EXHIBIT 10.4
ELGAR HOLDINGS, INC.
1998 Stock Option Plan
Amended and Restated
as of
March 24, 1999
1. PURPOSE. This Stock Option Plan (the "Plan") is intended as an incentive
to encourage stock ownership by officers and directors and executive and
professional employees of Elgar Holdings, Inc. (the "Company") and its Parent
and Subsidiary corporations so that they may acquire or increase their
equity interest in the success of the Company and its Parents and
Subsidiaries, and to encourage them to remain in the service of the Company
or of its Parents or Subsidiaries. Each option granted under this Plan will
be designated as either an "Incentive Stock Option" or a "Nonqualified Stock
Option." It is intended that each option designated as an Incentive Stock
Option granted under this Plan will qualify as an incentive stock option
within the meaning of Section 422(b) of the Code.
2. DEFINITIONS
2.1 "Board of Directors" means the board of directors of the Company.
2.2 "Change in Control" shall mean the happening of any of the following:
2.2.1 any person who is not a stockholder of the Company or of any
Parent on the date of adoption of this Plan (or group of such persons acting
in concert) acquires, during any period of twelve consecutive calendar
months, stock of the Company or of a Parent representing a majority of the
voting power of all stock of the Company or any Parent having the right to
vote for the election of directors;
2.2.2 the stockholders of the Company approve a merger or consolidation
of the Company with any other corporation, other than (i) a merger or
consolidation which would result in the voting securities of the Company
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity) more than eighty percent (80%) of the combined voting power
of the voting securities of the Company or such surviving entity outstanding
immediately after such merger or consolidation or (ii) a merger or
consolidation effected to implement a Recapitalization of the Company;
2.2.3 the stockholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or disposition by the
Company of all or substantially all of the Company's assets or any
transaction having a similar effect; or
2.2.4 if the Company enters into an agreement with an unrelated party
for the sale of all or substantially all of the assets or outstanding stock
of a Subsidiary (or a transaction having a similar effect), or any other
event occurs by reason of which a Subsidiary ceases to be a Subsidiary of
the Company, a Change in Control shall be deemed to have occurred with
respect to those Employees who are then employed by such Subsidiary.
2.3 "Change in Control Date" shall mean the earliest date on which one
of the events described in the definition of "Change in Control" occurs, as
determined by the Board of Directors, in its sole discretion, provided that,
if Section 2.2.4 of the definition of "Change of Control" applies, the Change
in Control Date shall be deemed to be the date of the agreement, provided
that the transaction does close.
2.4 "Change in Control Price" shall mean the highest fair market
value, or the highest price paid or offered in any bona fide transaction
related to a Change in Control of the Company, at any time during the sixty
(60) days preceding the Change in Control Date.
2.5 "Code" means the Internal Revenue Code of 1986, as amended.
2.6 "Company" means Elgar Holdings, Inc., a Delaware corporation.
2.7 "Employee" means any bona fide full or part time common law
employee of the Company or of any Parent or Subsidiary of the Company.
2.8 "Incentive Stock Option" means an Option granted pursuant to this
Plan intended to qualify and designated as an incentive stock option within
the meaning of Section 422 of the Code.
2.9 "Nonqualified Stock Option" means any Option granted pursuant to
this Plan other than an Incentive Stock Option.
2.10 "Option" or "Stock Option" means any stock option granted pursuant
to this Plan.
2.11 "Optionee" means any individual to whom an Option is granted
pursuant to this Plan.
2.12 "Parent" means, at the time of granting any Option, any
corporation (other than the Company) in an unbroken chain of corporations
ending with the Company if each of the corporations other than the Company
owns stock possessing fifty percent (50%) or more of the total combined
voting power of all classes of stock in one of the other corporations in such
chain.
2.13 "Plan" means the Elgar Holdings, Inc. 1998 Stock Option Plan.
2.14 "Recapitalization" means any reorganization, merger or other
subdivision, consolidation, recapitalization, reclassification, stock split,
combination of shares, issuance of warrants, stock dividend or similar event
with respect to or affecting the common stock of the Company, par value one
cent ($.01) per share.
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2.15 "Stock Option Committee" means the committee appointed to
administer the Plan pursuant to Article 7 herein, if such committee is
appointed.
2.16 "Subsidiary" means, at the time of granting any Option, any
corporation (other than the Company) in an unbroken chain of corporations
beginning with the Company if each of the corporations other than the last
corporation in the unbroken chain owns stock possessing fifty percent (50%)
or more of the total combined voting power of all classes of stock in one of
the other corporations in such chain.
2.17 "Ten Percent Shareholder" means any person who owns (or is
considered by reason of Section 425(d) of the Code to own) stock possessing
more than ten percent (10%) of the total combined voting power of all classes
of stock of the Company or of any Parent or Subsidiary of the Company.
3. ELIGIBILITY. The persons who shall be eligible to receive Options shall
be such officers, directors and executive and professional employees of the
Company or its Parent or Subsidiary corporations as the Board of Directors
shall select from time to time. An Optionee may hold more than one Option,
but only on the terms and subject to the restrictions hereafter set forth.
4. STOCK. The stock subject to the Options shall be shares of the Company's
authorized but unissued or reacquired common stock, par value one cent ($.01)
per share, hereafter sometimes called Stock. The aggregate number of shares
which may be issued under Options shall not exceed four hundred eighty nine
thousand seven hundred and sixty three (489,763) shares of Stock. The
limitation established by the preceding sentence shall be subject to
adjustment as provided in Section 5.12 of the Plan. If any outstanding
Option for any reason expires or is terminated, the shares of Stock allocable
to the unexercised portion of such Option may again be subjected to an Option
under the Plan.
5. TERMS AND CONDITIONS
5.1 Option Agreement. Stock Options granted pursuant to the Plan shall
be authorized by the Board of Directors and shall be evidenced by agreements
in such form as the Board of Directors shall from time to time approve, which
agreements shall comply with and be subject to the terms and conditions set
forth in this Article 5. The agreements shall not impose upon the Company or
its Parents or Subsidiaries any obligation to retain the Optionee in their
employ for any period.
5.2 Number of Shares. Each Option shall state the number of shares of
Stock to which it pertains.
5.3 Option Price. Each Option shall state the option price, which in
the case of an Incentive Stock Option shall be not less than (i) one hundred
percent (100%) of the fair market value of the shares of Stock on the date of
the granting of the Option if the Optionee is not a Ten Percent Shareholder,
or (ii) one hundred ten percent (110%) of the fair market value of the shares
of Stock on the date of the granting of the Option if the Optionee is a Ten
Percent Shareholder. The fair market value of the shares of Stock shall be
determined pursuant to Section 7.2.
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5.4 Medium and Time of Payment. The option price shall be payable upon
the exercise of the Option and may be paid in cash or by good check. At the
sole option of the Company, if approved by the Board of Directors, a portion
of the purchase price may be paid by delivery of shares of Stock previously
owned by the Optionee, duly endorsed for transfer to the Company, with a fair
market value (as determined by the Board of Directors) on the date of
delivery equal to the option price, or by delivery of a recourse promissory
note bearing interest at such rate, on such other terms and in form and with
security satisfactory to the Company, or any combination of the foregoing
approved by the Board of Directors. Exercise of an Option shall not be
effective until the Company has received written notice of exercise,
specifying the number of whole and fractional shares of Stock to be
purchased, accompanied by payment in full of the aggregate option price of
the number of shares purchased.
5.5 Term of Options. Each Option, by its terms, shall not be
exercisable after the expiration of ten years from the date the Option is
granted, provided, however, that any Incentive Stock Option granted to a Ten
Percent Shareholder, by its terms, shall not be exercisable after the
expiration of five years from the date the Option is granted. Any Option may
provide that it will expire within a shorter period than the maximum
permitted hereby.
5.6 Installments. Each Option shall be exercisable on such dates and in
such amounts (subject to the other provisions hereof) as shall be determined
by the Board of Directors. It is not required that each Option have the same
installment provisions. In its sole discretion, the Board of Directors may
accelerate the exercise date of part or all of any Option.
5.7 Transferability. Each Option, by its terms, shall not be
transferable by the individual to whom granted otherwise than by will or the
laws of descent and distribution, and shall be exercisable, during the
Optionee's lifetime, only by the Optionee.
5.8 Limits on Exercise. Each Option shall be subject to the requirement
that, if at any time the Board of Directors, in its discretion, shall
determine that the listing, registration, or qualification of the shares
subject to such Option upon any securities exchange or under any state or
federal law, or the consent or approval of any government regulatory body, is
necessary or desirable as a condition of, or in connection with, the granting
of such Option, or the issue or purchase of shares thereunder, such Option
may not be exercised in whole or in part unless such listing, registration,
qualification, consent or approval shall have been effected or obtained free
of any conditions not acceptable to the Board of Directors.
5.9 Limit on Options. An Option shall not be an Incentive Stock Option
to the extent that the aggregate fair market value of stock with respect to
which such Option is exercisable for the first time by any individual during
any calendar year (taking into account all Incentive Stock Options
simultaneously or previously granted under all stock option plans of the
Company and its Parents and Subsidiaries) exceeds One Hundred Thousand
Dollars ($100,000).
5.10 Termination of Employment. Each Option by its terms shall not be
exercisable after thirty (30) days after the termination of employment of
the individual to whom the Option was granted, unless such termination was a
result of the death or disability of the employee, and
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may provide that it shall not be exercisable after the date of termination of
employment of the individual to whom the Option was granted.
5.11 Expiration of Plan. No Option shall be granted under this Plan more
than ten years from the date on which this Plan was adopted or approved by
the stockholders of the Company, whichever is earlier. No Option granted
under this Plan shall be valid unless the Plan is approved by the
stockholders of the Company within twelve (12) months before or after its
adoption by the Board of Directors.
5.12 Recapitalization. Upon any Recapitalization, the Board of Directors
shall make an appropriate and equitable adjustment in the number and kind of
securities with respect to which rights may be granted under this Plan and
the price at which such securities may be purchased, and an appropriate and
equitable adjustment in the number and kind of securities that may be
purchased under each outstanding Option and the price at which shares may be
purchased under each such Option.
The grant of an Option pursuant to the Plan shall not affect in any way
the right or power of the Company to make or authorize any adjustments,
recapitalizations, reorganizations, or other changes in the Company's capital
structure or business, any merger or consolidation, any issuance of bonds,
debentures, preferred shares or common shares, the dissolution or liquidation
of the Company, any sale or transfer of all or any part of the Company's
assets or business, or any other act, whether or not similar to the events
described above.
5.13 Rights as a Stockholder. An Optionee or a transferee of an Option
shall have no rights as a stockholder with respect to any shares covered by
the Option until the date of the issuance of a stock certificate for such
shares. No adjustment shall be made for dividends (ordinary or
extraordinary, whether in cash, securities or other property) or
distributions or other rights for which the record date is prior to the date
such stock certificate is issued, except as provided in Section 5.12 hereof.
5.14 Modification, Extension and Renewal of Options. Subject to the
terms and conditions and within the limitations of the Plan, the Board of
Directors 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 therefor (to the extent not theretofore exercised).
Notwithstanding the foregoing, no modification of an Option shall, without
the consent of the Optionee, alter or impair any rights or obligations under
any Option theretofore granted under the Plan.
5.15 Investment Purpose. Each Option under the Plan shall be granted on
the condition that the purchases of stock thereunder shall be for investment
purposes, and not with a view to resale or distribution unless the stock
subject to such Option is registered under the Securities Act of 1933, as
amended, and any applicable state securities laws, or a resale of such stock
without such registration would otherwise be permissible. Each person
exercising an Option must represent that such condition is fulfilled, unless
in the opinion of counsel for the Company such condition is not required
under the Securities Act of 1933 or any other applicable law, regulation, or
rule of any governmental agency.
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5.16 Withholding Taxes. Whenever under the Plan shares are to be issued
or cash is to be paid in satisfaction of Options, the Company shall have the
right to require the recipient to remit to the Company an amount sufficient
to satisfy federal, state and local withholding tax requirements prior to the
delivery of any certificate or certificates for such shares or payment of
such cash.
5.17 Termination of Options. Each Option, by its terms, shall reserve to
the Company the right to terminate the Option, in connection with a Change in
Control for a payment in cash equal to the difference between the exercise
price for the shares of Stock subject to the Option and the Change in Control
Price of such Stock.
5.18 Other Provisions. The Option agreements authorized under the Plan
shall contain such other provisions, including, without limitation, such
rights of redemption, purchase and first refusal, and such other restrictions
upon the exercise of Options or the transfer of the Stock issued upon
exercise, as the Board of Directors of the Company shall deem advisable. Any
Incentive Stock Option agreement shall contain such limitations and
restrictions upon the exercise of the Option as shall be necessary in order
that such Option will be an "Incentive Stock Option" as defined in Section
422 of the Code.
6. EXERCISE OF OPTIONS
6.1 Stock Transfer Books. Notwithstanding any other provision of this
Plan or of any Option, no stock shall be issued by the Company while its
stock transfer books are closed.
6.2 Securities Laws. Notwithstanding any other provision of this Plan
or of any Option, no Option shall be exercisable, and no stock shall be
issued upon the exercise of any Option, if such exercise or such issuance of
stock would result in any violation of law or the imposition on the Company
of a requirement that it commence filing periodic reports under the
Securities Exchange Act of 1934 or any similar provision of law.
7. ADMINISTRATION
7.1 Administration by Board of Directors . The Plan shall be
administered by the Board of Directors. The interpretation and construction
by the Board of Directors of any provisions of the Plan or of any Option
granted under it shall be final. The Board of Directors shall have the
authority to appoint a Stock Option Committee to assume the duties and
responsibilities of administering the Plan. The Stock Option Committee, if
such be established by the Board of Directors, shall be composed of no less
than three (3) persons (who shall be members of the Board of Directors), each
of whom shall be a "disinterested person" as defined herein, and such Stock
Option Committee shall have the same power, authority and rights in the
administration of the Plan as the Board of Directors. No director shall be
liable for any action or determination made in good faith with respect to
the Plan or any Option granted under it.
The Board of Directors shall determine from time to time the persons who
shall receive Options hereunder; provided, however, Options may be granted
hereunder only to persons who, at the
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time of the grant thereof, are officers, directors or key employees of the
Company and its Parents and Subsidiaries, except as otherwise provided in
this Plan; provided, further, that any decision to award Options hereunder to
any person or the determination of the maximum number of shares of Stock (as
hereinafter defined) which may be subject to Options granted to any such
director, employee or officer shall be made by either (i) the Board of
Directors, all of the directors of which and all of the directors acting in
such matter shall be disinterested persons as defined herein, or (ii) the
Stock Option Committee appointed by the Board of Directors pursuant to this
section. For purposes of this Plan, "disinterested person" shall mean a
director who is not, during the one year prior to service as an administrator
of the Pl
7.2 Determination of Fair Market Value. For the purpose of granting
Incentive Stock Options, the Board of Directors shall determine the fair
market value of the Stock of the Company as follows:
7.2.1 If the Company's Stock is traded on any recognized stock
exchange or exchanges, such fair market value shall be deemed to be the
highest closing price of the Stock on such stock exchange or exchanges on the
day the Option is granted or if no sale of the Company's Stock shall have
been made on any stock exchange on that day, on the next preceding day on
which there was a sale of such stock.
7.2.2 During such time as the Stock is not listed on an established
exchange, but is actively traded on the over-the-counter market, the fair
market value per share shall be the mean between dealer "bid" and "ask"
prices of the Stock in the over-the-counter market on the day the Option is
granted, as reported by the National Association of Securities Dealers, Inc.
7.2.3 During such time as the Company's Stock is neither listed on
any recognized exchange nor actively traded over-the-counter, the fair market
value shall be determined in good faith by the Board of Directors. In making
such determination, the Board of Directors may (but shall not be required to)
rely on the opinions of one or more qualified, independent appraisers.
7.3 Indemnification. In addition to such other rights of
indemnification as they may have as directors or as members of the Stock
Option Committee, the members of the Board of Directors shall be indemnified
by the Company against the reasonable expenses, including attorneys' 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
hereunder, and against all amounts paid by them in settlement thereof
(provided such settlement is approved by independent legal counsel selected
by the Company) or paid by them in satisfaction of a judgment in any such
action, suit or proceeding, except in relation to matters as to which it
shall be adjudged in such action, suit or proceeding that such Board or Stock
Option Committee member is liable for negligence or misconduct in the
performance of his duties; provided that within sixty (60) days after
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institution of any such action, suit or proceeding a Board or Stock Option
Committee member shall in writing offer the Company the opportunity, at its
own expense, to handle and defend the same.
8. AMENDMENT AND TERMINATION
8.1 Amendment. The Board of Directors of the Company may, insofar as
permitted by law, from time to time, with respect to any shares at the time
not subject to Options, suspend or discontinue the Plan or revise or amend it
in any respect whatsoever except that, without approval of the stockholders,
no such revision or amendment shall change the number of shares subject to
the Plan, change the designation of the class of employees eligible to
receive Options or decrease the price at which Incentive Stock Options may be
granted, materially increase the benefits accruing to participants under the
Plan, materially increase the number of securities which may be issued under
the Plan, or materially modify the requirements as to eligibility for
participation in the Plan.
9. MISCELLANEOUS
9.1 Governing Law. This Plan shall be governed by, and construed in
accordance with, the laws of the State of Delaware.
9.2 Construction. In the event any parts of this Plan are found to be
void, the remaining provisions of this Plan shall nevertheless be binding
with the same effect as though the void parts were deleted.
9.3 Application of Funds. The proceeds received by the Company from the
sale of Stock pursuant to Options will be used for general corporate purposes.
9.4 No Obligation to Exercise Option. The grant of an Option shall
impose no obligation upon the Optionee to exercise such Option.
9.5 Approval of Stockholders. The Plan shall take effect immediately
upon adoption by the Board of Directors. However, if this Plan is not
approved by the stockholders of the Company 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, no Options granted hereunder shall
constitute Incentive Stock Options.
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