Document:

exv10w3

EXHIBIT 10.3

ASTRONICS CORPORATION

1997 DIRECTOR STOCK OPTION PLAN

ARTICLE I

PURPOSE

     The purpose of this 1997 Director Stock Option Plan (the “Plan”) is to advance the
interest of ASTRONICS CORPORATION, a New York corporation (the “Company”), by encouraging the
efforts of directors of the Company who are not employees, by heightening the desire of such
persons to continue in their service and by assisting the Company to compete effectively with
other enterprises for new directors.

ARTICLE II

GRANTING OF OPTIONS

     Subject to the terms and conditions of this Plan, the Company may issue options
(“Options”) to purchase up to one
hundred thousand (100,000) shares of its $.01 par value Common Stock (“Shares”) to persons
eligible to participate under Section 4.1 below. One hundred thousand (100,000) of the
Company’s authorized but unissued shares of Common Stock are hereby reserved for issuance under
this Plan; provided, however, that treasury shares shall also be available for issuance under
this Plan at the Company’s discretion. Any Share subject to an Option that terminates for any
reason other than exercise may be made subject to a subsequent Option.

ARTICLE III

TERM

Section 3.1 Effective Date.

     This plan shall become effective upon its adoption by the Board of Directors. The Plan
shall be submitted to the
shareholders of the Company for their approval within twelve months of such adoption. No
Option shall be exercisable unless and until the shareholders of the Company have approved the
Plan.

Section 3.2 Termination.

     This Plan shall terminate when all of the Shares have been acquired through exercise of
Options or ten (10) years from the effective date as set forth in Section 3.1 above, unless
sooner terminated by the Board of Directors. Any Option outstanding under this Plan at the
time of its termination shall remain in effect in accordance with its terms and conditions and
those of this Plan.

ARTICLE IV

PARTICIPANTS

Section 4.1 Eligible Directors.

     Options may be granted to directors of the Company unless at the time of grant they are
also an officer or employee of the Company or any of its subsidiary corporations. As used in
this Plan, “Participant” means a director of the Company and includes a director’s legal
representative if he or she is incompetent or deceased, or any other person who acquires the
legal right to exercise a Participant’s Options.

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ARTICLE V

GENERAL TERMS

Section 5.1 Written Agreement.

     Options shall be evidenced by a written Option Agreement that shall contain such terms and
conditions as this Plan requires and such additional provisions as the Committee, as defined in
Section 6.1, may deem necessary or appropriate in its sole discretion and that do not conflict
with the provisions of this Plan. Each Option Agreement shall be signed by the Participant and
an officer of the Company designated by the Committee. Options granted pursuant to this Plan
need not be identical, but each Option shall be subject to the terms and conditions set forth
in this Plan.

Section 5.2 Time of Grant.

     Options shall be granted only during the thirty (30) day period commencing one week after
a press release announcing quarterly or annual results of operations of the Company.

Section 5.3 Price.

     The purchase price of the Shares under each Option shall be as determined by the
Committee, but in no event less than the fair market value of the Shares optioned on the date
of granting. “Fair market value” shall be deemed to be:

	 	1.	 	The closing price on the date of grant as reflected in reports of the automated
quotation service or national
securities exchange on which the price of the Shares is reported.
	 
	 	 	 	In all cases where the Shares are selling ex-dividend on the date of grant, the amount of
the dividend shall
be added to the ex-dividend quotation to determine the fair market value of the Shares as
of the date of
grant; or
	 
	 	2.	 	If the fair market value cannot be established under the provisions of (1) above,
then the “fair market
value” shall be that value determined in good faith by the Board of Directors based on a
consideration of the
following relevant factors: the Company’s net worth, prospective earning power, its
dividend paying
capacity, the value of its underlying assets, and any other factors such as the goodwill
of the business,
the economic outlook in the industry, the Company’s position in the industry and its
management, and the
value of securities of corporations engaged in the same or similar businesses which are
listed on a
national securities exchange. The weight to be accorded by comparisons or any other
evidentiary
factors considered by the Board of Directors in the determination of value will depend on
the particular
circumstances applying at the time. In every case, the determination of the Board of
Directors shall be
final.

Section 5.4 Payment of Exercise Price; Taxes.

     5.4.1. The exercise price of each Option shall be paid in full at the time of exercise by
cash or certified check or the exchange of Shares, or a combination of both such that the sum
of (a) the aggregate fair market value (as of the exercise date) of the Shares exchanged by the
Participant (as determined by the Committee), and (b) the cash paid, equals the total exercise
price of the Option.

     5.4.2. If the exercise of an Option gives rise to an obligation of the Company to
withhold state or federal income or other taxes, or gives rise to any other tax liability of
the Company of any kind, the Participant shall tender the amount of such tax to the Company
along with the exercise price, unless the incidence of such tax cannot lawfully be placed on
the Participant.

Section 5.5 Exercise of Options.

     Options shall be exercisable as provided in the Option Agreement. In no event shall
Options be exercised during the six (6) month period immediately following such grant.

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Section 5.6 Duration of Option.

     Each Option shall be exercisable for so long as the Participant is a director of the
Company and, to the extent that
the Option is exercisable on the date of termination of the Participant’s directorship, for
thirty (30) days thereafter, but
not longer than ten (10) years from the date the Option is granted. Nothing in this Plan
requires Options to be exercisable upon grant.

Section 5.7 Death or Disability.

     If a Participant dies or is “permanently and totally disabled” (within the meaning of
section 22(e)(3) of the Internal
Revenue Code of 1986, as amended [“Code"]) while serving as a director of the Company, the
thirty (30) day period specified in Section 5.6 above shall be one (1) year.

Section 5.8 Misconduct.

     If a Participant is determined by the Committee to have committed an act of embezzlement,
fraud, dishonesty, deliberate or repeated disregard for the rules of the Company, unauthorized
disclosure of any of the trade secrets or confidential information of the Company, unfair
competition with the Company, inducement of any customer of the Company to breach a contract
with the Company, inducement of any principal for whom the Company acts as agent to terminate
that agency relationship or any culpable degree of negligence, then neither the Participant nor
the Participant’s estate shall be entitled to exercise any Option after termination of the
Participant’s directorship,
whether or not, after termination of such directorship, such Participant may receive payment
from the Company for services rendered prior to termination, services for the day on which
termination occurs, or other benefits.

Section 5.9 Transferability of Option.

     Options shall be transferable only by will or the laws of descent and distribution.

Section 5.10 No Employment Agreement.

     No Option Agreement, nor anything contained in this Plan, shall confer upon any
Participant any right to continue as a director of the Company nor limit in any way the right
of the Company, or the shareholders thereof, to terminate a Participant’s directorship at any
time.

Section 5.11 Adjustments to Options.

     Subject to the general limitations of this Plan, the Committee may make any adjustment in
the exercise price, term, or any other provision of an Option by cancelling an outstanding
Option and subsequently regranting the Option or by amendment or substitution of an outstanding
Option. Options that have been so amended, substituted, or regranted may have higher or lower
exercise prices, have longer or shorter terms, or be subject to different rights and
restrictions than prior Options. The Committee may also adjust the number of Options granted
to a Participant by cancelling outstanding Options or granting additional Options. Except for
amendments necessary to ensure compliance with any applicable state or federal law, no such
amendment shall impair a Participant’s rights and privileges pursuant to the grant of an Option
without the consent of the Participant.

Section 5.12 Form of Agreement.

     The Committee shall adopt a form of Option Agreement to be used pursuant to this Plan and
may modify, add to, or delete from the form as it shall deem appropriate, subject to the
provisions set forth herein.

ARTICLE VI

ADMINISTRATION AND AMENDMENT OF THE PLAN

Section 6.1 The Committee.

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     This Plan shall be administered by a committee (“Committee”) of at least two persons not
eligible to participate in the Plan and who are appointed by the Board of Directors and may or
may not be members of the Board. The Board of Directors shall fill vacancies on the Committee
and may from time to time remove members from, or add members to, the Committee, provided that
at all times the Committee shall have at least two members. The Committee shall act pursuant
to the written consent of a majority of its members or the majority vote of its members at any
meeting thereof.

Section 6.2 Committee Rights and Powers.

     Subject to this Plan and to the supervision of the Board of Directors, the Committee shall
have the authority and discretion:

	 	(a)	 	to determine which of the Company’s directors shall receive Options;
	 
	 	(b)	 	to determine when Options shall be granted (subject to Section 5.2 above);
	 
	 	(c)	 	to determine the terms and conditions of Options (which terms and conditions may
differ between Options);
	 
	 	(d)	 	to interpret the Plan; and
	 
	 	(e)	 	to take such action as is necessary or appropriate to the administration of the Plan.

     All decisions, determinations, and interpretations of the Committee shall be final and
binding on all Participants (subject to review by the Board of Directors in its sole and
absolute discretion).

Section 6.3 Administration.

     The Committee from time to time may adopt rules and regulations for implementing this
Plan, and it may from time to time suspend or terminate this Plan or make such changes and
additions hereto as it may deem desirable, without further action on the part of the Board of
Directors or the shareholders of the Company; provided, however, that unless the Company’s
shareholders shall have first given their approval, then (a) the total number of Shares that
may be purchased under the Plan shall not be increased except as otherwise provided in this
Plan; (b) the description of the persons eligible to receive Options shall not be changed; and
(c) the minimum exercise price shall not be changed. The suspension, termination or amendment
of this Plan shall not, without the consent of the Participant, alter or impair any rights or
obligations under any Options theretofore granted under this Plan.

ARTICLE VII

ADJUSTMENT OF AND CHANGES IN STOCK

Section 7.1 Changes in Stock; Stock Dividends.

     If the Shares presently constituted are changed into or exchanged for a different number
or kind of shares of stock or other securities of the Company or of another corporation
(whether by reason of merger, consolidation, recapitalization, reclassification, split-up,
combination of shares, or otherwise), or if the number of Shares shall be increased through the
payment of a stock dividend or other distribution, then notwithstanding any other provision of
this Plan, there shall be substituted for or added to each Share subject to this Plan the
number and kind of shares of stock or other securities into which each outstanding Share shall
be entitled, as the case may be. Outstanding Options shall also be amended as to price and
other terms if necessary to reflect the foregoing events. If there shall be any other change
in the number or kind of the outstanding Shares, or of any stock or other securities into which
it shall have been exchanged, then if the Committee shall, in its sole discretion, determine
that such change equitably requires an adjustment in any Option theretofore granted or that may
be granted under this Plan, such adjustment shall be made in accordance with such
determination.

Section 7.2 Termination of Business.

     Upon any merger of the Company with another corporation where the Company is not the
surviving corporation, dissolution or liquidation of the Company, sale of substantially all the
property of the company, or the acquisition of more than 80% of the voting power of the stock
of the Company by another corporation, then the Company shall have the right, at its option, to
do any of the following:

	 	(a)	 	provide for the continuance of this Plan and all outstanding Options granted
hereunder;

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	 	(b)	 	permit the immediate exercise of all outstanding Options not otherwise immediately
exercisable;
	 
	 	(c)	 	terminate all outstanding Options, whether exercisable or not, by paying each holder
an amount equal to the
aggregate current market price of Shares underlying the Options held by the holder less
the aggregate
exercise price of such Shares; or
	 
	 	(d)	 	terminate this Plan and all Options granted hereunder after giving written notice to
all holders of
exercisable Options informing them of the Company’s intention to terminate the Options and
giving the
holders a reasonable opportunity to exercise their exercisable Options.

Section 7.3 Fractional Shares.

     No right to purchase fractional Shares shall result from any adjustment in Options
pursuant to this Article VII. In the case of any such adjustment, the Shares subject to
Options of each Participant shall be rounded down to the nearest whole Share. Notice of any
adjustment shall be given by the Company to each holder of Options that shall have been so
adjusted and such adjustment (whether or not such notice is given) shall be effective and
binding for all purposes of the Plan.

ARTICLE VIII

BINDING ON HEIRS, SUCCESSORS AND ASSIGNS

     Except as provided in Section 7.2 above, this Plan shall inure to the benefit of, and be
binding upon, each successor to the Company. All obligations imposed upon the Participants and
all rights granted to the Company under this Plan shall be binding upon each Participant’s
heirs, legal representatives, and successors. This Plan and the Option Agreements executed
between the Company and each Participant shall be the sole and exclusive source of any and all
rights that each Participant and his or her heirs, legal representatives, or successors may
have in respect to this Plan or any Options or Shares granted hereunder, whether to the
Participant or to any other person.

ARTICLE IX

TAX STATUS

     Options granted hereunder are not intended to be eligible for favorable tax treatment
under Section 422 of the Code. The Company does not hereby, nor by way of any Plan, document,
or otherwise, attempt to make any representation to any person, including the Participants,
with respect to the tax effect on such person of the grant or exercise of an Option or the
subsequent disposition of Shares obtained by the exercise of an Option pursuant to this Plan
or any other aspect of this Plan.

ARTICLE X

PLAN GOVERNS

     If there is any discrepancy between this Plan and any documents related to this Plan,
including any Option Agreement, this Plan shall govern. Nothing contained in this Plan shall
be construed to constitute, or be evidence of, any right in favor of any person to receive
Options hereunder or any obligation on the part of the Company to issue Options.

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EXHIBIT 10.4

ASTRONICS CORPORATION

2001 STOCK OPTION PLAN

I. PURPOSE

     The purpose of the 2001 Stock Option Plan (the “Plan”) of ASTRONICS CORPORATION, a New York
corporation (the “Company”), is to enable the Company to attract, retain, and motivate key
employees responsible for the success and growth of the Company by offering selected officers and
other key employees of the Company and its Subsidiaries an opportunity to purchase Shares of
Company Stock. The Plan provides for the grant of Options to purchase Shares. Options granted under
the Plan may include Non-Qualified Stock Options (“NQSOs”) as well as options that are intended to
qualify as Incentive Stock Options (“ISOs”) under Section 422 of the Internal Revenue Code of 1986,
as amended (the “Code”).

     Certain capitalized terms used in this Plan are defined in Section 2.

II. DEFINITIONS

a. “Board” means the Board of Directors of the Company.

b. “Committee” means the Stock Option Committee of the Board, consisting of at least 2
Directors who are not eligible to participate in the Plan and who are appointed to the Committee by
the Board.

c. “Director” means a member of the Board.

d. “Exercise Price” means the amount for which one Share may be purchased when an Option is
exercised, as specified by the Committee in the applicable Stock Option Agreement.

e. “Option” means an ISO or NQSO granted under the Plan that entitles the holder to purchase
Shares.

f. “Optionee” means a person who holds an Option.

g. “Share” means a share of Stock issuable when an Option is exercised, as adjusted in
accordance with Section 8 (if applicable).

h. “Stock” means the Common Stock or Class B Stock of the Company.

i. “Stock Option Agreement” means the agreement or other instrument between the Company and
an Optionee that evidences and sets forth the terms, conditions and restrictions pertaining to the
Optionee’s Option.

j. “Subsidiary” means any corporation (other than the Company) in an unbroken chain of
corporations beginning with the Company, if each of the corporations other than the last
corporation in the unbroken chain owns stock possessing 50% or more of the total combined voting
power of all classes of stock in one of the other corporations in the chain. A corporation that
attains the status of a Subsidiary on a date after the adoption of the Plan will be considered a
Subsidiary commencing as of the date.

III. ADMINISTRATION

a. Stock Option Committee. The Plan will be administered by the Committee. Subject
to and not inconsistent with the provisions of the Plan, the Committee has the full authority and
responsibility to administer the Plan and to exercise all the powers and authorities either
specifically granted to it under the Plan or necessary or advisable in the administration of the
Plan, including the power to:

          i. Determine and designate those employees selected to receive Options, the time at
which each Option will be granted, and the number of Shares subject to each Option;

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          ii. Determine the time and manner of exercise, the duration of the exercise periods,
and the exercise price of the Options granted;

          iii. Prescribe, amend, or rescind any rules and regulations necessary or appropriate
for the administration of the Plan;

          iv. Correct any defect, supply any deficiency, and reconcile any inconsistency in the
Plan or in any related Option or agreement; and

          v. Make other determinations and take such other action in connection with the
administration of the Plan as it deems necessary or advisable.

b. Delegation of Duties. The Committee may direct appropriate officers of the
Company to implement its rules, regulations and determinations and to execute and deliver on behalf
of the Company such documents, forms, agreements and other instruments as are deemed by the
Committee to be necessary for the administration and implementation of the Plan.

c. Interpretation of Plan. The Committee has the power to interpret and construe the
Plan and all related Options and agreements. All decisions, interpretations and determinations of
the Committee with respect to the Plan will be final and binding on all Optionees and all persons
deriving their rights from Optionees.

d. Indemnification. Each member of the Board and the Committee is indemnified and
held harmless by the Company against any cost or expense (including any sum paid in settlement of a
claim with the approval of the Company) arising out of any act or omission to act in connection
with the Plan to the extent permitted by applicable law. This indemnification is in addition to any
rights of indemnification a member may have as a Director or otherwise under the by-laws of the
Company or a Subsidiary, any agreement, any vote of shareholders or disinterested directors, or
otherwise.

IV. ELIGIBILITY

a. General Rule. Options may be granted to full-time salaried officers and key
employees of the Company or any Subsidiary.

b. Ten-PercentStockholders. An individual who owns more than 10% of the total
combined voting power of all classes of outstanding stock of the Company or any of its Subsidiaries
(as determined in accordance with Section 424(d) of the Code) will not be eligible for the grant of
an ISO unless (i) the Exercise Price is at least 110% of the Fair Market Value of a Share on the
date of grant and (ii) the Option by its terms is not exercisable after the expiration of 5 years
from the date of grant.

V. STOCK SUBJECT TO PLAN

a. Basic Limitation. The aggregate number of Shares that may be issued under the
Plan on exercise of Options may not exceed 800,000 Shares, subject to adjustment as provided in
Section 8. Shares offered under the Plan may be authorized but unissued Shares or Shares reacquired
by the Company (“Treasury Shares”). The number of Shares that are subject to Options outstanding at
any time under the Plan must not exceed the number of Shares that then remain available for
issuance under the Plan. The Company, during the term of the Plan, at all times will reserve and
keep available sufficient Shares to satisfy the requirements of the Plan.

b. Additional Shares. If any outstanding Option expires, is canceled or otherwise
terminates for any reason, the Shares allocable to the unexercised portion of that Option will be
available again for purposes of the Plan. If Shares issued under the Plan are reacquired by the
Company, those Shares will be available again for purposes of the Plan.

VI. TERMS AND CONDITIONS OF OPTIONS

a. Stock Option Agreement. Each grant of an Option under the Plan will be evidenced
by a Stock Option Agreement between the Optionee and the Company. The Option will be subject to
terms and conditions that are consistent with the Plan and that the Board deems appropriate for
inclusion in a Stock Option Agreement. The provisions of Stock Option Agreements entered into under
the Plan need not be identical.

b. Number of Shares. Each Stock Option Agreement will specify the number of Shares
that are subject to the Option and will provide for the adjustment of that number in accordance
with Section 8. The Stock Option Agreement also will specify whether the

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Option is an ISO or NQSO. However, if any portion of an Option does not meet the requirements to
qualify as an ISO, that portion will be a NQSO.

c. Exercise Price. Each Stock Option Agreement will specify the Exercise Price. The
Exercise Price under any Option will be determined by the Committee in its sole discretion, except
that the Exercise Price may not be less than 100% of the Fair Market Value of a Share on the date
of grant, and any higher percentage required by Section 4(b).

     For purposes of the Plan, “Fair Market Value” will be determined in the following manner:

     If the Shares are listed or admitted to trading on a nationally recognized U.S. securities
exchange or the National Association of Securities Dealers Automated Quotation System (“NASDAQ”),
the Fair Market Value will be determined with reference to the closing price of a Share on such
exchange or on NASDAQ as of the last trading day prior to the date of grant.

     If the Fair Market Value cannot be established under the provisions of subsection (i) above,
the Fair Market Value will be determined by the Board, acting in good faith on the basis of such
information as they, in their reasonable judgment, consider appropriate. The determination of the
Board will be conclusive and binding.

d. Limitation on Amount. The aggregate Fair Market Value (determined with respect to
each ISO as of the time the ISO is granted) of the Stock with respect to which ISOs are exercisable
for the first time by an Optionee during any calendar year (under this Plan or any other ISO plan
of the Company or any Subsidiary) may not exceed $100,000.

e. Withholding Taxes. As a condition to the exercise of an Option, the Optionee will
make such arrangements as the Committee may require for the satisfaction of any withholding tax
obligations that may arise in connection with the exercise. Subject to Section 7(b), the Optionee
may pay any or all required withholding taxes by delivering to the Company shares of Stock already
owned. The Company may authorize the Optionee to pay any or all required withholding taxes by
directing that Shares otherwise deliverable upon exercise of the Option be withheld.

     The Optionee also will make such arrangements as the Committee may require for the
satisfaction of any withholding tax obligations that may arise in connection with the disposition
of Shares acquired by exercising an Option. Subject to Section 7(b), the Optionee may pay any or
all such required withholding taxes by delivering to the Company shares of Stock already owned.

f. Exercisability. Each Stock Option Agreement will specify when all or any
installment of the Option becomes exercisable. The exercisability provisions of any Stock Option
Agreement will be determined by the Committee in its sole discretion.

g. Accelerated Excercisability. Unless the applicable Stock Option Agreement
provides otherwise, all of an Optionee’s Options will become exercisable in full upon the
Optionee’s termination of employment due to retirement on or after the Optionee’s attainment of age
65 with 15 years of service with the Company or a Subsidiary. Unless the applicable Stock Option
Agreement provides otherwise or the next sentence applies, all of an Optionee’s Options may become
exercisable in full, in the sole discretion of the Committee, if the Company is subject to a Change
in Control before the Optionee’s employment terminates. If the Company and the other party to the
transaction constituting a Change in Control agree that the transaction is to be treated as a
“pooling of interests” for financial reporting purposes, and if the transaction in fact is so
treated, then the accelleration of exercisability will not occur to the extent that the Company’s
independent public accounts determine in good faith that the acceleration would preclude the use of
“pooling of interests” accounting.

     For purposes of the Plan, “Change in Control” means:

i. The consummation of a merger or consolidation of the Company with or into another entity
or any other corporate reorganization, if more than 50% of the combined voting power of the
continuing or surviving entity’s securities outstanding immediately after the merger, consolidation
or other reorganization is owned by persons who were not stockholders of the Company immediately
prior to the merger, consolidation or other reorganization; or

ii. The sale, transfer or other disposition of all or substantially all of the Company’s
assets.

     A transaction will not constitute a Change in Control if its sole purpose is to change the
state of the Company’s incorporation or to create a holding company that will be owned in
substantially the same proportions by the persons who held the Company’s securities immediately
before the transaction or if it is a Designated Exchange Transaction. A “Designated Exchange
Transaction” is

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any reorganization, share exchange or other transaction so designated by the Board, following the
occurrence of which (i) the Options remain outstanding or (ii) the Options are assumed by a
surviving or new corporation and new options with substantially the same terms are substituted.

h. Basic Term. The Stock Option Agreement will specify the term of the Option. The
Committee, in its sole discretion, will determine when an Option is to expire, except that the term
may not exceed 10 years from the date of grant, and any shorter term required by Section 4(b).

i. Nontransferability. No Option may be transferred by the Optionee other than by
beneficiary designation, will or the laws of descent and distribution, except as may otherwise be
determined by the Board with respect to NQSOs only. An Option may be exercised during the lifetime
of the Optionee only by the Optionee or by the Optionee’s guardian or legal representative or, with
respect to NQSOs only, by any permitted transferee of the Optionee or by that permitted
transferee’s guardian or legal representative. No Option or interest in it may be pledged or
hypothecated by the Optionee during the Optionee’s lifetime, whether by operation of law or
otherwise, or be made subject to execution, attachment or similar process.

j. Termination of Employment (Except by Death). If an Optionee’s employment
terminates for any reason other than the Optionee’s death, then the Optionee’s Options will expire
on the earliest of the following:

     i. The expiration date determined pursuant to subsection (h) above;

     ii. The date 90 days after the termination of the Optionee’s employment for any reason
other than Cause or permanent disability within the meaning of Section 22(e)(3) of the Code
(“Disability”);

     iii. The date of the termination of the Optionee’s employment for Cause; or

     iv. The date 12 months after the termination of the Optionee’s employment by reason of
Disability.

     Notwithstanding the provisions of subsection (j)(ii) above, and subject to subsection (h), the
Committee in its sole discretion, may permit an Optionee to exercise his or her Options on a date
more than 90 days after the termination of the Optionee’s employment for reasons other than Cause,
Disability or Death. If the Option is exercised after that date, the exercised Option may not
qualify for favorable tax treatment as an ISO. For purposes of the Plan, “Cause” means (i) the
unauthorized use or disclosure of the confidential information or trade secrets of the Company,
(ii) conviction of, or a plea of “guilty” or “no contest” to, a felony under the laws of the United
States or any state, (iii) negligence or misconduct in the performance of Optionee’s duties or (iv)
material breach of Optionee’s obligations under any agreement or arrangement with the Company, a
Subsidiary or any affiliate thereof (including under the terms of any loan made to the Optionee).

     The Optionee may exercise all or part of his or her Options at any time before the expiration
of the Options under this subsection, but only to the extent that the Options had become
exercisable before the Optionee’s employment terminated (or became exercisable as a result of the
termination). If the Optionee dies after termination of employment but before the expiration of the
Optionee’s Options, all or part of the Options may be exercised (prior to expiration) by the
executors or administrators of the Optionee’s estate or by any person who has acquired the Options
directly from the Optionee by beneficiary designation, bequest or inheritance, or in the case of
NQSOs only, by other transfer, if permitted, but in any event only to the extent that the Options
had become exercisable before the Optionee’s employment terminated (or became exercisable as a
result of the termination).

k. Leaves of Absence. For purposes of subsection (j) above, a bona fide leave of
absence will not be deemed a termination of employment if the leave was approved by the Company in
writing and if continued crediting of service for this purpose is expressly required by the terms
of the leave or by applicable law (as determined by the Company).

l. Death of Optionee. If an Optionee dies while employed by the Company, then his or
her Options expire on the earlier of the following dates:

     i. The expiration date determined pursuant to subsection (h) above; or

     ii. The date 12 months after the Optionee’s death.

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     At any time before the expiration of the Options under the preceding sentence, all or part of
the Optionee’s Options may be exercised by the executors or administrators of the Optionee’s estate
or by any person who has acquired the Options directly from the Optionee by beneficiary
designation, bequest or inheritance, or in the case of NQSOs only, by other transfer, if permitted,
but in any event only to the extent that the Options had become exercisable before the Optionee’s
death or became exercisable as a result of death.

m. No Rights as a Stockholder. An Optionee, or a transferee of an Optionee, has no
rights as a stockholder with respect to any Shares covered by an Option until the person becomes
entitled to receive the Shares by filing a notice of exercise and paying the Exercise Price
pursuant to the terms of the Option.

n. Modification, Extension and Assumption of Options. Within the limitations of the
Plan, the Committee may modify or extend outstanding Options. However, without the consent of the
Optionee, no modification may impair the Optionee’s rights or increase the Optionee’s obligations
under the Option.

o. Restrictions on Transfer of Shares. Any Shares issued on exercise of an Option
will be subject to such special forfeiture conditions, rights of repurchase, rights of first
refusal and other transfer restrictions as the Committee may determine. The restrictions will be
set forth in the applicable Stock Option Agreement and will apply in addition to any restrictions
that may apply to holders of Shares generally. The Company will be under no obligation to sell or
deliver Shares on exercise of Options under the Plan unless the Optionee executes an agreement
giving effect to the restrictions in the form prescribed by the Company.

p. Additional Grants. If otherwise eligible, an Optionee may be granted an
additional Option or Options under this Plan or any other share option or purchase plan of the
Company.

q. Cancellation and New Options. The Committee has the authority to grant to the
holder of an outstanding Option, in exchange for the surrender and cancellation of that Option, a
new Option having a purchase price lower than provided in the Option surrendered and canceled and
containing other terms and conditions as the Committee may prescribe in accordance with the
provisions of the Plan.

VII. PAYMENT FOR SHARES

a. General Rule. The entire Exercise Price of Shares issued under the Plan is
payable in cash or cash equivalents when the Shares are purchased, except as otherwise provided in
this Section.

b. Surrender of Stock. To the extent a Stock Option Agreement so provides, all or
any part of the Exercise Price, plus the amount of any withholding taxes for which such payment is
permitted by the Company, may be paid by surrendering, or attesting to the ownership of, Shares
that are already owned by the Optionee and that are acceptable to the Committee. These Shares will
be surrendered to the Company in good form for transfer and will be valued at their Fair Market
Value on the date the Option is exercised. Unless the Committee otherwise determines, the Optionee
will not surrender, or attest to the ownership of, Shares in payment of the Exercise Price or any
withholding taxes if that action would cause the Company to recognize compensation expense (or
additional compensation expense) with respect to the Option for financial reporting purposes.

c. Exercise/Sale. To the extent that a Stock Option Agreement so provides, and if
the Stock is publicly traded, payment may be made all or in part by the delivery (on a form
prescribed by the Company) of an irrevocable direction to a securities broker approved by the
Company to sell the Shares and to deliver all or part of the sales proceeds to the Company in
payment of all or part of the Exercise Price and any withholding taxes.

d. Exercise/Pledge. To the extent that a Stock Option Agreement so provides, and if
the Stock is publicly traded, payment may be made all or in part by the delivery (on a form
prescribed by the Company) of an irrevocable direction to pledge the Shares to a securities broker
or lender approved by the Company, as security for a loan, and to deliver all or part of the loan
proceeds to the Company in payment of all or part of the Exercise Price and any withholding taxes.

VIII. ADJUSTMENT OF SHARES

a. General. If the outside shares of Stock of the Company are increased, decreased,
changed into or exchanged for a different number or kind of shares or securities of the Company
through a reorganization, recapitalization, reclassification, stock dividend, stock split, reverse
stock split or other similar transaction, the Committee will make such appropriate and
proportionate adjustments as

5

 

it deems necessary or appropriate in one or more of (i) the number of Shares specified in Section
5, (ii) the number of Shares covered by each outstanding Option and (iii) the Exercise Price under
each outstanding Option.

b. Mergers and Consolidations. In the event that the Company is a party to a merger
or consolidation, the Board may provide that outstanding Options will be subject to the agreement
of merger or consolidation, which agreement, without the Optionees’ consent, may provide for the
cancellation of each outstanding Option after payment to the Optionee of an amount in cash or cash
equivalents equal to (i) the Fair Market Value of the Shares subject to the Option at the time of
the merger or consolidation minus (ii) the Exercise Price of the Shares subject to the Option.

c. Reservation of Rights. Except as provided in this Section, an Optionee has no
rights by reason of (i) any subdivision or consolidation of shares of stock of any class, (ii) the
payment of any dividend or (iii) any other increase or decrease in the number of shares of stock of
any class. Any issuance by the Company of shares of stock of any class, or securities convertible
into shares of stock of any class, will not affect the number or Exercise Price of Shares subject
to an Option. The grant of an Option will not affect in any way the right or power of the Company
to make adjustments, reclassifications, reorganizations or changes of its capital or business
structure, to merge or consolidate or to dissolve, liquidate, sell or transfer all or any part of
its business or assets.

IX. SECURITIES LAW REQUIREMENTS

     Shares may not be issued under the Plan unless the issuance and delivery of these Shares
comply with (or are exempt from) all applicable requirements of law, including (without limitation)
the Securities Act of 1933, as amended (the “Securities Act”), the rules and regulations
promulgated under it, state securities laws and regulations, and the regulations of any stock
exchange or other securities market on which the Company’s securities then may be traded.

X. NO RETENTION RIGHTS

     Nothing in the Plan or in any Option granted under the Plan will confer on the Optionee any
right to continue in the employ of the Company for any period of time or will interfere with or
otherwise restrict the rights of the Company (or any Subsidiary) or of the Optionee, which rights
are expressly reserved by each, to terminate his or her employment at any time and for any reason.

XI. DURATION AND AMENDMENTS

a. Term of the Plan. Subject to the approval of the Company’s shareholders, the Plan
is effective as of February 15, 2001, the date of its adoption by the Board. If the shareholders
fail to approve the Plan within 12 months after its adoption by the Board, any grants of Options
that have already occurred will be rescinded, and no additional grants will be made. The Plan will
terminate automatically on February 15, 2011, 10 years after its adoption by the Board, and may be
terminated on any earlier date pursuant to subsection (b) below.

b. Right to Amend or Terminate the Plan. The Board or the Committee may amend,
suspend or terminate the Plan at any time and for any reason. However, any amendment of the Plan
that increases the number of Shares available for issuance under the Plan (except as provided in
Section 8), or that materially changes the class of persons who are eligible for the grant of
Options, is subject to the approval of the Company’s shareholders. Shareholder approval will not be
required for any other amendment of the Plan.

c. Effect of Amendment or Termination. No Shares will be issued or sold under the
Plan after its termination, except on exercise of an Option granted prior to the termination. No
amendment, suspension, or termination of the Plan will, without the consent of the holder, alter or
impair any rights or obligations under any Option previously granted under the Plan.

XII. APPLICABLE LAW

     The Plan and all Options granted under it will be construed and interpreted in accordance
with, and governed by, the laws of the State of New York, other than its laws regarding choice of
law.

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