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EXHIBIT 99.7
PENTACOM LTD.
SHARE OPTION AGREEMENT
RECITALS
I. The Board has adopted the Plan for the purpose of retaining the
services of selected Employees, non-employee members of the Board or the board
of directors of any Parent or Subsidiary and consultants and other independent
advisors in the service of the Company (or any Parent or Subsidiary).
II. 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.
III. 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. During Optionee's lifetime, this option
shall be exercisable only by Optionee and shall not be assignable or
transferable other than by will or by the laws of inheritance following
Optionee's death.
4. ADDITIONAL TRANSFER RESTRICTIONS AND STATE REQUIREMENTS. Upon the
exercise of this option, Optionee shall become subject to and shall be required
to become a party to, that certain Purchase Option Agreement, dated as of June
2, 1999, by and between the Company, Cisco Systems, Inc. and certain
securityholders, with regard to any Option Shares acquired upon the exercise of
this option. The Purchase Option Agreement contains certain transfer
restrictions which shall be applied to the Option Shares and gives Cisco
Systems, Inc. the right to purchase securities of the Company (including any
acquired Option Shares) upon terms set forth in such agreement.
5. DATES OF EXERCISE. 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.
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6. 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 Optionee shall have a period of three (3) months (commencing
with the date of such cessation of Service) during which to exercise this
option, but in no event shall this option be exercisable at any time after the
Expiration Date.
(ii) Should Optionee die while this option is outstanding, 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 inheritance shall have the right to exercise this option. Such right
shall lapse, and this option shall cease to be outstanding, upon the earlier of
(i) the expiration of the twelve (12)-month period measured from the date of
Optionee's death or (ii) the Expiration Date.
(iii) Should Optionee cease Service by reason of Permanent
Disability while this option is outstanding, then Optionee shall have a period
of twelve (12) months (commencing with the date of such cessation of Service)
during which to exercise this option. In no event shall this option be
exercisable at any time after the Expiration Date.
(iv) 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 in which Optionee is, at the time of Optionee's cessation of
Service, vested pursuant to the Exercise Schedule specified in the Grant Notice
or the special vesting 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 vested
Option Shares for which the option has not been exercised. To the extent
Optionee is not vested in one or more Option Shares at the time of Optionee's
cessation of Service, this option shall immediately terminate and cease to be
outstanding with respect to those shares.
(v) Should Optionee's Service be terminated for Misconduct, or
should Optionee otherwise engage in Misconduct while his or her option is
outstanding, then this option shall terminate immediately and cease to remain
outstanding.
7. SPECIAL ACCELERATION OF OPTION.
(i) In the event of any Company Transaction, the Option Shares
shall immediately become exercisable so that this option shall, immediately
prior to the effective date of the Company Transaction become fully exercisable
for any and all of the Option Shares as fully-vested shares and may be fully
exercised for any or all of those Option Shares as vested shares. However, the
Option Shares shall not become exercisable on such an accelerated basis if and
to the extent: (a) this option is assumed by the successor company (or parent
thereof) in the Company Transaction and the Company's repurchase rights with
respect to the unvested Option Shares are assigned to such successor company (or
parent thereof), or (b) this option is to be replaced with a cash incentive
program of the successor company which preserves the spread
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existing on the unvested Option Shares at the time of the Company 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 same Exercise Schedule applicable to those unvested Option Shares as
set forth in the Grant Notice.
(ii) Immediately following the Company 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 Company
Transaction.
(iii) If this option is assumed in connection with a Company
Transaction, then this option shall be appropriately adjusted, immediately after
such Company Transaction, to apply to the number and class of securities which
would have been issuable to Optionee in consummation of such Company Transaction
had the option been exercised immediately prior to such Company Transaction, and
appropriate adjustments shall also be made to the Exercise Price, provided the
aggregate Exercise Price shall remain the same.
(iv) 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.
8. ADJUSTMENT IN OPTION SHARES. Should any change be made to the Shares
by reason of any stock split, stock dividend, recapitalization, combination of
shares, exchange of shares or other change affecting the outstanding Shares 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.
9. SHAREHOLDER RIGHTS. The holder of this option shall not have any
shareholder 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.
10. MANNER OF EXERCISING OPTION.
(i) 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:
(a) Execute and deliver to the Company an Exercise
Notice for the Option Shares for which the option is exercised, in the form
provided by the Company.
(b) Pay the aggregate Exercise Price for the purchased
shares in one or more of the following forms:
(I) cash or check made payable to the Company;
or
(II) a promissory note payable to the Company,
but only to the extent authorized by the Plan Administrator in accordance with
Paragraph 14.
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(c) 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.
(d) 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 United States Federal and state securities
laws and any pertinent international securities laws.
(e) 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.
(ii) 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.
(iii) In no event may this option be exercised for any
fractional shares.
11. COMPLIANCE WITH LAWS AND REGULATIONS.
(i) 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 Shares may be listed for trading at the time of such
exercise and issuance.
(ii) 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 Shares pursuant to this option shall relieve the
Company of any liability with respect to the non-issuance or sale of the Shares
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 term of this Agreement shall be in writing and addressed to the
Company at its principal Company 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. FINANCING. The Plan Administrator may, in its absolute discretion
and without any obligation to do so, permit Optionee to pay the Exercise Price
for the purchased
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Option Shares by delivering a full-recourse, interest-bearing promissory note
secured by those Option Shares. The payment schedule in effect for any such
promissory note shall be established by the Plan Administrator in its sole
discretion.
15. 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.
16. GOVERNING LAW. The interpretation, performance and enforcement of
this Agreement shall be governed by Israeli law.
17. SHAREHOLDER APPROVAL. If the Option Shares covered by this Agreement
exceed, as of the Grant Date, the number of shares of Shares which may be issued
under the Plan as last approved by the shareholders, then this option shall be
void with respect to such excess shares, unless shareholder approval of an
amendment sufficiently increasing the number of shares of Shares issuable under
the Plan is obtained in accordance with the provisions of the Plan.
18. ADDITIONAL TERMS APPLICABLE TO AN INCENTIVE OPTION. In the event
this option is designated an Incentive Option in the Grant Notice, the following
terms and conditions shall also apply to the grant:
(i) This option shall cease to qualify for favorable tax
treatment as an Incentive Option if (and to the extent) this option is exercised
for one or more Option Shares: (i) more than three (3) months after the date
Optionee ceases to be an Employee for any reason other than death or Permanent
Disability or (ii) more than twelve (12) months after the date Optionee ceases
to be an Employee by reason of Permanent Disability.
(ii) This option shall not become exercisable in the calendar
year in which granted if (and to the extent) the aggregate Fair Market Value
(determined at the Grant Date) of the Shares for which this option would
otherwise first become exercisable in such calendar year would, when added to
the aggregate value (determined as of the respective date or dates of grant) of
the Shares and any other securities for which one or more other Incentive
Options granted to Optionee prior to the Grant Date (whether under the Plan or
any other option plan of the Company or any Parent or Subsidiary) first become
exercisable during the same calendar year, exceed One Hundred Thousand U.S.
Dollars ($1 00,000) in the aggregate. To the extent the exercisability of this
option is deferred by reason of the foregoing limitation, the deferred portion
shall become exercisable in the first calendar year or years thereafter in which
the One Hundred Thousand U.S. Dollar ($100,000) limitation of this Paragraph
18(b) would not be contravened, but such deferral shall in all events end
immediately prior to the effective date of a Company Transaction in which this
option is not to be assumed, whereupon the option shall become immediately
exercisable as a Non-Statutory Option for the deferred portion of the Option
Shares.
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(iii) Should Optionee hold, in addition to this option, one or
more other options to purchase Shares which become exercisable for the first
time in the same calendar year as this option, then the foregoing limitations on
the exercisability of such options as Incentive Options shall be applied on the
basis of the order in which such options are granted.
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APPENDIX
The following definitions shall be in effect under the Agreement:
I. AGREEMENT shall mean this Share Option Agreement.
II. BOARD shall mean the Company's Board of Directors.
III. CODE shall mean the Internal Revenue Code of 1986, as amended.
IV. COMPANY Transaction-shall mean either of the following
shareholder-approved transactions to which the Company is a party:
(a) 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;
(b) the sale, transfer or other disposition of all or
substantially all of the Company's assets in complete liquidation or dissolution
of the Company;
(c) any sale of Shares by the shareholders of the Company in
such aggregate amount as shill exceed fifty percent (50%) of the Shares
beneficially held by them.
V. COMPANY shall mean PentaCom Ltd., an Israeli company.
VI. EXERCISE SCHEDULE shall mean the exercise schedule specified in the
Grant Notice pursuant to which the Optionee is to vest and be allowed to
exercise the Option Shares in a series of installments over his or her period of
Service
VII. 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.
VIII. EXERCISE DATE shall mean the date on which the option shall have
been exercised in accordance with Paragraph 9 of the Agreement.
IX. EXERCISE PRICE shall mean the exercise price payable per Option
Share as specified in the Grant Notice.
X. EXPIRATION DATE shall mean the date on which the option expires as
specified in the Grant Notice.
XI. FAIR MARKET VALUE per share of Shares on any relevant date shall be
determined in accordance with the following provisions:
(d) If the Shares is at the time traded on the Nasdaq National
Market, then the Fair Market Value shall be the closing selling price per share
of Shares on the date in question, as the price is reported by the National
Association of Securities Dealers on the Nasdaq
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National Market. If there is no closing selling price for the Shares 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.
(e) If the Shares is at the time listed on any Stock Exchange,
then the Fair Market Value shall be the closing selling price per share of
Shares on the date in question on the Stock Exchange determined by the Plan
Administrator to be the primary market for the Shares, as such price is
officially quoted in the composite tape of transactions on such exchange. If
there is no closing selling price for the Shares 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.
(f) If the Shares 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.
XII. GRANT DATE shall mean the date of grant of the option as specified
in the Grant Notice.
XIII. GRANT NOTICE shall mean the Notice of Grant of Share Option
accompanying the Agreement, pursuant to which Optionee has been informed of the
basic terms of the option evidenced hereby.
XIV. INCENTIVE OPTION shall mean an option which satisfies the
requirements of Internal Revenue Code Section 422.
XV. 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).
XVI. 1934 ACT shall mean the Securities Exchange Act of 1934, as
amended.
XVII. NON-STATUTORY OPTION shall mean an option not intended to satisfy
the requirements of Code Section 4:12.
XVIII. OPTION SHARES shall mean the number of shares of Shares subject
to the option.
XIX. OPTIONEE shall mean the person to whom the option is granted as
specified in the Grant Notice.
XX. PARENT shall mean any Company (other than the Company) in an
unbroken chain of companies ending with the Company, provided each Company in
the
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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 companies in such chain.
XXI. 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.
XXII. PLAN shall mean the Company's 1999 Share Option Plan.
XXIII. PLAN ADMINISTRATOR shall mean either the Board or a committee of
the Board acting in its capacity as administrator of the Plan.
XXIV. SERVICE shall mean the Optionee's performance of services for the
Company (or any Parent or Subsidiary) in the capacity of an Employee, a
non-employee member of the board of directors or an independent consultant.
XXV. SHARES shall mean the Company's ordinary shares.
XXVI. STOCK EXCHANGE shall mean the American Stock Exchange or the New
York Stock Exchange.
XXVII. SUBSIDIARY shall mean any Company (other than the Company) in an
unbroken chain of companies beginning with the Company, provided each Company
(other than the last Company) 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 companies in
such chain.
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PENTACOM LTD.
NOTICE OF GRANT OF STOCK OPTION
Notice is hereby given of the following option grant (the "Option") to
purchase shares of the Shares of PentaCom Ltd. (the "Company"); such grant is
subject to the terms and conditions set forth herein, including but not limited
to the "Effectiveness Conditions" set forth below:
Grant Date:
Vesting Commencement Date:
Exercise Price:
Number of Option Shares:
Expiration Date:
Type of Option: _____Statutory Stock Option
Exercise Schedule: The Option Shares shall become exercisable with
respect to (i) twenty-five percent (2.5%) of the Option Shares upon Optionee's
completion of one (1) year of Service measured from the Vesting Commencement
Date and (ii) the balance of the Option Shares in a series of thirty-six (36)
successive equal monthly installments upon Optionee's completion of each
additional month of Service over the thirty-six (36)-month period measured from
the first anniversary of the Vesting Commencement Date. In no event shall any
additional Option Shares vest after Optionee's cessation of Service.
Optionee understands and agrees that the Option is granted subject to
and in accordance with the terms of the PentaCom Ltd. 1999 Share Option Plan
(the "Plan"). Optionee further agrees to be bound by the terms of the Plan and
the terms of the Option as set forth in the Stock Option Agreement attached
hereto as Exhibit A.
TRANSFER RESTRICTIONS. OPTIONEE HEREBY AGREES THAT ALL OPTION SHARES
ACQUIRED UPON THE EXERCISE OF THE OPTION SHALL BE SUBJECT TO CERTAIN TRANSFER
RESTRICTIONS EXERCISABLE BY THE COMPANY AND ITS ASSIGNS.
At Will Employment. Nothing in this Notice or in the attached Stock
Option Agreement or Plan shall confer upon Optionee any right to continue in
Service for any period of specific duration or interfere with or otherwise
restrict in any way the rights of the Company (or any Parent or Subsidiary
employing or retaining Optionee or of Optionee, which rights are hereby
expressly reserved by each, to terminate Optionee's Service at any, time for any
reason, with or without cause.
Effectiveness Conditions. The grant of the Option set forth herein shall
be conditional on the satisfaction of the following conditions:
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(I) The Optionee shall execute a proxy in the form attached
hereto as Exhibit C.
(II) The spouse of the Optionee shall execute a "waiver and
acknowledgement" letter in the form attached hereto as Exhibit D.
All capitalized terms in this Notice shall have the meaning
assigned to them in this Notice or in the attached Stock Option Agreement.
DATED:_____________________, ____________
PENTACOM LTD.
By:
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Title:
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Address:
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Exhibit A - Stock Option Agreement
Exhibit B - 1999 Share Option Plan
Exhibit C + Form of Proxy
Exhibit D + Form of Spouse Waiver and Acknowledgement
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EXHIBIT A
STOCK OPTION AGREEMENT
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EXHIBIT B
1999 SHARE OPTION PLAN
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EXHIBIT C
IRREVOCABLEPROXY
The undersigned, _______________________ residing at ___________________, hereby
nominates, constitutes and appoints the Chairman of the Board of Directors of
PentaCom Ltd. (as shall be in office from time to time), my true and lawful
attorney-in-fact and proxy, with power of substitution, for me and in my name,
place and xxxxx:
To appear and vote at any and all meetings of the shareholders of
PentaCom Ltd. (the "Company"), an Israeli company, or, sign on any unanimous
written consents of the shareholders of the Company, and otherwise act as my
proxy and representative in respect to all shares of the Company which may be
held by me now or in the future, and for that purpose to sip and execute in my
name and on my behalf any proxies or other instruments with respect to said
shares, all in accordance with the instructions and directions of the Board of
Directors of the Company.
This proxy shall remain in full force and effect until the consummation of the
Company's initial public offering, and shall bind any transferees to whom I may
transfer said shares in the future.
IN WITNESS WHEREOF, the undersigned hereby signs this proxy effective as of the
____ day of ________, ______.
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EXHIBIT D
WAIVER AND ACKNOWLEDGEMENT LETTER
To. PentaCom Ltd. and my spouse
From:_____________________________(spouse of __________________)
Date:______________________________
,hereby waive any rights that I may have, or may have in the future, which
relate directly or indirectly to any options and/or shares in PentaCom Ltd. that
my spouse currently holds or may hold in the future, including any options or
shares in other companies which may be issued to my spouse in connection with
his/her options and/or shares in PentaCom Ltd.
This letter will serve as my acknowledgement that I do not have, and will not
have in the future, any rights in any of the aforesaid options or shares under
any legal theory, agreement or otherwise.
Very truly yours,
Employee and Spouse's Signature
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