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 jurisdiction I.R.S. Employer
of incorporation or Identification No.
organization)
60 East South Temple
Salt Lake City, Utah 84111
(801) 328-0161
(Address of principal executive offices and Zip Code
And Telephone Number of Issuer)
1997 Stock Option and Incentive Plan
(Full Title of the Plan)
________________________________
Jeffrey N. Clayton, Esq., Vice President, Legal
fonix corporation
60 East South Temple
Salt Lake City, Utah 84111
(801) 328-0161
(Name, address 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>
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
________________________________________________________________________________________________________
Title of each class Proposed maximum Proposed maxi-
of securities to be Amount to be offering price per mum aggregate Amount of
registered registered(1) unit offering price registration fee(4)
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Shares, 200,000 shares $6.59 $ 1,318,000(2) $ 399.39
par value $.0001
per share, granted
to consultants
Common Shares, 300,000 shares $7.13 $ 2,139,000(3) $ 648.18
par value $.0001 3,000,000 shares $6.50 $19,500,000 $ 5,909.09
per share, subject 325,000 shares $6.00 $ 1,950,000 $ 590.91
to stock options
granted to directors
and employees
Common Shares, 3,675,000 shares $6.59 $24,218,250 $ 7,338.86
par value $.0001
per share, subject
to stock awards,
stock options or
stock warrants to
be granted to
employees, directors,
or consultants
===========
$14,886.43
_______________________________________________________________________________________________________
</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(c) and (h) 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 October 2, 1997 (within 5 business days prior to the date of
filing the registration statement).
(3) 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.
(4) 1/33 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 and
consultants 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 Forms 10-KSB and 10-KSB-A
for the fiscal year ended December 31, 1996;
(b) The Company's Current Report on Form 8-K as filed on March
19, 1997;
(c) The Company's Current Report on Form 8-K as filed on March
31, 1997;
(d) The Company's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1997;
(e) The Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1997;
(f) Amendment Nos.1 and 2 to the Company's Quarterly Report on
Form 10-Q for the quarter ended June 30, 1997; and
(g) 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 approximately 90,000
shares of Common Stock of the Company.
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) -- 1997 Stock Option and Incentive Plan of fonix Corporation (the
"1997 Plan").
4(b) -- Form of Consulting Agreement ("Consulting Agreement") between the
Company and certain consultants to the Company, pursuant to
which consultants receive Common Stock and/or warrants to
purchase Common Stock of the Company.
5 -- Opinion of Durham, Evans, Jones & Pinegar, P.C. regarding
validity of Common Stock issuable pursuant to the 1997 Stock
Option and Incentive Plan.
23(a) -- Consent of Deloitte & Touche LLP.
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
October 2, 1997.
fonix corporation
By /s/ Roger D. Dudley
------------------------------------
Roger D. Dudley
Executive V.P.
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 Title Date
-------------- ------------ -----------
/s/ Stephen M. Studdert CEO, Chairman of the September 3, 1997
------------------------- Board of Directors
Stephen M. Studdert
/s/ Thomas A. Murdock President/COO and August 29, 1997
-------------------------- Director (Principal
Thomas A. Murdock Executive Officer)
/s/ Roger D. Dudley Executive VP August 29, 1997
-------------------------- and Director
Roger D. Dudley
/s/ Alan C. Ashton Director September 3, 1997
--------------------------
Alan C. Ashton, Ph.D.
/s/ Joseph Verner Reed Director September 4, 1997
--------------------------
Joseph Verner Reed
/s/ James B. Hayes Director September 3, 1997
--------------------------
James B. Hayes
/s/ Rick D. Nydegger Director September 10, 1997
--------------------------
Rick D. Nydegger
/s/ John A. Oberteuffer Director September 3, 1997
-------------------------
John A. Oberteuffer, Ph.D.
/s/ Douglas L. Rex Chief Financial September 17, 1997
-------------------------- Officer
Douglas L. Rex
<PAGE>
EXHIBIT INDEX
Exhibits
4(a) -- 1997 Stock Option and Incentive Plan of fonix
corporation (the "1997 Plan").
4(b) -- Form of Consulting Agreement ("Consulting Agreement")
between the Company and certain consultants to the
Company, pursuant to which consultants receive
Common Stock and/or warrants to purchase Common
Stock of the Company.
5 -- Opinion of Durham, Evans, Jones & Pinegar, P.C.
regarding validity of Common Stock issuable pursuant
to the Consulting Agreement.
23(a) -- Consent of Deloitte & Touche LLP.
23(b) -- Consent of Durham, Evans, Jones & Pinegar, P.C.
(included in the opinion filed as Exhibit 5 to this
Registration Statement).
fonix CORPORATION
a Delaware corporation
1997 Stock Option and Incentive Plan
ARTICLE I GENERAL
1.01. Purpose.
The purposes of this 1997 Stock Option and Incentive Plan (the "Plan")
are to: (1) closely associate the interests of the management of fonix
Corporation, a Delaware corporation, and its 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 with the Company, whether as an employee,
officer or director, and to put forth maximum efforts for the success of its
business.
1.02. Administration.
(a) Pursuant to the corporate laws of the State of Delaware, the
Board of Directors of the Company, or a Committee appointed by the Board
consisting solely of two or more non-employee directors (whether the full
Board, or a committee, referred to herein as the "Committee"), shall
administer the Plan and shall approve any transaction under the Plan
involving a grant, award or other acquisition from 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.
(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 directors, 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.
(f) For purposes of this Section 1.02, a "non-employee director"
shall mean a director who: (i) is not currently an officer of the Company
or a parent or subsidiary of the Company, or otherwise currently employed by
the Company or a parent or subsidiary of the Company; (ii) does not receive
compensation, either directly or indirectly, from the Company or a parent or
subsidiary of the Company, for services rendered as a consultant or in any
capacity other than as a director, except for an amount that does not exceed
the dollar amount for which disclosure would be required pursuant to Item
404(a) of Regulation S-K promulgated by the Securities and Exchange
Commission; (iii) does not possess an interest in any other transaction for
which disclosure would be required pursuant to Item 404(a) of Regulation S-
K; and (iv) is not engaged in a business relationship for which disclosure
would be required pursuant to Item 404(b) of Regulation S-K.
(g) Unless such holding period is waived by the Company, officers
and directors of the Company who are subject to the short-swing profits
provisions of Section 16 of the Securities Exchange Act of 1934 (the "34
Act") and who acquire shares of Company stock pursuant to this Plan, must
hold such shares for a period of six months following the date of
acquisition, provided that this condition shall be satisfied with respect to
stock options or other derivative securities granted to such officers or
directors if at least six months elapse from the date of grant of the Option
to the date of disposition by Optionee of the Option (other than upon
exercise), or the shares of Common Stock underlying the Option.
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 by
the Committee, to directors, 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." An
Optionee shall be eligible to receive more than one Option and/or Stock
Appreciation Right 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:
(a) "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;
(b) "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;
(c) "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;
(d) "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
(e) "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.
(f) "Stock Bonuses" which are compensation, the tax consequences of
which are governed by Section 83 of the Code, as described in Article VII.
(g) "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
7,500,000 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 canceled,
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 10th day of March,
1997, the date the Plan is adopted by a majority of the Board (the
"Effective Date").
(b) No awards shall be granted under the Plan after or on the 10th
day of March, 2007, 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.
Unless otherwise provided by the Committee or in the Stock Option
Agreement pertaining to the Stock Options, each Stock Option shall be fully
exercisable beginning after the date of its grant and 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 three years 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 three years from the date of termination, exercise any
Stock Options to the extent such options are exercisable during such three
year period.
2.08 Termination for Other Reasons.
Except as provided in Sections 2.06, 2.07, or 9.12(f), or except as
otherwise determined by the Committee, all Stock Options shall terminate six
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 elsewhere herein, or unless otherwise provided by
the Committee, or in the Stock Option Agreement pertaining to the Incentive
Stock Option, each Incentive Stock Option shall be fully exercisable
beginning after the date of its grant and 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 three years 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 three years 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 9.12(f), or except as
otherwise determined by the Committee, all Incentive Stock Options shall
terminate six 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; and 2.09, 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 9.11 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.
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 Death of Optionee; 2.07,
Retirement or Disability; 2.08, Termination for Other Reasons; and 2.09,
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 the form of Common Stock, of 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.
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 9.12(f), or except as otherwise
determined by the Committee, all Alternate Rights shall terminate six months
after the date of termination of the Optionee's employment or three years
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 in 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 any other provision in this Section 6.03 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").
As used in the Plan, a "Change of Control" shall be deemed to have
occurred if (a) individuals who are currently directors of the Company
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 the Company, or to all or
substantially all of its assets), or any entity, person or Group other than
the Company or a Subsidiary Corporation of the Company acquires shares of
the Company 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 the Company.
As used herein, "Control Transaction" shall be (i) any tender offer
for or acquisition of capital stock of the Company, (ii) any merger,
consolidation, reorganization or sale of all or substantially all of the
assets of the Company which has been approved by the shareholders, (iii) any
contested election of directors of the Company, 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 9.12(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 three years 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. 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.
9.03. 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 affect any right which the Company may have to
terminate the employment of such participant.
9.04. 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.
9.05. 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.
9.06Fractional 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.
9.07. 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 the Company.
(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 the
Company) 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
the Company) 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.
9.08. 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.
9.09. 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.
<PAGE>
9.10. 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, the Option Price of
Options theretofore granted under the Plan, the performance targets referred
to in Section 9.08 and any and all other matters deemed appropriate by the
Committee.
9.11. Amendment of the Plan.
The Committee may at any time and from time to time terminate or
modify or amend the Plan in any respect, including 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. The termination or any modification or
amendment of the Plan shall not, without the consent of a participant,
affect his other rights under an award previously granted to him or her.
9.12. 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 9.12(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 9.12(f) and 9.12(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 9.12(e) and in this
Section 9.12(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 six 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
9.03 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, or 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 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 three years after the date of
death, disability or retirement of the Optionee. If the Optionee's
employment shall terminate by reason of removal for cause, all Options
theretofore granted to such Optionee shall terminate immediately upon
removal and may not be exercised.
(h) Non-transferability of Options. For the purpose of preserving
to the Company the right and ability to register the exercise of Options on
Form S-8 under the Act, including exercises of Options by former employees
and the executors, administrators or beneficiaries of the estates of
deceased employees, 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, or unless the Committee determines
that the ability to register the underlying shares on Form S-8 need not be
preserved, 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, if so determined by the
Committee, 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
9.12(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 9.12(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 9.12(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 9.12(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.0
9.13. 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 10th DAY OF
MARCH, 1997.
_________________________________________
Jeffrey Clayton, Secretary
CONSULTING AGREEMENT
THIS CONSULTING AGREEMENT ("Agreement") is made and entered into
effective as of the ___ day of ______________, 1997 by and between fonix
corporation, a Delaware corporation ("fonix"), and__________________
("Consultant"). Hereinafter either party may be referred to as "Party" and
collectively as "Parties".
RECITALS:
WHEREAS, fonix is a development stage company, of which the primary
business activity is presently research and development associated with the
commercial exploitation of certain proprietary computer voice recognition
technology and seeking strategic alliance partners, development partners and
licensees of such technology; and
WHEREAS, fonix desires to develop licensing or strategic partnership
relationships with technology companies in____________; and
WHEREAS, Consultant desires to introduce fonix to such technology
companies and other potential development and strategic alliance partners and
licensees in_____________.
AGREEMENT:
NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter set forth and other good and valuable consideration, the receipt
of which is hereby acknowledged, the parties agree as follows:
ARTICLE I
CONSULTING
1.1 Description. fonix hereby retains Consultant to perform, and
Consultant hereby agrees to perform, consulting services to fonix as herein
provided.
1.2 Services to be Performed . Consultant will (a) introduce fonix
to______________ technology companies and other potential development and
strategic alliance partners and licensees located in____________________, and
(b) assist fonix in obtaining executed confidentiality agreements in a form
satisfactory to fonix from such companies.
1.3. Independent Contractor. Consultant acknowledges that Consultant's
retention does not confer upon Consultant any ownership interest in or personal
claim upon any license, right, product of fonix , nor does this Agreement
confer any employment right on Consultant. Consultant agrees that in
performing its duties under this Agreement, it shall be operating as an
independent contractor as that term is defined in Treasury Department
regulations and Internal Revenue Service rulings and interpretations. Nothing
contained herein shall in any way constitute any association, partnership,
employer/employee relationship, or joint venture between the parties hereto,
or be construed to evidence of the intention of the parties to establish any
such relationship. Neither party shall have any right, power or authority to
make any representation nor to assume or create any obligation, whether express
or implied, on behalf of the other, or to bind the other party in any manner
whatsoever. Both of the parties agree, respectively, that they shall not hold
themselves out in any manner that would be contrary to the terms of this
Section 1.3
1.4 Confidentiality and Non-disclosure. Consultant acknowledges that
in the performance of services under this Agreement, he may acquire
confidential information concerning fonix technology, know-how, product plans
and specifications, records, business concepts, financial matters and other
information which are valuable, special and unique assets of fonix (herein
"Information"). Consultant will not, during or after the term of this
Agreement, disclose any Information, no matter how acquired, to any person or
entity for any reason or purpose outside of fonix's usual business activities
as defined hereunder, and will not in any manner directly or indirectly aid or
be a party to any acts, the effects of which would tend to divert, diminish or
prejudice the technology, good will, business or business opportunities of
fonix. In the event of a threatened breach by Consultant of the provisions of
this paragraph, fonix shall be entitled to an injunction restraining Consultant
from disclosing any such information or from rendering any services to any
person or entity to whom any such information has been disclosed or threatened
to be disclosed. Nothing herein shall be construed as prohibiting fonix from
pursuing any other remedies available to fonix for actual breach of the
provision of this paragraph, including the recovery of damages from Consultant.
1.4.1 In exchange for fonix executing this Agreement and agreeing
to the retention of Consultant's Services by fonix, Consultant does hereby
enter into the covenant of confidentiality set forth in this Section 1.4 (the
"Confidentiality Covenant") and acknowledges the adequacy of the consideration
to support the Confidentiality Covenant.
1.4.2 The Confidentiality Covenant shall survive the expiration or
termination of this Agreement
ARTICLE II
TERM OF CONTRACT
2.1 Term. The term of this Agreement shall be from the effective date
hereof until ___________________, except as provided in Article III.
2.2 Termination for Cause. Consultant acknowledges that its retainer
under this Agreement may be terminated for Cause as set forth herein. For the
purposes of this paragraph, "Cause" shall mean any of the following:
(a) Fraud;
(b) fonix, after consultation with legal counsel of its choice,
reasonably has determined that a violation of law has taken
place or is about to take place in connection with this
Agreement.
(c) Violation of the Confidentiality Covenant.
ARTICLE III
COMPENSATION
3.1 Compensation. As soon as possible after the mutual execution of
this Agreement by all Parties, fonix shall issue as compensation for
Consultant's services under this Agreement,___________________ (_____________)
shares of the Company's common stock, par value $.0001 per shares (the
"Compensation Shares").
3.2 Registration of Stock. Any offer or issuance of the Compensation
Shares under this Agreement shall be subject to the filing and effectiveness,
at or prior to the time this Agreement is executed by fonix, of a registration
statement under the Securities Act of 1933, as amended, on Form S-8, covering
the Compensation Shares. In connection with such registration, Consultant
represents and warrants that it has received the most recent annual report
(Form 10-KSB) and quarterly report (Form 10-Q) of fonix which are delivered
with this Agreement. If the S-8 Registration is invalidated or otherwise
rendered not effective, fonix will, as soon as practicable thereafter, provide
registration for Consultant's shares.
3.3 Expenses. Consultant shall be responsible for the payment of any
expenses incurred by Consultant in the providing of services hereunder.
ARTICLE IV
MISCELLANEOUS PROVISIONS
4.1 Entire Agreement. This Agreement constitutes the entire agreement
between the parties and supersedes any prior written or oral agreements
concerning the subject matter contained herein.
4.2 Amendment. This Agreement may be amended only by the written
consent of the parties.
4.3 Waiver. No waiver of any breach or default of this Agreement by
either party hereto shall be considered to be a waiver of any other breach or
default of this Agreement.
4.4 Notices. Any notices pertaining to this Agreement shall be in
writing and shall be transmitted by personal hand delivery or fax to an officer
or director of fonix or to Consultant, or through the facilities of the United
States Post Office, certified mail, return receipt requested. The addresses
set forth below for the respective parties shall be the places where notices
shall be sent, unless written notice of a change of address is given.
fonix:
fonix corporation
Attention Jeffrey N. Clayton
Vice President - Legal
60 East South Temple
1225 Eagle Gate Tower
Salt Lake City, Utah 84111
Consultant:
___________________
___________________
___________________
___________________
___________________
Notices given by mail shall be deemed to be delivered on the day such notice
is deposited in the United States mail, postage prepaid.
4.5 Assignment. The Consultant's rights and duties pursuant to this
Agreement are not assignable without the express written agreement of fonix.
fonix may assign any of its rights or obligations hereunder.
4.6 Consultant not Exclusive Consultant of fonix. Nothing in this
Agreement shall restrict or otherwise limit the right of fonix to engage or
retain other consultants, either as employees or as independent contractors.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
fonix:
fonix corporation
By:______________________________________
Roger D. Dudley
Title: Executive Vice President
CONSULTANT:
_________________________________________
DURHAM, EVANS, JONES & PINEGAR, P.C.
50 South Main Street, Suite 850
Salt Lake City, Utah 84144
September 25, 1997
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 1997 Stock Option Plan (the "Plan")
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 7.500,000 shares of
the Company's Common Stock, par value $.0001 (the "Shares"), to be issued
in accordance with the terms of the Plan.
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 Plan, 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
----------------------------------
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement
of fonix(TM) corporation on Form S-8 of our report dated March 28, 1997,
appearing in and incorporated by reference in the Annual Report on Form 10-KSB
of fonix(TM) corporation for the year ended December 31, 1996.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
Salt Lake City, Utah
September 25, 1997
