As filed with the Securities and Exchange Commission on August 14, 1998.
Registration No. 333-_______
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------------
FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------------
DUNN COMPUTER CORPORATION
(Exact name of registrant as specified in its charter)
<TABLE>
<CAPTION>
<S><C>
VIRGINIA 5060 54-1890464
(State or other jurisdiction (Primary Standard Industrial (IRS Employer
of incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
1306 SQUIRE COURT, STERLING, VA 20166
(703) 450-0400
(Address and Telephone Number of Principal Executive Offices)
Dunn Computer Corporation Employee Stock Purchase Plan
(Full title of the Plan)
John D. Vazzana
Executive Vice President and Chief Financial Officer
Dunn Computer Corporation
1306 Squire Court
Sterling, Virginia 20166
(703) 450-0400
(Name, Address and Telephone Number, Including Area Code, of Agent for Service)
Copy To:
John L. Sullivan, III
Anne W. Marculewicz
Venable, Baetjer and Howard, LLP
2010 Corporate Ridge, Suite 400
McLean, Virginia 22102
(410) 244-7400
---------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Amount to Proposed maximum Proposed Amount of
Title of Securities be offering price maximum registration
to be registered registered(1) per share(2) offering price(2) fee
- ----------------------------- --------------------- ------------------------ --------------------- -----------------
<S><C>
Common Stock, 300,000 $4.13 $1,239,000 $370
$.001 per share Par Value Shares
============================= ===================== ======================== ===================== =================
</TABLE>
(1) Pursuant to Rule 416 of the Securities Act of 1933, this Registration
Statement also covers such additional shares of Common Stock as may become
issuable pursuant to the anti-dilution provisions of the Dunn Computer
Corporation Employee Stock Purchase Plan.
(2) Calculated solely for the purpose of computing the registration fee pursuant
to Rules 457(c) and (h), based upon the average of the high and low prices of
the Common Stock reported on the Nasdaq National Market on August 12, 1998.
<PAGE>
PART I
Documents containing the information specified in Part I of Form S-8
have been and/or will be sent or given to employees as specified by Rule
428(b)(1) of the Securities Act of 1933, as amended (the "Securities Act"). In
accordance with the instructions to Part I of Form S-8, such documents will not
be filed with the Securities and Exchange Commission (the "Commission") either
as part of this Registration Statement or as prospectuses or prospectus
supplements pursuant to Rule 424 under the Securities Act. These documents and
the documents incorporated by reference pursuant to Item 3 of Part II of this
Registration Statement, taken together, constitute the prospectus as required by
Section 10(a) of the Securities Act.
PART II
Item 3. Incorporation of Documents by Reference.
---------------------------------------
The following documents previously filed with the Commission
by Dunn Computer Corporation (the "Company") are incorporated herein by
reference: (a) The Company's Final Prospectus filed pursuant to Rule 424(b)
dated April 28, 1998 (Registration No. 333-47631); (b) Quarterly Report on Form
10-QSB for the quarter ended January 31, 1998; (c) Quarterly Report on Form
10-QSB for the quarter ended April 30, 1998; and (d) the description of the
Company's Common Stock contained in the Company's Registration Statement on Form
8-A under the Exchange Act, including any amendment or report filed to update
the description.
All documents filed by the Company pursuant to Sections 13(a),
13(c), 14 or 15(d) of the Exchange Act after the date of this Registration
Statement and prior to the filing of a post-effective amendment which indicates
that all securities offered have been sold or deregisters all securities then
remaining unsold shall be deemed to be incorporated by reference in this
Registration Statement and to be a part hereof from the date of filing of such
documents.
Item 4. Description of Securities.
-------------------------
Not applicable.
Item 5. Interests of Named Experts and Counsel.
--------------------------------------
Not applicable.
Item 6. Indemnification of Directors and Officers.
-----------------------------------------
Pursuant to Section 13.1-698 of the Corporations Title of the
Annotated Code of Virginia (the "Corporations Code"), unless limited by its
articles of incorporation, a corporation must indemnify a director who entirely
prevails in the defense of any proceeding to which he was a party because he is
or was a director of the corporation against reasonable expenses incurred by him
in connection with the proceeding.
Indemnification is permitted pursuant to Section 13.1-697 of
the Corporations Code by a corporation of its present and former directors,
among others, against judgments, penalties, fines, settlements and reasonable
expenses actually incurred by them in connection with any proceeding to which
they may be made a party by reason of their services in those or other
capacities, if (a) the director conducted himself in good faith; (b) the
director believed (i) in
-2-
<PAGE>
the case of conduct in his official capacity with the corporation, that his
conduct was in the corporation's best interests or (ii) in all other cases, that
his conduct was not at least opposed to its best interests; or (c) in the case
of any criminal proceeding, the director or officer had no reasonable cause to
believe that the act or omission was unlawful. In addition, Section 13.1-697 of
the Corporations Code prohibits the indemnification of a director by a
corporation (y) in connection with a proceeding by or in the right of the
corporation in which the director is adjudged liable to the corporation, or (z)
in connection with any other proceeding charging improper personal benefit to
him, whether or not involving action in his official capacity, in which he was
adjudged liable on the basis that personal benefit was improperly received by
him. Virginia law permits a corporation to indemnify a present and former
officer to the same extent as a director.
Section 13.1-699 of the Corporations Code permits a
corporation to pay or reimburse, in advance of the final disposition of a
proceeding, reasonable expenses (including attorney's fees) incurred by a
present or former director or officer made a party to the proceeding by reason
of his service in that capacity, provided that the corporation shall have
received (a) a written affirmation by the director or officer of his good faith
belief that he has met the standard of conduct necessary for indemnification by
the corporation; (b) a written undertaking by or on behalf of the officer or
director to repay the amount paid or reimbursed by the corporation if it shall
ultimately be determined that the requisite standard of conduct was not met; and
(c) a determination is made that the facts then known to those making the
determination would not preclude indemnification.
Under Section 700.1 of the Corporations Code, an individual
who is made a party to a proceeding because he is or was a director of a
corporation may apply to a court for an order directing the corporation to make
advances or reimbursement for expenses or to provide indemnification. The court
shall order the corporation to make advances and/or reimbursement for expenses
or to provide indemnification if it determines that the director is entitled to
such advances, reimbursement or indemnification and shall also order the
corporation to pay the director's reasonable expenses incurred to obtain the
order. With respect to a proceeding by or in the right of the corporation, the
court may (1) order indemnification of the director to the extent of his
reasonable expenses if it determines that, considering all the relevant
circumstances, the director is entitled to indemnification even though he was
adjudged liable to the corporation and (2) also order the corporation to pay the
director's reasonable expenses incurred to obtain the order of indemnification.
Section 702 of Corporations Code states that, unless limited
by the corporation's articles of incorporation, (1) an officer of the
corporation is entitled to mandatory indemnification under Section 698 of the
Corporations Code, and is entitled to apply for court-ordered indemnification
under Section 700 of the Corporations Code, to the same extent as a director,
and (2) the corporation may indemnify and advance expenses to an officer,
employee or agent of the corporation to the same extent as to a director.
Section 703 of the Corporations Code provides that a
corporation may purchase and maintain insurance on behalf of an individual who
is or was a director, officer, employee or agent of the corporation, or who,
while a director, officer, employee, or agent of the corporation, is or was
serving at the request of the corporation as a director, officer, partner,
trustee, employee or agent of another foreign or domestic corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise,
against liability asserted against him or incurred by him in that capacity, or
arising from his status as such, whether or not the corporation would have the
power to indemnify him against such liability under the provisions of Sections
697 or 698 of the Corporations Code.
-3-
<PAGE>
Section 704 of the Corporations Code states that, unless
limited by the corporation's articles of incorporation, a corporation shall have
power to make any further indemnity, including indemnity with respect to a
proceeding by or in the right of the corporation, and to make additional
provision for advances and reimbursement of expenses, to any director, officer
employee or agent that may be authorized by its articles of incorporation or any
bylaw made by the shareholders or any resolution adopted, before or after the
event, by the shareholders, except an indemnity against (1) his willful
misconduct, or (2) a knowing violation of the criminal law. Unless the articles
of incorporation, or any such bylaw or resolution expressly provide otherwise,
any determination as to the right of any further indemnity shall be made in
accordance with Section 701 B of the Corporations Code. Each such indemnity may
continue as to a person who has ceased to have the capacity referred to above
and may inure to the benefit of the heirs, executors and administrators of such
person.
Section 704 of the Corporations Code further provides that no
right provided by the aforementioned sections regarding indemnification and
limitation of liability shall be reduced or eliminated by any amendment to the
articles of incorporation or bylaws with respect to any act or omission
occurring prior to such amendment.
Articles of Incorporation
Article 11 of the Company's articles of incorporation provides
that the Company shall, to the fullest extent permitted by the law of Virginia,
indemnify an individual who is or was a director or officer of the Company and
who was, is, or is threatened to be made, a named defendant or respondent in any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative and whether formal or informal
(collectively, a "proceeding"), against any obligation to pay a judgment,
settlement, penalty, fine (including any excise tax assessed with respect to any
employee benefit plan) or other liability and reasonable expenses (including
counsel fees) incurred with respect to such proceeding, except such liabilities
and expenses as are incurred because of such director's or officer's willful
misconduct or knowing violation of criminal law.
Article 11 also provides that unless a determination has been
made that indemnification is not permissible, the Company shall make advances
and reimbursements for expenses reasonably incurred by a director or officer in
a proceeding as described above upon receipt of an undertaking from such
director or officer to repay the same if it is ultimately determined that such
director or officer is not entitled to indemnification.
Article 11 also provides that the determination that
indemnification is permissible, the authorization of such indemnification (if
applicable), and the evaluation as to the reasonableness of expenses in a
specific case shall be made as provided by law. Special legal counsel selected
to make determinations under such Article 11 may be counsel for the Company. The
termination of a proceeding by judgment, order, settlement, conviction, or upon
a plea of nolo contendere or its equivalent shall not of itself create a
presumption that a director or officer acted in such a manner as to make him or
her ineligible for indemnification.
For the purposes of Article 11, every reference to a director
or officer includes, without limitation, (1) every individual who is a director
or officer of the Company, (2) an individual who, while a director or officer,
is or was serving at the Company's request as a director, officer, partner,
trustee, employee or agent of another foreign or domestic corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise,
(3) an individual who formerly was a director or officer of the Company or who,
while a director or officer, occupied at
-4-
<PAGE>
the request of the Company any of the other positions referred to in clause (2)
of this sentence, and (4) the estate, personal representative, heirs, executors
and administrators of a director or officer of the Company or other person
referred to herein. Service as a director, officer, partner, trustee, employee
or agent of another foreign or domestic corporation, partnership, joint venture,
trust, employee benefit plan or other enterprise controlled by the Company is
deemed service at the request of the Company. A director or officer is deemed to
be serving an employee benefit plan at the Company's request if such person's
duties to the Company also impose duties on, or otherwise involve services by,
such person to the plan or to the participants in or beneficiaries of the plan.
Indemnification Agreements
The Company may enter into indemnification agreements with its
directors and officers for the indemnification of and advancing of expenses to
such persons to the fullest extent permitted by law.
Insurance
The Company has purchased directors and officers liability
insurance in the amount of $1.0 million.
Item 7. Exemption from Registration Claimed.
-----------------------------------
Not applicable.
Item 8. Exhibits.
--------
4.1 - Form of Common Stock Certificate (incorporated herein by
reference to Exhibit 4.3 of Amendment No. 2 of the Company's
Registration Statement on Form S-1 (Reg. No. 333-47631) dated
April 23, 1998).
4.2 - Articles of Incorporation of the Company, dated February 5,
1998 and effective as of February 26, 1998 (incorporated
herein by reference to Exhibit 3.1 to Amendment No. 1 to the
Registration Statement on Form S-1 (Reg. No. 333-47631) filed
April 1, 1998).
4.3 - Bylaws of the Company effective as of March 5, 1998
(incorporated herein by reference to Exhibit 3.2 to Amendment
No. 2 to the Registration Statement on Form S-1 (Reg. No.
333-47631) filed on April 23, 1998).
4.4 Dunn Computer Corporation Employee Stock Purchase Plan (filed
herewith).
5.1 - Opinion of Venable, Baetjer and Howard, LLP (filed herewith).
23.1 - Consent of Ernst & Young LLP (filed herewith).
23.2 Consent of KPMG Peat Marwick LLP (filed herewith).
23.3 Consent of Davis, Sita & Company, P.A.(filed herewith).
23.4 - Consent of Venable, Baetjer and Howard, LLP (contained in
Exhibit 5.1).
-5-
<PAGE>
24.1 - Power of Attorney (included in signature page).
Item 9. Undertakings.
------------
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 of 1933, as amended, (the "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 the registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
(4) That, for purposes of determining any liability under the
Securities Act of 1933, each filing of the registrant's annual report pursuant
to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (and, where
applicable, each filing of an employee benefit plan's annual report pursuant to
Section 15(d) of the Securities Exchange Act of 1934) 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."
Insofar as indemnification for liabilities arising under the
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 of 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 of 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.
-6-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, the Registrant, Dunn Computer Corporation 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 city of Sterling in the
Commonwealth of Virginia on this 5th day of August, 1998.
DUNN COMPUTER CORPORATION
/s/ Thomas P. Dunne
_____________________________
Thomas P. Dunne, President
Each person whose signature appears below does hereby make,
constitute and appoint Thomas P. Dunne and John D. Vazzana, and each of them,
his/her true and lawful attorneys-in-fact and agents with the Securities and
Exchange Commission, for and on his/her behalf, and in his/her capacity or
capacities as stated below, any amendment (including post-effective amendments)
to the Registration Statement with all exhibits thereto, making such changes in
the Registration Statement as the Registrant deems appropriate.
Pursuant to the requirements of the Securities Act of 1933, as
amended, this Registration Statement has been signed by the following persons in
the capacities indicted on August 5, 1998.
<TABLE>
<CAPTION>
Signature Capacity
- --------- --------
<S><C>
/s/ Thomas P. Dunne
__________________________________________ President and Director
Thomas P. Dunne (Principal Executive Officer)
/s/ John D. Vazzana
__________________________________________ Executive Vice President, Chief Financial
John D. Vazzana Officer (Principal Financial and
Accounting Officer)
/s/ Claudia N. Dunne
__________________________________________ Vice President, Director
Claudia N. Dunne
/s/ VADM E.A. Burkhalter, Jr., USN (Ret.)
__________________________________________ Director
VADM E.A. Burkhalter, Jr., USN (Ret.)
/s/ Danniel Sinnott
__________________________________________ Director
Danniel Sinnott
</TABLE>
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<PAGE>
EXHIBIT INDEX
-------------
EXHIBIT NUMBER DESCRIPTION
- -------------- -----------
4.4 Dunn Computer Corporation Employee
Stock Purchase Plan
5.1 Opinion of Venable, Baetjer and
Howard, LLP
23.1 Consent of Ernst & Young LLP
23.2 Consent of KPMG Peat Marwick LLP
23.3 Consent of Davis, Sita & Company, P.A.
23.4 Consent of Venable, Baetjer and Howard, LLP
(included in Exhibit 5.1)
-8-
Exhibit 4.4
DUNN COMPUTER CORPORATION
EMPLOYEE STOCK PURCHASE PLAN
ARTICLE I
---------
PURPOSE
-------
1.01. PURPOSE. The DUNN COMPUTER CORPORATION Employee Stock Purchase
Plan is intended to provide a method whereby employees of DUNN COMPUTER
CORPORATION (the "Company") and its subsidiary corporations will have an
opportunity to acquire a proprietary interest in the Company through the
purchase of shares of the Common Stock of the Company. It is the intention of
the Company to have the Plan qualify as an "employee stock purchase plan" under
ss.423 of the Internal Revenue Code of 1986, as amended (the "Code"). The
provisions of the Plan shall be construed so as to extend and limit
participation in a manner consistent with the requirements of that section of
the Code.
ARTICLE II
----------
DEFINITIONS
-----------
2.01 BASE PAY. "Base Pay" means regular straight-time earnings
excluding payments for overtime, shift premium, bonuses and other special
payments, commissions and other marketing incentive payments.
2.02 BOARD. "Board of Directors" or "Board" means the Board of
Directors of the Company.
2.03 COMMITTEE. "Committee" means the individuals described in
Article XI.
2.04 COMMON STOCK. "Common Stock" means the common stock of the
Company.
2.05 DESIGNATED SUBSIDIARY CORPORATION. "Designated Subsidiary
Corporation" means a Subsidiary Corporation which is designated by the Company's
Board of Directors to participate in the Plan.
2.06 EMPLOYEE. "Employee" means any person who is employed by
the Company or a Designated Subsidiary Corporation.
2.07 SUBSIDIARY CORPORATION. "Subsidiary Corporation" means any
present or future corporation which would be a "subsidiary corporation" of the
Company as that term is defined in ss.424 of the Code.
<PAGE>
ARTICLE III
-----------
ELIGIBILITY AND PARTICIPATION
-----------------------------
3.01 INITIAL ELIGIBILITY. All Employees are eligible to participate
hereunder, commencing on any Offering Commencement Date.
3.02 COMMENCEMENT OF PARTICIPATION. An eligible Employee may become a
participant by completing an authorization for a payroll deduction on the form
provided by the Company and filing it with the office of the Human Resources
Director of the Company on or before the date set therefor by the Committee,
which date shall be prior to the Offering Commencement Date for the Offering (as
such terms are defined below). Payroll deductions for a participant shall
commence on the applicable Offering Commencement Date when his authorization for
a payroll deduction becomes effective and shall end on the Offering Termination
Date of the Offering to which such authorization is applicable unless sooner
terminated by the participant as provided in Article VIII.
3.03 RESTRICTIONS ON PARTICIPATION. Notwithstanding any provision of
the Plan to the contrary, no Employee shall be granted an option to participate
in the Plan:
(a) if, immediately after the grant, such Employee would own
stock, and/or hold outstanding options to purchase stock, possessing 5% or more
of the total combined voting power or value of all classes of stock of the
Company or any Subsidiary Corporation. (For purposes of this paragraph, the
rules of ss.424(d) of the Code shall apply in determining stock ownership of any
Employee); or
(b) which permits his rights to purchase stock under all
employee stock purchase plans of the Company and its Subsidiary Corporations to
accrue at a rate which exceeds $25,000 in fair market value of the stock
(determined at the time such option is granted) for each calendar year in which
such option is outstanding.
3.04 LEAVE OF ABSENCE. For purposes of participation in the Plan, a
person on leave of absence shall be deemed to be an Employee for the first 90
days of such leave of absence and such Employee's employment shall be deemed to
have terminated at the close of business on the 90th day of such leave of
absence unless such Employee shall have returned to regular full-time or
part-time employment (as the case may be) prior to the close of business on such
90th day. Termination by the Company of any Employee's leave of absence, other
than termination of such leave of absence on return to full time or part time
employment, shall terminate an Employee's employment for all purposes of the
Plan and shall terminate such Employee's participation in the Plan and right to
exercise any option.
2
<PAGE>
ARTICLE IV
----------
OFFERINGS
---------
4.01 SEMI-ANNUAL OFFERING PERIODS.
(a) Offering Periods. The Plan will be implemented by
Offerings in consecutive Offering Periods, each constituting a six month period.
Such Offering Periods shall continue until the termination of the Plan in
accordance with Section 12.05. The first such Offering Period shall be the six
month period beginning on August 15, 1998, and ending on February 14, 1999.
(Provided, however, that the first Offering Period will not begin before the
effective date of the registration statement filed by the Company for the Plan
with the Securities and Exchange Commission.) Subsequent Offering Periods will
begin on February 15th and August 15th of each year.
(b) Offering Commencement Date. The Offering Commencement Date
is the first day of an Offering Period during which the NASDAQ system is open
for trading.
(c) Offering Termination Date. The Offering Termination Date
is the last day of an Offering Period during which the NASDAQ System is open for
trading.
4.02 REVISED OFFERING PERIODS. In the discretion of the Committee,
semi-annual Offering Periods may be divided into quarterly Offering Periods or
combined into annual Offering Periods. The maximum number of shares available
during an Offering Period under Section 10.01 shall be adjusted appropriately.
ARTICLE V
---------
PAYROLL DEDUCTIONS
------------------
5.01 AMOUNT OF DEDUCTION. At the time a participant files his
authorization for payroll deduction, he shall elect to have deductions made from
his pay on each payday during the Offering Period at the rate of 1, 2, 3, 4, 5,
6, 7, 8, 9 or 10% of his base pay in effect at any such payday.
5.02 PARTICIPANT'S ACCOUNT. All payroll deductions made for a
participant shall be credited to his account under the Plan. A participant may
not make any separate cash payment into such account except when on leave of
absence and then only as provided in ss.5.04.
5.03 CHANGES IN PAYROLL DEDUCTIONS. A participant may discontinue his
participation in the Plan as provided in Article VIII, but no other change can
be made during an Offering and, specifically, a participant may not alter the
amount of his payroll deductions for that Offering. The payroll deduction form
may provide that it shall
3
<PAGE>
continue from Offering Period to Offering Period unless changed by a participant
before the beginning of a subsequent Offering Period.
5.04 LEAVE OF ABSENCE. If a participant goes on a leave of absence,
such participant shall have the right to elect: (a) to withdraw the balance in
his or her account pursuant to ss.7.02, (b) to discontinue contributions to the
Plan but remain a participant in the Plan, or (c) remain a participant in the
Plan during such leave of absence (provided the individual was eligible to
participate at the Offering Commencement Date), authorizing deductions to be
made from payments by the Company or its Designated Subsidiary Corporations to
the participant during such leave of absence and undertaking to make cash
payments to the Plan at the end of each payroll period to the extent that
amounts payable by the Company and its Designated Subsidiary Corporations to
such participant are insufficient to meet such participant's authorized Plan
deductions.
ARTICLE VI
----------
GRANTING OF OPTION
------------------
6.01 NUMBER OF OPTION SHARES. On the Offering Commencement Date of
each Offering, a participating Employee shall be deemed to have been granted a
qualified option to purchase on the Offering Termination Date of such Offering
Period (at the Option Price in Section 6.02) the number of shares of the
Company's Common Stock determined by dividing such Employee's payroll deductions
accumulated during such Offering Period and retained in the participant's
account as of the Offering Termination Date by the applicable Option Price.
6.02 OPTION PRICE. The Option Price of Common Stock purchased with
payroll deductions made during an Offering Period for a participant therein
shall be the lower of:
(a) 85% of the closing price of the stock on the Offering
Commencement Date, or (in the event the stock was not traded on such date) the
nearest prior business day on which trading of the Company's Common Stock
occurred, on the NASDAQ National Market System; or
(b) 85% of the closing price of the stock on the Offering
Termination Date, or (in the event the stock was not traded on such date) the
nearest prior business day on which trading of the Company's Common Stock
occurred, on the NASDAQ National Market System. If the Company's Common Stock is
not admitted to trading on the NASDAQ National Market System on any of the
aforesaid dates for which closing prices of the stock are to be determined, then
reference shall be made to the fair market value of the stock on that date, as
determined on such basis as shall be established or specified for the purpose by
the Committee.
4
<PAGE>
ARTICLE VII
-----------
EXERCISE OF OPTION
------------------
7.01 AUTOMATIC EXERCISE. Unless a participant gives written notice to
the Company as hereinafter provided, his option for the purchase of stock with
payroll deductions made during any Offering will be deemed to have been
exercised automatically on the Offering Termination Date applicable to such
Offering, for the purchase of the number of full shares of Common Stock which
the accumulated payroll deductions in his account at that time will purchase at
the applicable Option Price, subject to the maximum stated in Section 10.01.
Except as provided in Section 7.03, any excess in his account at that time will
be refunded to him.
7.02 WITHDRAWAL OF ACCOUNT. By written notice to the Human Resources
Director of the Company, at any time prior to the Offering Termination Date
applicable to any Offering, a participant may elect to withdraw all of the
accumulated payroll deductions in his account at such time.
7.03 FRACTIONAL SHARES. Fractional shares will not be issued under the
Plan. Any accumulated payroll deductions which would have been used to purchase
fractional shares will be carried over and applied to purchase shares in the
succeeding Offering Period, if the Employee elects to participate in such
Offering Period. If not, such excess payroll deductions will be promptly
returned to the Employee.
7.04 TRANSFERABILITY OF OPTION. During a participant's lifetime,
options held by such participant shall be exercisable only by that participant.
7.05 DELIVERY OF STOCK. As promptly as practicable after the Offering
Termination Date of each Offering, the Company will deliver to each participant,
as appropriate, the stock purchased upon exercise of his option.
ARTICLE VIII
------------
WITHDRAWAL
----------
8.01 IN GENERAL. As indicated in ss.7.02, a participant may withdraw
payroll deductions credited to his account under the Plan at any time prior to
an Offering Termination Date by giving written notice to the Human Resources
Director of the Company. All of the participant's payroll deductions credited to
his account will be paid to him promptly after receipt of his notice of
withdrawal, and no further payroll deductions will be made from his pay during
such Offering. The Company may, at its option, treat any attempt to borrow by an
Employee on the security of his accumulated payroll deductions as an election,
under ss.7.02, to withdraw such deductions.
5
<PAGE>
8.02 EFFECT ON SUBSEQUENT PARTICIPATION. A participant's withdrawal
from any Offering will not have any effect upon his eligibility to participate
in any succeeding Offering or in any similar plan which may hereafter be adopted
by the Company.
8.03 TERMINATION OF EMPLOYMENT. Upon termination of the participant's
employment for any reason, including retirement or death (but excluding
continuation of a leave of absence for a period beyond 90 days), the payroll
deductions credited to his account will be returned to him, or, in the case of
his death, to the person or persons entitled thereto under ss.12.01.
ARTICLE IX
----------
INTEREST
--------
9.01 NO PAYMENT OF INTEREST. No interest will be paid or allowed on
any money paid into the Plan or credited to the account of any participating
Employee.
ARTICLE X
---------
STOCK
-----
10.01 SHARES SUBJECT TO PLAN. The stock subject to the Plan shall be
shares of the Company's Common Stock, which may be (i) authorized but unissued
shares, (ii) treasury shares and/or (iii) shares purchased on the open market by
a broker designated by the Company. The maximum number of shares of Common Stock
which shall be issued under the Plan, subject to adjustment upon changes in
capitalization of the Company as provided in ss.12.04, shall be 75,000 shares in
each Offering plus in each Offering all unissued shares from prior Offerings,
whether offered or not, not to exceed 300,000 shares for all Offerings. No
participant may purchase more than 2,500 shares in any one Offering Period. If
the total number of shares for which options are exercised on any Offering
Termination Date in accordance with Article VI exceeds the maximum number of
shares for the applicable offering, the Company shall make a pro rata allocation
of the shares available for delivery and distribution in as nearly a uniform
manner as shall be practicable and as it shall determine to be equitable, and
the balance of payroll deductions credited to the account of each participant
under the Plan shall be returned to him as promptly as possible.
10.02 PARTICIPANT'S INTEREST IN OPTION STOCK. The participant will have
no interest in stock covered by his option until such option has been exercised.
10.03 ISSUANCE OF STOCK. Stock purchased under the Plan will be issued
in the name of the participant, or, if the participant so directs by written
notice to the Human Resources Director of the Company prior to the Offering
Termination Date applicable thereto, in the names of the participant and one
such other person as may be designated
6
<PAGE>
by the participant, as joint tenants with rights of survivorship or as tenants
by the entireties, to the extent permitted by applicable law.
10.04 RESTRICTIONS ON EXERCISE. The Board of Directors may, in its
discretion, require as conditions to the exercise of any option that the shares
of Common Stock reserved for issuance upon the exercise of the option shall have
been duly listed, upon official notice of issuance, upon a stock exchange, and
that either:
(a) a registration statement under the Securities Act of 1933,
as amended, with respect to said shares shall be effective, or
(b) the participant shall have represented at the time of
purchase, in form and substance satisfactory to the Company, that it is his
intention to purchase the shares for investment and not for resale or
distribution.
ARTICLE XI
----------
ADMINISTRATION
--------------
11.01 APPOINTMENT OF COMMITTEE. The Board of Directors shall appoint a
committee (the "Committee") to administer the Plan, which shall consist of
either (a) the full Board of Directors or (b) no fewer than two members of the
Board of Directors.
11.02 AUTHORITY OF COMMITTEE. Subject to the express provisions of the
Plan, the Committee shall have plenary authority in its discretion to interpret
and construe any and all provisions of the Plan, to adopt rules and regulations
for administering the Plan, and to make all other determinations deemed
necessary or advisable for administering the Plan. The Committee's determination
on the foregoing matters shall be conclusive.
11.03 RULES GOVERNING THE ADMINISTRATION OF THE COMMITTEE. The Board of
Directors may from time to time appoint members of the Committee in substitution
for or in addition to members previously appointed and may fill vacancies,
however caused, in the Committee. The Committee may select one of its members as
its Chairman and shall hold its meetings at such times and places as it shall
deem advisable and may hold telephonic meetings. A majority of its members shall
constitute a quorum. All determinations of the Committee shall be made by a
majority of its members. The Committee may correct any defect or omission or
reconcile any inconsistency in the Plan, in the manner and to the extent it
shall deem desirable. Any decision or determination reduced to writing and
signed by a majority of the members of the Committee shall be as fully effective
as if it had been made by a majority vote at a meeting duly called and held. The
Committee may appoint a secretary and shall make such rules and regulations for
the conduct of its business as it shall deem advisable.
11.04 LIMITED LIABILITY; INDEMNIFICATION. To the maximum extent
permitted by Virginia law, neither the Company, Board or Committee nor any of
its members shall be
7
<PAGE>
liable for any action or determination made in good faith with respect to this
Plan. In addition to such other rights of indemnification that they may have,
the members of the Board and Committee shall be indemnified by the Company to
the maximum extent permitted by Virginia law against any and all liabilities and
expenses incurred in connection with their service in connection with the Plan
in such capacity.
ARTICLE XII
-----------
MISCELLANEOUS
-------------
12.01 DESIGNATION OF BENEFICIARY. A participant may file a written
designation of a beneficiary who is to receive any Common Stock which has not
been issued or cash which is in the participant's account at the time of the
participant's death. Such designation of beneficiary may be changed by the
participant at any time by written notice to the Human Resources Director of the
Company. Upon the death of a participant and upon receipt by the Company of
proof of identity and existence at the participant's death of a beneficiary
validly designated by him under the Plan, the Company shall deliver such stock
and/or cash to such beneficiary. In the event of the death of a participant and
in the absence of a beneficiary validly designated under the Plan who is living
at the time of such participant's death, the Company shall deliver such stock
and/or cash to the executor or administrator of the estate of the participant,
or if no such executor or administrator has been appointed (to the knowledge of
the Company), the Company, in its discretion, may deliver such stock and/or cash
to the spouse or to any one or more dependents of the participant as the Company
may designate. No beneficiary shall, prior to the death of the participant by
whom he has been designated, acquire any interest in the stock or cash credited
to the participant under the Plan.
12.02 TRANSFERABILITY. Neither payroll deductions credited to a
participant's account nor any rights with regard to the exercise of an option or
to receive stock under the Plan may be assigned, transferred, pledged, or
otherwise disposed of in any way by the participant other than by will or the
laws of descent and distribution. Any such attempted assignment, transfer,
pledge or other disposition shall be without effect, except that the Company may
treat such act as an election to withdraw funds in accordance with ss.7.02.
12.03 USE OF FUNDS. All payroll deductions received or held by the
Company under this Plan may be used by the Company for any corporate purpose and
the Company shall not be obligated to segregate such payroll deductions.
12.04 ADJUSTMENT UPON CHANGES IN CAPITALIZATION.
(a) If, while any options are outstanding, the outstanding
shares of Common Stock of the Company have increased, decreased, changed into,
or been exchanged for a different number or kind of shares or securities of the
Company through reorganization, merger, recapitalization, reclassification,
stock split, reverse stock split or
8
<PAGE>
similar transaction, appropriate and proportionate adjustments may be made by
the Committee in the number and/or kind of shares which are subject to purchase
under outstanding options and on the option exercise price or prices applicable
to such outstanding options. In addition, in any such event, the maximum number
and/or kind of shares which may be offered in the Offerings described in
Articles IV and Section 10.01 hereof shall also be proportionately adjusted. No
adjustments shall be made for stock dividends. For the purposes of this
Paragraph, any distribution of shares to shareholders in an amount aggregating
20% or more of the outstanding shares shall be deemed a stock split and any
distributions of shares aggregating less than 20% of the outstanding shares
shall be deemed a stock dividend.
(b) Upon the dissolution or liquidation of the Company, or
upon a reorganization, merger or consolidation of the Company with one or more
corporations as a result of which the Company is not the surviving corporation,
or upon a sale of substantially all of the property or stock of the Company to
another corporation, the Committee shall take such action as it deems
appropriate and equitable, which action may include, without limitation, one of
the following: (i) refund of payroll deductions for such Offering Period; (ii)
shortening of the Offering Period or (iii) providing that the holder of each
option then outstanding under the Plan will thereafter be entitled to receive at
the next Offering Termination Date upon the exercise of such option for each
share as to which such option shall be exercised, as nearly as reasonably may be
determined, the cash, securities and/or property which a holder of one share of
the Common Stock was entitled to receive upon and at the time of such
transaction. In the event the Plan is continued after such event, the Board of
Directors shall take such steps in connection with such transactions as the
Board shall deem necessary to assure that the provisions of this ss.12.04 shall
thereafter be applicable, as nearly as reasonably may be determined, in relation
to the said cash, securities and/or property as to which such holder of such
option might thereafter be entitled to receive.
12.05 AMENDMENT AND TERMINATION.
(a) Action by Board. The Board of Directors shall have
complete power and authority to terminate or amend the Plan; provided, however,
that the Board of Directors shall not, without the approval of the stockholders
of the Company (i) increase the maximum number of shares which may be issued
under the Plan or under any Offering (except pursuant to ss.ss.4.02 and 12.04);
or (ii) amend the requirements as to the class of employees eligible to purchase
stock under the Plan. Upon termination of the Plan during an Offering Period, at
the discretion of the Committee, cash balances in participants accounts may be
refunded or the Offering Termination Date may be accelerated. No termination,
modification, or amendment of the Plan may otherwise, without the consent of an
Employee then having an option under the Plan to purchase stock, adversely
affect the rights of such Employee under such option.
9
<PAGE>
(b) Automatic Termination. The Plan shall automatically
terminate on the earlier of August 4, 2008, or the issuance of the maximum
number of shares available under the Plan pursuant to Section 10.01.
12.06 TAX WITHHOLDING. At the time an option is exercised or at the
time some or all of the Company's Common Stock issued under the Plan is disposed
of, the participant must make adequate provision for the Company's federal,
state, or other tax withholding obligations, if any, which arise upon the
exercise of the option or the disposition of the Common Stock. At any time, the
Company may, but shall not be obligated to, withhold from the participant's
compensation the amount necessary for the Company to meet applicable withholding
obligations.
12.07 DISQUALIFYING DISPOSITION. The Committee may require that a
participant notify the Company of any disposition of shares of Common Stock
purchased under the Plan within a period of two (2) years subsequent to the
respective Offering Commencement Date or one (1) year from the Offering
Termination Date.
12.08 EFFECTIVE DATE. The Plan shall become effective as of August 5,
1998, subject to approval by the holders of the majority of the Common Stock
present and represented at a special or annual meeting of the shareholders held
on or before August 4, 1999. If the Plan is not so approved, the Plan shall be
discontinued, any options which had been issued shall be considered nonqualified
options and any payroll deductions then held by the Company shall be refunded to
the respective Employees.
12.09 NO EMPLOYMENT RIGHTS. The Plan does not, directly or indirectly,
create in any Employee or class of Employees any right with respect to
continuation of employment by the Company, and it shall not be deemed to
interfere in any way with the Company's right to terminate, or otherwise modify,
an Employee's employment at any time.
12.10 EXCLUSION FROM RETIREMENT AND FRINGE BENEFIT COMPUTATION. No
portion of the award of options under this Plan, or the proceeds from the sale
of stock purchased under the Plan, shall be taken into account as "wages,"
"salary" or "compensation" for any purpose, whether in determining eligibility,
benefits or otherwise, under (i) any pension, retirement, profit sharing or
other qualified or non-qualified plan of deferred compensation, (ii) any
employee welfare or fringe benefit plan including, but not limited to, group
insurance, hospitalization, medical, and disability, or (iii) any form of
extraordinary pay including, but not limited to, bonuses, sick pay and vacation
pay.
12.11 EFFECT OF PLAN. The provisions of the Plan shall, in accordance
with its terms, be binding upon, and inure to the benefit of, all successors of
each Employee participating in the Plan, including, without limitation, such
Employee's estate and the executors, administrators or trustees thereof, heirs
and legatees, and any receiver, trustee in bankruptcy or representative of
creditors of such Employee.
10
<PAGE>
12.12 EXPENSES. Expenses of administering the Plan shall be borne by
the Company except that brokerage expenses incurred in connection with the
purchase of shares shall be included as part of the cost of the shares to
participating Employees.
12.13 GOVERNING LAW. The law of the Commonwealth of Virginia will
govern all matters relating to this Plan except to the extent it is superseded
by the laws of the United States.
11
Ex. 5.1
Venable, Baetjer and Howard, LLP
1800 Mercantile Bank & Trust Bldg.
2 Hopkins Plaza
Baltimore, MD 21201
(410) 244-7400
August 5, 1998
Dunn Computer Corporation
1306 Squire Court
Sterling, Virginia 20166
Re: Registration Statement on Form S-8
Ladies and Gentlemen:
We have acted as counsel to Dunn Computer Corporation, a
Virginia corporation (the "Company"), in connection with a registration
statement on Form S-8 filed with the Securities and Exchange Commission (the
"Registration Statement") pertaining to the registration of up to 300,000 shares
of its Common Stock, $0.001 par value (the "Common Stock"), for issuance and
sale pursuant to the Company's Employee Stock Purchase Plan (the "Plan").
In that connection, we have examined originals or copies of
such documents, corporate records and other instruments as we have deemed
necessary or appropriate for purposes of this opinion including, but not limited
to, the following: (i) the Registration Statement; (ii) the Articles of
Incorporation and the Bylaws of the Company, as amended and as currently in
effect; (iii) the Plan; (iv) certain resolutions of the Board of Directors of
the Corporation relating to the issuance of the Common Stock and the other
transactions contemplated by the Registration Statement; (v) a Certificate of
Good Standing from the State Corporation Commission of the Commonwealth of
Virginia; and (vi) such other documents as we have deemed necessary or
appropriate as a basis for the opinion set forth below. We have assumed, without
independent verification, the genuineness of signatures, the authenticity of
documents and the conformity with originals of copies.
Based on the foregoing, we are of the opinion that the Common
Stock, when issued and sold in accordance with the terms of the Plan, will be
validly issued, fully paid and non-assessable.
<PAGE>
We are members of the Bar of the Commonwealth of Virginia and
the opinions expressed herein are limited to the corporate laws of Virginia
pertaining to matters such as the issuance of stock, but not including the
"securities" or "blue sky" law of the Commonwealth.
We hereby consent to the use of this opinion as an exhibit to
the Registration Statement. By giving the foregoing consent, we do not admit
that we come within the category of persons whose consent is required under
Section 7 of the Securities Act of 1933.
Very truly yours,
/S/ VENABLE, BAETJER AND HOWARD, LLP
-2-
Consent of Ernst & Young LLP, Independent Auditors
We consent to the incorporation by reference in the Registration Statement
on Form S-8 (No. 333-_____) of Dunn Computer Corporation (a Virginia
corporation) pertaining to the Dunn Computer Corporation Employee Stock Purchase
Plan, of our report dated January 7, 1998, except for Notes 2 and 11, with
respect to the earnings per share calculations, as to which the date is March 5,
1998, with respect to the consolidated financial statements and schedule of Dunn
Computer Corporation (a Delaware Corporation), incorporated herein by reference
from the final prospectus filed by Dunn Computer Corporation (a Virginia
corporation) pursuant to Rule 424(b) of the Securities Act on April 28, 1998
(Registration Statement No. 333-47631).
/s/ Ernst & Young LLP
_____________________________
Ernst & Young LLP
Vienna, Virginia
August 14, 1998
<PAGE>
Consent of Ernst & Young LLP, Independent Auditors
We consent to the incorporation by reference in the Registration Statement
on Form S-8 (No. 333-_____) of Dunn Computer Corporation (a Virginia
corporation) pertaining to the Dunn Computer Corporation Employee Stock Purchase
Plan, of our report dated February 26, 1998, with respect to the balance sheet
of Dunn Computer Corporation (a Virginia Corporation), incorporated herein by
reference from the final prospectus filed by Dunn Computer Corporation (a
Virginia corporation) pursuant to Rule 424(b) of the Securities Act on April 28,
1998 (Registration Statement No. 333-47631).
/s/ Ernst & Young LLP
_____________________________
Ernst & Young LLP
Vienna, Virginia
August 14, 1998
EXHIBIT 23.2
Consent of KPMG Peat Marwick LLP, Independent Accountants
The Board of Directors
Dunn Computer Corporation:
We consent to the incorporation by reference in the Registration Statement
(Registration No. 333- ______) on Form S-8 of our report dated November 7, 1997
on the combined financial statements of International Data Products, Inc. and
combined company as of September 30, 1997 and 1996 and for each of the years in
the three year period ended September 30, 1997, which report appears in the
final prospectus filed by Dunn Computer Corporation on Form S-1 on April 28,
1998 (Registration No. 337-47631).
/s/ KPMG Peat Marwick LLP
__________________________
McLean, Virginia
August 13, 1998
EXHIBIT 23.3
[Davis, Sita & Company, P.A. Letterhead]
Certified Public Accountants (bullet) Management Consultants
The Board of Directors
Dunn Computer Corporation
We consent to incorporation by reference in the registration statement on
Form S-8 of Dunn Computer Corporation of our report dated August 25, 1997 except
for Note 9, as to which the date is September 12, 1997 relating to the
consolidated statements of financial condition of STMS, Inc. as of December 31,
1995 and 1996 and the related statements of operations, changes in stockholders'
deficit and cash flows for the years then ended, which reports are included in
the final prospectus of Dunn Computer Corporation, dated April 28, 1998.
/s/ Davis, Sita & Company, P.A.
_______________________________________
DAVIS, SITA & COMPANY, P.A.
Greenbelt, MD
August 14, 1998
7833 Walker Drive (bullet) Suite 520 (bullet) Greenbelt, Maryland 20770 (bullet)
(301)220-1152 (bullet) Fax (301)220-3814
