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GIGA-TRONICS INCORPORATED
NONSTATUTORY STOCK OPTION AGREEMENT
AGREEMENT made as of the 22nd day of January, 1991, by and between
Giga-Tronics Incorporated, a California corporation (hereinafter called
"Company", and _________________ (hereinafter called "Optionee").
WITNESSETH:
RECITALS
A. The Board of Directors of the Company (the "Board") has adopted
the Company's Restated 1990 Stock Option Plan (the "Plan") for the purpose of
attracting and retaining the services of employees and non-employee members of
the Board who contribute to the financial success of the Company or its parent
or subsidiary corporations.
B. Optionee is a non-employee member of the Board who is to render
valuable services to the Company or its parent or subsidiary corporations. This
Agreement is executed pursuant to, and is intended to carry out the purposes
of, the Plan in connection with a special one-time stock option grant made to
such Optionee thereunder.
C. The granted option is not intended to be an incentive stock
option within the meaning of Section 422 of the Internal Revenue Code.
D. For purposes of this Agreement, the following definitions shall
be in effect:
Fair Market Value: The Fair Market Value per share of Common Stock on
any relevant date under the Plan shall be the mean between the highest bid
and lowest asked prices (or, if such information is available, the closing
selling price) per share of Common Stock on such date in the over-the-
counter market, as such prices are reported by the National Association of
Securities Dealers through the NASDAQ system (or any successor system).
Should the Common Stock become traded on a national securities exchange,
then the Fair Market Value per share shall be the closing selling price on
such exchange on the date in question, as such price is quoted on the
composite tape of transactions on such exchange. If there is no reported
sale of Common Stock on the over-the-counter market (or national
securities exchange) on the date in
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question, then the Fair Market Value shall be the mean between the highest
bid and lowest asked prices (or closing selling price) on the last
preceding date for which such quotations exist.
Parent: A corporation shall be deemed to be a Parent of the Company
if it is a corporation (other than the Company) in an unbroken chain of
corporations ending with the Company, provided each such corporation in
the unbroken chain (other than the Company) owns, at the time of the
determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other
corporations in such chain.
Subsidiary: A corporation shall be deemed to be a Subsidiary of the
Company if it is a member of an unbroken chain of corporation beginning
with the Company, provided each corporation in such chain (other than the
last corporation) owns, at the time of determination, stock possessing 50%
or more of the total combined voting power of all classes of stock in one
of the other corporations in such chain. The term "Subsidiary" shall also
include any partnership, joint venture or other business entity of which
the Company owns, directly or indirectly through another subsidiary
corporation, more than a fifty percent (50%) interest in voting power,
capital or profits.
TERMS
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1. Grant of Option. Subject to and upon the terms and conditions
set forth in this Agreement, the Company hereby grants to Optionee, as of the
date of this Agreement (the "Grant Date"), a stock option to purchase up to
_____ shares of the Company's Common Stock (the "Optioned Shares"). The
Optioned Shares shall be purchasable from time to time during the option term
at the option price of $5.875 per share (the "Option Price"), the Fair Market
Value per share of the Common Stock on the Grant Date.
2. Option Term. This option shall have a maximum term of five (5)
years measured from the Grant Date and shall accordingly expire at the close of
business on January 21, 1996 (the "Expiration Date"), unless sooner terminated
in accordance with Paragraph 5 or 7A of this Agreement.
3. Transferability. This option shall not be transferable or
assignable by Optionee other than by will or by the laws of descent and
distribution. Accordingly, this option may be exercised, during Optionee's
lifetime, only by Optionee.
4. Exercisability. Subject to the shareholder-approval requirement
of Paragraph 18, this option shall become exercisable
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for the Optioned Shares in a series of four (4) equal and successive annual
installments, beginning one (1) year after the Grant Date, provided the
Optionee continues to serve as a member of the Board. As the option becomes
exercisable for one or more installments, it shall remain so exercisable until
the Expiration Date or sooner termination of the option term under Paragraph 5
or Paragraph 7A of this Agreement.
5. Cessation of Board Membership. In connection with the Optionee's
cessation of Board membership, the option term specified in Paragraph 2 shall
terminate (and this option shall cease to be exercisable) prior to the
Expiration Date in accordance with the following provisions:
(i) Should Optionee cease to be a Board member for any reason
other than death while this option remains outstanding, then the period
for exercising this option shall be reduced to a six-month period
commencing with the date of such cessation of Board membership, but in no
event shall this option be exercisable at any time after the specified
Expiration Date. During such limited period of exercisability, this
option may not be exercised for more than the number of shares (if any)
for which it is exercisable on the date of Optionee's cessation of Board
membership. Upon the earlier of (A) the expiration of such six (6)-month
period of (B) the Expiration Date, the option shall terminate and cease to
be outstanding.
(ii) Should Optionee die while this option is outstanding, then
the personal representative of the Optionee's estate (or 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) shall have the
right to exercise this option for any or all of the Optioned Shares for
which this option is exercisable on the date of the Optionee's cessation
of Board membership. Such right shall lapse, and this option shall cease
to be exercisable, upon the earlier of (A) the expiration of the twelve
(12) month period measured from the date of Optionee's death or (B) the
Expiration Date.
6. Adjustment in Optioned Shares. In the event any change is made
to the Common Stock issuable under the Plan by reason of any stock dividend,
stock split, combination of shares, exchange of shares, or other change
affecting the outstanding Common Stock as a class without receipt of
consideration, the Plan Administrator shall make appropriate adjustments to (a)
the class and/or number of securities subject to this option and (b) the Option
Price payable per share in order to reflect such change and
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thereby preclude a dilution or enlargement of benefits hereunder. The
adjustments so determined by the Plan Administrator shall be final, binding and
conclusive.
7. Corporate Transaction/Change in Control.
A. Upon the occurrence of one or more of the following transactions (a
"Corporate Transaction") for which the approval of the Company's shareholders
has been obtained:
(i) a merger or acquisition in which the Company is not the
surviving entity, except for a transaction of the principal purpose of
which is to change the State of the Company's incorporation,
(ii) the sale, transfer or other disposition of all or substantially
all of the assets of the Company to any entity other than a Parent or
Subsidiary of the Company, or,
(iii) any reverse merger in which the Company is the surviving entity
but in which fifty percent (50%) or more of the Company's outstanding
voting stock is transferred to holders different from those who held the
stock immediately prior to such merger,
the exercisability of this option shall, to the extent it is not otherwise
at the time fully exercisable, be automatically accelerated so that such option
shall, immediately prior to the specified effective date for the Corporate
Transaction, become fully exercisable for all of the Optioned Shares and may be
exercised for all or any portion of such shares.
B. This option, to the extent not previously exercised, shall terminate
upon the consummation of the Corporate Transaction and cease to be exercisable.
C. Upon the occurrence of one or more of the following transactions (a
"Change in Control"):
(i) the acquisition by a person or group of related persons, other
than the Company or any person controlling, controlled by or under common
control with the Company, of beneficial ownership (as determined pursuant
to the provisions of Rule 13d-3 under the Securities Exchange Act of 1934,
as amended) of securities of the Company representing thirty percent (30%)
or more of the combined voting power of the Company's then outstanding
securities pursuant to a transaction or series of related transactions
which the Board does not approve; or
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(ii) the first date within any period of thirty-six (36) consecutive
months or less on which there is effected any change in the composition of
the Board such that the majority of the Board (determined by rounding up to
the next whole number) ceases to be comprised of individuals who either (I)
have been members of the Board continuously since the beginning of such
period or (II) have been elected or nominated for election as Board members
during such period by at least a majority of the Board members described in
clause (I) who were still in office at the time such election or nomination
was approved by the Board;
the exercisability of this option (if outstanding at the time) shall be
automatically accelerated so that such option shall become exercisable,
immediately prior to the consummation of the Change in Control, for all of the
Optioned Shares and may be exercised for all or any portion of such shares at
any time thereafter until the expiration or sooner termination of the option
term.
D. In no event shall this option be accelerated pursuant to the
provisions of this Paragraph 7 if the Corporate Transaction or Change in Control
is consummated prior to the satisfaction of the shareholder-approval
requirements of Paragraph 18.
E. This Agreement shall not in any way affect the right of the Company to
adjust, reclassify, reorganize or otherwise make changes in its capital or
business structure or to merge, consolidate, dissolve, liquidate or sell or
transfer all or any part of its business or assets.
8. Privilege of Stock Ownership. The holder of this option shall not have
any of the rights of a shareholder with respect to the Optioned Shares until
such individual shall have exercised the option, paid the Option Price for the
purchased shares and satisfied all other applicable conditions precedent to the
issuance of the certificates for such shares.
9. Manner of Exercising Option.
A. In order to exercise this option for one or more Optioned Shares for
which this option is at the time exercisable, Optionee (or in the case of
exercise after Optionee's death, the Optionee's executor, administrator, heir or
legatee, as the case may be) must take the following actions:
(i) Execute and deliver to the Secretary of the Company a written
notice of exercise (the "Exercise Notice") in substantially the form of
Exhibit I attached hereto.
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(ii) Pay the aggregate Option Price for the purchased shares
in one or more of the following alternative forms:
(1) full payment in cash or check made payable to the
Company's order; or
(2) full payment in shares of Common Stock held by the
Optionee for the requisite period necessary to avoid a charge to the
Company's reported earnings and valued at Fair Market Value on the
Exercise Date (as such term is defined below); or
(3) full payment in a combination of shares of Common
Stock held for the requisite period necessary to avoid a charge to
the Company's reported earnings and valued at Fair Market Value on
the Exercise Date and cash or check.
(iii) Furnish to the Company appropriate documentation that
the person or persons exercising the option, if other than Optionee, have
the right to exercise this option.
B. To the extent permissible at the time pursuant to applicable
regulations of the Federal Reserve Board, the Option Price may also be paid
through a sale and remittance procedure. Pursuant to such procedure, Optionee
(I) shall provide irrevocable written instructions to a designated brokerage
firm to effect the immediate sale of the purchased Optioned Shares and remit to
the Company, out of the sale proceeds available on the settlement date,
sufficient funds to cover the aggregate Option Price payable for such purchased
shares plus all applicable Federal and State income and employment taxes
required to be withheld by the Company by reason of such purchase and (II)
shall concurrently provide written directives to the Company to deliver the
certificates for the purchased Optioned Shares directly to such brokerage firm
in order to complete the sale transaction.
C. For purposes of this Agreement, the Exercise Date shall be the
first date on which the Exercise Notice shall have been delivered to the
Company. Except to the extent the sale and remittance procedure of Paragraph 9B
is utilized, payment of the Option Price shall immediately become due and shall
accompany the Exercise Notice.
D. As soon as practical after the Exercise Date, the Company shall
mail or deliver to Optionee (or to the other person or persons exercising this
option) a certificate or certificates representing the purchased shares.
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E. In no event may this option be exercised for any fractional shares.
10. Compliance with Laws and Regulations.
A. The exercise of this option and the issuance of Optioned Shares upon
such exercise shall be subject to compliance by the Company and the Optionee
with all applicable requirements of law relating thereto and with all applicable
regulations of any stock exchange on which shares of the Company's Common Stock
may be listed at the time of such exercise and issuance.
B. In connection with the exercise of this option, Optionee shall execute
and deliver to the Company such representations in writing as may be requested
by the Company in order for it to comply with the applicable requirements of
Federal and State securities laws.
11. Successors and Assigns. Except to the extent otherwise provided in
Paragraph 3, the provisions of this Agreement shall inure to the benefit of, and
be binding upon, the successors, administrators, heirs, legal representatives
and assigns of Optionee and the successors and assigns of the Company.
12. Liability of Company. The inability of the Company to obtain approval
from any regulatory body having authority deemed by the Company to be necessary
to the lawful issuance and sale of any Common Stock pursuant to this option
shall relieve the Company of any liability with respect to the non-issuance or
sale of the Common Stock as to which such approval shall not have been obtained.
The Company, however, shall use its best efforts to obtain all such approvals.
13. No Impairment of Rights. Nothing in this Agreement or in the Plan
shall be deemed to impair or otherwise restrict the rights of the Company or
the shareholders to remove the Optionee from the Board at any time pursuant to
the provisions of applicable law.
14. Notices. Any notice required to be given or delivered to the Company
under the terms of this Agreement shall be in writing and addressed to the
Company in care of the Corporate Secretary at its principal corporate offices.
Any notice required to be given or delivered to Optionee shall be in writing and
addressed to Optionee at the address indicated below Optionee's signature line
on this Agreement. All notices shall be deemed to have been given or delivered
upon personal delivery or upon deposit in the U.S. mail, postage prepaid and
properly addressed to the party to be notified.
15. Construction. This Agreement and the option evidenced hereby are
made and granted pursuant to the Plan and are
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in all respects limited by and subject to the express terms and provisions of
the Plan.
16. Governing Law. The interpretation, performance, and enforcement of
this Agreement shall be governed by the laws of the State of California without
resort to that State's conflict-of-laws rules.
[17. Limited Stock Appreciation Right. Optionee is hereby granted a limited
stock appreciation right, exercisable upon the terms and conditions set forth
below:
A. In the event there should occur a Change in Control (within the
meaning of Paragraph 7C), Optionee shall have the right to surrender this option
upon the following terms and conditions:
(i) The stock appreciation right shall not become exercisable in
whole or in part until this option has been outstanding for at least a six
(6)-month period measured from the Grant Date.
(ii) Provided such six (6)-month requirement is satisfied, Optionee
shall have the right, exercisable for a period of thirty (30) days
following the Change in Control, to surrender this option (if outstanding
at the time) in exchange for a cash distribution from the Company equal in
amount to the excess of (a) the Change in Control Price (at date of
surrender) of the number of Optioned Shares subject to the surrendered
option over (b) the aggregate option price payable for such shares.
(iii) For purposes of subparagraph (ii) above, the Change in Control
Price per share of the Optioned Shares subject to the surrendered option
shall be deemed to be equal to the greater of (a) the Fair Market Value per
share on the date of surrender or, if applicable, (b) the highest reported
price per share paid in effecting the Change in Control.
(iv) The stock appreciation right may be exercised by the Optionee
upon written notice to the Company, accompanied by the return of this
Agreement and all other instruments evidencing the surrendered option,
prior to the expiration of the applicable thirty (30) day exercise period.
Such exercise period shall be shortened to the extent the option has not
been outstanding for at least six (6) months on the date such exercise
would otherwise commence under subparagraph (ii) above.
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(v) The appreciation distribution to which such individual shall
become entitled upon exercise of the stock appreciation right in accordance
herewith shall be made entirely in cash, and no approval of the Plan
Administrator shall be required in connection with the exercise of such
right or the payment of the appreciation distribution.
(vi) In no event may this limited stock appreciation right be
exercised when there is not a positive spread between the Change in Control
Price and the aggregate option price payable for such shares. This limited
stock appreciation right shall in all events terminate upon the expiration
or sooner termination of the option term and may not be assigned or
transferred by the Optionee.
B. Upon the exercise of the stock appreciation right, Optionee shall
have no further rights to acquire shares of Common Stock under the surrendered
option.]
IN WITNESS WHEREOF, the Company has caused this Agreement to be duly
executed in duplicate by its officer thereunto duly authorized, and the
Optionee has duly executed this Agreement in duplicate, all as of the day and
year first above written.
GIGA-TRONICS INCORPORATED
By
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Title:
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, Optionee
Address:
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EXHIBIT I
NOTICE OF EXERCISE OF STOCK OPTION
I hereby notify Giga-Tronics Incorporated (the "Company") that I elect to
purchase _________ shares of Common Stock of the Company (the "Purchased
Shares") pursuant to that certain option (the "Option") granted to me on
_______________ to purchase up to ________ shares of the Company's Common Stock
at an option price of $_____ per share (the "Option Price").
Concurrently with the delivery of this Exercise Notice to the Secretary of
the Company, I shall hereby pay to the Company the Option price for the
Purchased Shares in accordance with the provisions of my agreement with the
Company evidencing the Option and shall deliver whatever additional documents
may be required by such agreement as a condition for exercise.
_____________________________________ ______________________________________
Date Optionee
Address: ______________________________________
______________________________________
Print name in exact manner
it is to appear on the
stock certificate: ______________________________________
Address to which certificate
is to be sent, if different
from address above: ______________________________________
______________________________________
______________________________________
Social Security Number: ______________________________________