STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT made as of the 4th day of August, 1998 by and
between AMERICAN CARD TECHNOLOGY, INC., a Delaware corporation, with a business
office at 0000 Xxxxxxx Xxxx Xxxx, Xxxxx 000, Xxxxxxxx, Xxxxxxx 00000
(hereinafter called the "Corporation"), and XXXXX X. XXXXX, XX. (hereinafter
called the "Optionee").
The Corporation has adopted a 1996 Stock Option Plan (the "Plan") to be
used to award options to purchase shares of its common stock to certain
employees, consultants, and other persons who perform substantial services for
the Corporation or any of its subsidiaries or affiliates, as determined by the
Board of Directors of the Corporation (the "Board") or a special committee of
the Board (the "Committee"). The Board or Committee has authorized the awarding
of an option under the Plan to the Optionee. The options issued under the Plan
may in some cases be entitled to favorable tax treatment afforded to "incentive
stock options" under Sections 421 and 422 of the Internal Revenue Code (such an
option being hereinafter sometimes referred to as an "Incentive Stock Option").
Wherever the context so requires, the "Corporation" shall be deemed to refer to
any or all of the Corporation's subsidiaries or affiliates.
NOW, THEREFORE, in consideration of the premises contained herein, it is
hereby agreed as follows:
1. The Corporation hereby grants to the Optionee as of the date of this
Agreement the right and option to purchase (hereinafter called the "Option") all
or any part of an aggregate of 92,700 shares of the Corporation's common stock,
with a par value of $.001 per share (hereinafter called the "Common Stock"), on
the terms and conditions herein set forth.
2. The Option granted herein shall constitute an Incentive Stock Option.
3. The Optionee's right to exercise the Option shall be subject to the
following terms and conditions:
(a) OPTION PRICE. The price per share with respect to the Option
shall be Eleven and 00/100 Dollars ($11.00).
(b) EXERCISE OF OPTION. The Option shall be exercisable only as
follows:
(i) At any time after the date hereof, the Option may be
exercised to the extent of one-fourth of the aggregate number of shares of
Common Stock.
(ii) At any time after the expiration of the next three
successive anniversaries of the date hereof, the first such date being
August 4, 1999, the Option may be exercised to the extent of an additional
one-fourth of the aggregate number of shares originally covered by the
Option, and the Option may also be exercised to the extent to which the
right to exercise shall theretofore have accrued and not been exercised.
(iii) No portion of the Option shall be exercisable after the
tenth anniversary of the date of its grant, and after that date the Option
shall lapse with respect to any shares of Common Stock not theretofore
purchased.
(iv) The Option may not be exercised for less than one
hundred (100) shares of Common Stock at any one time, unless fewer than one
hundred (100) shares of Common Stock remain covered by the Option, in which
event the Option must be exercised for all such shares.
(c) NOTICE OF EXERCISE; PAYMENT; SHAREHOLDERS' RIGHTS. The
Optionee shall exercise the Option by giving a written notice of exercise, in
the form attached to this Agreement as EXHIBIT A, to the President of the
Corporation, indicating the number of shares of Common Stock to be purchased,
and tendering payment in
full (i) by cash or certified or bank check, (ii) by delivery of shares of
Common Stock then owned by the Optionee with a fair market value at the time of
exercise equal to the Option Price, or (iii) by a combination of (i) and (ii).
No shares shall be issued or delivered until full payment therefor has been
made. The Optionee shall have none of the rights of a shareholder, in respect
of the Common Stock, except with respect to shares actually issued to the
Optionee.
(d) NON-TRANSFERABILITY OF OPTION. The Option shall not be
transferable other than by will or by the laws of descent and distribution.
During the Optionee's lifetime, only the Optionee may exercise the Option.
(e) TERMINATION OF EMPLOYMENT. If the Optionee's employment shall
be terminated by the Corporation or by the Optionee, with or without cause, for
whatever reason other than by death, the Optionee shall have the right within
three months after such termination to exercise the Option to the extent the
right to exercise the Option shall have accrued at the date of such a
termination of employment, except to the extent the Option shall have been
exercised or shall have expired. Any portion of the Option not exercised within
said three months shall lapse.
(f) DEATH OF OPTIONEE.
(i) If the Optionee shall die, the Option shall lapse and
neither the Optionee nor the Optionee's heirs or legal representatives
shall have any further rights under this Agreement relating to any Option
with respect to which the right to exercise shall not have accrued prior to
the date of the Optionee's death.
(ii) If the Optionee shall die while employed by the
Corporation, or within the three-month period specified in Section 3(e)
hereof, the executor or administrator of the estate of the Optionee, or the
person or persons to whom the Option shall have been validly transferred by
the executor or administrator pursuant to will or the laws of descent and
distribution, shall have the right within one year from the date of the
Optionee's death to exercise the Option to the extent the right to exercise
the Option shall have accrued at the date of death, except to the extent
the Option shall have been exercised or shall have expired. Any portion of
the Option not exercised within said one-year period shall lapse.
4. Shares of Common Stock issued upon the exercise of any portion of the
Option granted under this Agreement shall be subject to the following terms and
conditions:
(a) TRANSFERABILITY. The Common Stock shall be transferable only
in compliance with this Section 4 and only pursuant to an effective registration
or exemption from registration under the Securities Act of 1933, as amended.
All transfers, whether or not permitted by this section, shall be subject to all
of the provisions of this Agreement. Stock certificates representing shares of
Common Stock shall bear a legend in substantially the following form:
The shares of the Corporation's common stock represented
by this certificate have not been registered under the
Securities Act of 1933, as amended, and may not be transferred
except pursuant to an effective registration, or exemption from
registration, under said Act. In addition, such shares are
subject to a right of repurchase by the Corporation.
(b) REPURCHASE OF COMMON STOCK BY THE CORPORATION FOLLOWING
TERMINATION OF EMPLOYMENT OR BY EXERCISE OF RIGHT OF FIRST REFUSAL. The
Corporation shall have a right to repurchase, at the buy-back price set forth
below, any or all of the Common Stock issued upon the exercise of the Option.
Such right shall arise if the Optionee ceases to be employed by the Corporation
for any reason, at the time of the Optionee's death, or if the Optionee elects
to dispose of any such shares of Common Stock by sale, transfer or other
disposition.
(i) REPURCHASE ON DEATH, DISABILITY, OR TERMINATION OF
EMPLOYMENT. In the event the Optionee dies or ceases to be employed by the
Corporation for any reason, the Corporation shall, within
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thirty days immediately following the date on which the Optionee's
employment terminates, give to the Optionee or the Optionee's legal
representative, as the case may be, a signed notice in writing, either
delivered by hand, or mailed by registered or certified mail, to the
Optionee's last known address: (1) stating that the Corporation has the
first right to purchase the Common Stock; (2) designating the number of
shares of the Common Stock that the Optionee or the Optionee's legal
representative must sell to the Corporation; (3) naming the buy-back price
per share in cash at which the Optionee or the Optionee's legal
representative is obligated to sell such shares, as determined herein; and
(4) stating whether the Corporation elects to exercise its right to
repurchase the Common Stock.
(ii) REPURCHASE ON ATTEMPTED TRANSFER. In the event the
Optionee elects to dispose of any of the Common Stock, the Optionee shall
give to the President of the Corporation a signed notice in writing, either
delivered by hand, or mailed by registered or certified mail, to the
Corporation's principal office: (1) designating the number of shares of
the Common Stock to be disposed of; (2) stating the specific manner in
which the Optionee proposes to dispose of such shares if they are not
purchased by the Corporation pursuant to this Agreement; (3) specifying the
names and addresses of the persons to whom the Optionee desires to dispose
of such shares to the extent not so purchased by the Corporation;
(4) offering to sell such shares to the Corporation; (5) naming the price
per share in cash at which the Optionee is willing to sell such shares to
the Corporation, which price shall not be greater than the buy-back price
as determined herein; and (6) designating the Optionee's mailing address.
The Corporation shall have a period of thirty days after the receipt of the
notice within which to accept the Optionee's offer as contained in the
Optionee's notice. Acceptance shall be by notice in writing to that effect
hand delivered or mailed to the Optionee prior to the expiration date of
said thirty-day period to the mailing address designated in the Optionee's
notice. If the Corporation declines to accept such offer, the Optionee
shall have a period of forty-five (45) days within which to dispose of such
shares of Common Stock. Such forty-five (45) day period shall commence on
the date of receipt of the Corporation's written rejection of such offer
or, if the Corporation does not reject such offer in writing, on the
expiration of the thirty-day period within which the Corporation may accept
such offer.
(iii) BUY-BACK. The buy-back price per share for purposes of
this Section 4(b) shall be:
(1) the price per share offered in a bona fide offer
to purchase, or
(2) in the absence of a bona fide offer to purchase,
the fair market value per share as determined by the Board or the
Committee, which amount shall not be less than the price per share at
which shares of Common Stock were last sold by the Corporation other
than pursuant to the Plan.
(c) PROCEDURE FOR REPURCHASE. If any shares of the Common Stock
are subject to repurchase as provided in Section 4(b) hereof, and the
Corporation shall have exercised its right to repurchase, the Optionee or the
Optionee's legal representative shall immediately deliver to the Corporation the
certificates for the shares. The certificates shall be voided, and the shares
of the Common Stock represented by the certificates shall be thereafter treated
on the books of the Corporation as treasury shares. A person required to
deliver a certificate for the Common Stock under this section shall be deemed
irrevocably to have authorized the voiding of such certificate and the treatment
of such Common Stock as treasury shares (regardless whether the certificates are
in fact delivered) and irrevocably to have authorized the Board to terminate his
status as a shareholder in respect of such shares.
(d) PAYMENT FOR SHARES OF COMMON STOCK. The Corporation shall have
the right to pay the purchase price for any shares purchased pursuant to this
Section 4 over a one year period, in equal quarterly installments without
interest, or, in the case of a bona fide offer to purchase, in the manner and
over such period of time as provided for in such offer.
(e) PRICE ADJUSTMENT. In all cases the buy-back price per share
shall be adjusted to reflect previous capital changes, if any, as described in
Section 8 hereof. No offer to purchase shall be deemed "bona fide"
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unless made by a third party unrelated to the Corporation or its shareholders
with the intention that such purchase be an investment in the Corporation and
not with a view to distribution or resale, nor shall any offer to purchase be
deemed "bona fide" if made by a competitor of the Corporation regardless of the
offeror's intention.
5. In the event the Optionee dies or ceases to be employed by the
Corporation and the Optionee has accrued but not exercised rights to purchase
shares of Common Stock, the following terms and conditions shall apply.
(a) REPURCHASE ON TERMINATION OF EMPLOYMENT OR DEATH WITH RESPECT
TO OPTIONS ACCRUED BUT NOT EXERCISED. Upon termination of the Optionee's
employment, or upon the Optionee's death giving the Optionee, or the Optionee's
legal representative, rights to exercise the Option under either Section 3(e) or
3(f)(ii) hereof, the Corporation shall, within thirty days immediately following
the date on which the Corporation learns of the Optionee's death or the date on
which the Optionee's employment terminates, give to the Optionee or the
Optionee's legal representative, as the case may be, a signed notice in writing,
either delivered by hand, or mailed by registered or certified mail, to the
Optionee's last known address: (i) stating that the Corporation has the first
right to purchase the Common Stock subject to the Option; (ii) designating the
number of shares of the Common Stock which the Optionee or the Optionee's legal
representative has a right to purchase under the Option and the option price per
share under this Agreement; (iii) naming the buy-back price per share in cash
which the Optionee or the Optionee's legal representative is obligated to sell
the shares subject to the Option, as determined herein; and (iv) stating whether
the Corporation will exercise its right to repurchase the Common Stock if the
Optionee or the Optionee's legal representative exercised the Option.
(b) SIMULTANEOUS EXERCISE OF OPTION AND REPURCHASE OF COMMON STOCK.
The Optionee or the Optionee's legal representative may exercise the Option
within the time period provided in Section 3(e) or Section 3(f)(ii) hereof, as
the case may be, by giving the Corporation notice of exercise of the Option
under Section 3(c) hereof. However, such notice need not be accompanied by
tender of payment if the Corporation has elected to exercise its right to
repurchase. Upon receipt of the notice of exercise from the Optionee or the
Optionee's legal representative within the applicable time period, the
Corporation shall pay the Optionee or the Optionee's legal representative for
each share an amount equal to the buy-back price per share less the option price
per share. If the Corporation does not exercise its right to repurchase under
Section 5(a) hereof, then this Section 5(b) shall be of no effect, and the
provisions for exercising the Option under Section 3(c) shall apply.
(c) COMBINING NOTICES. If the Optionee, or the Optionee's legal
representative, has both shares of Common Stock and a right to exercise the
Option as to additional shares of Common Stock, then the Corporation may deliver
one notice to the Optionee or the Optionee's legal representative to satisfy the
provisions of Section 4(b)(i) hereof and Section 5(a) hereof provided the
information required to be contained in each notice under such sections are
contained in the single notice.
6. Failure by the Corporation to exercise its rights to repurchase the
Common Stock upon the termination of employment of the Optionee shall not be a
waiver of the Corporation's right to repurchase on a subsequent sale, transfer
or other disposition of Common Stock.
7. The Optionee acknowledges that the exercise by the Corporation of the
repurchase rights set forth in Sections 4 or 5 hereof may, if such repurchase is
effected within two (2) years after the date of grant of the Option or one (1)
year after the date of issuance of such shares of Common Stock, result in
disqualifying the Option from eligibility for the favorable tax treatment
accorded Incentive Stock Options under Section 421 of the Internal Revenue Code.
The Optionee further acknowledges that other special rules must be complied with
in order to ensure that the Option remains eligible for such favorable tax
treatment, and that the Optionee, in addition to conferring with appropriate
representatives of the Corporation, may wish to consult with his or her personal
tax adviser.
8. In the event that a dividend shall be declared upon the shares of
Common Stock payable in shares of Common Stock, the number of shares of Common
Stock then subject to this Option shall be adjusted by adding to each of such
shares the number of shares which would be distributable thereon if such shares
had been outstanding
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on the date fixed for determining the stockholders entitled to receive such
stock dividend. In the event that the outstanding shares of Common Stock shall
be changed into or exchanged for a different number or kind of shares of stock
or other securities of the Corporation or of another corporation, whether
through reorganization, recapitalization, stock split-up, combination of shares,
merger, or consolidation, then there shall be substituted for each share of
Common Stock subject to this Option, the number and kind of shares of stock or
other securities into which each outstanding share of Common Stock shall be so
changed or for which each such share shall be exchanged; PROVIDED, HOWEVER, that
in the event that such change or exchange results from a merger or
consolidation, and in the judgment of the Committee such substitution cannot be
effected or would be inappropriate, or if the Corporation shall sell all or
substantially all of its assets, the Corporation shall use reasonable efforts to
effect some other adjustment of this Option which the Committee, in its sole
discretion, shall deem equitable. In the event that there shall be any change,
other than as specified above in this Section 8, in the number or kind of
outstanding shares of Common Stock or of any stock or other securities into
which such shares of Common Stock shall have been changed or for which they
shall have been exchanged, then, if the Committee shall determine that such
change equitably requires an adjustment in the number or kind of shares then
subject to this Option, such adjustment shall be made by the Committee and shall
be effective and binding for all purposes of this Option. In the case of any
such substitution or adjustment as provided for in this paragraph, the Option
Price in this Option for each share covered hereby prior to such substitution or
adjustment will be the total option price for all shares of stock or other
securities which shall have been substituted for each such share or to which
such share shall have been adjusted pursuant to this Section 8. No adjustment
or substitution provided for in this Section 8 shall require the Corporation to
sell a fractional share; and the total substitution or adjustment with respect
to this Option shall be limited accordingly. Any of the foregoing adjustments
or substitutions in the shares subject to the Option shall not limit
applicability of the restrictions hereunder and such restrictions shall
automatically apply to all Common Stock or other securities issued by the
Corporation and at any time held by the Optionee by virtue of having exercised
the Option.
9. Subject to the restrictions of this Agreement, the Optionee shall have
all the rights of a shareholder in respect of the Common Stock issued hereunder,
beginning with the date of issuance of the Common Stock. The Common Stock shall
be fully paid and non-assessable.
10. The Optionee represents and agrees to represent and agree at the time
of the exercise of the Option that any and all Common Stock purchased pursuant
to the exercise of the Option will be purchased for investment and not with a
view to the distribution or resale thereof, and that the Common Stock will not
be sold except in accordance with the restrictions or limitations set forth in
this Agreement or as may be imposed by law.
11. 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 Agreement.
12. If the Corporation registers any of its shares of common stock under
the Securities Act of 1933, as amended (the "Act"), the provisions of Section 4
and Section 5 hereof shall terminate on the day the registration statement
becomes effective. The Common Stock issued upon exercise of the Option shall
thereupon be free of any restriction imposed hereby, except for the restriction
requiring transfer pursuant to the Act if such registration does not include the
Common Stock, and neither the Corporation nor the Optionee shall have any
further rights or obligations under Section 4 or Section 5 hereof, except the
Corporation's obligation to complete payments, under Section 4(b) hereof, for
the Common Stock previously repurchased.
13. This Agreement shall be interpreted according to the laws of the State
of Georgia.
14. Any controversy or claim arising out of or relating to this Agreement,
or the breach thereof, shall be settled by arbitration in accordance with the
Rules of the American Arbitration Association, and judgment upon the award
rendered may be entered in any Court having jurisdiction thereof.
15. This Agreement and the Plan which is hereby incorporated by reference
herein contain the entire agreement of the parties with respect to the Common
Stock. All prior agreements and understandings are merged
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herein. No amendment or modification hereof shall be binding unless in writing
and signed by the party against whom enforcement is sought.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year as first above written.
Seal AMERICAN CARD TECHNOLOGY, INC.
By:
----------------------------------
Xxxxxxx Xxxxxxx, Xx.
Its President
Attest:
----------------------------- ---------------------------------------
Secretary Xxxxx X. Xxxxx, Xx.
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EXHIBIT A
______________________________________________________
Address of Person Exercising Option
_____________________
Date
American Card Technology, Inc.
0000 Xxxxxxx Xxxx Xxxx - Xxxxx 000
Xxxxxxxx, Xxxxxxx 00000
Attention: President
Dear Sirs:
I hereby elect to exercise the Option to purchase shares of Common Stock of
the Corporation awarded to me on August 4, 1998.
A. The number of shares being purchased: ________ shares at $11.00 per
share for a total purchase price equal to $__________________ (the
"Purchase Price").
B. I desire to follow Procedures 1, 2, or 3 as indicated below:
[CHECK EITHER PROCEDURE 1, 2, OR 3 AND FILL IN BLANKS UNDER THAT
PROCEDURE ONLY].
_____ PROCEDURE 1: A certified or bank cashier's check payable to
the order of the Corporation in the amount of $_______________
[insert the full purchase price of the shares being purchased]
is attached.
The certificate or certificates should be mailed or delivered
to:
_____________________________________________
_____________________________________________
_____________________________________________
_____ PROCEDURE 2: The Purchase Price of the shares being purchased
which is payable to the Corporation pursuant to this notice
shall be offset against the fair market value of __________
shares of Common Stock surrendered herewith. The balance of
the Purchase Price shall be paid with the certified or bank
cashier's check payable to the order of the Corporation in the
amount of $_______________. The (i) certificate(s) for such
shares of Common Stock, (ii) a stock power conveying such
shares of Common Stock to the Corporation, and (iii) the
certified or bank cashier's check for the balance of the
Purchase Price are attached hereto.
_____ PROCEDURE 3: The Purchase Price of the shares being purchased
which is payable to the Corporation pursuant to this notice
shall be offset against the fair market value of that number of
such shares which is an amount equal to the Purchase
Price. For example, if the fair market value of the shares
being purchased is $22.00 per share, then 50% of the shares
being so purchased shall be retained by the Corporation as
payment for the other 50% of the shares. This method of
exercise is only available to the extent that it is consistent
with the Plan and is permissible for incentive stock options
under Sections 421 and 422 of the Internal Revenue Code.
C. The certificate or certificates for the shares being purchased should
be registered and the name and address to be shown on the Corporation's stock
records should be as follows:
_____________________________________________
_____________________________________________
_____________________________________________
D. I represent and agree that the shares as to which I am hereby
exercising an option are being purchased for investment and not with a view to
the distribution or resale thereof, and the Common Stock will not be sold except
in accordance with the restrictions or limitations set forth in the Stock Option
Agreement or as may be imposed by law.
Sincerely yours,
----------------------------------
Xxxxx X. Xxxxx, Xx.
