EXHIBIT 99.4
FORM OF AGREEMENT TO SURRENDER OPTIONS
[LETTERHEAD OF DUALSTAR TECHNOLOGIES CORPORATION]
June 25, 2003
[management addressee]
[address]
[city/state/zip]
Dear [Mr. Executive]:
As you know, DualStar Technologies Corporation (the "Company") has reached an
agreement with its senior lender, Xxxxxxxxx LLC ("Xxxxxxxxx"), whereby Xxxxxxxxx
would exchange all of the outstanding principal and accrued interest with
respect to the senior secured indebtedness owed by the Company to Xxxxxxxxx for
the Company's interests in certain real estate and certain private cable
television assets and for common equity of the Company. A copy of said agreement
in principle is annexed hereto as Exhibit A. As part of the agreement, you and
certain other members of the Company's management have agreed to surrender all
of your outstanding stock options for cancellation.
In consideration of such cancellation, and subject to the satisfaction of the
two conditions set forth below in this letter, the Company will issue to you
under the Company's 1994 Stock Option Plan, as amended (the "Plan"), new options
to purchase the same aggregate number of shares of Common Stock, which shall
include
(a) a ten year term which shall continue even if you are no longer in the
employ of the Company for any reason;
(b) an exercise price equal to 50% of the fair market value at the date of
grant;
(c) immediate vesting; and
(d) a date of grant which is at least six months and one day from the date
of surrender of said options.
The issuance of new options is conditioned upon (1) the issuance of Common Stock
to Xxxxxxxxx in exchange for the reduction of the Company's outstanding
indebtedness to Xxxxxxxxx (the "Stock Issuance") and (2) approval, by the
Company's shareholders, of an amendment to the Company's Certificate of
Incorporation increasing the number of authorized shares of Common Stock. The
Company will present such amendment to the shareholders at the next meeting of
shareholders. The surrender of options will become effective simultaneously with
the Stock Issuance.
Upon satisfaction of the conditions herein, the Company will grant the new
options at least six months and one day (but not more than one year) following
the Stock Issuance and surrender. Pursuant to the Plan, the stock option
committee of the board of directors will meet to grant the new options within
the time period set forth in the preceding sentence. The terms and conditions of
new options will be substantially the same as provided in the form of option
agreement attached hereto as Exhibit B (except as specified above).
You acknowledge and agree that you have received and reviewed the agreement in
principle referred to above and you understand the terms and conditions in such
agreement in principle.
The Company will use its best efforts to consummate a definitive agreement in
accordance with the agreement in principle and to call a meeting of shareholders
to vote upon the amendment to the
Company's Certificate of Incorporation and any related matters and the Company
will solicit proxies in favor of such amendment and any related matters.
Upon the execution and delivery of this letter, you, on your own behalf and on
behalf of your heirs, assigns, attorneys, agents and legal representatives, do
hereby release and forever discharge the Company (including any subsidiaries and
affiliates) of and from any and all claims, causes of action, obligations,
demands and liabilities whatsoever, of every name and nature, both in law and
equity, known and unknown, anticipated and unanticipated, which you had, have or
hereafter may have, or which any person or entity may have on your behalf,
against the Company, including any subsidiaries and affiliates, solely because
of or arising from any matter, event or thing which has happened, developed or
occurred before the execution of this letter relating to the grant, exercise (or
failure to exercise) any options, warrants or other securities issued (or not
issued) by the Company (including any subsidiaries and affiliates).
If you have any questions about the option surrender, please contact me.
Sincerely,
Xxxxxxx Xxxxx
President and Chief Executive Officer
I agree to and surrender for cancellation the options to purchase ___________
shares of Common Stock of the Company, pursuant to the terms hereof, which
surrender shall be effective simultaneously with the Stock Issuance.
By____________________________
Name
Dated as June 25, 2003
EXHIBIT A
DualStar Technologies Corporation
Agreement in Principle for Conversion of Outstanding Debt held
by Xxxxxxxxx, L.L.C.
Xxxxxxxxx, X.X.X. ("Xxxxxxxxx") and DualStar Technologies Corporation
(the "Company") have agreed to exchange all of the outstanding principal and
accrued interest with respect to the senior secured indebtedness owed by the
Company to Xxxxxxxxx (the "Indebtedness") for the Company's interests in certain
real estate and certain telecommunications assets and for common equity of the
Company. The transaction is subject to approval by the Board of Directors of the
Company and to the execution of definitive agreements in form and substance
satisfactory to the parties and their respective counsel. The Company and
Xxxxxxxxx each agree to use its best efforts to consummate this transactions
contemplated by this agreement in principle as quickly as is practicable.
The Indebtedness. The Indebtedness is represented by a Promissory Note
(the "Note") of the Company to Xxxxxxxxx dated November 8, 2000, in the
principal amount of $12,500,000, bearing interest at the rate of 11% per annum,
which is due and payable on November 8, 2007. The Note is presently in default
pursuant to its terms. As set forth in this agreement in principle, the
Indebtedness shall be reduced to zero in consideration of (a) consummation of
the sale of certain assets and business in Florida of ParaComm, Inc., a
wholly-owned subsidiary of the Company ("ParaComm"), to an affiliate of
Xxxxxxxxx; (b) conveyance of the real estate owned by the Company located at
00-00 00xx Xxxxxx, Xxxx Xxxxxx Xxxx, Xxx Xxxx (the "Real Estate"); and (c)
issuance of shares of the Company's common stock to Xxxxxxxxx, all as described
below.
The Indebtedness will be reduced as follows:
(a) by an aggregate of $3,025,000 plus accrued and unpaid interest on
such principal amount in consideration and upon consummation of the
sale of certain assets and business in Florida of ParaComm to an
affiliate of Xxxxxxxxx;
(b) by an amount equal to the fair market value of the Real Estate; and
(c) the balance of the Indebtedness shall be exchanged for shares of
Common Stock of the Company, in an amount to be determined, which amount shall
be not less than 5,411,899 shares and not more than 8,498,432 shares. Such
number of shares issuable to Xxxxxxxxx shall represent all of the authorized and
unissued shares of Common Stock of the Company less shares reserved for issuance
pursuant to the exercise of outstanding stock options and warrants to purchase
Common Stock that are not surrendered and cancelled.
Management Stock Options. Xxxxxxxx Xxxx, Xxxxx Xxxxxx, Xxxxxx Xxxxxxxx,
Xxxxxxx Xxxxx, Xxxxxxx X'Xxxxxxx, Xxxxxx Xxxxxxx, Xx., Xxxxx Xxxxxxx, Xxxx
Xxxxxxx and Xxxxxxx Xxxxx, executive officers of the Company and/or its
affiliates, will agree to surrender and cancel options heretofore issued to them
to purchase shares of Common Stock of the Company. In consideration of such
cancellation, the Company will issue new options to each officer to purchase the
same number of shares of Common Stock, under the Company's 1994 Stock Option
Plan, as amended, which shall include (w) a date of grant which is at least six
months and one
day from the date of surrender of said options, (x) an exercise price equal to
the 50% of the fair market value at the date of grant, (y) immediate vesting,
and (z) a ten year term which shall continue even if the executive officer is no
longer in the employ of the Company for any reason. Such issuance shall be
subject to approval by the shareholders of the Company of an amendment to the
Company's Certificate of Incorporation increasing the number of authorized
shares of Common Stock. It is intended that such amendment of the Company's
Certificate of Incorporation will be presented to the shareholders at the next
meeting of shareholders. Xxxxxxxxx agrees to vote its shares in favor of the
proposed amendment to the Company's Certificate of Incorporation and any related
matters.
Xxxxxxxxx Xxxxxxxxx Warrants. DualStar Warrant Co. LLC, an affiliate of
Xxxxxxxxx, will surrender for cancellation warrants to purchase a total of
3,125,000 shares of the Company's Common Stock.
IN WITNESS WHEREOF, the parties hereto have caused this agreement in
principle to be duly executed by their respective authorized signatories as of
the 13th of June 2003.
XXXXXXXXX, X.X.X. DUALSTAR TECHNOLOGIES CORPORATION
By: By:
-------------------------------- --------------------------------
Name: Name:
------------------------------ ------------------------------
Title: Title:
----------------------------- -----------------------------
EXHIBIT B
FORM OF STOCK OPTION AGREEMENT
------------------------------
THIS AGREEMENT, made as of the __th day of _____, 200_, (the "Grant
Date") between DualStar Technologies Corporation, a Delaware corporation (the
"Company"), with an address at 00-00 00xx Xxxxxx, Xxxx Xxxxxx Xxxx, Xxx Xxxx
00000 and _____________ (the "Optionee").
WHEREAS, the Company has adopted the 1994 Stock Option Plan, as amended
(the "Plan"), in order to provide additional incentive to certain
directors, officers, employees or consultants of the Company;
WHEREAS, the Company has agreed to re-issue new options to Optionee to
purchase the same aggregate number of shares of Common Stock as Optionee
surrendered pursuant to that certain letter dated June 25, 2003 between the
Company and Optionee; and
WHEREAS, the Board and/or the Committee responsible for administration of
the Plan has determined to grant to the Optionee the Stock Option as
provided herein;
NOW, THEREFORE, the parties hereto agree as follows:
1. Grant of Option.
1.1 The Company hereby grants to the Optionee the right and
option (the "Option") to purchase all or any part of an
aggregate of ________ shares of Common Stock, $0.01 par
value, of the Company ("Stock"), subject to, and in
accordance with, the terms and conditions set forth in this
Agreement and the Plan. Dividends, subscription rights and
other rights generally afforded stockholders declared or
granted with respect to Stock prior to the exercise of the
Option are not included in the Option.
1.2 This Agreement shall be construed in accordance and
consistent with, and subject to, the provisions of the Plan
(the provisions of which are incorporated herein by
reference) and, except as otherwise expressly set forth
herein, the capitalized terms used in this Agreement shall
have the same definitions as set forth in the Plan.
[1.3 This Option is not intended to be and shall not be treated
as an incentive stock option under Section 422 of the Code.]
2. Purchase Price. The price at which the Optionee shall be entitled to
purchase shares of Stock upon the exercise of the Option shall be $_______ per
share.
3. Duration of Option. The Option (or portion thereof) shall be exercisable
to the extent and in the manner provided herein for a period of ten (10) years
from the applicable Vesting Date of the Option (or portion thereof)(the
"Exercise Term").
4. Exercisability of Option. The Option shall vest and be exercisable by
Optionee and Optionee shall be entitled to purchase the number of shares covered
by the Option, in whole at any time or in part (in whole numbers only),
immediately upon the Grant Date.
5. Exercise, Payment for, and Delivery of Stock.
5.1 Subject to the terms and conditions of this Agreement and the Plan,
the Option may be exercised by delivery of written notice to the Company, at its
principal executive office, received at the Company not later than 5:00 p.m.
N.Y. time on or prior to the day the Option is to expire. Such notice shall
state that the Optionee is electing to exercise the Option and the number of
shares of Stock in respect of which the Option is being exercised and shall be
signed by the person or persons exercising the Option. If requested by the Board
and/or the Committee, such person or persons shall (i) deliver this Agreement to
the Secretary of the Company who shall endorse thereon a notation of such
exercise, and (ii) provide satisfactory proof as to the right of such person or
persons to exercise the Option.
5.2 Subject to the terms and conditions of the Plan, the notice of
exercise described in Section 5.1 shall be accompanied by the full purchase
price for the shares of Stock in respect of which the Option is being exercised
and by the Withholding Taxes, if any, in cash (U.S. dollars), by certified or
bank check.
5.3 Upon receipt of notice of exercise and full payment for the shares
of Stock in respect of which the Option is being exercised and of the
Withholding Taxes, the Company shall, subject to the Plan, promptly take such
action as may be necessary to effect the issuance to the Optionee of the number
of shares of Stock as to which such exercise was effective, including issuing
and delivering such shares of Stock and entering the Optionee's name as a
stockholder of record on the books of the Company.
5.4 The Optionee shall not be deemed to be the holder of, or to have
any of the rights of a holder with respect to any shares of Stock subject to the
Option until the Optionee shall have given the Company the written notice of
exercise described in Section 5.1 and the Optionee shall have paid the full
purchase price for the number of shares of Stock in respect of which the Option
was exercised.
6. Termination of Employment. If the employment, consultancy, or service as
a director of the Optionee with the Company (or its subsidiaries) is terminated
by the Company for any reason or voluntarily by the Optionee, the Optionee may
at any time after such termination (but in no event after the expiration of the
Exercise Term) exercise the Option. In the event of the Optionee's death, the
Option shall be exercisable, to the extent provided in the Plan and this
Agreement, by the legatee or legatees under Optionee's will, or by Optionee's
personal representatives or distributes and such person or persons shall be
substituted for the Optionee each time the Optionee is referred to herein.
7. Nontransferability. This Option may not be transferred by the Optionee
other than by will or the laws of descent and distribution and may be exercised
during the Optionee's lifetime only by the Optionee or the Optionee's guardian
or legal representative, subject to the Plan.
8. Withholding Taxes. If applicable, no later than the date as of which an
amount first becomes includible in the gross income of the Optionee for Federal
income tax purposes with respect to the receipt of shares, securities, cash or
property under the Plan, the Optionee shall pay to the Company, or make
arrangements satisfactory to the Company regarding the payment of, any Federal,
state, or local or foreign taxes of any kind required by law to be withheld with
respect to such amount ("Withholding Taxes"). The obligations of the Company
under the Plan shall be conditional on such payment or arrangements, and the
Company shall, to the extent permitted by law, have the right to deduct any such
taxes from any payment otherwise due to the Optionee.
9. No Right to Continued Employment. Nothing in this Agreement or the Plan
shall be interpreted or construed to confer upon the Optionee any right with
respect to continuance of employment by the Company, nor shall this Agreement or
the Plan interfere in any way with the right of the Company to terminate the
Optionee's employment at any time.
10. Optionee Bound by the Plan. The Optionee hereby acknowledges receipt of
a copy of the Plan and agrees to be bound by all terms and provisions thereof,
including any amendments thereto.
11. Modification of Agreement. This Agreement may be modified, amended,
suspended or terminated, and any terms or conditions may be waived, but only by
a written instrument executed by the parties hereto.
12. Severability. Should any provision of this Agreement be held by a court
of competent jurisdiction to be unenforceable or invalid for any reason, the
remaining provisions of this Agreement shall not be affected by such holding and
shall continue in full force in accordance with their terms.
13. Governing Law. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the State of New
York, without giving effect to the conflicts of laws principles thereof.
14. Successors in Interest. This Agreement shall inure to the benefit of
and be binding upon any successor to the Company. This Agreement shall inure to
the benefit of the Optionee's legal representatives. All obligations imposed
upon the Optionee and all rights granted to the Company under this Agreement
shall be final, binding and conclusive upon the Optionee's heirs, executors,
administrators and successors.
15. Complete Agreement. This Agreement including the Plan contains the
entire agreement and understanding between the parties relating to the subject
matter hereof, and supersedes any prior understandings, agreements or
representations by or between the parties, written or oral, relating to the
subject matter hereof.
16. Notices. Any notice required or permitted hereunder shall be given in
writing and shall be personally delivered or mailed by first class registered or
certified mail, postage prepaid, return-receipt-requested, or transmitted by
facsimile or by reputable overnight courier, at:
if to the Company: DualStar Technologies Corporation
00-00 00xx Xxxxxx
Xxxx Xxxxxx Xxxx, Xxx Xxxx 00000
Attn: Chief Executive Officer
if to the Optionee: ________________________________________
At the home address on file with Company
or at such other addresses as such party may designate by five business days
advance written notice to the other party.
Each notice or communication that shall have been transmitted in the
manner described above shall be deemed sufficiently given, served, sent or
received for all purposes at such time as it is sent to the addressee (with
return receipt, delivery receipt or the answer back being deemed conclusive, but
not exclusive, evidence of such sending) or at such time as delivery is refused
by the addressee upon presentation.
17. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, and all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
DUALSTAR TECHNOLOGIES CORPORATION
By:
---------------------------------- ----------------------------------
Name: Optionee:
Title: President/CEO
SCHEDULE
------------------------------ --------------------
Name Options
---- -------
------------------------------ --------------------
Xxxxxxxx Xxxx 226,000
------------------------------ --------------------
Xxxxx Xxxxxx 104,000
------------------------------ --------------------
Xxxxxx Xxxxxxxx 666,000
------------------------------ --------------------
Xxxxxxx Xxxxx 200,000
------------------------------ --------------------
Xxxxxxx X'Xxxxxxx 251,000
------------------------------ --------------------
Xxxxxx Xxxxxxx, Xx. 200,000
------------------------------ --------------------
Xxxxx Xxxxxxx 301,000
------------------------------ --------------------
Xxxx Xxxxxxx 100,000
------------------------------ --------------------
Xxxxxxx Xxxxx 200,000
------------------------------ --------------------
2,248,000
------------------------------ --------------------
