Nonemployee Directors' Stock Option

AMERICAN CARD TECHNOLOGY, INC.


1996 NONEMPLOYEE DIRECTORS' STOCK OPTION PLAN


(1) Establishment. There is hereby established the American Card Technology, Inc. 1996 Nonemployee Directors' Stock Option Plan (the "Directors' Plan") pursuant to which certain directors of American Card Technology, Inc. (the "Corporation") may be granted options to purchase shares of common stock, par value $.001 per share ("Common Stock"), and thereby share in the future growth of the business. The purpose of the Directors' Plan is to attract and retain the services of non-employee members of the Board of Directors and to provide them with increased motivation and incentive to exert their best efforts on behalf of the Corporation by enlarging their personal stake in the Corporation.


(2) Status of Options. The options to be issued pursuant to this Directors' Plan ("Options") shall not constitute incentive stock options within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the "Code").


(3) Eligibility. All directors of the Corporation who are not employees of the Corporation or any of its subsidiaries (collectively, the "Participants") shall be eligible to be granted Options under this Directors' Plan.


(4) Number of Shares Covered by Options; No Preemptive Rights. The total number of shares which may be issued and sold pursuant to Options granted under this Directors' Plan shall be 30,000 shares of Common Stock (or the number and kind of shares of stock or other securities which, in accordance with paragraph 8 of this Directors' Plan, shall be substituted for such shares of Common Stock or to which said shares shall be adjusted; hereinafter, all references to shares of Common Stock are deemed to be references to said shares or shares so adjusted). The issuance of shares upon exercise of an Option shall be free from any preemptive or preferential right of subscription or purchase on the part of any stockholder. If any outstanding Option granted under this Directors' Plan is terminated for any reason, the shares of Common Stock subject to the unexercised portion of the Option will again be available for Options issued under this Directors' Plan.


(5) Administration


(a) The Directors' Plan shall be administered by a committee consisting of from two (2) to five (5) individuals who are members of the Board. The Committee shall be appointed by the Board, which may at any time, and from time to time, remove any member of the Committee, with or without cause, appoint additional members to the Committee and fill vacancies, however caused, in the Committee. A majority of the members of the Committee shall constitute a quorum and all determinations of the committee shall be made by a majority of such quorum. Any decision or determination of the Committee reduced to writing and signed by all of the members of the Committee shall be fully as effective as if it had been made at a meeting duly called and held. A Participant may receive Options under this Directors' Plan whether or not such Participant also serves as a member of the Committee.


(b) Options shall be automatically granted to Participants in accordance with paragraph 6 hereof and shall be issued upon the terms and conditions set forth in paragraph 7 hereof. Accordingly, the persons to whom Options shall be granted, the number of shares subject thereto, and the material terms and conditions governing the Options, will not be subject to the discretion of the Committee. However, if any questions of interpretation of this Directors' Plan or of any Options issued hereunder shall arise, they shall be determined by the Committee and such determination shall be final and binding upon all persons having an interest in the Directors' Plan.


(6) Non-Discretionary Grants. Subject to approval of the Plan by the stockholders of the Corporation, Options shall be automatically granted to Participants as follows:


(a) an Option to purchase 2,500 shares of Common Stock will be granted to each Participant on the effective date of the Corporation's registration statement on Form SB-2 relating to an initial public offering of the Company's Common Stock (the "IPO");


(b) an Option to purchase 2,500 shares of Common Stock will be granted to each Participant who was not granted Options pursuant to paragraph 6(a) herein upon their initial election or appointment as a director of the Corporation; and


(c) an additional Option to purchase 2,500 shares of Common Stock will be granted to each Participant at each Annual Meeting of the Board immediately following the Annual Meeting of Stockholders in each year, commencing with the first Annual Meeting following the consummation of the IPO, during the term of this Directors' Plan. If the number of shares remaining in the Directors' Plan on any such date is insufficient to grant each Participant an Opt ...