Exhibit 10.7
IMAGEWARE SOFTWARE, INC.
1994 NONQUALIFIED STOCK OPTION PLAN
1. PURPOSE
The purpose of this 1994 Nonqualified Stock Option Plan (the "Plan")
is to encourage and enable Directors and Consultants of IMAGEWARE SOFTWARE, INC.
(the "Company") and its subsidiaries (if any are organized or acquired) to
acquire a proprietary interest, or increase their proprietary interest, in the
Company through the ownership of Common Stock of the Company. It is also
expected that the Plan will encourage qualified persons to accept offers of
Directorship with the Company. Pursuant to the Plan, optionees will be offered
the opportunity to acquire such Common Stock through the grant of Nonqualified
Stock Options.
2. ADMINISTRATION OF THE PLAN
The Plan shall be administered by a Stock Option Committee of the
Board of Directors of the Company (the "Committee") consisting of three members
appointed by the Board.
In administering the Plan, the Committee may adopt rules and
regulations for carrying out the Plan. The interpretation and decisions made by
the Committee with regard to any questions arising under the Plan shall be final
and conclusive on all officers and employees of the Company and its
subsidiaries.
The Committee shall have the power and authority to designate
participants, which shall not include Committee members during the time they are
serving on the Committee, and to determine the terms and provisions of
respective Option agreements (which need not be identical), including the
authority to grant to the holder of an outstanding Option, in exchange for the
surrender and cancellation of such Option, a new Option having a purchase price
lower than provided in the Option so surrendered and canceled and containing
such other terms and conditions as the Committee may prescribe in accordance
with the provisions of the Plan.
The term "subsidiary" means any corporation 50% or more of the voting
stock of which is owned by the Company or by a subsidiary (as so defined) of the
Company.
3. STOCK RESERVED FOR THE PLAN
Subject to the adjustments provided for in paragraph 9 hereof, a total
of 100,000 shares of Common Stock ("Common Stock") of the Company shall be
subject to the Plan. The shares subject to the Plan shall consist of unissued
shares or previously issued shares reacquired and held by the Company, and such
amount of shares shall be and is hereby reserved for sale for such purpose. Any
of such shares which may remain unsold and which are not subject to outstanding
Options at the termination of the Plan shall cease to be reserved for the
purpose of the Plan, but until termination of the Plan the Company shall at all
times reserve a sufficient number of shares to meet
the requirements of the Plan. Any shares subject to any Option which for any
reason expires or is terminated unexercised as to such shares may again be
subject to an Option under the Plan.
4. DESIGNATIONS OF PARTICIPANTS
The persons eligible for participating in the Plan as recipients of
Options shall be Directors of the Company or Consultants of the Company or any
of its subsidiaries.
5. OPTION PRICE
The purchase price of each share of Common Stock placed under Option
pursuant to the Plan shall be determined by the Committee, but shall in no event
be less than 85% of the fair market value of such share on the date the Option
is granted.
6. OPTION PERIOD
(a) TERM. The Options granted under this Plan shall be for a term of
not more than five years from the date of the granting of each Option.
(b) REORGANIZATION, ETC. If the Company is merged reorganized, or
consolidated with another corporation while unexercised Options remain
outstanding under the Plan, there shall be substituted for the shares subject to
the unexercised portions of such outstanding Options an appropriate number of
shares of each class of stock or other securities of the merged, reorganized, or
consolidated corporation distributed to the holders of the Company's Common
Stock in respect of their shares; provided, however, that all such Options may
be canceled by the Company as of the effective date of any such merger,
reorganization or consolidation or of any dissolution or liquidation of the
Company by giving notice of its intention to do so to each holder thereof or his
personal representative and by permitting the purchase during a period of not
less than thirty days next preceding such effective date of all of the shares
subject to such outstanding Options.
7. EXERCISE OF OPTIONS
The Committee, in granting Options, shall have the discretion to
determine the terms upon which such Options shall be exercisable, subject to the
applicable provisions of this Plan. In any event, Options shall be subject to
the following provisions:
(a) EXERCISE IN INSTALLMENTS. Except as provided in this Section 7,
a Director or Consultant must continue to act in that capacity at all times in
order to exercise such Option. Unless the Committee determines otherwise,
Options shall be exercisable in installments as follows: 30% after 12 months
from date of grant; 30% after 24 months from date of grant; and 40% after 36
months from date of grant. To the extent not exercised, installments shall
accumulate and be exercisable, in whole or in part, in any subsequent period.
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(b) TERMINATION AS DIRECTOR OR CONSULTANT WITHOUT CAUSE. The effect
of termination of a person's relationship with the Company as a Director or
Consultant shall be that any outstanding Option then held by such Director or
Consultant may be exercised at any time prior to the expiration date of the
Option, or within three months after the date of such termination, whichever is
the shorter period.
(c) TERMINATION AS DIRECTOR OR CONSULTANT FOR CAUSE. If a Director
or Consultant is terminated for "cause", then his rights under any then
outstanding Option shall terminate at the time of such termination of
employment. Termination for "cause" shall include, but not be limited to,
termination due to the occurrence of any of the following events:
(i) The Director or Consultant's persistent or excessive use
of drugs or alcohol to an extent that such use interferes with the
proper performance of his duties to the Company hereunder; or
(ii) The Director or Consultant's misappropriation of funds or
property of the Company (as determined by the Company's Board of
Directors); or
(iii) The Director or Consultant's gross negligence, willful
misconduct, insubordination or habitual neglect of duty in carrying
out his duties as a director or consultant (as determined by the
Company's Board of Directors).
(d) PAYMENT. The purchase price of the shares as to which an Option
is exercised shall be paid in full at the time of exercise. Such purchase price
shall be payable in cash, or, at the discretion of the Company, in shares of
Common Stock theretofore owned by the holder of such Option (or in a combination
of cash and such Common Stock). For purposes of determining the amount, if any,
of the purchase price satisfied by payment in Common Stock, such Stock shall be
valued at its fair market value on the date of exercise. Any Common Stock
delivered in satisfaction of all or a portion of the purchase price shall be
appropriately endorsed for transfer and assignment to the Company. No holder of
an Option shall be, or have any of the rights or privileges of, a shareholder of
the Company in respect of any shares purchasable upon the exercise of any part
of an Option unless and until certificates representing such shares shall have
been issued by the Company to such holder.
(e) GENERAL RESTRICTIONS. Each Option granted under the Plan shall
be subject to the requirement that, if at any time the Board of Directors shall
determine, in its discretion, that the listing, registration, or qualification
of the shares issuable or transferable upon exercise thereof upon any securities
exchange or under any state or federal law, or the consent or approval of any
governmental regulatory body is necessary or desirable as a condition of, or in
connection with, the granting of such Option or the issuance or transfer of
shares thereunder, such Option may not be exercised in whole or in part unless
such listing, registration, qualification, consent or approval shall have been
effected or obtained free of any conditions not acceptable to the Board of
Directors.
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(f) SPECIAL RESTRICTION. No Option granted under the Plan may be
exercised until the Plan has been approved and ratified by the holders of a
majority of the voting stock of the Company at a shareholders' meeting. In the
event that the Plan is not approved by the shareholders of the Company within
one year of the date of its adoption by the Company's Board of Directors, the
right to exercise any Option shall terminate.
8. CAPITAL CHANGE OF THE COMPANY
If the outstanding shares of Common Stock of the Company shall at any
time be changed or exchanged by declaration of a stock dividend, split-up,
combination of shares or recapitalization, the number and kind of shares subject
to this Plan or subject to any Options theretofore granted, and the Option
prices, shall be appropriately and equitably adjusted so as to maintain the
proportionate number of shares without changing the aggregate Option price,
provided, however, no adjustment shall be made by reason of the distribution of
subscription rights on outstanding stock.
9. OPTION AGREEMENT
Each Option granted under the Plan shall be evidenced by a written
stock Option agreement executed by the Company and accepted by the Director or
Consultant, which (a) shall contain each of the provisions and agreements herein
specifically required to be contained therein, including, without limitation, in
the case of Options granted prior to the approval of the Plan by the
shareholders of the Company, a provision specifically indicating that such
Option may not be exercised unless and until such approval is obtained, and (b)
shall contain such other terms and conditions as the Committee may deem
desirable and which are not inconsistent with the Plan, including a
representation that the shares of Common Stock will be purchased for investment
and not with a view to their distribution, or other representations necessary to
comply with federal or state securities laws.
10. AMENDMENT OF THE PLAN
The Board of Directors shall have the right to amend, suspend or
terminate the Plan at any time; provided, however, that no such action shall
affect or in any way impair the rights of a Director or Consultant under any
Option theretofore granted under the Plan. In addition, unless duly approved by
the holders of Common Stock entitled to vote thereon at a meeting (which may be
the annual meeting) duly called and held for such purpose, no amendment or
change shall be made in the Plan (a) increasing the total number of shares which
may be issued or transferred under the Plan (except for adjustments for
recapitalization, stock dividends and other changes in corporate structure); (b)
changing the minimum purchase price hereinbefore specified for the shares
subject to Options; (c) changing the maximum period during which Options may be
exercised; or (d) extending the period during which Options may be granted under
the Plan.
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11. EFFECTIVE DATE OF THE PLAN
The Plan shall be effective as of September 1, 1994.
12. DURATION OF THE PLAN
Subject to the provisions of paragraph 6, the Plan shall remain in
effect until all shares subject or which may become subject to the Plan shall
have been purchased pursuant to the exercise of Options granted under the Plan,
provided that no Options may be granted after August 31, 2004.
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