STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT dated as of August 19, 2004, between DATA
SYSTEMS & SOFTWARE INC., a Delaware corporation (the "Company"), and Xxxxxxx
Xxxxxxxxxxx (the "Optionee").
Preliminary Statement
Pursuant to the Company's 1994 Stock Incentive Plan (the "Plan"),
and in accordance with Section 5(f)(ii) of the Employment Agreement, dated as of
January 1, 2004 and executed on August 19, 2004, between the Optionee, the
Company and Databit Inc. (a wholly-owned subsidiary of the Company) (the
"Employment Agreement"), the Board of Directors of the Company (the "Committee")
has authorized the granting to Optionee of an option to purchase 305,000 shares
of the Company's Common Stock, par value $.01 per share ("Common Stock"),
subject to the Plan and the terms and conditions set forth herein. The parties
hereto desire to enter into this Agreement in order to set forth the terms of
such option.
Accordingly, the parties hereto agree as follows:
1. Grant of Option. Subject to the Plan and the terms and conditions
of this Agreement, the Company hereby grants to Optionee the option (the
"Option") to purchase from the Company up to 305,000 shares of Common Stock (the
"Option Shares") at a price per share of $0.71. The number of shares to which
this Option pertains and the price per share at which this Option may be
exercised are subject to adjustment in accordance with the provisions of the
Plan.
2. Plan Governs Terms of Option. The Option is subject in all
respects to the terms and conditions of the Plan as amended to date. A copy of
the Plan is available from the Secretary of the Company.
3. Type of Option. The Option is not intended to qualify as an
"incentive stock option" within the meaning of Section 422A of the Internal
Revenue Code of 1986, as amended.
4. Time of Exercise of Option. (a) This Option may be exercised as
to not more than 105,000 shares at any time after August 18, 2006, as to not
more than 205,000 shares at any time after February 18, 2007 and as to the total
of 305,000 shares at any time after February 18, 2008 unless this Option has
been terminated in accordance with the provisions of Paragraph 5.
(b) Change of Control. Anything in the Employment Agreement and in
this Paragraph 4 and in Paragraph 5 hereof to the contrary notwithstanding, this
Option may be exercised as to all the Option Shares (less the number of Option
Shares as to which it has previously been exercised, surrendered or forfeited)
during the period commencing on the occurrence of a Change of Control (as
defined in Section 6(c) of the Employment Agreement) of the Company or Databit
Inc. ("Databit"), and ending on August 18, 2014.
5. Termination of Option. This Option shall immediately terminate
after August 18, 2014, or upon the earlier termination of the Optionee's
employment with Databit or the Company, except that (x) if such termination was
pursuant to Section 6 of the Employment Agreement, this Option may be exercised
as to all the Option Shares (less the number of Option Shares as to which it has
previously been exercised, surrendered or forfeited) and the Optionee's right to
exercise such unexercised portion shall continue for 12 months after the date of
such termination (but in no event later than August 18, 2014), or (y) if such
termination was pursuant to Section 7 of the Employment Agreement and the date
of such termination is on or after August 18, 2006, this Option may be exercised
as to the number of Option Shares as to which it would otherwise have been
exercisable and the Optionee's right to exercise such vested unexercised portion
of this Option shall continue for three months after the date of such
termination (but in no event later than August 18, 2014). The Optionee's right
to exercise any portion of this Option after any termination of the Optionee's
employment with Databit or the Company shall be subject to the Optionee's
compliance with (i) Section 9 of the Employment Agreement (Non-Competition;
Non-Disclosure of Information) and (ii) Section 10 of the Employment Agreement
(Mutual Non-Disparagement)..
6. Manner of Exercise. This Option may be exercised by the delivery
to the Company of a written notice signed by the Optionee in the form of Exhibit
A hereto, together with either (i) full payment of the purchase price therefor
in cash or by certified check payable to the order of the Company or (ii)
irrevocable instructions to a broker designated or approved by the Company to
sell shares of Common Stock issuable upon exercise of this Option and promptly
deliver to the Company a portion of the proceeds thereof equal to the exercise
price and any applicable withholding taxes. As provided in the Plan, the
Committee may require Optionee to remit to the Company an amount sufficient to
satisfy any federal, state or local withholding tax requirements prior to
delivering to Optionee any shares purchased upon exercise of this Option. This
Option may not be exercised with respect to a fractional share.
7. Restriction on Transfer. This Option may not be assigned or
transferred except by will or the law of descent and distribution and during the
Optionee's lifetime may be exercised only by Optionee.
8. Notice. Any notice or communication to the Company hereunder
shall be in writing and shall be deemed to have been duly given when delivered
in person, or by United States mail, to the following address (or to such other
address as the Company shall from time to time specify):
Data Systems & Software Inc.
000 Xxxxx 00
Xxxxxx, Xxx Xxxxxx 00000
Attention: Secretary
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date and year first above written.
DATA SYSTEMS & SOFTWARE INC.
By /s/ Xxxxx Xxxxxxx
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Xxxxx Xxxxxxx, CFO
OPTIONEE:
/s/ Xxxxxxx Xxxxxxxxxxx
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Xxxxxxx Xxxxxxxxxxx
EXHIBIT A TO STOCK OPTION AGREEMENT
OPTION EXERCISE FORM
DATA SYSTEMS & SOFTWARE INC.
000 XXXXX 00
XXXXXX, XX 00000
Gentlemen:
I hereby exercise the following portion of the stock option that has
heretofore been granted to me as follows:
Date of grant August 19, 2004
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Exercise price per share $0.71
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Number of shares underlying option grant
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Number of shares underlying option held
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Number of shares for which option being exercised hereby
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In connection with this exercise [check one]:
_____ I enclose my check in the amount of $__________
_____ I am delivering to a broker designated or approved by the
Company irrevocable instructions to (i) sell shares of Common Stock acquired
upon exercise and (ii) promptly deliver to the Company a portion of the proceeds
thereof equal to the exercise price and any applicable withholding taxes.
I hereby agree to execute whatever other documents are necessary in
order to comply with the Plan and any applicable legal requirements in
connection with the issuance of the stock to me pursuant to the Plan.
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Optionee (Signature) Social Security Number
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Please print name
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Date Address
