NICHOLS RESEARCH CORPORATION
1997 STOCK OPTION PLAN
1. PURPOSE
The 1997 Stock Option Plan ("Plan") of Nichols Research
Corporation ("Corporation") is intended as an incentive for key
employees which will foster increased productivity, encourage
them to remain in the employ of the Corporation, and enable them
to acquire or increase their proprietary interest in the
Corporation. At the discretion of the Committee, as defined
below, options issued pursuant to this Plan may be either
incentive stock options within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended ("Incentive Options"),
or options which are not Incentive Options ("Non-Statutory
Options").
2. ADMINISTRATION
The Plan shall be administered by a committee (the
"Committee") composed of either the entire Board of Directors or
a committee of the Board of Directors that is composed solely of
two or more Non-Employee Directors. For this purpose, the term
"Non-Employee Director" shall mean a person who is a member of
the Company's Board of Directors who (a) is not currently an
officer or employee of the Company or any parent or subsidiary of
the Company, (b) does not directly or indirectly receive
compensation for serving as a consultant or in any other non-
director capacity from the Company or any parent or subsidiary of
the Company that exceeds the dollar amount for which disclosure
would be required pursuant to Item 404(a) of Regulation S-K
promulgated under the Securities Act of 1933 and the Securities
Exchange Act of 1934 ("Regulation S-K"), (c) does not possess an
interest in any other transaction with the Company or any parent
or subsidiary of the Company for which disclosure would be
required pursuant to Item 404(a) of Regulation S-K, and (d) is
not engaged in a business relationship with the Company or any
parent or subsidiary of the Company which would be disclosable
under Item 404(b) of Regulation S-K. In the event the Committee
is a committee composed of two or more Non-Employee Directors,
the Board of Directors may from time to time remove members from,
add members to, and fill vacancies, on the Committee. A member
of the Committee shall be eligible to participate in the Plan and
receive options under the Plan. The Committee shall select one
of its members as Chairman, and shall hold meetings at such times
and places as it may determine. Action taken by a majority of
the Committee at which a quorum is present, or action reduced to
writing or approved in writing by a majority of the members of
the Committee, shall be valid acts of the Committee. The
Committee may, from time to time and at its discretion, grant
options to eligible employees. Subject to the terms of this
Plan, the Committee shall exercise its sole discretion in
determining which eligible employees shall receive options, and
the number of shares subject to each option granted.
The Committee's interpretation and construction of any
provision of the Plan, or any option granted under it, shall be
final. No member of the Committee shall be liable for any action
or determination made in good faith with respect to the Plan or
any option granted under the Plan.
3. ELIGIBILITY
Persons eligible to receive options shall be such key
employees (including officers) of the Corporation and its
subsidiaries as the Committee shall from time to time select.
The determination of whether a company is a subsidiary of the
Corporation shall be made in accordance with Section 425(f) of
the Internal Revenue Code, as amended. No person shall be
eligible to receive an option for a larger number of shares than
is recommended for him by the Committee. In selecting the
individuals to whom options shall be granted, as well as
determining the number of shares subject to each option, the
Committee shall weigh the position and the responsibility of the
individual being considered, the nature of his or her services,
his or her present and potential contributions to the
Corporation, and such other factors as the Committee deems
relevant to accomplish the purposes of the Plan. No Incentive
Option shall be granted to an employee who, immediately after
such Incentive Option is granted, owns or has rights to stock
possessing more than ten percent (10%) of the total combined
voting power of all classes of stock of the Corporation, unless
such Incentive Option is granted at a price which is at least
110% of the fair market value of the stock subject to the
Incentive Option and such Incentive Option by its terms is not
exercisable after the expiration of five (5) years from the date
such Incentive Option is granted.
4. STOCK
The stock subject to options issued under the Plan shall be
shares of the Corporation's authorized but unissued, or
reacquired, one cent ($.01) par value common stock (hereafter
sometimes called "Capital Stock" or "Common Stock"). The
aggregate number of shares which may be issued pursuant to option
exercises shall not exceed 1,300,000 shares of Capital Stock.
The limitations established by each of the preceding sentences
shall be subject to adjustment as provided in Article 5(g) of the
Plan.
In the event that any outstanding option under the Plan for
any reason expires or is terminated, the shares of Capital Stock
allocable to the unexercised portion of such option may again be
subjected to an option under the Plan.
5. TERMS AND CONDITIONS OF OPTIONS
No obligation to retain an option recipient as an employee
of the Corporation or its subsidiaries, or to provide or continue
providing the option recipient with, or to permit the option
recipient to retain, any incident associated with or arising out
of employment with the Corporation or its subsidiaries, including
but not limited to tenure, salary, benefits, title, or position,
shall be imposed on the Corporation or its subsidiaries by virtue
of the adoption of the Plan, the grant or acceptance of an option
granted pursuant to the Plan, or the exercise of an option under
the Plan. Stock options granted under the Plan shall be
authorized by the Committee and shall be evidenced by agreements
in such form as the Committee shall from time to time approve.
Such agreements shall conform with, and be subject to, the
following terms and conditions:
(a) Number of Shares and Form of Option
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Each option agreement shall state the number of shares to
which it pertains and whether the option granted is an Incentive
Option or a Non-Statutory Option.
(b) Exercise Price
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Each option agreement shall state the exercise price. The
per share exercise price for shares obtainable pursuant to an
Incentive Option shall not be less than 100% of the Fair Market
Value, as defined below, of the shares of Capital Stock of the
Corporation on the date the option is granted. The per share
exercise price for shares obtainable pursuant to a Non-Statutory
Option shall not be less than the par value of the shares. For
all purposes under the Plan, Fair Market Value shall be deemed to
be the closing sale price of the Common Stock as reported on the
Nasdaq National Market (or the mean between the highest and
lowest per share sales price should the Common Stock be listed on
an exchange) on a given day, or if such stock is not traded on
that day, then on the next preceding day on which such stock was
traded ("Fair Market Value"). Subject to the foregoing, the
Committee shall have full authority and discretion, and shall be
fully protected, with respect to the price fixed for shares
obtainable pursuant to the exercise of options. The aggregate
Fair Market Value (determined at the time the Incentive Option is
granted) of the Common Stock with respect to which Incentive
Options are exercisable for the first time by the option
recipient during any calendar year (under all such plans of the
Corporation and its subsidiary corporations) shall not exceed
$100,000. If an option recipient is granted an Incentive Option
which exceeds this limitation, the Incentive Option shall be
treated as Non-Statutory Options to the extent such limitation is
exceeded.
(c) Medium and Time of Payment
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The option recipient may pay the exercise price in cash, by
means of unrestricted shares of the Corporation's Common Stock,
or in any combination thereof. Notwithstanding the foregoing,
shares of the Corporation's Common Stock may be used to exercise
an option only if the number of shares for which the option is
then being exercised is at least five hundred (500) shares. The
option recipient must pay for shares received pursuant to an
option exercise on or before the date of such exercise. Payment
in currency or by check, bank draft, cashier's check, or postal
money order shall be considered payment in cash. In the event of
payment in the Corporation's Common Stock, the shares used in
payment of the exercise price shall be taken at the Fair Market
Value of such shares on the date they are tendered to the
Corporation. The shares purchased upon exercise of an option
with shares of the Corporation's Common Stock owned by the option
recipient may not be sold, exchanged, pledged or otherwise
transferred during the one (1) year period following such
purchase and shall bear the following restrictive legend:
The shares represented by this certificate
were acquired with shares of Nichols Research
Corporation common stock and, therefore,
pursuant to the terms of Section 5(c) of the
Nichols Research Corporation 1997 Stock
Option Plan, may not be sold, exchanged,
pledged or otherwise transferred during the
one (1) year period commencing on the date
shown on the face of this certificate.
(d) Term and Exercise of Options
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No Non-Statutory Option shall be exercisable either in whole
or in part prior to (a) the earlier of the date specified in the
Non-Statutory Option, or (b) six (6) months from the date the Non-
Statutory Option is granted. During the option recipient's
lifetime, the Non-Statutory Option shall be exercisable only by
the option recipient or the option recipient's guardian or legal
representative if one has been appointed, and shall not be
assignable or transferable other than by will or the laws of
descent and distribution. No Non-Statutory Option shall be
exercisable after the earlier of (1) the date specified in the
Non-Statutory Option, or (2) the expiration of ten (10) years
from the date the Non-Statutory Option is granted.
No Incentive Option shall be exercisable either in whole or
in part prior to twenty-four (24) months from the date it is
granted. Subject to the right of accretion provided in the next
to last sentence of this Article 5 (d), each Incentive Option
shall be exercisable in three (3) installments as follows: (1) up
to one-third of the total shares covered by the Incentive Option
may be purchased after twenty-four (24) months from the date the
Incentive Option is granted; (2) up to one-third of the total
shares covered by the Incentive Option may be purchased after
thirty-six (36) months from the date the Incentive Option is
granted; and (3) up to one-third of the total shares covered by
the Incentive Option may be purchased after forty-eight (48)
months from the date the Incentive Option is granted. The
Committee may provide, however, for the exercise of an Incentive
Option after the initial twenty-four month period, either as an
increased percentage of shares per year or as to all remaining
shares, if the option recipient dies, is or becomes disabled, or,
with the permission of the Committee, retires. During the option
recipient's lifetime, the Incentive Option shall be exercisable
only by the option recipient, or the option recipient's guardian
or legal representative if one has been appointed, and shall not
be assignable or transferable other than by will or the laws of
descent and distribution. To the extent not exercised, Incentive
Option installments shall accumulate and be exercisable, in whole
or in part, in any subsequent period but not later than five (5)
years from the date the Incentive Option is granted. No
Incentive Option shall be exercisable after the expiration of
five (5) years from the date it is granted.
(e) Termination of Employment Except Death
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If an option recipient's employment with the Corporation or
its subsidiaries ceases for any reason other than the option
recipient's death, all options held by him pursuant to the Plan
and not previously exercised as of the date of such termination
shall terminate immediately and become void and of no effect;
provided, however, that the Committee shall have the right to
extend the exercise period by up to three (3) months from the
date the option recipient's employment is terminated. If
termination occurs because of disability, or as a result of the
option recipient's retirement with the consent of the
Corporation, such disabled or retiring option recipient shall
have the right to exercise any options which were exercisable but
unexercised as of the date of such termination at any time within
three (3) months after such termination, subject to the condition
that no Non-Statutory Option shall be exercisable after the date
specified in the Non-Statutory Option and no Incentive Option
shall be exercisable after the expiration of five (5) years from
the date it is granted. The term "disability" shall mean a
mental or physical condition resulting from an injury or illness
(other than substantial dependence on or addiction to alcohol or
any drug) which renders an option recipient incapable of
performing his normal duties as an employee of the Corporation or
its subsidiaries. The option recipient shall not be considered
to be disabled until the Committee shall have been furnished the
opinion of two licensed physicians that the option recipient is
prevented from performing his duties and that his condition is
likely to continue for a period in excess of twelve (12) months
or for an indefinite period. Whether termination of employment
is due to disability or is to be considered a retirement with the
consent of the Committee shall be determined by the Committee in
its sole and absolute discretion, and such determination shall be
final and conclusive. Authorized leaves of absence or absence
for military service shall not constitute termination of
employment for the purposes of the Plan.
(f) Death of Option Recipient and Transfer of Option
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If an option recipient dies while employed by the
Corporation or its subsidiaries or within three (3) months after
being terminated due to disability or retirement with the consent
of the Committee, and has not fully exercised all of his
exercisable options, such options may be exercised, at any time
within three (3) months after such termination, by the option
recipient's executors or administrators, or by any person or
persons who shall have acquired the option directly from the
option recipient by bequest or inheritance. In no event,
however, shall a Non-Statutory Option be exercisable after the
date specified in the Non-Statutory Option and no Incentive
Option shall be exercisable more than five (5) years after the
date such Incentive Option is granted. In the event an option is
transferred to an option recipient's estate, or to a person to
whom such right devolves by reason of the option recipient's
death, then the option shall be nontransferable by the option
recipient's executor or administrator or by such person, except
that the option may be distributed by the option recipient's
executors or administrators to the distributees of the option
recipient's estate entitled thereto.
(g) Recapitalization
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Subject to any required action by the shareholders, the
aggregate number of shares which may be issued pursuant to option
exercises, the number of shares of Capital Stock covered by each
outstanding option, and the price per share applicable to shares
under such option, shall be proportionately adjusted for any
increase or decrease in the number of issued shares of Capital
Stock of the Corporation resulting from a subdivision or
consolidation of shares or the payment of a stock dividend (but
only on the Capital Stock), or any other increase or decrease in
the number of such shares effected without receipt of
consideration by the Corporation.
If the Corporation is merged with or consolidated into any
other corporation, or if an or substantially all of the business
or property of the Corporation is sold, or if the Corporation is
liquidated or dissolved, or if a tender or exchange offer is made
for all or any part of the Corporation's voting securities, or if
any other actual or threatened change in control of the
Corporation occurs, the Committee, with or without the consent of
the option recipient, may (but shall not be obligated to), either
at the time of or in anticipation of any such transaction, take
any of the following actions that the Committee may deem
appropriate in its sole and absolute discretion: (i) cancel any
option by providing for the payment to the option recipient of
the excess of the Fair Market Value of the shares subject to the
option over the exercise price of the option, (ii) substitute a
new option of substantially equivalent value for any option,
(iii) accelerate the exercise terms of any option, or (iv) make
such other adjustments in the terms and conditions of any option
as it deems appropriate.
In the event of a change in Capital Stock of the Corporation
as presently constituted, which is limited to a change of all of
its authorized shares with par value into the same number of
shares with a different par value or without par value, the
shares resulting from any change shall be deemed to be the
Capital Stock within the meaning of the Plan.
To the extent that the foregoing adjustments relate to stock
or securities of the Corporation, such adjustments shall be made
by the Committee, whose determination in that respect shall be
final, provided that each Incentive Option granted pursuant to
this Plan shall not be adjusted in a manner that causes the
Incentive Option to fail to continue to qualify as an incentive
stock option within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended.
Except as otherwise expressly provided in this Article 5(g),
the option recipient shall have no rights by reason of any
subdivision or consolidation of shares of stock of any class, or
the payment of any stock dividend or any other increase or
decrease in the number of shares of stock of any class, or by
reason of any dissolution, liquidation, merger or consolidation
or spin-off of assets or stock of another corporation. Any issue
by the Corporation of shares of stock of any class, or securities
convertible into shares of stock of any class, shall not affect,
and no adjustment by reason thereof shall be made with respect
to, the number or price of shares of Capital Stock subject to the
option.
The grant of an option pursuant to the Plan shall not affect
in any way the right or power of the Corporation to make
adjustments, reclassifications, reorganizations, or changes of
its capital or business structure, or to merge, consolidate,
dissolve, liquidate, sell, or transfer all or any part of its
business or assets.
(h) Rights as a Stockholder
-----------------------
An option recipient or a transferee of an option shall have
no rights as a stockholder with respect to any shares subject to
his option until a stock certificate is issued to him for such
shares. No adjustment shall be made for dividends (ordinary or
extraordinary, whether in cash, securities, or other property),
distributions, or other rights for which the record date is prior
to the date such stock certificate is issued, except as provided
in Article 5 (g) of the Plan.
(i) Modification, Extension, and Renewal of Options
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Subject to the terms of the Plan, the Committee may modify,
extend or renew outstanding options granted under the Plan, or
accept the surrender of outstanding options (to the extent not
theretofore exercised) and authorize the granting of new options
in substitution therefore (to the extent not theretofore
exercised). The Committee shall not, however, modify any
outstanding Incentive Options so as to specify a lower price, or
accept the surrender of outstanding Incentive Options and
authorize the granting of new options in substitution therefore
specifying a lower price. Notwithstanding the foregoing,
however, no modification of an option shall, without the consent
of the option recipient, alter or impair any rights or
obligations under any option theretofore granted under the Plan.
(j) Withholding
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Whenever the Corporation proposes or is required to issue or
transfer shares of Capital Stock under the Plan, the Corporation
shall have the right to require the option recipient, prior to
the issuance or delivery of any certificates for such shares, to
remit to the Corporation, or provide indemnification satisfactory
to the Corporation for, an amount sufficient to satisfy any
federal, state, local, and foreign withholding tax requirements
incurred as a result of an option exercise under the Plan by such
option recipient.
(k) Other Provisions
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The option agreements authorized under the Plan shall
contain such other provisions, including, without limitation,
restrictions upon the exercise of the option, as the Committee
shall deem advisable. Limitations and restrictions shall be
placed upon the exercise of Incentive Options, in the Incentive
Option agreement, so that such option will be an "incentive stock
option" as defined in Section 422 of the Internal Revenue Code of
1986.
6. TERM OF PLAN
Incentive Options and Non-Statutory Options may be granted
pursuant to the Plan from time to time within a period of ten
(10) years commencing on November 14, 1997 and continuing through
November 14, 2007.
7. INDEMNIFICATION OF COMMITTEE
In addition to such other rights of indemnification as they
may have as directors or as members of the Committee, the members
of the Committee shall be indemnified by the Corporation against
the reasonable expenses, including attorney's fees, actually and
necessarily incurred in connection with the defense of any
action, suit, or proceeding, or in connection with any appeal
therein, to which they or any of them may be a party by reason of
any action taken or failure to act under or in connection with
the Plan or any option granted thereunder, and against all
amounts paid by them in settlement thereof (provided such
settlement is approved by independent legal counsel selected by
the Corporation) or paid by them in satisfaction of a judgment in
any such action or suit, or proceeding, except in relation to
matters as to which it shall be adjudged in such action, suit, or
proceeding that such Committee member is liable for negligence or
misconduct in the performance of his duties; provided, that
within sixty (60) days after institution of any such action,
suit, or proceeding a Committee member shall in writing offer the
Corporation the opportunity, at its own expense, to handle and
defend the same.
8. AMENDMENT OF THE PLAN
The Board of Directors, insofar as permitted by law, shall
have the right from time to time with respect to any shares at
the time not subject to options, to suspend or discontinue the
Plan or revise or amend it in any respect whatsoever, except that
without approval of the shareholders of the Company, no such
revision or amendment shall: (a) change the number of shares for
which options may be granted under the Plan either in the
aggregate or to any individual employee, (b) change the
provisions relating to the determination of employees to whom
options shall be granted, (c) remove the administration of the
Plan from the Committee, or (d) decrease the price at which
Incentive Options may be granted.
9. APPLICATION OF FUNDS
The proceeds received by the Corporation from the sale of
Capital Stock pursuant to the exercise of options will be used
for general corporate purposes.
10. NO OBLIGATION TO EXERCISE OPTION
The granting of an option shall impose no obligation upon
the option recipient to exercise such option.
11. APPROVAL OF STOCKHOLDERS
This Plan shall take effect as of November 14, 1997, subject
to approval by the affirmative vote of the holders of a majority
of the outstanding shares of Capital Stock of the Corporation
present, or represented, and entitled to vote at a meeting of the
shareholders, which approval must occur within the period
beginning twelve (12) months before and ending twelve (12) months
after the date the Plan is adopted by the Board of Directors.