SCHEDULE 14C INFORMATION
Information Statement Pursuant to Section 14(c) of the Securities Exchange Act
of 1934
Check the appropriate box:
[ ] Preliminary Information Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule 14c-
5(d)(2))
[X] Definitive Information Statement
CASH SYSTEMS, INC.
(Name of Registrant as Specified in its Charter)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14c-5(g) and 0-11.
(1) Title of each class of securities to which transaction applies: N/A.
(2) Aggregate number of securities to which transaction applies: N/A.
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined): N/A.
(4) Proposed maximum aggregate value of transaction: N/A.
(5) Total fee paid: N/A.
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid: $0.
(2) Form, Schedule or Registration Statement No.: N/A
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(4) Date Filed: N/A
Contact Persons: Leonard W. Burningham, Esq.
Branden T. Burningham, Esq.
Suite 205, 455 East 500 South Street
Salt Lake City, Utah 84111
Tel: 801-363-7411; Fax: 801-355-7126
CASH SYSTEMS, INC.
3201 West County Road 42, Suite 106
BURNSVILLE, MN 55306
INFORMATION STATEMENT
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE
REQUESTED NOT TO SEND A PROXY
INTRODUCTION
This Information Statement is being furnished to our stockholders
(Cash Systems, Inc., a Delaware corporation [the "Company," "Cash Systems,"
"we", "our" or "us" or words or similar import]) regarding resolutions that
have been adopted by our Board of Directors and two of our stockholders who
own in excess of 50% of our outstanding voting securities (the "Majority
Stockholders") in accordance with the General Corporation Law of the State of
Delaware (the "Delaware Law") that will amend our 2001 Stock Option Plan
("2001 Plan") by increasing the number of shares covered thereby from
1,000,000 shares to 2,500,000 shares; that have granted certain additional
options thereunder that are outlined below; and that have approved the
participation by one of our new directors in our current private placement of
shares of our common stock that are "restricted securities" and that are being
offered by us below current market price by reason of their restricted nature.
The two Majority Stockholders beneficially own 7,623,550 shares or
approximately 54.8% of our outstanding voting securities. No other votes were
required or necessary to amend the 2001 Plan; or to have granted the options
outlined below; or to have approved the participation of one of our directors
in our current private placement, and none are being solicited hereunder. See
the captions "Voting Securities and Principal Holders Thereof" and "Vote
Required for Approval," herein.
APPROXIMATE DATE OF MAILING: March 22, 2004.
The amendment to our 2001 Plan, the granting of the additional
options thereunder that are outlined below and the approval of the
participation of one of our directors in our current private placement will
become effective on the later of the opening of business on April 12, 2004, or
a date that is at least 21 days from the mailing of this Information Statement
to our stockholders. However, for accounting purposes, the granting of these
options may be accounted for in the quarter in which they were granted. These
are the only matters covered by this Information Statement.
AMENDMENT TO OUR 2001 PLAN
Our 2001 Plan was first adopted by our Board of Directors and then
by our stockholders at our annual meeting that was held on January 2, 2003.
The 2001 Plan was adopted as a means of promoting the interests of our Company
and our stockholders by providing our key personnel and other individuals who
are not employees but who provide services to us in the capacity of an advisor
or consultant, including non-employee directors, with an opportunity to
acquire a proprietary interest in our Company and thereby develop a stronger
incentive to put forth maximum effort for our continued success and growth. We
also believed that the 2001 Plan will aid us in attracting and retaining key
personnel of outstanding ability. The 2001 Plan will expire in September,
2011, and currently provides for up to 1,000,000 shares of our Company's
common stock to be issued thereunder. Pursuant to the terms of the 2001 Plan,
although it will expire in September, 2011, the options issued thereunder
shall continue to be exercisable until the relevant dates set forth in the
individual stock option grants. A copy of the 2001 Plan is attached as Exhibit
A.
The 2001 Plan is administered by our Company's Board. The Board
determines whether each option is to be an Incentive Option or Non-Qualified
Option, and determines the terms of options granted, including the exercise
price, the number of shares subject to the option and the period of
exercisability. No Incentive Option may be exercised more than 10 years after
its grant date, provided, however, that no Incentive Option granted to a
person owning more than 10% of the total combined voting power of all classes
of our stock or any parent or subsidiary of our Company (a "Ten Percent
Stockholder") may be exercised more than five years from the date that the
option is granted. To the extent the aggregate fair market value, determined
at the time the option is granted, of our common stock with respect to which
all Incentive Options are exercisable for the first time by an employee during
any calendar year exceeds $100,000, such options shall be treated as options
which do not qualify as Incentive Options. During the lifetime of the
optionee, only the optionee may exercise the option. In the event of a change
in control of our Company as defined in the 2001 Plan, our Board may provide
for the acceleration of vesting of options.
The exercise price of all Incentive Options granted under the 2001
Plan must be not less than the fair market value of the common stock at the
time the Incentive Options are granted, as determined according to the 2001
Plan. The exercise price of any Incentive Options granted to a Ten Percent
Stockholder must be not less than 110% of the fair market value of the common
stock at the time the Incentive Options are granted, as determined by the
Board of Directors in good faith.
Under the 2001 Plan, our Board may permit participants, subject to
compliance with applicable securities laws and the discretion of our Board and
upon such terms and conditions as it may impose, to surrender shares of the
common stock (either shares received upon the exercise of the option or shares
previously owned by the optionee) to us to satisfy federal and state
withholding tax obligations. In addition, our Board may grant, subject to its
discretion and such rules as it may adopt, a bonus to a participant in order
to provide funds to pay all or a portion of federal and state taxes due as a
result of the exercise of the option. The amount of any such bonus will be
taxable to the participant as ordinary income, and we will have a
corresponding deduction equal to such amount (subject to the tax rules
concerning reasonable compensation).
The grant of an incentive stock option pursuant to the 2001 Plan
should result in no tax consequences to the optionee or our Company. The
holder of an Incentive Option generally will have no taxable income upon
exercising an Incentive Option (except that the alternative minimum tax may
apply), and we generally will receive no tax deduction when an Incentive
Option is exercised. Upon exercise of a Non-Statutory Option, the optionee
must recognize ordinary income equal to the excess of the fair market value of
the shares acquired on the date of exercise over the option price, and we will
be entitled to a tax deduction for the same amount for the taxable year in
which the exercise occurs. The tax consequences to an optionee of a
disposition of shares acquired through the exercise of an option will depend
on how long the shares have been held and upon whether such shares were
acquired by exercising an Incentive Option or a Non-Statutory Option.
Generally, there will be no tax consequence to us in connection with a
disposition of shares acquired under an option except that we may be entitled
to a tax deduction in the case of a disposition of shares acquired under an
Incentive Option before the applicable Incentive Option holding period has
been satisfied.
Special rules apply in the case of individuals subject to Section
16(b) of the Securities Exchange Act of 1934, as amended (the "Exchange Act").
In particular, under current law, shares received pursuant to the exercise of
a stock option may be treated as restricted as to transferability and subject
to a substantial risk of forfeiture for a period of up to six months after the
date of exercise. Accordingly, unless a special tax election is made, the
amount of ordinary income recognized and the amount of the employer's
deduction may be determined as of such later date.
Although the Board may amend, suspend or discontinue the 2001 Plan,
the approval of our stockholders is required to increase the number of shares
of our common stock authorized for issuance under the 2001 Plan, change
the manner of determining the exercise price of an option issued under the
2001 Plan, increase the maximum term of options provided for under the 2001
Plan or change class of persons eligible to receive Options under the 2001
Plan.
The resolutions adopted by the Board of Directors and the Majority
Stockholders only increase the shares authorized to be issued under the 2001
Plan from 1,000,000 to 2,500,000. All other terms and provisions of the 2001
Plan remain unchanged.
GRANT OF CERTAIN OPTIONS UNDER THE 2001 PLAN
Current Options Granted.
- ------------------------
The following table reflects the options that had already been
granted under the 2001 Plan, along with other information respecting each
grant:
Current 2001 Plan Option Table
------------------------------
Qual/NonQual
/Number of Grant Vest Out-
Optionee Shares Price Date Date standing
- -------- ------ ----- ---- ---- --------
Craig Potts Q/100,000 1.38 09/25/01 09/25/01 100,000
Q/281,000 1.83 01/30/03 01/30/03 281,000
Christopher
Larson Q/ 25,000 1.25 09/25/01 09/25/01 25,000
Q/106,000 1.83 01/30/03 01/30/03 106,000
David Stueve Q/ 50,000 1.25 09/25/01 09/25/01 50,000
Q/ 50,000 1.25 09/25/01 09/25/02 50,000
Q/ 25,000 1.66 01/30/03 01/30/03 25,000
Jason Bohn N/ 25,000 .10 09/25/01 09/25/01 25,000
N/ 25,000 .10 09/25/01 09/25/02 25,000
N/ 8,750 2.50 04/03/03 04/03/03 8,750
N/ 8,750 2.50 04/03/03 07/03/03 8,750
N/ 8,750 2.50 04/03/03 10/03/03 8,750
N/ 8,750 2.50 04/03/03 01/03/04 8,750
Kathy Bodnar Q/ 25,000 1.50 10/21/02 10/21/02 25,000
Q/ 25,000 1.50 10/21/02 10/21/03 25,000
Q/ 25,000 1.50 10/21/02 10/21/04 25,000
Q/ 25,000 1.50 10/21/02 10/21/05 25,000
Gaming Venture
Corp, USA N/ 10,000 2.00 10/28/02 12/31/02 10,000
N/ 10,000 2.00 10/28/02 03/31/03 10,000
N/ 10,000 2.00 10/28/02 06/30/03 10,000
N/ 10,000 2.00 10/28/02 09/30/03 10,000
Jonah
Anderson Q/ 7,500 2.00 03/14/03 03/14/04 7,500
Andrew Kawa Q/ 25,000 2.60 05/06/03 05/06/03 25,000
Q/ 25,000 2.60 05/06/03 05/06/04 25,000
Q/ 25,000 2.60 05/06/03 05/06/05 25,000
Q/ 25,000 2.60 05/06/03 05/06/06 25,000
Gary Demers Q/ 5,000 2.50 04/03/03 04/03/03 5,000
Additional Options Granted.
- ---------------------------
The Board of Directors and the Majority Stockholders have resolved to
have the following additional options granted to the persons indicated in the
following table effective for accounting purposes at November 3, 2003, or
March 1, 2004, as applicable, with respect to the additional options granted
as outlined below. The market price (the "Fair Market Value") of our common
stock was $4.00 on November 3, 2003, and was $5.55 on March 1, 2004, the dates
of these additional grants.
With the new options, the following table reflects the options that
have been now been granted under the 2001 Plan, along with other information
respecting each grant:
As Resolved 2001 Plan Option Table Including Additional Grants
--------------------------------------------------------------
Qual/NonQual
/Number of Grant Vest Out-
Optionee Shares Price Date Date standing
- -------- ------ ----- ---- ---- --------
Craig Potts Q/100,000 1.38 09/25/01 09/25/01 100,000
Q/281,000 1.83 01/30/03 01/30/03 281,000
*Q/100,000 4.40 11/03/03 01/30/04 100,000
*Q/100,000 4.40 11/03/03 01/30/05 100,000
*Q/ 15,000 6.10 03/01/04 03/01/04 15,000
*Q/ 25,000 6.10 03/01/04 09/01/04 25,000
*Q/ 25,000 6.10 03/01/04 09/01/05 25,000
*Q/ 25,000 6.10 03/01/04 09/01/06 25,000
*Q/ 25,000 6.10 03/01/04 09/01/07 25,000
Christopher
Larson Q/ 25,000 1.25 09/25/01 09/25/01 25,000
Q/106,000 1.83 01/30/03 01/30/03 106,000
*Q/100,000 4.00 11/03/03 01/30/04 100,000
*Q/100,000 4.00 11/03/03 01/30/05 100,000
*Q/ 15,000 5.55 03/01/04 03/01/04 15,000
*Q/ 25,000 5.55 03/01/04 09/01/04 25,000
*Q/ 25,000 5.55 03/01/04 09/01/05 25,000
*Q/ 25,000 5.55 03/01/04 09/01/06 25,000
*Q/ 25,000 5.55 03/01/04 09/01/07 25,000
David Stueve Q/ 50,000 1.25 09/25/01 09/25/01 50,000
Q/ 50,000 1.25 09/25/01 09/25/02 50,000
Q/ 25,000 1.66 01/30/03 01/30/03 25,000
*Q/ 25,000 4.00 11/03/03 01/30/04 25,000
*Q/ 25,000 4.00 11/03/03 01/30/05 25,000
Jason Bohn N/ 25,000 .10 09/25/01 09/25/01 25,000
N/ 25,000 .10 09/25/01 09/25/02 25,000
N/ 8,750 2.50 04/03/03 04/03/03 8,750
N/ 8,750 2.50 04/03/03 07/03/03 8,750
N/ 8,750 2.50 04/03/03 10/03/03 8,750
N/ 8,750 2.50 04/03/03 01/03/04 8,750
*N/ 25,000 4.00 11/03/03 01/30/04 25,000
*N/ 25,000 4.00 11/03/03 01/30/05 25,000
Kathy Bodnar Q/ 25,000 1.50 10/21/02 10/21/02 25,000
Q/ 25,000 1.50 10/21/02 10/21/03 25,000
Q/ 25,000 1.50 10/21/02 10/21/04 25,000
Q/ 25,000 1.50 10/21/02 10/21/05 25,000
Gaming Venture
Corp, USA N/ 10,000 2.00 10/22/02 12/31/02 10,000
N/ 10,000 2.00 10/22/02 03/31/03 10,000
N/ 10,000 2.00 10/22/02 06/30/03 10,000
N/ 10,000 2.00 10/22/02 09/30/03 10,000
Jonah
Anderson Q/ 7,500 2.00 03/14/03 03/14/04 7,500
Andrew Kawa Q/ 25,000 2.60 05/06/03 05/06/03 25,000
Q/ 25,000 2.60 05/06/03 05/06/04 25,000
Q/ 25,000 2.60 05/06/03 05/06/05 25,000
Q/ 25,000 2.60 05/06/03 05/06/06 25,000
Gary Demers Q/ 5,000 2.50 04/03/03 04/03/03 5,000
Curt Cook *Q/ 5,000 4.00 11/03/03 10/10/04 5,000
*Q/ 5,000 4.00 11/03/03 10/10/05 5,000
*Q/ 5,000 4.00 11/03/03 10/10/06 5,000
Kath Lehnert *Q/ 1,500 4.00 11/03/03 01/30/04 1,500
Scott Onque *Q/ 5,000 4.00 11/03/03 04/15/04 5,000
Jason Schiprett*Q/ 2,500 4.00 11/03/03 01/30/04 5,000
Gordon Graves *Q/ 15,000 5.55 03/01/04 03/01/04 15,000
*Q/ 25,000 5.55 03/01/04 09/01/04 25,000
*Q/ 25,000 5.55 03/01/04 09/01/05 25,000
*Q/ 25,000 5.55 03/01/04 09/01/06 25,000
*Q/ 25,000 5.55 03/01/04 09/01/07 25,000
Patrick Cruzen *Q/ 15,000 5.55 03/01/04 03/01/04 15,000
*Q/ 25,000 5.55 03/01/04 09/01/04 25,000
*Q/ 25,000 5.55 03/01/04 09/01/05 25,000
*Q/ 25,000 5.55 03/01/04 09/01/06 25,000
*Q/ 25,000 5.55 03/01/04 09/01/07 25,000
* Denotes new options granted, and except for Messrs. Potts and
Larson, who are directors and executive officers of our
Company, Messrs. Graves and Cruzen, who are directors of our
Company, and Jason Bohn, Esq., who is our legal counsel, the
remaining grantees are employees.
PARTICIPATION BY ONE OF OUR DIRECTORS IN CURRENT COMPANY PRIVATE PLACEMENT
Our common stock is currently traded on the American Stock Exchange
("AMEX"). Rules and regulations of AMEX require that any purchases of our
common stock at below current market price by directors or executive officers
must be approved by our stockholders. On March 4, 2004, our Board of
Directors authorized an original, nonpublic issuance (the "Offering") of
shares of our common stock at a price of $5.00 per share for an aggregate
Offering price of $10,000,000. The shares of our common stock being offered
under the Offering are "restricted securities," and are being offered at a
discount to the current market price. Gordon Graves, a new director of our
Company who was appointed as a director on March 1, 2004, desires to
participate in this Offering. The Board of Directors and the Majority
Stockholders have approved the participation of Mr. Graves in this Offering.
Any purchases of our common stock by Mr. Graves in our Offering will be on the
same terms and conditions as any purchases by non-affiliated persons.
DISSENTERS' RIGHTS
There are no dissenters' rights applicable to the amendment to our
2001 Plan or the approval of Mr. Graves' participation in our Offering.
INTEREST OF CERTAIN PERSONS IN MATTERS TO BE ACTED UPON
Except as set forth under the captions "Grant of Certain Options
Under the 2001 Plan" and "PARTICIPATION BY ONE OF OUR DIRECTORS IN CURRENT
COMPANY PRIVATE PLACEMENT," above, no director, executive officer, nominee for
election as a director, associate of any director, executive officer or
nominee or any other person has any substantial interest, direct or indirect,
by security holdings or otherwise, in the increase of the shares allocable
under our 2001 Plan and the additional options to be granted thereunder or the
approval of Mr. Graves' participation in our Offering which is not shared by
all other stockholders.
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
Voting Securities.
- ------------------
The securities that would have been entitled to vote if a meeting
was required to have been held regarding the amendment to our 2001 Plan to
increase the number of shares allocable thereunder and to grant certain
additional options thereunder, and the approval of Mr. Graves to participate
in our Offering, consist of shares of our common stock. Each share of our
common stock is entitled to one vote. The number of outstanding shares of our
common stock at the close of business on March 3, 2004, the record date for
determining our stockholders who would have been entitled to notice of and to
vote on these matters, was 13,391,598.
Security Ownership of Principal Holders and Management.
- -------------------------------------------------------
The following table sets forth the share holdings of management and
those persons who own more than five percent of the Company's common stock:
Number of Shares Percentage
Name and Address Beneficially Owned of Class(1)
- ---------------- ------------------ --------
Kristen Potts (2) 6,990,050 50.3%
2955 Fox Hollow
Prior Lake, MN 55372
(1) Calculations are based upon 13,903,598 outstanding shares on
March 3, 2004, which includes an aggregate total of 512,000
shares issuable under the 2001 Plan that can presently be
exercised by our two directors and executive officers, Messrs.
Potts and Larson.
(2) Consists of 6,609,050 shares owned by Kristen Potts, who is the
spouse of Craig Potts, our President and one of our directors,
and 381,000 shares issuable upon currently exercisable options
held by Mr. Potts.
Security Ownership of Management.
- ---------------------------------
The following table sets forth the shareholdings of the Company's
directors and executive officers as of March 3, 2004:
Number of Percentage of
Name and Address Shares Beneficially Owned of Class(1)
- ---------------- ------------------------- --------
Craig Potts (2) 6,990,050 50.2%
2955 Fox Hollow
Prior Lake, MN 55372
Christopher Larson (3) 633,500 4.5%
20466 Kensfield Trail
Lakeville, MN 55044
Gordon Graves 0 0%
1604 Crested Butte Drive
Austin, TX 78746
Patrick Cruzen 0 0%
16355 36th Avenue North
Suite 700
Plymouth, MN 55446
All Directors and
Executive Officers
as a group (2 persons) 7,623,550 54.8%
(1) Calculations are based upon 13,903,598 outstanding shares on
March 3, 2004, which includes an aggregate total of 512,000
shares issuable under the 2001 Plan that can presently be
exercised by our two directors and executive officers, Messrs.
Potts and Larson; however, the additional 60,000 shares
underlying grants of additional options made by the Board of
Directors on March 1, 2004, 15,000 each to Messrs. Potts,
Larson, Graves and Cruzen, are not included in these
calculations as these grants can not be made effective until the
effective date of the resolutions being presented to our
stockholders in this Information Statement, which shall be April
12, 2004, or a date that is at least 21 days from the mailing of
this Information Statement to our stockholders.
(2) Consists of 6,609,050 shares owned by Kristen Potts, who is the
spouse of Craig Potts, our President and one or our directors,
and 381,000 shares issuable upon currently exercisable options
held by Mr. Potts. Mr. Potts is one of the Majority
Stockholders who has consented to the resolutions that have been
adopted by our Board of Directors and that are covered by this
Information Statement.
(3) Includes 131,000 shares issuable under currently exercisable
options held by Mr. Larson. Mr. Larson is one of the Majority
Stockholders who has consented to the resolutions that have been
adopted by our Board of Directors and that are covered by this
Information Statement.
VOTE REQUIRED FOR APPROVAL AND EFFECTIVE DATE
Vote Required for Approval.
- ---------------------------
Under Delaware Law, a quorum of the outstanding voting securities of
a company required to be present at a meeting if a meeting were required to be
held is 50.1%; and a majority of that number would be sufficient to elect
directors and adopt most matters ordinarily presented, including the matters
outlined herein.
The Majority Stockholders who have voted, in writing, to approve the
resolutions to amend our 2001 Plan and to approve the grants of the additional
options thereunder as outlined above, and to approve the participation of Mr.
Graves in our Offering, beneficially own 7,623,550 shares or approximately
54.8% of our outstanding voting securities. No other votes were required or
necessary to amend the 2001 Plan or to grant the options outlined herein under
the caption "Grant of Certain Options Under the 2001 Plan," above, or to
approve Mr. Graves' participation in our Offering, and none are being
solicited hereunder. See the caption "Voting Securities and Principal Holders
Thereof," above.
Effective Date of Amendment and Additional Grants.
- --------------------------------------------------
The amendment to our 2001 Plan and the grant of the additional
options outlined herein, along with Mr. Graves' participation in our Offering,
will become effective on the later of the opening of business on April 12,
2004, or a date that is at least 21 days from the mailing of this Information
Statement to our stockholders; however, for accounting purposes, these options
may be deemed to have been issued as of the quarterly periods in which the
additional options were granted by the Board of Directors as outlined above.
NOTICE
OUR BOARD OF DIRECTORS, AND THE MAJORITY STOCKHOLDERS OF OUR COMPANY WHO HAVE
CONSENTED TO THE ADOPTION OF THE AMENDMENT TO OUR STOCK OPTION PLAN, THE
GRANT OF CERTAIN ADDITIONAL OPTIONS THEREUNDER AND THE APPROVAL OF MR. GRAVES'
PARTICIPATION IN OUR OFFERING OWN IN EXCESS OF THE REQUIRED NUMBER OF SHARES
OF OUR OUTSTANDING VOTING SECURITIES TO ADOPT THESE MATTERS UNDER DELAWARE
LAW, AND HAS DONE SO. NO FURTHER CONSENTS, VOTES OR PROXIES ARE NEEDED, AND
NONE ARE REQUESTED.
BY ORDER OF THE BOARD OF DIRECTORS
March 15, 2003 CRAIG POTTS, President
EXHIBIT "A"
CASH SYSTEMS, INC.
2001 STOCK OPTION PLAN
1. Purpose. The purpose of the Cash Systems, Inc. 2001 Stock Option
Plan is to induce certain designated persons to continue to provide valuable
services to Cash Systems, Inc. (the "Company") and to encourage such persons
to secure or increase on reasonable terms their stock ownership in the
Company. The Board of Directors of the Company believes the Plan is in the
best interest of the Company and will promote the success of the Company.
This success will be achieved by encouraging continuity of management and
increased incentive and personal interest in the welfare of the Company by
those who are primarily responsible for shaping and implementing the
long-range plans of the Company.
Certain Options granted under this Plan are intended to be Incentive
Stock Options qualified under Section 422 of the Code. The Plan also permits
the grant of Nonqualified Stock Options.
2. Definitions. For purposes of this Plan, the following terms shall
have the meanings indicated below:
(a) "Capital Stock" or "Common Stock": any of the Company's
authorized but unissued shares of common stock.
(b) "Code": the Internal Revenue Code of 1986, as amended from
time to time.
(c) "Fair Market Value": the price per share determined by the
Board of Directors at the time any Option is granted. Fair Market Value
of Incentive Stock Options shall be determined consistent with the Code
and regulations.
(d) "Incentive Stock Option": an option defined in Section 422 of
the Code to purchase shares of the Common Stock of the Company.
(e) "Non-Qualified Stock Option": an option, not intended to
qualify as an Incentive Stock Option as defined in Section 422 of the
Code, to purchase Common Stock of the Company.
(f) "Option": the term shall refer to a Stock Option granted
under this Plan.
(g) "Option Agreement": a written agreement pursuant to which
the Company grants an Option to an Optionee and sets the terms and
conditions of the Option.
(h) "Option Date": the date upon which an Option Agreement for
an option granted pursuant to this Plan is duly executed by or on behalf
of the Company.
(i) "Option Stock": the Common Stock of the Company (subject to
adjustment as described in Section 7) reserved for options pursuant to
this Plan, or any other class of stock of the Company which may be
substituted therefore by exchange, stock split or otherwise.
(j) "Optionee": a person who is eligible to receive an Option
under Section 5 of the Plan and to whom an Option has been granted under
the Plan.
(k) "Plan": this Cash Systems, Inc. 2001 Stock Option Plan
effective September 25, 2001, and as amended hereafter from time to time.
(l) A "Subsidiary": any corporation in an unbroken chain of
corporations beginning with the Company, if, at the time of granting the
option, each of the corporations other than the last corporation in the
chain owns stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other
corporations in such chain. The term shall include any subsidiaries
which become such after adoption of this Plan.
3. Options Available Under Plan. An aggregate of 1,000,000 shares of
the Company's authorized but unissued shares of Common Stock are hereby made
available for grant, and shall be reserved for issuance, under this Plan. The
aggregate number of shares available under this Plan shall be subject to
adjustment on the occurrence of any of the events and in the manner set forth
in Section 7. If an Option shall expire or terminate for any reason without
having been exercised in full, the unpurchased shares, shall (unless the Plan
shall have been terminated) become available for other Options under the Plan.
4. Administration. The Plan shall be administered by the Board of
Directors of the Company. At all times subject to the authority of the Board
of Directors, the Board of Directors may from time to time delegate some or
all of its authority under the Plan to a committee consisting of three (3) or
more Directors (the "Committee"), and/or obtain assistance or recommendations
from such Committee. If no separate committee is appointed, the Board shall
constitute the Committee, and references to the Committee shall include the
entire Board of Directors.
The Company shall grant Options pursuant to the Plan upon determinations
of the Committee as to which of the eligible persons shall be granted Options,
the number of shares to be Optioned and the term during which any such Options
may be exercised. At all times, a majority of the members of the Committee
making determinations about the grant of Options to employee-directors or
employee-officers must be disinterested in the grant being made. The
Committee may from time to time adopt rules and procedures for carrying out
the Plan and interpretations and constructions of any provision of the Plan,
which shall be final and conclusive.
5. Eligibility for Stock Options. Incentive Stock Options under the
Plan may only be granted to such employees of the Company or any Subsidiary
thereof, as selected by the Committee. Non-Qualified Stock Options may be
granted to key employees, non-employee directors and any other persons
providing valuable services to the Corporation.
In selecting the employees or other persons to whom Stock Options shall
be granted, as well as determining the number of shares subject to each
Option, the Committee shall take into consideration such factors as it deems
relevant in connection with accomplishing the purpose of the Plan. For any
calendar year, the aggregate Fair Market Value (determined at the Option Date)
of the stock with respect to which any Incentive Stock Options are exercisable
for the first time by any individual employee (under all Incentive Stock
Option plans of the Company and all subsidiary corporations) shall not exceed
$100,000. Subject to the provisions of Section 3, an optionee who has been
granted an Option may, if he or she is otherwise eligible, be granted an
additional Option or Options if the Committee shall so determine. Any
Incentive Stock Option that becomes exercisable and exceeds the above
limitation shall be treated as a Non-Qualified Option.
No Stock Option may be granted under this Plan later than the expiration
of ten (10) years from the Effective Date.
6. Terms and Conditions of Options. Whenever the Committee shall
designate an Optionee, it shall communicate to the Secretary of the Company
the name of the Optionee, the number of shares to be Optioned and such other
terms and conditions as it shall determine, not inconsistent with the
provisions of this Plan. The President or other officer of the Company shall
then enter into an Option Agreement with the Optionee, complying with and
subject to the following terms and conditions and setting forth such other
terms and conditions of the Option as determined by the Committee:
(a) Number of shares and option price. The Option Agreement shall
state the total number of shares to which it pertains. The price of
Incentive Stock Option Stock shall be not less than one hundred percent
(100%) of the Fair Market Value of the Option Stock at the Option Date.
In the event an Incentive Stock Option is granted to an employee, who, at
the Option Date, owns more than ten percent (10%) of the voting power of
all classes of the Company's stock then outstanding, the price of the
shares of Option Stock which will be covered by such Option shall be not
less than one hundred ten percent (110%) of the Fair Market Value of the
Option Stock at the Option Date. Non-Qualified Options may be granted at
a price equal to, greater than or less than Fair Market Value at the date
of grant. The Option price shall be subject to adjustment as provided in
Section 7 hereof.
(b) Period of options and right to exercise. Options granted
under this Plan shall be subject to such terms and conditions, shall be
exercisable at such times and shall be evidenced by such form of written
Option Agreement as the Committee shall determine, provided that such
determinations are not inconsistent with Code Section 422 and the
regulations thereunder. The Option Agreement may, at the discretion of
the Committee, provide for the acceleration of vesting of Options upon a
"Change in Control" of the Company, as defined in Section 6(h) below.
In addition, no Option granted, shall by its terms, be exercisable after
the expiration of ten (10) years from the date such Option is granted.
Except, however, Incentive Stock Options granted to any employee who at
the Option Date owns more than ten percent (10%) of the voting power of
all shares of the classes of Company's stock then outstanding, may not
be exercisable after expiration of five (5) years from the Option Date.
The period during which the Option may be exercised, once it is granted,
shall not be reduced, except as provided in paragraphs (c), (d) and (e)
below. The exercise of any Option will be contingent upon receipt by the
Company of payment as provided in paragraph (f) below for the full
purchase price of such shares. No Optionee or his or her legal
representatives, legatees or distributees, as the case may be, will be,
or will be deemed to be, a holder of any shares subject to an Option
unless and until certificates for such shares are issued under the terms
of the Plan.
(c) Termination of Employment or Service. Unless the Option
Agreement otherwise provides, in the event that an Optionee shall cease
to be employed by (or performing services for, in the event of a Non-
Qualified Stock Option) the Company for any reason other than death,
subject to the condition that no Incentive Stock Option shall be
exercisable after the expiration of ten (10) years from the date it is
granted, such Optionee shall have the right to exercise any outstanding
Options at any time within three (3) months after the termination of
employment (or service in the case of a Non-Qualified Stock Option).
Notwithstanding the foregoing, in the case of a disabled employee or
other Optionee, the Board of Directors at its discretion may permit
exercise of Options within one year of termination of employment). In
the event an Optionee shall cease to be employed, or in the case of an
independent consultant, shall cease to provide services to the Company,
for "cause," any outstanding Options in favor of such Optionee shall
immediately terminate and such Optionee shall have no right to exercise
any such Options. For purposes of this Plan, the terms "disability "
and "cause" shall have the meanings ascribed such terms in the
employment or independent consulting agreements between the Company and
any such Optionees.
(d) Death of Optionee. If the Optionee holding a "Qualified Stock
Options" shall die (i) while in the employ of or while providing
services to the Company or any Subsidiary, or (ii) within a period of
three (3) months after the termination of his or her employment with the
Company or any subsidiary as provided in paragraph (c) of this section,
and in either case shall not have fully exercised his or her Options,
any Options granted pursuant to the Plan shall be exercisable until the
earlier of the originally stated date of termination or one year from
the date of death. Such Option shall be exercised pursuant to
subparagraph (f) of this Section by the person or persons to whom the
Optionee's rights under the Option shall pass by the Optionee's will or
by the laws of descent and distribution, and only to the extent that
such Options were exercisable at the time of his or her death.
(e) Transfer of Option. Each Option granted hereunder shall, by
its terms, not be transferable by the Optionee other than by will or by
the laws of descent and distribution, and shall be, during the
Optionee's lifetime, exercisable only by the Optionee. Except as
permitted by the preceding sentence, each Option granted under the Plan
and the rights and privileges thereby conferred shall not be
transferred, assigned or pledged in any way (whether by operation of law
or otherwise), and shall not be subject to execution, attachment or
similar process. Upon any attempt to so transfer, assign, pledge, or
otherwise dispose of the Option, or of any right or privilege conferred
thereby, contrary to the provisions of the Option or the Plan, or upon
levy of any attachment or similar process upon such rights and
privileges, the Option, and such rights and privileges, shall
immediately become null and void.
(f) Manner of Exercise of Options. An Option may be exercised, in
whole or in part, at such time or times and with respect to such number
of shares, as the Board of Directors, in its sole discretion, shall
determine at the time that the Option is granted. The Option terms
shall be set forth in the Option Agreement granting the Option. Such
Option shall be exercisable only within the Option period and only by
(i) written notice to the Company of intent to exercise the Option with
respect to a specified number of shares of stock; (ii) tendering the
original Option Agreement to the Company; and (iii) payment to the
Company of the amount of the Option purchase price for the number of
shares of stock with respect to which the Option is then exercised.
Payment of the Option purchase price may be made in cash, by cashier's
check (by personal check at the discretion of the Company) or by a
"cashless exercise" procedure established between the Company and a
stock brokerage firm, subject to compliance with applicable securities
laws. When shares of stock are issued to the Optionee pursuant to the
exercise of an Option, the fact of such issuance shall be noted on the
Option Agreement by the Company before the Agreement is returned to the
Optionee. When all shares of Optioned stock covered by the Option
Agreement have been issued to the Optionee, or the Option shall expire,
the Option Agreement shall be canceled and retained by the Company.
(g) Delivery of Certificate. As promptly as practicable after
receipt of the written notice and payment specified above, the Company
shall deliver to the Optionee certificates for the number of shares with
respect to which the Option has been exercised, issued in the Optionee's
name; provided, however, that such delivery shall be deemed effected for
all purposes when the Company, or the stock transfer agent for the
Company, shall have deposited such certificates in the United States
mail, postage prepaid, addressed to the Optionee at the address
specified in the written notice of exercise.
(h) Change in Control. A "Change in Control" shall, unless the
Board otherwise directs by resolution adopted prior thereto, be deemed
to occur if (i) any "person" (as that term is used in Sections 13 and
14(d)(2) of the Securities Exchange Act of 1934 as amended ("Exchange
Act")) is or becomes the beneficial owner (as that term is used in
Section 13(d) of the Exchange Act), directly or indirectly, of 50% or
more of the voting Capital Stock of the Company ("Voting Stock") or (ii)
during any period of two consecutive years, individuals who at the
beginning of such period constitute the Board cease for any reason to
constitute at least a majority thereof, unless the election or the
nomination for election by the Company's shareholders of each new
director was approved by a vote of at least three-quarters of the
directors then still in office who were directors at the beginning of
the period. Any merger, consolidation or corporate reorganization in
which the owners of the Company's capital stock entitled to vote in the
election of directors prior to said combination, own 50% or more of the
resulting entity's Voting Stock shall not, by itself, be considered a
change in control for the purposes of this Plan.
(i) Other Provisions. The Option Agreements authorized under this
Section shall contain such other provisions as the Committee shall deem
advisable.
7. Adjustment of Number of Shares. If, and to the extent that, the
number of issued shares of the Capital Stock of the Company shall be increased
or reduced by change in par value, recapitalization, reorganization, merger,
consolidation, split up, distribution of a dividend payable in stock or the
like, the number of shares subject to the Option and the Option price therefor
shall be equitably adjusted by the Committee consistent with such change to
prevent substantial dilution or enlargement of the rights granted to or
available to Optionees.
Subject to the foregoing, the grant of an Option pursuant to the Plan
shall not affect in any way the right or power of the Company to make
adjustments, reclassifications, reorganizations, or changes of its capital or
business structure or to merge or to consolidate or to dissolve, liquidate or
sell, or transfer all or any part of its business or assets.
8. No Rights as Stockholder. An Optionee shall not, by reason of any
Option granted hereunder, have any right of a stockholder of the Company with
respect to the shares covered by his or her Option until such shares shall
have been issued to the Optionee.
9. No Obligation to Exercise Option. The granting of an Option shall
impose no obligation upon the Optionee to exercise such Option. Neither shall
the Plan confer upon the Optionee any rights respecting continued employment
nor limit the Optionee's rights or the employer Company's rights to terminate
such employment.
10. Withholding Taxes. If required by law, upon a disqualified
disposition of an Incentive Stock Option, the Company shall have the right to
require any Optionee that is or was an employee as of the Option Date, to
remit to the Company an amount sufficient to satisfy any federal and state
withholding or other employment taxes, if any, resulting from such option
exercise or early disposition of Option Stock. Payment of such amount may be
made in the same manner as payment of the exercise price or by tendering
previously owned shares of the Company's Common Stock with a Fair Market Value
on the date of exercise equal to such amount, subject to compliance with
applicable securities laws.
11. Common Stock Acquired for Investment. Common Stock acquired by an
Optionee under this Plan by exercise of any Option shall be acquired by the
Optionee for investment and without intention of resale, unless, in the
opinion of counsel of the Company, such common stock may be purchased without
any investment representation. Where an investment representation is deemed
necessary, the Committee may require a written representation to that effect
by the Optionee as a condition of the Optionee exercising an Option under this
Plan, and the Committee may place an appropriate legend on the common stock
issued to the Optionee indicating that such common stock has not been
registered under federal or state securities laws. Each Option shall be
subject to the requirement that if, at any time, the Committee shall determine
in its discretion that the listing, registration or qualification of the
shares subject to such Option 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 purchase of shares thereunder, then
such Option shall not be granted or 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 Committee.
Nothing contained herein shall require the Company to register the Options or
the shares of voting common stock purchased upon the exercise of said Options.
12. Effective Date. This Plan shall be effective September 25, 2001
(the "Effective Date") as approved by the Board of Directors, subject to
approval by the shareholders of the Company. However, unless within 12 months
after the Plan is adopted by the Board of Directors, the Plan is approved by
the vote of the holders of a majority of the outstanding Capital Stock of the
Company, the Plan and options granted hereunder shall not qualify under
Section 422 of the Code. All subsequent stock options granted hereunder will
be Non-Qualified Stock Options. All Options granted prior to disqualification
of the Plan for failure to obtain shareholder approval shall be converted to
Non-Qualified Stock Options.
13. Liquidation. Upon the complete liquidation of the Company, any
unexercised Options theretofore granted under this Plan shall be deemed
canceled, except as otherwise provided in Section 7 in connection with a
merger, consolidation or reorganization of the Company.
14. Termination and Amendment of the Plan. This Plan shall terminate ten
(10) years after the Effective Date or at such earlier time as the Board of
Directors shall determine. Any termination shall not affect any Options then
outstanding under the Plan.
The Board may make such modifications of the Plan as it shall deem
advisable, but may not, without further approval of the stockholders of the
Company, except as provided in Section 7 hereof, (a) increase the number of
shares reserved for Options under this Plan, (b) change the manner of
determining the Option price for Incentive Stock Options, (c) increase the
maximum term of the Options provided for herein or (d) change the class of
persons eligible to receive Options under the Plan.
15. Governing law. The Plan shall be governed by and construed in
accordance with the internal laws of the State of Minnesota without reference
to the principles of conflicts of law thereof.