1995 STOCK OPTION PLAN
1. Definitions. As used in this Raytheon Company 1995 Stock Option Plan
the following terms have the following meanings:
1.1 'Change in Corporate Control' means (a) the time of approval by the
shareholders of the Company of (i) any consolidation or merger of the Company in
which the Company is not the continuing or surviving corporation or pursuant to
which shares of Stock would be converted into cash, securities or other
property, other than a merger in which the holders of Stock immediately prior to
the merger will have the same proportionate ownership of common stock of the
surviving corporation immediately after the merger, (ii) any sale, lease,
exchange, or other transfer (in one transaction or a series of related
transactions) of all or substantially all the assets of the Company, or (iii)
adoption of any plan or proposal for the liquidation or dissolution of the
Company; or (b) the date on which any 'person' (as defined in Section 13(d) of
the Securities Exchange Act of 1934), other than the Company or a subsidiary or
employee benefit plan or trust maintained by the Company or any of its
subsidiaries, shall become (together with its 'affiliates' and 'associates,' as
defined in Rule 12b-2 under the Securities Exchange Act of 1934) the 'beneficial
owner' (as defined in Rule 13d-3 under the Securities Exchange Act of 1934),
directly or indirectly, of more than 25% of the Stock outstanding at the time,
without the prior approval of the Board of Directors of the Company.
1.2 'Code' means the Internal Revenue Code of 1986, as amended.
1.3 'Committee' means the Compensation Committee of the Company's Board
of Directors, consisting exclusively of directors who at the relevant time are
'outside directors' within the meaning of ss.162(m) of the Code.
1.4 'Company' means Raytheon Company, a Delaware corporation.
1.5 'Company Officer' means the Chairman of the Board, the President,
and any Executive Vice President, Senior Vice President or Vice President of the
1.6 'Fair Market Value' means the value of a share of Stock of the Company
on any date as determined by the Board.
1.7 'Grant Date' means the date on which an Option is granted, as
specified in Section 7.
1.8 'Immediate Family' means any child, stepchild, grandchild, parent,
grandparent, spouse, sibling, mother-in-law, father-in-law, son-in-law,
daughter-in-law, brother-in-law, or sister-in-law, including adoptive
1.9 'Incentive Stock Option' means an Option grant that is intended to meet
the requirements of Section 422 of the Code.
1.10 'Non-Statutory Stock Option' means an Option grant that is not
intended to be an Incentive Stock Option.
1.11 'Option' means an option to purchase shares of the Stock granted
under the Plan.
1.12 'Option Agreement' means an agreement between the Company and an
Optionee setting forth the terms and conditions of an Option.
1.13 'Option Period' means the period from the date of the grant of an
Option to the date when the Option expires as stated in the terms of the Option
1.14 'Option Price' means the price paid by an Optionee for an Option
under this Plan.
1.15 'Option Share' means any share of Stock of the Company transferred
to an Optionee upon exercise of an Option pursuant to this Plan.
1.16 'Optionee' means a person eligible to receive an Option, as
provided in Section 6, to whom an Option shall have been granted under the Plan.
1.17 'Plan' means this 1995 Stock Option Plan of the Company.
1.18 'Related Corporation' means a Parent Corporation or a Subsidiary
Corporation, each as defined in Section 424 of the Code.
1.19 'Stock' means common stock, $0.01 par value, of the Company.
2. Purpose. This 1995 Stock Option Plan is intended to encourage
ownership of Stock by key employees of the Company and its Related Corporations
and to provide additional incentive for them to promote the success of the
Company's business. With respect to any Incentive Stock Options that may be
granted hereunder, the Plan is intended to be an incentive stock option plan
within the meaning of Section 422 of the Code.
3. Term of the Plan. Options under the Plan may be granted not later
than March 21, 2005.
4. Stock Subject to the Plan. At no time shall the number of shares of
Stock then outstanding which are attributable to the exercise of Options granted
under the Plan, plus the number of shares then issuable upon exercise of
outstanding options granted under the Plan, exceed 20,000,000 shares, subject,
however, to the provisions of Section 15 of the Plan. No Optionee may be granted
in any year Options to purchase more than 200,000 shares of Stock, subject to
adjustment pursuant to Section 15. Shares to be issued upon the exercise of
Options granted under the Plan may be either authorized but unissued shares or
shares held by the Company in its treasury. If any Option expires or terminates
for any reason without having been exercised in full, the shares not purchased
thereunder shall again be available for Options thereafter to be granted.
5. Administration. The Plan shall be administered by the Committee.
Subject to the provisions of the Plan (including, without limitation, the
provisions of Section 19), the Committee shall have complete authority, in its
discretion, to make the following determinations with respect to each Option to
be granted by the Company: (a) the key employee to receive the Option; (b) the
time of granting the Option; (c) the number of shares subject thereto; (d) the
Option Price (subject to Section 8 below); (e) the Option Period; and (f)
whether the Option is an Incentive Stock Option or a Non-Statutory Stock Option.
Incentive Stock Options granted under this Plan shall be designated specifically
as such. In making such determinations, the Committee may take into account the
nature of the services rendered by the respective employees, their present and
potential contributions to the success of the Company and its subsidiaries, and
such other factors as the Committee in its discretion shall deem relevant.
Subject to the provisions of the Plan, the Committee shall also have complete
authority to interpret the Plan, to prescribe, amend and rescind rules and
regulations relating to it, to determine the terms and provisions of the
respective Option Agreements (which need not be identical), and to make all
other determinations necessary or advisable for the administration of the Plan.
The Committee's determinations on the matters referred to in this Section 5
shall be conclusive.
6. Eligibility. An Option may be granted only to a key employee of one
or more of the Company and its subsidiaries. A director of one or more of the
Company and its subsidiaries who is not also an employee of one or more of the
Company and its subsidiaries shall not be eligible to receive Options.
7. Time of Granting Options. The granting of an Option shall take place
at the time specified by the Committee. Only if expressly so provided by the
Committee shall the Grant Date be the date on which an Option Agreement shall
have been duly executed and delivered by the Company and the Optionee.
8. Option Price. The Option Price under each Option shall be as
determined by the Committee but shall not be less than 100% of the Fair Market
Value of the Stock on the Grant Date.
9. Option Period. No Incentive Stock Option may be exercised later than
the tenth anniversary of the Grant Date. No Non-Statutory Stock Option may be
exercised later than one day after the tenth anniversary of the Grant Date. An
Option may become exercisable in such installments, cumulative or
non-cumulative, or may be immediately exercisable, as the Committee may
10. Maximum Size of Incentive Stock Option as Such. To the extent that
the aggregate Fair Market Value of Stock for which an Incentive Stock Option
becomes exercisable by an Optionee for the first time in any calendar year
exceeds $100,000, the portion of such Incentive Stock Option which exceeds such
$100,000 limitation shall be treated as a Non-Statutory Stock Option, and not an
incentive option under Section 422 of the Code. For purposes of this Section 10,
all Incentive Stock Options granted to an Optionee by the Company, as well as
any options that have been granted to the Optionee under any other stock
incentive plans of the Company or any related corporation which are intended to
comply with the provisions of Section 422 of the Code, shall be considered in
the order in which they were granted, and the Fair Market Value shall be
determined as of the Grant Dates.
11. Exercise of Option.
11.1 An Option may be exercised only by giving written notice, in the
manner provided in Section 21 hereof, specifying the number of shares as to
which the Option is being exercised, accompanied (except as otherwise provided
in Subsection 11.2 of this Section 11) by full payment for such shares in the
form of check or bank draft payable to the order of the Company or other shares
of the Stock with a current Fair Market Value equal to the Option Price of the
shares to be purchased. Receipt by the Company of such notice and payment shall
constitute the exercise of the Option or a part thereof. Within 20 days
thereafter, the Company shall deliver or cause to be delivered to the Optionee a
certificate or certificates for the number of shares then being purchased. Such
shares shall be fully paid and nonassessable. If such shares are not at that
time effectively registered under the Securities Act of 1933, as amended, the
Optionee shall include with such notice a letter, in form and substance
satisfactory to the Company, confirming that such shares are being purchased for
the Optionee's own account for investment and not with a view to distribution.
11.2 In lieu of payment by check, bank draft or other shares of Stock
accompanying the written notice of exercise as described in Subsection 11.2 of
this Section 11, an Optionee may, unless prohibited by applicable law, elect to
effect payment by including with the written notice referred to in Subsection
11.2 irrevocable instructions to deliver for sale to a registered securities
broker acceptable to the Company a number of the shares subject to the Option
being exercised sufficient, after brokerage commissions, to cover the aggregate
exercise price of such Option and, if the Optionee further elects, the
Optionee's withholding obligations with respect to such exercise referred to in
Sections 12 or 20, together with irrevocable instructions to such broker to sell
such shares and to remit directly to the Company such aggregate exercise price
and, if the Optionee has so elected, the amount of such withholding obligation.
The Company shall not be required to deliver to such securities broker any stock
certificate for such shares until it has received from the broker such exercise
price and, if the Optionee has so elected, such withholding obligation amount.
12. Notice of Disposition of Stock Prior to Expiration of Specified
Incentive Stock Option Holding Period. The Company may require that the person
exercising an Incentive Stock Option give a written representation to the
Company, satisfactory in form and substance to its counsel and upon which the
Company may reasonably rely, that he or she will report to the Company any
disposition of shares purchased upon exercise prior to the expiration of the
holding periods specified by Section 422(a)(1) of the Code. If and to the extent
that the disposition imposes upon the Company federal, state, local or other
withholding tax requirements, or any such withholding is required to secure for
the Company an otherwise available tax deduction, the Company shall have the
right to require that the person making the disposition remit to the Company an
amount sufficient to satisfy those requirements.
13. Transferability of Options. Incentive options granted hereunder and
nonqualified options granted to individuals other than Company Officers shall
not be transferable, otherwise than by will or the laws of descent and
distribution, and may be exercised during the life of the holder thereof only by
him or her. Nonqualified options granted hereunder to a Company Officer may be
transferred to a member of such Company Officer's Immediate Family or trusts
established solely for the benefit of such Immediate Family members. The holder
of an Option or his or her legal representatives, legatees, distributees, or
permitted transferees, as the case may be, shall have none of the rights of a
stockholder with respect to any shares subject to such Option until such shares
have been issued to him or her under this Plan.
14. Termination of Employment or Service. Each Option shall terminate
and may no longer be exercised if the Optionee ceases to perform services for
the Company or a Related Corporation in accordance with the following:
14.1 If an Optionee ceases to be an active employee of the Company or
any Related Corporation other than by reason of death or retirement, absent in
any case a determination by the Committee to the contrary, any Options which
were exercisable by the Optionee on the date of cessation of active employment
may be exercised any time (a) before their expiration date or (b) within the
respective periods listed below in this Section 14.1, depending upon the reason
for cessation of active employment, whichever is earlier, but only to the extent
that the Options were exercisable when active employment ceased. Notwithstanding
the foregoing, in the event an Optionee fails to exercise an Incentive Stock
Option within three months after the date of termination, such Option will be
treated as a Non-Statutory Stock Option pursuant to Section 422 of the Code. The
respective periods following cessation of active employment referred to in
clause (a) of the first sentence of this Section 14.1 are as follows:
Reason for Cessation Period Following Last Day
of Active Employment of Active Employment
Within Which Option May Be Exercised
Medical leave of absence During such leave
Personal leave of absence Three months
Discharge for cause or other None
severance of employment
determined by Committee to
warrant termination of option
Layoff or similar involuntary One Year
termination without cause
Voluntary termination (non-retirement) Three Months
14.2 If an Optionee's employment terminates because of death, Options
may be exercised at any time before the expiration date or within one year after
the date of termination, whichever is earlier, but only (a) if and to the extent
that the Optionee was entitled to exercise the Option at the date of the
Optionee's death and (b) by the Optionee's estate or by the person(s) who
acquired the right to exercise such Option by bequest or inheritance or by
reason of the death of the Optionee.
14.3 If an Optionee's employment terminates because of retirement, any
Options which were exercisable by the Optionee on the date of termination of
employment may be exercised any time before their expiration date or within
three years after the date of termination, whichever is earlier, but only to the
extent that the Options were exercisable when employment ceased (absent a
determination by the Committee to the contrary at the time any such Options were
granted or prior to their expiration date), as provided hereunder.
Notwithstanding the foregoing, in the event an Optionee fails to exercise an
Incentive Stock Option within three months after the date of his or her
retirement, such Option will be treated as a Non-Statutory Stock Option.
15. Anti-Dilution Adjustments. Pro rata adjustment shall be made in the
maximum number of shares of Stock subject to the Plan or that may be awarded to
any individual in any year to give effect to any stock dividends, stock splits,
stock combinations, recapitalizations and other similar changes in the capital
structure of the Company. Pro rata adjustments shall be made in the number, kind
and price of shares of Stock covered by any outstanding Option hereunder to give
effect to any stock dividends, stock splits, stock combinations,
recapitalizations and similar changes in the capital structure of the Company,
or a merger, dissolution or reorganization of the Company, after the date the
Option is granted, so that the Optionee is treated in a manner equivalent to
that of holders of the underlying Stock.
16. Change in Corporate Control. Upon a Change in Corporate Control,
each outstanding Option shall immediately become fully exercisable, and a
registration statement under the Securities Act of 1933, as amended, with
respect to shares covered by all outstanding Options, whether to be issued by
the Company or by any successor corporation, shall be effective at all times
during which the Options may be exercised and, to facilitate resale of the
shares, during the twelve months after the last exercise of the Options.
17. Reservation of Stock. The Company shall at all times during the
term of the Options reserve and keep available such number of shares of the
Stock as will be sufficient to satisfy the requirements of this Plan and shall
pay all fees and expenses necessarily incurred by the Company in connection
18. Limitation of Rights in the Option Shares. The Optionee shall not
be deemed for any purpose to be a stockholder of the Company with respect to any
of the Option Shares except to the extent that the Option shall have been
exercised with respect thereto and, in addition, a certificate shall have been
issued therefor and delivered to the Optionee.
19. Termination and Amendment of the Plan. The Committee may at any
time terminate the Plan or make such amendment to the Plan as it shall deem
advisable, provided that, except as provided in Section 14, the Committee may
not, without the approval by the holders of a majority of the Stock, change the
classes of persons eligible to receive Options, increase the maximum number of
shares available for option under the Plan or extend the period during which
Options may be granted or exercised. No termination or amendment of the Plan
may, without the consent of the Optionee to whom any Option shall theretofore
have been granted, adversely affect the rights of such Optionee under such
20. Withholding. The Company's obligations to deliver shares of Stock
upon exercise of an Option shall be subject to the Optionee's satisfaction of
all applicable federal, state and local income and employment tax withholding
obligations. The Committee may, at or after grant, permit an Optionee to satisfy
such tax withholding requirements by delivery to the Company of shares retained
from the Option grant creating the tax obligation having a value equal to the
amount to be withheld. The value of shares of Stock to be withheld or delivered
shall be based on the Committee's determination of the Fair Market Value of a
share of Stock on the date the amount of tax to be withheld is to be determined.
21. Notices. Any communication or notice required or permitted to be
given under the Plan shall be in writing, and mailed by registered or certified
mail or delivered in hand, if to the Company, to 141 Spring Street, Lexington,
Massachusetts 02421, Attention: Vice President - Human Resources and, if to the
Optionee, to the address as the Optionee shall last have furnished to the