As filed with the Securities and Exchange Commission on December 29, 2005
Registration No. 333-__________
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
LYNCH CORPORATION
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(Exact name of Registrant as specified in its charter)
INDIANA 38-1799862
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(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
140 GREENWICH AVENUE, 4TH FLOOR
GREENWICH, CONNECTICUT 06830
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(Address of principal executive offices) (Zip Code)
2001 EQUITY INCENTIVE PLAN
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(Full Title of Plan)
JOHN C. FERRARA
PRESIDENT AND CHIEF EXECUTIVE OFFICER
LYNCH CORPORATION
140 GREENWICH AVENUE, 4TH FLOOR
GREENWICH, CONNECTICUT 06830
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(Name and Address of Agent for Service)
(203) 622-1150
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(Telephone Number, Including Area Code, of Agent For Service)
COPY TO:
David J. Adler, Esq.
Olshan Grundman Frome Rosenzweig & Wolosky LLP
Park Avenue Tower
65 East 55th Street
New York, New York 10022
(212) 451-2300
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CALCULATION OF REGISTRATION FEE
======================= ================== ======================= ======================== ========================
TITLE OF
EACH CLASS OF AMOUNT PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
SECURITIES TO BE OFFERING PRICE AGGREGATE OFFERING REGISTRATION
TO BE REGISTERED REGISTERED(1) PER SHARE(2) PRICE FEE
----------------------- ------------------ ----------------------- ------------------------ ------------------------
Common Shares, $.01 300,000 $8.05 $2,415,000 $258.41
par value per share common shares
----------------------- ------------------ ----------------------- ------------------------ ------------------------
(1) Pursuant to Rule 416 of the Securities Act of 1933, as amended (the
"Securities Act"), this Registration Statement also registers such
indeterminate number of additional common shares that may be offered or
issued pursuant to the anti-dilution provisions set forth in the 2001
Equity Incentive Plan.
(2) No options relating to the 300,000 common shares that are being
registered in this Registration Statement have been granted or issued,
as the case may be. Pursuant to Rule 457(h) promulgated under the
Securities Act, the offering price per share, solely for the purpose of
calculating the registration fee, is based on $8.05, the average of the
high and low prices of the common shares as reported by the American
Stock Exchange ("AMEX") on December 28, 2005.
EXPLANATORY NOTE
On June 26, 2002, Lynch Corporation (the "Company") filed with the Securities
Exchange Commission a Registration Statement on Form S-8 (File No. 333-91192)
covering the registration of 300,000 shares of common stock authorized for
issuance under our 2001 Equity Incentive Plan (the "Plan"). On May 26, 2005, the
Company's stockholders approved a proposal to increase the number of shares
available under the Plan to 600,000.
This Registration Statement registers the additional 300,000 shares of the same
class of Common Stock authorized for issuance under the Plan. Pursuant to
General Instruction E to Form S-8, the contents of the prior registration
statements set forth above relating to the Plan, and all periodic reports that
the Company filed after such registration statements to maintain current
information about the Company, are incorporated herein by reference.
This Form S-8 includes a Reoffer Prospectus prepared in accordance with Part I
of Form S-3 under the Securities Act. The Reoffer Prospectus may be utilized for
reoffering and resales of up to 95,000 shares acquired pursuant to the Plan by
selling shareholders, each of which may be deemed an "affiliate" (as such term
is defined in Rule 405 under the Securities Act) of the Company.
PART I
INFORMATION REQUIRED IN THE SECTION 10(A) PROSPECTUS
The Company will provide documents containing the information specified in Part
1 of Form S-8 to employees as specified by Rule 428(b)(1) under the Securities
Act. Pursuant to the instructions to Form S-8, the Company is not required to
file these documents either as part of this Registration Statement or as
prospectuses or prospectus supplements pursuant to Rule 424 under the Securities
Act.
PROSPECTUS
95,000 COMMON SHARES
LYNCH CORPORATION
COMMON SHARES, $0.01 PAR VALUE PER SHARE
This Prospectus relates to the reoffer and resale by certain selling
shareholders of our common shares that we may issue to the selling shareholders
through the issuance of shares or upon the exercise of stock options issued or
granted under our 2001 Equity Incentive Plan, referred to as the Plan in this
Prospectus. This Prospectus also relates to certain of our common shares or
common shares underlying options that have not been issued or granted as the
case may be under the Plan as of this date. If and when such shares are issued
or options are granted to persons required to use the Prospectus to reoffer and
resell the common shares, we will distribute a Prospectus supplement. The shares
are being reoffered and resold for the account of the selling shareholders, and
we will not receive any of the proceeds from the resale of the shares.
The selling shareholders have advised us that the resale of their shares may be
effected from time to time in one or more transactions on the American Stock
Exchange, in negotiated transactions or otherwise, at market prices prevailing
at the time of the sale or at prices otherwise negotiated. See "Plan of
Distribution." We will bear all expenses in connection with the preparation of
this Prospectus.
Our common shares are listed on the American Stock Exchange under the symbol
"LGL." The last reported sale price on the American Stock Exchange for our
common shares on December 28, 2005 was $8.10 per share.
Our principal executive offices are located at 140 Greenwich Avenue, 4th Floor,
Greenwich, Connecticut 06830. Our telephone number is (203) 622-1150.
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THIS INVESTMENT INVOLVES RISK. SEE "RISK FACTORS" BEGINNING AT PAGE 3.
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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE
SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE
SECURITIES OR PASSED UPON THE ADEQUACY OR ACCURACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
The date of this Prospectus is December 29, 2005
TABLE OF CONTENTS
INCORPORATION BY REFERENCE.......................................................................................1
ABOUT THIS PROSPECTUS............................................................................................1
THE COMPANY......................................................................................................3
RISK FACTORS.....................................................................................................3
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS...............................................................13
USE OF PROCEEDS.................................................................................................14
SELLING SHAREHOLDERS............................................................................................14
PLAN OF DISTRIBUTION............................................................................................16
LEGAL MATTERS...................................................................................................17
EXPERTS.........................................................................................................18
WHERE YOU CAN FIND MORE INFORMATION.............................................................................18
INCORPORATION BY REFERENCE
The Securities and Exchange Commission (the SEC") allows us to "incorporate by
reference" the information we file with it, which means that we can disclose
important information to you by referring you to those documents. The
information we incorporate by reference is considered to be a part of this
Prospectus and information that we file later with the SEC will automatically
update and replace this information. We incorporate by reference the documents
listed below and any future filings we make with the SEC under Sections 13(a),
13(c), 14 or 15(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"):
1 Our Annual Report on Form 10-K for the fiscal year ended December 31, 2004;
2. Our Quarterly Report on Form 10-Q for the fiscal quarter ended March 31,
2005;
3. Our Quarterly Report on Form 10-Q for the fiscal quarter ended June 30,
2005;
4. Our Quarterly Report on Form 10-Q for the fiscal quarter ended September
30, 2005;
5. Our Current Report on Form 8-K/A filed on January 3, 2005;
6. Our Current Report on Form 8-K filed on January 4, 2005;
7. Our Current Report on Form 8-K filed on April 29, 2005;
8. Our Current Report on Form 8-K filed on May 16, 2005;
9. Our Current Report on Form 8-K filed on July 6, 2005;
10. Our Current Report on Form 8-K filed on August 30, 2005;
11. Our Current Report on Form 8-K filed on September 9, 2005;
12. Our Current Report on Form 8-K filed on October 4, 2005;
13. Our Current Report on Form 8-K filed on October 11, 2005;
14. Our Current Report on Form 8-K filed on October 26, 2005;
15. Our Current Report on Form 8-K filed on November 10, 2005;
16. Our Current Report on Form 8-K filed on December 9, 2005;
17. Our Current Report on Form 8-K filed on December 19, 2005; and
18. The description of the common shares contained in our Registration
Statement under the Exchange Act with respect to such common shares filed
with the Securities and Exchange Commission, including any amendments or
reports filed for the purpose of updating such description.
You may request a copy of these filings (excluding the exhibits to such filings
that we have not specifically incorporated by reference in such filings) at no
cost, by writing or telephoning us at the following address:
Lynch Corporation
140 Greenwich Avenue, 4th Floor
Greenwich, Connecticut 06830
Attention: Eugene Hynes
(203) 622-1150
ABOUT THIS PROSPECTUS
This Prospectus is part of a Registration Statement we filed with the SEC. You
should rely only on the information provided or incorporated by reference in
this Prospectus or any related supplement. We have not authorized anyone else to
provide you with different information. The selling shareholders will not make
1
an offer of these shares in any state where the offer is not permitted. You
should not assume that the information in this Prospectus or any supplement is
accurate as of any other date than the date on the front of those documents.
2
THE COMPANY
We are a diversified holding company with subsidiaries engaged in manufacturing.
Our business development strategy is to expand our existing operations through
internal growth and acquisitions. We may also, from time to time, consider the
acquisition of other assets or businesses that are not related to our present
businesses and the strategic disposition of certain assets.
M-TRON INDUSTRIES, INC./PIEZO TECHNOLOGY, INC.
Mtron designs, manufactures and markets custom designed electronic components
used primarily to control the frequency or timing of electronic signals in
communications equipment. Its devices, which are commonly called frequency
control devices, crystals or oscillators, support fixed and mobile wireless,
copper wire, coaxial cable, wide area networks, local area networks and fiber
optic systems. It sells its products to original equipment manufacturers,
contract manufacturers and to distributors.
On October 15, 2004, Mtron completed its acquisition of all the issued and
outstanding common shares of Piezo. Piezo is a wholly-owned subsidiary of Mtron
that designs, manufactures and markets frequency control devices, crystal
resonators, crystal oscillators, timing devices, filters, crystal filters,
liquid crystal filters and related products and technologies. The combined
operations of Mtron and PTI are referred to herein as "MtronPTI."
LYNCH SYSTEMS, INC.
Lynch Systems designs, develops, manufactures and markets a broad range of
manufacturing equipment for the electronic display and consumer glass
industries. Lynch Systems also produces replacement parts for various types of
packaging and glass container-making machines, which Lynch Systems does not
manufacture.
RISK FACTORS
AN INVESTMENT IN OUR COMMON SHARES INVOLVES A HIGH DEGREE OF RISK. THE
FOLLOWING RISK FACTORS SHOULD BE CONSIDERED CAREFULLY IN ADDITION TO THE OTHER
INFORMATION IN THIS PROSPECTUS, INCLUDING THE INFORMATION UNDER "SPECIAL NOTE
REGARDING FORWARD-LOOKING STATEMENTS," BEFORE MAKING AN INVESTMENT IN OUR COMMON
SHARES.
WE HAVE INCURRED OPERATING LOSSES FOR THE PAST THREE YEARS AND FACE UNCERTAINTY
IN OUR ABILITY TO ACHIEVE OPERATING PROFITS IN THE FUTURE.
We have incurred substantial operating losses for the past three years. Without
giving effect to gains realized from the deconsolidation in 2002 of one of our
holdings, we suffered operating losses of $2.9 million, $832,000 and $3.3
million in 2004, 2003 and 2002, respectively. We are uncertain whether we will
be able to achieve or sustain operating profits in the future.
3
IF WE ARE UNABLE TO SECURE NECESSARY FINANCING, WE MAY NOT BE ABLE TO FUND OUR
OPERATIONS OR STRATEGIC GROWTH.
In order to achieve our strategic business objectives, we will be required to
seek additional financing. Effective October 6, 2005, Lynch Systems entered into
a one-year loan agreement with Branch Banking and Trust Company, the proceeds of
which were used to pay off Lynch Systems' working capital revolving loan from
SunTrust Bank. Lynch Systems' remaining credit facility with SunTrust Bank,
which was to have expired on September 30, 2005, has been extended to December
31, 2005. Lynch Systems intends to refinance this facility with another lender,
however, there can be no assurance that such financing will be available. On
September 30, 2005, MtronPTI entered into a five-year loan agreement with RBC
Centura Bank, the proceeds of which were used to pay off MtronPTI's bridge loan
from First National Bank of Omaha. MtronPTI's revolving credit facility from
First National Bank of Omaha is scheduled to mature on May 31, 2006. On December
22, 2005, the Company paid off its loan with Venator Merchant Fund, L.P.
Under certain of our existing credit facilities, we are required to obtain the
lenders' consent for most additional debt financing and to comply with other
covenants, including specific financial ratios. For example, we may require
further capital to continue to develop our technology and infrastructure and for
working capital purposes. In addition, future acquisitions would likely require
additional equity and/or debt financing. Our failure to secure additional
financing could have a material adverse effect on our continued development or
growth.
AS A HOLDING COMPANY, WE DEPEND ON THE OPERATIONS OF OUR SUBSIDIARIES TO MEET
OUR OBLIGATIONS.
We are a holding company that transacts all of our business through operating
subsidiaries. Our primary assets are the common shares of our operating
subsidiaries. Our ability to meet our operating requirements and to make other
payments depends on the surplus and earnings of our subsidiaries and their
ability to pay dividends or to advance or repay funds. Payments of dividends and
advances and repayments of inter-company debt by our subsidiaries are restricted
by our credit agreements.
WE MAY MAKE ACQUISITIONS THAT ARE NOT SUCCESSFUL OR FAIL TO PROPERLY INTEGRATE
ACQUIRED BUSINESSES INTO OUR OPERATIONS.
We intend to explore opportunities to buy other businesses or technologies that
could complement, enhance or expand our current business or product lines or
that might otherwise offer us growth opportunities. We may have difficulty
finding such opportunities or, if we do identify such opportunities, we may not
be able to complete such transactions for reasons including a failure to secure
necessary financing.
Any transactions that we are able to identify and complete may involve a number
of risks, including:
4
o the diversion of our management's attention from our existing business
to integrate the operations and personnel of the acquired or combined
business or joint venture;
o possible adverse effects on our operating results during the
integration process;
o substantial acquisition related expenses, which would reduce our net
income in future years;
o the loss of key employees and customers as a result of changes in
management; and
o our possible inability to achieve the intended objectives of the
transaction.
In addition, we may not be able to successfully or profitably integrate,
operate, maintain and manage our newly acquired operations or employees. We may
not be able to maintain uniform standards, controls, procedures and policies,
and this may lead to operational inefficiencies.
PROVISIONS IN OUR CHARTER DOCUMENTS AND UNDER INDIANA LAW MAY PREVENT OR DELAY A
CHANGE OF CONTROL OF US AND COULD ALSO LIMIT THE MARKET PRICE OF OUR COMMON
SHARES.
Provisions of our certificate of incorporation and bylaws, as well as provisions
of Indiana corporate law, may discourage, delay or prevent a merger, acquisition
or other change in control of our company, even if such a change in control
would be beneficial to our shareholders. These provisions may also prevent or
frustrate attempts by our shareholders to replace or remove our management.
These provisions include those:
o prohibiting our shareholders from fixing the number of our directors;
o requiring advance notice for shareholder proposals and nominations;
and
o prohibiting shareholders from acting by written consent, unless
unanimous.
We are subject to certain provisions of the Indiana Business Corporation Law, or
IBCL, that limit business combination transactions with 10% shareholders during
the first five years of their ownership, absent approval of our board of
directors. The IBCL also contains control share acquisition provisions that
limit the ability of certain shareholders to vote their common shares unless
their control share acquisition was approved in advance by shareholders. These
provisions and other similar provisions make it more difficult for shareholders
or potential acquirers to acquire us without negotiation and could limit the
price that investors are willing to pay in the future for our common shares.
COMPLIANCE WITH CHANGING REGULATION OF CORPORATE GOVERNANCE AND PUBLIC
DISCLOSURE WILL REQUIRE US EITHER TO INCUR ADDITIONAL EXPENSES OR CEASE TO BE A
REPORTING COMPANY.
Keeping abreast of, and in compliance with, changing laws, regulations and
standards relating to corporate governance and public disclosure, including the
5
Sarbanes-Oxley Act of 2002, new SEC regulations and American Stock Exchange
rules, will require an increased amount of management attention and external
resources. We would be required to invest additional resources to comply with
evolving standards, which would result in increased general and administrative
expenses and a diversion of management time and attention from
revenue-generating activities to compliance activities.
Our Board of Directors may determine that it is in the best interests of
shareholders to eliminate or reduce such expense by ceasing to be a reporting
company for purposes of the Securities Exchange Act of 1934, as amended. One
commonly used method, subject to shareholder approval, is to effect a reverse
share split to reduce the number of shareholders to fewer than 300, permitting
termination of registration. Under this method, shareholders who own less than
one whole common share following the reverse split would cease to be
shareholders and would receive a cash payment for their fractional shares. After
a reverse split, there might be no established trading market for our common
shares, although we expect that our common shares may then be quoted on the
"pink sheets."
WE MAY BE EXPOSED TO LIABILITY AS A RESULT OF BEING NAMED AS A DEFENDANT IN A
LAWSUIT BROUGHT UNDER THE SO-CALLED "QUI TAM" PROVISIONS OF THE FEDERAL FALSE
CLAIMS ACT.
The Company, Lynch Interactive Corporation, which was formed via a tax-free
spin-off from Lynch Corporation on September 1, 1999 ("Lynch Interactive"), and
various other parties are defendants in a lawsuit brought under the so-called
"qui tam" provisions of the federal False Claims Act in the United States
District Court for the District of Columbia. The main allegation in the case is
that the defendants participated in the creation of "sham" bidding entities that
allegedly defrauded the U.S. Treasury Department by improperly participating in
Federal Communications Commission spectrum auctions restricted to small
businesses, and obtained bidding credits in other spectrum auctions allocated to
"small" and "very small" businesses. While the lawsuit seeks to recover an
unspecified amount of damages, which would be subject to mandatory trebling
under the statute, a report prepared for the relator (a private individual who
filed the action on behalf of the United States) in 2005 alleges damages of
approximately $91 million in respect of bidding credits, approximately $70
million in respect of government loans and approximately $206 million in respect
of subsequent resales of licenses, in each case prior to trebling. Although
Lynch Interactive is contractually bound to indemnify us for any losses or
damages we may incur as a result of this lawsuit, Lynch Interactive may lack the
capital resources to do so. As a result, we could be held liable and forced to
pay a significant amount of damages without recourse.
WE DO NOT ANTICIPATE PAYING CASH DIVIDENDS ON OUR COMMON SHARES IN THE
FORESEEABLE FUTURE.
We anticipate that all of our earnings will be retained for the development of
our business. The Board of Directors has adopted a policy of not paying cash
dividends on our common shares. We do not anticipate paying cash dividends on
our common shares in the foreseeable future.
6
THERE IS A LIMITED MARKET FOR OUR COMMON SHARES. OUR COMMON SHARE PRICE IS
LIKELY TO BE HIGHLY VOLATILE AND COULD DROP UNEXPECTEDLY.
There is a limited public market for our common shares, and we cannot assure you
that an active trading market will develop. As a result of low trading volume in
our common shares, the purchase or sale of a relatively small number of common
shares could result in significant share price fluctuations. Our share price may
fluctuate significantly in response to a number of factors, including the
following, several of which are beyond our control:
o changes in financial estimates or investment recommendations by
securities analysts relating to our common shares;
o loss of a major customer;
o announcements by us or our competitors of significant contracts,
acquisitions, strategic partnerships, joint ventures or capital
commitments; and
o changes in key personnel.
In the past, securities class action litigation has often been brought against a
company following periods of volatility in the market price of its securities.
We could be the target of similar litigation in the future. Securities
litigation, regardless of merit or ultimate outcome, would likely cause us to
incur substantial costs, divert management's attention and resources, harm our
reputation in the industry and the securities markets and reduce our
profitability.
SECURITIES ANALYSTS MAY NOT INITIATE COVERAGE OF OUR COMMON SHARES OR MAY ISSUE
NEGATIVE REPORTS, AND THIS MAY HAVE A NEGATIVE IMPACT ON THE MARKET PRICE OF OUR
COMMON SHARES.
We cannot assure you that securities analysts will initiate coverage and publish
research reports on us. It is difficult for companies with smaller market
capitalizations, such as us, to attract independent financial analysts who will
cover our common shares. If securities analysts do not, this lack of research
coverage may adversely affect the market price of our common shares.
IF WE ARE UNABLE TO INTRODUCE INNOVATIVE PRODUCTS, DEMAND FOR OUR PRODUCTS MAY
DECREASE.
Our future operating results are dependent on our ability to continually
develop, introduce and market innovative products, to modify existing products,
to respond to technological change and to customize some of our products to meet
customer requirements. There are numerous risks inherent in this process,
including the risks that we will be unable to anticipate the direction of
technological change or that we will be unable to develop and market new
products and applications in a timely or cost-effective manner to satisfy
customer demand.
OUR OPERATING RESULTS AND FINANCIAL CONDITION COULD BE MATERIALLY ADVERSELY
AFFECTED BY ECONOMIC, POLITICAL, HEALTH, REGULATORY AND OTHER FACTORS EXISTING
IN FOREIGN COUNTRIES IN WHICH WE OPERATE.
As we have significant international operations, our operating results and
financial condition could be materially adversely affected by economic,
7
political, health, regulatory and other factors existing in foreign countries in
which we operate. Our international operations are subject to inherent risks,
which may materially adversely affect us, including:
o political and economic instability in countries in which our products
are manufactured and sold;
o expropriation or the imposition of government controls;
o sanctions or restrictions on trade imposed by the United States
government;
o export license requirements;
o trade restrictions;
o currency controls or fluctuations in exchange rates; o high levels of
inflation or deflation;
o greater difficulty in collecting our accounts receivable and longer
payment cycles;
o changes in labor conditions and difficulties in staffing and managing
our international operations; and
o limitations on insurance coverage against geopolitical risks, natural
disasters and business operations.
In addition, these same factors may also place us at a competitive disadvantage
when compared to some of our foreign competitors. In response to competitive
pressures and customer requirements, we may further expand internationally at
lower cost locations. If we expand into these locations, we will be required to
incur additional capital expenditures.
OUR BUSINESSES ARE CYCLICAL. THE RECENT DECLINE IN DEMAND IN THE ELECTRONIC
COMPONENT AND GLASS COMPONENT INDUSTRIES MAY CONTINUE, RESULTING IN ADDITIONAL
ORDER CANCELLATIONS AND DEFERRALS AND LOWER AVERAGE SELLING PRICES FOR OUR
PRODUCTS.
Our subsidiaries sell to industries that are subject to cyclical economic
changes. The electronic component and glass component industries in general, and
specifically the Company, have for the past several years experienced a decline
in product demand on a global basis, resulting in order cancellations and
deferrals and lower average selling prices. This decline is primarily
attributable to a slowing of growth in the demand for components used by
telecommunications infrastructure manufacturers and newer technologies
introduced in the glass display industry. We cannot assure you that any expected
or perceived improvements in the economy and the electronic component and glass
component industry will occur. The slowdown may continue and may become more
pronounced. A slowdown in demand, as well as recessionary trends in the global
economy, make it more difficult for us to predict our future sales, which also
makes it more difficult to manage our operations.
8
OUR MARKETS ARE HIGHLY COMPETITIVE, AND WE MAY LOSE BUSINESS TO LARGER AND
BETTER-FINANCED COMPETITORS.
Our markets are highly competitive worldwide, with low transportation costs and
few import barriers. We compete principally on the basis of product quality and
reliability, availability, customer service, technological innovation, timely
delivery and price. All of the industries in which we compete have become
increasingly concentrated and globalized in recent years. Our major competitors,
some of which are larger than us, and potential competitors have substantially
greater financial resources and more extensive engineering, manufacturing,
marketing and customer support capabilities than we have.
OUR SUCCESS DEPENDS ON OUR ABILITY TO RETAIN OUR KEY MANAGEMENT AND TECHNICAL
PERSONNEL AND ATTRACTING, RETAINING, AND TRAINING NEW TECHNICAL PERSONNEL.
Our future growth and success will depend in large part upon our ability to
retain our existing management and technical team and to recruit and retain
highly skilled technical personnel, including engineers. The labor markets in
which we operate are highly competitive and most of our operations are not
located in highly populated areas. As a result, we may not be able to retain and
recruit key personnel. Our failure to hire, retain or adequately train key
personnel could have a negative impact on our performance.
WE MAY NOT REALIZE THE SYNERGIES OR ACHIEVE THE INTENDED OBJECTIVES SOUGHT FROM
MTRON'S ACQUISITION OF PTI.
Effective September 30, 2004, Mtron completed its acquisition of PTI. The value
of this acquisition is largely based on the synergies that we believe will be
created by the integration of these two companies. This process involves a
number of risks, including the diversion of our management's attention from our
existing business to integrate PTI's operations and personnel, and possible
adverse effects on our operating results during the integration process. In
addition, we may be unable to integrate, operate, maintain and manage PTI's
operations or employees. We also may not be able to maintain uniform standards,
controls, procedures and policies, and this may lead to operational
inefficiencies.
MTRONPTI'S BACKLOG MAY NOT BE INDICATIVE OF FUTURE SALES AND MAY ADVERSELY
AFFECT OUR BUSINESS.
MtronPTI's backlog comprises orders that are subject to specific production
release orders under written contracts, oral and written orders from customers
with which MtronPTI has had long-standing relationships and written purchase
orders from sales representatives. MtronPTI's customers may order components
from multiple sources to ensure timely delivery when backlog is particularly
long and may cancel or defer orders without significant penalty. They often
cancel orders when business is weak and inventories are excessive, a phenomenon
that MtronPTI has experienced in the recent economic slowdown. As a result,
MtronPTI's backlog as of any particular date may not be representative of actual
net sales for any succeeding period.
9
MTRONPTI RELIES UPON ONE CONTRACT MANUFACTURER FOR A SIGNIFICANT PORTION OF ITS
FINISHED PRODUCTS, AND A DISRUPTION IN ITS RELATIONSHIP COULD HAVE A NEGATIVE
IMPACT ON MTRONPTI'S SALES.
In 2004, approximately 12% of MtronPTI's net sales was attributable to finished
products that were manufactured by an independent contract manufacturer located
in both Korea and China. We expect this manufacturer to account for a smaller
but substantial portion of MtronPTI's net sales in 2005 and a material portion
of MtronPTI's sales for the next several years. MtronPTI does not have a
written, long-term supply contract with this manufacturer. If this manufacturer
becomes unable to provide products in the quantities needed, or at acceptable
prices, MtronPTI would have to identify and qualify acceptable replacement
manufacturers or manufacture the products internally. Due to specific product
knowledge and process capability, MtronPTI could encounter difficulties in
locating, qualifying and entering into arrangements with replacement
manufacturers. As a result, a reduction in the production capability or
financial viability of this manufacturer, or a termination of, or significant
interruption in, MtronPTI's relationship with this manufacturer, may adversely
affect MtronPTI's results of operations and our financial condition.
CONTINUED MARKET ACCEPTANCE OF MTRONPTI'S PACKAGED QUARTZ CRYSTALS, OSCILLATOR
MODULES AND ELECTRONIC FILTERS IS CRITICAL TO OUR SUCCESS, BECAUSE FREQUENCY
CONTROL DEVICES ACCOUNT FOR NEARLY ALL OF MTRONPTI'S SALES.
Virtually all of MtronPTI's 2003 and 2004 net sales came from sales of frequency
control devices, which consist of packaged quartz crystals, oscillator modules
and electronic filters. We expect that this product line will continue to
account for substantially all of MtronPTI's net sales for the foreseeable
future. Any decline in demand for this product line or failure to achieve
continued market acceptance of existing and new versions of this product line
may harm MtronPTI's business and our financial condition.
MTRONPTI'S FUTURE RATE OF GROWTH IS HIGHLY DEPENDENT ON THE DEVELOPMENT AND
GROWTH OF THE MARKET FOR COMMUNICATIONS AND NETWORK EQUIPMENT.
MtronPTI's business depends heavily upon capital expenditures by the providers
of communications and network services. In 2004, the majority of MtronPTI's net
sales were to manufacturers of communications and network infrastructure
equipment, including indirect sales through distributors and contract
manufacturers. In 2005, MtronPTI expects a smaller but significant portion of
its net sales to be to manufacturers of communications and network
infrastructure equipment. MtronPTI intends to increase its sales to
communications and network infrastructure equipment manufacturers in the future.
Communications and network service providers have experienced periods of
capacity shortage and periods of excess capacity. In periods of excess capacity,
communications systems and network operators cut purchases of capital equipment,
including equipment that incorporates MtronPTI's products. A slowdown in the
manufacture and purchase of communications and network infrastructure equipment
could substantially reduce MtronPTI's net sales and operating results and
adversely affect our financial condition. Moreover, if the market for
communications or network infrastructure equipment fails to grow as expected,
MtronPTI may be unable to sustain its growth. In addition, MtronPTI's growth
depends upon the acceptance of its products by communications and network
10
infrastructure equipment manufacturers. If, for any reason, these manufacturers
do not find MtronPTI's products to be appropriate for their use, our future
growth will be adversely affected.
COMMUNICATIONS AND NETWORK INFRASTRUCTURE EQUIPMENT MANUFACTURERS INCREASINGLY
RELY UPON CONTRACT MANUFACTURERS, THEREBY DIMINISHING MTRONPTI'S ABILITY TO SELL
ITS PRODUCTS DIRECTLY TO THOSE EQUIPMENT MANUFACTURERS.
There is a growing trend among communications and network infrastructure
equipment manufacturers to outsource the manufacturing of their equipment or
components. As a result, MtronPTI's ability to persuade these original equipment
manufacturers to specify our products has been reduced and, in the absence of a
manufacturer's specification of MtronPTI's products, the prices that MtronPTI
can charge for them may be subject to greater competition.
MTRONPTI'S GOVERNMENT CONTRACTS CONTAIN PROVISIONS THAT ARE UNFAVORABLE TO IT
AND HAVE A NUMBER OF SPECIFIC RISKS THAT MAY RESULT IN LOST ORDERS AND PROFITS.
Many of MtronPTI's contracts with government agencies contain provisions that
give the governments rights and remedies not typically found in private
commercial contracts, including provisions enabling the government to:
o terminate or cancel existing contracts without good reason or penalty;
o suspend MtronPTI from doing business with a foreign government or
prevent MtronPTI from selling its products in certain countries;
o audit and object to MtronPTI's contract-related costs and expenses,
including allocated indirect costs; and
o change specific terms and conditions in MtronPTI's contracts,
including changes that would reduce the value of the contract to
MtronPTI.
MtronPTI's business generated from government contracts could be materially and
adversely affected if:
o MtronPTI's reputation or relationship with government agencies were
impaired;
o MtronPTI were suspended or otherwise prohibited from contracting with
a domestic or foreign government;
o any of MtronPTI's products were to fail to meet the requirements of
certain applicable specified military standards;
o levels of government spending were to decrease;
o MtronPTI were barred from entering into new government contracts or
extending existing government contracts based on violations or
suspected violations of laws or regulations; or
11
o MtronPTI were not granted security clearances required to provide its
services and solutions to governments, or such security clearances
were revoked.
FUTURE CHANGES IN MTRONPTI'S ENVIRONMENTAL LIABILITY AND COMPLIANCE OBLIGATIONS
MAY INCREASE COSTS AND DECREASE PROFITABILITY.
MtronPTI's manufacturing operations, products and/or product packaging are
subject to environmental laws and regulations governing air emissions,
wastewater discharges, and the handling, disposal and remediation of hazardous
substances, wastes and other chemicals. In addition, more stringent
environmental regulations may be enacted in the future, and we cannot presently
determine the modifications, if any, in MtronPTI's operations that any future
regulations might require, or the cost of compliance that would be associated
with these regulations.
MTRONPTI MAY BE UNABLE TO MODIFY ITS PRODUCTS OR MAY INCUR INCREASED COSTS TO
MEET THE REQUIREMENTS OF THE EUROPEAN UNION'S RESTRICTION ON HAZARDOUS
SUBSTANCES DIRECTIVE.
MtronPTI may be unable to modify its products or may incur increased costs to
meet the requirements of the European Union's Restriction on Hazardous
Substances Directive. If MtronPTI is unable to comply with these regulations, it
may not be permitted to ship its products to the European Union.
LYNCH SYSTEMS' REVENUE IS LARGELY DEPENDENT ON DEMAND FOR ITS TELEVISIONS AND
COMPUTER MONITORS BASED ON CATHODE-RAY TUBE TECHNOLOGY. THIS TECHNOLOGY WILL
EVENTUALLY BE REPLACED BY PLASMA AND LIQUID CRYSTAL DISPLAYS.
Lynch Systems generates a significant portion of its revenue from sales to glass
producers that supply television and computer monitor displays that are based on
cathode-ray tube technology. This market is being rapidly penetrated by thinner,
lighter weight plasma displays and liquid crystal displays. Although cathode-ray
tube televisions and computer monitors currently retain advantages in image
quality and price, glass producers are investing billions of dollars to improve
the quality and lower the unit price of plasma, liquid crystal and other display
types. We believe that market penetration by plasma and liquid crystal display
producers will continue and eventually render obsolete cathode-ray tube
technology and this Lynch Systems product line.
LYNCH SYSTEMS' DEPENDENCE ON A FEW SIGNIFICANT CUSTOMERS EXPOSES IT TO OPERATING
RISKS.
Lynch Systems' sales to its ten largest customers accounted for approximately
80% of its net sales in 2004, 2003 and 2002. Lynch Systems' sales to its largest
customer accounted for approximately 36%, 42% and 27% of its net sales in 2004,
2003 and 2002. If a significant customer reduces, delays or cancels its orders
for any reason, the business and results of operations of Lynch Systems would be
negatively affected.
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AN ORDER TO BUILD MULTIPLE MACHINES IN THE FUTURE WITH A SIGNIFICANT CUSTOMER IN
THE TABLEWARE MARKET IS CONTINGENT UPON THE SUCCESSFUL INSTALLATION AND
OPERATION OF THE MACHINES CURRENTLY IN PRODUCTION.
Lynch Systems has a significant order for glass manufacturing machines that are
scheduled to be shipped and installed in the customer's factories in 2006. Many
of these machines utilize new processes and require customer training. The
ability of the customer's personnel and resources to operate these machines
successfully is critical. If the customer does not realize the full benefit from
these machines, new orders from this customer may be canceled.
THE RESULTS OF LYNCH SYSTEMS' OPERATIONS ARE SUBJECT TO FLUCTUATIONS IN THE
AVAILABILITY AND COST OF STEEL USED TO MANUFACTURE GLASS-FORMING EQUIPMENT.
Lynch Systems uses large amounts of steel to manufacture its glass forming
equipment. The price of steel has risen substantially and demand for steel is
very high. Lynch Systems has only been able to pass some of the increased costs
to its customers. As a result, Lynch Systems' profit margins on glass forming
equipment have decreased. If the price of and demand for steel continues to
rise, our profit margins will continue to decrease.
LYNCH SYSTEMS MAY BE UNABLE TO PROTECT ITS INTELLECTUAL PROPERTY.
The success of Lynch Systems' business depends, in part, upon its ability to
protect trade secrets, designs, drawings and patents, obtain or license patents
and operate without infringing on the intellectual property rights of others.
Lynch Systems relies on a combination of trade secrets, designs, drawings,
patents, nondisclosure agreements and technical measures to protect its
proprietary rights in its products and technology. The steps taken by Lynch
Systems in this regard may not be adequate to prevent misappropriation of its
technology. In addition, the laws of some foreign countries in which Lynch
Systems operates do not protect its proprietary rights to the same extent as do
the laws of the United States. Although Lynch Systems continues to evaluate and
implement protective measures, we cannot assure you that these efforts will be
successful. Lynch Systems' inability to protect its intellectual property rights
could diminish or eliminate the competitive advantages that it derives from its
technology, cause Lynch Systems to lose sales or otherwise harm its business.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Prospectus and documents incorporated by reference into this Prospectus
contain forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Securities Exchange
Act of 1934, as amended, that are not historical facts, but rather are based on
current expectations, estimates and projections about our business and industry,
our beliefs and assumptions. Words such as "anticipates," "expects," "intends,"
"plans," "believes," "seeks," "estimates," and variations of these words and
similar expressions are intended to identify forward-looking statements. These
statements are based on our current plans and expectations and involve risks and
uncertainties over which we have no control, that could cause actual future
activities and results of operations to be materially different from those set
forth in the forward-looking statements. Important factors that could cause
actual future activities and operating results to differ include fluctuating
demand for capital goods such as large glass presses, delay in the recovery of
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demand for components used by telecommunications infrastructure manufacturers
and exposure to foreign economies. Important information regarding risks and
uncertainties is also set forth elsewhere in this document, including in those
described in "Risk Factors" beginning on page 3, as well as elsewhere in this
Prospectus and in documents incorporated by reference into this Prospectus. You
are cautioned not to place undue reliance on these forward-looking statements,
which reflect our management's view only as of the date of this Prospectus or as
of the date of any document incorporated by reference into this Prospectus. All
subsequent written or oral forward-looking statements attributable to us or
persons acting on our behalf are expressly qualified in their entirety by these
cautionary statements. We undertake no obligation to update these statements or
publicly release the results of any revisions to the forward-looking statements
that we may make to reflect events or circumstances after the date of this
Prospectus or the date of any document incorporated into this Prospectus or to
reflect the occurrence of unanticipated events.
You are also urged to carefully review and consider the various disclosures made
by us in this document, as well as in our prior periodic reports on Forms 10-K,
10-Q and 8-K, filed with the Securities and Exchange Commission and listed under
the caption "Incorporation by Reference" on 2 of this Prospectus.
We make available, free of charge, our annual report on Form 10-K, quarterly
reports on Form 10-Q, and current reports on Form 8-K, if any.
We also make this information available on our website at WWW.LYNCHCORP.COM.
USE OF PROCEEDS
The common shares offered hereby are being registered for the account of the
selling shareholders identified in this Prospectus. See "Selling Shareholders."
All net proceeds from the sale of the common shares will go to the shareholders
who offer and sell their shares. We will not receive any part of the proceeds
from such sales of common shares. We will, however, receive the exercise price
of the options at the time of their exercise. Such proceeds will be used for
general corporate purposes, working capital and to make acquisitions, although
the Company has not identified any specific acquisitions at this time.
SELLING SHAREHOLDERS
This Prospectus relates to the reoffer and resale of shares issued or that may
be issued to the selling shareholders under our 2001 Equity Incentive Plan. This
Prospectus also relates to such indeterminate number of additional common shares
that may be acquired by the selling shareholders as a result of the antidilution
provisions of the Plan. We will provide additional information regarding the
identity of the selling shareholders and certain other information relating to
the selling shareholders in a supplement to this Prospectus if we are required
by law to do so.
The following table sets forth (i) the number of common shares owned by each
selling shareholder as of December 22, 2005, (ii) the number of common shares to
be offered for resale by each selling shareholder (i.e., the total number of
common shares underlying options held by each selling shareholder irrespective
of whether such options are presently exercisable within 60 days after December
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22, 2005) and (iii) the number and percentage of common shares that each selling
shareholder will beneficially own after completion of the offering, assuming
that all shares that may be offered for resale are sold and no other shares
beneficially owned by the selling shareholders are also sold.
NUMBER OF COMMON NUMBER OF COMMON NUMBER OF COMMON PERCENTAGE OF CLASS
SHARES SHARES SHARES AFTER TO BE OWNED AFTER
OWNED AT TO BE OFFERED COMPLETION OF THE COMPLETION OF THE
NAME DECEMBER 22, 2005(1) FOR RESALE(2) OFFERING(3) OFFERING
---- -------------------- ------------- ----------------- -------------------
Marc Gabelli 470,512(4) 20,000 450,512 20.9%
John C. Ferrara 75,552(5) 75,000 552 *
-----------------
* Less than 1%.
(1) Unless otherwise indicated, we believe that all people named in the
above table have sole voting and investment power with respect to all
common shares beneficially owned by them. A person is deemed to be the
beneficial owner of securities that can be acquired by such person
within 60 days after December 22, 2005 upon the exercise of options,
warrants or convertible securities. Each beneficial owner's percentage
ownership is determined by assuming that options, warrants and
convertible securities held by such person (but not those held by any
other person) and which are exercisable or convertible within 60 days
have been exercised or converted.
(2) Consists of common shares issuable upon exercise of options currently
exercisable.
(3) Beneficial ownership of shares held by each selling shareholder after
this offering assumes that each selling shareholder sold all of the
shares it is offering in this Prospectus but actually will depend on
the number of shares sold by such selling shareholder in this offering.
(4) Consists of (i) 1,334 common shares owned directly by Marc Gabelli,
(ii) 449,178 common shares beneficially owned by Venator Merchant Fund,
L.P. ("Venator Fund") and Venator Global, LLC ("Venator LLC") and (iii)
20,000 common shares issuable upon exercise of currently exercisable
options granted to Mr. Gabelli pursuant to the Plan. Venator LLC, which
is the sole general partner of Venator Fund, is deemed to have
beneficial ownership of the securities owned beneficially by Venator
Fund. Marc Gabelli is the President of Venator Fund.
(5) Includes 75,000 common shares issuable upon exercise of currently
exercisable options granted pursuant to the Plan. Mr. Ferrara has been
President and Chief Executive Officer of the Company from October 2004
to the present.
We cannot assure you that the selling shareholders will exercise their options
to purchase our common shares.
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The shares covered by this Prospectus may be sold from time to time so long as
this Prospectus remains in effect; provided, however, that the selling
shareholders first contact our Corporate Secretary to confirm that this
Prospectus is in effect. We intend to distribute to each selling shareholder a
letter describing the procedures that the selling shareholder may follow in
order to use this Prospectus to sell the shares and under what conditions the
Prospectus may not be used. The selling shareholders expect to sell the shares
at prices then attainable, less ordinary brokers' commissions and dealers'
discounts as applicable.
PLAN OF DISTRIBUTION
This offering is self-underwritten; neither we nor the selling shareholders have
employed an underwriter for the sale of common shares by the selling
shareholders. We will bear all expenses in connection with the preparation of
this Prospectus. The selling shareholders will bear all expenses associated with
the sale of the common shares.
The selling shareholders may offer their common shares directly or through
pledgees, donees, transferees or other successors in interest in one or more of
the following transactions:
o On any stock exchange on which the common shares may be listed at the
time of sale;
o In negotiated transactions;
o In the over-the-counter market; and
o In a combination of any of the above transactions.
The selling shareholders may offer their common shares at any of the following
prices:
o Fixed prices that may be changed;
o Market prices prevailing at the time of sale;
o Prices related to such prevailing market prices; and
o At negotiated prices.
The selling shareholders may effect such transactions by selling shares to or
through broker-dealers, and all such broker-dealers may receive compensation in
the form of discounts, concessions, or commissions from the selling shareholders
and/or the purchasers of common shares for whom such broker-dealers may act as
agents or to whom they sell as principals, or both (which compensation as to a
particular broker-dealer might be in excess of customary commissions).
Any broker-dealer acquiring common shares from the selling shareholders may sell
the shares either directly, in its normal market-making activities, through or
to other brokers on a principal or agency basis or to its customers. Any such
sales may be at prices then prevailing on AMEX or at prices related to such
prevailing market prices or at negotiated prices to its customers or a
16
combination of such methods. The selling shareholders and any broker-dealers
that act in connection with the sale of the common shares hereunder might be
deemed to be "underwriters" within the meaning of Section 2(11) of the
Securities Act; any commissions received by them and any profit on the resale of
shares as principal might be deemed to be underwriting discounts and commissions
under the Securities Act. Any such commissions, as well as other expenses
incurred by the selling shareholders and applicable transfer taxes, are payable
by the selling shareholders.
The selling shareholders reserve the right to accept, and together with any
agent of the selling shareholder, to reject in whole or in part any proposed
purchase of the common shares. The selling shareholders will pay any sales
commissions or other seller's compensation applicable to such transactions.
We have not registered or qualified offers and sales of common shares under the
laws of any country other than the United States. To comply with certain states'
securities laws, if applicable, the selling shareholders will offer and sell
their common shares in such jurisdictions only through registered or licensed
brokers or dealers. In addition, in certain states the selling shareholders may
not offer or sell common shares unless we have registered or qualified such
shares for sale in such states or we have complied with an available exemption
from registration or qualification.
The selling shareholders have represented to us that any purchase or sale of
common shares by them will comply with Regulation M promulgated under the
Exchange Act. In general, Rule 102 under Regulation M prohibits any person
connected with a distribution of our common shares (a "Distribution") from
directly or indirectly bidding for, or purchasing for any account in which he or
she has a beneficial interest, any of our common shares or any right to purchase
our common shares, for a period of one business day before and after completion
of his or her participation in the Distribution (we refer to that time period as
the "Distribution Period").
During the Distribution Period, Rule 104 under Regulation M prohibits the
selling shareholders and any other persons engaged in the Distribution from
engaging in any stabilizing bid or purchasing our common shares except for the
purpose of preventing or retarding a decline in the open market price of our
common shares. No such person may effect any stabilizing transaction to
facilitate any offering at the market. Inasmuch as the selling shareholders will
be reoffering and reselling our common shares at the market, Rule 104 prohibits
them from effecting any stabilizing transaction in contravention of Rule 104
with respect to our common shares.
There can be no assurance that the selling shareholders will sell any or all of
the shares offered by them hereunder or otherwise.
LEGAL MATTERS
Certain legal matters in connection with the issuance of the common shares
offered hereby have been passed upon for us by Olshan Grundman Frome Rosenzweig
& Wolosky LLP, New York, New York.
17
EXPERTS
Ernst & Young LLP, independent registered public accounting firm, has audited
our consolidated financial statements and schedules included in our Annual
Report on Form 10-K for the year ended December 31, 2004, as set forth in their
report, which is incorporated by reference in this Registration Statement. Our
financial statements and schedules are incorporated by reference in reliance on
Ernst & Young LLP's report, given on their authority as experts in accounting
and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We have filed a Registration Statement on Form S-8 with the SEC for our common
shares offered in this offering. This Prospectus does not contain all the
information set forth in the Registration Statement. You should refer to the
Registration Statement and its exhibits for additional information. Whenever we
make references in this Prospectus to any of our contracts, agreements or other
documents, the references are not necessarily complete and you should refer to
the exhibits attached to the Registration Statement for the copies of the actual
contract, agreement or other document.
The SEC maintains an Internet site at WWW.SEC.GOV that contains reports, proxy
and information statements, and other information regarding us. You may also
read and copy any document we file with the SEC at its Public Reference Room at
450 Fifth Street, N.W., Washington, D.C. 20549. Please call the SEC at
1-800-SEC-0330 for further information on the operation of the Public Reference
Room.
Our common shares are listed on the American Stock Exchange and our reports and
other information about us may also be inspected at the offices of the American
Stock Exchange at 86 Trinity Place, New York, New York 10006. Additional
information about us is available over the Internet at our web site at
WWW.LYNCHCORP.COM.
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PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
ITEM 3. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE.
The following documents filed by Lynch Corporation (the "Company") with the
Securities and Exchange Commission (the "SEC") are incorporated herein by
reference and made a part hereof:
1. Our Annual Report on Form 10-K for the fiscal year ended December 31, 2004;
2. Our Quarterly Report on Form 10-Q for the fiscal quarter ended March 31,
2005;
3. Our Quarterly Report on Form 10-Q for the fiscal quarter ended June 30,
2005;
4. Our Quarterly Report on Form 10-Q for the fiscal quarter ended September
30, 2005;
5. Our Current Report on Form 8-K/A filed on January 3, 2005;
6. Our Current Report on Form 8-K filed on January 4, 2005;
7. Our Current Report on Form 8-K filed on April 29, 2005;
8. Our Current Report on Form 8-K filed on May 16, 2005;
9. Our Current Report on Form 8-K filed on July 6, 2005;
10. Our Current Report on Form 8-K filed on August 30, 2005;
11. Our Current Report on Form 8-K filed on September 9, 2005;
12. Our Current Report on Form 8-K filed on October 4, 2005;
13. Our Current Report on Form 8-K filed on October 11, 2005;
14. Our Current Report on Form 8-K filed on October 26, 2005;
15. Our Current Report on Form 8-K filed on November 10, 2005;
16. Our Current Report on Form 8-K filed on December 9, 2005;
17. Our Current Report on Form 8-K filed on December 19, 2005; and
18. The description of the common shares contained in our Registration
Statement under the Securities Exchange Act of 1934 with respect to such
common shares filed with the Securities and Exchange Commission, including
any amendments or reports filed for the purpose of updating such
description.
All reports and other documents subsequently filed by the Company pursuant to
Sections 13, 14 and 15(d) of the Securities Exchange Act of 1934, as amended,
prior to the filing of a post-effective amendment that indicates that all
securities offered hereby have been sold or that de-registers all securities
remaining unsold, shall be deemed to be incorporated by reference herein and to
be a part hereof from the date of the filing of such reports and documents.
ITEM 4. DESCRIPTION OF SECURITIES.
Not applicable.
ITEM 5. INTEREST OF NAMED EXPERTS AND COUNSEL.
Not applicable.
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ITEM 6. INDEMNIFICATION OF OFFICERS AND DIRECTORS.
Except as hereinafter set forth, there is no statute, charter provision, by-law,
contract or other arrangement under which any controlling person, director or
officer of the Company is insured or indemnified in any manner against liability
which he may incur in his capacity as such.
Article VI, Section 6.2 of Registrant's Restated Articles of Incorporation
provides that to the extent not inconsistent with applicable law, every director
and officer shall be indemnified by Registrant against all liability and
reasonable expense that may be incurred by such director or officer in
connection with or resulting from any claim, (i) if such director or officer is
wholly successful with respect to the claim, or (ii) if not wholly successful,
then if such director or officer is determined to have acted in good faith, in
what the director or officer reasonably believed to be the best interests of
Registrant or at least not opposed to its best interest and, in addition, with
respect to any criminal claim is determined to have had reasonable cause to
believe that his conduct was lawful or had no reasonable cause to believe that
his conduct was unlawful. The termination of any claim, by judgment, order,
settlement (whether with or without court approval), or conviction or upon a
plea of guilty or of nolo contendere, or its equivalent, shall not create a
presumption that a director or officer did not meet the standards of conduct set
forth in clause (ii) hereof. For a more detailed description, reference is made
to Article VI, Section 6.2 of the Registrant's Restated Articles of
Incorporation filed as Exhibit 3(a) hereto which contains certain
indemnification provisions pursuant to authority contained in the Indiana
Business Corporation Law.
Registrant's directors and officers are also covered under Registrant's
directors and officers insurance policy up to a maximum of $10 million.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers or persons controlling the
Registrant pursuant to the foregoing provisions, the Registrant has been
informed 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.
The following sections of Chapter 37 of the Indiana Business Corporation Law
provide as follows:
Section 23-1-37-8 Permissive Indemnification
(a) A corporation may indemnify an individual made a party to a proceeding
because the individual is or was a director against liability incurred in the
proceeding if:
(1) the individual's conduct was in good faith; and
(2) the individual reasonably believed:
(A) in the case of conduct in the individual's official capacity
with the corporation, that the individual's conduct was in its best
interests; and
(B) in all other cases, that the individual's conduct was at
II-2
least not opposed to its best interests; and
(3) in the case of any criminal proceeding, the individual either:
(A) had reasonable cause to believe the individual's conduct was
lawful; or
(B) had no reasonable cause to believe the individual's conduct
was unlawful.
(b) A director's conduct with respect to an employee benefit plan for a
purpose the director reasonably believed to be in the interests of the
participants in and beneficiaries of the plan is conduct that satisfies the
requirement of subsection (a)(2)(B).
(c) The termination of a proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent is not, of
itself, determinative that the director did not meet the standard of conduct
described in this section.
Section 23-1-37-9 Mandatory Indemnification
Unless limited by its articles of incorporation, a corporation shall indemnify a
director who was wholly successful, on the merits or otherwise, in the defense
of any proceeding to which the director was a party because the director is or
was a director of the corporation against reasonable expenses incurred by the
director in connection with the proceeding.
Section 23-1-37-10 Advance Indemnification
(a) A corporation may pay for or reimburse the reasonable expenses incurred
by a director who is a party to a proceeding in advance of final disposition of
the proceeding if:
(1) the director furnishes the corporation a written affirmation of
the director's good faith belief that the director has met the standard of
conduct described in section 8 of this chapter;
(2) the director furnishes the corporation a written undertaking,
executed personally or on the director's behalf, to repay the advance if it
is ultimately determined that the director did not meet the standard of
conduct; and
(3) a determination is made that the facts then known to those making
the determination would not preclude indemnification under this chapter.
(b) The undertaking required by subsection (a)(2) must be an unlimited
general obligation of the director but need not be secured and may be accepted
without reference to financial ability to make repayment.
(c) Determinations and authorizations of payments under this section shall
be made in the manner specified in section 12 of this chapter.
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Section 23-1-37-11 Application for Indemnification
Unless a corporation's articles of incorporation provide otherwise, a director
of the corporation who is a party to a proceeding may apply for indemnification
to the court conducting the proceeding or to another court of competent
jurisdiction. On receipt of an application, the court after giving any notice
the court considers necessary may order indemnification if it determines:
(1) the director is entitled to mandatory indemnification under section 9
of this chapter, in which case the court shall also order the corporation to pay
the director's reasonable expenses incurred to obtain court-ordered
indemnification; or
(2) the director is fairly and reasonably entitled to indemnification in
view of all the relevant circumstances, whether or not the director met the
standard of conduct set forth in section 8 of this chapter.
Section 23-1-37-12 Procedure for Determining Indemnification
(a) A corporation may not indemnify a director under section 8 of this
chapter unless authorized in the specific case after a determination has been
made that indemnification of the director is permissible in the circumstances
because the director has met the standard of conduct set forth in section 8 of
this chapter.
(b) The determination shall be made by any one (1) of the following
procedures:
(1) By the board of directors by majority vote of a quorum consisting
of directors not at the time parties to the proceeding.
(2) If a quorum cannot be obtained under subdivision (1), by majority
vote of a committee duly designated by the board of directors (in which
designation directors who are parties may participate), consisting solely
of two (2) or more directors not at the time parties to the proceeding.
(3) By special legal counsel:
(A) selected by the board of directors or its committee in the
manner prescribed in subdivision (1) or (2); or
(B) if a quorum of the board of directors cannot be obtained
under subdivision (1) and a committee cannot be designated under
subdivision (2), selected by majority vote of the full board of
directors (in which selection directors who are parties may
participate).
(4) By the shareholders, but common shares owned by or voted under the
control of directors who are at the time parties to the proceeding may not
be voted on the determination.
(c) Authorization of indemnification and evaluation as to reasonableness of
expenses shall be made in the same manner as the determination that
indemnification is permissible, except that if the determination is made by
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special legal counsel, authorization of indemnification and evaluation as to
reasonableness of expenses shall be made by those entitled under subsection
(b)(3) to select counsel.
Section 23-1-37-13 Indemnification of Officers, Agents and Employees
Unless a corporation's articles of incorporation provide otherwise:
(1) an officer of the corporation, whether or not a director, is entitled
to mandatory indemnification under section 9 of this chapter, and is entitled to
apply for court-ordered indemnification under section 11 of this chapter, in
each case to the same extent as a director;
(2) the corporation may indemnify and advance expenses under this chapter
to an officer, employee, or agent of the corporation, whether or not a director,
to the same extent as to a director; and
(3) a corporation may also indemnify and advance expenses to an officer,
employee, or agent, whether or not a director, to the extent, consistent with
public policy, that may be provided by its articles of incorporation, bylaws,
general or specific action of its board of directors, or contract.
Section 23-1-37-14 Insurance
A corporation may purchase and maintain insurance on behalf of an individual who
is or was a director, officer, employee, or agent of the corporation, or who,
while a director, officer, employee, or agent of the corporation, is or was
serving at the request of the corporation as a director, officer, partner,
member, manager, trustee, employee, or agent of another foreign or domestic
corporation, partnership, limited liability company, joint venture, trust,
employee benefit plan, or other enterprise, against liability asserted against
or incurred by the individual in that capacity or arising from the individual's
status as a director, officer, member, manager, employee, or agent, whether or
not the corporation would have power to indemnify the individual against the
same liability under section 8 or 9 of this chapter. The:
(1) corporation may purchase insurance under this section from; and
(2) insurance purchased under this section may be reinsured in whole
or in part by; an insurer that is owned by or otherwise affiliated with the
corporation whether the insurer does or does not do business with other
persons.
Section 23-1-37-15 Indemnification Under Chapter Not Exclusive
(a) The indemnification and advance for expenses provided for or authorized
by this chapter does not exclude any other rights to indemnification and advance
for expenses that a person may have under:
(1) a corporation's articles of incorporation or bylaws;
(2) a resolution of the board of directors or of the shareholders; or
II-5
(3) any other authorization, whenever adopted, after notice, by a
majority vote of all the voting common shares then issued and outstanding.
(b) If the articles of incorporation, bylaws, resolutions of the board of
directors or of the shareholders, or other duly adopted authorization of
indemnification or advance for expenses limit indemnification or advance for
expenses, indemnification and advance for expenses are valid only to the extent
consistent with the articles, bylaws, resolution of the board of directors or of
the shareholders, or other duly adopted authorization of indemnification or
advance for expenses.
(c) This chapter does not limit a corporation's power to pay or reimburse
expenses incurred by a director, officer, employee, or agent in connection with
the person's appearance as a witness in a proceeding at a time when the person
has not been made a named defendant or respondent to the proceeding.
ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED.
Not applicable.
ITEM 8. EXHIBITS.
4 Amended and Restated 2001 Equity Incentive Plan.
5 Opinion of Olshan Grundman Frome Rosenzweig & Wolosky LLP.
23(a) Consent of Independent Registered Public Accounting Firm - Ernst
& Young LLP.
23(b) Consent of Olshan Grundman Frome Rosenzweig & Wolosky LLP
(included in its opinion filed herewith as Exhibit 5).
24 Powers of Attorney (included on the signature page to this
Registration Statement).
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 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
II-6
information set forth in the registration statement.
Notwithstanding the foregoing, any increase or decrease in volume
of securities offered (if the total dollar value of securities
offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum
offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate,
the changes in volume and price represent no more than 20 percent
change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective
registration statement; and
(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:
(A) Paragraphs (a)(1)(i) and (a)(1)(ii) of this section do not
apply if the registration statement is on Form S-8 (ss.239.16b of this chapter),
and the information required to be included in a post-effective amendment by
those paragraphs is contained in 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 (15 U.S.C. 78m or 78o(d)) that are incorporated,
by reference in the registration statement; and
(B) Paragraphs (a)(1)(i), (a)(1)(ii) and (a)(1)(iii) of
this section do not apply if the registration statement is on Form S-3
(ss.239.13 of this chapter) or Form F-3 (ss.239.33 of this chapter) and the
information required to be included in a post-effective amendment by those
paragraphs is contained in 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 registration
statement, or is contained in a form of prospectus filed pursuant to Rule
424(b)(ss.230.424(b) of this chapter) that is part of the registration
statement.
(C) PROVIDED FURTHER, HOWEVER, that paragraphs (a)(1)(i) and
(a)(1)(ii) do not apply if the registration statement is for an offering of
asset-backed securities on Form S-1 (ss. 239.11 of this chapter) or Form S-3
(ss. 239.13 of this chapter), and the information required to be included in a
post-effective amendment is provided pursuant to Item 1100(c) of Regulation AB
(ss. 229.1100(c)).
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be
deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering
thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain
unsold at the termination of the offering.
(4) If the registrant is a foreign private issuer, to file a
II-7
post-effective amendment to the registration statement to include
any financial statements required by Item 8.A. of Form 20-F 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 isat 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 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.
(5) That, for the purpose of determining liability under the
Securities Act of 1933 to any purchaser:
(i) If the registrant is relying on Rule 430B (ss.230.430B of
this chapter):
(A) Each prospectus filed by the registrant pursuant to Rule 424(b)(3)
(ss.230.424(b)(3) of this chapter) shall be deemed to be part of the
registration statement as of the date the filed prospectus was deemed part of
and included in the registration statement; and
(B) Each prospectus required to be filed pursuant to Rule 424(b)(2),
(b)(5), or (b)(7) (ss.230.424(b)(2), (b)(5), or (b)(7) of this chapter) as part
of a registration statement in reliance on Rule 430B relating to an offering
made pursuant to Rule 415(a)(1)(i), (vii), or (x) (ss.230.415(a)(1)(i), (vii),
or (x) of this chapter) for the purpose of providing the information required by
section 10(a) of the Securities Act of 1933 shall be deemed to be part of and
included in the registration statement as of the earlier of the date.such form
of prospectus is first used after effectiveness or the date of the first
contract of sale of securities in the offering described in the prospectus. As
provided in Rule 430B, for liability purposes of the issuer and any person that
is at that date an underwriter, such date shall be deemed to be a new effective
date of the registration statement relating to the securities in the
registration statement to which that prospectus relates, and the offering of
such securities at that time shall be deemed to be the initial bona fide
offering thereof. Provided, however, that no statement made in a registration
statement or prospectus that is part of the registration statement or made in a
document incorporated or deemed incorporated by reference into the registration
statement or prospectus that is part of the registration statement will, as to a
purchaser with a time of contract of sale prior to such effective date,
supersede or modify any statement that was made in the registration statement or
prospectus that was part of the registration statement or made in any such
document immediately prior to such effective date; or
(ii) If the registrant is subject to Rule 430C (ss.230.43OC of this
chapter). each prospectus filed pursuant to Rule 424(b) as part
of a registration statement relating to an offering, other than
II-8
registration statements relying on Rule 430B or other than
prospectuses filed in reliance on Rule 430A (ss.230.430A of this
chapter), shall be deemed to be part of and included in the
registration statement as of the date it is first used after
effectiveness. Provided, however, that no statement made in a
registration statement or prospectus that is part of the
registration statement or made in a document incorporated or
deemed incorporated by reference into the registration statement
or prospectus that is part of the registration statement will, as
to a purchaser with a time of contract of sale prior to such
first use, supersede or modify any statement that was made in the
registration statement or prospectus that was part of the
registration statement, or made in any such document immediately
prior to such date of first use.
(6) That; for the purpose of determining liability of the registrant
under the Securities Act of 1933 to any purchaser in the initial
distribution of the securities:
The undersigned registrant undertakes that in a primary offering of securities
of the undersigned registrant pursuant to this registration statement,
regardless of the underwriting method used to sell the securities to the
purchaser, if the securities are offered or sold to such purchaser by means of
any of the following communications, the undersigned registrant willbe a seller
to the purchaser and will be considered to offer or sell such securities to such
purchaser:
(i) Any preliminary prospectus or prospectus of the undersigned
registrant' re ating to th offering required to be filed pursuant
to Rule 424 (ss.230.424 of this chapter);
(ii) Any free writing prospectus relating to the offering prepared by
or on behalf of the undersigned registrant or used or referred to
by the undersigned registrant;
(iii) The portion of any other free writing prospectus relating to the
offering containing material information about the undersigned
registrant or its securities provided by or on behalf of the
undersigned registrant; and
(iv) Any other communication that is an offer n the offering made by
the undersigned registrant to the purchaser.
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Exchange Act 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.
(h) Insofar as indemnification for liabilities arising under the Securities Act
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 Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
II-9
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 Securities Act and will be governed by the final
adjudication of such issue.
II-10
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 Town of Greenwich, State of Connecticut on the 29th day of
December, 2005.
LYNCH CORPORATION
By: /s/ John C. Ferrara
-----------------------
John C. Ferrara
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below
constitutes and appoints John C. Ferrara and Eugene Hynes as his true and lawful
attorney-in-fact, each acting alone, with full power of substitution and
resubstitution for him and in his name, place and stead, in any and all
capacities, to sign any and all amendments, including post-effective amendments
to this Registration Statement, and any related registration statement filed
pursuant to Rule 462(b) of the Act and to file the same, with exhibits thereto,
and other documents in connection therewith, with the Securities and Exchange
Commission, hereby ratifying and confirming all that said attorneys-in-fact or
their substitutes, each acting along, may lawfully do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities and
on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ John C. Ferrara
------------------------ Chief Executive Officer and Director December 29, 2005
John C. Ferrara (Principal Executive Officer)
/s/ Eugene Hynes
------------------------ Vice President, Treasurer and Secretary December 29, 2005
Eugene Hynes (Principal Financial and Accounting Officer)
------------------------ Chairman of the Board of Directors December 29, 2005
Marc Gabelli
------------------------ Director December 29, 2005
E. Val Cerutti
/s/ Avrum Gray
------------------------ Director December 29, 2005
Avrum Gray
/s/ Anthony R. Pustorino
------------------------ Director December 29, 2005
Anthony R. Pustorino
Exhibit 4
LYNCH CORPORATION
2001 EQUITY INCENTIVE PLAN
1. PURPOSE
The purpose of this Equity Incentive Plan (the "Plan") is to advance
the interests of Lynch Corporation (the "Company") and its subsidiaries by
enhancing their ability to attract and retain employees and other persons or
entities who are in a position to make significant contributions to the success
of the Company and its subsidiaries through ownership of shares of the Company's
common stock ("Stock"), and cash incentives.
The Plan is intended to accomplish these goals by enabling the Company
to grant Awards in the form of Options, Stock Appreciation Rights, Restricted
Stock or Unrestricted Stock Awards, Deferred Stock Awards or Performance Awards,
or combinations thereof, all as more fully described below.
2. ADMINISTRATION
Unless otherwise determined by the Board of Directors of the Company
(the "Board"), the Plan will be administered by the Company's Executive
Compensation and Benefits Committee (the "Committee").
The Committee will have authority, not inconsistent with the express
provisions of the Plan and in addition to other authority granted under the
Plan, to (a) grant Awards at such time or times as it may choose; (b) determine
the size of each Award, including the number of shares of Stock subject to the
Award; (c) determine the type or types of each Award; (d) determine the terms
and conditions of each Award; (e) waive compliance by a holder of an Award with
any obligations to be performed by such holder under an Award and waive any
terms or conditions of an Award; (f) amend or cancel an existing Award in whole
or in part (and if an award is canceled, grant another Award in its place on
such terms and conditions as the Committee shall specify), except that the
Committee may not, without the consent of the holder of an Award, take any
action under this clause with respect to such Award if such action would
adversely affect the rights of such holder; (g) prescribe the form or forms of
instruments that are required or deemed appropriate under the Plan, including
any written notices and elections required of Participants (as defined below),
and change such forms from time to time; (h) adopt, amend and rescind rules and
regulations for the administration of the Plan; and (i) interpret the Plan and
decide any questions and settle all controversies and disputes that may arise in
connection with the Plan. Such determinations and actions of the Committee, and
all other determinations and actions of the Committee made or taken under
authority granted by any provision of the Plan, will be conclusive and will bind
all parties. Nothing in this paragraph shall be construed as limiting the power
of the Committee to make adjustments under Section 7.3 or Section 8.6.
3. EFFECTIVE DATE AND TERM OF PLAN
The Plan will become effective on the date on which it is approved by
the stockholders of the Company. Awards may be made prior to such stockholder
approval if made subject thereto. No Award may be granted under the Plan after
December 10, 2011, but Awards previously granted may extend beyond that date.
4. SHARES SUBJECT TO THE PLAN
Subject to adjustment as provided in Section 8.6, the aggregate number
of shares of Stock that may be delivered under the Plan will be 600,000. If any
Award requiring exercise by the Participant for delivery of Stock terminates
without having been exercised in full, or if any Award payable in Stock or cash
is satisfied in cash rather than Stock, the number of shares of Stock as to
which such Award was not exercised or for which cash was substituted will be
available for future grants.
Subject to Section 8.6(a), the maximum number of shares of Stock as to
which Options or Stock Appreciation Rights may be granted to any Participant in
any one calendar year is 200,000, which limitation shall be construed and
applied consistently with the rules under Section 162(m) of the Internal Revenue
Code of 1986, as amended (the "Code").
Stock delivered under the Plan may be either authorized but unissued
Stock or previously issued Stock acquired by the Company and held in treasury.
No fractional shares of Stock will be delivered under the Plan.
5. ELIGIBILITY AND PARTICIPATION
Each key employee of the Company or any of its subsidiaries (an
"Employee") and each other person or entity (including without limitation
non-Employee directors of the Company or a subsidiary of the Company) who, in
the opinion of the Committee, is in a position to make a significant
contribution to the success of the Company or its subsidiaries will be eligible
to receive Awards under the Plan (each such Employee, person or entity receiving
an Award, "a Participant"). A "subsidiary" for purposes of the Plan will be a
corporation in which the Company owns, directly or indirectly, stock possessing
50% or more of the total combined voting power of all classes of stock.
6. TYPES OF AWARDS
6.1. OPTIONS
(a) Nature of Options. An Option is an Award giving the recipient
the right on exercise thereof to purchase Stock.
Both "incentive stock options," as defined in Section 422(b) of the
Code (any Option intended to qualify as an incentive stock option being
hereinafter referred to as an "ISO"), and Options that are not ISOs, may be
granted under the Plan. ISOs shall be awarded only to Employees. An Option
awarded under the Plan shall be a non-ISO unless it is expressly designated as
an ISO at time of grant.
(b) Exercise Price. The exercise price of an Option will be
determined by the Committee subject to the following:
2
(1) The exercise price of an ISO or an Option intended to
qualify as performance based compensation under Section 162(m) of the
Code shall not be less than 100% of the fair market value of the Stock
subject to the Option, determined as of the time the Option is granted.
(2) In no case may the exercise price paid for Stock
which is part of an original issue of authorized Stock be less than the
par value per share of the Stock.
(c) Duration of options. The latest date on which an Option may be
exercised will be the tenth anniversary of the day immediately preceding the
date the Option was granted, or such earlier date as may have been specified by
the Committee at the time the Option was granted.
(d) Exercise of Options. An Option will become exercisable at such
time or times, and on such conditions, as the Committee may specify. The
Committee may at any time and from time to time accelerate the time at which all
or any part of the Option may be exercised. Any exercise of an Option must be in
writing, signed by the proper person and delivered or mailed to the Company,
accompanied by (1) any documents required by the Committee and (2) payment in
full in accordance with paragraph (e) below for the number of shares for which
the Option is exercised.
(e) Payment for Stock. Stock purchased on exercise of an Option
must be paid for as follows: (1) in cash or by check (acceptable to the Company
in accordance with guidelines established for this purpose), bank draft or money
order payable to the order of the Company or (2) if so permitted by the
Committee at or after the grant of the Option or by the instrument evidencing
the Option, (i) through the delivery of shares of Stock which have been held for
at least six months (unless the Committee approves a shorter period) and which
have a fair market value equal to the exercise price, (ii) by delivery of an
unconditional and irrevocable undertaking by a broker to deliver promptly to the
Company sufficient funds to pay the exercise price, or (iii) by any combination
of the foregoing permissible forms of payment.
(f) Discretionary Payments. If (i) the market price of shares of
Stock subject to an Option (other than an Option which is in tandem with a Stock
Appreciation Right as described in Section 6.2) exceeds the exercise price of
the Option at the time of its exercise, and (ii) the person exercising the
Option so requests the Committee in writing, the Committee may in its sole
discretion cancel the Option and cause the Company to pay in cash or in shares
of Common Stock (at a price per share equal to the fair market value per share)
to the person exercising the Option an amount equal to the difference between
the fair market value of the Stock which would have been purchased pursuant to
the exercise (determined on the date the Option is canceled) and the aggregate
exercise price which would have been paid.
6.2. STOCK APPRECIATION RIGHTS.
(a) Nature of Stock Appreciation Rights. A Stock Appreciation
Right (or "SAR") is an Award entitling the holder on exercise to receive an
amount in cash or Stock or a combination thereof (such form to be determined by
the Committee) determined in whole or in part by reference to appreciation, from
and after the date of grant, in the fair market value of a share of Stock. SARs
may be based solely on appreciation in the fair market value of Stock or on a
comparison of such appreciation with some other measure of market growth such as
3
(but not limited) to appreciation in a recognized market index. The date as of
which such appreciation or other measure is determined shall be the exercise
date unless another date is specified by the Committee.
(b) Grant of Stock Appreciation Rights. Stock Appreciation Rights
may be granted in tandem with, or independently of, Options granted under the
Plan.
(1) Rules Applicable to Tandem Awards. When Stock
Appreciation Rights are granted in tandem with Options, (a) the Stock
Appreciation Right will be exercisable only at such time or times, and
to the extent, that the related Option is exercisable and will be
exercisable in accordance with the procedure required for exercise of
the related Option; (b) the Stock Appreciation Right will terminate and
no longer be exercisable upon the termination or exercise of the
related Option, except that a Stock Appreciation Right granted with
respect to less than the full number of shares covered by an Option
will not be reduced until the number of shares as to which the related
Option has been exercised or has terminated exceeds the number of
shares not covered by the Stock Appreciation Right; (c) the Option will
terminate and no longer be exercisable upon the exercise of the related
Stock Appreciation Right; and (d) the Stock Appreciation Right will be
transferable only with the related Option.
(2) Exercise of Independent Stock Appreciation Rights. A
Stock Appreciation Right not granted in tandem with an Option will
become exercisable at such time or times, and on such conditions, as
the Committee may specify. The Committee may at any time accelerate the
time at which all or any part of the Right may be exercised.
Any exercise of an independent Stock Appreciation Right must be in
writing, signed by the proper person and delivered or mailed to the Company,
accompanied by any other documents required by the Committee.
6.3. RESTRICTED AND UNRESTRICTED STOCK.
(a) Grant of Restricted Stock. Subject to the terms and provisions
of the Plan, the Committee may grant shares of Stock in such amounts and upon
such terms and conditions as the Committee shall determine subject to the
restrictions described below ("Restricted Stock").
(b) Restricted Stock Agreement. The Committee may require, as a
condition to an Award, that a recipient of a Restricted Stock Award enter into a
Restricted Stock Award Agreement, setting forth the terms and conditions of the
Award. In lieu of a Restricted Stock Award Agreement, the Committee may provide
the terms and conditions of an Award in a notice to the Participant of the
Award, on the stock certificate representing the Restricted Stock, in the
resolution approving the Award, or in such other manner as it deems appropriate.
(c) Transferability and Other Restrictions. Except as otherwise
provided in this Section 6.3, the shares of Restricted Stock granted herein may
not be sold, transferred, pledged, assigned, or otherwise alienated or
hypothecated until the end of the applicable period or periods established by
the Committee and the satisfaction of any other conditions or restrictions
4
established by the Committee (such period during which a share of Restricted
Stock is subject to such restrictions and conditions is referred to as the
"Restricted Period"). Except as the Committee may otherwise determine under
Section 7.1 or Section 7.2, if a Participant dies or suffers a Status Change (as
defined at Section 7.2(a)) for any reason during the Restricted Period, the
Company may purchase the shares of Restricted Stock subject to such restrictions
and conditions for the amount of cash paid by the Participant for such shares;
provided, that if no cash was paid by the Participant such shares of Restricted
Stock shall be automatically forfeited to the Company.
During the Restricted Period with respect to any shares of Restricted
Stock, the Company shall have the right to retain in the Company's possession
the certificate or certificates representing such shares.
(d) Removal of Restrictions. Except as otherwise provided in this
Section 6.3, a share of Restricted Stock covered by a Restricted Stock grant
shall become freely transferable by the Participant upon completion of the
Restricted Period, including the passage of any applicable period of time and
satisfaction of any conditions to vesting. The Committee, in its sole
discretion, shall have the right at any time immediately to waive all or any
part of the restrictions and conditions with regard to all or any part of the
shares held by any Participant.
(e) Voting Rights. Dividends and Other Distributions. During the
Restricted Period, Participants holding shares of Restricted Stock granted
hereunder may exercise full voting rights and shall receive all regular cash
dividends paid with respect to such shares. Except as the Committee shall
otherwise determine, any other cash dividends and other distributions paid to
Participants with respect to shares of Restricted Stock, including any dividends
and distributions paid in shares, shall be subject to the same restrictions and
conditions as the shares of Restricted Stock with respect to which they were
paid.
(f) Other Awards Settled with Restricted Stock. The Committee may,
at the time any Award described in this Section 6 is granted, provide that any
or all the Stock delivered pursuant to the Award will be Restricted Stock.
(g) Unrestricted Stock. Subject to the terms and provisions of the
Plan, the Committee may grant shares of Stock free of restrictions under the
Plan in such amounts and upon such terms and conditions as the Committee shall
determine.
(h) Notice of Section 83(b) Election. Any Participant making an
election under Section 83(b) of the Code with respect to Restricted Stock must
provide a copy thereof to the Company within 10 days of filing such election
with the Internal Revenue Service.
6.4. DEFERRED STOCK.
A Deferred Stock Award entitles the recipient to receive shares of
Stock to be delivered in the future. Delivery of the Stock will take place at
such time or times, and on such conditions, as the Committee may specify. The
Committee may at any time accelerate the time at which delivery of all or any
part of the Stock will take place. At the time any Award described in this
Section 6.4 is granted, the Committee may provide that, at the time Stock would
otherwise be delivered pursuant to the Award, the Participant will instead
5
receive an instrument evidencing the Participant's right to future delivery of
Deferred Stock.
6.5. PERFORMANCE AWARDS; PERFORMANCE GOALS.
(a) Nature of Performance Awards. A Performance Award entitles the
recipient to receive, without payment, an amount in cash or Stock or a
combination thereof (such form to be determined by the Committee) following the
attainment of Performance Goals (as hereinafter defined). Performance Goals may
be related to personal performance, corporate performance, departmental
performance or any other category of performance established by the Committee.
The Committee will determine the Performance Goals, the period or periods during
which performance is to be measured and all other terms and conditions
applicable to the Award.
(b) Other Awards Subject to Performance Condition. The Committee
may, at the time any Award described in this Section 6.5 is granted, impose the
condition (in addition to any conditions specified or authorized in this Section
6 or any other provision of the Plan) that Performance Goals be met prior to the
Participant's realization of any payment or benefit under the Award. Any such
Award made subject to the achievement of Performance Goals (other than an Option
or SAR) shall be treated as a Performance Award for purposes of Section 6.5(c)
below.
(c) Limitations and Special Rules. In the case of any Performance
Award intended to qualify for the performance-based remuneration exception
described in Section 162(m)(4)(C) of the Code and the regulations thereunder (an
"Exempt Award"), the Committee shall in writing pre-establish specific
Performance Goals. A Performance Goal must be established prior to passage of
25% of the period of time over which attainment of such goal is to be measured.
"Performance Goal" means criteria based upon any one or more of the following
(on a consolidated, divisional, subsidiary, line of business or geographical
basis or in combinations thereof): (i) sales; revenues; assets; expenses;
earnings before or after deduction for all or any portion of interest, taxes,
depreciation or amortization, whether or not on a continuing operations or an
aggregate or per share basis; return on equity, investment, capital or assets;
inventory level or turns; one or more operating ratios; borrowing levels,
leverage ratios or credit rating; market share; capital expenditures; cash flow;
stock price; stockholder return; or any combination of the foregoing; or (ii)
acquisitions and divestitures (in whole or in part); joint ventures and
strategic alliances; spin-offs, split-ups and the like; reorganizations;
recapitalizations, restructurings, financings (issuance of debt or equity) and
refinancings; transactions that would constitute a Change of Control; or any
combination of the foregoing. A Performance Goal and targets with respect
thereto determined by the Committee need not be based upon an increase, a
positive or improved result or avoidance of loss. The maximum Exempt Award
payable to any Participant in respect of any such Performance Goal for any year
shall not exceed $2,500,000. Payment of Exempt Awards based upon a Performance
Goal for the year ending December 31, 2008 and thereafter is conditioned upon
reapproval by Employer's shareholders no later than Employer's first meeting of
shareholders in the year ending December 31, 2007.
7. EVENTS AFFECTING OUTSTANDING AWARDS
7.1. DEATH.
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If a Participant dies, the following will apply:
(a) All Options and Stock Appreciation Rights held by the
Participant immediately prior to death, to the extent then exercisable, may be
exercised by the Participant's executor or administrator or the person or
persons to whom the Option or Right is transferred by will or the applicable
laws of descent and distribution, at any time within the one year period ending
with the first anniversary of the Participant's death (or such shorter or longer
period as the Committee may determine), and shall thereupon terminate. In no
event, however, shall an Option or Stock Appreciation Right remain exercisable
beyond the latest date on which it could have been exercised without regard to
this Section 7. Except as otherwise determined by the Committee, all Options and
Stock Appreciation Rights held by a Participant immediately prior to death that
are not then exercisable shall terminate at death.
(b) Except as otherwise determined by the Committee, all
Restricted Stock held by the Participant must be transferred to the Company
(and, in the event the certificates representing such Restricted Stock are held
by the Company, such Restricted Stock will be so transferred without any further
action by the Participant) in accordance with Section 6.3(c).
(c) Any payment or benefit under a Deferred Stock Award or
Performance Award to which the Participant was not irrevocably entitled prior to
death will be forfeited and the Award canceled as of the time of death, except
as otherwise determined the Committee.
7.2. TERMINATION OF SERVICE (OTHER THAN BY DEATH).
If a Participant who is an Employee ceases to be an Employee for any
reason other than death or retirement with consent of the Company after
attainment of age 65, or if there is a termination (other than by reason of
death) of the consulting, service or similar relationship in respect of which a
non-Employee Participant was granted an Award hereunder (such termination of the
employment or other relationship being hereinafter referred to as a "Status
Change"), the following will apply:
(a) Except as otherwise determined by the Committee, all Options
and Stock Appreciation Rights held by the Participant that were not exercisable
immediately prior to the Status Change shall terminate at the time of the Status
Change. Any Options or Rights that were exercisable immediately prior to the
Status Change will continue to be exercisable for a period of three months (or
such longer period as the Committee may determine), and shall thereupon
terminate, unless the Award provides by its terms for immediate termination in
the event of a Status Change (unless otherwise determined by the Committee) or
unless the Status Change results from a discharge for cause which in the opinion
of the Committee casts such discredit on the Participant as to justify immediate
termination of the Award. In no event, however, shall an Option or Stock
Appreciation Right remain exercisable beyond the latest date on which it could
have been exercised without regard to this Section 7. For purposes of this
paragraph, in the case of a Participant who is an Employee, a Status Change
shall not be deemed to have resulted by reason of (i) a sick leave or other bona
fide leave of absence approved for purposes of the Plan by the Committee, so
long as the Employee's right to reemployment is guaranteed either by statute or
by contract, or (ii) a transfer of employment between the Company and a
subsidiary or between subsidiaries, or to the employment of a corporation (or a
parent or subsidiary corporation of such corporation) issuing or assuming an
option in a transaction to which Section 424(a) of the Code applies.
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(b) Except as otherwise determined by the Committee, all
Restricted Stock held by the Participant at the time of the Status Change must
be transferred to the Company (and, in the event the certificates representing
such Restricted Stock are held by the Company, such Restricted Stock will be so
transferred without any further action by the Participant) in accordance with
Section 6.3(c) above.
(c) Any payment or benefit under a Deferred Stock Award or
Performance Award to which the Participant was not irrevocably entitled prior to
the Status Change will be forfeited and the Award cancelled as of the date of
such Status Change unless otherwise determined by the Committee.
7.3. CERTAIN CORPORATE TRANSACTIONS.
Except as otherwise provided by the Committee at the time of grant, in
the event of a consolidation or merger in which the Company is not the surviving
corporation or which results in the acquisition of substantially all the
Company's outstanding Stock by a single person or entity or by a group of
persons and/or entities acting in concert, or in the event of the sale or
transfer of substantially all the Company's assets or a dissolution or
liquidation of the Company (a "covered transaction"), the following rules shall
apply:
(a) Subject to paragraph (b) below, all outstanding Awards
requiring exercise will cease to be exercisable, and all other Awards to the
extent not fully vested (including Awards subject to conditions not yet
satisfied or determined) will be forfeited, as of the effective time of the
covered transaction, provided that the Committee may in its sole discretion (but
subject to Section 7.4), on or prior to the effective date of the covered
transaction, (1) make any outstanding Option and Stock Appreciation Right
exercisable in full, (2) remove the restrictions from any Restricted Stock, (3)
cause the Company to make any payment and provide any benefit under any Deferred
Stock Award or Performance Award and (4) remove any performance or other
conditions or restrictions on any Award; or
(b) With respect to an outstanding Award held by a participant
who, following the covered transaction, will be employed by or otherwise
providing services to an entity which is a surviving or acquiring entity in the
covered transaction or an affiliate of such an entity, the Committee may at or
prior to the effective time of the covered transaction, in its sole discretion
and in lieu of the action described in paragraph (a) above, arrange to have such
surviving or acquiring entity or affiliate assume any Award held by such
participant outstanding hereunder or grant a replacement award which, in the
judgment of the Committee, is substantially equivalent to any Award being
replaced.
7.4. CHANGE OF CONTROL PROVISIONS.
(a) Impact of Event. Notwithstanding any other provision of the
Plan to the contrary, in the event of a Change of Control, and unless otherwise
provided for in any certificate or agreement evidencing an Award:
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(1) Acceleration of Options and SARs. Any Options and
SARs outstanding as of the date such Change of Control is determined to
have occurred and which are not then exercisable shall become
exercisable to the full extent of the original grant, and all shares of
Restricted Stock which are not otherwise vested shall vest. Holders of
Performance Awards granted hereunder as to which the relevant
performance period has not ended as of the date such Change of Control
is determined to have occurred shall be entitled at the time of such
Change of Control to receive a cash payment per Performance Award equal
to the full value of the cash component of such Award (if any) plus the
fair market value of Stock included in such Award.
(2) Restriction on Application of Plan Provisions
Applicable in the Event of Termination of Employment. After a Change of
Control, Options and SARs shall not be terminated as a result of a
termination of employment other than by reason of death, disability (as
determined by the Company) or retirement for seven months following
such termination of employment or until expiration of the original
terms of the Option or SAR, whichever period is shorter.
(3) Restriction on Amendment. In connection with or
following a Change of Control, neither the Committee nor the Board may
impose additional conditions upon exercise or otherwise amend or
restrict an Option, SAR, share of Restricted Stock or Performance
Award, or amend the terms of the Plan in any manner adverse to the
holder thereof, without the written consent of such holder.
(b) Definition of Change of Control. Except as provided in Section
9 herein with respect to compliance with Section 409A of the Code, a "Change of
Control" shall be deemed to have occurred if (i) any corporation, person or
other entity (other than the Company, a majority-owned subsidiary of the
Company, any employee benefit plan maintained by the Company or any of its
subsidiaries or members of the Board on the date the Plan is approved by the
stockholders of the Company), including a "group" as defined in Section 13(d)(3)
of the 1934 Act becomes the beneficial owner of Stock representing more than
twenty-five percent of the voting power of the Company (other than by
consolidation or merger) or (ii) within any 24 consecutive month period, persons
who were members of the Board immediately prior to such 24-month period,
together with any persons who were first elected as directors (other than as a
result of any settlement of a proxy or consent solicitation contest or any
action taken to avoid such a contest) during such 24-month period by or upon the
recommendation of persons who were members of the Board immediately prior to
such 24-month period and who constituted a majority of the Board at the time of
such election, cease to constitute a majority of the Board.
8. GENERAL PROVISIONS
8.1. DOCUMENTATION OF AWARDS.
Awards will be evidenced by such written instruments, if any, as may be
prescribed by the Committee from time to time. Such instruments may be in the
form of agreements to be executed by both the Participant and the Company, or
certificates, letters or similar instruments, which need not be executed by the
Participant but acceptance of which will evidence agreement to the terms
thereof.
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8.2. RIGHTS AS A STOCKHOLDER, DIVIDEND EQUIVALENTS.
Except as specifically provided by the Plan, the receipt of an Award
will not give a Participant rights as a stockholder; the Participant will obtain
such rights, subject to any limitations imposed by the Plan or the instrument
evidencing the Award, only upon the issuance of Stock. However, the Committee
may, on such conditions as it deems appropriate, provide that a Participant will
receive a benefit in lieu of cash dividends that would have been payable on any
or all Stock subject to the Participant's Award had such Stock been outstanding.
Without limitation, the Committee may provide for payment to the Participant of
amounts representing such dividends, either currently or in the future, or for
the investment of such amounts on behalf of the Participant.
8.3. CONDITIONS ON DELIVERY OF STOCK.
The Company will not be obligated to deliver any shares of Stock
pursuant to the Plan or to remove restriction from shares previously delivered
under the Plan (a) until all conditions of the Award have been satisfied or
removed, (b) until, in the opinion of the Company's counsel, all applicable
federal and state laws and regulation have been complied with, (c) if the
outstanding Stock is at the time listed on any stock exchange or The Nasdaq
National Market, until the shares to be delivered have been listed or authorized
to be listed on such exchange or market upon official notice of notice of
issuance, and (d) until all other legal matters in connection with the issuance
and delivery of such shares have been approved by the Company's counsel. If the
sale of Stock has not been registered under the Securities Act of 1933, as
amended, the Company may require, as a condition to exercise of the Award, such
representations or agreements as counsel for the Company may consider
appropriate to avoid violation of such Act and may require that the certificates
evidencing such Stock bear an appropriate legend restricting transfer.
If an Award is exercised by the Participant's legal representative, the
Company will be under no obligation to deliver Stock pursuant to such exercise
until the Company is satisfied as to the authority of such representative.
8.4. TAX WITHHOLDING.
The Company will withhold from any cash payment made pursuant to an
Award an amount sufficient to satisfy all federal, state and local withholding
tax requirements (the "withholding requirements").
In the case of an Award pursuant to which Stock may be delivered, the
Committee will have the right to require that the Participant or other
appropriate person remit to the Company an amount sufficient to satisfy the
withholding requirements, or make other arrangements satisfactory to the
Committee with regard to such requirements, prior to the delivery of any Stock
or removal of restrictions thereon. If and to the extent that such withholding
is required, the Committee may permit the Participant or such other person to
elect at such time and in such manner as the Committee provides to have the
Company hold back from the shares to be delivered, or to deliver to the Company,
Stock having a value calculated to satisfy the withholding requirement. The
Committee may make such share withholding mandatory with respect to any Award at
the time such Award is made to a Participant.
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If at the time an ISO is exercised, the Committee may require as a
condition of exercise that the person exercising the ISO agree to inform the
Company promptly of any disposition (within the meaning of section 424(c) of the
Code) of Stock received upon exercise.
8.5. TRANSFERABILITY OF AWARDS.
Unless otherwise permitted by the Committee, no Award (other than an
Award in the form of an outright transfer of cash or Unrestricted Stock) may be
transferred other than by will or by the laws of descent and distribution.
8.6. ADJUSTMENTS IN THE EVENT OF CERTAIN TRANSACTIONS.
(a) In the event of a stock dividend, stock split or combination
of shares, recapitalization or other change in the Company's capitalization, or
other distribution to holders of Stock other than normal cash dividends, after
the effective date of the Plan, the Committee will make any appropriate
adjustments to the maximum number of shares that may be delivered under the Plan
under the first paragraph of Section 4 above and to the limits described in the
second paragraph of Section 4 and in Section 6.5(c).
(b) In any event referred to in paragraph (a), the Committee will
also make any appropriate adjustments to the number and kind of shares of Stock
or securities subject to Awards then outstanding or subsequently granted, any
exercise prices relating to Awards and any other provision of Awards affected by
such change. The Committee may also make such adjustments to take into account
material changes in law or in accounting practices or principles, mergers,
consolidations, acquisitions, dispositions or similar corporate transactions, or
any other event, if it is determined by the Committee that adjustments are
appropriate to avoid distortion in the operation of the Plan; provided, that
adjustments pursuant to this sentence shall not be made to the extent it would
cause any Award intended to be exempt under Section 162(m)(4)(c) of the Code to
fail to be so exempt.
(c) The adjustments described in (a) and (b) will be made only to
the extent consistent with continued qualification of the Option under Section
422 of the Code (in the case of an ISO), Section 162(m) and Section 409A of the
Code.
8.7. EMPLOYMENT RIGHTS, ETC.
Neither the adoption of the Plan nor the grant of Awards will confer
upon any person any right to continued retention by the Company or any
subsidiary as an Employee or otherwise, or affect in any way the right of the
Company or subsidiary to terminate an employment, service or similar
relationship at any time. Except as specifically provided by the Committee in
any particular case, the loss of existing or potential profit in Awards granted
under the Plan will not constitute an element of damages in the event of
termination of an employment, service or similar relationship even if the
termination is in violation of an obligation of the Company to the Participant.
8.8. DEFERRAL OF PAYMENTS.
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The Committee may agree at any time, upon request of the Participant,
to defer the date on which any payment under an Award will be made.
8.9. PAST SERVICES AS CONSIDERATION.
Where a Participant purchases Stock under an Award for a price equal to
the par value of the Stock the Committee may determine that such price has been
satisfied by past services rendered by the Participant.
9. EFFECT, AMENDMENT AND TERMINATION; COMPLIANCE WITH SECTION 409A OF THE
CODE.
Neither adoption of the Plan nor the grant of Awards to a Participant
will affect the Company's right to grant to such Participant awards that are not
subject to the Plan, to issue to such Participant Stock as a bonus or otherwise,
or to adopt other plans or arrangements under which Stock may be issued to
Employees.
The Committee may at any time or times amend the Plan or any
outstanding Award for any purpose which may at the time be permitted by law, or
may at any time terminate the Plan as to any further grants of Awards, provided
that (except to the extent expressly required or permitted by the Plan) no such
amendment will, without the approval of the stockholders of the Company,
effectuate a change for which stockholder approval is required in order for the
Plan to continue to qualify for the award of ISOs under Section 422 of the Code
or for the award of performance based compensation under Section 162(m) of the
Code.
It is the intention of the Board that the Plan comply strictly with the
provisions of Section 409A of the Code and Treasury Regulations and other
Internal Revenue Service guidance promulgated thereunder (the "Section 409A
Rules) and the Committee shall exercise its discretion in granting Awards
hereunder (and the terms of such Awards), accordingly. The Plan and any grant of
an Award hereunder may be amended from time to time (without, in the case of an
Award, the consent of the Participant) as may be necessary or appropriate to
comply with the Section 409A Rules.