exv10w16






EXHIBIT 10.16




IRVINE SENSORS CORPORATION

NON-INCENTIVE STOCK OPTION AGREEMENT




     This NON-INCENTIVE STOCK OPTION AGREEMENT (the “Agreement”) is made this       day of      ,
     , by and between Irvine Sensors Corporation, a Delaware corporation (the “Company”) and      ,
an individual resident of      ,       (“Optionee”).



     1. Grant of Option. The Company hereby grants Optionee the option (the “Option”) to
purchase all or any part of an aggregate of       shares (the “Shares”) of common stock, $0.01 par
value (“Common Stock”), of the Company at the exercise price of $      per share according to the
terms and conditions set forth in this Agreement and in the Irvine Sensors Corporation 2006 Omnibus
Incentive 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:



	 	 	 
	 	 	Number of Shares
	On or after each of	 	with respect to which
	the following dates	 	the Option is exercisable
	 
	 	 






     (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, the
next vesting date for the Option, as set out in Section 2(a) above, shall accelerate by
twelve (12) months as of such date of termination; and (ii) if, after the initial vesting
date set forth above, 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, “ 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 shall be terminated for any reason, voluntary
or involuntary, other than for “Misconduct” (as defined in Section 3(f)), Ordinary
Retirement (as defined in Section 2(c)) or Optionee’s death or Permanent Disability,
Optionee may at any time within a period of three (3) months after such termination exercise
the Option to the extent the Option was exercisable by Optionee on the date of the
termination of Optionee’s employment or Service.




     (b) If Optionee’s employment or Service is terminated for Misconduct, the Option shall
be terminated as of the date of the act giving rise to such termination.




     (c) If Optionee shall die while the Option is still exercisable according to its terms,
or if employment or Service is terminated because of Optionee’s Permanent Disability while
in the employ of the Company, 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 or
date of termination of employment or Service for Permanent Disability, by Optionee, personal
representatives or administrators or guardians of Optionee, 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 (i) the earlier of the date of death or termination of employment or
Service or (ii) the date of termination for such Permanent Disability, as applicable.




     (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) “Misconduct” 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 Misconduct
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 Misconduct.



     6. 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.




     (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.




     (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 Stock Exchange or the Nasdaq Stock Market 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.



 









 






     (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:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 


	 	 	 	 	 
	 	OPTIONEE:
 	 
	 	 	 
	 	
Name:	 	 
	 	
Address:	 	 
	 	 	 
	 	
Facsimile: