EXHIBIT 3
IMAGE SENSING SYSTEMS, INC.
NON-INCENTIVE STOCK OPTION AGREEMENT
This Option Agreement, made and entered into this 10th day of May 2000
between Image Sensing Systems, Inc., a Minnesota corporation (the "Company") and
Xxxxx Xxxxxxxxxxxxx, an individual resident of Minnesota ("Director").
WHEREAS, the Company has taken all necessary actions to grant the
following option, which option is not granted pursuant to the terms of the
Company's 1995 Long-Term Incentive and Stock Option Plan.
NOW THEREFORE, for good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the Company and Director agree as
follows:
1. Grant of Option. The Company hereby grants Director the right and
option (hereinafter called the "Option") to purchase all or any part of the
aggregate of Six thousand (6,000) shares of the Company's common stock at the
option price of $7.50 per share on the terms and conditions set forth in this
agreement and in the Plan. It is understood and agreed that the option price is
the per share fair market value of such shares on the date of the grant. The
Option is not intended to be an incentive stock option within the meaning of
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code").
2. Vesting of Option Rights. Except as otherwise provided in section 3
of this agreement, the Director may exercise the Option in accordance with the
following schedule:
On or after each of Number of shares with respect to
the following dates which the Option is exercisable
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05/10/00 6,000
Notwithstanding the foregoing, the Option may be exercised as to 100%
of the shares of common stock of the Company for which the Option was granted on
the date of a "change of control", as hereinafter defined. A "change of control"
shall mean any of the following: (i) a public announcement that any person has
acquired or has the right to acquire beneficial ownership of 51% or more of the
then outstanding shares of common stock of the Company and, for this purpose,
the terms "person" and `beneficial ownership" shall have the meanings provided
in Section 13(d) of the Securities Exchange Act of 1934 or related rules
promulgated by the Securities and Exchange Commission; (ii) the commencement of
or public announcement of an intention to make a tender or exchange offer for
51% or more of the then outstanding shares of the common stock of the Company;
(iii) a sale of all or substantially all of the assets of the Company, or (iv)
the Board of Directors of the Company, in its sole and absolute discretion,
determines that there has been a sufficient change in the stock ownership of the
Company to constitute a change in control of the Company.
The Option shall terminate at the close of business on May 10, 2010 or
such shorter period as is prescribed herein. The Director shall not have any of
the rights of a shareholder with respect to the shares subject to the Option
until such shares shall be issued to Director upon the proper exercise of the
Option.
3. Termination of Option. In the event the Director ceases to be
employed by the Company or its subsidiaries as an employee or director, any
Option Rights which have not become vested on, or before, the date on which such
employment terminates, shall become null and void. In the event such termination
is due to the death or legal incapacity of the Director, then the heirs or other
legal representative of the Director or his estate may enjoy the same rights and
options contained herein for the benefit of the Director. In the event of a
"change in control", as that term may be defined by the Board of Directors from
time to time, then all unvested share option shall become vested at the time of
such event
4. Method of Exercise of Option. Subject to the foregoing, the
Option may be exercised in whole or in part from time to time by serving written
notice of exercise on the Company at its principal office at 500 Spruce Tree
Centre, 0000 Xxxxxxxxxx Xxxxxx, Xx. Xxxx, Xxxxxxxxx 00000. The notice shall set
forth the number of shares as to which the Option is being exercised and shall
be accompanied by payment of the purchase price. Payment of the purchase price
shall be made in cash (including bank check, personal check or money order
payable to the Company), or, at the discretion of the Company, by delivering to
the Company for cancellation shares of the Company's common stock already owned
by Director having a fair market value equal to the full purchase price of the
shares being acquired or a combination of cash and such shares. The fair market
value of any shares delivered by Director upon the exercise of the Option shall
be determined as provided in section 5 of the Company's 1995 Long-Term Incentive
and Stock Option Plan.
5. Miscellaneous.
(a) This agreement shall not confer on Director any right with
respect to continuance of employment with the Company or any subsidiary
of the Company, nor will it interfere in any way with the right of the
Company to terminate such employment at any time.
(b) The exercise of all or any parts of the Option shall only
be effective at such time that the sale of shares of common stock
pursuant to such exercise will not violate any state or federal
securities or other laws.
(c) The Option may not be transferred, except by will or the
laws of descent and distribution to the extent provided in subsection
3, and during Director's lifetime the Option is exercisable only by
Director.
(d) If there shall be any change in the common stock subject
to the Option through merger, consolidation, reorganization,
recapitalization, stock dividend, stock split or other change in the
corporate structure of the Company, appropriate adjustments shall be
made by the Company in the number of shares and the price per share of
the shares
subject to the Option in order to prevent dilution or enlargement of
the option rights granted hereunder.
(e) The Company shall at all times during the term of the
Option reserve and keep available such number of shares of the
Company's common stock as will be sufficient to satisfy the
requirements of this agreement.
(f) In order to comply with all applicable federal or state
income tax laws or regulation, the Company may take such action as it
deems appropriate to insure that, if necessary, all applicable federal
or state payroll, withholding, income or other taxes are withheld or
collected from Employee.
(g) Director shall not disclose either the contents or any of
the terms and conditions of the Option to any other person, except with
the consent of an authorized officer of the Company that is not the
Employee or on a confidential basis for personal financial planning,
legal or administrative purposes, and agrees that disclosure in
violation of this Section 5(g) may result in both immediate termination
of the Option without the right to exercise any part thereof and
termination of employment with the Company.
IN WITNESS WHEREOF, the Company and Director have executed this
agreement on the date set forth in the first paragraph.
IMAGE SENSING SYSTEMS, INC.
By /s/ Xxxxxxx X. Xxxxxxx
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Xxxxxxx X. Xxxxxxx
Its President and Chairman
By /s/ Xxxxx Xxxxxxxxxxxxx
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Xxxxx Xxxxxxxxxxxxx
Director
