-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, L/9ti1py3daACwEwzQdX1pWcqQ4b/bh9VVBHlE+SfKmiQ1ZDEcFK/UM1ISOfYG8O K2CCcmnUsBCxe9qtYu+6bA== 0000027116-96-000007.txt : 19961121 0000027116-96-000007.hdr.sgml : 19961121 ACCESSION NUMBER: 0000027116-96-000007 CONFORMED SUBMISSION TYPE: S-8 PUBLIC DOCUMENT COUNT: 9 FILED AS OF DATE: 19961119 EFFECTIVENESS DATE: 19961119 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: DATRON SYSTEMS INC/DE CENTRAL INDEX KEY: 0000027116 STANDARD INDUSTRIAL CLASSIFICATION: RADIO & TV BROADCASTING & COMMUNICATIONS EQUIPMENT [3663] IRS NUMBER: 952582922 STATE OF INCORPORATION: DE FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: S-8 SEC ACT: 1933 Act SEC FILE NUMBER: 333-16367 FILM NUMBER: 96669007 BUSINESS ADDRESS: STREET 1: 304 ENTERPRISE ST CITY: ESCONDIDO STATE: CA ZIP: 92029 BUSINESS PHONE: 6197473734 S-8 1 As filed with the Securities and Exchange Commission on November 19, 1996 Registration No. ________ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM S-8 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 DATRON SYSTEMS INCORPORATED ------------------------------------------------------ (Exact name of registrant as specified in its charter) Delaware 95-2582922 - ------------------------------ --------------- (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification No.) 304 Enterprise Street, Escondido, California 92029 -------------------------------------------------- (Address of principal executive offices) 1995 STOCK OPTION PLAN ---------------------- (Full title of the plan) David A. Derby Datron Systems Incorporated 304 Enterprise Street Escondido, California 92029 --------------------------- (Name and address of agent for service) (619) 747-3734 ------------- (Telephone number, including area code, of agent for service) Copy to: Timothy G. Hoxie, Esq. Heller, Ehrman, White & McAuliffe 333 Bush Street San Francisco, California 94104-2878 (415) 772-6000 CALCULATION OF REGISTRATION FEE =================================================================== Proposed Proposed Title of maximum maximum securities Amount offering aggregate Amount of to be to be price per offering registration registered registered share (1) price fee Common Stock ($.01 par value) 500,000 $10.0625 $5,031,250 $1,524.62 ===================================================================== (1) Estimated (solely for the purpose of calculating the registration fee) on the basis of the average high and low prices of the registrant's Common Stock on November 13, 1996 as reported by the Nasdaq Stock Market. 2 PART II INFORMATION REQUIRED IN THE REGISTRATION STATEMENT Item 3. Incorporation of Documents by Reference The following documents filed or to be filed with the Commission by the Registrant are incorporated by reference in this registration statement: (a) The Registrant's latest annual report (Form 10-K) filed pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or the latest prospectus filed pursuant to Rule 424(b) under the Securities Act of 1933, as amended (the "Securities Act"), that contains audited financial statements for the Registrant's latest fiscal year for which such statements have been filed; (b) All other reports filed by the Registrant pursuant to Section 13(a) or 15(d) of the Exchange Act since the end of the fiscal year covered by the annual report or prospectus referred to in (a) above; (c) The description of the Common Stock of the Registrant contained in the registration statement filed under the Exchange Act registering such Common Stock under Section 12 of the Exchange Act. All documents subsequently filed by the Registrant pursuant to Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act, prior to the filing of a post-effective amendment which indicates that all securities offered hereby have been sold or which deregisters all securities then remaining unsold, shall be deemed to be incorporated by reference in this registration statement and to be part thereof from the date of filing of such documents. Item 4. Description of Securities Not Applicable. Item 5. Interests of Named Experts and Counsel Victor A. Hebert is a shareholder of a professional corporation that is a partner of Heller, Ehrman, White & McAuliffe and holds options to purchase 10,000 shares of Common Stock of the Registrant. Item 6. Indemnification of Directors and Officers The Registrant has the power to indemnify its officers and directors against liability for certain acts pursuant to Section 42 of the Registrant's By-laws: "(a) Right of Indemnity. The corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding whether civil, criminal, administrative or 3 investigative, whether or not the action is by or in the right of the corporation, by reason of the fact that the person is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against expenses, judgments, fines and amounts paid in settlement actually and reasonably incurred by the person in connection with such action, suit or proceeding to the maximum extent permitted by Section 145 of the Delaware General Corporation Law, as amended from time to time. For purposes of these subparagraphs, "the corporation", "other enterprise", "fines", and "serving at the request of the corporation" shall have the meaning specified in Section 145. (b) Approval of Indemnity. Upon written request to the Board of Directors by any person seeking indemnification under Section 145(a) or (b), the Board of Directors shall approve indemnification upon a determination that indemnification of the person is proper in the circumstances because the person has met the applicable standard of conduct set forth in Section 145(a) or (b). Such determination shall be made (1) by the Board of Directors by a majority vote of a quorum consisting of directors who were not parties to such action, suit or proceeding, of (2) if such a quorum is not obtainable, or, even if obtainable a quorum of disinterested directors so directs, by independent legal counsel in a written opinion, or (3) if there are no disinterested directors, by the stockholders. (c) Advancement of Expenses. Expenses incurred by any person entitled to indemnification under this Bylaw in defending a civil or criminal action, suit or proceeding shall be paid by the corporation in advance of the final disposition of such action, suit or proceeding, provided that, if Section 145 so requires, the payment of such expenses incurred by an officer or director in his or her capacity as such (and not in any other capacity in which a director or officer, including without limitation service with respect to an employee benefit plan) in advance of an action, suit or proceeding shall only be made upon receipt of an undertaking by or on behalf of such director or officer to repay such amount if it shall ultimately be determined that such director or officer is not entitled to be indemnified by the corporation as authorized in Section 145. (d) Non-exclusivity of Rights. The right to indemnification and payment of expenses incurred in defending a proceeding in advance of its final disposition conferred in this Bylaw shall not be exclusive of any other right which any person may have or hereafter acquire under any statute, provision of the Certificate of Incorporation, Bylaw, agreement, vote of stockholders or disinterested directors or otherwise. Such rights shall continue as to a person who has ceased to be an officer, director, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such a person. (e) Contract Right. The right to indemnification confirmed by this Bylaw shall be a contract right. (f) Proceedings by Indemnitee. A person otherwise entitled to indemnification in connection with any action, suit or proceeding (or part thereof) initiated by such person shall only be indemnified for, or have his or her expenses advanced in connection therewith, if such proceedings (or part thereof) are authorized by the Board of Directors." 4 In addition, the Registrant has entered into Indemnification Agreements with each of its directors and officers as authorized by the Registrant's stockholders at the annual meeting held August 11, 1992. Such agreements are intended to require the Registrant to indemnify such directors and officers to the fullest extent permitted by Delaware law. The Registrant has directors and officers liability insurance which would indemnify the directors and officers of the Registrant against damages arising out of certain kinds of claims which might be made against them based on actions taken or omissions made in their capacity as directors or officers of the Registrant. Item 8. Exhibits 4.1 1995 Stock Option Plan 4.2 Form of Stock Purchase Agreement 4.3 Form of Incentive Stock Option Agreement 4.4 Form of Nonqualified Stock Option Agreement 5 Opinion of Heller, Ehrman, White & McAuliffe 23.1 Consent of Heller, Ehrman, White & McAuliffe (filed as part of Exhibit 5) 23.2 Consent of Deloitte & Touche LLP 24 Power of Attorney (see page 8) Item 9. Undertakings A. The undersigned Registrant hereby undertakes: (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement; (i) To include any prospectus required by Section 10(a)(3) of the Securities Act; (ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high and of the estimated maximum offering range may be reflected in the form of prospectus filed with the 5 Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than 20 percent change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement. (iii) 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; provided, however, that paragraphs a(1)(i) and a(1)(ii) do not apply if the information required to be included in a post-effective amendment by those paragraphs is contained in periodic reports filed by the Registrant pursuant to Section 13 or 15(d) of the Exchange Act that are incorporated by reference in the registration statement. (2) That, for the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (3) To remove from registration by means of a post- effective amendment any of the securities being registered which remain unsold at the termination of the offering. B. The undersigned Registrant hereby undertakes that, for purposes of determining any liability under the Securities Act, each filing of the Registrant's annual report pursuant to Section 13(a) or 15(d) of the Exchange Act that is incorporated by reference in 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. The undersigned Registrant hereby undertakes to deliver or cause to be delivered with the prospectus, to each person to whom the prospectus is sent or given, the latest annual report, to security holders that is incorporated by reference in the prospectus and furnished pursuant to and meeting the requirements of Rule 14a-3 or Rule 14c-3 under the Securities Exchange Act of 1934; and, where interim financial information required to be presented by Article 3 of Regulation S-X is not set forth in the prospectus, to deliver, or cause to be delivered to each person to whom the prospectus is sent or given, the latest quarterly report that is specifically incorporated by reference in the prospectus to provide such interim financial information. D. Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the Registrant pursuant to the provisions described in Item 6, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling 6 person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue. 7 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, 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 Escondido, State of California, on this 13th day of November, 1996. DATRON SYSTEMS INCORPORATED By: DAVID A. DERBY, President and Chief Executive Officer 8 POWER OF ATTORNEY TO SIGN AMENDMENTS KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below appoints David A. Derby and William L. Stephan, and each of them, with full power of substitution and full power to act without the other such person's true and lawful attorney-in-fact and agent for such person in such person's name, place and stead, in any and all capacities, to sign any or all amendments (including post-effective amendments) to this registration statement on Form S-8 and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises in order to effectuate the same as fully, to all intents and purposes, as they or such person might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, as amended, this registration statement on Form S-8 has been signed by the following persons in the capacities and on the dates indicated. DAVID A. DERBY President, Chief November 7, Executive Officer and 1996 Director (Principal Executive Officer) RICHARD W. PERSHING Chairman of the Board November 7, of Directors 1996 WILLIAM L. STEPHAN Vice President, Chief November 7, Financial Officer and 1996 Treasurer (Principal Accounting Officer) KENT P. AINSWORTH Director November 7, 1996 MICHAEL F. BIGHAM Director November 7, 1996 ADRIAN C. CASSIDY Director November 7, 1996 PETER F. SCOTT Director November 7, 1996 ROBERT D. SHERER Director November 7, 1996 9 Index to Exhibits Exhibit No. Description of Exhibit 4.1 1995 Stock Option Plan 4.2 Form of Stock Purchase Agreement 4.3 Form of Incentive Stock Option Agreement 4.4 Form of Nonqualified Stock Option Agreement 5 Opinion of Heller, Ehrman, White & McAuliffe 23.1 Consent of Heller, Ehrman, White & McAuliffe (filed as part of Exhibit 5) 23.2 Consent of Deloitte & Touche LLP 24 Power of Attorney (see page 8) EX-4.1 2 1995 STOCK OPTION PLAN 1995 STOCK OPTION PLAN OF DATRON SYSTEMS INCORPORATED AS AMENDED ON NOVEMBER 7, 1996 1. PURPOSES OF THE PLAN The purposes of the 1995 Stock Option Plan (the "Plan") of Datron Systems Incorporated (the "Company") are to: (a) Encourage selected employees and directors to improve operations and increase profits of the Company; (b) Encourage selected employees and directors to accept or continue employment or association with the Company or its Affiliates; and (c) Increase the interest of selected employees in the Company's welfare through their participation in the growth in value of the common stock, $0.01 par value, of the Company ("Common Stock"). To accomplish the foregoing objectives, this Plan provides a means whereby employees and directors may receive options to purchase Common Stock, as well as Stock Appreciation Rights ("SARs"). Options granted under this Plan ("Options") will be either nonqualified options ("NQOS") subject to federal income taxation upon exercise or incentive stock options ("ISOs") not subject to immediate federal income taxation upon exercise. 2. ELIGIBLE PERSONS Every person who at the date of grant is an employee of the Company or of any Affiliate of the Company or a director of the Company is eligible to receive NQOs, ISOs and SARs under this Plan, provided, however, (a) that nonemployee directors are ineligible to receive ISOs at any time; (b) that an ISO may not be granted under this Plan to any person who owns, directly or indirectly, stock of the Company constituting more than ten percent of the total combined voting power of all classes of outstanding stock of the Company or of any Affiliate of the Company, unless the exercise price of the ISO at the time the Option is granted is at least 110 percent of the fair market value of the stock subject to the Option, and the Option is exercisable for no more than five years after the date of grant, as set forth in Section 6.2. 2 The term "Affiliate," as used in this Plan, means a parent or subsidiary corporation, as defined in the applicable provisions (currently Section 424) of the Internal Revenue Code of 1986, as amended (the "Code"). The term "employee" shall have the meaning ascribed for purposes of Section 3401(c) of the Code and the Treasury Regulations promulgated thereunder and shall include an officer or a director who is also an employee. 3. STOCK SUBJECT TO THIS PLAN Subject to the provisions of Section 6.1.1 of the Plan, the total number of shares of stock that may be (i) issued upon the exercise of Options and (ii) covered by Options cancelled or surrendered upon the exercise of SARs is 500,000 shares of Common Stock, less (A) any shares in respect of which options have been granted and are presently outstanding under the Company's 1985 Stock Option Plan (the "1985 Plan") or any predecessor plan as of February 6, 1995 and less (B) any shares in respect of which options are granted under the 1985 Plan on or after February 7, 1995 and prior to the expiration of such 1985 Plan. The shares covered by the portions of any grants under this Plan or the 1985 Plan that are cancelled or expire unexercised shall become available again for grants under this Plan. The number of shares reserved for purchase under this Plan or covered by options that may be cancelled or surrendered upon the exercise of SARs is subject to adjustment in accordance with the provisions for adjustment in this Plan. 4. ADMINISTRATION (a) This Plan shall be administered by the Board of Directors of the Company (the "Board") or, either in its entirety or insofar as it relates to persons subject to Section 16 of the Securities Exchange Act ("Section 16"), by a committee (the "Committee") comprised of non-employee members as described in Section 4(b) (in either case, the "Administrator"). (b) The Committee shall consist of two or more Board members, each of whom shall be a "non-employee director" as defined in Rule 16b-3(b)(3)(i) under the Securities Exchange Act (the "Exchange Act"). (c) Subject to the provisions of this Plan, the Administrator shall have the authority to select the persons to receive Options or SARs under this Plan, to fix the number of shares that each optionee may purchase or that are subject to a SAR, to set the terms and conditions of each Option (including whether each Option should be a NQO or an ISO) and SAR, and to determine all other matters relating to this Plan. No member of the Administrator shall be liable for any act or omission on such member's own part, including but not limited to the exercise of any power or discretion given to such member under this Plan, except for those acts or omissions resulting from such member's 3 own gross negligence or willful misconduct. All questions of interpretation, implementation, and application of this Plan shall be determined by the Administrator. Such determinations shall be final and binding on all persons. The Administrator may delegate nondiscretionary administrative duties to such employees of the Company as it deems proper. (d) It is intended that this Plan shall be administered in accordance with the requirements of Rule 16b-3 promulgated by the Securities and Exchange Commission ("Rule 16b-3"), or any successor rule thereto. With respect to persons subject to Section 16, if any, transactions under this Plan are intended to comply with the applicable conditions of Rule 16b-3, or any successor rule thereto. To the extent any provision of this Plan or action by the Administrator fails to so comply, it shall be deemed null and void, to the extent permitted by law and deemed advisable by the Administrator. Notwithstanding the above, it shall be the responsibility of such persons, not of the Company or the Administrator, to comply with the requirements of Section 16; and neither the Company nor the Administrator shall be liable if this Plan or any transaction under this Plan fails to comply with the applicable conditions of Rule 16b-3 or any successor rule thereto, or if any such person incurs any liability under Section 16. 5. GRANTING OF RIGHTS 5.1 Ten Year Limitation. No Options or SARs shall be granted under this Plan after ten years from the date of adoption of this Plan by the Board of Directors. 5.2 Written Agreement; Effect. Each Option or SAR shall be evidenced by a written agreement in the form satisfactory to the Company, executed by the Company and the person to whom such Option or SAR is granted. If the agreement relates to an Option (an "Option Agreement"), it shall specify whether each Option it evidences is a NQO or an ISO or SAR. Failure of the grantee to execute an agreement shall not void or invalidate the grant of an Option; SARs may be included in the Option Agreement or may be evidenced by a separate written agreement satisfactory to the Company, executed by the Company and the person to whom such SAR is granted; the Option or SAR may not be exercised, however, until the agreement is executed. 5.3 Advance Approvals. Subject to Section 6.3.3 with respect to ISOs, the Administrator may approve the grant of Options or SARs under this Plan to persons who are expected to become employees or directors of the Company, but are not employees or directors at the date of approval. In such cases, the Option or SAR shall be deemed granted (and the exercise price determined with reference to the fair market value of the underlying stock), without further approval, on the date the grantee becomes an employee or director and must satisfy all requirements of this Plan for Options or SARs granted on that date. 4 6. TERMS AND CONDITIONS OF OPTIONS Each Option shall be designated as an ISO or a NQO and shall be subject to the terms and conditions set forth in Section 6.1. NQOs shall be also subject to the terms and conditions set forth in Section 6.2, but not those set forth in Section 6.3. ISOs shall also be subject to the terms and conditions set forth in Section 6.3, but not those set forth in Section 6.2. 6.1 Terms and Conditions to Which All Options Are Subject. All Options shall be subject to the following terms and conditions: 6.1.1 Changes in Capital Structure. Subject to Sections 6.1.2 and 6.1.3, if the stock of the Company is changed by reason of a stock split, reverse stock split, stock dividend, or recapitalization, or converted into or exchanged for other securities as a result of a merger, consolidation or reorganization, appropriate adjustments shall be made in (A) the number and class of shares of stock subject to this Plan and each Option outstanding under this Plan, and (B) the exercise price of each outstanding Option; provided, however, that the company shall not be required to issue fractional shares as a result of any such adjustment. Each such adjustment shall be determined by the Administrator in its sole discretion, which determination shall be final and binding on all persons. 6.1.2 Corporate Transactions. Subject to Section 6.1.3, new option rights may be substituted for the Options granted under this Plan, or the Company's obligations as to Options outstanding under this Plan may be assumed, by an employer corporation other than the Company, or by a parent or subsidiary of such employer corporation, in connection with any merger, consolidation, acquisition, separation, reorganization, liquidation or like occurrence in which the Company is involved and which the Administrator determines, in its absolute discretion, would materially alter the structure of the Company or its ownership. Such assumption or substitution shall be done in such manner that the then outstanding Options which are ISOs will continue to be "incentive stock options" within the meaning of Section 422 of the Code to the full extent permitted thereby. Notwithstanding the foregoing or the provisions of Section 6.1.1, if such employer corporation, or parent or subsidiary of such employer corporation, does not substitute new option rights for, and substantially equivalent to, the Options granted hereunder, or assume the Options granted hereunder, or if there is no employer corporation, the Administrator may upon 10 days' prior written notice to optionees in its absolute discretion (i) shorten the period during which options are exercisable (provided they remain exercisable, to the extent otherwise exercisable, for at least 10 days after the date the notice is given); or (ii) subject to Rule 16b-3 in the case of optionees subject to Section 16, cancel options upon payment to the optionee in cash, with respect to each option to the extent then exercisable, of an amount which, in the absolute discretion of the Administrator, is 5 determined to be equivalent to any excess of (y) the fair market value (at the effective time of the dissolution, liquidation, merger, reorganization, sale or other event) of the consideration that the optionee would have received if the option had been exercised before the effective time, over (z) the exercise price of the option; provided, however, if there is a successor corporation and replacement options are not granted by the successor corporation, all outstanding Options shall become exercisable prior to the consummation of the transaction such that the optionees shall have not less than ten days to exercise their options and become shareholders of record entitled to participate as shareholders of record in the proposed transaction. The actions described in this Section may be taken without regard to any resulting tax consequences to the optionee. 6.1.3 Change of Control. In the event of a "Change of Control," the Administrator may in its discretion determine that any Options granted under this plan outstanding as of the date such Change of Control is determined to have occurred shall become exercisable for all of the shares of stock subject to such Options effective (a) immediately prior to the transaction constituting a Change of Control (if the Administrator has made, prior to such date, the election to accelerate the vesting of Options pursuant to this Section) or (b) the date that the Administrator determines to permit acceleration of vesting pursuant to this Section (if such determination is made concurrently with or after the transaction constituting a Change of Control). For purposes of this Section 6.1.3, a "Change of Control" shall mean the occurrence of any one of the following: (i) Any "person", as such term is used in Sections 13(d) and 14(d) of the Exchange Act (other than the Company, a subsidiary, or a Company employee benefit plan, including any trustee of such plan acting as trustee) is or becomes the "beneficial owner" (as defined in Rule 13D-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 50% or more of the combined voting power of the Company's then outstanding securities; or (ii) the dissolution or liquidation (partial or total) of the Company or a sale of assets involving 75% or more of the assets of the Company, or any merger or reorganization of the Company (whether or not another entity is the survivor) or other transaction pursuant to which the holders, as a group, of all the voting power of the entity surviving the transaction prior to the transaction hold, as a group, less than 50% of the voting power of the Company after the transaction. 6.1.4 Option Grant Date. Each Option Agreement shall specify the date as of which it shall be effective (the "Effective Date"). The Effective Date shall be the date as of which the Administrator approves the grant, or, in the case of advance approvals pursuant to Section 5.3, the date the optionee actually becomes an employee of the Company. 6 6.1.5 Time of Option Exercise. Subject to Sections 5.3 and 6.3.5, and except as otherwise provided by the Administrator or in Section 6.1.3, an Option shall be exercisable with respect to 33% of the shares of stock covered by the Option on the first anniversary of the Effective Date, with respect to another 33% of the shares of stock subject to the Option on the second anniversary of the Effective Date, and with respect to all shares of stock subject to the Option on the third anniversary of the Effective Date. Subject to the foregoing, Options are exercisable in whole or in part. 6.1.6 Nonassignability of Option Rights. No Option shall be assignable or otherwise transferable by the optionee except by will or by the laws of descent and distribution or, if the Option is a NQO, pursuant to a qualified domestic relations order as defined by the Code or Title I of the Employee Retirement Income Security Act, or the rules thereunder. During the life of the optionee, an Option shall be exercisable only by the optionee or the optionee's guardian or legal representative in the event of death or permanent disability of the optionee or, in the case of a NQO, by the optionee's transferee pursuant to a qualified domestic relations order. 6.1.7 Payment. Except as provided below, payment in full shall be made for all stock purchased at the time written notice of exercise of an Option is given to the Company either (a) in cash or (b) by delivery by the optionee of Common Stock already owned by the optionee for all or part of the aggregate exercise price of the shares as to which the Option is being exercised, provided the value (determined as set forth in Section 6.1.12) of such Common Stock is equal on the date of exercise to the aggregate exercise price of the shares as to which the Option is being exercised; provided, however, that if an optionee has exercised any portion of any Option granted by the Company by delivery of Common Stock, the Optionee may not, within six months following such exercise, exercise any Option by delivery of Common Stock. Proceeds of any payment shall constitute general funds of the Company. At the time an Option is granted or exercised, the Administrator, in the exercise of its absolute discretion, may authorize one or both of the following additional methods of payment: (A) Acceptance of the optionee's full recourse promissory note for a portion of the aggregate exercise price of the shares as to which the Option is being exercised, payable on such terms and bearing such interest rate as determined by the Administrator, which promissory note may be either secured or unsecured in such manner as the Administrator shall approve (including, without limitation, by a security interest in the shares of the Company) provided that at least the aggregate par value of the shares of Common Stock to be issued is received in cash; (B) Any other property, so long as such property constitutes valid consideration under applicable law for the 7 shares as to which the Option is being exercised and is surrendered in good form for transfer. 6.1.8 Termination of Employment. Any Option which has not vested on or before the date on which an optionee ceases, for any reason and with or without cause, to be an employee or director of the Company or an Affiliate (an "Employment Termination"), shall expire upon such Employment Termination. Option rights granted to an optionee under this Plan that have vested as of such Employment Termination, to the extent such rights have not expired or been exercised, shall terminate (a) three months, in the case of ISOs and for any optionee who immediately prior to the date of Employment Termination is not subject to Section 16, or (b) seven months in the case of NQOs held by an optionee who immediately prior to the date of Employment Termination is subject to Section 16, after such Employment Termination and shall not be exercisable on or after such date. Notwithstanding the foregoing, if Employment Termination is due to the permanent disability (as determined by the Administrator) or death of the optionee, the optionee, or the optionee's personal representative or any other person who acquires the option rights from the optionee by will or the applicable laws of dissent and distribution, may, within 12 months after the date of Employment Termination, exercise the rights to the extent they were exercisable on the date of Employment Termination. The transfer of an optionee from the Company to an Affiliate or vice versa, or from one Affiliate to another, or a leave of absence duly authorized by the Company, shall not be deemed an Employment Termination or break in continuous employment. 6.1.9 Other Provisions. Each Option Agreement may contain such other terms, provisions, and conditions not inconsistent with this Plan as may be determined by the Administrator (including, without limitation, rights of repurchase), and each ISO granted under this Plan shall include such provisions and conditions as are necessary to qualify the Option as an "incentive stock option" within the meaning of Section 422 of the Code. 6.1.10 Tax Compensation Rights. In connection with the grant of any Option under this Plan (the "Associated Option"), the Administrator may grant the optionee the right ("Tax Compensation Right") to receive from the Company an amount (the "Tax Compensation Amount") in cash equal to the then existing maximum statutory Federal income tax rate (including any surtax or similar charge or assessment) for corporations multiplied by the amount of ordinary income, if any, realized by the optionee for federal income tax purpose as a result of exercise of the Associated Option. The Tax Compensation Right is subject to any terms and conditions the Administrator may deem appropriate (including without limitation, the condition that such Tax Compensation Right may be exercised only if the optionee is subject to Section 16 at the time the Associated Option is exercised), and may cancel or limit the term or amount of such 8 Tax Compensation Right at any time. The Administrator may also, in its discretion, loan to the optionee an amount equal to the Tax Compensation amount in return for optionee's non-recourse promissory note, payable on such terms and bearing such interest rate as may be determined by the Administrator, which promissory note the Administrator may approve (including, without limitation, by a security interest in the shares of the Company). 6.1.11 Withholding and Employment Taxes. At the time of exercise of an Option or at such other time as the amount of such obligations becomes determinable (the "Tax Date"), the optionee shall remit to the Company in cash all applicable federal and state withholding and employment taxes. The Administrator may, in the exercise of the Administrator's sole discretion, permit an optionee to pay some or all of such taxes by means of a promissory note on such terms as the Administrator deems appropriate. If and to the extent authorized by the Administrator in its sole discretion, an optionee may make an election, by means of a form of election to be prescribed by the Administrator, (i) to have shares of Common Stock which are acquired upon exercise of the Option withheld by the Company or (ii) to tender other shares of Common Stock or other securities of the Company owned by the optionee to the Company, at the time the amount of such taxes is determined, to pay the amount of such tax obligations, subject to the following limitations: (a) Any election pursuant to clause (i) above by an optionee subject to Section 16 shall either (x) be made at least six months before the Tax Date and shall be irrevocable; or (y) shall be made in (or made earlier to take effect in) any ten-day period beginning on the third business day following the date of release by the Company for publication of quarterly or annual summary statements of sales or earnings of the Company and shall be subject to approval by the Administrator. In addition, in the case of (y), the Option shall be held at least six months prior to the Tax Date. (b) Any election pursuant to clause (ii) above, where the optionee is tendering Common Stock issued pursuant to the exercise of an Option, shall require that such shares be held at least six months prior to the Tax Date. Any of the foregoing limitations may be waived (or additional limitations may be imposed) by the Administrator, in its sole discretion, if the Administrator determines that such foregoing limitations are not required (or that such additional limitations are required) in order that the transaction shall be exempt from Section 16(b) of the Exchange Act pursuant to Rule 16b-3, or any successor rule thereto. In addition, any of the foregoing limitations may be waived by the Administrator, in its sole discretion, if the Administrator determines that Rule 16b-3, or any successor rule thereto, is not applicable to the exercise of the Option by the optionee or for any other reason. 9 Any Common Stock or other securities of the Company so withheld or tendered will be valued as of the Tax Date in accordance with Section 6.1.12. 6.1.12 Determination of Value. For purposes of the Plan, the fair market value of the common stock covered by an Option shall be determined as follows: (a) If the common stock is listed on any established stock exchange or a national market system, including without limitation the National Market System of the National Association of Securities Dealers Automated Quotation System ("NASDAQ"), its fair market value shall be the closing sales price or the mean between the high bid and low asked prices if no sales were reported, as quoted on such system or exchange (or the largest such exchange) for the date the value is to be determined (or if there are no sales or bid and asked price quotations for such date, then for the last preceding business day on which there were sales or bid and asked price quotations), as reported in the Wall Street Journal or similar publication. (b) If the common stock is regularly quoted by a recognized securities dealer, its fair market value shall be (i) the mean between the closing high bid and low asked quotations for the stock on the date the value is to be determined (or if there are no quoted prices for such date, then for the last preceding business day on which there were quoted prices) as quoted on NASDAQ or any similar system of automated dissemination of quotations of securities prices then in common use, as reported in the Wall Street Journal or similar publication, or (ii) if not quoted as described in clause (i), the mean between the high bid and low asked quotations for the stock as reported by the National Quotation Bureau Incorporated if at least two securities dealers have inserted both bid and asked quotations for the security on at least five trading days of the 20 trading days preceding the date the value is to be determined; provided, however, that if the stock is quoted on a national securities or central market system, in lieu of a market or quotation system described above, the fair market value shall be determined in the manner set forth in clause (i) if bid and asked quotations are reported but actual transactions are not, and in the manner set forth in paragraph (a) if actual transactions are reported. (c) In the absence of an established market for the common stock, the fair market value thereof shall be determined in good faith by the Administrator, with reference to the Company's net worth, prospective earnings power, dividend- paying capacity, and other relevant factors, including the goodwill of the Company, the economic outlook in the Company's industry, the Company's position in the industry and its management, and the values of stock of other corporations in the same or a similar line of business. 10 6.2 Terms and Conditions to Which Only NQOs Are Subject. Options granted under this Plan which are designated as NQOs shall be subject to the following terms and conditions: 6.2.1 Exercise Price. The exercise price of an NQO shall be not less than 85% of the fair market value of the stock subject to the Option on the date of its grant, as determined in accordance with Section 6.1.12. 6.2.2 Expiration. Subject to Section 6.1.2, each NQO granted under this Plan shall expire ten years and two days from the date of its grant or such earlier date as may be set by the Administrator on the date of its grant. 6.3 Terms and Conditions to Which Only ISOs Are Subject. Options granted under this Plan which are designated as ISOs shall be subject to the following terms and conditions: 6.3.1 Exercise Price. The exercise price of an ISO, which shall be approved by the Board of Directors, shall be determined in accordance with the applicable provisions of the Code and shall in no event be less than the fair market value (determined as described in Section 6.1.12) of the stock covered by the ISO at the time the ISO is granted, except that the exercise price of an ISO granted to any person who owns, directly or indirectly, (or is treated as owning by reason of attribution rules, currently set forth in Code Section 424) stock of the Company constituting more than ten percent of the total combined voting power of all classes of outstanding stock of the company or of any Affiliate of the Company, shall in no event be less than 110 percent of such fair market value. 6.3.2 Expiration. Subject to Section 6.1.2, and unless an earlier expiration date is specified by the Administrator at the time of grant, each ISO granted under this Plan shall expire ten years from the date of its grant, except that an ISO granted to any person who owns, directly or indirectly, (or is treated as owning by reason of applicable attribution rules, currently set forth in Code Section 424) stock of the company constituting more than ten percent of the total combined voting power of the Company's outstanding stock, or the stock of any Affiliate of the company, shall expire five years from the date of its grant. 6.3.3 Grant Date. If an ISO is granted in anticipation of employment as provided in Section 5(d), the Option shall be deemed granted, without further approval, on the date the grantee assumes the employment relationship forming the basis for such grant, and, in addition, satisfies all requirements of this Plan for Options granted on that date. 6.3.4 Disqualifying Dispositions. If stock acquired by exercise of an ISO granted pursuant to this Plan is disposed of within two years from the date of grant of the ISO or within one year after the transfer of the stock to the optionee, 11 the holder of the stock immediately prior to the disposition shall promptly notify the Company in writing of the date and terms of the disposition and shall provide such other information regarding the disposition as the Company may require. Such holder shall pay to the Company any withholding and employment taxes which the Company in its sole discretion deems applicable to such disposition. Any disposition not in accordance with this Section 6.3.4. shall be void and of no effect. The Company may instruct its stock transfer agent by appropriate means, including placement of legends on stock certificates, not to transfer stock acquired by exercise of an ISO unless it has been advised by the Company that the requirements of this Section 6.3.4 have been satisfied. 6.3.5 Vesting. Notwithstanding any other provision of this Plan, ISOs granted under all incentive stock option plans of the Company and its subsidiaries may not "vest" for more than $100,000 in fair market value of stock (measured on the grant dates(s)) in any calendar year, unless otherwise provided by the Administrator. For purposes of the preceding sentence, an option "vests" when it first becomes exercisable. If, by their terms, such ISOs taken together would vest to a greater extent in a calendar year, and unless otherwise provided by the Administrator, the vesting limitation described above shall be applied by deferring the exercisability of those ISOs or portions of ISOs which have the highest per share exercise prices; but in no event shall more than $100,000 in fair market value of stock (measured on the grant date(s)) vest in any calendar year. The ISOs or portions of ISOs whose exercisability is so deferred shall become exercisable on the first day of the first subsequent calendar year during which they may be exercised, as determined by applying these same principles and all other provisions of this Plan including those relating to the expiration and termination of ISOs. In no event, however, will the operation of this Section 6.3.5 cause an ISO to vest before its terms or, having vested, cease to be vested. 7. MANNER OF EXERCISE An optionee wishing to exercise an Option shall give written notice to the Company at its principal executive office, to the attention of the Chief Financial Officer of the Company, accompanied by an executed stock purchase agreement in form and substance satisfactory to the Company and by payment of the exercise price as provided in Section 6.1.7. The date the Company receives written notice of an exercise hereunder accompanied by payment of the exercise price will be considered as the date such Option was exercised. Promptly after receipt of written notice of exercise of an Option, the Company shall, without stock issue or transfer taxes to the optionee or the person entitled to exercise the Option, deliver to the optionee or such other person a certificate or certificates for the requisite number of shares of stock. An optionee or transferee of an Option shall not have any privileges as shareholder with 12 respect to any stock covered by the Option until the date of issuance of a stock certificate. 8. DEFINITIONS RELATING TO SARs For purposes of this Plan, the following items shall have the following meanings: 8.1 FMV per Share. The term "FMV per Share" shall mean, for the day or period with respect to which the FMV per Share is being determined, the fair market value of the Common Stock determined in accordance with the provisions of Section 6.1.12. 8.2 Related Right. The term "Related Right" shall mean an option with respect to which a SAR is granted. 8.3 SAR Holder. The term "SAR Holder" shall mean a person holding an option to acquire shares of Common Stock to whom a SAR is granted pursuant to this Plan. 8.4 SAR Spread. The term "SAR Spread" shall mean an amount (rounded to the nearest whole dollar) equal to the product computed by multiplying (a) the excess of (i) if the SAR may only be exercised during the Window Period under Section 9.6 below, then the highest FMV per Share on any day during the Window Period, and if exercise of the SAR is not so limited under Section 9.6 below, then the FMV per Share on the date the SAR is exercised, over (ii) the exercise price per share of Common Stock at which the Related Right is exercisable, or in the case of a SAR granted without reference to a Related Right, such other price as the Administrator establishes at the time the SAR is granted, by (b) the number of shares of Common Stock with respect to which a SAR is being exercised. 8.5 Window Period. The term "Window Period" shall mean the periods specified in Rule 16b-3(e)(3), or any successor rule, within which a SAR must be exercised in order to be exempt from the operation of Section 16(b) of the Exchange Act by virtue of paragraph (e) of Rule 16b-3 or any successor provision. This period is, as of the date of this Plan, between the third and twelfth business days following release by the Company of quarterly or annual summary statements of sales and earnings. 9. STOCK APPRECIATION RIGHTS 9.1 Grant of SAR. The Administrator may, in the exercise of the Administrator's discretion, grant SARs to eligible employees. A SAR may be granted either (i) with respect to shares of Common Stock subject to a Related Right held by the SAR Holder, whether or not the Related Right is an Option granted pursuant to this Plan, or (ii) without reference to any Related Right. If a Related Right is an ISO, a SAR granted with respect 13 to such Related Right may be granted only at the time of grant of the related ISO, but if the Related Right is a non-qualified option, the SAR may be granted either simultaneously with the grant of the related non-qualified option, or may be granted at any time during the term of such related non-qualified option, whether or not the option is a NQO granted pursuant to this Plan or a previously or subsequently granted non-qualified option not granted pursuant to this Plan, and whether or not the option is granted pursuant to a "plan" within the meaning of Rule 16b-3. Notwithstanding any other provision of the Plan, the Administrator shall have sole discretion to specify a maximum limitation on the amount of the SAR Spread, to determine the time at which any SAR otherwise exercisable may be exercised, to determine whether upon exercise of a SAR the SAR Holder may receive cash or stock as provided in Sections 9.9 and 9.10 below or may elect to receive either cash or stock, to establish a price other than the exercise price of shares subject to a Related Right as a basis for determining the amount of the SAR Spread, and to grant any SAR subject to such additional terms and conditions as are consistent with the provisions of this Plan. 9.2 Changes in Capital Structure. If, by virtue of any event described in Section 6.1.1, an adjustment is made to a Related Right held by a SAR Holder, then the number of shares covered by the SAR shall also be adjusted accordingly. 9.3 Corporate Transactions. Subject to Section 9.4, new SARs may be substituted for the SARs granted under this Plan, or the Company's obligations as to options outstanding under this Plan may be assumed, by an employer corporation other than the Company, or by a parent or subsidiary of such employer corporation, in connection with any merger, consolidation, acquisition, separation, reorganization, liquidation or like occurrence in which the Company is involved and which the Administrator determines, in its absolute discretion, would materially alter the structure of the Company or its ownership. Notwithstanding the foregoing or the provisions of Section 9.2, if such employer corporation, or parent or subsidiary of such employer corporation, does not substitute new SARs for, and substantially equivalent to, the SARs granted hereunder, or assume the SARs granted hereunder, or if there is no employer corporation, or if the Administrator determines, in its sole discretion, that SARs outstanding under this Plan should not then continue to be outstanding, (A) upon dissolution or liquidation of the Company, or similar occurrence, or (B) upon any merger, consolidation, acquisition, separation, or similar occurrence, where the Company, will not in economic substance be the surviving corporation; provided, however, that each SAR Holder shall be mailed notice at least 15 days prior to such dissolution, liquidation, merger, consolidation, acquisition, separation, or similar occurrence, and shall have at least 10 days after the mailing of such notice to exercise any unexpired SARs granted hereunder to the extent such SARs are then exercisable. 14 9.4 Change of Control In the event of a "Change of Control" as defined in Section 6.1.3, the Administrator may in its discretion determine that all SARs granted under this plan, except for SARs held by SAR Holders who are subject to Section 16, shall become exercisable at the same time that Options become exercisable pursuant to Section 6.1.3. 9.5 SAR Grant Date. Except in the case of advance approvals described in Section 5.3, the date of grant of a SAR under this Plan shall be the date as of which the Administrator approves the grant. 9.6 Time of SAR Exercise. A SAR shall generally be exercisable six months from the date of grant of the SAR and shall be exercisable in whole or in part. Any election by a SAR Holder to receive cash in full or partial settlement of a SAR, as well as any exercise by the SAR Holder of a SAR for such cash, shall be made only during the Window Period. Where a SAR is granted with respect to a Related Right, unless the written agreement pursuant to which the SAR is granted otherwise provides, the SAR may be exercised only to the extent to which the Related Right is exercisable and the shares covered by the Related Right are not covered by any right of repurchase. Except as otherwise provided in Section 9.7, a SAR may be exercised immediately in the event of the death or permanent disability of the SAR Holder. 9.7 Effect on Related Right; Termination of SAR. If a SAR granted with respect to a Related Right is exercised, the Related Right shall cease to be exercisable and shall be cancelled to the extent of the number of shares with respect to which the SAR was exercised. The Company and the SAR Holder shall take such actions and execute such documents as may be necessary or appropriate to reflect such cancellation. Upon the exercise or termination of a Related Right, SARs granted with respect thereto shall terminate to the extent of the number of shares as to which the Related Right was exercised or terminated. Upon the death or permanent disability of the SAR Holder, the SAR shall be exercisable only by the SAR Holder's personal representative or any other person who acquires the SAR Holder's right by will or the applicable laws of descent and distribution and, in the case of a SAR granted with respect to a Related Right, only to the extent to which the Related Right is then exercisable. 9.8 Nonassignability of SARs. No SAR granted under this Plan shall be assignable or otherwise transferable by the SAR Holder except by will or by the laws of descent and distribution or pursuant to a qualified domestic relations order as defined by the Code or Title I of the Employee Retirement Income Security Act, or the rules thereunder. During the life of the SAR Holder, a SAR shall be exercisable only by the SAR Holder or the SAR Holder's guardian or legal representative or by the optionee's transferee pursuant to a qualified domestic relations order. 15 9.9 Manner of Exercise; Election to Receive Cash or Stock. A SAR Holder wishing to exercise a SAR shall (i) give written notice to the Company at its principal executive office, to the attention of the Secretary of the Company, specifying the number of shares of Common Stock with respect to which the SAR Holder is exercising the SAR and if under the terms of the SAR the SAR Holder may elect to receive either cash, stock, or a combination of cash and stock upon exercise of the SAR, stating the manner in which the SAR Holder has elected to receive payment upon exercise; (ii) deliver to the Company such written representations, warranties, and covenants as the Company may reasonably require; and (iii) if so requested by the Company, deliver to the Chief Financial Officer of the Company any written agreement that the Company may reasonably require relating to the SAR being exercised or pertaining to the Related Right. The date the Company receives all of the instruments referred to in the preceding sentence shall be considered as the date upon which the SAR was exercised. A SAR Holder who receives stock upon exercise of a SAR shall not have any privileges as a stockholder with respect to any such shares of stock until the date of issuance of a stock certificate. 9.10 Exercise of SARs; Market Price. Upon the exercise of a SAR, the SAR Holder shall be entitled to receive one of the following kinds of payments: (a) that number of whole shares of Common Stock equal to the number computed by dividing the SAR Spread by the highest FMV per Share during the Window Period in which the SAR was exercised and an amount of cash equal to the highest FMV per Share during the Window Period in which the SAR was exercised multiplied by the fraction (if any) of a share of Common Stock not so issued (such payment to be in lieu of issuance of fractional shares); or (b) An amount in cash equal to the SAR Spread; or (c) A combination of cash and whole shares of Common Stock (the combined value of which, however, shall not exceed the SAR Spread) in the respective amounts specified in the SAR Holder's notice of exercise. Notwithstanding any other provision of this Section 9, if the terms of a SAR entitle the SAR Holder to elect upon exercise of the SAR whether to receive cash in full or partial settlement of the SAR, then the Administrator shall have sole discretion to consent to or disapprove such election ("Cash Election"). Such consent or disapproval may be given at any time after the Cash Election to which it relates. If the Administrator shall disapprove a Cash Election, the exercise of the SAR with respect to which the Cash Election was made shall be of no effect but shall be without prejudice to the right of the SAR Holder to exercise the SAR in the future in accordance with its terms. 16 9.11 Withholding and Employment Taxes. At the time of exercise of a SAR, the SAR Holder shall remit to the Company in cash all applicable federal and state withholding and employment taxes, and the Administrator may, in its sole discretion, reduce the amount paid to a SAR Holder upon exercise of the SAR by such amount. The Administrator may, in the exercise of its sole discretion, permit a SAR Holder to pay some or all of such taxes by means of a promissory note on such terms as the Administrator deems appropriate. 10. EMPLOYMENT RELATIONSHIP Nothing in this Plan or any Option or SAR granted hereunder shall interfere with or limit in any way the right of the Company or of any of its Affiliates to terminate any optionee's employment or status as a director at any time, nor confer upon any optionee or SAR Holder any right to continue in the employ of, or as a director of, the Company or any of its Affiliates. 11. AMENDMENT OR ALTERATION OF PLAN The Board may at any time amend, alter, suspend, or discontinue this Plan, except to the extent that shareholder approval is required by applicable law or regulations; provided, however, no amendment, alteration, suspension, or discontinuation shall be made that would impair the rights of any grantee, without the grantee's consent, under any Option or SAR theretofore granted. The Board shall have the power to make such changes in this Plan and in the regulations and administrative provisions hereunder or in any outstanding Option as in the opinion of counsel for the Company may be necessary or appropriate from time to time to enable any Option granted pursuant to this Plan to qualify as an ISO under Section 422 of the Code, subject in all events to the consent of the holder of such Option. 12. INDEMNIFICATION OF ADMINISTRATOR The Company shall indemnify each present and future member of the group constituting the Administrator against, and each member of the group constituting the Administrator shall be entitled without further act on his part to indemnity from the Company for, all expenses (including the amount of judgments and the amount of approved settlements made with a view to the curtailment of costs of litigation, other than amounts paid to the Company itself) reasonably incurred by such person in connection with or arising out of any action, suit, or proceeding to the full extent permitted by the laws of the State of Delaware and by the Bylaws of the Company. 17 13. EFFECTIVE DATE OF THIS PLAN This Plan shall become effective upon adoption by the Board; provided, however, that if this Plan is not approved within 12 months after its adoption by the Board, by unanimous written consent of the shareholders of the Company or by the shareholders of the Company voting at a validly called shareholders meeting by a majority (or such greater number as may be required by law or applicable governmental regulations or orders) of the shares entitled to vote, then any options exercised pursuant to this Plan shall constitute NQOs and not ISOs, regardless of their status on the date of grant. Options and SARs may be granted and exercised under this Plan only after there has been compliance with all applicable federal and state securities laws. Date of Board Approval: February 7, 1995 Date of Stockholder Approval: August 15, 1995 EX-4.2 3 STOCK PURCHASE AGREEMENT DATRON SYSTEMS INCORPORATED 1995 STOCK OPTION PLAN STOCK PURCHASE AGREEMENT (A) Name of Purchaser: ___________________ (B) Number of Plan Shares: _______________ (C) Exercise Price: ______________________ (D) Purchase Price: ______________________ (E) Date of Option Agreement: ____________ (F) Effective Date: ______________________ THIS STOCK PURCHASE AGREEMENT (the "Agreement") is made and entered into as of the date set forth in Item F above (the "Effective Date") between Datron Systems Incorporated, a Delaware corporation (the "Company"), and the person named in Item A above (the "Purchaser"). THE PARTIES AGREE AS FOLLOWS: 1. Purchase of Shares. Pursuant to the Company's 1995 Stock Option Plan (the "Plan"), a copy of which has been delivered to Purchaser, and to a stock option agreement ("Option Agreement") between the parties hereto dated the date set forth in Item E above, the Company hereby sells to Purchaser, and Purchaser hereby buys from the Company, that number of shares (the "Plan Shares") of the Common Stock (as defined in the Plan) set forth in Item B above on the terms and conditions set forth herein and in the Plan and the Option Agreement, the terms and conditions of the Plan and the Option Agreement being hereby incorporated into this Agreement by reference. 2. Purchase Price. Purchaser shall purchase the Plan Shares from the Company, and the Company shall sell the Plan Shares to Purchaser, at a price per share as set forth in Item C above (the "Exercise Price"), for a total purchase price as set forth in Item D above (the "Purchase Price"). 3. Manner of Payment. Purchaser shall pay the Purchase Price of the Plan Shares (a) in cash, (b) by delivery by the optionee of Common Stock already owned by the optionee in accordance with (and subject to the restrictions contained in) Section 6.1.7 of the Plan, (c) in the manner set forth in Exhibit 5.4 to the Option Agreement (the absence of any Exhibit 5.4 indicating that no such exhibit was intended), or (d) in the manner set forth in Exhibit 3 hereto (the absence of any Exhibit 3 indicating that no such exhibit was intended). 4. Disqualifying Dispositions of ISO Stock. If the Plan Shares are being acquired by exercise of an incentive stock option ("ISO"), and any of such shares are disposed of within two 2 years from the date of grant of the ISO or within one year after the transfer of the stock to Purchaser, immediately prior to the disposition Purchaser shall promptly notify the Company in writing of the date and terms of the disposition and shall provide such other information regarding the disposition as the Company may reasonably require. 5. Binding Effect. Subject to the limitations set forth in this Agreement, this Agreement shall be binding upon, and inure to the benefit of, the executors, administrators, heirs, legal representatives, successors, and assigns of the parties hereto. 6. Taxes 6.1 Section 83(b) Election. If Purchaser is an officer or director of the Company, an owner of 10% or more of any class of the Company's stock, or is otherwise subject to Section 16(b) of the Securities Exchange Act of 1934, then Purchaser shall execute and deliver to the Company with this executed Agreement a copy of the Acknowledgement and Statement of Decision Regarding Election Pursuant to Section 83(b) of the Internal Revenue Code (the "Acknowledgement") attached hereto as Exhibit 6A and shall follow the procedures set forth in this Section. If Purchaser is exercising a non-qualified stock option, Purchaser shall execute and submit with the Acknowledgement a copy of the Election Pursuant to Section 83(b) of the Code attached hereto as Exhibit 6B, if Purchaser has indicated in the Acknowledgement his decision to make such an election. If Purchaser is exercising an ISO, Purchaser shall execute and submit with the Acknowledgement a copy of the Protective Special Election Pursuant to Section 83(b) of the Code attached hereto as Exhibit 6C, if Purchaser has indicated in the Acknowledgement Purchaser's decision to make such an election. If Purchaser is not a California resident, Purchaser should consult Purchaser's tax advisor to determine if there is a comparable election to file in Purchaser's state of residence and whether such filing is desirable under the circumstances. Purchaser acknowledges that the Company has made no warranties or representations to Purchaser with respect to the income tax consequences of the transactions contemplated by this Agreement, and Purchaser is in no manner relying on the Company or its representatives for an assessment of such tax consequences. 6.2 Withholding and Employment Taxes. Purchaser herewith delivers to the Company in cash all applicable federal and state withholding and employment taxes resulting from purchase of the Plan Shares. Purchaser also agrees to pay to the Company in cash all such taxes that may in the future result from such purchase or from the lapse of any restrictions imposed on the Plan Shares; provided, however, that the Company may in its discretion withhold from Purchaser's wages such amount; and provided further, that the Administrator in its discretion may permit Purchaser to pay some or all such amount by means of a promissory note in such form as is satisfactory to the 3 Administrator. In addition, if Purchaser has been authorized to make, and has made or makes, the election described in the Plan and Option Agreement to have Plan Shares withheld or to tender already-owned shares of Common Stock in order to pay withholding and employment taxes, then unless the Administrator in its discretion disapproves such election, such taxes may be paid in the manner in which Purchaser has so elected. 7. Damages. Purchaser shall be liable to the Company for all costs and damages, including incidental and consequential damages and attorneys fees, resulting from a disposition of Plan Shares which is not in conformity with the provisions of this Agreement. 8. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of California applicable to contracts entered into and wholly to be performed within the State of California by California residents. 9. Notices. All notices and other communications under this Agreement shall be in writing. Unless and until Purchaser is notified in writing to the contrary, all notices, communications, and documents directed to the Company and related to the Agreement, if not delivered by hand, shall be mailed, addressed as follows: Datron Systems Incorporated 304 Enterprise Street Escondido, California 92029 Attention: Chief Financial Officer Unless and until the Company is notified in writing to the contrary, all notices, communications and documents intended for Purchaser and related to this Agreement, if not delivered by hand, shall be mailed to Purchaser's last known address as shown on the Company's books. Notices and communications shall be mailed by certified or registered mail, return receipt requested, postage prepaid. All mailings and deliveries related to this Agreement shall be deemed received only when actually received. 10. Prospectus. Purchaser acknowledges receipt of a copy of the Company's most recent prospectus (with the appendix thereto) describing the Plan. Purchaser has, prior to entering this Agreement, read and understands the information contained in the prospectus. 4 IN WITNESS WHEREOF, the parties hereto have executed this Stock Purchase Agreement as of the day and year first above written. DATRON SYSTEMS INCORPORATED By _______________________________ Title ____________________________ Purchaser hereby accepts and agrees to be bound by all of the terms and conditions of this Agreement and the Plan. Purchaser ________________________ Purchaser's spouse indicates by the execution of this Agreement his or her consent to be bound by the terms herein as to his or her interests, whether as community property or otherwise, if any, in the Plan Shares hereby purchased. Purchaser's Spouse _________________________ 5 EXHIBITS Exhibit 3 Manner of Payment if Other Than by Cash Exhibit 6A Acknowledgement and Statement of Decision Regarding Election Pursuant to Section 83(b) of Internal Revenue Code Exhibit 6B Election Pursuant to Section 83(b) of the InternalRevenue Code to Include in Gross Income the Excess Over the Purchase Price, If Any, of the Value of Property Transferred in Connection With Such Services Exhibit 6C Protective Special Election Pursuant to Section 83(b) of the Internal Revenue Code with Respect to Property Acquired by Exercise of an Incentive Stock Option 6 EXHIBIT 3 MANNER OF PAYMENT IF OTHER THAN BY CASH By the attachment of this Exhibit 3 the Administrator hereby authorizes Optionee to pay for any shares of the Company's Common Stock purchased under this Agreement by [check as applicable]: ____ 1. Giving to the Company Optionee's full recourse promissory note for the exercise price (other than the par value of the shares acquired, which will be paid in cash or other lawful consideration), as provided in Section 6.1.7(A) of the Plan; and/or ____ 2. Delivering to the Company the following property as permitted pursuant to section 6.1.7(B) of the Plan: DATRON SYSTEMS INCORPORATED By: _________________________ OPTIONEE 7 EXHIBIT 6A ACKNOWLEDGEMENT AND STATEMENT OF DECISION REGARDING ELECTION PURSUANT TO SECTION 83(b) OF INTERNAL REVENUE CODE The undersigned (which term includes the undersigned's spouse), a purchaser of common shares, par value $0.01, of DATRON SYSTEMS INCORPORATED (the "Company") pursuant to the Company's 1995 Stock Option Plan Stock Purchase Agreement (the "Agreement"), hereby states as follows: 1. The undersigned acknowledges receipt of a copy of the Agreement. The undersigned has carefully reviewed the Agreement. 2. The undersigned either [check as applicable]: ___ (a) has consulted, and has been fully advised by, the undersigned's own tax advisor, _____________________, whose business address is _____________________________, regarding the federal, state, and local tax consequences of purchasing shares under the Agreement, and particularly regarding the advisability of making elections pursuant to Section 83(b) of the Internal Revenue Code of 1986, as amended (the "Code"), and pursuant to the corresponding provisions, if any, of applicable state laws; or ___ (b) has knowingly chosen not to consult such a tax advisor. 3. The undersigned hereby states that the undersigned has decided [check as applicable]: ___ (a) to make an election pursuant to Section 83(b) of the Code, and is submitting to the Company, together with the undersigned's executed Agreement, an executed form which is attached to Exhibit 6B to the Agreement if the undersigned is exercising a non-qualified option, or as Exhibit 6C to the Agreement if the undersigned is exercising an incentive stock option; or ___ (b) not to make an election pursuant to Section 83(b) of the Code. 4. With respect to any election under Section 83(b) of the Code indicated in paragraph (3), above, the undersigned herewith submits an executed copy of the appropriate form of election and acknowledges that copies thereof have been duly and timely filed with the appropriate offices of the Internal Revenue Service and applicable state taxing authorities and that the undersigned will attach a copy of the form of election to the 8 undersigned's federal income tax return for the year of the purchase and, if required, to the undersigned's state income tax return(s) for the same period. 5. Neither the Company nor any subsidiary or representative of the Company has made any warranty or representation to the undersigned with respect to the tax consequences of the undersigned's purchase of shares under the Agreement or of the making or failure to make an election pursuant to Section 83(b) of the Code or the corresponding provisions, if any, of applicable state law. Date: ____________________________ [Purchaser] Date: ____________________________ [Purchaser] 9 EXHIBIT 6B ELECTION PURSUANT TO SECTION 83(b) OF THE INTERNAL REVENUE CODE TO INCLUDE IN GROSS INCOME THE EXCESS OVER THE PURCHASE PRICE, IF ANY, OF THE VALUE OF PROPERTY TRANSFERRED IN CONNECTION WITH SUCH SERVICES The undersigned hereby elects pursuant to Section 83(b) of the Internal Revenue Code of 1986, as amended, to include in the undersigned's gross income for the 19__ taxable year the excess (if any) of the fair market value of the property described below, over the amount the undersigned paid for such property, and supplies herewith the following information in accordance with the Treasury regulations promulgated under Section 83 (b): 1. The undersigned's name, address and taxpayer identification (social security) number are: Name: ____________________________ Address: ____________________________ Social Security #: ____________________________ 2. The property with respect to which the election is made consists of _________ common shares, par value $0.01, of DATRON SYSTEMS INCORPORATED (the "Company"). 3. The date on which the above property was transferred to the undersigned was ______________, 19__, and the taxable year to which this election relates is 19__. 4. The above property is subject to possible limits on sale imposed by the "short-swing profits" prohibition of Section 16(b) of the Securities Exchange Act of 1934, as amended. The above property may also be subject to a right of repurchase, which lapses over a period of time, at the original purchase price upon the employment termination of the undersigned. 5. The fair market value of the above property at the time of transfer (determined without regard to any restrictions other than those which by their terms will never lapse) is $___________ per share. 6. The amount paid for the above property by the undersigned was $__________ per share. 10 7. A copy of this election has been furnished to the Company. Dated: _____________, 19__. Purchaser's Signature 11 EXHIBIT 6C PROTECTIVE SPECIAL ELECTION PURSUANT TO SECTION 83(b) OF THE INTERNAL REVENUE CODE WITH RESPECT TO PROPERTY ACQUIRED BY EXERCISE OF AN INCENTIVE STOCK OPTION The undersigned hereby makes the election, modified to the effect described below, authorized by Section 83(b) of the Internal Revenue Code, as amended (the "Code"), with respect to common stock acquired by the undersigned pursuant to the exercise of an "incentive stock option" during the _______ taxable year. Pursuant to the Treasury Regulations under Section 83(b) of the Code the undersigned supplies herewith the following information: 1. The undersigned's name, address and taxpayer identification (Social Security) number are: Name: ____________________________ Address: ____________________________ Social Security #: ____________________________ 2. The property with respect to which the election is made consists of ______ common shares, par value $0.01, of DATRON SYSTEMS INCORPORATED (the "Company"). 3. The date on which the above property was transferred to the undersigned was ______________ and the taxable year to which this election relates is the ______ calendar year. 4. The above property is subject to possible limits on sale imposed by the "short-swing profits" prohibition of Section 16(b) of the Securities Exchange Act of 1934, as amended. The above property may also be subject to a right of repurchase, which lapses over a period of time, at the original purchase price upon the employment termination of the undersigned. 5. The fair market value of the above property at the time of transfer (determined without regard to any restrictions other than restrictions which by their terms will never lapse) was $__________ per share. 6. The amount paid for the above property by the undersigned was $_________ per share. 7. The amount expressly excluded from income pursuant to Sections 421(a) and 422 of the Code was $__________ per share. 8. A copy of this election has been furnished to the Company and a copy will be filed with the income tax returns of the undersigned to which the election relates. 12 9. Because the property described above is comprised of shares of stock of the Company acquired by exercise of an "incentive stock option" (within the meaning of Section 422 of the Code), Section 421(a) (1) of the Code expressly excludes from income any excess of the fair market value of the above property over the amount paid for the above property. Accordingly, this election is protective only, and is made solely to bar application of Section 83(a) of the Code, not to cause the undersigned actually to recognize income which, apart from this election, is protected from recognition by Section 421 and 422 of the Code, with respect to the property described above. Date: __________________, 19__. Purchaser's Signature EX-4.3 4 ISO STOCK OPTION AGREEMENT DATRON SYSTEMS INCORPORATED 1995 STOCK OPTION PLAN INCENTIVE STOCK OPTION AGREEMENT (A) Name of Optionee: __________________ (B) Grant Date: ________________________ (C) Number of Shares: __________________ (D) Exercise Price: ____________________ (E) Effective Date: ____________________ THIS INCENTIVE STOCK OPTION AGREEMENT (the "Agreement"), is made and entered into as of the date set forth in Item E above (the "Effective Date") between Datron Systems Incorporated, a Delaware corporation (the "Company") and the person named in Item A above ("Optionee"). THE PARTIES AGREE AS FOLLOWS: 1. Grant of Option; Effective Date. 1.1 Grant. The Company hereby grants to Optionee pursuant to the Company's 1995 Stock Option Plan (the "Plan"), a copy of which is attached to this Agreement as Exhibit 1, an incentive stock option (the "ISO") to purchase all or any part of an aggregate of the number of shares (the "ISO Shares") of the Company's Common Stock (as defined in the Plan) listed in Item C above on the terms and conditions set forth herein and in the Plan, the terms and conditions of the Plan being hereby incorporated into this Agreement by reference. 1.2 Effective Date. The parties hereby establish the date set forth in Item E above as the Effective Date. 2. Exercise Price. The exercise price for purchase of each share of Common Stock covered by this ISO shall be the price set forth in Item D above. 3. Term. Unless otherwise specified on Exhibit 3 attached hereto, if any (the absence of such exhibit indicating that no such exhibit was intended), this ISO shall expire as provided in Section 6.3.2 of the Plan. 4. Adjustment of ISOs. The Company shall adjust the number and kind of shares and the exercise price thereof in certain circumstances in accordance with the provisions of Section 6.1.1 of the Plan. 5. Exercise of Options. 5.1 Time of Exercise. This ISO shall be exercisable in accordance with Section 6.1.5 of the Plan and the provisions of Exhibit 3 hereto, the absence of such exhibit indicating that no such exhibit was intended. 2 5.2 Exercise After Termination of Status as an Employee or Director. In the event of termination of Optionee's continuous status as an employee or director, this ISO may be exercised only in accordance with the provisions of Section 6.1.8 of the Plan. 5.3 Manner of Exercise. Optionee may exercise this ISO, or any portion of this ISO, as provided in Section 7 of the Plan. 5.4 Payment. Except as provided in Exhibit 5.4 attached hereto, if any (the absence of such exhibit indicating that no exhibit was intended), or in the stock purchase agreement executed upon exercise of this ISO, payment for ISO Shares shall be made in cash or by delivery by the optionee of Common Stock already owned by the optionee in accordance with (and subject to the restrictions contained in) Section 6.1.7 of the Plan. 5.5 Delivery of Certificate. Promptly after receipt of written notice of exercise of the ISO, the Company shall, without stock issue or transfer taxes to the Optionee or other person entitled to exercise, deliver to the Optionee or other person a certificate or certificates for the requisite number of ISO Shares. An Optionee or transferee of an Optionee shall not have any privileges as a shareholder with respect to any ISO Shares covered by the option until the date of issuance of a stock certificate. 6. Nonassignability of ISO. This ISO is not assignable or transferable by Optionee except as provided in Section 6.1.6 of the Plan. 7. Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of California applicable to contracts entered into and wholly to be performed within the State of California by California residents. 8. Notices. All notices and other communications under this Agreement shall be in writing. Unless and until the Optionee is notified in writing to the contrary, all notices, communications, and documents directed to the Company and related to the Agreement, if not delivered by hand, shall be mailed, addressed as follows: Datron Systems Incorporated 304 Enterprise Street Escondido, California 92029 Attention: Chief Financial Officer Unless and until the Company is notified in writing to the contrary, all notices, communications, and documents intended for the Optionee and related to this Agreement, if not delivered by hand, shall be mailed to Optionee's last known address as shown on the Company's books. Notices and communications shall be mailed by first class mail, postage prepaid; documents shall be 3 mailed by registered mail, return receipt requested, postage prepaid. All mailings and deliveries related to this Agreement shall be deemed received when actually received, if by hand delivery, and two business days after mailing, if by mail. 9. Tax Consequences. The Optionee understands that the tax consequences associated with this option and with shares purchasable under this option can be complex and can depend, in part, upon the Optionee's particular circumstances. The Optionee understands, for example, that the exercise of this option can result in the imposition of tax even before the Optionee resells the option shares. Accordingly, the Optionee should consult a tax adviser. The Optionee also understands that if the Optionee sells or otherwise disposes of any shares purchased under this option within two years after the date this option was granted or within one year after the date the Optionee purchased the shares (a "disqualifying disposition"), the Company may be entitled to a deduction from its income for income tax purposes. The amount of the deduction could depend on the price the Optionee receives for the shares. Accordingly, the Optionee agrees to notify the Company in writing of the date and terms of any disqualifying disposition and to comply with any other requirements now or hereafter specified by the Company which are intended to enable the Company to secure such a deduction. IN WITNESS WHEREOF, the parties have executed this Incentive Stock Option Agreement as of the Effective Date. DATRON SYSTEMS INCORPORATED By________________________________ Title_____________________________ The Optionee hereby accepts and agrees to be bound by all of the terms and conditions of this Agreement and the Plan. __________________________________ Optionee Dated:___________________________ Optionee's spouse indicates by the execution of this Incentive Stock Option Agreement his or her consent to be bound by the terms thereof as to his or her interests, whether as community property or otherwise, if any, in the option granted hereunder, and in any ISO Shares purchased pursuant to this Agreement. _________________________________ Optionee's Spouse 4 EXHIBITS Exhibit 1 1995 Stock Option Plan Exhibit 3 (if applicable) Exercise Schedule and Expiration Date Exhibit 5.4 (if applicable) Payment 5 EXHIBIT 3 DATRON SYSTEMS INCORPORATED Option of ________________ Granted ____________, 19__ Exercise Schedule Subject to the terms and conditions set forth in the Agreement of which this schedule is a part, the Option is exercisable in accordance with the following schedule: On and After Exercisable Portion of Option 19__ __% 19__ another __% 19__ another __% Expiration Date This option expires on __________________ __, ____. (Do not enter a date after the maximum term provided in Section 6.3.2 of the Plan; if blank, or if a date after the latest date permitted under Section 6.3.2 is entered, then the option expires as provided in Section 6.3.2 of the Plan.) 6 EXHIBIT 5.4 MANNER OF PAYMENT IF OTHER THAN BY CASH By the attachment of this Exhibit 5.4 the Administrator hereby authorizes Optionee to pay for any shares of the Company's Common Stock purchased upon exercise of this Option by [check as applicable]: ____ 1. Giving to the Company Optionee's full recourse promissory note for the exercise price (other than the par value of the shares acquired, which is payable in cash or other lawful consideration), as provided in Section 6.1.7(A) of the Plan; and/or ____ 2. Delivering to the Company the following property as permitted pursuant to section 6.1.7(B) of the Plan: DATRON SYSTEMS INCORPORATED By: _________________________ OPTIONEE _______________________ EX-4.4 5 NONQUALIFIED STOCK OPTION AGREEMENT DATRON SYSTEMS INCORPORATED 1995 STOCK OPTION PLAN NONQUALIFIED STOCK OPTION AGREEMENT (A) Name of Optionee: __________________ (B) Grant Date: ________________________ (C) Number of Shares: __________________ (D) Exercise Price: ____________________ (E) Effective Date: ____________________ THIS NONQUALIFIED STOCK OPTION AGREEMENT (the "Agreement"), is made and entered into as of the date set forth in Item E above (the "Effective Date") between Datron Systems Incorporated, a Delaware corporation (the "Company") and the person named in Item A above ("Optionee"). THE PARTIES AGREE AS FOLLOWS: 1. Grant of Option; Effective Date. 1.1 Grant. The Company hereby grants to Optionee pursuant to the Company's 1995 Stock Option Plan (the "Plan"), a copy of which is attached to this Agreement as Exhibit 1, a nonqualified stock option (the "NQO") to purchase all or any part of an aggregate of the number of shares (the "NQO Shares") of the Company's Common Stock (as defined in the Plan), listed in Item C above on the terms and conditions set forth herein and in the Plan, the terms and conditions of the Plan being hereby incorporated into this Agreement by reference. 1.2 Effective Date. The parties hereby establish the date set forth in Item E above as the Effective Date. 2. Exercise Price. The exercise price for purchase of each share of Common Stock covered by this NQO shall be the price set forth in Item D above. 3. Term. Unless otherwise specified on Exhibit 3 attached hereto, if any (the absence of such exhibit indicating that no such exhibit was intended), this NQO shall expire as provided in Section 6.2.2 of the Plan. 4. Adjustment of NQOs. The Company shall adjust the number and kind of shares and the exercise price thereof in certain circumstances in accordance with the provisions of Section 6.1.1 of the Plan. 5. Exercise of Options. 5.1 Time of Exercise. This NQO shall be exercisable in accordance with Section 6.1.5 of the Plan and the provisions of Exhibit 3 hereto, the absence of such exhibit indicating that no such exhibit was intended. 2 5.2 Exercise After Termination of Status as an Employee or Director. In the event of termination of Optionee's continuous status as an employee or director, this NQO may be exercised only in accordance with the provisions of Section 6.1.8 of the Plan. 5.3 Manner of Exercise. Optionee may exercise this NQO, or any portion of this NQO, in accordance with Section 7 of the Plan. 5.4 Payment. Except as provided in Exhibit 5.4 attached hereto, if any (the absence of such exhibit indicating that no exhibit was intended), or in the stock purchase agreement executed upon exercise of this NQO, payment for NQO Shares shall be made in cash or by delivery by the optionee of Common Stock already owned by the optionee in accordance with (and subject to the restrictions contained in) Section 6.1.7 of the Plan. 5.5 Delivery of Certificate. Promptly after receipt of written notice of exercise of the NQO, the Company shall, without stock issue or transfer taxes to the Optionee or other person entitled to exercise, deliver to the Optionee or other person a certificate or certificates for the requisite number of NQO Shares. An Optionee or transferee of an Optionee shall not have any privileges as a shareholder with respect to any NQO Shares covered by the option until the date of issuance of a stock certificate. 6. Nonassignability of NQO. This NQO is not assignable or transferable by Optionee except except as provided in Section 6.1.6 of the Plan. 7. Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of California applicable to contracts entered into and wholly to be performed within the State of California by California residents. 8. Notices. All notices and other communications under this Agreement shall be in writing. Unless and until the Optionee is notified in writing to the contrary, all notices, communications, and documents directed to the Company and related to the Agreement, if not delivered by hand, shall be mailed, addressed as follows: Datron Systems Incorporated 304 Enterprise Street Escondido, California 92029 Attention: Chief Financial Officer Unless and until the Company is notified in writing to the contrary, all notices, communications, and documents intended for the Optionee and related to this Agreement, if not delivered by hand, shall be mailed to Optionee's last known address as shown on the Company's books. Notices and communications shall be 3 mailed by first class mail, postage prepaid; documents shall be mailed by registered mail, return receipt requested, postage prepaid. All mailings and deliveries related to this Agreement shall be deemed received when actually received, if by hand delivery, and two business days after mailing, if by mail. 9. Tax Consequences. The Optionee understands that the tax consequences associated with this option and with shares purchasable under this option can be complex and can depend, in part, upon the Optionee's particular circumstances. The Optionee understands, for example, that the exercise of this option can result in the imposition of tax even before the Optionee resells the option shares. Accordingly, the Optionee should consult a tax adviser. IN WITNESS WHEREOF, the parties have executed this Nonqualified Stock Option Agreement as of the Effective Date. DATRON SYSTEMS INCORPORATED By________________________________ Title_____________________________ The Optionee hereby accepts and agrees to be bound by all of the terms and conditions of this Agreement and the Plan. __________________________________ Optionee Dated:___________________________ Optionee's spouse indicates by the execution of this Nonqualified Stock Option Agreement his or her consent to be bound by the terms thereof as to his or her interests, whether as community property or otherwise, if any, in the option granted hereunder, and in any NQO Shares purchased pursuant to this Agreement. _______________________________ Optionee's Spouse 4 EXHIBITS Exhibit 1 1995 Stock Option Plan Exhibit 3 (if applicable) Exercise Schedule and Expiration Date Exhibit 5.4 (if applicable) Payment 5 EXHIBIT 3 DATRON SYSTEMS INCORPORATED Option of ________________ Granted ____________, 19__ Exercise Schedule Subject to the terms and conditions set forth in the Agreement of which this schedule is a part, the Option is exercisable in accordance with the following schedule: On and After Exercisable Portion of Option __________________ 19__ __% - ------------------ 19__ another __% - ------------------ 19__ another __% Expiration Date This option expires on ____________________ __, _____. (Do not enter a date after the maximum term provided in Section 6.2.2 of the Plan; if blank, or if a date after the latest date permitted under Section 6.2.2 is entered, then the option expires as provided in Section 6.2.2 of the Plan.) 6 EXHIBIT 5.4 MANNER OF PAYMENT IF OTHER THAN BY CASH By the attachment of this Exhibit 5.4 the Administrator hereby authorizes Optionee to pay for any shares of the Company's Common Stock purchased upon exercise of this Option by [check as applicable]: ____ 1. Giving to the Company Optionee's full recourse promissory note for the exercise price (other than the par value of the shares acquired, which must be paid in cash or other lawful consideration), as provided in Section 6.1.7(A) of the Plan; and/or ____ 2. Delivering to the Company the following property as permitted pursuant to section 6.1.7(B) of the Plan: DATRON SYSTEMS INCORPORATED By: _________________________ OPTIONEE _____________________________ EX-5 6 OPINION OF LEGAL COUNSEL November 13, 1996 11410-0000 Datron Systems Incorporated 304 Enterprise Street Escondido, California 92029 Registration Statement on Form S-8 1995 Stock Option Plan Ladies and Gentlemen: We have acted as counsel to Datron Systems Incorporated, a Delaware corporation (the "Company"), in connection with the Registration Statement on Form S-8 (the "Registration Statement") which the Company proposes to file with the Securities and Exchange Commission on or about November 18, 1996 for the purpose of registering under the Securities Act of 1933, as amended, 500,000 shares (the "Shares") of Common Stock, par value $0.01 per share, issuable under the Company's 1995 Stock Option Plan (the "Plan"). In connection with this opinion, we have assumed the authenticity of all records, documents and instruments submitted to us as originals, the genuineness of all signatures, the legal capacity of natural persons and the authenticity and the conformity to the originals of all records, documents and instruments submitted to us as copies. In addition, you have advised us that, other than options outstanding under the Plan or the Company's 1985 Stock Option Plan, the Company has no outstanding options, warrants, conversion rights or other agreements requiring the future issuance of Common Stock. We have based our opinion upon our review of the following records, documents and instruments: (a) The Certificate of Incorporation of the Company certified by the Secretary of State of the State of Delaware as of October 7, 1996 and certified to us by an officer of the Company as being complete and in full force and effect as of the date of this opinion; 2 (b) The Bylaws of the Company certified to us by an officer of the Company as being complete and in full force and effect as of the date of this opinion; (c) A Certificate of Good Standing from the Delaware Secretary of State dated October 7, 1996; (d) A Certificate of the Company's transfer agent as to the number of issued and outstanding shares of the Company's Common Stock dated as of November 12, 1996; (e) The Registration Statement; and (f) The Plan. This opinion is limited to Delaware General Corporation Law. We disclaim any opinion as to any statute, rule, regulation, ordinance, order or other promulgation of any other jurisdiction or any regional or local governmental body. Based upon the foregoing and our examination of such questions of law as we have deemed necessary or appropriate for the purpose of this opinion, and assuming that (i) the Registration Statement becomes and remains effective during the period when the Shares are offered and sold, (ii) the full consideration stated in the Plan is paid for each Share and (iii) all applicable securities laws are complied with, it is our opinion that, when issued and sold by the Company, and after payment therefor in the manner provided in the Plan, the Shares will be validly issued, fully paid and nonassessable. This opinion is rendered to you in connection with the issuance of the Shares and is solely for your benefit. This opinion may not be relied upon by you for any other purpose, or relied upon by any other person, firm, corporation or other entity for any purpose, without our prior written consent. We disclaim any obligation to advise you of any developments in areas covered by this opinion that occur after the date of this opinion. We hereby consent to the filing of this opinion as an exhibit to the Registration Statement. Very truly yours, HELLER, EHRMAN, WHITE & MCAULIFFE EX-23.1 7 CONSENT OF LEGAL COUNSEL CONSENT OF HELLER, EHRMAN, WHITE & MCAULIFFE (Filed as part of Exhibit 5) EX-23.2 8 AUDITOR'S CONSENT INDEPENDENT AUDITORS' CONSENT We consent to the incorporation by reference in this Registration Statement of Datron Systems Incorporated on Form S-8 of our reports dated May 10, 1996, appearing in and incorporated by reference in the Annual Report on Form 10-K of Datron Systems Incorporated for the year ended March 31, 1996. DELOITTE & TOUCHE LLP San Diego, California November 18, 1996 EX-24 9 POWER OF ATTORNEY POWER OF ATTORNEY See Page 8 of Form S-8 -----END PRIVACY-ENHANCED MESSAGE-----