HEI INC
EX-10.10 1991 STOCK OPTION PLAN
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<TYPE>EX-10.10
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<FILENAME>c73246kexv10w10.txt
<DESCRIPTION>EX-10.10 1991 STOCK OPTION PLAN
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                                                                   Exhibit 10.10



                                    HEI, INC.
                1998 STOCK OPTION PLAN FOR NONEMPLOYEE DIRECTORS
           (AS AMENDED BY THE BOARD OF DIRECTOR ON DECEMBER 12, 2002)


     1. Purpose. The purpose of this Plan is to attract and retain qualified
individuals to serve as nonemployee members of the Board of Directors of HEI,
Inc. (the "Company") and to provide such persons with appropriate incentives.
The Company has adopted the Plan effective as of November 18, 1998, subject to
the approval of the Company's stockholders, and unless extended by amendment in
accordance with the terms of the Plan, no Option Rights will be granted
hereunder after the tenth anniversary of such effective date. Upon the approval
of the adoption of the Plan by the Company's stockholders, the Plan will replace
and supersede the Company's prior Stock Option Plan for Nonemployee Directors
(the "1991 Plan").

     2. Definitions. As used in this Plan,

     "Board" means the Board of Directors of the Company.

     "Change in Control" means a change in control of the Company, which will be
deemed to have occurred after the effective date of this Plan if:

          (i) any "person" as such term is used in Section 3(a)(9) of the
     Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof
     except that such term shall not include (A) the Company or any of its
     subsidiaries, (B) any trustee or other fiduciary holding securities under
     an employee benefit plan of the Company or any of its affiliates, (C) an
     underwriter temporarily holding securities pursuant to an offering of such
     securities, (D) any corporation owned, directly or indirectly, by the
     stockholders of the Company in substantially the same proportions as their
     ownership of Common Shares, or (E) any person or group as used in Rule
     13d-1(b) under the Exchange Act, is or becomes the Beneficial Owner, as
     such term is defined in Rule 13d-3 under the Exchange Act, directly or
     indirectly, of securities of the Company (not including in the securities
     beneficially owned by such person any securities acquired directly from the
     Company or its affiliates other than in connection with the acquisition by
     the Company or its affiliates of a business) representing 50% or more of
     the combined voting power of the Company's then outstanding securities.

          (ii) during any period of two consecutive years, individuals who at
     the beginning of such period constitute the Board, and any new director
     (other than (A) a director designated by a person who has entered into an
     agreement with the Company to effect a transaction described in clause (i),
     (iii), or (iv) of this definition or (B) a director whose initial
     assumption of office is in connection with an actual or threatened election
     contest, including but not limited to a consent solicitation, relating to
     the election of directors of the Company) whose election by the Board or
     nomination for election by the Company's stockholders was approved by a
     vote of at least two-thirds (2/3) of the directors then still in office who
     either were directors at the beginning of the period or

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     whose election or nomination for election was previously so approved, cease
     for any reason to constitute at least a majority thereof;

          (iii) there is consummated a merger or consolidation of the Company or
     any direct or indirect subsidiary of the Company with any other
     corporation, other than (A) a merger or consolidation which would result in
     the voting securities of the Company outstanding immediately prior thereto
     continuing to represent (either by remaining outstanding or by being
     converted into voting securities of the surviving entity or any parent
     thereof) in combination with the ownership of any trustee or other
     fiduciary holding securities under an employee benefit plan of the Company
     or any subsidiary of the Company, at least 75% of the combined voting power
     of the securities of the Company or such surviving entity or any parent
     thereof outstanding immediately after such merger or consolidation, or (B)
     a merger or consolidation effected to implement a recapitalization of the
     Company (or similar transaction) in which no person (as defined above) is
     or becomes the beneficial owner, directly or indirectly, of securities of
     the Company (not including in the securities beneficially owned by such
     person any securities acquired directly from the Company or its affiliates
     other than in connection with the acquisition by the Company or its
     affiliates of a business) representing 25% or more of the combined voting
     power of the Company's then outstanding securities; or

          (iv) the stockholders of the Company approve a plan of complete
     liquidation or dissolution of the Company or there is consummated an
     agreement for the sale or disposition by the Company of all or
     substantially all of the Company's assets (or any transaction having a
     similar effect) other than a sale or disposition by the Company of all or
     substantially all of the Company's assets to an entity, at least 75% of the
     combined voting power of the voting securities of which are owned by
     stockholders of the Company in substantially the same proportions as their
     ownership of the Company immediately prior to such sale.

     "Code" means the Internal Revenue Code of 1986, as amended from time to
time.

     "Common Shares" means (i) shares of the voting common stock of the Company
and (ii) any security into which Common Shares may be converted by reason of any
transaction or event of the type referred to in Section 6 of this Plan.

     "Date of Grant" means the date specified by the Board on which a grant of
Option Rights shall become effective, which shall not be earlier than the date
on which the Board takes action with respect thereto.

     "Disability" means any physical or mental illness, injury or condition that
would qualify a Participant for benefits under any long-term disability benefit
plan maintained by the Company or any Subsidiary and applicable to such
Participant (or, if the Participant is not eligible for any such plan, to senior
executive officers of the Company).

     "Exchange Act" means the Securities Exchange Act of 1934, as amended from
time to time.


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     "Market Value per Share" means the fair market value of the Common Shares
as determined by the Board from time to time.

     "Option Price" means the purchase price payable upon the exercise of an
Option Right.

     "Option Right" means the right to purchase Common Shares from the Company
upon the exercise of a nonqualified stock option granted pursuant to Section 4
of this Plan.

     "Participant" means an individual who, at the time of any automatic award
of Option Rights pursuant to Section 4 below, is a member of the Board and both
a "non-employee director" within the meaning of Rule 16b-3 and an "outside
director" within the meaning of Section 162(m) of the Code.

     "Rule 16b-3" means Rule 16b-3, as promulgated and amended from time to time
by the Securities and Exchange Commission under the Exchange Act, or any
successor rule to the same effect.

     "Subsidiary" means a corporation, partnership, joint venture,
unincorporated association or other entity in which the Company has a direct or
indirect ownership or other equity interest.

     3. Shares Available under the Plan. Subject to adjustment as provided in
Section 6 of this Plan, the number of Common Shares which may be issued or
transferred upon the exercise of Option Rights shall not in the aggregate exceed
425,000 Common Shares (including any Common Shares remaining under the 1991
Plan), which may be Common Shares of original issuance or Common Shares held in
treasury or a combination thereof. For the purposes of this Section 3:

     (a) Upon payment in cash of the benefit provided by any award granted under
this Plan, any Common Shares that were covered by that award shall again be
available for issuance or transfer hereunder; and

     (b) Upon the full or partial payment of any Option Price by the transfer to
the Company of Common Shares or upon satisfaction of tax withholding obligations
in connection with any such exercise or any other payment made or benefit
realized under this Plan by the transfer or relinquishment of Common Shares,
there shall be deemed to have been issued or transferred under this Plan only
the net number of Common Shares actually issued or transferred by the Company
less the number of Common Shares so transferred or relinquished.

     4. Option Rights. Subject to adjustment as provided in Section 6 of this
Plan, the Board shall automatically grant to each Participant Option Rights to
purchase Common Shares upon such terms and conditions as the Board may determine
in accordance with the following provisions:



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     (a) Effective as of November 18, 1998, each individual who was then a
Participant shall be granted Option Rights to purchase 55,000 Common Shares.
Thereafter, commencing with the annual meeting of the Company's stockholders in
January 2000, each individual who is a Participant upon the adjournment of an
annual meeting of the Company's stockholders shall be granted Option Rights to
purchase 10,000 Common Shares, effective as of the date of such annual meeting.

     (b) Each grant shall specify an Option Price per Common Share, which shall
equal the Market Value per Share on the Date of Grant.

     (c) Each grant shall specify the form of consideration to be paid in
satisfaction of the Option Price and the manner of payment of such
consideration, which may include (i) cash in the form of currency or check or
other cash equivalent acceptable to the Company, (ii) nonforfeitable,
unrestricted Common Shares, which are already owned by the Participant, (iii)
any other legal consideration that the Board may deem appropriate, on such basis
as the Board may determine in accordance with this Plan and (iv) any combination
of the foregoing.

     (d) Any grant may, if there is then a public market for the Common Shares,
provide for deferred payment of the Option Price from the proceeds of sale
through a broker of some or all of the Common Shares to which the exercise
relates.

     (e) Successive grants may be made to the same Participant regardless of
whether any Option Rights previously granted to the Participant remain
unexercised.

     (f) Each grant shall specify that the Option Rights awarded thereby shall
become exercisable in full upon the earliest to occur of (i) the ninth
anniversary of the Date of Grant, (ii) the first date after the Date of Grant on
which the Market Value per Share of the Common Shares (as adjusted as provided
in Section 6 of this Plan) equals or exceeds $25.00, (iii) the date of the
Participant's death or Disability, and (iv) the effective date of a Change in
Control.

     (g) Each grant shall specify whether the Participant must remain in
continuous service with the Company in order for the Option Rights awarded
thereby to become exercisable in full as set forth in Section 4(f) above.

     (h) Option Rights granted pursuant to this Section 4 shall be nonqualified
stock options.

     (i) No Option Right granted pursuant to this Section 4 may be exercised
more than 10 years from the Date of Grant.

     (j) Each grant shall be evidenced by an agreement, which shall be executed
on behalf of the Company by any designated officer thereof and delivered to and
accepted by the Participant and shall contain such terms and provisions as the
Board may determine consistent with this Plan.



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     5. Transferability. No Option Right granted under this Plan may be
transferred by a Participant, except (i) by will or the laws of descent and
distribution, (ii) to one or more members of the Participant's immediate family,
or (iii) to a trust established for the benefit of the Participant and/or one or
more members of the Participant's immediate family. Option Rights granted under
this Plan may not be exercised during a Participant's lifetime except by (i) the
Participant, (ii) a transferee of the Participant described in the preceding
sentence, or (iii) in the event of the legal incapacity of the Participant or
any such transferee, by the guardian or legal representative of the Participant
or such transferee (as applicable) acting in a fiduciary capacity on behalf
thereof under state law and court supervision.

     6. Adjustments.

     (a) The Board may make or provide for such adjustments in the number of
Common Shares covered by outstanding Option Rights granted hereunder, the Option
Prices per Common Share applicable to any such Option Rights, and the kind of
shares (including shares of another issuer) covered thereby, as the Board may in
good faith determine to be equitably required in order to prevent dilution or
expansion of the rights of Participants that otherwise would result from (i) any
stock dividend, stock split, combination of shares, recapitalization or similar
change in the capital structure of the Company or (ii) any merger,
consolidation, spin-off, spin-out, split-off, split-up, reorganization, partial
or complete liquidation or other distribution of assets, issuance of warrants or
other rights to purchase securities or any other corporate transaction or event
having an effect similar to any of the foregoing. In the event of any such
transaction or event, the Board may provide in substitution for any or all
outstanding awards under this Plan such alternative consideration as it may in
good faith determine to be equitable under the circumstances and may require in
connection therewith the surrender of all awards so replaced. Moreover, the
Board may on or after the Date of Grant provide in the agreement evidencing any
award under this Plan that the holder of the award may elect to receive an
equivalent award in respect of securities of the surviving entity of any merger,
consolidation or other transaction or event having a similar effect, or the
Board may provide that the holder will automatically be entitled to receive such
an equivalent award. The Board may also make or provide for such adjustments in
the maximum numbers of Common Shares specified in Section 3 of this Plan as the
Board may in good faith determine to be appropriate in order to reflect any
transaction or event described in this Section 6.

     (b) If another corporation is merged into the Company or the Company
otherwise acquires another corporation, the Board may elect to assume under this
Plan any or all outstanding stock options or other awards granted by such
corporation under any stock option or other plan adopted by it prior to such
acquisition. Such assumptions shall be on such terms and conditions as the Board
may determine; provided, however, that the awards as so assumed do not contain
any terms, conditions or rights that are inconsistent with the terms of this
Plan. Unless otherwise determined by the Board, such awards shall not be taken
into account for purposes of the limitations contained in Section 3 of this
Plan.

     7. Fractional Shares. The Company shall not be required to issue any
fractional Common Shares pursuant to this Plan. The Board may provide for the
elimination of fractions or for the settlement thereof in cash.


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     8. Withholding Taxes. To the extent that the Company is required to
withhold federal, state, local or foreign taxes in connection with any payment
made or benefit realized by a Participant or other person under this Plan, and
the amounts available to the Company for the withholding are insufficient, it
shall be a condition to the receipt of any such payment or the realization of
any such benefit that the Participant or such other person make arrangements
satisfactory to the Company for payment of the balance of any taxes required to
be withheld. At the discretion of the Board, any such arrangements may without
limitation include voluntary or mandatory relinquishment of a portion of any
such payment or benefit or the surrender of outstanding Common Shares. The
Company and any Participant or such other person may also make similar
arrangements with respect to the payment of any taxes with respect to which
withholding is not required.

     9. Administration of the Plan.

     (a) This Plan shall be administered by the Board. A majority of the Board
shall constitute a quorum, and the acts of the members of the Board who are
present at any meeting thereof at which a quorum is present, or acts unanimously
approved by the members of the Board in writing, shall be the acts of the Board.

     (b) The interpretation and construction by the Board of any provision of
this Plan or any agreement, notification or document evidencing the grant of
Option Rights, and any determination by the Board pursuant to any provision of
this Plan or any such agreement, notification or document, shall be final and
conclusive. No member of the Board shall be liable for any such action taken or
determination made in good faith.

     10. Amendments and Other Matters.

     (a) This Plan may be amended from time to time by the Board; provided,
however, that except as expressly authorized by this Plan, no such amendment
shall cause this Plan to cease to satisfy any applicable condition of Rule 16b-3
without the further approval of the stockholders of the Company.

     (b) With the concurrence of the affected Participant, the Board may cancel
any agreement evidencing Option Rights or any other award granted under this
Plan. In the event of any such cancellation, the Board may authorize the
granting of new Option Rights or other awards hereunder, which may or may not
cover the same number of Common Shares as had been covered by the cancelled
Option Rights or other award, at such Option Price, in such manner and subject
to such other terms, conditions and discretion as would have been permitted
under this Plan had the cancelled Option Rights or other award not been granted.

     (c) This Plan shall not confer upon any Participant any right with respect
to continuance of service with the Board, the Company or any Subsidiary and
shall not interfere in any way with any right that the Company, its stockholders
or any Subsidiary would otherwise have to terminate any Participant's service at
any time.



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     (d) Any award that may be made pursuant to an amendment to this Plan that
shall have been adopted without the approval of the stockholders of the Company
shall be null and void if it is subsequently determined that such approval was
required under the terms of the Plan or applicable law.

     (e) Unless otherwise determined by the Board, this Plan is intended to
comply with Rule 16b-3 at all times that awards hereunder are subject to such
Rule.





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