TECH LABORATORIES, INC.
STOCK OPTION AGREEMENT
This Stock Option Agreement (this "Agreement") is made and entered into as
of the Date of Grant set forth below (the "Date of Grant") by and between Tech
Laboratories, Inc., a New Jersey corporation (the "Company"), and the Optionee
named below ("Optionee").
Optionee: Bernard M. Ciongoli
Social Security Number:
Optionee's Address: 17 Liberty Ridge Trail
Totowa, New Jersey 07512
Total Option Shares: 300,000
Exercise Price Per Share: $0.50
Date of Grant: October 1, 1998
Vesting Start Date: October 1, 1998
Expiration Date: October 1, 2003
Type of Stock Option
(Check one): |_| Incentive Stock Option
|X| Nonqualified Stock Option
1. Grant of Option. The Company hereby grants to Optionee an option (this
"Option") to purchase up to the total number of shares of Common Stock of the
Company set forth above as Total Option Shares (collectively, the "Shares") at
the Exercise Price Per Share set forth above (the "Exercise Price"). This Option
is not intended to qualify as an "incentive stock option" ("ISO") within the
meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code").
2. Vesting; Exercise Period.
2.1. Vesting Of Shares. This Option shall be exercisable as it vests. This
Option shall vest and become exercisable as to portions of the Shares as
follows: (a) this Option shall not be exercisable with respect to any of the
Shares until October 1, 1998 (the "First Vesting Date"); (b) if Optionee has
continuously provided services to the Company, or any parent or Subsidiary of
the Company, then on the First Vesting Date, this Option shall become
exercisable as to 100,000 Shares; and (c) thereafter this Option shall become
exercisable as to an additional 100,000 Shares on each yearly anniversary of the
First Vesting Date for two (2) years, provided that Optionee has continuously
provided services to the Company, or any Parent or Subsidiary of the Company.
2.2. Vesting of Options. Shares that are vested pursuant to the schedule
set forth in Section 2.1 hereof are "Vested Shares." Shares that are not vested
pursuant to the schedule set forth in Section 2.1 hereof are "Unvested Shares."
2.3. Expiration. This Option shall expire on the Expiration Date set forth
above and must be exercised, if at all, on or before the earlier of the
Expiration Date or the date on which this Option is earlier terminated in
accordance with the provisions of Section 3 hereof.
3. Termination.
3.1. Termination For Any Reason Except Death, Disability, or Cause. If
Optionee is Terminated for any reason except Optionee's death, disability, or
cause, then this Option, to the extent (and only to the extent) that it is
vested in accordance with the schedule set forth in Section 2.1 hereof on the
Termination Date, may be exercised by Optionee no later than three (3) months
after the Termination Date, but in any event, no later than the Expiration Date.
3.2. Termination Because of Death or Disability. If Optionee is Terminated
because of death or disability of Optionee (or Optionee dies within three (3)
months after Termination other than for cause or because of disability), then
this Option, to the extent that it is vested in accordance with the schedule set
forth in Section 2.1 hereof on the Termination Date, may be exercised by
Optionee (or Optionee's legal representative or authorized assignee) no later
than twelve (12) months after the Termination Date, but in any event, no later
than the Expiration Date.
3.3. Termination for Cause. If Optionee is Terminated for cause, this
Option will expire on Optionee's date of Termination.
4. Manner of Exercise.
4.1. Stock Option Exercise Agreement. To exercise this Option, Optionee (or
in the case of exercise after Optionee's death, Optionee's executor,
administrator, heir, or legatee, as the case may be) must deliver to the Company
an executed stock option exercise agreement in the form attached hereto as
Exhibit A, or in such other form as may be approved by the Company from time to
time (the "Exercise Agreement"), which shall set forth, inter alia, Optionee's
election to exercise this Option, the number of shares being purchased, any
restrictions imposed on the Shares and any representations, warranties, and
agreements regarding Optionee's investment intent and access to information as
may be required by the Company to comply with applicable securities laws. If
someone other than Optionee exercises this Option, then such person must submit
documentation reasonably acceptable to the Company that such person has the
right to exercise this Option.
4.2. Limitations on Exercise. This Option may not be exercised unless such
exercise is in compliance with all applicable federal and state securities laws,
as they are in effect on the date of exercise.
4.3. Payment. The Exercise Agreement shall be accompanied by full payment
of the Exercise Price for the shares being purchased in cash (by check) or,
where permitted by law:
(a) by cancellation of indebtedness of the Company to Optionee;
-2-
(b) provided that a public market for the Company's stock exists: (1)
through a "same day sale" commitment from Optionee and a broker-dealer that
is a member of the National Association of Securities Dealers, Inc. (an
"NASD Dealer"), whereby Optionee irrevocably elects to exercise this Option
and to sell a portion as of the Shares so purchased to pay for the Exercise
Price, and whereby the NASD Dealer irrevocably commits upon receipt of such
Shares to forward the Exercise Price directly to the Company; or (2)
through a "margin" commitment from Optionee and an NASD Dealer, whereby
Optionee irrevocably elects to exercise this Option and to pledge the
Shares so purchased to the NASD Dealer in a margin account as security for
a loan from the NASD Dealer in the amount of the Exercise Price, and
whereby the NASD Dealer irrevocably commits upon receipt of such Shares to
forward the Exercise Price directly to the Company; or
(c) Optionee may elect to receive Shares equal to the value of this
Option by deliering the Excercise Agreement with the provision marked off
for a cashless exercise. In such event, the Company shall issue to Optionee
the number of shares of Common Stock, as applicable, computed using the
following formula:
(Y) (A-B)
X = ----------
A
Where: X = The final number of Shares to be issued to Optionee.
Y = The number of Shares to be canceled pursuant to such
exercise of options granted under this Stock Option
Agreement.
A = The fair market value of one share of the Common Stock.
B = Exercise Price (as adjusted to the date of such
calculations).
4.4. Tax Withholding. Prior to the issuance of the Shares upon exercise of
this Option, Optionee must pay or provide for any applicable federal or state
withholding obligations of the Company. If the Company permits, Optionee may
provide for payment of withholding taxes upon exercise of this Option by
requesting that the Company retain Shares with a Fair Market Value equal to the
minimum amount of taxes required to be withheld. In such case, the Company shall
issue the net number of Shares to Optionee by deducting the Shares retained from
the Shares issuable upon exercise.
4.5. Issuance of Shares. Provided that the Exercise Agreement and payment
are in form and substance satisfactory to counsel for the Company, the Company
shall issue Shares registered in the name of Optionee, Optionee's authorized
assignee, or Optionee's legal representative, and shall deliver certificates
representing the Shares with the appropriate legends affixed thereto.
5. Compliance with Laws and Regulations. The exercise of this Option and
the issuance and transfer of Shares shall be subject to compliance by the
Company and Optionee with all applicable requirements of federal and state
securities laws and with all applicable requirements of any stock exchange on
which the Company's Common Stock may be listed at the time of such issuance or
transfer. Optionee understands that the Company is under no obligation to
register or qualify the Shares with the Securities and Exchange Commission, any
state securities commission or any stock exchange to effect such compliance.
-3-
6. Nontransferability of Option. This Option may not be transferred in any
manner other than by will or by the laws of descent and distribution, and may be
exercised during the lifetime of Optionee only by Optionee. The terms of this
Option shall be binding upon the executors, administrators, successors, and
assigns of Optionee.
7. Privileges of Stock Ownership. Optionee shall not have any of the rights
of a stockholder with respect to any Shares until the Shares are issued to
Optionee.
8. Interpretation. Any dispute regarding the interpretation of this
Agreement shall be submitted by Optionee or the Company to the Board of
Directors of the Company for review. The resolution of such dispute by the Board
of Directors shall be final and binding on the Company and Optionee.
9. Entire Agreement. This Agreement and the Plan and the Exercise Agreement
constitute the entire agreement and understanding of the parties hereto and with
respect to the subject matter hereof, and supersede all prior understandings and
agreements with respect to such subject matter.
10. Notices. Any notice required to be given or delivered to the Company
under the terms of this Agreement shall be in writing and addressed to the
Corporate Secretary of the Company at its principal corporate offices. Any
notice required to be given or delivered to Optionee shall be in writing and
addressed to Optionee at the address indicated above or to such other address as
such party may designate in writing from time to time to the Company. All
notices shall be deemed to have been given or delivered upon: personal delivery;
three (3) days after deposit in the United States mail by certified or
registered mail (return receipt requested); one (1) business day after deposit
with any return receipt express courier (prepaid); or one (1) business day after
transmission by facsimile.
11. Successors and Assigns. The Company may assign any of its rights under
this Agreement. This Agreement shall be binding upon and inure to the benefit of
the successors and assigns of the Company. Subject to the restrictions on
transfer set forth herein, this Agreement shall be binding upon Optionee and
Optionee's heirs, executors, administrators, legal representatives, successors,
and assigns.
12. Governing Law. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of New Jersey, without regard to
that body of law pertaining to choice of law or conflict of law.
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed in
duplicate by its duly representative, and Optionee has executed this Agreement
in duplicate as of the Date of Grant.
TECH LABORATORIES, INC. OPTIONEE
By:
-------------------------- -----------------------------
Earl Bjorndal Bernard M. Ciongoli
Vice President
-4-
Exhibit A
TECH LABORATORIES, INC.
STOCK OPTION EXERCISE AGREEMENT
I hereby elect to purchase the number of shares of Common Stock of Tech
Laboratories, Inc. (the "Company") as set forth below:
Optionee:
-----------------------------------------------------------------------
Social Security Number:
---------------------------------------------------------
Address:
------------------------------------------------------------------------
Type of Option: |_| Incentive Stock Option
|X| Nonqualified Stock Option
Number of Shares Purchased:
-----------------------------------------------------
Purchase Price per Share:
-------------------------------------------------------
Aggregate Purchase Price:
-------------------------------------------------------
Date of Option Agreement:
-------------------------------------------------------
Exact Name of Title to Shares:
--------------------------------------------------
1. Delivery Purchase Price. Optionee hereby delivers to the Company the
Aggregate Purchase Price, to the extent permitted in the Option Agreement (the
"Option Agreement") as follows (check as applicable and complete):
|_| In cash (by check) in the amount of $______________, receipt of which is
acknowledged by the Company;
|_| By cancellation of indebtedness of the Company to Optionee in the amount of
$______________; or
|_| Through the cashless exercise provision of the agreement.
2. Market Standoff Agreement. Optionee, if requested by the Company and an
underwriter of Common Stock (or other securities of the Company, agrees not to
sell or otherwise transfer or dispose of any Common Stock (or other securities)
of the Company held by Optionee during the period requested by the managing
underwriter following the effective date of a registration statement of the
Company filed under the Securities Act, provided that all officers and directors
of the Company are required to enter into a similar agreement. Such agreement
shall be in writing in a form satisfactory to the Company and such underwriter.
The Company may impose stop-transfer instructions with respect to the shares (or
other securities) subject to the foregoing restriction until the end of such
period.
Date:
--------------------------- -----------------------------
Signature of Optionee
-5-