EXHIBIT 10.11
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT (this "Agreement"), is made and effective as
of this _____ day of __________, 1997, by and between Advanced Electronic
Support Products, Inc., a Florida corporation with its principal place of
business at ▇▇▇▇ ▇.▇. ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇ (the "Company"),
and __________________________________________________, ______________________
______________________________________________ (the "Optionee").
W I T N E S S E T H:
WHEREAS, the Optionee is willing to assist the Company in the further
development of its business;
WHEREAS, the Company is desirous of increasing the incentive of the
Optionee to exert Optionee's utmost efforts to improve the business and increase
the assets of the Company; and
WHEREAS, the Company is desirous of granting the Optionee certain
contingent options (the "Contingent Options"), to purchase shares of Common
Stock of the Company from the Company upon the terms and conditions set forth
herein.
NOW, THEREFORE, in consideration of the foregoing, and for other good
and valuable consideration, receipt and adequacy of which is hereby
acknowledged, the parties hereto hereby agree as follows:
1. GRANT OF CONTINGENT OPTIONS.
Subject to the terms and conditions of this Agreement, the Company
hereby grants to the Optionee, the option to purchase, subject to certain
contingencies and vesting schedules, prior to 5:00 p.m. on ___________, 2007
(ten (10) years from the date hereof), an aggregate 125,000 shares of Common
Stock of the Company (the "Option Shares"). The Contingent Options shall expire
pursuant to their terms on ___________, 2007 (ten (10) years from the date
hereof), unless sooner exercised by the Optionee as provided hereunder.
2. EXERCISE PRICE.
The exercise price ("Exercise Price") of the Contingent Options shall be
the initial public offering price of the Company's Common Stock. The Optionee
shall pay all transfer taxes, if any, upon the exercise of the Contingent
Options and all other fees and expenses, if any, necessarily incurred by the
Company in connection therewith. The Exercise Price of the Contingent Options
shall be subject to adjustment in the event of changes in the capitalization of
the Company, as set forth in SECTION 5 hereto.
3. EXERCISABILITY OF OPTIONS.
(a) VESTING OF CONTINGENT OPTIONS. The Contingent Options shall vest and
become exercisable seven (7) years from the date hereof but may vest earlier
contingent upon the Company satisfying certain Performance Thresholds (as that
term is defined below). The earlier vesting and exercise of the Contingent
Options is contingent upon the Company achieving specified earnings per share
levels, specified stock price levels or net income levels (the "Performance
Thresholds"), for the corresponding fiscal year-end. Commencing with fiscal
year-ended December 31, 1997, and at each of the four fiscal year ends
thereafter, 25,000 of such options shall become exercisable if the Company
achieves the following Performance Thresholds: (i) achieves earnings per share
of $.50, $.60, $.72, $.86 and $1.04 for the fiscal years ended December 31,
1997, 1998, 1999, 2000 and 2001 (collectively, the "Fiscal Years"), respectively
(or cumulative earnings per share of $.50, $1.10, $1.82, $2.68 and $3.72,
respectively), (ii) obtains an average closing bid price of the Company's Common
Stock on any 20 consecutive trading days during each Fiscal Year of $7.20,
$8.64, $10.37, $12.44 and $14.93, respectively, or (iii) the Company has net
income, during each Fiscal Year of $1.0 million, $1.2 million, $1.440 million,
$1.728 million and $2.074 million, respectively (or cumulative net income of
$1.0 million, $2.2 million, $3.64 million, $5.368 million and $7.442 million,
respectively). The following chart illustrates the foregoing Performance
Thresholds:
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EPS NET
FYE OPTIONS CURRENT EPS STOCK NET INCOME
1/31 VESTED YEAR CUM PRICE INCOME CUMULATIVE
------------------------------------------------------------------------------------------------
1997 50,000 $.50 $.50 $ 7.20 $1,000,000 $1,000,000
------------------------------------------------------------------------------------------------
1998 50,000 .60 1.10 8.64 1,200,000 2,200,000
------------------------------------------------------------------------------------------------
1999 50,000 .72 1.82 10.37 1,440,000 3,640,000
------------------------------------------------------------------------------------------------
2000 50,000 .86 2.68 12.44 1,728,000 5,368,000
------------------------------------------------------------------------------------------------
2001 50,000 1.04 3.72 14.93 2,074,000 7,442,000
------------------------------------------------------------------------------------------------
For any Fiscal Year after January 31, 1997 in which the Company attains the
foregoing Performance Thresholds, any Contingent Options eligible for vesting in
prior years which were not vested and exercisable because the Performance
Thresholds for such Fiscal Years were not achieved, shall vest and become
immediately exercisable. In addition, for any Fiscal Year in which the Company
attains the Performance Thresholds applicable to a subsequent Fiscal Year, all
Contingent Options eligible for vesting in such subsequent Fiscal Year shall
vest and become exercisable. Notwithstanding the foregoing, regardless of the
Company's performance under the Performance Thresholds, all of the Contingent
Options shall vest and become fully exercisable seven (7) years from the date
hereof to the extent not already vested in accordance with the foregoing. If any
of the Common Stock purchase warrants offered by the Company in connection with
the initial public offering of its Common Stock (the "Warrants") are exercised,
the Contingent Options shall vest and become exercisable pro rata (based on the
number of Warrants exercised) to the extent not already vested in accordance
with the foregoing. By way of illustration only, if 100,000 of the 750,000
Warrants
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(13.33%) were exercised, then the corresponding pro rata amount of Contingent
Options (16,662.25 of the total 125,000 Options, or 13.33%) shall vest and
become exercisable. Net income amounts and earnings per share calculations shall
be those reflected on the Company's audited financial statements.
(b) TIME AND AMOUNT OF EXERCISE. The Contingent Options may be exercised
in whole or in part subject to the vesting schedule set forth in SECTION 3(A)
above, but in no case may a Contingent Option (i) be exercised as to less than
one hundred (100) shares of Common Stock at any one time, or the remaining
shares of Common Stock covered by the Contingent Option if less than one hundred
(100), and (ii) be exercised more than ten years from the date of its grant.
(c) MANNER OF EXERCISE. A Contingent Option granted hereunder shall be
exercised by the delivery by the holder thereof to the Company at its principal
office (to the attention of the Secretary of the Company) of written notice of
the number of full shares of Common Stock with respect to which the Contingent
Option is being exercised, accompanied by payment in full of the price for such
shares of Common Stock (i), in cash or by certified or bank check payable to the
order of the Company, (ii) by delivery of shares of Common Stock already owned
by the Optionee and having a fair market value equal to the Exercise Price, or
(iii) by a combination of cash and Common Stock The consideration for the
Contingent Option may also be paid in full by a broker-dealer to whom the
Optionee has submitted an exercise notice consisting of a fully endorsed
Contingent Option, or through any other medium of payment as the Company, in its
sole and absolute discretion, may authorize in writing.
(d) TRANSFER OF OPTIONS. All Contingent Options granted hereunder shall
not be transferable and any Contingent Option granted hereunder may be exercised
during the lifetime of the holder thereof only by the holder. No Contingent
Option granted hereunder shall be subject to execution, attachment or other
process.
4. THE OPTIONEE'S INVESTMENT REPRESENTATIONS.
The Optionee hereby agrees, acknowledges, represents and warrants to the
Company the following:
(a) The Optionee is acquiring the Contingent Options hereunder for
investment purposes only and without the intent toward the further sale and/or
distribution thereof. In addition, the Optionee hereby agrees, acknowledges,
represents and warrants, that in the event of the exercise of any of the
Contingent Options hereunder, said Option Shares shall be acquired for
investment purposes only and without the intent toward the further sale and/or
distribution thereof.
(b) Unless the Option Shares are registered in compliance with the
registration requirements of the Security Act of 1933, as amended, with other
applicable securities laws, the certificates evidencing the Option Shares will
bear a restrictive legend with respect to the sale or transfer thereof. Any
subsequent sale, transfer, assignment or disposition of the Option Shares, if
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then otherwise permitted in accordance with any contractual commitment or
obligation entered into by the Optionee, must be made in compliance with the
registration requirements of the Securities Act of 1933, as amended, and with
other applicable securities laws or pursuant to an opinion of counsel,
reasonably satisfactory to the Company, that such registration is not required.
(c) The Optionee is familiar with the business and financial condition
of the Company, and the Optionee has been afforded the opportunity to ask all
relevant questions of the Company's management with respect to the business and
financial condition of the Company. The Optionee further agrees to re-assert any
of said representations and warranties and to make any other representations and
warranties, as reasonably requested by the Company, as of the date of exercise
of any of said Contingent Options.
(d) The Optionee hereby further acknowledges, agrees, represents and
warrants that the issuance of the Option Shares upon the exercise of the
Contingent Options is conditioned, in part, upon the compliance with applicable
securities laws. The Optionee agrees to deliver to the Company any reasonable
documentation requested with respect thereto and further acknowledges and agrees
that any said exercise of the Contingent Options and the issuance of the Option
Shares may only be effectuated provided said exercise is in compliance with
applicable laws and regulations. In addition, the Optionee further acknowledges
that the Company is relying upon the representations and warranties of the
Optionee hereunder with respect to compliance by the Company with applicable
securities laws and regulations.
5. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION.
(a) In the event of a merger, reorganization, consolidation,
recapitalization, stock dividend, stock split, or other change in corporate
structure affecting the shares of Common Stock of the Company, such adjustment
shall be made in the number of Option Shares, and the Exercise Price shall be
correspondingly adjusted to equitably reflect such change.
(b) Any adjustment in the number of Option Shares shall apply
proportionately to only the unexercised portion of the Contingent Options
granted hereunder. If fractions of an Option Share would result from any such
adjustment, the adjustment shall be revised to the next lower whole number of
Option Shares.
6. NO RIGHTS AS THE OPTIONEE.
The Optionee shall have no rights as a shareholder of the Company with
respect to the Option Shares issuable upon the exercise of Contingent Options
granted hereunder that have not been exercised and for which payment in full of
the applicable Exercise Price has not been made as provided herein. The delivery
of notice hereunder above of the Optionee's desire to exercise Contingent
Options shall not create any rights in the Optionee as a shareholder of the
Company. The Optionee shall have rights as a shareholder of the Company with
respect to any Option Shares only upon the tendering in full of the applicable
Exercise Price to the Company as provided herein.
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7. PIGGY-BACK REGISTRATION.
(a) Within six (6) years from the date of this Agreement, whenever the
Company proposes to file a Registration Statement (as defined below), it will,
prior to such filing, give written notice to the Optionee of its intention to do
so and, upon the written request of the Optionee given within 5 days after the
Company provides such notice (which request shall state the intended method of
disposition of the Registrable Shares (defined below)), the Company shall use
its best efforts to cause all such shares of Common Stock underlying the
Contingent Options (the "Registrable Shares") which the Company has been
requested by the Optionee to register to be registered under the Securities Act
of 1933, as amended, to the extent necessary to permit their sale or other
disposition in accordance with the intended methods of distribution specified in
the request of the Optionee; PROVIDED, HOWEVER, that the Company shall have the
right postpone or withdraw any registration effected pursuant to this SECTION 7
without any obligation to the Optionee whatsoever.
(b) In connection with any registration under this SECTION 7 involving
an underwritten offering, the Company shall not be required to include any
Registrable Shares in such registration unless the holder thereof accepts the
terms of the underwriting as agreed upon between the Company and the
underwriters selected by the Company. If, in the opinion of the managing
underwriter, it is appropriate because of marketing factors to limit the number
of Registrable Shares to be included in the offering, then the Company shall be
required to include in the registration only that number of Registrable Shares,
if any, which the managing underwriter believes should be included therein, and
shall be entitled to include before such Registrable Shares up to the number of
shares of Common Stock to be issued by the Company in the offering; PROVIDED,
HOWEVER, that no persons or entities other than the Company and the Optionee
shall be permitted to include securities in the offering. If the number of
Registrable Shares to be included in the offering in accordance with the
foregoing is less than the total number of shares which the holder of
Registrable Shares has requested to be included, then the holder of Registrable
Shares who has requested registration and other holders of securities entitled
to be included in such registration shall participate in the registration pro
rata based upon their total ownership of shares of Common Stock subject to the
managing underwriter's discretion.
(c) For the purposes of this SECTION 7 the term "Registration Statement"
means a registration statement filed by the Company with the Securities and
Exchange Commission for a public offering and sale of Common Stock (other than a
Registration Statement on Form S-4, or its successors, or any other form for a
similar limited purpose, or any registration statement covering only securities
proposed to be issued in exchange for securities or assets of another
corporation).
8. FURTHER CONDITIONS OF EXERCISE.
(a) DELIVERY OF SHARES BY COMPANY. The Company shall not be obligated to
deliver any shares of Common Stock until they have been listed on each
securities exchange on which the shares of Common Stock may then be listed or
until there has been qualification under or compliance with
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such state or federal laws, rules or regulations as the Company may deem
applicable. The Company shall use reasonable efforts to obtain such listing,
qualification and compliance.
(b) WITHHOLDINGS. The Company may make such provisions and take such
steps as it may deem necessary or appropriate for the withholding of any taxes
that the Company is required by any law or regulation of any governmental
authority, whether federal, state or local, domestic or foreign, to withhold in
connection with the exercise of any Contingent Option, including, but not
limited to, (i) the withholding of delivery of shares of Common Stock upon
exercise of Contingent Options until the holder reimburses the Company for the
amount the Company is required to withhold with respect to such taxes, (ii) the
canceling of any number of shares of Common Stock issuable upon exercise of such
Contingent Options in an amount sufficient to reimburse the Company for the
amount it is required to so withhold, or (iii) withholding the amount due from
any such person's wages or compensation due such person.
9. MISCELLANEOUS.
(a) INDULGENCES, ETC. Neither the failure nor any delay on the part of
either party to exercise any right, remedy, power or privilege under this
Agreement shall operate as a waiver thereof, nor shall any single or partial
exercise of any right, remedy, power or privilege preclude any other or further
exercise of the same or of any other right, remedy, power or privilege, nor
shall any waiver of any right, remedy, power or privilege with respect to any
occurrence be construed as a waiver of such right, remedy, power or privilege
with respect to any other occurrence. No waiver shall be effective unless it is
in writing and is signed by the party asserted to have granted such waiver.
(b) CONTROLLING LAW. This Agreement and all questions relating to its
validity, interpretation, performance and enforcement (including, without
limitation, provisions concerning limitations of actions), shall be governed by
and construed in accordance with the laws of the State of Florida, without
application to the principles of conflict of laws.
(c) NOTICES. All notices, requests, demands and other communications
required or permitted under this Agreement shall be in writing and shall be
deemed to have been duly given, made and received only when personally
delivered, one day following the day when deposited with an overnight courier
service for overnight priority service, such as Federal Express, for delivery to
the intended addressee or three days following the day when deposited in the
United States mails, first class postage prepaid, certified or registered mail,
and addressed as set forth in the first paragraph of this Agreement. Any person
may alter the address to which communications or copies are to be sent by giving
notice of such change of address in conformity with the provisions of this
Section for the giving of notice.
(d) BINDING NATURE OF AGREEMENT; NO ASSIGNMENT. This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
heirs, personal representatives,
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successors and assigns, except that no party may assign or transfer its rights
under this Agreement without the prior written consent of the other parties
hereto.
(e) PROVISIONS SEPARABLE. The provisions of this Agreement are
independent of and separable from each other, and no provision shall be affected
or rendered invalid or unenforceable by virtue of the fact that for any reason
any other or others of them may be invalid or unenforceable in whole or in part.
(f) SECTION HEADINGS. The section headings in this Agreement are for
convenience only; they form no part of this Agreement and shall not affect its
interpretation.
(g) NUMBER OF DAYS. In computing the number of days for purposes of this
Agreement, all days shall be counted, including Saturdays, Sundays and holidays;
PROVIDED, HOWEVER that if the final day of any time period falls on a Saturday,
Sunday or holiday on which federal banks are or may elect to be closed, then the
final day shall be deemed to be the next day which is not a Saturday, Sunday or
such holiday.
(h) NO THIRD-PARTY BENEFICIARIES. This Agreement shall not confer any
rights or remedies upon any person other than the parties and their respective
successors and permitted assigns.
(i) ENTIRE AGREEMENT; AMENDMENTS. This Agreement (including the
documents and exhibits referred to herein) constitutes the entire agreement
among the parties and supersedes any prior understandings, agreements, or
representations by or among the parties, written or oral, that may have related
in any way to the subject matter hereof. This Agreement may not be amended,
supplemented or modified in whole or in part except by an instrument in writing
signed by the party or parties against whom enforcement of any such amendment,
supplement or modification is sought.
(j) CONSTRUCTION. The language used in this Agreement will be deemed to
be the language chosen by the parties to express their mutual intent, and
thereof strict construction shall be applied against any party. Any reference to
any federal, state, local or foreign statute or law shall be deemed also to
refer to the rules and regulations promulgated thereunder, unless the context
requires otherwise. The parties intend that each representation, warranty, and
covenant contained herein shall have independent significance. If any party has
breached any representation, warranty, or covenant contained herein in any
respect, the fact that there exists another representation, warranty or covenant
relating to the same subject matter (regardless of the relative levels of
specificity) which the party has not breached shall not detract from or mitigate
the fact that the party is in breach of the first representation, warranty or
covenant. This Agreement shall be neither construed against nor in favor of any
of the parties hereto, but rather in accordance with the fair meaning of its
content.
(k) COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which will be deemed an original and all of which together
will constitute one and the same instrument.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
ADVANCED ELECTRONIC SUPPORT
PRODUCTS, INC.
By: ______________________________________
Name: ________________________________
Title:________________________________
OPTIONEE:
Print Name: ______________________________
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