EXHIBIT (d)(3)
EXTREME NETWORKS, INC.
STOCK OPTION AGREEMENT
AMENDED 1996 STOCK OPTION PLAN
Extreme Networks, Inc. has granted to the individual (the "Optionee") named
in the Notice of Grant of Stock Options (the "Notice") to which this Stock
Option Agreement (the "Option Agreement") is attached an option (the "Option")
to purchase certain shares of Stock upon the terms and conditions set forth in
the Notice and this Option Agreement. The Option has been granted pursuant to
and shall in all respects be subject to the terms and conditions of the Extreme
Networks, Inc. Amended 1996 Stock Option Plan (the "Plan"), as amended to the
Date of Option Grant, the provisions of which are incorporated herein by
reference. By signing the Notice, the Optionee: (a) represents that the Optionee
has read and is familiar with the terms and conditions of the Notice, the Plan
and this Option Agreement, (b) accepts the Option subject to all of the terms
and conditions of the Notice, the Plan and this Option Agreement, (c) agrees to
accept as binding, conclusive and final all decisions or interpretations of the
Board upon any questions arising under the Notice, the Plan or this Option
Agreement, and (d) acknowledges receipt of a copy of the Notice, the Plan and
this Option Agreement.
1. Definitions and Construction.
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1.1 Definitions. Whenever used herein, the following terms shall have
their respective meanings set forth below:
(a) "Date of Option Grant" means the effective date of grant of
the Option as set forth in the Notice.
(b) "Disability" means the permanent and total disability of the
Optionee within the meaning of Section 22(e)(3) of the Code.
(c) "Exercise Price" means the purchase price per share of Stock
as set forth in the Notice.
(d) "Number of Option Shares" means the total number of shares
of Stock subject to the Option as set forth in the Notice.
(e) "Option Expiration Date" means the date ten (10) years after
the Date of Option Grant.
(f) "Securities Act" means the Securities Act of 1933, as
amended.
(g) "Service" means the Optionee's employment or service with
the Participating Company Group, whether in the capacity of an Employee or a
Consultant. The Optionee's Service shall not be deemed to have terminated
merely because of a change in the capacity in which the Optionee renders Service
to the Participating Company Group or a change in the Participating Company for
which the Optionee renders such Service, provided that there is no interruption
or termination of the Optionee's Service. Furthermore, the Optionee's Service
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with the Participating Company Group shall not be deemed to have terminated if
the Optionee takes any military leave, sick leave, or other bona fide leave of
absence approved by the Company; provided, however, that if any such leave
exceeds ninety (90) days, on the ninety-first (91st) day of such leave the
Optionee's Service shall be deemed to have terminated unless the Optionee's
right to return to Service with the Participating Company Group is guaranteed by
statute or contract. Notwithstanding the foregoing, unless otherwise designated
by the Company or required by law, a leave of absence shall not be treated as
Service for purposes of determining vesting under the Option Agreement. The
Optionee's Service shall be deemed to have terminated either upon an actual
termination of Service or upon the corporation for which the Optionee performs
Service ceasing to be a Participating Company. Subject to the foregoing, the
Company, in its sole discretion, shall determine whether the Optionee's Service
has terminated and the effective date of such termination.
(h) "Vested Shares" means, on any relevant date, that portion of
the Number of Option Shares which has vested in accordance with vesting schedule
set forth in the Notice. Provided that the Optionee's Service has not terminated
prior to the relevant date, an initial installment of shares will become Vested
Shares on the initial "Full Vest" date set forth in the Notice, and thereafter
the remaining shares will become Vested Shares in substantially equal
installments at the periodic rate set forth in the Notice, with the last such
installment vesting on the last "Full Vest" date set forth in the Notice.
1.2 Construction. Captions and titles contained herein are for
convenience only and shall not affect the meaning or interpretation of any
provision of this Option Agreement. Except when otherwise indicated by the
context, the singular shall include the plural and the plural shall include the
singular. Use of the term "or" is not intended to be exclusive, unless the
context clearly requires otherwise.
2. Tax Consequences.
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2.1 Tax Status of Option. As indicated in the Notice, this Option is
intended to be either an Incentive Stock Option ("ISO") within the meaning of
Section 422(b) of the Code or a nonstatutory stock option, which is not intended
to qualify as an ISO. The Optionee should consult with the Optionee's own tax
advisor regarding the tax effects of this Option (and any requirements necessary
to obtain favorable income tax treatment under Section 422 of the Code,
including, but not limited to, holding period requirements).
2.2 ISO Fair Market Value Limitation. If this Option is designated
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an ISO in the Notice, to the extent that the Option (together with all Incentive
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Stock Options granted to the Optionee under all stock option plans of the
Participating Company Group, including the Plan) becomes exercisable for the
first time during any calendar year for shares having a Fair Market Value
greater than One Hundred Thousand Dollars ($100,000), the portion of such
options which exceeds such amount will be treated as Nonstatutory Stock Options.
For purposes of this Section 2.2, options designated as Incentive Stock Options
are taken into account in the order in which they were granted, and the Fair
Market Value of stock is determined as of the time the option with respect to
such stock is granted. If the Code is amended to provide for a different
limitation from that set forth in this Section 2.2, such different limitation
shall be deemed incorporated herein effective as of the date required or
permitted by such amendment to
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the Code. If the Option is treated as an Incentive Stock Option in part and as a
Nonstatutory Stock Option in part by reason of the limitation set forth in this
Section 2.2, the Optionee may designate which portion of such Option the
Optionee is exercising. In the absence of such designation, the Optionee shall
be deemed to have exercised the Incentive Stock Option portion of the Option
first. Separate certificates representing each such portion shall be issued upon
the exercise of the Option. (NOTE: If the aggregate Exercise Price of the Option
(that is, the Exercise Price multiplied by the Number of Option Shares) plus the
aggregate exercise price of any other Incentive Stock Options you hold (whether
granted pursuant to the Plan or any other stock option plan of the Participating
Company Group) is greater than $100,000, you should contact the Chief Financial
Officer of the Company to ascertain whether the entire Option qualifies as an
Incentive Stock Option.
3. Exercise of the Option.
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3.1 Right to Exercise. Except as otherwise provided herein, the
Option shall be exercisable prior to the termination of the Option (as provided
in Section 5) in an amount not to exceed the Vested Shares less the number of
shares previously acquired upon exercise of the Option. In no event shall the
Option be exercisable for more shares than the Number of Option Shares.
3.2 Method of Exercise. Exercise of the Option shall be by written
notice to the Company which must state the election to exercise the Option, the
number of whole shares of Stock for which the Option is being exercised and such
other representations and agreements as to the Optionee's investment intent with
respect to such shares as may be required pursuant to the provisions of this
Option Agreement. The written notice must be signed by the Optionee and must be
delivered in person, by certified or registered mail, return receipt requested,
by confirmed facsimile transmission, or by such other means as the Company may
permit, to the Chief Financial Officer of the Company, or other authorized
representative of the Participating Company Group, prior to the termination of
the Option as set forth in Section 5, accompanied by full payment of the
aggregate Exercise Price for the number of shares of Stock being purchased. The
Option shall be deemed to be exercised upon receipt by the Company of such
written notice and the aggregate Exercise Price.
3.3 Payment of Exercise Price.
(a) Forms of Consideration Authorized. Except as otherwise
provided below, payment of the aggregate Exercise Price for the number of shares
of Stock for which the Option is being exercised shall be made (i) in cash, by
check, or cash equivalent, (ii) by tender to the Company, or attestation to the
ownership, of whole shares of Stock owned by the Optionee having a Fair Market
Value (as determined by the Company without regard to any restrictions on
transferability applicable to such stock by reason of federal or state
securities laws or agreements with an underwriter for the Company) not less than
the aggregate Exercise Price, (iii) by means of a Cashless Exercise, as defined
in Section 3.3(b), or (iv) by any combination of the foregoing.
(b) Limitations on Forms of Consideration.
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(i) Tender of Stock. Notwithstanding the foregoing, the
Option may not be exercised by tender to the Company, or attestation to the
ownership, of shares of Stock to the extent such tender, or attestation to the
ownership, of Stock would constitute a violation of the provisions of any law,
regulation or agreement restricting the redemption of the Company's stock. The
Option may not be exercised by tender to the Company, or attestation to the
ownership, of shares of Stock unless such shares either have been owned by the
Optionee for more than six (6) months or were not acquired, directly or
indirectly, from the Company.
(ii) Cashless Exercise. A "Cashless Exercise" means the
assignment in a form acceptable to the Company of the proceeds of a sale or loan
with respect to some or all of the shares of Stock acquired upon the exercise of
the Option pursuant to a program or procedure approved by the Company
(including, without limitation, through an exercise complying with the
provisions of Regulation T as promulgated from time to time by the Board of
Governors of the Federal Reserve System). The Company reserves, at any and all
times, the right, in the Company's sole and absolute discretion, to decline to
approve or terminate any such program or procedure. Generally, and without
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limiting the Company's absolute discretion, a "cashless exercise" will only be
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permitted at such times in which the shares underlying this Option are publicly
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traded.
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3.4 Tax Withholding. At the time the Option is exercised, in whole or in
part, or at any time thereafter as requested by the Company, the Optionee hereby
authorizes withholding from payroll and any other amounts payable to the
Optionee, and otherwise agrees to make adequate provision for (including by
means of a Cashless Exercise to the extent permitted by the Company), any sums
required to satisfy the federal, state, local and foreign tax withholding
obligations of the Participating Company Group, if any, which arise in
connection with the Option, including, without limitation, obligations arising
upon (i) the exercise, in whole or in part, of the Option, (ii) the transfer, in
whole or in part, of any shares acquired upon exercise of the Option, (iii) the
operation of any law or regulation providing for the imputation of interest, or
(iv) the lapsing of any restriction with respect to any shares acquired upon
exercise of the Option. The Optionee is cautioned that the Option is not
exercisable unless the tax withholding obligations of the Participating Company
Group are satisfied. Accordingly, the Optionee may not be able to exercise the
Option when desired even though the Option is vested, and the Company shall have
no obligation to issue a certificate for such shares.
3.5 Certificate Registration. Except in the event the Exercise Price is
paid by means of a Cashless Exercise, the certificate for the shares as to which
the Option is exercised shall be registered in the name of the Optionee, or, if
applicable, the Optionee's heirs.
3.6 Restrictions on Grant of the Option and Issuance of Shares. The grant
of the Option and the issuance of shares of Stock upon exercise of the Option
shall be subject to compliance with all applicable requirements of federal,
state or foreign law with respect to such securities. The Option may not be
exercised if the issuance of shares of Stock upon exercise would constitute a
violation of any applicable federal, state or foreign securities laws or other
law or regulations or the requirements of any stock exchange or market system
upon which the Stock may then be listed. In addition, the Option may not be
exercised unless (i) a registration statement under the Securities Act shall at
the time of exercise of the Option be in effect with respect to the shares
issuable upon exercise of the Option or (ii) in the opinion of legal counsel to
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the Company, the shares issuable upon exercise of the Option may be issued in
accordance with the terms of an applicable exemption from the registration
requirements of the Securities Act. THE OPTIONEE IS CAUTIONED THAT THE OPTION
MAY NOT BE EXERCISED UNLESS THE FOREGOING CONDITIONS ARE SATISFIED. ACCORDINGLY,
THE OPTIONEE MAY NOT BE ABLE TO EXERCISE THE OPTION WHEN DESIRED EVEN THOUGH THE
OPTION IS VESTED. The inability of the Company to obtain from any regulatory
body having jurisdiction the authority, if any, deemed by the Company's legal
counsel to be necessary to the lawful issuance and sale of any shares subject to
the Option shall relieve the Company of any liability in respect of the failure
to issue or sell such shares as to which such requisite authority shall not have
been obtained. As a condition to the exercise of the Option, the Company may
require the Optionee to satisfy any qualifications that may be necessary or
appropriate, to evidence compliance with any applicable law or regulation and to
make any representation or warranty with respect thereto as may be requested by
the Company.
3.7 Fractional Shares. The Company shall not be required to issue
fractional shares upon the exercise of the Option.
4. Nontransferability of the Option.
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The Option may be exercised during the lifetime of the Optionee only
by the Optionee or the Optionee's guardian or legal representative and may not
be assigned or transferred in any manner except by will or by the laws of
descent and distribution. Following the death of the Optionee, the Option, to
the extent provided in Section 6, may be exercised by the Optionee's legal
representative or by any person empowered to do so under the deceased Optionee's
will or under the then applicable laws of descent and distribution.
5. Termination of the Option.
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The Option shall terminate and may no longer be exercised on the first
to occur of (a) the Option Expiration Date, (b) the last date for exercising the
Option following termination of the Optionee's Service as described in Section
6, or (c) pursuant to a Transfer of Control, to the extent provided in the Plan.
6. Effect of Termination of Service.
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6.1 Option Exercisability.
(a) Disability. If the Optionee's Service with the Participating
Company Group is terminated because of the Disability of the Optionee, the
Option, to the extent unexercised and exercisable on the date on which the
Optionee's Service terminated, may be exercised by the Optionee (or the
Optionee's guardian or legal representative) at any time prior to the expiration
of twelve (12) months after the date on which the Optionee's Service terminated,
but in any event no later than the Option Expiration Date. (NOTE: If the Option
is exercised more than three (3) months after the date on which the Optionee's
Service as an Employee terminated as a result of a Disability other than a
permanent and total disability as defined in Section 22(e)(3) of the Code, the
Option will be treated as a Nonstatutory Stock Option and not as an Incentive
Stock Option to the extent required by Section 422 of the Code.)
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(b) Death. If the Optionee's Service with the Participating Company
Group is terminated because of the death of the Optionee, the Option, to the
extent unexercised and exercisable on the date on which the Optionee's Service
terminated, may be exercised by the Optionee's legal representative or other
person who acquired the right to exercise the Option by reason of the Optionee's
death at any time prior to the expiration of twelve (12) months after the date
on which the Optionee's Service terminated, but in any event no later than the
Option Expiration Date. If the Option is granted prior to April 17, 2001, the
Optionee's Service shall be deemed to have terminated on account of death if the
Optionee dies within thirty (30) days after the Optionee's termination of
Service. If the Option is granted on or after April 17, 2001, the Optionee's
Service shall be deemed to have terminated on account of death if the Optionee
dies within ninety (90) days after the Optionee's termination of Service.
(c) Other Termination of Service. If the Optionee's Service with
the Participating Company Group terminates for any reason, except Disability or
death, the Option, to the extent unexercised and exercisable by the Optionee on
the date on which the Optionee's Service terminated, (i) for the Option with a
Date of Option Grant prior to or on April 17, 2001, may be exercised by the
Optionee within thirty (30) days after the date on which the Optionee's Service
terminated, but in any event no later than the Option Expiration Date, and (ii)
for the Option with a Date of Option Grant on or after April 17, 2001, may be
exercised by the Optionee within ninety (90) days after the date on which the
Optionee's Service terminated, but in any event no later than the Option
Expiration Date (or such other longer period of time as determined by the Board,
in its sole discretion).
6.2 Extension if Exercise Prevented by Law. Notwithstanding the
foregoing, if the exercise of the Option within the applicable time periods set
forth in Section 6.1 is prevented by the provisions of Section 3.6, the Option
shall remain exercisable until one (1) month after the date the Optionee is
notified by the Company that the Option is exercisable, but in any event no
later than the Option Expiration Date. The Company makes no representation as to
the tax consequences of any such delayed exercise. The Optionee should consult
with the Optionee's own tax advisor as to the tax consequences of any such
delayed exercise.
6.3 Extension if Optionee Subject to Section 16(b). Notwithstanding the
foregoing, if a sale within the applicable time periods set forth in Section 6.1
of shares acquired upon the exercise of the Option would subject the Optionee to
suit under Section 16(b) of the Exchange Act, the Option shall remain
exercisable until the earliest to occur of (i) the tenth (10th) day following
the date on which a sale of such shares by the Optionee would no longer be
subject to such suit, (ii) the one hundred and ninetieth (190th) day after the
Optionee's termination of Service, or (iii) the Option Expiration Date. The
Company makes no representation as to the tax consequences of any such delayed
exercise. The Optionee should consult with the Optionee's own tax advisor as to
the tax consequences of any such delayed exercise.
7. Rights as a Stockholder or Service Provider.
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The Optionee shall have no rights as a stockholder with respect to any
shares covered by the Option until the date of the issuance of a certificate for
the shares for which the Option has been exercised (as evidenced by the
appropriate entry on the books of the Company
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or of a duly authorized transfer agent of the Company). No adjustment shall be
made for dividends, distributions or other rights for which the record date is
prior to the date such certificate is issued, except as provided in Section 4.2
of the Plan. If the Optionee is an Employee, the Optionee understands and
acknowledges that, except as otherwise provided in a separate, written
employment agreement between a Participating Company and the Optionee, the
Optionee's employment is "at will" and is for no specified term. Nothing in this
Option Agreement shall confer upon the Optionee any right to continue in the
Service of a Participating Company or interfere in any way with any right of the
Participating Company Group to terminate the Optionee's Service as an Employee,
Consultant or Director, as the case may be, at any time.
8. Notice of Sales Upon Disqualifying Disposition.
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The Optionee shall dispose of the shares acquired pursuant to the
Option only in accordance with the provisions of this Option Agreement. In
addition, the Optionee shall promptly notify the Chief Financial Officer of the
Company if the Optionee disposes of any of the shares acquired pursuant to the
Option within one (1) year after the date of the Optionee exercises all or part
of the Option or within two (2) years after the Date of Grant. Until such time
as the Optionee disposes of such shares in a manner consistent with the
provisions of this Option Agreement, unless otherwise expressly authorized by
the Company, the Optionee shall hold all shares acquired pursuant to the Option
in the Optionee's name (and not in the name of any nominee) for the one-year
period immediately after the exercise of the Option and the two-year period
immediately after Date of Grant. At any time during the one-year or two-year
periods set forth above, the Company may place a legend on any certificate
representing shares acquired pursuant to the Option requesting the transfer
agent for the Company's stock to notify the Company of any such transfers. The
obligation of the Optionee to notify the Company of any such transfer shall
continue notwithstanding that a legend has been placed on the certificate
pursuant to the preceding sentence.
9. Legends.
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The Company may at any time place legends referencing any applicable
federal, state or foreign securities law restrictions, and, if applicable, that
the Option is an Incentive Stock Option, on all certificates representing shares
of stock subject to the provisions of this Option Agreement. The Optionee shall,
at the request of the Company, promptly present to the Company any and all
certificates representing shares acquired pursuant to the Option in the
possession of the Optionee in order to carry out the provisions of this Section.
10. Restrictions on Transfer of Shares.
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No shares acquired upon exercise of the Option may be sold, exchanged,
transferred (including, without limitation, any transfer to a nominee or agent
of the Optionee), assigned, pledged, hypothecated or otherwise disposed of,
including by operation of law, in any manner which violates any of the
provisions of this Option Agreement, and any such attempted disposition shall be
void. The Company shall not be required (a) to transfer on its books any shares
which will have been transferred in violation of any of the provisions set forth
in this
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Option Agreement or (b) to treat as owner of such shares or to accord the right
to vote as such owner or to pay dividends to any transferee to whom such shares
will have been so transferred.
11. Binding Effect.
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Subject to the restrictions on transfer set forth herein, this Option
Agreement shall inure to the benefit of and be binding upon the parties hereto
and their respective heirs, executors, administrators, successors and assigns.
12. Termination or Amendment.
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The Board may terminate or amend the Plan or the Option at any time;
provided, however, that except in connection with a Transfer of Control, no such
termination or amendment may adversely affect the Option or any unexercised
portion hereof without the consent of the Optionee unless such termination or
amendment is necessary to comply with any applicable law or government
regulation or is required to enable an Option designated as an Incentive Stock
Option to qualify as an Incentive Stock Option. No amendment or addition to this
Option Agreement shall be effective unless in writing.
13. Notices.
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Any notice required or permitted hereunder shall be given in writing
and shall be deemed effectively given (except to the extent that this Option
Agreement provides for effectiveness only upon actual receipt of such notice)
upon personal delivery or upon deposit in the United States Post Office, by
registered or certified mail, with postage and fees prepaid, addressed to the
other party at the address shown on the Notice or at such other address as such
party may designate in writing from time to time to the other party.
14. Integrated Agreement.
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The Notice, this Option Agreement and the Plan constitute the entire
understanding and agreement of the Optionee and the Participating Company Group
with respect to the subject matter contained herein and therein and there are no
agreements, understandings, restrictions, representations, or warranties among
the Optionee and the Participating Company Group with respect to such subject
matter other than those as set forth or provided for herein or therein. To the
extent contemplated herein or therein, the provisions of the Notice and this
Option Agreement shall survive any exercise of the Option and shall remain in
full force and effect.
15. Applicable Law.
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This Option Agreement shall be governed by the laws of the State of
California as such laws are applied to agreements between California residents
entered into and to be performed entirely within the State of California.
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[_] Incentive Stock Option
[_] Nonstatutory Stock Option
Optionee: _____________________
Date: _________________________
EXERCISE NOTICE
[Public Company/Registered Shares]
Extreme Networks, Inc.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: Chief Financial Officer
Ladies and Gentlemen:
1. Option. I was granted an option ("Option") to purchase shares of
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the common stock of Extreme Networks, Inc. ("Company") pursuant to the Company's
Amended 1996 Stock Option Plan (the "Plan"), and a Notice of Grant of Stock
Options and related Stock Option Agreement (collectively, the "Option
Agreement") as follows:
Grant Number: ____________________
Date of Option Grant: ____________________
Number of Option Shares: ____________________
Exercise Price per Share: $ __________________
2. Exercise of Option. I hereby elect to exercise the Option to
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purchase ____________ shares of the Company's Common Stock (the "Shares"), all
of which have vested in accordance with the Option Agreement.
3. Payment. I enclose payment in full or have made arrangements for
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payment from the sales proceeds of the Shares of the total exercise price for
the Shares in the following form(s), as authorized by my Option Agreement:
[_] Cash: $ __________________
[_] Check: $ __________________
[_] Tender of Company shares: $ __________________
[_] Cashless exercise (same-day-sale): $ __________________
4. Tax Withholding. I authorize payroll withholding and otherwise
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will make adequate provision for federal, state, local and foreign tax
withholding obligations of the
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Company, if any, in connection with my exercise of the Option and my subsequent
disposition of the Shares.
5. Notice of Disqualifying Disposition. I agree that, if the Option
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is designated an Incentive Stock Option, I will promptly notify the Chief
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Financial Officer of the Company if I transfer any of the Shares within one (1)
year from the date I exercise all or part of the Option or within two (2) years
of the Date of Option Grant.
6. Optionee Information.
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My address is:
_________________________________________________________________
_________________________________________________________________
My Social Security Number is: ___________________________________
I understand that I am purchasing the Shares pursuant to the terms of
the Plan and my Option Agreement, copies of which I have received and carefully
read and understand.
Very truly yours,
____________________________
Receipt of the above is hereby acknowledged.
EXTREME NETWORKS, INC.
By:
____________________________________
Title:
________________________________
Dated:
________________________________
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