SUTRON CORPORATION
STOCK OPTION AGREEMENT
(Non-qualified Stock Option)
THIS STOCK OPTION AGREEMENT (the "Agreement") is made
and entered into as of the first day of November, 1996, by and between
Sutron Corporation, a Virginia corporation (the "Company"), and Xxxx
X. XxXxxxxx (the "Optionee").
WHEREAS, the Board of Directors of the Company (the "Board") has
adopted and approved that certain Sutron Corporation 1996 Stock
Option Plan (the "Plan"), a copy of which has been provided to the
Optionee and which is incorporated by reference herein; and
WHEREAS, pursuant to and in accordance with the provisions of the
Plan, the Board has determined that the Optionee is eligible to be
granted an option (the "Option") to acquire shares of the Company's
Common Stock, $0.01 par value per share (the "Stock"); and
WHEREAS, Options granted under the Plan are not intended or
designed to qualify for Federal income tax treatment as incentive stock
options under Section 422 of the Internal Revenue Code of 1986 (the
"Code"); and
WHEREAS, the Optionee desires to be granted Options under the
Plan; and
WHEREAS, the Corporation and the Optionee desire to set forth
herein the terms of such Options.
NOW, THEREFORE, in consideration of the foregoing, of the mutual
covenants set forth herein, and of other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Grant of Option. The Company hereby grants to the
Optionee the right and option to purchase 93,600 shares of Stock,
subject to and in accordance with the terms and conditions set forth in
the Plan and in this Agreement.
2. Exercise Price. The Exercise Price to be paid for each share
of Stock to be acquired upon exercise of the Option granted hereunder
is $1.125. Such Exercise Price is equal to the Fair Market Value (as
defined in the Plan) of the Stock as of the date of grant of the Option.
3. Transferability. The Option granted hereunder shall be
exercisable during the Optionee's lifetime only by the Optionee and
shall not be assignable or transferable other than by will or by the laws
of descent and distribution following the Optionee's death.
4. Exercise Terms; Vesting; Procedure.
(a) Except as provided in Section 6 hereof, the Option may be
exercised in whole or in part in accordance with the vesting schedule
set forth in Section 5 hereof, provided, however, that the Option shall
not be exercisable after the expiration of ten (10) years from the date
of grant of the Option.
(b) In order to exercise the Option granted hereunder, the
Optionee shall deliver to the Secretary of the Company written notice
stating the Optionee's intent to exercise the Option, which notice shall
specify:
(i) the name of the Optionee;
(ii) the Option to be exercised;
(iii) the number of shares of Stock to be purchased pursuant to
such exercise; and
(iv) the address to which certificates representing the shares of
Stock issuable upon exercise of the Option are to be mailed.
(c) The Optionee's written notice shall be accompanied by a
certified check payable to the Company in the amount of the product
of the Exercise Price times the number of shares with respect to which
the Option is being exercised. The notice and payment shall be
delivered in person or sent by registered mail, return receipt requested,
to the Secretary of the Company. The Option shall be considered
exercised on the date the notice and payment are delivered to the
Secretary or deposited in the mail, as the case may be. As promptly as
practicable after the Secretary's receipt of the notice of exercise and
payment, and the receipt of any certificates from the Optionee required
by the Company pursuant to Sections 8 and 9 hereof, the Company
shall deliver to the Optionee a certificate or certificates for the number
of shares of Stock with respect to which the Option has been exercised.
5. Vesting. Each Option shall vest and become cumulatively
exercisable as to twenty percent (20%) of the shares of Stock subject to
such Option on each anniversary of the date of grant of the Option;
provided, however, that the Option shall become immediately
exercisable in full at the time of a Change of Control of the Company.
6. Effect of Termination of Employment, Disability or Death.
The following provisions shall govern the exercise of any Options held
by an Optionee at the time the Optionee ceases to be an employee of
the Company, suffers a Disability, or dies.
6.1 Termination of Employment. In the event that the Optionee
ceases to be an employee of the Company for any reason other than
Disability or death, then the period during which each outstanding
Option held by such Optionee is to remain exercisable shall be limited
to the ninety (90) day period following the date of termination of
employment. Under no circumstances, however, shall any such
Option be exercisable after the specified expiration date of the Option
term. Any outstanding Option may not be exercised in the aggregate
for more than the number of vested shares for which the Option is
exercisable on the date of the termination of employment, and such
Option shall terminate and cease to be outstanding with respect to any
Option shares for which the Option is not at that time exercisable or in
which the Optionee is not otherwise at that time vested.
6.2 Disability. In the event that the Optionee ceases to be an
employee of the Company by reason of a Disability, then the period
during which each outstanding Option held by such Optionee is to
remain exercisable shall be limited to a period of one (1) year
following the date of termination of employment due to Disability.
Under no circumstances, however, shall any such Option be
exercisable after the specified expiration date of the Option term as set
forth in the Option Agreement. Any outstanding Option may not be
exercised in the aggregate for more than the number of vested shares
for which the Option is exercisable on the date of the termination of
employment due to Disability, and such Option shall terminate and
cease to be outstanding with respect to any Option shares for which the
Option is not at that time exercisable or in which the Optionee is not
otherwise at that time vested.
6.3 Death. In the event that the Optionee dies while holding one
or more outstanding Options, then the period during which each
outstanding Option held by such Optionee is to remain exercisable
shall be limited to a period of one (1) year following the date of the
Optionee's death. During such limited period, the Option may be
exercised by the personal representative of the Optionee's estate or by
the person or persons to whom the option is transferred pursuant to the
Optionee's will or in accordance with the laws of descent and
distribution. Under no circumstances, however, shall any such Option
be exercisable after the specified expiration date of the Option term.
Any outstanding Option may not be exercised in the aggregate for
more than the number of vested shares for which the Option is
exercisable on the date of the death of the Optionee, and such Option
shall terminate and cease to be outstanding with respect to any Option
shares for which the Option is not at that time exercisable or in which
the Optionee is not otherwise at that time vested.
7. Adjustments to Upon Certain Events. In the event that any
change is made to the Stock issuable under the Plan and the Option
granted hereunder by reason of stock split, stock dividend,
recapitalization, combination of shares, exchange of shares,
repurchase, merger, consolidation, spin-off or other change affecting
the outstanding Stock as a class, the Board shall make appropriate
adjustments to the maximum number of shares and/or class of shares,
and the number of shares and/or class of shares and the exercise price
per share in effect under the Option, in order to prevent the dilution or
enlargement of benefits thereunder. Any adjustments made by the
Board pursuant to this Section 7 shall be final, binding and conclusive.
Neither the existence nor the terms of the Plan or this Agreement, nor
the grant of any Option hereunder, shall affect the right or power of
the Company to make any adjustments, reorganizations,
reclassifications or other changes to its capital structure or to merge,
consolidate, dissolve, liquidate, sell or transfer any or all of its assets
or otherwise change its business structure.
Except as expressly provided above, the issuance by the Company of
shares of stock of any class, for cash or property, or for labor or
services, either upon direct sale or upon the exercise of rights,
warrants or options to subscribe therefor, or upon conversions of
shares or obligations of the Company convertible into such shares or
other securities, shall not affect the number, class or exercise price of
shares of Stock then subject to the Option, and no adjustment shall be
made by reason thereof.
8. Requirements of Law. The Company shall not be required to
sell or issue shares of its Stock under the Option if the sale or issuance
would constitute a violation by the Optionee or the Company of any
provisions of any state or federal law, rule or regulation. In addition,
in connection with the Securities Act of 1933, as amended, upon
exercise of the Option, the Company shall not be required to issue
such shares of Stock unless the Company has received evidence
satisfactory to it to the effect that the Optionee will not transfer such
shares except pursuant to a registration statement in effect under the
Securities Act of 1933, as amended, or unless an opinion of counsel to
the Company has been received to the effect that such registration is
not required. Any determination in this regard by the Company shall
be final, binding and conclusive. Certificates representing shares of
Stock issued pursuant to the exercise of the Option will be subject to
such stop-transfer orders and other restrictions as may be applicable
under federal and state laws, regulations and rules, or the requirements
of any securities exchange or automated quotation system. In the event
the shares issuable on exercise of the Option are not registered under
the Securities Act, the Company may imprint the following legend or
any other legend which counsel to the Company considers necessary or
advisable:
"The shares of Stock represented by this certificate have not been
registered under the Securities Act of 1933 or under the securities laws
of any state and may not be sold or transferred except upon such
registration or upon receipt by the Company of an opinion of counsel
satisfactory to the Company that registration is not required for such
sale or transfer."
The Corporation may, but shall in no event be obligated to, register
any securities covered hereby pursuant to the Securities Act of 1933;
and in the event any shares are so registered, the Company may, in its
discretion, remove any legend on certificates representing such shares.
The Company shall not be obligated to take any other affirmative
action in order to cause the exercise of the Option or the issuance of
shares pursuant thereto to comply with any state or federal law or
regulation.
9. Investment Purpose. The Optionee agrees that any shares of
Stock subject to the Option granted hereunder will be acquired for
investment and not with any present intention to resell the same, and
the Optionee further agrees to confirm such intention by an
appropriate written assurances and certificates at the time of
exercising an Option or any portion thereof.
10. Withholding. The Company's obligation to deliver shares of
Stock upon exercise of the Option shall be subject to any and all
applicable federal, state and local tax withholding and reporting
requirements.
11. No Rights as Shareholder. The Optionee shall have no right
as a shareholder with respect to the Stock covered by the Option until
the date of issuance of Stock Certificates for such Stock to the
Optionee.
12. No Employment Obligation. The granting of any Option
shall not impose upon the Company any obligation to employ the
Optionee. The right of the Company to terminate the employment of
the Optionee shall not be diminished or affected by reason of the fact
that an Option has been granted hereunder to the Optionee.
13. General Provisions.
(a) This Agreement shall be binding upon, and shall inure to the
benefit of, the parties hereto and their respective heirs, executors,
administrators, personal representatives, successors and assigns.
(b) This Agreement shall be construed in accordance with, and
shall be governed by, the laws of the Commonwealth of Virginia.
(c) No waiver by any party hereto of any breach of any covenant,
condition or agreement hereof shall be considered to constitute a
waiver of any such covenant, condition or provision, or of any
subsequent breach thereof.
(d) In the event any court of competent jurisdiction shall declare
any portion of this Agreement to be invalid, the remainder of this
Agreement shall not be invalidated thereby, but shall remain in full
force and effect.
(e) Unless otherwise provided in this Agreement, no notice or
other communication which may be or is required or permitted to be
given under this Agreement shall be effective unless the same is in
writing and is either hand delivered or sent by registered or certified
mail, return receipt requested, first-class postage prepaid, (1) if to the
Optionee, to 00000 Xxxxxx Xxxxx, Xxxxxx, Xxxxxxxx 00000, and (2) if
to the Company, to Sutron Corporation., Attn: Secretary, 00000
Xxxxxxxx Xxxxxx, Xxxxxxxx, XX 00000, or at any other address that may
be given by one party to the other party by notice pursuant to this
paragraph 6(e), with a copy to the law firm of Shulman, Rogers,
Gandal, Pordy & Xxxxx, P.A., 00000 Xxxxxxxxx Xxxx, Xxxxx Xxxxx,
Xxxxxxxxx, Xxxxxxxx 00000. Unless otherwise provided in this
Agreement, such notices, or other communications, if sent by
registered or certified mail in accordance with this paragraph 6(e),
shall be deemed to have been given at the time of mailing.
(f) Where the text requires, words in the singular shall be
deemed to include the plural and vice-versa, and words in one gender
shall be deemed to include all genders.
(g) Any headings preceding the text of the sections or sub-
sections in this Agreement are inserted solely for convenience of
reference and shall not constitute a part of this Agreement, nor shall
they affect its meaning, construction or effect.
(h) The Option granted pursuant hereto is not intended or
designed to qualify for federal income tax treatment as an incentive
stock option under Section 422 of the Code.
(i) The Options are subject to all terms, conditions, limitations
and restrictions contained in the Plan, which shall be controlling in
the event of any conflicting or inconsistent provisions between this
Agreement and the Plan.
IN WITNESS WHEREOF, the Company has caused this Agreement to
be executed and sealed by its duly authorized officers, and the
Optionee has executed and sealed this Agreement, all as of the day and
year first above written.
THE COMPANY:
SUTRON CORPORATION
/s/ Xxxxx X. Xxxxxxx
Xxxxx X. Xxxxxxx
ATTEST
/s/ Xxxxxx X. Xxxxxxx
Xxxxxx X. Xxxxxxx
Secretary
WITNESS:
/s/ Xxxxxx X. Xxxxxx
Xxxxxx X. Xxxxxx
Treasurer
THE OPTIONEE:
/s/ Xxxx X. XxXxxxxx
Xxxx X. XxXxxxxx
