APPENDIX II
NON-QUALIFIED STOCK OPTION
To:
---------------------------------------------------------
Name
---------------------------------------------------------
Address
Date:
----------------------
You are hereby granted an option, effective as of the date hereof, to
purchase _______ shares of common stock (par value $.001 per share) ("Common
Stock") of American Business Financial Services, Inc. (the "Company") at an
exercise price of $_____ per share pursuant to the Company's 1995 Stock Option
Plan for Non-Employee Directors (the "Plan").
Your option may first be exercised on and after the date hereof for up
to 100% of the total number of shares of Common Stock which are subject to this
option minus the number of shares previously purchased by exercise of the option
(as adjusted for any change in the outstanding shares of the Common Stock of the
Company by reason of a stock dividend, stock split, combination shares,
recapitalization, merger, consolidation, transfer of assets, reorganization,
conversion or what the Board of Directors deems in its sole discretion to be
similar circumstances).
You may exercise your option by giving written notice to the Secretary
of the Company on forms supplied by the Company at its then principal executive
office, accompanied by payment of the option price for the total number of
shares you specify that you wish to purchase. The payment may be in any of the
following forms: (a) cash, which may be evidenced by a check; (b) (unless
prohibited by the Board of Directors) certificates representing shares of Common
Stock of the Company, which will be valued by the Secretary of the Company at
the fair market value per share of the Company's Common Stock (as determined in
accordance with the Plan) on the date of delivery of such certificates to the
Company, accompanied by an assignment of the stock to the Company; or (c)
(unless prohibited by the Board of Directors) any combination of cash and Common
Stock of the Company valued as provided in clause (b). Any assignment of stock
shall be in a form and substance satisfactory to the Secretary of the Company,
including guarantees of signature(s) and payment of all transfer taxes if the
Secretary deems such guarantees necessary or desirable.
Your option will, to the extent not previously exercised by you,
terminate three months after the date on which you cease to be a director of the
Company or a subsidiary corporation (whether by death, disability, resignation,
removal, failure to be reelected or otherwise and regardless of whether the
failure to continue as a director was for cause or otherwise), but in no event
later than ten years from the date this option is granted. After the date you
cease to be a director, you may exercise this option only for the number of
shares which you had a right to purchase and did not
II-1
purchase on the date you ceased to be a director. If you are a director of a
subsidiary corporation, your directorship shall be deemed to have terminated on
the date such company ceases to be a subsidiary corporation, unless you are also
a director of the Company or another subsidiary corporation, or on that date
became a director of the Company or another subsidiary corporation. Your
directorship shall not be deemed to have terminated as long as you are a
director of either the Company or any direct or indirect subsidiary corporation
thereof.
If you die while a director of the Company or a subsidiary corporation,
your executor or administrator, as the case may be, may, at any time within
three months after the date of your death (but in no event later than ten years
from the date this option is granted), exercise the option as to any shares
which you had a right to purchase and did not purchase during your lifetime. If
your directorship with the Company or a subsidiary corporation is terminated by
reason of your becoming disabled, you or your legal guardian or custodian may at
any time within three months after the date of such termination (but in no event
later than 10 years from the date this option is granted), exercise the option
as to any shares which you had a right to purchase and did not purchase prior to
such termination. Your executor, administrator, guardian or custodian must
present proof of his authority satisfactory to the Company prior to being
allowed to exercise this option.
In the event of any change in the outstanding shares of the Common
Stock of the Company by reason of a stock dividend, stock split, combination of
shares, recapitalization, merger, consolidation, transfer of assets,
reorganization, conversion or what the Board of Directors deems in its sole
discretion to be similar circumstances, the number and kind of shares subject to
this option and the option price of such shares shall be appropriately adjusted
in a manner to be determined in the sole discretion of the Board of Directors.
This option is not transferable otherwise than by will or the laws of
descent and distribution, and is exercisable during your lifetime only by you,
including, for this purpose, your legal guardian or custodian in the event of
disability. Until the option price has been paid in full pursuant to due
exercise of this option and the purchased shares are delivered to you or such
trust, you do not have any rights as a stockholder of the Company. The Company
reserves the right not to deliver to you the shares purchased by virtue of
exercise of this option during any period of time in which the Company deems, in
its sole discretion, that such delivery may not be consummated without violating
a federal, state, local or securities exchange rule, regulation or law.
II-2
Notwithstanding anything to the contrary contained herein, this option
is not exercisable during any period of time in which the Company deems that the
exercisability of this option, the offer to sell the shares optioned hereunder,
or the sale thereof, may violate a federal, state, local or securities exchange
rule, regulation or law, or may cause the Company to be legally obligated to
issue or sell more shares than the Company is legally entitled to issue or sell.
The following two paragraphs shall be applicable if, on the date of
exercise of this option, the Common Stock to be purchased pursuant to such
exercise has not been registered under the Securities Act of 1933, as amended,
and under applicable state securities laws, and shall continue to be applicable
for so long as such registration has not occurred:
(a) The optionee hereby agrees, warrants and represents that
he will acquire the Common Stock to be issued hereunder for his own account for
investment purposes only, and not with a view to, or in connection with, any
resale or other distribution of any of such shares, except as hereafter
permitted. The optionee further agrees that he will not at any time make any
offer, sale, transfer, pledge or other disposition of such Common Stock to be
issued hereunder without an effective registration statement under the
Securities Act of 1933, as amended, and under any applicable state securities
laws or an opinion of counsel acceptable to the Company to the effect that the
proposed transaction will be exempt from such registration. The optionee shall
execute such instruments, representations, acknowledgments and agreements as the
Company may, in its sole discretion, deem advisable to avoid any violation of
federal, state, local or securities exchange rule, regulation or law.
(b) The certificates for Common Stock to be issued to the
optionee hereunder shall bear the following legend:
"The shares represented by this certificate have not been
registered under the Securities Act of 1933, as amended, or under
applicable state securities laws. The shares have been acquired for
investment and may not be offered, sold, transferred, pledged or
otherwise disposed of without an effective registration statement under
the Securities Act of 1933, as amended, and under any applicable state
securities laws or an opinion of counsel acceptable to the Company that
the proposed transaction will be exempt from such registration."
The foregoing legend shall be removed upon registration of the legended shares
under the Securities Act of 1933, as amended, and under any applicable state
laws or upon receipt of any opinion of counsel acceptable to the Company that
said registration is no longer required.
The sole purpose of the agreements, warranties, representations and
legend set forth in the two immediately preceding paragraphs is to prevent
violations of the Securities Act of 1933, as amended, and any applicable state
securities laws.
II-3
This option shall be subject to the terms of the Plan in effect on the
date this option is granted, which terms are hereby incorporated herein by
reference and made a part hereof. In the event of any conflict between the terms
of this option and the terms of the Plan in effect on the date of this option,
the terms of the Plan shall govern. This option constitutes the entire
understanding between the Company and you with respect to the subject matter
hereof and no amendment, supplement or waiver of this option, in whole or in
part, shall be binding upon the Company unless in writing and signed by the
President of the Company. This option and the performances of the parties
hereunder shall be construed in accordance with and governed by the laws of the
Commonwealth of Pennsylvania.
Please sign the copy of this option and return it to the Company's
Secretary, thereby indicating your understanding of and agreement with its terms
and conditions.
AMERICAN BUSINESS FINANCIAL
SERVICES, INC.
(SEAL) By:
-----------------------------------
I hereby acknowledge receipt of a copy of the foregoing stock option
and, having read it hereby signify my understanding of, and my agreement with,
its terms and conditions.
---------------------------------------
(Signature)
---------------------------------------
(Date)
II-4
