INCOMNET, INC.
EMPLOYEE STOCK PURCHASE PLAN
SECTION 1
PURPOSE
This Incomnet, Inc. Employee Stock Purchase Plan (the "Plan") is designed
to encourage and assist employees of Incomnet, Inc. (the "Company") and any
Participating Subsidiary, as defined in Section 4, to acquire an equity interest
in the Company through the purchase of shares of Company common stock (the
"Common Stock").
SECTION 2
ADMINISTRATION
The Plan shall be administered by the Board of Directors of the Company
(or a committee thereof designated by the Board of Directors, which in either
case is referred to as the "Board"). The Board may from time to time select a
committee or persons (the "Administrator") to be responsible for any matters in
implementing the Plan. If no such committee or persons are selected, the Board
shall be the Administrator. Subject to the express provisions of the Plan, to
the overall supervision of the Board, and to the limitations of Section 423 of
the Internal Revenue Code of 1986, as amended (the "Code"), the Administrator
may administer and interpret the Plan in any manner it believes to be desirable,
and any such interpretation shall be conclusive and binding on the Company and
all persons.
SECTION 3
NUMBER OF SHARES
(a) The total number of shares of Common Stock reserved and available for
issuance pursuant to this Plan shall be 1,000,000. Such shares may consist, in
whole or in part, of authorized and unissued shares or treasury shares
reacquired in private transactions or open market purchases, but all shares
issued under this Plan and the Foreign Plan shall be counted against the
1,000,000 share limitation.
(b) In the event of any reorganization, recapitalization, stock split,
reverse stock split, stock dividend, combination of shares, offering of rights,
or other similar change in the capital structure of the Company, the Board may
make such adjustment, if any, as it deems appropriate in the number, kind, and
purchase price of the shares available for purchase under the Plan and in the
maximum number of shares subject to any option under the Plan.
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SECTION 4
ELIGIBILITY REQUIREMENTS
(a) Each employee of the Company and each Participating Subsidiary, except
those described in the next paragraph, shall become eligible to participate in
the Plan in accordance with Section 5 on the first Enrollment Date on or
following commencement of his or her employment by the Company or the
Participating Subsidiary or following such period of employment as is designated
by the Board from time to time. Participation in the Plan is entirely voluntary.
(b) The following employees are not eligible to participate in the Plan:
(i) employees who would, immediately upon enrollment in the Plan,
own directly or indirectly (including options or rights to acquire stock
possessing) five percent or more of the total combined voting power or value of
all classes of stock of the Company or any subsidiary of the Company; and
(ii) employees who are customarily employed by the Company less than
20 hours per week or less than five months in any calendar year.
(c) "Employee" shall mean any individual who is an employee of the Company
or a Participating Subsidiary. Whether an individual qualifies as an Employee
shall be determined by the Administrator, in its sole discretion. The
Administrator shall be guided by the provisions of Treasury Regulation Section
1.421-7 and Section 3401(c) of the Code and the Treasury Regulations thereunder,
with the intent that the Plan cover all "employees" within the meaning of those
provisions other than those who are not eligible to participate in the Plan.
Unless the Administrator makes a contrary determination, the Employees of the
Company shall, for all purposes of this Plan, be those individuals who are
carried as employees of the Company or a Participating Subsidiary for regular
payroll purposes. Any inquiries regarding eligibility to participate in the Plan
shall be directed to the Administrator, whose decision will be final.
(d) "Subsidiary" shall mean any corporation described in Section 424(e) or
(f) of the Code. "Participating Subsidiary" shall mean a subsidiary which has
been designated by the Administrator as covered by the Plan.
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SECTION 5
ENROLLMENT
Any eligible employee may enroll or re-enroll in the Plan each year as of
the first trading day of (i) July 1999, (ii) the third month following such
month, and (iii) each yearly anniversary of such months (e.g. any January,
April, July and October), or such other days as may be established by the Board
from time to time (the "Enrollment Dates"). In order to enroll, an eligible
employee must complete, sign, and submit to the Company an enrollment form. Any
enrollment form received by the designee of the Administrator by the 15th day of
the month preceding an Enrollment Date (or by the day preceding the Enrollment
Date in the case of employees hired after such 15th day), or such other date
established by the Administrator from time to time, will be effective on that
Enrollment Date. For purposes of the Plan, a "trading day" is any day on which
regular trading occurs on any established stock exchange or market system on
which the Common Stock is traded.
SECTION 6
GRANT OF OPTION ON ENROLLMENT
(a) Enrollment or re-enrollment by a participant in the Plan on an
Enrollment Date will constitute the grant by the Company to the participant of
an option to purchase shares of Common Stock from the Company under the Plan.
Any participant whose option expires and who has not withdrawn from the Plan
will automatically be re-enrolled in the Plan and granted a new option on the
Enrollment Date immediately following the date on which the option expires.
Furthermore, except as may otherwise be determined by the Administrator, each
Participant who has not withdrawn from the Plan will automatically be
re-enrolled in the Plan and granted a new option on any Enrollment Date on which
the fair market value per share of the Company's Common Stock is lower than the
fair market value per share on the Enrollment Date for such Participant's
existing option.
(b) Except as provided in Section 9, each option granted under the Plan
shall have the following terms:
(i) each option granted under the Plan will have a term of not more
than 24 months or such shorter option period as may be established by the Board
from time to time; notwithstanding the foregoing, however, (x) whether or not
all shares have been purchased thereunder, the option will expire on the earlier
to occur of (A) the completion of the purchase of shares on the last Purchase
Date occurring within 24 months after the Enrollment Date for such option, or
such shorter option period as may be established by the Board before an
Enrollment Date for all options to be granted on such date, or (B) the date on
which the
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employee's participation in the Plan terminates for any reason and (y) options
granted under the Plan shall have a term of three months unless extended by the
Board, effective on the Enrollment Date following such extension;
(ii) payment for shares purchased under the option will be made only
through payroll withholding in accordance with Section 7;
(iii) purchase of shares upon exercise of the option will be
effected only on the Purchase Dates established in accordance with Section 8;
(iv) the price per share under the option will be determined as
provided in Section 8;
(v) the number of shares available for purchase under an option
will, unless otherwise established by the Board before an Enrollment Date for
all options to be granted on such date, be determined by dividing $25,000 by the
fair market value of a share of Common Stock on the Enrollment Date and by
multiplying the result by the number of calendar years included in whole or in
part in the period from grant to expiration of the option;
(vi) the option (taken together with all other options then
outstanding under this and all other similar stock purchase plans of the Company
and any subsidiary of the Company, collectively "Options") will in no event give
the participant the right to purchase shares at a rate per calendar year which
accrues in excess of $25,000 of fair market value of such shares, determined at
the applicable Enrollment Date; and
(vii) the option will in all respects be subject to the terms and
conditions of the Plan, as interpreted by the Administrator from time to time.
SECTION 7
PAYROLL AND TAX WITHHOLDING; USE BY COMPANY
(a) Each participant shall elect to have amounts withheld from his or her
compensation paid by the Company during the option period, at a rate equal to
any whole percentage up to 15 percent, or such other maximum percentage as the
Board may establish from time to time before an Enrollment Date. Compensation
includes regular salary payments, commissions, overtime pay and any other
compensation as may be determined from time to time by the Board of Directors,
but excludes all other payments including, without limitation, long-term
disability or workers compensation payments, car allowances, employee referral
bonuses, relocation payments, expense reimbursements (including but not limited
to travel, entertainment, and moving expenses), salary gross-up payments, and
non-cash recognition awards. The participant shall designate a rate of
withholding in his or her enrollment form and may elect to increase or decrease
the rate of contribution effective as of any Enrollment Date, by delivery to the
Company, not later than the
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15th day of the month preceding such Enrollment Date, of a written notice
indicating the revised withholding rate.
(b) Payroll withholdings shall be credited to an account maintained for
purposes of the Plan on behalf of each participant, as soon as administratively
feasible after the withholding occurs. The Company shall be entitled to use the
withholdings for any corporate purpose, shall have no obligation to pay interest
on withholdings to any participant, and shall not be obligated to segregate
withholdings.
(c) Upon disposition of shares acquired by exercise of an option, the
participant shall pay, or make provision adequate to the Company for payment of,
all federal, state, and other tax (and similar) withholdings that the Company
determines, in its discretion, are required due to the disposition, including
any such withholding that the Company determines in its discretion is necessary
to allow the Company to claim tax deductions or other benefits in connection
with the disposition. A participant shall make such similar provisions for
payment that the Company determines, in its discretion, are required due to the
exercise of an option, including such provisions as are necessary to allow the
Company to claim tax deductions or other benefits in connection with the
exercise of the option.
SECTION 8
PURCHASE OF SHARES
(a) On the last trading day of each month immediately preceding a month
containing an Enrollment Date, or on such other days as may be established by
the Board from time to time, prior to an Enrollment Date for all options to be
granted on an Enrollment Date (each a "Purchase Date"), the Company shall apply
the funds then credited to each participant's payroll withholdings account to
the purchase of whole shares of Common Stock. The cost to the participant for
the shares purchased under any option shall be not less than 85 percent of the
lower of:
(i) the fair market value of the Common Stock on the Enrollment
Date for such option; or
(ii) the fair market value of the Common Stock on that Purchase
Date. The "fair market value" of the Common Stock on a date shall be (a) if the
Common Stock is listed on any established stock exchange, the Nasdaq National
Market System or the Nasdaq SmallCap Market System, the closing sales price for
the Stock or the average of the bid and asked prices if no sales were reported,
as quoted on such system or exchange, as reported in the Wall Street Journal or
similar publication; or (b) in the absence of an established market for the
Common Stock, the fair market value of the Common Stock as determined by the
Board in
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good faith, or the fair market value on such date as determined by the
Administrator if shares of Common Stock are not so traded, quoted or reported.
(b) Any funds in an amount less than the cost of one share of Common Stock
left in a participant's payroll withholdings account on a Purchase Date shall be
carried forward in such account for application on the next Purchase Date, and
any additional amount shall be distributed to the participant.
(c) If at any Purchase Date, the shares available under the Plan are less
than the number all participants would otherwise be entitled to purchase on such
date, purchases shall be reduced proportionately to eliminate the deficit. Any
funds that cannot be applied to the purchase of shares due to such a reduction
shall be refunded to participants as soon as administratively feasible.
SECTION 9
WITHDRAWAL FROM THE PLAN
A participant may withdraw from the Plan in full (but not in part) at any
time, effective after written notice thereof is received by the Company. All
funds credited to a participant's payroll withholdings account shall be
distributed to him or her without interest within 60 days after notice of
withdrawal is received by the Company. Any eligible employee who has withdrawn
from the Plan may enroll in the Plan again on any subsequent Enrollment Date in
accordance with the provisions of Section 5.
SECTION 10
TERMINATION OF EMPLOYMENT
Participation in the Plan terminates immediately when a participant ceases
to be employed by the Company for any reason whatsoever (including death or
disability) or otherwise becomes ineligible to participate in the Plan. As soon
as administratively feasible after termination, the Company shall pay to the
participant or his or her beneficiary or legal representative, all amounts
credited to the participant's payroll withholdings account; provided, however,
that if a participant ceases to be employed by the Company because of the
commencement of employment with a Subsidiary of the Company that is not a
Participating Subsidiary, funds then credited to such participant's payroll
withholdings account shall be applied to the purchase of whole shares of Common
Stock at the next Purchase Date, and any funds remaining after such purchase
shall be paid to the participant.
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SECTION 11
DESIGNATION OF BENEFICIARY
(a) Each participant may designate one or more beneficiaries in the event
of death and may, in his or her sole discretion, change such designation at any
time. Any such designation shall be effective upon receipt in written form by
the Company and shall control over any disposition by will or otherwise.
(b) As soon as administratively feasible after the death of a participant,
amounts credited to his or her account shall be paid in cash to the designated
beneficiaries or, in the absence of a designation, to the executor,
administrator, or other legal representative of the participant's estate. Such
payment shall relieve the Company of further liability with respect to the Plan
on account of the deceased participant. If more than one beneficiary is
designated, each beneficiary shall receive an equal portion of the account
unless the participant has given express contrary written instructions.
SECTION 12
ASSIGNMENT
(a) The rights of a participant under the Plan shall not be assignable by
such participant, by operation of law or otherwise. No participant may create a
lien on any funds, securities, rights, or other property held by the Company for
the account of the participant under the Plan, except to the extent that there
has been a designation of beneficiaries in accordance with the Plan, and except
to the extent permitted by the laws of descent and distribution if beneficiaries
have not been designated.
(b) A participant's right to purchase shares under the Plan shall be
exercisable only during the participant's lifetime and only by him or her,
except that a participant may direct the Company in the enrollment form to issue
share certificates to the participant and his or her spouse in community
property, to the participant jointly with one or more other persons with right
of survivorship, or to certain forms of trusts approved by the Administrator.
SECTION 13
ADMINISTRATIVE ASSISTANCE
If the Administrator in its discretion so elects, it may retain a
brokerage firm, bank, or other financial institution to assist in the purchase
of shares, delivery of reports, or other administrative aspects of the Plan. If
the Administrator so elects, each participant shall be deemed upon enrollment in
the Plan to have authorized the establishment of an account on his or her behalf
at such institution. Shares purchased by a participant under the Plan shall be
held in the account in the
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name in which the share certificate would otherwise be issued pursuant to
Section 12(b).
SECTION 14
COSTS
All costs and expenses incurred in administering the Plan shall be paid by
the Company, except that any stamp duties or transfer taxes applicable to
participation in the Plan may be charged to the account of such participant by
the Company. Any brokerage fees for the purchase of shares by a participant
shall be paid by the Company, but brokerage fees for the resale of shares by a
participant shall be borne by the participant.
SECTION 15
EQUAL RIGHTS AND PRIVILEGES
All eligible employees shall have equal rights and privileges with respect
to the Plan so that the Plan qualifies as an "employee stock purchase plan"
within the meaning of Section 423 of the Code and the related Treasury
Regulations. Any provision of the Plan which is inconsistent with Section 423 of
the Code shall without further act or amendment by the Company or the Board be
reformed to comply with the requirements of Section 423. This Section 15 shall
take precedence over all other provisions of the Plan.
SECTION 16
APPLICABLE LAW
The Plan shall be governed by the substantive laws (excluding the conflict
of laws rules) of the State of California.
SECTION 17
MODIFICATION AND TERMINATION
(a) The Board may amend, alter, or terminate the Plan at any time,
including amendments to outstanding options. No amendment shall be effective
unless within 12 months after it is adopted by the Board, it is approved by the
holders of a majority of the votes cast at a duly held shareholders' meeting at
which a quorum of the voting power of the Company is represented in person or by
proxy, if such amendment would:
(i) increase the number of shares reserved for purchase under the
Plan; or
(ii) require shareholder approval in order to comply with Rule 16b-3
under the Securities Exchange Act of 1934, as amended.
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(b) In the event the Plan is terminated, the Board may elect to terminate
all outstanding options either immediately or upon completion of the purchase of
shares on the next Purchase Date, or may elect to permit options to expire in
accordance with their terms (and participation to continue through such
expiration dates). If the options are terminated prior to expiration, all funds
contributed to the Plan that have not been used to purchase shares shall be
returned to the participants as soon as administratively feasible.
(c) In the event of the sale of all or substantially all of the assets of
the Company, or the merger or consolidation of the Company with or into another
corporation, or the dissolution or liquidation of the Company, the Board shall
provide for the assumption or substitution of each option under the Plan by the
successor or surviving corporation, or a parent or subsidiary thereof, unless
the Board decides to take such other action as it deems appropriate, including,
without limitation, providing for the termination of the Plan and providing for
a Purchase Date to occur on the trading day immediately preceding the date of
such termination.
SECTION 18
RIGHTS AS AN EMPLOYEE
Nothing in the Plan shall be construed to give any person the right to
remain in the employ of the Company or to affect the Company's right to
terminate the employment of any person at any time with or without cause.
SECTION 19
RIGHTS AS A SHAREHOLDER; DELIVERY OF CERTIFICATES
Unless otherwise determined by the Board, certificates evidencing shares
purchased on any Purchase Date shall be delivered to participants as soon as
administratively feasible. Participants shall be treated as the owners of their
shares effective as of the Purchase Date. If approved by the Administrator in
its discretion, the Company instead of delivery of share certificates (i)
deliver a certificate (or equivalent) to a broker for crediting to the
Participant's account, or (ii) make a notation in the Participant's favor of
non-certificated shares on the Company's stock records.
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SECTION 20
SIX-MONTH NONTRANSFERABILITY OF SHARES
Unless otherwise determined by the Board, shares purchased under the Plan
shall be nontransferable except by operation of law or bequest for a period of
six months from the date of issue. Any certificate delivered to a Participant
shall be so legended. Such legended certificate may be exchanged for an
unlegended certificate after the expiration of such six-month period.
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