Exhibit 10.8
IMAGEWARE SYSTEMS, INC.
AMENDED AND RESTATED 1999 STOCK OPTION PLAN
1. PURPOSE. This Stock Option Plan (the "Plan") is intended to serve as
an incentive to, and to encourage stock ownership by, certain eligible
participants rendering services to ImageWare Systems, Inc., a California
corporation (the "Corporation"), and certain affiliates as set forth below, so
that they may acquire or increase their proprietary interest in the Corporation
and to encourage them to remain in the service of the Corporation.
2. ADMINISTRATION.
2.1 COMMITTEE. The Plan shall be administered by the Board of
Directors of the Corporation (the "Board of Directors") or a committee of two or
more members appointed by the Board of Directors (the "Committee") who are
Non-Employee Directors as defined in Rule 16b-3 promulgated under Section 16 of
the Securities Exchange Act of 1934 and an outside director as defined in
Treasury Regulation Section 1.162-27(e)(3). The Committee shall select one of
its members as Chairman and shall appoint a Secretary, who need not be a member
of the Committee. The Committee shall hold meetings at such times and places as
it may determine and minutes of such meetings shall be recorded. Acts by a
majority of the Committee in a meeting at which a quorum is present and acts
approved in writing by a majority of the members of the Committee shall be valid
acts of the Committee.
2.2 TERM. If the Board of Directors selects a Committee, the
members of the Committee shall serve on the Committee for the period of time
determined by the Board of Directors and shall be subject to removal by the
Board of Directors at any time. The Board of Directors may terminate the
function of the Committee at any time and resume all powers and authority
previously delegated to the Committee.
2.3 AUTHORITY. The Committee shall have sole discretion and
authority to grant options under the Plan to eligible participants rendering
services to the Corporation or any "parent" or "subsidiary" of the Corporation
("Parent or Subsidiary"), as defined in Section 424 of the Internal Revenue Code
of 1986, as amended (the "Code"), at such times, under such terms and in such
amounts as it may decide. For purposes of this Plan and any Stock Option
Agreement (as defined below), the term "Corporation" shall include any Parent or
Subsidiary, if applicable. Subject to the express provisions of the Plan, the
Committee shall have complete authority to interpret the Plan, to prescribe,
amend and rescind the rules and regulations relating to the Plan, to determine
the details and provisions of any Stock Option Agreement, to accelerate any
options granted under the Plan and to make all other determinations necessary or
advisable for the administration of the Plan.
2.4 TYPE OF OPTION. The Committee shall have full authority
and discretion to determine, and shall specify, whether the eligible individual
will be granted options intended to qualify as incentive options under Section
422 of the Code ("Incentive Options") or options
which are not intended to qualify under Section 422 of the Code ("Non-Qualified
Options"); provided, however, that Incentive Options shall only be granted to
employees of the Corporation, or a Parent or Subsidiary thereof, and shall be
subject to the special limitations set forth herein attributable to Incentive
Options.
2.5 INTERPRETATION. The interpretation and construction by the
Committee of any provisions of the Plan or of any option granted under the Plan
shall be final and binding on all parties having an interest in this Plan or any
option granted hereunder. No member of the Committee shall be liable for any
action or determination made in good faith with respect to the Plan or any
option granted under the Plan.
3. ELIGIBILITY.
3.1 GENERAL. All directors, officers, employees of and certain
persons rendering services to the Corporation, or any Parent or Subsidiary,
relative to the Corporation's, or any Parent's or Subsidiaries', management,
operation or development shall be eligible to receive options under the Plan.
The selection of recipients of options shall be within the sole and absolute
discretion of the Committee. No person shall be granted an option under this
Plan unless such person has executed the grant representation letter set forth
on Exhibit "A", as such Exhibit may be amended by the Committee from time to
time and no person shall be granted an Incentive Option under this Plan unless
such person is an employee of the Corporation, or a Parent or Subsidiary, on the
date of grant. No employee shall be granted more than 75,000 options in any one
year period.
3.2 TERMINATION OF ELIGIBILITY.
3.2.1 If an optionee ceases to be employed by the
Corporation, or its Parent or Subsidiary, is no longer an officer or member of
the Board of Directors of the Corporation or no longer performs services for the
Corporation, or its Parent or Subsidiary for any reason (other than for "cause,"
as hereinafter defined, or such optionee's death), any option granted hereunder
to such optionee shall expire three months after the date the occurrence giving
rise to such termination of eligibility (or 1 year in the event an optionee is
"disabled," as defined in Section 22(e)(3) of the Code) or upon the date it
expires by its terms, whichever is earlier. Any option that has not vested in
the optionee as of the date of such termination shall immediately expire and
shall be null and void. The Committee shall, in its sole and absolute
discretion, decide, utilizing the provisions set forth in Treasury Regulations
Section 1.4271-7(h), whether an authorized leave of absence or absence for
military or governmental service, or absence for any other reason, shall
constitute termination of eligibility for purposes of this Section.
3.2.2 If an optionee ceases to be employed by the
Corporation, or its Parent or Subsidiary, is no longer an officer or member of
the Board of Directors of the Corporation, or no longer performs services for
the Corporation, or its Parent or Subsidiary and such termination is as a result
of "cause," as hereinafter defined, then all options granted hereunder to such
optionee shall expire on the date of the occurrence giving rise to such
termination of eligibility or upon the date it expires by its terms, whichever
is earlier, and such optionee shall have no rights with respect to any
unexercised options. For purposes of this Plan, "cause" shall mean an optionee's
personal dishonesty, misconduct, breach of fiduciary duty, incompetence,
intentional failure to perform stated obligations, willful violation of any law,
rule, regulation or final cease and desist order, or any material breach of any
provision of this Plan, any Stock Option Agreement or any employment agreement.
3.3 DEATH OF OPTIONEE AND TRANSFER OF OPTION. In the event an
optionee shall die, an option may be exercised (subject to the condition that no
option shall be exercisable after its expiration and only to the extent that the
optionee's right to exercise such option had accrued at the time of the
optionee's death) at any time within six months after the optionee's death by
the executors or administrators of the optionee or by any person or persons who
shall have acquired the option directly from the optionee by bequest or
inheritance. Any option that has not vested in the optionee as of the date of
death or termination of employment, whichever is earlier, shall immediately
expire and shall be null and void. No option shall be transferable by the
optionee other than by will or the laws of intestate succession.
3.4 LIMITATION ON INCENTIVE OPTIONS. No person shall be
granted any Incentive Option to the extent that the aggregate fair market value
of the Stock (as defined below) to which such options are exercisable for the
first time by the optionee during any calendar year (under all plans of the
Corporation as determined under Section 422(d) of the Code) exceeds $100,000.
4. IDENTIFICATION OF STOCK. The Stock, as defined herein, subject to
the options shall be shares of the Corporation's authorized but unissued or
acquired or reacquired common stock (the "Stock"). The aggregate number of
shares subject to outstanding options shall not exceed 350,000 shares of Stock
(subject to adjustment as provided in Section 6). If any option granted
hereunder shall expire or terminate for any reason without having been exercised
in full, the unpurchased shares subject thereto shall again be available for
purposes of this Plan. Notwithstanding the above, at no time shall the total
number of shares of Stock issuable upon exercise of all outstanding options and
the total number of shares of Stock provided for under any stock bonus or
similar plan of the Corporation exceed 30% as calculated in accordance with the
conditions and exclusions of ss.260.140.45 of Title 10, California Code of
Regulations, based on the shares of the issuer which are outstanding at the time
the calculation is made.
5. TERMS AND CONDITIONS OF OPTIONS. Any option granted pursuant to the
Plan shall be evidenced by an agreement ("Stock Option Agreement") in such form
as the Committee shall from time to time determine, which agreement shall comply
with and be subject to the following terms and conditions:
5.1 NUMBER OF SHARES. Each option shall state the number of
shares of Stock to which it pertains.
5.2 OPTION EXERCISE PRICE. Each option shall state the option
exercise price, which shall be determined by the Committee; provided, however,
that (i) the exercise price of
any Incentive Option shall not be less than the fair market value of the Stock,
as determined by the Committee, on the date of grant of such option, (ii) the
exercise price of any option granted to any person who owns more than 10% of the
total combined voting power of all classes of the Corporation's stock, as
determined for purposes of Section 422 of the Code, shall not be less than 110%
of the fair market value of the Stock, as determined by the Committee, on the
date of grant of such option, and (iii) the exercise price of any Non-Qualified
Option shall not be less than 85 % of the fair market value of the Stock, as
determined by the Committee, on the date of grant of such option.
5.3 TERM OF OPTION. The term of an option granted hereunder
shall be determined by the Committee at the time of grant, but shall not exceed
ten years from the date of the grant. The term of any Incentive Option granted
to an employee who owns more than 10% of the total combined voting power of all
classes of the Corporation's stock, as determined for purposes of Section 422 of
the Code, shall in no event exceed five years from the date of grant. All
options shall be subject to early termination as set forth in this Plan. In no
event shall any option be exercisable after the expiration of its term.
5.4 METHOD OF EXERCISE. An option shall be exercised by
written notice to the Corporation by the optionee (or successor in the event of
death) and execution by the optionee of an exercise representation letter in the
form set forth on Exhibit "B," as such Exhibit may be amended by the Committee
from time to time. Such written notice shall state the number of shares with
respect to which the option is being exercised and designate a time, during
normal business hours of the Corporation, for the delivery thereof ("Exercise
Date"), which time shall be at least 30 days after the giving of such notice
unless an earlier date shall have been mutually agreed upon. At the time
specified in the written notice, the Corporation shall deliver to the optionee
at the principal office of the Corporation, or such other appropriate place as
may be determined by the Committee, a certificate or certificates for such
shares. Notwithstanding the foregoing, the Corporation may postpone delivery of
any certificate or certificates after notice of exercise for such reasonable
period as may be required to comply with any applicable listing requirements of
any securities exchange. In the event an option shall be exercisable by any
person other than the optionee, the required notice under this Section shall be
accompanied by appropriate proof of the right of such person to exercise the
option.
5.5 MEDIUM AND TIME OF PAYMENT. The option exercise price
shall be payable in full on or before the option Exercise Date in any one of the
following alternative forms:
5.5.1 Full payment in cash or certified bank or
cashier's check;
5.5.2 A Promissory Note (as defined below);
5.5.3 Full payment in shares of Stock or other
securities of the Corporation having a fair market value on the Exercise Date in
the amount equal to the option exercise price;
5.5.4 Through a special sale and remittance
procedure pursuant to
which the optionee shall concurrently provide irrevocable written instruction to
(a) a Corporation designated brokerage firm to effect the immediate sale of the
purchased shares and remit to the Corporation, out of the sale proceeds
available on the settlement date, sufficient funds to cover the aggregate
exercise price payable for the purchased shares plus all applicable Federal,
state and local income and employment taxes required to be withheld by the
Corporation by reason of such exercise and (b) the Corporation to deliver the
certificates for the purchased shares directly to such brokerage firm in order
to complete the sale.
5.5.5 A combination of the consideration set forth
in Sections 5.5.1, 5.5.2 and 5.5.3 equal to the option exercise price; or
5.5.6 Any other method of payment complying with
the provisions of Section 422 of the Code with respect to Incentive Options,
provided that the terms of payment are established by the Committee at the time
of grant and any other method of payment established by the Committee with
respect to Non-Qualified Options.
5.6 FAIR MARKET VALUE. The fair market value of a share of
Stock or other security of the Corporation on any relevant date shall be
determined in accordance with the following provisions:
5.6.1 If the Stock or other security of the
Corporation at the time is neither listed nor admitted to trading on any stock
exchange nor traded in the over-the-counter market, then the fair market value
shall be determined by the Committee after taking into account such factors as
the Committee shall deem appropriate.
5.6.2 If the Stock or other security of the
Corporation is not at the time listed or admitted to trading on any stock
exchange but is traded in the over-the-counter market, the fair market value
shall be the mean between the highest bid and lowest asked prices (or, if such
information is available, the closing selling price) of one share of Stock or
other security of the Corporation on the date in question in the
over-the-counter market, as such prices are reported by the National Association
of Securities Dealers through its NASDAQ system or any successor system. If
there are no reported bid and asked prices (or closing selling price) for the
Stock or other security of the Corporation on the date in question, then the
mean between the highest bid price and lowest asked price (or the closing
selling price) on the last preceding date for which such quotations exist shall
be determinative of fair market value.
5.6.3 If the Stock or other security of the
Corporation is at the time listed or admitted to trading on any stock exchange,
then the fair market value shall be the closing selling price of one share of
Stock or other security of the Corporation on the date in question on the stock
exchange determined by the Committee to be the primary market for the Stock or
other security of the Corporation, as such price is officially quoted in the
composite tape of transactions on such exchange. If there is no reported sale of
Stock or other security of the Corporation on such exchange on the date in
question, then the fair market value shall be the closing selling price on the
exchange on the last preceding date for which such quotation exists.
5.7 PROMISSORY NOTE. Subject to the requirements of applicable
state or Federal law or margin requirements, payment of all or part of the
purchase price of the Stock may be made by delivery of a full recourse
promissory note ("Promissory Note"). The Promissory Note shall be executed by
the optionee, made payable to the Corporation and bear interest at such rate as
the Committee shall determine, but in no case less than the minimum rate which
will not cause under the Code (i) interest to be imputed, (ii) original issue
discount to exist, or (iii) any other similar results to occur. Unless otherwise
determined by the Committee, interest on the Note shall be payable in quarterly
installments on March 31, June 30, September 30 and December 31 of each year. A
Promissory Note shall contain such other terms and conditions as may be
determined by the Committee; provided, however, that the full principal amount
of the Promissory Note and all unpaid interest accrued thereon shall be due not
later than five years from the date of exercise. The Corporation may obtain from
the optionee a security interest in all shares of Stock issued to the optionee
under the Plan for the purpose of securing payment under the Promissory Note and
shall retain possession of the stock certificates representing such shares in
order to perfect its security interest.
5.8 RIGHTS AS A SHAREHOLDER. An optionee or successor shall
have no rights as a shareholder with respect to any Stock underlying any option
until the date of the issuance to such optionee of a certificate for such Stock.
No adjustment shall be made for dividends (ordinary or extraordinary, whether in
cash, securities or other property) or distributions or other rights for which
the record date is prior to the date such Stock certificate is issued, except as
provided in Section 6.
5.9 MODIFICATION, EXTENSION AND RENEWAL OF OPTIONS. Subject to
the terms and conditions of the Plan, the Committee may modify, extend or renew
outstanding options granted under the Plan, or accept the surrender of
outstanding options (to the extent not exercised) and authorize the granting of
new options in substitution therefor.
5.10 VESTING AND RESTRICTIONS. The Committee shall have
complete authority and discretion to set the terms, conditions, restrictions,
vesting schedules and other provisions of any option in the applicable Stock
Option Agreement and shall have complete authority to require conditions and
restrictions on any Stock issued pursuant to this Plan; provided, however, that,
except with respect to options granted to officers or directors of the
Corporation, options granted pursuant to this Plan shall be exercisable or
"vest" at the rate of at least 20% per year over the 5-year period beginning on
the date the option is granted. Options granted to officers and directors shall
become exercisable or "vest," subject to reasonable conditions, at any time
during any period established by the Corporation.
5.11 OTHER PROVISIONS. The Stock Option Agreements shall
contain such other provisions, including without limitation, restrictions or
conditions upon the exercise of options, as the Committee shall deem advisable.
6. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION.
6.1 SUBDIVISION OR CONSOLIDATION. Subject to any required
action by
shareholders of the Corporation, the number of shares of Stock covered by each
outstanding option, and the exercise price thereof, shall be proportionately
adjusted for any increase or decrease in the number of issued shares of Stock of
the Corporation resulting from a subdivision or consolidation of shares,
including, but not limited to, a stock split, reverse stock split,
recapitalization, continuation or reclassification or the payment of a stock
dividend (but only on the Stock) or any other increase or decrease in the number
of such shares effected without receipt of consideration by the Corporation. Any
fraction of a share subject to option that would otherwise result from an
adjustment pursuant to this Section shall be rounded downward to the next full
number of shares without other compensation or consideration to the holder of
such option.
6.2 CAPITAL TRANSACTIONS. Upon a sale or exchange of all or
substantially all of the assets of the Corporation, a merger or consolidation in
which the Corporation is not the surviving corporation, a merger, reorganization
or consolidation in which the Corporation is the surviving corporation and
shareholders of the Corporation exchange their stock for securities or property,
a liquidation of the Corporation or similar transaction as determined by the
Committee ("Capital Transaction"), this Plan and each option issued under this
Plan, whether vested or unvested, shall terminate, unless such options are
assumed by a successor corporation in a merger or consolidation, immediately
prior to such Capital Transaction; provided, however, that unless the
outstanding options are assumed by a successor corporation in a merger or
consolidation, subject to terms approved by the Committee or the options are
repurchased pursuant to Section 8, all optionees will have the right, during the
30 days prior to such Capital Transaction, to exercise all vested options.
The Corporation shall, subject to any nondisclosure provisions, attempt to
provide optionees at least 15 days notice of the option termination date. The
Committee may (but shall not be obligated to) (i) accelerate the vesting of any
option or (ii) apply the foregoing provisions, including but not limited to
termination of this Plan and any options granted pursuant to the Plan, in the
event there is a sale of 50% or more of the stock of the Corporation in any one
year period or a transaction similar to a Capital Transaction.
6.3 ADJUSTMENTS. To the extent that the foregoing adjustments
relate to stock or securities of the Corporation, such adjustments shall be made
by the Committee, whose determination in that respect shall be final, binding
and conclusive.
6.4 ABILITY TO ADJUST. The grant of an option pursuant to the
Plan shall not affect in any way the right or power of the Corporation to make
adjustments, reclassifications, reorganizations or changes of its capital or
business structure or to merge, consolidate, dissolve, liquidate, sell or
transfer all or any part of its business or assets.
6.5 NOTICE OF ADJUSTMENT. Whenever the Corporation shall take
any action resulting in any adjustment provided for in this Section, the
Corporation shall forthwith deliver notice of such action to each optionee,
which notice shall set forth the number of shares subject to the option and the
exercise price thereof resulting from such adjustment.
6.6 LIMITATION ON ADJUSTMENTS. Any adjustment, assumption or
substitution of an Incentive Option shall comply with Section 425 of the Code,
if applicable.
7. NONASSIGNABILITY. Options granted under this Plan may not be sold,
pledged, assigned or transferred in any manner other than by will or by the laws
of intestate succession, and may be exercised during the lifetime of an optionee
only by such optionee. Any transfer in violation of this Section shall void such
option and any Stock Option Agreement entered into by the optionee and the
Corporation regarding such transferred option shall be void and have no further
force or effect. No option shall be pledged or hypothecated in any way, nor
shall any option be subject to execution, attachment or similar process.
8. REPURCHASE OPTION.
8.1 The Corporation shall have the right to purchase all Stock
held by an optionee or any unexercised option held by an optionee which has been
obtained pursuant to the Plan, together with any rights, securities or
additional stock that has been received pursuant to a stock dividend, stock
split, reorganization or other similar transaction that has been received as a
result of an employee option or Stock acquired pursuant thereto in the event (i)
an optionee terminates his or her services with the Corporation, or any Parent
or Subsidiary thereof, or (ii) the Corporation so elects, in the event of a
Capital Transaction. The price paid for any unexercised option or Stock shall be
the fair market value of such option or Stock as determined herein. The fair
market value assigned to any option shall be the fair market value of the Stock
as to which it is exercisable reduced by the exercise price. The parties shall
first negotiate in good faith to reach an agreement as to the value of the
option or Stock. Absent an agreement within 30 days, the parties shall select
one appraiser to determine the value of the Stock. In the event the parties
cannot agree as to an appraiser, then each party shall appoint one appraiser and
the two appraisers shall jointly determine a third appraiser. In the event the
two appraisers cannot determine a third appraiser, such third appraiser shall be
appointed by a Judge of the Superior Court of the County of San Diego,
California. Such appraisers shall make their determination of the fair market
value of the Stock, and the average of the two appraisers whose valuations are
closest to each other shall control. Any appraiser selected by any party shall
be an appraiser experienced in the area of valuing similar stock. The
Corporation and the optionee, or successor, shall each pay for one-half of the
cost of any such appraisal. If the Corporation desires to purchase the Stock or
options held by an employee as set forth in this Section, then the Corporation
shall provide written notice to such optionee at such optionee's last known
address within 120 days after the termination of such optionee's employment, or
at least 30 days prior to a Capital Transaction.
8.2 The Committee may assign the Corporation's repurchase
option under this Section to any person selected by the Committee including one
or more of the shareholders of the Corporation.
8.3 The repurchase option set forth in this Section shall
terminate upon the consummation of an underwritten public offering of the
Corporation's Stock registered under the Securities Act of 1933, as amended (the
"Act").
9. RIGHT OF FIRST REFUSAL.
9.1 Stock issued pursuant to this Plan together with any
rights, securities or additional stock that have been received pursuant to a
stock dividend, stock split, reorganization or other transaction that has been
received as a result of an employee option or stock acquired pursuant thereto
shall be subject to a right of first refusal by the Corporation in the event the
holder of such shares proposes to sell, pledge or otherwise transfer said shares
or any interest in said shares to any person or entity. Any holder of shares of
Stock (or other securities) acquired under the Plan desiring to transfer such
Stock (or other securities) or any interest therein shall give written notice to
the Corporation describing the proposed transfer, including the price of shares
proposed to be transferred, the proposed transfer price and terms, and the name
and address of the proposed transferee. Unless otherwise agreed by the
Corporation and the holder of such shares, repurchases by the Corporation under
this Section shall be at the proposed price and terms specified in the notice to
the Corporation. The Corporation's rights under this Section shall be freely
assignable.
9.2 If the Corporation fails to exercise its right of first
refusal within 30 days from the date upon which the Corporation received the
shareholder's written notice, the shareholder may, within the next 90 days,
conclude a transfer of the exact number of shares covered by said notice on
terms not more favorable to the transferee than those described in the notice.
Any subsequent proposed transfer by such transferee shall again be subject to
the Corporation's right of first refusal. If the Corporation exercises its right
of first refusal, the shareholder shall endorse and deliver to the Corporation
the stock certificates representing the shares being repurchased, and the
Corporation shall promptly pay the shareholder the total repurchase price as set
forth in the terms of the agreement. The holders of shares being repurchased
pursuant to this Section shall cease to have any rights with respect to such
shares immediately upon repurchase.
9.3 No written notice of a proposed transfer shall be required
under this Section and no right of first refusal shall exist with respect to
transfers by will or the laws of intestate succession.
9.4 The right of first refusal set forth in this Section shall
terminate upon the consummation of an underwritten public offering of the
Corporation's Stock registered under the Securities Act of 1933, as amended (the
"Act").
9.5 Any attempted transfer of any Stock or securities subject
to this right of first refusal which is not made in compliance with this Section
shall be null and void.
9.6 The Committee may assign the Corporation's repurchase
option under this Section to any person selected by the Committee including one
or more or the shareholders of the Corporation.
10. NO RIGHT OF EMPLOYMENT. Neither the grant nor exercise of any
option nor anything in this Plan shall impose upon the Corporation or any other
corporation any obligation to employ or continue to employ any optionee. The
right of the Corporation and any
other corporation to terminate any employee shall not be diminished or affected
because an option has been granted to such employee.
11. TERM OF PLAN. This Plan is effective on November ___, 1999 and
options may be granted pursuant to the Plan from time to time within a period of
ten (10) years from such date, or the date of any required shareholder approval
required under the Plan, if earlier. Termination of the Plan shall not affect
any option theretofore granted.
12. AMENDMENT OF THE PLAN. The Board of Directors of the Corporation
may, subject to any required shareholder approval, suspend, discontinue or
terminate the Plan, or revise or amend it in any respect whatsoever with respect
to any shares of Stock at that time not subject to options.
13. APPLICATION OF FUNDS. The proceeds received by the Corporation from
the sale of Stock pursuant to options may be used for general corporate
purposes.
14. RESERVATION OF SHARES. The Corporation, during the term of this
Plan, shall at all times reserve and keep available such number of shares of
Stock as shall be sufficient to satisfy the requirements of the Plan.
15. NO OBLIGATION TO EXERCISE OPTION. The granting of an option shall
not impose any obligation upon the optionee to exercise such option.
16. APPROVAL OF BOARD OF DIRECTORS AND SHAREHOLDERS. The Plan
shall not take effect until approved by the Board of Directors of the
Corporation. This Plan shall be approved by a vote of the shareholders within 12
months from the date of approval by the Board of Directors. In the event such
shareholder vote is not obtained, all options granted hereunder, whether vested
or unvested, shall be null and void. Further, any stock acquired pursuant to the
exercise of any options under this Agreement may not count for purposes of
determining whether shareholder approval has been obtained.
17. WITHHOLDING TAXES. Notwithstanding anything else to the contrary in
this Plan or any Stock Option Agreement, the exercise of any option shall be
conditioned upon payment by such optionee in cash, or other provisions
satisfactory to the Committee, of all local, state, federal or other withholding
taxes applicable, in the Committee's judgment, to the exercise or to later
disposition of shares acquired upon exercise of an option (including any
repurchase of an option or the Stock).
18. PARACHUTE PAYMENTS. Any outstanding option under the Plan may not
be accelerated to the extent any such acceleration of such option would, when
added to the present value of other payments in the nature of compensation which
becomes due and payable to the optionee would result in the payment to such
optionee of an excess parachute payment under Section 280G of the Code. The
existence of any such excess parachute payment shall be determined in the sole
and absolute discretion of the Committee.
19. SECURITIES LAWS COMPLIANCE. Notwithstanding anything contained
herein, the Corporation shall not be obligated to grant any option under this
Plan or to sell, issue or effect any transfer of any Stock unless such grant,
sale, issuance or transfer is at such time effectively (i) registered or exempt
from registration under Securities Act of 1933, as amended (the "Act") and (ii)
qualified or exempt from qualification under the California Corporate Securities
Law of 1968 and any other applicable state securities laws. As a condition to
exercise of any option, each optionee shall make such representations as may be
deemed appropriate by counsel to the Corporation for the Corporation to use any
available exemption from registration under the Act or any applicable state
securities law.
20. RESTRICTIVE LEGENDS. The certificates representing the Stock issued
upon exercise of options granted pursuant to this Plan will bear legends
required by applicable securities laws as determined by the Committee.
21. NOTICES. Any notice to be given under the terms of the Plan shall
be addressed to the Corporation in care of its Secretary at its principal
office, and any notice to be given to an optionee shall be addressed to such
optionee at the address maintained by the Corporation for such person or at such
other address as the optionee may specify in writing to the Corporation.
22. INFORMATION TO PARTICIPANTS. The Corporation shall make available
to all holders of options the information required pursuant to Section
260.140.46 of the California Code of Regulations.
As adopted by the Board of Directors effective December 17, 1999.
IMAGEWARE SYSTEMS, INC., a California
corporation
By: /s/ S. James Miller
-------------------------------
Its: President
-------------------------------
EXHIBIT A
____________________, 1999
ImageWare Systems, Inc.
Re: 1999 STOCK OPTION PLAN
----------------------
To Whom It May Concern:
This letter is delivered to ImageWare Systems, Inc., a California
corporation (the "Corporation"), in connection with the grant to __________ (the
"Optionee") of an option (the "Option") to purchase _____ shares of common stock
of the Corporation (the "Stock") pursuant to the ImageWare Systems, Inc. Amended
and Restated 1999 Stock Option Plan dated November 18, 1999 (the "Plan"). The
Optionee understands that the Corporation's receipt of this letter executed by
the Optionee is a condition to the Corporation's willingness to grant the Option
to the Optionee.
In addition, the Optionee makes the following representations and
warranties with the understanding that the Corporation will rely upon them.
1. The Optionee acknowledges receipt of a copy of the Plan and
Agreement. The Optionee has carefully reviewed the Plan and Agreement.
2. The Optionee understands and acknowledges that the Option and the
Stock are subject to the terms and conditions of the Plan.
3. The Optionee understands and agrees that, at the time of exercise of
any part of the Option for Stock, the Optionee may be required to provide the
Corporation with additional representations, warranties and/or covenants similar
to those contained in this letter.
4. The Optionee is a resident of the State of __________.
5. The Optionee will notify the Corporation immediately of any change
in the above information which occurs before the Option is exercised in full by
the Optionee.
The foregoing representations and warranties are given on
______________, 1999 at ________________.
OPTIONEE:
--------------------------------
EXHIBIT B
____________, 1999
ImageWare Systems, Inc.
Re: 1999 STOCK OPTION PLAN
----------------------
To Whom It May Concern:
I (the "Optionee") hereby exercise my right to purchase _____ shares of
common stock (the "Stock") of ImageWare Systems, Inc., a California corporation
(the "Corporation"), pursuant to, and in accordance with, the ImageWare Systems,
Inc. Amended and Restated 1999 Stock Option Plan dated November __, 1999 (the
"Plan") and Stock Option Agreement (the "Agreement") dated November __, 1999.
As provided in such Plan, I deliver herewith payment as set forth in the Plan in
the amount of the aggregate option exercise price. Please deliver to me at my
address as set forth above stock certificates representing the subject shares
registered in my name (and (SPOUSE) , as (STYLE OF VESTING)).
The Optionee hereby represents and agrees as follows:
1. The Optionee acknowledges receipt of a copy of the Plan and
Agreement. The Optionee has carefully reviewed the Plan and Agreement.
2. The Optionee is a resident of the State of __________.
3. The foregoing representations and warranties are given on
___________________ at ______________________.
OPTIONEE:
_____________, President