1995 STOCK OPTION PLAN
OF
DATRON SYSTEMS INCORPORATED
AS AMENDED ON NOVEMBER 7, 1996
1. PURPOSES OF THE PLAN
The purposes of the 1995 Stock Option Plan (the "Plan")
of Datron Systems Incorporated (the "Company") are to:
(a) Encourage selected employees and directors to
improve operations and increase profits of the Company;
(b) Encourage selected employees and directors to
accept or continue employment or association with the
Company or its Affiliates; and
(c) Increase the interest of selected employees in the
Company's welfare through their participation in the growth
in value of the common stock, $0.01 par value, of the
Company ("Common Stock").
To accomplish the foregoing objectives, this Plan
provides a means whereby employees and directors may receive
options to purchase Common Stock, as well as Stock Appreciation
Rights ("SARs"). Options granted under this Plan ("Options")
will be either nonqualified options ("NQOS") subject to federal
income taxation upon exercise or incentive stock options ("ISOs")
not subject to immediate federal income taxation upon exercise.
2. ELIGIBLE PERSONS
Every person who at the date of grant is an employee of
the Company or of any Affiliate of the Company or a director of
the Company is eligible to receive NQOs, ISOs and SARs under this
Plan, provided, however,
(a) that nonemployee directors are ineligible to
receive ISOs at any time;
(b) that an ISO may not be granted under this Plan to
any person who owns, directly or indirectly, stock of the
Company constituting more than ten percent of the total
combined voting power of all classes of outstanding stock of
the Company or of any Affiliate of the Company, unless the
exercise price of the ISO at the time the Option is granted
is at least 110 percent of the fair market value of the
stock subject to the Option, and the Option is exercisable
for no more than five years after the date of grant, as set
forth in Section 6.2.
2
The term "Affiliate," as used in this Plan, means a parent
or subsidiary corporation, as defined in the applicable
provisions (currently Section 424) of the Internal Revenue Code
of 1986, as amended (the "Code"). The term "employee" shall have
the meaning ascribed for purposes of Section 3401(c) of the Code
and the Treasury Regulations promulgated thereunder and shall
include an officer or a director who is also an employee.
3. STOCK SUBJECT TO THIS PLAN
Subject to the provisions of Section 6.1.1 of the Plan,
the total number of shares of stock that may be (i) issued upon
the exercise of Options and (ii) covered by Options cancelled or
surrendered upon the exercise of SARs is 500,000 shares of Common
Stock, less (A) any shares in respect of which options have been
granted and are presently outstanding under the Company's 1985
Stock Option Plan (the "1985 Plan") or any predecessor plan as of
February 6, 1995 and less (B) any shares in respect of which
options are granted under the 1985 Plan on or after February 7,
1995 and prior to the expiration of such 1985 Plan. The shares
covered by the portions of any grants under this Plan or the 1985
Plan that are cancelled or expire unexercised shall become
available again for grants under this Plan. The number of shares
reserved for purchase under this Plan or covered by options that
may be cancelled or surrendered upon the exercise of SARs is
subject to adjustment in accordance with the provisions for
adjustment in this Plan.
4. ADMINISTRATION
(a) This Plan shall be administered by the Board
of Directors of the Company (the "Board") or, either in its
entirety or insofar as it relates to persons subject to Section
16 of the Securities Exchange Act ("Section 16"), by a committee
(the "Committee") comprised of non-employee members as described
in Section 4(b) (in either case, the "Administrator").
(b) The Committee shall consist of two or more
Board members, each of whom shall be a "non-employee director" as
defined in Rule 16b-3(b)(3)(i) under the Securities Exchange Act
(the "Exchange Act").
(c) Subject to the provisions of this Plan, the
Administrator shall have the authority to select the persons to
receive Options or SARs under this Plan, to fix the number of
shares that each optionee may purchase or that are subject to a
SAR, to set the terms and conditions of each Option (including
whether each Option should be a NQO or an ISO) and SAR, and to
determine all other matters relating to this Plan. No member of
the Administrator shall be liable for any act or omission on such
member's own part, including but not limited to the exercise of
any power or discretion given to such member under this Plan,
except for those acts or omissions resulting from such member's
3
own gross negligence or willful misconduct. All questions of
interpretation, implementation, and application of this Plan
shall be determined by the Administrator. Such determinations
shall be final and binding on all persons. The Administrator may
delegate nondiscretionary administrative duties to such employees
of the Company as it deems proper.
(d) It is intended that this Plan shall be
administered in accordance with the requirements of Rule 16b-3
promulgated by the Securities and Exchange Commission ("Rule
16b-3"), or any successor rule thereto. With respect to persons
subject to Section 16, if any, transactions under this Plan are
intended to comply with the applicable conditions of Rule 16b-3,
or any successor rule thereto. To the extent any provision of
this Plan or action by the Administrator fails to so comply, it
shall be deemed null and void, to the extent permitted by law and
deemed advisable by the Administrator. Notwithstanding the
above, it shall be the responsibility of such persons, not of the
Company or the Administrator, to comply with the requirements of
Section 16; and neither the Company nor the Administrator shall
be liable if this Plan or any transaction under this Plan fails
to comply with the applicable conditions of Rule 16b-3 or any
successor rule thereto, or if any such person incurs any
liability under Section 16.
5. GRANTING OF RIGHTS
5.1 Ten Year Limitation. No Options or SARs shall be
granted under this Plan after ten years from the date of adoption
of this Plan by the Board of Directors.
5.2 Written Agreement; Effect. Each Option or SAR
shall be evidenced by a written agreement in the form
satisfactory to the Company, executed by the Company and the
person to whom such Option or SAR is granted. If the agreement
relates to an Option (an "Option Agreement"), it shall specify
whether each Option it evidences is a NQO or an ISO or SAR.
Failure of the grantee to execute an agreement shall not void or
invalidate the grant of an Option; SARs may be included in the
Option Agreement or may be evidenced by a separate written
agreement satisfactory to the Company, executed by the Company
and the person to whom such SAR is granted; the Option or SAR may
not be exercised, however, until the agreement is executed.
5.3 Advance Approvals. Subject to Section 6.3.3 with
respect to ISOs, the Administrator may approve the grant of
Options or SARs under this Plan to persons who are expected to
become employees or directors of the Company, but are not
employees or directors at the date of approval. In such cases,
the Option or SAR shall be deemed granted (and the exercise price
determined with reference to the fair market value of the
underlying stock), without further approval, on the date the
grantee becomes an employee or director and must satisfy all
requirements of this Plan for Options or SARs granted on that
date.
4
6. TERMS AND CONDITIONS OF OPTIONS
Each Option shall be designated as an ISO or a NQO and
shall be subject to the terms and conditions set forth in Section
6.1. NQOs shall be also subject to the terms and conditions set
forth in Section 6.2, but not those set forth in Section 6.3.
ISOs shall also be subject to the terms and conditions set forth
in Section 6.3, but not those set forth in Section 6.2.
6.1 Terms and Conditions to Which All Options Are
Subject. All Options shall be subject to the following terms and
conditions:
6.1.1 Changes in Capital Structure. Subject
to Sections 6.1.2 and 6.1.3, if the stock of the Company is
changed by reason of a stock split, reverse stock split, stock
dividend, or recapitalization, or converted into or exchanged for
other securities as a result of a merger, consolidation or
reorganization, appropriate adjustments shall be made in (A) the
number and class of shares of stock subject to this Plan and each
Option outstanding under this Plan, and (B) the exercise price of
each outstanding Option; provided, however, that the company
shall not be required to issue fractional shares as a result of
any such adjustment. Each such adjustment shall be determined by
the Administrator in its sole discretion, which determination
shall be final and binding on all persons.
6.1.2 Corporate Transactions. Subject to
Section 6.1.3, new option rights may be substituted for the
Options granted under this Plan, or the Company's obligations as
to Options outstanding under this Plan may be assumed, by an
employer corporation other than the Company, or by a parent or
subsidiary of such employer corporation, in connection with any
merger, consolidation, acquisition, separation, reorganization,
liquidation or like occurrence in which the Company is involved
and which the Administrator determines, in its absolute
discretion, would materially alter the structure of the Company
or its ownership. Such assumption or substitution shall be done
in such manner that the then outstanding Options which are ISOs
will continue to be "incentive stock options" within the meaning
of Section 422 of the Code to the full extent permitted thereby.
Notwithstanding the foregoing or the provisions of Section 6.1.1,
if such employer corporation, or parent or subsidiary of such
employer corporation, does not substitute new option rights for,
and substantially equivalent to, the Options granted hereunder,
or assume the Options granted hereunder, or if there is no
employer corporation, the Administrator may upon 10 days' prior
written notice to optionees in its absolute discretion (i)
shorten the period during which options are exercisable (provided
they remain exercisable, to the extent otherwise exercisable, for
at least 10 days after the date the notice is given); or (ii)
subject to Rule 16b-3 in the case of optionees subject to Section
16, cancel options upon payment to the optionee in cash, with
respect to each option to the extent then exercisable, of an
amount which, in the absolute discretion of the Administrator, is
5
determined to be equivalent to any excess of (y) the fair market
value (at the effective time of the dissolution, liquidation,
merger, reorganization, sale or other event) of the consideration
that the optionee would have received if the option had been
exercised before the effective time, over (z) the exercise price
of the option; provided, however, if there is a successor
corporation and replacement options are not granted by the
successor corporation, all outstanding Options shall become
exercisable prior to the consummation of the transaction such
that the optionees shall have not less than ten days to exercise
their options and become shareholders of record entitled to
participate as shareholders of record in the proposed
transaction. The actions described in this Section may be taken
without regard to any resulting tax consequences to the optionee.
6.1.3 Change of Control. In the event of a
"Change of Control," the Administrator may in its discretion
determine that any Options granted under this plan outstanding as
of the date such Change of Control is determined to have occurred
shall become exercisable for all of the shares of stock subject
to such Options effective (a) immediately prior to the
transaction constituting a Change of Control (if the
Administrator has made, prior to such date, the election to
accelerate the vesting of Options pursuant to this Section) or
(b) the date that the Administrator determines to permit
acceleration of vesting pursuant to this Section (if such
determination is made concurrently with or after the transaction
constituting a Change of Control). For purposes of this Section
6.1.3, a "Change of Control" shall mean the occurrence of any one
of the following: (i) Any "person", as such term is used in
Sections 13(d) and 14(d) of the Exchange Act (other than the
Company, a subsidiary, or a Company employee benefit plan,
including any trustee of such plan acting as trustee) is or
becomes the "beneficial owner" (as defined in Rule 13D-3 under
the Exchange Act), directly or indirectly, of securities of the
Company representing 50% or more of the combined voting power of
the Company's then outstanding securities; or (ii) the
dissolution or liquidation (partial or total) of the Company or a
sale of assets involving 75% or more of the assets of the
Company, or any merger or reorganization of the Company (whether
or not another entity is the survivor) or other transaction
pursuant to which the holders, as a group, of all the voting
power of the entity surviving the transaction prior to the
transaction hold, as a group, less than 50% of the voting power
of the Company after the transaction.
6.1.4 Option Grant Date. Each Option
Agreement shall specify the date as of which it shall be
effective (the "Effective Date"). The Effective Date shall be
the date as of which the Administrator approves the grant, or, in
the case of advance approvals pursuant to Section 5.3, the date
the optionee actually becomes an employee of the Company.
6
6.1.5 Time of Option Exercise. Subject to
Sections 5.3 and 6.3.5, and except as otherwise provided by the
Administrator or in Section 6.1.3, an Option shall be exercisable
with respect to 33% of the shares of stock covered by the Option
on the first anniversary of the Effective Date, with respect to
another 33% of the shares of stock subject to the Option on the
second anniversary of the Effective Date, and with respect to all
shares of stock subject to the Option on the third anniversary of
the Effective Date. Subject to the foregoing, Options are
exercisable in whole or in part.
6.1.6 Nonassignability of Option Rights. No
Option shall be assignable or otherwise transferable by the
optionee except by will or by the laws of descent and
distribution or, if the Option is a NQO, pursuant to a qualified
domestic relations order as defined by the Code or Title I of the
Employee Retirement Income Security Act, or the rules thereunder.
During the life of the optionee, an Option shall be exercisable
only by the optionee or the optionee's guardian or legal
representative in the event of death or permanent disability of
the optionee or, in the case of a NQO, by the optionee's
transferee pursuant to a qualified domestic relations order.
6.1.7 Payment. Except as provided below,
payment in full shall be made for all stock purchased at the time
written notice of exercise of an Option is given to the Company
either (a) in cash or (b) by delivery by the optionee of Common
Stock already owned by the optionee for all or part of the
aggregate exercise price of the shares as to which the Option is
being exercised, provided the value (determined as set forth in
Section 6.1.12) of such Common Stock is equal on the date of
exercise to the aggregate exercise price of the shares as to
which the Option is being exercised; provided, however, that if
an optionee has exercised any portion of any Option granted by
the Company by delivery of Common Stock, the Optionee may not,
within six months following such exercise, exercise any Option by
delivery of Common Stock. Proceeds of any payment shall
constitute general funds of the Company. At the time an Option
is granted or exercised, the Administrator, in the exercise of
its absolute discretion, may authorize one or both of the
following additional methods of payment:
(A) Acceptance of the optionee's full recourse
promissory note for a portion of the aggregate exercise
price of the shares as to which the Option is being
exercised, payable on such terms and bearing such interest
rate as determined by the Administrator, which promissory
note may be either secured or unsecured in such manner as
the Administrator shall approve (including, without
limitation, by a security interest in the shares of the
Company) provided that at least the aggregate par value of
the shares of Common Stock to be issued is received in cash;
(B) Any other property, so long as such property
constitutes valid consideration under applicable law for the
7
shares as to which the Option is being exercised and is
surrendered in good form for transfer.
6.1.8 Termination of Employment. Any Option
which has not vested on or before the date on which an optionee
ceases, for any reason and with or without cause, to be an
employee or director of the Company or an Affiliate (an
"Employment Termination"), shall expire upon such Employment
Termination. Option rights granted to an optionee under this
Plan that have vested as of such Employment Termination, to the
extent such rights have not expired or been exercised, shall
terminate (a) three months, in the case of ISOs and for any
optionee who immediately prior to the date of Employment
Termination is not subject to Section 16, or (b) seven months in
the case of NQOs held by an optionee who immediately prior to the
date of Employment Termination is subject to Section 16, after
such Employment Termination and shall not be exercisable on or
after such date. Notwithstanding the foregoing, if Employment
Termination is due to the permanent disability (as determined by
the Administrator) or death of the optionee, the optionee, or the
optionee's personal representative or any other person who
acquires the option rights from the optionee by will or the
applicable laws of dissent and distribution, may, within 12
months after the date of Employment Termination, exercise the
rights to the extent they were exercisable on the date of
Employment Termination. The transfer of an optionee from the
Company to an Affiliate or vice versa, or from one Affiliate to
another, or a leave of absence duly authorized by the Company,
shall not be deemed an Employment Termination or break in
continuous employment.
6.1.9 Other Provisions. Each Option Agreement
may contain such other terms, provisions, and conditions not
inconsistent with this Plan as may be determined by the
Administrator (including, without limitation, rights of
repurchase), and each ISO granted under this Plan shall include
such provisions and conditions as are necessary to qualify the
Option as an "incentive stock option" within the meaning of
Section 422 of the Code.
6.1.10 Tax Compensation Rights. In connection
with the grant of any Option under this Plan (the "Associated
Option"), the Administrator may grant the optionee the right
("Tax Compensation Right") to receive from the Company an amount
(the "Tax Compensation Amount") in cash equal to the then
existing maximum statutory Federal income tax rate (including any
surtax or similar charge or assessment) for corporations
multiplied by the amount of ordinary income, if any, realized by
the optionee for federal income tax purpose as a result of
exercise of the Associated Option. The Tax Compensation Right is
subject to any terms and conditions the Administrator may deem
appropriate (including without limitation, the condition that
such Tax Compensation Right may be exercised only if the optionee
is subject to Section 16 at the time the Associated Option is
exercised), and may cancel or limit the term or amount of such
8
Tax Compensation Right at any time. The Administrator may also,
in its discretion, loan to the optionee an amount equal to the
Tax Compensation amount in return for optionee's non-recourse
promissory note, payable on such terms and bearing such interest
rate as may be determined by the Administrator, which promissory
note the Administrator may approve (including, without
limitation, by a security interest in the shares of the Company).
6.1.11 Withholding and Employment Taxes. At
the time of exercise of an Option or at such other time as the
amount of such obligations becomes determinable (the "Tax Date"),
the optionee shall remit to the Company in cash all applicable
federal and state withholding and employment taxes. The
Administrator may, in the exercise of the Administrator's sole
discretion, permit an optionee to pay some or all of such taxes
by means of a promissory note on such terms as the Administrator
deems appropriate. If and to the extent authorized by the
Administrator in its sole discretion, an optionee may make an
election, by means of a form of election to be prescribed by the
Administrator, (i) to have shares of Common Stock which are
acquired upon exercise of the Option withheld by the Company or
(ii) to tender other shares of Common Stock or other securities
of the Company owned by the optionee to the Company, at the time
the amount of such taxes is determined, to pay the amount of such
tax obligations, subject to the following limitations:
(a) Any election pursuant to clause (i)
above by an optionee subject to Section 16 shall either (x) be
made at least six months before the Tax Date and shall be
irrevocable; or (y) shall be made in (or made earlier to take
effect in) any ten-day period beginning on the third business day
following the date of release by the Company for publication of
quarterly or annual summary statements of sales or earnings of
the Company and shall be subject to approval by the
Administrator. In addition, in the case of (y), the Option shall
be held at least six months prior to the Tax Date.
(b) Any election pursuant to clause
(ii) above, where the optionee is tendering Common Stock issued
pursuant to the exercise of an Option, shall require that such
shares be held at least six months prior to the Tax Date.
Any of the foregoing limitations may be waived (or
additional limitations may be imposed) by the Administrator, in
its sole discretion, if the Administrator determines that such
foregoing limitations are not required (or that such additional
limitations are required) in order that the transaction shall be
exempt from Section 16(b) of the Exchange Act pursuant to Rule
16b-3, or any successor rule thereto. In addition, any of the
foregoing limitations may be waived by the Administrator, in its
sole discretion, if the Administrator determines that Rule 16b-3,
or any successor rule thereto, is not applicable to the exercise
of the Option by the optionee or for any other reason.
9
Any Common Stock or other securities of the Company so
withheld or tendered will be valued as of the Tax Date in
accordance with Section 6.1.12.
6.1.12 Determination of Value. For purposes
of the Plan, the fair market value of the common stock covered by
an Option shall be determined as follows:
(a) If the common stock is listed on any
established stock exchange or a national market system, including
without limitation the National Market System of the National
Association of Securities Dealers Automated Quotation System
("NASDAQ"), its fair market value shall be the closing sales
price or the mean between the high bid and low asked prices if no
sales were reported, as quoted on such system or exchange (or the
largest such exchange) for the date the value is to be determined
(or if there are no sales or bid and asked price quotations for
such date, then for the last preceding business day on which
there were sales or bid and asked price quotations), as reported
in the Wall Street Journal or similar publication.
(b) If the common stock is regularly quoted
by a recognized securities dealer, its fair market value shall be
(i) the mean between the closing high bid and low asked
quotations for the stock on the date the value is to be
determined (or if there are no quoted prices for such date, then
for the last preceding business day on which there were quoted
prices) as quoted on NASDAQ or any similar system of automated
dissemination of quotations of securities prices then in common
use, as reported in the Wall Street Journal or similar
publication, or (ii) if not quoted as described in clause (i),
the mean between the high bid and low asked quotations for the
stock as reported by the National Quotation Bureau Incorporated
if at least two securities dealers have inserted both bid and
asked quotations for the security on at least five trading days
of the 20 trading days preceding the date the value is to be
determined; provided, however, that if the stock is quoted on a
national securities or central market system, in lieu of a market
or quotation system described above, the fair market value shall
be determined in the manner set forth in clause (i) if bid and
asked quotations are reported but actual transactions are not,
and in the manner set forth in paragraph (a) if actual
transactions are reported.
(c) In the absence of an established market
for the common stock, the fair market value thereof shall be
determined in good faith by the Administrator, with reference to
the Company's net worth, prospective earnings power, dividend-
paying capacity, and other relevant factors, including the
goodwill of the Company, the economic outlook in the Company's
industry, the Company's position in the industry and its
management, and the values of stock of other corporations in the
same or a similar line of business.
10
6.2 Terms and Conditions to Which Only NQOs Are
Subject. Options granted under this Plan which are designated as
NQOs shall be subject to the following terms and conditions:
6.2.1 Exercise Price. The exercise price of
an NQO shall be not less than 85% of the fair market value of the
stock subject to the Option on the date of its grant, as
determined in accordance with Section 6.1.12.
6.2.2 Expiration. Subject to Section 6.1.2,
each NQO granted under this Plan shall expire ten years and two
days from the date of its grant or such earlier date as may be
set by the Administrator on the date of its grant.
6.3 Terms and Conditions to Which Only ISOs Are
Subject. Options granted under this Plan which are designated as
ISOs shall be subject to the following terms and conditions:
6.3.1 Exercise Price. The exercise price of
an ISO, which shall be approved by the Board of Directors, shall
be determined in accordance with the applicable provisions of the
Code and shall in no event be less than the fair market value
(determined as described in Section 6.1.12) of the stock covered
by the ISO at the time the ISO is granted, except that the
exercise price of an ISO granted to any person who owns, directly
or indirectly, (or is treated as owning by reason of attribution
rules, currently set forth in Code Section 424) stock of the
Company constituting more than ten percent of the total combined
voting power of all classes of outstanding stock of the company
or of any Affiliate of the Company, shall in no event be less
than 110 percent of such fair market value.
6.3.2 Expiration. Subject to Section 6.1.2,
and unless an earlier expiration date is specified by the
Administrator at the time of grant, each ISO granted under this
Plan shall expire ten years from the date of its grant, except
that an ISO granted to any person who owns, directly or
indirectly, (or is treated as owning by reason of applicable
attribution rules, currently set forth in Code Section 424) stock
of the company constituting more than ten percent of the total
combined voting power of the Company's outstanding stock, or the
stock of any Affiliate of the company, shall expire five years
from the date of its grant.
6.3.3 Grant Date. If an ISO is granted in
anticipation of employment as provided in Section 5(d), the
Option shall be deemed granted, without further approval, on the
date the grantee assumes the employment relationship forming the
basis for such grant, and, in addition, satisfies all
requirements of this Plan for Options granted on that date.
6.3.4 Disqualifying Dispositions. If stock
acquired by exercise of an ISO granted pursuant to this Plan is
disposed of within two years from the date of grant of the ISO or
within one year after the transfer of the stock to the optionee,
11
the holder of the stock immediately prior to the disposition
shall promptly notify the Company in writing of the date and
terms of the disposition and shall provide such other information
regarding the disposition as the Company may require. Such
holder shall pay to the Company any withholding and employment
taxes which the Company in its sole discretion deems applicable
to such disposition. Any disposition not in accordance with this
Section 6.3.4. shall be void and of no effect. The Company may
instruct its stock transfer agent by appropriate means, including
placement of legends on stock certificates, not to transfer stock
acquired by exercise of an ISO unless it has been advised by the
Company that the requirements of this Section 6.3.4 have been
satisfied.
6.3.5 Vesting. Notwithstanding any other
provision of this Plan, ISOs granted under all incentive stock
option plans of the Company and its subsidiaries may not "vest"
for more than $100,000 in fair market value of stock (measured on
the grant dates(s)) in any calendar year, unless otherwise
provided by the Administrator. For purposes of the preceding
sentence, an option "vests" when it first becomes exercisable.
If, by their terms, such ISOs taken together would vest to a
greater extent in a calendar year, and unless otherwise provided
by the Administrator, the vesting limitation described above
shall be applied by deferring the exercisability of those ISOs or
portions of ISOs which have the highest per share exercise
prices; but in no event shall more than $100,000 in fair market
value of stock (measured on the grant date(s)) vest in any
calendar year. The ISOs or portions of ISOs whose exercisability
is so deferred shall become exercisable on the first day of the
first subsequent calendar year during which they may be
exercised, as determined by applying these same principles and
all other provisions of this Plan including those relating to the
expiration and termination of ISOs. In no event, however, will
the operation of this Section 6.3.5 cause an ISO to vest before
its terms or, having vested, cease to be vested.
7. MANNER OF EXERCISE
An optionee wishing to exercise an Option shall give
written notice to the Company at its principal executive office,
to the attention of the Chief Financial Officer of the Company,
accompanied by an executed stock purchase agreement in form and
substance satisfactory to the Company and by payment of the
exercise price as provided in Section 6.1.7. The date the
Company receives written notice of an exercise hereunder
accompanied by payment of the exercise price will be considered
as the date such Option was exercised. Promptly after receipt of
written notice of exercise of an Option, the Company shall,
without stock issue or transfer taxes to the optionee or the
person entitled to exercise the Option, deliver to the optionee
or such other person a certificate or certificates for the
requisite number of shares of stock. An optionee or transferee
of an Option shall not have any privileges as shareholder with
12
respect to any stock covered by the Option until the date of
issuance of a stock certificate.
8. DEFINITIONS RELATING TO SARs
For purposes of this Plan, the following items shall
have the following meanings:
8.1 FMV per Share. The term "FMV per Share" shall
mean, for the day or period with respect to which the FMV per
Share is being determined, the fair market value of the Common
Stock determined in accordance with the provisions of Section
6.1.12.
8.2 Related Right. The term "Related Right" shall
mean an option with respect to which a SAR is granted.
8.3 SAR Holder. The term "SAR Holder" shall mean a
person holding an option to acquire shares of Common Stock to
whom a SAR is granted pursuant to this Plan.
8.4 SAR Spread. The term "SAR Spread" shall mean an
amount (rounded to the nearest whole dollar) equal to the product
computed by multiplying (a) the excess of (i) if the SAR may only
be exercised during the Window Period under Section 9.6 below,
then the highest FMV per Share on any day during the Window
Period, and if exercise of the SAR is not so limited under
Section 9.6 below, then the FMV per Share on the date the SAR is
exercised, over (ii) the exercise price per share of Common Stock
at which the Related Right is exercisable, or in the case of a
SAR granted without reference to a Related Right, such other
price as the Administrator establishes at the time the SAR is
granted, by (b) the number of shares of Common Stock with respect
to which a SAR is being exercised.
8.5 Window Period. The term "Window Period" shall
mean the periods specified in Rule 16b-3(e)(3), or any successor
rule, within which a SAR must be exercised in order to be exempt
from the operation of Section 16(b) of the Exchange Act by virtue
of paragraph (e) of Rule 16b-3 or any successor provision. This
period is, as of the date of this Plan, between the third and
twelfth business days following release by the Company of
quarterly or annual summary statements of sales and earnings.
9. STOCK APPRECIATION RIGHTS
9.1 Grant of SAR. The Administrator may, in the
exercise of the Administrator's discretion, grant SARs to
eligible employees. A SAR may be granted either (i) with respect
to shares of Common Stock subject to a Related Right held by the
SAR Holder, whether or not the Related Right is an Option granted
pursuant to this Plan, or (ii) without reference to any Related
Right. If a Related Right is an ISO, a SAR granted with respect
13
to such Related Right may be granted only at the time of grant of
the related ISO, but if the Related Right is a non-qualified
option, the SAR may be granted either simultaneously with the
grant of the related non-qualified option, or may be granted at
any time during the term of such related non-qualified option,
whether or not the option is a NQO granted pursuant to this Plan
or a previously or subsequently granted non-qualified option not
granted pursuant to this Plan, and whether or not the option is
granted pursuant to a "plan" within the meaning of Rule 16b-3.
Notwithstanding any other provision of the Plan, the
Administrator shall have sole discretion to specify a maximum
limitation on the amount of the SAR Spread, to determine the time
at which any SAR otherwise exercisable may be exercised, to
determine whether upon exercise of a SAR the SAR Holder may
receive cash or stock as provided in Sections 9.9 and 9.10 below
or may elect to receive either cash or stock, to establish a
price other than the exercise price of shares subject to a
Related Right as a basis for determining the amount of the SAR
Spread, and to grant any SAR subject to such additional terms and
conditions as are consistent with the provisions of this Plan.
9.2 Changes in Capital Structure. If, by virtue of
any event described in Section 6.1.1, an adjustment is made to a
Related Right held by a SAR Holder, then the number of shares
covered by the SAR shall also be adjusted accordingly.
9.3 Corporate Transactions. Subject to Section 9.4,
new SARs may be substituted for the SARs granted under this Plan,
or the Company's obligations as to options outstanding under this
Plan may be assumed, by an employer corporation other than the
Company, or by a parent or subsidiary of such employer
corporation, in connection with any merger, consolidation,
acquisition, separation, reorganization, liquidation or like
occurrence in which the Company is involved and which the
Administrator determines, in its absolute discretion, would
materially alter the structure of the Company or its ownership.
Notwithstanding the foregoing or the provisions of Section 9.2,
if such employer corporation, or parent or subsidiary of such
employer corporation, does not substitute new SARs for, and
substantially equivalent to, the SARs granted hereunder, or
assume the SARs granted hereunder, or if there is no employer
corporation, or if the Administrator determines, in its sole
discretion, that SARs outstanding under this Plan should not then
continue to be outstanding, (A) upon dissolution or liquidation
of the Company, or similar occurrence, or (B) upon any merger,
consolidation, acquisition, separation, or similar occurrence,
where the Company, will not in economic substance be the
surviving corporation; provided, however, that each SAR Holder
shall be mailed notice at least 15 days prior to such
dissolution, liquidation, merger, consolidation, acquisition,
separation, or similar occurrence, and shall have at least 10
days after the mailing of such notice to exercise any unexpired
SARs granted hereunder to the extent such SARs are then
exercisable.
14
9.4 Change of Control In the event of a "Change of
Control" as defined in Section 6.1.3, the Administrator may in
its discretion determine that all SARs granted under this plan,
except for SARs held by SAR Holders who are subject to Section
16, shall become exercisable at the same time that Options become
exercisable pursuant to Section 6.1.3.
9.5 SAR Grant Date. Except in the case of advance
approvals described in Section 5.3, the date of grant of a SAR
under this Plan shall be the date as of which the Administrator
approves the grant.
9.6 Time of SAR Exercise. A SAR shall generally be
exercisable six months from the date of grant of the SAR and
shall be exercisable in whole or in part. Any election by a SAR
Holder to receive cash in full or partial settlement of a SAR, as
well as any exercise by the SAR Holder of a SAR for such cash,
shall be made only during the Window Period. Where a SAR is
granted with respect to a Related Right, unless the written
agreement pursuant to which the SAR is granted otherwise
provides, the SAR may be exercised only to the extent to which
the Related Right is exercisable and the shares covered by the
Related Right are not covered by any right of repurchase. Except
as otherwise provided in Section 9.7, a SAR may be exercised
immediately in the event of the death or permanent disability of
the SAR Holder.
9.7 Effect on Related Right; Termination of SAR. If a
SAR granted with respect to a Related Right is exercised, the
Related Right shall cease to be exercisable and shall be
cancelled to the extent of the number of shares with respect to
which the SAR was exercised. The Company and the SAR Holder
shall take such actions and execute such documents as may be
necessary or appropriate to reflect such cancellation. Upon the
exercise or termination of a Related Right, SARs granted with
respect thereto shall terminate to the extent of the number of
shares as to which the Related Right was exercised or terminated.
Upon the death or permanent disability of the SAR Holder, the SAR
shall be exercisable only by the SAR Holder's personal
representative or any other person who acquires the SAR Holder's
right by will or the applicable laws of descent and distribution
and, in the case of a SAR granted with respect to a Related
Right, only to the extent to which the Related Right is then
exercisable.
9.8 Nonassignability of SARs. No SAR granted under
this Plan shall be assignable or otherwise transferable by the
SAR Holder except by will or by the laws of descent and
distribution or pursuant to a qualified domestic relations order
as defined by the Code or Title I of the Employee Retirement
Income Security Act, or the rules thereunder. During the life of
the SAR Holder, a SAR shall be exercisable only by the SAR Holder
or the SAR Holder's guardian or legal representative or by the
optionee's transferee pursuant to a qualified domestic relations
order.
15
9.9 Manner of Exercise; Election to Receive Cash or
Stock. A SAR Holder wishing to exercise a SAR shall (i) give
written notice to the Company at its principal executive office,
to the attention of the Secretary of the Company, specifying the
number of shares of Common Stock with respect to which the SAR
Holder is exercising the SAR and if under the terms of the SAR
the SAR Holder may elect to receive either cash, stock, or a
combination of cash and stock upon exercise of the SAR, stating
the manner in which the SAR Holder has elected to receive payment
upon exercise; (ii) deliver to the Company such written
representations, warranties, and covenants as the Company may
reasonably require; and (iii) if so requested by the Company,
deliver to the Chief Financial Officer of the Company any written
agreement that the Company may reasonably require relating to the
SAR being exercised or pertaining to the Related Right. The date
the Company receives all of the instruments referred to in the
preceding sentence shall be considered as the date upon which the
SAR was exercised. A SAR Holder who receives stock upon exercise
of a SAR shall not have any privileges as a stockholder with
respect to any such shares of stock until the date of issuance of
a stock certificate.
9.10 Exercise of SARs; Market Price. Upon the exercise
of a SAR, the SAR Holder shall be entitled to receive one of the
following kinds of payments:
(a) that number of whole shares of Common Stock equal
to the number computed by dividing the SAR Spread by the
highest FMV per Share during the Window Period in which the
SAR was exercised and an amount of cash equal to the highest
FMV per Share during the Window Period in which the SAR was
exercised multiplied by the fraction (if any) of a share of
Common Stock not so issued (such payment to be in lieu of
issuance of fractional shares); or
(b) An amount in cash equal to the SAR Spread; or
(c) A combination of cash and whole shares of Common
Stock (the combined value of which, however, shall not
exceed the SAR Spread) in the respective amounts specified
in the SAR Holder's notice of exercise.
Notwithstanding any other provision of this Section 9, if the
terms of a SAR entitle the SAR Holder to elect upon exercise of
the SAR whether to receive cash in full or partial settlement of
the SAR, then the Administrator shall have sole discretion to
consent to or disapprove such election ("Cash Election"). Such
consent or disapproval may be given at any time after the Cash
Election to which it relates. If the Administrator shall
disapprove a Cash Election, the exercise of the SAR with respect
to which the Cash Election was made shall be of no effect but
shall be without prejudice to the right of the SAR Holder to
exercise the SAR in the future in accordance with its terms.
16
9.11 Withholding and Employment Taxes. At the time of
exercise of a SAR, the SAR Holder shall remit to the Company in
cash all applicable federal and state withholding and employment
taxes, and the Administrator may, in its sole discretion, reduce
the amount paid to a SAR Holder upon exercise of the SAR by such
amount. The Administrator may, in the exercise of its sole
discretion, permit a SAR Holder to pay some or all of such taxes
by means of a promissory note on such terms as the Administrator
deems appropriate.
10. EMPLOYMENT RELATIONSHIP
Nothing in this Plan or any Option or SAR granted
hereunder shall interfere with or limit in any way the right of
the Company or of any of its Affiliates to terminate any
optionee's employment or status as a director at any time, nor
confer upon any optionee or SAR Holder any right to continue in
the employ of, or as a director of, the Company or any of its
Affiliates.
11. AMENDMENT OR ALTERATION OF PLAN
The Board may at any time amend, alter, suspend, or
discontinue this Plan, except to the extent that shareholder
approval is required by applicable law or regulations; provided,
however, no amendment, alteration, suspension, or discontinuation
shall be made that would impair the rights of any grantee,
without the grantee's consent, under any Option or SAR
theretofore granted. The Board shall have the power to make such
changes in this Plan and in the regulations and administrative
provisions hereunder or in any outstanding Option as in the
opinion of counsel for the Company may be necessary or
appropriate from time to time to enable any Option granted
pursuant to this Plan to qualify as an ISO under Section 422 of
the Code, subject in all events to the consent of the holder of
such Option.
12. INDEMNIFICATION OF ADMINISTRATOR
The Company shall indemnify each present and future
member of the group constituting the Administrator against, and
each member of the group constituting the Administrator shall be
entitled without further act on his part to indemnity from the
Company for, all expenses (including the amount of judgments and
the amount of approved settlements made with a view to the
curtailment of costs of litigation, other than amounts paid to
the Company itself) reasonably incurred by such person in
connection with or arising out of any action, suit, or proceeding
to the full extent permitted by the laws of the State of Delaware
and by the Bylaws of the Company.
17
13. EFFECTIVE DATE OF THIS PLAN
This Plan shall become effective upon adoption by the
Board; provided, however, that if this Plan is not approved
within 12 months after its adoption by the Board, by unanimous
written consent of the shareholders of the Company or by the
shareholders of the Company voting at a validly called
shareholders meeting by a majority (or such greater number as may
be required by law or applicable governmental regulations or
orders) of the shares entitled to vote, then any options
exercised pursuant to this Plan shall constitute NQOs and not
ISOs, regardless of their status on the date of grant. Options
and SARs may be granted and exercised under this Plan only after
there has been compliance with all applicable federal and state
securities laws.
Date of Board Approval: February 7, 1995
Date of Stockholder Approval: August 15, 1995