EXHIBIT 99.3
CISCO SYSTEMS, INC.
STOCK OPTION ASSUMPTION AGREEMENT
PSIONIC SOFTWARE, INC. 2000 STOCK OPTION PLAN
OPTIONEE:((First_Name))((Last_Name)),
STOCK OPTION ASSUMPTION AGREEMENT effective as of the 20th day of
December, 2002 by Cisco Systems, Inc., a California corporation ("Cisco").
WHEREAS, the undersigned individual ("Optionee") holds one or more
outstanding options to purchase shares of common stock of Psionic Software,
Inc., a Delaware corporation ("Psionic"), which were granted to Optionee
pursuant to the Psionic Software, Inc. 2000 Stock Option Plan (the "Plan") and
are each evidenced by a Notice of Grant of Stock Option and Stock Option
Agreement (together the "Option Agreement"), with any shares purchased under
such options to be subject to the terms and conditions of the applicable Option
Agreement.
WHEREAS, Psionic has been acquired by Cisco (the "Merger") pursuant
to an Agreement and Plan of Merger and Reorganization dated October 21, 2002
(the "Merger Agreement") which requires Cisco to assume all obligations of
Psionic under each outstanding option under the Plan upon the consummation of
the Merger and to issue to the holder of each such outstanding option an
agreement evidencing such assumption of the option.
WHEREAS, pursuant to the provisions of the Merger Agreement, the
exchange ratio (the "Exchange Ratio") in effect for the Merger is 0.139780
shares of Cisco common stock, par value $0.001 per share ("Cisco Stock") for
each outstanding share of share of Psionic common stock ("Psionic Stock").
WHEREAS, the purpose of this Agreement is to evidence the assumption
by Cisco of the outstanding options held by Optionee at the time of the
consummation of the Merger (the "Effective Time") and to reflect certain
adjustments to Optionee's outstanding options which have become necessary in
connection with their assumption by Cisco.
NOW, THEREFORE, it is hereby agreed as follows:
1. The number of shares of Psionic Stock subject to the option held
by Optionee immediately prior to the Effective Time (the "Psionic Option") and
the exercise price payable per share are set forth below. Cisco hereby assumes,
as of the Effective Time, all the duties and obligations of Psionic under each
Psionic Option. In connection with such assumption, the number of shares of
Cisco Stock purchasable under each Psionic 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 Psionic
Option hereby assumed shall be as specified for that option below, and the
adjusted exercise price payable per share of Cisco Stock under the assumed
Psionic Option shall also be as indicated for that option below.
PSIONIC STOCK OPTIONS CISCO ASSUMED OPTIONS
---------------------------------------------------- ----------------------------------------------
Number of Shares of Exercise Price Number of Shares of Adjusted Exercise
Psionic Common Stock per Share Cisco Common Stock Price per Share
-------------------- ------------------ ------------------- -----------------
((Psionic_Shares)) $((Psionic_Price)) ((Cisco_Shares)) $((Cisco_Price))
2. The intent of the foregoing adjustments to each assumed Psionic
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, be substantially the same as (and in no event
greater than) the spread which existed, immediately prior to the Merger, between
the then aggregate fair market value of the Psionic Stock subject to the Psionic
Option and the aggregate exercise price in effect at such time under the Option
Agreement. Such adjustments are also intended 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 Psionic Option
immediately prior to the Merger.
3. The following provisions shall govern each Psionic Option hereby
assumed by Cisco:
(a) Unless the context otherwise requires, all references in
the Option Agreement and the Plan shall be adjusted as follows: (i) all
references to the "Company" shall mean Cisco, (ii) all references to
"Plan" shall mean the Psionic, Inc. 2000 Stock Option Plan as assumed
pursuant to the Merger Agreement, (iii) all references to "Stock" shall
mean the common stock of Cisco, par value $0.001 per share, (iv) all
references to "Option Shares" shall mean the shares of Cisco common stock
subject to the assumed Psionic Option, (v) all references to "Board" or
"Board of Directors" shall mean the Board of Directors of Cisco and (vi)
all references 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
Psionic Option and all other provisions which govern either the exercise
or the termination of the assumed Psionic Option shall remain the same as
set forth in the Option Agreement applicable to that option, and the
provisions of the Plan and the Option Agreement shall accordingly govern
and control Optionee's rights to purchase Cisco Stock under the assumed
Psionic Option.
(c) Pursuant to the terms of the applicable Option Agreements
(as may have been modified in connection with the Merger) and the Plan,
none of the assumed Psionic Options shall vest or become exercisable on an
accelerated basis upon the consummation of the Merger. Accordingly, each
Psionic Option assumed by Cisco shall continue to vest and become
exercisable for any shares of
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Cisco Stock subject to that option in accordance with the same installment
vesting schedule in effect under the applicable Option Agreement
immediately prior to the Effective Time; provided, however, that 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
Option Agreement and/or the Plan relating to Optionee's period of Service
with Psionic or its parent and subsidiary corporations, Optionee shall be
deemed to continue in such Service status for so long as Optionee renders
services to Cisco or any present or future majority-owned Cisco subsidiary
in the capacity of an employee, consultant or board member. Accordingly,
the provisions of the Option Agreement governing the termination of the
assumed Psionic Options and the limited period during which those options
may be exercised following Optionee's cessation of Service shall hereafter
be applied on the basis of Optionee's cessation of Service in such
capacity with Cisco and its majority-owned subsidiaries. Each assumed
Psionic Option shall accordingly terminate upon the expiration of the
designated time period following Optionee's cessation of Service set forth
in the Option Agreement for that option, as measured from the date of
Optionee's cessation of Service in such capacity with Cisco and its
majority-owned subsidiaries.
(e) The adjusted exercise price payable for the Cisco Stock
subject to each assumed Psionic Option shall be payable in any of the
forms authorized under the Option Agreement applicable to that option.
(f) In order to exercise each assumed Psionic 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 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.
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Attention: Stock Administration
4. Except to the extent specifically modified by this Option
Assumption Agreement, all of the terms and conditions of each 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.
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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 20th day of December, 2002.
CISCO SYSTEMS, INC.
By:________________________________________
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Corporate Secretary
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 Psionic Options hereby assumed by Cisco are as set
forth in the Option Agreement, the Plan, as applicable, and such Stock Option
Assumption Agreement.
______________________________________
((FIRST_NAME)) ((LAST_NAME)), OPTIONEE
DATED: ___________________, 2003
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