SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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NETWORKS ELECTRONIC CORP.
(Exact Name of Registrant as Specified in Its Charter)
CALIFORNIA
(State or Other Jurisdiction of Incorporation or Organization)
95-1770469
(I.R.S. Employer Identification No.)
9750 DE SOTO AVENUE
CHATSWORTH, CALIFORNIA 91311
(Address of Principal Executive Offices)
NETWORKS ELECTRONIC CORP. 1996 STOCK INCENTIVE PLAN
(Full Title of the Plan)
DAVID WACHTEL, CEO, CFO AND PRESIDENT
NETWORKS ELECTRONIC CORP.
9750 DE SOTO AVENUE
CHATSWORTH, CALIFORNIA 91311
(Name and Address of Agent for Service) (Zip Code)
(818) 341-0440
(Telephone Number, Including Area Code, of Agent for Service)
-------------------
Copies to:
MURRAY MARKILES, ESQ.
TROOP MEISINGER STEUBER & PASICH, LLP
10940 WILSHIRE BOULEVARD
LOS ANGELES, CALIFORNIA 90024
(310) 824-7000
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CALCULATION OF REGISTRATION FEE
============================================================================
Title Of Proposed Proposed
Securities Maximum Maximum Amount of
To Be Amount To Be Offering Aggregate Registration
Registered Registered Price Offering Fee
Per Share(1) Price(1)
- ------------ -------------- ------------ ------------ ------------
Common Stock 100,000 Shares $2.125 $212,500 $63
============================================================================
(1) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457(h)(1) under the Securities Act of 1933, as amended, and based upon
the average of the bid and asked prices of the Common Stock on the OTC
Electronic Bulletin Board on April 16, 1998.
<PAGE>
PART I
INFORMATION REQUIRED IN SECTION 10(A) PROSPECTUS
ITEM 1. PLAN INFORMATION.*
ITEM 2. REGISTRANT INFORMATION AND EMPLOYEE PLAN ANNUAL
INFORMATION.*
* Information required by Part I to be contained in the Section 10(a)
prospectus is omitted from the Registration Statement in accordance
with Rule 428 under the Securities Act of 1933, as amended, and the
Note to Part I of Form S-8.
PART II
ITEM 3. INCORPORATION OF DOCUMENTS BY REFERENCE.
The following documents are incorporated herein by reference:
(a) Registrant's Annual Report on Form 10-K for the fiscal year ended
June 30, 1997.
(b) The Company's Reports on Form 10-Q for the quarters ended October 30,
1997, December 31, 1997 and March 31, 1997.
(c) All documents subsequently filed by Registrant pursuant to Sections
13(a), 13(c), 14 and 15(d) of the Securities Exchange Act of 1934
prior to the filing of a post-effective amendment which indicates
that all securities offered have been sold or which deregisters all
securities then remaining unsold, shall be deemed to be incorporated
by reference in this Registration Statement and to be part hereof
from the date of filing of such documents.
ITEM 4. DESCRIPTION OF SECURITIES.
The Company is authorized to issue 10,000,000 shares of Common Stock, par
value $0.25 per share. The holders of Common Stock are entitled to one vote
for each share held of record on all matters on which the holders of Common
Stock are entitled to vote. The holders of Common Stock are entitled to
receive dividends ratably when, as and if declared by the Board of Directors
out of funds legally available therefor. In the event of liquidation,
dissolution or winding up of the Company, the holders of Common Stock are
entitled to share ratably in all assets remaining available for distribution to
them after payment of liabilities.
The holders of Common Stock have no preemptive or conversion rights and
they are not subject to further calls or assessments by the Company. There are
no redemption or sinking fund provisions applicable to the Common Stock. The
outstanding shares of Common Stock are, and the shares of Common Stock issuable
pursuant to this Registration Statement will be, when issued, fully paid and
nonassessable.
ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL.
None.
ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Page 2
<PAGE>
In accordance with Section 317 of the California Corporations Code (the
"California Code"), the Company's By-Laws provide that the Corporation shall
have power to indemnify any person who was or is a party or is threatened to be
made a party to any proceeding (other than an action by or in the right of the
corporation to procure a judgment in its favor) by reason of the fact that such
person is or was an agent (as defined by Section 317 of the California Code) of
the corporation, against expenses, judgments, fines, settlements and other
amounts actually and reasonably incurred in connection with such proceeding if
such person acted in good faith and in a manner such person reasonably believed
to be in the best interests of the corporation and, in the case of a criminal
proceeding, had no reasonable cause to believe the conduct of such person was
unlawful. The termination of a proceeding by judgment, order, settlement,
conviction or upon a plea of nolo contendere or its equivalent shall not, of
itself, create a presumption that the person did not act in good faith and in a
manner which the person reasonably believed to be in the best interests of the
corporation or that the person had reasonable cause to believe that the
person's conduct was unlawful.
The Company's By-Laws also provide that the corporation shall have the
power to indemnify any person who was or is a party or is threatened to be made
a party to any threatened, pending or completed action by or in the right of
the corporation to procure a judgment in its favor by reason of the fact that
such person is or was an agent of the corporation, against expenses actually
and reasonably incurred by such person in connection with the defense or
settlement of such action if such person acted in good faith, in a manner such
person believed to be in the best interests of the corporation and with such
care, including reasonable inquiry, as an ordinarily prudent person in a like
position would use under similar circumstances. However, Section 317 of the
California Code provides that no such indemnification shall be made for any of
the following: (1) In respect of any claim, issue or matter as to which the
person shall have been adjudged to be liable to the corporation in the
performance of that person's duty to the corporation and its shareholders,
unless and only to the extent that the court in which the proceeding is or was
pending shall determine upon application that, in view of all the circumstances
of the case, the person is fairly and reasonably entitled to indemnity for
expenses and then only to the extent that the court shall determine; (2) Of
amounts paid in settling or otherwise disposing of a pending action without
court approval; (3) Of expenses incurred in defending a pending action which is
settled or otherwise disposed of without court approval.
ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED.
Not applicable.
ITEM 8. EXHIBITS.
4.1 Networks Electronic Corp. Form of Amended 1996 Stock Incentive Plan.
4.2 Form of Registrant's Stock Option Agreement pursuant to Registrant's
1996 Stock Incentive Plan.
5.1 Opinion of Troop Meisinger Steuber & Pasich, LLP regarding validity
of securities.
23.1 Consent of Troop Meisinger Steuber & Pasich, LLP (included in Exhibit
5.1).
24.1 Power of Attorney (included as part of the Signature Page of this
Registration Statement).
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 material information with respect to the plan
of distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement.
Page 3
<PAGE>
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, 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.
(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 of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act
of 1934) that is incorporated by reference in the 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 of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
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 the 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, Registrant will, unless in the
opinion of the counsel the matter has been settled by controlling precedent,
submit to the appropriate jurisdiction the question of whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
Page 4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, 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 the City of Los Angeles, State of California, on this ___ day of
April, 1998.
NETWORKS ELECTRONIC CORP.
(Registrant)
By: /S/ David Wachtel
------------------------------
DAVID WACHTEL, CHAIRMAN AND CHIEF
EXECUTIVE OFFICER
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints
David Wachtel as his true and lawful attorney-in-fact and agent with full power
of substitution and resubstitution, for him and his name, place and stead, in
any and all capacities, to sign any or all amendments (including post-effective
amendments) to this Registration Statement and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact and
agent full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the foregoing, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorney-in-fact and agent, or his substitute, may
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed below by the following persons in the
capacities and on the date indicated.
SIGNATURE TITLE DATE
- --------- ----- ----
/S/ David Wachtel Chairman of the Board, April 20, 1998
- -------------------- Chief Executive Officer and
DAVID WACHTEL Chief Financial Officer
/S/ Jack Friery Corporate Secretary April 20, 1998
- -------------------- and Director
JACK FRIERY
/S/ Glenn Linderman Director April 20, 1998
- --------------------
GLENN LINDERMAN
/S/ Rodica Patrichi Director April 20, 1998
- --------------------
RODICA PATRICHI
/S/ Ileana Wachtel Director April 20, 1998
- --------------------
ILEANA WACHTEL
Page 5
<PAGE>
EXHIBIT INDEX
EXHIBIT NO. EXHIBIT DESCRIPTION
- ---------- -------------------
4.1 Networks Electronic Corp. Form of Amended 1996 Stock Incentive Plan.
4.2 Form of Registrant's Stock Option Agreement pursuant to Registrant's
1996 Stock Incentive Plan.
5.1 Opinion of Troop Meisinger Steuber & Pasich, LLP regarding validity
of securities.
23.1 Consent of Troop Meisinger Steuber & Pasich, LLP (included in
Exhibit 5.1).
24.1 Power of Attorney (included as part of the Signature Page of this
Registration Statement).
Page 6
<PAGE>
NETWORKS ELECTRONIC CORP.
1996 STOCK INCENTIVE PLAN
1. PURPOSES
(a) The purpose of the 1996 Stock Incentive Plan (the "Plan") is to
provide a means by which Employees or Directors of or Consultants to Networks
Electronic Corp. (the "Company"), and its Affiliates, may be given an
opportunity to benefit from increases in value of the Common Stock of the
Company through the granting of Stock Awards.
(b) The Company, by means of the Plan, seeks to retain the services of
persons who are now Employees or Directors of or Consultants to the Company, to
secure and retain the services of new Employees, Directors and Consultants, and
to provide incentives for such persons to exert maximum efforts for the success
of the Company.
(c) The Company intends that the Stock Awards issued under the Plan
shall, in the discretion of the Board or any Committee to which responsibility
for administration of the Plan has been delegated pursuant to Section 3(c), be
either (1) Options granted pursuant to Section 6 hereof, including Incentive
Stock Options and Nonstatutory Stock Options, (2) stock bonuses or rights to
purchase restricted stock granted pursuant to Section 7 hereof, or (3) Stock
Appreciation Rights granted pursuant to Section 8 hereof. All Options shall be
separately designated Incentive Stock Options or Nonstatutory Stock Options at
the time of grant and a separate certificate or certificates will be issued for
shares purchased upon exercise of each type of Option.
2. DEFINITIONS.
(a) "AFFILIATE" means any parent corporation or subsidiary
corporation, whether now or hereafter existing, as those terms are defined in
Sections 424(e) and (f), respectively, of the Code.
(b) "BOARD" means the Board of Directors of the Company.
(c) "CCSL" means the California Corporate Securities Law of 1968, as
amended.
(d) "CODE" means the Internal Revenue Code of 1986, as amended.
(e) "COMMITTEE" means a Committee appointed by the Board in accordance
with Section 3(c) of the Plan.
(f) "COMMON STOCK" means the common stock, par value $.25 per share, of
the Company.
<PAGE>
(g) "COMPANY" means Networks Electronic Corp., a California corporation.
(h) "CONCURRENT STOCK APPRECIATION RIGHT" or "CONCURRENT RIGHT"
means a
right granted pursuant to subsection 8(b)(ii) of the Plan.
(i) "CONSULTANT" means any person, including an advisor, engaged by the
Company or an Affiliate to render bona fide consulting services and who is
compensated for such services, provided that the term "Consultant" shall not
include Directors who are paid only a director's fee by the Company or who are
not compensated by the Company for their services as Directors.
(j) "CONTINUOUS STATUS AS AN EMPLOYEE, DIRECTOR OR CONSULTANT"
means the
employment or relationship as a Director or Consultant is not interrupted or
terminated by the Company or any Affiliate. The Board, in its sole discretion,
may determine whether Continuous Status as an Employee, Director or Consultant
shall be considered interrupted in the case of: (1) any leave of absence
approved by the Board, including sick leave, military leave, or any other
personal leave; PROVIDED, HOWEVER, that for purposes of Incentive Stock Options
and Stock Appreciation Rights appurtenant thereto, any such leave may not
exceed ninety days, unless reemployment upon the expiration of such leave is
guaranteed by contract (including certain Company policies) or statute: (2)
transfers between locations of the Company or between the Company, Affiliates
or its successor; or (3) a change in the status of the relationship from
Employee to Director or Consultant, from Director to Employee or Consultant, or
from Consultant to Employee or Director.
(k) "DIRECTOR" means a member of the Board.
(l) "DISABILITY" means total and permanent disability as defined in
Section 22(e)(3) of the Code.
(m) "EMPLOYEE" means any person, including Officers and Directors,
employed by the Company or any Affiliate of the Company. Neither service as a
Director nor payment of a director's fee by the Company shall be sufficient to
constitute "employment" by the Company.
(n) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
(o) "FAIR MARKET VALUE" means, as of any date, the value of the Common
Stock determined as follows:
(i) If the Common Stock is listed on any established stock exchange
or a national market system, including without limitation the Nasdaq
National Market, the Fair Market Value of a share of Common Stock shall be
the closing sales price for such stock (or the closing bid, if no sales
were reported) as quoted on such system or exchange (or the exchange with
the greatest volume of trading in the Common Stock) on the last market
trading day prior to the day of determination, as reported in the Wall
Street Journal or such other source as the Board deems reliable:
<PAGE 2>
(ii) if the Common Stock is quoted on the Nasdaq System (but not on
the Nasdaq National Market) or is regularly quoted by a recognized
securities dealer but selling prices are not reported, the Fair Market
Value of a share of Common Stock shall be the mean between the bid and
asked prices for the Common Stock on the last market trading day prior to
the day of determination, as reported in The WALL STREET JOURNAL or such
other source as the Board deems reliable;
(iii) In the absence of an established market for the Common
Stock, the Fair Market Value shall be determined in good faith by the
Board.
(p) "INCENTIVE STOCK OPTION" means an Option intended by the Board at the
time of grant to qualify as an incentive stock option within the meaning of
Section 422 of the Code and the regulations promulgated thereunder.
(q) "INDEPENDENT STOCK APPRECIATION RIGHT" or "INDEPENDENT RIGHT"
means a
right granted under subsection 8(b)(iii) of the Plan.
(r) "NON-EMPLOYEE DIRECTOR" means a director (l) who is not currently an
officer of the Company or any of its Affiliates or otherwise currently employed
by the Company or any of its Affiliates: (2) does not receive compensation,
either directly or indirectly from the Company or any of its Affiliates for
services rendered as a consultant or in any capacity other than as a director,
except for an amount that does not exceed the dollar amount for which
disclosure would be required pursuant to Item 404(a) of Regulation S-K; (3)
does not possess an interest in any other transaction for which disclosure
would be required pursuant to Item 404(a) of Regulation S-K; or (4) is not
engaged in a business relationship for which disclosure would be required
pursuant to Item 404(b) of Regulation S-K.
(s) "NONSTATUTORY STOCK OPTION" means an Option not intended by the Board
at the time of grant to qualify as an Incentive Stock Option.
(t) "OFFICER" means a person who is an officer of the Company within the
meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.
(u) "OPTION" means a stock option granted pursuant to the Plan.
(v) "OPTIONEE" means an Employee, Director or Consultant who holds an
outstanding Option.
(w) "PLAN" means this 1996 Stock Incentive Plan.
(x) "RULE 16B-3" means Rule 16b-3 under the Exchange Act or any successor
to Rule 16b-3, as in effect when discretion is being exercised with respect to
the Plan.
(y) "REGULATION S-K" means Regulation S-K of the Securities and Exchange
Commission.
<PAGE 3>
(z) "SECURITIES ACT" means the Securities Act of 1933.
(aa) "STOCK APPRECIATION RIGHT" means any of the various types of rights
which may be granted under Section 8 of the Plan.
(bb) "STOCK AWARD" means any right granted under the Plan, including any
Option, any stock bonus, any right to purchase restricted stock and any Stock
Appreciation Right.
(cc) "STOCK AWARD AGREEMENT" means a written agreement between the Company
and a holder of a Stock Award evidencing the terms and conditions of an
individual Stock Award grant. Each Stock Award Agreement shall be subject to
the terms and conditions of the Plan.
(dd) "TANDEM STOCK APPRECIATION RIGHT" or "TANDEM RIGHT" means a right
granted under subsection 8(b)(i) of the Plan.
3. ADMINISTRATION.
(a) The Plan shall be administered by the Board unless and until the
Board delegates administration to a Committee, as provided in Section 3(c).
(b) The Board shall have the power, subject to, and within the
limitations of, the express provisions of the Plan:
(i) To determine from time to time which of the persons eligible
under the Plan shall be granted Stock Awards; when and how Stock Awards
shall be granted; whether a Stock Award will be an Incentive Stock Option,
a Nonstatutory Stock Option, a stock bonus, a right to purchase restricted
stock, a Stock Appreciation Right, or a combination of the foregoing; the
provisions of each Stock Award granted (which need not be identical),
including, without limitation, the time or times when a person shall be
permitted to receive stock pursuant to a Stock Award; whether a person
shall be permitted to receive stock upon exercise of an Independent Stock
Appreciation Right; and the number of shares with respect to which Stock
Awards shall be granted to each such person.
(ii) To construe and interpret the Plan and Stock Awards granted
under it, and to establish, amend and revoke rules and regulations for its
administration. The Board, in the exercise of this power, may correct any
defect, omission or inconsistency in the Plan or in any Stock Award
Agreement and, subject to Section 14 hereof, otherwise amend the Plan in a
manner and to the extent it shall deem necessary.
(iii) Generally, to exercise such powers and to perform such acts
as the Board deems necessary or expedient to promote the best interests of
the Company and which are not in conflict with the provisions of the Plan.
(c) The Board may delegate administration of the Plan to a committee
composed of not fewer than two members (the "Committee"), and at least two of
the members of the Committee shall be Non-Employee Directors. If administration
is delegated to a Committee, the Committee
<PAGE 4>
shall have, in connection with the administration of the Plan,
the powers theretofore possessed by the Board (and references in this Plan to
the Board shall thereafter be to the Committee), subject, however, to such
resolutions, not inconsistent with the provisions of the Plan, as may be
adopted from time to time by the Board. The Board may abolish the Committee at
any time and revest in the Board the administration of the Plan.
4. SHARES SUBJECT TO THE PLAN.
Subject to the provisions of Section 13 relating to adjustments upon
changes in the Common Stock, the number of shares of Common Stock that may be
issued pursuant to Stock Awards under the Plan shall not exceed in the
aggregate 100,000 shares. If any Stock Award or option granted under the terms
of the Plan shall for any reason expire or otherwise terminate without having
been exercised in full, the Common Stock not purchased shall again become
available for issuance under the Plan. Shares subject to Stock Appreciation
Rights exercised in accordance with Section 8 of the Plan and Shares withheld
by the Company to satisfy a federal, state and/or local tax withholding
obligation of a participant relating to the exercise of a Stock Award shall not
be available for subsequent issuance under the Plan.
5. ELIGIBILITY.
(a) Incentive Stock Options and Stock Appreciation Rights appurtenant
thereto may be granted only to Employees. Stock Awards other than Incentive
Stock Options and Stock Appreciation Rights appurtenant thereto may be granted
only to Employees, Directors or Consultants.
(b) No person shall be eligible for the grant of an Incentive Stock
Option if, at the time of grant, such person owns (or is deemed to own pursuant
to Section 424(d) of the Code) stock possessing more than ten percent (10%) of
the total combined voting power of all classes of stock of the Company or of
any of its Affiliates unless the exercise price of such Incentive Stock Option
is at least one hundred ten percent (110%) of the Fair Market Value of the
Common Stock at the date of grant and such Incentive Stock Option is not
exercisable after the expiration of five years from the date of its grant.
6. OPTION PROVISIONS.
Each Option shall be approved by the Board and be in such form and shall
contain such terms and conditions as the Board shall deem appropriate. The
provisions of separate options need not be identical, but each Option shall
include (through incorporation of provisions hereof by reference in the Option
or otherwise) the substance of each of the following provisions:
(a) TERM. No Option shall be exercisable after the expiration of ten
years from the date it was granted.
(b) PRICE. The exercise price of each Incentive Stock option shall be
not less than one hundred percent (100%) of the Fair Market Value of the Common
Stock subject to the Option on the date the Option is granted. The exercise
price of each Nonstatutory Stock Option shall be
<PAGE 5>
established at the discretion of the Board. Notwithstanding the foregoing, the
exercise price of an Option for which an exemption from the qualification
requirements of the CCSL is unavailable, and which is granted to a person who
owns stock possessing more than ten percent (10%) of the total combined voting
power of all classes of stock of the Company or of any of its Affiliates, shall
be at least one hundred ten percent (110%) of the Fair Market Value of the
Common Stock at the date of grant.
(c) CONSIDERATION. The exercise price of Common Stock acquired pursuant
to the exercise of an Option shall be paid, to the extent permitted by
applicable statutes and regulations, either (1) in cash at the time the Option
is exercised, or (2) at the discretion of the Board, either at the time of the
grant or exercise of the Option, (i) by delivery to the Company of other shares
of Common Stock, (ii) according to a deferred payment or other arrangement
(which may include, without limiting the generality of the foregoing, the use
of other shares of Common Stock) with the person to whom the Option is granted
or to whom the Option is transferred pursuant to Section 6(d), or (iii) in any
other form of legal consideration that may be acceptable to the Board.
In the case of any deferred payment arrangement, interest shall be payable
at least annually and shall be payable at the minimum rate of interest
necessary to avoid the imputation of interest, under the applicable provisions
of the Code and Treasury Regulations.
(d) TRANSFERABILITY. An Incentive Stock Option shall not be transferable
except by will or by the laws of descent and distribution, and shall be
exercisable during the lifetime of the person to whom the Incentive Stock
Option is granted only by such person, or in the case of such person's
disability by such person's legal representative or guardian. A Nonstatutory
Stock Option shall not be transferable except by will or by the laws of descent
and distribution or pursuant to a qualified domestic relations order satisfying
the requirements of Rule 16b-3 and any administrative interpretations or
pronouncements thereunder (a "QDRO"), and shall be exercisable during the
lifetime of the person to whom the Option is granted only by such person or any
transferee pursuant to a QDRO.
(e) VESTING. The total number of shares of Common Stock subject to an
Option may, but need not, be allotted in periodic installments (which may, but
need not, be equal). The Option may provide that from time to time during each
of such installment periods, the Option may become exercisable ("vest") with
respect to some or all of the shares allotted to that period, and may be
exercised with respect to some or all of the shares allotted to such period
and/or any prior period as to which the Option became vested but was not fully
exercised. The Option may be subject to such other terms and conditions on the
time or times when it may be exercised (which may be based on performance or
other criteria) as the Board may deem appropriate. The vesting provisions of
individual Options may vary; however, in the case of an Option for which an
exemption from the qualification requirements of the CCSL is unavailable, the
vesting provisions must provide for vesting of at least twenty percent (20%)
per year of the total number of shares subject to the Option from the date the
Option was granted; PROVIDED, HOWEVER, that Options granted to Officers,
Directors or Consultants of the Company may vest at a rate of less than twenty
percent (20%) per year. During the remainder of the term of the Option (if its
term extends beyond the end of the installment periods), the option may be
exercised from time to time with respect to any shares then remaining subject
to the Option. The provisions of this Section 6(e) are
<PAGE 6>
subject to any Option provisions governing the minimum number of shares as to
which an Option may be exercised.
(f) SECURITIES LAW COMPLIANCE. The Company may require any Optionee, or
any person to whom an Option is transferred pursuant to Section 6(d), as a
condition of exercising any such Option, (1) to give written assurances
satisfactory to the Company as to the Optionee's knowledge and experience in
financial and business matters and/or to employ a purchaser representative
reasonably satisfactory to the Company who is knowledgeable and experienced in
financial and business matters, and that he or she is capable of evaluating,
alone or together with the purchaser representative, the merits and risks of
exercising the option; and (2) to give written assurances satisfactory to the
Company stating that such person is acquiring the Common Stock subject to the
Option for such person's own account and not with any present intention of
selling or otherwise distributing the Common Stock. These requirements, and any
assurances given pursuant to such requirements, shall be inoperative if (i) the
issuance of the shares upon the exercise of the Option has been registered
under a then currently effective registration statement under the Securities
Act, or (ii) as to any particular requirement, a determination is made by
counsel for the Company that such requirement need not be met in the
circumstances under the then applicable securities laws.
(g) TERMINATION OF EMPLOYMENT OR RELATIONSHIP AS A DIRECTOR OR
CONSULTANT. In the event an Optionee's Continuous Status as an Employee,
Director or Consultant terminates (other than upon the Optionee's death or
Disability) (a "Termination"), the Optionee may exercise his or her Option (to
the extent that the Optionee is entitled to exercise it at the date of
Termination), but only within such period of time as is determined by the
Board, which period shall not be longer than ninety days from the date of
Termination for an Incentive Stock Option nor less than thirty days from the
date of Termination for an Option for which an exemption from the qualification
requirements of the CCSL is unavailable; PROVIDED, HOWEVER, that if an Optionee
is terminated for cause, as defined by the Board, the Option may provide for an
exercise period shorter than thirty days, or may provide for expiration
concurrent with such Termination. In no event shall an Option be exercised
later than the expiration of the term of such Option as set forth in the
Option. If, at the date of Termination, the Optionee is not entitled to
exercise his or her entire Option, the shares covered by the unexercisable
portion of the Option shall revert to the Plan. If, after Termination, the
Optionee does not exercise his or her Option within the time specified in the
Option, the Option shall terminate, and the shares covered by such Option, to
the extent unexercised, shall revert to the Plan.
(h) DISABILITY OF OPTIONEE. If an Optionee's Continuous Status as an
Employee, Director or Consultant terminates as a result of the Optionee's
Disability, the Optionee may exercise his or her Option, but only within six
months from the date of such Termination (or such longer period, not exceeding
twelve months for Incentive Stock Options, as specified in the Option), and
only to the extent that the Optionee was entitled to exercise the Option at the
date of such Termination (but in no event later than the expiration of the term
of such Option as set forth in the Option). If, at the date of Termination, the
Optionee is not entitled to exercise his or her entire Option, the shares
covered by the unexercisable portion of the Option shall revert to the Plan.
If, after Termination, the Optionee does not exercise his or her Option within
the time
<PAGE 7>
specified therein, the Option shall terminate, and the shares covered by such
Option, to the extent unexercised, shall revert to the Plan.
(i) DEATH OF OPTIONEE. In the event of the death of an Optionee, the
Option may be exercised at any time within six months following the date of
death (or such longer period not exceeding twelve months, for Incentive Stock
Options, as specified in the Option), but in no event later than the expiration
of the term of such Option as set forth in the Option, by the Optionee's estate
or by a person who acquired the right to exercise the Option by bequest or
inheritance, but only to the extent the Optionee was entitled to exercise the
Option at the date of death. If, at the time of death, the Optionee was not
entitled to exercise his or her entire Option, the shares covered by the
unexercisable portion of the Option shall revert to the Plan. If, after death,
the Optionee's estate or a person who acquired the right to exercise the Option
by bequest or inheritance does not exercise the Option within the time
specified herein, the Option shall terminate, and the shares covered by such
Option, to the extent unexercised, shall revert to the Plan.
(j) EARLY EXERCISE. The Option may, but need not, include a provision
whereby the Optionee may elect at any time while an Employee, Director or
Consultant to exercise the Option as to any part or all of the shares subject
to the Option prior to the full vesting of the Option. Any unvested shares so
purchased shall be subject to a right to repurchase in favor of the Company
upon Termination of the Optionee, at a repurchase price equal to the exercise
price of the Option, payable in cash or cancellation of purchase money
indebtedness for the shares; PROVIDED, HOWEVER, that for any Option for which
an exemption from the qualification requirements of the CCSL is unavailable,
the Company's right to repurchase at the exercise price of the Option shall
lapse at a minimum rate of twenty percent (20%) per year over five years from
the date the Option was granted and such right shall terminate to the extent
not exercised within ninety days following Termination of the Optionee.
(k) WITHHOLDING. To the extent provided by the terms of an Option, the
Optionee may satisfy any federal, state or local tax withholding obligation
relating to the exercise of such Option by any of the following means or by a
combination of such means: (1) tendering a cash payment; (2) authorizing the
Company to withhold shares from the shares of the Common Stock otherwise
issuable to the Optionee as a result of the exercise of the Option; or (3)
delivering to the Company owned and unencumbered shares of Common Stock.
(l) RE-LOAD OPTIONS. Without in any way limiting the authority of the
Board to make or not to make grants of Options hereunder, the Board shall have
the authority (but not an obligation) to include as part of any Option a
provision entitling the Optionee to a further Option (a "Re-Load Option") in
the event the Optionee exercises the Option, in whole or in part, by
surrendering other shares of Common Stock in accordance with this Plan and the
terms and conditions of the Option. Any such Re-Load Option (1) shall be for a
number of shares equal to the number of shares surrendered as part or all of
the exercise price of such Option; (2) shall have an expiration date which is
the same as the expiration date of the Option the exercise of which gave rise
to such Re-Load Option; and (3) in the case of a Re-Load Option which is an
Incentive Stock Option or an Option for which an exemption from the
qualification requirements of the CCSL is unavailable, and which is granted to
a 10% shareholder (as described in Section 5(c)), shall have an exercise price
which is equal to one hundred ten percent (110%) of the Fair Market
<PAGE 8>
Value of the Common Stock subject to the Re-Load Option on the date of exercise
of the original Option and, with respect to Incentive Stock Options, shall have
a term which is no longer than five years.
Any such Re-Load Option may be an Incentive Stock Option or a Nonqualified
Stock Option, as the Board may designate at the time of the grant of the
original Option; PROVIDED, HOWEVER, that the designation of any Re-Load Option
as an Incentive Stock Option shall be subject to the one hundred thousand
dollar ($100,000) annual limitation on exercisability of Incentive Stock
Options described in Section 12(d) of the Plan and in Section 422(d) of the
Code. There shall be no Re-Load Options on a Re-Load Option. Any such Re-Load
Option shall be subject to the availability of sufficient shares under Section
4(a) and shall be subject to such other terms and conditions as the Board may
determine which are not inconsistent with the express provisions of the Plan
regarding the terms of the Options.
7. TERMS OF STOCK BONUSES AND PURCHASES OF RESTRICTED STOCK.
Each stock bonus or restricted stock purchase agreement shall be approved
by the Board and be in such form and shall contain such terms and conditions as
the Board shall deem appropriate. The terms and conditions of stock bonus or
restricted stock purchase agreements may change from time to time, and the
terms and conditions of separate agreements need not be identical, but each
stock bonus or restricted stock purchase agreement shall include (through
incorporation of provisions hereof by reference in the agreement or otherwise)
the substance of each of the following provisions, as appropriate:
(a) PURCHASE PRICE. The purchase price under each stock purchase
agreement shall be such amount as the Board shall determine and designate in
such agreement. Additionally, the Board may determine that eligible
participants in the Plan may be awarded stock pursuant to a stock bonus
agreement in consideration for past services actually rendered to the Company
or for its benefit. Notwithstanding the foregoing, the purchase price of shares
of Common Stock for which an exemption from the qualification requirements of
the CCSL is unavailable shall be at least eighty-five percent (85%) of the Fair
Market Value of the Common Stock at the date of the grant or the sale;
provided, if such shares of Common Stock are granted or sold to a person who
owns stock possessing more than ten percent (10%) of the total combined voting
power of all classes of stock of the Company or of any of its Affiliates, the
purchase price shall be at least one hundred ten percent (110%) of the Fair
Market Value of the Common Stock at the date of grant or sale.
(b) TRANSFERABILITY. No rights under a stock bonus or restricted stock
purchase agreement shall be assignable by any participant under the Plan,
either voluntarily or by operation of law, except by will or by the laws of
descent and distribution, and shall be exercisable during the lifetime of the
person to whom the rights are granted only by such person. The person to whom
such rights are granted may, by delivering written notice to the Company, in a
form satisfactory to the Company, designate a third party who, in the event of
the death of such person, shall thereafter be entitled to exercise the rights
held by such person under the stock bonus or restricted stock purchase
agreement.
<PAGE 9>
(c) CONSIDERATION. The purchase price of Common Stock acquired pursuant
to a stock purchase agreement shall be paid either: (1) in cash at the time of
purchase; (2) at the discretion of the Board, according to a deferred payment
or other arrangement with the person to whom the Common Stock is sold; or (3)
in any other form of legal consideration that may be acceptable to the Board in
its discretion. Notwithstanding the foregoing, the Board may award stock
pursuant to a stock bonus agreement in consideration for past services actually
rendered to the Company or for its benefit.
(d) VESTING. Shares of Common Stock sold or awarded under the Plan may,
but need not, be subject a right to repurchase in favor of the Company upon
Termination of the person to whom such shares have been sold or awarded at a
repurchase price equal to the original purchase price (or such higher price as
the Board may determine to be appropriate) payable in cash or cancellation of
purchase money indebtedness. The Board shall provide that such rights to
repurchase lapse with respect to such purchased shares (or that such purchased
shares vest) pursuant to a schedule determined by the Board; PROVIDED, HOWEVER,
that for any stock bonus or restricted stock purchase right for which an
exemption from the qualification requirements of the CCSL is unavailable, the
Company's right to repurchase at the original purchase price shall lapse (or
the purchased shares shall vest) at a minimum rate of twenty percent (20%) per
year over five years from the date the stock bonus or restricted stock purchase
right was granted and such right shall terminate to the extent not exercised
within ninety days following Termination of the purchaser.
8. STOCK APPRECIATION RIGHTS.
(a) The Board shall have full power and authority, exercisable in its
sole discretion, to grant Stock Appreciation Rights to Employees or Directors
of, or Consultants to, the Company or its Affiliates under the Plan. Each such
right shall entitle the holder to a distribution based on the appreciation in
the Fair Market Value per share of a designated amount of Common Stock.
(b) Three types of Stock Appreciation Rights shall be authorized for
issuance under the Plan, Tandem Rights, Concurrent Rights and Independent
Rights, and the terms and conditions applicable to each shall be as follows:
(i) TANDEM STOCK APPRECIATION RIGHTS. Tandem Rights will be granted
appurtenant to an Option and will require the holder to elect between the
exercise of such Option for shares of Common Stock and the surrender, in
whole or in part, of such Option for an appreciation distribution payable
in cash in an amount equal to (1) the aggregate Fair Market Value (on the
date of Option surrender) of the number of vested shares of Common Stock
under the Option (or portion thereof) being surrendered on such date, less
(2) the aggregate exercise price of such vested shares of Common Stock.
Tandem Rights may be tied to either Incentive Stock Options or
Nonstatutory Stock Options. Each such right shall, except as specifically
set forth below, be subject to the same terms and conditions applicable to
the particular Option to which it pertains.
(ii) CONCURRENT STOCK APPRECIATION RIGHTS. Concurrent Rights will be
granted appurtenant to an Option and may apply to all or any portion of
the shares of Common
<PAGE 10>
Stock subject to such Option and will be automatically exercised at the
same time such Option is exercised with respect to the particular shares
of Common Stock to which the Concurrent Right pertains. The appreciation
distribution, payable in cash, to which the holder of such Concurrent
Rights shall be entitled upon exercise of the related Option shall be an
amount equal to (1) the aggregate Fair Market Value (on the date of Option
exercise) of the number of vested shares of Common Stock under the Option
(or portion thereof) being exercised on such date and with respect to
which such Concurrent Rights apply, less (2) the aggregate exercise price
paid for such vested shares of Common Stock. Concurrent Rights may be tied
to any or all of the shares of Common Stock under any Incentive Stock
Option or Nonstatutory Stock Option. A Concurrent Right shall, except as
specifically set forth below, be subject to the same terms and conditions
applicable to the particular Option grant to which it pertains.
(iii) INDEPENDENT STOCK APPRECIATION RIGHTS. Independent Rights shall
be granted independently of any Option and will entitle the holder upon
exercise thereof to an appreciation distribution payable in cash in an
amount equal to (1) the aggregate Fair Market Value (on the date of the
exercise of the Independent Right) of a number of shares of Common Stock
equal to the number of vested share equivalents with respect to which the
holder is exercising the Independent Right on such date, less (2) the
aggregate Fair Market Value (on the date of the grant of the Independent
Right) of such number of shares of Common Stock. Independent Rights shall,
except as specifically set forth below, be subject to the same terms and
conditions applicable to Nonstatutory Stock Options as set forth in
Section 6. They shall be denominated in share equivalents.
(iv) TERMS APPLICABLE TO STOCK APPRECIATION RIGHTS GENERALLY.
(A) To exercise any outstanding Stock Appreciation Right, the holder
must provide written notice of exercise to the Company in compliance with
the provisions of the instrument evidencing such right.
(B) If a Stock Appreciation Right is granted to an individual who is
at the time subject to Section 16(b) of the Exchange Act, the instrument
of grant shall incorporate all the terms and conditions at the time
necessary to assure that the subsequent exercise of such right shall
qualify for the safe-harbor exemption from short-swing profit liability
provided by Rule 16b-3 promulgated under the Exchange Act (or any
successor role or regulation).
(C) No limitation shall exist on the aggregate amount of cash
payments the Company may make under the Plan in connection with the
exercise of Stock Appreciation Rights.
9. CANCELLATION AND REGRANT OF OPTIONS.
The Board shall have the authority to effect, at any time and from time to
time, with the consent of the affected holders of Options and/or Stock
Appreciation Rights, (1) the repricing of any outstanding Options and/or any
Stock Appreciation Rights under the Plan and/or (2) the
<PAGE 11>
cancellation of any outstanding Options and/or any Stock Appreciation Rights
under the Plan and the grant in substitution therefor of new Options and/or
Stock Appreciation Rights under the Plan covering the same or different numbers
of shares of Common Stock, but having an exercise price per share not less than
eighty-five percent (85%) of the Fair Market Value (one hundred percent (100%)
of the Fair Market Value in the case of an Incentive Stock Option or, in the
case of an Incentive Stock Option granted to a 10% shareholder as described in
Section 5(c), not less than one hundred ten percent (110%) of the Fair Market
Value) per share of Common Stock on the new grant date. Notwithstanding the
forgoing, the Board may grant an Option and/or Stock Appreciation Right with an
exercise price lower than that set forth above if such Option and/or Stock
Appreciation Right is granted as part of a transaction to which Section 424(a)
of the Code applies.
10. COVENANTS OF THE COMPANY.
(a) During the terms of the Stock Awards, the Company shall keep
available at all times the number of shares of Common Stock required to satisfy
such Stock Awards up to the number of shares of Common Stock authorized under
the Plan.
(b) The Company shall seek to obtain from each regulatory commission or
agency having jurisdiction over the Plan such authority as may be required to
effect any Stock Award, and to issue and sell shares of Common Stock under the
Stock Awards; PROVIDED, HOWEVER, that this undertaking shall not require the
Company to register under the Securities Act either the Plan, any Stock Award
or any stock issued or issuable pursuant to any such Stock Award. If, after
reasonable efforts, the Company is unable to obtain from any such regulatory
commission or agency the authority which counsel for the Company deems
necessary for the lawful issuance and sale of Common Stock under the Plan, the
Company shall be relieved from any liability for failure to issue and sell
stock under such Stock Awards unless and until such authority is obtained.
11. USE OF PROCEEDS FROM STOCK.
Proceeds from the sale of Common Stock pursuant to Stock Awards shall
constitute general funds of the Company.
12. MISCELLANEOUS.
(a) The Board shall have the power to accelerate the time at which a
Stock Award may first be exercised or the time during which a Stock Award or
any part thereof will vest, notwithstanding the provisions in the Stock Award
stating the time at which it may first be exercised or the time during which it
will vest.
(b) Neither an Optionee nor any person to whom an Option is transferred
under Section 6(d) shall be deemed to be the holder of, or to have any of the
rights of a holder with respect to, any shares of Common Stock subject to such
Option unless and until such person has satisfied all requirements for exercise
of the Option pursuant to its terms.
<PAGE 12>
(c) Nothing in the Plan or any instrument executed or Stock Award granted
pursuant thereto shall confer upon any Employee, Director, Consultant,
Optionee, or other holder of Stock Awards any right to continue in the employ
of the Company or any Affiliate (or to continue acting as a Director or
Consultant) or shall affect the right of the Company or any Affiliate to
terminate the employment or relationship as a Director or Consultant of any
Employee, Director, Consultant or Optionee, with or without cause.
(d) To the extent that the aggregate Fair Market Value (determined at the
time of grant) of Common Stock with respect to which Incentive Stock Options
are exercisable for the first time by any Optionee during any calendar year
under all plans of the Company and its affiliates exceeds one hundred thousand
dollars ($100,000), the Options or portions thereof which exceed such limit
(according to the order in which they were granted) shall be treated as
Nonstatutory Stock Options.
(e) The Company shall deliver to the holders of Stock Awards. not later
than one hundred twenty days after the close of each of the Company's fiscal
years, a balance sheet and an income statement. This Section shall not apply
when the issuance of Stock Awards is limited to key employees whose duties in
connection with the Company assure them access to equivalent information.
13. ADJUSTMENTS UPON CHANGES IN THE COMMON STOCK.
(a) Subject to the provisions of Section 13(b), if any change is made in
the Common Stock subject to the Plan, or subject to any Stock Award, without
receipt of consideration by the Company (through merger, consolidation,
reorganization, recapitalization, reincorporation, stock dividend, dividend in
property other than cash, stock split, liquidating dividend, combination of
shares, exchange of shares, change in corporate structure or other transaction
not involving the receipt of consideration by the Company) the Plan will be
appropriately adjusted in the class(es) and maximum number of shares subject to
the Plan pursuant to Section 4(a) and the maximum number of shares subject to
Options and Stock Appreciation Rights pursuant to Section 5(d), and the
outstanding Stock Awards will be appropriately adjusted in the class(es) and
number of shares and price per share of stock subject to such outstanding Stock
Awards. Such adjustments shall be made by the Board, the determination of which
shall be final, binding and conclusive. (The conversion of any convertible
securities of the Company shall not be treated as a "transaction of not
involving the receipt of consideration by the Company.")
(b) In the event of: (1) a dissolution, liquidation or sale of
substantially all of the assets of the Company; (2) a merger or consolidation
in which the Company is not the surviving corporation; or (3) a reverse merger
in which the Company is the surviving corporation but the shares of the Common
Stock outstanding immediately preceding the merger are converted by virtue of
the merger into other property, whether in the form of securities, cash or
otherwise, then, at the sole discretion of the Board and to the extent
permitted by applicable law, such Stock Awards shall (i) terminate upon such
event and may be exercised prior thereto to the extent such Stock Awards are
then exercisable or (ii) continue in full force and effect and, if applicable,
the surviving corporation or an Affiliate of such surviving corporation shall
assume any Stock Awards
<PAGE 13>
outstanding under the Plan and/or shall substitute similar Stock Awards for
those outstanding under the Plan.
14. AMENDMENT OF THE PLAN AND STOCK AWARDS.
(a) The Board at any time, and from time to time, may amend the Plan.
However, except as provided in Section 13 relating to adjustments upon changes
in the Common Stock, no amendment shall be effective unless approved by the
shareholders of the Company within twelve months before or after the adoption
of the amendment, where the amendment will:
(i) Increase the number of shares of Common Stock reserved for Stock
Awards under the Plan;
(ii) Modify the requirements as to eligibility for participation in the
Plan to the extent such modification requires shareholder approval in
order for the Plan to satisfy the requirements of Section 422 of the Code:
or
(iii) Modify the Plan in any other way if such modification requires
shareholder approval in order for the Plan to satisfy the requirements of
Section 422 of the Code or to comply with the requirements of Rule 16b-3.
Rights and obligations under any Stock Award granted before amendment of
the Plan shall not be altered or impaired by any amendment of the Plan
unless (1) the Company requests the consent of the person to whom the
Stock Award was granted and (2) such person consents thereto in writing.
(b) The Board at any time, and from time to time, may amend the terms of
any one or more Stock Award; PROVIDED, HOWEVER, that the rights and obligations
under any Stock Award shall not be impaired by any such amendment unless (1)
the Company requests the consent of the person to whom the Stock Award was
granted and (2) such person consents thereto in writing.
15. TERMINATION OR SUSPENSION OF THE PLAN.
(a) The Board may suspend or terminate the Plan at any time. Unless
sooner terminated, the Plan shall terminate on July 10, 2006. No Stock Awards
may be granted under the Plan while the Plan is suspended or after it is
terminated.
(b) Rights and obligations under any Stock Award granted while the Plan
is in effect shall not be altered or impaired by suspension or termination of
the Plan, except with the written consent of the person to whom the Stock Award
was granted.
16. EFFECTIVE DATE OF PLAN.
The Plan shall become effective as determined by the Board, but no Stock
Awards granted under the Plan shall be exercisable unless and until the Plan
has been approved by the shareholders of the Company (and such approval by the
shareholders must be obtained within twelve months of the Plan being adopted by
the Board), and, for Stock Awards for which an exemption from the
<PAGE 14>
qualification requirements of the CCSL is unavailable, an appropriate permit
has been issued by the Commissioner of Corporations of the State of California.
OPTION CERTIFICATE
(INCENTIVE STOCK OPTION)
THIS IS TO CERTIFY that NETWORKS ELECTRONIC CORP., a
California corporation (the "COMPANY"), has granted to the
employee named below ("EMPLOYEE") an incentive stock option (the
"OPTION") to purchase shares of the Company's Common Stock (the
"SHARES") under its 1996 Stock Incentive Plan as amended (the
"PLAN") and upon the terms and conditions as follows:
Name of Employee: ----------------------------------
Address of Employee: ----------------------------------
Number of Shares: ----------------------------------
Option Exercise Price: $-------------- per share
Date of Grant: ------------ ----, 199--
Option Expiration Date: -------- ----, 200--
EXERCISE SCHEDULE: The Option shall become exercisable as
follows:
SUMMARY OF OTHER TERMS: This Option is defined in the Stock
Option Agreement (Incentive Stock Option) (the "OPTION
AGREEMENT") which is attached to this Option Certificate (the
"CERTIFICATE") as Annex I. This Certificate summarizes certain
of the provisions of the Option Agreement for your information,
but is not complete. Your rights are governed by the Option
Agreement, NOT by this summary. The Company strongly suggests
that you carefully review the full Option Agreement prior to
signing this Certificate or exercising the Option.
<PAGE>
Among the terms of the Option Agreement are the following:
EMPLOYMENT: The Option Agreement does not obligate the
Company to retain you for any period of time. Unless otherwise
agreed IN WRITING, the Company reserves the right to terminate
any employee at any time, with or without cause. See Section
5(d) of the attached Option Agreement.
TERMINATION OF EMPLOYMENT: While the Option terminates on
the Option Expiration Date, it will terminate earlier if you
cease to be employed by the Company. If your employment ends due
to death or permanent disability, the Option terminates six
months after the date of death or disability, and is exercisable
during such six-month period as to the portion of the Option
which had vested prior to the date of death or disability. In
all other cases, the Option terminates 45 days after the date of
termination of employment, and is exercisable during such time
period as to the portion of the Option which had vested prior to
the date of termination of employment; PROVIDED, HOWEVER, if you
are terminated "for cause," the Option will terminate 30 days
after the date of termination of your employment and is
exercisable during such time period as to the portion of the
Option which had vested prior to the date of termination of
employment. See Section 5 of the attached Option Agreement.
TRANSFER: The Option is personal to you, and cannot be
sold, transferred, assigned or otherwise disposed of to any other
person, except on your death. See Section 15(d) of the attached
Option Agreement.
EXERCISE: You can exercise the Option (once it is
exercisable), in whole or in part, by delivering to the Company a
Notice of Exercise identical to Exhibit "A" attached to the
Option Agreement, accompanied by payment of the Exercise Price
for the Shares to be purchased. The Company will then issue a
certificate to you for the Shares you have purchased. You are
under no obligation to exercise the Option. See Section 4 of the
attached Option Agreement. If at the time of the grant of the
Option you own stock possessing more than 10 percent (10%) of the
total combined voting power of all classes of stock of the
Company (applying the attribution rules), you may not exercise
the Option for five years from the date the Option is granted.
MARKET STAND-OFF: The Option provides that in connection
with any underwritten public offering by the Company, you may not
sell or transfer any of your Shares without the prior written
consent of the Company or its underwriters for a period of up to
180 days after the effective date of the offering. See Section
6(a) of the attached Option Agreement.
ADJUSTMENTS UPON RECAPITALIZATION: The Option contains
provisions which affect your rights in the event of stock splits,
stock dividends, mergers and other major corporate
reorganizations. See Section 7 of the attached Option Agreement.
WAIVER: By signing this Certificate, you will be agreeing
to all of the terms of the Option Agreement, including those not
summarized in this Certificate. You will waive your rights to
<PAGE 2>
options or stock which may otherwise have been promised to you.
See Section 8 of the attached Option Agreement.
WITHHOLDING: The Company may require you to make any
arrangements necessary to insure the proper withholding of any
amount of tax, if any, required to be withheld by the Company as
a result of the exercise of the Option. See Section 13 of the
attached Option Agreement.
<PAGE 3>
AGREEMENT
Networks Electronic Corp., a California corporation, and
Employee each hereby agrees to be bound by all of the terms and
conditions of the Stock Option Agreement (Incentive Stock Option)
which is attached hereto as Annex I and incorporated herein by
this reference as if set forth in full in this document.
DATED: ----------------------
NETWORKS ELECTRONIC CORP.
By: ------------------------------
Its:------------------------------
EMPLOYEE
----------------------------------
Name:
----------------------------------
(Please print your name exactly as
you wish it to appear on any stock
certificates issued to you upon
exercise of the Option)
<PAGE 4>
ANNEX I
STOCK OPTION AGREEMENT
(INCENTIVE STOCK OPTION)
This STOCK OPTION AGREEMENT (this "OPTION AGREEMENT") is
made and entered into as of the execution date of the Option
Certificate to which it is attached (the "CERTIFICATE") by and
between Networks Electronic Corp., a California corporation (the
"COMPANY"), and the employee named in the Certificate
("EMPLOYEE").
Pursuant to the Networks Electronic Corp. 1996 Stock
Incentive Plan, as amended (the "PLAN"), the Board of Directors
of the Company (the "BOARD") has authorized the grant to Employee
of an incentive stock option to purchase shares of the Company's
Common Stock, par value $.001 per share (the "COMMON STOCK"),
upon the terms and subject to the conditions set forth in this
Option Agreement and in the Plan.
The Company and Employee agree as follows:
1. GRANT OF OPTION.
The Company hereby grants to Employee the right and
option (the "OPTION"), upon the terms and subject to the
conditions set forth in this Option Agreement and the Plan, to
purchase all or any portion of that number of shares of the
Common Stock (the "SHARES") set forth in the Certificate at the
Option exercise price set forth in the Certificate (the "EXERCISE
PRICE").
2. TERM OF OPTION.
The Option shall terminate and expire on the Option
Expiration Date set forth in the Certificate (the "EXPIRATION
DATE"), unless sooner terminated as provided herein. In no event
shall the Option be exercisable after the expiration of ten years
from the date it was granted.
3. EXERCISE PERIOD.
(a) Subject to the provisions of Sections 3(b), 5 and
7(b) of this Option Agreement, the Option shall become
exercisable (in whole or in part) upon and after the dates set
forth under the caption "Exercise Schedule" in the Certificate.
The installments shall be cumulative; I.E., the Option may be
exercised, as to any or all Shares covered by an installment, at
any time or times after the installment first becomes exercisable
and until the Option Expiration Date or the termination of the
Option.
<PAGE>
(b) Notwithstanding anything to the contrary contained
in this Option Agreement, the Option may not be exercised, in
whole or in part, unless and until any then-applicable
requirements of all federal, state and local laws and regulatory
agencies shall have been fully complied with to the satisfaction
of the Company and its counsel.
(c) Notwithstanding anything to the contrary contained
in this Option Agreement, if at the time of the grant of the
Option you own stock possessing more than 10 percent (10%) of the
total combined voting power of all classes of stock of the
Company (applying the attribution rules as required under the
Code), you may not exercise the Option for five years from the
date the Option is granted.
4. EXERCISE OF OPTION.
There is no obligation to exercise the Option, in whole
or in part. The Option may be exercised, in whole or in part,
only by delivery to the Company of:
(a) written notice of exercise in form and substance
identical to Exhibit "A" attached to this Option Agreement
stating the number of Shares then being purchased (the "PURCHASED
SHARES");
(b) payment of the Exercise Price of the Purchased
Shares, either (1) in cash, or (2) with the consent of the Board
(which may be withheld in its absolute discretion), by (i)
delivery to the Company of other shares of Common Stock with an
aggregate Fair Market Value equal to the total Exercise Price of
the Purchased Shares, (ii) according to a deferred payment or
other arrangement (which may include without limiting the
generality of the foregoing, the use of other shares of Common
Stock) with the person to whom the Option is granted or to whom
the Option is transferred pursuant to the terms of this Option
Agreement, or (iii) in any other form of legal consideration that
may be acceptable to the Board; and
(c) if requested by the Company, a letter of
investment intent in such form and containing such provisions as
the Company may require.
In the case of any deferred payment arrangement,
interest shall be payable at least annually and shall be payable
at the minimum rate of interest necessary to avoid the imputation
of interest, under the applicable provision of the Internal
Revenue Code of 1986, as amended (the "CODE") and Treasury
Regulations.
Following receipt of the notice and payment referred to
above, the Company shall issue and deliver to Employee a stock
certificate or stock certificates evidencing the Purchased
Shares; PROVIDED, HOWEVER, that the Company shall not be
obligated to issue a fraction or fractions of a share of its
Common Stock, and may pay to Employee, in cash or by check, the
Fair Market Value of any fraction or fractions of a share
exercised by Employee. "FAIR MARKET VALUE" shall be determined
as follows: (1) if the Common Stock is listed on any established
stock exchange or
<PAGE 2>
a national market system, including without limitation the Nasdaq
National Market, the Fair Market Value of a share of Common Stock
shall be the closing sales price for such stock (or the closing
bid, if no sales were reported) as quoted on such system or
exchange (or the exchange with the greatest volume of trading in
the Common Stock) on the last market trading day prior to the day
of determination, as reported in THE WALL STREET JOURNAL or such
other source as the Board deems reliable; (2) if the Common Stock
is quoted on the Nasdaq System (but not on the Nasdaq National
Market) or is regularly quoted by a recognized securities dealer
but selling prices are not reported, the Fair Market Value of a
share of Common Stock shall be the mean between the bid and asked
prices for the Common Stock on the last market trading day prior
to the day of determination, as reported in THE WALL STREET
JOURNAL or such other source as the Board deems reliable; and
(3) in the absence of an established market for the Common Stock,
the Fair Market Value shall be determined in good faith by the
Board.
5. TERMINATION OF EMPLOYMENT.
(a) If the Employee's "Continuous Status as Employee,
Director or Consultant" (as defined in the Plan) ceases for any
reason other than death or permanent disability (a "TERMINATING
EVENT"), Employee shall have the right, subject to the provisions
of Section 5(c) below, to exercise the Option at any time
following such Terminating Event until the earlier to occur of
(1) 45 days following the date of such Terminating Event and (2)
the Expiration Date. The Option may be exercised following a
Terminating Event only to the extent exercisable as of the date
of the Terminating Event. To the extent unexercised at the end
of the period referred to above, the Option shall terminate. The
Board, in its sole and absolute discretion, shall determine
whether or not authorized leaves of absence shall constitute
termination of employment for purposes of this Option Agreement.
(b) If, by reason of death or disability (a "SPECIAL
TERMINATING EVENT"), Employee shall cease to be an officer or
employee the Company or any Subsidiary or Parent of the Company,
then Employee, Employee's executors or administrators or any
person or persons acquiring the Option directly from Employee by
bequest or inheritance, shall have the right to exercise the
Option at any time following such Special Terminating Event until
the earlier to occur of (1) six months following the date of such
Special Terminating Event and (2) the Expiration Date. The
Option may be exercised following a Special Terminating Event
only to the extent exercisable at the date of the Special
Terminating Event. To the extent unexercised at the end of the
period referred to above, the Option shall terminate. For
purposes of this Option Agreement, "disability" shall mean total
and permanent disability as defined in Section 22(e)(3) of the
Code. Employee shall not be considered permanently disabled
unless he furnishes proof of such disability in such form and
manner, and at such times, as the Board may from time to time
require.
(c) If Employee shall be terminated "for cause" by the
Company, any Subsidiary or any Parent, Employee shall have the
right to exercise the Option at any time following such
Terminating Event until the earlier to occur of (1) 30 days
following the date of such Terminating Event and (2) the
Expiration Date. For purposes of this Option Agreement, "for
<PAGE 3>
cause" shall mean the following to the extent it results in
substantial harm to the Company or could reasonably be expected
to result in substantial harm to the Company:
(1) the willful failure or refusal by Employee to
perform his duties to the Company; or
(2) Employee's willful disobedience of any orders
or directives of the Board or any officers thereof acting under
the authority thereof or Employee's deliberate interference with
the compliance by other employees of the Company with any such
orders or directives; or
(3) the willful failure or refusal of Employee to
abide by or comply with the written policies, standard procedures
or regulations of the Company; or
(4) any willful or continued act or course of
conduct by Employee which the Board in good faith determines
might reasonably be expected to have a material detrimental
effect on the Company or the business, operations, affairs or
financial position thereof; or
(5) the committing by the Employee of any fraud,
theft, embezzlement or other dishonest act against the Company;
or
(6) the determination by the Board, in good faith
and in the exercise of reasonable discretion, that Employee is
not competent to perform his duties of employment.
(d) Nothing in the Plan, the Certificate or this
Option Agreement shall confer upon the Employee any right to
continue in the employ of the Company or any affiliate (as
defined in the Plan) or shall affect the right of the Company or
any Affiliate to terminate the employment of the Employee, with
or without cause.
6. RESTRICTIONS ON PURCHASED SHARES.
(a) MARKET STAND-OFF.
(1) In connection with any underwritten public
offering by the Company of its equity securities pursuant to an
effective registration statement filed under the Securities Act
of 1933, as amended (the "1933 ACT"), including the Company's
initial public offering, Employee shall not sell, make any short
sale of, loan, hypothecate, pledge, grant any option for the
purchase of, or otherwise dispose or transfer for value or
otherwise agree to engage in any of the foregoing transactions
with respect to any Purchased Shares without the prior written
consent of the Company or its underwriters, for such period of
time from and after the effective date of such registration
statement as may be requested by the Company or such
underwriters; PROVIDED, HOWEVER, that in no event shall such
period exceed 180 days. Employee agrees to execute and
<PAGE 4>
deliver to the Company such further documents or instruments
as the Company reasonably determines to be necessary or
appropriate to effect the provisions of this Section 6(a).
(2) In the event of any stock dividend, stock
split, recapitalization or other transaction resulting in an
adjustment under Section 7 hereof, then any new, substituted or
additional securities or other property which is by reason of
such transaction distributed with respect to or in exchange for
the Purchased Shares shall be immediately subject to the
provisions of this Section 6(a), to the same extent the Purchased
Share are at such time covered by such provisions.
(3) In order to enforce the provisions of Section
6(a), the Company may impose stop-transfer instructions with
respect to the Purchased Shares until the end of the applicable
stand-off period.
(b) SECURITIES LAW RESTRICTIONS. None of the
Purchased Shares shall be Transferred (with or without
consideration) and the Company shall not be required to register
any such Transfer and the Company may instruct its transfer agent
not to register any such Transfer, unless and until all of the
following events shall have occurred:
(1) the Purchased Shares are Transferred pursuant
to and in conformity with (i)(A) an effective registration
statement filed with the Securities and Exchange Commission (the
"COMMISSION") pursuant to the 1933 Act, or (B) an exemption from
registration under the 1933 Act, and (ii) the securities laws of
any state of the United States; and
(2) Employee has, prior to the Transfer of such
Purchased Shares, and if requested by the Company, provided all
relevant information to Company's counsel so that upon Company's
request, Company's counsel is able to, and actually prepares and
delivers to the Company a written opinion that the proposed
Transfer (i)(A) is pursuant to a registration statement which
has been filed with the Commission and is then effective, or (B)
is exempt from registration under the 1933 Act as then in effect,
and the Rules and Regulations of the Commission thereunder, and
(ii) is either qualified or registered under any applicable state
securities laws, or exempt from such qualification or
registration. The Company shall bear all reasonable costs of
preparing such opinion.
(c) NONCOMPLYING TRANSFERS INVALID. Any attempted
Transfer which is not in full compliance with this Section 6
shall be null and void AB INITIO, and of no force or effect.
7. ADJUSTMENTS UPON RECAPITALIZATION.
(a) Subject to the provisions of Section 7(b), if any
change is made in the Common Stock, without receipt of
consideration by the Company (through merger, consolidation,
reorganization, recapitalization, reincorporation, stock
dividend, dividend in property other than
<PAGE 5>
cash, stock split, liquidating dividend, combination of shares,
exchange of shares, change in corporate structure or other
transaction not involving the receipt of consideration by the
Company) the Option will be proportionately adjusted for such
change in the class(es) and number of shares and price per share
of stock subject to the Option. Such adjustments shall be made
by the Board, the determination of which shall be final, binding
and conclusive. The conversion of any convertible securities of
the Company shall not be treated as a "transaction not involving
the receipt of consideration by the Company."
(b) In the event of: (1) a dissolution, liquidation or
sale of substantially all of the assets of the Company; (2) a
merger or consolidation in which the Company is not the surviving
corporation; or (3) a reverse merger in which the Company is the
surviving corporation but the shares of the Common Stock
outstanding immediately preceding the merger are converted by
virtue of the merger into other property, whether in the form of
securities, cash or otherwise, then, at the sole discretion of
the Board and to the extent permitted by applicable law, the
Option shall (i) terminate upon such event and may be exercised
prior thereto to the extent the Option is then exercisable or
(ii) continue in full force and effect and, if applicable, the
surviving corporation or an Affiliate of such surviving
corporation shall assume the Option and/or shall substitute
similar option or award in place of the Option.
(c) To the extent that the foregoing adjustments
relate to stock or securities of the Company, such adjustments
shall be made by the Board, and its determination shall be final,
binding and conclusive.
(d) The provisions of this Section 7 are intended to
be exclusive, and Employee shall have no other rights upon the
occurrence of any of the events described in this Section 7.
(e) The grant of the Option shall not affect in any
way the right or power of the Company to make adjustments,
reclassifications, reorganizations or changes in its capital or
business structure, or to merge, consolidate, dissolve or
liquidate, or to sell or transfer all or any part of its business
or assets.
8. WAIVER OF RIGHTS TO PURCHASE STOCK.
By signing this Option Agreement, Employee acknowledges
and agrees that neither the Company nor any other person or
entity is under any obligation to sell or transfer to Employee
any option or equity security of the Company, other than the
Shares subject to the Option and any other right or option to
purchase Common Stock which was previously granted in writing to
Employee by the Board. By signing this Option Agreement,
Employee specifically waives all rights which he or she may have
had prior to the date of this Option Agreement to receive any
option or equity security of the Company.
<PAGE 6>
9. INVESTMENT INTENT.
Employee represents and agrees that if he or she
exercises the Option in whole or in part, and if at the time of
such exercise the Plan and/or the Purchased Shares have not been
registered under the 1933 Act, he or she will acquire the Shares
upon such exercise for the purpose of investment and not with a
view to the distribution of such Shares, and that upon each
exercise of the Option he or she will furnish to the Company a
written statement to such effect.
10. LEGEND ON STOCK CERTIFICATES.
Employee agrees that all certificates representing the
Purchased Shares will be subject to such stock transfer orders
and other restrictions (if any) as the Company may deem advisable
under the rules, regulations and other requirements of the
Commission, any stock exchange upon which the Common Stock is
then listed and any applicable federal or state securities laws,
and the Company may cause a legend or legends to be put on such
certificates to make appropriate reference to such restrictions.
11. NO RIGHTS AS SHAREHOLDER.
Except as provided in Section 7 of this Option
Agreement, Employee shall have no rights as a shareholder with
respect to the Shares until the date of the issuance to Employee
of a stock certificate or stock certificates evidencing such
Shares. Except as may be provided in Section 7 of this Option
Agreement, 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.
12. MODIFICATION.
Subject to the terms and conditions and within the
limitations of the Plan, the Board (excluding the Employee) may
modify, extend or renew the Option or accept the surrender of,
and authorize the grant of a new option in substitution for, the
Option (to the extent not previously exercised). No modification
of the Option shall be made which, without the consent of
Employee, would cause the Option to fail to continue to qualify
as an "incentive stock option" under Section 422 of the Code or
would alter or impair any rights of the Employee under the
Option.
13. DISQUALIFYING DISPOSITION; WITHHOLDING.
(a) To receive the favorable tax treatment accorded
grants and exercises of incentive stock options, Employee must
hold the Purchased Shares until the later of two years after the
grant of this Option or one year after the issuance of the
Purchased Shares to the Employee (the "HOLDING PERIOD").
Employee understands that should he or she make a disposition of
those shares (as defined in Section 424(c) of the Code) (a
"DISQUALIFYING DISPOSITION") before the end of the Holding
Period, Employee will recognize taxable ordinary income to the
extent of the
<PAGE 7>
difference between the Fair Market Value of the Purchased
Shares upon the exercise and the Exercise Price. Employee
agrees that should he or she make a Disqualifying Disposition
of all or any of the Purchased Shares, he or she shall
immediately advise the Company in writing as to the occurrence
of the sale and the price realized upon the sale of such Purchased
Shares. Employee agrees that he or she shall maintain all
Purchased Shares in his or her name so long as he or
she maintains beneficial ownership of such Shares.
(b) The Company shall be entitled to require as a
condition of delivery of any Purchased Shares upon exercise of
any Option that the Employee agree to remit, at the time of such
delivery or at such later date as the Company may determine, an
amount sufficient to satisfy all federal, state and local
withholding tax requirements relating thereto, and Employee
agrees to take such other action required by the Company to
satisfy such withholding requirements.
(c) With the consent of the Board, and in accordance
with any rules and procedures from time to time adopted by the
Board, Employee may elect to satisfy his or her obligations under
Section 13(b) above by (1) directing the Company to withhold a
portion of the Shares otherwise deliverable (or to tender back to
the Company a portion of the Shares issued where the Employee (a
"SECTION 16(B) RECIPIENT") is required to report the ownership of
the Shares pursuant to Section 16(a) of the Securities Exchange
Act of 1934, as amended, and has not made an election under
Section 83(b) of the Code (a "WITHHOLDING RIGHT")); or (2)
tendering other shares of the Common Stock of the Company which
are already owned by Employee which in all cases have a Fair
Market Value (as determined in accordance with the provisions of
Section 4 hereof) on the date as of which the amount of tax to be
withheld is determined (the "TAX DATE") equal to the amount of
taxes to be paid by such method.
(d) To exercise a Withholding Right, the Employee must
follow the election procedures set forth below, together with
such additional procedures and conditions set forth in this
Option Agreement or otherwise adopted by the Board:
(1) the Employee must deliver to the Company
a written notice of election (the "ELECTION") and specify whether
all or a stated percentage of the applicable taxes will be paid
in accordance with Section 13(c) above and whether the amount so
paid shall be made in accordance with the "flat" withholding
rates for supplemental wages or as determined in accordance with
Employee's form W-4 (or comparable state or local form);
(2) unless disapproved by the Board as
provided in subsection (3) below, the Election once made will be
irrevocable;
(3) no Election is valid unless the Board has
the right and power, in its sole discretion, with or without cause or
reason therefor, to consent to the Election, to refuse to consent
to the Election, or to disapprove the Election; and if the Board
has not consented to the Election on or prior to the Tax Date,
the Election will be deemed approved; and
<PAGE 8>
(4) if the Employee on the date of delivery
of the Election to the Company is a Section 16(b) Recipient, the
following additional provisions will apply:
(i) the Election cannot be made during
the six calendar month period commencing with the date of grant of
the Withholding Right (even if the Option to which such
Withholding Right relates has been granted prior to such date);
and
(ii) the Election (and the exercise of
the related Option) must be made either during the period beginning
on the third business day following the date of release for
publication of the quarterly or annual summary statements of
sales and earnings of the Company and ending on the 12th business
day following such date or at least six calendar months or more
prior to the Tax Date.
14. CHARACTER OF OPTION.
The Option is intended to qualify as an "incentive
stock option" as that term is defined in Section 422 of the Code.
15. GENERAL PROVISIONS.
(a) FURTHER ASSURANCES. Employee shall promptly take
all actions and execute all documents requested by the Company
which the Company deems to be reasonably necessary to effectuate
the terms and intent of this Option Agreement.
(b) NOTICES. All notices, requests, demands and other
communications under this Option Agreement shall be in writing
and shall be given to the parties hereto as follows:
(1) If to the Company, to:
Networks Electronic Corp.
9750 De Soto Avenue
Chatsworth, CA 91311
(2) If to Employee, to the address set
forth in the records of the Company,
or at such other address or addresses as may have been furnished
by such either party in writing to the other party hereto. Any
such notice, request, demand or other communication shall be
effective (i) if given by mail, 72 hours after such communication
is deposited in the mail by first-class certified mail, return
receipt requested, postage prepaid, addressed as aforesaid,
or (ii) if given by any other means, when delivered at the
address specified in this subsection (b).
<PAGE 8>
(c) TRANSFER OF RIGHTS UNDER THIS OPTION AGREEMENT.
The Company may at any time transfer and assign its rights and
delegate its obligations under this Option Agreement to any other
person, corporation, firm or entity, including its officers,
directors and stockholders, with or without consideration.
(d) OPTION NON-TRANSFERABLE. Employee may not sell,
transfer, assign or otherwise dispose of the Option except by
will or the laws of descent and distribution, and the Option may
be exercised during the lifetime of Employee only by Employee or
by his or her guardian or legal representative in the case of a
disability, and upon the Employee's death only by his or her
Estate or by any person who acquired the Option by bequest or
inheritance or by reason of the death of the Employee.
(e) SUCCESSORS AND ASSIGNS. Except to the extent
specifically limited by the terms and provisions of this Option
Agreement, this Option Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective
successors, assigns, heirs and personal representatives.
(f) GOVERNING LAW. THIS OPTION AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF CALIFORNIA APPLICABLE TO CONTRACTS MADE IN, AND TO BE
PERFORMED WITHIN, THAT STATE, EXCEPT TO THE EXTENT PREEMPTED BY
FEDERAL LAW, WHICH SHALL TO THAT EXTENT GOVERN.
(g) INCORPORATION OF PLAN BY REFERENCE. This Option
is granted pursuant to the terms of the Plan, the terms of which
are incorporated herein by reference, and it is intended that
this Option Agreement shall be interpreted in a manner to comply
therewith. Capitalized terms used in the Certificate or this
Option Agreement shall have the meaning set forth in the Plan.
Any provision of this Option Agreement inconsistent with the Plan
shall be superseded and governed by the Plan.
(h) A COMMITTEE. As provided in the Plan, the Board
may delegate administration of the Plan and this Option Agreement
to a committee (the "COMMITTEE"). If administration is delegated
to a Committee, the Committee shall have, in connection with
this Option Agreement, the powers theretofore possessed by the
Board (and references in this Option Agreement to the Board shall
thereafter be to the Committee).
(i) MISCELLANEOUS. Titles and captions contained in
this Option Agreement are inserted for convenience of reference
only and do not constitute a part of this Option Agreement for
any other purpose. Except as specifically provided herein,
neither this Option Agreement nor any right pursuant hereto or
interest herein shall be assignable by any of the parties hereto
without the prior written consent of the other party hereto.
<PAGE 10>
THE SIGNATURE PAGE TO THIS OPTION AGREEMENT CONSISTS OF
THE LAST PAGE OF THE CERTIFICATE.
<PAGE 11>
Exhibit "A"
NOTICE OF EXERCISE
(To be signed only upon exercise of the Option)
To: Networks Electronic Corp.
The undersigned, the holder of the enclosed Stock Option
Agreement (Incentive Stock Option), hereby irrevocably elects to
exercise the purchase rights represented by the Option and to
purchase thereunder ______* shares of Common Stock of Networks
Electronic Corp. (the "COMPANY"), and herewith encloses payment
of $__________ and/or _________ shares of the Company's Common
Stock in full payment of the purchase price of such shares being
purchased.
Dated:
------------------------------
(Signature must conform in all
respects to name of holder as
specified on the face of the
Option)
------------------------------
(Please Print Name)
------------------------------
(Address)
* Insert here the number of Shares called for on the face of
the Option (or, in the case of a partial exercise, the number of
Shares being exercised), in either case without making any
adjustment for additional Common Stock of the Company, other
securities or property which, pursuant to the adjustment
provisions of the Option, may be deliverable upon exercise.
<PAGE>
[LETTERHEAD OF TROOP MEISINGER STEUBER & PASICH, LLP]
April 21, 1998
Networks Electronic Corp.
9750 De Soto Avenue
Chatsworth, CA 91311
Ladies/Gentlemen:
At your request, we have examined the Registration Statement on Form S-8
(the "Registration Statement") to which this letter is attached as Exhibit 5.1
filed by Networks Electronic Corp., a California corporation (the "Company"),
in order to register under the Securities Act of 1933, as amended (the "Act"),
100,000 shares of Common Stock (the "Shares"), of the Company issuable pursuant
to the Company's 1996 Stock Incentive Plan (the "Plan").
We are of the opinion that the Shares have been duly authorized and upon
issuance and sale in conformity with and pursuant to the Plan, the Shares will
be validly issued, fully paid and non-assessable.
We consent to the use of this opinion as an Exhibit to the Registration
Statement and to the use of our name in the Prospectus constituting a part
thereof.
Respectfully submitted,
/S/ Troop Meisinger Steuber & Pasich, LLP
TROOP MEISINGER STEUBER & PASICH, LLP
