EXHIBIT 10.21
STOCK OPTION AGREEMENT
(NONQUALIFIED STOCK OPTION)
OPTIONEE: Xxx Xxxxxx
NUMBER OF SHARES: 3,005,038
OPTION EXERCISE PRICE: See Section 1.3, below
DATE OF GRANT: September 25, 2002
EXERCISE TERM: Ten Years from the Date of Grant
VESTING SCHEDULE: See Section 3, below
THIS OPTION AGREEMENT (the "AGREEMENT") is entered into effective as of the
25th day of September, 2002 by and between HIENERGY TECHNOLOGIES, INC., a
Washington corporation (the "Company"), and the individual designated above (the
"Optionee").
RECITALS
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WHEREAS, an employment agreement (the "Employment Agreement") was executed
between the Optionee and the Company on September 25, 2002; and
WHEREAS, the Optionee has agreed to perform valuable services for the
Company;
NOW, THEREFORE, the parties agree to the terms and conditions as follows:
1. GRANT OF OPTION.
1.1 Option. An option to purchase shares of the Company's Common Stock, par
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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 purchase
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upon exercise of the Option is set forth above.
1.3 Option Exercise Price. The price the Optionee must pay to exercise the
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Option (the "Option Exercise Price") shall be the lesser of (a) $1.00 per share;
or (b) for any Offering (as defined below) that closes within six months of the
Date of Grant, the percentage of the price per unit of the Company's equity
securities (or the price per share at which a series of the Company's preferred
stock is convertible into the Company's Common Stock) set forth in the following
table:
Stock Option Agreement, Xxx Xxxxxx - Page 1
Preferred Common
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With Warrants 70% 90%
Without Warrants 80% 100%
An "Offering" shall be a sale of the Company's Common Stock or preferred stock
(either of which may be bundled with warrants or other securities to form a unit
of securities) for cash to one or more investors who are not employees or
consultants of the Company for gross proceeds of $500,000 or more; provided that
the term "Offering" shall not include a sale of the Company's Series A
Convertible Preferred Stock that closes by September 30, 2002. As soon as
practicable after the date that is six months after the Date of Grant, the
Company and the Optionee shall execute a writing acknowledging the specific
Option Exercise Price.
1.4 Date of Grant. The date the Option is granted (the "Date of Grant") is
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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 of
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this Agreement. If this Agreement is not executed by the Optionee, it may be
canceled by the Company's Board of Directors or a duly authorized committee
thereof (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.
3. VESTING.
The Option shall vest, 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, as follows: (a) with respect to 2,251,524 underlying Shares,
the Option shall vest one-twelfth (1/12) with respect to such Shares on each of
the dates that is the following number of months after the Date of Grant: 3, 6,
9, 12, 15, 18, 21, 24, 27, 30, 33, 36; and (b) with respect to 750,499
underlying Shares, the Option shall vest with respect to such Shares, the
earlier of (i) on the date when the closing sale price of the Company's common
stock has equaled or exceeded $1.75 on every trading day in a period of 90
consecutive calendar days, (ii) on the date immediately preceding a sale of the
Company (whether by merger, share exchange or sale of assets) for $1.75 per
share of Common Stock or more, or (iii) if the Company's Common Stock ceases to
be publicly traded, on the date following the Closing of an Offering at a deemed
Stock Option Agreement, Xxx Xxxxxx - Page 2
price per share of Common Stock of $1.75 or more, using the pricing structure
set forth in Section 1.3(b). The right to purchase the Shares as they become
vested shall be cumulative and shall continue during the Exercise Term unless
sooner terminated as provided herein 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 tender the Option Exercise Price to the Company, (i) 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, (ii) by "cashless
exercise" in accordance with the provisions of Section 4.3, but only when a
registration statement under Securities Act of 1933, as amended (the "Securities
Act"), qualifying a public offering of the underlying Shares is not then in
effect, or (iii) by a combination of the foregoing methods of payment selected
by the Optionee. The Option may be exercised in whole or in part with respect to
the vested Shares. Within ten (10) 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 and (ii) the Company shall have issued
and delivered the Shares to the Optionee.
4.3 Notwithstanding any provisions herein to the contrary, if the Per Share
Market Value of one share of Common Stock is greater than the Option Exercise
Price (at the date of calculation as set forth below), in lieu of exercising
this Option by payment of cash, the Optionee may exercise this Option by a
cashless exercise and shall receive the number of shares of Common Stock equal
to an amount (as determined below) by surrendering this Option at the principal
office of the Company together with the properly endorsed Option Exercise Form
in which event the Company shall issue to the Optionee a number of shares of
Common Stock computed using the following formula:
X = Y - (A)(Y)
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B
Where X = the number of shares of Common Stock to be issued to the
Optionee.
Stock Option Agreement, Xxx Xxxxxx - Page 3
Y = the number of shares of Common Stock purchasable upon exercise
of all of the Option or, if only a portion of the Option is being
exercised, the portion of the Option being exercised.
A = the Option Exercise Price.
B = the Per Share Market Value of one share of Common Stock.
"Per Share Market Value" means on any particular date (a) the closing bid price
for a share of Common Stock in the over-the-counter market, as reported by the
OTC Bulletin Board (or in the National Quotation Bureau Incorporated or similar
organization or agency succeeding to its functions of reporting prices), or any
United States market or exchange senior to the OTC Bulletin Board where the
Company's Common Stock may become traded, at the close of business on such date,
or (b) if the Common Stock is not then reported by the OTC Bulletin Board or the
National Quotation Bureau Incorporated (or similar organization or agency
succeeding to its functions of reporting prices or any senior market or
exchange), then the average of the "Pink Sheet" quotes for the relevant
conversion period, as determined in good faith by the Board, or (c) if the
Common Stock is not then publicly traded the fair market value of a share of
Common Stock as determined by the Board in good faith; provided, however, that
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the Optionee, after receipt of the determination by the Board, shall have the
right to select, jointly with the Company, an Independent Appraiser, in which
case, the fair market value shall be the determination by such Independent
Appraiser; and provided, further that all determinations of the Per Share Market
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Value shall be appropriately adjusted for any stock dividends, stock splits or
other similar transactions during such period. The determination of fair market
value shall be based upon the fair market value of the Company determined on a
going concern basis as between a willing buyer and a willing seller and taking
into account all relevant factors determinative of value, and shall be final and
binding on all parties. In determining the fair market value of any shares of
Common Stock, no consideration shall be given to any restrictions on transfer of
the Common Stock imposed by agreement or by federal or state securities laws, or
to the existence or absence of, or any limitations on, voting rights.
"Independent Appraiser" means a nationally recognized or major regional
investment banking firm or firm of independent certified public accountants of
recognized standing (which may be the firm that regularly examines the financial
statements of the Company) that is regularly engaged in the business of
appraising the capital stock or assets of corporations or other entities as
going concerns, and which is not affiliated with either the Company or the
Optionee.
5. TERMINATION.
5.1 Termination Due to Death. In the event of the death of the Optionee
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during the Term of the Employment Agreement, any vested options shall terminate
at the end of the Exercise Term. 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. Any
nonvested options shall terminate immediately upon the death of the Optionee.
Stock Option Agreement, Xxx Xxxxxx - Page 4
5.2 Termination Due to Disability. If the Optionee's status as Chief
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Executive Officer is terminated at any time during the Term of the Employment
Agreement by reason of a disability (as provided in Section 4 therein), any
vested options shall terminate at the end of the Exercise Term. Any nonvested
options shall terminate immediately upon termination of the Optionee's status as
Chief Executive Officer.
5.3 Termination of Employment Agreement for Other Reasons. If the
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Optionee's status as Chief Executive Officer is terminated at any time after the
grant of the Option other than due to death or disability, as provided in
Sections 5.1 and 5.2, and not pursuant to Section 5.1 of the Employment
Agreement, then (a) any vested options shall terminate at the end of the
Exercise Term, (b) subject to clause (c), below, 50% of such nonvested options
shall vest immediately prior to termination of the Employment Agreement, (c)
notwithstanding clause (b), above, and clause (d), below, if a change in control
event or a sale transaction, as provided by Section 9.3, shall occur within six
months following the Company's termination of Optionee without cause under
Section 5.2 of the Employment Agreement, then any nonvested options that may
have expired shall be deemed reinstated and fully vested immediately prior to
termination of the Employment Agreement, and (d) subject to clause (c), above,
any remaining nonvested options shall terminate immediately upon termination of
the Employment Agreement. If the Optionee's status as Chief Executive Officer is
terminated pursuant to Section 5.1 of the Employment Agreement, (x) for cause by
the Company, then any options that have been granted to the Optionee shall
terminate on the date of termination of the Employment Agreement, or (y) by the
Optionee, then any vested options shall terminate 90 days following termination
of the Employment Agreement, and any nonvested options shall terminate
immediately upon termination of the Employment Agreement.
6. TRANSFERABILITY.
Except as permitted by the Board, the Option shall not be transferable
other than by will or by the laws of descent and distribution, and, 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. Upon
demand by the Optionee, the Company shall register the Shares issuable upon the
exercise of the Option under any such laws within 30 days of such demand and
shall make all reasonable efforts to maintain the effectiveness of such
Stock Option Agreement, Xxx Xxxxxx - Page 5
registration statement. The Optionee shall cooperate with the Company to effect
such registration, including certifying such information about Optionee, his
plan of distribution or other matters as may be necessary to prepare and file a
registration statement. 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 Company may, in its sole discretion, place a "Blue Sky"
legend on the certificates in accordance with U.S. state securities laws or as
required by applicable securities laws.
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 Board, 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 provided that all other officers and directors of the Company
are subject to the same restrictions.
8. NO RIGHT TO CONTINUED STATUS AS CHIEF EXECUTIVE OFFICER.
Nothing in this Agreement shall be interpreted or construed to confer upon
the Optionee any right with respect to continuance as Chief Executive Officer
for the Company or any successor, nor shall this Agreement interfere in any way
with the right of the Company or any successor to terminate the Optionee's
status as Chief Executive Officer at any time.
9. ADJUSTMENTS UPON CERTAIN EVENTS.
9.1. Adjustments Upon Changes in Capitalization. Subject to any required
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action by the shareholders of the Company, in the event of a change in
capitalization, such as a stock split or other subdivision or consolidation of
Shares or the payment of any 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, whose
determination in that respect is final, binding and conclusive. Except as
Stock Option Agreement, Xxx Xxxxxx - Page 6
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 Optionee will have the
right to exercise the Optionee's Option as to all of the vested 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 the
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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 become fully vested immediately prior to
such transaction, or, with the consent of the Optionee, be assumed or replaced
with a substitute equivalent option as proposed by the Board.
10. WITHHOLDINGS OF TAXES.
The Company shall have the right to deduct from any distribution of cash to
the Optionee an amount equal to the federal, state and local income taxes and
other amounts as may be required by law to be withheld (the "Withholdings
Taxes") with respect to the Option. If the Optionee is entitled to receive
Shares upon exercise of the Option, the Optionee shall pay the Withholdings
Taxes (if any) to the Company in cash prior to the issuance of such Shares. In
satisfaction of the Withholdings Taxes, the Optionee may make a written election
(the "Tax Election"), which may be accepted or rejected in the discretion of the
Company, to have withheld a portion of the Shares issuable to him or her upon
exercise of the Option, having an aggregate Fair Market Value equal to the
Withholdings Taxes, provided that, if the Optionee may be subject to liability
under Section 16(b) of the Exchange Act, the election must comply with the
requirements applicable to Share transactions by such Optionees.
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.
Stock Option Agreement, Xxx Xxxxxx - Page 7
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 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 as provided by the Employment Agreement. Any
determination made hereunder shall be final, binding and conclusive on the
Optionee and the Company for all purposes.
16. RATIFICATION.
This Agreement and the Option granted hereby shall be submitted to the
shareholders for their ratification at the next special or annual meeting of
shareholders following the 2002 annual meeting. This Option shall remain in
effect whether or not such ratification is obtained.
[remainder of page intentionally left blank]
Stock Option Agreement, Xxx Xxxxxx - Page 8
IN WITNESS WHEREOF, the parties have executed this Agreement effective as
of the date first above written.
HIENERGY TECHNOLOGIES, INC.
By: ________________
Name: ______________
Title: _____________
By signing below, Optionee hereby accepts the Option subject to all its
terms and provisions.
OPTIONEE
Signature: ______________
Print Name: ____________
[EXHIBIT FOLLOWS]
Stock Option Agreement, Xxx Xxxxxx - Page 9
EXHIBIT A
OPTION EXERCISE FORM
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To: HiEnergy Technologies, Inc.
(1) a) 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 __________________,
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: = $____________
b) The undersigned hereby elects to exercise the Option with respect to
the number of underlying Shares set forth below according to the "cashless
exercise" provisions of the Option.
Number of underlying Shares: ________________ Shares
The undersigned understands that he will be issued a certificate for a lesser
number of net Shares based on the provisions of the Option.
(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 other than in compliance with the safe harbor
provisions of Rule 144 under the Securities Act of 1933, as amended, or as
permitted by the general instructions to Form S-8; 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
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
Option Exercise Form - Page 1
e) the undersigned otherwise reaffirms all representations, warranties, and
indemnifications contained in the Stock Option Agreement, including, but not
limited to, those contained in Section 7 of the Stock Option Agreement; and
f) the undersigned has reviewed all of Company's 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
Option Exercise Form - Page 2
