Exhibit 2
STOCK OPTION AGREEMENT
AGREEMENT, made as of the 1st day of April, 2003 ("Grant Date") by and
between CPI Aerostructures, Inc., a New York corporation ("Company") with
principal offices located at 000X Xxxxxxxxx Xxxxx Xxxxxxxx, Xxx Xxxx 00000, and
Xxxx Xxxxxxxxx ("Optionee") with offices located at c/o Crescendo Partners,
L.P., 000 Xxxx Xxxxxx, 0xx Xxxxx, Xxx Xxxx, XX 00000.
WHEREAS, the Optionee is presently a director of the Company and the
Company is desirous of increasing the incentive of the Optionee to exert his
utmost efforts in improving the business of the Company;
WHEREAS, on January 1, 2003, pursuant to the terms and conditions of the
Company's 1995 Stock Option Plan ("Plan"), the Board of Directors of the Company
authorized that each non-employee director be granted immediately exercisable
options to purchase 5,000 shares of the authorized but unissued common shares of
the Company, $.001 par value ("Common Shares") on April 1st of each year as long
as the director is serving as such on such date, conditioned upon the Optionee's
acceptance thereof upon the terms and conditions set forth in this Agreement and
subject to the terms of the Plan (capitalized terms used herein and not
otherwise defined shall have the meanings set forth in the Plan); and
WHEREAS, the Optionee desires to acquire the Option on the terms and
conditions set forth in this Agreement and subject to the terms of the Plan;
IT IS AGREED:
1. Grant of Stock Option. The Company hereby grants to the Optionee the
right and option ("Option") to purchase all or any part of an aggregate of 5,000
Common Shares ("Option Shares") on the terms and conditions set forth herein and
subject to the provisions of the Plan.
2. Non-Incentive Stock Option. The Option represented hereby is not
intended to be an Option that qualifies as an "Incentive Stock Option" under
Section 422 of the Internal Revenue Code of 1986, as amended.
3. Exercise Price. The exercise price ("Exercise Price") of the Option
shall be $6.45 per share, subject to adjustment as hereinafter provided.
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4. Exercisability. Subject to the terms and conditions of the Plan and this
Agreement, this Option is exercisable immediately to the extent of all of the
Option Shares, and shall remain exercisable until the close of business on March
31, 2008 ("Exercise Period").
5. Termination Due to Death. Upon the death of the Optionee, the Option may
thereafter be exercised by the legal representative of the estate or by the
legatee of the Optionee under the will of the Optionee for a period of one year
from the date of such death or until the expiration of the Exercise Period,
whichever period is shorter.
6. Withholding Tax. Not later than the date as of which an amount first
becomes includible in the gross income of the Optionee for Federal income tax
purposes with respect to the Option, the Optionee shall pay to the Company, or
make arrangements satisfactory to the Committee regarding the payment of, any
Federal, state and local taxes of any kind required by law to be withheld or
paid with respect to such amount ("Withholding Tax"). The obligations of the
Company under the Plan and pursuant to this Agreement shall be conditional upon
such payment or arrangements with the Company and the Company shall, to the
extent permitted by law, have the right to deduct any Withholding Taxes from any
payment of any kind otherwise due to the Optionee from the Company.
7. Adjustments. In the event of any change in the Common Shares of the
Company as a whole occurring as the result of a common stock split, or reverse
split, common stock dividend payable on Common Shares, combination or exchange
of shares, or other extraordinary or unusual event occurring after the grant of
the Option, the Board of Directors shall determine, in its sole discretion,
whether such change equitably requires an adjustment in the terms of this Option
or the aggregate number of shares reserved for issuance under the Plan. Any such
adjustments will be made by the Board of Directors, whose determination will be
final, binding and conclusive.
8. Method of Exercise.
8.1. Notice to the Company. The Option shall be exercised in whole or
in part by written notice in substantially the form attached hereto as
Exhibit A directed to the Company at its principal place of business
accompanied by full payment as hereinafter provided of the exercise price
for the number of Option Shares specified in the notice and of the
Withholding Taxes, if any.
8.2. Delivery of Option Shares. The Company shall deliver a
certificate for the Option Shares to the Optionee as soon as practicable
after payment therefor.
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8.3. Payment of Purchase Price.
8.3.1. Cash Payment. The Optionee shall make cash payments by wire
transfer, certified or bank check or personal check, in each case payable
to the order of the Company; the Company shall not be required to deliver
certificates for Option Shares until the Company has confirmed the receipt
of good and available funds in payment of the purchase price thereof.
8.3.2. Cashless Payment. Provided that prior approval of the Company
has been obtained, the Optionee may use Common Shares of the Company owned
by him or her to pay the purchase price for the Option Shares by delivery
of stock certificates in negotiable form which are effective to transfer
good and valid title thereto to the Company, free of any liens or
encumbrances. Common Shares used for this purpose shall be valued at the
Fair Market Value.
8.3.3. Payment of Withholding Tax. Any required Withholding Tax may be
paid in cash or with Common Shares in accordance with Sections 8.3.1 and
8.3.2.
8.3.4. Exchange Act Compliance. Notwithstanding the foregoing, the
Company shall have the right to reject payment in the form of Common Shares
if in the opinion of counsel for the Company, (i) it could result in an
event of "recapture" under Section 16(b) of the Securities Exchange Act of
1934; (ii) such Common Shares may not be sold or transferred to the
Company; or (iii) such transfer could create legal difficulties for the
Company.
9. Nonassignability. The Option shall not be assignable or transferable,
except by will or by the laws of descent and distribution in the event of the
death of the Employee. No transfer of the Option by the Employee by will or by
the laws of descent and distribution shall be effective to bind the Company
unless the Company shall have been furnished with written notice thereof and a
copy of the will and such other evidence as the Company may deem necessary to
establish the validity of the transfer and the acceptance by the transferee or
transferees of the terms and conditions of the Option.
10. Company Representations. The Company hereby represents and warrants to
the Optionee that:
(i) the Company, by appropriate and all required action, is duly authorized
to enter into this Agreement and consummate all of the transactions contemplated
hereunder; and
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(ii) the Option Shares, when issued and delivered by the Company to the
Optionee in accordance with the terms and conditions hereof, will be duly and
validly issued and fully paid and non-assessable.
11. Optionee Representations. The Optionee hereby represents and warrants
to the Company that:
(i) he is acquiring the Option and shall acquire the Option Shares for his
own account and not with a view towards the distribution thereof;
(ii) he has received a copy of the Plan as in effect as of the date of this
Agreement;
(iii) he has received a copy of all reports and documents required to be
filed by the Company with the Securities and Exchange Commission pursuant to the
Exchange Act, within the last 24 months and all reports issued by the Company to
its stockholders;
(iv) he understands that he must bear the economic risk of the investment
in the Option Shares, which cannot be sold by him unless they are registered
under the Securities Act of 1933 ("1933 Act") or an exemption therefrom is
available thereunder and that the Company is under no obligation to register the
Option Shares for sale under the 1933 Act;
(v) in his position with the Company, he has had both the opportunity to
ask questions and receive answers from the officers and directors of the Company
and all persons acting on its behalf concerning the terms and conditions of the
offer made hereunder and to obtain any additional information to the extent the
Company possesses or may possess such information or can acquire it without
unreasonable effort or expense necessary to verify the accuracy of the
information obtained pursuant to clause (iii) above;
(vi) he is aware that the Company shall place stop transfer orders with its
transfer agent against the transfer of the Option Shares in the absence of
registration under the 1933 Act or an exemption therefrom as provided herein;
and
(vii) if, at the time of issuance of the Option Shares, the issuance of
such shares have not been registered under the 1933 Act, the certificates
evidencing the Option Shares shall bear the following legends:
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"The shares represented by this certificate have been acquired
for investment and have not been registered under the Securities
Act of 1933. The shares may not be sold or transferred in the
absence of such registration or an exemption therefrom under said
Act."
"The shares represented by this certificate have been acquired
pursuant to a Stock Option Agreement dated as of April 1, 2003, a
copy of which is on file with the Company, and may not be
transferred, pledged or disposed of except in accordance with the
terms and conditions thereof."
12. Restriction on Transfer of Option Shares.
12.1. Anything in this Agreement to the contrary notwithstanding, the
Optionee hereby agrees that he or she shall not sell, transfer by any means
or otherwise dispose of the Option Shares acquired by him or her without
registration under the 1933 Act, or in the event that they are not so
registered, unless (i) an exemption from the 1933 Act registration
requirements is available thereunder, and (ii) the Optionee has furnished
the Company with notice of such proposed transfer and the Company's legal
counsel, in its reasonable opinion, shall deem such proposed transfer to be
so exempt.
12.2. Anything in this Agreement to the contrary notwithstanding,
Optionee hereby agrees that he shall not sell, transfer by any means or
otherwise dispose of the Option Shares acquired by him (i) prior to six
months after the Grant Date and (ii) except in accordance with Company's
policy regarding the sale and disposition of securities owned by Company
insiders.
13. Miscellaneous.
13.1. Notices. All notices, requests, deliveries, payments, demands
and other communications which are required or permitted to be given under
this Agreement shall be in writing and shall be either delivered personally
or sent by registered or certified mail, or by private courier to the
parties at their respective addresses set forth herein, or to such other
address as either party shall have specified by notice in writing to the
other. Notice shall be deemed duly given hereunder when delivered or mailed
as provided herein.
13.2. Conflicts with the Plan. In the event of a conflict between the
provisions of the Plan and the provisions of this Agreement, the provisions
of the Plan shall in all respects be controlling.
13.3. Optionee and Stockholder Rights. The Optionee shall not have any
of the rights of a stockholder with respect to the Option Shares until such
shares have been issued after the due
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exercise of the Option. Nothing contained in this Agreement shall be deemed to
confer upon Optionee any right to continue to be a director of the Company.
13.4. Waiver. The waiver by any party hereto of a breach of any
provision of this Agreement shall not operate or be construed as a waiver
of any other or subsequent breach.
13.5. Entire Agreement. This Agreement constitutes the entire
agreement between the parties with respect to the subject matter hereof.
This Agreement may not be amended except by writing executed by the
Optionee and the Company.
13.6. Binding Effect; Successors. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and, to the extent not
prohibited herein, their respective heirs, successors, assigns and
representatives. Nothing in this Agreement, expressed or implied, is
intended to confer on any person other than the parties hereto and as
provided above, their respective heirs, successors, assigns and
representatives, any rights, remedies, obligations or liabilities.
13.7. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York (without regard to
choice of law provisions).
13.8. Headings. The headings contained herein are for the sole purpose
of convenience of reference, and shall not in any way limit or affect the
meaning or interpretation of any of the terms or provisions of this
Agreement.
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IN WITNESS WHEREOF, the parties hereto have signed this Agreement as
of the day and year first above:
CPI AEROSTRUCTURES, INC.
By: /s/ Xxxxxx X. Xxxx
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Name: Xxxxxx X. Xxxx
Title: Chief Executive Officer
Optionee:
/s/ Xxxx Xxxxxxxxx
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XXXX XXXXXXXXX
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EXHIBIT A
FORM OF NOTICE OF EXERCISE OF OPTION
--------------------
DATE
CPI AEROSTRUCTURES, INC.
000X Xxxxxxxxx Xxxxx
Xxxxxxxx, Xxx Xxxx 00000
Attention:
Re: Purchase of Option Shares
Gentlemen:
In accordance with my Stock Option Agreement dated as of April 1, 2003 with
CPI Aerostructures, Inc. ("Company"), I hereby irrevocably elect to exercise the
right to purchase _________ common shares, par value $.001 per share of the
Company, which are being purchased for investment and not for resale.
As payment for my shares, enclosed is (check and complete applicable
box[es]):
|_| a [personal check] [certified check] [bank check] payable to the order
of "CPI Aerostructures, Inc." in the sum of $_________;
|_| confirmation of wire transfer in the amount of $_____________; and/or
|_| with the consent of the Company, a certificate for _____________
Common Shares of the Company, free and clear of any encumbrances, duly
endorsed, having a Fair Market Value (as such term is defined in the
1995 Stock Option Plan of $___________.
I hereby represent and warrant to, and agree with, the Company that:
(i) I am acquiring the Option Shares for my own account, for investment,
and not with a view towards the distribution thereof;
(ii) I have received a copy of the Plan and all reports and documents
required to be filed by the Company with the Commission pursuant to the Exchange
Act within the last 24 months and all reports issued by the Company to its
stockholders;
(iii) I understand that I must bear the economic risk of the investment in
the Option Shares, which cannot be sold by me unless they are registered under
the Securities Act of 1933 ("1933 Act") or an exemption therefrom is available
thereunder and that the Company is under no obligation to register the Option
Shares for sale under the 1933 Act;
(iv) I agree that I will not sell, transfer by any means or otherwise
dispose of the Option Shares acquired by me hereby except in accordance with
Company's policy regarding the sale and disposition of securities owned by
Company insiders;
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(v) in my position with the Company, I have had both the opportunity to ask
questions and receive answers from the officers and directors of the Company and
all persons acting on its behalf concerning the terms and conditions of the
offer made hereunder and to obtain any additional information to the extent the
Company possesses or may possess such information or can acquire it without
unreasonable effort or expense necessary to verify the accuracy of the
information obtained pursuant to clause (ii) above;
(vi) my rights with respect to the Option Shares shall, in all respects, be
subject to the terms and conditions of the Company's 1995 Stock Option Plan and
the Agreement.
(vii) I am aware that the Company shall place stop transfer orders with its
transfer agent against the transfer of the Option Shares in the absence of
registration under the 1933 Act or an exemption therefrom as provided herein;
and
(viii) if, at the time of issuance of the Option Shares, the issuance of
such shares have not been registered under the 1933 Act, the certificates
evidencing the Option Shares shall bear the following legends:
"The shares represented by this certificate have been acquired for
investment and have not been registered under the Securities Act of
1933. The shares may not be sold or transferred in the absence of such
registration or an exemption therefrom under said Act."
"The shares represented by this certificate have been acquired
pursuant to a Stock Option Agreement dated as of April 1, 2003, a copy
of which is on file with the Company, and may not be transferred,
pledged or disposed of except in accordance with the terms and
conditions thereof."
Kindly forward to me my certificate at your earliest convenience.
Very truly yours,
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(Signature) (Address)
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(Print Name)
---------------------------
(Social Security Number)
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