EXHIBIT 10.71
AMENDED AND RESTATED 1995 STOCK OPTION PLAN
1995 STOCK OPTION PLAN
OF
DATRON SYSTEMS INCORPORATED,
(As Amended through August 9, 1999)
1. PURPOSES OF THE PLAN
The purposes of the 1995 Stock Option Plan, as amended,
(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.
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 canceled or surrendered upon the exercise of
SARs is 406,700 shares of Common Stock. The shares
covered by the portions of any grants under this Plan or
the 1985 Stock Option Plan that are canceled 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 canceled 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 Exchange Act ("Section 16"), by a
committee (the "Committee") comprised of disinterested
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 "disinterested person"
as defined in Rule 16b-3(c)(2)(i) under 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 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 disinterested administration
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.
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 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.
6.1.5 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 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 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.
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.
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 set by the Administrator at the time
of grant but 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 NQO at the time the NQO is
granted.
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, 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 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
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.
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 canceled 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.
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.
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
Rule 16b-3; 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 California and by the Bylaws of the
Company.
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 Original Board Approval: February 7, 1995
Date of Original Stockholder Approval: August 15, 1995
Plan History
In May, 1995, the Plan was adopted by the Board of
Directors, and in August, 1995, the Plan was approved by
the shareholders. (The plan was adopted as the
successor to the Company's 1985 Stock Option Plan, which
had expired in May, 1995.)
In May, 1999, the Board of Directors approved amendments
to the Plan (i) increasing the number of shares reserved
for issuance, (ii) requiring that the exercise price for
all options be at least equal to the fair market value
at the time of the grant of the option. The amendments
were approved by the shareholders in August 1999.