Exhibit 10(a)(4)
1998 STOCK OPTION PLAN
OF
TII INDUSTRIES, INC.
(AS AMENDED OF DECEMBER 6, 2000)
1. PURPOSES OF THE PLAN. This stock option plan (the "Plan") is
designed to provide an incentive to employees (including directors and officers
who are employees) and directors of, and consultants to, TII INDUSTRIES, INC., a
Delaware corporation (the "Company"), or any Parent or Subsidiary (as such terms
are defined in Paragraph 19 hereof) of the Company, and to offer an additional
inducement in obtaining the services of such persons. The Plan provides for the
grant of "incentive stock options" ("ISOs") within the meaning of Section 422 of
the Internal Revenue Code of 1986, as amended (the "Code"), and nonqualified
stock options which do not qualify as ISOs ("NQSOs"). The Company makes no
representation or warranty, express or implied, as to the qualification of any
option as an "incentive stock option" under the Code.
2. STOCK SUBJECT TO THE PLAN. Subject to the provisions of Paragraph 12
hereof, the aggregate number of shares of Common Stock, $.01 par value per
share, of the Company ("Common Stock") for which options may be granted under
the Plan shall not exceed 2,500,000. Such shares of Common Stock may consist
either in whole or in part of authorized but unissued shares of Common Stock or
shares of Common Stock held in the treasury of the Company. Subject to the
provisions of Paragraph 13 hereof, any shares of Common Stock subject to an
option which for any reason expires, is canceled or is terminated unexercised or
which ceases for any reason to be exercisable, shall again become available for
the granting of options under the Plan. The Company shall at all times during
the term of the Plan reserve and keep available such number of shares of Common
Stock as will be sufficient to satisfy the requirements of the Plan.
3. ADMINISTRATION OF THE PLAN. The Plan shall be administered by the
Board of Directors or a committee (the "Committee") of the Board of Directors of
the Company (the "Board of Directors"), which Committee, to the extent required
by Rule 16b-3 promulgated under the Securities Exchange Act of 1934, as amended
(as the same may be in effect and interpreted from time to time, "Rule 16b-3"),
shall consist of not less than two (2) directors, each of whom shall be a
non-employee director within the meaning of Rule 16b-3. Unless otherwise
provided in the By-laws of the Company or by resolution of the Board of
Directors, a majority of the members of the Committee shall constitute a quorum,
and the acts of a majority of the members present at any meeting at which a
quorum is present, and any acts approved in writing by all of the members of the
Committee without a meeting, shall be the acts of the Committee. Those
administering the Plan are referred to herein as the "Administrators".
Subject to the express provisions of the Plan, the
Administrators shall have the authority, in their sole discretion, to determine:
the employees, consultants and directors who shall be granted options; whether
an option to be granted to a employee is to be in ISO or an NQSO (options to be
granted to consultants and directors who are not employees shall be NQSOs); the
times when an option shall be granted; the number of shares of Common Stock to
be subject to each option; the term of each option; the
date each option shall become exercisable; whether an option shall be
exercisable in whole, in part or in installments and, if in installments, the
number of shares of Common Stock to be subject to each installment, whether the
installments shall be cumulative, the date each installment shall become
exercisable and the term of each installment; whether to accelerate the date of
exercise of any option or installment; whether shares of Common Stock may be
issued upon the exercise of an option as partly paid and, if so, the dates when
future installments of the exercise price shall become due and the amounts of
such installments; the exercise price of each option; the form of payment of the
exercise price; whether to restrict the sale or other disposition of the shares
of Common Stock acquired upon the exercise of an option and, if so, whether and
under what conditions to waive any such restriction; whether and under what
conditions to subject all or a portion of the grant, the vesting or the exercise
of an option or the shares acquired pursuant to the exercise of an option to the
fulfillment of certain restrictions or contingencies as specified in the
contract referred to in Paragraph 11 hereof (the "Contract"), including, without
limitation, restrictions or contingencies relating to entering into a covenant
not to compete with the Company, any of its Subsidiaries or a Parent (as such
term is defined in Paragraph 19 hereof), to financial objectives for the
Company, any of its Subsidiaries or a Parent, a division of any of the
foregoing, a product line or other category, and/or to the period of continued
employment of the optionee with the Company, any of its Subsidiaries or a
Parent, and to determine whether such restrictions or contingencies have been
met; whether an optionee is Disabled (as such term is defined in Paragraph 19
hereof); the amount, if any, necessary to satisfy the obligation of the Company,
a Subsidiary or Parent to withhold taxes or other amounts; the fair market value
of a share of Common Stock; to construe the respective Contracts and the Plan;
with the consent of the optionee, to cancel or modify an option, provided that
the modified provision is permitted to be included in an option granted under
the Plan on the date of the modification, and provided, further, that in the
case of a modification (within the meaning of Section 424(h) of the Code) of an
ISO, such option as modified would be permitted to be granted on the date of
such modification under the terms of the Plan; to prescribe, amend and rescind
rules and regulations relating to the Plan; to approve any provision of the Plan
or any option granted under the Plan, or any amendment to either, which under
Rule 16b-3 requires the approval of the Board of Directors, a committee of
non-employee directors or the stockholders in order to be exempt (unless
otherwise specifically provided herein); and to make all other determinations
necessary or advisable for administering the Plan. Any controversy or claim
arising out of or relating to the Plan, any option granted under the Plan or any
Contract shall be determined unilaterally by the Administrators in their sole
discretion. The determinations of the Administrators on the matters referred to
in this Paragraph 3 shall be conclusive and binding on the parties thereto. No
Administrator or former Administrator shall be liable for any action, failure to
act or determination made in good faith with respect to the Plan or any option
hereunder.
4. ELIGIBILITY. The Administrators may from time to time, in their sole
discretion, consistent with the purposes of the Plan, grant options to (a)
employees (including officers and directors who are employees) of, (b) directors
(who are not employees) of, and (c) consultants to, the Company or any Parent or
Subsidiary of the Company. Such options granted shall cover such number of
shares of Common Stock as the Administrators may determine, in their sole
discretion, as set forth in the applicable Contract; provided, however, that the
maximum number of shares subject to options that may be granted to any employee
during any calendar year under the Plan (the "162(m) Maximum") shall be 250,000
shares; and provided, further, that the aggregate market value (determined at
the time the option is granted in accordance with Paragraph 5 hereof) of the
shares of Common Stock for which any eligible employee may be granted ISOs under
the Plan or any other plan of the Company, or of a Parent or a Subsidiary of the
Company, which are exercisable for the first time by such optionee during any
calendar year shall not exceed $100,000. Such ISO limitation shall be applied by
taking ISOs into account in the
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order in which they were granted. Any option granted in excess of such ISO
limitation amount shall be treated as a NQSO to the extent of such excess.
5. EXERCISE PRICE. The exercise price of the shares of Common Stock
under each option shall be determined by the Administrators, in their sole
discretion, as set forth in the applicable Contract; provided, however, that the
exercise price of an ISO shall not be less than the fair market value of the
Common Stock subject to such option on the date of grant; and provided, further,
that if, at the time an ISO is granted, the optionee owns (or is deemed to own
under Section 424(d) of the Code) stock possessing more than 10% of the total
combined voting power of all classes of stock of the Company, of any of its
Subsidiaries or of a Parent, the exercise price of such ISO shall not be less
than 110% of the fair market value of the Common Stock subject to such ISO on
the date of grant.
The fair market value of a share of Common Stock on any day shall be
(a) if actual sales price information is available with respect to the Common
Stock, the average of the highest and lowest sales prices per share of Common
Stock on such day, or (b) if such information is not available, the average of
the highest bid and lowest asked prices per share of Common Stock on such day as
reported by the market upon which the Common Stock is quoted, The Wall Street
Journal, the National Quotation Bureau Incorporated or an independent dealer in
the Common Stock, as determined by the Company; provided, however, that if
clauses (a) and (b) of this Paragraph are all inapplicable, or if no trades have
been made or no quotes are available for such day, the fair market value of the
Common Stock shall be determined by the Board of Directors by any method
consistent with applicable regulations adopted by the Treasury Department
relating to stock options.
6. TERM. The term of each option granted pursuant to the Plan shall be
such term as is established by the Administrators, in their sole discretion, as
set forth in the applicable Contract; provided, however, that the term of each
ISO granted pursuant to the Plan shall be for a period not exceeding ten (10)
years from the date of grant thereof; and provided, further, that if, at the
time an ISO is granted, the optionee owns (or is deemed to own under Section
424(d) of the Code) stock possessing more than 10% of the total combined voting
power of all classes of stock of the Company, any of its Subsidiaries or a
Parent, the term of the ISO shall be for a period not exceeding five (5) years
from the date of grant. Options shall be subject to earlier termination as
hereinafter provided.
7. EXERCISE. An option (or any part or installment thereof), to the
extent then exercisable, shall be exercised by giving written notice to the
Company at its principal office stating which option is being exercised,
specifying the number of shares of Common Stock as to which such option is being
exercised and accompanied by payment in full of the aggregate exercise price
therefor (or the amount due on exercise if the applicable Contract permits
installment payments) (a) in cash or by certified check or (b) if the applicable
Contract permits, with previously acquired shares of Common Stock having an
aggregate fair market value on the date of exercise (determined in accordance
with Paragraph 5 hereof) equal to the aggregate exercise price of all options
being exercised or a combination of cash, certified check or shares of Common
Stock having such value. The Company shall not be required to issue any shares
of Common Stock pursuant to any such option until all required payments,
including payments for any required withholding amounts, have been made.
The Administrators may, in their sole discretion (in the Contract or
otherwise), permit payment of the exercise price of an option by delivery by the
optionee of a properly executed notice, together with a copy of his irrevocable
instructions to a broker acceptable to the Administrators to deliver promptly to
the Company the amount of sale or loan proceeds sufficient to pay such exercise
price. In
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connection therewith, the Company may enter into agreements for coordinated
procedures with one or more brokerage firms.
A person entitled to receive Common Stock upon the exercise of an
option shall not have the rights of a stockholder with respect to such shares of
Common Stock until the date of issuance of a stock certificate for such shares
or, in the case of uncertificated shares, until the date an entry is made on the
books of the Company's transfer agent representing such shares; provided,
however, that until such stock certificate is issued or until such book entry is
made, any optionee using previously acquired shares of Common Stock in payment
of an option exercise price shall continue to have the rights of a stockholder
with respect to such previously acquired shares.
In no case may a fraction of a share of Common Stock be purchased or
issued under the Plan.
8. TERMINATION OF RELATIONSHIP. Except as may otherwise be expressly
provided in the applicable Contract, any optionee whose relationship with the
Company, its Subsidiaries and Parent as an employee, director or consultant has
terminated for any reason (other than as a result of the death or Disability (as
such term is defined in Paragraph 19 hereof) of the Optionee) may exercise such
option, to the extent exercisable on the date of such termination, at any time
within three months after the date of termination, but not thereafter and in no
event after the date the option would otherwise have expired; provided, however,
that if such relationship is terminated either (a) for Cause (as such term is
defined in Paragraph 19 hereof), or (b) without the consent of the Company, such
option shall terminate immediately.
For the purposes of the Plan, an employment relationship shall be
deemed to exist between an individual and the Company, any of its Subsidiaries
or a Parent if, at the time of the determination, the individual was an employee
of such corporation for purposes of Section 422(a) of the Code. As a result, an
individual on military, sick leave or other bona fide leave of absence shall
continue to be considered an employee for purposes of the Plan during such leave
if the period of the leave does not exceed 90 days or, if longer, so long as the
individual's right to reemployment with the Company, any of its Subsidiaries or
a Parent is guaranteed either by statute or by contract. If the period of leave
exceeds 90 days and the individual's right to reemployment is not guaranteed by
statute or by contract, the employment relationship shall be deemed to have
terminated on the 91st day of such leave.
Notwithstanding the foregoing, except as may otherwise be expressly
provided in the applicable Contract, options granted under the Plan shall not be
affected by any change in the status of the optionee so long as the optionee
continues to be an employee or director of, or a consultant to, the Company, any
of its Subsidiaries or a Parent (regardless of having changed from one position
to another or having been transferred from one entity to another).
Nothing in the Plan or in any option granted under the Plan shall
confer on any optionee any right to continue in the employ of, as a director of,
or as a consultant to, the Company, any of its Subsidiaries or a Parent, or
interfere in any way with any right of the Company, any of its Subsidiaries or a
Parent to terminate the optionee's relationship at any time for any reason
whatsoever without liability to the Company, any of its Subsidiaries or a
Parent.
9. DEATH OR DISABILITY OF AN OPTIONEE. Except as may otherwise be
expressly provided in the applicable Contract, if an individual optionee dies
(a) while he is an employee or director of, or a consultant to, the Company, any
of its Subsidiaries or a Parent, (b) within three months
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after the termination of such relationship (unless such termination was for
Cause or without the consent of the Company or such Subsidiary or Parent) or (c)
within one year following the termination of such relationship by reason of
Disability, the optionee's option may be exercised, to the extent exercisable on
the date of the optionee's death, by the optionee's Legal Representative (as
defined in Paragraph 19) at any time within one year after death, but not
thereafter and in no event after the date the option would otherwise have
expired.
Except as may otherwise be expressly provided in the applicable
Contract, any optionee whose relationship as an employee or director of, or a
consultant to, the Company, any of its Subsidiaries or a Parent has terminated
by reason of Disability (without continuing in another such capacity) may
exercise the optionee's option, to the extent exercisable upon the effective
date of such termination, at any time within one year after such date, but not
thereafter and in no event after the date the option would otherwise have
expired.
10. COMPLIANCE WITH SECURITIES LAWS. It is a condition to the exercise
of any option that either (a) a Registration Statement under the Securities Act
of 1933, as amended (the "Securities Act"), with respect to the shares of Common
Stock to be issued upon such exercise shall be effective and current at the time
of exercise or (b) there is an exemption from registration under the Securities
Act for the issuance of the shares of Common Stock upon such exercise. Nothing
herein shall be construed as requiring the Company to register shares subject to
any option under the Securities Act or to keep any Registration Statement
effective or current.
The Administrators may require, in their sole discretion, as a
condition to the receipt of an option or the exercise of any option that the
optionee execute and deliver to the Company such representations and warranties,
in form, substance and scope satisfactory to the Administrators, as the
Administrators determine are necessary or appropriate to facilitate the
perfection of an exemption from the registration requirements of the Securities
Act, applicable state securities laws or other legal requirement, including,
without limitation, that (a) the shares of Common Stock to be issued upon the
exercise of the option are being acquired by the optionee for the optionee's own
account, for investment only and not with a view to the resale or distribution
thereof, and (b) any subsequent resale or distribution of shares of Common Stock
by such optionee will be made only pursuant to (i) a Registration Statement
under the Securities Act which is effective and current with respect to the
shares of Common Stock being sold, or (ii) a specific exemption from the
registration requirements of the Securities Act, but in claiming such exemption,
the optionee shall, prior to any offer of sale or sale of such shares of Common
Stock, provide the Company with a favorable written opinion of counsel
satisfactory to the Company, in form, substance and scope satisfactory to the
Company, as to the applicability of such exemption to the proposed sale or
distribution.
In addition, if at any time the Administrators shall determine, in
their sole discretion, that the listing or qualification of the shares of Common
Stock subject to any option on any securities exchange, Nasdaq or under any
applicable law, or the consent or approval of any governmental agency or
self-regulatory body, is necessary or desirable as a condition to, or in
connection with, the granting of an option or the issuing of shares of Common
Stock upon the exercise thereof, such option may not be granted and such option
may not be exercised in whole or in part unless such listing, qualification,
consent or approval shall have been effected or obtained free of any conditions
not acceptable to the Administrators.
11. CONTRACTS. Each option shall be evidenced by an appropriate
Contract which shall be duly executed by the Company and the optionee, which
Contract shall contain such terms,
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provisions and conditions not inconsistent herewith as may be determined by the
Administrators. The terms of each option and Contract need not be identical.
12. ADJUSTMENTS UPON CHANGES IN COMMON STOCK. Notwithstanding any other
provision of the Plan, in the event of a stock dividend, stock split,
combination, reclassification, recapitalization, merger in which the Company is
the surviving corporation, spin-off, split-up or exchange of shares or the like
which results in a change in the number or kind of shares of Common Stock which
is outstanding immediately prior to such event, the aggregate number and kind of
shares subject to the Plan, the aggregate number and kind of shares subject to
each outstanding option and the exercise price thereof, and the 162(m) Maximum
shall be appropriately adjusted by the Board of Directors, whose determination
shall be conclusive and binding on all parties thereto. Such adjustment may
provide for the elimination of fractional shares which might otherwise be
subject to options without payment therefor.
In the event of (a) the liquidation or dissolution of the Company, or
(b) a transaction (or series of related transactions) that is approved by a
majority of the members of the Company's Board of Directors who were elected by
stockholders prior to the first of such transactions (including, without
limitation, a merger, consolidation, sale of stock by the Company or its
stockholders, tender offer or sale of assets) and in which either (i) the voting
power (in the election of directors generally) of the Company's voting
securities outstanding immediately prior to such transaction(s) cease to
represent at least 50% of the combined voting power (in the election of
directors generally) of the Company or such surviving entity outstanding
immediately after such transaction(s) or (ii) the registration of the Common
Stock under the Securities Exchange Act of 1934 is terminated, then all
outstanding options shall terminate upon the earliest of any such event, unless
other provision is made therefor in the transaction.
13. AMENDMENTS AND TERMINATION OF THE PLAN. The Plan was adopted by the
Board of Directors on October 8, 1998. No ISO may be granted under the Plan
after October 7, 2007. The Board of Directors, without further approval of the
Company's stockholders, may at any time suspend or terminate the Plan, in whole
or in part, or amend it from time to time in such respects as it may deem
advisable, including, without limitation, in order that ISOs granted hereunder
meet the requirements for "incentive stock options" under the Code, or to comply
with the provisions of Rule 16b-3, Section 162(m) of the Code or any change in
applicable law, regulations, rulings or interpretations of administrative
agencies; provided, however, that no amendment shall be effective without the
requisite prior or subsequent stockholder approval which would (a) except as
contemplated in Paragraph 12 hereof, increase the maximum number of shares of
Common Stock for which options may be granted under the Plan or the 162(m)
Maximum, (b) change the eligibility requirements to receive options hereunder or
(c) make any change for which applicable law requires stockholder approval. No
termination, suspension or amendment of the Plan shall, without the consent of
the optionee, adversely affect the optionee's rights under any option granted
under the Plan. The power of the Administrators to construe and administer any
option granted under the Plan prior to the termination or suspension of the Plan
nevertheless shall continue after such termination or during such suspension.
14. NON-TRANSFERABILITY. No option granted under the Plan shall be
transferable otherwise than by will or the laws of descent and distribution, and
options may be exercised, during the lifetime of the optionee, only by the
optionee or his Legal Representatives. Except to the extent provided in the
immediately preceding sentence, options may not be assigned, transferred,
pledged, hypothecated or disposed of in any way (whether by operation of law or
otherwise) and shall not be subject to execution, attachment or similar process,
and any such attempted assignment, transfer, pledge, hypothecation or
disposition shall be null and void ab initio and of no force or effect.
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15. WITHHOLDING TAXES. The Company, a Subsidiary or Parent may withhold
(a) cash or (b) with the consent of the Administrators (in the Contract or
otherwise), shares of Common Stock to be issued upon exercise of an option
having an aggregate fair market value on the relevant date (determined in
accordance with Paragraph 5 hereof) or a combination of cash and shares, in an
amount equal to the amount which the Administrators determine is necessary to
satisfy the obligation of the Company, a Subsidiary or Parent to withhold
Federal, state and local income taxes or other amounts incurred by reason of the
grant, vesting, exercise or disposition of an option, or the disposition of the
underlying shares of Common Stock. Alternatively, the Company, a Subsidiary or
Parent may require the holder to pay to it such amount, in cash, promptly upon
demand.
16. LEGENDS; PAYMENT OF EXPENSES. The Company may endorse such legend
or legends upon the certificates for shares of Common Stock issued upon exercise
of an option under the Plan and may issue such "stop transfer" instructions to
its transfer agent in respect of such shares as it determines, in its
discretion, to be necessary or appropriate to (a) prevent a violation of, or to
perfect an exemption from, the registration requirements of the Securities Act
and any applicable state securities laws, (b) implement the provisions of the
Plan or any agreement between the Company and the optionee with respect to such
shares of Common Stock or (c) permit the Company to determine the occurrence of
a "disqualifying disposition," as described in Section 421(b) of the Code, of
the shares of Common Stock issued or transferred upon the exercise of an ISO
granted under the Plan.
The Company shall pay all issuance taxes with respect to the issuance
of shares of Common Stock upon the exercise of an option granted under the Plan,
as well as all fees and expenses incurred by the Company in connection with such
issuance.
17. USE OF PROCEEDS. The cash proceeds received upon the exercise of an
option under the Plan shall be added to the general funds of the Company and
used for such corporate purposes as the Board of Directors may determine, in its
discretion.
18. SUBSTITUTIONS AND ASSUMPTIONS OF OPTIONS OF CERTAIN CONSTITUENT
CORPORATIONS. Anything in this Plan to the contrary notwithstanding, the Board
of Directors may, without further approval by the Company's stockholders,
substitute new options for prior options of a Constituent Corporation (as such
term is defined in Paragraph 19 thereof) or assume the prior options of such
Constituent Corporation.
19. DEFINITIONS. For purposes of the Plan, the following terms shall be
defined as set forth below:
(a) "Cause" shall mean (i) in the case of an employee or consultant, if
there is a written employment or consulting agreement between the optionee and
the Company, any of its Subsidiaries or a Parent which defines termination of
such relationship for cause, cause as defined in such agreement, and (ii) in all
other cases, cause within the meaning of applicable state law.
(b) "Constituent Corporation" shall mean any corporation which engages
with the Company, any of its Subsidiaries or a Parent in a transaction to which
Section 424(a) of the Code applies (or would apply if the option assumed or
substituted were an ISO), or any Parent or any Subsidiary of such corporation.
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(c) "Disability" shall mean a permanent and total disability within the
meaning of Section 22(e)(3) of the Code.
(d) "Legal Representative" shall mean the executor, administrator or
other person who at the time is entitled by law to exercise the rights of a
deceased or incapacitated optionee with respect to an option granted under the
Plan.
(e) "Parent" shall have the same definition as "parent corporation" in
Section 424(e) of the Code.
(f) "Subsidiary" shall have the same definition as "subsidiary
corporation" in Section 424(f) of the Code.
20. GOVERNING LAW; CONSTRUCTION. The Plan, the options and Contracts
hereunder and all related matters shall be governed by, and construed in
accordance with, the laws of the State of Delaware, without regard to conflict
of law provisions.
Neither the Plan nor any Contract shall be construed or interpreted
with any presumption against the Company by reason of the Company causing the
Plan or Contract to be drafted. Whenever from the context it appears
appropriate, any term stated in either the singular or plural shall include the
singular and plural, and any term stated in the masculine, feminine or neuter
gender shall include the masculine, feminine and neuter.
21. PARTIAL INVALIDITY. The invalidity, illegality or unenforceability
of any provision in the Plan, any option or Contract shall not affect the
validity, legality or enforceability of any other provision, all of which shall
be valid, legal and enforceable to the fullest extent permitted by applicable
law.
22. STOCKHOLDER APPROVAL. The Plan shall be subject to approval by a
majority of the votes present in person or by proxy and entitled to vote thereon
at the next duly held meeting of the Company's stockholders at which a quorum is
present. No options granted hereunder may be exercised prior to such approval;
provided, however, that the date of grant of any option shall be determined as
if the Plan had not been subject to such approval. The amendment to the Plan
authorized by the Board on September 5, 2000 shall be effective on the date of
the Company's 2000 Annual Meeting of Stockholders provided it is approved by
stockholders at such meeting. If the amendment is not approved, the Plan as it
exists prior to such amendment shall continue in full force and effect.
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