APPENDIX B
NON-QUALIFIED STOCK OPTION AGREEMENT
This OPTION AGREEMENT is made as of the [DATE], by and between FIRETECTOR
INC., a Delaware corporation, having an office at 000 Xxxxx Xxxxxx, Xxxxxxxxxx,
Xxx Xxxx 00000 (the "Corporation") and [OPTIONEE] having an office at 000 Xxxxx
Xxxxxx, Xxxxxxxxxx, Xxx Xxxx 00000 (the "Optionee").
Recital
The Corporation desires to afford the Optionee an opportunity to purchase
its common stock, $0.001 per share (the "Common Stock") in accordance with the
terms of the 1997 Non-Qualified Stock Option Plan (the "Plan"), as approved by
the Corporation's Directors and as approved or subsequently ratified by the
Corporation's stockholders. Capitalized terms not otherwise defined in this
Option Agreement shall have the same meaning as in the Plan.
Terms
1. Grant of Option. The Corporation 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 (such number being subject to adjustment as
provided in Section 7 of this Option Agreement) (the "Option Shares") on the
terms and conditions set forth in this Option Agreement.
2. Nature of the Option. The Option is a non-statutory, non-qualified stock
option and is not intended to qualify for any special tax benefits to the
Optionee.
3. Exercise Price. Except as provided in Section 7, the purchase price of
the Option Shares covered by the Option shall be $[PRICE] per share (the
"Purchase Price").
4. Limit on Exercise of the Option. Subject to the termination provisions
under the Plan, this Option shall vest on the basis of 20% of the total number
of Option Shares purchasable hereunder (as adjusted from time to time pursuant
to Section 7) vesting on the day prior to each anniversary date of this Option
Agreement. Except as otherwise provided in this Option Agreement, the Option
shall first become exercisable on the date this Option Agreement is made. The
term of the Option shall be for a period of five years from the date this Option
Agreement is made. The "vested" portion of this Option may be exercised within
the above time limitations, at any time or from time to time, in whole or in
part (but not for a fraction of a share of Common Stock). The Purchase Price of
the underlying Option Shares as to which the Option shall be exercised shall be
paid in full in cash or by certified or bank check (made payable to the order of
the Corporation) at the time of exercise. The Optionee shall not have any of the
rights of a stockholder of the Corporation with respect to the underlying Option
Shares covered by the Option, except to the extent that one or more certificates
for such Option Shares shall be delivered to him upon the due exercise of the
Option.
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5. Nontransferability. The Option shall not be transferable otherwise than
by will or by applicable laws of descent and distribution. While the Optionee is
alive, the Option may be exercised only by the Optionee. More particularly (but
without limiting the generality of the foregoing), the Option (a) may not be
assigned, transferred (except as provided above), pledged, or hypothecated in
any way, (b) shall not be assignable by operation of law, and (c) shall not be
subject to execution, attachment, or similar process. Any attempted assignment,
transfer, pledge, hypothecation, or other disposition of the Option contrary to
the provisions of this Option Agreement, and the levy of any execution,
attachment, or similar process upon the Option, shall be null and void and
without any effect.
6. Disclosure and Risk. The Optionee represents and warrants to the
Corporation as follows:
(a) Investment. The Option and the underlying Option Shares will be
acquired by the Optionee for Optionee's own account, for investment and not
with a view to, or for resale in connection with, any distribution or
public offering thereof within the meaning of the Securities Act of 1933,
as amended (the "Securities Act").
(b) No Registration. The Optionee understands that: (i) at time of
grant and exercise, the Option and the underlying Option Shares covered by
the Option have not been, and probably will not have been, registered under
the Securities Act by reason of those underlying Option Shares being issued
in a transaction exempt from the registration and prospectus delivery
requirements of the Securities Act; (ii) the underlying Option Shares must
be held by the Optionee as an investment indefinitely; (iii) the Optionee
must bear the economic risk, if any, of such investment indefinitely,
unless a subsequent disposition thereof is registered under the Securities
Act or is exempt from registration under that act; (iv) the Rule 144
exemption from registration is only available under certain limited
circumstances and only after the satisfaction of certain specific
requirements; and (v) it is likely that it will be necessary that the
Option Shares underlying the Option be sold pursuant to another exemption
from registration, which exemption and its requirements may be difficult to
satisfy.
(c) Optionee Information. That as a result (i) of the optionee's
position with the Corporation; (ii) of inquiries made by the Optionee; and
(iii) of information furnished to the Optionee by the Corporation, the
Optionee has at the date of the grant of the Option, and will have as of
the date of the Option's exercise, reviewed all information necessary to
make an informed investment decision.
(d) Tax Consequences. The Optionee understands that, under certain
conditions, disposition of the Option Shares underlying the Option could
result in adverse tax consequences because of failure to meet prescribed
holding period requirements.
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(e) Legend. The Optionee understands that each certificate
representing the Option Shares underlying the Option shall be endorsed with
the following legend:
"The shares represented by this certificate have not been registered
under the Securities Act of 1933, as amended, and may not be sold, pledged
or otherwise transferred or disposed of except (i) in accordance with the
provisions of the Securities Act of 1933, as amended, and any applicable
state law and (ii) in accordance with the terms and provisions of a certain
Option Agreement, dated as of March 15, 1996, by and between Firetector
Inc. and Optionee."
(f) Transfer Restrictions. Except as provided in Section 9, the
Corporation need not register any transfer of any of the Option Shares not
in compliance with applicable Federal and State securities laws. In such
event, the Corporation may instruct its transfer agent not to register
transfer of any of the Option Shares. Any legend endorsed on a certificate
pursuant to the foregoing language and the stop-transfer instructions with
respect to such Option Shares, shall be removed, and the Corporation shall
promptly issue a certificate without such legend to the holder of such
Option Shares, if such Option Shares are registered under the Securities
Act and a prospectus meeting the requirements of the Securities Act is
available or if such holder establishes in a manner reasonably satisfactory
to the Corporation, that such legend may be removed and such stop-transfer
instructions may be rescinded.
7. Antidilution Provisions. The option is subject to the following terms
and conditions during its term:
(a) Stock Distributions and Splits. If (i) the Corporation's
outstanding Common Stock shall be subdivided into a greater number of
shares, (ii) a dividend in Common Stock or other voting stock shall be paid
in respect of the Corporation's Common Stock or (iii) there shall be any
other distribution on the Corporation's Common Stock payable otherwise than
out of earnings, retained earnings or earned surplus, the Purchase Price
per underlying Option Share in effect immediately prior to such subdivision
or at the record date of such dividend or distribution shall simultaneously
with the effectiveness of such subdivision or immediately after the record
date of such dividend or distribution be proportionately reduced; and,
conversely, if outstanding Common Stock of the Corporation shall be
combined into a smaller number of shares thereof, the Purchase Price per
underlying Option Share in effect immediately prior to such combination
shall simultaneously with the effectiveness of such combination, be
proportionately increased. If there shall be a distribution described in
subparagraph (iii) of this Section 7(a) the Purchase Price per underlying
Option Share in effect immediately prior to such distribution shall be
reduced by an amount equal to the fair value of such distribution per
Common Stock of the Corporation. Any dividend paid or distributed on the
Corporation's Common Stock in stock of any other class or securities
convertible into Common Stock shall be
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treated as a dividend paid in Common Stock of the Corporation to the extent
that those Common Stock are issuable upon the conversion thereof and such
Common Stock shall be deemed to have been issued without consideration.
(b) Adjustment of Number of Underlying Shares. Whenever the Purchase
Price per underlying Option Share is adjusted as provided in Section 7(a)
above, the number of the underlying Option Shares purchasable upon exercise
of the Option immediately prior to such adjustment shall be adjusted,
effective simultaneously with such adjustment, to equal the product
obtained (calculated to the nearest full share) by multiplying such number
of the underlying Option Shares by a fraction, the numerator of which is
the Purchase Price per underlying Option Share in effect immediately prior
to such adjustment and the denominator of which is the Purchase Price per
underlying Option Share in effect upon such adjustment, which adjusted
number of the underlying Option Shares shall thereupon be the number of the
underlying Option Shares purchasable upon exercise of the Option until
adjusted again as provided herein, if necessary and appropriate.
(c) Reorganizations. If (i) the Corporation or its successor
corporation shall be recapitalized by reclassifying its outstanding Common
Stock into a stock with a different par value or by changing its
outstanding Common Stock with par value to Common Stock without par value
or vice versa, or (ii) the Corporation or its successor corporation shall
be a party to a consolidation or merge with, or sell or convey all, or
substantially all, of its (or any successor corporation's) assets to any
other entity or entities, then as a condition of that reorganization,
consolidation, merger, sale or conveyance lawful and adequate provisions
shall be made whereby the Optionee shall have the right to purchase, upon
the terms and conditions specified in this Option Agreement, in lieu of the
underlying Option Shares theretofore purchasable upon the exercise of the
Option, the kind and amount of shares (or other securities and property)
receivable upon such recapitalization, consolidation, merger, sale or
conveyance by such holder of the number of shares of Common Stock which the
Optionee might have purchased immediately prior to such recapitalization,
consolidation, merger, sale or conveyance.
(d) Notice of Change of Purchase Price. Whenever the Purchase Price
per underlying Option Share or the kind or amount of securities purchasable
under the Option shall be adjusted pursuant to any of the provisions of
this Option Agreement, the Corporation shall forthwith thereafter cause to
be sent to the Optionee, a certificate setting forth the adjustments in the
Purchase Price per underlying Option Share and/or the number of underlying
Option Shares then purchasable, and also setting forth in detail the facts
requiring such adjustments including, without limitation, a statement of
the consideration
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received or deemed to have been received by the Corporation for any
additional Common Stock issued by it.
(e) Notice of Record Date. In the event of (i) any taking by the
Corporation of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend (other than a cash dividend payable out of earned surplus of the
Corporation) or other distribution, or any right to subscribe for, purchase
or otherwise acquire any shares of any class or any other securities or
property, or to receive any other right, (ii) any capital reorganization of
the Corporation, or any reclassification or recapitalization of the capital
stock of the Corporation, or any transfer of all or substantially all of
the assets of the Corporation to or consolidation or merger of the
Corporation with or into any other person, or (iii) any voluntary or
involuntary dissolution or liquidation of the Corporation, then, and in
each such event, the Corporation will mail or cause to be mailed to the
Optionee a notice specifying not only the date on which any such record is
to be taken for the purpose of such dividend, distribution or right, and
stating the amount and character of such dividend, distribution, or right,
but also the date on which any such reorganization, reclassification,
recapitalization, transfer, consolidation, merger, dissolution, liquidation
or winding-up is to take place, and the time, if any, as of which the
holders of record of the Corporation's Common Stock shall be entitled to
exchange their Common Stock for securities or other property deliverable
upon such reorganization, reclassification, recapitalization, transfer,
consolidation, merger, dissolution, liquidation or winding-up. Such notice
shall be mailed immediately upon determination of such record date and no
less than ten (10) calendar days prior to the proposed record date therein
specified.
8. Method Of Exercising the Option. Subject to the terms and conditions of
this Option Agreement, the Option may be exercised by written notice to the
Corporation, at its principal office. Such notice shall state the election to
exercise the Option and the number of Option Shares in respect of which it is
being exercised, and shall be signed by the person or persons so exercising the
Option. Such notice shall: (a) be accompanied by payment of the full purchase
price of such Option Shares, in which event the Corporation shall deliver a
certificate or certificates representing such shares as soon as practicable
after the notice shall be received; or (b) fix a date (not less than five nor
more than ten business days from the date such notice shall be received by the
Corporation) for the payment of the full purchase price of such Option Shares at
the principal office of the Corporation, against delivery of a certificate or
certificates representing such Option Shares. The certificate or certificates
for the Option Shares as to which the Option shall have been so exercised shall
be registered in the name of the person or persons so exercising the Option and
shall be delivered as provided above to or upon the written order of the person
or persons exercising the Option. In the event the Option shall be exercised by
any person or persons other than the Optionee, such notice shall be accompanied
by appropriate proof of the right of such person or persons to exercise the
Option. All Option Shares that shall be purchased upon the exercise of the
Option as provided herein shall be fully paid and nonassessable.
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9. General. The Corporation shall at all times during the term of the
Option reserve and keep available such number of shares of Common Stock as will
be sufficient to satisfy the requirements of this Option Agreement, shall pay
all original issue and transfer taxes with respect to the issue and transfer of
Option shares pursuant hereto and all other fees and expenses necessarily
incurred by the Corporation in connection therewith, and will from time to time
use its best efforts to comply with all laws and regulations which, in the
opinion of counsel for the Corporation, shall be applicable thereto.
10. Taxation Upon Exercise of Option. The Optionee understands that, upon
exercise of this Option, he or she will recognize income for tax purposes in an
amount equal to the excess of the then fair market value of the Option Shares
over the exercise price. Upon a resale of such Option Shares by the Optionee,
any difference between the sale price and the fair market value of the shares on
the date of exercise of the Option will be treated as taxable gain.
IN WITNESS WHEREOF, the Corporation has caused this Option Agreement to be
duly executed by its officers thereunto duly authorized, and the Optionee has
executed this Agreement, all as of the date and year first above written.
FIRETECTOR INC.
By:
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Xxxxxx Xxxxxx
Title: President
--------------------------------
[__________], Optionee
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