1
EXHIBIT 99.3
CISCO SYSTEMS, INC.
STOCK OPTION ASSUMPTION AGREEMENT
COMPATIBLE SYSTEMS CORPORATION
1993 STOCK OPTION PLAN
OPTIONEE: <> <>,
STOCK OPTION ASSUMPTION AGREEMENT effective as of the 24th day
of March 2000 by Cisco Systems, Inc., a California corporation ("Cisco").
WHEREAS, the undersigned individual ("Optionee") holds one or
more outstanding options to purchase shares of the common stock of Compatible
Systems Corporation, a Colorado corporation ("Compatible"), which were granted
to Optionee under the Compatible 1993 Stock Option Plan (the "Plan").
WHEREAS, each outstanding Compatible option is evidenced by a
Stock Option Agreement the ("Option Agreement"), with any shares purchased under
such options to be subject to the terms and conditions of such Agreement.
WHEREAS, Compatible has been acquired by Cisco through the
merger of Compatible with Cisco (the "Merger") pursuant to the Agreement and
Plan of Reorganization, by and between Cisco and Compatible (the "Merger
Agreement").
WHEREAS, the provisions of the Merger Agreement require the
obligations of Compatible under each outstanding option under the Plan to be
assumed by Cisco at the consummation of the Merger, and the holder of each such
outstanding option to be issued an agreement evidencing the assumption of such
option.
WHEREAS, pursuant to the provisions of the Merger Agreement, the
exchange ratio (the "Exchange Ratio") in effect for the Merger is 0.4832569 of a
share of Cisco Common Stock ("Cisco Stock"), for each outstanding share of
Compatible common stock ("Compatible 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 Compatible Stock subject to the
options held by Optionee immediately prior to the Effective Time (the
"Compatible Options") 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 Compatible under each of the Compatible Options. In connection
with such assumption, the number of shares of Cisco Stock purchasable under each
Compatible Option hereby assumed and the exercise price payable thereunder have
been adjusted to reflect
2
the Exchange Ratio. Accordingly, the number of shares of Cisco Stock subject to
each Compatible 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 Compatible Option shall also be as indicated for that option below.
COMPATIBLE STOCK OPTIONS CISCO ASSUMED OPTIONS
------------------------ ---------------------
# of Shares of Exercise Price # of Shares of Cisco Adjusted Exercise
Compatible Common Stock per Share Common Stock Price per Share
Compatible Shares $Compatible Price Cisco Shares $Cisco Price
2. The intent of the foregoing adjustments to each assumed
Compatible 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) than the spread which existed, immediately prior
to the Merger, between the then aggregate fair market value of the Compatible
Stock subject to the Compatible 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 Compatible Option immediately prior to the Merger.
3. The following provisions shall govern each Compatible Option
hereby assumed by Cisco:
(a) Unless the context otherwise requires, all
references in the Option Agreement and, if applicable, in the Plan (as
incorporated into such Option Agreement) shall be adjusted as follows;
(i) all references to the "Corporation" shall mean Cisco, (ii) all
references to "Share" shall mean shares of Cisco Stock, (iii) all
references to "Common Stock" shall mean Cisco Stock, (iv) all references
to the "Board" shall mean the Board of Directors of Cisco and (v) 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 Compatible Option and all other provisions which govern either
the exercise or the termination of the assumed Compatible 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 Compatible Option.
(c) Pursuant to the terms of the Option Agreement and
the Plan, none of the Compatible Options assumed by Cisco hereunder
shall vest as to any shares on an accelerated basis in connection with
the Merger. Accordingly, each assumed Compatible Option shall continue
to vest and become exercisable
2
3
for the unvested shares of Cisco Stock subject to that option in
accordance with the same installment vesting schedule in effect for that
option, pursuant to the provisions of the applicable Option Agreement,
immediately prior to the Effective Time; provided, however, that the
number of shares 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 status as an
employee or a consultant of Compatible, Optionee shall be deemed to
continue in such status as an employee or a consultant for so long as
Optionee renders services as an employee or a consultant to Cisco or any
present or future majority-owned Cisco subsidiary. Accordingly, the
provisions of the Option Agreements governing the termination of the
assumed Compatible Options shall hereafter be applied on the basis of
Optionee's cessation of employee or consultant status with Cisco and its
majority-owned subsidiaries. Each assumed Compatible Option shall
accordingly terminate, within the designated time period in effect under
the Option Agreement for that option, following such cessation of
service as an employee or a consultant of Cisco and its majority-owned
subsidiaries.
(e) The adjusted exercise price payable for the Cisco
Stock subject to each assumed Compatible Option shall be payable in any
of the forms authorized under the Option Agreement applicable to that
option. For purposes of determining the holding period of any shares of
Cisco Stock delivered in payment of such adjusted exercise price, the
period for which such shares were held as Compatible Stock prior to the
Merger shall be taken into account.
(f) In order to exercise each assumed Compatible 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.
000 Xxxx Xxxxxx Xxxxx
XX 00-0
Xxx Xxxx, XX 00000
Attention: Stock Administration
3
4
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.
IN WITNESS WHEREOF, Cisco, Inc. has caused this Stock Option
Assumption Agreement to be executed on its behalf by its duly-authorized officer
as of the 24th day of March 2000.
CISCO SYSTEMS, INC.
By:
---------------------------------
Title:
------------------------------
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 Compatible Options hereby assumed by Cisco are as
set forth in the Option Agreement, the Plan, as applicable, and such Stock
Option Assumption Agreement.
------------------------------------
<> <>, OPTIONEE
DATED: _________________, 2000
4
