Applied Signal Technology, Inc.
Exhibit 10.11

Applied Signal Technology, Inc. 2000 Stock Option Plan

 

1. Establishment, Purpose and Term of Plan.

1.1 Establishment. The Applied Signal Technology, Inc. 2000 Stock Option Plan
(the "Plan") is hereby established effective as of May 11, 2000.

1.2 Purpose. The purpose of the Plan is to advance the interests of the
Participating Company Group and its shareholders by providing an incentive to
attract, retain and reward persons performing services for the Participating
Company Group and by motivating such persons to contribute to the growth and
profitability of the Participating Company Group.

1.3 Term of Plan. The Plan shall continue in effect until the earlier of its
termination by the Board or the date on which all of the shares of Stock
available for issuance under the Plan have been issued and all restrictions on
such shares under the terms of the Plan and the agreements evidencing Options
granted under the Plan have lapsed. However, all Options shall be granted, if at
all, within ten (10) years from the earlier of the date the Plan is adopted by
the Board or the date the Plan is duly approved by the shareholders of the
Company.

2. Definitions and Construction.

2.1 Definitions. Whenever used herein, the following terms shall have their
respective meanings set forth below:

> (a) "Board" means the Board of Directors of the Company. If one or more
> Committees have been appointed by the Board to administer the Plan, "Board"
> also means such Committee(s).

> (b) "Code" means the Internal Revenue Code of 1986, as amended, and any
> applicable regulations promulgated thereunder.

> (c) "Committee" means the Compensation Committee or other committee of the
> Board duly appointed to administer the Plan and having such powers as shall be
> specified by the Board. Unless the powers of the Committee have been
> specifically limited, the Committee shall have all of the powers of the Board
> granted herein, including, without limitation, the power to amend or terminate
> the Plan at any time, subject to the terms of the Plan and any applicable
> limitations imposed by law.

> (d) "Company" means Applied Signal Technology, Inc., a California corporation,
> or any successor corporation thereto.

> (e) "Consultant" means a person engaged to provide consulting or advisory
> services (other than as an Employee or a Director) to a Participating Company,
> provided that the identity of such person, the nature of such services or the
> entity to which such services are provided would not preclude the Company from
> offering or selling securities to such person pursuant to the Plan in reliance
> on registration on a Form S-8 Registration Statement under the Securities Act.

> (f) "Director" means a member of the Board or of the board of directors of any
> other Participating Company.

> (g) "Disability" means the permanent and total disability of the Optionee
> within the meaning of Section 22(e)(3) of the Code.

> (h) "Employee" means any person treated as an employee (excluding, however,
> any person who is an officer of the Company or a Director) in the records of a
> Participating Company. The Company shall determine in good faith and in the
> exercise of its discretion whether an individual has become or has ceased to
> be an Employee and the effective date of such individual’s employment or
> termination of employment, as the case may be. For purposes of an individual’s
> rights, if any, under the Plan as of the time of the Company’s determination,
> all such determinations by the Company shall be final, binding and conclusive,
> notwithstanding that the Company or any court of law or governmental agency
> subsequently makes a contrary determination.

> (i) "Exchange Act" means the Securities Exchange Act of 1934, as amended.

> (j) "Fair Market Value" means, as of any date, the value of a share of Stock
> or other property as determined by the Board, in its discretion, or by the
> Company, in its discretion, if such determination is expressly allocated to
> the Company herein, subject to the following:

> > (i) If, on such date, the Stock is listed on a national or regional
> > securities exchange or market system, the Fair Market Value of a share of
> > Stock shall be the closing price of a share of Stock (or the mean of the
> > closing bid and asked prices of a share of Stock if the Stock is so quoted
> > instead) as quoted on the Nasdaq National Market, The Nasdaq SmallCap Market
> > or such other national or regional securities exchange or market system
> > constituting the primary market for the Stock, as reported in The Wall
> > Street Journal or such other source as the Company deems reliable. If the
> > relevant date does not fall on a day on which the Stock has traded on such
> > securities exchange or market system, the date on which the Fair Market
> > Value shall be established shall be the last day on which the Stock was so
> > traded prior to the relevant date, or such other appropriate day as shall be
> > determined by the Board, in its discretion.

> > (ii) If, on such date, the Stock is not listed on a national or regional
> > securities exchange or market system, the Fair Market Value of a share of
> > Stock shall be as determined by the Board in good faith without regard to
> > any restriction other than a restriction which, by its terms, will never
> > lapse.

> (k) "Nonstatutory Stock Option" means an Option not intended to be (as set
> forth in the Option Agreement) or which does not qualify as an incentive stock
> option within the meaning of Section 422(b) of the Code.

> (l) "Option" means a right to purchase Stock (subject to adjustment as
> provided in Section 4.2) pursuant to the terms and conditions of the Plan. All
> Options shall be Nonstatutory Stock Options.

> (m) "Option Agreement" means a written agreement between the Company and an
> Optionee setting forth the terms, conditions and restrictions of the Option
> granted to the Optionee and any shares acquired upon the exercise thereof. An
> Option Agreement may consist of a form of "Notice of Grant of Stock Option"
> and a form of "Stock Option Agreement" incorporated therein by reference, or
> such other form or forms as the Board may approve from time to time.

> (n) "Optionee" means a person who has been granted one or more Options.

> (o) "Parent Corporation" means any present or future "parent corporation" of
> the Company, as defined in Section 424(e) of the Code.

> (p) "Participating Company" means the Company or any Parent Corporation or
> Subsidiary Corporation.

> (q) "Participating Company Group" means, at any point in time, all
> corporations collectively which are then Participating Companies.

> (r) "Securities Act" means the Securities Act of 1933, as amended.

> (s) "Service" means an Optionee’s employment or service with the Participating
> Company Group, whether in the capacity of an Employee or a Consultant. An
> Optionee’s Service shall not be deemed to have terminated merely because of a
> change in the capacity in which the Optionee renders Service to the
> Participating Company Group or a change in the Participating Company for which
> the Optionee renders such Service, provided that there is no interruption or
> termination of the Optionee’s Service. Furthermore, an Optionee’s Service with
> the Participating Company Group shall not be deemed to have terminated if the
> Optionee takes any military leave, sick leave, or other bona fide leave of
> absence approved by the Company. Notwithstanding the foregoing, unless
> otherwise designated by the Company or required by law, a leave of absence
> shall not be treated as Service for purposes of determining vesting under the
> Optionee’s Option Agreement. The Optionee’s Service shall be deemed to have
> terminated either upon an actual termination of Service or upon the
> corporation for which the Optionee performs Service ceasing to be a
> Participating Company. Subject to the foregoing, the Company, in its
> discretion, shall determine whether the Optionee’s Service has terminated and
> the effective date of such termination.

> (t) "Stock" means the common stock of the Company, as adjusted from time to
> time in accordance with Section 4.2.

> (u) "Subsidiary Corporation" means any present or future "subsidiary
> corporation" of the Company, as defined in Section 424(f) of the Code.

2.2 Construction. Captions and titles contained herein are for convenience only
and shall not affect the meaning or interpretation of any provision of the Plan.
Except when otherwise indicated by the context, the singular shall include the
plural and the plural shall include the singular. Use of the term "or" is not
intended to be exclusive, unless the context clearly requires otherwise.

3. Administration.

3.1 Administration by the Board. The Plan shall be administered by the Board.
All questions of interpretation of the Plan or of any Option shall be determined
by the Board, and such determinations shall be final and binding upon all
persons having an interest in the Plan or such Option.

3.2 Authority of Officers. Any officer of a Participating Company shall have the
authority to act on behalf of the Company with respect to any matter, right,
obligation, determination or election which is the responsibility of or which is
allocated to the Company herein, provided the officer has apparent authority
with respect to such matter, right, obligation, determination or election.

3.3 Powers of the Board. In addition to any other powers set forth in the Plan
and subject to the provisions of the Plan, the Board shall have the full and
final power and authority, in its discretion:

> (a) to determine the persons to whom, and the time or times at which, Options
> shall be granted and the number of shares of Stock to be subject to each
> Option;

> (b) to determine the Fair Market Value of shares of Stock or other property;

> (c) to determine the terms, conditions and restrictions applicable to each
> Option (which need not be identical) and any shares acquired upon the exercise
> thereof, including, without limitation, (i) the exercise price of the Option,
> (ii) the method of payment for shares purchased upon the exercise of the
> Option, (iii) the method for satisfaction of any tax withholding obligation
> arising in connection with the Option or such shares, including by the
> withholding or delivery of shares of stock, (iv) the timing, terms and
> conditions of the exercisability of the Option or the vesting of any shares
> acquired upon the exercise thereof, (v) the time of the expiration of the
> Option, (vi) the effect of the Optionee’s termination of Service with the
> Participating Company Group on any of the foregoing, and (vii) all other
> terms, conditions and restrictions applicable to the Option or such shares not
> inconsistent with the terms of the Plan;

> (d) to approve one or more forms of Option Agreement;

> (e) to amend, modify, extend, cancel or renew any Option or to waive any
> restrictions or conditions applicable to any Option or any shares acquired
> upon the exercise thereof;

> (f) to accelerate, continue, extend or defer the exercisability of any Option
> or the vesting of any shares acquired upon the exercise thereof, including
> with respect to the period following an Optionee’s termination of Service with
> the Participating Company Group;

> (g) to prescribe, amend or rescind rules, guidelines and policies relating to
> the Plan, or to adopt supplements to, or alternative versions of, the Plan,
> including, without limitation, as the Board deems necessary or desirable to
> comply with the laws of, or to accommodate the tax policy or custom of,
> foreign jurisdictions whose citizens may be granted Options; and

> (h) to correct any defect, supply any omission or reconcile any inconsistency
> in the Plan or any Option Agreement and to make all other determinations and
> take such other actions with respect to the Plan or any Option as the Board
> may deem advisable to the extent not inconsistent with the provisions of the
> Plan or applicable law.

3.4 Indemnification. In addition to such other rights of indemnification as they
may have as members of the Board or officers or employees of the Participating
Company Group, members of the Board and any officers or employees of the
Participating Company Group to whom authority to act for the Board or the
Company is delegated shall be indemnified by the Company against all reasonable
expenses, including attorneys’ fees, actually and necessarily incurred in
connection with the defense of any action, suit or proceeding, or in connection
with any appeal therein, to which they or any of them may be a party by reason
of any action taken or failure to act under or in connection with the Plan, or
any right granted hereunder, and against all amounts paid by them in settlement
thereof (provided such settlement is approved by independent legal counsel
selected by the Company) or paid by them in satisfaction of a judgment in any
such action, suit or proceeding, except in relation to matters as to which it
shall be adjudged in such action, suit or proceeding that such person is liable
for gross negligence, bad faith or intentional misconduct in duties; provided,
however, that within sixty (60) days after the institution of such action, suit
or proceeding, such person shall offer to the Company, in writing, the
opportunity at its own expense to handle and defend the same.

4. Shares Subject to Plan.

4.1 Maximum Number of Shares Issuable. Subject to adjustment as provided in
Section 4.2, the maximum aggregate number of shares of Stock that may be issued
under the Plan shall be five hundred thousand (500,000) and shall consist of
authorized but unissued or reacquired shares of Stock or any combination
thereof. If an outstanding Option for any reason expires or is terminated or
canceled or if shares of Stock are acquired upon the exercise of an Option
subject to a Company repurchase option and are repurchased by the Company at the
Optionee’s exercise price, the shares of Stock allocable to the unexercised
portion of such Option or such repurchased shares of Stock shall again be
available for issuance under the Plan.

4.2 Adjustments for Changes in Capital Structure. In the event of any change in
the Stock through merger, consolidation, reorganization, reincorporation,
recapitalization, reclassification, stock dividend, stock split, reverse stock
split, split-up, split-off, spin-off, combination of shares, exchange of shares
or similar change in the capital structure of the Company, appropriate
adjustments shall be made in the number and class of shares subject to the Plan
and to any outstanding Options, and in the exercise price per share of any
outstanding Options in order to prevent dilution or enlargement of Optionees’
rights under the Plan. Notwithstanding the foregoing, any fractional share
resulting from an adjustment pursuant to this Section 4.2 shall be rounded down
to the nearest whole number, and in no event may the exercise price of any
Option be decreased to an amount less than the par value, if any, of the stock
subject to the Option. The adjustments determined by the Board pursuant to this
Section 4.2 shall be final, binding and conclusive.

5. Eligibility and Option Limitations.

5.1 Persons Eligible for Options. Options may be granted only to Employees and
Consultants. For purposes of the foregoing sentence, "Employees" and
"Consultants" shall include prospective Employees and prospective Consultants to
whom Options are granted in connection with written offers of an employment or
other service relationship with the Participating Company Group. However,
notwithstanding any other provision herein to the contrary, no person shall be
eligible to be granted an Option under the Plan whose eligibility would require
approval of the Plan by the shareholders of the Company under any law or
regulation or the rules of any stock exchange or market system upon which the
Stock may then be listed. If not inconsistent with any such law, regulation or
rule, an Option may be granted to a person, not previously employed by the
Company, as an inducement essential to entering into an employment contract with
the Company. Eligible persons may be granted more than one (1) Option. However,
eligibility in accordance with this Section shall not entitle any person to be
granted an Option, or, having been granted an Option, to be granted an
additional Option.

5.2 Option Grant Restrictions. Options granted under the Plan may only be
Nonstatutory Stock Options.

6. Terms and Conditions of Options.

Options shall be evidenced by Option Agreements specifying the number of shares
of Stock covered thereby, in such form as the Board shall from time to time
establish. No Option or purported Option shall be a valid and binding obligation
of the Company unless evidenced by a fully executed Option Agreement. Option
Agreements may incorporate all or any of the terms of the Plan by reference and
shall comply with and be subject to the following terms and conditions:

6.1 Exercise Price. The exercise price for each Option shall be established in
the discretion of the Board; provided, however, that the exercise price per
share shall be not less than eighty-five percent (85%) of the Fair Market Value
of a share of Stock on the effective date of grant of the Option.
Notwithstanding the foregoing, an Option may be granted with an exercise price
lower than the minimum exercise price set forth above if such Option is granted
pursuant to an assumption or substitution for another option in a manner
qualifying under the provisions of Section 424(a) of the Code.

6.2 Exercisability and Term of Options. Options shall be exercisable at such
time or times, or upon such event or events, and subject to such terms,
conditions, performance criteria and restrictions as shall be determined by the
Board and set forth in the Option Agreement evidencing such Option; provided,
however, that (a) no Option shall be exercisable after the expiration of ten
(10) years after the effective date of grant of such Option, and (b) no Option
granted to a prospective Employee or prospective Consultant may become
exercisable prior to the date on which such person commences Service with a
Participating Company. Subject to the foregoing, unless otherwise specified by
the Board in the grant of an Option, any Option granted hereunder shall
terminate ten (10) years after the effective date of grant of the Option, unless
earlier terminated in accordance with its provisions.

6.3 Payment of Exercise Price.

> (a) Forms of Consideration Authorized. Except as otherwise provided below,
> payment of the exercise price for the number of shares of Stock being
> purchased pursuant to any Option shall be made (i) in cash, by check or cash
> equivalent, (ii) by tender to the Company, or attestation to the ownership, of
> shares of Stock owned by the Optionee having a Fair Market Value (as
> determined by the Company without regard to any restrictions on
> transferability applicable to such stock by reason of federal or state
> securities laws or agreements with an underwriter for the Company) not less
> than the exercise price, (iii) by delivery of a properly executed notice
> together with irrevocable instructions to a broker providing for the
> assignment to the Company of the proceeds of a sale or loan with respect to
> some or all of the shares being acquired upon the exercise of the Option
> (including, without limitation, through an exercise complying with the
> provisions of Regulation T as promulgated from time to time by the Board of
> Governors of the Federal Reserve System) (a "Cashless Exercise"), (iv) by such
> other consideration as may be approved by the Board from time to time to the
> extent permitted by applicable law, or (v) by any combination thereof. The
> Board may at any time or from time to time, by approval of or by amendment to
> the standard forms of Option Agreement described in Section 7, or by other
> means, grant Options which do not permit all of the foregoing forms of
> consideration to be used in payment of the exercise price or which otherwise
> restrict one or more forms of consideration.

> (b) Limitations on Forms of Consideration.

> > (i) Tender of Stock. Notwithstanding the foregoing, an Option may not be
> > exercised by tender to the Company, or attestation to the ownership, of
> > shares of Stock to the extent such tender or attestation would constitute a
> > violation of the provisions of any law, regulation or agreement restricting
> > the redemption of the Company’s stock. Unless otherwise provided by the
> > Board, an Option may not be exercised by tender to the Company, or
> > attestation to the ownership, of shares of Stock unless such shares either
> > have been owned by the Optionee for more than six (6) months (and not used
> > for another Option exercise by attestation during such period) or were not
> > acquired, directly or indirectly, from the Company.

> > (ii) Cashless Exercise. The Company reserves, at any and all times, the
> > right, in the Company’s sole and absolute discretion, to establish, decline
> > to approve or terminate any program or procedures for the exercise of
> > Options by means of a Cashless Exercise.

6.4 Tax Withholding. The Company shall have the right, but not the obligation,
to deduct from the shares of Stock issuable upon the exercise of an Option, or
to accept from the Optionee the tender of, a number of whole shares of Stock
having a Fair Market Value, as determined by the Company, equal to all or any
part of the federal, state, local and foreign taxes, if any, required by law to
be withheld by the Participating Company Group with respect to such Option or
the shares acquired upon the exercise thereof. Alternatively or in addition, in
its discretion, the Company shall have the right to require the Optionee,
through payroll withholding, cash payment or otherwise, including by means of a
Cashless Exercise, to make adequate provision for any such tax withholding
obligations of the Participating Company Group arising in connection with the
Option or the shares acquired upon the exercise thereof. The Fair Market Value
of any shares of Stock withheld or tendered to satisfy any such tax withholding
obligations shall not exceed the amount determined by the applicable minimum
statutory withholding rates. The Company shall have no obligation to deliver
shares of Stock or to release shares of Stock from an escrow established
pursuant to the Option Agreement until the Participating Company Group’s tax
withholding obligations have been satisfied by the Optionee.

6.5 Repurchase Rights. Shares issued under the Plan may be subject to a right of
first refusal, one or more repurchase options, or other conditions and
restrictions as determined by the Board in its discretion at the time the Option
is granted. The Company shall have the right to assign at any time any
repurchase right it may have, whether or not such right is then exercisable, to
one or more persons as may be selected by the Company. Upon request by the
Company, each Optionee shall execute any agreement evidencing such transfer
restrictions prior to the receipt of shares of Stock hereunder and shall
promptly present to the Company any and all certificates representing shares of
Stock acquired hereunder for the placement on such certificates of appropriate
legends evidencing any such transfer restrictions.

6.6 Effect of Termination of Service.

> (a) Option Exercisability. Subject to earlier termination of the Option as
> otherwise provided herein and unless otherwise provided by the Board in the
> grant of an Option and set forth in the Option Agreement, an Option shall be
> exercisable after an Optionee’s termination of Service only during the
> applicable time period determined in accordance with this Section 6.6 and
> thereafter shall terminate:

> > (i) Disability. If the Optionee’s Service with the Participating Company
> > Group terminates because of the Disability of the Optionee, the Option, to
> > the extent unexercised and exercisable on the date on which the Optionee’s
> > Service terminated, may be exercised by the Optionee (or the Optionee’s
> > guardian or legal representative) at any time prior to the expiration of
> > twelve (12) months (or such longer period of time as determined by the
> > Board, in its discretion) after the date on which the Optionee’s Service
> > terminated, but in any event no later than the date of expiration of the
> > Option’s term as set forth in the Option Agreement evidencing such Option
> > (the "Option Expiration Date").

> > (ii) Death. If the Optionee’s Service with the Participating Company Group
> > terminates because of the death of the Optionee, the Option, to the extent
> > unexercised and exercisable on the date on which the Optionee’s Service
> > terminated, may be exercised by the Optionee’s legal representative or other
> > person who acquired the right to exercise the Option by reason of the
> > Optionee’s death at any time prior to the expiration of twelve (12) months
> > (or such longer period of time as determined by the Board, in its
> > discretion) after the date on which the Optionee’s Service terminated, but
> > in any event no later than the Option Expiration Date. The Optionee’s
> > Service shall be deemed to have terminated on account of death if the
> > Optionee dies within three (3) months (or such longer period of time as
> > determined by the Board, in its discretion) after the Optionee’s termination
> > of Service.

> > (iii) Other Termination of Service. If the Optionee’s Service with the
> > Participating Company Group terminates for any reason, except Disability or
> > death, the Option, to the extent unexercised and exercisable by the Optionee
> > on the date on which the Optionee’s Service terminated, may be exercised by
> > the Optionee at any time prior to the expiration of three (3) months (or
> > such longer period of time as determined by the Board, in its discretion)
> > after the date on which the Optionee’s Service terminated, but in any event
> > no later than the Option Expiration Date.

> (b) Extension if Exercise Prevented by Law. Notwithstanding the foregoing, if
> the exercise of an Option within the applicable time periods set forth in
> Section 6.6(a) is prevented by the provisions of Section 10 below, the Option
> shall remain exercisable until three (3) months (or such longer period of time
> as determined by the Board, in its discretion) after the date the Optionee is
> notified by the Company that the Option is exercisable, but in any event no
> later than the Option Expiration Date.

6.7 Transferability of Options. During the lifetime of the Optionee, an Option
shall be exercisable only by the Optionee or the Optionee’s guardian or legal
representative. No Option shall be assignable or transferable by the Optionee,
except by will or by the laws of descent and distribution. Notwithstanding the
foregoing, to the extent permitted by the Board, in its discretion, and set
forth in the Option Agreement evidencing such Option, an Option shall be
assignable or transferable subject to the applicable limitations, if any,
described in the General Instructions to Form S-8 Registration Statement under
the Securities Act.

7. Standard Forms of Option Agreement.

7.1 Option Agreement. Unless otherwise provided by the Board at the time the
Option is granted, an Option shall comply with and be subject to the terms and
conditions set forth in the form of Option Agreement approved by the Board
concurrently with its adoption of the Plan and as amended from time to time.

7.2 Authority to Vary Terms. The Board shall have the authority from time to
time to vary the terms of any standard form of Option Agreement described in
this Section 7 either in connection with the grant or amendment of an individual
Option or in connection with the authorization of a new standard form or forms;
provided, however, that the terms and conditions of any such new, revised or
amended standard form or forms of Option Agreement are not inconsistent with the
terms of the Plan.

8. Change in Control.

8.1 Definitions.

> (a) An "Ownership Change Event" shall be deemed to have occurred if any of the
> following occurs with respect to the Company: (i) the direct or indirect sale
> or exchange in a single or series of related transactions by the shareholders
> of the Company of more than fifty percent (50%) of the voting stock of the
> Company; (ii) a merger or consolidation in which the Company is a party; (iii)
> the sale, exchange, or transfer of all or substantially all of the assets of
> the Company; or (iv) a liquidation or dissolution of the Company.

> (b) A "Change in Control" shall mean an Ownership Change Event or a series of
> related Ownership Change Events (collectively, a "Transaction") wherein the
> shareholders of the Company immediately before the Transaction do not retain
> immediately after the Transaction, in substantially the same proportions as
> their ownership of shares of the Company’s voting stock immediately before the
> Transaction, direct or indirect beneficial ownership of more than fifty
> percent (50%) of the total combined voting power of the outstanding voting
> stock of the Company or, in the case of a Transaction described in Section
> 8.1(a)(iii), the corporation or corporations to which the assets of the
> Company were transferred (the "Transferee Corporation(s)"), as the case may
> be. For purposes of the preceding sentence, indirect beneficial ownership
> shall include, without limitation, an interest resulting from ownership of the
> voting stock of one or more corporations which, as a result of the
> Transaction, own the Company or the Transferee Corporation(s), as the case may
> be, either directly or through one or more subsidiary corporations. The Board
> shall have the right to determine whether multiple sales or exchanges of the
> voting stock of the Company or multiple Ownership Change Events are related,
> and its determination shall be final, binding and conclusive.

8.2 Effect of Change in Control on Options. In the event of a Change in Control,
the surviving, continuing, successor, or purchasing corporation or other
business entity or parent thereof, as the case may be (the "Acquiring
Corporation"), may, without the consent of the Optionee, either assume the
Company’s rights and obligations under outstanding Options or substitute for
outstanding Options substantially equivalent options for the Acquiring
Corporation’s stock. Any Options which are neither assumed or substituted for by
the Acquiring Corporation in connection with the Change in Control nor exercised
as of the date of the Change in Control shall terminate and cease to be
outstanding effective as of the date of the Change in Control. Notwithstanding
the foregoing, shares acquired upon exercise of an Option prior to the Change in
Control and any consideration received pursuant to the Change in Control with
respect to such shares shall continue to be subject to all applicable provisions
of the Option Agreement evidencing such Option except as otherwise provided in
such Option Agreement. Furthermore, notwithstanding the foregoing, if the
corporation the stock of which is subject to the outstanding Options immediately
prior to an Ownership Change Event described in Section 8.1(a)(i) constituting a
Change in Control is the surviving or continuing corporation and immediately
after such Ownership Change Event less than fifty percent (50%) of the total
combined voting power of its voting stock is held by another corporation or by
other corporations that are members of an affiliated group within the meaning of
Section 1504(a) of the Code without regard to the provisions of Section 1504(b)
of the Code, the outstanding Options shall not terminate unless the Board
otherwise provides in its discretion.

9. Provision of Information.

Each Optionee shall be given access to information concerning the Company
equivalent to that information generally made available to the Company’s common
shareholders.

10. Compliance with Securities Law.

The grant of Options and the issuance of shares of Stock upon exercise of
Options shall be subject to compliance with all applicable requirements of
federal, state and foreign law with respect to such securities. Options may not
be exercised if the issuance of shares of Stock upon exercise would constitute a
violation of any applicable federal, state or foreign securities laws or other
law or regulations or the requirements of any stock exchange or market system
upon which the Stock may then be listed. In addition, no Option may be exercised
unless (a) a registration statement under the Securities Act shall at the time
of exercise of the Option be in effect with respect to the shares issuable upon
exercise of the Option or (b) in the opinion of legal counsel to the Company,
the shares issuable upon exercise of the Option may be issued in accordance with
the terms of an applicable exemption from the registration requirements of the
Securities Act. The inability of the Company to obtain from any regulatory body
having jurisdiction the authority, if any, deemed by the Company’s legal counsel
to be necessary to the lawful issuance and sale of any shares hereunder shall
relieve the Company of any liability in respect of the failure to issue or sell
such shares as to which such requisite authority shall not have been obtained.
As a condition to the exercise of any Option, the Company may require the
Optionee to satisfy any qualifications that may be necessary or appropriate, to
evidence compliance with any applicable law or regulation and to make any
representation or warranty with respect thereto as may be requested by the
Company.

11. Termination or Amendment of Plan.

The Board may terminate or amend the Plan at any time. No termination or
amendment of the Plan shall affect any then outstanding Option unless expressly
provided by the Board. In any event, no termination or amendment of the Plan may
adversely affect any then outstanding Option without the consent of the
Optionee, unless such termination or amendment is necessary to comply with any
applicable law, regulation or rule.

IN WITNESS WHEREOF, the undersigned Secretary of the Company certifies that the
foregoing sets forth the Applied Signal Technology, Inc. 2000 Stock Option Plan
as duly adopted by the Board on May 11, 2000.

 

[adsig.gif]

Secretary

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Plan History

May 11, 2000

Board adopts Plan, with an initial reserve of 500,000 shares.

Shareholder approval of Plan not sought. Options granted will be nonstatutory
stock options only.

 

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Standard Forms of
Applied Signal Technology, Inc.
Notice of Grant of Stock Option
and
Stock Option Agreement

 

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Applied Signal Technology, Inc. Stock Option Agreement

 

Applied Signal Technology, Inc. has granted to the individual (the "Optionee")
named in the Notice of Grant of Stock Option (the "Notice") to which this Stock
Option Agreement (the "Option Agreement") is attached an option (the "Option")
to purchase certain shares of Stock upon the terms and conditions set forth in
the Notice and this Option Agreement. The Option has been granted pursuant to
and shall in all respects be subject to the terms and conditions of the Applied
Signal Technology, Inc. 2000 Stock Option Plan (the "Plan"), as amended to the
Date of Option Grant. By signing the Notice, the Optionee: (a) represents that
the Optionee has received copies of, and has read and is familiar with the terms
and conditions of, the Notice and this Option Agreement, (b) accepts the Option
subject to all of the terms and conditions of the Notice and this Option
Agreement, and (c) agrees to accept as binding, conclusive and final all
decisions or interpretations of the Board upon any questions arising under the
Notice or this Option Agreement.

1. Definitions and Construction.

1.1 Definitions. Whenever used herein, capitalized terms shall have the meanings
assigned to such terms in the Notice or as set forth below:

> (a) "Board" means the Board of Directors of the Company. If one or more
> Committees have been appointed by the Board to administer the Plan, "Board"
> also means such Committee(s).

> (b) "Code" means the Internal Revenue Code of 1986, as amended, and any
> applicable regulations promulgated thereunder.

> (c) "Committee" means the Compensation Committee or other committee of the
> Board duly appointed to administer the Plan and having such powers as shall be
> specified by the Board. Unless the powers of the Committee have been
> specifically limited, the Committee shall have all of the powers of the Board
> granted herein, including, without limitation, the power to amend or terminate
> the Plan at any time, subject to the terms of the Plan and any applicable
> limitations imposed by law.

> (d) "Company" means Applied Signal Technology, Inc., a California corporation,
> or any successor corporation thereto.

> (e) "Consultant" means a person engaged to provide consulting or advisory
> services (other than as an Employee or a Director) to a Participating Company,
> provided that the identity of such person, the nature of such services or the
> entity to which such services are provided would not preclude the Company from
> offering or selling securities to such person pursuant to the Plan in reliance
> on registration on a Form S-8 Registration Statement under the Securities Act.

> (f) "Director" means a member of the Board or of the board of directors of any
> other Participating Company.

> (g) "Disability" means the permanent and total disability of the Optionee
> within the meaning of Section 22(e)(3) of the Code.

> (h) "Employee" means any person treated as an employee (excluding, however,
> any person who is an officer of the Company or a Director) in the records of a
> Participating Company. The Company shall determine in good faith and in the
> exercise of its discretion whether an individual has become or has ceased to
> be an Employee and the effective date of such individual’s employment or
> termination of employment, as the case may be. For purposes of an individual’s
> rights, if any, under the Plan as of the time of the Company’s determination,
> all such determinations by the Company shall be final, binding and conclusive,
> notwithstanding that the Company or any court of law or governmental agency
> subsequently makes a contrary determination.

> (i) "Exchange Act" means the Securities Exchange Act of 1934, as amended.

> (j) "Fair Market Value" means, as of any date, the value of a share of Stock
> or other property as determined by the Board, in its sole discretion, or by
> the Company, in its sole discretion, if such determination is expressly
> allocated to the Company herein, subject to the following:

> > (i) If, on such date, the Stock is listed on a national or regional
> > securities exchange or market system, the Fair Market Value of a share of
> > Stock shall be the closing price of a share of Stock (or the mean of the
> > closing bid and asked prices of a share of Stock if the Stock is so quoted
> > instead) as quoted on the Nasdaq National Market, The Nasdaq SmallCap Market
> > or such other national or regional securities exchange or market system
> > constituting the primary market for the Stock, as reported in The Wall
> > Street Journal or such other source as the Company deems reliable. If the
> > relevant date does not fall on a day on which the Stock has traded on such
> > securities exchange or market system, the date on which the Fair Market
> > Value shall be established shall be the last day on which the Stock was so
> > traded prior to the relevant date, or such other appropriate day as shall be
> > determined by the Board, in its discretion.

> > (ii) If, on such date, the Stock is not listed on a national or regional
> > securities exchange or market system, the Fair Market Value of a share of
> > Stock shall be as determined by the Board in good faith without regard to
> > any restriction other than a restriction which, by its terms, will never
> > lapse.

> (k) "Parent Corporation" means any present or future "parent corporation" of
> the Company, as defined in Section 424(e) of the Code.

> (l) "Participating Company" means the Company or any Parent Corporation or
> Subsidiary Corporation.

> (m) "Participating Company Group" means, at any point in time, all
> corporations collectively which are then Participating Companies.

> (n) "Securities Act" means the Securities Act of 1933, as amended.

> (o) "Service" means the Optionee’s employment or service with the
> Participating Company Group, whether in the capacity of an Employee or a
> Consultant. The Optionee’s Service shall not be deemed to have terminated
> merely because of a change in the capacity in which the Optionee renders
> Service to the Participating Company Group or a change in the Participating
> Company for which the Optionee renders such Service, provided that there is no
> interruption or termination of the Optionee’s Service. Furthermore, the
> Optionee’s Service with the Participating Company Group shall not be deemed to
> have terminated if the Optionee takes any military leave, sick leave, or other
> bona fide leave of absence approved by the Company. Notwithstanding the
> foregoing, unless otherwise designated by the Company or required by law, a
> leave of absence shall not be treated as Service for purposes of determining
> the Optionee’s Vested Shares. The Optionee’s Service shall be deemed to have
> terminated either upon an actual termination of Service or upon the
> corporation for which the Optionee performs Service ceasing to be a
> Participating Company. Subject to the foregoing, the Company, in its
> discretion, shall determine whether the Optionee’s Service has terminated and
> the effective date of such termination.

> (p) "Stock" means the common stock of the Company, as adjusted from time to
> time in accordance with Section 9.

> (q) "Subsidiary Corporation" means any present or future "subsidiary
> corporation" of the Company, as defined in Section 424(f) of the Code.

1.2 Construction. Captions and titles contained herein are for convenience only
and shall not affect the meaning or interpretation of any provision of this
Option Agreement. Except when otherwise indicated by the context, the singular
shall include the plural and the plural shall include the singular. Use of the
term "or" is not intended to be exclusive, unless the context clearly requires
otherwise.

2. Tax Status of Option.

This Option is intended to be a Nonstatutory Stock Option and shall not be
treated as an Incentive Stock Option within the meaning of Section 422(b) of the
Code.

3. Administration.

All questions of interpretation concerning this Option Agreement shall be
determined by the Board. All determinations by the Board shall be final and
binding upon all persons having an interest in the Option. Any Officer shall
have the authority to act on behalf of the Company with respect to any matter,
right, obligation, or election which is the responsibility of or which is
allocated to the Company herein, provided the Officer has apparent authority
with respect to such matter, right, obligation, or election.

4. Exercise of the Option.

4.1 Right to Exercise. Except as otherwise provided herein, the Option shall be
exercisable on and after the Initial Vesting Date and prior to the termination
of the Option (as provided in Section 6) in an amount not to exceed the number
of Vested Shares less the number of shares previously acquired upon exercise of
the Option. In no event shall the Option be exercisable for more shares than the
Number of Option Shares, as adjusted pursuant to Section 9.

4.2 Method of Exercise. Exercise of the Option shall be by written notice to the
Company which must state the election to exercise the Option, the number of
whole shares of Stock for which the Option is being exercised and such other
representations and agreements as to the Optionee’s investment intent with
respect to such shares as may be required pursuant to the provisions of this
Option Agreement. The written notice must be signed by the Optionee and must be
delivered in person, by certified or registered mail, return receipt requested,
by confirmed facsimile transmission, or by such other means as the Company may
permit, to the Chief Financial Officer of the Company, or other authorized
representative of the Participating Company Group, prior to the termination of
the Option as set forth in Section 6, accompanied by full payment of the
aggregate Exercise Price for the number of shares of Stock being purchased. The
Option shall be deemed to be exercised upon receipt by the Company of such
written notice and the aggregate Exercise Price.

4.3 Payment of Exercise Price.

> (a) Forms of Consideration Authorized. Except as otherwise provided below,
> payment of the aggregate Exercise Price for the number of shares of Stock for
> which the Option is being exercised shall be made (i) in cash, by check, or
> cash equivalent, (ii) by tender to the Company, or attestation to the
> ownership, of whole shares of Stock owned by the Optionee having a Fair Market
> Value not less than the aggregate Exercise Price, (iii) by means of a Cashless
> Exercise, as defined in Section 4.3(b), or (iv) by any combination of the
> foregoing.

> (b) Limitations on Forms of Consideration.

> > (i) Tender of Stock. Notwithstanding the foregoing, the Option may not be
> > exercised by tender to the Company, or attestation to the ownership, of
> > shares of Stock to the extent such tender or attestation would constitute a
> > violation of the provisions of any law, regulation or agreement restricting
> > the redemption of the Company’s stock. The Option may not be exercised by
> > tender to the Company, or attestation to the ownership, of shares of Stock
> > unless such shares either have been owned by the Optionee for more than six
> > (6) months (and not used for another option exercise by attestation during
> > such period) or were not acquired, directly or indirectly, from the Company.

> > (ii) Cashless Exercise. A "Cashless Exercise" means the delivery of a
> > properly executed notice together with irrevocable instructions to a broker
> > in a form acceptable to the Company providing for the assignment to the
> > Company of the proceeds of a sale or loan with respect to some or all of the
> > shares of Stock acquired upon the exercise of the Option pursuant to a
> > program or procedure approved by the Company (including, without limitation,
> > through an exercise complying with the provisions of Regulation T as
> > promulgated from time to time by the Board of Governors of the Federal
> > Reserve System). The Company reserves, at any and all times, the right, in
> > the Company’s sole and absolute discretion, to decline to approve or
> > terminate any such program or procedure.

4.4 Tax Withholding. At the time the Option is exercised, in whole or in part,
or at any time thereafter as requested by the Company, the Optionee hereby
authorizes withholding from payroll and any other amounts payable to the
Optionee, and otherwise agrees to make adequate provision for (including by
means of a Cashless Exercise to the extent permitted by the Company), any sums
required to satisfy the federal, state, local and foreign tax withholding
obligations of the Participating Company Group, if any, which arise in
connection with the Option, including, without limitation, obligations arising
upon (i) the exercise, in whole or in part, of the Option, (ii) the transfer, in
whole or in part, of any shares acquired upon exercise of the Option, (iii) the
operation of any law or regulation providing for the imputation of interest, or
(iv) the lapsing of any restriction with respect to any shares acquired upon
exercise of the Option. The Option is not exercisable unless the tax withholding
obligations of the Participating Company Group are satisfied. Accordingly, the
Company shall have no obligation to deliver shares of Stock until the tax
withholding obligations of the Participating Company Group have been satisfied
by the Optionee.

4.5 Certificate Registration. Except in the event the Exercise Price is paid by
means of a Cashless Exercise, the certificate for the shares as to which the
Option is exercised shall be registered in the name of the Optionee, or, if
applicable, in the names of the heirs of the Optionee.

4.6 Restrictions on Grant of the Option and Issuance of Shares. The grant of the
Option and the issuance of shares of Stock upon exercise of the Option shall be
subject to compliance with all applicable requirements of federal, state or
foreign law with respect to such securities. The Option may not be exercised if
the issuance of shares of Stock upon exercise would constitute a violation of
any applicable federal, state or foreign securities laws or other law or
regulations or the requirements of any stock exchange or market system upon
which the Stock may then be listed. In addition, the Option may not be exercised
unless (i) a registration statement under the Securities Act shall at the time
of exercise of the Option be in effect with respect to the shares issuable upon
exercise of the Option or (ii) in the opinion of legal counsel to the Company,
the shares issuable upon exercise of the Option may be issued in accordance with
the terms of an applicable exemption from the registration requirements of the
Securities Act. THE OPTIONEE IS CAUTIONED THAT THE OPTION MAY NOT BE EXERCISED
UNLESS THE FOREGOING CONDITIONS ARE SATISFIED. ACCORDINGLY, THE OPTIONEE MAY NOT
BE ABLE TO EXERCISE THE OPTION WHEN DESIRED EVEN THOUGH THE OPTION IS VESTED.
The inability of the Company to obtain from any regulatory body having
jurisdiction the authority, if any, deemed by the Company’s legal counsel to be
necessary to the lawful issuance and sale of any shares subject to the Option
shall relieve the Company of any liability in respect of the failure to issue or
sell such shares as to which such requisite authority shall not have been
obtained. As a condition to the exercise of the Option, the Company may require
the Optionee to satisfy any qualifications that may be necessary or appropriate,
to evidence compliance with any applicable law or regulation and to make any
representation or warranty with respect thereto as may be requested by the
Company.

4.7 Fractional Shares. The Company shall not be required to issue fractional
shares upon the exercise of the Option.

5. Nontransferability of the Option.

The Option may be exercised during the lifetime of the Optionee only by the
Optionee or the Optionee’s guardian or legal representative and may not be
assigned or transferred in any manner except by will or by the laws of descent
and distribution. Following the death of the Optionee, the Option, to the extent
provided in Section 7, may be exercised by the Optionee’s legal representative
or by any person empowered to do so under the deceased Optionee’s will or under
the then applicable laws of descent and distribution.

6. Termination of the Option.

The Option shall terminate and may no longer be exercised after the first to
occur of (a) the Option Expiration Date, (b) the last date for exercising the
Option following termination of the Optionee’s Service as described in Section
7, or (c) a Change in Control to the extent provided in Section 8.

7. Effect of Termination of Service.

7.1 Option Exercisability.

> (a) Disability. If the Optionee’s Service terminates because of the Disability
> of the Optionee, the Option, to the extent unexercised and exercisable on the
> date on which the Optionee’s Service terminated, may be exercised by the
> Optionee (or the Optionee’s guardian or legal representative) at any time
> prior to the expiration of twelve (12) months after the date on which the
> Optionee’s Service terminated, but in any event no later than the Option
> Expiration Date.

> (b) Death. If the Optionee’s Service terminates because of the death of the
> Optionee, the Option, to the extent unexercised and exercisable on the date on
> which the Optionee’s Service terminated, may be exercised by the Optionee’s
> legal representative or other person who acquired the right to exercise the
> Option by reason of the Optionee’s death at any time prior to the expiration
> of twelve (12) months after the date on which the Optionee’s Service
> terminated, but in any event no later than the Option Expiration Date. The
> Optionee’s Service shall be deemed to have terminated on account of death if
> the Optionee dies within three (3) months after the Optionee’s termination of
> Service.

> (c) Other Termination of Service. If the Optionee’s Service terminates for any
> reason, except Disability or death, the Option, to the extent unexercised and
> exercisable by the Optionee on the date on which the Optionee’s Service
> terminated, may be exercised by the Optionee at any time prior to the
> expiration of three (3) months (or such other longer period of time as
> determined by the Board, in its discretion) after the date on which the
> Optionee’s Service terminated, but in any event no later than the Option
> Expiration Date.

7.2 Extension if Exercise Prevented by Law. Notwithstanding the foregoing, if
the exercise of the Option within the applicable time periods set forth in
Section 7.1 is prevented by the provisions of Section 4.6, the Option shall
remain exercisable until three (3) months after the date the Optionee is
notified by the Company that the Option is exercisable, but in any event no
later than the Option Expiration Date.

8. Change in Control.

8.1 Definitions.

> (a) An "Ownership Change Event" shall be deemed to have occurred if any of the
> following occurs with respect to the Company: (i) the direct or indirect sale
> or exchange in a single or series of related transactions by the shareholders
> of the Company of more than fifty percent (50%) of the voting stock of the
> Company; (ii) a merger or consolidation in which the Company is a party; (iii)
> the sale, exchange, or transfer of all or substantially all of the assets of
> the Company; or (iv) a liquidation or dissolution of the Company.

> (b) A "Change in Control" shall mean an Ownership Change Event or a series of
> related Ownership Change Events (collectively, a "Transaction") wherein the
> shareholders of the Company immediately before the Transaction do not retain
> immediately after the Transaction, in substantially the same proportions as
> their ownership of shares of the Company’s voting stock immediately before the
> Transaction, direct or indirect beneficial ownership of more than fifty
> percent (50%) of the total combined voting power of the outstanding voting
> securities of the Company or, in the case of a Transaction described in
> Section 8.1(a)(iii), the corporation or other business entity to which the
> assets of the Company were transferred (the "Transferee"), as the case may be.
> For purposes of the preceding sentence, indirect beneficial ownership shall
> include, without limitation, an interest resulting from ownership of the
> voting securities of one or more corporations or other business entities which
> own the Company or the Transferee, as the case may be, either directly or
> through one or more subsidiary corporations or other business entities. The
> Board shall have the right to determine whether multiple sales or exchanges of
> the voting securities of the Company or multiple Ownership Change Events are
> related, and its determination shall be final, binding and conclusive.

8.2 Effect of Change in Control on Option. In the event of a Change in Control,
the surviving, continuing, successor, or purchasing corporation or other
business entity or parent thereof, as the case may be (the "Acquiring
Corporation"), may, without the consent of the Optionee, either assume the
Company’s rights and obligations under the Option or substitute for the Option a
substantially equivalent option for the Acquiring Corporation’s stock. The
Option shall terminate and cease to be outstanding effective as of the date of
the Change in Control to the extent that the Option is neither assumed or
substituted for by the Acquiring Corporation in connection with the Change in
Control nor exercised as of the date of the Change in Control. Notwithstanding
the foregoing, shares acquired upon exercise of the Option prior to the Change
in Control and any consideration received pursuant to the Change in Control with
respect to such shares shall continue to be subject to all applicable provisions
of this Option Agreement except as otherwise provided herein. Furthermore,
notwithstanding the foregoing, if the corporation the stock of which is subject
to the Option immediately prior to an Ownership Change Event described in
Section 8.1(a)(i) constituting a Change in Control is the surviving or
continuing corporation and immediately after such Ownership Change Event less
than fifty percent (50%) of the total combined voting power of its voting stock
is held by another corporation or by other corporations that are members of an
affiliated group within the meaning of Section 1504(a) of the Code without
regard to the provisions of Section 1504(b) of the Code, the Option shall not
terminate unless the Board otherwise provides in its discretion.

9. Adjustments for Changes in Capital Structure.

In the event of any change in the Stock through merger, consolidation,
reorganization, reincorporation, recapitalization, reclassification, stock
dividend, stock split, reverse stock split, split-up, split-off, spin-off,
combination of shares, exchange of shares or similar change in the capital
structure of the Company, appropriate adjustments shall be made in the number,
Exercise Price and class of shares of stock subject to the Option in order to
prevent dilution or enlargement of the Optionee’s rights under the Option.
Notwithstanding the foregoing, any fractional share resulting from an adjustment
pursuant to this Section 9 shall be rounded down to the nearest whole number,
and in no event may the Exercise Price be decreased to an amount less than the
par value, if any, of the stock subject to the Option. The adjustments
determined by the Board pursuant to this Section 9 shall be final, binding and
conclusive.

10. Rights as a Shareholder, Employee or Consultant.

The Optionee shall have no rights as a shareholder with respect to any shares
covered by the Option until the date of the issuance of a certificate for the
shares for which the Option has been exercised (as evidenced by the appropriate
entry on the books of the Company or of a duly authorized transfer agent of the
Company). No adjustment shall be made for dividends, distributions or other
rights for which the record date is prior to the date such certificate is
issued, except as provided in Section 9. If the Optionee is an Employee, the
Optionee understands and acknowledges that, except as otherwise provided in a
separate, written employment agreement between a Participating Company and the
Optionee, the Optionee’s employment is "at will" and is for no specified term.
Nothing in this Option Agreement shall confer upon the Optionee any right to
continue in the Service of a Participating Company or interfere in any way with
any right of the Participating Company Group to terminate the Optionee’s Service
as an Employee or Consultant, as the case may be, at any time.

11. Legends.

The Company may at any time place legends referencing any applicable federal,
state or foreign securities law restrictions on all certificates representing
shares of stock subject to the provisions of this Option Agreement. The Optionee
shall, at the request of the Company, promptly present to the Company any and
all certificates representing shares acquired pursuant to the Option in the
possession of the Optionee in order to carry out the provisions of this Section.

12. Miscellaneous Provisions.

12.1 Binding Effect. Subject to the restrictions on transfer set forth herein,
this Option Agreement shall inure to the benefit of and be binding upon the
parties hereto and their respective heirs, executors, administrators, successors
and assigns.

12.2 Termination or Amendment. The Board may terminate or amend the Plan or the
Option at any time; provided, however, that except as provided in Section 8.2 in
connection with a Change in Control, no such termination or amendment may
adversely affect the Option or any unexercised portion hereof without the
consent of the Optionee unless such termination or amendment is necessary to
comply with any applicable law or government regulation. No amendment or
addition to this Option Agreement shall be effective unless in writing.

12.3 Notices. Any notice required or permitted hereunder shall be given in
writing and shall be deemed effectively given (except to the extent that this
Option Agreement provides for effectiveness only upon actual receipt of such
notice) upon personal delivery or upon deposit in the United States Post Office,
by registered or certified mail, with postage and fees prepaid, addressed to the
other party at the address shown below that party’s signature or at such other
address as such party may designate in writing from time to time to the other
party.

12.4 Integrated Agreement. The Notice and this Option Agreement constitute the
entire understanding and agreement of the Optionee and the Participating Company
Group with respect to the subject matter contained herein or therein and
supersedes any prior agreements, understandings, restrictions, representations,
or warranties among the Optionee and the Participating Company Group with
respect to such subject matter other than those as set forth or provided for
herein or therein. To the extent contemplated herein or therein, the provisions
of the Notice and the Option Agreement shall survive any exercise of the Option
and shall remain in full force and effect.

12.5 Applicable Law. This Option Agreement shall be governed by the laws of the
State of California as such laws are applied to agreements between California
residents entered into and to be performed entirely within the State of
California.

12.6 Counterparts. The Notice may be executed in counterparts, each of which
shall be deemed an original, but all of which together shall constitute one and
the same instrument.

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Optionee: ___________________

Date: ______________________

 

STOCK OPTION EXERCISE NOTICE

 

Applied Signal Technology, Inc.
Attention: Chief Financial Officer
400 West California Avenue
Sunnyvale, California 94086

 

Ladies and Gentlemen:

 

1. Option. I was granted an option (the "Option") to purchase shares of the
common stock (the "Shares") of Applied Signal Technology, Inc. (the "Company")
pursuant to the Company’s 2000 Stock Option Plan (the "Plan"), my Notice of
Grant of Stock Option (the "Notice") and my Stock Option Agreement (the "Option
Agreement") as follows:

Grant Number: ________________________ Date of Option Grant:
________________________ Number of Option Shares: ________________________
Exercise Price per Share: $_______________________

 

2. Exercise of Option. I hereby elect to exercise the Option to purchase the
following number of Shares, all of which are Vested Shares in accordance with
the Notice and the Option Agreement:

Total Shares Purchased: ________________________ Total Exercise Price (Total
Shares X Price per Share) $_______________________

 

3. Payments. I enclose payment in full of the total exercise price for the
Shares in the following form(s), as authorized by my Option Agreement:

™Cash: $_______________________ ™Check: $_______________________ ™Tender of
Company Stock: Contact Plan Administrator ™Cashless exercise (same day sale):
Contact Plan Administrator

 

4. Tax Withholding. I authorize payroll withholding and otherwise will make
adequate provision for the federal, state, local and foreign tax withholding
obligations of the Company, if any, in connection with the Option. I enclose
payment in full of my withholding taxes, if any, as follows:

(Contact Plan Administrator for amount of tax due.)

™Cash: $_______________________ ™Check: $_______________________

 

5. Optionee Information.

My address is: ___________________________________
___________________________________ My Social Security Number is:
___________________________________

 

6. Binding Effect. I agree that the Shares are being acquired in accordance with
and subject to the terms, provisions and conditions of the Option Agreement to
all of which I hereby expressly assent. This Agreement shall inure to the
benefit of and be binding upon the my heirs, executors, administrators,
successors and assigns.

 

Very truly yours,

__________________________

(Signature)

 

Receipt of the above is hereby acknowledged.

Applied Signal Technology, Inc.

 

By: ______________________

Title: _____________________

Dated: ___________________