Exhibit 10.1
 
BELL INDUSTRIES, INC.
2007 STOCK INCENTIVE PLAN, AS AMENDED
 
ARTICLE ONE

 
GENERAL PROVISIONS
 

A.   Purpose of the Plan

 
1. This 2007 Stock Incentive Plan (the “Plan”) is intended to promote the
interests of Bell Industries, Inc., a California corporation (the
“Corporation”), by providing eligible persons with the opportunity to acquire a
proprietary interest, or otherwise increase their proprietary interest, in the
Corporation as an incentive for them to remain in the Service of the
Corporation.
 
2. Capitalized terms shall have the meanings assigned to such terms in the
attached Appendix.
 

B.   Structure of the Plan

 
1. The Plan shall be divided into two separate equity programs:
 
(a) the Discretionary Option Grant Program under which eligible persons may, at
the discretion of the Plan Administrator, be granted options to purchase shares
of Common Stock and stock appreciation rights; and
 
(b) the Stock Issuance Program under which eligible persons may, at the
discretion of the Plan Administrator, be issued shares of Common Stock directly,
either through the immediate purchase of such shares, as bonus for services
rendered the Corporation (or any Parent or Subsidiary), or pursuant to share
right awards which entitle Participants to receive shares upon the attainment of
designated Performance Goals or Service requirements.
 
2. The provisions of Articles One and Five shall apply to both equity programs
under the Plan and shall govern the interests of all persons under the Plan.
 

C.   Administration of the Plan

 
1. The Plan shall be administered by the Board or one or more committees
appointed by the Board, provided that with respect to Section 16 Insiders
(a) the Board may administer the Plan in compliance with Rule 16b-3 of the
1934 Act, or (b) the Primary Committee may, at the Board’s discretion,
administer the Plan. Administration of the Plan may otherwise, at the Board’s
discretion, be vested in the Primary Committee or a Secondary Committee. Any
discretionary option grants or stock issuances to members of the Board or the
Primary Committee must be authorized and approved by a disinterested majority of
the Board.
 
2. Members of the Primary Committee or any Secondary Committee shall serve for
such period of time as the Board may determine and may be removed by the Board
at any time. The Board may also at any time terminate the functions of the
Primary Committee or any Secondary Committee and reassume all powers and
authority previously delegated to such committee.
 
3. Each Plan Administrator shall, within the scope of its administrative
functions under the Plan, have full power and authority (subject to the
provisions of the Plan) to establish such rules and regulations as it may deem
appropriate for proper administration of the Discretionary Option Grant and
Stock Issuance Programs and to make such determinations under, and issue such
interpretations of, the provisions of such programs and any outstanding options
or stock issuances thereunder as it may deem necessary or advisable. Decisions
of the Plan Administrator within the scope of its administrative functions under
the Plan shall be final and binding on all parties who have an interest in the
Discretionary Option Grant and Stock Issuance Programs under its jurisdiction or
any option or stock issuance thereunder.
 
4. Each Plan Administrator shall, within the scope of its administrative
jurisdiction under the Plan, have full authority to determine: (a) with respect
to the option grants or stock appreciation rights under the Discretionary

A-1

--------------------------------------------------------------------------------

 

Option Grant Program, which eligible persons are to receive grants, the time or
times when such grants are to be made, the number of shares to be covered by
each such grant, the status of a granted option as either an Incentive Option or
a Non-Statutory Option, the time or times when each option is to become
exercisable, the vesting schedule (if any) applicable to the option shares and
the maximum term for which the option is to remain outstanding; and (b) with
respect to stock issuances under the Stock Issuance Program, which eligible
persons are to receive stock issuances, the time or times when such issuances
are to be made, the number of shares to be issued to each Participant, the
vesting schedule (if any) applicable to the issued shares and the consideration
for such shares.
 
5. The Plan Administrator shall have the absolute discretion either to grant
options or stock appreciation rights in accordance with the Discretionary Option
Grant Program or to effect stock issuances in accordance with the Stock Issuance
Program.
 
6. Service on the Primary Committee or any Secondary Committee shall constitute
service as a Board member, and members of each such committee shall accordingly
be entitled to full indemnification and reimbursement as Board members for their
service on such committee. No member of the Primary Committee or any Secondary
Committee shall be liable for any act or omission made in good faith with
respect to the Plan or any option grants or stock issuances under the Plan.
 

D.   Eligibility

 
1. The persons eligible to participate in the Discretionary Option Grant and
Stock Issuance Programs are as follows:
 
(a) Employees,
 
(b) non-employee members of the Board or the board of directors of any Parent or
Subsidiary, and
 
(c) consultants and other independent advisors who provide services to the
Corporation (or any Parent or Subsidiary).
 
E.  Stock Subject to the Plan
 
1. The stock issuable under the Plan shall be shares of authorized but unissued
or reacquired Common Stock, including shares repurchased by the Corporation on
the open market. The maximum number of shares of Common Stock initially reserved
for issuance over the term of the Plan shall not exceed 1,000,000 [amendment
proposal: 5,000,000] shares. No one person participating in the Plan may receive
stock options, direct stock issuances and share right awards for more than
1,000,000 [amendment proposal: 2,000,000] shares of Common Stock in the
aggregate in any calendar year.
 
2. Shares of Common Stock subject to outstanding options (including options
incorporated into this Plan from the Predecessor Plan) shall be available for
subsequent issuance under the Plan to the extent those options expire or
terminate for any reason prior to exercise in full. Unvested shares issued under
the Plan and subsequently cancelled or repurchased by the Corporation at the
original exercise or issue price paid per share, pursuant to the Corporation’s
repurchase rights under the Plan, shall be added back to the number of shares of
Common Stock reserved for issuance under the Plan and shall accordingly be
available for reissuance through one or more subsequent option grants or direct
stock issuances under the Plan. In addition, should the exercise price of an
option under the Plan be paid with shares of Common Stock or should shares of
Common Stock otherwise issuable under the Plan be withheld by the Corporation in
satisfaction of the withholding taxes incurred in connection with the exercise
of an option or the vesting of a stock issuance under the Plan, then the number
of shares of Common Stock available for issuance under the Plan shall be reduced
only by the net number of shares of Common Stock issued to the holder of such
option or stock issuance, and not by the gross number of shares for which the
option is exercised or which vest under the stock issuance. However, shares of
Common Stock underlying one or more stock appreciation rights exercised under
Section D of Article Two of the Plan shall not be available for subsequent
issuance under the Plan.

A-2

--------------------------------------------------------------------------------

 

3. If any change is made to the Common Stock by reason of any stock split, stock
dividend, recapitalization, combination of shares, exchange of shares or other
change affecting the outstanding Common Stock as a class without the
Corporation’s receipt of consideration, appropriate adjustments shall be made
to:
 
(a) the maximum number and/or class of securities issuable under the Plan;
 
(b) the number and/or class of securities for which any one person may be
granted stock options, direct stock issuances and share right awards under this
Plan per calendar year;
 
(c) the number and/or class of securities and the exercise price per share in
effect under each outstanding option under the Plan;
 
(d) the number and/or class of securities and exercise price per share in effect
under each outstanding option incorporated into this Plan from the Predecessor
Plan; and
 
(e) the maximum number and/or class of securities which may be added to the Plan
through the forfeiture, surrender, cancellation or termination of shares issued
under the Predecessor Plan. Such adjustments to the outstanding options are to
be effected in a manner which shall preclude the enlargement or dilution of
rights and benefits under such options. The adjustments determined by the Plan
Administrator shall be final, binding and conclusive.
 
ARTICLE TWO

 
DISCRETIONARY OPTION GRANT PROGRAM
 

A.   Option Terms

 
Each option shall be evidenced by one or more documents in the form approved by
the Plan Administrator; provided, however, that each such document shall comply
with the terms specified below. Each document evidencing an Incentive Option
shall, in addition, be subject to the provisions of the Plan applicable to such
option.
 
1. Exercise Price.
 
(a) The exercise price per share shall be fixed by the Plan Administrator but
shall not be less than 100% of the Fair Market Value per share of Common Stock
on the option grant date.
 
(b) The exercise price shall become immediately due upon exercise of the option
and may, subject to the provisions of Section A of Article Five and the
documents evidencing the option, be payable in one or more of the forms
specified below:
 
(i) cash or certified check made payable to the Corporation,
 
(ii) shares of Common Stock held for the requisite period necessary to avoid a
charge to the Corporation’s earnings for financial reporting purposes and valued
at Fair Market Value on the Exercise Date, or
 
(iii) to the extent the sale complies with all applicable laws relating to the
regulation and sale of securities, through a special sale and remittance
procedure pursuant to which the Optionee shall concurrently provide irrevocable
written instructions to: (x) a brokerage firm to effect the immediate sale of
the purchased shares and remit to the Corporation, out of the sale proceeds
available on the settlement date, sufficient funds to cover the aggregate
exercise price payable for the purchased shares plus all applicable Federal,
state and local income and employment taxes required to be withheld by the
Corporation by reason of such exercise; and (y) the Corporation to deliver the
certificates for the purchased shares directly to such brokerage firm in order
to complete the sale.
 
Except to the extent such sale and remittance procedure is utilized, payment of
the exercise price for the purchased shares must be made on the Exercise Date.
 
2. Exercise and Term of Options.

A-3

--------------------------------------------------------------------------------

 

Each option shall be exercisable at such time or times, during such period and
for such number of shares as shall be determined by the Plan Administrator and
set forth in the documents evidencing the option. However, no option shall have
a term in excess of ten years measured from the option grant date.
 
3. Effect of Termination of Service.
 
(a) The following provisions shall govern the exercise of any options held by
the Optionee at the time of cessation of Service or death:
 
(i) Any option outstanding at the time of the Optionee’s cessation of Service
for any reason shall remain exercisable for such period of time thereafter as
shall be determined by the Plan Administrator and set forth in the documents
evidencing the option.
 
(ii) Any option held by the Optionee at the time of death and exercisable in
whole or in part at that time may be subsequently exercised by the personal
representative of the Optionee’s estate or by the person or persons to whom the
option is transferred pursuant to the Optionee’s will or in accordance with the
laws of descent and distribution of by the Optionee’s designated beneficiary or
beneficiaries of that option.
 
(iii) Except as otherwise determined in the discretion of the Plan Administrator
either at the time an option is granted or at any time the option remains
outstanding, should the Optionee’s Service be terminated for Misconduct or
should the Optionee otherwise engage in Misconduct while holding one or more
outstanding options under this Article Two, then all those options shall
terminate immediately and cease to be outstanding.
 
(b) During the applicable post-Service exercise period, the option may not be
exercised in the aggregate for more than the number of vested shares for which
the option is exercisable on the date of the Optionee’s cessation of Service.
Upon the expiration of the applicable exercise period or (if earlier) upon the
expiration of the option term, the option shall terminate and cease to be
outstanding for any vested shares for which the option has not been exercised.
However, the option shall, immediately upon the Optionee’s cessation of Service,
terminate and cease to be outstanding to the extent the option is not otherwise
at that time exercisable for vested shares.
 
(c) The Plan Administrator shall have complete discretion, either at the time an
option is granted or at any time while the option remains outstanding, to:
 
(i) extend the period of time for which the option is to remain exercisable
following the Optionee’s cessation of Service from the limited exercise period
otherwise in effect for that option to such greater period of time as the Plan
Administrator shall deem appropriate, but in no event beyond the expiration of
the option term, and/or
 
(ii) permit the option to be exercised, during the applicable post-Service
exercise period, not only with respect to the number of vested shares of Common
Stock for which such option is exercisable at the time of the Optionee’s
cessation of Service but also with respect to one or more additional
installments in which the Optionee would have vested had the Optionee continued
in Service.
 
4. Shareholder Rights.
 
The holder of an option shall have no shareholder rights with respect to the
shares subject to the option until such person shall have exercised the option,
paid the exercise price and become a holder of record of the purchased shares.
 
5. Repurchase Rights.
 
The Plan Administrator shall have the discretion to grant options which are
exercisable for unvested shares of Common Stock. Should the Optionee cease
Service while holding such unvested shares, the Corporation shall have the right
to repurchase, at the exercise price paid per share, any or all of those
unvested shares. The terms upon which such repurchase right shall be exercisable
(including the period and procedure for exercise and the appropriate vesting
schedule for the purchased shares) shall be established by the Plan
Administrator and set forth in the document evidencing such repurchase right.
 
6. Limited Transferability of Options.

A-4

--------------------------------------------------------------------------------

 

During the lifetime of the Optionee, Incentive Options shall be exercisable only
by the Optionee and shall not be assignable or transferable other than by will
or by the laws of descent and distribution following the Optionee’s death.
Non-Statutory Options shall be subject to the same limitation, except that a
Non-Statutory Option may be assigned in whole or in part during Optionee’s
lifetime to one or more members of the Optionee’s Immediate Family or to a trust
established for the exclusive benefit of one or more members of the Optionee’s
Immediate Family or the Optionee’s former spouse, to the extent such assignment
is in connection with Optionee’s estate plan or pursuant to a domestic relations
order. The assigned portion shall be exercisable only by the person or persons
who acquire a proprietary interest in the option pursuant to such assignment.
The terms applicable to the assigned portion shall be the same as those in
effect for this option immediately prior to such assignment and shall be set
forth in such documents issued to the assignee as the Plan Administrator may
deem appropriate. Notwithstanding the foregoing, the Optionee may also designate
one or more persons as the beneficiary or beneficiaries of his or her
outstanding options under this Article Two, and those options shall, in
accordance with such designation, automatically be transferred to such
beneficiary or beneficiaries upon the Optionee’s death while holding those
options. Such beneficiary or beneficiaries shall take the transferred option
subject to all the terms and conditions of this Agreement, including (without
limitation) the limited time period during which the option may be exercised
following the Optionee’s death.
 

B.   Incentive Options

 
1. The terms specified below shall be applicable to all Incentive Options.
Except as modified by the provisions of this Section B of Article Two, all the
provisions of Articles One, Two and Five shall be applicable to Incentive
Options. Options which are specifically designated as Non-Statutory Options when
issued under the Plan shall NOT be subject to the terms of this Section B of
Article Two.
 
2. Eligibility.
 
Incentive Options may only be granted to Employees.
 
3. Exercise Price.
 
The exercise price per share shall not be less than 100% of the Fair Market
Value per share of Common Stock on the option grant date.
 
4. Dollar Limitation.
 
The aggregate Fair Market Value of the shares of Common Stock (determined as of
the respective date or dates of grant) for which one or more options granted to
any Employee under the Plan (or any other option plan of the Corporation or any
Parent or Subsidiary) may for the first time become exercisable as Incentive
Options during any one calendar year shall not exceed the sum of $100,000. To
the extent the Employee holds two or more such options which become exercisable
for the first time in the same calendar year, the foregoing limitation on the
exercisability of such options as Incentive Options shall be applied on the
basis of the order in which such options are granted.
 
5. Failure to Qualify as Incentive Option.
 
To the extent that any option governed by this Plan does not qualify as an
Incentive Option by reason of the dollar limitation described in Section B.4 of
this Article Two or for any other reason, such option shall continue to be
outstanding and exercisable in accordance with its terms and conditions, but as
a Non-Statutory Option under the Federal tax laws.
 
6. 10% Shareholder.
 
If any Employee to whom an Incentive Option is granted is a 10% Shareholder,
then the exercise price per share shall not be less than 110% of the Fair Market
Value per share of Common Stock on the option grant date, and the option term
shall not exceed five years measured from the option grant date.

A-5

--------------------------------------------------------------------------------

 

C.   Change in Control/Hostile Take-Over

 
1. No option outstanding at the time of a Change in Control shall become
exercisable on an accelerated basis if and to the extent:
 
(a) that option is, in connection with the Change in Control, assumed by the
successor corporation (or parent thereof) or otherwise continued in full force
and effect pursuant to the terms of the Change in Control transaction,
 
(b) such option is replaced with a cash incentive program of the successor
corporation which preserves the spread existing at the time of the Change in
Control on the shares of Common Stock for which the option is not otherwise at
that time exercisable, provides for subsequent payout in accordance with the
same exercise/vesting schedule applicable to those option shares and does not
cause any IRC 409A Consequences, or
 
(c) the acceleration of such option is subject to other limitations imposed by
the Plan Administrator at the time of the option grant.
 
However, if none of the foregoing conditions are satisfied, then each option
outstanding at the time of the Change in Control but not otherwise exercisable
for all the shares of Common Stock at that time subject to such option shall
automatically accelerate so that each such option shall, immediately prior to
the effective date of the Change in Control, become exercisable for all the
shares of Common Stock at the time subject to such option and may be exercised
for any or all of those shares as fully vested shares of Common Stock.
 
2. All of the Corporation’s outstanding repurchase rights under the
Discretionary Option Grant Program shall also terminate automatically, and the
shares of Common Stock subject to those terminated rights shall immediately vest
in full, in the event of any Change in Control, except to the extent:
 
(a) those repurchase rights are assigned to the successor corporation (or parent
thereof) or otherwise continued in full force and effect pursuant to the terms
of the Change in Control transaction or
 
(b) such accelerated vesting is precluded by other limitations imposed by the
Plan Administrator at the time the repurchase right is issued.
 
3. Immediately following the consummation of the Change in Control, all
outstanding options shall terminate and cease to be outstanding, except to the
extent assumed by the successor corporation (or parent thereof) or otherwise
expressly continued in full force and effect pursuant to the terms of the Change
in Control transaction.
 
4. Each option which is assumed in connection with a Change in Control or
otherwise continued in effect shall be appropriately adjusted, immediately after
such Change in Control, to apply to the number and class of securities which
would have been issuable to the Optionee in consummation of such Change in
Control had the option been exercised immediately prior to such Change in
Control. Appropriate adjustments to reflect such Change in Control shall also be
made to:
 
(a) the exercise price payable per share under each outstanding option
(including options incorporated into this Plan from the Predecessor Plan),
provided the aggregate exercise price payable for such securities shall remain
the same;
 
(b) the maximum number and/or class of securities available for issuance over
the remaining term of the Plan;
 
(c) the maximum number and/or class of securities available for issuance over
the remaining term of the Plan;
 
(d) the maximum number and/or class of securities for which any one person may
be granted options, direct stock issuances and share right awards under the Plan
per calendar year; and
 
(e) the maximum number and class of securities which may be added to the Plan
through the repurchase of shares issued under the Predecessor Plan. To the
extent the actual holders of the Corporation’s outstanding Common Stock receive
cash consideration for their Common Stock in consummation of the Change in
Control transaction, the successor corporation may, in connection with the
assumption of the outstanding options under

A-6

--------------------------------------------------------------------------------

 

the Discretionary Option Grant Program, substitute one or more shares of its own
common stock with a fair market value equivalent to the cash consideration paid
per share of Common Stock in such Change in Control transaction.
 
5. The Plan Administrator shall have the discretionary authority to structure
one or more outstanding options under the Discretionary Option Grant Program so
that those options shall, immediately prior to the effective date of a Change in
Control, become exercisable for all the shares of Common Stock at that time
subject to such options on an accelerated basis and may be exercised for any or
all of such shares as fully vested shares of Common Stock, whether or not those
options are to be assumed or otherwise continued in full force and effect or
replaced with a cash incentive program pursuant to the express terms of the
Change in Control transaction. In addition, the Plan Administrator shall have
the discretionary authority to structure one or more of the Corporation’s
repurchase rights under the Discretionary Option Grant Program so that those
rights shall immediately terminate at the time of such Change in Control and
shall not be assignable to the successor corporation (or parent thereof), and
the shares subject to those terminated rights shall accordingly vest in full at
the time of such Change in Control.
 
6. The Plan Administrator shall have full power and authority to structure one
or more outstanding options under the Discretionary Option Grant Program so that
those options shall vest and become exercisable for all the shares of Common
Stock at that time subject to such options on an accelerated basis in the event
the Optionee’s Service is subsequently terminated by reason of an Involuntary
Termination within a designated period (not to exceed 18 months) following the
effective date of any Change in Control in which those options do not otherwise
accelerate. Any options so accelerated shall remain exercisable for fully vested
shares of Common Stock until the expiration or sooner termination of the option
term. In addition, the Plan Administrator may structure one or more of the
Corporation’s repurchase rights under the Discretionary Option Grant Program so
that those rights shall immediately terminate with respect to any shares of
Common Stock held by the Optionee at the time of his or her Involuntary
Termination, and the shares subject to those terminated repurchase rights shall
accordingly vest in full at that time.
 
7. The Plan Administrator shall have the discretionary authority to structure
one or more outstanding options under the Discretionary Option Grant Program so
that those options shall, immediately prior to the effective date of a Hostile
Take-Over, vest and become exercisable for all the shares of Common Stock at
that time subject to such options on an accelerated basis and may be exercised
for any or all of such shares as fully vested shares of Common Stock. In
addition, the Plan Administrator shall have the discretionary authority to
structure one or more of the Corporation’s repurchase rights under the
Discretionary Option Grant Program so that those rights shall terminate
automatically upon the consummation of such Hostile Take-Over, and the shares
subject to those terminated rights shall thereupon immediately vest in full.
Alternatively, the Plan Administrator may condition the automatic acceleration
of one or more outstanding options under the Discretionary Option Grant Program
and the termination of one or more of the Corporation’s outstanding repurchase
rights under such program upon the Involuntary Termination of the Optionee’s
Service within a designated period (not to exceed 18 months) following the
effective date of such Hostile Take-Over. Each option so accelerated shall
remain exercisable for fully vested shares of Common Stock until the expiration
or sooner termination of the option term.
 
8. The portion of any Incentive Option accelerated in connection with change in
Control or Hostile Take-Over shall remain exercisable as an Incentive Option
only to the extent the applicable $100,000 limitation is not exceeded. To the
extent such dollar limitation is exceeded, the accelerated portion of such
option shall be exercisable as a Non-Statutory Option under the Federal tax
laws.
 
9. The grant of options under the Discretionary Option Grant Program shall in no
way affect the right of the Corporation to adjust, reclassify, reorganize or
otherwise change its capital or business structure or to merge, consolidate,
dissolve, liquidate or sell or transfer all or any part of its business or
assets.
 

D.   Stock Appreciation Rights

 
1. The Plan Administrator shall have full power and authority to grant to
selected Optionees tandem stock appreciation rights and/or limited stock
appreciation rights.

A-7

--------------------------------------------------------------------------------

 

2. The following terms shall govern the grant and exercise of tandem stock
appreciation rights:
 
(a) One or more Optionees may be granted the right, exercisable upon such terms
as the Plan Administrator may establish, to elect between the exercise of the
underlying option for shares of Common Stock and the surrender of that option in
exchange for a payment from the Corporation in an amount equal to the excess of
(i) the Fair Market Value (on the option surrender date) of the number of shares
in which the Optionee is at the time vested under the surrendered option (or
surrendered portion thereof) over (ii) the aggregate exercise price payable for
such shares.
 
(b) No such option surrender shall be effective unless it is made in accordance
with the terms and conditions of the grant as approved by the Plan
Administrator. If the surrender is so made, then the payment to which the
Optionee shall be entitled may be made in shares of Common Stock valued at Fair
Market Value on the option surrender date, in cash, or partly in shares and
partly in cash, as the Plan Administrator in its sole discretion shall establish
and set forth in the document evidencing such tandem stock appreciation right.
 
(c) If the surrender of an option is not made in accordance with the terms and
conditions of the grant as approved by the Plan Administrator, then the Optionee
shall retain whatever rights the Optionee had under the surrendered option (or
surrendered portion thereof) on the option surrender date and may exercise such
rights at any time prior to the later of (i) five business days after the
receipt of the rejection notice or (ii) the last day on which the option is
otherwise exercisable in accordance with the terms of the documents evidencing
such option.
 
3. The following terms shall govern the grant and exercise of limited stock
appreciation rights:
 
(a) One or more Section 16 Insiders may be granted limited stock appreciation
rights with respect to their outstanding options.
 
(b) Upon the occurrence of a Hostile Take-Over, each individual holding one or
more options with such a limited stock appreciation rights shall have the
unconditional right (exercisable for a 30-day period following such Hostile
Take-Over) to surrender each such option (or any portion thereof) to the
Corporation. In return for the surrendered option, the Optionee shall receive a
cash payment from the Corporation in an amount equal to the excess of (i) the
Take-Over Price of the shares of Common Stock at the time subject to such option
(whether or not the option is otherwise vested and exercisable for those shares)
over (ii) the aggregate exercise price payable for those shares. Such cash
payment shall be paid within five days following the option surrender date.
 
(c) At the time such limited stock appreciation right is granted, the Plan
Administrator shall pre-approve any subsequent exercise of that right in
accordance with the terms of this Section D. Accordingly, no further approval of
the Plan Administrator or the Board shall be required at the time of the actual
option surrender and cash payment.
 
(d) The balance of the option (if any) shall remain outstanding and exercisable
in accordance with the documents evidencing such option.
 
ARTICLE THREE

 
STOCK ISSUANCE PROGRAM
 

A.   Stock Issuances

 
Shares of Common Stock may be issued under the Stock Issuance Program through
direct and immediate issuances without any intervening option grants. Each such
stock issuance shall be evidenced by a Stock Issuance Agreement which complies
with the terms specified below. Shares of Common Stock may also be issued under
the Stock Issuance Program pursuant to share right awards which entitle the
recipients to receive those shares upon the attainment of designated Performance
Goals or Service requirements.
 

B.   Stock Issuance Terms

 
1. Purchase Price.

A-8

--------------------------------------------------------------------------------

 

(a) The purchase price per share shall be fixed by the Plan Administrator, but
shall not be less than 100% of the Fair Market Value per share of Common Stock
on the issuance date.
 
(b) Subject to the provisions of Section A of Article Five, shares of Common
Stock may be issued under the Stock Issuance Program for any of the following
items of consideration which the Plan Administrator may deem appropriate in each
individual instance:
 
(i) cash or certified check made payable to the Corporation, or
 
(ii) past services rendered to the Corporation (or any Parent or Subsidiary).
 
2. Vesting Provisions.
 
(a) Shares of Common Stock issued under the Stock Issuance Program may, in the
discretion of the Plan Administrator, be fully and immediately vested upon
issuance or may vest in one or more installments over the Participant’s period
of Service or upon attainment of specified performance objectives. The elements
of the vesting schedule applicable to any unvested shares of Common Stock issued
under the Stock Issuance Program shall be determined by the Plan Administrator
and incorporated into the Stock Issuance Agreement. Shares of Common Stock may
also be issued under the Stock Issuance Program pursuant to share right awards
which entitle the recipients to receive those shares upon the attainment of
designated Performance Goals or Service requirements. Upon the attainment of
such Performance Goals or Service requirements, fully vested shares of Common
Stock shall be issued upon satisfaction of those share right awards. For
purposes of qualifying grants of stock as “performance-based compensation” under
Section 162(m) of the Code, the Administrator, in its discretion, may set
restrictions based upon the achievement of Performance Goals. The Performance
Goals shall be set by the Administrator on or before the latest date permissible
to enable the stock to qualify as “performance-based compensation” under
Section 162(m) of the Code. In granting stock which is intended to qualify under
Section 162(m) of the Code, the Administrator shall follow any procedures
determined by it from time to time to be necessary or appropriate to ensure
qualification of the stock under Section 162(m) of the Code (e.g., in
determining the Performance Goals).
 
(b) Any new, substituted or additional securities or other property(including
money paid other than as a regular cash dividend) which the Participant may have
the right to receive with respect to the Participant’s unvested shares of Common
Stock by reason of any stock dividend, stock split, recapitalization,
combination of shares, exchange of shares or other change affecting the
outstanding Common Stock as a class without the Corporation’s receipt of
consideration shall be issued subject to: (i) the same vesting requirements
applicable to the Participant’s unvested shares of Common Stock; and (ii) such
escrow arrangements as the Plan Administrator shall deem appropriate.
 
(c) The Participant shall have full shareholder rights with respect to any
shares of Common Stock issued to the Participant under the Stock Issuance
Program, whether or not the Participant’s interest in those shares is vested.
Accordingly, the Participant shall have the right to vote such shares and to
receive any regular cash dividends paid on such shares. The holder of a share
right award shall have no shareholder rights with respect to such award until
shares of Common Stock have been issued to such Participant in satisfaction of
such award.
 
(d) Should the Participant cease to remain in Service while holding one or more
unvested shares of Common Stock issued under the Stock Issuance Program or
should the performance objectives not be attained with respect to one or more
such unvested shares of Common Stock, then those shares shall be immediately
surrendered to the Corporation for cancellation, and the Participant shall have
no further shareholder rights with respect to those shares. To the extent the
surrendered shares were previously issued to the Participant for consideration
paid in cash or cash equivalent (including the Participant’s purchase-money
indebtedness), the Corporation shall repay to the Participant the cash
consideration paid for the surrendered shares and shall cancel the unpaid
principal balance of any outstanding purchase-money note of the Participant
attributable to the surrendered shares.
 
(e) The Plan Administrator may in its discretion waive the surrender and
cancellation of one or more unvested shares of Common Stock which would
otherwise occur upon the cessation of the Participant’s Service or then
on-attainment of the performance objectives applicable to those shares. Such
waiver shall result in the immediate vesting of the Participant’s interest in
the shares as to which the waiver applies. Such waiver may be effected at

A-9

--------------------------------------------------------------------------------

 

anytime, whether before or after the Participant’s cessation of Service or the
attainment or non-attainment of the applicable performance objectives.
 
(f) Outstanding share right awards under the Stock Issuance Program shall
automatically terminate, and no shares of Common Stock shall actually be issued
in satisfaction of those awards, if the Performance Goals or Service
requirements established for such awards are not attained. The Plan
Administrator, however, shall have the discretionary authority to issue shares
of Common Stock under one or more outstanding share right awards as to which the
designated Performance Goals or Service requirements have not been attained.
 

C.   Change in Control/Hostile Take-Over

 
1. All of the Corporation’s outstanding repurchase rights under the Stock
Issuance Program shall terminate automatically, and all the shares of Common
Stock subject to those terminated rights shall immediately vest in full, in the
event of any Change in Control, except to the extent (a) those repurchase rights
are assigned to the successor corporation (or parent thereof) or otherwise
continued in full force and effect pursuant to the express terms of the Change
in Control transaction or (b) such accelerated vesting is precluded by other
limitations imposed in the Stock Issuance Agreement.
 
2. The Plan Administrator shall have the discretionary authority to structure
one or more of the Corporation’s repurchase rights under the Stock Issuance
Program so that those rights shall automatically terminate in whole or in part
upon the occurrence of a Change in Control and shall not be assignable to the
successor corporation (or parent thereof), and the shares of Common Stock
subject to those terminated rights shall immediately vest in full at the time of
such Change in Control.
 
3. The Plan Administrator shall also have the discretionary authority to
structure one or more of the Corporation’s repurchase rights under the Stock
Issuance Program so that those rights shall automatically terminate in whole or
in part, and the shares of Common Stock subject to those terminated rights shall
immediately vest in full, upon the Involuntary Termination of the Participant’s
Service within a designated period (not to exceed 18 months) following the
effective date of any Change in Control in which those repurchase rights do not
otherwise terminate.
 
4. The Plan Administrator shall also have the discretionary authority to
structure one or more of the Corporation’s repurchase rights under the Stock
Issuance Program so that those rights shall automatically terminate in whole or
in part upon the occurrence of a Hostile Take-Over, and the shares of Common
Stock subject to those terminated rights shall immediately vest in full at the
time of such Hostile Take-Over.
 
ARTICLE FOUR
 
[RESERVED]
 
ARTICLE FIVE
 
MISCELLANEOUS
 

A.   Financing

 
The Plan Administrator may permit any Optionee or Participant to pay the option
exercise price under the Discretionary Option Grant Program or the purchase
price of shares issued under the Stock Issuance Program by delivering a
full-recourse, interest bearing promissory note payable in one or more
installments, provided that such purchase with a promissory note shall not be
permitted if it will cause any violation of the Sarbanes-Oxley Act of 2002. The
terms of any such promissory note (including the interest rate and the terms of
repayment) shall be established by the Plan Administrator in its sole
discretion. In no event may the maximum credit available to the Optionee or
Participant exceed the sum of (1) the aggregate option exercise price or
purchase price payable for the purchased shares plus (2) any Federal, state and
local income and employment tax liability incurred by the Optionee or the
Participant in connection with the option exercise or share purchase.

A-10

--------------------------------------------------------------------------------

 

B.   Share Escrow/Legends

 
Unvested shares issued under the Plan may, in the Plan Administrator’s
discretion, be held in escrow by the Corporation until the Participant’s
interest in such shares vests or may be issued directly to the Participant with
restrictive legends on the certificates evidencing those unvested shares.
 

C.   Tax Withholding

 
1. The Corporation’s obligation to deliver shares of Common Stock upon the
exercise of options or the issuance or vesting of such shares under the Plan
shall be subject to the satisfaction of all applicable Federal, state and local
income and employment tax withholding requirements.
 
2. The Plan Administrator may, in its discretion, provide any or all holders of
Non-Statutory Options or unvested shares of Common Stock under the Plan with the
right to use shares of Common Stock in satisfaction of all or part of the Taxes
incurred by such holders in connection with the exercise of their options or the
vesting of their shares. Such right may be provided to any such holder in either
or both of the following formats:
 
(a) The election to have the Corporation withhold from the shares of Common
Stock otherwise issuable upon the exercise of such Non-Statutory Option or the
vesting of such shares, a portion of those shares with an aggregate Fair Market
Value equal to the amount of the Taxes (not to exceed one hundred percent (100%)
of such Taxes) to be satisfied in such manner as designated by the holder in
writing; or
 
(b) The election to deliver to the Corporation, at the time the Non-Statutory
Option is exercised or the shares vest, one or more shares of Common Stock
previously acquired by such holder (other than in connection with the option
exercise or share vesting triggering the Taxes) with an aggregate Fair Market
Value equal to the amount of the Taxes (not to exceed 100% of such Taxes) to be
satisfied in such manner as designated by the holder in writing.
 

D.   Effective Date and Term of the Plan

 
1. The Plan shall become effective immediately upon the Plan Effective Date.
Options may be granted under the Discretionary Option Grant at any time on or
after the Plan Effective Date. However, no options granted under the Plan maybe
exercised, and no shares shall be issued under the Plan, until the Plan is
approved by the Corporation’s shareholders. If such shareholder approval is not
obtained within 12 months after the Plan Effective Date, then all options
previously granted under this Plan shall terminate and cease to be outstanding,
and no further options shall be granted and no shares shall be issued under the
Plan.
 
2. The Plan shall serve as the successor to the Predecessor Plan, and no further
option grants or direct stock issuances shall be made under the Predecessor Plan
after the Plan Effective Date. All options outstanding under the Predecessor
Plan on the Plan Effective Date shall be incorporated into the Plan at that time
and shall be treated as outstanding options under the Plan. However, each
outstanding option so incorporated shall continue to be governed solely by the
terms of the documents evidencing such option, and no provision of the Plan
shall be deemed to affect or otherwise modify the rights or obligations of the
holders of such incorporated options with respect to their acquisition of shares
of Common Stock.
 
3. One or more provisions of the Plan, including (without limitation) the
option/vesting acceleration provisions of Article Two relating to Changes in
Control and Hostile Take-Overs, may, in the Plan Administrator’s discretion, be
extended to one or more options incorporated from the Predecessor Plan which do
not otherwise contain such provisions.
 
4. The Plan shall terminate upon the earliest of (a) the tenth anniversary of
the Plan Effective Date, (b) the date on which all shares available for issuance
under the Plan shall have been issued as fully-vested shares or (c) the
termination of all outstanding options in connection with a Change in Control.
Upon such plan termination, all outstanding option grants and unvested stock
issuances shall thereafter continue to have force and effect in accordance with
the provisions of the documents evidencing such grants or issuances.

A-11

--------------------------------------------------------------------------------

 

E.   Amendment of the Plan

 
1. The Board shall have complete and exclusive power and authority to amend or
modify the Plan in any or all respects. However, no such amendment or
modification shall adversely affect the rights and obligations with respect to
stock options, stock appreciation rights or unvested stock issuances at the time
outstanding under the Plan unless the Optionee or the Participant consents to
such amendment or modification. In addition, certain amendments may require
shareholder approval pursuant to applicable laws or regulations.
 
2. Options to purchase shares of Common Stock may be granted under the
Discretionary Option Grant Program and shares of Common Stock may be issued
under the Stock Issuance Program that are in each instance in excess of the
number of shares then available for issuance under the Plan, provided any excess
shares actually issued under those programs shall be held in escrow until there
is obtained any required approval of an amendment sufficiently increasing the
number of shares of Common Stock available for issuance under the Plan. If such
approval is not obtained within 12 months after the date the first such excess
issuances are made, then (a) any unexercised options granted on the basis of
such excess shares shall terminate and cease to be outstanding and (b) the
Corporation shall promptly refund to the Optionees and the Participants the
exercise or purchase price paid for any excess shares issued under the Plan and
held in escrow, together with interest(at the applicable Short Term Federal
Rate) for the period the shares were held in escrow, and such shares shall
thereupon be automatically cancelled and cease to be outstanding.
 

F.   Use of Proceeds

 
Any cash proceeds received by the Corporation from the sale of shares of Common
Stock under the Plan shall be used for general corporate purposes.
 

G.   Regulatory Approvals

 
1. The implementation of the Plan, the granting of any stock option under the
Plan and the issuance of any shares of Common Stock (a) upon the exercise of any
granted option or (b) under the Stock Issuance Program shall be subject to the
Corporation’s procurement of all approvals and permits required by regulatory
authorities having jurisdiction over the Plan, the stock options granted under
it and the shares of Common Stock issued pursuant to it.
 
2. No shares of Common Stock or other assets shall be issued or delivered under
the Plan unless and until there shall have been compliance with all applicable
requirements of Federal and state securities laws, including the filing and
effectiveness of the Form S-8 registration statement for the shares of Common
Stock issuable under the Plan, and all applicable listing requirements of any
stock exchange (or the Nasdaq National Market, if applicable) on which Common
Stock is then listed for trading.
 

H.   No Employment/Service Rights

 
Nothing in the Plan shall confer upon the Optionee or the Participant any right
to continue in Service for any period of specific duration or interfere with or
otherwise restrict in any way the rights of the Corporation (or any Parent or
Subsidiary employing or retaining such person) or of the Optionee or the
Participant, which rights are hereby expressly reserved by each, to terminate
such person’s Service at any time for any reason, with or without cause.
 
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

A-12

--------------------------------------------------------------------------------

 

APPENDIX
 
The following definitions shall be in effect under the Plan:
 
A. 1934 ACT shall mean the Securities Exchange Act of 1934, as amended.
 
B. BOARD shall mean the Corporation’s Board of Directors.
 
C. CHANGE IN CONTROL shall mean a change in ownership or control of the
Corporation effected through any of the following transactions:
 
1. a shareholder-approved merger or consolidation in which securities possessing
more than 50% of the total combined voting power of the Corporation’s
outstanding securities are transferred to a person or persons not related to the
persons holding those securities immediately prior to such transaction. For the
purpose of this subsection, the persons are “related” if one of them owns,
directly or indirectly, at least 50% of the voting capital stock of the other or
a third person owns, directly or indirectly, at least fifty percent 50% of the
voting capital stock of each of them;
 
2. a sale, transfer or other disposition of all or substantially all of the
Corporation’s assets to one or more persons that are not related, as defined in
subsection 1 above, to the Company immediately prior to the sale or transfer; or
 
3. the acquisition, directly or indirectly by any person or related group of
persons (other than the Corporation or a person that directly or indirectly
controls, is controlled by, or is under common control with, the Corporation),
of beneficial ownership (within the meaning of Rule 13d-3 of the 1934 Act) of
securities possessing more than 50% of the total combined voting power of the
Corporation’s outstanding securities pursuant to a tender or exchange offer made
directly to the Corporation’s shareholders which the Board recommends such
shareholders accept, other than a group of two or more persons not acting in
concert for the purpose of acquiring, holding or disposing of such stock. The
acquisition of additional stock by any person who immediately prior to such
acquisition already is the beneficial owner of more than 50% of the capital
stock of the Company entitled to vote in the election of directors is not a
Change of Control.
 
D. CODE shall mean the Internal Revenue Code of 1986, as amended.
 
E. COMMON STOCK shall mean the Corporation’s common stock.
 
F. CORPORATION shall mean Bell Industries, Inc., a California corporation, and
its successors.
 
G. DISABILITY shall means a medically determinable physical or mental impairment
which can be expected to result in death or can be expected to last for a
continuous period of not less than 12 months and which: (1) renders the
individual unable to engage in any substantial gainful activity; or (2) results
in the individual receiving income replacement benefits for a period of not less
than three months under any policy of long-term disability insurance maintained
by a Corporation for the benefit of its employees.
 
H. DISCRETIONARY OPTION GRANT PROGRAM shall mean the discretionary option grant
program in effect under the Plan.
 
I. EMPLOYEE shall mean an “employee” of the Corporation (or any Parent or
Subsidiary) within the meaning of Section 3401(c) of the Code and the
regulations thereunder.
 
J. EXERCISE DATE shall mean the date on which the Corporation shall have
received written notice of the option exercise.
 
K. FAIR MARKET VALUE per share of Common Stock on any relevant date shall be
determined in accordance with the following provisions:
 
1. If the Common Stock is at the time traded on the Nasdaq National Market, then
the Fair Market Value shall be deemed equal to the closing selling price per
share of Common Stock on the date in question, as such price is reported on the
Nasdaq National Market or any successor system. If there is no closing selling
price for

A-13

--------------------------------------------------------------------------------

 

the Common Stock on the date in question, then the Fair Market Value shall be
the closing selling price on the last preceding date for which such quotation
exists.
 
2. If the Common Stock is at the time listed on any Stock Exchange, then the
Fair Market Value shall be deemed equal to the closing selling price per share
of Common Stock on the date in question on the Stock Exchange determined by the
Plan Administrator to be the primary market for the Common Stock, as such price
is officially quoted in the composite tape of transactions on such exchange. If
there is no closing selling price for the Common Stock on the date in question,
then the Fair Market Value shall be the closing selling price on the last
preceding date for which such quotation exists.
 
L. HOSTILE TAKE-OVER shall mean:
 
1. the acquisition, directly or indirectly, by any person or related group of
persons (other than the Corporation or a person that directly or indirectly
controls, is controlled by, or is under common control with, the Corporation),
of beneficial ownership (within the meaning of Rule 13d-3 of the 1934 Act) of
securities possessing more than 35% of the total combined voting power of the
Corporation’s outstanding securities pursuant to a tender or exchange offer made
directly to the Corporation’s shareholders which the Board does not recommend
such shareholders to accept; or
 
2. a change in the composition of the Board over a period of 12 consecutive
months or less such that a majority of the Board members ceases, by reason of
one or more contested elections for Board membership, to be comprised of
individuals who either: (1) have been Board members continuously since the
beginning of such period; or (2) have been elected or nominated for election as
Board members during such period by at least a majority of the Board members
described in clause (1) who were still in office at the time the Board approved
such election or nomination.
 
M. IMMEDIATE FAMILY shall mean any child, stepchild, grandchild, parent,
stepparent, grandparent, spouse, sibling, mother-in-law, father-in-law,
son-in-law, daughter-in-law, brother-in-law, or sister-in-law, and shall include
adoptive relationships.
 
N. INCENTIVE OPTION shall mean an option which satisfies the requirements of
Code Section 422.
 
O. INVOLUNTARY TERMINATION shall mean the termination of the Service of any
individual which occurs by reason of:
 
1. such individual’s involuntary dismissal or discharge by the Corporation for
reasons other than Misconduct, or
 
2. such individual’s voluntary resignation following (a) a change in his or her
position with the Corporation which materially reduces his or her level of
responsibility or the level of management to which Optionee reports, (b) a
reduction in his or her level of compensation (including base salary, fringe
benefits and participation in any corporate-performance based bonus or incentive
programs) by more than 15% or (c) a relocation of such individual’s place of
employment by more than 50 miles, provided and only if such change, reduction or
relocation is effected by the Corporation without the individual’s consent.
 
P. IRC 409A CONSEQUENCES shall mean, to the extent imposed by Section 409A of
the Code, (1) inclusion in gross income of deferred compensation from current
and prior years, (2) interest liability on deferred taxes at increased federal
rate and (3) 20% excise tax on deferred compensation.
 
Q. MISCONDUCT shall mean the commission of any act of fraud, embezzlement or
dishonesty by the Optionee or Participant, any unauthorized use or disclosure by
such person of confidential information or trade secrets of the Corporation (or
any Parent or Subsidiary), or any other intentional misconduct by such person
adversely affecting the business or affairs of the Corporation (or any Parent or
Subsidiary) in a material manner. The foregoing definition shall not be deemed
to be inclusive of all the acts or omissions which the Corporation (or any
Parent or Subsidiary) may consider as grounds for the dismissal or discharge of
any Optionee, Participant or other person in the Service of the Corporation (or
any Parent or Subsidiary).
 
R. NON-STATUTORY OPTION shall mean an option not intended to satisfy the
requirements of Code Section 422.

A-14

--------------------------------------------------------------------------------

 

S. OPTIONEE shall mean any person to whom an option is granted under the
Discretionary Option Grant Program.
 
T. PARENT shall mean any corporation (other than the Corporation) in an unbroken
chain of corporations ending with the Corporation, provided each corporation in
the unbroken chain (other than the Corporation) owns, at the time of the
determination, stock possessing 50% or more of the total combined voting power
of all classes of stock in one of the other corporations in such chain.
 
U. PARTICIPANT shall mean any person who is issued shares of Common Stock or a
share right award under the Stock Issuance Program.
 
V. PERFORMANCE GOALS shall mean the goal(s) (or combined goal(s)) determined by
the Administrator (in its discretion) to be applicable to a Participant with
respect to a share of stock. As determined by the Administrator, the Performance
Goals shall be objective and shall otherwise meet the requirements of
Section 162(m)(4)(C) of the Code, and shall be based upon one or more of the
following performance-based business criteria, either on a business unit or
Company-specific basis or in comparison with peer group performance: net sales;
gross sales; return on net assets; return on assets; return on equity; return on
capital; return on revenues; asset turnover; economic value added; total
shareholder return; net income; pre-tax income; operating profit margin; net
income margin; sales margin; market share; inventory turnover; days sales
outstanding; sales growth; capacity utilization; increase in customer base; cash
flow; book value; share price performance (including options and stock
appreciation rights tied solely to appreciation in the fair market of the shares
of Common Stock); earnings per share; stock price earnings ratio; earnings
before interest, taxes, depreciation and amortization expenses (“EBITDA”);
earnings before interest and taxes (“EBIT”); or EBITDA, EBIT or earnings before
taxes and unusual or nonrecurring items as measured either against the annual
budget or as a ratio to revenue. The Performance Goals may differ for each
Participant and for each stock grant.
 
W. PLAN shall mean the Corporation’s 2005 Stock Incentive Plan, as set forth in
this document.
 
X. PLAN ADMINISTRATOR shall mean the particular entity, whether the Board, the
Primary Committee or the Secondary Committee, which is authorized to administer
the Discretionary Option Grant and Stock Issuance Programs with respect to one
or more classes of eligible persons, to the extent such entity is carrying out
its administrative functions under those programs with respect to the persons
under its jurisdiction.
 
Y. PLAN EFFECTIVE DATE shall mean the date on which the Plan was adopted by the
Board.
 
Z. PREDECESSOR PLAN shall mean the Corporation’s 2001 Stock Option Plan, as in
effect immediately prior to the Plan Effective Date hereunder.
 
AA. PRIMARY COMMITTEE shall mean a committee of two (2) or more Board members
appointed by the Board to administer the Plan with respect to Section 16
Insiders, which shall be constituted in such a manner as to permit grants under
the Plan in compliance with Rule 16b-3 of the 1934 Act and Section 162(m) of the
Code.
 
BB. SECONDARY COMMITTEE shall mean a committee of two (2) or more Board members
appointed by the Board to administer any aspect of Plan not administered by the
Primary Committee. The members of the Secondary Committee may be Board members
who are Employees eligible to receive discretionary option grants or direct
stock issuances under the Plan or any other stock option, stock appreciation,
stock bonus or other stock plan of the Corporation (or any Parent or
Subsidiary).
 
CC. SECTION 16 INSIDER shall mean an officer or director of the Corporation
subject to the short-swing profit liabilities of Section 16 of the 1934 Act.
 
DD. SERVICE shall mean the performance of services for the Corporation (or any
Parent or Subsidiary) by a person in the capacity of an Employee, anon-employee
member of the board of directors or a consultant or independent advisor, except
to the extent otherwise specifically provided in the documents evidencing the
option grant or stock issuance.
 
EE. SHORT TERM FEDERAL RATE shall mean the federal short-term rate in effect
under Section 1274(d) of the Code at the beginning of the period the shares were
held in escrow.

A-15

--------------------------------------------------------------------------------

 

FF. STOCK EXCHANGE shall mean either the American Stock Exchange or the New York
Stock Exchange.
 
GG. STOCK ISSUANCE AGREEMENT shall mean the agreement entered into by the
Corporation and the Participant at the time of issuance of shares of Common
Stock under the Stock Issuance Program.
 
HH. STOCK ISSUANCE PROGRAM shall mean the stock issuance program in effect under
the Plan.
 
II. SUBSIDIARY shall mean any corporation (other than the Corporation) in an
unbroken chain of corporations beginning with the Corporation, provided each
corporation (other than the last corporation) in the unbroken chain owns, at the
time of the determination, stock possessing 50% or more of the total combined
voting power of all classes of stock in one of the other corporations in such
chain.
 
JJ. TAKE-OVER PRICE shall mean the greater of (1) the Fair Market Value per
share of Common Stock on the date the option is surrendered to the Corporation
in connection with a Hostile Take-Over or, if applicable, (2) the highest
reported price per share of Common Stock paid by the tender offeror in effecting
the Hostile Take-Over through the acquisition of such Common Stock. However, if
the surrendered option is an Incentive Option, the Take-Over Price shall not
exceed the price per share described in clause (1) above.
 
KK. TAXES shall mean the Federal, state and local income and employment tax
liabilities incurred by the holder of Non-Statutory Options or unvested shares
of Common Stock in connection with the exercise of those options or the vesting
of those shares.
 
LL. 10% SHAREHOLDER shall mean the owner of stock (as determined under Code
Section 424(d)) possessing more than 10% of the total combined voting power of
all classes of stock of the Corporation (or any Parent or Subsidiary).

A-16