<PAGE>
As filed with the Securities and Exchange Commission on May 28, 1998
Registration No. 333-
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------
FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------
ODS NETWORKS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 75-1911917
(State or other jurisdiction (IRS Employer Identification No.)
of incorporation or organization)
1101 EAST ARAPAHO ROAD, RICHARDSON, TEXAS 75081
(Address of principal executive offices) (Zip Code)
---------
ESSENTIAL COMMUNICATION CORPORATION
1996 STOCK OPTION PLAN
(Full title of the plan)
G. WARD PAXTON
CHAIRMAN OF THE BOARD OF DIRECTORS, PRESIDENT AND CHIEF EXECUTIVE OFFICER
ODS NETWORKS, INC.
1101 EAST ARAPAHO ROAD, RICHARDSON, TEXAS 75081
(Name and address of agent for service)
(972) 234-6400
(Telephone number, including area code, of agent for service)
---------
CALCULATION OF REGISTRATION FEE
<TABLE>
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
Proposed Proposed
Title of Maximum Maximum
Securities Amount Offering Aggregate Amount of
to be to be Price Offering Registration
Registered Registered(1) per Share(2) Price(2) Fee(2)
---------- ------------- ------------ -------- ------
<S> <C> <C> <C> <C>
Common Stock, 103,063 shares $4.49 $462,752.87 $136.51
$0.01 par value per share
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
</TABLE>
(1) This Registration Statement shall also cover any additional shares of
Common Stock which become issuable under the Essential Communication
Corporation 1996 Stock Option Plan by reason of any stock dividend, stock
split, recapitalization or other similar transaction effected without the
receipt of consideration which results in an increase in the number of the
Registrant's outstanding shares of Common Stock.
(2) Calculated solely for purposes of this offering under Rule 457(h) of the
Securities Act of 1933, as amended (the "Securities Act"), on the basis of
the weighted average exercise price of the outstanding options.
<PAGE>
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
Item 3. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
ODS Networks, Inc. (the "Registrant") hereby incorporates by reference
into this Registration Statement the following documents previously filed
with the Securities and Exchange Commission (the "Commission"):
(a) The Registrant's Annual Report on Form 10-K for the fiscal year
ended December 31,1997 filed with the Commission on March 9, 1998,
pursuant to Section 13 of the Securities Exchange Act of 1934 (the
"1934 Act").
(b) The Registrant's Quarterly Report on Form 10-Q for the fiscal
quarter ended March 31, 1998, filed with the Commission on May 7,
1998.
(c) The Registrant's Current Report on Form 8-K dated May 7, 1998, filed
with the Commission on May 21, 1998.
(d) The description of the Common Stock of the Registrant incorporated by
reference in its Registration Statement on Form 8-A (File No. 0-20191)
which was declared effective by the Commission on May 21, 1992,
pursuant to Section 12(g) of the Exchange Act, including any amendment
or report filed for the purpose of updating such description.
All reports and definitive proxy or information statements filed
pursuant to Section 13(a), 13(c), 14 or 15(d) of the 1934 Act after the date
of this Registration Statement and prior to the filing of a post-effective
amendment which indicates that all securities offered hereby have been sold
or which deregisters all securities then remaining unsold shall be deemed to
be incorporated by reference into this Registration Statement and to be a
part hereof from the date of filing of such documents. Any statement
contained in a document incorporated or deemed to be incorporated by
reference herein shall be deemed to be modified or superseded for purposes of
this Registration Statement to the extent that a statement contained herein
or in any subsequently filed document which also is deemed to be incorporated
by reference herein modifies or supersedes such statement. Any such
statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Registration Statement.
Item 4. DESCRIPTION OF SECURITIES
Not Applicable.
Item 5. INTERESTS OF NAMED EXPERTS AND COUNSEL
Not Applicable.
II-2.
<PAGE>
Item 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Registrant's Certificate of Incorporation relieves its directors
from liability for monetary damages to the fullest extent permitted by
Delaware law. Section 145 of the Delaware General Corporation Law authorizes
a corporation to indemnify, among others, any officer or director against
certain liabilities under specified circumstances, and to purchase and
maintain insurance on behalf of its officers and directors.
Article Six, Section 3, and Article Ten of the Registrant's Certificate
of Incorporation, as amended, provide, in general, that no director of the
Registrant shall be personally liable for monetary damages for breach of the
director's fiduciary duty as a director, except for liability for (i) any
breach of the director's duty of loyalty to the Registrant or its
stockholders; (ii) an act or omission not in good faith or an act or omission
that involves intentional misconduct or a knowing violation of law; (iii) any
liability under Section 174 of the Delaware General Corporation Law
(pertaining to unlawful payment of a dividend or an unlawful stock purchase
or redemption); or (iv) a transaction from which the director received an
improper personal benefit.
Article Six of the Registrant's Bylaws, provides, in general, that the
Registrant shall indemnify its directors and officers under the circumstances
defined in Section 145 of the Delaware General Corporation Law and gives
authority to the Registrant to purchase insurance with respect to such
indemnification.
The Registrant has entered into separate Indemnity Agreements with each
of its directors and certain of its executive officers (each, an
"Indemnitee"), under which the Registrant will, upon proper request of the
Indemnitee, indemnify any Indemnitee if such Indemnitee is a party to or is
threatened to be made a party to or is otherwise involved in any third party
proceedings or proceedings by or in the right of the Registrant to procure a
judgment in its favor by reason of the fact that the Indemnitee is or was a
director and/or officer of the Registrant or is or was serving at the request
of the Registrant as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, against
all expenses, judgments, fines and penalties, actually and reasonably
incurred by the Indemnitee in connection with the defense or settlement of
any of such proceedings; provided that (i) in the case of a third party
proceeding, the Indemnitee acted in good faith and in a manner which the
Indemnitee reasonably believed to be in or not opposed to the best interests
of the Registrant, and in the case of a criminal proceeding, in addition,
that the Indemnitee had no reasonable cause to believe that his conduct was
unlawful, (ii) in the case of a proceeding by or in the right of the
Registrant, the Indemnitee acted in good faith and in manner which the
Indemnitee reasonably believed to be in or not opposed to the best interests
of the Registrant and in which the Indemnitee shall not have been adjudged to
be liable to the Registrant for negligence or misconduct in the performance
of the Indemnitee's duty to the Registrant, unless the court in which such
proceeding is brought determines that the Indemnitee is fairly and reasonably
entitled to indemnity for expenses as such court deems proper, and (iii) in
the case of a proceeding by or in the right of the Registrant, the Indemnitee
is only indemnified against expenses and not against any judgment, fines or
penalties. Notwithstanding the above, the Registrant shall indemnify an
Indemnitee for all expenses incurred in connection with any proceedings to
the extent that the Indemnitee has been successful in defense of any such
proceeding, or in defense of any claim, issue or matter therein. The
Registrant will also, upon proper request of the Indemnitee, pay in advance
the expenses incurred by the Indemnitee in any of the above proceedings, if
the Indemnitee shall undertake to repay such amounts to the extent it is
determined that the Indemnitee is not entitled to indemnification.
Item 7. EXEMPTION FROM REGISTRATION CLAIMED
Not Applicable.
Item 8. EXHIBITS
The exhibits listed in the accompanying index to exhibits are filed or
incorporated as part of this Registration Statement.
II-3.
<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 (i) to include any prospectus
required by Section 10(a)(3) of the Securities Act, (ii) to reflect in the
prospectus any facts or events arising after the effective date of the
Registration Statement (or the most recent post-effective amendment thereof)
which, individually or in the aggregate, represent a fundamental change in
the information set forth in the Registration Statement, and (iii) to include
any material information with respect to the plan of distribution not
previously disclosed in the Registration Statement or any material change to
such information in the Registration Statement; PROVIDED, however, that
clauses (1)(i) and (1)(ii) shall not apply if the information required to be
included in a post-effective amendment by those paragraphs is contained in
periodic reports filed by the Registrant pursuant to Section 13 or Section
15(d) of the 1934 Act that are incorporated by reference into 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; and (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 Essential Communication
Corporation 1996 Stock Option Plan.
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
1934 Act that is incorporated by reference into 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 or controlling persons
of the Registrant pursuant to the indemnity provisions summarized in Item 6
or otherwise, the Registrant has been informed that, in the opinion of the
Commission, such indemnification is against public policy as expressed in the
Securities 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
Securities Act and will be governed by the final adjudication of such issue.
II-4.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
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 Richardson, State of Texas, on this
28th day of May, 1998.
ODS NETWORKS, INC.
By /s/ G. Ward Paxton
-----------------------------------------
G. Ward Paxton
Chairman of the Board of Directors,
President and Chief Executive Officer
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints G. Ward Paxton, as such person's true and
lawful attorney-in-fact and agent, each with full power of substitution, for
such person, in any and all capacities, to sign any and all amendments
(including post-effective amendments) to this Registration Statement, and to
file same, with all exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorney-in-fact and agent full power and authority to do and perform each
and every act and thing requisite and necessary to be done in connection
therewith, as fully to all intents and purposes as such person might or could
do in person, hereby ratifying and confirming that said attorney-in-fact and
agent, or his or her substitutes, may do or cause to be done by virtue
thereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons on
behalf of the Registrant and in the capacities and on the dates indicated:
<TABLE>
Signatures Title Date
- ---------- ----- ----
<S> <C> <C>
/s/ G. Ward Paxton Chairman of the Board of Directors, May 28, 1998
- ------------------------ President and Chief Executive Officer
G. Ward Paxton (Principal Executive Officer)
/s/ Timothy W. Kinnear Vice President and May 28, 1998
- ------------------------ Chief Financial Officer
Timothy W. Kinnear (Principal Financial Officer)
/s/ Kandis Tate Thompson Controller-Finance and Accounting May 28, 1998
- ------------------------ (Principal Accounting Officer)
Kandis Tate Thompson
</TABLE>
II-5.
<PAGE>
<TABLE>
Signatures Title Date
- ---------- ----- ----
<S> <C> <C>
/s/ T. Joe Head Senior Vice President and Director May 28, 1998
- ------------------------
T. Joe Head
/s/ Robert Anderson Director May 28, 1998
- ------------------------
Robert Anderson
/s/ J. Fred Bucy Director May 28, 1998
- ------------------------
J. Fred Bucy
/s/ Donald M. Johnston Director May 28, 1998
- ------------------------
Donald M. Johnston
</TABLE>
II-6.
<PAGE>
INDEX TO EXHIBITS
<TABLE>
Exhibit Number Exhibit
- -------------- -------
<S> <C>
4.1(1) Certificate of Incorporation and Certificate of Amendment to
the Certificate of Incorporation of the Registrant.
4.2(1) Bylaws of the Registrant.
4.3(2) Specimen Common Stock Certificate.
4.4(3) Essential Communication Corporation 1996 Stock Option Plan.
4.5(3) Form of Stock Option Agreement in connection with the
Essential Communication Corporation 1996 Stock Option Plan.
4.6(3) Form of Stock Option Assumption Agreement.
5.1(3) Opinion of Brobeck, Phleger & Harrison LLP.
23.1(3) Consent of Independent Auditors - Ernst & Young LLP.
23.2(3) Consent of Brobeck, Phleger & Harrison LLP is contained in
Exhibit 5.1.
24.1(3) Power of Attorney. Reference is made to page II-5 of this
Registration Statement.
</TABLE>
- ---------------------
(1) Such Certificate of Incorporation and Bylaws were each filed as an Exhibit
in the Registrant's Current Report on Form 8-K dated November 6, 1995 (Date
of Earliest Event Reported: October 31, 1995; Commission File
No. 0-20191), which Exhibit is hereby incorporated herein by reference.
Such Certificate of Amendment to the Registrant's Certificate of
Incorporation was filed as an Exhibit in the Registrant's Current Report
on Form 8-K dated May 7, 1997 (Date of Earliest Event Reported: April 24,
1997; Commission File No. 0-20191), which Exhibit is hereby incorporated
herein by reference.
(2) Filed as an Exhibit in the Registrant's Current Report on Form 8-K dated
May 7, 1997 (Date of Earliest Event Reported: April 24, 1997; Commission
File No. 0-20191), which Exhibit is hereby incorporated herein by
reference.
(3) Filed herewith.
<PAGE>
EXHIBIT 4.4
ESSENTIAL COMMUNICATION CORPORATION 1996 STOCK OPTION PLAN
ESSENTIAL COMMUNICATIONS CORPORATION
1996 STOCK OPTION PLAN
AMENDED AND RESTATED ON APRIL 12, 1996
INTRODUCTION
The Essential Communications Corporation Incentive Stock Option Plan is
hereby renamed the Essential Communications Corporation 1996 Stock Option
Plan and is hereby amended and restated in the form hereof.
1. PURPOSES.
(a) The purpose of the Plan is to provide a means by which selected
Employees and Directors of and Consultants to the Company, and its Affiliates,
may be given an opportunity to purchase stock of the Company.
(b) The Company, by means of the Plan, seeks to retain the services of
persons who are now Employees or Directors of or Consultants to the Company or
its Affiliates, to secure and retain the services of new Employees, Directors
and Consultants, and to provide incentives for such persons to exert maximum
efforts for the success of the Company and its Affiliates.
(c) The Company intends that the Options issued under the Plan shall, in
the discretion of the Board or any Committee to which responsibility for
administration of the Plan has been delegated pursuant to subsection 3(c), be
either Incentive Stock Options or Nonstatutory Stock Options. All Options shall
be separately designated Incentive Stock Options or Nonstatutory Stock Options
at the time of grant, and in such form as issued pursuant to Section 6, and a
separate certificate or certificates will be issued for shares purchased on
exercise of each type of Option.
2. DEFINITIONS.
(a) "AFFILIATE" means any parent corporation or subsidiary corporation,
whether now or hereafter existing, as those terms are defined in Sections 424(e)
and (f) respectively, of the Code.
(b) "BOARD" means the Board of Directors of the Company.
(c) "CODE" means the Internal Revenue Code of 1986, as amended.
<PAGE>
(d) "COMMITTEE" means a Committee appointed by the Board in accordance
with subsection 3(c) of the Plan.
(e) "COMPANY" means Essential Communications Corporation, a New Mexico
corporation.
(f) "CONSULTANT" means any person, including an advisor, engaged by the
Company or an Affiliate to render consulting services and who is compensated for
such services, provided that the term "Consultant" shall not include Directors
who are paid only a director's fee by the Company or who are not compensated by
the Company for their services as Directors.
(g) "CONTINUOUS STATUS AS AN EMPLOYEE, DIRECTOR OR CONSULTANT" means that
the service of an individual to the Company, whether as an Employee, Director or
Consultant, is not interrupted or terminated. The Board, in its sole
discretion, may determine whether Continuous Status as an Employee, Director or
Consultant shall be considered interrupted in the case of: (i) any leave of
absence approved by the Board, including sick leave, military leave, or any
other personal leave; or (ii) transfers between the Company, Affiliates or their
successors.
(h) "DIRECTOR" means a member of the Board.
(i) "DISINTERESTED PERSON" means a Director who either (i) was not
during the one year prior to service as an administrator of the Plan granted
or awarded equity securities pursuant to the Plan or any other plan of the
Company or any affiliate entitling the participants therein to acquire equity
securities of the Company or any affiliate except as permitted by Rule
16b-(c)(2)(i); or (ii) is otherwise considered to be a "disinterested person"
in accordance with Rule 16b-3(c)(2)(i), or any other applicable rules,
regulations or interpretations of the Securities and Exchange Commission.
(j) "EMPLOYEE" means any person, including Officers and Directors,
employed by the Company or any Affiliate of the Company. Neither service as a
Director nor payment of a director's fee by the Company shall be sufficient to
constitute "employment" by the Company.
(k) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
(l) "FAIR MARKET VALUE" means, as of any date, the value of the common
stock of the Company determined as follows:
2.
<PAGE>
(1) If the common stock is listed on any established stock exchange
or a national market system, including without limitation the National Market
System of the National Association of Securities Dealers, Inc. Automated
Quotation ("NASDAQ") System, the Fair Market Value of a share of common stock
shall be the closing sales price for such stock (or the closing bid, if no sales
were reported) as quoted on such system or exchange (or the exchange with the
greatest volume of trading in common stock) on the last market trading day prior
to the day of determination, as reported in the Wall Street Journal or such
other source as the Board deems reliable;
(2) If the common stock is quoted on the NASDAQ System (but not on
the National Market System thereof) or is regularly quoted by a recognized
securities dealer but selling prices are not reported, the Fair Market Value of
a share of common stock shall be the mean between the bid and asked prices for
the common stock on the last market trading day prior to the day of
determination, as reported in the Wall Street Journal or such other source as
the Board deems reliable;
(3) In the absence of an established market for the common stock, the
Fair Market Value shall be determined in good faith by the Board.
(m) "INCENTIVE STOCK OPTION" means an Option intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code and the
regulations promulgated thereunder.
(n) "NONSTATUTORY STOCK OPTION" means an Option not intended to qualify as
an Incentive Stock Option.
(o) "OFFICER" means a person who is an officer of the Company within the
meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.
(p) "OPTION" means a stock option granted pursuant to the Plan.
(q) "OPTION AGREEMENT" means a written agreement between the Company and
an Optionee evidencing the terms and conditions of an individual Option grant.
Each Option Agreement shall be subject to the terms and conditions of the Plan.
(r) "OPTIONEE" means a person who holds an outstanding Option.
(s) "PLAN" means this Essential Communications Corporation 1996 Stock
Option Plan.
3.
<PAGE>
(t) "RULE 16b-3" means Rule 16b-3 of the Exchange Act or any successor to
Rule 16b-3, as in effect when discretion is being exercised with respect to the
Plan.
3. ADMINISTRATION.
(a) The Plan shall be administered by the Board unless and until the Board
delegates administration to a Committee, as provided in subsection 3(c).
(b) The Board shall have the power, subject to, and within the limitations
of, the express provisions of the Plan:
(1) To determine from time to time which of the persons eligible
under the Plan shall be granted Options; when and how each Option shall be
granted; whether an Option will be an Incentive Stock Option or a
Nonstatutory Stock Option; the provisions of each Option granted (which need
not be identical), including the time or times such Option may be exercised
in whole or in part; and the number of shares for which an Option shall be
granted to each such person.
(2) To construe and interpret the Plan and Options granted under
it, and to establish, amend and revoke rules and regulations for its
administration. The Board, in the exercise of this power, may correct any
defect, omission or inconsistency in the Plan or in any Option Agreement, in
a manner and to the extent it shall deem necessary or expedient to make the
Plan fully effective.
(3) To amend the Plan or an Option as provided in Section 11.
(4) Generally, to exercise such powers and to perform such acts as
the Board deems necessary or expedient to promote the best interests of the
Company.
(c) The Board may delegate administration of the Plan to a committee
composed of not fewer than two (2) members (the "Committee"), all of the members
of which Committee shall be Disinterested Persons. If administration is
delegated to a Committee, the Committee shall have, in connection with the
administration of the Plan, the powers theretofore possessed by the Board (and
references in this Plan to the Board shall thereafter be to the Committee),
subject, however, to such resolutions, not inconsistent with the provisions of
the Plan, as may be adopted from time to time by the Board. The Board may
abolish the Committee at any time and revest in the Board the administration of
the Plan. Additionally, prior to the date of the first registration of an
equity security of the
4.
<PAGE>
Company under Section 12 of the Exchange Act, and notwithstanding anything to
the contrary contained herein, the Board may delegate administration of the
Plan to any person or persons and the term "Committee" shall apply to any
person or persons to whom such authority has been delegated. Notwithstanding
anything in this Section 3 to the contrary, the Board or the Committee may
delegate to a committee of one or more members of the Board the authority to
grant Options to eligible persons who are not then subject to Section 16 of
the Exchange Act.
(d) Any requirement that an administrator of the Plan be a Disinterested
Person shall not apply (i) prior to the date of the first registration of an
equity security of the Company under Section 12 of the Exchange Act, or (ii) if
the Board or the Committee expressly declares that such requirement shall not
apply. Any Disinterested Person shall otherwise comply with the requirements of
Rule 16b-3.
4. SHARES SUBJECT TO THE PLAN.
(a) Subject to the provisions of Section 10 relating to adjustments upon
changes in stock, the stock that may be sold pursuant to Options shall not
exceed in the aggregate Three Hundred Eighty Thousand (380,000) shares of the
Company's common stock. If any Option shall for any reason expire or otherwise
terminate, in whole or in part, without having been exercised in full, the stock
not purchased under such Option shall revert to and again become available for
issuance under the Plan.
(b) The stock subject to the Plan may be unissued shares or reacquired
shares, bought on the market or otherwise.
5. ELIGIBILITY.
(a) Incentive Stock Options may be granted only to Employees.
Nonstatutory Stock Options may be granted only to Employees, Directors or
Consultants.
(b) A Director shall in no event be eligible for the benefits of the Plan
unless at the time discretion is exercised in the selection of the Director as a
person to whom Options may be granted, or in the determination of the number of
shares which may be covered by Options granted to the Director: (i) the Board
has delegated its discretionary authority over the Plan to a Committee which
consists solely of Disinterested Persons; or (ii) the Plan otherwise complies
with the requirements of Rule 16b-3. The Board shall otherwise comply with the
requirements of Rule 16b-3. This subsection 5(b) shall not apply (i) prior to
the date of the first registration of an equity security
5.
<PAGE>
of the Company under Section 12 of the Exchange Act, or (ii) if the Board or
Committee expressly declares that it shall not apply.
(c) No person shall be eligible for the grant of an Incentive Stock Option
if, at the time of grant, such person owns (or is deemed to own pursuant to
Section 424(d) of the Code) stock possessing more than ten percent (10%) of the
total combined voting power of all classes of stock of the Company or of any of
its Affiliates unless the exercise price of such Incentive Stock Option is at
least one hundred ten percent (110%) of the Fair Market Value of such stock at
the date of grant and the Option is not exercisable after the expiration of five
(5) years from the date of grant.
6. OPTION PROVISIONS.
Each Option shall be in such form and shall contain such terms and
conditions as the Board shall deem appropriate. The provisions of separate
Options need not be identical, but each Option shall include (through
incorporation of provisions hereof by reference in the Option or otherwise)
the substance of each of the following provisions:
(a) TERM. No Option shall be exercisable after the expiration of ten (10)
years from the date it was granted.
(b) PRICE. The exercise price of each Incentive Stock Option shall be not
less than one hundred percent (100%) of the Fair Market Value of the stock
subject to the Option on the date the Option is granted; the exercise price of
each Nonstatutory Stock Option shall be not less than eighty-five percent (85%)
of the Fair Market Value of the stock subject to the Option on the date the
Option is granted. Notwithstanding the foregoing, an Option (whether an
Incentive Stock Option or a Nonstatutory Stock Option) may be granted with an
exercise price lower than that set forth in the preceding sentence if such
Option is granted pursuant to an assumption or substitution for another option
in a manner satisfying the provisions of Section 424(a) of the Code.
(c) CONSIDERATION. The purchase price of stock acquired pursuant to an
Option shall be paid, to the extent permitted by applicable statutes and
regulations, either (i) in cash at the time the Option is exercised, or (ii) at
the discretion of the Board or the Committee, at the time of the grant of the
Option, (A) by delivery to the Company of other common stock of the Company, (B)
according to a deferred payment or other arrangement (which may
6.
<PAGE>
include, without limiting the generality of the foregoing, the use of other
common stock of the Company) with the person to whom the Option is granted or
to whom the Option is transferred pursuant to subsection 6(d), or (C) in any
other form of legal consideration that may be acceptable to the Board.
In the case of any deferred payment arrangement, interest shall be payable
at least annually and shall be charged at the minimum rate of interest necessary
to avoid the treatment as interest, under any applicable provisions of the Code,
of any amounts other than amounts stated to be interest under the deferred
payment arrangement.
(d) TRANSFERABILITY. An Incentive Stock Option shall not be transferable
except by will or by the laws of descent and distribution, and shall be
exercisable during the lifetime of the person to whom the Incentive Stock Option
is granted only by such person. A Nonstatutory Stock Option shall not be
transferable except by will or by the laws of descent and distribution or
pursuant to a qualified domestic relations order satisfying the requirements of
Rule 16b-3 and the rules thereunder (a "QDRO"), and shall be exercisable during
the lifetime of the person to whom the Option is granted only by such person or
any transferee pursuant to a QDRO. The person to whom the Option is granted
may, by delivering written notice to the Company, in a form satisfactory to the
Company, designate a third party who, in the event of the death of the Optionee,
shall thereafter be entitled to exercise the Option.
(e) VESTING. The total number of shares of stock subject to an Option
may, but need not, be allotted in periodic installments (which may, but need
not, be equal). The Option Agreement may provide that from time to time during
each of such installment periods, the Option may become exercisable ("vest")
with respect to some or all of the shares allotted to that period, and may be
exercised with respect to some or all of the shares allotted to such period
and/or any prior period as to which the Option became vested but was not fully
exercised. The Option may be subject to such other terms and conditions on the
time or times when it may be exercised (which may be based on performance or
other criteria) as the Board may deem appropriate. The provisions of this
subsection 6(e) are subject to any Option provisions governing the minimum
number of shares as to which an Option may be exercised.
(f) SECURITIES LAW COMPLIANCE. The Company may require any Optionee, or
any person to whom an Option is transferred under subsection 6(d), as a
condition of exercising any such Option, (1) to give written
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assurances satisfactory to the Company as to the Optionee's knowledge and
experience in financial and business matters and/or to employ a purchaser
representative reasonably satisfactory to the Company who is knowledgeable and
experienced in financial and business matters, and that he or she is capable
of evaluating, alone or together with the purchaser representative, the merits
and risks of exercising the Option; and (2) to give written assurances
satisfactory to the Company stating that such person is acquiring the stock
subject to the Option for such person's own account and not with any present
intention of selling or otherwise distributing the stock. The foregoing
requirements, and any assurances given pursuant to such requirements, shall be
inoperative if (i) the issuance of the shares upon the exercise of the Option
has been registered under a then currently effective registration statement
under the Securities Act of 1933, as amended (the "Securities Act"), or (ii)
as to any particular requirement, a determination is made by counsel for the
Company that such requirement need not be met in the circumstances under the
then applicable securities laws. The Company may require the Optionee to
provide such other representations, written assurances or information which
the Company shall determine is necessary, desirable or appropriate to comply
with applicable securities and other laws as a condition of granting an Option
to such Optionee or permitting the Optionee to exercise such Option. The
Company may, upon advice of counsel to the Company, place legends on stock
certificates issued under the Plan as such counsel deems necessary or
appropriate in order to comply with applicable securities laws, including, but
not limited to, legends restricting the transfer of the stock.
(g) TERMINATION OF EMPLOYMENT OR RELATIONSHIP AS A DIRECTOR OR CONSULTANT.
In the event an Optionee's Continuous Status as an Employee, Director or
Consultant terminates (other than upon the Optionee's death or disability), the
Optionee may exercise his or her Option (to the extent that the Optionee was
entitled to exercise it as of the date of termination) but only within such
period of time ending on the earlier of (i) the date three (3) months after the
termination of the Optionee's Continuous Status as an Employee, Director or
Consultant (or such longer or shorter period specified in the Option Agreement),
or (ii) the expiration of the term of the Option as set forth in the Option
Agreement. If, after termination, the Optionee does not exercise his or her
Option within the time specified, the Option shall terminate, and the shares
covered by such Option shall revert to and again become available for issuance
under the Plan.
8.
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(h) DISABILITY OF OPTIONEE. In the event an Optionee's Continuous Status
as an Employee, Director or Consultant terminates as a result of the Optionee's
disability, the Optionee may exercise his or her Option (to the extent that the
Optionee was entitled to exercise it as of the date of termination), but only
within such period of time ending on the earlier of (i) the date twelve (12)
months following such termination (or such longer or shorter period specified in
the Option Agreement), or (ii) the expiration of the term of the Option as set
forth in the Option Agreement. If, at the date of termination, the Optionee is
not entitled to exercise his or her entire Option, the shares covered by the
unexercisable portion of the Option shall revert to and again become available
for issuance under the Plan. If, after termination, the Optionee does not
exercise his or her Option within the time specified, the Option shall
terminate, and the shares covered by such Option shall revert to and again
become available for issuance under the Plan.
(i) DEATH OF OPTIONEE. In the event of the death of an Optionee during,
or within a period specified in the Option Agreement after the termination of,
the Optionee's Continuous Status as an Employee, Director or Consultant, the
Option may be exercised (to the extent the Optionee was entitled to exercise the
Option as of the date of death) by the Optionee's estate, by a person who
acquired the right to exercise the Option by bequest or inheritance or by a
person designated to exercise the option upon the Optionee's death pursuant to
subsection 6(d), but only within the period ending on the earlier of (i) the
date eighteen (18) months following the date of death (or such longer or shorter
period specified in the Option Agreement), or (ii) the expiration of the term of
such Option as set forth in the Option Agreement. If, at the time of death, the
Optionee was not entitled to exercise his or her entire Option, the shares
covered by the unexercisable portion of the Option shall revert to and again
become available for issuance under the Plan. If, after death, the Option is
not exercised within the time specified, the Option shall terminate, and the
shares covered by such Option shall revert to and again become available for
issuance under the Plan.
(j) EARLY EXERCISE. The Option may, but need not, include a provision
whereby the Optionee may elect at any time while an Employee, Director or
Consultant to exercise the Option as to any part or all of the shares subject to
the Option prior to the full vesting of the Option. Any unvested shares so
purchased may be subject to a repurchase right in favor of the Company or to any
other restriction the Board determines to be appropriate.
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(k) RIGHT OF REPURCHASE. The Option may, but need not, include a
provision whereby the Company may elect, prior to the date of the first
registration of an equity security of the Company under Section 12 of the
Exchange Act, to repurchase all or any part of the vested shares exercised
pursuant to the Option.
(l) RIGHT OF FIRST REFUSAL. The Option may, but need not, include a
provision whereby the Company may elect, prior to the date of the first
registration of an equity security of the Company under Section 12 of the
Exchange Act, to exercise a right of first refusal following receipt of notice
from the Optionee of the intent to transfer all or any part of the shares
exercised pursuant to the Option.
(m) WITHHOLDING. To the extent provided by the terms of an Option
Agreement, the Optionee may satisfy any federal, state or local tax withholding
obligation relating to the exercise of such Option by any of the following means
or by a combination of such means: (1) tendering a cash payment; (2)
authorizing the Company to withhold shares from the shares of the common stock
otherwise issuable to the Optionee as a result of the exercise of the Option; or
(3) delivering to the Company owned and unencumbered shares of the common stock
of the Company.
7. COVENANTS OF THE COMPANY.
(a) During the terms of the Options, the Company shall keep available at
all times the number of shares of stock required to satisfy such Options.
(b) The Company shall seek to obtain from each regulatory commission or
agency having jurisdiction over the Plan such authority as may be required to
issue and sell shares of stock upon exercise of the Options; PROVIDED, HOWEVER,
that this undertaking shall not require the Company to register under the
Securities Act either the Plan, any Option or any stock issued or issuable
pursuant to any such Option. If, after reasonable efforts, the Company is
unable to obtain from any such regulatory commission or agency the authority
which counsel for the Company deems necessary for the lawful issuance and sale
of stock under the Plan, the Company shall be relieved from any liability for
failure to issue and sell stock upon exercise of such Options unless and until
such authority is obtained.
8. USE OF PROCEEDS FROM STOCK.
Proceeds from the sale of stock pursuant to Options shall constitute
general funds of the Company.
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9. MISCELLANEOUS.
(a) The Board shall have the power to accelerate the time at which an
Option may first be exercised or the time during which an Option or any part
thereof will vest pursuant to subsection 6(e), notwithstanding the provisions in
the Option stating the time at which it may first be exercised or the time
during which it will vest.
(b) Neither an Optionee nor any person to whom an Option is transferred
under subsection 6(d) shall be deemed to be the holder of, or to have any of the
rights of a holder with respect to, any shares subject to such Option unless and
until such person has satisfied all requirements for exercise of the Option
pursuant to its terms.
(c) Nothing in the Plan or any instrument executed or Option granted
pursuant thereto shall confer upon any Employee, Director, Consultant or
Optionee any right to continue in the employ of the Company or any Affiliate (or
to continue acting as a Director or Consultant) or shall affect the right of the
Company or any Affiliate to terminate the employment of any Employee, with or
without cause, to remove any Director as provided in the Company's By-Laws and
the applicable provisions of the laws of the State of New Mexico, or to
terminate the relationship of any Consultant in accordance with the terms of
that Consultant's agreement with the Company or Affiliate to which such
Consultant is providing services.
(d) To the extent that the aggregate Fair Market Value (determined at the
time of grant) of stock with respect to which Incentive Stock Options are
exercisable for the first time by any Optionee during any calendar year under
all plans of the Company and its Affiliates exceeds one hundred thousand dollars
($100,000), the Options or portions thereof which exceed such limit (according
to the order in which they were granted) shall be treated as Nonstatutory Stock
Options.
(e) The Board or the Committee shall have the authority to effect, at any
time and from time to time (i) the repricing of any outstanding Options under
the Plan and/or (ii) with the consent of the affected holders of Options, the
cancellation of any outstanding Options and the grant in substitution therefor
of new Options under the Plan covering the same or different numbers of shares
of common stock, but having an exercise price per share not less than eighty-
five percent (85%) of the Fair Market Value (one hundred percent (100%) of the
Fair Market Value in the case of an Incentive Stock Option or, in the case of an
Incentive Stock Option granted to a ten percent (10%)
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stockholder (as defined in subsection 5(c)), not less than one hundred and ten
percent (110%) of the Fair Market Value) per share of common stock on the new
grant date.
10. ADJUSTMENTS UPON CHANGES IN STOCK.
(a) If any change is made in the stock subject to the Plan, or subject to
any Option (through merger, consolidation, reorganization, recapitalization,
stock dividend, dividend in property other than cash, stock split, liquidating
dividend, combination of shares, exchange of shares, change in corporate
structure or other transaction not involving the receipt of consideration by the
Company), the Plan will be appropriately adjusted in the class(es) and maximum
number of shares subject to the Plan pursuant to subsection 4(a), and the
outstanding Options will be appropriately adjusted in the class(es) and number
of shares and price per share of stock subject to such outstanding Options.
Such adjustments shall be made by the Board or Committee, the determination of
which shall be final, binding and conclusive. (The conversion of any
convertible securities of the Company shall not be treated as a "transaction not
involving the receipt of consideration by the Company.")
(b) In the event of: (1) a dissolution, liquidation, or sale of all or
substantially all of the assets of the Company; (2) a merger or consolidation in
which the Company is not the surviving corporation; (3) a reverse merger in
which the Company is the surviving corporation but the shares of the Company's
common stock outstanding immediately preceding the merger are converted by
virtue of the merger into other property, whether in the form of securities,
cash or otherwise; or (4) the acquisition by any person, entity or group within
the meaning of Section 13(d) or 14(d) of the Exchange Act, or any comparable
successor provisions (excluding any employee benefit plan, or related trust,
sponsored or maintained by the Company or any Affiliate of the Company) of the
beneficial ownership (within the meaning of Rule 13d-3 promulgated under the
Exchange Act, or comparable successor rule) of securities of the Company
representing at least fifty percent (50%) of the combined voting power entitled
to vote in the election of directors, then to the extent permitted by applicable
law: (i) any surviving or acquiring corporation shall assume any Options
outstanding under the Plan or shall substitute similar Options (including an
option to acquire the same consideration paid to the stockholders in the
transaction described in this subsection 10(b)) for those outstanding under the
Plan, or (ii) such Options shall continue in full force and effect. In the
event any surviving or acquiring corporation refuses to assume such Options, or
to substitute similar options for
12.
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those outstanding under the Plan, then, with respect to Options held by
persons then performing services as Employees, Directors or Consultants, the
time during which such Options may be exercised shall be accelerated prior to
such event and the Options terminated if not exercised after such acceleration
and at or prior to such event.
11. AMENDMENT OF THE PLAN AND OPTIONS.
(a) The Board at any time, and from time to time, may amend the Plan.
However, except as provided in Section 10 relating to adjustments upon changes
in stock, no amendment shall be effective unless approved by the stockholders of
the Company within twelve (12) months before or after the adoption of the
amendment, where the amendment will:
(1) Increase the number of shares reserved for Options under the
Plan;
(2) Modify the requirements as to eligibility for participation in
the Plan (to the extent such modification requires stockholder approval in order
for the Plan to satisfy the requirements of Section 422 of the Code); or
(3) Modify the Plan in any other way if such modification requires
stockholder approval in order for the Plan to satisfy the requirements of
Section 422 of the Code or to comply with the requirements of Rule 16b-3.
(b) The Board may in its sole discretion submit any other amendment to the
Plan for stockholder approval, including, but not limited to, amendments to the
Plan intended to satisfy the requirements of Section 162(m) of the Code and the
regulations promulgated thereunder regarding the exclusion of performance-based
compensation from the limit on corporate deductibility of compensation paid to
certain executive officers.
(c) It is expressly contemplated that the Board may amend the Plan in any
respect the Board deems necessary or advisable to provide Optionees with the
maximum benefits provided or to be provided under the provisions of the Code and
the regulations promulgated thereunder relating to Incentive Stock Options
and/or to bring the Plan and/or Incentive Stock Options granted under it into
compliance therewith.
(d) Rights and obligations under any Option granted before amendment of
the Plan shall not be impaired by any amendment of the Plan unless (i) the
Company requests the consent of the person to whom the Option was granted and
(ii) such person consents in writing.
13.
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(e) The Board at any time, and from time to time, may amend the terms of
any one or more Options; PROVIDED, HOWEVER, that the rights and obligations
under any Option shall not be impaired by any such amendment unless (i) the
Company requests the consent of the person to whom the Option was granted and
(ii) such person consents in writing.
12. TERMINATION OR SUSPENSION OF THE PLAN.
(a) The Board may suspend or terminate the Plan at any time. Unless
sooner terminated, the Plan shall terminate on April 12, 2006, which shall be
within ten (10) years from the date the Plan is adopted by the Board or approved
by the stockholders of the Company, whichever is earlier. No Options may be
granted under the Plan while the Plan is suspended or after it is terminated.
(b) Rights and obligations under any Option granted while the Plan is in
effect shall not be impaired by suspension or termination of the Plan, except
with the written consent of the person to whom the Option was granted.
13. EFFECTIVE DATE OF PLAN.
The Plan shall become effective as determined by the Board, but no Options
granted under the Plan shall be exercised unless and until the Plan has been
approved by the stockholders of the Company, which approval shall be within
twelve (12) months before or after the date the Plan is adopted by the Board,
and, if required, an appropriate approval has been issued by the New Mexico
Securities Division.
14.
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EXHIBIT 4.5
FORM OF STOCK OPTION AGREEMENT IN CONNECTION WITH THE
ESSENTIAL COMMUNICATION CORPORATION 1996 STOCK OPTION PLAN
INCENTIVE STOCK OPTION
______________________, Optionee:
ESSENTIAL COMMUNICATIONS CORPORATION (the "Company"), pursuant to its
1996 Stock Option Plan (the "Plan") has this day granted to you, the Optionee
named above, an option to purchase shares of the common stock of the Company
("Common Stock"). This option is intend to qualify as an "incentive stock
option" within the meaning of Section 422 of the Internal Revenue Code of
1986, as amended (the "Code").
The grant hereunder is in connection with and in furtherance of the
Company's compensatory benefit plan for participation of the Company's
employees (including officers) and is intended to comply with the provisions
of Rule 701 promulgated by the Securities and Exchange Commission under the
Securities Act of 1933, as amended (the "Act"). Defined terms not explicitly
defined in this agreement but defined in the Plan shall have the same
definitions as in the Plan.
The details of your option are as follows:
1. TOTAL NUMBER OF SHARES SUBJECT TO THIS OPTION. The total number of
shares of Common Stock subject to this option is ___________________
(__________).
2. VESTING. The date that vesting begins on this option is
______________, 199___. Subject to the limitations contained herein, twenty
percent (20%) of the shares vest (become exercisable) on the one-year
anniversary of the date vesting begins and twenty percent of the shares will
then vest on each successive one-year anniversary date thereafter until
either (i) you cease to provide services to the Company for one reason, or
(ii) this option becomes fully vested.
3. EXERCISE PRICE AND METHOD PAYMENT.
(a) EXERCISE PRICE. The exercise price of this option is Seventy
Five Cents ($.75) per share, being not less than the fair market value of the
Common Stock on the date of grant of this option.
(b) METHOD OF PAYMENT. Payment of the exercise price per share is
due in full upon exercise of all or any part of each installment which has
accrued to you. You may elect, to the extent permitted by applicable
statutes and regulations, to make payment of the exercise price under one of
the following alternatives:
(i) Payment of the exercise price per share in cash
(including check) at the time of exercise; or
(ii) Payment pursuant to a program developed under Regulation
T as promulgated by the Federal Reserve Board which results in the receipt of
cash (or check) by the Company prior to the issuance of Common Stock; or
(iii) Provided that at the time of exercise the Company's
Common Stock is publicly traded and quoted regularly in the Wall Street
Journal, payment by delivery of already-owned shares of Common Stock, held
for the period required to avoid a charge to the Company's reported earnings,
and owned free and clear
15.
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of any liens, claims, encumbrances or security interest, which Common Stock
shall be valued at its fair market value on the date of exercise; or
(iv) Payment by a combination of the methods of payment
permitted by subparagraph 3(b)(i) through 3(b)(iii) above.
4. WHOLE SHARES. This option may not be exercised for any number of
shares which would require the issuance of anything other than whole shares.
5. SECURITIES LAW COMPLIANCE. Notwithstanding anything to the
contrary contained herein, this option may not be exercised unless the shares
issuable upon exercise of this option are then registered under the Act or,
if such shares are not then so registered, the Company has determined that
such exercise and issuance would be exempt from the registration requirements
of the Act.
6. TERM. The term of this option commences on ______________, 199___,
the date of grant, and expires on ______________, 200___ (the "Expiration
Date," which date shall be no more than ten (10) years from the date this
option is granted), unless this option expires sooner as set forth below or
in the Plan. In no event may this option be exercised on or after the
Expiration Date. This option shall terminate prior to the Expiration Date as
follows: three (3) months after the termination of your Continuous Status as
an Employee with the Company or an Affiliate of the Company (as defined in
the Plan) unless one of the following circumstances exists:
(a) Your termination of Continuous Status as an Employee is due to
your permanent and total disability (within the meaning of Section 422(c)(6)
of the Code). This option will then expire on the earlier of the Expiration
Date set forth above or twelve (12) months following such termination of
Continuous Status as an Employee.
(b) Your termination of Continuous Status as an Employee is due to
your death or your death occurs within three (3) months following your
termination of Continuous Status as an Employee for any other reason. This
option will then expire on the earlier of the Expiration Date set forth above
or twelve (12) months after your death.
(c) If during any part of such three (3) month period you may not
exercise your option solely because of the condition set forth in paragraph 5
above, thin your option will not expire until the earlier of the Expiration
Date set forth above or until this option shall have been exercisable for an
aggregate period of three (3) months after your termination of Continuous
Status as an Employee.
(d) If your exercise of the option within three (3) months after
termination of your Continuous Status as an Employee with the Company or with
an Affiliate would result in liability under section 16(b) of the Securities
Exchange Act of 1934, then your option will expire on the earlier of (i) the
Expiration Date set forth above, (ii) the tenth (10th) day after the last
date upon which exercise would result in such liability or (iii) six (6)
months and ten (10) days after the termination of your Continuous Status as
an Employee with the Company or an Affiliate.
However, this option may be exercised following termination of
Continuous Status of an Employee only as to that number of shares as to which
it was exercisable on the date of termination of Continuous Status of an
Employee under the provisions of paragraph 2 of this option.
In order to obtain the federal income tax advantages associated with an
"incentive stock option," the Code requires that at all times beginning on
the date of grant of the option and ending on the day three (3) months before
the date of the option's exercise, you must be an employee of the Company or
an Affiliate, except in the event of your death or permanent and total
disability. The Company has provided for continued vesting or extended
exercisability of your option under certain circumstances for your benefit,
but cannot guarantee that your option will
16.
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necessarily be treated as an "incentive stock option" if you provide services
to the Company or an Affiliate as a consultant or exercise your option more
than three (3) months after the date your employment with the Company and all
Affiliates terminates.
7. EXERCISE.
(a) This option may be exercised, to the extent specified above, by
delivering a notice of exercise (in a form designated by the Company)
together with the exercise price to the Secretary of the Company, or to such
other person as the Company may designate, during regular business hours,
together with such additional documents as the Company may then require
pursuant to subparagraph 6(f) of the Plan.
(b) By exercising this option you agree that:
(i) as a precondition to the completion of any exercise of this
option, the Company may require you to enter an arrangement providing for the
payment by you to the Company of any tax withholding obligation of the
Company arising by reason of (1) the exercise of this option; (2) the lapse
of any substantial risk of forfeiture to which the shares are subject at the
time of exercise; or (3) the disposition of shares acquired upon such
exercise;
(ii) you will notify the Company in writing within fifteen (15)
days after the date of any disposition of any of the shares of the Common
Stock issued upon exercise of this option that occurs within two (2) years
after the date of this option grant or within one (1) year after such shares
of Common Stock are transferred upon exercise of this option; and
(iii) the Company (or a representative of the underwriters) may, in
connection with the first underwritten registration of the offering of any
securities of the company under the Act, require that you not sell or
otherwise transfer or dispose of any shares of Common Stock or other
securities of the Company during such period (not to exceed one hundred
eighty (180) days) following the effective date (the "Effective Date") of the
registration statement of the Company filed under the Act as may be requested
by the Company or the representative of the underwriters. You further agree
that the Company may impose stop-transfer instructions with respect
securities subject to the foregoing restrictions until the end of such period.
8. TRANSFERABILITY. This option is not transferable, except by will
or by the laws of descent and distribution, and is exercisable during your
life only by you. Notwithstanding the foregoing, by delivering written
notice to the Company, in a form satisfactory to the Company, you may
designate a third party who, in the event of your death, shall thereafter be
entitled to exercise this option.
9. OPTION NOT A SERVICE CONTRACT. This option is not an employment
contract and nothing in this option shall be deemed to create in any way
whatsoever any obligation on your part to continue in the employ of the
Company, or of the Company to continue your employment with the Company. In
addition, nothing in this option shall obligate the Company or any Affiliate,
or their respective [stockholders/shareholders], Board of Directors, officers
or employees to continue any relationship which you might have as a Director
or Consultant for the Company or Affiliate.
10. NOTICES. Any notices provided for in this option or the Plan shall
be given in writing and shall be deemed effectively given upon receipt or, in
the case of notices delivered by the Company to you, five (5) days after
deposit in the United States mail, postage prepaid, addressed to you at the
address specified below or at such other address as you hereafter designate
by written notice to the Company.
11. GOVERNING PLAN DOCUMENT. This option is subject to all the
provisions of the Plan, a copy of which is attached hereto and its provisions
are hereby made a part of this option, including without limitation the
provisions of Section 6 of the Plan relating to option provisions, and is
further subject to all interpretations,
17.
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amendments, rules and regulations which may from time to time be promulgated
and adopted pursuant to the Plan. In the event of any conflict between the
provisions of this option and those of the Plan, the provisions of the Plan
shall control.
Dated the _______th day of ________________________, 1996.
Very truly yours,
-----------------------------------------------------
By
---------------------------------------------------
Duly authorized on behalf of the Board of Directors
ATTACHMENTS:
Essential Communications Corporation 1996 Stock Option Plan
18.
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The undersigned:
(a) Acknowledges receipt of the foregoing option and the attachments
referenced therein and understands that all rights and liabilities with
respect to this option are set forth in the option and the Plan; and
(b) Acknowledges that as of the date of grant of this option, it sets
forth the understanding between the undersigned optionee and the Company and
its affiliates regarding the acquisition of stock in the Company and
supersedes all prior oral and written agreements on that subject with the
exception of (i) the options previously granted and delivered to the
undersigned under stock option plans of the Company, and (ii) the following
agreements only:
NONE
-------------------
(Initial)
OTHER
-------------------------------------------------
-------------------------------------------------
-------------------------------------------------
-------------------------------------------
OPTIONEE
Address:
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EXHIBIT 4.6
FORM OF STOCK OPTION ASSUMPTION AGREEMENT
ODS NETWORKS, INC.
STOCK OPTION ASSUMPTION AGREEMENT
ESSENTIAL COMMUNICATION CORPORATION
1996 STOCK OPTION PLAN
OPTIONEE: (1)
STOCK OPTION ASSUMPTION AGREEMENT issued as of the 7th day of May,
1998 by ODS Networks, Inc., a Delaware corporation ("ODSN").
WHEREAS, the undersigned individual ("Optionee") holds one or more
outstanding options to purchase shares of the common stock of Essential
Communication Corporation ("Essential") which were granted to Optionee under the
Essential 1996 Stock Option Plan (the "Plan") and are evidenced by an agreement
(the "Option Agreement") between Essential and Optionee.
WHEREAS, Essential has this day been acquired by ODSN through the
merger of ECC Acquisition Corp., a wholly owned subsidiary of ODSN with and into
Essential (the "Merger") pursuant to the Agreement of Merger dated April 30,
1998, by and between ODSN, ECC Acquisition Corp. and Essential (the "Merger
Agreement").
WHEREAS, the provisions of the Merger Agreement require ODSN to assume
all obligations of Essential under all outstanding options under the Plan at the
consummation of the Merger and to issue to the holder of each outstanding option
an agreement evidencing the assumption of such option.
WHEREAS, Essential has issued a letter on May 1, 1998 to Optionee
describing Optionee's right to elect between two alternative treatments of the
assumed options with respect to the consideration to be received upon exercise
of the assumed options following the Merger.
WHEREAS, Optionee has elected to receive only ODSN common stock ("ODSN
Stock") upon exercise of the assumed options.
WHEREAS, pursuant to the provisions of the Merger Agreement, the
exchange ratio (the "Exchange Ratio") in effect for the options that are to be
exercisable only for ODSN stock is 0.39967576 of a share of ODSN Stock for each
share of Essential common stock ("Essential Stock") subject to that option.
WHEREAS, this Agreement is effective as of the consummation of the
Merger (the "Effective Time") in order to reflect certain adjustments to
Optionee's outstanding options under the Plan which have become necessary by
reason of the assumption of those options by ODSN in connection with the Merger.
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NOW, THEREFORE, it is hereby agreed as follows:
1. The number of shares of Essential Stock subject to the options
held by Optionee under the Plan immediately prior to the Effective Time (the
"Essential Options") and the exercise price payable per share are set forth in
EXHIBIT A hereto. ODSN hereby assumes, as of the Effective Time, all the duties
and obligations of Essential under each of the Essential Options. In connection
with such assumption, the number of shares of ODSN Stock purchasable under each
Essential Option hereby assumed and the exercise price payable thereunder have
been adjusted to reflect the Exchange Ratio. Accordingly, the number of shares
of ODSN Stock subject to each Essential Option hereby assumed and the adjusted
exercise price payable per share of ODSN Stock under the assumed Essential
Option shall be as indicated for that option in attached EXHIBIT A.
2. The following provisions shall govern each Essential Option
hereby assumed by ODSN:
(a) Unless the context otherwise requires, all references
in each Option Agreement and in the Plan (as incorporated into such
Option Agreement) (i) to the "Company" shall mean ODSN, (ii) to
"Common Stock" shall mean shares of ODSN Stock, (iii) to the "Board"
shall mean the Board of Directors of ODSN and (iv) to the "Committee"
shall mean the Compensation Committee of the ODSN Board of Directors.
(b) The date of grant and the Expiration Date of each
assumed Essential Option and all other provisions which govern either
the exercisability or the termination of the assumed Essential Option
shall remain the same as set forth in the Option Agreement applicable
to that option and shall accordingly govern and control Optionee's
rights under this Agreement to purchase ODSN Stock.
(c) The shares subject to each assumed Essential Option
shall continue to vest in accordance with the same installment vesting
schedule in effect under the applicable Option Agreement immediately
prior to the Effective Time, with the number of shares of ODSN Stock
subject to each such installment adjusted to reflect the Exchange
Rate. Accordingly, no acceleration of vesting under the Essential
Options shall be deemed to occur by reason of the Merger, and the
vesting dates under each applicable Option Agreement shall remain the
same following the Merger.
(d) Each assumed Essential Option (whether or not such
option was an incentive stock option pursuant to Section 422 of the
Internal Revenue Code prior to the Merger) shall be a non-qualified
option, not subject to Section 422 of the Internal Revenue Code.
Accordingly, upon exercise of an assumed Essential Option, Optionee
shall recognize ordinary income in an amount equal to the excess of
(i) the fair market value of the acquired ODSN Stock on the option
exercise date over (ii) the price paid for those shares; such income
shall be subject to all applicable income and employment taxes.
(e) For purposes of applying any and all provisions of the
Option Agreement relating to Optionee's status as an employee of
Essential, Optionee shall be deemed to continue in such status as an
employee for so long as Optionee renders services as an employee to
ODSN or any present or future ODSN subsidiary, including Essential.
Accordingly, the provisions of the Option Agreement governing the
termination of the assumed Essential Options upon Optionee's cessation
of service as an employee of Essential shall hereafter be applied on
the basis of Optionee's cessation of employee status with ODSN and its
subsidiaries, and each assumed Essential Option shall accordingly
terminate, within the designated time period in effect under the
Option Agreement for that option, following such cessation of service
as an employee of ODSN and its subsidiaries.
(f) The adjusted exercise price payable for the ODSN Stock
subject to each
21.
<PAGE>
assumed Essential Option shall be payable in any of the forms
authorized under the Option Agreement applicable to that option.
For purposes of determining the holding period of any shares of ODSN
Stock delivered in payment of such adjusted exercise price, the
period for which such shares were held as Essential Stock prior to
the Merger shall be taken into account.
(g) In order to exercise each assumed Essential Option,
Optionee must deliver to ODSN a written notice of exercise in which
the number of shares of ODSN Stock to be purchased thereunder must be
indicated. The exercise notice must be accompanied by payment of the
adjusted exercise price payable for the purchased shares of ODSN Stock
and should be delivered to ODSN at the following address:
ODS Networks, Inc.
1101 E. Arapaho Road
Richardson, Texas 75081
Attention: Tim Kinnear
3. Except to the extent specifically modified by this Stock Option
Assumption Agreement, all of the terms and conditions of each Option Agreement
as in effect immediately prior to the Merger shall continue in full force and
effect and shall not in any way be amended, revised or otherwise affected by
this Stock Option Assumption Agreement.
22.
<PAGE>
IN WITNESS WHEREOF, ODS Networks, Inc. has caused this Stock Option
Assumption Agreement to be executed on its behalf by its duly-authorized officer
as of the 7th day of May, 1998.
ODS NETWORKS, INC.
By:
-----------------------------------
ACKNOWLEDGMENT
The undersigned acknowledges receipt of the foregoing Stock Option
Assumption Agreement and understands that all rights and liabilities with
respect to each of his or her Essential Options hereby assumed by ODSN are as
set forth in the Option Agreement, the Plan and such Stock Option Assumption
Agreement.
--------------------------------------
(1), OPTIONEE
DATED: , 1998
------------------
23.
<PAGE>
EXHIBIT A
Optionee's Outstanding Options to Purchase Shares
of Essential Communication Corporation
Common Stock (Pre-Merger)
and
Optionee's Outstanding Options to Purchase Shares
of ODS Networks, Inc.
Common Stock (Post-Merger)
<PAGE>
EXHIBIT 5.1
OPINION AND CONSENT OF BROBECK, PHLEGER & HARRISON LLP
May 28, 1998
ODS Networks, Inc.
1101 East Arapaho Road
Richardson, Texas 75081
Re: ODS Networks, Inc. Registration Statement for
Offering of 103,063 Shares of Common Stock
------------------------------------------
Ladies and Gentlemen:
We refer to your registration on Form S-8 (the "Registration Statement")
under the Securities Act of 1933, as amended, of 103,063 shares of the common
stock ("Common Stock") of ODS Networks, Inc. (the "Company") issuable under
the Essential Communication Corporation 1996 Stock Option Plan (the "Plan")
as assumed by the Company. We advise you that, in our opinion, when such
shares have been issued and sold pursuant to the applicable provisions of the
Plan and in accordance with the Registration Statement, such shares will be
validly issued, fully paid and nonassessable shares of Common Stock.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement.
Very truly yours,
/s/ Brobeck, Phleger & Harrison LLP
BROBECK, PHLEGER & HARRISON LLP
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS - ERNST & YOUNG LLP
We consent to the incorporation by reference in the Registration Statement on
Form S-8 pertaining to the registration of 103,603 shares of the common stock
of ODS Networks, Inc. issuable under the Essential Communication Corporation
1996 Stock Option Plan as assumed by ODS Networks, Inc. pursuant to the
acquisition of Essential Communication Corporation, of our report dated
January 21, 1998, with respect to the consolidated financial statements and
schedules of ODS Networks, Inc. and subsidiaries included or incorporated by
reference in its Annual Report (Form 10-K) for the year ended December 31,
1997, filed with the Securities and Exchange Commission.
/s/ ERNST & YOUNG LLP
Dallas, Texas
May 28, 1998
