INCENTIVE STOCK OPTION AGREEMENT WINLAND ELECTRONICS, INC.
EXHIBIT
10.2
XXXXXXX
ELECTRONICS, INC.
2008
EQUITY INCENTIVE PLAN
THIS AGREEMENT, made effective as of
this 6th day of May, 2008, by and between Xxxxxxx Electronics, Inc., a Minnesota
corporation (the “Company”), and Xxxxxx X. de Xxxxx
(“Participant”).
W I T N E
S S E T H:
WHEREAS, Participant on the date hereof
is a key employee or officer of the Company or one of its Subsidiaries;
and
WHEREAS, the Company wishes to grant an
incentive stock option to Participant to purchase shares of the Company’s Common
Stock pursuant to the Company’s 2008 Equity Incentive Plan (the “Plan”);
and
WHEREAS, the Administrator of the Plan
has authorized the grant of an incentive stock option to Participant and has
determined that, as of the effective date of this Agreement, the fair market
value of the Company’s Common Stock is $1.74 per share;
NOW, THEREFORE, in consideration of the
premises and of the mutual covenants herein contained, the parties hereto agree
as follows:
1. Grant of
Option. The Company hereby grants to Participant on the date
set forth above (the “Date of Grant”) the right and option (the “Option”) to
purchase all or any portion of an aggregate of fifty thousand (50,000) shares of
Common Stock at a per share price of $1.74 on the terms and conditions set forth
herein and subject to adjustment pursuant to Section 15 of the
Plan. This Option is intended to be an incentive stock option within
the meaning of Section 422, or any successor provision, of the Internal Revenue
Code of 1986, as amended (the “Code”), and the regulations thereunder, to the
extent permitted under Code Section 422(d).
2. Duration
and Exercisability.
a. General. The
term during which this Option may be exercised shall terminate on May 6,
2014, except as
otherwise provided in Paragraphs 2(b) through 2(d) below. This Option
shall become exercisable according to the following schedule:
|
Vesting
Date
|
Number of
Shares
|
|
|
May
6, 2009
|
10,000
|
|
|
May
6, 2010
|
10,000
|
|
|
May
6, 2011
|
10,000
|
|
|
May
6, 2012
|
10,000
|
|
|
May
6, 2013
|
10,000
|
|
Once the
Option becomes exercisable to the extent of one hundred percent (100%) of the
aggregate number of shares specified in Paragraph 1, Participant may continue to
exercise this Option under the terms and conditions of this Agreement until the
termination of the Option as provided herein. If Participant does not
purchase upon an exercise of this Option the full number of shares which
Participant is then entitled to purchase, Participant may purchase upon any
subsequent exercise prior to this Option’s termination such previously
unpurchased shares in addition to those Participant is otherwise entitled to
purchase.
b. Termination
of Employment (other than Disability or Death). If
Participant’s employment with the Company or any Subsidiary is terminated for
any reason other than disability or death, this Option shall completely
terminate on the earlier of (i) the close of business on the three-month
anniversary date of such termination of employment, and (ii) the expiration
date of this Option stated in Paragraph 2(a) above. In such period
following the termination of Participant’s employment, this Option shall be
exercisable only to the extent the Option was exercisable on the vesting date
immediately preceding such termination of employment, but had not previously
been exercised. To the extent this Option was not exercisable upon
such termination of employment, or if Participant does not exercise the Option
within the time specified in this Paragraph 2(b), all rights of Participant
under this Option shall be forfeited.
c. Disability. If
Participant’s employment terminates because of disability (as defined in Code
Section 22(e), or any successor provision), this Option shall terminate on the
earlier of (i) the close of business on the twelve-month anniversary date of
such termination of employment, and (ii) the expiration date of this Option
stated in Paragraph 2(a) above. In such period following the
termination of Participant’s employment, this Option shall be exercisable only
to the extent the Option was exercisable on the vesting date immediately
preceding such termination of employment, but had not previously been
exercised. To the extent this Option was not exercisable upon such
termination of employment, or if Participant does not exercise the Option within
the time specified in this Paragraph 2(c), all rights of Participant under this
Option shall be forfeited.
d. Death. In
the event of Participant’s death, this Option shall terminate on the earlier of
(i) the close of business on the twelve-month anniversary date of the date of
Participant’s death, and (ii) the expiration date of this Option stated in
Paragraph 2(a) above. In such period following Participant’s death,
this Option shall be exercisable by the person or persons to whom Participant’s
rights under this Option shall have passed by Participant’s will or by the laws
of descent and distribution only to the extent the Option was exercisable on the
vesting date immediately preceding the date of Participant’s death, but had not
previously been exercised. To the extent this Option was not
exercisable upon the date of Participant’s death, or if such person or persons
do not exercise this Option within the time specified in this Paragraph 2(d),
all rights under this Option shall be forfeited.
3. Manner of
Exercise.
a. General. The
Option may be exercised only by Participant (or other proper party in the event
of death or incapacity), subject to the conditions of the Plan and subject to
such other administrative rules as the Administrator may deem advisable, by
delivering within the Option Period written notice of exercise to the Company at
its principal office. The notice shall state the number of shares as
to which the Option is being exercised and shall be accompanied by payment in
full of the Option price for all shares designated in the notice. The
exercise of the Option shall be deemed effective upon receipt of such notice by
the Company and upon payment that complies with the terms of the Plan and this
Agreement. The Option may be exercised with respect to any number or
all of the shares as to which it can then be exercised and, if partially
exercised, may be so exercised as to the unexercised shares any number of times
during the Option period as provided herein.
b. Form of
Payment. Payment of the option price by Participant shall be
in the form of cash, personal check, certified check or, if not prohibited by
the Administrator, previously acquired shares of Common Stock of the Company, or
any combination thereof. Any stock so tendered as part of such
payment shall be valued at its Fair Market Value as provided in the
Plan. For purposes of this Agreement, “previously acquired shares of
Common Stock” shall include shares of Common Stock that are already owned by
Participant at the time of exercise.
c. Stock
Transfer Records. As soon as practicable after the effective
exercise of all or any part of the Option, Participant shall be recorded on the
stock transfer books of the Company as the owner of the shares purchased, and
the Company shall deliver to Participant one or more duly issued stock
certificates evidencing such ownership. All requisite original issue
or transfer documentary stamp taxes shall be paid by the Company.
4. Miscellaneous.
a. Employment;
Rights as Shareholder. This Agreement shall not confer on
Participant any right with respect to continuance of employment by the Company
or any of its Subsidiaries, nor will it interfere in any way with the right of
the Company to terminate such employment. Participant shall have no
rights as a shareholder with respect to shares subject to this Option until such
shares have been issued to Participant upon exercise of this
Option. No adjustment shall be made for dividends (ordinary or
extraordinary, whether in cash, securities or other property), distributions or
other rights for which the record date is prior to the date such shares are
issued, except as provided in Section 15 of the Plan.
b. Securities
Law Compliance. The exercise of all or any parts of this
Option shall only be effective at such time as counsel to the Company shall have
determined that the issuance and delivery of Common Stock pursuant to such
exercise will not violate any state or federal securities or other
laws. Participant may be required by the Company, as a condition of
the effectiveness of any exercise of this Option, to agree in writing that all
Common Stock to be acquired pursuant to such exercise shall be held, until such
time that such Common Stock is registered and freely tradable under applicable
state and federal securities laws, for Participant’s own account without a view
to any further distribution thereof, that the certificates for such shares shall
bear an appropriate legend to that effect and that such shares will be not
transferred or disposed of except in compliance with applicable state and
federal securities laws.
c. Mergers,
Recapitalizations, Stock Splits, Etc. Pursuant and subject to
Section 15 of the Plan, certain changes in the number or character of the Common
Stock of the Company (through sale, merger, consolidation, exchange,
reorganization, divestiture (including a spin-off), liquidation,
recapitalization, stock split, stock dividend or otherwise) shall result in an
adjustment, reduction or enlargement, as appropriate, in Participant’s rights
with respect to any unexercised portion of the Option (i.e., Participant
shall have such “anti-dilution” rights under the Option with respect to such
events, but shall not have “preemptive” rights).
d. Shares
Reserved. The Company shall at all times during the option
period reserve and keep available such number of shares as will be sufficient to
satisfy the requirements of this Agreement.
e. Withholding
Taxes on Disqualifying Disposition. In the event of a
disqualifying disposition of the shares acquired through the exercise of this
Option, Participant hereby agrees to inform the Company of such
disposition. Upon notice of a disqualifying disposition, the Company
may take such action as it deems appropriate to insure that, if necessary to
comply with all applicable federal or state income tax laws or regulations, all
applicable federal and state payroll, income or other taxes are withheld from
any amounts payable by the Company to Participant. If the Company is
unable to withhold such federal and state taxes, for whatever reason,
Participant hereby agrees to pay to the Company an amount equal to the amount
the Company would otherwise be required to withhold under federal or state
law. Participant may, subject to the approval and discretion of the
Administrator or such administrative rules it may deem advisable, elect to have
all or a portion of such tax withholding obligations satisfied by delivering
shares of the Company’s Common Stock having a fair market value equal to such
obligations. Such election shall be approved by the Administrator and
otherwise comply with such rules as the Administrator may adopt to assure
compliance with Rule 16b-3, or any successor provision, as then in effect, of
the General Rules and Regulations under the Securities Exchange Act of 1934, if
applicable.
f. Nontransferability. During
the lifetime of Participant, the accrued Option shall be exercisable only by
Participant or by the Participant’s guardian or other legal representative, and
shall not be assignable or transferable by Participant, in whole or in part,
other than by will or by the laws of descent and distribution.
g. 2008
Equity Incentive Plan. The Option evidenced by this Agreement
is granted pursuant to the Plan, a copy of which Plan has been made available to
Participant and is hereby incorporated into this Agreement. This
Agreement is subject to and in all respects limited and conditioned as provided
in the Plan. All defined terms of the Plan shall have the same
meaning when used in this Agreement. The Plan governs this Option
and, in the event of any questions as to the construction of this Agreement or
in the event of a conflict between the Plan and this Agreement, the Plan shall
govern, except as the Plan otherwise provides.
h. Lockup
Period Limitation. Participant agrees that in the event the
Company advises Participant that it plans an underwritten public offering of its
Common Stock in compliance with the Securities Act of 1933, as amended, and that
the underwriter(s) seeks to impose restrictions under which certain shareholders
may not sell or contract to sell or grant any option to buy or otherwise dispose
of part or all of their stock purchase rights of the underlying Common Stock,
Participant hereby agrees that for a period not to exceed 180 days from the
prospectus, Participant will not sell or contract to sell or grant an option to
buy or otherwise dispose of this option or any of the underlying shares of
Common Stock without the prior written consent of the underwriter(s) or its
representative(s).
i. Blue Sky
Limitation. Notwithstanding anything in this Agreement to the
contrary, in the event the Company makes any public offering of its securities
and determines in its sole discretion that it is necessary to reduce the number
of issued but unexercised stock purchase rights so as to comply with any state
securities or Blue Sky law limitations with respect thereto, the Board of
Directors of the Company shall have the right (i) to accelerate the
exercisability of this Option and the date on which this Option must be
exercised, provided that the Company gives Participant 15 days’ prior written
notice of such acceleration, and (ii) to cancel any portion of this Option or
any other option granted to Participant pursuant to the Plan which is not
exercised prior to or contemporaneously with such public
offering. Notice shall be deemed given when delivered personally or
when deposited in the United States mail, first class postage prepaid and
addressed to Participant at the address of Participant on file with the
Company.
j. Stock
Legend. The Administrator may require that the certificates
for any shares of Common Stock purchased by Participant (or, in the case of
death, Participant’s successors) shall bear an appropriate legend to reflect the
restrictions of Paragraphs 4(b), 4(h) and 4(i) of this Agreement.
k. Scope of
Agreement. This Agreement shall bind
and inure to the benefit of the Company and its successors and assigns and
Participant and any successor or successors of Participant permitted by
Paragraph 2 or Paragraph 4(f) above.
l. Arbitration. Any
dispute arising out of or relating to this Agreement or the alleged breach of
it, or the making of this Agreement, including claims of fraud in the
inducement, shall be discussed between the disputing parties in a good faith
effort to arrive at a mutual settlement of any such controversy. If,
notwithstanding, such dispute cannot be resolved, such dispute shall be settled
by binding arbitration. Judgment upon the award rendered by the
arbitrator may be entered in any court having jurisdiction
thereof. The arbitrator shall be a retired state or federal judge or
an attorney who has practiced securities or business litigation for at least 10
years. If the parties cannot agree on an arbitrator within 20 days,
any party may request that the chief judge of the District Court for Hennepin
County, Minnesota, select an arbitrator. Arbitration will be
conducted pursuant to the provisions of this Agreement, and the commercial
arbitration rules of the American Arbitration Association, unless such rules are
inconsistent with the provisions of this Agreement. Limited civil
discovery shall be permitted for the production of documents and taking of
depositions. Unresolved discovery disputes may be brought to the
attention of the arbitrator who may dispose of such dispute. The
arbitrator shall have the authority to award any remedy or relief that a court
of this state could order or grant; provided, however, that punitive or
exemplary damages shall not be awarded. The arbitrator may award to
the prevailing party, if any, as determined by the arbitrator, all of its costs
and fees, including the arbitrator’s fees, administrative fees, travel expenses,
out-of-pocket expenses and reasonable attorneys’
fees. Unless otherwise agreed by the parties, the place of any
arbitration proceedings shall be Hennepin County, Minnesota.
IN WITNESS WHEREOF, the parties hereto
have caused this Agreement to be executed on the day and year first above
written.
| XXXXXXX ELECTRONICS, INC. | |||
|
|
By:
|
/s/ Xxxxxx X. Xxxxxxxxxx | |
| Xxxxxx X. Xxxxxxxxxx, Chairman | |||
| COMPANY | |||
|
|
By:
|
/s/ Xxxxxx X. de Xxxxx | |
| Xxxxxx J. de Xxxxx | |||
| PARTICIPANT | |||
