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EXHIBIT 10.10
STOCK OPTION AGREEMENT
Options granted under the Incentive Stock Option Plan of S.T. Research
Corporation.
This Stock Option Agreement ("Agreement") is entered into as of December
9, 1996, between Xxxxxx X. Xxxxx, a Virginia Resident, residing at 0000
Xxxxxxxxx Xxxx, Xxxxxx, Xxxxxxxx 00000 ("Employee") and S.T. Research
Corporation, a Virginia Corporation with its principal place of business at 0000
Xxxxxxxx Xxxx, Xxxxxxxxx, Xxxxxxxx 00000 ("Company").
GENERAL
On May 22, 1996, the Company adopted an incentive stock option plan
designated as the Incentive Stock Option Plan of S.T. Research Corporation (the
"Plan"), pursuant to the options that qualify as "incentive stock options" under
Section 422A of the Internal Revenue Code (the "Code") as added by the Economic
Recovery Act of 1981 and as it may be amended from time to time ("Section 422A")
may be granted to selected key employees of the Company or any of its
affiliates.
On the date of this Agreement the Employee is a bona fide employee of the
Company or one of its affiliates, as defined in the Plan.
The Board of Directors of the Company (the "Board") regards the Employee
as a key employee, as contemplated by the Plan, has determined that it would be
to the advantage and interest of the Company and its shareholders to grant to
the Employee the option rights provided for within this Agreement as an
inducement to remain in the service of the Company and as an incentive for
increased efforts during such service, and has instructed the Company's officers
to issue such option rights as provided in the Plan.
The Board (or an Executive Committee designated by the Board) has
approved of the granting to the Employee of the option rights evidenced by this
Agreement.
In consideration for the mutual promises, covenants, and Agreements made
below, the parties, intending to be legally bound, agree as follows:
AGREEMENT
1. GRANT OF OPTION RIGHTS. Subject to the Employee's continued employment,
as provided in this Agreement, the Company hereby grants to the Employee the
option rights specified below (the "Option Rights"):
1.1 The number of shares of the Company's stock that are subject to the
Option Rights is 6,000 shares of the Company's common stock (the "Shares").
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1.2 The option exercise price, which is not less than the fair market value
of the Shares as of the date hereof, and in the case of an Employee who owns 10%
or more of the Company's stock, not less than 110% of the fair market value of
the Shares as of the date of this Agreement, is $8.69 per Share.
1.3 The Option Rights may be exercised during the time periods, and as to the
number of Shares with respect to when the Option is exercisable during each such
time period, as follows:
1.3.1 Option Rights for up to 20% of the Shares may be exercised at any time or
times, from and including the date that is 12 months from the date hereof to and
including the Expiration Date;
1.3.2 Option Rights for up to an additional 20% of the Shares may be exercised
at any time or times, from and including the date that is 24 months from the
date of this Agreement to and including the Expiration Date;
1.3.3 Option Rights for up to an additional 20% of the Shares, may be exercised
at any time or times, from and including the date that is 36 months from the
date of this Agreement to including the Expiration Date;
1.3.4 Option Rights for up to an additional 20% of the Shares, may be exercised
at any time or times, from and including the date that is 48 months from the
date of this Agreement to including the Expiration Date; and
1.3.5 Option Rights for up to an additional 20% of the Shares, may be exercised
at any time or times, from and including the date that is 60 months from the
date of this Agreement to including the Expiration Date.
1.4 The minimum number of Shares with respect to which the Option Rights may
be exercised is the lesser of 100 Shares or the total number of Shares with
respect to when the Option Rights may be exercised during any given time period.
1.5 To exercise any of the Option Rights, the Employee must have remained in
the employ of the Company or one of its affiliates continuously through the
exercise date, except as otherwise provided in Section 3 below. The granting of
the Option Rights shall impose no obligation on the Company or any of its
affiliates to continue the employment of the Employee, and shall not lessen or
affect the right of the Company or any affiliate that employs the Employee to
terminate such employment or to change the duties, compensation, or other terms
of employment of the Employee. Any Option Rights that are not exercised on or
before the Expiration Date (as defined in Section 3 below) shall automatically
terminate and become null and void.
2. FRACTIONAL SHARES; COMPLIANCE WITH LAWS. In no event shall the Company be
required to issue fractional shares upon the exercise of any Option Rights
granted under this Agreement. No Option Rights may be exercised, and the Company
shall not be required to issue or deliver any certificate(s) for any of the
Shares until there has been compliance with all then applicable requirements of
law, including such registration or other proceedings under federal and state
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securities laws as may in the Company's opinion be necessary or appropriate.
3. NECESSITY OF EMPLOYMENT WHEN OPTION IS EXERCISED. The Option Rights, to
the extent they have not expired or been exercised, shall terminate and become
null and void on the date that the Employee ceases, for any reason, to be an
employee of the Company or one of its affiliates, and shall not be exercisable
on or after such date, except that:
3.1 In the event of the termination of such employment for any reason other
than the death or disability of the Employee, the Employee may, at any time
within a period of one month after such termination of employment, exercise any
or all of the Option Rights to the extent the Option Rights were exercisable
under the provisions of Section 1 in this Agreement on the date of the
termination of such employment.
3.2 In the event of the death of disability of the Employee while in the
employ of the Company, the Employee, the personal representatives of the
Employee or any person or persons who acquired any such Option Rights from the
Employee by will or the applicable laws of descent and distribution may, at any
time within a period of three months after the death or disability of the
Employee, exercise any or all of the Option Rights to the extent the Option
Rights were exercisable under the provisions of Section 1 within this Agreement
on the date of the death or disability of the Employee.
In no event may any Option Rights be exercised by any person or entity
after the date immediately preceding the 10th anniversary date of this
Agreement, or the date on which the Option Rights terminate pursuant to this
Section 3 or any other provision of this Agreement. Each such date is referred
to in this Agreement as the "Expiration Date." References throughout this
Agreement to the Employee shall be deemed, where appropriate, to include any
person entitled to exercise the Option Rights after the death of the Employee
under the terms of Section 3.1 or Section 3.2.
4. NONASSIGNABILITY OF OPTION RIGHTS. The Option Rights: (1) shall, except
as provided in Section 3 of this Agreement, be exercisable only by the Employee;
(2) shall not be transferred, assigned, pledged or hypothecated in any manner
whatsoever, whether voluntarily, involuntarily or by operation of law; and (3)
shall not be subject to execution, attachment or similar process. Upon any
attempt to transfer, assign, pledge, hypothecate, or otherwise dispose of the
Option Rights contrary to the provisions of this Agreement, the Option Rights
shall immediately become null and void.
5. ADJUSTMENTS. Appropriate proportionate adjustments shall be made by the
Company in the number and class of Shares subject to the Option Rights and the
exercise price of the Option Rights in the event that: (1) the common stock of
the Company is changed by reason of any stock split, reverse stock split,
recapitalization, or other change in the capital structure of the Company, or
converted into or exchanged for other securities as a result of any merger,
consolidation or reorganization; or (2) the outstanding number of shares of
common stock of the Company is increased through payment of a stock dividend;
provided, however, that the Company shall not be required to issue fractional
Shares as a result of any such adjustment. If there is any other change in the
number or kind of the outstanding shares of capital stock of the Company, or of
any
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other security into which such stock shall have been changed or for which it
shall have been exchanged, and if the Board, in its sole discretion, determines
that such change equitably requires any adjustment in the Option Rights granted
under this Agreement, such adjustment shall be made in accordance with the
determination of the Board. No adjustments shall be required by reason of the
issuance or sale by the Company for cash or other consideration of additional
sales of its capital stock or securities convertible into or exchangeable for
shares of its capital stock. All adjustments shall be made in such a manner that
will allow the Option Rights to continue to qualify under Section 422A as
"Incentive Stock Option" rights.
New option rights may be substituted for the Option Rights, or the
Company's duties under this Agreement may be assumed by an employer corporation
other than the Company, or by a parent or subsidiary of such employer
corporation, in connection with any merger, consolidation, acquisition,
separation, reorganization, liquidation, or like occurrence, where the Company
is involved, in such a manner that will allow the Option Rights to continue to
qualify as "incentive stock option" rights under Section 422A and to the full
extent permitted thereby. Notwithstanding the foregoing provisions of this
Paragraph 5, in the event such employer corporation, or parent or subsidiary of
such employer corporation, refuses to substitute new option rights for, and
substantially equivalent to, the option rights, or to assume the Options Rights,
as permitted by the Code, the Option Rights shall terminate and therefore become
null and void: (1) upon the reorganization; dissolution or liquidation of the
Company, or similar occurrence; or (2) upon any merger, consolidation,
acquisition, or separation, or similar occurrence, if the Company is not the
surviving corporation; provided, however, that the Employee shall have the
right, immediately prior to or concurrently with such reorganization,
dissolution, liquidation, merger, consolidation, acquisition, separation or
similar occurrence, and upon at least 10 days' written notice thereof, to
exercise any unexpired Option Rights granted under this Agreement to the extent
the Option Rights are exercisable at the time of mailing of such notice, but
subject, nevertheless, to the condition that no Option Rights granted under this
Agreement may be exercised after the Expiration Date.
In the event that the Board of Directors, in its discretion, determines
that it is in the best interests of the Company to offer its shares of capital
stock to the public pursuant to a registration statement filed with the
Securities and Exchange Commission under the Securities Act of 1933, as amended,
or pursuant to an exemption under such Act, the Secretary of the Company shall
notify the Employee in writing of such determination. In that event, all
outstanding Option Rights shall become null and void 30 days after such notice
is mailed, but the Employee shall during such 30-day period, have the right to
exercise any unexpired Option Rights granted to him or her under this Agreement
to the extent such Option Rights are exercisable at the time of mailing of such
notice, but in any event subject to the time limitations for exercise of the
Option Rights provided in the Code.
6. METHOD OF EXERCISE; RIGHTS OF OPTIONEE IN STOCK. The Option Rights shall
be exercisable upon delivery to the Company of an executed Investment
Representation Letter attached hereto as Exhibit A, accompanied by payment in
cash to the Company of the option exercise price as to the Shares being
purchased. Neither the Employee nor his / her personal representatives, heirs,
or legatees shall have any rights or privileges of a shareholder of the Company
in respect to the Shares issuable upon the exercise of the Option Rights, unless
and
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until certificate(s) representing such shares shall have been issued and
delivered in accordance with the terms hereof.
7. NOTICES. Any notice to be given under the terms of this Agreement shall
be mailed, telegraphed or delivered, and confirmed, to the Company, in care of
its Secretary, at the principal office of the Company, and any notice to be
given to the Employee shall be mailed, telegraphed or delivered, and confirmed,
to him or her at the address given beneath his / her signature hereto, or at
such other address as either party may hereafter designate in writing to the
other. Any such notice shall be deemed to have been duly given 48 hours after
the deposit in the United States mail, addressed as mentioned before, registered
or certified and postage and registry or certification fee prepaid.
8. DATE OF GRANT. The Option Rights shall be deemed to have been granted on
the date when the Company executed this Agreement and notified the Employee of
the granting of the Option Rights. Such date is within 10 years from the
Effective Date as defined in the Plan.
9. OPTION RIGHTS GOVERNED BY PLAN AND INTERNAL REVENUE CODE. The provisions
of the Plan shall be deemed to be incorporated in and to have been made a part
of this Agreement, and shall be deemed to be controlling in the event that any
of the provisions of this Agreement are inconsistent. This Agreement shall be
deemed to include such other provisions not set forth in the Plan or herein, or
inconsistent with any provisions set forth in the Plan or herein, as may be
necessary to qualify the option granted under this Agreement as an "incentive
stock option" under Section 422A.
10. ACQUISITION FOR INVESTMENT. By accepting this Stock Option Agreement, the
Employee represents, covenants, and warrants for himself, his personal
representatives, heirs, and legatees that such stock Option Rights are being
acquired with no view to any distribution and that, upon each issuance of Shares
in accordance with this Agreement, the Employee, his personal representatives,
heirs, or legatees receiving such Shares shall, if requested, represent in
writing to the Company that such Shares are being acquired with no view to any
distribution or shall make such other representations in writing to the Company,
with respect to the further transfer of such Shares, as may be deemed by the
Company to be necessary or appropriate under the applicable federal and state
securities laws. The Company, at its sole discretion, may take all reasonable
steps (including the affixing of an appropriate legend on certificates embodying
such Shares) to assure itself against any resale or distribution not in
compliance with federal or state securities laws.
11. PERSONS BOUND. Subject to the provisions against assignment set forth in
Section 4 hereof, this Agreement shall be binding upon and inure to the benefit
of any successor or successors of the Company, and the personal representatives,
heirs, and legatees of the Employee.
The Company has caused this Agreement to be executed on its behalf by an
officer of the Company, on the date set forth above, and the Employee has
executed this Agreement on or as of such date, which date is the time of the
granting of the Option Rights.
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We have carefully reviewed this contract and agree to and accept its
terms and conditions. We are executing this Agreement as of the day and year
first written above.
Employee: Company:
Xxxxxx X. Xxxxx S.T. Research Corporation
S.R. Xxxxxxx, President
By: /s/ X.X. Xxxxx By: /s/ S. R. Xxxxxxx
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