Exhibit 10.9
IRVINE SENSORS CORPORATION
NON-INCENTIVE STOCK OPTION AGREEMENT
BETWEEN THE COMPANY AND BILL JOLL
This NON-INCENTIVE STOCK OPTION AGREEMENT (the “Agreement”) is made this 24th
day of December, 2010, by and between Irvine Sensors Corporation, a Delaware
corporation (the “Company”) and Bill Joll, an individual resident of Irvine,
California (“Optionee”).
1. Grant of Option. The Company hereby grants Optionee the option (the “Option”)
to purchase all or any part of an aggregate of 5,000,000 shares (the “Shares”)
of common stock, $0.01 par value (“Common Stock”), of the Company at the
exercise price of $0.09 per share according to the terms and conditions set
forth in this Agreement and in the Irvine Sensors Corporation 2010 Non-Qualified
Stock Option Plan (the “Plan”). The Option will not be treated as an incentive
stock option within the meaning of Section 422 of the Internal Revenue Code of
1986, as amended (the “Code”). The Option is issued under the Plan and is
subject to its terms and conditions. A copy of the Plan will be furnished upon
request of Optionee.
The Option shall terminate at the close of business ten (10) years from the date
hereof.
2. Vesting of Option Rights.
(a) Except as otherwise provided in this Agreement, the Option may be exercised
by Optionee in accordance with the following schedule: 2,000,000 shares will be
immediately vested, with the balance vesting in 36 equal monthly installments
thereafter.
(b) During the lifetime of Optionee, the Option shall be exercisable only by
Optionee and shall not be assignable or transferable by Optionee, other than by
will or the laws of descent and distribution. Notwithstanding the foregoing,
Optionee may transfer the Option to any Family Member (as such term is defined
in the General Instructions to Form S-8 (or successor to such Instructions or
such Form)); provided, however, that (i) Optionee may not receive any
consideration for such transfer, (ii) the Family Member must agree in writing
not to make any subsequent transfers of the Option other than by will or the
laws of the descent and distribution and (iii) the Company receives prior
written notice of such transfer.
(c) Notwithstanding the provisions set forth above in Section 2(a), (i) in the
event of termination of Optionee’s employment with or Service to the Company as
a result of Optionee’s death or Permanent Disability while in the employ or
Service of the Company prior to the vesting of the Option under Sections 2 or 5
hereof, then the vesting of the Option, as set out in Section 2(a) above, shall
accelerate in full as of such date of death or termination; (ii) in the event of
termination by the Company of Optionee’s employment with or Service to the
Company without Cause (other than upon death or Permanent Disability) or, if
applicable under an employment agreement between the Company and Optionee, due
to the Optionee’s resignation for Good Reason (as defined below), prior to the
vesting of the Option under Sections 2 or 5 hereof, provided that within sixty
(60) days following the date of termination, the Optionnee executes and does not
revoke (during any applicable revocation period) an effective general release of
all claims against the Company and its affiliates in a form reasonably
acceptable to the Company, then the vesting of the Option, as set out in Section
2(a) above, shall accelerate in full as of such date of termination or
resignation; and (iii) if, after the earlier of the initial vesting date set
forth above and the date hereof, Optionee ceases to be an employee or provide
Service by reason of Ordinary Retirement prior to the vesting of the Option
under Sections 2 or 5 hereof, then the vesting of the Option, as set out in
Section 2(a) above, shall accelerate in full as of such date of Ordinary
Retirement. For purposes of this Agreement, “Permanent Disability” shall mean a
physical or mental impairment which, the Board in good faith determines, after
consideration and implementation of reasonable accommodations, precludes the
Optionee from performing his essential job functions for a period longer than
three consecutive months or a total of one hundred twenty (120) days in any
twelve month period (or such longer period as may be required to comply with the
Family Medical Leave Act or other applicable law); and “Ordinary Retirement”
shall mean the retirement of the Optionee on a date upon which, if the Optionee
is an employee, the sum of the Optionee’s age and number of years of employment
with the Company equals or exceeds eighty-five (85) years or, if the Optionee is
a non-employee director, the number of years of Service to the Company exceeds
five (5) years.

 

 

--------------------------------------------------------------------------------

 

3. Exercise of Option after Death or Termination of Employment or Service. The
Option shall terminate and may no longer be exercised if Optionee ceases to be
employed by or provide Service to the Company or its Affiliates, except that:
(a) If Optionee’s employment or Service is terminated for Cause, the Option
shall be terminated as of the date of the act giving rise to such termination.
(b) If Optionee’s employment or Service is terminated because of Optionee’s
Permanent Disability while in the employ of the Company or is terminated by the
Company without Cause (other than upon death or Permanent Disability) or, if
applicable under an employment agreement between the Company and Optionee, is
terminated due to Optionee’s resignation for Good Reason (and Optionnee executes
and does not revoke the general release described above), and Optionee shall not
have fully exercised the Option, such Option may be exercised, at any time
within five (5) years after Optionee’s date of termination of employment or
Service.
(c) If Optionee shall die while the Option is still exercisable according to its
terms, and Optionee shall not have fully exercised the Option, such Option may
be exercised, at any time within twelve (12) months after Optionee’s death, by
the personal representatives, or administrators or guardians of Optionee or the
executor of Optionee’s estate, as applicable, or by any person or persons to
whom the Option is transferred by will or the applicable laws of descent and
distribution, to the extent of the full number of Shares Optionee was entitled
to purchase under the Option on the date of death.
(d) If Optionee’s employment or Service is terminated for Ordinary Retirement,
the Option shall not be terminated and shall remain exercisable for its full
term.
(e) Notwithstanding the above, in no case may the Option be exercised to any
extent by anyone after the termination date of the Option.
(f) “Cause” shall mean (i) the commission of any act of fraud, embezzlement or
dishonesty by Optionee, (ii) any unauthorized use or disclosure by such person
of confidential information or trade secrets of the Company (or of any
Affiliate), or (iii) any other intentional misconduct by such person adversely
affecting the business or affairs of the Company (or any Affiliate) in a
material manner. However, if the term or concept has been defined in an
employment agreement between the Company and Optionee, then Cause shall have the
definition set forth in such employment agreement. The foregoing definition
shall not in any way preclude or restrict the right of the Company (or any
Affiliate) to discharge or dismiss any Optionee or other person in the Service
of the Company (or any Affiliate) for any other acts or omissions but such other
acts or omissions shall not be deemed, for purposes of the Agreement, to
constitute grounds for termination for Cause.

 

2

--------------------------------------------------------------------------------

 

(g) “Good Reason” shall have such meaning as may be set forth in an employment
agreement between the Company and Optionee.
4. Method of Exercise of Option. Subject to the foregoing, the Option may be
exercised in whole or in part from time to time by serving written notice of
exercise on the Company at its principal office within the Option period. The
notice shall state the number of Shares as to which the Option is being
exercised and shall be accompanied by payment of the exercise price. Payment of
the exercise price shall be made (i) in cash (including bank check, personal
check or money order payable to the Company), (ii) with the approval of the
Company (which may be given in its sole discretion), by delivering to the
Company for cancellation shares of the Company’s Common Stock already owned by
Optionee having a Fair Market Value equal to the full exercise price of the
Shares being acquired, (iii) with the approval of the Company (which may be
given in its sole discretion) and subject to Section 402 of the Sarbanes-Oxley
Act of 2002, by delivering to the Company the full exercise price of the Shares
being acquired in a combination of cash and Optionee’s full recourse liability
promissory note with a principal amount not to exceed eighty percent (80%) of
the exercise price and a term not to exceed five (5) years, which promissory
note shall provide for interest on the unpaid balance thereof which at all times
is not less than the minimum rate required to avoid the imputation of income,
original issue discount or a below-market rate loan pursuant to Sections 483,
1274 or 7872 of the Code or any successor provisions thereto, (iv) subject to
Section 402 of the Sarbanes-Oxley Act of 2002, to the extent this Option is
exercised for vested shares, through a special sale and remittance procedure
pursuant to which Optionee shall concurrently provide irrevocable instructions
(1) to Optionee’s brokerage firm to effect the immediate sale of the purchased
Shares and remit to the Company, out of the sale proceeds available on the
settlement date, sufficient funds to cover the aggregate exercise price payable
for the purchased Shares plus all applicable income and employment taxes
required to be withheld by the Company by reason of such exercise and (2) to the
Company to deliver the certificates for the purchased shares directly to such
brokerage firm in order to complete the sale, or (v) with the approval of the
Company (which may be given in its sole discretion) and subject to Section 402
of the Sarbanes-Oxley Act of 2002, by delivering to the Company a combination of
any of the forms of payment described above. This Option may be exercised only
with respect to full shares and no fractional share of stock shall be issued.
5. Change in Control.
(a) Immediately prior to the effective date of a “Change in Control” (as defined
in Section 5(e)), this Option shall vest and become exercisable for all of the
Shares and may be exercised for any or all of those Shares. However, this Option
shall not vest and become exercisable on an accelerated basis if and to the
extent: (i) this Option is to be assumed by the successor corporation (or parent
thereof) or is otherwise to be continued in full force and effect pursuant to
the terms of the Change in Control transaction or (ii) this Option is to be
replaced with a cash incentive program of the successor corporation which
preserves the spread existing at the time of the Change in Control on the Shares
for which this Option is not otherwise at that time exercisable (the excess of
the Fair Market Value of those Shares over the aggregate exercise price payable
for such Shares) and provides for subsequent payout of that spread no later than
the time this Option would have vested and become exercisable for those Shares.
(b) Immediately following the consummation of the Change in Control, this Option
shall terminate, except to the extent assumed by the successor corporation (or
parent thereof) or otherwise continued in effect pursuant to the terms of the
Change in Control transaction.

 

3

--------------------------------------------------------------------------------

 

(c) If this Option is assumed or otherwise continued in effect in connection
with a Change in Control, then this Option shall be appropriately adjusted, upon
such Change in Control, to apply to the number and class of securities which
would have been issuable to Optionee in consummation of such Change in Control
had this Option been exercised immediately prior to such Change in Control, and
appropriate adjustments shall also be made to the exercise price, provided the
aggregate exercise price shall remain the same. To the extent that the holders
of Common Stock receive cash consideration for their Common Stock in
consummation of the Change in Control, the successor corporation (or its parent)
may, in connection with the assumption of this Option, substitute one or more
shares of its own common stock with a fair market value equivalent to the cash
consideration paid per share of Common Stock in such Change in Control.
(d) This Agreement shall not in any way affect the right of the Company to
adjust, reclassify, reorganize or otherwise change its capital or business
structure or to merge, consolidate, dissolve, liquidate or sell or transfer all
or any part of its business or assets.
(e) For purposes of this Agreement, “Change in Control” shall mean a change in
ownership or control of the Company effected through any of the following
transactions: (i) a merger, consolidation or other reorganization unless
securities representing more than 50% of the total combined voting power of the
voting securities of the successor corporation are immediately thereafter
beneficially owned, directly or indirectly and in substantially the same
proportion, by the persons who beneficially owned the Company’s outstanding
voting securities immediately prior to such transaction; (ii) the sale, transfer
or other disposition of all or substantially all of the Company’s assets; or
(iii) the acquisition, directly or indirectly by any person or related group of
persons (other than the Company or a person that directly or indirectly
controls, is controlled by, or is under common control with, the Company), of
beneficial ownership (within the meaning of Rule 13d-3 of the Exchange Act) of
securities possessing more than 50% of the total combined voting power of the
Company’s outstanding securities pursuant to a tender or exchange offer made
directly to the Company’s stockholders.
6. Capital Adjustments and Reorganization. Should any change be made to the
Common Stock by reason of any stock split, reverse stock split, stock dividend,
recapitalization, combination of shares, exchange of shares or other change
affecting the outstanding Common Stock as a class without the Company’s receipt
of consideration, appropriate adjustments shall be made to (a) the number and/or
class of securities subject to this Option and (b) the exercise price in order
to reflect such change and thereby preclude a dilution or enlargement of
benefits hereunder.
7. Miscellaneous.
(a) Entire Agreement; Plan Provisions Control. This Agreement (and any addendum
hereto) and the Plan constitute the entire agreement between the parties hereto
with regard to the subject matter hereof. In the event that any provision of the
Agreement conflicts with or is inconsistent in any respect with the terms of the
Plan, the terms of the Plan shall control. All decisions of the Committee with
respect to any question or issue arising under the Plan or this Agreement shall
be and binding on all persons having an interest in this Option. All capitalized
terms used in this Agreement and not otherwise defined in this Agreement shall
have the meaning assigned to them in the Plan.
(b) No Rights of Stockholders. Neither Optionee, Optionee’s legal representative
nor a permissible assignee of this Option shall have any of the rights and
privileges of a stockholder of the Company with respect to the Shares, unless
and until such Shares have been issued in the name of Optionee, Optionee’s legal
representative or permissible assignee, as applicable, without restrictions
thereto.

 

4

--------------------------------------------------------------------------------

 

(c) No Right to Employment. The grant of the Option shall not be construed as
giving Optionee the right to be retained in the employ of, or if Optionee is a
director of the Company or an Affiliate as giving the Optionee the right to
continue as a director of, the Company or an Affiliate, nor will it affect in
any way the right of the Company or an Affiliate to terminate such employment or
position at any time, with or without cause. In addition, the Company or an
Affiliate may at any time dismiss Optionee from employment, or terminate the
term of a director of the Company or an Affiliate, free from any liability or
any claim under the Plan or the Agreement. Nothing in the Agreement shall confer
on any person any legal or equitable right against the Company or any Affiliate,
directly or indirectly, or give rise to any cause of action at law or in equity
against the Company or an Affiliate. The Option granted hereunder shall not form
any part of the wages or salary of Optionee for purposes of severance pay or
termination indemnities, irrespective of the reason for termination of
employment. Under no circumstances shall any person ceasing to be an employee of
the Company or any Affiliate be entitled to any compensation for any loss of any
right or benefit under the Agreement or Plan which such employee might otherwise
have enjoyed but for termination of employment, whether such compensation is
claimed by way of damages for wrongful or unfair dismissal, breach of contract
or otherwise. By participating in the Plan, Optionee shall be deemed to have
accepted all the conditions of the Plan and the Agreement and the terms and
conditions of any rules and regulations adopted by the Committee and shall be
fully bound thereby.
(d) Governing Law. The validity, construction and effect of the Plan and the
Agreement, and any rules and regulations relating to the Plan and the Agreement,
shall be determined in accordance with the internal laws, and not the law of
conflicts, of the State of Delaware.
(e) Severability. If any provision of the Agreement is or becomes or is deemed
to be invalid, illegal or unenforceable in any jurisdiction or would disqualify
the Agreement under any law deemed applicable by the Committee, such provision
shall be construed or deemed amended to conform to applicable laws, or if it
cannot be so construed or deemed amended without, in the determination of the
Committee, materially altering the purpose or intent of the Plan or the
Agreement, such provision shall be stricken as to such jurisdiction or the
Agreement, and the remainder of the Agreement shall remain in full force and
effect.
(f) No Trust or Fund Created. Neither the Plan nor the Agreement shall create or
be construed to create a trust or separate fund of any kind or a fiduciary
relationship between the Company or any Affiliate and Optionee or any other
person.
(g) Headings. Headings are given to the Sections and subsections of the
Agreement solely as a convenience to facilitate reference. Such headings shall
not be deemed in any way material or relevant to the construction or
interpretation of the Agreement or any provision thereof.
(h) Notices. Any notice required to be given or delivered to the Company under
the terms of this Agreement shall be addressed to the Company at its principal
corporate offices. Any notice required to be given or delivered to Optionee
shall be addressed to Optionee at the address indicated below Optionee’s
signature line at the end of this Agreement or at such other address as Optionee
may designate by ten (10) days’ advance written notice to the Company. Any
notice required to be given under this Agreement shall be in writing and shall
be deemed effective upon personal delivery or upon the third (3rd) day following
deposit in the U.S. mail, registered or certified, postage prepaid and properly
addressed to the party entitled to such notice.
(i) Conditions Precedent to Issuance of Shares. Shares shall not be issued
pursuant to the exercise of the Option unless such exercise and the issuance and
delivery of the applicable Shares pursuant thereto shall comply with all
relevant provisions of law, including, without limitation, the Securities Act of
1933, as amended, the Exchange Act of 1934, as amended, the rules and
regulations promulgated thereunder, state blue sky laws, the requirements of any
applicable securities exchange and the Delaware General Corporation Law. As a
condition to the exercise of the purchase price relating to the Option, the
Company may require that the person exercising or paying the purchase price
represent and warrant that the Shares are being purchased only for investment
and without any present intention to sell or distribute such Shares if, in the
opinion of counsel for the Company, such a representation and warranty is
required by law.

 

5

--------------------------------------------------------------------------------

 

(j) Withholding. In order to provide the Company with the opportunity to claim
the benefit of any income tax deduction which may be available to it upon the
exercise of the Option and in order to comply with all applicable federal or
state income tax laws or regulations, the Company may take such action as it
deems appropriate to insure that, if necessary, all applicable federal or state
payroll, withholding, income or other taxes are withheld or collected from
Optionee.
(k) Consultation With Professional Tax and Investment Advisors. Optionee
acknowledges that the grant, exercise and vesting with respect to this Option,
and the sale or other taxable disposition of the Shares, may have tax
consequences pursuant to the Code or under local, state or international tax
laws. Optionee further acknowledges that Optionee is relying solely and
exclusively on Optionee’s own professional tax and investment advisors with
respect to any and all such matters (and is not relying, in any manner, on the
Company or any of its employees or representatives). Optionee understands and
agrees that any and all tax consequences resulting from the Option and its
grant, exercise and vesting, and the sale or other taxable disposition of the
Shares, is solely and exclusively the responsibility of Optionee without any
expectation or understanding that the Company or any of its employees or
representatives will pay or reimburse Optionee for such taxes or other items.
IN WITNESS WHEREOF, the Company and Optionee have executed this Agreement on the
date set forth in the first paragraph.

                      IRVINE SENSORS CORPORATION    
 
                    By:   /s/ John J. Stuart, Jr.                  
 
      Name:   John J. Stuart, Jr.    
 
      Title:   Sr. Vice President & Chief Financial Officer    

                      OPTIONEE:    
 
                    /s/ Bill Joll                   Name:   Bill Joll    
 
  Address:                                   Irvine, California    

 

6