<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
ON MAY 6, 1999
REGISTRATION STATEMENT NO. 333-
FORM S-8
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
DESTIA COMMUNICATIONS, INC.
(Formerly Econophone, Inc.)
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 11-3132722
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
95 Rte. 17 South, Paramus, New Jersey 07652
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(Address of Principal Executive Offices) (Zip Code)
1996 FLEXIBLE INCENTIVE PLAN
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(Full title of the plan)
Richard L. Shorten, Jr., Esq.
Senior Vice President & General Counsel
Destia Communications, Inc.
95 Rte. 17 South
Paramus, New Jersey 07652
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(Name and address of agent for service)
(201) 226-4500
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(Telephone number, including area code, of agent for service)
Please send copies to:
Michael R. Littenberg, Esq.
Schulte Roth & Zabel LLP
900 Third Avenue
New York, New York 10022
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
==================================================================================================================
Proposed Proposed maximum
maximum aggregate offering Amount of
Amount offering price(2) registration fee
Title of securities to be registered price per
to be registered (1) share(2)
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock,
$.01 par value per share 5,500,000 $4.60 25,272,627 $7,026
==================================================================================================================
</TABLE>
<PAGE>
(1) The shares of Common Stock of Destia Communications, Inc. (formerly
Econophone, Inc.), a Delaware corporation (the "Company"), being registered
include restricted shares and shares that may be acquired by exercising options
issued or issuable to participants in the Company's 1996 Flexible Incentive Plan
(the "Plan").
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(h)(1) under the Securities Act of 1933, as amended (the
"Securities Act").
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PART I
INFORMATION REQUIRED IN THE SECTION 10(A) PROSPECTUS
The documents containing information specified in Part I of
Form S-8 will be sent or given to employees participating in the Plan as
specified by Rule 428(b)(1) of the Securities Act. Those documents and the
documents incorporated by reference into this registration statement (the
"Registration Statement") pursuant to Item 3 of Part II of this Registration
Statement, taken together, constitute a prospectus that meets the requirements
of Section 10(a) of the Securities Act.
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
Item 3. Incorporation of Documents by Reference.
The Securities and Exchange Commission (the "SEC") allows the Company
to "incorporate by reference" the information the Company files with the SEC,
which means the Company can disclose important information to investors by
referring investors to those documents. The information incorporated by
reference is an important part of this Registration Statement, and information
the Company files later will automatically update and supersede this
information. The following documents are incorporated by reference:
1. The Company's Annual Report on Form 10-K for the year ended December
31, 1998;
2. The Company's Current Reports on Form 8-K dated February 2, 1999,
February 18, 1999 and April 20, 1999; and
3. The description of the Common Stock contained in registration
statement no. 333-71463, initially filed by the Company with the SEC on January
29, 1999, under the Securities Act, which is incorporated by reference into the
registration statement on Form 8-A, filed by the Company with the SEC on May 4,
1999 pursuant to the Securities Exchange Act of 1934, as amended (the "Exchange
Act").
The Company also incorporates by reference in this Registration
Statement all reports and other documents filed by the Company pursuant to
Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act after the date of this
Registration Statement and before the Company files a post-effective amendment
which indicates that all securities have been sold or which deregisters all
securities remaining unsold.
Item 4. Description of Securities.
Not applicable.
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Item 5. Interests of Named Experts and Counsel.
The legality of the issuance of the Common Stock being registered
hereby is being passed upon by Schulte Roth & Zabel LLP, 900 Third Avenue, New
York, New York 10022, counsel for the Company.
Item 6. Indemnification of Directors and Officers.
The Company's Certificate of Incorporation indemnifies its officers and
directors to the fullest extent permitted by the General Corporation Law of
Delaware (the "DGCL"). Under Section 145 of the DGCL, a corporation may
indemnify its directors, officers, employees and agents and those who serve, at
the corporation's request, in such capacities with another enterprise, against
expenses (including attorneys' fees), as well as judgments, fines and
settlements in nonderivative lawsuits, actually and reasonably incurred in
connection with the defense of any action, suit or proceeding in which they or
any of them were or are made parties or are threatened to be made parties by
reason of their serving or having served in such capacity. The DGCL provides,
however, that such person must have acted in good faith and in a manner such
person reasonably believed to be in (or not opposed to) the best interests of
the corporation and, in the case of a criminal action, such person must have had
no reasonable cause to believe his or her conduct was unlawful. In addition, the
DGCL does not permit indemnification in an action or suit by or in the right of
the corporation, where such person has been adjudged liable to the corporation,
unless, and only to the extent that, a court determines that such person fairly
and reasonably is entitled to indemnity for costs the court deems proper in
light of liability adjudication. Indemnity is mandatory to the extent a claim,
issue or matter has been successfully defended. The Certificate of Incorporation
and the DGCL also prohibit limitations on officer or director liability for acts
or omissions which resulted in a violation of a statute prohibiting certain
dividend declarations, certain payments to stockholders after dissolution and
particular types of loans. The effect of these provisions is to eliminate the
rights of the Company and its stockholders (through stockholders' derivative
suits on behalf of the Company) to recover monetary damages against an officer
or director for breach of fiduciary duty as an officer or director (including
breaches resulting from grossly negligent behavior), except in the situations
described above. These provisions will not limit the liability of directors or
officers under the federal securities laws of the United States. The foregoing
summary of the Company's Certificate of Incorporation, as amended, is qualified
in its entirety by reference to the relevant provisions thereof.
In addition, The Company has entered into indemnification agreements
with its directors and officers providing for, among other things,
indemnification to the extent permitted under Delaware law.
Item 7. Exemption from Registration Claimed.
Not applicable.
4
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Item 8. Exhibits.
The following is a complete list of exhibits filed as part of this
Registration Statement:
EXHIBIT NUMBER
4.1 The Amended and Restated Destia Communications, Inc. 1996 Flexible
Incentive Plan, effective as of October 31, 1996.
4.2 Amendment to 1996 Flexible Incentive Plan.
4.3 Second Amendment to 1996 Flexible Incentive Plan.
5 Opinion of Schulte Roth & Zabel LLP.
23.1 Consent of Arthur Andersen LLP.
23.2 Consent of Schulte Roth & Zabel LLP (included in Exhibit 5).
Item 9. Undertakings.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section
10(a)(3) of the Securities Act.
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any increase or decrease
in volume of securities offered (if the total dollar value of securities offered
would not exceed that which was registered) and any deviation from the low or
high of the estimated maximum offering range may be reflected in the form of
prospectus filed with the SEC pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20 percent change in the
maximum aggregate offering price set forth in the "Calculation of Registration
Fee" table in the effective registration statement.
(iii) To include any material information with
respect to the plan of distribution not previously disclosed in the registration
statement or any material change to such information in the registration
statement.
(2) That, for the purpose of determining any liability under
the Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(b) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the SEC such indemnification
is against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the
5
<PAGE>
event that a claim for indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense or any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933,
the registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-8 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the Borough of Paramus, State of New Jersey, on this 6th day
of May 1999.
DESTIA COMMUNICATIONS, INC.
By: /s/ RICHARD L. SHORTEN, JR.
---------------------------------------
Richard L. Shorten, Jr.
Senior Vice President & General Counsel
7
<PAGE>
POWER OF ATTORNEY
The Registrant and each person whose signature appears below
hereby appoint Alan L. Levy, Richard L. Shorten, Jr. and Alfred West, and each
of them, as their attorneys-in-fact, with full power of substitution, to execute
in their names and on behalf of the Registrant and each such person,
individually and in each capacity stated below, one or more amendments
(including post-effective amendments) to this Registration Statement as the
attorney-in-fact acting on the premise shall from time to time deem appropriate
and to file any such amendment to this Registration Statement with the
Securities and Exchange Commission.
Pursuant to the requirements of the Securities Act of 1933,
this Registration Statement has been signed by the following persons in the
capacities indicated, on this 6th day of May 1999.
Signature and Title
/s/ ALFRED WEST
---------------------------------------
Alfred West
Chief Executive Officer and
Chairman of the Board of Directors
(principal executive officer)
---------------------------------------
Phillip J. Storin
Chief Financial Officer, Treasurer and
Senior Vice President (principal
financial and accounting officer)
/s/ ALAN L. LEVY
---------------------------------------
Alan L. Levy
Director
---------------------------------------
Gary S. Bondi
Director
---------------------------------------
Steven West
Director
/s/ STEPHEN R. MUNGER
---------------------------------------
Stephen R. Munger
Director
8
<PAGE>
Pursuant to the requirements of the Securities Act of 1933,
the Company's Compensation Committee, as administrator of the Company's 1996
Flexible Incentive Plan, has duly caused this Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the
Borough of Paramus, State of New Jersey, on this 6th day of May, 1999.
THE DESTIA COMMUNICATIONS, INC.
1996 FLEXIBLE INCENTIVE PLAN
By: /s/ STEPHEN R. MUNGER
---------------------------------------
Name: Stephen R. Munger
Title: Member of Compensation Committee
9
<PAGE>
EXHIBIT INDEX
EXHIBIT NUMBER EXHIBIT
- -------------- -------
4.1 The Amended and Restated Destia Communications, Inc. 1996
Flexible Incentive Plan, effective as of October 31, 1996.
4.2 Amendment to 1996 Flexible Incentive Plan
4.3 Second Amendment to 1996 Flexible Incentive Plan
5 Opinion of Schulte Roth & Zabel LLP
23.1 Consent of Arthur Andersen LLP
23.2 Consent of Schulte Roth & Zabel LLP (included in Exhibit 5)
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<PAGE>
Exhibit 4.1
================================================================================
AMENDED AND RESTATED
ECONOPHONE, INC.
1996 FLEXIBLE INCENTIVE PLAN
================================================================================
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE 1 ESTABLISHMENT AND PURPOSE..........................................1
1.1 Establishment and Effective Date................................1
1.2 Purpose1
ARTICLE 2 AWARDS.............................................................1
2.1 Form of Awards..................................................1
2.2 Maximum Shares Available........................................1
2.3 Return of Prior Awards..........................................2
ARTICLE 3 ADMINISTRATION.....................................................2
3.1 Committee.......................................................2
3.2 Powers of the Committee.........................................2
3.3 Delegation......................................................3
3.4 Interpretations.................................................3
3.5 Liability; Indemnification......................................3
ARTICLE 4 ELIGIBILITY........................................................3
ARTICLE 5 STOCK OPTIONS......................................................4
5.1 Grant of Options................................................4
5.2 Designation as Non-qualified Stock Option or
Incentive Stock Option.......................................4
5.3 Option Price....................................................4
5.4 Limitation on Amount of Incentive Stock Options.................4
5.5 Limitation on Time of Grant.....................................5
5.6 Exercise and Payment............................................5
5.7 Term............................................................5
5.8 Rights as a Stockholder.........................................5
5.9 General Restrictions............................................6
5.10 Cancellation of Stock Appreciation Rights.......................6
ARTICLE 6 STOCK APPRECIATION RIGHTS..........................................6
6.1 Grants of Stock Appreciation Rights.............................6
6.2 Limitations on Exercise.........................................6
6.3 Surrender or Exchange of Tandem Stock Appreciation Rights.......7
6.4 Exercise of Nontandem Stock Appreciation Rights.................7
6.5 Settlement of Stock Appreciation Rights.........................7
6.6 Cash Settlement.................................................7
ARTICLE 7 NONTRANSFERABILITY OF OPTIONS AND STOCK APPRECIATION RIGHTS........7
ARTICLE 8 EFFECT OF TERMINATION OF EMPLOYMENT, DISABILITY, RETIREMENT,
DEATH OR CHANGE IN CONTROL...............................8
8.1 General Rule....................................................8
<PAGE>
8.2 Disability or Retirement........................................9
8.3 Death...........................................................9
8.4 Change in Control..............................................10
8.5 Termination of Unvested Options................................10
ARTICLE 9 RESTRICTED SHARES.................................................10
9.1 Grant or Sale of Restricted Shares.............................10
9.2 Restrictions...................................................10
9.3 Restricted Stock Certificates..................................11
9.4 Rights of Holders of Restricted Shares.........................11
9.5 Forfeiture; Repurchase.........................................11
9.6 Delivery of Restricted Shares..................................11
ARTICLE 10 UNRESTRICTED SHARES..............................................12
10.1 Grant or Sale of Unrestricted Shares..........................12
10.2 Delivery of Unrestricted Shares...............................12
ARTICLE 11 TAX OFFSET PAYMENTS..............................................12
ARTICLE 12 ADJUSTMENT UPON CHANGES IN CAPITALIZATION........................12
ARTICLE 13 AMENDMENT AND TERMINATION........................................13
ARTICLE 14 WRITTEN AGREEMENT................................................13
ARTICLE 15 MISCELLANEOUS PROVISIONS.........................................13
15.1 Tax Withholding...............................................13
15.2 Compliance With Section 16(b).................................13
15.3 Successors....................................................14
15.4 General Creditor Status.......................................14
15.5 No Right to Employment........................................14
15.6 Notices.......................................................14
15.7 Severability..................................................14
15.8 Governing Law.................................................14
ii
<PAGE>
AMENDED AND RESTATED
ECONOPHONE, INC.
1996 FLEXIBLE INCENTIVE PLAN
ARTICLE 1. ESTABLISHMENT AND PURPOSE
1.1 ESTABLISHMENT AND EFFECTIVE DATE. Econophone, Inc., a New
York corporation (the "Corporation"), hereby establishes a stock option plan to
be known as the "Econophone, Inc. 1996 Flexible Incentive Plan" (the "Plan").
The Plan shall become effective as of October 31, 1996, subject to the approval
of the stockholders of the Corporation. In the event that such stockholder
approval is not obtained, any awards made hereunder shall be cancelled and all
rights of employees and consultants with respect to such awards shall thereupon
cease. Upon approval of the Plan by the Board of Directors of the Corporation
(the "Board"), any awards may be made by the Board or a committee of the Board
duly authorized to administer the Plan, as provided herein.
1.2 PURPOSE The purpose of the Plan is to encourage and enable
key employees and consultants (subject to such requirements as may be prescribed
by the Committee) of the Corporation and its subsidiaries to acquire a
proprietary interest in the Corporation through the ownership of the
Corporation's voting common stock ("Common Stock"), and other rights with
respect to the Common Stock. Such ownership will provide such employees and
consultants with a more direct stake in the future welfare of the Corporation
and encourage them to remain with the Corporation and its subsidiaries. It is
also expected that the Plan will encourage qualified persons to seek and accept
employment with the Corporation and its subsidiaries.
ARTICLE 2 AWARDS
2.1 FORM OF AWARDS. Awards under the Plan may be granted in
any one or all of the following forms: (i) incentive stock options ("Incentive
Stock Options") meeting the requirements of Section 422 of the Internal Revenue
Code of 1986, as amended (the "Code"); (ii) non-qualified stock options
("Non-qualified Stock Options") (unless otherwise indicated, references in the
Plan to "Options" shall include both Incentive Stock Options and Non-qualified
Stock Options); (iii) stock appreciation rights ("Stock Appreciation Rights"),
as described in Article 6 hereof, which may be awarded either in tandem with
Options ("Tandem Stock Appreciation Rights") or on a stand-alone basis
("Nontandem Stock Appreciation Rights"); (iv) shares of Common Stock which are
subject to vesting requirements as provided in Article 9 hereof ("Restricted
Shares"); (v) shares of Common Stock that are not subject to any vesting
requirements ("Unrestricted Shares"); and (vi) tax offset payments ("Tax Offset
Payments"), as described in Article 11 hereof.
2.2 MAXIMUM SHARES AVAILABLE. The maximum aggregate number of
shares of Common Stock available for award under the Plan is 4,000,000, subject
to adjustment pursuant to Article 12 hereof. Shares of Common Stock issued
pursuant to the Plan may be either authorized but unissued shares or issued
shares reacquired by the Corporation. In the event that prior to the end of the
period during which Options may be granted under the Plan, any Option or any
Nontandem Stock Appreciation Rights under the Plan expires unexercised or is
terminated, surrendered or cancelled (other than in connection with the exercise
of Stock
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Appreciation Rights) without being exercised in whole or in part for any reason,
or any Restricted Shares are forfeited, or if such awards are settled in cash in
lieu of shares of Common Stock, then such shares shall be available for
subsequent awards under the Plan, upon such terms as the Committee may
determine.
2.3 RETURN OF PRIOR AWARDS. As a condition to any subsequent
award, the Committee shall have the right, in its sole discretion, to require
employees to return to the Corporation awards previously granted under the Plan.
Subject to the provisions of the Plan, such new award shall be upon such terms
and conditions as are specified by the Committee at the time the new award is
granted.
ARTICLE 3 ADMINISTRATION
3.1 COMMITTEE. Awards shall be determined, and the Plan shall
be administered, by the Board or a committee of the Board duly authorized to
administer the Plan (the "Committee"); PROVIDED, HOWEVER, that from and after
the consummation of the initial public offering of the Common Stock and so long
as the Plan shall be required to comply with Rule 16b-3 ("Rule 16b-3")
promulgated by the Securities and Exchange Commission (the "SEC") under the
Securities Exchange Act of 1934, as amended (the "1934 Act"), in order to permit
transactions pursuant to the plan by officers and directors of the Corporation
to be exempt from the provisions of Section 16(b) of the 1934 Act, each member
of the Committee, at the effective date of his appointment to the Committee,
shall be a "non-employee director," as that term is defined in Rule 16b-3, as in
effect from time to time.
3.2 POWERS OF THE COMMITTEE. Subject to the express provisions
of the Plan, the Committee at any time or, prior to the designation of the
Committee, the Board, shall have the power and authority (i) to grant Options
and to determine the purchase price of the Common Stock covered by each Option,
the term of each Option, the number of shares of Common Stock to be covered by
each Option, the time or times at which each Option shall become exercisable and
the duration of the exercise period applicable to each Option; (ii) to designate
Options as Incentive Stock Options or Non-qualified Stock Options and to
determine which Options, if any, shall be accompanied by Tandem Stock
Appreciation Rights, (iii) to grant Tandem Stock Appreciation Rights and
Nontandem Stock Appreciation Rights and to determine the terms and conditions of
such rights; (iv) to grant or cause to be sold Restricted Shares and to
determine the purchase price, if any, of such shares and the vesting period and
other conditions and restrictions applicable to such shares; (v) to grant or
cause to be sold Unrestricted Shares and to determine the purchase price, if
any, of such shares; (vi) to determine the amount of, and to make, Tax Offset
Payments; (vii) to determine the directors, the employees and the Consultants to
whom, and the time or times at which, Options, Stock Appreciation Rights,
Restricted Shares, Unrestricted Shares and Tax Offset Payments shall be granted
or made; and (viii) to take all other actions contemplated to be taken by the
Board or the Committee under the Plan, including, but not limited to,
authorizing the amendment of any written agreement relating to any award made
thereunder. Without limiting the foregoing, in the event of a merger,
consolidation, combination, exchange of shares, separation, spin-off,
reorganization, liquidation or other similar transaction, the Board may, in its
sole discretion, accelerate the lapse of Restricted Periods and other vesting
periods and waiting periods and extend exercise periods applicable to any award
made under the Plan.
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3.3 DELEGATION. The Board or the Committee, as the case may
be, may delegate to one or more of its members or to any other person or persons
such ministerial duties as it may deem advisable; PROVIDED, HOWEVER, that the
Committee may not delegate any of its responsibilities hereunder if such
delegation would cause the Plan or the grant of any Award hereunder to fail to
qualify for exemption under Rule 16b-3. The Board and the Committee may also
employ attorneys, consultants, accountants or other professional advisors and
shall be entitled to rely upon the advice, opinions or valuations of any such
advisors.
3.4 INTERPRETATIONS. The Board shall have sole discretionary
authority to interpret the terms of the Plan, to adopt and revise rules,
regulations and policies to administer the Plan and to make any other factual
determinations which it believes to be necessary or advisable for the
administration of the Plan. All actions taken and interpretations and
determinations made by the Board in good faith shall be final and binding upon
the Corporation, all directors, employees and consultants who have received
awards under the Plan and all other interested persons.
3.5 LIABILITY; INDEMNIFICATION. No member of the Board, nor
any person to whom ministerial duties have been delegated, shall be personally
liable for any action, interpretation or determination made with respect to the
Plan or awards made thereunder, and each member of the Board shall be fully
indemnified and protected by the Corporation with respect to any liability he or
she may incur with respect to any such action, interpretation or determination,
to the extent permitted by applicable law and to the extent provided in the
Corporation's Certificate of Incorporation and Bylaws, as amended from time to
time, or under any agreement between any such member and the Corporation.
ARTICLE 4 ELIGIBILITY
Awards may be made to all directors, employees and consultants
of the Corporation or any of its subsidiaries (subject to such requirements as
may be prescribed by the Committee). In determining the directors, employees and
consultants to whom awards shall be granted and the number of shares to be
covered by each award, the Board shall take into account the nature of the
services rendered by such directors, employees and consultants, their present
and potential contributions to the success of the Corporation and its
subsidiaries and such other factors as the Board in its sole discretion shall
deem relevant.
Notwithstanding the foregoing, only employees of the
Corporation and any present or future corporation which is or may be a
"subsidiary corporation" of the Corporation (as such term is defined in Section
424 (f) of the Code) shall be eligible to receive Incentive Stock Options.
ARTICLE 5 STOCK OPTIONS
5.1 GRANT OF OPTIONS. Options may be granted under the Plan
for the purchase of shares of Common Stock. Options shall be granted in such
form and upon such terms and conditions, including the satisfaction of corporate
or individual performance objectives and other vesting standards, as the
Committee shall from time to time determine.
5.2 DESIGNATION AS NON-QUALIFIED STOCK OPTION OR INCENTIVE
STOCK OPTION. In connection with any grant of Options, the Board shall designate
in the
3
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written agreement required pursuant to Article 14 hereof whether the Options
granted shall be Incentive Stock Options or Non-qualified Stock Options, or in
the case both are granted, the number of shares of each.
5.3 OPTION PRICE. The purchase price per share under each
Incentive Stock Option shall be the Market Price (as hereinafter defined) of the
Common Stock on the date the Incentive Stock Option is granted. The purchase
price per share under each Non-qualified Stock Option shall be determined by the
Committee. In no case, however, shall the purchase price per share of either an
Incentive Stock Option or Non-qualified Stock Option be less than the par value
of the Common Stock ($0.01). In the case of an Incentive Stock Option granted to
an employee owning (actually or constructively under Section 424(d) of the
Code), more than 10% of the total combined voting power of all classes of stock
of the Corporation or of a subsidiary (a "10% Stockholder"), the option price
shall not be less than 110% of the Market Price of the Common Stock on the date
of grant.
The "Market Price" of the Common Stock on any day shall be
determined as follows: (i) if the Common Stock is listed on a national
securities exchange or quoted through the NASDAQ National Market System, the
Market Price on any day shall be the average of the closing price for the
preceding 45 days of either (x) the average of the closing bid and asked prices
reported on the Consolidated Trading listing for each day or (y) the closing
price reported on the Consolidated Trading listing for such day; (ii) if the
Common Stock is quoted on the NASDAQ interdealer quotation system, the Market
Price on any day shall be the average for the preceding 45 days of the average
of the representative bid and asked prices at the close of business for each
day; (iii) if the Common Stock is not listed on a national stock exchange or
quoted on NASDAQ, the Market Price on any day shall be the average for the
preceding 45 days of the average of the high bid and low asked prices reported
by the National Quotation Bureau, Inc. for each day; or (iv) if the Common Stock
is not registered under Section 12 of the Securities Act of 1933, as amended,
the Market Price on any day shall be the fair market value of the Common Stock
as determined by the Board. In no event shall the Market Price of a share of
Common Stock subject to an Incentive Stock Option be less than the fair market
value as determined for purposes of Section 422(b)(4) of the Code.
The Option price so determined shall also be applicable in
connection with the exercise of any Tandem Stock Appreciation Rights granted
with respect to such Option.
5.4 LIMITATION ON AMOUNT OF INCENTIVE STOCK OPTIONS. In the
case of Incentive Stock Options, the aggregate Market Price (determined at the
time the Incentive Stock Option is granted) of the Common Stock with respect to
which Incentive Stock Options are exercisable for the first time by any optionee
during any calendar year (under all plans of the Corporation and any subsidiary)
shall not exceed $100,000.
5.5 LIMITATION ON TIME OF GRANT. No grant of an Incentive
Stock Option shall be made under the Plan more than ten (10) years after the
date the Plan is approved by the stockholders of the Corporation.
5.6 EXERCISE AND PAYMENT. Options may be exercised in whole or
in part. Common Stock purchased upon the exercise of Options shall be paid for
at the time of purchase. Such payment shall be made in cash or, in the sole
discretion of the Board, through delivery of shares of Common Stock, installment
payments under
4
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the optionee's promissory note or a combination of cash, Common Stock and/or
installment payments, in accordance with procedures to be established by the
Board. Any shares so delivered shall be valued at their Market Price on the date
of exercise. Upon receipt of a notice of exercise and payment in accordance with
procedures to be established by the Board, the Corporation or its agent shall
deliver to the person exercising the Option (or his or her designee) a
certificate for such shares.
The Board in its sole discretion may, on an individual basis
or pursuant to a general program established by the Board in connection with the
Plan, lend money to an optionee to exercise all or a portion of an Option
granted hereunder. If the exercise price is paid in whole or part with an
optionee's promissory note, such note shall (i) provide for full recourse to the
maker, (ii) be collateralized by the pledge of the shares of Common Stock that
the optionee purchases upon exercise of such Option, (iii) bear interest at a
rate no less than the applicable Federal rate (within the meaning of Section
1274 of the Code), and (iv) contain such other terms as the Board in its sole
discretion shall require. In the event that payment for exercised Options is
made through the delivery of shares of Common Stock, the Board, in accordance
with procedures established by the Board, may grant Non-qualified Stock Options
("Restoration Options") to the person exercising the Option for the purchase of
a number of shares equal to the number of shares of Common Stock delivered to
the Corporation in connection with the payment of the exercise price of the
Option and the payment of or surrender of shares for any withholding taxes due
upon such exercise. The purchase price per share under each Restoration Option
shall be the Market Price of the Common Stock on the date the Restoration Option
is granted.
5.7 TERM. The term of each Option granted hereunder shall be
determined by the Board; PROVIDED, HOWEVER, that, notwithstanding any other
provision of the Plan, in no event shall an Incentive Stock Option be
exercisable after ten (10) years from the date it is granted, or in the case of
an Incentive Stock Option granted to a 10% Stockholder, five (5) years from the
date it is granted.
5.8 RIGHTS AS A STOCKHOLDER. A recipient of Options shall have
no rights as a stockholder with respect to any shares issuable or transferable
upon exercise thereof until the date a stock certificate representing such
shares is issued to such recipient. Except as otherwise expressly provided in
the Plan or by the Board, no adjustment shall be made for cash dividends or
other rights for which the record date is prior to the date such stock
certificate is issued.
5.9 GENERAL RESTRICTIONS. Each Option granted under the Plan
shall be subject to the requirement that, if at any time the Board shall
determine, in its sole 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 issue,
transfer, or purchase 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.
The Board or the Committee may, in connection with the
granting of any Option, require the individual to whom the Option is to be
granted to enter into an
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agreement with the Corporation stating that as a condition precedent to each
exercise of the Option, in whole or in part, such individual shall if then
required by the Corporation represent to the Corporation in writing that such
exercise is for investment only and not with a view to distribution, and also
setting forth such other terms and conditions as the Board or the Committee may
prescribe.
5.10 CANCELLATION OF STOCK APPRECIATION RIGHTS. Upon exercise
of all or a portion of an Option, the related Tandem Stock Appreciation Rights
shall be cancelled with respect to an equal number of shares of Common Stock.
ARTICLE 6 STOCK APPRECIATION RIGHTS
6.1 GRANTS OF STOCK APPRECIATION RIGHTS. Tandem Stock
Appreciation Rights may be awarded by the Board in connection with any Option
granted under the Plan, either at the time the Option is granted or thereafter
at any time prior to the exercise, termination or expiration of the Option.
Nontandem Stock Appreciation Rights may also be granted by the Board at any
time. At the time of grant of Nontandem Stock Appreciation Rights, the Committee
shall specify the number of shares of Common Stock covered by such right and the
base price of shares of Common Stock to be used in connection with the
calculation described in Section 6.4 below. The base price of any Nontandem
Stock Appreciation Rights shall be not less than 100% of the Market Price of a
share of Common Stock on the date of grant. Stock Appreciation Rights shall be
subject to such terms and conditions not inconsistent with the other provisions
of the Plan as the Board shall determine.
6.2 LIMITATIONS ON EXERCISE. Tandem Stock Appreciation Rights
shall be exercisable only to the extent that the related Option is exercisable
and shall be exercisable only for such period as the Board may determine (which
period may expire prior to the expiration date of the related Option). Upon the
exercise of all or a portion of Tandem Stock Appreciation Rights, the related
Option shall be cancelled with respect to an equal number of shares of Common
Stock. Shares of Common Stock subject to Options, or portions thereof,
surrendered upon exercise of Tandem Stock Appreciation Rights shall not be
available for subsequent awards under the Plan. Nontandem Stock Appreciation
Rights shall be exercisable during such period as the Committee shall determine.
6.3 SURRENDER OR EXCHANGE OF TANDEM STOCK APPRECIATION RIGHTS.
Tandem Stock Appreciation Rights shall entitle the recipient to surrender to the
Corporation unexercised the related Option, or any portion thereof, and to
receive from the Corporation in exchange therefor that number of shares of
Common Stock having an aggregate Market Price equal to (A) the excess of (i) the
Market Price of one (1) share of Common Stock as of the date the Tandem Stock
Appreciation Rights are exercised over (ii) the option price per share specified
in such Option, multiplied by (B) the number of shares of Common Stock subject
to the Option, or portion thereof, which is surrendered. Cash shall be delivered
in lieu of any fractional shares.
6.4 EXERCISE OF NONTANDEM STOCK APPRECIATION RIGHTS. The
exercise of Nontandem Stock Appreciation Rights shall entitle the recipient to
receive from the Corporation that number of shares of Common Stock having an
aggregate Market Price equal to (A) the excess of (i) the Market Price of one
(1) share of Common Stock as of the date on which the Nontandem Stock
Appreciation Rights are exercised over (ii) the base price of the shares covered
by the Nontandem Stock Appreciation Rights, multiplied by (B) the number of
shares of Common Stock covered by the
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Nontandem Stock Appreciation Rights, or the portion thereof being exercised.
Cash shall be delivered in lieu of any fractional shares.
6.5 SETTLEMENT OF STOCK APPRECIATION RIGHTS. As soon as is
reasonably practicable after the exercise of any Stock Appreciation Rights, the
Corporation shall (i) issue, in the name of the recipient, stock certificates
representing the total number of full shares of Common Stock to which the
recipient is entitled pursuant to Section 6.3 or 6.4 hereof and cash in an
amount equal to the Market Price, as of the date of exercise, of any resulting
fractional shares, and (ii) if the Committee causes the Corporation to elect to
settle all or part of its obligations arising out of the exercise of the Stock
Appreciation Rights in cash pursuant to Section 6.6 hereof, deliver to the
recipient an amount in cash equal to the Market Price, as of the date of
exercise, of the shares of Common Stock it would otherwise be obligated to
deliver.
6.6 CASH SETTLEMENT. The Board, in its sole discretion, may
cause the Corporation to settle all or any part of its obligation arising out of
the exercise of Stock Appreciation Rights by the payment of cash in lieu of all
or part of the shares of Common Stock it would otherwise be obligated to deliver
in an amount equal to the Market Price of such shares on the date of exercise.
ARTICLE 7 NONTRANSFERABILITY OF OPTIONS AND STOCK APPRECIATION RIGHTS
No Option or Stock Appreciation Rights may be transferred,
assigned, pledged or hypothecated (whether by operation of law or otherwise),
except as provided by will or the applicable laws of descent and distribution,
and no Option or Stock Appreciation Rights shall be subject to execution,
attachment or similar process. Any attempted assignment, transfer, pledge,
hypothecation or other disposition of an Option or Stock Appreciation Rights not
specifically permitted herein shall be null and void and without effect. An
Option or Stock Appreciation Rights may be exercised by the recipient only
during his or her lifetime, or following his or her death pursuant to Section
8.3 hereof.
Notwithstanding anything to the contrary in the preceding
paragraph, the Committee may, in its sole discretion, cause the written
agreement relating to any Non-qualified Stock Options or Stock Appreciation
Rights granted hereunder to provide that the recipient of such Non-qualified
Stock Options or Stock Appreciation Rights may transfer any of such
Non-qualified Stock Options or Stock Appreciation Rights other than by will or
the laws of descent and distribution in any manner authorized under applicable
law.
ARTICLE 8 EFFECT OF TERMINATION OF EMPLOYMENT,
DISABILITY, RETIREMENT, DEATH OR CHANGE IN CONTROL
8.1 GENERAL RULE. Except as expressly provided in the written
agreement relating to any Option or Stock Appreciation Rights or as otherwise
expressly determined by the Committee in its sole discretion, in the event that
a recipient of Options or Stock Appreciation Rights ceases to be an employee or
consultant of the Corporation and its subsidiaries (a "Terminated Person") for
any reason other than Cause, Disability, Retirement (as hereinafter defined) or
death, any Options or Stock Appreciation Rights which were held by such Person
on the date on which he or she ceased to be director, employee or consultant
(the "Termination Date") and which were otherwise exercisable on such Date shall
expire unless exercised within the period of 30 days following the Termination
Date, but in no
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event after the expiration of the exercise period of such Options or Stock
Appreciation Rights. Notwithstanding the foregoing, if the Termination Date
occurs prior to the consummation of an initial public offering of the Common
Stock (an "IPO"), the Options or Stock Appreciation Rights which were otherwise
exercisable on the Termination Date shall expire 90 days after the consummation
of the IPO.
Except as expressly provided in the written agreement relating
to the Options or Stock Appreciation Rights or as otherwise expressly determined
by the Committee in its sole discretion, the Board may, in its sole discretion,
cause any Option or Stock Appreciation Rights to be forfeited upon an employee's
termination of employment or the termination of a consultant's consulting
arrangement if the employee or consultant was terminated for Cause. "Cause"
shall mean one (or more) of the following reasons: (i) the employee's or
consultant's conviction, or plea of guilty or NOLO CONTENDERE to the commission,
of a felony, (ii) the employee's or consultant's commission of any fraud,
misappropriation or misconduct which causes demonstrable injury to the
Corporation or a subsidiary, (iii) an act of dishonesty by the employee or
consultant resulting or intended to result, directly or indirectly, in gain or
personal enrichment at the expense of the Corporation or a subsidiary, (iv) any
breach of the employee's or consultant's fiduciary duties to the Corporation, or
(v) the employee's or consultant's willful failure to perform those duties which
the employee or consultant is required to perform as an employee or consultant
of the Corporation or a subsidiary; PROVIDED, HOWEVER, that "cause," in the case
of an employee or consultant who has an employment or consulting agreement with
the Corporation or a subsidiary thereof, shall have the meaning, if any, set
forth in such employment or consulting agreement. It shall be within the sole
discretion of the Board to determine whether an employee's or consultant's
termination was for one of the foregoing reasons, and the decision of the Board
shall be final and conclusive.
8.2 DISABILITY OR RETIREMENT. Except as expressly provided
otherwise in the written agreement relating to any Option or Stock Appreciation
Rights granted under the Plan or as otherwise determined by the Board in its
sole discretion, in the event of a termination of employment or consulting
arrangement of a Terminated Person due to the Disability or Retirement of such
Person, any Options or Stock Appreciation Rights which were held by such Person
on the Termination Date and which were otherwise exercisable on such Date shall
expire unless exercised within the period of 180 days following such Date, but
in no event after the expiration date of the exercise period of such Options or
Stock Appreciation Rights; PROVIDED, HOWEVER, that any Incentive Stock Option of
such Terminated Person shall no longer be treated as an Incentive Stock Option
unless exercised within three (3) months of the Termination Date (or within one
(1) year in the case of an employee who is "disabled" within the meaning of
Section 22(e)(3) of the Code). Notwithstanding the foregoing, if the termination
of employment or consulting arrangement of a Terminated Person due to the
Disability or Retirement occurs prior to the consummation of an IPO, the Options
or Stock Appreciation Rights which were otherwise exercisable on the Termination
Date shall expire 90 days after the consummation of the IPO.
"Disability" shall mean any termination of employment or
consulting arrangement with the Corporation or a subsidiary because of a
long-term or total disability, as determined by the Committee in its sole
discretion. "Retirement" shall mean a termination of employment or consulting
arrangement with the Corporation or a subsidiary with the written consent of the
Board in its sole discretion. The decision of the Board shall be final and
conclusive.
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8.3 DEATH. Except as expressly provided in the written
agreement relating to the Options or Stock Appreciation Rights or as otherwise
expressly determined by the Board in its sole discretion, in the event of the
death of a recipient of Options or Stock Appreciation Rights while an employee
or consultant of the Corporation or any subsidiary, any Options or Stock
Appreciation Rights which were held by such Person at the date of death and
which were otherwise exercisable on such date shall be exercisable by the
beneficiary designated by the employee or consultant for such purpose (the
"Designated Beneficiary") or if no Designated Beneficiary shall be appointed or
if the Designated Beneficiary shall predecease the employee, by the employee's
personal representatives, heirs or legatees for a period of one (1) year from
the date of death, but in no event later than the expiration date of the
exercise period of such Options or Stock Appreciation Rights, at which time such
Options or Stock Appreciation Rights shall expire; PROVIDED, HOWEVER, that any
Incentive Stock Option of such recipient shall no longer be treated as an
Incentive Stock Option unless exercised within three (3) months of the date of
the recipient's death. Notwithstanding the forgoing, if the death of a recipient
of an option occurs prior to the consummation of an IPO, the Options or Stock
Appreciation Rights which were otherwise exercisable on the Termination Date
shall expire 90 days after the consummation of the IPO.
In the event of the death of a Terminated Person following a
termination of employment due to Disability or Retirement, any Options or Stock
Appreciation Rights which were held by such Person on the Termination Date and
which were exercisable on such Date shall be exercisable by such recipient's
Designated Beneficiary, or if no Designated Beneficiary shall be appointed or if
the Designated Beneficiary shall predecease such recipient, by such recipient's
personal representatives, heirs or legatees for a period of one (1) year from
the date of death but in no event later than the expiration date of the exercise
period of such Options or Stock Appreciation Rights, at which time such Options
or Stock Appreciation Rights shall expire; PROVIDED, HOWEVER, that any Incentive
Stock Option of such Terminated Person shall no longer be treated as an
Incentive Stock Option unless exercised within three (3) months of the date of
such Termination Date (or within one (1) year in the case of an employee who is
"disabled" within the meaning of Section 22(e)(3) of the Code).
8.4 CHANGE IN CONTROL. Except as expressly provided otherwise
in the written agreement relating to any Option or Stock Appreciation Rights
granted under the Plan, if there should be a Change in Control of the
Corporation, the Corporation shall give each holder of an Option or Stock
Appreciation Right who has been employed by the Corporation for the twelve month
period preceding the Change of Control written notice of such Change in Control
as promptly as practicable prior to the effective date thereof and any
outstanding Options or Stock Appreciation Rights held by such holders shall
become immediately exercisable. For purposes hereof, a "Change in Control" shall
mean (i) the acquisition by any person, firm, entity or group (as such term is
used or defined in Section 13(d) of the 1934 Act), which is not as of the date
hereof a shareholder of the corporation, of 50% or more of the Common Stock,
(ii) other than the merger effected in connection with the investment in the
Corporation by Princes Gate Investors II, L.P., if the Corporation merges or
consolidates with another entity and the Corporation is not the surviving
entity, or (iii) a sale by the Corporation of all or substantially all of its
assets.
8.5 TERMINATION OF UNVESTED OPTIONS. All Options and Stock
Appreciation Rights which were not exercisable by a Terminated Person as of the
Termination Date of such Terminated Person shall terminate as of such Date,
except
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as expressly provided in the written agreement relating to the Options or Stock
Appreciation Rights or as otherwise expressly determined by the Board in its
sole discretion. Options and Stock Appreciation Rights shall not be affected by
any change of employment so long as the recipient continues to be employed by
either the Corporation or a subsidiary.
ARTICLE 9 RESTRICTED SHARES
9.1 GRANT OR SALE OF RESTRICTED SHARES. The Committee may from
time to time cause the Corporation to grant or to sell Restricted Shares under
the Plan to employees and consultants, subject to such restrictions, conditions
and other terms as the Committee may determine. The purchase price, if any, for
Restricted Shares shall be determined by the Board in its sole discretion.
9.2 RESTRICTIONS. At the time a grant of Restricted Shares is
made, the Board shall establish a period over which such Restricted Shares will
vest (the "Restricted Period"). Each grant of Restricted Shares may be subject
to a different Restricted Period. The Board may, in its sole discretion, at the
time a grant is made prescribe restrictions in addition to or other than the
expiration of the Restricted Period, including the satisfaction of corporate or
individual performance objectives, which shall be applicable to all or any
portion of the Restricted Shares. The Board may also, in its sole discretion, at
any time shorten or terminate the Restricted Period or waive any other
restrictions applicable to all or a portion of such Restricted Shares. None of
the Restricted Shares may be sold, transferred, assigned, pledged or otherwise
encumbered or disposed of during the Restricted Period or prior to the
satisfaction of any other restrictions prescribed by the Board with respect to
such Restricted Shares.
9.3 RESTRICTED STOCK CERTIFICATES. The Corporation shall
issue, in the name of each director, employee or consultant to whom Restricted
Shares have been granted or sold, stock certificates representing the total
number of Restricted Shares granted or sold to the employee or consultant, as
soon as reasonably practicable after the grant or sale. The Corporation, at the
direction of the Board, shall hold such certificates, properly endorsed for
transfer, for the employee's or consultant's benefit until such time as the
Restricted Shares are forfeited to or repurchased by the Corporation or the
restrictions lapse.
9.4 RIGHTS OF HOLDERS OF RESTRICTED SHARES. Holders of
Restricted Shares shall have the right to vote such shares and the right to
receive any cash dividends with respect to such shares. All distributions, if
any, received by an employee or consultant with respect to Restricted Shares as
a result of any stock split, stock distribution, a combination of shares, or
other similar transaction shall be subject to the restrictions of this Article
9.
9.5 FORFEITURE; REPURCHASE. Except as expressly provided in
the written agreement relating to the Options or Stock Appreciation Rights or as
otherwise expressly determined by the Board in its sole discretion, any
Restricted Shares held by a director, employee or consultant pursuant to the
Plan shall be forfeited or subject to repurchase by the Corporation at a price
equal to the original price paid therefor by the employee or consultant upon the
termination of his or her employment or consulting arrangement of the consultant
with the Corporation or its subsidiaries, as the case may be, prior to the
expiration or termination of the Restricted Period and the satisfaction of any
other conditions applicable to such Restricted Shares. Upon any such forfeiture
or repurchase, the
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Restricted Shares shall be retained in the treasury of the Corporation and
available for subsequent awards under the Plan, unless the Board directs that
such Restricted Shares be cancelled.
9.6 DELIVERY OF RESTRICTED SHARES. Upon the expiration or
termination of the Restricted Period applicable to any Restricted Shares and the
satisfaction of any other conditions prescribed by the Board that are applicable
to such Shares, the restrictions applicable to the Restricted Shares shall lapse
and a stock certificate for the number of Restricted Shares with respect to
which the restrictions have lapsed shall be delivered, free of all such
restrictions, to the director, employee, consultant, beneficiary or estate, as
the case may be.
ARTICLE 10 UNRESTRICTED SHARES
10.1 GRANT OR SALE OF UNRESTRICTED SHARES. The Board may cause
the Corporation to grant or to sell Unrestricted Shares to employees and
consultants at such time or times, in such amounts and for such reasons as the
Board, in its sole discretion, shall determine. The purchase price, if any, for
Unrestricted Shares shall be determined by the Board in its sole discretion.
10.2 DELIVERY OF UNRESTRICTED SHARES. The Corporation shall
issue, in the name of each director, employee or consultant to whom Unrestricted
Shares have been granted or sold, stock certificates representing the total
number of Unrestricted Shares granted or sold to the employee or consultant, and
shall deliver such certificates to the director, employee or consultant as soon
as reasonably practicable after the date of grant or sale or on such later date
as the Board shall determine at the time of grant or sale.
ARTICLE 11 TAX OFFSET PAYMENTS
The Board shall have the authority at the time of any award
under the Plan or anytime thereafter to make Tax Offset Payments to assist
employees in paying income taxes incurred as a result of their participation in
the Plan. The Tax Offset Payments shall be determined by applying a percentage
established by the Board to all or a portion (as the Board shall determine) of
the taxable income recognizable by an employee upon (i) the exercise of
Non-qualified Stock Options or Stock Appreciation Rights, (ii) the disposition
of shares received upon exercise of Incentive Stock Options, (iii) the lapse of
restrictions on Restricted Shares or (iv) the award or sale of Unrestricted
Shares. The percentage shall be established, from time to time, by the Board at
that rate which the Board, in its sole discretion, determines to be appropriate
and in the best interests of the Corporation to assist employees in paying
income taxes incurred as a result of the events described in the preceding
sentence. Tax Offset Payments shall be subject to the restrictions on
transferability applicable to Options and Stock Appreciation Rights under
Article 7.
ARTICLE 12 ADJUSTMENT UPON CHANGES IN CAPITALIZATION
Notwithstanding any other provision of the Plan, the Board
may: (i) at any time, make or provide for such adjustments to the Plan or to the
number and class of shares available thereunder or (ii) at the time of grant of
any Options, Stock Appreciation Rights or Restricted Shares, provide for such
adjustments to such Options, Stock Appreciation Rights or Restricted Shares, in
each case as the Board shall deem appropriate to prevent dilution or enlargement
of rights,
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including, without limitation, adjustments in the event of stock dividends,
stock splits, recapitalizations, mergers, consolidations, combinations or
exchanges of shares, separations, spin-offs, reorganizations, liquidations and
the like.
ARTICLE 13 AMENDMENT AND TERMINATION
The Board may suspend, terminate, modify or amend the Plan,
provided that any amendment that would (i) materially increase the aggregate
number of shares which may be issued under the Plan, (ii) materially increase
the benefits accruing to employees under the Plan, or (iii) materially modify
the requirements as to eligibility for participation in the Plan, shall be
subject to the approval of the Corporation's stockholders, except that any such
increase or modification that may result from adjustments authorized by Article
12 hereof shall not require such stockholder approval. If the Plan is
terminated, the terms of the Plan shall, notwithstanding such termination,
continue to apply to awards granted prior to such termination. No suspension,
termination, modification or amendment of the Plan may, without the consent of
the employee or consultant to whom an award shall theretofore have been granted,
adversely affect the rights of such employee or consultant under such award.
ARTICLE 14 WRITTEN AGREEMENT
Each award of Options, Stock Appreciation Rights, Restricted
Shares, Unrestricted Shares and Tax Offset Payments shall be evidenced by a
written agreement containing such restrictions, terms and conditions, if any, as
the Board may require. In the event of any conflict between a written agreement
and the Plan, the terms of the Plan shall govern.
ARTICLE 15 MISCELLANEOUS PROVISIONS
15.1 TAX WITHHOLDING. The Corporation shall have the right to
require employees or their beneficiaries or legal representatives to remit to
the Corporation an amount sufficient to satisfy Federal, state and local
withholding tax requirements, or to deduct from all payments under the Plan,
including Tax Offset Payments, amounts sufficient to satisfy all withholding tax
requirements. Whenever payments under the Plan are to be made to an employee in
cash, such payments shall be net of any amounts sufficient to satisfy all
Federal, state and local withholding tax requirements. The Board may, in its
sole discretion, permit an employee to satisfy his or her tax withholding
obligation either by (i) surrendering shares owned by the employee or (ii)
having the Corporation withhold from shares otherwise deliverable to the
employee. Shares surrendered or withheld shall be valued at their Market Price
as of the date on which income is required to be recognized for income tax
purposes.
15.2 COMPLIANCE WITH SECTION 16(B). In the case of employees
who are or may be subject to Section 16 of the 1934 Act, it is the intent of the
Corporation that the Plan, any award granted hereunder and any other transaction
contemplated by the Plan satisfy and be interpreted in a manner that satisfies
the applicable requirements of Rule 16b-3 so that such persons will be entitled
to the benefits of Rule 16b-3 or other exemptive rules under Section 16 of the
1934 Act and will not be subjected to liability thereunder. If any provision of
the Plan, any award or any other transaction contemplated by the Plan would
otherwise conflict with the intent expressed herein, that provision, to the
extent possible, shall be interpreted and deemed amended so as to avoid such
conflict. To the
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extent of any remaining irreconcilable conflict with such intent, such provision
shall be deemed void as applicable to directors or employees who are or may be
subject to Section 16 of the 1934 Act.
15.3 SUCCESSORS. The obligations of the Corporation under the
Plan shall be binding upon any successor corporation or organization resulting
from the merger, consolidation or other reorganization of the Corporation, or
upon any successor corporation or organization succeeding to all or
substantially all of the assets and business of the Corporation. In the event of
any of the foregoing, the Board may, in its discretion prior to the consummation
of the transaction and subject to Article 13 hereof, cancel, offer to purchase,
exchange, adjust or modify any outstanding awards, at such time and in such
manner as the Board deems appropriate and in accordance with applicable law.
15.4 GENERAL CREDITOR STATUS. Directors, employees and
consultants shall have no right, title, or interest whatsoever in or to any
investments which the Corporation may make to aid it in meeting its obligations
under the Plan. Nothing contained in the Plan, and no action taken pursuant to
its provisions, shall create or be construed to create a trust of any kind, or a
fiduciary relationship between the Corporation and any director, employee,
consultant, beneficiary or legal representative of such person. To the extent
that any person acquires a right to receive payments from the Corporation under
the Plan, such right shall be no greater than the right of an unsecured general
creditor of the Corporation. All payments to be made hereunder shall be paid
from the general funds of the Corporation and no special or separate fund shall
be established and no segregation of assets shall be made to assure payment of
such amounts except as expressly set forth in the Plan.
15.5 NO RIGHT TO EMPLOYMENT. Nothing in the Plan or in any
written agreement entered into pursuant to Article 14 hereof, nor the grant of
any award, shall confer upon any employee any right to continue in the employ of
the Corporation or a subsidiary or to be entitled to any remuneration or
benefits not set forth in the Plan or such written agreement or interfere with
or limit the right of the Corporation or a subsidiary to modify the terms of or
terminate such employee's employment at any time. The preceding sentence shall
be equally applicable with respect to directors or consultants of the
Corporation or a subsidiary.
15.6 NOTICES. Notices required or permitted to be made under
the Plan shall be sufficiently made if personally delivered or sent by regular
mail addressed (a) to the director, employee or consultant at the person's
address as set forth in the books and records of the Corporation or its
subsidiaries, or (b) to the Corporation at the principal office of the
Corporation clearly marked "Attention: Chief Financial Officer."
15.7 SEVERABILITY. In the event that any provision of the Plan
shall be held illegal or invalid for any reason, such illegality or invalidity
shall not affect the remaining parts of the Plan, and the Plan shall be
construed and enforced as if the illegal or invalid provision had not been
included.
15.8 GOVERNING LAW. To the extent not preempted by Federal
law, the Plan, and all agreements hereunder, shall be construed in accordance
with and governed by the laws of the State of New York.
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Exhibit 4.2
AMENDMENT TO THE AMENDED AND RESTATED ECONOPHONE, INC.
1996 FLEXIBLE INCENTIVE PLAN
1. The first sentence of Section 1.2 of the Amended and Restated
Econophone, Inc. 1996 Flexible Incentive Plan (the "Plan") is amended to read as
follows:
The purpose of the Plan is to encourage and enable key employees and
consultants (subject to such requirements as may be prescribed by the
Committee) of the Corporation and its subsidiaries to acquire a
proprietary interest in the Corporation through the ownership of the
Corporation's voting common stock ("Voting Stock") and non-voting
common stock ("Non-voting Stock" and together with Voting Stock,
"Common Stock"), and other rights with respect to the Common Stock.
2. The first sentence of Section 2.2 of the Plan is amended to read as
follows:
The maximum aggregate number of shares Common Stock available for award
under the Plan is 4,600,000, subject to adjustment pursuant to Article
12 hereof, of which 4,350,000 may be in the form of Voting Stock and
250,000 may be in the form of Non-voting Stock.
3. The first sentence of Section 3.2 of the Plan is amended to
read as follows:
Subject to the express provisions of the Plan, the Committee
at any time or prior to the designation of the Committee, the
Board, shall have the power and authority (i) to grant Options
and to determine the purchase price of the Common Stock
covered by each Option, the term of each Option, the number of
shares of Common Stock to be covered by each Option, the time
or times at which each Option shall become exercisable and the
duration of the exercise period applicable to each Option;
(ii) to designate Options as Incentive Stock Options or
Non-qualified Stock Options and to determine which Options, if
any, shall be accompanied by Tandem Stock Appreciation Rights;
(iii) to grant Tandem Stock Appreciation Rights and Nontandem
Stock Appreciation Rights and to determine the terms and
conditions of such rights; (iv) to grant or cause to be sold
Restricted Shares and to determine the purchase price, if any,
of such shares and the vesting period and other conditions and
restrictions applicable to such shares; (v) to grant or cause
to be sold Unrestricted Shares and to determine the purchase
price, if any, of such shares; (vi) to determine the amount
of, and to make, Tax Offset Payments; (vii) to determine the
directors, the employees and the consultants to whom, and the
time or times at which, Options, Stock Appreciation Rights,
Restricted Shares, Unrestricted Shares and Tax Offset Payments
shall be granted or made; (viii) to designate awards in the
form of shares of Voting Stock or Non-voting Stock, provided,
however, that, to the extent the form is not designated in the
written agreement relating to such award, the award shall be
in the form of Voting Stock; and (ix) to take all other
actions contemplated to be
1
<PAGE>
taken by the Board or the Committee under the Plan, including,
but not limited to, authorizing the amendment of any written
agreement relating to any award made thereunder.
4. The first sentence of Section 9.4 of the Plan is amended to
read as follows:
To the extent Restricted Shares are in the form of Voting
Stock, holders of such Restricted Shares shall have the right
to receive any cash dividends with respect to such shares and
the right to vote such shares and holders of Restricted Shares
in the form of Non-voting Stock shall not have any rights to
receive cash dividends or to vote such shares.
5. The first sentence of Section 9.5 of the Plan is amended to
read as follows:
Except as expressly provided in the written agreement relating
to Restricted Shares or as otherwise expressly determined by
the Board in its sole discretion, any Restricted Shares held
by a director, employee or consultant pursuant to the Plan
shall be forfeited or subject to repurchase by the Corporation
at a price equal to the original price paid therefor, if any,
by the director, employee or consultant upon the termination
of his or her employment or consulting agreement with the
Corporation or its subsidiaries, as the case may be, prior to
the expiration or termination of the Restricted Period and the
satisfaction of any other conditions applicable to such
Restricted Shares.
6. Article 12 of the Plan is amended to read as follows:
In the event of any change in the Common Stock by reason of
any stock dividend, stock split, recapitalization, merger,
consolidations, combination or exchange of shares, separation,
spin-off reorganization, liquidation or the like, the number
and kind of shares represented by any awards and the purchase
price per share thereof, if any, shall be appropriately
adjusted consistent with such change in such manner as the
Board may deem equitable to prevent dilution or enlargement of
the rights granted under any awards.
7. A new Section 15.9 is added to the Plan to read as follows:
15.9 PUBLIC OFFERING. Effective as of the consummation of an
initial public offering of the Common Stock, subject to the
terms of the written agreement relating to Restricted Shares
or as otherwise expressly determined by the Board in its sole
discretion, any awards made or granted in the form of shares
of Non-voting Stock shall be converted into awards for Voting
Stock having the same terms and conditions as the award for
Non-voting Stock and, to the extent awards for Non-voting
Stocks have been exercised prior to the consummation of the
initial public offering, the shares of Non-voting Stock shall
be exchangeable for an equivalent number of shares of Voting
Stock.
2
<PAGE>
Exhibit 4.3
SECOND AMENDMENT
TO THE AMENDED AND RESTATED ECONOPHONE, INC.
1996 FLEXIBLE INCENTIVE PLAN
1. The first sentence of Section 2.2 of the Plan is amended to read as
follows:
The maximum aggregate number of shares of Common Stock available for
award under the Plan is 5,500,000, subject to adjustment pursuant to
Article 12 hereof, of which 5,250,000 may be in the form of Voting
Stock and 250,000 may be in the form of Non-voting Stock.
<PAGE>
Exhibit 5
[LETTERHEAD OF SCHULTE ROTH & ZABEL LLP]
May , 1999
Destia Communications, Inc.
95 Rte. 17 South
Paramus, New Jersey 07692
Dear Sirs:
We have acted as counsel to Destia Communications, Inc., a
Delaware corporation (the "Company"), in connection with the preparation and
filing by the Company with the Securities and Exchange Commission (the
"Commission") of a Registration Statement on Form S-8 (the "Registration
Statement") under the Securities Act of 1933, as amended (the "Securities Act"),
relating to the offer and sale of an aggregate of 5,500,000 shares of Common
Stock, par value $.01 per share, of the Company (the "Shares") issuable to
participants in the Company's Amended and Restated 1996 Flexible Incentive Plan,
as amended (the "Plan").
In this capacity, we have examined originals, telecopies or
copies, certified or otherwise identified to our satisfaction, of such records
of the Company and all such agreements, certificates of public officials,
certificates of officers or representatives of the Company and others, and such
other documents, certificates and corporate or other records as we have deemed
necessary or appropriate as a basis for this opinion.
In our examination, we have assumed the genuineness of all
signatures, the legal capacity of natural persons signing or delivering any
instrument, the authenticity of all documents submitted to us as originals, the
conformity to original documents of all documents submitted to us as certified
or photostatic copies and the authenticity of the originals of such latter
documents.
Based upon the foregoing, and having regard for such legal
considerations as we deem relevant, we are of the opinion that the Shares have
been duly authorized and, when issued and delivered to plan participants in
accordance with the terms of the Plan, will be validly issued, fully paid and
nonassessable.
We hereby consent to the filing of this opinion as an exhibit
to the Registration Statement and to the reference to this firm under the
heading "Legal Matters" in the prospectus which forms a part thereof. In giving
such consent, we do not thereby admit that we are in the category of persons
whose consent is required under Section 7 of the Securities Act or the rules and
regulations of the Commission promulgated thereunder.
Very truly yours,
/s/ Schulte Roth & Zabel LLP
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
Destia Communications, Inc.
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement of our reports dated February 2,
1999 incorporated by reference in Destia Communications, Inc. Form 10-K for
the year ended December 31, 1998 and to all references to our Firm included
in this registration statement.
/s/ ARTHUR ANDERSON LLP
-------------------------
ARTHUR ANDERSEN LLP
New York, New York
May 5, 1999
