As filed with the Securities and Exchange Commission on October 23, 1998.
File No. 333-________
==========================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------
FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-----------------
INNOTRAC CORPORATION
--------------------------------------------------
(Exact Name of Issuer as Specified in its Charter)
Georgia 58-1592285
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
1828 Meca Way
Norcross, Georgia 30093
______________
(Address and Telephone Number of Issuer's Principal Executive Offices)
Innotrac Corporation Stock Option and Incentive Award Plan,
as amended November 24, 1997
----------------------------------------------------------
(Full Title of the Plans)
Scott D. Dorfman
Chairman and Chief Executive Officer
1828 Meca Way
Norcross, Georgia 30093
(770) 717-2000
_____________
(Name, Address and Telephone Number, Including Area Code, of Agent for
Service)
Copies to:
Jan M. Davidson, Esq.
KILPATRICK STOCKTON LLP
1100 Peachtree Street, N.E.
Atlanta, Georgia 30309-4530
(404) 815-6500
<TABLE>
<CAPTION>
Calculation of Registration Fee
==================================================================================================================================
Proposed Maximum Proposed Maximum
Title of Securities Amount to Offering Price Aggregate Amount of
to be Registered be Registered Per Share <F1> Offering Price Registration Fee
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <S> <C> <C> <C>
Common Stock 800,000 shares $8.375 $6,700,000 $1,862.60
===================================================================================================================================
<FN>
<F1> Determined in accordance with Rule 457(c) under the Securities Act
of 1933, based on $8.375, the average of the high and low prices on
the NASDAQ on October 20, 1998.
</FN>
/TABLE
<PAGE>
PART II. INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
ITEM 3. INCORPORATION OF DOCUMENTS BY REFERENCE
The following documents are incorporated by reference
into this Registration Statement and are deemed to be a part hereof
from the date of the filing of such documents:
(1) The Registrant's Prospectus dated May 6, 1998, filed
pursuant to Rule 424(b) under the Securities Act of 1933, as
amended (the "Securities Act").
(2) The description of the Common Stock contained in the
Registrant's Registration statement on Form 8-A, filed under
Section 12 of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), including all amendments or
reports filed for the purpose of updating such description.
(3) All other documents subsequently filed by the Registrant
pursuant to Sections 13(a), 13(c), 14 and 15(d) of the
Exchange Act prior to the filing of a post-effective
amendment which indicates that all securities offered
pursuant to this Registration Statement have been sold or
which deregisters all securities that remain unsold.
ITEM 4. DESCRIPTION OF SECURITIES
Not Applicable.
ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL
Not Applicable.
ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Registrant's Articles of Incorporation provides for
indemnification of directors to the full extent permitted by Georgia
law and, to the extent permitted by such law, eliminates or limits the
personal liability of directors to the Registrant and its stockholders
for monetary damages for certain breaches of fiduciary duty and the
duty of care. Such indemnification may be available for liabilities
arising in connection with this Offering. Insofar as indemnification
for liabilities under the Securities Act may be permitted to
directors, officers or persons controlling the Registrant pursuant to
the foregoing provisions, the Registrant has been informed that, in
the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the
Securities Act and is therefore unenforceable. Pursuant to its
Articles of Incorporation, the Registrant may indemnify its officers,
employees, agents and other persons to the fullest extent permitted by
Georgia law. The Registrant's Bylaws obligate the Registrant, under
certain circumstances, to advance expenses to its directors and
officers in defending an action, suit or proceeding for which
indemnification may be sought.
The Registrant's Bylaws also provide that the Registrant shall
have the power to purchase and maintain insurance on behalf of any
person who is or was a director, officer, employee or agent of the
Registrant, or who, while a director, officer, employee or agent, is
II-1
<PAGE>
or was serving as a director, officer, trustee, general partner,
employee or agent of one of the Registrant's subsidiaries or, at the
request of the Registrant, of any other organization, against any
liability asserted against such person or incurred by such person in
any such capacity, whether the Registrant would have the power to
indemnify such person against such liability under Georgia law. The
Registrant maintains such insurance on behalf of all of its directors
and executive officers.
ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED
Not Applicable.
ITEM 8. EXHIBITS
The exhibits included as part of this Registration Statement
are as follows:
Exhibit Number Description
4 Innotrac Corporation Stock Option and
Incentive Award Plan, as amended
November 24, 1997
5 Opinion and Consent of Kilpatrick
Stockton LLP, counsel to the Registrant
23 Consent of Arthur Andersen LLP
II-2
<PAGE>
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, 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; (3) to remove from registration by
means of a post-effective amendment any of the securities being
registered which remain unsold at the termination of the offering.
(b) The undersigned Registrant hereby undertakes that, for
purposes of determining any liability under the Securities Act, each
filing of the Registrant's annual report pursuant to Section 13(a) or
Section 15(d) of the Exchange Act that is incorporated by reference in
the Registration Statement 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.
(c) 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 Securities and Exchange Commission such indemnification
is against public policy as expressed in the Act and is, therefore,
unenforceable. In the 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 of 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 Act and will be
governed by the final adjudication of such issue.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, 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 City of Norcross, State
of Georgia, on October 19, 1998.
INNOTRAC CORPORATION
By: /s/ Scott D. Dorfman
Scott D. Dorfman
Chairman and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Scott D. Dorfman and John H.
Nichols, III, as attorneys-in-fact, having the power of substitution,
for them in any and all capacities, to sign any amendments to this
Registration Statement on Form S-8 and to file the same, with exhibits
thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and confirming
all that said attorneys-in-fact, or their substitute or substitutes,
may do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act, this
Registration Statement has been signed by the following persons in the
capacities indicated on October 19, 1998.
/s/ Scott D. Dorfman President, Chief
SCOTT D. DORFMAN Executive Officer and
Chairman of the Board of
Directors (Principal
Executive Officer)
/s/ David L. Ellin Senior Vice President,
DAVID L. ELLIN Chief Operating Officer,
and Director
/s/ John H. Nichols, III Vice President, Chief
JOHN H. NICHOLS, III Financial Officer and
Secretary (Principal
Financial and Accounting
Officer)
/s/ Bruce V. Benator Director
BRUCE V. BENATOR
/s/ Martin J. Blank Director
MARTIN J. BLANK
/s/ Campbell B. Lanier Director
CAMPBELL B. LANIER
/s/ William H. Scott, III Director
WILLIAM H. SCOTT, III
/s/ Larry Hanger Director
LARRY HANGER
II-4<PAGE>
EXHIBIT INDEX
TO
REGISTRATION STATEMENT ON FORM S-8
Exhibit Number Description
- -------------- -----------
4 Innotrac Corporation Stock Option and
Incentive Award Plan, as amended
November 24, 1997
5 Opinion and Consent of Kilpatrick
Stockton LLP, counsel to the Registrant
23 Consent of Arthur Andersen LLP
II-5
INNOTRAC CORPORATION
STOCK OPTION AND INCENTIVE
AWARD PLAN
AS AMENDED,
NOVEMBER 24, 1997
<PAGE>
INNOTRAC CORPORATION
STOCK OPTION AND INCENTIVE AWARD PLAN
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
ARTICLE 1. ESTABLISHMENT, PURPOSE, AND DURATION . . . . . . . . . . . . . . . . . 1
1.1 Establishment of the Plan . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Purposes of the Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.3 Duration of the Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE 2. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE 3. ADMINISTRATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.1 The Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.2 Authority of the Committee . . . . . . . . . . . . . . . . . . . . . . . 5
3.3 Committee Decisions Binding . . . . . . . . . . . . . . . . . . . . . . . 5
ARTICLE 4. SHARES SUBJECT TO THE PLAN . . . . . . . . . . . . . . . . . . . . . . 5
4.1 Number of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
4.2 Lapsed Grants or Awards . . . . . . . . . . . . . . . . . . . . . . . . . 6
4.3 Adjustments in Number of Plan Shares . . . . . . . . . . . . . . . . . . . 6
ARTICLE 5. ELIGIBILITY AND PARTICIPATION . . . . . . . . . . . . . . . . . . . . 6
ARTICLE 6. STOCK OPTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
6.1 Grant of Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
6.2 Option Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
6.3 Option Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
6.4 Duration of Options . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
6.5 Exercise of Options . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
6.6 Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
i
<PAGE>
6.7 Termination of Employment Due to Death, Disability or Retirement . . . . . .8
6.8 Termination of Employment for Other Reasons . . . . . . . . . . . . . . . .9
6.9 Nontransferability of Options . . . . . . . . . . . . . . . . . . . . . . .9
ARTICLE 7. STOCK APPRECIATION RIGHTS . . . . . . . . . . . . . . . . . . . . . . . 9
7.1 Grant of SAR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
7.2 Award Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10
7.3 Exercise of SARs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10
ARTICLE 8 STOCK AWARDS - RESTRICTED AND UNRESTRICTED . . . . . . . . . . . . . . 11
8.1 Award . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
8.2 Restricted Period; Lapse of Restrictions . . . . . . . . . . . . . . . . . .11
8.3 Rights of Restricted Stock Holder; Limitations Thereon . . . . . . . . . . .11
8.4 Delivery of Unrestricted Shares . . . . . . . . . . . . . . . . . . . . . .12
8.5 Nonassignability of Restricted Stock . . . . . . . . . . . . . . . . . . . .12
ARTICLE 9. PERFORMANCE SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
9.1 Grant of Performance Shares . . . . . . . . . . . . . . . . . . . . . . . 13
9.2 Value of Performance Shares . . . . . . . . . . . . . . . . . . . . . . . .13
9.3 Earning of Performance Shares . . . . . . . . . . . . . . . . . . . . . . .13
9.4 Form and Timing of Payment of Performance Shares . . . . . . . . . . . . . .14
9.5 Termination of Employment Due to Death, Disability or Retirement
or by the Company Without Cause . . . . . . ............................... 14
9.6 Termination of Employment for Other Reasons . . . . . . . . . . . . . . . 14
9.7 Nontransferability . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14
ARTICLE 10. BENEFICIARY DESIGNATION . . . . . . . . . . . . . . . . . . . . . . . 14
ARTICLE 11. DEFERRALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
ARTICLE 12. RIGHTS OF PARTICIPANTS . . . . . . . . . . . . . . . . . . . . . . . 15
12.1 Employment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
ii<PAGE>
12.2 Participation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15
ARTICLE 13. CHANGE IN CONTROL . . . . . . . . . . . . . . . . . . . . . . . . . . 15
13.1 Occurrence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
13.2 Definition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16
13.3 Pooling of Interests Accounting . . . . . . . . . . . . . . . . . . . . . .17
ARTICLE 14. AMENDMENT, MODIFICATION AND TERMINATION . . . . . . . . . . . . . . . 17
14.1 Amendment, Modification and Termination . . . . . . . . . . . . . . . . . .17
14.2 Grants or Awards Previously Granted . . . . . . . . . . . . . . . . . . . .17
14.3 Compliance With Code Section 162(m). . . . . . . . . . . . . . . . . . . .18
ARTICLE 15. WITHHOLDING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
15.1 Tax Withholding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
15.2 Share Withholding . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18
ARTICLE 16. SUCCESSORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
ARTICLE 17. LEGAL CONSTRUCTION . . . . . . . . . . . . . . . . . . . . . . . . . 18
17.1 Gender and Number . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18
17.2 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19
17.3 Requirements of Law . . . . . . . . . . . . . . . . . . . . . . . . . . . .19
17.4 Regulatory Approvals and Listing . . . . . . . . . . . . . . . . . . . . .19
17.5 Securities Law Compliance . . . . . . . . . . . . . . . . . . . . . . . . .19
17.6 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19
17.7 Disputes and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . 19
</TABLE> iii
<PAGE>
INNOTRAC CORPORATION
Stock Option and Incentive Award Plan
ARTICLE 1. ESTABLISHMENT, PURPOSE, AND DURATION
1.1 ESTABLISHMENT OF THE PLAN. Innotrac Corporation, a Georgia
corporation (hereinafter referred to as the "Company"), hereby
establishes a stock option and incentive award plan known as the
"Innotrac Corporation Stock Option and Incentive Award Plan" (the
"Plan"), as set forth in this document. The Plan permits the grant of
Non-qualified Stock Options and Incentive Stock Options, and the award
of Stock Appreciation Rights, Stock Awards (restricted or
unrestricted), and Performance Shares.
The Plan shall become effective on November 24, 1997 (the
"Effective Date") and shall remain in effect as provided in Section
1.3. The Plan and all action taken pursuant thereto gives effect to
the 70.58823 for one stock split of the Company that was approved
simultaneously with the approval of the Plan.
1.2 PURPOSES OF THE PLAN. The purposes of the Plan are to
promote greater stock ownership in the Company by those Participants
who are principally responsible for its future growth and continued
success; to more closely link the personal interests of Participants
to those of the Company's shareholders; and to provide flexibility to
the Company in its ability to motivate, attract and retain the
services of Participants upon whose judgment, initiative and special
effort the continued success of the Company depends.
1.3 DURATION OF THE PLAN. The Plan shall commence on the
Effective Date, and shall remain in effect, subject to the right of
the Board of Directors to amend or terminate the Plan at any time
pursuant to Article 14, until the day prior to the tenth (10th)
anniversary of the Effective Date.
ARTICLE 2. Definitions
Whenever used in the Plan the following terms shall have the
meanings set forth below and, when the meaning is intended, the
initial letter of the word is capitalized:
(a) "Award" means, individually or collectively, any award under
this Plan of Stock Appreciation Rights, Stock Awards, or
Performance Shares.
(b) "Award Agreement" or "Option Agreement" means an agreement
entered into by each Participant and the Company, setting
forth as applicable, the terms and provisions applicable to
Grants or Awards made to Participants under this Plan.
(c) "Beneficial Owner" or "Beneficial Ownership" shall have the
meaning ascribed to such term in Rule 13d-3 of the General
Rules and Regulations under the Exchange Act.
-1-
<PAGE>
(d) "Board" or "Board of Directors" means the Board of Directors
of the Company.
(e) "Cause" means: (i) with respect to the Company or any
Subsidiary which employs the Participant or for which the
Participant primarily performs services, the commission by
the Participant of an act of fraud, embezzlement, theft or
proven dishonesty, or any other illegal act or practice
(whether or not resulting in criminal prosecution or
conviction), or any act or practice which the Committee
shall, in good faith, deem to have resulted in the
Participant's becoming unbondable under the Company's or the
Subsidiary's fidelity bond; (ii) the willful engaging by the
Participant in misconduct which is deemed by the Committee,
in good faith, to be materially injurious to the Company or
any Subsidiary, monetarily or otherwise; or (iii) the
willful and continued failure or habitual neglect by the
Participant to perform his duties with the Company or the
Subsidiary substantially in accordance with the operating
and personnel policies and procedures of the Company or the
Subsidiary generally applicable to all their employees. For
purposes of this Plan, no act or failure to act by the
Participant shall be deemed to be "willful" unless done or
omitted to be done by the Participant not in good faith and
without reasonable belief that the Participant's action or
omission was in the best interest of the Company and/or the
Subsidiary. Notwithstanding the foregoing, if the
Participant has entered into an employment agreement that is
binding as of the date of employment termination, and if
such employment agreement defines "Cause," then the
definition of "Cause" in such agreement shall apply to the
Participant in this Plan. "Cause" under either (i), (ii) or
(iii) shall be determined by the Committee.
(f) "Change in Control" has the meaning set forth in Article 13
of this Plan.
(g) "Code" means the Internal Revenue Code of 1986, as amended
from time to time.
(h) "Committee" means: (i) the committee appointed by the Board
to administer the Plan with respect to Grants or Awards, as
specified in Article 3; or (ii) in the absence of such
appointment, the Board itself.
(i) "Company" means Innotrac Corporation, a Georgia corporation,
or any successor thereto, as provided in Article 16.
(j) "Director" means any individual who is a member of the Board
of Directors of the Company.
(k) "Disability" shall have the meaning ascribed to such term in
the Company's long-term disability plan covering the
Participant, or in the absence of such plan, a meaning
consistent with Section 22(e) (3) of the Code.
(l) "Employee" means any full-time, salaried employee of the
Company, or of any of the Company's Subsidiaries.
-2-
<PAGE>
(m) "Effective Date" shall have the meaning ascribed to such
term in Section 1.1.
(n) "Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time, or any successor act thereto.
(o) "Fair Market Value" shall be determined as follows:
(i) If, on the relevant date, the Shares are traded on a
national or regional securities exchange or on The
NASDAQ National Market System and closing sale prices
for the Shares are customarily quoted, on the basis of
the quoted closing sale price or, if there is no such
sale on the relevant date, then on the last previous
day on which a sale was reported;
(ii) If, on the relevant date, the Shares are not listed on
any securities exchange or traded on the NASDAQ
National Market System but the Shares otherwise are
publicly traded and reported by NASDAQ (but closing
sale prices for the Shares are not customary quoted),
on the basis of the mean between the closing bid and
asked quotations in such other over-the-counter market
as reported by NASDAQ; but if there are no bid and
asked quotations in the over-the-counter market as
reported by NASDAQ on that date, then the mean between
the closing bid and asked quotations in the over-the-
counter market as reported by NASDAQ on the last
previous day such bid and asked prices were quoted; and
(iii) If, on the relevant date, the Shares are not
publicly traded as described in (i) or (ii), on the
basis of the good faith determination of the Committee.
(p) "Grant" means, individually or collectively, any grant under
this Plan of Non-qualified Stock Options or Incentive Stock
Options.
(q) "Incentive Stock Option" or "ISO" means an option to
purchase Shares granted under Article 6 which is designated
as an Incentive Stock Option and is intended to meet the
requirements of Section 422 of the Code.
(r) "Insider" shall mean an Employee who is, on the relevant
date, an officer or a Director; or a beneficial owner of ten
percent (10%) or more of any class of the Company's equity
securities that is registered pursuant to Section 12 of the
Exchange Act, all as defined under Section 16 of the
Exchange Act.
(s) "Named Executive Officer" means a Participant who, as of the
date of vesting and/or payout of an Award or Grant is one of
the group of "covered employees," as defined in the
regulations promulgated under Code Section 162(m), or any
successor statute.
-3-
<PAGE>
(t) "Non-qualified Stock Option" or "NQSO" means an option to
purchase Shares granted under Article 6, and which is not
intended to meet the requirements of Code Section 422.
(u) "Option" means an Incentive Stock Option or a Non-qualified
Stock Option.
(v) "Option Price" means the price at which a Share may be
purchased by a Participant Pursuant to an Option, as
determined by the Committee.
(w) "Participant" means any Director or Employee, independent
contractor, adviser, or consultant to the Company who has an
outstanding Grant or Award made under the Plan.
(x) "Performance Share" means an Award granted to a Participant,
as described in Article 9 hereof.
(y) "Retirement," "Normal Retirement Age," and "Normal
Retirement Date" shall have the meanings ascribed to such
terms in the Innotrac Corporation Employee Retirement Plan,
or any successor plan thereto.
(z) "Restricted Stock" means restricted Shares awarded in
accordance with the terms of Article 8 and the other
provisions of the Plan.
(aa) "SAR Award Value" means, as applied to a SAR granted
independent of an Option, such amount which may be greater
than 100% but not less than 100% of the Fair Market Value of
a Share on the date the SAR is granted, as shall be fixed by
the Committee.
(ab) "Shares" means the shares of Common Stock of the Company.
(ac) "Stock Award" means Shares (whether restricted or
unrestricted) awarded under the provisions of Article 8 of
the Plan.
(ad) "Stock Appreciation Rights" or "SAR" means an Award of the
right to receive an amount based upon an increase in the
Fair Market Value of the Shares.
(ae) "Subsidiary" means any corporation, partnership, limited
liability company, joint venture or other entity in which
the Company has a majority voting interest, either direct or
indirect. With respect to a Participant, the term shall
refer to the Subsidiary for which the Participant primarily
performs services.
-4-
<PAGE>
ARTICLE 3. ADMINISTRATION
3.1 THE COMMITTEE. The Plan shall be administered by the
Compensation Committee of the Board, or by any substitute Committee
appointed by the Board that is granted authority to administer the
Plan. Qualified members of the Committee shall be appointed from time
to time by, and shall serve at the discretion of, the Board of
Directors. In the absence of any such appointment or if no
Compensation Committee is then empowered, the Plan shall be
administered by the Board.
3.2 AUTHORITY OF THE COMMITTEE. Subject to the provisions of
the Plan the Committee shall have full and exclusive power to select
Participants who shall participate in the Plan (who may change from
year to year); determine the size and types of Awards or Grants;
determine the terms and conditions of Awards or Grants in a manner
consistent with the Plan (including vesting provisions and the
duration of the Awards or Grants); construe and interpret the Plan and
any agreement or instrument entered into under the Plan; establish,
amend or waive rules and regulations for the Plan's administration;
and (subject to the provisions of Article 14) amend the terms and
conditions of any outstanding Award or Grant to the extent such terms
and conditions are within the discretion of the Committee as provided
in the Plan. Further, the Committee shall make all other
determinations which may be necessary or advisable in the Committee's
opinion for the administration of the Plan.
3.3 COMMITTEE DECISIONS BINDING. All determinations and
decisions made by the Committee pursuant to Paragraph 3.2 above shall
be final, conclusive and binding on the Company and the Participants,
their estates and beneficiaries.
ARTICLE 4. SHARES SUBJECT TO THE PLAN
4.1 NUMBER OF SHARES. Subject to adjustment as provided in
Section 4.3, the gross number of Shares available for Awards or Grants
under the plan shall be Eight Hundred Thousand (800,000) Shares.
These Shares may, in the discretion of the Company, be either
authorized but unissued Shares or Shares purchased by the Company on
the open market.
The following rules shall apply for purposes of the determination
of the number of Shares available for Grant or Award under the Plan:
(a) The number of Shares underlying any outstanding Stock
Option, SAR, or Stock Award shall be counted against
the gross number of Plan shares authorized to be issued
under the Plan regardless of its vested status.
(b) The Committee shall determine the appropriate number of
Shares to deduct against the gross number of authorized
shares in connection with the award of Performance
Shares.
4.2 LAPSED GRANTS OR AWARDS. If any Award or Grant made under
this Plan is canceled, terminates, expires or lapses for any reason,
any Shares subject to such Award or Grant shall again be available for
issue under the Plan. However, in the event that prior to the Award's
or Grant's cancellation, termination, expiration or lapse, the holder
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of the Award or Grant at any time received one or more "benefits of
ownership" pursuant to such Award (as defined by the Securities and
Exchange Commission, pursuant to any rule or interpretation
promulgated under Section 16 of the Exchange Act), the Shares subject
to such Award or Grant shall not be made available for issue under the
Plan.
4.3 ADJUSTMENTS IN NUMBER OF PLAN SHARES. In the event of any
change in corporate capitalization (such as a stock split or a
corporate transaction, such as any merger, consolidation, separation,
including a spin-off, or other distribution of stock or property of
the Company, any reorganization [whether or not such reorganization
comes within the definition of such term in Code Section 368] or any
partial or complete liquidation of the Company) and to prevent
dilution or enlargement of rights under this Plan, an adjustment, as
the Committee shall in its sole discretion determine to be appropriate
and equitable, shall be made in the number and class of Shares which
may be delivered under the Plan and in the number and class of and/or
price of Shares subject to outstanding Awards or Grants made under the
Plan; provided however, that the number of Plan Shares subject to any
Award or Grant shall always be a whole number and the Committee shall
make such adjustments as are necessary to insure Awards or Grants of
whole Shares. In no event will any such adjustment be made as a
result of the consolidation of the Company with IELC, Inc., HomeTel
Systems, Inc., SellTel #1, Inc., RenTel #1, Inc., HomeTel Providers,
Inc., SellTel #2, LLC, RenTel #2, LLC, and HomeTel Providers Partners,
L.P. that is contemplated to take place in connection with the
Company's initial public offering of its securities.
ARTICLE 5. Eligibility and Participation
Any Director or key Employee of the Company, or of any
Subsidiary, or any independent contractor, adviser, or consultant to
the Company or any Subsidiary, whose judgment, initiative and efforts
contribute or may be expected to contribute materially to the
successful performance of the Company and its Subsidiaries shall be
eligible to receive an Award or Grant under the Plan. In determining
the Participants to whom such an Award or Grant will be made, the
Committee shall take into account the duties and responsibilities of
the respective Participants, their present and potential contributions
to the success of the Company and its Subsidiaries, and such other
factors as the Committee shall deem relevant in connection with
accomplishing the purpose of the Plan. No person who is a member of
the Committee shall be eligible to receive an Award or Grant under the
Plan while so serving.
ARTICLE 6. Stock Options
6.1 GRANT OF OPTIONS. Subject to the terms and provisions of
the Plan, Options may be granted to Participants from time to time, as
determined by the Committee. The Committee shall have sole discretion
in determining the number of Shares underlying each Option granted to
a Participant; provided, however, that in the case of any ISO granted
under the Plan, the aggregate Fair Market Value (determined at the
time such Option is granted) of the Shares to which ISOs are
exercisable for the first time by the Participant during any calendar
year (under the Plan and all other incentive stock option plans of the
Company and any Subsidiary) shall not exceed One Hundred Thousand
United States Dollars ($100,000).
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The Committee may grant a Participant ISOs, NQSOs or a
combination thereof, and may vary such Grants among Participants. In
no event however, shall any Participant who owns (within the meaning
of Section 424(d) of the Code), at the time he would otherwise be
granted an Option to purchase Shares, stock of the Company possessing
more than ten percent (10%) of the total combined voting power of all
classes of stock of the Company be eligible to receive an Incentive
Stock Option to purchase Shares hereunder.
The maximum number of Shares subject to Options which can be
granted under the Plan during a 12-month period to any Participant
including a Named Executive Officer is Two Hundred Thousand (200,000)
Shares; provided, however, that the maximum number of Option Shares
available for grant to a Participant during any 12-month period should
be correspondingly reduced by the number of Shares underlying any SAR
Awards made under Article 7 hereof to the Participant during the same
period.
6.2 OPTION AGREEMENT. Each Option granted under the Plan shall
be evidenced by an Option Agreement that shall specify the Option
Price, the duration of the Option, the number of Shares to which the
Option pertains and such other provision as the Committee shall
determine. The Option Agreement shall further specify whether the
Option is intended to be an ISO within the meaning of Code Section
422, or an NQSO, which is not intended to fall under the provisions of
Code Section 422. The failure to so specify shall not impair the
treatment of an Option as an ISO if it otherwise so qualifies.
6.3 OPTION PRICE. The Option Price for each ISO granted under
this Article 6 shall be not less than the Fair Market Value of a Share
on the date the ISO is granted. The Option Price of each Share
underlying a NQSO shall be established by the Committee, but in no
event shall such price be less than eighty-five percent (85%) of the
Fair Market Value (or such higher percentage of Fair Market Value as
may be established by Internal Revenue Service rules or regulations as
the limit for granting discounted stock options without causing
immediate tax consequences to the Participant) of a Share on the date
the Option is granted.
6.4 DURATION OF OPTIONS. Each Option shall expire at such time
as the Committee shall determine at the time of grant; provided,
however, that no Options shall be exercisable later than the tenth
(10th) anniversary of its grant. Notwithstanding anything to the
contrary herein or in any Option Agreement, if at the time of vesting
of the Option, the Shares of the Company are not registered under the
Exchange Act, or the Shares are not publicly traded on a national or
regional securities exchange, on The NASDAQ Stock Market, or in the
over-the-counter market, then such Option expires ninety days (90)
after the date of vesting, unless the Shares are registered or become
publicly traded within that ninety (90) day period.
6.5 EXERCISE OF OPTIONS. Options granted under the Plan shall
be subject to such vesting schedules and exercise periods, and other
restrictions and conditions, as the Committee shall in each instance
approve, which need not be the same for each Grant or for each
Participant. Except as the Committee may otherwise provide, Options
granted under this Plan shall not generally be exercisable prior to
six (6) months following the date of grant.
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6.6 PAYMENT. Options shall be exercised by the delivery of a
written notice of exercise to the Company, setting forth the number of
Shares with respect to which the Option is to be exercised,
accompanied by full payment for the Shares. The Option Price upon
exercise of any Option shall be payable to the Company in full either:
(a) in cash, or (b) by tendering previously acquired Shares having an
aggregate Fair Market Value at the time of exercise equal to the total
Option Price (provided that the Shares which are tendered must have
been held by the Participant for the period required by law, if any,
prior to their tender to satisfy the Option Price), or (c) by a
combination of (a) and (b). The Committee also may allow cashless
exercises, subject to applicable securities law restrictions, or by
any other means which the Committee determines to be consistent with
the Plan's purpose and applicable law.
As soon as practicable after receipt of a written notification of
exercise and full payment, the Company shall deliver to the
Participant, in the Participant's name, Share certificates in an
appropriate amount based upon the number of Shares purchased under the
Option(s).
6.7 TERMINATION OF EMPLOYMENT DUE TO DEATH, DISABILITY OR
RETIREMENT. Unless otherwise provided by the Committee in the Option
Agreement, the following rules shall apply in the event of the
Participant's termination of employment due to death, Disability or
Retirement:
(A) TERMINATION BY DEATH. In the event the Participant
dies while actively employed, all outstanding unvested
Options granted to that Participant shall immediately
vest, and thereafter all vested Options shall remain
exercisable at any time prior to their expiration date,
or for two (2) years after the date of death, whichever
period is shorter, by (i) such person(s) as shall have
been named as the Participant's beneficiary, (ii) such
person(s) that have acquired the Participant's rights
under such Options by will or by the laws of descent
and distribution, or (iii) the Participant's estate or
representative of the Participant's estate.
(B) TERMINATION BY DISABILITY. In the event the employment
of the Participant is terminated by reason of
Disability, all outstanding unvested Options granted to
the Participant shall immediately vest as of the date
the Committee determines the definition of Disability
to have been satisfied, and thereafter all vested
Options shall remain exercisable at any time prior to
their expiration date, or for one (1) year after the
date that the Committee determines the definition of
Disability to have been satisfied, whichever period is
shorter.
(C) TERMINATION BY RETIREMENT. In the event the employment
of the Participant is terminated by reason of
Retirement the Participant shall be entitled to prorata
vesting of all outstanding unvested Options. The
prorata vesting shall be determined by the Committee,
in its sole discretion, and shall be based upon the
length of time that the Participant held the unvested
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Options relative to the vesting period for each Grant
of outstanding unvested Options. Upon Retirement
vested Options shall remain exercisable at any time
prior to their expiration date, or for one (1) year
after the effective date of Retirement, whichever
period is shorter.
6.8 TERMINATION OF EMPLOYMENT FOR OTHER REASONS. In the event a
Participant's employment is terminated by the Company or Subsidiary
for Cause, the Participant's right to exercise any then vested
outstanding Options shall expire immediately upon termination of
employment. If the Participant's employment is terminated by the
Company or Subsidiary without Cause, or the Participant voluntarily
terminates his employment, any Options vested as of his date of
termination shall remain exercisable at any time prior to their
expiration date or for three (3) months after his date of termination
of employment, whichever period is shorter.
6.9 NONTRANSFERABILITY OF OPTIONS. Unless the Committee
provides otherwise in the Option Agreement, no Option granted under
the Plan may be sold, transferred, pledged, assigned, or otherwise
alienated or hypothecated, other than by will or by the laws of
descent and distribution, and any attempt to sell transfer, pledge,
assign or otherwise alienate or hypothecate an Option shall be null
and void and of no force or effect, and all Options granted to a
Participant under the Plan shall be exercisable during his or her
lifetime only by such Participant.
ARTICLE 7. STOCK APPRECIATION RIGHTS
7.1 GRANT OF SAR. Stock Appreciation Rights or SARs may be
awarded in conjunction with, or in addition to, any Options granted
under the Plan, or may be awarded under the Plan independent of any
Option. Nothing shall preclude the award on the same day an Option is
granted (with or without related SARs) of SARs independent of an
Option. SARs granted in conjunction with, or in addition to, an
Option may be granted either at the time of the Grant of the Option or
any time thereafter during the term of the Option. SARs awarded in
conjunction with an Option shall entitle the holder of the related
Option, upon exercise, in whole or in part, of the SARs, to surrender
the Option, or any portion thereof, to the extent unexercised, and to
receive a number of Shares determined pursuant to subsection 7.3
below. Such Option shall, to the extent so surrendered, cease to be
exercisable.
The maximum number of Shares underlying SARs which can be awarded
under the Plan during any 12-month period to any Participant including
a Named Executive Officer is Two Hundred Thousand (200,000) Shares;
provided, however, that the maximum number of Shares available for
award to a Participant during any 12-month period shall be
correspondingly reduced by the number of Shares subject to Options
granted to the Participant during the same period.
7.2 AWARD AGREEMENT. SARs shall be subject to such terms and
conditions not inconsistent with the Plan as shall from time to time
be approved by the Committee and to the following:
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<PAGE>
(a) SARs granted in conjunction with an Option shall be
exercisable at such time or times and to the extent,
but only to the extent, that the Option to which they
relate shall be exercisable.
(b) SARs not granted in conjunction with an Option shall be
exercisable at such time or times as may be determined
by the Committee at the time of grant, but shall be
subject to the same restrictions and other rules as to
duration, transferability, and exercisability that are
set out for Options in Article 6 above.
7.3 EXERCISE OF SARS. (a) Upon exercise of SARs, the holder
thereof shall be entitled to receive a number of Shares which have an
aggregate Fair Market Value on the date of exercise equal to the
amount by which the Fair Market Value per share of one Share on the
date of such exercise shall exceed (i) in the case of SARs granted in
conjunction with an Option or in addition to an Option, the Option
price per Share of the related Option, or (ii) in the case of SARs
unrelated to an Option, its SAR Grant Value, in each case multiplied
by the number of Shares in respect of which the SARs shall have been
exercised.
(b) All or any part of the obligation arising out of an exercise
of SARs, whether or not such rights are granted in conjunction with an
Option, may in the sole discretion of the Committee (and consistent
with the requirements of Rule 16b-3 of the Exchange Act) be settled by
the payment of cash equal to the aggregate Fair Market Value of the
Shares that would otherwise have been delivered under subsection (a)
above.
(c) To the extent that SARs granted in conjunction with an
Option shall be exercisable and whether the obligation upon such
exercise shall be discharged by the delivery of Shares or the payment
of cash the Option in connection with which such SAR shall have been
granted shall be deemed to have been exercised for the purpose of the
maximum share limitation set forth in the Plan.
(d) To the extent that SARs granted in addition to, or
independent of, an Option shall be exercised and whether the
obligation upon such exercise shall be discharged by the delivery of
Shares or the payment of cash, the number of Shares in respect of
which the SARs shall have been exercised shall be charged against the
maximum share limitation set forth in the Plan.
ARTICLE 8. STOCK AWARDS - RESTRICTED AND UNRESTRICTED
8.1 AWARD. The Committee may from time to time in its
discretion make Stock Awards to Participants and may determine the
number of Shares to be awarded. The Committee shall determine the
terms and conditions of, and the amount of payment, if any, to be made
by the Participant for such Stock Award. An Award of Restricted Stock
may require the Participant to pay for such Shares of Restricted
Stock, but the Committee may establish a price below Fair Market Value
at which the Participant can purchase the Shares of Restricted Stock.
Each Award of Restricted Stock will be evidenced by an Award Agreement
containing terms and conditions not inconsistent with the Plan as the
Committee shall determine to be appropriate in its sole discretion.
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The maximum number of Shares that may be awarded under a Stock
Award (whether restricted or unrestricted) to a Named Executive
Officer during any 12-month period is Two Hundred Thousand (200,000)
Shares.
8.2 RESTRICTED PERIOD; LAPSE OF RESTRICTIONS. At the time an
Award of Restricted Stock is made, the Committee shall establish a
period or periods of time (the "Restricted Period") applicable to such
Award which, unless the Committee otherwise provides, shall not be
less than six (6) months. Subject to the other provisions of this
Section 8, at the end of the Restricted Period all restrictions shall
lapse and the Restricted Stock shall vest in the Participant. At the
time an Award is made, the Committee may, in its discretion, prescribe
conditions for the incremental lapse of restrictions during the
Restricted Period and for the lapse or termination of restrictions
upon the occurrence of other conditions in addition to or other than
the expiration of the Restricted Period with respect to all or any
portion of the Restricted Stock. Such conditions may, but need not,
include without limitation:
(a) The death, Disability or Retirement of the Employee to
whom Restricted Stock is awarded, or
(b) The occurrence of a Change in Control.
The Committee may also, in its discretion, shorten or terminate the
Restricted Period, or waive any conditions for the lapse or
termination of restrictions with respect to all or any portion of the
Restricted Stock at any time after the date the Award is made.
8.3 RIGHTS OF RESTRICTED STOCK HOLDER; LIMITATIONS THEREON.
Upon an Award of Restricted Stock, a stock certificate (or
certificates) representing the number of Shares of Restricted Stock
granted to the Participant shall be registered in the Participant's
name and shall be held in custody by the Company or a bank selected by
the Committee for the Participant's account. Following such
registration, the Participant shall have the rights and privileges of
a shareholder as to such Restricted Stock, including the right to
receive dividends and to vote such Restricted Stock, provided that,
the right to receive cash dividends shall be the right to receive such
dividends either in cash currently or by payment in Restricted Stock,
as the Committee shall determine, and provided further that the
following restrictions shall apply:
(a) The Participant shall not be entitled to delivery of a
certificate until the expiration or termination of the
Restricted Period for the Shares represented by such
certificate and the satisfaction of any and all other
conditions prescribed by the Committee;
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(b) None of the Shares of Restricted Stock may be sold,
transferred, assigned, pledged, or otherwise encumbered
or disposed of during the Restricted Period and until
the satisfaction of any and all other conditions
prescribed by the Committee; and
(c) All of the Shares of Restricted Stock that have not
vested shall be forfeited and all rights of the
Participant to such Shares of Restricted Stock shall
terminate without further obligation on the part of the
Company, unless the Participant has remained a full-
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time employee of the Company, or any of its
Subsidiaries, until the expiration or termination of
the Restricted Period and the satisfaction of any and
all other conditions prescribed by the Committee
applicable to such Shares of Restricted Stock. Upon
the forfeiture of any Shares of Restricted Stock, such
forfeited Shares shall be transferred to the Company
without, further action by the Participant.
With respect to any Shares received as a result of adjustments
under Section 4.3 hereof and any Shares received with respect to cash
dividends declared on Restricted Stock, the Participant shall have the
same rights and privileges, and be subject to the same restrictions,
as are set forth in this Section 8.
8.4 DELIVERY OF UNRESTRICTED SHARES. Upon the expiration or
termination of the Restricted Period for any Shares of Restricted
Stock and the satisfaction of any and all other conditions prescribed
by the Committee, the restrictions applicable to such Shares of
Restricted Stock shall lapse and a stock certificate for the number of
Shares of Restricted Stock with respect to which the restrictions have
lapsed shall be delivered, free of all such restrictions except any
that may be imposed by law, to the holder of the Restricted Stock.
The Company shall not be required to deliver any fractional Share but
will pay, in lieu thereof, the Fair Market Value (determined as of the
date the restrictions lapse) of such fractional share to the holder
thereof. Prior to or concurrently with the delivery of a certificate
for Restricted Stock, the holder shall be required to pay an amount
necessary to satisfy any applicable federal, state and local tax
requirements as set out in Article 15 below.
8.5 NONASSIGNABILITY OF RESTRICTED STOCK. Unless the Committee
provides otherwise in the Award Agreement, no Award of, nor any right
or interest of a Participant in or to any Restricted Stock, or in any
instrument evidencing any Award of Restricted Stock under the Plan,
may be assigned, encumbered or transferred except, in the event of the
death of a Participant, by will or the laws of descent and
distribution.
ARTICLE 9. PERFORMANCE SHARES
9.1 GRANT OF PERFORMANCE SHARES. Subject to the terms of the
Plan, Performance Shares may be granted to Participants from time to
time for no payment. The Committee shall have complete discretion in
determining the number of Performance Shares granted to each
Participant; provided, however, that unless and until the Company's
shareholders vote to change the maximum number of Performance Shares
that may be earned by any one Named Executive Officer (subject to the
terms of Article 14 hereof), none of the Named Executive Officers may
earn more than Two Hundred Thousand (200,000) Performance Shares with
respect to any performance period.
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9.2 VALUE OF PERFORMANCE SHARES. Each Performance Share shall
have a value equal to the Fair Market Value of a Share on the date the
Performance Share is earned. The Committee shall set performance
goals in its discretion which, depending on the extent to which they
are met, will determine the number of Performance Shares that will be
earned by the Participants. The time period during which the
performance goals must be met shall be called a "performance period."
Performance periods shall, in all cases, equal or exceed two (2) years
in length. The performance goals shall be established at the
beginning of the performance period (or within such time period as is
permitted by Code Section 162(m) and the regulations thereunder).
The Committee will select one or more of the following
performance measures for purposes of Awards under the Plan to Named
Executive Officers: total shareholder return, average return on
assets, average return on equity, average growth in assets, increase
in operating earnings per share, increase in book value per share of
Common Stock, and ratio of operating revenue to operating overhead.
The Committee, in its sole discretion, may assign the relative weights
to be given to each performance measure selected by it. For
Participants other than Named Executive Officers, the Committee may,
in its sole discretion, select such performance measures (from among
those described above or other) as it may deem appropriate, and may
assign the relative weights to be given to each performance measure
selected by it. The Committee may, in its sole discretion, reserve
the right to exclude the effect of extraordinary and non-recurring
items from calculations involving any performance measure.
In the event that applicable tax and/or securities laws
(including, but not limited to, Code Section 162(m) and Section 16 of
the Exchange Act) change to permit the Committee to alter the
governing performance measures without obtaining shareholder approval
of such changes, the Committee shall have sole discretion to make such
changes without obtaining shareholder approval.
9.3 EARNING OF PERFORMANCE SHARES. After the applicable
performance period has ended, the Committee shall certify the extent
to which the established performance goals have been achieved. The
Committee may increase or decrease the amount of any Performance Share
Award otherwise payable to a Participant under this Article 9 if, in
the Committee's view, the Company's financial performance during the
relevant performance period justifies such adjustment, whether or not
any one or more of the established performance goals has been
achieved; provided, however, that the Committee shall have no
discretion to increase the amount of any Performance Share Award
otherwise payable to a Named Executive Officer under this Article 9.
9.4 FORM AND TIMING OF PAYMENT OF PERFORMANCE SHARES. Except as
otherwise provided in Article 13 hereof payment of earned Performance
Shares shall be made in a single lump sum as soon as practical after
the end of the performance period to which the Award relates. The
Committee, in its sole discretion, may pay earned Performance Shares
in the form of cash or in Shares (or in a combination thereof) which
have, as of the last day of the performance period, an aggregate value
equal to the Fair Market Value of the earned Performance Shares.
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9.5 TERMINATION OF EMPLOYMENT DUE TO DEATH, DISABILITY OR
RETIREMENT OR BY THE COMPANY WITHOUT CAUSE. Unless the Award
Agreement provides otherwise, in the event the employment of a
Participant is terminated by reason of death, Disability or Retirement
or by the Company without Cause during a performance period, the
Participant shall be entitled to a prorated payout with respect to the
unearned Performance Shares. The prorated payout shall be determined
by the Committee, in its sole discretion, and shall be based upon the
length of time that the Participant held the unearned Performance
Shares during the performance period relative to the performance
period, and shall be the greater of the target award prorated for the
applicable time period, or the payout earned on the basis of actual
performance, measured by the achievement of the established
performance goals prorated to the time of his termination due to
death, Disability or Retirement or by the Company without Cause.
Payment of earned Performance Shares to Participants whose
termination is due to Retirement or by the Company without Cause shall
be made at the same time payments are made to Participants who did not
terminate employment during the applicable performance period.
Payment of earned Performance Shares to Participants whose termination
is due to death or Disability shall be made as soon as practical after
the Participant's termination.
9.6 TERMINATION OF EMPLOYMENT FOR OTHER REASONS. Except as
provided in Article 13 and in the Award Agreement, in the event that a
Participant's employment terminates during a performance period for
any reason other than those reasons set forth in Section 9.5 hereof,
all unearned Performance Shares shall be forfeited by the Participant
to the Company.
9.7 NONTRANSFERABILITY. Performance Shares may not be sold,
transferred, pledged, assigned or otherwise alienated or hypothecated,
other than by will or by the laws of descent and distribution.
Further, a Participant's Performance Share rights under the Plan shall
be exercisable during the Participant's lifetime only by the
Participant or the Participant's legal representative.
ARTICLE 10. Beneficiary Designation
Each Participant under the Plan may, from time to time, name any
beneficiary or beneficiaries (who may be named contingently or
successively) to whom any benefit under the Plan is to be paid in case
of his or her death before he or she receives any or all of such
benefit. Each such designation shall revoke all prior designations by
the same Participant, shall be in a form prescribed by the Company and
shall be effective only when filed by the Participant in writing, with
the Company during the Participant's lifetime. In the absence of any
such designation, benefits remaining unpaid at the Participant's death
shall be paid to the Participant's estate.
ARTICLE 11. DEFERRALS
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The Committee may permit a Participant to defer to another plan
or program such Participant's receipt of Shares or cash that would
otherwise be due to such Participant by virtue of the exercise of an
Option or SAR, the vesting of Restricted Stock or the earning of
Performance Shares. If any such deferral election is required or
permitted, the Committee shall, in its sole discretion, establish
rules and procedures for such payment deferrals.
ARTICLE 12. RIGHTS OF PARTICIPANTS
12.1 EMPLOYMENT. Nothing in the Plan shall interfere with or
limit in any way the right of the Company or a Subsidiary to terminate
any Participant's employment at any time, nor confer upon any
Participant any right to continue in the employ of the Company or a
Subsidiary. For purpose of the Plan, transfer of employment of a
Participant between the Company and any one of its Subsidiaries (or
between Subsidiaries) shall not be deemed a termination of employment.
12.2 PARTICIPATION. No Employee shall have the right to be
selected to receive an Award or Grant under this Plan, or, having been
so selected, to be selected to receive a future Award or Grant.
ARTICLE 13. CHANGE IN CONTROL
13.1 OCCURRENCE. If after the initial registration of the
Company's Shares with the Securities and Exchange Commission pursuant
to the Exchange Act, a Change in Control should occur, and except as
provided in the Award Agreement or Section 13.3, or as prohibited by
the terms of Article 17 hereof, then:
(a) All outstanding, unvested Options and SARs granted or
awarded to Participants hereunder (or, in the case of
the termination of a Participant by the Company or
Subsidiary other than for Cause, to the terminated
Participant) shall become fully vested and immediately
exercisable;
(b) To the extent provided by the Committee in the Award
Agreement, the earning of unearned Performance Shares
will be based upon the target award levels or the
actual performance compared with goals prorated to the
date of the Change in Control or to the date of the
Participant's termination by the Company or Subsidiary
other than for Cause, whichever provides the greater
amount. Unearned Performance Shares outstanding at the
time of a Change in Control or at the time of a
Participant's termination by the Company or Subsidiary
other than for Cause will be fully vested (subject to
the employment requirements in the next sentence) and
will be payable in Shares or cash, or a combination
thereof as determined by the Committee. The
Participant will be entitled to payment of vested
Performance Shares for a performance period only if (i)
he remains employed by the Company or Subsidiary (or
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their respective successors) until the date that would
have been the last day of the performance period, at
which time the payment of the Performance Shares shall
be made, or (ii) prior to the end of the performance
period, his employment is terminated by the Company or
Subsidiary without Cause, he terminates employment for
a reason other than Cause or he retires (whether early,
normal or late) under the Innotrac Corporation Employee
Retirement Plan or any successor plan thereto, dies or
becomes Disabled. In any of these cases, payment of
vested Performance Shares shall be made as soon as
possible after the Participant ceases active
employment.
(c) Unless otherwise provided in the Award Agreement, all
restrictions on an Award of Restricted Stock shall
lapse and such Restricted Stock shall be delivered to
the Participant in accordance with Section 8.4; and
(d) Subject to Article 14 hereof the Committee shall have
the authority to make any modifications to the Awards
or Grants as determined by the Committee to be
appropriate before the effective date of the Change in
Control or the date of the Participant's termination by
the Company or Subsidiary other than for Cause.
13.2 DEFINITION. For purposes of the Plan, a "Change in Control"
shall be deemed to have occurred if:
(a) the Company consolidates or merges with or into another
company, or is otherwise reorganized, if the Company is
not the surviving company in such transaction, or, if
after such transaction, any other company, association
or other person, entity or group or the shareholders
thereof that did not own fifty percent (50%) or more of
the then outstanding Shares prior to such transaction,
then own, directly and/or indirectly, more than fifty
percent (50%) of the then outstanding Shares of the
Company or more than fifty percent (50%) of the assets
of the Company; or
(b) more than 35% of the Shares of the Company are, in a
single transaction or in a series of related
transactions, sold or otherwise transferred to or are
acquired by (except as collateral security for a loan)
any other company, association or other person, entity
or group, whether or not any such shareholder or any
shareholders included in such group were shareholders
of the Company prior to the Change in Control, provided
however that a "Change in Control" shall not be deemed
to have occurred as a result of any transaction wherein
any person, entity or group that owns more than sixty-
five percent (65%) of the then outstanding Shares prior
to such transaction continues to own sixty-five percent
(65%) or more after such transaction; or
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(c) all or substantially all of the assets of the Company
are sold or otherwise transferred to or otherwise
acquired by any other company, association or other
person, entity or group; or
(d) the occurrence of any other event or circumstance which
is not covered by (a) through (c) above which the
Committee determines affects control of the Company and
constitutes a Change in Control for purpose of the
Plan.
13.3 POOLING OF INTERESTS ACCOUNTING. During the two (2) year
period commencing on the Effective Date, the acceleration of vesting
provided for in Section 13.1 shall not apply in a transaction
involving a Change in Control if both of the following circumstances
exist:
(a) The provisions contained in Section 13.1 create
conditions which would preclude the use of pooling of
interests accounting, and
(b) The completion of the transaction is subject to the use
of pooling of interests accounting.
ARTICLE 14. AMENDMENT, MODIFICATION AND TERMINATION
14.1 AMENDMENT, MODIFICATION AND TERMINATION. The Board may, at
any time and from time to time, alter, amend, suspend or terminate the
Plan in whole or in part; provided, that, unless approved by the
holders of a majority of the total number of Shares of the Company
represented and entitled to vote at a meeting at which a quorum is
present, no amendment shall be made to the Plan if such amendment
would (a) materially modify the eligibility requirements provided in
Article 5; (b) increase the total number of Shares (except as provided
in Section 4.3) which may be granted or awarded under the Plan, as
provided in Section 4. 1; (c) extend the term of the Plan; or (d)
amend the Plan in any other manner which the Board, in its discretion,
determines should become effective only if approved by the
shareholders even though such shareholder approval is not expressly
required by the Plan or by law.
14.2 GRANTS OR AWARDS PREVIOUSLY GRANTED. No termination,
amendment or modification of the Plan shall adversely affect in any
material way any Award or Grant previously made under the Plan,
without the written consent of the Participant holding such Award or
Grant. The Committee shall, with the written consent of the
Participant holding such Award or Grant, have the authority to cancel
Awards or Grants outstanding and grant replacement Awards or Grants
therefor.
14.3 COMPLIANCE WITH CODE SECTION 162(M). It is the intent of
the Board that all Awards or Grants made under this Plan shall comply
with the requirements of Code Section 162(m). In the event changes
are made to Code Section 162(m) to permit greater flexibility with
respect to any Award or Grant under the Plan, the Committee may,
subject to this Article 14, make any adjustments it deems appropriate
in such Award or Grant.
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ARTICLE 15. WITHHOLDING
15.1 TAX WITHHOLDING. The Company shall have the power and the
right to deduct or withhold, or require a Participant to remit to the
Company, an amount sufficient to satisfy Federal, state and local
taxes (including the Participant's FICA obligation) required by law to
be withheld with respect to any taxable event arising in connection
with an Award or Grant under this Plan.
15.2 SHARE WITHHOLDING. With respect to withholding required
upon the exercise of Options, or upon any other taxable event arising
as a result of Awards or Grants made hereunder which are to be paid in
the form of Shares, Participants may request subject to the approval
of the Committee, to satisfy the withholding requirement, in whole or
in part, by having the Company withhold Shares having a Fair Market
Value on the date the tax is to be determined equal to the minimum
statutory total tax which could be imposed on the Award or Grant. All
such requests shall be irrevocable, made in writing, and signed by the
Participant, and requests by Insiders shall additionally comply with
all legal requirements applicable to Share transactions by such
Participants.
ARTICLE 16. SUCCESSORS
All obligations of the Company under the Plan, with respect to
Awards or Grants made hereunder, shall be binding on any successor to
the Company, whether the existence of such successor is the result of
a direct or indirect purchase, merger, consolidation or otherwise, of
all or substantially all of the business and/or assets of the Company.
ARTICLE 17. LEGAL CONSTRUCTION
17.1 GENDER AND NUMBER. Except where otherwise indicated by the
context, any masculine term used herein also shall include the
feminine; the plural shall include the singular and the singular shall
include the plural.
17.2 SEVERABILITY. In the event any provision of the Plan shall
be held illegal or invalid for any reason, the 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.
17.3 REQUIREMENTS OF LAW. The making of Awards or Grants and the
issuance of Shares under the Plan shall be subject to all applicable
laws, rules and regulations, and to such approvals by any governmental
agencies or national securities exchanges as may be required.
17.4 REGULATORY APPROVALS AND LISTING. The Company shall not be
required to issue any certificate or certificates for Shares under the
Plan prior to (i) obtaining any approval from any governmental agency
which the Company shall, in its discretion, determine to be necessary
or advisable, (ii) the admission of such shares to listing on any
national securities exchange on which the Company's Shares may be
listed, and (iii) the completion of any registration or other
qualification of such Shares under any state or federal law or ruling
or regulations of any governmental body which the Company shall, in
its sole discretion, determine to be necessary or advisable.
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Notwithstanding any other provision set forth in the Plan, if
required by the then-current Section 16 of the Exchange Act, any
"derivative security" or "equity security" offered pursuant to the
Plan to any Insider may not be sold or transferred for at least six
(6) months after the date of grant of such Award. The terms "equity
security" and "derivative security" shall have the meanings ascribed
to them in the then-current Rule 16(a) under the Exchange Act.
The Committee may impose such restrictions on any Shares acquired
pursuant to the Plan as it may deem advisable, including, without
limitation, restrictions under applicable Federal securities laws,
under the requirements of any stock exchange or market upon which such
Shares are then listed and/or traded and under any blue sky or state
securities laws applicable to such Shares.
17.5 SECURITIES LAW COMPLIANCE. With respect to Insiders,
transactions under this Plan are intended to comply with all
applicable conditions of Rule 16b-3 or its successors under the
Exchange Act. To the extent any provisions of the Plan or action by
the Committee fails to so comply, it shall be deemed null and void, to
the extent permitted by law and deemed advisable by the Committee.
17.6 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 Georgia,
without reference to its conflict of laws rules.
17.7 DISPUTES AND EXPENSES. After a Change in Control, if a
Participant affected by such Change in Control incurs legal fees or
other expenses in seeking to obtain or enforce any rights to benefits
under this Plan and is successful, in whole or in part, in obtaining
or enforcing any such rights through settlement, litigation,
arbitration or otherwise, the Company shall promptly pay the affected
Participant's reasonable legal fees and expenses incurred in enforcing
his rights under the Plan.
-19-
<PAGE>
AS APPROVED BY THE SOLE MEMBER OF THE BOARD OF DIRECTORS AND THE
SOLE SHAREHOLDER OF INNOTRAC CORPORATION ON NOVEMBER 24, 1997.
INNOTRAC CORPORATION
By: /s/ Scott Dortman
SCOTT DORFMAN
PRESIDENT
ATTEST:
By: /s/ David Ellin
DAVID ELLIN
SENIOR VICE PRESIDENT
Exhibit 5
Attorneys at Law
Suite 2800
1100 Peachtree Street
Atlanta, Georgia 30309-4530
KILPATRICK STOCKTON LLP Telephone: 404.815.6500
Facsimile: 404.815.6555
October 21, 1998
Innotrac Corporation
1828 Meca Way
Norcross, Georgia 30093
Re: Form S-8 Registration Statement
Gentlemen:
We have acted as counsel for Innotrac Corporation, a Georgia
corporation (the "Company"), in the preparation of the Form S-8
Registration Statement relating to the Company's Stock Option and
Incentive Award Plan and the proposed offer and sale of up to 800,000
shares of the Company's common stock, par value $.10 per share (the
"Common Stock"), pursuant thereto.
In such capacity, we have examined certificates of public
officials and originals or copies of such corporate records,
documents, and other instruments relating to the authorization of the
Plan and the authorization and issuance of the shares of Common Stock
as we have deemed relevant under the circumstances.
Based on and subject to the foregoing, it is our opinion that the
Plan and the proposed offer and sale thereunder of up to 800,000
shares of Common Stock have been duly authorized by the Board of
Directors of the Company, and that the shares, when issued in
accordance with the terms and conditions of the Plan, will be validly
issued, fully paid and nonassessable.
We hereby consent to the filing of this opinion as an exhibit to
said Registration Statement.
Sincerely,
KILPATRICK STOCKTON LLP
By: /s/ Jan M. Davidson
Jan M. Davidson, a partner
Exhibit 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation by reference of our report dated January 26, 1998
(except with respect to Note 11, as to which the date is April 7,
1998) included in Innotrac Corporation's Registration Statement on
Form S-1 into this Registration Statement.
/s/ Arthur Andersen LLP
Atlanta, Georgia
October 21, 1998
