HIRSCH INTERNATIONAL CORP.
NON-QUALIFIED STOCK OPTION AGREEMENT
AGREEMENT, made and entered into this 20th day of December, 1996, between
HIRSCH INTERNATIONAL CORP., a Delaware corporation with its principal place of
business at 200 Wireless Boulevard, Hauppauge, New York 11788 (the
"Corporation"), and JIMMY L. YATES, residing at 3801 Hollow Creek Road, Fort
Worth, Texas 76116 (the "Optionee").
WHEREAS, simultaneously herewith the Corporation has entered into an
employment agreement with the Optionee pursuant to which the Corporation has
agreed to grant to the Optionee an option to purchase an aggregate of Sixty
Thousand Three Hundred (60,300) authorized but unissued shares of the
Corporation's Class A Common Stock, par value $.01 per share (the "Common
Shares"), upon the terms and conditions set forth in this Agreement.
NOW, THEREFORE, for good and valuable consideration paid by the Optionee to
the Corporation, the receipt and sufficiency of which is hereby acknowledged,
and the mutual covenants hereinafter set forth, the parties agree as follows:
1. Grant of Option. The Corporation hereby grants to the Optionee the right
and option to purchase all or any part of an aggregate of Sixty Thousand Three
Hundred (60,300) Common Shares (subject to adjustment as provided in Paragraph 6
hereof) on the terms and conditions set forth herein (the "Option").
2. Purchase Price. The purchase price of Common Shares covered by the
Option shall be the closing bid price of the Corporation's Class A Common Stock
on the date hereof as reported by NASDAQ (subject to adjustment as provided in
Paragraph 6 hereof).
3. Vesting of Option. The Option granted hereby shall be exercisable as to
(i) Fifteen Thousand Seventy-Five (15,075) Common Shares commencing one year
from the date hereof, (ii) an additional Fifteen Thousand Seventy-Five (15,075)
Common Shares commencing two years from the date hereof, (iii) an additional
Fifteen Thousand Seventy-Five (15,075) Common Shares commencing three years from
the date hereof, and (iv) an additional Fifteen Thousand Seventy-Five (15,075)
Common Shares commencing four years from the date hereof.
4. Method of Exercising Option. If the Optionee elects to exercise the
Option, he may do so in whole or in part (to the extent that it is exercisable
in accordance with its terms) by giving written notice to the Corporation,
specifying therein the number of Common Shares which he then elects to purchase.
Such notice shall be accompanied by payment of the full purchase price of the
Common Shares by cash or by a certified check payable to the order of the
Corporation.
As soon as practicable after receipt by the Corporation of such notice and
of payment in full of the purchase price of all the Common Shares with respect
to which the Option has been exercised, a certificate or certificates
representing such Common Shares shall be issued in the name of the Optionee and
shall be delivered to the Optionee. All Common Shares shall be issued only upon
receipt by the Corporation of the Optionee's representation that the Common
Shares are purchased for investment and not with a view toward distribution
thereof.
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5. Availability of Shares. The Corporation, during the term of this Option,
shall keep available at all times the number of shares of common stock required
to satisfy the Option.
The Corporation shall utilize its best efforts to comply with the
requirements of each regulatory commission or agency having jurisdiction in
order to issue and sell the Common Shares to satisfy the Option. Such compliance
will be a condition precedent to the right to exercise the Option. The inability
of the Corporation to effect such compliance with any such regulatory commission
or agency which counsel for the Corporation deems necessary for the lawful
issuance and sale of the Common Shares to satisfy this Option shall relieve the
Corporation from any liability for failure to issue and sell the Common Shares
to satisfy the Option for such period of time as such compliance is not
effectuated.
6. Adjustments. If prior to the exercise of any option granted hereunder
the Corporation shall have effected one or more stock split-ups, stock
dividends, or other increases or reductions of the number of shares of its
common stock outstanding without receiving compensation therefor in money,
services or property, the number of Common Shares subject to the option hereby
granted shall (a) if a net increase shall have been effected in the number of
outstanding shares of the Corporation's Common Shares, be proportionately
increased and the cash consideration payable per Common Share shall be
proportionately reduced; and (b) if a net reduction shall have been effected in
the number of outstanding shares of the Corporation's Common Shares, be
proportionately reduced and the cash consideration payable per Common Share be
proportionately increased.
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7. Non-Transferability of Option and Common Shares. The holder of this
Option, by acceptance hereof, represents, warrants and agrees as follows:
(a) Optionee is acquiring the Option for his own account and not with a
view to the resale or distribution thereof.
(b) This Option and the right to purchase the Common Shares hereunder is
personal to the Optionee and shall not be transferred by Optionee other than by
will or the laws of descent and distribution and may be exercised during
Optionee's lifetime only by the Optionee or the Optionee's guardian or legal
representative. The Option may not be pledged or otherwise hypothecated.
(c) The holder hereof has been advised and understands that the Option has
been issued in reliance upon exemptions from registration under the Securities
Act and applicable state statutes; the exercise of the Option and resale of the
Option and the Common Shares have not been registered under the Securities Act
or applicable state statutes and must be held and may not be sold, transferred,
or otherwise disposed of for value unless (i) they are subsequently registered
under the Securities Act or (ii) unless an exemption from such registration is
available and the Optionee has furnished the Corporation with notice of such
proposed transfer and the Corporation's legal counsel, in its reasonable
opinion, shall deem such proposed transfer to be so exempt.
8. Stockholder's Rights. The Optionee shall not have any of the rights of a
stockholder with respect to the Common Shares until such shares have been issued
after the due exercise of the Option.
9. Acknowledgements. The Optionee hereby acknowledges that:
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(a) The Option is not intended to qualify as an incentive stock option
under Section 422A of the Internal Revenue Code of 1986, as amended, and that
the tax benefits associated with incentive stock options will not be available
in connection with the granting and exercise of the Option or the sale of the
Common Shares.
(b) If Optionee exercises the Option, he must bear the economic risk of the
investment in the Common Shares for an indefinite period of time since the
Common Shares will not have been registered under the Act and cannot be sold by
Optionee unless they are registered under the Act or an exemption therefrom is
available thereunder.
(c) The Corporation shall place stop transfer orders with its transfer
agent against the transfer of the Common Shares in the absence of registration
under the Act or an exemption therefrom.
(d) In the absence of registration, the certificates evidencing the Common
Shares shall bear the following legend: THE SECURITIES REPRESENTED BY THIS
CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT") AND ARE "RESTRICTED SECURITIES" WITHIN THE
MEANING OF RULE 144 PROMULGATED UNDER THE SECURITIES ACT. THE SECURITIES HAVE
BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD OR TRANSFERRED WITHOUT
COMPLYING WITH RULE 144 IN THE ABSENCE OF EFFECTIVE REGISTRATION OR OTHER
COMPLIANCE UNDER THE SECURITIES ACT.
10. Withholding and Deductions. Notwithstanding anything to the contrary
contained herein, if at any time specified herein for the making of any payment
of cash or any delivery of Common Shares to the Optionee, any law or regulation
of any governmental authority having jurisdiction in the premises shall require
the Corporation to withhold, to
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make any deduction for any taxes or take any other action in connection
with the payment or delivery then to be made, such payment or delivery, as the
case may be, shall be deferred until such withholding or deduction shall have
been adequately provided for, in the opinion of the Board of Directors of the
Corporation. 11. Registration Rights. The Corporation agrees to promptly file a
registration statement on Form S-8 (the "Registration Statement") with the
Securities and Exchange Commission with respect to the Common Shares. 12.
Termination of Option. To the extent not heretofore exercised, this Option shall
terminate at 5:00 P.M. New York City time on December 19, 2001. 13. Notices. All
notices, requests, deliveries, payments, demands and other communication which
are required or permitted to be given under this Agreement shall be in writing
and shall either be delivered personally or sent by certified mail, return
receipt requested, postage prepaid, to the parties at their respective addresses
as first set forth above, or to such other address as either shall have
specified by notice in writing to the other, and shall be deemed duly given
hereunder when so delivered or mailed, as the case may be. 14. Waiver. The
waiver by any party hereto of a breach of any provision of this Agreement shall
not operate or be construed as a waiver of any other or subsequent breach. 15.
Entire Agreement. This Agreement constitutes the entire agreement between the
parties with respect to the subject matter hereof. 16. Successors and Assigns.
This Agreement shall inure to the benefit of and be binding upon the parties
hereto and to the extent not prohibited herein, their
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respective heirs, successors, assigns and representatives. Nothing in this
Agreement, expressed or implied, is intended to confer on any person other than
the parties hereto and as provided above, their respective heirs, successors,
assigns and representatives any rights, remedies, obligations or liabilities.
17. Validity and Construction. The validity and construction of this Option
shall be governed by the laws of the State of Delaware. Such construction is
vested in the board and its construction shall be final and conclusive. IN
WITNESS WHEREOF, the Corporation has caused this Option Agreement to be executed
by its proper corporate officers thereunto duly authorized.
HIRSCH INTERNATIONAL CORP.
By:________________________________________
Henry Arnberg, President
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JIMMY L. YATES, Optionee
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