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EXHIBIT 99.2
INTERNET ENGINEERING GROUP, L.L.C.
EQUITY OPTION AGREEMENT
RECITALS
A. The Board has adopted the Plan for the purpose of retaining the
services of selected Employees of the Company (or any Parent or Subsidiary).
B. Optionee is to render valuable services to the Company (or a Parent
or Subsidiary), and this Agreement is executed pursuant to, and is intended to
carry out the purposes of, the Plan in connection with the Company's grant of an
option to Optionee.
C. All capitalized terms in this Agreement shall have the meaning
assigned to them in the attached Appendix.
NOW, THEREFORE, it is hereby agreed as follows:
1. GRANT OF OPTION. The Company hereby grants to Optionee, as of the
Grant Date, an option to purchase up to the number of Option Shares specified in
the Grant Notice. The Option Shares shall be purchasable from time to time
during the option term specified in Paragraph 2 at the Exercise Price.
2. OPTION TERM. This option shall have a term of ten (10) years
measured from the Grant Date and shall accordingly expire at the close of
business on the Expiration Date, unless sooner terminated in accordance with
Paragraph 5 or 6.
3. LIMITED TRANSFERABILITY. This option shall be neither
transferable nor assignable by Optionee other than by will or by the laws of
descent and distribution following Optionee's death and may be exercised, during
Optionee's lifetime, only by Optionee.
4. EXERCISABILITY. This option shall become exercisable for the
Option Shares in one or more installments as specified in the Grant Notice. As
the option becomes exercisable for such installments, those installments shall
accumulate, and the option shall remain exercisable for the accumulated
installments until the Expiration Date or sooner termination of the option term
under Paragraph 5 or 6.
5. CESSATION OF SERVICE. The option term specified in Paragraph 2
shall terminate (and this option shall cease to be outstanding) prior to the
Expiration Date should any of the following provisions become applicable:
(i) Should Optionee cease to remain in Service for any reason
(other than death, Permanent Disability or Misconduct) while this
option is outstanding, then the period for exercising this option shall
be limited to a three (3)-month period measured from the date of such
cessation of Service but in no event shall this option be exercisable
at any time after the Expiration Date.
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(ii) Should Optionee die while holding this option, then the
personal representative of Optionee's estate or the person or persons
to whom the option is transferred pursuant to Optionee's will or in
accordance with the laws of descent and distribution shall have the
right to exercise this option. Such right shall lapse, and this option
shall cease to be outstanding, upon the earlier of the expiration of
the twelve (12)-month period measured from the date of Optionee's death
or the Expiration Date.
(iii) Should Optionee cease Service by reason of Permanent
Disability while this option is outstanding, then the period for
exercising this option shall be limited to a twelve (12)-month period
measured from the date of such cessation of Service. In no event shall
this option be exercisable at any time after the Expiration Date.
(iv) Should Optionee's Service be terminated for Misconduct,
then this option shall terminate immediately and cease to remain
outstanding.
(v) During the limited period of post-Service exercisability,
this option may not be exercised in the aggregate for more than the
number of Option Shares for which this option is, at the time of
Optionee's cessation of Service, exercisable in accordance with the
Exercise Schedule specified in the Grant Notice or the special
acceleration provisions of Paragraph 6. Upon the expiration of such
limited exercise period or (if earlier) upon the Expiration Date, this
option shall terminate and cease to be outstanding for any Option
Shares for which the option has not been exercised. To the extent this
option is not exercisable at the time of Optionee's cessation of
Service, this option shall immediately terminate and cease to be
outstanding.
(vi) In the event of a Corporate Transaction, the provisions
of Paragraph 6 shall govern the period for which this option is to
remain exercisable following Optionee's cessation of Service and shall
supersede any provisions to the contrary in this Paragraph.
(vii) Failure on or before December 31, 1999, of the Company
to consummate the transactions contemplated by the Agreement and Plan
of Reorganization, between Cisco Systems, Inc., a California
corporation, and the Company, dated as of December ___, 1999.
6. SPECIAL ACCELERATION AND TERMINATION OF OPTION.
(a) Immediately prior to the effective date of a Corporate
Transaction, the exercisability of this option shall automatically accelerate so
that this option shall become exercisable for all of the Option Shares as
fully-vested shares of Common Stock and may be exercised for any or all of those
Option Shares. No such accelerated exercisability of this option, however, shall
occur if and to the extent: (i) this option is, in connection with the Corporate
Transaction, either to be assumed by the successor Company (or parent thereof)
in the Corporate
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Transaction or (ii) this option is to be replaced with a cash incentive program
of the successor Company which preserves the spread existing on the Option
Shares for which this option is exercisable at the time of the Corporate
Transaction (the excess of the Fair Market Value of those Option Shares over the
Exercise Price payable for such shares) and provides for subsequent payout in
accordance with the Exercise Schedule.
(b) Immediately following the Corporate Transaction, this option
shall terminate and cease to be outstanding, except to the extent assumed by the
successor Company (or parent thereof) in connection with the Corporate
Transaction.
(c) If this option is assumed in connection with a Corporate
Transaction, then this option shall be appropriately adjusted, immediately after
such Corporate Transaction, to apply to the number and class of securities which
would have been issuable to Optionee in consummation of such Corporate
Transaction had the option been exercised immediately prior to such Corporate
Transaction, and appropriate adjustments shall also be made to the Exercise
Price, provided the aggregate Exercise Price shall remain the same.
(d) This Agreement shall not in any way affect the right of the
Company to adjust, reclassify, reorganize or otherwise change its capital or
business structure or to merge, consolidate, dissolve, liquidate or sell or
transfer all or any part of its business or assets.
7. ADJUSTMENT IN OPTION SHARES. Should any change be made to the Common
Stock by reason of any stock split, stock dividend, recapitalization,
combination of shares, exchange of shares or other change affecting the
outstanding Common Stock as a class without the Company's receipt of
consideration, appropriate adjustments shall be made to (i) the total number
and/or class of securities subject to this option and (ii) the Exercise Price in
order to reflect such change and thereby preclude a dilution or enlargement of
benefits hereunder.
8. STOCKHOLDER RIGHTS. The holder of this option shall not have any
stockholder rights with respect to the Option Shares until such person shall
have exercised the option, paid the Exercise Price and become the record holder
of the purchased shares.
9. MANNER OF EXERCISING OPTION.
(a) In order to exercise this option with respect to all or any part
of the Option Shares for which this option is at the time exercisable, Optionee
(or any other person or persons exercising the option) must take the following
actions:
(i) Execute and deliver to the Company a Purchase Agreement
for the Option Shares for which the option is exercised, to the extent
required by the Board.
(ii) Pay the aggregate Exercise Price for the purchased shares
in one or more of the following forms:
(A) cash or check made payable to the Company; or
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Should the Common Stock be registered under Section
12 of the 1934 Act at the time the option is exercised, then
the Exercise Price may also be paid as follows:
(B) in shares of Common Stock held by Optionee (or
any other person or persons exercising the option) for the
requisite period necessary to avoid a charge to the Company's
earnings for financial reporting purposes and valued at Fair
Market Value on the Exercise Date; or
(C) through a special sale and remittance procedure
pursuant to which Optionee (or any other person or persons
exercising the option) shall concurrently provide irrevocable
instructions to a Company-designated brokerage firm to effect
the immediate sale of the purchased shares and remit to the
Company, out of the sale proceeds available on the settlement
date, sufficient funds to cover the aggregate Exercise Price
payable for the purchased shares plus all applicable Federal,
state and local income and employment taxes required to be
withheld by the Company by reason of such exercise and to the
Company to deliver the certificates for the purchased shares
directly to such brokerage firm in order to complete the sale.
Except to the extent the sale and remittance
procedure is utilized in connection with the option exercise,
payment of the Exercise Price must accompany the Purchase
Agreement delivered to the Company in connection with the
option exercise.
(iii) Furnish to the Company appropriate
documentation that the person or persons exercising the option (if
other than Optionee) have the right to exercise this option.
(iv) Execute and deliver to the Company such
written representations as may be requested by the Company in order for
it to comply with the applicable requirements of Federal and state
securities laws.
(v) Make appropriate arrangements with the
Company (or Parent or Subsidiary employing or retaining Optionee) for
the satisfaction of all Federal, state and local income and employment
tax withholding requirements applicable to the option exercise.
(b) As soon as practical after the Exercise Date, the Company
shall issue to or on behalf of Optionee (or any other person or persons
exercising this option) a certificate for the purchased Option Shares, with the
appropriate legends affixed thereto.
(c) In no event may this option be exercised for any fractional
shares.
10. TRANSFER RESTRICTIONS. ALL OPTION SHARES ACQUIRED UPON THE EXERCISE
OF THIS OPTION SHALL BE SUBJECT TO CERTAIN
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RESTRICTIONS ON TRANSFER IN ACCORDANCE WITH THE TERMS SPECIFIED IN THE PURCHASE
AGREEMENT, IF REQUIRED.
11. COMPLIANCE WITH LAWS AND REGULATIONS.
(a) The exercise of this option and the issuance of the Option
Shares upon such exercise shall be subject to compliance by the Company and
Optionee with all applicable requirements of law relating thereto and with all
applicable regulations of any stock exchange (or the Nasdaq National Market, if
applicable) on which the Common Stock may be listed for trading at the time of
such exercise and issuance.
(b) The inability of the Company to obtain approval from any
regulatory body having authority deemed by the Company to be necessary to the
lawful issuance and sale of any Common Stock pursuant to this option shall
relieve the Company of any liability with respect to the non-issuance or sale of
the Common Stock as to which such approval shall not have been obtained. The
Company, however, shall use its best efforts to obtain all such approvals.
12. SUCCESSORS AND ASSIGNS. Except to the extent otherwise provided in
Paragraphs 3 and 6, the provisions of this Agreement shall inure to the benefit
of, and be binding upon, the Company and its successors and assigns and
Optionee, Optionee's assigns and the legal representatives, heirs and legatees
of Optionee's estate.
13. NOTICES. Any notice required to be given or delivered to the
Company under the terms of this Agreement shall be in writing and addressed to
the Company at its principal corporate offices. Any notice required to be given
or delivered to Optionee shall be in writing and addressed to Optionee at the
address indicated below Optionee's signature line on the Grant Notice. All
notices shall be deemed effective upon personal delivery or upon deposit in the
U.S. mail, postage prepaid and properly addressed to the party to be notified.
14. CONSTRUCTION. This Agreement and the option evidenced hereby are
made and granted pursuant to the Plan and are in all respects limited by and
subject to the terms of the Plan. All decisions of the Plan Administrator with
respect to any question or issue arising under the Plan or this Agreement shall
be conclusive and binding on all persons having an interest in this option.
15. GOVERNING LAW. The interpretation, performance and enforcement of
this Agreement shall be governed by the laws of the State of Michigan without
resort to that State's conflict-of-laws rules.
16. STOCKHOLDER APPROVAL. This Section 16 shall only apply if this
option is assumed by a corporation. If the Option Shares covered by this
Agreement exceed, as of the Grant Date, the number of shares of Common Stock
which may without stockholder approval be issued under the Plan, then this
option shall be void with respect to such excess shares, unless stockholder
approval of an amendment sufficiently increasing the number of shares of Common
Stock issuable under the Plan is obtained in accordance with the provisions of
the Plan.
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APPENDIX
The following definitions shall be in effect under the Agreement:
A. AGREEMENT shall mean this Stock Option Agreement.
B. BOARD shall mean the members of the Company, or if this option is
assumed by a corporation, then such corporation's Board of Directors.
C. CODE shall mean the Internal Revenue Code of 1986, as amended.
D. COMMON STOCK shall mean the Class A Units of the Company, or if this
Option is assumed by a corporation, then such corporation's common stock.
E. COMPANY shall mean Internet Engineering Group, L.L.C., a Michigan
limited liability company, and any successor corporation to all or substantially
all of the assets or voting equity of Internet Engineering Group, L.L.C. which
shall by appropriate action adopt the Plan.
F. CORPORATE TRANSACTION shall mean either of the following
stockholder-approved transactions to which the Company is a party:
(i) a merger or consolidation in which securities possessing
more than fifty percent (50%) of the total combined voting power of the
Company's outstanding securities are transferred to a person or persons
different from the persons holding those securities immediately prior
to such transaction, or
(ii) the sale, transfer or other disposition of all or
substantially all of the Company's assets in complete liquidation or
dissolution of the Company.
G. EMPLOYEE shall mean an individual who is in the employ of the
Company (or any Parent or Subsidiary), subject to the control and direction of
the employer entity as to both the work to be performed and the manner and
method of performance.
H. EXERCISE DATE shall mean the date on which the option shall have
been exercised in accordance with Paragraph 9 of the Agreement.
I. EXERCISE PRICE shall mean the exercise price payable per Option
Share as specified in the Grant Notice.
J. EXERCISE SCHEDULE shall mean the exercise schedule specified in the
Grant Notice pursuant to which this option is to become exercisable in a series
of installments over Optionee's period of Service.
K. EXPIRATION DATE shall mean the date on which the option expires as
specified in the Grant Notice.
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L. FAIR MARKET VALUE per share of Common Stock on any relevant date
shall be determined in accordance with the following provisions:
(i) If the Common Stock is at the time traded on the Nasdaq
National Market, then the Fair Market Value shall be the closing
selling price per share of Common Stock on the date in question, as the
price is reported by the National Association of Securities Dealers on
the Nasdaq National Market. If there is no closing selling price for
the Common Stock on the date in question, then the Fair Market Value
shall be the closing selling price on the last preceding date for which
such quotation exists.
(ii) If the Common Stock is at the time listed on any Stock
Exchange, then the Fair Market Value shall be the closing selling price
per share of Common Stock on the date in question on the Stock Exchange
determined by the Plan Administrator to be the primary market for the
Common Stock, as such price is officially quoted in the composite tape
of transactions on such exchange. If there is no closing selling price
for the Common Stock on the date in question, then the Fair Market
Value shall be the closing selling price on the last preceding date for
which such quotation exists.
(iii) If the Common Stock is at the time neither listed on any
Stock Exchange nor traded on the Nasdaq National Market, then the Fair
Market Value shall be determined by the Plan Administrator after taking
into account such factors as the Plan Administrator shall deem
appropriate.
▇. ▇▇▇▇▇ DATE shall mean the date of grant of the option as specified
in the Grant Notice.
▇. ▇▇▇▇▇ NOTICE shall mean the Notice of Grant of Stock Option
accompanying the Agreement, pursuant to which Optionee has been informed of the
basic terms of the option evidenced hereby.
O. MISCONDUCT shall mean the commission of any act of fraud,
embezzlement or dishonesty by Optionee, any unauthorized use or disclosure by
Optionee of confidential information or trade secrets of the Company (or any
Parent or Subsidiary), or any other intentional misconduct by Optionee adversely
affecting the business or affairs of the Company (or any Parent or Subsidiary)
in a material manner. The foregoing definition shall not be deemed to be
inclusive of all the acts or omissions which the Company (or any Parent or
Subsidiary) may consider as grounds for the dismissal or discharge of Optionee
or any other individual in the Service of the Company (or any Parent or
Subsidiary).
P. 1934 ACT shall mean the Securities Exchange Act of 1934, as amended.
Q. NON-STATUTORY OPTION shall mean an option not intended to satisfy
the requirements of Code Section 422.
R. OPTION SHARES shall mean Class A Units of the Company subject to the
option as specified in the Grant Notice, unless this option is assumed by a
corporation, then such term shall
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mean the number of shares of Common Stock to which the option is converted under
Paragraph 6.
S. OPTIONEE shall mean the person to whom the option is granted as
specified in the Grant Notice.
T. PARENT shall mean any corporation (other than the Company) in an
unbroken chain of corporations ending with the Company, provided each
corporation in the unbroken chain (other than the Company) owns, at the time of
the determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.
U. PERMANENT DISABILITY shall mean the inability of Optionee to engage
in any substantial gainful activity by reason of any medically determinable
physical or mental impairment which is expected to result in death or has lasted
or can be expected to last for a continuous period of twelve (12) months or
more.
V. PLAN shall mean the Company's 1999 Equity Option/Equity Issuance
Plan.
W. PLAN ADMINISTRATOR shall mean either the Board or a committee of the
Board acting in its capacity as administrator of the Plan.
X. PURCHASE AGREEMENT shall mean a stock purchase agreement that must
be signed by Optionee if the Option Shares are not registered on a Form S-8
under the Securities Act of 1933 at the time of purchase.
Y. SERVICE shall mean Optionee's performance of services for the
Company (or any Parent or Subsidiary) in the capacity of an Employee.
AA. STOCK EXCHANGE shall mean the American Stock Exchange or the New
York Stock Exchange.
AB. SUBSIDIARY shall mean any corporation (other than the Company) in
an unbroken chain of corporations beginning with the Company, provided each
corporation (other than the last corporation) in the unbroken chain owns, at the
time of the determination, stock possessing fifty percent (50%) or more of the
total combined voting power of all classes of stock in one of the other
corporations in such chain.
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