Fill and Sign the Phoenix Network Inc Business Merger Registration S 4 Secreport Form

SALE OR PURCHASE OF CAPITAL STOCK§4.101 December 19974-104E APPENDIX I 1994 EQUITY INCENTIVE PLAN 1. PURPOSE The purpose of this 1994 Equity Incentive Plan (the "Plan") is to advance the interests of El ectronic Associates, Inc. (the "Company") and its subsidiaries by enhancing the ability of the Com pany to (i) attract and retain employees and other persons or entities who are in a position t o make significant contributions to the success of the Company and its subsidiaries; (ii) reward such persons or entiti es for such contributions; and (iii) encourage such persons or entities to take into account the long-term interest of the Company through ownership of shares ("Shares") of the Company's common stock ("Stock"). The Plan is intended to accomplish these goals by enabling the Company to grant awards ("Awards") in the form of Options, Stock Appreciation Rights, Restricted Stock or Deferred Stock, all as more fully described below. 2. ADMINISTRATION The Plan will be administered by the Compensation Committee (the "Committ ee") of the Board of Directors of the Company (the "Board"). The Committee will determine the recipie nts of Awards, the times at which Awards will be made and the size and type or types of Awards to be made to each recipient and will set forth in such Awards the terms, conditions and limitati ons applicable to it. Awards may be made singly, in combination or in tandem. The Committee will have full and exclusive power to interpret the Plan, to adopt rules. regulations and guidelines relating to the Plan, to grant waivers of Plan restrictions and to make all of the determinations necessary for this administrati on. In its discretion, the Board of Directors may elect to administer all or any aspects of the Plan and to perform any of the duties or exercise any of the rights delegated or granted to the Committee under the terms of the Plan; provided, however, that the Board may not make such election if the election would result in the failure of the Plan to comply with Rule 16b-3 promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), at a time at which the Plan would otherwise be in compliance wi th such rule. Such determinations and actions of the Committee (or the Board as the case may be ), and all other determinations and actions of the Committee (or the Board as the case may be) made or taken under authority granted by any provision of the Plan, will be conclusive and binding on all parties· Nothing in this paragraph shall be construed as limiting the power of the Committee to make adjustments under Section 11 or to amend or terminate the Plan under Section 16. 3. EFFECTIVE DATE AND TERM OF PLAN Subject to the approval of the Plan by the Company's shareholders, the Plan will be deeme d effective on May 17, 1994. Grants of Awards under the Plan may be made prior to the receipt of shareholder approval, subject to such approval of the Plan. The Plan will terminate ten (10) years after the effective date of the Pla n, subject to earlier termination of the Plan by the Board pursuant to Section 16. No Award may be granted under the Plan after the termination date of the Plan, but Awards previously granted may extend beyond that date. 4. SHARES SUBJECT TO THE PLAN Subject to adjustment as provided in Section 11 below, the maximum aggregate number of Shares of Stock that may be delivered for all purposes under the Plan shall be three million (3,000,000). If any Award requiring exercise by the Participant for delivery of Stock is canceled or term inates without having been exercised in full, or if any Award payable in Stock or cash is sat isfied in cash rather than Stock, the number of Shares of Stock as to which such Award was not exercised or for which c ash was substituted will be available for future grants of Stock except that Stock subject to an Option §4.101 PROXY STATEMENTS: STRATEGY & FORMS 4-104F© 1997 Jefren Publishing Company, Inc. canceled upon the exercise of an SAR shall not again be available for Awards under the Plan unless, and to the extent that, the SAR is settled in cash. Likewise, if any Award payable in Stock or cash is satisfied in Stock rather than cash, the amount of cash for which such Stock was substituted will be available for future Awards of cash compensation. Shares of Stock tendered by a Participant or withheld by the Company to pay the exercise price of an Option or to satisfy the tax withholding obligati ons of the exercise or vesting of an Award shall be available again for Awards under the Plan, but only to Participants who are not subject to Section 16 of the Exchange Act. Shares of Restricte d Stock forfeited to the Company in accordance with the Plan and the terms of the particular Award sha ll be available again for Awards under the Plan unless the Participant has received the benefits of ownership (withi n the applicable interpretation under Rule 16b-3 under the Exchange Act), in which case such Sha res may only be available for Awards to Participants who are not subject to Section 16 of the Exchange Act. 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 del ivered under the Plan and the Committee shall determine the manner in which fractiona l share value will be treated. 5. ELIGIBILITY AND PARTICIPATION Those eligible to receive Awards under the Plan ("Participants") will be persons in the em ploy of the Company or any of its subsidiaries ("Employees") and other persons or entities who, in t he opinion of the Committee, are in a position to make a significant contribution to the succ ess of the Company or its subsidiaries, including non-employee directors of the Company or a subsidiary of the Company and consultants to the Company or a subsidiary of the Company. 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. OPTIONS a.Nature of Options. An Option is an Award entitling the Participant to purchase a specified number of Shares at a specified exercise price. Both "incentive stock opt ions," as defined in Section 422 of the Internal Revenue Code of 1986, as amended (the "Code") (referred to herein as an "ISO") and non-incentive stock options may be granted under the Plan. ISOs may be awarde d only to Employees. b.Exercise Price. The exercise price of each Option shall be determined by the Committee, but in the case of an ISO shall not be less than 100% (l10% in the case of an ISO grante d to a ten (10%) percent shareholder) of the Fair Market Value of a Share at the time the ISO is grant ed. For purposes of this Plan, "Fair Market Value" shall have the same meaning as it does in the provisions of the Code and the regulations thereunder applicable to ISOs. For purposes of this Plan, "ten- percent shareholder" shall mean any Employee who at the time of grant owns directly, or is deemed to own by reason of the attribution rules set forth in Section 424(d) of the Code, Stock posse ssing more than ten (10%) percent of the total combined voting power of all classes of stoc k of the Company or any of its subsidiaries. c.Duration of Options. In no case shall an Option be exercisable more than ten (10) years (five (5) years, in the case of an ISO granted to a "ten-percent shareholder" as defined in (b) above) from the date the Option was granted. d.Exercise of Options and Conditions. Options granted under any single Award will become exercisable at such time or times, and on and subject to such conditions, as the Committee may specify; provided, however, that no Option will become exercisable until the expirat ion date of such Option if subsequent to the effectiveness of the Plan, the Sale Price (as defined below) of the Company's common stock does not equal or exceed $6.00 per share for ten (10) consecutive trading days. For purposes of this Plan, the Sale Price of the Company's common stock shall be the ave rage SALE OR PURCHASE OF CAPITAL STOCK§4.101 December 19974-104G of the high and low sale prices or, in case no such sale takes place on such day, the average of the high bid and low asked prices, in either case as reported in the principal consolidate d transaction reporting system with respect to securities listed or admitted to trading on the New York Stock Exchange or, if the common stock is not then listed or admitted to trading on the New York Stock Exchange, as reported in the principal consolidated transaction reporting system with respect to securities listed on the principal national securities exchange on which the comm on stock is listed or admitted to trading or, if the common stock is not listed or admitted to tradi ng on any national securities exchange, the average of the high bid and low asked prices in the over-the-counte r market, as reported by the National Association of Securities Dealers, Inc. Automated Quotations System ("NASDAQ") or such other system then in use, or, if on any such date the common stock is not quoted by any such organization, the average of the high bid and low asked prices as furnished by a professional market maker making a market in the common stock selected by t he Board of Directors. In addition, options will not be exercisable unless the shares subject thereto have been approved for listing on the New York Stock Exchange or such other exchange or quotation system on which the common stock is then listed or quoted. Subject to the conditions described above with respect to the Sale Price and listing of the common stock, the Committee m ay at any time and from time to time accelerate the time at which all or any part of the Option may be exercised. e. Payment for and Delivery of Stock. Full payment for Shares purchased will be made at the time of the exercise of the Option, in whole or in part. Payment of the purchase pric e will be made in cash or in such other form of consideration as the Committee may approve, incl uding, without limitation, delivery of Shares of Stock, 7. STOCK APPRECIATION RIGHTS a.Nature of Stock Appreciation Rights. A Stock Appreciation Right (an "SAR") is an Award entitling the recipient to receive payment, in cash and/or Stock, determine d in whole or in part by reference to appreciation in the value of a Share. In general, an SAR entitl es the recipient to receive, with respect to each Share as to which the SAR is exercised, the exce ss of the Fair Market Value of a Share on the date of exercise over the Fair Market Value of a Share on the date the SAR was granted. However, the Committee may provide at the time of grant that the a mount the recipient is entitled to receive will be adjusted upward or downward under rules establi shed by the Committee to take into account the performance of the Shares in comparison with t he performance of other stocks or an index or indices of other stocks. b.Grant of SARs. SARs may be granted in tandem with, or independently of, Options granted under the Plan. An SAR granted in tandem with an Option which is not an ISO may be granted either at or after the time the Option is granted. An SAR granted in ta ndem with an ISO may be granted only at the time the Option is granted. c.Exercise of SARs. An SAR not granted in tandem with an Option will become exercisable at such time or times, and on such conditions, as the Committee may specify. An SAR granted in tandem with an Option will be exercisable only at such times, and to the extent, that the related Option is exercisable. An SAR granted in tandem with an ISO may be exercised only whe n the market price of the Shares subject to the Option exceeds the exercise pride of such Opti on. The Committee may at any time and from time to time accelerate t he time at which all or part of the SAR may be exercised. 8. RESTRICTED STOCK A Restricted Stock Award entitles the recipient to acquire Shares, subject to c ertain restrictions or conditions, for no cash consideration, if permitted by applicable law, or for such other considera tion as determined by the Committee. The Award may be subject to such restrictions, conditi ons and forfeiture provisions as the Committee may determine, including, but not limited to, restric tions on transfer; §4.101 PROXY STATEMENTS: STRATEGY & FORMS 4-104H© 1997 Jefren Publishing Company, Inc. continuous service with the Company or any of its subsidiaries; achievement of business objec tives, and individual, unit and Company performance. Subject to such restrictions, conditions and forfeiture provisions as may be established by the Committee, any Participant receiving an Award will have all the rights of a shareholder of the Company with respect to Shares of Restricted Stock, including t he fight to vote the Shares and the right to receive any dividends thereon. 9. DEFERRED STOCK A Deferred Stock Award entitles the recipient to receive Shares to be delivered in the future. Delivery of the Shares will take place at such time or times, and on such condi tions, as the Committee may specify. The Committee may at any time accelerate the time at which delivery of all or any part of the Shares will take place. At the time any Deferred Stock Award is granted, the Committee may provide that the Participant will receive an instrument evidencing the Participant 's right to future delivery of Deferred Stock. 10. TRANSFERS No Award (other than an Award in the form Of an outright transfer of cash or Stock) may be assigned, pledged or transferred other than by will or by the laws of descent and distribution and duri ng a Participant's lifetime will be exercisable only by the Participant or, in the e vent of a Participant's incapacity, his or her guardian or legal representative. 11. ADJUSTMENTS a. In the event of a stock dividend, stock split or combination of Shares, recapitaliza tion or other change in the Company's capitalization, or other distribution to holders of the Compa ny's common 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 de livered under the Plan and to any Participant under Section 4 above. b. In any event referred to in paragraph (a), the Committee will also make any appropria te 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, including the requirement that the Sale Price of the common stock equal or exceed the threshold described in Section 6(d). The Committee may al so make such adjustments to take into account material changes in law or in accounting prac tices or principles, mergers, consolidations, acquisitions, dispositions or similar corporate transactions, or any other event, if it is determined by the Committee that adjustments are appropria te to avoid distortion in the operation of the Plan. 12. RIGHTS AS A SHAREHOLDER Except as specifically provided by the Plan, the receipt of an Award will not give a Participant rights as a shareholder; the Participant will obtain such rights, subject to any lim itations imposed by the Plan or the instrument evidencing the Award, upon actual receipt of Shares. However, the Commi ttee may, on such conditions as it deems appropriate, provide that a Participant will rec eive a benefit in lieu of cash dividends that would have been payable on any or all Shares subject to the Participa nt's Award had such Shares been outstanding. 13. CONDITIONS ON DELIVERY OF STOCK The Company will not be obligated to deliver any Shares pursuant to the Plan or to rem ove any restrictions or legends from Shares previously delivered under the Plan until, (a) in the opinion of the Company's counsel, all applicable federal and state laws and regulations have been complied with, (b) if the outstanding Shares are at the time listed on any stock exchange, until the Sha res to be delivered have SALE OR PURCHASE OF CAPITAL STOCK§4.101 December 1997 4-104I been listed or authorized to be listed on such exchange upon official notice of notice of issuance, and (c) until all other legal matters in connection with the issuance and delivery of suc h Shares have been approved by the Company's counsel. If the sale of Shares has not been registered under the Securitie s Act of 1933, as amended, the Company may require, as a condition to exercise of the Award, such representations and agreements as counsel for the Company may consider appropriate to avoid violation of such Act and may require that the certificates evidencing such Shares bear an appropri ate legend restricting transfer. If an Award is exercised by the Participant's legal representative , the Company will be under no obligation to deliver Shares pursuant to such exercise until the Company is satisfi ed as to the authority of such representative. 14. TAX WITHHOLDING The Company will have the fight to deduct from any cash payment under the Plan taxes that are required to be withheld and further to condition the obligation to deliver or vest Shares unde r this Plan upon the Participant's paying the Company such amount as it may request to satisfy any l iability for applicable withholding taxes. The Committee may in its discretion permit Part icipants to satisfy all or part of their withholding liability by delivery of Shares with a Fair Market Value equal t o such liability or by having the Company withhold from Stock delivered upon exercise of an Award, Shares whose Fair Market Value is equal to such liability. 15. MERGERS; ETC. In the event of any merger or consolidation involving the Company, any sale of substantially all of the Company's assets or any other transaction or series of related transactions as a result of which a single person or several persons acting in concert own a majority of the Company's then outstanding Stoc k (such merger, consolidation, sale or other transaction being hereinafter referred to as a "Transac tion"), all outstanding Options and SARs shall become immediately exercisable and each outstandi ng share of Restricted Stock and each outstanding Deferred Stock Award shall immediately become free of all restrictions and conditions. Upon consummation of the Transaction, all outstanding Options and SARs shall terminate and cease to be exercisable. There shall be excluded from the foregoing any Transaction as a result of which (a) the holders of Stock prior to the Transaction retain or acquire securities constituting a majority of the outstanding voting common stock of the acquiring or surviving c orporation or other entity and (b) no single person owns more than half of the outstanding voting common stock of the acquiring or surviving corporation or other entity. For purposes of this Section, voting common stock of the acquiring or surviving corporation or other entity that is issuable upon conversion of convert ible securities or upon exercise of warrants or options shall be considered outstanding, and all securiti es that vote in the election of directors (other than solely as the result of a default in the making of any dividend or other payment) shall be deemed to constitute that number of shares of voting common stock which is equivalent to the number of such votes that may be cast by the holders of such securities. In lieu of the foregoing, if there is an acquiring or surviving corporation or entity, the Comm ittee may by vote of a majority of the members of the Committee who are Continuing Direct ors (as defined below), arrange to have such acquiring or surviving corporation or entity or an Affiliate (as de fined below) thereof grant to Participants holding outstanding Awards replacement Awards which, in the ca se of ISOs, satisfy, in the determination of the Committee, the requirements of Section 425(e ) of the Code. The term "Continuing Director" shall mean any director of the Company who (i) is not an Acquiring Person or an Affiliate of an Acquiring Person and (ii) either was (A) a member of the Board of Directors of the Company on the effective date of the Plan or (B) nominated for his or her initi al term of office by a majority of the Continuing Directors in office at the time of such nomination. The t erm "Acquiring Person" shall mean, with respect to any Transaction, each Person who is a party to or a pa rticipant in such Transaction or who, as a result of such Transaction, would (together with other Persons acting in concert) own a majority of the Company's outstanding Common Stock: provided, however, that none of the Company, any wholly-owned subsidiary of the Company. any employee benefit plan of the Company or §4.101 PROXY STATEMENTS: STRATEGY & FORMS 4-104J© 1997 Jefren Publishing Company, Inc. any trustee in respect thereof acting in such capacity shall. for purposes of this Section, be deemed an "Acquiring Person." The term "Affiliate", with respect to any Person, shall mean any other Person who is, or would be deemed to be an "affiliate" or an "associate" of such Person within the respec tive meanings ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under the Sec urities Exchange Act of 1934, as amended. The term "Person" shall mean a corporation, association, partnership, joi nt venture, trust, organization, business, individual or government or any governmental agency or political subdivision thereof. 16. AMENDMENTS AND TERMINATION The Committee will have the authority to make such amendments to any term s and conditions applicable to outstanding Awards as are consistent with this Plan provided that, except for adjustments under Section 11 hereof, no such action will modify such Award in a manner adverse to the Participant without the Participant's consent except as such modification is provided for or contempla ted in the terms of the Award. The Board may amend, suspend or terminate the Plan without shareholder approval. SALE OR PURCHASE OF CAPITAL STOCK§4.101 December 19974-104K 17. NO GUARANTEE OF EMPLOYMENT The grant of an Award under this Plan shall not constitute an assurance of continued employment for any period. 18. MISCELLANEOUS This Plan shall be governed by and construed in accordance with the laws of the State of New Jersey. Electronic Associates, Inc. 6/7/94 [THE NEXT PAGE IS 4-105]