Appendix B
NAPCO SECURITY SYSTEMS, INC.
2002 EMPLOYEE STOCK OPTION PLAN
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1. Purpose of the
Plan. This 2002 Employee Stork Option Plan (hereinafter
referred to as the ""Plan") is intended to encourage ownership of
stock of Napco
Security Systems, Inc. (hereinafter referred to as the
"Corporation") by key
employees of the Corporation and its subsidiaries, if any, to
attract and retain
high caliber personnel upon whose judgment, skill and initiative
the success of
the Company is dependent and to provide additional incentive for
them to promote
the success of the Corporation. As used in the Plan, the term
"subsidiary" shall
have the same meaning as the term "subsidiary corporation" defined
in Section
424(f) of the Internal Revenue Code of 1986, as amended (the
"Code"). Options
granted to employees under the Plan may be either incentive stock
options
("Incentive Stock Options"), within the meaning of Section 422(b)
of the Code,
or options that do not constitute Incentive Stock Options.
2.
Scope of the Plan. Three Hundred Forty Thousand (340,000) shares of
the
Corporation's Common Stock, par value $.01 per share (hereinafter
referred to as
"Common Stock"), shall be available and reserved for issue under
the Plan
subject, however, to the provisions of Section 11 hereof. Shares
issued under
the Plan may be, in whole or in part, as determined by the
Committee, authorized
but unissued shares of Common Stock or treasury shares. If an
option should
expire or terminate for any reason without having been exercised in
full, the
unpurchased shares that were subject thereto shall, unless the Plan
shall have
terminated, become available for other options under the Plan.
Common Stock
shall not be issued in respect of an option granted under the Plan
unless the
exercise of such option and the issuance and delivery of shares of
Common Stock
pursuant thereto shall comply with all relevant provisions of law,
including the
Securities Act of 1933, as amended, the rules and regulations
thereunder, the
Securities Exchange Act of 1934, as amended, the rules and
regulations
thereunder, and the requirements of any stock exchange upon which
the Common
Stock may then be listed.
3.
Administration of the Plan. The Plan shall be administered by
the
Compensation/Stock Option Committee (hereinafter sometimes referred
to as the
"Committee") of the Board of Directors of the Corporation. The
Committee shall
be composed of two or more persons who shall be designated by the
Board to
administer the Plan. Each member of the Committee, while serving as
such, shall
be a member of the Board and shall be a "non-employee director"
within the
meaning of Rule 16b-3 under the Securities and Exchange Act of
1934.
(a) The Committee
shall have the full power to grant options under
the Plan, to construe and interpret the Plan, and to establish
rules and regulations and perform all other acts it believes
reasonable and proper, including the authority to delegate
responsibilities to others to assist in administering the Plan.
(b) The determination
of those eligible to receive options, and the
amount, type and terms and conditions of each Stock Option
shall
rest in the sole discretion of the Committee, subject to the
provisions of the Plan.
4.
Eligibility. Options may be granted only to valued key
employees
(including officers and directors who are employees) of the
Corporation or any
subsidiary; provided, however, that no option shall be granted
hereunder to any
person who owns more than 10% of the Common Stock determined in
accordance with
the provisions of Section 422(b)(6) of the Code unless the Option
meets the
requirements of Section 422(c)(5) of the Code.
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5.
Option Price. The purchase price to be paid for Common Stock
issued
pursuant to the exercise of any option granted under the Plan shall
be not less
than the fair market value of such stock on the date the option is
granted as
provided in Section 13 hereof (but in no event less than the par
value of the
Common Stock), and shall not thereafter be subject to reduction
except as
provided in Section 11 hereof; provided, however, that the purchase
price to be
paid for Common Stock issued pursuant to an option granted to an
individual who,
at the time of grant, owns stock possessing more than ten percent
of the total
combined voting power of all classes of stock of the Corporation or
its
subsidiaries, as described in Section 422(b)(6) of the Code, shall,
as provided
by Section 422(c)(5) of the Code, be not less than 110% of the fair
market value
of the Common Stock. For purposes under the Plan, the fair market
value of a
share of Stock on a particular date shall be equal to the last
reported sales
price of the Common Stock (i) reported by the National Market
System of NASDAQ
on that date or (ii) if the Common Stock is listed on a national
stock exchange,
reported on the stock exchange composite tape on that date; or, in
either case,
if no prices are reported on that date, on the last preceding date
on which such
price of the Common Stock is so reported. If the Common Stock is
traded over the
counter at the time a determination of its fair market value is
required to be
made hereunder, its fair market value shall be deemed to be equal
to the average
between the reported high and low or closing bid and asked prices
of Common
Stock on the most recent date on which Common Stock was publicly
traded. In the
event Common Stock is not publicly traded at the time a
determination of its
value is required to be made hereunder, the determination of its
fair market
value shall be made by the Committee in such manner as it deems
appropriate.
6.
Term of Options. The Committee shall establish the term of any
option
granted under the Plan provided however that no option shall be
exercisable
after the expiration of 10 years from the date of grant of the
option.
7.
Non-Transferability of Options. An option granted under the Plan
shall
by its terms not be transferable and an option may be exercised,
during the
lifetime of the holder of the option, only by such holder; provided
however, an
option may be transferred by will or the laws of descent and
distribution, to
the estate of a deceased employee, and such option may be exercised
by the
estate's legal representative within three (3) months of the date
of death. More
particularly, but
