Document:

Third Senior Convertible Promissory Note

 Exhibit 4.5C 
 THIS NOTE HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED, AND ACCORDINGLY MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT. 
 September 17, 2007 
 THIRD SENIOR
CONVERTIBLE PROMISSORY NOTE 
 FOR THE VALUE RECEIVED, TERCICA, INC., a Delaware corporation (the Company), promises to pay Ipsen, S.A. a
French société anonyme, or its registered assigns (the Holder) the principal sum of Fifteen Million Dollars ($15,000,000) on the Maturity Date (as specified herein), together with interest computed on the basis of
a 360-day year of twelve 30-day months (a) on the unpaid principal balance hereof at a rate equal to 2.5% per annum from the date hereof, which interest shall be compounded quarterly on
March 31, June 30, September 30 and December 31 of each year, commencing October 1, 2007, and (b) to the extent permitted by law on any overdue payment of principal or interest at a rate per annum equal to
Default Rate, which default interest shall be payable on demand. Payment shall be made in lawful tender of the United States to the Holder by the method and at the address specified for such purpose by the Holder from time to time. 
  

	1.	DEFINITIONS 

 For purposes hereof, the following
definitions shall apply: 
  

	(a)	Additional Shares of Common Stock has the meaning attributed to it in Section 3(f) of this Note. 

  

	(b)	Adjustment Events means (1) any reclassification or change of Common Stock (other than a change in par value, as a result of a Subdivision or Combination),
(2) any consolidation, merger or mandatory share exchange of the Company with or into another corporation (other than a merger or mandatory share exchange with another corporation in which the Company is a continuing corporation and which does
not result in any reclassification or change other than a change in par value or as a result of a Subdivision or Combination). 

  

	(c)	Affiliate means, in respect of any Person, any other Person directly or indirectly controlling, controlled by, or under common control with, such Person or any of its
subsidiaries, and the term “control” (including the terms “controlled by” and “under common control with”) means having, directly or indirectly, the power to direct or cause the direction of the management and policies
of a Person, whether through ownership of voting securities or by contract or otherwise. 

	(d)	Affiliation Agreement means that certain Affiliation Agreement dated as of the date hereof by and among the Company, Ipsen S.A., a French société anonyme
and Suraypharm, a French société par actions simplifiée. 

  

	(e)	Aggregate Consideration has the meaning attributed to it in Section 3(d) of this Note. 

  

	(f)	The terms beneficial owner, beneficial ownership and beneficially own have the meanings attributed to them in the Affiliation Agreement.

  

	(g)	Board means the Board of Directors of the Company. 

  

	(h)	Business Day means a day, other than Saturday, Sunday or other day on which commercial banks in New York, New York are authorized or required by applicable law to
close. 

  

	(i)	Capital Lease means any lease that is required to be capitalized on the balance sheet of the lessee in accordance with generally accepted accounting principles.

  

	(j)	Combination has the meaning attributed to in Section 4(c) of this Note. 

  

	(k)	Common Stock means the Company’s common stock with a par value of $0.001 per share. 

  

	(l)	Conversion Amount means, with respect to any conversion of this Note, the sum of (1) the principal amount of this Note to be converted in such conversion plus
(2) accrued and unpaid interest on such principal amount at the interest rates provided in this Note to the Conversion Date plus (3) Default Interest, if any, on the interest referred to in the immediately preceding clause (2).

  

	(m)	Conversion Date has the meaning attributed to it in Section 2(a) of this Note. 

  

	(n)	Conversion Price means $7.41, as adjusted pursuant to Sections 3 and 4 of this Note. 

  

	(o)	Convertible Notes has the meaning attributed to it in the Purchase Agreement. 

  

	(p)	Convertible Securities has the meaning attributed to it in Section 3(e) of this Note. 

  

	(q)	Covenant Defeasance has the meaning attributed to it in Section 8.1(c) of this Note. 

  

	(r)	Default has the meaning attributed to it in Section 11 of this Note. 

  

	(s)	Default Interest means the interest payable at the Default Rate in respect of this Note as provided herein. 

  

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	(t)	Default Rate means the rate of interest that is the greater of (i) 5.52% and (ii) 3% over the applicable Libor Rate. 

  

	(u)	Disposition means the sale, lease or other disposition of any property by any Person. 

  

	(v)	EBITDA means, for any period, the sum, for the Company and its subsidiaries (determined on a consolidated basis without duplication in accordance with GAAP), of the
following: (i) net income for such period plus (ii) Interest Expense for such period, together with any original issue discount to the extent deducted in calculating net income plus (iii) income taxes for such period
plus (iv) depreciation and amortization (to the extent deducted in computing net income) for such period. 

  

	(w)	Effective Price has the meaning attributed to it in Section 3(g) of this Note. 

  

	(x)	Guaranty, with respect to any Person, means all obligations of such Person guaranteeing or in effect guaranteeing any Indebtedness (“primary obligations”) of
any other Person (the “primary obligor”) in any manner, whether directly or indirectly, including obligations incurred through an agreement, contingent or otherwise, by such Person (a) to purchase such primary obligation or any
property or assets constituting security therefor, (b) to advance or supply funds (i) for the purchase or payment of such primary obligation or (ii) to maintain working capital or equity capital, or otherwise to advance or make
available funds for the purchase or payment of such primary obligation, (c) to purchase property, securities or services primarily for the purpose of assuring the owner of such primary obligation of the ability of the primary obligor to make
payment of such primary obligation or (d) otherwise to assure the owner of such primary obligation against loss in respect thereof; provided that the term “Guaranty” shall not include any endorsement of a matured instrument for
collection or deposit in the ordinary course of business. The amount of any Guaranty shall be deemed to be an amount equal to the stated or determinable amount of the primary obligation in respect of which such Guaranty is made or, if not stated or
determinable, the maximum reasonably anticipated liability in respect thereof (assuming such Person is required to perform thereunder) as determined by such Person in good faith. The verb “Guarantee” shall have a correlative meaning.

  

	(y)	Increlex License has the meaning attributed to it in the Purchase Agreement. 

  

	(z)	 Indebtedness, with respect to any Person, means all items (other than capital stock, capital surplus, retained earnings, obligations payable in
capital stock of such Person and deferred credits) which in accordance with generally accepted accounting principles would be included in determining total liabilities as shown on the liability side of a balance sheet of such Person as at the date
of which Indebtedness is to be determined. The term “Indebtedness” shall also include, whether or not so reflected, (i) indebtedness, obligations and liabilities secured by 

  

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any Lien on property of such Person whether or not the indebtedness secured thereby shall have been assumed by such Person, (ii) the amount that would
appear on the liabilities side of a balance sheet of such Person as at the date of determination in respect of rentals under Capital Leases, (iii) obligations of such Person to pay the deferred purchase price or acquisition price of property or
services, other than trade accounts payable (other than for borrowed money) arising in the ordinary course of business, (iv) payment obligations with respect to interest rate swaps, currency swaps and similar obligations, and (v) all
Guaranties of any of the above. Notwithstanding the foregoing, in determining the indebtedness of any Person, there shall be included all indebtedness of such Person deemed to be extinguished under generally accepted accounting principles but for
which such Person remains legally liable. The amount of any limited recourse Indebtedness shall be equal to the principal amount of such limited recourse debt for which such Person provides credit support of any kind is liable as a guarantor or
otherwise. 

  

	(aa)	Indemnitees has the meaning attributed to it in Section 12 of this Note. 

  

	(bb)	Interest Expense means, for any period, the sum, for the Company and its subsidiaries (determined on a consolidated basis without duplication in accordance with GAAP),
of the following: (i) all cash interest in respect of Indebtedness (including, without limitation, the interest component of any payments in respect of Capital Lease Obligations) accrued during such period (whether or not actually paid during
such period) plus (ii) the net amount payable (or minus the net amount receivable) under the Interest Rate Protection Agreements during such period (whether or not actually paid or received during such period).

  

	(cc)	Investor has the meaning attributed to it in the Affiliation Agreement. 

  

	(dd)	Investor Directors has the meaning attributed to it in the Affiliation Agreement. 

  

	(ee)	Libor Rate shall mean, for any date, the rate appearing on Page 3750 of the Dow Jones Markets Service (or on any successor or substitute page of such Service, or
any successor to or substitute for such Service, providing rate quotations comparable to those currently provided on such page of such Service, as determined by the Holder from time to time for purposes of providing quotations of interest rates
applicable to dollar deposits in the London interbank market) at approximately 11:00 a.m., London time, on such date with a three-month maturity. In the event that such rate is not available at such time for any reason, then the Libor Rate
shall be the arithmetic average of the rates (rounded upwards, if necessary, to the next 1/16 of 1%) at which dollar deposits of $5,000,000 and for a maturity of three months are offered by the principal London office of Barclays Bank plc in
immediately available funds in the London interbank market at approximately 11:00 a.m., London time, on such date. 

  

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	(ff)	Lien means any lien, pledge, mortgage, deed of trust, security interest, attachment, easement or other similar encumbrance of any kind. 

  

	(gg)	Losses has the meaning attributed to in Section 12 of this Note. 

  

	(hh)	Material Adverse Effect means a material adverse change in, or a material adverse effect upon (i) the operations, business, assets, properties, liabilities or
financial condition of the Company and its subsidiaries taken as a whole or (ii) the ability of the Company to make any payments due in respect of this Note. 

  

	(ii)	Maturity Date has the meaning attributed to it in Section 2(a) of this Note. 

  

	(jj)	Net Indebtedness means as of any date (i) Indebtedness as of such date minus (ii) cash and cash equivalents held by the Company as of such date.

  

	(kk)	New Note has the meaning attributed to in Section 4(a) of this Note. 

  

	(ll)	Note Adjustment Factor means a fraction, the numerator of which is the total number of shares outstanding immediately after the relevant Subdivision, Combination or
Stock Dividend, and the denominator of which is the total number of shares existing immediately prior to such event. 

  

	(mm)	Note Conversion Shares has the meaning attributed to it in Section 2(a) of this Note. 

  

	(nn)	Note Ledger has the meaning attributed to it in Section 2(c) of this Note. 

  

	(oo)	Notice of Conversion means a notice to the Company of the Holder’s intention to convert all or a portion of this Note in accordance, such notice to be consistent
with the form of notice attached as Annex A to this Note. 

  

	(pp)	Opinion of Counsel has the meaning attributed to it in Section 8.1(d)(iv) of this Note. 

  

	(qq)	Ownership Trigger has the meaning attributed to it in Section 2(a) of this Note. 

  

	(rr)	 Permitted Indebtedness means (i) Indebtedness of the Company hereafter incurred in the ordinary course of business, (ii) Indebtedness listed
on Schedule 1(rr) hereto, (iii) Indebtedness of the Company in respect of obligations under Capital Leases and other purchase money indebtedness, in each case incurred to finance expenditures that, in accordance with generally accepted
accounting principles, are included in “capital expenditures,” “additions to property, plant or equipment” or comparable items in the financial statements of the Company incurred in the ordinary course of business, not to exceed
One Million Dollars ($1,000,000) at any time outstanding, (iv) trade payables arising in the ordinary course of business, (v) Guarantees of Indebtedness permitted hereunder, (vi) loans by the Company or wholly-owned subsidiaries of
the Company made in the 

  

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ordinary course of business to the Company’s subsidiaries not to exceed, in the aggregate and at any time, One Million Dollars ($1,000,000) of principal
amount outstanding, (vii) loans by the Company’s subsidiaries to the Company, (viii) payment obligations with respect to interest rate swaps, currency swaps and similar obligations entered into in the ordinary course of business and
not for speculative or trading purposes, (ix) Indebtedness in respect of performance, bid, surety, indemnity, appeal bonds, completion guarantees and other obligations of like nature and Guarantees and or obligations as an account party in
respect of the face amount of trade letters of credit in respect thereof (including worker’s compensation claims, environmental remediation and other environmental matters and obligations in connection with self-insurance or similar
requirements), in each such case to the extent provided in the ordinary course of business, (x) subordinated indebtedness, (xi) Indebtedness of a Person existing at the time such Person becomes a subsidiary of the Company and not in
contemplation thereof, provided such Indebtedness is repaid (and the commitments thereunder terminated) not later than 180 days following the date on which such Person becomes a subsidiary, and (x) Indebtedness of the Company as an account
party or applicant in respect of letters of credit issued to landlords in an aggregate and at any time, One Million Dollars ($1,000,000) of principal amount outstanding. 

  

	(ss)	Permitted Investments means (i) investments made in accordance with the Company’s investment policy, attached hereto as Schedule 1(ss)(1),
(ii) investments of subsidiaries or the Company in or to other subsidiaries that are not wholly owned not to exceed $250,000 in the aggregate in any calendar year, (iii) investments (including debt obligations) received in connection with
the bankruptcy or reorganization of customers or suppliers and in settlement of delinquent obligations of, and other disputes with, customers or suppliers arising in the ordinary course of business, (iv) investments received as consideration in
connection with a permitted disposition of any assets or received in satisfaction of judgments not to exceed $2,000,000, and (v) loans, advances or ownership existing on the date of this Note and set forth in Schedule 1(ss)(2) hereto.

  

	(tt)	 Permitted Liens means (i) any Lien for taxes, assessments or governmental charges or levies not yet due or payable or being contested in good
faith by appropriate proceedings for which adequate reserves have been established in accordance with generally accepted accounting principles applied on a consistent basis, (ii) any statutory Lien and Liens of carriers, warehousemen,
mechanics, materialmen, repairmen and suppliers and other Liens imposed by law or pursuant to customary reservations or retentions of title, in each case, arising in the ordinary course of business by operation of law with respect to a liability
that is not past due or which is being contested in good faith by appropriate proceedings and for which reserves have been established in accordance with GAAP, (iii) Liens securing equipment subject to Capital Leases that qualify as Permitted
Indebtedness above, which Liens are in favor of the party from whom the Company is leasing the equipment, (iv) Liens existing on the date hereof and set 

  

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forth in Schedule 1(tt) hereto, (v) pledges or deposits in the ordinary course of business in connection with workers’ compensation, unemployment
insurance and other social security legislation, (vi) easements, rights-of-way, restrictions and other similar encumbrances affecting real property which do not in any case materially detract from the value of the property subject thereto or
materially interfere with the ordinary conduct of the business of the applicable Person, (vii) Liens securing judgments for the payment of money (or appeal or other surety bonds relating to such judgments) not constituting an Event of Default,
(viii) leases or subleases granted to others not interfering in any material respect with the Company’s business, (ix) any interest of title of a lessor under, and Liens arising from UCC financing statements (or equivalent filings,
registrations or agreements in foreign jurisdictions) relating to, leases permitted hereunder, (x) normal and customary rights of setoff upon deposits of cash in favor of banks or other depository institutions, (xi) Liens of a collection
bank arising under Section 4-210 of the Uniform Commercial Code on items in the course of collection, (xii) Liens of sellers of goods arising under Article 2 of the Uniform Commercial Code or similar provisions of applicable law in the
ordinary course of business, covering only the goods sold and securing only the unpaid purchase price for such goods and related expenses, (xiii) Liens in favor of customs and revenue authorities arising as a matter of law to secure payment of
customs duties in connection with the importation of goods, or (xiv) Liens solely on deposits, advances, contractual payments, including implementation allowances or escrows made or paid by any loan party or any subsidiary to or with customers,
clients or landlords in the ordinary course of business, provided that, such deposits, advances, contractual payments, implementation allowances or escrows do not, in the aggregate and at any one time, exceed One Million Dollars ($1,000,000).

  

	(uu)	Permitted Transfer means the (i) Disposition of obsolete or worn out property or property no longer used or useful in the conduct of business, whether now owned
or hereafter acquired, in the ordinary course of business, (ii) Disposition of inventory in the ordinary course of business, (iii) Disposition of equipment or real property in the ordinary course of business to the extent that
(x) such property is exchanged for credit against the purchase price of similar replacement property or is otherwise reinvested in the business of the Company or its subsidiaries or (y) the proceeds of such disposition are applied within
180 days to the purchase price of similar replacement property or is otherwise reinvested in the business of the Company and its subsidiaries, (iv) Disposition of assets by any subsidiary of the Company to the Company, (v) the granting of
a non-exclusive license or sublicense by the Company and its subsidiaries of software, trademarks, patents and other intellectual property in the ordinary course of business, and which do not materially interfere with the business of the Company and
its subsidiaries taken as a whole or otherwise conflict with any contract or license to which the Company or any of its subsidiaries are bound, and only to the extent that such grant does not require the Holder’s consent pursuant to
Section 8.1(a), (vi) Dispositions of cash equivalents and (vi) liquidation, winding up or dissolution of a subsidiary of the Company that has no operations or revenues. 

  

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	(vv)	Person means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization and a government or any
department or agency thereof. 

  

	(ww)	Purchase Agreement means that certain Stock Purchase and Master Transaction Agreement dated as of July 18, 2006 by and between the Company and Ipsen, S.A., a
French société anonyme. 

  

	(xx)	Reference Price means $4.75. 

  

	(yy)	Registration Rights Agreement has the meaning attributed to it in the Purchase Agreement. 

  

	(zz)	Rights has the meaning attributed to it in the Rights Agreement. 

  

	(aaa)	Rights Agreement has the meaning attributed to it in the Affiliation Agreement. 

  

	(bbb)	Somatuline Autogel License has the meaning attributed to it in the Purchase Agreement. 

  

	(ccc)	Stock Dividend means a payment by the Company of a dividend or other distribution in Common Stock to all holders of Common Stock. 

  

	(ddd)	Subdivision has the meaning attributed to in Section 4(b) of this Note. 

  

	(eee)	Tax means any tax (whether income, documentary, sales, stamp, registration, issue, capital, property, excise or otherwise), duty, assessment, levy, impost, fee,
compulsory loan, charge or withholding. 

  

	(fff)	Transaction Documents has the meaning attributed to it in the Purchase Agreement. 

  

	(ggg)	Trigger Price has the meaning attributed to it in Section 3(a) of this Note. 

  

	(hhh)	Triggering Sale has the meaning attributed to it in the Affiliation Agreement. 

  

	(iii)	Trustee has the meaning attributed to it in Section 8.1(d)(i) of this Note. 

  

	(jjj)	Trustee Account has the meaning attributed to it in Section 8.1(d)(i) of this Note. 

  

	(kkk)	Warrant has the meaning attributed to it in the Purchase Agreement. 

  

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	2.	PAYMENT; CONVERSION OF NOTE 

  

	(a)	The entire principal balance of this Note, together with interest accrued thereon, shall be immediately due and payable, in cash, on the date which is the later of
(i) October 13, 2011 and (ii) two years following the date on which the Holder provides notice to the Company that it will not convert this Note in full (the Maturity Date); provided however, that such amount will
become due and payable, at the option of the Holder, by notice to the Company upon the occurrence of and at any time after an Ownership Trigger. For purposes of this Note, an Ownership Trigger shall occur if, after the date hereof,
(x) the provisions of Section 3 of the Affiliation Agreement remain in effect and (1) any Person or “group” (within the meaning of Section 13(d)(3) of the Securities Exchange Act of 1934, as amended) (other than the
Holder or its Affiliates) that is not already the beneficial owner of more than 9.9% of the then outstanding Common Stock acquires beneficial ownership of greater than 9.9% of the then outstanding Common Stock, or (2) any Person or
“group” (within the meaning of Section 13(d)(3) of the Securities Exchange Act of 1934, as amended) (other than the Holder or its Affiliates) currently beneficially owning greater than 9.9% of the outstanding Common Stock increases
the percentage of the outstanding Common Stock currently beneficially owned by such Person or group; or (y) the provisions of Section 3 of the Affiliation Agreement shall cease to be effective and any Person or “group” (within
the meaning of Section 13(d)(3) of the Securities Exchange Act of 1934, as amended) (other than the Holder or its Affiliates) acquires beneficial ownership of greater than 50% of the then outstanding Common Stock. All payments made in respect
of the Notes shall be made on a pari passu basis. The Company shall not be permitted to prepay any interest or principal due under the Note without the prior written consent of the Holder. The Holder shall have the right, at its option, at any time
from and after the date of this Note, to convert the principal amount of this Note and all accrued interest thereon, or any portion of such principal amount and interest, into that number of fully paid and nonassessable shares of Common Stock (as
such shares shall then be constituted) determined pursuant to this Section 2. The number of shares of Common Stock to be issued upon each conversion of this Note (the Note Conversion Shares) shall be determined by dividing the
Conversion Amount by the Conversion Price in effect on the date (the Conversion Date) a Notice of Conversion is delivered to the Company by the Holder by facsimile or other reasonable means of communication dispatched prior to 5:00
p.m., New York Time. 

  

	(b)	The Company (i) shall promptly irrevocably instruct its transfer agent to issue certificates for the Common Stock issuable upon conversion of this Note and (ii) agrees
that its issuance of this Note shall constitute full authority to its officers and agents who are charged with the duty of executing stock certificates to execute and issue the necessary certificates for shares of Common Stock in accordance with the
terms and conditions of this Note. 

  

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	(c)	Notwithstanding anything to the contrary set forth herein, upon conversion of this Note in accordance with the terms hereof, the Holder shall not be required to physically surrender
this Note to the Company unless the entire unpaid principal amount of this Note is so converted. Rather, records showing the principal amount converted (or otherwise repaid) and the date of such conversion or repayment shall be maintained on a
ledger in a form to be reasonably acceptable to the Company and the Holder (the Note Ledger) (a copy of which shall be delivered to the Company or transfer agent with each Notice of Conversion). It is specifically contemplated that the
Company hereof shall act as the calculation agent for conversions and repayments. In the event of any dispute or discrepancies, such records maintained by the Company shall be controlling and determinative in the absence of manifest error. The
Holder and any assignee, by acceptance of this Note, acknowledge and agree that, by reason of the provisions of this paragraph, following a conversion of a portion of this Note, the principal amount represented by this Note will be the amount
indicated on the Note Ledger (which may be less than the amount stated on the face hereof). 

  

	(d)	The Company shall not be required to pay any tax which may be payable in respect of any transfer involved in the issuance and delivery of shares of Common Stock or other securities
or property on conversion of this Note in a name other than that of the Holder (or in street name), and the Company shall not be required to issue or deliver any such shares or other securities or property unless and until the Person or Persons
(other than the Holder or the custodian in whose street name such shares are to be held for the Holder’s account) requesting the issuance thereof shall have paid to the Company the amount of any such tax or shall have established to the
satisfaction of the Company that such tax has been paid. 

  

	(e)	 Upon receipt by the Company of a Notice of Conversion, the Holder shall be deemed to be the holder of record of the Common Stock issuable upon such conversion, the
outstanding principal amount and the amount of accrued and unpaid interest on this Note shall be reduced to reflect such conversion, and, unless the Company defaults on its obligations under this Section 2, all rights with respect to the
portion of this Note being so converted shall forthwith terminate except the right to receive the Common Stock or other securities, cash or other assets, as herein provided, on such conversion. If the Holder shall have given a Notice of Conversion
as provided herein, the Company’s obligation to issue and deliver the certificates for shares of Common Stock shall be absolute and unconditional, irrespective of the absence of any action by the Holder to enforce the same, any waiver or
consent with respect to any provision thereof, the recovery of any judgment against any Person or any action by the Holder to enforce the same, any failure or delay in the enforcement of any other obligation of the Company to the Holder of record,
or any setoff, counterclaim, recoupment, limitation or termination, or any breach or alleged breach by the Holder of any obligation to the Company, and irrespective of any other circumstance which might otherwise limit such obligation of the Company
to the Holder in connection 

  

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with such conversion. The date of receipt (including receipt via telecopy) of such Notice of Conversion shall be the Conversion Date so long as it is
received before 5:00 p.m., New York Time, on such date. 

  

	3.	PRICE-BASED ANTI-DILUTION ADJUSTMENT OF CONVERSION PRICE

  

	(a)	If at any time or from time to time after the date hereof, the Company issues or sells, or is deemed by the express provisions of this Section 3 to have issued or sold,
Additional Shares of Common Stock, other than as provided in Sections 4(a)-4(d) below, for an Effective Price less than the lower of (i) the Reference Price or (ii) the then effective Conversion Price (such lower amount, the Trigger
Price), then and in each such case, the then effective Conversion Price shall be reduced, as of the opening of business on the date of such issue or sale, to a price determined in accordance with the following formula:

  

							
	A	 	=	 	B x [C + (D/E)]	 	
		 		 	          [C + F]	 	

 For the purposes of this clause (a) and clause (g), the following definitions shall apply:

 A = the Conversion Price in effect immediately after such issue or sale of Additional Shares of Common Stock. 
 B = the Conversion Price in effect immediately prior to such issue or sale of Additional Shares of Common Stock. 
 C = the number of shares of Common Stock Outstanding (as defined in clause (b) below) immediately prior to such issue or sale of
Additional Shares of Common Stock. 
 D = the Aggregate Consideration received in exchange for such Additional Shares of Common
Stock. 
 E = the Trigger Price. 
 F = the number of such Additional Shares of Common Stock so issued or sold. 
  

	(b)	For the purposes of Section 3(a), the number of shares of Common Stock deemed to be outstanding (Common Stock Outstanding) as of a given date shall be the sum of
(A) the number of shares of Common Stock outstanding, plus (B) the number of shares of Common Stock into which the then outstanding Convertible Notes could be converted if fully converted on the day immediately preceding the given date,
plus (C) the number of shares of Common Stock which are issuable upon the exercise of the Warrant on the day immediately preceding the given date. 

  

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	(c)	No adjustment shall be made to the Conversion Price under this Section 3 in an amount less than one cent per share. Any adjustment required by this Section 3 shall be
rounded to the nearest one cent ($0.01) per share. Any adjustment otherwise required by this Section 3 that is not required to be made due to the preceding two sentences shall be included in any subsequent adjustment to the Conversion Price.

  

	(d)	For the purpose of making any adjustment required under this Section 3, the aggregate consideration received by the Company for any issue or sale of securities (the
Aggregate Consideration) shall be defined as: (A) to the extent it consists of cash, be computed at the gross amount of cash received by the Company before deduction of any underwriting or similar commissions, compensation or
concessions paid or allowed by the Company in connection with such issue or sale and without deduction of any expenses payable by the Company, (B) to the extent it consists of property other than cash, be computed at the fair value of that
property as determined in good faith by the Board, and (C) if Additional Shares of Common Stock, Convertible Securities or rights or options to purchase either Additional Shares of Common Stock or Convertible Securities are issued or sold
together with other stock or securities or other assets of the Company for a consideration which covers both, be computed as the portion of the consideration so received that may be reasonably determined in good faith by the Board (in a manner
consistent with comparable activities such as valuing stock options for accounting purposes) to be allocable to such Additional Shares of Common Stock, Convertible Securities or rights or options. 

  

	(e)	For the purpose of the adjustment required under this Section 3, if the Company issues or sells (x) capital stock, options, warrants, purchase rights or other securities
convertible into, Additional Shares of Common Stock, other than the Rights (such convertible stock or securities being herein referred to as Convertible Securities), or (y) rights (other than the Rights) or options for the
purchase of Additional Shares of Common Stock or Convertible Securities and if the Effective Price of such Additional Shares of Common Stock is less than the Conversion Price, in each case the Company shall be deemed to have issued at the time of
the issuance of such rights or options or Convertible Securities the maximum number of Additional Shares of Common Stock issuable upon exercise or conversion thereof and to have received as consideration for the issuance of such shares an amount
equal to the total amount of the consideration, if any, received by the Company for the issuance of such rights or options or Convertible Securities plus: 

  

	 	(i)	in the case of such rights or options, the minimum amounts of consideration, if any, payable to the Company upon the exercise of such rights or options; and

  

	 	(ii)	 in the case of Convertible Securities, the minimum amounts of consideration, if any, payable to the Company upon the conversion thereof (other than by cancellation
of liabilities or obligations evidenced by such 

  

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Convertible Securities); provided that if the minimum amounts of such consideration cannot be ascertained, but are a function of antidilution or
similar protective clauses, the Company shall be deemed to have received the minimum amounts of consideration without reference to such clauses. 

  

	 	(iii)	If the minimum amount of consideration payable to the Company upon the exercise or conversion of rights, options or Convertible Securities is reduced over time or on the occurrence
or non-occurrence of specified events other than by reason of antidilution or similar protective adjustments, the Effective Price shall be recalculated using the figure to which such minimum amount of consideration is reduced; provided
however, that if the minimum amount of consideration payable to the Company upon the exercise or conversion of such rights, options or Convertible Securities is subsequently increased, the Effective Price shall be again recalculated using the
increased minimum amount of consideration payable to the Company upon the exercise or conversion of such rights, options or Convertible Securities. 

  

	 	(iv)	No further adjustment of the Conversion Price, as adjusted upon the issuance of such rights, options or Convertible Securities, shall be made as a result of the actual issuance of
Additional Shares of Common Stock or the exercise of any such rights or options or the conversion of any such Convertible Securities. If any such rights or options or the conversion privilege represented by any such Convertible Securities shall
expire without having been exercised, the Conversion Price as adjusted upon the issuance of such rights, options or Convertible Securities shall be subsequently adjusted to the Conversion Price which would have been in effect had an adjustment been
made on the basis that the only Additional Shares of Common Stock so issued were the Additional Shares of Common Stock, if any, actually issued or sold on the exercise of such rights or options or rights of conversion of such Convertible Securities,
and such Additional Shares of Common Stock, if any, were issued or sold for the consideration actually received by the Company upon such exercise, plus the consideration, if any, actually received by the Company for the granting of all such rights
or options, whether or not exercised, plus the consideration received for issuing or selling the Convertible Securities actually converted, plus the consideration, if any, actually received by the Company (other than by cancellation of liabilities
or obligations evidenced by such Convertible Securities) on the conversion of such Convertible Securities. 

  

	(f)	For the purpose of making any adjustment to the Conversion Price under this Section 3, Additional Shares of Common Stock shall mean all shares of Common Stock
issued by the Company or deemed to be issued pursuant to this Section 3, other than: 

  

	 	(i)	shares of Common Stock issued upon conversion of the Convertible Notes; 

  

 Page 13 of 41 

	 	(ii)	shares of Common Stock or Convertible Securities issued after the date hereof to employees, officers or directors of, or consultants to, the Company or any subsidiary pursuant to
stock purchase or stock option plans or other arrangements that are approved by the Board (provided that such consultants receive no more than 75,000 shares of Common Stock in aggregate per calendar year and the issuance of such shares to
such consultants shall be for services and in amounts that are consistent with past issuances); 

  

	 	(iii)	shares of Common Stock issued pursuant to the exercise of Convertible Securities outstanding as of the date hereof, including the Warrant; or 

  

	 	(iv)	shares of Common Stock or Convertible Securities issued in connection with any stock split, stock dividend or recapitalization by the Company. 

 References to Common Stock in the subsections of this clause (f) shall mean all shares of Common Stock issued by the Company or deemed to be issued
pursuant to this Section 3. 
  

	(g)	The Effective Price shall mean the price at which Additional Shares of Common Stock are issued or sold and shall be determined in accordance with the following
formula: 

 Effective Price = (D)/(F) 
 where D and F have the meaning given to them in Section 3(a) above. 
  

	(h)	In the event that the number of shares of Additional Shares of Common Stock or the Effective Price cannot be ascertained at the time of issuance, such Additional Shares of Common
Stock shall be deemed issued immediately upon the occurrence of the first event that makes such number of shares or the Effective Price, as applicable, ascertainable. 

  

	4.	FURTHER ADJUSTMENTS TO CONVERSION PRICE 

 The Conversion Price and the Note Conversion Shares shall be subject to further adjustment from time to time upon the happening of certain events as follows: 

 

	(a)	 Reclassification, Consolidation, Merger, Mandatory Share Exchange, Sale or Transfer. Upon the occurrence of any Adjustment Events while any outstanding
principal amount of this Note or any accrued interest thereon remains capable of being converted pursuant to Section 2 above, the Holder may in its sole discretion require the Company, or any successor or purchasing corporation, as the case may
be, without payment of any additional consideration therefor, to execute and 

  

 Page 14 of 41 

	 	 
deliver to the Holder a new note which shall be upon terms no less favorable to the Holder than those then applicable to this Note (a New Note)
and upon conversion of the principal amount of the New Note and all accrued interest thereon or conversion of any portion of such principal amount and interest, the Holder shall receive in lieu of each share of Common Stock theretofore issuable upon
such conversion of this Note, the kind and amount of shares of stock, other securities, money or property receivable upon such Adjustment Event by the holder of one share of Common Stock issuable upon such conversion of this Note had this Note been
converted in such manner immediately prior to such Adjustment Event. Such new Note shall provide for adjustments that shall be as nearly equivalent as may be practicable to the adjustments provided for in Sections 3 and 4 hereto. Prior to such
request for a New Note, this Note shall be convertible for such number of shares for which the New Note would be convertible. 

  

	(b)	Subdivision of Shares. If, while any outstanding principal amount of this Note or any accrued interest thereon remains capable of being converted pursuant to Section 2
above, the Company shall subdivide its Common Stock (a Subdivision), then as of the effective date of such Subdivision, or, if the Company shall take a record of holders of its Common Stock for the purpose of so subdividing, as of such
record date, whichever is earlier, the Conversion Price in effect on such date shall be adjusted by dividing such Conversion Price by the Note Adjustment Factor applicable to such Subdivision. 

  

	(c)	Combination of Shares. If, while any outstanding principal amount of this Note or any accrued interest thereon remains capable of being converted pursuant to Section 2
above, the Company shall combine its Common Stock (a Combination), then as of the effective date of such Combination, or, if the Company shall take a record of holders of its Common Stock for the purpose of so combining, as of such
record date, whichever is earlier, the Conversion Price in effect on such date shall be adjusted by dividing such Conversion Price by the Note Adjustment Factor applicable to such Combination. 

  

	(d)	Stock Dividends. If, while any outstanding principal amount of this Note or any accrued interest thereon remains capable of being converted pursuant to Section 2 above,
the Company shall pay a Stock Dividend, then as of the date the Company shall take a record of the holders of its Common Stock for the purpose of receiving such dividend or other distribution (or if no such record is taken, as at the date of such
payment or other distribution), the Conversion Price in effect on such date shall be adjusted by dividing such Conversion Price by the Note Adjustment Factor applicable to such Stock Dividend; provided that the provisions of this
clause (d) shall not apply under any of the circumstances for which an adjustment is provided in clauses (a), (b) or (c). 

  

 Page 15 of 41 

	5.	NOTICE OF ADJUSTMENTS 

 Whenever the Conversion Price shall be adjusted pursuant to Sections 3 or 4 hereof, the Company shall promptly prepare a certificate signed by its Chief Executive Officer or Chief Financial Officer setting forth in reasonable detail the
event requiring the adjustment, the amount of the adjustment, the method by which such adjustment was calculated (including a description of the basis on which the Company’s Board of Directors made any determination hereunder), and the
Conversion Price after giving effect to such adjustment, and shall promptly cause copies of such certificate to be sent by overnight courier to the Holder. 
  

	6.	ISSUANCE OF STOCK ON CONVERSION 

 Upon conversion of this Note as set forth in Section 2 above, the Company at its expense will cause to be issued, in the name of and delivered to the Holder, a
certificate or certificates for, or, to the extent the Note Conversion Shares are not restricted securities, make deposit with the Depository Trust Company via book-entry, the number of shares of Common Stock to which the Holder shall be entitled on
such conversion together with any other securities and property, if any, to which the Holder is entitled on such conversion under the terms of this Note. The Company shall not issue any fraction of a share of Common Stock upon any conversion. If the
issuance would result in the issuance of a fraction of a share of Common Stock, the Company shall calculate and pay a cash adjustment in respect of such fraction. 
  

	7.	REPRESENTATIONS AND WARRANTIES 

 Except as set forth on the Disclosure Schedule attached hereto, the Company represents and warrants that the following are true as of the date hereof: (a) as of the date hereof, all outstanding Indebtedness of the Company is listed on
Schedule 1(rr) attached hereto; (b) no outstanding Indebtedness of the Company will be senior to the Indebtedness evidenced by this Note other than Indebtedness that is collaterally secured (and then only to the extent of such collateral
security); (c) except as set forth on Schedule 7(c) hereto, there are no financing statements on file naming the Company as debtor; (d) upon conversion of this Note, the Note Conversion Shares will be duly authorized, validly issued, fully
paid and nonassessable assuming that such amendment does not otherwise provide for assessment, and upon issuance, will be free of any taxes, liens and encumbrances related to the issuance thereof and will not be subject to the preemptive rights or
other similar rights of stockholders of the Company; and (e) the Company’s payment obligations under this Note rank at least pari passu, without preference or priority, with all other unsecured Indebtedness of the Company 
  

 Page 16 of 41 

	8.	COVENANTS 

  

	8.1	Negative Covenants 

  

	(a)	Unless the Holder shall otherwise consent in writing, the Company hereby covenants and agrees with the Holder that it will not (and will cause its subsidiaries not to) until the
earlier of: (i) payment in full by the Company to the Holder of the principal and any outstanding interest payable in respect of this Note, or (ii) the date of completion of a Triggering Sale and the occurrence of the Covenant Defeasance
in compliance with the provisions of Sections 8.1(c) and 8.1(d): 

  

	 	(i)	make, or permit any subsidiary to make, any loan or advance to, or own any stock or other securities of, any subsidiary or other corporation, partnership, or other entity unless it
is wholly owned by the Company other than Permitted Investments; 

  

	 	(ii)	adopt any plan or arrangement for the dissolution or liquidation of the Company; 

  

	 	(iii)	enter into any material transaction or contract unless the transaction or contract would reflect the execution of a board-approved budget and would not be reasonably anticipated to
increase future budgets (i) beyond current projections, or (ii) where no current projections have been formally prepared, beyond reasonably anticipated growth based on the Company’s recent operating performance;

  

	 	(iv)	directly or indirectly acquire, sell, lease or otherwise dispose of any property or assets other than in its ordinary course of business; provided that, the Company shall not
in any event acquire, sell, lease, or dispose of any property or assets with an aggregate value exceeding Five Million Dollars ($5,000,000) without the Investor’s written consent unless it is a Permitted Transfer; 

  

	 	(v)	merge into or consolidate with any other Person other than with the Company; 

  

	 	(vi)	establish or approve an operating budget with anticipated research and development spending per calendar year in excess of the sum of (i) Twenty Five Million Dollars
($25,000,000) (with such research and development spending being determined on a GAAP basis) plus (ii) the amounts approved by the Joint Steering Committee established under the Somatuline Autogel License for spending related to the products of
Ipsen, S.A. or its Affiliates; 

  

 Page 17 of 41 

	 	(vii)	enter into any transaction or agreement that would be reasonably likely to require an increase to research and development spending that would cause such spending to exceed the
aggregate amount specified in Section 8.1(a)(vi) hereof; 

  

	 	(viii)	incur capital expenditures (on a GAAP basis) of more than Two Million Dollars ($2,000,000) in any given calendar year; 

  

	 	(ix)	make any investment, through the direct or indirect holding of securities or otherwise, other than Permitted Investments; 

  

	 	(x)	incur any Indebtedness (including extensions, renewals or refinancings and drawdowns under existing facilities), other than (i) Indebtedness evidenced by the Convertible Notes,
and (ii) Permitted Indebtedness; provided that, with respect to (ii), if following the incurrence of such Permitted Indebtedness, the total Indebtedness exceeds Two Million Five Hundred Thousand Dollars ($2,500,000) (excluding trade
payables in the ordinary course of business that are not more than 90 days past due), then such Permitted Indebtedness shall not be permitted unless immediately prior and after giving effect to the incurrence of such Permitted Indebtedness, the
Company’s ratio of Net Indebtedness to EBITDA shall not exceed 1 to 1; 

  

	 	(xi)	change the principal business of the Company, enter new lines of business (if such business or businesses are material to the Company or its subsidiaries), or exit the current line
of business of the Company; provided that the Company shall be permitted to make reasonable extensions, developments or expansions to the business of the Company; 

  

	 	(xii)	declare or pay any cash dividend on or redeem or repurchase any of its capital stock, directly or indirectly, until the Note has been converted or paid in its entirety as provided
herein, other than acquisitions of Common Stock by the Company pursuant to agreements which permit the Company to repurchase such shares upon termination of services to the Company; 

  

	 	(xiii)	create, incur, assume or permit to exist, any Liens on any of its properties or assets whether now owned or hereafter acquired, other than Permitted Liens; 

 

	 	(xiv)	prepay or pay any Indebtedness except for trade payables incurred in the ordinary course of the Company’s business and Permitted Indebtedness; or 

  

	 	(xv)	permit any of its subsidiaries to enter into any agreement or contractual or other restriction (other than customary limitations imposed by corporate law or similar statutes)
restricting the ability of such subsidiary to pay dividends out of profits or make any other similar distributions of profits to the Company or any of its subsidiaries that owns outstanding shares of capital stock or similar equity interests of such
subsidiary. 

  

 Page 18 of 41 

	(b)	Notwithstanding the foregoing, in the event that any action set forth in this Section 8.1 is approved by the Board, including the affirmative vote of the Investor Directors,
the Company shall as soon as reasonably practicable following such approval, provide the Holder with written notice of such approval and unless the Holder, within ten (10) Business Days after receipt of such notice, notifies the Company in
writing that it does not consent to such action, the Holder’s written consent to such action shall be deemed to have been given. 

  

	(c)	Notwithstanding the foregoing, in the event that a Triggering Sale occurs, the Company may, subject to the terms and conditions set forth herein, elect to provide for the defeasance
of its obligations with respect to certain covenants contained in this Note by delivering written notice to the Holder, which notice (i) shall be given not later than 30 days prior to the intended date for the deposit of funds contemplated by
Section 8.1(d) and (ii) shall state that the Company wishes to provide for the defeasance of certain of its obligations in accordance with Sections 8.1(c), 8.1(d), 8.1(e) and 8.1(f) and that such defeasance shall be subject to the
terms and conditions set forth in Sections 8.1(d), 8.1(e) and 8.1(f). Upon satisfaction of the conditions set forth in Section 8.1(d), the Company shall be released from its obligations under Section 8.1(a) (other than its obligations
under Sections 8.1(a)(ii), 8.1(a)(v) and 8.1(a)(xi) (in so far as such Section 8.1(a)(xi) relates to changing the principal place of business of the Company) with respect to this Note (the Covenant Defeasance) and this Note shall
thereafter be deemed not to be outstanding for the purposes of any direction, waiver, consent or declaration or act of the Holder (and the consequences of any thereof) in connection with such covenants, but shall continue to be deemed outstanding
for all other purposes hereunder. For this purpose, such Covenant Defeasance means that, with respect to this Note, the Company may omit to comply with and shall have no liability in respect of any term, condition or limitation set forth in any such
covenant, whether directly or indirectly, by reason of any reference elsewhere herein to any such covenant or by reason of any reference in any such covenant to any other provision herein or in any other document and such omission to comply shall
not constitute a Default under Section 11, but, except as specified above, the remainder of this Note shall be unaffected thereby. Notwithstanding the foregoing, the Company shall be released from its obligations under Section 8.1(a)(v)
only if it meets the merger conditions set forth in Section 8.1(g) (the Merger Conditions). 

  

	(d)	The following shall be the conditions to the application of Section 8.1(c): 

  

	 	(i)	 the Company must irrevocably deposit or cause to be deposited to an account (the Trust Account) to be held with a financial institution reasonably
acceptable to the Holder and the Company that shall act as trustee for the Holder (the Trustee), as trust funds in trust, specifically 

  

 Page 19 of 41 

	 	 
pledged as security for, and dedicated solely to, the benefit of the Holder, cash, United States government securities, or a combination thereof, in such
amounts sufficient, in the opinion of a nationally recognized firm of independent public accountants, to pay and discharge the principal of, premium, if any, and interest then due or known to be due on this Note on the Maturity Date of such
principal (and premium, if any) or installment of interest; 

  

	 	 (ii)
	 the Company has delivered evidence reasonably acceptable to the Holder that no Default has occurred and is continuing on
the date of such deposit and, insofar as an event of bankruptcy under Section 11(h) is concerned, at any time after the date of such deposit until the 91st day after the date of such deposit; 

  

	 	(iii)	such Covenant Defeasance shall not result in a breach or violation of, or constitute a default under, this Note or any other material agreement or instrument to which the Company is
a party or by which it is bound; 

  

	 	(iv)	the Company shall have delivered to the Holder a written legal opinion (which may be subject to customary exceptions), from legal counsel that is reasonably acceptable to the Holder
(an Opinion of Counsel), to the effect that the Holder will not recognize income, gain or loss for federal income tax purposes as a result of such Covenant Defeasance and will be subject to federal income tax on the same amounts, in
the same manner and at that same times as would have been the case if such Covenant Defeasance had not occurred; 

  

	 	(v)	the Company must have delivered to the Holder a certificate signed by an authorized officer of the Company and an Opinion of Counsel, each stating that all conditions precedent to
the Covenant Defeasance have been complied with; and 

  

	 	(vi)	the Company shall have delivered documentation reasonably acceptable to the Holder providing for the creation of the trust contemplated by this Sections 8.1(d), the appointment
of the Trustee and the terms of the trust and the creation and perfection of the security interest referred to in Section 8.1(d)(i). 

  

	(e)	Any money and United States government securities deposited in the Trust Account pursuant to Section 8.1(d)(i) in respect of this Note shall be held in trust and applied by the
Company, in accordance with the provisions of this Note and the other Transaction Documents, to the payment to the Holder of this Note and of all sums due and to become due thereon in respect of principal, premium, if any, and interest.

  

 Page 20 of 41 

	(f)	If the Trustee is unable to apply any money or United States government securities in accordance with Section 8.1(e) by reason of any order or judgment of any court or
governmental authority enjoining, restraining or otherwise prohibiting such application, then the Company’s obligations under this Note shall be revived and reinstated as though no deposit had occurred pursuant to Section 8.1(d)(i), until
such time as the Trustee or the Holder is permitted to apply all such money and United States government securities in accordance with Section 8.1(e). The Company hereby waives, until the indefeasible payment in full of the Note, any right of
subrogation or contribution it may have, whether arising by contract or law (including any such right arising under the US Federal Bankruptcy Code) or otherwise, by reason of any payment of principal of, or premium, if any, or interest on this Note
following the reinstatement of its obligations hereunder. 

  

	(g)	The following conditions shall be applicable to the application of Section 8.1(c) in respect of the Merger Conditions: 

  

	 	(i)	the surviving entity of the merger or consolidation is organized under the laws of the United States, any state thereof or the District of Columbia or the European Union (as of
April 20, 2004); 

  

	 	(ii)	the Holder receives 30 days’ prior notice of the merger or consolidation; 

  

	 	(iii)	the Holder receives an Opinion of Counsel to the effect that, after giving effect to the merger or consolidation, the Company will not be required to withhold or deduct in respect
of any payments under this Note or, prior to giving effect to such merger or consolidation, the Holder receives a satisfactory indemnification indemnifying it for any withholding or deduction in respect of any Tax on payments made hereunder; and

  

	 	(iv)	the surviving entity delivers to the Holder a certified copy of its charter documents and an assumption agreement reasonably acceptable to the Holder pursuant to which the Holder
irrevocably and unconditionally assumes all of the obligations of the Company under this Note and any agreement delivered thereunder, including the documentation relating to the trust provided for in Section 8.1(d). 

  

	8.2	AFFIRMATIVE COVENANTS 

 The Company
hereby covenants and agrees that it shall: 
  

	(a)	give written notice to the Holder upon the occurrence of a Default or any event but for the giving of notice or lapse of time, or both, would constitute a Default within five
(5) Business Days of such event; 

  

	(b)	 use the proceeds from the issuance of this Note solely for product development, general working capital purposes, liabilities incurred in the ordinary course of

  

 Page 21 of 41 

	 	 
business and not in any way for any purpose that entails a violation of, or is inconsistent with, Regulation U of the Board of Governors of the Federal
Reserve System of the United States of America; 

  

	(c)	comply in all material respects with all applicable laws (whether federal, state or local and whether statutory, administrative or judicial or other) and with every applicable
lawful governmental order (whether administrative or judicial) except in such instances in which (i) such law or governmental order is being contested in good faith by appropriate proceedings or (ii) the failure to comply therewith would
not be reasonably be expected to have a Material Adverse Effect; 

  

	(d)	keep adequate and proper records and books of account, in which complete and correct entries will be made consistent with the Company’s past practice, reflecting all financial
transactions of the Company; 

  

	(e)	maintain and preserve its existence, rights and privileges, and obtain, maintain and preserve any permits, licenses, authorizations and approvals that are necessary in the proper
conduct of its business except to the extent that the failure to do so would not reasonably be expected to have a Material Adverse Effect; and 

  

	(f)	maintain sufficient available shares for the issuance of the Note Conversion Shares and cause the Note Conversion Shares to be (i) validly issued, fully paid and nonassessable
(ii) free from all taxes, liens and encumbrances with respect to the issue thereof and (iii) not subject to any required consent, any preemptive rights or other similar rights of stockholders of the Company that have not been duly waived
at such time as this Note is converted into the Note Conversion Shares. 

  

	9.	NO IMPAIRMENT 

 The Company shall not
intentionally take or omit any action which would impair the rights and privileges of this Note set forth herein or the rights and privileges of the Holder of this Note. 
  

	10.	REPLACEMENT NOTE; NOTE TRANSFER 

  

	(a)	In the event that the Holder notifies the Company that this Note has been lost, stolen or destroyed, a replacement Note identical in all respects to the original Note shall be
issued by the Company to the Holder. 

  

	(b)	 The Company shall keep at its principal executive office a register for the registration and registration of transfers of Notes. The name and address of each holder
of one or more Notes, each transfer thereof and the name and address of each transferee of one or more Notes shall be registered in such register. Prior to due presentment for registration of transfer, the Person in whose name any Note shall be
registered shall be deemed and treated as the owner and holder thereof for 

  

 Page 22 of 41 

	 	 
all purposes hereof, and the Company shall not be affected by any notice or knowledge to the contrary. The Company shall give to any holder of a Note that is
an Institutional Investor promptly upon request therefore, a complete and correct copy of the names and addresses of all registered holders of the Notes. 

  

	(c)	Upon surrender of any Note at the principal executive office of the Company for registration of transfer or exchange (and in the case of a surrender for registration of transfer,
duly endorsed or accompanied by a written instrument of transfer duly executed by the registered holder of such Note or his attorney duly authorized in writing and accompanied by the address for notices of each transferee of such Note or part
thereof), the Company shall execute and deliver, at the Company’s expense, one or more new Notes in exchange therefore, in an aggregate principal amount equal to the unpaid principal amount of the surrendered Note. 

  

	11.	EVENTS OF DEFAULT 

 If
any of the following shall occur (each a Default): 
  

	(a)	the Company shall fail to pay any principal or interest in respect of this Note and such failure continues for five (5) Business Days following written notice thereof from the
Holder to the Company specifying such failure; 

  

	(b)	any representation or warranty made by the Company in this Note or any other Transaction Document shall have been incorrect in any material respect when made,

  

	(c)	the Company shall fail to perform or observe any covenant or agreement contained in this Note or any other Transaction Document to be performed or observed by it and such failure
shall remain unremedied for a period of (i) thirty (30) calendar days after the Holder has been informed thereof and the Company has received notice of such failure, or (ii) thirty (30) calendar days after the occurrence thereof
if the Holder has not been informed thereof in accordance with the terms hereof; 

  

	(d)	any default or event of default (howsoever described) shall occur under any other Note after giving effect to any applicable grace or cure period; 

  

	(e)	 (i) the Company or any of its subsidiaries shall fail to pay any Indebtedness for borrowed money in excess of $250,000 (other than the Indebtedness evidenced by the
Notes), including any interest or premium thereon, when due (whether by scheduled maturity, required prepayment, acceleration, demand or otherwise) and such failure shall continue after the applicable grace or cure period, if any, specified in the
agreement or instrument relating to such Indebtedness, (ii) any other event shall occur and shall continue after the applicable grace or cure period, if any, specified in such agreement or instrument, if the effect of such event is to
accelerate, or to permit the acceleration of, the maturity of such 

  

 Page 23 of 41 

	 	 
Indebtedness for borrowed money in excess of the Threshold; or any such Indebtedness for borrowed money in excess of the Threshold shall be declared to be
due and payable, or required to be prepaid (other than by a regularly scheduled required prepayment), prior to the stated maturity thereof, or (iii) as a consequence of the occurrence or continuation of any event or condition (other than the
passage of time), the Company or any subsidiary has become obligated to purchase or repay such Indebtedness for borrowed money before its regular maturity or before its regularly scheduled dates of payment in an aggregate outstanding principal
amount in excess of the Threshold (or its equivalent in the relevant currency of payment), or one or more Persons have the right to require the Company or any subsidiary so to purchase or repay such Indebtedness; 

  

	(f)	this Note shall for any reason fail or cease to rank at least pari passu in right of payment to all other Indebtedness with the Company’s most senior debt other than
(i) any senior debt of the Company set forth in Schedule 11(f) hereto, and (ii) Permitted Indebtedness secured by Permitted Liens that is collaterally secured (and then only to the extent of such collateral security);

  

	(g)	the Company or any of its subsidiaries shall be generally not paying its debts as such debts become due, or shall admit in writing its inability to pay its debts generally, or shall
make a general assignment for the benefit of creditors; or 

  

	(h)	any proceeding shall be instituted by or against the Company or any of its subsidiaries seeking to adjudicate it a bankrupt or insolvent, or seeking dissolution, liquidation,
winding up, reorganization, arrangement, adjustment, protection, relief or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors, or seeking the entry of an order for relief or the
appointment of a receiver, trustee, custodian or other similar official for the Company or for any substantial part of its property and such proceeding shall remain undismissed or unstayed for a period of sixty (60) days, or the Company shall
take any action to authorize or effect any of the actions set forth above in this clause (h); 

 then the Holder may
(1) declare all amounts due hereunder (including without limitation, principal, interest and all other amounts due hereunder) to be immediately due and payable, whereupon all amounts due under this Note shall become and shall be forthwith due
and payable, without diligence, presentment, demand, protest or other notice of any kind, all of which are hereby expressly waived, and (2) exercise any and all of its other rights under applicable law and hereunder, provided that upon
the occurrence of a Default in clause (g) or (h) above (as to the Company), all amounts due hereunder (including, without limitation, principal, interest and all other amounts due hereunder) shall automatically become immediately due and
payable without notice to the Company and the Holder shall have the right to exercise any and all of its other rights under applicable law and hereunder. 
  

 Page 24 of 41 

	12.	INDEMNIFICATION 

 The Company hereby agrees to
indemnify and hold harmless the Holder and its respective Affiliates, directors, officers, partners, employees and other agents and representatives (Indemnitees) from and against any and all liabilities, judgments, claims, settlements,
losses, damages, reasonable fees (including attorneys’, accountants’ and other experts’ fees and disbursements), liens, taxes, penalties, obligations and expenses (collectively, Losses) incurred or suffered by any such
Person or entity arising from, by reason of or in connection with any misrepresentation or breach of any representation, warranty or covenant of the Company contained in this Note or other document delivered by the Company pursuant to or in
connection with this Note (other than the Purchase Agreement, the Somatuline Autogel License, the Increlex License, the Registration Rights Agreement and the Affiliation Agreement) or otherwise in connection with or as a result of or related to the
execution, delivery or performance of this Note or the transactions contemplated hereby other than any Losses caused by the gross negligence or willful misconduct of the Indemnitees. The indemnification provisions of this Section 12 shall
survive repayment in full of this Note. For the avoidance of doubt, the provisions of this Section 12 shall be without prejudice to any remedies to which the parties to any of the other Transaction Documents may be entitled thereunder at law or
in equity, including for any breach or non-performance of any representation, warranty, covenant or covenant contained therein. 
  

	13.	SET-OFF; DEDUCTION; WITHHOLDING 

 If provision is required to by law or regulation of the United States for withholding of Taxes with respect to any amounts payable by the Company to the Holder pursuant to this Agreement, the Company shall promptly
pay such Tax on behalf of the Holder to the proper governmental authority and the Company shall promptly furnish the Holder with a certificate of Taxes deducted under such withholding tax laws. The Company shall have the right to offset any such Tax
actually paid from any payment due to the Holder. The Company and the Holder shall cooperate with each other in obtaining any exemption from or reduced rate of Tax available under any applicable law or tax treaty. 
 The obligations of the Company under this Section 13 shall survive the payment or transfer of this Note and the provisions of this Section 13 shall also apply
to successive transferees of this Note. 
  

	14.	MISCELLANEOUS 

  

	(a)	All notices, requests, consents and other communications hereunder shall be in writing, shall be delivered by facsimile (with receipt confirmed by telephone) or nationally
recognized overnight express courier postage prepaid, and shall be deemed given when so mailed and shall be delivered as addressed as follows: 

  

	 	(i)	if to the Company, to: 

 Tercica, Inc. 
 2000 Sierra Point Parkway, Suite 400 
 Brisbane, California 94005 
 United States of America 
 Attention: General Counsel 
 Facsimile: +1
650 238 1520 
  

 Page 25 of 41 

 with a copy (which shall not constitute notice) to: 
 Cooley Godward LLP 
 Five Palo Alto Square

 3000 El Camino Real 
 Palo
Alto 
 California 94306 
 United States of America 
 Attention: Suzanne Sawochka Hooper 
 Facsimile: +1 650 849 7400 
 or to such
other person, at such other place or to such other facsimile number as the Company shall designate to the Holder in writing; and 
  

	 	(ii)	if to the Holder, to: 

 Ipsen S.A 
 42, rue du Docteur Blanche 
 75016 Paris

 France 
 Attention: General
Counsel 
 Facsimile: +33 1 4496 1188 
 with a copy (which shall not constitute notice) to: 
 Freshfields Bruckhaus Deringer LLP 
 520 Madison Avenue, 34th Floor 
 New York, NY 10022 
 United States of America 
 Attention:
Matthew Jacobson, Esq. 
 Facsimile: +1 212 277 4001 
 or to such other person, at such other place or to such other facsimile number as the Holder shall designate to the Company in writing. 
  

	(b)	 No failure on the part of the Holder to exercise, and no delay in exercising, any right, power, privilege or remedy hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise thereof by the Holder preclude any other or further exercise thereof or the exercise of any other right, power, privilege or 

  

 Page 26 of 41 

	 	 
remedy of the Holder. All rights, powers, privileges and remedies hereunder and under applicable law are cumulative and not exclusive. No amendment or waiver
of any provision of this Note, nor consent to any departure by the Company therefrom, shall in any event be effective unless the same shall be in writing and signed by the Holder, and then such waiver or consent shall be effective only in the
specific instance and For the specific purpose for which given. 

  

	(c)	Any provision hereof which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective only to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof or affecting the validity or enforceability of such provision in any other jurisdiction. 

  

	(d)	The Company hereby (i) irrevocably submits to the exclusive jurisdiction of any New York State or Federal court located in the Borough of Manhattan in the City of New York in
any action or proceeding arising out of or relating to this Note, (ii) waives any defense based on doctrines of venue or forum non conveniens, or similar rules or doctrines, (iii) irrevocably agrees that all claims in respect of such an
action or proceeding may be heard and determined in such New York State or Federal court; and (iv) irrevocably agrees that service of process in any such action or proceeding may be effected by mailing a copy thereof by registered or certified
mail (or any substantially similar form of mail), return receipt requested, postage prepaid and specifying next day or two-day delivery, to the Company at its address set forth in Section 14(a) or at such other address of which the Holder shall
have been notified pursuant thereto. 

  

	(e)	This Note shall be construed in accordance with, and this Note and all matters arising out of or relating in any way whatsoever to this Note (whether in contract, tort, or
otherwise) shall be governed by, the law of the State of New York. 

  

	(f)	The Company promises to pay all costs and expenses, including, without limitation, reasonable attorneys’ fees and expenses, incurred by the Holder in connection with the
enforcement or collection of this Note, including, without limitation, in connection with the foreclosure of Collateral, regardless of whether any action is instituted. The obligations of the Company under this Section 14(f) shall survive
repayment in full of this Note. 

  

	(g)	This Note and the rights and obligations hereunder shall not be assigned, delegated, or otherwise transferred (whether by operation of law, by contract, or otherwise) without the
prior written consent of the other party hereto; provided that the Holder may, without obtaining the prior written consent of the Company, assign, delegate, or otherwise transfer its rights and obligations hereunder to any Affiliate of the
Holder. Any attempted assignment, delegation or transfer in violation of this Section 14(g) shall be void and of no force or effect. 

  

 Page 27 of 41 

 IN WITNESS WHEREOF, the Company has caused this Note to be signed on the date first set forth above. 

 

			
	TERCICA, INC.
		
	By:	 	 /s/ Stephen N. Rosenfield

	Name:	 	Stephen N. Rosenfield
	Title:	 	Executive Vice President Legal Affairs, General Counsel and Secretary

 The undersigned acknowledges and agrees to the terms of this Note. 
  

			
	IPSEN, S.A.
		
	By:	 	 /s/ Willy Mathot

	Name:	 	Willy Mathot
	Title:	 	General Counsel

  

 Page 28 of 41 

 ANNEX A 
 FORM OF NOTICE OF CONVERSION 
  

	To:	Tercica, Inc. 

 2000 Sierra Point Parkway, Suite 400

 Brisbane, California 94005 
 USA 
  

	Attn:	General Counsel 

 TERCICA, INC. 
 Third Senior Convertible Promissory Note 
 convertible into shares
of Tercica, Inc.’s common stock 
 Any term used in this Notice of Conversion and not
otherwise defined shall have the meaning set forth in the Tercica, Inc. Third Senior Convertible Promissory Note (the Note) for the principal sum of $15,000,000 issued to Ipsen, S.A., a French société anonyme, and
dated September 17, 2007. The undersigned, being the holder of the Note, hereby irrevocably elects that a Conversion Amount of $[            ] [(comprised of a principal
amount of $[            ], accrued and unpaid interest on such principal amount at the interest rates provided in the Note to the Conversion Date of
$[            ] and Default Interest on such accrued and unpaid interest of $[            ])]1 be converted into fully paid and non assessable shares of Common Stock in accordance with the terms and conditions of the Note. In accordance with the terms of
the Note, by dividing the above Conversion Amount by a Conversion Price of $[    ] (such price being the Conversion Price in effect on the date of this Notice of Conversion), the undersigned has calculated that
[            ] shares of Common Stock (the Conversion Shares) are issuable upon such conversion. 
 The undersigned requests that stock certificates for the Conversion Shares be issued and delivered to the undersigned at the address set forth below. 
 In accordance with Section 2(c) of the Note, attached hereto as Exhibit A is the updated Note Ledger, recording the principal amount of the Note to be converted
pursuant to this Notice of Conversion and the outstanding principal amount of the Note following such conversion. 
 Dated:                     
 Signature
of Registered Holder 
  

					
	  
 	  	  	 	  
	

	 1
	 Only include if the Conversion Amount includes any accrued and unpaid interest on
the principal amount to be converted or any Default Interest on such accrued and unpaid interest 

  

 Page 29 of 41 

 Name of Registered Holder (Print) 
  

	
	
	  
	Address
	
	  

	  

	  

  

 Page 30 of 41 

 Schedule 1(rr) 
 Permitted Indebtedness 
  

	 	•	 	 Letter of Credit of $340,000 to Clarendon Hills Investors, LLC related to Sierra Point Office lease 

  

 Page 31 of 41 

 Schedule 1(ss)(1) 
 Tercica, Inc. 
 Investment Policy 
 The following is the TERCICA, INC. Investment Policy. This document establishes specific guidelines for the investment of TERCICA corporate surplus cash. “Surplus cash” is defined as cash in corporate
accounts not immediately required for working capital, capital investment, debt repayment or to meet other outstanding near-term financial obligations. At a minimum, this document shall be reviewed every six months, or at the time of change in the
senior or financial management of the company, by the Chief Executive Officer, and the Chief Financial Officer. The major categories covered by this document are: 
 I. Objectives 
 II. Liquidity and Maturities Guidelines 
 III. Investment Restrictions

 IV. Concentration Limits 
 V. MINIMUM ACCEPTABLE CREDIT QUALITY 
 VI. Marketability 
 VII. Trade Guidelines 
 VIII. Treasury Advisor 
 IX. Investment Performance 
 X. Fiduciary Discretion 
 I. OBJECTIVES 
 The primary objective of this policy is to comply with the Security and Exchange Commission proposed rules of the Investment Company Act of 1993. As such, it is
acknowledged that the funds invested in TERCICA are intended for the working capital requirements of the company’s primary business of research and product development. 
  

 Page 32 of 41 

 The secondary objective is to obtain above-market returns versus industry averages. In meeting these two objectives, the
Chief Financial Officer and CAO shall maintain systems and procedures that ensure the: 
  

	 	a.	Preservation of capital, 

  

	 	b.	Anticipation of liquidity requirements, 

  

	 	c.	Diversification of investments to minimize the risk and inappropriate concentrations of investments with any one entity, 

  

	 	d.	Fiduciary control of cash and investments. 

 II. LIQUIDITY AND
MATURITIES GUIDELINES 
 Surplus cash is invested under a plan to provide adequate liquidity for company operations without any loss of principal. Under
this plan, daily liquidity is essential. As such, periodic updates shall be reviewed with the company’s Treasury Advisor (as defined in section VII.) not less than on a quarterly basis. Specific restrictions on liquidity are: 
  

	a.	At least $500,000 must be available each business day until 10:30 a.m. Pacific Standard time, 

  

	b.	At least 5% of funds available with 7 days notice, 

  

	c.	Maximum Maturities will not exceed 12 months with weighted average Maturities to be maintained at 6 months or less (for securities which have put dates, reset dates, or are traded
based on their average maturity, or average life, the put date, reset date, or average maturity or average life will be used, instead of the final maturity date, for maturity guideline purposes), 

  

	d.	Repositioning of these securities before their maturity, generating small gains or losses, is permitted for managing liquidity requirements only. Any repositioning of securities
causing a gain or loss must be pre-approved by the CFO for fiduciary control purposes. 

 III. INVESTMENT RESTRICTIONS 
 Investments shall be made in the context of the following investment guidelines: 
  

 Page 33 of 41 

 Eligible Investments: 
  

	a.	Direct obligations of the U.S. Treasury, including bills, notes and bonds, 

  

	b.	Obligations issued or guaranteed by agencies or instrumentality’s of the U.S. governments, 

  

	c.	Bank obligation, including certificates of deposit, banknote time deposits and bankers acceptances. 

  

	d.	Corporate obligations, including intermediate term notes, commercial paper (foreign and domestic issues) and floating rate notes. 

  

	e.	Repurchase agreements collaterized at a minimum of 102% with U.S. Treasury securities or other securities rates “AAA” or equivalent that would be permitted by this policy,

  

	f.	Money market funds over $1 billion in assets, with an historical constant dollar net asset value, consisting of acceptable securities as stated above are appropriate for investing,
as long as the fund’s manager has been in business over five years, has name recognition, and has performance that is easily tracked, 

  

	g.	Taxable and tax exempt Municipal Securities, municipal notes, commercial paper, taxable and tax-exempt auction rate floaters, floating rate notes; Municipal Notes, and Bonds,

  

	h.	U.S. and dollar denominated International corporate debt of all types is acceptable as long as the issuer meets credit rating and marketability guidelines, 

 

	i.	Derivative instruments are ineligible as investments. This would cover all investments where the value is based on an underlying variable causing the coupon and/or the maturity
value to be unknown for the life of the security, at the time of purchase, 

  

	j.	Asset-Backed Securities 

  

	k.	Trends for a given company or industry must be reviewed periodically with Tercica by the Treasury Advisor and adjustments in percentage positions made accordingly. Should an
investment held in TERCICA portfolio fall short of prescribed guidelines, notification from its Treasury Advisors are expected to be made to the CFO or CAO within 2 business days. 

  

 Page 34 of 41 

 IV. CONCENTRATION LIMITS 
 Diversification of the portfolio will be a tool for minimizing risk while maintaining liquidity. They following parameters will be adhered to in managing the portfolio: 
  

	a.	Obligations of the U.S. Government and have no concentration limits, No more than 50% of the portfolio shall be invested in any single GSE/Federal Agency securities at time of
purchase, 

  

	b.	A maximum of 5% will be invested in any one issuer except for the U.S. Government at time of purchase, 

  

	c.	No more than 10% of the portfolio in entities or issuers of any one country other than the U.S, 

  

	d.	U.S. bank and insurance company securities (CDs, commercial paper, BA’s, etc.), must not in total exceed 60% of the portfolio. Holdings of one issuer cannot exceed 5% of the
total portfolio at the time of purchase, 

  

	e.	No investment will be permitted in common stocks, preferred stocks, options (put or calls), commodities, foreign securities, futures or mutual funds whose underlying securities are
ineligible investments according to this investment policy. 

 V. MINIMUM ACCEPTABLE CREDIT QUALITY 
 The obligor must be rated in the rating category as indicated below by at least one of the Nationally Recognized Statistical Rating Organizations (NRSROs) for municipal
securities and at least two for non-municipal securities. Non-rated, pre-refunded issues may be purchased if collateralized by U.S. Treasuries /Agencies. 
  

							
	 	    	S&P	    	Moody’s	    	Fitch
	 Minimum Short Term Rating
	    	A-1/SP-1	    	P-1/MIG-1	    	F-1
	 Minimum Long Term Rating
	    	A-	    	A3	    	A-

  

 Page 35 of 41 

 VI. MARKETABILITY 
 All securities are to be purchased through investment banking and brokerage firms of high quality and reputation, with a history of making markets for the securities in which we invest. In the unlikely event that securities must be sold
before their maturity, the securities must be easily re-marketed. To accomplish this, the securities must be conventional “products” with strong name recognition. 
 VII. TRADE GUIDELINES 
 All purchases and sales will be executed at the best net price with the principal dealers and
banks in the particular securities. U.S. Government, U.S. Federal Agency and repurchase agreement securities brokers will be limited to the list of Primary Government Securities Dealers published by the Federal Reserve Bank. All securities purchased
will be in the name of the account of the nominee name of the custodian bank. 
 VIII. TREASURY ADVISOR 
 The company shall establish a relationship with a Treasury Advisor to assist in the administration of these guidelines. The Treasury Advisor shall have the responsibility
of: 
  

	a.	Adherence to TERCICA Investment Policy, 

  

	b.	Discretionary Authority to make investment decisions on a discretionary basis regarding all assets placed under its jurisdiction. Such “discretion” includes decisions to
buy, hold and sell securities (including cash equivalents) in amounts and proportions that are reflective of the Treasury Advisor’s current investment strategy within the guidelines set forth in this policy, 

  

	c.	Communication: 

  

	 	1.	With TERCICA on a timely basis of major changes in its investment outlook, investment strategy, asset allocation, and other matters affecting its investment policies or philosophy,

  

	 	2.	Whenever the Treasury Advisor believes that any particular guideline should be altered or deleted, it will be the Treasury Advisor’s responsibility to initiate written
communications with TERCICA expressing its views and recommendations, 

  

	d.	Reporting: 

  

 Page 36 of 41 

	 	1.	Timely notices of transaction activity as well as monthly performance reports. 

  

	 	2.	Any information needs to assist TERCICA in conduction an evaluation of portfolio management will be expected on a timely basis. 

  

	e.	Compliance with Appropriate Legislation: 

  

	 	1.	The Treasury Advisor is responsible for strict compliance with federal and state law as it pertains to its duties and responsibilities as a fiduciary. 

  

	 	2.	The Treasury Advisor shall be registered under the Investment Advisory Act of 1940. 

 The company shall review the performance of the Treasury Advisor as noted in section IX. 
 IX. INVESTMENT PERFORMANCE

 The Treasury Advisor will issue a quarterly investment performance analysis using time-weighted measures. At a minimum, a quarterly meeting will be
held with the CFO or CAO to review performance figures. 
 X. FIDUCIARY DISCRETION 
 The CFO is responsible for securing and managing investments and cash for operations and has full discretion to invest any excess capital subject to strict adherence to these guidelines 
  

 Page 37 of 41 

 Schedule 1(ss)(2) 
 Permitted Investments 
  

	 	•	 	 Loan to Employee of $35,000 

  

 Page 38 of 41 

 Schedule 1(tt) 
 Permitted Liens 
  

	 	•	 	 Letter of Credit of $340,000 to Clarendon Hills Investors, LLC related to Sierra Point Office lease 

  

 Page 39 of 41 

 Schedule 7(c) 
 Financing Statements 
 None. 
  

 Page 40 of 41 

 Schedule 11(f) 
 Senior Debt 
 None. 
  

 Page 41 of 41Cisco Systems, Inc. Amended and Restated 1996 Stock Incentive Plan

 Exhibit 10.1 
  
 CISCO SYSTEMS, INC. 
 1996 STOCK INCENTIVE PLAN 
  
 As Amended and Restated Effective March 18, 2003 
  
 ARTICLE ONE 
  
 GENERAL PROVISIONS 

  
 I. PURPOSE OF THE PLAN 
  
 This 1996 Stock Incentive Plan is intended to promote the interests of Cisco
Systems, Inc., a California corporation, by providing eligible persons with the opportunity to acquire a proprietary interest, or otherwise increase their proprietary interest, in the Corporation as an incentive for them to remain in the service of
the Corporation. 
  
 Capitalized terms shall have the meanings
assigned to such terms in the attached Appendix. 
  
 All share
numbers in this March 18, 2003 restatement reflect all splits of the Common Stock effected through March 22, 2000, including (i) the three (3)-for-two (2) split of Common Stock effected on December 16, 1997, (ii) the three (3)-for-two (2) split of
Common Stock effected on September 15, 1998, (iii) the two (2)-for-one (1) spilt of Common Stock effected on June 21, 1999, and (iv) the two (2)-for-one (1) split of Common Stock effected on March 22, 2000. 
  
 II. STRUCTURE OF THE PLAN 
  
 A. The Plan shall be divided into three separate equity programs:

  
 (i) the Discretionary Option Grant Program
under which eligible persons may, at the discretion of the Plan Administrator, be granted options to purchase shares of Common Stock, 
  
 (ii) the Automatic Option Grant Program under which eligible non-employee Board members shall automatically receive option grants at
periodic intervals to purchase shares of Common Stock, and 
  
 (iii) the Stock Issuance Program under which eligible persons may, at the discretion of the Plan Administrator, be issued shares of Common Stock directly, either through the immediate purchase of such shares or as a
bonus for services rendered the Corporation (or any Parent or Subsidiary) or the attainment of designated performance goals. 

 B. The provisions of Articles One and Five shall apply to all equity programs under the Plan and shall
govern the interests of all persons under the Plan. 
  
 III.
ADMINISTRATION OF THE PLAN 
  
 A. The Primary Committee shall
have sole and exclusive authority to administer the Discretionary Option Grant Program with respect to Section 16 Insiders. 
  
 B. Administration of the Discretionary Option Grant Program with respect to all other persons eligible to participate in that program may, at the
Board’s discretion, be vested in the Primary Committee or a Secondary Committee, or the Board may retain the power to administer that program with respect to all such persons. The members of the Secondary Committee may be Board members who are
Employees eligible to receive discretionary option grants under the Plan or any other stock option, stock appreciation, stock bonus or other stock plan of the Corporation (or any Parent or Subsidiary). Administration of the Stock Issuance Program
shall be vested in the Primary Committee, except to the extent the Board delegates administrative authority under the Stock Issuance Program to a Secondary Committee or retains such authority for itself. 
  
 C. Members of the Primary Committee or any Secondary Committee shall serve
for such period of time as the Board may determine and may be removed by the Board at any time. The Board may also at any time terminate the functions of any Secondary Committee and reassume all powers and authority previously delegated to such
committee. 
  
 D. Each Plan Administrator shall, within the scope
of its administrative functions under the Plan, have full power and authority (subject to the provisions of the Plan) to establish such rules and regulations as it may deem appropriate for proper administration of the Discretionary Option Grant and
Stock Issuance Programs and to make such determinations under, and issue such interpretations of, the provisions of such programs and any outstanding options or stock issuances thereunder as it may deem necessary or advisable. Decisions of the Plan
Administrator within the scope of its administrative functions under the Plan shall be final and binding on all parties who have an interest in the Discretionary Option Grant or Stock Issuance Program under its jurisdiction or any option or stock
issuance thereunder. 
  
 E. Service on the Primary Committee or
the Secondary Committee shall constitute service as a Board member, and members of each such committee shall accordingly be entitled to full indemnification and reimbursement as Board members for their service on such committee. No member of the
Primary Committee or the Secondary Committee shall be liable for any act or omission made in good faith with respect to the Plan or any option grants under the Plan. 
  
 F. Administration of the Automatic Option Grant Program shall be self-executing in accordance with the terms of that
program, and no Plan Administrator shall exercise any discretionary functions with respect to any option grants made under that program. 
  

 2. 

 IV. ELIGIBILITY 
  

 A. The persons eligible to participate in the Discretionary Option Grant Program are as follows: 
  
 (i) Employees, 
  
 (ii) non-employee members of the Board or the board of
directors of any Parent or Subsidiary, and 
  
 (iii) consultants and other independent advisors who provide services to the Corporation (or any Parent or Subsidiary). 
  
 B. The persons eligible to participate in the Stock Issuance Program shall be limited to those individuals who render services to the Corporation (or any
Parent or Subsidiary) in the capacity of independent, non-employee consultants and who are not otherwise Section 16 Insiders at the time of issuance. 
  
 C. Each Plan Administrator shall, within the scope of its administrative jurisdiction under the Plan, have full authority to determine (i) with respect to
the Discretionary Option Grant Program, which eligible persons are to receive option grants, the time or times when such option grants are to be made, the number of shares to be covered by each such grant, the status of the granted option as either
an Incentive Option or a Non-Statutory Option, the time or times when each option is to become exercisable, the vesting schedule (if any) applicable to the option shares and the maximum term for which the option is to remain outstanding and (ii)
with respect to stock issuances under the Stock Issuance Program, which eligible persons are to receive stock issuances, the time or times when such issuances are to be made, the number of shares to be issued to each Participant, the vesting
schedule (if any) applicable to the issued shares and the consideration for such shares. 
  
 D. The individuals who shall be eligible to participate in the Automatic Option Grant Program shall be limited to (i) those individuals serving as non-employee Board members on the Plan Effective Date, (ii) those
individuals who first become non-employee Board members on or after the Plan Effective Date, whether through appointment by the Board or election by the Corporation’s shareholders, and (iii) those individuals who continue to serve as
non-employee Board members at one or more Annual Shareholders Meetings held after the Plan Effective Date. A non-employee Board member who has previously been in the employ of the Corporation (or any Parent or Subsidiary) shall not be eligible to
receive an option grant under the Automatic Option Grant Program at the time he or she first becomes a non-employee Board member, but shall be eligible to receive periodic option grants under the Automatic Option Grant Program while he or she
continues to serve as a non-employee Board member.  
  

 3. 

 V. STOCK SUBJECT TO THE PLAN 
  
 A. The stock issuable under the Plan shall be shares of authorized but unissued or reacquired Common Stock, including shares
repurchased by the Corporation on the open market. The maximum number of shares of Common Stock reserved for issuance over the term of the Plan shall not exceed 2,504,006,600 shares, subject to the automatic share increases described in Paragraph
V.B. below. Such share reserve consists of the number of shares of Common Stock transferred from the Predecessor Plan, as of the Plan Effective Date (619,524,900), plus the number of shares added to the reserve pursuant to the automatic share
increases effected in December 1996, December 1997, December 1998, December 1999, December 2000 and December 2001 (1,884,481,700 shares in the aggregate). 
  
 B. The number of shares of Common Stock available for issuance under the Plan shall automatically increase on the first trading day of fiscal December
each calendar year, beginning with fiscal December in calendar year 1996 and continuing through fiscal December in calendar year 2001, by a number of shares equal to four and three-quarters percent (4.75%) of the total number of shares of Common
Stock outstanding on the last trading day in the immediately preceding fiscal November, but in no event shall any such annual increase exceed 480,000,000 shares. 
  
 C. No one person participating in the Plan may receive stock options, separately exercisable stock appreciation rights or
direct stock issuances for more than 18,000,000 shares of Common Stock in the aggregate per calendar year. 
  
 D. Shares of Common Stock subject to outstanding options (including options incorporated into this Plan from the Predecessor Plan) shall be available for
subsequent issuance under the Plan to the extent those options expire or terminate for any reason prior to exercise in full. Unvested shares issued under the Plan and subsequently cancelled or repurchased by the Corporation, at the original issue
price paid per share, pursuant to the Corporation’s repurchase rights under the Plan shall be added back to the number of shares of Common Stock reserved for issuance under the Plan and shall accordingly be available for reissuance through one
or more subsequent option grants under the Plan. However, should the exercise price of an option under the Plan be paid with shares of Common Stock or should shares of Common Stock otherwise issuable under the Plan be withheld by the Corporation in
satisfaction of the withholding taxes incurred in connection with the exercise of an option or the vesting of a stock issuance under the Plan, then the number of shares of Common Stock available for issuance under the Plan shall be reduced by the
gross number of shares for which the option is exercised or which vest under the stock issuance, and not by the net number of shares of Common Stock issued to the holder of such option or stock issuance. Shares of Common Stock underlying one or more
stock appreciation rights exercised under Section IV of Article Two of the Plan shall not be available for subsequent issuance under the Plan. 
  
 E. If any change is made to the Common Stock by reason of any stock split, stock dividend, recapitalization, combination of shares, exchange of shares or
other change affecting the outstanding Common Stock as a class without the Corporation’s receipt of consideration, appropriate adjustments shall be made to (i) the maximum number and/or class of 
  

 4. 

 securities issuable under the Plan, (ii) the maximum number and/or class of securities for which any one person may be
granted stock options, separately exercisable stock appreciation rights and direct stock issuances in the aggregate under the Plan per calendar year, (iii) the maximum number and/or class of securities issuable under the Stock Issuance Program, (iv)
the number and/or class of securities for which grants are subsequently to be made under the Automatic Option Grant Program to new and continuing non-employee Board members, unless the Plan Administrator determines otherwise, (v) the number and/or
class of securities and the exercise price per share in effect under each outstanding option under the Plan and (vi) the number and/or class of securities and price per share in effect under each outstanding option incorporated into this Plan from
the Predecessor Plan. Such adjustments to the outstanding options are to be effected in a manner which shall preclude the enlargement or dilution of rights and benefits under such options. The adjustments determined by the Plan Administrator shall
be final, binding and conclusive. 
  

 5. 

 ARTICLE TWO 
  
 DISCRETIONARY OPTION GRANT PROGRAM 
  
 I. OPTION TERMS 
  
 Each option shall be evidenced by one or more documents in the form approved by the Plan Administrator; provided, however, that each such document
shall comply with the terms specified below. Each document evidencing an Incentive Option shall, in addition, be subject to the provisions of the Plan applicable to such options. 
  
 A. Exercise Price. 
  

1. The exercise price per share shall be fixed by the Plan Administrator but shall not be less than one hundred percent (100%) of the Fair Market
Value per share of Common Stock on the option grant date. 
  
 2.
The exercise price shall become immediately due upon exercise of the option and shall, subject to the provisions of Section I of Article Four and the documents evidencing the option, be payable in one or more of the forms specified below:

  
 (i) cash or check made payable to the
Corporation, 
  
 (ii) shares of Common Stock
held for the requisite period necessary to avoid a charge to the Corporation’s earnings for financial reporting purposes and valued at Fair Market Value on the Exercise Date, or 
  
 (iii) to the extent the option is exercised for vested shares, through a special sale and remittance
procedure pursuant to which the Optionee shall concurrently provide irrevocable instructions to (a) a brokerage firm (reasonably acceptable to the Corporation for purposes of administering such procedure in compliance with the Corporation’s
pre-notification policy for sales of Common Stock) to effect the immediate sale of the purchased shares and remit to the Corporation, out of the sale proceeds available on the settlement date, sufficient funds to cover the aggregate exercise price
payable for the purchased shares plus all applicable Federal, state and local income and employment taxes required to be withheld by the Corporation by reason of such exercise and (b) the Corporation to deliver the certificates for the purchased
shares directly to such brokerage firm in order to complete the sale. 
  
 Except to the extent such sale and remittance procedure is utilized, payment of the exercise price for the purchased shares must be made on the Exercise Date. 
  

 6. 

 B. Exercise and Term of Options. Each option shall be exercisable at such time or times,
during such period and for such number of shares as shall be determined by the Plan Administrator and set forth in the documents evidencing the option. However, no option shall have a term in excess of nine (9) years measured from the option grant
date. 
  
 C. Effect of Termination of Service.

  
 1. The following provisions shall govern the exercise of any
options held by the Optionee at the time of cessation of Service or death: 
  
 (i) Any option outstanding at the time of the Optionee’s cessation of Service for any reason shall remain exercisable for such period of time thereafter as shall be determined by the Plan Administrator and set
forth in the documents evidencing the option, but no such option shall be exercisable after the expiration of the option term. 
  
 (ii) Any option exercisable in whole or in part by the Optionee at the time of death may be subsequently exercised by the personal
representative of the Optionee’s estate or by the person or persons to whom the option is transferred pursuant to the Optionee’s will or in accordance with the laws of descent and distribution. 
  
 (iii) Should the Optionee’s Service be terminated for
Misconduct, then all outstanding options held by the Optionee shall terminate immediately and cease to be outstanding. 
  
 (iv) During the applicable post-Service exercise period, the option may not be exercised in the aggregate for more than the number of
vested shares for which the option is exercisable on the date of the Optionee’s cessation of Service. Upon the expiration of the applicable exercise period or (if earlier) upon the expiration of the option term, the option shall terminate and
cease to be outstanding for any vested shares for which the option has not been exercised. However, the option shall, immediately upon the Optionee’s cessation of Service, terminate and cease to be outstanding to the extent the option is not
otherwise at that time exercisable for vested shares. 
  
 D. The
Plan Administrator shall have complete discretion, exercisable either at the time an option is granted or at any time while the option remains outstanding, to: 
  

(i) extend the period of time for which the option is to remain exercisable following the Optionee’s cessation of Service from
the limited exercise period otherwise in effect for that option to such greater period of time as the Plan Administrator shall deem appropriate, but in no event beyond the expiration of the option term, and/or 
  

 7. 

 (ii) permit the option to be exercised, during the applicable post-Service exercise
period, not only with respect to the number of vested shares of Common Stock for which such option is exercisable at the time of the Optionee’s cessation of Service but also with respect to one or more additional installments in which the
Optionee would have vested had the Optionee continued in Service. 
  
 E. Shareholder Rights. The holder of an option shall have no shareholder rights with respect to the shares subject to the option until such person shall have exercised the option, paid the exercise price and become a holder of
record of the purchased shares. 
  
 F. Repurchase
Rights. The Plan Administrator shall have the discretion to grant options which are exercisable for unvested shares of Common Stock. Should the Optionee cease Service while holding such unvested shares, the Corporation shall have the right
to repurchase, at the exercise price paid per share, any or all of those unvested shares. The terms upon which such repurchase right shall be exercisable (including the period and procedure for exercise and the appropriate vesting schedule for the
purchased shares) shall be established by the Plan Administrator and set forth in the document evidencing such repurchase right. 
  
 G. Limited Transferability of Options. During the lifetime of the Optionee, Incentive Options shall be exercisable only by the Optionee and
shall not be assignable or transferable other than by will or by the laws of inheritance following the Optionee’s death. However, a Non-Statutory Option may be assigned in whole or in part during the Optionee’s lifetime to one or more
members of the Optionee’s immediate family or to a trust established exclusively for one or more such family members or to one or more individuals, to the extent such assignment is in connection with the Optionee’s estate plan or pursuant
to a domestic relations order. The assigned portion may only be exercised by the person or persons who acquire a proprietary interest in the option pursuant to the assignment. The terms applicable to the assigned portion shall be the same as those
in effect for the option immediately prior to such assignment and shall be set forth in such documents issued to the assignee as the Plan Administrator may deem appropriate. 
  
 II. INCENTIVE OPTIONS 
  
 The terms specified below shall be applicable to all Incentive Options. Except as modified by the provisions of this Section II, all the provisions of
Articles One, Two and Four shall be applicable to Incentive Options. Options designated as Non-Statutory Options when issued under the Plan shall not be subject to the terms of this Section II. 
  
 A. Eligibility. Incentive Options may only be granted to
Employees. 
  

 8. 

 B. Dollar Limitation. The aggregate Fair Market Value of the shares of Common Stock
(determined as of the respective date or dates of grant) for which one or more options granted to any Employee under the Plan (or any other option plan of the Corporation or any Parent or Subsidiary) may for the first time become exercisable as
Incentive Options during any one calendar year shall not exceed the sum of One Hundred Thousand Dollars ($100,000). To the extent the Employee holds two (2) or more such options which become exercisable for the first time in the same calendar year,
the foregoing limitation on the exercisability of such options as Incentive Options shall be applied on the basis of the order in which such options are granted. 
  
 C. 10% Shareholder. If any Employee to whom an Incentive Option is granted is a 10% Shareholder, then the
exercise price per share shall not be less than one hundred ten percent (110%) of the Fair Market Value per share of Common Stock on the option grant date, and the option term shall not exceed five (5) years measured from the option grant date.

  
 III. CORPORATE TRANSACTION/CHANGE IN CONTROL

  
 A. In the event of any Corporate Transaction, each
outstanding option shall automatically accelerate so that each such option shall, immediately prior to the effective date of the Corporate Transaction, become exercisable for all of the shares of Common Stock at the time subject to such option and
may be exercised for any or all of those shares as fully-vested shares of Common Stock. However, an outstanding option shall not so accelerate if and to the extent: (i) such option is, in connection with the Corporate Transaction, either to be
assumed by the successor corporation (or parent thereof) or to be replaced with a comparable option to purchase shares of the capital stock of the successor corporation (or parent thereof), (ii) such option is to be replaced with a cash incentive
program of the successor corporation which preserves the spread existing on the unvested option shares at the time of the Corporate Transaction and provides for subsequent payout in accordance with the same vesting schedule applicable to those
option shares or (iii) the acceleration of such option is subject to other limitations imposed by the Plan Administrator at the time of the option grant. The determination of option comparability under clause (i) above shall be made by the Plan
Administrator, and its determination shall be final, binding and conclusive. 
  
 B. All outstanding repurchase rights shall also terminate automatically, and the shares of Common Stock subject to those terminated rights shall immediately vest in full, in the event of any Corporate Transaction,
except to the extent: (i) those repurchase rights are to be assigned to the successor corporation (or parent thereof) in connection with such Corporate Transaction or (ii) such accelerated vesting is precluded by other limitations imposed by the
Plan Administrator at the time the repurchase right is issued. 
  
 C. Immediately following the consummation of the Corporate Transaction, all outstanding options shall terminate and cease to be outstanding, except to the extent assumed by the successor corporation (or parent thereof). 
  

 9. 

 D. Each option which is assumed in connection with a Corporate Transaction shall be appropriately
adjusted, immediately after such Corporate Transaction, to apply to the number and class of securities which would have been issuable to the Optionee in consummation of such Corporate Transaction had the option been exercised immediately prior to
such Corporate Transaction. Appropriate adjustments to reflect such Corporate Transaction shall also be made to (i) the exercise price payable per share under each outstanding option, provided the aggregate exercise price payable for such
securities shall remain the same, (ii) the maximum number and/or class of securities available for issuance over the remaining term of the Plan, (iii) the maximum number and/or class of securities for which any one person may be granted stock
options, separately exercisable stock appreciation rights and direct stock issuances under the Plan per calendar year and (iv) . the maximum number and/or class of securities available for issuance under the Stock Issuance Program. 
  
 E. The Plan Administrator shall have full power and authority to grant
options under the Discretionary Option Grant Program which will automatically accelerate in the event the Optionee’s Service subsequently terminates by reason of an Involuntary Termination within a designated period (not to exceed eighteen (18)
months) following the effective date of any Corporate Transaction in which those options are assumed or replaced and do not otherwise accelerate. Any options so accelerated shall remain exercisable for fully-vested shares until the expiration or
sooner termination of the option term. In addition, the Plan Administrator may provide that one or more of the Corporation’s outstanding repurchase rights with respect to shares held by the Optionee at the time of such Involuntary Termination
shall immediately terminate, and the shares subject to those terminated repurchase rights shall accordingly vest in full. 
  
 F. The Plan Administrator shall have full power and authority to grant options under the Discretionary Option Grant Program which will automatically
accelerate in the event the Optionee’s Service subsequently terminates by reason of an Involuntary Termination within a designated period (not to exceed eighteen (18) months) following the effective date of any Change in Control. Each option so
accelerated shall remain exercisable for fully-vested shares until the expiration or sooner termination of the option term. In addition, the Plan Administrator may provide that one or more of the Corporation’s outstanding repurchase rights with
respect to shares held by the Optionee at the time of such Involuntary Termination shall immediately terminate, and the shares subject to those terminated repurchase rights shall accordingly vest in full. 
  
 G. The portion of any Incentive Option accelerated in connection with a
Corporate Transaction or Change in Control shall remain exercisable as an Incentive Option only to the extent the applicable One Hundred Thousand Dollar limitation is not exceeded. To the extent such dollar limitation is exceeded, the accelerated
portion of such option shall be exercisable as a Non-Statutory Option under the Federal tax laws. 
  

 10. 

 H. The outstanding options shall in no way affect the right of the Corporation 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. 
  
 IV. STOCK APPRECIATION RIGHTS 
  
 A. The Plan Administrator shall have full power and authority, exercisable in its sole discretion, to grant to selected
Optionees or other individuals eligible to receive option grants under the Discretionary Option Grant Program stock appreciation rights. 
  
 B. Three types of stock appreciation rights shall be authorized for issuance under the Plan: (i) tandem stock appreciation rights (“Tandem
Rights”), (ii) stand-alone stock appreciation rights (“Stand-alone Rights”) and (iii) limited stock appreciation rights (“Limited Rights”). 
  
 C. The following terms and conditions shall govern the grant and exercise of Tandem Rights under this Article Two.

  
 1. One or more Optionees may be granted a Tandem Right,
exercisable upon such terms and conditions as the Plan Administrator may establish, to elect between the exercise of the underlying Article Two stock option for shares of Common Stock or the surrender of that option in exchange for a distribution
from the Corporation in an amount equal to the excess of (i) the Fair Market Value (on the option surrender date) of the number of shares in which the Optionee is at the time vested under the surrendered option (or surrendered portion thereof) over
(ii) the aggregate exercise price payable for such vested shares. 
  
 2. No such option surrender shall be effective unless it is approved by the Plan Administrator, either at the time of the actual option surrender or at any earlier time. If the surrender is so approved, then the distribution to which the
Optionee shall accordingly become entitled under this Section V may be made in shares of Common Stock valued at Fair Market Value on the option surrender date, in cash, or partly in shares and partly in cash, as the Plan Administrator shall in its
sole discretion deem appropriate. 
  
 3. If the surrender of an
option is not approved by the Plan Administrator, then the Optionee shall retain whatever rights the Optionee had under the surrendered option (or surrendered portion thereof) on the option surrender date and may exercise such rights at any time
prior to the later of (i) five (5) business days after the receipt of the rejection notice or (ii) the last day on which the option is otherwise exercisable in accordance with the terms of the instrument evidencing such option, but in no
event may such rights be exercised more than nine (9) years after the date of the option grant. 
  
 D. The following terms and conditions shall govern the grant and exercise of Stand-alone Rights under this Article Two: 
  

 11. 

 1. One or more individuals eligible to participate in the Discretionary Option Grant Program may be
granted a Stand-alone Right not tied to any underlying option under this Discretionary Option Grant Program. The Stand-alone Right shall cover a specified number of underlying shares of Common Stock and shall be exercisable upon such terms and
conditions as the Plan Administrator may establish. Upon exercise of the Stand-alone Right, the holder shall be entitled to receive a distribution from the Corporation in an amount equal to the excess of (i) the aggregate Fair Market Value (on the
exercise date) of the shares of Common Stock underlying the exercised right over (ii) the aggregate base price in effect for those shares. 
  
 2. The number of shares of Common Stock underlying each Stand-alone Right and the base price in effect for those shares shall be determined by the Plan
Administrator in its sole discretion at the time the Stand-alone Right is granted. In no event, however, may the base price per share be less than the Fair Market Value per underlying share of Common Stock on the grant date. 
  
 3. The distribution with respect to an exercised Stand-alone Right may be
made in shares of Common Stock valued at Fair Market Value on the exercise date, in cash, or partly in shares and partly in cash, as the Plan Administrator shall in its sole discretion deem appropriate. 
  
 E. The following terms and conditions shall govern the grant and exercise of
Limited Rights under this Article Two: 
  
 1. One or more
Section 16 Insiders may, in the Plan Administrator’s sole discretion, be granted Limited Rights with respect to their outstanding options under this Article Two. 
  
 2. Upon the occurrence of a Hostile Take-Over, the Section 16 Insider shall have the unconditional right (exercisable for a
thirty (30)-day period following such Hostile Take-Over) to surrender each option with such a Limited Right to the Corporation, to the extent the option is at the time exercisable for fully vested shares of Common Stock. The Section 16 Insider shall
in return be entitled to a cash distribution from the Corporation in an amount equal to the excess of (i) the Take-Over Price of the vested shares of Common Stock at the time subject to each surrendered option (or surrendered portion of such option)
over (ii) the aggregate exercise price payable for such vested shares. Such cash distribution shall be made within five (5) days following the option surrender date. 
  
 3. The Plan Administrator shall pre-approve, at the time such Limited Right is granted, the subsequent exercise of that
right in accordance with the terms of the grant and the provisions of this Section IV. No additional approval of the Plan Administrator or the Board shall be required at the time of the actual option surrender and cash distribution. Any
unsurrendered portion of the option shall continue to remain outstanding and become exercisable in accordance with the terms of the instrument evidencing such grant. 
  
 F. The shares of Common Stock underlying any stock appreciation rights exercised under this Section IV shall not be
available for subsequent issuance under the Plan. 
  

 12. 

 ARTICLE THREE 
  
 AUTOMATIC OPTION GRANT PROGRAM 
  

 The following terms and provisions reflect the amendment to the Automatic Option Grant Program authorized by the Board on July 8, 1999 and
approved by the shareholders at the 1999 Annual Shareholder Meeting on November 10, 1999. 
  
 I. OPTION TERMS 
  
 A.
Grant Dates. Option grants under this Article Three shall be made on the dates specified below: 
  
 1. Each individual who is first elected or appointed as a non-employee Board member on or after
November 10, 1999 shall automatically be granted, on the date of such initial election or appointment, a Non-Statutory Option to purchase 30,000 shares of Common Stock,1 provided that individual has not previously been in the employ of the Corporation or any Parent or Subsidiary. 
  
 2. On the date of
each Annual Shareholders Meeting, beginning with the 1999 Annual Shareholders Meeting, each individual who is re-elected to serve as an Eligible Director shall automatically be granted a Non-Statutory Option to purchase 15,000 shares of Common
Stock2, provided such individual has served as a non-employee Board member for at least six (6) months. There shall be no limit on the number of such
15,000-share option grants any one Eligible Director may receive over his or her period of Board service, and non-employee Board members who have previously been in the employ of the Corporation (or any Parent or Subsidiary) shall be eligible to
receive one or more such annual option grants over their period of continued Board service. 
  
 B. Exercise Price. 
  
 1. The exercise price per share shall be equal to one hundred percent (100%) of the Fair Market Value per share of Common Stock on the option grant date.

	 1
	 Prior to the July 8, 1999 restatement, the number of shares of Common Stock for
which an initial option grant was to be made to each newly elected or appointed non-employee Board member was set at 20,000 shares (before taking into account any splits of the Common Stock effected after that date).

	 2
	 Prior to the July 8, 1999 restatement, the number of shares of Common Stock for
which a continuing non-employee Board member was to be granted an option at each annual shareholders meeting at which he or she was re-elected to the Board was set at 10,000 shares (before taking into account any splits of the Common Stock effected
after that date). 

  

 13. 

 2. The exercise price shall be payable in one or more of the alternative forms authorized under the
Discretionary Option Grant Program. Except to the extent the sale and remittance procedure specified thereunder is utilized, payment of the exercise price for the purchased shares must be made on the Exercise Date. 
  
 C. Option Term. Each option shall have a maximum term equal to
the lesser of (i) nine (9) years measured from the option grant date or (ii) twelve (12) months following termination of Board service. 
  
 D. Exercise and Vesting of Options. Each option shall be immediately exercisable for any or all of the option shares. However, any shares
purchased under the option shall be subject to repurchase by the Corporation, at the exercise price paid per share, upon the Optionee’s cessation of Board service prior to vesting in those shares. Each initial 30,000-share grant shall vest, and
the Corporation’s repurchase right with respect to those shares shall lapse, in four (4) successive equal annual installments over the Optionee’s period of Board service, with the first such installment to vest upon the completion of one
(1) year of Board service measured from the automatic grant date. Each annual 15,000-share grant shall vest, and the Corporation’s repurchase right with respect to those shares shall lapse, in two (2) successive equal annual installments over
the optionee’s period of Board service measured from the automatic grant date. 
  
 E. Termination of Board Service. The following provisions shall govern the exercise of any options held by the Optionee upon his or her cessation of Board service: 
  
 (i) The Optionee (or, in the event of Optionee’s death,
the personal representative of the Optionee’s estate or the person or persons to whom the option is transferred pursuant to the Optionee’s will or the laws of inheritance) shall have a twelve (12)-month period following the date of such
cessation of Board service in which to exercise each such option. 
  
 (ii) During the twelve (12)-month exercise period, the option may not be exercised in the aggregate for more than the number of vested shares of Common Stock for which the option is exercisable at the time of the
Optionee’s cessation of Board service. 
  
 (iii) Should the Optionee cease to serve as a Board member by reason of death or Permanent Disability, then all shares at the time subject to the option shall immediately vest so that such option may, during the twelve (12)-month exercise
period following such cessation of Board service, be exercised for all or any portion of those shares as fully-vested shares of Common Stock. 
  
 (iv) In no event shall the option remain exercisable after the expiration of the option term. Upon the expiration of the twelve (12)-month
exercise period or (if earlier) upon the expiration of the option term, the option shall terminate and cease to be outstanding for any vested shares for which the option has not been exercised. However, the option shall, immediately upon the

  

 14. 

 Optionee’s cessation of Board service for any reason other than death or Permanent Disability,
terminate and cease to be outstanding to the extent the option is not otherwise at that time exercisable for vested shares. 
  
 II. CORPORATE TRANSACTION/CHANGE IN CONTROL/HOSTILE TAKE-OVER 
  
 A. In the event of any Corporate Transaction, the shares of Common Stock at the time subject to each outstanding option but
not otherwise vested shall automatically vest in full so that each such option shall, immediately prior to the effective date of the Corporate Transaction, become exercisable for all of the shares of Common Stock at the time subject to such option
and may be exercised for any or all of those shares as fully-vested shares of Common Stock. Immediately following the consummation of the Corporate Transaction, each automatic option grant shall terminate and cease to be outstanding, except to the
extent assumed by the successor corporation (or parent thereof). 
  
 B. In connection with any Change in Control, the shares of Common Stock at the time subject to each outstanding option but not otherwise vested shall automatically vest in full so that each such option shall, immediately prior to the
effective date of the Change in Control, become exercisable for all of the shares of Common Stock at the time subject to such option and may be exercised for any or all of those shares as fully-vested shares of Common Stock. Each such option shall
remain exercisable for such fully-vested option shares until the expiration or sooner termination of the option term or the surrender of the option in connection with a Hostile Take-Over. 
  
 C. Upon the occurrence of a Hostile Take-Over, the Optionee shall have a thirty (30)-day period in which to surrender to the
Corporation each of his or her outstanding automatic option grants. The Optionee shall in return be entitled to a cash distribution from the Corporation in an amount equal to the excess of (i) the Take-Over Price of the shares of Common Stock at the
time subject to each surrendered option (whether or not the Optionee is otherwise at the time vested in those shares) over (ii) the aggregate exercise price payable for such shares. Such cash distribution shall be paid within five (5) days following
the surrender of the option to the Corporation. At the 1999 Annual Meeting on November 10, 1999, shareholder approval of a proposal amending the 1996 Stock Incentive Plan created an automatic pre-approval of each option grant with such a cash
surrender right made under the Automatic Option Grant Program on or after this date and the subsequent exercise of that right in accordance with the provisions of this Section II.C, and no additional approval of the Board or any Plan Administrator
shall accordingly be required at the time of the actual option surrender and cash distribution. 
  
 D. Each option which is assumed in connection with a Corporate Transaction shall be appropriately adjusted, immediately after such Corporate Transaction,
to apply to the number and class of securities which would have been issuable to the Optionee in consummation 
  

 15. 

 of such Corporate Transaction had the option been exercised immediately prior to such Corporate Transaction. Appropriate
adjustments shall also be made to the exercise price payable per share under each outstanding option, provided the aggregate exercise price payable for such securities shall remain the same. 
  
 E. The grant of options under the Automatic Option Grant Program shall in no
way affect the right of the Corporation 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. 

 
 III. REMAINING TERMS 
  
 The remaining terms of each option granted under the Automatic Option Grant
Program shall be the same as the terms in effect for option grants made under the Discretionary Option Grant Program. 
  

 16. 

 ARTICLE FOUR 
  
 STOCK ISSUANCE PROGRAM 
  

Shares of Common Stock reserved for issuance under the Plan may be issued under the Stock Issuance Program through direct and immediate issuances
without any intervening option grants. Only person who render services to the Corporation (or any Parent or Subsidiary) in the capacity of an independent, non-employee consultant and who are not otherwise Section 16 Insiders at the time of issuance
may receive a stock issuance under the Program. Each such stock issuance shall be evidenced by a Stock Issuance Agreement which complies with the terms specified below. Shares of Common Stock may also be issued under the Stock Issuance Program
pursuant to share right awards which entitle the recipients to receive those shares upon the attainment of designated performance goals. In no event may more than One Million (1,000,000) shares of Common Stock reserved for issuance under the Plan be
issued pursuant to the provisions of the Stock Issuance Program. 
  
 A. Purchase Price. 
  
 1. The purchase
price per share of Common Stock subject to direct issuance shall be fixed by the Plan Administrator, but shall not be less than one hundred percent (100%) of the Fair Market Value per share of Common Stock on the issuance date. 
  
 2. Shares of Common Stock may be issued under the Stock Issuance Program for
any of the following items of consideration which the Plan Administrator may deem appropriate in each individual instance: 
  
 (i) cash or check made payable to the Corporation, or 
  
 (ii) past services rendered to the Corporation (or any Parent or Subsidiary). 
  
 B. Vesting/Issuance Provisions. 
  
 1. Shares of Common Stock issued under the Stock Issuance Program may, in
the discretion of the Plan Administrator, be fully and immediately vested upon issuance or may vest in one or more installments over the Participant’s period of Service or upon attainment of specified performance objectives. Alternatively, the
Plan Administrator may issue share right awards under the Stock Issuance Program which shall entitle the recipient to receive a specified number of shares of Common Stock upon the attainment of one or more performance goals established by the Plan
Administrator or the completion of a specified period of Service designated by the Plan Administrator. Upon the attainment of such performance goals or the completion of such Service requirement, fully-vested shares of Common Stock shall be issued
in satisfaction of those share right awards. 
  

 17. 

 2. Any new, substituted or additional securities or other property (including money paid other than as a
regular cash dividend) which the Participant may have the right to receive with respect to his or her unvested shares of Common Stock by reason of any stock dividend, stock split, recapitalization, combination of shares, exchange of shares or other
change affecting the outstanding Common Stock as a class without the Corporation’s receipt of consideration shall be issued subject to (i) the same vesting requirements applicable to the Participant’s unvested shares of Common Stock and
(ii) such escrow arrangements as the Plan Administrator shall deem appropriate. 
  
 3. The Participant shall have full stockholder rights with respect to any shares of Common Stock issued to the Participant under the Stock Issuance Program, whether or not the Participant’s interest in those
shares is vested. Accordingly, the Participant shall have the right to vote such shares and to receive any regular cash dividends paid on such shares. 
  
 4. Should the Participant cease to remain in Service while holding one or more unvested shares of Common Stock issued under the Stock Issuance Program or
should the performance objectives not be attained with respect to one or more such unvested shares of Common Stock, then those shares shall be immediately surrendered to the Corporation for cancellation, and the Participant shall have no further
stockholder rights with respect to those shares. To the extent the surrendered shares were previously issued to the Participant for cash consideration, the Corporation shall repay that consideration to the Participant at the time the shares are
surrendered. 
  
 5. The Plan Administrator may in its discretion
waive the surrender and cancellation of one or more unvested shares of Common Stock (or other assets attributable thereto) which would otherwise occur upon the cessation of the Participant’s Service or the non-attainment of the performance
objectives applicable to those shares. Such waiver shall result in the immediate vesting of the Participant’s interest in the shares of Common Stock as to which the waiver applies. Such waiver may be effected at any time, whether before or
after the Participant’s cessation of Service or the attainment or non-attainment of the applicable performance objectives. 
  
 6. Outstanding share right awards under the Stock Issuance Program shall automatically terminate, and no shares of Common Stock shall actually be issued
in satisfaction of those awards, if the performance goals or Service requirement established for such awards are not attained. The Plan Administrator, however, shall have the discretionary authority to issue shares of Common Stock under one or more
outstanding share right awards as to which the designated performance goals or Service requirement have not been attained. 
  

 18. 

 II. CORPORATE TRANSACTION/CHANGE IN CONTROL 
  
 A. All of the Corporation’s outstanding repurchase rights under the
Stock Issuance Program shall terminate automatically, and all the shares of Common Stock subject to those terminated rights shall immediately vest in full, in the event of any Corporate Transaction, except to the extent those repurchase rights are
to be assigned to the successor corporation (or parent thereof) in connection with such Corporate Transaction. 
  
 B. The Plan Administrator shall have the discretionary authority, exercisable either at the time the unvested shares are issued or any time while the
Corporation’s repurchase rights remain outstanding under the Stock Issuance Program, to provide that those rights shall automatically terminate in whole or in part, and the shares of Common Stock subject to those terminated rights shall
immediately vest, in the event the Participant’s Service should subsequently terminate by reason of an Involuntary Termination within a designated period (not to exceed eighteen (18) months) following the effective date of any Corporate
Transaction in which those repurchase rights are assigned to the successor corporation (or parent thereof). 
  
 C. The Plan Administrator shall have the discretionary authority, exercisable either at the time the unvested shares are issued or any time while the
Corporation’s repurchase rights remain outstanding under the Stock Issuance Program, to provide that those rights shall automatically terminate in whole or in part, and the shares of Common Stock subject to those terminated rights shall
immediately vest, in the event the Participant’s Service should subsequently terminate by reason of an Involuntary Termination within a designated period (not to exceed eighteen (18) months) following the effective date of any Change in
Control. 
  
 III. SHARE ESCROW/LEGENDS 
  
 Unvested shares may, in the Plan Administrator’s discretion, be held in
escrow by the Corporation until the Participant’s interest in such shares vests or may be issued directly to the Participant with restrictive legends on the certificates evidencing those unvested shares. 
  
  

 19. 

 ARTICLE FIVE 
  
 MISCELLANEOUS 
  
 I. FINANCING 
  
 The Plan Administrator may permit any Optionee (other than a Section 16 Insider) to pay the option exercise price under the Discretionary Option Grant
Program by delivering a full-recourse, interest bearing promissory note payable in one or more installments. The terms of any such promissory note (including the interest rate and the terms of repayment) shall be established by the Plan
Administrator in its sole discretion. In no event may the maximum credit available to the Optionee exceed the sum of (i) the aggregate option exercise price payable for the purchased shares plus (ii) any Federal, state and local income and
employment tax liability incurred by the Optionee in connection with the option exercise or share purchase. 
  
 II. TAX WITHHOLDING 
  
 A. The Corporation’s obligation to deliver shares of Common Stock upon the exercise of options under the Plan shall be subject to the satisfaction of
all applicable Federal, state and local income and employment tax withholding requirements. 
  
 B. The Plan Administrator may, in its discretion, provide any or all holders of Non-Statutory Options under the Discretionary Option Grant Program or unvested shares of Common Stock under the Stock Issuance Program
with the right to use shares of Common Stock in satisfaction of all or part of the Withholding Taxes to which such holders may become subject in connection with the exercise of their options or the vesting of their shares. Such right may be provided
to any such holder in either or both of the following formats: 
  
 Stock Withholding: The election to have the Corporation withhold, from the shares of Common Stock otherwise issuable upon the exercise of such Non-Statutory Option or the vesting of such shares, a portion of
those shares with an aggregate Fair Market Value equal to the percentage of the Withholding Taxes (not to exceed one hundred percent (100%)) designated by the holder. 
  

 Stock Delivery: The election to deliver to the Corporation, at the time the Non-Statutory Option is exercised or the
issued shares vest, one or more shares of Common Stock previously acquired by such holder (other than in connection with the option exercise or stock vesting which triggers the Withholding Taxes) with an aggregate Fair Market Value equal to the
percentage of the Withholding Taxes (not to exceed one hundred percent (100%)) designated by the holder. 
  

 20. 

 III. EFFECTIVE DATE AND TERM OF THE PLAN 
  
 A. The Plan and each of the equity incentive programs thereunder shall
become effective immediately upon the approval of the Corporation’s shareholders at the 1996 Annual Meeting. Options may be granted under the Plan at any time on or after the date of such shareholder approval. If such shareholder approval is
not obtained, then this Plan shall not become effective, and no options shall be granted and no shares shall be issued under the Plan. 
  
 B. The Plan shall serve as the successor to the Predecessor Plan, and no further option grants shall be made under the Predecessor Plan after this Plan is
approved by the shareholders at the 1996 Annual Meeting. All options outstanding under the Predecessor Plan at the time of such shareholder approval shall be incorporated into the Plan at that time and shall be treated as outstanding options under
the Plan. However, each outstanding option so incorporated shall continue to be governed solely by the terms of the documents evidencing such option, and no provision of the Plan shall be deemed to affect or otherwise modify the rights or
obligations of the holders of such incorporated options with respect to their acquisition of shares of Common Stock. 
  
 C. One or more provisions of the Plan, including (without limitation) the option/vesting acceleration provisions of Article Two relating to Corporate
Transactions and Changes in Control, may, in the Plan Administrator’s discretion, be extended to one or more options incorporated from the Predecessor Plan which do not otherwise contain such provisions. 
  
 D. The Plan shall terminate upon the earliest of (i) December 31,
2006, (ii) the date on which all shares available for issuance under the Plan shall have been issued as fully-vested shares or (iii) the termination of all outstanding options in connection with a Corporate Transaction. Upon such plan termination,
all outstanding option grants shall thereafter continue to have force and effect in accordance with the provisions of the documents evidencing such grants. 
  
 IV. AMENDMENT OF THE PLAN 
  
 A. The Board shall have complete power and authority to amend or modify the Plan in any or all respects but may delegate such authority in whole or in
part to the Primary Committee, as the Board deems appropriate. However, no such amendment or modification shall adversely affect the rights and obligations with respect to stock options at the time outstanding under the Plan unless the Optionee
consents to such amendment or modification. In addition, certain amendments may require shareholder approval in accordance with applicable laws and regulations. 
  

B. The Plan was amended by the Board on July 29, 1998 and approved by the Shareholders at the 1998 Annual Shareholders Meeting, in order to extend the
automatic share increase provisions of the Plan for an additional three (3)-year through fiscal December in calendar year 2001. The Automatic Option Grant Program in effect under the Plan was amended by the Board on July 8, 1999 and approved by the
shareholders at the 1999 Annual Shareholder Meeting, in order to increase the number of shares of Common Stock for which newly elected or 
  

 21. 

 appointed non-employee Board members and continuing non-employee Board members may be granted stock options under such
program. The Plan was amended on January 9, 2001 to allow the Board to delegate, in whole or in part, its authority to amend the Plan to the Primary Committee as it deems appropriate. The Plan was amended on March 18, 2003 to implement the Stock
Issuance Program pursuant to which up to One Million (1,000,000) shares of Common Stock reserved for issuance under the Plan may be issued pursuant to direct stock issuances under the Stock Issuance Program. 
  
 C. Options to purchase shares of Common Stock may be granted under the
Discretionary Option Grant Program that are in excess of the number of shares then available for issuance under the Plan, provided any excess shares actually issued under that program shall be held in escrow until there is obtained shareholder
approval of an amendment sufficiently increasing the number of shares of Common Stock available for issuance under the Plan. If such shareholder approval is not obtained within twelve (12) months after the date the first such excess issuances are
made, then (i) any unexercised options granted on the basis of such excess shares shall terminate and cease to be outstanding and (ii) the Corporation shall promptly refund to the Optionees the exercise or purchase price paid for any excess shares
issued under the Plan and held in escrow, together with interest (at the applicable Short Term Federal Rate) for the period the shares were held in escrow, and such shares shall thereupon be automatically cancelled and cease to be outstanding.

  
 V. USE OF PROCEEDS 
  
 Any cash proceeds received by the Corporation from the sale of shares of
Common Stock under the Plan shall be used for general corporate purposes. 
  
 VI. REGULATORY APPROVALS 
  
 A. The implementation of the Plan, the granting of any stock option under the Plan and the issuance of any shares of Common Stock under the Plan shall be subject to the Corporation’s procurement of all approvals and permits required by
regulatory authorities having jurisdiction over the Plan, the stock options granted under it and the shares of Common Stock issued pursuant to it. 
  
 B. No shares of Common Stock or other assets shall be issued or delivered under the Plan unless and until there shall have been compliance with all
applicable requirements of Federal and state securities laws, including the filing and effectiveness of the Form S-8 registration statement for the shares of Common Stock issuable under the Plan, and all applicable listing requirements of any stock
exchange (or the Nasdaq National Market, if applicable) on which Common Stock is then listed for trading. 
  

 22. 

 VII. NO EMPLOYMENT/SERVICE RIGHTS 
  
 Nothing in the Plan shall confer upon the 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 Corporation (or any Parent or Subsidiary employing or retaining such person) or of the Optionee, which rights are hereby expressly reserved by each, to terminate such person’s
Service at any time for any reason, with or without cause. 
  

 23. 

 APPENDIX 
  
 The following definitions shall be in effect under the Plan: 
  
 A. Automatic Option Grant Program shall mean the automatic option grant program in effect under Article Three
of the Plan. 
  
 B. Board shall mean the
Corporation’s Board of Directors. 
  
 C. Change in
Control shall mean a change in ownership or control of the Corporation effected through either of the following transactions: 
  
 (i) the acquisition, directly or indirectly by any person or related group of persons (other than the Corporation or a person that
directly or indirectly controls, is controlled by, or is under common control with, the Corporation), of beneficial ownership (within the meaning of Rule 13d-3 of the 1934 Act) of securities possessing more than thirty-five percent (35%) of the
total combined voting power of the Corporation’s outstanding securities pursuant to a tender or exchange offer made directly to the Corporation’s shareholders which the Board does not recommend such shareholders to accept, or 

 
 (ii) a change in the composition of the Board over a
period of thirty-six (36) consecutive months or less such that a majority of the Board members ceases, by reason of one or more contested elections for Board membership, to be comprised of individuals who either (A) have been Board members
continuously since the beginning of such period or (B) have been elected or nominated for election as Board members during such period by at least a majority of the Board members described in clause (A) who were still in office at the time the Board
approved such election or nomination. 
  
 D. Code
shall mean the Internal Revenue Code of 1986, as amended. 
  
 E.
Common Stock shall mean the Corporation’s common stock. 
  
 F. Corporate Transaction shall mean either of the following shareholder-approved transactions to which the Corporation is a party: 
  
 (i) a merger or consolidation in which securities possessing more than fifty percent (50%) of the total
combined voting power of the Corporation’s outstanding securities are transferred to a person or persons different from the persons holding those securities immediately prior to such transaction, or 
  
 (ii) the sale, transfer or other disposition of all or
substantially all of the Corporation’s assets in complete liquidation or dissolution of the Corporation. 
  

 A-1. 

 G. Corporation shall mean Cisco Systems, Inc., a California corporation, and its
successors. 
  
 H. Discretionary Option Grant
Program shall mean the discretionary option grant program in effect under Article Two of the Plan. 
  
 I. Eligible Director shall mean a non-employee Board member eligible to participate in the Automatic Option Grant Program in accordance with
the eligibility provisions of Article One. 
  
 J.
Employee shall mean an individual who is in the employ of the Corporation (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. 
  
 K. Exercise Date shall mean the
date on which the Corporation shall have received written notice of the option exercise. 
  
 L. Fair Market Value per share of Common Stock on any relevant date shall be determined in accordance with the following provisions: 
  
 (i) If the Common Stock is at the time traded on the Nasdaq National Market, then the Fair Market Value
shall be deemed equal to the closing selling price per share of Common Stock on the date in question, as such price is reported on the Nasdaq National Market. If there is no closing selling price for the Common Stock 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. 
  
 (ii) If the Common Stock is at the time listed on any Stock Exchange, then the Fair Market Value shall be deemed equal to the closing
selling price per share of Common Stock on the date in question on the Stock Exchange determined by the Plan Administrator to be the primary market for the Common Stock, as such price is officially quoted in the composite tape of transactions on
such exchange. If there is no closing selling price for the Common Stock 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. 
  
 M. Hostile Take-Over shall mean the acquisition, directly or
indirectly, by any person or related group of persons (other than the Corporation or a person that directly or indirectly controls, is controlled by, or is under common control with, the Corporation) of beneficial ownership (within the meaning of
Rule 13d-3 of the 1934 Act) of securities possessing more than thirty-five percent (35%) of the total combined voting power of the Corporation’s outstanding securities pursuant to a tender or exchange offer made directly to the
Corporation’s shareholders which the Board does not recommend such shareholders to accept. 
  

 A-2. 

 N. Incentive Option shall mean an option which satisfies the requirements of Code Section
422. 
  
 O. Involuntary Termination shall mean the
termination of the Service of any individual which occurs by reason of: 
  
 (i) such individual’s involuntary dismissal or discharge by the Corporation for reasons other than Misconduct, or 
  
 (ii) such individual’s voluntary resignation following (A) a change in his or her position with the Corporation which materially
reduces his or her level of responsibility, (B) a reduction in his or her level of compensation (including base salary, fringe benefits and target bonuses under any corporate-performance based bonus or incentive programs) by more than fifteen
percent (15%) or (C) a relocation of such individual’s place of employment by more than fifty (50) miles, provided and only if such change, reduction or relocation is effected without the individual’s consent. 
  
 P. Misconduct shall mean the commission of any act of fraud,
embezzlement or dishonesty by the Optionee, any unauthorized use or disclosure by such person of confidential information or trade secrets of the Corporation (or any Parent or Subsidiary), or any other intentional misconduct by such person adversely
affecting the business or affairs of the Corporation (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 Corporation (or any Parent or Subsidiary)
may consider as grounds for the dismissal or discharge of any Optionee or other person in the Service of the Corporation (or any Parent or Subsidiary). 
  
 Q. 1934 Act shall mean the Securities Exchange Act of 1934, as amended. 
  
 R. Non-Statutory Option shall mean an option not intended to satisfy the requirements of Code Section 422.

  
 S. Optionee shall mean any person to whom an
option is granted under the Discretionary Option Grant or Automatic Option Grant Program. 
  
 T. Parent shall mean any corporation (other than the Corporation) in an unbroken chain of corporations ending with the Corporation, provided each corporation in the unbroken chain (other than the
Corporation) 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 corporations in such chain. 
  
 U. Participant shall mean any person who is issued shares of
Common Stock under the Stock Issuance Program. 
  

 A-3. 

 V. Permanent Disability or Permanently Disabled shall mean the inability of the Optionee to
engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment expected to result in death or to be of continuous duration of twelve (12) months or more. However, solely for purposes of the Automatic
Option Grant Program, Permanent Disability or Permanently Disabled shall mean the inability of the non-employee Board member to perform his or her usual duties as a Board member by reason of any medically determinable physical or mental impairment
expected to result in death or to be of continuous duration of twelve (12) months or more. 
  
 W. Plan shall mean the Corporation’s 1996 Stock Incentive Plan, as set forth in this document. 
  
 X. Plan Administrator shall mean the particular entity, whether the Primary Committee, the Board or the Secondary Committee, which is
authorized to administer the Discretionary Option Grant Program with respect to one or more classes of eligible persons, to the extent such entity is carrying out its administrative functions under those programs with respect to the persons under
its jurisdiction. 
  
 Y. Predecessor Plan shall mean
the Corporation’s pre-existing 1987 Stock Option Plan in effect immediately prior to the Plan Effective Date hereunder. 
  
 Z. Primary Committee shall mean the committee of two (2) or more non-employee Board members appointed by the Board to administer the
Discretionary Option Grant Program with respect to Section 16 Insiders. 
  
 AA. Secondary Committee shall mean a committee of two (2) or more Board members appointed by the Board to administer the Discretionary Option Grant Program with respect to eligible persons other than Section 16 Insiders.

  
 BB. Section 16 Insider shall mean an officer or
director of the Corporation subject to the short-swing profit liabilities of Section 16 of the 1934 Act. 
  
 CC. Service shall mean the performance of services for the Corporation (or any Parent or Subsidiary) by a person in the capacity of an
Employee, a non-employee member of the board of directors or a consultant or independent advisor, except to the extent otherwise specifically provided in the documents evidencing the option grant or stock issuance. 
  
 DD. Stock Exchange shall mean either the American Stock
Exchange or the New York Stock Exchange. 
  
 EE. Stock
Issuance Agreement shall mean the agreement entered into by the Corporation and the Participant at the time of issuance of shares to such person under the Stock Issuance Program. 
  
 FF. Stock Issuance Program shall mean the stock issuance program in effect under Article Four of the Plan.

  

 A-4. 

 GG. Subsidiary shall mean any corporation (other than the Corporation) in an unbroken chain
of corporations beginning with the Corporation, provided each corporation (other than the last corporation) 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 corporations in such chain. 
  
 HH. Take-Over Price shall mean the greater of (i) the Fair Market Value per share of Common Stock on the date the option is surrendered to the Corporation in connection with a Hostile Take-Over or (ii) the highest
reported price per share of Common Stock paid by the tender offeror in effecting such Hostile Take-Over. However, if the surrendered option is an Incentive Option, the Take-Over Price shall not exceed the clause (i) price per share. 
  
 II. 10% Shareholder shall mean the owner of stock (as
determined under Code Section 424(d)) possessing more than ten percent (10%) of the total combined voting power of all classes of stock of the Corporation (or any Parent or Subsidiary). 
  
 JJ. Withholding Taxes shall mean the Federal, state and local income and employment withholding taxes to which
the holder of Non-Statutory Options or unvested shares of Common Stock may become subject in connection with the exercise of those options or the vesting of those shares. 
  

 A-5. 

 CISCO SYSTEMS, INC. 
  
 NOTICE OF GRANT OF STOCK OPTION 
  

 Notice is hereby given of the following option grant (the “Option”) made to purchase shares of Cisco Systems, Inc. (the
“Company”) common stock (the “Common Stock”): 
  
 Optionee:
                                        
                                        
               
 Grant Date:
                                        
                                        
             
 Type of
Option:                                      Incentive Stock
Option 
                                        
                            Non-Statutory Stock Option 
 Grant Number:
                                        
                                        
       
 Number of Option Shares:
                                        
        shares 
 Exercise Price:
$                                        
                             per share 
 Vesting Commencement Date:
                                        
                         
 Expiration Date:
                                        
                                        
         
  
 Exercise
Schedule 
  
 The Option shall become exercisable with
respect to (i) twenty percent (20%) 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 forty-eight (48) successive
equal monthly installments upon Optionee’s completion of each additional month of Service over the forty-eight (48)-month period measured from the first anniversary of the Vesting Commencement Date. In no event shall the Option become
exercisable for any additional Option Shares after Optionee’s cessation of Service. 
  
 Should Optionee request a reduction to his or her work commitment to less than thirty (30) hours per week, then the Plan Administrator shall have the right, exercisable in connection with the approval of that
reduction, to extend the period over which the Option shall thereafter vest and become exercisable for the Option Shares during the remainder of the option term. The decision whether or not to approve Optionee’s request for such reduced work
commitment shall be at the sole discretion of the Plan Administrator. In no event shall any extension of the Exercise Schedule for the Option Shares result in the extension of the Expiration Date of the Option. 
  
 Optionee understands and agrees that the Option is offered subject to and in
accordance with the terms of the Cisco Systems, Inc. 1996 Stock Incentive 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. 
  
 No Employment or Service Contract. Nothing in this
Notice or in the attached Stock Option Agreement or in the 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 Corporation (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. 
  
 Definitions. All capitalized terms in this Notice shall have the meaning
assigned to them in this Notice or in the attached Stock Option Agreement. 

 STOCK OPTION AGREEMENT 
  
 Recitals 
  
 A. The Board has adopted the Plan for the purpose of retaining the services of selected Employees, non-employee members of the Board or of the board of
directors of any Parent or Subsidiary and consultants and other independent advisors who provide services to the Corporation (or any Parent or Subsidiary). 
  
 B. Optionee is to render valuable services to the Corporation (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 Corporation’s grant of an option to Optionee. 
  
 C. 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 Corporation 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 maximum term of
nine (9) 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. This option may, in connection with the Optionee’s estate plan, be assigned
in whole or in part during Optionee’s lifetime to one or more members of the Optionee’s immediate family or to a trust established for the exclusive benefit of one or more such family members. The assigned portion shall be exercisable only
by the person or persons who acquire a proprietary interest in the option pursuant to such assignment. The terms applicable to the assigned portion shall be the same as those in effect for this option immediately prior to such assignment and shall
be set forth in such documents issued to the assignee as the Corporation may deem appropriate. Should the Optionee die while holding this option, then this option shall be transferred in accordance with Optionee’s will or the laws of descent
and distribution. 
  
 4. 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. As an administrative matter, the exercisable portion of this option may only be exercised until the close of the Nasdaq
National Market on the last trading day before the Expiration Date or earlier date of termination of the option term under 

 Paragraph 5. Any later attempt to exercise this option will not be honored. For example, if Optionee ceases to remain in
Service as provided in Paragraph 5(i) and the date three (3) months from the date of cessation is Monday, July 4 (a holiday on which the Nasdaq National Market is closed), Optionee must exercise the exercisable portion of this option by 4 pm Eastern
Daylight Time on Friday, July 1. 
  
 5. 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) If Optionee dies 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 descent and distribution shall have the right to exercise this option. Such right shall lapse, and this option shall cease to be
outstanding, upon the earlier of (A) the expiration of the twelve (12)- month period measured from the date of Optionee’s death or (B) 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) For purposes of this Agreement, Optionee’s period
of Service shall not include any period of notice of termination of employment, whether expressed or implied. Optionee’s date of cessation of Service shall mean the date upon which Optionee ceases active performance of services for the
Corporation following the provision of such notification of termination or resignation from Service and shall be determined solely by this Agreement and without reference to any other agreement, written or oral, including Optionee’s contract of
employment. 
  
 (v) During the limited period of
post-Service exercisability, this option may not be exercised in the aggregate for more than the number of vested Option Shares for which the option is exercisable at the time of Optionee’s cessation of Service. 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 
  

 2 

 been exercised. However, this option shall, immediately upon Optionee’s cessation of Service for any
reason, terminate and cease to be outstanding with respect to any Option Shares in which Optionee is not otherwise at that time vested or for which this option is not otherwise at that time exercisable. 
  
 (vi) Should Optionee’s Service be terminated for
Misconduct or should Optionee otherwise engage in Misconduct while this option is outstanding, then this option shall terminate immediately and cease to remain outstanding. 
  
 6. Special Acceleration of Option 
  
 (a) This option, to the extent outstanding at the time of a Corporate Transaction but not otherwise fully exercisable,
shall automatically accelerate so that this option shall, immediately prior to the effective date of the Corporate Transaction, become exercisable for all of the Option Shares at the time subject to this option and may be exercised for any or all of
those Option Shares as fully-vested shares of Common Stock. No such acceleration of this option, however, shall occur if and to the extent: (i) this option is, in connection with the Corporate Transaction, either to be assumed by the successor
corporation (or parent thereof) or to be replaced with a comparable option to purchase shares of the capital stock of the successor corporation (or parent thereof) or (ii) this option is to be replaced with a cash incentive program of the successor
corporation which preserves the spread existing on the unvested Option Shares at the time of the Corporate Transaction (the excess of the Fair Market Value of those Option Shares over the aggregate Exercise Price payable for such shares) and
provides for subsequent pay-out in accordance with the same option exercise/vesting schedule set forth in the Grant Notice. The determination of option comparability under clause (i) shall be made by the Plan Administrator, and such determination
shall be final, binding and conclusive. 
  
 (b) Immediately
following the Corporate Transaction, this option shall terminate and cease to be outstanding, except to the extent assumed by the successor corporation (or parent thereof) in connection with the Corporate Transaction. 
  
 (c) If this option is assumed in connection with a Corporate Transaction,
then this option shall be appropriately adjusted, immediately after such Corporate Transaction, to apply to the number and class of securities which would have been issuable to Optionee in consummation of such Corporate Transaction had the option
been exercised immediately prior to such Corporate Transaction, and appropriate adjustments shall also be made to the Exercise Price, provided the aggregate Exercise Price shall remain the same. 
  
 (d) This option, to the extent outstanding at the time of a Change in
Control but not otherwise fully exercisable, shall automatically accelerate so that this option shall, immediately prior to the effective date of the Change in Control, become exercisable for all of the Option Shares at the time subject to this
option and may be exercised for any or all of those Option Shares as fully-vested shares of Common Stock. This option shall remain so exercisable until the Expiration Date or sooner termination of the option term. 
  

 3 

 (e) This Agreement shall not in any way affect the right of the Corporation 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. 
  
 7. Adjustment in Option Shares. Should any change be made to the Common Stock by reason of any stock split,
stock dividend, recapitalization, combination of shares, exchange of shares or other change affecting the outstanding Common Stock as a class without the Corporation’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. 
  
 8. 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 a holder of record of the purchased shares. 
  
 9. Manner of Exercising Option. 
  

 (a) 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: 
  
 (i) Pay the aggregate Exercise Price for the purchased shares in one or more of the following forms: 
  
 (A) cash or check made payable to the Corporation;

  
 (B) to the extent the option is exercised
for vested Option Shares, through a special sale and remittance procedure pursuant to which Optionee (or any other person or persons exercising the option) shall concurrently provide irrevocable written instructions (I) to a Corporation-designated
brokerage firm (or in the case of an Executive Officer or Board member of the Corporation, an Optionee-designated brokerage firm) to effect the immediate sale of the purchased shares and remit to the Corporation, out of the sale proceeds available
on the settlement date, sufficient funds to cover the aggregate Exercise Price payable for the purchased shares plus all applicable taxes required to be withheld by the Corporation by reason of such exercise and (II) to the Corporation to deliver
the certificates for the purchased shares directly to such brokerage firm in order to complete the sale transaction; 
  
 (C) a promissory note payable to the Corporation, but only to the extent authorized by the Plan Administrator in accordance with
Paragraph 13; and 
  

 4 

 (D) shares of Common Stock held by Optionee (or any other person or persons exercising
the option) for the requisite period necessary to avoid a charge to the Corporation’s earnings for financial reporting purposes and valued at Fair Market Value on the Exercise Date. 
  
 (ii) Furnish to the Corporation appropriate documentation that the person or persons exercising the option
(if other than Optionee) have the right to exercise this option. 
  
 (iii) Make appropriate arrangements with the Corporation (or Parent or Subsidiary employing or retaining Optionee) for the satisfaction of all tax withholding requirements applicable to the option exercise.

  
 (b) As soon as practical after the Exercise Date, the
Corporation 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. 
  
 (c) In no event may this option be exercised for any fractional shares.

  
 (d) Notwithstanding any other provisions of the Plan, this
Agreement or any other agreement to the contrary, if at the time this option is exercised, Optionee is indebted to the Corporation (or any Parent or Subsidiary) for any reason, the following actions shall be taken, as deemed appropriate by the Plan
Administrator: 
  
 (i) any shares of Common
Stock to be issued upon such exercise shall automatically be pledged against Optionee’s outstanding indebtedness; and 
  
 (ii) if this option is exercised in accordance with subparagraph 9(a)(i)(B) above, the after tax proceeds of the sale of Optionee’s
stock shall automatically be applied to the outstanding balance of Optionee’s indebtedness. 
  
 10. Compliance with Laws and Regulations. 
  
 (a) The exercise of this option and the issuance of the Option Shares upon such exercise shall be subject to compliance by the Corporation 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 Common Stock may be listed for trading at the time of such exercise and
issuance. 
  
 (b) The inability of the Corporation to obtain
approval from any regulatory body having authority deemed by the Corporation to be necessary to the lawful issuance and sale of any Common Stock pursuant to this option shall relieve the Corporation of any liability with respect to the non-issuance
or sale of the Common Stock as to which such 
  

 5 

 approval shall not have been obtained. The Corporation, however, shall use its best efforts to obtain all such approvals.

  
 11. 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 Corporation and its successors and assigns and Optionee, Optionee’s assigns and the legal representatives, heirs
and legatees of Optionee’s estate. 
  
 12.
Notices. Any notice required to be given or delivered to the Corporation under the terms of this Agreement shall be in writing and addressed to the Corporation at its principal corporate 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. 
  
 13. 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 Option Shares by delivering a full-recourse promissory note
payable to the Corporation. The terms of any such promissory note (including the interest rate, the requirements for collateral and the terms of repayment) shall be established by the Plan Administrator in its sole discretion. 
  
 14. 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. 
  
 15. Governing Law. The interpretation, performance and enforcement of this Agreement shall be governed by the laws of the State of California without resort to that State’s conflict-of-laws rules.

  
 16. Excess Shares. If the Option Shares covered
by this Agreement exceed, as of the Grant Date, the number of shares of Common Stock which may without shareholder approval be issued under the Plan, then this option shall be void with respect to those excess shares, unless shareholder approval of
an amendment sufficiently increasing the number of shares of Common Stock issuable under the Plan is obtained in accordance with the provisions of the Plan. 
  
 17. 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: 
  
 (a) 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: (A) more than three (3) months after the date Optionee ceases to be an
Employee for any reason other than death or Permanent Disability or (B) more than twelve (12) months after the date Optionee ceases to be an Employee by reason of Permanent Disability. 
  

 6 

 (b) No installment under this option shall qualify for favorable tax treatment as an Incentive Option if
(and to the extent) the aggregate Fair Market Value (determined at the Grant Date) of the Common Stock for which such installment first becomes exercisable hereunder would, when added to the aggregate value (determined as of the respective date or
dates of grant) of the Common Stock or other securities for which this option or any other Incentive Options granted to Optionee prior to the Grant Date (whether under the Plan or any other option plan of the Corporation or any Parent or Subsidiary)
first become exercisable during the same calendar year, exceed One Hundred Thousand Dollars ($100,000) in the aggregate. Should such One Hundred Thousand Dollar ($100,000) limitation be exceeded in any calendar year, this option shall nevertheless
become exercisable for the excess shares in such calendar year as a Non-Statutory Option. 
  
 (c) Should the exercisability of this option be accelerated upon a Corporate Transaction or Change in Control, then this option shall qualify for favorable tax treatment as an Incentive Option only to the extent the
aggregate Fair Market Value (determined at the Grant Date) of the Common Stock for which this option first becomes exercisable in the calendar year in which the Corporate Transaction or Change in Control occurs does not, when added to the aggregate
value (determined as of the respective date or dates of grant) of the Common Stock or other securities for which this option or 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 Corporation or any Parent or Subsidiary) first become exercisable during the same calendar year, exceed One Hundred Thousand Dollars ($100,000) in the aggregate. Should the applicable One Hundred Thousand Dollar ($100,000)
limitation be exceeded in the calendar year of such Corporate Transaction or Change in Control, the option may nevertheless be exercised for the excess shares in such calendar year as a Non-Statutory Option. 
  
 (d) Should Optionee hold, in addition to this option, one or more other
options to purchase Common Stock 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. 
  
 18. Leave of
Absence. The following provisions shall apply upon the Optionee’s commencement of an authorized leave of absence: 
  
 (a) The exercise schedule in effect under the Grant Notice shall be frozen as of the first day of the authorized leave, and this option shall not become
exercisable for any additional installments of the Option Shares during the period Optionee remains on such leave. 
  
 (b) If the option is designated as an Incentive Option in the Grant Notice, then the following additional provision shall apply: 
  
 If the leave of absence continues for more than ninety (90)
days, then this option shall automatically convert to a Non-Statutory Option under the Federal tax laws at the end of the three (3)-month period measured from the ninety-first (91st) day of such leave, unless the Optionee’s reemployment rights
are guaranteed by statute or by written agreement. Following any such 
  

 7 

 conversion of the option, all subsequent exercises of such option, whether effected before or after
Optionee’s return to active Employee status, shall result in an immediate taxable event, and the Corporation shall be required to collect from Optionee all withholding taxes applicable to such exercise. 
  
 (c) In no event shall this option become exercisable for any additional
Option Shares or otherwise remain outstanding if Optionee does not resume Employee status prior to the Expiration Date of the option term. 
  
 19. Further Instruments. The parties agree to execute such further instruments and to take such further action as may be reasonably
necessary to carry out the purposes and intent of this Agreement. 
  
 20. Authorization to Release Necessary Personal Information. 
  
 (a) Optionee hereby authorizes and directs Optionee’s employer to collect, use and transfer in electronic or other form, any personal information (the “Data”) regarding Optionee’s employment, the
nature and amount of Optionee’s compensation and the fact and conditions of Optionee’s participation in the Plan (including, but not limited to, Optionee’s name, home address, telephone number, date of birth, social security number
(or any other social or national identification number), salary, nationality, job title, number of shares of Common Stock held and the details of all options or any other entitlement to shares of Common Stock awarded, cancelled, exercised, vested,
unvested or outstanding) for the purpose of implementing, administering and managing Optionee’s participation in the Plan. Optionee understands that the Data may be transferred to the Corporation or any of its Subsidiaries, or to any third
parties assisting in the implementation, administration and management of the Plan, including any requisite transfer to a broker or other third party assisting with the exercise of Options under the Plan or with whom shares of Common Stock acquired
upon exercise of this option or cash from the sale of such shares may be deposited. Optionee acknowledges that recipients of the Data may be located in different countries, and those countries may have data privacy laws and protections different
from those in the country of Optionee’s residence. Furthermore, Optionee acknowledges and understands that the transfer of the Data to the Corporation or any of its Subsidiaries, or to any third parties is necessary for Optionee’s
participation in the Plan. 
  
 (b) Optionee may at any time
withdraw the consents herein, by contacting Optionee’s local human resources representative in writing. Optionee further acknowledges that withdrawal of consent may affect Optionee’s ability to exercise or realize benefits from the option,
and Optionee’s ability to participate in the Plan. 
  
 21.
No Entitlement or Claims for Compensation. 
  
 (a)
The grant of options under the Plan is made at the discretion of the Plan Administrator, and the Plan may be suspended or terminated by the Corporation at any time. The grant of an option in one year or at one time does not in any way entitle
Optionee to an option grant in the future. The Plan is wholly discretionary in nature and is not to be considered part of Optionee’s normal or expected compensation subject to severance, resignation, 
  

 8 

 redundancy or similar compensation. The value of the option is an extraordinary item of compensation which is outside the
scope of Optionee’s employment contract (if any). 
  
 (b)
Optionee shall have no rights to compensation or damages as a result of Optionee’s cessation of Service for any reason whatsoever, whether or not in breach of contract, insofar as those rights arise or may arise from Optionee’s ceasing to
have rights under or be entitled to exercise this option as a result of such cessation or from the loss or diminution in value of such rights. If Optionee did acquire any such rights, Optionee is deemed to have waived them irrevocably by accepting
the option. 
  

 9 

 Appendix 
  
 The following definitions shall be in effect under the Agreement: 
  
 A. Agreement shall mean this Stock Option Agreement.

  
 B. Board shall mean the Corporation’s Board
of Directors. 
  
 C. Change in Control shall mean a
change in ownership or control of the Corporation effected through either of the following transactions: 
  
 (i) the acquisition, directly or indirectly by any person or related group of persons (other than the Corporation or a person that directly or indirectly
controls, is controlled by, or is under common control with, the Corporation), of beneficial ownership (within the meaning of Rule 13d-3 of the 1934 Act) of securities possessing more than thirty-five percent (35%) of the total combined voting power
of the Corporation’s outstanding securities pursuant to a tender or exchange offer made directly to the Corporation’s shareholders which the Board does not recommend such shareholders to accept, or 
  
 (ii) a change in the composition of the Board over a period of thirty-six
(36) consecutive months or less such that a majority of the Board members ceases, by reason of one or more contested elections for Board membership, to be comprised of individuals who either (A) have been Board members continuously since the
beginning of such period or (B) have been elected or nominated for election as Board members during such period by at least a majority of the Board members described in clause (A) who were still in office at the time the Board approved such election
or nomination. 
  
 D. Code shall mean the Internal
Revenue Code of 1986, as amended. 
  
 E. Common
Stock shall mean the Corporation’s common stock. 
  
 F. Corporate Transaction shall mean either of the following shareholder-approved transactions to which the Corporation is a party: 
  
 (i) a merger or consolidation in which securities possessing more than fifty percent (50%) of the total combined voting power of the
Corporation’s outstanding securities are transferred to a person or persons different from the persons holding those securities immediately prior to such transaction, or 
  
 (ii) the sale, transfer or other disposition of all or substantially all of the Corporation’s assets in
complete liquidation or dissolution of the Corporation. 
  
 G.
Corporation shall mean Cisco Systems, Inc., a California corporation. 
  

 A-1 

 H. Employee shall mean an individual who is in the employ of the Corporation (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. 
  
 I. Exercise Date shall mean the date on which the option shall have been exercised in accordance with Paragraph 9 of the Agreement.

  
 J. Exercise Price shall mean the exercise price
per share as specified in the Grant Notice. 
  
 K.
Expiration Date shall mean the date on which the option expires as specified in the Grant Notice. 
  
 L. Fair Market Value per share of Common Stock on any relevant date shall be determined in accordance with the following provisions:

  
 (i) If the Common Stock is at the time traded
on the Nasdaq National Market, then the Fair Market Value shall be the closing selling price per share of Common Stock on the date in question, as the price is reported by the National Association of Securities Dealers on the Nasdaq National Market
or any successor system. If there is no closing selling price for the Common Stock 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. 
  
 (ii) If the Common Stock is at the time listed on any Stock
Exchange, then the Fair Market Value shall be the closing selling price per share of Common Stock on the date in question on the Stock Exchange determined by the Plan Administrator to be the primary market for the Common Stock, as such price is
officially quoted in the composite tape of transactions on such exchange. If there is no closing selling price for the Common Stock 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. 
  
 M. Grant Date shall
mean the date of grant of the option as specified in the Grant Notice. 
  
 N. Grant Notice shall mean the Notice of Grant of Stock Option accompanying the Agreement, pursuant to which Optionee has been informed of the basic terms of the option evidenced hereby. 
  
 O. Incentive Option shall mean an option which satisfies the
requirements of Code Section 422. 
  
 P. 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 Corporation (or any Parent or Subsidiary), or any other

  

 A-2 

 intentional misconduct by Optionee adversely affecting the business or affairs of the Corporation (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 Corporation (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 Corporation (or any Parent or Subsidiary). 
  
 Q. 1934 Act shall mean the Securities Exchange Act of 1934, as amended. 
  
 R. Non-Statutory Option shall mean an option not intended to satisfy the requirements of Code Section 422. 
  
 S. Option Shares shall mean the number of shares of Common
Stock subject to the option as specified in the Grant Notice. 
  
 T. Optionee shall mean the person to whom the option is granted as specified in the Grant Notice. 
  
 U. Parent shall mean any corporation (other than the Corporation) in an unbroken chain of corporations ending with the Corporation, provided
each corporation in the unbroken chain (other than the Corporation) 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 corporations in
such chain. 
  
 V. 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. 
  
 W. Plan shall mean
the Corporation’s 1996 Stock Incentive Plan. 
  
 X.
Plan Administrator shall mean either the Board or a committee of the Board acting in its administrative capacity under the Plan. 
  
 Y. Service shall mean the Optionee’s performance of services for the Corporation (or any Parent or Subsidiary) in the capacity of an
Employee, a non-employee member of the board of directors or a consultant or independent advisor. 
  
 Z. Stock Exchange shall mean the American Stock Exchange or the New York Stock Exchange. 
  
 AA. Subsidiary shall mean any corporation (other than the
Corporation) in an unbroken chain of corporations beginning with the Corporation, provided each corporation (other than the last corporation) 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 corporations in such chain. 
  

 A-3 

 INITIAL GRANT 
 NON-EMPLOYEE DIRECTOR 
  
 CISCO SYSTEMS, INC. 
 NOTICE OF GRANT OF NON-EMPLOYEE DIRECTOR 
 AUTOMATIC STOCK OPTION 
  
 Notice is hereby given of the following option grant (the “Option”) to purchase shares of the Common Stock of Cisco Systems, Inc. (the
“Corporation”): 
  
 Optionee:
                                        
                                        
                     
  
 Grant Date:
                                        
                                        
                  
  
 Exercise Price: $                    
per share 
  
 Number of Option Shares:
                     shares 
  
 Expiration Date:
                                        
                                        
         
  
 Type
of Option: Non-Statutory Stock Option 
  
 Date
Exercisable: Immediately Exercisable 
  
 Vesting
Schedule: The Option Shares shall initially be unvested and subject to repurchase by the Corporation at the Exercise Price paid per share. Optionee shall acquire a vested interest in, and the Corporation’s repurchase right shall accordingly
lapse with respect to, the Option Shares in a series of four (4) successive equal annual installments upon the Optionee’s completion of each year of service as a member of the Corporation’s Board of Directors (the “Board”) over
the four (4)-year period measured from the Grant Date. In no event shall any additional Option Shares vest after Optionee’s cessation of Board service. 
  
 Optionee understands and agrees that the Option is granted subject to and in accordance with the terms of the automatic option grant program under the
Cisco Systems, Inc. 1996 Stock Incentive 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 Automatic Stock Option Agreement attached hereto as Exhibit A.

  
 Optionee hereby acknowledges receipt of a copy of the official
prospectus for the Plan in the form attached hereto as Exhibit B. A copy of the Plan is available upon request made to the Corporate Secretary at the Corporation’s principal offices. 

 REPURCHASE RIGHT. OPTIONEE HEREBY AGREES THAT ALL UNVESTED OPTION SHARES ACQUIRED UPON THE
EXERCISE OF THE OPTION SHALL NOT BE TRANSFERABLE AND SHALL BE SUBJECT TO REPURCHASE BY THE CORPORATION, AT THE EXERCISE PRICE PAID PER SHARE, UPON OPTIONEE’S TERMINATION OF SERVICE AS A MEMBER OF THE CORPORATION’S BOARD OF DIRECTORS PRIOR
TO VESTING IN THOSE SHARES. THE TERMS AND CONDITIONS OF SUCH REPURCHASE RIGHT SHALL BE SPECIFIED IN A STOCK PURCHASE AGREEMENT, IN FORM AND SUBSTANCE SATISFACTORY TO THE CORPORATION, EXECUTED BY OPTIONEE AT THE TIME OF THE OPTION EXERCISE.

  
 No Impairment of Rights. Nothing in this Notice or
in the attached Automatic Stock Option Agreement or the Plan shall interfere with or otherwise restrict in any way the rights of the Corporation or the Corporation’s shareholders to remove Optionee from the Board at any time in accordance with
the provisions of applicable law. 
  
 Definitions. All
capitalized terms in this Notice shall have the meaning assigned to them in this Notice or in the attached Automatic Stock Option Agreement. 
  
 DATED:                     ,
         
  

			
	CISCO SYSTEMS, INC.
		
	By:	 	                                       
                                        
              

	Title:	 	  
                                       
                                        
              

  

			
	
	                                      
                                        
                         
	
	OPTIONEE
		
	Address:	 	  
                                       
                                        
        

	  
                                       
                                        
                         

  
 ATTACHMENTS 

Exhibit A - Automatic Stock Option Agreement 
 Exhibit B - Plan Summary and
Prospectus 
  

 2 

 ANNUAL GRANT 
 NON-EMPLOYEE DIRECTOR 
  
 CISCO SYSTEMS, INC. 
 NOTICE OF GRANT OF NON-EMPLOYEE DIRECTOR 
 AUTOMATIC STOCK OPTION 
  
 Notice is hereby given of the following option grant (the “Option”) to purchase shares of the Common Stock of Cisco Systems, Inc. (the
“Corporation”): 
  
 Optionee:
                                        
                                        
                 
  
 Grant Date:
                                        
                                        
               
  
 Exercise Price: $                         per share 
  
 Number of Option Shares:
                     shares 
  
 Expiration Date:
                                        
                                        
       
  
 Type of
Option: Non-Statutory Stock Option 
  
 Date
Exercisable: Immediately Exercisable 
  
 Vesting
Schedule: The Option Shares shall initially be unvested and subject to repurchase by the Corporation at the Exercise Price paid per share. Optionee shall acquire a vested interest in, and the Corporation’s repurchase right shall accordingly
lapse with respect to, the Option Shares in a series of two (2) successive equal annual installments upon Optionee’s completion of each year of service as a member of the Corporation’s Board of Directors (the “Board”) over the
two (2)-year period measured from the Grant Date. In no event shall any additional Option Shares vest after Optionee’s cessation of Board service. 
  
 Optionee understands and agrees that the Option is granted subject to and in accordance with the terms of the automatic option grant program under the
Cisco Systems, Inc. 1996 Stock Incentive 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 Automatic Stock Option Agreement attached hereto as Exhibit A.

  
 Optionee hereby acknowledges receipt of a copy of the official
prospectus for the Plan in the form attached hereto as Exhibit B. A copy of the Plan is available upon request made to the Corporate Secretary at the Corporation’s principal offices. 
  
 REPURCHASE RIGHT. OPTIONEE HEREBY AGREES THAT ALL UNVESTED OPTION
SHARES ACQUIRED UPON THE EXERCISE OF THE OPTION SHALL NOT BE TRANSFERABLE AND SHALL BE SUBJECT TO REPURCHASE BY THE CORPORATION, AT THE EXERCISE PRICE PAID PER SHARE, UPON OPTIONEE’S TERMINATION OF SERVICE AS A MEMBER OF THE 

 CORPORATION’S BOARD OF DIRECTORS PRIOR TO VESTING IN THOSE SHARES. THE TERMS AND CONDITIONS OF SUCH REPURCHASE
RIGHT SHALL BE SPECIFIED IN A STOCK PURCHASE AGREEMENT, IN FORM AND SUBSTANCE SATISFACTORY TO THE CORPORATION, EXECUTED BY OPTIONEE AT THE TIME OF THE OPTION EXERCISE. 
  

 No Impairment of Rights. Nothing in this Notice or in the attached Automatic Stock Option Agreement or the Plan shall interfere with
or otherwise restrict in any way the rights of the Corporation or the Corporation’s shareholders to remove Optionee from the Board at any time in accordance with the provisions of applicable law. 
  
 Definitions. All capitalized terms in this Notice shall have the
meaning assigned to them in this Notice or in the attached Automatic Stock Option Agreement. 
  
 DATED:                     ,          
  

			
	CISCO SYSTEMS, INC.
		
	By:	 	                                       
                                        
              

	Title:	 	  
                                       
                                        
              

  

			
	
	                                       
                                        
                         

	
	OPTIONEE
		
	Address:	 	  
                                       
                                        
        

	  
                                       
                                        
                         

  
 ATTACHMENTS 

Exhibit A - Automatic Stock Option Agreement 
 Exhibit B - Plan Summary and
Prospectus 
  

 2 

 NON-EMPLOYEE DIRECTOR 
  

 CISCO SYSTEMS, INC. 
 AUTOMATIC STOCK OPTION AGREEMENT 
  
 RECITALS

  
 A. The Corporation has implemented an automatic option
grant program under the Corporation’s 1996 Stock Incentive Plan pursuant to which eligible non-employee members of the Board will automatically receive special option grants at designated intervals over their period of Board service in order to
provide such individuals with a meaningful incentive to continue to serve as a member of the Board. 
  
 B. Optionee is an eligible non-employee Board member, and this Agreement is executed pursuant to, and is intended to carry out the purposes of, the Plan
in connection with the automatic grant of a stock option to purchase shares of the Corporation’s Common Stock under the Plan. 
  
 C. The granted option is intended to be a non-statutory option which does not meet the requirements of Section 422 of the Internal Revenue Code.

  
 D. All capitalized terms in this Agreement, to the extent not
otherwise defined in the 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 Corporation hereby grants to Optionee, as of the Grant Date, a Non-Statutory 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 maximum term of nine (9) 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, 6 or 7. 
  
 3. Limited Transferability. This option may, in connection with the Optionee’s estate plan, be assigned in whole or in part during
Optionee’s lifetime to one or more members of the Optionee’s immediate family or to a trust established for the exclusive benefit of one or more such family members. The assigned portion shall be exercisable only by the person or persons
who acquire a proprietary interest in the option pursuant to such assignment. The terms applicable to the assigned portion shall be the same as those in effect for this option immediately prior to such assignment and shall be set forth in such
documents issued to the assignee as the Corporation may deem appropriate. Should the Optionee die while holding this option, then this option shall be transferred in accordance with Optionee’s will or the laws of descent and distribution.

 4. Exercisability/Vesting. 
  
 (a) This option shall be immediately exercisable for any or all of the Option Shares, whether or not the Option Shares are
vested in accordance with the Vesting Schedule set forth in the Grant Notice, and shall remain so exercisable until the Expiration Date or the sooner termination of the option term under Paragraph 5, 6 or 7. 
  
 (b) Optionee shall, in accordance with the Vesting Schedule set forth in the
Grant Notice, vest in the Option Shares in a series of installments over his or her period of Board service. Vesting in the Option Shares may be accelerated pursuant to the provisions of Paragraph 5, 6 or 7. In no event, however, shall any
additional Option Shares vest following Optionee’s cessation of service as a Board member. 
  
 5. Cessation of Board Service. Should Optionee’s service as a Board member cease while this option remains outstanding, then the option
term specified in Paragraph 2 shall terminate (and this option shall cease to be outstanding) prior to the Expiration Date in accordance with the following provisions: 
  

 (i) Should Optionee cease to serve as a Board member for any reason (other than death or Permanent Disability) while this
option is outstanding, then the period for exercising this option shall be reduced to a twelve (12)-month period commencing with the date of such cessation of Board service, but in no event shall this option be exercisable at any time after the
Expiration Date. During such limited period of exercisability, this option may not be exercised in the aggregate for more than the number of Option Shares (if any) in which Optionee is vested on the date of his or her cessation of Board service.
Upon the earlier of (i) the expiration of such twelve (12)-month period or (ii) the specified Expiration Date, the option shall terminate and cease to be exercisable with respect to any vested Option Shares for which the option has not been
exercised. 
  
 (ii) Should Optionee die during
the twelve (12)-month period following his or her cessation of Board service and hold this option at the time of his or her death, 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 descent and distribution shall have the right to exercise this option for any or all of the Option Shares in which Optionee is vested at the time of Optionee’s cessation of
Board service (less any Option Shares purchased by Optionee after such cessation of Board service but prior to death). Such right of exercise shall terminate, and this option shall accordingly cease to be exercisable for such vested Option Shares,
upon the earlier of (i) the expiration of the twelve (12)-month period measured from the date of Optionee’s cessation of Board service or (ii) the specified Expiration Date of the option term. Should this option be transferred during
Optionee’s lifetime in accordance with the provisions of Paragraph 3, then the transferee(s) shall have the same limited time period in which to exercise this option for any or all of those vested Option Shares. 
  

 2 

 (iii) Should Optionee cease service as a Board member by reason of death or Permanent
Disability, then all Option Shares at the time subject to this option but not otherwise vested shall immediately vest in full so that Optionee (or the personal representative of Optionee’s estate or the person or persons to whom the option is
transferred upon Optionee’s death or to whom the option is transferred during Optionee’s lifetime in accordance with the provisions of Paragraph 3) shall have the right to exercise this option for any or all of the Option Shares as
fully-vested shares of Common Stock at any time prior to the earlier of (i) the expiration of the twelve (12)-month period measured from the date of Optionee’s cessation of Board service or (ii) the specified Expiration Date. 

 
 (iv) Upon Optionee’s cessation of Board service for
any reason other than death or Permanent Disability, this option shall immediately terminate and cease to be outstanding with respect to any and all Option Shares in which Optionee is not otherwise at that time vested in accordance with the normal
Vesting Schedule set forth in the Grant Notice or the special vesting acceleration provisions of Paragraph 6 or 7 below. 
  
 6. Corporate Transaction. 
  
 (a) In the event of a Corporate Transaction, all Option Shares at the time subject to this option but not otherwise vested shall automatically vest so
that this option shall, immediately prior to the specified effective date for the Corporate Transaction, become fully exercisable for all of the Option Shares at the time subject to this option and may be exercised for all or any portion of such
shares as fully-vested shares of Common Stock. Immediately following the consummation of the Corporate Transaction, this option shall terminate and cease to be outstanding, except to the extent assumed by the successor corporation or its parent
company. 
  
 (b) If this option is assumed in connection with a
Corporate Transaction, then this option shall be appropriately adjusted, immediately after such Corporate Transaction, to apply to the number and class of securities which would have been issuable to Optionee in consummation of such Corporate
Transaction had the option been exercised immediately prior to such Corporate Transaction, and appropriate adjustments shall also be made to the Exercise Price, provided the aggregate Exercise Price shall remain the same. 
  
 7. Change in Control/Hostile Take-Over. 
  
 (a) All Option Shares subject to this option at the time of a Change in
Control but not otherwise vested shall automatically vest so that this option shall, immediately prior to the effective date of such Change in Control, become fully exercisable for all of the Option Shares at the time subject to this option and may
be exercised for all or any portion of such shares as fully-vested shares of Common Stock. This option shall remain exercisable for such fully-vested Option Shares until the earliest to occur of (i) the specified Expiration Date, (ii) the
sooner termination of this option in accordance with Paragraph 5 or 6 or (iii) the surrender of this option under Paragraph 7(b). 
  

 3 

 (b) Optionee shall have an unconditional right (exercisable during the thirty (30)-day period
immediately following the consummation of a Hostile Take-Over) to surrender this option to the Corporation in exchange for a cash distribution from the Corporation in an amount equal to the excess of (i) the Take-Over Price of the Option Shares at
the time subject to the surrendered option (whether or not those Option Shares are otherwise at the time vested) over (ii) the aggregate Exercise Price payable for such shares. This Paragraph 7(b) limited stock appreciation right shall in all events
terminate upon the expiration or sooner termination of the option term and may not be assigned or transferred by Optionee. 
  
 (c) To exercise the Paragraph 7(b) limited stock appreciation right, Optionee must, during the applicable thirty (30)-day exercise period, provide the
Corporation with written notice of the option surrender in which there is specified the number of Option Shares as to which the option is being surrendered. Such notice must be accompanied by the return of Optionee’s copy of this Agreement,
together with any written amendments to such Agreement. The cash distribution shall be paid to Optionee within five (5) business days following such delivery date. Such option surrender and cash distribution has been pre-approved by the
Corporation’s shareholders in connection with their approval of the Plan, and no additional approval of the Plan Administrator or the Board shall be required at the time of the actual option surrender and cash distribution. Upon receipt of such
cash distribution, this option shall be cancelled with respect to the shares subject to the surrendered option (or the surrendered portion), and Optionee shall cease to have any further right to acquire those Option Shares under this Agreement. The
option shall, however, remain outstanding for the balance of the Option Shares (if any) in accordance with the terms and provisions of this Agreement, and the Corporation shall accordingly issue a new stock option agreement (substantially in the
same form as this Agreement) for those remaining Option Shares. 
  
 8. Adjustment in Option Shares. Should any change be made to the Common Stock by reason of any stock split, stock dividend, recapitalization, combination of shares, exchange of shares or other change affecting the outstanding
Common Stock as a class without the Corporation’s receipt of consideration, appropriate adjustments shall be made to (i) the 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; provided, however, that the aggregate Exercise Price shall remain the same. 
  
 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 a holder of record of the purchased shares. 
  
 10. Manner of Exercising Option. 
  
 (a) In order to exercise this option for all or any part of the Option Shares for which the option is at the time exercisable, Optionee or, in the case
of exercise after Optionee’s death, Optionee’s executor, administrator, heir or legatee, as the case may be, must take the following actions: 
  

 4 

 (i) To the extent the option is exercised for vested Option Shares, the Secretary of the
Corporation shall be provided with written notice of the option exercise (the “Exercise Notice”) in substantially the form of Exhibit I attached hereto, in which there is specified the number of vested Option Shares to be purchased under
the exercised option. To the extent that the option is exercised for one or more unvested Option Shares, Optionee (or other person exercising the option) shall deliver to the Secretary of the Corporation a Purchase Agreement for those unvested
Option Shares. 
  
 (ii) The Exercise Price for
the purchased shares shall be paid in one or more of the following alternative forms: 
  
 • cash or check made payable to the Corporation’s order; or 
  
 • shares of Common Stock held by Optionee (or any other person or persons exercising the option) for
the requisite period necessary to avoid a charge to the Corporation’s earnings for financial reporting purposes and valued at Fair Market Value on the Exercise Date; or 
  
 • to the extent the option is exercised for vested Option Shares, through a special sale and
remittance procedure pursuant to which Optionee shall provide irrevocable written instructions (A) to a Optionee-designated brokerage firm to effect the immediate sale of the vested shares purchased under the option and remit to the Corporation, out
of the sale proceeds available on the settlement date, sufficient funds to cover the aggregate Exercise Price payable for those shares plus the applicable Federal, state and local income taxes required to be withheld by the Corporation by reason of
such exercise and (B) to the Corporation to deliver the certificates for the purchased shares directly to such brokerage firm in order to complete the sale. 
  
 (iii) Appropriate documentation evidencing the right to exercise this option shall be furnished the Corporation if the person or persons
exercising the option is other than Optionee. 
  
 (iv) Appropriate arrangement must be made with the Corporation for the satisfaction of all Federal, state and local income tax withholding requirements applicable to the option exercise. 
  
 (b) Except to the extent the sale and remittance procedure specified above
is utilized in connection with the exercise of the option for vested Option Shares, payment of the Exercise Price for the purchased shares must accompany the Exercise Notice or Purchase Agreement delivered to the Corporation in connection with the
option exercise. 
  

 5 

 (c) As soon as practical after the Exercise Date, the Corporation shall issue to or on behalf of
Optionee (or any other person or persons exercising this option) a certificate or certificates representing the purchased Option Shares. To the extent any such Option Shares are unvested, the certificates for those Option Shares shall be endorsed
with an appropriate legend evidencing the Corporation’s repurchase rights and may be held in escrow with the Corporation until such shares vest. 
  
 (d) In no event may this option be exercised for fractional shares. 
  
 11. No Impairment of Rights. This Agreement shall not in any way affect the right of the Corporation to
adjust, reclassify, reorganize or otherwise make changes in its capital or business structure or to merge, consolidate, dissolve, liquidate or sell or transfer all or any part of its business or assets. In addition, nothing in this Agreement shall
in any way be construed or interpreted so as to affect adversely or otherwise impair the right of the Corporation or the shareholders to remove Optionee from the Board at any time in accordance with the provisions of applicable law. 
  
 12. Compliance with Laws and Regulations. 
  
 (a) The exercise of this option and the issuance of the Option Shares upon
such exercise shall be subject to compliance by the Corporation 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 Common Stock may be listed for trading at the time of such exercise and issuance. 
  
 (b) The inability of the Corporation to obtain approval from any regulatory body having authority deemed by the Corporation to be necessary to the lawful issuance and sale of any Common Stock pursuant to this option
shall relieve the Corporation of any liability with respect to the non-issuance or sale of the Common Stock as to which such approval shall not have been obtained. However, the Corporation shall use its best efforts to obtain all such applicable
approvals. 
  
 13. Successors and Assigns. Except to
the extent otherwise provided in Paragraph 3 or 6, the provisions of this Agreement shall inure to the benefit of, and be binding upon, the Corporation and its successors and assigns and Optionee, Optionee’s assigns and the legal
representatives, heirs and legatees of Optionee’s estate. 
  
 14. Construction/Governing Law. This Agreement and the option evidenced hereby are made and granted pursuant to the automatic option grant program in effect under the Plan and are in all respects limited by and subject to the
express terms and provisions of that program. The interpretation, performance, and enforcement of this Agreement shall be governed by the laws of the State of California without resort to that State’s conflict-of-laws rules. 
  

 6 

 15. Notices. Any notice required to be given or delivered to the Corporation under the
terms of this Agreement shall be in writing and addressed to the Corporation at its principal corporate 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. 
  

 7 

 EXHIBIT I 
  

NOTICE OF EXERCISE 
  
 I hereby notify Cisco Systems, Inc. (the “Corporation”) that I elect to purchase
             shares of the Corporation’s Common Stock (the “Purchased Shares”) at the option exercise price of
$             per share (the “Exercise Price”) pursuant to that certain option (the “Option”) granted to me pursuant to the automatic option grant program under
the Corporation’s 1996 Stock Incentive Plan on                     ,
            . 
  
 Concurrently with the delivery of this Exercise Notice to the Secretary of the Corporation, I shall hereby pay to the Corporation the Exercise Price for the Purchased Shares in accordance with the provisions of my
agreement with the Corporation evidencing the Option and shall deliver whatever additional documents may be required by such agreement as a condition for exercise. Alternatively, I may utilize the special broker/dealer sale and remittance procedure
specified in my agreement to effect payment of the Exercise Price for any Purchased Shares in which I am vested at the time of exercise. 
  
                     ,
             
 Date 
  

					
	 	 	                                       
                                        
                                      
 

	 	 	Optionee
		
	 	 	                                       
                                        
                                      
 

			
	 	 	Address:	 	  
                                       
                                        
                      

	 	 	  
                                       
                                        
                                      
 

		
	 Print name in exact manner
 it is to appear on the
 stock certificate:
	 	  
                                       
                                        
                                      
 

		
	 Address to which certificate
 is to be sent, if different
 from address above:
	 	  
                                       
                                        
                                      
 

	 	 	  
                                       
                                        
                                      
 

		
	 Social Security Number:
	 	  
                                       
                                        
                                      
 

 APPENDIX 
  
 The following definitions shall be in effect under the Agreement: 
  
 A. Agreement shall mean this Automatic Stock Option Agreement.

  
 B. Board shall mean the Corporation’s Board
of Directors. 
  
 C. Change in Control shall mean a
change in ownership or control of the Corporation effected through either of the following transactions: 
  
 (i) the acquisition, directly or indirectly, by any person or related group of persons (other than the Corporation or a person that
directly or indirectly controls, is controlled by, or is under common control with, the Corporation) of beneficial ownership (within the meaning of Rule 13d-3 of the 1934 Act) of securities possessing more than thirty-five percent (35%) of the total
combined voting power of the Corporation’s outstanding securities pursuant to a tender or exchange offer made directly to the Corporation’s shareholders which the Board does not recommend such shareholders to accept, or 
  
 (ii) a change in the composition of the Board over a period
of thirty-six (36) consecutive months or less such that a majority of the Board members ceases, by reason of one or more contested elections for Board membership, to be comprised of individuals who either (A) have been Board members continuously
since the beginning of such period or (B) have been elected or nominated for election as Board members during such period by at least a majority of the Board members described in clause (A) who were still in office at the time the Board approved
such election or nomination. 
  
 D. Code shall mean
the Internal Revenue Code of 1986, as amended. 
  
 E. Common
Stock shall mean the Corporation’s common stock. 
  
 F. Corporate Transaction shall mean either of the following shareholder-approved transactions to which the Corporation is a party: 
  
 (i) a merger or consolidation in which securities possessing more than fifty percent (50%) of the total combined voting power of the
Corporation’s outstanding securities are transferred to a person or persons different from the persons holding those securities immediately prior to such transaction, or 
  
 (ii) the sale, transfer or other disposition of all or substantially all of the Corporation’s assets in
complete liquidation or dissolution of the Corporation. 
  

 A-1 

 G. Corporation shall mean Cisco Systems, Inc., a California corporation. 
  
 H. Exercise Date shall mean the date on which the option shall
have been exercised in accordance with Paragraph 10 of the Agreement. 
  
 I. Exercise Price shall mean the exercise price payable per share as specified in the Grant Notice. 
  
 J. Expiration Date shall mean the date on which the option term expires as specified in the Grant Notice. 
  
 K. Fair Market Value per share of Common Stock on any relevant
date shall be determined in accordance with the following provisions: 
  
 (i) If the Common Stock is at the time traded on the Nasdaq National Market, then the Fair Market Value shall be the closing selling price per share of Common Stock on the date in question, as the price is reported on
the Nasdaq National Market. If there is no closing selling price for the Common Stock 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. 
  
 (ii) If the Common Stock is at the time listed on any Stock
Exchange, then the Fair Market Value shall be the closing selling price per share of Common Stock on the date in question on the Stock Exchange determined by the Plan Administrator to be the primary market for the Common Stock, as such price is
officially quoted in the composite tape of transactions on such exchange. If there is no closing selling price for the Common Stock 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. 
  
 L. Grant Date shall
mean the date of grant of the option as specified in the Grant Notice. 
  
 M. Grant Notice shall mean the Notice of Grant of Automatic Stock Option accompanying this Agreement, pursuant to which Optionee has been informed of the basic terms of the option evidenced hereby. 
  
 N. Hostile Take-Over shall mean the acquisition, directly or
indirectly, by any person or related group of persons (other than the Corporation or a person that directly or indirectly controls, is controlled by, or is under common control with, the Corporation) of beneficial ownership (within the meaning of
Rule 13d-3 of the 1934 Act) of securities possessing more than thirty five percent (35%) of the total combined voting power of the Corporation’s outstanding securities pursuant to a tender or exchange offer made directly to the
Corporation’s shareholders which the Board does not recommend such shareholders to accept. 
  
 O. 1934 Act shall mean the Securities Exchange Act of 1934, as amended. 
  

 A-2 

 P. Non-Statutory Option shall mean an option not intended to satisfy the requirements of
Code Section 422. 
  
 Q. Option Shares shall mean
the number of shares of Common Stock subject to the option. 
  
 R.
Optionee shall mean the person to whom the option is granted as specified in the Grant Notice. 
  
 S. Permanent Disability shall mean the inability of Optionee to perform his or her usual duties as a Board member 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. 
  
 T. Plan shall mean the Corporation’s 1996 Stock Incentive Plan. 
  
 U. Purchase Agreement shall mean the stock purchase agreement
(in form and substance satisfactory to the Corporation) which must be executed at the time the option is exercised for unvested Option Shares and which will accordingly (i) grant the Corporation the right to repurchase, at the Exercise Price, any
and all of those Option Shares in which Optionee is not otherwise vested at the time of his or her cessation of service as a Board member and (ii) preclude the sale, transfer or other disposition of any of the Option Shares purchased under such
agreement while those Option Shares remain subject to the repurchase right. 
  
 V. Stock Exchange shall mean the American Stock Exchange or the New York Stock Exchange. 
  
 W. Take-Over Price shall mean the greater of (i) the Fair Market Value per share of Common Stock on the date the option is
surrendered to the Corporation in connection with a Hostile Take-Over or (ii) the highest reported price per share of Common Stock paid by the tender offeror in effecting the Hostile Take-Over. 
  
 X. Vesting Schedule shall mean the vesting schedule specified
in the Grant Notice, pursuant to which Optionee will vest in the Option Shares in one or more installments over his or her period of Board service, subject to acceleration in accordance with the provisions of the Agreement. 
  

 A-3 

 INITIAL GRANT 
 NON-EMPLOYEE DIRECTOR 
  
 CISCO SYSTEMS, INC. 
 NOTICE OF GRANT OF NON-EMPLOYEE DIRECTOR 
 DISCRETIONARY STOCK OPTION 
  
 Notice is hereby given of the following option grant (the “Option”) to purchase shares of the Common Stock of Cisco Systems, Inc. (the
“Corporation”): 
  
 Optionee:
                                        
                                        
                       
  
 Grant Date:
                                        
                                        
                     
  
 Exercise Price: $                    
per share 
  
 Number of Option Shares:
                     shares 
  
 Expiration Date:
                                        
                                        
             
  
 Type of Option: Non-Statutory Stock Option 
  
 Date Exercisable: Immediately Exercisable 
  
 Vesting Schedule: The Option Shares shall initially be unvested and subject to repurchase by the Corporation at the Exercise Price paid per share. Optionee shall acquire a vested interest in, and the
Corporation’s repurchase right shall accordingly lapse with respect to, the Option Shares in a series of four (4) successive equal annual installments upon the Optionee’s completion of each year of service as a member of the
Corporation’s Board of Directors (the “Board”) over the four (4)-year period measured from the Grant Date. In no event shall any additional Option Shares vest after Optionee’s cessation of Board service. 
  
 Optionee understands and agrees that the Option is granted subject to and in
accordance with the terms of the Cisco Systems, Inc. 1996 Stock Incentive 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 Discretionary Stock Option Agreement
attached hereto as Exhibit A. 
  
 Optionee hereby
acknowledges receipt of a copy of the official prospectus for the Plan in the form attached hereto as Exhibit B. A copy of the Plan is available upon request made to the Corporate Secretary at the Corporation’s principal offices.

 REPURCHASE RIGHT. OPTIONEE HEREBY AGREES THAT ALL UNVESTED OPTION SHARES ACQUIRED UPON THE
EXERCISE OF THE OPTION SHALL NOT BE TRANSFERABLE AND SHALL BE SUBJECT TO REPURCHASE BY THE CORPORATION, AT THE EXERCISE PRICE PAID PER SHARE, UPON OPTIONEE’S TERMINATION OF SERVICE AS A MEMBER OF THE CORPORATION’S BOARD OF DIRECTORS PRIOR
TO VESTING IN THOSE SHARES. THE TERMS AND CONDITIONS OF SUCH REPURCHASE RIGHT SHALL BE SPECIFIED IN A STOCK PURCHASE AGREEMENT, IN FORM AND SUBSTANCE SATISFACTORY TO THE CORPORATION, EXECUTED BY OPTIONEE AT THE TIME OF THE OPTION EXERCISE.

  
 No Impairment of Rights. Nothing in this Notice or
in the attached Discretionary Stock Option Agreement or the Plan shall interfere with or otherwise restrict in any way the rights of the Corporation or the Corporation’s shareholders to remove Optionee from the Board at any time in accordance
with the provisions of applicable law. 
  
 Definitions. All
capitalized terms in this Notice shall have the meaning assigned to them in this Notice or in the attached Discretionary Stock Option Agreement. 
  
 DATED:                     ,
         
  

			
	CISCO SYSTEMS, INC.
		
	By:	 	  
                                       
                                        
                 

	Title:	 	  
                                       
                                        
                 

	  
                                       
                                        
                         

	
	OPTIONEE
		
	Address:	 	  
                                       
                                        
                 

	  
                                       
                                        
                         

  
 ATTACHMENTS 

Exhibit A – Discretionary Stock Option Agreement 
 Exhibit B- Plan
Summary and Prospectus 
  

 2 

 ANNUAL GRANT 
 NON-EMPLOYEE DIRECTOR 
  
 CISCO SYSTEMS, INC. 
 NOTICE OF GRANT OF NON-EMPLOYEE DIRECTOR 
 DISCRETIONARY STOCK OPTION 
  
 Notice is hereby given of the following option grant (the “Option”) to purchase shares of the Common Stock of Cisco Systems, Inc. (the
“Corporation”): 
  
 Optionee:
                                        
                                        
                 
  
 Grant Date:
                                        
                                        
               
  
 Exercise Price: $                     per share 
  
 Number of Option Shares:
                     shares 
  
 Expiration Date:
                                        
                                        
       
  
 Type of
Option: Non-Statutory Stock Option 
  
 Date
Exercisable: Immediately Exercisable 
  
 Vesting
Schedule: The Option Shares shall initially be unvested and subject to repurchase by the Corporation at the Exercise Price paid per share. Optionee shall acquire a vested interest in, and the Corporation’s repurchase right shall accordingly
lapse with respect to, the Option Shares in a series of two (2) successive equal annual installments upon Optionee’s completion of each year of service as a member of the Corporation’s Board of Directors (the “Board”) over the
two (2)-year period measured from the Grant Date. In no event shall any additional Option Shares vest after Optionee’s cessation of Board service. 
  
 Optionee understands and agrees that the Option is granted subject to and in accordance with the terms of the Cisco Systems, Inc. 1996 Stock Incentive
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 Discretionary Stock Option Agreement attached hereto as Exhibit A. 
  
 Optionee hereby acknowledges receipt of a copy of the official prospectus for
the Plan in the form attached hereto as Exhibit B. A copy of the Plan is available upon request made to the Corporate Secretary at the Corporation’s principal offices. 
  
 REPURCHASE RIGHT. OPTIONEE HEREBY AGREES THAT ALL UNVESTED OPTION SHARES ACQUIRED UPON THE EXERCISE OF THE OPTION
SHALL NOT BE TRANSFERABLE AND SHALL BE SUBJECT TO REPURCHASE BY THE CORPORATION, AT THE EXERCISE PRICE PAID PER SHARE, UPON OPTIONEE’S TERMINATION OF SERVICE AS A MEMBER OF THE CORPORATION’S BOARD OF DIRECTORS PRIOR TO VESTING IN THOSE

 SHARES. THE TERMS AND CONDITIONS OF SUCH REPURCHASE RIGHT SHALL BE SPECIFIED IN A STOCK PURCHASE AGREEMENT, IN FORM
AND SUBSTANCE SATISFACTORY TO THE CORPORATION, EXECUTED BY OPTIONEE AT THE TIME OF THE OPTION EXERCISE. 
  
 No Impairment of Rights. Nothing in this Notice or in the attached Discretionary Stock Option Agreement or the Plan shall interfere with or
otherwise restrict in any way the rights of the Corporation or the Corporation’s shareholders to remove Optionee from the Board at any time in accordance with the provisions of applicable law. 
  
 Definitions. All capitalized terms in this Notice shall have the
meaning assigned to them in this Notice or in the attached Discretionary Stock Option Agreement. 
  
 DATED:                     ,          
  

			
	CISCO SYSTEMS, INC.
		
	 By:
	 	                                       
                                        
        

	 Title:
	 	  
                                       
                                        
        

	
	                                       
                                        
                         

	
	OPTIONEE
		
	 Address:
	 	  
                                       
                                        
        

	  
                                       
                                        
                         

  
 ATTACHMENTS 

Exhibit A – Discretionary Stock Option Agreement 
 Exhibit B - Plan
Summary and Prospectus 
  

 2 

 NON-EMPLOYEE DIRECTOR 
  

 CISCO SYSTEMS, INC. 
 DISCRETIONARY STOCK OPTION AGREEMENT 
  
 RECITALS

  
 A. The Board has adopted the Plan for the purpose of
retaining the services of selected employees, non-employee members of the Board or of the board of directors of any Parent or Subsidiary and consultants and other independent advisors who provide services to the Corporation (or any Parent or
Subsidiary). 
  
 B. Optionee is an eligible non-employee Board
member, and this Agreement is executed pursuant to, and is intended to carry out the purposes of, the Plan in connection with the Corporation’s grant of a stock option to purchase shares of the Corporation’s Common Stock under the Plan.

  
 C. The granted option is intended to be a non-statutory option
which does not meet the requirements of Section 422 of the Internal Revenue Code. 
  
 D. All capitalized terms in this Agreement, to the extent not otherwise defined in the 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 Corporation hereby grants to Optionee,
as of the Grant Date, a Non-Statutory 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 maximum
term of nine (9) 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, 6 or 7. 
  
 3. Limited Transferability. This option may, in connection with
the Optionee’s estate plan, be assigned in whole or in part during Optionee’s lifetime to one or more members of the Optionee’s immediate family or to a trust established for the exclusive benefit of one or more such family members.
The assigned portion shall be exercisable only by the person or persons who acquire a proprietary interest in the option pursuant to such assignment. The terms applicable to the assigned portion shall be the same as those in effect for this option
immediately prior to such assignment and shall be set forth in such documents issued to the assignee as the Corporation may deem appropriate. Should the Optionee die while holding this option, then this option shall be transferred in accordance with
Optionee’s will or the laws of descent and distribution. 
  
 4. Exercisability/Vesting. 
  

	 	(a)	This option shall be immediately exercisable for any or all of the Option Shares, whether or not the Option Shares are vested in 

 accordance with the Vesting Schedule set forth in the Grant Notice, and shall remain so exercisable
until the Expiration Date or the sooner termination of the option term under Paragraph 5, 6 or 7. 
  

	 	(b)	Optionee shall, in accordance with the Vesting Schedule set forth in the Grant Notice, vest in the Option Shares in a series of installments over his or her period of Board service.
Vesting in the Option Shares may be accelerated pursuant to the provisions of Paragraph 5, 6 or 7. In no event, however, shall any additional Option Shares vest following Optionee’s cessation of service as a Board member.

  
 5. Cessation of Board Service.
Should Optionee’s service as a Board member cease while this option remains outstanding, then the option term specified in Paragraph 2 shall terminate (and this option shall cease to be outstanding) prior to the Expiration Date in accordance
with the following provisions: 
  
 (i) Should
Optionee cease to serve as a Board member for any reason (other than death, Permanent Disability or Misconduct) while this option is outstanding, then the period for exercising this option shall be reduced to a twelve (12)-month period commencing
with the date of such cessation of Board service, but in no event shall this option be exercisable at any time after the Expiration Date. During such limited period of exercisability, this option may not be exercised in the aggregate for more than
the number of Option Shares (if any) in which Optionee is vested on the date of his or her cessation of Board service. Upon the earlier of (i) the expiration of such twelve (12)-month period or (ii) the specified Expiration Date, the option
shall terminate and cease to be exercisable with respect to any vested Option Shares for which the option has not been exercised. 
  
 (ii) Should Optionee die during the twelve (12)-month period following his or her cessation of Board service and hold this option at the
time of his or her death, 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 descent and distribution shall have
the right to exercise this option for any or all of the Option Shares in which Optionee is vested at the time of Optionee’s cessation of Board service (less any Option Shares purchased by Optionee after such cessation of Board service but prior
to death). Such right of exercise shall terminate, and this option shall accordingly cease to be exercisable for such vested Option Shares, upon the earlier of (i) the expiration of the twelve (12)-month period measured from the date of
Optionee’s cessation of Board service or (ii) the specified Expiration Date of the option term. Should this option be transferred during Optionee’s lifetime in accordance with the provisions of Paragraph 3, then the transferee(s) shall
have the same limited time period in which to exercise this option for any or all of those vested Option Shares. 
  

 2 

 (iii) Should Optionee cease service as a Board member by reason of death or Permanent
Disability, then all Option Shares at the time subject to this option but not otherwise vested shall immediately vest in full so that Optionee (or the personal representative of Optionee’s estate or the person or persons to whom the option is
transferred upon Optionee’s death or to whom the option is transferred during Optionee’s lifetime in accordance with the provisions of Paragraph 3) shall have the right to exercise this option for any or all of the Option Shares as
fully-vested shares of Common Stock at any time prior to the earlier of (i) the expiration of the twelve (12)-month period measured from the date of Optionee’s cessation of Board service or (ii) the specified Expiration Date. 

 
 (iv) Upon Optionee’s cessation of Board service for
any reason other than death or Permanent Disability, this option shall immediately terminate and cease to be outstanding with respect to any and all Option Shares in which Optionee is not otherwise at that time vested in accordance with the normal
Vesting Schedule set forth in the Grant Notice or the special vesting acceleration provisions of Paragraph 6 or 7 below. 
  
 (v) Should Optionee cease service as a Board member by reason of Misconduct, then this option shall terminate immediately and cease to
remain outstanding. 
  
 6. Corporate Transaction.

  
 (a) In the event of a Corporate Transaction, all Option
Shares at the time subject to this option but not otherwise vested shall automatically vest so that this option shall, immediately prior to the specified effective date for the Corporate Transaction, become fully-exercisable for all of the Option
Shares at the time subject to this option and may be exercised for all or any portion of such shares as fully-vested shares of Common Stock. No such acceleration of this option, however, shall occur if and to the extent: (i) this option is, in
connection with the Corporate Transaction, either to be assumed by the successor corporation (or parent thereof) or to be replaced with a comparable option to purchase shares of the capital stock of the successor corporation (or parent thereof) or
(ii) this option is to be replaced with a cash incentive program of the successor corporation which preserves the spread existing on the unvested Option Shares at the time of the Corporate Transaction (the excess of the Fair Market Value of those
Option Shares over the aggregate Exercise Price payable for such shares) and provides for subsequent pay-out in accordance with the same option Vesting Schedule set forth in the Grant Notice. The determination of option comparability under clause
(i) shall be made by the Plan Administrator, and such determination shall be final, binding and conclusive. 
  
 (b) Immediately following the Corporate Transaction, this option shall terminate and cease to be outstanding, except to the extent assumed by the
successor corporation (or parent thereof) in connection with the Corporate Transaction. 
  
 (c) If this option is assumed in connection with a Corporate Transaction, then this option shall be appropriately adjusted, immediately after such Corporate Transaction, to apply to the number and class of securities
which would have been issuable to 
  

 3 

 Optionee in consummation of such Corporate Transaction had the option been exercised immediately prior to such Corporate
Transaction, and appropriate adjustments shall also be made to the Exercise Price, provided the aggregate Exercise Price shall remain the same. 
  
 7. Change in Control/Hostile Take-Over. 
  
 (a) All Option Shares subject to this option at the time of a Change in Control but not otherwise vested shall automatically vest so that this option
shall, immediately prior to the effective date of such Change in Control, become fully exercisable for all of the Option Shares at the time subject to this option and may be exercised for all or any portion of such shares as fully-vested shares of
Common Stock. This option shall remain exercisable for such fully-vested Option Shares until the earliest to occur of (i) the specified Expiration Date, (ii) the sooner termination of this option in accordance with Paragraph 5 or 6 or (iii)
the surrender of this option under Paragraph 7(b). 
  
 (b)
Optionee shall have an unconditional right (exercisable during the thirty (30)-day period immediately following the consummation of a Hostile Take-Over) to surrender this option to the Corporation in exchange for a cash distribution from the
Corporation in an amount equal to the excess of (i) the Take-Over Price of the Option Shares at the time subject to the surrendered option (whether or not those Option Shares are otherwise at the time vested) over (ii) the aggregate Exercise Price
payable for such shares. This Paragraph 7(b) limited stock appreciation right shall in all events terminate upon the expiration or sooner termination of the option term and may not be assigned or transferred by Optionee. 
  
 (c) To exercise the Paragraph 7(b) limited stock appreciation right,
Optionee must, during the applicable thirty (30)-day exercise period, provide the Corporation with written notice of the option surrender in which there is specified the number of Option Shares as to which the option is being surrendered. Such
notice must be accompanied by the return of Optionee’s copy of this Agreement, together with any written amendments to such Agreement. The cash distribution shall be paid to Optionee within five (5) business days following such delivery date.
Upon receipt of such cash distribution, this option shall be cancelled with respect to the shares subject to the surrendered option (or the surrendered portion), and Optionee shall cease to have any further right to acquire those Option Shares under
this Agreement. The option shall, however, remain outstanding for the balance of the Option Shares (if any) in accordance with the terms and provisions of this Agreement, and the Corporation shall accordingly issue a new stock option agreement
(substantially in the same form as this Agreement) for those remaining Option Shares. 
  
 8. Adjustment in Option Shares. Should any change be made to the Common Stock by reason of any stock split, stock dividend, recapitalization, combination of shares, exchange of shares or other change
affecting the outstanding Common Stock as a class without the Corporation’s receipt of consideration, appropriate adjustments shall be made to (i) the 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; provided, however, that the aggregate Exercise Price shall remain the same. 
  

 4 

 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 a holder of record of the purchased shares. 
  

10. Manner of Exercising Option. 
  
 (a) In order to exercise this option for all or any part of the Option Shares for which the option is at the time exercisable, Optionee or, in the case
of exercise after Optionee’s death, Optionee’s executor, administrator, heir or legatee, as the case may be, must take the following actions: 
  
 (i) To the extent the option is exercised for vested Option Shares, the Secretary of the Corporation shall be provided with written notice
of the option exercise (the “Exercise Notice”) in substantially the form of Exhibit I attached hereto, in which there is specified the number of vested Option Shares to be purchased under the exercised option. To the extent that the option
is exercised for one or more unvested Option Shares, Optionee (or other person exercising the option) shall deliver to the Secretary of the Corporation a Purchase Agreement for those unvested Option Shares. 
  
 (ii) The Exercise Price for the purchased shares shall be
paid in one or more of the following alternative forms: 
  
 • cash or check made payable to the Corporation’s order; or 
  
 • shares of Common Stock held by Optionee (or any other person or persons exercising the option) for the requisite period necessary
to avoid a charge to the Corporation’s earnings for financial reporting purposes and valued at Fair Market Value on the Exercise Date; or 
  
 • to the extent the option is exercised for vested Option Shares, through a special sale and remittance procedure pursuant to which
Optionee shall provide irrevocable written instructions (A) to a Optionee-designated brokerage firm to effect the immediate sale of the vested shares purchased under the option and remit to the Corporation, out of the sale proceeds available on the
settlement date, sufficient funds to cover the aggregate Exercise Price payable for those shares plus the applicable Federal, state and local income taxes required to be withheld by the Corporation by reason of such exercise and (B) to the
Corporation to deliver the certificates for the purchased shares directly to such brokerage firm in order to complete the sale. 
  
 (iii) Appropriate documentation evidencing the right to exercise this option shall be furnished to the Corporation if the person or
persons exercising the option is other than Optionee. 
  

 5 

 (iv) Appropriate arrangements must be made with the Corporation for the satisfaction of
all Federal, state and local income tax withholding requirements applicable to the option exercise. 
  
 (b) Except to the extent the sale and remittance procedure specified above is utilized in connection with the exercise of the option for vested Option
Shares, payment of the Exercise Price for the purchased shares must accompany the Exercise Notice or Purchase Agreement delivered to the Corporation in connection with the option exercise. 
  
 (c) As soon as practical after the Exercise Date, the Corporation shall issue
to or on behalf of Optionee (or any other person or persons exercising this option) a certificate or certificates representing the purchased Option Shares. To the extent any such Option Shares are unvested, the certificates for those Option Shares
shall be endorsed with an appropriate legend evidencing the Corporation’s repurchase rights and may be held in escrow with the Corporation until such shares vest. 
  

 (d) In no event may this option be exercised for fractional shares. 
  
 11. No Impairment of Rights. This Agreement shall not in any way affect the right of the Corporation to
adjust, reclassify, reorganize or otherwise make changes in its capital or business structure or to merge, consolidate, dissolve, liquidate or sell or transfer all or any part of its business or assets. In addition, nothing in this Agreement shall
in any way be construed or interpreted so as to affect adversely or otherwise impair the right of the Corporation or the shareholders to remove Optionee from the Board at any time in accordance with the provisions of applicable law. 
  
 12. Compliance with Laws and Regulations. 
  
 (a) The exercise of this option and the issuance of the Option Shares upon
such exercise shall be subject to compliance by the Corporation 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 Common Stock may be listed for trading at the time of such exercise and issuance. 
  
 (b) The inability of the Corporation to obtain approval from any regulatory body having authority deemed by the Corporation to be necessary to the lawful issuance and sale of any Common Stock pursuant to this option
shall relieve the Corporation of any liability with respect to the non-issuance or sale of the Common Stock as to which such approval shall not have been obtained. However, the Corporation shall use its best efforts to obtain all such applicable
approvals. 
  
 13. Successors and Assigns. Except to
the extent otherwise provided in Paragraph 3 or 6, the provisions of this Agreement shall inure to the benefit of, and be binding upon, the Corporation and its successors and assigns and Optionee, Optionee’s assigns and the legal
representatives, heirs and legatees of Optionee’s estate. 
  

 6 

 14. Construction/Governing Law. 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. The interpretation, performance, and enforcement of this Agreement shall be governed by the laws of the State of California without resort to that
State’s conflict-of-laws rules. 
  
 15.
Notices. Any notice required to be given or delivered to the Corporation under the terms of this Agreement shall be in writing and addressed to the Corporation at its principal corporate 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. 
  

 7 

 EXHIBIT I 
  

NOTICE OF EXERCISE 
  
 I hereby notify Cisco Systems, Inc. (the “Corporation”) that I elect to purchase
             shares of the Corporation’s Common Stock (the “Purchased Shares”) at the option exercise price of $
             per share (the “Exercise Price”) pursuant to that certain option (the “Option”) granted to me under the Corporation’s 1996 Stock Incentive Plan
on              , 20    . 
  
 Concurrently with the delivery of this Exercise Notice to the Secretary of the Corporation, I shall hereby pay to the Corporation the Exercise Price for
the Purchased Shares in accordance with the provisions of my agreement with the Corporation evidencing the Option and shall deliver whatever additional documents may be required by such agreement as a condition for exercise. Alternatively, I may
utilize the special broker/dealer sale and remittance procedure specified in my agreement to effect payment of the Exercise Price for any Purchased Shares in which I am vested at the time of exercise. 
  
                     ,              
 Date 
  

					
	 	 	                                       
                                        
                                      
 

	 	 	Optionee
	 	 	  
                                       
                                        
                                      
 

			
	 	 	Address:	 	  
                                       
                                        
                      

	 	 	  
                                       
                                        
                                      
 

	 Print name in exact manner
 it is to appear on
the
 stock certificate:
	 	                                       
                                        
                                      
 

		
	 Address to which certificate
 is to be sent, if different

 from address above:
	 	                                       
                                        
                                      
 

	 	 	  
                                       
                                        
                                      
 

	Social Security Number:	 	  
                                       
                                        
                                      
 

 APPENDIX 
  

The following definitions shall be in effect under the Agreement: 
  
 A. Agreement shall mean this Discretionary Stock Option Agreement. 
  
 B. Board shall mean the Corporation’s Board of Directors.

  
 C. Change in Control shall mean a change in
ownership or control of the Corporation effected through either of the following transactions: 
  
 (i) the acquisition, directly or indirectly, by any person or related group of persons (other than the Corporation or a person that
directly or indirectly controls, is controlled by, or is under common control with, the Corporation) of beneficial ownership (within the meaning of Rule 13d-3 of the 1934 Act) of securities possessing more than thirty-five percent (35%) of the total
combined voting power of the Corporation’s outstanding securities pursuant to a tender or exchange offer made directly to the Corporation’s shareholders which the Board does not recommend such shareholders to accept, or 
  
 (ii) a change in the composition of the Board over a period
of thirty-six (36) consecutive months or less such that a majority of the Board members ceases, by reason of one or more contested elections for Board membership, to be comprised of individuals who either (A) have been Board members continuously
since the beginning of such period or (B) have been elected or nominated for election as Board members during such period by at least a majority of the Board members described in clause (A) who were still in office at the time the Board approved
such election or nomination. 
  
 D. Code shall mean
the Internal Revenue Code of 1986, as amended. 
  
 E. Common
Stock shall mean the Corporation’s common stock. 
  
 F. Corporate Transaction shall mean either of the following shareholder-approved transactions to which the Corporation is a party: 
  
 (i) a merger or consolidation in which securities possessing more than fifty percent (50%) of the total combined voting power of the
Corporation’s outstanding securities are transferred to a person or persons different from the persons holding those securities immediately prior to such transaction, or 
  
 (ii) the sale, transfer or other disposition of all or substantially all of the Corporation’s assets in
complete liquidation or dissolution of the Corporation. 
  

 A-1 

 G. Corporation shall mean Cisco Systems, Inc., a California corporation. 
  
 H. Exercise Date shall mean the date on which the option shall
have been exercised in accordance with Paragraph 10 of the Agreement. 
  
 I. Exercise Price shall mean the exercise price payable per share as specified in the Grant Notice. 
  
 J. Expiration Date shall mean the date on which the option term expires as specified in the Grant Notice. 
  
 K. Fair Market Value per share of Common Stock on any relevant
date shall be determined in accordance with the following provisions: 
  
 (i) If the Common Stock is at the time traded on the Nasdaq National Market, then the Fair Market Value shall be the closing selling price per share of Common Stock on the date in question, as the price is reported on
the Nasdaq National Market. If there is no closing selling price for the Common Stock 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. 
  
 (ii) If the Common Stock is at the time listed on any Stock
Exchange, then the Fair Market Value shall be the closing selling price per share of Common Stock on the date in question on the Stock Exchange determined by the Plan Administrator to be the primary market for the Common Stock, as such price is
officially quoted in the composite tape of transactions on such exchange. If there is no closing selling price for the Common Stock 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. 
  
 L. Grant Date shall
mean the date of grant of the option as specified in the Grant Notice. 
  
 M. Grant Notice shall mean the Notice of Grant of Discretionary Stock Option accompanying this Agreement, pursuant to which Optionee has been informed of the basic terms of the option evidenced hereby. 
  
 N. Hostile Take-Over shall mean the acquisition, directly or
indirectly, by any person or related group of persons (other than the Corporation or a person that directly or indirectly controls, is controlled by, or is under common control with, the Corporation) of beneficial ownership (within the meaning of
Rule 13d-3 of the 1934 Act) of securities possessing more than thirty five percent (35%) of the total combined voting power of the Corporation’s outstanding securities pursuant to a tender or exchange offer made directly to the
Corporation’s shareholders which the Board does not recommend such shareholders to accept. 
  
 O. 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 Corporation (or any Parent or Subsidiary), or any other intentional misconduct by Optionee adversely affecting the business or affairs of the Corporation 
  

 A-2 

 (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 Corporation (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 Corporation (or any Parent or Subsidiary). 
  
 P. 1934 Act shall mean the Securities Exchange Act of 1934, as
amended. 
  
 Q. Non-Statutory Option shall mean an
option not intended to satisfy the requirements of Code Section 422. 
  
 R. Option Shares shall mean the number of shares of Common Stock subject to the option. 
  
 S. Optionee shall mean the person to whom the option is granted as specified in the Grant Notice. 
  
 T. Parent shall mean any corporation (other than the
Corporation) in an unbroken chain of corporations ending with the Corporation, provided each corporation in the unbroken chain (other than the Corporation) 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 corporations in such chain. 
  
 U. 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. 
  
 V. Plan shall mean the Corporation’s 1996 Stock Incentive Plan. 
  
 W. Purchase Agreement shall mean the stock purchase agreement
(in form and substance satisfactory to the Corporation) which must be executed at the time the option is exercised for unvested Option Shares and which will accordingly (i) grant the Corporation the right to repurchase, at the Exercise Price, any
and all of those Option Shares in which Optionee is not otherwise vested at the time of his or her cessation of service as a Board member and (ii) preclude the sale, transfer or other disposition of any of the Option Shares purchased under such
agreement while those Option Shares remain subject to the repurchase right. 
  
 X. Stock Exchange shall mean the American Stock Exchange or the New York Stock Exchange. 
  
 Y. Subsidiary shall mean any corporation (other than the Corporation) in an unbroken chain of corporations beginning with the Corporation,
provided each corporation (other than the last corporation) 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
corporations in such chain. 
  
 Z. Take-Over Price
shall mean the greater of (i) the Fair Market Value per share of Common Stock on the date the option is surrendered to the Corporation in connection with a 
  

 A-3 

 Hostile Take-Over or (ii) the highest reported price per share of Common Stock paid by the tender offeror in effecting
the Hostile Take-Over. 
  
 AA. Vesting Schedule
shall mean the vesting schedule specified in the Grant Notice, pursuant to which Optionee will vest in the Option Shares in one or more installments over his or her period of Board service, subject to acceleration in accordance with the provisions
of the Agreement. 
  

 A-4 

 CISCO SYSTEMS, INC. 
 STOCK ISSUANCE AGREEMENT 
  
 RECITALS 
  
 This stock issuance agreement (this
“Stock Issuance Agreement”) is made and entered into as of                      by and between Cisco Systems, Inc., a California
corporation having a principal place of business at 170 West Tasman Drive, San Jose, California (the “Corporation”) and
                    , an individual having a principal place of business at
                     (“Consultant”). 
  
 A. Capitalized terms not defined in this Stock Issuance Agreement shall have the meanings assigned to such terms in the Corporation’s 1996 Stock
Incentive Plan (the “Plan”). 
  
 B. The Board has
adopted the Plan for the purpose of retaining the services of selected employees, non-employee members of the Board or of the board of directors of any Parent or Subsidiary and consultants and other independent advisors who provide services to the
Corporation (or any Parent or Subsidiary). 
  
 C. Consultant is to
render valuable services to the Corporation pursuant to the consulting agreement by and between the Corporation and Consultant executed on
                     (the “Consulting Agreement”), and this Stock Issuance Agreement is executed pursuant to Article
                     of, and is intended to carry out the purposes of, the Plan in connection with the Corporation’s grant of a share
right award to Consultant. 
  
 NOW, THEREFORE, it is hereby
agreed as follows: 
  
 1. GRANT OF SHARE RIGHT AWARD. In
full satisfaction of its obligation under Section              of the Consulting Agreement, the Corporation hereby grants to Consultant a share right award which entitles Consultant
to receive              shares of Common Stock as soon as practicable following each Issuance Date, in each case subject to Consultant having provided continuous service to the
Corporation pursuant to the Consulting Agreement through each such date. In no event will Consultant be issued any shares of Common Stock following Consultant’s termination of service pursuant to the Consulting Agreement. For purposes of this
Stock Issuance Agreement, “Issuance Date” shall mean                             .

  
 2. NON-TRANSFERABILITY. This share right award shall be
neither transferable or assignable by Consultant. 
  
 3.
ADJUSTMENT IN SHARE RIGHT AWARD SHARES. If any change is made to the Common Stock by reason of any stock split, stock dividend, recapitalization, combination of shares, exchange of shares or other change affecting the outstanding Common Stock
as a class without the Corporation’s or its successor’s receipt of consideration, appropriate adjustments shall be made to the number and/or class of securities in effect under the share right award made hereunder. Such adjustments are to
be effected in a manner which shall preclude the enlargement or dilution of rights and benefits under such share right award. 

 4. STOCKHOLDER RIGHTS. Consultant shall have full stockholder rights with respect to any shares of
Common Stock issued to Consultant hereunder. Accordingly, Consultant have the right to vote such shares and to receive any regular cash dividends paid on such shares. 
  
 5. CONSTRUCTION. This Stock Issuance Agreement and the share right award 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 Stock Issuance Agreement shall be conclusive
and binding on all persons having an interest in this share right award. 
  
 IN WITNESS WHEREOF, the parties have entered into this Stock Issuance Agreement as of the date first written above. 
  

					
	Corporation:	 	CISCO SYSTEMS, INC.
			
	 	 	By:	 	                                       
                                        
                         

		
	Consultant:	 	                                       
                                        
                                    

  

 2 

  
 CISCO SYSTEMS, INC. 

  
 VESTING ACCELERATION POLICY 
 FOR 
 DEATH AND TERMINAL ILLNESS 

 AS 
 AMENDED JULY 26,
2007 
  
 Unless and until the Compensation & Management Development
Committee of the Board of Directors of Cisco Systems, Inc. determines otherwise, the following policy shall be applied to all equity awards issued under any equity plan maintained Cisco or any Cisco subsidiary, including equity awards and/or equity
plans assumed by Cisco in connection with its acquisition of companies, and held by any employee of Cisco or any Cisco subsidiary (each such award shall be referred to herein as an “equity award”), except to the extent that the application
of such policy would be prohibited by the applicable equity plan, equity award agreement or any applicable law, rule or regulation. 
  
 For purposes of this policy: 
  

	 	•	 	 the value of stock options and stock appreciation rights is based on the difference between the exercise price of the equity awards and the closing price of
Cisco’s stock on the date of the employee’s death or terminal illness, as applicable, or if such day is not a trading day, the last trading day prior to the date of death or terminal illness, as applicable; and

  

	 	•	 	 the value of stock grants, stock units, and unvested shares previously acquired pursuant to equity awards (such shares are referred to herein as “unvested
equity award shares”) is based on the difference between the purchase price, if any, and the closing price of Cisco’s stock on the date of the employee’s death or terminal illness, as applicable, or if such day is not a trading day,
the last trading day prior to the date of death or terminal illness, as applicable. 

  
 ACCELERATION UPON DEATH OF EMPLOYEE 
  
 Upon the death of an employee, Cisco will accelerate the vesting of the employee’s outstanding equity awards and any unvested equity award shares up to a specified limit based on the value of the equity awards and/or shares on the date
of death. The limit on the amount of accelerated vesting is the greater of: (a) one-hundred percent (100%) of the unvested equity awards and/or unvested equity award shares up to a total value of $10 million; or (b) up to one year of vesting from
the date of death as to all unvested equity awards and/or unvested equity award shares. For example, if an employee held unvested options for 100,000 shares with an exercise price of $1 which would vest in four annual installments of 25,000 shares,
and the closing price of Cisco’s stock on the date of the employee’s death was $101, all 100,000 of the shares would become vested (100,000 shares x $100 (the difference between $101 and $1) = $10,000,000). 
  
 ACCELERATION UPON TERMINAL ILLNESS OF EMPLOYEE 
  
 Upon the terminal illness of an employee, Cisco will accelerate the vesting of the
employee’s outstanding equity awards and any unvested equity award shares up to a specified limit based on the value of the equity awards and/or shares on the date of the terminal illness. An employee will be considered terminally ill upon the
approval by Cisco’s employee life insurance provider of the accelerated life insurance benefit which indicates 12 months or less to live. The date of terminal illness will be the date the determination is made by Cisco’s employee life
insurance provider. The limit on the amount of accelerated vesting is the greater of: (a) one-hundred percent (100%) of the unvested equity awards and/or unvested equity award shares up to a total value of $10 million; or (b) up to one year of
vesting from the date of the terminal illness as to all unvested equity awards and/or unvested equity award shares. For example, if an employee holds unvested options for 100,000 shares with an exercise price of $1 which would vest in four annual
installments of 25,000 shares, and the closing price of Cisco’s stock on the date that the employee is determined to be terminally ill was $101, all 100,000 of the shares would become vested (100,000 shares x $100 (the difference between $101
and $1) = $10,000,000). 

  
 CISCO SYSTEMS, INC. 

  
 VESTING POLICY 
 FOR 
 LEAVES OF ABSENCE

  
 Unless and until the Compensation & Management Development Committee
of the Board of Directors of Cisco Systems, Inc. determines otherwise, the following policy shall be applied to all equity awards issued under any equity plan maintained Cisco or any Cisco subsidiary, including equity awards and/or equity plans
assumed by Cisco in connection with its acquisition of companies, and held by any employee of Cisco or any Cisco subsidiary (each such award shall be referred to herein as an “equity award”), except to the extent that the application of
such policy would be prohibited by the applicable equity plan, equity award agreement or any applicable law, rule or regulation. 
  
 90 DAYS CONTINUED VESTING ON AUTHORIZED LEAVES OF ABSENCE 
  
 The exercise or vesting schedule in effect for any outstanding equity award and any unvested shares previously acquired pursuant to any equity award (such shares referred
to herein as “unvested equity award shares”) held by an employee at the time of the employee’s commencement of an authorized leave of absence shall continue to vest and/or become exercisable in accordance with the vesting schedule set
forth in the applicable equity award agreement during the period the employee remains on such authorized leave of absence; provided that, in no event shall any employee be entitled to vest for more than 90 days of authorized leaves of absence during
any rolling 12-month period (the “LOA Limit”). 
  
 If an employee
exceeds the LOA Limit during any rolling 12-month period, the unvested equity award shares held by such an employee shall be suspended immediately following the expiration of the LOA Limit and the equity award and any unvested equity shares shall
not vest and/or become exercisable for any additional shares during the remainder of the rolling 12-month period. 

 CISCO SYSTEMS, INC. 
  

 TRANSFER POLICY 
 FOR

 DIVORCE 
  
 Unless and until the Compensation & Management Development Committee of the Board of Directors of Cisco Systems, Inc. determines otherwise, the following policy shall
be applied to all equity awards issued under any equity plan maintained Cisco or any Cisco subsidiary, including equity awards and/or equity plans assumed by Cisco in connection with its acquisition of companies, and held by any employee of Cisco or
any Cisco subsidiary (each such award shall be referred to herein as an “equity award”), except to the extent that the application of such policy would be prohibited by the applicable equity plan, equity award agreement or any applicable
law, rule or regulation. 
  
 PROHIBITION ON TRANSFER OF EQUITY AWARDS UPON
DIVORCE 
  
 Equity awards and any unvested shares acquired pursuant to equity
awards shall not be anticipated, assigned, attached, garnished, optioned, transferred or made subject to any creditor’s process in connection with the divorce of the holder of such equity award or shares.

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