UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark one)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- --- EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
--------------
Commission File Number 0-6072
EMS TECHNOLOGIES, INC.
----------------------
(Exact name of registrant as specified in its charter)
Georgia 58-1035424
------- ----------
(State or other jurisdiction of (IRS Employer Identification Number)
incorporation of organization)
660 Engineering Drive
Norcross, Georgia 30092
- --------------------------------------- -----
(Address of principal executive offices) (Zip Code)
Registrant's Telephone Number, Including Area Code - (770) 263-9200
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
Yes X No
--- --
The number of shares outstanding of each of the issuer's classes of
common stock, as of the close of business on May 1, 2000:
Class Number of Shares
---------------------------- ----------------
Common Stock, $.10 Par Value 8,763,428
PART I
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Financial Information
Item 1. Financial Statements
EMS TECHNOLOGIES, INC.
Consolidated Statements of Earnings (Unaudited)
(In thousands, except net earnings per share)
Quarter Ended
-----------------------
March 31 April 2
2000 1999
------- -------
Net sales $62,434 55,193
Cost of sales 41,121 35,511
Selling, general and
administrative expenses 11,607 11,455
Research and development expenses 7,986 4,707
------ ------
Operating income 1,720 3,520
Non-operating income (expense), net 182 (11)
Interest expense (898) (554)
------ ------
Earnings before income taxes 1,004 2,955
Income tax expense (220) (993)
------ ------
Net earnings $ 784 1,962
====== ======
Net earnings per share:
Basic $ .09 .23
Diluted .09 .22
Weighted average number shares:
Common 8,729 8,699
Common and dilutive common equivalent 8,932 9,306
See accompanying notes to interim consolidated financial statements.
EMS TECHNOLOGIES, INC.
Consolidated Balance Sheets (Unaudited)
(In thousands)
March 31 December 31
2000 1999
------- -----------
ASSETS
- ------
Current assets:
Cash and cash equivalents $ 4,668 4,832
Trade accounts receivable, net 72,002 67,804
Inventories:
Work in process 7,810 6,803
Parts and materials 21,408 21,946
------ ------
Total inventories 29,218 28,749
Deferred income taxes 1,020 1,020
------- -------
Total current assets 106,908 102,405
------- -------
Property, plant and equipment:
Land 3,649 3,667
Buildings and leasehold improvements 21,080 21,077
Machinery and equipment 63,007 59,102
Furniture and fixtures 5,395 7,553
------- -------
Total property, plant and equipment 93,131 91,399
Less accumulated depreciation
and amortization 44,405 42,345
------- -------
Net property, plant and equipment 48,726 49,054
Investment in limited partnership 13,000 13,000
Deferred income taxes, net 2,409 2,409
Accrued pension asset 2,945 3,084
Other assets 9,609 8,854
Goodwill, net of accumulated amortization 10,892 11,022
------- -------
$194,489 189,828
======= =======
Accompanying notes to interim consolidated financial statements.
EMS TECHNOLOGIES, INC.
Consolidated Balance Sheets (Unaudited), continued
(In thousands, except share data)
March 31 December 31
2000 1999
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LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current liabilities:
Current installments of long-term debt $ 16,901 16,613
Accounts payable 18,083 18,811
Income taxes 218 -
Accrued compensation costs 6,089 6,184
Accrued retirement costs 1,006 594
Accrued post-retirement benefit 2,309 2,309
Deferred revenue 4,320 3,471
Other liabilities 1,583 2,324
------- -------
Total current liabilities 50,509 50,306
Long-term debt, excluding
current installments 37,244 33,707
------- -------
Total liabilities 87,753 84,013
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Stockholders' equity:
Preferred stock of $1.00 par value
per share. Authorized 10,000,000
shares; none issued - -
Common stock of $.10 par value per
share. Authorized 75,000,000 shares;
issued and outstanding 8,753,000 in
2000 and 8,706,000 in 1999 875 871
Additional paid-in capital 34,672 34,503
Accumulated other comprehensive loss -
foreign currency translation adjustment (1,874) (1,838)
Retained earnings 73,063 72,279
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Total stockholders' equity 106,736 105,815
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$194,489 189,828
======= =======
See accompanying notes to interim consolidated financial statements
EMS TECHNOLOGIES, INC.
Consolidated Statements of Cash Flows (Unaudited)
(In thousands)
Quarter Ended
March 31 April 2
2000 1999
------- --------
Cash flows from operating activities:
Net earnings $ 784 1,962
Adjustments to reconcile net earnings
to net cash (used in) provided by
operating activities:
Depreciation and amortization 2,138 2,182
Goodwill amortization 130 130
Deferred income taxes - 566
Changes in operating assets
and liabilities:
Trade accounts receivable (4,198) (441)
Inventories (469) (2,555)
Accounts payable (728) 3,175
Income taxes 218 (566)
Accrued costs, deferred revenue
and other current liabilities 425 (174)
Other (518) 182
------ -----
Net cash (used in) provided by
operating activities (2,218) 4,461
Cash flows used in investing activities:
Purchase of property, plant and equipment (1,735) (2,438)
Initial payment for asset acquisition - (6,227)
------ -----
Net cash used in investing activities (1,735) (8,665)
------ -----
Cash flows from financing activities:
Borrowing of long-term debt 3,825 7,641
------ -----
Net change in cash and cash equivalents (128) 3,437
Effect of exchange rates on cash (36) 71
Cash and cash equivalents at
beginning of period 4,832 4,384
----- -----
Cash and cash equivalents at
end of period $ 4,668 7,892
====== =====
Consolidated Statements of Cash Flows (Unaudited), continued
(In thousands)
Supplemental disclosure of
cash flow information:
Cash paid for interest $ 679 457
===== =====
Cash paid for income taxes $ 216 1,059
===== =====
Noncash Investing and Financing:
In January 1999, the Company acquired (through its subsidiary, EMS
Technologies Canada, Ltd.) the Space Systems and Products Division of
Spar Aerospace Limited and Spar Holdings, Inc. (a wholly-owned
subsidiary of Spar Aerospace Limited), located near Montreal, Quebec.
The transaction was accounted for as an asset purchase valued at $17.4
million. In 1999, the Company made cash payments to the seller of $6.2
million of the purchase price at closing and $4.2 million in two
installments relating to the deferred portion of the purchase price,
with funds provided under the Company's U.S. revolving credit
agreement. The remaining $7.0 million of the purchase price was
financed by the seller in equal installments that are due, with annual
interest of 5.5%, on December 31, 2000 and 2001. These installments
are payable, at the Company's option, either in cash or equivalent
value of the Company's common stock.
See accompanying notes to interim consolidated financial statements.
EMS TECHNOLOGIES, INC.
Notes to Interim Consolidated Financial Statements (Unaudited)
(1) Basis of Presentation
The interim consolidated financial statements include the accounts of
EMS Technologies, Inc. and its wholly-owned subsidiaries LXE Inc. and
EMS Technologies Canada, Ltd. (formerly known as CAL Corporation)
(collectively, "the Company"). In the opinion of management, the
interim consolidated financial statements reflect all normal and
recurring adjustments necessary for a fair presentation of results for
such periods. Certain balance sheet amounts in 1999 were reclassified
to conform with classifications adopted in 2000. The results of
operations for any interim period are not necessarily indicative of
results for the full year. These consolidated financial statements
should be read in conjunction with the consolidated financial
statements and related notes contained in the Company's Annual report
on Form 10-K for the year ended December 31, 1999.
(2) Acquisition
In January 1999, the Company acquired (through its subsidiary, EMS
Technologies Canada, Ltd.) the Space Systems and Products Division of
Spar Aerospace Limited, located near Montreal, Quebec, and Spar
Holdings, Inc. (a wholly-owned subsidiary of Spar Aerospace Limited) --
collectively, the Montreal Space Division. The transaction was
accounted for as an asset purchase under the purchase method of
accounting; accordingly, the Company's 1999 consolidated statement of
earnings includes the results of operations of the former Montreal
Space Division only subsequent to the acquisition date. The asset
purchase was valued at $17.4 million, representing the $20.3 million
price per the purchase agreement, as adjusted for approximately
$400,000 of debt owed by the seller and assumed by the Company (which
debt related to Canadian government support for Montreal Space Division
research activities) and for the $2.5 million that the Space Division's
actual working capital at the closing date was less than the working
capital that had been projected in the purchase agreement.
The Company has made cash payments to the seller of $6.2 million of the
purchase price at closing, and a total of $4.2 million for installments
in 1999 relating to the deferred portion of the purchase price, with
funds provided under the Company's U.S. revolving credit agreement.
The remaining $7.0 million of the purchase price is financed by the
seller in equal installments that are due, with annual interest of
5.5%, on December 31 of 2000 and 2001. These installments are payable,
at the Company's option, either in cash or equivalent value of the
Company's common stock.
The sole asset of Spar Holdings, Inc. (now named EMS Holdings, Inc.)
was an equity investment of less than 5% in a limited partnership. The
general partner in this venture is a large, international aerospace
firm. The goal of the investment is to enable the Company to
participate in the development and implementation of a satellite
network that will provide high-data-rate wireless services. In
subsequent negotiations with the general partner concerning the
Company's future scope of work, the Company agreed to invest an
additional $9 million, comprising a $3 million payment in late 1999, a
$3 million payment in May 2000, and a $3 million in-kind contribution
in the form of a specific technological development. After making
these additional investments, the Company's equity stake in the limited
partnership will remain below 5%. The Company does not expect to make
any further cash or in-kind investments. The Company's equity
investment is accounted for at historical cost and has a carrying value
of $13 million at March 31, 2000 and December 31, 1999.
The following schedule (in thousands, except per share data) presents
pro forma consolidated financial data for the 1999 first quarter, as
though the acquisition had occurred at the beginning of that period:
First Quarter Ended
-----------------------
March 31 April 2
2000 1999
(Actual) (Pro Forma)
------ ---------
Consolidated Data:
Revenue $ 62,434 59,233
Net income 784 1,567
Earnings per share:
Basic .09 .18
Diluted .09 .18
(3) Earnings per Share
Basic earnings per share is the per share allocation of income
available to common stockholders based only on the weighted average
number of common shares actually outstanding during the period.
Diluted earnings per share represents the per share allocation of
income attributable to common stockholders based on the weighted
average number of common shares actually outstanding plus all dilutive
potential common shares outstanding during the period.
The Company has granted stock options that are potentially dilutive to
basic earnings per share, summarized as follows (shares in thousands):
March 31 April 2
2000 1999
------- -------
Dilutive stock options,
included in earnings per
share calculations:
Shares 1,125 241
Average price per share $ 13.31 $ 11.20
Antidilutive stock options,
excluded from earnings per
share calculations:
Shares 263 738
Average price per share $ 23.73 $ 17.24
The Company's earnings per share in any particular period could be
diluted by the effect of the convertible debt issued in the acquisition
of the Montreal Space Division (see note 2), calculated as if the debt
were converted on the first day of the period, with net income adjusted
for interest expense (net of taxes) that would have been avoided if
such conversion had occurred. The convertible debt did not have a
dilutive effect on first quarter earnings in 2000, however it was
dilutive to first quarter earnings in 1999.
Following is a reconciliation of the numerator and denominator for
first quarter basic and diluted earnings per share calculations (in
thousands, except earnings per share data):
Net Common Earnings
Earnings Shares Per
(Numerator) (Denominator) Share
------------- ------------- -----------
2000 1999 2000 1999 2000 1999
---- ---- ---- ---- ---- ----
Basic $ 784 1,962 8,729 8,699 $.09 .23
Common equivalent shares:
From stock options 203 47
From convertible debt - 560
Add: Interest expense on
convertible debt, net
of income taxes - 60
----- ----- ----- -----
Diluted $ 784 2,022 8,932 9,306 $.09 .22
===== ===== ===== =====
(4) Comprehensive Income
Beginning in fiscal 1998, the Company adopted SFAS 130, "Reporting
Comprehensive Income," which established standards for the reporting
and display of comprehensive income and its components. Under SFAS 130,
all items that are recognized under accounting standards as components
of comprehensive income must be reported in the financial statements.
The only element of comprehensive income that is applicable to the
Company is the change in the foreign currency translation adjustment.
Following is a summary of comprehensive income (in thousands):
Quarter Ended
March 31 April 2
2000 1999
-------- -------
Net income $ 784 1,962
Other comprehensive income (loss) -
foreign currency translation adjustment (36) 85
----- -----
Comprehensive income $ 748 2,047
===== =====
(5) Interim Segment Disclosures
The Company is organized into two reportable segments: Space and
Technologies, and Wireless Products. Each segment is separately
managed and comprises a range of products and services that share
distinct operating characteristics. The Company evaluates each segment
primarily upon operating profit.
Following is a summary of the Company's interim segment data (in
thousands)
First Quarter Ended
----------------------
March 31 April 2
2000 1999
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Revenues:
Space and technologies $ 29,365 26,196
Wireless products 33,069 28,997
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Total $ 62,434 55,193
====== ======
Operating income
Space and technologies $ 277 1,893
Wireless products 1,443 1,627
------ ------
Total $ 1,720 3,520
====== ======
Net earnings
Space and technologies $ 216 1,113
Wireless products 735 807
Corporate (167) 42
------ ------
Total $ 784 1,962
====== ======
Assets:
Space and technologies $103,129 87,399
Wireless products 83,377 85,191
Corporate 7,983 7,449
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Total $194,489 180,039
======= =======
Supplemental Information -
Revenue by Product Line:
Space and Technologies $ 29,365 26,196
Wireless Products:
Network Products and
Systems Integration 18,197 21,807
PCS/Cellular Antennas 11,626 4,508
SATCOM 3,246 2,682
------ ------
Total Wireless Products 33,069 28,997
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Total Consolidated Revenue $ 62,434 55,193
====== ======
ITEM 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Results of Operations
- ---------------------
Consolidated net sales for the first quarter were $62.4 million in
2000, compared with $55.2 million in 1999. This growth was
attributable to a net increase in the wireless products segment, in
which the sales increase from PCS/cellular antennas more than offset
the sales decrease related to network products and systems integration.
In addition, in the first quarter of 2000, the space and technologies
segment benefited from three months of revenues for the Montreal
operations, as compared with only two months in 1999 due to the
acquisition of these operations at the end of January 1999.
Cost of sales, as a percentage of consolidated net sales, was 66% for
the first quarter of 2000 and 64% for the first quarter of 1999. The
increase related mainly to network products and systems integration,
which is a product group within the wireless products segment. This
product group experienced a less favorable product mix in 2000 compared
with 1999, as well as a higher proportion of indirect sales, which
generally have a higher cost of sales percentage as compared with
direct sales to end-users.
Selling, general and administrative expenses increased slightly in 2000
compared with 1999. However, these costs did not increase
proportionately with the growth in revenues, and as a percentage of
sales, these costs decreased to 19% in 2000, compared with 21% in 1999.
Research and development expenses represent the cost of the Company's
internally funded efforts. Significant research and development effort
also occurs under many specific customer orders in the space and
technologies segment and, accordingly, is reflected in cost of sales.
The increase in research and development expenses is related to
specific products being developed for new applications in space,
satellite communications, and private local area networks.
Interest expense increased in 2000 compared with 1999 due to the
increased debt levels associated with funding operations in the
Company's Canadian subsidiary.
The effective income tax rate for 2000 was 22%, compared with 28% for
the year 1999. This decrease related to a relatively higher level of
research-related income tax incentives that benefited the Company's
Canadian operations.
Liquidity and Capital Resources
- -------------------------------
The Company used cash in operating activities primarily due to
receivables growth that resulted from higher sales, particularly in
wireless products. However, the cash balance did not change
substantially from the level at the end of 1999 due to additional
borrowing from the Company's lines of credit. Management believes that
the Company's present liquidity, together with cash from operations and
sources of external financing, will support its current business
activities and near-term capital investment plans. However, additional
sources of liquidity will be needed over the next few years if the
Company and its markets continue to grow, and particularly if the
Company completes the acquisition of a controlling interest in NetSat
28 Company, LLC and proceeds with the proposed design, construction and
launch of a geostationary Ka-band satellite for broadband
communications.
Risk Factors and Forward-Looking Statements
- -------------------------------------------
Forward looking statements with respect to expected cash flows and tax
rates are included in management's discussion and analysis of financial
condition and results of operations. Actual results could differ
materially from those suggested in any forward-looking statements as a
result of a variety of factors. Such factors include, but are not
limited to:
- - the Company's ability to achieve product development and
manufacturing objectives within the cost and timing parameters created
by customers and end-users;
- - the timeliness of orders and payments from customers;
- - the availability of funding for major new space programs;
- - the strength and timing of end-user demand for new communications
services, such as broadband services;
- - the effects of technology and communications systems that may be
developed by competitors;
- - the outcome of Federal Communications Commission proceedings in which
several parties have filed opposing motions related to the Company's
proposed control of NetSat 28 Company, LLC; and
- - the Company's ability to achieve expected levels of research efforts
that qualify for tax incentives, and apportionment of pre-tax income
among various tax jurisdictions.
Effect of New Accounting Pronouncement
- --------------------------------------
In June 1998, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting
for Derivative Instruments and Hedging Activities," which requires that
all derivatives be recognized as either assets or liabilities on the
balance sheet and be measured at fair value. In June 1999, SFAS No.
133 was amended by SFAS No. 137, "Accounting for Derivative Instruments
and Hedging Activities - Deferral of the Effective Date of FASB
Statement No. 133." SFAS No. 137 delays the effective date of SFAS No.
133 until fiscal years beginning after June 15, 2000. The Company will
adopt SFAS No. 133 effective January 1, 2001, but it has not determined
the impact of the statement on its results of operations or financial
position.
PART II
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Other Information
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk
At March 31, 2000, the Company had the following market risk sensitive
instruments (in thousands):
Revolving credit loan, maturing in November 2003,
interest payable quarterly at a variable rate
(7.83% at the end of the quarter) $ 23,242
Revolving credit loan, maturing in February 2001,
interest payable at a variable rate
(7.45% at the end of the quarter) 12,257
------
Total market-sensitive debt $ 35,499
======
At March 31, 1999, the Company also had intercompany accounts that
eliminate in consolidation but that are considered market risk
sensitive instruments:
Short-Term Due to Parent, payable by European
subsidiaries in the following countries and
arising from purchase of the Parent's products
for sale in Europe:
Exchange Rate
($U.S. per unit $U.S. in thousands
of local currency) (Reporting Currency)
------------------ --------------------
Belgium .024 /Franc $ 152
France .146 /Franc 568
Germany .489 /Mark 1,225
Netherlands .434 /Guilder 1,518
Sweden .116 /Krona 152
United Kingdom 1.591 /Pound 306
-----
Total short-term due to parent $ 3,921
=====
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits - The following exhibit is filed as part of this report:
3.1 Second Amended and Restated Articles of Incorporation of EMS
Technologies, Inc. effective March 22, 1999 (incorporated by reference
to Exhibit 3.1 to the Company's Annual Report on Form 10-K for the year
ended December 31, 1998).
3.2 Bylaws of EMS Technologies, Inc., as amended through March
15, 1999 (incorporated by reference Exhibit 3.2 to the Company's Annual
Report on Form 10-K for the year ended December 31, 1998).
10.1 Letter dated January 17, 2000 between the Company and Alfred
G. Hansen concerning the terms of his employment as President and Chief
Operating Officer (incorporated by reference to Exhibit 10.7 to the
Company's Annual Report on Form 10-K for the year ended December 31,
1999).
10.2 EMS Technologies, Inc. Directors' Stock Purchase Plan
effective January 1, 2000 (incorporated by reference to Exhibit 10.8 to
the Company's Annual Report on Form 10-K for the year ended December
31, 1999).
10.3 EMS Technologies, Inc. 1997 Stock Incentive Plan, as adopted
January 24, 1997, and amended through April 28, 2000.
27.1 Financial Data Schedule
(b) Reports on Form 8-K.
No reports of Form 8-K were filed during the quarter ended March 31,
2000.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
and Exchange Act of 1934, the Registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
EMS TECHNOLOGIES, INC.
By: /s/ Thomas E. Sharon Date: 5/15/00
----------------------------- -------
Thomas E. Sharon
Chairman and Chief Executive
Officer
By: /s/ Don T. Scartz Date: 5/15/00
------------------------------ -------
Don T. Scartz
Senior Vice President and Chief
Financial Officer, Treasurer
As adopted January 24, 1997
and amended through
April 28, 2000
EMS TECHNOLOGIES, INC.
1997 STOCK INCENTIVE PLAN
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS 1
(a) "Award" 1
(b) "Board" 1
(c) "Code" 1
(d) "Committee" 1
(e) "Company" 1
(f) "Director" 2
(g) "Disinterested Person" 2
(h) "Employee" 2
(i) "Employer" 2
(j) "Fair Market Value" 3
(k) "Grantee" 3
(l) "ISO" 3
(m) "1934 Act" 3
(n) "Officer" 3
(o) "Option" 3
(p) "Option Agreement" 4
(q) "Optionee" 4
(r) "Option Price" 4
(s) "Parent" 4
(t) "Plan" 4
(u) "Purchasable" 4
(v) "Qualified Domestic Relations Order" 4
(w) "Reload Option" 4
(x) "Restricted Stock" 5
(y) "Restriction Agreement" 5
(z) "Stock" 5
(aa) "Subsidiary" 5
ARTICLE II THE PLAN 5
Section 2.1 Name 5
Section 2.2 Purpose 5
Section 2.3 Effective Date 5
Section 2.4 Termination Date 5
TABLE OF CONTENTS (Cont'd)
Page
ARTICLE III ELIGIBILITY 6
ARTICLE IV ADMINISTRATION 6
Section 4.1 Duties and Powers of the Committee 6
Section 4.2 Interpretation; Rules 6
Section 4.3 No Liability 7
Section 4.4 Majority Rule 7
Section 4.5 Company Assistance 7
ARTICLE V SHARES OF STOCK SUBJECT TO PLAN 7
Section 5.1 Limitations 7
Section 5.2 Antidilution 8
ARTICLE VI OPTIONS 9
Section 6.1 Types of Options Granted 9
Section 6.2 Option Grant and Agreement 10
Section 6.3 Optionee Limitations 10
Section 6.4 $100,000 Limitation 11
Section 6.5 Option Price 11
Section 6.6 Exercise Period 11
Section 6.7 Option Exercise 12
Section 6.8 Nontransferability of Option 13
Section 6.9 Termination of Employment 14
Section 6.10 Employment Rights 14
Section 6.11 Certain Successor Options 14
Section 6.12 Conditions to Issuing Option Stock 15
Section 6.13 Automatic Option Grants to Certain Directors 15
ARTICLE VII RESTRICTED STOCK 17
Section 7.1 Awards of Restricted Stock 17
Section 7.2 Non-Transferability 18
Section 7.3 Lapse of Restrictions 18
Section 7.4 Termination of Employment 18
Section 7.5 Treatment of Dividends 18
Section 7.6 Delivery of Shares 19
Section 7.7 Payment of Withholding Taxes 19
ARTICLE VIII TERMINATION, AMENDMENT AND MODIFICATION OF PLAN 20
ARTICLE IX MISCELLANEOUS 20
Section 9.1 Replacement or Amended Grants 20
Section 9.2 Forfeiture for Competition 21
Section 9.3 Plan Binding on Successors 21
Section 9.4 Headings Not a Part of Plan 21
EMS TECHNOLOGIES, INC.
1997 STOCK INCENTIVE PLAN
ARTICLE I
DEFINITIONS
As used herein, the following terms have the meanings
hereinafter set forth unless the context clearly indicates to the
contrary:
(a) "Award" shall mean a grant of Restricted Stock.
(b) "Board" shall mean the Board of Directors of the
Company.
(c) "Code" shall mean the United States Internal Revenue
Code of 1986, as amended, including effective date and
transition rules (whether or not codified). Any reference
herein to a specific section or sections of the Code shall be
deemed to include a reference to any corresponding provision
of future law.
(d) "Committee" shall mean a committee of at least two
Directors appointed from time to time by the Board, having the
duties and authority set forth herein in addition to any other
authority granted by the Board; provided, however, that with
respect to any Options or Awards granted to an individual who
is also an Officer or Director, the Committee shall consist of
at least two Non-Employee Directors (who need not be members
of the Committee with respect to Options or Awards granted to
any other individuals), and all authority and discretion shall
be exercised by such Non-Employee Directors, and references
herein to the "Committee" shall mean such Non-Employee
Directors insofar as any actions or determinations of the
Committee shall relate to or affect Options or Awards made to
or held by any Officer or Director.
(e) "Company" shall mean EMS Technologies, Inc., a
Georgia corporation.
(f) "Director" shall mean a member of the Board.
(g) "Employee" shall mean any employee of the Company or
any Subsidiary of the Company.
(h) "Employer" shall mean the corporation that employs a
Grantee.
(i) "Fair Market Value" of the shares of Stock on any
date shall mean
(i) the closing sales price, regular way, or in the
absence thereof the mean of the last reported bid
and asked quotations, on such date on the exchange
having the greatest volume of trading in the shares
during the thirty-day period preceding such date
(or if such exchange was not open for trading on
such date, the next preceding date on which it was
open); or
(ii) if there is no price as specified in (i), the
final reported sales price, or if not reported in
the following manner, the mean of the closing high
bid and low asked prices, in the over-the-counter
market for the shares as reported by the National
Association of Securities Dealers Automatic
Quotation System or, if not so reported, then as
reported by the National Quotation Bureau
Incorporated, or if such organization is not in
existence, by an organization providing similar
services, on such date (or if such date is not a
date for which such system or organization
generally provides reports, then on the next
preceding date for which it does so); or
(iii) if there also is no price as specified in
(ii), the price determined by the Committee by
reference to bid-and-asked quotations for the
shares provided by members of an association of
brokers and dealers registered pursuant to
subsection 15(b) of the 1934 Act, which members
make a market in the shares, for such recent dates
as the Committee shall determine to be appropriate
for fairly determining current market value; or
(iv) if there also is no price as specified in
(iii), the amount determined in good faith by the
Committee based on such relevant facts, which may
include opinions of independent experts, as may be
available to the Committee.
(j) "Grantee" shall mean an Employee, former employee or
other person who is an Optionee or who has received an Award
of Restricted Stock.
(k) "ISO" shall mean an Option that complies with and is
subject to the terms, limitations and conditions of Code
section 422 and any regulations promulgated with respect
thereto.
(l) "1934 Act" shall mean the Securities Exchange Act of
1934, as amended from time to time.
(m) "Non-Employee Director" shall have the meaning set
forth for such term or corresponding concept in Rule 16b-3
under the 1934 Act, as the same may be in effect from time to
time, or in any successor rule thereto, and shall be
determined for all purposes under the Plan according to
interpretative or "no-action" positions with respect thereto
issued by the Securities and Exchange Commission or its
staff; provided, however, that to the extent it is determined
and intended that Options qualify as "performance-based
compensation" within the meaning of section 162(m) of the
Code, a person shall be a "Non-Employee Director" only if he
or she is also an "outside director" within the meaning of
such section 162(m).
(n) "Officer" shall mean a person who constitutes an
officer of the Company for the purposes of Section 16 of the
1934 Act, as determined by reference to such Section 16 and
to the rules, regulations, judicial decisions, and
interpretative or "no-action" positions with respect thereto
of the Securities and Exchange Commission or its staff, as
the same may be in effect or set forth from time to time.
(o) "Option" shall mean a contractual right to purchase
Stock granted pursuant to the provisions of Article VI
hereof.
(p) "Option Agreement" shall mean an agreement between
the Company and an Optionee setting forth the terms of an
Option.
(q) "Optionee" shall mean a person to whom an Option has
been granted hereunder.
(r) "Option Price" shall mean the price at which an
Optionee may purchase a share of Stock pursuant to an Option.
(s) "Parent", when used with respect to any subject
corporation, shall mean any other corporation that owns stock
possessing 50% or more of the total combined voting power of
all classes of stock of the subject corporation or that owns
such stock of another corporation in an unbroken chain of
corporations having such ownership of the stock of another
corporation and ending with the subject corporation.
(t) "Plan" shall mean the 1997 Stock Incentive Plan of
the Company.
(u) "Purchasable," when used to describe Stock, shall
refer to Stock that may be purchased by an Optionee under the
terms of this Plan on or after a certain date specified in the
applicable Option Agreement.
(v) "Qualified Domestic Relations Order" shall have the
meaning set forth in the Code or in the Employee Retirement
Income Security Act of 1974, as amended, or the rules and
regulations promulgated under the Code or such Act.
(w) "Reload Option" shall mean an Option that is
granted, without further action of the Committee, (i) to an
Optionee who surrenders or authorizes the withholding of
shares of Stock in payment of amounts specified in paragraphs
6.7(c) or 6.7(d) hereof, (ii) for the same number of shares as
is so paid, (iii) as of the date of such payment and at an
Option Price equal to the Fair Market Value of the Stock on
such date, and (iv) otherwise on the same terms and conditions
as the Option whose exercise has occasioned such payment,
subject to such contingencies, conditions or other terms as
the Committee shall specify at the time such exercised Option
is granted.
(x) "Restricted Stock" shall mean Stock issued, subject
to restrictions, to an Employee pursuant to Article VII
hereof.
(y) "Restriction Agreement" shall mean the agreement
setting forth the terms of an Award, and executed by a Grantee
as provided in Section 7.1 hereof.
(z) "Stock" shall mean the $.10 par value common stock
of the Company or, in the event that the outstanding shares of
such stock are hereafter changed into or exchanged for shares
of a different class of stock or securities of the Company or
some other corporation, such other stock or securities.
(aa) "Subsidiary", when used with respect to any subject
corporation, shall mean any other corporation as to which the
subject corporation is a Parent.
ARTICLE II
THE PLAN
2.1 Name. This plan shall be known as the "EMS
Technologies,
Inc. 1997 Stock Incentive Plan."
2.2 Purpose. The purpose of the Plan is to advance the
interests of the Company, its shareholders, and any Subsidiary of
the Company, by offering certain Employees and Directors an
opportunity to acquire or increase their proprietary interests in
the Company. Options and Awards will promote the growth and
profitability of the Company and any Subsidiary of the Company,
because Grantees will be provided with an additional incentive to
achieve the Company's objectives through participation in its
success and growth.
2.3 Effective Date. The Plan shall become effective on
January 24, 1997.
2.4 Termination Date. No further Options or Awards shall be
granted hereunder on or after January 24, 2007, but all Options or
Awards granted prior to that time shall remain in effect in
accordance with their terms.
ARTICLE III
ELIGIBILITY
The persons eligible to participate in this Plan shall consist
only of Directors and those Employees whose participation the
Committee determines is in the best interests of the Company.
However, no ISO's may be granted, and no Options or Awards may be
granted to any Director or Officer, prior to the approval of this
Plan by the Company's shareholders. Persons who are not Employees
but who serve as directors of any Subsidiary of the Company shall
also be eligible to participate in this Plan, and references
herein
to "Employee" shall be deemed to include any such persons to the
extent appropriate for him or her to become a Grantee.
ARTICLE IV
ADMINISTRATION
4.1 Duties and Powers of the Committee. The Plan shall be
administered by the Committee. The Committee shall select one of
its members as its Chairman and shall hold its meetings at such
times and places as it may determine. The Committee shall keep
minutes of its meetings and shall make such rules and regulations
for the conduct of its business as it may deem necessary. The
Committee shall have the power to act by unanimous written consent
in lieu of a meeting, and shall have the right to meet
telephonically. In administering the Plan, the Committee's
actions and determinations shall be binding on all interested
parties. The Committee shall have the power to grant Options or
Awards in accordance with the provisions of the Plan. Subject to
the provisions of the Plan, the Committee shall have the
discretion and authority to determine those individuals to whom
Options or Awards will be granted and whether such Options shall
be accompanied by the right to receive Reload Options, the number
of shares of Stock subject to each Option or Award, such other
matters as are specified herein, and any other terms and
conditions of an Option Agreement or Restriction Agreement. To
the extent not inconsistent with the provisions of the Plan, the
Committee shall have the authority to amend or modify an
outstanding Option Agreement or Restriction Agreement, or to waive
any provision thereof, provided that the Grantee consents to such
action.
4.2 Interpretation; Rules. Subject to the express
provisions of the Plan, the Committee also shall have complete
authority to interpret the Plan, to prescribe, amend and rescind
rules and regulations relating to it, and to make all other
determinations necessary or advisable in the administration of the
Plan, including, without limitation, the amending or altering of
any Options or Awards granted hereunder as may be required to
comply with or to conform to any federal, state or local laws or
regulations.
4.3 No Liability. Neither any member of the Board nor any
member of the Committee shall be liable to any person for any act
or determination made in good faith with respect to the Plan or
any Option or Award granted hereunder.
4.4 Majority Rule. A majority of the members of the
Committee shall constitute a quorum, and any action taken by a
majority at a meeting at which a quorum is present, or any action
taken without a meeting evidenced by a writing executed by all the
members of the Committee, shall constitute the action of the
Committee.
4.5 Company Assistance. The Company shall supply full and
timely information to the Committee on all matters relating to
eligible persons, their employment, death, retirement, disability
or other termination of employment, and such other pertinent facts
as the Committee may require. The Company shall furnish the
Committee with such clerical and other assistance as is necessary
in the performance of its duties.
ARTICLE V
SHARES OF STOCK SUBJECT TO PLAN
5.1 Limitations. Shares subject to an Option or issued as
an Award may be either authorized and unissued shares or shares
issued and later acquired by the Company. Subject to any
antidilution adjustment pursuant to the provisions of Section 5.2
hereof, the maximum number of shares of Stock that may be issued
hereunder shall be 1,250,000 (of which a maximum of 80,000 shares
may be issued as Restricted Stock). Shares (i) covered by any
unexercised portion of an Option that has terminated for any
reason; (ii) covered by any forfeited portion of an Award (except
any portion as to which the Grantee has received, and not
forfeited, dividends or other benefits of ownership other than
voting rights); (iii) withheld in payment of the Option Price or
withholding taxes; or (iv) issued hereunder but equal to the
number of shares surrendered in payment of the Option Price or
withholding taxes or purchased by the Company for an aggregate
price not exceeding the aggregate cash received from Grantees in
payment of Option Prices or withholding taxes, may each again be
optioned or awarded under the Plan, and such shares shall not be
considered as having been optioned or issued in computing the
number of shares of Stock remaining available for option or award
hereunder.
5.2 Antidilution.
(a) In the event that the outstanding shares of Stock
are changed into or exchanged for a different number or kind
of shares or other securities of the Company by reason of
merger, consolidation, reorganization, recapitalization,
reclassification, combination or exchange of shares, stock
split or stock dividend, or in the event that any spin-off,
spin-out or other distribution of assets materially affects
the price of the Company's stock:
(i) The aggregate number and kind of shares of
Stock for which Options or Awards may be granted
hereunder shall be adjusted proportionately by the
Committee; and
(ii) The rights of Optionees (concerning the
number of shares subject to Options and the Option
Price) under outstanding Options and the rights of the
holders of Awards (concerning the terms and conditions
of the lapse of any then-remaining restrictions), shall
be adjusted proportionately by the Committee.
(b) If the Company shall be a party to any
reorganization in which it does not survive, involving
merger, consolidation, or acquisition of the stock or
substantially all the assets of the Company, the Committee,
in its discretion, may:
(i) notwithstanding other provisions hereof,
declare that all Options granted under the Plan shall
become exercisable immediately notwithstanding the
provisions of the respective Option Agreements regarding
exercisability, that all such Options shall terminate a
specified period of time after the Committee gives
written notice of the immediate right to exercise all
such Options and of the decision to terminate all
Options not exercised within such period, and that all
then-remaining restrictions pertaining to Awards under
the Plan shall immediately lapse; or
(ii) notify all Grantees that all Options or Awards
granted under the Plan shall be assumed by the successor
corporation or substituted on an equitable basis with
options or restricted stock issued by such successor
corporation.
c) If the Company is to be liquidated or dissolved in
connection with a reorganization described in paragraph
5.2(b), the provisions of such paragraph shall apply. In all
other instances, the adoption of a plan of dissolution or
liquidation of the Company shall, notwithstanding other
provisions hereof, cause all then-remaining restrictions
pertaining to Awards under the Plan to lapse, and shall cause
every Option outstanding under the Plan to terminate to the
extent not exercised prior to the adoption of the plan of
dissolution or liquidation by the shareholders, provided
that, notwithstanding other provisions hereof, the Committee
may declare all Options granted under the Plan to be
exercisable at any time on or before the fifth business day
following such adoption notwithstanding the provisions of the
respective Option Agreements regarding exercisability.
(d) The adjustments described in paragraphs (a) through
(c) of this Section 5.2, and the manner of their application,
shall be determined solely by the Committee, and any such
adjustment may provide for the elimination of fractional
share interests. The adjustments required under this Article
V shall apply to any successors of the Company and shall be
made regardless of the number or type of successive events
requiring such adjustments.
ARTICLE VI
OPTIONS
6.1 Types of Options Granted. Within the limitations
provided herein, Options may be granted to one Employee at one or
several times or to different Employees at the same time or at
different times, in either case under different terms and
conditions, as long as the terms and conditions of each Option are
consistent with the provisions of the Plan. Without limitation of
the foregoing, Options may be granted subject to conditions based
on the financial performance of the Company or any other factor
the Committee deems relevant.
6.2 Option Grant and Agreement. Each Option granted or
modified hereunder shall be evidenced (a) by either minutes of a
meeting or a written consent of the Committee, and (b) by a
written Option Agreement executed by the Company and the Optionee.
The terms of the Option, including the Option's duration, time or
times of exercise, exercise price, whether the Option is intended
to be an ISO, whether the Option is transferable under paragraph
6.8(b), and whether the Option is to be accompanied by the right
to receive a Reload Option, shall be stated in the Option
Agreement. Separate Option Agreements shall be used for Options
intended to be ISO's and those not so intended, but any failure to
use such separate Agreements shall not invalidate, or otherwise
adversely affect the Optionee's rights under and interest in, the
Options evidenced thereby.
6.3 Optionee Limitations. The Committee shall not grant an
ISO to any person who, at the time the ISO would be granted:
(a) is not an Employee; or
(b) owns or is considered to own stock possessing more
than 10% of the total combined voting power of all classes of
stock of the Employer, or any Parent or Subsidiary of the
Employer; provided, however, that this limitation shall not
apply if at the time an ISO is granted the Option Price is at
least 110% of the Fair Market Value of the Stock subject to
such Option and such Option by its terms would not be
exercisable after the expiration of five years from the date
on which the Option is granted. For the purpose of this
paragraph (b), a person shall be considered to own (i) the
stock owned, directly or indirectly, by or for his brothers
and sisters (whether by the whole or half blood), spouse,
ancestors and lineal descendants, (ii) the stock owned,
directly or indirectly, by or for a corporation, partnership,
estate, or trust in proportion to such person's stock
interest, partnership interest or beneficial interest
therein, and (iii) the stock which such person may purchase
under any outstanding options of the Employer or of any
Parent or Subsidiary of the Employer.
6.4 Certain Limitations
(a) Limitation on Number of Shares. No Optionee shall
be granted, during any calendar year, Options to purchase in
excess of 50,000 shares of stock.
(b) $100,000 Limitation on ISO's. Except as provided
below, the Committee shall not grant an ISO to, or modify the
exercise provisions of outstanding ISO's held by, any person
who, at the time the ISO is granted (or modified), would
thereby receive or hold any incentive stock options (as
described in Code section 422) of the Employer and any Parent
or Subsidiary of the Employer, such that the aggregate Fair
Market Value (determined as of the respective dates of grant
or modification of each option) of the stock with respect to
which such incentive stock options are exercisable for the
first time during any calendar year is in excess of $100,000;
provided, that the foregoing restriction on modification of
outstanding ISO's shall not preclude the Committee from
modifying an outstanding ISO if, as a result of such
modification and with the consent of the Optionee, such
Option no longer constitutes an ISO; and provided that, if
the $100,000 limitation described in this Section 6.4 is
exceeded, an Option that otherwise qualifies as an ISO shall
be treated as an ISO up to the limitation and the excess
shall be treated as an Option not qualifying as an ISO. The
preceding sentence shall be applied by taking options
intended to be ISO's into account in the order in which they
were granted.
6.5 Option Price. The Option Price under each Option shall
be determined by the Committee. However, the Option Price shall
not be less than the Fair Market Value of the Stock on the date
that the Option is granted (or, in the case of an ISO that is
subsequently modified, on the date of such modification).
6.6 Exercise Period. The period for the exercise of each
Option granted hereunder shall be determined by the Committee, but
the Option Agreement with respect to each Option intended to be an
ISO shall provide that such Option shall not be exercisable after
a date not more than ten years from the date of grant (or
modification) of the Option. In addition, no Option granted to an
Employee who is also an Officer or Director shall be exercisable
prior to the expiration of six months from the date such Option is
granted, other than in the case of the death or disability of such
Employee.
6.7 Option Exercise.
(a) Unless otherwise provided in the Option Agreement,
an Option may be exercised at any time or from time to time
during the term of the Option as to any or all whole shares
that have become Purchasable under the provisions of the
Option, but not at any time as to less than 100 shares unless
the remaining shares that have become so Purchasable are less
than 100 shares. The Committee shall have the authority to
prescribe in any Option Agreement that the Option may be
exercised only in accordance with a vesting schedule during
the term of the Option.
(b) An Option shall be exercised by (i) delivery to the
Treasurer of the Company at its principal office of written
notice of exercise with respect to a specified number of
shares of Stock, and (ii) payment to the Company at that
office of the full amount of the Option Price for such number
of shares.
(c) The Option Price shall be paid in full upon the
exercise of the Option. The Committee may provide in an
Option Agreement that, in lieu of cash, all or any portion of
the Option Price may be paid by (i) tendering to the Company
shares of Stock duly endorsed for transfer and owned by the
Optionee, or (ii) delivering to the Company an attestation of
the Optionee's then-current ownership of a number of shares
equal to the number thereby authorized to be withheld by the
Company from the shares otherwise deliverable upon exercise
of the Option, in each case to be credited against the Option
Price at the Fair Market Value of such shares on the date of
exercise (however, no fractional shares may be so
transferred, and the Company shall not be obligated to make
any cash payments in consideration of any excess of the
aggregate Fair Market Value of shares transferred over the
aggregate Option Price).
(d) In addition to and at the time of payment of the
Option Price, the Optionee shall pay to the Company in cash
the full amount of any federal, state and local income,
employment or other taxes required to be withheld from the
income of such Optionee as a result of such exercise.
However, in the discretion of the Committee any Option
Agreement may provide that all or any portion of such tax
obligations, together with additional taxes not exceeding the
actual additional taxes to be owed by the Optionee as a
result of such exercise, may, upon the irrevocable election
of the Optionee, be paid by (i) tendering to the Company
whole shares of Stock duly endorsed for transfer and owned by
the Optionee, (ii) delivering to the Company an attestation
of the Optionee's then-current ownership of a number of
shares equal to the number thereby authorized to be withheld
by the Company from the shares otherwise deliverable upon
exercise of the Option, or (iii) authorizing the Company to
withhold shares of Stock otherwise issuable upon exercise of
the Option, in either case in that number of shares having a
Fair Market Value on the date of exercise equal to the amount
of such taxes thereby being paid, in all cases subject to
such restrictions as the Committee may from time to time
determine, including any such restrictions as may be
necessary or appropriate to satisfy the conditions of the
exemption set forth in Rule 16b-3 under the 1934 Act.
(e) The holder of an Option shall not have any of the
rights of a shareholder with respect to the shares of Stock
subject to the Option until such shares have been issued upon
exercise of the Option.
6.8 Nontransferability of Option.
(a) Except as provided in paragraph 6.8(b), no Option or
any rights therein shall be transferable by an Optionee other
than by will or the laws of descent and distribution, or
(except for an ISO) pursuant to a Qualified Domestic
Relations Order. During the lifetime of an Optionee, an
Option granted to that Optionee shall be exercisable only by
such Optionee, by such Optionee's guardian or other legal
representative, should one be appointed, or by such
Optionee's transferee permitted under paragraph 6.8(b).
(b) The Committee may, in its discretion, provide that
all or a portion of an Option (other than an ISO) may be
transferred by the Optionee to (i) the spouse, children or
grandchildren of the Optionee ("Immediate Family Member"),
(ii) a trust or trusts for the exclusive benefit of such
Immediate Family Members, or (iii) a partnership in which the
Optionee and or such Immediate Family Members are the only
partners. Following transfer, any such Option shall continue
to be subject to the same terms and conditions as were
applicable immediately prior to transfer, including those
terms and conditions governing transfer and the effect on
such Option of the termination of employment of the Optionee.
The Company shall have no obligation to any transferee to
provide notice of any termination of an Option as a result of
termination of the Optionee's employment. The Committee may
specify as a condition of any such transfer the manner in
which the Optionee shall remain responsible for the payment
of taxes required to be withheld as a result of the exercise
of such transferred Option.
6.9 Termination of Employment. The Committee shall have the
power to specify, with respect to the Options granted to any
particular Optionee, the effect upon such Optionee's right to
exercise an Option of the termination of such Optionee's
employment
under various circumstances, which effect may include (but is not
limited to) immediate or deferred termination of such Optionee's
rights under an Option, or acceleration of the date at which an
Option may be exercised in full. With respect to an ISO, such
effects shall be consistent with applicable requirements for
treatment as an ISO.
6.10 Employment Rights. Options granted under the Plan
shall
not be affected by any change of employment so long as the
Optionee
continues to be an Employee. Nothing in the Plan or in any Option
Agreement shall confer on any person any right to continue in the
employ of the Company or any Subsidiary of the Company, or shall
interfere in any way with the right of the Company or any such
Subsidiary to terminate such person's employment at any time.
6.11 Certain Successor Options. To the extent not
inconsistent with the terms, limitations and conditions of Code
section 422, and any regulations promulgated with respect thereto,
an Option issued in respect of an option held by an employee to
acquire stock of any entity acquired, by merger or otherwise, by
the Company (or by any Subsidiary of the Company) may contain
terms that differ from those stated in this Article VI, but solely
to the extent necessary to preserve for any such employee the
rights and benefits contained in such predecessor option, or to
satisfy the requirements of Code section 424(a).
6.12 Conditions to Issuing Option Stock. The Company shall
not be required to issue or deliver any Stock upon the full or
partial exercise of any Option prior to fulfillment of all of the
following conditions:
(a) The admission of such shares to listing on all stock
exchanges on which the Stock is then listed;
(b) The completion of any registration or other
qualification of such shares that the Company shall determine
to be necessary or advisable under any federal or state law
or under the rulings or regulations of the Securities and
Exchange Commission or any other governmental regulatory
body, or the Company's determination that an exemption is
available from such registration or qualification;
(c) The obtaining of any approval or other clearance
from any federal or state governmental agency that the
Company shall determine to be necessary or advisable; and
(d) The lapse of such reasonable period of time
following exercise as shall be appropriate for reasons of
administrative convenience.
Unless the shares of Stock covered by the Plan shall be the
subject of an effective registration statement under the
Securities Act of 1933, as amended, stock certificates issued and
delivered to Optionees shall bear such restrictive legends as the
Company shall deem necessary or advisable pursuant to applicable
federal and state securities laws.
6.13 Automatic Option Grants to Certain Directors.
(a) Options for New Directors. Each person who is not
an Employee, or an employee of any Parent of the Company,
shall automatically, and without any action of the Board or
the Committee, be granted, on the first day on which such
person serves as a Director, an Option for the purchase of
10,000 shares of Stock if such first day of service occurs
prior to 1999, and of 15,000 shares if such first day occurs
in 1999 or thereafter (subject in all cases to automatic
proportionate adjustment for stock splits or stock dividends,
and otherwise to proportionate adjustment by the Committee as
provided in Section 5.2). Each such Option shall become
exercisable as to one-fifth of the subject shares on the date
that is six months after the date of grant, and as to an
additional one-fifth of the subject shares on each of the
first, second, third and fourth anniversaries of such six-
month date. Persons receiving such Option prior to 1999 shall
also be granted, automatically and without further action of
the Board or Committee, upon election in 1999 to a further
term of service as a Director, an Option for 1,000 shares for
each 2,000 shares of such original Option not yet exercisable
as of such 1999 election, which additional Option shall
become exercisable as to 1,000 shares on each date on which
an additional 2,000 shares of the original Option becomes
exercisable.
(b) Additional Options for Continuing Service. Each
person who is not at that time an Employee, or an employee of
any Parent of the Company, shall automatically and without
any action of the Board or the Committee, be granted, on the
date on which such person is elected to a new one-year term
of service beginning after such person has completed five
one-year terms of service (or its equivalent) following the
grant (whether under this Plan or otherwise)to such person of
options for at least 10,000 shares that become exercisable
based on continued service as a Director, and on each
subsequent date on which such person is elected to a further
term of service as a Director, an Option for the purchase of
2,500 shares of Stock for elections occurring prior to 1999,
and of 3,000 shares for elections occurring in 1999 and
thereafter (subject in all cases to automatic proportionate
adjustment for stock splits or stock dividends, and otherwise
to proportionate adjustment by the Committee as provided in
Section 5.2). Each such Option shall become exercisable on
the date that is six months after the date of grant.
(c) Other Terms of Automatic Options. Each Option
automatically granted under this Section 6.13 shall not be an
ISO, shall not include the right to receive a Reload Option,
and shall have an Option Price equal to the Fair Market Value
of the Stock on the date of grant. Each such Option shall
become immediately exercisable in the event a party other
than the Company or any Parent or Subsidiary of the Company
purchases or otherwise acquires shares of Stock pursuant to a
tender offer or exchange offer for such shares, or any person
or group becomes the beneficial owner (for the purposes of
Section 13(d)(3) of the Securities Exchange Act of 1934, as
amended) of 50% or more of the outstanding shares of the
Stock. To the extent such an Option shall have become
exercisable, it shall be non-forfeitable and shall remain
exercisable until the tenth anniversary of its date of grant,
but if the Grantee ceases to be a Director for any reason,
any portion of such Option that is not at that time
exercisable shall immediately terminate and shall not
thereafter become exercisable. The Option Price for each
such Option may be paid in cash or in the manners specified
in the second sentence of paragraph 6.7(c) hereof. In
addition, any taxes related to the exercise of each such
Option may be paid in the manner contemplated in the second
sentence of paragraph 6.7(d) hereof.
ARTICLE VII
RESTRICTED STOCK
7.1 Awards of Restricted Stock. The Committee may grant
Awards of Restricted Stock upon determination by the Committee,
acting pursuant to the delegation hereby of the Board's authority
to make such determinations, that the value or other benefit to
the Company of the services of a Grantee theretofore performed or
to be performed as a condition of the lapse of restrictions
applicable to such Restricted Stock, or the benefit to the Company
of the incentives created by the issuance thereof, is adequate
consideration for the issuance of such shares. Each such Award
shall be governed by a Restriction Agreement between the Company
and the Grantee. Each Restriction Agreement shall contain such
restrictions, terms and conditions as the Committee shall, in its
discretion, determine, and may require that an appropriate legend
be placed on the certificates evidencing the subject Restricted
Stock.
Shares of Restricted Stock granted pursuant to an Award
hereunder shall be issued in the name of the Grantee as soon as
reasonably practicable after the Award is granted, provided that
the Grantee has executed the Restriction Agreement governing the
Award, the appropriate blank stock powers and, in the discretion
of the Committee, an escrow agreement and any other documents
which the Committee may require as a condition to the issuance of
such shares. If a Grantee shall fail to execute the foregoing
documents, within any time period prescribed by the Committee, the
Award shall be null and void. At the discretion of the Committee,
shares of Restricted Stock issued in connection with an Award
shall be held by the Company or deposited together with the stock
powers with an escrow agent designated by the Committee. Unless
the Committee determines otherwise and as set forth in the
Restriction Agreement, upon issuance of such shares, the Grantee
shall have all of the rights of a shareholder with respect to such
shares, including the right to vote the shares and to receive all
dividends or other distributions paid or made with respect to
them.
7.2 Non-Transferability. Until any restrictions upon
Restricted Stock awarded to a Grantee shall have lapsed in a
manner set forth in Section 7.3, such shares of Restricted Stock
shall not be transferable other than by will or the laws of
descent and distribution, or pursuant to a Qualified Domestic
Relations Order, nor shall they be delivered to the Grantee.
7.3 Lapse of Restrictions. Restrictions upon Restricted
Stock awarded hereunder shall lapse at such time or times (but,
with respect to any award to an Employee who is also a Director or
Officer, not less than six months after the date of the Award) and
on such terms and conditions as the Committee shall, in its
discretion, determine at the time the Award is granted or
thereafter.
7.4 Termination of Employment. The Committee shall have the
power to specify, with respect to each Award granted to any
particular Employee, the effect upon such Grantee's rights with
respect to such Restricted Stock of the termination of such
Grantee's employment under various circumstances, which effect may
include (but is not limited to) immediate or deferred forfeiture
of such Restricted Stock or acceleration of the date at which any
then-remaining restrictions shall lapse.
7.5 Treatment of Dividends. At the time an Award of
Restricted Stock is made the Committee may, in its discretion,
determine that the payment to the Grantee of any dividends, or a
specified portion thereof, declared or paid on such Restricted
Stock shall be (i) deferred until the lapsing of the relevant
restrictions, and (ii) held by the Company for the account of the
Grantee until such time. In the event of such deferral, there
shall be credited at the end of each year (or portion thereof)
interest on the amount of the account at the beginning of the year
at a rate per annum determined by the Committee. Payment of
deferred dividends, together with interest thereon, shall be made
upon the lapsing of restrictions imposed on such Restricted Stock,
and any dividends deferred (together with any interest thereon) in
respect of Restricted Stock shall be forfeited upon any forfeiture
of such Restricted Stock.
7.6 Delivery of Shares. Within a reasonable period of time
following the lapse of the restrictions on shares of Restricted
Stock, the Committee shall cause a stock certificate or
certificates to be delivered to the Grantee with respect to such
shares. Such shares shall be free of all restrictions hereunder,
except that if the shares of stock covered by the Plan shall not
be the subject of an effective registration statement under the
Securities Act of 1933, as amended, such stock certificates shall
bear such restrictive legends as the Company shall deem necessary
or advisable pursuant to applicable federal and state securities
laws.
7.7 Payment of Withholding Taxes.
(a) The Restriction Agreement may authorize the Company
to withhold from compensation otherwise due to the Grantee
the full amount of any federal, state and local income,
employment or other taxes required to be withheld from the
income of such Grantee as a result of the lapse of the
restrictions on shares of Restricted Stock, or otherwise as a
result of the recognition of taxable income with respect to
an Award. At the time of and as a condition to the delivery
of a stock certificate or certificates pursuant to Section
7.6, the Grantee shall pay to the Company in cash any balance
owed with respect to such withholding requirements.
(b) In the discretion of the Committee, any Restriction
Agreement may provide that all or any portion of the tax
obligations otherwise payable in the manner set forth in
paragraph 7.7(a), together with additional taxes not
exceeding the actual additional taxes to be owed by the
Grantee with respect to the Award, may, upon the irrevocable
election of the Grantee, be paid by tendering to the Company
whole shares of Stock duly endorsed for transfer and owned by
the Grantee, or by authorizing the Company to withhold and
cancel shares of Stock otherwise deliverable pursuant to
Section 7.6, in either case in that number of shares having a
Fair Market Value on the date that taxable income is
recognized equal to the amount of such taxes thereby being
paid, in all cases subject to such restrictions as the
Committee may from time to time determine.
ARTICLE VIII
TERMINATION, AMENDMENT AND MODIFICATION OF PLAN
The Board may at any time, (i) cause the Committee to cease
granting Options and Awards, (ii) terminate the Plan, or (iii) in
any respect amend or modify the Plan. However, the Board (unless
its actions are approved or ratified by the shareholders of the
Company within twelve months of the date the Board amends the
Plan) may not amend the Plan to materially increase the number of
shares of Stock available under the Plan to Directors or Officers.
No termination, amendment or modification of the Plan shall
affect adversely a Grantee's rights under an Option Agreement or
Restriction Agreement without the consent of the Grantee or his or
her legal representative.
From and after the first date on which an Option is
automatically granted pursuant to Section 6.13, the provisions of
such Section 6.13 may not be amended in any manner more frequently
than once every six months, other than to comport with changes in
the Code, the Employee Retirement Income Security Act of 1974, as
amended, or the rules and regulations promulgated under the Code
or such Act.
ARTICLE IX
MISCELLANEOUS
9.1 Replacement or Amended Grants. At the sole discretion
of the Committee, and subject to the terms of the Plan, the
Committee may modify outstanding Options or Awards or accept the
surrender of outstanding Options or Awards on terms specified by
the Committee, which terms may include the grant of new Options or
Awards in substitution for them. However, no modification of an
Option or Award shall adversely affect a Grantee's rights under an
Option Agreement or Restriction Agreement without the consent of
the Grantee or his or her legal representative, and no
modification of an existing Option, or grant of a new Option in
substitution for the surrender of an existing Option, shall be at
an Option Price lower than that of the existing Option at the time
it was first granted (as thereafter adjusted pursuant to Section
5.2).
9.2 Forfeiture for Competition. If a Grantee provides
services to a competitor of the Company or any of its
Subsidiaries, whether as an employee, officer, director,
independent contractor, consultant, agent or otherwise, such
services being of a nature that can reasonably be expected to
involve the skills and experience used or developed by the Grantee
while a Director or an Employee, then that Grantee's rights under
any Options outstanding hereunder shall be forfeited and
terminated, and any shares of Restricted Stock held by such
Grantee subject to remaining restrictions shall be forfeited,
subject in each case to a determination to the contrary by the
Committee.
9.3 Plan Binding on Successors. The Plan shall be binding
upon the successors of the Company.
9.4 Headings Not a Part of Plan. Headings of Articles and
Sections hereof are inserted for convenience and reference, and do
not constitute a part of the Plan.
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