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EXHIBIT 99.1
PECO II, INC.
2000 EMPLOYEE STOCK PURCHASE PLAN
1. PURPOSE OF THE PLAN. The Plan is intended as an incentive to
encourage stock ownership by all Eligible Employees of the Company and
Participating Subsidiaries so that they may share in the fortunes of the Company
by acquiring or increasing their proprietary interest in the Company. The Plan
is designed to encourage Eligible Employees to remain in the employ of the
Company. It is intended that options granted pursuant to this Plan shall
constitute options issued pursuant to an "employee stock purchase plan" within
the meaning of Section 423 of the Code.
2. DEFINITIONS. In addition to such other capitalized terms as are
defined elsewhere in this Plan, the following terms shall when used in this Plan
have the respective meanings set forth below:
(a) "Business Day" means a day on which there is trading in the
Common Shares on the Principal Market.
(b) "Closing Price" means the closing price for one Common Share on
the Principal Market.
(c) "Compensation" means an employee's annual base salary, or if not
salaried, annualized amount of hourly pay (including any shift or other
compensatory premium which the employee will regularly receive) based on
the employee's regular weekly or biweekly hours, for services rendered to
the Company and Participating Subsidiaries, including overtime,
commissions, bonuses, paid vacation and holidays and before adjustment for
salary reduction contributions to the Company's 401(k) plan, health care or
dependent care spending accounts and similar pre-tax plans.
(d) "Code" means the Internal Revenue Code of 1986, as amended from
time to time.
(e) "Committee" means the Compensation Committee of the Board of
Directors.
(f) "Common Shares" means the Common Shares without par value of the
Company.
(g) "Company" means PECO II, Inc., an Ohio corporation.
(h) "Effective Date" means the effective date of the Company's first
registration statement to become effective in accordance with the
provisions of the Securities Act of 1933, as amended, and the rules and
regulations of the Securities and Exchange Commission thereunder.
(i) "Eligible Employees" shall have the meaning set forth in Section
3.
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(j) "Option Price" means, in respect of each Payment Period, the
dollar amount (carried out to one one-thousandth of a cent ($0.00001))
equal to 85% of the lesser of (i) the Closing Price of the Common Shares on
the first Business Day of the Payment Period and (ii) the Closing Price of
the Common Shares on the last Business Day of the Payment Period.
Notwithstanding the preceding sentence, in the case of the initial Payment
Period, "Option Price" means the dollar amount (carried out to one-
thousandth of a cent ($0.00001) equal to 85% of the lesser of (i) the
initial public offering price at which the shares were offered to the
public, as specified in the Company's registration statement and (ii) the
Closing Price of the Common Shares on the last Business Day of the initial
Payment Period.
(k) "Participating Subsidiaries" means any majority-owned subsidiary
of the Company which is designated by the Committee to participate in the
Plan. The Committee shall have the power to make such designation before or
after the Plan is approved by the Company's shareholders.
(l) "Payment Period" means the initial Payment Period as set forth in
Section 5 and the six-month periods thereafter during which payroll
deductions will be accumulated under the Plan.
(m) "Plan" means this PECO II, Inc. 2000 Employee Stock Purchase
Plan.
(n) "Principal Market" means the Nasdaq Stock Market's National
Market or stock exchange which is then the principal trading market for the
Common Shares (if the Common Shares are traded on more than one market,
that market which the Committee determines to be the principal trading
market).
(o) "Securities Law Requirements" means the Securities Act of 1933,
the Securities and Exchange Act of 1934 and the rules and regulations
promulgated by the Securities and Exchange Commission thereunder, including
but not limited to Rule 16b-3, as adopted and amended from time to time and
as interpreted by formal or informal opinions of and releases published or
other interpretative advice provided by the Staff of the Securities and
Exchange Commission, and the requirements of any stock exchange, automated
interdealer quotation system or other recognized securities market on which
the Common Shares are listed or traded or in which the Common Shares are
included, as adopted and amended from time to time and as interpreted by
formal or informal opinions of, and other interpretative advice provided
by, the representatives of such stock exchange, quotation system or other
securities market.
3. ELIGIBLE EMPLOYEES. Each employee of the Company or any of its
Participating Subsidiaries, regularly working at least 20 hours per week whose
customary employment is at least five months per calendar year shall be eligible
to receive options under this Plan to purchase Common Shares. Persons who are so
employed on the first day of a Payment Period shall receive their options as of
such day. Except as otherwise provided in Section 14, all other eligibility
requirements must be satisfied at all times throughout the Payment Period until
and including the third Friday of the last month of such Payment Period or, in
the case of the requirement that a participant be employed by the Company or a
Participating
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Subsidiary, up until and including the last Business Day of such Payment Period
(provided that, after the third Friday of the last month of the Payment Period,
satisfaction of said employment conditions shall be determined without regard to
the minimum hour requirement of the first sentence of this Section 3, which
minimum hour requirement shall apply for that Payment Period only through said
third Friday). All participating employees satisfying the eligibility
requirements of the Plan as of said third Friday or last Business Day of the
Payment Period as provided in the preceding sentence shall be entitled to
purchase shares on the last Business Day of such Payment Period as provided in
this Plan. Any employee eligible to and duly participating in the Plan as of the
beginning of a Payment Period but who at any time during that Payment Period
loses his or her status as an Eligible Employee will be deemed to have lost such
status, and to have withdrawn from participation in the Plan as described in
Section 10, effective as of the beginning of the regular payroll period during
which he or she ceases to satisfy any such requirement; provided, however, that
if such ineligibility is the result of the termination of his or her employment,
the provisions of Section 15 shall, subject to the provisions of Section 14,
control over the foregoing provisions of this sentence.
In no event may an employee be granted an option if such employee,
immediately after the option is granted, owns shares representing 5% or more of
the total combined voting power or value of all classes of stock of the Company.
For purposes of determining stock ownership under this paragraph, the rules of
Section 424(d) of the Code shall apply, and shares which the employee may
purchase under outstanding options shall be treated as shares owned by the
employee.
4. SHARES SUBJECT TO THE PLAN. The total number of Common Shares for
which options may be granted under the Plan is 1,000,000 shares, which may
consist, in whole or in part, of unissued shares or treasury shares.
5. PAYMENT PERIODS AND GRANT OF OPTIONS. The six-month periods June 1 to
November 30 and December 1 to May 31, are the Payment Periods during which
payroll deductions will be accumulated under the Plan. Notwithstanding the
preceding sentence, the initial Payment Period shall be the period commencing on
the Effective Date and ending on May 31, 2001.
Two times each year, on the first Business Day of each Payment Period, each
Eligible Employee who is then a participant in the Plan will automatically be
granted by the Company an option to purchase, on the last Business Day of such
Payment Period, at the applicable Option Price, such number of whole shares of
the Common Shares reserved under this Plan as such employee is entitled to
purchase under this Plan with the payroll deductions authorized and credited to
his or her account during each Payment Period in accordance with the terms
hereof, up to that number of shares which does not exceed 15% of the employee's
Compensation during the Payment Period divided by the Option Price, provided
that such employee remains eligible to participate in the Plan as provided
herein. The participant shall be entitled to exercise such options as granted
only to the extent of his or her unused payroll deductions accumulated as of the
third Friday of the last month of a Payment Period. Deductions after the third
Friday of the last month of a Payment Period shall be included in the subsequent
Payment Period.
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No employee shall be granted an option which permits his or her rights to
purchase Common Shares under the Plan and any similar plans of the Company or
any parent or subsidiary corporations to accrue at a rate which exceeds $25,000
of fair market value of such shares (determined at the time such option is
granted) for each calendar year in which such option is outstanding at any time.
The purpose of the limitation in the preceding sentence is to comply with
Section 423(b)(8) of the Code.
6. EXERCISE OF OPTIONS. Each Eligible Employee who continues to qualify
as such as of the last Business Day of a Payment Period, or would have been a
continuing participant in the Plan as of such date had he or she not withdrawn,
or been deemed to have withdrawn, from participation pursuant to Section 10,
shall be deemed by his or her payroll deduction contributions to the Plan during
such Payment Period to have irrevocably stated his or her intention to exercise
his or her option on the last Business Day of such Payment Period and shall be
deemed to have purchased from the Company such number of whole shares of the
Common Shares reserved for the purposes of the Plan as his or her unused payroll
deductions accumulated as of the third Friday of the last month of such Payment
Period will pay for at the Option Price. If a participant is not an employee of
the Company or any Participating Subsidiary on the last Business Day of a
Payment Period, he or she shall not be entitled to exercise his or her option.
7. AUTHORIZATION FOR ENTERING PLAN. An employee may enter the Plan by
filling out, signing and delivering to the Company's Human Resources Department
a written "Authorization", in form and manner satisfactory to the Company:
(a) stating the whole percentage of Compensation to be deducted
regularly from his or her pay; and
(b) authorizing the purchase of shares for him or her in each
Payment Period in accordance with the terms of the Plan.
Such Authorization must be received by the Company's Human Resources
Department no later than the third Friday of the last month of a Payment Period
in order to be effective for the following Payment Period. For purposes of the
initial Payment Period, such Authorization must be received by the Company's
Human Resources Department by September 25, 2000, and the Company shall not make
payroll deductions pursuant to such Authorization until the first pay period in
October 2000.
The Company will accumulate as a credit for the employee's account the
authorized deductions made from his or her pay. Except as otherwise described
in Section 27, no interest will be paid on such accumulated amounts.
8. AMOUNT OF PAYROLL DEDUCTIONS. An employee may authorize payroll
deductions in a whole percentage amount not less than 1% but not more than 15%
of his or her Compensation received during the Payment Period. Notwithstanding
the preceding sentence, an employee's payroll deduction may not exceed $5,000
per Payment Period, with the exception of the initial Payment Period, for which
an employee's payroll deduction may not exceed $6,660. Compensation is
considered received on the date a payroll check for, or direct
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deposit of, the net amount thereof due employee is issued or made by the Company
(provided, however, that any commission or other advances are not considered
Compensation received until the date such advanced amount has been actually
earned and would have regularly been paid had such amount not been advanced),
and deductions therefrom authorized for purchases of Common Shares under this
Plan are considered made at the time of the issuance or making of the related
check or deposit and not as of the date as of which the associated Compensation
was earned or accrued.
9. CHANGE IN PAYROLL DEDUCTIONS. An employee may increase or decrease
(including to zero) his or her rate of payroll deduction effective only as of
the beginning of a Payment Period and, except as otherwise provided in Section
10, not as of any other time. A new written Authorization will be required to
effect any such change and must be received by the Company's Human Resources
Department no later than the third Friday of the last month of a Payment Period
in order to be effective for the following Payment Period.
10. WITHDRAWAL FROM PARTICIPATION. An employee may withdraw from
participation in the Plan, in whole but not in part, at any time prior to the
last pay period of the Payment Period by delivering to the Company's Human
Resources Department a written "Withdrawal", in form and manner satisfactory to
the Company, indicating such employee's intent to withdraw. Deductions will be
stopped as soon as practicable, and deductions accumulated during such Payment
Period prior to the discontinuation of deductions will be applied to the
purchase of shares as of the end of the Payment Period. Once made, a Withdrawal
is irrevocable for the balance of that Payment Period, and no further
contributions can be made during that Payment Period.
An employee who withdraws or is deemed to have withdrawn from the Plan as
provided in this Section 10 will be treated (other than with respect to the
purchase of shares with his or her accumulated pre-withdrawal deductions) as an
employee who has never entered the Plan. To resume participation in the Plan in
any future Payment Period (which resumed participation will be effective only as
of the beginning of such Payment Period), he or she must file a new
Authorization by the third Friday of the last month of the preceding Payment
Period.
11. ESTABLISHMENT OF BROKERAGE ACCOUNT. By enrolling in the Plan, each
participating employee will be deemed to have authorized the establishment of a
brokerage account in his or her name at such securities brokerage firm as may be
designated from time to time by the Committee and to have consented to the
sharing by such brokerage firm with the Company of information regarding the
disposition of shares from said brokerage account.
12. ISSUANCE OF SHARES. Shares purchased under the Plan will be issued,
or in the event the Committee establishes brokerage accounts pursuant to Section
11, held in an account, in the name of the employee, or if his or her
Authorization so designates, in the name of the employee and another person of
legal age as joint tenants with rights of survivorship, unless prohibited by
state or local law. Shares will be issued to or for the account of a
participating employee or his or her designee as of the end of each Payment
Period in an amount equal to the number of shares calculated by dividing his or
her unused payroll deductions accumulated as of the third Friday of the last
month of such Payment Period by the Option Price, rounded down to the nearest
whole share. No fractional shares will be issued or accrued, but the excess of
an
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employee's accumulated payroll deductions over the aggregate Option Price for
the whole number of shares that can be purchased with such accumulated
deductions with respect to such Payment Period will be carried forward for the
employee's account under the Plan until applied to the purchase of shares in
future Payment Periods or refunded pursuant to the provisions of the Plan. The
Committee may establish a procedure for the refund of such carried-forward
balance to requesting employees who do not continue participation in the Plan
during the Payment Period (or number of Payment Periods specified by the
Committee) subsequent to the Payment Period with respect to which such excess
arises.
13. NO TRANSFER OR ASSIGNMENT OF EMPLOYEE'S RIGHTS. An employee's rights
under the Plan are his or hers alone and may not be transferred or assigned. Any
option granted to an employee may be exercised only by him or her.
14. SUSPENSION OF PARTICIPATION. An employee's leave of absence (absence
from active employment not involving authorized vacation, death, retirement,
resignation, discharge, reduction-in-force or layoff, such as due to disability,
illness, compensable or non-compensable injury, personal emergency or other
approved personal leave) shall not have any effect on his or her eligibility to
participate in the Plan, and if such employee was participating in the Plan at
the time such leave commenced, his or her deductions shall be automatically
suspended for the duration of such leave (which suspension shall not constitute
a withdrawal from the Plan subject to Section 10) and, upon such employee's
resumption of an eligible level of active employment, shall automatically resume
at the pre-suspension amount authorized by the employee unless the employee has
properly submitted a revised Authorization in the interim; provided that if the
employee receives Compensation, or payments in lieu thereof, from the Company
during any such leave of absence (such as, for example, short-term disability
benefits), the deduction rate authorized by the employee prior to such leave (or
if the employee has properly submitted a revised Authorization, at the level
specified therein) shall be applied to all such amounts so paid during such
leave of absence.
15. TERMINATION OF EMPLOYEE'S RIGHTS. Except as otherwise provided in
Section 14, an employee's rights under the Plan will terminate when he or she is
no longer employed by the Company or any Participating Subsidiary, whether
because of retirement, resignation, discharge, death, or for any other reason.
All accumulated payroll deductions not used to purchase shares as of the date of
such cessation of employment will be refunded to the former employee or, in the
event of an employee's death, to his or her estate as an adjustment to such
former employee's final paycheck.
16. TERMINATION OF AND AMENDMENTS TO THE PLAN. The Plan may be
terminated at any time by the Committee. It will terminate in any case when all
or substantially all of the shares reserved for the purposes of the Plan have
been purchased. If at any time shares of stock reserved for the purpose of the
Plan remain available for purchase but not in sufficient number to satisfy all
then unfilled purchase requirements, the available shares shall be apportioned
among participants in proportion to their options, and the Plan shall terminate.
Upon such termination or any other termination of the Plan, all payroll
deductions not used to purchase shares will be refunded.
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The Committee also has authority to amend the Plan from time to time in any
respect; provided, however, that no amendment shall be effective without prior
approval of the shareholders of the Company, which would (a) except as provided
in Section 23, increase the number of shares of Common Shares to be offered
above, or (b) change the class of employees eligible to receive options under
the Plan.
17. LIMITS ON SALE OF SHARES PURCHASED UNDER THE PLAN. The Plan is
intended to provide Common Shares for investment and not for resale. The Company
does not, however, intend to restrict or influence any employee in the conduct
of his or her own affairs. An employee may, therefore, sell or otherwise dispose
of shares purchased under the Plan at any time he or she chooses; provided,
however, so that the Company is able to properly account for the consequences
that a disposition of shares purchased under the Plan under the United States
income tax laws, each employee agrees by his or her participation in the Plan to
(a) notify the Company in writing of any withdrawal of shares from the brokerage
account established pursuant to Section 11, and any related sale or other
disposition of the withdrawn shares within ten days thereof, (b) provide such
further information, and otherwise cooperate with the Company in taking such
further steps (which may include the legending of the withdrawn shares), as the
Company may reasonably request to enable it to properly account for such tax
consequences of the transaction described in the notification and any subsequent
sale or other disposition of the withdrawn shares, and (c) if the withdrawal
does not involve a sale or other disposition which is reported on that initial
notification, provide the Company with written notice of any subsequent sale or
other disposition of the withdrawn shares within ten days after the making
thereof. An employee shall be obligated to provide such notices and cooperation
under the preceding sentence where such withdrawal, sale or other disposition
occurs within (i) two years after the date of grant of the applicable option, or
(ii) one year after the transfer of such shares to such employee. The Company
may waive such written notification requirement to the extent that it is able to
obtain the necessary information from the brokerage firm designated and serving
pursuant to Section 11. The employee assumes the risk of all market fluctuations
in the price of all shares acquired hereunder.
18. PLAN EXPENSES. The Company will bear all costs of administering and
carrying out the Plan.
19. ADMINISTRATION OF THE PLAN. The Plan shall be administered by the
Committee. Acts by a majority of the Committee, or acts reduced to or approved
in writing by a majority of the members of the Committee, shall be the valid
acts of the Committee.
The interpretation and construction of the Plan are entrusted to the
discretion of the Committee, and its interpretation and construction of any
provisions of the Plan or of any option granted under it shall be final. The
Committee may from time to time adopt such rules and regulations for carrying
out the Plan as it may deem necessary or appropriate. No member of the Board of
Directors or the Committee shall be liable for any action or determination made
in good faith with respect to the Plan or any option granted under it.
20. NO EMPLOYMENT RIGHTS. The existence of this Plan shall not create in
any employee any right to be granted an option or to purchase Common Shares
hereunder. Neither the existence of this Plan nor the granting of any option
hereunder to any employee shall
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confer upon such employee any right to the continuation of his or her employment
with the Company or any subsidiary thereof or shall in any way interfere with or
otherwise limit the right which such employee, the Company or any subsidiary may
otherwise have to terminate such employment at any time with or without cause.
Any benefits realized by an employee under this Plan or any option granted
hereunder shall not be deemed a part of such employee's regular, recurring
compensation for purposes of the termination, indemnity or severance pay laws of
any jurisdiction and shall not be included in, or have any effect on, the
determination of benefits under any such law or, except as otherwise expressly
provided thereby or determined in the discretion of the person or group
authorized to administer the same, any other employee benefit plan or similar
arrangement in which an employee may otherwise be eligible to participate.
21. OPTIONEES NOT SHAREHOLDERS. Neither the granting of an option to an
employee nor the deductions from his or her pay shall cause such employee to be
the owner of the shares covered by an option until such shares have been
purchased by him or her.
22. APPLICATION OF FUNDS. The proceeds received by the Company from the
sale of Common Shares pursuant to options granted under the Plan may be used by
the Company for any corporate purpose. The Company shall have no obligation to
segregate employees' payroll deductions from any other funds of the Company or
to hold funds representing the same pending the application thereof in
accordance with this Plan.
23. CHANGES IN CAPITAL. If the Common Shares subject to the Plan shall
at any time be changed or exchanged by declaration of a stock dividend, stock
split, combination of shares, recapitalization, merger, consolidation or other
corporate reorganization in which the Company is the surviving corporation, the
number and kind of shares subject to this Plan and the Option Price shall be
appropriately and equitably adjusted. In the event of a dissolution or
liquidation of the Company or a merger, consolidation, sale of all or
substantially all of its assets, or other corporate reorganization in which the
Company is not the surviving corporation, or any merger in which the Company is
the surviving corporation but the holders of its Common Shares receive
securities of another corporation, the then current Payment Period shall be
deemed to end as of the Business Day prior to the effective date of such
transaction such that all then accumulated payroll deductions shall be applied
to the purchase of Common Shares in accordance with the provisions hereof. Other
than giving effect to the provisions of this Section 23, the existence of the
Plan or options hereunder shall not in any way prevent any transaction described
herein, and no holder of an option shall have the right to prevent such
transaction.
24. CONDITIONS UPON ISSUANCE OF SHARES. Shares shall not be issued with
respect to an Option unless the exercise of such Option and the issuance and
delivery of Shares pursuant thereto shall comply with all applicable Securities
Law Requirements and all other applicable provisions of law, including, without
limitation, any applicable state "blue sky" laws and foreign (national and
local) securities laws and the rules and regulations promulgated under such
laws, and shall be further subject to the approval of counsel for the Company
with respect to such compliance.
As a condition to the exercise of an Option or the issuance of Shares upon
exercise of an Option, the Company may require the person exercising such Option
to make such
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representations and warranties to the Company as may be required, in the opinion
of counsel for the Company, by any of the aforementioned Securities Law
Requirements and other laws, which may include, without limitation,
representations and warranties that the Shares are being purchased for
investment only and without any present intention to sell or distribute such
Shares.
The Company shall not have any liability to any Plan participant in respect
of any delay in the sale or issuance of Shares hereunder until the Company is
able to obtain governmental authority (domestic or foreign) or the authority of
a self-regulatory organization having jurisdiction over it, which authority is
deemed by the Company's counsel to be necessary to the lawful sale and issuance
of such Shares, or any failure to sell or issue such Shares as to which such
requisite authority the Company is unable to obtain.
25. GOVERNING LAW. To the extent the laws of the United States (such as
the Code) do not otherwise control, this Plan and all determinations made and
actions taken pursuant hereto shall be governed by the laws of the State of
Ohio, without regard to principles of conflicts of laws, and construed
accordingly.
26. CAPTIONS. The captions contained in this Plan are for convenience of
reference only and shall not affect the meaning of any term or provision hereof.
27. APPROVAL OF SHAREHOLDERS; IMPLEMENTATION OF PLAN. This Plan was
adopted by the Company's Board of Directors subject to, and to become effective
only upon approval hereof by the Company's shareholders. It is anticipated that
such approval will be obtained at the Company's next Annual Meeting of such
shareholders to be held by May 31, 2001. In the event such approval is not
obtained, then all monies contributed to the Plan by Eligible Employees during
the initial Payment Period shall be returned to each such Eligible Employee
together with interest at the prime rate as published in the Wall Street Journal
on May 31, 2001 for the period such monies were held by the Company. The Plan
shall begin operation using an initial transitional Payment Period ending May
31, 2001, for the purposes of which initial Payment Period the prices set forth
in the second sentence of Section 2(j) shall be used for determining the Option
Price. Except as specifically provided otherwise in this Section 27, the Plan
shall, during and with respect to said initial Payment Period, be governed by
and administered in accordance with the provisions of the foregoing Sections 1
through 26 of this Plan. With respect to all Payment periods beginning on or
after June 1, 2001, the Payment Periods, related determinations of the Option
Price and employee eligibility and accumulation of payroll deductions, and all
other matters arising under the Plan shall be governed by and administered in
accordance with the provisions of this Plan without regard to the transitional
rules set forth for the initial implementation of the Plan as set forth in this
Section 27.
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