OPTION
FOR THE PURCHASE OF SHARES OF
COMMON STOCK OF
PRECISION AEROSPACE COMPONENTS, INC.
THIS OPTION CERTIFIES THAT, FOR VALUE RECEIVED,
Andrew S. Prince (the “Holder”), is entitled to
subscribe for and purchase from Precision Aerospace Components,
Inc., a Delaware corporation (the “Company”),
_________________________________________shares of Common Stock,
$0.001 par value per share, of the Company at the purchase price of
$.01 per share (the “Exercise Price”) subject to
adjustment as provided herein.
1.
Definitions . When used in this
Option, the following terms shall have the meanings
specified:
a.
“Common Stock” shall mean the
presently existing common stock, $0.001 par value per share, of
the Company.
b.
“Convertible Securities” means
evidences of indebtedness, shares of stock or other securities
which are convertible into or exchangeable for, with or without
payment of additional consideration in cash or property,
additional shares of Common Stock, either immediately or upon
the arrival of a specified date or the happening of a specified
event.
c.
“Exercise Notice” shall mean a
notice of exercise of all or any portion of this Option, in the
form attached hereto as Exhibit A.
d.
“E xempt Issuance ” means
the issuance of (a) shares of Common Stock or options to
employees, officers, directors of and consultants of the
Company, (b) securities upon the exercise, or conversion of any
securities issued hereunder or any other options, warrants or
convertible securities which are outstanding on the date of
issuance of these securities, and (c) securities issued pursuant
to acquisitions, licensing agreements, or other strategic
transactions, provided any such issuance shall only be to a
Person which is, itself or through its subsidiaries, an
operating company in a business which the Company’s board
of directors believes is beneficial to the Company and in which
the Company receives benefits in addition to the investment of
funds, but shall not include a transaction in which the Company
is issuing securities primarily for the purpose of raising
capital or to an entity whose primary business is investing in
securities.
e.
“Expiration Date” shall mean the
earliest of (i) the date of exercise of all of the rights
represented by this Option, or (ii) the day which is 60 days
after the effective date of a combination or split of the
presently existing common stock of the Company
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or (iii) the date which is the first anniversary
of the date of this Option, February 27, 2009.
f.
“Person” shall mean and include an individual,
partnership, corporation, trust, joint venture, incorporated
organization and a government or any department or agency
thereof.
g.
“Securities Act” means the Securities Act of 1933, as
amended.
h.
“Option Shares” shall mean the shares of Common Stock
issuable to the Holder of this Option upon any exercise of this
Option.
i.
"Change in Control" means the occurrence during the Term of any of
the following: (i) the sale, lease, transfer, conveyance, or other
disposition (other than by way of merger or consolidation), in one
or a series of related transactions, of all or substantially all of
the assets of the Company and its Subsidiaries taken as a whole to
any "person" (as such term is used in Section 13(d)(3) of the
Exchange Act) other than a principal owner of the Company or a
related party of a principal; (ii) the adoption of a plan relating
to the liquidation or dissolution of the Company; (iii) the
consummation of any transaction (including, without limitation, any
merger or consolidation) the result of which is that any "person"
(as defined above), other than the present principals and their
related parties, becomes the "beneficial owner" (as such term is
defined in Rule 13(d)(3) and Rule 13(d)(5) under the Exchange Act
of the Company.
j.
“Vested” The total shares represented by this
option shall become vested, and capable of being exercised with the
passage of time as follows: 58% immediately upon the delivery of
this Option plus 6% per month on the last day of each of the
successive months through August 31, 2008, provided the Holder is
still employed by the Company at the time of each vesting amount;
provided, however, the remaining unvested options shall vest
immediately in the event there is a Change of Control of the
Company and the Holder was employed by the Company immediately
prior to such Change of Control.
2.
Option Exercise; Issuance of Certificates;
Payment for Option Shares; Cashless Exercise . The
Vested portion of this Option may be exercised by the Holder in
whole or in part, at any time prior to the Expiration Date by
delivery of an Exercise Notice and, within five (5) business
days thereafter, surrender of this Option (properly endorsed if
required) and payment by the Holder of the Exercise Price by
certified or cashier’s check, unless cashless exercise
provisions, set forth below are chosen. If prior to such
exercise, the Company shall have issued any Common Stock or Convertible
Securities (other than Exempt Securities) at an effective price
per share less than the closing bid price of the Common Stock on
the date of this Option, the Exercise Price shall be changed to
a new Exercise Price equal to such lower effective price per
share. Upon such surrender and payment, the Holder
shall be entitled to receive a certificate or certificates
representing the Option Shares so purchased. Option Shares
so purchased shall be deemed to be issued to the Holder as the
record owner of such Option Shares as of the close of business
on the date on which this Option shall have been surrendered and
payment made for
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such shares. Certificates for the Option
Shares so purchased shall be delivered to the Holder within a
reasonable time, not exceeding five (5) business days, after the
rights represented by this Option shall have been so exercised.
If the rights of the Holder of this Option are exercised
in part, the number of Option Shares subject to this Option
shall be reduced accordingly and the Company shall reissue an
Option or Options of like tenor representing in the aggregate
the right to purchase the number of Option Shares as so
reduced.
Cashless Exercise Notwithstanding
anything contained herein to the contrary, if at the time of
exercise, the Option Shares are not subject to an effective
registration statement, by delivering an Exercise Notice and in
lieu of making payment of the Aggregate Exercise Price in cash
or wire transfer, elect instead to receive upon such exercise
the “Net Number” of shares of Common Stock
determined according to the following formula the holder of this
Option may, at its election exercised in its sole discretion,
exercise this Option in whole or in part and, in lieu of making
the cash payment otherwise contemplated to be made to the
Company upon such exercise in payment of the Aggregate Exercise
Price, elect instead to receive upon such exercise the “
Net Number
” of shares of Common Stock determined according to the
following formula (a “ Cashless Exercise
”):
Net Number = (A x B) – (A x C)
B
For purposes of the foregoing formula:
A= the total number shares with respect to which
this Option is then being exercised.
B= the last reported sale (or if no sale price
reported bid) price of the Common Stock on the trading day
immediately preceding the date of the Exercise Notice.
C= the Option Exercise Price then in effect at
the time of such exercise.
No fractional Option Shares are to be issued
upon any pro rata exercise of this Option, but rather the number
of Option Shares issued upon such exercise of this Option shall
be rounded up or down to the nearest whole number.
3.
Affirmative Covenants . The Company
covenants and agrees that the Option Shares will, upon exercise
of this Option, if sufficient authorized shares are available
for exercise, and issuance in accor
