Exhibit 10.1

 

ADTRAN, INC.

 

2005 DIRECTORS STOCK OPTION PLAN

 

ARTICLE I

Purpose

 

1.1 General Purpose. The purpose of this Plan is to further the growth and
development of the Company by encouraging Directors who are not employees of the
Company to obtain a proprietary interest in the Company by owning its stock. The
Company intends that the Plan will provide such persons with an added incentive
to continue to serve as Directors and will stimulate their efforts in promoting
the growth, efficiency and profitability of the Company. The Company also
intends that the Plan will afford the Company a means of attracting persons of
outstanding quality to service on the Board.

 

1.2 Intended Tax Effects of Options. It is intended that the tax effects of any
Option granted hereunder should be determined under Code §83.

 

ARTICLE II

Definitions

 

The following words and phrases as used in this Plan shall have the meanings set
forth in this Article unless a different meaning is clearly required by the
context:

 

2.1 1933 Act shall mean the Securities Act of 1933, as amended.

 

2.2 1934 Act shall mean the Securities Exchange Act of 1934, as amended.

 

2.3 Beneficiary shall mean, with respect to an Optionee, the Person or Persons
to whom the Optionee’s Option shall be transferred upon the Optionee’s death
(i.e., the Optionee’s Beneficiary).

 

(a) Designation of Beneficiary. An Optionee’s Beneficiary shall be the Person
who is last designated in writing by the Optionee as such Optionee’s Beneficiary
hereunder. An Optionee shall designate his or her original Beneficiary in
writing on his or her Option Agreement. Any subsequent modification of the
Optionee’s Beneficiary shall be in a written executed letter addressed to the
Company and shall be effective when it is received and accepted by the
Committee, determined in the Committee’s sole discretion.

 

(b) No Designated Beneficiary. If, at any time, no Beneficiary has been validly
designated by an Optionee, or the Beneficiary designated by the Optionee is no
longer living or in existence at the time of the Optionee’s death, then the
Optionee’s Beneficiary shall be deemed to be the Optionee’s spouse, or if none,
the Optionee’s estate.

 

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(c) Designation of Multiple Beneficiaries. An Optionee may, consistent with
subsection (a) above, designate more than one Person as a Beneficiary if, for
each such Beneficiary, the Optionee also designates a percentage of the
Optionee’s Options to be transferred to such Beneficiary upon the Optionee’s
death. Unless otherwise specified by the Optionee, any designation by the
Optionee of multiple Beneficiaries shall be interpreted as a designation by the
Optionee that each such Beneficiary (to the extent such Beneficiary is alive or
in existence as of the Optionee’s date of death) should be entitled to an equal
percentage of the Optionee’s Options. Each Beneficiary shall have complete and
non-joint rights with respect to the portion of an Optionee’s Options to be
transferred to such Beneficiary upon the Optionee’s death.

 

(d) Contingent Beneficiaries. An Optionee may designate one or more contingent
Beneficiaries to receive all or a portion of the Optionee’s Option in the event
that one or more of the Optionee’s original Beneficiaries should predecease the
Optionee; otherwise, in the event that one or more Beneficiaries predeceases the
Optionee, then the individual or individuals specified above shall take the
place of each such deceased Optionee’s Beneficiary.

 

2.4 Board shall mean the Board of Directors of the Company.

 

2.5 Cause shall mean an act or acts by an individual involving personal
dishonesty, incompetence, willful misconduct, moral turpitude, intentional
failure to perform stated duties, willful violation of any law, rule or
regulation (other than traffic violations or similar offenses), the use for
profit or disclosure to unauthorized persons of confidential information or
trade secrets of the Company or its parents or subsidiaries, the breach of any
contract with the Company or its parents or subsidiaries, the unlawful trading
in the securities of the Company or of another corporation based on information
gained as a result of the performance of services for the Company or its parents
or subsidiaries, a felony conviction or the failure to contest prosecution for a
felony, embezzlement, fraud, deceit or civil rights violations, any of which
acts cause the Company or any subsidiary liability or loss, as determined by the
Committee in its sole discretion.

 

2.6 Change of Control shall mean the occurrence of any one of the following
events:

 

(a) Acquisition By Person of Substantial Percentage. The acquisition by a Person
(including “affiliates” and “associates” of such Person, but excluding the
Company, any “parent” or “subsidiary” of the Company, or any employee benefit
plan of the Company or of any “parent” or “subsidiary” of the Company) of a
sufficient number of shares of the Common Stock, or securities convertible into
the Common Stock, and whether through direct acquisition of shares or by merger,
consolidation, share exchange, reclassification of securities or
recapitalization of or involving the Company or any “parent” or “subsidiary” of
the Company, to constitute the Person the actual or beneficial owner of greater
than 50% of the Common Stock; or

 

(b) Disposition of Assets. Any sale, lease, transfer, exchange, mortgage, pledge
or other disposition, in one transaction or a series of transactions, of all or
substantially all of the assets of the Company or of any “subsidiary” of the
Company to a

 

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Person (including “affiliates” and “associates” of such Person, but excluding
the Company, any “parent” or “subsidiary” of the Company, or any employee
benefit plan of the Company or of any “parent” or “subsidiary” of the Company).

 

For purposes of this Section, the terms “affiliate,” “associate,” “parent” and
“subsidiary” shall have the respective meanings ascribed to such terms in Rule
12b-2 under Section 12 of the 1934 Act.

 

2.7 Code shall mean the Internal Revenue Code of 1986, as amended.

 

2.8 Committee shall mean the committee appointed by the Board to administer and
interpret the Plan in accordance with Article III below.

 

2.9 Common Stock shall mean the common stock, par value $0.01 per share, of the
Company.

 

2.10 Company shall mean ADTRAN, Inc.

 

2.11 Director shall mean an individual who is serving as a member of the Board
(i.e., a director of the Company).

 

2.12 Disability shall mean, with respect to an individual, the total and
permanent disability of such individual as determined by the Committee in its
sole discretion.

 

2.13 Effective Date shall mean May 18, 2005, subject to shareholder approval.
See Article IX herein.

 

2.14 Fair Market Value of the Common Stock as of a date of determination shall
mean the following:

 

(a) Stock Listed and Shares Traded. If the Common Stock is listed and traded on
a national securities exchange (as such term is defined by the 1934 Act) or on
The Nasdaq Stock Market (“Nasdaq”) on the date of determination, the Fair Market
Value per share shall be the closing price of a share of the Common Stock on
said national securities exchange or Nasdaq on the date of determination. If the
Common Stock is traded in the over-the-counter market, the Fair Market Value per
share shall be the average of the closing bid and asked prices on the date of
determination.

 

(b) Stock Listed But No Shares Traded. If the Common Stock is listed on a
national securities exchange or on Nasdaq and no shares of the Common Stock are
traded on the date of determination but there were shares traded on dates within
a reasonable period before the date of determination, the Fair Market Value
shall be the closing price of the Common Stock on the most recent date before
the date of determination. If the Common Stock is regularly traded in the
over-the-counter market and no shares of the Common Stock are traded on the date
of determination (or if records of such trades are unavailable or burdensome to
obtain) but there were shares traded on dates within a reasonable period before
the date of determination, the Fair Market Value shall be the average of the
closing bid and asked prices of the Common Stock on the most recent date before
the date of determination.

 

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(c) Stock Not Listed. If the Common Stock is not listed on a national securities
exchange or on Nasdaq and is not regularly traded in the over-the-counter
market, then the Committee shall determine the Fair Market Value of the Common
Stock from all relevant available facts, which may include the average of the
closing bid and ask prices reflected in the over-the-counter market on a date
within a reasonable period either before or after the date of determination or
opinions of independent experts as to value and may take into account any recent
sales and purchases of such Common Stock to the extent they are representative.

 

The Committee’s determination of Fair Market Value, which shall be made pursuant
to the foregoing provisions, shall be final and binding for all purposes of this
Plan.

 

2.15 Option shall mean options to which Code §421 (relating generally to certain
incentive stock options and other options) does not apply, granted to
individuals pursuant to the terms and provisions of this Plan.

 

2.16 Option Agreement shall mean a written agreement, executed and dated by the
Company and an Optionee, evidencing an Option granted under the terms and
provisions of this Plan, setting forth the terms and conditions of such Option,
and specifying the name of the Optionee and the number of shares of stock
subject to such Option.

 

2.17 Option Price shall mean the purchase price of the shares of Common Stock
underlying an Option.

 

2.18 Optionee shall mean an individual who is granted an Option pursuant to the
terms and provisions of this Plan.

 

2.19 Person shall mean any individual, organization, corporation, partnership,
trust or other entity.

 

2.20 Plan shall mean this ADTRAN, Inc. 2005 Directors Stock Option Plan.

 

ARTICLE III

Administration

 

3.1 General Administration. The Plan shall be administered and interpreted by
the Committee. Subject to the express provisions of the Plan, the Committee
shall have authority to interpret the Plan, to prescribe, amend and rescind
rules and regulations relating to the Plan, to determine the terms and
provisions of the Option Agreements by which Options shall be evidenced (which
shall not be inconsistent with the terms of the Plan), and to make all other
determinations necessary or advisable for the administration of the Plan, all of
which determinations shall be final, binding and conclusive.

 

3.2 Appointment. The Board shall appoint the Committee from among its members to
serve at the pleasure of the Board. The Board from time to time may remove
members from, or add members to, the Committee and shall fill all vacancies
thereon. The Committee at all times shall be composed of two or more directors.

 

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3.3 Indemnification. In addition to such other rights of indemnification as they
have as directors or as members of the Committee, the members of the Committee,
to the extent permitted by applicable law, shall be indemnified by the Company
against reasonable expenses (including, without limitation, attorneys’ fees)
actually and necessarily incurred in connection with the defense of any action,
suit or proceeding, or in connection with any appeal, 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 Options granted hereunder, and against all
amounts paid by them in settlement thereof (provided such settlement is approved
to the extent required by and in the manner provided by the articles or
certificate of incorporation or the bylaws of the Company relating to
indemnification of directors) 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 Committee
member or members did not act in good faith and in a manner he or they
reasonably believed to be in or not opposed to the best interest of the Company.

 

ARTICLE IV

Stock

 

The stock subject to the Options and other provisions of the Plan shall be
authorized but unissued or reacquired shares of Common Stock. Subject to
readjustment in accordance with the provisions of Article VII, the total number
of shares of Common Stock for which Options may be granted to persons
participating in the Plan shall not exceed in the aggregate 400,000 shares of
Common Stock. Notwithstanding the foregoing, shares of Common Stock allocable to
the unexercised portion of any expired or terminated Option again may become
subject to Options under the Plan.

 

ARTICLE V

Eligibility to Receive and Grant of Options

 

5.1 Individuals Eligible for Grants of Options. The individuals eligible to
receive Options hereunder shall be solely those individuals who are Directors
and who are not employees of the Company or any parent or subsidiary corporation
of the Company. Such Directors shall receive Options hereunder in accordance
with the provisions of Section 5.2 below.

 

5.2 Grant of Options. Options shall be granted to those Directors who are
eligible under Section 5.1 above in accordance with the following formulas:

 

(a) Option Upon Initially Becoming a Director. Upon initially becoming a
Director, an individual shall be granted an Option to purchase 10,000 shares of
Common Stock, with such Option subject to the provisions of Article VI below.
Options granted under this subsection (a) shall be evidenced by the Option
Agreement shown in Appendix A. The Options granted under this subsection (a)
shall not be granted to a Director who has previously served as a Director and
who is again becoming a Director, but shall only be granted upon an individual’s
initially becoming a Director.

 

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(b) Option Upon Commencement of Term. As of December 31 of each calendar year
following the calendar year in which a Director receives a grant of Options
under subsection (a) above, if such individual is a Director as of such date and
subject to subsection (d) below, such individual shall be granted an Option to
purchase 5,000 shares of Common Stock, with such Option subject to the
provisions of Article VI below. Options granted under this subsection (b) shall
be evidenced by the Option Agreement shown in Appendix B.

 

(c) Transitional Rules. Notwithstanding anything in subsections (a) and (b) to
the contrary, no individual who is serving as a Director as of the Effective
Date of this Plan shall be entitled to any Options until the December 31 next
following the Effective Date.

 

(d) Rules Against Double Granting of Options for Simultaneous Service.
Notwithstanding any provision of this Section to the contrary, an individual
shall not be granted an Option to purchase more than 5,000 shares as of any
December 31 under the provisions of subsection (b) above.

 

ARTICLE VI

Terms and Conditions of Options

 

Options granted hereunder and Option Agreements shall comply with and be subject
to the following terms and conditions:

 

6.1 Requirement of Option Agreement. Upon the grant of an Option hereunder, the
Committee shall prepare (or cause to be prepared) an Option Agreement. The
Committee shall present such Option Agreement to the Optionee. Upon execution of
such Option Agreement by the Optionee, such Option shall be deemed to have been
granted effective as of the date of grant. The failure of the Optionee to
execute the Option Agreement within 30 days after the date of the receipt of
same shall render the Option Agreement and the underlying Option null and void
ab initio.

 

6.2 Optionee and Number of Shares. Each Option Agreement shall state the name of
the Optionee and the total number of shares of the Common Stock to which it
pertains, the Option Price, the Beneficiary of the Optionee and the date as of
which the Option was granted under this Plan.

 

6.3 Vesting. Each Option shall first become exercisable (i.e., vested) with
respect to 100% of the shares subject to such Option as of the first anniversary
of the date the Option is granted. Prior to said date, the Option shall be
unexercisable in its entirety. Notwithstanding the foregoing, all Options
granted to an Optionee shall become immediately vested and exercisable for 100%
of the number of shares subject to the Options upon the Optionee’s becoming
Disabled or upon his death or upon a Change of Control. Other than as provided
in the preceding sentences, if an Optionee ceases to be a Director, his rights
with regard to all non-vested Options shall cease immediately.

 

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6.4 Option Price. The Option Price of the shares of Common Stock underlying each
Option shall be the Fair Market Value of the Common Stock on the date the Option
is granted. Upon execution of an Option Agreement by both the Company and
Optionee, the date as of which the Option was granted under this Plan as noted
in the Option Agreement shall be considered the date on which such Option is
granted.

 

6.5 Terms of Options. Terms of Options granted under the Plan shall commence on
the date of grant and shall expire ten years from the date the Option is
granted.

 

6.6 Terms of Exercise. The exercise of an Option may be for less than the full
number of shares of Common Stock subject to such Option, but such exercise shall
not be made for less than (i) 100 shares or (ii) the total remaining shares
subject to the Option, if such total is less than 100 shares. Subject to the
other restrictions on exercise set forth herein, the unexercised portion of an
Option may be exercised at a later date.

 

6.7 Method of Exercise. All Options granted hereunder shall be exercised by
written notice directed to the Secretary of the Company at its principal place
of business or to such other person as the Committee may direct. Each notice of
exercise shall identify the Option that the Optionee is exercising (in whole or
in part) and shall be accompanied by payment of the Option Price for the number
of shares specified in such notice and by any documents required by Section 8.1.
The Company shall make delivery of such shares within a reasonable period of
time; provided, if any law or regulation requires the Company to take any action
(including, but not limited to, the filing of a registration statement under the
1933 Act and causing such registration statement to become effective) with
respect to the shares specified in such notice before the issuance thereof, then
the date of delivery of such shares shall be extended for the period necessary
to take such action.

 

6.8 Medium and Time of Payment.

 

(a) The Option Price shall be payable upon the exercise of the Option in an
amount equal to the number of shares then being purchased times the per share
Option Price. Payment, at the election of the Optionee (or his Beneficiary as
provided in subsection (c) of Section 6.9), shall be (A) in cash; (B) by
delivery to the Company of shares of the Common Stock that have been owned by
the Optionee for at least six months, guaranteed or notarized, with such
documentation as the Committee may require, or in such other manner as the
Committee may require; or (C) by a combination of (A) and (B).

 

(b) If the Optionee delivers Common Stock with a value that is less than the
total Option Price, then such Optionee shall pay the balance of the total Option
Price in cash, as provided in subsection (a) above.

 

6.9 Effect of Termination of Service, Disability or Death. Except as provided in
subsections (a), (b) and (c) below, no Option shall be exercisable unless the
Optionee thereof shall have been a Director from the date of the granting of the
Option until the date of exercise.

 

(a) Termination of Service. In the event an Optionee ceases to be a Director for
any reason other than death or Disability, any Option or unexercised portion
thereof

 

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granted to him shall terminate on and shall not be exercisable after the
earliest to occur of (i) the expiration date of the Option, (ii) three months
after the date the Optionee ceases to be a Director (except as provided in
subsection (c)) or (iii) the date on which the Company gives notice to such
Optionee of termination of his service as a Director if service is terminated by
the Company or by its shareholders for Cause (an Optionee’s resignation in
anticipation of termination of service by the Company or by its shareholders for
Cause shall constitute a notice of termination by the Company). Notwithstanding
the foregoing, in the event that an Optionee’s service as a Director terminates
for a reason other than death or Disability at any time after a Change of
Control, the term of all Options of that Optionee shall be extended through the
end of the three-month period immediately following the date of such termination
of service. Prior to the earlier of the dates specified in the preceding
sentences of this subsection (a), the Option shall be exercisable only in
accordance with its terms and only for the number of shares exercisable on the
date of termination of service as a Director.

 

(b) Disability. Upon the termination of an Optionee’s service as a Director due
to Disability, any Option or unexercised portion thereof granted to him which is
otherwise exercisable shall terminate on and shall not be exercisable after the
earlier to occur of (i) the expiration date of such Option, or (ii) one year
after the date on which such Optionee ceases to be a Director due to Disability
(except as provided in subsection (c)). Prior to the earlier of such dates, such
Option shall be exercisable only in accordance with its terms and only for the
number of shares exercisable on the date such Optionee’s service as a Director
ceases due to Disability.

 

(c) Death. In the event of the death of the Optionee (i) while he is a Director,
(ii) within three months after the date on which such Optionee’s service as a
Director is terminated (for a reason other than Cause) as provided in subsection
(a) above, or (iii) within one year after the date on which such Optionee’s
service as a Director terminated due to his Disability, any Option or
unexercised portion thereof granted to him which is otherwise exercisable may be
exercised by the Optionee’s Beneficiary at any time prior to the expiration of
one year from the date of death of such Optionee, but in no event later than the
date of expiration of the Option. Such exercise shall be effected pursuant to
the terms of this Section as if such Beneficiary is the named Optionee.

 

6.10 Restrictions on Transfer and Exercise of Options. No Option shall be
assignable or transferable by the Optionee except by transfer to a Beneficiary
upon the death of the Optionee, and any purported transfer (other than as
excepted above) shall be null and void. After the death of an Optionee and upon
the death of the Optionee’s Beneficiary, an Option shall be transferred only by
will or by the laws of descent and distribution. During the lifetime of an
Optionee, the Option shall be exercisable only by him; provided, however, that
in the event the Optionee is incapacitated and unable to exercise Options, such
Options may be exercised by such Optionee’s legal guardian, legal
representative, fiduciary or other representative whom the Committee deems
appropriate based on applicable facts and circumstances.

 

6.11 Rights as a Shareholder. An Optionee shall have no rights as a shareholder
with respect to shares covered by his Option until date of the issuance of the
shares to him and only after the Option Price of such shares is fully paid.
Unless specified in Article VII, no adjustment will be made for dividends or
other rights for which the record date is prior to the date of such issuance.

 

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6.12 No Obligation to Exercise Option. The granting of an Option shall impose no
obligation upon the Optionee to exercise such Option.

 

ARTICLE VII

Adjustments Upon Changes in Capitalization

 

7.1 Recapitalization. In the event that the outstanding shares of the Common
Stock of the Company are hereafter increased or decreased or changed into or
exchanged for a different number or kind of shares or other securities of the
Company by reason of a recapitalization, reclassification, stock split,
combination of shares or dividend payable in shares of the Common Stock, the
following rules shall apply:

 

(a) The Committee shall make an appropriate adjustment in the number and kind of
shares available for the granting of Options under the Plan, and in the number
and kind of shares granted under Section 5.2.

 

(b) The Committee also shall make an appropriate adjustment in the number and
kind of shares as to which outstanding Options, or portions thereof then
unexercised, shall be exercisable; any such adjustment in any outstanding
Options shall be made without change in the total price applicable to the
unexercised portion of such Option and with a corresponding adjustment in the
Option Price per share. No fractional shares shall be issued or optioned in
making the foregoing adjustments, and the number of shares available under the
Plan or the number of shares subject to any outstanding Options shall be the
next lower number of shares, rounding all fractions downward.

 

(c) If any rights or warrants to subscribe for additional shares are given pro
rata to holders of outstanding shares of the class or classes of stock then set
aside for the Plan, each Optionee shall be entitled to the same rights or
warrants on the same basis as holders of the outstanding shares with respect to
such portion of his Option as is exercised on or prior to the record date for
determining shareholders entitled to receive or exercise such rights or
warrants.

 

7.2 Reorganization. Subject to any required action by the shareholders, if the
Company shall be a party to any reorganization involving merger, consolidation,
acquisition of the stock or acquisition of the assets of the Company which does
not constitute a Change of Control, and if the agreement memorializing such
reorganization so provides, any Option granted but not yet exercised shall
pertain to and apply, with appropriate adjustment as determined by the
Committee, to the securities of the resulting corporation to which a holder of
the number of shares of the Common Stock subject to such Option would have been
entitled. If such agreement does not so provide, any or all Options granted
hereunder shall become immediately nonforfeitable and fully exercisable or
vested (to the extent permitted under federal or state securities laws) and are
to be terminated after giving at least 30 days’ notice to the Optionees to whom
such Options have been granted.

 

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7.3 Dissolution and Liquidation. If the Board adopts a plan of dissolution and
liquidation that is approved by the shareholders of the Company, the Committee
shall give each Optionee written notice of such event at least ten days prior to
its effective date, and the rights of all Optionees shall become immediately
nonforfeitable and fully exercisable or vested (to the extent permitted under
federal or state securities laws).

 

7.4 Limits on Adjustments. Any issuance by the Company of stock of any class, or
securities convertible into shares of stock of any class, shall not affect, and
no adjustment by reason thereof shall be made with respect to, the number or
price of shares of the Common Stock subject to any Option, except as
specifically provided otherwise in this Article. The grant of Options pursuant
to the Plan shall not affect in any way the right or power of the Company to
make adjustments, reclassifications, reorganizations or changes of its capital
or business structure or to merge, consolidate or dissolve, or to liquidate,
sell or transfer all or any part of its business or assets. All adjustments the
Committee makes under this Article shall be conclusive.

 

ARTICLE VIII

Agreement by Optionee and Securities Registration

 

8.1 Agreement. If, in the opinion of counsel to the Company, such action is
necessary or desirable, no Options shall be granted to any Optionee and no
Option shall be exercisable unless, at the time of grant or exercise, as
applicable, such Optionee (i) represents and warrants that he will acquire the
Common Stock for investment only and not for purposes of resale or distribution,
and (ii) makes such further representations and warranties as are deemed
necessary or desirable by counsel to the Company with regard to holding and
resale of the Common Stock. The Optionee shall, upon the request of the
Committee, execute and deliver to the Company an agreement or affidavit to such
effect. Should the Committee have reasonable cause to believe that such Optionee
did not execute such agreement or affidavit in good faith, the Company shall not
be bound by the grant of the Option or by the exercise of the Option. All
certificates representing shares of Common Stock issued pursuant to the Plan
shall be marked with the following restrictive legend or similar legend, if such
marking, in the opinion of counsel to the Company, is necessary or desirable:

 

The shares represented by this certificate [have not been registered under the
Securities Act of 1933, as amended, or the securities laws of any state and] are
held by an “affiliate” (as such term is defined in Rule 144 promulgated by the
Securities and Exchange Commission under the Securities Act of 1933, as amended)
of the Corporation. Accordingly, these shares may not be sold, hypothecated,
pledged or otherwise transferred except (i) pursuant to an effective
registration statement under the Securities Act of 1933, as amended, and any
applicable securities laws or regulations of any state with respect to such
shares, (ii) in accordance with Securities and Exchange Commission Rule 144, or
(iii) upon the issuance to the Corporation of a favorable opinion of counsel or
the submission to the Corporation of such other evidence as may be satisfactory
to the Corporation that such proposed sale, assignment, encumbrance or other
transfer will not be in violation of the Securities Act of 1933, as amended, or
any applicable securities laws of any state or any rules or regulations
thereunder. Any attempted transfer of this certificate or the shares represented
hereby which is in violation of the preceding restrictions will not be
recognized by the Corporation, nor will any transferee be recognized as the
owner thereof by the Corporation.

 

If the Common Stock is (A) held by an Optionee who ceases to be an “affiliate,”
as that term is defined in Rule 144 of the 1933 Act, or (B) registered under the
1933 Act and all applicable state securities laws and regulations as provided in
Section 8.2, the Committee, in its discretion and with the advice of counsel,
may dispense with or authorize the removal of the restrictive legend set forth
above or the portion thereof which is inapplicable.

 

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8.2 Registration. In the event that the Company in its sole discretion shall
deem it necessary or advisable to register, under the 1933 Act or any state
securities laws or regulations, any shares with respect to which Options have
been granted hereunder, then the Company shall take such action at its own
expense before delivery of the certificates representing such shares to an
Optionee. In such event, and if the shares of Common Stock of the Company shall
be listed on any national securities exchange or on Nasdaq at the time of the
exercise of any Option, the Company shall make prompt application at its own
expense for the listing on such stock exchange or Nasdaq of the shares of Common
Stock to be issued.

 

ARTICLE IX

Effective Date

 

The Plan shall be effective as of the Effective Date, and no Options shall be
granted hereunder prior to said date. Adoption of the Plan shall be approved by
the shareholders of the Company at the earlier of (i) the annual meeting of the
shareholders of the Company which immediately follows the date of the first
grant or award of Options hereunder, or (ii) 12 months after the adoption of the
Plan by the Board. Shareholder approval shall be made by a majority of the votes
cast at a duly held meeting at which a quorum representing a majority of all
outstanding voting stock is, either in person or by proxy, present and voting on
the Plan, or by the written consent in lieu of a meeting of the holders of a
majority of the outstanding voting stock or such greater number of shares of
voting stock as may be required by the Company’s articles or certificate of
incorporation and bylaws and by applicable law; provided, however, such
shareholder approval, whether by vote or by written consent in lieu of a
meeting, must be solicited substantially in accordance with the rules and
regulations in effect under Section 14(a) of the 1934 Act. Failure to obtain
such approval shall render the Plan and any Options granted hereunder null and
void ab initio.

 

ARTICLE X

Amendment and Termination

 

10.1 Amendment and Termination By the Board. Subject to Section 10.2 below, the
Board shall have the power at any time to add to, amend, modify or repeal any of
the provisions of the Plan, to suspend the operation of the entire Plan or any
of its provisions for any period or periods or to terminate the Plan in whole or
in part. In the event of any such action, the Committee shall prepare written
procedures which, when approved by the Board, shall govern the administration of
the Plan resulting from such addition, amendment, modification, repeal,
suspension or termination.

 

10.2 Restrictions on Amendment and Termination. Notwithstanding the provisions
of Section 10.1 above, the following restrictions shall apply to the Board’s
authority under Section 10.1 above:

 

(a) Prohibition Against Adverse Affects on Outstanding Options. No addition,
amendment, modification, repeal, suspension or termination shall adversely
affect, in any way, the rights of the Optionees who have outstanding Options
without the consent of such Optionees;

 

11

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

(b) Shareholder Approval Required for Certain Modifications. No modification or
amendment of the Plan may be made without the prior approval of the shareholders
of the Company if such approval is necessary with respect to tax, securities or
other applicable laws or the applicable rules or regulations of any stock
exchange or Nasdaq.

 

10.3 Expiration of Plan. No Option shall be granted hereunder after ten years
from the earlier of (a) the date the Plan is approved by the shareholders, or
(b) the date the Plan is adopted by the Board.

 

ARTICLE XI

Miscellaneous Provisions

 

11.1 Application of Funds. The proceeds received by the Company from the sale of
the Common Stock subject to the Options granted hereunder will be used for
general corporate purposes.

 

11.2 Notices. All notices or other communications by an Optionee to the
Committee pursuant to or in connection with the Plan shall be deemed to have
been duly given when received in the form specified by the Committee at the
location, or by the person, designated by the Committee for the receipt thereof.

 

11.3 Term of Plan. Subject to the terms of Article X, the Plan shall terminate
upon the later of (i) the complete exercise or lapse of the last outstanding
Option, or (ii) the last date upon which Options may be granted hereunder.

 

11.4 Compliance with Rule 16b-3. This Plan is intended to be in compliance with
the requirements of Rule 16b-3 as promulgated under Section 16 of the 1934 Act.

 

11.5 Governing Law. The Plan shall be governed by and construed in accordance
with the laws of the State of Alabama.

 

11.6 Additional Provisions By Committee. The Option Agreements authorized under
the Plan may contain such other provisions, including, without limitation,
restrictions upon the exercise of an Option, as the Committee shall deem
advisable.

 

11.7 Plan Document Controls. In the event of any conflict between the provisions
of an Option Agreement and the Plan, the Plan shall control.

 

11.8 Gender and Number. Wherever applicable, the masculine pronoun shall include
the feminine pronoun, and the singular shall include the plural.

 

11.9 Headings. The titles in this Plan are inserted for convenience of
reference; they constitute no part of the Plan and are not to be considered in
the construction hereof.

 

12

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

11.10 Legal References. Any references in this Plan to a provision of law which
is, subsequent to the Effective Date of this Plan, revised, modified, finalized
or redesignated, shall automatically be deemed a reference to such revised,
modified, finalized or redesignated provision of law.

 

11.11 No Rights to Perform Services. Nothing contained in the Plan, or any
modification thereof, shall be construed to give any individual any rights to
perform services for the Company or any parent or subsidiary corporation of the
Company.

 

11.12 Unfunded Arrangement. The Plan shall not be funded, and except for
reserving a sufficient number of authorized shares to the extent required by law
to meet the requirements of the Plan, the Company shall not be required to
establish any special or separate fund or to make any other segregation of
assets to assure the payment of any grant under the Plan.

 

ADOPTED BY BOARD OF DIRECTORS ON JANUARY 24, 2005,

EFFECTIVE AS OF MAY 18, 2005

 

APPROVED BY SHAREHOLDERS ON MAY 18, 2005

 

13

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APPENDIX A

 

NONQUALIFIED STOCK OPTION NO.             

 

ADTRAN, INC.

2005 DIRECTORS STOCK OPTION PLAN

 

NONQUALIFIED STOCK OPTION AGREEMENT

 

This Nonqualified Stock Option Agreement (the “Agreement”) is entered into as of
the          day of                     ,             , by and between ADTRAN,
Inc. (the “Company”) and                                         
                 (“Optionee”).

 

W I T N E S S E T H:

 

WHEREAS, the Company has adopted the ADTRAN, Inc. 2005 Directors Stock Option
Plan (the “Plan”) which is administered by a committee appointed by the
Company’s Board of Directors (the “Committee”); and

 

WHEREAS, effective as of                     ,             , the Committee
granted to Optionee a nonqualified stock option under, and in accordance with,
the terms of the Plan to reward Optionee for his efforts on behalf of the
Company and to encourage his continued loyalty and diligence; and

 

WHEREAS, to comply with the terms of the Plan and to further the interests of
the Company and Optionee, the parties hereto have set forth the terms of such
option in writing in this Agreement;

 

NOW, THEREFORE, for and in consideration of the premises and mutual promises
herein contained, and for other good and valuable consideration, the receipt and
sufficiency of which are acknowledged, the parties agree as follows:

 

1. Grant of Option. Effective as of                     ,             , the
Optionee was granted a nonqualified stock option under the Plan. Under that
option and subject to the terms and conditions set forth herein, Optionee shall
have the right to purchase 10,000 shares of the $0.01 par value common stock of
the Company (the “Common Stock”); such 10,000 shares hereinafter are referred to
as the “Optioned Shares”, and this option hereinafter is referred to as the
“Option”. The Option is intended to be a nonqualified stock option.

 

2. Option Price. The price per share for each of the Optioned Shares shall be
$                     (the “Option Price”), which is equal to 100% of the per
share Fair Market Value of the Optioned Shares on the date of grant specified
above.

 

3. Exercise of Option.

 

(a) General. The Option may be exercised by Optionee’s delivery to the Secretary
of the Company of a written notice of exercise executed by Optionee (the “Notice
of

 

14

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

Exercise”). The Notice of Exercise shall be substantially in the form set forth
as Exhibit A, attached hereto and made a part hereof, and shall identify the
Option and the number of Optioned Shares that are being exercised.

 

(b) Beginning of Exercise Period. The Option first shall become exercisable
(i.e., vested) as of the first anniversary of the date of grant of the Option;
provided, if Optionee ceases to be a Director, his rights with regard to all
non-vested Options under this schedule shall cease immediately. Notwithstanding
the foregoing, the Option shall become 100% vested immediately upon the death or
Disability of Optionee or upon a Change of Control of the Company.

 

(c) Partial Exercise. Optionee may exercise the Option for less than the full
number of exercisable Optioned Shares, but such exercise may not be made for
less than 100 shares or the total remaining shares subject to the Option, if
less than 100 shares.

 

4. Termination of Option. Notwithstanding any provisions to the contrary herein,
the Option shall not be exercisable either in whole or in part after the
earliest of:

 

(a) Ten years from the date of grant;

 

(b) The date that is immediately prior to the first anniversary of the date on
which Optionee dies (i) while a Director, (ii) within the three-month period
that begins on the date on which Optionee ceases to be a Director for any reason
other than death or Disability or (iii) within the one-year period that begins
on the date on which Optionee ceases to be a Director due to Disability;

 

(c) The date of expiration of the one-year period that begins on the date on
which Optionee ceases to be a Director due to Disability; provided, if Optionee
dies during such one-year period, the terms of subsection (b) shall control;

 

(d) The date of expiration of the three-month period that begins on the date on
which Optionee ceases to be a Director for any reason other than death or
Disability; provided, if Optionee dies during such one-year period, the terms of
subsection (b) shall control;

 

(e) The date on which the Company gives notice (or is deemed to have given
notice) to Optionee of his termination of service as a director for Cause, as
described in Section 6.9(a) of the Plan; or

 

(f) Such other earlier date as may be required under the terms of the Plan.

 

5. Option Non-Transferable. The Option shall not be transferable by Optionee
other than by will or by the laws of descent and distribution, and any purported
transfer shall be null and void. During the lifetime of Optionee, the Option
shall be exercisable only by Optionee (or, if he becomes disabled or otherwise
incapacitated, by the guardian of his property or his duly appointed
attorney-in-fact), and shall not be assignable or transferable by Optionee and,
subject to Section 6 hereof, no other person shall acquire any rights in the
Option.

 

15

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

6. Death of Optionee and Transfer of Option. In the event of the death of
Optionee while a Director, within a period of one year after the termination of
his service as a Director due to Disability, or within a three-month period
after the director ceases to be a Director for any reason other than for Cause,
all or any of the unexercised portion of the Option owned by the deceased
Optionee may be exercised by Optionee’s Beneficiary at any time prior to the
first anniversary of the date of the death of Optionee, but in no event later
than the date as of which such Option expires pursuant to Section 4 hereof. Such
exercise shall be effected in accordance with the terms hereof as if such
Beneficiary was Optionee herein. The Optionee agrees that the following
individual shall initially be his Beneficiary:

 

Name:   __________________________________________ Address:  
__________________________________________    
__________________________________________    
__________________________________________

 

Any subsequent modification of the Optionee’s Beneficiary shall be made pursuant
to the terms and provisions of the Plan.

 

7. Medium and Time of Payment of Option Price.

 

(a) General. The Option Price shall be payable by Optionee (or his Beneficiary
in accordance with Section 6 hereof) upon exercise of the Option and shall be
paid in cash, in shares of the Common Stock, or any combination thereof.

 

(b) Payment in Shares of the Common Stock. If Optionee pays all or part of the
Option Price with shares of the Common Stock, the following conditions shall
apply:

 

(i) Optionee shall deliver to the Secretary of the Company shares of the Common
Stock that have been owned by the Optionee for at least six months, guaranteed
or notarized, with such documentation as the Committee may require, or in such
other manner as the Committee may require;

 

(ii) Such shares shall be valued on the basis of the Fair Market Value of the
Common Stock on the date of exercise pursuant to the terms of the Plan; and

 

(iii) The value of such Common Stock shall be less than or equal to the Option
Price. If Optionee delivers Common Stock with a value that is less than the
Option Price, then Optionee shall pay the balance of the Option Price in cash.

 

8. Agreement of Optionee. Optionee acknowledges that he has read Article VIII of
the Plan and understands that certain restrictions may apply with respect to
shares of the Common Stock acquired by him pursuant to his exercise of the
Option (including restrictions on resale applicable to “affiliates” under Rule
144 of the Securities Act of 1933, as amended, and restrictions on resale
applicable to shares of the Common Stock that have not been registered under the
Securities Act of 1933, as amended, and applicable state securities laws).
Optionee hereby agrees to execute such documents and take such actions as the
Company may require with respect to state and federal securities laws and any
restrictions on the resale of such shares which may pertain.

 

16

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

9. Delivery of Stock Certificates. As promptly as practical after the date of
exercise of the Option and the receipt by the Company of full payment therefor,
and satisfaction of any other conditions provided under the Plan, the Company
shall deliver to Optionee a stock certificate representing the shares of the
Common Stock acquired by Optionee pursuant to his exercise of the Option.

 

10. Notices. All notices or other communications hereunder shall be in writing
and shall be effective (i) when personally delivered by courier (including
overnight carriers) or otherwise to the party to be given such notice or other
communication or (ii) on the third business day following the date deposited in
the United States mail if such notice or other communication is sent by
certified or registered mail with return receipt requested and postage thereon
fully prepaid. The addresses for such notices shall be as follows:

 

If to the Company:

 

ADTRAN, Inc.

Attention: Corporate Secretary

901 Explorer Boulevard

Huntsville, AL 35814-4000

 

If to Optionee:

 

__________________________ __________________________ __________________________
__________________________

 

Any party hereto, by notice to the other party hereunder, may change its address
for receipt of notices hereunder.

 

11. Other Terms and Conditions. In addition to the terms and conditions set
forth herein, the Option is subject to and governed by the other terms and
conditions set forth in the Plan, each of which is hereby incorporated by
reference. In the event of any conflict between the provisions of this Agreement
and the Plan, the Plan shall control.

 

12. Miscellaneous.

 

(a) The granting of the Option and the execution of this Agreement shall not
give Optionee any rights to similar grants in future years or any right to be
retained in the service of the Company or to interfere in any way with the right
of the Company to terminate Optionee’s services at any time.

 

(b) Unless and except as otherwise specifically provided in this Agreement,
Optionee shall have no rights of a stockholder with respect to any shares
covered by the Option until the date of issuance of a stock certificate to him
for such shares.

 

17

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

(c) If any term, provision, covenant or restriction contained in this Agreement
is held by a court or a federal regulatory agency of competent jurisdiction to
be invalid, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions contained in this Agreement shall remain in full
force and effect, and shall in no way be affected, impaired or invalidated. If
for any reason such court or regulatory agency determines that this Agreement
will not permit Optionee to acquire the full number of Optioned Shares as
provided in Section 1 hereof, it is the express intention of the Company to
allow Optionee to acquire such lesser number of shares as may be permissible
without any amendment or modification hereof.

 

(d) This Agreement shall be construed and enforced in accordance with the laws
of the State of Alabama.

 

(e) This Agreement, together with the Plan, contains the entire understanding
between the parties and supersedes any prior understanding and agreements
between them representing the subject matter hereof. There are no
representations, agreements, arrangements or understandings, oral or written,
between and among the parties hereto relating to the subject matter hereof which
are not fully expressed herein, or in the Plan.

 

(f) Section and other headings contained in this Agreement are for reference
purposes only and are in no way intended to describe, interpret, define or limit
the scope, extent or intent of this Agreement or any provision hereof.

 

(g) This Agreement may be executed in multiple counterparts, each of which shall
be deemed an original and all of which shall constitute one agreement, and the
signatures of any party or any counterpart shall be deemed to be a signature to,
and may be appended to, any other counterpart.

 

(h) All capitalized terms in this Agreement shall be construed in accordance
with their defined terms under the Plan.

 

18

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

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
first date written above.

 

ADTRAN, INC. By:  

 

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

Title:  

 

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

OPTIONEE:

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

Signature

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

Print or type name

 

 

19

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

EXHIBIT A

 

ADTRAN, INC.

2005 DIRECTORS STOCK OPTION PLAN

 

NOTICE OF EXERCISE FOR NONQUALIFIED STOCK OPTION AGREEMENT

 

This Notice of Exercise is given pursuant to the terms of the Nonqualified Stock
Option Agreement, dated                     ,             , between ADTRAN, Inc.
(the “Company”) and the undersigned Optionee (the “Agreement”), which Agreement
represents Nonqualified Stock Option No.                      and which is made
a part hereof and incorporated herein by reference.

 

EXERCISE OF OPTION. Optionee hereby exercises his option to purchase
                     of his Optioned Shares. Optionee hereby delivers, together
with this written statement of exercise, the full Option Price with respect to
the exercised Optioned Shares, which consists of: [COMPLETE ONLY ONE]

 

  ¨ cash in the total amount of $                    .

 

  ¨              shares of the Company’s Common Stock.

 

  ¨ cash in the total amount of $                     and              shares of
the Company’s Common Stock.

 

ACKNOWLEDGMENT. Optionee hereby acknowledges that, to the extent he is an
“affiliate” of the Company (as that term is defined in Rule 144 promulgated
under the Securities Act of 1933, as amended) or to the extent that the Optioned
Shares have not been registered under the Securities Act of 1933, as amended, or
applicable state securities laws, any shares of the Company’s Common Stock
acquired by him as a result of his exercise of the Option pursuant to this
Notice are subject to, and the certificates representing such shares shall be
legended to reflect, certain trading restrictions under applicable securities
laws (including particularly the Securities and Exchange Commission’s Rule 144),
all as described in Article VIII of the Plan, and Optionee hereby agrees to
comply with all such restrictions and to execute such documents or take such
other actions as the Company may require in connection with such restrictions.

 

Executed this          day of                     ,             .

 

OPTIONEE:

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

Signature

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

Print or Type Name

 

ADTRAN, Inc. hereby acknowledges receipt of this Notice of Exercise and receipt
of payment in the form and amount indicated above, all on this          day of
                    ,             .

 

ADTRAN, INC. By:  

 

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

Title:  

 

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

 

20

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

APPENDIX B

 

NONQUALIFIED STOCK OPTION NO.             

 

ADTRAN, INC.

2005 DIRECTORS STOCK OPTION PLAN

 

NONQUALIFIED STOCK OPTION AGREEMENT

 

This Nonqualified Stock Option Agreement (the “Agreement”) is entered into as of
the          day of                     ,             , by and between ADTRAN,
Inc. (the “Company”) and                                         
                 (“Optionee”).

 

W I T N E S S E T H:

 

WHEREAS, the Company has adopted the ADTRAN, Inc. 2005 Directors Stock Option
Plan (the “Plan”) which is administered by a committee appointed by the
Company’s Board of Directors (the “Committee”); and

 

WHEREAS, effective as of December 31,             , the Committee granted to
Optionee a nonqualified stock option under, and in accordance with, the terms of
the Plan to reward Optionee for his efforts on behalf of the Company and to
encourage his continued loyalty and diligence; and

 

WHEREAS, to comply with the terms of the Plan and to further the interests of
the Company and Optionee, the parties hereto have set forth the terms of such
option in writing in this Agreement;

 

NOW, THEREFORE, for and in consideration of the premises and mutual promises
herein contained, and for other good and valuable consideration, the receipt and
sufficiency of which are acknowledged, the parties agree as follows:

 

1. Grant of Option. Effective as of December 31,             , the Optionee was
granted a nonqualified stock option under the Plan. Under that option and
subject to the terms and conditions set forth herein, Optionee shall have the
right to purchase 5,000 shares of the $0.01 par value common stock of the
Company (the “Common Stock”); such 5,000 shares hereinafter are referred to as
the “Optioned Shares”, and this option hereinafter is referred to as the
“Option”. The Option is intended to be a nonqualified stock option.

 

2. Option Price. The price per share for each of the Optioned Shares shall be
$                     (the “Option Price”), which is equal to 100% of the per
share Fair Market Value of the Optioned Shares on the date of grant specified
above.

 

3. Exercise of Option.

 

(a) General. The Option may be exercised by Optionee’s delivery to the Secretary
of the Company of a written notice of exercise executed by Optionee (the “Notice
of

 

21

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

Exercise”). The Notice of Exercise shall be substantially in the form set forth
as Exhibit A, attached hereto and made a part hereof, and shall identify the
Option and the number of Optioned Shares that are being exercised.

 

(b) Beginning of Exercise Period. The Option first shall become exercisable
(i.e., vested) as of the first anniversary of the date of grant of the Option;
provided, if Optionee ceases to be a Director, his rights with regard to all
non-vested Options under this schedule shall cease immediately. Notwithstanding
the foregoing, the Option shall become 100% vested immediately upon the death or
Disability of Optionee or upon a Change of Control of the Company.

 

(c) Partial Exercise. Optionee may exercise the Option for less than the full
number of exercisable Optioned Shares, but such exercise may not be made for
less than 100 shares or the total remaining shares subject to the Option, if
less than 100 shares.

 

4. Termination of Option. Notwithstanding any provisions to the contrary herein,
the Option shall not be exercisable either in whole or in part after the
earliest of:

 

(a) Ten years from the date of grant;

 

(b) The date that is immediately prior to the first anniversary of the date on
which Optionee dies (i) while a Director, (ii) within the three-month period
that begins on the date on which Optionee ceases to be a Director for any reason
other than death or Disability or (iii) within the one-year period that begins
on the date on which Optionee ceases to be a Director due to Disability;

 

(c) The date of expiration of the one-year period that begins on the date on
which Optionee ceases to be a Director due to Disability; provided, if Optionee
dies during such one-year period, the terms of subsection (b) shall control;

 

(d) The date of expiration of the three-month period that begins on the date on
which Optionee ceases to be a Director for any reason other than death or
Disability; provided, if Optionee dies during such one-year period, the terms of
subsection (b) shall control;

 

(e) The date on which the Company gives notice (or is deemed to have given
notice) to Optionee of his termination of service as a Director for Cause, as
described in Section 6.9(a) of the Plan; or

 

(f) Such other earlier date as may be required under the terms of the Plan.

 

5. Option Non-Transferable. The Option shall not be transferable by Optionee
other than by will or by the laws of descent and distribution, and any purported
transfer shall be null and void. During the lifetime of Optionee, the Option
shall be exercisable only by Optionee (or, if he becomes disabled or otherwise
incapacitated, by the guardian of his property or his duly appointed
attorney-in-fact), and shall not be assignable or transferable by Optionee and,
subject to Section 6 hereof, no other person shall acquire any rights in the
Option.

 

22

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

6. Death of Optionee and Transfer of Option. In the event of the death of
Optionee while a Director, within a period of one year after the termination of
his service as a Director due to Disability, or within a three-month period
after the director ceases to be a Director for any reason other than for Cause,
all or any of the unexercised portion of the Option owned by the deceased
Optionee may be exercised by Optionee’s Beneficiary at any time prior to the
first anniversary of the date of the death of Optionee, but in no event later
than the date as of which such Option expires pursuant to Section 4 hereof. Such
exercise shall be effected in accordance with the terms hereof as if such
Beneficiary was Optionee herein. The Optionee agrees that the following
individual shall initially be his Beneficiary:

 

Name:   __________________________________________ Address:  
__________________________________________    
__________________________________________    
__________________________________________

 

Any subsequent modification of the Optionee’s Beneficiary shall be made pursuant
to the terms and provisions of the Plan.

 

7. Medium and Time of Payment of Option Price.

 

(a) General. The Option Price shall be payable by Optionee (or his Beneficiary
in accordance with Section 6 hereof) upon exercise of the Option and shall be
paid in cash, in shares of the Common Stock, or any combination thereof.

 

(b) Payment in Shares of the Common Stock. If Optionee pays all or part of the
Option Price with shares of the Common Stock, the following conditions shall
apply:

 

(i) Optionee shall deliver to the Secretary of the Company shares of the Common
Stock that have been owned by the Optionee for at least six months, guaranteed
or notarized, with such documentation as the Committee may require, or in such
other manner as the Committee may require;

 

(ii) Such shares shall be valued on the basis of the fair market value of the
Common Stock on the date of exercise pursuant to the terms of the Plan; and

 

(iii) The value of such Common Stock shall be less than or equal to the Option
Price. If Optionee delivers Common Stock with a value that is less than the
Option Price, then Optionee shall pay the balance of the Option Price in cash.

 

8. Agreement of Optionee. Optionee acknowledges that he has read Article VIII of
the Plan and understands that certain restrictions may apply with respect to
shares of the Common Stock acquired by him pursuant to his exercise of the
Option (including restrictions on resale applicable to “affiliates” under Rule
144 of the Securities Act of 1933, as amended, and restrictions on resale
applicable to shares of the Common Stock that have not been registered under the
Securities Act of 1933, as amended, and applicable state securities laws).
Optionee hereby agrees to execute such documents and take such actions as the
Company may require with respect to state and federal securities laws and any
restrictions on the resale of such shares which may pertain.

 

23

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

9. Delivery of Stock Certificates. As promptly as practical after the date of
exercise of the Option and the receipt by the Company of full payment therefor,
and satisfaction of any other conditions provided under the Plan, the Company
shall deliver to Optionee a stock certificate representing the shares of the
Common Stock acquired by Optionee pursuant to his exercise of the Option.

 

10. Notices. All notices or other communications hereunder shall be in writing
and shall be effective (i) when personally delivered by courier (including
overnight carriers) or otherwise to the party to be given such notice or other
communication or (ii) on the third business day following the date deposited in
the United States mail if such notice or other communication is sent by
certified or registered mail with return receipt requested and postage thereon
fully prepaid. The addresses for such notices shall be as follows:

 

If to the Company:

 

ADTRAN, Inc.

Attention: Corporate Secretary

901 Explorer Boulevard

Huntsville, AL 35814-4000

 

If to Optionee:

 

_________________________________ _________________________________
_________________________________ _________________________________

 

Any party hereto, by notice to the other party hereunder, may change its address
for receipt of notices hereunder.

 

11. Other Terms and Conditions. In addition to the terms and conditions set
forth herein, the Option is subject to and governed by the other terms and
conditions set forth in the Plan, which is hereby incorporated by reference. In
the event of any conflict between the provisions of this Agreement and the Plan,
the Plan shall control.

 

12. Miscellaneous.

 

(a) The granting of the Option and the execution of this Agreement shall not
give Optionee any rights to similar grants in future years or any right to be
retained in the service of the Company or to interfere in any way with the right
of the Company to terminate Optionee’s services at any time.

 

(b) Unless and except as otherwise specifically provided in this Agreement,
Optionee shall have no rights of a stockholder with respect to any shares
covered by the Option until the date of issuance of a stock certificate to him
for such shares.

 

24

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

(c) If any term, provision, covenant or restriction contained in this Agreement
is held by a court or a federal regulatory agency of competent jurisdiction to
be invalid, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions contained in this Agreement shall remain in full
force and effect, and shall in no way be affected, impaired or invalidated. If
for any reason such court or regulatory agency determines that this Agreement
will not permit Optionee to acquire the full number of Optioned Shares as
provided in Section 1 hereof, it is the express intention of the Company to
allow Optionee to acquire such lesser number of shares as may be permissible
without any amendment or modification hereof.

 

(d) This Agreement shall be construed and enforced in accordance with the laws
of the State of Alabama.

 

(e) This Agreement, together with the Plan, contains the entire understanding
between the parties and supersedes any prior understanding and agreements
between them representing the subject matter hereof. There are no
representations, agreements, arrangements or understandings, oral or written,
between and among the parties hereto relating to the subject matter hereof which
are not fully expressed herein, or in the Plan.

 

(f) Section and other headings contained in this Agreement are for reference
purposes only and are in no way intended to describe, interpret, define or limit
the scope, extent or intent of this Agreement or any provision hereof.

 

(g) This Agreement may be executed in multiple counterparts, each of which shall
be deemed an original and all of which shall constitute one agreement, and the
signatures of any party or any counterpart shall be deemed to be a signature to,
and may be appended to, any other counterpart.

 

(h) All capitalized terms in this Agreement shall be construed in accordance
with their defined terms under the Plan.

 

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
first date written above.

 

ADTRAN, INC. By:  

 

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

Title:  

 

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

OPTIONEE:

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

Signature

 

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

Print or type name

 

25

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

EXHIBIT A

 

ADTRAN, INC.

2005 DIRECTORS STOCK OPTION PLAN

 

NOTICE OF EXERCISE FOR NONQUALIFIED STOCK OPTION AGREEMENT

 

This Notice of Exercise is given pursuant to the terms of the Nonqualified Stock
Option Agreement, dated                     ,             , between ADTRAN, Inc.
(the “Company”) and the undersigned Optionee (the “Agreement”), which Agreement
represents Nonqualified Stock Option No.              and which is made a part
hereof and incorporated herein by reference.

 

EXERCISE OF OPTION. Optionee hereby exercises his option to purchase
             of his Optioned Shares. Optionee hereby delivers, together with
this written statement of exercise, the full Option Price with respect to the
exercised Optioned Shares, which consists of: [COMPLETE ONLY ONE]

 

  ¨ cash in the total amount of $                    .

 

  ¨              shares of the Company’s Common Stock.

 

  ¨ cash in the total amount of $                     and              shares of
the Company’s Common Stock.

 

ACKNOWLEDGMENT. Optionee hereby acknowledges that, to the extent he is an
“affiliate” of the Company (as that term is defined in Rule 144 promulgated
under the Securities Act of 1933, as amended) or to the extent that the Optioned
Shares have not been registered under the Securities Act of 1933, as amended, or
applicable state securities laws, any shares of the Company’s Common Stock
acquired by him as a result of his exercise of the Option pursuant to this
Notice are subject to, and the certificates representing such shares shall be
legended to reflect, certain trading restrictions under applicable securities
laws (including particularly the Securities and Exchange Commission’s Rule 144),
all as described in Article VIII of the Plan, and Optionee hereby agrees to
comply with all such restrictions and to execute such documents or take such
other actions as the Company may require in connection with such restrictions.

 

Executed this          day of                     ,             .

 

OPTIONEE:

 

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Signature

 

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Print or Type Name

 

ADTRAN, Inc. hereby acknowledges receipt of this Notice of Exercise and receipt
of payment in the form and amount indicated above, all on this          day of
                    ,             .

 

ADTRAN, INC. By:  

 

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Title:  

 

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