanding with respect to those option shares.

          4.     Except to the limited extent specifically provided above, should the Optionee cease for any reason to remain in Service before his or her outstanding option first becomes exercisable for one or more option shares, then that option shall immediately terminate upon such cessation of Service and shall cease to remain outstanding.

          E.     Stockholder Rights. The Optionee shall have none of the rights of a stockholder with respect to any option shares until such individual shall have exercised the option and paid the exercise price for those shares.

III. CORPORATE TRANSACTION/CHANGE IN CONTROL

          A.     Should any Corporate Transaction occur while the Optionee remains in Service, then each outstanding option held by such Optionee under this Salary Reduction Program shall become exercisable, immediately prior to the specified effective date of such Corporate Transaction, for all of the shares at the time subject to such option and may be exercised for any or all of such shares as fully-vested shares of Common Stock. Immediately following the consummation of the Corporate Transaction, each such option shall terminate unless assumed by the successor entity or its parent corporation.

          B.     Upon the Involuntary Termination of the Optionee’s Service following a Change in Control, each outstanding option held by such Optionee under this Salary Reduction Program shall immediately become exercisable for all of the shares at the time subject to such option and may be exercised for any or all of such shares as fully-vested shares of Common Stock. The option shall remain so exercisable until the expiration of the ten (10)-year option term.

          C.     Option grants under this Salary Reduction Program shall not affect the Corporation’s right to adjust, reclassify, reorganize or change its capital or business structure or to merge, consolidate, dissolve, liquidate or sell or transfer any or all of its assets.

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ARTICLE SIX

STOCK ISSUANCE PROGRAM

I. TERMS AND CONDITIONS OF STOCK ISSUANCES

          Shares of Common Stock may be issued under the Stock Issuance Program through direct and immediate purchases without any intervening stock option grants. The issued shares shall be evidenced by a Stock Issuance Agreement (“Issuance Agreement”) that complies with the terms and conditions below.

          A.     Consideration

          1.     Newly Issued Shares shall be issued under the Stock Issuance Program for one or more of the following items of consideration that the Plan Administrator may deem appropriate in each individual instance:

     (i)     full payment in cash or check made payable to the Corporation’s order,

     (ii)     a promissory note payable to the Corporation’s order in one or more installments, which may be subject to cancellation in whole or in part upon terms and conditions established by the Plan Administrator, or

     (iii)     past services rendered to the Corporation or any Parent or Subsidiary.

          2.     Newly Issued Shares must be issued for consideration with a value not less than eighty-five percent (85%) of the Fair Market Value of such shares at the time of issuance.

          3.     Treasury Shares may be issued under the Stock Issuance Program for such consideration (including one or more of the items of consideration specified above) as the Plan Administrator may deem appropriate, whether such consideration is in an amount less than, equal to or greater than the Fair Market Value of the Treasury Shares at the time of issuance. Treasury Shares may, in lieu of any cash consideration, be issued subject to such vesting requirements tied to the Participant’s period of future Service or the Corporation’s attainment of specified performance objectives as the Plan Administrator may establish at the time of issuance.

          4.     Shares of Common Stock may also, in the Plan Administrator’s absolute discretion, be issued pursuant to an irrevocable election by the Participant to receive a portion of his or her base salary in shares of Common Stock in lieu of such base salary. Any such issuance shall be effected in accordance with the following guidelines:

     –     On the first trading day in January of the calendar year for which the election is effective, the portion of base salary subject to such election shall automatically be applied to the acquisition of Common Stock by dividing the

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elected dollar amount by the Fair Market Value per share of the Common Stock on that trading day. The number of issuable shares shall be rounded down to the next whole share, and the issued shares shall be held in escrow by the Secretary of the Corporation as partly-paid shares until the Participant vests in those shares. The Participant shall have full stockholder rights, including voting, dividend and liquidation rights, with respect to all issued shares held in escrow on his or her behalf, but such shares shall not be assignable or transferable while they remain unvested.

     –     Upon completion of each calendar month of Service during the year for which the election is in effect, the Participant shall vest in one-twelfth (1/12) of the issued shares, and the stock certificate for those shares shall be released from escrow. All the issued shares shall immediately vest upon (i) the consummation of a Corporate Transaction or (ii) the Involuntary Termination of the Participant’s Service following a Change in Control. Should the Participant otherwise cease Service prior to vesting in one or more monthly installments of the issued shares, then those unvested shares shall immediately be surrendered to the Corporation for cancellation, and the Participant shall not be entitled to any cash payment or other consideration from the Corporation with respect to the canceled shares and shall have no further stockholder rights with respect to such shares.

          B.     Vesting Provisions

          1.     The shares of Common Stock issued under the Stock Issuance Program (other than shares issued in lieu of salary) may, in the absolute discretion of the Plan Administrator, be fully and immediately vested upon issuance or may vest in installments over the Participant’s period of Service. The elements of the vesting schedule applicable to any unvested shares of Common Stock issued under the Stock Issuance Program, namely:

               (i)     the Service period to be completed by the Participant or the performance objectives to be achieved by the Corporation,

               (ii)     the number of installments in which the shares are to vest,

               (iii)     the interval or intervals (if any) which are to lapse between installments, and

               (iv)     the effect which death, Permanent Disability or other event designated by the Plan Administrator is to have upon the vesting schedule,

shall be determined by the Plan Administrator and incorporated into the Issuance Agreement executed by the Corporation and the Participant at the time such unvested shares are issued.

          2.     The Participant shall have full stockholder rights with respect to any shares of Common Stock issued to him or her under the Stock Issuance Program, whether or not his or her interest in those shares is vested. Accordingly, the Participant shall have the right to

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vote such shares and to receive any regular cash dividends paid on such shares. Any new, additional or different shares of stock 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 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 and (ii) such escrow arrangements as the Plan Administrator shall deem appropriate.

          3.     Should the Participant cease to remain in Service while holding one or more unvested shares of Common Stock under the Stock Issuance Program, then those shares shall be immediately canceled by the Corporation, and the Participant shall have no further stockholder rights with respect to those shares. To the extent the canceled shares were previously issued to the Participant for consideration paid in cash or cash equivalent (including the Participant’s purchase-money promissory note), the Corporation shall repay to the Participant the cash consideration paid for the surrendered shares and shall cancel the unpaid principal balance of any outstanding purchase-money note of the Participant attributable to such canceled shares. The canceled shares may, at the Plan Administrator’s discretion, be retained by the Corporation as Treasury Shares or may be retired to authorized but unissued share status.

          4.     The Plan Administrator may in its discretion elect to waive the cancellation of one or more unvested shares of Common Stock (or other assets attributable thereto) which would otherwise occur upon the non-completion of the vesting schedule applicable to such 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.

II. CORPORATE TRANSACTIONS/CHANGE IN CONTROL

          A.     Upon the occurrence of any Corporate Transaction, all unvested shares of Common Stock at the time outstanding under this Stock Issuance Program shall immediately vest in full and the Corporation’s repurchase rights shall terminate, except to the extent: (i) any such repurchase right is expressly assigned to the successor corporation (or parent thereof) in connection with the Corporate Transaction or (ii) such termination is precluded by other limitations imposed in the Issuance Agreement.

          B.     The Plan Administrator shall have the discretionary authority, exercisable at any time while unvested shares remain outstanding under this Stock Issuance Program, to provide for the immediate and automatic vesting of those shares in whole or in part upon the occurrence of a Change in Control. The Plan Administrator shall also have full power and authority to condition any such accelerated vesting upon the subsequent termination of the Participant’s Service through an Involuntary Termination effected within a specified period following the Change in Control.

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III. TRANSFER RESTRICTIONS/SHARE ESCROW

          A.     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 such unvested shares. To the extent an escrow arrangement is utilized, the unvested shares and any securities or other assets issued with respect to such shares (other than regular cash dividends) shall be delivered in escrow to the Corporation to be held until the Participant’s interest in such shares (or other securities or assets) vests. Alternatively, if the unvested shares are issued directly to the Participant, the restrictive legend on the certificates for such shares shall read substantially as follows:

     “THE SHARES REPRESENTED BY THIS CERTIFICATE ARE UNVESTED AND ARE SUBJECT TO (I) CERTAIN TRANSFER RESTRICTIONS AND (II) CANCELLATION OR REPURCHASE IN THE EVENT THE REGISTERED HOLDER (OR HIS/HER PREDECESSOR IN INTEREST) CEASES TO REMAIN IN THE CORPORATION’S SERVICE. SUCH TRANSFER RESTRICTIONS AND THE TERMS AND CONDITIONS OF SUCH CANCELLATION OR REPURCHASE ARE SET FORTH IN A STOCK ISSUANCE AGREEMENT BETWEEN THE CORPORATION AND THE REGISTERED HOLDER (OR HIS/HER PREDECESSOR IN INTEREST) DATED           , A COPY OF WHICH IS ON FILE AT THE PRINCIPAL OFFICE OF THE CORPORATION.”

          B.     The Participant shall have no right to transfer any unvested shares of Common Stock issued to him or her under the Stock Issuance Program. For purposes of this restriction, the term “transfer” shall include (without limitation) any sale, pledge, assignment, encumbrance, gift, or other disposition of such shares, whether voluntary or involuntary. Upon any such attempted transfer, the unvested shares shall immediately be canceled, and neither the Participant nor the proposed transferee shall have any rights with respect to such canceled shares. However, the Participant shall have the right to make a gift of unvested shares acquired under the Stock Issuance Program to the Participant’s spouse or issue, including adopted children, or to a trust established for such spouse or issue, provided the transferee of such shares delivers to the Corporation a written agreement to be bound by all the provisions of the Stock Issuance Program and the Issuance Agreement applicable to the transferred shares.

ARTICLE SEVEN

MISCELLANEOUS

I. LOANS OR INSTALLMENT PAYMENTS

          A.     The Plan Administrator may, in its discretion, assist any Optionee or Participant (including an Optionee or Participant who is an officer of the Corporation), in the exercise of one or more options granted to such Optionee under the Discretionary Grant Program or the Salary Reduction Grant Program or the purchase of one or more shares issued to such Participant under the Stock Issuance Program, including the satisfaction of any Federal, state and

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local income and employment tax obligations arising therefrom, by (i) authorizing the extension of a loan from the Corporation to such Optionee or Participant or (ii) permitting the Optionee or Participant to pay the exercise price or purchase price for the acquired shares in installments over a period of years. The terms of any loan or installment method of payment (including the interest rate and terms of repayment) shall be upon such terms as the Plan Administrator specifies in the applicable option or issuance agreement or otherwise deems appropriate under the circumstances. Loans or installment payments may be authorized with or without security or collateral. However, the maximum credit available to the Optionee or Participant may not exceed the exercise or purchase price of the acquired shares (less the par value of such shares) plus any Federal, state and local income and employment tax liability incurred by the Optionee or Participant in connection with the acquisition of such shares.

          B.     The Plan Administrator may, in its absolute discretion, determine that one or more loans extended under this financial assistance program shall be subject to forgiveness by the Corporation in whole or in part upon such terms and conditions as the Plan Administrator may deem appropriate.

II. AMENDMENT OF THE PLAN AND AWARDS

          A.     The Board has complete and exclusive power and authority to amend or modify the Plan (or any component thereof) in any or all respects whatsoever. To the extent necessary to comply with applicable laws or if the Plan Administrator deems it advisable, the Corporation shall obtain stockholder approval of any Plan amendment in such manner and to such a degree as required. However, no such amendment or modification shall adversely affect rights and obligations with respect to stock options, stock appreciation rights or unvested stock issuances at the time outstanding under the Plan, unless the Optionee or Participant consents to such amendment.

          B.     Unless approved by the stockholders, the Board (or Plan Administrator) shall not reduce the exercise price of any outstanding stock option or reduce the base amount on which the appreciation of any outstanding stock appreciation right is calculated to reflect a reduction in the Fair Market Value of the Common Stock since the grant date of the stock option or stock appreciation right.

          C.     Options to purchase shares of Common Stock may be granted under the Discretionary Grant Program and the Salary Reduction Grant Program and shares of Common Stock may be issued under the Stock Issuance Program, which are in excess of the number of shares then available for issuance under the Plan, provided any excess shares actually issued under those programs are held in escrow until stockholder approval is obtained for a sufficient increase in the number of shares available for issuance under the Plan. If such stockholder approval is not obtained within twelve (12) months after the date the first such excess option grants or excess share issuances are made, then (i) any unexercised excess options shall terminate and cease to be exercisable and (ii) the Corporation shall promptly refund the purchase price paid for any excess shares actually issued under the Plan and held in escrow, together with interest (at the applicable short term federal rate) for the period the shares were held in escrow.

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III. TAX WITHHOLDING

          A.     The Corporation’s obligation to deliver shares of Common Stock upon the exercise of stock options or stock appreciation rights or the direct issuance or vesting of such shares under the Plan shall be subject to the satisfaction of all applicable Federal, state, local and foreign income tax and employment tax withholding requirements.

          B.     The Plan Administrator may, in its discretion, provide any holder of Non-Statutory Options or unvested shares under the Stock Issuance Program with the right to use shares of Common Stock in satisfaction of all or part of no more than the minimum amount of the Federal, state and local income and employment tax liabilities required to be withheld from such holder (the “Taxes”) in connection with the exercise of their options or the vesting of their shares. Such right may be provided to any such holder in either or both of the following formats:

          –     Stock Withholding: The holder of the Non-Statutory Option or unvested shares may be provided with the election to have the Corporation withhold, from the shares of Common Stock otherwise issuable upon the exercise of such Non-Statutory Option or the vesting of such shares, a portion of those shares with an aggregate Fair Market Value equal to the percentage of the Taxes (up to one hundred percent (100%)) specified by such holder.

          –     Stock Delivery: The holder of the Non-Statutory Option or the unvested shares may be provided with the election to deliver to the Corporation, at the time the Non-Statutory Option is exercised or the shares vest, one or more shares of Common Stock previously acquired by such individual (other than in connection with the option exercise or share vesting triggering the Taxes) with an aggregate Fair Market Value equal to the percentage of the Taxes (up to one hundred percent (100%)) specified by such holder.

IV. EFFECTIVE DATE AND TERM OF PLAN

          A.     This Plan shall become effective immediately upon approval by the Corporation’s stockholders at the 1994 Annual Meeting.

          B.     The Automatic Option Grant Program shall terminate on November 12, 1999. All option grants under the Automatic Option Grant Program that are outstanding on such date shall thereafter continue to have force and effect in accordance with the provisions of the instruments evidencing such grants.

          C.     The Stock Fee Program shall terminate on December 31, 1999, and no portion of the annual retainer fee or meeting fees payable to a non-employee Board member after that date shall be used for the acquisition of shares of Common Stock under the Stock Fee Program.

          D.     The Plan shall terminate upon the earlier of (i) April 28, 2004 or (ii) the date on which all shares available for issuance under the Plan shall have been issued or canceled pursuant to the exercise of options or stock appreciation rights or the issuance of shares (whether vested or unvested) under the Plan. If the date of termination is determined under clause (i) above, then all option grants and unvested stock issuances outstanding on such date shall

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thereafter continue to have force and effect in accordance with the provisions of the instruments evidencing such grants or issuances.

V. USE OF PROCEEDS

          Any cash proceeds received by the Corporation from the sale of shares pursuant to option grants or stock issuances under the Plan shall be used for general corporate purposes.

VI. REGULATORY APPROVALS

          A.     The implementation of the Plan, the granting of any option or stock appreciation right under the Plan, the issuance of any shares under the Stock Issuance Program, and the issuance of Common Stock upon the exercise of the stock options and stock appreciation rights granted hereunder 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 and stock appreciation rights granted under it and the Common Stock issued pursuant to it.

          B.     No shares of Common Stock or other assets shall be issued or delivered under this Plan unless and until there shall have been compliance with all applicable requirements of Federal and state securities laws, including the filing and effectiveness of the Form S-8 registration statement for the shares of Common Stock issuable under the Plan, and all applicable listing requirements of any securities exchange on which the Common Stock is then listed for trading.

VII. 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 the Service of the Corporation (or Subsidiary) for any period of specific duration, and the Corporation (or any Subsidiary retaining the services of such individual) may terminate such individual’s Service at any time and for any reason, with or without cause.

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GLOSSARY

          The following definitions shall be in effect under the Plan:

          Change in Control: a change in ownership or control of the Corporation effected through any of the following transactions:

     –     the direct or indirect acquisition 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 stockholders which the Board does not recommend such stockholders to accept, or

     –     a change in the composition of the Board over a period of thirty-six (36) months or less such that a majority of the Board members (rounded up to the next whole number) 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 such election or nomination was approved by the Board.

          Code: the Internal Revenue Code of 1986, as amended.

          Committee: a committee appointed by the Board to administer the Plan and constituted in such manner for transactions under the Plan to be exempt from Section 16(b) of the 1934 Act in accordance with Rule 16b-3 thereunder.

          Common Stock: common stock of the Corporation.

          Corporate Transaction: any of the following stockholder-approved transactions to which the Corporation is a party:

     –     a merger or consolidation in which the Corporation is not the surviving entity, except for a transaction the principal purpose of which is to change the state in which the Corporation is incorporated,

     –     a sale, transfer or other disposition of all or substantially all of the Corporation’s assets in complete liquidation or dissolution of the Corporation, or

     –     any reverse merger in which the Corporation is the surviving entity but in which securities possessing more than fifty percent (50%) of the total combined voting power of the Corporation’s outstanding securities are transferred

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     to a person or persons different from the persons holding those securities immediately prior to such merger.

          Covered Employee: an individual defined as a “Covered Employee” under Section 162(m) of the Code and the regulations thereunder.

          Employee: an individual who performs services while in the employ of the Corporation or one or more Parents or Subsidiaries, subject to the control and direction of the employer entity not only as to the work to be performed but also as to the manner and method of performance.

          Fair Market Value: the closing selling price per share on the date in question on the NASDAQ National Market. If there is no reported 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.

          Hostile Take-Over: a change in ownership of the Corporation effected through the following transaction:

     –      the direct or indirect acquisition by any person or related group of persons 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 stockholders which the Board does not recommend such stockholders to accept, and

     –     more than fifty percent (50%) of the acquired securities are accepted from holders other than the officers and directors of the Corporation subject to the short-swing profit restrictions of Section 16 of the 1934 Act.

          Incentive Option: a stock option which satisfies the requirements of Code Section 422.

          Involuntary Termination: the termination of the Service of any Optionee or Participant 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 level of responsibility, (B) a reduction in his or her level of compensation (including base salary, fringe benefits and any non-discretionary and objective-standard incentive payment or bonus award) by more than five percent (5%) or (C) a relocation of such individual’s place of employment by more than fifty (50) miles, provided and only if such change, reduction or relocation is effected by the Corporation without the individual’s consent.

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          Misconduct: the commission of any act of fraud, embezzlement or dishonesty by the Optionee or Participant, any unauthorized use or disclosure by such individual of confidential information or trade secrets of the Corporation or any Parent or Subsidiary, or any other intentional misconduct by such individual adversely affecting the business or affairs of the Corporation 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 individual in the Service of the Corporation or any Parent or Subsidiary.

          Newly Issued Shares: shares of Common Stock drawn from the Corporation’s authorized but unissued shares of Common Stock.

          1934 Act: the Securities Exchange Act of 1934, as amended.

          Non-Statutory Option: a stock option not intended to meet the requirements of Code Section 422.

          Optionee: any person to whom an option is granted under the Discretionary Grant, Automatic Grant or Salary Reduction Grant Program in effect under the Plan.

          Parent: each corporation (other than the Corporation) in an unbroken chain of corporations ending with the Corporation, provided each such corporation (other than the 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 any other corporation in such chain.

          Participant: any person who receives a direct issuance of Common Stock under the Stock Issuance Program in effect under the Plan.

          Permanent Disability or Permanently Disabled: the inability of the Optionee or the Participant to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment expected to result in death or to be of continuous duration of twelve (12) months or more.

          Plan Administrator: the committee of two (2) or more non-employee Board members appointed by the Board to administer the Discretionary Option Grant, the Salary Reduction and the Stock Issuance Programs.

          Service: the provision of services on a periodic basis to the Corporation or any Parent or Subsidiary in the capacity of an Employee, a non-employee member of the board of directors or an independent consultant or advisor, except to the extent otherwise specifically provided in the applicable stock option or stock issuance agreement.

          Subcommittee: a subcommittee of the Committee comprised solely of two or more “outside directors” within the meaning of Section 162(m) of the Code and the regulations thereunder.

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          Subsidiary: each corporation (other than the Corporation) in an unbroken chain of corporations beginning with the Corporation, provided each such 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 any other corporation in such chain.

          Take-Over Price: the greater of (i) the Fair Market Value per share of Common Stock on the date the option is surrendered to the Corporation in connection with a Hostile Take-Over or (ii) the highest reported price per share of Common Stock paid by the tender offer or in effecting such Hostile Take-Over. However, if the surrendered option is an Incentive Option, the Take-Over Price shall not exceed the clause (i) price per share.

          Treasury Shares: shares of Common Stock reacquired by the Corporation and held as treasury shares.

31 EX-99.(D)(2) 13 f90816toexv99wxdyx2y.htm EXHIBIT (D)(2)

Exhibit (d)(2)

DIGITAL MICROWAVE CORPORATION
NOTICE OF GRANT OF STOCK OPTION

               Notice is hereby given of the following stock option grant (the “Option”) to purchase shares of the Common Stock of Digital Microwave Corporation (the “Corporation”):

               Optionee:          «firstname» «lastname»

               Grant Date:          «grantdate»

               Vesting Commencement Date:          «grantdate»

               Option Exercise Price:          $«price»

               Number of Option Shares:    «shares»

               Expiration Date:          «end»

               Type of Option:          Incentive Stock Option

               Exercise Schedule: The Option shall become exercisable for the Option Shares in a series of five (5) successive equal annual installments upon Optionee’s Completion of each year of Service (as defined in the attached Stock Option Agreement) over the five (5)-year period measured from the Vesting Commencement Date, with the first such installment to become exercisable upon Optionee’s completion of one (1)-year of Service measured from such Vesting Commencement Date. In no event shall the Option become exercisable for any additional Option Shares following the Optionee’s cessation of Service.

               Optionee understands and agrees that the Option is granted subject to and in accordance with the express terms and conditions of the Digital Microwave Corporation 1994 Stock Incentive Plan (the “Plan”). Optionee further agrees to be bound by the terms and conditions of the Option as set forth in the Stock Option Agreement attached hereto as Exhibit A. Optionee also acknowledges receipt of a copy of the official prospectus for the Plan attached hereto as Exhibit B. A copy of the Plan is also available upon request made to the Corporate Secretary at the Corporate Offices at 170 Rose Orchard Way, San Jose, CA 95134.

1 EX-99.(D)(3) 14 f90816toexv99wxdyx3y.htm EXHIBIT (D)(3)

Exhibit (d)(3)

DIGITAL MICROWAVE CORPORATION
1996 NON-OFFICER EMPLOYEE STOCK OPTION PLAN

ARTICLE ONE
GENERAL

I.      PURPOSE OF THE PLAN

          A.          This 1996 Non-Officer Employee Stock Option Plan (the “Plan”) is intended to promote the interests of Digital Microwave Corporation, a Delaware corporation (the “Corporation”), by providing key employees (excluding officers) of the Corporation (or its Parent or Subsidiary corporations) who are responsible for the management, growth and financial success of the Corporation with the opportunity to acquire a proprietary interest, or otherwise increase their proprietary interest, in the Corporation as an incentive for them to remain in the service of the Corporation (or its subsidiary corporations).

          B.          The Effective Date of the Plan is April 18, 1996.

          C.          Capitalized terms shall, except as otherwise specifically defined within the provisions of the Plan, have the meanings assigned to such terms in the Glossary.

II.       ADMINISTRATION OF THE PLAN

          A.          The Committee shall have sole and exclusive authority to administer the Discretionary Option Grant Program. Members of the Committee shall serve for such period as the Corporation’s Board of Directors (the “Board”) may determine and shall be subject to removal by the Board at any time.

          B.          The Committee as 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 Discretionary Option Grant Program and to make such determinations under, and issue such interpretations of, the provisions of such program and any outstanding option grants 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 program or any outstanding option thereunder.

          C.          Service on the Committee shall constitute service as a Board member, and members of the Committee shall accordingly be entitled to full indemnification and reimbursement as Board members for their service on the Committee. No member of the Committee shall be liable for any act or omission made in good faith with respect to the Plan or any option grants under the Plan.

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III.      ELIGIBILITY

          A.          The persons eligible to participate in the Discretionary Option Grant Program are key employees (other than officers) of the Corporation (or any Parent or Subsidiary) who render services which contribute to the management, growth and financial success of the Corporation.

          B.          Non-employee Board members shall not be eligible to participate in the Discretionary Option Grant Program.

          C.          The Plan Administrator shall have full authority to determine, with respect to grants made under the Discretionary Option Grant Program, which eligible individuals are to receive such grants, the number of shares to be covered by each such grant, the time or times at which each granted option is to become exercisable and the maximum term for which the option may remain outstanding.

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 number of shares of Common Stock reserved for issuance over the term of the Plan shall initially be fixed at 1,000,000 shares.

          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. Shares subject to any stock appreciation rights exercised under the Plan, whether or not the issued shares are subsequently repurchased by the Corporation pursuant to its repurchase rights under the Plan, shall reduce on a share-for-share basis the number of shares of Common Stock available for subsequent issuance under the Plan. In addition, should the exercise price of an outstanding option under the Plan be paid with shares of Common Stock or should shares of Common Stock otherwise issuable under the Plan be withheld by the Corporation in satisfaction of the withholding taxes incurred in connection with the exercise of an outstanding option under the Plan, then the number of shares of Common Stock available for issuance under the Plan shall be reduced by the gross number of shares for which the option is exercised, 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 options are to be effected in a manner which shall preclude the enlargement or dilution of rights and benefits under those options. The adjustments determined by the Plan Administrator shall be final, binding and conclusive.

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ARTICLE TWO

DISCRETIONARY OPTION GRANT PROGRAM

I.       TERMS AND CONDITIONS OF OPTIONS

          Options granted pursuant to the Discretionary Grant Program shall be authorized by action of the Plan Administrator and shall be Non-Statutory Options. Each granted option 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.

          A.          Exercise Price.

                    1.          The exercise price per share of Common Stock subject to a Non-Statutory Option shall be fixed by the Plan Administrator and in no event shall be less than eighty-five percent (85%) of the Fair Market Value of such Common Stock on the grant date.

                    2.          The exercise price shall become immediately due upon exercise of the option and shall be payable in one of the alternative forms specified below:

                              (i)          full payment in cash or check made payable to the Corporation’s order,

                              (ii)          full payment in 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 date the option is exercised,

                              (iii)          full payment in a combination of 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 date the option is exercised and cash or check made payable to the Corporation’s order, or

                              (iv)          to the extent the option is exercised for vested shares, full payment through a broker-dealer sale and remittance procedure pursuant to which the Optionee shall provide concurrent irrevocable written 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 sales 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 (II) to the Corporation to deliver the certificates for the purchased shares directly to such brokerage firm in order to complete the sale transaction.

          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 instrument evidencing such option. No option shall, however, have a maximum term in excess of ten (10) years. During the lifetime of the Optionee, the

3

option, together with any stock appreciation rights pertaining to such 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 descent and distribution following the Optionee’s death, except as the Plan Administrator may otherwise provide.

          C.          Termination of Service.

                    1.          Except to the extent otherwise expressly authorized by the Plan Administrator, no Optionee shall have more than a thirty-six (36)-month period measured from the date of such individual’s cessation of Service in which to exercise his or her outstanding options under the Plan.

                    2.          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. However, no such option shall remain exercisable for more than thirty-six (36) months after the date of the Optionee’s death.

                    3.          Under no circumstances shall any such option be exercisable after the specified expiration date of the option term.

                    4.          During the applicable post-Service exercise period, the option may not be exercised in the aggregate for more than the number of shares (if any) in which the Optionee is vested at the time of his or her cessation of Service. Upon the expiration of the limited post-Service exercise period or (if earlier) upon the specified expiration date of the option term, each such option shall terminate and cease to remain outstanding with respect to any vested shares for which the option has not otherwise been exercised. However, each outstanding option shall immediately terminate and cease to remain outstanding, at the time of the Optionee’s cessation of Service, with respect to any shares for which the option is not otherwise at that time exercisable or in which the Optionee is not otherwise vested.

                    5.          Should the Optionee’s Service be terminated for Misconduct, all outstanding options held by that individual shall terminate immediately and cease to remain outstanding.

                    6.          The Plan Administrator shall have complete discretion, exercisable either at the time the option is granted or at any time while the option remains outstanding:

                     –           to permit one or more options to be exercised not only with respect to the number of vested shares of Common Stock for which each such option is exercisable at the time of the Optionee’s cessation of Service but also with respect to one or more subsequent installments of vested shares for which the option would otherwise have become exercisable had such cessation of Service not occurred,

                     –           to extend the period of time for which the option is to remain exercisable following the 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

4

Administrator shall deem appropriate, but in no event beyond the specified expiration date of the option term.

          D.          Stockholder Rights. An Optionee shall have none of the rights of a stockholder with respect to any option shares until such individual shall have exercised the option and paid the exercise price for the purchased shares.

          E.          Repurchase Rights. The shares of Common Stock acquired under this Discretionary Grant Program may be subject to repurchase by the Corporation in accordance with the following provisions:

                    1.          The Plan Administrator shall have the discretion to grant options which are exercisable for unvested shares of Common Stock. Should the Optionee cease Service while holding any unvested shares purchased under such options, then the Corporation shall have the right to repurchase any or all of those unvested shares at the exercise price paid per share. The terms and conditions upon which such repurchase right shall be exercisable (including the period and procedure for exercise and the appropriate vesting schedule for the purchased shares) shall be established by the Plan Administrator and set forth in the instrument evidencing such repurchase right.

                    2.          All of the Corporation’s outstanding repurchase rights shall automatically terminate, and all shares subject to such terminated rights shall immediately vest in full, upon the occurrence of a Corporate Transaction, except to the extent: (i) any such repurchase right is expressly assigned to the successor corporation (or parent thereof) in connection with the Corporate Transaction or (ii) such accelerated vesting is precluded by other limitations imposed by the Plan Administrator at the time the repurchase right is issued.

                    3.          The Plan Administrator shall have the discretionary authority, exercisable either before or after the Optionee’s cessation of Service, to cancel the Corporation’s outstanding repurchase rights with respect to one or more shares purchased or purchasable by the Optionee under the Plan and thereby accelerate the vesting of such shares in whole or in part at any time.

II.      CORPORATE TRANSACTIONS/CHANGES IN CONTROL/HOSTILE TAKE-OVER

          A.          In the event of any Corporate Transaction, each outstanding option 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 such option and may be exercised for all or any portion of such shares. However, an outstanding option shall not so accelerate if and to the extent: (i) such option is, in connection with the Corporate Transaction, either to be assumed by the successor corporation or parent thereof or to be replaced with a comparable option to purchase shares of the capital stock of the successor corporation or parent thereof, (ii) such option is to be replaced with a cash incentive program of the successor corporation which preserves the option spread existing at the time of the Corporate Transaction and provides for subsequent payout in accordance with the same vesting schedule applicable to such option or (iii) the acceleration of such option is subject to other limitations imposed by the Plan

5

Administrator at the time of the option grant. The determination of option comparability under clause (i) above shall be made by the Plan Administrator, and its determination shall be final, binding and conclusive.

          B.          The Plan Administrator shall have the discretionary authority, exercisable either at the time the option is granted or at any time while the option remains outstanding, to provide for the automatic acceleration of one or more outstanding options upon the occurrence of a Corporate Transaction, whether or not those options are to be assumed or replaced in the Corporate Transaction. Alternatively, the Plan Administrator shall have the authority to provide for the subsequent acceleration of any outstanding options which do not otherwise accelerate at the time of the Corporate Transaction, or the subsequent termination of any of the Corporation’s outstanding repurchase rights which do not otherwise terminate at the time of the Corporate Transaction, should the Optionee’s Service terminate through an Involuntary Termination effected within a designated period following the effective date of such Corporate Transaction.

          C.          Immediately following the consummation of the Corporate Transaction, all outstanding options shall terminate, except to the extent assumed by the successor corporation or its parent company.

          D.          Each outstanding option under this Discretionary Grant Program that is assumed in connection with the Corporate Transaction or is otherwise to continue in effect 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 option holder, in consummation of such Corporate Transaction, had such person exercised the option immediately prior to such 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 on both an aggregate and per individual basis following the consummation of the Corporate Transaction shall be appropriately adjusted.

          E.          The Plan Administrator shall have the discretionary authority, exercisable either at the time the option is granted or at any time while the option remains outstanding, to provide for the automatic acceleration of one or more outstanding options (and the termination of one or more of the Corporation’s outstanding repurchase rights) upon the occurrence of a Change in Control. The Plan Administrator shall also have full power and authority to condition any such option acceleration (and the termination of any outstanding repurchase rights) upon the subsequent termination of the Optionee’s Service through an Involuntary Termination effected within a specified period following the Change in Control.

          F.          Any options accelerated in connection with the Change in Control shall remain fully exercisable until the expiration or sooner termination of the option term.

          G.          The grant of options shall in no way affect the right of the Corporation to adjust, reclassify, reorganize or otherwise change its capital or business structure or to merge, consolidate, dissolve, liquidate or sell or transfer all or any part of its business or assets.

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III.      STOCK APPRECIATION RIGHTS

          A.          The Plan Administrator shall have full power and authority, exercisable in its sole discretion, to grant to selected Optionees Tandem Stock Appreciation Rights (“Tandem Rights”).

          B.          The following terms and conditions shall govern the grant and exercise of Tandem Rights:

                    1.          One or more Optionees may be granted the Tandem Right, exercisable upon such terms and conditions as the Plan Administrator may establish, to elect between the exercise of the underlying stock option for shares of Common Stock and the surrender of that option in exchange for a distribution from the Corporation in an amount equal to the excess of (i) the Fair Market Value (on the option surrender date) of the number of shares in which the Optionee is at the time vested under the surrendered option (or surrendered portion thereof) over (ii) the aggregate exercise price payable for such vested shares.

                    2.          No such option surrender shall be effective unless it is approved by the Plan Administrator. If the surrender is so approved, then the distribution to which the Optionee shall accordingly become entitled may be made in shares of Common Stock valued at Fair Market Value on the option surrender date, in cash, or partly in shares and partly in cash, as the Plan Administrator shall in its sole discretion deem appropriate.

                    3.          If the surrender of an option is rejected by the Plan Administrator, then the Optionee shall retain whatever rights the Optionee had under the surrendered option (or surrendered portion thereof) on the option surrender date and may exercise such rights at any time prior to the later of (i) five (5) business days after the receipt of the rejection notice or (ii) the last day on which the option is otherwise exercisable in accordance with the terms of the instrument evidencing such option, but in no event may such rights be exercised more than ten (10) years after the date of the option grant.

ARTICLE THREE

MISCELLANEOUS

I.       LOANS OR INSTALLMENT PAYMENTS

          A.          The Plan Administrator may, in its discretion, assist any Optionee in the exercise of one or more options granted to such Optionee under the Discretionary Grant Program, including the satisfaction of any Federal, state and local income and employment tax obligations arising therefrom, by (i) authorizing the extension of a loan from the Corporation to such Optionee or (ii) permitting the Optionee to pay the exercise price or purchase price for the acquired shares in installments over a period of years. The terms of any loan or installment method of payment (including the interest rate and terms of repayment) shall be upon such terms

7

as the Plan Administrator specifies in the applicable option agreement or otherwise deems appropriate under the circumstances. Loans or installment payments may be authorized with or without security or collateral. However, the maximum credit available to the Optionee may not exceed the exercise price of the acquired shares (less the par value of such shares) plus any Federal, state and local income and employment tax liability incurred by the Optionee in connection with the acquisition of such shares.

          B.          The Plan Administrator may, in its absolute discretion, determine that one or more loans extended under this financial assistance program shall be subject to forgiveness by the Corporation in whole or in part upon such terms and conditions as the Plan Administrator may deem appropriate.

II.      AMENDMENT OF THE PLAN AND AWARDS

          The Plan Administrator has complete authority to amend or modify the Plan (or any component thereof) in any or all respects whatsoever. However, no such amendment or modification shall adversely affect rights and obligations with respect to stock options or stock appreciation rights at the time outstanding under the Plan, unless the Optionee consents to such amendment.

III.      TAX WITHHOLDING

          A.          The Corporation’s obligation to deliver shares of Common Stock upon the exercise of stock options or stock appreciation rights under the Plan shall be subject to the satisfaction of all applicable Federal, state and local income tax and employment tax withholding requirements.

          B.          The Plan Administrator may, in its discretion, provide any or all holders of Non-Statutory Options with the right to use shares of Common Stock in satisfaction of all or part of the Federal, state and local income and employment tax liabilities (the “Taxes”) incurred by such holders in connection with the exercise of their options or the vesting of their shares. Such right may be provided to any such holder in either or both of the following formats:

                    –          Stock Withholding: The holder of the Non-Statutory Option may be provided with the election to have the Corporation withhold, from the shares of Common Stock otherwise issuable upon the exercise of such Non-Statutory Option or the vesting of such shares, a portion of those shares with an aggregate Fair Market Value equal to the percentage of the Taxes (up to one hundred percent (100%)) specified by such holder.

                    –          Stock Delivery: The holder of the Non-Statutory Option may be provided with the election to deliver to the Corporation, at the time the Non-Statutory Option is exercised or the shares vest, one or more shares of Common Stock previously acquired by such individual (other than in connection with the option exercise or share vesting triggering the Taxes) with an aggregate Fair Market Value equal to the percentage of the Taxes (up to one hundred percent (100%)) specified by such holder.

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IV.       USE OF PROCEEDS

          Any cash proceeds received by the Corporation from the sale of shares pursuant to option grants under the Plan shall be used for general corporate purposes.

V.       REGULATORY APPROVALS

          A.          The implementation of the Plan, the granting of any option or stock appreciation right under the Plan, and the issuance of Common Stock upon the exercise of the stock options and stock appreciation rights granted hereunder 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 and stock appreciation rights granted under it and the Common Stock issued pursuant to it.

          B.          No shares of Common Stock or other assets shall be issued or delivered under this Plan unless and until there shall have been compliance with all applicable requirements of Federal and state securities laws, including the filing and effectiveness of the Form S-8 registration statement for the shares of Common Stock issuable under the Plan, and all applicable listing requirements of any securities exchange on which the Common Stock is then listed for trading.

VI.       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 the Service of the Corporation (or Subsidiary) for any period of specific duration, and the Corporation (or any Subsidiary retaining the services of such individual) may terminate such individual’s Service at any time and for any reason, with or without cause.

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GLOSSARY

          The following definitions shall be in effect under the Plan:

          Change in Control: a change in ownership or control of the Corporation effected through any of the following transactions:

          –          the direct or indirect acquisition 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 stockholders which the Board does not recommend such stockholders to accept, or

          –          a change in the composition of the Board over a period of thirty-six (36) months or less such that a majority of the Board members (rounded up to the next whole number) 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 such election or nomination was approved by the Board.

          Code: the Internal Revenue Code of 1986, as amended.

          Committee: a committee of two (2) or more Board members appointed by the Board to administer the Plan.

          Corporate Transaction: any of the following stockholder-approved transactions to which the Corporation is a party:

          –          a merger or consolidation in which the Corporation is not the surviving entity, except for a transaction the principal purpose of which is to change the state in which the Corporation is incorporated,

          –          a sale, transfer or other disposition of all or substantially all of the Corporation’s assets in complete liquidation or dissolution of the Corporation, or

          –          any reverse merger in which the Corporation is the surviving entity but 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 merger.

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          Employee: an individual who performs services while in the employ of the Corporation or one or more Subsidiaries, subject to the control and direction of the employer entity not only as to the work to be performed but also as to the manner and method of performance.

          Fair Market Value: the closing selling price per share on the date in question on the NASDAQ National Market. If there is no reported 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.

          Hostile Take-Over: a change in ownership of the Corporation effected through the following transaction:

          –          the direct or indirect acquisition by any person or related group of persons 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 stockholders which the Board does not recommend such stockholders to accept, and

          –          more than fifty percent (50%) of the acquired securities are accepted from holders other than the officers and directors of the Corporation subject to the short-swing profit restrictions of Section 16 of the 1934 Act.

          Involuntary Termination: the termination of the Service of any Optionee 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 level of responsibility, (B) a reduction in his or her level of compensation (including base salary, fringe benefits and any non-discretionary and objective-standard incentive payment or bonus award) by more than five percent (5%) or (C) a relocation of such individual’s place of employment by more than fifty (50) miles, provided and only if such change, reduction or relocation is effected by the Corporation without the individual’s consent.

          Misconduct: the commission of any act of fraud, embezzlement or dishonesty by the Optionee, any unauthorized use or disclosure by such individual of confidential information or trade secrets of the Corporation or any Parent or Subsidiary, or any other intentional misconduct by such individual adversely affecting the business or affairs of the Corporation in a material manner. The foregoing definition shall not be deemed to be inclusive of all the acts or omissions which the Corporation or any Parent or Subsidiary may consider as grounds for the dismissal or discharge of any Optionee or other individual in the Service of the Corporation.

          Newly Issued Shares: shares of Common Stock drawn from the Corporation’s authorized but unissued shares of Common Stock.

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          1934 Act: the Securities and Exchange Act of 1934, as amended.

          Non-Statutory Option: a stock option not intended to meet the requirements of Code Section 422.

          Optionee: any person to whom an option is granted under the Discretionary Grant Program in effect under the Plan.

          Parent: each corporation (other than the Corporation) in an unbroken chain of corporations ending with the Corporation, provided each such corporation (other than the 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 any other corporation in such chain.

          Permanent Disability or Permanently Disabled: the inability of the Optionee 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.

          Plan Administrator: the committee of two (2) or more Board members appointed by the Board to administer the Discretionary Option Grant Program.

          Service: the provision of services on a periodic basis to the Corporation or any Parent or Subsidiary in the capacity of an Employee, except to the extent otherwise specifically provided in the applicable stock option agreement.

          Subsidiary: each corporation (other than the Corporation) in an unbroken chain of corporations beginning with the Corporation, provided each such 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 any other corporation in such chain.

          Take-Over Price: the greater of (i) the Fair Market Value per share of Common Stock on the date the option is surrendered to the Corporation in connection with a Hostile Take-Over or (ii) the highest reported price per share of Common Stock paid by the tender offer in effecting such Hostile Take-Over. However, if the surrendered option is an Incentive Option, the Take-Over Price shall not exceed the clause (i) price per share.

          Treasury Shares: shares of Common Stock reacquired by the Corporation and held as treasury shares.

12 EX-99.(D)(4) 15 f90816toexv99wxdyx4y.htm EXHIBIT (D)(4)

Exhibit (d)(4)

DIGITAL MICROWAVE CORPORATION
NOTICE OF GRANT OF STOCK OPTION

     Notice is hereby given of the following stock option grant (the “Option”) to purchase shares of the Common Stock of Digital Microwave Corporation (the “Corporation”):

Optionee: 1~

Grant Date: 2~

Vesting Commencement Date: 3~

Option Exercise Price: $4~ per share

Number of Option Shares: 5~ shares

Expiration Date: End of 120-month period measured from the Grant Date

Type of Option: Non-Statutory Option

Exercise Schedule: The Option shall become exercisable for the Option Shares in a series of five (5) successive equal annual installments upon Optionee’s completion of each year of Service (as defined in the attached Stock Option Agreement) over the five (5)-year period measured from the Vesting Commencement Date, with the first such installment to become exercisable upon Optionee’s completion of one (1)-year of Service measured from such Vesting Commencement Date. In no event shall the Option become exercisable for any additional Option Shares following the Optionee’s cessation of Service.

     Optionee understands and agrees that the Option is granted subject to and in accordance with the express terms and conditions of the Digital Microwave Corporation 1996 Non-Officer Employee Stock Option Plan (the “Plan”). Optionee further agrees to be bound by the terms and conditions of the Plan and the terms and conditions of the Option as set forth in the Stock Option Agreement attached hereto as Exhibit A. Optionee also acknowledges receipt of a copy of the official prospectus for the Plan attached hereto as Exhibit B. A copy of the Plan is also available upon request made to the Corporate Secretary at the Corporate Offices at 170 Rose Orchard Way, San Jose, California 95134.

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     No Employment or Service Contract. Nothing in this Agreement or in the Plan shall confer upon Optionee any right to continue in Service for any period of specific duration or interfere with or otherwise restrict in any way the rights of the Corporation (or any parent or subsidiary employing or retaining Optionee) or Optionee, which rights are hereby expressly reserved by each, to terminate Optionee’s Service at any time for any reason whatsoever, with or without cause.

DATED:         , 199

DIGITAL MICROWAVE CORPORATION

By:

Title:

1~, OPTIONEE

Address:

ATTACHMENTS:

Exhibit A: Stock Option Agreement
Exhibit B: Plan Prospectus

2 EX-99.(D)(5) 16 f90816toexv99wxdyx5y.htm EXHIBIT (D)(5)

Exhibit (d)(5)

DIGITAL MICROWAVE CORPORATION
1998 NON-OFFICER EMPLOYEE STOCK OPTION PLAN

ARTICLE ONE

GENERAL

I. PURPOSE OF THE PLAN

     A.     This 1998 Non-Officer Employee Stock Option Plan (the “Plan”) is intended to promote the interests of Digital Microwave Corporation, a Delaware corporation (the “Corporation”), by providing key employees (excluding officers) of the Corporation (or its Parent or Subsidiary corporations) who are responsible for the management, growth and financial success of the Corporation with the opportunity to acquire a proprietary interest, or otherwise increase their proprietary interest, in the Corporation as an incentive for them to remain in the service of the Corporation (or its subsidiary or parent corporations).

     B.     The Effective Date of the Plan is January 2, 1998.

     C.     Capitalized terms shall, except as otherwise specifically defined within the provisions of the Plan, have the meanings assigned to such terms in the Glossary.

II. ADMINISTRATION OF THE PLAN

     A.     The Committee shall have sole and exclusive authority to administer the Discretionary Option Grant Program. Members of the Committee shall serve for such period as the Corporation’s Board of Directors (the “Board”) may determine and shall be subject to removal by the Board at any time.

     B.     The Committee as 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 Discretionary Option Grant Program and to make such determinations under, and issue such interpretations of, the provisions of such program and any outstanding option grants 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 program or any outstanding option thereunder.

     C.     Service on the Committee shall constitute service as a Board member, and members of the Committee shall accordingly be entitled to full indemnification and reimbursement as Board members for their service on the Committee. No member of the Committee shall be liable for any act or omission made in good faith with respect to the Plan or any option grants under the Plan.

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III. ELIGIBILITY

     A.     The persons eligible to participate in the Discretionary Option Grant Program are Employees (other than officers) of the Corporation (or any Parent or Subsidiary) who render services which contribute to the management, growth and financial success of the Corporation.

     B.     The Plan Administrator shall have full authority to determine, with respect to grants made under the Discretionary Option Grant Program, which eligible individuals are to receive such grants, the number of shares to be covered by each such grant, the time or times at which each granted option is to become exercisable and the maximum term for which the option may remain outstanding.

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 number of shares of Common Stock reserved for issuance over the term of the Plan shall initially be fixed at 500,000 shares.

     B.     Should one or more outstanding options under this Plan expire or terminate for any reason prior to its 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. Shares subject to any stock appreciation rights exercised under the Plan, whether or not the issued shares are subsequently repurchased by the Corporation pursuant to its repurchase rights under the Plan, shall reduce on a share-for-share basis the number of shares of Common Stock available for subsequent issuance under the Plan. In addition, should the exercise price of an outstanding option under the Plan be paid with shares of Common Stock or should shares of Common Stock otherwise issuable under the Plan be withheld by the Corporation in satisfaction of the withholding taxes incurred in connection with the exercise of an outstanding option under the Plan, then the number of shares of Common Stock available for issuance under the Plan shall be reduced by the gross number of shares for which the option is exercised, 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 options are to be effected in a manner which shall preclude the enlargement or dilution of rights and benefits under those options. The adjustments determined by the Plan Administrator shall be final, binding and conclusive.

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ARTICLE TWO

DISCRETIONARY OPTION GRANT PROGRAM

I. TERMS AND CONDITIONS OF OPTIONS

     Options granted pursuant to the Discretionary Grant Program shall be authorized by action of the Plan Administrator and shall be Non-Statutory Options. Each granted option 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.

     A.     Exercise Price.

          1. The exercise price per share of Common Stock subject to a Non-Statutory Option shall be fixed by the Plan Administrator and in no event shall be less than eighty-five percent (85%) of the Fair Market Value of such Common Stock on the grant date.

          2. The exercise price shall become immediately due upon exercise of the option and shall be payable in one of the alternative forms specified below:

               (i) full payment in cash or check made payable to the Corporation’s order,

               (ii) full payment in 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 date the option is exercised,

               (iii) full payment in a combination of 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 date the option is exercised and cash or check made payable to the Corporation’s order, or

               (iv) to the extent the option is exercised for vested shares, full payment through a broker-dealer sale and remittance procedure pursuant to which the Optionee shall provide concurrent irrevocable written 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 sales 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 (II) to the Corporation to deliver the certificates for the purchased shares directly to such brokerage firm in order to complete the sale transaction.

     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 instrument evidencing such option. No option shall, however, have a maximum term in excess of ten (10) years. The option, together with any stock

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appreciation rights pertaining to such option, shall be assignable or transferable to the extent provided in the option agreement or as the Plan Administration may otherwise provide.

     C.     Termination of Service.

          1. Except to the extent otherwise expressly authorized by the Plan Administrator, no Optionee shall have more than a thirty-six (36)-month period measured from the date of such individual’s cessation of Service in which to exercise his or her outstanding options under the Plan.

          2. 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. However, no such option shall remain exercisable for more than thirty-six (36) months after the date of the Optionee’s death.

          3. Under no circumstances shall any such option be exercisable after the specified expiration date of the option term.

          4. During the applicable post-Service exercise period, the option may not be exercised in the aggregate for more than the number of shares (if any) in which the Optionee is vested at the time of his or her cessation of Service. Upon the expiration of the limited post-Service exercise period or (if earlier) upon the specified expiration date of the option term, each such option shall terminate and cease to remain outstanding with respect to any vested shares for which the option has not otherwise been exercised. However, each outstanding option shall immediately terminate and cease to remain outstanding, at the time of the Optionee’s cessation of Service, with respect to any shares for which the option is not otherwise at that time exercisable or in which the Optionee is not otherwise vested.

          5. Should the Optionee’s Service be terminated for Misconduct, all outstanding options held by that individual shall terminate immediately and cease to remain outstanding.

          6. The Plan Administrator shall have complete discretion, exercisable either at the time the option is granted or at any time while the option remains outstanding:

     - to permit one or more options to be exercised not only with respect to the number of vested shares of Common Stock for which each such option is exercisable at the time of the Optionee’s cessation of Service but also with respect to one or more subsequent installments of vested shares for which the option would otherwise have become exercisable had such cessation of Service not occurred,

     - to extend the period of time for which the option is to remain exercisable following the 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 specified expiration date of the option term.

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     D.     Stockholder Rights. An Optionee shall have none of the rights of a stockholder with respect to any option shares until such individual shall have exercised the option and paid the exercise price for the purchased shares.

     E.     Repurchase Rights. The shares of Common Stock acquired under this Discretionary Grant Program may be subject to repurchase by the Corporation in accordance with the following provisions:

          1. The Plan Administrator shall have the discretion to grant options which are exercisable for unvested shares of Common Stock. Should the Optionee cease Service while holding any unvested shares purchased under such options, then the Corporation shall have the right to repurchase any or all of those unvested shares at the exercise price paid per share. The terms and conditions upon which such repurchase right shall be exercisable (including the period and procedure for exercise and the appropriate vesting schedule for the purchased shares) shall be established by the Plan Administrator and set forth in the instrument evidencing such repurchase right.

          2. All of the Corporation’s outstanding repurchase rights shall automatically terminate, and all shares subject to such terminated rights shall immediately vest in full, upon the occurrence of a Corporate Transaction, except to the extent: (i) any such repurchase right is expressly assigned to the successor corporation (or parent thereof) in connection with the Corporate Transaction or (ii) such accelerated vesting is precluded by other limitations imposed by the Plan Administrator at the time the repurchase right is issued.

          3. The Plan Administrator shall have the discretionary authority, exercisable either before or after the Optionee’s cessation of Service, to cancel the Corporation’s outstanding repurchase rights with respect to one or more shares purchased or purchasable by the Optionee under the Plan and thereby accelerate the vesting of such shares in whole or in part at any time.

II. CORPORATE TRANSACTIONS/CHANGES IN CONTROL

     A.     In the event of any Corporate Transaction, each outstanding option 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 such option and may be exercised for all or any portion of such shares. However, an outstanding option shall not so accelerate if and to the extent: (i) such option is, in connection with the Corporate Transaction, either to be assumed by the successor corporation or parent thereof or to be replaced with a comparable option to purchase shares of the capital stock of the successor corporation or parent thereof, (ii) such option is to be replaced with a cash incentive program of the successor corporation which preserves the option spread existing at the time of the Corporate Transaction and provides for subsequent payout in accordance with the same vesting schedule applicable to such option or (iii) the acceleration of such option is subject to other limitations imposed by the Plan Administrator at the time of the option grant. The determination of option comparability under clause (i) above shall be made by the Plan Administrator, and its determination shall be final, binding and conclusive.

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     B.     The Plan Administrator shall have the discretionary authority, exercisable either at the time the option is granted or at any time while the option remains outstanding, to provide for the automatic acceleration of one or more outstanding options upon the occurrence of a Corporate Transaction, whether or not those options are to be assumed or replaced in the Corporate Transaction. Alternatively, the Plan Administrator shall have the authority to provide for the subsequent acceleration of any outstanding options which do not otherwise accelerate at the time of the Corporate Transaction, or the subsequent termination of any of the Corporation’s outstanding repurchase rights which do not otherwise terminate at the time of the Corporate Transaction, should the Optionee’s Service terminate through an Involuntary Termination effected within a designated period following the effective date of such Corporate Transaction.

     C.     Immediately following the consummation of the Corporate Transaction, all outstanding options shall terminate, except to the extent assumed by the successor corporation or its parent company.

     D.     Each outstanding option under this Discretionary Grant Program that is assumed in connection with the Corporate Transaction or is otherwise to continue in effect 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 option holder, in consummation of such Corporate Transaction, had such person exercised the option immediately prior to such 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 on both an aggregate and per individual basis following the consummation of the Corporate Transaction shall be appropriately adjusted.

     E.     The Plan Administrator shall have the discretionary authority, exercisable either at the time the option is granted or at any time while the option remains outstanding, to provide for the automatic acceleration of one or more outstanding options (and the termination of one or more of the Corporation’s outstanding repurchase rights) upon the occurrence of a Change in Control. The Plan Administrator shall also have full power and authority to condition any such option acceleration (and the termination of any outstanding repurchase rights) upon the subsequent termination of the Optionee’s Service through an Involuntary Termination effected within a specified period following the Change in Control.

     F.     Any options accelerated in connection with the Change in Control shall remain fully exercisable until the expiration or sooner termination of the option term.

     G.     The grant of options shall in no way affect the right of the Corporation to adjust, reclassify, reorganize or otherwise change its capital or business structure or to merge, consolidate, dissolve, liquidate or sell or transfer all or any part of its business or assets.

III. STOCK APPRECIATION RIGHTS

     A.     The Plan Administrator shall have full power and authority, exercisable in its sole discretion, to grant to selected Optionees Tandem Stock Appreciation Rights (“Tandem Rights”).

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     B.     The following terms and conditions shall govern the grant and exercise of Tandem Rights:

     1. One or more Optionees may be granted the Tandem Right, exercisable upon such terms and conditions as the Plan Administrator may establish, to elect between the exercise of the underlying stock option for shares of Common Stock and the surrender of that option in exchange for a distribution from the Corporation in an amount equal to the excess of (i) the Fair Market Value (on the option surrender date) of the number of shares in which the Optionee is at the time vested under the surrendered option (or surrendered portion thereof) over (ii) the aggregate exercise price payable for such vested shares.

     2. No such option surrender shall be effective unless it is approved by the Plan Administrator. If the surrender is so approved, then the distribution to which the Optionee shall accordingly become entitled may be made in shares of Common Stock valued at Fair Market Value on the option surrender date, in cash, or partly in shares and partly in cash, as the Plan Administrator shall in its sole discretion deem appropriate.

     3. If the surrender of an option is rejected by the Plan Administrator, then the Optionee shall retain whatever rights the Optionee had under the surrendered option (or surrendered portion thereof) on the option surrender date and may exercise such rights at any time prior to the later of (i) five (5) business days after the receipt of the rejection notice or (ii) the last day on which the option is otherwise exercisable in accordance with the terms of the instrument evidencing such option, but in no event may such rights be exercised more than ten (10) years after the date of the option grant.

ARTICLE THREE

MISCELLANEOUS

I. LOANS OR INSTALLMENT PAYMENTS

     A.     The Plan Administrator may, in its discretion, assist any Optionee in the exercise of one or more options granted to such Optionee under the Discretionary Grant Program, including the satisfaction of any Federal, state and local income and employment tax obligations arising therefrom, by (i) authorizing the extension of a loan from the Corporation to such Optionee or (ii) permitting the Optionee to pay the exercise price or purchase price for the acquired shares in installments over a period of years. The terms of any loan or installment method of payment (including the interest rate and terms of repayment) shall be upon such terms as the Plan Administrator specifies in the applicable option agreement or otherwise deems appropriate under the circumstances. Loans or installment payments may be authorized with or without security or collateral. However, the maximum credit available to the Optionee may not exceed the exercise price of the acquired shares (less the par value of such shares) plus any

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Federal, state and local income and employment tax liability incurred by the Optionee in connection with the acquisition of such shares.

     B.     The Plan Administrator may, in its absolute discretion, determine that one or more loans extended under this financial assistance program shall be subject to forgiveness by the Corporation in whole or in part upon such terms and conditions as the Plan Administrator may deem appropriate.

II. AMENDMENT OF THE PLAN AND AWARDS

     The Plan Administrator has complete authority to amend or modify the Plan (or any component thereof) in any or all respects whatsoever. However, no such amendment or modification shall adversely affect rights and obligations with respect to stock options or stock appreciation rights at the time outstanding under the Plan, unless the Optionee consents to such amendment.

III. TAX WITHHOLDING

     A.     The Corporation’s obligation to deliver shares of Common Stock upon the exercise of stock options or stock appreciation rights under the Plan shall be subject to the satisfaction of all applicable Federal, state and local income tax and employment tax withholding requirements.

     B.     The Plan Administrator may, in its discretion, provide any or all holders of Non-Statutory Options with the right to use shares of Common Stock in satisfaction of all or part of the Federal, state and local income and employment tax liabilities (the “Taxes”) incurred by such holders in connection with the exercise of their options or the vesting of their shares. Such right may be provided to any such holder in either or both of the following formats:

          - Stock Withholding: The holder of the Non-Statutory Option may be provided with the election to have the Corporation withhold, from the shares of Common Stock otherwise issuable upon the exercise of such Non-Statutory Option or the vesting of such shares, a portion of those shares with an aggregate Fair Market Value equal to the percentage of the Taxes (up to one hundred percent (100%)) specified by such holder.

          - Stock Delivery: The holder of the Non-Statutory Option may be provided with the election to deliver to the Corporation, at the time the Non-Statutory Option is exercised or the shares vest, one or more shares of Common Stock previously acquired by such individual (other than in connection with the option exercise or share vesting triggering the Taxes) with an aggregate Fair Market Value equal to the percentage of the Taxes (up to one hundred percent (100%)) specified by such holder.

IV. USE OF PROCEEDS

     Any cash proceeds received by the Corporation from the sale of shares pursuant to option grants under the Plan may be used for general corporate purposes.

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V. REGULATORY APPROVALS

     A.     The implementation of the Plan, the granting of any option or stock appreciation right under the Plan, and the issuance of Common Stock upon the exercise of the stock options and stock appreciation rights granted hereunder 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 and stock appreciation rights granted under it and the Common Stock issued pursuant to it.

     B.     No shares of Common Stock or other assets shall be issued or delivered under this Plan unless and until there shall have been compliance with all applicable requirements of Federal and state securities laws, including the filing and effectiveness of the Form S-8 registration statement for the shares of Common Stock issuable under the Plan, and all applicable listing requirements of any securities exchange on which the Common Stock is then listed for trading.

VI. 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 the Service of the Corporation (or Subsidiary) for any period of specific duration, and the Corporation (or any Subsidiary retaining the services of such individual) may terminate such individual’s Service at any time and for any reason, with or without cause.

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GLOSSARY

     The following definitions shall be in effect under the Plan:

     Change in Control: a change in ownership or control of the Corporation effected through any of the following transactions:

     - the direct or indirect acquisition 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 stockholders which the Board does not recommend such stockholders to accept, or

     - a change in the composition of the Board over a period of thirty-six (36) months or less such that a majority of the Board members (rounded up to the next whole number) 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 such election or nomination was approved by the Board.

     Code: the Internal Revenue Code of 1986, as amended.

     Committee: a committee of two (2) or more Board members appointed by the Board to administer the Plan.

     Common Stock: the common stock of the Corporation.

     Corporate Transaction: any of the following stockholder-approved transactions to which the Corporation is a party:

     - a merger or consolidation in which the Corporation is not the surviving entity, except for a transaction the principal purpose of which is to change the state in which the Corporation is incorporated,

     - a sale, transfer or other disposition of all or substantially all of the Corporation’s assets in complete liquidation or dissolution of the Corporation, or

     - any reverse merger in which the Corporation is the surviving entity but 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 merger; provided, however, that if such merger is

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preceded by a Change in Control (other than a Change in Control described as a change in the composition of the Board) within six (6) months of the merger then a Corporate Transaction will be deemed to have occurred if securities possessing more than fifty percent (50%) of the total combined voting power of the Company’s outstanding securities are transferred pursuant to the merger to a person or persons different from those who held such securities immediately prior to such Change in Control.

     Employee: an individual who performs services while in the employ of the Corporation or one or more Subsidiaries or Parents, subject to the control and direction of the employer entity not only as to the work to be performed but also as to the manner and method of performance.

     Fair Market Value: the closing selling price per share on the date in question on the NASDAQ National Market. If there is no reported 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.

     Involuntary Termination: the termination of the Service of any Optionee 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 level of responsibility, (B) a reduction in his or her level of compensation (including base salary, fringe benefits and any non-discretionary and objective-standard incentive payment or bonus award) by more than five percent (5%) or (C) a relocation of such individual’s place of employment by more than fifty (50) miles, provided and only if such change, reduction or relocation is effected by the Corporation without the individual’s consent.

     Misconduct: the commission of any act of fraud, embezzlement or dishonesty by the Optionee, any unauthorized use or disclosure by such individual of confidential information or trade secrets of the Corporation or any Parent or Subsidiary, or any other intentional misconduct by such individual adversely affecting the business or affairs of the Corporation in a material manner. The foregoing definition shall not be deemed to be inclusive of all the acts or omissions which the Corporation or any Parent or Subsidiary may consider as grounds for the dismissal or discharge of any Optionee or other individual in the Service of the Corporation or any Parent or Subsidiary.

     Newly Issued Shares: shares of Common Stock drawn from the Corporation’s authorized but unissued shares of Common Stock.

     1934 Act: the Securities Exchange Act of 1934, as amended.

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     Non-Statutory Option: a stock option not intended to meet the requirements of Code Section 422.

     Optionee: any person to whom an option is granted under the Discretionary Grant Program in effect under the Plan.

     Parent: each corporation (other than the Corporation) in an unbroken chain of corporations ending with the Corporation, provided each such corporation (other than the 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 any other corporation in such chain.

     Permanent Disability or Permanently Disabled: the inability of the Optionee 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.

     Plan Administrator: the committee of two (2) or more Board members appointed by the Board to administer the Discretionary Option Grant Program.

     Service: the provision of services on a periodic basis to the Corporation or any Parent or Subsidiary in the capacity of an Employee, except to the extent otherwise specifically provided in the applicable stock option agreement.

     Subsidiary: each corporation (other than the Corporation) in an unbroken chain of corporations beginning with the Corporation, provided each such 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 any other corporation in such chain.

     Treasury Shares: shares of Common Stock reacquired by the Corporation and held as treasury shares.

12 EX-99.(D)(6) 17 f90816toexv99wxdyx6y.htm EXHIBIT (D)(6)

Exhibit (d)(6)

DIGITAL MICROWAVE CORPORATION
NOTICE OF GRANT OF STOCK OPTION

     Notice is hereby given of the following stock option grant (the “Option”) to purchase shares of the Common Stock of Digital Microwave Corporation (the “Corporation”):

     Optionee: 1~

     Grant Date: 2~

     Vesting Commencement Date: 3~

     Option Exercise Price: $4~ per share

     Number of Option Shares: 5~ shares

     Expiration Date: End of 120-month period measured from the Grant Date

     Type of Option: Non-Statutory Option

Exercise Schedule: The Option shall become exercisable for the Option Shares in a series of five (5) successive equal annual installments upon Optionee’s completion of each year of Service (as defined in the attached Stock Option Agreement) over the five (5)-year period measured from the Vesting Commencement Date, with the first such installment to become exercisable upon Optionee’s completion of one (1)-year of Service measured from such Vesting Commencement Date. In no event shall the Option become exercisable for any additional Option Shares following the Optionee’s cessation of Service.

     Optionee understands and agrees that the Option is granted subject to and in accordance with the express terms and conditions of the Digital Microwave Corporation 1998 Non-Officer Employee Stock Option Plan (the “Plan”). Optionee further agrees to be bound by the terms and conditions of the Plan and the terms and conditions of the Option as set forth in the Stock Option Agreement attached hereto as Exhibit A. Optionee also acknowledges receipt of a copy of the official prospectus for the Plan attached hereto as Exhibit B. A copy of the Plan is also available upon request made to the Corporate Secretary at the Corporate Offices at 170 Rose Orchard Way, San Jose, California 95134.

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     No Employment or Service Contract. Nothing in this Agreement or in the Plan shall confer upon Optionee any right to continue in Service for any period of specific duration or interfere with or otherwise restrict in any way the rights of the Corporation (or any parent or subsidiary employing or retaining Optionee) or Optionee, which rights are hereby expressly reserved by each, to terminate Optionee’s Service at any time for any reason whatsoever, with or without cause.

DATED:          , 199

DIGITAL MICROWAVE CORPORATION

By:

Title:

1~, OPTIONEE

Address:

ATTACHMENTS:

Exhibit A: Stock Option Agreement
Exhibit B: Plan Prospectus

2 EX-99.(D)(7) 18 f90816toexv99wxdyx7y.htm EXHIBIT (D)(7)

Exhibit (d)(7)

DMC STRATEX NETWORKS, INC.

1999 STOCK INCENTIVE PLAN

(Amended as of May 24, 2001)

     1.     Purposes of the Plan. The purposes of this Stock Incentive Plan are to attract and retain the best available personnel, to provide additional incentive to Employees, Directors and Consultants and to promote the success of the Company’s business.

     2.     Definitions. As used herein, the following definitions shall apply:

          (a) “Administrator” means the Board or any of the Committees appointed to administer the Plan.

          (b) “Affiliate” and “Associate” shall have the respective meanings ascribed to such terms in Rule 12b-2 promulgated under the Exchange Act.

          (c) “Applicable Laws” means the legal requirements relating to the administration of stock incentive plans, if any, under applicable provisions of federal securities laws, state corporate and securities laws, the Code, the rules of any applicable stock exchange or national market system, and the rules of any foreign jurisdiction applicable to Awards granted to residents therein.

          (d) “Award” means the grant of an Option or other right or benefit under the Plan.

          (e) “Award Agreement” means the written agreement evidencing the grant of an Award executed by the Company and the Grantee, including any amendments thereto.

          (f) “Board” means the Board of Directors of the Company.

          (g) “Cause” means, with respect to the termination by the Company or a Related Entity of the Grantee’s Continuous Service, that such termination is for “Cause” as such term is expressly defined in a then-effective written agreement between the Grantee and the Company or such Related Entity, or in the absence of such then-effective written agreement and definition, is based on, in the determination of the Administrator, the Grantee’s: (i) performance of any act or failure to perform any act in bad faith and to the detriment of the Company or a Related Entity; (ii) dishonesty, intentional misconduct or material breach of any agreement with the Company or a Related Entity; (iii) unauthorized use or disclosure of confidential information or trade secrets of the Company or a Related Entity or (iv) commission of a crime involving dishonesty, breach of trust, or physical or emotional harm to any person.

          (h) “Change in Control” means a change in ownership or control of the Company effected through either of the following transactions:

               (i) the direct or indirect acquisition by any person or related group of persons (other than an acquisition from or by the Company or by a Company-sponsored

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employee benefit plan or by a person that directly or indirectly controls, is controlled by, or is under common control with, the Company) of beneficial ownership (within the meaning of Rule 13d-3 of the Exchange Act) of securities possessing more than fifty percent (50%) of the total combined voting power of the Company’s outstanding securities pursuant to a tender or exchange offer made directly to the Company’s stockholders which a majority of the Continuing Directors who are not Affiliates or Associates of the offeror do not recommend such stockholders accept, or

               (ii) a change in the composition of the Board over a period of thirty-six (36) months or less such that a majority of the Board members (rounded up to the next whole number) ceases, by reason of one or more contested elections for Board membership, to be comprised of individuals who are Continuing Directors.

          (i) “Code” means the Internal Revenue Code of 1986, as amended.

          (j) “Committee” means any committee appointed by the Board to administer the Plan.

          (k) “Common Stock” means the common stock of the Company.

          (l) “Company” means DMC Stratex Networks, Inc., a Delaware corporation.

          (m) “Consultant” means any person (other than an Employee or a Director, solely with respect to rendering services in such person’s capacity as a Director) who is engaged by the Company or any Related Entity to render consulting or advisory services to the Company or such Related Entity.

          (n) “Continuing Directors” means members of the Board who either (i) have been Board members continuously for a period of at least thirty-six (36) months or (ii) have been Board members for less than thirty-six (36) months and were elected or nominated for election as Board members by at least a majority of the Board members described in clause (i) who were still in office at the time such election or nomination was approved by the Board.

          (o) “Continuous Service” means that the provision of services to the Company or a Related Entity in any capacity of Employee, Director or Consultant, is not interrupted or terminated. Continuous Service shall not be considered interrupted in the case of (i) any approved leave of absence, (ii) transfers among the Company, any Related Entity, or any successor, in any capacity of Employee, Director or Consultant, or (iii) any change in status as long as the individual remains in the service of the Company or a Related Entity in any capacity of Employee, Director or Consultant (except as otherwise provided in the Award Agreement). An approved leave of absence shall include sick leave, military leave, or any other authorized personal leave. For purposes of Incentive Stock Options, no such leave may exceed ninety (90) days, unless reemployment upon expiration of such leave is guaranteed by statute or contract.

          (p) “Corporate Transaction” means any of the following transactions:

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               (i) a merger or consolidation in which the Company is not the surviving entity, except for a transaction the principal purpose of which is to change the state in which the Company is incorporated;

               (ii) the sale, transfer or other disposition of all or substantially all of the assets of the Company (including the capital stock of the Company’s subsidiary corporations) in connection with the complete liquidation or dissolution of the Company;

               (iii) any reverse merger in which the Company is the surviving entity but in which securities possessing more than fifty percent (50%) of the total combined voting power of the Company’s outstanding securities are transferred to a person or persons different from those who held such securities immediately prior to such merger; or

               (iv) acquisition by any person or related group of persons (other than the Company or by a Company-sponsored employee benefit plan) of beneficial ownership (within the meaning of Rule 13d-3 of the Exchange Act) of securities possessing more than fifty percent (50%) of the total combined voting power of the Company’s outstanding securities (whether or not in a transaction also constituting a Change in Control), but excluding any such transaction that the Administrator determines shall not be a Corporate Transaction.

          (q) “Covered Employee” means an Employee who is a “covered employee” under Section 162(m)(3) of the Code.

          (r) “Director” means a member of the Board or the board of directors of any Related Entity.

          (s) “Disability” means that a Grantee would qualify for benefit payments under the long-term disability policy of the Company or the Related Entity to which the Grantee provides services regardless of whether the Grantee is covered by such policy.

          (t) “Employee” means any person, including an Officer or Director, who is an employee of the Company or any Related Entity. The payment of a director’s fee by the Company or a Related Entity shall not be sufficient to constitute “employment” by the Company.

          (u) “Exchange Act” means the Securities Exchange Act of 1934, as amended.

          (v) “Fair Market Value” means, as of any date, the value of Common Stock determined as follows:

               (i) Where there exists a public market for the Common Stock, the Fair Market Value shall be (A) the closing price for a Share for the last market trading day prior to the time of the determination (or, if no closing price was reported on that date, on the last trading date on which a closing price was reported) on the stock exchange determined by the Administrator to be the primary market for the Common Stock or the Nasdaq National Market, whichever is applicable or (B) if the Common Stock is not traded on any such exchange or national market system, the average of the closing bid and asked prices of a Share on the Nasdaq Small Cap Market for the day prior to the time of the determination (or, if no such prices were

3

reported on that date, on the last date on which such prices were reported), in each case, as reported in The Wall Street Journal or such other source as the Administrator deems reliable; or

               (ii) In the absence of an established market for the Common Stock of the type described in (i), above, the Fair Market Value thereof shall be determined by the Administrator in good faith.

          (w) “Good Reason” means the occurrence after a Corporate Transaction, Change in Control or a Related Entity Disposition of any of the following events or conditions unless consented to by the Grantee:

               (i) (A) a change in the Grantee’s status, title, position or responsibilities which represents an adverse change from the Grantee’s status, title, position or responsibilities as in effect at any time within six (6) months preceding the date of a Corporate Transaction, Change in Control or Related Entity Disposition or at any time thereafter or (B) the assignment to the Grantee of any duties or responsibilities which are inconsistent with the Optionee’s status, title, position or responsibilities as in effect at any time within six (6) months preceding the date of a Corporate Transaction, Change in Control or Related Entity Disposition or at any time thereafter;

               (ii) reduction in the Grantee’s base salary to a level below that in effect at any time within six (6) months preceding the date of a Corporate Transaction, Change in Control or Related Entity Disposition or at any time thereafter; or

               (iii) requiring the Grantee to be based at any place outside a 50-mile radius from the Grantee’s job location or residence prior to the Corporate Transaction, Change in Control or Related Entity Disposition, except for reasonably required travel on business which is not materially greater than such travel requirements prior to the Corporate Transaction, Change in Control or Related Entity Disposition.

          (x) “Grantee” means an Employee, Director or Consultant who receives an Award pursuant to an Award Agreement under the Plan.

          (y) “Immediate Family” means any child, stepchild, grandchild, parent, stepparent, grandparent, spouse, former spouse, sibling, niece, nephew, mother-in-law, father-in-law, son-in law, daughter-in-law, brother-in-law, or sister-in-law, including adoptive relationships, any person sharing the Grantee’s household (other than a tenant or employee), a trust in which these persons have more than fifty percent (50%) of the beneficial interest, a foundation in which these persons (or the Grantee) control the management of assets, and any other entity in which these persons (or the Grantee) own more than fifty percent (50%) of the voting interests.

          (z) “Incentive Stock Option” means an Option intended to qualify as an incentive stock option within the meaning of Section 422 of the Code.

          (aa) “Non-Qualified Stock Option” means an Option not intended to qualify as an Incentive Stock Option.

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          (bb) “Officer” means a person who is an officer of the Company or a Related Entity within the meaning of Section 16 of the Exchange Act and the rules and regulations promulgated thereunder.

          (cc) “Option” means an option to purchase Shares pursuant to an Award Agreement granted under the Plan.

          (dd) “Parent” means a “parent corporation,” whether now or hereafter existing, as defined in Section 424(e) of the Code.

          (ee) “Performance — Based Compensation” means compensation qualifying as “performance-based compensation” under Section 162(m) of the Code.

          (ff) “Plan” means this 1999 Stock Incentive Plan.

          (gg) “Related Entity” means any Parent, Subsidiary and any business, corporation, partnership, limited liability company or other entity in which the Company, a Parent or a Subsidiary holds a substantial ownership interest, directly or indirectly.

          (hh) “Related Entity Disposition” means the sale, distribution or other disposition by the Company, a Parent or a Subsidiary of all or substantially all of the interests of the Company, a Parent or a Subsidiary in any Related Entity effected by a sale, merger or consolidation or other transaction involving that Related Entity or the sale of all or substantially all of the assets of that Related Entity, other than any Related Entity Disposition to the Company, a Parent or a Subsidiary.

          (ii) “Rule 16b-3” means Rule 16b-3 promulgated under the Exchange Act or any successor thereto.

          (jj) “Share” means a share of the Common Stock.

          (kk) “Subsidiary” means a “subsidiary corporation,” whether now or hereafter existing, as defined in Section 424(f) of the Code.

     3.     Stock Subject to the Plan.

          (a) Subject to the provisions of Section 10, below, the maximum aggregate number of Shares which may be issued pursuant to all Awards (including Incentive Stock Options) is six million five hundred thousand (6,500,000) Shares of which no more than seven hundred eighty thousand (780,000) Shares may be used to grant Awards other than Options. The Shares to be issued pursuant to Awards may be authorized, but unissued, or reacquired Common Stock.

          (b) Any Shares covered by an Award (or portion of an Award) which is forfeited or canceled, expires or is settled in cash, shall be deemed not to have been issued for purposes of determining the maximum aggregate number of Shares which may be issued under the Plan. Shares that actually have been issued under the Plan pursuant to an Award shall not be returned to the Plan and shall not become available for future issuance under the Plan, except that if

5

unvested Shares are forfeited, or repurchased by the Company at their original purchase price, such Shares shall become available for future grant under the Plan.

     4.     Administration of the Plan.

          (a) Plan Administrator.

               (i) Administration with Respect to Directors and Officers. With respect to grants of Awards to Directors or Employees who are also Officers or Directors 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 and to permit such grants and related transactions under the Plan to be exempt from Section 16(b) of the Exchange Act in accordance with Rule 16b-3. Once appointed, such Committee shall continue to serve in its designated capacity until otherwise directed by the Board.

               (ii) Administration With Respect to Consultants and Other Employees. With respect to grants of Awards 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. Once appointed, such Committee shall continue to serve in its designated capacity until otherwise directed by the Board. The Board may authorize one or more Officers to grant such Awards and may limit such authority as the Board determines from time to time.

               (iii) Administration With Respect to Covered Employees. Notwithstanding the foregoing, grants of Awards to any Covered Employee intended to qualify as Performance-Based Compensation shall be made only by a Committee (or subcommittee of a Committee) which is comprised solely of two or more Directors eligible to serve on a committee making Awards qualifying as Performance-Based Compensation. In the case of such Awards granted to Covered Employees, references to the “Administrator” or to a “Committee” shall be deemed to be references to such Committee or subcommittee.

               (iv) Administration Errors. In the event an Award is granted in a manner inconsistent with the provisions of this subsection (a), such Award shall be presumptively valid as of its grant date to the extent permitted by the Applicable Laws.

          (b) Powers of the Administrator. Subject to Applicable Laws and the provisions of the Plan (including any other powers given to the Administrator hereunder), and except as otherwise provided by the Board, the Administrator shall have the authority, in its discretion:

               (i) to select the Employees, Directors and Consultants to whom Awards may be granted from time to time hereunder;

               (ii) to determine whether and to what extent Awards are granted hereunder;

               (iii) to determine the number of Shares or the amount of other consideration to be covered by each Award granted hereunder;

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               (iv) to approve forms of Award Agreements for use under the Plan;

               (v) to determine the terms and conditions of any Award granted hereunder;

               (vi) to amend the terms of any outstanding Award granted under the Plan, provided that any amendment that would adversely affect the Grantee’s rights under an outstanding Award shall not be made without the Grantee’s written consent and that any amendment to reduce the exercise price of any outstanding Option shall not be made without the approval of the Company’s stockholders;

               (vii) to construe and interpret the terms of the Plan and Awards granted pursuant to the Plan, including without limitation, any notice of Award or Award Agreement, granted pursuant to the Plan;

               (viii) to establish additional terms, conditions, rules or procedures to accommodate the rules or laws of applicable foreign jurisdictions and to afford Grantees favorable treatment under such laws; provided, however, that no Award shall be granted under any such additional terms, conditions, rules or procedures with terms or conditions which are inconsistent with the provisions of the Plan; and

               (ix) to take such other action, not inconsistent with the terms of the Plan, as the Administrator deems appropriate.

     5.     Eligibility. Awards other than Incentive Stock Options may be granted to Employees, Directors and Consultants. Incentive Stock Options may be granted only to Employees of the Company, a Parent or a Subsidiary. An Employee, Director or Consultant who has been granted an Award may, if otherwise eligible, be granted additional Awards. Awards may be granted to such Employees, Directors or Consultants who are residing in foreign jurisdictions as the Administrator may determine from time to time.

     6.     Terms and Conditions of Awards.

          (a) Type of Awards. The Administrator is authorized under the Plan to award any type of arrangement to an Employee, Director or Consultant that is not inconsistent with the provisions of the Plan and that by its terms involves or might involve the issuance of (i) Shares or (ii) an Option with a fixed or variable price related to the Fair Market Value of the Shares and with an exercise right or vesting provision related to the passage of time, the occurrence of one or more events, or the satisfaction of performance criteria or other conditions.

          (b) Designation of Award. Each Award shall be designated in the Award Agreement. In the case of an Option, the Option shall be designated as either an Incentive Stock Option or a Non-Qualified Stock Option. However, notwithstanding such designation, to the extent that the aggregate Fair Market Value of Shares subject to Options designated as Incentive Stock Options which become exercisable for the first time by a Grantee during any calendar year (under all plans of the Company or any Parent or Subsidiary) exceeds $100,000, such excess Options, to the extent of the Shares covered thereby in excess of the foregoing limitation, shall

7

be treated as Non-Qualified Stock Options. For this purpose, 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 date the Option with respect to such Shares is granted.

          (c) Conditions of Award. Subject to the terms of the Plan, the Administrator shall determine the provisions, terms, and conditions of each Award including, but not limited to, the Award vesting schedule, repurchase provisions, rights of first refusal, forfeiture provisions, form of payment (cash, Shares, or other consideration) upon settlement of the Award, payment contingencies, and satisfaction of any performance criteria. The performance criteria established by the Administrator may be based on any one of, or combination of, increase in share price, earnings per share, total stockholder return, return on equity, return on assets, return on investment, net operating income, cash flow, revenue, economic value added, personal management objectives, or other measure of performance selected by the Administrator. Partial achievement of the specified criteria may result in a payment or vesting corresponding to the degree of achievement as specified in the Award Agreement.

          (d) Acquisitions and Other Transactions. The Administrator may issue Awards under the Plan in settlement, assumption or substitution for, outstanding awards or obligations to grant future awards in connection with the Company or a Related Entity acquiring another entity, an interest in another entity or an additional interest in a Related Entity whether by merger, stock purchase, asset purchase or other form of transaction.

          (e) Deferral of Award Payment. The Administrator may establish one or more programs under the Plan to permit selected Grantees the opportunity to elect to defer receipt of consideration upon exercise of an Award, satisfaction of performance criteria, or other event that absent the election would entitle the Grantee to payment or receipt of Shares or other consideration under an Award. The Administrator may establish the election procedures, the timing of such elections, the mechanisms for payments of, and accrual of interest or other earnings, if any, on amounts, Shares or other consideration so deferred, and such other terms, conditions, rules and procedures that the Administrator deems advisable for the administration of any such deferral program.

          (f) Award Exchange Programs. The Administrator may establish one or more programs under the Plan to permit selected Grantees to exchange an Award under the Plan for one or more other types of Awards under the Plan on such terms and conditions as determined by the Administrator from time to time.

          (g) Separate Programs. The Administrator may establish one or more separate programs under the Plan for the purpose of issuing particular forms of Awards to one or more classes of Grantees on such terms and conditions as determined by the Administrator from time to time.

          (h) Individual Award Limit. The maximum number of Shares with respect to which Options may be granted to any Employee in any fiscal year of the Company shall be seven hundred fifty thousand (750,000) Shares. In connection with an Employee’s commencement of Continuous Service, the Employee may be granted Options for up to an additional seven hundred fifty thousand (750,000) Shares which shall not count against the limit set forth in the previous

8

sentence. The foregoing limitations shall be adjusted proportionately in connection with any change in the Company’s capitalization pursuant to Section 10, below. To the extent required by Section 162(m) of the Code or the regulations thereunder, in applying the foregoing limitation with respect to an Employee, if any Option is canceled, the canceled Option shall continue to count against the maximum number of Shares with respect to which Options may be granted to the Employee. For this purpose, the repricing of an Option shall be treated as the cancellation of the existing Option and the grant of a new Option.

          (i) Term of Award. The term of each Award shall be the term stated in the Award Agreement, provided, however, that the term of any Award shall be no more than seven (7) years from the date of grant thereof. However, in the case of an Incentive Stock Option granted to a Grantee 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, the term of the Incentive Stock Option shall be five (5) years from the date of grant thereof or such shorter term as may be provided in the Award Agreement.

          (j) Transferability of Awards. Incentive Stock Options 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 and may be exercised, during the lifetime of the Grantee, only by the Grantee; provided, however, that the Grantee may designate a beneficiary of the Grantee’s Incentive Stock Option in the event of the Grantee’s death on a beneficiary designation form provided by the Administrator. Other Awards may be transferred by gift or through a domestic relations order to members of the Grantee’s Immediate Family to the extent provided in the Award Agreement or in the manner and to the extent determined by the Administrator.

          (k) Time of Granting Awards. The date of grant of an Award shall for all purposes be the date on which the Administrator makes the determination to grant such Award, or such other date as is determined by the Administrator. Notice of the grant determination shall be given to each Employee, Director or Consultant to whom an Award is so granted within a reasonable time after the date of such grant.

     7.     Award Exercise or Purchase Price, Consideration, and Taxes.

          (a) Exercise or Purchase Price. The exercise or purchase price, if any, for an Award shall be as follows:

               (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 not less than one hundred ten percent (110%) of the Fair Market Value per Share on the date of grant; or

                    (B) granted to any Employee other than an Employee described in the preceding paragraph, the per Share exercise price shall be not less than one hundred percent (100%) of the Fair Market Value per Share on the date of grant.

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               (ii) In the case of a Non-Qualified Stock Option, the per Share exercise price shall be not less than one-hundred percent (100%) of the Fair Market Value per Share on the date of grant.

               (iii) In the case of Awards intended to qualify as Performance-Based Compensation, the exercise or purchase price, if any, shall be not less than one hundred percent (100%) of the Fair Market Value per Share on the date of grant.

               (iv) In the case of other Awards, such price as is determined by the Administrator.

               (v) Notwithstanding the foregoing provisions of this Section 7(a), in the case of an Award issued pursuant to Section 6(d), above, the exercise or purchase price for the Award shall be determined in accordance with the principles of Section 424(a) of the Code.

          (b) Consideration. Subject to Applicable Laws, the consideration to be paid for the Shares to be issued upon exercise or purchase of an Award including the method of payment, shall be determined by the Administrator (and, in the case of an Incentive Stock Option, shall be determined at the time of grant). In addition to any other types of consideration the Administrator may determine, the Administrator is authorized to accept as consideration for Shares issued under the Plan the following, provided that the portion of the consideration equal to the par value of the Shares must be paid in cash or other legal consideration permitted by the Delaware General Corporation Law:

               (i) cash or check in U.S. dollars;

               (ii) surrender of Shares or delivery of a properly executed form of attestation of ownership of Shares as the Administrator may require (including withholding of Shares otherwise deliverable upon exercise of the Award) which have a Fair Market Value on the date of surrender or attestation equal to the aggregate exercise price of the Shares as to which said Award shall be exercised (but only to the extent that such exercise of the Award would not result in an accounting compensation charge with respect to the Shares used to pay the exercise price unless otherwise determined by the Administrator);

               (iii) with respect to Options, payment through a broker-dealer sale and remittance procedure pursuant to which the Grantee (A) shall provide written instructions to a Company designated brokerage firm to effect the immediate sale of some or all of the purchased Shares and remit to the Company, out of the sale proceeds available on the settlement date, sufficient funds to cover the aggregate exercise price payable for the purchased Shares and (B) shall provide written directives to the Company to deliver the certificates for the purchased Shares directly to such brokerage firm in order to complete the sale transaction; or

               (iv) any combination of the foregoing methods of payment.

          (c) Taxes. No Shares shall be delivered under the Plan to any Grantee or other person until such Grantee or other person has made arrangements acceptable to the Administrator for the satisfaction of any foreign, federal, state, or local income and employment

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tax withholding obligations, including, without limitation, obligations incident to the receipt of Shares or the disqualifying disposition of Shares received on exercise of an Incentive Stock Option. Upon exercise of an Award, the Company shall withhold or collect from Grantee an amount sufficient to satisfy such tax obligations.

     8.     Exercise of Award.

          (a) Procedure for Exercise; Rights as a Stockholder.

               (i) Any Award granted hereunder shall be exercisable at such times and under such conditions as determined by the Administrator under the terms of the Plan and specified in the Award Agreement; provided, however, that no Award shall be exercisable prior to the first anniversary of the grant date.

               (ii) An Award 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 Award by the person entitled to exercise the Award and full payment for the Shares with respect to which the Award is exercised, including, to the extent selected, use of the broker-dealer sale and remittance procedure to pay the purchase price as provided in Section 7(b)(iii) 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 certificate evidencing such Shares, no right to vote or receive dividends or any other rights as a stockholder shall exist with respect to Shares subject to an Award, notwithstanding the exercise of an Option or other Award. The Company shall issue (or cause to be issued) such stock certificate promptly upon exercise of the Award. No adjustment will 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 the Award Agreement or Section 10, below.

          (b) Exercise of Award Following Termination of Continuous Service.

               (i) An Award may not be exercised after the termination date of such Award set forth in the Award Agreement and may be exercised following the termination of a Grantee’s Continuous Service only to the extent provided in the Award Agreement.

               (ii) Where the Award Agreement permits a Grantee to exercise an Award following the termination of the Grantee’s Continuous Service for a specified period, the Award shall terminate to the extent not exercised on the last day of the specified period or the last day of the original term of the Award, whichever occurs first.

               (iii) Any Award designated as an Incentive Stock Option to the extent not exercised within the time permitted by law for the exercise of Incentive Stock Options following the termination of a Grantee’s Continuous Service shall convert automatically to a Non-Qualified Stock Option and thereafter shall be exercisable as such to the extent exercisable by its terms for the period specified in the Award Agreement.

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     9.     Conditions Upon Issuance of Shares.

          (a) Shares shall not be issued pursuant to the exercise of an Award unless the exercise of such Award and the issuance and delivery of such Shares pursuant thereto shall comply with all Applicable Laws, and shall be further subject to the approval of counsel for the Company with respect to such compliance.

          (b) As a condition to the exercise of an Award, the Company may require the person exercising such Award 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 Applicable Laws.

     10.     Adjustments Upon Changes in Capitalization. Subject to any required action by the stockholders of the Company, the number of Shares covered by each outstanding Award, and the number of Shares which have been authorized for issuance under the Plan but as to which no Awards have yet been granted or which have been returned to the Plan, the exercise or purchase price of each such outstanding Award, the maximum number of Shares with respect to which Options may be granted to any Employee in any fiscal year of the Company, as well as any other terms that the Administrator determines require adjustment shall be proportionately adjusted for (i) any increase or decrease in the number of issued Shares resulting from a stock split, reverse stock split, stock dividend, combination or reclassification of the Shares, or similar event affecting the Shares, (ii) any other increase or decrease in the number of issued Shares effected without receipt of consideration by the Company, or (iii) as the Administrator may determine in its discretion, any other transaction with respect to Common Stock to which Section 424(a) of the Code applies or any similar transaction; 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 and its determination shall be final, binding and conclusive. Except as the Administrator determines, 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 hereof shall be made with respect to, the number or price of Shares subject to an Award.

     11.     Corporate Transactions/Changes in Control/Related Entity Dispositions. Except as may be provided in an Award Agreement:

          (a) In the event of any Corporate Transaction, each Award which is at the time outstanding under the Plan automatically shall become fully vested and exercisable and be released from any restrictions on transfer (other than transfer restrictions applicable to Incentive Stock Options) and repurchase or forfeiture rights, immediately prior to the specified effective date of such Corporate Transaction, for all of the Shares at the time represented by such Award. Effective upon the consummation of the Corporate Transaction, all outstanding Awards under the Plan shall terminate. However, all such Awards shall not terminate if the Awards are, in connection with the Corporate Transaction, assumed by the successor corporation or Parent thereof. In addition, an outstanding Award under the Plan shall not so fully vest and be exercisable and released from such limitations if and to the extent: (i) such Award is, in connection with the Corporate Transaction, either assumed by the successor corporation or

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Parent thereof or replaced with a comparable Award with respect to shares of the capital stock of the successor corporation or Parent thereof or (ii) such Award is to be replaced with a cash incentive program of the successor corporation which preserves the compensation element of such Award existing at the time of the Corporate Transaction and provides for subsequent payout in accordance with the same vesting schedule applicable to such Award The determination of Award comparability above shall be made by the Administrator.

          (b) The Administrator shall have the authority, exercisable either in advance of any actual or anticipated Change in Control or at the time of an actual Change in Control Disposition and exercisable at the time of the grant of an Award under the Plan or any time while an Award remains outstanding, to provide for the full automatic vesting and exercisability of one or more outstanding unvested Awards under the Plan and the release from restrictions on transfer and repurchase or forfeiture rights of such Awards in connection with a Change in Control, on such terms and conditions as the Administrator may specify. The Administrator also shall have the authority to condition any such Award vesting and exercisability or release from such limitations upon the subsequent termination of the Continuous Service of the Grantee within a specified period following the effective date of the Change in Control. The Administrator may provide that any Awards so vested or released from such limitations in connection with a Change in Control shall remain fully exercisable until the expiration or sooner termination of the Award.

          (c) Effective upon the consummation of a Related Entity Disposition, for purposes of the Plan and all Awards, the Continuous Service of each Grantee who is at the time engaged primarily in service to the Related Entity involved in such Related Entity Disposition shall be deemed to terminate and each Award of such Grantee which is at the time outstanding under the Plan automatically shall become fully vested and exercisable and be released from any restrictions on transfer (other than transfer restrictions applicable to Incentive Stock Options) and repurchase or forfeiture rights for all of the Shares at the time represented by such Award and be exercisable in accordance with the terms of the Award Agreement evidencing such Award. However, such Continuous Service shall be not be deemed to terminate if such Award is, in connection with the Related Entity Disposition, assumed by the successor entity or its Parent. In addition, such Continuous Service shall not be deemed to terminate and an outstanding Award under the Plan shall not so fully vest and be exercisable and released from such limitations if and to the extent: (i) such Award is, in connection with the Related Entity Disposition, either to be assumed by the successor entity or its parent or to be replaced with a comparable Award with respect to interests in the successor entity or its parent or (ii) such Award is to be replaced with a cash incentive program of the successor entity which preserves the compensation element of such Award existing at the time of the Related Entity Disposition and provides for subsequent payout in accordance with the same vesting schedule applicable to such Award. The determination of Award comparability above shall be made by the Administrator.

          (d) The portion of any Incentive Stock Option accelerated under this Section 11 in connection with a Corporate Transaction, Change in Control or Related Entity Disposition shall remain exercisable as an Incentive Stock Option under the Code only to the extent the $100,000 dollar limitation of Section 422(d) of the Code is not exceeded. To the

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extent such dollar limitation is exceeded, the accelerated excess portion of such Option shall be exercisable as a Non-Qualified Stock Option.

     12.     Effective Date and Term of Plan. The Plan shall become effective upon the earlier to occur of its adoption by the Board or its approval by the stockholders of the Company. It shall continue in effect for a term of seven (7) years unless sooner terminated. Subject to Section 17, below, and Applicable Laws, Awards may be granted under the Plan upon its becoming effective.

     13.     Amendment, Suspension or Termination of the Plan.

          (a) The Board may at any time amend, suspend or terminate the Plan. To the extent necessary to comply with Applicable Laws, the Company shall obtain stockholder approval of any Plan amendment in such a manner and to such a degree as required. In addition, any amendment to this Section 13(a) or Section 4(b)(vi) shall also require stockholder approval.

          (b) No Award may be granted during any suspension of the Plan or after termination of the Plan.

          (c) Any amendment, suspension or termination of the Plan (including termination of the Plan under Section 12, above) shall not affect Awards already granted, and such Awards shall remain in full force and effect as if the Plan had not been amended, suspended or terminated, unless mutually agreed otherwise between the Grantee and the Administrator, which agreement must be in writing and signed by the Grantee and the Company.

     14.     Reservation of Shares.

          (a) The Company, during the term of the Plan, will at all times reserve and keep available such number of Shares as shall be sufficient to satisfy the requirements of the Plan.

          (b) The 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.

     15.     No Effect on Terms of Employment/Consulting Relationship. The Plan shall not confer upon any Grantee any right with respect to the Grantee’s Continuous Service, nor shall it interfere in any way with his or her right or the Company’s right to terminate the Grantee’s Continuous Service at any time, with or without cause.

     16.     No Effect on Retirement and Other Benefit Plans. Except as specifically provided in a retirement or other benefit plan of the Company or a Related Entity, Awards shall not be deemed compensation for purposes of computing benefits or contributions under any retirement plan of the Company or a Related Entity, and shall not affect any benefits under any other benefit plan of any kind or any benefit plan subsequently instituted under which the availability

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or amount of benefits is related to level of compensation. The Plan is not a “Retirement Plan” or “Welfare Plan” under the Employee Retirement Income Security Act of 1974, as amended.

     17.     Stockholder Approval. The Plan was originally adopted by the Board on June 11, 1999 and by the Company’s stockholders on August 10, 1999. On May 24, 2001, the Board adopted and approved an amendment and restatement of the Plan to increase the number of Shares available for issuance under the Plan, added a prohibition on option repricing unless such repricing is approved by stockholders and made stockholder approval necessary for amendment of certain sections of the Plan. The May 24, 2001 Board amendment was approved by the Company’s stockholders on August 14, 2001.

15 EX-99.(D)(8) 19 f90816toexv99wxdyx8y.htm EXHIBIT (D)(8)

Exhibit (d)(8)

DMC STRATEX NETWORKS, INC. 1999 STOCK INCENTIVE PLAN

NOTICE OF STOCK OPTION AWARD

Grantee’s Name and Address:

     You have been granted an option to purchase shares of Common Stock, subject to the terms and conditions of this Notice of Stock Option Award (the “Notice”), the DMC Stratex Networks, Inc. 1999 Stock Incentive Plan, as amended from time to time (the “Plan”) and the Stock Option Award Agreement (the “Option Agreement”) attached hereto, as follows. Unless otherwise defined herein, the terms defined in the Plan shall have the same defined meanings in this Notice.

Award Number
Date of Award
Vesting Commencement Date
Exercise Price per Share	$
Total Number of Shares subject to the Option
Total Exercise Price	$
Type of Option:	Incentive Stock Option
	Non-Qualified Stock Option
Expiration Date:
Post-Termination Exercise Period:	Three (3) Months

Vesting Schedule:

     Subject to Grantee’s Continuous Service and other limitations set forth in this Notice, the Plan and the Option Agreement, the Option may be exercised, in whole or in part, in accordance with the following schedule:

     25% of the Shares subject to the Option shall vest twelve months after the Vesting Commencement Date, and an additional 25% of the Shares subject to the Option shall vest on each yearly anniversary of the Vesting Commencement Date thereafter.

     During any authorized leave of absence, the vesting of the Option as provided in this schedule shall cease after the leave of absence exceeds a period of ninety (90) days. Vesting of the Option shall resume upon the Grantee’s termination of the leave of absence and return to service to the Company or a Related Entity.

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     In the event of the Grantee’s change in status from Employee to Consultant or from an Employee whose customary employment is 20 hours or more per week to an Employee whose customary employment is fewer than 20 hours per week, vesting of the Option shall continue only to the extent determined by the Administrator as of such change in status.

     In the event of termination of the Grantee’s Continuous Service for Cause, the Grantee’s right to exercise the Option shall terminate concurrently with the termination of the Grantee’s Continuous Service.

     IN WITNESS WHEREOF, the Company and the Grantee have executed this Notice and agree that the Option is to be governed by the terms and conditions of this Notice, the Plan, and the Option Agreement.

DMC Stratex Networks, Inc.,
a Delaware corporation

By:

Title:

THE GRANTEE ACKNOWLEDGES AND AGREES THAT THE SHARES SUBJECT TO THE OPTION SHALL VEST, IF AT ALL, ONLY DURING THE PERIOD OF THE GRANTEE’S CONTINUOUS SERVICE (NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED THE OPTION OR ACQUIRING SHARES HEREUNDER). THE GRANTEE FURTHER ACKNOWLEDGES AND AGREES THAT NOTHING IN THIS NOTICE, THE OPTION AGREEMENT, OR THE PLAN SHALL CONFER UPON THE GRANTEE ANY RIGHT WITH RESPECT TO FUTURE AWARDS OR CONTINUATION OF GRANTEE’S CONTINUOUS SERVICE, NOR SHALL IT INTERFERE IN ANY WAY WITH THE GRANTEE’S RIGHT OR THE RIGHT OF THE GRANTEE’S EMPLOYER TO TERMINATE GRANTEE’S CONTINUOUS SERVICE, WITH OR WITHOUT CAUSE.

     The Grantee acknowledges receipt of a copy of the Plan and the Option Agreement, and represents that he or she is familiar with the terms and provisions thereof, and hereby accepts the Option subject to all of the terms and provisions hereof and thereof. The Grantee has reviewed this Notice, the Plan, and the Option Agreement in their entirety, has had an opportunity to obtain the advice of counsel prior to executing this Notice, and fully understands all provisions of this Notice, the Plan and the Option Agreement. The Grantee hereby agrees that all disputes arising out of or relating to this Notice, the Plan and the Option Agreement shall be resolved in accordance with Section 13 of the Option Agreement. The Grantee further agrees to notify the Company upon any change in the residence address indicated in this Notice.

Dated:	Signed:
		Grantee

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Award Number: ___________

DMC STRATEX NETWORKS, INC. 1999 STOCK INCENTIVE PLAN

STOCK OPTION AWARD AGREEMENT

     1.     Grant of Option. DMC Stratex Networks, Inc., a Delaware corporation (the “Company”), hereby grants to the Grantee (the “Grantee”) named in the Notice of Stock Option Award (the “Notice”), an option (the “Option”) to purchase the Total Number of Shares of Common Stock subject to the Option (the “Shares”) set forth in the Notice, at the Exercise Price per Share set forth in the Notice (the “Exercise Price”) subject to the terms and provisions of the Notice, this Stock Option Award Agreement (the “Option Agreement”) and the Company’s 1999 Stock Incentive Plan, as amended from time to time (the “Plan”), which are incorporated herein by reference. Unless otherwise defined herein, the terms defined in the Plan shall have the same defined meanings in this Option Agreement.

     If designated in the Notice as an Incentive Stock Option, the Option is intended to qualify as an Incentive Stock Option as defined in Section 422 of the Code. However, notwithstanding such designation, to the extent that the aggregate Fair Market Value of Shares subject to Options designated as Incentive Stock Options which become exercisable for the first time by the Grantee during any calendar year (under all plans of the Company or any Parent or Subsidiary) exceeds $100,000, such excess Options, to the extent of the Shares covered thereby in excess of the foregoing limitation, shall be treated as Non-Qualified Stock Options. For this purpose, 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 date the Option with respect to such Shares is awarded.

     2.     Exercise of Option.

          (a) Right to Exercise. The Option shall be exercisable during its term in accordance with the Vesting Schedule set out in the Notice and with the applicable provisions of the Plan and this Option Agreement. The Option shall be subject to the provisions of Section 11 of the Plan relating to the exercisability or termination of the Option in the event of a Corporate Transaction, Change in Control or Related Entity Disposition. No partial exercise of the Option may be for less than the lesser of five percent (5%) of the total number of Shares subject to the Option or the remaining number of Shares subject to the Option. In no event shall the Company issue fractional Shares.

          (b) Method of Exercise. The Option shall be exercisable only by delivery of an Exercise Notice (attached as Exhibit A) which shall state the election to exercise the Option, the whole number of Shares in respect of which the Option is being exercised, such other representations and agreements as to the holder’s investment intent with respect to such Shares and such other provisions as may be required by the Administrator. The Exercise Notice shall be signed by the Grantee and shall be delivered in person, by certified mail, or by such other method as determined from time to time by the Administrator to the Company accompanied by payment of the Exercise Price. The Option shall be deemed to be exercised upon receipt by the

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Company of such written notice accompanied by the Exercise Price, which, to the extent selected, shall be deemed to be satisfied by use of the broker-dealer sale and remittance procedure to pay the Exercise Price provided in Section 3(d), below.

          (c) Taxes. No Shares will be delivered to the Grantee or other person pursuant to the exercise of the Option until the Grantee or other person has made arrangements acceptable to the Administrator for the satisfaction of applicable income tax, employment tax, and social security tax withholding obligations, including, without limitation, obligations incident to the receipt of Shares or the disqualifying disposition of Shares received on exercise of an Incentive Stock Option. Upon exercise of the Option, the Company or the Grantee’s employer may offset or withhold (from any amount owed by the Company or the Grantee’s employer to the Grantee) or collect from the Grantee or other person an amount sufficient to satisfy such tax obligations and/or the employer’s withholding obligations.

     3.     Method of Payment. Payment of the Exercise Price shall be by any of the following, or a combination thereof, at the election of the Grantee; provided, however, that such exercise method does not then violate any Applicable Law and, provided further, that the portion of the Exercise Price equal to the par value of the Shares must be paid in cash or other legal consideration permitted by the Delaware General Corporation Law:

          (a) cash;

          (b) check;

          (c) surrender of Shares or delivery of a properly executed form of attestation of ownership of Shares as the Administrator may require (including withholding of Shares otherwise deliverable upon exercise of the Option) which have a Fair Market Value on the date of surrender or attestation equal to the aggregate Exercise Price of the Shares as to which the Option is being exercised (but only to the extent that such exercise of the Option would not result in an accounting compensation charge with respect to the Shares used to pay the exercise price); or

          (d) payment through a broker-dealer sale and remittance procedure pursuant to which the Grantee (i) shall provide written instructions to a Company designated brokerage firm to effect the immediate sale of some or all of the purchased Shares and remit to the Company, out of the sale proceeds available on the settlement date, sufficient funds to cover the aggregate exercise price payable for the purchased Shares and (ii) shall provide written directives to the Company to deliver the certificates for the purchased Shares directly to such brokerage firm in order to complete the sale transaction.

     4.     Restrictions on Exercise. The Option may not be exercised if the issuance of the Shares subject to the Option upon such exercise would constitute a violation of any Applicable Laws. In addition, the Option, if an Incentive Stock Option, may not be exercised until such time as the Plan has been approved by the stockholders of the Company.

     5.     Termination or Change of Continuous Service. In the event the Grantee’s Continuous Service terminates, other than for Cause, the Grantee may, to the extent otherwise so

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entitled at the date of such termination (the “Termination Date”), exercise the Option during the Post-Termination Exercise Period. In the event of termination of the Grantee’s Continuous Service for Cause, the Grantee’s right to exercise the Option shall, except as otherwise determined by the Administrator, terminate concurrently with the termination of the Grantee’s Continuous Service. In no event shall the Option be exercised later than the Expiration Date set forth in the Notice. In the event of the Grantee’s change in status from Employee, Director or Consultant to any other status of Employee, Director or Consultant, the Option shall remain in effect and, except to the extent otherwise determined by the Administrator, continue to vest; provided, however, that with respect to any Incentive Stock Option that shall remain in effect after a change in status from Employee to Director or Consultant, such Incentive Stock Option shall cease to be treated as an Incentive Stock Option and shall be treated as a Non-Qualified Stock Option on the day three (3) months and one (1) day following such change in status. Except as provided in Sections 6 and 7 below, to the extent that the Grantee is not entitled to exercise the Option on the Termination Date, or if the Grantee does not exercise the Option within the Post-Termination Exercise Period, the Option shall terminate.

     6.     Disability of Grantee. In the event the Grantee’s Continuous Service terminates as a result of his or her Disability, the Grantee may, but only within twelve (12) months from the Termination Date (and in no event later than the Expiration Date), exercise the Option to the extent he or she was otherwise entitled to exercise it on the Termination Date; provided, however, that if such Disability is not a “disability” as such term is defined in Section 22(e)(3) of the Code and the Option is an Incentive Stock Option, such Incentive Stock Option shall cease to be treated as an Incentive Stock Option and shall be treated as a Non-Qualified Stock Option on the day three (3) months and one (1) day following the Termination Date. To the extent that the Grantee is not entitled to exercise the Option on the Termination Date, or if the Grantee does not exercise the Option to the extent so entitled within the time specified herein, the Option shall terminate.

     7.     Death of Grantee. In the event of the termination of the Grantee’s Continuous Service as a result of his or her death, or in the event of the Grantee’s death during the Post-Termination Exercise Period or during the twelve (12) month period following the Grantee’s Termination of Continuous Service as a result of his or her Disability, the Grantee’s estate, or a person who acquired the right to exercise the Option by bequest or inheritance, may exercise the Option, but only to the extent the Grantee could exercise the Option at the date of termination, within twelve (12) months from the date of death (but in no event later than the Expiration Date). To the extent that the Grantee is not entitled to exercise the Option on the date of death, or if the Option is not exercised to the extent so entitled within the time specified herein, the Option shall terminate.

     8.     Transferability of Option. The Option, if an Incentive Stock Option, may not be transferred in any manner other than by will or by the laws of descent and distribution and may be exercised during the lifetime of the Grantee only by the Grantee; provided, however, that the Grantee may designate a beneficiary of the Grantee’s Incentive Stock Option in the event of the Grantee’s death on a beneficiary designation form provided by the Administrator. The Option, if a Non-Qualified Stock Option may be transferred to any person by will and by the laws of descent and distribution. Non-Qualified Stock Options also may be transferred during the lifetime of the Grantee by gift and pursuant to a domestic relations order to members of the

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Grantee’s Immediate Family to the extent and in the manner determined by the Administrator. The terms of the Option shall be binding upon the executors, administrators, heirs, successors and transferees of the Grantee.

     9.     Term of Option. The Option may be exercised no later than the Expiration Date set forth in the Notice or such earlier date as otherwise provided herein.

     10.     Tax Consequences. Set forth below is a brief summary as of the date of this Option Agreement of some of the federal tax consequences of exercise of the Option and disposition of the Shares. THIS SUMMARY IS NECESSARILY INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE. THE GRANTEE SHOULD CONSULT A TAX ADVISER BEFORE EXERCISING THE OPTION OR DISPOSING OF THE SHARES.

          (a) Exercise of Incentive Stock Option. If the 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 income for purposes of the alternative minimum tax for federal tax purposes and may subject the Grantee to the alternative minimum tax in the year of exercise. However, the Internal Revenue Service issued proposed regulations which would subject the Grantee to withholding at the time the Grantee exercises an Incentive Stock Option for Social Security, Medicare and other payroll taxes (not including income tax) based upon the excess, if any, of the Fair Market Value of the Shares on the date of exercise over the Exercise Price. These proposed regulations are subject to further modification by the Internal Revenue Service and, if adopted, would be effective only for the exercise of Incentive Stock Options on or after January 1, 2003.

          (b) Exercise of Incentive Stock Option Following Disability. If the Grantee’s Continuous Service terminates as a result of Disability that is not total and permanent disability as defined in Section 22(e)(3) of the Code, to the extent permitted on the date of termination, the Grantee must exercise an Incentive Stock Option within three (3) months of such termination for the Incentive Stock Option to be qualified as an Incentive Stock Option.

          (c) Exercise of Non-Qualified Stock Option. On exercise of a Non-Qualified Stock Option, the Grantee 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. If the Grantee is an Employee or a former Employee, the Company will be required to withhold from the Grantee’s compensation or collect from the Grantee and pay to the applicable taxing authorities an amount in cash equal to a percentage of this compensation income at the time of exercise, and may refuse to honor the exercise and refuse to deliver Shares if such withholding amounts are not delivered at the time of exercise.

          (d) Disposition of Shares. In the case of a Non-Qualified Stock Option, if Shares are held for more than one year, any gain realized on disposition of the Shares will be treated as long-term capital gain for federal income tax purposes and subject to tax at a maximum rate of 20%. In the case of an Incentive Stock Option, if Shares transferred pursuant

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to the Option are held for more than one year after receipt of the Shares and are disposed more than two years after the Date of Award, any gain realized on disposition of the Shares also will be treated as capital gain for federal income tax purposes and subject to the same tax rates and holding periods that apply to Shares acquired upon exercise of a Non-Qualified Stock Option. If Shares purchased under an Incentive Stock Option are disposed of prior to the expiration of such one-year or two-year periods, any gain realized on such disposition will be treated as compensation income (taxable at ordinary income rates) to the extent of the difference between the Exercise Price and the lesser of (i) the Fair Market Value of the Shares on the date of exercise, or (ii) the sale price of the Shares.

     11.     Entire Agreement: Governing Law. The Notice, the Plan and this Option Agreement constitute the entire agreement of the parties with respect to the subject matter hereof and supersede in their entirety all prior undertakings and agreements of the Company and the Grantee with respect to the subject matter hereof, and may not be modified adversely to the Grantee’s interest except by means of a writing signed by the Company and the Grantee. Nothing in the Notice, the Plan and this Option Agreement (except as expressly provided therein) is intended to confer any rights or remedies on any persons other than the parties. The Notice, the Plan and this Option Agreement are to be construed in accordance with and governed by the internal laws of the State of California (as permitted by Section 1646.5 of the California Civil Code, or any similar successor provision) without giving effect to any choice of law rule that would cause the application of the laws of any jurisdiction other than the internal laws of the State of California to the rights and duties of the parties. Should any provision of the Notice, the Plan or this Option Agreement be determined by a court of law to be illegal or unenforceable, such provision shall be enforced to the fullest extent allowed by law and the other provisions shall nevertheless remain effective and shall remain enforceable.

     12.     Headings. The captions used in the Notice and this Option Agreement are inserted for convenience and shall not be deemed a part of the Option for construction or interpretation.

     13.     Dispute Resolution. The provisions of this Section 13 shall be the exclusive means of resolving disputes arising out of or relating to the Notice, the Plan and this Option Agreement. The Company, the Grantee, and the Grantee’s assignees pursuant to Section 9 (the “parties”) shall attempt in good faith to resolve any disputes arising out of or relating to the Notice, the Plan and this Option Agreement by negotiation between individuals who have authority to settle the controversy. Negotiations shall be commenced by either party by notice of a written statement of the party’s position and the name and title of the individual who will represent the party. Within thirty (30) days of the written notification, the parties shall meet at a mutually acceptable time and place, and thereafter as often as they reasonably deem necessary, to resolve the dispute. If the dispute has not been resolved by negotiation, the parties agree that any suit, action, or proceeding arising out of or relating to the Notice, the Plan or this Option Agreement shall be brought in the United States District Court for the Northern District of California (or should such court lack jurisdiction to hear such action, suit or proceeding, in the Santa Clara County Superior Court) and that the parties shall submit to the jurisdiction of such court. The parties irrevocably waive, to the fullest extent permitted by law, any objection the party may have to the laying of venue for any such suit, action or proceeding brought in such

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court. THE PARTIES ALSO EXPRESSLY WAIVE ANY RIGHT THEY HAVE OR MAY HAVE TO A JURY TRIAL OF ANY SUCH SUIT, ACTION OR PROCEEDING. If any one or more provisions of this Section 13 shall for any reason be held invalid or unenforceable, it is the specific intent of the parties that such provisions shall be modified to the minimum extent necessary to make it or its application valid and enforceable.

     14.     Notices. Any notice required or permitted hereunder shall be given in writing and shall be deemed effectively given upon personal delivery or upon deposit in the United States mail by certified mail (if the parties are within the United States) or upon deposit for delivery by an internationally recognized express mail courier service (for international delivery of notice), with postage and fees prepaid, addressed to the other party at its address as shown beneath its signature in the Notice, or to such other address as such party may designate in writing from time to time to the other party.

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EXHIBIT A

DMC STRATEX NETWORKS, INC. 1999 STOCK INCENTIVE PLAN

EXERCISE NOTICE

DMC Stratex Networks, Inc.
170 Rose Orchard Way
San Jose, California 95134

Attention: Secretary

     1.     Exercise of Option. Effective as of today,          ,     the undersigned (the “Grantee”) hereby elects to exercise the Grantee’s option to purchase                               shares of the Common Stock (the “Shares”) of DMC Stratex Networks, Inc. (the “Company”) under and pursuant to the Company’s 1999 Stock Incentive Plan, as amended from time to time (the “Plan”) and the [ ] Incentive [ ] Non-Qualified Stock Option Award Agreement (the “Option Agreement”) and Notice of Stock Option Award (the “Notice”) dated          ,          . Unless otherwise defined herein, the terms defined in the Plan shall have the same defined meanings in this Exercise Notice.

     2.     Representations of the Grantee. The Grantee acknowledges that the Grantee has received, read and understood the Notice, the Plan, and the Option Agreement and agrees to abide by and be bound by their terms and conditions.

     3.     Rights as Stockholder. Until the stock certificate evidencing such Shares is issued (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company), no right to vote or receive dividends or any other rights as a stockholder shall exist with respect to the Shares, notwithstanding the exercise of the Option. The Company shall issue (or cause to be issued) such stock certificate promptly after the Option is exercised. No adjustment will 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 10 of the Plan.

     4.     Delivery of Payment. The Grantee herewith delivers to the Company the full Exercise Price for the Shares, which, to the extent selected, shall be deemed to be satisfied by use of the broker-dealer sale and remittance procedure to pay the Exercise Price provided in Section 3(d) of the Option Agreement.

     5.     Tax Consultation. The Grantee understands that the Grantee may suffer adverse tax consequences as a result of the Grantee’s purchase or disposition of the Shares. The Grantee represents that the Grantee has consulted with any tax consultants the Grantee deems advisable in connection with the purchase or disposition of the Shares and that the Grantee is not relying on the Company for any tax advice

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     6.     Taxes. The Grantee agrees to satisfy all applicable federal, state and local income and employment tax withholding obligations and herewith delivers to the Company the full amount of such obligations or has made arrangements acceptable to the Company to satisfy such obligations. In the case of an Incentive Stock Option, the Grantee also agrees, as partial consideration for the designation of the Option as an Incentive Stock Option, to notify the Company in writing within thirty (30) days of any disposition of any shares acquired by exercise of the Option if such disposition occurs within two (2) years from the Award Date or within one (1) year from the date the Shares were transferred to the Grantee. If the Company is required to satisfy any federal, state or local income or employment tax withholding obligations as a result of such an early disposition, the Grantee agrees to satisfy the amount of such withholding in a manner that the Administrator prescribes.

     7.     Successors and Assigns. The Company may assign any of its rights under this Exercise Notice to single or multiple assignees, and this agreement shall inure to the benefit of the successors and assigns of the Company. This Exercise Notice shall be binding upon the Grantee and his or her heirs, executors, administrators, successors and assigns.

     8.     Headings. The captions used in this Exercise Notice are inserted for convenience and shall not be deemed a part of this agreement for construction or interpretation.

     9.     Dispute Resolution. The provisions of Section 13 of the Option Agreement shall be the exclusive means of resolving disputes arising out of or relating to this Exercise Notice.

     10.     Governing Law; Severability. This Exercise Notice is to be construed in accordance with and governed by the internal laws of the State of California (as permitted by Section 1646.5 of the California Civil Code, or any similar successor provision) without giving effect to any choice of law rule that would cause the application of the laws of any jurisdiction other than the internal laws of the State of California to the rights and duties of the parties. Should any provision of this Exercise Notice be determined by a court of law to be illegal or unenforceable, such provision shall be enforced to the fullest extent allowed by law and the other provisions shall nevertheless remain effective and shall remain enforceable.

     11.     Notices. Any notice required or permitted hereunder shall be given in writing and shall be deemed effectively given upon personal delivery or upon deposit in the United States mail by certified mail, (if the parties are within the United States) or upon deposit for delivery by an internationally recognized express mail courier service (for international delivery of notice) with postage and fees prepaid, addressed to the other party at its address as shown below beneath its signature, or to such other address as such party may designate in writing from time to time to the other party.

     12.     Further Instruments. The parties agree to execute such further instruments and to take such further action as may be reasonably necessary to carry out the purposes and intent of this agreement.

     13.     Entire Agreement. The Notice, the Plan, and the Option Agreement are incorporated herein by reference, and together with this Exercise Notice constitute the entire agreement of the parties with respect to the subject matter hereof and supersede in their entirety

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all prior undertakings and agreements of the Company and the Grantee with respect to the subject matter hereof, and may not be modified adversely to the Grantee’s interest except by means of a writing signed by the Company and the Grantee. Nothing in the Notice, the Plan, the Option Agreement and this Exercise Notice (except as expressly provided therein) is intended to confer any rights or remedies on any persons other than the parties.

Submitted by:	Accepted by:
GRANTEE:	DMC STRATEX NETWORKS, INC.
	By:
	Title:
(Signature)
Address:	Address:
	170 Rose Orchard Way
	San Jose, California 95134

3 EX-99.(D)(9) 20 f90816toexv99wxdyx9y.htm EXHIBIT (D)(9)

Exhibit (d)(9)

STRATEX NETWORKS, INC.

2002 STOCK INCENTIVE PLAN

     1.     Purposes of the Plan. The purposes of this Stock Incentive Plan are to attract and retain the best available personnel, to provide additional incentive to Employees, Directors and Consultants and to promote the success of the Company’s business.

     2.     Definitions. As used herein, the following definitions shall apply:

          (a) “Administrator” means the Board or any of the Committees appointed to administer the Plan.

          (b) “Affiliate” and “Associate” shall have the respective meanings ascribed to such terms in Rule 12b-2 promulgated under the Exchange Act.

          (c) “Applicable Laws” means the legal requirements relating to the administration of stock incentive plans, if any, under applicable provisions of federal securities laws, state corporate and securities laws, the Code, the rules of any applicable stock exchange or national market system, and the rules of any foreign jurisdiction applicable to Awards granted to residents therein.

          (d) “Assumed” means that (i) pursuant to a Corporate Transaction defined in Section 2(q)(i), 2(q)(ii) or 2(q)(iii), the contractual obligations represented by the Award are expressly assumed (and not simply by operation of law) by the successor entity or its Parent in connection with the Corporate Transaction or (ii) pursuant to a Corporate Transaction defined in Section 2(q)(iv) or 2(q)(v), the Award is expressly affirmed by the Company.

          (e) “Award” means the grant of an Option, Restricted Stock, Share or other right or benefit under the Plan.

          (f) “Award Agreement” means the written agreement evidencing the grant of an Award executed by the Company and the Grantee, including any amendments thereto.

          (g) “Board” means the Board of Directors of the Company.

          (h) “Cause” means, with respect to the termination by the Company or a Related Entity of the Grantee’s Continuous Service, that such termination is for “Cause” as such term is expressly defined in a then-effective written agreement between the Grantee and the Company or such Related Entity, or in the absence of such then-effective written agreement and definition, is based on, in the determination of the Administrator, the Grantee’s: (i) performance of any act or failure to perform any act in bad faith and to the detriment of the Company or a Related Entity; (ii) dishonesty, intentional misconduct or material breach of any agreement with the Company or a Related Entity; (iii) unauthorized use or disclosure of confidential information or trade secrets of the Company or a Related Entity or (iv) commission of a crime involving dishonesty, breach of trust, or physical or emotional harm to any person.

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          (i) “Change in Control” means a change in ownership or control of the Company effected through either of the following transactions:

               (i) the direct or indirect acquisition by any person or related group of persons (other than an acquisition from or by the Company or by a Company-sponsored employee benefit plan or by a person that directly or indirectly controls, is controlled by, or is under common control with, the Company) of beneficial ownership (within the meaning of Rule 13d-3 of the Exchange Act) of securities possessing more than fifty percent (50%) of the total combined voting power of the Company’s outstanding securities pursuant to a tender or exchange offer made directly to the Company’s stockholders which a majority of the Continuing Directors who are not Affiliates or Associates of the offeror do not recommend such stockholders accept, or

               (ii) a change in the composition of the Board over a period of thirty-six (36) months or less such that a majority of the Board members (rounded up to the next whole number) ceases, by reason of one or more contested elections for Board membership, to be comprised of individuals who are Continuing Directors.

          (j) “Code” means the Internal Revenue Code of 1986, as amended.

          (k) “Committee” means any committee appointed by the Board to administer the Plan.

          (l) “Common Stock” means the common stock of the Company.

          (m) “Company” means Stratex Networks, Inc., a Delaware corporation.

          (n) “Consultant” means any person (other than an Employee or a Director, solely with respect to rendering services in such person’s capacity as a Director) who is engaged by the Company or any Related Entity to render consulting or advisory services to the Company or such Related Entity.

          (o) “Continuing Directors” means members of the Board who either (i) have been Board members continuously for a period of at least thirty-six (36) months or (ii) have been Board members for less than thirty-six (36) months and were elected or nominated for election as Board members by at least a majority of the Board members described in clause (i) who were still in office at the time such election or nomination was approved by the Board.

          (p) “Continuous Service” means that the provision of services to the Company or a Related Entity in any capacity of Employee, Director or Consultant, is not interrupted or terminated. Continuous Service shall not be considered interrupted in the case of (i) any approved leave of absence, (ii) transfers among the Company, any Related Entity, or any successor, in any capacity of Employee, Director or Consultant, or (iii) any change in status as long as the individual remains in the service of the Company or a Related Entity in any capacity of Employee, Director or Consultant (except as otherwise provided in the Award Agreement). An approved leave of absence shall include sick leave, military leave, or any other authorized personal leave. For purposes of each Incentive Stock Option granted under the Plan, if such

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leave exceeds ninety (90) days, and reemployment upon expiration of such leave is not guaranteed by statute or contract, then the Incentive Stock Option shall be treated as a Non-Qualified Stock Option on the day three (3) months and one (1) day following the expiration of such ninety (90) day period.

          (q) “Corporate Transaction” means any of the following transactions:

               (i) a merger or consolidation in which the Company is not the surviving entity, except for a transaction the principal purpose of which is to change the state in which the Company is incorporated;

               (ii) the sale, transfer or other disposition of all or substantially all of the assets of the Company (including the capital stock of the Company’s subsidiary corporations);

               (iii) the complete liquidation or dissolution of the Company;

               (iv) any reverse merger in which the Company is the surviving entity but in which securities possessing more than forty percent (40%) of the total combined voting power of the Company’s outstanding securities are transferred to a person or persons different from those who held such securities immediately prior to such merger; or

               (v) acquisition in a single or series of related transactions by any person or related group of persons (other than the Company or by a Company-sponsored employee benefit plan) of beneficial ownership (within the meaning of Rule 13d-3 of the Exchange Act) of securities possessing more than forty percent (40%) of the total combined voting power of the Company’s outstanding securities but excluding any such transaction or series of related transactions that the Administrator determines shall not be a Corporate Transaction.

          (r) “Covered Employee” means an Employee who is a “covered employee” under Section 162(m)(3) of the Code.

          (s) “Director” means a member of the Board or the board of directors of any Related Entity.

          (t) “Disability” means as defined under the long-term disability policy of the Company or the Related Entity to which the Grantee provides services regardless of whether the Grantee is covered by such policy. If the Company or the Related Entity to which the Grantee provides service does not have a long-term disability plan in place, “Disability” means that a Grantee is unable to carry out the responsibilities and functions of the position held by the Grantee by reason of any medically determinable physical or mental impairment for a period of not less than ninety (90) consecutive days. A Grantee will not be considered to have incurred a Disability unless he or she furnishes proof of such impairment sufficient to satisfy the Administrator in its discretion.

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          (u) “Employee” means any person, including an Officer or Director, who is an employee of the Company or any Related Entity. The payment of a director’s fee by the Company or a Related Entity shall not be sufficient to constitute “employment” by the Company.

          (v) “Exchange Act” means the Securities Exchange Act of 1934, as amended.

          (w) “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 Nasdaq National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its Fair Market Value shall be the closing sales price for such stock (or the closing bid, if no sales were reported) as quoted on such exchange or system on the date of determination (or, if no closing sales price or closing bid was reported on that date, as applicable, on the last trading date such closing sales price or closing bid was reported), as reported in The Wall Street Journal or such other source as the Administrator deems reliable;

               (ii) If the Common Stock is regularly quoted on an automated quotation system (including the OTC Bulletin Board) or by a recognized securities dealer, but selling prices are not reported, the Fair Market Value of a share of Common Stock shall be the mean between the high bid and low asked prices for the Common Stock on the date of determination (or, if no such prices were reported on that date, on the last date such prices were reported), as reported in The Wall Street Journal or such other source as the Administrator deems reliable; or

               (iii) In the absence of an established market for the Common Stock of the type described in (i) and (ii), above, the Fair Market Value thereof shall be determined by the Administrator in good faith.

          (x) “Good Reason” means the occurrence after a Corporate Transaction or Change in Control of any of the following events or conditions unless consented to by the Grantee (and the Grantee shall be deemed to have consented to any such event or condition unless the Grantee provides written notice of the Grantee’s non-acquiescence within 30 days of the effective time of such event or condition):

               (i) a change in the Grantee’s responsibilities or duties which represents a material and substantial diminution in the Grantee’s responsibilities or duties as in effect immediately preceding the consummation of a Corporate Transaction or Change in Control;

               (ii) a reduction in the Grantee’s base salary to a level below that in effect at any time within six (6) months preceding the consummation of a Corporate Transaction or Change in Control or at any time thereafter; or

               (iii) requiring the Grantee to be based at any place outside a 50-mile radius from the Grantee’s job location or residence prior to the Corporate Transaction or Change

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in Control, except for reasonably required travel on business which is not materially greater than such travel requirements prior to the Corporate Transaction or Change in Control.

          (y) “Grantee” means an Employee, Director or Consultant who receives an Award pursuant to an Award Agreement under the Plan.

          (z) “Immediate Family” means any child, stepchild, grandchild, parent, stepparent, grandparent, spouse, former spouse, sibling, niece, nephew, mother-in-law, father-in-law, son-in law, daughter-in-law, brother-in-law, or sister-in-law, including adoptive relationships, any person sharing the Grantee’s household (other than a tenant or employee), a trust in which these persons (or the Grantee) have more than fifty percent (50%) of the beneficial interest, a foundation in which these persons (or the Grantee) control the management of assets, and any other entity in which these persons (or the Grantee) own more than fifty percent (50%) of the voting interests.

          (aa) “Incentive Stock Option” means an Option intended to qualify as an incentive stock option within the meaning of Section 422 of the Code.

          (bb) “Non-Qualified Stock Option” means an Option not intended to qualify as an Incentive Stock Option.

          (cc) “Officer” means a person who is an officer of the Company or a Related Entity within the meaning of Section 16 of the Exchange Act and the rules and regulations promulgated thereunder.

          (dd) “Option” means an option to purchase Shares pursuant to an Award Agreement granted under the Plan.

          (ee) “Parent” means a “parent corporation,” whether now or hereafter existing, as defined in Section 424(e) of the Code.

          (ff) “Performance - Based Compensation” means compensation qualifying as “performance-based compensation” under Section 162(m) of the Code.

          (gg) “Plan” means this 2002 Stock Incentive Plan.

          (hh) “Related Entity” means any Parent or Subsidiary of the Company and any business, corporation, partnership, limited liability company or other entity in which the Company or a Parent or a Subsidiary of the Company holds a substantial ownership interest, directly or indirectly.

          (ii) “Replaced” means that pursuant to a Corporate Transaction the Award is replaced with a comparable stock award or the Award is replaced with a cash incentive program of the successor entity or Parent thereof which preserves the compensation element of such Award existing at the time of the Corporate Transaction and provides for subsequent payout in accordance with the same vesting schedule applicable to such Award. The determination of

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Award comparability shall be made by the Administrator and its determination shall be final, binding and conclusive.

          (jj) “Restricted Stock” means Shares issued under the Plan to the Grantee for such consideration, if any, and subject to such restrictions on transfer, rights of first refusal, repurchase provisions, forfeiture provisions, and other terms and conditions as established by the Administrator.

          (kk) “Rule 16b-3” means Rule 16b-3 promulgated under the Exchange Act or any successor thereto.

          (ll) “Share” means a share of the Common Stock.

          (mm) “Subsidiary” means a “subsidiary corporation,” whether now or hereafter existing, as defined in Section 424(f) of the Code.

     3.     Stock Subject to the Plan.

          (a) Subject to the provisions of Section 10, below, the maximum aggregate number of Shares which may be issued pursuant to all Awards (including Incentive Stock Options) is ten million (10,000,000) Shares. Notwithstanding the foregoing and subject to the provisions of Section 10, below, of the number of Shares specified above, the maximum aggregate number of Shares which may be issued pursuant to all Awards other than Options is one million two hundred thousand (1,200,000) Shares. The Shares to be issued pursuant to Awards may be authorized, but unissued, or reacquired Common Stock.

          (b) Any Shares covered by an Award (or portion of an Award) which is forfeited or canceled, expires or is settled in cash, shall be deemed not to have been issued for purposes of determining the maximum aggregate number of Shares which may be issued under the Plan. Shares that actually have been issued under the Plan pursuant to an Award shall not be returned to the Plan and shall not become available for future issuance under the Plan, except that if unvested Shares are forfeited, or repurchased by the Company at their original purchase price, such Shares shall become available for future grant under the Plan.

     4.     Administration of the Plan.

          (a) Plan Administrator.

               (i) Administration with Respect to Directors and Officers. With respect to grants of Awards to Directors or Employees who are also Officers or Directors 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 and to permit such grants and related transactions under the Plan to be exempt from Section 16(b) of the Exchange Act in accordance with Rule 16b-3. Once appointed, such Committee shall continue to serve in its designated capacity until otherwise directed by the Board.

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               (ii) Administration With Respect to Consultants and Other Employees. With respect to grants of Awards 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. Once appointed, such Committee shall continue to serve in its designated capacity until otherwise directed by the Board. The Board may authorize one or more Officers to grant such Awards and may limit such authority as the Board determines from time to time.

               (iii) Administration With Respect to Covered Employees. Notwithstanding the foregoing, grants of Awards to any Covered Employee intended to qualify as Performance-Based Compensation shall be made only by a Committee (or subcommittee of a Committee) which is comprised solely of two or more Directors eligible to serve on a committee making Awards qualifying as Performance-Based Compensation. In the case of such Awards granted to Covered Employees, references to the “Administrator” or to a “Committee” shall be deemed to be references to such Committee or subcommittee.

               (iv) Administration Errors. In the event an Award is granted in a manner inconsistent with the provisions of this subsection (a), such Award shall be presumptively valid as of its grant date to the extent permitted by the Applicable Laws.

          (b) Powers of the Administrator. Subject to Applicable Laws and the provisions of the Plan (including any other powers given to the Administrator hereunder), and except as otherwise provided by the Board, the Administrator shall have the authority, in its discretion:

               (i) to select the Employees, Directors and Consultants to whom Awards may be granted from time to time hereunder;

               (ii) to determine whether and to what extent Awards are granted hereunder;

               (iii) to determine the number of Shares or the amount of other consideration to be covered by each Award granted hereunder;

               (iv) to approve forms of Award Agreements for use under the Plan;

               (v) to determine the terms and conditions of any Award granted hereunder;

               (vi) to amend the terms of any outstanding Award granted under the Plan, provided that any amendment that would adversely affect the Grantee’s rights under an outstanding Award shall not be made without the Grantee’s written consent and that any amendment to reduce the exercise price of any outstanding Option shall not be made without the approval of the Company’s stockholders;

               (vii) to construe and interpret the terms of the Plan and Awards granted pursuant to the Plan, including without limitation, any notice of Award or Award Agreement, granted pursuant to the Plan;

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               (viii) to establish additional terms, conditions, rules or procedures to accommodate the rules or laws of applicable foreign jurisdictions and to afford Grantees favorable treatment under such rules or laws; provided, however, that no Award shall be granted under any such additional terms, conditions, rules or procedures with terms or conditions which are inconsistent with the provisions of the Plan; and

               (ix) to take such other action, not inconsistent with the terms of the Plan, as the Administrator deems appropriate.

     5.     Eligibility. Awards other than Incentive Stock Options may be granted to Employees, Directors and Consultants. Incentive Stock Options may be granted only to Employees of the Company or a Parent or a Subsidiary of the Company. An Employee, Director or Consultant who has been granted an Award may, if otherwise eligible, be granted additional Awards. Awards may be granted to such Employees, Directors or Consultants who are residing in foreign jurisdictions as the Administrator may determine from time to time.

     6.     Terms and Conditions of Awards.

          (a) Type of Awards. The Administrator is authorized under the Plan to award any type of arrangement to an Employee, Director or Consultant that is not inconsistent with the provisions of the Plan and that by its terms involves or might involve the issuance of (i) Shares, (ii) an Option with a fixed or variable price related to the Fair Market Value of the Shares and with an exercise right or vesting provision related to the passage of time, the occurrence of one or more events, or the satisfaction of performance criteria or other conditions or (iii) Restricted Stock. An Award may consist of one or more such securities or benefits in any combination or alternative.

          (b) Designation of Award. Each Award shall be designated in the Award Agreement. In the case of an Option, the Option shall be designated as either an Incentive Stock Option or a Non-Qualified Stock Option. However, notwithstanding such designation, to the extent that the aggregate Fair Market Value of Shares subject to Options designated as Incentive Stock Options which become exercisable for the first time by a Grantee during any calendar year (under all plans of the Company or any Parent or Subsidiary of the Company) exceeds $100,000, such excess Options, to the extent of the Shares covered thereby in excess of the foregoing limitation, shall be treated as Non-Qualified Stock Options. For this purpose, 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 grant date of the relevant Option with respect to which such Shares are granted.

          (c) Conditions of Award. Subject to the terms of the Plan, the Administrator shall determine the provisions, terms, and conditions of each Award including, but not limited to, the Award vesting schedule, repurchase provisions, rights of first refusal, forfeiture provisions, form of payment (cash, Shares, or other consideration) upon settlement of the Award, payment contingencies, and satisfaction of any performance criteria. The performance criteria established by the Administrator may be based on any one of, or combination of, increase in share price, earnings per share, total stockholder return, return on equity, return on assets, return on investment, net operating income, cash flow, revenue, economic value added, personal

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management objectives, or other measure of performance selected by the Administrator. Partial achievement of the specified criteria may result in a payment or vesting corresponding to the degree of achievement as specified in the Award Agreement.

          (d) Acquisitions and Other Transactions. The Administrator may issue Awards under the Plan in settlement, assumption or substitution for, outstanding awards or obligations to grant future awards in connection with the Company or a Related Entity acquiring another entity, an interest in another entity or an additional interest in a Related Entity whether by merger, stock purchase, asset purchase or other form of transaction.

          (e) Deferral of Award Payment. The Administrator may establish one or more programs under the Plan to permit selected Grantees the opportunity to elect to defer receipt of consideration upon exercise of an Award, satisfaction of performance criteria, or other event that absent the election would entitle the Grantee to payment or receipt of Shares or other consideration under an Award (but only to the extent that such deferral programs would not result in an accounting compensation charge unless otherwise determined by the Administrator). The Administrator may establish the election procedures, the timing of such elections, the mechanisms for payments of, and accrual of interest or other earnings, if any, on amounts, Shares or other consideration so deferred, and such other terms, conditions, rules and procedures that the Administrator deems advisable for the administration of any such deferral program.

          (f) Separate Programs. The Administrator may establish one or more separate programs under the Plan for the purpose of issuing particular forms of Awards to one or more classes of Grantees on such terms and conditions as determined by the Administrator from time to time.

          (g) Individual Award Limit. The maximum number of Shares with respect to which Options may be granted to any Grantee in any fiscal year of the Company shall be seven hundred fifty thousand (750,000) Shares. In connection with a Grantee’s commencement of Continuous Service, the Grantee may be granted Options for up to an additional seven hundred fifty thousand (750,000) Shares, which shall not count against the limit set forth in the previous sentence. The foregoing limitations shall be adjusted proportionately in connection with any change in the Company’s capitalization pursuant to Section 10, below. To the extent required by Section 162(m) of the Code or the regulations thereunder, in applying the foregoing limitation with respect to a Grantee, if any Option is canceled, the canceled Option shall continue to count against the maximum number of Shares with respect to which Options may be granted to the Grantee. For this purpose, the repricing of an Option shall be treated as the cancellation of the existing Option and the grant of a new Option.

          (h) Early Exercise. The Award Agreement may, but need not, include a provision whereby the Grantee may elect at any time while an Employee, Director or Consultant to exercise any part or all of the Award prior to full vesting of the Award. Any unvested Shares received pursuant to such exercise may be subject to a repurchase right in favor of the Company or a Related Entity or to any other restriction the Administrator determines to be appropriate.

          (i) Term of Award. The term of each Award shall be the term stated in the Award Agreement, provided, however, that the term of any Award shall be no more than

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seven (7) years from the date of grant thereof. However, in the case of an Incentive Stock Option granted to a Grantee 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 of the Company, the term of the Incentive Stock Option shall be five (5) years from the date of grant thereof or such shorter term as may be provided in the Award Agreement.

          (j) Transferability of Awards. Incentive Stock Options 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 and may be exercised, during the lifetime of the Grantee, only by the Grantee; provided, however, that the Grantee may designate a beneficiary of the Grantee’s Incentive Stock Option in the event of the Grantee’s death on a beneficiary designation form provided by the Administrator. Other Awards shall be transferred by will and by the laws of descent and distribution, and during the lifetime of the Grantee, by gift and/or pursuant to a domestic relations order to members of the Grantee’s Immediate Family to the extent and in the manner determined by the Administrator.

          (k) Time of Granting Awards. The date of grant of an Award shall for all purposes be the date on which the Administrator makes the determination to grant such Award, or such other date as is determined by the Administrator. Notice of the grant determination shall be given to each Employee, Director or Consultant to whom an Award is so granted within a reasonable time after the date of such grant.

     7.     Award Exercise or Purchase Price, Consideration, and Taxes.

          (a) Exercise or Purchase Price. The exercise or purchase price, if any, for an Award shall be as follows:

               (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 of the Company, the per Share exercise price shall be not less than one hundred ten percent (110%) of the Fair Market Value per Share on the date of grant; or

                    (B) granted to any Employee other than an Employee described in the preceding paragraph, the per Share exercise price shall be not less than one hundred percent (100%) of the Fair Market Value per Share on the date of grant.

               (ii) In the case of a Non-Qualified Stock Option, the per Share exercise price shall be not less than one-hundred percent (100%) of the Fair Market Value per Share on the date of grant.

               (iii) In the case of Awards intended to qualify as Performance-Based Compensation, the exercise or purchase price, if any, shall be not less than one hundred percent (100%) of the Fair Market Value per Share on the date of grant.

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               (iv) In the case of other Awards, such price as is determined by the Administrator.

               (v) Notwithstanding the foregoing provisions of this Section 7(a), in the case of an Award issued pursuant to Section 6(d), above, the exercise or purchase price for the Award shall be determined in accordance with the provisions of the relevant instrument evidencing the agreement to issue such Award.

          (b) Consideration. Subject to Applicable Laws, the consideration to be paid for the Shares to be issued upon exercise or purchase of an Award including the method of payment, shall be determined by the Administrator (and, in the case of an Incentive Stock Option, shall be determined at the time of grant). In addition to any other types of consideration the Administrator may determine, the Administrator is authorized to accept as consideration for Shares issued under the Plan the following, provided that the portion of the consideration equal to the par value of the Shares must be paid in cash or other legal consideration permitted by the Delaware General Corporation Law:

               (i) cash or check in U.S. dollars;

               (ii) surrender of Shares or delivery of a properly executed form of attestation of ownership of Shares as the Administrator may require (including withholding of Shares otherwise deliverable upon exercise of the Award) which have a Fair Market Value on the date of surrender or attestation equal to the aggregate exercise price of the Shares as to which said Award shall be exercised (but only to the extent that such exercise of the Award would not result in an accounting compensation charge with respect to the Shares used to pay the exercise price unless otherwise determined by the Administrator);

               (iii) with respect to Options, payment through a broker-dealer sale and remittance procedure pursuant to which the Grantee (A) shall provide written instructions to a Company designated brokerage firm to effect the immediate sale of some or all of the purchased Shares and remit to the Company, out of the sale proceeds available on the settlement date, sufficient funds to cover the aggregate exercise price payable for the purchased Shares and (B) shall provide written directives to the Company to deliver the certificates for the purchased Shares directly to such brokerage firm in order to complete the sale transaction; or

               (iv) any combination of the foregoing methods of payment.

          (c) Taxes. No Shares shall be delivered under the Plan to any Grantee or other person until such Grantee or other person has made arrangements acceptable to the Administrator for the satisfaction of any foreign, federal, state, or local income and employment tax withholding obligations, including, without limitation, obligations incident to the receipt of Shares or the disqualifying disposition of Shares received on exercise of an Incentive Stock Option. Upon exercise of an Award, the Company shall withhold or collect from Grantee an amount sufficient to satisfy such tax obligations.

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     8.     Exercise of Award.

          (a) Procedure for Exercise; Rights as a Stockholder.

               (i) Any Award granted hereunder shall be exercisable at such times and under such conditions as determined by the Administrator under the terms of the Plan and specified in the Award Agreement; provided, however, that no Award granted to an Employee, except for Restricted Stock or an Award granted under an Award Agreement described in Section 6(h), shall be exercisable prior to the first anniversary of the grant date.

               (ii) An Award shall be deemed to be exercised when written notice (including written notice provided via electronic transmission) of such exercise has been given to the Company in accordance with the terms of the Award by the person entitled to exercise the Award and full payment for the Shares with respect to which the Award is exercised, including, to the extent selected, use of the broker-dealer sale and remittance procedure to pay the purchase price as provided in Section 7(b)(iii). 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 certificate evidencing such Shares, no right to vote or receive dividends or any other rights as a stockholder shall exist with respect to Shares subject to an Award, notwithstanding the exercise of an Option or other Award. The Company shall issue (or cause to be issued) such stock certificate promptly upon exercise of the Award. No adjustment will 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 the Award Agreement or Section 10, below.

          (b) Exercise of Award Following Termination of Continuous Service.

               (i) An Award may not be exercised after the termination date of such Award set forth in the Award Agreement and may be exercised following the termination of a Grantee’s Continuous Service only to the extent provided in the Award Agreement.

               (ii) Where the Award Agreement permits a Grantee to exercise an Award following the termination of the Grantee’s Continuous Service for a specified period, the Award shall terminate to the extent not exercised on the last day of the specified period or the last day of the original term of the Award, whichever occurs first.

               (iii) Any Award designated as an Incentive Stock Option to the extent not exercised within the time permitted by law for the exercise of Incentive Stock Options following the termination of a Grantee’s Continuous Service shall convert automatically to a Non-Qualified Stock Option and thereafter shall be exercisable as such to the extent exercisable by its terms for the period specified in the Award Agreement.

     9.     Conditions Upon Issuance of Shares.

          (a) Shares shall not be issued pursuant to the exercise of an Award unless the exercise of such Award and the issuance and delivery of such Shares pursuant thereto shall comply with all Applicable Laws, and shall be further subject to the approval of counsel for the Company with respect to such compliance.

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          (b) As a condition to the exercise of an Award, the Company may require the person exercising such Award 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 Applicable Laws.

     10.     Adjustments Upon Changes in Capitalization. Subject to any required action by the stockholders of the Company, the number of Shares covered by each outstanding Award, and the number of Shares which have been authorized for issuance under the Plan but as to which no Awards have yet been granted or which have been returned to the Plan, the exercise or purchase price of each such outstanding Award, the maximum number of Shares with respect to which Options may be granted to any Grantee in any fiscal year of the Company, as well as any other terms that the Administrator determines require adjustment shall be proportionately adjusted for (i) any increase or decrease in the number of issued Shares resulting from a stock split, reverse stock split, stock dividend, combination or reclassification of the Shares, or similar transaction affecting the Shares, (ii) any other increase or decrease in the number of issued Shares effected without receipt of consideration by the Company, or (iii) as the Administrator may determine in its discretion, any other transaction with respect to Common Stock including a corporate merger, consolidation, acquisition of property or stock, separation (including a spin-off or other distribution of stock or property), reorganization, liquidation (whether partial or complete) or any similar transaction; 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 and its determination shall be final, binding and conclusive. Except as the Administrator determines, 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 hereof shall be made with respect to, the number or price of Shares subject to an Award.

     11.     Corporate Transactions/Changes in Control.

          (a) Termination of Award to Extent Not Assumed.

               (i) Corporate Transaction. Effective upon the consummation of a Corporate Transaction, all outstanding Awards under the Plan shall terminate. However, all such Awards shall not terminate to the extent they are Assumed in connection with the Corporate Transaction.

          (b) Acceleration of Award Upon Corporate Transaction/Change in Control.

               (i) Corporate Transaction. Except as provided otherwise in an individual Award Agreement, in the event of a Corporate Transaction, for the portion of each Award that is neither Assumed nor Replaced, such portion of the Award shall automatically become fully vested and exercisable and be released from any repurchase or forfeiture rights (other than repurchase rights exercisable at fair market value) for all of the Shares at the time represented by such portion of the Award, immediately prior to the specified effective date of such Corporate Transaction.

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               (ii) Change in Control. The Administrator shall have the authority, exercisable either in advance of any actual or anticipated Change in Control or at the time of an actual Change in Control and exercisable at the time of the grant of an Award under the Plan or any time while an Award remains outstanding, to provide for the full or partial automatic vesting and exercisability of one or more outstanding unvested Awards under the Plan and the release from restrictions on transfer and repurchase or forfeiture rights of such Awards in connection with a Change in Control, on such terms and conditions as the Administrator may specify. The Administrator also shall have the authority to condition any such Award vesting and exercisability or release from such limitations upon the subsequent termination of the Continuous Service of the Grantee within a specified period following the effective date of the Change in Control. The Administrator may provide that any Awards so vested or released from such limitations in connection with a Change in Control, shall remain fully exercisable until the expiration or sooner termination of the Award.

          (c) Effect of Acceleration on Incentive Stock Options. The portion of any Incentive Stock Option accelerated under this Section 11 in connection with a Corporate Transaction or Change in Control shall remain exercisable as an Incentive Stock Option under the Code only to the extent the $100,000 dollar limitation of Section 422(d) of the Code is not exceeded. To the extent such dollar limitation is exceeded, the accelerated excess portion of such Option shall be exercisable as a Non-Qualified Stock Option.

     12.     Effective Date and Term of Plan. The Plan shall become effective upon the earlier to occur of its adoption by the Board or its approval by the stockholders of the Company. It shall continue in effect for a term of seven (7) years unless sooner terminated. Subject to Section 17, below, and Applicable Laws, Awards may be granted under the Plan upon its becoming effective.

     13.     Amendment, Suspension or Termination of the Plan.

          (a) The Board may at any time amend, suspend or terminate the Plan. To the extent necessary to comply with Applicable Laws, the Company shall obtain stockholder approval of any Plan amendment in such a manner and to such a degree as required. In addition, any amendment to this Section 13(a) or Section 4(b)(vi) shall also require stockholder approval.

          (b) No Award may be granted during any suspension of the Plan or after termination of the Plan.

          (c) No amendment, suspension or termination of the Plan (including termination of the Plan under Section 12, above) shall adversely affect any rights under Awards already granted to a Grantee, unless consented to by the Grantee.

     14.     Reservation of Shares.

          (a) The Company, during the term of the Plan, will at all times reserve and keep available such number of Shares as shall be sufficient to satisfy the requirements of the Plan.

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          (b) The 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.

     15.     No Effect on Terms of Employment/Consulting Relationship. The Plan shall not confer upon any Grantee any right with respect to the Grantee’s Continuous Service, nor shall it interfere in any way with his or her right or the right of the Company or any Related Entity to terminate the Grantee’s Continuous Service at any time, with or without Cause, and with or without notice. The ability of the Company or any Related Entity to terminate the employment of a Grantee who is employed at will is in no way affected by its determination that the Grantee’s Continuous Service has been terminated for Cause for the purposes of this Plan.

     16.     No Effect on Retirement and Other Benefit Plans. Except as specifically provided in a retirement or other benefit plan of the Company or a Related Entity, Awards shall not be deemed compensation for purposes of computing benefits or contributions under any retirement plan of the Company or a Related Entity, and shall not affect any benefits under any other benefit plan of any kind or any benefit plan subsequently instituted under which the availability or amount of benefits is related to level of compensation. The Plan is not a “Retirement Plan” or “Welfare Plan” under the Employee Retirement Income Security Act of 1974, as amended.

     17.     Stockholder Approval. The grant of Incentive Stock Options under the Plan shall be subject to approval by the stockholders of the Company within twelve (12) months before or after the date the Plan is adopted excluding Incentive Stock Options issued in substitution for outstanding Incentive Stock Options pursuant to Section 424(a) of the Code. Such stockholder approval shall be obtained in the degree and manner required under Applicable Laws. The Administrator may grant Incentive Stock Options under the Plan prior to approval by the stockholders, but until such approval is obtained, no such Incentive Stock Option shall be exercisable. In the event that stockholder approval is not obtained within the twelve (12) month period provided above, all Incentive Stock Options previously granted under the Plan shall be exercisable as Non-Qualified Stock Options.

15 EX-99.(D)(10) 21 f90816toexv99wxdyx10y.htm EXHIBIT (D)(10)

Exhibit (d)(10)

STRATEX NETWORKS, INC. 2002 STOCK INCENTIVE PLAN

NOTICE OF STOCK OPTION AWARD

Grantee’s Name and Address:

     You have been granted an option to purchase shares of Common Stock, subject to the terms and conditions of this Notice of Stock Option Award (the “Notice”), the Stratex Networks, Inc. 2002 Stock Incentive Plan, as amended from time to time (the “Plan”) and the Stock Option Award Agreement (the “Option Agreement”) attached hereto, as follows. Unless otherwise defined herein, the terms defined in the Plan shall have the same defined meanings in this Notice.

Award Number
Date of Award
Vesting Commencement Date
Exercise Price per Share	$
Total Number of Shares subject to the Option
Total Exercise Price	$

Type of Option:	Incentive Stock Option
	Non-Qualified Stock Option

Expiration Date:
Post-Termination Exercise Period:	Three (3) Months

Vesting Schedule:

     Subject to Grantee’s Continuous Service and other limitations set forth in this Notice, the Plan and the Option Agreement, the Option may be exercised, in whole or in part, in accordance with the following schedule:

     25% of the Shares subject to the Option shall vest twelve months after the Vesting Commencement Date, and an additional 25% of the Shares subject to the Option shall vest on each yearly anniversary of the Vesting Commencement Date thereafter.

     During any authorized leave of absence, the vesting of the Option as provided in this schedule shall be suspended after the leave of absence exceeds a period of ninety (90) days. Vesting of the Option shall resume upon the Grantee’s termination of the leave of absence and return to service to the Company or a Related Entity. The Vesting Schedule of the Option shall be extended by the length of the suspension.

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     In the event of the Grantee’s change in status from Employee to Consultant or from an Employee whose customary employment is 20 hours or more per week to an Employee whose customary employment is fewer than 20 hours per week, vesting of the Option shall continue only to the extent determined by the Administrator as of such change in status.

     In the event of termination of the Grantee’s Continuous Service for Cause, the Grantee’s right to exercise the Option shall terminate concurrently with the termination of the Grantee’s Continuous Service.

     IN WITNESS WHEREOF, the Company and the Grantee have executed this Notice and agree that the Option is to be governed by the terms and conditions of this Notice, the Plan, and the Option Agreement.

Stratex Networks, Inc.,

a Delaware corporation

By:

Title:

THE GRANTEE ACKNOWLEDGES AND AGREES THAT THE SHARES SUBJECT TO THE OPTION SHALL VEST, IF AT ALL, ONLY DURING THE PERIOD OF THE GRANTEE’S CONTINUOUS SERVICE (NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED THE OPTION OR ACQUIRING SHARES HEREUNDER). THE GRANTEE FURTHER ACKNOWLEDGES AND AGREES THAT NOTHING IN THIS NOTICE, THE OPTION AGREEMENT, OR THE PLAN SHALL CONFER UPON THE GRANTEE ANY RIGHT WITH RESPECT TO FUTURE AWARDS OR CONTINUATION OF GRANTEE’S CONTINUOUS SERVICE, NOR SHALL IT INTERFERE IN ANY WAY WITH THE GRANTEE’S RIGHT OR THE RIGHT OF THE GRANTEE’S EMPLOYER TO TERMINATE GRANTEE’S CONTINUOUS SERVICE, WITH OR WITHOUT CAUSE, AND WITH OR WITHOUT NOTICE. THE GRANTEE ACKNOWLEDGES THAT UNLESS THE GRANTEE HAS A WRITTEN EMPLOYMENT AGREEMENT WITH THE COMPANY TO THE CONTRARY, GRANTEE’S STATUS IS AT WILL.

     The Grantee acknowledges receipt of a copy of the Plan and the Option Agreement, and represents that he or she is familiar with the terms and provisions thereof, and hereby accepts the Option subject to all of the terms and provisions hereof and thereof. The Grantee has reviewed this Notice, the Plan, and the Option Agreement in their entirety, has had an opportunity to obtain the advice of counsel prior to executing this Notice, and fully understands all provisions of this Notice, the Plan and the Option Agreement. The Grantee hereby agrees that all disputes arising out of or relating to this Notice, the Plan and the Option Agreement shall be resolved in accordance with Section 15 of the Option Agreement. The Grantee further agrees to notify the Company upon any change in the residence address indicated in this Notice.

Dated:	Signed:
		Grantee

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Award Number:  ___________

STRATEX NETWORKS, INC. 2002 STOCK INCENTIVE PLAN

STOCK OPTION AWARD AGREEMENT

     1.     Grant of Option. Stratex Networks, Inc., a Delaware corporation (the “Company”), hereby grants to the Grantee (the “Grantee”) named in the Notice of Stock Option Award (the “Notice”), an option (the “Option”) to purchase the Total Number of Shares of Common Stock subject to the Option (the “Shares”) set forth in the Notice, at the Exercise Price per Share set forth in the Notice (the “Exercise Price”) subject to the terms and provisions of the Notice, this Stock Option Award Agreement (the “Option Agreement”) and the Company’s 2002 Stock Incentive Plan, as amended from time to time (the “Plan”), which are incorporated herein by reference. Unless otherwise defined herein, the terms defined in the Plan shall have the same defined meanings in this Option Agreement.

     If designated in the Notice as an Incentive Stock Option, the Option is intended to qualify as an Incentive Stock Option as defined in Section 422 of the Code. However, notwithstanding such designation, to the extent that the aggregate Fair Market Value of Shares subject to Options designated as Incentive Stock Options which become exercisable for the first time by the Grantee during any calendar year (under all plans of the Company or any Parent or Subsidiary of the Company) exceeds $100,000, such excess Options, to the extent of the Shares covered thereby in excess of the foregoing limitation, shall be treated as Non-Qualified Stock Options. For this purpose, 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 date the Option with respect to such Shares is awarded.

     2.     Exercise of Option.

          (a) Right to Exercise. The Option shall be exercisable during its term in accordance with the Vesting Schedule set out in the Notice and with the applicable provisions of the Plan and this Option Agreement. The Option shall be subject to the provisions of Section 11 of the Plan relating to the exercisability or termination of the Option in the event of a Corporate Transaction or Change in Control. No partial exercise of the Option may be for less than the lesser of five percent (5%) of the total number of Shares subject to the Option or the remaining number of Shares subject to the Option. The Grantee shall be subject to reasonable limitations on the number of requested exercises during any monthly or weekly period as determined by the Administrator. In no event shall the Company issue fractional Shares.

          (b) The Option shall be exercisable only by delivery of an exercise notice (a form of which is attached as Exhibit A) or by other such procedure as specified from time to time by the Administrator which shall state the election to exercise the Option, the whole number of Shares in respect of which the Option is being exercised, such other representations and agreements as to the holder’s investment intent with respect to such Shares and such other provisions as may be required by the Administrator. The exercise notice shall be signed by the Grantee and shall be delivered in person, by certified mail, or by such other method (including

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electronic transmission) as determined from time to time by the Administrator to the Company accompanied by payment of the Exercise Price. The Option shall be deemed to be exercised upon receipt by the Company of such written notice accompanied by the Exercise Price, which, to the extent selected, shall be deemed to be satisfied by use of the broker-dealer sale and remittance procedure to pay the Exercise Price provided in Section 3(d), below.

          (c) Taxes. No Shares will be delivered to the Grantee or other person pursuant to the exercise of the Option until the Grantee or other person has made arrangements acceptable to the Administrator for the satisfaction of applicable income and employment tax withholding obligations, including, without limitation, such other tax obligations of the Grantee incident to the receipt of Shares or the disqualifying disposition of Shares received on exercise of an Incentive Stock Option. Upon exercise of the Option, the Company or the Grantee’s employer may offset or withhold (from any amount owed by the Company or the Grantee’s employer to the Grantee) or collect from the Grantee or other person an amount sufficient to satisfy such tax obligations and/or the employer’s withholding obligations.

     3.     Method of Payment. Payment of the Exercise Price shall be by any of the following, or a combination thereof, at the election of the Grantee; provided, however, that such exercise method does not then violate any Applicable Law and, provided further, that the portion of the Exercise Price equal to the par value of the Shares must be paid in cash or other legal consideration permitted by the Delaware General Corporation Law:

          (a) cash;

          (b) check;

          (c) surrender of Shares or delivery of a properly executed form of attestation of ownership of Shares as the Administrator may require (including withholding of Shares otherwise deliverable upon exercise of the Option) which have a Fair Market Value on the date of surrender or attestation equal to the aggregate Exercise Price of the Shares as to which the Option is being exercised (but only to the extent that such exercise of the Option would not result in an accounting compensation charge with respect to the Shares used to pay the exercise price); or

          (d) payment through a broker-dealer sale and remittance procedure pursuant to which the Grantee (i) shall provide written instructions to a Company designated brokerage firm to effect the immediate sale of some or all of the purchased Shares and remit to the Company, out of the sale proceeds available on the settlement date, sufficient funds to cover the aggregate exercise price payable for the purchased Shares and (ii) shall provide written directives to the Company to deliver the certificates for the purchased Shares directly to such brokerage firm in order to complete the sale transaction.

     4.     Restrictions on Exercise. The Option may not be exercised if the issuance of the Shares subject to the Option upon such exercise would constitute a violation of any Applicable Laws. In addition, the Option, if an Incentive Stock Option, may not be exercised until such time as the Plan has been approved by the stockholders of the Company.

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     5.     Termination or Change of Continuous Service. In the event the Grantee’s Continuous Service terminates, other than for Cause, the Grantee may, but only during the Post-Termination Exercise Period, exercise the portion of the Option that was vested at the date of such termination (the “Termination Date”). In the event of termination of the Grantee’s Continuous Service for Cause, the Grantee’s right to exercise the Option shall, except as otherwise determined by the Administrator, terminate concurrently with the termination of the Grantee’s Continuous Service (also the “Termination Date”). In no event shall the Option be exercised later than the Expiration Date set forth in the Notice. In the event of the Grantee’s change in status from Employee, Director or Consultant to any other status of Employee, Director or Consultant, the Option shall remain in effect and, except to the extent otherwise determined by the Administrator, continue to vest; provided, however, with respect to any Incentive Stock Option that shall remain in effect after a change in status from Employee to Director or Consultant, such Incentive Stock Option shall cease to be treated as an Incentive Stock Option and shall be treated as a Non-Qualified Stock Option on the day three (3) months and one (1) day following such change in status. Except as provided in Sections 6 and 7 below, to the extent that the Option was unvested on the Termination Date, or if the Grantee does not exercise the vested portion of the Option within the Post-Termination Exercise Period, the Option shall terminate.

     6.     Disability of Grantee. In the event the Grantee’s Continuous Service terminates as a result of his or her Disability, the Grantee may, but only within twelve (12) months from the Termination Date (and in no event later than the Expiration Date), exercise the portion of the Option that was vested on the Termination Date; provided, however, that if such Disability is not a “disability” as such term is defined in Section 22(e)(3) of the Code and the Option is an Incentive Stock Option, such Incentive Stock Option shall cease to be treated as an Incentive Stock Option and shall be treated as a Non-Qualified Stock Option on the day three (3) months and one (1) day following the Termination Date. To the extent that the Option was unvested on the Termination Date, or if the Grantee does not exercise the vested portion of the Option within the time specified herein, the Option shall terminate.

     7.     Death of Grantee. In the event of the termination of the Grantee’s Continuous Service as a result of his or her death, or in the event of the Grantee’s death during the Post-Termination Exercise Period or during the twelve (12) month period following the Grantee’s termination of Continuous Service as a result of his or her Disability, the Grantee’s estate, or a person who acquired the right to exercise the Option by bequest or inheritance, may exercise the portion of the Option that was vested at the date of termination, within twelve (12) months from the date of death (but in no event later than the Expiration Date). To the extent that the Option was unvested on the date of death, or if the vested portion of the Option is not exercised within the time specified herein, the Option shall terminate.

     8.     Transferability of Option. The Option, if an Incentive Stock Option, may not be transferred in any manner other than by will or by the laws of descent and distribution and may be exercised during the lifetime of the Grantee only by the Grantee. The Option, if a Non- Qualified Stock Option, may not be transferred in any manner other than by will or by the laws of descent and distribution, provided, however, that a Non-Qualified Stock Option may be transferred to members of the Grantee’s Immediate Family to the extent and in the manner

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authorized by the Administrator. The terms of the Option shall be binding upon the executors, administrators, heirs and successors of the Grantee.

     9.      Stop-Transfer Notices. In order to ensure compliance with the restrictions on transfer set forth in this Option Agreement, the Notice or the Plan, the Company may issue appropriate “stop transfer” instructions to its transfer agent, if any, and, if the Company transfers its own securities, it may make appropriate notations to the same effect in its own records.

     10.     Refusal to Transfer. The Company shall not be required (i) to transfer on its books any Shares that have been sold or otherwise transferred in violation of any of the provisions of this Option Agreement or (ii) to treat as owner of such Shares or to accord the right to vote or pay dividends to any purchaser or other transferee to whom such Shares shall have been so transferred.

     11.     Term of Option. The Option may be exercised no later than the Expiration Date set forth in the Notice or such earlier date as otherwise provided herein.

     12.     Tax Consequences. Set forth below is a brief summary as of the date of this Option Agreement of some of the federal tax consequences of exercise of the Option and disposition of the Shares. THIS SUMMARY IS NECESSARILY INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE. THE GRANTEE SHOULD CONSULT A TAX ADVISER BEFORE EXERCISING THE OPTION OR DISPOSING OF THE SHARES.

          (a) Exercise of Incentive Stock Option. If the 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 income for purposes of the alternative minimum tax for federal tax purposes and may subject the Grantee to the alternative minimum tax in the year of exercise. However, the Internal Revenue Service issued proposed regulations which would subject the Grantee to withholding at the time the Grantee exercises an Incentive Stock Option for Social Security and Medicare taxes based upon the excess, if any, of the Fair Market Value of the Shares on the date of exercise over the Exercise Price. These proposed regulations are subject to further modification by the Internal Revenue Service and, if adopted, would be effective only for the exercise of Incentive Stock Options on or after January 1, 2003.

          (b) Exercise of Incentive Stock Option Following Disability. If the Grantee’s Continuous Service terminates as a result of Disability that is not total and permanent disability as defined in Section 22(e)(3) of the Code, to the extent permitted on the date of termination, the Grantee must exercise an Incentive Stock Option within three (3) months of such termination for the Incentive Stock Option to be qualified as an Incentive Stock Option.

          (c) Exercise of Non-Qualified Stock Option. On exercise of a Non-Qualified Stock Option, the Grantee 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. If the Grantee is an Employee or a former Employee, the Company will be required to withhold from the Grantee’s compensation or collect

4

from the Grantee and pay to the applicable taxing authorities an amount in cash equal to a percentage of this compensation income at the time of exercise, and may refuse to honor the exercise and refuse to deliver Shares if such withholding amounts are not delivered at the time of exercise.

          (d) Disposition of Shares. In the case of a Non-Qualified Stock Option, if Shares are held for more than one year, any gain realized on disposition of the Shares will be treated as long-term capital gain for federal income tax purposes and subject to tax at a maximum rate of 20%. In the case of an Incentive Stock Option, if Shares transferred pursuant to the Option are held for more than one year after receipt of the Shares and are disposed more than two years after the Date of Award, any gain realized on disposition of the Shares also will be treated as capital gain for federal income tax purposes and subject to the same tax rates and holding periods that apply to Shares acquired upon exercise of a Non-Qualified Stock Option. If Shares purchased under an Incentive Stock Option are disposed of prior to the expiration of such one-year or two-year periods, any gain realized on such disposition will be treated as compensation income (taxable at ordinary income rates) to the extent of the difference between the Exercise Price and the lesser of (i) the Fair Market Value of the Shares on the date of exercise, or (ii) the sale price of the Shares.

     13.     Entire Agreement: Governing Law. The Notice, the Plan and this Option Agreement constitute the entire agreement of the parties with respect to the subject matter hereof and supersede in their entirety all prior undertakings and agreements of the Company and the Grantee with respect to the subject matter hereof, and may not be modified adversely to the Grantee’s interest except by means of a writing signed by the Company and the Grantee. Nothing in the Notice, the Plan and this Option Agreement (except as expressly provided therein) is intended to confer any rights or remedies on any persons other than the parties. The Notice, the Plan and this Option Agreement are to be construed in accordance with and governed by the internal laws of the State of California without giving effect to any choice of law rule that would cause the application of the laws of any jurisdiction other than the internal laws of the State of California to the rights and duties of the parties. Should any provision of the Notice, the Plan or this Option Agreement be determined by a court of law to be illegal or unenforceable, such provision shall be enforced to the fullest extent allowed by law and the other provisions shall nevertheless remain effective and shall remain enforceable.

     14.     Headings. The captions used in the Notice and this Option Agreement are inserted for convenience and shall not be deemed a part of the Option for construction or interpretation.

     15.     Dispute Resolution The provisions of this Section 15 shall be the exclusive means of resolving disputes arising out of or relating to the Notice, the Plan and this Option Agreement. The Company, the Grantee, and the Grantee’s assignees pursuant to Section 8 (the “parties”) shall attempt in good faith to resolve any disputes arising out of or relating to the Notice, the Plan and this Option Agreement by negotiation between individuals who have authority to settle the controversy. Negotiations shall be commenced by either party by notice of a written statement of the party’s position and the name and title of the individual who will represent the party. Within thirty (30) days of the written notification, the parties shall meet at a

5

mutually acceptable time and place, and thereafter as often as they reasonably deem necessary, to resolve the dispute. If the dispute has not been resolved by negotiation, the parties agree that any suit, action, or proceeding arising out of or relating to the Notice, the Plan or this Option Agreement shall be brought in the United States District Court for the Northern District of California (or should such court lack jurisdiction to hear such action, suit or proceeding, in the Santa Clara County Superior Court) and that the parties shall submit to the jurisdiction of such court. The parties irrevocably waive, to the fullest extent permitted by law, any objection the party may have to the laying of venue for any such suit, action or proceeding brought in such court. THE PARTIES ALSO EXPRESSLY WAIVE ANY RIGHT THEY HAVE OR MAY HAVE TO A JURY TRIAL OF ANY SUCH SUIT, ACTION OR PROCEEDING. If any one or more provisions of this Section 15 shall for any reason be held invalid or unenforceable, it is the specific intent of the parties that such provisions shall be modified to the minimum extent necessary to make it or its application valid and enforceable.

     16.     Notices. Any notice required or permitted hereunder shall be given in writing and shall be deemed effectively given upon personal delivery or upon deposit in the United States mail by certified mail (if the parties are within the United States) or upon deposit for delivery by an internationally recognized express mail courier service (for international delivery of notice), with postage and fees prepaid, addressed to the other party at its address as shown beneath its signature in the Notice, or to such other address as such party may designate in writing from time to time to the other party.

6

EXHIBIT A

STRATEX NETWORKS, INC. 2002 STOCK INCENTIVE PLAN

EXERCISE NOTICE

Stratex Networks, Inc.
170 Rose Orchard Way
San Jose, California 95134

Attention: Secretary

     1.     Exercise of Option. Effective as of today,      ,      the undersigned (the “Grantee”) hereby elects to exercise the Grantee’s option to purchase      shares of the Common Stock (the “Shares”) of Stratex Networks, Inc. (the “Company”) under and pursuant to the Company’s 2002 Stock Incentive Plan, as amended from time to time (the “Plan”) and the [ ] Incentive [ ] Non-Qualified Stock Option Award Agreement (the “Option Agreement”) and Notice of Stock Option Award (the “Notice”) dated      ,      . Unless otherwise defined herein, the terms defined in the Plan shall have the same defined meanings in this Exercise Notice.

     2.     Representations of the Grantee. The Grantee acknowledges that the Grantee has received, read and understood the Notice, the Plan, and the Option Agreement and agrees to abide by and be bound by their terms and conditions.

     3.     Rights as Stockholder. Until the stock certificate evidencing such Shares is issued (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company), no right to vote or receive dividends or any other rights as a stockholder shall exist with respect to the Shares, notwithstanding the exercise of the Option. The Company shall issue (or cause to be issued) such stock certificate promptly after the Option is exercised. No adjustment will 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 10 of the Plan.

     4.     Delivery of Payment. The Grantee herewith delivers to the Company the full Exercise Price for the Shares, which, to the extent selected, shall be deemed to be satisfied by use of the broker-dealer sale and remittance procedure to pay the Exercise Price provided in Section 3(d) of the Option Agreement.

     5.     Tax Consultation. The Grantee understands that the Grantee may suffer adverse tax consequences as a result of the Grantee’s purchase or disposition of the Shares. The Grantee represents that the Grantee has consulted with any tax consultants the Grantee deems advisable in connection with the purchase or disposition of the Shares and that the Grantee is not relying on the Company for any tax advice

1

     6.     Taxes. The Grantee agrees to satisfy all applicable federal, state and local income and employment tax withholding obligations and herewith delivers to the Company the full amount of such obligations or has made arrangements acceptable to the Company to satisfy such obligations. In the case of an Incentive Stock Option, the Grantee also agrees, as partial consideration for the designation of the Option as an Incentive Stock Option, to notify the Company in writing within thirty (30) days of any disposition of any shares acquired by exercise of the Option if such disposition occurs within two (2) years from the Date of Award or within one (1) year from the date the Shares were transferred to the Grantee. If the Company is required to satisfy any federal, state or local income or employment tax withholding obligations as a result of such an early disposition, the Grantee agrees to satisfy the amount of such withholding in a manner that the Administrator prescribes.

     7.     Successors and Assigns. The Company may assign any of its rights under this Exercise Notice to single or multiple assignees, and this agreement shall inure to the benefit of the successors and assigns of the Company. This Exercise Notice shall be binding upon the Grantee and his or her heirs, executors, administrators, successors and assigns.

     8.     Headings. The captions used in this Exercise Notice are inserted for convenience and shall not be deemed a part of this agreement for construction or interpretation.

     9.     Dispute Resolution. The provisions of Section 15 of the Option Agreement shall be the exclusive means of resolving disputes arising out of or relating to this Exercise Notice.

     10.    Governing Law; Severability. This Exercise Notice is to be construed in accordance with and governed by the internal laws of the State of California without giving effect to any choice of law rule that would cause the application of the laws of any jurisdiction other than the internal laws of the State of California to the rights and duties of the parties. Should any provision of this Exercise Notice be determined by a court of law to be illegal or unenforceable, such provision shall be enforced to the fullest extent allowed by law and the other provisions shall nevertheless remain effective and shall remain enforceable.

     11.    Notices. Any notice required or permitted hereunder shall be given in writing and shall be deemed effectively given upon personal delivery or upon deposit in the United States mail by certified mail, (if the parties are within the United States) or upon deposit for delivery by an internationally recognized express mail courier service (for international delivery of notice) with postage and fees prepaid, addressed to the other party at its address as shown below beneath its signature, or to such other address as such party may designate in writing from time to time to the other party.

     12.    Further Instruments. The parties agree to execute such further instruments and to take such further action as may be reasonably necessary to carry out the purposes and intent of this agreement.

     13.    Entire Agreement. The Notice, the Plan, and the Option Agreement are incorporated herein by reference, and together with this Exercise Notice constitute the entire agreement of the parties with respect to the subject matter hereof and supersede in their entirety all prior undertakings and agreements of the Company and the Grantee with respect to the

2

subject matter hereof, and may not be modified adversely to the Grantee’s interest except by means of a writing signed by the Company and the Grantee. Nothing in the Notice, the Plan, the Option Agreement and this Exercise Notice (except as expressly provided therein) is intended to confer any rights or remedies on any persons other than the parties.

Submitted by:	Accepted by:
GRANTEE:	STRATEX NETWORKS, INC.
	By:
	Title:
(Signature)
Address:	Address:
	170 Rose Orchard Way San Jose, California 95134

3 EX-99.(D)(11) 22 f90816toexv99wxdyx11y.htm EXHIBIT (D)(11)

Exhibit (d)(11)

Dear Stratex Networks (NZ) Limited Employee

Tax obligations under the Stratex Networks (NZ) Limited Stock Option Plan

I am writing to advise you of your income tax obligations following your participation in Stratex Networks (NZ) Limited Stock Option Plan (“SOP”).

1.	The Plan
	The Stock Option Plan (“the SOP”)
	Under the SOP you will be granted options to purchase Stratex, Inc. (“Stratex”) shares. These options will have an excise price. At various times you can exercise these options by paying the exercise price per share and receive Stratex shares. Generally options will only be exercised when they are “in the money” (i.e., the exercise price is less than the market price).
2.	Tax Implications
	The “gain” you make on the exercise of the options is taxable income to you. The amount of taxable income is the difference between the amount unpaid by you for Stratex shares (the exercise price) and the market value of Stratex shares on the day you exercise the option.
	You should include in your 2003 tax return the income on all options exercised between 1 April 2002 to 31 March 2003.
	The options may have been granted/vested in your name before they are converted to shares. The day this is done is commonly called the “vesting date”. This vesting date is ignored when calculating your taxable income because it is the market value of Stratex shares on the day you actually exercise the options (i.e., the day you acquire the shares) that is important.
	You have been advised of the total discount from the purchase of shares in the “Confirmation of Exercise” statement issued by Stratex or you can obtain this information from the website. You should use this statement to calculate your taxable income arising from the purchase of shares.
	This amount should be included in Box 22 of your 2003 IR3 income tax return as other income.

3.	Provisional Tax
	Your other income from the exercise of options under the SOP may give rise to provisional tax issues in the 2004 income year and the future. In preparing your 2003 tax return you should seek advice from your tax accountant or Inland Revenue on the possible application of these rules to you.
	If you wish Ernst & Young can help prepare your 2003 tax return for a fee and consider these issues.
4.	Taxable Income on the Sale of Stratex Shares
	We note that taxpayers who buy shares with the intention of reselling those shares are taxable on any profit made or alternatively they can claim a loss for any losses incurred on resale. This may also apply to the sale of Stratex shares acquired under the Stratex ESOP. If taxable, the amount of income would be the difference between the market value on the date you acquired your shares and the sale price (“the capital gain”).
	Although the tax laws in this area are uncertain and depend on the specific facts of the situation, as a general rule, the following will apply:

• If you sold the shares soon after acquiring them, it is likely that Inland Revenue would, in the absence of exceptional circumstances, consider that you should pay tax on the capital gain. If there is a capital loss (i.e., the sale price was less than the market value on the date you acquired your shares), the loss should be deductible for tax purposes.

• If you hold on to the shares for investment purposes, any capital gain is unlikely to be taxable, however, this will again depend on the particular facts of the situation. Likewise, any capital loss in unlikely to be deductible.

However, as these rules are uncertain and depend on your particular circumstances, we suggest that you consult with your tax advisor to ensure that you treat these correctly.

Yours sincerely,
ERNST & YOUND LIMITED

Malcolm Smith
Director

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EX-99.(A)(1)

Exhibit (a)(1)

EX-99.(A)(2)

Exhibit (a)(2)

EX-99.(A)(3)

Exhibit (a)(3)

EX-99.(A)(4)

Exhibit (a)(4)

EX-99.(A)(5)

Exhibit (a)(5)

EX-99.(A)(6)

Exhibit (a)(6)

EX-99.(A)(7)

Exhibit (a)(7)

EX-99.(A)(8)

Exhibit (a)(8)

EX-99.(A)(9)

Exhibit (a)(9)

EX-99.(D)(1)

Exhibit (d)(1)

EX-99.(D)(2)

Exhibit (d)(2)

EX-99.(D)(3)

Exhibit (d)(3)

EX-99.(D)(4)

Exhibit (d)(4)

EX-99.(D)(5)

Exhibit (d)(5)

EX-99.(D)(6)

Exhibit (d)(6)

EX-99.(D)(7)

Exhibit (d)(7)

EX-99.(D)(8)

Exhibit (d)(8)

EX-99.(D)(9)

Exhibit (d)(9)

EX-99.(D)(10)

Exhibit (d)(10)

EX-99.(D)(11)

Exhibit (d)(11)