EXHIBIT 99.3
FORM OF OPTION ASSUMPTION AGREEMENT FOR HAMMERHEAD NETWORKS, INC.
EFFECTIVE DATE: JUNE 24, 2002
CISCO SYSTEMS, INC.
STOCK OPTION ASSUMPTION AGREEMENT
Dear [Name]:
As you know, on June 24, 2002 (the "Closing Date") Cisco Systems, Inc. ("Cisco")
acquired Hammerhead Networks, Inc. ("Hammerhead") (the "Acquisition"). In the
Acquisition, each share of Hammerhead common stock was exchanged for
0.6033926104 of a share of Cisco common stock (the "Exchange Ratio"). On the
Closing Date you held one or more outstanding options (the "Hammerhead Options")
to purchase shares of Hammerhead Networks, Inc. common stock granted to you
under the Hammerhead Networks, Inc. 2000 Omnibus Stock Plan (the "Plan"), each
documented with a Stock Option Agreement (the "Option Agreement") issued to you
under the Plan. In accordance with the Acquisition, on the Closing Date Cisco
assumed all obligations of Hammerhead under the Hammerhead Options. This
Agreement evidences the assumption of the Hammerhead Options, including the
necessary adjustments to the Hammerhead Options required by the Acquisition.
Your Hammerhead Options immediately before and after the Acquisition are as
follows:
HAMMERHEAD STOCK OPTIONS CISCO ASSUMED OPTIONS
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# Shares of Hammerhead Exercise
Hammerhead Price # of Shares of Cisco Cisco Exercise Price
Common Stock Per Share Common Stock Per Share
------------------ ------------------- -------------------- --------------------
[Hammerhead Shares] [Hammerhead Price] [Cisco Shares] [Cisco Price]
The post-Acquisition adjustments are based on the Exchange Ratio and are
intended to: (i) assure that the total spread of each assumed Hammerhead Option
(i.e., the difference between the aggregate fair market value and the aggregate
exercise price) does not exceed the total spread that existed immediately prior
to the Acquisition; (ii) to preserve, on a per share basis, the ratio of
exercise price to fair market value that existed immediately prior to the
Acquisition; and (iii) to the extent applicable and allowable by law, to retain
incentive stock option ("ISO") status under the Federal tax laws.
Unless the context otherwise requires, any references in the Plan and the Option
Agreement (i) to the "Company" or the "Corporation" means Cisco, (ii) to
"Stock," "Common Stock" or "Shares" means shares of Cisco Stock, (iii) to the
"Board of Directors" or the "Board" means the Board of Directors of Cisco and
(iv) to the "Committee" means the Compensation Committee of the Cisco Board of
Directors. All references in the Option Agreement and the Plan relating to your
status as an employee of Hammerhead will now refer to your status as an employee
of Cisco or any present or future Cisco subsidiary. To the extent the Option
Agreement allowed you to deliver shares of Hammerhead common stock as payment
for the exercise price, shares of Cisco common stock may be delivered in payment
of the adjusted exercise price, and the period for which such shares were held
as Hammerhead Stock prior to the Acquisition will be taken into account.
The grant date, vesting commencement date, vesting schedule and expiration date
of your assumed Hammerhead Options remain the same as set forth in your Option
Agreement, but the number of shares subject to each vesting installment has been
adjusted to reflect the Exchange Ratio. All other
EFFECTIVE DATE: JUNE 24, 2002
provisions which govern either the exercise or the termination of the assumed
Hammerhead Option remain the same as set forth in your Option Agreement, and the
provisions of the Option Agreement (except as expressly modified by this
Agreement and the Acquisition) will govern and control your rights under this
Agreement to purchase shares of Cisco Stock. HOWEVER, TO THE EXTENT AN ITEM IS
NOT EXPLICITLY PROVIDED FOR IN YOUR OPTION DOCUMENTS, CISCO POLICIES WILL APPLY.
FOR EXAMPLE, VESTING OF OPTIONS WILL BE SUSPENDED DURING ALL LEAVES OF ABSENCE
IN ACCORDANCE WITH CISCO POLICY, UNLESS YOUR OPTION DOCUMENTS EXPLICITLY PROVIDE
OTHERWISE. Upon your termination of employment with Cisco you will have the
limited time period specified in your Option Agreement to exercise your assumed
Hammerhead Option to the extent vested and outstanding at the time, generally a
sixty day period, after which time your Hammerhead Options will expire and NOT
be exercisable for Cisco Stock.
To exercise your assumed Hammerhead Option, you must deliver to Cisco (i) a
written notice of exercise for the number of shares of Cisco Stock you want to
purchase, (ii) the adjusted exercise price, and (iii) all applicable taxes. The
exercise notice and payment should be delivered to Cisco at the following
address:
Cisco Systems, Inc.
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Attention: Stock Administration
Nothing in this Agreement or your Option Agreement interferes in any way with
your rights and Cisco's rights, which rights are expressly reserved, to
terminate your employment at any time for any reason. Any future options, if
any, you may receive from Cisco will be governed by the terms of the Cisco stock
option plan, and such terms may be different from the terms of your assumed
Hammerhead Options, including, but not limited to, the time period in which you
have to exercise vested options after your termination of employment.
Please sign and date this Agreement and return it promptly to the address listed
above. Until your fully executed Agreement is received by Cisco's Stock
Administration Department your Cisco account will not be activated. If you have
any questions regarding this Agreement or your assumed Hammerhead Options,
please contact ▇▇▇▇ ▇▇▇▇ at ▇▇▇-▇▇▇-▇▇▇▇.
CISCO SYSTEMS, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Corporate Secretary
EFFECTIVE DATE: JUNE 24, 2002
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 Hammerhead Options hereby assumed by Cisco are as
set forth in the Option Agreement, the Plan and such Stock Option Assumption
Agreement.
DATED: __________________, 2002 ----------------------------------------
[NAME], OPTIONEE