FORM S-8
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
FONAR CORPORATION
..............................................................................
(Exact name of registrant as specified in its charter)
Delaware 11-64137
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
110 Marcus Drive, Melville, New York 11747
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(Address of Principal Executive Office) (Zip Code)
2002 Incentive Stock Option Plan
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(Full Title of the plan)
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Henry T. Meyer, Esq., 110 Marcus Drive, Melville, New York 11747
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(Name and address of agent for service)
(631) 694-2929
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(Telephone number, including area code, of agent for service)
Title of securities Amt. to be Proposed Proposed Amount of
to be registered registered maximum maximum registration
offering aggregate fee
price per offering
share price
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Common Stock
par value $.0001 2,500,000 $1.36 $3,400,000 $312.80
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Total
2,500,000 $1.36 $3,400,000 $312.80
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* Pursuant to Rule 457, subsections (h) and (c) Specified Date: July 11, 2002
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
Item 3. Incorporation of Documents by Reference.
The following documents, filed with, or furnished to, the Commission are incorporated in this registration statement by reference:
(a) The registrant's latest annual report on Form 10-K filed pursuant to
Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act").
(b) All other reports filed by the registrant pursuant to Section 13(a) or 15(d) of the Exchange Act since the end of the fiscal year covered by the annual report on Form 10-K referred to in (a) above.
(c) The description of securities which is contained in Form 8-A filed by the registrant pursuant to Section 12 of the Exchange Act including any amendment or report filed for the purpose of updating such description.
All documents subsequently filed by the registrant pursuant to Section
13(a), 13(c), 14 and 15(d) of the Exchange Act, prior to the filing of a
post-effective amendment which either indicates that all securities offered have
been sold or 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 such documents.
Item 4. Description of Securities.
The class of securities to be offered is registered under Section 12 of the Exchange Act.
Item 5. Interests of Named Experts and Counsel.
The validity of the securities being registered will be passed upon by Henry T. Meyer, Esq., General Counsel to the registrant, 110 Marcus Drive, Melville, New York 11747. Mr. Meyer is an employee of the registrant and eligible to receive, in the discretion of the appropriate Committee or the Board of Directors, awards of options under the 2002 Incentive Stock Option Plan.
Item 6. Indemnification of Directors and Officers.
Article Eighth of the Certificate of Incorporation, as amended, of the registrant provides as follows: The personal liability of directors to the Corporation or its stockholders for monetary damages for breach of their fiduciary duties as directors is eliminated, provided however, that this provision shall not eliminate the liability of a director (i) for any breach of the director's duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or knowing violation of the law, (iii) under Section 174 of the Delaware General Corporation law, or (iv) for any transaction from which the director derived an improper personal benefit.
Article V of the By-Laws of the registrant generally provides for indemnification of its officers and directors to the full extent permitted by Delaware Corporation Law.
Section 145 of the Delaware General Corporation Law permits indemnification of officers, directors and employees of the Company under certain conditions and subject to certain limitations.
Item 7. Exemption From Registration Claimed.
Not applicable. No restricted securities are to be reoffered or resold pursuant to this registration statement.
Item 8. Exhibits.
4.1 Article Fourth of the Certificate of Incorporation, as amended by the Certificate of Amendment filed June 9, 1995, incorporated herein by reference to Exhibit 4.1 to the registrant's registration statement on Form S-8, Commission File No. 33-62099.
4.2 Section A of Article Fourth of the Certificate of Incorporation, as amended by the Certificate of Amendment filed May 21, 2001 and the Certificate of Correction filed June 13, 2001, incorporated herein by reference to Exhibit 4.2 to the registrant's registration statement on Form S-8, Commission File No. 333-66760.
4.3 Specimen Common Stock Certificate incorporated herein by reference to Exhibit 4.1 to the registrant's registration statement on Form S-1, Commission File No. 33-13365.
5 Opinion of Counsel re Legality.
23.1 Consent of Certified Public Accountants.
23.2 Consent of Counsel is included in Exhibit 5.
99.1 2002 Incentive Stock Option Plan.
Item 9. Undertakings.
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 prospectus required by section 10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement;
(iii)To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement.Provided, however, that 1 (i) and 1(ii) do not apply if the information required to be included in a post-effective amendment thereby is contained in periodic reports filed 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 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 post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.
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 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 that time shall be deemed to be the initial bona fide offering thereof.
The Certificate of Incorporation and By-Laws of the registrant contain various provisions for limitation of liability and indemnification of officers and directors, as described in Item 6. Section 145 of the Delaware General Corporation law permits indemnification of officers, directors and employees under certain conditions.
Insofar as indemnification for liability 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 Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-8 and has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the Village of Melville, State of New York, on July 16, 2002.
FONAR CORPORATION
By: /s/ Raymond V. Damadian --------------------------- Raymond V. Damadian, President |
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 dates indicated.
Signature Title Date
--------- ----- ----
/s/ Raymond V. Damadian Chairman of the Board July 16, 2002
----------------------- of Directors, President
Raymond V. Damadian and a Director (Principal
Executive Officer)
/s/ Claudette Chan Director July 16, 2002
----------------------
Claudette Chan
/s/ Robert J. Janoff Director July 16, 2002
----------------------
Robert J. Janoff
/s/Charles N. O'Data Director July 16, 2002
----------------------
Charles N. O'Data
/s/ Robert Djerejian Director July 16, 2002
----------------------
Robert Djerejian
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EXHIBIT 5
OPINION OF COUNSEL RE: LEGALITY
July 16, 2002
Fonar Corporation
110 Marcus Drive
Melville, NY 11747
Dear Sirs:
I refer to the Registration Statement on Form S-8 to which this opinion is an Exhibit (the "Registration Statement"), being filed by Fonar Corporation, a Delaware corporation (the "Company"), with the Securities and Exchange Commission under the Securities Act of 1933, as amended, relating to: 2,500,000 shares of the Company's Common Stock which may be issued pursuant to the Company's 2002 Incentive Stock Option Plan ("Underlying Common Stock").
As counsel for the Company, I have examined the originals or photostatic or certified copies of such records, certificates and instruments of the Company, certificates of officers of the Company and of public officials and such other instruments and documents as I have deemed relevant and necessary for the purposes of rendering the opinions set forth below. In such examination, I have assumed the genuineness of all signatures, the authenticity of all documents submitted to me as originals, the conformity to original documents of all documents submitted to me as certified or photostatic copies and the authenticity of the originals of such copies and the correctness of all statements of fact contained therein.
Based upon the foregoing, I am of the opinion that:
The Underlying Common Stock has been duly and validly authorized, and when issued in accordance with the terms of the Company's 2002 Incentive Stock Option Plan and any applicable incentive stock option awards made thereunder will be legally issued, fully paid and non-assessable.
I consent to the filing of this opinion as an exhibit to the Registration Statement and to the reference to me in Item 5 of the Registration Statement.
Very truly yours,
/s/ Henry T. Meyer Henry T. Meyer, Esq. General Counsel |
EXHIBIT 23.1
CONSENT OF CERTIFIED PUBLIC ACCOUNTANTS
Consent of Certified Public Accountants
We consent to the incorporation by reference in this Registration Statement on Form S-8 of our report dated September 28, 2001, except for note 13, as to which the date is October 25, 2001, which appears in the 2001 Annual Report to Shareholders of Fonar Corporation.
/s/ Grassi & Co., CPA's, P.C.
Grassi & Co., CPA's, P.C.
New York, New York
July 16, 2002
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EXHIBIT 23.2
(CONSENT OF COUNSEL IS INCLUDED IN EXHIBIT 5)
Consent of Counsel
The consent of Henry T. Meyer, Esq. is included in his opinion filed as Exhibit 5 to this Registration Statement.
EXHIBIT 99.1
2002 INCENTIVE STOCK OPTION PLAN
2,500,000 SHARES
FONAR CORPORATION
1. Purposes of the Plan.
The purpose of this Plan (the "Plan"), which is designed to qualify as an "incentive stock option plan" under section 422A of the Internal Revenue Code of 1954, as amended (the "Code"), is to assist Fonar Corporation, a Delaware corporation (the "Corporation"), and its subsidiaries (as hereinafter defined) in attracting and retaining key employees and to secure for the Corporation and its subsidiaries the benefits of the incentive inherent in ownership of the Corporation's equity securities by employees who are responsible for the continuing growth and success of the Corporation and its subsidiaries. The Plan provides a means by which such employees may be given an opportunity, as an incentive to service or continued service with the Corporation or a subsidiary, to purchase shares of the Common Stock of the Corporation upon the exercise of options designed to qualify as "incentive stock options" under Section 422A of the Code.
For the purposes of this Plan, the term "subsidiary" and/or "subsidiaries" shall have the same meaning as the term "subsidiary corporation" defined in section 425 (f) of the Code, as from time to time amended, and shall include specifically Health Management Corporation of America.
2. Shares Subject to the Plan.
Subject to the provisions of Section 13 of the Plan, an aggregate of 2,500,000 shares of Common Stock, par value $.0001 per share, of the Corporation ("Common Stock"), are available for the issuance upon the exercise of options under the Plan.
The shares to be issued upon the exercise of options under the Plan may be authorized but unissued shares of Common Stock or issued shares of Common Stock which are held in the treasury of the Corporation. If an option shall expire or terminate for any reason without having been exercised in full, the unpurchasable shares which were subject thereto shall, unless the Plan shall have been terminated, be added to the shares otherwise available for options under the Plan.
3. Term of the Plan.
Subject to the provisions of Section 14 and 15, the Plan shall commence effective as of July 1, 2002, and options granted under the Plan must be granted no later than June 30, 2012.
4. Administration of the Plan.
The Plan shall be administered by a committee which shall consist of one or more members, as the Board of Directors shall from time to time determine, who shall be appointed by the Board of Directors of the Corporation (the "Committee") or, in the absence of such a Committee, by the Board of Directors of the Corporation. Directors of the Corporation who are either eligible to receive options, or to whom options have been granted, may vote on any matters affecting the administration of the Plan or the granting of options under the Plan; provided, however, that no Director shall vote upon the granting of an option to himself, but any such Director may be counted in determining the existence of a quorum at any meeting of the Board of Directors at which the Plan is administered or action is taken with respect to the granting of an option. Any action of the Committee or the Board of Directors may be taken by a written instrument signed by all of the members of the Committee or the Board of Directors, as the case may be, and any action so taken by written consent shall be as fully effective as if it had been taken by a majority of the members at a meeting duly held and called.
Subject to the express provisions of the Plan, the Committee or the Board
or Directors, as the case may be, shall have the authority, in its discretion:
(i) to determine the individuals to receive options, the times when they shall
receive them, the number of shares to be subject to each option, the exercise
price for shares of Common Stock subject to each option, the term of each
option, the date each option shall become exercisable in whole, in part or in
installments, and, if in installments, the number of shares to be subject to
each installment, the date each installment shall become exercisable and the
term of each installment: to accelerate the date of exercise of any installment;
to determine whether shares may be issued upon exercise of an option as partly
paid and, if so, the date when future installments of the exercise price shall
become due and the amounts of such installments, and to determine the other
terms and provisions of each option granted under the Plan; (ii) to construe and
interpret the terms of the respective option certificates and the Plan; (iii) to
establish, amend and rescind rules and regulations for the administration of the
Plan; and (iv) to make all other determinations deemed necessary or advisable
for administering the Plan. The determinations of the Committee or the Board of
Directors, as the case may be, on the matters referred to in this Section 4
shall be final and conclusive.
5. Eligibility and Selection.
Only key employees (including employees who are officers and directors) of the Corporation or of any of its subsidiaries are eligible to receive options under the Plan. For the purposes of the Plan, the term "key employees" shall mean and include all employees of the Corporation or any of its subsidiaries who render substantial services to the Corporation in the management, administration or supervision of the business or affairs of the Corporation or any of its subsidiaries or are engaged in the research, development, production, sale, marketing, or promotion of the products or services of the Corporation or any of its subsidiaries. Directors of the Corporation who are not employees of the Corporation or a subsidiary are not eligible to receive options under the Plan. In determining the employees to whom options shall be granted under the Plan and the number of shares of Common Stock as to which options may be granted to such an employee, the Committee or the Board of Directors, as the case may be, shall consider the duties of the employees, their present and potential contributions to the success of the business of the Corporation, and such other factors as the Committee or the Board of Directors deems relevant in furthering the purposes of the granting of such options and the interests of the Corporation. An employee may receive more than one option under the Plan.
6. Incentive Stock Options.
(a) Each option ("Option") may be evidenced by a written Incentive Stock Option Certificate (the "Certificate"); provided that to the extent permitted by law and consistent with the terms and conditions of the Plan and the Option, the Board of Directors may make such modifications in the terms and conditions of the Option as the Board shall deem necessary or advisable, or as may be required in order that the Option evidenced by the Certificate be an "incentive stock option".
(b) Each Option under the Plan (i) shall specify the exercise price per share of Common Stock, which shall not be less than the fair market value of the Common Stock of the Company on the date on which such Option is granted, provided that the exercise price per share of any Option granted to an individual who, at the time such option is granted, is the owner of stock possessing more than ten percent (10%) of the total combined voting power of all classes of stock of the Corporation shall not be less than 110% of the fair market value of a share of the Common Stock of the Corporation on the date on which such Option is granted; (ii) shall be exercisable during a period no later than ten (10) years after the date on which it is granted, as determined by the Committee or the Board of Directors at the time of grant; provided that any Option granted to any person who, at the time such Option is granted, is the owner of stock possessing more than ten percent (10%) of the total combined voting power of all classes of stock of the Corporation, must expire no later than five (5) years after the date of grant of the Option; (iii) shall be exercisable at such time or times as may be determined by the Committee or the Board of Directors at the time of grant, provided that an Option shall become immediately exercisable as to all shares subject to the Option upon the death or "disability" (as defined in Section 13) of the holder of the Option; (iv) shall not be transferable by the holder of the Option (other than by will or the laws of descent and distribution), and shall be exercisable during the lifetime of the holder of the Option only by such holder; and (v) shall contain such other terms and conditions or be in such other form as may be determined by the Committee or the Board of Directors at the time of grant, provided that such other terms and conditions shall be permitted by law, shall not be inconsistent with the Plan and shall not prevent the Option from qualifying as an "incentive stock option" under Section 422A of the Code. To the extent permitted by law, and without limitation to the foregoing, the Board of Directors may make such modifications in the provisions of any particular Option under the Plan as it shall deem advisable or as may be required in order that the Option may qualify as an "incentive stock option" under section 422A of the Code.
7. Exercise Price.
The exercise price for each share of Common Stock issuable upon the exercise of an Option granted under the Plan shall not be less than the fair market value (or, in the case of an Option granted to any person who, at the time of the grant of such Option, is the owner of more than ten percent (10%) of the total combined voting power of all classes of stock of the Corporation or any of its subsidiaries, not less than 110% of the fair market value) of a share of Common Stock at the time of granting of the Option, as determined by the Committee or the Board of Directors, provided that the method of determination shall not be inconsistent with any regulations applicable to "incentive stock options" which may be promulgated by the Internal Revenue Service or the Secretary of the Treasury.
8. Term of Options.
Options under the Plan shall be exercisable as shall be determined by the Committee or the Board of Directors, as the case may be, at the time of grant; provided that Options granted hereunder shall be exercisable for a period not exceeding ten (10) years from the date such Option is granted, and provided that any Option granted to any person who, at the time such Option is granted, is the owner of stock possessing more than ten percent (10%) of the total combined voting power of all classes of stock of the Corporation or any of its subsidiaries shall be exercisable for a period not exceeding five (5) years from the date such Option is granted. Options shall be subject to earlier termination as hereinafter provided.
9. Exercise of Options.
Each Option shall be exercised, in whole or in part, as to such number of shares of Common Stock and at such time or times as the Committee or the Board of Directors shall have determined at the time of grant. Except as provided in Sections 10 and 11 hereof, an Option may only be exercised if the holder is at the time of exercise in the employ of the Corporation or a subsidiary of the Corporation. Options shall be exercised only by the holder at the Corporation's principal office, or at such other office as may be designated by the Corporation, specifying the number of shares purchased and accompanied by payment in full by certified or bank cashier's check, shares of Common Stock of the Corporation owned by the holder of the Option (or by any other property, or in any other form, acceptable to the Committee or the Board of Directors, as the case may be.) Certificates representing the shares of stock purchased upon exercise shall be issued as promptly as practicable thereafter. The holder of an Option shall not have any of the rights of a stockholder of the Corporation with respect to the shares of Common Stock issuable upon exercise of the Option until one or more certificates evidencing such shares of Common Stock shall have been issued to the holder of the Option. In no event may a fraction of a share be purchased or issued under the Plan.
Options issued under the Plan (and any other plans of the Corporation) to any individual will not be treated as "incentive stock options" under Section 422A of the Code to the extent that the aggregate fair market value of the stock underlying any such options (determined as at the time the options are granted), which become exercisable for the first time in any calendar year, exceeds $100,000.
10. Termination of Employment.
Except as provided in Section 11, any Option granted under the Plan to an employee who voluntarily terminates his employment with the Corporation without the written consent of the Corporation shall expire immediately upon such termination of employment. Any Option granted under the Plan to an employee who voluntarily terminates his employment with written consent of the Corporation or whose employment is involuntarily terminated, shall be exercisable for a period which shall expire on the day 3 months after the cessation of employment, but in no event after expiration of the term of the Option and only to the extent such Option is otherwise exercisable. Except as provided in Section 11, upon the expiration of any such Options, all rights thereunder, to the extent that such rights shall not have been exercised, shall terminate immediately. Options granted under the Plan shall not be affected by any change of employment as long as the holder continues to be an employee of the Corporation or of any subsidiary of the Corporation.
11. Exercise Upon Death, Disability or Retirement of the Employee.
(a) If the holder of an Option dies while employed by the Corporation or any of its subsidiaries, the Option may be exercised as to all shares subject to the Option by the executor or administrator of such deceased employee or by such other person at the time entitled by law to the rights of such deceased employee under the Option, at any time within six (6) months after death, but in no event after the expiration of the term of the Option.
(b) In the event that the employment of the holder of any Option by the Corporation or a subsidiary of the Corporation is terminated by reason of the "disability" of the holder of the Option, the Option may be exercised as to all shares subject to the Option by the holder thereof at any time within one (1) year after the date of such termination of employment, but in no event after the expiration of the term of the Option. For purposes of the Plan the term "disability" shall mean a physical or mental disability as defined in Section 105 of the Code.
(c) In the event that the employment of the holder of any Option by the Corporation or a subsidiary of the Corporation is terminated by reason of the retirement of the holder of the Option, the Option may be exercised (to the extent otherwise exercisable on the date of the retirement of the holder of the Option) by the holder thereof at any time within three (3) months after the date of such retirement, but in no event after the expiration of the term of the Option.
12. Non-Transferability of Options.
Options shall not be transferable otherwise than by the last will and testament of the holder of the Option or the applicable laws of descent and distribution, and during the lifetime of the holder, Options may be exercised only by the holder thereof. Options may not be assigned, transferred, pledged, hypothecated or disposed of in any way (whether by operation of law or otherwise) except to the extent expressly provided for in the Plan, and shall not be subject to execution, attached or similar process.
Any assignment, transfer, pledge, hypothecation or other disposition of any Option attempted contrary to the provisions of this Plan, or any levy or execution, attachment or other process attempted upon an Option, will be null and void and without effect. Any attempt to make any such assignment, transfer, pledge, hypothecation or other disposition of an Option or any attempt to make any such levy or execution, attachment or other process will cause the Option to be terminated immediately upon the happening of any such event if the Corporation, at any time, should, in the sole discretion of the Committee or the Board of Directors, so elect, by written notice to the employee or to the person then entitled to exercise the Option under the provisions of Section 11 hereof; provided that any such termination of the Option under the foregoing provisions of this Section 12 will not prejudice any rights or remedies which the Corporation or any subsidiary may have under the Plan, any Incentive Stock Option Certificate or otherwise.
13. Adjustments.
If (a) the Corporation shall at any time be involved in a transaction to which subsection (a) of Section 425 of the Code is applicable, (b) the Corporation shall declare a dividend payable in, or shall subdivide or combine its Common Stock, or (c) any other event shall occur which, in the judgment of the Committee or the Board of Directors, necessitates action by way of adjusting the terms of the outstanding Options, the Committee or the Board of Directors, as the case may be, shall take any such action as in its judgment shall be necessary to preserve to the holders of Options rights substantially proportionate to the rights existing prior to such event. To the extent that such action shall include an increase or decrease in the number of shares of Common Stock subject to Options outstanding under the Plan, the aggregate number of shares of Common Stock available under Section 2 of the Plan for issuance upon exercise of such outstanding Options and of additional Options which may be granted shall be increased or decreased, as the case may be, proportionately. No action shall be taken by the Committee or by the Board of Directors under the provisions of this Section 13 which, in its judgment, would constitute a modification, extension or renewal of the Option (within the meaning of Section 425(h) of the Code), or would prevent the Option from qualifying as an "incentive stock option" (within the meaning of Section 422A of the Code). The determination of the Committee or the Board of Directors, as the case may be, with respect to any matter referred to in this Section 13 shall be conclusive and binding upon each holder of an Option under the Plan.
14. Termination and Amendment of the Plan.
(a) Unless sooner terminated, as hereinafter provided, this Plan shall
terminate at 11:59 p.m. on June 30, 2012, and no options shall be granted
hereunder after that date. The Board of Directors may, without further approval
by the stockholders at any time terminate or amend this Plan without notice, or
make such modifications of this Plan as it shall deem advisable; provided that
the Board of Directors may not, without prior approval by the stockholders of
the Corporation, (i) increase the maximum number of shares of Common Stock as to
which Options may be granted under the Plan (except as contemplated by the
provisions of Section 13 hereof), (ii) extend the term during which options may
be granted under the Plan, (iii) permit the exercise of an Option after the date
on which such Option would otherwise terminate pursuant to the terms thereof; or
(iv) reduce the exercise price per share to less than the fair market value of a
share of Common Stock on the date the Option is granted, or, in the case of any
Option granted to an individual who, on the date of the grant of the Option, is
the owner of more than ten percent (10%) of the total combined voting power of
all classes of stock of the Corporation or any subsidiary, 110% of the fair
market value of a share of Common stock (except, in both cases, as contemplated
by the provisions of section 13 hereof). No termination, amendment or
modification of the Plan may, without the consent of the person to whom any
Option has been granted, adversely affect the rights of such person under such
Option or any unexercised portion thereof.
(b) Notwithstanding the limitation set forth in Paragraph (a) of this
Section 14, the Plan and any Option and the number of shares as to which any
Option under the Plan shall have been granted may be reduced, retroactively at
any time, to conform to the provisions of the Code and the regulations
promulgated thereunder, in order that Options under the Plan may qualify as
"incentive stock options" within the meaning of Section 422A of the Code, and no
such amendment shall be considered prejudicial to the rights of any holder of an
Option.
15. Substitutions and Assumptions of Options of Certain Constituent Corporations.
Anything in this Plan to the contrary notwithstanding, the Board of Directors may, without further approval by the stockholders, substitute new Options for prior options of a constituent corporation (as hereinafter defined) or assume the prior options of such constituent corporation. The term "constituent corporation" shall mean any corporation which has been merged into or consolidated with the Corporation, or whose assets or stock have been purchased or acquired by or liquidated into the Corporation or by or into one or more subsidiaries of the Corporation, or any parent or any subsidiary of any such corporation.
16. Indemnification of Committee.
In addition to such other rights of indemnification as they may have as Directors or as members of the Committee, the members of the Committee or the Directors, as the case may be, shall be indemnified by the Corporation against the reasonable expenses, including attorneys' fees actually and necessarily incurred in connection with the defense of any action, suit or proceeding, or in connection with any appeal therein, to which they or any of them may be a party by reason of any action taken or failure to act under or in connection with the Plan or any Option granted thereunder, and against all amounts paid by them in settlement thereof (provided such settlement is approved by the Corporation) or paid by them in satisfaction of a judgment in any such action, suit or proceeding, except in relation to matters as to which it shall be adjudicated in such action, suit or proceeding that such Committee member or Director is liable for negligence or misconduct in the performance of his duties; provided that within 10 days after institution of any such action, suit or proceeding a Committee member shall in writing offer the Corporation the opportunity, at its own expense, to handle and defend the same.
17. Effectiveness of the Plan.
The Plan shall become effective upon adoption by the Board of Directors of the Corporation; provided that the Plan shall be submitted for approval by the stockholders of the Corporation no later than twelve (12) months after the date of adoption of the Plan by the Board of Directors.