As filed with the Securities and Exchange Commission on May 11, 2000
Registration No. 33-_______
------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
Essex Corporation
(Exact name of registrant as specified in its charter)
Virginia 54-0846569
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
9150 Guilford Road
Columbia, Maryland 21046
(Address of Principal Executive Offices) (Zip Code)
----------------------------------------------
Essex Corporation
1. 1999 stock option and appreciation rights plan
2. 1998 stock option and appreciation rights plan
3. 1996 stock option and appreciation rights plan
(Full title of the plan)
------------------------------------
Leonard E. Moodispaw, Esquire WITH A COPY TO:
President and Chief Operating Officer D. Scott Freed, Esquire
Essex Corporation Whiteford, Taylor & Preston L.L.P.
9150 Guilford Road Seven Saint Paul Street
Columbia, Maryland 21046 Baltimore, Maryland 21202
(301) 939-7000 (410) 347-8700
(Name, address and telephone number, including area code, of agent for service)
<TABLE>
CALCULATION OF REGISTRATION FEE
<CAPTION>
Title of securities Amount Proposed maximum Proposed maximum
to be registered to be offering price aggregate Amount of
- ------------------ registered per share offering price registration fee
---------- ------------------ -------------- ----------------
<S> <C> <C> <C> <C>
Common Stock (par 900,000(1) $.875(2) $787,500(2) $207.90(2)
value $.10 per share)
<FN>
(1) Together with an indeterminable number of additional shares in order to
adjust the number of shares reserved for issuance pursuant to the plan as the
result of a stock split, stock dividend or similar transaction affecting the
common stock, pursuant to 17 C.F.R. ss. 230.416.
(2) Pursuant to Rule 457(h)(1), the proposed maximum offering price per share,
proposed maximum aggregate offering price and the amount of the registration fee
are based upon the average of the high and low prices reported on the OTC
Bulletin Board on May 8, 2000 of $1.00 and $.75 per share, respectively.
This Registration Statement shall become effective immediately upon filing with
the Securities and Exchange Commission, and sales of registered securities will
begin as soon as possible after such effective date.
</FN>
</TABLE>
<PAGE>
PART I
INFORMATION IN THE SECTION 10(a) PROSPECTUS1
Item 1. Plan Information
Item 2. Registrant Information and Employee Plan Annual Information
- -------------------------------
1 Information required by Part I to be contained in the Section 10(a)
prospectus is omitted from this Registration Statement in accordance with
Rule 428 under the Securities Act of 1933, as amended (hereinafter, the
"Securities Act"), and the Note to Part I of Form S-8.
<PAGE>
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
Item 3. Incorporation of Documents by Reference.
The following documents, filed or to be filed with the
Commission, are, or shall be deemed to be, incorporated herein by reference:
(a) The Registrant's Annual Report on Form 10-KSB for the
fiscal year ended December 26, 1999.
(b) Quarterly Report on Form 10-QSB for the quarter ended
March 26, 2000.
(c) The description of the common stock, par value $.10 per
share (the "Common Stock"), of the Registrant contained in its Registration
Statement on Form 8-A under Section 12 of the Exchange Act, and amendments
thereto, which are incorporated by reference into its Registration Statement
filed by the Registrant pursuant to the Securities Exchange Act of 1934, as
amended (the "Exchange Act").
(d) All documents filed by the Registrant pursuant to Sections
13(a), 13(c), 14 and 15(d) of the Exchange Act subsequent to the date of this
Registration Statement and prior to the filing of a post-effective amendment
which indicates that all securities offered hereby have been sold or which
deregisters all securities then remaining unsold. Any statement contained in a
document incorporated or deemed to be incorporated by reference herein shall be
deemed to be modified or superseded for purposes of this Registration Statement
to the extent that a statement contained herein or in any other subsequently
filed document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. The documents required to be so modified
or superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Registration Statement.
Item 4. Description of Securities.
Not applicable.
Item 5. Interests of Named Experts and Counsel.
Not applicable.
Item 6. Indemnification of Directors and Officers.
The Virginia Stock Corporation Act ("Act") permits indemnification of
directors and officers of a corporation under certain conditions and subject to
certain limitations.
II-1
<PAGE>
Articles (h) and (I) of the Articles of Incorporation of the Company contain
provisions for the indemnification of directors and officers of the Company
within the limitations permitted by the Act. In addition, the Company has
entered into indemnity agreements with certain of its directors and officers
which provide the maximum indemnification allowed by the Act.
Item 7. Exemption from Registration Claimed.
Not applicable.
Item 8. Exhibits.
See Exhibit Index on Page II-6.
Item 9. Undertakings.
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section
10(a)(3) of the Securities Act;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of this Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in this Registration
Statement;
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in this Registration Statement or
any material change to such information in this Registration Statement;
Provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) shall not
apply if the information required to be included in a post-effective amendment
by those paragraphs is contained in periodic reports filed by the Registrant
pursuant to Section 13 or 15(d) of the Exchange Act that are incorporated by
reference in this Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
II-2
<PAGE>
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or 15(d) of the Exchange
Act that is incorporated by reference in this Registration Statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-8 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in Columbia, State of Maryland, on May 11, 2000.
ESSEX CORPORATION
By:/s/ Harry Letaw, Jr.
Harry Letaw, Jr.
Chairman of the Board and Chief
Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each director whose signature
appears below constitutes and appoints Leonard E. Moodispaw and Joseph R. Kurry,
Jr., or either of them, his true and lawful attorneys-in-fact and agents, with
full power of substitution and resubstitution, for him and in his name, place
and stead, in any and all capacities, to sign for the undersigned any and all
amendments or post-effective amendments to this Registration Statement on Form
S-8 relating to the issuance of Common Stock of the Registrant and participation
interests in the Plan, and to file the same, with all exhibits thereto and other
documents in connection therewith, with the Securities and Exchange Commission.
We hereby confirm all acts taken by such agents and attorneys-in-fact, or any
one or more of them, as herein authorized.
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed by the following persons in the capacities and on the
dates indicated.
Signature Title Date
/s/ Harry Letaw, Jr. Chairman of the Board May 11, 2000
- --------------------- and Chief Executive
Harry Letaw, Jr. Officer (principal
executive officer)
/s/ Leonard E. Moodispaw President, Chief May 11, 2000
- ------------------------ Operating Officer and
Leonard E. Moodispaw Director
/s/ Joseph R. Kurry, Jr. Chief Financial Officer May 11, 2000
- ------------------------ Officer (principal
Joseph R. Kurry, Jr. financial and
accounting officer)
/s/ Harold P. Hanson Director May 11, 2000
- --------------------
Harold P. Hanson
/s/ Robert W. Hicks Director May 11, 2000
- -------------------
Robert W. Hicks
II-4
<PAGE>
/s/ Ray M. Keeler Director May 11, 2000
- -----------------
Ray M. Keeler
/s/ Frank E. Manning Director May 11, 2000
- --------------------
Frank E. Manning
/s/ Terry M. Turpin Director May 11, 2000
- -------------------
Terry M. Turpin
II-5
<PAGE>
EXHIBIT INDEX
Exhibit Number
Description
4.1 Essex Corporation 1999 Stock Option and Appreciation Rights Plan
4.2 1998 Stock Option and Appreciation Rights Plan
4.3 1996 Stock Option and Appreciation Rights Plan
5.1 Opinion of Whiteford, Taylor & Preston L.L.P. (contains Consent of
Counsel).
23.1 Consent of Whiteford, Taylor & Preston L.L.P. (contained in Exhibit
5.1 filed herewith).
23.2 Consent of Stegman & Company
- ------------------------------------
II-6
EXHIBIT 4.1
Essex Corporation
1999 Stock Option and Appreciation Rights Plan
<PAGE>
ESSEX CORPORATION
1999 STOCK OPTION AND APPRECIATION RIGHTS PLAN
ARTICLE I
ESTABLISHMENT AND PURPOSE
Section 1.1. Essex Corporation (the "Company"), a Virginia corporation,
hereby establishes a stock option and appreciation rights plan to be named the
Essex Corporation 1999 Stock Option and Appreciation Rights Plan (the "1999
Plan").
Section 1.2. The purpose of this 1999 Plan is to induce persons who are
officers, directors, employees and consultants of the Company or any of its
subsidiaries who are in a position to contribute materially to the Company's
prosperity to remain with the Company, to offer said persons incentives and
rewards in recognition of their contributions to the Company's progress, and to
encourage said persons to continue to promote the best interests of the Company.
This 1999 Plan provides for the grant of options to purchase shares of common
stock of the Company, par value $.10 per share (the "Common Stock") which
qualify as incentive stock options ("Incentive Options") under Section 422 of
the Internal Revenue Code of 1986, as amended (the "Code"), to persons who are
employees, as well as options which do not so qualify ("Non-Qualified Options")
to be issued to persons or consultants, including those who are not employees.
This 1999 Plan also provides for grants of stock appreciation rights ("SARs") in
connection with the grant of options under this 1999 Plan. Incentive Options and
Non-Qualified Options may be collectively referred to hereinafter as the
"Options" as the context may require.
Section 1.3. All options and other rights previously granted by the
Company under any other plan previously adopted by the Company shall continue to
be governed by such plan. All Options granted hereunder on or after the date
that this 1999 Plan has been approved and adopted by the Company's board of
directors (the "Board of Directors") shall be governed by the terms and
conditions of this 1999 Plan unless the terms of such Option specifically
indicate that it is not to be so governed.
ARTICLE II
ADMINISTRATION
Section 2.1. All determinations under this 1999 Plan concerning the
selection of persons eligible to receive awards under this 1999 Plan and with
respect to the timing, pricing and amount of an award under this 1999 Plan shall
be made by the administrator (the "Administrator") of this 1999 Plan. The
Administrator shall be either: (a) the Board of Directors or (b) in the
discretion of the Board of Directors by a committee (the "Committee") of the
Board of Directors of two or more members of the Board of Directors, each of
whom is a "Non-Employee director" as such term is defined by Rule 16b-3 (as such
rule may be amended from time to time, "Rule 16b-3") under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). In such case, a majority
of the total number of members of the Committee shall be necessary to constitute
a quorum; and (i) the affirmative act of a majority of the members present at
any meeting at which a quorum is present, or (ii) the approval in writing by a
majority of the members of the Committee shall be necessary to constitute action
by the Committee.
With respect to persons subject to Section 16 of the Exchange Act,
transactions under this 1999 Plan are intended to comply with all applicable
conditions of Rule 16b-3 or its successors under the Exchange Act. To the extent
that any provision of this 1999 Plan or action by the Administrator fails to so
comply, it shall be deemed to be null and void, to the extent permitted by law
and deemed advisable by the Administrator.
Section 2.2. The provisions of this 1999 Plan relating to Incentive
Options are intended to comply in every respect with Section 422 of the Code
("Section 422") and the regulations promulgated thereunder. In the event that
any future statute or regulation shall modify Section 422, this 1999 Plan shall
be deemed to incorporate by reference such modification. Any stock option
agreement relating to the grant of any Incentive Option pursuant to this 1999
Plan, which option is outstanding and unexercised at the time that any modifying
statute or regulation becomes effective, shall also be deemed to incorporate by
reference such modification, and no notice of such modification need be given to
the Optionee (as hereinafter defined). Any stock option agreement relating to an
Incentive Option shall provide that the Optionee (as hereinafter defined) hold
the stock received upon exercise of such Incentive Option for a minimum of two
<PAGE>
years from the date of grant of the Incentive Option and one year from the date
of exercise of such Incentive Option, absent the written approval, consent or
waiver of the Administrator.
Section 2.3. If any provision of this 1999 Plan is determined to
disqualify the shares of Common Stock purchasable upon exercise of an Incentive
Option granted under this 1999 Plan from the special tax treatment provided by
Section 422, such provision shall be deemed to incorporate by reference the
modification required to qualify such shares of Common Stock for said tax
treatment.
Section 2.4. The Company shall grant Options under this 1999 Plan in
accordance with determinations made by the Administrator pursuant to the
provisions of this 1999 Plan. All Options granted pursuant to this 1999 Plan
shall be clearly identified as Incentive Options or Non-Qualified Options. The
Administrator may from time to time adopt (and thereafter amend or rescind) such
rules and regulations for carrying out this 1999 Plan and take such action in
the administration of this 1999 Plan, not inconsistent with the provisions
hereof, as it shall deem proper. The Board of Directors or, subject to the
supervision of the Board of Directors, the Committee, as the Administrator,
shall have plenary discretion, subject to the express provisions of this 1999
Plan, to determine which officers, directors, employees and consultants shall be
granted Options, the number of shares subject to each Option, the time or times
when an Option may be exercised (whether in whole or in installments), whether
Rights under Section 7.6 hereof shall be granted, the terms and provisions of
the respective option agreements (which need not be identical), including such
terms and provisions which may be amended from time to time as shall be
required, in the judgment of the Administrator, to conform to any change in any
law or regulation applicable hereto, and to make all other determinations deemed
necessary or advisable for the administration of this 1999 Plan. The
interpretation and construction of any provision of this 1999 Plan by the
Administrator (unless otherwise determined by the Board of Directors) shall be
final, conclusive and binding upon all persons.
Section 2.5. No member of the Administrator shall be liable for any
action or determination made in good faith with respect to administration of
this 1999 Plan or the Options granted hereunder. A member of the Administrator
shall be indemnified by the Company, pursuant to the Company's bylaws, for any
expenses, judgments or other costs incurred as a result of a lawsuit filed
against such member claiming any rights or remedies arising out of such member's
participation in the administration of this 1999 Plan.
ARTICLE III
TOTAL NUMBER OF SHARES TO BE OPTIONED
Section 3.1. There shall be reserved for issuance or transfer upon
exercise of Options to be granted from time to time under this 1999 Plan an
aggregate of 300,000 shares of Common Stock of the Company (subject to
adjustment as provided in Article VIII hereof). The shares issued upon exercise
of any Options granted under this 1999 Plan may be shares of Common Stock
previously issued and reacquired by the Company at any time or authorized but
unissued shares of Common Stock, as the Board of Directors from time to time may
determine.
Section 3.2. In the event that any Options outstanding under this 1999
Plan for any reason expire or are terminated without having been exercised in
full or shares of Common Stock subject to Options are surrendered in whole or in
part pursuant to Rights granted under Section 7.6 hereof (except to the extent
that shares of Common Stock are issued as payment to the holder of the Option
upon such surrender) the unpurchased shares of Common Stock subject to such
Option and any such surrendered shares of Common Stock may again be available
for transfer under this 1999 Plan.
Section 3.3. No Options shall be granted pursuant to this 1999 Plan to
any Optionee after the tenth anniversary of the date that this 1999 Plan is
adopted by the Board of Directors.
ARTICLE IV
ELIGIBILITY
Section 4.1. Non-Qualified Options may be granted pursuant to this 1999
Plan to officers, directors, employees and consultants of the Company (or any of
its subsidiaries) selected by the Administrator, and Incentive Options may be
granted pursuant to this 1999 Plan only to employees (including officers and
directors who are also employees) of the Company (or any of its subsidiaries)
selected by the Administrator. Persons granted Options pursuant
ii
<PAGE>
to this 1999 Plan are referred to herein as "Optionees." For purposes of
determining who is an employee with respect to eligibility for Incentive
Options, Section 422 shall govern. The Administrator may determine (in its sole
discretion) that any person who would otherwise be eligible to be granted
Options shall, nonetheless, be ineligible to receive any award under this 1999
Plan.
Section 4.2. The Administrator will (in its discretion) determine the
persons to be granted Options, the time or times at which Options shall be
granted, the number of shares of Common Stock subject to each Option, the terms
of a vesting or forfeiture schedule, if any, the type of Option issued, the
period during which such Options may be exercised, the manner in which Options
may be exercised and all other terms and conditions of the Options; provided,
however, no Option will be granted which has terms or conditions inconsistent
with those stated in Articles V and VI hereof. Relevant factors in making such
determinations may include the value of the services rendered by the respective
Optionee, his or her present and potential contributions to the Company, and
such other factors which are deemed relevant in accomplishing the purpose of
this 1999 Plan.
ARTICLE V
TERMS AND CONDITIONS OF OPTIONS
Section 5.1. Each Option granted under this 1999 Plan shall be
evidenced by a stock option certificate and agreement (the "Stock Option
Certificate and Agreement") in a form consistent with this 1999 Plan, provided
that the following terms and conditions shall apply:
(a) The price at which each share of Common Stock covered by an Option
may be purchased shall be set forth in the Stock Option Certificate and
Agreement and shall be determined by the Administrator, provided that the option
price for any Incentive Option shall not be less than the "fair market value" of
the shares of Common Stock at the time of grant determined in accordance with
Section 5.1(b) below. Notwithstanding the foregoing, if an Incentive Option to
purchase shares of Common Stock is granted pursuant to this 1999 Plan to an
Optionee who, on the date of the grant, directly or indirectly owns more than
ten percent (10%) of the voting power of all classes of capital stock of the
Company (or its parent or subsidiary), not including the shares of Common Stock
obtainable upon exercise of the Option, the minimum exercise price of such
Option shall be not less than one hundred ten percent (110%) of the "fair market
value" of the shares of Common Stock on the date of grant determined in
accordance with Section 5.1(b) below.
(b) The "fair market value" shall be determined by the Administrator,
which determination shall be binding upon the Company and its officers,
directors, employees and consultants. The determination of the fair market value
shall be based upon the following: (i) if the shares of Common Stock are not
listed and traded upon a recognized securities exchange and there is no report
of stock prices with respect to the shares of Common Stock published by a
recognized stock quotation service, on the basis of the recent purchases and
sales of the shares of Common Stock in arms-length transactions; or (ii) if the
shares of Common Stock are not then listed and traded upon a recognized
securities exchange or quoted on the NASDAQ Stock Market, and there are reports
of stock prices by a recognized quotation service, upon the basis of the last
reported sale or transaction price of such stock on the date of grant as
reported by a recognized quotation service, or, if there is no last reported
sale or transaction price on that day, then upon the basis of the mean of the
last reported closing bid and closing asked prices for such stock on that day or
on the date nearest preceding that day; or (iii) if the shares of Common Stock
shall then be listed and traded upon a recognized securities exchange or quoted
on the NASDAQ Stock Market, upon the basis of the last reported sale or
transaction price at which shares of Common Stock were traded on such recognized
securities exchange on the date of grant or, if the shares of Common Stock were
not traded on such date, upon the basis of the last reported sale or transaction
price on the date nearest preceding that date. The Administrator shall also
consider such other factors relating to the fair market value of the shares of
Common Stock as it shall deem appropriate.
(c) For the purpose of determining whether an Optionee owns more than
ten percent (10%) of the voting power of all classes of stock of the Company, an
Optionee is considered to own those shares which are owned directly or
indirectly through brothers and sisters (including half-blooded siblings),
spouse, ancestors and lineal descendants; and proportionately as a shareholder
of a corporation, a partner of a partnership, and/or a beneficiary of a trust or
an estate that owns shares of the Company.
(d) Notwithstanding any other provision of this 1999 Plan, in
accordance with the provisions of Section 422(d) of the Code, to the extent that
the aggregate fair market value (determined at the time the Option is
iii
<PAGE>
granted) of the shares of Common Stock of the Company with respect to which
Incentive Options (without reference to this provision) are exercisable for the
first time by any individual in any calendar year under any and all stock option
plans of the Company, its subsidiary corporations and its parent (if any)
exceeds $100,000, such Options shall be treated as Non-Qualified Options.
(e) An Optionee may, in the Administrator's discretion, be granted more
than one Incentive Option or Non-Qualified Option during the duration of this
1999 Plan, and may be issued a combination of Non-Qualified Options and
Incentive Options; provided, however, that non-employees are not eligible to
receive Incentive Options.
(f) The duration of any Option and any Right related thereto shall be
within the sole discretion of the Administrator; provided, however, that any
Incentive Option granted to a ten percent (10%) or less stockholder or any
Non-Qualified Option shall, by its terms, be exercised within ten years after
the date the Option is granted and any Incentive Option granted to a greater
than ten percent (10%) stockholder shall, by its terms, be exercised within five
years after the date the Option is granted.
(g) An Option and any Right related thereto shall not be transferable
by the Optionee other than by will, or by the laws of descent and distribution.
An Option may be exercised during the Optionee's lifetime only by the Optionee.
(h) The Administrator may impose such other or further conditions on
any transaction under the 1999 Plan, including without limitation, the grant or
award of any Option or the exercise or other disposition thereof, as it, in its
discretion, may deem necessary or advisable in order to exempt the transaction
from Section 16(b) of the Exchange Act, including without limitation thereto,
the approval or ratification of the transaction by shareholders or a six-month
restriction on disposition of the Option or the Common Stock issuable upon
exercise thereof.
ARTICLE VI
EMPLOYMENT OR SERVICE OF OPTIONEE
Section 6.1. If the employment or service of an Optionee is terminated
for cause, the option rights of such Optionee, both accrued and future, under
any then outstanding Non-Qualified or Incentive Option shall terminate
immediately. "Cause" shall mean incompetence in the performance of duties,
disloyalty, dishonesty, theft, embezzlement, unauthorized disclosure of patents,
processes or trade secrets of the Company, individually or as an employee,
partner, associate, officer or director of any organization. The determination
of the existence and the proof of "cause" shall be made by the Administrator
and, subject to the review of any determination made by the Administrator, such
determination shall be binding on the Optionee and the Company.
Section 6.2. If the employment or service of the Optionee is terminated
by either the Optionee or the Company for any reason other than for cause,
death, retirement or for disability, as defined in Section 22(e)(3) of the Code,
the option rights of such Optionee under any then outstanding Incentive Option
shall, subject to the provisions of Section 5.1(h) hereof, be exercisable by
such Optionee at any time prior to the expiration of the Option or within three
months after the date of such termination, whichever period of time is shorter,
but only to the extent of the accrued right to exercise the Option at the date
of such termination.
Section 6.3. In the case of an Optionee who becomes disabled, as
defined by Section 22(e)(3) of the Code, the option rights of such Optionee
under any then outstanding Incentive Option shall, subject to the provisions of
Section 5.1(h) hereof, be exercisable by such Optionee at any time prior to the
expiration of the Option or within one year after the date of termination of
employment or service due to disability, whichever period of time is shorter,
but only to the extent of the accrued right to exercise the Option at the date
of such termination.
Section 6.4. In the event of the death of an Optionee, the option
rights of such Optionee under any then outstanding Incentive Option shall be
exercisable by the person or persons to whom these rights pass by will or by the
laws of descent and distribution, at any time prior to the expiration of the
Option or within three years after the date of death, whichever period of time
is shorter, but only to the extent of the accrued right to exercise the Option
at the date of death. If a person or estate acquires the right to exercise an
Incentive Option by bequest or inheritance, the Administrator may require
reasonable evidence as to the ownership of such Option, and may require such
consents and releases of taxing authorities as the Administrator may deem
advisable.
iv
<PAGE>
Section 6.5. If an Optionee to whom an Option has been granted under
this 1999 Plan retires from his employment or service with the Company or any of
the Subsidiaries under a retirement plan or policy of the Company and its
Subsidiaries or at his or her normal retirement date or earlier with the
approval or consent of the Company or such Subsidiary, or as a result of the
Disability as defined in Section 22(e)(3) of the Code, such Option shall
continue to be exercisable in whole or in part, to the extent not therefore
exercised, by the Optionee to whom granted in the manner set forth in this 1999
Plan, at any time within the remaining term of such Option.
Section 6.6. The Administrator may also provide that an employee must
be continuously employed by the Company for such period of time as the
Administrator, in its discretion, deems advisable before the right to exercise
any portion of an Option granted to such employee will accrue, and may also set
such other targets, restrictions or other terms relating to the employment of
the Optionee which targets, restrictions, or terms must be fulfilled or complied
with, as the case may be, prior to the exercise of any portion of an Option
granted to any employee.
Section 6.7. Except in the event of termination for cause,
Non-Qualified Options shall be exercisable during such term as determined at the
time of grant by the Administrator.
Section 6.8. Options granted under this 1999 Plan shall not be affected
by any change of duties or position, so long as the Optionee continues in the
service of the Company.
Section 6.9. Nothing contained in this 1999 Plan, or in any Option
granted pursuant to this 1999 Plan, shall confer upon any Optionee any right
with respect to continuance of employment or service by the Company nor
interfere in any way with the right of the Company to terminate the Optionee's
employment or service or change the Optionee's compensation at any time.
ARTICLE VII
PURCHASE OF SHARES
Section 7.1. Except as provided in this Article VII, an Option shall be
exercised by tender to the Company of the full exercise price of the shares of
Common Stock with respect to which the Option is exercised and written notice of
the exercise. The right to purchase shares of Common Stock shall be cumulative
so that, once the right to purchase any shares of Common Stock has accrued, such
shares or any part thereof may be purchased at any time thereafter until the
expiration or termination of the Option. A partial exercise of an Option shall
not affect the right of the Optionee to exercise the Option from time to time,
in accordance with this 1999 Plan, as to the remaining number of shares of
Common Stock subject to the Option. The purchase price of the shares shall be in
United States dollars, payable in cash or by certified bank check.
Notwithstanding the foregoing, in lieu of cash, an Optionee may, with the
approval of the Administrator, exercise his or her Option by tendering to the
Company shares of Common Stock of the Company owned by him or her and having an
aggregate fair market value at least equal to the full exercise price. The fair
market value of any shares of Common Stock so surrendered shall be determined by
the Administrator in accordance with Section 5.1(b) hereof.
Section 7.2. Except as provided in Article VI above, an Option may not
be exercised unless the holder thereof is an officer, director, employee, or
consultant of the Company at the time of exercise.
Section 7.3. No Optionee, or Optionee's executor, administrator,
legatee, or distributee or other permitted transferee, shall be deemed to be a
holder of any shares of Common Stock subject to an Option for any purpose
whatsoever unless and until a stock certificate or certificates for such shares
are issued to such person under the terms of this 1999 Plan. No adjustment shall
be made for dividends (ordinary or extraordinary, whether in cash, securities or
other property) or distributions or other rights for which the record date is
prior to the date such stock certificate is issued, except as provided in
Article VIII hereof.
Section 7.4. If: (i) the listing, registration or qualification of the
Options issued hereunder, or of any securities issuable upon exercise of such
Options (the "Subject Securities") upon any securities exchange or quotation
system or under federal or state law is necessary as a condition of or in
connection with the issuance or exercise of the Options, or (ii) the consent or
approval of any governmental regulatory body is necessary as a condition of or
in connection with the issuance or exercise of the Options, the Company shall
not be obligated to deliver the certificates representing the Subject Securities
or to accept or to recognize an Option exercise unless and until such listing,
v
<PAGE>
registration, qualification, consent or approval shall have been effected or
obtained. The Company will take reasonable action to so list, register, or
qualify the Options and the Subject Securities, or effect or obtain such consent
or approval, so as to allow for their issuance.
Section 7.5. An Optionee may be required to represent to the Company as
a condition of his or her exercise of Options issued under this 1999 Plan that:
(i) the Subject Securities acquired upon exercise of his or her Option are being
acquired by him or her for investment purposes only and not with a view to
distribution or resale, unless counsel for the Company is then of the view that
such a representation is not necessary and is not required under the Securities
Act of 1933, as amended (the "Securities Act"), or any other applicable statute,
law, regulation or rule; and (ii) that the Optionee shall make no exercise or
disposition of an Option or of the Subject Securities in contravention of the
Securities Act, the Exchange Act or the rules and regulations thereunder.
Optionees may also be required to provide (as a condition precedent to exercise
of an Option) such documentation as may be reasonably requested by the Company
to assure compliance with applicable law and the terms and conditions of this
1999 Plan and the subject Option.
Section 7.6. The Administrator may, in its discretion, grant in
connection with any Option, at any time prior to the exercise thereof, the right
(previously defined as an "SAR" or collectively, the "SARs") to surrender all or
part of the Option to the extent that such Option is exercisable and receive in
exchange an amount (payable in cash, shares of Common Stock valued at the then
fair market value, or a combination thereof as determined by the Administrator)
equal to the difference (the "Spread") between the then fair market value of the
shares of Common Stock issuable upon the exercise of the Option (or portions
thereof surrendered) and the option price payable upon the exercise of the
Option (or portions thereof surrendered). Such SARs may be included in an Option
only under the following conditions: (a) the SARs will expire no later than the
expiration of the underlying Option; (b) the SARs may be for no more than one
hundred percent (100%) of the Spread; (c) the SARs are transferable only when
the underlying Option is transferable and under the same conditions; (d) the
SARs may be exercised only when the underlying Option is eligible to be
exercised; and (e) the SARs may be exercised only when the Spread is positive,
i.e., when the market price of the stock subject to the Option exceeds the
exercise price of the Option.
Section 7.7. An Option may also be exercised by tender to the Company
of a written notice of exercise together with advice of the delivery of an order
to a broker to sell part or all of the shares of Common Stock subject to such
exercise notice and an irrevocable order to such broker to deliver to the
Company (or its transfer agent) sufficient proceeds from the sale of such shares
to pay the exercise price and any withholding taxes. All documentation and
procedures to be followed in connection with such a "cashless exercise" shall be
approved in advance by the Administrator.
ARTICLE VIII
CHANGE IN NUMBER OF OUTSTANDING SHARES OF
STOCK, ADJUSTMENTS, REORGANIZATIONS, ETC.
Section 8.1. In the event that the outstanding shares of Common Stock
of the Company are hereafter increased or decreased or changed into or exchanged
for a different number of shares or kind of shares or other securities of the
Company or of another corporation by reason of reorganization, merger,
consolidation, recapitalization, reclassification, stock split, combination of
shares, or a dividend payable in capital stock, appropriate adjustment shall be
made by the Administrator in the number and kind of shares for the purchase of
which Options may be granted under this 1999 Plan, including the maximum number
that may be granted to any one person. In addition, the Administrator shall make
appropriate adjustments in the number and kind of shares as to which outstanding
Options, or portions thereof then unexercised, shall be exercisable, to the end
that the Optionee's proportionate interest shall be maintained as before the
occurrence to the unexercised portion of the Option and with a corresponding
adjustment in the option price per share. Any such adjustment made by the
Administrator shall be conclusive.
Section 8.2. The grant of an Option pursuant to this 1999 Plan shall
not affect in any way the right or power of the Company to make adjustments,
reclassifications, reorganizations or changes of its capital or business
structure or to merge or to consolidate or to dissolve, liquidate or sell, or
transfer all or any part of its business or assets.
Section 8.3. Upon the dissolution or liquidation of the Company, or
upon a reorganization, merger or consolidation of the Company as a result of
which the outstanding securities of the class then subject to Options hereunder
are changed into or exchanged for cash or property or securities not of the
Company's issue, or upon a sale of
vi
<PAGE>
substantially all the property of the Company to an association, person, party,
corporation, partnership, or control group as that term is construed for
purposes of the Exchange Act, this 1999 Plan shall terminate, and all
outstanding Options theretofore granted hereunder shall terminate, unless
provision be made in writing in connection with such transaction for the
continuance of this 1999 Plan and/or for the assumption of Options theretofore
granted, or the substitution for such Options of options covering the stock of a
successor employer corporation, or a parent or a subsidiary thereof, with
appropriate adjustments as to the number and kind of shares and prices, in which
event this 1999 Plan and options theretofore granted shall continue in the
manner and under the terms so provided. If this 1999 Plan and unexercised
Options shall terminate pursuant to the foregoing sentence, all persons owning
any unexercised portions of Options then outstanding shall have the right, at
such time prior to the consummation of the transaction causing such termination
as the Company shall designate, to exercise the unexercised portions of their
Options, including the portions thereof which would, but for this Section 8.3
not yet be exercisable.
ARTICLE IX
DURATION, AMENDMENT AND TERMINATION
Section 9.1. The Board of Directors may at any time terminate this 1999
Plan or make such amendments hereto as it shall deem advisable and in the best
interests of the Company, without action on the part of the stockholders of the
Company unless such approval is required pursuant to Section 422 of the Code or
the regulations thereunder or other federal or state law; provided, however,
that no such termination or amendment shall, without the consent of the
individual to whom any Option shall theretofore have been granted, materially
adversely affect or impair the rights of such individual under such Option.
Pursuant to Section 422(b) of the Code, no Incentive Option may be granted
pursuant to this 1999 Plan after ten years from the date this 1999 Plan is
adopted or the date this 1999 Plan is approved by the stockholders of the
Company, whichever is earlier.
ARTICLE X
RESTRICTIONS
Section 10.1. Any Options and shares of Common Stock issued pursuant to
this 1999 Plan shall be subject to such restrictions on transfer and limitations
as shall, in the opinion of the Administrator, be necessary or advisable to
assure compliance with the laws, rules and regulations of the United States
government or any state or jurisdiction thereof. In addition, the Administrator
may in any Stock Option Certificate and Agreement impose such other restrictions
upon the disposition or exercise of an Option or upon the sale or other
disposition of the shares of Common Stock deliverable upon exercise thereof as
the Administrator may, in its sole discretion, determine. By accepting an award
pursuant to this 1999 Plan, each Optionee shall thereby agree to any such
restrictions.
Section 10.2. Any certificate issued to evidence shares of Common Stock
issued pursuant to an Option shall bear such legends and statements as the
Committee, the Board of Directors or counsel to the Company shall deem advisable
to assure compliance with the laws, rules and regulations of the United States
government or any state or jurisdiction thereof. No shares of Common Stock will
be delivered pursuant to exercise of the Options granted under this 1999 Plan
until the Company has obtained such consents or approvals from such regulatory
bodies of the United States government or any state or jurisdiction thereof as
the Committee, the Board of Directors or counsel to the Company deems necessary
or advisable.
ARTICLE XI
FINANCIAL ASSISTANCE
Section 11.1. The Company is vested with authority under this 1999 Plan
to assist any employee to whom an Option is granted hereunder (including any
officer or director of the Company or any of its subsidiaries who is also an
employee) in the payment of the purchase price payable on exercise of such
Option, by lending the amount of such purchase price to such employee on such
terms and at such rates of interest and upon such security (or unsecured) as
shall have been authorized by or under authority of the Board of Directors. Any
such assistance shall comply with the requirements of Regulation G promulgated
by the Board of the Federal Reserve System, as amended from time to time, and
any other applicable law, rule or regulation.
vii
<PAGE>
ARTICLE XII
APPLICATION OF FUNDS
Section 12.1. The proceeds received by the Company from the issuance
and sale of Common Stock upon exercise of Options granted pursuant to this 1999
Plan are to be added to the general funds of the Company and used for its
corporate purposes as determined by the Board of Directors.
ARTICLE XIII
EFFECTIVENESS OF PLAN
Section 13.1. This 1999 Plan shall become effective upon adoption by
the Board of Directors, and Options may be issued hereunder from and after that
date subject to the provisions of Section 3.3 above. This 1999 Plan must be
approved by the Company's stockholders in accordance with the applicable
provisions (relating to the issuance of stock or options) of the Company's
governing documents and state law or, if no such approval is prescribed therein,
by the affirmative vote of the holders of a majority of the votes cast at a duly
held stockholders meeting at which a quorum representing a majority of all the
Company's outstanding voting stock is present and voting (in person or by proxy)
or, without regard to any required time period for approval, by any other method
permitted by Section 422 of the Code and the regulations thereunder. If such
stockholder approval is not obtained within one year of the adoption of this
1999 Plan by the Board of Directors or within such other time period required
under Section 422 of the Code and the regulations thereunder, this 1999 Plan
shall remain in force, provided however, that all Options issued and issuable
hereunder shall automatically be deemed to be Non-Qualified Options.
IN WITNESS WHEREOF, pursuant to the approval of this 1999 Plan by the
Board of Directors, this 1999 Plan is executed and adopted as of the 13th day of
September, 1999.
Essex Corporation
viii
<PAGE>
EXHIBIT 4.2
Essex Corporation
1998 Stock Option and Appreciation Rights Plan
<PAGE>
ESSEX CORPORATION
1998 STOCK OPTION AND APPRECIATION RIGHTS PLAN
ARTICLE I
ESTABLISHMENT AND PURPOSE
Section I.1. Essex Corporation (the "Company"), a Virginia corporation,
hereby establishes a stock option and appreciation rights plan to be named the
Essex Corporation 1998 Stock Option and Appreciation Rights Plan (the "1998
Plan").
Section I.2. The purpose of this 1998 Plan is to induce persons who are
officers, directors, employees and consultants of the Company or any of its
subsidiaries who are in a position to contribute materially to the Company's
prosperity to remain with the Company, to offer said persons incentives and
rewards in recognition of their contributions to the Company's progress, and to
encourage said persons to continue to promote the best interests of the Company.
This 1998 Plan provides for the grant of options to purchase shares of common
stock of the Company, par value $.10 per share (the "Common Stock") which
qualify as incentive stock options ("Incentive Options") under Section 422 of
the Internal Revenue Code of 1986, as amended (the "Code"), to persons who are
employees, as well as options which do not so qualify ("Non-Qualified Options")
to be issued to persons or consultants, including those who are not employees.
This 1998 Plan also provides for grants of stock appreciation rights ("SARs") in
connection with the grant of options under this 1998 Plan. Incentive Options and
Non-Qualified Options may be collectively referred to hereinafter as the
"Options" as the context may require.
Section I.3. All options and other rights previously granted by the
Company under any other plan previously adopted by the Company shall continue to
be governed by such plan. All Options granted hereunder on or after the date
that this 1998 Plan has been approved and adopted by the Company's board of
directors (the "Board of Directors") shall be governed by the terms and
conditions of this 1998 Plan unless the terms of such Option specifically
indicate that it is not to be so governed.
ARTICLE II
ADMINISTRATION
Section II.1. All determinations under this 1998 Plan concerning the
selection of persons eligible to receive awards under this 1998 Plan and with
respect to the timing, pricing and amount of an award under this 1998 Plan shall
be made by the administrator (the "Administrator") of this 1998 Plan. The
Administrator shall be either: (a) the Board of Directors or (b) in the
discretion of the Board of Directors by a committee (the "Committee") of the
Board of Directors of two or more members of the Board of Directors, each of
whom is a "Non-Employee director" as such term is defined by Rule 16b-3 (as such
rule may be amended from time to time, "Rule 16b-3") under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). In such case, a majority
of the total number of members of the Committee shall be necessary to constitute
a quorum; and (i) the affirmative act of a majority of the members present at
any meeting at which a quorum is present, or (ii) the approval in writing by a
majority of the members of the Committee shall be necessary to constitute action
by the Committee.
With respect to persons subject to Section 16 of the Exchange Act,
transactions under this 1998 Plan are intended to comply with all applicable
conditions of Rule 16b-3 or its successors under the Exchange Act. To the extent
that any provision of this 1998 Plan or action by the Administrator fails to so
comply, it shall be deemed to be null and void, to the extent permitted by law
and deemed advisable by the Administrator.
Section II.2. The provisions of this 1998 Plan relating to Incentive
Options are intended to comply in every respect with Section 422 of the Code
("Section 422") and the regulations promulgated thereunder. In the event that
any future statute or regulation shall modify Section 422, this 1998 Plan shall
be deemed to incorporate by reference such modification. Any stock option
agreement relating to the grant of any Incentive Option pursuant to this 1998
Plan, which option is outstanding and unexercised at the time that any modifying
statute or regulation becomes effective, shall also be deemed to incorporate by
reference such modification, and no notice of such modification need be given to
the Optionee (as hereinafter defined). Any stock option agreement relating to an
Incentive Option shall provide that the Optionee (as hereinafter defined) hold
the stock received upon exercise of such Incentive Option for a minimum of two
years from the date of grant of the Incentive Option and one year from the date
of exercise of such Incentive Option, absent the written approval, consent or
waiver of the Administrator.
<PAGE>
Section II.3. If any provision of this 1998 Plan is determined to
disqualify the shares of Common Stock purchasable upon exercise of an Incentive
Option granted under this 1998 Plan from the special tax treatment provided by
Section 422, such provision shall be deemed to incorporate by reference the
modification required to qualify such shares of Common Stock for said tax
treatment.
Section II.4. The Company shall grant Options under this 1998 Plan in
accordance with determinations made by the Administrator pursuant to the
provisions of this 1998 Plan. All Options granted pursuant to this 1998 Plan
shall be clearly identified as Incentive Options or Non-Qualified Options. The
Administrator may from time to time adopt (and thereafter amend or rescind) such
rules and regulations for carrying out this 1998 Plan and take such action in
the administration of this 1998 Plan, not inconsistent with the provisions
hereof, as it shall deem proper. The Board of Directors or, subject to the
supervision of the Board of Directors, the Committee, as the Administrator,
shall have plenary discretion, subject to the express provisions of this 1998
Plan, to determine which officers, directors, employees and consultants shall be
granted Options, the number of shares subject to each Option, the time or times
when an Option may be exercised (whether in whole or in installments), whether
Rights under Section 7.6 hereof shall be granted, the terms and provisions of
the respective option agreements (which need not be identical), including such
terms and provisions which may be amended from time to time as shall be
required, in the judgment of the Administrator, to conform to any change in any
law or regulation applicable hereto, and to make all other determinations deemed
necessary or advisable for the administration of this 1998 Plan. The
interpretation and construction of any provision of this 1998 Plan by the
Administrator (unless otherwise determined by the Board of Directors) shall be
final, conclusive and binding upon all persons.
Section II.5. No member of the Administrator shall be liable for any
action or determination made in good faith with respect to administration of
this 1998 Plan or the Options granted hereunder. A member of the Administrator
shall be indemnified by the Company, pursuant to the Company's bylaws, for any
expenses, judgments or other costs incurred as a result of a lawsuit filed
against such member claiming any rights or remedies arising out of such member's
participation in the administration of this 1998 Plan.
ARTICLE III
TOTAL NUMBER OF SHARES TO BE OPTIONED
Section III.1. There shall be reserved for issuance or transfer upon
exercise of Options to be granted from time to time under this 1998 Plan an
aggregate of 300,000 shares of Common Stock of the Company (subject to
adjustment as provided in Article VIII hereof). The shares issued upon exercise
of any Options granted under this 1998 Plan may be shares of Common Stock
previously issued and reacquired by the Company at any time or authorized but
unissued shares of Common Stock, as the Board of Directors from time to time may
determine.
Section III.2. In the event that any Options outstanding under this
1998 Plan for any reason expire or are terminated without having been exercised
in full or shares of Common Stock subject to Options are surrendered in whole or
in part pursuant to Rights granted under Section 7.6 hereof (except to the
extent that shares of Common Stock are issued as payment to the holder of the
Option upon such surrender) the unpurchased shares of Common Stock subject to
such Option and any such surrendered shares of Common Stock may again be
available for transfer under this 1998 Plan.
Section III.3. No Options shall be granted pursuant to this 1998 Plan
to any Optionee after the tenth anniversary of the date that this 1998 Plan is
adopted by the Board of Directors.
ii
<PAGE>
ARTICLE IV
ELIGIBILITY
Section IV.1. Non-Qualified Options may be granted pursuant to this
1998 Plan to officers, directors, employees and consultants of the Company (or
any of its subsidiaries) selected by the Administrator, and Incentive Options
may be granted pursuant to this 1998 Plan only to employees (including officers
and directors who are also employees) of the Company (or any of its
subsidiaries) selected by the Administrator. Persons granted Options pursuant to
this 1998 Plan are referred to herein as "Optionees." For purposes of
determining who is an employee with respect to eligibility for Incentive
Options, Section 422 shall govern. The Administrator may determine (in its sole
discretion) that any person who would otherwise be eligible to be granted
Options shall, nonetheless, be ineligible to receive any award under this 1998
Plan.
Section IV.2. The Administrator will (in its discretion) determine the
persons to be granted Options, the time or times at which Options shall be
granted, the number of shares of Common Stock subject to each Option, the terms
of a vesting or forfeiture schedule, if any, the type of Option issued, the
period during which such Options may be exercised, the manner in which Options
may be exercised and all other terms and conditions of the Options; provided,
however, no Option will be granted which has terms or conditions inconsistent
with those stated in Articles V and VI hereof. Relevant factors in making such
determinations may include the value of the services rendered by the respective
Optionee, his or her present and potential contributions to the Company, and
such other factors which are deemed relevant in accomplishing the purpose of
this 1998 Plan.
ARTICLE V
TERMS AND CONDITIONS OF OPTIONS
Section V.1. Each Option granted under this 1998 Plan shall be
evidenced by a stock option certificate and agreement (the "Stock Option
Certificate and Agreement") in a form consistent with this 1998 Plan, provided
that the following terms and conditions shall apply:
(a) The price at which each share of Common Stock covered by an Option
may be purchased shall be set forth in the Stock Option Certificate and
Agreement and shall be determined by the Administrator, provided that the option
price for any Incentive Option shall not be less than the "fair market value" of
the shares of Common Stock at the time of grant determined in accordance with
Section 5.1(b) below. Notwithstanding the foregoing, if an Incentive Option to
purchase shares of Common Stock is granted pursuant to this 1998 Plan to an
Optionee who, on the date of the grant, directly or indirectly owns more than
ten percent (10%) of the voting power of all classes of capital stock of the
Company (or its parent or subsidiary), not including the shares of Common Stock
obtainable upon exercise of the Option, the minimum exercise price of such
Option shall be not less than one hundred ten percent (110%) of the "fair market
value" of the shares of Common Stock on the date of grant determined in
accordance with Section 5.1(b) below.
(b) The "fair market value" shall be determined by the Administrator,
which determination shall be binding upon the Company and its officers,
directors, employees and consultants. The determination of the fair market value
shall be based upon the following: (i) if the shares of Common Stock are not
listed and traded upon a recognized securities exchange and there is no report
of stock prices with respect to the shares of Common Stock published by a
recognized stock quotation service, on the basis of the recent purchases and
sales of the shares of Common Stock in arms-length transactions; or (ii) if the
shares of Common Stock are not then listed and traded upon a recognized
securities exchange or quoted on the NASDAQ Stock Market, and there are reports
of stock prices by a recognized quotation service, upon the basis of the last
reported sale or transaction price of such stock on the date of grant as
reported by a recognized quotation service, or, if there is no last reported
sale or transaction price on that day, then upon the basis of the mean of the
last reported closing bid and closing asked prices for such stock on that day or
on the date nearest preceding that day; or (iii) if the shares of Common Stock
shall then be listed and traded upon a recognized securities exchange or quoted
on the NASDAQ Stock Market, upon the basis of the last reported sale or
transaction price at which shares of Common Stock were traded on such recognized
securities exchange on the date of grant or, if the shares of Common Stock were
not traded on such date, upon the basis of the last reported sale or transaction
price on the date nearest preceding that date. The Administrator shall also
consider such other factors relating to the fair market value of the shares of
Common Stock as it shall deem appropriate.
iii
<PAGE>
(c) For the purpose of determining whether an Optionee owns more than
ten percent (10%) of the voting power of all classes of stock of the Company, an
Optionee is considered to own those shares which are owned directly or
indirectly through brothers and sisters (including half-blooded siblings),
spouse, ancestors and lineal descendants; and proportionately as a shareholder
of a corporation, a partner of a partnership, and/or a beneficiary of a trust or
an estate that owns shares of the Company.
(d) Notwithstanding any other provision of this 1998 Plan, in
accordance with the provisions of Section 422(d) of the Code, to the extent that
the aggregate fair market value (determined at the time the Option is granted)
of the shares of Common Stock of the Company with respect to which Incentive
Options (without reference to this provision) are exercisable for the first time
by any individual in any calendar year under any and all stock option plans of
the Company, its subsidiary corporations and its parent (if any) exceeds
$100,000, such Options shall be treated as Non-Qualified Options.
(e) An Optionee may, in the Administrator's discretion, be granted more
than one Incentive Option or Non-Qualified Option during the duration of this
1998 Plan, and may be issued a combination of Non-Qualified Options and
Incentive Options; provided, however, that non-employees are not eligible to
receive Incentive Options.
(f) The duration of any Option and any Right related thereto shall be
within the sole discretion of the Administrator; provided, however, that any
Incentive Option granted to a ten percent (10%) or less stockholder or any
Non-Qualified Option shall, by its terms, be exercised within ten years after
the date the Option is granted and any Incentive Option granted to a greater
than ten percent (10%) stockholder shall, by its terms, be exercised within five
years after the date the Option is granted.
(g) An Option and any Right related thereto shall not be transferable
by the Optionee other than by will, or by the laws of descent and distribution.
An Option may be exercised during the Optionee's lifetime only by the Optionee.
(h) The Administrator may impose such other or further conditions on
any transaction under the 1998 Plan, including without limitation, the grant or
award of any Option or the exercise or other disposition thereof, as it, in its
discretion, may deem necessary or advisable in order to exempt the transaction
from Section 16(b) of the Exchange Act, including without limitation thereto,
the approval or ratification of the transaction by shareholders or a six-month
restriction on disposition of the Option or the Common Stock issuable upon
exercise thereof.
ARTICLE VI
EMPLOYMENT OR SERVICE OF OPTIONEE
Section VI.1. If the employment or service of an Optionee is terminated
for cause, the option rights of such Optionee, both accrued and future, under
any then outstanding Non-Qualified or Incentive Option shall terminate
immediately. "Cause" shall mean incompetence in the performance of duties,
disloyalty, dishonesty, theft, embezzlement, unauthorized disclosure of patents,
processes or trade secrets of the Company, individually or as an employee,
partner, associate, officer or director of any organization. The determination
of the existence and the proof of "cause" shall be made by the Administrator
and, subject to the review of any determination made by the Administrator, such
determination shall be binding on the Optionee and the Company.
Section VI.2. If the employment or service of the Optionee is
terminated by either the Optionee or the Company for any reason other than for
cause, death, retirement or for disability, as defined in Section 22(e)(3) of
the Code, the option rights of such Optionee under any then outstanding
Incentive Option shall, subject to the provisions of Section 5.1(h) hereof, be
exercisable by such Optionee at any time prior to the expiration of the Option
or within three months after the date of such termination, whichever period of
time is shorter, but only to the extent of the accrued right to exercise the
Option at the date of such termination.
Section VI.3. In the case of an Optionee who becomes disabled, as
defined by Section 22(e)(3) of the Code, the option rights of such Optionee
under any then outstanding Incentive Option shall, subject to the provisions of
Section 5.1(h) hereof, be exercisable by such Optionee at any time prior to the
expiration of the Option or within one year after the date of termination of
employment or service due to disability, whichever period of time is shorter,
but only to the extent of the accrued right to exercise the Option at the date
of such termination.
iv
<PAGE>
Section VI.4. In the event of the death of an Optionee, the option
rights of such Optionee under any then outstanding Incentive Option shall be
exercisable by the person or persons to whom these rights pass by will or by the
laws of descent and distribution, at any time prior to the expiration of the
Option or within three years after the date of death, whichever period of time
is shorter, but only to the extent of the accrued right to exercise the Option
at the date of death. If a person or estate acquires the right to exercise an
Incentive Option by bequest or inheritance, the Administrator may require
reasonable evidence as to the ownership of such Option, and may require such
consents and releases of taxing authorities as the Administrator may deem
advisable.
Section VI.5. If an Optionee to whom an Option has been granted under
this 1998 Plan retires from his employment or service with the Company or any of
the Subsidiaries under a retirement plan or policy of the Company and its
Subsidiaries or at his or her normal retirement date or earlier with the
approval or consent of the Company or such Subsidiary, or as a result of the
Disability as defined in Section 22(e)(3) of the Code, such Option shall
continue to be exercisable in whole or in part, to the extent not therefore
exercised, by the Optionee to whom granted in the manner set forth in this 1998
Plan, at any time within the remaining term of such Option.
Section VI.6. The Administrator may also provide that an employee must
be continuously employed by the Company for such period of time as the
Administrator, in its discretion, deems advisable before the right to exercise
any portion of an Option granted to such employee will accrue, and may also set
such other targets, restrictions or other terms relating to the employment of
the Optionee which targets, restrictions, or terms must be fulfilled or complied
with, as the case may be, prior to the exercise of any portion of an Option
granted to any employee.
Section VI.7. Except in the event of termination for cause,
Non-Qualified Options shall be exercisable during such term as determined at the
time of grant by the Administrator.
Section VI.8. Options granted under this 1998 Plan shall not be
affected by any change of duties or position, so long as the Optionee continues
in the service of the Company.
Section VI.9. Nothing contained in this 1998 Plan, or in any Option
granted pursuant to this 1998 Plan, shall confer upon any Optionee any right
with respect to continuance of employment or service by the Company nor
interfere in any way with the right of the Company to terminate the Optionee's
employment or service or change the Optionee's compensation at any time.
ARTICLE VII
PURCHASE OF SHARES
Section VII.1. Except as provided in this Article VII, an Option shall
be exercised by tender to the Company of the full exercise price of the shares
of Common Stock with respect to which the Option is exercised and written notice
of the exercise. The right to purchase shares of Common Stock shall be
cumulative so that, once the right to purchase any shares of Common Stock has
accrued, such shares or any part thereof may be purchased at any time thereafter
until the expiration or termination of the Option. A partial exercise of an
Option shall not affect the right of the Optionee to exercise the Option from
time to time, in accordance with this 1998 Plan, as to the remaining number of
shares of Common Stock subject to the Option. The purchase price of the shares
shall be in United States dollars, payable in cash or by certified bank check.
Notwithstanding the foregoing, in lieu of cash, an Optionee may, with the
approval of the Administrator, exercise his or her Option by tendering to the
Company shares of Common Stock of the Company owned by him or her and having an
aggregate fair market value at least equal to the full exercise price. The fair
market value of any shares of Common Stock so surrendered shall be determined by
the Administrator in accordance with Section 5.1(b) hereof.
Section VII.2. Except as provided in Article VI above, an Option may
not be exercised unless the holder thereof is an officer, director, employee, or
consultant of the Company at the time of exercise.
Section VII.3. No Optionee, or Optionee's executor, administrator,
legatee, or distributee or other permitted transferee, shall be deemed to be a
holder of any shares of Common Stock subject to an Option for any purpose
whatsoever unless and until a stock certificate or certificates for such shares
are issued to such person under the terms of this 1998 Plan. No adjustment shall
be made for dividends (ordinary or extraordinary, whether in cash, securities or
v
<PAGE>
other property) or distributions or other rights for which the record date is
prior to the date such stock certificate is issued, except as provided in
Article VIII hereof.
Section VII.4. If: (i) the listing, registration or qualification of
the Options issued hereunder, or of any securities issuable upon exercise of
such Options (the "Subject Securities") upon any securities exchange or
quotation system or under federal or state law is necessary as a condition of or
in connection with the issuance or exercise of the Options, or (ii) the consent
or approval of any governmental regulatory body is necessary as a condition of
or in connection with the issuance or exercise of the Options, the Company shall
not be obligated to deliver the certificates representing the Subject Securities
or to accept or to recognize an Option exercise unless and until such listing,
registration, qualification, consent or approval shall have been effected or
obtained. The Company will take reasonable action to so list, register, or
qualify the Options and the Subject Securities, or effect or obtain such consent
or approval, so as to allow for their issuance.
Section VII.5. An Optionee may be required to represent to the Company
as a condition of his or her exercise of Options issued under this 1998 Plan
that: (i) the Subject Securities acquired upon exercise of his or her Option are
being acquired by him or her for investment purposes only and not with a view to
distribution or resale, unless counsel for the Company is then of the view that
such a representation is not necessary and is not required under the Securities
Act of 1933, as amended (the "Securities Act"), or any other applicable statute,
law, regulation or rule; and (ii) that the Optionee shall make no exercise or
disposition of an Option or of the Subject Securities in contravention of the
Securities Act, the Exchange Act or the rules and regulations thereunder.
Optionees may also be required to provide (as a condition precedent to exercise
of an Option) such documentation as may be reasonably requested by the Company
to assure compliance with applicable law and the terms and conditions of this
1996 Plan and the subject Option.
Section VII.6. The Administrator may, in its discretion, grant in
connection with any Option, at any time prior to the exercise thereof, the right
(previously defined as an "SAR" or collectively, the "SARs") to surrender all or
part of the Option to the extent that such Option is exercisable and receive in
exchange an amount (payable in cash, shares of Common Stock valued at the then
fair market value, or a combination thereof as determined by the Administrator)
equal to the difference (the "Spread") between the then fair market value of the
shares of Common Stock issuable upon the exercise of the Option (or portions
thereof surrendered) and the option price payable upon the exercise of the
Option (or portions thereof surrendered). Such SARs may be included in an Option
only under the following conditions: (a) the SARs will expire no later than the
expiration of the underlying Option; (b) the SARs may be for no more than one
hundred percent (100%) of the Spread; (c) the SARs are transferable only when
the underlying Option is transferable and under the same conditions; (d) the
SARs may be exercised only when the underlying Option is eligible to be
exercised; and (e) the SARs may be exercised only when the Spread is positive,
i.e., when the market price of the stock subject to the Option exceeds the
exercise price of the Option.
Section VII.7. An Option may also be exercised by tender to the Company
of a written notice of exercise together with advice of the delivery of an order
to a broker to sell part or all of the shares of Common Stock subject to such
exercise notice and an irrevocable order to such broker to deliver to the
Company (or its transfer agent) sufficient proceeds from the sale of such shares
to pay the exercise price and any withholding taxes. All documentation and
procedures to be followed in connection with such a "cashless exercise" shall be
approved in advance by the Administrator.
ARTICLE VIII
CHANGE IN NUMBER OF OUTSTANDING SHARES OF
STOCK, ADJUSTMENTS, REORGANIZATIONS, ETC.
Section VIII.1. In the event that the outstanding shares of Common
Stock of the Company are hereafter increased or decreased or changed into or
exchanged for a different number of shares or kind of shares or other securities
of the Company or of another corporation by reason of reorganization, merger,
consolidation, recapitalization, reclassification, stock split, combination of
shares, or a dividend payable in capital stock, appropriate adjustment shall be
made by the Administrator in the number and kind of shares for the purchase of
which Options may be granted under this 1998 Plan, including the maximum number
that may be granted to any one person. In addition, the Administrator shall make
appropriate adjustments in the number and kind of shares as to which outstanding
Options, or portions thereof then unexercised, shall be exercisable, to the end
that the Optionee's proportionate interest shall be maintained as
vi
<PAGE>
before the occurrence to the unexercised portion of the Option and with a
corresponding adjustment in the option price per share. Any such adjustment made
by the Administrator shall be conclusive.
Section VIII.2. The grant of an Option pursuant to this 1998 Plan shall
not affect in any way the right or power of the Company to make adjustments,
reclassifications, reorganizations or changes of its capital or business
structure or to merge or to consolidate or to dissolve, liquidate or sell, or
transfer all or any part of its business or assets.
Section VIII.3. Upon the dissolution or liquidation of the Company, or
upon a reorganization, merger or consolidation of the Company as a result of
which the outstanding securities of the class then subject to Options hereunder
are changed into or exchanged for cash or property or securities not of the
Company's issue, or upon a sale of substantially all the property of the Company
to an association, person, party, corporation, partnership, or control group as
that term is construed for purposes of the Exchange Act, this 1998 Plan shall
terminate, and all outstanding Options theretofore granted hereunder shall
terminate, unless provision be made in writing in connection with such
transaction for the continuance of this 1998 Plan and/or for the assumption of
Options theretofore granted, or the substitution for such Options of options
covering the stock of a successor employer corporation, or a parent or a
subsidiary thereof, with appropriate adjustments as to the number and kind of
shares and prices, in which event this 1998 Plan and options theretofore granted
shall continue in the manner and under the terms so provided. If this 1998 Plan
and unexercised Options shall terminate pursuant to the foregoing sentence, all
persons owning any unexercised portions of Options then outstanding shall have
the right, at such time prior to the consummation of the transaction causing
such termination as the Company shall designate, to exercise the unexercised
portions of their Options, including the portions thereof which would, but for
this Section 8.3 not yet be exercisable.
ARTICLE IX
DURATION, AMENDMENT AND TERMINATION
Section IX.1. The Board of Directors may at any time terminate this
1998 Plan or make such amendments hereto as it shall deem advisable and in the
best interests of the Company, without action on the part of the stockholders of
the Company unless such approval is required pursuant to Section 422 of the Code
or the regulations thereunder or other federal or state law; provided, however,
that no such termination or amendment shall, without the consent of the
individual to whom any Option shall theretofore have been granted, materially
adversely affect or impair the rights of such individual under such Option.
Pursuant to Section 422(b) of the Code, no Incentive Option may be granted
pursuant to this 1998 Plan after ten years from the date this 1998 Plan is
adopted or the date this 1998 Plan is approved by the stockholders of the
Company, whichever is earlier.
ARTICLE X
RESTRICTIONS
Section X.1. Any Options and shares of Common Stock issued pursuant to
this 1998 Plan shall be subject to such restrictions on transfer and limitations
as shall, in the opinion of the Administrator, be necessary or advisable to
assure compliance with the laws, rules and regulations of the United States
government or any state or jurisdiction thereof. In addition, the Administrator
may in any Stock Option Certificate and Agreement impose such other restrictions
upon the disposition or exercise of an Option or upon the sale or other
disposition of the shares of Common Stock deliverable upon exercise thereof as
the Administrator may, in its sole discretion, determine. By accepting an award
pursuant to this 1998 Plan, each Optionee shall thereby agree to any such
restrictions.
Section X.2. Any certificate issued to evidence shares of Common Stock
issued pursuant to an Option shall bear such legends and statements as the
Committee, the Board of Directors or counsel to the Company shall deem advisable
to assure compliance with the laws, rules and regulations of the United States
government or any state or jurisdiction thereof. No shares of Common Stock will
be delivered pursuant to exercise of the Options granted under this 1998 Plan
until the Company has obtained such consents or approvals from such regulatory
bodies of the United States government or any state or jurisdiction thereof as
the Committee, the Board of Directors or counsel to the Company deems necessary
or advisable.
vii
<PAGE>
ARTICLE XI
FINANCIAL ASSISTANCE
Section XI.1. The Company is vested with authority under this 1998 Plan
to assist any employee to whom an Option is granted hereunder (including any
officer or director of the Company or any of its subsidiaries who is also an
employee) in the payment of the purchase price payable on exercise of such
Option, by lending the amount of such purchase price to such employee on such
terms and at such rates of interest and upon such security (or unsecured) as
shall have been authorized by or under authority of the Board of Directors. Any
such assistance shall comply with the requirements of Regulation G promulgated
by the Board of the Federal Reserve System, as amended from time to time, and
any other applicable law, rule or regulation.
ARTICLE XII
APPLICATION OF FUNDS
Section XII.1. The proceeds received by the Company from the issuance
and sale of Common Stock upon exercise of Options granted pursuant to this 1998
Plan are to be added to the general funds of the Company and used for its
corporate purposes as determined by the Board of Directors.
ARTICLE XIII
EFFECTIVENESS OF PLAN
Section XIII.1. This 1998 Plan shall become effective upon adoption by
the Board of Directors, and Options may be issued hereunder from and after that
date subject to the provisions of Section 3.3 above. This 1998 Plan must be
approved by the Company's stockholders in accordance with the applicable
provisions (relating to the issuance of stock or options) of the Company's
governing documents and state law or, if no such approval is prescribed therein,
by the affirmative vote of the holders of a majority of the votes cast at a duly
held stockholders meeting at which a quorum representing a majority of all the
Company's outstanding voting stock is present and voting (in person or by proxy)
or, without regard to any required time period for approval, by any other method
permitted by Section 422 of the Code and the regulations thereunder. If such
stockholder approval is not obtained within one year of the adoption of this
1998 Plan by the Board of Directors or within such other time period required
under Section 422 of the Code and the regulations thereunder, this 1998 Plan
shall remain in force, provided however, that all Options issued and issuable
hereunder shall automatically be deemed to be Non-Qualified Options.
IN WITNESS WHEREOF, pursuant to the approval of this 1998 Plan by the
Board of Directors, this 1998 Plan is executed and adopted as of the 7th day of
August, 1998.
Essex Corporation
viii
<PAGE>
EXHIBIT 4.3
Essex Corporation
1996 Stock Option and Appreciation Rights Plan
<PAGE>
ESSEX CORPORATION
1996 STOCK OPTION AND APPRECIATION RIGHTS PLAN
ARTICLE I
ESTABLISHMENT AND PURPOSE
Section I.1. Essex Corporation (the "Company"), a Virginia corporation,
hereby establishes a stock option and appreciation rights plan to be named the
Essex Corporation 1996 Stock Option and Appreciation Rights Plan (the "1996
Plan").
Section I.2. The purpose of this 1996 Plan is to induce persons who are
officers, directors, employees and consultants of the Company or any of its
subsidiaries who are in a position to contribute materially to the Company's
prosperity to remain with the Company, to offer said persons incentives and
rewards in recognition of their contributions to the Company's progress, and to
encourage said persons to continue to promote the best interests of the Company.
This 1996 Plan provides for the grant of options to purchase shares of common
stock of the Company, par value $.10 per share (the "Common Stock") which
qualify as incentive stock options ("Incentive Options") under Section 422 of
the Internal Revenue Code of 1986, as amended (the "Code"), to persons who are
employees, as well as options which do not so qualify ("Non-Qualified Options")
to be issued to persons or consultants, including those who are not employees.
This 1996 Plan also provides for grants of stock appreciation rights ("SARs") in
connection with the grant of options under this 1996 Plan. Incentive Options and
Non-Qualified Options may be collectively referred to hereinafter as the
"Options" as the context may require.
Section I.3. All options and other rights previously granted by the
Company under any other plan previously adopted by the Company shall continue to
be governed by such plan. All Options granted hereunder on or after the date
that this 1996 Plan has been approved and adopted by the Company's board of
directors (the "Board of Directors") shall be governed by the terms and
conditions of this 1996 Plan unless the terms of such Option specifically
indicate that it is not to be so governed.
ARTICLE II
ADMINISTRATION
Section II.1. All determinations under this 1996 Plan concerning the
selection of persons eligible to receive awards under this 1996 Plan and with
respect to the timing, pricing and amount of an award under this 1996 Plan shall
be made by the administrator (the "Administrator") of this 1996 Plan. The
Administrator shall be either: (a) the Board of Directors or (b) in the
discretion of the Board of Directors by a committee (the "Committee") of the
Board of Directors of two or more members of the Board of Directors, each of
whom is a "Non-Employee Director" as such term is defined by Rule 16b-3 (as such
rule may be amended from time to time, "Rule 16b-3") under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). In such case, a majority
of the total number of members of the Committee shall be necessary to constitute
a quorum; and (i) the affirmative act of a majority of the members present at
any meeting at which a quorum is present, or (ii) the approval in writing by a
majority of the members of the Committee shall be necessary to constitute action
by the Committee.
With respect to persons subject to Section 16 of the Exchange Act,
transactions under this 1996 Plan are intended to comply with all applicable
conditions of Rule 16b-3 or its successors under the Exchange Act. To the extent
that any provision of this 1996 Plan or action by the Administrator fails to so
comply, it shall be deemed to be null and void, to the extent permitted by law
and deemed advisable by the Administrator.
Section II.2. The provisions of this 1996 Plan relating to Incentive
Options are intended to comply in every respect with Section 422 of the Code
("Section 422") and the regulations promulgated thereunder. In the event that
any future statute or regulation shall modify Section 422, this 1996 Plan shall
be deemed to incorporate by reference such modification. Any stock option
agreement relating to the grant of any Incentive Option pursuant to this 1996
Plan, which option is outstanding and unexercised at the time that any modifying
statute or regulation becomes effective, shall also be deemed to incorporate by
reference such modification, and no notice of such modification need be given to
the Optionee (as hereinafter defined). Any stock option agreement relating to an
Incentive Option shall provide that the
<PAGE>
Optionee (as hereinafter defined) hold the stock received upon exercise of such
Incentive Option for a minimum of two years from the date of grant of the
Incentive Option and one year from the date of exercise of such Incentive
Option, absent the written approval, consent or waiver of the Administrator.
Section II.3. If any provision of this 1996 Plan is determined to
disqualify the shares of Common Stock purchasable upon exercise of an Incentive
Option granted under this 1996 Plan from the special tax treatment provided by
Section 422, such provision shall be deemed to incorporate by reference the
modification required to qualify such shares of Common Stock for said tax
treatment.
Section II.4. The Company shall grant Options under this 1996 Plan in
accordance with determinations made by the Administrator pursuant to the
provisions of this 1996 Plan. All Options granted pursuant to this 1996 Plan
shall be clearly identified as Incentive Options or Non-Qualified Options. The
Administrator may from time to time adopt (and thereafter amend or rescind) such
rules and regulations for carrying out this 1996 Plan and take such action in
the administration of this 1996 Plan, not inconsistent with the provisions
hereof, as it shall deem proper. The Board of Directors or, subject to the
supervision of the Board of Directors, the Committee, as the Administrator,
shall have plenary discretion, subject to the express provisions of this 1996
Plan, to determine which officers, directors, employees and consultants shall be
granted Options, the number of shares subject to each Option, the time or times
when an Option may be exercised (whether in whole or in installments), whether
Rights under Section 7.6 hereof shall be granted, the terms and provisions of
the respective option agreements (which need not be identical), including such
terms and provisions which may be amended from time to time as shall be
required, in the judgment of the Administrator, to conform to any change in any
law or regulation applicable hereto, and to make all other determinations deemed
necessary or advisable for the administration of this 1996 Plan. The
interpretation and construction of any provision of this 1996 Plan by the
Administrator (unless otherwise determined by the Board of Directors) shall be
final, conclusive and binding upon all persons.
Section II.5. No member of the Administrator shall be liable for any
action or determination made in good faith with respect to administration of
this 1996 Plan or the Options granted hereunder. A member of the Administrator
shall be indemnified by the Company, pursuant to the Company's bylaws, for any
expenses, judgments or other costs incurred as a result of a lawsuit filed
against such member claiming any rights or remedies arising out of such member's
participation in the administration of this 1996 Plan.
ARTICLE III
TOTAL NUMBER OF SHARES TO BE OPTIONED
Section III.1. There shall be reserved for issuance or transfer upon
exercise of Options to be granted from time to time under this 1996 Plan an
aggregate of 300,000 shares of Common Stock of the Company (subject to
adjustment as provided in Article VIII hereof). The shares issued upon exercise
of any Options granted under this 1996 Plan may be shares of Common Stock
previously issued and reacquired by the Company at any time or authorized but
unissued shares of Common Stock, as the Board of Directors from time to time may
determine.
Section III.2. In the event that any Options outstanding under this
1996 Plan for any reason expire or are terminated without having been exercised
in full or shares of Common Stock subject to Options are surrendered in whole or
in part pursuant to Rights granted under Section 7.6 hereof (except to the
extent that shares of Common Stock are issued as payment to the holder of the
Option upon such surrender) the unpurchased shares of Common Stock subject to
such Option and any such surrendered shares of Common Stock may again be
available for transfer under this 1996 Plan.
Section III.3. No Options shall be granted pursuant to this 1996 Plan
to any Optionee after the tenth anniversary of the date that this 1996 Plan is
adopted by the Board of Directors.
ii
<PAGE>
ARTICLE IV
ELIGIBILITY
Section IV.1. Non-Qualified Options may be granted pursuant to this
1996 Plan to officers, directors, employees and consultants of the Company (or
any of its subsidiaries) selected by the Administrator, and Incentive Options
may be granted pursuant to this 1996 Plan only to employees (including officers
and directors who are also employees) of the Company (or any of its
subsidiaries) selected by the Administrator. Persons granted Options pursuant to
this 1996 Plan are referred to herein as "Optionees." For purposes of
determining who is an employee with respect to eligibility for Incentive
Options, Section 422 shall govern. The Administrator may determine (in its sole
discretion) that any person who would otherwise be eligible to be granted
Options shall, nonetheless, be ineligible to receive any award under this 1996
Plan.
Section IV.2. The Administrator will (in its discretion) determine the
persons to be granted Options, the time or times at which Options shall be
granted, the number of shares of Common Stock subject to each Option, the terms
of a vesting or forfeiture schedule, if any, the type of Option issued, the
period during which such Options may be exercised, the manner in which Options
may be exercised and all other terms and conditions of the Options; provided,
however, no Option will be granted which has terms or conditions inconsistent
with those stated in Articles V and VI hereof. Relevant factors in making such
determinations may include the value of the services rendered by the respective
Optionee, his or her present and potential contributions to the Company, and
such other factors which are deemed relevant in accomplishing the purpose of
this 1996 Plan.
ARTICLE V
TERMS AND CONDITIONS OF OPTIONS
Section V.1. Each Option granted under this 1996 Plan shall be
evidenced by a stock option certificate and agreement (the "Stock Option
Certificate and Agreement") in a form consistent with this 1996 Plan, provided
that the following terms and conditions shall apply:
(a) The price at which each share of Common Stock covered by an Option
may be purchased shall be set forth in the Stock Option Certificate and
Agreement and shall be determined by the Administrator, provided that the option
price for any Incentive Option shall not be less than the "fair market value" of
the shares of Common Stock at the time of grant determined in accordance with
Section 5.1(b) below. Notwithstanding the foregoing, if an Incentive Option to
purchase shares of Common Stock is granted pursuant to this 1996 Plan to an
Optionee who, on the date of the grant, directly or indirectly owns more than
ten percent (10%) of the voting power of all classes of capital stock of the
Company (or its parent or subsidiary), not including the shares of Common Stock
obtainable upon exercise of the Option, the minimum exercise price of such
Option shall be not less than one hundred ten percent (110%) of the "fair market
value" of the shares of Common Stock on the date of grant determined in
accordance with Section 5.1(b) below.
(b) The "fair market value" shall be determined by the Administrator,
which determination shall be binding upon the Company and its officers,
directors, employees and consultants. The determination of the fair market value
shall be based upon the following: (i) if the shares of Common Stock are not
listed and traded upon a recognized securities exchange and there is no report
of stock prices with respect to the shares of Common Stock published by a
recognized stock quotation service, on the basis of the recent purchases and
sales of the shares of Common Stock in arms-length transactions; or (ii) if the
shares of Common Stock are not then listed and traded upon a recognized
securities exchange or quoted on the NASDAQ Stock Market, and there are reports
of stock prices by a recognized quotation service, upon the basis of the last
reported sale or transaction price of such stock on the date of grant as
reported by a recognized quotation service, or, if there is no last reported
sale or transaction price on that day, then upon the basis of the mean of the
last reported closing bid and closing asked prices for such stock on that day or
on the date nearest preceding that day; or (iii) if the shares of Common Stock
shall then be listed and traded upon a recognized securities exchange or quoted
on the NASDAQ Stock Market, upon the basis of the last reported sale or
transaction price at which shares of Common Stock were traded on such recognized
securities exchange on the date of grant or, if the shares of Common Stock were
not traded on such date, upon the basis of the last reported sale or transaction
price on
iii
<PAGE>
the date nearest preceding that date. The Administrator shall also consider such
other factors relating to the fair market value of the shares of Common Stock as
it shall deem appropriate.
(c) For the purpose of determining whether an Optionee owns more than
ten percent (10%) of the voting power of all classes of stock of the Company, an
Optionee is considered to own those shares which are owned directly or
indirectly through brothers and sisters (including half-blooded siblings),
spouse, ancestors and lineal descendants; and proportionately as a shareholder
of a corporation, a partner of a partnership, and/or a beneficiary of a trust or
an estate that owns shares of the Company.
(d) Notwithstanding any other provision of this 1996 Plan, in
accordance with the provisions of Section 422(d) of the Code, to the extent that
the aggregate fair market value (determined at the time the Option is granted)
of the shares of Common Stock of the Company with respect to which Incentive
Options (without reference to this provision) are exercisable for the first time
by any individual in any calendar year under any and all stock option plans of
the Company, its subsidiary corporations and its parent (if any) exceeds
$100,000, such Options shall be treated as Non-Qualified Options.
(e) An Optionee may, in the Administrator's discretion, be granted more
than one Incentive Option or Non-Qualified Option during the duration of this
1996 Plan, and may be issued a combination of Non-Qualified Options and
Incentive Options; provided, however, that non-employees are not eligible to
receive Incentive Options.
(f) The duration of any Option and any Right related thereto shall be
within the sole discretion of the Administrator; provided, however, that any
Incentive Option granted to a ten percent (10%) or less stockholder or any
Non-Qualified Option shall, by its terms, be exercised within ten years after
the date the Option is granted and any Incentive Option granted to a greater
than ten percent (10%) stockholder shall, by its terms, be exercised within five
years after the date the Option is granted.
(g) An Option and any Right related thereto shall not be transferable
by the Optionee other than by will, or by the laws of descent and distribution.
An Option may be exercised during the Optionee's lifetime only by the Optionee.
(h) The Administrator may impose such other or further conditions on
any transaction under the 1996 Plan, including without limitation, the grant or
award of any Option or the exercise or other disposition thereof, as it, in its
discretion, may deem necessary or advisable in order to exempt the transaction
from Section 16(b) of the Exchange Act, including without limitation thereto,
the approval or ratification of the transaction by shareholders or a six-month
restriction on disposition of the Option or the Common Stock issuable upon
exercise thereof.
ARTICLE VI
EMPLOYMENT OR SERVICE OF OPTIONEE
Section VI.1. If the employment or service of an Optionee is terminated
for cause, the option rights of such Optionee, both accrued and future, under
any then outstanding Non-Qualified or Incentive Option shall terminate
immediately. "Cause" shall mean incompetence in the performance of duties,
disloyalty, dishonesty, theft, embezzlement, unauthorized disclosure of patents,
processes or trade secrets of the Company, individually or as an employee,
partner, associate, officer or director of any organization. The determination
of the existence and the proof of "cause" shall be made by the Administrator
and, subject to the review of any determination made by the Administrator, such
determination shall be binding on the Optionee and the Company.
Section VI.2. If the employment or service of the Optionee is
terminated by either the Optionee or the Company for any reason other than for
cause, death, or for disability, as defined in Section 22(e)(3) of the Code, the
option rights of such Optionee under any then outstanding Non-Qualified or
Incentive Option shall, subject to the provisions of Section 5.1(h) hereof, be
exercisable by such Optionee at any time prior to the expiration of the Option
or within three months after the date of such termination, whichever period of
time is shorter, but only to the extent of the accrued right to exercise the
Option at the date of such termination.
iv
<PAGE>
Section VI.3. In the case of an Optionee who becomes disabled, as
defined by Section 22(e)(3) of the Code, the option rights of such Optionee
under any then outstanding Non-Qualified or Incentive Option shall, subject to
the provisions of Section 5.1(h) hereof, be exercisable by such Optionee at any
time prior to the expiration of the Option or within one year after the date of
termination of employment or service due to disability, whichever period of time
is shorter, but only to the extent of the accrued right to exercise the Option
at the date of such termination.
Section VI.4. In the event of the death of an Optionee, the option
rights of such Optionee under any then outstanding Non-Qualified or Incentive
Option shall be exercisable by the person or persons to whom these rights pass
by will or by the laws of descent and distribution, at any time prior to the
expiration of the Option or within three years after the date of death,
whichever period of time is shorter, but only to the extent of the accrued right
to exercise the Option at the date of death. If a person or estate acquires the
right to exercise a Non-Qualified or Incentive Option by bequest or inheritance,
the Administrator may require reasonable evidence as to the ownership of such
Option, and may require such consents and releases of taxing authorities as the
Administrator may deem advisable.
Section VI.5. The Administrator may also provide that an employee must
be continuously employed by the Company for such period of time as the
Administrator, in its discretion, deems advisable before the right to exercise
any portion of an Option granted to such employee will accrue, and may also set
such other targets, restrictions or other terms relating to the employment of
the Optionee which targets, restrictions, or terms must be fulfilled or complied
with, as the case may be, prior to the exercise of any portion of an Option
granted to any employee.
Section VI.6. Options granted under this 1996 Plan shall not be
affected by any change of duties or position, so long as the Optionee continues
in the service of the Company.
Section VI.7. Nothing contained in this 1996 Plan, or in any Option
granted pursuant to this 1996 Plan, shall confer upon any Optionee any right
with respect to continuance of employment or service by the Company nor
interfere in any way with the right of the Company to terminate the Optionee's
employment or service or change the Optionee's compensation at any time.
ARTICLE VII
PURCHASE OF SHARES
Section VII.1. Except as provided in this Article VII, an Option shall
be exercised by tender to the Company of the full exercise price of the shares
of Common Stock with respect to which the Option is exercised and written notice
of the exercise. The right to purchase shares of Common Stock shall be
cumulative so that, once the right to purchase any shares of Common Stock has
accrued, such shares or any part thereof may be purchased at any time thereafter
until the expiration or termination of the Option. A partial exercise of an
Option shall not affect the right of the Optionee to exercise the Option from
time to time, in accordance with this 1996 Plan, as to the remaining number of
shares of Common Stock subject to the Option. The purchase price of the shares
shall be in United States dollars, payable in cash or by certified bank check.
Notwithstanding the foregoing, in lieu of cash, an Optionee may, with the
approval of the Administrator, exercise his or her Option by tendering to the
Company shares of Common Stock of the Company owned by him or her and having an
aggregate fair market value at least equal to the full exercise price. The fair
market value of any shares of Common Stock so surrendered shall be determined by
the Administrator in accordance with Section 5.1(b) hereof.
Section VII.2. Except as provided in Article VI above, an Option may
not be exercised unless the holder thereof is an officer, director, employee, or
consultant of the Company at the time of exercise.
Section VII.3. No Optionee, or Optionee's executor, administrator,
legatee, or distributee or other permitted transferee, shall be deemed to be a
holder of any shares of Common Stock subject to an Option for any purpose
whatsoever unless and until a stock certificate or certificates for such shares
are issued to such person under the terms of this 1996 Plan. No adjustment shall
be made for dividends (ordinary or extraordinary, whether in cash, securities or
v
<PAGE>
other property) or distributions or other rights for which the record date is
prior to the date such stock certificate is issued, except as provided in
Article VIII hereof.
Section VII.4. If: (i) the listing, registration or qualification of
the Options issued hereunder, or of any securities issuable upon exercise of
such Options (the "Subject Securities") upon any securities exchange or
quotation system or under federal or state law is necessary as a condition of or
in connection with the issuance or exercise of the Options, or (ii) the consent
or approval of any governmental regulatory body is necessary as a condition of
or in connection with the issuance or exercise of the Options, the Company shall
not be obligated to deliver the certificates representing the Subject Securities
or to accept or to recognize an Option exercise unless and until such listing,
registration, qualification, consent or approval shall have been effected or
obtained. The Company will take reasonable action to so list, register, or
qualify the Options and the Subject Securities, or effect or obtain such consent
or approval, so as to allow for their issuance.
Section VII.5. An Optionee may be required to represent to the Company
as a condition of his or her exercise of Options issued under this 1996 Plan
that: (i) the Subject Securities acquired upon exercise of his or her Option are
being acquired by him or her for investment purposes only and not with a view to
distribution or resale, unless counsel for the Company is then of the view that
such a representation is not necessary and is not required under the Securities
Act of 1933, as amended (the "Securities Act"), or any other applicable statute,
law, regulation or rule; and (ii) that the Optionee shall make no exercise or
disposition of an Option or of the Subject Securities in contravention of the
Securities Act, the Exchange Act or the rules and regulations thereunder.
Optionees may also be required to provide (as a condition precedent to exercise
of an Option) such documentation as may be reasonably requested by the Company
to assure compliance with applicable law and the terms and conditions of this
1996 Plan and the subject Option.
Section VII.6. The Administrator may, in its discretion, grant in
connection with any Option, at any time prior to the exercise thereof, the right
(previously defined as an "SAR" or collectively, the "SARs") to surrender all or
part of the Option to the extent that such Option is exercisable and receive in
exchange an amount (payable in cash, shares of Common Stock valued at the then
fair market value, or a combination thereof as determined by the Administrator)
equal to the difference (the "Spread") between the then fair market value of the
shares of Common Stock issuable upon the exercise of the Option (or portions
thereof surrendered) and the option price payable upon the exercise of the
Option (or portions thereof surrendered). Such SARS may be included in an Option
only under the following conditions: (a) the SARS will expire no later than the
expiration of the underlying Option; (b) the SARS may be for no more than one
hundred percent (100%) of the Spread; (c) the SARS are transferable only when
the underlying Option is transferable and under the same conditions; (d) the
SARS may be exercised only when the underlying Option is eligible to be
exercised; and (e) the SARS may be exercised only when the Spread is positive,
i.e., when the market price of the stock subject to the Option exceeds the
exercise price of the Option.
Section VII.7. An Option may also be exercised by tender to the Company
of a written notice of exercise together with advice of the delivery of an order
to a broker to sell part or all of the shares of Common Stock subject to such
exercise notice and an irrevocable order to such broker to deliver to the
Company (or its transfer agent) sufficient proceeds from the sale of such shares
to pay the exercise price and any withholding taxes. All documentation and
procedures to be followed in connection with such a "cashless exercise" shall be
approved in advance by the Administrator.
ARTICLE VIII
CHANGE IN NUMBER OF OUTSTANDING SHARES OF
STOCK, ADJUSTMENTS, REORGANIZATIONS, ETC.
Section VIII.1. In the event that the outstanding shares of Common
Stock of the Company are hereafter increased or decreased or changed into or
exchanged for a different number of shares or kind of shares or other securities
of the Company or of another corporation by reason of reorganization, merger,
consolidation, recapitalization, reclassification, stock split, combination of
shares, or a dividend payable in capital stock, appropriate adjustment shall be
made by the Administrator in the number and kind of shares for the purchase of
which Options may be granted under this 1996 Plan, including the maximum number
that may be granted to any one person. In addition, the Administrator
vi
<PAGE>
shall make appropriate adjustments in the number and kind of shares as to which
outstanding Options, or portions thereof then unexercised, shall be exercisable,
to the end that the Optionee's proportionate interest shall be maintained as
before the occurrence to the unexercised portion of the Option and with a
corresponding adjustment in the option price per share. Any such adjustment made
by the Administrator shall be conclusive.
Section VIII.2. The grant of an Option pursuant to this 1996 Plan shall
not affect in any way the right or power of the Company to make adjustments,
reclassifications, reorganizations or changes of its capital or business
structure or to merge or to consolidate or to dissolve, liquidate or sell, or
transfer all or any part of its business or assets.
Section VIII.3. Upon the dissolution or liquidation of the Company, or
upon a reorganization, merger or consolidation of the Company as a result of
which the outstanding securities of the class then subject to Options hereunder
are changed into or exchanged for cash or property or securities not of the
Company's issue, or upon a sale of substantially all the property of the Company
to an association, person, party, corporation, partnership, or control group as
that term is construed for purposes of the Exchange Act, this 1996 Plan shall
terminate, and all outstanding Options theretofore granted hereunder shall
terminate, unless provision be made in writing in connection with such
transaction for the continuance of this 1996 Plan and/or for the assumption of
Options theretofore granted, or the substitution for such Options of options
covering the stock of a successor employer corporation, or a parent or a
subsidiary thereof, with appropriate adjustments as to the number and kind of
shares and prices, in which event this 1996 Plan and options theretofore granted
shall continue in the manner and under the terms so provided. If this 1996 Plan
and unexercised Options shall terminate pursuant to the foregoing sentence, all
persons owning any unexercised portions of Options then outstanding shall have
the right, at such time prior to the consummation of the transaction causing
such termination as the Company shall designate, to exercise the unexercised
portions of their Options, including the portions thereof which would, but for
this Section 8.3 not yet be exercisable.
ARTICLE IX
DURATION, AMENDMENT AND TERMINATION
Section IX.1. The Board of Directors may at any time terminate this
1996 Plan or make such amendments hereto as it shall deem advisable and in the
best interests of the Company, without action on the part of the stockholders of
the Company unless such approval is required pursuant to Section 422 of the Code
or the regulations thereunder or other federal or state law; provided, however,
that no such termination or amendment shall, without the consent of the
individual to whom any Option shall theretofore have been granted, materially
adversely affect or impair the rights of such individual under such Option.
Pursuant to Section 422(b) of the Code, no Incentive Option may be granted
pursuant to this 1996 Plan after ten years from the date this 1996 Plan is
adopted or the date this 1996 Plan is approved by the stockholders of the
Company, whichever is earlier.
ARTICLE X
RESTRICTIONS
Section X.1. Any Options and shares of Common Stock issued pursuant to
this 1996 Plan shall be subject to such restrictions on transfer and limitations
as shall, in the opinion of the Administrator, be necessary or advisable to
assure compliance with the laws, rules and regulations of the United States
government or any state or jurisdiction thereof. In addition, the Administrator
may in any Stock Option Certificate and Agreement impose such other restrictions
upon the disposition or exercise of an Option or upon the sale or other
disposition of the shares of Common Stock deliverable upon exercise thereof as
the Administrator may, in its sole discretion, determine. By accepting an award
pursuant to this 1996 Plan, each Optionee shall thereby agree to any such
restrictions.
Section X.2. Any certificate issued to evidence shares of Common Stock
issued pursuant to an Option shall bear such legends and statements as the
Committee, the Board of Directors or counsel to the Company shall deem advisable
to assure compliance with the laws, rules and regulations of the United States
government or any state or jurisdiction thereof. No shares of Common Stock will
be delivered pursuant to exercise of the Options granted under this 1996 Plan
until the Company has obtained such consents or approvals from such regulatory
bodies of the United
vii
<PAGE>
States government or any state or jurisdiction thereof as the Committee, the
Board of Directors or counsel to the Company deems necessary or advisable.
ARTICLE XI
FINANCIAL ASSISTANCE
Section XI.1. The Company is vested with authority under this 1996 Plan
to assist any employee to whom an Option is granted hereunder (including any
officer or director of the Company or any of its subsidiaries who is also an
employee) in the payment of the purchase price payable on exercise of such
Option, by lending the amount of such purchase price to such employee on such
terms and at such rates of interest and upon such security (or unsecured) as
shall have been authorized by or under authority of the Board of Directors. Any
such assistance shall comply with the requirements of Regulation G promulgated
by the Board of the Federal Reserve System, as amended from time to time, and
any other applicable law, rule or regulation.
ARTICLE XII
APPLICATION OF FUNDS
Section XII.1. The proceeds received by the Company from the issuance
and sale of Common Stock upon exercise of Options granted pursuant to this 1996
Plan are to be added to the general funds of the Company and used for its
corporate purposes as determined by the Board of Directors.
ARTICLE XIII
EFFECTIVENESS OF PLAN
Section XIII.1. This 1996 Plan shall become effective upon adoption by
the Board of Directors, and Options may be issued hereunder from and after that
date subject to the provisions of Section 3.3 above. This 1996 Plan must be
approved by the Company's stockholders in accordance with the applicable
provisions (relating to the issuance of stock or options) of the Company's
governing documents and state law or, if no such approval is prescribed therein,
by the affirmative vote of the holders of a majority of the votes cast at a duly
held stockholders meeting at which a quorum representing a majority of all the
Company's outstanding voting stock is present and voting (in person or by proxy)
or, without regard to any required time period for approval, by any other method
permitted by Section 422 of the Code and the regulations thereunder. If such
stockholder approval is not obtained within one year of the adoption of this
1996 Plan by the Board of Directors or within such other time period required
under Section 422 of the Code and the regulations thereunder, this 1996 Plan
shall remain in force, provided however, that all Options issued and issuable
hereunder shall automatically be deemed to be Non-Qualified Options.
IN WITNESS WHEREOF, pursuant to the approval of this 1996 Plan by the
Board of Directors, this 1996 Plan is executed and adopted as of the 26th day of
August, 1996.
Essex Corporation
viii
EXHIBIT 5.1
Opinion of Whiteford, Taylor & Preston L.L.P.
(Includes Consent of Counsel)
<PAGE>
May 8, 2000
Board of Directors
Essex Corporation
9150 Guilford Road
Columbia, Maryland 21046-1891
Re: Registration Statement on Form S-8
Gentlemen:
We have acted as counsel to Essex Corporation, a Virginia
corporation (the "Corporation"), in connection with the filing of the
Registration Statement on Form S-8 by the Corporation under the Securities Act
of 1933, as amended (the "Registration Statement"), which Registration Statement
registers the distribution of up to 900,000 shares of common stock of the
Corporation, par value $0.10 per share ("Common Stock"), reserved for issuance
to eligible employees of the Corporation pursuant to each of the Corporation's
1999, 1998 and 1996 Stock Option and Stock Appreciation Rights Plans (the
"Plans"). In that capacity, we have reviewed the Articles of Incorporation and
Bylaws of the Corporation, both as amended to date, the Registration Statement,
the Plans, the originals or copies of corporate records reflecting the corporate
action taken by the Corporation in connection with the approval of the Plans and
amendments thereto and the issuance of the Common Stock under the Plans and such
other instruments as we have deemed necessary for the issuance of this opinion.
Based upon the foregoing, we are of the opinion that the
Common Stock to be offered under the Plans has been duly authorized by all
requisite action on the part of the Corporation and, when issued in accordance
with the terms and conditions of the Plans, will be legally issued, fully paid
and non-assessable.
We consent to the filing of this opinion as an exhibit to the
Registration Statement. In giving this consent, we do not admit that we are
within the category of persons whose consent is required by Section 7 of the
Securities Act of 1933, as amended.
Very truly yours,
/s/ Whiteford & Preston
Whiteford, Taylor & Preston L.L.P.
EXHIBIT 23.1
Consent of Whiteford, Taylor & Preston L.L.P.
(Contained in Exhibit 5.1 filed herewith)
<PAGE>
EXHIBIT 23.2
Consent Of Stegman & Company
<PAGE>
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in this Registration Statement of
Essex Corporation on Form S-8 of our report dated March 16, 2000 on our audits
of the financial statements of Essex Corporation as of December 26, 1999 and for
each of the years ended December 26, 1999 and December 27, 1998 which report
appears in the Essex Corporation 1999 Annual Report on Form 10-KSB.
Stegman & Company
Baltimore, Maryland
May 9, 2000
