Document:

EX-10.2

 Exhibit 10.2 

 
  

 
 SHAREHOLDER’S LOAN AGREEMENT 

dated as of 
 December 28,
2020 
 between 
 POWER
SOLUTIONS INTERNATIONAL, INC., 
 as Borrower 

and 

WEICHAI AMERICA CORP., 

as Lender 

 This SHAREHOLDER’S LOAN AGREEMENT dated as of December 28, 2020 (this “Loan
Agreement”), between POWER SOLUTIONS INTERNATIONAL, INC., a Delaware corporation, as Borrower (the “Borrower”), and WEICHAI AMERICA CORP., an Illinois corporation, as
Lender (the “Lender”). 
 WHEREAS: 
  

	I.	 The Borrower desires to borrow up to an aggregate principal amount of US$100,000,000 from the Lender for
repayment of the Existing Bank Obligations (as defined below) in accordance with the terms and conditions of this Loan Agreement. 

  

	II.	 The Lender, which owns 51.3% of the total issued shares of capital stock of the Borrower, is willing to make
available the Loan (as defined below) to the Borrower in accordance with the terms and conditions of this Loan Agreement. 

ARTICLE I 
 DEFINITIONS

 SECTION 1. Defined Terms. As used in this Loan Agreement, the following terms have the meanings specified below: 

“Applicable Law” means, as to any Person, all applicable laws binding upon such Person or to which such a Person is subject. 

“Borrowing Request” means a request for a Loan in substantially the form attached hereto as Exhibit “A”. 

“Business Day” means any day that is not a Saturday, Sunday or other day that is a legal holiday under the laws of the United States and the
laws of China or is a day on which banking institutions in such countries are authorized or required by law to close. 
 “Credit Agreement”
means that certain Credit Agreement dated as of March 27, 2020 (as the same may be further amended, supplemented or otherwise modified, renewed or replaced from time to time), among the Borrower, the lenders party thereto and Standard Chartered
Bank, as administrative agent. 
 “Controlled Account” means that certain deposit account of the Borrower at Wells Fargo Bank, National
Association with account number XXXXXXXXX. 
 “Dollar” and “$” mean lawful money of the United States. 

“Event of Default” has the meaning ascribed to such term in Section 5 of this Loan Agreement. 

 “Existing Bank Obligations” means all “Obligations” (as defined in the Credit
Agreement), including, for the avoidance of doubt, any loans, advances, liabilities and obligations owed by the Borrower to the lenders under the Credit Agreement. 

“Facility Amount” has the meaning ascribed to such term in Section 2.1.1. of this Loan Agreement. 

“LIBOR” means the offered rate per annum for deposits of Dollars that appears on Reuters Screen LIBOR Page as of 11:00 A.M. (London, England
time) one (1) Business Day prior to the first date of the period for which an interest rate is to be determined. 
 “Loan” means a
loan by the Lender to the Borrower under this Loan Agreement. 
 “Loan Documents” means this Loan Agreement and any other agreements,
instruments or documents executed in connection herewith. 
 “Material Adverse Effect” means a material adverse effect on (i) the
business operations or financial condition of the Borrower, or (ii) the ability of the Borrower to repay the Loan or otherwise perform its obligations under the Loan Documents. 

“Maturity Date” means April 30th, 2021. 

“Person” means any natural person, corporation, limited liability company, trust, joint venture, association, company, partnership,
governmental authority or other entity. 
 “Standard Chartered Bank” mean Standard Chartered Bank, in its capacity as administrative agent
under the Credit Agreement. 
 ARTICLE II 

LOANS AND BORROWINGS 
 SECTION 2.1.
Loans and Purpose. 
  

	2.1.1.	 At the request of the Borrower, the Lender has established, as of the date hereof, a loan facility in favor of
the Borrower in accordance with the terms and conditions of this Loan Agreement with a maximum principal amount at any one time outstanding up to One Hundred Million Dollars (US$100,000,000) (the “Facility Amount”); provided, however, that
no provision of this Loan Agreement shall be deemed to require the Lender to advance any Loan to the Borrower at any time. At any time that the Borrower desires the Lender to advance a Loan hereunder, the Borrower may request the same, and such Loan
may be made in the Lender’s sole discretion. 

 2.1.2. Purpose. All Loan proceeds shall be used solely for repayment of the Existing Bank
Obligations, unless specifically consented to the contrary by the Lender in writing. 
 SECTION 2.2. Borrowing Requests. 

2.2.1. Borrowing Request. The Borrower shall notify the Lender in writing for each Loan five (5) Business Days in advance. Each such notice shall
be in the form of Borrowing Request, appropriately completed and signed by an authorized officer of the Borrower. 
 2.2.2. Content of Borrowing
Requests. Each Borrowing Request for a Loan pursuant to this Section shall specify the following information in substantially the form of “Exhibit A” hereto: (i) the aggregate amount of the requested Loan; (ii) the date of
such Loan (which shall be a Business Day); (iii) the location and number of the Borrower’s account to which funds are to be disbursed; and (iv) any other information as the Lender may request from time to time. The Lender shall assess
each Borrowing Request and decide whether or not to approve such Borrowing Request. If a Borrowing Request is approved, the Lender shall make the amount of the Loan available to the Borrower on the proposed date thereof. If a Borrowing Request is
not approved, the Lender shall notify the Borrower within 3 Business Days after receipt of the applicable Borrowing Request. Notwithstanding anything to the contrary contained herein, the proceeds of any Loan made in accordance with the terms hereof
shall only be funded to the Controlled Account. 
  

	2.2.3.	 The Borrower may draw down the Loan in one lump sum or in installments, upon the Lender’s approval of the
Borrowing Request; provided, however, that: 

  
  

	 	(a)	 the aggregate principal amount drawn under this Loan Agreement shall not exceed the Facility Amount;

  

	 	(b)	 if the Borrower elects to borrow an amount less than the Facility Amount, the minimum amount of each Loan shall
be $10,000,000 and integral multiples of $10,000,000 in excess thereof; and 

  

	 	(c)	 amounts repaid or prepaid may not be reborrowed by the Borrower. 

SECTION 2.3. Prepayments. The Borrower may prepay at any time and from time to time, in whole or in part, upon ten (10) Business Days’ prior
written notice to the Lender, the outstanding principal balance of the Loan. All prepayments shall include accrued interest on the principal amount being prepaid to the date of prepayment. 

 SECTION 2.4. Repayment of Loans. The Borrower shall repay to the Lender the aggregate
outstanding principal amount of the Loan, together with accrued interest and any other amount owing under this Loan Agreement and the Loan Documents on Maturity Date. 

SECTION 2.5. Interest. 
  

	2.5.1.	 Interest Rates. Each Loan shall bear interest from the date of drawdown at a rate per annum equal to the
applicable LIBOR as at the date of drawdown, plus 3.5% per annum. If the applicable LIBOR is negative, the interest rate per annum shall be deemed as 3.5% per annum. Interest shall be calculated on the basis of actual number of days elapsed over a
year of 365 days. 

  

	2.5.2.	 Payment Dates. Accrued and unpaid interest shall be payable on the Maturity Date. In the event of
prepayment, interest accrued from the principal to be prepaid shall be payable on the day of such prepayment. 

 SECTION 2.6.
Expenses. The Borrower shall pay all reasonable costs and expenses incurred by the Lender in connection with the negotiation, drafting, filing, registration, or recording of this Loan Agreement. 

SECTION 2.7. Obligation. The Borrower hereby unconditionally promises to pay to the Lender, in Dollars in immediately available funds, all principal,
interest and other amounts owing under this Loan Agreement when such amounts are due and payable hereunder, without counterclaim, deduction, setoff or other reduction for any reason. 

ARTICLE III 
 REPRESENTATIONS
AND WARRANTIES 
 The Borrower represents and warrants to the Lender that: 

SECTION 3.1. Existence, Qualification and Power. The Borrower (a) is duly incorporated, validly existing and in good standing under the laws of the
jurisdiction of its incorporation, (b) has all requisite power and authority and all requisite governmental licenses, authorizations, consents and approvals to execute, deliver and perform its obligations under this Loan Agreement. 

SECTION 3.2. Authorization; No Contravention. The execution and delivery and performance by the Borrower of this Loan Agreement and the
Loan Documents have been duly authorized by all necessary corporate or other organizational action, and do not and will not (i) contravene any provisions of any Applicable Law to which it or any of its assets or revenues are subject; or
(ii) conflict with, or result in any breach of any of the terms of, or constitute a default under, any material agreement or other instrument to which it is a party; or (iii) result in the creation or imposition of or oblige
it to create any security interest other than as permitted under the terms of this Loan Agreement on any of its undertaking, assets, rights or revenues. 

 SECTION 3.3. Enforceability. This Loan Agreement has been duly executed and delivered by the Borrower
and constitutes a legal, valid and binding obligation of the Borrower, enforceable against the Borrower in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, receivership, moratorium or
other Applicable Laws affecting creditors’ rights generally and by general principles of equity. 
 SECTION 3.4. No Material Adverse Effect;
No Default. The Borrower is not in default under or with respect to any contractual obligation that, either individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect. No Event of Default has occurred
and is continuing or would result from the consummation of the transactions contemplated by this Loan Agreement. 
 SECTION 3.5. Litigation. There is
no legal action or proceeding pending or, to the knowledge of the Borrower, threatened, against the Borrower, before any court or administrative agency which would reasonably be expected to have a Material Adverse Effect. 

ARTICLE IV 
 AFFIRMATIVE
COVENANTS 
 SECTION 4. Affirmative Covenants. The Borrower covenants and agrees with the Lender that, so long as this Loan Agreement shall
remain in effect or the principal of or interest on the Loan or any other amount payable in connection herewith shall be unpaid, unless the Lender otherwise consents in writing, the Borrower shall: 

 

	 	(a)	 provide to the Lender within thirty (30) days of the end of each calendar month with monthly financial
statements for such month; and 

  

	 	(b)	 furnish the Lender prompt written notice upon its becoming aware of the filing or commencement of, or any
threat or notice of intention of any person to file or commence, any action, suit or proceeding, whether at law or in equity or by or before any governmental authority, against it which would reasonably be expected to result in a Material Adverse
Effect or in a material impairment of the ability of the Borrower to perform any of its obligations under this Loan Agreement. 

ARTICLE V 
 EVENTS OF DEFAULT

 SECTION 5. Events of Default. 

 In case of the occurrence of any of the following events (each, an “Event of Default”):

  

	 	(a)	 the Borrower defaults in the payment of(i) when due, any principal of the Loan, whether at maturity, by
acceleration or otherwise and (ii) within three (3) Business Days when due, any interest on the Loan, whether at maturity, by acceleration or otherwise; 

 

	 	(b)	 any representation or warranty made or deemed made by the Borrower hereunder is false or misleading in any
material respect as of the time made or deemed made or furnished, which is not remedied within thirty (30) days after the Lender has notified the Borrower in writing of the same; 

 

	 	(c)	 the Borrower defaults in the performance or observance of any other covenant or agreement under this Loan
Agreement and such default continues for a period of thirty (30) days after written notice from the Lender; 

  

	 	(d)	 the Borrower passes a resolution to dissolve, wind-up or liquidate
itself; 

  

	 	(e)	 any case, proceeding or other action against the Borrower is commenced seeking an order for relief against it
as debtor or to adjudicate it as bankrupt or insolvent, or seeking reorganization, arrangement, adjustment, liquidation, dissolution or composition of it or its Debts under any law relating to bankruptcy, insolvency, reorganization or relief of
debtors, or seeking appointment of a receiver, trustee, custodian or other similar official for it or for all or any substantial part of its property, and such case, proceeding or other action (i) results in the entry of an order for relief
against it that is not fully stayed or dismissed within sixty (60) days after the entry thereof; or 

  

	 	(f)	 the Borrower generally fails to pay its debts as they become due or admits in writing its inability to pay its
debts, or makes a general assignment for the benefit of creditors; or the Borrower commences any case, proceeding or other action seeking an order for relief on its behalf as debtor or adjudicating it a bankrupt or insolvent, or seeking
reorganization, arrangement, adjustment, liquidation, dissolution or composition of it or its debts under any law relating to bankruptcy, insolvency, reorganization or relief of debtors or seeking appointment of a receiver, trustee, custodian or
other similar official for it or for all or any substantial part of its property; or the Borrower takes any corporate action to authorize or in contemplation of any of the actions set forth above in this paragraph (f). 

Then, and in every such event, the Lender shall in addition to all other rights and remedies available to it be entitled by written (including facsimile)
notice to the Borrower to terminate this Loan Agreement and to declare any outstanding principal of and all accrued and unpaid interest accrued on the Loan and all other liabilities accrued hereunder to be forthwith due and payable, and the same
shall thereupon become immediately due and payable without presentment, demand, protest or further notice of any kind, all of which are hereby expressly waived by the Borrower, anything contained herein to the contrary notwithstanding. 

 ARTICLE VI 

MISCELLANEOUS 
 SECTION 6.1. Governing
Law. This Loan Agreement shall be governed by and construed in accordance with the laws of the State of Illinois. Each party hereto irrevocably waives any objection which it may now or hereafter have to the laying of the venue of any proceedings
in the courts of Illinois and any claim that any such proceedings have been brought in an inconvenient forum and further irrevocably agrees that a judgement in any proceedings brought in the State courts of Illinois shall be conclusive and binding
upon the relative party and may be enforced in the courts of any other jurisdiction, in each case to the fullest extent permitted by Applicable Law. 

SECTION 6.2. Entire Agreement; Amendments; Invalidity. This Loan Agreement and the other Loan Documents constitute the entire agreement and
understanding of the parties, and supersede and replace in their entirety any prior discussions, agreements, etc., all of which are merged herein and therein. None of the terms of this Loan Agreement or any of the other Loan Documents may be amended
or otherwise modified except by an instrument executed by each of the Borrower, the Lender and Standard Chartered Bank. If any provision or part of a provision of this Loan Agreement or its application to either party, shall be, or be found by any
authority of competent jurisdiction to be, invalid or unenforceable, such invalidity or unenforceability shall not affect the other provisions or parts of such provisions of this Loan Agreement, all of which shall remain in full force and effect.

 SECTION 6.3. No Third Party Beneficiary. This Loan Agreement shall not be construed so as to confer any right or benefit upon any
person or entity other than the parties to this Loan Agreement and their respective successors and assigns; provided that, notwithstanding the foregoing, Standard Chartered Bank shall be an express third party beneficiary of Section 6.2
hereof. 
 SECTION 6.4. Indemnification; Expenses. 

(a) The Borrower shall indemnify the Lender, and its directors, officers, employees, and agents (each such person being called an
“Indemnitee”) against, and hold each Indemnitee harmless from, any and all losses, claims, damages, liabilities and related reasonable expenses (including the reasonable fees, charges and disbursements of any counsel for any
Indemnitee), incurred by any Indemnitee or asserted against any Indemnitee by any third party or by the Borrower arising out of or as a result of (i) the Lender being party to this Loan Agreement, any other Loan Document or any agreement or
instrument contemplated hereby or thereby, the performance by the parties hereto of their respective obligations hereunder or thereunder or the consummation of the transactions contemplated hereby or thereby, (ii) any Loan or the use or
proposed use of proceeds therefrom, or (iii) any actual or prospective claim, litigation, investigation or proceeding relating to any of the foregoing, whether based on contract, tort or any other theory, whether brought by a third party or by
the Borrower, and regardless of whether any Indemnitee is a party thereto, provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related expenses are
determined by a court of competent jurisdiction to have resulted from the gross negligence, bad faith or willful misconduct of such Indemnitee. 

 (b) The Borrower agrees to pay to the Lender, within thirty (30) days after written
demand (which shall include reasonable documentation), any and all reasonable costs, expenses, and fees incurred by the Lender including, without limitation, the reasonable fees, charges and disbursements of counsel for the Lender in connection with
the collection, enforcement, preservation or protection of its rights in connection with this Loan Agreement and the other Loan Documents, including its rights under this Section, or in connection with the Loans made. Notwithstanding anything to the
contrary herein, payments in respect of amounts claimed by the Lender under this Section 6.4 shall be due and payable on the Maturity Date. 

SECTION 6.5. Notice. All notices or communications required to be given under this Loan Agreement shall be in writing an shall be served personally,
sent by email, or delivered by overnight courier service to the addresses set forth below: 
 To the Borrower: 

Address: Power Solutions International, Inc. 
 201
Mittel Dr., Wood Dale, IL 60191 
 Attention: Chief Financial Officer 

Email address: don.klein@psiengines.com 
 To the Lender: 

Address: Weichai America Corp. 
 3100 Golf Road,
Rolling Meadows, IL 60008 
 Attention: Sidong Shao 
 Email
address: Sidong.Shao@weichaiamerica.com 
 SECTION 6.6. Headings. The headings of the sections of this Loan Agreement are for convenience only and
shall not control or affect the meaning or construction of any provision of this Loan Agreement. 
 SECTION 6.7. Counterparts. This Loan Agreement
may be executed in one or more counterparts, each of which shall constitute an original, but all of which when taken together shall constitute but one instrument. Counterparts may be delivered via facsimile, electronic mail (including pdf) or other
transmission method and any counterpart so delivered shall be deemed to be as effective as an original signature page delivered manually. 

[Signature page follows.] 

 IN WITNESS WHEREOF, the parties hereto have caused this Loan Agreement to be duly executed by their
respective authorized officers as of the day and year first above written. 
  

			
	 POWER SOLUTIONS INTERNATIONAL, INC.,
as Borrower

		
	By	 	/s/ John P. Miller
	  
 Name: John P. Miller

 
 Title: CEO

  

			
	 WEICHAI AMERICA CORP.,

as Lender

		
	By	 	/s/ Shao Sidong
	  
 Name: Shao, Sidong

 
 Title: President

 EXHIBIT “A” 

BORROWING REQUEST 

The undersigned, being a duly elected and acting authorized officer of POWER SOLUTIONS INTERNATIONAL, INC., a Delaware corporation
(the “Borrower”), does hereby request that the Lender make a Loan, in the aggregate amount of
$            on                    , 20    , the proceeds of
which shall be transferred to Controlled Account as follows: 
 Account Name: Power Solutions International, Inc. 

Bank Name: Wells Fargo Bank, National Association 

Bank Address: 
 Attention: 

Telephone: 
 Account Number:
4128970167 
 ABA Number: 
 In
support of this Borrowing Request, the Borrower hereby certifies to Weichai America Corp., an Illinois corporation (the “Lender”), in connection with the SHAREHOLDER’S LOAN AGREEMENT, dated as of December 28, 2020
between the Borrower and the Lender (the “Loan Agreement”; with other capitalized terms used below having the meanings ascribed thereto in the Loan Agreement) that: 

1. Each of the representations and warranties of the Borrower contained in the Loan Agreement and the Loan Documents are true and correct in
all material respects (except that any representation and warranty that is qualified as to “materiality” or “Material Adverse Effect” shall be true and correct in all respects) as of the date the Loan is made (other than any such
representations or warranties that, by their terms, refer to a date other than such dates in which case such representations and warranties were true and correct in all material respects (except that any representation and warranty that is qualified
as to “materiality” or “Material Adverse Effect” shall be true and correct in all respects) on and as of such earlier date); and 

2. At the time of, and immediately after giving effect to, such Loan, no Event of Default or event or condition which upon notice, lapse of
time or both would constitute an Event of Default, has occurred and is continuing. 

Dated:                    , 202    

  

			
	BORROWER:
	
	POWER SOLUTIONS INTERNATIONAL, INC.
		
	By:	 	  

	Name:	 	  

	Title:	 	 CEO

	By:	 	  

	Name:	 	  

	Title:	 	 CFOex_219524.htm

Exhibit 10.1

 

Stock Option Award Agreement

 

Giga-tronics Incorporated, a California corporation, and the undersigned person (“Optionee”) are entering into this Stock Option Agreement effective as of the Grant Date set forth below. The Company has granted to Optionee the option (the “Option”) to purchase the number of shares (the “Shares”) of common stock, no par value, of the Company (“Stock”) set forth below at the per Share purchase price (the “Exercise Price”) set forth below, pursuant to the terms of this Award Agreement. The Option was granted under the Company’s Amended and Restated 2018 Equity Incentive Plan, as the same may be amended, modified, supplemented or interpreted from time to time (the “Plan”), which is incorporated herein by reference and to which this Option is subject in all respects.

 

 

Optionee Name:                                                                       

 

Grant Date:                                                                              

 

Vesting Commencement Date:                                                

 

Number of Shares:                             ISO                               

 

Expiration Date:                                                                    

 

Exercise Price:                                                                        

 

 

 

 

 

1.    Terms of Plan; Definitions.

 

(a)    All capitalized terms used in this Award Agreement and not otherwise defined shall have the meanings ascribed thereto in the Plan. Optionee confirms and acknowledges that Optionee has received and reviewed copies of the Plan and the Prospectus with respect to the Plan. The Plan is administered by the Committee which has complete authority to make all determinations with respect to each Award, to interpret the Plan, to prescribe, amend and rescind rules and regulations relating to the Plan, to determine the terms and provisions of Award Agreements, and to make all other determinations under the Plan.

 

(b)“    Good Reason” means the occurrence of any of the following without the Optionee’s consent provided that the requirements regarding advance notice and an opportunity to cure set forth below are satisfied: (i) a material diminution in Optionee’s current base salary, excluding reductions that are in proportion to any salary reduction program approved by the Board or the Committee that affects a majority of the senior executives of the Company; (ii) a material diminution in Optionee’s authority, duties, or responsibilities; (iii) a material diminution in the authority, duties, or responsibilities of the supervisor to whom Optionee is required to report, including a requirements that Optionee report to a corporate officer or employee instead of reporting directly to the Board; (iv) a material change in the geographic location at which Optionee must perform his services of not less than fifty (50) miles from the Company’s primary place of business immediately prior to such relocation; or (v) a material breach of any employment agreement between the Company and Optionee.

 

2.    Nature of the Option. The Option has been granted as an incentive to Optionee’s Continuous Service, and is in all respects subject to such Continuous Service and all other terms and conditions of this Award Agreement and the Plan. The Option is intended to be an Incentive Option.

 

3.    Vesting, Exercise and Term of Option. The Option shall vest and become exercisable during its term in accordance with the following provisions:

 

(a)    Vesting and Right of Exercise. 

 

(i)    The Option shall vest and become exercisable with respect to 100% of the Shares on the first anniversary of the Vesting Commencement Date, subject to Optionee’s Continuous Service; provided that if (A) such termination occurs on or after Change of Control, (2) such termination is not a result of Optionee’s voluntary resignation without Good Reason, death or disability, and (3) Section 6.5 of the Plan does not apply, then any portion of then unvested and outstanding Option shall immediately vest upon such termination of employment. In order for Optionee to resign for Good Reason, Optionee must provide written notice to the Company of the existence of the Good Reason condition within 30 days of the initial existence of such Good Reason condition. Upon receipt of such notice, the Company will have 30 days during which it may remedy the Good Reason condition and not be required to provide for the vesting acceleration described herein as a result of such proposed resignation. If the Good Reason condition is not remedied within such 30-day period, Optionee may resign based on the Good Reason condition specified in the notice effective no later than 30 days following the expiration of the 30-day cure period.

 

-1-

 

 

(ii)    Subject to Section 6.5 of the Plan, in the event of Optionee’s death, disability or other termination of Optionee’s Continuous Service, the Option shall be exercisable in the following manner, provided that the unvested portion of the Option shall be immediately forfeited:

 

(I)    Termination of Employment: the Option ceases to be exercisable 90 days following termination of employment, during which time it shall be exercisable only to the extent exercisable at the date of termination, except that the Option shall not be exercised after its Expiration Date;

 

(II)    Disability: if Optionee was in Continuous Service from the Grant Date until the date of termination of service due to disability the Option ceases to be exercisable twelve months following the date of termination of Continuous Service from disability, during which time it shall be exercisable only to the extent exercisable at the date of termination due to disability, except that the Option shall not be exercised after its Expiration Date; and

 

(III)    Death: if the Optionee was in Continuous Service from the Grant Date until the date of death, the Option ceases to be exercisable twelve months following the date of death, during which time it shall be exercisable by the Optionee’s estate or by a person who acquired the right to exercise the Option by bequest, inheritance or otherwise as a result of the Optionee’s death only to the extent exercisable at the date of death, except that the Option shall not be exercised after its Expiration Date.

 

(b)    Method of Exercise. In order to exercise any vested portion of the Option, Optionee shall notify the Company in writing by executing and delivering the Notice of Exercise of Stock Option in the form attached hereto as Exhibit A (the “Exercise Notice”). The Shares as to which the Option has been exercised shall be registered in the name of Optionee or otherwise as the Optionee may request and the Company shall permit.

 

(c)    Restrictions on Exercise; Term of Option.

 

(i)    Optionee may exercise the Option only with respect to Shares that have vested in accordance with Section 3(a) of this Award Agreement.

 

(ii)    Optionee may not exercise the Option if the issuance of the Shares upon such exercise or the method of payment of consideration for such Shares would constitute a violation of any applicable federal or state securities law or other law or regulation.

 

(iii)    The method and manner of payment of the Exercise Price will be subject to the prohibition on loans to directors and executive officers in Section 402 of the Sarbanes-Oxley Act of 2002, to the rules under Part 221 of Title 12 of the Code of Federal Regulations as promulgated by the Federal Reserve Board, and to any other applicable laws, rules or regulations.

 

-2-

 

 

(iv)    As a condition to the exercise of the Option, the Company may require certain representations and warranties as the Company may request pursuant to Section 9.3 of the Plan. Prior to or subsequent to exercise of the Option, the Company may require the Optionee to enter into certain lock-up arrangements as provided in Section 9.4 of the Plan.

 

(v)    Optionee may only exercise the Option upon, and the obligations of the Company under this Award Agreement to issue Shares to Optionee upon any exercise of the Option is conditioned on, satisfaction of all federal, state, local or other withholding tax obligations associated with such exercise (whether so required to secure for the Company a tax deduction or otherwise) (“Withholding Obligations”). The Company reserves the right to require Optionee to remit to the Company an amount sufficient to satisfy all Withholding Obligations prior to the issuance of any Shares upon any exercise of the Option. In addition, Optionee authorizes the Company to deduct any such Withholding Obligations from any payments of any kind due to Optionee (whether in connection with the Option or otherwise). Subject to the approval of the Committee (which may be unreasonably withheld), the Optionee may elect to satisfy Withholding Obligations, in whole or in part, by having the Company withhold shares of Stock otherwise due to the Optionee upon exercise of the Option, or by submitting shares of Stock previously owned by the Optionee.

 

(vi)    No fraction of a Share shall be purchasable or deliverable upon exercise of the Option, but in the event any such Shares shall include a fraction of a Share (whether due to net exercise, payment of the Exercise Price by having Shares withheld or by submitting previously owned shares, by adjustment of the Option as provided in the Plan, or otherwise), such number of Shares shall be rounded down to the nearest smaller whole number of Shares.

 

(vii)    The Option may not be exercised following the Expiration Date, and may be exercised during such term only in accordance with the terms of this Award Agreement.

 

4.    Transferability of Option.

 

(a)    The Option may not be transferred by the Optionee and any transfer of the Option shall be void.

 

(b)    The terms of this Award Agreement shall bind the Optionee and his or her spouse or domestic partner and the respective Permitted Transferees, executors, administrators, heirs, personal representatives and successors of the foregoing.

 

-3-

 

 

5.    Method of Payment.

 

(a)    Upon exercise (and together with the delivery of the Exercise Notice), Optionee shall pay the aggregate Exercise Price of the Shares purchased and the Withholding Obligations by any of the following methods, or a combination thereof, at the election of Optionee:

 

(i)    cash;

 

(ii)    certified or bank cashier’s check;

 

(iii)    if shares of Stock are traded on an established stock market or exchange on the date of exercise, by surrender of whole shares of Stock having a Market Value equal to the portion of the Exercise Price to be paid by such surrender, provided that if such shares of Stock to be surrendered were acquired upon exercise of an Incentive Option, Optionee must have first satisfied the holding period requirements under Section 422(a)(1) of the Code;

 

(iv)    by a “net exercise” of the Option, in which the Company will not require a payment of the Exercise Price but will reduce the number of shares of Stock issued upon the exercise by the largest number of whole shares that have a Fair Market Value that does not exceed the aggregate Exercise Price of the Shares as to which the Option is being exercised. With respect to any remaining balance of the aggregate Exercise Price, the Company will accept a cash payment from the Optionee. The number of shares of Stock underlying the Option will decrease following exercise to the extent of (i) Shares used to pay the Exercise Price of an Option under the “net exercise” feature, (ii) Shares actually delivered to the Optionee as a result of such exercise and (iii) shares withheld to pay the Withholding Obligations; or

 

(v)    if shares of Stock are traded on an established stock market or exchange on the date of exercise, pursuant to and under the terms and conditions of any formal cashless exercise program authorized by the Company entailing the sale of the Stock subject to an Option in a brokered transaction (other than to the Company).

 

(b)    Payment in Stock. If Optionee shall pay all or a portion of the aggregate Exercise Price and Withholding Obligations due upon an exercise of the Option by surrendering shares of Stock pursuant to Section 5(a)(iii), then Optionee:

 

(i)    shall accompany the Exercise Notice with a duly endorsed blank stock power (with an appropriate signature guarantee if requested by the Company) with respect to the number of shares of Stock to be surrendered and shall deliver the certificate(s) representing such surrendered shares to the Company at its principal offices within two business days after the date of the Exercise Notice;

 

(ii)    authorizes the Company to transfer so many whole number of Shares represented by such certificate(s) that have a Fair Market Value that does not exceed the aggregate Exercise Price for the Shares as to which the Option is being exercised. With respect to any remaining balance of the aggregate Exercise Price, the Company will accept a cash payment from the Optionee; and

 

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(iii)    may not surrender any fractional share as payment of any portion of the Exercise Price.

 

6.    Not an Employment Contract. Nothing in the Plan or this Award Agreement shall confer upon Optionee any right to continuation of the Optionee’s employment or other association with the Company or shall interfere with or restrict in any way the rights of the Company, which are hereby expressly reserved, to modify the terms of Optionee’s employment or to terminate Optionee’s employment at any time for any reason whatsoever, with or without cause.

 

7.    Tax Consequences Generally. Optionee acknowledges that Optionee may suffer adverse tax consequences as a result of exercise of the Option. Optionee acknowledges that the Company advises Optionee to consult with the Optionee’s tax advisers in connection with the tax implications relating to the Option including but not limited to the acquisition, disposition or transfer of the Option or of any securities or property in connection therewith, and that Optionee is not relying on the Company for any tax advice in connection therewith. Any adverse consequences incurred by an Optionee in connection with the Option, including, without limitation, from the use of shares of Stock to pay any part of the Exercise Price or any tax in connection with the exercise of the Option, and any adverse tax consequences arising from a disqualifying disposition within the meaning of Section 422 of the Code, shall be the sole responsibility of Optionee.

 

8.    Consent of Spouse/Domestic Partner. Optionee agrees that Optionee’s spouse’s or domestic partner’s interest in the Option is subject to this Award Agreement and such spouse or domestic partner is irrevocably bound by the terms and conditions of this Award Agreement. Optionee agrees that all community property interests of Optionee and Optionee’s spouse or domestic partner in the Option, if any, shall similarly be bound by this Award Agreement. Optionee agrees that this Award Agreement is binding upon Optionee’s and Optionee’s spouse’s or domestic partner’s executors, administrators, heirs and assigns. Optionee represents and warrants to the Company that Optionee has the authority to bind Optionee’s spouse/domestic partner with respect to the Option. Optionee agrees to execute and deliver such documents as may be necessary to carry out the intent of this Section 10 and the consent of Optionee’s spouse/domestic partner.

 

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IN WITNESS WHEREOF, Optionee and the Company are entering into this Award Agreement as of the Grant Date.

 

 

	 	 	Giga-tronics Incorporated
	 	 	 
	 	 	 
	 	 	 
	 	 	 
	 	 	By:	 
	Optionee Signature	 	 	 
	 	 	Name:	 
	 	 	 	 
	Optionee Name	 	Title:	 

 

 

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Exhibit A

 

Notice of Exercise of Stock Option/Tandem Stock Appreciation Right

 

 

I ________________________________________ (please print legibly) hereby elect to exercise the stock options(s) identified below (the “Option(s)”) granted to me by Giga-tronics Incorporated (the “Company”) under its Amended and Restated 2018 Equity Incentive Plan (the “Plan”) with respect to the number of shares of Stock of the Company set forth below (the “Shares”). I acknowledge and agree that my exercise of the Option(s) is subject to the terms and conditions of the Plan and the Stock Option Award Agreement(s) governing the Option(s). Optionee confirms and acknowledges that Optionee has received and reviewed copies of the Plan and the Prospectus, dated _____________, with respect to the Plan.

 

1.         _____________ Shares at $ ________ per share (Grant date of Option): ____________

2.         _____________ Shares at $ ________ per share (Grant date of Option): ____________

3.         _____________ Shares at $ ________ per share (Grant date of Option): ____________

4.         _____________ Shares at $ ________ per share (Grant date of Option): ____________

 

 

	
			 

			[OPTION EXERCISE]

			 

			I choose to pay the Exercise Price of the above option(s) as follows [please complete the numbered item(s) which apply to your exercise]:

			 

			1.         Cash:  $____________________

			 

			2.         Check: $____________________ (please make checks payable to Giga-tronics Incorporated)

			 

			3.         Surrender of _________________ Shares

			 

			4.         Net exercise as described in Section 5(a)(iv) of the Option  ☐   [if applicable check box]

			 

			 

			 

			I choose to pay the tax withholding relating to the exercise of the above option(s) as follows:

			 

			5.         Cash: $____________________

			 

			6.         Check: $____________________ (please make checks payable to Giga-tronics Incorporated)

			 

			7.         Surrender of _________________ Shares currently owned by Optionee

			 

			8.         Withholding of _______________ Shares from Shares otherwise deliverable on exercise.

			 

			 

			

 

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			[IF APPLICABLE]

			 

			
	
			 

			Please deliver the stock certificate(s) representing the Shares to (please print legibly):

			 

			 

			                                                                     

			 

			                                                                     

			 

			                                                                     

			 

			                                                                     

			 

			 

			 

			

 

 

 

 

Name:                                                                      

(please print legibly)

 

Signature:                                                               

 

Date:                                                                       

 

Phone No:                                                               

 

 

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