EXHIBIT 4.1
FORM OF STOCK OPTION AGREEMENT
------------------------------
AGREEMENT made the 20th day of June, 2005 between AEROFLEX
INCORPORATED, a Delaware corporation, (hereinafter called the "Company") and
[NAME] (hereinafter called the "Optionee").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Company is desirous of inducing or encouraging the
Optionee to accept employment with the Company by offering the Optionee certain
incentives or rewards to do so; and
WHEREAS, the Board of Directors of the Company has determined that
Optionee is eligible for, and should be granted an option as hereinbelow
provided, and Optionee desires to have such option;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants hereinafter set forth, the parties hereto agree as follows:
1. GRANT AND EXERCISE OF OPTION. The Company hereby grants to Optionee
--------------------------------
an option to purchase a total of [AMOUNT IN WORDS] [AMOUNT IN NUMBERS] shares of
the authorized and unissued Common Stock of the Company, having a par value of
$.10 per share, at the price of $8.55 per share, upon and subject to the
following terms and conditions:
(a) The within option may be exercised on or before June 19,
2015 (the "Expiration Date") and, within such period, only at the following
times and in the following amounts:
(i) After the expiration of one (1) year from the date
of this Agreement, the option may be exercised to the extent
of not more than TWENTY-FIVE(25%) PERCENT of the shares
granted in Paragraph 1 hereof;
(ii) After the expiration of two (2) years from the
date of this Agreement, the option may be exercised to the
extent of not more than FIFTY(50%) PERCENT of the shares
granted in Paragraph 1 hereof;
(iii) After the expiration of three(3) years from the
date of this Agreement, the option may be exercised to the
extent of not more than SEVENTY-FIVE(75%) PERCENT of the
shares granted in Paragraph 1 hereof; and
(iv) After the expiration of four (4) years from the
date of this Agreement, the option may be exercised to the
extent of not more than ONE HUNDRED (100%) PERCENT of the
shares granted in Paragraph 1 hereof.
(b) The right to exercise set forth in Paragraph 1(a)(i),
(ii),(iii) and (iv) shall, at the option of the Board of Directors, be
accelerated to provide for immediate exercise in the event of a change in
control of the Company.
(1) For purposes of this Agreement, a change in control of the
Company, or in any person directly or indirectly controlling the Company, shall
mean:
(i) a change in control as such term is presently
defined in Regulation 240.12b-under the Securities and Exchange Act of
1934; or
9
(ii) if any "person" (as such term is used in Section
13(d) and 14(d) of the Exchange Act) other than the Company or any
"person" who on the date of this Agreement is a director or officer of
the Company, becomes the "beneficial owner" (as defined in Rule 13(d)-3
under the Exchange Act) directly or indirectly, of securities of the
Company representing ten (10%) percent of the voting power of the
Company's then outstanding securities; or
(iii) if during any period of two (2) consecutive years
during the term of this Agreement, individuals who at the beginning of
such period constitute the Board of Directors, cease for any reason to
constitute at least a majority thereof, unless the election of each
director who is not a director at the beginning of such period has been
approved in advance by directors representing at least two-third (2/3)
of the directors then in office who were directors at the beginning of
the period.
(2) Notwithstanding the foregoing, this paragraph shall have
no applicability to any change of control as defined hereunder in the event
that:
(i) a majority of the Board of Directors in office
immediately prior to the event or events resulting in the change of
control determine that such change is in the best interests of the
Company; or
(ii) a majority of the Board of Directors in office
immediately prior to the event or events resulting in the change of
control determine that such change is not in the best interests of the
Company; and thereafter Employee cooperates, assists or acts, directly
or indirectly, on behalf of or in connection with the party seeking to
acquire control of the Company; it being expressly understood and
agreed that in the event the within option is not exercised on or
before the Expiration Date, as to any part or all of the shares which
may be purchased under the option, the right to purchase such shares
shall completely lapse;
(c) Each exercise of the within option shall be by delivery to
the Company, at its then principal office (attention of the Secretary) of
written notice stating the number of shares to be purchased, accompanied by
payment in full of the option price of such shares. The option price shall be
payable in United States dollars in cash or by certified check, bank draft,
postal or express money order; provided, however, that in lieu of payment in
full in cash, the Optionee may, with the approval of the Board of Directors,
exercise his option by tendering to the Company shares of the Company's Common
Stock owned by him and having a fair market value (as determined by the Board of
Directors in its absolute discretion) equal to the cash exercise price (or the
balance thereof) applicable to his option.
(d) In the event of each exercise of the within option, the
Company shall deliver to the Optionee, personally or at the Optionee's
designated address, as soon as practicable, a certificate made out to the
Optionee for the number of shares being purchased.
2. NON-TRANSFERABILITY OF OPTION. The option granted under this
--------------------------------
Agreement shall not be transferred otherwise than by will or the laws of descent
and distribution and shall be exercisable during Optionee's lifetime only by the
Optionee. No option granted hereunder shall be subject to execution, attachment,
pledge, hypothecation, or other process.
3. DEATH, RETIREMENT AND TERMINATION OF EMPLOYMENT. Any Option, the
--------------------------------------------------
period of which has not expired, shall terminate at the time of death of the
Optionee, or at the time of retirement or termination for any reason of such
person's employment or service, including service as a consultant, and no share
of Common Stock may thereafter be delivered pursuant to such Option, except
that:
(a) Upon retirement or termination of employment or service
(other than by death, disability, or termination for cause), an Optionee may
within three (3) months after the date of such
10
retirement or termination, purchase all or part of the shares with respect to
which the Option was exercisable on the date of such termination, in accordance
herewith, but in no event after the Expiration Date;
(b) Upon the termination of employment or service for cause,
this Option shall immediately terminate. For purposes of this Section, "cause"
shall mean (i) willful disregard of duties and/or gross insubordination, (ii)
habitual absence from employment,(iii) the commission of fraud,
misrepresentation or embezzlement; or (iv) as defined in any employment
agreement between the Company or any affiliate of the Company and the Optionee;
(c) Upon the "disability" of any Optionee, the Optionee may
within one (1) year after the date of such termination of employment, but in no
event after the Expiration Date, purchase all or part of the shares with respect
to which the Option was exercisable on the date of such termination. For
purposes of this section, the term "disability" shall mean a physical or mental
disability as defined in Section 105 of the Internal Revenue Code of 1986, as
amended;
(d) Upon the death of the Optionee during his employment or
within one (1) year after termination due to "disability", the person or persons
to whom such Optionee's rights under the Option are transferred by will or the
laws of descent and distribution may, within three (3) years after the date of
such Optionee's death, but in no event after the Expiration Date, purchase all
of the shares subject to this Option, including any shares for which the Option
was not yet exercisable on the date of death. Upon the death of the Optionee
within three (3) months after any termination of employment under clause 3(a) of
this Option, the person or persons to whom such Optionee's rights under the
Option are transferred by will or the laws of descent and distribution may,
within three (3) years after the date of such Optionee's death, but in no event
after the Expiration Date, purchase all or any part of the shares with respect
to which the Option was exercisable on the date of termination of employment or
service in accordance herewith.
4. DILUTION AND OTHER ADJUSTMENTS. In the event that there is any
---------------------------------
change in the stock subject to the within option through merger, consolidation
or reorganization, or in the event of any dividend in stock of the same class to
holders of issued and outstanding stock of the same class, or the issuance to
the holders of such stock of rights to subscribe to stock of the same class, or
in the event of any split, combination or exchange of stock or other change in
the capital structure of the Company, the Board of Directors of the Company
shall make such adjustments in the within option as it may deem equitable to
prevent dilution or enlargement of the rights granted to the Optionee hereunder,
and such adjustments, when so made, shall be conclusive and binding on the
parties to this Agreement; and provided, further, that nothing herein shall be
construed as limiting or preventing the Company from exercising any right or
power to make or enter into adjustments, reclassifications, reorganizations, or
changes in its capital or business structure or to merge, consolidate or
dissolve or to sell or transfer all or any part of its business or assets.
5. REGISTRATION.
-------------
The Company shall cause a Registration Statement on Form S-8 covering
the Shares of the Common Stock of the Company issuable upon the exercise of the
Option granted hereunder to be filed with the Securities and Exchange Commission
and to become effective under the Securities Act of 1933, as amended, prior to
the first anniversary date of this Agreement; provided, however, that if the
Company is not permitted for any reason to register such Common Stock pursuant
to a Registration Statement on Form S-8, the Company shall use its best efforts
to cause a Registration Statement on Form S-3 covering the Common Stock to be
filed with the Securities and Exchange Commission and to become effective under
the Securities Act of 1933, as amended, prior to the first anniversary date of
this Agreement.
11
6. REQUIREMENTS OF LAW.
--------------------
(a) If any law, regulation of the Securities and Exchange
Commission, or any regulation of any other commission or agency having
jurisdiction shall require the Company or the Optionee to take any action with
respect to the shares of stock to be acquired upon the exercise of the within
option, then the date upon which the Company shall deliver or cause to be
delivered the certificate or certificates for the shares of stock shall be
postponed until full compliance has been made with all such requirements of law
or regulation.
(b) Neither the Optionee nor any person or persons referred to in
Paragraph 3 above, as the case may be, shall be, or shall be deemed to be, a
holder of any shares subject to the within option unless and until certificates
for such shares are delivered to him or them in accordance with this Agreement,
and no certificates may be delivered until the shares represented thereby are
paid in full.
7. PURCHASE FOR INVESTMENT. The Optionee represents, on behalf of
--------------------------
himself and the person or persons referred to in Paragraph 3 above, that any
shares of the Company purchased pursuant to this Agreement will be acquired in
good faith for investment and not for resale or distribution, and Optionee on
behalf of himself and said person or persons, agrees that each notice of the
exercise of the within option shall contain or be accompanied by a
representation in writing signed by him or said person or persons, as the case
may be, in form satisfactory to the Company, that the shares of the Company to
be purchased pursuant to such notice are being so acquired and will not be sold
except in compliance with applicable securities laws. The requirements of this
Paragraph 7 may be waived by the Company if the Company shall have received an
opinion of its counsel that such representation is not required.
8. ACKNOWLEDGMENT. Optionee represents that he has read and
---------------
understands the terms and conditions of this Agreement and agrees to be bound
thereby.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
AEROFLEX INCORPORATED
By: ---------------------------
--------------------------------
[NAME], Optionee
12
