TII INDUSTRIES, INC.
1983 Employee Incentive Stock Option Plan
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(as amended effective August 15, 1996)
1. Purpose. The TII Industries, Inc. 1983 Employee
Incentive Stock Option Plan (the "Plan") is intended to provide a method whereby
employees (including officers and directors) of TII Industries, Inc. (the
"Company") and its subsidiaries who are making and are expected to continue
making substantial contributions to the successful management and growth of the
Company and its subsidiaries may be offered an opportunity to acquire common
stock, $.01 par value per share ("Common Stock"), of the Company in order to
increase their proprietary interests in the Company and their incentive to
remain in and advance in the employ of the Company and its subsidiaries.
Accordingly, the Company may, from time to time, grant to such employees as may
be selected in the manner hereinafter provided incentive stock options, as
defined in Section 422 of the Internal Revenue Code of 1986, as amended, or any
corresponding provisions of any succeeding law ("Code"), to purchase Common
Stock of the Company ("Incentive Stock Options" or "Options") on the terms and
conditions hereinafter set forth.
2. Administration. The Plan shall be administered by the
Board of Directors of the Company (the "Board of Directors") which, to the
extent it shall determine, may delegate its powers with respect to the
administration of the Plan to a committee (the "Committee") appointed by the
Board of Directors, the Committee to consist of two or more members of the Board
of Directors, each of whom is a "non-employee director" within the meaning of
Rule 16b-3 of the rules and regulations (as amended, "Rule 16b-3") promulgated
by the Securities and Exchange Commission under the Securities Exchange Act of
1934 (the "Exchange Act"). References in the Plan to determinations or actions
by the Committee shall be deemed to include determinations and actions by the
Board of Directors. Subject to the terms and conditions of the Plan, the
Committee shall have exclusive authority to select the employees to whom Options
shall be granted, to determine the number of shares of Common Stock to be
covered by each Option, the time at which each option shall be granted, the
Option Exercise Price (as hereinafter defined), the term during which options
may be exercised and the form of option agreement under the Plan ("Option
Agreement").
The Board of Directors may at any time appoint or remove members of
the Committee and may fill vacancies however caused in the Committee. The
Committee shall select one of its members as its Chairman and shall hold its
meetings at such time and place and in such manner as it shall deem advisable.
All actions of the Committee shall be taken by a majority of its members and can
be taken by unanimous written consent in lieu of a meeting. The Committee shall
keep records of its meetings and shall make such rules and regulations for the
conduct of its business as it shall deem advisable.
3. Interpretation and Amendment. The interpretation and
construction of any terms or conditions of the Plan, or of any Option Agreement
or other matters related to the Plan, by the Committee shall be final and
conclusive. No member of the Board of Directors or the Committee shall be liable
for any action or determination made in good faith with respect to the Plan.
The Board of Directors may at any time terminate or from time to
time modify or suspend the Plan; provided, however, that no such action shall
impair any Incentive Stock Options theretofore granted; and provided further,
that without the affirmative vote of the holders of at least a majority of the
voting stock of the Company present, or represented, and entitled to vote at a
duly held meeting: (a) the total number of shares of Common Stock which may be
issued under the Plan (except as permitted by Section 9) or the aggregate fair
market value of shares of Common stock which may be issued under the Plan to any
one employee shall not be increased; (b) the Option Exercise Price shall not be
decreased (except as permitted by Section 9) ; (c) the term of the Plan or any
Incentive Stock Option shall not be extended; (d) requirements as to eligibility
for participation in the Plan shall not be modified; and (e) the benefits
accruing to participants under the Plan shall not be materially increased.
4. Participants. Incentive Stock Options shall be granted
to employees of the Company or its subsidiaries who are selected by the
Committee from time to time. The term "employees" shall include officers and
directors who are employees of the Company or its subsidiaries. The term
"parent" or a "subsidiary' shall mean "parent corporation" or a "subsidiary
corporation" as defined in Section 424 of the Code. No Incentive Stock Option
shall be granted to an employee who, at the time the Incentive Stock Option
would otherwise be granted, owns (or is deemed to own under Section 424(d) of
the Code) capital stock possessing more than ten percent (10%) of the total
combined voting power of all classes of capital stock of the Company, or any
parent or any subsidiary of the Company; provided, however, that an Incentive
Stock Option may be granted to such an employee if the Option Exercise Price per
share of Common Stock to be acquired by the exercise of such Option is at least
one hundred and ten percent (110%) of the fair market value per share of Common
Stock at the time such Option is granted, and such Option is not exercisable
after the expiration of five (5) years from the date such Option is granted.
Receipt of stock options under any other stock option plan
maintained by the Company or any subsidiary shall not, for that reason, preclude
an employee from receiving Incentive Stock Options under the Plan.
5. Shares of Common Stock Subject to the Plan. Subject to
Section 9, no more than an aggregate of six hundred twenty thousand (620,000)
shares of Common Stock may be issued and sold pursuant to the Plan. The shares
of Common Stock issued and sold under the Plan will be the Company's authorized
but unissued shares of Common Stock.
Should any Incentive Stock Option expire or terminate for any reason
without having been exercised in full, the unsold shares of Common Stock covered
thereby shall be added to the shares of Common Stock otherwise available for
option hereunder.
The aggregate fair market value (determined at the time an Incentive
Stock Option is granted) of the shares of Common Stock for which any employee
may be granted Incentive Stock Options in any calendar year or part thereof
through January 8, 1992 may not exceed $100,000 plus
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any available carryover for such year. The term "available carryover" shall mean
the "unused limit carryover" permitted by Section 422A(c)(4) of the Code (as
such section existed prior to its repeal). In the case of Incentive Stock
Options granted to any employee after December 31, 1986, the aggregate fair
market value (determined at the time an Incentive Stock Option is granted) of
the shares of Common Stock with respect to which Incentive Stock Options are
exercisable for the first time by such employee during any calendar year shall
not exceed $100,000.
6. Terms and Conditions of Options. Incentive Stock options
shall be in such form and on such terms and conditions as the Committee shall
from time to time approve, subject to the following terms and conditions (in
addition to those specifically required by other provisions in this Plan):
(a) An Incentive Stock option shall state the number of
shares of Common Stock to which it relates and no fractional shares
of Common Stock shall be issued.
(b) The option price per share of Common Stock issuable
upon the exercise of an Incentive Stock Option ("Option Exercise
Price") shall not be less than one hundred percent (100%) of the
fair market value per share of Common Stock on the date of grant of
such Option.
(c) The term of an incentive Stock option shall not be
more than ten (10) years from the date such Option is granted.
(d) An Incentive Stock Option granted prior to January
9, 1992 may not be exercised while there is outstanding (within the
meaning of Section 422A(c)(7) of the Code, as such section existed
prior to its repeal) any incentive stock option which was granted
before the granting of such Incentive Stock Option to the employee
to purchase any capital stock in the Company or in any corporation
which, at the time of granting of such Incentive Stock Option, is a
parent or a subsidiary corporation the Company or any predecessor
corporation of any such corporation.
7. Termination of Employment. In the event that the holder
of an Option granted pursuant to the Plan shall cease to be employed by the
Company or by a subsidiary of the Company for any reason other than disability
(within the meaning of Section 22(e)(3) of the Code), retirement with the
consent of the Company or death, any Incentive Stock Options granted to such
person pur suant to the Plan shall terminate on the date of termination of
employment or on a date not more than three (3) months after the date of
termination of employment (as determined by the Committee in its sole
discretion) , but in no event may an Incentive Stock Option be exercised after
the date on which such Option would have expired and, during such period as the
Incentive Stock option may be exercised, such Option may only be exercised to
the extent exercisable at the date of termination of employment. If the holder
of an Incentive Stock option ceases to be employed by reason of such disability
or retires with the consent of the Company, such Option shall terminate one (1)
year after the date of disability and not later than three (3) months after the
date of retirement (as determined
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by the Committee), but in no event may an Incentive Stock Option be exercised
after the date on which such Option would have (except for termination of
employment) expired and, during such period as the Incentive Stock Option may be
exercised, such Option may only be exercised to the extent exercisable at the
date of termination of employment.
Solely for purposes of the Plan, the transfer of an employee from
the employ of the Company to the employ of a subsidiary of the Company, or
vice-versa, or from one subsidiary of the Company to another shall not be deemed
a termination of employment.
8. Death. If an employee shall die while employed by the
Company or by any subsidiary of the Company or during the periods referred to in
Section 7 during which an Option may be exercised, then his estate, personal
representative or beneficiary shall have the right, for a period of one (1) year
(or within such shorter period as may be specified by the Committee in the
Option Agreement) after the employee dies, to exercise those Incentive Stock
Options granted to the employee which were exercisable by him at the time of his
death, but in no event may an Incentive Stock Option be exercised after the date
on which such Option would have (except for termination of employment) expired.
9. Stock Splits, Mergers, etc. In case of any stock split,
stock dividend or similar transaction which increases or decreases the number of
outstanding shares of Common Stock, appropriate adjustment shall be made by the
Board of Directors, whose determination shall be final, to the number of shares
of Common Stock which may be purchased under the Plan and the number and Option
Exercise Price of the shares of Common Stock which may be purchased under any
outstanding Incentive Stock Options. In the case of a merger, sale of assets or
similar transaction which results in a replacement of the shares of Common Stock
with stock of another corporation, the Company will make a reasonable effort,
but shall not be required, to replace any outstanding Incentive Stock Options
with comparable options to purchase the stock of such other corporation, or will
provide for immediate exercisability of all outstanding Incentive Stock Options,
with all Incentive Stock Options which are not exercised within the time period
specified by the Board of Directors being terminated.
10. Transferability. Incentive Stock Options shall not be
assignable or transferable except by will or the laws of descent and
distribution and, during an employee's lifetime, may be exercised only by him.
11. Option Agreements. Option Agreements granting Incentive
Stock Options under the Plan shall be in writing, duly executed and delivered by
or on behalf of the Company and the employee and shall contain such terms and
conditions as the Committee deems advisable. If there is any conflict between
the terms and conditions of any Option Agreement and of the Plan, the terms and
conditions of the Plan shall control.
12. Exercise of Options. An employee electing to exercise an
Incentive Stock Option shall give written notice to the Company of such election
and of the number of shares of
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Common Stock which he has elected to acquire. An employee shall have no rights
of a shareholder with respect to the shares of Common Stock to be acquired by
the exercise of an Incentive Stock Option until the issuance to him of a
certificate representing such Common Stock; provided, however, that until such
certificates are issued, any employee using existing shares of Common Stock in
payment of an Option Exercise Price (pursuant to Section 13) shall continue to
have the rights of a stockholder with respect to such existing shares of Common
Stock.
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 such shares shall be effective at the time of
exercise or (b) there is an exemption from registration under the Securities Act
for the issuance of shares of Common Stock upon such exercise. Nothing herein
shall be construed as requiring the Company to register, or perfect an exception
from registration of, the shares subject to any Option under the Securities Act.
Each Option shall be subject to the further requirement that, if at any time the
Committee shall determine, in its discretion, that the listing or qualification
of the shares subject to such Option on any securities exchange or under
applicable law, or the consent or approval of any governmental regulatory body,
is necessary or desirable as a con dition of, or in connection with, the
granting of such Option, or the issue of shares thereunder, 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 Committee.
13. Payment. The Option Exercise Price shall be payable upon
the exercise of an Incentive Stock Option and shall be paid in cash, by
certified check or in shares of Common Stock, in the discretion of the
Committee. If shares of Common Stock are tendered as payment of the Option
Price, the value of such shares of Common Stock shall be their fair market value
as of the date of exercise.
14. Continuance of Employment. Neither the Plan nor any
Option Agreement shall impose any obligation on the Company or any subsidiary to
continue to employ any employee.
15. Term of Plan. No Incentive Stock Option shall be granted
pursuant to the Plan after May 8, 1993.
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