As filed with the Securities and Exchange Commission on September 9, 1996
Registration No. 33-________
_____________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________
FORM S-8
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
______________________
fonix corporation
(Exact name of registrant as specified in its charter)
Delaware 22-2994719
(State or other (I.R.S. Employer
jurisdiction Identification No.)
of incorporation or
organization)
_____________________
60 East South Temple
Salt Lake City, Utah 84111
(801) 328-0161
(Address, including zip code, and telephone number, including area code,
of Registrant's principal executive offices)
Long-Term Stock Investment and
Incentive Plan
and
1996 Director's Stock Option Plan
and
Compensation Contracts with
Consultants
(Full Title of Plans)
----------------------------
Roger D. Dudley, Executive V.P./Secretary
fonix corporation
60 East South Temple
Salt Lake City, Utah 84111
(801) 328-0161
(Name, address, including zip code, and telephone number, including
area code, of agent for service)
Copies to:
Jeffrey M. Jones, Esq.
Durham, Evans, Jones & Pinegar, P.C.
50 South Main Street, Suite 850
Salt Lake City, Utah 84144
(801) 538-2424
<PAGE>
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
Title of each class Proposed maximum Proposed maxi- Amount of
of securities to be Amount to be offering price per mum aggregate registration
registered registered (1) unit offering price fee (4)
- ----------------------- ------------------- ----------------- ---------------- --------------
<S> <C> <C> <C> <C>
Common Shares, 4,400,000 shares $ 4.0625 $17,875,000 (2) $ 6,163.79
par value $.0001
per share, subject
to stock options
granted to Directors
Common Shares, 1,000,000 shares $ 7.84 $ 7,840,000 (3) $ 2,703.45
par value $.0001
per share, subject
to stock options to
be granted to
Directors
Common Shares, 129,100 shares $ 3.66 $ 472,5060(2) $ 162.93
par value $.0001 500 shares $ 5.06 $ 2,530 $ .87
per share, subject 600 shares $ 9.88 $ 5,928 $ 2.04
to stock options 60,000 shares $ 9.31 $ 558,600 $ 192.62
granted to 25,000 shares $ 2.97 $ 74,250 $ 25.60
employees 500 shares $ 8.50 $ 4,250 $ 1.47
Common Shares, 684,300 shares $ 8.70 $ 5,953,410(3) $ 2,052.90
par value $.0001
per share, subject
to stock options to
be granted to
employees
Common Shares, 360,000 shares $ 0.50 $ 180,000(2) $ 62.07
par value $.0001
per share, subject
to stock warrants $11,367.74
granted to
consultants
</TABLE>
_____________________________________________________________________________
(1) This Registration Statement also covers an indeterminate number of
Common Shares that may be issuable by reason of stock splits,
stock dividends or similar transactions in accordance with Rule
416 under the Securities Act of 1933, as amended.
(2) Calculated solely for the purpose of determining the registration
fee pursuant to Rule 457(h) under the Securities Act of 1933,
based upon the price at which the options may be exercised.
(3) Calculated solely for the purpose of determining the registration
fee pursuant to Rule 457(c) under the Securities Act of 1933,
based upon the average of the high and low prices of the Common
Shares as reported on NASDAQ on September 4, 1996 (within 5 business
days prior to the date of filing the registration statement).
(4) 1/29 of 1 percent of the maximum aggregate offering price,
pursuant to Section 6(b) of the Securities Act of 1933.
<PAGE>
PART I
INFORMATION REQUIRED IN THE SECTION 10(a) PROSPECTUS
The documents containing the information specified in Part I of
this Registration Statement will be sent or given to employees as
specified by Rule 428(b)(1). Such documents are not required to be and
are not filed with the Securities and Exchange Commission (the
"Commission") either as part of this Registration Statement or as
prospectuses or prospectus supplements pursuant to Rule 424. These
documents and the documents incorporated by reference in this
Registration Statement pursuant to Item 3 of Part II of this Form S-8,
taken together, constitute a prospectus that meets the requirements of
Section 10(a) of the Securities Act of 1933, as amended (the "Securities
Act").
<PAGE>
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
Item 3. Incorporation of Documents by Reference.
The following documents filed with the Commission by fonix
corporation (the "Company" are incorporated herein by reference:
(a) The Company's Annual Report on Form 10-KSB for the fiscal
year ended December 31, 1995;
(b) Other reports of the Company filed pursuant to Section
13(a) or 15(d) of the Exchange Act since the end of the fiscal year covered by
the Annual Report referred to in (a) above:
The Company's Quarterly Report on Form 10-QSB for the quarter ended
March 31, 1996.
The Company's Quarterly Report on Form 10-QSB for the quarter ended
June 30, 1996.
The Company's Current Report on Form 8-K dated as of June 20, 1996.
(c) Description of the class of securities of the Company to
be offered, (incorporated by reference to the Registration Statement of the
Company previously filed, pursuant to which the class of Common Stock of
the Company was registered under the Securities Exchange Act of 1934, as
amended).
All documents subsequently filed by the Company with the
Commission pursuant to Sections 13(a), 13(c), 14 and 15(d) of the
Exchange Act, prior to the filing of a post-effective amendment to this
Registration Statement which indicates that all securities offered have
been sold or which deregisters all securities then remaining unsold,
shall be deemed to be incorporated by reference in this Registration
Statement and to be a part hereof from the date of filing of such
documents.
Item 4. Description of Securities.
Not applicable.
Item 5. Interests of Named Experts and Counsel.
The law firm of Durham, Evans, Jones & Pinegar, P.C. (the "Firm"),
Salt Lake City, counsel to the Company, has rendered an opinion attached
as an exhibit hereto with respect to the legality of the shares of
Common Stock to be registered herein. The Profit Sharing Plan and Trust
of the Firm, together with Messrs. Paul Durham, Richard Evans, Jeffrey
Jones and Kevin Pinegar as individuals, collectively own 50,000 shares
of Common Stock of the Company. Mr. Jones, individually, owns warrants
to purchase an additional 50,000 shares of Common Stock of the Company,
which shares are included in this Registration Statement.
Item 6. Indemnification of Directors and Officers.
Section 145 of the General Corporation Law of Delaware, together
with Article VII, Section 7, of the Bylaws of the Company, provide for
indemnification of the Company's directors, officers, employees,
fiduciaries or agents, subject to the Company's determination in each
instance that indemnification is in accordance with the standards set
forth in the General Corporation Law and in the Bylaws. The Company may
purchase and maintain liability insurance on behalf of a person who is
or was a director, officer, employee, fiduciary, or agent of the Company
against liability asserted against or incurred by him or her in that
capacity or arising from his or her status as a director, officer,
employee, fiduciary, or agent, whether or not the Company would have
power to indemnify him or her against the same liability under the
provisions of the Bylaws. See Article VII, Section 7 of the Company's
Bylaws, which is incorporated herein by reference and which qualifies
the foregoing summary statement.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers or
persons controlling the Company pursuant to the foregoing provisions, or
otherwise, the Company has been informed that in the opinion of the
Commission such indemnification is against public policy as expressed in
the Act and is therefore unenforceable.
Item 7. Exemption from Registration Claimed.
Not applicable.
Item 8. Exhibits.
4(a) -- Long-Term Stock Investment and Incentive Plan (the
"Incentive Plan") of fonix corporation.
4(b) -- Form of Stock Option Agreement for the purchase of Common
Stock of fonix corporation, used in connection with the
Incentive Plan.
4(c) -- 1996 Directors' Stock Option Plan (the "Directors' Plan")
of fonix corporation.
4(d) -- Form of Stock Option Agreement for the purchase of Common
Stock of the Company, used in connection with the
Directors' Plan.
4(e) -- Form of Consulting Agreements between the Company and
certain Advisors to the Company, pursuant to which the
advisors received Warrants to Purchase Common Stock of the
Company.
4(f) -- Form of Warrants issued by the Company to the Advisors
referred to in 4(e) above.
5 -- Opinion of Durham, Evans, Jones & Pinegar, P.C.
23(a) -- Consent of Peterson, Siler & Stevenson.
23(b) -- Consent of Durham, Evans, Jones & Pinegar, P.C. (included
in the opinion filed as Exhibit 5 to this Registration
Statement).
Item 9. Undertakings.
(a) The undersigned Company 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 of 1933;
(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;
(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 paragraphs (a)(1)(i) and (a)(1)(ii) do 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
Company pursuant to Section 13 or Section 15(d) of the Securities
Exchange Act of 1934 that are incorporated by reference in the
registration statement.
(2) That, for the purpose of determining any liability under
the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at
the termination of the offering.
(b) The undersigned Company hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing
of the Company's annual report pursuant to Section 13(a) or Section
15(d) of the Securities Exchange Act of 1934 (and, where applicable,
each filing of an employee benefit plan's annual report pursuant to
Section 15(d) of the Securities Exchange Act of 1934) that is
incorporated by reference in the registration statement shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at the time shall be deemed
to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling
persons of the Company pursuant to the foregoing provisions, or
otherwise, the Company has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against
public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Company of expenses
incurred or paid by a director, officer or controlling person of the
Company 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 Company 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.
<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 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 Salt Lake City,
State of Utah, on this 22nd day of July, 1996.
fonix CORPORATION
By /s/ Roger D. Dudley
--------------------------------
Roger D. Dudley
Executive V.P., CFO and Secretary
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose
signature appears below constitutes and appoints Roger D. Dudley, his
attorney-in-fact, with the power of substitution, for him and in any and
all capacities, to sign any and all amendments to this Registration
Statement (including post effective amendments), and to file the same,
with exhibits thereto and other documents in connection therewith, with
the Securities and Exchange Commission, hereby ratifying and confirming
all that said attorney-in-fact or his substitute or substitutes may do
or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated and on the dates indicated.
Signature Date
/s/ Stephen M. Studdert July 22, 1996
- ----------------------------------
Stephen M. Studdert, CEO and Chairman
of the Board of Directors
/s/ Thomas A. Murdock July 22, 1996
- ----------------------------------
Thomas A. Murdock, President/COO
and Director (Principal Executive
Officer)
/s/ Roger D. Dudley July 22, 1996
- ----------------------------------
Roger D. Dudley, Executive Vice President
CFO and Secretary (Principal Financial
and Accounting Officer)
/s/ Alan C. Ashton July 22, 1996
- ----------------------------------
Alan C. Ashton, Ph.D., Director
/s/ Joseph Verner Reed July 22, 1996
- ----------------------------------
Joseph Verner Reed, Director
/s/ James B. Hayes July 22, 1996
- ----------------------------------
James B. Hayes, Director
<PAGE>
EXHIBIT INDEX
4(a) -- Long-Term Stock Investment and Incentive Plan of fonix
corporation (the "Incentive Plan").
4(b) -- Form of Stock Option Agreement for the purchase of Common
Stock of the Company used in connection with the
Incentive Plan.
4(c) -- 1996 Directors' Stock Option Plan of fonix corporation
(the "Directors' Plan").
4(d) -- Form of Stock Option Agreement for the purchase of Common
Stock of the Company, used in connection with the
Directors' Plan.
4(e) -- Form of Consulting Agreements between the Company and
certain Advisors to the Company, pursuant to which the
advisors received Warrants to Purchase Common Stock of
the Company.
4(f) -- Form of Warrants issued by the Company to the Advisors
referred to in 4(g) above.
5 -- Opinion of Durham, Evans, Jones & Pinegar, P.C.
23(a)-- Consent of Peterson, Siler & Stevenson.
23(b)-- Consent of Durham, Evans, Jones & Pinegar, P.C. (included
in the opinion filed as Exhibit 5 to this Registration
Statement).
<PAGE>
fonix corporation
a Delaware corporation
Long-Term Stock Investment and Incentive Plan
ARTICLE I GENERAL
1.01. Purpose.
The purposes of this Long-Term Stock Investment and Incentive Plan (the
"Plan") are to: (1) closely associate the interests of the management of
fonix corporation, a Delaware corporation, and its Parent and Subsidiary
Corporations and Affiliates (collectively referred to as the "Company")
with the shareholders of the Company by reinforcing the relationship
between participants' rewards and shareholder gains; (2) provide
management with an equity ownership in the Company commensurate with
Company performance, as reflected in increased shareholder value; (3)
maintain competitive compensation levels; and (4) provide an incentive to
management to remain in continuing employment with the Company and to put
forth maximum efforts for the success of its business.
1.02. Administration.
(a) Pursuant to Delaware General Corporation Law Section 157 and
Utah Code Annotated Section 16-10a-624, the Board of Directors of fonix
corporation, (the "Board") shall appoint a Committee consisting of two or
more disinterested directors to administer the Plan (the "Committee"), as
constituted from time to time. Any Committee member shall also be a
member of the Board. During the one year prior to commencement of service
on the Committee, the Committee members will not have participated in, and
while serving and for one year after serving on the Committee, such
members shall not be eligible for selection as persons to whom stock may
be allocated or to whom Options or Stock Appreciation Rights may be
granted under the Plan or any other discretionary plan of the Company
under which participants are entitled to acquire stock, Options or Stock
Appreciation Rights of the Company.
Once appointed, the Committee shall continue to serve until
otherwise directed by the Board. From time to time, the Board may
increase or change the size of the Committee, and appoint new 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; provided, however, that at no time shall any
person administer the Plan who is not otherwise "disinterested" as that
term is defined in Rule 16 b-3(c)(2)(i) promulgated under the Securities
Exchange Act of 1934 (the "1934 Act"). Members of the Board who are
either presently eligible or who have been eligible at any time within the
preceding year for Options or Stock Appreciation Rights, may not vote on
any matters affecting the administration of the Plan or the grant of any
Options or Stock Appreciation Rights pursuant to the Plan.
(b) The Committee shall have the authority without limitation, in
its sole discretion, subject to and not inconsistent with the express
provisions of the Plan, and from time to time, to:
(i) administer the Plan and to exercise all the powers and
authorities either specifically granted to it under the Plan
or necessary or advisable in the administration of the Plan;
(ii) designate the employees or classes of employees
eligible to participate in the Plan from among those described
in Section 1.03 below;
(iii) grant awards provided in the Plan in such form, amount
and under such terms as the Committee shall determine;
(iv) determine the purchase price of shares of Common Stock
covered by each Option (the "Option Price");
(v) determine the Fair Market Value of Common Stock for
purposes of Options or of determining the appreciation of
Common Stock with respect to Stock Appreciation Rights;
(vi) determine the time or times at which Options and/or
Stock Appreciation Rights shall be granted;
(vii) determine the terms and provisions of the various
Option or Stock Appreciation Rights Agreements (none of which
need be identical or uniform) evidencing Options or Stock
Appreciation Rights granted under the Plan and to impose such
limitations, restrictions and conditions upon any such award
as the Committee shall deem appropriate; and
(viii) interpret the Plan, adopt, amend and rescind rules and
regulations relating to the Plan, and make all other
determinations and take all other action necessary or
advisable for the implementation and administration of the
Plan.
The Committee may delegate to one or more of its members or to one or more
agents such administrative duties as it may deem advisable, and the
Committee or any delegate may employ one or more persons to render advice
with respect to any responsibility the Committee or such person may have
under the Plan.
(c) All decisions, determinations and interpretations of the
Committee on all matters relating to the Plan shall be in its sole
discretion and shall be final, binding and conclusive on all Optionees and
the Company.
(d) One member of the Committee shall be elected by the Board as
chairman. The Committee shall hold its meetings at such times and places
as it shall deem advisable. All determinations of the Committee shall be
made by a majority of its members either present in person or
participating by conference telephone at a meeting or by written consent.
The Committee may appoint a secretary and make such rules and regulations
for the conduct of its business as it shall deem advisable, and shall keep
minutes of its meetings.
(e) No member of the Board or Committee shall be liable for any
action taken or decision or determination made in good faith with respect
to any Option, Stock Appreciation Right, the Plan, or any award
thereunder.
1.03. Eligibility for Participation
Participants in the Plan shall be selected by the Committee, and awards
under the Plan, as described in Section 1.04 below, may be granted to
officers and key employees of the Company and to other key individuals
such as consultants and non-employee agents to the Company whom the
Committee believes have made or will make an essential contribution to the
Company; provided, however, that Incentive Stock Options may only be
granted to executive officers and other key employees of the Company who
occupy responsible managerial or professional positions, who have the
capability of making a substantial contribution to the success of the
Company, and who agree, in writing, to remain in the employ of, and to
render services to, the Company for a period of at least one (1) year from
the date of the grant of the award. The Committee has the authority to
select particular employees within the eligible group to receive awards
under the Plan. In making this selection and in determining the persons
to whom awards under the Plan shall be granted and the form and amount of
awards under the Plan, the Committee shall consider any factors deemed
relevant in connection with accomplishing the purposes of the Plan,
including the duties of the respective persons and the value of their
present and potential services and contributions to the success,
profitability and sound growth of the Company. A person to whom an award
has been granted is sometimes referred to herein as an "Optionee." In no
event shall participants include Directors or any person described in this
Section who also serves as a Director or is otherwise an interested person
involved in the administration of the Plan. Such Directors are
participants in a separate nondiscretionary plan of the Company. An
Optionee shall be eligible to receive more than one Option and/or Stock
Appreciation Rights during the term of the Plan, but only on the terms and
subject to the restrictions hereinafter set forth.
1.04. Types of Awards Under Plan.
Awards under the Plan may be in the form of any one or more of the
following:
(i) "Stock Options" which are nonqualified stock options,
the tax consequences of which are governed by the provisions of
Section 83 of the Internal Revenue Code (the "Code"), as described
in Article II;
(ii) "Incentive Stock Options" which are statutory stock
options, the tax consequences of which are governed by Section 422
of the Code, as described in Article III;
(iii) "Reload Options" which are also nonqualified stock
options, the tax consequences of which are governed by Section 83 of
the Code, as described in Article IV;
(iv) "Alternate Rights" which are Stock Appreciation Rights,
the tax consequences of which are governed by Section 83 of the
Code, as described in Article V; and/or
(v) "Limited Rights" which are also Stock Appreciation
Rights, the tax consequences of which are governed by Section 83 of
the Code, as described in Article VI.
(vi) "Stock Bonuses" which are compensation, the tax
consequences of which are governed by Section 83 of the Code, as
described in Article VII.
(vii) "Cash Bonuses" which are compensation, the tax
consequences of which are governed by Section 61 of the Code, as
described in Article VIII.
1.05. Aggregate Limitation on Awards.
(a) Except as may be adjusted pursuant to Section 9.12(i) below,
shares of stock which may be issued as Stock Bonuses or upon exercise of
Options or Alternate Rights under the Plan shall be authorized and
unissued or treasury shares of Common Stock of the Company ("Common
Stock"). The number of shares of Common Stock the Company shall reserve
for issuance as Stock Bonuses or upon exercise of Options or Alternate
Rights to be granted from time to time under the Plan, and the maximum
number of shares of Common Stock which may be issued under the Plan, shall
not exceed in the aggregate 900,000 shares of Common Stock. In the
absence of an effective registration statement under the Securities Act of
1933 (the "Act"), all Stock Bonuses, Options and Stock Appreciation Rights
granted and shares of Common Stock subject to their exercise will be
restricted as to subsequent resale or transfer, pursuant to the provisions
of Rule 144, promulgated under the Act.
(b) For purposes of calculating the maximum number of shares of
Common Stock which may be issued under the Plan:
(i) all the shares issued (including the shares, if any, withheld
for tax withholding requirements) shall be counted when cash is used
as full payment for shares issued upon exercise of an Option;
(ii) only the shares issued (including the shares, if any,
withheld for tax withholding requirements) as a result of an
exercise of Alternate Rights shall be counted; and
(iii) only the net shares issued (including the shares, if any,
withheld for tax withholding requirements) shall be counted when
shares of Common Stock are used as full or partial payment for
shares issued upon exercise of an Option.
(iv) all shares issued (including the shares, if any, withheld
for tax withholding requirements as Stock Bonuses shall be counted.
(c) In addition to shares of Common Stock actually issued pursuant
to Stock Bonuses or the exercise of Options or Alternate Rights, there
shall be deemed to have been issued a number of shares equal to the number
of shares of Common Stock in respect of which Limited Rights shall have
been exercised.
(d) Shares tendered by a participant as payment for shares issued
upon exercise of an Option shall be available for issuance under the Plan.
Any shares of Common Stock subject to an Option or Stock Appreciation
Right granted without a related Option, which for any reason is cancelled,
terminated, unexercised or expires in whole or in part shall again be
available for issuance under the Plan, but shares subject to an Option or
Alternate Right which are not issued as a result of the exercise of
Limited Rights shall not again be available for issuance under the Plan.
1.06. Effective Date and Term of Plan.
(a) The Plan shall become effective as of the 30th day of April,
1996, the date the Plan is adopted by a majority of the Board (the
"Effective Date"), but for purposes of qualifying awards under the Plan
under Section 16(b) of the Securities Exchange Act of 1934, as amended,
and rules promulgated thereunder, shall be subject to approval by the
holders of a majority of the issued and outstanding shares of fonix
corporation Common Stock present in person or by proxy and entitled to
vote at the earlier of either a Special Meeting of Shareholders called for
that purpose or the 1996 Annual Meeting of Shareholders of fonix
corporation, which meeting shall in any event, be held not more than
twelve (12) months after adoption of the Effective Date.
(b) No awards shall be granted under the Plan after or on the 30th
day of April, 2006, which date is ten (10) years after the Effective Date
(the "Plan Termination Date"). Provided, however, that the Plan and all
awards made under the Plan prior to such Plan Termination Date shall
remain in effect until such awards have been satisfied or terminated in
accordance with the Plan and the terms of such awards.
ARTICLE II STOCK OPTIONS
2.01. Award of Stock Options.
The Committee may from time to time, and subject to the provisions of the
Plan, and such other terms and conditions as the Committee may prescribe,
grant to any participant in the Plan one or more options to purchase for
cash or for Company shares the number of shares of Common Stock allotted
by the Committee ("Stock Options"). The date a Stock Option is granted
shall mean the date selected by the Committee as of which the Committee
allots a specific number of shares to a participant pursuant to the Plan.
2.02. Stock Option Agreements.
The grant of a Stock Option shall be evidenced by a written Stock Option
Agreement, executed by the Company and the holder of a Stock Option (the
"Optionee"), stating the number of shares of Common Stock subject to the
Stock Option evidenced thereby, and in such form as the Committee may from
time to time determine.
2.03 Stock Option Price.
The Option Price per share of Common Stock deliverable upon the exercise
of a Stock Option shall be 100% of the Fair Market Value of a share of
Common Stock on the date the Stock Option is granted, unless the Committee
shall determine, in its sole discretion, that there are circumstances
which reasonably justify the establishment of a lower Option Price.
2.04. Term and Exercise.
Each Stock Option shall be fully exercisable at any time within the period
beginning not earlier than six months after the date of its grant and,
unless a shorter period is provided by the Committee or by another Section
of this Plan, ending not later than ten years after the date of grant
thereof (the "Option Term"). No Stock Option shall be exercisable after
the expiration of its Option Term.
2.05 Manner of Payment.
Each Stock Option Agreement shall set forth the procedure governing the
exercise of the Stock Option granted thereunder, and shall provide that,
upon such exercise in respect of any shares of Common Stock subject
thereto, the Optionee shall pay to the Company, in full, the Option Price
for such shares with cash or with Common Stock previously owned by
Optionee.
2.06 Death of Optionee.
(a) Upon the death of the Optionee, any rights to the extent
exercisable on the date of death may be exercised by the Optionee's
estate, or by a person who acquires the right to exercise such Stock
Option by bequest or inheritance or by reason of the death of the
Optionee, provided that such exercise occurs within both the remaining
effective term of the Stock Option and one year after the Optionee's
death.
(b) The provisions of this Section shall apply notwithstanding the
fact that the Optionee's employment may have terminated prior to death,
but only to the extent of any rights exercisable on the date of death.
2.07 Retirement or Disability.
Upon termination of the Optionee's employment by reason of retirement or
permanent disability (as each is determined by the Committee), the
Optionee may, within 36 months from the date of termination, exercise any
Stock Options to the extent such options are exercisable during such 36-
month period.
2.08 Termination for Other Reasons.
Except as provided in Sections 2.06, 2.07 or 9.13(f), or except as
otherwise determined by the Committee, all Stock Options shall terminate
three months after the termination of the Optionee's employment.
2.9 Effect of Exercise.
The exercise of any Stock Option shall cancel that number of related
Alternate Rights and/or Limited Rights, if any, which is equal to the
number of shares of Common Stock purchased pursuant to said Stock Option.
ARTICLE III INCENTIVE STOCK OPTIONS
3.01 Award of Incentive Stock Options.
The Committee may, from time to time and subject to the provisions of the
Plan and such other terms and conditions as the Committee may prescribe,
grant to any participant in the Plan one or more "incentive stock options"
which are intended to qualify as such under the provisions of Section 422
of the Code, to purchase for cash or for Company shares the number of
shares of Common Stock allotted by the Committee ("Incentive Stock
Options"). The date an Incentive Stock Option is granted shall mean the
date selected by the Committee as of which the Committee shall allot a
specific number of shares to a participant pursuant to the Plan.
3.02 Incentive Stock Option Agreements.
The grant of an Incentive Stock Option shall be evidenced by a written
Incentive Stock Option Agreement, executed by the Company and the holder
of an Incentive Stock Option (the "Optionee"), stating the number of
shares of Common Stock subject to the Incentive Stock Option evidenced
thereby, and in such form as the Committee may from time to time
determine.
3.03 Incentive Stock Option Price.
Except as provided in Section 3.10 below, the Option Price per share of
Common Stock deliverable upon the exercise of an Incentive Stock Option
shall be 100% of the Fair Market Value of a share of Common Stock on the
date the Incentive Stock Option is granted.
3.04 Term and Exercise.
Except as provided in Section 3.10 below, each Incentive Stock Option
shall be fully exercisable at any time within the period beginning not
earlier than six months after the date of its grant and, unless a shorter
period is provided by the Committee or another Section of this Plan,
ending not later than ten years after the date of grant thereof (the
"Option Term"). No Incentive Stock Option shall be exercisable after the
expiration of its Option Term.
3.05 Maximum Amount of Incentive Stock Option Grant.
The aggregate Fair Market Value (determined on the date the Incentive
Stock Option is granted) of Common Stock subject to an Incentive Stock
Option granted to any Optionee by the Committee in any calendar year shall
not exceed $100,000. Multiple Incentive Stock Options may be granted to
an Optionee in any calendar year, which Multiple Incentive Stock Options
may in the aggregate exceed such $100,000 Fair Market Value limitation, so
long as each such Incentive Stock Option within the Multiple Incentive
Stock Option award does not exceed such $100,000 Fair Market Value
limitation and so long as no two such Incentive Stock Options may be
exercised by the Optionee in the same calendar year.
3.06 Death of Optionee.
(a) Upon the death of the Optionee, any Incentive Stock Option
exercisable on the date of death may be exercised by the Optionee's estate
or by a person who acquires the right to exercise such Incentive Stock
Option by bequest or inheritance or by reason of the death of the
Optionee, provided that such exercise occurs within both the remaining
Option Term of the Incentive Stock Option and one year after the
Optionee's death.
(b) The provisions of this Section shall apply notwithstanding the
fact that the Optionee's employment may have terminated prior to death,
but only to the extent of any Incentive Stock Options exercisable on the
date of death.
3.07 Retirement or Disability.
Upon the termination of the Optionee's employment by reason of permanent
disability or retirement (as each is determined by the Committee), the
Optionee may, within 36 months from the date of such termination of
employment, exercise any Incentive Stock Options to the extent such
Incentive Stock Options were exercisable at the date of such termination
of employment. Notwithstanding the foregoing, the tax treatment available
pursuant to Section 422 of the Code, upon the exercise of an Incentive
Stock Option will not be available to an Optionee who exercises any
Incentive Stock Options more than (i) 12 months after the date of
termination of employment due to permanent disability or (ii) three months
after the date of termination of employment due to retirement.
3.08 Termination for Other Reasons.
Except as provided in Sections 3.06, 3.07 or 9.13(f), or except as
otherwise determined by the Committee, all Incentive Stock Options shall
terminate three months after the date of termination of the Optionee's
employment.
3.09 Applicability of Stock Options Sections and Other Restrictions.
Sections 2.05, Manner of Payment; 2.06, Restrictions on Certain Shares;
and 2.10, Effect of Exercise, applicable to Stock Options, shall apply
equally to Incentive Stock Options. Said Sections are incorporated by
reference in this Article III as though fully set forth herein. In
addition, the Optionee shall be prohibited from the sale, exchange,
transfer, pledge, hypothecation, gift or other disposition of the shares
of Common Stock underlying the Incentive Stock Options until the later of
either two (2) years after the date of granting the Incentive Stock Option
or one (1) year after the transfer to the Optionee of such underlying
Common Stock after the Optionee's exercise of such Incentive Stock
Options.
3.10 Employee/Ten Percent Shareholders.
In the event the Committee determines to grant an Incentive Stock Option
to an employee who is also a Ten Percent Stockholder, as defined in
9.07(i) below, (i) the Option Price shall not be less than 110% of the
Fair Market Value of the shares of Common Stock of the Company on the date
of grant of such Incentive Stock Option, and (ii) the exercise period
shall not exceed 5 years from the date of grant of such Incentive Stock
Option. Fair Market Value shall be as defined in 9.07(c) below.
ARTICLE IV RELOAD OPTIONS
4.01. Authorization of Reload Options.
Concurrently with the award of Stock Options and/or the award of Incentive
Stock Options to any participant in the Plan, the Committee may, subject
to the provisions of the Plan, particularly the provisions of Section 9.12
below, and such other terms and conditions as the Committee may prescribe,
authorize reload options to purchase for cash or for Company shares a
number of shares of Common Stock allotted by the Committee ("Reload
Options"). The number of Reload Options shall equal (i) the number of
shares of Common Stock used to exercise the underlying Stock Options or
Incentive Stock Options and (ii) to the extent authorized by the
Committee, the number of shares of Common Stock used to satisfy any tax
withholding requirement incident to the exercise of the underlying Stock
Options or Incentive Stock Options. The grant of a Reload Option will
become effective upon the exercise of underlying Stock Options, Incentive
Stock Options or other Reload Options through the use of shares of Common
Stock held by the Optionee for at least 12 months. Notwithstanding the
fact that the underlying Option may be an Incentive Stock Option, a Reload
Option is not intended to qualify as an "incentive stock option" under
Section 422 of the Code.
4.02. Reload Option Amendment.
Each Stock Option Agreement and Incentive Stock Option Agreement shall
state whether the Committee has authorized Reload Options with respect to
the underlying Stock Options and/or Incentive Stock Options. Upon the
exercise of an underlying Stock Option, Incentive Stock Option or other
Reload Option, the Reload Option will be evidenced by an amendment to the
underlying Stock Option Agreement or Incentive Stock Option Agreement.
4.03. Reload Option Price.
The Option Price per share of Common Stock deliverable upon the exercise
of a Reload Option shall be the Fair Market Value of a share of Common
Stock on the date the grant of the Reload Option becomes effective, unless
the Committee shall determine, in its sole discretion, that there are
circumstances which reasonably justify the establishment of a lower Option
Price.
4.04. Term and Exercise.
Each Reload Option is fully exercisable not earlier than six months from
the effective date of grant. The term of each Reload Option shall be
equal to the remaining Option Term of the underlying Stock Option and/or
Incentive Stock Option.
4.05. Termination of Employment.
No additional Reload Options shall be granted to Optionees when Stock
Options, Incentive Stock Options and/or Reload Options are exercised
pursuant to the terms of this Plan following termination of the Optionee's
employment.
4.06. Applicability of Stock Options Sections.
Sections 2.05, Manner of Payment; 2.06, Restrictions on Certain Shares;
2.07, Death of Optionee; 2.08, Retirement or Disability; 2.09, Termination
for Other Reasons; and 2.10, Effect of Exercise, applicable to Stock
Options, shall apply equally to Reload Options. Said Sections are
incorporated by reference in this Article IV as though fully set forth
herein.
ARTICLE V ALTERNATE STOCK APPRECIATION RIGHTS
5.01. Award of Alternate Rights.
Concurrently with or subsequent to the award of any Option to purchase one
or more shares of Common Stock, the Committee may, subject to the
provisions of the Plan and such other terms and conditions as the
Committee may prescribe, award to the Optionee with respect to each share
of Common Stock, a related alternate stock appreciation right, permitting
the Optionee to be paid the appreciation on the Option in Common Stock in
lieu of exercising the Option ("Alternate Right").
5.02. Alternate Rights Agreement.
Alternate Rights shall be evidenced by written agreements in such form as
the Committee may from time to time determine.
5.03. Term and Exercise.
An Optionee who has been granted Alternate Rights may, from time to time,
in lieu of the exercise of an equal number of Options, elect to exercise
one or more Alternate Rights and thereby become entitled to receive from
the Company payment in Common Stock the number of shares determined
pursuant to Sections 5.04 and 5.05. Alternate Rights shall be exercisable
only to the same extent and subject to the same conditions and within the
same Option Terms as the Options related thereto are exercisable, as
provided in this Plan. The Committee may, in its discretion, prescribe
additional conditions to the exercise of any Alternate Rights.
5.04. Amount of Payment.
The amount of payment to which an Optionee shall be entitled upon the
exercise of each Alternate Right shall be equal to 100% of the amount, if
any, by which the Fair Market Value of a share of Common Stock on the
exercise date exceeds the Fair Market Value of a share of Common Stock on
the date the Option related to said Alternate Right was granted or became
effective, as the case may be.
5.05. Form of Payment.
Upon exercise of Alternate Rights, the Company shall pay Optionee the
amount of payment determined pursuant to Section 5.04 in Common Stock.
The number of shares to be paid shall be determined by dividing the amount
of payment determined pursuant to Section 5.04 by the Fair Market Value of
a share of Common Stock on the exercise date of such Alternate Rights. As
soon as practicable after exercise, the Company shall deliver to the
Optionee a certificate or certificates for such shares of Common Stock.
All such shares shall be issued with the rights and restrictions specified
in Section 2.06.
5.06. Effect of Exercise.
The exercise of any Alternate Rights shall cancel an equal number of Stock
Options, Incentive Stock Options, Reload Options and Limited Rights, if
any, related to said Alternate Rights.
5.07. Retirement or Disability.
Upon termination of the Optionee's employment (including employment as a
director of the Company after an Optionee terminates employment as an
officer or key employee of the Company) by reason of permanent disability
or retirement (as each is determined by the Committee), the Optionee may,
within three years from the date of such termination, exercise any
Alternate Rights to the extent such Alternate Rights are exercisable
during such three year period.
5.08. Death of Optionee or Termination for Other Reasons.
Except as provided in Section 5.07 or 9.13(f), or except as otherwise
determined by the Committee, all Alternate Rights shall terminate three
months after the date of termination of the Optionee's employment or one
year after the death of the Optionee.
ARTICLE VI LIMITED RIGHTS
6.01. Award of Limited Rights.
Concurrently with or subsequent to the award of an Option or Alternate
Right, the Committee may, subject to the provisions of the Plan and such
other terms and conditions as the Committee may prescribe, award to the
Optionee with respect to each share of Common Stock underlying such Option
or Alternate Right, a related limited right permitting the Optionee,
during a specified limited time period, to be paid the appreciation on the
Option in cash in lieu of exercising the Option ("Limited Right").
6.02. Limited Rights Agreement.
Limited Rights granted under the Plan shall be evidenced by written
agreements in such form as the Committee may from time to time determine.
6.03. Term and Exercise.
An Optionee who has been granted Limited Rights may, from time to time, in
lieu of the exercise of an equal number of Options and Alternate Rights
related thereto, elect to exercise one or more Limited Rights and thereby
become entitled to receive from the Company payment in cash the amount
determined pursuant to Sections 6.04 and 6.05. Limited Rights shall be
exercisable only to the same extent and subject to the same conditions and
within the same Option Terms as the Options or Alternate Rights related
thereto are exercisable, as provided in this Plan. The Committee may, in
its discretion, prescribe additional conditions to the exercise of any
Limited Rights.
Notwithstanding anything above to the contrary, Limited Rights are
exercisable in full for a period of seven months following the date of a
Change in Control of the Company, (the "Exercise Period"); provided,
however, that Limited Rights may not be exercised under any circumstances
until the expiration of the six-month period following the date of grant.
As used in the Plan, a "Change of Control" shall be deemed to have
occurred if (a) individuals who are currently directors of fonix
corporation immediately prior to a Control Transaction shall cease, within
one year of such Control Transaction, to constitute a majority of the
Board (or of the Board of Directors of any successor to fonix corporation
or to all or substantially all of its assets), or any entity, person or
Group other than fonix corporation or a Subsidiary Corporation of fonix
corporation acquires shares of fonix corporation in a transaction or
series of transactions that result in such entity, person or Group
directly or indirectly owning beneficially fifty-one percent (51%) or more
of the outstanding shares of fonix corporation
As used herein, "Control Transaction" shall be (i) any tender offer for or
acquisition of capital stock of fonix corporation, (ii) any merger,
consolidation, reorganization or sale of all or substantially all of the
assets of fonix corporation which has been approved by the shareholders,
(iii) any contested election of directors of fonix corporation or (iv) any
combination of the foregoing which results in a change in voting power
sufficient to elect a majority of the Board. As used herein, "Group"
shall mean persons who act in concert as described in Sections 13(d)(3)
and/or 14(d)(2) of the Securities Exchange Act of 1934, as amended.
6.04. Amount of Payment.
The amount of payment to which an Optionee shall be entitled upon the
exercise of each Limited Right shall be equal to 100% of the amount, if
any, which is equal to the difference between the Fair Market Value per
share of Common Stock covered by the related Option or Alternative Right
on the date the Option or Alternate Right was granted and the Fair Market
Value per share of such Common Stock on the exercise date.
6.05. Form of Payment.
Payment of the amount to which an Optionee is entitled upon the exercise
of Limited Rights, as determined pursuant to Section 6.04, shall be paid
by the Company solely in cash.
6.06. Effect of Exercise.
If Limited Rights are exercised, the Options and Alternate Rights, if any,
related to such Limited Rights cease to be exercisable to the extent of
the number of shares with respect to which the Limited Rights were
exercised. Upon the exercise or termination of the Options and Alternate
Rights, if any, related to such Limited Rights, the Limited Rights granted
with respect thereto terminate to the extent of the number of shares as to
which the related Options and Alternate Rights were exercised or
terminated.
6.07. Retirement or Disability.
Upon termination of the Optionee's employment (including employment as a
director of this Company after an Optionee terminates employment as an
officer or key employee of this Company) by reason of permanent disability
or retirement (as each is determined by the Committee), the Optionee may,
within three years from the date of termination, exercise any Limited
Right to the extent such Limited Right is exercisable during such three
year period.
6.08. Death of Optionee or Termination for Other Reasons.
Except as provided in Sections 6.07, 6.09 or 9.13(f), or except as
otherwise determined by the Committee, all Limited Rights granted under
the Plan shall terminate three months after the date of termination of the
Optionee's employment or one year after the death of the Optionee.
6.09. Termination Related to a Change in Control.
The requirement that an Optionee be terminated by reason of retirement or
permanent disability or be employed by the Company at the time of exercise
pursuant to Sections 6.07 and 6.08 respectively, is waived during the
Exercise Period as to any Optionee who (i) was employed by the Company at
the time of the Change in Control and (ii) is subsequently terminated by
the Company other than for cause, or who voluntarily terminates if such
termination was the result of a good faith determination by the Optionee
that as a result of the Change in Control he is unable to effectively
discharge his present duties or the duties of the position which he
occupied just prior to the Change in Control. As used in this Plan, "for
cause" shall mean willful misconduct or dishonesty or conviction of or
failure to contest prosecution for a felony, or excessive absenteeism
unrelated to illness.
ARTICLE VII STOCK BONUSES
7.01 Terms, Conditions and Restrictions.
The Committee may from time to time, and subject to the provisions of the
Plan and such other terms and conditions as the Committee may prescribe,
grant to any participant in the Plan one or more Stock Bonuses as
compensation the number of shares of Common Stock allotted by the
Committee ("Stock Bonuses"). Stock awarded as a Stock Bonus shall be
subject to the terms, conditions and restrictions determined by the
Committee at the time of the award. The Committee may require the
recipient to sign an agreement as a condition of the award. The agreement
may contain such terms, conditions, representations, and warranties as the
Committee may require.
ARTICLE VIII CASH BONUSES
8.01 Grant.
The Committee may from time to time, and subject to the provisions of the
Plan and such other terms and conditions as the Committee may prescribe,
grant to any participant in the Plan one or more cash bonuses as
compensation ("Cash Bonuses"). The Committee may grant Cash Bonuses under
the Plan outright or in connection with (i) an Option or Stock
Appreciation Right granted or previously granted or (ii) a Stock Bonus
awarded, or previously awarded. Bonuses will be subject to rules, terms,
and conditions as the Committee may prescribe.
8.02 Cash Bonuses in Connection with Options and Stock Appreciation
Rights.
Cash Bonuses granted in connection with Options will entitle an Optionee
to a Cash Bonus when the related Option is exercised (or surrendered in
connection with exercise of a Stock Appreciation Right related to the
Option) in whole or in part. Cash Bonuses granted in connection with
Stock Appreciation Rights will entitle the holder to a Cash Bonus when the
Stock Appreciation Right is exercised. Upon exercise of an Option, the
amount of the Cash Bonus shall be determined by multiplying the amount by
which the total Fair Market Value of the shares to be acquired upon the
exercise exceeds the total Option Price for the shares by the applicable
bonus percentage. Upon exercise of a Stock Appreciation Right, the cash
bonus shall be determined by multiplying the total Fair Market Value of
the shares or cash received pursuant to the exercise of the Stock
Appreciation Right by the applicable bonus percentage. The bonus
percentage applicable to a Cash Bonus shall be determined from time to
time by the Committee but shall in no event exceed thirty percent.
8.03 Cash Bonuses in Connection with Stock Bonuses.
Cash Bonuses granted in connection with Stock Bonuses will entitle the
person awarded such Stock Bonuses to a Cash Bonus either at the time the
Stock Bonus is awarded or at such time as restrictions, if any, to which
the Stock Bonus is subject lapse. If a Stock Bonus awarded is subject to
restrictions and is repurchased by the Company or forfeited by the holder,
the Cash Bonus granted in connection with such Stock Bonus shall terminate
and may not be exercised. Whether any Cash Bonus is to be awarded and, if
so, the amount and timing of such Cash Bonus shall be determined from time
to time by the Committee.
ARTICLE IX MISCELLANEOUS
9.01. General Restriction.
Each award under the Plan shall be subject to the requirement that, if at
any time the Committee 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) an
agreement by the grantee of an award 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 award or the issue or purchase of
shares of Common Stock thereunder, such award may not be exercised or
consummated in whole or in part unless and until such listing,
registration, qualification, consent, approval or agreement shall have
been effected or obtained free of any conditions not acceptable to the
Committee.
9.02. Non-Assignability.
No award under the Plan shall be assignable or transferable by the
recipient thereof, except by Will or by the laws of descent and
distribution or pursuant to the terms of a qualified domestic relations
order as defined in the U.S. Internal Revenue Code. During the life of
the recipient, such award shall be exercisable only by such person or by
such person's guardian or legal representative.
9.03. Withholding Taxes.
Whenever the Company proposes or is required to issue or transfer shares
of Common Stock under the Plan, the Company shall, to the extent permitted
or required by law, have the right to require the grantee, as a condition
of issuance of a Stock Bonus or exercise of its Options or Stock
Appreciation Rights, to remit to the Company no later than the date of
issuance or exercise, or make arrangements satisfactory to the Committee
regarding payment of, any amount sufficient to satisfy any Federal, state
and/or local taxes of any kind, including, but not limited to, withholding
tax requirements prior to the delivery of any certificate or certificates
for such shares. If the participant fails to pay the amount required by
the Committee, the Company shall have the right to withhold such amount
from other amounts payable by the Company to the participant, including
but not limited to, salary, fees or benefits, subject to applicable law.
Alternatively, the Company may issue or transfer such shares of Common
Stock net of the number of shares sufficient to satisfy any such taxes,
including, but not limited to, the withholding tax requirements. For
withholding tax purposes, the shares of Common Stock shall be valued on
the date the withholding obligation is incurred.
9.04. Right to Terminate Employment.
Nothing in the Plan or in any agreement entered into pursuant to the Plan
shall confer upon any participant the right to continue in the employment
of the Company or effect any right which the Company may have to terminate
the employment of such participant.
9.05. Non-Uniform Determinations.
The Committee's determinations under the Plan (including without
limitation determinations of the persons to receive awards, the form,
amount and timing of such awards, the terms and provisions of such awards
and the agreements evidencing same) need not be uniform and may be made by
it selectively among persons who receive, or are eligible to receive,
awards under the Plan, whether or not such persons are similarly situated.
9.06. Rights as a Shareholder.
The recipient of any award under the Plan shall have no rights as a
shareholder with respect thereto unless and until certificates for shares
of Common Stock are issued to him or her.
9.07 Fractional Shares. Fractional shares shall not be granted under any
award under this Plan, unless the provision of the Plan which authorizes
such award also specifies the terms under which fractional shares or
interests may be granted.
9.08. Definitions.
As used in this Plan, the following words and phrases shall have the
meanings indicated in the following definitions:
(a) "AFFILIATE" means any person or entity which directly, or
indirectly through one or more intermediaries, controls, is
controlled by, or is under common control with fonix
corporation.
(b) "DISABILITY" shall mean an Optionee's inability to engage in
any substantial gainful activity by reason of any medically
determinable physical or mental impairment that can be
expected to result in death or that has lasted or can be
expected to last for a continuous period of not less than one
year.
(c) "FAIR MARKET VALUE" per share in respect of any share of
Common Stock as of any particular date shall mean (i) the
closing sales price per share of Common Stock reflected on a
national securities exchange for the last preceding date on
which there was a sale of such Common Stock on such exchange;
or (ii) if the shares of Common Stock are then traded on an
over-the-counter market, the average of the closing bid and
asked prices for the shares of Common Stock in such over-the-
counter market for the last preceding date on which there was
a sale of such Common Stock in such market; or (iii) in case
no reported sale takes place, the average of the closing bid
and asked prices on the National Association of Securities
Dealers' Automated Quotations System ("NASDAQ") or any
comparable system, or if the shares of Common Stock are not
listed on NASDAQ or comparable system, the closing sale price
or, in case no reported sale takes place, the average of the
closing bid and asked prices, as furnished by any member of
the National Association of Securities Dealers, Inc. selected
from time to time by the Company for that purpose; or (iv) if
the shares of Common Stock are not then listed on a national
securities exchange or traded in an over-the-counter market,
such value as the Committee in its discretion may determine in
any such other manner as the Committee may deem appropriate.
In no event shall the Fair Market Value of any share of Common
Stock be less than its par value. In the case of Incentive
Stock Options, the Fair Market Value shall not be discounted
for restrictions, lack of marketability and other such
limitations on the enjoyment of the Common Stock. In the case
of other type of Options, the Fair Market Value of the Common
Stock shall be so discounted.
(d) "OPTION" means Stock Option, Incentive Stock Option or Reload
Option.
(e) "OPTION PRICE" means the purchase price per share of Common
Stock deliverable upon the exercise of an Option.
(f) "PARENT CORPORATION" shall mean any corporation (other than
fonix corporation) in an unbroken chain of corporations ending
with the Optionee's employer corporation if, at the time of
granting an Option, each of the corporations other than the
Optionee's employer corporation owns stock possessing 50% or
more of the total combined voting power of all classes of
stock in one of the other corporations in such chain.
(g) "STOCK APPRECIATION RIGHT" shall mean Alternate Right or
Limited Right.
(h) "SUBSIDIARY CORPORATION" shall mean any corporation (other
than fonix corporation) in an unbroken chain of corporations
beginning with the Optionee's employer corporation if, at the
time of granting an Option, each of the corporations other
than the last corporation in the unbroken chain owns stock
possessing 50% or more of the total combined voting power of
all classes of stock in one of the other corporations in such
chain.
(i) "TEN PERCENT STOCKHOLDER" shall mean an Optionee who, at the
time an Incentive Stock Option is granted, is an employee of
the Company who owns stock possessing more than ten percent
(10%) of the total combined voting power of all classes of
stock of the Company or of its Parent or Subsidiary
Corporations.
9.09. Leaves of Absence and Performance Targets.
The Committee shall be entitled to make such rules, regulations and
determinations as it deems appropriate under the Plan in respect of any
leave of absence taken by the recipient of any award. Without limiting
the generality of the foregoing, the Committee shall be entitled to
determine (i) whether or not any such leave of absence shall constitute a
termination of employment within the meaning of the Plan and (ii) the
impact, if any, of such leave of absence on awards under the Plan
theretofore made to any recipient who takes such leave of absence. The
Committee shall also be entitled to make such determination of performance
targets, if any, as it deems appropriate and to impose them upon an
Optionee as a condition of continued employment.
9.10. Newly Eligible Employees.
The Committee shall be entitled to make such rules, regulations,
determinations and awards as it deems appropriate in respect of any
employee who becomes eligible to participate in the Plan or any portion
thereof, after the commencement of an award or incentive period.
9.11. Adjustments.
In the event of any change in the outstanding Common Stock by reason of a
stock dividend or distribution, recapitalization, merger, consolidation,
split-up, combination, exchange of shares or the like, the Committee may
appropriately adjust the number of shares of Common Stock which may be
issued under the Plan, the number of shares of Common Stock subject to
Options theretofore granted under the Plan, the Option Price of Options
theretofore granted under the Plan, the amount of Restricted Stock Units
theretofore awarded under the Plan, the performance targets referred to in
Section 9.08 and any and all other matters deemed appropriate by the
Committee.
9.12. Amendment of the Plan.
(a) The Committee may, without further action by the shareholders
and without receiving further consideration from the participants, amend
this Plan or condition or modify awards under this Plan in response to
changes in securities, tax or other laws or rules, regulations or
regulatory interpretations thereof applicable to this Plan or to comply
with stock exchange rules or requirements.
(b) The Committee may at any time and from time to time terminate or
modify or amend the Plan in any respect, except that without shareholder
approval the Committee may not (i) increase the maximum number of shares
of Common Stock which may be issued under the Plan (other than increases
pursuant to Section 9.10), (ii) extend the period during which any award
may be granted or exercised, or (iii) extend the term of the Plan. The
termination or any modification or amendment of the Plan, except as
provided in subsection (a), shall not without the consent of a
participant, affect his other rights under an award previously granted to
him or her.
9.13. General Terms and Conditions of Options.
Each Option shall be evidenced by a written Option Agreement between the
Company and the Optionee, which agreement, unless otherwise stated in
Articles II, III or IV of the Plan, shall comply with and be subject to
the following terms and conditions:
(a) Number of Shares. Each Option Agreement shall state the
number of shares of Common Stock to which the Option relates.
(b) Type of Option. Each Option Agreement shall
specifically identify the portion, if any, of the Option which
constitutes an Incentive Stock Option and the portion, if any, which
constitutes a Non-qualified Stock Option in the form of either a
Stock Option or a Reload Option.
(c) Option Price. Each Option Agreement shall state the
Option Price which, in the case of Incentive Stock Options (except
to the extent provided in Article III above), shall be not less than
100% of the undiscounted Fair Market Value of the shares of Common
Stock of the Company on the date of grant of the Option. The Option
Price shall be subject to adjustment as provided in 9.13(i) hereof.
The date on which the Committee adopts a resolution expressly
granting an Option shall be considered the day on which such Option
is granted. No Options shall be granted under the Plan more than 10
years after the date of adoption of the Plan by the Board, but the
validity of Options previously granted may extend and be validly
exercised beyond that date. Except as provided in Section 3.10
above, Options granted under the Plan shall be for a period
determined by the Committee as provided in Section 9.13(e), below.
(d) Medium and Time of Payment. The Option Price shall be
paid in full at the time of exercise in cash or in shares of Common
Stock having a Fair Market Value equal to such Option Price or in a
combination of cash and such shares, and may be effected in whole or
in part (i) with monies received from the Company at the time of
exercise as a compensatory cash payment, or (ii) with monies
borrowed from the Company pursuant to repayment terms and conditions
as shall be determined from time to time by the Committee, in its
discretion, separately with respect to each exercise of Options and
each Optionee; provided, however, that each such method and time for
payment and each such borrowing and terms and conditions of
repayment shall be permitted by and be in compliance with applicable
law, and provided, further, if the Option Price is paid with monies
borrowed from the Company, such fact shall be noted conspicuously on
the certificate evidencing such shares in accordance with applicable
law.
(e) Term and Exercise of Options. Options shall be
exercisable over the exercise period as and at the times and upon
the conditions that the Committee may determine, as reflected in the
Option Agreement; provided, however, that the Committee shall have
the authority to accelerate the exercisability of any outstanding
Option at such time and under such circumstances, as it, in its sole
discretion, deems appropriate. The exercise period shall be
determined by the Committee for all Options; provided, however that
such exercise period shall not exceed 10 years from the date of
grant of such Option. The exercise period shall be subject to
earlier termination as provided in Sections 9.13(f) and 9.13(g)
hereof. An Option may be exercised, as to any or all full shares of
Common Stock as to which the Option has become exercisable, by
giving written notice of such exercise to the Committee; provided,
however, that an Option may not be exercised at any one time as to
fewer than 100 shares (or such number of shares as to which the
Option is then exercisable if such number of shares is less than
100).
(f) Termination. Except as provided in Section 9.13(e) and
in this Section 9.13(f) hereof, an Option may not be exercised
unless the Optionee is then in the employ of the Company or a
Parent, division or Subsidiary Corporation (or a corporation issuing
or assuming the Option in a transaction to which Code Section 424(a)
applies), and unless the Optionee has remained continuously so
employed since the date of grant of the Option. If the employment
of an Optionee shall terminate (other than by reason of death,
disability or retirement), all Options of such Optionee that are
exercisable at the time of such termination may, unless earlier
terminated in accordance with their terms, be exercised within three
months after such termination; provided, however, that if the
employment of an Optionee shall terminate for cause, all Options
theretofore granted to such Optionee shall, to the extent not
theretofore exercised, terminate forthwith. Nothing in the Plan or
in any Option shall limit the Company's rights under Section 9.04
above. No Option may be exercised after the expiration of its term.
(g) Death, Disability or Retirement. If an Optionee shall
die while employed by the Company, a Parent or a Subsidiary
Corporation thereof, or die within three months after the
termination of such Optionee's employment other than for cause, all
Options theretofore granted to such Optionee (to the extent
otherwise exercisable) may, unless earlier terminated in accordance
with their terms, be exercised by the Optionee or by the Optionee's
estate or by a person who acquired the right to exercise such Option
by bequest or inheritance or otherwise by reason of the death or
disability of the Optionee, at any time within one year after the
date of death of the Optionee. If the Optionee's employment shall
terminate by reason of disability or retirement, all Options
theretofore granted to such Optionee (to the extent otherwise
exercisable) may, unless earlier terminated in accordance with their
terms, be exercised by the Optionee at any time within three years
after the date of disability or retirement of the Optionee.
(h) Non-transferability of Options. Options granted under
the Plan shall not be transferable otherwise than (i) by will; (ii)
by the laws of descent and distribution; or (iii) to a revocable
inter vivos trust for the primary benefit of the Optionee and his or
her spouse. Options may be exercised, during the lifetime of the
Optionee, only by the Optionee, his or her guardian, legal
representative or the Trustee of an above described trust. Except
as permitted by the preceding sentences, no Option granted under the
Plan or any of the rights and privileges thereby conferred shall be
transferred, assigned, pledged, or hypothecated in any way (whether
by operation of law or otherwise), and no such Option, right, or
privilege shall be subject to execution, attachment, or similar
process. Upon any attempt so to transfer, assign, pledge,
hypothecate, or otherwise dispose of the Option, or of any right or
privilege conferred thereby, contrary to the provisions of this
Plan, or upon the levy of any attachment or similar process upon
such Option, right, or privilege, the Option and such rights and
privileges shall immediately become null and void.
(i) Effect of Certain Changes.
(A) If there is any change in the number of shares of
Common Stock through the declaration of stock dividends, or
through recapitalization resulting in stock splits, or
combinations or exchanges of such shares, the number of shares
of Common Stock available for awards under the Plan pursuant
to Section 1.05 above, the number of such shares covered by
the outstanding Options and the price per share of such
Options shall be proportionately adjusted by the Committee to
reflect any increase or decrease in the number of issued
shares of Common Stock; provided, however, that any fractional
shares resulting from such adjustment shall be eliminated.
(B) In the event of the proposed dissolution or
liquidation of the Company, in the event of any corporate
separation or division, including, but not limited to split-
up, split-off or spin-off, or in the event of a merger,
consolidation or other reorganization of the Corporation with
another corporation, the Committee may provide that the holder
of each Option then exercisable shall have the right to
exercise such Option (at its then Option Price) solely for the
kind and amount of shares of stock and other securities,
property, cash or any combination thereof receivable upon such
dissolution, liquidation, or corporate separation or division,
or merger, consolidation or other reorganization by a holder
of the number of shares of Common Stock for which such Option
might have been exercised immediately prior to such
dissolution, liquidation, or corporate separation or division,
or merger, consolidation or other reorganization; or the
Committee may provide, in the alternative, that each Option
granted under the Plan shall terminate as of a date to be
fixed by the Committee; provided, however, that not less than
90-days' written notice of the date so fixed shall be given to
each Optionee, who shall have the right, during the period of
90 days preceding such termination, to exercise the Options as
to all or any part of the shares of Common Stock covered
thereby, including shares as to which such Options would not
otherwise be exercisable; provided, further, that failure to
provide such notice shall not invalidate or affect the action
with respect to which such notice was required.
(C) If while unexercised Options remain outstanding
under the Plan, the stockholders of the Corporation approve a
definitive agreement to merge, consolidate or otherwise
reorganize the Company with or into another corporation or to
sell or otherwise dispose of all or substantially all of its
assets, or adopt a plan of liquidation (each, a "Disposition
Transaction"), then the Committee may: (i) make an appropriate
adjustment to the number and class of shares available for
awards under the Plan pursuant to Section 1.05 above, and to
the amount and kind of shares or other securities or property
(including cash) receivable upon exercise of any outstanding
options after the effective date of such transaction, and the
price thereof, or, in lieu of such adjustment, provide for the
cancellation of all options outstanding at or prior to the
effective date of such transaction; (ii) provide that
exercisability of all Options shall be accelerated, whether or
not otherwise exercisable; or (iii) in its discretion, permit
Optionees to surrender outstanding options for cancellation;
provided, however, that if the stockholders approve such
Disposition Transaction within five years of the date of
adoption of this Plan and before the Company is taken public,
the Committee shall provide for the alternative in (ii) above.
Upon any cancellation of an outstanding Option pursuant to
this 9.13(i)(C), the Optionee shall be entitled to receive, in
exchange therefor, a cash payment under any such Option in an
amount per share determined by the Committee in its sole
discretion, but not less than the difference between the per
share exercise price of such Option and the Fair Market Value
of a share of Company Common Stock on such date as the
Committee shall determine.
(D) Paragraphs (B) and (C) of this Section 9.13(i)
shall not apply to a merger, consolidation or other
reorganization in which the Company is the surviving
corporation and shares of Common Stock are not converted into
or exchanged for stock, securities of any other corporation,
cash or any other thing of value. Notwithstanding the
preceding sentence, in case of any consolidation, merger or
other reorganization of another corporation into the Company
in which the Company is the surviving corporation and in which
there is a reclassification or change (including a change to
the right to receive cash or other property) of the shares of
Common Stock (other than a change in par value, or from par
value to no par value, or as a result of a subdivision or
combination, but including any change in such shares into two
or more classes or series of shares), the Committee may
provide that the holder of each Option then exercisable shall
have the right to exercise such Option solely for the kind and
amount of shares of stock and other securities (including
those of any new direct or indirect parent of the Company),
property, cash or any combination thereof receivable upon such
reclassification, change, consolidation or merger by the
holder of the number of shares of Common Stock for which such
Option might have been exercised.
(E) In the event of a change in the Common Stock of the
Company as presently constituted which is limited to a change
of all of its authorized shares with par value into the same
number of shares with a different par value or without par
value, the shares resulting from any such change shall be
deemed to be the Common Stock within the meaning of the Plan.
(F) To the extent that the foregoing adjustments relate
to stock or securities of the Company, such adjustments shall
be made by the Committee, whose determination in that respect
shall be final, binding and conclusive, provided that each
Incentive Stock Option granted pursuant to Article III of this
Plan shall not be adjusted in a manner that causes such option
to fail to continue to qualify as an Incentive Stock Option
within the meaning of Section 422 of the Code.
(G) Except as hereinbefore expressly provided in this
Section 9.13(i), the Optionee shall have no rights by reason
of any subdivision or consolidation of shares of stock or any
class or the payment of any stock dividend or any other
increase or decrease in the number of shares of stock of any
class or by reason of any dissolution, liquidation, merger,
consolidation or other reorganization or spin-off of assets or
stock of another corporation; and any issue by the Company of
shares of stock of any class shall not affect, and no
adjustment by reason thereof shall be made with respect to,
the number of price of shares of Common Stock subject to the
Option. The grant of an Option pursuant to the Plan shall not
affect in any way the right or power of the Company to make
adjustments, reclassifications, reorganizations or changes of
its capital or business structures or to merge or to
consolidate or to dissolve, liquidate or sell, or transfer all
or part of its business or assets.
(j) Rights as a Shareholder. An Optionee or a transferee of
an Option shall have no right as a shareholder with respect to any
shares covered by the Option until the date of the issuance of a
certificate evidencing such shares. No adjustment shall be made for
dividends (ordinary or extraordinary, whether in cash, securities or
other property) or distribution of other rights for which the record
date is prior to the date such certificate is issued, except as
provided in Section 9.13(i) hereof.
(k) Other Provisions. The Option Agreement authorized under
the Plan shall contain such other provisions, including, without
limitation, (A) the imposition of restrictions upon the exercise of
an Option; (B) in the case of an Incentive Stock Option, the
inclusion of any condition not inconsistent with such Option
qualifying as an Incentive Stock Option; and (C) conditions relating
to compliance with applicable federal and state securities laws, as
the Committee shall deem advisable.
9.14. Effects of Headings
The Section and Subsection headings contained herein are for convenience
only and shall not affect the construction hereof.
ADOPTED BY RESOLUTION OF THE BOARD OF DIRECTORS, EFFECTIVE THE 30TH DAY OF
APRIL 1996.
/S/ Roger D. Dudley, Secretary
---------------------
fonix CORPORATION
STOCK OPTION AGREEMENT
(Employee Plan)
This Stock Option Agreement ("Agreement") is entered into as
of the ____th day of ________, 1996, between fonix Corporation, a
Delaware corporation (the "Company"), and ______________________
("Optionee").
WHEREAS, the Company has adopted the fonix Corporation Long-
Term Stock Investment and Incentive Plan (the "Plan") and has approved
the granting to certain officers and key employees of the Company
nonqualified stock options to purchase common stock of the Company, par
value $.0001 per share ("Common Stock"); and
WHEREAS, Optionee is employed by the Company in a key
executive capacity, or is engaged by the Company as a key consultant,
and the Company desires that Optionee remain in such employ and desires
to secure or increase Optionee's stock ownership of the Company in order
to increase Optionee's incentive and personal interest in the welfare of
the Company.
NOW, THEREFORE, in consideration of the premises, covenants
and agreements hereinafter set forth, and other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto have agreed and do hereby agree as
follows:
1. Grant of Options. The Company hereby grants to
Optionee options (the "Options") to purchase all or any part of an
aggregate amount of ____________________________ (___________) shares of
the Common Stock of the Company at a purchase price of $________ per
share, on the terms and conditions hereinafter set forth.
2. Term of Options. Except as otherwise provided in
Section 5 below, the Options shall be exercisable pursuant to the
vesting schedule set forth in Section 3 and ending ten (10) years after
the date of this Agreement, at which time the Options shall terminate
and not be exercisable thereafter.
3. Vesting Schedule. The Options granted herein are
subject to a three year vesting schedule, pursuant to which one-third
(1/3) of the total number of Options granted may be exercised by
Optionee commencing one year from _______________, 19___, the date of
hire of Optionee by the Company (the "Employment Date"), and an
additional 1/3 of the Options may be exercised each year thereafter,
until three years from the Employment Date, at which time all Options
granted hereunder shall be fully vested and may be exercised.
4. Exercise of Options. The Options or any portion
thereof may be exercised by Optionee paying the purchase price of any
shares with respect to which the Options are being exercised by cash,
certified check, bank draft or postal or express money order, or at the
request of Optionee, prior-acquired shares of Common Stock valued at
their fair market value on the date prior to exercise, in each case
delivered with a written notice of exercise which shall:
(a) State the number of shares being
exercised, the name, address and social security
number of each person for whom the stock
certificate or certificates for such shares of
the Common Stock are to be registered;
(b) Contain any representations and
agreements as to Optionee's investment intent
with respect to the shares exercised as may be
satisfactory to the Company's counsel; and
(c) Be signed by the person or persons
entitled to exercise the Options and, if the
Options are being exercised by any person or
persons other than Optionee, be accompanied by
proof satisfactory to counsel for the Company of
the right of such person or persons to exercise
the Options.
As a condition to the exercise of the Options, the Company
may require the person exercising the Options to make any representation
and warranty to the Company that may be required by any applicable law
or regulation.
5. Termination of Employment or Death.
(a) In the event Optionee's employment shall
terminate on account of death, the Options held by Optionee, to the
extent exercisable through the date of death, may be exercised by a
person who acquires the right to exercise the Options, provided such
exercise occurs within both the remaining effective term of the Options
and one year after the Optionee's death.
(b) In the event Optionee's employment shall
terminate on account of retirement or permanent disability (as defined
in the Plan), the Options held by Optionee, to the extent exercisable
through the date of such retirement or disability, may be exercised by
Optionee, provided such exercise occurs within both the remaining
effective term of the Options and three years from the date of
termination of employment.
(c) In the event Optionee's employment shall
terminate on account of resignation, discharge not "for cause" (as
defined below), or expiration of elected term, Optionee may exercise the
Options within both the remaining effective term of the Options and
three months from the date of termination.
(d) In the event Optionee's employment shall
terminate on account of discharge for cause, no exercise period shall
exist and Optionee shall forfeit the Options as of the date of
termination.
(e) To the extent not then exercisable in accordance
with this Section, the Options shall terminate on the date Optionee's
employment terminates with the Company.
(f) For purposes of this Agreement, termination of
employment shall be considered to occur when an employee is no longer an
employee of the Company or any Subsidiary. Whether an authorized leave
of absence or absence on military or government service shall constitute
termination of employment for purposes of this Plan shall be determined
by the Committee. Retirement shall be considered to mean retirement
pursuant to any applicable retirement plan of the Company or any of its
Subsidiaries. Termination "for cause" shall mean willful misconduct or
dishonesty or conviction of or failure to contest prosecution for a
felony, or excessive absenteeism unrelated to illness. The Options, to
the extent exercisable after death of Optionee, may be exercised by
Optionee's personal representatives.
6. Transfer of Options. The Options may not be assigned
or transferred in any manner except upon the death of Optionee by will
or by the laws of descent and distribution. During the lifetime of
Optionee, the Options shall be exercisable only by Optionee.
7. Reservation of Shares. The Company, during the term
hereof, will at all times reserve and keep available, and will seek or
obtain from any regulatory body having jurisdiction any requisite
authority in order to issue and sell such number of shares of its Common
Stock as shall be sufficient to satisfy the requirements hereof. The
inability of the Company to obtain from any regulatory body having
jurisdiction the authority deemed by the Company's counsel to be
necessary to the lawful issuance and sale of any shares of stock
hereunder shall relieve the Company of any liability in respect of the
nonissuance or sale of such stock as to which such requisite authority
shall not have been obtained.
8. Application of Section 16(b). The parties acknowledge
that, if Optionee is an officer, director or ten percent (10%)
shareholder of the Company, the grant to Optionee of Options hereunder,
or the Optionee's sale of shares underlying the Options, may, unless the
Plan is qualified under Rule 16b-3 of the SEC, subject Optionee to
liability under the insider trading prohibitions of Section 16(b) of the
Securities Exchange Act of 1934, if Optionee purchases or sells Common
Stock of the Company within six months before or after the grant of the
Options, or within six months before or after the sale of the shares
underlying the Options. This acknowledgement is for informational
purposes only and is not to be construed as increasing, limiting or
describing the rights and obligations of the parties hereunder.
9. Restriction on Option Exercise. Notwithstanding any
contrary provision hereof, the Options may not be exercised by Optionee
unless the shares to be acquired by Optionee have been registered under
the Securities Act of 1933 (the "Act"), and any other applicable
securities laws of any other state, or the Company receives an opinion
of counsel (which may be counsel for the Company) reasonably acceptable
to the Company stating that the exercise of the Options and the issuance
of shares pursuant to the exercise is registered or exempt from such
registration requirements. Optionee shall represent that unless and
until the shares have been registered under the Act and applicable state
securities laws: (1) Optionee is acquiring the shares for investment
purposes only and without the intent of making any sale or disposition
thereof; (2) Optionee has been advised and understands that the shares
have not been registered for sale pursuant to federal and state
securities laws and are "restricted securities" under such laws; and
(3) Optionee acknowledges that the shares will be subject to stop
transfer instructions and bear the following legend:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR UNDER ANY OTHER STATE
SECURITIES LAWS AND MAY NOT BE OFFERED, SOLD OR
TRANSFERRED IN THE ABSENCE OF REGISTRATION OR
THE AVAILABILITY OF AN EXEMPTION FROM SUCH
REGISTRATION. NO OFFER, SALE OR TRANSFER MAY
TAKE PLACE WITHOUT PRIOR WRITTEN APPROVAL OF THE
COMPANY BEING AFFIXED HERETO. IN THE ABSENCE OF
AN EFFECTIVE REGISTRATION STATEMENT, SUCH
APPROVAL SHALL BE GRANTED ONLY IF THE COMPANY
HAS RECEIVED AN OPINION OF SHAREHOLDER'S COUNSEL
AT SHAREHOLDER'S EXPENSE SATISFACTORY TO THE
COMPANY TO THE EFFECT THAT THIS CERTIFICATE MAY
BE LAWFULLY TRANSFERRED PURSUANT TO AN EXEMPTION
FROM REGISTRATION.
10. Withholding of Taxes. The Options may not be
exercised unless Optionee has paid or has made provision satisfactory to
the Company for payment of, federal, state and local income taxes, or
any other taxes (other than stock transfer taxes) which the Company may
be obligated to collect as a result of the issue or transfer of Common
Stock upon such exercise of the Options. In its sole discretion, and at
the request of Optionee, the Company may permit Optionee (other than an
Optionee who would be subject to Section 16(b) of the Exchange Act) to
satisfy the obligation imposed by this Section, in whole or in part, by
instructing the Company to withhold up to that number of shares
otherwise issuable to Optionee with a fair market value equal to the
amount of tax to be withheld.
11. Merger. The Company hereby agrees that, in the event
of the Company's liquidation, reorganization, separation, merger or
consolidation into, or acquisition of property or stock by another
corporation, the Company will use its best efforts to cause a
substitution or assumption of the Options.
12. Antidilution. The aggregate number of shares of
Common Stock available for issuance under the Options, and the price per
share, shall all be proportionately adjusted for any increase or
decrease in the number of issued shares of Common Stock subsequent to
the date of this Agreement resulting from a recapitalization,
reorganization, merger, consolidation or similar transaction as provided
in the Plan. Upon dissolution or liquidation of the Company, or upon a
merger or consolidation in which the Company is not the surviving
corporation (unless otherwise agreed in connection with the merger), the
Options shall terminate.
13. No Rights as a Stockholder. Optionee or a permitted
transferee of the Options shall have no rights as a stockholder with
respect to any shares covered by the Options until the date as of which
stock is issued following exercise of such Options. Except as provided
in this Agreement, no adjustment shall be made for dividends (ordinary
or extraordinary, whether in cash, securities or other property) or any
other distributions for which the record date is prior to the date as of
which such stock is issued.
14. No Employment Rights. This Agreement is not an
employment agreement or contract and does not grant any employment
rights to Optionee.
15. Other Provisions. The Company may, as a condition
precedent to the exercise of the Options, require Optionee (including,
in the event of Optionee's death, his legal representatives, legatees or
distributees) to enter into such agreements or to make such
representations as may be required to make lawful the exercise of the
Options and the ultimate disposition of the shares acquired by such
exercise.
16. Notices. Any notice which either of the parties
hereto is required or permitted to give to the other must be in writing
and may be given by personal delivery or by mailing the same by
registered or certified mail, return receipt requested, to the party to
which or to whom the notice is directed, at the address each party
designates in writing. Any notice mailed to such address shall be
effective when deposited in the mail, duly addressed and postage
prepaid, notwithstanding failure by the addressee thereof to receive the
mailed notice.
17. Governing Law. All transactions contemplated
hereunder and all rights of the parties hereto shall be governed as to
validity, construction, enforcement and in all other respects by the
laws and decisions of the State of Utah.
18. Titles. The titles of the sections of this Agreement
are inserted only as a matter of convenience and for reference, and in
no way define, limit or describe the scope of this Agreement or the
intent of any provisions hereof.
19. Amendment. This Agreement shall not be modified or
amended except by written agreement signed by all of the parties hereto.
20. Attorney's Fees and Costs of Enforcement. If any
party to this Agreement shall incur any costs resulting from enforcement
of this Agreement, the defaulting party shall be liable to the
prevailing party for such costs. Costs, as used herein, shall include
costs of enforcement, interpretation, or collection, including without
limitation, reasonable attorney's fees, court costs, collection charges,
travel and other related or similar expenses.
21. Severability of Provisions. Any provision of this
Agreement which is invalid, prohibited, or unenforceable in any
jurisdiction, shall not invalidate the remainder of the provision or the
remaining provisions of the Agreement.
22. Entire Agreement. Subject to the Plan, this Agreement
contains all of the representations, declarations and statements from
either party to the other and expresses the entire understanding between
the parties with respect to the transactions provided for herein. All
prior memoranda, letters, statements and agreements concerning this
subject matter, if any, are merged in and replaced by this Agreement.
23. Pronouns, Number and Gender. Wherever necessary to
implement the intent of the parties hereto, references herein to the
singular shall be interpreted as the plural, and vice versa, and the
feminine, masculine or neuter gender shall be treated as one of the
other genders.
24. Binding Effect. This Agreement shall be binding upon
and shall inure to the benefit of the parties hereto and their
respective legal representatives, successors and assigns.
25. Counterparts. This Agreement may be executed in one
or more counterparts, each of which may be deemed an original, but all
of which together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed the day and year first above written.
fonix Corporation
By: _____________________________________
Its:_____________________________________
OPTIONEE
_________________________________________
fonix corporation
a Delaware corporation
1996 Directors' Stock Option Plan
The purpose of this 1996 Directors' Stock Option Plan (the
"Plan") is to promote the long-term success of fonix corporation (the
"Company") by creating a long-term mutuality of interests between the
Directors and the shareholders of the Company, to provide an incentive
to the Directors to remain with the Company and to provide a means
through which the Company may attract able persons to serve as
Directors of the Company.
1. Administration
The Plan shall be administered by a Committee consisting of two
or more Directors appointed by the Board of Directors of the Company
(the "Board"). The Committee shall keep records of action taken at its
meetings. A majority of the Committee shall constitute a quorum at any
meeting, and the acts of a majority of the members present at any
meeting at which a quorum is present or acts approved in writing by all
the members of the Committee shall be the acts of the Committee. The
Committee shall interpret the Plan and prescribe such rules,
regulations and procedures in connection with the operations of the
Plan as it shall deem to be necessary and advisable for the
administration of the Plan consistent with the purposes of the Plan.
All questions of interpretation and application of the Plan or as to
"Nonstatutory Stock Options" and their related alternate stock
appreciation rights ("Alternate Rights") granted under the Plan
(hereinafter collectively referred to as "Options"), shall be subject
to the determination of the Committee, which shall be final and
binding. Notwithstanding the above, the selection of the Directors to
whom Options are to be granted, the timing of such grants, the number
of shares subject to any Option, the exercise price of any Option, the
periods during which any Option may be exercised and the term of any
Option shall be as hereinafter provided by formula and the Committee
shall have no discretion as to such matters.
2. Shares Available Under the Plan
Except as may be adjusted as provided elsewhere herein, the
shares of stock which may be issued upon exercise of Options under the
Plan shall be authorized and unissued or treasury shares of Common
Stock of the Company ("Common Stock"). The number of shares of Common
Stock the Company shall reserve for issuance upon exercise of Options
to be granted from time to time under the Plan, shall not exceed in the
aggregate 5,400,000 shares of Common Stock. In the absence of an
effective registration statement under the Securities Act of 1933 (the
"Act"), all Options granted and shares of Common Stock subject to their
exercise will be restricted as to subsequent resale or transfer,
pursuant to the provisions of Rule 144, promulgated under the Act;
provided, however, that the Company shall as soon as practicable, file
a registration statement covering the shares of Common Stock reserved
for issuance under the Plan on Form S-8, if such form is available for
use by the Company.
3. Formula Grant of Options
Only Directors of the Company are eligible to receive grants of
Options under the Plan.
A. Upon adoption of the Plan by the Board of Directors,
each current member of the Board will automatically and without further
action by the Board or the Committee be granted the following Options,
together with related Alternative Rights:
(1) Options to purchase 200,000 shares of Common
Stock for each prior calendar year, or portion of a
calendar year (but not less than 6 months) during which the
Director has served as a member of the Board, all of which
Options vest immediately upon the date of grant, and
(2) Options to purchase 400,000 shares of Common
Stock, which Options vest on January 1 of each year
commencing on January 1, 1997, at the rate of 200,000
shares per year (subject to adjustment and substitution as
provided below) for each prior calendar year or portion of
a calendar year (but not less than 6 months) during which
such Director serves as a member of the Board, provided
that no Options shall be granted pursuant to this Section
3.A(2) for any calendar year prior to 1996.
B. In addition to the Options granted to current
Directors of the Company upon adoption of Plan, any new member of the
Board of Directors appointed or elected after adoption of the Plan,
automatically and without further action by the Board or the Committee,
and to the extent shares are available for issuance under the Plan,
shall be granted Options to purchase 400,000 shares of Common Stock of
the Company on the day following the date of appointment of such person
to the Board. Such Options, if granted, shall vest on January 1 of
each year, following the end of the calendar year during which that
Optionee became a Director, at the rate of 200,000 shares per year
(subject to adjustment and substitution as provided below) for each
prior calendar year or portion of a calendar year (but not less than 6
months) which such Director completes in service as a member of the
Board.
C. A Director may decline acceptance of the grant of
Options hereunder by notifying the Committee of such decision.
4. Effective Date and Term of Plan
The Plan shall become effective as of the 30th day of April 1996,
the date the Plan is effectively adopted by a majority of the Board
(the "Effective Date"), but for purposes of qualification under the
exemptions stated in Section 16(b) of the Securities Exchange Act of
1934, the Plan must be approved by the holders of a majority of the
issued and outstanding shares of fonix corporation Common Stock present
in person or by proxy and entitled to vote at the earlier of either a
Special Meeting of Shareholders called for that purpose or the 1996
Annual Meeting of Shareholders of fonix corporation, which meeting
shall in any event, be held not more than twelve (12) months after
adoption of the Effective Date.
No awards shall be granted under the Plan after or on the 30th
day of April, 2006, which date is ten (10) years after the Effective
Date (the "Plan Termination Date"). Provided, however, that the Plan
and all awards made under the Plan prior to such Plan Termination Date
shall remain in effect until such awards have been satisfied or
terminated in accordance with the Plan and the terms of such awards.
5. Terms and Conditions of Nonstatutory Stock Options
Nonstatutory Stock Options granted under the Plan shall be
subject to the following terms and conditions:
A. The grant of a Nonstatutory Stock Option shall be
evidenced by a written Stock Option Agreement, executed by the Company
and the Director who is the holder of the Option (the "Optionee"),
stating the number of shares of Common Stock subject to the
Nonstatutory Stock Option evidenced thereby, and in such form as the
Committee may from time to time determine.
B. The purchase price at which each Nonstatutory Stock
Option may be exercised (the "Option Price") shall be one hundred
percent (100%) of the fair market value per share of the Common Stock
covered by the Nonstatutory Stock Option on the date of grant as
provided below.
C. Subject to the vesting schedule under Paragraph 3,
above, each Nonstatutory Stock Option shall be fully exercisable at any
time beginning six months, and within ten (10) years, after the date of
grant thereof (the "Option Term"). No Nonstatutory Stock Option shall
be exercisable after the expiration of its Option Term. A Nonstatutory
Stock Option to the extent exercisable at any time may be exercised in
whole or in part.
D. Each Nonstatutory Stock Option Agreement shall set
forth the procedure governing the exercise of the Nonstatutory Stock
Option granted thereunder, and shall provide that, upon such exercise
in respect of any shares of Common Stock subject thereto, the Optionee
shall pay to the Company, in full, the Option Price for such shares
with cash or with Common Stock previously owned by Optionee having a
fair market value on the date of exercise of the Nonstatutory Stock
Option, determined as provided below, equal to the Option Price for the
shares being purchased. Delivery of the shares may be accomplished
through the effective transfer to the Company of shares held by a
broker or other agent. The Company will also cooperate with any person
exercising a Nonstatutory Stock Option who participates in a cashless
exercise program of a broker or other agent under which all or part of
the shares received upon exercise of the Nonstatutory Stock Option are
sold through the broker or other agent or under which the broker or
other agent makes a loan to such person. Notwithstanding the
foregoing, the exercise of the Nonstatutory Stock Option shall not be
deemed to occur and no shares of stock will be issued by the Company
upon exercise of the Nonstatutory Stock Option until the Company has
received payment of the Option Price in full. The date of exercise of
a Nonstatutory Stock Option shall be determined under procedures
established by the Committee as provided above. Payment of the Option
Price with shares shall not increase the number of shares of stock
which may be issued under the Plan.
E. If an Optionee ceases to be a Director of the Company
for any reason, any outstanding Nonstatutory Stock Options held by the
Director shall be exercisable according to the following provisions:
(1) If the Optionee ceases to be a Director for any
reason other than resignation, removal for cause or death, any
outstanding Nonstatutory Stock Option held by the Optionee at
such time shall be exercisable by the Optionee (but only if
exercisable immediately prior to ceasing to be a Director) at any
time prior to the expiration date of such Nonstatutory Stock
Option or within three years after the date the grantee ceases to
be a Director, whichever is the shorter period;
(2) If during his term of office as a Director an
Optionee resigns from the Board or is removed from office for
cause, any outstanding Nonstatutory Stock Option held by the
Optionee which is not exercisable by him immediately prior to
resignation or removal shall terminate as of the date of
resignation or removal, and any outstanding Nonstatutory Stock
Option held by the Optionee which is exercisable immediately
prior to resignation or removal shall be exercisable at any time
prior to the expiration date of such Nonstatutory Stock Option or
within six months after the date of resignation or removal,
whichever period is shorter;
(3) Following the death of an Optionee during
service as a Director of the Company, any outstanding
Nonstatutory Stock Option held by him at the time of death
(whether or not exercisable by the grantee immediately prior to
death) shall be exercisable by the person entitled to do so under
the Will of the Optionee, or, if the Optionee shall fail to make
testamentary disposition of the Nonstatutory Stock Option or
shall die intestate, by the legal representative of the Optionee
at any time prior to the expiration date of such Nonstatutory
Stock Option or within three years after the date of death of
Optionee, whichever is the shorter period;
(4) Following the death of an Optionee after
ceasing to be a Director and during a period when a Nonstatutory
Stock Option is exercisable under (2) above, the Nonstatutory
Stock Option shall be exercisable by such person entitled to do
so under the will of the Optionee or by such legal representative
at any time prior to the expiration date of the Nonstatutory
Stock Option or within one year after the date of death,
whichever is the shorter period;
(5) Following the death of an optionee after
ceasing to be a Director and during a period when a Nonstatutory
Stock Option is exercisable under clause (1) above, the
Nonstatutory Stock Option shall be exercisable by such person
entitled to do so under the Will of the optionee or by such legal
representative at any time during the shorter of the following
two periods: (i) until the expiration date of the Nonstatutory
Stock Option or (ii) until three years after the grantee ceased
being a Director or one year after the date of death of the
Optionee (whichever is longer).
A Nonstatutory Stock Option held by an Optionee who has ceased to
be a Director of the Company shall terminate upon the expiration of the
applicable exercise period, if any, specified in this Section 5E.
F. "FAIR MARKET VALUE" per share in respect of any share
of Common Stock as of any particular date shall mean (i) the closing
sales price per share of Common Stock reflected on a national
securities exchange for the last preceding date on which there was a
sale of such Common Stock on such exchange; or (ii) if the shares of
Common Stock are then traded on an over-the-counter market, the average
of the closing bid and asked prices for the shares of Common Stock in
such over-the-counter market for the last preceding date on which there
was a sale of such Common Stock in such market; or (iii) in case no
reported sale takes place, the average of the closing bid and asked
prices on the National Association of Securities Dealers' Automated
Quotations System ("NASDAQ") or any comparable system, or if the shares
of Common Stock are not listed on NASDAQ or comparable system, the
closing sale price or, in case no reported sale takes place, the
average of the closing bid and asked prices, as furnished by any member
of the National Association of Securities Dealers, Inc. selected from
time to time by the Company for that purpose; or (iv) if the shares of
Common Stock are not then listed on a national securities exchange or
traded in an over-the-counter market, such value as the Committee in
its discretion may determine in any such other manner as the Committee
may deem appropriate. In no event shall the Fair Market Value of any
share of Common Stock be less than its par value.
6. Alternate Stock Appreciation Rights
A. Concurrently with the award of Nonstatutory Stock
Options to purchase one or more shares of Common Stock, the Board or
Committee shall, subject to the provisions of the Plan, award to the
Optionee with respect to each share of Common Stock, a related
Alternate Right, permitting the Optionee to be paid the appreciation on
the Nonstatutory Stock Option in Common Stock in lieu of exercising the
Nonstatutory Stock Option.
B. Alternate Rights shall be evidenced by written
agreements in such form as the Committee may from time to time
determine.
C. An Optionee who has been granted Alternate Rights
may, from time to time, in lieu of the exercise of an equal number of
Nonstatutory Stock Options, elect to exercise one or more Alternate
Rights and thereby become entitled to receive from the Company payment
in Common Stock the number of shares determined pursuant to Subsections
D and E. Alternate Rights shall be exercisable only to the same extent
and subject to the same conditions and within the same Option Terms as
the Nonstatutory Stock Options related thereto are exercisable, as
provided in this Plan.
D. The amount of payment to which an Optionee shall be
entitled upon the exercise of each Alternate Right shall be equal to
100% of the amount, if any, by which the Fair Market Value of a share
of Common Stock on the exercise date exceeds the Fair Market Value of
a share of Common Stock on the date the Nonstatutory Stock Option
related to said Alternate Right was granted or became effective, as the
case may be.
E. Upon exercise of Alternate Rights, the Company shall
pay Optionee the amount of payment determined pursuant to Subsection D
in Common Stock. The number of shares to be paid shall be determined
by dividing the amount of payment determined pursuant to Subsection D
by the Fair Market Value of a share of Common Stock on the exercise
date of such Alternate Rights. As soon as practicable after exercise,
the Company shall deliver to the Optionee a certificate or certificates
for such shares of Common Stock. All such shares shall be issued with
the rights and restrictions specified in this Plan for shares issued
pursuant to the exercise of Nonstatutory Stock Options.
F. The exercise of any Alternate Rights shall cancel an
equal number of Nonstatutory Stock Options related to said Alternate
Rights.
G. Upon termination of the Optionee's employment as a
Director of the Company by reason of permanent disability or retirement
(as each is determined by the Committee), the Optionee may, within six
months from the date of such termination, exercise any Alternate Rights
to the extend such Alternate Rights are exercisable during such six-
month period.
H. Except as provided in Subsection G, all Alternate
Rights shall terminate three months after the date of termination of
the Optionee's employment as a Director or upon the death of the
Optionee.
7. Restrictions
A. Each award under the Plan shall be subject to the
requirement that, if at any time the Committee 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) an agreement by the grantee of an
award 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 award or the issue or purchase of shares of Common
Stock thereunder, such award may not be exercised or consummated in
whole or in part unless and until such listing, registration,
qualification, consent, approval or agreement shall have been effected
or obtained free of any conditions not acceptable to the Committee. No
award under the Plan shall be assignable or transferable by the
recipient thereof, except by Will or by the laws of descent and
distribution or pursuant to the terms of a qualified domestic relations
order as defined in the U.S. Internal Revenue Code, as amended, or
Title I of the Employee Retirement Income Security Act, or the rules
thereunder. During the life of the recipient, such award shall be
exercisable only by such person or by such person's guardian or legal
representative. The recipient of an award shall not exercise the
Options for at least six months after date of grant of award.
B. Subject to the foregoing provisions of Section 5 and
the other provisions of this Plan, any Option granted under the Plan
shall be subject to such restrictions and other terms and conditions,
if any, as shall be determined, in its discretion, by the Committee and
set forth in the agreement under which the Option is granted, or an
amendment thereto; except that in no event, notwithstanding anything in
this Plan to the contrary, shall the Committee or the Board have any
power or authority which would cause the Plan to fail to be a plan
described in Rule 16b-3 of the Securities Exchange Act or any successor
Rule.
8. Withholding Taxes
Whenever the Company proposes or is required to issue or transfer
shares of Common Stock under the Plan, the Company shall, to the extent
permitted or required by law, have the right to require the grantee, as
a condition of exercise of its Options to remit to the Company no later
than the date of issuance or exercise, or make arrangements
satisfactory to the Board regarding payment of, any amount sufficient
to satisfy any federal, state and/or local taxes of any kind,
including, but not limited to, withholding tax requirements prior to
the delivery of any certificate or certificates for such shares. If
the participant fails to pay the amount required by the Board, the
Company shall have the right to withhold such amount from other amounts
payable by the Company to the participant, including but not limited
to, salary, fees or benefits, subject to applicable law.
Alternatively, the Board may cause the Company to issue or transfer
such shares of Common Stock net of the number of shares sufficient to
satisfy any such taxes, including, but not limited to, the withholding
tax requirements. For withholding tax purposes, the shares of Common
Stock shall be valued on the date the withholding obligation is
incurred.
9. Rights as a Shareholder
The recipient of any award under the Plan shall have no rights as
a shareholder with respect thereto unless and until certificates for
shares of Common Stock are issued to him or her upon exercise of the
options.
10. Adjustments
In the event of any change in the outstanding Common Stock by
reason of a stock dividend or distribution, recapitalization, merger,
consolidation, split-up, combination, exchange of shares or the like,
the Committee may appropriately adjust the number of shares of Common
Stock which may be issued under the Plan, the number of shares of
Common Stock subject to Options theretofore granted under the Plan and
the Option Price of Nonstatutory Stock Options theretofore granted
under the Plan.
11. Effect of Certain Changes
Notwithstanding Section 10 above, the following adjustments shall
be made upon the occurrence of certain events or changes to the Company
or its capitalization:
A. If there is any change in the number of shares of
Common Stock through the declaration of stock dividends, or through
recapitalization resulting in stock splits, or combinations or
exchanges of such shares, the number of shares of Common Stock
available for awards under the Plan, the number of such shares covered
by the outstanding Options and the price per share of such Options
shall be proportionately adjusted by the Committee to reflect any
increase or decrease in the number of issued shares of Common Stock;
provided, however, that any fractional shares resulting from such
adjustment shall be eliminated.
B. In the event of the proposed dissolution or
liquidation of the Company, in the event of any corporate separation or
division, including, but not limited to split-up, split-off or spin-
off, or in the event of a merger, consolidation or other reorganization
of the Corporation with another corporation, the Committee may provide
that the holder of each Option then exercisable shall have the right to
exercise such Option (at its then Option Price) solely for the kind and
amount of shares of stock and other securities, property, cash or any
combination thereof receivable upon such dissolution, liquidation, or
corporate separation or division, or merger, consolidation or other
reorganization by a holder of the number of shares of Common Stock for
which such Option might have been exercised immediately prior to such
dissolution, liquidation, or corporate separation or division, or
merger, consolidation or other reorganization; or the Committee may
provide, in the alternative, that each Option granted under the Plan
shall terminate as of a date to be fixed by the Committee; provided,
however, that not less than 90-days' written notice of the date so
fixed shall be given to each Optionee, who shall have the right, during
the period of 90 days preceding such termination, to exercise the
Options as to all or any part of the shares of Common Stock covered
thereby, including shares as to which such Options would not otherwise
be exercisable; provided, further, that failure to provide such notice
shall not invalidate or affect the action with respect to which such
notice was required.
C. If while unexercised Options remain outstanding under
the Plan, the stockholders of the Corporation approve a definitive
agreement to merge, consolidate or otherwise reorganize the Company
with or into another corporation or to sell or otherwise dispose of all
or substantially all of its assets, or adopt a plan of liquidation
(each, a "Disposition Transaction"), then the Committee may: (i) make
an appropriate adjustment to the number and class of shares available
for awards under the Plan, and to the amount and kind of shares or
other securities or property (including cash) receivable upon exercise
of any outstanding options after the effective date of such
transaction, and the price thereof, or, in lieu of such adjustment,
provide for the cancellation of all options outstanding at or prior to
the effective date of such transaction; (ii) provide that
exercisability of all Options shall be accelerated, whether or not
otherwise exercisable; or (iii) in its discretion, permit Optionees to
surrender outstanding options for cancellation.
D. Paragraphs (B) and (C) of this Section shall not
apply to a merger, consolidation or other reorganization in which the
Company is the surviving corporation and shares of Common Stock are not
converted into or exchanged for stock, securities of any other
corporation, cash or any other thing of value. Notwithstanding the
preceding sentence, in case of any consolidation, merger or other
reorganization of another corporation into the Company in which the
Company is the surviving corporation and in which there is a
reclassification or change (including a change to the right to receive
cash or other property) of the shares of Common Stock (other than a
change in par value, or from par value to no par value, or as a result
of a subdivision or combination, but including any change in such
shares into two or more classes or series of shares), the Committee may
provide that the holder of each Option then exercisable shall have the
right to exercise such Option solely for the kind and amount of shares
of stock and other securities (including those of any new direct or
indirect parent of the Company), property, cash or any combination
thereof receivable upon such reclassification, change, consolidation or
merger by the holder of the number of shares of Common Stock for which
such Option might have been exercised.
E. In the event of a change in the Common Stock of the
Company as presently constituted which is limited to a change of all of
its authorized shares with par value into the same number of shares
with a different par value or without par value, the shares resulting
from any such change shall be deemed to be the Common Stock within the
meaning of the Plan.
F. To the extent that the foregoing adjustments relate
to stock or securities of the Company, such adjustments shall be made
by the Committee, whose determination in that respect shall be final,
binding and conclusive.
G. Except as hereinbefore expressly provided in this
Section, the Optionee shall have no rights by reason of any subdivision
or consolidation of shares of stock or any class or the payment of any
stock dividend or any other increase or decrease in the number of
shares of stock of any class or by reason of any dissolution,
liquidation, merger, consolidation or other reorganization or spin-off
of assets or stock of another corporation; and any issue by the Company
of shares of stock of any class shall not affect, and no adjustment by
reason thereof shall be made with respect to, the number or price of
shares of Common Stock subject to the Option. The grant of an Option
pursuant to the Plan shall not affect in any way the right or power of
the Company to make adjustments, reclassifications, reorganizations or
changes of its capital or business structures or to merge or to
consolidate or to dissolve, liquidate or sell, or transfer all or part
of its business or assets.
12. Amendment of the Plan
A. The Committee may, without further action by the
shareholders and without receiving further consideration from the
participants, amend this Plan or condition or modify awards under this
Plan in response to changes in securities, tax or other laws or rules,
regulations or regulatory interpretations thereof applicable to this
Plan or to comply with stock exchange rules or requirements. Provided,
however, that no such amendment pursuant to this Section 10 shall
circumvent the provisions of the last sentence of Paragraph 1, above or
otherwise disqualify the Plan for exemption under Rule 16b-3 of the
Securities Exchange Act or any successor Rule.
B. The Committee may at any time and from time to time
terminate or modify or amend the Plan in any respect, except that
without shareholder approval the Committee may not (i) increase the
maximum number of shares of Common Stock which may be issued under the
Plan (other than increases pursuant to Section 9), (ii) extend the
period during which any award may be granted or exercised, or (iii)
extend the term of the Plan. The termination or any modification or
amendment of the Plan, except as provided in subsection (a), shall not
without the consent of a participant, affect his other rights under an
award previously granted to him or her.
C. Notwithstanding anything contained in the preceding
paragraph or any other provision of the Plan or any Nonstatutory Stock
Option agreement, the Board shall have the power to amend the Plan in
any manner deemed necessary or advisable for Nonstatutory Stock Options
granted under the Plan to qualify for the exemption provided by Rule
16b-3 (or any successor Rule relating to exemption from Section 16(b)
of the Securities Exchange Act), and any such amendment shall, to the
extent deemed necessary or advisable by the Board, be applicable to any
outstanding Nonstatutory Stock Options theretofore granted under the
Plan notwithstanding any contrary provisions contained in any
Nonstatutory Stock Option agreement. In the event of any such
amendment to the Plan, the holder of any Nonstatutory Stock Option
outstanding under the Plan shall, upon request of the Committee and as
a condition to the exercisability of such option, execute a conforming
amendment in the form prescribed by the Committee to the Nonstatutory
Stock Option agreement within such reasonable time as the Committee
shall specify in such request.
13. Effect of Headings
The Section and Subsection headings contained herein are for
convenience only and shall not affect the construction hereof.
ADOPTED BY RESOLUTION OF THE BOARD OF DIRECTORS, EFFECTIVE THE 30TH DAY
OF APRIL 1996.
/S/ Roger D. Dudley, Secretary
--------------------
fonix CORPORATION
STOCK OPTION AND STOCK APPRECIATION RIGHTS AGREEMENT
(Directors' Plan)
This Stock Option and Stock Appreciation Rights Agreement
("Agreement"), is entered into as of the 30th day of April, 1996,
between fonix Corporation, a Delaware corporation (the "Company"), and
______________________________ ("Optionee").
WHEREAS, the Company has adopted the fonix Corporation 1996
Directors' Stock Option Plan (the "Plan") and has approved the granting
to certain directors of the Company nonqualified stock options and
related alternative stock appreciation rights to purchase common stock
of the Company, par value $.0001 per share ("Common Stock"); and
WHEREAS, Optionee is a director of the Company, and the
Company desires to secure or increase Optionee's stock ownership of the
Company in order to increase Optionee's incentive and personal interest
in the welfare of the Company.
NOW, THEREFORE, in consideration of the premises, covenants
and agreements hereinafter set forth, and other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto have agreed and do hereby agree as
follows:
1. Grant of Options. The Company hereby grants to
Optionee options (the "Options") to purchase all or any part of an
aggregate amount of _________________________ (_________) shares of the
Common Stock of the Company at a price of $4.0625 per share, on the
terms and conditions hereinafter set forth, representing:
(a) Options to purchase ------- shares of Common
Stock (representing options for 200,000 shares for each prior calendar
year, or portion of a calendar year, but not less than 6 months, during
which Optionee has served as a member of the Board), all of which
Options vest immediately upon the date hereof, subject to any other
restrictions on exercise set forth in this Agreement, and
(b) Options to purchase 400,000 shares of Common
Stock, which Options vest on January 1 of each year commencing on
January 1, 1997, at the rate of 200,000 shares per year (subject to
adjustment and substitution as provided below), provided Optionee serves
as a member of the Board of Directors for the calendar year or portion
of a calendar year (but not less than 6 months) prior to the January 1
vesting date. If Optionee does not serve as a Director of the Company
during the requisite six- month period during the year prior to the
vesting date, any unvested Options heretofore granted to Optionee
pursuant to this Section 1(b) shall be forfeited by Optionee and
surrendered to the Company.
2. Term of Options. Except as otherwise provided in
Section 4 below, the Options shall be exercisable provided they have
vested, and at any time beginning six (6) months after the date of grant
and ending ten (10) years after the date of this Agreement, at which
time the Options shall terminate and not be exercisable thereafter.
3. Grant of Alternate Stock Appreciation Rights.
Concurrently with the grant of the Options pursuant to paragraph 1, the
Company hereby grants to Optionee with respect to each share of Common
Stock subject to the Options, related Alternate Rights ("Alternate
Rights"). Each Alternate Right entitles the Optionee, in lieu of
exercising the Options granted herein, to elect to receive from the
Company, in the form of Common Stock, the value of the appreciation in
the Common Stock underlying the Options.
(a) Entitlement Upon Exercise of Alternate Rights.
Upon the exercise of an Alternate Right, Optionee shall be entitled to
receive from the Company the amount, if any, by which the Fair Market
Value (as defined in the Plan) of a share of Common Stock on the
exercise date exceeds the Fair Market Value of a share of Common Stock
on the date the Options related to the Alternate Rights were granted.
(b) Payment in the Form of Common Stock. Payment
pursuant to paragraph 3(a) shall be made by the Company in the form of
Common Stock. The exercise of any Alternate Rights shall cancel an
equal number of Options related to said Alternate Rights. All shares
issued upon the exercise of Alternate Rights shall be issued with the
rights and restrictions specified in the Plan for shares issued pursuant
to the exercise of Options.
(c) Rights Subject to Terms of Related Options.
Alternate Rights shall be exercisable only to the same extent and
subject to the same conditions and within the same terms and vesting
schedules, as the Options related thereto are exercisable. Accordingly,
unless the context indicates otherwise, reference in this Agreement to
"Options" shall include the Alternate Rights associated therewith.
4. Exercise of Options. The Options or any portion
thereof may be exercised by Optionee paying the purchase price of any
shares with respect to which the Options are being exercised by cash,
certified check, bank draft or postal or express money order, or at the
request of Optionee, prior-acquired shares of Common Stock valued at
their fair market value on the date prior to exercise, in each case
delivered with a written notice of exercise which shall:
(a) State the number of shares being
exercised, the name, address and social security
number of each person for whom the stock
certificate or certificates for such shares of
the Common Stock are to be registered;
(b) Contain any representations and
agreements as to Optionee's investment intent
with respect to the shares exercised as may be
satisfactory to the Company's counsel; and
(c) Be signed by the person or persons
entitled to exercise the Options and, if the
Options are being exercised by any person or
persons other than Optionee, be accompanied by
proof satisfactory to counsel for the Company of
the right of such person or persons to exercise
the Options.
As a condition to the exercise of the Options, the Company
may require the person exercising the Options to make any representation
and warranty to the Company that may be required by any applicable law
or regulation.
5. Termination of Directorship.
(a) In the event Optionee shall cease to be a
Director on account of death of the Optionee during service as a
Director, the Options held by Optionee, to the extent exercisable
through the date of death, may be exercised by a person who acquires the
right to exercise the Options, provided such exercise occurs within both
the remaining effective term of the Options and three years after the
Optionee's death.
(b) In the event Optionee's employment shall
terminate on account of resignation, or removal "for cause" (as defined
below), Optionee may exercise the Options within both the remaining
effective term of the Options and six months from the date of
resignation or removal; provided, however, if the Optionee dies during
the six month period, the Options may be exercised by the person
entitled to do so within both the remaining effective term of the
Options and one year from the date of death.
(c) In the event Optionee shall cease to be a
Director for reasons other than resignation, removal for cause, or
death, (e.g. retirement, permanent disability, or removal not for
cause), the Options held by Optionee, to the extent exercisable through
the date of such termination, may be exercised by Optionee, provided
such exercise occurs within both the remaining effective term of the
Options and three years from the date Optionee ceases to be a Director;
provided, however, if the Optionee dies during the three year period,
the Options may be exercised by the person entitled to do so during the
shorter of the following two periods: (i) until the expiration date of
the Options, or (ii) until three years after the Optionee ceased being a
Director, or one year after the date of death of the Optionee (whichever
is longer).
(d) For purposes of this Agreement, "retirement" and
"disability" shall be as determined by the Company or the Committee
which administers the Plan. Removal "for cause" shall mean willful
misconduct or dishonesty or conviction of or failure to contest
prosecution for a felony, or excessive absenteeism unrelated to illness.
6. Transfer of Options. The Options may not be assigned
or transferred in any manner except upon the death of Optionee by will
or by the laws of descent and distribution, or pursuant to a qualified
domestic relations order as defined by the Internal Revenue Code of
1986, as amended, or Title I of the Employee Retirement Income Security
Act, or the rules thereunder. During the lifetime of Optionee, the
Options shall be exercisable only by Optionee.
7. Reservation of Shares. The Company, during the term
hereof, will at all times reserve and keep available, and will seek or
obtain from any regulatory body having jurisdiction any requisite
authority in order to issue and sell such number of shares of its Common
Stock as shall be sufficient to satisfy the requirements hereof. The
inability of the Company to obtain from any regulatory body having
jurisdiction the authority deemed by the Company's counsel to be
necessary to the lawful issuance and sale of any shares of stock
hereunder shall relieve the Company of any liability in respect of the
nonissuance or sale of such stock as to which such requisite authority
shall not have been obtained.
8. Application of Section 16(b). The parties acknowledge
that inasmuch as Optionee is a director of the Company, the grant to
Optionee of Options hereunder, or the Optionee's sale of shares
underlying the Options, may, unless the Plan is qualified under Rule
16b-3 of the SEC, subject Optionee to liability under the insider
trading prohibitions of Section 16(b) of the Securities Exchange Act of
1934, if Optionee purchases or sells Common Stock of the Company within
six months before or after the grant of the Options, or within six
months before or after the sale of the shares underlying the Options.
This acknowledgement is for informational purposes only and is not to be
construed as increasing, limiting or describing the rights and
obligations of the parties hereunder.
9. Restriction on Option Exercise. Notwithstanding any
contrary provision hereof, the Options may not be exercised by Optionee
unless the shares to be acquired by Optionee have been registered under
the Securities Act of 1933 (the "Act"), and any other applicable
securities laws of any other state, or the Company receives an opinion
of counsel (which may be counsel for the Company) reasonably acceptable
to the Company stating that the exercise of the Options and the issuance
of shares pursuant to the exercise is registered or exempt from such
registration requirements. Optionee shall represent that unless and
until the shares have been registered under the Act and applicable state
securities laws: (1) Optionee is acquiring the shares for investment
purposes only and without the intent of making any sale or disposition
thereof; (2) Optionee has been advised and understands that the shares
have not been registered for sale pursuant to federal and state
securities laws and are "restricted securities" under such laws; and
(3) Optionee acknowledges that the shares will be subject to stop
transfer instructions and bear the following legend:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR UNDER ANY OTHER STATE
SECURITIES LAWS AND MAY NOT BE OFFERED, SOLD OR
TRANSFERRED IN THE ABSENCE OF REGISTRATION OR
THE AVAILABILITY OF AN EXEMPTION FROM SUCH
REGISTRATION. NO OFFER, SALE OR TRANSFER MAY
TAKE PLACE WITHOUT PRIOR WRITTEN APPROVAL OF THE
COMPANY BEING AFFIXED HERETO. IN THE ABSENCE OF
AN EFFECTIVE REGISTRATION STATEMENT, SUCH
APPROVAL SHALL BE GRANTED ONLY IF THE COMPANY
HAS RECEIVED AN OPINION OF SHAREHOLDER'S COUNSEL
AT SHAREHOLDER'S EXPENSE SATISFACTORY TO THE
COMPANY TO THE EFFECT THAT THIS CERTIFICATE MAY
BE LAWFULLY TRANSFERRED PURSUANT TO AN EXEMPTION
FROM REGISTRATION.
10. Withholding of Taxes. The Options may not be
exercised unless Optionee has paid or has made provision satisfactory to
the Company for payment of, federal, state and local income taxes, or
any other taxes (other than stock transfer taxes) which the Company may
be obligated to collect as a result of the issue or transfer of Common
Stock upon such exercise of the Options. In its sole discretion, and at
the request of Optionee, the Company may permit Optionee (other than an
Optionee who would be subject to Section 16(b) of the Exchange Act) to
satisfy the obligation imposed by this Section, in whole or in part, by
instructing the Company to withhold up to that number of shares
otherwise issuable to Optionee with a fair market value equal to the
amount of tax to be withheld.
11. Merger. The Company hereby agrees that, in the event
of the Company's liquidation, reorganization, separation, merger or
consolidation into, or acquisition of property or stock by another
corporation, the Company will use its best efforts to cause a
substitution or assumption of the Options.
12. Antidilution. The aggregate number of shares of
Common Stock available for issuance under the Options, and the price per
share, shall all be proportionately adjusted for any increase or
decrease in the number of issued shares of Common Stock subsequent to
the date of this Agreement resulting from a recapitalization,
reorganization, merger, consolidation or similar transaction as provided
in the Plan. Upon dissolution or liquidation of the Company, or upon a
merger or consolidation in which the Company is not the surviving
corporation (unless otherwise agreed in connection with the merger), the
Options shall terminate.
13. No Rights as a Stockholder. Optionee or a permitted
transferee of the Options shall have no rights as a stockholder with
respect to any shares covered by the Options until the date as of which
stock is issued following exercise of such option. Except as provided
in this Agreement, no adjustment shall be made for dividends (ordinary
or extraordinary, whether in cash, securities or other property) or any
other distributions for which the record date is prior to the date as of
which such stock is issued.
14. No Employment Rights. This Agreement is not an
employment agreement or contract and does not grant any employment
rights to Optionee.
15. Other Provisions. The Company may, as a condition
precedent to the exercise of the Options, require Optionee (including,
in the event of Optionee's death, his legal representatives, legatees or
distributees) to enter into such agreements or to make such
representations as may be required to make lawful the exercise of the
Options and the ultimate disposition of the shares acquired by such
exercise.
16. Notices. Any notice which either of the parties
hereto is required or permitted to give to the other must be in writing
and may be given by personal delivery or by mailing the same by
registered or certified mail, return receipt requested, to the party to
which or to whom the notice is directed, at the address each party
designates in writing. Any notice mailed to such address shall be
effective when deposited in the mail, duly addressed and postage
prepaid, notwithstanding failure by the addressee thereof to receive the
mailed notice.
17. Governing Law. All transactions contemplated
hereunder and all rights of the parties hereto shall be governed as to
validity, construction, enforcement and in all other respects by the
laws and decisions of the State of Utah.
18. Titles. The titles of the sections of this Agreement
are inserted only as a matter of convenience and for reference, and in
no way define, limit or describe the scope of this Agreement or the
intent of any provisions hereof.
19. Amendment. This Agreement shall not be modified or
amended except by written agreement signed by all of the parties hereto.
20. Attorney's Fees and Costs of Enforcement. If any
party to this Agreement shall incur any costs resulting from enforcement
of this Agreement, the defaulting party shall be liable to the
prevailing party for such costs. Costs, as used herein, shall include
costs of enforcement, interpretation, or collection, including without
limitation, reasonable attorney's fees, court costs, collection charges,
travel and other related or similar expenses.
21. Severability of Provisions. Any provision of this
Agreement which is invalid, prohibited, or unenforceable in any
jurisdiction, shall not invalidate the remainder of the provision or the
remaining provisions of the Agreement.
22. Entire Agreement. Subject to the Plan, this Agreement
contains all of the representations, declarations and statements from
either party to the other and expresses the entire understanding between
the parties with respect to the transactions provided for herein. All
prior memoranda, letters, statements and agreements concerning this
subject matter, if any, are merged in and replaced by this Agreement.
23. Pronouns, Number and Gender. Wherever necessary to
implement the intent of the parties hereto, references herein to the
singular shall be interpreted as the plural, and vice versa, and the
feminine, masculine or neuter gender shall be treated as one of the
other genders.
24. Binding Effect. This Agreement shall be binding upon
and shall inure to the benefit of the parties hereto and their
respective legal representatives, successors and assigns.
25. Counterparts. This Agreement may be executed in one
or more counterparts, each of which may be deemed an original, but all
of which together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed the day and year first above written.
fonix Corporation
By:_________________________________
Its:________________________________
OPTIONEE
____________________________________
______________, 19____
______________________________
______________________________
______________________________
RE: Consulting Services to fonix corporation
Dear __________________:
This letter confirms your authorization to act as a consultant to
fonix corporation ("fonix") concerning possible partnerships and/or joint
ventures with other companies in the computer software industry. You have
previously identified and introduced certain parties to fonix. It is
anticipated that you will continue to do so in the future. fonix has and
shall continue to assume complete responsibility for negotiations with any
party introduced by you.
For the various professional consulting services described above
rendered to fonix by you, the Board of Directors of fonix has recently
authorized the issuance of ______________ warrants valued at $_______ per
warrant. Warrant rights are for a period of _________ years from the date
hereof and allow the holder thereof to acquire one share of common stock
of fonix at $_______ per share for each warrant issued. Proper
documentation will follow, reflecting the authorized issuance of these
Warrants.
You agree that exercise of the Warrants is subject to the opinion of
fonix's securities counsel that delivery of the Warrants and exercise
thereof would not constitute a violation of any applicable law or
regulation nor would it in any way jeopardize the availability of an
exemption from registration requirements of the Securities Act of 1933, as
amended, or any state securities registration requirements.
We appreciate your interest and continued support of fonix.
Sincerely,
-----------------------------------
THIS WARRANT AND ANY SHARES ACQUIRED UPON THE
EXERCISE OF THIS WARRANT HAVE NOT BEEN AND WILL
NOT BE, AS OF THE TIME OF ISSUANCE, REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
ANY COMPARABLE STATE LAW, AND MAY NOT BE
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION
OR AN EXEMPTION THEREFROM UNDER SUCH ACT. THIS
WARRANT AND SUCH SHARES MAY BE TRANSFERRED ONLY
IN COMPLIANCE WITH THE CONDITIONS SPECIFIED IN
THIS WARRANT
fonix corporation
COMMON STOCK PURCHASE WARRANT
Expiring ___________________
No. ______ _______________, 19____
fonix corporation, a Delaware corporation (the "Company"), for value
received, hereby certifies that ________________________, or its
registered assigns, is entitled to purchase from the Company at any time
from time to time prior to 5:00 p.m., Salt Lake City, Utah time, on
_______________, 19_____, _______________ duly authorized shares of the
Company's common stock, par value $.0001 per share (the "Warrant Stock")
at a purchase price per share of $_________, all subject to the terms and
conditions set forth below.
1. Exercise of Warrant.
1.1 Manner of Exercise. The holder of this Warrant may
exercise it, in whole or in part, during normal business hours on any
business day by surrendering this Warrant to the Company at the Company's
principal office, accompanied by an executed subscription agreement in
substantially the form annexed hereto as Exhibit A and by payment, in cash
or by certified or official bank check payable to the order of the
Company, or by any combination of such methods, in the amount obtained by
multiplying (a) the number of shares of Warrant Stock designated in such
subscription by (b) $_______, whereupon such holder shall be entitled to
receive the number of duly authorized, validly issued, fully paid and
nonassessable shares of Warrant Stock as is indicated on the subscription.
1.2 When Exercise Effective. Each exercise of this Warrant
shall be deemed to have been effected immediately prior to the close of
business on the business day on which this Warrant shall have been
surrendered to the Company as provided in Section 1.1, and at such time
the person or persons in whose name or names any certificate or
certificates for shares of Warrant Stock shall be issued upon such
exercise shall be deemed for all corporate purposes to have become the
holder of record thereof.
1.3 Delivery of Stock Certificates. As soon as practicable
after each exercise of this Warrant, and in any event within five business
days thereafter, the Company at its expense (including the payment by it
of any applicable issue taxes) will cause to be issued in the name of and
delivered to the holder hereof or to the person or entity such holder may
direct (and upon payment by such holder of any applicable transfer taxes),
a certificate or certificates for the number of duly authorized, validly
issued, fully paid and nonassessable shares of Warrant Stock to which the
holder or its designee shall be entitled upon such exercise.
1.4 Partial Exercise.
1.4.1 Fractional Shares. In the event of any
partial exercise of this Warrant, the Company will not issue certificates
for any fractional shares of the Warrant Stock to which the holder
otherwise may be entitled, and the Company shall not be obligated to
refund an amount of cash comprising the market value of any fractional
share of Warrant Stock for which the Company will not issue a certificate.
1.4.2 Replacement Warrant. In the event of any
partial exercise of this Warrant, upon tender of this Warrant to the
Company, the Company shall issue a new Warrant containing the same terms
and conditions as this Warrant but calling on the face thereof for the
number of shares of Warrant Stock equal to the number of shares called for
on the face of this Warrant minus the number of shares of Warrant Stock
issued upon the partial exercise of this Warrant.
2. Adjustment of Warrant Stock Issuable Upon Exercise. If the
Company at any time or from time to time after the date of this Warrant
but before expiration effects a split or subdivision of the outstanding
shares of its then outstanding common stock into a greater number of
shares of common stock, or if the Company effects a reverse split of the
outstanding shares of its common stock into a lesser number of shares of
common stock, (by reclassification or otherwise than by payment of a
dividend in common stock), then, and in each such case, the number of
shares called for on the face of this Warrant (or the face of any
replacement Warrant issued upon partial exercise) shall be adjusted
proportionally, and the exercise price with respect to such adjusted
number of shares also shall be adjusted proportionally.
3. Restrictions on Transfer.
3.1 Restrictive Legends. Each replacement Warrant issued
upon partial exercise or the transfer of any Warrant shall contain a
legend in substantially the following form:
THIS WARRANT AND ANY SHARES ACQUIRED UPON THE
EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION
OR AN EXEMPTION THEREFROM UNDER SUCH ACT. THIS
WARRANT AND SUCH SHARES MAY BE TRANSFERRED ONLY
IN COMPLIANCE WITH THE CONDITIONS SPECIFIED IN
THIS WARRANT.
Each certificate for Common Stock issued upon the exercise of any Warrant,
and each certificate issued upon the transfer of any such Common Stock,
shall be stamped or otherwise imprinted with a legend in substantially the
following form:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR UNDER THE SECURITIES LAWS OF
ANY STATE. THESE SECURITIES MAY NOT BE OFFERED,
SOLD, TRANSFERRED, PLEDGED OR HYPOTHECATED IN THE
ABSENCE OF REGISTRATION, OR THE AVAILABILITY OF
AN EXEMPTION FROM REGISTRATION, UNDER THE
SECURITIES ACT OF 1933 AND APPROPRIATE STATE
SECURITIES LAWS. FURTHERMORE, NO OFFER, SALE,
TRANSFER, PLEDGE OR HYPOTHECATION IS TO TAKE
PLACE UNLESS THE COMPANY RECEIVES AN OPINION OF
COUNSEL AT SHAREHOLDER'S EXPENSE, AND
SATISFACTORY TO IT, THAT AN EXEMPTION FROM
REGISTRATION IS AVAILABLE.
3.2 Notice of Proposed Transfer; Opinions of Counsel.
Prior to the transfer of any shares of Common Stock issued upon the
exercise of this Warrant and during any period during which such shares of
Common Stock are not registered by the Company under an effective
registration statement filed pursuant to the Securities Act of 1933, the
holder thereof shall give written notice to the Company, which notice
shall (a) state such holder's intention to transfer such restricted shares
and to comply in all other respects with the transfer requirements of this
Warrant; (b) describe the circumstances of the proposed transfer in
sufficient detail to enable counsel to render the opinions referred to
below, and (c) designate counsel for the holder giving such notice. The
holder giving such notice shall submit a copy thereof to the counsel
designated in such notice and the Company will promptly submit a copy
thereof to its counsel. The following provisions shall then apply:
3.2.1 If (a) in the opinion of counsel for the
holder designated in the notice the proposed transfer may be
effected without registration of such shares of Common Stock under
the Securities Act of 1933 and any applicable state securities laws,
and (b) counsel for the Company shall not have rendered an opinion
within 15 days after receipt by the Company of such written notice
that such registration is required, such holder shall thereupon be
entitled to transfer such shares of Common Stock in accordance with
the terms of the notice delivered by such holder to the Company.
Each Warrant or certificate, if any, issued upon or in connection
with such transfer shall bear the appropriate restrictive legend set
forth in Section 3.1, unless in the opinion of each such counsel
such legend is no longer required to insure compliance with the
Securities Act. If for any reason counsel for the Company (after
having been furnished with the information required to be furnished
by clause (a) of this Section 3.2) shall fail to deliver an opinion
to the Company as aforesaid, then for all purposes of this Warrant
the opinion of counsel for the Company shall be deemed to be the
same as the opinion of counsel for such holder.
3.2.3 If in the opinion of either or both of such
counsel the proposed transfer may not legally be effected without
registration of such shares of Common Stock under the Securities Act
of 1933 or applicable state securities laws (such opinion or
opinions to state the basis of the legal conclusions reached
therein), the Company will promptly so notify the holder thereof and
thereafter such holder shall not be entitled to transfer such shares
of Common Stock until receipt of a further notice from the holder
under Section 3.2.1 above or until registration of such shares of
Common Stock under the Securities Act or applicable state law has
become effective.
4. Reservation of Shares. The Company will at all times reserve
and keep available, solely for issuance and delivery upon the exercise of
the Warrants, the number of shares of Warrant Stock that would be issuable
upon the exercise of all Warrants at the time outstanding. All such
shares shall be duly authorized and, when issued upon such exercise, shall
be validly issued, fully paid and nonassessable with no liability on the
part of the holders thereof.
5. Ownership, Transfer and Substitution of Warrants.
5.1 Ownership of Warrants. The Company may treat the
person in whose name any Warrant is registered on the Company's records as
the owner and holder thereof for all purposes, notwithstanding any notice
to the contrary. Nevertheless, when a Warrant is properly assigned in
blank, the holder thereof may exercise the Warrant without first having a
new Warrant issued.
5.2 Transfer and Exchange of Warrants. Upon the surrender
of any Warrant, properly endorsed, for registration of transfer of
exchange at the principal office of the Company, the Company will execute
and (upon payment by such holder of any applicable transfer taxes) deliver
to any person specified by the holder of the Warrant a new Warrant or
Warrants of like tenor, calling in the aggregate on the face or faces of
such replacement Warrants for the number of shares of Warrant Stock called
for on the face or faces of the Warrant or Warrants so surrendered.
5.3 Replacement of Warrants. Upon receipt of evidence
reasonably satisfactory to the Company of the loss, theft, destruction or
mutilation of any Warrant and, in the case of any such loss, theft of
destruction of any Warrant, upon delivery of indemnity reasonably
satisfactory to the Company in form and amount or, in the case of any such
mutilation, upon surrender of such the Company at its expense will execute
and deliver, in lieu thereof, a new Warrant of like tenor.
6. No Rights or Liabilities as Stockholder. Nothing herein
shall give or shall be construed to give the holder of this Warrant any of
the rights of a shareholder of the Company including, without limitation,
the right to vote on matters requiring the vote of shareholders, the right
to receive any dividend declared and payable to the holders of common
stock, and the right to a pro-rata distribution upon the Company's
dissolution.
7. Notices. All notices and other communications provided for
herein shall be delivered or mailed by first class mail, postage prepaid,
addressed (a) if to the holders of any Warrant, at the registered address
of such holder as set forth in the register kept at the principal office
of the Company, or (b) if to the Company, at its principal office, 1225
Eagle Gate Plaza, 60 East South Temple, Salt Lake City, Utah 84111, or at
the address of such other principal office of the Company as the Company
shall have furnished to each holder of any Warrants in writing, provided
that the exercise of any Warrants shall be effective only in the manner
provided in Section 1.
8. Miscellaneous. This Warrant and any term hereof may be
changed, waived, discharged or terminated only by an instrument in writing
signed by the party against which enforcement of such change, waiver,
discharge or termination is sought. This Warrant shall be governed by the
laws of the State of Utah. The headings of this Warrant are inserted for
convenience only and shall not be deemed to constitute a part hereof.
9. Expiration. The right to exercise this Warrant shall expire
at 5:00 p.m., Salt Lake City, Utah time, on ______________, 19_____.
fonix corporation, a Delaware
corporation
By:_________________________________
Thomas A. Murdock, President
<PAGE>
Exhibit A
SUBSCRIPTION
(To be executed by the holder of the Warrant to exercise the right
to purchase common stock evidenced by the Warrant)
To: fonix corporation
1225 Eagle Gate Plaza
60 East South Temple
Salt Lake City, Utah 84111
The undersigned hereby irrevocably subscribes for ________ shares of
the Common Stock, par value $.0001 per share, of fonix corporation, a
Delaware corporation, pursuant to and in accordance with the terms and
conditions of a Warrant dated ________________, 19_____ (the "Warrant"),
and tenders with the Warrant and this Subscription Agreement payment of
$_____________ as payment for the shares, and requests that a certificate
for such shares be issued in the name of the undersigned and be delivered
to the undersigned at the address stated below.
__________________________________________________
NAME
__________________________________________________
ADDRESS
__________________________________________________
__________________________________________________
SOCIAL SECURITY NUMBER
__________________________________________________
Signed
__________________________________________________
Dated
DURHAM, EVANS, JONES & PINEGAR, P.C.
50 South Main Street, Suite 850
Salt Lake City, Utah 84144
September 9, 1996
fonix corporation
1225 Eagle Gate Tower
60 East South Temple Street
Salt Lake City, Utah 84111
Re: Registration Statement on Form S-8 relating to fonix
corporation Long-Term Stock Investment and Incentive Plan, 1996
Director's Stock Option Plan, and Consultant Compensation
Contracts (collectively the "Plans")
Dear Sirs:
We have acted as counsel for fonix corporation, a Delaware corporation
(the "Company"), in connection with the registration under the Securities
Act of 1933, as amended (the "Act"), of an aggregate of 6,660,000 shares of
the Company's Common Stock, par value $.0001 (the "Shares"), to be issued
in accordance with the terms of the Plans.
In connection with the foregoing, we have examined originals or
copies, certified or otherwise authenticated to our satisfaction, of such
corporate records of the Company and other instruments and documents as we
have deemed necessary to require as a basis for the opinion hereinafter
expressed.
Based upon the foregoing and in reliance thereon, it is our opinion
that the Shares described in the above-referenced Registration Statement,
when issued pursuant to the terms of the Plans, will be validly issued,
fully paid and non-assessable.
We consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to our firm in the Registration
statement and the prospectus to be delivered thereunder. In giving this
consent, we do not thereby admit that we come within the category of persons
whose consent is required under Section 7 of the Act or the rules and
regulations of the Securities and Exchange Commission promulgated
thereunder.
Sincerely,
DURHAM, EVANS, JONES & PINEGAR, P.C.
/s/ DURHAM, EVANS, JONES & PINEGAR
----------------------------------
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
We hereby consent to the incorporation by reference in this
Registration Statement of fonix incorporated on Form S-8 of our report
dated March 4, 1996, filed as an exhibit to the Company's Annual Report on
Form 10-KSB for the year ended December 31, 1995, and to the reference to
us under the heading of "Experts" in the Prospectus, which is part of this
Registration Statement.
/s/ PRITCHETT, SILER & HARDY, P.C.
Pritchett, Siler & Hardy, P.C.
(formerly Peterson, Siler & Stevenson, P.C.)
Salt Lake City, Utah
July 31, 1996
