EXHIBIT 10.5
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SUTRON CORPORATION
STOCK OPTION AGREEMENT
(Non-qualified Stock Option)
THIS STOCK OPTION AGREEMENT (the "Agreement") is made and entered into as
of the 22nd day of December 2005 by and between Sutron Corporation, a Virginia
corporation (the "Company"), and Xxxxxx X. Xxxxxx (the "Optionee").
WHEREAS, the Board of Directors of the Company (the "Board") has adopted
and approved that certain Amended and Restated Sutron Corporation 2002 Stock
Option Plan (the "Plan"), a copy of which has been provided to the Optionee and
which is incorporated by reference herein; and
WHEREAS, pursuant to and in accordance with the provisions of the Plan, the
Board has determined that the Optionee is eligible to be granted an option (the
"Option") to acquire shares of the Company's Common Stock, $0.01 par value per
share (the "Stock"); and
WHEREAS, Options granted under the Plan are not intended or designed to
qualify for Federal income tax treatment as incentive stock options under
Section 422 of the Internal Revenue Code of 1986 (the "Code"); and
WHEREAS, the Optionee desires to be granted Options under the Plan; and
WHEREAS, the Corporation and the Optionee desire to set forth herein the
terms of such Options.
NOW, THEREFORE, in consideration of the foregoing, of the mutual covenants
set forth herein, and of other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. Grant of Option. The Company hereby grants to the Optionee the right and
option to purchase Five thousand (5,000) shares of Stock, subject to and in
accordance with the terms and conditions set forth in the Plan and in this
Agreement.
2. Exercise Price. The Exercise Price to be paid for each share of Stock to
be acquired upon exercise of the Option granted hereunder is $7.45. Such
Exercise Price is equal to the Fair Market Value (as defined in the Plan) of the
Stock as of the date of grant of the Option.
3. Transferability. The Option granted hereunder shall be exercisable
during the Optionee's lifetime only by the Optionee and shall not be assignable
or transferable other than by will or by the laws of descent and distribution
following the Optionee's death.
4. Exercise Terms; Vesting; Procedure.
(a) Except as provided in Section 6 hereof, the Option may be
exercised in whole or in part in accordance with the vesting schedule set forth
in Section 5 hereof, provided, however, that the Option shall not be exercisable
after the expiration of ten (10) years from the date of grant of the Option.
(b) In order to exercise the Option granted hereunder, the Optionee
shall deliver to the Secretary of the Company written notice stating the
Optionee's intent to exercise the Option, which notice shall specify:
(i) the name of the Optionee;
(ii) the Option to be exercised;
(iii) the number of shares of Stock to be purchased pursuant to
such exercise; and
(iv) the address to which certificates representing the shares of
Stock issuable upon exercise of the Option are to be mailed.
(c) The Optionee's written notice shall be accompanied by a certified
check payable to the Company in the amount of the product of the Exercise Price
times the number of shares with respect to which the Option is being exercised.
The notice and payment shall be delivered in person or sent by registered mail,
return receipt requested, to the Secretary of the Company. The Option shall be
considered exercised on the date the notice and payment are delivered to the
Secretary or deposited in the mail, as the case may be. As promptly as
practicable after the Secretary's receipt of the notice of exercise and payment,
and the receipt of any certificates from the Optionee required by the Company
pursuant to Sections 8 and 9 hereof, the Company shall deliver to the Optionee a
certificate or certificates for the number of shares of Stock with respect to
which the Option has been exercised.
5. Vesting. Each Option shall vest and become cumulatively exercisable as
to one hundred percent (100%) of the shares of Stock subject to such Option on
the date of grant of the Option.
6. Effect of Termination of Employment, Disability or Death. The following
provisions shall govern the exercise of any Options held by an Optionee at the
time the Optionee ceases to be an employee of the Company, suffers a Disability,
or dies.
6.1 Termination of Employment. In the event that the Optionee ceases
to be an employee of the Company for any reason other than Disability or death,
then the period during which each outstanding Option held by such Optionee is to
remain exercisable shall be limited to the ninety (90) day period following the
date of termination of employment. Under no
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circumstances, however, shall any such Option be exercisable after the specified
expiration date of the Option term. Any outstanding Option may not be exercised
in the aggregate for more than the number of vested shares for which the Option
is exercisable on the date of the termination of employment, and such Option
shall terminate and cease to be outstanding with respect to any Option shares
for which the Option is not at that time exercisable or in which the Optionee is
not otherwise at that time vested.
6.2 Disability. In the event that the Optionee ceases to be an
employee of the Company by reason of a Disability, then the period during which
each outstanding Option held by such Optionee is to remain exercisable shall be
limited to a period of one (1) year following the date of termination of
employment due to Disability. Under no circumstances, however, shall any such
Option be exercisable after the specified expiration date of the Option term as
set forth in the Option Agreement. Any outstanding Option may not be exercised
in the aggregate for more than the number of vested shares for which the Option
is exercisable on the date of the termination of employment due to Disability,
and such Option shall terminate and cease to be outstanding with respect to any
Option shares for which the Option is not at that time exercisable or in which
the Optionee is not otherwise at that time vested.
6.3 Death. In the event that the Optionee dies while holding one or
more outstanding Options, then the period during which each outstanding Option
held by such Optionee is to remain exercisable shall be limited to a period of
one (1) year following the date of the Optionee's death. During such limited
period, the Option may be exercised by the personal representative of the
Optionee's estate or by the person or persons to whom the option is transferred
pursuant to the Optionee's will or in accordance with the laws of descent and
distribution. Under no circumstances, however, shall any such Option be
exercisable after the specified expiration date of the Option term. Any
outstanding Option may not be exercised in the aggregate for more than the
number of vested shares for which the Option is exercisable on the date of the
death of the Optionee, and such Option shall terminate and cease to be
outstanding with respect to any Option shares for which the Option is not at
that time exercisable or in which the Optionee is not otherwise at that time
vested.
7. Adjustments to Upon Certain Events. In the event that any change is made
to the Stock issuable under the Plan and the Option granted hereunder by reason
of stock split, stock dividend, recapitalization, combination of shares,
exchange of shares, repurchase, merger, consolidation, spin-off or other change
affecting the outstanding Stock as a class, the Board shall make appropriate
adjustments to the maximum number of shares and/or class of shares, and the
number of shares and/or class of shares and the exercise price per share in
effect under the Option, in order to prevent the dilution or enlargement of
benefits thereunder. Any adjustments made by the Board pursuant to this Section
7 shall be final, binding and conclusive. Neither the existence nor the terms of
the Plan or this Agreement, nor the grant of any Option hereunder, shall affect
the right or power of the Company to make any adjustments, reorganizations,
reclassifications or other changes to its capital structure or to merge,
consolidate, dissolve, liquidate, sell or transfer any or all of its assets or
otherwise change its business structure.
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Except as expressly provided above, the issuance by the Company of shares
of stock of any class, for cash or property, or for labor or services, either
upon direct sale or upon the exercise of rights, warrants or options to
subscribe therefor, or upon conversions of shares or obligations of the Company
convertible into such shares or other securities, shall not affect the number,
class or exercise price of shares of Stock then subject to the Option, and no
adjustment shall be made by reason thereof.
8. Requirements of Law. The Company shall not be required to sell or issue
shares of its Stock under the Option if the sale or issuance would constitute a
violation by the Optionee or the Company of any provisions of any state or
federal law, rule or regulation. In addition, in connection with the Securities
Act of 1933, as amended, upon exercise of the Option, the Company shall not be
required to issue such shares of Stock unless the Company has received evidence
satisfactory to it to the effect that the Optionee will not transfer such shares
except pursuant to a registration statement in effect under the Securities Act
of 1933, as amended, or unless an opinion of counsel to the Company has been
received to the effect that such registration is not required. Any determination
in this regard by the Company shall be final, binding and conclusive.
Certificates representing shares of Stock issued pursuant to the exercise of the
Option will be subject to such stop-transfer orders and other restrictions as
may be applicable under federal and state laws, regulations and rules, or the
requirements of any securities exchange or automated quotation system. In the
event the shares issuable on exercise of the Option are not registered under the
Securities Act, the Company may imprint the following legend or any other legend
which counsel to the Company considers necessary or advisable:
"The shares of Stock represented by this certificate have not been
registered under the Securities Act of 1933 or under the securities laws of
any state and may not be sold or transferred except upon such registration
or upon receipt by the Company of an opinion of counsel satisfactory to the
Company that registration is not required for such sale or transfer."
The Corporation may, but shall in no event be obligated to, register any
securities covered hereby pursuant to the Securities Act of 1933; and in the
event any shares are so registered, the Company may, in its discretion, remove
any legend on certificates representing such shares. The Company shall not be
obligated to take any other affirmative action in order to cause the exercise of
the Option or the issuance of shares pursuant thereto to comply with any state
or federal law or regulation.
9. Investment Purpose. The Optionee agrees that any shares of Stock subject
to the Option granted hereunder will be acquired for investment and not with any
present intention to resell the same, and the Optionee further agrees to confirm
such intention by an appropriate written assurances and certificates at the time
of exercising an Option or any portion thereof.
10. Withholding. The Company's obligation to deliver shares of Stock upon
exercise of the Option shall be subject to any and all applicable federal, state
and local tax withholding and reporting requirements.
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11. No Rights as Shareholder. The Optionee shall have no right as a
shareholder with respect to the Stock covered by the Option until the date of
issuance of Stock Certificates for such Stock to the Optionee.
12. No Employment Obligation. The granting of any Option shall not impose
upon the Company any obligation to employ the Optionee. The right of the Company
to terminate the employment of the Optionee shall not be diminished or affected
by reason of the fact that an Option has been granted hereunder to the Optionee.
13. General Provisions.
(a) This Agreement shall be binding upon, and shall inure to the
benefit of, the parties hereto and their respective heirs, executors,
administrators, personal representatives, successors and assigns.
(b) This Agreement shall be construed in accordance with, and shall be
governed by, the laws of the Commonwealth of Virginia.
(c) No waiver by any party hereto of any breach of any covenant,
condition or agreement hereof shall be considered to constitute a waiver of any
such covenant, condition or provision, or of any subsequent breach thereof.
(d) In the event any court of competent jurisdiction shall declare any
portion of this Agreement to be invalid, the remainder of this Agreement shall
not be invalidated thereby, but shall remain in full force and effect.
(e) Unless otherwise provided in this Agreement, no notice or other
communication which may be or is required or permitted to be given under this
Agreement shall be effective unless the same is in writing and is either hand
delivered or sent by registered or certified mail, return receipt requested,
first-class postage prepaid, (1) if to the Optionee, X.X. Xxx 000 Xxxxxxxxxxx,
Xxxxxxxx 00000, and (2) if to the Company, to Sutron Corporation., Attn:
Secretary, 00000 Xxxxxxxx Xxxxxx, Xxxxxxxx, XX 00000, or at any other address
that may be given by one party to the other party by notice pursuant to this
paragraph 6(e), with a copy to the law firm of Shulman, Rogers, Gandal, Pordy &
Xxxxx, P.A., 00000 Xxxxxxxxx Xxxx, Xxxxx Xxxxx, Xxxxxxxxx, Xxxxxxxx 00000.
Unless otherwise provided in this Agreement, such notices, or other
communications, if sent by registered or certified mail in accordance with this
paragraph 6(e), shall be deemed to have been given at the time of mailing.
(f) Where the text requires, words in the singular shall be deemed to
include the plural and vice-versa, and words in one gender shall be deemed to
include all genders.
(g) Any headings preceding the text of the sections or sub-sections in
this Agreement are inserted solely for convenience of reference and shall not
constitute a part of this
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Agreement, nor shall they affect its meaning, construction or effect.
(h) The Option granted pursuant hereto is not intended or designed to
qualify for federal income tax treatment as an incentive stock option under
Section 422 of the Code.
(i) The Options are subject to all terms, conditions, limitations and
restrictions contained in the Plan, which shall be controlling in the event of
any conflicting or inconsistent provisions between this Agreement and the Plan.
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed
and sealed by its duly authorized officers, and the Optionee has executed and
sealed this Agreement, all as of the day and year first above written.
ATTEST: THE COMPANY:
SUTRON CORPORATION
/s/ Xxxxxx X. Xxxxxx By: /s/ Xxxx X. XxXxxxxx (SEAL)
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Name: Xxxxxx X. Xxxxxx Name: Xxxx X. XxXxxxxx
Title: Secretary Title: President
WITNESS: THE OPTIONEE:
/s/ Xxxxxx X. Xxxxxx /s/ Xxxxxx X. Xxxxxx
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Name: Xxxxxx X. Xxxxxx Name: Xxxxxx X. Xxxxxx
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