1
EXHIBIT 99.2
ArrowPoint Communications, Inc.
Incentive Stock Option Agreement
Granted Under 1997 Stock Incentive Plan
1. Grant of Option.
This agreement evidences the grant by ArrowPoint Communications, Inc., a
Delaware corporation (the "Company") on __________ to___________, an employee of
the Company (the "Participant"), of an option to purchase, in whole or in part,
on the terms provided herein and in the Company's 1997 Stock Incentive Plan (the
"Plan"), a total of __________ shares of common stock, $.001 par value per
share, of the Company ("Common Stock") (the "Shares") at $_________ per Share.
Unless earlier terminated, this option shall expire on ___________ (the "Final
Exercise Date").
It is intended that the option evidenced by this agreement shall be an
incentive stock option as defined in Section 422 of the Internal Revenue Code of
1986, as amended and any regulations promulgated thereunder (the "Code"). Except
as otherwise indicated by the context, the term "Participant," as used in this
option, shall be deemed to include any person who acquires the right to exercise
this option validly under its terms.
2. Vesting Schedule.
This option will become exercisable ("vest") as to 20% of the original
number of Shares on the first anniversary of the date of the grant of the option
(the "Grant Date") and as to an additional 1.6667% of the original number of
Shares at the end of each successive full calendar month period following the
first anniversary of the Grant Date. This option shall expire upon, and shall
not be exercisable after, the Final Exercise Date.
The right of exercise shall be cumulative so that to the extent the
option is not exercised in any period to the maximum extent permissible it shall
continue to be exercisable, in whole or in part, with respect to all Shares for
which it is vested until the earlier of the Final Exercise Date or the
termination of this option under Section 3 hereof or the Plan.
Notwithstanding the foregoing, in the event of an Acquisition Event (as
defined below), then 50% of the number of Shares which are not then vested shall
become vested immediately prior to the closing of the Acquisition Event. The
remaining one-half of such number of Shares shall continue to vest in accordance
with the original vesting schedule (i.e., on each subsequent vesting date,
one-half of the number of Shares that would otherwise have first vested shall
become vested).
An "Acquisition Event" shall mean: (a) any merger or consolidation which
results in the voting securities of the Company outstanding immediately prior
thereto representing immediately thereafter (either by remaining outstanding or
by being converted into voting securities of the surviving or acquiring entity)
less than a majority of the combined voting power of the voting securities of
the Company or such surviving or acquiring entity outstanding
-1-
2
immediately after such merger or consolidation; (b) any sale of all or
substantially all of the assets of the Company; or (c) sale of shares of capital
stock of the Company, in a single transaction or series of related transactions,
representing at least 80% of the voting power of the voting securities of the
Company.
3. Exercise of Option.
(a) Form of Exercise. Each election to exercise this option shall be in
writing, signed by the Participant, and received by the Company at its principal
office, accompanied by this agreement, and payment in full in the manner
provided in the Plan. The Participant may purchase less than the number of
Shares covered hereby, provided that no partial exercise of this option may be
for any fractional share or for fewer than ten whole Shares.
(b) Continuous Relationship with the Company Required. Except as
otherwise provided in this Section 3, this option may not be exercised unless
the Participant, at the time he or she exercises this option, is, and has been
at all times since the date of grant of this option, an employee, officer or
director of, or consultant or advisor to, the Company or any parent or
subsidiary of the Company as defined in Section 424(e) or (f) of the Code (an
"Eligible Participant").
(c). Termination of Relationship with the Company. If the Participant
ceases to be an Eligible Participant for any reason, then, except as provided in
paragraphs (d) and (e) below, the right to exercise this option shall terminate
three months after such cessation (but in no event after the Final Exercise
Date), provided that this option shall be exercisable only to the extent that
the Participant was entitled to exercise this option on the date of such
cessation. Notwithstanding the foregoing, if the Participant, prior to the Final
Exercise Date, violates the non-competition or confidentiality provisions of any
employment contract, confidentiality and nondisclosure agreement or other
agreement between the Participant and the Company, the right to exercise this
option shall terminate immediately upon such violation.
(d) Exercise Period Upon Death or Disability. If the Participant dies or
becomes disabled (within the meaning of Section 22(e)(3) of the Code) prior to
the Final Exercise Date while he or she is an Eligible Participant and the
Company has not terminated such relationship for "cause" as specified in
paragraph (e) below, this option shall be exercisable, within the period of one
year following the date of death or disability of the Participant by the
Participant, provided that this option shall be exercisable only to the extent
that this option was exercisable by the Participant on the date of his or her
death or disability, and further provided that this option shall not be
exercisable after the Final Exercise Date.
(e) Discharge for Cause. If the Participant, prior to the Final Exercise
Date, is discharged by the Company for "cause" (as defined below), the right to
exercise this option shall terminate immediately upon the effective date of such
discharge. "Cause" shall mean willful misconduct by the Participant or willful
failure by the Participant to perform his or her responsibilities to the Company
(including, without limitation, breach by the Participant of any provision of
any employment, consulting, advisory, nondisclosure, non-competition or other
similar agreement between the Participant and the Company), as determined by the
Company,
-2-
3
which determination shall be conclusive. The Participant shall be considered to
have been discharged for "Cause" if the Company determines, within 30 days after
the Participant's resignation, that discharge for cause was warranted.
4. Withholding.
No Shares will be issued pursuant to the exercise of this option unless
and until the Participant pays to the Company, or makes provision satisfactory
to the Company for payment of, any federal, state or local withholding taxes
required by law to be withheld in respect of this option.
5. Nontransferability of Option.
This option may not be sold, assigned, transferred, pledged or otherwise
encumbered by the Participant, either voluntarily or by operation of law, except
by will or the laws of descent and distribution, and, during the lifetime of the
Participant, this option shall be exercisable only by the Participant.
6. Disqualifying Disposition.
If the Participant disposes of Shares acquired upon exercise of this
option within two years from the date of grant of the option or one year after
such Shares were acquired pursuant to exercise of this option, the Participant
shall notify the Company in writing of such disposition.
7. Provisions of the Plan.
This option is subject to the provisions of the Plan, a copy of which is
furnished to the Participant with this option.
IN WITNESS WHEREOF, the Company has caused this option to be executed
under its corporate seal by its duly authorized officer. This option shall take
effect as a sealed instrument.
ARROWPOINT COMMUNICATIONS, INC.
Dated: By:
-------------------- ---------------------------------------
Name: Xxxxxxx Xxxxxxx
Title: Vice President, Chief Financial Officer
-3-
4
PARTICIPANT'S ACCEPTANCE
The undersigned hereby accepts the foregoing option and agrees to the
terms and conditions thereof. The undersigned hereby acknowledges receipt of a
copy of the Company's 1997 Stock Incentive Plan.
PARTICIPANT:
Dated:
-------------------- ---------------------------------------
(signature)
---------------------------------------
(full name)
Address:
-------------------------------
-------------------------------
-4-
