THIS DOCUMENT CONSTITUTES PART OF A PROSPECTUS COVERING SECURITIES THAT HAVE
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933.
APA OPTICS, INC.
INCENTIVE STOCK OPTION AGREEMENT
October 30, 2003
Dear Xxxxx Xxxxxxxx:
You are hereby notified that you have been granted an Incentive Stock
Option ("Option"), pursuant to and as defined in Section 5 of the APA Optics,
Inc. 1997 Stock Compensation Plan (the "Plan").
THE EFFECTIVENESS OF THIS STOCK OPTION AGREEMENT IS CONTINGENT UPON THE
COMPANY'S RECEIPT OF AN EXECUTED COPY OF THIS AGREEMENT.
The Option granted to you is to purchase 35,000 shares of Common Stock
("Stock") of the Company at a price of $2.55 per share. The date of grant of
this Option is the date of this letter, and it is the determination of the Board
of Directors that on this date the fair market value of the Stock does not
exceed $2.55 per share.
Your Option is in all respects limited and conditioned by the terms of the
Plan, including, but not limited to, the following:
1. The Plan is administered by the Board of Directors or a Committee
appointed by the Board of Directors of the Company, which, in either case, has
final and conclusive authority to administer the Plan and determine all
questions arising thereunder.
2. Your Option is exercisable as follows:
a. 11,000 shares of Stock subject to the Option may be purchased on or
after October 31, 2005, provided you remain employed by the Company through
October 31,2005;
b. An additional 7,000 shares of Stock subject to the Option may be
purchased on or after October 31, 2006, provided you remain employed by the
Company through October 31, 2006;
c. An additional 8,000 shares of Stock subject to the Option may be
purchased on or after October 31, 2007, provided you remain employed by the
Company through October 31, 2007;
d. An additional 9,000 shares of Stock subject to the Option may be
purchased on or after October 31, 2008, provided you remain employed by the
Company through October 31, 2008, and
3. The Option will expire, to the extent not exercised, on October 30,
2009.
4. The purchase price of any shares of Stock purchased pursuant to exercise
of this Option may be paid in cash, by certified or cashier's check, or by
transfer to the Company of shares of Stock owned by you for at least six months
prior to the exercise of the Option having a fair market value, as of the date
of your exercise of the Option, which is not less than the purchase price of the
Stock being acquired pursuant to your Option, or any combination thereof, or by
any other method authorized by the Board of Directors.
5. In the event of termination of your employment, your Option may be
exercised at any time within three months after the date of termination of your
employment or until the expiration of the stated term of the Option, whichever
is shorter, but only to the extent you were entitled to exercise your Option at
the date of termination of your employment.
6. In the event of termination of your employment as a result of
"Disability" (as defined in the Plan), your Option may be exercised at any time
within one year of such termination or until the expiration of the stated term
of the Option, whichever is shorter, to the extent you were entitled to exercise
the Option at the time of your Disability. In the event of your death within one
year after termination of your employment as a result of Disability, your Option
may be exercised at any time within one year following the date of your death or
until the expiration of the stated term of the Option, whichever is shorter, by
your estate or by a person who acquired the right to exercise your Option by
will or by the laws of descent and distribution, but only to the extent you were
entitled to exercise the Option at the time of termination of your employment.
7. In the event of your death while you are an employee, your Option may be
exercised at any time within one year after your death or until the expiration
of the stated term of the Option, whichever is shorter, by your estate or by a
person who acquired the right to exercise the Option by will or by the laws of
descent and distribution, to the extent the Option was exercisable by you at the
time of your death.
8. You may not transfer, sell, pledge, assign, or otherwise dispose of your
Option, other than at death by will or the laws of descent and distribution, and
your Option during your lifetime is exercisable only by you.
9. In the event of a "Change in Control" (as defined in the Plan), this
Option shall become fully exercisable.
10. The shares of Stock you acquire upon exercise of your Option may be
subject to restrictions against transfer as set forth in Section 11 of the Plan.
11. Unless a registration statement under the Securities Act of 1933 (and
applicable state securities laws) is in effect with respect to this Option or
Stock to be purchased pursuant to this Option, you agree with, and represent to,
the Company that you are acquiring the Option and Stock for the purpose of
investment and not with a view to transfer, sell, or otherwise dispose of the
Option or Stock, except as may be permitted
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under the Plan. The Company may require an opinion of counsel satisfactory to it
prior to the transfer of any Stock to you to assure at all times that it will be
in compliance with applicable federal and state securities laws. Reference is
made to Section 11 of the Plan in connection with restrictions on transfer and
the legending of any stock certificates issued to you upon your exercise of this
Option.
The exercise of this Option and the disposition of the Stock acquired upon
exercise are subject to certain tax benefits and consequences under the Internal
Revenue Code of 1986, as amended (the "Code"), which you are urged to discuss
with your tax adviser prior to exercise of the Option or disposition of the
Stock. The Company assumes no liability for any tax consequences to you on your
exercise of this Option or disposition of the Stock.
If you dispose of the Stock in a "disqualifying disposition" (as defined in
the Code), you authorize the Company to withhold all applicable state and
federal withholding taxes from your other compensation or any other amounts owed
to you by the Company or, alternatively, you will pay the Company any such
amount. Such payment may be made by authorizing the Company to withhold shares
issuable upon exercise of this Option in an amount equal in fair market value to
the taxes required to be paid.
At the time or times when you wish to exercise this Option, in whole, or in
parts of not less than 100 shares, please refer to the provisions of the Plan
dealing with methods and formalities of exercise of your Option.
APA OPTICS. INC.
By /s/ Xxxx Xxxx
---------------------------------
Its President
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ACCEPTANCE
I hereby accept the terms and provisions of the above Incentive Stock
Option Agreement and acknowledge that I have received a copy of the APA OPTICS,
INC. 1997 Stock Compensation Plan and agree to be bound by its terms. I also
agree to accept as binding, conclusive, and final all decisions or
interpretations of the Board of Directors upon any questions arising under the
Plan.
Dated effective October 30, 2003
/s/ Xxxxx Xxxxxxxx
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Xxxxx Xxxxxxxx
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