STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT (the "Agreement"), dated as of March 10, 2000, by
and between Netgateway, Inc., a Delaware corporation ("Parent") and John J.
Poelman ("Stockholder").
WITNESSETH:
WHEREAS, concurrently with the execution and delivery of this Agreement,
Parent, Galaxy Acquisition Corp., a Delaware corporation ("Sub"), and Galaxy
Enterprises, Inc., a Nevada corporation (the "Company") are entering into an
Agreement and Plan of Merger, dated as of the date hereof (the "Merger
Agreement"), which provides that, among other things, upon the terms and subject
to the conditions thereof, Sub will be merged with and into the Company (the
"Merger"), with the Company continuing as the surviving corporation; and
WHEREAS, as of the date hereof, Stockholder is the record and beneficial
owner of 980,213 shares of the Company Common Stock owned beneficially and of
record by Stockholder as of the date hereof ("Stockholder's Shares") of the
common stock, $0.07 par value, of the Company (the "Company Common Stock"); and
WHEREAS, as a condition and inducement to Parent's willingness to enter
into the Merger Agreement, Parent has required that Stockholder agree, and
Stockholder has so agreed, to grant to Parent an option with respect to the
Stockholder's Shares on the terms and subject to the conditions set forth
herein.
NOW, THEREFORE, to induce Parent and Sub to enter into the Merger Agreement
and in consideration of the representations, warranties, covenants and
agreements set forth herein and in the Merger Agreement, the parties hereto
intending to be legally bound, hereby agree as follows. Capitalized terms used
herein but not defined herein shall have the meanings set forth in the Merger
Agreement.
1. GRANT OF OPTION. Stockholder hereby grants Parent an irrevocable option
(the "Option") to purchase the Stockholder's Shares on the terms and subject to
the conditions set forth below.
2. EXERCISE OF OPTION.
(a) Exercise. At any time or from time to time prior to the termination of
the Option granted hereunder in accordance with the terms of this Agreement,
Parent (or a wholly-owned subsidiary of Parent designated by Parent) may
exercise the Option, in whole or in part, if on or after the date hereof, the
events described in Section 11.02(b) of the Merger Agreement that would require
the Company to pay Parent the Termination Fee set forth therein shall have
occurred.
The event described in the preceding sentence shall be referred to herein
as a "Trigger Event." Stockholder shall notify Parent promptly in writing of the
occurrence of any Trigger Event; however, such notice shall not be a condition
to the right of Parent to exercise the Option.
(b) Exercise Procedure. In the event Parent wishes to exercise the Option,
Parent shall deliver to Stockholder and Company a written notice (an "Exercise
Notice") specifying the total number of the Stockholder's Shares it wishes to
purchase. To the extent permitted by law and the Articles of Incorporation of
the Company and provided that the conditions set forth in Section 4 hereof to
Stockholder's obligation to deliver the Stockholder's Shares to Parent hereunder
have been satisfied or waived, Parent shall, upon delivery of the Exercise
Notice and tender of the applicable aggregate Exercise Price, immediately be
deemed to be the holder of record of the Stockholder's Shares, transferable upon
such exercise, notwithstanding that the stock transfer books of the Company
shall then be closed or that certificates representing such shares of the
Company Common Stock shall not heretofore have been delivered to Parent. Each
closing of a purchase of the Stockholder's Shares (a "Closing") shall occur at a
place, on a date and at a time designated by Parent in an Exercise Notice
delivered at least two business days prior to the date of the Closing.
(c) Termination of the Option. The Option shall terminate upon the earlier
of: (i) the Effective Time of the Merger; or (ii) thirty (30) days following the
termination of the Merger Agreement pursuant to Section 11.01 thereof.
Notwithstanding the foregoing, if the Option cannot be exercised by reason of
any applicable judgment, decree, order, law or regulation, the Option shall
remain exercisable and shall not terminate until the earlier of (x) the date on
which such impediment shall become final and not subject to appeal, and (y) 5:00
p.m. Pacific Standard Time, on the tenth (10th) business day after such
impediment shall have been removed. Notwithstanding the termination of the
Option, Parent shall been entitled to purchase the Stockholder's Shares with
respect to which Parent had exercised the Option prior to such termination.
(d) Exercise Price. The purchase price per share of the Stockholder's
Shares (the "Exercise Price") shall be equal to the product of (i) the Exchange
Ratio and (ii) the average closing price of one share of Parent Common Stock for
the twenty (20) most recent days that Parent Common Stock has traded ending on
the trading day ending one day prior to the date hereof.
3. CONDITIONS TO CLOSING. The obligation of Stockholder to deliver the
Stockholder's Shares to Parent hereunder is subject to the conditions that (i)
all consents, approvals, orders or authorizations of, or registrations,
declarations or filings with, any federal, state or local administrative agency
or commission or other federal state or local governmental authority or
instrumentality, if any, required in connection with the delivery of the
Stockholder's Shares and the acquisition of such shares by Parent hereunder
shall have been obtained or made, as the case may be; and (ii) no preliminary or
permanent injunction or other order by any court of competent jurisdiction
prohibiting or otherwise restraining such issuance shall be in effect.
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4. CLOSING. At any Closing,
(a) Stockholder shall cause to be delivered to Parent a single certificate
in definitive form representing the number of Stockholder's Shares designated by
Parent in its Exercise Notice, such certificate to be registered in the name of
Parent and to bear the legend set forth in Section 11 hereof;
(b) Parent shall deliver to Stockholder the aggregate price for the
Stockholder's Shares so designated and being purchased by wire transfer of
immediately available funds to the account or accounts specified in writing by
Stockholder; and
(c) at any Closing at which Parent is exercising the Option in part, Parent
shall present and surrender this Agreement to Stockholder, and Stockholder shall
deliver to Parent an executed new agreement with the same terms as this
Agreement evincing the right to purchase the balance of the Stockholder's Shares
purchasable hereunder.
5. REPRESENTATIONS AND WARRANTIES OF STOCKHOLDER. Stockholder represents
and warrants to Parent that:
(a) Ownership of Shares. Stockholder is the sole record and Beneficial
Owner of the Stockholder's Shares. On the date hereof, the Stockholder's Shares
constitute all of the shares of the Company Common Stock owned of record or
Beneficially Owned by Stockholder. Except for the Pledge Agreement (as defined
below), there are no outstanding options or other rights to acquire from
Stockholder or obligations of Stockholder to sell or to acquire, any shares of
the Company Common Stock. Stockholder has sole voting power and sole power to
issue instructions with respect to the matters set forth herein (subject to
Pledge Agreements dated January 7, 2000 and February 4, 2000 in favor of Parent
("Pledge Agreement")), sole power of disposition, sole power of conversion, sole
power to demand appraisal rights and sole power to agree to all of the matters
set forth in this Agreement, in each case with respect to all of the
Stockholder's Shares with no limitations, qualifications or restrictions on such
rights, subject to applicable securities laws and the terms of this Agreement.
(b) Power; Binding Agreement. Stockholder has the legal capacity, power and
authority to enter into and perform all of Stockholder's obligations under this
Agreement. This Agreement has been duly and validly executed and delivered by
Stockholder and constitutes a valid and binding agreement of Stockholder,
enforceable against Stockholder in accordance with its terms except that (i)
such enforcement may be subject to applicable bankruptcy, insolvency or other
similar laws, now or hereafter in effect, affecting creditors' rights generally,
and (ii) the remedy of specific performance and injunctive and other forms of
equitable relief maybe subject to equitable defenses and to the discretion of
the court before which any proceeding therefor may be brought.
(c) No Conflicts. Except as contemplated by the Merger Agreement, no filing
with, and no permit, authorization, consent or approval of, any Governmental or
Regulatory Authority is necessary for the execution of this Agreement by
Stockholder and the consummation by Stockholder of the transactions contemplated
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hereby, none of the execution and delivery of this Agreement by Stockholder, the
consummation by Stockholder of the transactions contemplated hereby or
compliance by Stockholder with any of the provisions hereof shall (i) conflict
with or result in any breach of any organizational documents applicable to
Stockholder, (ii) result in a violation or breach of, or constitute (with or
without notice or lapse of time or both) a default (or give rise to any third
party right of termination, cancellation, material modification or acceleration)
under any of the terms, conditions or provisions of any note, loan agreement,
bond, mortgage, indenture, license, contract, commitment, arrangement,
understanding, agreement or other instrument or obligation of any kind to which
Stockholder is a party or by which Stockholder or any of its properties or
assets may be bound, or (iii) violate any order, writ, injunction, decree,
judgment, order, statute, rule or regulation applicable to Stockholder or any of
Stockholder's properties or assets, except in the case of clauses (ii) and (iii)
where the failure to obtain such permits, authorizations, consents or approvals
or to make such filings, or where such violations, breaches or defaults would
not, individually or in the aggregate, materially impair the ability of
Stockholder or the Company to consummate the transactions contemplated by the
Merger Agreement, this Agreement or the other agreements executed in connection
therewith.
(d) No Encumbrance. Except as permitted by this Agreement, the
Stockholder's Shares are now and, at all times during the term hereof, will be,
held by Stockholder, or by a nominee or custodian for the benefit of
Stockholder, free and clear of any Liens, except for the Pledge Agreement and
any Liens arising hereunder. Upon delivery of the Stockholder's Shares to Parent
upon the exercise of the Option, Parent will acquire the Stockholder's Shares
free and clear of all claims, liens, charges, encumbrances and security
interests of any nature whatsoever;
(e) No Finder's Fees. No broker, investment banker, financial advisor or
other person is entitled to any broker's, finder's, financial adviser's or other
similar fee or commission in connection with the transactions contemplated
hereby based upon arrangements made by or on behalf of Stockholder.
(f) Reliance by Parent. Stockholder understands and acknowledges that
Parent is entering into, and causing Sub to enter into, the Merger Agreement in
reliance upon Stockholder's execution and delivery of this Agreement.
6. REPRESENTATIONS AND WARRANTIES OF PARENT. Parent represents and warrants
to the Company that:
(a) Parent is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware and has the corporate power and
authority to enter into this Agreement and to carry out its obligations
hereunder;
(b) the execution and delivery of this Agreement by Parent and the
consummation by Parent of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of Parent and no other
corporate proceedings on the part of Parent are necessary to authorize this
Agreement or any of the transactions contemplated hereby;
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(c) this Agreement has been duly executed and delivered by Parent and
constitutes a valid and binding obligation of Parent, and, assuming this
Agreement constitutes a valid and binding obligation of the Company, is
enforceable against Parent in accordance with its terms, except as
enforceability may be limited by bankruptcy and other laws affecting the rights
and remedies of creditors generally and general principles of equity;
(d) the execution and delivery of this Agreement by Parent does not, and
the performance of this Agreement by Parent will not, result in any Violation
pursuant to, (A) any provision of the Certificate of Incorporation or By-laws of
Parent, (B) any provisions of any mortgage, indenture, lease, contract or other
agreement, instrument, permit, concession, franchise, or license or (C) any
judgment, order, decree, statute, law, ordinance, rule or regulation applicable
to Parent or its properties or assets, which Violation, in the case of each of
clauses (B)and (C), would have a material adverse effect on Parent;
(e) except as may be required under the Securities Act, the execution and
delivery of this Agreement by Parent does not, and the performance of this
Agreement by Parent will not, require any consent, approval, authorization or
permit of, or filing with or notification to, any governmental or regulatory
authority;
(f) any shares of the Company Common Stock acquired by Parent upon exercise
of the Option will be acquired for Parent's own account, for investment purposes
only and will not be, and the Option is not being, acquired by Parent with a
view to the public distribution thereof, in violation of any applicable
provision of the Securities Act.
7. ADJUSTMENT UPON CHANGES IN CAPITALIZATION. In the event of any change in
the Company Common Stock by reason of stock dividends, splitups, mergers (other
than the Merger), recapitalizations, combinations, exchange of shares or the
like, the type and number of shares or securities subject to the Option, and the
purchase price per share provided in Section 2(d) hereof, shall be adjusted
appropriately so that Parent shall receive, upon exercise of the Option, the
number and class of shares or other securities or property that Parent would
have received in respect of the Company Common Stock if the Option had been
exercised immediately prior to such event or the record date therefor, as
applicable.
8. RESTRICTIVE LEGENDS. Stockholder will promptly after the date hereof
surrender to the Company all certificates representing the Securities, the
Company will place the following legend on such certificates in addition to any
other legend required thereof:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
RESTRICTIONS ON TRANSFER PURSUANT TO AND OTHER PROVISIONS OF A STOCK
OPTION AGREEMENT, DATED AS OF MARCH 8, 2000, BY AND AMONG NETGATEWAY,
INC., AND JOHN J. POELMAN."
9. BINDING EFFECT; NO ASSIGNMENT. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
permitted assigns. Except as expressly provided for in this Agreement, neither
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this Agreement nor the rights or the obligations of either party hereto are
assignable, except by operation of law, or with the written consent of the other
party. Nothing contained in this Agreement, express or implied, is intended to
confer upon any person other than the parties hereto and their respective
permitted assigns any rights or remedies of any nature whatsoever by reason of
this Agreement.
10. SPECIFIC PERFORMANCE. The parties recognize and agree that if for any
reason any of the provisions of this Agreement are not performed in accordance
with their specific terms or are otherwise breached, immediate and irreparable
harm or injury would be caused for which money damages would not be an adequate
remedy. Accordingly, each party agrees that, in addition to other remedies, the
other party shall be entitled to an injunction restraining any violation or
threatened violation of the provisions of this Agreement. In the event that any
action should be brought in equity to enforce the provisions of this Agreement,
neither party will allege, and each party hereby waives the defense, that there
is adequate remedy at law.
11. ENTIRE AGREEMENT. This Agreement, the Merger Agreement, and the other
Ancillary Agreements constitute the entire agreement among the parties with
respect to the subject matter hereof and supersede all other prior agreements
and understandings, both written and oral, among the parties or any of them with
respect to the subject matter hereof.
12. FURTHER ASSURANCE. Each party will execute and deliver all such further
documents and instruments and take all such further action as may be necessary
in order to consummate the transactions contemplated hereby.
13. VALIDITY. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of the other
provisions of this Agreement, which shall remain in full force and effect. In
the event any court or other competent authority holds any provision of this
Agreement to be null, void or unenforceable, the parties hereto shall negotiate
in good faith the execution and delivery of an amendment to this Agreement in
order, as nearly as possible, to effectuate, to the extent permitted by law, the
intent of the parties hereto with respect to such provision. Each party agrees
that, should any court or other competent authority hold any provision of this
Agreement or part hereof to be null, void or unenforceable, or order any party
to take any action inconsistent herewith, or not take any action required
herein, the other party shall not be entitled to specific performance of such
provision or part hereof or to any other remedy, including but not limited to
money damages, for breach hereof or of any other provision of this Agreement or
part hereof as the result of such holding or order.
14. NOTICES. Any notice or communication required or permitted hereunder
shall be in writing and either delivered personally, telegraphed or telecopied
or sent by certified or registered mail, postage prepaid, and shall be deemed to
be given, dated and received when so delivered personally, telegraphed or
telecopied or, if mailed, five business days after the date of mailing to the
following address or facsimile number, or to such other address or addresses as
such person may subsequently designate by notice given hereunder.
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(a) if to Parent, to:
Netgateway, Inc.
300 Oceangate, 5th Floor
Long Beach, CA 90802
Attn: Craig Gatarz, Esq.
Fax: (562) 308-0021
with a copy to:
Nida & Maloney, LLP
800 Anacapa Street
Santa Barbara, California 93101
Attention: C. Thomas Hopkins, Esq.
Facsimile No.: (805) 568-1955
(b) if to Stockholder, to:
John J. Poelman
c/o Galaxy Enterprises, Inc
754 East Technology Avenue
Orem, Utah 84907
Facsimile: (801) 228-9762
with a copy to:
Parsons Behle & Latimer, P.C.
One Utah Center
201 South Main Street, Suite 1800
P.O. Box 45898
Salt Lake City, UT 84145-0898
Attn: Brent Christensen, Esq.
Fax: (801) 536-6111
15. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of California, without giving effect to
the principles of conflicts of law thereof.
16. DESCRIPTIVE HEADINGS. The descriptive headings herein are inserted for
convenience of reference only and are not intended to be part of or to affect
the meaning or interpretation of this Agreement.
17. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which,
taken together, shall constitute one and the same instrument.
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18. EXPENSES. Except as otherwise expressly provided herein or in the
Merger Agreement, all costs and expenses incurred in connection with the
transactions contemplated by this Agreement shall be paid by the party incurring
such expenses.
19. AMENDMENTS; WAIVER. This Agreement may be amended by the parties hereto
and the terms and conditions hereof may be waived only by an instrument in
writing signed on behalf of each of the parties hereto, or, in the case of a
waiver, by an instrument signed on behalf of the party waiving compliance.
20. FIDUCIARY DUTIES. Nothing contained in this Agreement shall be deemed
to apply to or limit or restrict in any manner, the obligations of Stockholder
under or with respect to the exercise or discharge of his fiduciary duties as an
officer and director of the Company. The parties hereto agree that this Section
20 shall not in any way limit or impair the benefits provided to Parent pursuant
to this Agreement.
[signature page follows]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective duly authorized officers as of the date first above
written.
NETGATEWAY, INC.,
a Delaware corporation
By:___________________________________
Name:
Title:
______________________________________
JOHN J. POELMAN,
in his individual capacity