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                                                                    EXHIBIT 10.3

                             AMENDED AND RESTATED
                         STRATEGIC DISTRIBUTION, INC.
                    1996 NON-EMPLOYEE DIRECTOR STOCK PLAN

     1.   PURPOSE.  This Amended and Restated 1996 Non-Employee Director Stock
Plan (the "Plan") is intended to promote the interests of Strategic
Distribution, Inc. (the "Company") by promoting ownership of Company stock by
the non-employee members of the Company's Board of Directors (the "Board").

     2.   SHARES TO BE GRANTED.  Under the Plan, options ("Options") to purchase
shares of common stock, par value $.10, of the Company ("Common Stock") are
granted to non-employee members of the Board ("Non-Employee Directors") on an
annual basis.  The number of Options so granted is determined in each instance
in accordance with the terms of the Plan.  Options granted under the Plan are
not intended to qualify as "incentive stock options" under Section 422 of the
Internal Revenue Code.

     3.   AVAILABLE SHARES.  The total number of shares of Common Stock to be
granted shall not exceed 150,000, subject to adjustment in accordance with
Section 12 hereof.  Shares subject to the Plan are authorized but unissued
shares or shares that were once issued and subsequently reacquired by the
Company.

     4.   ADMINISTRATION.  The Plan shall be administered by the Board.  The
Board shall have the power to construe the Plan and to adopt and amend such
rules and regulations for the administration of the Plan as it may deem
desirable.

     5.   ELIGIBILITY AND LIMITATIONS.  Options shall be granted pursuant to the
Plan only to Non-Employee Directors.

     6.   FAIR MARKET VALUE.  For purposes of the Plan, the Fair Market Value of
a share of Common Stock on any date shall be the mean of the closing bid and
asked quotations in the over-the-counter market on such date, as reported by the
National Association of Securities Dealers, through NASDAQ.  In the event the
shares are listed on any exchange or on the NASDAQ National Market System, the
Fair Market Value shall be the closing sale price on such exchange or in the
over-the-counter market, as reported by the National Association of Securities
Dealers, Inc. through NASDAQ, on such date or, if there are no sales on such
date, the mean of the bid and asked price for the shares on such exchange or in
the over-the-counter market, as reported by the National Association of
Securities Dealers, Inc., through NASDAQ, at the close of business on such date.

     7.   GRANT OF OPTIONS.  On December 31 of each calendar year commencing
with calendar year 1996, each person who is a Non-

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Employee Director as of such date shall be granted without further action by
the Board an Option to purchase 4,000 shares of Common Stock, with a per
share exercise price equal to the Fair Market Value of a share of Common
Stock on such date.  Each such Option shall be fully vested on the date of
grant, shall have a maximum term of five years, and shall be subject to such
other terms and conditions as the Board shall approve. Each Non-Employee
Director shall enter into a customary stock option agreement with respect to
each Option granted under the Plan.

     8.   TRANSFERABILITY; SHARE CERTIFICATES.  Options may not be sold,
transferred, assigned, pledged or otherwise encumbered by a Non-Employee
Director other than by will or the laws of descent and distribution.  At the
time a Non-Employee Director's Options are exercised, a certificate for shares
of Common Stock covered by the Options shall be registered in the Non-Employee
Director's name and delivered to the Non-Employee Director (or to such Non-
Employee Director's legal representative or designated beneficiary in the event
of the Non-Employee Director's death).

     9.   SHAREHOLDER RIGHTS.  A Non-Employee Director shall have no rights as a
shareholder with respect to shares of Common Stock covered by Options until the
time such Options are exercised and certificates for such shares are registered
in the Non-Employee Director's name.

     10.  EXERCISE OF OPTIONS.  Options granted under the Plan may be exercised
by written notice to the Company in such form as the Board may designate,
accompanied by full payment of the exercise price therefor.  The exercise price
may be paid (i) in cash or cash equivalents, (ii) by tendering shares of Stock
previously owned for at least six months, having a Fair Market Value equal to
the exercise price, and (iii) by any other means approved by the Board.

     11.  LEGENDS.  The certificates representing shares granted under the Plan
shall carry such appropriate legends, and such written instructions shall be
given to the Company's Transfer Agent, as may be deemed necessary or advisable
by counsel to the Company in order to comply with the requirements of the
Securities Act of 1933 or any state securities laws.

     12.  ADJUSTMENTS UPON CHANGES IN CAPITALIZATION AND OTHER MATTERS.  In the
event that the outstanding shares of Common Stock are changed into or exchanged
for a different number or kind of shares or other securities of the Company or
of another corporation by reason of any reorganization, merger, consolidation,
recapitalization or reclassification, or in the event of a stock split,
combination of shares or dividends payable in capital stock, the Board shall
equitably adjust (i) the number and kind of available shares set forth in
Section 3 hereof, (ii) the number and kind of shares subject to each outstanding
Option, and (iii) the per share exercise price applicable to each outstanding
Option.

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     13.  RESTRICTIONS ON ISSUANCE OF SHARES.  Any other provision of this Plan
notwithstanding, the Company shall have no obligation to deliver any certificate
or certificates for shares until the following conditions have been satisfied:

     (i)  The shares to be granted are at the time of the issuance of such
          shares effectively registered under applicable Federal and state
          securities acts as now in force or hereafter amended; or

     (ii) Counsel for the Company shall have determined that such shares are
          exempt from registration under Federal and state securities acts as
          now in force or hereafter amended;

and the Company has complied with all applicable laws and regulations, including
without limitation all regulations required by any stock exchange upon which the
Common Stock is then listed.

     The Company shall use its best efforts to bring about compliance with the
above conditions within a reasonable time, except that the Company shall be
under no obligation to cause a registration statement or a post-effective
amendment to any registration statement to be prepared at its expense solely for
the purpose of covering the issuance of shares under the Plan.

     14.  REPRESENTATIONS.  The Company may require any Non-Employee Director to
deliver written warranties and representations upon delivery of shares that are
necessary to show compliance with Federal and state securities laws including to
the effect that an acquisition of shares under the Plan is made for investment
and not with a view to distribution (as that term is used in the Securities Act
of 1933).

     15.  TERMINATION AND AMENDMENT OF PLAN.  The Board may at any time
terminate the Plan or make such modification or amendment thereof as it deems
advisable, PROVIDED, HOWEVER, that the Board may not, without approval by the
affirmative vote of the holders of a majority of the shares present in person or
by proxy and entitled to vote at a meeting of stockholders, increase the maximum
number of shares that may be granted under the Plan.

                                      3EXHIBIT
10.99

 

SOUTHWALL
TECHNOLOGIES INC.

1998
STOCK PLAN FOR EMPLOYEES AND CONSULTANTS

 

ARTICLE
ONE

 

GENERAL
PROVISIONS

 

I.       PURPOSE OF THE PLAN

 

This 1998 Stock Plan for Employees and Consultants is
intended to promote the interests of Southwall Technologies Inc., a Delaware
corporation, by providing non-officer employees who are not members of the
Board and certain other eligible persons with the opportunity to acquire a
proprietary interest, or otherwise increase their proprietary interest, in the
Corporation as an incentive for them to remain in the service of the
Corporation.

 

Capitalized terms shall have the meanings assigned to
such terms in the attached Appendix.

 

II.      STRUCTURE
OF THE PLAN

 

A.  The Plan
shall be divided into two separate equity programs:

 

(i)  the
Discretionary Option Grant Program under which eligible persons may, at the
discretion of the Plan Administrator, be granted options to purchase shares of
Common Stock, and

 

(ii)  the Stock
Issuance Program under which eligible persons may, at the discretion of the
Plan Administrator, be issued shares of Common Stock directly, either through
the immediate purchase of such shares or as a bonus for services rendered the
Corporation (or any Parent or Subsidiary).

 

B.  The
provisions of Articles One and Four shall apply to all equity programs under
the Plan and shall govern the interests of all persons under the Plan.

 

III.     ADMINISTRATION
OF THE PLAN

 

A. 
Administration of the Plan may, at the Board’s discretion, be vested in
one or more committees consisting of members of the Board, or the Board may
retain the power to administer the Plan.

 

B.  Members of
a committee shall serve for such period of time as the Board may determine and
may be removed by the Board at any time. 
The Board may also at any time terminate the functions of any committee
and reassume all powers and authority previously delegated to such committee.

 

C.  Each Plan
Administrator shall, within the scope of its administrative functions under the
Plan, have full power and authority (subject to the provisions of the Plan) to

 

 

establish such rules and regulations as it may deem appropriate for
proper administration of the Discretionary Option Grant and Stock Issuance
Programs and to make such determinations under, and issue such interpretations
of, the provisions of such programs and any outstanding options or stock
issuances thereunder as it may deem necessary or advisable.  Decisions of the Plan Administrator within
the scope of its administrative functions under the Plan shall be final and
binding on all parties who have an interest in the Discretionary Option Grant
and Stock Issuance Programs under its jurisdiction or any option or stock
issuance thereunder.

 

D.  Service on
a committee shall constitute service as a Board member, and members of each
such committee shall accordingly be entitled to full indemnification and
reimbursement as Board members for their service on such committee.  No member of a committee shall be liable for
any act or omission made in good faith with respect to the Plan or any option
grants or stock issuances under the Plan.

 

IV.    ELIGIBILITY

 

A.  The persons
eligible to participate in the Discretionary Option Grant and Stock Issuance
Programs are as follows:

 

(i)  Employees who are not officers of the
Company or members of the Board, and

 

(ii) 
consultants and other independent advisors who provide services to the
Corporation (or any Parent or Subsidiary).

 

B.  Each Plan
Administrator shall, within the scope of its administrative jurisdiction under
the Plan, have full authority to determine, (i) with respect to the option
grants under the Discretionary Option Grant Program, which eligible persons are
to receive option grants, the time or times when such option grants are to be
made, the number of shares to be covered by each such grant, the time or times
when each option is to become exercisable, the vesting schedule (if any)
applicable to the option shares and the maximum term for which the option is to
remain outstanding and (ii) with respect to stock issuances under the Stock
Issuance Program, which eligible persons are to receive stock issuances, the
time or times when such issuances are to be made, the number of shares to be
issued to each Participant, the vesting schedule (if any) applicable to the
issued shares and the consideration for such shares.

 

C.  The Plan
Administrator shall have the absolute discretion either to grant options in
accordance with the Discretionary Option Grant Program or to effect stock
issuances in accordance with the Stock Issuance Program.

 

V.      STOCK
SUBJECT TO THE PLAN

 

A.  The stock
issuable under the Plan shall be shares of authorized but unissued or
reacquired Common Stock, including shares repurchased by the Corporation on the
open market.  The maximum number of shares
of Common Stock initially reserved for issuance over the term of the Plan shall
not exceed 250,000 shares.

 

2

 

B.  The number
of shares of Common Stock available for issuance under the Plan shall automatically
increase on the first trading day of each calendar year during the term of the
Plan by 150,000 shares of Common Stock for each year after 1998.

 

C.  No one
person participating in the Plan may receive options for more than 50,000
shares of Common Stock in the aggregate per calendar year, beginning with the
1998 calendar year.

 

D.  Shares of
Common Stock subject to outstanding options shall be available for subsequent
issuance under the Plan to the extent those options expire or terminate for any
reason prior to exercise in full. 
Unvested shares issued under the Plan and subsequently canceled or
repurchased by the Corporation, at the original issue price paid per share,
pursuant to the Corporation's repurchase rights under the Plan shall be added
back to the number of shares of Common Stock reserved for issuance under the
Plan and shall accordingly be available for reissuance through one or more
subsequent option grants or direct stock issuances under the Plan.  However, should the exercise price of an
option under the Plan be paid with shares of Common Stock or should shares of
Common Stock otherwise issuable under the Plan be withheld by the Corporation
in satisfaction of the withholding taxes incurred in connection with the
exercise of an option or the vesting of a stock issuance under the Plan, then
the number of shares of Common Stock available for issuance under the Plan
shall be reduced by the gross number of shares for which the option is
exercised or which vest under the stock issuance, and not by the net number of
shares of Common Stock issued to the holder of such option or stock issuance.

 

E.  If any
change is made to the Common Stock by reason of any stock split, stock
dividend, recapitalization, combination of shares, exchange of shares or other
change affecting the outstanding Common Stock as a class without the
Corporation's receipt of consideration, appropriate adjustments shall be made
to (i) the maximum number and/or class of securities issuable under the Plan,
(ii) the number and/or class of securities for which any one person may be
granted stock options and direct stock issuances under this Plan per calendar
year, and (iii) the number and/or class of securities and the exercise price
per share in effect under each outstanding option under the Plan.  Such adjustments to the outstanding options
are to be effected in a manner which shall preclude the enlargement or dilution
of rights and benefits under such options. 
The adjustments determined by the Plan Administrator shall be final,
binding and conclusive.

 

3

 

ARTICLE
TWO

 

DISCRETIONARY
OPTION GRANT PROGRAM

 

I.       OPTION TERMS

 

Each option shall be evidenced by one or more
documents in the form approved by the Plan Administrator; provided,
however, that each such document shall comply with the terms specified below.

 

A.  Exercise Price.

 

1.  The exercise price per share shall be fixed
by the Plan Administrator but shall not be less than eighty–five percent
(85%) of the Fair Market Value per share of Common Stock on the option grant
date.

 

2.  The exercise price shall become immediately
due upon exercise of the option and shall, subject to the provisions of Section
I of Article Four and the documents evidencing the option, be payable in one or
more of the forms specified below:

 

(i)  cash or check made payable to the
Corporation,

 

(ii)  shares of Common Stock held for the
requisite period necessary to avoid a charge to the Corporation’s earnings for
financial reporting purposes and valued at Fair Market Value on the Exercise
Date, or

 

(iii)  to the extent the option is exercised for
vested shares, through a special sale and remittance procedure pursuant to
which the Optionee shall concurrently provide irrevocable written instructions
to (a) a Corporation-designated brokerage firm to effect the immediate sale of
the purchased shares and remit to the Corporation, out of the sale proceeds
available on the settlement date, sufficient funds to cover the aggregate
exercise price payable for the purchased shares plus all applicable Federal,
state and local income and employment taxes required to be withheld by the
Corporation by reason of such exercise and (b) the Corporation to deliver the
certificates for the purchased shares directly to such brokerage firm in order
to complete the sale.

 

Except to the extent such sale and remittance
procedure is utilized, payment of the exercise price for the purchased shares
must be made on the Exercise Date.

 

B.  Exercise and Term of Options.  Each option shall be exercisable at such
time or times, during such period and for such number of shares as shall be
determined by the Plan Administrator and set forth in the documents evidencing
the option.  However, no option shall have
a term in excess of ten (10) years measured from the option grant date.

 

4

 

C.  Effect of Termination of Service.

 

1.  The following provisions shall govern the
exercise of any options held by the Optionee at the time of cessation of Service
or death:

 

(i)  Any option outstanding at the time of the
Optionee's cessation of Service for any reason shall remain exercisable for up
to eighteen (18) months (or such other period of time determined by the Plan
Administrator and set forth in the documents evidencing the option), but no
such option shall be exercisable after the expiration of the option term.

 

(ii)  Any option exercisable in whole or in part
by the Optionee at the time of death may be subsequently exercised, by the
personal representative of the Optionee's estate or by the person or persons to
whom the option is transferred pursuant to the Optionee's will or in accordance
with the laws of descent and distribution, for up to eighteen (18) months (or
such other period of time determined by the Plan Administrator and set forth in
the documents evidencing the option), but no such option shall be exercisable
after the expiration of the option term.

 

(iii)  Unless the Plan Administrator determines
otherwise, if the Optionee's Service is terminated for Misconduct, then all
outstanding options held by the Optionee shall terminate immediately and cease
to be outstanding.

 

(iv)  During the applicable post-Service exercise
period, the option may not be exercised in the aggregate for more than the number
of vested shares for which the option is exercisable on the date of the
Optionee's cessation of Service.  The
option shall, immediately upon the Optionee's cessation of Service, terminate
and cease to be outstanding to the extent the option is not otherwise at that
time exercisable for vested shares. 
Upon the expiration of the applicable exercise period or (if earlier)
upon the expiration of the option term, the option shall terminate and cease to
be outstanding for any vested shares for which the option has not been
executed.

 

2.  The Plan Administrator shall have complete
discretion, exercisable either at the time an option is granted or at any time
while the option remains outstanding, to:

 

(i)  extend the period of time for which the
option is to remain exercisable following the Optionee's cessation of Service
from the limited exercise period otherwise in effect for that option to such
greater period of time as the Plan Administrator shall deem appropriate, but in
no event beyond the expiration of the option term, and/or

 

(ii)  permit the option to be exercised, during
the applicable post-Service exercise period, not only with respect to the
number of vested shares of Common Stock for which such option is exercisable at
the time of the Optionee's cessation of Service but also with respect to one or
more additional installments in which the Optionee would have vested had the
Optionee continued in Service.

 

5

 

D.  Stockholder Rights.  The holder of an option shall have no
stockholder rights with respect to the shares subject to the option until such
person shall have exercised the option, paid the exercise price and become a
holder of record of the purchased shares.

 

E.  Repurchase Rights.  The Plan Administrator shall have the
discretion to grant options which are exercisable for unvested shares of Common
Stock.  Should the Optionee cease
Service while holding such unvested shares, the Corporation shall have the right
to repurchase, at the exercise price paid per share, any or all of those
unvested shares.  The terms upon which
such repurchase right shall be exercisable (including the period and procedure
for exercise and the appropriate vesting schedule for the purchased shares)
shall be established by the Plan Administrator and set forth in the document
evidencing such repurchase right.

 

F. Limited
Transferability of Options.  A
Non-Statutory Option may, in connection with the Optionee’s estate plan, be
assigned in whole or in part during the Optionee’s lifetime to one or more
members of the Optionee’s immediate family or to a trust established
exclusively for one or more such family members.  The assigned portion may only be exercised by the person or
persons who acquire a proprietary interest in the option pursuant to the
assignment.  The terms applicable to the
assigned portion shall be the same as those in effect for the option
immediately prior to such assignment and shall be set forth in such documents
issued to the assignee as the Plan Administrator may deem appropriate.

 

II.      CORPORATE TRANSACTION/CHANGE IN CONTROL

 

A.  In the
event of any Corporate Transaction, the Plan Administrator shall have full
power and authority exercisable, either at the time the option is granted or at
any time while the option remains outstanding, to provide for the automatic
acceleration of one or more outstanding options under the Discretionary Option
Grant Program upon the occurrence of any Corporate Transaction, so that
immediately prior to the effective date of the Corporate Transaction, the
option becomes fully exercisable with respect to the total number of shares of
Common Stock at the time subject to such option and may be exercised for any or
all of those shares as fully–vested shares of Common Stock.  However, an outstanding option shall not so
accelerate if and to the extent:  (i)
such option is, in connection with the Corporate Transaction, either to be
assumed by the successor corporation (or parent thereof) or to be replaced with
a comparable option to purchase shares of the capital stock of the successor
corporation (or parent thereof), (ii) such option is to be replaced with a cash
incentive program of the successor corporation which preserves the spread
existing on the unvested option shares at the time of the Corporate Transaction
and provides for subsequent payout in accordance with the same vesting schedule
applicable to those option shares or (iii) the acceleration of such option is
subject to other limitations imposed by the Plan Administrator at the time of
the option grant.  The determination of
option comparability under clause (i) above shall be made by the Plan
Administrator, and its determination shall be final, binding and conclusive.

 

B.  All
outstanding repurchase rights shall also terminate automatically, and the
shares of Common Stock subject to those terminated rights shall immediately
vest in full, in the event of any Corporate Transaction, except to the extent:
(i) those repurchase rights are to be assigned to the successor corporation (or
parent thereof) in connection with such Corporate

 

6

 

Transaction or (ii) such accelerated vesting is precluded by other
limitations imposed by the Plan Administrator at the time the repurchase right
is issued.

 

C.  Immediately
following the consummation of the Corporate Transaction, all outstanding
options shall terminate and cease to be outstanding, except to the extent
assumed by the successor corporation (or parent thereof).

 

D.  Each
option, which is assumed in connection with a Corporate Transaction shall be
appropriately adjusted, immediately after such Corporate Transaction, to apply
to the number and class of securities which would have been issuable to the
Optionee in consummation of such Corporate Transaction, had the option been
exercised immediately prior to such Corporate Transaction. Appropriate
adjustments to reflect such Corporate Transaction shall also be made to (i) the
exercise price payable per share under each outstanding option, provided
the aggregate exercise price payable for such securities shall remain the same,
(ii) the maximum number and/or class of securities available for issuance over
the remaining term of the Plan and (iii) the maximum number and/or class of
securities for which any one person may be granted stock options and direct
stock issuances under the Plan per calendar year.

 

E. 
Notwithstanding Section II.A. of this Article Two, the Plan
Administrator shall have the discretionary authority, exercisable either at the
time the option is granted or at any time while the option remains outstanding,
to provide for the automatic acceleration of one or more outstanding options
under the Discretionary Option Grant Program upon the occurrence of a Corporate
Transaction, whether or not those options are to be assumed or replaced in the
Corporate Transaction.  In addition, the
Plan Administrator may provide that one or more of the Corporation's
outstanding repurchase rights with respect to shares held by the Optionee at
the time of such Transaction shall immediately terminate, and the shares
subject to those terminated repurchase rights shall accordingly vest in full,
even in the event the options are to be assumed.

 

F.  The Plan
Administrator shall have full power and authority exercisable, either at the
time the option is granted or at any time while the option remains outstanding,
to provide for the automatic acceleration of one or more outstanding options
under the Discretionary Option Grant Program in the event the Optionee's
Service subsequently terminates by reason an on Involuntary Termination within
a designated period (not to exceed eighteen (18) months) following the
effective date of any Corporate Transaction in which those options are assumed
or replaced and do not otherwise accelerate. 
Any options so accelerated shall remain exercisable for fully-vested
shares until the earlier of (i) the expiration of the option term or
(ii) the expiration of the one (1)-year period measured from the effective date
of the Involuntary Termination.  In
addition, the Plan Administrator may provide that one or more of the
Corporation's outstanding repurchase rights with respect to shares held by the
Optionee at the time of such Involuntary Termination shall immediately
terminate, and the shares subject to those terminated repurchase rights shall
accordingly vest in full.

 

G.  The Plan
Administrator shall have full power and authority exercisable, either at the
time the option is granted or at any time while the option remains outstanding,
to provide for the automatic acceleration of one or more outstanding options
under the Discretionary Option Grant Program upon (i) a Change in Control or
(ii) the subsequent

 

 

7

 

termination of the Optionee’s Service by reason of an Involuntary
Termination within a designated period (not to exceed eighteen (18) months)
following the effective date of such Change in Control.  Each option so accelerated shall remain
exercisable for fully-vested shares until the earlier of (i) the
expiration of the option term or (ii) the expiration of the one (1)-year period
measured from the effective date of the Optionee’s cessation of Service.  In addition, the Plan Administrator may
provide that one or more of the Corporation’s outstanding repurchase rights
with respect to shares held by the Optionee at the time of such Change in
Control or Involuntary Termination shall immediately terminate, and the shares
subject to those terminated repurchase rights shall accordingly vest in full.

 

H.  The
outstanding options shall in no way affect the right of the Corporation to
adjust, reclassify, reorganize or otherwise change its capital or business
structure or to merge, consolidate, dissolve, liquidate or sell or transfer all
or any part of its business or assets.

 

III.     CANCELLATION AND REGRANT OF OPTIONS

 

The Plan Administrator shall have the authority to
effect, at any time and from time to time, with the consent of the affected
option holders, the cancellation of any or all outstanding options under the
Discretionary Option Grant Program and to grant in substitution new options
covering the same or different number of shares of Common Stock but with an
exercise price per share based on the Fair Market Value per share of Common
Stock on the new grant date.

 

8

 

ARTICE
THREE

 

STOCK
ISSUANCE PROGRAM

 

 

I.       STOCK ISSUANCE TERMS

 

Shares of Common Stock may be issued under the Stock
Issuance Program through direct and immediate issuances without any intervening
option grants.  Each such stock issuance
shall be evidenced by a Stock Issuance Agreement which complies with the terms
specified below.

 

A.            Purchase Price

 

1.  The purchase price per share shall be fixed
by the Plan Administrator, but shall not be less than one hundred percent
(100%) of the Fair Market Value per share of Common Stock on the issuance date.

 

2.  Subject to the provisions of Section I of
Article Four, shares of Common Stock may be issued under the Stock Issuance
Program for any of the following items of consideration which the Plan
Administrator may deem appropriate in each individual instance:

 

(i)  cash or check made payable to the
Corporation, or 

 

(ii)  past services rendered to the Corporation
(or any Parent or Subsidiary).

 

B.            Vesting Provisions

 

1.  Shares of Common Stock issued under the
Stock Issuance Program may, in the discretion of the Plan Administrator, be
fully and immediately vested upon issuance or may vest in one or more
installments over the Participant's period of Service or upon attainment of
specified performance objectives.

 

2.  Any new, substituted or additional
securities or other property (including money paid other than as a regular cash
dividend) which the Participant may have the right to receive with respect to
the Participant's unvested shares of Common Stock by reason of any stock
dividend, stock split, recapitalization, combination of shares, exchange of
shares or other change affecting the outstanding Common Stock as a class
without the Corporation's receipt of consideration shall be issued subject to
(i) the same vesting requirements applicable to the Participant's unvested
shares of Common Stock and (ii) such escrow arrangements as the Plan
Administrator shall deem appropriate.

 

3.  The Participant shall have full stockholder
rights with respect to any shares of Common Stock issued to the Participant
under the Stock Issuance Program, whether or not the Participant's interest in
those shares is vested.  Accordingly,
the Participant shall have the right to vote such shares and to receive any
regular cash dividends paid on such shares.

 

9

 

4.  Should the Participant cease to remain in
Service while holding one or more unvested shares of Common Stock issued under
the Stock Issuance Program or should the performance objectives not be attained
with respect to one or more such unvested shares of Common Stock, then those
shares shall be immediately surrendered to the Corporation for cancellation,
and the Participant shall have no further stockholder rights with respect to
those shares.  To the extent the
surrendered shares were previously issued to the Participant for consideration
paid in cash or cash equivalent (including the Participant’s purchase-money
indebtedness), the Corporation shall repay to the Participant the cash
consideration paid for the surrendered shares and shall cancel the unpaid
principal balance of any outstanding purchase money note of the Participant
attributable to the surrendered shares.

 

5.  The Plan Administrator may in its discretion
waive the surrender and cancellation of one or more unvested shares of Common
Stock which would otherwise occur upon the cessation of the Participant’s
Service or the non–attainment of the performance objectives applicable to
those shares.  Such waiver shall result
in the immediate vesting of the Participant’s interest in the shares as to
which the waiver applies.  Such waiver
may be effected at any time, whether before or after the Participant’s
cessation of Service or the attainment or non-attainment of the applicable
performance objectives.

 

II.      CORPORATE TRANSACTION/CHANGE IN CONTROL

 

A.  All of the
Corporation’s outstanding repurchase rights under the Stock Issuance Program
shall terminate automatically, and all the shares of Common Stock subject to
those terminated rights shall immediately vest in full, in the event of any
Corporate Transaction, except to the extent (i) those repurchase rights are to
be assigned to the successor corporation (or parent thereof) in connection with
such Corporate Transaction or (ii) such accelerated vesting is precluded by
other limitations imposed in the Stock Issuance Agreement.

 

B. 
Notwithstanding Section II.A. of this Article Three, the Plan
Administrator shall have the discretionary authority, exercisable either at the
time the unvested shares are issued or any time while the Corporation’s
repurchase rights remain outstanding under the Stock Issuance Program, to
provide that those rights shall automatically terminate in whole or in part,
and the shares of Common Stock subject to those terminated rights shall
immediately vest, in the event of a Corporate Transaction, whether or not those
repurchase rights are to be assigned to the successor corporation (or its
parent) in connection with such Corporate Transaction.

 

C.  The Plan
Administrator shall have the discretionary authority, exercisable either at the
time the unvested shares are issued or any time while the Corporation’s
repurchase rights remain outstanding under the Stock Issuance Program, to
provide that those rights shall automatically terminate in whole or in part,
and the shares of Common Stock subject to those terminated rights shall
immediately vest, in the event the Participant’s Service should subsequently terminate
by reason of an Involuntary Termination within a designated period (not to
exceed eighteen (18) months) following the effective date of any Corporate
Transaction in which those repurchase rights are assigned to the successor
corporation (or parent thereof).

 

10

 

D.  The Plan
Administrator shall have the discretionary authority, exercisable either at the
time the unvested shares are issued or any time with the Corporation's
repurchase rights remain outstanding under the Stock Issuance Program, to
provide that those rights shall automatically terminate in whole or in part,
and the shares of Common Stock subject to those terminated rights shall
immediately vest upon (i) a Change in Control or (ii) the subsequent
termination of the Participant's Service by reason of an Involuntary
Termination within a designated period (not to exceed eighteen (18) months)
following the effective date of such Change in Control or Involuntary
Termination.

 

III.     SHARES TO ESCROW/LEGENDS

 

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

 

11

 

ARTICLE
FOUR

 

MISCELLANEOUS

 

I.       FINANCING

 

The Plan Administrator may permit any Optionee or
Participant to pay the option exercise price under the Discretionary Option
Grant Program or the purchase price of shares issued under the Stock Issuance
Program by delivering a full-recourse, interest bearing promissory note payable
in one or more installments.  The terms
of any such promissory note (including the interest rate and the terms of
repayment) shall be established by the Plan Administrator in its sole
discretion.  In no event may the maximum
credit available to the Optionee or Participant exceed the sum of (i) the
aggregate option exercise price or purchase price payable for the purchased
shares plus (ii) any Federal, state and local income and employment tax
liability incurred by the Optionee or the Participant in connection with the
option exercise or share purchase.

 

II.      TAX WITHHOLDING

 

A.  The
Corporation’s obligation to deliver shares of Common Stock upon the exercise of
options or the issuance or vesting of such shares under the Plan shall be
subject to the satisfaction of all applicable Federal, state and local income
and employment tax withholding requirements.

 

B.  The Plan
Administrator may, in its discretion, provide any or all holders of Non–Statutory
Options or unvested shares of Common Stock under the Plan with the right to use
shares of Common Stock in satisfaction of all or part of the Taxes incurred by
such holders in connection with the exercise of their options or the vesting of
their shares.  Such right may be
provided to any such holder in either or both of the following formats:

 

Stock Withholding:  The election to have the Corporation
withhold, from the shares of Common Stock otherwise issuable upon the exercise
of such Non-Statutory Option or the vesting of such shares, a portion of those
shares with an aggregate Fair Market Value equal to the percentage of the Taxes
(not to exceed one hundred percent (100%)) designated by the holder.

 

Stock Delivery:  The election to deliver to the Corporation,
at the time the Non–Statutory Option is exercised or the shares vest, one
or more shares of Common Stock previously acquired by such holder (other than
in connection with the option exercise or share vesting triggering the Taxes)
with an aggregate Fair Market Value equal to the percentage of the Taxes (not
to exceed one hundred percent (100%)) designated by the holder.

 

12

 

III.     EFFECTIVE DATE AND TERM OF THE PLAN

 

A.            The
Plan shall become effective immediately upon the Plan Effective Date. Options
may be granted under the Discretionary Option Grant Program at any time on or
after the Plan Effective Date.

 

B.            The
Plan shall terminate upon the earliest of (i) July 21, 2008, or (ii) the
termination of all outstanding options. Upon such plan termination, all
outstanding option grants and unvested stock issuances shall thereafter
continue to have force and effect in accordance with the provisions of the
documents evidencing such grants or issuances.

 

IV.    AMENDMENT OF THE PLAN

 

The Board shall have complete and exclusive power and
authority to amend or modify the Plan in any or all respects. However, no such
amendment or modification shall adversely affect the rights and obligations
with respect to stock options or unvested stock issuances at the time
outstanding under the Plan unless the Optionee or the Participant consents to
such amendment or modification. In addition, certain amendments may require
stockholder approval pursuant to applicable laws or regulations.

 

V.      USE OF PROCEEDS

 

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

 

VI.    REGULATORY APPROVALS

 

A.            The
implementation of the Plan, the granting of any stock option under the Plan and
the issuance of any shares of Common Stock (i) upon the exercise of any granted
option or (ii) under the Stock Issuance Program shall be subject to the
Corporation's procurement of all approvals and permits required by regulatory
authorities having jurisdiction over the Plan, the stock options granted under
it and the shares of Common Stock issued pursuant to it.

 

B.            No
shares of Common Stock or other assets shall be issued or delivered under the
Plan unless and until there shall have been compliance with all applicable
requirements of Federal and state securities laws, including the filing and
effectiveness of the Form S-8 registration statement for the shares of Common
Stock issuable under the Plan, and all applicable listing requirements of any
stock exchange (or the Nasdaq National Market, if applicable) on which Common
Stock is then listed for trading.

 

VII.   NO EMPLOYMENT/SERVICE RIGHTS

 

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

 

13

 

APPENDIX

 

The following definitions shall be in effect under the
Plan:

 

A.  Board shall mean the Corporation’s
Board of Directors.

 

B.  Change in Control shall mean a change
in ownership or control of the Corporation effected through either of the
following transactions:

 

(i)  the
acquisition, directly or indirectly by any person or related group of persons
(other than the Corporation or a person that directly or indirectly controls,
is controlled by, or is under common control with, the Corporation), of
beneficial ownership (within the meaning of Rule 13d-3 of the 1934 Act) of
securities possessing more than twenty-five percent (25%) of the total combined
voting power of the Corporation’s outstanding securities pursuant to a tender
or exchange offer made directly to the Corporation’s stockholders which the
Board does not recommend such stockholders to accept, or

 

(ii)  a change
in the composition of the Board over a period of thirty-six (36) consecutive
months or less such that a majority of the Board members ceases, by reason of
one or more contested elections for Board membership, to be comprised of
individuals who either (A) have been Board members continuously since the
beginning of such period or (B) have been elected or nominated for election as
Board members during such period by at least a majority of the Board members
described in clause (A) who were still in office at the time the Board approved
such election or nomination.

 

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

 

D.  Common Stock shall mean the
Corporation’s common stock.

 

E.  Corporate Transaction shall mean either
of the following stockholder-approved transactions to which the Corporation is
a party:

 

(i)  a merger or consolidation in which
securities possessing more than fifty percent (50%) of the total combined
voting power of the Corporation’s outstanding securities are transferred to a
person or persons different from the persons holding those securities
immediately prior to such transaction, or

 

(ii)  the sale, transfer or other disposition of
all or substantially all of the Corporation’s assets in complete liquidation or
dissolution of the Corporation.

 

F.  Corporation shall mean Southwall
Technologies Inc., a Delaware corporation, and its successors.

 

G.  Discretionary Option Grant Program
shall mean the discretionary option grant program in effect under the Plan.

 

A-1

 

H.            Employee shall mean an individual who
is in the employ of the Corporation (or any Parent or Subsidiary), subject to
the control and direction of the employer entity as to both the work to be
performed and the manner and method of performance.

 

I.              Exercise Date shall mean the date on
which the Corporation shall have received written notice of the option
exercise.

 

J.             Fair Market Value per share of Common
Stock on any relevant date shall be determined in accordance with the following
provisions.

 

(i)      If the Common Stock is at the time traded
on the Nasdaq National Market, then the Fair Market Value shall be deemed equal
to the closing selling price per share of Common Stock on the date in question,
as such price is reported on the Nasdaq National Market or any successor
system. If there is no closing selling price for the Common Stock on the date
in question, then the Fair Market Value shall be the closing selling price on
the last preceding date for which such quotation exists.

 

(ii)     If the Common Stock is at the time listed
on any Stock Exchange, then the Fair Market Value shall be deemed equal to the
closing selling price per share of Common Stock on the date in question on the
Stock Exchange determined by the Plan Administrator to be the primary market
for the Common Stock, as such price is officially quoted in the composite tape
of transactions on such exchange. If there is no closing selling price for the
Common Stock on the date in question, then the Fair Market Value shall be the
closing selling price on the last preceding date for which such quotation
exists.

 

K.            Hostile Take-Over shall mean the
acquisition, directly or indirectly, by any person or related group of persons
(other than the Corporation or a person that directly or indirectly controls,
is controlled by, or is under common control with, the Corporation) of
beneficial ownership (within the meaning of Rule 13d-3 of the 1934 Act) of
securities possessing more than fifty percent (50%) of the total combined
voting power of the Corporation's outstanding securities pursuant to a tender
or exchange offer made directly to the Corporation's stockholders which the
Board does not recommend such stockholders to accept.

 

L.             Involuntary Termination shall mean the
termination of the Service of any individual which occurs by reason of:

 

(i)      such individual's involuntary dismissal or
discharge by the Corporation for reasons other than Misconduct, or

 

(ii)     such individual's voluntary resignation
following (A) a change in his or her position with the Corporation which
materially reduces his or her level of responsibility, (B) a reduction in his
or her level of compensation (including base salary, fringe benefits and
participation in any corporate-performance based bonus or incentive programs)
by more than fifteen percent (15%) or (C) a relocation of such individual's
place of employment by more than fifty (50) miles, provided and only if such
change, reduction or relocation is effected by the Corporation without the
individual's consent.

 

A-2

 

M.  Misconduct shall mean the commission of
any act of fraud, embezzlement or dishonesty by the Optionee or Participant,
any unauthorized use or disclosure by such person of confidential information
or trade secrets of the Corporation (or any Parent or Subsidiary), or any other
intentional misconduct by such person adversely affecting the business or
affairs of the Corporation (or any Parent or Subsidiary) in a material
manner.  The foregoing definition shall
not be deemed to be inclusive of all the acts or omissions which the
Corporation (or any Parent or Subsidiary) may consider as grounds for the
dismissal or discharge of any Optionee, Participant or other person in the
Service of the Corporation (or any Parent or Subsidiary).

 

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

 

O.  Non–Statutory Option shall mean
an option not intended to satisfy the requirements of Code Section 422.

 

P.  Optionee shall mean any person to whom
an option is granted under the Discretionary Option Grant Program.

 

Q.  Parent shall mean any corporation (other
than the Corporation) in an unbroken chain of corporations ending with the
Corporation, provided each corporation in the unbroken chain (other than the
Corporation) owns, at the time of the determination, stock possessing fifty
percent (50%) or more of the total combined voting power of all classes of
stock in one of the other corporations in such chain.

 

R.  Participant shall mean any person who
is issued shares of Common Stock under the Stock Issuance Program.

 

S.  Permanent Disability or Permanently Disabled
shall mean the inability of the Optionee or the Participant to engage in any
substantial gainful activity by reason of any medically determinable physical
or mental impairment expected to result in death or to be of continuous
duration of twelve (12) months or more.

 

T.  Plan shall mean the Corporation’s 1998
Stock Plan for Employees and Consultants, as set forth in this document.

 

U.  Plan Administrator shall mean the
particular entity, whether the Board or a particular committee, which is authorized
to administer the Discretionary Option Grant and Stock Issuance Programs with
respect to one or more classes of eligible persons, to the extent such entity
is carrying out its administrative functions under those programs with respect
to the persons under its jurisdiction.

 

V.  Plan Effective Date shall mean July 21,
1998, the date on which the Plan was adopted by the Board.

 

W.  Service shall mean the performance of
services for the Corporation (or any Parent or Subsidiary) by a person in the
capacity of an Employee or a consultant or independent advisor, except to the
extent otherwise specifically provided in the documents evidencing the option
grant or stock issuance.

 

A-3

 

                                X.            Stock
Exchange shall mean either the American Stock Exchange or the
New York Stock Exchange.

 

                                Y.            Stock
Issuance Agreement shall mean the agreement entered into by the
Corporation and the Participant at the time of issuance of shares of Common
Stock under the Stock Issuance Program.

 

                                Z.            Stock
Issuance Program shall mean the stock issuance program in effect
under the Plan.

 

                                AA.        Subsidiary
shall mean any corporation (other than the Corporation) in an unbroken chain of
corporations beginning with the Corporation, provided each corporation (other
than the last corporation) in the unbroken chain owns, at the time of the
determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.

 

                                BB.          Take-Over
Price shall mean the greater of (i) the Fair Market Value
per share of Common Stock on the date the option is surrendered to the
Corporation in connection with a Hostile Take-Over or (ii) the highest reported
price per share of Common Stock paid by the tender offeror in effecting such
Hostile Take-Over.

 

                                CC.          Taxes
shall mean the Federal, state and local income and employment tax liabilities
incurred by the holder of Non-Statutory Options or unvested shares of Common
Stock in connection with the exercise of those options or the vesting of those
shares.

 

A-4

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