<PAGE>
As filed with the Securities and Exchange Commission on March 29, 2000
Registration No. 333-______
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
______________________
FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
AVERY COMMUNICATIONS, INC.
(Exact Name of Registrant as Specified in Its Charter)
Delaware 12-2227079
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
190 South LaSalle Street, Suite 1710
Chicago, Illinois 60603
(Address of Principal Executive Offices) (Zip Code)
AVERY COMMUNICATIONS, INC.
1999 FLEXIBLE INCENTIVE PLAN
(Full Title of the Plan)
Scot M. McCormick
Avery Communications, Inc.
190 South LaSalle Street, Suite 1710
Chicago, Illinois 60603
(Name and Address of Agent for Service)
(312) 419-0077
(Telephone Number, Including Area Code, of Agent for Service)
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
Proposed Proposed
Title of Amount Maximum Maximum Amount of
Securities to be Offering Price Aggregate Registration
to be Registered Registered Per Share Offering Price Fee
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock,
par value $0.01
per share 1,500,000 $3.625* $5,437,500* $1,435.50
- ------------------------------------------------------------------------------
</TABLE>
* Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457(h). Pursuant to Rule 457(h), this estimate is
based upon the average of the bid and the ask prices of the Registrant's
common stock, par value $0.01 per share, on March 27, 2000 (as reported on
the OTC Bulletin Board).
<PAGE>
PART I
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
Item 3. Incorporation of Documents by Reference.
The Registrant hereby incorporates by reference into this Registration
Statement the following documents filed by the Registrant with the Securities
and Exchange Commission (the "Commission"):
(a) The Registrant's prospectus filed on August 27, 1999 pursuant to Rule
424(b)(3) (File No. 333-65133);
(b) All other reports filed by the Registrant pursuant to Sections 13(a)
or 15(d) of the Securities Exchange Act of 1934 (the "Exchange Act")
since August 27, 1999; and
(c) The description of the Registrant's common stock, par value $.01 per
share (the "Common Stock"), contained in the Registrant's Registration
Statement on Form 8-A filed by the Registrant with the Commission
pursuant to Section 12 of the Exchange Act, including any amendments
or reports filed for the purpose of updating such description.
All documents filed by the Registrant and the Plan pursuant to Sections
13(a), 13(c), 14 and 15(d) of the Exchange Act after the date of this
Registration Statement and prior to the filing of a post-effective amendment
which indicates that all securities offered have been sold or which deregisters
all securities then remaining unsold shall be deemed to be incorporated by
reference in this Registration Statement and to be a part hereof from the date
of filing of such documents.
Item 6. Indemnification of Directors and Officers.
Delaware General Corporation Law
Section 145(a) of the Delaware General Corporation Law (the "DGCL")
provides that a corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigation
(other than an action by or in the right of the corporation) by reason of the
fact that he is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of the corporation, or is or was serving at
the request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interest of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful.
Section 145(b) of the DGCL provides that a corporation may indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action or
1
<PAGE>
suit by or in the right of the corporation to procure a judgment in its favor by
reason of the fact that he is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to be the best interests of the
corporation and except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable to the corporation unless and only to the extent that the Court of
Chancery or the court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability but in view of all
the circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the Court of Chancery or such other court
shall deem proper.
Section 145(c) of the DGCL provides that to the extent that a present or
former director, officer, employee or agent of a corporation has been successful
on the merits or otherwise in defense of any action, suit or proceeding referred
to in subsections (a) and (b) of Section 145, or in defense of any claim, issue
or matter therein, such person shall be indemnified against expenses (including
attorneys' fees) actually and reasonably incurred by such person in connection
therewith.
Section 145(d) of the DGCL provides that any indemnification under
subsections (a) and (b) of Section 145 (unless ordered by a court) shall be made
by the corporation only as authorized in the specific case upon a determination
that indemnification of the present or former director, officer, employee or
agent is proper in the circumstances because he has met the applicable standard
of conduct set forth in subsections (a) and (b) of Section 145. Such
determination shall be made, with respect to a person who is a director or
officer at the time of such determination, (1) by a majority vote of the
directors who are not parties to such action, suit or proceeding, even though
less than a quorum, or (2) by a committee of such directors designated by
majority vote of such directors, even though less than a quorum, or (3) if there
are not such director, or if such directors so direct, by independent legal
counsel in a written opinion, or (4) by the stockholders.
Section 145(e) of the DGCL provides that expenses (including attorneys'
fees) incurred by an officer or director in defending any civil, criminal,
administrative or investigative action, suit or proceeding may be paid by the
corporation in advance of the final disposition of such action, suit or
proceeding upon receipt of an undertaking by or on behalf of such director or
officer to repay such amount if it shall ultimately be determined that such
person is not entitled to be indemnified by the corporation as authorized in
Section 145. Such expenses (including attorneys' fees) incurred by former
directors and officers or other employees and agents may be so paid upon such
terms and conditions, if any, as the corporation deems appropriate.
Certificate of Incorporation
The Certificate of Incorporation of the Registrant, as amended, provides
that a director of the Registrant shall not be liable to Avery or its
stockholders for monetary damages for breach of fiduciary duty as a director,
unless the breach involved (i) a breach of the director's duty of loyalty to the
Registrant or its stockholders, (ii) acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii)
liability for unlawful dividend payments or stock purchases or redemptions or
(iv) for a transaction from which the director derived an
2
<PAGE>
improper personal benefit. The Amended Certificate of Incorporation provides
that the Registrant will indemnify all persons whom it may indemnify to the
fullest extent permitted by the DGCL.
Amended and Restated Bylaws
The Amended and Restated Bylaws of the Registrant provide that each person
who at any time is or was a director of the Registrant, and is threatened to be
or is made a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative, arbitrative or
investigative (a "Proceeding"), by reason of the fact that such person is or was
a director of the Registrant, or is or was serving at the request of the
Registrant as a director, officer, partner, venturer, proprietor, member,
employee, trustee, agent or similar functionary of another domestic of foreign
corporation, partnership, joint venture, sole proprietorship, trust, employee
benefit plan or other for-profit or non-profit enterprise, whether the basis of
a Proceeding is alleged action in such person's official capacity or in another
capacity while holding such office, shall be indemnified and held harmless by
the Registrant, against costs, charges, expenses (including without limitation,
court costs and attorneys' fees), judgments, fines and amounts paid or to be
paid in settlement actually and reasonably incurred or suffered by such person
in connection with a Proceeding, so long as a majority of a quorum of
disinterested directors, the stockholders or legal counsel through a written
opinion do not determine that such person did not act in good faith or in a
manner he reasonably believed to be in or not opposed to the best interests of
the Registrant, and in the cause of a criminal Proceeding, such person had
reasonable cause to believe his conduct was unlawful. The Amended and Restated
Bylaws also contain certain provisions designed to facilitate receipt of such
benefits by any such persons, including the prepayment of any such benefits.
Indemnification Agreements
The Registrant has entered into Indemnification Agreements pursuant to
which it will indemnify certain of its directors and officers against judgments,
claims, damages, losses and expenses incurred as a result of the fact that any
director or officer, in his capacity as such, is made or threatened to be made a
party to any suit or proceeding. Such persons will be indemnified to the
fullest extent now or hereafter permitted by the DGCL. The Indemnification
Agreements also provide for the advancement of certain expenses to such
directors and officers in connection with any such suit or proceeding.
Insurance
The Registrant has a directors' and officers' liability insurance policy to
insure its directors and officers against losses resulting from wrongful acts
committed by them in their capacities as directors and officers of the
Registrant, including liabilities arising under the Securities Act.
Item 8. Exhibits
4.1/(1)/ Certificate of Incorporation, as amended
4.2/(2)/ Amended and Restated Bylaws
5.1* Opinion of Winstead Sechrest & Minick P.C. regarding the validity of the
securities being registered
3
<PAGE>
23.1* Consent of King Griffin & Adamson P.C.
23.2* Consent of Winstead Sechrest & Minick P.C. (included as part of
Exhibit 5.1)
24.1* Power of Attorney (See Page II-1 of this Registration Statement).
99.1* Avery Communications, Inc. 1999 Flexible Incentive Plan
_______________________
*Filed herewith.
/(1)/ Incorporated herein by referenced to Exhibit 3.1 to the Registrant's
Registration Statement on Form SB-2 (File No. 333-65133).
/(2)/ Incorporated herein by reference to Exhibit 3.2 to the Registrant's
Registration Statement on From SB-2 (File No. 333-65133).
Item 9. Undertakings.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any 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.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to
be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
(4) If the registrant is a foreign private issuer, to file a post-
effective amendment to the registration statement to include any financial
statement required by Rule 3-19 of this chapter at the start of any delayed
offering or throughout a continuous offering. Financial statements and
information otherwise required by Section 10(a)(3) of the Act need not be
furnished, provided, that the registrant includes in the prospectus, by
means of a post-effective amendment, financial statements required pursuant
to this paragraph (a)(4) and other information necessary to ensure that all
other information in the prospectus is at least as current as the date of
those financial statements. Notwithstanding the foregoing, with respect to
registration statements on Form F-3, a post-effective amendment need not be
filed to include financial statements on Form F-3, a post-effective
amendment need not be filed to include financial statements and information
required by Section 10(a)(3) of the Act or Rule 3-19 of this chapter if such
financial statements and information are contained in periodic reports filed
with or furnished to the Commission by the registrant pursuant to Section 13
or Section 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in the Form F-3."
4
<PAGE>
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or 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 that time shall be deemed to be
the initial bona fide offering thereof."
(c) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act of 1933 and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
5
<PAGE>
SIGNATURES
The Registrant. Pursuant to the requirements of the Securities Act of 1933,
the Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-8 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Chicago, State of Illinois, on this 29th day of
March, 2000.
AVERY COMMUNICATIONS, INC.
By: /s/ Scot M. McCormick
---------------------------------------
Scot M. McCormick
Vice President, Chief Financial
Officer and Secretary
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints Patrick J. Haynes, III, Mark J. Nielsen
and Scot M. McCormick, and each of them, his true and lawful attorneys-in-fact
and agents, with full power of substitution and resubstitution, for him and on
his behalf and in his name, place and stead, in any and all capacities, to sign
any and all documents relating to this Registration Statement, including any and
all amendments (including post-effective amendments) to this Registration
Statement, and to file the same, with all exhibits and supplements thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, and hereby grants to such attorneys-in-fact and agents, and each of
them, full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises in order to
effectuate the same, as fully to all intents and purposes as he might or could
do in person, hereby ratifying and confirming all that said attorneys-in-fact
and agents or any of them, or their or his substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
II-1
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the date indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Patrick J. Haynes, III Director, Chairman of the Board March 29, 2000
- ----------------------------
Patrick J. Haynes, III
/s/ Mark J. Nielsen Director, President and Chief March 29, 2000
- ---------------------------- Executive Officer (Principal
Mark J. Nielsen Executive Officer)
/s/ Scot M. McCormick Director, Vice President, Chief March 29, 2000
- ---------------------------- Financial Officer and Secretary
Scot M. McCormick (Principal Accounting Officer)
/s/ Norman M. Phipps Director March 29, 2000
- ----------------------------
Norman M. Phipps
/s/ J. Alan Lindauer Director March 29, 2000
- ----------------------------
J. Alan Lindauer
/s/ Stephen L. Brown Director and Vice Chairman March 29, 2000
- ---------------------------- of the Board
Stephen L. Brown
/s/ Spencer L. Brown Director March 29, 2000
- ----------------------------
Spencer L. Brown
/s/ Robert T. Isham, Jr. Director March 29, 2000
- ----------------------------
Robert T. Isham, Jr.
</TABLE>
II-2
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description
------ -----------
4.1/(1)/ Certificate of Incorporation, as amended.
4.2/(2)/ Amended and Restated Bylaws of the Registrant.
5.1* Opinion of Winstead Sechrest & Minick P.C.
23.1* Consent of King Griffin & Adamson P.C.
23.2* Consent of Winstead Sechrest & Minick P.C. (included as part of
Exhibit 5.1)
24.1* Power of Attorney (See Page II-1 of this Registration
Statement)
99.1* Avery Communications, Inc. 1999 Flexible Incentive Plan
- -----------------------
* Filed herewith
/(1)/ Incorporated herein by reference to Exhibit 3.1 to the Registrant's
Registration Statement on Form SB-2 (File No. 333-65133)
/(2)/ Incorporated herein by reference to Exhibit 3.2 to Registrant's
Registration Statement on Form SB-2 (File No. 333-65133)
<PAGE>
[Letterhead of Winstead Sechrest & Minick P.C.]
EXHIBIT 5.1
-----------
OPINION REGARDING LEGALITY
March 29, 2000
Avery Communications, Inc.
190 South La Salle Street, Suite 1710
Chicago, Illinois 60603
Gentlemen:
Avery Communications, Inc., a Delaware corporation (the "Company"), is
-------
today filing with the Securities and Exchange Commission (the "Commission") a
----------
Registration Statement on Form S-8 (the "Registration Statement") under the
----------------------
Securities Act of 1933, as amended, with respect to the registration of
1,500,000 shares (the "Shares") of common stock ("Common Stock"), $.01 par value
------ ------------
per share, of the Company which may hereafter be issued pursuant to the Avery
Communications, Inc. 1999 Flexible Incentive Plan (the "Plan").
----
In rendering the opinions expressed herein, we have examined (i) the
Company's Certificate of Incorporation and all amendments thereto, (ii) the
Company's Amended and Restated Bylaws, as amended, (iii) the applicable minutes
of meetings or consents in lieu of meetings of the Company's board of directors
(the "Board") and stockholders, and (iv) such other corporate records and
-----
documents, certificates of corporate and public officials and statutes as we
have deemed necessary for the purposes of this opinion. In such examination, we
have assumed the genuineness of all signatures, the authenticity of all
corporate records, documents and instruments submitted to us as originals, the
conformity to original documents of all documents submitted to us as conformed,
certified or photostatic copies thereof, the authenticity of the originals of
such photostatic, certified or conformed copies, and compliance both in the past
and in the future with the terms of the Plan by the Company and its employees,
officers, the Board and any committees appointed to administer the Plan.
Based upon such examination and in reliance thereon, we are of the opinion
that upon the issuance of Shares in accordance with the terms and conditions of
the Plan, including receipt prior to issuance by the Company of the full
consideration for the Shares (which consideration shall be at least equal to the
par value thereof), the Shares will be validly issued, fully paid and
nonassessable shares of Common Stock.
<PAGE>
Avery Communications, Inc.
March 29, 2000
Page 2
This firm consents to the filing of this opinion with the Commission as
Exhibit 5.1 to the Registration Statement.
Very truly yours,
/s/ WINSTEAD SECHREST & MINICK P.C.
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the incorporation by reference in the Registration Statement on
Form S-8 pertaining to 1,500,000 shares of Avery Communications, Inc. common
stock, of our report dated July 16, 1999, with respect to the financial
statements of Avery Communications, Inc. and Subsidiaries for the years ended
December 31, 1998 and 1997.
/s/ KING GRIFFIN & ADAMSON P.C.
--------------------------------
KING GRIFFIN & ADAMSON P.C.
Dallas, Texas
March 29, 2000
<PAGE>
EXHIBIT 99.1
AVERY COMMUNICATIONS, INC.
1999 FLEXIBLE INCENTIVE PLAN
SECTION 1. PURPOSE OF THIS PLAN
The purposes of the Avery Communications, Inc. 1999 Flexible Incentive Plan
are to (a) promote the interests of Avery Communications, Inc. (the "Company")
and its shareholders by enabling the Company and each of its Subsidiaries (as
hereinafter defined) to (1) attract, motivate and retain their respective
employees and Directors (as hereinafter defined) by offering such employees and
Directors performance-based stock incentives and other equity interests in the
Company and other incentive awards and (2) compensate Consultants (as
hereinafter defined) by offering such Consultants performance-based stock
incentives and other equity interests in the Company and other incentive awards
that recognize the creation of value for the shareholders of the Company and (b)
promote the Company's long-term growth and success. To achieve these purposes,
eligible Persons may receive Stock Options or Restricted Stock (as such terms
are hereinafter defined), or any combination thereof.
SECTION 2. DEFINITIONS
As used in this Plan, the following terms shall have the meanings set forth
below unless the context otherwise requires:
2.1 "Award" shall mean the grant of a Stock Option or Restricted Stock
pursuant to this Plan.
2.2 "Book Value" shall mean the excess of the value of the assets of an
entity over the liabilities of such entity (determined in accordance with United
States generally accepted accounting principles, consistently applied).
2.3 "Board" shall mean the Board of Directors of the Company, as the same
may be constituted from time to time.
2.4 "Cause" shall mean (a) the Participant's violation of the provisions
of any non-competition agreement, confidentiality agreement or proprietary
rights agreement; (b) an illegal or negligent action by the Participant that
materially and adversely affects the Company; (c) the Participant's failure or
refusal to perform his duties (except by reason of Disability); (d) the
Participant's failure to comply with or conform to the Company's rules and
regulations or code of conduct; or (e) the Participant's conviction of a felony.
2.5 "Change in Control" shall mean, after the Effective Date, (a) the
occurrence of an event of a nature that would be required to be reported by the
Company in response to Item 1 of a Current Report on Form 8-K (or any successor
to such form) promulgated pursuant to the Exchange Act; provided, without
limitation, such a Change in Control shall be deemed to have occurred if (1) any
Person or Group (other than (A) the Company, (B) a wholly-owned Subsidiary, (C)
any employee benefit plan (including, without limitation, an employee stock
ownership plan) adopted
<PAGE>
by the Company or any wholly-owned Subsidiary or (D) any trustee or other
fiduciary holding securities under any employee benefit plan adopted by the
Company or any Subsidiary), becomes the "beneficial owner" (as defined in Rule
13d-3 (or any successor to such rule) promulgated under the Exchange Act),
directly or indirectly, of securities of the Company or any Material Subsidiary
representing fifty percent (50%) or more of the combined voting power of the
Company's or such Material Subsidiary's then outstanding securities or (2)
during any period of twenty-four (24) months, individuals who at the beginning
of such period constitute the Board cease for any reason to constitute at least
a majority thereof, unless the election by the Board or the nomination for
election by the Company's shareholders was approved by a vote of at least two-
thirds (2/3) of the directors then still in office who either were directors at
the beginning of such twenty-four (24) month period or whose election or
nomination for election was previously so approved; (b) a Corporate Transaction
is consummated, other than a Corporate Transaction that would result in the
holders of voting securities of the Company outstanding immediately prior
thereto owning (directly or indirectly) not less than fifty percent (50%) of the
combined voting power of the voting securities of the issuing/surviving/
resulting entity outstanding immediately after such Corporate Transaction; (c)
the shareholders of the Company approve a plan of complete liquidation of the
Company or (d) an agreement for the sale or other disposition of all or
substantially all of the Company's assets (evaluated on a consolidated basis,
without regard to whether the sale or disposition is effected via a sale or
disposition of assets of the Company, the sale or disposition of the securities
of one or more Subsidiaries or the sale or disposition of the assets of one or
more Subsidiaries) is consummated. If the Company is not subject to the Exchange
Act, the determination of whether a Change in Control has occurred under this
Section shall be made as if the Company were subject to the Exchange Act.
2.6 "Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time (or any successor to such legislation).
2.7 "Committee" shall mean the Committee established by the Board to
administer the Plan, as such Committee may be constituted from time to time;
provided, however, membership on the Committee shall be limited to "Non-Employee
Directors" (as that term is defined in Rule 16b-3 (or any successor to such
rule) promulgated under the Exchange Act) who are also "outside directors," as
required pursuant to Section 162(m) of the Code and such Treasury regulations as
may be promulgated thereunder; and provided further, the Committee will consist
of not less than two (2) directors. All members of the Committee will serve at
the pleasure of the Board.
2.8 "Common Stock" shall mean the Common Stock, par value $.01 per share
of the Company.
2.9 "Company" shall have the meaning set forth in Section 1 of this Plan.
---------
2.10 "Consultant" shall mean any Person who or which is engaged by the
Company or any Subsidiary to render consulting services.
-2-
<PAGE>
2.11 "Corporate Transaction" shall mean any recapitalization (other than a
transaction contemplated by Subsection 9.1(a)), merger, consolidation or
------------------
conversion involving the Company or any exchange of securities involving the
Common Stock.
2.12 "Designated Beneficiary" shall mean the beneficiary designated by a
Participant, in a manner authorized by the Committee or the Board, to exercise
the rights of such Participant in the event of such Participant's death. In the
absence of an effective designation by a Participant, the Designated Beneficiary
shall be such Participant's estate.
2.13 "Director" shall mean any member of the Board.
2.14 "Disability" shall mean permanent and total inability to engage in
any substantial gainful activity, even with reasonable accommodation, by reason
of any medically determinable physical or mental impairment which has lasted or
can reasonably be expected to last without material interruption for a period of
not less than twelve (12) months, as determined in the sole discretion of the
Committee or the Board.
2.15 "Effective Date" shall mean September 17, 1999.
2.16 "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended from time to time (or any successor to such legislation).
2.17 "Fair Market Value" shall mean the fair market value of the Shares
determined as follows:
(a) If the principal market for the Common Stock is a national
securities exchange or The Nasdaq Stock Market, then the Fair Market Value
as of that date shall be the average between the lowest and highest
reported sale prices of the Common Stock on that date on the principal
exchange on which the Common Stock is then listed or admitted to trading;
(b) If sale prices are not available or if the principal market for
the Common Stock is not a national securities exchange and the Common Stock
is not quoted on The Nasdaq Stock Market, the Fair Market Value as of that
date shall be the average between the highest bid and lowest asked prices
for the Common Stock on such date as reported on the OTC Bulletin Board or
by the National Quotation Bureau, LLC or a comparable service; or
(c) If the day is not a business day, and as a result, paragraphs
(a) and (b) next above are inapplicable, the Fair Market Value of the Stock
shall be determined as of the last preceding business day. If paragraphs
(a) and (b) next above are otherwise inapplicable, then the Fair Market
Value of the Shares shall be determined in good faith by the Committee.
Notwithstanding the foregoing, with respect to Incentive Stock Options,
Fair Market Value must be determined in accordance with Section 422 of the
Code.
-3-
<PAGE>
2.18 "Group" shall have the meaning ascribed to such term in Section 13(d)
of the Exchange Act.
2.19 "Incentive Stock Option" shall mean any option to purchase Shares
awarded pursuant to this Plan which qualifies as an "Incentive Stock Option"
pursuant to Section 422 of the Code.
2.20 "Material Subsidiary" shall mean any Subsidiary of which the Book
Value or fair market value (whichever is greater) constitute fifty percent (50%)
or more of the Book Value of the Company. The fair market value of a Subsidiary
will be determined in good faith by the Board.
2.21 "Non-Qualified Stock Option" shall mean any option to purchase Shares
awarded pursuant to this Plan that does not qualify as an Incentive Stock Option
(including, without limitation, any option to purchase Shares originally
designated as or intended to qualify as an Incentive Stock Option).
2.22 "Non-Share Method" shall have the meaning set forth in Subsection
----------
6.6(c) of this Plan.
- ------
2.23 "Optionee" shall mean any Participant who has been granted or holds a
Stock Option awarded pursuant to this Plan.
2.24 "Participant" shall mean any Person who has been granted or holds an
Award granted pursuant to this Plan.
2.25 "Permitted Modification" shall be deemed to be any modification of an
Award which is made in connection with a Corporate Transaction and which
provides, in connection with a Stock Option, that subsequent to the consummation
of the Corporate Transaction (a) the exercise price of such Stock Option will be
proportionately adjusted to reflect the exchange ratio applicable to the
particular Corporate Transaction and/or (b) the nature and amount of
consideration to be received upon exercise of the Stock Option will be the same
(on a per share basis) as was received by Persons who were holders of shares of
Common Stock immediately prior to the consummation of the Corporate Transaction.
2.26 "Person" shall mean an individual, partnership, limited liability
company, corporation, joint stock company, trust, estate, joint venture,
association or unincorporated organization or any other form of business
organization.
2.27 "Plan" shall mean this Avery Communications, Inc. 1999 Flexible
Incentive Plan as it may be amended from time to time.
2.28 "Reload Option" shall mean a Stock Option as defined in Subsection
----------
6.6(b) of this Plan.
- ------
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<PAGE>
2.29 "Reorganization" shall mean any stock split, stock dividend, reverse
stock split, combination of Shares or any other similar increase or decrease in
the number of Shares issued and outstanding.
2.30 "Restricted Stock" shall mean any Shares granted pursuant to this
Plan that are subject to restrictions or a substantial risk of forfeiture.
2.31 "Retirement" shall mean termination of employment, other than
discharge for Cause, of an employee of the Company or any Subsidiary after age
65 or on or before age 65 if pursuant to the terms of any retirement plan
maintained by the Company or any Subsidiary in which such employee participates.
2.32 "Securities Act" shall mean the Securities Act of 1933, as amended
from time to time (or any successor to such legislation).
2.33 "Share Retention Method" shall have the meaning set forth in
Subsection 6.6(c) of this Plan.
- -----------------
2.34 "Shares" shall mean shares of the Common Stock and any shares of
capital stock or other securities hereafter issued or issuable upon, in respect
of or in substitution or exchange for shares of Common Stock.
2.35 "Stock Option" shall mean any Incentive Stock Option or Non-
Qualified Stock Option.
2.36 "Subsidiary" shall mean a subsidiary corporation of the Company, as
defined in Section 424(f) of the Code.
2.37 "Transactional Consideration" shall have the meaning set forth in
Subsection 9.1(b) of this Plan.
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SECTION 3. ADMINISTRATION OF THIS PLAN
3.1 Committee/Board. This Plan shall be administered and interpreted by
the Committee and/or the Board.
3.2 Awards.
(a) Subject to the provisions of this Plan and directions from the
Board, the Committee has the discretionary authority to:
(1) determine the Persons to whom Awards are to be granted;
-5-
<PAGE>
(2) determine the types and combinations of Awards to be granted;
the number of Shares to be covered by an Award; the exercise price of
an Award; the time or times when an Award shall be granted and may be
exercised; the terms, performance criteria or other conditions,
vesting periods or any restrictions for an Award; any restrictions on
Shares acquired pursuant to the exercise of an Award; and any other
terms and conditions of an Award;
(3) construe and interpret the provisions of this Plan,
including, without limitation, resolving any ambiguities or
contradictions; correcting deficiencies; and supplying omissions;
(4) prescribe, amend and rescind rules and regulations relating
to this Plan;
(5) determine whether, to what extent and under what
circumstances to provide loans from the Company to Participants to
exercise Awards granted pursuant to this Plan, and the terms and
conditions of such loans;
(6) rely upon employees of the Company or third party
administrators for such clerical and recordkeeping duties as may be
necessary in connection with the administration of this Plan;
(7) accelerate or defer (with the consent of the Participant) the
vesting of any rights pursuant to an Award; and
(8) make all other determinations and take all other actions
necessary or advisable for the administration of this Plan.
(b) Without limiting the Board's right to amend this Plan pursuant to
Section 11, the Board may take all actions authorized by Subsection 3.2(a)
---------- -----------------
of this Plan, including, without limitation, granting such Awards pursuant
to this Plan as the Board may deem necessary or appropriate.
3.3 Procedures.
(a) Proceedings by the Board with respect to this Plan will be
conducted in accordance with the articles of incorporation and bylaws of
the Company.
(b) A majority of the Committee members shall constitute a quorum for
action by the Committee. All determinations of the Committee shall be made
by not less than a majority of its members.
(c) All questions of interpretation and application of this Plan or
questions pertaining to any question of fact or Award granted hereunder
will be decided by the
-6-
<PAGE>
Committee or the Board, whose decision will be final, conclusive, and
binding upon the Company and each other affected party. In the event of a
conflict between any decision of the Committee and of the Board, the
decision of the Board shall be controlling.
SECTION 4. SHARES SUBJECT TO PLAN
4.1 Limitations. The maximum number of Shares that may be issued with
respect to Awards granted pursuant to this Plan shall not exceed 1,500,000
unless increased or decreased by reason of changes in the capitalization of the
Company as hereinafter provided or by amendment of this Plan. The Shares issued
pursuant to this Plan may be authorized but unissued Shares, or may be issued
Shares which have been reacquired by the Company.
4.2 Changes. To the extent that any Award granted pursuant to this Plan
shall be forfeited, shall expire or shall be cancelled, in whole or in part,
then the number of Shares covered by the Award so forfeited, expired or
cancelled may again be awarded pursuant to the provisions of this Plan. In the
event that Shares are delivered to the Company in full or partial payment of the
exercise price for the exercise of a Stock Option, the number of Shares
available for future Awards granted pursuant to this Plan shall be reduced only
by the net number of Shares issued upon the exercise of the Stock Option.
Awards that may be satisfied either by the issuance of Shares or by cash or
other consideration shall, until the form of consideration to be paid is finally
determined, be counted against the maximum number of Shares that may be issued
pursuant to this Plan. If the Award is ultimately satisfied by the payment of
consideration other than Shares, such Shares may again be made the subject of an
Award granted pursuant to this Plan. Awards will not reduce the number of
Shares that may be issued pursuant to this Plan if the settlement of the Award
will not require the issuance of Shares.
SECTION 5. ELIGIBILITY
5.1 Eligibility. Eligibility for participation in this Plan shall be
confined to those individuals who are employed by the Company or a Subsidiary
and such Consultants and Directors as may be designated by the Committee or the
Board. In making any determination as to Persons to whom Awards shall be
granted, the type of Award and/or the number of Shares to be covered by the
Award, the Committee or the Board shall consider the position and
responsibilities of the Person, the importance of the Person to the Company, the
duties of the Person, the past, present and potential contributions of the
Person to the growth and success of the Company and such other factors as the
Committee or the Board may deem relevant in connection with accomplishing the
purposes of this Plan.
SECTION 6. STOCK OPTIONS
6.1 Grants. The Committee or the Board may grant Stock Options alone or
in addition to other Awards granted pursuant to this Plan to any eligible
Person. Each Person so selected shall be offered a Stock Option to purchase the
number of Shares determined by the Committee or the Board. The Committee or the
Board shall specify whether such Stock Option is an Incentive Stock
-7-
<PAGE>
Option or Non-Qualified Stock Option and any other terms or conditions relating
to such Award; provided, however only employees of the Company or a Subsidiary
may be granted Incentive Stock Options. To the extent that any Stock Option
designated as an Incentive Stock Option does not qualify as an Incentive Stock
Option (whether because of its provisions, the failure of the shareholders of
the Company to authorize the issuance of Incentive Stock Options, the time or
manner of its exercise or otherwise), such Stock Option or the portion thereof
which does not qualify shall be deemed to constitute a Non-Qualified Stock
Option. Each Person to be granted a Stock Option shall enter into a written
agreement with the Company, in such form as the Committee or the Board may
prescribe, setting forth the terms and conditions (including, without
limitation, the exercise price and vesting schedule) of the Stock Option. At any
time and from time to time, the Optionee and the Committee or the Board may
agree to modify an option agreement in such respects as they may deem
appropriate, including, without limitation, the conversion of an Incentive Stock
Option into a Non-Qualified Stock Option. The Committee or the Board may require
that an Optionee meet certain conditions before the Stock Option or a portion
thereof may vest or be exercised, as, for example, that the Optionee remain in
the employ of the Company or a Subsidiary for a stated period or periods of
time.
6.2 Incentive Stock Options Limitations.
(a) In no event shall any individual be granted Incentive Stock
Options to the extent that the Shares covered by any Incentive Stock
Options (and any incentive stock options granted pursuant to any other
plans of the Company or its Subsidiaries) that may be exercised for the
first time by such individual in any calendar year have an aggregate Fair
Market Value in excess of $100,000. For this purpose, the Fair Market
Value of the Shares shall be determined as of the dates on which the
Incentive Stock Options are granted. It is intended that the limitation on
Incentive Stock Options provided in this Subsection 6.2(a) be the maximum
-----------------
limitation on Stock Options which may be considered Incentive Stock Options
pursuant to the Code.
(b) The option exercise price of an Incentive Stock Option shall not
be less than one hundred percent (100%) of the Fair Market Value of the
Shares subject to such Incentive Stock Option on the date of the grant of
such Incentive Stock Option.
(c) Notwithstanding anything herein to the contrary, in no event shall
any employee owning more than ten percent (10%) of the total combined
voting power of the Company or any Subsidiary be granted an Incentive Stock
Option unless the option exercise price of such Incentive Stock Option
shall be at least one hundred ten percent (110%) of the Fair Market Value
of the Shares subject to such Incentive Stock Option on the date of the
grant of such Incentive Stock Option.
(d) In no event shall any individual be granted an Incentive Stock
Option after the expiration of ten (10) years from the earlier of the date
this Plan is adopted or the date this Plan is approved by the shareholders
of the Company (if shareholder approval is required by Section 422 of the
Code).
-8-
<PAGE>
(e) To the extent shareholder approval of this Plan is required by
Section 422 of the Code, (1) no individual shall be granted an Incentive
Stock Option unless this Plan is approved by the shareholders of the
Company within twelve (12) months before or after the date this Plan is
initially adopted and (2) in the event this Plan is amended to increase
the number of Shares subject to issuance upon the exercise of Incentive
Stock Options or to change the class of employees eligible to receive
Incentive Stock Options, no individual shall be granted an Incentive Stock
Option unless such amendment is approved by the shareholders of the Company
within twelve (12) months before or after such amendment.
(f) To maintain special tax treatment for Incentive Stock Options, to
the extent required by Section 421 of the Code, an Optionee may not dispose
of the Stock acquired pursuant to the exercise of an Incentive Stock Option
within two years after the date of grant nor within one year after the
optionee receives the Stock following exercise of the Incentive Stock
Option. This limitation on disposal does not apply to Stock acquired
pursuant to the exercise of an Incentive Stock Option after an Optionee's
death by his or her estate or heirs, as applicable.
(g) To the extent that any Option designated as an Incentive Stock
Option does not qualify as such (whether because of its provisions, the
failure of the stockholders of the Company to authorize the issuance of
Incentive Stock Options, the timely manner of its exercise, or otherwise),
such Option, or the portion thereof which does not qualify, shall be deemed
to constitute a Non-Qualified Stock Option.
6.3 Option Term. The term of a Stock Option shall be for such period of
time from the date of its grant as may be determined by the Committee or the
Board; provided, however, that no Incentive Stock Option shall be exercisable
later than ten (10) years from the date of its grant and no Incentive Stock
Option shall be granted to any employee owning more than ten percent (10%) of
the total combined voting power of the Company or any Subsidiary unless the term
of such Incentive Stock Option is equal to or less than five (5) years measured
from the date on which such Incentive Stock Option is granted.
6.4 Time of Exercise. No Stock Option may be exercised unless it is
exercised prior to the expiration of its stated term and, in connection with
options granted to employees of the Company or its Subsidiaries, at the time of
such exercise, the Optionee is, and has been continuously since the date of
grant of such Stock Option, employed by the Company or a Subsidiary, except
that:
(a) A Stock Option may, to the extent vested as of the date the
Optionee ceases to be an employee of the Company or a Subsidiary, be
exercised during the three month period immediately following the date the
Optionee ceases (for any reason other than death, disability or termination
for Cause) to be an employee of the Company or a Subsidiary (or within such
other period as may be specified in the applicable option agreement),
provided that, if the Stock Option has been designated as an Incentive
Stock Option and the option
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<PAGE>
agreement provides for a longer exercise period, the exercise of such Stock
Option after such three-month period shall be treated as the exercise of a
Non-Qualified Stock Option;
(b) If the Optionee dies while in the employ of the Company or a
Subsidiary, or within three months after the Optionee ceases (for any
reason other than termination for Cause) to be such an employee, a Stock
Option may, to the extent vested as of the date of the Optionee's death, be
exercised by the Optionee's Designated Beneficiary during the one-year
period immediately following the date of the Optionee's death (or within
such other period as may be specified in the applicable option agreement);
(c) If the Optionee ceases to be an employee of the Company or a
Subsidiary by reason of the Optionee's Disability, a Stock Option, to the
extent vested as of the date the Optionee ceases to be an employee of the
Company or a Subsidiary, may be exercised during the one-year period
immediately following the date on which the Disability is determined to
exist (or within such other period as may be specified in the applicable
option agreement); provided that, if the Stock Option has been designated
as an Incentive Stock Option and the option agreement provides for a longer
exercise period, the exercise of such Stock Option after such one-year
period shall be treated as the exercise of a Non-Qualified Stock Option;
(d) If the Optionee's employment is terminated for Cause, all Stock
Options held by such Optionee shall immediately and simultaneously
terminate and will no longer be exercisable; and
(e) An Optionee's employment relationship with the Company or
Subsidiary will be considered to continue during a leave of absence to the
extent so provided in the personnel policies of the Company or Subsidiary;
provided that with respect to an Incentive Stock Option, such employment
relationship shall not be considered continued for a period exceeding that
set forth in Treasury Regulation Section 1.421-7(h)(2). Nothing contained
in this Subsection 6.4 will be deemed to extend the term of a Stock Option
--------------
or to revive any Stock Option which has previously lapsed or been
cancelled, terminated or surrendered. Stock Options granted under this
Plan to Consultants or Directors will contain such terms and conditions
with respect to the death or disability of a Consultant or Director or
termination of a Consultant's or Director's relationship with the Company
as the Committee or the Board deems necessary or appropriate. Such terms
and conditions will be set forth in the option agreements evidencing the
grant of such Stock Options.
6.38 Vesting of Stock Options.
(a) Each Stock Option granted pursuant to this Plan may only be
exercised to the extent that the Optionee is vested in such Stock Option.
Each Stock Option shall vest separately in accordance with the option
vesting schedule determined by the Committee or the Board, which will be
incorporated in the option agreement entered into between the Company and
such Optionee. The option vesting schedule may be accelerated if, in the
sole
-10-
<PAGE>
discretion of the Committee or the Board, the acceleration of the option
vesting schedule would be in the best interests the Company.
(b) In the event of the dissolution or liquidation of the Company,
each Stock Option granted pursuant to this Plan shall terminate as of a
date to be fixed by the Committee or Board; provided, however, that not
less than thirty (30) days' written notice of the date so fixed shall be
given to each Optionee. During such period all Stock Options which have
not previously been terminated, exercised or cancelled will (subject to the
provisions of Subsection 6.4) fully vest and become exercisable,
--------------
notwithstanding the vesting schedule set forth in the option agreement
evidencing the grant of such Stock Option. Upon the date fixed by the
Committee or the Board, any unexercised Stock Options shall terminate and
be of no further effect.
(c) Upon the occurrence of a Change in Control, all unvested Shares
subject to Stock Options shall become fifty percent (50%) vested.
6.6 Manner of Exercise of Stock Options.
(a) Stock Options may be exercised as to Shares only in amounts and at
intervals of time specified in the written option agreement between the
Company and the Optionee. Each exercise of a Stock Option, or any part
thereof, shall be evidenced by a written notice delivered by the Optionee
to the Company. The purchase price of the Shares as to which a Stock
Option shall be exercised shall be paid in full at the time of exercise,
and may be paid to the Company either:
(1) in cash (including check, bank draft or money order); or
(2) by other consideration deemed acceptable by the Committee or
the Board in its sole discretion, including, without limitation,
Shares, promissory notes, or the proceeds of loans made or guaranteed
by the Company or a Subsidiary.
(b) If an Optionee delivers Shares (including Shares of Restricted
Stock) already owned by the Optionee in full or partial payment of the
exercise price for any Stock Option, or if the Optionee elects to have the
Company retain that number of Shares out of the Shares being acquired
through the exercise of the Stock Option having a Fair Market Value equal
to the exercise price of the Stock Option being exercised, the Committee or
the Board may, in its sole discretion, authorize the grant of a new Stock
Option (a "Reload Option") for that number of Shares equal to the number of
-------------
already owned Shares surrendered (including Shares of Restricted Stock) or
newly acquired Shares being retained by the Company in payment of the
option exercise price of the underlying Stock Option being exercised. The
grant of a Reload Option will become effective upon the exercise of the
underlying Stock Option. The option exercise price of the Reload Option
shall be the Fair Market Value of a Share on the effective date of the
grant of the Reload Option. Each Reload Option shall be exercisable no
later than the time when the underlying stock option being exercised could
-11-
<PAGE>
be last exercised. The Committee or the Board may also specify additional
terms, conditions and restrictions for the Reload Option and the Shares to
be acquired upon the exercise thereof.
(c) The amount, as determined by the Committee or the Board, of any
federal, state or local tax required to be withheld by the Company due to
the exercise of a Stock Option shall, subject to the authorization of the
Committee or the Board, be satisfied, at the election of the Optionee,
either (1) by payment by the Optionee to the Company of the amount of such
withholding obligation in cash or other consideration acceptable to the
Committee or the Board in its sole discretion (the "Non-Share Method") or
----------------
(2) through either the retention by the Company of a number of Shares out
of the Shares being acquired through the exercise of the Stock Option or
the delivery of already owned Shares having a Fair Market Value equal to
the amount of the withholding obligation (the "Share Retention Method").
----------------------
If an Optionee elects to use the Share Retention Method in full or partial
satisfaction of any tax liability resulting from the exercise of a Stock
Option, the Committee or the Board may authorize the grant of a Reload
Option for that number of Shares as shall equal the number of Shares used
to satisfy the tax liabilities of the Optionee arising out of the exercise
of such Stock Option. Such Reload Option will be granted at the price and
on the terms set forth in Subsection 6.6(b). The cash payment or an amount
-----------------
equal to the Fair Market Value of the Shares so withheld, as the case may
be, shall be remitted by the Company to the appropriate taxing authorities.
(d) An Optionee shall not have any of the rights of a shareholder of
the Company with respect to the Shares covered by a Stock Option except to
the extent that such Stock Option is exercised and one or more certificates
representing such Shares shall have been delivered to the Optionee.
SECTION 7. RESTRICTED STOCK
7.1 Grants. The Committee or the Board may grant Awards of Restricted
Stock to any Consultant, Director or employee of the Company or a Subsidiary for
such minimum consideration, if any, as may be required by applicable law or such
greater consideration as may be determined by the Committee or the Board, in its
sole discretion. Restricted Stock may not be acquired with the proceeds of a
nonrecourse loan that is made or guaranteed by the Company or a Subsidiary. The
terms and conditions of the Restricted Stock shall be specified by the grant
agreement. The Committee or the Board, in its sole discretion, may specify any
particular rights which the Participant to whom a grant of Restricted Stock is
made shall have in the Restricted Stock during the restriction period and the
restrictions applicable to the particular Award, the vesting schedule (which may
be based on service, performance or other factors) and rights to acceleration of
vesting (including, without limitation, whether non-vested Shares are forfeited
or vested upon termination of employment). Further, the Committee or the Board
may grant performance-based Awards consisting of Restricted Stock by
conditioning the grant, or vesting or such other factors, such as the release,
expiration or lapse of restrictions upon any such Award (including the
acceleration of any such conditions or terms) of such Restricted Stock upon the
attainment of specified performance
-12-
<PAGE>
goals or such other factors as the Committee or the Board may determine. The
Committee or the Board shall also determine when the restrictions shall lapse or
expire and the conditions, if any, pursuant to which the Restricted Stock will
be forfeited or sold back to the Company. Each Award of Restricted Stock may
have different restrictions and conditions. Unless otherwise set forth in this
Plan, Restricted Stock may not be sold, pledged, encumbered or otherwise
disposed of by the recipient until the restrictions specified in the Award
expire. Awards of Restricted Stock are subject to acceleration of vesting,
termination of restrictions and termination in the same manner as Stock Options
pursuant to Subsections 6.4 and 6.5 of this Plan.
-----------------------
7.2 Awards and Certificates. Any Restricted Stock issued hereunder may be
evidenced in such manner as the Committee or the Board, in its sole discretion,
shall deem appropriate including, without limitation, book-entry registration or
issuance of a stock certificate or certificates. In the event any stock
certificate is issued in respect of Shares of Restricted Stock, such certificate
shall bear an appropriate legend with respect to the restrictions applicable to
such Award. The Company may retain, at its option, the physical custody of any
stock certificate representing any awards of Restricted Stock during the
restriction period or require that the certificates evidencing Restricted Stock
be placed in escrow or trust, along with a stock power endorsed in blank, until
all restrictions are removed or expire.
SECTION 8. COMPLIANCE WITH SECURITIES AND OTHER LAWS
8.1 Conditions. As a condition to the issuance or transfer of any Award
or any security issuable in connection with such Award, the Company may require
an opinion of counsel, satisfactory to the Company, to the effect that (a) such
issuance and/or transfer will not be in violation of the Securities Act or any
other applicable securities laws and (b) such issuance and/or transfer will not
be in violation of the rules and regulations of any securities exchange or
automated quotation system on which the Common Stock is listed or admitted to
trading. Further, the Company may refrain from issuing, delivering or
transferring any Award or any security issuable in connection with such Award
until the Committee or the Board has determined that such issuance, delivery or
transfer will not violate applicable securities laws and that the recipient has
tendered to the Company any federal, state or local tax owed as a result of such
issuance, delivery or transfer, when the Company has a legal liability to
satisfy such tax. The Company shall not be liable for damages due to delay in
the issuance, delivery or transfer of any Award or any security issuable in
connection with such Award or any agreement, instrument or certificate
evidencing such Award or security for any reason whatsoever, including, but not
limited to, a delay caused by the listing requirements of any securities
exchange or automated quotation system or any registration requirements under
the Securities Act, the Exchange Act, or under any other state or federal law,
rule or regulation. The Company is under no obligation to take any action or
incur any expense to register or qualify the issuance, delivery or transfer of
any Award or any security issuable in connection with such Award under
applicable securities laws or to perfect any exemption from such registration or
qualification or to list any security on any securities exchange or automated
quotation system. Furthermore, the Company will have no liability to any person
for refusing to issue, deliver or transfer any Award or any security issuable in
connection with such Award if such refusal is based upon the foregoing
provisions of this Section 8. As a condition to any issuance, delivery or
---------
transfer
-13-
<PAGE>
of any Award or any security issuable in connection with such Award, the Company
may place legends on any agreement, instrument or certificate evidencing such
Award or security, issue stop transfer orders with respect thereto and require
such agreements or undertakings as the Company may deem necessary or advisable
to assure compliance with applicable laws or regulations, including, if the
Company or its counsel deems it appropriate, representations from the recipient
of such Award or security to the effect that such recipient is acquiring such
Award or security solely for investment and not with a view to distribution and
that no distribution of the Award or the security will be made unless registered
pursuant to applicable federal and state securities laws, or in the opinion of
counsel to the Company, such registration is unnecessary.
SECTION 9. ADJUSTMENTS UPON THE OCCURRENCE OF A REORGANIZATION OR CORPORATE
TRANSACTION
9.1 Adjustments.
(a) In the event of a Reorganization, the number of Shares subject
to this Plan and to each outstanding Award, and the exercise price of each
Award which is based upon Shares, shall (to the extent deemed appropriate
by the Committee or the Board) be proportionately adjusted (as determined
by the Committee or the Board in its sole discretion) to account for any
increase or decrease in the number of issued and outstanding Shares of the
Company resulting from such Reorganization.
(b) If a Corporate Transaction is consummated and immediately
following the consummation of such Corporate Transaction the Persons who
were holders of shares of Common Stock immediately prior to the
consummation of such Corporate Transaction do not receive any securities or
other property (hereinafter collectively referred to as "Transactional
-------------
Consideration") as a result of such Corporate Transaction and continue to
-------------
hold the shares of Common Stock held by them immediately prior to the
consummation of such Corporate Transaction, the Awards will remain
outstanding and will continue in full force and effect (without any
modification) following the consummation of the Corporate Transaction.
(c) If a Corporate Transaction is consummated and immediately
following the consummation of such Corporate Transaction the Persons who
were holders of shares of Common Stock immediately prior to the
consummation of such Corporate Transaction do receive Transactional
Consideration as a result of such Corporate Transaction or do not continue
to hold the shares of Common Stock held by them immediately prior to the
consummation of such Corporate Transaction, the terms and conditions of the
Awards will be modified as follows:
(1) If the documentation pursuant to which a Corporate
Transaction will be consummated provides for the assumption by the
entity issuing Transactional Consideration to the Persons who were the
holders of shares of Common Stock immediately prior to the
consummation of such Corporate Transaction of the Awards
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<PAGE>
granted pursuant to this Plan without any modification or amendment
(other than Permitted Modifications and the modifications contemplated
by Subsections 6.5(c) and 7.1 of this Plan), such Awards will remain
--------------------------
outstanding and will continue in full force and effect following the
consummation of such Corporate Transaction (subject to such Permitted
Modifications and other contemplated modifications).
(2) If the documentation pursuant to which a Corporate
Transaction will be consummated does not provide for the assumption by
the entity issuing Transactional Consideration to the Persons who were
the holders of shares of Common Stock immediately prior to the
consummation of such Corporate Transaction of the Awards granted
pursuant to this Plan without any modification or amendment (other
than Permitted Modifications), all vesting restrictions (performance
based or otherwise) applicable to Awards which will not be assumed
will accelerate to the extent of fifty percent (50%) of the unvested
Shares subject to the Awards and the holders of such Awards may
(subject to the expiration of the term of such Awards)
exercise/receive the benefits of such Awards during the ten (10)-day
period immediately preceding the consummation of such Corporate
Transaction. For purposes of the immediately preceding sentence, all
performance based goals will be deemed to have been satisfied in full.
The Company will provide each Participant holding Awards which will
not be assumed with reasonable notice of the termination of such
vesting restrictions and the impending termination of such Awards.
Upon the consummation of such a Corporate Transaction, all unexercised
Awards which are not to be assumed will automatically terminate and
cease to be outstanding.
Nothing contained in this Section 9 will be deemed to extend the term of an
---------
Award or to revive any Award which has previously lapsed or been cancelled,
terminated or surrendered.
SECTION 10. AMENDMENT OR TERMINATION OF THIS PLAN
10.1 Amendment of This Plan. Notwithstanding anything contained in this
Plan to the contrary, all provisions of this Plan (including, without
limitation, the maximum number of Shares that may be issued with respect to
Awards to be granted pursuant to this Plan) may at any time or from time to time
be modified or amended by the Board; provided, however, that no Award at any
time outstanding pursuant to this Plan may be modified, impaired or cancelled
adversely to the holder of the Award without the consent of such holder.
10.2 Termination of This Plan. The Board may suspend or terminate this
Plan at any time, and such suspension or termination may be retroactive or
prospective. Termination of this Plan shall not impair or affect any Award
previously granted hereunder and the rights of the holder of the Award shall
remain in effect until the Award has been exercised in its entirety or has
expired or otherwise has been terminated by the terms of such Award.
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<PAGE>
SECTION 11. AMENDMENTS AND ADJUSTMENTS TO AWARDS
11.1 Amendments and Adjustments.
The Committee or the Board may amend, modify or terminate any outstanding
Award with the Participant's consent at any time prior to payment or exercise in
any manner not inconsistent with the terms of this Plan, including, without
limitation, (a) to change the date or dates as of which and/or the terms and
conditions pursuant to which (1) a Stock Option becomes exercisable or (2) a
Performance Award is deemed earned; (b) to amend the terms of any outstanding
Award to provide an exercise price per share which is higher or lower than the
then current exercise price per share of such outstanding Award; or (c) to
cancel an Award and grant a new Award in substitution therefor under such
different terms and conditions as the Committee or the Board determines in its
sole discretion to be appropriate including, but not limited to, having an
exercise price per share which may be higher or lower than the exercise price
per share of the cancelled Award. The Committee or the Board may also make
adjustments in the terms and conditions of, and the criteria included in
agreements evidencing Awards in recognition of unusual or nonrecurring events
(including, without limitation, the events described in Section 9 hereof)
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affecting the Company, or the financial statements of the Company or any
Affiliate, or of changes in applicable laws, regulations or accounting
principles, whenever the Committee or the Board determines that such adjustments
are appropriate to prevent reduction or enlargement of the benefits or potential
benefits intended to be made available pursuant to this Plan. Any provision of
this Plan or any agreement regarding an Award to the contrary notwithstanding,
the Committee or the Board may cause any Award granted to be cancelled in
consideration of a cash payment or alternative Award made to the holder of such
cancelled Award equal in value to the Fair Market Value of such cancelled Award.
The determinations of value pursuant to this Section 11 shall be made by the
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Committee or the Board in its sole discretion.
SECTION 12. GENERAL PROVISIONS
12.1 No Limit on Other Compensation Arrangements. Nothing contained in
this Plan shall prevent the Company from adopting or continuing in effect other
compensation arrangements, and such arrangements may be either generally
applicable or applicable only in specific cases.
12.2 No Right to Employment or Continuation of Relationship. Nothing in
this Plan or in any Award, nor the grant of any Award, shall confer upon or be
construed as giving any Participant any right to remain in the employ of the
Company or a Subsidiary or to continue as a Consultant or Director. Further,
the Company or a Subsidiary may at any time dismiss a Participant from
employment or terminate the relationship of any Consultant or Director with the
Company or any Subsidiary, free from any liability or any claim pursuant to this
Plan, unless otherwise expressly provided in this Plan or in any agreement
evidencing an Award made under this Plan. No Consultant, Director or employee
of the Company or any Subsidiary shall have any claim to be granted any Award,
and there is no obligation for uniformity of treatment of any Consultant,
Director or employee of the Company or any Subsidiary or of any Participants.
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<PAGE>
12.3 GOVERNING LAW. THE VALIDITY, CONSTRUCTION AND EFFECT OF THIS PLAN
AND ANY RULES AND REGULATIONS RELATING TO THIS PLAN SHALL BE DETERMINED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT GIVING EFFECT TO THE
CONFLICT OF LAWS PRINCIPLES THEREOF.
12.4 Severability. If any provision of this Plan or any Award is or
becomes or is deemed to be invalid, illegal or unenforceable in any jurisdiction
or as to any individual or Award, or would disqualify this Plan or any Award
under any law deemed applicable by the Committee or the Board, such provision
shall be construed or deemed amended to conform to applicable law, or if it
cannot be construed or deemed amended without, in the sole determination of the
Committee or the Board, materially altering the intent of this Plan or the
Award, such provision shall be stricken as to such jurisdiction, individual or
Award and the remainder of this Plan and any such Award shall remain in full
force and effect.
12.5 No Fractional Shares. No fractional Shares shall be issued or
delivered pursuant to this Plan or any Award, and the Committee or the Board
shall determine, in its sole discretion, whether cash, other securities or other
property shall be paid or transferred in lieu of any fractional Shares or
whether such fractional Shares or any rights thereto shall be cancelled,
terminated or otherwise eliminated.
12.6 Headings. Headings are given to the Sections and Subsections of this
Plan solely as a convenience to facilitate reference. Such headings shall not
be deemed in any way material or relevant to the construction or interpretation
of this Plan or any provision thereof.
12.7 Effective Date. The provisions of this Plan that relate to the grant
of Incentive Stock Options shall be effective as of the date of the approval of
this Plan by the shareholders of the Company.
12.8 Transferability of Awards. Incentive Stock Options shall not be
transferable otherwise than by will or the laws of descent and distribution.
Incentive Stock Options may be exercised, during the lifetime of the holder,
only by the holder. Non-Qualified Stock Options and Restricted Stock may be
transferred upon approval of the Committee or the Board, subject to the terms of
the Plan and related Award Agreements. Any attempted assignment, transfer,
pledge, hypothecation or other disposition of an Award contrary to the
provisions hereof, or the levy of any execution, attachment or similar process
upon an Award shall be null and void and without effect.
12.9 Rights of Participants. Except as hereinbefore expressly provided in
this Plan, any Person to whom an Award is granted shall have no rights by reason
of any subdivision or consolidation of stock of 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, reorganization,
merger or consolidation or spinoff of assets or stock of another corporation,
and any issue by the Company of shares of stock of any class or securities
convertible into shares of stock of any class shall not affect, and no
adjustment by reason thereof shall be made with respect to, the number or
exercise price of Shares subject to an Award.
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<PAGE>
12.10 No Limitation Upon the Rights of the Company. The grant of an Award
pursuant to this Plan shall not affect in any way the right or power of the
Company to make adjustments, reclassifications, or changes of its capital or
business structure; to merge, convert or consolidate; to dissolve or liquidate;
or sell or transfer all or any part of its business or assets.
12.11 Date of Grant of an Award. Except as noted in this Subsection
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12.11, the granting of an Award shall take place only upon the execution and
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delivery by the Company and the Participant of a written agreement and neither
any other action taken by the Committee or the Board nor anything contained in
this Plan or in any resolution adopted or to be adopted by the Committee, the
Board or the shareholders of the Company shall constitute the granting of an
Award pursuant to this Plan. Solely, for purposes of determining the Fair
Market Value of the Shares subject to an Award, such Award will be deemed to
have been granted as of the date of Board or Committee action to approve the
Award, or such later date as is specified by the Committee or the Board,
notwithstanding any delay which may elapse in executing and delivering the
applicable agreement.
12.12 Withholding. The Company shall not be required to issue or deliver
any certificates for Shares purchased upon the exercise of an Option (or an
Award, as applicable), prior to the determination by the Committee that the
optionee has tendered to the Company (in cash, Shares, or such other
consideration as is acceptable to the Committee) any federal, state or local tax
owed by the Optionee as a result of the Award, if the Company has or may have a
legal liability to satisfy such tax.
SECTION 13. NAMED EXECUTIVE OFFICERS
13.1 Applicability of Section 13. The provisions of this Section 13
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shall apply only to those executive officers (a) whose compensation is required
to be reported in the Company's proxy statement pursuant to Item 402(a)(3)(i)
and (ii) (or any successor thereto) of Regulation S-K (or any successor thereto)
under the general rules and regulations under the Exchange Act and (b) whose
total compensation, including estimated Awards, is determined by the Committee
or the Board to possibly be subject to the limitations on deductions imposed by
Section 162(m) of the Code ("Named Executive Officers"). In the event of any
inconsistencies between this Section 13 and the other Plan provisions as they
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pertain to Named Executive Officers, the provisions of this Section 13 shall
----------
control.
13.2 Establishment of Performance Goals. Awards for Named Executive
Officers, other than Options, shall be based on the attainment of certain
performance goals. No later than the earlier of (a) ninety (90) days after the
commencement of the applicable fiscal year of the Company or one of its
Subsidiaries or such other award period as may be established by the Committee
or the Board ("Award Period") and (b) the completion of twenty-five percent
(25%) of such Award Period, the Committee or the Board shall establish, in
writing, the performance goals applicable to each such Award for Named Executive
Officers. At the time the performance goals are established, their outcome must
be substantially uncertain. In addition, the performance goal must state, in
terms of an objective formula or standard, the method for computing the amount
of compensation payable to the Named Executive Officer if the goal is obtained.
Such formula or standard shall be
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<PAGE>
sufficiently objective so that a third party with knowledge of the relevant
performance results could calculate the amount to be paid to the subject Named
Executive Officer. The material terms of the performance goals for Named
Executive Officers and the compensation payable thereunder shall be submitted to
the shareholders of the Company for their review and approval if and to the
extent required for such compensation to be deductible pursuant to Section
162(m) (or any successor thereto) of the Code, and the Treasury regulations
thereunder. Shareholder approval, if necessary, shall be obtained for such
performance goals prior to any Award being paid to such Named Executive Officer.
If shareholder approval is required and not received with respect to such
performance goals, no amount shall be paid to such Named Executive Officer for
such applicable Award Period pursuant to this Plan.
13.3 Components of Awards. Each Award granted to a Named Executive
Officer, other than Options, shall be based on performance goals which are
sufficiently objective so that a third party having knowledge of the relevant
facts could determine whether the goal was met. Except as provided in
Subsection 13.8 herein, performance measures which may serve as determinants of
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Named Executive Officers' Awards shall be limited to the following measures:
earnings per share; return on assets; return on equity; return on capital; net
profit after taxes; net profit before taxes; operating profits; stock price; and
sales or expenses. Within ninety (90) days following the end of each Award
Period, the Committee or the Board shall certify in writing that the performance
goals, and any other material terms were satisfied. Thereafter, Awards shall be
made for each Named Executive Officer as determined by the Committee or the
Board. The Awards may not vary from the pre-established amount based on the
level of achievement.
13.4 No Mid-Year Change in Awards. Except as provided in Subsections
-----------
13.8 and 13.9 herein, each Named Executive Officer's Awards shall be based
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exclusively on the performance measures established by the Committee or the
Board pursuant to Subsections 13.2 and 13.3.
--------------------------
13.5 No Partial Award Period Participation. A Named Executive Officer
who becomes eligible to participate in this Plan after performance goals have
been established in an Award Period pursuant to Subsections 13.2 and 13.3 may
-------------------------
not participate in this Plan prior to the next succeeding Award Period, except
with respect to Awards which are Options.
13.6 Performance Goals. Except as provided in Subsection 13.8 herein,
---------------
performance goals shall not be changed following their establishment, and Named
Executive Officers shall not receive any payout, except with respect to Awards
which are Options, when the minimum performance goals are not met or exceeded.
13.7 Individual Performance and Discretionary Adjustments. Except as
provided in Subsection 13.8 herein, subjective evaluations of individual
---------------
performance of Named Executive Officers shall not be reflected in their Awards,
other than Awards which are Options. The payment of such Awards shall be
entirely dependent upon the attainment of the preestablished performance goals.
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<PAGE>
13.8 Amendments. No amendment of this Plan with respect to any Named
Executive Officer may be made which would (a) increase the maximum amount that
can be paid to any one Participant pursuant to this Plan, (b) change the
specified performance goal for payment of Awards, or (c) modify the
requirements as to eligibility for participation in this Plan, unless the
Company's shareholders have first approved such amendment in a manner which
would permit the deduction under Section 162(m) (or any successor thereto) of
the Code of such payment in the fiscal year it is paid. The Committee or the
Board shall amend this Section 13 and such other provisions as it deems
----------
appropriate, to cause amounts payable to Named Executive Officers to satisfy the
requirements of Section 162(m) (or any successor thereto) and the Treasury
regulations promulgated thereunder.
13.9 Options. Notwithstanding any provision of this Plan (including the
provisions of this Section 13) to the contrary, the amount of compensation which
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a Named Executive Officer may receive with respect to Options which are granted
hereunder is based solely on an increase in the value of the applicable Shares
after the date of grant of such Award. Thus, no Option may be granted hereunder
to a Named Executive Officer with an exercise price less than the Fair Market
Value of shares of Stock on the date of grant. Furthermore, the maximum number
of Shares(or cash equivalent value) with respect to which Options may be granted
hereunder to any Named Executive Officer during any calendar year may not exceed
750,000 Shares (fifty percent (50%) of the Shares listed in Section 4.1),
subject to adjustment as provided in Section 9 hereunder.
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13.10 Maximum Amount of Compensation. The maximum amount of compensation
payable as an Award (other than an Award which is an Option) to any Named
Executive Officer during any calendar year may not exceed $1,000,000.
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