As filed with the Securities and Exchange Commission on January 23, 1998
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------
FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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COMPUTONE CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 23-2472952
- ------------------------------- -----------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1060 Windward Ridge Parkway
Suite 100
Alpharetta, Georgia 30005-3992
- ---------------------------------------- ----------
(Address of Principal Executive Offices) (Zip Code)
--------------------
COMPUTONE CORPORATION
1997 EQUITY INCENTIVE PLAN
(Full title of plan)
--------------------
Thomas J. Anderson, President and Chief Executive Officer
Computone Corporation
1060 Windward Ridge Parkway
Suite 100
Alpharetta, Georgia 30005-3992
(Name and address of agent for service)
(770) 625-0000
(Telephone number, including area code,
of agent for service)
--------------------
Copy to:
Frederick W. Dreher, Esquire
Duane, Morris & Heckscher LLP
4200 One Liberty Place
Philadelphia, Pennsylvania 19103-7396
CALCULATION OF REGISTRATION FEE
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Proposed Proposed
Title of securities Amount to be maximum offering maximum aggregate Amount of
to be registered registered(1) price per share(2) offering price(2) registration fee
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<S> <C> <C> <C> <C>
Common Stock, 250,000 shares $3.56 $890,000.00 $262.55
par value $.01
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</TABLE>
(1) In addition, pursuant to Rule 416(c) under the Securities Act of 1933,
this registration statement also covers an indeterminate amount of
interests to be offered or sold pursuant to the 1997 Equity Incentive
Plan.
(2) Pursuant to paragraph (h) of Rule 457, the proposed maximum offering price
per share and the proposed maximum aggregate offering price have been
computed on the basis of the average of the high and low prices of the
Common Stock of Computone Corporation on the Nasdaq Small-Cap Market on
January 20, 1998.
<PAGE>
PART II
INFORMATION REQUIRED IN REGISTRATION STATEMENT
Item 3. Incorporation of Documents by Reference.
The following material is incorporated herein by reference:
(a) The Annual Report on Form 10-KSB of Computone Corporation (the
"Company") for the fiscal year ended April 4, 1997 as filed by the Company with
the Securities and Exchange Commission (the "Commission") on July 2, 1997;
(b) The Company's Form 10-QSB Report for the quarter ended July 4, 1997
as filed by the Company with the Commission on July 22, 1997;
(c) The Company's Form 10-QSB Report for the quarter ended October 3,
1997 as filed by the Company with the Commission on November 10, 1997; and
(d) The description of the Company's Common Stock set forth in
Registration Statement No. 33-46463 on Form S-1 filed with the Commission under
the Securities Act of 1933, as amended (the "Act"), on March 18, 1992, as
amended on July 28, 1994 and as declared effective on August 15, 1994, under the
caption "Description of Capital Stock."
All reports or other documents filed pursuant to Sections 13, 14 and
15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")
subsequent to the date of this Registration Statement, in each case filed by the
Company prior to the termination of the offering of the securities offered
hereby, 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 reports and
documents. Any statement contained in a document incorporated or deemed to be
incorporated herein by reference shall be deemed to be modified or superseded
for the purposes of this Registration Statement to the extent that a statement
contained herein or in any other subsequently filed document, which also is or
is deemed to be incorporated herein by reference, modifies or supersedes such
statement. Any 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.
No answer to this item is required because the class of securities to
be offered is registered under Section 12 of the Exchange Act.
Item 5. Interests of Named Experts and Counsel.
The financial statements of the Company have been audited and reported
on by BDO Seidman LLP, independent certified public accountants, for the two
fiscal years ended April 4, 1997, and
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April 5, 1996, as indicated in its report with respect thereto, and are
incorporated by reference in reliance upon the authority of said firm as experts
in accounting and auditing.
The validity of the issuance of the shares of Common Stock registered
hereby will be passed upon for the Company by Duane, Morris & Heckscher LLP,
Philadelphia, Pennsylvania. As of December 31, 1997, the law firm of Duane,
Morris & Heckscher LLP owned 55,000 shares of the Company's Common Stock and
partners of such firm owned an aggregate of 843 shares of the Company's Common
Stock.
Item 6. Indemnification of Directors and Officers.
Section 145 of the General Corporation Law of the State of Delaware
empowers a Delaware corporation to indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the corporation) by reason of the
fact that the person is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by the person in connection with such action, suit or proceeding if the
person acted in good faith and in a manner the person reasonably believed to be
in or not opposed to the best interests of the corporation, and, with respect to
any criminal action or proceeding, had no reasonable cause to believe the
person's conduct was unlawful. The termination of any action, suit or proceeding
by judgment, order, settlement, conviction, or upon plea of nolo contendere or
its equivalent, does not, of itself, create a presumption that the person did
not act in good faith and in a manner which the person reasonably believed to be
in or not opposed to the best interests of the corporation, and, with respect to
any criminal action or proceeding, had reasonable cause to believe that the
person's conduct was unlawful.
In the case of an action or suit by or in the right of the corporation
to procure a judgment in its favor, Section 145 empowers a corporation to
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action or suit by reason of the fact
that the person is or was acting in any of the capacities set forth above
against expenses (including attorneys' fees) actually and reasonably incurred by
the person in connection with the defense or settlement of such action or suit
if the person acted in good faith and in a manner the person reasonably believed
to be in or not opposed to the best interests of the corporation, except that
indemnification is not permitted in respect of any claim, issue or matter as to
which such person is adjudged to be liable to the corporation unless and only to
the extent that the Court of Chancery or the court in which such action or suit
was brought determines upon application that, despite the adjudication of
liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses which the Court of
Chancery or such other court deems proper.
Section 145 further provides that a Delaware corporation is required to
indemnify a director, officer, employee or agent against expenses (including
attorneys' fees) actually and
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reasonably incurred by such person in connection with any action, suit or
proceeding or in defense of any claim, issue or matter therein as to which such
person has been successful on the merits or otherwise; that indemnification
provided for by Section 145 shall not be deemed exclusive of any other rights to
which the indemnified party may be entitled; that indemnification provided for
by Section 145 shall, unless otherwise provided when authorized or ratified,
continue as to a person who has ceased to be a director, officer, employee or
agent and shall inure to the benefit of such person's heirs, executors and
administrators and empowers the corporation to purchase and maintain insurance
on behalf of a director or officer against any liability asserted against him or
her and incurred by him or her in any such capacity or arising out of his or her
status as such whether or not the corporation would have the power to indemnify
him or her against such liability under Section 145. A Delaware corporation may
provide indemnification only as authorized in the specific case upon a
determination that indemnification of the director, officer, employee or agent
is proper in the circumstances because he or she has met the applicable standard
of conduct. Such determination is to be made (i) by the board of directors by a
majority vote of a quorum consisting of directors who were not party to such
action, suit or proceeding, even though less than a quorum, (ii) if there are no
such directors or if such directors so direct, by independent legal counsel in a
written opinion or (iii) by the stockholders.
Article VI of the Company's By-laws provides for indemnification of
directors and officers of the Company to the fullest extent permitted by the
General Corporation Law of the State of Delaware, as presently or hereafter in
effect.
Additionally, as permitted by the General Corporation Law of the State
of Delaware, Article VI of the Company's Certificate of Incorporation provides
that no director of the Company shall incur personal liability to the Company or
its stockholders for monetary damages for breach of his or her fiduciary duty as
a director; provided, however, that this provision does not eliminate or limit
the liability of a director for (i) any breach of the director's duty of loyalty
to the Company or its stockholders; (ii) acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law; (iii) the
unlawful payment of dividends or unlawful purchase or redemption of stock under
Section 174 of the General Corporation Law of the State of Delaware or (iv) any
transaction from which the director derived an improper personal benefit.
Item 7. Exemption from Registration Claimed.
No answer to this item is required because no restricted securities are
to be reoffered or resold pursuant to this Registration Statement.
Item 8. Exhibits.
(4) Computone Corporation 1997 Equity Incentive Plan.
(5) Opinion of Duane, Morris & Heckscher LLP.
(23)(A) Consent of Duane, Morris & Heckscher LLP (included in their
opinion filed as Exhibit 5).
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(23)(B) Consent of BDO Seidman LLP.
(24) Power of Attorney (see page II-5 of this Registration Statement).
(99) Computone Corporation 1997 Equity Incentive Plan Memorandum to
Participants.
Item 9. Undertakings.
The registrant hereby undertakes:
(a) 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;
(e) that for purposes of determining any liability under 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 offer thereof; and
(f) to remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
The undersigned registrant hereby further undertakes that, insofar as
indemnification for liabilities arising under the Act may be permitted to
directors, officers and controlling persons of the registrant, the registrant
has been advised that in the opinion of the Commission such indemnification is
against public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities, other
than the payment by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful defense of any
action, suit or proceeding, is asserted by such director, officer or controlling
person in connection with the securities being registered, the registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-8 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in Alpharetta, Georgia on January 8, 1998.
COMPUTONE CORPORATION
By: /s/ Thomas J. Anderson
-------------------------------------
Thomas J. Anderson, President and
Chief Executive Officer
Know all men by these presents, that each person whose signature
appears below constitutes and appoints Thomas J. Anderson and Gregory A. Alba,
and each or either of them, as such person's true and lawful attorney-in-fact
and agent, with full power of substitution, for such person, and in such
person's name, place and stead, in any and all capacities to sign any or all
amendments or post-effective amendments to this Registration Statement, and to
file the same, with all exhibits thereto and other documents in connection
therewith, with the Commission, granting unto said attorneys-in-fact and agents
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as such person might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or any of
them or their substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed below by the following persons in
the capacities and on the date indicated.
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Signature Title Date
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<S> <C> <C>
/s/ Richard A. Hansen Chairman of the Board January 8, 1998
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Richard A. Hansen
/s/ Thomas J. Anderson President, Chief Executive Officer January 8, 1998
- ---------------------------- and Director (principal executive officer)
Thomas J. Anderson
/s/ Gregory A. Alba Vice President, Finance and Administration, January 8, 1998
- ---------------------------- and Chief Financial Officer (principal
Gregory A. Alba financial and accounting officer)
- ---------------------------- Director January _, 1998
John D. Freitag
</TABLE>
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EXHIBIT INDEX
(Pursuant to Item 601 of Regulation S-K)
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Exhibit No. Exhibit Reference
<S> <C> <C>
(4) Computone Corporation 1997 Equity Incentive Plan. Filed herewith
(5) Opinion of Duane, Morris & Heckscher LLP. Filed herewith
(23)(A) Consent of Duane, Morris & Heckscher LLP (included in their
opinion filed as Exhibit 5).
(23)(B) Consent of BDO Seidman LLP. Filed herewith
(24) Power of Attorney (see page II-5 of this Registration Statement).
(99) Computone Corporation 1997 Equity Incentive Plan
Memorandum to Participants. Filed herewith
</TABLE>
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EXHIBIT (4)
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COMPUTONE CORPORATION
1997 EQUITY INCENTIVE PLAN
Computone Corporation, a Delaware corporation (the "Company"), hereby
sets forth the Computone Corporation 1997 Equity Incentive Plan (the "Plan").
The Plan provides for the grant of non-qualified stock options ("Options") to
officers, directors, employees and consultants of the Company.
1. Purpose. The purpose of the Plan is to further the growth,
development and financial success of the Company by providing additional
incentives to officers, directors, employees and consultants of the Company,
which will enable them to participate directly in the growth of the value of the
capital stock of the Company. The Company intends that the Plan will facilitate
securing, retaining and motivating officers, directors, employees and
consultants of high caliber and potential. To accomplish these purposes, the
Plan provides a means whereby officers, directors, employees and consultants of
the Company may receive Options to purchase shares of the Company's Common
Stock, par value $.01 per share (the "Common Stock").
2. Administration.
(a) Administration by the Board. The Plan shall be administered by the
Board of Directors of the Company (the "Board"), which, in its discretion, may
appoint a committee (the "Committee") consisting solely of two or more
non-employee directors of the Company, as that term is defined in Rule
16b-3(b)(3)(i) of the Securities Exchange Act of 1934 (the "1934 Act"), to
administer the Plan in lieu of the Board, subject to the ultimate authority of
the Board to administer the Plan. If the Board appoints a Committee, the Board,
from time to time, may increase the size of the Committee and appoint additional
members thereof, remove members with or without cause and appoint new members in
substitution therefor, fill vacancies, however caused, or remove all members of
the Committee and thereafter directly administer the Plan.
(b) Authority of the Board. The Board or the Committee, if such is
appointed, shall have full and final authority, in its sole discretion, to
interpret the provisions of the Plan and to decide all questions of fact arising
in its application and to make all other determinations necessary or advisable
for the administration of the Plan. As used herein the "Board" shall be deemed
to refer to the "Committee," as such is appointed, subject to the ultimate
authority of the Board as set forth in Section 2(a) hereof. All decisions,
determinations and interpretations of the Board shall be final and binding on
all holders of Options granted under the Plan and their successors in interest.
The Board shall determine the officers, directors, employees or consultants to
whom Options are to be granted; the type, amount, size and terms of each such
grant; and the time(s) when Options are to be exercisable. Members of the Board
shall not receive any compensation for their services in administering the Plan,
but all expenses and liabilities they incur in connection with the
administration of the Plan shall be borne by the Company. No member of the Board
or of the Committee shall be personally liable for any action, determination or
interpretation made in good faith with respect to the Plan, and
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all members of the Board and of the Committee shall be fully protected and
indemnified by the Company in respect to any such action, determination or
interpretation.
3. Grant of Options.
(a) Limitations. The number of shares of Common Stock available under
the Plan for issuance pursuant to Options is 250,000 shares of Common Stock in
the aggregate. Such shares may be authorized and unissued shares or shares
issued and subsequently reacquired by the Company. Except as otherwise provided
herein, any shares subject to an Option that for any reason expires or is
terminated unexercised as to such shares shall again be available under the
Plan.
(b) Eligibility To Receive Options. Officers, directors, employees and
consultants of the Company shall be eligible to receive Options under the Plan
as determined by the Board or the Committee, if such is appointed, in its sole
discretion.
(c) Type of Options. Grants may be made at any time and from time to
time by the Board or the Committee, if such is appointed, in the form of Options
to purchase shares of Common Stock. Options granted hereunder are not intended
to qualify as incentive stock options within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code") or any amendment or
substitute thereto.
(d) Option Agreements. Options for the purchase of Common Stock shall
be evidenced by written agreements in such form not inconsistent with the Plan
as the Board or the Committee, if such is appointed, shall approve from time to
time. The Options granted hereunder may be evidenced by a single agreement or by
multiple agreements, as determined by the Board or the Committee, if such is
appointed, in its sole discretion. Each option agreement shall contain in
substance the following terms and conditions:
(i) Exercise Price. Each option agreement shall set forth the
exercise price of the Common Stock purchasable upon the exercise of the Option
evidenced thereby. The exercise price of the Common Stock subject to an Option
shall be not less than 100% of the fair market value of such stock on the date
the Option is granted, as determined by the Board or the Committee, if such is
appointed, but in no event less than the par value of such stock. For this
purpose, fair market value on any date shall mean the closing price of the
Common Stock as reported in The Wall Street Journal or, if not so reported, as
otherwise reported by the National Association of Securities Dealers Automated
Quotation System ("Nasdaq"), or if the price of the Common Stock is not reported
by Nasdaq, the fair market value shall be as determined by the Board or the
Committee, if such is appointed.
(ii) Exercise Term. Each Option shall state the period or
periods of time within which the Option may be exercised, in whole or in part,
as determined by the Board, provided that no Option shall be exercisable after
ten years from the date of grant thereof. The Board shall have the power to
permit an acceleration of exercise terms upon such circumstances and subject to
such terms and conditions as the Board deems appropriate in its sole discretion.
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(iii) Substitution of Options. Options may be granted under the
Plan from time to time in substitution for stock options held by officers,
directors, employees or consultants of other corporations who are about to
become, and who do concurrently with the grant of such options become, officers,
directors, employees or consultants of the Company as a result of a merger or
consolidation of such corporation with the Company, or the acquisition by the
Company of the assets of such corporation or the acquisition by the Company of
stock of such corporation. The terms and conditions of the substitute Options so
granted may vary from the terms and conditions set forth in this Section 3 to
such extent as the Board or the Committee, if such is appointed, at the time of
grant may deem appropriate to conform, in whole or in part, to the provisions of
the stock options in substitution for which Options are granted.
4. Date of Grant. The date on which an Option shall be deemed to have
been granted under the Plan shall be the date of the Board's authorization of
the Option or such later date as may be determined by the Board at the time the
Option is authorized. Notice of the determination shall be given to each
individual to whom an Option is so granted within a reasonable time after the
date of such grant.
5. Manner of Exercise. Options may be exercised in whole or in part,
from time to time, by giving written notice of exercise to the President of the
Company, specifying the number of shares to be purchased. The purchase price of
the shares with respect to which an Option is exercised shall be payable in full
with the notice of exercise in cash, Common Stock of the Company at fair market
value or a combination thereof, as the Board may determine from time to time and
subject to such terms and conditions as may be prescribed by the Board for such
purpose. The Board may also, in its discretion and subject to prior notification
to the Company by an optionee, permit an optionee to enter into an agreement
with the Company's transfer agent or a brokerage firm of national standing
whereby the optionee will simultaneously exercise the Option and sell the shares
acquired thereby through the Company's transfer agent or such a brokerage firm
and either the Company's transfer agent or the brokerage firm executing the sale
will remit to the Company from the proceeds of sale the exercise price of the
shares as to which the Option has been exercised. The Company shall not be
required to issue fractional shares on exercise of an Option.
6. Rights upon Termination of Service. In the event an optionee ceases
to be an officer, director, employee or consultant of the Company for any reason
other than death, total disability (within the meaning of Section 22(e)(3) of
the Code) or retirement, the optionee shall have the right to exercise the
Option during its term within a period of three months after such termination to
the extent that the Option was exercisable at the time of termination, or within
such other period, and subject to such other or different terms and conditions,
as may be specified by the Board in a written agreement evidencing an Option. In
the event that an optionee dies, retires or becomes totally disabled prior to
the expiration of his or her Option and without having fully exercised such
Option, the optionee or the optionee's successor in interest shall have the
right to exercise the Option during its term within a period of one year after
such termination due to death, retirement or total disability to the extent that
the Option was exercisable at the time of such termination or within such other
period, and subject to such other or different terms and conditions, as may be
specified by the Board in a written agreement evidencing an Option. As used
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in this Section 6, "retirement" means a termination of employment by reason of
an optionee's retirement at or after the optionee's earliest permissible
retirement date pursuant to and in accordance with the Company's regular
retirement plan or personnel practices.
7. General Restrictions. Each Option granted under the Plan shall be
subject to the requirement that if at any time the Board shall determine that
(i) the listing, registration or qualification of the shares of Common Stock
subject or related thereto upon any securities exchange or under any state or
federal law, or (ii) the consent or approval of any government regulatory body,
or (iii) the satisfaction of any tax withholding obligation or (iv) an agreement
by the recipient of an Option with respect to the disposition of shares of
Common Stock is necessary or desirable as a condition of or in connection with
the granting of such Option or the issuance or purchase of shares of Common
Stock thereunder, such Option shall not be consummated in whole or in part
unless such listing, registration, qualification, consent, approval or agreement
shall have been effected or obtained free of any conditions not acceptable to
the Board.
8. Rights of a Stockholder. The recipient of any Option under the Plan,
unless otherwise provided by the Plan, shall have no rights as a stockholder
unless and until certificates for shares of Common Stock are issued and
delivered to such recipient.
9. Right to Terminate Employment. Nothing contained in the Plan or in
any option agreement entered into pursuant to the Plan shall confer upon any
optionee the right to continue in the employment or service of the Company or
affect any right that the Company may have to terminate the service or
employment of such optionee.
10. Withholding. Whenever the Company proposes or is required to issue
or transfer shares of Common Stock under the Plan, the Company shall have the
right to require the recipient to remit to the Company an amount sufficient to
satisfy any federal, state or local withholding tax requirements prior to the
delivery of any certificate or certificates for such shares. If and to the
extent authorized by the Board, in its sole discretion, an optionee may make an
election, by means of a form of election to be prescribed by the Board, to have
shares of Common Stock that are acquired upon exercise of an Option withheld by
the Company or to tender other shares of Common Stock of the Company owned by
the optionee to the Company at the time of exercise of an Option to pay the
amount of tax that would otherwise be required by law to be withheld by the
Company as a result of any exercise of an Option. Any such election shall be
irrevocable and shall be subject to termination by the Company, in its sole
discretion, at any time. Any securities so withheld or tendered will be valued
by the Board at the fair market value thereof as of the date of exercise.
11. Assignability. Options under the Plan shall be assignable and
transferable by the recipient thereof to the extent that the agreement
evidencing such Option expressly so indicates. The Company shall not be required
to recognize any such transfer or assignment until written notice thereof,
signed by the holder of the Option, is delivered to the secretary of the
Company. Unless otherwise transferred or assigned, the Option shall be
exercisable only by the recipient or by the recipient's guardian or legal
representative during the life of the recipient.
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<PAGE>
12. Non-Uniform Determinations. Determinations by the Board and the
Committee, if such is appointed, under the Plan (including, without limitation,
recommendations and determinations of the persons to receive Options, the form,
amount and timing of such grants, the terms and provisions of Options, and the
agreements evidencing same) need not be uniform and may be made selectively
among persons who receive, or are eligible to receive, grants of Options under
the Plan whether or not such persons are similarly situated.
13. Adjustments.
(a) Changes in Capitalization. Subject to any required action by
the stockholders of the Company, the number of shares of Common Stock covered by
each outstanding Option and the number of shares of Common Stock that have been
authorized for issuance under the Plan but as to which no Options have yet been
granted or which have been returned to the Plan upon cancellation or expiration
of an Option, as well as the price per share of Common Stock covered by each
such outstanding Option, shall be proportionately adjusted for any increase or
decrease in the number of issued shares of Common Stock resulting from a stock
split, reverse stock split, stock dividend, combination or reclassification of
the Common Stock or any other increase or decrease in the number of issued
shares of Common Stock effected without receipt of consideration by the
Company; provided, however, that conversion of any securities convertible into
or exchangeable for Common Stock of the Company shall not be deemed to have been
"effected without receipt of consideration." Such adjustment shall be made by
the Board or the Committee, if such is appointed, whose determination in that
respect shall be final, binding and conclusive. Except as expressly provided
herein or in an agreement evidencing an Option, no issuance by the Company of
shares of stock of any class, or securities convertible into shares of stock of
any class, shall affect, and no adjustment by reason thereof shall be made with
respect to, the number of shares of Common Stock subject to an Option or the
exercise price thereof.
(b) Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, all outstanding Options will
terminate immediately prior to the consummation of such proposed action, unless
otherwise provided by the Board. The Board may, in the exercise of its
discretion in such instances, declare that any Option shall terminate as of a
date fixed by the Board and give each Option holder the right to exercise his or
her Option as to all or any part of the shares of Common Stock covered by the
Option, including shares as to which the Option would not otherwise then be
exercisable.
(c) Sale or Merger. In the event of a proposed sale of all or
substantially all of the assets of the Company, or the merger of the Company
with or into another corporation, the Board, in the exercise of its sole
discretion, may take such action as it deems desirable, including, but not
limited to: (i) causing an Option to be assumed or an equivalent option to be
substituted by the successor corporation or a parent or subsidiary of such
successor corporation, (ii) providing that each Option holder shall have the
right to exercise his or her Option as to all of the shares of Common Stock
covered by the Option, including shares as to which the Option would not
otherwise then be exercisable or (iii) declaring that an Option shall terminate
at a date fixed by the Board, provided that the Option holder is given notice
thereof and opportunity to exercise the then exercisable portion of his or her
Option prior to such date.
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14. Rights Upon Change in Control. In the event of a Change of Control
of the Company, the Board may, in its absolute discretion and upon such terms
and conditions as it deems appropriate, provide, by resolution adopted prior to
such Change in Control, that at some time prior to the effective date of such
Change in Control, that all Options granted pursuant to the Plan shall become
immediately exercisable as to all of the shares covered thereby, notwithstanding
any other provision contained herein or in the option agreements. As used
herein, "Change of Control" shall mean (a) the acquisition of shares of the
Company by any "person" or "group" (as such terms are used in Rule 13d-3 under
the 1934 Act as now or hereafter amended) in a transaction or series of
transactions, that result in such person or group directly or indirectly first
owning beneficially more than 35% of the Company's Common Stock, (b) the
consummation of a merger or other business combination after which the holders
of voting capital stock of the Company do not collectively own 50% or more of
the voting capital stock of the entity surviving such merger or other business
combination or the sale, lease, exchange or other transfer in a transaction or
series of transactions of all or substantially all of the assets of the Company
or (c) as the result of or in connection with any cash tender offer or exchange
offer, merger or other business combination, sale of assets or contested
election of directors or any combination of the foregoing transactions (a
"Transaction"), the persons who constituted a majority of the members of the
Boards of Directors of the Company on July 30, 1997 and persons whose election
as members of the Boards of Directors of the Company was approved by such
members then still in office or whose election was previously so approved after
July 30, 1997, but before the event that constitutes a Change of Control, no
longer constitute such a majority of the members of the Boards of Directors of
the Company then in office. A Transaction constituting a Change in Control shall
only be deemed to have occurred upon the closing of the Transaction.
15. Amendment, Suspension or Termination of the Plan. The Plan may be
wholly or partially amended or otherwise modified, suspended or terminated at
any time or from time to time by the Board, subject to any required stockholder
approval or any stockholder approval that the Board may deem advisable for any
reason, such as for the purpose of obtaining or retaining any statutory or
regulatory benefits under tax, securities or other laws or satisfying any
applicable stock exchange or automated quotation system listing requirements.
The Board may not, without the consent of the holder of an Option, alter or
impair any Option previously granted under the Plan, except as specifically
authorized herein.
16. Reservation of Shares. The Company, during the term of the Plan,
will at all times reserve and keep available such number of shares of Common
Stock as shall be sufficient to satisfy the requirements of the Plan. The
inability of the Company to obtain authority from any regulatory body having
jurisdiction, which authority is deemed by the Company's counsel to be necessary
to the lawful issuance and sale of any shares hereunder, shall relieve the
Company of any liability for the failure to issue or sell such shares as to
which such requisite authority shall not have been obtained.
17. Effect on Other Plans. Participation in the Plan shall not affect
an optionee's eligibility to participate in any other benefit or incentive plan
of the Company. Any Options
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<PAGE>
granted pursuant to the Plan shall not be used in determining the benefits
provided under any other plan of the Company unless specifically provided.
18. Duration of the Plan. The Plan shall remain in effect until all
Options granted under the Plan have been satisfied by the issuance of shares or
expired, but no Option shall be granted after July 29, 2007.
19. Forfeiture for Dishonesty. Notwithstanding anything to the contrary
in the Plan, if the Board or the Committee, if such is appointed, finds, by a
majority vote, after full consideration of the facts presented on behalf of both
the Company and any optionee, that an optionee has been engaged in fraud,
embezzlement, theft, commission of a felony or dishonest conduct in the course
of such optionee's employment, service or retention by the Company or any
subsidiary of the Company that damaged the Company or that the optionee has
disclosed confidential information of the Company or any subsidiary of the
Company, such optionee shall forfeit all unexercised Options and all exercised
Options under which the Company has not yet delivered the certificates, provided
that the Company shall return to the optionee any exercise price theretofore
paid by the optionee to the Company. The decision of the Board or the Committee,
if such is appointed, in interpreting and applying the provisions of this
Section 19 shall be final. No decision of the Board, however, shall affect the
finality of the discharge or termination of such optionee by the Company or any
subsidiary of the Company in any manner.
20. No Prohibition on Corporate Action. No provision of the Plan shall
be construed to prevent the Company, or any officer or director of the Company,
from taking any action deemed by the Company, or such officer or director, to be
appropriate or in the best interest of the Company, whether or not such action
could have an adverse effect on the Plan or any Options granted hereunder, and
no optionee or optionee's successor in interest shall have any claim against the
Company or any officer or director of the Company or member of the Committee, as
a result of the taking of such action.
21. Indemnification. With respect to the administration of the Plan,
the Company shall indemnify each present and future member of the Board and the
Committee against, and each member of the Board and the Committee shall be
entitled, without further action on such member's part, to indemnity from the
Company for all expenses, including the amount of judgments and the amount of
approved settlements made with a view to the curtailment of costs of litigation,
other than amounts paid to the Company itself, reasonably incurred by the member
in connection with or arising out of any action, suit or proceeding in which the
member may be involved by reason of his or her being or having been a member of
the Board or of the Committee, whether or not he or she continues to be such
member at the time of incurring such expenses; provided, however, that such
indemnity shall not include any expenses incurred by any such member of the
Board or of the Committee (a) in respect of matters as to which he or she shall
be finally adjudged in any such action, suit or proceeding to have been guilty
of gross negligence or willful misconduct in the performance of his or her duty
as such member of the Board or such Committee or (b) in respect of any matter in
which any settlement is effected for an amount in excess of the amount approved
by the Company on the advice of its legal counsel; and provided further that no
right of indemnification under the provisions set forth herein shall be
available to or enforceable by any such member of the Board or of the Committee
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<PAGE>
unless, within 60 days after institution of any such action, suit or proceeding,
he or she shall have offered the Company in writing the opportunity to defend
such action, suit or proceeding at its own expense. The foregoing right of
indemnification shall inure to the benefit of the heirs, executors or
administrators of each such member of the Board and of the Committee and shall
be in addition to all other rights to which such member may be entitled as a
matter of law, contract or otherwise.
22. Miscellaneous Provisions.
(a) Compliance with Plan Provisions. No optionee or other person shall
have any right with respect to the Plan, the Common Stock reserved for issuance
under the Plan or in any Option until a written option agreement shall have been
executed on behalf of the Company and by the optionee and all the terms,
conditions and provisions of the Plan and the Option applicable to such
optionee, and each person claiming under or through such optionee, have been
met.
(b) Approval of Counsel. In the discretion of the Board, no shares of
Common Stock, other securities or property of the Company or other forms of
payment shall be issued hereunder with respect to any Option unless counsel for
the Company shall be satisfied that such issuance will be in compliance with
applicable federal, state, local and foreign legal, securities exchange and
other applicable requirements.
(c) Effects of Acceptance. By accepting any Option under the Plan, each
optionee and each person claiming under or through such optionee shall be
conclusively deemed to have indicated his or her acceptance and ratification of,
and consent to, any action taken under the Plan by the Company or its officers,
the Board or the Committee.
(d) Compliance with Rule 16b-3. To the extent that Rule 16b-3 under the
1934 Act applies to Options granted under the Plan, it is the intention of the
Company that the Plan comply in all respects with the requirements of Rule
16b-3, that any ambiguities or inconsistencies in construction of the Plan be
interpreted to give effect to such intention and that, if the Plan shall not so
comply, whether on the date of adoption or by reason of any later amendment to
or interpretation of Rule 16b-3, the provisions of the Plan shall be deemed to
have been automatically amended so as to bring the provisions of the Plan into
full compliance with such Rule.
23. Stockholder Approval. No Option may be exercised until the Plan
shall have been approved by the affirmative vote of the holders of a majority
of the shares of the Company's outstanding Common Stock present or represented
and entitled to vote at a duly convened meeting of stockholders.
24. Titles. Titles are provided herein for convenience of reference
only and are not to serve as a basis for interpretation or construction of the
Plan.
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EXHIBIT (5)
<PAGE>
[Duane, Morris & Heckscher LLP letterhead]
January 9, 1998
The Board of Directors
Computone Corporation
1060 Windward Ridge Parkway, Suite 100
Alpharetta, Georgia 30005-3992
Gentlemen:
We have acted as counsel to Computone Corporation (the "Company") in
connection with the preparation and filing with the Securities and Exchange
Commission under the Securities Act of 1933, as amended, of a registration
statement on Form S-8 (the "Registration Statement") relating to the offer and
sale by the Company of up to 250,000 shares (the "Shares") of Common Stock, $.01
par value, of the Company, pursuant to the Company's 1997 Equity Incentive Plan
(the "Plan").
As counsel to the Company, we have supervised all corporate proceedings
in connection with the preparation and filing of the Registration Statement. We
have also examined the Company's Certificate of Incorporation and By-laws, as
amended to date, the corporate minutes and other proceedings and the records
relating to the authorization, sale and issuance of the Shares, and such other
documents and matters of law as we have deemed necessary or appropriate in order
to render this opinion.
Based upon the foregoing, it is our opinion that each of the Shares,
when issued in accordance with the terms and conditions of the Plan, will be
duly authorized, legally and validly issued and outstanding and fully paid and
nonassessable.
We hereby consent to the use of this opinion in the Registration
Statement and to the reference to us under the heading "Interests of Named
Experts and Counsel" in such Registration Statement.
Sincerely,
DUANE, MORRIS & HECKSCHER LLP
By: /s/ Frederick W. Dreher
-----------------------------------
FWD:LMD A Partner
EXHIBIT (23)(B)
Accountants' Consent
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 of our report dated June 6, 1997, except for Notes
2 and 4(b) as to which the date is June 20, 1997, relating to the consolidated
financial statements and schedule of Computone Corporation appearing in the
Company's Annual Report on Form 10-KSB for the year ended April 4, 1997.
We also consent to the reference to our firm under the heading "Experts" in the
Registration Statement.
BDO Seidman, LLP
Atlanta, Georgia
January 20, 1998
EXHIBIT (99)
<PAGE>
THIS DOCUMENT CONSTITUTES PART OF A PROSPECTUS
COVERING SECURITIES THAT HAVE BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
COMPUTONE CORPORATION
1997 EQUITY INCENTIVE PLAN
MEMORANDUM TO PARTICIPANTS
This Memorandum relates to the shares of Common Stock, $.01 par value
(the "Common Stock"), of Computone Corporation (the "Company") that are being
offered to officers, directors, employees and consultants of the Company
pursuant to stock options ("Options") granted or to be granted under the
Company's 1997 Equity Incentive Plan (the "Plan"). Persons who receive Options
under the Plan are referred to herein as "Optionees."
This Memorandum may be updated from time to time in the future by
furnishing to Optionees appendices containing new information. It is suggested
that this Memorandum be retained for future reference.
The date of this Memorandum is January 9, 1998.
<PAGE>
TABLE OF CONTENTS
Introduction.............................................................. 1
Description of the Plan................................................... 1
Administration............................................................ 1
Modification or Termination of Plan or Awards............................. 2
Eligibility............................................................... 2
Termination of Options.................................................... 3
Price and Exercise of Options............................................. 3
Restrictions on Transfer ................................................. 4
Resale Restrictions....................................................... 4
Federal Income Tax Consequences........................................... 5
Incorporation of Certain Documents by Reference and Requests for
Copies of Certain Documents ............................................ 7
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<PAGE>
INTRODUCTION
This Memorandum describes the terms and conditions upon which officers,
directors, employees and consultants of the Company may participate in the Plan.
The purposes of the Plan are to further the growth, development and financial
success of the Company by providing additional incentives to officers,
directors, employees and consultants of the Company, which will enable them to
participate directly in any appreciation of the value of the Company's Common
Stock, and to facilitate securing, retaining and motivating officers, directors,
employees and consultants of high caliber and potential. The Plan was adopted by
the Board of Directors of the Company (the "Board") on July 30, 1997, and by the
stockholders of the Company on November 25, 1997.
This Memorandum contains a summary of certain provisions of the Plan,
and statements made as to the contents of the Plan are not necessarily complete.
Reference is made to the Plan for a more complete description of the terms and
provisions of the Plan, and each statement herein is qualified in its entirety
by such reference. A copy of the Plan and information about the Plan's
administrators may be obtained without charge upon written request to Gregory A.
Alba, Vice President, Finance and Administration, and Chief Financial Officer,
Computone Corporation, 1060 Windward Ridge Parkway, Suite 100, Alpharetta,
Georgia 30005. The Company's telephone number is (770) 625-0000.
DESCRIPTION OF THE PLAN
An aggregate of 250,000 shares of the Company's Common Stock are
reserved for issuance under the Plan. The Plan permits the granting of options
(the "Options") that are not intended to qualify as incentive stock options
under Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"),
to purchase Common Stock to officers, directors, employees and consultants of
the Company. The term during which Options may be granted under the Plan shall
expire at the close of business on July 29, 2007, subject to earlier termination
by the Board. The Plan is not subject to the provisions of the Employee
Retirement Income Security Act of 1974.
Each Option granted under the Plan will be evidenced by a written
agreement, which will state the number of shares that may be purchased upon
exercise, the exercise price of the shares purchasable upon exercise of the
Option, the exercise term of the Option and other terms and provisions of the
Option.
ADMINISTRATION
The Plan currently is administered by the Board, which has full and
final authority to interpret the provisions of the Plan, to decide all questions
of fact arising in its application, to determine to whom Options shall be
granted and the timing, type, amount and terms of each award and to make other
determinations necessary or advisable for the administration of the Plan.
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<PAGE>
MODIFICATION OR TERMINATION OF PLAN OR AWARDS
The Plan may be wholly or partially amended or otherwise modified,
suspended or terminated at any time or from time to time by the Board, subject
to any required stockholder approval or any stockholder approval that the Board
may deem advisable for any reason, such as for the purpose of obtaining or
retaining any statutory or regulatory benefits under tax, securities or other
laws or satisfying any applicable stock exchange or automated quotation system
listing requirements. The Board may not, without the consent of the holder of an
Option, alter or impair any Option previously granted under the Plan, except as
specifically authorized herein.
The Plan provides that the Board will make appropriate and equitable
adjustments in the number and kind of shares that may be issued on the exercise
of Options to maintain optionees' and grantees' proportionate interest in the
event of a stock split, reverse stock split, stock dividend, combination or
reclassification of the Common Stock, or any other increase or decrease in the
number of issued shares of Common Stock effected without receipt of
consideration by the Company. Such adjustment to an outstanding Option will be
made without change in the total price applicable to the Option or the
unexercised portion thereof.
In the event of a merger of the Company with or into another
corporation or a proposed sale of all or substantially all of the assets of the
Company, the Board, in its discretion, may take such action as it deems
desirable including (i) causing an Option to be assumed or an equivalent option
to be substituted by the successor corporation or a parent or subsidiary of such
successor corporation, (ii) providing that each Option holder shall have the
right to exercise his or her Option as to all of the shares of Common Stock
covered by the Option, including shares as to which the Option would not
otherwise then be exercisable or (iii) declaring that an Option shall terminate
at a date fixed by the Board, provided that the Option holder is given notice
thereof and an opportunity to exercise the then exercisable portion of his or
her Option prior to such date.
In the event of a Change of Control of the Company, as defined in the
Plan, the Board may, in its absolute discretion, provide, by resolution adopted
prior to such Change of Control, that at some time prior to the effective date
of such Change of Control, all Options granted pursuant to the Plan shall become
immediately exercisable as to all the shares covered thereby, notwithstanding
any other provision contained in the Plan or in the option agreements, and
certain Options granted under the Plan require such an acceleration.
ELIGIBILITY
The Plan provides that Options may be granted to any and all officers,
directors, employees and consultants of the Company. The Board selects the
persons to whom Options will be granted and determines the number of shares to
be subject to each Option.
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<PAGE>
TERMINATION OF OPTIONS
If an optionee's employment or service with the Company is terminated
due to death, retirement or total disability, the optionee or the optionee's
representative or successor in interest may exercise the Option during its term,
to the extent that the Option was exercisable at the time of termination, within
a period of one year after such termination due to death, retirement or total
disability.
If an optionee's employment or service terminates for any other reason
other than death, retirement or total disability, Options subject to exercise on
the date of such termination may be exercised by the optionees until the earlier
to occur of the expiration of the Options in accordance with their terms or
three months after the date of termination.
Notwithstanding anything to the contrary contained in this Memorandum
or in the Plan, if the Board finds that an optionee has engaged in fraud,
embezzlement, theft, commission of a felony or dishonest conduct in the course
of the optionee's employment by the Company, all Options granted to the optionee
under the Plan which have not been exercised, or which have been exercised but
for which certificates have not yet been delivered, will be forfeited. The
decision of the Board in this regard shall be final.
PRICE AND EXERCISE OF OPTIONS
The exercise price for Options granted under the Plan is determined by
the Board at the time the Option is granted. However, the exercise price may not
be less than 100% of the fair market value of such stock on the date the Option
is granted, and in no event less than the par value of such stock.
The Board determines on the date of grant when Options granted under
the Plan become exercisable, but in no event may an Option be exercisable after
ten years from the date of grant. An Option granted under the Plan may be
exercised only by written notice from the holder thereof to the Company's
President at the Company's principal business office, which notice must specify
the number of shares to be purchased and must be accompanied by full payment for
the shares with respect to which the Option is being exercised. The option price
is payable as set forth in the option agreement, which may include payment by
cash, check, the Company's Common Stock at fair market value or such other
consideration as determined by the Board and as permitted under the Delaware
General Corporation Law. The Board may also, in its discretion and subject to
prior notification to the Company by an optionee, permit an optionee to enter
into an agreement with the Company's transfer agent or a brokerage firm of
national standing whereby the optionee will simultaneously exercise the Option
and sell the shares acquired thereby through the Company's transfer agent or
such a brokerage firm and either the Company's transfer agent or the brokerage
firm executing the sale will remit to the Company from the proceeds of the sale
the exercise price of the shares as to which the Option has been exercised. The
Company shall issue certificates for shares purchased upon the exercise of
Options as soon as practicable following receipt by the Company of payment
therefor, subject to certain conditions specified in the Plan.
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<PAGE>
Except as may be otherwise specified in the agreement pursuant to which
an Option is granted, the Option may be exercised in cumulative installments of
one-third of the shares covered by the Option on the first, second and third
anniversaries of the date of grant. In the event of a proposed sale of all or
substantially all of the assets of the Company, a merger of the Company into
another corporation or a Change of Control of the Company, the Board may, in its
sole discretion, accelerate the time at which any Option which is not
immediately exercisable in full may be exercised.
RESTRICTIONS ON TRANSFER
No Option granted under the Plan may be transferred, assigned, pledged
or hypothecated by an Optionee in any way other than by will or by the laws of
descent and distribution. Subject to the provisions relating to death of the
Optionee or termination of the employment relationship between the Optionee and
the Company, an Option under the Plan is exercisable only by the Optionee during
the Optionee's lifetime. No person has or may create any lien on any Options
held under the Plan.
RESALE RESTRICTIONS
The Company's Common Stock is registered under the Securities Exchange
Act of 1934 (the "Exchange Act") and is quoted on the Nasdaq Small-Cap Market,
and the shares of Common Stock purchasable upon exercise of the Options have
been registered under the Securities Act of 1933 (the "Securities Act").
Optionees who are not officers or directors of the Company generally are not -
subject to any reporting requirements or restrictions on the sale of shares
of Common Stock purchased upon exercise of stock options under the federal
securities laws, other than general restrictions applicable to all purchases and
sales of securities of the Company, such as the prohibition against trading
while in possession of material non-public information. Officers and directors
of the Company are subject to various reporting requirements and trading
restrictions under the federal securities laws, which are discussed more fully
herein.
Executive officers and directors of the Company who perform significant
policy-making functions for the Company must report the receipt and exercise of
an Option and the sale of shares acquired upon exercise pursuant to Section
16(a) of the Exchange Act. Such persons will also be subject to liability under
Section 16(b) of the Exchange Act for "short swing profits" arising from the
purchase and sale, or sale and purchase, of securities of the Company that occur
during the same six-month period.
Both the grant and the exercise of stock options are considered to be
purchases of securities for purposes of Section 16(b); however, because of the
manner in which the Plan has been structured and implemented, these transactions
will be exempt from the liability provisions of Section 16(b) and will not be
matched against any sale of shares of the Company that occurs within the same
six-month period. The sale of shares acquired upon exercise of an Option,
however, constitutes a sale of securities and must always be considered from a
Section 16(b) perspective. Prior to exercising
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<PAGE>
any Options or selling any shares of the Company's Common Stock, executive
officers and directors of the Company who are subject to Section 16 of the
Exchange Act should discuss the applicable securities law considerations with
Gregory A. Alba, Vice President, Finance and Administration, and Chief Financial
Officer of the Company.
The sale of the shares acquired upon exercise, however, will not be an
exempt transaction for Section 16(b) purposes. However, an officer or director
may sell shares of stock purchased upon exercise of an Option immediately upon
exercise without incurring liability under Section 16(b), unless another
non-exempt purchase of the Company's Common Stock by the officer or director
occurs within six months before or after said sale.
Shares of Common Stock that are issued upon the exercise of Options
have been registered under the Securities Act and may be sold without
restriction by optionees who are not affiliates of the Company. Affiliates of
the Company may sell their shares publicly by means of a separate registration
statement under the Securities Act that registers the sale of such shares by the
affiliate or by complying with the requirements of Rule 144 under the Securities
Act.
The following conditions must be satisfied to sell shares under Rule
144: (i) the amount of shares that may be sold in any three-month period is
limited to the greater of (a) 1% of the total number of shares of the Company's
outstanding Common Stock or (b) the average weekly trading volume for the
Company's Common Stock on the Nasdaq Small-Cap Market during the four calendar
weeks preceding the date on which the Form 144 notice referred to below is
transmitted for filing; (ii) the sale must be effected through a broker who
complies with the manner of sale requirements under Rule 144 or directly with a
dealer that makes a market in the Company's Common Stock and (iii) a notice on
Form 144 must be transmitted for filing with the Securities and Exchange
Commission (the "Commission") and the Nasdaq Small-Cap Market concurrently with
either the placing of an order to execute a sale with a broker or the execution
of the sale directly with a dealer who makes a market in the Company's Common
Stock.
As with all purchases and sales of the Company's Common Stock,
executive officers and directors of the Company should contact Gregory A. Alba,
Vice President, Finance and Administration, and Chief Financial Officer of the
Company, prior to the date on which they plan to sell any shares.
FEDERAL INCOME TAX CONSEQUENCES
The Plan is not qualified under Section 401(a) of the Code. The
following description, which is based on existing laws, generally sets forth
certain of the federal income tax consequences of the Options under the Plan.
This description may differ from the actual tax consequences of participation in
the Plan. Optionees under the Plan should consult their own tax advisors
concerning the tax consequences, if any, of the grant and exercise of their
Options and disposition of any shares.
An optionee will not recognize income for federal income tax purposes
upon the receipt of the Option, nor will the Company be entitled to any
deduction on account of such grant. Such
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<PAGE>
optionee will recognize ordinary taxable income for federal income tax purposes
at the time of exercise of the Option in the amount by which the fair market
value of such shares then exceeds the option price times the number of shares
acquired. When the optionee disposes of the shares acquired upon exercise of the
Option, the optionee will generally recognize capital gain or loss equal to the
difference between (i) the amount received upon disposition of the shares and
(ii) the sum of the option price and any amount included in the optionee's
income when the Option was exercised. Such gain will be long-term, mid-term or
short-term upon the period the shares were held the date of exercise.
Under current law, any gain realized by the Optionee, other than
long-term capital gain, is taxable at a maximum federal income tax rate of
39.6%. Long-term gain is taxable at a maximum federal income tax rate of 20%.
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INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
AND REQUESTS FOR COPIES OF CERTAIN DOCUMENTS
The following material is incorporated herein by reference:
(a) The Annual Report on Form 10-KSB of the Company for the fiscal year
ended April 4, 1997 as filed by the Company with the Commission on July 2, 1997;
(b) The Company's Form 10-QSB Report for the quarter ended July 4, 1997
as filed by the Company with the Commission on July 22, 1997;
(c) The Company's Form 10-QSB Report for the quarter ended October 4,
1997 as filed by the Company with the Commission on November 10, 1997; and
(d) A description of the Common Stock set forth in Registration
Statement No. 33-46463 on Form S-1 filed with the Commission under the
Securities Act on March 18, 1992, as amended on July 28, 1994 and as declared
effective on August 15, 1994, under the caption "Description of Securities."
In addition, all reports or other documents filed pursuant to Sections
13, 14 and 15(d) of the Exchange Act subsequent to the date hereof, in each case
filed by the Company prior to the termination of the offering of the shares
reserved for issuance under the Plan, shall be deemed to be incorporated by
reference herein. Copies of any of the foregoing reports or documents, as well
as copies of all other reports, proxy statements and other communications
distributed to the Company's security holders generally are available without
charge to participants in the Plan upon oral or written request directed to
Gregory A. Alba, Vice President, Finance and Administration, and Chief Financial
Officer, Computone Corporation, 1060 Windward Ridge Parkway, Suite 100,
Alpharetta, Georgia 30005, (770) 625-0000.
The Company will furnish without charge to each person to whom this
Memorandum is delivered, on the written or oral request of any such person, a
copy of any or all of the documents incorporated by reference (other than
certain exhibits to such documents). The Company will also furnish without
charge to optionees in the Plan, on written or oral request, a copy of its most
recent Annual Report to Stockholders, all other reports, proxy statements and
other communications distributed to the Company's stockholders generally and
other documents required to be delivered to such persons pursuant to Rule 428(b)
under the Securities Act. Additional copies may be obtained by such persons,
without charge, on written or oral request. Requests should be directed to:
Gregory A. Alba, Vice President, Finance and Administration, and Chief Financial
Officer, Computone Corporation, 1060 Windward Ridge Parkway, Suite 100,
Alpharetta, Georgia 30005. The Company's telephone number is (770) 625-0000.
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<PAGE>
