UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10 KSB
Annual Report Pursuant To Section 13 Or 15(D)
Of The Securities Exchange Act Of 1934
For the fiscal year ended: December 31, 1996
Commission file number: 0-12227
Sutron Corporation
(Exact name of registrant as specified in its charter.)
Virginia 54-1006352
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
21300 Ridgetop Circle, Sterling Virginia 20166
(Address of principal executive offices) (Zip Code)
(703) 406-2800
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the Registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [ X ] No [ ]
Check if there is no disclosure of delinquent filers in
response to Item 405 of Regulation S-B contained in this form,
and no disclosure will be contained to the best of registrant's
knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or
any amendments to this Form 10-KSB. [X]
Issuer's revenues for its most recent fiscal year were
$8,689,068.
The aggregate market value of the voting stock held by non-
affiliates as of March 26, 1997 was approximately $2,092,000
based on the average bid and asked prices of such stock.
The number of shares outstanding of the issuer's
Common Stock, $.01 par value, as of March 26, 1997 was 4,225,851.
Documents Incorporated by Reference
Portions of the registrant's definitive proxy statement dated April 11 1997
are incorporated in Part III as set forth herein.
PART I
Item 1. Business
Business Development
Sutron Corporation, incorporated in 1975, is an environmental
monitoring firm. The Company designs and manufactures
environmental monitoring and control systems for use by
government agencies and industry. The Company's business is to
provide real-time data collection,
telemetry, and technical expertise to monitor, control, manage,
and forecast activities in the areas of hydrology, meteorology
and water management.
Business
The Company offers products and professional services in the
areas of hydrology, meteorology and water mangement. Sutron's
products consist of sensors, data collection platforms (DCP's)
and remote terminal units (RTU's) with telemetry capability and
system and application software. Sutron provides services in
the integration and installation of turnkey real-time data
collection systems, the support of Sutron's data management
software and in the maintenance and repair of field site
sensors and data collection platforms. Sutron's customers
include a diversified base of federal, state and foreign
government agencies, universities, the Department of Defense
and hydropower companies.
Products
The Products Division manufactures data collection platforms,
remote terminal units and sensors. Sutron's data collection
platforms and remote terminal units collect and transmit sensor
data to central facilities by radio, telephone, cable, fiber
optics, or microwave. Sutron's sensors support the collection
of hydrological and meteorological data and include a tipping
bucket rain gauge, a barometric pressure sensor, a temperature
sensor, and several water level sensors. The Company's
equipment is compatible with sensors from other companies.
Sutron has long-standing relationships with suppliers for wind
speed and wind direction, water quality, humidity and solar radiation sensors.
Sutron's Products Division maintains a MIL-Q-9858 certification
and is currently working towards an ISO 9000 certification.
The Company's principal products are described below.
8200/8210 Data Logger/Transmitter
The 8200/8210 Data Logger/Transmitter is a simple-to-
operate, low-cost data collection platform which supports a
wide variety of telemetry applications. The 8200/8210 is
environmentally hardened, capable of operating from -40 C to 60
C, making it ideal for remote locations. As a data recorder,
the 8200/8210 will store over 65,000 readings in battery backed
memory. The 8200/8210 supports a wide variety of
communications, including radio, satellite, and telephone. The
Telephone/Voice Synthesis option allows communications over
standard telephone circuits using either a synthesized voice
message or a modem connected to a computer terminal.
8400 Digital Data Logger
The 8400 Digital Data Recorder consists of a shaft encoder
and data logger integrated into a single enclosure that is
compatible with the accessories of older analog water level
recorders which it was designed to replace. The 8400 is a low
cost, low maintenance system that reduces te time required for
site servicing and data processing and makes water level
monitoring networks more efficient.
9000 RTU Family
The 9000 RTU is an expandable multitasking RTU System designed
for remote control data acquisition and control. The 9000 is
modular by design which affords its users great flexibility in
the use and application of these units. This family of plug in
modules is available for the collection of sensor data, output
control of process devices, and data communication between
other 9000 RTUs and a central site. Sutron has certified the
9000 radio transmitter on the GOES, ARGOS, GMS, and METEOSAT
satellites. The 9000 RTU in various configurations is
currently installed and collecting and transmitting seismic
data around Naples, Italy, meteorological data in Canada,
Switzerland, Australia, Pakistan and New Zealand, and tidal
information around the United States and in Taiwan as well as
controlling a series of pumping stations, near Alamosa,
Colorado and Yuma, Arizona.
8600 Wind Sensor
The 8600 Wind Sensor began under an Air Force contract awarded
to Sutron in 1985 to develop a replacement for the AN-GMQ-20,
an aging wind sensing system used by the U.S. Air Force. The
8600 combined thick film sputtering and microprocessor
technology to create a state-of-the-art wind sensor named the
AN-FMQ-13. Initial efforts to purchase components off the
shelf to meet the Air Force specifications proved unsuccessful.
During 1988 and 1989 Sutron redesigned the 8600 sensor head in
an effort to improve the accuracy and to improve the de-icing
capabilities. Acceptance testing by the Air Force began again
in April 1989, and "First Article" approval was granted in
November 1989. Items manufactured under this contract have
included 8600 wind sensors and ancillary displays and recording
equipment, ground support equipment and spares. The Company
received contracts for spares and for repairs of older units in
1996 with final delivery and acceptance of these items
anticipated in 1997.
Services
The company provides system integration services which include
the sale of Sutron's real-time database software (HYDRIS/PC
Base), the design and developement of customer-specific
hardware configurations and software applications, and long-
term software support for (HYDRIS/PC Base) users. This
capability allows the Company to provide turnkey hydrological
and meteorological systems to a variety of users.
Distribution Methods of Products and Services
The Company's products and services are currently sold in the
United States by the Company's direct sales force. As of
December 31, 1996, the Company employed eight salaried sales and
marketing personnel, including four engaged directly in field
sales activities, and four in various other marketing and sales
support functions. Internationally, the Company utilizes
sales agents to market its products and services.
Customers
During 1996, approximately 55% of the Company's products and
services were sold to the Federal Government. Revenues in 1996
among the various agencies were as follows: U.S. Army Corps of Engineers, 8%;
Department of Defense, 6%; Department of the Interior, 38%; and
various other agencies of the federal government, 3%. The
revenues from the Corps of Engineers were spread among some ten
(10) separate Districts, and the revenues from the Department
of the Interior among two (2) Regions. As all of these
districts and agencies act independently, the loss of any
single district or agency as a customer would not have a
material adverse effect on the Company's business. See Note 11
to the Financial Statments under Part II, Item 7 hereof for
this information.
The Company also performed on various contracts of foreign
origin. Total revenues from foreign customers amounted to
approximately 35% of total revenues in 1996, 14% of total
revenues in 1995, and approximately 22% in 1994. Sutron
actively markets its products and services internationally.
Contracts for products or services with federal, state and
local government agencies typically allow for termination at
the convenience of the government and for audit and annual
negotiation of overhead rates. Upon termination, the Company
would be entitled to reimbursement for allowable costs incurred
and to a proportionate share of profits or fees earned to the
date of termination. Such contracts are also typically
dependent upon compliance by the contractor with applicable
civil rights, equal employment opportunity, and contract
procurement requirements. The Company at this time has no
reason to believe that any material changes will occur in the
foreseeable future with respect to federal, state, or local
government programs or services with respect to which the
Company has been granted its contracts or provides its
services. However, due to changes in administration, national
goals and budgetary restrictions, funding of such programs or
services could be altered or abolished. If a substantial cut-
back in the level of funding by the applicable government
agency were to occur, it would have a material adverse effect
on the Company. Further, while certain of the Company's
contracts are dependent upon its continued certification by the
Small Business Administration as a "Small Business" (the
principal elements for certification being an employer
principally engaged in specified activities with less than 500
employees), the Company does not believe it would be materially
affected by the loss of such certification(s) which usually
differ for each industry.
Although the Company's military contracts are subject to audit
by the Defense Contract Audit Agency, prior audits have not
resulted in material adjustments and the Company does not
anticipate that any additional such audits would result in
material adjustments.
Competition
The Company is aware of both domestic and foreign competitors
offering complete real-time networks of their own, and
companies which fabricate real-time networks from components
manufactured by themselves and others. The Company is also
aware of numerous additional firms, ranging in size from large
to small, from general to highly specialized, and from new to
well established, offering competitive sensors and other
instruments, DCPs, telemetry equipment, satellite and other
electronic equipment, and software.
Several of these companies have financial, research and
development, marketing, management and technical resources
substantially greater than those of the Company. The Company
may also be at a competitive disadvantage because it purchases
certain sensors and other equipment components, as well as
computer hardware and peripheral equipment, from manufacturers
who are or may become competitors with respect to one or more
of the Company's products.
The Company, with respect to its professional engineering and
technical services, is in competition with numerous diverse
engineering and consulting firms, many of which have larger
staffs and facilities, and are better known, have greater
financial resources, and have more experience than the Company.
As to its maintenance services, the Company is aware that many
of the firms offering competitive products, as well as several
independent service organizations, offer maintenance services;
some of these companies have larger staffs, are better
equipped, and have greater financial, marketing and management
resources than the Company.
Price, performance and integration capabilities are believed by
the Company to be the primary competitive factors with respect
to all of its products and services.
Research and Development
During the three years ended December 31, 1996, 1995, and 1994,
Sutron's internally funded research and development costs were
$547,617, $505,953, and $434,300 respectively. PC Base II, our data
management software, received its final release in 1996 and enhancements
were made to several existing products.
Patents, Trademarks, Copyrights and Agreements
Although the Company does not deem patent protection to be of
significant importance to its industry, it has and may in the
future seek patents for certain of its products, real-time
networks, and technology as well as Company software products,
real-time networks, and technology. Company software products
and innovations may not be patentable but may be subject to
automatic but limited copyright protection. The Company has
treated its products, real-time networks, technology and
software as proprietary and relies on trade secret laws and
internal non-disclosure safeguards rather than making their
designs and processes generally available to the public by
applying for patents. Further, the Company believes that,
because of the rapid pace of technological change in the
computer, electronics and telecommunications industries, patent
and copyright protection is of less significance than factors
such as the knowledge and experience of Company personnel and
their ability to design and develop enhanced and new products,
real-time networks and their components.
Under the Company's federal contracts, the federal government
obtained, among other rights, the right to move any and all
equipment from place to place and to reproduce purchased
equipment. However, since the Company has not disclosed its
electrical schematics for its equipment or source codes for its
computer software for use in connection with such equipment,
the Company believes that it would not be economical for the
government to exercise its reproduction rights.
Raw Materials
The raw materials used by the Company, such as electronic
components and fabricated parts, are generally available from a
wide variety of sources at competitive prices. The Company does
not anticipate that its present or proposed business activities
would be substantially adversely affected by the scarcity of
any raw materials.
Backlog
The Company's backlog at December 31, 1996 was $3,733,465 as
compared with $1,390,682 at December 31, 1995 and $830,000 at
December 31, 1994. The Company anticipates that 98% of its
1996 year-end backlog will be shipped in 1997.
Employees
The Company had a total of 54 employees as of December 31,
1996 of which 53 were full time.
Item 2. Properties
On July 30, 1992, the Company entered into a five and one-half
year lease, for approximately 17,000 square feet of
manufacturing and office space in Sterling, Virginia. The
lease commenced on October 23, 1992. This facility allowed the
Company to consolidate it's manufacturing, systems integration,
research and development, and sales and administration
departments into one building.
In October, 1986, the Company purchased a 4.2-acre building
site in Sterling, Virginia and commissioned an architectural
firm to design a new facility. This site is located in the
technology park where the Company currently leases space. In
an effort to reduce the debt of the Company and the associated
interest expenses, the Company is seeking a purchaser for the
land, site plans, and architectural plans. See Note 6 to the
Financial Statements under Part II, Item 7 hereof for this
information.
The Company believes that its facility is adequate for its
present needs and that its properties are in good condition,
well maintained and adequately insured.
Item 3. Legal Proceedings
The Company is not a party to any pending legal proceeding nor
is its property the subject of a pending legal proceeding.
Item 4. Submission of Matters To A Vote of Security Holders
No matter was submitted during the fourth quarter of 1996 to a
vote of the Company's security holders, either through the
solicitation of proxies or otherwise.
PART II
Item 5. Market for Common Equity and Related Stockholder
Matters
(a) Market Information
The common stock of Sutron Corporation is quoted over the
counter through the NASD Bulletin Board supplied by the
National Association of Securities Dealers, Inc. under the
symbol STRN, and through the Pink Sheet Service of the National
Quotation Bureau, Inc. The following table shows the high and
low bid quotations in 1996 and 1995 by quarter as reported by
the National Quotation Bureau, Inc. and the National
Association of Securities Dealers, Inc. These quotations
represent prices between dealers in securities, do not include
retail mark-ups, mark-downs, or commissions and do not
necessarily represent actual transactions.
<TABLE>
MARKET INFORMATION
<CAPTION>
1996 1995
Quarter HIGH LOW HIGH LOW
<S> <C> <C> <C> <C>
First Quarter 3/8 5/16 5/8 1/4
Second Quarter 11/16 5/16 9/16 1/4
Third Quarter 1 13/16 5/8 9/16 1/8
Fourth Quarter 1 7/16 1 1/8 5/16 1/16
</TABLE>
(b) Approximate Number of Equity Shareholders:
Title of Class: Common Stock, $.01 par value
Approximate Number of Record Holders At March 26, 1997: 348
(c) Dividends:
The Company has never paid a dividend on its common stock and the Board of
Directors intends for the foreseeable future to retain all earnings for use
in the Company's business.
Item 6. Management's Discussion and Analysis of Financial
Condition and Results of Operations
<TABLE>
The following table sets forth for the periods indicated the
percentage of net sales represented by each line item in the
Company's Statement of Operations:
<CAPTION>
Fiscal Year
1996 1995 1994
<S> <C> <C> <C>
Revenues 100.0% 100.0% 100.0%
Cost of sales 60.0 63.7 62.8
Gross profit 40.0 36.3 37.2
Selling, general and administrative expenses 21.3 23.5 23.4
Research and development expenses 6.3 9.1 8.3
Income from operations 12.4 3.7 5.5
Other expense --- -- --
Interest expense 1.9 3.3 3.8
Income before income taxes 10.5 .4 1.7
Provision for income taxes 1.6
Net income 8.9% .4% 1.7%
</TABLE>
Fiscal 1996 Compared to Fiscal 1995
Revenues. The Company's revenues for 1996 increased 57% to
$8,689,068 from revenues of $5,532,612 in 1995. The increase
was primarily the result of sales of two products released in late 1995,
the digital data recorder (DDR) and the 8210 Data Recorder/Transmitter,
and increased international systems sales. Revenues from international
contracts and projects increased to $3,014,000 in 1996 from $757,000 in
1995, an increase of $2,257,000. Sales to agencies of the federal government
and other domestic customers improved to $5,160,000 in 1996 from
$4,321,000, an increase of $839,000. Revenues from contracts
with the Air Force for FMQ-13 wind sensors, spares and repairs
decreased to $515,000 in 1996 from $455,000 in 1995, an increase
of $50,000. The Company's largest customer in each
of 1996 and 1995 was the Department of the Interior, which
accounted for 39% and 56% of revenues, respectively.
Gross Profit. Gross profit for 1996 increased 73% to $3,473,050
from $2,011,010 in 1995. Gross margin as a percentage of
revenues for 1996 increased to 40.0% as compared to 36.3% in
1995. The increase in the Company's gross margin as a
percentage of sales was attributed to the increase in sales volume.
Selling, General and Administrative. Selling, general and
administrative expenses increased 43% to $1,850,899 in 1996 from
$1,298,411 in 1995. Selling, general and administrative
expenses as a percentage of revenues decreased to 21.3% in 1996
from 23.5% in 1995 due to the increase in sales volume.
The increase of $552,488 in 1996 over 1995
was primarily due to increased international commissions,
the addition of a new international sales manager in June 1996, and
increased sales and marketing activities. The Company has been proactively
engaged in expanding its sales and marketing activities in an effort
to increase its customer base and to improve its market share.
Research and Development. Research and development expenses
increased 8% to $547,617 in 1996 from $505,956 in 1995.
Research and development expenses as a percentage of revenues
decreased to 6.3% in 1996 from 9.1% in 1995. The increase of
$41,661 in 1996 over 1995 was primarily due to increased
product development activities. The Company continues to focus
on expanding its product line of data recorders/transmitters, sensors
and data management software and reducing product development cycles.
Net Interest Expense. Interest expenses for 1996 decreased to
$162,848 from $185,639 in 1995. This decrease is attributed to
reduced borrowings.
Fiscal 1995 Compared to Fiscal 1994
Revenues. The Company's revenues for 1995 increased 6% to
$5,532,612 from revenues of $5,217,951 in 1994. The increase was
primarily the result of increased sales of data collection platforms,
sensors and services to agencies of the Federal government. Sales to
agencies of the federal government and other domestic customers
improved to $4,321,000 in 1995 from $3,597,000, an increase of
$724,000. Revenues from contracts with the Air Force for FMQ-13
wind sensors, spares and repairs decreased to $455,000 in 1995 from
$463,000 in 1994, a decrease of $8,000. Revenues from international
contracts and projects declined to $757,000 in 1995 from $1,158,000
in 1994, a decrease of $401,000. The Company's largest customer in
each of 1995 and 1994 was the Department of the Interior, which
accounted for 56% and 35% of revenues, respectively.
Gross Profit. Gross profit for 1995 increased 4% to $2,011,010 from
$1,939,137 in 1994. Gross margin as a percentage of revenues for
1995 decreased to 36.3% as compared to 37.2% in 1994. The decrease
in the Company's gross margin as a percentage of sales was attributed
to an increase in direct material costs primarily associated with data
collection platforms, higher contract costs than anticipated and
competitive pricing pressure. Although there can be no assurance that
Sutron can improve its current gross margin, management negotiated
a new General Services Administration contract, effective December 1,
1995, resulting in price increases on many products. There had been
no previous price increases on the contract since June 1992. Revenues
from the General Services Administration contract represented
approximately 59% and 43% of revenues in 1995 and 1994,
respectively.
Selling, General and Administrative. Selling, general and
administrative expenses increased 9% to $1,298,411 in 1995 from
$1,221,041 in 1994. Selling, general and administrative expenses as a
percentage of revenues increased to 23.5% in 1995 from 23.4% in
1994. The increase of $77,370 in 1995 over 1994 was primarily due
to increased selling costs as a result of adding a new direct salesperson
and the development and printing of a new product catalog. The new
salesperson is responsible for an eleven state territory in the Pacific
northwest and allows for expanded coverage of customers in that
region. The new product catalog covers the years 1995 to 1996 and
provides the Company with a significant sales and marketing tool not
previously available. The Company has been proactively engaged in
expanding its sales and marketing activities in an effort to increase its
customer base and to improve its market share.
Research and Development. Research and development expenses
increased 17% to $505,956 in 1995 from $434,300 in 1994. Research
and development expenses as a percentage of revenues increased to
9.1% in 1995 from 8.3% in 1994. The increase of $71,656 in 1995
over 1994 was primarily due to a new development engineer being
employed for a full year in 1995 as compared with eight months in
1994 and reduced assistance by development engineeers on contract
work. The increase in expenditures was associated with projects to
modify and enhance existing products and to meet new product
development schedules. The Company continues to focus on
expanding its product line of data recorders/transmitters, sensors and
data management software and reducing product development cycles.
Net Interest Expense. Interest expenses for 1995 decreased to
$185,639 from $195,677 in 1994. This decrease is attributed to a
reduced interest rate on bank borrowings from prime plus three
percent to prime plus two percent and reduced borrowings.
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 1996, the Company had working capital of
$1,291,361 compared to working capital of $784,071 at January 1,
1996. Cash and cash equivalents at December 31, 1996 were $78,970
compared to $49,889 at January 1, 1996. In 1996, the Company's
major uses of cash were for purchases of inventory and payments on
bank notes payable.
The Company signed a loan and security agreement dated December
11, 1992, with its bank which extended a line of credit and a term note
with a principal balance of $2,121,222. Remaining principal
payments on the term note amount to $25,000 per month for 18
months and 1 final payment on July 15, 1998 for the remaining unpaid
balance. Interest on the unpaid balance is payable monthly at prime
plus two percent The current portion of the term note at December 31,
1996 was $300,000 and the long term portion was $166,222.
Borrowings on the Company's revolving credit facility, which has a
maximum limit of $1,000,000, are subject to a defined borrowing base
composed primarily of certain accounts receivables and unbilled
receivables. Borrowings outstanding against the revolving credit
facility as of December 31, 1996 were $905,000. The revolving credit
facility expires on April 30, 1997. The Company believes the credit
facility will be extended on the renewal date.
The term note and the credit facility bear interest at prime plus two
percent. The credit facility and the term note are secured by accounts
receivable, inventory, and equipment. The agreements contain
restrictive covenants pertaining to the maintenance of tangible net
worth and operating cash flows and limiting capital expenditures,
acquisitions by the Company of its own stock and other matters. The
agreements also restrict the payment of dividends.
Management believes that its working capital, cash flows from
operations, and credit facilities will provide adequate resources to
finance the current needs of the Company's operations and to satisfy its
anticipated cash requirement for more than twelve months. In
addition, Sutron will continue to consider and review other financing
arrangements which could be used to reduce the outstanding balance
of both current and long term debt.
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders
Sutron Corporation
Sterling, Virginia
We have audited the accompanying balance sheets of Sutron
Corporation as of December 31, 1996 and 1995, and the related
statements of operations, stockholders' equity (deficit), and cash flows
for each of the three years ended December 31, 1996, 1995 and 1994.
These financial statements are the responsibility of the Corporation's
management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that we plan and
perform the audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Sutron Corporation
as of December 31, 1996 and 1995, and the results of its operations and its
cash flows for each of the three years ended December 31, 1996, 1995 and 1994
in conformity with generally accepted accounting principles.
Thompson, Greenspon & Co.
Fairfax, Virginia
February 28, 1997
<PAGE>
<TABLE>
PART I. - FINANCIAL INFORMATION
SUTRON CORPORATION
BALANCE SHEETS
<CAPTION>
(Unaudited)
December 31, December 31,
1996 1995
___________ ___________
<S> <C> <C>
Assets
Current Assets:
Cash $ 78,970 $ 49,889
Accounts receivables 1,195,281 1,498,737
Unbilled Contract receivables 15,096 36,130
Cost and estimated earnings
in excess of billings 628,344 366,230
Inventory 2,135,231 952,371
Prepaid and other 46,482 57,141
_________ _________
Total Current Asset 4,099,404 2,960,498
Property, Plant, and Equipment,
Furniture and Fixtures 1,201,030 1,382,161
Automative equipment 44,974 44,974
Leasehold improvements 9,264 9,264
________ _________
1,255,268 1,436,399
Accumulated deprectiation (1,072,273) (1,221,504)
_________ _________
Net property, plant and
equipment 182,995 214,895
Investment 493,118 493,118
Other Assets 50,940 63,134
Total Other Assests 544,058 556,252
_________ _________
TOTAL ASSETS $ 4,826,457 $ 3,731,645
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
Current Liabilities:
Accounts payable $ 895,524 $ 589,010
Accrued payroll 60,224 35,187
Accrued expenses 396,841 218,563
Contract billings on contracts in
progress in excess of costs and
estimated earnings 162,702 192,273
Estimated losses on
uncompleted contracts 1,095 10,893
Current maturities:
Line of credit 905,000 735,000
Installment notes payable 6,657 5,501
Term notes payable 300,000 300,000
Shareholder loans payable 80,000 90,000
___________ ___________
Total Current Liabilities 2,808,043 2,176,427
Long-term liabilities:
Installment notes payable 16,411 22,972
Term notes payable 166,222 466,222
Total Long-term Liabilities 182,633 489,194
Total liabilities 2,990,676 2,665,621
Stockholders' Equity:
Common stock, $.01 par value,
12,000,000 shares authorized;
4,225,851 shares issued and
outstanding in 1996 and 1995 43,540 43,540
Additional paid in capital 2,281,585 2,281,585
2,325,125 2,325,125
Accumulated Deficit (489,344) (1,259,101)
_____________ ___________
Total Stockholders' Equity 1,835,781 1,066,024
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 4,826,457 $ 3,731,645
<FN>
See Accompanying Notes to Financial Statements
</TABLE>
<PAGE>
<TABLE>
SUTRON CORPORTION
STATEMENTS OF OPERATIONS
<CAPTION>
Year Ended December 31,
1996 1995 1994
<S> <C> <C> <C>
Revenue $8,689,068 $5,532,612 $ 5,217,951
Cost of Goods Sold 5,216,018 3,521,602 3,278,814
Gross Profit 3,473,050 2,011,010 1,939,137
Research and Development
Expenses 547,617 505,956 434,300
Selling, General, and
Administrative
Expenses 1,850,899 1,298,411 1,221,041
Operating Income 1,074,534 206,643 283,796
Financial Expense, net,
including interest expense
of $165,181 in 1996,
$188,250 in 1995, and
$197,717 in 1994 162,848 185,639 195,677
Income before
Income Taxes 911,686 21,004 88,119
Income Tax 141,929 - 1,000
Net Income $769,757 $21,004 $ 87,119
Net Income per
Common Share $ .18 $ .005 $ .02
Weighted Average Number
of Common Shares 4,309,465 4,018,375 3,927,676
<FN>
See Accompanying Notes to Financial Statements
</TABLE>
<PAGE>
<TABLE>
SUTRON CORPORATION
STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1996, 1995, AND 1994
<CAPTION>
COMMON PAID-INACCUMULATED
SHARES AMOUNT CAPITAL DEFICIT
<S> <C> <C> <C> <C>
Balances,
December 31, 1993 3,922,051 $40,502 $2,246,648 $(1,367,224)
Exercise of Stock
Options 35,000 350 4,025 --
Net Income for 1994 - - - 87,119
Balances,
December 31, 1994 3,957,051 40,852 2,250,673 (1,280,105)
Exercise of Stock
Options 268,800 2,688 30,912 --
Net Income for 1995 - - - 21,004
Balances,
December 31, 1995 4,225,851 43,540 2,281,585 (1,259,101)
Net Income for 1996 - - 769,757 769,757
Balances,
Totals 4,225,851 $ 43,540 $2,281,585 $ (489,344)
<FN> See Accompanying Notes to Financial Statements
</TABLE>
<PAGE>
<TABLE>
SUTRON CORPORTION
STATEMENTS OF CASH FLOWS <CAPTION> Year Ended December 31,
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Cash Flows from Operating Activities
Net income $769,757 $21,004 $87,119
Noncash items included in net income
Depreciation and amortization 109,596 102,369 82,813
Gain (loss) on sale of
equipment, net 6,411 (4,478) 42
(Increase) Decrease in
Accounts receivables 324,490 (251,579) 445,291
Costs and estimated earnings
in excess of contract billings
on contracts in progress (262,114) 91,602 72,115
Inventory (1,182,860) 96,089 144,357
Prepaid items and other 10,659 (31,405) (11,068)
Other assets -- -- (475)
Increase (Decrease) in
Accounts payable 306,514 28,350 (154,450)
Accrued expenses 203,315 7,763 (85,766)
Contract billings on contracts in progress
in excess of costs and estimated earnings (29,571) 192,273 --
Estimated losses on
uncompleted contracts (9,798) 3,928 (47,768)
Net Cash Provided by
Operating Activities 246,399 255,916 532,210
Cash Flows from Investing Activities
Purchase of property and
equipment (71,913) (10,157) (66,105)
Capitalized software costs -- (13,270)- (47,700)
Net Cash used by Investing Activities (71,913) (23,427) (113,805)
Cash Flows from Financing Activities
Proceeds from issuance of common stock -- 33,600 4,375
Proceeds from sale of
property and equipment -- -- 2,701
Proceeds from line of
credit, net 170,000 81,000 --
Payments on line of
credit, net -- -- (321,000)
Payments on term notes payable (300,000) (375,000) (300,000)
Advance on term notes payable -- -- 100,000
Payments on installment notes payable (5,405) (2,716)_ --
Payments on stockholder loans payable (10,000) (10,000) --
Proceeds from stockholder loans payable -- -- 100,000
Net Cash Used by
Financing Activities (145,405) (273,116) (413,924)
Net Increase (Decrease)
in Cash and Cash
Equivalents 29,801 (40,627) 4,481
Cash and Cash Equivalents,
beginning of year 49,889 90,516 86,035
Cash and Cash Equivalents,
end of year $78,970 $79,889 $90,516
Schedule of Noncash
Investing and Financing
Activities
Purchase of equipment
through issuance of
installment ntoes payable $ -- $ 31,189 $ --
<FN>
See Accompanying Notes to Financial Statements
</TABLE>
<PAGE>
SUTRON CORPORATION
NOTES TO FINANCIAL STATEMENTS
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business: Sutron Corporation ("the Company") was incorporated
on December 30, 1975 under the General Laws of the Commonwealth
of Virginia. The Company designs and manufactures
environmental monitoring and control systems for use by
government agencies and industry. The Company's products
include sensors, data collection platforms and remote terminal
units with telemetry capability and system and application
software. Sutron's customers include a diversified base of
federal, state and foreign government agencies, universities,
the Department of Defense and hydropower companies.
Revenue Recognition: The Company utilizes the accrual method
of accounting for both financial statement and tax return
reporting purposes. Thus, revenue from manufacturing is
recognized when it is earned, and expenses are recognized when
incurred. Selling, general, and administrative expenses are
charged against periodic income. Revenue from cost-plus-fee
contracts is recognized to the extent of costs incurred, plus a
proportionate amount of fees earned. Revenue from fixed-price
contracts is recognized on the percentage-of-completion method
based on costs incurred in relation to total estimated costs.
Revenue from time-and-materials contracts is recognized to the
extent of billable rates, times hours delivered, plus materials
costs incurred. Contract costs include allocated indirect
costs and general and administrative expenses. Anticipated
losses are recognized as soon as they become known.
Cash and Cash Equivalents: For purposes of the statements of
cash flows, cash equivalents include time deposits, and all highly liquid
debt instruments with original maturities of three months or less.
Interest paid amounted to $160,637 in 1996, $180,523 in 1995, and $193,186
in 1994. Income taxes paid amounted to $162,350 in 1996, $-0- in 1995, and
$1,000 in 1994.
Accounts Receivables: The Company has had no material bad
debts. Because management considers all accounts to be fully
collectible, no provision has been made for accounts that may
not be collected in future periods. Amounts earned on
completed contracts and receivables that have not yet been
billed, are recorded as unbilled receivables.
Property, Plant, and Equipment: Equipment is recorded at cost
and depreciated over estimated useful lives ranging from 3 to 7
years using the straight-line method for financial statement
purposes and the straight-line and accelerated methods for
income tax purposes. Expenditures for maintenance, repairs,
and improvements which do not materially extend the useful
lives of the assets are charged to earnings. When items of
property, plant, and equipment are disposed of, the cost of the
asset and the related accumulated depreciation are removed from
the accounts. Any gain or loss resulting from the removal from
service is taken into the current period earnings.
Investment: Land held for sale is recorded at lower of cost or
net realizable value, based on management's estimate.
Income Taxes: The Company utilizes an asset and liability
approach to accounting for income taxes. The objective is to
recognize the amount of income taxes payable or refundable in
the current year based on the Company's income tax return and
the deferred tax liabilities and assests for the expected
future tax consequences of events that have been recognized in
the Company's financial statements or tax returns.
The asset and liability method accounts for deferred income
taxes by applying enacted statutory rates to temporary
differences, the difference between financial statement amounts
and tax bases of assets and liabilities. The resulting
deferred tax liabilities or assets are classified as current or
noncurrent based on the classification of the related asset or
liability. Deferred income tax liabilities or assets are
adjusted to reflect changes in tax laws or rates in the year of
enactment.
Earnings Per Share: Earnings per average common share is computed
using the weighted average number of common and common
equivalent shares outstanding during the periods. Common equivalent
shares result from the assumed exercise of outstanding stock options
that have a dilutive effect when applying the treasury stock method.
The number of shares used in the computation of income per common
share was 4,356,419 in 1996, 4,018,375 in 1995 and 3,927,676 in
1994.
Financial Instruments: The estimated fair value of cash and cash
equivalents, accounts receivable, accounts payable and accrued
expenses and short term notes receivable and payable approximate
their carrying amounts in the financial statements. Based on the
borrowing rates currently available to the company for debt with
similar maturity dates and collateral, the estimated fair value of long-
term debt is $172,000 at December 31, 1996.
Use of Estimates: The preparation of financial statements in
conformity with generally accepted accounting principles
requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenue
and expenses during the reporting period. Actual results could
vary from the estimates that were used.
(2) CONTRACTS IN PROGRESS
Information with respect to contracts in progress at December
31, is as follows:
1996 1995
Direct and indirect
costs, including overhead $2,162,549 $10,476,091
Estimated losses, net (1,095) (10,893)
Total $2,161,454 $10,465,198
Billings $1,534,215 $10,109,861
Costs and estimated
earnings in excess of
billings 628,334 366,230
Estimated losses on
contracts in process (1,095) (10,893)
Total $2,161,454 $10,465,198
(3) INVENTORY
Inventory is stated at the lower of cost or market. Electronic
components costs are based on the weighted average method.
Work in process and finished goods costs consist of materials,
labor and overhead and are recorded at a standard cost.
Inventory consists of the following at December 31:
1996 1995
Electronic components $702,216 $408,035
Work in process 1,232,440 426,996
Finished goods 200,575 117,340
$2,135,231 $952,371
(4) ACCUMULATED DEPRECIATION AND AMORTIZATION
Accumulated depreciation and amortization at December 31, is as
follows:
1996 1995
Furniture and equipment $1,041,005 $1,199,007
Automotive equipment 24,743 17,817
Leasehold improvements 6,525 4,678
$1,072,273 $1,221,504
(5) INVESTMENT
Land, including related improvements and architectural fees,
which was originally acquired as a future plant site, is now
being held for sale. The total amount presented as investment
consists of land and building design fees of $1,300,311 net of
a valuation allowance of $807,192 in 1996 and 1995.
(6) LINE OF CREDIT
The Company signed a loan and security agreement dated December
11, 1992, with its bank which extends the Company a revolving
line of credit. The maximum amount of borrowing under the line
is not to exceed the lesser of $1,000,000 or the Company's
borrowing base as determined by the bank. Interest on the
unpaid balance is payable monthly at prime plus two percent.
The maturity date of the line is April 30, 1997, and the
outstanding balance at December 31, 1996 amounted to $905,000
and $735,000 in 1995.
(7) TERM NOTE PAYABLE
Under the above referenced loan and security agreement, the Company
was also extended a term note payable with a principal amount of
$2,121,222. The remaining principal payments under the agreement,
amount to $25,000 per month for 18 months and 1 final payment on
July 15, 1998 for the remaining unpaid balance. Interest on the
unpaid balance is payable monthly at prime plus two percent.
Additional principal payments may be due under the agreement if the
Company reaches specified cash flow levels described by the bank.
The above referenced line of credit and term note payable are
secured by substantially all assets of the Company.
Additionally, the loan agreement contains certain restrictive
financial covenants. As of December 31, 1995, the Company was
in violation of certain equity covenants. The bank has waived
compliance. Principal maturities for all indebtedness
described in Notes 6 and 7 are as follows at December 31:
Year ending December 31: 1996 1995
1996 $ -- $1,035,000
1997 1,211,657 300,000
1998 173,769 166,222
1999 5,075
2000 3,789
$1,394,290 $1,501,222
(8) STOCKHOLDER LOANS PAYABLE
At December 31, 1996 the Company had promissory notes totaling
$80,000 payable on demand to two officers of the Company.
The promissory notes are expected to be repaid in 1997 with
interest at 10.75 percent.
(9) LEASE OBLIGATIONS
The Company entered into a lease on October 23, 1992 for its
headquarters and production facilities. The 5.5-year operating
lease calls for monthly rent of $12,021, including $3,090
estimated as the Company's pro rata share of operating
expenses, and annual rent increases of 3%. Rent expense
amounted to $144,258 for 1996, $151,125 for 1995, and $134,000
for 1994. The following is a schedule, by years, of future
payments due:
Year ending December 31: 1996 1995
1996 135,517
1997 147,473 138,756
1998 36,063 35,310
$183,536 $327,041
(10) INCOME TAXES
The provision for income taxes charged to continuing operations
for the years ended December 31, was as follows:
1996 1995 1994
Current income taxes $141,929 $0 $1,000
Deferred tax expense 0 0 0
Total tax expense $141,929 $0 $1,000
Deferred tax assets, net of tax effect, are comprised of the
following at December 31:
1996 1995
Net operating loss carry forward $ - $ 123,000
Investment 307,000 307,000
Estimated losses on contracts - 4,000
Accrued vacation 29,000 29,000
Gross deferred tax assets 336,000 463,000
Depreciation (23,000) (25,000)
Gross deferred tax liability 313,000 (25,000)
Deferred tax asset valuation allowance (313,000) (438,000)
Net deferred tax asset $ - $ -
A reconciliation between the amount of reported income tax
expense and the amount computed by multiplying the applicable
statutory Federal income tax rate is as follows:
1996 1995 1994
Income before income taxes $911,686 $21,005 $87,119
Applicable statutory income tax rate 34% 34% 34%
Computed "expected" Federal tax expenses 310,000 7,000 30,000
Adjustments to Federal incometax resulting from:
State income tax 18,000 1,000 6,000
Tax Credits (61,071) - -
Change in valuation allowance (125,000) (8,000) (35,000)
Provision for Income Taxes $141,929 $ - $ 1,000
(11) MAJOR CUSTOMERS
Set forth below are customers, including agencies of the U. S.
Government, from which the Company received more than 10
percent of total revenue, for the years ended December 31:
1996 1995 1994
Domestic:
Department of Defense 6% 9% 10%
Department of Interior 39% 56% 35%
Army Corp. of Engineer's 7% 9% 15%
International 35% 14% 22%
(12) STOCK BONUS AND STOCK OPTION PLANS
Stock Bonus Plan: A Company stock bonus plan rewards Company
employees rendering extraordinary services to the Company.
These shares are subject to restrictions upon transfer for
periods of time varying from a few months for grants of 25 or
fewer shares to four to ten years for larger grants. The
Company has a thirty-day option to purchase the restricted shares on the
employee's termination at a price equal to 50 percent of the market
value on the termination date.
Stock Options: The Company has granted stock options under a stock
option agreement and the 1996 Stock Option Plan to key employees
and directors for valuable services to the Company. Under the 1996
Plan a maximum of 260,000 shares may be granted at not less than
100 percent of the fair market value at the grant date. All options
have a ten year term from the date of grant. The following
summarizes the option activity under the stock option agreement and
the 1996 Stock Option Plan for the last three years.
Number of Shares Option Price
Per Share
Outstanding, December 31, 1993 443,500 $.125 - .53
Grants
Exercised (35,000) .125
Canceled or expired
Outstanding, December 31, 1994 408,500 .125 - .53
Grants
Exercised (268,800) .125
Canceled or expired (22,200) .125
Outstanding, December 31, 1995 117,500 .53
Grants 259,000 1.125
Exercised
Canceled or expired
Outstanding, December 31, 1996 376,500 $.53 - 1.125
The vesting period of the remaining options is as follows:
Vested and exercisable 94,000
December 6, 1997 23,500
November 1, 1997 51,800
November 1, 1998 51,800
November 1, 1999 51,800
November 1, 2000 51,800
November 1, 2001 51,800
376,500
In February, 1997, the Board of Directors granted options for an
additional 275,000 shares to key employees and officers under a 1997
stock option plan. The shares have an option price of $1.31, a five
year vesting period, and a ten year term.
Stock Compensation
In 1996, the Company adopted the disclosure-only provisions of
Statement of Financial Accounting Standards No. 123, Accounting for
Stock-Based Compensation and will continue to apply Accounting
Principles Board No. 25 and related interpretations in accounting for
its plans. SFAS 123 establishes standards of financial accounting and
reporting for stock-based employee compensation plans including
stock option plans, stock purchase plans and other arrangements by
which employees receive shares of stock or other equity instruments
based on the market price of an entity's stock.
If the Company had elected to recognize compensation cost for the
plan based on the fair value at the grant dates for awards under those
plans, consistent with the method prescribed by SFAS No. 123, net
income and earnings per share would have been changed to the pro
forma amounts indicated below:
Year ended
December 31, 1996
Net Income As reported $769,757
Pro forma $737,218
Earnings per share As reported $ .18
Pro forma $ .17
The fair value of the options granted in 1996 amounted to $120,000.
The fair value of Sutron Corporation stock options used to compute
pro forma net income and earnings per share disclosures is the
estimated present value at grant date using the Black Scholes pricing
model with the following assumptions for 1996: a risk free interest
rate of 6.45 percent, no estimated dividend yield, an expected volatility
of 34 percent and an expected holding period of five years.
(13) PROFIT SHARING PLAN
The 401(k) Profit Sharing plan covers substantially all full
time employees. The contributions, if any, to the plan will be
determined each year by the Board of Directors based on
profits. The contribution was $92,660 for 1996, $-0-for 1995
and 1994.
(14) EXPORT SALES
Export Sales from the Company's operations were as follows:
(In thousands) 1995 1994 1993
South America $1,844 $480 $186
Canada 765 43 84
Asia 321 108 671
Other 75 117 217
Australia 9 9 15
Mexico - 1 69
$3,014 $758 $1,242
<PAGE>
Item 8. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
None
PART III
Information required by Item 10 - Executive Compensation, Item
11 - Security Ownership of Certain Beneficial Owners and
Management and Item 12 - Certain Relationships and Related
Transactions and certain information required by Item 9 -
Directors, Executive Officers, Promoters and Control Persons
will be contained on pages 2 through 8 of the registrant's
definitive proxy statement to be filed on April 11, 1997 and is
incorporated herein by reference.
Item 9. Directors, Executive Officers, Promoters and Control
Persons
Executive Officers
The following tabulation sets forth the names of the executive
officers at December 31, 1996, the positions and offices with
the Company held by them, the date they first became officers,
and their ages at December 31, 1996:
First
Became
Name Office an Officer Age
Raul S. McQuivey President, Chief Executive 1980 57
Officer and Chairman
Thomas N. Keefer Vice President and a Director 1981 52
Daniel W. Farrell Vice President, Secretary 1984 44
and a Director
Glenn A. Conover Vice President and a Director 1985 57
Sidney C. Hooper Treasurer 1993 38
Item 13. Exhibits and Reports on Form 8-K.
(A) Index to Exhibits
Exhibit No. Description
3(a) Copy of Articles of Incorporation of Sutron Corporation,
received and approved December 30, 1975 (1)
3(b) Copy of Articles of Amendment to the Articles of
Incorporation and Articles of Reduction of Stated
Capital of Sutron Corporation received and approved
September 7, 1983(1)
3(c) By-laws of the Registrant(1)
3(d) Copy of Articles of Amendment to the Articles of
Incorporation received and approved June 8, 1995(10)
4(a) Specimen Shares of Common Stock Certificate(2)
4(b) Form of Warrant to be issued as part of Unit (2)
4(c) Amended Form of Warrant issued as part of Unit(3)
4(d) Incentive Stock Option Plan dated August 31, 1983(1)
4(e) Stock Bonus Plan dated August 31, 1983(1)
4(f) Loan and Security Agreement, dated December 11, 1992
between the Company and Crestar Bank (8)
4(g) 1996 Stock Option Plan (11)
10(a) Employment Agreement dated as of July 1, 1983 with
Kenneth W. Whitt(1)
10(b) Employment Agreement dated as of July 1, 1983 with
Dr.
Raul S. McQuivey(1)
10(c) Employment Agreement dated as of July 1, 1983 with
Dr.
Thomas N. Keefer(1)
10(d) Employment Agreement dated as of July 1, 1983 with
Duane
M. Preble(1)
10(e) Purchase Agreement dated as of July 1, 1983 with Eric
S.
Clyde(1)
10(f) Stock Option Agreement between Registrant and Gerald
Calhoun dated July 1, 1983(1)
10(g) Certified Copy of Resolution of Commissioners of
Fairfax
County Economic Development Authority, adopted October 12,
1982, approving $425,000 Industrial revenue bond loan
to registrant(1)
10(h) Certified Copy of Resolution of Commissioners of
Fairfax County Economic Development Authority, adopted
March 8, 1983, approving $400,000 industrial revenue
bond loan to registrant (1)
10(i) Certified Copy of Resolution of Board of Supervisors
of Fairfax County, adopted March 21, 1983, approving
issuance of industrial revenue bonds for purpose of
$400,000 loan to Registrant(1)
10(j) License agreement dated January 29, 1987, with TSUKASA
SOKKEN Co., Ltd. of Japan, to use U.S. Patent No.
3,677,085 (4)
10(k) License agreement dated November 10, 1986, with S.A.
Des Caliberies et Trefileries de Cossonay of
Switzerland, to use U.S. Patent No. 4,279,147 and
Canada Patent No. 1,120,286 (4)
10(l) Lease agreement dated September 18, 1987, with Squire
Court Limited Partnership to lease building space
(9,000 sq. ft.) (4)
10(m) Copy of termination agreement with Duane Preble dated April 1, 1988 (5)
10(n) Sale agreement with National Hospital Health System
Corporation, dated November 29, 1989, and subsequent
amendments dated December 29, 1989, February 28, 1990,
and March 27, 1990, to sell land and building in
Herndon, Virginia (6)
10(o) Lease agreement dated May 9, 1990 with National
Hospital Health SystemCorporation to lease building
space (5545 sq.ft.) (7)
10(p) Stock Option Agreement between Sutron Corporation and
Glenn A. Conover dated October 15, 1990 (7)
10(q) Stock Option Agreement between Sutron Corporation and
Daniel W. Farrell dated October 15, 1990 (7)
10(r) Lease agreement dated July 30, 1992 with Loudoun
Holding Inc. to lease building space (16,794 sq. ft.)
(8)
10(s) Stock Option Agreement between Sutron Corporation and
Ronald C. Dodson dated December 6, 1993 (9)
10(t) Stock Option Agreement between Sutron Corporation and
Raul S. McQuivey dated November 1, 1996 (11)
10(u) Stock Option Agreement between Sutron Corporation and
Glenn A. Conover dated November 1, 1996 (11)
10(v) Stock Option Agreement between Sutron Corporation and
Daniel W. Farrell dated November 1, 1996 (11)
10(w) Stock Option Agreement between Sutron Corporation and
Sidney C. Hooper November 1, 1996 (11)
(1) Filed as Exhibits to Registrant's Registration Statement on Form
S-18 (File No. 2-86573-W) dated September 16, 1983, and
incorporated herein by reference.
(2) Filed as Exhibits to Amendment No. 1 to Registrant's Registration
Statement on Form S-18 (File No. 2-86573-W) dated October 26,
2983, and incorporated herein by reference.
(3) Filed as Exhibits to Amendment No. 2 to Registrant's Registration
Statement on form S-18 (File No. 2-896573-W) dated November 4,
1983 and incorporated herein by reference.
(4) Filed as Exhibits to Registrant's Annual Report on Form 10-K for
the year ended December 31, 1987, and incorporated herein by
reference.
(5) Filed as Exhibit on Form 8-K dated April 1, 1990, and
incorporated herein by reference.
(6) Filed as Exhibits to Registrant's Annual Report on Form 10-K for
the year ended December 31, 1989, and incorporated herein by
reference.
(7) Filed as Exhibits to Registrant's Annual Report on Form 10-K for
the year ended December 31, 1990 and incorporated herein by
reference.
(8) Filed as Exhibits to Registrants Annual Report on Form 10-KSB
for the year ended December 31, 1992 and incorporated herein by
reference.
(9) Filed as Exhibits to Registrants Annual Report on Form 10-KSB
for the year ended December 31, 1993 and incorporated herein by
reference.
(10) Filed as Exhibits to Registrants Annual Report on Form 10-KSB
for the year ended December 31, 1995 and incorporated herein by
reference.
(11) Filed as Exhibits to Registrants Annual Report on Form 10-KSB
for the year ended December 31, 1996 and incorporated herein by
reference.
(B) Reports on Form 8-K
The registrant did not file any reports on Form 8-K during the fourth
quarter of the fiscal year ended December 31, 1996.
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
Sutron Corporation
(Registrant)
Date: March 31, 1997
By
/s/ Raul S. McQuivey
Raul S. McQuviey, President
and Director (Principal
Executive and Financial
Officer)
In accordance with the Securities Exchange Act, this report has been signed
by the following persons on behalf of the Registrant and in the capacities
and on the dates indicated.
Date: March 31, 1997
By
/s/ Raul S. McQuivey
Raul S. McQuivey,
President
and Director
(Principal
Executive and
Financial
Officer)
Date: March 31, 1997
By
/s/ Thomas N. Keefer
Thomas N. Keefer,
Vice
President and
Director
Date: March 31, 1997
By
/s/ Daniel W. Farrell
Daniel W. Farrell,
Vice
President and
Director
Date: March 31, 1997
By
/s/ Glenn A. Conover
Glenn A. Conover,
Vice
President and
Director
Date: March 31, 1997
By
/s/ Ronald C. Dodson
Ronald C. Dodson
Director
Date: March 31, 1997
By
/s/ Sidney C. Hooper
Sidney C. Hooper,
Chief
Accounting Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Article 5 Fin. Data Schedule for fiscal ended DEC-31-96
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 78970
<SECURITIES> 0
<RECEIVABLES> 1195281
<ALLOWANCES> 0
<INVENTORY> 2135231
<CURRENT-ASSETS> 4099404
<PP&E> 1255268
<DEPRECIATION> 1072273
<TOTAL-ASSETS> 4826457
<CURRENT-LIABILITIES> 2808043
<BONDS> 0
<COMMON> 43540
0
0
<OTHER-SE> 1792241
<TOTAL-LIABILITY-AND-EQUITY> 4826457
<SALES> 8689068
<TOTAL-REVENUES> 8689068
<CGS> 5216018
<TOTAL-COSTS> 5216018
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 162848
<INCOME-PRETAX> 911686
<INCOME-TAX> 141929
<INCOME-CONTINUING> 769757
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 769757
<EPS-PRIMARY> .018
<EPS-DILUTED> .018
</TABLE>
SUTRON CORPORATION
1996 STOCK OPTION PLAN
1. Purpose. The Plan is intended to promote the interests of the Company
by providing a method whereby officers and key employees who have
provided and are expected in the future to provide valuable services to
the Company may be given the opportunity to acquire an ownership interest
in the Company and benefit from increases in the value of the Stock.
The purpose of the Plan is to set forth terms and conditions applicable
to the Options granted hereunder and to the shares of Stock issuable
upon exercise of such Options.
Options granted pursuant to the Plan shall be Non-Qualified Stock
Options. The proceeds received by the Company from the sale of
Stock pursuant to exercise of the Options shall be used for general
corporate purposes.
2. Definitions. In addition to terms defined elsewhere in the
Plan, the following terms are defined as set forth below:
2.1 "Board" means the Board of Directors of the Company.
2.2 "Change of Control" means a transaction or event in which,
after the effective date of the Plan, (a) the Company shall merge or
consolidate with any other corporation and shall not be the surviving
corporation; (b) the Company shall transfer all or substantially all of
its assets to another person; or (c) any person shall have become the
beneficial owner of more than fifty percent (50%) of the voting power
of the Company's outstanding voting securities.
2.3 "Code" means the Internal Revenue Code of 1986, as
amended from time to time. References to any provision of the Code
include regulations promulgated thereunder and successor provisions
and regulations thereto.
2.4 "Company" means Sutron Corporation, a Virginia
corporation.
2.5 "Date of Grant" means, with respect to any Option, the date
on which an Option was granted as specified in the corresponding
Option Agreement.
2.6 "Disability" shall mean the inability of an individual to fulfill
his or her responsibilities to the Company by reason of any medically
determinable physical or mental impairment and shall be determined
by the Board on the basis of such medical evidence as the Board deems
warranted under the circumstances.
2.7 "Exchange Act" means the Securities Exchange Act of 1934,
as amended. References to any provision of the Exchange Act include
rules promulgated thereunder and successor provisions and rules
thereto.
2.8 "Exercise Price" means, for each share of Stock subject to an
Option, the Fair Market Value, determined as of the date of grant of
such Option.
2.9 "Fair Market Value" of the Stock means, as of any given
date, the closing sales price of a share of Stock reported on the
NASDAQ over-the-counter market for such date or, if no such closing
price was reported for such date, for the most recent trading day prior
to such date for which such closing price was reported.
2.10 "Non-Qualified Stock Option" means a stock option that is
not intended to meet the requirements of Section 422 of the Code.
2.11 "Option" means the right granted under this Plan to purchase
a specified number of shares of Stock, at the specified exercise price
and for a specified period of time under the Plan. All Options will be
Non-qualified Stock Options.
2.12 "Option Agreement" means a written agreement between the
Company and an Optionee evidencing the terms and conditions of the
grant of an Option. Each Option Agreement shall be subject to the
terms and conditions of the Plan.
2.13 "Optionee" means the officer or key employee of the
Company who is granted an Option under the Plan.
2.14 "Plan" means this Sutron Corporation 1996 Stock Option
Plan.
2.15 "Rule 16b-3" means Rule 16b-3 promulgated under the
Exchange Act or any successor to such rule.
2.16 "Stock" means the Common Stock, $0.01 par value per share,
of the Company.
3. Shares Available under the Plan.
3.1 Maximum Shares Available. The Stock issuable pursuant to
the exercise of Options granted under the Plan shall consist of shares
of the Company's authorized but unissued or reacquired Stock. The
maximum number of Shares which may be issued over the term of the
Plan shall be two hundred sixty thousand (260,000), subject to
adjustment from time to time in accordance with the provisions of
Section 3.2 hereof. Shares subject to outstanding Options shall be
available for subsequent issuance under the Plan to the extent that
such Options expire or terminate for any reason prior to their exercise
in full.
3.2 Adjustments Upon Certain Events. In the event that any
change is made to the Stock issuable under the Plan by reason of stock
split, stock dividend, recapitalization, combination of shares, exchange
of shares, repurchase, merger, consolidation, spin-off or other change
affecting the outstanding Stock as a class, the Board shall make
appropriate adjustments to the maximum number of shares and/or
class of shares, and the number of shares and/or class of shares and the
exercise price per share in effect under each outstanding Option, in
order to prevent the dilution or enlargement of benefits thereunder.
Any adjustments made by the Board pursuant to this Section 3.2 shall
be final, binding and conclusive. Neither the existence nor the terms
of this Plan, nor the grant of any Options hereunder, shall affect the
right or power of the Company to make any adjustments,
reorganizations, reclassifications or other changes to its capital
structure or to merge, consolidate, dissolve, liquidate, sell or transfer
any or all of its assets or otherwise change its business structure.
Except as expressly provided above, the issuance by the Company of
shares of stock of any class, for cash or property, or for labor or
services, either upon direct sale or upon the exercise of rights,
warrants or options to subscribe therefor, or upon conversions of
shares or obligations of the Company convertible into such shares or
other securities, shall not affect the number, class or exercise price of
shares of Stock then subject to an Option, and no adjustment shall be
made by reason thereof.
4. Administration of the Plan. The Plan shall be administered
by the Board. All actions taken by the Board shall be taken by a
majority of its members. The Board shall have the full power and
authority, subject to the specific provisions of the Plan, to establish
such rules and regulations as it may deem appropriate for proper
administration of the Plan, and to make such determinations under,
and issue such interpretations of, the Plan as it may deem necessary or
advisable. Decisions of the Board shall be final and binding on all
parties who have an interest in the Plan or any outstanding Option.
Any action may be taken by a written instrument signed by a majority
of the members of the Board.
The Board may designate any officer of the Company to assist it in the
administration of the Plan and may grant authority to any such officer
to execute agreements or other documents and otherwise take action
on behalf of the Board. The Board may employ legal counsel and
other professional advisors as it may deem desirable for the
administration of the Plan and may rely on any opinion received from
such counsel or advisors.
5. Eligibility. Officers and key employee of the Company, as
selected by the Board, are eligible to participate in the Plan.
6. Options.
6.1 Grants of Options. The Board, in its sole discretion, will
designate each individual to whom an Option is to be granted and will
specify the number of shares covered by such Option. In making such
awards, the Board may consider, among other factors, the
recommendations of the Company's President and Chief Executive
Officer.
6.2 Option Exercise Price. The exercise price per share for Stock
that may be purchased upon the exercise of an Option shall be
determined by the Board on the date of grant of such Option and shall
be equal to Fair Market Value on the date of grant of the Option.
6.3 Option Exercise Period. The period in which an Option may
be exercised shall be determined by the Board on the date of grant of
the Option, except that no Option shall be exercisable after the
expiration of ten (10) years from the date of grant of the Option. In
the event of (a) the termination of the Optionee's employment with the
Company for reasons other than a Disability; (b) the termination of the
Optionee's employment with the Company due to a Disability; or (c)
the death of the Optionee, the provisions of Section 7 hereof will
govern the Option Exercise Period.
6.4 Vesting of Option. Each Option shall become cumulatively
exercisable as to twenty percent (20%) of the shares of Stock subject to
such Option on each anniversary of the date of grant of the Option;
provided, however, that an Option will become immediately
exercisable in full at the time of a Change of Control of the Company.
6.5 Restrictions on Transfer of Option. Any Option granted
under the Plan shall be exercisable during the Optionee's lifetime only
by the Optionee and shall not be assignable or transferable other than
by will or by the laws of descent and distribution following the
Optionee's death.
6.6 Manner of Exercise. Subject to the provisions of the Plan and
the applicable Option Agreement, an Option may be exercised in
whole at any time and in part from time to time at such times and
upon such other terms and conditions as the Board shall determine. A
partial exercise of an Option shall not affect the right to exercise the
Option from time to time in accordance with the Plan and the
applicable Option Agreement with respect to the remaining shares of
Stock subject to the Option. In order to exercise an Option, an
Optionee must give notice of exercise to the Secretary of the Company,
specifying the Option to be exercised, the number of shares of Stock to
be purchased pursuant to such exercise, and must be accompanied by
payment in full for such shares. Payment shall be made in cash or
check payable to the Company for the full amount of the purchase
price, unless otherwise provided in the Option Agreement.
7. Effect of Termination of Employment, Disability or Death.
Except to the extent otherwise provided pursuant to Section 7.4 below,
the following provisions shall govern the exercise of any Options held
by an Optionee at the time the Optionee ceases to be an employee of
the Company, suffers a Disability, or dies.
7.1 Termination of Employment. In the event that the Optionee
ceases to be an employee of the Company for any reason other than
Disability or death, then the period during which each outstanding
Option held by such Optionee is to remain exercisable shall be limited
to the ninety (90) day period following the date of termination of
employment. Under no circumstances, however, shall any such
Option be exercisable after the specified expiration date of the Option
term. Any outstanding Option may not be exercised in the aggregate
for more than the number of vested shares for which the Option is
exercisable on the date of the termination of employment, and such
Option shall terminate and cease to be outstanding with respect to any
Option shares for which the Option is not at that time exercisable or in
which the Optionee is not otherwise at that time vested.
7.2 Disability. In the event that the Optionee ceases to be an
employee of the Company by reason of a Disability, then the period
during which each outstanding Option held by such Optionee is to
remain exercisable shall be limited to a period of one (1) year
following the date of termination of employment due to Disability.
Under no circumstances, however, shall any such Option be
exercisable after the specified expiration date of the Option term as set
forth in the Option Agreement. Any outstanding Option may not be
exercised in the aggregate for more than the number of vested shares
for which the Option is exercisable on the date of the termination of
employment due to Disability, and such Option shall terminate and
cease to be outstanding with respect to any Option shares for which the
Option is not at that time exercisable or in which the Optionee is not
otherwise at that time vested.
7.3 Death. In the event that the Optionee dies while holding one
or more outstanding Options, then the period during which each
outstanding Option held by such Optionee is to remain exercisable
shall be limited to a period of one (1) year following the date of the
Optionee's death. During such limited period, the Option may be
exercised by the personal representative of the Optionee's estate or by
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. Under no circumstances, however, shall any such Option
be exercisable after the specified expiration date of the Option term.
Any outstanding Option may not be exercised in the aggregate for
more than the number of vested shares for which the Option is
exercisable on the date of the death of the Optionee, and such Option
shall terminate and cease to be outstanding with respect to any Option
shares for which the Option is not at that time exercisable or in which
the Optionee is not otherwise at that time vested.
7.4 Extensions. The Board shall have full power and authority to
extend the period of time for which the Option is to remain exercisable
under the circumstances set forth in Sections 7.1, 7.2 and 7.3 above to
such greater period of time as the Board shall deem appropriate;
provided, however, that in no event shall such Option be exercisable
after the specified expiration date of the Option as set forth in the
Option Agreement.
8. Changes and Amendments to the Plan. The Board shall have
complete and exclusive power and authority to amend or modify the
Plan in any respect, provided, however, that no such amendment or
modification shall adversely affect the rights and obligations of an
Optionee with respect to any Options at the time outstanding under the
Plan without the consent of such Optionee. Any such amendment or
modification will be subject to the approval of the Company's
shareholders at or before the next annual meeting of shareholders for
which the record date is after the date of such Board action if such
shareholder approval is required by any federal or state law or
regulation or the rules of any stock exchange or automated quotation
system. The Board, in its sole discretion, may also seek shareholder
approval of amendments or modifications to the Plan that are not
required to be submitted for shareholder approval under any federal or
state law or regulation or the rules of any stock exchange or automated
quotation system, if it deems such shareholder approval to be
desirable.
9. General Provisions.
9.1 Agreements. The grant of any Option shall be effected by the
execution of an Option Agreement by and between the Company and
each Optionee. Each Option Agreement shall be a binding contract
between the Company and the Optionee, shall incorporate the terms of
the Plan, and shall specify the particular terms and condition of the
Option, including the number of shares of Stock subject to the Option.
9.2 Compliance with Laws and Obligations. The implementation
of the Plan, the granting of Options under the Plan, and the issuance
of Stock upon the exercise of any Option shall be subject to the
Company's procurement of all required regulatory approvals relating
to the Plan, the Options and shares of Stock issuable pursuant to
exercise of such Options. Certificates representing shares of Stock
issued pursuant to the exercise of Options granted under the Plan will
be subject to such stop-transfer orders and other restrictions as may be
applicable under federal and state laws, regulations and rules, or the
requirements of any securities exchange or automated quotation
system, including the requirement that a legend or legends be placed
on such certificates.
The Company shall not be required to sell or issue shares of its Stock
under any Option if the sale or issuance would constitute a violation by
the Optionee or the Company of any provisions of any state or federal
law, rule or regulation. In addition, in connection with the Securities
Act of 1933, as amended, upon exercise of any Option, the Company
shall not be required to issue such shares of Stock unless the Company
has received evidence satisfactory to it to the effect that the Optionee
will not transfer such shares except pursuant to a registration
statement in effect under the Securities Act of 1933, or unless an
opinion of counsel to the Company has been received to the effect that
such registration is not required.
The Corporation may, but shall in no event be obligated to, register
any securities covered hereby pursuant to the Securities Act of 1933;
and in the event any shares are so registered, the Company may, in its
discretion, remove any legend on certificates representing such shares
of Stock. The Company shall not be obligated to take any other
affirmative action in order to cause the exercise of the Option or the
issuance of shares of Stock pursuant thereto to comply with any state
or federal law or regulation.
9.3 Compliance with Section 16 of the Exchange Act. The Board
shall implement transactions under the Plan and administer the Plan
in a manner that will ensure that each transaction involving an
Optionee (other than a sale of shares acquired through the exercise of
an Option) is exempt from liability under Rule 16b-3, except that an
Optionee may be permitted to engage in a non-exempt transaction
under the Plan if written notice is given to the Optionee regarding the
non-exempt nature of such transaction.
9.4 No Shareholder Rights Conferred. An Optionee shall have
no rights as a shareholder with respect to the shares of Stock subject to
an Option until the date of issuance of stock certificates for such Stock
to the Optionee.
9.5 Nonexclusivity of the Plan. The adoption of the Plan by the
Board shall not be construed as creating any limitations on the power
of the Board to adopt such other compensation and incentive plans as
it may deem desirable.
9.6 Governing Law. The validity, construction and effect of the
Plan and any agreement hereunder shall be determined in accordance
with the laws of the Commonwealth of Virginia, without giving effect
to principles of conflicts of laws, and applicable federal law.
9.7 Withholding. The Company's obligation to deliver shares of
Stock upon the exercise of any Options granted hereunder the Plan
shall be subject to the satisfaction of all applicable federal, state and
local tax withholding requirements.
9.8 No Employment. Nothing in this Plan, including the
granting of any Option shall impose upon the Company any obligation
to employ the Optionee. The right of the Company to terminate the
employment of the Optionee shall not be diminished or affected by
reason of the fact that an Option has been granted hereunder to the
Optionee.
9.9 Investment Purpose. The Optionee agrees that any shares of
Stock subject to the Option granted under the Plan will be acquired for
investment and not with any present intention to resell the same, and
the Optionee further agrees to confirm such intention by an
appropriate written assurances and certificates at the time of
exercising an Option or any portion thereof.
10. Effective Date of Plan; Termination.
10.1 Effective Date. The Plan shall become effective upon its
adoption by the Board.
10.2 Termination. Unless earlier terminated by the action of the
Board, the Plan shall remain in effect until such time as no shares of
Stock remain available for issuance under the Plan and the Company
and Optionees have no further rights or obligations under the Plan.
SUTRON CORPORATION
STOCK OPTION AGREEMENT
(Non-qualified Stock Option)
THIS STOCK OPTION AGREEMENT (the "Agreement") is made
and entered into as of the first day of November, 1996, by and between
Sutron Corporation, a Virginia corporation (the "Company"), and Raul
S. McQuivey (the "Optionee").
WHEREAS, the Board of Directors of the Company (the "Board") has
adopted and approved that certain Sutron Corporation 1996 Stock
Option Plan (the "Plan"), a copy of which has been provided to the
Optionee and which is incorporated by reference herein; and
WHEREAS, pursuant to and in accordance with the provisions of the
Plan, the Board has determined that the Optionee is eligible to be
granted an option (the "Option") to acquire shares of the Company's
Common Stock, $0.01 par value per share (the "Stock"); and
WHEREAS, Options granted under the Plan are not intended or
designed to qualify for Federal income tax treatment as incentive stock
options under Section 422 of the Internal Revenue Code of 1986 (the
"Code"); and
WHEREAS, the Optionee desires to be granted Options under the
Plan; and
WHEREAS, the Corporation and the Optionee desire to set forth
herein the terms of such Options.
NOW, THEREFORE, in consideration of the foregoing, of the mutual
covenants set forth herein, and of other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Grant of Option. The Company hereby grants to the
Optionee the right and option to purchase 93,600 shares of Stock,
subject to and in accordance with the terms and conditions set forth in
the Plan and in this Agreement.
2. Exercise Price. The Exercise Price to be paid for each share
of Stock to be acquired upon exercise of the Option granted hereunder
is $1.125. Such Exercise Price is equal to the Fair Market Value (as
defined in the Plan) of the Stock as of the date of grant of the Option.
3. Transferability. The Option granted hereunder shall be
exercisable during the Optionee's lifetime only by the Optionee and
shall not be assignable or transferable other than by will or by the laws
of descent and distribution following the Optionee's death.
4. Exercise Terms; Vesting; Procedure.
(a) Except as provided in Section 6 hereof, the Option may be
exercised in whole or in part in accordance with the vesting schedule
set forth in Section 5 hereof, provided, however, that the Option shall
not be exercisable after the expiration of ten (10) years from the date
of grant of the Option.
(b) In order to exercise the Option granted hereunder, the
Optionee shall deliver to the Secretary of the Company written notice
stating the Optionee's intent to exercise the Option, which notice shall
specify:
(i) the name of the Optionee;
(ii) the Option to be exercised;
(iii) the number of shares of Stock to be purchased pursuant to
such exercise; and
(iv) the address to which certificates representing the shares of
Stock issuable upon exercise of the Option are to be mailed.
(c) The Optionee's written notice shall be accompanied by a
certified check payable to the Company in the amount of the product
of the Exercise Price times the number of shares with respect to which
the Option is being exercised. The notice and payment shall be
delivered in person or sent by registered mail, return receipt requested,
to the Secretary of the Company. The Option shall be considered
exercised on the date the notice and payment are delivered to the
Secretary or deposited in the mail, as the case may be. As promptly as
practicable after the Secretary's receipt of the notice of exercise and
payment, and the receipt of any certificates from the Optionee required
by the Company pursuant to Sections 8 and 9 hereof, the Company
shall deliver to the Optionee a certificate or certificates for the number
of shares of Stock with respect to which the Option has been exercised.
5. Vesting. Each Option shall vest and become cumulatively
exercisable as to twenty percent (20%) of the shares of Stock subject to
such Option on each anniversary of the date of grant of the Option;
provided, however, that the Option shall become immediately
exercisable in full at the time of a Change of Control of the Company.
6. Effect of Termination of Employment, Disability or Death.
The following provisions shall govern the exercise of any Options held
by an Optionee at the time the Optionee ceases to be an employee of
the Company, suffers a Disability, or dies.
6.1 Termination of Employment. In the event that the Optionee
ceases to be an employee of the Company for any reason other than
Disability or death, then the period during which each outstanding
Option held by such Optionee is to remain exercisable shall be limited
to the ninety (90) day period following the date of termination of
employment. Under no circumstances, however, shall any such
Option be exercisable after the specified expiration date of the Option
term. Any outstanding Option may not be exercised in the aggregate
for more than the number of vested shares for which the Option is
exercisable on the date of the termination of employment, and such
Option shall terminate and cease to be outstanding with respect to any
Option shares for which the Option is not at that time exercisable or in
which the Optionee is not otherwise at that time vested.
6.2 Disability. In the event that the Optionee ceases to be an
employee of the Company by reason of a Disability, then the period
during which each outstanding Option held by such Optionee is to
remain exercisable shall be limited to a period of one (1) year
following the date of termination of employment due to Disability.
Under no circumstances, however, shall any such Option be
exercisable after the specified expiration date of the Option term as set
forth in the Option Agreement. Any outstanding Option may not be
exercised in the aggregate for more than the number of vested shares
for which the Option is exercisable on the date of the termination of
employment due to Disability, and such Option shall terminate and
cease to be outstanding with respect to any Option shares for which the
Option is not at that time exercisable or in which the Optionee is not
otherwise at that time vested.
6.3 Death. In the event that the Optionee dies while holding one
or more outstanding Options, then the period during which each
outstanding Option held by such Optionee is to remain exercisable
shall be limited to a period of one (1) year following the date of the
Optionee's death. During such limited period, the Option may be
exercised by the personal representative of the Optionee's estate or by
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. Under no circumstances, however, shall any such Option
be exercisable after the specified expiration date of the Option term.
Any outstanding Option may not be exercised in the aggregate for
more than the number of vested shares for which the Option is
exercisable on the date of the death of the Optionee, and such Option
shall terminate and cease to be outstanding with respect to any Option
shares for which the Option is not at that time exercisable or in which
the Optionee is not otherwise at that time vested.
7. Adjustments to Upon Certain Events. In the event that any
change is made to the Stock issuable under the Plan and the Option
granted hereunder by reason of stock split, stock dividend,
recapitalization, combination of shares, exchange of shares,
repurchase, merger, consolidation, spin-off or other change affecting
the outstanding Stock as a class, the Board shall make appropriate
adjustments to the maximum number of shares and/or class of shares,
and the number of shares and/or class of shares and the exercise price
per share in effect under the Option, in order to prevent the dilution or
enlargement of benefits thereunder. Any adjustments made by the
Board pursuant to this Section 7 shall be final, binding and conclusive.
Neither the existence nor the terms of the Plan or this Agreement, nor
the grant of any Option hereunder, shall affect the right or power of
the Company to make any adjustments, reorganizations,
reclassifications or other changes to its capital structure or to merge,
consolidate, dissolve, liquidate, sell or transfer any or all of its assets
or otherwise change its business structure.
Except as expressly provided above, the issuance by the Company of
shares of stock of any class, for cash or property, or for labor or
services, either upon direct sale or upon the exercise of rights,
warrants or options to subscribe therefor, or upon conversions of
shares or obligations of the Company convertible into such shares or
other securities, shall not affect the number, class or exercise price of
shares of Stock then subject to the Option, and no adjustment shall be
made by reason thereof.
8. Requirements of Law. The Company shall not be required to
sell or issue shares of its Stock under the Option if the sale or issuance
would constitute a violation by the Optionee or the Company of any
provisions of any state or federal law, rule or regulation. In addition,
in connection with the Securities Act of 1933, as amended, upon
exercise of the Option, the Company shall not be required to issue
such shares of Stock unless the Company has received evidence
satisfactory to it to the effect that the Optionee will not transfer such
shares except pursuant to a registration statement in effect under the
Securities Act of 1933, as amended, or unless an opinion of counsel to
the Company has been received to the effect that such registration is
not required. Any determination in this regard by the Company shall
be final, binding and conclusive. Certificates representing shares of
Stock issued pursuant to the exercise of the Option will be subject to
such stop-transfer orders and other restrictions as may be applicable
under federal and state laws, regulations and rules, or the requirements
of any securities exchange or automated quotation system. In the event
the shares issuable on exercise of the Option are not registered under
the Securities Act, the Company may imprint the following legend or
any other legend which counsel to the Company considers necessary or
advisable:
"The shares of Stock represented by this certificate have not been
registered under the Securities Act of 1933 or under the securities laws
of any state and may not be sold or transferred except upon such
registration or upon receipt by the Company of an opinion of counsel
satisfactory to the Company that registration is not required for such
sale or transfer."
The Corporation may, but shall in no event be obligated to, register
any securities covered hereby pursuant to the Securities Act of 1933;
and in the event any shares are so registered, the Company may, in its
discretion, remove any legend on certificates representing such shares.
The Company shall not be obligated to take any other affirmative
action in order to cause the exercise of the Option or the issuance of
shares pursuant thereto to comply with any state or federal law or
regulation.
9. Investment Purpose. The Optionee agrees that any shares of
Stock subject to the Option granted hereunder will be acquired for
investment and not with any present intention to resell the same, and
the Optionee further agrees to confirm such intention by an
appropriate written assurances and certificates at the time of
exercising an Option or any portion thereof.
10. Withholding. The Company's obligation to deliver shares of
Stock upon exercise of the Option shall be subject to any and all
applicable federal, state and local tax withholding and reporting
requirements.
11. No Rights as Shareholder. The Optionee shall have no right
as a shareholder with respect to the Stock covered by the Option until
the date of issuance of Stock Certificates for such Stock to the
Optionee.
12. No Employment Obligation. The granting of any Option
shall not impose upon the Company any obligation to employ the
Optionee. The right of the Company to terminate the employment of
the Optionee shall not be diminished or affected by reason of the fact
that an Option has been granted hereunder to the Optionee.
13. General Provisions.
(a) This Agreement shall be binding upon, and shall inure to the
benefit of, the parties hereto and their respective heirs, executors,
administrators, personal representatives, successors and assigns.
(b) This Agreement shall be construed in accordance with, and
shall be governed by, the laws of the Commonwealth of Virginia.
(c) No waiver by any party hereto of any breach of any covenant,
condition or agreement hereof shall be considered to constitute a
waiver of any such covenant, condition or provision, or of any
subsequent breach thereof.
(d) In the event any court of competent jurisdiction shall declare
any portion of this Agreement to be invalid, the remainder of this
Agreement shall not be invalidated thereby, but shall remain in full
force and effect.
(e) Unless otherwise provided in this Agreement, no notice or
other communication which may be or is required or permitted to be
given under this Agreement shall be effective unless the same is in
writing and is either hand delivered or sent by registered or certified
mail, return receipt requested, first-class postage prepaid, (1) if to the
Optionee, to 11211 Lapham Drive, Oakton, Virginia 22124, and (2) if
to the Company, to Sutron Corporation., Attn: Secretary, 21300
Ridgetop Circle, Sterling, VA 20166, or at any other address that may
be given by one party to the other party by notice pursuant to this
paragraph 6(e), with a copy to the law firm of Shulman, Rogers,
Gandal, Pordy & Ecker, P.A., 11921 Rockville Pike, Third Floor,
Rockville, Maryland 20852. Unless otherwise provided in this
Agreement, such notices, or other communications, if sent by
registered or certified mail in accordance with this paragraph 6(e),
shall be deemed to have been given at the time of mailing.
(f) Where the text requires, words in the singular shall be
deemed to include the plural and vice-versa, and words in one gender
shall be deemed to include all genders.
(g) Any headings preceding the text of the sections or sub-
sections in this Agreement are inserted solely for convenience of
reference and shall not constitute a part of this Agreement, nor shall
they affect its meaning, construction or effect.
(h) The Option granted pursuant hereto is not intended or
designed to qualify for federal income tax treatment as an incentive
stock option under Section 422 of the Code.
(i) The Options are subject to all terms, conditions, limitations
and restrictions contained in the Plan, which shall be controlling in
the event of any conflicting or inconsistent provisions between this
Agreement and the Plan.
IN WITNESS WHEREOF, the Company has caused this Agreement to
be executed and sealed by its duly authorized officers, and the
Optionee has executed and sealed this Agreement, all as of the day and
year first above written.
THE COMPANY:
SUTRON CORPORATION
/s/ Glenn A. Conover
Glenn A. Conover
ATTEST
/s/ Daniel W. Farrell
Daniel W. Farrell
Secretary
WITNESS:
/s/ Sidney C. Hooper
Sidney C. Hooper
Treasurer
THE OPTIONEE:
/s/ Raul S. McQuivey
Raul S. McQuivey
THIS STOCK OPTION AGREEMENT (the "Agreement") is made
and entered into as of the first day of November, 1996, by and between
Sutron Corporation, a Virginia corporation (the "Company"),
and Glenn A. Conover (the "Optionee").
WHEREAS, the Board of Directors of the Company (the "Board") has
adopted and approved that certain Sutron Corporation 1996 Stock
Option Plan (the "Plan"), a copy of which has been provided to the
Optionee and which is incorporated by reference herein; and
WHEREAS, pursuant to and in accordance with the provisions of the
Plan, the Board has determined that the Optionee is eligible to be
granted an option (the "Option") to acquire shares of the Company's
Common Stock, $0.01 par value per share (the "Stock"); and
WHEREAS, Options granted under the Plan are not intended or
designed to qualify for Federal income tax treatment as incentive stock
options under Section 422 of the Internal Revenue Code of 1986 (the
"Code"); and
WHEREAS, the Optionee desires to be granted Options under the
Plan; and
WHEREAS, the Corporation and the Optionee desire to set forth
herein the terms of such Options.
NOW, THEREFORE, in consideration of the foregoing, of the mutual
covenants set forth herein, and of other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Grant of Option. The Company hereby grants to the
Optionee the right and option to purchase 60,000 shares of Stock,
subject to and in accordance with the terms and conditions set forth in
the Plan and in this Agreement.
2. Exercise Price. The Exercise Price to be paid for each share
of Stock to be acquired upon exercise of the Option granted hereunder
is $1.125. Such Exercise Price is equal to the Fair Market Value (as
defined in the Plan) of the Stock as of the date of grant of the Option.
3. Transferability. The Option granted hereunder shall be
exercisable during the Optionee's lifetime only by the Optionee and
shall not be assignable or transferable other than by will or by the laws
of descent and distribution following the Optionee's death.
4. Exercise Terms; Vesting; Procedure.
(a) Except as provided in Section 6 hereof, the Option may be
exercised in whole or in part in accordance with the vesting schedule
set forth in Section 5 hereof, provided, however, that the Option shall
not be exercisable after the expiration of ten (10) years from the date
of grant of the Option.
(b) In order to exercise the Option granted hereunder, the
Optionee shall deliver to the Secretary of the Company written notice
stating the Optionee's intent to exercise the Option, which notice shall
specify:
(i) the name of the Optionee;
(ii) the Option to be exercised;
(iii) the number of shares of Stock to be purchased pursuant to
such exercise; and
(iv) the address to which certificates representing the shares of
Stock issuable upon exercise of the Option are to be mailed.
(c) The Optionee's written notice shall be accompanied by a
certified check payable to the Company in the amount of the product
of the Exercise Price times the number of shares with respect to which
the Option is being exercised. The notice and payment shall be
delivered in person or sent by registered mail, return receipt requested,
to the Secretary of the Company. The Option shall be considered
exercised on the date the notice and payment are delivered to the
Secretary or deposited in the mail, as the case may be. As promptly as
practicable after the Secretary's receipt of the notice of exercise and
payment, and the receipt of any certificates from the Optionee required
by the Company pursuant to Sections 8 and 9 hereof, the Company
shall deliver to the Optionee a certificate or certificates for the number
of shares of Stock with respect to which the Option has been exercised.
5. Vesting. Each Option shall vest and become cumulatively
exercisable as to twenty percent (20%) of the shares of Stock subject to
such Option on each anniversary of the date of grant of the Option;
provided, however, that the Option shall become immediately
exercisable in full at the time of a Change of Control of the Company.
6. Effect of Termination of Employment, Disability or Death.
The following provisions shall govern the exercise of any Options held
by an Optionee at the time the Optionee ceases to be an employee of
the Company, suffers a Disability, or dies.
6.1 Termination of Employment. In the event that the Optionee
ceases to be an employee of the Company for any reason other than
Disability or death, then the period during which each outstanding
Option held by such Optionee is to remain exercisable shall be limited
to the ninety (90) day period following the date of termination of
employment. Under no circumstances, however, shall any such
Option be exercisable after the specified expiration date of the Option
term. Any outstanding Option may not be exercised in the aggregate
for more than the number of vested shares for which the Option is
exercisable on the date of the termination of employment, and such
Option shall terminate and cease to be outstanding with respect to any
Option shares for which the Option is not at that time exercisable or in
which the Optionee is not otherwise at that time vested.
6.2 Disability. In the event that the Optionee ceases to be an
employee of the Company by reason of a Disability, then the period
during which each outstanding Option held by such Optionee is to
remain exercisable shall be limited to a period of one (1) year
following the date of termination of employment due to Disability.
Under no circumstances, however, shall any such Option be
exercisable after the specified expiration date of the Option term as set
forth in the Option Agreement. Any outstanding Option may not be
exercised in the aggregate for more than the number of vested shares
for which the Option is exercisable on the date of the termination of
employment due to Disability, and such Option shall terminate and
cease to be outstanding with respect to any Option shares for which the
Option is not at that time exercisable or in which the Optionee is not
otherwise at that time vested.
6.3 Death. In the event that the Optionee dies while holding one
or more outstanding Options, then the period during which each
outstanding Option held by such Optionee is to remain exercisable
shall be limited to a period of one (1) year following the date of the
Optionee's death. During such limited period, the Option may be
exercised by the personal representative of the Optionee's estate or by
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. Under no circumstances, however, shall any such Option
be exercisable after the specified expiration date of the Option term.
Any outstanding Option may not be exercised in the aggregate for
more than the number of vested shares for which the Option is
exercisable on the date of the death of the Optionee, and such Option
shall terminate and cease to be outstanding with respect to any Option
shares for which the Option is not at that time exercisable or in which
the Optionee is not otherwise at that time vested.
7. Adjustments to Upon Certain Events. In the event that any
change is made to the Stock issuable under the Plan and the Option
granted hereunder by reason of stock split, stock dividend,
recapitalization, combination of shares, exchange of shares,
repurchase, merger, consolidation, spin-off or other change affecting
the outstanding Stock as a class, the Board shall make appropriate
adjustments to the maximum number of shares and/or class of shares,
and the number of shares and/or class of shares and the exercise price
per share in effect under the Option, in order to prevent the dilution or
enlargement of benefits thereunder. Any adjustments made by the
Board pursuant to this Section 7 shall be final, binding and conclusive.
Neither the existence nor the terms of the Plan or this Agreement, nor
the grant of any Option hereunder, shall affect the right or power of
the Company to make any adjustments, reorganizations,
reclassifications or other changes to its capital structure or to merge,
consolidate, dissolve, liquidate, sell or transfer any or all of its assets
or otherwise change its business structure.
Except as expressly provided above, the issuance by the Company of
shares of stock of any class, for cash or property, or for labor or
services, either upon direct sale or upon the exercise of rights,
warrants or options to subscribe therefor, or upon conversions of
shares or obligations of the Company convertible into such shares or
other securities, shall not affect the number, class or exercise price of
shares of Stock then subject to the Option, and no adjustment shall be
made by reason thereof.
8. Requirements of Law. The Company shall not be required to
sell or issue shares of its Stock under the Option if the sale or issuance
would constitute a violation by the Optionee or the Company of any
provisions of any state or federal law, rule or regulation. In addition,
in connection with the Securities Act of 1933, as amended, upon
exercise of the Option, the Company shall not be required to issue
such shares of Stock unless the Company has received evidence
satisfactory to it to the effect that the Optionee will not transfer such
shares except pursuant to a registration statement in effect under the
Securities Act of 1933, as amended, or unless an opinion of counsel to
the Company has been received to the effect that such registration is
not required. Any determination in this regard by the Company shall
be final, binding and conclusive. Certificates representing shares of
Stock issued pursuant to the exercise of the Option will be subject to
such stop-transfer orders and other restrictions as may be applicable
under federal and state laws, regulations and rules, or the requirements
of any securities exchange or automated quotation system. In the event
the shares issuable on exercise of the Option are not registered under
the Securities Act, the Company may imprint the following legend or
any other legend which counsel to the Company considers necessary or
advisable:
"The shares of Stock represented by this certificate have not been
registered under the Securities Act of 1933 or under the securities laws
of any state and may not be sold or transferred except upon such
registration or upon receipt by the Company of an opinion of counsel
satisfactory to the Company that registration is not required for such
sale or transfer."
The Corporation may, but shall in no event be obligated to, register
any securities covered hereby pursuant to the Securities Act of 1933;
and in the event any shares are so registered, the Company may, in its
discretion, remove any legend on certificates representing such shares.
The Company shall not be obligated to take any other affirmative
action in order to cause the exercise of the Option or the issuance of
shares pursuant thereto to comply with any state or federal law or
regulation.
9. Investment Purpose. The Optionee agrees that any shares of
Stock subject to the Option granted hereunder will be acquired for
investment and not with any present intention to resell the same, and
the Optionee further agrees to confirm such intention by an
appropriate written assurances and certificates at the time of
exercising an Option or any portion thereof.
10. Withholding. The Company's obligation to deliver shares of
Stock upon exercise of the Option shall be subject to any and all
applicable federal, state and local tax withholding and reporting
requirements.
11. No Rights as Shareholder. The Optionee shall have no right
as a shareholder with respect to the Stock covered by the Option until
the date of issuance of Stock Certificates for such Stock to the
Optionee.
12. No Employment Obligation. The granting of any Option
shall not impose upon the Company any obligation to employ the
Optionee. The right of the Company to terminate the employment of
the Optionee shall not be diminished or affected by reason of the fact
that an Option has been granted hereunder to the Optionee.
13. General Provisions.
(a) This Agreement shall be binding upon, and shall inure to the
benefit of, the parties hereto and their respective heirs, executors,
administrators, personal representatives, successors and assigns.
(b) This Agreement shall be construed in accordance with, and
shall be governed by, the laws of the Commonwealth of Virginia.
(c) No waiver by any party hereto of any breach of any covenant,
condition or agreement hereof shall be considered to constitute a
waiver of any such covenant, condition or provision, or of any
subsequent breach thereof.
(d) In the event any court of competent jurisdiction shall declare
any portion of this Agreement to be invalid, the remainder of this
Agreement shall not be invalidated thereby, but shall remain in full
force and effect.
(e) Unless otherwise provided in this Agreement, no notice or
other communication which may be or is required or permitted to be
given under this Agreement shall be effective unless the same is in
writing and is either hand delivered or sent by registered or certified
mail, return receipt requested, first-class postage prepaid, (1) if to the
Optionee, to 224 Primavera Circle, Sterling, Virginia 20165, and (2)
if to the Company, to Sutron Corporation., Attn: Secretary, 21300
Ridgetop Circle, Sterling, VA 20166, or at any other address that may
be given by one party to the other party by notice pursuant to this
paragraph 6(e), with a copy to the law firm of Shulman, Rogers,
Gandal, Pordy & Ecker, P.A., 11921 Rockville Pike, Third Floor,
Rockville, Maryland 20852. Unless otherwise provided in this
Agreement, such notices, or other communications, if sent by
registered or certified mail in accordance with this paragraph 6(e),
shall be deemed to have been given at the time of mailing.
(f) Where the text requires, words in the singular shall be
deemed to include the plural and vice-versa, and words in one gender
shall be deemed to include all genders.
(g) Any headings preceding the text of the sections or sub-
sections in this Agreement are inserted solely for convenience of
reference and shall not constitute a part of this Agreement, nor shall
they affect its meaning, construction or effect.
(h) The Option granted pursuant hereto is not intended or
designed to qualify for federal income tax treatment as an incentive
stock option under Section 422 of the Code.
(i) The Options are subject to all terms, conditions, limitations
and restrictions contained in the Plan, which shall be controlling in
the event of any conflicting or inconsistent provisions between this
Agreement and the Plan.
IN WITNESS WHEREOF, the Company has caused this Agreement to
be executed and sealed by its duly authorized officers, and the
Optionee has executed and sealed this Agreement, all as of the day and
year first above written.
THE COMPANY:
SUTRON CORPORATION
/s/ Raul S. McQuivey
Raul S. McQuivey
ATTEST
/s/ Daniel W. Farrell
Daniel W. Farrell
Secretary
WITNESS:
/s/ Sidney C. Hooper
Sidney C. Hooper
Treasurer
THE OPTIONEE:
/s/ Glenn A. Conover
Glenn A. Conover
THIS STOCK OPTION AGREEMENT (the "Agreement") is made
and entered into as of the first day of November, 1996, by and between
Sutron Corporation, a Virginia corporation (the "Company"), and
Daniel W. Farrell (the "Optionee").
WHEREAS, the Board of Directors of the Company (the "Board") has
adopted and approved that certain Sutron Corporation 1996 Stock
Option Plan (the "Plan"), a copy of which has been provided to the
Optionee and which is incorporated by reference herein; and
WHEREAS, pursuant to and in accordance with the provisions of the
Plan, the Board has determined that the Optionee is eligible to be
granted an option (the "Option") to acquire shares of the Company's
Common Stock, $0.01 par value per share (the "Stock"); and
WHEREAS, Options granted under the Plan are not intended or
designed to qualify for Federal income tax treatment as incentive stock
options under Section 422 of the Internal Revenue Code of 1986 (the
"Code"); and
WHEREAS, the Optionee desires to be granted Options under the
Plan; and
WHEREAS, the Corporation and the Optionee desire to set forth
herein the terms of such Options.
NOW, THEREFORE, in consideration of the foregoing, of the mutual
covenants set forth herein, and of other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Grant of Option. The Company hereby grants to the
Optionee the right and option to purchase 40,200 shares of Stock,
subject to and in accordance with the terms and conditions set forth in
the Plan and in this Agreement.
2. Exercise Price. The Exercise Price to be paid for each share
of Stock to be acquired upon exercise of the Option granted hereunder
is $1.125. Such Exercise Price is equal to the Fair Market Value (as
defined in the Plan) of the Stock as of the date of grant of the Option.
3. Transferability. The Option granted hereunder shall be
exercisable during the Optionee's lifetime only by the Optionee and
shall not be assignable or transferable other than by will or by the laws
of descent and distribution following the Optionee's death.
4. Exercise Terms; Vesting; Procedure.
(a) Except as provided in Section 6 hereof, the Option may be
exercised in whole or in part in accordance with the vesting schedule
set forth in Section 5 hereof, provided, however, that the Option shall
not be exercisable after the expiration of ten (10) years from the date
of grant of the Option.
(b) In order to exercise the Option granted hereunder, the
Optionee shall deliver to the Secretary of the Company written notice
stating the Optionee's intent to exercise the Option, which notice shall
specify:
(i) the name of the Optionee;
(ii) the Option to be exercised;
(iii) the number of shares of Stock to be purchased pursuant to
such exercise; and
(iv) the address to which certificates representing the shares of
Stock issuable upon exercise of the Option are to be mailed.
(c) The Optionee's written notice shall be accompanied by a
certified check payable to the Company in the amount of the product
of the Exercise Price times the number of shares with respect to which
the Option is being exercised. The notice and payment shall be
delivered in person or sent by registered mail, return receipt requested,
to the Secretary of the Company. The Option shall be considered
exercised on the date the notice and payment are delivered to the
Secretary or deposited in the mail, as the case may be. As promptly as
practicable after the Secretary's receipt of the notice of exercise and
payment, and the receipt of any certificates from the Optionee required
by the Company pursuant to Sections 8 and 9 hereof, the Company
shall deliver to the Optionee a certificate or certificates for the number
of shares of Stock with respect to which the Option has been exercised.
5. Vesting. Each Option shall vest and become cumulatively
exercisable as to twenty percent (20%) of the shares of Stock subject to
such Option on each anniversary of the date of grant of the Option;
provided, however, that the Option shall become immediately
exercisable in full at the time of a Change of Control of the Company.
6. Effect of Termination of Employment, Disability or Death.
The following provisions shall govern the exercise of any Options held
by an Optionee at the time the Optionee ceases to be an employee of
the Company, suffers a Disability, or dies.
6.1 Termination of Employment. In the event that the Optionee
ceases to be an employee of the Company for any reason other than
Disability or death, then the period during which each outstanding
Option held by such Optionee is to remain exercisable shall be limited
to the ninety (90) day period following the date of termination of
employment. Under no circumstances, however, shall any such
Option be exercisable after the specified expiration date of the Option
term. Any outstanding Option may not be exercised in the aggregate
for more than the number of vested shares for which the Option is
exercisable on the date of the termination of employment, and such
Option shall terminate and cease to be outstanding with respect to any
Option shares for which the Option is not at that time exercisable or in
which the Optionee is not otherwise at that time vested.
6.2 Disability. In the event that the Optionee ceases to be an
employee of the Company by reason of a Disability, then the period
during which each outstanding Option held by such Optionee is to
remain exercisable shall be limited to a period of one (1) year
following the date of termination of employment due to Disability.
Under no circumstances, however, shall any such Option be
exercisable after the specified expiration date of the Option term as set
forth in the Option Agreement. Any outstanding Option may not be
exercised in the aggregate for more than the number of vested shares
for which the Option is exercisable on the date of the termination of
employment due to Disability, and such Option shall terminate and
cease to be outstanding with respect to any Option shares for which the
Option is not at that time exercisable or in which the Optionee is not
otherwise at that time vested.
6.3 Death. In the event that the Optionee dies while holding one
or more outstanding Options, then the period during which each
outstanding Option held by such Optionee is to remain exercisable
shall be limited to a period of one (1) year following the date of the
Optionee's death. During such limited period, the Option may be
exercised by the personal representative of the Optionee's estate or by
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. Under no circumstances, however, shall any such Option
be exercisable after the specified expiration date of the Option term.
Any outstanding Option may not be exercised in the aggregate for
more than the number of vested shares for which the Option is
exercisable on the date of the death of the Optionee, and such Option
shall terminate and cease to be outstanding with respect to any Option
shares for which the Option is not at that time exercisable or in which
the Optionee is not otherwise at that time vested.
7. Adjustments to Upon Certain Events. In the event that any
change is made to the Stock issuable under the Plan and the Option
granted hereunder by reason of stock split, stock dividend,
recapitalization, combination of shares, exchange of shares,
repurchase, merger, consolidation, spin-off or other change affecting
the outstanding Stock as a class, the Board shall make appropriate
adjustments to the maximum number of shares and/or class of shares,
and the number of shares and/or class of shares and the exercise price
per share in effect under the Option, in order to prevent the dilution or
enlargement of benefits thereunder. Any adjustments made by the
Board pursuant to this Section 7 shall be final, binding and conclusive.
Neither the existence nor the terms of the Plan or this Agreement, nor
the grant of any Option hereunder, shall affect the right or power of
the Company to make any adjustments, reorganizations,
reclassifications or other changes to its capital structure or to merge,
consolidate, dissolve, liquidate, sell or transfer any or all of its assets
or otherwise change its business structure.
Except as expressly provided above, the issuance by the Company of
shares of stock of any class, for cash or property, or for labor or
services, either upon direct sale or upon the exercise of rights,
warrants or options to subscribe therefor, or upon conversions of
shares or obligations of the Company convertible into such shares or
other securities, shall not affect the number, class or exercise price of
shares of Stock then subject to the Option, and no adjustment shall be
made by reason thereof.
8. Requirements of Law. The Company shall not be required to
sell or issue shares of its Stock under the Option if the sale or issuance
would constitute a violation by the Optionee or the Company of any
provisions of any state or federal law, rule or regulation. In addition,
in connection with the Securities Act of 1933, as amended, upon
exercise of the Option, the Company shall not be required to issue
such shares of Stock unless the Company has received evidence
satisfactory to it to the effect that the Optionee will not transfer such
shares except pursuant to a registration statement in effect under the
Securities Act of 1933, as amended, or unless an opinion of counsel to
the Company has been received to the effect that such registration is
not required. Any determination in this regard by the Company shall
be final, binding and conclusive. Certificates representing shares of
Stock issued pursuant to the exercise of the Option will be subject to
such stop-transfer orders and other restrictions as may be applicable
under federal and state laws, regulations and rules, or the requirements
of any securities exchange or automated quotation system. In the event
the shares issuable on exercise of the Option are not registered under
the Securities Act, the Company may imprint the following legend or
any other legend which counsel to the Company considers necessary or
advisable:
"The shares of Stock represented by this certificate have not been
registered under the Securities Act of 1933 or under the securities laws
of any state and may not be sold or transferred except upon such
registration or upon receipt by the Company of an opinion of counsel
satisfactory to the Company that registration is not required for such
sale or transfer."
The Corporation may, but shall in no event be obligated to, register
any securities covered hereby pursuant to the Securities Act of 1933;
and in the event any shares are so registered, the Company may, in its
discretion, remove any legend on certificates representing such shares.
The Company shall not be obligated to take any other affirmative
action in order to cause the exercise of the Option or the issuance of
shares pursuant thereto to comply with any state or federal law or
regulation.
9. Investment Purpose. The Optionee agrees that any shares of
Stock subject to the Option granted hereunder will be acquired for
investment and not with any present intention to resell the same, and
the Optionee further agrees to confirm such intention by an
appropriate written assurances and certificates at the time of
exercising an Option or any portion thereof.
10. Withholding. The Company's obligation to deliver shares of
Stock upon exercise of the Option shall be subject to any and all
applicable federal, state and local tax withholding and reporting
requirements.
11. No Rights as Shareholder. The Optionee shall have no right
as a shareholder with respect to the Stock covered by the Option until
the date of issuance of Stock Certificates for such Stock to the
Optionee.
12. No Employment Obligation. The granting of any Option
shall not impose upon the Company any obligation to employ the
Optionee. The right of the Company to terminate the employment of
the Optionee shall not be diminished or affected by reason of the fact
that an Option has been granted hereunder to the Optionee.
13. General Provisions.
(a) This Agreement shall be binding upon, and shall inure to the
benefit of, the parties hereto and their respective heirs, executors,
administrators, personal representatives, successors and assigns.
(b) This Agreement shall be construed in accordance with, and
shall be governed by, the laws of the Commonwealth of Virginia.
(c) No waiver by any party hereto of any breach of any covenant,
condition or agreement hereof shall be considered to constitute a
waiver of any such covenant, condition or provision, or of any
subsequent breach thereof.
(d) In the event any court of competent jurisdiction shall declare
any portion of this Agreement to be invalid, the remainder of this
Agreement shall not be invalidated thereby, but shall remain in full
force and effect.
(e) Unless otherwise provided in this Agreement, no notice or
other communication which may be or is required or permitted to be
given under this Agreement shall be effective unless the same is in
writing and is either hand delivered or sent by registered or certified
mail, return receipt requested, first-class postage prepaid, (1) if to the
Optionee, to 2799 Equus Court, Herndon, Virginia 22071, and (2)
if to the Company, to Sutron Corporation., Attn: Secretary, 21300
Ridgetop Circle, Sterling, VA 20166, or at any other address that may
be given by one party to the other party by notice pursuant to this
paragraph 6(e), with a copy to the law firm of Shulman, Rogers,
Gandal, Pordy & Ecker, P.A., 11921 Rockville Pike, Third Floor,
Rockville, Maryland 20852. Unless otherwise provided in this
Agreement, such notices, or other communications, if sent by
registered or certified mail in accordance with this paragraph 6(e),
shall be deemed to have been given at the time of mailing.
(f) Where the text requires, words in the singular shall be
deemed to include the plural and vice-versa, and words in one gender
shall be deemed to include all genders.
(g) Any headings preceding the text of the sections or sub-
sections in this Agreement are inserted solely for convenience of
reference and shall not constitute a part of this Agreement, nor shall
they affect its meaning, construction or effect.
(h) The Option granted pursuant hereto is not intended or
designed to qualify for federal income tax treatment as an incentive
stock option under Section 422 of the Code.
(i) The Options are subject to all terms, conditions, limitations
and restrictions contained in the Plan, which shall be controlling in
the event of any conflicting or inconsistent provisions between this
Agreement and the Plan.
IN WITNESS WHEREOF, the Company has caused this Agreement to
be executed and sealed by its duly authorized officers, and the
Optionee has executed and sealed this Agreement, all as of the day and
year first above written.
THE COMPANY:
SUTRON CORPORATION
/s/ Raul S. McQuivey
Raul S. McQuivey
ATTEST
/s/ Sidney C. Hooper
Sidney C. Hooper
Treasurer
WITNESS:
/s/ Glenn A. Conover
Glenn A. Conover
Vice President
THE OPTIONEE:
/s/ Daniel W. Farrell
Daniel W. Farrell
THIS STOCK OPTION AGREEMENT (the "Agreement") is made
and entered into as of the first day of November, 1996, by and between
Sutron Corporation, a Virginia corporation (the "Company"), and Sidney C.
Hooper (the "Optionee").
WHEREAS, the Board of Directors of the Company (the "Board") has
adopted and approved that certain Sutron Corporation 1996 Stock
Option Plan (the "Plan"), a copy of which has been provided to the
Optionee and which is incorporated by reference herein; and
WHEREAS, pursuant to and in accordance with the provisions of the
Plan, the Board has determined that the Optionee is eligible to be
granted an option (the "Option") to acquire shares of the Company's
Common Stock, $0.01 par value per share (the "Stock"); and
WHEREAS, Options granted under the Plan are not intended or
designed to qualify for Federal income tax treatment as incentive stock
options under Section 422 of the Internal Revenue Code of 1986 (the
"Code"); and
WHEREAS, the Optionee desires to be granted Options under the
Plan; and
WHEREAS, the Corporation and the Optionee desire to set forth
herein the terms of such Options.
NOW, THEREFORE, in consideration of the foregoing, of the mutual
covenants set forth herein, and of other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Grant of Option. The Company hereby grants to the
Optionee the right and option to purchase 40,200 shares of Stock,
subject to and in accordance with the terms and conditions set forth in
the Plan and in this Agreement.
2. Exercise Price. The Exercise Price to be paid for each share
of Stock to be acquired upon exercise of the Option granted hereunder
is $1.125. Such Exercise Price is equal to the Fair Market Value (as
defined in the Plan) of the Stock as of the date of grant of the Option.
3. Transferability. The Option granted hereunder shall be
exercisable during the Optionee's lifetime only by the Optionee and
shall not be assignable or transferable other than by will or by the laws
of descent and distribution following the Optionee's death.
4. Exercise Terms; Vesting; Procedure.
(a) Except as provided in Section 6 hereof, the Option may be
exercised in whole or in part in accordance with the vesting schedule
set forth in Section 5 hereof, provided, however, that the Option shall
not be exercisable after the expiration of ten (10) years from the date
of grant of the Option.
(b) In order to exercise the Option granted hereunder, the
Optionee shall deliver to the Secretary of the Company written notice
stating the Optionee's intent to exercise the Option, which notice shall
specify:
(i) the name of the Optionee;
(ii) the Option to be exercised;
(iii) the number of shares of Stock to be purchased pursuant to
such exercise; and
(iv) the address to which certificates representing the shares of
Stock issuable upon exercise of the Option are to be mailed.
(c) The Optionee's written notice shall be accompanied by a
certified check payable to the Company in the amount of the product
of the Exercise Price times the number of shares with respect to which
the Option is being exercised. The notice and payment shall be
delivered in person or sent by registered mail, return receipt requested,
to the Secretary of the Company. The Option shall be considered
exercised on the date the notice and payment are delivered to the
Secretary or deposited in the mail, as the case may be. As promptly as
practicable after the Secretary's receipt of the notice of exercise and
payment, and the receipt of any certificates from the Optionee required
by the Company pursuant to Sections 8 and 9 hereof, the Company
shall deliver to the Optionee a certificate or certificates for the number
of shares of Stock with respect to which the Option has been exercised.
5. Vesting. Each Option shall vest and become cumulatively
exercisable as to twenty percent (20%) of the shares of Stock subject to
such Option on each anniversary of the date of grant of the Option;
provided, however, that the Option shall become immediately
exercisable in full at the time of a Change of Control of the Company.
6. Effect of Termination of Employment, Disability or Death.
The following provisions shall govern the exercise of any Options held
by an Optionee at the time the Optionee ceases to be an employee of
the Company, suffers a Disability, or dies.
6.1 Termination of Employment. In the event that the Optionee
ceases to be an employee of the Company for any reason other than
Disability or death, then the period during which each outstanding
Option held by such Optionee is to remain exercisable shall be limited
to the ninety (90) day period following the date of termination of
employment. Under no circumstances, however, shall any such
Option be exercisable after the specified expiration date of the Option
term. Any outstanding Option may not be exercised in the aggregate
for more than the number of vested shares for which the Option is
exercisable on the date of the termination of employment, and such
Option shall terminate and cease to be outstanding with respect to any
Option shares for which the Option is not at that time exercisable or in
which the Optionee is not otherwise at that time vested.
6.2 Disability. In the event that the Optionee ceases to be an
employee of the Company by reason of a Disability, then the period
during which each outstanding Option held by such Optionee is to
remain exercisable shall be limited to a period of one (1) year
following the date of termination of employment due to Disability.
Under no circumstances, however, shall any such Option be
exercisable after the specified expiration date of the Option term as set
forth in the Option Agreement. Any outstanding Option may not be
exercised in the aggregate for more than the number of vested shares
for which the Option is exercisable on the date of the termination of
employment due to Disability, and such Option shall terminate and
cease to be outstanding with respect to any Option shares for which the
Option is not at that time exercisable or in which the Optionee is not
otherwise at that time vested.
6.3 Death. In the event that the Optionee dies while holding one
or more outstanding Options, then the period during which each
outstanding Option held by such Optionee is to remain exercisable
shall be limited to a period of one (1) year following the date of the
Optionee's death. During such limited period, the Option may be
exercised by the personal representative of the Optionee's estate or by
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. Under no circumstances, however, shall any such Option
be exercisable after the specified expiration date of the Option term.
Any outstanding Option may not be exercised in the aggregate for
more than the number of vested shares for which the Option is
exercisable on the date of the death of the Optionee, and such Option
shall terminate and cease to be outstanding with respect to any Option
shares for which the Option is not at that time exercisable or in which
the Optionee is not otherwise at that time vested.
7. Adjustments to Upon Certain Events. In the event that any
change is made to the Stock issuable under the Plan and the Option
granted hereunder by reason of stock split, stock dividend,
recapitalization, combination of shares, exchange of shares,
repurchase, merger, consolidation, spin-off or other change affecting
the outstanding Stock as a class, the Board shall make appropriate
adjustments to the maximum number of shares and/or class of shares,
and the number of shares and/or class of shares and the exercise price
per share in effect under the Option, in order to prevent the dilution or
enlargement of benefits thereunder. Any adjustments made by the
Board pursuant to this Section 7 shall be final, binding and conclusive.
Neither the existence nor the terms of the Plan or this Agreement, nor
the grant of any Option hereunder, shall affect the right or power of
the Company to make any adjustments, reorganizations,
reclassifications or other changes to its capital structure or to merge,
consolidate, dissolve, liquidate, sell or transfer any or all of its assets
or otherwise change its business structure.
Except as expressly provided above, the issuance by the Company of
shares of stock of any class, for cash or property, or for labor or
services, either upon direct sale or upon the exercise of rights,
warrants or options to subscribe therefor, or upon conversions of
shares or obligations of the Company convertible into such shares or
other securities, shall not affect the number, class or exercise price of
shares of Stock then subject to the Option, and no adjustment shall be
made by reason thereof.
8. Requirements of Law. The Company shall not be required to
sell or issue shares of its Stock under the Option if the sale or issuance
would constitute a violation by the Optionee or the Company of any
provisions of any state or federal law, rule or regulation. In addition,
in connection with the Securities Act of 1933, as amended, upon
exercise of the Option, the Company shall not be required to issue
such shares of Stock unless the Company has received evidence
satisfactory to it to the effect that the Optionee will not transfer such
shares except pursuant to a registration statement in effect under the
Securities Act of 1933, as amended, or unless an opinion of counsel to
the Company has been received to the effect that such registration is
not required. Any determination in this regard by the Company shall
be final, binding and conclusive. Certificates representing shares of
Stock issued pursuant to the exercise of the Option will be subject to
such stop-transfer orders and other restrictions as may be applicable
under federal and state laws, regulations and rules, or the requirements
of any securities exchange or automated quotation system. In the event
the shares issuable on exercise of the Option are not registered under
the Securities Act, the Company may imprint the following legend or
any other legend which counsel to the Company considers necessary or
advisable:
"The shares of Stock represented by this certificate have not been
registered under the Securities Act of 1933 or under the securities laws
of any state and may not be sold or transferred except upon such
registration or upon receipt by the Company of an opinion of counsel
satisfactory to the Company that registration is not required for such
sale or transfer."
The Corporation may, but shall in no event be obligated to, register
any securities covered hereby pursuant to the Securities Act of 1933;
and in the event any shares are so registered, the Company may, in its
discretion, remove any legend on certificates representing such shares.
The Company shall not be obligated to take any other affirmative
action in order to cause the exercise of the Option or the issuance of
shares pursuant thereto to comply with any state or federal law or
regulation.
9. Investment Purpose. The Optionee agrees that any shares of
Stock subject to the Option granted hereunder will be acquired for
investment and not with any present intention to resell the same, and
the Optionee further agrees to confirm such intention by an
appropriate written assurances and certificates at the time of
exercising an Option or any portion thereof.
10. Withholding. The Company's obligation to deliver shares of
Stock upon exercise of the Option shall be subject to any and all
applicable federal, state and local tax withholding and reporting
requirements.
11. No Rights as Shareholder. The Optionee shall have no right
as a shareholder with respect to the Stock covered by the Option until
the date of issuance of Stock Certificates for such Stock to the
Optionee.
12. No Employment Obligation. The granting of any Option
shall not impose upon the Company any obligation to employ the
Optionee. The right of the Company to terminate the employment of
the Optionee shall not be diminished or affected by reason of the fact
that an Option has been granted hereunder to the Optionee.
13. General Provisions.
(a) This Agreement shall be binding upon, and shall inure to the
benefit of, the parties hereto and their respective heirs, executors,
administrators, personal representatives, successors and assigns.
(b) This Agreement shall be construed in accordance with, and
shall be governed by, the laws of the Commonwealth of Virginia.
(c) No waiver by any party hereto of any breach of any covenant,
condition or agreement hereof shall be considered to constitute a
waiver of any such covenant, condition or provision, or of any
subsequent breach thereof.
(d) In the event any court of competent jurisdiction shall declare
any portion of this Agreement to be invalid, the remainder of this
Agreement shall not be invalidated thereby, but shall remain in full
force and effect.
(e) Unless otherwise provided in this Agreement, no notice or
other communication which may be or is required or permitted to be
given under this Agreement shall be effective unless the same is in
writing and is either hand delivered or sent by registered or certified
mail, return receipt requested, first-class postage prepaid, (1) if to the
Optionee, to 20621 Parkside Circle, Sterling, Virginia 20165, and (2)
if to the Company, to Sutron Corporation., Attn: Secretary, 21300
Ridgetop Circle, Sterling, VA 20166, or at any other address that may
be given by one party to the other party by notice pursuant to this
paragraph 6(e), with a copy to the law firm of Shulman, Rogers,
Gandal, Pordy & Ecker, P.A., 11921 Rockville Pike, Third Floor,
Rockville, Maryland 20852. Unless otherwise provided in this
Agreement, such notices, or other communications, if sent by
registered or certified mail in accordance with this paragraph 6(e),
shall be deemed to have been given at the time of mailing.
(f) Where the text requires, words in the singular shall be
deemed to include the plural and vice-versa, and words in one gender
shall be deemed to include all genders.
(g) Any headings preceding the text of the sections or sub-
sections in this Agreement are inserted solely for convenience of
reference and shall not constitute a part of this Agreement, nor shall
they affect its meaning, construction or effect.
(h) The Option granted pursuant hereto is not intended or
designed to qualify for federal income tax treatment as an incentive
stock option under Section 422 of the Code.
(i) The Options are subject to all terms, conditions, limitations
and restrictions contained in the Plan, which shall be controlling in
the event of any conflicting or inconsistent provisions between this
Agreement and the Plan.
IN WITNESS WHEREOF, the Company has caused this Agreement to
be executed and sealed by its duly authorized officers, and the
Optionee has executed and sealed this Agreement, all as of the day and
year first above written.
THE COMPANY:
SUTRON CORPORATION
/s/ Raul S. McQuivey
Raul S. McQuivey
ATTEST
/s/ Daniel W. Farrell
Daniel W. Farrell
Secretary
WITNESS:
/s/ Glenn A. Conover
Glenn A. Conover
Vice President
THE OPTIONEE:
/s/ Sidney C. Hooper
Sidney C. Hooper
