EXHIBIT 10.7
STOCK OPTION AGREEMENT
(NONQUALIFIED STOCK OPTION)
EMPLOYEE/OPTIONEE: Xx. Xxxxxx X. Xxxxxxx
NUMBER OF SHARES: 2,480,011
OPTION EXERCISE PRICE: $ 0.134 per Share
DATE OF GRANT: April 24, 2002
EXERCISE TERM: Through November 30, 2008
VESTING: Immediate
THIS OPTION AGREEMENT (the "AGREEMENT") is entered into effective as of the
24th day of April, 2002 by and between HIENERGY TECHNOLOGIES, INC. (formerly SLW
Enterprises Inc.) (the "Company"), a Washington corporation, and the individual
designated above (the "Optionee").
RECITALS
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A. An employment agreement (the "Employment Agreement") was executed
between the Optionee and HiEnergy Microdevices, Inc., a Delaware
corporation and a majority-owned subsidiary of the Company, on March
6, 2002, which confirmed the grant of an option to purchase 111,040
shares of HiEnergy Microdevices, Inc. common stock to the Optionee
with an exercise price of $3.00 per share; and
B. In connection with a business combination between the Company and
HiEnergy Microdevices, Inc., on April 24, 2002, the Board of Directors
of the Company approved the grant to the Optionee of an option to
purchase 2,480,011 shares of the Company's common stock pursuant to
Rule 506 of Regulation D under the Securities Act of 1933, as amended,
in exchange for canceling his HiEnergy Microdevices, Inc. option and
other transactions taken or proposed to be taken in connection with
such HiEnergy Microdevices, Inc. option; and
C. The Optionee performs valuable services for the Company and its
subsidiary, HiEnergy Microdevices, Inc.;
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NOW, THEREFORE, the parties agree to the terms and conditions herein, including
the recitals.
1. GRANT OF OPTION.
1.1 Option. An option to purchase shares of the Company's Common
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Stock, par value $0.0001 per share, (the "Shares") is hereby granted to the
Optionee (the "Option").
1.2 Number of Shares. The number of Shares that the Optionee can
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purchase upon exercise of the Option is set forth above.
1.3 Option Exercise Price. The price the Optionee must pay to exercise
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the Option (the "Option Exercise Price") is set forth above.
1.4 Date of Grant. The date the Option is granted (the "Date of
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Grant") is set forth above.
1.5 Type of Option. The Option is intended to be a Nonqualified Stock
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Option. It is not intended to qualify as an Incentive Stock Option within the
meaning of Section 422 of the Internal Revenue Code of 1986, as amended from
time to time, or any successor provision thereto.
1.6 Condition. The Option is conditioned on the Optionee's execution
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of this Agreement. If this Agreement is not executed by the Optionee, it may be
canceled by the Board.
2. DURATION.
The Option shall be exercisable to the extent and in the manner provided
herein during the Exercise Term, which is set forth above; provided, however,
that the Option may be earlier terminated as provided in Section 1.6 or Section
5 hereof or in the Employment Agreement.
3. VESTING.
The Option is fully vested, and may be exercised, with respect to the
Shares, subject to earlier termination of the Option as provided in Section 1.6
and Section 5 hereof or in the Employment Agreement.
4. MANNER OF EXERCISE AND PAYMENT.
4.1 To exercise the Option, the Optionee must deliver a completed copy
of the Option Exercise Form, attached hereto as Exhibit A, to the address
indicated on such Form or such other address designated by the Company from time
to time. Contemporaneously with the delivery of the Option Exercise Form, the
Optionee shall
Stock Option Agreement, Xx. Xxxxxx X. Xxxxxxx - Page 2
tender the Option Exercise Price to the Company, by cash, check, wire transfer
or such other method of payment (e.g., delivery or attestation of Shares already
owned) as may be acceptable to the Company. The Option may be exercised in whole
or in part with respect to the vested Shares. Within thirty (30) days of
delivery of the Option Exercise Form and tender of the Option Exercise Price,
the Company shall deliver certificates evidencing the Shares to the Optionee,
duly endorsed for transfer to the Optionee, free and clear of all liens,
security interests, pledges or other claims or charges.
4.2 The Optionee shall not be deemed to be the holder of, or to have
any of the rights of a holder with respect to any Shares subject to the Option
until (i) the Option shall have been exercised pursuant to the terms of this
Agreement and the Optionee shall have paid the full purchase price for the
number of Shares in respect of which the Option was exercised, (ii) the Company
shall have issued and delivered the Shares to the Optionee, and (iii) the
Optionee's name shall have been entered as a stockholder of record on the books
of the Company, whereupon the Optionee shall have full voting and other
ownership rights with respect to such Shares.
5. TERMINATION OF EMPLOYMENT.
5.1 Termination of Employment Due to Death. In the event of the death
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of the Optionee, who at the time of his death was an Employee and who had been
in continuous status as an Employee since the date of the grant of the Option,
the Option shall terminate on the expiration date provided in this Agreement.
Under these circumstances, the Option will be exercisable at any time prior to
such termination by the Optionee's estate, or by such person or persons who have
acquired the right to exercise the Option by bequest or by inheritance or by
reason of the death of the Optionee.
5.2 Termination of Employment Due to Disability. If the Optionee's
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status as an Employee is terminated at any time during the Option period by
reason of a disability (within the meaning of Section 22(e)(3) of the Code) and
if the Optionee had been in continuous status as an Employee at all times since
the date of grant of the Option, the Option shall terminate on the expiration
date provided in this Agreement.
5.3 Termination of Employment for Other Reasons. If the
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Optionee's status as an Employee is terminated by the Optionee or the Company at
any time after the grant of the Option for any reason other than death or
disability, as provided in Sections 5.1 and 5.2, then the Option terminates on
the expiration date provided in this Agreement.
5.4 Employment by Subsidiary. For purposes of this Section and Section
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8, employment with the Company includes employment with any Parent or Subsidiary
of the Company and service as a Director of the Company or any Parent or
Subsidiary shall be considered employment with the Company. A change of
employment between the Company and any Parent or Subsidiary (or between
Subsidiaries or between a Subsidiary and a Parent) is not a termination of
employment under this Agreement.
Stock Option Agreement, Xx. Xxxxxx X. Xxxxxxx - Page 3
6. TRANSFERABILITY.
The Option shall not be transferable other than by will or by the laws of
descent and distribution. During the lifetime of the Optionee, the Option shall
be exercisable only by the Optionee.
7. RESTRICTIONS ON THE OPTIONS; RESTRICTIONS ON THE SHARES.
The Option may not be exercised at any time unless, in the opinion of
counsel for the Company, the issuance and sale of the Shares issued upon such
exercise is exempt from registration under the Securities Act of 1933, as
amended, or any other applicable federal or state securities law, rule or
regulation, or the Shares have been duly registered under such laws. The
Company shall not be required to register the Shares issuable upon the exercise
of the Option under any such laws. Unless the Shares have been registered under
all applicable laws, the Optionee shall represent, warrant and agree, as a
condition to the exercise of the Option, that the Shares are being purchased for
investment only and without a view to any sale or distribution of such Shares
and that such Shares shall not be transferred or disposed of in any manner
without registration under such laws, unless it is the opinion of counsel for
the Company that such a disposition is exempt from such registration. The
Optionee acknowledges that an appropriate legend, in such form as the Company
shall determine, giving notice of the foregoing restrictions shall appear
conspicuously on all certificates evidencing the Shares issued upon the exercise
of the Option.
The Optionee also acknowledges and agrees that, in connection with any
public offering of the Company's stock, upon request of the Company or the
underwriters managing any underwritten public offering of the Company's stock
and making such request with the approval of the Company's Board of Directors,
not to sell, make any short sale of, loan, grant any option for the purchase of,
or otherwise dispose of any of his Shares without the prior written consent of
the Company or such underwriters, as the case may be, from the effective date of
such registration for so long as the Company or the underwriters may specify,
but in any event not to exceed 180 days.
8. NO RIGHT TO CONTINUED EMPLOYMENT.
Nothing in this Agreement shall be interpreted or construed to confer upon
the Optionee any right with respect to continuance of employment by the Company
or any Parent or Subsidiary, nor shall this Agreement interfere in any way with
the right of the Company or a Parent or Subsidiary to terminate the Optionee's
employment at any time.
9. ADJUSTMENTS UPON CERTAIN EVENTS.
9.1 Adjustments Upon Changes in Capitalization. Subject to any
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required action by the shareholders of the Company, the event of a change in
capitalization, such as a stock split or other subdivision or consolidation of
Shares or the payment of any
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stock dividend consisting of Shares or any other increase or decrease in the
number of Shares effected without receipt of consideration by the Company, the
Company shall make appropriate and proportionate adjustments to the number and
class of Shares subject to the Option and the purchase price for such Shares or
other stock or securities; provided, however, that conversion of the Option will
not be deemed to have been "effected without receipt of consideration". Any
adjustments as a result of a change in the Company's capitalization will be made
by the Board of Directors, whose determination in that respect is final, binding
and conclusive. Except as otherwise expressly provided in this Section 9.1, any
issue by the Company of shares of stock of any class, or securities convertible
into shares of stock of any class, shall not affect the number of Shares or the
exercise price of the Shares subject to the Option, and no adjustments in the
Option shall be made by reason thereof. The grant of this Option does not in any
way affect the right or power of the Company to make adjustments,
reclassifications, reorganizations or changes of its capital or business
structure.
9.2 Liquidation or Dissolution. In the event of a liquidation or
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dissolution, any unexercised options will terminate. The Board of Directors may,
in its discretion, provide that the Optionee will have the right to exercise the
Optionee's Option as to all of the optioned stock prior to the consummation of
the liquidation or dissolution.
9.3 Change of Control, Merger, Sale of Assets, Etc. In the event of
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the sale or other transfer of the outstanding shares of stock of the Company in
one transaction or a series of related transactions or a merger or
reorganization of the Company with or into any other corporation, where
immediately following the transaction, those persons who were shareholders of
the Company immediately before the transaction control less than 50% of the
voting power of the surviving organization (a "change of control event") or in
the event of a proposed sale of substantially all of the assets of the Company
(collectively, "sale transaction"), the Option shall be assumed or replaced with
a substitute equivalent option.
10. WITHHOLDINGS OF TAXES.
The Company and the Optionee shall be subject to Section 12 of the
Employment Agreement with respect to tax liabilities arising from the grant of
the Option or the issuance of Shares upon exercise of the Option.
11. MODIFICATION OF AGREEMENT.
This Agreement may be modified, amended, suspended or terminated, and any
terms or conditions may be waived, only by a written instrument executed by the
parties hereto.
12. SEVERABILITY.
Should any provision of this Agreement be held by a court of competent
jurisdiction to be unenforceable or invalid for any reason, the remaining
provisions of this
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Agreement shall not be affected by such holdings and shall continue in full
force in accordance with their terms.
13. GOVERNING LAW.
The validity, interpretation, construction and performance of this
Agreement shall be governed by the laws of the State of California without
giving effect to the conflicts of laws principles thereof.
14. SUCCESSORS IN INTEREST.
This Agreement shall be binding upon, and inure to the benefit of, the
Company and its successors and assigns, and upon any person acquiring, whether
by merger, consolidation, reorganization, purchase of stock or assets, or
otherwise, all or substantially all of the Company's assets and business. This
Agreement shall inure to the benefit of the Optionee's heirs and legal
representatives. All obligations imposed upon the Optionee and all rights
granted to the Company under this Agreement shall be final, binding and
conclusive upon the Optionee's heirs, executors, administrators and successors.
15. RESOLUTION OF DISPUTES.
Any dispute or disagreement which may arise under, or as a result of, or in
any way relate to, the interpretation, construction or application of this
Agreement shall be determined by the Board of Directors of the Company. Any
determination made hereunder shall be final, binding and conclusive on the
Optionee and the Company for all purposes.
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Stock Option Agreement, Xx. Xxxxxx X. Xxxxxxx - Page 6
IN WITNESS WHEREOF, the parties have executed this Agreement effective as
of the date first above written.
HIENERGY TECHNOLOGIES, INC.
By: /s/ Xxxxx Xxxxx
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Name: Xxxxx Xxxxx
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Title: President
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By signing below, Optionee hereby accepts the Option subject to all its
terms and provisions.
OPTIONEE
Signature: /s/ X. X. Xxxxxxx
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Name: X. X. Xxxxxxx
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Stock Option Agreement, Xx. Xxxxxx X. Xxxxxxx - Page 7
EXHIBIT A
OPTION EXERCISE FORM
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To: HiEnergy Technologies, Inc.
(1) The undersigned hereby elects to purchase the number of shares of the
Common Stock of HiEnergy Technologies, Inc. (the "Company") set forth
below, pursuant to the terms of the Stock Option Agreement dated May
____, 2002, tendering simultaneous full payment of the Total Option
Exercise Price for such shares.
Number of Shares: ________________ Shares
Option Exercise Price Per Share: x $____________ per Share
Total Option Exercise Price: = $____________
(2) In exercising this Option, the undersigned hereby confirms and
acknowledges that:
a) the shares of Common Stock to be issued upon exercise are being
acquired solely for the account of the undersigned and not as a
nominee for any other party; and
b) the shares of Common Stock to be issued upon exercise are not
acquired with a view toward distribution; and
c) the undersigned is an "accredited investor" as that term is
defined in Rule 501 of Regulation D under the Securities Act of
1933, as amended, and as provided in the Subscription Agreement;
and
d) the undersigned will not offer, sell or otherwise dispose of any
such shares of Common Stock except pursuant to an effective
registration, or an exemption therefrom, under the Securities Act
of 1933, as amended, together with a similar exemption under the
securities laws of all applicable jurisdictions; and
e) the undersigned otherwise reaffirms all representations,
warranties, and indemnifications contained in the Stock Option
Agreement and Subscription Agreement, including, but not limited
to, those contained in Section 7 of the Stock Option Agreement;
and
Option Exercise Form - Page 1
f) the undersigned has reviewed all of Company's public filings with
the Securities and Exchange Commission; and
g) the undersigned consents to delay the exercise of the Option
until, in the Company's judgment, the Company has disclosed any
additional matters that need to be disclosed to the undersigned,
beyond those contained in the public filings with the Securities
and Exchange Commission.
(3) Subject to Section (2), please issue a certificate or certificates
representing said shares of Common Stock in the name of the
undersigned as instructed.
(4) Please issue a new Option for the unexercised portion of the attached
Option in the name of the undersigned.
This ________ day of, ________, _____:
______________________________________
Signature
______________________________________
Print Name of Signatory
______________________________________
Name of Entity (if applicable)
Send or deliver this Form with an original signature to:
HiEnergy Technologies, Inc.
Attn: President
00 Xxxxxxx Xxxxx
Xxxxxx, XX 00000
XXX
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