Exhibit 10.6
IMAGEWARE SOFTWARE, INC.
1994 EMPLOYEE STOCK OPTION PLAN
(AMENDED SEPTEMBER 3, 1997)
1. PURPOSE
The purpose of this 1994 Employee Stock Option Plan (the "Plan") is to
encourage and enable officers and other key employees of IMAGEWARE SOFTWARE,
INC. ("Company") and its subsidiaries (if any are organized or acquired) to
acquire a proprietary interest, or increase their proprietary interest, in the
Company through the ownership of Common Stock of the Company. It is also
expected that the Plan will encourage qualified persons to seek or accept
employment with the Company and its subsidiaries. Pursuant to the Plan,
optionees will be offered the opportunity to acquire such Common Stock through
the grant of Incentive Stock Options.
2. ADMINISTRATION OF THE PLAN
The Plan shall be administered by a Stock Option Committee of the
Board of Directors of the Company ("Committee") consisting of three members
appointed by the Board.
In administering the Plan, the Committee may adopt rules and
regulations for carrying out the Plan. The interpretation and decisions made by
the Committee with regard to any questions arising under the Plan shall be final
and conclusive on all officers and employees of the Company and its
subsidiaries.
The Options granted under this Plan are intended to be "Incentive
Stock Options" within the meaning of Section 422A of the Internal Revenue Code
of 1986, as amended (the "Code"). The Committee shall have the power and
authority to designate participants, which shall not include Committee members
during the time they are serving on the Committee, and to determine the terms
and provisions of respective Option agreements (which need not be identical),
including the authority to grant to the holder of an outstanding Option, in
exchange for the surrender and cancellation of such Option, a new Option having
a purchase price lower than provided in the Option so surrendered and canceled
and containing such other terms and conditions as the Committee may prescribe in
accordance with the provisions of the Plan.
The term "subsidiary" means any corporation 50% or more of the voting
stock of which is owned by the Company or by a subsidiary (as so defined) of the
Company.
3. STOCK RESERVED FOR THE PLAN
Subject to the adjustments provided for in paragraph 9 hereof, a total
of 900,000 shares of Common Stock ("Common Stock") of the Company shall be
subject to the Plan. The shares subject to the Plan shall consist of unissued
shares or previously issued shares reacquired and held by the Company, and such
amount of shares shall be and is hereby reserved for sale for such
purpose. Any of such shares which may remain unsold and which are not
subject to outstanding Options at the termination of the Plan shall cease to
be reserved for the purpose of the Plan, but until termination of the Plan
the Company shall at all times reserve a sufficient number of shares to meet
the requirements of the Plan. Any shares subject to any Option which for any
reason expires or is terminated unexercised as to such shares may again be
subject to an Option under the Plan.
4. DESIGNATIONS OF PARTICIPANTS
The persons eligible for participating in the Plan as recipients of
Options shall be officers and key employees ("Employees") of the Company or any
of its subsidiaries. The aggregate fair market value (determined as of the time
an Option is granted) of the Common Stock for which any Employee may be granted
Incentive Stock Options shall not exceed $100,000 for any calendar year in which
the Option is exercisable for the first time by such individual (under all such
plans of the Company or any subsidiary).
5. OPTION PRICE
The purchase price of each share of Common Stock placed under Option
pursuant to the Plan shall be determined by the Committee, but shall in no event
be less than 100% of the fair market value of such share on the date the Option
is granted; provided however, that if an Option is granted to an Employee who
owns 10% or more of the Common Stock of the Company, then the purchase price of
each share of Common Stock placed under Option pursuant to the Plan shall in no
event be less than 110% of the fair market value of such share on the date the
Option is granted.
6. OPTION PERIOD
(a) TERM. The Options granted under this Plan shall be for a term of
not more than ten years from the date of the granting of each Option; provided
however, that if an Option is granted to an Employee who owns 10% or more of the
Common Stock of the Company, then the term of his Option shall be for not more
than five years from the date of the granting of such Option.
(b) REORGANIZATION, ETC. If the Company is reorganized, merged or
consolidated with another corporation while unexercised Options remain
outstanding under the Plan, there shall be substituted for the shares subject to
the unexercised portions of such outstanding Options an appropriate number of
shares of each class of stock or other securities of the reorganized, merged or
consolidated corporation distributed to the holders of the Company's Common
Stock in respect of their shares, such number of shares to be determined in
accordance with applicable provisions of the Code or regulations issued
thereunder which may from time to time govern the treatment of Incentive Stock
Options in such a transaction; provided, however, that all such Options may be
canceled by the Company as of the effective date of any such reorganization,
consolidation or merger or of any dissolution or liquidation of the Company by
giving notice of its intention to do so to each holder thereof or his personal
representative and by permitting the purchase during a
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period of not less than thirty days next preceding such effective date of all
of the shares subject to such outstanding Options.
7. EXERCISE OF OPTIONS
The Committee, in granting Options, shall have the discretion to
determine the terms upon which such Options shall be exercisable, subject to the
applicable provisions of this Plan. In any event, Options shall be subject to
the following provisions:
(a) EXERCISE IN INSTALLMENTS. Except as provided in this Section 7,
an Employee must remain in the employ of the Company or any of its subsidiaries
at all times in order to exercise such Option. Unless the Committee determines
otherwise, Options shall be exercisable in installments as follows: 30% after 12
months from date of grant; 30% after 24 months from date of grant; and 40% after
36 months from date of grant. To the extent not exercised, installments shall
accumulate and be exercisable, in whole or in part, in any subsequent period.
(b) TERMINATION OF EMPLOYMENT. The effect of termination of an
Employee's employment with the Company or any of its subsidiaries shall be as
follows:
(1) TERMINATION. If the employment of an Employee is terminated
for any reason, except for "cause" then any outstanding Option held by such
Employee may be exercised at any time prior to the expiration date of the
Option, or within three months after the date of such termination, whichever is
the shorter period.
(2) RETIREMENT. If an Employee's employment terminates as the
result of retirement of the Employee under any retirement plan of the Company or
a subsidiary, he may exercise any outstanding Option at any time prior to the
expiration date of the Option or within three months after the effective date of
his retirement, whichever is the shorter period.
(3) DEATH. If an Employee shall die while he is an Employee, or
within three months after his retirement, or within three months after the
involuntary termination of his employment, his Option or Options may be
exercised by the person or persons entitled to do so under the Employee's will
or, if the Employee shall have failed to make testamentary disposition of such
Option or shall have died intestate, by the Employee's legal representative or
representatives, in either case at any time prior to the expiration date of the
Option or within six months of the date of Employee's death, whichever is the
shorter period.
(4) TERMINATION FOR CAUSE. If the employment of an Employee
shall terminate for "cause", then his rights under any then outstanding Option
shall terminate at the time of such termination of employment. Termination for
"cause" shall include, but not be limited to, termination due to the occurrence
of any of the following events:
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(i) Employee's persistent or excessive use of drugs or alcohol
to an extent that such use interferes with the proper performance of
his duties to the Company hereunder; or
(ii) Employee's misappropriation of funds or property of the
Company (as determined by the Company's Board of Directors); or
(iii) Employee's gross negligence, willful misconduct,
insubordination or habitual neglect of duty in carrying out his
employment (as determined by the Company's Board of Directors).
(c) NONTRANSFERABILITY. Each Option granted under the Plan shall by
its terms be nontransferable by the Employee except by will or the laws of
descent and distribution, and each Option shall be exercisable during the
Employee's lifetime only by him.
(d) PAYMENT. The purchase price of the shares as to which an Option
is exercised shall be paid in full at the time of exercise. Such purchase price
shall be payable in cash, or, at the discretion of the Company, in shares of
Common Stock theretofore owned by the holder of such Option (or in a combination
of cash and such Common Stock). For purposes of determining the amount, if any,
of the purchase price satisfied by payment in Common Stock, such Stock shall be
valued at its fair market value on the date of exercise. Any Common Stock
delivered in satisfaction of all or a portion of the purchase price shall be
appropriately endorsed for transfer and assignment to the Company. No holder of
an Option shall be, or have any of the rights or privileges of, a shareholder of
the Company in respect of any shares purchasable upon the exercise of any part
of an Option unless and until certificates representing such shares shall have
been issued by the Company to such holder.
(e) OUTSTANDING INCENTIVE STOCK OPTIONS. An Incentive Stock Option
will be exercisable at any time, subject to the terms of the Option, without
regard to other outstanding Incentive Stock Options, whether such Options were
granted before or after the Option to be exercised.
(f) GENERAL RESTRICTIONS. Each Option granted under the Plan shall
be subject to the requirement that, if at any time the Board of Directors shall
determine, in its discretion, that the listing, registration, or qualification
of the shares issuable or transferable upon exercise thereof upon any securities
exchange or under any state or federal law, or the consent or approval of any
governmental regulatory body is necessary or desirable as a condition of, or in
connection with, the granting of such Option or the issuance or transfer of
shares thereunder, such Option may not be exercised in whole or in part unless
such listing, registration, qualification, consent or approval shall have been
effected or obtained free of any conditions not acceptable to the Board of
Directors.
(g) SPECIAL RESTRICTION. No Option granted under the Plan may be
exercised until the Plan has been approved and ratified by the holders of a
majority of the voting stock of the
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Company at a shareholders' meeting. In the event that the Plan is not
approved by the shareholders of the Company within one year of the date of
its adoption by the Company's Board of Directors, the right to exercise any
Option shall terminate.
8. CAPITAL CHANGE OF THE COMPANY
If the outstanding shares of Common Stock of the Company shall at any
time be changed or exchanged by declaration of a stock dividend, split-up,
combination of shares or recapitalization, the number and kind of shares subject
to this Plan or subject to any Options theretofore granted, and the Option
prices, shall be appropriately and equitably adjusted so as to maintain the
proportionate number of shares without changing the aggregate Option price,
provided, however, no adjustment shall be made by reason of the distribution of
subscription rights on outstanding stock.
9. OPTION AGREEMENT
Each Option granted under the Plan shall be evidenced by a written
stock Option agreement executed by the Company and accepted by the Employee,
which (a) shall contain each of the provisions and agreements herein
specifically required to be contained therein, including, without limitation, in
the case of Options granted prior to the approval of the Plan by the
shareholders of the Company, a provision specifically indicating that such
Option may not be exercised unless and until such approval is obtained, and (b)
shall contain such other terms and conditions as the Committee may deem
desirable and which are not inconsistent with the Plan, including a
representation that the shares of Common Stock will be purchased for investment
and not with a view to their distribution, or other representations necessary to
comply with federal or state securities laws.
10. AMENDMENT OF THE PLAN
The Board of Directors shall have the right to amend, suspend or
terminate the Plan at any time; provided, however, that no such action shall
affect or in any way impair the rights of an Employee under any Option
theretofore granted under the Plan. In addition, unless duly approved by the
holders of Common Stock entitled to vote thereon at a meeting (which may be the
annual meeting) duly called and held for such purpose, no amendment or change
shall be made in the Plan (a) increasing the total number of shares which may be
issued or transferred under the Plan (except for adjustments for
recapitalization, stock dividends and other changes in corporate structure);
(b) changing the minimum purchase price hereinbefore specified for the shares
subject to Options; (c) changing the maximum period during which Options may be
exercised; (d) increasing the maximum number of shares for which Options may be
granted to any Employee; or (e) extending the period during which Options may be
granted under the Plan.
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11. EFFECTIVE DATE OF THE PLAN
The Plan shall be effective as of September 1, 1994.
12. DURATION OF THE PLAN
Subject to the provisions of paragraph 6, the Plan shall remain in
effect until all shares subject or which may become subject to the Plan shall
have been purchased pursuant to the exercise of Options granted under the Plan,
provided that no Options may be granted after August 31, 2004.
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