EXHIBIT 10.2

 

IMAGEWARE SOFTWARE, INC.

 

Stock Option Agreement
Date:  [          ]

 

This Stock Option Agreement is entered into by and between ImageWare Software,
Inc. a California corporation (the “Company”) and [                    
                    ] (“Optionee”) with reference to the following facts:

 

Recitals

 

A.            Optionee is an employee of the Company on the date of this
Agreement.

 

B.            Pursuant to the Amended and Restated 1999 Stock Award Plan of the
Company (the “Plan”), the Stock Option Committee of the Board of Directors has
authorized the granting to Optionee of an Incentive Stock Option to purchase
shares of Common Stock of the Company upon the terms and conditions hereinafter
stated.

 

`NOW, THEREFORE, in consideration of the covenants herein set forth, the parties
agree as follows:

 

1.             Shares; Price.

 

The Company hereby grants to Optionee the right to purchase, upon and subject to
the terms and conditions herein stated and the terms and conditions of the Plan,
all or any part of the number of shares of Common Stock of the Company at the
price per share as hereinafter set forth:

 

No. of Shares

 

Option Price

 

 

 

 

 

[          ]

 

[          ]

 

 

2.             Term of Option.

 

This Option shall expire [          ] years from the date hereof.

 

3.             Installments.

 

Subject to the provisions of Paragraphs 4, 5 and 6 hereof, this Option shall
become exercisable in the installments below set forth.  Each installment shall
include the number of shares, and shall become exercisable (in whole or in part)
upon and after the dates below set forth:

 

Date

 

Number of Shares

 

 

 

 

 

[               ]

 

[          ]

 

 

 

 

 

[               ]

 

[          ]

 

 

 

 

 

[               ]

 

[          ]

 

 

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The installments shall be cumulative, i.e., this Option may be exercised, as to
any or all shares covered by an installment, at any time or times after an
installment becomes exercisable and until expiration or termination of this
Option.

 

4.             Exercise.

 

This Option may be exercised by delivery to the Company of (a) written notice of
exercise stating the number of shares then being purchased hereunder in the form
attached hereto as Exhibit A; (b) a check or cash in the amount of the purchase
price of such shares; and (c) written statement provided for in Paragraph 9
hereof.

 

5.             Termination of Employment.

 

(a)           If Optionee shall cease to be employed by the Company for any
reason other than his death or for “cause”, then at any time within 90 days
after the date Optionee ceases to be employed by the Company, and prior to the
expiration of this Option pursuant to Paragraph 2 hereof, Optionee may exercise
this Option to the extent that Optionee was entitled to exercise it at the date
Optionee ceased to be employed by the Company.

 

(b)           If Optionee’s employment with the Company is terminated for
“cause,” then Optionee’s rights with respect to this Option shall terminate at
the time of such termination of employment.  Termination for “cause” includes,
but is not limited to, termination due to the occurrence of any of the following
events:

 

(i)            Optionee’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)           Optionee’s misappropriation of funds or property of the Company
(as determined by the Company’s Board of Directors); or

 

(iii)          Optionee’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).

 

6.             Death of Optionee; No Assignment.

 

This Option shall not be assignable or transferable, except by will or by the
laws of descent and distribution and shall be exercisable only by the Optionee
during his lifetime.  If Optionee shall die while in the employ of the Company,
his personal representative or the person entitled to succeed to his rights
hereunder shall have the right, at any time within six months after the date of
Optionee’s death, and prior to the expiration of this Option pursuant to
Paragraph 2 hereof, to exercise this Option to the extent that Optionee was
entitled to exercise this Option at the date of his death.

 

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7.             No Rights as Shareholder.

 

Optionee shall have no rights as a shareholder with respect to the Common Stock
of the Company covered by the Option until the date of the issuance of a stock
certificate or stock certificates to him.  Except as may be provided under
Paragraph 8 of the Plan, no adjustment will be made for dividends or other
rights for which the record date is prior to the date such stock certificate or
certificates are issued.

 

8.             Modification and Termination.

 

The rights of Optionee are subject to modification and termination in certain
events as provided in Paragraphs 6 and 10 of the Plan.

 

9.             Shares Purchased for Investment.

 

Optionee represents and agrees that if he exercises this Option in whole or in
part, he will acquire the shares upon such exercise for the purpose of
investment and not with a view to resale or distribution.  Optionee also
represents and agrees that upon each exercise of this Option he will furnish to
the Company a written statement to such effect, satisfactory to the Company in
form and substance.  The Company may, at its election, include a legend on each
Certificate representing shares subject to this Option, stating in effect that
such shares have not been registered under the Securities Act of 1933, as
amended, and that the transferability thereof is restricted.  If the shares
represented by this Option are registered under the Securities Act of 1933, as
amended, either before or after the exercise of this Option (in whole or in
part) Optionee shall be relieved of the foregoing investment representation and
agreement and shall not be required to furnish the Company with the foregoing
written statement.  Optionee further agrees that no shares shall be purchased
upon the exercise of this Option unless and until any then applicable
requirements of state and federal laws and regulatory agencies shall have been
fully complied with to the satisfaction of the Company and its counsel.

 

10.           Optionee’s Representations.

 

In the event the sale of the Shares may not be made pursuant to an effective
registration statement under the Securities Act of 1933, as amended, at the time
this Option is exercised, the Optionee shall, if required by the Company,
concurrently with the exercise of all or any portion of this Option, deliver to
the Company his or her Investment Representation Statement in the form attached
hereto as Exhibit B.

 

11.           Non-Transferability of Option.

 

This Option may not be transferred in any manner otherwise than by will or by
the laws of descent or distribution and may be exercised during the lifetime of
Optionee only by Optionee.

 

12.           No Guarantee of Continued Service.

 

OPTIONEE ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES PURSUANT TO THE
VESTING SCHEDULE HEREOF IS EARNED ONLY BY CONTINUING AS A SERVICE PROVIDER AT
THE WILL OF THE COMPANY (NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED THIS
OPTION OR ACQUIRING SHARES HEREUNDER).  OPTIONEE FURTHER ACKNOWLEDGES AND AGREES
THAT THIS

 

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AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREUNDER AND THE VESTING SCHEDULE SET
FORTH HEREIN DO NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED
ENGAGEMENT AS A SERVICE PROVIDER FOR THE VESTING PERIOD, FOR ANY PERIOD, OR AT
ALL, AND SHALL NOT INTERFERE IN ANY WAY WITH OPTIONEE’S RIGHT OR THE COMPANY’S
RIGHT TO TERMINATE OPTIONEE’S RELATIONSHIP AS A SERVICE PROVIDER AT ANY TIME,
WITH OR WITHOUT CAUSE.

 

Optionee acknowledges receipt of a copy of the Plan and represents that he or
she is familiar with the terms and provisions thereof, and hereby accepts this
Option subject to all of the terms and provisions thereof.  Optionee has
reviewed the Plan and this Option in their entirety, has had an opportunity to
obtain the advice of counsel prior to executing this Option and fully
understands all provisions of the Option.  Optionee hereby agrees to accept as
binding, conclusive and final all decisions or interpretations of the
Administrator upon any questions arising under the Plan or this Option. 
Optionee further agrees to notify the Company upon any change in the residence
address indicated below.

 

13.           This Agreement Subject to Plan.

 

This Agreement is made pursuant to all of the provisions of the Plan, and is
intended, and shall be interpreted in a manner, to comply therewith.  Any
provision hereof inconsistent with the Plan shall be superseded and governed by
the Plan.

 

IN WITNESS WHEREOF, the parties hereto have executed this Agreement.

 

Date:  [               ].

 

Optionee:

IMAGEWARE SOFTWARE, INC.   

 

 

 

 

 

 

By:

 

 

 

 

 

Wayne Wetherell, SVP and CFO

 

 

 

 

 

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EXHIBIT A

 

2005 STOCK OPTION PLAN
EXERCISE NOTICE

 

Imageware, Inc.
10883 Thornmint Road

San Diego, CA  92127

 

Attention:

 

1.             Exercise of Option.  Effective as of today,                ,
         , the undersigned (“Optionee”) hereby elects to exercise Optionee’s
option to purchase                 shares of the Common Stock (the “Shares”) of
ImageWare Systems, Inc. (the “Company”) under and pursuant to the Amended and
Restated 1999 Stock Award Plan of the Company (the “Plan”) and the Stock Option
Agreement dated                ,           (the “Option Agreement”).

 

2.             Delivery of Payment and Required Documents.  Optionee herewith
delivers to the Company the full purchase price of the Shares, as set forth in
the Option Agreement, and any and all withholding taxes due in connection with
the exercise of the Option.  In addition, Optionee delivers the Investment
Representation Statement (attached as Exhibit B of the Option Agreement), and
any other documents required by the Company.

 

3.             Representations of Optionee.  Optionee acknowledges that Optionee
has received, read and understood the Plan and the Option Agreement and agrees
to abide by and be bound by their terms and conditions.

 

4.             Rights as Stockholder.  Until the issuance of the Shares (as
evidenced by the appropriate entry on the books of the Company or of a duly
authorized transfer agent of the Company), no right to vote or receive dividends
or any other rights as a stockholder shall exist with respect to the Optioned
Stock, notwithstanding the exercise of the Option.  The Shares shall be issued
to the Optionee as soon as practicable after the Option is exercised in
accordance with the Option Agreement.  No adjustment shall be made for a
dividend or other right for which the record date is prior to the date of
issuance except as provided in Section 10(c) of the Plan.

 

5.             Tax Consultation.  Optionee understands that Optionee may suffer
adverse tax consequences as a result of Optionee’s purchase or disposition of
the Shares.  Optionee represents that Optionee has consulted with any tax
consultants Optionee deems advisable in connection with the purchase or
disposition of the Shares and that Optionee is not relying on the Company for
any tax advice.

 

6.             Restrictive Legends and Stop-Transfer Orders.

 

(a)           Legends.  Optionee understands and agrees that the Company shall
cause the legends set forth below or legends substantially equivalent thereto,
to be placed upon any

 

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certificate(s) evidencing ownership of the Shares together with any other
legends that may be required by the Company or by state or federal securities
laws:

 

THE REOFFER AND RESALE OF THE SECURITIES REPRESENTED HEREBY AND HELD BY ANY
AFFILIATE OF THE COMPANY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933 (THE “ACT”) AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED
OR HYPOTHECATED BY AN AFFILIATE UNLESS AND UNTIL REGISTERED UNDER THE ACT OR, IN
THE OPINION OF COMPANY COUNSEL SATISFACTORY TO THE ISSUER OF THESE SECURITIES,
SUCH OFFER, SALE OR TRANSFER, PLEDGE OR HYPOTHECATION IS IN COMPLIANCE
THEREWITH.

 

THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS ON
TRANSFER FOR A PERIOD NOT TO EXCEED 180 DAYS FOLLOWING THE EFFECTIVE DATE OF THE
UNDERWRITTEN PUBLIC OFFERING OF THE COMPANY’S SECURITIES AND MAY NOT BE SOLD OR
OTHERWISE DISPOSED OF BY THE HOLDER WITHOUT THE CONSENT OF THE COMPANY OR THE
MANAGING UNDERWRITER.

 

(b)           Stop-Transfer Notices.  Optionee agrees that, in order to ensure
compliance with the restrictions referred to herein, the Company may issue
appropriate “stop transfer” instructions to its transfer agent, if any, and
that, if the Company transfers its own securities, it may make appropriate
notations to the same effect in its own records.

 

(c)           Refusal to Transfer.  The Company shall not be required (i) to
transfer on its books any Shares that have been sold or otherwise transferred in
violation of any of the provisions of this Exercise Notice or any other
agreement between the Optionee and the Company or (ii) to treat as owner of such
Shares or to accord the right to vote or pay dividends to any Optionee or other
transferee to whom such Shares shall have been so transferred.

 

7.             Successors and Assigns.  The Company may assign any of its rights
under this Exercise Notice to single or multiple assignees, and this Exercise
Notice shall inure to the benefit of the successors and assigns of the Company. 
Subject to the restrictions on transfer herein set forth, this Exercise Notice
shall be binding upon Optionee and his or her heirs, executors, administrators,
successors and assigns.

 

8.             Interpretation.  Any dispute regarding the interpretation of this
Exercise Notice shall be submitted by Optionee or by the Company forthwith to
the Administrator which shall review such dispute at its next regular meeting. 
The resolution of such a dispute by the Administrator shall be final and binding
on all parties.

 

9.             Governing Law; Severability.  This Exercise Notice is governed by
the internal substantive laws but not the choice of law rules, of California. 
In the event that any provision hereof becomes or is declared by a court of
competent jurisdiction to be illegal, unenforceable or void, this Option
Agreement will continue in full force and effect.

 

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10.           Entire Agreement.  The Plan and Option Agreement are incorporated
herein by reference.  This Exercise Notice, the Plan, the Option Agreement and
the Investment Representation Statement constitute the entire agreement of the
parties with respect to the subject matter hereof and supersede in their
entirety all prior undertakings and agreements of the Company and Optionee with
respect to the subject matter hereof, and may not be modified adversely to the
Optionee’s interest except by means of a writing signed by the Company and
Optionee.  In the event of a conflict between the terms and conditions of the
Plan and this Exercise Notice, the terms and conditions of the Plan shall
prevail.  In the event of a conflict between the terms and conditions of the
Option Agreement and this Exercise Notice, the terms and conditions of the
Option Agreement shall prevail.

 

OPTIONEE

 

IMAGEWARE SYSTEMS, INC.

 

 

 

 

 

 

 

Signature

 

By

 

 

 

 

 

 

 

Print Name

 

Title

 

 

 

 

 

 

 

 

 

 

 

 

Residence Address

 

 

 

 

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EXHIBIT B

 

INVESTMENT REPRESENTATION STATEMENT

 

OPTIONEE:

 

 

 

 

 

COMPANY:

 

IMAGEWARE SYSTEMS, INC.

 

 

 

SECURITY:

 

Common Stock

 

 

 

AMOUNT:

 

 

 

 

 

DATE:

 

 

 

In connection with the purchase of the above-listed Securities, the undersigned
Optionee represents to the Company the following:

 

(a)           Optionee is aware of the Company’s business affairs and financial
condition and has acquired sufficient information about the Company to reach an
informed and knowledgeable decision to acquire the Securities.  Optionee is
acquiring these Securities for investment for Optionee’s own account only and
not with a view to, or for resale in connection with, any “distribution” thereof
within the meaning of the Securities Act of 1933, as amended (the “Securities
Act”).

 

(b)           Optionee acknowledges and understands that the Securities
constitute “restricted securities” under the Securities Act and have not been
registered under the Securities Act in reliance upon a specific exemption
therefrom, which exemption depends upon, among other things, the bona fide
nature of Optionee’s investment intent as expressed herein.  In this connection,
Optionee understands that, in the view of the Securities and Exchange
Commission, the statutory basis for such exemption may be unavailable if
Optionee’s representation was predicated solely upon a present intention to hold
these Securities for the minimum capital gains period specified under tax
statutes, for a deferred sale, for or until an increase or decrease in the
market price of the Securities, or for a period of one year or any other fixed
period in the future.  Optionee further understands that the Securities must be
held indefinitely unless they are subsequently registered under the Securities
Act or an exemption from such registration is available.  Optionee further
acknowledges and understands that the Company is under no obligation to register
the Securities.  Optionee understands that the certificate evidencing the
Securities will be imprinted with any legend required under applicable state
securities laws.

 

(c)           Optionee is familiar with the provisions of Rule 701 and Rule 144,
each promulgated under the Securities Act, which, in substance, permit limited
public resale of “restricted securities” acquired, directly or indirectly from
the issuer thereof, in a non-public offering subject to the satisfaction of
certain conditions.  Rule 701 provides that if the issuer qualifies under
Rule 701 at the time of the grant of the Option to the Optionee, the exercise
will be exempt from registration under the Securities Act.  In the event the
Company becomes subject to the reporting requirements of Section 13 or 15(d) of
the Securities Exchange Act of 1934,

 

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ninety (90) days thereafter (or such longer period as any market stand-off
agreement may require) the Securities exempt under Rule 701 may be resold,
subject to the satisfaction of certain of the conditions specified by Rule 144,
including: (1) the resale being made through a broker in an unsolicited
“broker’s transaction” or in transactions directly with a market maker (as said
term is defined under the Securities Exchange Act of 1934); and, in the case of
an affiliate, (2) the availability of certain public information about the
Company, (3) the amount of Securities being sold during any three month period
not exceeding the limitations specified in Rule 144(e), and (4) the timely
filing of a Form 144, if applicable.

 

In the event that the Company does not qualify under Rule 701 at the time of
grant of the Option, then the Securities may be resold in certain limited
circumstances subject to the provisions of Rule 144, which requires the resale
to occur not less than one year after the later of the date the Securities were
sold by the Company or the date the Securities were sold by an affiliate of the
Company, within the meaning of Rule 144; and, in the case of acquisition of the
Securities by an affiliate, or by a non-affiliate who subsequently holds the
Securities less than two years, the satisfaction of the conditions set forth in
Sections (1), (2), (3) and (4) of the paragraph immediately above.

 

(d)           Optionee further understands that in the event all of the
applicable requirements of Rule 701 or 144 are not satisfied, registration under
the Securities Act, compliance with Regulation A, or some other registration
exemption will be required; and that, notwithstanding the fact that Rules 144
and 701 are not exclusive, the Staff of the Securities and Exchange Commission
has expressed its opinion that persons proposing to sell private placement
securities other than in a registered offering and otherwise than pursuant to
Rules 144 or 701 will have a substantial burden of proof in establishing that an
exemption from registration is available for such offers or sales, and that such
persons and their respective brokers who participate in such transactions do so
at their own risk.  Optionee understands that no assurances can be given that
any such other registration exemption will be available in such event.

 

 

 

Signature of Optionee:

 

 

 

 

 

 

 

 

 

 

 

 

Date:

 

 ,

 

 

 

 

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