CYLINK CORPORATION
CYLINK/ARL 1997 STOCK OPTION PLAN
1. Establishment, Purpose, and Definitions.
a. There is hereby adopted the Cylink/ARL 1997 Stock Option Plan (the
"Plan") of Cylink Corporation (the "Company").
b. The purpose of the Plan is to provide a means whereby eligible
individuals (as defined in paragraph 4, below) can acquire shares of the
Company's Common Stock, $.01 par value per share (the "Stock"). The Plan
provides employees, independent contractors, and consultants of Algorithmic
Research Ltd., a company organized and existing under the laws of the State of
Israel ("ARL"), and of its subsidiaries, whether currently existing or which
become such after adoption of the Plan, but excluding any such person who is
also an executive officer of the Company or member of the Board of Directors of
the Company, an opportunity to purchase shares of Stock pursuant to options
which are not described in Section 422 or 423 of the Internal Revenue Code of
1986, as amended (the "Code") (referred to as "nonqualified stock options").
c. The term "Affiliates" as used in the Plan means parent and
subsidiary corporations of the Company, as defined in Sections 424(e) and (f) of
the Code (but substituting the "Company" for "employer corporation"), including
parents or subsidiaries which become such after adoption of the Plan.
2. Administration of the Plan.
a. The Plan shall be administered by the Board of Directors of the
Company (the "Board"). The Board may delegate the responsibility for
administering the Plan to a committee, under such terms and conditions as the
Board shall determine (the "Committee"). Members of the Committee shall serve at
the pleasure of the Board. The Committee shall select one of its members as
chairman, and shall hold meetings at such times and places as it may determine.
A majority of the Committee shall constitute a quorum and acts of the Committee
at which a quorum is present, or acts reduced to or approved in writing by all
the members of the Committee, shall be the valid acts of the Committee. If the
Board does not delegate administration of the Plan to the Committee, then each
reference in this Plan to "the Committee" shall be construed to refer to the
Board.
b. Subject to Section 1(b) above, the Committee shall determine which
eligible individuals (as defined in paragraph 4, below) shall be granted options
under the Plan, the timing of such grants, the terms thereof (including any
restrictions on the Stock), and the number of shares of Stock subject to such
options.
c. The Committee may amend the terms of any outstanding option granted
under this Plan, but any amendment which would adversely affect an optionee's
rights under an outstanding option shall not be made without the optionee's
written consent. The Committee may, with the
optionee's written consent, cancel any outstanding stock option or accept any
outstanding stock option in exchange for a new option.
d. The Committee shall have the sole authority, in its absolute
discretion, to adopt, amend and rescind such rules and regulations as, in its
opinion, may be advisable for the administration of the Plan, to construe and
interpret the Plan, the rules and the regulations and the instruments evidencing
options granted under the Plan and to make all other determinations deemed
necessary or advisable for the administration of the Plan. All decisions,
determinations, and interpretations of the Committee shall be binding on all
participants.
3. Stock Subject to the Plan.
a. An aggregate of 410,000 shares of Stock shall be available for the
grant of stock options and the issuance of Stock under the Plan. If an option is
surrendered (except surrender for shares of Stock) or for any other reason
ceases to be exercisable in whole or in part, the shares which were subject to
such option but as to which the option had not been exercised shall continue to
be available under the Plan. Any Stock which is retained by the Company upon
exercise of an option in order to satisfy the exercise price for such option or
any withholding taxes due with respect to such option exercise shall be treated
as issued to the optionee and will thereafter not be available under the Plan.
b. If there is any change in the Stock subject to either the Plan or an
option agreement pursuant to the Plan, through merger, consolidation,
reorganization, recapitalization, reincorporation, stock split, stock dividend,
or other change in the corporate structure of the Company, appropriate
adjustments shall be made by the Committee in order to preserve but not to
increase the benefits to the individual, including adjustments to the aggregate
number, kind of shares, and price per share subject to either the Plan or an
option agreement.
4. Eligible Individuals.
Individuals who shall be eligible to have granted to them the options
provided for by the Plan shall be such employees, independent contractors and
consultants of ARL and of its subsidiaries, but excluding executive officers and
directors of the Company, whether currently existing or which become such after
adoption of the Plan as the Committee, in its discretion, shall designate from
time to time. If an eligible individual is granted an option under this Plan,
and later is transferred to the Company or an Affiliate of the Company, such
individual shall continue to be eligible to participate under the Plan to the
extent of such previously granted options.
2.
5. The Option Price.
The purchase price of the Stock covered by each nonqualified stock
option shall be the price as established by the Board or the Committee, as
applicable. The exercise price of an option shall be subject to adjustment to
the extent provided in paragraph 3(b), above.
6. Terms and Conditions of Options.
a. Each option granted pursuant to the Plan will be evidenced by a
written stock option agreement executed by the Company and the person to whom
such option is granted.
b. The Committee shall determine the term of each option granted under
the Plan; provided, however, that the terms of all options granted under the
Plan shall not be for more than ten (10) years.
c. An optionee's stock option agreement may contain such other terms,
provisions and conditions consistent with this Plan as may be determined by the
Committee.
7. Use of Proceeds.
Cash proceeds realized from the issuance of Stock under the Plan shall
constitute general funds of the Company.
8. Amendment, Suspension, or Termination of the Plan.
a. The Board may at any time amend, suspend or terminate the Plan as it
deems advisable; provided that such amendment, suspension or termination
complies with all applicable requirements of state and federal law.
b. No option may be granted under the Plan during any suspension or
after the termination of the Plan, and no amendment, suspension or termination
of the Plan shall without the affected individual's consent, alter or impair any
rights or obligations under any option previously granted under the Plan.
9. Assignability.
Unless otherwise provided in a specific option agreement, each option
granted pursuant to this Plan shall, during an optionee's lifetime, be
exercisable only by such optionee, and neither the option nor any right
hereunder shall be transferable by such optionee by operation of law or
otherwise other than by will or the laws of descent and distribution.
3.
10. Payment Upon Exercise of Options.
Payment of the purchase price of Stock to be received upon exercise of
any option granted under this Plan shall be made in cash or in such other manner
as the Committee may approve.
4.
CYLINK CORPORATION
CYLINK/ARL 1997 NONQUALIFIED STOCK OPTION PLAN
NONQUALIFIED STOCK OPTION AGREEMENT
THIS NONQUALIFIED STOCK OPTION AGREEMENT ("Agreement") is made as of
September 8, 1997, between CYLINK CORPORATION, a California corporation (the
"Company"), and A ("Optionee").
WITNESSETH:
WHEREAS, the Company has adopted the Cylink/ARL 1997 Stock Option Plan
(the "Plan"), which Plan is incorporated in this Agreement by reference and made
a part hereof; and
WHEREAS, the Company regards Optionee as a valuable employee or
director of, or service provider to, Algorithmic Research Ltd., a company
organized and existing under the laws of the state of Israel ("ARL"), or one of
ARL's subsidiaries, and has determined that it would be to the advantage and in
the interests of the Company and its shareholders to grant the option provided
for in this Agreement to Optionee;
NOW, THEREFORE, in consideration of the mutual covenants hereinafter
set forth, the parties to this Agreement hereby agree as follows:
1. Option Grant.
The Company hereby grants to Optionee the right and option to purchase
from the Company on the terms and conditions hereinafter set forth, all or any
part of an aggregate of <<B>> shares of the Company's Common Stock, $0.01 par
value per share (the "Stock"). This option is not intended to satisfy the
requirements of Section 422 of the Internal Revenue Code of 1986, as amended
(the "Code"), and is not intended to qualify as an incentive stock option.
2. Option Price.
The per share purchase price of the Stock subject to this option shall
be U.S.$0.01. The term "Option Price" as used in this Agreement refers to the
per share purchase price of the Stock subject to this option.
3. Option Period.
This option shall be exercisable only during the Option Period (as
defined below), and during such Option Period, the exercisability of this option
shall be subject to the vesting provisions
of paragraph 4 hereof. The "Option Period" shall commence on September 8, 1997
and shall terminate on September 8, 2007 (the "Termination Date").
4. Vesting of Right to Exercise Options.
The Optionee shall have the right to exercise this option in accordance
with the following schedule:
Exercisable as of March 1, 1998: C
Exercisable as of September 1, 1998: D
Exercisable as of September 1, 1999: E
Any portion of this option that is not exercised shall accumulate and
may be exercised at any time during the Option Period prior to the Termination
Date. In no event shall the Company be required to issue fractional shares. In
lieu of any fractional share otherwise required to be issued upon exercise of
this option, the fraction of a share shall be rounded up to the nearest whole
share.
Notwithstanding anything to the contrary contained in this Agreement,
the entire unvested portion of this option shall become immediately exercisable
upon the first to occur of any of the following events: (a) the date of
commencement of a tender or exchange offer relating to at least 50% of the
outstanding shares of Stock; (b) the date on which a Change in Control of the
Company occurs; (c) the date on which a Change in Control of ARL occurs; (d) the
date of execution of any binding letter of intent, contract, agreement or
understanding contemplating or otherwise relating to an event of the type
referred to in clause "(b)" of this sentence; (e) the date of occurrence of any
material breach or default by the Company with respect to any of its obligations
under Article 5 of that certain Option Grant Agreement of even date herewith
between the Company and Optionee, which breach or default is not cured within
twenty (20) days after notice thereof is given to the Company; or (f) the date
on which Optionee shall die or become disabled.
For purposes of this Agreement, the following terms shall have the
following respective meanings:
A "Change in Control of the Company" shall be deemed to have
occurred if: (a) any person or entity (other than Pittway Corporation) or
"group" (within the meaning of Rule 13d-3 under the Securities Exchange Act of
1934, as amended (the "Exchange Act")) becomes the "beneficial owner" (within
the meaning of Rule 13d-3 under the Exchange Act) of at least 50% of the voting
securities of the Company; (b) a merger, consolidation or similar transaction
involving the Company or any affiliate of the Company is effected, and the
shareholders of the Company immediately prior to such transaction own less than
60% of the voting securities of the surviving corporation in such transaction;
(c) assets representing more than 50% of the aggregate net book value of the
Company's assets (exclusive of its wireless communications division) are sold or
otherwise transferred to any person (or persons) or entity (or entities) (in a
single transaction or a series of transactions); or (d) the individuals who, as
of the date of this Agreement, are members of
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the Board of Directors of the Company (the "Incumbent Board") cease for any
reason to constitute at least two-thirds of the Board of Directors of the
Company (provided, however, that if the election, or nomination for election by
the Company's shareholders, of any new director was approved by a vote of at
least two-thirds of the Incumbent Board, such new director shall, for purposes
of this Agreement, be considered as a member of the Incumbent Board).
A "Change in Control of ARL" shall be deemed to have occurred
if: (a) a person or entity (other than the Company) becomes the "beneficial
owner" (within the meaning of Rule 13d-3 under the Exchange Act) of at least 50%
of the voting securities of ARL (other than in connection with a Change in
Control of the Company); (b) ARL ceases to own more than 50% of the outstanding
shares of ARL; or (c) assets representing more than 50% of the aggregate net
book value of ARL's assets are sold or otherwise transferred to any person (or
persons) or entity (or entities) (in a single transaction or a series of
transactions).
5. Method of Exercise.
Optionee may exercise this option with respect to all or any part of
the shares of Stock then subject to such exercise by giving the Company written
notice of such exercise, specifying the number of such shares of Stock as to
which this option is exercised. Such notice shall be accompanied by an amount
equal to the Option Price of such shares, in the form of any one or combination
of the following: cash, a certified check, bank draft or postal or express money
order payable to the order of the Company in lawful money of the United States.
As soon as practicable after receipt of the notice required in this paragraph 5,
the Company shall, without transfer or issue tax and without other incidental
expense to Optionee, issue in the name of Optionee, and deliver to Optionee, a
certificate or certificates of such shares of Stock.
6. Corporate Transactions.
(a) If there should be any change in a class of stock subject to this
option, through merger, consolidation, reorganization, recapitalization,
reincorporation, stock split, stock dividend or other change in the corporate
structure of the Company, the Company shall make appropriate adjustments in
order to preserve, but not to increase, the benefits to Optionee, including
adjustments in the number of shares of such stock subject to this option and in
the per share purchase price thereof. Any adjustment made pursuant to this
paragraph 6 as a consequence of a change in the corporate structure of the
Company shall not entitle Optionee to acquire a number of shares of such stock
of the Company or shares of stock of any successor company greater than the
number of shares Optionee would receive if, prior to such change, Optionee had
actually held a number of shares of such stock equal to the number of shares
subject to this option.
(b) For purposes of this paragraph 6, a "Corporate Transaction" shall
include any of the following shareholder-approved transactions to which the
Company is a party:
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(i) a merger or consolidation in which the Company is not the
surviving entity, except for a transaction the principal purpose of which is to
change the state of the Company's incorporation;
(ii) the sale, transfer or other disposition of all or
substantially all of the assets of the Company in liquidation or dissolution of
the Company; or
(iii) any reverse merger in which the Company is the surviving
entity but in which securities possessing more than fifty percent (50%) of the
total combined voting power of the Company's outstanding securities are
transferred to a holder or holders different from those who held such securities
immediately prior to such merger.
In the event of any Corporate Transaction, this option shall be assumed
in full by the successor corporation or its parent company, or substitute
options shall be issued to Optionee, in either case having substantially
equivalent provisions as the option granted pursuant to this Agreement (except
that (i) following such Corporate Transaction, this option shall be exercisable
only for the securities or other property issued or paid in such Corporate
Transaction to holders of an equal number of shares of Stock as are then subject
to this option, and (ii) if such Corporate Transaction constitutes a "Change in
Control of the Company" (as defined above), this option shall become immediately
exercisable on the date on which such Corporate Transaction occurs).
7. Limitations on Transfer.
This option shall, during Optionee's lifetime, be exercisable only by
Optionee, and neither this option nor any right hereunder shall be transferable
by Optionee by operation of law or otherwise other than by will or the laws of
descent and distribution. In the event of any attempt by Optionee to alienate,
assign, pledge, hypothecate, or otherwise dispose of this option or of any right
hereunder, except as provided for in this Agreement, or in the event of the levy
of any attachment, execution, or similar process upon the rights or interest
hereby conferred, the Company at its election may terminate this option by
notice to Optionee and this option shall thereupon become null and void.
8. No Shareholder Rights.
Neither Optionee nor any person entitled to exercise Optionee's rights
in the event of his death shall have any of the rights of a shareholder with
respect to the shares of Stock subject to this option except to the extent such
shares shall have been issued upon the exercise of this option.
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9. No Effect On Terms Of Employment.
SUBJECT TO THE TERMS OF ANY WRITTEN EMPLOYMENT CONTRACT TO THE
CONTRARY, ANY MEMBER OF THE CYLINK/ARL GROUP WHICH EMPLOYS OPTIONEE SHALL HAVE
THE RIGHT TO TERMINATE OR CHANGE THE TERMS OF EMPLOYMENT OF OPTIONEE AT ANY TIME
AND FOR ANY REASON WHATSOEVER, WITH OR WITHOUT CAUSE.
10. Notice.
Any notice required to be given under the terms of this Agreement shall
be addressed to the Company in care of its Secretary at the Office of the
Company at 910 Hermosa Court, Sunnyvale, California 94086, USA, and any notice
to be given to Optionee shall be addressed to Optionee at the address given by
Optionee beneath Optionee's signature to this Agreement, or such other address
as either party to this Agreement may hereafter designate in writing to the
other. Any such notice shall be deemed to have been duly given (a) when
delivered in person, (b) three business days after delivery to an "overnight"
courier, or (c) 24 hours after delivery by facsimile transmission (if receipt of
such facsimile is evidenced by a transmission report or other reasonable
evidence of the successful and accurate transmission of such notice or
communication).
11. Committee Decisions Conclusive.
All decisions of the Board of Directors of the Company of a Committee
designated by it upon any question arising under the Plan or under this
Agreement shall be conclusive.
12. Successors.
This Agreement shall be binding upon and inure to the benefit of any
successor or successors of the Company. Where the context requires, "Optionee"
as used in this Agreement shall include Optionee's spouse, executor,
administrator or other legal representative or the person or persons to whom
Optionee's rights pass by will or the applicable laws of descent and
distribution.
13. Governing Law; Venue.
The interpretation, performance and enforcement of this Agreement shall
be governed by the laws of the State of California. Any dispute arising out of
or relating to this Agreement shall be resolved through binding arbitration
under the Rules of Conciliation and Arbitration of the International Chamber of
Commerce. The venue for such arbitration proceedings shall be in London,
England. The resolution of a dispute by the arbitrator shall be conclusive and
binding upon the parties hereto and judgment may be entered thereon in any court
having jurisdiction thereof. The arbitrator shall have the authority to make an
award of actual compensatory damages incurred by a party in connection with a
dispute, but shall have no right to grant special, punitive or
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exemplary damages or indirect or consequential damages or to grant any form of
equitable relief (except that the arbitrator may, as part of his award, require
the Company to perform its obligations under this Agreement).
IN WITNESS WHEREOF, the Company and Optionee have executed this
Agreement as of the day and year first above written.
THE COMPANY:
CYLINK CORPORATION
By ____________________________________________
Its ___________________________________________
OPTIONEE
_______________________________________________
A
Address:
_______________________________________________
_______________________________________________
_______________________________________________
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