FRISBY TECHNOLOGIES, INC.
NON-QUALIFIED STOCK OPTION AGREEMENT
THIS OPTION AGREEMENT is made and entered as of the 27th day of July 2000,
by and between Frisby Technologies, Inc., a Delaware corporation (the
"Corporation") and ---------- (the "Optionee").
WHEREAS, the Optionee is a consultant of the Corporation; and
WHEREAS, the Corporation considers it desirable and in its best interests
that Optionee be given an opportunity to acquire a proprietary interest in the
Corporation by possessing a non-qualified option to purchase up to ----------
shares of Common Stock of the Corporation, par value $.001 per share (the
"Common Stock").
NOW, THEREFORE, in consideration of the mutual covenants hereinafter set
forth and for other good and valuable consideration, the receipt and adequacy of
which is hereby acknowledged, the parties agree as follows:
1. Grant of Option. The Corporation hereby grants to the Optionee the right
and option (hereinafter the "Option") to purchase all or any part of an
aggregate of ------------- shares of Common Stock (such number being subject to
adjustment as hereinafter provided).
The Optionee acknowledges that the Option is not an "incentive option"
within the meaning of an "incentive stock option plan" and Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code").
2. Purchase Price. The purchase price of the Common Stock covered by the
Option shall be $4.125 per share (the "Purchase Price").
3. Term of the Option. Unless terminated earlier pursuant to Paragraph 9
hereof, the Option shall vest in accordance with the Section 5 (Compensation) of
the Endorsement and Representation Agreement entered into on July 27, 2000
between the Company and the Optionee. Accordingly, the Option shall be
exercisable as to the full amount of the Option commencing one year from the
date hereof. The Option granted hereby shall terminate July 27, 2005 unless
earlier terminated as provided herein or in the Plan.
4. Method of Exercising Option. The Option may be exercised in whole or in
part at any time (to the extent that it is exercisable in accordance with its
terms) by giving written notice to the Corporation, together with the tender of
the Purchase Price of the Common Stock covered by the Option. Payment of the
Purchase Price may be made in any of the following ways:
(a) in United States dollars in cash or by check payable to the
Corporation; or
(b) by delivery of shares of Common Stock of the Corporation already owned
by the Optionee, valued at fair market value; or
(c) by a combination of cash or check and Common Stock as provided in (a)
and (b) above; or
(d) in the discretion of the Corporation, by the issuance by the Optionee
of a promissory note, which shall be payable in thirty (30) days and shall bear
interest at such rate as shall be determined by the Corporation, which in no
event shall be less than the minimum rate required by the provisions of Section
483 of the Code to avoid the imputation of income to such Optionee.
As soon as practicable after receipt by the Corporation of such notice and
of payment in full of the Option price of all the Common Stock with respect to
which the Option has been exercised (including interest if payment is made in
installments), a certificate or certificates representing such Common Stock
shall be issued in the name of the Optionee, and shall be delivered to the
Optionee. All Common Stock shall be issued only upon receipt by the Corporation
of the Optionee's representation that the shares of Common Stock are purchased
for investment and not with a view toward distribution thereof.
5. Availability of Shares. The Corporation, during the term of this Option,
shall keep available at all times the number of shares of Common Stock required
to satisfy the Option. Notwithstanding the foregoing, the Corporation shall not
be obligated to deliver any Common Stock unless and until, in the opinion of the
Corporation's counsel, all applicable federal and state laws and regulations
have been complied with, nor, if the outstanding Common Stock is at the time
listed on any securities exchange, unless and until the Common Stock to be
delivered has been listed (or authorized to be added to the list upon official
notice of issuance) upon such exchange, nor unless or until all other legal
matters in connection with the issuance and delivery of the Common Stock have
been approved by the Corporation's counsel.
6. Adjustments. (a) If prior to the exercise of the Option granted
hereunder the Corporation shall have effected one or more stock split-ups, stock
dividends, or other increases or reductions of the number of shares of its
Common Stock outstanding without receiving compensation therefor in money,
services or property, the number of shares of Common Stock subject to the option
hereby granted shall (i) if a net increase shall have been effected in the
number of outstanding shares of the Corporation's Common Stock, be
proportionately increased and the Purchase Price per share of Common Stock shall
be proportionately reduced; and (ii) if a net reduction shall have been effected
in the number of outstanding shares of the Corporation's Common Stock, be
proportionately reduced and the Purchase Price per share of Common Share be
proportionately increased.
(b) In the event the Corporation is merged into or consolidated with
another corporation under circumstances where the Corporation is not the
surviving corporation, or if the Corporation is liquidated or sells or otherwise
disposes of all or substantially all of its assets to another corporation while
any unexercised Options remain outstanding:
(i) subject to the provisions of clauses (iii), (iv) and
(v) below, after the effective date of such merger,
consolidation or sale, as the case may be, the
Optionee shall be entitled, upon exercise of the
Option, to receive in lieu of shares of Common
Stock, shares of such stock or other securities as
the holders of the shares of Common Stock received
pursuant to the terms of the merger, consolidation
or sale; or
(ii) the Corporation may waive any discretionary
limitations imposed with respect to the exercise of
the Option so that the Option from and after a date
prior to the effective date of such merger,
consolidation, liquidation or sale, as the case may
be, specified by the Corporation, shall be
exercisable in full; or
(iii) the Option may be cancelled by the Corporation as of
the effective date of any such merger, consolidation,
liquidation or sale, provided that notice of such
cancellation shall be given to the Optionee, and the
Optionee shall have the right to exercise such option
in full (without regard to any discretionary
limitations imposed with respect to the option)
during a 30-day period preceding the effective date
of such merger, consolidation, liquidation or sale;
or
(iv) the Option may be cancelled by the Corporation as of
the date of any such merger, consolidation,
liquidation or sale, provided that notice of such
cancellation shall be given to the Optionee and the
Optionee shall have the right to exercise the Option
but only to the extent exercisable in accordance with
any discretionary limitations imposed with respect to
the Option prior to the effective date of such
merger, consolidation, liquidation or sale; or
(v) the Corporation in its discretion may provide for the
cancellation of the Option and for the payment to the
Optionee of some part or all of the amount by which
the value thereof exceeds the payment, if any, which
the Optionee would have been required to make to
exercise such Option.
(c) Except as expressly provided herein, no issuance by the Corporation of
shares of stock of any class, or securities convertible into shares of stock of
any class, shall affect, and no adjustment by reason thereof shall be made with
respect to, the number or Purchase Price of shares of Common Stock subject to
the Option.
7. Restrictions. The holder of this Option, by acceptance hereof,
represents and warrants as follows: (a) This Option and the right to purchase
Common Stock hereunder is personal to the holder and shall not be transferred to
any other person, other than by will or the laws of descent and distribution or
pursuant to a qualified domestic relations order as defined by the Code, or
Title I of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), or by the rules thereunder. The Option shall not be assigned, pledged
or hypothecated in any way (whether by operation of law or otherwise) and shall
not be subject to execution, attachment or similar process. Any attempted
transfer, assignment, pledge, hypothecation or other disposition of the Option
or of any rights granted hereunder contrary to the provisions of this Section 7,
or the levy of any attachment or similar process upon the Option or such right,
shall be null and void.
(b) The holder hereof has been advised and understands that the Option has
been issued in reliance upon exemptions from registration under the Securities
Act and applicable state statutes; the exercise of the Option and resale of the
Option and the Common Stock have not been registered under the Securities Act or
applicable state statutes and must be held and may not be sold, transferred, or
otherwise disposed of for value unless they are subsequently registered under
the Securities Act or an exemption from such registration is available; except
as set forth herein, the Corporation is under no obligation to register the
Option or the Common Stock under the Securities Act or the applicable state
statutes; in the absence of such registration, the sale of the Option or the
Common Stock may be practicably impossible; the Corporation's registrar and
transfer agent will maintain stop-transfer instructions against registration or
transfer of the Option and the Common Stock and any certificate issued upon
exercise of the Option representing the Common Stock will bear on its face a
legend in substantially the following form restricting the sale of the Common
Stock:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") AND
ARE "RESTRICTED SECURITIES" WITHIN THE MEANING OF RULE 144 PROMULGATED
UNDER THE SECURITIES ACT. THE SECURITIES HAVE BEEN ACQUIRED FOR
INVESTMENT AND MAY NOT BE SOLD OR TRANSFERRED WITHOUT COMPLYING WITH
RULE 144 IN THE ABSENCE OF EFFECTIVE REGISTRATION OR OTHER COMPLIANCE
UNDER THE SECURITIES ACT.
(c) Prior to one year from the date the Option has been exercised and the
Common Stock fully paid for, the Corporation may refuse to transfer the Common
Stock unless the holder thereof provides an opinion of legal counsel reasonably
satisfactory to the Corporation or a "no action" letter or interpretive response
from the staff of the Securities and Exchange Commission to the effect that the
transfer is proper; further, unless such opinion letter or response states that
the Common Stock are free of any restrictions under the Securities Act, the
Corporation may refuse to transfer the Common Stock to any transferee who does
not furnish in writing to the Corporation the same representations and agree to
the same conditions with respect to such Common Stock as are set forth herein.
Notwithstanding any of the foregoing, the Corporation may refuse to transfer the
Common Stock if any circumstances are present reasonably indicating that the
transferee's representations are not accurate.
(d) After one year but prior to two years from the date the incentive
Option has been exercised and the Common Stock fully paid for, the Corporation
may refuse to transfer the Common Stock unless the holder either (i) meets the
requirements of Subparagraph (b) above; or (ii) sells such Common Stock in
accordance with Rule 144 and furnishes to the Corporation written assurances of
compliance therewith in the form of a copy of the Notice of Form 144 and
appropriate letters of compliance from the holder of such Common Stock and the
securities broker-dealer to or through which such Common Stock are being sold.
No opinion of counsel for the holder of the Common Stock shall be required
respecting sales in reliance on Rule 144 pursuant to Clause (ii) of this
Subparagraph (d).
(e) After two years from the date of the Option has been exercised and the
Common Stock fully paid for, the Corporation shall, upon the written request of
any persons who have held the Common Stock for one year (excluding any tolling
period provided for by Rule 144) and who is not, and has not been during the
preceding three months, an affiliate of the Corporation, re-issue to such holder
in such names and denominations as the holder shall request, one or more
certificates for the Common Stock without any restriction whatsoever on their
further transfer and cancel any and all stop transfer instructions regarding
such Common Stock on the books and records of the Corporation.
8. Shareholder's Rights. The Optionee shall have no rights as a shareholder
with respect to the Common Stock issuable upon exercisable of this Option until
payment of the Purchase Price and delivery to the Optionee of the Common Stock
as provided herein.
9. Termination of Option. Except as otherwise stated herein, the Option to
the extent not heretofore exercised shall terminate on July 27, 2005, the fifth
anniversary of this Agreement.
10. Validity and Construction. The validity and construction of this Option
shall be governed by the laws of the State of Delaware. Such construction is
vested in the Board of Directors and its construction shall be final and
conclusive.
IN WITNESS WHEREOF, the Corporation has caused this Option Agreement to be
executed by its proper corporate officers thereunto duly authorized.
FRISBY TECHNOLOGIES, INC.
By:
---------------------
Gregory S. Frisby, Chairman and CEO
--------------------------
Optionee
