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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------
FORM S-8
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
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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 organization) Identification No.)
Eagle Gate Tower, Suite 1225
60 East South Temple
Salt Lake City, Utah 84111
(801) 328-8700
(Address of Principal Executive Offices and Zip Code
and Telephone Number of Issuer)
1998 Stock Option and Incentive Plan, Amended Jan. 31, 2000
and
Consultant Compensation Contracts
(Full Title of the Plan)
--------------------------------
Douglas L. Rex, Chief Financial Officer
Fonix Corporation
Eagle Gate Tower, Suite 1225
60 East South Temple
Salt Lake City, Utah 84111
(801) 328-8700
(Name, address and telephone number, including area code,
of agent for service)
Copies to:
Jeffrey M. Jones, Esq.
Durham, Jones & Pinegar, P.C.
50 South Main Street, Suite 800
Salt Lake City, Utah 84144
(801) 538-2424
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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 share offering price registration fee(4)
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A Common 10,000,000(1) $0.76 $ 7,600,000(2)
Shares, par value
$.0001 per share,
subject to stock
options, stock
awards or warrants
to be granted to
officers, directors,
employees or con-
sultants under
Revised 1998 Stock
Option Plan
Class A Common 1,000,000 $0.76 760,000 (2)
Shares, par value
$.0001 per share,
subject to stock
awards to be granted
to consultants
Class A Common 500,000 $0.31 155,000(3)
Shares, par value 500,000 $0.50 250,000(3)
$.0001 per share,
subject to stock
warrants granted
to consultants
--------------- --------------
$ 8,765,000 $2,436.67
=============== ==============
- -----------------------------------------------------------------------------------------------
</TABLE>
(1) This Registration Statement is being filed, in part, for the purpose of
increasing the number of shares registered under the 1998 Stock Option and
Incentive Plan of the Company. Pursuant to a Registration Statement on Form S-8
filed with the SEC on March 19, 1999, the Company registered 10,000,000 shares
of Class A Voting Common Stock (the "Common Shares" or "Common Stock") subject
to stock options, warrants, or awards granted or to be granted under the 1998
Plan. Effective January 31, 2000, the 1998 Plan was amended by action of the
Board of Directors of the Company to increase the total number of shares
available under the Plan from 10,000,000 to 20,000,000. Accordingly, this
Registration Statement covers the additional 10,000,000 shares made available
under the 1998 Plan as amended. 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 (the "Securities Act").
(2) Calculated solely for the purpose of determining the registration fee
pursuant to Rule 457(c) and (h) under the Securities Act, based upon the average
of the high and low prices of the Common Shares as reported on the OTC Bulletin
Board on February 10, 2000 (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, based upon the price at which
the options may be exercised.
(4) $278 per $1,000,000 of aggregate offering price, pursuant to Section
6(b) of the Securities Act.
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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 mailed or otherwise delivered to
employees and consultants as specified by Rule 428(b)(1). Such documents are not
required to be and are not filed with the SEC, 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.
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PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
Item 3. Incorporation of Documents by Reference.
The following documents filed with the SEC by Fonix
Corporation (the "Company") are incorporated herein by reference:
(a) The Company's Annual Report on Form 10-K for the year
ended December 31, 1998;
(b) Amendment on Form 10-K/A as filed on March 17, 1999;
(c) Amendment on Form 10-K/A as filed on August 11, 1999;
(d) The Company's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1999;
(e) The Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1999;
(f) The Company's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1999;
(g) Three Amendments on Form 10-Q/A as filed on March 17,
1999;
(h) Amendment on Form 10-Q/A as filed on June 21, 1999;
(i) Amendment on Form 10-Q/A as filed on August 11, 1999;
(j) Amendment on Form 10-Q/A as filed on December 30,
1999;
(k) The Company's Current Report on Form 8-K as filed on
January 7, 1999;
(l) Two Amendments on Form 8-K/A as filed on June 21,
1999;
(m) Amendment on Form 8-K/A as filed on November 15,
1999;
(n) Registration Statement on Form S-2 as filed on
December 30, 1999;
(o) Amendment to Registration Statement on Form S-2/A as
on February 10, 2000; and
(p) 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 SEC
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
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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, Jones & Pinegar, P.C. (the "Firm"), Salt
Lake City, Utah, 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. This Registration Statement includes the registration of up
to 250,000 shares of Common Stock subject to unexercised warrants granted by the
Company to the Firm, exercisable at $0.31 per share.
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 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 SEC such indemnification is against
public policy as expressed in the Securities Act and is therefore unenforceable.
Item 7. Exemption from Registration Claimed.
Not applicable.
Item 8. Exhibits.
4(a) -- 1998 Stock Option and Incentive Plan of Fonix Corporation,
as amended January 31, 2000 (the "Revised 1998 Plan")(filed
herewith).
4(b) -- Form of 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 (filed herewith).
4(c) -- Form of Option Agreement between the Company and certain
employees of the Company (incorporated by reference to Exhibit
4(c) of the Company's Registration Statement on Form S-8 filed
on May 19, 1999).
5 -- Opinion of Durham, Jones & Pinegar, P.C. regarding validity of
Common Stock issuable pursuant to the Revised 1998 Plan.
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23(a) -- Consent of Arthur Andersen LLP.
23(b) -- Consent of Deloitte & Touche LLP.
23(c) -- Consent of Pritchett, Siler & Hardy, P.C.
23(d) -- Consent of Durham, 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;
(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, 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, 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.
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(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 SEC, 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.
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SIGNATURES
Pursuant to the requirements of the Securities Act, 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 February 15, 2000.
FONIX CORPORATION
By /s/
--------------------------------
Douglas L. Rex
Chief Financial Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose
signature appears below constitutes and appoints Douglas L. Rex, 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, this
Registration Statement has been signed by the following persons in the
capacities indicated and on the dates indicated.
Signature Title Date
/s/ CEO, President, February 15, 2000
- ------------------------ Chairman and Director --
Thomas A. Murdock (Principal Executive
Officer)
/s/ Executive Vice President February 15, 2000
- ------------------------ and Director --
Roger D. Dudley
/s/ Director February 15, 2000
- ------------------------ --
Mark S. Tanner
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/s/ Director February 15, 2000
- ------------------------- --
William A. Maasberg, Jr.
/s/ Director February 15, 2000
- ------------------------- --
John A. Oberteuffer, Ph.D.
/s/ Chief Financial February 15, 2000
- ------------------------- Officer (principal --
Douglas L. Rex financial officer)
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EXHIBIT INDEX
Exhibits
4(a) -- 1998 Stock Option and Incentive Plan of Fonix Corporation,
as amended January 31, 2000 (the "Revised 1998 Plan")(filed
herewith).
4(b) -- Form of 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 (filed herewith).
4(c) -- Form of Option Agreement between the Company and certain
employees of the Company (incorporated by reference to Exhibit
4(c) of the Company's Registration Statement on Form S-8 filed
on May 19, 1999).
5 -- Opinion of Durham, Jones & Pinegar, P.C. regarding
validity of Common Stock issuable pursuant to the
Revised 1998 Plan.
23(a) -- Consent of Arthur Andersen LLP.
23(b) -- Consent of Deloitte & Touche LLP.
23(c) -- Consent of Pritchett, Siler & Hardy, P.C.
23(d) -- Consent of Durham, Jones & Pinegar, P.C. (included in the
opinion filed as Exhibit 5 to this Registration Statement).
Fonix Corporation
a Delaware corporation
Revised 1998 Stock Option and Incentive Plan
ARTICLE I GENERAL
1.01. Purpose.
The purposes of this Revised 1998 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 or others 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;
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(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
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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.
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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 20,000,000 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:
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(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 1st day of June, 1998,
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 that date which 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.
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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.
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(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.
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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.
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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.
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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.
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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.
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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.
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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 (b) 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 34 Act.
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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.
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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
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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.
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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.
9.06 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.
9.07. 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;
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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.
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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.
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.
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(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
20
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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.
21
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(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
22
<PAGE>
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.
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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.
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
31st DAY OF JANUARY, 2000.
Fonix Corporation
By: /s/
-------------------------------------
Roger D. Dudley, Executive Vice Pres.
24
NONEXCLUSIVE INDEPENDENT CONSULTING AGREEMENT
THIS NONEXCLUSIVE CONSULTING AGREEMENT ("Agreement") is made
and entered into effective this _____ day of __________, _____, by and between
Fonix Corporation, a Delaware corporation ("Fonix"), and ___________________, a
company organized and existing under the laws of _________________.
("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 the development, marketing, sales and
licensing of certain proprietary human- computer interface technologies and
products. Fonix is seeking new marketing and licensing opportunities as well as
other significant business development opportunities in Europe and Asia; and
WHEREAS, Consultant is generally familiar with many of Fonix's
technologies and products, and has expertise identifying and making
introductions to European and Asian companies interested in purchasing,
licensing or otherwise acquiring the rights to market or use technologies and
products of a type offered by Fonix; and
WHEREAS, Fonix desires that Consultant provide such services
in Europe and Asia as hereinafter set forth.
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 shall provide
bona fide consulting services to Fonix in connection with Fonix's efforts to
identify and enter into appropriate agreements for sales and with third-party
licensing and co-development partners located principally in Europe and Asia.
Such services shall include, without limitation, (i) consultation regarding
strategic planning, partnerships and similar alliances; (ii) finding and
introducing, on a best efforts and nonexclusive basis, potential buyers and
licensing and co-development partners located principally in Europe and Asia;
and (iii) to the extent requested by Fonix, participating in negotiations with
such potential purchasers and partners.
Page 1 of 6
<PAGE>
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 or 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 United States Treasury
Department regulations and United States 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 be 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 performance of services under this Agreement, it may
acquire confidential information concerning Fonix technology, know-how, product
development and marketing plans, 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 Consultant'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 of 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.
Page 2 of 6
<PAGE>
2.2 Termination for Cause. Consultant acknowledges that its
engagement under this Agreement may be terminated for Cause as set forth herein.
For the purpose of this paragraph, "Cause shall mean any of the following:
2.2.1 fraud or misrepresentation;
2.2.2 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; or
2.2.3 violation of a Confidentiality Covenant.,
ARTICLE III
COMPENSATION
3.1 Compensation. As soon as possible after the mutual
execution of this Agreement 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 share (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 U.S. Securities Act of 1933, as amended, on
Form S-8, covering the Compensation 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
REPRESENTATIONS AND WARRANTIES
4.1 Representations and Warranties of Consultant. To
induce Fonix to enter into this Agreement, Consultant hereby represents and
warrants as follows:
4.1.1 Restrictions; Limitations. Consultant is
under no obligation or restriction which would in any way interfere or be
inconsistent with, or present a conflict of interest concerning the services
to be furnished to Fonix under this Agreement. Consultant will not enter into
any such obligation or restriction prior to the termination of this Agreement.
4.1.2 Organization, Standing Authorization.
Consultant is duly organized, validly existing, and in good standing under the
laws of Liechtenstein, and has the requisite power and authority to enter into
this Agreement and perform as anticipated by this Agreement. The execution and
delivery of this Agreement by Consultant have been duly authorized by all
required action of Consultant's owners or management. The person executing,
on Consultant's behalf, this Agreement is duly authorized to do so.
Page 3 of 6
<PAGE>
4.1.3 Disclosure, Access to Information.
Consultant confirms that it has received and thoroughly read and is familiar
with and understands this Agreement, and that all documents, records, books and
other information pertaining to Consultant's performance under this
Agreement requested by Consultant have been made available for inspection and
copying and that there are no additional materials or documents that have been
requested by Consultant that have not been made available by Fonix. Consultant
further acknowledges that it understands that Fonix is subject to the periodic
reporting requirements of the U.S. Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and Consultant has reviewed or received copies
of any such reports that have been requested by it. Without limiting the
generality of the foregoing, Consultant acknowledges that it has received and
has reviewed copies of the following reports filed by Fonix:
(a) Annual Report on Form 10-K for the fiscal year
ended December 31, 1998;
(b) Quarterly Reports on Form 10-Q, as amended,
for the quarters ended March 31, 1999, June
30, 1999, and September 30, 1999.
(c) Current Reports on Form 8-K filed during 1999.
Consultant acknowledges that the statements contained in the above-described
Exchange Act Reports are not purely historical and include forward-looking
statements within the meaning of Section 27A of the Act and Section 21E of the
Exchange Act, including statements regarding the Company's expectations, hopes,
intentions or strategies regarding the future. Forward looking statements
include statements regarding future development of fonix's automatic human
computer interaction technologies, statements regarding Fonix's ability to enter
into appropriate licensing and co-development agreements, and projections for
the timing and amount of revenues to be received from Fonix in connection with
such agreements. All such forward looking statements are based on information
available to Fonix on the date hereof, and Fonix assumes no obligation to update
any such forward looking statements. Fonix's actual results could differ
materially from the results predicted in such forward looking statements.
ARTICLE V
MISCELLANEOUS PROVISIONS
5.1 Entire Agreement. This Agreement constitutes the
entire agreement between the parties and supercedes any prior written or oral
agreements concerning the subject matter contained herein.
5.2 Amendment. This Agreement may be amended only by the
written consent of the parties.
5.3 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 of default of this Agreement.
Page 4 of 6
<PAGE>
5.4 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. Notices
given by mail shall be deemed to be delivered on the day such notice is
deposited in the United States mail, postage prepaid.
5.5 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.
5.6 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.
5.7 Indemnification. Consultant will indemnify and hold
harmless Fonix and its directors, officers, and each person, if any, who
controls Fonix within the meaning of the Act, from and against any and all
losses, claims, damages, expenses, liabilities or actions to which any of them
may become subject under applicable law (including, without limitation, the Act)
and will reimburse them or any legal or other expenses incurred by them in
connection with investigating or defending any claims or actions, whether or not
resulting in liability, insofar as such losses, claims, damages, expenses,
liabilities or actions arise out of or are based upon Consultant's failure to
comply with the provisions of this Agreement or the inaccuracy of any
representation made by Consultant in connection with this Agreement. The
indemnification agreement contained in this paragraph shall remain in full force
or effect, regardless of any investigation made by or on behalf of Consultant,
and shall survive the consummation of the transactions contemplated by this
Agreement.
5.8 Attorney Fees and Costs. The parties agree that, in the
event of any dispute arising under this Agreement, the prevailing party in any
such dispute shall be entitled to an award of all costs and expenses, including
without limitation attorneys' fees and legal costs, which may arise from the
enforcement of this Agreement, whether such enforcement is pursued by filing of
a suit or otherwise.
5.9 Governing Law. This Agreement shall be governed by
and construed in accordance with the laws of the State of Utah of the United
States of America.
5.10 Counterparts. This Agreement may be executed in any
number of counterparts, each of which when so executed shall be deemed to be an
original, and such counterparts together shall constitute one and the same
instrument.
Page 5 of 6
<PAGE>
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
Executive Vice President
CONSULTANT:
------------------------------------
By:
-----------------------------------
Page 6 of 6
DURHAM, JONES & PINEGAR, P.C.
50 South Main Street, Suite 800
Salt Lake City, Utah 84144
February 15, 2000
Fonix Corporation
Eagle Gate Tower, Suite 1225
60 East South Temple Street
Salt Lake City, Utah 84111
Re: Registration Statement on Form S-8 relating to Fonix Corporation
Revised 1998 Stock Option and Incentive Plan (the "Plan")
Consultant Compensation Contracts
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 the following: (i) an aggregate of up to
20,000,000 shares of the Company's Class A Common Stock, par value $.0001 per
share (the "Shares"), which may be issued to directors, officers and key
consultants of the Company pursuant to the terms of the Plan; (ii) up to
1,000,000 shares of the Company's Class A Common Stock, par value $.0001 per
share, to be awarded to consultants of the Company pursuant to written
consulting agreements; and (iii) up to 1,000,000 shares of the Company's Class A
Common Stock, par value $.0001 per share, subject to stock warrants granted to
consultants of the Company pursuant to written consulting agreements.
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 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, the Consultant Warrants, or the Consulting
Agreements, 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, JONES & PINEGAR, P.C.
/s/ DURHAM, JONES & PINEGAR, P.C.
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report
dated April 14, 1999 (except with respect to the matter described in Note 21, as
to which the date is December 29, 1999) included by reference in this
registration statement on Form S-8. Our report dated April 14, 1999 included in
Fonix Corporation's Form 10-K (Amendment No. 1) for the year ended December 31,
1998 is no longer appropriate since restated financial statements have been
presented giving effect to the sale of a business segment and the classification
of its net assets and operating activities as discontinued operations.
ARTHUR ANDERSEN LLP
Salt Lake City, Utah
February 10, 2000
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement of
Fonix Corporation on Form S-8 of our report dated March 28, 1997, appearing in
the Annual Report on Form 10-K/A of Fonix corporation for the year ended
December 31, 1998.
DELOITTE & TOUCHE LLP
Salt Lake City, Utah
February 10, 2000
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
We hereby consent to the incorporation by reference into the accompanying
Registration Statement on Form S-8 for Fonix Corporation, of our report dated
March 4, 1996, relating to the financial statements of Fonix Corporation for the
period from the date of inception on October 1, 1993 through December 31, 1995,
which financial statements are not seperately presented herein.
/s/
- ----------------------------------------
PRITCHETT, SILER & HARDY, P.C.
Salt Lake City, Utah
February 10, 2000
