-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, J4pvccSE4of8WoSbKTpSBvD+eHiKpWGJUb5uOXJGAtCzpr6EkvuXWys62wpSCICJ /ni9md15riPGjC5Nz79HoQ== 0000891618-98-002000.txt : 19980430 0000891618-98-002000.hdr.sgml : 19980430 ACCESSION NUMBER: 0000891618-98-002000 CONFORMED SUBMISSION TYPE: S-8 PUBLIC DOCUMENT COUNT: 7 FILED AS OF DATE: 19980429 EFFECTIVENESS DATE: 19980429 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: CISCO SYSTEMS INC CENTRAL INDEX KEY: 0000858877 STANDARD INDUSTRIAL CLASSIFICATION: COMPUTER COMMUNICATIONS EQUIPMENT [3576] IRS NUMBER: 770059951 STATE OF INCORPORATION: CA FISCAL YEAR END: 0731 FILING VALUES: FORM TYPE: S-8 SEC ACT: SEC FILE NUMBER: 333-51315 FILM NUMBER: 98604416 BUSINESS ADDRESS: STREET 1: 170 WEST TASMAN DRIVE CITY: SAN JOSE STATE: CA ZIP: 95134-1706 BUSINESS PHONE: 4085264000 MAIL ADDRESS: STREET 1: 225 WEST TASMAN DRIVE CITY: SAN JOSE STATE: CA ZIP: 95134-1706 S-8 1 FORM S-8 1 As filed with the Securities and Exchange Commission on April ___, 1998 Registration No. 333-________________ ================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ----------------- FORM S-8 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ----------------- CISCO SYSTEMS, INC. (Exact name of issuer as specified in its charter) CALIFORNIA 77-0059951 (State or other jurisdiction (IRS Employer Identification No.) of incorporation or organization) 170 WEST TASMAN DRIVE, SAN JOSE, CALIFORNIA 95134-1706 (Address of principal executive offices) (Zip Code) ----------------- NETSPEED, INC. 1996 STOCK OPTION PLAN (Full title of the plan) ----------------- JOHN T. CHAMBERS PRESIDENT, CHIEF EXECUTIVE OFFICER AND DIRECTOR CISCO SYSTEMS, INC. 170 WEST TASMAN DRIVE, SAN JOSE, CALIFORNIA 95134-1706 (Name and address of agent for service) (408) 526-4000 (Telephone number, including area code, of agent for service) ----------------- CALCULATION OF REGISTRATION FEE
============================================================================================== Proposed Proposed Title of Maximum Maximum Securities Amount Offering Aggregate Amount of to be to be Price Offering Registration Registered Registered(1) per Share(2) Price(2) Fee ---------- ------------- ------------ -------------- ------------- Netspeed, Inc. 1996 Stock Option Plan Common Stock 513,401 $19.38 $9,949,711.38 $2,935.16 ==============================================================================================
(1) This Registration Statement shall also cover any additional shares of Common Stock which become issuable under the Netspeed, Inc. 1996 Stock Option Plan by reason of any stock dividend, stock split, recapitalization or other similar transaction effected without the receipt of consideration which results in an increase in the number of the Registrant's outstanding shares of Common Stock. (2) Calculated solely for purposes of this offering under Rule 457(h) of the Securities Act of 1933, as amended, on the basis of the weighted average exercise price of the outstanding options. 2 PART II INFORMATION REQUIRED IN THE REGISTRATION STATEMENT Item 3. Incorporation of Certain Documents by Reference Cisco Systems, Inc. (the "Registrant") hereby incorporates by reference into this Registration Statement the following documents previously filed with the Securities and Exchange Commission (the "Commission"): (a) The Registrant's Annual Report on Form 10-K for the fiscal year ended July 26, 1997 filed with the Commission on October 22, 1997, pursuant to Section 13 of the Securities Exchange Act of 1934 (the "1934 Act"). (b) The Registrant's Quarterly Reports on Forms 10-Q for the fiscal quarters ended October 25, 1997 and January 24, 1998, filed with the Commission on December 9, 1997, and March 9, 1998, respectively. (c) The Registrant's current reports on Forms 8-K filed with the Commission on August 22, 1997, September 9, 1997, February 11, 1998, and April 29, 1998. (d) The Registrant's Registration Statement No. 0-18225 on Form 8-A filed with the Commission on January 11, 1990, together with Amendment No. 1 on Form 8-A filed with the Commission on February 15, 1990, in which there is described the terms, rights and provisions applicable to the Registrant's outstanding Common Stock. All reports and definitive proxy or information statements filed pursuant to Section 13(a), 13(c), 14 or 15(d) of the 1934 Act after the date of this Registration Statement and prior to the filing of a post-effective amendment which indicates that all securities offered hereby have been sold or which deregisters all securities then remaining unsold shall be deemed to be incorporated by reference into this Registration Statement and to be a part hereof from the date of filing of such documents. Any statement contained in a document incorporated or deemed to be incorporated by reference herein shall be deemed to be modified or superseded for purposes of this Registration Statement to the extent that a statement contained herein or in any subsequently filed document which also is deemed to be incorporated by reference herein modifies or supersedes such statement. Any such statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Registration Statement. Item 4. Description of Securities Not Applicable. Item 5. Interests of Named Experts and Counsel Not Applicable. II-2. 3 Item 6. Indemnification of Directors and Officers Section 317 of the California Corporations Code authorizes a court to award, or a corporation's Board of Directors to grant, indemnity to directors and officers in terms sufficiently broad to permit indemnification (including reimbursement of expenses incurred) under certain circumstances for liabilities arising under the Securities Act of 1933, as amended, (the "1933 Act"). The Registrant's Restated Articles of Incorporation, as amended, and Amended and Restated Bylaws provide for indemnification of its directors, officers, employees and other agents to the maximum extent permitted by the California Corporations Code. In addition, the Registrant has entered into Indemnification Agreements with each of its directors and officers. Item 7. Exemption from Registration Claimed Not Applicable. Item 8. Exhibits
Exhibit Number Exhibit - -------------- ------- 4.0 Instruments Defining Rights of Shareholders. Reference is made to Registrant's Registration Statement No. 0-18225 on Form 8-A, including the exhibits thereto, which are incorporated herein by reference pursuant to Item 3(d). 5.0 Opinion of Brobeck, Phleger & Harrison LLP. 23.1 Consent of Independent Accountants - Coopers & Lybrand L.L.P. 23.2 Consent of Brobeck, Phleger & Harrison LLP is contained in Exhibit 5. 24.0 Power of Attorney. Reference is made to page II-5 of this Registration Statement. 99.1 Netspeed 1996 Stock Option Plan. 99.2 Form of Stock Option Agreement in connection with the Netspeed 1996 Stock Option Plan. 99.3 Form of acceleration waiver letter. 99.4 Form of Option Assumption Agreement.
Item 9. Undertakings A. The undersigned Registrant hereby undertakes: (1) to file, during any period in which offers or sales are being made, a post-effective amendment to this Registration Statement (i) to include any prospectus required by Section 10(a)(3) of the 1933 Act, (ii) to reflect in the prospectus any facts or events arising after the effective date of the Registration Statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the Registration Statement, and (iii) to include any material information with respect to the plan of distribution not previously disclosed in the Registration Statement or any material change to such information in the Registration Statement; provided, however, that clauses (1)(i) and (1)(ii) shall not apply if the information required to be included in a post-effective amendment by those paragraphs is contained in periodic reports filed by the Registrant pursuant to Section 13 or Section 15(d) of the 1934 Act that are incorporated by reference into the Registration Statement; (2) that for the purpose of determining any liability under the 1933 Act each such post-effective amendment shall be deemed to be a new Registration Statement relating to the securities offered therein and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof; and (3) to remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the Netspeed, Inc. 1996 Stock Option Plan. B. The undersigned Registrant hereby undertakes that, for purposes of determining any liability under the 1933 Act, each filing of the Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the 1934 Act that is incorporated by reference into the Registration Statement shall be deemed to be a new Registration Statement relating II-3. 4 to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. C. Insofar as indemnification for liabilities arising under the 1933 Act may be permitted to directors, officers or controlling persons of the Registrant pursuant to the indemnity provisions summarized in Item 6 or otherwise, the Registrant has been informed that, in the opinion of the Commission, such indemnification is against public policy as expressed in the 1933 Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the 1933 Act and will be governed by the final adjudication of such issue. II-4. 5 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of San Jose, State of California, on this 28th day of April, 1998. CISCO SYSTEMS, INC. By /s/ JOHN T. CHAMBERS ------------------------------------- John T. Chambers President and Chief Executive Officer KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints John T. Chambers and Larry R. Carter and each of them acting individually, as such person's true and lawful attorneys-in-fact and agents, each with full power of substitution, for such person, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this Registration Statement, and to file same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully to all intents and purposes as such person might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, or their or his or her substitutes, may do or cause to be done by virtue thereof. Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed by the following persons on behalf of the Registrant and in the capacities and on the dates indicated:
Signatures Title Date - ---------- ----- ---- /s/ JOHN T. CHAMBERS President, Chief Executive April 28, 1998 - ------------------------------ Officer and Director (Principal John T. Chambers Executive Officer) /s/ LARRY R. CARTER Senior Vice President, Finance and April 28, 1998 - ------------------------------ Administration, Chief Financial Larry R. Carter Officer and Secretary (Principal Financial and Accounting Officer) /s/ JOHN P. MORGRIDGE Chairman of the Board April 28, 1998 - ------------------------------ and Director John P. Morgridge
II-5. 6
Signatures Title Date - ---------- ----- ---- /s/ DONALD T. VALENTINE Director April 28, 1998 - ------------------------------ Donald T. Valentine /s/ JAMES F. GIBBONS Director April 28, 1998 - ------------------------------ James F. Gibbons /s/ ROBERT L. PUETTE Director April 28, 1998 - ------------------------------ Robert L. Puette /s/ MASAYOSHI SON Director April 28, 1998 - ------------------------------ Masayoshi Son /s/ STEVEN M. WEST Director April 28, 1998 - ------------------------------ Steven M. West /s/ EDWARD KOZEL Director April 28, 1998 - ------------------------------ Edward Kozel /s/ CAROL BARTZ Director April 28, 1998 - ------------------------------ Carol Bartz /s/ MARY CIRILLO Director April 28, 1998 - ------------------------------ Mary Cirillo /s/ JAMES C. MORGAN Director April 28, 1998 - ------------------------------ James C. Morgan
II-6. 7 EXHIBIT INDEX
Exhibit Number Exhibit - -------------- ------- 4.0 Instruments Defining Rights of Shareholders. Reference is made to Registrant's Registration Statement No. 0-18225 on Form 8-A, including the exhibits thereto, which are incorporated herein by reference pursuant to Item 3(d). 5.0 Opinion of Brobeck, Phleger & Harrison LLP. 23.1 Consent of Independent Accountants - Coopers & Lybrand L.L.P. 23.2 Consent of Brobeck, Phleger & Harrison LLP is contained in Exhibit 5. 24.0 Power of Attorney. Reference is made to page II-5 of this Registration Statement. 99.1 Netspeed, Inc. 1996 Stock Option Plan. 99.2 Form of Stock Option Agreement in connection with the Netspeed, Inc. 1996 Stock Option Plan. 99.3 Form of Acceleration Waiver Letter. 99.4 Form of Option Assumption Agreement.
EX-5.0 2 OPINION OF BROBECK, PHLEGER & HARRISON 1 EXHIBIT 5 April 28, 1998 Cisco Systems, Inc. 170 West Tasman Drive San Jose, CA 95134-1706 Re: Cisco Systems, Inc. Registration Statement for Offering of 513,401 shares of Common Stock Ladies and Gentlemen: We refer to your registration on Form S-8 (the "Registration Statement") under the Securities Act of 1933, as amended, of 513,401 shares of the common stock ("Common Stock") of Cisco Systems, Inc. (the "Company") issuable under the Netspeed, Inc. 1996 Stock Option Plan (the "Plan") as assumed by the Company. We advise you that, in our opinion, when such shares have been issued and sold pursuant to the applicable provisions of the Plan and in accordance with the Registration Statement, such shares will be validly issued, fully paid and nonassessable shares of Common Stock. We hereby consent to the filing of this opinion as an exhibit to the Registration Statement. Very truly yours, /s/ BROBECK, PHLEGER & HARRISON LLP ----------------------------------- BROBECK, PHLEGER & HARRISON LLP EX-23.1 3 CONSENT OF INDEPENDENT ACCOUNTANTS 1 EXHIBIT 23.1 CONSENT OF INDEPENDENT ACCOUNTANTS - COOPERS & LYBRAND L.L.P. We consent to the incorporation by reference in the Registration Statement on Form S-8 of Cisco Systems, Inc. for the registration of 513,401 common shares pursuant to the acquisition of Netspeed, Inc., of our reports dated August 4, 1997, on our audits of the consolidated financial statements and financial statement schedule of Cisco Systems, Inc. as of July 26, 1997 and July 28, 1996, and for the years ended July 26, 1997, July 28, 1996 and July 30, 1995 which reports are included in the Company's 1997 Annual Report on Form 10-K, filed with the Securities and Exchange Commission. /s/ Coopers & Lybrand L.L.P. COOPERS & LYBRAND L.L.P. San Jose, California April 24, 1998 EX-99.1 4 NETSPEED, INC. 1996 STOCK OPTION PLAN 1 EXHIBIT 99.1 NETSPEED, INC. 1996 STOCK OPTION PLAN 1. Purpose. The NetSpeed, Inc. 1996 Stock Option Plan (the "Plan") is intended to advance the interests of NetSpeed, Inc., a Texas corporation (the "Company"), and its shareholders, by encouraging and enabling selected officers, directors and employees, upon whose judgment, initiative and effort the Company is largely dependent for the successful conduct of its business, to acquire and retain a proprietary interest in the Company by ownership of its stock. It is intended that options which may qualify for treatment as "incentive stock options" under Section 422 of the Internal Revenue Code of 1986, as amended, and applicable regulations and rulings promulgated thereunder (collectively the "Code"), as well as options which may not so qualify, may be granted under the Plan. 2. Definitions. (a) "Change of Control" means the occurrence of any of the following events, as a result of one transaction or a series of transactions: (i) any "person" (as that term is used in Sections 13(d) and 14(d) of the Exchange Act (as defined below), but excluding the Company, its affiliates and any qualified or non-qualified plan maintained by the Company or its affiliates) becomes the "beneficial owner" (as defined in Rule 13d-3 promulgated under such Act), directly or indirectly, of securities of the Company representing more than 50% of the combined voting power of the Company's then outstanding securities; (ii) individuals who constitute a majority of the Board of Directors of the Company immediately prior to a contested election for positions on the Board cease to constitute a majority as a result of such contested election; (iii) the Company is combined (by merger, share exchange, consolidation, or otherwise) with another corporation and as a result of such combination, less than 50% of the outstanding securities of the surviving or resulting corporation are owned in the aggregate by the former shareholders of the Company; (iv) the Company sells, leases, or otherwise transfers all or substantially all of its properties or assets to another person or entity; or (v) a dissolution or liquidation of the Company or a partial liquidation involving 50% or more of the assets of the Company. 2 (b) "Committee" means a Committee of the Board of Directors of the Company to whom the Board's authority has been delegated in accordance with Section 3 of this Plan. (c) "Common Stock" means the Company's Common Stock, $.01 par value per share. (d) "Date of Grant" means the date on which an Option is granted under the Plan, which will be the date the Committee authorizes the Option unless the Committee specifies a later date. (e) "Date of Exercise" means the date on which an Option is validly exercised pursuant to the Plan. (f) "Disability" means any medically determinable physical or mental impairment that, in the opinion of the Committee, based upon medical reports and other evidence satisfactory to the Committee, can reasonably be expected to prevent an Optionee from performing substantially all of the Optionee's customary duties of employment for a continuous period of not less than 12 months so as to be disabled within the meaning of Section 22(a)(3) of the Code. (g) "Exchange Act" means the Securities Exchange Act of 1934, as amended. (h) "Fair Market Value" of the Company's Common Stock means the closing sale price (or the average of the quoted closing bid and asked prices if there is no closing sale price reported) on the last market trading day prior to the date of determination as reported by the principal national stock exchange on which the Common Stock is then listed. If there is no reported price information for the Common Stock, the Fair Market Value will be determined by the Committee, in its sole discretion. In making such determination, the Committee may, but shall not be obligated to, commission and rely upon an independent appraisal of the Common Stock. (i) "Incentive Stock Option" means an option that qualifies as an incentive stock option under all of the requirements of the Code. (j) "Incentive Stock Option Agreement" means the agreement between the Company and the Optionee, in such form as may from time to time be adopted by the Committee, under which the Optionee may purchase Common Stock pursuant to the terms of an Incentive Stock Option granted under the Plan. (k) "Non-Qualified Stock Option" means an option to purchase Common Stock granted pursuant to the provisions of the Plan that does not qualify as an Incentive Stock Option. 2. 3 (l) "Non-Qualified Stock Option Agreement" means the agreement between the Company and the Optionee, in such form as may from time to time be adopted by the Committee, under which the Optionee may purchase Common Stock pursuant to the terms of a Non-Qualified Stock Option granted under the Plan. (m) "Option" means an option granted under the Plan. (n) "Optionee" means a person to whom an Option, which has not expired, has been granted under the Plan. (o) "Retirement" shall mean the termination of an Optionee's employment in accordance with the requirements of a written retirement plan, policy or rule of the Company which has been duly adopted by the Board of Directors of the Company. (p) "Rule 16b-3" means Rule 16b-3 promulgated under the Exchange Act, as (and to the extent) such rule, or any successor thereto, may from time to time be in effect and including all interpretations thereunder. (q) "Subsidiary" or "Subsidiaries" means a subsidiary corporation or corporations of the Company as defined in Section 424(f) of the Code. (r) "Successor" means the legal representative of the estate of a deceased Optionee or the person or persons who acquire the right to exercise an Option by bequest or inheritance or by reason of the death of an Optionee. 3. Administration and Interpretation of Plan. The Plan shall be administered by a Committee designated by the Board of Directors which shall consist entirely of "disinterested persons" in accordance with the provisions of Rule 16b-3. A "disinterested person" shall mean a person who has not at any time within one year prior to the service as a member of the Committee (or during such service) been granted or awarded Options or other equity securities pursuant to the Plan or any other plan of the Company or any Subsidiary. Notwithstanding the foregoing, a member of the Committee shall not fail to be a "disinterested person" merely because he or she participates in a plan meeting the requirements of Rule 16b-3(c)(2)(i)(A) or (B) promulgated under the Exchange Act. The Committee shall have full and final authority in its discretion, subject to the provisions of the Plan: (i) to determine the individuals to whom, and the time or times at which, Options shall be granted and the number of shares of Common Stock covered by each Option; (ii) to construe and interpret the Plan; and (iii) to make all other determinations and take all other actions deemed necessary or advisable for the proper administration of the Plan. All such actions and determinations by the Committee shall be final and conclusively binding for all purposes and upon all persons. 3. 4 4. Common Stock Subject to Options. The aggregate number of shares of the Company's Common Stock which may be issued upon the exercise of Options granted under the Plan shall not exceed one million (1,000,000) shares of Common Stock, subject to adjustment as set forth in Section 8 of this Plan. The shares of Common Stock to be issued upon the exercise of Options may be authorized but unissued shares, shares issued and reacquired by the Company or shares bought on the open market for the purposes of the Plan. In the event any Option shall, for any reason, terminate or expire or be canceled or surrendered without having been exercised in full, the shares subject to such Option, but not purchased thereunder, shall again be available for Options to be granted under the Plan. 5. Participant. Incentive Stock Options may be granted under the Plan to any person who is an officer or other key employee (including officers and employees who are also directors) of the Company or any of its Subsidiaries. Non-Qualified Options may be granted under the Plan to any person who is an officer, key employee, director or consultant of the Company; provided, however, that no member of any Committee administering this Plan shall be eligible to be granted an option hereunder except under circumstances that may be permitted under Rule 16b-3 without adversely affecting any requirement of such rule that this Plan be administered by disinterested persons. 6. Terms and Conditions of Options. Any Option granted under the Plan shall be evidenced by either an Incentive Stock Option Agreement or a Non-Qualified Stock Option Agreement executed by the Company and the Optionee. Such agreement shall be subject to the following limitations and conditions: (a) Option Price. The option price per share with respect to each Option shall be determined by the Committee but in no instance shall the option price for an Option which is intended to qualify as an Incentive Stock Option be less than 100% of the Fair Market Value of a share of the Common Stock on the Date of Grant. (b) Payment of Option Price. Full payment for shares purchased upon exercising an Option shall be made in cash or by check, or by delivery of previously owned shares of Common Stock, or partly in cash or by check and partly in such Common Stock. The value of shares of Common Stock delivered in connection with the payment of the option price shall be the Fair Market Value of such shares on the Date of Exercise of the Option. Any shares of Common Stock to be used as payment must, if originally acquired from the Company pursuant to the exercise of an Incentive Stock Option, have been held for at least two years after the Date of Grant and one year after the Date of Exercise. (c) Term of Option. The expiration date of each Incentive Stock Option and each Non-Qualified Option shall not be more than ten (10) years from the Date of Grant. 4. 5 (d) Vesting of Shareholder Rights. Neither an Optionee nor his Successor shall have any of the rights of a shareholder of the Company until the certificate or certificates evidencing the shares purchased pursuant to the exercise of an Option are properly delivered to such Optionee or his Successor. (e) Exercise of an Option. Each Option shall be exercisable at any time, and from time to time, and in no particular order if the Optionee holds more than one Option, throughout a period commencing on or after the Date of Grant, as specified by the Committee and reflected in the Incentive Stock Option Agreement or Non-Qualified Stock Option Agreement, as the case may be, and ending upon the earliest of the expiration, cancellation, surrender or termination of the Option; provided, however, that no Option shall be exercisable in whole or in part prior to the date of shareholder approval of the Plan. Furthermore, the exercise of each Option shall be subject to the condition that if at any time the Company shall determine in its discretion that the satisfaction of withholding tax or other withholding liabilities, or that the listing, registration or qualification of any share otherwise deliverable upon such exercise upon any securities exchange or under any state or federal law, or that the report to, or consent or approval of any regulatory body, is necessary or desirable as a condition of, or in connection with, such exercise or the delivery or purchase of shares pursuant thereto, then in any such event, such exercise shall not be effective unless such withholding, listing, registration, qualification, report, consent or approval shall have been effected or obtained free of any conditions not acceptable to the Company. (f) Company Loans. The Company may make stock purchase loans in connection with Option exercises upon the following terms and conditions: (i) Upon the exercise by an Optionee of his Option, or any part thereof, and the Optionee's request for a loan pursuant hereto, the Company, upon approval by the Committee, may loan said Optionee, for the sole purpose of purchasing Common Stock from the Company pursuant to the exercise of such Option, an amount up to the exercise price of the Option; provided, however, that the Optionee shall execute concurrently a promissory note in form satisfactory to the Committee for such amount payable to the order of the Company; (ii) The Company shall have no obligation to make any loan to any Optionee at any time; (iii) The promissory note referenced above shall provide for interest to be payable upon the outstanding principal balance thereof at such rate and times as the Committee may determine. Interest shall be payable at least annually and shall be charged at the minimum rate necessary to avoid the treatment as interest under any applicable provision of the Code, of any amounts other than amounts stated to be interest under such note. Such note shall also provide that the Committee may require the Optionee to secure the payment thereof at any time with collateral deemed adequate by the Committee in its sole discretion. Such note shall mature, and all outstanding principal and interest shall become immediately due and payable in installments or in 5. 6 lump sum at such time or times as the Committee shall provide. The note will provide for prepayment of principal and accrued interest in whole or in part from time to time without premium or penalty and may be extended or modified, from time to time, at the Committee's discretion. The note shall provide for acceleration of maturity by the Company upon the happening of any events determined appropriate by the Committee, including, without limitation, any of the following events: (1) failure of the Optionee to pay or perform any term or provision thereof; (2) termination of the Optionee's employment with the Company or a Subsidiary for any reason, whether voluntary or involuntary, except Retirement, Disability or death; (3) if the Optionee shall execute an assignment for the benefit of creditors, or admit in writing his inability to pay his debts generally as they become due, or voluntarily seek the benefit of, or have a petition filed against him seeking the benefit of, a judgment, order or decree filed against him pursuant to any bankruptcy, insolvency, reorganization, or similar debtor relief law affecting the rights of creditors generally; (4) failure of the Optionee to have discharged within a period of thirty (30) days after the commencement thereof any attachment, sequestration or similar proceeding against any of the assets of the Optionee; (5) failure of the Optionee to pay any money judgment against him at least thirty (30) days prior to the date on which any of his assets may be lawfully sold to satisfy such judgment; (6) failure or refusal of the Optionee to comply with any of the terms and conditions of his stock option agreement or any other oral or written agreement with the Company; (7) failure or refusal of the Optionee to provide adequate security for payment of the promissory note immediately upon request for collateral by the Committee; or (8) the divorce of the Optionee, unless arrangement satisfactory to the Committee are agreed to prior to the entry of the divorce decree. (g) Nontransferability of Option. No Option shall be transferable or assignable by an Optionee, voluntarily or by operation of law, other than by will or the laws of descent and distribution. Each Option shall be exercisable, during the Optionee's lifetime, only by 6. 7 him. No Option or the shares covered thereby shall be pledged or hypothecated in any way and no Option or the shares covered thereby shall be subject to execution, attachment or similar process. (h) Termination of Employment. Upon termination of an Optionee's employment with the Company or with any of its Subsidiaries for any reason other than death or Disability, any and all outstanding Options of such Optionee shall expire, and shall not be exercisable with respect to any vested portion as to which such Options have not been exercised on a date thirty days after such date of termination. Any and all Outstanding Options shall be null and void, and shall not be exercisable with respect to any unvested portion of such Options immediately upon the termination of the Optionee's employment with the Company for any reason, including death or Disability. The right of the Optionee to receive any benefits from the Company or any of its Subsidiaries after termination of employment with the Company or any of its Subsidiaries by reason of employment contract, severance arrangement or otherwise shall not affect the determination that an Optionee's employment has been terminated with the Company or any of its Subsidiaries for purposes of the Plan. Neither the adoption of this Plan nor the grant of an Option to an eligible person shall alter in any way the Company's or the relevant Subsidiary's rights to terminate such person's employment or directorship at any time with or without cause nor does it confer upon such person any rights or privileges to continued employment, or any other rights and privileges, except as specifically provided in the Plan. (i) Disability or Death of Optionee. If an Optionee dies or suffers a Disability while in the employ of the Company, but prior to termination of his right to exercise an Option in accordance with the provisions of his stock option agreement, without having totally exercised the Option, the Option may be exercised, to the extent of the shares with respect to which the Option could have been exercised by the Optionee on the date of the Optionee's death or Disability, by (i) the Optionee's estate or by the person who acquired the right to exercise the Option by bequest or inheritance or by reason of the death of the Optionee in the event of the Optionee's death, or (ii) the Optionee or his personal representative in the event of the Optionee's Disability, provided the Option is exercised prior to the date of its expiration or not more than one year from the date of the Optionee's death or Disability, whichever first occurs. The date of Disability of an Optionee shall be determined by the Company. (j) Ten Percent Shareholders. Notwithstanding anything herein to the contrary, an Option which is intended to qualify as an Incentive Stock Option shall be granted hereunder to any Optionee who, immediately before such Option is granted, beneficially owns, directly or indirectly, more than 10% of the total combined voting power of all classes of stock of the Company only if both of the following conditions are met: (i) The option price per share shall be no less than 110% of the Fair Market Value of a share of Common Stock on the Date of Grant, and 7. 8 (ii) The expiration date of the Option shall be not more than five (5) years from the Date of Grant. (k) Other Terms. Each Incentive Stock Option Agreement or NonQualified Stock Option Agreement, as the case may be, may contain such other provisions (not inconsistent herewith) as the Committee in its discretion may determine, including, without limitation: (i) any provision which shall condition the exercise of all or part of an Option upon such matters as the Committee may deem appropriate (if any) such as the passage of time, or the attainment of certain performance goals, appropriate to reflect the contribution of the Optionee to the performance of the Company; (ii) any provision which would give the Committee the discretionary authority to accelerate the exercisability of an Option in spite of any provision contained in an Option pursuant to clause (i) above, under such circumstances as the Committee may deem appropriate; and (iii) the manner in which an Option is to be exercised. 7. Allotment of Shares. The grant of an Option shall not be deemed either to entitle the Optionee to, or disqualify the Optionee from, participation in any other grant of options under this Plan or any other stock option plan of the Company. The number of shares allotted to each Optionee shall be determined by the Committee, in its discretion; provided that the aggregate Fair Market Value (determined as of the time the option is granted) of the Common Stock with respect to which Options which are intended to qualify as Incentive Stock Options are exercisable for the first time by such Optionee during any calendar year (under all such plans of the Optionee's employer corporation and its parent and subsidiary corporations) shall not exceed $100,000. 8. Adjustments. In the event that the number of outstanding shares of Common Stock is changed by reason of a stock dividend, stock split, recapitalization or combination of shares, the number of shares of Common Stock subject to the Plan and to Options granted pursuant to the Plan shall be proportionately adjusted. 9. Change of Control. In the event of a Change in Control of the Company, all outstanding stock options shall immediately vest and become immediately exercisable effective the date immediately prior to a Change of Control for a period of three months after such Change of Control. 10. Designation of Incentive Stock Options. The Committee shall cause each Option granted hereunder to be clearly designated in the agreement evidencing such Option, at the time of grant, as to whether or not it is intended to qualify as an Incentive Stock Option. 8. 9 11. Notices. Whenever any notice is required or permitted hereunder, such notice must be in writing and personally delivered or sent by mail. Any notice required or permitted to be delivered hereunder shall be deemed to be delivered on the date which it is personally delivered, or, whether actually received or not, on the third business day after it is deposited in the United States mail, certified or registered, postage prepaid, addressed to the person who is to receive it at the address which such person has theretofore specified by written notice delivered in accordance herewith. The Company or an Optionee may change, at any time and from time to time, by written notice to the other, the address which it or he had theretofore specified for receiving notices. Until changed in accordance herewith, the Company and each Optionee shall specify as its and his address for receiving notices the address set forth in the option agreement pertaining to the shares to which such notice relate. 12. Amendment or Discontinuance. The Plan and any Option outstanding hereunder may be amended or discontinued by the Committee without the approval of the shareholders of the Company, except that the Committee may not, except as expressly provided in the Plan, increase the aggregate number of shares which may be issued under Options granted pursuant to the Plan, materially amend the eligibility requirements of the Plan or materially increase the benefits which may accrue to participants under the Plan, without such approval (if any) as may be required pursuant to the provisions of Rule 16b-3, or applicable law (including the Code) or the requirements of any national stock exchange upon which the Company's Common Stock is traded. 13. Effect of the Plan. Neither the adoption of this Plan nor any action of the Committee shall be deemed to give any officer or employee any right to be granted an option to purchase Common Stock of the Company or any of its Subsidiaries, or any other rights except as may be evidenced by a stock option agreement, or any amendment thereto, duly authorized by the Committee and executed on behalf of the Company and then only to the extent and on the terms and conditions expressly set forth therein. 14. Grant of Incentive Stock Options. No Incentive Stock Options shall be granted pursuant to this Plan after the expiration of ten (10) years from the date of the earlier of: (i) the date the Plan is adopted, or (ii) the date the Plan is approved by the shareholders of the Company. 15. Shares Not Transferable. As a condition to the transfer of the shares of Common Stock issued under this Plan, the Company may require an opinion of counsel, satisfactory to the Company, to the effect that such transfer will not be in violation of the Securities Act of 1933, as amended, or any other applicable securities laws or that such transfer has been registered under federal and all applicable state securities laws. Further, the Company shall be authorized to refrain from delivering or transferring shares of Common Stock issued under this Plan until the Committee has determined that the Optionee has tendered to the Company any federal, state or local tax owed by the Optionee as a result of exercising the Option or disposing of any Common Stock, when the 9. 10 Company has a legal liability to satisfy such tax. The Company shall not be liable to any party for damages due to a delay in the delivery or issuance of any stock certificate for any reason whatsoever. 16. Reservation of Shares. During the term of the Plan, the Company will at all times reserve and keep available, and will seek or obtain from any regulatory body having jurisdiction any requisite authority in order to issue and sell such number of shares of Common Stock as shall be sufficient to satisfy the requirements of the Plan. The inability of the Company to obtain the authority from any regulatory body having jurisdiction which is deemed by the Company's counsel to be necessary to the lawful issuance and sale of any shares of Common Stock hereunder shall relieve the Company of any liability in respect of the nonissuance or sale of such Common Stock as to which such requisite authority shall not have been obtained. 17. Approval of Plan. The Plan shall be subject to approval by the affirmative vote of the holders of a majority of the outstanding capital stock of the Company entitled to vote and will be submitted for approval to the shareholders of the Company. Any amendments to the Plan which require shareholder approval shall be by the affirmative vote of the holders of a majority of the outstanding capital stock of the Company entitled to vote. No options granted under the Plan shall be exercised unless and until the Plan has been approved by the shareholders of the Company as specified above. 18. Conformity with the Code. The Incentive Stock Options authorized pursuant to the Plan are intended to satisfy all requirements for the Incentive Stock Options under the Code and, notwithstanding any provision of the Plan or any Incentive Stock Option Agreement, the Plan and all Incentive Stock Options granted pursuant hereto shall be so construed and all contrary provisions shall be so limited in scope and effect and to the extent they cannot be so limited, they shall be void. 19. Liability of the Company. Neither the Company, its directors, officers or employees, nor any Subsidiary which is in existence or hereafter comes into existence, shall be liable to any Optionee or other person if it is determined for any reason by the Internal Revenue Service or any court having jurisdiction that any incentive stock option granted hereunder does not qualify for tax treatment as an incentive stock option under Section 422 of the Code. 20. GOVERNING LAW. THE PLAN SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS AND THE UNITED STATES, AS APPLICABLE, WITHOUT REFERENCE TO THE CONFLICT OF LAWS PROVISIONS THEREOF. 21. Severability of Provisions. If any provision of this Plan is determined to be invalid, illegal or unenforceable, such invalidity, illegality or unenforceability shall not affect the remaining provisions of the Plan, but such invalid, illegal or unenforceable provision shall be fully severable, and the Plan shall be construed and enforced as if such provision had never been inserted herein. 10. EX-99.2 5 FORM OF STOCK OPTION AGREEMENT 1 EXHIBIT 99.2 NETSPEED, INC. STOCK OPTION AGREEMENT [Form of Non-Qualified Stock Option] THIS AGREEMENT (this "Agreement"), effective as of _____________, 1997, is made and entered into by and between NetSpeed, Inc., a Texas Company (the "Company"), and ____________ (the "Optionee"). WITNESSETH: WHEREAS, the Company has implemented the NetSpeed, Inc. 1996 Stock Option Plan (the "Plan"), which was adopted by the Company's Board of Directors (the "Board") and approved by the Company's shareholders, and which provides for the grant of stock options to certain selected officers, directors and key employees of the Company or its subsidiaries with respect to shares of Common Stock, $.01 par value, of the Company (the "Common Stock"); WHEREAS, the committee appointed by the Board to administer the Plan (the "Committee") has selected the Optionee to participate in the Plan and has awarded the non-qualified stock option described in this Agreement (the "Option") to the Optionee; WHEREAS, the stock options provided for under the Plan are intended to comply with the requirements of Rule 16b-3 under the Securities Exchange Act of 1934, as amended; and WHEREAS, the parties hereto desire to evidence in writing the terms and conditions of the Option. NOW, THEREFORE, in consideration of the foregoing and of the mutual covenants and agreements herein contained, and as an inducement to the Optionee to continue as an employee of the Company or its subsidiaries and to promote the success of the business of the Company and its subsidiaries, the parties hereby agree as follows: 1. Grant of Option. The Company hereby grants to the Optionee, upon the terms and subject to the conditions, limitations and restrictions set forth in the Plan and in this Agreement, the Option to acquire ________ shares of Common Stock, at an exercise price per share of $_____, effective as of the date of this Agreement (the "Date of Grant"). The Optionee hereby accepts the Option from the Company. 2. Vesting. Except as otherwise provided for by the Plan, the shares of Common Stock subject to the Option shall vest ratably in __________ equal annual increments commencing on the first anniversary of the Date of Grant. 2 3. Exercise. In order to exercise the Option with respect to any vested portion, the Optionee shall provide written notice to the Company at its principal executive office. At the time of exercise, the Optionee shall pay to the Company the exercise price per share set forth in Section 1 times the number of vested shares as to which the Option is being exercised. The Optionee shall make such payment in cash, check or at the Company's option, by the delivery of shares of Common Stock having a Fair Market Value (as defined in the Plan) on the date immediately preceding the exercise date equal to the aggregate exercise price. If the Option is exercised in full, the Optionee shall surrender this Agreement to the Company for cancellation. If the Option is exercised in part, the Optionee shall surrender this Agreement to the Company so that the Company may make appropriate notation hereon or cancel this Agreement and issue a new agreement representing the unexercised portion of the Option. 4. Who May Exercise. The Option shall be exercisable only by the Optionee except in the case of death or Disability (as defined in the Plan). To the extent exercisable after the Optionee's death or Disability, the Option shall be exercised only by the Optionee's representatives, executors, successors or beneficiaries. 5. Expiration of Option. The Option shall expire, and shall not be exercisable with respect to any vested portion as to which the Option has not been exercised, on the first to occur of: (a) the _________ anniversary of the Date of Grant; (b) thirty days after the date of termination of the Optionee's employment with the Company for any reason other than death or Disability; or (c) one year after any termination of the Optionee's employment with the Company if such termination is due to the death or Disability of the Optionee. The Option shall expire, and shall not be exercisable, with respect to any unvested portion, immediately upon the termination of the Optionee's employment with the Company for any reason, including death or Disability. The right of the Optionee to receive any benefits from the Company after termination of employment with the Company by reason of employment contract, severance arrangement or otherwise shall not affect the determination that the Optionee's employment has been terminated with the Company for purposes of this Agreement. 6. Tax Withholding. Any provision of this Agreement to the contrary notwithstanding, the Company may take such steps as it deems necessary or desirable for the withholding of any taxes that it is required by law or regulation of any governmental authority, federal, state or local, domestic or foreign, to withhold in connection with any of the shares of Common Stock subject hereto. 7. Transfer of Option. The Optionee shall not, directly or indirectly, sell, transfer, pledge, encumber or hypothecate ("Transfer") any unvested portion of the Option or the rights and privileges pertaining thereto. In addition, the Optionee shall not, directly or indirectly, Transfer any vested portion of the Option other than by will or the laws of descent and distribution. Any permitted transferee to whom the Optionee shall Transfer the Option shall agree to be bound by this Agreement. Neither the Option nor the underlying shares of Common Stock is liable for or 2. 3 subject to, in whole or in part, the debts, contracts, liabilities or torts of the Optionee, nor shall they be subject to garnishment, attachment, execution, levy or other legal or equitable process. 8. Certain Legal Restrictions. The Company shall not be obligated to sell or issue any shares of Common Stock upon the exercise of the Option or otherwise unless the issuance and delivery of such shares shall comply with all relevant provisions of law and other legal requirements including, without limitation, any applicable federal or state securities laws and the requirements of any stock exchange upon which shares of the Common Stock may then be listed. As a condition to the exercise of the Option or the sale by the Company of any additional shares of Common Stock to the Optionee, the Company may require the Optionee to make such representations and warranties as may be necessary to assure the availability of an exemption from the registration requirements of applicable federal or state securities laws. The Company shall not be liable for refusing to sell or issue any shares if the Company cannot obtain authority from the appropriate regulatory bodies deemed by the Company to be necessary to lawfully sell or issue such shares. In addition, the Company shall have no obligation to the Optionee, express or implied, to list, register or otherwise qualify any of the Optionee's shares of Common Stock. The shares of Common Stock issued upon the exercise of the Option may not be transferred except in accordance with applicable federal or state securities laws. At the Company's option, the certificate evidencing shares of Common Stock issued to the Optionee may be legended as follows: THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER THE APPLICABLE SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION AND MAY NOT BE SOLD, ASSIGNED, TRANSFERRED OR PLEDGED EXCEPT IN COMPLIANCE WITH THE REQUIREMENTS OF SUCH ACT AND THE APPLICABLE SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION. Any Common Stock issued pursuant to the exercise of Options granted pursuant to this Agreement to a person who would be deemed an officer or director of the Company under Rule 16b-3 shall not be transferred until at least six months have elapsed from the date of grant of such Option to the date of disposition of the Common Stock underlying such Option. 9. Plan Incorporated. The Optionee accepts the Option subject to all the provisions of the Plan, which are incorporated into this Agreement, including the provisions that authorize the Committee to administer and interpret the Plan and which provide that the Committee's decisions, determinations and interpretations with respect to the Plan are final and conclusive on all persons affected thereby. Except as otherwise set forth in this Agreement, terms defined in the Plan have the same meanings herein. 3. 4 10. Miscellaneous. (a) The Option is intended to be a non-qualified stock option under applicable tax laws, and it is not to be characterized or treated as an incentive stock option under such laws. (b) The granting of the Option shall impose no obligation upon the Optionee to exercise the Option or any part thereof. Nothing contained in this Agreement shall affect the right of the Company to terminate the Optionee at any time, with or without cause, or shall be deemed to create any rights to employment on the part of the Optionee. (c) The rights and obligations arising under this Agreement are not intended to and do not affect the employment relationship that otherwise exists between the Company and the Optionee, whether such employment relationship is at will or defined by an employment contract. Moreover, this Agreement is not intended to and does not amend any existing employment contract between the Company and the Optionee. (d) Neither the Optionee nor any person claiming under or through the Optionee shall be or shall have any of the rights or privileges of a shareholder of the Company in respect of any of the shares issuable upon the exercise of the Option herein unless and until certificates representing such shares shall have been issued and delivered to the Optionee or such Optionee's agent. (e) Any notice to be given to the Company under the terms of this Agreement or any delivery of the Option to the Company shall be addressed to the Company at its principal executive offices, and any notice to be given to the Optionee shall be addressed to the Optionee at the address set forth beneath his or her signature hereto, or at such other address for a party as such party may hereafter designate in writing to the other. Any such notice shall be deemed to have been duly given if mailed, postage prepaid, addressed as aforesaid. (f) Subject to the limitations in this Agreement on the transferability by the Optionee of the Option and any shares of Common Stock, this Agreement shall be binding upon and inure to the benefit of the representatives, executors, successors or beneficiaries of the parties hereto. (g) THE INTERPRETATION, PERFORMANCE AND ENFORCEMENT OF THIS AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE OF TEXAS AND THE UNITED STATES, AS APPLICABLE, WITHOUT REFERENCE TO THE CONFLICT OF LAWS PROVISIONS THEREOF. (h) If any provision of this Agreement is declared or found to be illegal, unenforceable or void, in whole or in part, then the parties shall be relieved of all obligations arising under such provision, but only to the extent that it is illegal, unenforceable or void, it being the intent 4. 5 and agreement of the parties that this Agreement shall be deemed amended by modifying such provision to the extent necessary to make it legal and enforceable while preserving its intent or, if that is not possible, by substituting therefor another provision that is legal and enforceable and achieves the same objectives. (i) All section titles and captions in this Agreement are for convenience only, shall not be deemed part of this Agreement, and in no way shall define, limit, extend or describe the scope or intent of any provisions of this Agreement. (j) The parties shall execute all documents, provide all information, and take or refrain from taking all actions as may be necessary or appropriate to achieve the purposes of this Agreement. (k) This Agreement constitutes the entire agreement among the parties hereto pertaining to the subject matter hereof and supersedes all prior agreements and understandings pertaining thereto. (l) No failure by any party to insist upon the strict performance of any covenant, duty, agreement or condition of this Agreement or to exercise any right or remedy consequent upon a breach thereof shall constitute waiver of any such breach or any other covenant, duty, agreement or condition. (m) This Agreement may be executed in counterparts, all of which together shall constitute one agreement binding on all the parties hereto, notwithstanding that all such parties are not signatories to the original or the same counterpart. (n) At any time and from time to time the Committee may execute an instrument providing for modification, extension, or renewal of any outstanding option, provided that no such modification, extension or renewal shall (i) impair the Option in any respect without the consent of the holder of the Option or (ii) conflict with the provisions of Rule 16b-3. Except as provided in the preceding sentence, no supplement modification or amendment of this Agreement or waiver of any provision of this Agreement shall be binding unless executed in writing by all parties to this Agreement. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provision of this Agreement (regardless of whether similar), nor shall any such waiver constitute a continuing waiver unless otherwise expressly provided. (o) In addition to all other rights or remedies available at law or in equity, the Company shall be entitled to injunctive and other equitable relief to prevent or enjoin any violation of the provisions of this Agreement. (p) The Optionee's spouse joins this Agreement for the purpose of agreeing to and accepting the terms of this Agreement and to bind any community property interest 5. 6 he or she has or may have in the Option, any vested portion or any unvested portion of the Option, any shares of Common Stock acquired upon exercise of the Option and any other shares of Common Stock held by the Optionee. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written. COMPANY: NetSpeed, Inc. By: ---------------------------------- Name: ---------------------------------- Title: ---------------------------------- OPTIONEE: ----------------------------------------- Name: ---------------------------------- Address: ---------------------------------- ----------------------------------------- ----------------------------------------- OPTIONEE'S SPOUSE: ----------------------------------------- Name: ---------------------------------- 6. EX-99.3 6 FORM OF ACCELERATION WAIVER LETTER 1 EXHIBIT 99.3 FORM OF OPTION WAIVER EXHIBIT E [NETSPEED LETTERHEAD] [ ] c/o NetSpeed, Inc. - ------------------ - ------------------ Dear [ ]: As you know, Cisco Systems, Inc. ("Cisco") is in the process of acquiring NetSpeed, Inc. (the "Company"). Under the terms of the acquisition (the "Acquisition"), Cisco has agreed to assume the outstanding options held by certain employees of the Company. However, in order to facilitate the completion of this Acquisition, the vesting acceleration provisions currently in effect for those options need to be revised prior the Acquisition so that those options do not accelerate in full upon the Acquisition. You currently hold the following stock option(s) (collectively the "Options") to acquire shares of the Company's common stock under the Company's 1996 Stock Option Plan (the "Option Plan"):
Number of Outstanding Grant Date Exercise Price Option Shares ---------- -------------- ------------- [ ] [ ] [ ]
In order to facilitate the completion of the Acquisition, the vesting acceleration provisions of your existing Options must be amended so that those Options will NOT vest in full at the time of the Acquisition and will NOT become exercisable for all of the shares of the Company's common stock subject to those Options at that time. Instead, you will be given credit for only twelve (12) months of vesting service upon the Acquisition, i.e., you will be treated for vesting purposes as if you have worked for the Company for an additional twelve (12) months. 2 Your additional twelve (12) months of vesting service will be based on a revised vesting schedule. Each of your Options currently vests and becomes exercisable in four (4) equal successive annual installments measured from the option grant date. In connection with the Acquisition and the assumption of your Options, the vesting schedule for your Options will be revised to match the standard Cisco vesting schedule. Accordingly, following the Acquisition your Option vesting schedule will be as follows: 25% of the Option shares vest upon your completion of one (1) year of service measured from your initial option grant date, and the balance of the Option shares vest in thirty-six (36) equal successive monthly installments over your next thirty-six (36) months of service. The twelve (12) months of vesting service credit you will be given upon the assumption of your Options is calculated based on this revised vesting schedule. For example, if you had completed 1 month of employment following your option grant date prior to the Acquisition, you would not be vested in any of your Option shares prior to the Acquisition. Immediately following the Acquisition, you would be vested in 27.083% of the Option shares (25% for the annual installment plus 2.083% for one (1) additional month of vesting). The balance of the assumed Option would become exercisable in 35 equal successive monthly installments as long as you remain employed with Cisco (or any Cisco subsidiary) following the Acquisition. The amendment to each of your Options to limit the acceleration to twelve (12) months of vesting service will be effected by an amendment to Section 9 of the Option Plan, which has been incorporated into the stock option agreement (the "Option Agreement") for each of your Options. Accordingly, in order to facilitate the completion of the Acquisition, you must agree to the following amendment of Section 9 of the Option Plan and to the incorporation of that amended provision into each of your Option Agreements so that your Options will not vest in full on an accelerated basis at the time of the Acquisition. AMENDED SECTION 9 TO BE EFFECTIVE IMMEDIATELY FOR EACH OF YOUR OPTIONS "9. Change in Control. In the event of a Change in Control of the Company (including the merger of the Company with and into Cisco Systems, Inc. (the "Acquisition")), all outstanding Options shall not vest in full. However, upon the effective date of a merger (including the Acquisition) all Optionees shall be given credit for twelve (12) months of vesting service based on a revised vesting schedule. The revised vesting schedule applicable to the outstanding Options and upon which the vesting acceleration shall be based is as follows: 25% of the shares subject to an Option shall vest upon the Optionee's completion of one (1) year of service measured from the Date of Grant, and balance of the shares subject to the Option shall vest in thirty-six (36) equal successive monthly installments upon the Optionee's completion of each additional month of service over the thirty-six (36) month period measured from the first 3 anniversary of the Date of Grant." In addition, you agree that you will not exercise any of your Options during the period between the date of this letter agreement and the effective date of the Acquisition (or such earlier date on which it is announced that the Acquisition will not be consummated). The Acquisition is expected to become effective in approximately 30 to 45 days following the date of this letter, but the actual effective date cannot be determined at this time. Since each of your Options is a non-statutory option under the federal tax laws, you will recognize ordinary income at the time that option is exercised in an amount equal to the excess of (i) the fair market value of the purchased shares on the exercise date over (ii) the exercise price paid for those shares. Such income will be subject to all applicable withholding taxes at that time. To indicate your agreement with (i) the foregoing amendment to your Options and to confirm that accelerated vesting you will receive under your Options at the time the Acquisition closes will be limited to twelve (12) months of vesting service credit (based on the revised vesting schedule) and (ii) the suspended exercise period for your Options, please sign and date the Acknowledgement section below and return it to me. If you do not sign and return the Acknowledgement form, the Acquisition may not close, and you will not become entitled to any accelerated vesting or other change in your vesting schedule. For your records, you should attach a copy of this letter to each of your Option Agreement(s) in order to evidence the revision to the acceleration provisions of your Option(s) effected by this letter agreement. Very truly yours, By: ------------------------------------- Title: ------------------------------------- 4 ACKNOWLEDGEMENT In order to facilitate the closing of the Acquisition and in recognition of the twelve (12) months of vesting service credit and revised vesting schedule I will receive under each of my Options upon the closing of the Acquisition, I hereby knowingly and freely agree to the foregoing amendment to Section 9 of the Option Plan, as incorporated into the terms of the Option Agreement for each of my Options. I further agree not to exercise any of my Options during the period between the date of this letter agreement and the effective date of the Acquisition (or such earlier date on which it is announced that the Acquisition will not be consummated). Signature: -------------------------------------- [ ] Date: -------------------------------------- EX-99.4 7 FORM OF OPTION ASSUMPTION AGREEMENT 1 EXHIBIT 99.4 CISCO SYSTEMS, INC. STOCK OPTION ASSUMPTION AGREEMENT NETSPEED, INC. 1996 STOCK OPTION PLAN OPTIONEE: [ ] STOCK OPTION ASSUMPTION AGREEMENT issued as of the 10th day of April, 1998 by Cisco Systems, Inc., a California corporation ("Cisco"). WHEREAS, the undersigned individual ("Optionee") holds one or more outstanding options to purchase shares of the common stock of NetSpeed, Inc., a Texas corporation ("NetSpeed"), which were granted to Optionee under the NetSpeed, Inc. 1996 Stock Option Plan (the "Plan") and are each evidenced by the following agreements between NetSpeed and Optionee: (i) a Stock Option Agreement (the "Option Agreement") and (ii) that certain letter agreement (the "Letter Agreement") amending the Plan and the Option Agreement. The Option Agreement, including the incorporated provisions of the Plan as amended by the Letter Agreement, shall be referred to in this document as the "Amended Option Agreement." WHEREAS, NetSpeed has this day been acquired by Cisco through the merger of NetSpeed with and into Cisco (the "Merger") pursuant to the Agreement of Merger dated March 9, 1998, by and between Cisco and NetSpeed (the "Merger Agreement"). WHEREAS, the provisions of the Merger Agreement require Cisco to assume all obligations of NetSpeed under all outstanding options under the Plan at the consummation of the Merger and to issue to the holder of each outstanding option an agreement evidencing the assumption of such option. WHEREAS, pursuant to the provisions of the Merger Agreement, the exchange ratio (the "Exchange Ratio") in effect for the Merger is .5526 of a share of Cisco common stock ("Cisco Stock") for each outstanding share of NetSpeed common stock ("NetSpeed Stock"). WHEREAS, this Agreement is to become effective immediately upon the consummation of the Merger (the "Effective Time") in order to reflect certain adjustments to Optionee's outstanding options under the Plan which have become necessary by reason of the assumption of those options by Cisco in connection with the Merger. 2 NOW, THEREFORE, it is hereby agreed as follows: 1. The number of shares of NetSpeed Stock subject to the options held by Optionee immediately prior to the Effective Time (the "NetSpeed Options") and the exercise price payable per share are set forth in Exhibit A hereto. Cisco hereby assumes, as of the Effective Time, all the duties and obligations of NetSpeed under each of the NetSpeed Options. In connection with such assumption, the number of shares of Cisco Stock purchasable under each NetSpeed Option hereby assumed and the exercise price payable thereunder have been adjusted to reflect the Exchange Ratio. Accordingly, the number of shares of Cisco Stock subject to each NetSpeed Option hereby assumed shall be as specified for that option in attached Exhibit A, and the adjusted exercise price payable per share of Cisco Stock under the assumed NetSpeed Option shall also be as indicated for that option in attached Exhibit A. 2. The intent of the foregoing adjustments to each assumed NetSpeed Option is to assure that the spread between the aggregate fair market value of the shares of Cisco Stock purchasable under each such option and the aggregate exercise price as adjusted pursuant to this Agreement will, immediately after the consummation of the Merger, substantially equal the spread which existed, immediately prior to the Merger, between the then aggregate fair market value of the NetSpeed Stock subject to the NetSpeed Option and the aggregate exercise price in effect at such time under the Amended Option Agreement. Such adjustments are also designed to preserve, immediately after the Merger, on a per share basis, the same ratio of exercise price per option share to fair market value per share which existed under the NetSpeed Option immediately prior to the Merger. 3. The following provisions shall govern each NetSpeed Option hereby assumed by Cisco: (a) Unless the context otherwise requires, all references in each Amended Option Agreement and in the Plan (as incorporated into such Amended Option Agreement) (i) to the "Company" shall mean Cisco, (ii) to "Common Stock" shall mean shares of Cisco Stock, (iii) to the "Board" shall mean the Board of Directors of Cisco and (iv) to the "Committee" shall mean the Compensation Committee of the Cisco Board of Directors. (b) The grant date and the expiration date of each assumed NetSpeed Option and all other provisions which govern either the exercise or the termination of the assumed NetSpeed Option shall remain the same as set forth in the Amended Option Agreement applicable to that option, and the provisions of the Amended Option Agreement shall accordingly govern and control Optionee's rights under this Agreement to purchase Cisco Stock. 3 (c) Pursuant to the terms of the Amended Option Agreement, the four (4) year annual installment vesting schedule in effect for each assumed NetSpeed Option shall be revised to be a four (4) year schedule with twenty-five percent (25%) of the shares vesting upon the completion of one (1) year of employment and the balance of the shares vesting in thirty-six (36) equal successive monthly installments over the thirty-six (36) months of employment thereafter, all measured from the original grant date of the NetSpeed Option. In addition, Optionee was credited with twelve (12) months of vesting service at the time of the Merger. Optionee's additional twelve (12) months of vesting service shall be based on this revised vesting schedule. Each NetSpeed Option, as so revised and accelerated and as adjusted in accordance with the provisions of paragraph 1 above, shall be assumed by Cisco as of the Effective Time. Each such assumed NetSpeed Option shall thereafter continue to become exercisable for any remaining unvested shares of Cisco stock subject to that option in accordance with the revised vesting schedule, after giving effect to the twelve (12) months of accelerated vesting service, and the number of shares of Cisco Stock subject to each such installment shall be adjusted to reflect the Exchange Ratio. (d) For purposes of applying any and all provisions of the Amended Option Agreement and the Plan relating to Optionee's status as an employee of NetSpeed, Optionee shall be deemed to continue in such status as an employee for so long as Optionee renders services as an employee to Cisco or any present or future Cisco subsidiary. Accordingly, the provisions of the Amended Option Agreement governing the termination of the assumed NetSpeed Options upon Optionee's cessation of service as an employee of NetSpeed shall hereafter be applied on the basis of Optionee's cessation of employee status with Cisco and its subsidiaries, and each assumed NetSpeed Option shall accordingly terminate, within the designated time period in effect under the Amended Option Agreement for that option, following such cessation of service as an employee of Cisco and its subsidiaries. (e) The adjusted exercise price payable for the Cisco Stock subject to each assumed NetSpeed Option shall be payable in any of the forms authorized under the Amended Option Agreement applicable to that option. For purposes of determining the holding period of any shares of Cisco Stock delivered in payment of such adjusted exercise price, the period for which such shares were held as NetSpeed Stock prior to the Merger shall be taken into account. (f) In order to exercise each assumed NetSpeed Option, Optionee must deliver to Cisco a written notice of exercise in which the number of shares of Cisco Stock to be purchased thereunder must be indicated. The exercise notice must 3. 4 be accompanied by payment of the adjusted exercise price payable for the purchased shares of Cisco Stock and should be delivered to Cisco at the following address: Cisco Systems, Inc. 255 West Tasman Drive, Building J San Jose, CA 95134 Attention: Option Plan Administrator 4. Except to the extent specifically modified by this Option Assumption Agreement, all of the terms and conditions of each Amended Option Agreement as in effect immediately prior to the Merger shall continue in full force and effect and shall not in any way be amended, revised or otherwise affected by this Stock Option Assumption Agreement. 4. 5 IN WITNESS WHEREOF, Cisco Systems, Inc. has caused this Stock Option Assumption Agreement to be executed on its behalf by its duly-authorized officer as of the ___ day of _______________, 1998. CISCO SYSTEMS, INC. By: -------------------------------------- ACKNOWLEDGMENT The undersigned acknowledges receipt of the foregoing Stock Option Assumption Agreement and understands that all rights and liabilities with respect to each of his or her NetSpeed Options hereby assumed by Cisco are as set forth in the Amended Option Agreement, the Plan and such Stock Option Assumption Agreement. -------------------------------------- [ ], OPTIONEE DATED: __________________, 1998 5. 6 EXHIBIT A Optionee's Outstanding Options to Purchase Shares of NetSpeed, Inc. Common Stock (Pre-Merger) and Optionee's Outstanding Options to Purchase Shares of Cisco Systems, Inc. Common Stock (Post-Merger) -----END PRIVACY-ENHANCED MESSAGE-----