-----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, EchJb9mxM+ayFkl8xUrMq33PdheOfzgbisE6SX8wmti7+6A/Yp1+UVeOZbHxD4qc WgcTjCrh1R/0jOnSIARJ1g== /in/edgar/work/20000824/0001005477-00-006070/0001005477-00-006070.txt : 20000922 0001005477-00-006070.hdr.sgml : 20000922 ACCESSION NUMBER: 0001005477-00-006070 CONFORMED SUBMISSION TYPE: S-8 PUBLIC DOCUMENT COUNT: 5 FILED AS OF DATE: 20000824 EFFECTIVENESS DATE: 20000824 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NETWORK EQUIPMENT TECHNOLOGIES INC CENTRAL INDEX KEY: 0000752431 STANDARD INDUSTRIAL CLASSIFICATION: [3576 ] IRS NUMBER: 942904044 STATE OF INCORPORATION: DE FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: S-8 SEC ACT: SEC FILE NUMBER: 333-44436 FILM NUMBER: 709169 BUSINESS ADDRESS: STREET 1: 6500 PASEO PADRE PARKWAY CITY: FREMONT STATE: CA ZIP: 94555 BUSINESS PHONE: 5107137300 MAIL ADDRESS: STREET 1: 800 SAGINAW DRIVE CITY: REDWOOD CITY STATE: CA ZIP: 94063 S-8 1 0001.txt FORM S-8 As filed with the Securities and Exchange Commission on August 24, 2000 Registration No. 333-______ SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 ------------------------------- FORM S-8 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ------------------------------- NETWORK EQUIPMENT TECHNOLOGIES, INC. ------------------------------------ (Exact name of Registrant, as specified in its charter) DELAWARE 94-2904044 -------- ---------- (State of Incorporation) (IRS Employer Identification No.) 6530 Paseo Padre Parkway Fremont, California 94555 (Address of principal executive offices) ------------------------------- 1998 EMPLOYEE STOCK PURCHASE PLAN N.E.T. STOCK OPTION PROGRAM (Full title of the plan) ------------------------------- Mary Ann Moran, Esq. General Counsel NETWORK EQUIPMENT TECHNOLOGIES, INC. 6530 Paseo Padre Parkway Fremont, California 94555 (510) 713-7300 (Name, address and telephone number of agent for service) ------------------------------- Copies to: Twila L. Foster, Esq. Melinda L. Sesto, Esq. CROSBY, HEAFEY, ROACH & MAY PROFESSIONAL CORPORATION Two Embarcadero Center, Suite 2000 San Francisco, California 94111 CALCULATION OF REGISTRATION FEE ================================================================================ PROPOSED TITLE OF MAXIMUM PROPOSED MAXIMUM AMOUNT OF SECURITIES TO BE AMOUNT TO BE OFFERING PRICE AGGREGATE REGISTRATION REGISTERED REGISTERED PER SHARE (2) OFFERING PRICE FEE - -------------------------------------------------------------------------------- Common Stock, par 4,450,657(1) $9.20 $40,946,044 $10,809.76 value $0.01 per share - -------------------------------------------------------------------------------- (1) Registering 950,657 shares for the 1998 Employee Stock Purchase Plan (the "Stock Purchase Plan') and 3,500,000 shares for the N.E.T. Stock Option Program (the "Stock Option Program"). (2) Estimated in accordance with Rule 457 (h) under the Securities Act of 1933, as amended (the "Securities Act") and, in part, pursuant to Rule 457(c) under the Securities Act solely for the purpose of calculating the total registration fee. With respect to 25,319 shares subject to outstanding options to purchase Common Stock under the Stock Option Program, the Proposed Maximum Offering Price Per Share was estimated pursuant to Rule 457(h), under which the per share price of options to purchase stock under an employee stock option plan shall be estimated by reference to the exercise price of such options. The weighted average exercise price of the 25,319 shares subject to outstanding options under the Stock Option Program is $10.31. With respect to 3,474,681 shares of Common Stock available for future grant under the Stock Option Program, Stock, the estimated Proposed Maximum Offering Price Per Share was estimated pursuant to Rule 457(c) whereby the per share price was determined by reference to the average between the high and low price reported on the New York Stock Exchange on August 21, 2000, which average was $9.50. With respect to the 950,657 shares of Common Stock available for purchase under the Stock Purchase Plan, the calculation is based upon 85% of the average of the high and low prices reported of one share of Common Stock of the Registrant, as reported on the New York Stock Exchange on August 21, 2000. The price per share for the Stock Purchase Plan is 85% of the Market Price. The number referenced in the table above under "Proposed Maximum Offering Price Per Share" represents a weighted average of the foregoing estimates calculated in accordance with Rules 457(h) and 457(c). Pursuant to General Instruction E of the General Instructions to the Form S-8, this Registration Statement incorporates by reference the Registrant's Registration Statement on Form S-8 filed April 10, 1998 (No. 333-49837). ----------------------------------------- - 2 - PART II INFORMATION REQUIRED IN THE REGISTRATION STATEMENT Item 3. Incorporation of Documents by Reference. There are hereby incorporated by reference the following documents and information heretofore filed with the Securities and Exchange Commission (the "Commission"): 1. Registration Statement on Form S-8 (No. 333-49837), as filed on April 10, 1998; 2. The Company's Annual Report on Form 10-K for the fiscal year ended March 31, 2000, including all material incorporated by reference therein; 3. The Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2000, as filed on August 14, 2000; 4. The description of the Registrants' Common Stock contained in its registration statement filed with the Commission under the Securities Exchange Act of 1934, as amended ("Exchange Act"), including any amendment or reports filed for the purpose of updating such description; and 5. All documents subsequently filed by the Registrant pursuant to Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act, prior to the filing of a post-effective amendment which indicates that all securities offered have been sold or which de-registers all securities then remaining unsold, shall be deemed to be incorporated by reference in this Registration Statement and to be 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 other subsequently field document that also is or 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. Item 6. Indemnification of Directors and Officers. The Registrant has the power to indemnify its officers and directors against liability for certain acts pursuant to Section 145 of the General Corporation Law of the State of Delaware. Section 6 of Article VII of the Registrant's By-Laws provides: - 3 - "INDEMNIFICATION OF OFFICERS AND DIRECTORS (a) Indemnification in Actions Other Than Those Brought by the Corporation. The corporation shall indemnify and hold harmless, to the fullest extent permitted by the Delaware General Corporation Law, as the same exists or may hereafter be amended (but, in the case of such amendment, only to the extent that such amendment permits the corporation to provide broader indemnification rights than such law permitted the corporation to provide prior to such amendment), any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the corporation) by reason of the fact that he or she is or was a director or officer of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him or her in connection with such action, suit or proceeding. Except as provided in paragraph (d) of this Section 6, the corporation shall be required to indemnify a person in connection with a proceeding (or part thereof) initiated by such person only if the proceeding (or part thereof) was authorized by the Board of Directors of the corporation. (b) Indemnification in Actions Brought By or on Behalf of the Corporation. The corporation shall indemnify and hold harmless, to the fullest extent permitted by the Delaware General Corporation Law, as the same exists or may hereafter be amended, any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that he or she is or was a director or officer of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, against expenses (including attorneys' fees) actually and reasonably incurred by him or her in connection with the defense or settlement of such action or suit. (c) Expenses; Prepayment. The corporation shall pay the expenses (including attorneys' fees) incurred by a director or officer who has been successful on the merits or otherwise in defending any action, suit or proceeding referenced in paragraphs (a) and (b) of this Section 6 and shall pay such expenses in advance of the final disposition of such matter upon receipt of an undertaking by the director or officer to repay all amounts advanced if it should be ultimately determined that the director or officer is not entitled to be indemnified under this Article or otherwise. (d) Indemnification Procedure; Claims. Any indemnification under paragraphs (a) and (b) of this Section 6 (unless ordered by a court) shall be made by the corporation only as authorized in the specific case upon a determination that indemnification of the director or officer is proper in the circumstances because he or she has met the applicable standard of conduct set forth in paragraphs (a) and (b). If a claim for indemnification or payment of expenses under Section 6 of this - 4 - Article is not paid in full within sixty days after a written claim therefor has been received by the corporation, the claimant may file suit to recover the unpaid amount of such claim and, if successful in whole or in part, shall be entitled to be paid the expense of prosecuting such claim. (e) Indemnification of Others. The Board of Directors, in its discretion, shall have the power on behalf of the corporation to indemnify any person, other than a director or officer, made a party to any action, suit or proceeding by reason of the fact that he or she, or his or her testator or intestate, is or was an employee or agent of the corporation and to pay the expenses incurred by any such person in defending such action, suit or proceeding in advance of its final disposition. (f) Non-exclusivity of Rights. The indemnification and advancement of expenses provided by or granted pursuant to Section 6 of this Article VII shall not be deemed exclusive of any other rights to which those seeking indemnification or advancement of expenses may be entitled under any bylaw, agreement, vote of stockholders, or disinterested directors or otherwise, both as to action in his or her official capacity and as to action in another capacity while holding such office. (g) Other Indemnification. The corporation's obligation, if any, to indemnify any person who was or is serving at its request as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, enterprise or nonprofit entity shall be reduced by any amount such person may collect as indemnification from such other corporation, partnership, joint venture, trust, enterprise or nonprofit enterprise. (h) Insurance. The corporation shall have the power to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the corporation or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation against any liability asserted against him or her and incurred by him or her in such capacity, or arising out of his or her status as such, whether or not the corporation would have the power to indemnify him or her against such liability under the provisions of this Section 6. (i) Successor Entities. For purposes of Section 6 of this Article VII, references to "the corporation" shall include, in addition to the resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers, employees and agents so that any person who is or was a director, officer, employee or agent of such constituent corporation, or is or was serving at the request of such constituent corporation as a director, officer, employee or agent of another corporation shall stand in the same position under the provisions of this Section 6 of Article VII with respect to the resulting or surviving corporation as he or she would have with respect to such constituent corporation if its separate existence had continued. - 5 - (j) Survival of Rights; Amendment or Repeal. The indemnification and advancement of expenses provided by or granted pursuant to this Article VII shall, unless otherwise provided when authorized or ratified, continue as a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such a person. Any repeal or modification of the foregoing provisions of Section 6 of this Article VII shall not adversely affect any right or protection hereunder of any person in respect of any act or omission occurring prior to the time of such repeal or modification. In addition, the Article IX of the Registrant's Restated Certificate of Incorporation provides as follows: "A director of the corporation shall not be personally liable to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director's duty of loyalty to the corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the Delaware General Corporation Law, or (iv) for any transaction from which the director derived any improper personal benefit. If the Delaware General Corporation Law is hereafter amended to authorize, with the approval of a corporation's stockholders, further reductions in the liability of the corporation's directors for breach of fiduciary duty, then a director of the corporation shall not be liable for any such breach to the fullest extent permitted by the Delaware General Corporation Law as so amended. Any repeal or modification of the foregoing provisions of this Article IX by the stockholders of the corporation shall not adversely affect any right or protection of a director of the corporation existing at the time of such repeal or modification." Item 7. Exemption from Registration Claimed. Not applicable. Item 8. Exhibits. Exhibit No. 5.1 Opinion of Crosby, Heafey, Roach & May Professional Corporation, as to the legality of securities being registered. Exhibit No. 23.1 Independent Auditors' Consent. Exhibit No. 23.2 Consent of Counsel (contained in Exhibit 5.1 above). Exhibit No. 24.1 Power of Attorney (see page 10). Exhibit No. 99.1 1998 Employee Stock Purchase Plan, as amended. Exhibit No. 99.2 N.E.T. Stock Option Program, as amended. - 6 - 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 Securities 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. (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 paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the registration statement is on Form S-8 and 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 15(d) of the Exchange Act that are incorporated by reference in the Registration Statement. (2) That, for the purpose of determining any liability under the Securities 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. (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 offering. (b) The undersigned registrant hereby undertakes that, for purposes of determining any liability under the Securities Act, each filing of the Registrant's annual report pursuant to Section 13(a) or 15(d) of the Exchange Act (and, where applicable, each filing of an employee benefit plan's annual report pursuant to Section 15(d) of the Exchange Act) that is incorporated by reference in the Registration Statement 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. (c) Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in - 7 - the opinion of the Commission such indemnification is against public policy as expressed in the Securities 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 Securities Act and will be governed by the final adjudication of such issue. - 8 - SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-8 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Fremont, State of California, on August 21, 2000. NETWORK EQUIPMENT TECHNOLOGIES, INC. By: /s/ Hubert A.J. Whyte ------------------------------------- Hubert A.J. Whyte, President and Chief Executive Officer and Director - 9 - POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Hubert A.J. Whyte, John C. Batty and/or Mary Ann Moran, his or her attorneys-in-fact, each with the power of substitution, for him or her in any and all capacities to sign any amendments to this Registration Statement on Form S-8, and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that each of said attorneys-in-fact, alone or together, or his or her substitute or substitutes, may do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement on Form S-8 has been signed below by the following persons in the capacities and on the dates indicated:
Signature Title Date --------- ----- ---- /s/ Hubert A.J. Whyte President, Chief Executive - ------------------------------ Officer and Director August 21, 2000 Hubert A.J. Whyte (Principal Executive Officer) /s/ John C. Batty Senior Vice President and - ------------------------------ Chief Financial Officer August 21, 2000 /s/ John C. Batty (Principal Financial and Accounting Officer) /s/ Dixon R. Doll Director August 21, 2000 - ----------------------------- Dixon R. Doll /s/ James K. Dutton Director August 21, 2000 - ----------------------------- James K. Dutton /s/ Walter J. Gill Director August 21, 2000 - ----------------------------- Walter J. Gill /s/ George M. Scalise Director August 21, 2000 - ----------------------------- George M. Scalise /s/ Peter Sommerer Director August 21, 2000 - ----------------------------- Peter Sommerer /s/ Hans A. Wolf Director August 21, 2000 - ----------------------------- Hans A. Wolf
- 10 - SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 - -------------------------------------------------------------------------------- EXHIBITS - -------------------------------------------------------------------------------- Registration Statement on Form S-8 NETWORK EQUIPMENT TECHNOLOGIES, INC. INDEX OF EXHIBITS Sequentially Exhibit No. Numbered Page ----------- ------------- 5.1 Opinion of Crosby, Heafey, Roach & May, Professional Corporation 23.1 Independent Auditors' Consent 23.2 Consent of Counsel (contained in Exhibit 5.1 above). 24.1 Power of Attorney (see page 10) 99.1 1998 Employee Stock Purchase Plan, as amended 99.2 N.E.T. Stock Option Program, as amended EX-5.1 2 0002.txt OPINION EXHIBIT 5.1 Crosby, Heafey, Roach & May Professional Corporation August 23, 2000 Network Equipment Technologies, Inc. 6530 Paseo Padre Parkway Fremont, California 94555 Re: Registration Statement on Form S-8 of Network Equipment Technologies, Inc. 1998 Employee Stock Purchase Plan and N.E.T. Stock Option Program (the "Registration Statement") Ladies and Gentlemen: Reference is made to the Registration Statement on Form S-8 to be filed by Network Equipment Technologies, Inc., a Delaware corporation (the "Company"), with the Securities and Exchange Commission under the Securities Act of 1933, as amended, relating to the issuance of an additional 950,657 shares of Common Stock, par value $0.01 per share, of the Company (the "Common Stock") which are issuable pursuant to the 1998 Employee Stock Purchase Plan (the "1998 Plan") and 3,500,000 shares of Common Stock which are issuable pursuant to the N.E.T. Stock Option Program (the "Program")(collectively referred to herein as the "Stock"). Assuming that (i) the full consideration stated in the 1998 Plan and the Program, as the case may be, is paid for each share of Common Stock issued pursuant to such plan and that such consideration in respect of each share includes payment of cash or other lawful consideration at least equal to the par value thereof, and (ii) appropriate certificates evidencing the shares of Stock are executed and delivered by the Company, it is our opinion that when issued and sold by the Company, after payment therefor in the manner provided in the applicable plan and the Registration Statement, the shares of Stock will be legally issued, fully paid and nonassessable. This opinion is rendered to you in connection with the Registration Statement and is solely for your benefit. This opinion may not be relied upon by you for any other purpose, or relied upon by any other person, firm, corporation or other entity for any purpose, without our prior written consent. We disclaim any obligation to advise you of any change of law that occurs, or any facts of which we may become aware, after the date of this opinion. We hereby consent to the filing of this opinion with the Securities and Exchange Commission as Exhibit 5.1 to the Registration Statement. Very truly yours, /s/ CROSBY, HEAFEY, ROACH & MAY PROFESSIONAL CORPORATION EX-23.1 3 0003.txt CONSENT OF INDEPENDENT AUDITORS EXHIBIT 23.1 CONSENT OF INDEPENDENT AUDITORS We consent to the incorporation by reference in this Registration Statement of Network Equipment Technologies, Inc. on Form S-8 of our reports dated April 18, 2000, appearing in the Annual Report on Form 10-K of Network Equipment Technologies, Inc. for the year ended March 31, 2000. /s/ Deloitte & Touche LLP Deloitte & Touche LLP San Jose, California August 18, 2000 EX-99.1 4 0004.txt STOCK PURCHASE PLAN EXHIBIT 99.1 NETWORK EQUIPMENT TECHNOLOGIES, INC. 1998 EMPLOYEE STOCK PURCHASE PLAN AMENDED AND RESTATED AUGUST 10, 1999 1. PURPOSE. The Network Equipment Technologies Employee Stock Purchase Plan (the "Plan") is designed to foster continued employee retention and cordial employee relations, to encourage and assist employees of Network Equipment Technologies, Inc. (the "Company") and its designated subsidiaries, to acquire stock in the Company, and to help them provide for their future financial security. This Plan is the successor to the Company's 1990 Employee Stock Purchase Plan ("1990 Plan"). 2. SHARES SUBJECT TO PLAN. (a) Number of Shares: The Company has reserved for purchase under the Plan a total of 1,600,000 shares of its Common Stock (the "Shares") plus shares remaining under the 1990 Plan after April 30, 1998 (collectively "share limitation"). Shares sold under the Plan may be newly or previously issued shares, but all shares issued under the Plan, regardless of source, shall be counted against the share limitation. (b) Adjustments: In the event of any reorganization, recapitalization, stock split, reserve stock split, stock dividend, combination of shares, merger, consolidation, offering of rights or other similar change in the structure of the capital stock of the Company, the Company may make such adjustment, if any, as it may deem appropriate in the number, kind, and subscription price of the securities available for purchase under the Plan and in the maximum number of securities that a member is entitled to purchase. The Company may also make further adjustments to cause the Plan to qualify under Section 423 or any successor provision of the Internal Revenue Code of 1986, as amended (the "Code"), if and to the extent that it deems such qualification necessary or desirable. 3. ADMINISTRATION. The Plan shall be administered by such officers and employees of the Company or other persons as the Company's Board of Directors from time to time may select (the "Plan Committee"). All costs and expenses incurred in administering the Plan shall be paid by the Company, provided that any taxes applicable to a member's participation in the Plan may be charged to the member by the Company. The Plan Committee may make such rules and regulations as it deems necessary to administer the Plan and to interpret the provisions of the Plan. Any 1 determination, decision, or action of the Plan Committee in connection with the construction, interpretation, administration, or application of the Plan or any right granted under the Plan shall be final, conclusive, and binding upon all persons. No member of the Plan Committee shall be liable for any determination, decision, or action made. The Plan Committee may delegate the administration of the Plan to Corporate Officers and their designees. The Plan Committee may set date or dates of each "Offering Period", not to exceed 24 months for each such period, under this Plan. Offering Periods may have multiple "Purchase Periods" as set by the Plan Committee. Subject to stockholder approval of this Plan, the initial Offering Period is scheduled to commence on May 1, 2000 and to end on April 30, 2001 and to have three Purchase Periods of four months each. 4. ELIGIBILITY. Any "employee" (as defined below) who regularly is engaged in the rendition of personal services to the Company or its designated subsidiaries 20 hours per week or more and five months or more in any calendar year (except any employee who would own, directly or indirectly, five percent or more of the total combined voting power or value of all classes of stock of the Company or any of its subsidiaries immediately after Shares are purchased under the Plan) shall be an "employee" and eligible to become a member of and to participate in the Plan beginning on the first Enrollment Date following his or her employment with the Company or a designated subsidiary. Employees who participated under the 1990 Plan and who are employees as defined in this section of this Plan are eligible to participate under this Plan. Individuals who are classified by the Company as independent contractors shall not be eligible to be members unless and until such individuals are reclassified as common law employees for federal income and federal employment tax purposes. For purposes of the Plan: "employee" shall mean any individual carried as an "employee" on the payroll records of the Company or a designated subsidiary at the relevant time or times; "subsidiary" shall mean any corporation in an unbroken chain of corporations beginning with the Company if, as of a given Enrollment Date, each of the corporations other than the last corporation in the chain owns stock possessing 50 percent or more of the total combined voting power of all classes of stock in one of the other corporations in the chain. Employees who participate under the Plan are referred to herein as "members". 5. PARTICIPATION. (a) Enrollment: Any eligible employee may enroll in the Plan as of the first trading day of each Offering Period or Purchase Period or such other date or dates chosen by the Plan Committee (each such date is an "Enrollment Date"). Enrollment during any Offering Period may be subject to limitations or conditions set by the Plan Committee. To enroll, an eligible 2 employee must deliver to the Company a completed and signed Employee Stock Purchase Plan Subscription Agreement, substantially in the form provided by the Company, indicating the employee's acceptance of the Plan and agreement to participate in the Plan. Forms must be received by the Company no later than an Enrollment Date and shall be effective as of such Enrollment Date. Participation in the Plan is entirely voluntary. (b) Re-enrollment upon Expiration of Offering Period: At the end of a then-current Offering Period, each member automatically shall be enrolled in the next succeeding Offering Period (a "Re-enrollment") unless, in a manner and at a time specified by the Company, but in no event later than the day before the first day of such succeeding Offering Period, a member notifies the Company in writing of the member's desire not to be so enrolled. Re-enrollment shall be at the same percentage of contributions as the member's prior participation unless the member by timely written notice changes the percentage of contribution. No member shall be automatically re-enrolled whose participation terminates by operation of Section 9 or who, during the preceding Offering Period, has eliminated his or her percentage of contribution or has notified the Company in writing of his or her withdrawal from participation in the Plan. (c) Automatic Re-enrollment on Lower Price Enrollment Date: If the fair market value of the Company's Common Stock is lower on any Enrollment Date (the "Lower Price Enrollment Date") than it was on the Enrollment Date on which a participating member last enrolled in the Plan, the member shall be deemed to have re-enrolled in the Plan on such Lower Price Enrollment Date for the next succeeding Purchase Period. 6. MEMBER'S CONTRIBUTIONS. Each member shall make contributions by payroll deduction of any whole percentage up to a "maximum rate" of fifteen percent (15%) of the member's gross pay per pay period ("gross pay"), as designated by the member. Gross pay shall include the regular basic earnings paid to a member by the Company or a subsidiary. There shall be excluded from the calculation of gross pay (a) all overtime payments, bonuses, commissions, profit-sharing distributions and other incentive-type payments, and (b) all contributions made by the Company or its corporate affiliates for the member's benefit under any employee benefit or welfare plan now or hereafter established. Contributions shall not be made other than in accordance with this Section 6. At any time, a member may elect in writing to stop making contributions under the Plan. An election to stop contributions will take effect on the soonest practicable payroll date following receipt by the Company of the written election. Any election by a member to stop his or her payroll deductions shall be deemed to be an election to withdraw from the Plan effective immediately 3 following the purchase of Shares on the next Purchase Date. Such member may not re-enroll until the commencement of a new Offering Period. At any time prior to the start of a new Purchase Period, a member may elect in writing to increase (up to the maximum rate) or decrease (down to 1%) his or her rate of contribution by any whole percentage, for such subsequent Purchase Period or Periods. Notwithstanding any other provision of the Plan, no member may receive a right to acquire Shares under the Plan (and all other employee stock purchase plans of the Company and its subsidiaries that are qualified or intended to be qualified under Section 423 or any successor provision of the Code) that accrues at a rate in excess of $25,000 of fair market value of such Shares for any calendar year (determined as of the Enrollment Date). Employee contributions may be commingled with other Company funds free of any obligation of the Company to pay interest on such funds, but shall be credited to each member as soon as practicable after each withholding. 7. PURCHASE RIGHTS. (a) Grant of Purchase Rights. Enrollment or Re-enrollment of a member in the Plan on an Enrollment Date will constitute the grant by the Company to the member of limited rights to purchase Shares under the Plan. Upon enrollment, unless otherwise determined by the Plan Committee, a member will become eligible for the grant of purchase rights for up to the maximum permitted by Section 423 or such smaller number as authorized by the Plan Committee or by operation of this Plan, before the Enrollment Date. (b) Terms and Conditions of Purchase Rights. Each purchase right granted under the Plan shall have the following terms: (i) whether or not Shares have been purchased thereunder, the purchase right will expire on the earliest to occur of (A) the completion of the purchase of Shares on the last Purchase Date occurring within 24 months after the Enrollment Date on which such purchase right was granted, or such shorter period as may be established by the Board of Directors from time to time before an Enrollment Date for all purchase rights to be granted on such Enrollment Date, or (B) the date on which participation of such member in the Plan terminates for any reason; (ii) payment for Shares purchased under the purchase rights will be made only through payroll deduction in accordance with Section 6; 4 (iii) purchase of Shares upon exercise of the purchase rights will be accomplished only in installments in accordance with Section 8; (iv) the purchase price per Share under the purchase rights will be determined as provided in Section 8; and (v) the purchase rights will in all respects be subject to the terms and conditions of the Plan, as interpreted by the Plan Committee from time to time. 8. ISSUANCE OF SHARES. On the last day of trading of each Purchase Period during an Offering Period (each a "Purchase Date"), so long as the Plan shall remain in effect, the Company shall apply the funds then credited to each member's account to the purchase of whole Shares. The cost or charge to each member's account shall be the lower of 85 percent of the fair market value of one share of the Company's Common Stock on the applicable Enrollment Date or on the Purchase Date, which date shall be the last day on which the Company's stock is traded during a Purchase Period, as determined in good faith by the Plan Committee, multiplied by the number of Shares purchased. On each Purchase Date, if funds are still credited to a member after the purchase of Shares, then (a) if such funds exceed the purchase price of a whole share under the Plan, there shall be refunded to the member an amount equal to the purchase price of the maximum number of whole shares such funds would cover under the Plan, and (b) any remaining funds shall be held for purchases on the next succeeding Purchase Date. Upon the effective date of a member's written election to withdraw from participation in the Plan for the then-current Offering Period, any funds then credited to the member shall be refunded to the member. The Company shall, promptly after each Purchase Date so long as the Plan is in effect, issue to the member entitled thereto the Shares purchased by the member under the Plan. 9. TERMINATION OF MEMBERSHIP. A member's participation in the Plan shall terminate, and no Shares may thereafter be purchased by such member under the Plan, (a) when the member ceases to be employed by the Company and its subsidiaries for any reason whatsoever, (b) when the member dies, or (c) 90 days after the member ceases to receive any compensation from the Company and its subsidiaries unless, in the case of (c) above, (i) such cessation is due to a leave of absence in accordance with policies of the Company or approved by the person or persons appointed by the Plan Committee, and (ii) the member's right to reemployment is guaranteed by statute or contract. 10. WITHDRAWAL OF FUNDS. Except as otherwise provided under this Plan, a member may not withdraw all or part of the funds credited to him or her under the Plan at any time before the funds are used to purchase Shares. 5 11. BENEFICIARY. Each member may designate in writing one or more beneficiaries and may, in such member's sole discretion, change such designation from time to time. Any such designation shall be effective only after receipt by the Company and shall be controlling over any disposition by will or otherwise. Upon the death of a member, amounts credited to the member shall be paid in cash to the beneficiary or beneficiaries designated by the member or, in the absence of such designation, to the executor, administrator, or other legal representative of the member's estate. Such payment shall relieve the Company of further liability under the Plan on account of the member. If more than one beneficiary is designated, each beneficiary shall receive an equal portion of the account unless the member gave contrary instructions in such designation. 12. MODIFICATION, TERMINATION. The Company expects to continue this Plan until such time as all of the Shares reserved for purchase under the Plan have been purchased. However, the Company reserves the right to amend, alter, or terminate the Plan at any time. No amendment shall require stockholder approval, except: (a) for an increase in the number of shares reserved for purchase under the Plan; (b) to the extent required for the Plan to comply with Section 423 of the Code; (c) to the extent required by other applicable laws, regulations or rules; or (d) to the extent the Board otherwise concludes that stockholder approval is advisable. The Board of Directors may elect to terminate any or all outstanding enrollments at any time. If the Plan is terminated, the Board may also elect to terminate enrollments before, or upon completion of, the purchase of Shares on the next Purchase Date, or to permit enrollments to expire in accordance with their terms (and participation to continue through such expiration dates). If enrollments are terminated before expiration, any funds contributed to the Plan that have not been used to purchase Shares shall be returned to the members as soon as administratively feasible. If at any time the Shares available under the Plan are over-enrolled, enrollments shall be reduced proportionately to eliminate the over-enrollment. Any funds that cannot be applied to the purchase of whole Shares due to over-enrollment shall be refunded to members as soon as administratively feasible. Further, if additional shares of Common Stock are added to the Plan, the Company may, in its discretion, adjust the purchase price of those shares or have such shares available, in whole or in part, only for purchase rights granted subsequent to stockholder approval of such additional shares. 6 13. ASSIGNABILITY OF RIGHTS; CREATION OF LIENS. No rights of any member under the Plan shall be assignable by the member, by operation of law or otherwise, and no person may create a lien on any funds, securities or any other property, except to the extent that there has been a designation of a beneficiary or beneficiaries in accordance with the Plan, and except to the extent permitted by the laws of descent and distribution if such beneficiary is not designated. Prior to the purchase of any Shares under the Plan, each member shall be required to sign a statement to the foregoing effect. A member's right to purchase Shares under the Plan shall be exercisable only during the member's lifetime and only by the member. 14. PARTICIPATION IN OTHER PLANS. The Plan shall not affect an employee's right to participate in and receive benefits under the then-current provisions of any pension, insurance or other employee benefit plan or program of the Company or a subsidiary. 15. REPORTS. The Company shall make available to members copies of all communications with holders of Common Stock, including annual and interim reports. In connection with the issuance of Shares under the Plan, the Company shall provide each member with a summary of such member's total contributions during the preceding Offering Period, and the number of Shares purchased, purchase price and the balance of funds, if any, in the member's account. 16. EQUAL RIGHTS AND PRIVILEGES. It is intended that, except as may be determined by the Board of Directors, members shall have equal rights and privileges with respect to the Plan. 17. APPLICABLE LAW. The interpretation, performance and enforcement of the Plan shall be governed by the laws of the State of California. 18. APPROVAL. The Plan was approved by the Board of Directors on January 13, 1998 and by the stockholders of the Company on March 10, 1998. The amended Plan was approved by the Board of Directors on June 1, 1999 and by the stockholders of the Company on August 10, 1999. 7 EX-99.2 5 0005.txt STOCK OPTION PROGRAM EXHIBIT 99.2 NETWORK EQUIPMENT TECHNOLOGIES, INC. 1997 N.E.T. STOCK OPTION PROGRAM AMENDED AND RESTATED JANUARY 11, 2000 TABLE OF CONTENTS ARTICLE ONE............................................................... 2 GENERAL PROVISIONS........................................................ 2 I. PURPOSES OF PROGRAM................................................. 2 II. ADMINISTRATION OF PROGRAM........................................... 2 III. STOCK SUBJECT TO PROGRAM............................................ 3 ARTICLE TWO............................................................... 5 DISCRETIONARY OPTION GRANTS............................................... 5 I. ELIGIBILITY FOR OPTION GRANTS....................................... 5 II. TERMS AND CONDITIONS OF OPTIONS..................................... 5 III. CORPORATE TRANSACTION............................................... 9 IV. CANCELLATION AND REGRANT OF OPTIONS................................. 10 V. STOCK APPRECIATION RIGHTS; HOSTILE TAKE-OVER; CHANGE IN CONTROL................................................... 11 ARTICLE THREE............................................................. 14 RESTRICTED STOCK AWARDS................................................... 14 I. DETERMINATION OF ELIGIBILITY AND AMOUNT OF AWARDS................... 14 II. RESTRICTED STOCK.................................................... 14 III. VESTING SCHEDULE.................................................... 14 ARTICLE FOUR.............................................................. 18 MISCELLANEOUS............................................................. 18 I. AMENDMENT OF PROGRAM................................................ 18 II. TAX WITHHOLDING..................................................... 18 III. TERM OF PROGRAM..................................................... 18 IV. USE OF PROCEEDS..................................................... 19 V. REGULATORY APPROVALS................................................ 19 VI. NO EMPLOYMENT/SERVICE RIGHTS........................................ 20 VII. MISCELLANEOUS PROVISIONS............................................ 20 1 N.E.T. STOCK OPTION PROGRAM ARTICLE ONE GENERAL PROVISIONS I. PURPOSES OF PROGRAM A. This N.E.T. Stock Option Program (the "Program" ) is adopted by the Board of Directors (" Board" ) of Network Equipment Technologies, Inc. (" N.E.T. " or the "Corporation" ) as of April 1, 1997 (the "Effective Date" ) to promote the interests of Network Equipment Technologies, Inc., a Delaware corporation (the " Corporation" ), by allowing eligible individuals to acquire or increase proprietary interests in the Corporation as an incentive to remain in the service of the Corporation (or its ""parent"" or "subsidiary" corporations, as defined in Section 424 of the Internal Revenue Code). B. This Program is intended to provide for the granting of options to employees and consultants who are not Officers or Directors of the Corporation on substantively the same terms and conditions as the Network Equipment Technologies, Inc. 1993 Stock Option Plan. C. This Program was amended and restated as of April 14, 1998 to include the provisions of and provide a successor plan for the Corporation's 1988 Restricted Stock Award Plan (the "1988 Plan"). No restricted stock shall be granted under the 1988 Plan from and after April 14, 1998. The terms and conditions of restricted stock granted under the 1988 Plan before April 14, 1998 are not affected by the amendment of this Program. D. This Program is amended and restated as of January 11, 2000 to increase the number of available shares to 4,500,000. II. ADMINISTRATION OF PROGRAM A. This Program shall be administered by a committee (the "Program Administrator" or "Committee") of two (2) or more non-employee Directors appointed by the Corporation's Board. Committee members shall serve for such periods as the Board may determine and may be removed by the Board at any time. As of the 2 Effective Date, the Compensation Committee of the Board is the Program Administrator. B. The Program Administrator shall have full authority (subject to the provisions of this Program) to establish such rules and regulations as it deems appropriate for the proper administration of this Program and to make such determinations and interpretations concerning this Program and options granted under this Program as it deems necessary or advisable. Decisions of the Program Administrator shall be final and binding upon all parties. C. The Program Administrator shall have full authority to grant options and stock appreciation rights pursuant to this Program and restricted stock pursuant to this Program and to determine in its sole discretion which eligible individuals are to receive such options, rights, or restricted stock, the number of shares to be covered by each such option or grant, the time(s) at which each option or grant is to become vested or exercisable, and the maximum term for which each option is to be outstanding. Only non-statutory options ("Non-qualified Options") will be issuable under this Program. III. STOCK SUBJECT TO PROGRAM A. An aggregate of 4,500,000 shares of the Corporation's common stock, par value $0.01 per share ("Common Stock") is available for issuance under this Program. These shares may be authorized but unissued shares of Common Stock or reacquired shares of Common Stock, including shares repurchased by the Corporation on the open market. The Program Administrator shall periodically recommend to the Board the shares to be issued pursuant to this Program and the Board shall authorize such issuance as it deems to be in the best interests of the Corporation. B. To the extent that an option granted under this Program or a restricted stock award under the 1988 Plan expires or terminates for any reason before exercise or vesting in full (including any option canceled in accordance with the cancellation-regrant provisions of this Program), the shares then subject to the option or restricted stock award shall again be available for grant under this Program. Shares repurchased by the Corporation pursuant to any repurchase rights available under this Program, shall not again become available for option grants 3 under this Program. If the exercise price of an option granted under this Program is paid with shares of Common Stock, or if shares of Common Stock otherwise issuable under this Program are withheld by the Corporation in satisfaction of withholding taxes incurred upon the exercise of an option, then the number of shares available for issuance under this Program shall be reduced by the gross number of shares for which the option is exercised and not by the net number of shares issued to the option holder. C. If a change is made to the Common Stock by reason of any stock split, stock dividend, recapitalization, combination of shares, or other similar change, then appropriate adjustments shall be made to (i) the number and/or class of shares issuable under this Program, and (ii) the number and/or class of shares and price per share in effect under each then-outstanding option or restricted stock award granted under this Program. The purpose of adjustments to outstanding and restricted stock awards options shall be to preclude the enlargement or dilution of rights and benefits under such options or awards. The adjustments determined by the Program Administrator shall be final, binding, and conclusive. D. The Corporation may not issue stock options covering in the aggregate more than 100,000 shares of Common Stock (subject to adjustments as required above) to any one participant in any one-year period. 4 ARTICLE TWO DISCRETIONARY OPTION GRANTS I. ELIGIBILITY FOR OPTION GRANTS The following persons are eligible to participate in this Program: A. Key employees of the Corporation (or its parent or subsidiary corporations) whose services contribute to the management, growth, and financial success of the Corporation (or its parent or subsidiary corporations), and B. Those consultants and independent contractors who provide valuable services to the Corporation (or its parent or subsidiary corporations). C. Notwithstanding the foregoing, members of the Board of Directors and Officers of the Corporation shall not be eligible to participate in this Program. II. TERMS AND CONDITIONS OF OPTIONS Options granted pursuant to this Program may only be Non-qualified Options. Each option shall be evidenced by one or more written instruments in a form approved by the Program Administrator. Each such instrument shall comply with the terms and conditions specified below. Failure to issue, or (if agreement is required) to agree to, an instrument evidencing an option shall not invalidate the option grant; however, the option shall not be exercisable until a written instrument has been issued and (if required) agreed to. A. Option Price. 1. The option price per share shall be fixed by the Program Administrator, but shall not be less than the "fair market value" (defined below) per share of Common Stock on the date of the option grant. 5 2. The option price shall, subject to Section III below, be immediately due upon exercise of the option and shall be payable in one or a combination of the following forms: (a) cash or check payable to the Corporation; (b) shares of Common Stock held by the optionee for the period necessary to avoid a charge to the Corporation's earnings for financial reporting purposes and valued at "fair market value" on the exercise date; or (c) a broker-dealer sale-and-remittance procedure pursuant to which the optionee shall provide irrevocable written instructions (i) to a designated brokerage firm to effect the immediate sale of the option shares and remit to the Corporation, from the sale proceeds available on the settlement date, sufficient funds to cover the aggregate option price plus all income and employment taxes required to be withheld by the Corporation in connection with the exercise, and (ii) to the Corporation to deliver the certificates for the purchased shares directly to the brokerage firm to complete the transaction. 3. The Program Administrator may assist any optionee in the exercise of any option granted under this Program and the satisfaction of any federal and state income and employment tax obligations arising therefrom by (a) authorizing a loan to the optionee by the Corporation, or (b) permitting the optionee to pay the option price in installments over a period of months or years. The terms of any loan or installment method of payment (including the interest rate and terms of repayment) will be established by the Program Administrator in its sole discretion. Loans and installment payments may be allowed with or without security or collateral (other than to optionees who are consultants or independent contractors, who must adequately secure any loan by collateral other than the purchased shares), but the maximum credit available to the optionee shall not exceed the sum of (i) the aggregate option price (less par value) of the purchased shares, plus (ii) any federal and state income and employment tax liability incurred by the optionee in connection with the exercise of the option. 4. The "fair market value" per share of Common Stock on any relevant date shall be determined as follows: 6 (a) If the Common Stock is listed or admitted to trading on any national stock exchange, then the fair market value shall be the closing selling price per share of Common Stock on the date in question on the stock exchange determined by the Program Administrator to be the primary market for the Common Stock, as officially quoted on the composite tape of transactions on that exchange. If there is no reported sale of Common Stock on that exchange on the date in question, the fair market value shall be the closing selling price on the exchange on the next preceding date for which a closing selling price is quoted. (b) If the Common Stock is not listed or admitted to trading on any national stock exchange, but is traded on the Nasdaq National Market System, the fair market value shall be the closing selling price per share of Common Stock on the date in question as reported on that system. If there is no closing selling price for the Common Stock on the date in question, then the fair market value shall be the closing selling price for the next preceding date for which a closing selling price is quoted. B. Term and Exercise of Options. 1. Each option granted under this Program shall be exercisable at such time(s), during such period, and for such number of shares as shall be determined by the Program Administrator and set forth in the written instrument evidencing the option. No option granted under this Program shall have a term in excess of ten (10) years after the grant date. 2. During the lifetime of the optionee, the option shall be exercisable only by the optionee and shall not be assignable or transferable by the optionee other than by will or by the laws of descent and distribution following the optionee's death. 3. Exercise of an option shall be effected by delivery to the Corporation of a written notice in a form approved by the Program Administrator specifying the number of shares as to which the option is being exercised, accompanied by payment of the exercise price (or provision for payment acceptable to the Program Administrator), and containing such other provisions as the Program Administrator approves from time to time. 7 C. Termination of Service. 1. Except as otherwise approved by the Program Administrator, if the optionee's service to the Corporation is terminated: (a) for cause, each then-outstanding option held by the optionee shall terminate immediately; (b) for any reason other than cause, death, or permanent disability, each then-outstanding option held by the optionee shall expire no later than three (3) months after the termination date; (c) by reason of permanent disability (as defined in Section 22(e)(3) of the Internal Revenue Code), each then-outstanding option held by the optionee shall expire no later than twelve (12) months after the termination date; or (d) by reason of the optionee's death, or if the optionee dies during the three (3) months following termination of his or her employment other than for cause or by reason of permanent disability, each then-outstanding option held by the optionee shall expire no later than twelve (12) months following the termination date. Following the optionee's death, the option may be exercised by the personal representative of the optionee's estate or by the person(s) to whom the option is transferred pursuant to the optionee's will or in accordance with the laws of descent and distribution. 2. Under no circumstances shall any option be exercisable after the specified expiration date of the option term. 3. Following termination of the optionee's service, an option shall not be exercisable to any greater extent than on the termination date; provided, however, that the Program Administrator shall have complete discretion, at any time while the option remains outstanding, to permit the option to be exercised, not only with respect to the number of shares for which the option is exercisable at the time of the termination, but also with respect to one or more subsequent installments of purchasable shares for which the option would otherwise have become exercisable had termination not occurred. 4. For purposes of this Program: 8 (a) An optionee shall be deemed to remain in service to the Corporation for so long as he or she renders (or in the case of consultants or advisors, has agreed to render) services on a periodic basis to the Corporation (or any parent or subsidiary) as an employee or an independent consultant or advisor. (b) An optionee shall be considered to be an employee for so long as he or she remains in the employ of the Corporation (or any parent or subsidiary), subject to the control and direction of the employer entity as to the work to be performed and the manner and method of performance. D. Stockholder Rights. An optionee shall have no stockholder rights with respect to any option shares until he or she has exercised the option and paid (or made arrangements satisfactory to the Program Administrator to pay) the option price for the purchased shares. III. CORPORATE TRANSACTION A. In the event of any of the following stockholder-approved transactions (a "Corporate Transaction"): 1. a merger or consolidation in which the Corporation is not the surviving entity, except for a transaction whose principal purpose is to change the state of the Corporation's incorporation, 2. the sale, transfer, or other disposition of all or substantially all of the assets of the Corporation in liquidation or dissolution, or 3. any "reverse" merger in which the Corporation is the surviving entity, but in which securities possessing more than 50% of the total combined voting power of the Corporation's outstanding securities are transferred to holders other than those who owned such voting power immediately before the merger, then immediately before the Effective Date of the Corporate Transaction, each option granted under this Program shall become fully exercisable ("accelerate") with respect to the total number of shares of Common Stock then subject to the option. However, an option shall not accelerate if and to the extent: (i) the 9 option is, in connection with the Corporate Transaction, either to be assumed by the successor corporation or parent thereof or to be replaced by an equivalent option to purchase shares of the capital stock of the successor corporation or parent thereof, or (ii) acceleration of the option is subject to other limitations imposed by the Program Administrator at the time of grant. The determination of equivalence under clause (i) above shall be made by the Program Administrator and shall be final, binding, and conclusive. B. Upon the consummation of the Corporate Transaction, all options granted under this Program shall terminate and cease to be outstanding, except to the extent assumed by the successor (or surviving) corporation or its parent company. C. Each option granted under this Program that is replaced by an equivalent option in a Corporate Transaction, or that otherwise continues in effect, shall be appropriately adjusted, immediately after the Corporate Transaction, to apply to the number and class of securities that would have been issued in the Corporate Transaction to an actual holder of the number of shares of Common Stock that were subject to the option immediately before the Corporate Transaction. Appropriate adjustment shall also be made to the option price payable per share, provided the aggregate option price payable for such securities shall remain the same. In addition, the class and number of securities available for issuance under this Program following the consummation of the Corporate Transaction shall be appropriately adjusted. D. The grant of options under this Program shall not 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. IV. CANCELLATION AND REGRANT OF OPTIONS The Program Administrator may, at any time and from time to time, with the consent of the affected optionees, cancel any or all outstanding options granted under this Program and grant in substitution new options covering the same or different numbers of shares of Common Stock but having an option price per 10 share not less than the fair market value of the Common Stock on the new grant date. V. STOCK APPRECIATION RIGHTS; HOSTILE TAKE-OVER; CHANGE IN CONTROL A. As determined by the Program Administrator in its sole discretion, one or more optionees may be granted the right, exercisable upon such terms and conditions as the Program Administrator may establish, to surrender all or part of an unexercised option granted under this Program in exchange for a payment by the Corporation of 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 part thereof), over (ii) the aggregate option price payable for those shares. B. No surrender of an option shall be effective hereunder unless it is approved by the Program Administrator. If the surrender is approved, then the payment to the optionee under this Section V 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 Program Administrator determines in its sole discretion. C. If the surrender of an option is rejected by the Program Administrator, then the optionee shall retain whatever rights he or she had under the surrendered option (or surrendered portion thereof) on the option surrender date and may exercise such rights at any time before the later of (i) five (5) business days after receipt of the rejection notice, or (ii) the last day on which the option is otherwise exercisable in accordance with its terms, but in no event more than ten (10) years after the date of the option grant. D. In the event that an individual optionee under this Program thereafter becomes a member of the Board of Directors or a Corporate Officer of the Corporation and is subject to the short-swing profit restrictions of the federal securities laws, then that individual shall have the following limited stock appreciation rights in tandem with each option received under this Program. Upon the occurrence of a Hostile Take-Over (defined below), each option with such a limited stock appreciation right in effect for at least six (6) months shall automatically be canceled and the optionee shall be entitled to a 11 cash payment by the Corporation in the amount of the excess of (i) the Take-Over Price (defined below) of the shares of Common Stock subject to the canceled option (whether or not the option is otherwise exercisable for such shares), over (ii) the aggregate exercise price payable for such shares. The payment shall be made within five (5) days after consummation of the Hostile Take-Over. Neither the approval of the Program Administrator nor the consent of the Board shall be required in connection with such option cancellation and cash payment. E. A "Hostile Take-Over" shall be deemed to occur if (i) 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) directly or indirectly acquires beneficial ownership (within the meaning of Rule 13d-3 of the Securities Exchange Act of 1934, as amended [the "Exchange Act"]) of securities possessing more than 50% of the total combined voting power of the Corporation's outstanding securities pursuant to a tender or exchange offer that the Board does not recommend that the Corporation's stockholders accept, and (ii) more than 50% of the securities so acquired are accepted from holders other than Officers and Directors of the Corporation subject to Section 16 of the Exchange Act. The "Take-Over Price" per share shall be the greater of (a) the fair market value per share on the date of cancellation, as determined pursuant to the valuation provisions of Section II.A.4 of this Program, or (b) the highest reported price per share paid in effecting such Hostile Take-Over. F. The Program Administrator shall have full discretionary authority, exercisable either in advance of, or at the time of, a Change in Control (defined below), to provide for the automatic acceleration of options granted under this Program upon the occurrence of the Change in Control. The Program Administrator shall also have full discretionary authority to condition any such acceleration upon the subsequent termination of the optionee's service to the Corporation (or a parent or subsidiary) within a specified period after the Change in Control. The Program Administrator hereby exercises such discretion to accelerate vesting of all outstanding options held by Officers of the Corporation whose employment is terminated in conjunction with, or within a year of, a Change in Control or Corporate Transaction. Any option accelerated in connection with the Change in Control shall remain fully exercisable until the expiration of the option term. For all purposes of this Program, 12 a "Change in Control" shall mean a change in control of the Corporation of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Exchange Act, whether or not the Corporation is then subject to such reporting requirement, other than a Corporate Transaction; provided that, without limitation, a Change in Control shall be deemed to have occurred if: 1. any individual, partnership, firm, corporation, association, trust, unincorporated organization or other entity, or any syndicate or group deemed to be a "person" under Section 14(d)(2) of the Exchange Act, is or becomes the "beneficial owner" (as defined in Rule 13d-3 of the General Rules and Regulations under the Exchange Act), directly or indirectly, of securities of the Corporation representing 40% or more of the combined voting power of the Corporation's then-outstanding securities entitled to vote in the election of Directors of the Corporation, pursuant to a tender or exchange offer that the Board does not recommend that the Corporation's stockholders accept; or 2. during any period of two (2) consecutive years, individuals who, at the beginning of such period, constituted the Board and any new members of the Board, whose election by the Board or nomination for election by the Corporation's stockholders was approved by a vote of at least three-quarters (3/4) of the Directors then in office who either were Directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority thereof. G. The shares of Common Stock subject to any option surrendered or canceled for an appreciation distribution pursuant to this Section V shall not be available for subsequent option grant under this Program. 13 ARTICLE THREE RESTRICTED STOCK AWARDS I. DETERMINATION OF ELIGIBILITY AND AMOUNT OF AWARDS The persons who shall be eligible to receive restricted stock awards under this Article shall be such key employees of the Corporation or its subsidiaries, excluding officers and directors, as the Program Administrator shall select from time to time. In no event, however, shall any employee owning stock possessing more than ten percent (10%) of the total combined voting power or value of all classes of stock of the Corporation or any subsidiary be eligible to receive shares under this Article. II. RESTRICTED STOCK A. Restricted stock awards shall be made from time to time under the Program in recognition of the services rendered to the Corporation or its subsidiaries by the selected participants. All such restricted stock awards shall provide for the issuance, either as soon as practicable following the time of the award or at a later date specified in the agreement evidencing the award, of shares of the Corporation's Common Stock. B. Each recipient of a restricted stock award under the Program shall, at the time the shares of Common Stock are issued in payment of such award, pay to the Corporation, in cash or cash equivalent, an amount equal to the aggregate par value of the issued shares. III. VESTING SCHEDULE A. The interest of an employee in the shares of Common Stock issued to such employee under this Article may, in the discretion of the Program Administrator, be fully and immediately vested upon issuance or may vest in one or more installments in accordance with the vesting provisions of Section III.C. Except as otherwise provided in Section III.F., the employee may not transfer any of the Common Stock in which he or 14 she does not have a vested interest. Accordingly, all unvested shares issued to an employee under the Program shall bear the restrictive legend specified in Section III.D.1., until such legend is removed in accordance with Section III.D.2. The employee, however, shall have all the rights of a stockholder with respect to the shares of Common Stock issued to him or her hereunder, whether or not his or her interest in such shares is vested. Accordingly, the employee shall have the right to vote such shares and to receive any cash dividend paid on such shares. Any new, additional or different shares of stock or other property (including money paid other than as a cash dividend) which the holder of unvested Common Stock may have the right to receive by reason of a stock dividend, stock split or reclassification of Common Stock or by reason of a merger, consolidation, liquidation or other change in the capital structure of the Corporation shall be issued to the employee, subject to (i) the same vesting schedule applicable to his or her unvested Common Stock and (ii) such escrow arrangements as the Program Administrator shall deem appropriate. B. In the event an employee should, while his or her interest in the Common Stock remains unvested, (i) attempt to transfer (other than by way of a permissible gift under Section III.F.) any of the unvested Common Stock or any interest therein or (ii) cease employment with the Corporation for any reason whatsoever, then the certificates evidencing the employee's unvested Common Stock (other than shares which become vested by reason of, or upon, such termination in accordance with the agreement evidencing the award) shall be immediately surrendered to the Corporation for cancellation and the employee shall no longer have any stockholder rights with respect to the canceled Common Stock. In exchange for the surrendered certificates the employee shall receive a cash payment from the Corporation equal to the aggregate par value of the canceled shares. For purposes of this Article, the employee shall not be deemed to have ceased employment with the Corporation for so long as the employee remains in the active employ of the Corporation or one or more of its subsidiaries. C. Vesting; Corporate Transaction; Change in Control. 1. Any shares of Common Stock issued under this Article that are not vested at the time of such issuance shall vest in one or more installments thereafter. The elements of the vesting schedule applicable to the issued shares, including the number of installments in which the shares are to vest, the 15 interval or intervals (if any) which are to lapse between installments and the effect which death, disability or other event designated by the Program Administrator is to have upon the vesting schedule, shall be determined by the Program Administrator and shall be specified in the stock restriction agreement executed by the employee at the time the shares are issued. 2. Should the Corporation's Common Stock be converted into cash or other shares or securities of the Corporation or any other corporation as a result of a Corporate Transaction (as defined in Article Two, Section III.A.), then the shares of Common Stock outstanding at such time under this Article shall likewise be converted into cash or such other shares or securities, and such assets may, in the discretion of the Program Administrator, be held in escrow by the Corporation or its successor and shall thereafter be distributed to the employees from time to time as their interests therein vest in accordance with the same vesting schedules which are in effect for their shares of Common Stock immediately prior to such conversion. However, the interest each employee has in the shares of Common Stock issued to him or her under this Article (together with any cash or other shares or securities into which such Common Stock is to be converted) shall become vested immediately prior to the specified effective date for the Corporate Transaction if the Company's rights to repurchase or cancel unvested shares under this Article (for a payment equal to the par value of the shares) are not to be assigned to the successor corporation or parent thereof in connection with the Corporate Transaction. If the Corporation is to be acquired by a reverse merger in which it is to remain the surviving entity, then no accelerated vesting under the Program shall occur, unless the Program is to be terminated in connection with such reverse merger. 3. In the event of a Change in Control (as defined in Article Two, Section V.F.), then the Program Administrator shall have full power and authority (exercisable before or after the Change in Control) to accelerate the vesting of the interests of one or more of the employees in the shares of Common Stock issued to him or her under this Article. 4. In the event of a Corporate Transaction, then any outstanding obligations or commitments to issue Common Stock pursuant to this Article shall be assumed by the successor corporation or parent thereof. 16 D. Restrictive Legends. 1. Each certificate representing unvested shares of Common Stock (or other securities) issued under this Article shall bear the following restrictive legend: "THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS ON TRANSFER AND TO CANCELLATION IN ACCORDANCE WITH THE TERMS AND CONDITIONS OF ARTICLE THREE OF THE CORPORATION'S 1997 STOCK OPTION PROGRAM AND THE STOCK RESTRICTION AGREEMENT EXECUTED THEREUNDER BY THE CORPORATION AND THE REGISTERED HOLDER (OR HIS PREDECESSOR IN INTEREST). A COPY OF THE 1997 STOCK OPTION PROGRAM AND STOCK RESTRICTION AGREEMENT MAY BE OBTAINED FROM THE SECRETARY OF THE CORPORATION." 2. As the interest of the employee vests in the shares of Common Stock issued under this Article, the Corporation shall, upon the employee's delivery of the certificate for such shares, issue a new certificate for the vested shares without the restrictive legend of Section III.D.1. and a second certificate for any remaining unvested shares with the Section III.D.1. legend endorsed thereon. If any unvested shares of the employee are surrendered and canceled under Section III.C.3., then the Corporation shall at the time the cancellation is effected deliver a new certificate, without the restrictive legend of Section III.D.1., representing the number of shares (if any) in which the employee is at such time vested and which are accordingly no longer subject to cancellation by the Corporation. E. The Program Administrator may in its discretion waive, in whole or in part, any cancellation of unvested Common Stock (or other assets) to which an employee would otherwise be subject under Section III.B. Such a waiver shall result in the immediate vesting of the employee's interest in the shares of Common Stock (or other assets) as to which the waiver applies. F. As used in this Section III, the term "transfer" shall include (without limitation) any sale, pledge, encumbrance, gift or other disposition of the shares of Common Stock issued under Article Four. However, the employee shall have the right to make a gift of any or all of his unvested shares under Article to his spouse, parents or children or to a trust established for such spouse, parents or children, provided the recipient of the gifted shares delivers to the Corporation a written agreement to be bound by all the provisions of the Program and the stock restriction agreement executed by the employee with respect to such shares. 17 ARTICLE FOUR MISCELLANEOUS I. AMENDMENT OF PROGRAM The Board shall have complete and exclusive authority to amend or modify this Program in any or all respects whatsoever. However, no such amendment or modification shall, without the consent of the optionee or restricted stock award holders, adversely affect rights and obligations with respect to options or awards at the time outstanding under this Program. II. TAX WITHHOLDING A. The Corporation's obligation to deliver shares or cash upon exercise of options or stock appreciation rights or restricted stock awards granted under this Program shall be subject to the satisfaction of all federal, state, and local income and employment tax withholding requirements. B. The Program Administrator may, in its discretion and upon such terms and conditions as it deems appropriate, provide any or all optionees under this Program with the election to have the Corporation withhold, from the shares of Common Stock otherwise issuable upon the exercise of options, one or more share(s) with an aggregate fair market value equal to a designated percentage (any whole multiple of 5% specified by the optionee) of the federal and state income taxes ("Taxes") incurred in connection with the acquisition of such shares. In lieu of direct withholding, optionees may be granted the right to deliver shares of Common Stock to the Corporation in satisfaction of such Taxes. The withheld or delivered shares shall be valued at the fair market value on the applicable determination date for such Taxes. III. TERM OF PROGRAM A. This Program shall terminate on (i) August 10, 2003, or (ii) the date on which all shares available for issuance 18 under this Program have been issued pursuant to restricted stock awards or the exercise of options granted under this Program. If the date of termination is determined under clause (i) above, then no options or awards outstanding on such date shall be affected by the termination of this Program. B. Options may be granted under this Program to purchase shares of Common Stock in excess of the number of shares then available for issuance under this Program, provided each option granted is not to become exercisable, in whole or in part, at any time before Board approval of issuance of a sufficient increase in the number of shares issuable under this Program. IV. USE OF PROCEEDS Any cash proceeds received by the Corporation from the sale of shares pursuant to options or restricted stock awards granted under this Program may be used for general corporate purposes. V. REGULATORY APPROVALS A. The implementation of this Program, the granting of any option hereunder, and the issuance of stock for any restricted stock award or upon the exercise or surrender of any such option shall be subject to the procurement by the Corporation of all approvals and permits required by regulatory authorities having jurisdiction over this Program, the options granted under it, and the stock issued pursuant to it. B. No shares of Common Stock or other assets shall be issued or delivered under this Program unless and until there shall have been compliance with all applicable requirements of federal and state securities laws, including the filing and effectiveness of a Form S-8 registration statement for the shares of Common Stock issuable under this Program, and all applicable listing requirements of any securities exchange on which stock of the same class is then listed. 19 VI. NO EMPLOYMENT/SERVICE RIGHTS Neither the action of the Corporation in establishing this Program, nor any action taken by the Program Administrator hereunder, nor any provision of the Program, shall be construed so as to grant any individual the right to remain in the employ or service of the Corporation (or any parent or subsidiary corporation) for any period, and the Corporation (or any parent or subsidiary corporation retaining the services of such individual) may terminate such individual's employment or service at any time and for any reason, with or without cause. VII. MISCELLANEOUS PROVISIONS A. Except as otherwise provided in this Program, the right to acquire Common Stock or other assets under this Program may not be assigned, encumbered, or otherwise transferred by any optionee. B. The provisions of this Program shall be governed by the laws of the State of California, as such laws are applied to contracts entered into and performed in that state. C. The provisions of this Program shall inure to the benefit of, and be binding upon, the Corporation and its successors or assigns, and the optionees, the legal representatives of their respective estates, their respective heirs or legatees, and their permitted assignees. 20 -----END PRIVACY-ENHANCED MESSAGE-----