STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT made as of the 15th day of March, 1998 by and
between AMERICAN CARD TECHNOLOGY, INC., a Delaware corporation, with a business
office at 1355 Terrell Mill Road, Suite 200, Marietta, Georgia 30067
(hereinafter called the "Corporation"), and MICHAEL PATE (hereinafter called the
"Optionee").
The Corporation has adopted a 1996 Stock Option Plan (the "Plan") to be
used to award options to purchase shares of its common stock to certain
employees, consultants, and other persons who perform substantial services for
the Corporation or any of its subsidiaries or affiliates, as determined by the
Board of Directors of the Corporation (the "Board") or a special committee of
the Board (the "Committee"). The Board or Committee has authorized the awarding
of an option under the Plan to the Optionee. The options issued under the Plan
may in some cases be entitled to favorable tax treatment afforded to "incentive
stock options" under Sections 421 and 422 of the Internal Revenue Code (such an
option being hereinafter sometimes referred to as an "Incentive Stock Option").
Wherever the context so requires, the "Corporation" shall be deemed to refer to
any or all of the Corporation's subsidiaries or affiliates.
NOW, THEREFORE, in consideration of the premises contained herein, it is
hereby agreed as follows:
1. The Corporation hereby grants to the Optionee as of the date of this
Agreement the right and option to purchase (hereinafter called the "Option") all
or any part of an aggregate of 15,000 shares of the Corporation's common stock,
with a par value of $.001 per share (hereinafter called the "Common Stock"), on
the terms and conditions herein set forth.
2. The Option granted herein shall constitute an Incentive Stock Option.
3. The Optionee's right to exercise the Option shall be subject to the
following terms and conditions:
(a) OPTION PRICE. The price per share with respect to the Option
shall be Twelve and 00/100 Dollars ($12.00).
(b) EXERCISE OF OPTION. The Option shall be exercisable only as
follows:
(i) At any time after the date hereof, the Option may be
exercised to the extent of one-fourth of the aggregate number of shares of
Common Stock.
(ii) At any time after the expiration of the next three
successive anniversaries of the date hereof, the first such date being
March 15, 1999, the Option may be exercised to the extent of an additional
one-fourth of the aggregate number of shares originally covered by the
Option, and the Option may also be exercised to the extent to which the
right to exercise shall theretofore have accrued and not been exercised.
(iii) No portion of the Option shall be exercisable after the
tenth anniversary of the date of its grant, and after that date the Option
shall lapse with respect to any shares of Common Stock not theretofore
purchased.
(iv) The Option may not be exercised for less than one hundred
(100) shares of Common Stock at any one time, unless fewer than one hundred
(100) shares of Common Stock remain covered by the Option, in which event
the Option must be exercised for all such shares.
(c) NOTICE OF EXERCISE; PAYMENT; SHAREHOLDERS' RIGHTS. The Optionee
shall exercise the Option by giving a written notice of exercise, in the form
attached to this Agreement as EXHIBIT A, to the President of the Corporation,
indicating the number of shares of Common Stock to be purchased, and tendering
payment in full (i) by cash or certified or bank check, (ii) by delivery of
shares of Common Stock then owned by the Optionee with a fair market value at
the time of exercise equal to the Option Price, or (iii) by a combination of (i)
and (ii). No shares shall be issued or delivered until full payment therefor has
been made. The Optionee shall have none of the rights of a shareholder, in
respect of the Common Stock, except with respect to shares actually issued to
the Optionee.
(d) NON-TRANSFERABILITY OF OPTION. The Option shall not be
transferable other than by will or by the laws of descent and distribution.
During the Optionee's lifetime, only the Optionee may exercise the Option.
(e) TERMINATION OF EMPLOYMENT. If the Optionee's employment shall be
terminated by the Corporation or by the Optionee, with or without cause, for
whatever reason other than by death, the Optionee shall have the right within
three months after such termination to exercise the Option to the extent the
right to exercise the Option shall have accrued at the date of such a
termination of employment, except to the extent the Option shall have been
exercised or shall have expired. Any portion of the Option not exercised within
said three months shall lapse.
(f) DEATH OF OPTIONEE.
(i) If the Optionee shall die, the Option shall lapse and
neither the Optionee nor the Optionee's heirs or legal representatives
shall have any further rights under this Agreement relating to any Option
with respect to which the right to exercise shall not have accrued prior to
the date of the Optionee's death.
(ii) If the Optionee shall die while employed by the
Corporation, or within the three-month period specified in Section 3(e)
hereof, the executor or administrator of the estate of the Optionee, or the
person or persons to whom the Option shall have been validly transferred by
the executor or administrator pursuant to will or the laws of descent and
distribution, shall have the right within one year from the date of the
Optionee's death to exercise the Option to the extent the right to exercise
the Option shall have accrued at the date of death, except to the extent
the Option shall have been exercised or shall have expired. Any portion of
the Option not exercised within said one-year period shall lapse.
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4. Shares of Common Stock issued upon the exercise of any portion of the
Option granted under this Agreement shall be subject to the following terms and
conditions:
(a) TRANSFERABILITY. The Common Stock shall be transferable only in
compliance with this Section 4 and only pursuant to an effective registration or
exemption from registration under the Securities Act of 1933, as amended. All
transfers, whether or not permitted by this section, shall be subject to all of
the provisions of this Agreement. Stock certificates representing shares of
Common Stock shall bear a legend in substantially the following form:
The shares of the Corporation's common stock
represented by this certificate have not been registered
under the Securities Act of 1933, as amended, and may not
be transferred except pursuant to an effective registration,
or exemption from registration, under said Act. In addition,
such shares are subject to a right of repurchase by the
Corporation.
(b) REPURCHASE OF COMMON STOCK BY THE CORPORATION FOLLOWING
TERMINATION OF EMPLOYMENT OR BY EXERCISE OF RIGHT OF FIRST REFUSAL. The
Corporation shall have a right to repurchase, at the buy-back price set forth
below, any or all of the Common Stock issued upon the exercise of the Option.
Such right shall arise if the Optionee ceases to be employed by the Corporation
for any reason, at the time of the Optionee's death, or if the Optionee elects
to dispose of any such shares of Common Stock by sale, transfer or other
disposition.
(i) REPURCHASE ON DEATH, DISABILITY, OR TERMINATION OF
EMPLOYMENT. In the event the Optionee dies or ceases to be employed by the
Corporation for any reason, the Corporation shall, within thirty days
immediately following the date on which the Optionee's employment
terminates, give to the Optionee or the Optionee's legal representative, as
the case may be, a signed notice in writing, either delivered by hand, or
mailed by registered or certified mail, to the Optionee's last known
address: (1) stating that the Corporation has the first right to purchase
the Common Stock; (2) designating the number of shares of the Common Stock
that the Optionee or the Optionee's legal representative must sell to the
Corporation; (3) naming the buy-back price per share in cash at which the
Optionee or the Optionee's legal representative is obligated to sell such
shares, as determined herein; and (4) stating whether the Corporation
elects to exercise its right to repurchase the Common Stock.
(ii) REPURCHASE ON ATTEMPTED TRANSFER. In the event the
Optionee elects to dispose of any of the Common Stock, the Optionee shall
give to the President of the Corporation a signed notice in writing, either
delivered by hand, or mailed by registered or certified mail, to the
Corporation's principal office: (1) designating the number of shares of the
Common Stock to be disposed of; (2) stating the specific manner in which
the Optionee proposes to dispose of such shares if they are not purchased
by the Corporation pursuant to this Agreement; (3) specifying the names and
addresses of the persons to whom the Optionee desires to dispose of such
shares to the extent not so purchased by the Corporation; (4) offering to
sell such shares to the Corporation; (5) naming the price per share in cash
at which the Optionee is willing to sell such shares to the Corporation,
which price shall not be greater than the buy-back price as determined
herein; and
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(6) designating the Optionee's mailing address. The Corporation shall have
a period of thirty days after the receipt of the notice within which to
accept the Optionee's offer as contained in the Optionee's notice.
Acceptance shall be by notice in writing to that effect hand delivered or
mailed to the Optionee prior to the expiration date of said thirty-day
period to the mailing address designated in the Optionee's notice. If the
Corporation declines to accept such offer, the Optionee shall have a period
of forty-five (45) days within which to dispose of such shares of Common
Stock. Such forty-five (45) day period shall commence on the date of
receipt of the Corporation's written rejection of such offer or, if the
Corporation does not reject such offer in writing, on the expiration of
the thirty-day period within which the Corporation may accept such offer.
(iii) BUY-BACK. The buy-back price per share for purposes of
this Section 4(b) shall be:
(1) the price per share offered in a bona fide offer
to purchase, or
(2) in the absence of a bona fide offer to purchase,
the fair market value per share as determined by the Board or the
Committee, which amount shall not be less than the price per share at
which shares of Common Stock were last sold by the Corporation other
than pursuant to the Plan.
(c) PROCEDURE FOR REPURCHASE. If any shares of the Common Stock are
subject to repurchase as provided in Section 4(b) hereof, and the Corporation
shall have exercised its right to repurchase, the Optionee or the Optionee's
legal representative shall immediately deliver to the Corporation the
certificates for the shares. The certificates shall be voided, and the shares of
the Common Stock represented by the certificates shall be thereafter treated on
the books of the Corporation as treasury shares. A person required to deliver a
certificate for the Common Stock under this section shall be deemed irrevocably
to have authorized the voiding of such certificate and the treatment of such
Common Stock as treasury shares (regardless whether the certificates are in fact
delivered) and irrevocably to have authorized the Board to terminate his status
as a shareholder in respect of such shares.
(d) PAYMENT FOR SHARES OF COMMON STOCK. The Corporation shall have
the right to pay the purchase price for any shares purchased pursuant to this
Section 4 over a one year period, in equal quarterly installments without
interest, or, in the case of a bona fide offer to purchase, in the manner and
over such period of time as provided for in such offer.
(e) PRICE ADJUSTMENT. In all cases the buy-back price per share
shall be adjusted to reflect previous capital changes, if any, as described in
Section 8 hereof. No offer to purchase shall be deemed "bona fide" unless made
by a third party unrelated to the Corporation or its shareholders with the
intention that such purchase be an investment in the Corporation and not with a
view to distribution or resale, nor shall any offer to purchase be deemed "bona
fide" if made by a competitor of the Corporation regardless of the offeror's
intention.
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5. In the event the Optionee dies or ceases to be employed by the
Corporation and the Optionee has accrued but not exercised rights to purchase
shares of Common Stock, the following terms and conditions shall apply.
(a) REPURCHASE ON TERMINATION OF EMPLOYMENT OR DEATH WITH RESPECT TO
OPTIONS ACCRUED BUT NOT EXERCISED. Upon termination of the Optionee's
employment, or upon the Optionee's death giving the Optionee, or the Optionee's
legal representative, rights to exercise the Option under either Section 3(e) or
3(f)(ii) hereof, the Corporation shall, within thirty days immediately following
the date on which the Corporation learns of the Optionee's death or the date on
which the Optionee's employment terminates, give to the Optionee or the
Optionee's legal representative, as the case may be, a signed notice in writing,
either delivered by hand, or mailed by registered or certified mail, to the
Optionee's last known address: (i) stating that the Corporation has the first
right to purchase the Common Stock subject to the Option; (ii) designating the
number of shares of the Common Stock which the Optionee or the Optionee's legal
representative has a right to purchase under the Option and the option price per
share under this Agreement; (iii) naming the buy-back price per share in cash
which the Optionee or the Optionee's legal representative is obligated to sell
the shares subject to the Option, as determined herein; and (iv) stating whether
the Corporation will exercise its right to repurchase the Common Stock if the
Optionee or the Optionee's legal representative exercised the Option.
(b) SIMULTANEOUS EXERCISE OF OPTION AND REPURCHASE OF COMMON STOCK.
The Optionee or the Optionee's legal representative may exercise the Option
within the time period provided in Section 3(e) or Section 3(f)(ii) hereof, as
the case may be, by giving the Corporation notice of exercise of the Option
under Section 3(c) hereof. However, such notice need not be accompanied by
tender of payment if the Corporation has elected to exercise its right to
repurchase. Upon receipt of the notice of exercise from the Optionee or the
Optionee's legal representative within the applicable time period, the
Corporation shall pay the Optionee or the Optionee's legal representative for
each share an amount equal to the buy-back price per share less the option price
per share. If the Corporation does not exercise its right to repurchase under
Section 5(a) hereof, then this Section 5(b) shall be of no effect, and the
provisions for exercising the Option under Section 3(c) shall apply.
(c) COMBINING NOTICES. If the Optionee, or the Optionee's legal
representative, has both shares of Common Stock and a right to exercise the
Option as to additional shares of Common Stock, then the Corporation may deliver
one notice to the Optionee or the Optionee's legal representative to satisfy the
provisions of Section 4(b)(i) hereof and Section 5(a) hereof provided the
information required to be contained in each notice under such sections are
contained in the single notice.
6. Failure by the Corporation to exercise its rights to repurchase the
Common Stock upon the termination of employment of the Optionee shall not be a
waiver of the Corporation's right to repurchase on a subsequent sale, transfer
or other disposition of Common Stock.
7. The Optionee acknowledges that the exercise by the Corporation of the
repurchase rights set forth in Sections 4 or 5 hereof may, if such repurchase is
effected within two (2) years after the date of grant of the Option or one (1)
year after the date of issuance of such shares of Common Stock, result in
disqualifying the Option from eligibility for the favorable tax treatment
accorded Incentive Stock Options
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under Section 421 of the Internal Revenue Code. The Optionee further
acknowledges that other special rules must be complied with in order to ensure
that the Option remains eligible for such favorable tax treatment, and that the
Optionee, in addition to conferring with appropriate representatives of the
Corporation, may wish to consult with his or her personal tax adviser.
8. In the event that a dividend shall be declared upon the shares of
Common Stock payable in shares of Common Stock, the number of shares of Common
Stock then subject to this Option shall be adjusted by adding to each of such
shares the number of shares which would be distributable thereon if such shares
had been outstanding on the date fixed for determining the stockholders entitled
to receive such stock dividend. In the event that the outstanding shares of
Common Stock shall be changed into or exchanged for a different number or kind
of shares of stock or other securities of the Corporation or of another
corporation, whether through reorganization, recapitalization, stock split-up,
combination of shares, merger, or consolidation, then there shall be substituted
for each share of Common Stock subject to this Option, the number and kind of
shares of stock or other securities into which each outstanding share of Common
Stock shall be so changed or for which each such share shall be exchanged,
PROVIDED, HOWEVER, that in the event that such change or exchange results from a
merger or consolidation, and in the judgment of the Committee such substitution
cannot be effected or would be inappropriate, or if the Corporation shall sell
all or substantially all of its assets, the Corporation shall use reasonable
efforts to effect some other adjustment of this Option which the Committee, in
its sole discretion, shall deem equitable. In the event that there shall be any
change, other than as specified above in this Section 8, in the number or kind
of outstanding shares of Common Stock or of any stock or other securities into
which such shares of Common Stock shall have been changed or for which they
shall have been exchanged, then, if the Committee shall determine that such
change equitably requires an adjustment in the number or kind of shares then
subject to this Option, such adjustment shall be made by the Committee and shall
be effective and binding for all purposes of this Option. In the case of any
such substitution or adjustment as provided for in this paragraph, the Option
Price in this Option for each share covered hereby prior to such substitution or
adjustment will be the total option price for all shares of stock or other
securities which shall have been substituted for each such share or to which
such share shall have been adjusted pursuant to this Section 8. No adjustment or
substitution provided for in this Section 8 shall require the Corporation to
sell a fractional share; and the total substitution or adjustment with respect
to this Option shall be limited accordingly. Any of the foregoing adjustments or
substitutions in the shares subject to the Option shall not limit applicability
of the restrictions hereunder and such restrictions shall automatically apply to
all Common Stock or other securities issued by the Corporation and at any time
held by the Optionee by virtue of having exercised the Option.
9. Subject to the restrictions of this Agreement, the Optionee shall have
all the rights of a shareholder in respect of the Common Stock issued hereunder,
beginning with the date of issuance of the Common Stock. The Common Stock shall
be fully paid and non-assessable.
10. The Optionee represents and agrees to represent and agree at the time
of the exercise of the Option that any and all Common Stock purchased pursuant
to the exercise of the Option will be purchased for investment and not with a
view to the distribution or resale thereof, and that the Common Stock will not
be sold except in accordance with the restrictions or limitations set forth in
this Agreement or as may be imposed by law.
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11. The Corporation shall at all times during the term of the Option
reserve and keep available such number of shares of Common Stock as will be
sufficient to satisfy the requirements of this Agreement.
12. If the Corporation registers any of its shares of common stock under
the Securities Act of 1933, as amended (the "Act"), the provisions of Section 4
and Section 5 hereof shall terminate on the day the registration statement
becomes effective. The Common Stock issued upon exercise of the Option shall
thereupon be free of any restriction imposed hereby, except for the restriction
requiring transfer pursuant to the Act if such registration does not include the
Common Stock, and neither the Corporation nor the Optionee shall have any
further rights or obligations under Section 4 or Section 5 hereof, except the
Corporation's obligation to complete payments, under Section 4(b) hereof, for
the Common Stock previously repurchased.
13. This Agreement shall be interpreted according to the laws of the State
of Georgia.
14. Any controversy or claim arising out of or relating to this Agreement,
or the breach thereof, shall be settled by arbitration in accordance with the
Rules of the American Arbitration Association, and judgment upon the award
rendered may be entered in any Court having jurisdiction thereof.
15. This Agreement and the Plan which is hereby incorporated by reference
herein contain the entire agreement of the parties with respect to the Common
Stock. All prior agreements and understandings are merged herein. No amendment
or modification hereof shall be binding unless in writing and signed by the
party against whom enforcement is sought.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year as first above written.
Seal AMERICAN CARD TECHNOLOGY,
INC.
By: /s/ Raymond Findley, Jr.
----------------------------
Raymond Findley, Jr.
Its President
Attest:
/s/ Richard J. Shea, Jr. /s/ Michael Pate
- ------------------------------- -----------------------------
Secretary Michael Pate
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EXHIBIT A
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Address of Person Exercising Option
--------------------------
Date
American Card Technology, Inc.
1355 Terrell Mill Road - Suite 200
Marietta, Georgia 30067
Attention: President
Dear Sirs:
I hereby elect to exercise the Option to purchase shares of Common Stock of
the Corporation awarded to me on March 15, 1998.
A. The number of shares being purchased: ________ shares at $12.00 per
share for a total purchase price equal to $ ________________ (the
"Purchase Price").
B. I desire to follow Procedures 1, 2, or 3 as indicated below:
[CHECK EITHER PROCEDURE 1, 2, OR 3 AND FILL IN BLANKS UNDER THAT
PROCEDURE ONLY].
______ PROCEDURE 1: A certified or bank cashier's check payable to
the order of the Corporation in the amount of $_____________
[insert the full purchase price of the shares being purchased]
is attached.
The certificate or certificates should be mailed or
delivered to:
--------------------------------------
--------------------------------------
--------------------------------------
______ PROCEDURE 2: The Purchase Price of the shares being purchased
which is payable to the Corporation pursuant to this notice
shall be offset against the fair market value of ___________
shares of Common Stock surrendered herewith. The balance of
the Purchase Price shall be paid with the certified or bank
cashier's check payable to the order of the Corporation in the
amount of $_______________. The (i) certificate(s)
for such shares of Common Stock, (ii) a stock power conveying
such shares of Common Stock to the Corporation, and (iii) the
certified or bank cashier's check for the balance of the
Purchase Price are attached hereto.
______ PROCEDURE 3: The Purchase Price of the shares being purchased
which is payable to the Corporation pursuant to this notice
shall be offset against the fair market value of that number
of such shares which is an amount equal to the Purchase Price.
For example, if the fair market value of the shares being
purchased is $24.00 per share, then 50% of the shares being so
purchased shall be retained by the Corporation as payment for
the other 50% of the shares. This method of exercise is only
available to the extent that it is consistent with the Plan
and is permissible for incentive stock options under Sections
421 and 422 of the Internal Revenue Code.
C. The certificate or certificates for the shares being purchased should
be registered and the name and address to be shown on the Corporation's stock
records should be as follows:
----------------------------------------
----------------------------------------
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D. I represent and agree that the shares as to which I am hereby
exercising an option are being purchased for investment and not with a view to
the distribution or resale thereof, and the Common Stock will not be sold except
in accordance with the restrictions or limitations set forth in the Stock Option
Agreement or as may be imposed by law.
Sincerely yours,
------------------------------
Michael Pate
AMENDMENT TO STOCK OPTION AGREEMENT
THIS AMENDMENT TO STOCK OPTION AGREEMENT, dated as of the 9th day of July,
1998, by and between AMERICAN CARD TECHNOLOGY, INC., a Delaware corporation (the
"Company"), and the undersigned holder (the "Holder").
WITNESSETH:
WHEREAS, the Company and Holder entered into a Stock Option Agreement dated
as of February 2, 1998 (the "Option Agreement") whereby the Company granted to
Optionee an option (the "Option") to purchase 2,500 shares of the Company's
common stock, par value $.001 per share ("Common Stock") at the purchase price
of $12.00 per share (the "Exercise Price"); and
WHEREAS, the Company is this day effecting a split of its Common Stock of
1.545 to 1 so that each stockholder shall receive an additional six (6) shares
of Common Stock for each eleven (11) shares presently held; and
WHEREAS, in connection with the aforementioned stock split, the Company and
Holder desire to memorialize the adjustment in the Exercise Price and the number
of shares of Common Stock which may be purchased by Holder pursuant to the
Option Agreement as set forth in Paragraph 8 thereof.
NOW THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the sufficiency and receipt of which is hereby
acknowledged, the parties hereto agree as follows:
1. The Option Agreement is hereby amended as follows:
(a) Pursuant to Paragraph 8 of the Option Agreement, as a result of
the stock split, the number of Option Shares which may be purchased pursuant to
the Option is hereby adjusted so that the maximum number of shares of Common
Stock which may be purchased by Holder pursuant to the Option Agreement (as set
forth in paragraph 1 of the Option Agreement) shall be adjusted by a multiple of
1.545, provided that any fractional share thereby created shall be eliminated by
rounding such fraction to the next whole number (the "Adjusted Option Share
Amount").
(b) Pursuant to and consistent with Paragraph 8 of the Option
Agreement, as a result of the stock split, the Exercise Price is hereby adjusted
by a multiple of .6471. Therefore, Section 3(a) of the Option Agreement is
hereby deleted in its entirety and the following substituted in lieu therefor:
"(a) OPTION PRICE. The price per share with respect to the
Option shall be Seven and 77/100 Dollars ($7.77) (the "Option
Price")."
2. Except as modified hereby, the Option Agreement remains in full force
and effect and is hereby ratified and confirmed.
IN WITNESS WHEREOF, the parties hereto have set their hands and seals as of
the day and year first above written.
Signed, Sealed, and Delivered
in the Presence of: AMERICAN CARD TECHNOLOGY, INC.
By: /s/ Raymond Findley, Jr.
- ------------------------------ -----------------------------------
Raymond Findley, Jr.
Its President
- ------------------------------
HOLDER:
- ------------------------------ ------------------------------
Michael Pate
Name:
- ------------------------------ Adjusted Option Share Amount: 23,175