TECH LABORATORIES, INC.
NOVEMBER 2000 INCENTIVE STOCK OPTION PLAN
1. PURPOSE.
The purpose of the November 2000 Incentive Stock Option Plan (the "Plan")
is to provide an incentive to selected directors, officers and employees of Tech
Laboratories, Inc., and any subsidiaries of Tech Laboratories, Inc.
(collectively, the "Company"), to acquire a proprietary interest in the Company,
to continue as directors, officers and employees and to increase their efforts
on behalf of the Company.
2. THE PLAN.
The Plan provides for the grant of Options to acquire shares of the
Company's common stock, par value $.01 (the "Stock"). Options granted under the
Plan are intended to qualify as incentive stock options (the "Incentive Stock
Options" or "Options") within the meaning of Section 422 of the Internal Revenue
Code of 1986, as amended (the "Code").
3. ADMINISTRATION.
(a) The Plan shall be administered by a committee (the "Committee")
composed of one or more of the independent members of the Board of Directors of
the Company (the "Board") to operate and administer the Plan in its stead. A
member of the Board shall be ineligible to receive an Option under the Plan
unless he is an employee of the Company.
(b) The Committee shall have plenary authority in its discretion, subject
only to the express provisions of the Plan and, in reference to the Options, of
Code Section 422;
(i) to select the eligible persons who shall be granted Options (the
"Grantees"), the number of Shares subject to each Option and terms of the
Option granted to each Grantee, provided that, in making its determination,
the Committee shall consider the position and responsibilities of the
employee, the nature and value to the Company, of his or her services and
accomplishments, the employee's present and potential contribution to the
success of the Company and any other factors that the Committee may deem
relevant.
(ii) to determine the dates of the Option grants;
(iii) to prescribe the form of the instruments evidencing Options;
(iv) to adopt, amend and rescind rules and regulations for the
administration of the Plan and for its own acts and proceedings;
(v) to decide all questions and settle all controversies and disputes
of general applicability that may arise in connection with the Plan; and
(vi) to amend certain terms of the Plan as provided in Section 9.
<PAGE>
All decisions, determinations and interpretations with respect to the foregoing
matters shall be made by the Committee and shall be final and binding upon all
persons.
(c) EXCULPATION. No member of the Committee shall be personally liable for
monetary damages for any action taken or any failure to take any action in
connection with the administration of the Plan or the granting of Options under
it unless such action or failure to take action constitutes self-dealing, wilful
misconduct or recklessness; provided, however, that the provisions of this
subsection shall not apply to the responsibility or liability of a director
pursuant to any criminal statute or to the liability of a director for the
payment of taxes pursuant to local, state or federal law.
(d) INDEMNIFICATION. Each member of the Committee shall be entitled without
further act on his part or her part to indemnity from the Company to the fullest
extent provided by applicable law and the Company's Certificate of Incorporation
or Bylaws in connection with or arising out of any action, suit or proceeding
with respect to the administration of the Plan or the granting of Options under
it in which he or she may be involved by reason of being or having been a member
of the Committee at the time of the action, suit or proceeding.
4. EFFECTIVENESS AND TERMINATION OF THE PLAN.
The Plan shall become effective as of November 14, 2000, the date of its
adoption by the Board, provided that the Plan is approved by the stockholders of
the Company within one year of its adoption. Any Option outstanding under the
Plan at the time of termination under the Plan shall remain in effect in
accordance with its terms and conditions and those of the Plan. The Plan shall
terminate on the earliest of:
(a) November 14, 2010; or
(b) the date when all shares of Stock reserved for issuance under the
Plan shall have been acquired through exercise of Options granted under the
Plan; or
(c) such earlier date as the Board or Committee may determine.
5. THE STOCK.
The aggregate number of shares of Stock issuable under the Plan shall be
one hundred fifty thousand (150,000) shares or the number and kinds of shares of
capital stock or other securities substituted for the Stock as provided in
Section 8. The aggregate number of shares of Stock issuable under the Plan may
be set aside out of the authorized but unissued shares of Stock not reserved for
any other purpose or out of shares of Stock held in or acquired for the treasury
of the Company. All shares of Stock subject to an Option that terminates
unexercised for any reason may thereafter be subjected to a new Option under the
Plan.
6. OPTION AGREEMENT.
Each Grantee shall enter into a written agreement with the Company setting
forth the terms and conditions of the Option issued to the Grantee, consistent
with the Plan. The form of agreement to evidence Options may be established at
any time or from time to time by the Committee. No Grantee
-2-
<PAGE>
shall have rights in any Option unless and until a written option agreement is
entered into with the Company.
7. TERMS AND CONDITIONS OF OPTIONS.
Options may be granted by the Committee at any time and from time to time
prior to the termination of the Plan. Except as hereinafter provided, Options
granted under the Plan shall be subject to the following terms and conditions:
(a) GRANTEES. The Grantees shall be those employees of the Company
(including officers and directors) and any subsidiaries of the Company, selected
by the Committee, provided that no Incentive Stock Options shall be granted to
(i) any person owning Stock or other capital stock in the Company possessing
more than 10% of the total combined voting power of all classes of capital stock
of the Company, unless such Grantee meets the requirements of 7(b) and 7(e); or,
(ii) any director who is not an employee. The maximum number of Options which
may be granted to a Grantee within a calendar year is fifty thousand (50,000)
shares of the Company's Stock.
(b) PRICE. The exercise price of an Option shall be no less than the fair
market value of the Stock, without regard to any restriction, at the time the
Option is granted. If a Grantee owns more than 10% of the total combined voting
power of all classes of stock of the Company, the share price of any Options
granted to such individual shall be 110% of the fair market value of the Stock.
The Committee shall establish procedures to determine the fair market value of
the Stock.
(c) PAYMENT FOR STOCK. The exercise price of an Option shall be paid in
full at the time of the exercise in (i) cash, or (ii) by certified check payable
to the Company, or (iii) by other mode of payment as the Committee may approve.
(d) LIMITATION. Notwithstanding any provision of the Plan to the contrary,
an Option shall not be treated as an Incentive Stock Option to the extent to
which the aggregate fair market value (determined as of the time an Incentive
Stock Option is granted) of Stock for which Incentive Stock Options are
exercisable for the first time buy a Grantee during any calendar year exceeds
$100,000.
(e) DURATION AND EXERCISE OF OPTIONS. Options may be exercised for terms of
up to but not exceeding ten years from the date of grant. Subject to the
foregoing, Options shall be exercisable at the times and in the amounts (up to
the full amount thereof) determined by the Board or Committee at the time of
grant. If an Option granted under the Plan is exercisable in installments the
Board or Committee shall determine what events, if any, will make it subject to
acceleration. If an Option is granted to an employee who owns more than 10% of
the combined voting power of all classes of stock of the Company, the Option
must be exercised within 5 years.
(f) TERMINATION OF EMPLOYMENT. Upon the termination of the Grantee's
employment, the right to exercise an Option shall be set forth in the agreement
entered into between the Company and the Grantee.
(g) TRANSFERABILITY OF OPTION. No Option shall be transferable except by
will or the laws of descent and distribution. An Option shall be exercisable
during the Grantee's lifetime only by the Grantee.
-3-
<PAGE>
(h) MODIFICATION, EXTENSION AND RENEWAL OF OPTIONS. Subject to the terms
and conditions and within the limitations of the Plan, the Committee may modify,
extend or renew outstanding Options granted under the Plan, or accept the
surrender of outstanding Options (to the extent not theretofore exercised) and
authorize the granting of new Options in substitution thereof. Notwithstanding
the foregoing, however, no modification of an Option shall, without the consent
of the Grantee, alter or impair any rights or obligations under any Option
theretofore granted under the Plan or adversely affect the status of an
Incentive Stock Option.
(i) OTHER TERMS AND CONDITIONS. Option agreements may contain any other
provision not inconsistent with the Plan that the Committee deems appropriate.
8. ADJUSTMENT FOR CHANGES IN THE STOCK.
(a) In the event the shares of Stock, as presently constituted, shall be
changed into or exchanged for a different number or kind of shares or other
securities of the Company (whether by reason of merger, consolidation,
recapitalization, reclassification, split, reverse split, combination of shares
or otherwise), then there shall be substituted for or added to each share of
Stock theretofore or thereafter subject to an Option the number and kind of
shares of capital stock or other securities into, which each outstanding share
of Stock shall be changed, or for which each such share shall be exchanged, or
to which each such share shall be entitled, as the case may be. The price and
other terms of outstanding Options shall also be appropriately amended to
reflect the foregoing events. In the event there shall be any other change in
the number or kind of outstanding shares of the Stock, or of any capital stock
or other securities into which the Stock shall have been changed or for which it
shall have been exchanged, if the Committee shall, in its sole discretion,
determine that the change equitably requires an adjustment in any Option
theretofore granted or which may be granted under the Plan, then adjustments
shall be made in accordance with its determination.
(b) Fractional shares resulting from any adjustment in Options pursuant to
this Section 8 may be settled in cash or otherwise as the Committee shall
determine. Notice of any adjustment shall be given by the Company to each holder
of an Option that shall have been so adjusted, and the adjustment (whether or
not notice is given) shall be effective and binding for all purposes of the
plan.
(c) Notwithstanding Section 8(a), the Committee shall have the power, in
the event of the disposition of all or substantially all of the assets of the
Company, or the dissolution of the Company, or the merger or consolidation of
the Company, or the making of a tender offer to purchase all or a substantial
portion of outstanding Stock of the Company, to amend all outstanding Options
(upon such conditions as it shall deem fit) to (i) permit the exercise of
Options prior to the effective date of the transaction and to terminate all
unexercised Options as of that date, or (ii) require the forfeiture of all
Options, provided the Company pays to each Grantee the excess of the fair market
value of the Stock subject to the Option (determined in accordance with Section
7(b)) over the exercise price of the Option, or (iii) make any other provisions
that the Committee deems equitable.
9. AMENDMENT OF THE PLAN.
The Committee may amend the Plan, may correct any defect or supply any
omission or reconcile any inconsistency in the Plan or in any Option in the
manner and to the extent deemed desirable to carry out the Plan without action
on the part of the stockholders of the Company; provided, however, that, except
as provided in Section 8 and this Section 9, unless the stockholders of the
Company shall have first
-4-
<PAGE>
approved thereof (i) the total number of shares of Stock subject to the Plan
shall not be increased, (ii) no Option shall be exercisable more than ten years
after the date it is granted, (iii) the expiration date of the Plan shall not be
extended and (iv) no amendment shall permit the exercise price of any Option to
be less than the fair market value of the Stock at the time of grant, increase
the number of shares of Stock to be received on exercise of an Option,
materially increase the benefits accruing to a Grantee under an Option or modify
the eligibility requirements for participation in the Plan.
10. INTERPRETATION AND CONSTRUCTION. The interpretation and construction of any
provision of the Plan by the Committee shall be final, binding and conclusive
for all purposes.
11. APPLICATION OF FUNDS.
The proceeds received by the Company from the sale of Stock pursuant to
this Plan will be used for general corporate purposes.
12. NO OBLIGATION TO EXERCISE OPTION.
The granting of an Option shall impose no obligation upon the Grantee to
exercise an Option.
13. PLAN NOT A CONTRACT OF EMPLOYMENT.
The Plan is not a contract of employment, and the terms of employment of
any Grantee shall not be affected in any way by the Plan or related instruments
except as specifically provided therein. The establishment of the Plan shall not
be construed as conferring any legal rights upon any Grantee for a continuance
of employment; nor shall it interfere with the right of the Company to discharge
Grantee.
14. EXPENSE OF THE PLAN.
All of the expenses of administering the Plan shall be paid by the Company.
15. COMPLIANCE WITH APPLICABLE LAW.
Notwithstanding anything herein to the contrary, the Company shall not be
obligated to cause to be issued or delivered any certificates for shares of
Stock issuable upon exercise of an Option unless and until the Company is
advised by its counsel that the issuance and delivery of the certificates is in
compliance with all applicable laws, regulations of government authorities and
the requirements of any exchange upon which shares of stock are traded. The
Company shall in no event be obligated to register any securities pursuant to
the Securities Act of 1933 (as now in effect or as hereafter amended) or to take
any other action in order to cause the issuance and delivery of certificates to
comply with any of those laws, regulations or requirements. The Committee may
require, as a condition of the issuance and delivery of certificates and in
order to ensure compliance with those laws, regulations and requirements, that
the Grantee make such covenants, agreements and representations as the Board or
Committee, in its sole discretion, deems necessary or desirable. Each Option
shall be subject to the further requirement that if at any time the Committee
shall determine in its discretion that the listing or qualification of the
Shares of Stock subject to the Option, under any securities exchange
requirements or under any applicable law, or the consent or approval of any
regulatory body, is necessary in connection with the granting of the Option or
the issuance of stock thereunder, the Option may not be exercised in whole or in
part unless
-5-
<PAGE>
the listing, qualification, consent or approval shall have been effected or
obtained free of any conditions not acceptable to the Committee.
16. GOVERNING LAW.
Except to the extent preempted by federal law, this Plan shall be construed
and enforced in accordance with, and governed by, the laws of the State of New
Jersey.
-6-
