EXHIBIT 10.46
HIENERGY TECHNOLOGIES, INC.
STOCK OPTION AGREEMENT
This Stock Option Agreement (the "Agreement") is entered into as of February 11,
2003, by and between HiEnergy Technologies, Inc., a Delaware corporation (the
"Company") and Xxxxxx X. Xxxxxxx (the "Optionee") pursuant to the Employment
Agreement between the Company and Optionee (the "Employment Agreement").
A. The Employment Agreement provides that the Company shall grant and
issue to Optionee annually during the term of the Employment Agreement
stock options with a term of five years at a rate of not less than one
(1%) per annum of the Company's stock issued and outstanding at the end
of the year, such options to have an exercise price of the most recent
arms length sale, or if publicly traded, the average price for the
preceding thirty days.
B. The Optionee performs valuable services for the Company and its
subsidiaries, HiEnergy Microdevices, Inc. and HiEnergy Defense, Inc.
C. Pursuant to the Employment Agreement, the Board of Directors of the
Company approved a grant to the Optionee of a stock option to purchase
456,717 shares of the Company's common stock at an exercise price of
$2.81 per share.
1. GRANT OF OPTION.
The Company hereby grants to Optionee an option (the "Option") to purchase all
or any portion of a total of four hundred fifty-six thousand seven hundred
seventeen (456,717) shares (the "Shares") of the Common Stock of the Company at
a purchase price of Two Dollars and Eighty-One Cents (US$2.81) per share (the
"Exercise Price"), subject to the terms and conditions set forth herein and the
provisions of the Employment Agreement. This Option is not intended to qualify
as an "incentive stock option" as defined in Section 422 of the Internal Revenue
Code of 1986, as amended.
1.1 DEFINITIONS
"Change in Control" shall mean for purposes of this Agreement (i) the
acquisition, directly or indirectly, by any person or group (within the meaning
of Section 13(d)(3) of the Securities Exchange Act of 1934, as amended) of the
beneficial ownership of securities of the Company possessing more than fifty
percent (50%) of the total combined voting power of all outstanding securities
of the Company; (ii) a merger or consolidation in which the Company is not the
surviving entity, except for a transaction in which the holders of the
outstanding voting securities of the Company immediately prior to such merger or
consolidation hold, in the aggregate, securities possessing more than fifty
percent (50%) of the total combined voting power of all outstanding voting
securities of the surviving entity immediately after such merger or
consolidation; (iii) a reverse merger in which the Company is the surviving
entity but in which securities possessing more than fifty percent (50%) of the
total combined voting power of all outstanding voting securities of the Company
are transferred to or acquired by a person or persons different from the persons
holding those securities immediately prior to such merger; (iv) the sale,
transfer or other disposition (in one transaction or a series of related
transactions) of all or substantially all of the assets of the Company; or (v)
the approval by the shareholders of a plan or proposal for the liquidation or
dissolution of the Company.
"Continuous Service" shall mean for purposes of this Agreement:
(a) employment by either the Company or any parent or subsidiary
corporation of the Company, or by a corporation or a parent or
subsidiary of a corporation issuing or assuming a stock option in
a transaction to which Section 424(a) of the Code applies, which
is uninterrupted except for vacations, illness (except for
permanent disability, as defined in Section 22(e)(3) of the
Code), or leaves of absence which are approved in writing by the
Company or any of such other employer corporations, if
applicable,
(b) service as a member of the Board of Directors of the Company
until the Optionee resigns, is removed from office, or the
Optionee's term of office expires and he or she is not reelected,
or
(c) so long as the Optionee is engaged as a consultant or service
provider to the Company or any corporation referred to in clause
(a) above, or
(d) so long as the Optionee is granted and continues to hold the
status of a "friend of the Company" pursuant to action by the
Company.
"Service Termination Date" shall mean for purposes of this Agreement the date of
termination of the Optionee's Continuous Service.
2. VESTING OF OPTION.
2.1. VESTING SCHEDULE.
The right to exercise this Option shall be vested, and this Option shall be
exercisable, as to all of the Shares as of the date of this Agreement.
2.2. CHANGE IN CONTROL.
In the event of a Change in Control, the Company in its discretion may take one
or more of the following actions with respect to this Option (whether or not
then exercisable or vested):
(i) provide for the purchase or exchange of this Option for an amount
of cash or other property having a value equal to the difference,
or spread, between
(x) the value of the cash or other property that the Optionee
would have received pursuant to such Change in Control
transaction in exchange for any shares issuable upon
exercise of this Option, in the amount that the Optionee
would have received had the then exercisable portion, if
any, of this Option been exercised immediately prior to such
Change in Control transaction, and
(y) the Exercise Price,
(ii) adjust the terms of this Option in a manner determined by the
Company to reflect the Change in Control,
(iii) cause this Option to be assumed, or new rights substituted
therefor, by another entity, through the assumption of this
Option, or the substitution for this Option of a new option of
comparable value covering shares of a successor or parent
corporation, with appropriate adjustments as to the number and
kind of shares and Exercise Price, in which event this Option, or
the new option substituted therefor, shall continue in the manner
and under the terms so provided,
(iv)cancel this Option if this Option is deemed to have no net value
on the basis described in paragraph 2.2(i) above or if the Option
is not then exercisable by virtue of this Agreement, as then in
effect, or
(v) make such other provision as the Company may consider equitable.
If the Company does not take any of the forgoing actions, this Option shall
terminate upon the consummation of the Change in Control and the Company shall
cause written notice of the proposed transaction to be given to the Optionee not
less than fifteen (15) days prior to the anticipated effective date of the
proposed transaction.
3. TERM OF OPTION.
Optionee's right to exercise any vested portion of this Option shall terminate
upon the first to occur of the following:
3.1. MAXIMUM TERM.
the expiration of five (5) years from the date of this Agreement;
3.2. INVOLUNTARY TERMINATION WITHOUT CAUSE.
the expiration of three (3) months from the Service Termination Date if such
termination occurs for any reason OTHER THAN permanent disability, death,
voluntary resignation; or for "cause;" provided, however, that if Optionee dies
during such three-month period the provisions of subsection 3.5 below shall
apply;
3.3. VOLUNTARY RESIGNATION.
the expiration of one (1) month from the Service Termination Date if such
termination occurs due to voluntary resignation; provided, however, that if
Optionee dies during such one-month period the provisions of subsection 3.5
below shall apply;
3.4. PERMANENT DISABILITY.
the expiration of one (1) year from the Service Termination Date if such
termination is due to permanent disability of the Optionee (as defined in
Section 22(e)(3) of the Code);
3.5. DEATH.
the expiration of one (1) year from the Service Termination Date if such
termination is due to Optionee's death or if death occurs during either the
three-month or one-month period following the Service Termination Date pursuant
to subsection 3.2 or subsection 3.3 above, as the case may be;
3.6. CHANGE IN CONTROL.
upon the consummation of a Change in Control, unless otherwise provided by the
Company pursuant to Section 2.2 above; and
3.7. TERMINATION FOR CAUSE.
upon termination of Optionee's Continuous Service by the Company for "cause,"
defined hereby to mean the performance of those acts identified in Section 2924
of the California Labor Code, at which time this Option, whether or not
exercisable on the Service Termination Date, shall terminate immediately and
become void and of no effect.
3.8. BREACH AND NON-COMPETITION.
Notwithstanding the foregoing, the Company may cancel, rescind, suspend,
withhold or otherwise limit or restrict any Options or Common Stock, or the
exercise or purchase of any Options or Common Stock, at any time if the Optionee
engages in any "Adverse Activity." For purposes of this Section 3.8, "Adverse
Activity" shall include: (i) the rendering of services for any organization or
engaging directly or indirectly in any business which is or becomes competitive
with the Company, or which organization or business, or the rendering of
services to such organization or business, is or becomes otherwise prejudicial
to or in conflict with the interests of the Company; (ii) the disclosure to
anyone outside the Company, or the use in other than the Company's business,
without prior written authorization from the Company, of any confidential
information or material relating to the business of the Company, acquired by
Optionee either during or after employment with the Company; (iii) the failure
or refusal to disclose promptly and to assign to the Company, all right, title
and interest in any invention or idea, patentable or not, made or conceived by
Optionee during employment by the Company, relating in any manner to the actual
or anticipated business, research or development work of the Company; (iv)
activity that results in termination of Optionee's Continuous Service for
"cause," defined here to mean those acts identified in Section 2924 of the
California Labor Code; (v) any material violation of any terms or provisions of
this Agreement; or (vi) any attempt directly or indirectly to induce any
employee of the Company to be employed or perform services elsewhere or any
attempt directly or indirectly to solicit the trade or business of any current
or prospective customer, supplier or partner of the Company. In the event
Optionee engages in Adverse Activity prior to, or during the six (6) months
after, any exercise, payment or delivery pursuant to an Option Agreement, such
exercise, payment or delivery may be rescinded at the sole election of the
Company within two years thereafter. In the event of any such rescission, the
Optionee shall pay to the Company the amount of any gain realized or payment
received as a result of the disposition of Shares or Options, in such manner and
on such terms and conditions as may be required, and the Company shall be
entitled to set-off against the amount of any such gain any amount owed to the
Optionee by the Company.
4. EXERCISE OF OPTION.
4.1. PERSONS PERMITTED TO EXERCISE OPTION.
This Option may be exercised in whole or in part only by the Optionee or by a
Successor designated in Section 5 below.
4.2. EXERCISE AS TO VESTED PORTION OF OPTION.
This Option may be exercised only on or after the vesting of any portion of this
Option in accordance with Section 2 above, and only as to the cumulative amount
vested at the date of exercise, except pursuant to provisions made, if any, by
the Company pursuant to subsection 4.5 below.
4.3. NO EXERCISE AFTER TERMINATION.
This Option may not be exercised at the time of, or any time after, termination
of this Option in accordance with Section 3 above.
4.4. MECHANICS OF EXERCISE.
Exercise of this Option shall be made by delivery of the following to the
Company at its principal executive offices:
(a) a written notice of exercise which identifies this Agreement and states
the number of Shares then being purchased (but no fractional Shares may
be purchased);
(b) a check or cash in the amount of the Exercise Price (or payment of the
Exercise Price in such other form of lawful consideration as the
Company may approve from time to time);
(c) a check or cash in the amount reasonably requested by the Company to
satisfy the Company's withholding obligations under federal, state or
other applicable tax laws with respect to the taxable income, if any,
recognized by the Optionee in connection with the exercise of this
Option (unless the Company and Optionee shall have made other
arrangements for deductions or withholding from Optionee's wages, bonus
or other compensation payable to Optionee, or by the withholding of
Shares issuable upon exercise of this Option or the delivery of Shares
owned by the Optionee, provided such arrangements satisfy the
requirements of applicable tax laws); and
(d) a letter, if requested by the Company, in such form and substance as
the Company may require, setting forth the investment intent of the
Optionee, or of a Successor designated in Section 5, as the case may
be.
A check shall be considered payment only when honored by the bank against which
it is drawn upon first presentment.
5. TRANSFERS ON DEATH OF OPTIONEE; RESTRICTIONS ON LIFETIME ASSIGNMENTS.
Any attempt to sell, pledge, assign, hypothecate, transfer or dispose of this
Option in contravention of this Agreement shall be void and shall have no
effect.
This Option can be assigned or transferred (subject to all other restrictions in
this Agreement) only as follows:
(a) the rights of the Optionee under this Agreement may be assigned or
transferred by will or by the laws of descent and distribution,
and Optionee's legal representative, his or her legatee, or the
person who acquired the right to exercise this Option by reason of
the death of the Optionee shall succeed to the Optionee's rights
and obligations under this Agreement, and
(b) the rights of the Optionee under this Agreement also may be
assigned and transferred by the Optionee for estate planning
purposes to members of the immediate family of the Optionee,
including for this purpose, but not limited to, spouses, parents,
descendants, brothers and sisters, or to trusts established for
the benefit of such persons.
In the context of nonqualified stock options, the term "Successor"
refers to each of the transferees, successors or assigns described in
this Section 5.
6. REPRESENTATIONS AND WARRANTIES OF OPTIONEE.
6.1. INVESTMENT INTENT AS TO OPTIONS.
Optionee represents and warrants that this Option is being acquired by Optionee
for Optionee's personal account, for investment purposes only, and not with a
view to the distribution, resale or other disposition thereof.
6.2. INVESTMENT INTENT AS TO SHARES.
Optionee acknowledges that the Company may issue Shares upon the exercise of the
Option without registering such Shares under the Securities Act of 1933, as
amended (the "Act"), on the basis of certain exemptions from such registration
requirement. Accordingly, Optionee agrees that his or her exercise of the Option
may be expressly conditioned upon his or her delivery to the Company of an
investment certificate and agreement including such representations and
undertakings as the Company may reasonably require in order to assure the
availability of such exemptions, including representations, warranties and
agreements that--
(a) The Optionee is purchasing the Shares solely for the Optionee's own
account for investment and not with a view to or for sale or
distribution of the Shares or any portion thereof and not with any
present intention of selling, offering to sell or otherwise disposing
of or distributing the Shares or any portion thereof. The Optionee also
represents that the entire legal and beneficial interest of the Shares
the Optionee is purchasing is being purchased for, and will be held for
the account of, the Optionee only and neither in whole nor in part for
any other person.
(b) The Optionee has discussed the Company and its plans, operations and
financial condition with its officers and that the Optionee has
received all such information as the Optionee deems necessary and
appropriate to enable the Optionee to evaluate the financial risk
inherent in making an investment in the Shares of the Company, and has
received satisfactory and complete information concerning the business
and financial condition of the Company in response to all inquiries in
respect thereof.
(c) The Optionee realizes that the purchase of the Shares will be a highly
speculative investment.
(d) The Optionee is able, without impairing the Optionee's financial
condition, to hold the Shares for an indefinite period of time and to
suffer a complete loss on the investment.
(e) The Optionee acknowledges that he is aware that the Shares to be issued
to him by the Company pursuant to this Agreement have not been
registered under the Act, and--
(i) the Shares must be held indefinitely unless a transfer of them is
subsequently registered under the Act or an exemption
from such registration is available;
(ii) the share certificate(s) representing the Shares will be stamped
with the legends restricting transfer as specified in this
Agreement in Section 13 below; and
(iii)the Company will make a notation in its records of the
aforementioned restrictions on transfer and legends as described
in Section 14 below.
(f) The Optionee understands that the Shares are restricted securities
within the meaning of Rule 144 promulgated under the Act; that the
exemption from registration under Rule 144 will not be available in any
event for at least one year from the date of sale of the Shares to the
Optionee, and even then will not be available unless (i) a public
trading market then exists for the Shares of the Company, (ii) adequate
current public information concerning the Company is then available to
the public, (iii) the Optionee has been the beneficial owner and the
Optionee has paid the full purchase price for the Shares at least one
year prior to the sale, and (iv) other terms and conditions of Rule 144
are complied with; and that any sale of the Shares may be made by it
only in limited amounts in accordance with such terms and conditions of
Rule 144, as amended from time to time.
(g) Without in any way limiting any of the other provisions of this
Agreement, Optionee's further agreement that the Optionee shall in no
event make any disposition of all or any portion of the Shares which
the Optionee is purchasing unless and until:
(i) there is then in effect a Registration Statement under the Act
covering such proposed disposition and such disposition is made
in accordance with said Registration Statement; or
(ii) (A) the Optionee shall have notified the Company of the proposed
disposition and shall have
furnished the Company with a detailed statement of the
circumstances surrounding the proposed disposition, (B) the
Optionee shall have furnished the Company with an opinion of
counsel to the effect that such disposition will not require
registration of such shares under the Act, and (C) such opinion
of counsel shall have been concurred in by counsel for the
Company and the Company shall have advised the Optionee of such
concurrence.
(h) The Optionee represents and warrants that he or she has not
engaged in any Adverse Activity as defined in Section 3.8.
(i) The Optionee acknowledges that the Optionee has read this
Agreement, and understands that all rights and obligations
connected with this Agreement are set forth in this Agreement and
the Employment Agreement. 7. ADJUSTMENTS UPON CHANGES IN CAPITAL
STRUCTURE. In the event that the outstanding shares of Common
Stock of the Company are hereafter changed into or exchanged for
a different number or kind of shares or other securities of the
Company by reason of a recapitalization, stock split, combination
of shares, reclassification, stock dividend (in excess of two
percent (2%)) or other change in the capital structure of the
Company, then appropriate adjustments shall be made by the
Company to the number of Shares subject to the unexercised
portion of this Option and to the Exercise Price per share, in
order to preserve, as nearly as practical, but not to increase,
the benefits of the Optionee under this Option. No fractional
share shall be issued under this Option or upon any such
adjustment.
8. NO AFFECT ON OPTIONEE'S EMPLOYMENT IN ANY CAPACITY.
The terms of Optionee's employment set forth in the Employment Agreement shall
not be altered, diminished, enlarged or otherwise affected in any way by this
Agreement. This Agreement shall not create, enlarge or diminish any rights of
Optionee to continue in any capacity with the Company, and this Agreement shall
not create, enlarge or diminish any rights of the Company to terminate
Optionee's service to the Company.
9. RIGHTS AS SHAREHOLDER.
The Optionee (or transferee of this Option by will or by the laws of descent and
distribution) shall have no rights as a shareholder with respect to any Shares
covered by this Option until the date of the issuance of a stock certificate or
certificates to him or her for such Shares, notwithstanding the exercise of this
Option.
10. "MARKET STAND-OFF" AGREEMENT.
Optionee agrees that, if requested by the Company or the managing underwriter of
any proposed public offering of the Company's securities, Optionee will not sell
or otherwise transfer or dispose of any Shares held by Optionee without the
prior written consent of the Company or such underwriter, as the case may be,
during such period of time, not to exceed 180 days following the effective date
of the registration statement filed by the Company with respect to such
offering, as the Company or the underwriter may specify.
11. RESTRICTIVE LEGENDS.
In addition to all other legends that the Company or its legal counsel consider
appropriate under applicable securities laws, the certificates representing any
Shares purchased pursuant to this Agreement shall bear substantially the
following legend:
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THE SECURITIES REPRESENTED BY THIS CERTIFICATE (INCLUDING ANY
SECURITIES ISSUABLE ON EXERCISE OR WITH RESPECT TO ANY OTHER RIGHT
CONNECTED HEREWITH) HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933; THEY HAVE BEEN ACQUIRED BY THE HOLDER FOR INVESTMENT AND MAY
NOT BE PLEDGED, HYPOTHECATED, SOLD, TRANSFERRED, OR OTHERWISE DISPOSED
OF EXCEPT AS MAY BE AUTHORIZED UNDER THE SECURITIES ACT OF 1933, AND
THE RULES AND REGULATIONS PROMULGATED THEREUNDER. IN ADDITION ANY
TRANSFEREE OR ISSUEE OF SUCH SECURITIES MAY BE REQUIRED TO PROVIDE
APPROPRIATE INVESTMENT REPRESENTATIONS PRIOR TO ANY SUCH TRANSFER OR
ISSUANCE.
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12. STOP-TRANSFER NOTICES.
Optionee understands and agrees that, in order to ensure compliance with the
restrictions referred to herein, the Company may issue appropriate
"stop-transfer" instructions to its transfer agent, if any, and that, if the
Company transfers its own securities, it may make appropriate notations to the
same effect in its own records.
13. INTERPRETATION.
Any action, decision, interpretation or determination made in good faith by the
Company shall be final and binding on the Company and the Optionee. As used in
this Agreement, the term "Company" shall refer to the Board of Directors of the
Company.
14. NOTICES.
Any notice, demand or request required or permitted to be given under this
Agreement shall be in writing and shall be deemed given when delivered
personally or three (3) days after being deposited in the United States mail, as
certified or registered mail, with postage prepaid, and addressed, if to the
Company, at its principal place of business, Attention: the Chief Financial
Officer, and if to the Optionee, at his or her most recent address as shown in
the records of the Company.
15. GOVERNING LAW.
The validity, construction, interpretation, and effect of this Option shall be
governed by the laws of the State of California, excluding any conflicts of law
or choice of law rule or principle that might otherwise refer construction and
interpretation of the plan and such agreements to the substantive law of another
jurisdiction. Optionee hereby agrees to submit to the exclusive jurisdiction and
venue of federal or state courts of Orange County, California, to resolve any
and all issues that may arise out of or relate to this Option.
16. SEVERABILITY.
Should any provision or portion of this Agreement be held to be unenforceable or
invalid for any reason, the remaining provisions and portions of this Agreement
shall be unaffected by such holding.
17. ENTIRE AGREEMENT.
This Agreement and the Employment Agreement constitute the entire agreement
between the parties with respect to the subject matter hereof and supersede all
prior or contemporaneous written or oral agreements and understandings of the
parties, either express or implied. The option evidenced hereby may, in the
discretion of the Company, also be evidenced by a certificate in such form as
the Company may approve, in which case such option certificate and this
Agreement shall evidence one and the same option, which shall be governed by and
construed in accordance with this Agreement and the Plan.
18. AMENDMENT.
The Board shall have full power and authority (subject to certain amendments
requiring shareholder approval pursuant to applicable laws or regulations) from
time to time to alter this Agreement in ways which shall not substantially
adversely affect or impair the Optionee's right under this Agreement. No such
alteration, amendment, suspension or termination shall be made which shall
substantially affect or impair the rights of any Optionee under an outstanding
Option Agreement without such Optionee's consent.
19. COUNTERPARTS.
The Agreement may be executed in any number of counterparts, each of which shall
be deemed to be an original, but all of which together shall constitute one and
the same instrument. Execution an delivery of this Agreement or any notices,
certificates or instruments contemplated herein by fax, facsimile or telecopier
shall be deemed the execution and delivery of an originally signed agreement,
notice or instrument, as the case may be.
IN WITNESS WHEREOF, the parties have executed this Stock Option
Agreement as of the date first above written.
"COMPANY"
HIENERGY TECHNOLOGIES, INC.
By: /s/ XXXXX X. XXXXXXX
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Name: XXXXX X. XXXXXXX
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Title: SECRETARY
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"OPTIONEE"
/s/ XXXXXX X. XXXXXXX
-----------------------------------
(Signature)
XXXXXX X. XXXXXXX
-----------------------------------
(Type or Print Name)
ADDRESS: 0000 XXXXX XXXXXXX XXXXX X
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XXXXXX, XX 00000
