Exhibit 10.6
NETGATEWAY, INC.
1998 STOCK COMPENSATION PROGRAM
1. Purpose. This 1998 Stock Compensation Program (the "Program") is
intended to secure for NetGateway, Inc.(the "Company"). its subsidiaries, and
its stockholders the benefits arising from ownership of the Company's common
stock (the "Common Stock") by those selected individuals of the Company and its
subsidiaries, who will be responsible for the future growth of such
corporations. The Program is designed to help attract and retain superior
personnel for positions of substantial responsibility with the Company and its
subsidiaries, and to provide individuals with an additional incentive to
contribute to the success of the corporations. Nothing contained herein shall be
construed to amend or terminate any existing options, whether pursuant to any
existing plans or otherwise granted by the Company.
2. Elements of the Program. In order to maintain flexibility in the award
of stock benefits, the Program is composed of seven parts. The first part is the
Incentive Stock Option Plan (the "Incentive Plan") under which are granted
incentive stock options (the "Incentive Options"). The second part is the
Non-Qualified Stock Option Plan (the "Nonqualified Plan") under which are
granted nonqualified stock options (the "Nonqualified Options"). The third part
is the Restricted Share Plan (the "Restricted Plan") under which are granted
restricted shares of Common Stock. The fourth part is the Employee Stock
Purchase Plan (the "Stock Purchase Plan"). The fifth part is the Non-Employee
Director Stock Option Plan (the "Directors Plan") under which grants of options
to purchase shares of Common Stock may be made to non-employee directors of the
Company. The sixth part is the Stock Appreciation Rights Plan (the "SAR Plan")
under which SARs (as defined therein) are granted. The seventh part is the Other
Stock Rights Plan (the "Stock Rights Plan") under which (i) units representing
the equivalent of shares of Common Stock (the "Performance Shares") are granted;
(ii) payments of compensation in the form of shares of Common Stock (the "Stock
Payments") are granted; and (iii) rights to receive cash or shares of Common
Stock based on the value of dividends paid with respect to a share of Common
Stock (the "Dividend Equivalent Rights") are granted. The Incentive Plan, the
Nonqualified Plan, the Restricted Plan, the Stock Purchase Plan, the Directors
Plan, the SAR Plan and the Stock Rights Plan are included herein as Part I, Part
II, Part III, Part IV, Part V, Part VI and Part VII, respectively, and are
collectively referred to herein as the "Plans." The grant of an option, SAR or
restricted share or rights to purchase shares under one of the Plans shall not
be construed to prohibit the grant of an option, SAR or restricted share or
rights to purchase shares under any of the other Plans.
3. Applicability of General Provisions. Unless any Plan specifically
indicates to the contrary, all Plans shall be subject to the General Provisions
of the NETGATEWAY, Inc. 1998 Stock Compensation Program set forth below.
4. Administration of the Plans. The Plans shall be administered,
construed. governed, and amended in accordance with their respective terms.
GENERAL PROVISIONS OF STOCK COMPENSATION PROGRAM
Article I. Administration. The Program shall be administered by the
Company's Board of Directors (the "Board"). If an award is to be made to an
"Executive Officer" as defined in the Exchange Act (as hereinafter defined), it
must be approved if the Company has a class of equity securities registered
under Section 12 or 15(d) of the Exchange Act, by the Board or by a committee of
the Board, that is composed solely of two or more directors who are
"Non-Employee Directors" within the meaning of Rule 16b-3 promulgated pursuant
to the Securities Exchange Act of 1934, as amended (the "Exchange Act"). The
members of the Board, such committee of the Board or such other persons
appointed to administer the Program, when acting to administer the Program, are
herein collectively referred to as the "Program Administrators." To the extent
permitted under the Exchange Act, the Internal Revenue Code of 1986, as amended
(the "Code") or any other applicable law, the Program Administrators, shall have
the authority to delegate any and all power and authority to administer and
operate the Program hereunder to such person or persons as the Program
Administrators deems appropriate which if formed may be referred to by such
title specified by the Board. Subject to the foregoing limitations, as
applicable, the Board may from time to time remove members from the committee,
fill all vacancies on the committee, however caused, and may select one of the
members of the committee as its Chairman.
The Program Administrators shall hold meetings at such times and
places as they may determine and as necessary to approve all grants and other
transactions under the Program as required under Rule 16b-3(d) of the Exchange
Act, shall keep minutes of their meetings, and shall adopt, amend, and revoke
such rules and procedures as they may deem proper with respect to the Program.
Any action of the Program Administrators shall be taken by majority vote or the
unanimous written consent of the Program Administrators.
Article 2. Authority of Program Administrators. Subject to the other
provisions of this Program, and with a view to effecting its purpose, the
Program Administrators shall have sole authority, in their absolute discretion,
(a) to construe and interpret the Program; (b) to define the terms used herein;
(c) to determine the individuals to whom options and restricted shares and
rights to purchase shares shall be granted under the Program; (d) to determine
the time or times at which options and restricted shares or rights to purchase
shares shall be granted under the Program; (e) to determine the number of shares
subject to each option, restricted share and purchase right, the duration of
each option granted under the Program, and the price of any share purchase; (f)
to determine all of the other terms and conditions of options and restricted
shares and purchase rights granted under the Program; and (g) to make all other
determinations necessary or advisable for the administration of the Program and
to do everything necessary or appropriate to administer the Program; provided,
however, that the Board shall establish the price for all shares issued
hereunder. All decisions, determinations, and interpretations made by the
Program Administrators shall be binding and conclusive on all participants in
the Program (the "Plan Participants") and on their legal representatives, heirs
and beneficiaries.
Article 3. Maximum Number of Shares Subject to the Program. The
maximum aggregate number of shares of Common Stock subject to the Plans shall be
1,000,000 shares. The shares of Common Stock to be issued upon exercise of an
option, to the extent exercised for shares of Common Stock, issued as restricted
shares or issued upon stock purchases may be authorized but unissued shares,
shares issued and reacquired by the Company or shares purchased by the Company
on the open market. If any of the options granted under the Program expire or
terminate for any reason before they have been exercised in full, the
unpurchased shares subject to those expired or terminated options shall cease to
reduce the number of shares available for purposes of the Program. If the
conditions associated with the grant of restricted shares are not achieved
within the period specified for satisfaction of the applicable conditions, or if
the restricted share grant terminates for any reason before the date on which
the conditions must be satisfied, the shares of Common Stock associated with
such restricted shares shall cease to reduce the number of shares available for
purposes of the Program.
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The proceeds received by the Company from the sale of its Common
Stock pursuant to the exercise of options, transfer of restricted shares or
issuance of stock purchased under the Program, if in the form of cash, shall be
added to the Company's general funds and used for general corporate purposes.
Article 4. Eligibility and Participation. Officers, employees,
directors (whether employee directors or non-employee directors), and
independent contractors or agents of the Company or its subsidiaries who are
responsible for or contribute to the management, growth or profitability of the
business of the Company or its subsidiaries shall be eligible for selection by
the Program Administrators to participate in the Program. However, Incentive
Options may be granted under the Incentive Plan only to a person who is an
employee of the Company or its subsidiaries. An employee may be granted
Nonqualified Options under the Program; provided, however, that the grant of
Nonqualified Options and Incentive Options to an employee shall be the grant of
separate options and each Nonqualified Option and each Incentive Option shall be
specifically designated as such in accordance with applicable provisions of the
Treasury Regulations.
The term "subsidiary" as used herein means any company, other than
the Company, in an unbroken chain of companies, beginning with the Company if,
at the time of any grant hereunder, each of the companies, other than the last
company in the unbroken chain, owns stock possessing more than 50% of the total
combined voting power of all classes of stock in one of the other companies in
such chain.
Article 5. Effective Date and Term of Program. The Restricted Plan,
the Nonqualified Plan, the SAR Plan, the Stock Rights Plan and the Directors
Plan shall become effective upon their adoption by the Board of Directors of the
Company. The Incentive Plan and the Stock Purchase Plan shall become effective
upon their adoption by the Board of Directors of the Company subject to approval
of the Program by a majority of the voting shares of the Company voting in
person or by proxy at a meeting of stockholders, in either case following
adoption of the Program by the Board of Directors, which vote shall be taken or
consent granted within 12 months of adoption of the Program by the Company's
Board of Directors. The Program shall continue in effect for a term of 10 years
unless sooner terminated under Article 7 of these General Provisions.
Article 6. Adjustments. If the outstanding shares of Common Stock
are increased, decreased, changed into, or exchanged for a different number or
kind of shares or securities through merger, consolidation, combination,
exchange of shares, other reorganization, recapitalization, reclassification,
stock dividend, stock split or reverse stock split, an appropriate and
proportionate adjustment shall be made in the maximum number and kind of shares
as to which options and restricted shares may be granted under this Program. A
corresponding adjustment changing the number and kind of shares allocated to
unexercised options, restricted shares, or portions thereof, which shall have
been granted prior to any such change, shall likewise be made. Any such
adjustment in outstanding options shall be made without change in the aggregate
purchase price applicable to the unexercised portion of the option, but with a
corresponding adjustment in the price for each share or other unit of and
security covered by the option.
Article 7. Termination and Amendment of Program. The Program shall
terminate 10 years from the date the Program is adopted by the Board of
Directors, or, if applicable, the date a particular Plan is approved by the
stockholders, whichever is earlier, or shall terminate at such earlier time as
the Board of Directors may so determine. No options or restricted shares shall
be granted and no stock shall be sold and purchased under the Program after that
date. Subject to the limitation contained in Article 8 of these General
Provisions, the Program Administrators may at any time amend or revise the terms
of the Program, including the form and substance of the option, restricted share
and stock purchase agreements to be used hereunder; provided, however, that
without approval by the stockholders
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of the Company representing a majority of the voting power (as contained in
Article 5 of these General Provisions) no amendment or revision shall (a)
increase the maximum aggregate number of shares that may be sold or distributed
pursuant to options granted or stock sold and purchased under Part 1 or Part IV,
except as permitted under Article 6 of these General Provisions; (b) change the
minimum purchase price for shares under Section 4 of Part I or the Purchase
Price for shares under Part IV; (c) increase the maximum term established under
Parts I or IV for any option or restricted share; (d) permit the granting of an
option, or right to purchase shares under Parts I or IV to anyone other than as
provided in Article 4 of the General Provisions; (e) change the term of Parts I
or IV described in Article 5 of these General Provisions; or (f) materially
increase the benefits accruing to Plan Participants under Parts I or IV of the
Program.
Article 8. Prior Rights and Obligations. No amendment, suspension,
or termination of the Program shall, without the consent of the individual who
has received an option or restricted share or who has purchased a specified
share or shares under Part IV, alter or impair any of that person's rights or
obligations under any option or restricted share granted or shares sold and
purchased under the Program prior to that amendment, suspension, or termination.
Article 9. Privileges of Stock Ownership. Notwithstanding the
exercise of any option granted pursuant to the terms of this Program, the
achievement of any conditions specified in any restricted share granted pursuant
to the terms of this Program or the election to purchase any shares pursuant to
the terms of this Program, no individual shall have any of the rights or
privileges of a stockholder of the Company in respect of any shares of stock
issuable upon the exercise of his or her option, the satisfaction of his or her
restricted share conditions or the sale, purchase and issuance of such purchased
shares until certificates representing the shares have been issued and
delivered. No shares shall be required to be issued and delivered upon exercise
of any option, satisfaction of any conditions with respect to a restricted share
or a purchaser under Part IV unless and until all of the requirements of law and
of all regulatory agencies having jurisdiction over the issuance and delivery of
the securities shall have been fully complied with.
Article 10. Reservation of Shares of Common Stock. The Company,
during the term of this Program, will at all times reserve and keep available
such number of shares of its Common Stock as shall be sufficient to satisfy the
requirements of the Program. In addition, the Company will from time to time, as
is necessary to accomplish the purposes of this Program, seek or obtain from any
regulatory agency having jurisdiction any requisite authority in order to issue
and sell shares of Common Stock hereunder. The inability of the Company to
obtain from any regulatory agency having jurisdiction the authority deemed by
the Company's counsel to be necessary to the lawful issuance and sale of any
shares of its stock hereunder shall relieve the Company of any liability in
respect of the nonissuance or sale of the stock as to which the requisite
authority shall not have been obtained.
Article 11. Tax Withholding. The exercise of any option or
restricted share granted or the sale and issuance of any shares to be purchased
under this Program are subject to the condition that if at any time the Company
shall determine, in its discretion, that the satisfaction of withholding tax or
other withholding liabilities under any state or federal law is necessary or
desirable as a condition of, or in connection with, such exercise or the
delivery or purchase of shares pursuant thereto, then in such event, the
exercise of the option or restricted share or the sale and issuance of any
shares to be purchased shall not be effective unless such withholding shall have
been effected or obtained in a manner acceptable to the Company. At the
Company's sole and complete discretion, the Company may, from time to time,
accept shares of the Company's stock subject to one of the Plans as the source
of payment for such liabilities.
Article 12. Compliance with Law. It is the express intent of the
Company that this Program complies in all respect with all applicable provisions
of state and federal law, including without limitation Section 25102(o) of the
California Corporations Code to the extent such Section is applicable
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to the Company. It is the express intent of the Company that when the Company
becomes publicly-traded that this Program shall comply in all respects with
applicable provisions of the Rule 16b-3 or Rule 16a-1(c)(3) under the Exchange
Act in connection with any grant of awards to, or other transaction by, a Plan
Participant who is subject to Section 16 of the Exchange Act (except for
transactions exempted under alternative Exchange Act Rules). Accordingly, if any
provision of the Program or any agreement relating to any award thereunder does
not comply with Rule 16b-3 or Rule 16a-1(c)(3) as then applicable to any such
transaction, such provision will be construed or deemed amended to the extent
necessary to conform to the applicable requirements of Rule 16b-3 or Rule
16a-1(c)(3) so that such Plan Participant shall avoid liability under Section
16(b). Unless otherwise provided in any grant or aware to any person who is or
may thereafter be subject to Section 16 of the Exchange Act the approval of
shall include the approval of the disposition of the Company of Company equity
securities for the purposes of satisfying the payment of the exercise or
purchase price or tax withholding obligations related to such grant or award
within the meaning of Section 16b-3(e).
Article 13. Performance-Based Awards.
(a) Each agreement for the grant of Performance Shares
shall specify the number of Performance Shares subject to such agreement, the
Performance Period and the Performance Objective (each as defined below), and
each agreement for the grant of any other award that the Program Administrators
determine to make subject to a Performance Objective similarly shall specify the
applicable number of shares of Common Stock, the period for measuring
performance and the Performance Objective. As used herein, "Performance
Objective" means a performance objective specified in the agreement for a
Performance Share, or for any other award which the Program Administrators
determine to make subject to a Performance Objective, upon which the vesting or
settlement of such award is conditioned and "Performance Period" means the
period of time specified in an agreement over which Performance Shares, or
another award which the Program Administrators determine to make subject to a
Performance Objective, are to be earned. Each agreement for a performance-based
grant shall specify in respect of a Performance Objective the minimum level of
performance below which no payment will be made, shall describe the method for
determining the amount of any payment to be made if performance is at or above
the minimum acceptable level, but falls short of full achievement of the
Performance Objective, and shall specify the maximum percentage payout under the
agreement. Such maximum percentage in no event shall exceed one hundred percent
(100%) in the case of performance-based restricted shares and two hundred
percent (200%) in the case of Performance Shares or performance-based Dividend
Equivalent Rights.
(b) The Program Administrators shall determine and
specify, in their discretion, the Performance Objective in the agreement for a
Performance Share or for any other performance-based award, which Performance
Objective shall consist of: (i) one or more business criteria, including (except
as limited under subparagraph (c) below for awards to Covered Employees (as
defined below)) financial, service level and individual performance criteria:
and (ii) a targeted level or levels of performance with respect to such
criteria. Performance Objectives may differ between Plan Participants and
between types of awards from year to year.
(c) The Performance Objective for Performance Shares and
any other performance-based award granted to a Covered Employee, if deemed
appropriate by the Program Administrators, shall be objective and shall
otherwise meet the requirements of Section 162(m)(4)(C) of the Code, and shall
be based upon one or more of the following performance-based business criteria,
either on a business unit or Company-specific basis or in comparison with peer
group performance: net sales; gross sales; return on net assets; return on
assets; return on equity; return on capital: return on revenues; cash flow; book
value; share price performance (including Options and SARs tied solely to
appreciation in the Fair Market Value of the shares); earnings per share; stock
price earnings ratio; earnings before interest, taxes, depreciation and
amortization expenses ("EBITDA"); earnings before interest and taxes ("EBIT");
or EBITDA, EBIT or earnings before taxes and unusual or nonrecurring
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items as measured either against the annual budget or as a ratio to revenue.
Achievement of any such Performance Objective shall be measured over a period of
years not to exceed ten (10) as specified by the Program Administrators in the
agreement for the performance-based award. No business criterion other than
those named above in this Article 13(c) may be used in establishing the
Performance Objective for an award to a Covered Employee under this Article 13.
For each such award relating to a Covered Employee, the Program Administrators
shall establish the targeted level or levels of performance for each such
business criterion. The Program Administrators may, in their discretion, reduce
the amount of a payout otherwise to be made in connection with an award under
this Article 13(c), but may not exercise discretion to increase such amount, and
the Program Administrators may consider other performance criteria in exercising
such discretion. All determinations by the Program Administrators as to the
achievement of Performance Objectives under this Article 13(c) shall be made in
writing. The Program Administrators may not delegate any responsibility under
this Article 13(c). As used herein, "Covered Employee" shall mean, with respect
to any grant of an award, an executive of the Company or any subsidiary who is a
member of the executive compensation group under the Company's compensation
practices (not necessarily an executive officer) whom the Program Administrators
deem may be or become a covered employee as defined in Section 162(m)(3) of the
Code for any year that such award may result in remuneration over $1 million
which would not be deductible under Section 162(m) of the Code but for the
provisions of the Program and any other "qualified performance-based
compensation" plan (as defined under Section 162(m) of the Code) of the Company;
provided however, that the Program Administrators may determine that a Plan
Participant has ceased to be a Covered Employee prior to the settlement of any
award.
(d) The Program Administrators, in their sole
discretion, may require that one or more award agreements contain provisions
which provide that, in the event Section 162(m) of the Code, or any successor
provision relating to excessive employee remuneration, would operate to disallow
a deduction by the Company with respect to all or part of any award under the
Program, a Plan Participant's receipt of the benefit relating to such award that
would not be deductible by the Company shall be deferred until the next
succeeding year or years in which the Plan Participant's remuneration does not
exceed the limit set forth in such provisions of the Code.
Article 14. Death Beneficiaries. In the event of a Plan
Participant's death, all of such person's outstanding awards, including his or
her rights to receive any accrued but unpaid Stock Payments, will transfer to
the maximum extent permitted by law to such person's beneficiary (except to the
extent a permitted transfer of a Nonqualified Option or SAR was previously made
pursuant hereto). Each Plan Participant may name, from time to time, any
beneficiary or beneficiaries (which may be named contingently or successively)
as his or her beneficiary for purposes of this Program. Each designation shall
be on a form prescribed by the Program Administrators, will be effective only
when delivered to the Company, and when effective will revoke all prior
designations by the Plan Participant. If a Plan Participant dies with no such
beneficiary designation in effect, such person's beneficiary shall be his or her
estate and such person's awards will be transferable by will or pursuant to laws
of descent and distribution applicable to such person.
Article 15. Unfunded Program. The Program shall be unfunded and the
Company shall not be required to segregate any assets that may at any time be
represented by awards under the Program. Neither the Company, its affiliates,
the Program Administrators, nor the Board shall be deemed to be a trustee of any
amounts to be paid under the Program nor shall anything contained in the Program
or any action taken pursuant to its provisions create or be construed to create
a fiduciary relationship between any such party and a Plan Participant or anyone
claiming on his or her behalf. To the extent a Plan Participant or any other
person acquires a right to receive payment pursuant to an award under the
Program, such right shall be no greater than the right of an unsecured general
creditor of the Company.
Article 16. Choice of Law and Venue. The Program and all related
documents shall
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be governed by, and construed in accordance with, the laws of the State of
California. Acceptance of an award shall be deemed to constitute consent to the
jurisdiction and venue of the state and federal courts located in Los Angeles
County, State of California for all purposes in connection with any suit, action
or other proceeding relating to such award, including the enforcement of any
rights under the Program or any agreement or other document, and shall be deemed
to constitute consent to any process or notice of motion in connection with such
proceeding being served by certified or registered mail or personal service
within or without the State of California, provided a reasonable time for
appearance is allowed.
Article 17. Arbitration. Any disputes involving the Program will be
resolved by arbitration in Los Angeles County, California before one (1)
arbitrator in accordance with the Commercial Arbitration Rules of the American
Arbitration Association.
Article 18. Program Administrators' Right. Except as may be provided
in an award agreement, the Program Administrators may, in their discretion,
waive any restrictions or conditions applicable to, or accelerate the vesting
of, any award (other than the right to purchase shares pursuant to the Stock
Purchase Plan).
Article 19. Termination of Benefits Under Certain Conditions. The
Program Administrators, in their sole discretion, may cancel any unexpired,
unpaid or deferred award (other than a right to purchase shares pursuant to the
Stock Purchase Plan) at any time if the Plan Participant is not in compliance
with all applicable provisions of the Program or any award agreement or if the
Plan Participant, whether or not he or she is currently employed by the Company
or one of its subsidiaries, acts in a manner contrary to the best interests of
the Company and its subsidiaries.
Article 20. Conflicts in Program. In case of any conflict in the
terms of the Program, or between the Program and an award agreement, the
provisions in the Program which specifically grant such award shall control, and
the provisions in the Program shall control over the provisions in any award
agreement.
Article 21. Optional Deferral. The right to receive any award under
the Program (other than the right to purchase shares pursuant to the Stock
Purchase Plan) may, at the request of the Plan Participant, be deferred to such
period and upon such terms and conditions as the Program Administrators shall,
in their discretion, determine, which may include crediting of interest on
deferrals of cash and crediting of dividends on deferrals denominated in shares
of Common Stock.
Article 22. Information to Plan Participants. To the extent required
by applicable law, the Company shall provide Plan Participants with the
Company's financial statements at least annually.
Article 23. Company Repurchase Rights. Upon the discontinuance of
employment or service by any Plan Participant by resignation of such Plan
Participant, termination of employment by the Company or for any reason, with or
without cause (the "Termination"), the Company may elect, but is not obligated
to, repurchase all or any portion of the securities issued to such Plan
Participant hereunder. If the Company exercises its right to make such a
repurchase, the Company shall promptly notify the Plan Participant in writing
and repurchase the securities for cash within ninety (90) days of Termination
(or in the case of securities issued after Termination, within ninety (90) days
after the date of any such exercise). The repurchase price for the securities
shall be equal to the fair market value of the securities (as determined by the
Program Administrators) on the date of Termination. The Company's repurchase
rights shall terminate when the Company's securities become publicly traded.
Article 24. Lock-Up. To the extent requested by any managing
underwriter to the Company, the Plan Participants shall enter into such market
lock-up, escrow or other agreements as may be requested by such underwriter in
connection with any public offering of the Company's securities.
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PART I
NETGATEWAY, INC.
INCENTIVE STOCK OPTION PLAN
Section 1. Purpose. The purpose of this NetGateway, Inc. Incentive
Stock Option Plan (the "Incentive Plan") is to promote the growth and general
prosperity of the Company by permitting the Company to grant options to purchase
shares of its Common Stock. The Incentive Plan is designed to help attract and
retain superior personnel for positions of substantial responsibility with the
Company and its subsidiaries, and to provide individuals with an additional
incentive to contribute to the success of the Company. The Company intends that
options granted pursuant to the provisions of the Incentive Plan will qualify as
"incentive stock options" within the meaning of Section 422 of the Code. This
Incentive Plan is Part I of the Program. Unless any provision herein indicates
to the contrary, this Incentive Plan shall be subject to the General Provisions
of the Program.
Section 2. Maximum Number of Shares. Option Terms and Conditions.
The maximum aggregate number of shares of Common Stock subject to the Incentive
Plan should be 1,000,000. The terms and conditions of options granted under the
Incentive Plan may differ from one another as the Program Administrators shall,
in its discretion, determine as long as all options granted under the Incentive
Plan satisfy the requirements of the Incentive Plan.
Section 3. Duration of Options. Each option and all rights
thereunder granted pursuant to the terms of the Incentive Plan shall expire on
the date determined by the Program Administrators, but in no event shall any
option granted under the Incentive Plan expire later than ten (10) years from
the date on which the option is granted. However, notwithstanding the above
portion of this Section 3, if at the time the option is granted the grantee (the
"Optionee") owns or would be considered to own by reason of Code Section 424(d)
more than 10% of the total combined voting power of all classes of stock of the
Company or its subsidiaries, such option shall expire not more than 5 years from
the date the option is granted. In addition, each option shall be subject to
early termination as provided in the Incentive Plan.
Section 4. Purchase Price. The purchase price for shares acquired
pursuant to the exercise, in whole or in part, of any option shall not be less
than the fair market value of the shares at the time of the grant of the option.
Fair market value (the "Fair Market Value") shall be determined by the Program
Administrators on the basis of such factors as they deem appropriate; provided,
however, that Fair Market Value on any day shall be deemed to be, if the Common
Stock is traded on a national securities exchange, the closing price (or, if no
reported sale takes place on such day, the mean of the reported bid and asked
prices) of the Common Stock on such day on the principal such exchange, or, if
the stock is included on the composite tape, the composite tape. In each case,
the Program Administrators' determination of Fair Market Value shall be
conclusive.
Notwithstanding the above portion of this Section 4, if at the time
an option is granted the Optionee owns or would be considered to own by reason
of Code Section 424(d) more than 10% of the total combined voting power of all
classes of stock of the Company or its subsidiaries, the purchase price of the
shares covered by such option shall not be less than 110% of the Fair Market
Value of a share of Common Stock on the date the option is granted.
Section 5. Maximum Amount of Options Exercisable in Any Calendar
Year. Notwithstanding any other provision of this Incentive Plan, the aggregate
Fair Market Value (determined at the time any Incentive Stock Option is granted)
of the Common Stock with respect to which Incentive Stock Options become
exercisable for the first time by any employee during any calendar year under
all stock option plans of the Company and its subsidiaries shall not exceed
$100.000.
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Section 6. Exercise of Options. Each option shall be exercisable in
one or more installments during its term as determined by the Program
Administrators, and the right to exercise may be cumulative as determined by the
Program Administrators. Each option shall be exercisable at a rate of at least
twenty percent (20%) per year over five (5) years from the date the option is
granted, subject to such reasonable conditions as determined by the Program
Administrators. No option may be exercised for a fraction of a share of Common
Stock. The purchase price of any shares purchased shall be paid in full in cash
or by certified or cashier's check payable to the order of the Company or by
shares of Common Stock, if permitted by the Program Administrators, or by a
combination of cash, check, or shares of Common Stock, at the time of exercise
of the option. If any portion of the purchase price is paid in shares of Common
Stock, those shares shall be tendered at their then Fair Market Value as
determined by the Program Administrators in accordance with Section 4 of this
Incentive Plan. Payment in shares of Common Stock includes the automatic
application of shares of Common Stock received upon exercise of an option to
satisfy the exercise price for additional options.
Section 7. Reorganization. In the event of the dissolution or
liquidation of the Company, any option granted under the Incentive Plan shall
terminate as of a date to be fixed by the Program Administrators; provided that
not less than 30 days' written notice of the date so fixed shall be given to
each Optionee and each such Optionee shall have the right during such period
(unless such option shall have previously expired) to exercise any option,
including any option that would not otherwise be exercisable by reason of an
insufficient lapse of time.
In the event of a Reorganization (as defined below) in which the
Company is not the surviving or acquiring company, or in which the Company is or
becomes a subsidiary of another company after the effective date of the
Reorganization, then:
(a) if there is no plan or agreement respecting the
Reorganization (the "Reorganization Agreement") or if the
Reorganization Agreement does not specifically provide for the
change, conversion or exchange of the outstanding options for
options of another corporation, then exercise and termination
provisions equivalent to those described in this Section 7 shall
apply; or
(b) if there is a Reorganization Agreement and if the
Reorganization Agreement specifically provides for the change,
conversion, or exchange of the outstanding options for options of
another corporation, then the Program Administrators shall adjust
the outstanding unexercised options (and shall adjust the options
remaining under the Incentive Plan which have not yet been granted
if the Reorganization Agreement makes specific provision for such an
adjustment) in a manner consistent with the applicable provisions of
the Reorganization Agreement.
The term "Reorganization" as used in this Section 7 shall mean any statutory
merger, statutory consolidation, sale of all or substantially all of the assets
of the Company or a sale of the Common Stock pursuant to which the Company is or
becomes a subsidiary of another company after the effective date of the
Reorganization.
Adjustments and determinations under this Section 7 shall be made by
the Program Administrators, whose decisions as to such adjustments or
determinations shall be final, binding, and conclusive.
Section 8. Written Notice Required. Any option granted pursuant to
the terms of the Incentive Plan shall be exercised when written notice of that
exercise has been given to the Company at its principal office by the person
entitled to exercise the option and full payment for the shares with respect to
which the option is exercised, together with payment of applicable income taxes,
has been received by the Company.
9
Section 9. Compliance with Securities Laws. Shares shall not be
issued with respect to any option granted under the Incentive Plan, unless the
exercise of that option and the issuance and delivery of the shares pursuant to
that exercise shall comply with all applicable provisions of foreign, state and
federal law including, without limitation, the Securities Act of 1933, as
amended, and the Exchange Act, and the rules and regulations promulgated
thereunder, and the requirements of any stock exchange upon which the shares may
then be listed, and shall be further subject to the approval of counsel for the
Company with respect to such compliance. The Program Administrators may also
require an Optionee to furnish evidence satisfactory to the Company, including a
written and signed representation letter and consent to be bound by any transfer
restriction imposed by law, legend, condition, or otherwise, that the shares are
being purchased only for investment and without any present intention to sell or
distribute the shares in violation of any state or federal law, rule, or
regulation. Further, each Optionee shall consent to the imposition of a legend
on the shares of Common Stock subject to his or her Option and the imposition of
stop-transfer instructions restricting their transferability as required by law
or by this Section 9.
Section 10. Employment of Optionee. Each Optionee, if requested by
the Program Administrators, must agree in writing as a condition of receiving
his or her option, that he or she will remain in the employment of the Company
or its subsidiary corporations following the date of the granting of that option
for a period specified by the Program Administrators. Nothing in the Incentive
Plan or in any option granted hereunder shall confer upon any Optionee any right
to continued employment by the Company or its subsidiary corporations or limit
in any way the right of the Company or its subsidiary corporations at any time
to terminate or alter the terms of that employment.
Section 11. Option Rights Upon Termination of Employment. If an
Optionee ceases to be employed by the Company or any subsidiary corporation for
any reason other than death or disability, his or her option shall immediately
terminate; provided, however, that the Program Administrators may, in their sole
and absolute discretion, allow the option to be exercised (to the extent
exercisable on the date of termination of employment) at any time within sixty
(60) days after the date of termination of employment, unless either the option
or the Incentive Plan otherwise provides for earlier termination.
Section 12. Option Rights Upon Disability. If an Optionee becomes
disabled within the meaning of Code Section 422(e)(3) while employed by the
Company or any subsidiary corporation, the Program Administrators, in their
discretion, may allow the option to be exercised, to the extent exercisable on
the date of termination of employment, at any time within one year after the
date of termination of employment due to disability, unless either the option or
the Incentive Plan otherwise provides for earlier termination.
Section 13. Option Rights Upon Death of Optionee. Except as
otherwise limited by the Program Administrators at the time of the grant of an
option, if an Optionee dies while employed by the Company or any subsidiary
corporation, his or her Option shall expire one year after the date of death
unless by its terms it expires sooner. During this one year or shorter period,
the option may be exercised, to the extent that it remains unexercised on the
date of death, by the person or persons to whom the Optionee's rights under the
option shall pass by will or by the laws of descent and distribution, but only
to the extent that the Optionee is entitled to exercise the option at the date
of death.
Section 14. Options Not Transferable. Options granted pursuant to
the terms of the Incentive Plan may not be sold, pledged, assigned, or
transferred in any manner otherwise than by will or the laws of descent or
distribution and may be exercised during the lifetime of an Optionee only by
that Optionee. No such options shall be pledged or hypothecated in any way nor
shall they be subject to execution, attachment, or similar process.
Section 15. Adjustments to Number and Purchase Price of Optioned
Shares. All
10
options granted pursuant to the terms of this Incentive Plan shall be adjusted
in the manner prescribed by Article 6 of the General Provisions of this Program.
11
NETGATEWAY, INC., INCENTIVE STOCK OPTION PLAN
GRANT OF OPTION
Date of Grant: ____________________, ___
THIS GRANT, dated as of the date of grant first stated above (the
"Date of Grant"), is delivered by, NETGATEWAY, INC., a Nevada corporation (the
"Company") to ________________ (the "Grantee"), who is an employee of the
Company or one of its subsidiaries (the Grantee's employer is sometimes referred
to herein as the "Employer").
WHEREAS, the Board of Directors of the Company (the "Board") on July
1, 1998, adopted, with subsequent stockholder approval, the NETGATEWAY, INC.,
Incentive Stock Option Plan (the "Plan");
WHEREAS, the Plan provides for the granting of incentive stock
options by the Board or Program Administrators to employees of the Company or
any subsidiary of the Company to purchase, or to exercise certain rights with
respect to, shares of the Common Stock of the Company, no par value (the
"Stock"), in accordance with the terms and provisions thereof; and
WHEREAS, the Program Administrators consider the Grantee to be a
person who is eligible for a grant of incentive stock options under the Plan,
and has determined that it would be in the best interest of the Company to grant
the incentive stock options documented herein.
NOW, THEREFORE, the parties hereto, intending to be legally bound
hereby, agree as follows:
1. Grant of Option.
Subject to the terms and conditions hereinafter set forth, the Company,
with the approval and at the direction of the Program Administrators, hereby
grants to the Grantee, as of the Date of Grant, an option to purchase up to
______ shares of Stock at a price of $______ per share, the fair market value
(or, with respect to 10% stockholders, 110% of fair market value). Such option
is hereinafter referred to as the "Option" and the shares of stock purchasable
upon exercise of the Option are hereinafter sometimes referred to as the "Option
Shares." The Option is intended by the parties hereto to be, and shall be
treated as, an incentive stock option (as such term is defined under Section 422
of the Internal Revenue Code of 1986).
2. Installment Exercise.
Subject to such further limitations as are provided herein, the Option
shall become exercisable in ____________ installments, the Grantee having the
right hereunder to purchase from the Company the following number of Option
Shares upon exercise of the Option, on and after the following dates, in
cumulative fashion as determined by the Program Administrators:
______________________
3. Termination of Option.
(a) The Option and all rights hereunder with respect thereto, to the
extent such rights shall not have been exercised, shall terminate and become
null and void after the expiration of ______ years from the Date of Grant (the
"Option Term" [no more than 10 years from Date of Grant or, in the case of a 10%
owner, no more than 5 years from Date of Grant]).
12
(b) Upon the occurrence of the Grantee's ceasing for any reason to be
employed by the Employer (such occurrence being a "termination of the Grantee's
employment"), the Option, to the extent not previously exercised, shall
terminate and become null and void immediately upon such termination of the
Grantee's employment, except in a case where the Program Administrators may
otherwise determine in its sole and absolute discretion for up to sixty (60)
days following the termination of employment. As determined by the Program
Administrators, upon a termination of the Grantee's employment by reason of
disability or death, the Option may be exercised, but only to the extent that
the Option was outstanding and exercisable on such date of disability or death,
up to a one-year period following the date of such termination of the Grantee's
employment.
(c) In the event of the death of the Grantee, the Option may be exercised
by the Grantee's legal representative, but only to the extent that the option
would otherwise have been exercisable by the Grantee.
(d) A transfer of the Grantee's employment between the Company and any
subsidiary of the Company, or between any subsidiaries of the Company, shall not
be deemed to be a termination of the Grantee's employment.
4. Exercise of Options.
(a) The Grantee may exercise the option with respect to all or any part of
the number of option Shares then exercisable hereunder by giving the Secretary
of the Company written notice of intent to exercise. The notice of exercise
shall specify the number of Option Shares as to which the Option is to be
exercised and the date of exercise thereof.
(b) Full payment (in U.S. dollars) by the Grantee of the option price for
the Option Shares purchased shall be made on or before the exercise date
specified in the notice of exercise in cash, or, with the prior written consent
of the Program Administrators, in whole or in part through the surrender of
shares of Stock at their fair market value on the exercise date. The Grantee
shall also pay any required income tax withholding taxes which may be payable in
U.S. dollars or Option shares if acceptable to the Company.
(c) On the exercise date specified in the Grantee's notice or as soon
thereafter as is practicable, the Company shall cause to be delivered to the
Grantee, a certificate or certificates for the option Shares then being
purchased (out of theretofore unissued stock or reacquired Stock, as the Company
may elect) upon full payment for such option Shares. However, if (i) the Grantee
is subject to Section 16 of the Securities Exchange Act of 1934 and (ii) the
Grantee exercises the Option before six months have passed from the Date of
Grant, the Company shall be permitted to hold in its custody any stock
certificate arising from such exercise until six months has passed from the Date
of Grant. The obligation of the Company to deliver Stock shall, however, be
subject to the condition that if at any time the Program Administrators shall
determine in its discretion that the listing, registration or qualification of
the Option or the Option Shares upon any securities exchange or under any state
or federal law, or the consent or approval of any governmental regulatory body,
is necessary or desirable as a condition of, or in connection with, the Option
or the issuance or purchase of Stock thereunder, the Option may not be exercised
in whole or in part unless such listing, registration, qualification, consent or
approval shall have been effected or obtained free of any conditions not
acceptable to the Program Administrators.
(d) If the Grantee fails to pay for any of the Option Shares specified in
such notice or fails to accept delivery thereof, the Grantee's right to purchase
such Option Shares may be terminated by the Company. The date specified in the
Grantee's notice as the date of exercise shall be deemed the date of exercise of
the Option, provided that payment in full for the Option Shares to be purchased
upon such exercise shall have been received by such date.
13
5. Adjustment of and Changes in Stock of the Company.
In the event of a reorganization, recapitalization, change of shares,
stock split, spin-off, stock dividend, reclassification, subdivision or
combination of shares, merger, consolidation, rights offering, or any other
change in the corporate structure or shares of capital stock of the Company, the
Program Administrators shall make such adjustment as may be required under the
applicable reorganization agreement in the number and kind of shares of Stock
subject to the Option or in the option price; provided, however, that no such
adjustment shall give the Grantee any additional benefits under the Option. If
there is no provision for the treatment of the Option under an applicable
reorganization agreement, the Option may terminate on a date determined by the
Program Administrators following at least 30 days written notice to the Grantee.
6. Fair Market Value.
As used herein, the "fair market value" of a share of Stock shall be
determined by the Board. However, if the Stock is publicly-traded, fair market
value of a share of Stock shall be based upon the closing or other appropriate
trading price per share of Stock on a national securities exchange.
7. No Rights of Stockholders.
Neither the Grantee nor any personal representative shall be, or shall
have any of the rights and privileges of, a stockholder of the Company with
respect to any shares of Stock purchasable or issuable upon the exercise of the
Option, in whole or in part, prior to the date of exercise of the Option.
8. Non-Transferability of Option.
During the Grantee's lifetime, the Option hereunder shall be exercisable
only by the Grantee or any guardian or legal representative of the Grantee, and
the option shall not be transferable except, in case of the death of the
Grantee, by will or the laws of descent and distribution, nor shall the Option
be subject to attachment, execution or other similar process. In the event of
(a) any attempt by the Grantee to alienate, assign, pledge, hypothecate or
otherwise dispose of the option, except as provided for herein, or (b) the levy
of any attachment, execution or similar process upon the rights or interest
hereby conferred, the Company may terminate the Option by notice to the Grantee
and it shall thereupon become null and void.
9. Restriction on Exercise.
The Option may not be exercised if the issuance of the Option Shares upon
such exercise would constitute a violation of any applicable federal or State
securities or other law or valid regulation. As a condition to the exercise of
the Option, the Company may require the Grantee exercising the Option to make
any representation or warranty to the Company as may be required by any
applicable law or regulation and, specifically, may require the Grantee to
provide evidence satisfactory to the Company that the Option Shares are being
acquired only for investment purposes and without any present intention to sell
or distribute the shares in violation of any federal or State securities or
other law or valid regulation.
10. Employment Not Affected.
The granting of the option or its exercise shall not be construed as
granting to the Grantee any right with respect to continuance of employment of
the Employer. Except as may otherwise be limited by a written agreement between
the Employer and the Grantee, the right of the Employer to terminate at will the
Grantee's employment with it at any time (whether by dismissal, discharge,
retirement or otherwise) is specifically reserved by the Company, as the
Employer or on behalf of the Employer
14
(whichever the case may be), and acknowledged by the Grantee.
11. Amendment of Option.
The Option may be amended by the Program Administrators at any time (i) if
the Program Administrators determine, in their sole discretion, that amendment
is necessary or advisable in the light of any addition to or change in the
Internal Revenue Code of 1986 or in the regulations issued thereunder, or any
federal or state securities law or other law or regulation, which change occurs
after the Date of Grant and by its terms applies to the Option; or (ii) other
than in the circumstances described in clause (i), with the consent of the
Grantee.
12. Notice.
All notices, requests, demands, and other communications hereunder shall
be in writing and shall be deemed to have been duly given if delivered
personally or by certified mail, return receipt requested, as follows:
To Employer: NETGATEWAY, INC.
300 Oceangate, Suite 500
Long Beach, California 90802
To Grantee: _________________________________
_________________________________
_________________________________
_________________________________
13. Incorporation of Plan by Reference.
The Option is granted pursuant to the terms of the Plan, the terms of
which are incorporated herein by reference, and the option shall in all respects
be interpreted in accordance with the Plan. The Program Administrators shall
interpret and construe the Plan and this instrument, and its interpretations and
determinations shall be conclusive and binding on the parties hereto and any
other person claiming an interest hereunder, with respect to any issue arising
hereunder or thereunder.
14. Governing Law.
The validity, construction, interpretation and effect of this instrument
shall exclusively be governed by and determined in accordance with the law of
the State of California, except to the extent preempted by federal law, which
shall to the extent govern.
15
IN WITNESS WHEREOF, the Company has caused its duly authorized officers to
execute this Grant of Option, and to apply the corporate seal hereto, and the
Grantee has placed his or her signature hereon, effective as of the Date of
Grant.
NETGATEWAY, INC.
By: ______________________________
Name:
Title:
ACCEPTED AND AGREED TO:
__________________________________
[Grantee]
By: ______________________________
Name:
Title:
16
PART II
NETGATEWAY, INC.
NON-QUALIFIED STOCK OPTION PLAN
Section 1. Purpose. The purpose of this NETGATEWAY, INC.,
Non-Qualified Stock Option Plan (the "Nonqualified Plan") is to permit the
Company to grant options to purchase shares of its Common Stock. The
Nonqualified Plan is designed to help attract and retain superior personnel for
positions of substantial responsibility with the Company and its subsidiaries,
and to provide individuals with an additional incentive to contribute to the
success of the Company. Any option granted pursuant to the Nonqualified Plan
shall be clearly and specifically designated as not being an incentive stock
option, as defined in Section 422 of the Code. This Nonqualified Plan is Part II
of the Program. Unless any provision herein indicates to the contrary, the
Nonqualified Plan shall be subject to the General Provisions of the Program.
Section 2. Option Terms and Conditions. The terms and conditions of
options granted under the Nonqualified Plan may differ from one another as the
Program Administrators shall in their discretion determine as long as all
options granted under the Nonqualified Plan satisfy the requirements of the
Nonqualified Plan.
Section 3. Duration of Options. Each option and all rights
thereunder granted pursuant to the terms of the Nonqualified Plan shall expire
on the date determined by the Program Administrators, but in no event shall any
option granted under the Nonqualified Plan expire later than ten (10) years from
the date on which the option is granted. In addition, each option shall be
subject to early termination as provided in the Nonqualified Plan.
Section 4. Purchase Price. The purchase price for shares acquired
pursuant to the exercise, in whole or in part, of any option shall not be less
than the fair market value of the shares at the time of the grant of the option.
Fair market value (the "Fair Market Value") shall be determined by the Program
Administrators on the basis of such factors as they deem appropriate; provided,
however, that Fair Market Value on any day shall be deemed to be, if the Common
Stock is traded on a national securities exchange, the closing price (or, if no
reported sale takes place on such day, the mean of the reported bid and asked
prices) of the Common Stock on such day on the principal such exchange, or, if
the stock is included on the composite tape, the composite tape. In each case,
the Program Administrators' determination of Fair Market Value shall be
conclusive.
Section 5. Exercise of Options. Each option shall be exercisable in
one or more installments during its term and the right to exercise may be
cumulative as determined by the Program Administrators. Each option shall be
exercisable a rate of at least twenty percent (20%) per year over five (5) years
from the date the option is granted, subject to such reasonable conditions as
determined by the Program Administrators. No option may be exercised for a
fraction of a share of Common Stock. The purchase price of any shares purchased
shall be paid in full in cash or by certified or cashier's check payable to the
order of the Company or by shares of Common Stock, if permitted by the Program
Administrators, or by a combination of cash, check, or shares of Common Stock,
at the time of exercise of the option. If any portion of the purchase price is
paid in shares of Common Stock, those shares shall be tendered at their then
Fair Market Value as determined by the Program Administrators in accordance with
Section 4 of the Nonqualified Plan. Payment in shares of Common Stock includes
the automatic application of shares of Common Stock received upon exercise of an
option to satisfy the exercise price for additional options.
Section 6. Reorganization. In the event of the dissolution or
liquidation of the Company, any option granted under the Nonqualified Plan shall
terminate as of a date to be fixed by the Program Administrators; provided that
not less than 30 days' written notice of the date so fixed shall be
17
given to each Optionee and each such Optionee shall have the right during such
period (unless such option shall have previously expired) to exercise any
option, including any option that would not otherwise be exercisable by reason
of an insufficient lapse of time.
In the event of a Reorganization (as defined below) in which the
Company is not the surviving or acquiring company, or in which the Company is or
becomes a subsidiary of another company after the effective date of the
Reorganization, then:
a. if there is no plan or agreement respecting the
Reorganization ("Reorganization Agreement") or if the Reorganization
Agreement does not specifically provide for the change, conversion
or exchange of the outstanding options for options of another
corporation, then exercise and termination provisions equivalent to
those described in this Section 6 shall apply; or
(b) if there is a Reorganization Agreement and if the
Reorganization Agreement specifically provides for the change,
conversion, or exchange of the outstanding options for options of
another corporation, then the Program Administrators shall adjust
the outstanding unexercised options (and shall adjust the options
remaining under the Nonqualified Plan which have not yet been
granted if the Reorganization Agreement makes specific provision for
such an adjustment) in a manner consistent with the applicable
provisions of the Reorganization Agreement.
The term "Reorganization" as used in this Section 6 shall mean any statutory
merger, statutory consolidation, sale of all or substantially all of the assets
of the Company or a sale of the Common Stock pursuant to which the Company is or
becomes a subsidiary of another company after the effective date of the
Reorganization.
Adjustments and determinations under this Section 6 shall be made by
the Program Administrators, whose decisions as to such adjustments or
determinations shall be final, binding, and conclusive.
Section 7. Written Notice Required. Any option granted pursuant to
the terms of this Nonqualified Plan shall be exercised when written notice of
that exercise has been given to the Company at its principal office by the
person entitled to exercise the option and full payment for the shares with
respect to which the option is exercised has been received by the Company.
Section 8. Compliance with Securities Laws. Shares shall not be
issued with respect to any option granted under the Nonqualified Plan, unless
the exercise of that option and the issuance and delivery of the shares pursuant
thereto shall comply with all applicable provisions of foreign, state and
federal law, including, without limitation, the Securities Act of 1933, as
amended, and the Exchange Act, and the rules and regulations promulgated
thereunder, and the requirements of any stock exchange upon which the shares may
then be listed, and shall be further subject to the approval of counsel for the
Company with respect to such compliance. The Program Administrators may also
require an Optionee to furnish evidence satisfactory to the Company, including a
written and signed representation letter and consent to be bound by any transfer
restrictions imposed by law, legend, condition, or otherwise, that the shares
are being purchased only for investment purposes and without any present
intention to sell or distribute the shares in violation of any state or federal
law, rule, or regulation. Further, each Optionee shall consent to the imposition
of a legend on the shares of Common Stock subject to his or her option and the
imposition of stop-transfer instructions restricting their transferability as
required by law or by this Section 8.
Section 9. Continued Employment or Service. Each Optionee, if
requested by the Program Administrators, must agree in writing as a condition of
receiving his or her Option, to remain in
18
the employment of, or service to, the Company or any of its subsidiaries
following the date of the granting of that option for a period specified by the
Program Administrators. Nothing in this Nonqualified Plan or in any option
granted hereunder shall confer upon any Optionee any right to continued
employment by, or service to, the Company or any of its subsidiaries, or limit
in any way the right of the Company or any subsidiary at any time to terminate
or alter the terms of that employment or service arrangement.
Section 10. Option Rights Upon Termination of Employment or Service.
If an Optionee under this Nonqualified Plan ceases to be employed by, or provide
services to, the Company or any of its subsidiaries for any reason other than
death or disability, his or her option shall immediately terminate; provided,
however, that the Program Administrators may, in their sole and absolute
discretion, allow the option to be exercised, to the extent exercisable on the
date of termination of employment or service, at any time within sixty (60) days
after the date of termination of employment or service, unless either the option
or this Nonqualified Plan otherwise provides for earlier termination.
Section 11. Option Rights Upon Disability. If an Optionee becomes
disabled within the meaning of Code Section 422(e)(3) while employed by the
Company or any subsidiary corporation, the Program Administrators, in their
discretion, may allow the option to be exercised, to the extent exercisable on
the date of termination of employment, at any time within one year after the
date of termination of employment due to disability, unless either the option or
the Nonqualified Plan otherwise provides for earlier termination.
Section 12. Option Rights Upon Death of Optionee. Except as
otherwise limited by the Program Administrators at the time of the grant of an
option, if an Optionee dies while employed by, or providing services to, the
Company or any of its subsidiaries, his or her option shall expire one year
after the date of death unless by its terms it expires sooner. During this one
year or shorter period, the option may be exercised, to the extent that it
remains unexercised on the date of death, by the person or persons to whom the
Optionee's rights under the option shall pass by will or by the laws of descent
and distribution, but only to the extent that the Optionee is entitled to
exercise the option at the date of death.
Section 13. Options Not Transferable. Options granted pursuant to
the terms of this Nonqualified Plan may not be sold, pledged, assigned, or
transferred in any manner otherwise than by will or the laws of descent or
distribution and may be exercised during the lifetime of an Optionee only by
that Optionee. No such options shall be pledged or hypothecated in any way nor
shall they be subject to execution, attachment, or similar process.
Section 14. Adjustments to Number and Purchase Price of Optioned
Shares. All options granted pursuant to the terms of this Nonqualified Plan
shall be adjusted in a manner prescribed by Article 6 of the General Provisions
of the Program.
19
NETGATEWAY, INC.
NON-QUALIFIED STOCK OPTION PLAN
GRANT OF OPTION
Date of Grant: ____________, ____
THIS GRANT, dated as of the date of grant first stated above (the
"Date of Grant"), is delivered by NETGATEWAY, INC., a Nevada corporation (the
"Company"), to ___________________ (the "Grantee"), who is a employee or
non-employee of the Company or one of its subsidiaries (the Grantee's employer
is sometimes referred to herein as the ("Employer").
WHEREAS, the Board of Directors of the Company (the "Board") on July
1, 1998, adopted the NETGATEWAY, INC., Non-Qualified Stock Option Plan (the
"Plan");
WHEREAS, the Plan provides for the granting of stock options by the
Board or the Program Administrators to employees or non-employees of the Company
or any subsidiary of the Company to purchase, or to exercise certain rights with
respect to, shares of the Common Stock of the Company, no par value (the
"Stock"), in accordance with the terms and provisions thereof; and
WHEREAS, the Program Administrators consider the Grantee to be a
person who is eligible for a grant of non-qualified stock options under the
Plan, and has determined that it would be in the best interest of the Company to
grant the non-qualified stock options documented herein.
NOW, THEREFORE, the parties hereto, intending to be legally bound
hereby, agree as follows:
1. Grant of Option.
Subject to the terms and conditions hereinafter set forth, the
Company, with the approval and at the direction of the Program Administrators,
hereby grants to the Grantee, as of the Date of Grant, an option to purchase up
to ____________ shares of Stock at a price of $____________ per share, the fair
market value. Such option is hereinafter referred to as the "Option" and the
shares of stock purchasable upon exercise of the Option are hereinafter
sometimes referred to as the "Option Shares." The Option is intended by the
parties hereto to be, and shall be treated as, an option not qualified as an
incentive stock option (as such term is defined under Section 422 of the
Internal Revenue Code of 1986).
2. Installment Exercise.
Subject to such further limitations as are provided herein, the
Option shall become exercisable in ____________ installments, the Grantee having
the right hereunder to purchase from the Company the following number of Option
Shares upon exercise of the Option, on and after the following dates, in
cumulative fashion as determined by the Program Administrators:
_______________________
20
3. Termination of Option.
(a) The Option and all rights hereunder with respect thereto, to the
extent such rights shall not have been exercised, shall terminate and become
null and void after the expiration of ___________ years from the Date of Grant
(the "Option Term") [no more than 10 years from Date of Grant].
(b) Upon the occurrence of the Grantee's ceasing for any reason to
be employed by the Employer (such occurrence being a "termination of the
Grantee's employment"), the Option, to the extent not previously exercised,
shall terminate and become null and void immediately upon such termination of
the Grantee's employment, except in a case where the Program Administrators may
otherwise determine in its sole and absolute discretion for up to sixty (60)
days following the termination of employment. As determined by the Program
Administrators, upon a termination of the Grantee's employment by reason of
disability or death, the Option may be exercised, but only to the extent that
the Option was outstanding and exercisable on such date of disability or death,
up to a one-year period following the date of such termination of the Grantee's
employment.
(c) In the event of the death of the Grantee, the Option may be
exercised by the Grantee's legal representative, but only to the extent that the
Option would otherwise have been exercisable by the Grantee.
(d) A transfer of the Grantee's employment between the Company and
any subsidiary of the Company, or between any subsidiaries of the Company, shall
not be deemed to be a termination of the Grantee's employment.
4. Exercise of Options.
(a) The Grantee may exercise the Option with respect to all or any
part of the number of Option Shares then exercisable hereunder by giving the
Secretary of the Company written notice of intent to exercise. The notice of
exercise shall specify the number of Option Shares as to which the Option is to
be exercised and the date of exercise thereof.
(b) Full payment (in U.S. dollars) by the Grantee of the option
price for the Option Shares purchased shall be made on or before the exercise
date specified in the notice of exercise in cash, or, with the prior written
consent of the Program Administrators, in whole or in part through the surrender
of shares of Stock at their fair market value on the exercise date. The Grantee
shall also pay any required income tax withholding taxes which may be payable in
U.S. dollars or Option Shares if acceptable to the Company.
(c) On the exercise date specified in the Grantee's notice or as
soon thereafter as is practicable, the Company shall cause to be delivered to
the Grantee, a certificate or certificates for the Option Shares then being
purchased (out of theretofore unissued Stock or reacquired Stock, as the Company
may elect) upon full payment for such Option Shares. However, if (i) the Grantee
is subject to Section 16 of the Securities Exchange Act of 1934 and (ii) the
Grantee exercises the Option before six months have passed from the Date of
Grant, the Company shall be permitted to hold in its custody any stock
certificate arising from such exercise until six months has passed from the Date
of Grant. The obligation of the Company to deliver Stock shall, however, be
subject to the condition that if at any time the Program Administrators shall
determine in its discretion that the listing, registration or qualification of
the Option or the Option Shares upon any securities exchange or under any state
or federal law, or the consent or approval of any governmental regulatory body,
is necessary or desirable as a condition of, or in connection with, the Option
or the issuance or purchase of Stock thereunder, the Option may not be exercised
in whole or in part unless such listing, registration, qualification, consent or
approval shall
21
have been effected or obtained free of any conditions not acceptable to the
Program Administrators.
(d) If the Grantee fails to pay for any of the Option Shares
specified in such notice or fails to accept delivery thereof, the Grantee's
right to purchase such Option Shares may be terminated by the Company. The date
specified in the Grantee's notice as the date of exercise shall be deemed the
date of exercise of the Option, provided that payment in full for the Option
shares to be purchased upon such exercise shall have been received by such date.
5. Adjustment of and Changes in Stock of the Company.
In the event of a reorganization, recapitalization, change of
shares, stock split, spin-off, stock dividend, reclassification, subdivision or
combination of shares, merger, consolidation, rights offering, or any other
change in the corporate structure or shares of capital stock of the Company, the
Program Administrators shall make such adjustment as may be required under the
applicable reorganization agreement in the number and kind of shares of Stock
subject to the Option or in the option price; provided, however, that no such
adjustment shall give the Grantee any additional benefits under the Option. If
there is no provision for the treatment of the Option under an applicable
reorganization agreement, the Option may terminate on a date determined by the
Program Administrators following at least 30 days written notice to the Grantee.
6. Fair Market Value.
As used herein, the "fair market value" of a share of Stock shall be
determined by the Board. However, if the Stock is publicly-traded, fair market
value of a share of Stock shall be based upon the closing or other appropriate
trading price per share of Stock on a national securities exchange.
7. No Rights of Stockholders.
Neither the Grantee nor any personal representative shall be, or
shall have any of the rights and privileges of, a stockholder of the Company
with respect to any shares of Stock purchasable or issuable upon the exercise of
the Option, in whole or in part, prior to the date of exercise of the Option.
8. Non-Transferability of Option.
During the Grantee's lifetime, the option hereunder shall be
exercisable only by the Grantee or any guardian or legal representative of the
Grantee, and the Option shall not be transferable except, in case of the death
of the Grantee, by will or the laws of descent and distribution, nor shall the
Option be subject to attachment, execution or other similar process. In the
event of (a) any attempt by the Grantee to alienate, assign, pledge, hypothecate
or otherwise dispose of the Option, except as provided for herein, or (b) the
levy of any attachment, execution or similar process upon the rights or interest
hereby conferred, the Company may terminate the option by notice to the Grantee
and it shall thereupon become null and void.
9. Restriction on Exercise.
The Option may not be exercised if the issuance of the Option Shares
upon such exercise would constitute a violation of any applicable federal or
state securities or other law or valid regulation. As a condition to the
exercise of the Option, the Company may require the Grantee exercising the
Option to make any representation or warranty to the Company as may be required
by any applicable law or regulation and, specifically, may require the Grantee
to provide evidence satisfactory to the Company that the Option Shares are being
acquired only for investment purposes and without any present intention to sell
or distribute the shares in violation of any federal or state securities or
other law or valid
22
regulation.
10. Employment of Service Not Affected.
The granting of the option or its exercise shall not be construed as
granting to the Grantee any right with respect to continuance of employment or
service relationship with the Employer. Except as may otherwise be limited by a
written agreement between the Employer and the Grantee, the right of the
Employer to terminate at will the Grantee's employment or service relationship
with it at any time (whether by dismissal, discharge, retirement or otherwise)
is specifically reserved by the Company, as the Employer or on behalf of the
Employer (whichever the case may be), and acknowledged by the Grantee.
11. Amendment of Option.
The Option may be amended by the Program Administrators at any time
(i) if the Program Administrators determine, in their sole discretion, that
amendment is necessary or advisable in the light of any addition to or change in
the Internal Revenue Code of 1986 or in the regulations issued thereunder, or
any federal or state securities law or other law or regulation, which change
occurs after the Date of Grant and by its terms applies to the option; or (ii)
other than in the circumstances described in clause (i), with the consent of the
Grantee.
12. Notice
All notices, requests, demands, and other communications hereunder
shall be in writing and shall be deemed to have been duly given if delivered
personally or by certified mail, return receipt requested, as follows:
To Employer: NETGATEWAY, INC.
300 Oceangate, Suite 500
Long Beach, California 90802
To Grantee: ________________________
________________________
________________________
________________________
13. Incorporation of Plan by Reference.
The Option is granted pursuant to the terms of the Plan, the terms
of which are incorporated herein by reference, and the Option shall in all
respects be interpreted in accordance with the Plan. The Program Administrators
shall interpret and construe the Plan and this instrument, and its
interpretations and determinations shall be conclusive and binding on the
parties hereto and any other person claiming an interest hereunder, with respect
to any issue arising hereunder or thereunder.
///
///
///
///
23
14. Governing Law.
The validity, construction, interpretation and effect of this instrument
shall exclusively be governed by and determined in accordance with the law of
the State of California, except to the extent preempted by federal law, which
shall to the extent govern.
IN WITNESS WHEREOF, the Company has caused its duly authorized
officers to execute this Grant of Option, and to apply the corporate seal
hereto, and the Grantee has placed his or her signature hereon, effective as of
the Date of Grant.
NETGATEWAY, INC.
By: _________________________
Name:
Title:
ACCEPTED AND AGREED TO:
_____________________________
[Grantee]
By: _________________________
Name:
Title:
24
PART III
NETGATEWAY, INC.
RESTRICTED SHARE PLAN
Section 1. Purpose. The purpose of this Restricted Share Plan (the
"Restricted Plan") is to promote the growth and general prosperity of the
Company by permitting the Company to grant restricted shares to help attract and
retain superior personnel for positions of substantial responsibility with the
Company and its subsidiaries and to provide individuals with an additional
incentive to contribute to the success of the Company. The Restricted Plan is
Part III of the Program. Unless any provision herein indicates to the contrary,
the Restricted Plan shall be subject to the General Provisions of the Program.
Section 2. Terms and Conditions. The terms and conditions of
restricted shares granted under the Restricted Plan may differ from one another
as the Program Administrators shall, in their discretion, determine as long as
all restricted shares granted under the Restricted Plan satisfy the requirements
of the Restricted Plan.
Each restricted share grant shall provide to the recipient (the
"Holder") the transfer of a specified number of shares of Common Stock of the
Company that shall become nonforfeitable upon the achievement of specified
service or performance conditions within a specified period or periods (the
"Restriction Period") as determined by the Program Administrators. At the time
that the restricted share is granted, the Program Administrators shall specify
the service or performance conditions and the period of duration over which the
conditions apply.
The Holder of restricted shares shall not have any rights with
respect to such award, unless and until such Holder has executed an agreement
evidencing the terms and conditions of the award (the "Restricted Share Award
Agreement"). Each individual who is awarded restricted shares shall be issued a
stock certificate in respect of such shares. Such certificate shall be
registered in the name of the Holder and shall bear an appropriate legend
referring to the terms, conditions, and restrictions applicable to such award,
substantially in the following form:
The transferability of this certificate and the shares of stock
represented hereby are subject to the terms and conditions (including
forfeiture) of the NETGATEWAY, INC., Restricted Share Plan and Restricted
Share Award Agreement entered into between the registered owner and
NETGATEWAY, Inc. Copies of such Plan and Agreement are on file in the
offices of NETGATEWAY, Inc.
The Program Administrators shall require that the stock certificates
evidencing such shares be held in the custody of the Company until the
restrictions thereon shall have lapsed, and that, as a condition of any
restricted share award, the Holder shall have delivered a stock power. endorsed
in blank, relating to the stock covered by such award. At the expiration of each
Restriction Period, the Company shall redeliver to the Holder certificates held
by the Company representing the shares with respect to which the applicable
conditions have been satisfied.
Section 3. Nontransferable. Subject to the provisions of the
Restricted Plan and the Restricted Share Award Agreements, during the
Restriction Period as may be set by the Program Administrators commencing on the
grant date, the Holder shall not be permitted to sell. transfer, pledge, or
assign shares of restricted shares awarded under the Restricted Plan.
25
Section 4. Restricted Share Rights Upon Employment or Service. If a
Holder terminates employment or service with the company prior to the expiration
of the Restriction Period, any restricted shares granted to him subject to such
Restriction Period shall be forfeited by the Holder and shall be transferred to
the Company. The Program Administrators may, in their sole discretion,
accelerate the lapsing of or waive such restrictions in whole or in part based
upon such factors and such circumstances as the Program Administrators may
determine, in its sole discretion, including, but not limited to, the Plan
Participant's retirement, death, or disability.
Section 5. Stockholder Rights. The Holder shall have, with respect
to the restricted shares granted, all of the rights of a stockholder of the
Company, including the right to vote the shares, and the right to receive any
dividends thereon. Certificates for shares of unrestricted stock shall be
delivered to the grantee promptly after, and only after, the Restriction Period
shall expire without forfeiture in respect of such restricted shares.
Section 6. Compliance with Securities Laws. Shares shall not be
issued under the Restricted Plan unless the issuance and delivery of the shares
pursuant thereto shall comply with all relevant provisions of foreign, state and
federal law, including, without limitation, the Securities Act of 1933, as
amended, and the Exchange Act, and the rules and regulations promulgated
thereunder, and the requirements of any stock exchange upon which the shares may
then be listed, and shall be further subject to the approval of counsel for the
Company with respect to such compliance. The Program Administrators may also
require a Holder to furnish evidence satisfactory to the Company, including a
written and signed representation letter and consent to be bound by any transfer
restrictions imposed by law, legend, condition, or otherwise, that the shares
are being purchased only for investment purposes and without any present
intention to sell or distribute the shares in violation of any state or federal
law, rule, or regulation. Further, each Holder shall consent to the imposition
of a legend on the shares of Common Stock issued pursuant to the Restricted
Share Plan and the imposition of stop-transfer instructions restricting their
transferability as required by law or by this Section 6.
Section 7. Continued Employment or Service. Each Holder, if
requested by the Program Administrators, must agree in writing as a condition of
the granting of his or her restricted shares, to remain in the employment of, or
service to, the Company or any of its subsidiaries following the date of the
granting of that restricted share for a period specified by the Program
Administrators. Nothing in the Restricted Plan or in any restricted share
granted hereunder shall confer upon any Holder any right to continued employment
by, or service to, the Company or any of its subsidiaries, or limit in any way
the right of the Company or any subsidiary at any time to terminate or alter the
terms of that employment or service arrangement.
26
NETGATEWAY, INC.
RESTRICTED SHARES PLAN
RESTRICTED SHARE AWARD AGREEMENT
THIS AGREEMENT is made as of ___________, _____, by and between
NETGATEWAY, Inc. (the "Company"), and ______________________ ("Grantee"):
WHEREAS, the Company maintains the NETGATEWAY, INC., Restricted
Shares Plan ("Restricted Shares Plan") under which the Program Administrators
may award shares of the Company's common stock, no par value ("Common Stock") to
employees and non-employees as the Program Administrators may determine, subject
to terms, conditions, or restrictions as it may deem appropriate; and
WHEREAS, pursuant to the Restricted Shares Plan, the Program
Administrators has awarded to Grantee a restricted stock award conditioned upon
the execution by the Company and Grantee of a Restricted Share Award Agreement
setting forth all the terms and conditions applicable to such award;
NOW, THEREFORE, in consideration of the mutual promise and covenant
contained herein, it is hereby agreed as follows:
1. Award of Shares.
Under the terms of the Restricted Shares Plan, the Program
Administrators hereby awards and transfers to Grantee a restricted stock
award on _____________________ ("Grant Date"), covering shares of Common
Stock ("Shares") subject to the terms, conditions, and restrictions set
forth in this Agreement. This transfer of Shares shall constitute a
transfer of such property in connection with Grantee's performance of
service to the Company (which transfer is intended to constitute a
"transfer" for purposes of Section 83 of the Internal Revenue Code).
2. Share Restrictions.
During the period beginning on the Grant Date and ending on the
date(s) specified by the Program Administrators (the "Restriction
Period"), Grantee's ownership of the Shares shall be subject to a risk of
forfeiture (which risk is intended to constitute a "substantial risk of
forfeiture" for purposes of Section 83 of the Internal Revenue Code).
Specifically, if Grantee's employment or service with the Company is
terminated for any reason, including Grantee's death, disability, or
retirement at any time before the Restriction Period ends, Grantee shall
forfeit his or her ownership in the Shares. However, in the event of
Grantee's termination of employment or service, the Program Administrators
may, in its sole discretion, based upon relevant circumstances such as the
Grantee's death, disability, or retirement, waive the minimum employment
or service requirement and provide Grantee with a nonforfeitable right to
the Shares as of the date of such termination of employment or service.
3. Stock Certificates.
A stock certificate evidencing the Shares shall be issued in the
name of Grantee as of the Grant Date. Grantee shall thereupon be the
shareholder of all the Shares represented by the stock certificate. As
such, Grantee shall be entitled to all rights of a stockholder of the
Company, including the right to vote the Shares and receive dividends
and/or other distributions declared on such Shares.
27
Physical possession or custody of the stock certificate shall be
retained by the Company until such time as the Restriction Period lapses
without the occurrence of any forfeiture of the Shares in a manner
described in the above Paragraph 2. Upon the expiration of the Restriction
Period without the occurrence of such a forfeiture, the Company shall
cause the stock certificate covering the Shares to be delivered to
Grantee. In the event that Grantee's employment or service with the
Company is terminated prior to the lapse of the Restriction Period and
there occurs a forfeiture of the Shares, the stock certificate
representing such Shares shall be then canceled and revert to the Company.
4. Nontransferable.
During the Restriction Period, the Shares covered by the restricted
stock award shall not be transferable by Grantee by means of sale,
assignment, sale, pledge, encumbrance, or otherwise. During the
Restriction Period, the Company shall place a legend on the stock
certificate restricting the transferability of such certificate and
referring to the terms and conditions applicable to the Shares pursuant to
the Restricted Shares Plan and this Agreement.
Upon the lapse of the Restriction Period, the Shares shall not be
delivered to Grantee if such delivery would constitute a violation of any
applicable federal or state securities or other law or valid regulation.
As a condition to the delivery of the Shares to Grantee, the Company may
require Grantee to make any representation or warranty as may be required
by any applicable law or regulation and, specifically, may require Grantee
to provide evidence satisfactory to the Company that the Shares are being
acquired only for investment purposes and without any present intention to
sell or distribute the shares in violation of any federal or state
securities or other law or valid regulation.
5. Administration.
The Program Administrators shall have full authority and discretion
(subject only to the express provisions of the Restricted Shares Plan) to
decide all matters relating to the administration and interpretation of
the Restricted Shares Plan and this Agreement. All such Program
Administrators determinations shall be final, conclusive, and binding upon
the Company, Grantee, and any and all interested parties.
6. Right to Continued Employment or Service.
Nothing in the Restricted Shares Plan or this Agreement shall confer
on a Grantee any right to continue in the employ of or service to the
Company or, except as may otherwise be limited by a written agreement
between the Company and the Grantee, in any way affect the Company's right
to terminate Grantee's employment or service, at will, at any time without
prior notice at any time for any or no reason (whether by dismissal,
discharge, retirement or otherwise).
7. Amendment.
This Agreement shall be subject to the terms of the Restricted
Shares Plan as amended, the terms of which are incorporated herein by
reference. However, the restricted stock award that is the subject of this
Agreement may not in any way be restricted or limited by any Restricted
Shares Plan amendment or termination approved after the date of the award
without Grantee's written consent.
8. Force and Effect.
28
The various provisions of this Agreement are severable in their
entirety. Any determination of invalidity or unenforceability of any one
provision shall have no effect on the continuing force and effect of the
remaining provisions.
9. Governing Law.
This Agreement shall be construed and enforced in accordance with
and governed by the laws of the State of California.
10. Successors.
This Agreement shall be binding upon and inure to the benefit of the
successors, assigns, and heirs of the respective parties.
11. Notice.
All notices, requests, demands, and other communications hereunder
shall be in writing and shall be deemed to have been duly given if
delivered personally or by certified mail, return receipt requested, as
follows:
To Employer: NETGATEWAY, INC.
300 Oceangate, Suite 500
Long Beach, California 90802
To Grantee: ____________________________________
____________________________________
____________________________________
____________________________________
12. Incorporation of Plan by Reference.
The Option is granted pursuant to the terms of the Plan, the terms
of which are incorporated herein by reference, and the Option shall in all
respects be interpreted in accordance with the Plan. The Program Administrators
shall interpret and construe the Plan and this instrument, and its
interpretations and determinations shall be conclusive and binding on the
parties hereto and any other person claiming an interest hereunder, with respect
to any issue arising hereunder or thereunder.
29
IN WITNESS WHEREOF, the parties hereto have signed this Agreement as of
the date hereof
NETGATEWAY, INC. ________________________
[Grantee]
By: ________________________ ________________________
Name: Name.
Title: Title:
30
PART IV
NETGATEWAY, INC.
EMPLOYEE STOCK PURCHASE PLAN
Section 1. Purpose. The purpose of the NETGATEWAY, Inc. Employee
Stock Purchase Plan (the "Stock Purchase Plan") is to promote the growth and
general prosperity of the Company by permitting the Company to sell to employees
of the Company and its subsidiaries shares of the Company's stock in accordance
with Section 423 of the Code ("Section 423"), and it is the intention of the
Company to have the Stock Purchase Plan qualify as an Employee Stock Purchase
Plan in accordance with Section 423, and the Stock Purchase Plan shall be
construed to administer stock purchases and to extend and limit participation
consistent with the requirements of Section 423. The Stock Purchase Plan will be
administered by the Program Administrators.
Section 2. Maximum Number of Shares: Terms and Conditions. The
maximum aggregate number of shares of Common Stock subject to the Stock Purchase
price shall be _________. The terms and conditions of shares to be offered to be
sold to employees of the Company and its subsidiaries under the Stock Purchase
Plan shall comply with Section 423.
Section 3. Offering Periods and Participation. The Stock Purchase
Plan shall be implemented through a series of consecutive fiscal quarters of the
Company (the "Offering Periods"). A full-time employee may participate in the
Stock Purchase Plan and may enroll in an Offering Period by delivering to the
Company's payroll office an agreement evidencing the terms and conditions of the
stock subscription in a form prescribed by the Program Administrators (the
"Purchase Agreement") at least thirty (30) business days prior to the Enrollment
Date for that Offering Period (or such lesser number of business days as the
Program Administrators, in their sole discretion, may permit). Eligible
Employees who participate in the Stock Purchase Plan may do so in the Offering
Period. Purchases will be made through payroll deductions, unless direct
purchases have been approved by the Program Administrators. The first day of
each Offering Period will be the "Enrollment Date" and the last day of each
period will be the "Exercise Date."
Section 4. Purchase Price. The "Purchase Price" means an amount as
determined by the Program Administrators that is the lesser of: (a) the Purchase
Price Discount from the Fair Market Value of a share of Common Stock on the
Enrollment Date, or (b) the Purchase Price Discount from the Fair Market Value
of a share of Common Stock on the Exercise Date. The "Purchase Price Discount"
shall mean the amount of the discount from the Fair Market Value granted to Plan
Participants not to exceed fifteen percent (15%) of the Fair Market Value as
established by the Board from time to time. "Fair Market Value" of a share of
stock shall be determined by the Board. However, if the Stock is
publicly-traded, fair market value of a share of Stock shall be based upon the
closing or other appropriate trading price per share of Stock on a national
securities exchange.
Section 5. Grants.
(a) Grants. On the Enrollment Date for each Offering Period,
each Eligible Employee participating in such Offering Period shall be
granted the right to purchase on each Exercise Date during such Offering
Period (at the Purchase Price) shares of Common Stock in an amount from
time to time specified by the Program Administrators as set forth in
Section 5(b) below. The Program Administrators will also establish the
Purchase Price Discount and the Periodic Exercise Limit. The right to
purchase shall expire immediately after the last Exercise Date of the
Offering Period.
(b) Grant Limitations. Any provisions of the Stock Purchase
Plan to the
31
contrary notwithstanding, no Plan Participant shall be granted a right to
purchase under the Stock Purchase Plan:
(i) if, immediately after the grant, such Plan
Participant would own stock possessing five percent (5%) or more of the
total combined voting power or value of all classes of stock of the
Company or of any subsidiary (applying the constructive ownership rules of
Section 424(d) of the Code and treating stock that a Plan Participant may
acquire under outstanding options as stock owned by the Plan Participant);
(ii) that permits such Plan Participant's rights to
purchase stock under all employee stock purchase plans of the Company and
its subsidiaries to accrue at a rate that exceeds ______________ Dollars
($______) worth of stock (determined at the Fair Market Value of the
shares at the time such purchase) in any calendar year (computed utilizing
the rules of Section 423(b)(8) of the Code); or
(iii) that permits a Plan Participant to purchase Stock
in excess of twenty percent (20%) of his or her Compensation, which shall
include the gross base salary or hourly compensation paid to a Plan
Participant and the gross amount of any targeted bonus, without reduction
for contributions to any 401(k) plan sponsored by the Company.
(c) No Rights in Respect of Underlying Stock. The Plan
Participant will have no interest or voting right in shares covered by a
right to purchase until such purchase has been completed.
(d) Plan Account. The Company shall maintain a plan account
for the Plan Participants in the Stock Purchase Plan, to which are
credited the payroll deductions made for such Plan Participant pursuant to
Section 6 and from which are debited amounts paid for the purchase of
shares.
(e) Common Stock Account. As a condition of participation in
the Stock Purchase Plan, each Plan Participant shall be required to
receive shares purchased under the Stock Purchase Plan in a common stock
account (the "Common Stock Account") maintained by the Company to hold the
Common Stock purchased under the Stock Purchase Plan.
(f) Dividends on Shares. Subject to the limitations of Section
5(a) hereof and Section 423(b)(8) of the Code, all cash dividends, if any,
paid with respect to shares of Common Stock purchased under the Stock
Purchase Plan and held in a Plan Participant's Common Stock Account shall
be automatically invested in shares of Common Stock purchased at 100% of
Fair Market Value on the next Exercise Date. All non-cash distributions on
Common Stock purchased under the Stock Purchase Plan and held in a Plan
Participant's Common Stock Account shall be paid to the Plan Participant
as soon as practicable.
Section 6. Payroll Deductions/Direct Purchases.
(a) Plan Participant Designations. The Purchase Agreement
applicable to an Offering Period shall designate payroll deductions to be
made on each payday during the Offering Period as a whole number
percentage specified by the Program Administrators of such Eligible
Employee's Compensation for the pay period preceding such payday. Direct
purchases may be permitted on such terms specified by the Program
Administrators.
32
(b) Plan Account Balances. The Company shall make payroll
deductions as specified in each Plan Participant's Subscription Agreement
on each payday during the Offering Period and credit such payroll
deductions to such Plan Participant's Plan Account. A Plan Participant may
not make any additional payments into such Plan Account. No interest will
accrue on any payroll deductions. All payroll deductions received or held
by the Company under the Stock Purchase Plan may be used by the Company
for any corporate purpose, and the Company shall not be obligated to
segregate such payroll deductions.
(c) Plan Participant Changes. A Plan Participant may
discontinue his or her participation in the Stock Purchase Plan as
provided in Section 8, or may increase or decrease (subject to such limits
as the Program Administrator may impose) the rate of his or her payroll
deductions during any Offering Period by filing with the Company a new
Subscription Agreement authorizing such a change in the payroll deduction
rate. The change in rate shall be effective with the first full payroll
period following fifteen (15) business days after the Company's receipt of
the new Subscription Agreement, unless the Company elects to process a
given change in participation more quickly.
(d) Decreases. Notwithstanding the foregoing, to the extent
necessary to comply with Section 423(b)(8) of the Code and Section 4(b)
herein, a Plan Participant's payroll deductions shall be decreased to zero
percent at such time during any Purchase Period that is scheduled to end
during a calendar year (the "Current Purchase Period") when the aggregate
of all payroll deductions previously used to purchase stock under the
Stock Purchase Plan in a prior Purchase Period which ended during that
calendar year plus all payroll deductions accumulated with respect to the
Current Purchase Period equal to the maximum permitted by Section
423(b)(8) of the Code. Payroll deductions shall recommence at the rate
provided in such Plan Participant's Subscription Agreement at the
beginning of the first Purchase Period that is scheduled to end in the
following calendar year, unless terminated by the Plan Participant as
provided in Section 8.
(e) Tax Obligations. At the time of the purchase of shares,
and at the time any Common Stock issued under the Stock Purchase Plan to a
Plan Participant is disposed of, the Plan Participant must adequately
provide for the Company's federal, state or other tax withholding
obligations, if any, that arise upon the purchase of shares or the
disposition of the Common Stock. At any time, the Company may, but will
not he obligated to, withhold from the Plan Participant's Compensation the
amount necessary for the Company to meet applicable withholding
obligations, including, but not limited to, any withholding required to
make available to the Company any tax deductions or benefit attributable
to sale or early disposition of Common Stock by the eligible employee.
(f) Statements of Account. The Company shall maintain each
Plan Participant's Plan Account and shall give each Plan Participant a
statement of account at least annually. Such statements will set forth the
amounts of payroll deductions, the Purchase Price applicable to the Common
Stock purchased, the number of shares purchased, the remaining cash
balance and the dividends received, if any, for the period covered.
33
Section 7. Purchase of Shares.
(a) Automatic Exercise on Exercise Dates. Unless a Plan
Participant withdraws as provided in Section 8 below, his or her Option
for the purchase of shares will be exercised automatically on each
Exercise Date within the Offering Period in which such Plan Participant is
enrolled for the maximum whole number of shares of Common Stock as can
then be purchased at the applicable Purchase Price with the payroll
deductions accumulated in such Plan Participant's Plan Account and not yet
applied to the purchase of shares under the Stock Purchase Plan, subject
to the Periodic Exercise Limit. All such shares purchased under the Stock
Purchase Plan shall be credited to the Plan Participant's Common Stock
Account. During a Plan Participant's lifetime, a Plan Participant's
options to purchase shares under the Stock Purchase Plan shall be
exercisable only by the Plan Participant.
(b) Compliance With Securities Law. Shares of Common Stock
shall not be issued with respect to any purchase of shares granted under
the Stock Purchase Plan, unless the purchase of shares and the issuance
and delivery of those shares pursuant to that exercise comply with all
applicable provisions of foreign, state and federal law including, without
limitation, the Securities Act of 1933, as amended and the Exchange Act,
and the rules and regulations promulgated thereunder, and the requirements
of any stock exchange upon which the shares may then be listed, and shall
be further subject to the approval of counsel for the Company with respect
to such compliance. The Program Administrators may also require a Plan
Participant to furnish evidence satisfactory to the Company, including a
written and signed representation letter and consent to be bound by any
transfer restrictions imposed by law, legend, condition, or otherwise,
that the shares are being purchased only for investment purposes and
without any present intention to sell or distribute the shares in
violation of any state or federal law, rule, or regulation. Further, each
Plan Participant shall consent to the imposition of a legend on the shares
of Common Stock purchased and the imposition of stop-transfer instructions
restricting their transferability as required by law or by this Section 7.
(c) Excess Plan Account Balances. If, due to application of
the Periodic Exercise Limit or otherwise, there remains in a Plan
Participant's Plan Account immediately following exercise of such Plan
Participant's option to purchase shares on an Exercise Date any cash
accumulated immediately preceding such Exercise Date and not applied to
the purchase of shares under the Stock Purchase Plan, such cash shall
promptly be returned to the Plan Participant; provided, however, that if
the Plan Participant shall be enrolled in the Offering Period (including,
without limitation, by not withdrawing pursuant to Section 8), such cash
shall be contributed to the Plan Participant's Plan Account for such next
Purchase Period.
Section 8. Holding Period. The Program Administrators may establish,
as a condition to participation, a holding period of up to one (1) year.
Section 9. Withdrawal: Termination of Employment.
(a) Voluntary Withdrawal. A Plan Participant may withdraw from
an Offering Period by giving written notice to the Company's payroll
office at least thirty (30) business days prior to the next Exercise Date.
Such withdrawal shall be effective beginning thirty' (30) business days
after receipt by the Company's payroll office of notice thereof. On or
promptly following the effective date of any withdrawal, all (but not less
than all) of the withdrawing Plan Participant's payroll deductions
credited to his or her Plan Account and not yet applied to the purchase of
shares under the Stock Purchase Plan will be paid to such Plan
Participant, and on the effective date of such withdrawal such Plan
Participant's option to
34
purchase shares for the Offering Period will be automatically terminated
and no further payroll deductions for the purchase of shares will be made
during the Offering Period. If a Plan Participant withdraws from an
Offering Period, payroll deductions will not resume at the beginning of
any succeeding Offering Period, unless the Plan Participant delivers to
the Company a new Subscription Agreement with respect thereto.
(b) Termination of Employment. Promptly after a Plan
Participant's ceasing to be an employee for any reason all shares of
Common Stock held in a Plan Participant's Common Stock Account and the
payroll deductions credited to such Plan Participant's Plan Account and
not yet applied to the purchase of shares under the Stock Purchase Plan
will be returned to such Plan Participant or, in the case of his or her
death, to the person or persons entitled thereto, and such Plan
Participant's option to purchase shares will be automatically terminated,
provided that, if the Company does not learn of such death more than five
(5) business days prior to an Exercise Date, payroll deductions credited
to such Plan Participant's Plan Account may be applied to the purchase of
shares under the Stock Purchase Plan on such Exercise Date.
Section 10. Non-transferability. Neither payroll deductions credited
to a Plan Participant's Plan Account nor any rights with regard to the exercise
of a purchase of shares or to receive shares under the Stock Purchase Plan may
be assigned, transferred, pledged or otherwise disposed of by the Plan
Participant in any way other than by will or the laws of descent and
distribution, and any purchase of shares by a Plan Participant shall, during
such Plan Participant's lifetime, be exercisable only by such Plan Participant.
Any such attempt at assignment, transfer, pledge or other disposition shall be
without effect, except that the Program Administrator may treat such act as an
election to withdraw from an offering period in accordance with Section 8.
Section 11. Compliance with Securities Laws. Shares shall not be
issued with respect to the Stock Purchase Plan, unless the issuance and delivery
of the shares pursuant thereto shall comply with all applicable provisions of
foreign, state and federal law, including, without limitation, the Securities
Act of 1933, as amended, and the Exchange Act, and the rules and regulations
promulgated thereunder, and the requirements of any stock exchange upon which
the shares may then be listed, and shall be further subject to the approval of
counsel for the Company with respect to such compliance. The Program
Administrators may also require a Plan Participant to furnish evidence
satisfactory to the Company, including a written and signed representation
letter and consent to be bound by any transfer restrictions imposed by law,
legend, condition, or otherwise, that the shares are being purchased only for
investment purposes and without any present intention to sell or distribute the
shares in violation of any state or federal law, rule, or regulation. Further,
each Plan Participant shall consent to the imposition of a legend on the shares
of Common Stock subject to his or her Option and the imposition of stop-transfer
instructions restricting their transferability as required by law or by this
Section 11.
Section 12. Continued Employment or Service. Each Plan Participant.
if requested by the Program Administrators, must agree in writing, to remain in
the employment of, or service to, the Company or any of its subsidiaries
following the date of the granting of that option to purchase shares for a
period specified by the Program Administrators. Nothing in this Stock Purchase
Plan shall confer upon any Plan Participant any right to continued employment
by, or service to, the Company or any of its subsidiaries, or limit in any way
the right of the Company or any subsidiary at any time to terminate or alter the
terms of that employment or service arrangement.
35
PART V
NETGATEWAY, INC.
NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
Section 1. Purpose; Plan. The purpose of this NETGATEWAY, INC.,
Non-Employee Director Stock Option Plan (the "Directors Plan") is to permit the
Company to grant options to purchase shares of its Common Stock to non-employee
directors of the Company. Any option granted pursuant to the Directors Plan
shall be clearly and specifically designated as not being an incentive stock
option, as defined in Section 422 of the Code. This Directors Plan is Part V of
the Program. Unless any provision herein indicates to the contrary, the
Directors Plan shall be subject to the General Provisions of the Program. On the
next to last business day of each fiscal year of the Company, the Company shall
grant to each non-employee director of the Company options to purchase that
number of shares of Common Stock as determined annually by the Program
Administrators. The terms and conditions of options granted under the Directors
Plan shall be in duration, form and substance as the Program Administrators
shall in their discretion determine, but in no event shall any option granted
under the Directors Plan expire later than ten (10) years from the date on which
the option is granted.
Section 2. Compliance with Securities Laws. Shares of Common Stock
shall not be issued with respect to any option granted under the Directors Plan,
unless the exercise of that option and the issuance and delivery of the shares
pursuant thereto shall comply with all applicable provisions of foreign, state
and federal law, including, without limitation, the Securities Act of 1933, as
amended, and the Exchange Act, and the rules and regulations promulgated
thereunder, and the requirements of any stock exchange upon which the shares may
then be listed, and shall be further subject to the approval of counsel for the
Company with respect to such compliance. The Program Administrators may also
require an Optionee to furnish evidence satisfactory to the Company, including a
written and signed representation letter and consent to be bound by any transfer
restrictions imposed by law, legend, condition, or otherwise, that the shares
are being purchased only for investment purposes and without any present
intention to sell or distribute the shares in violation of any state or federal
law, rule, or regulation. Further, each Optionee shall consent to the imposition
of a legend on the shares of Common Stock subject to his or her option and the
imposition of stop-transfer instructions restricting their transferability as
required by law or by this Section 2.
Section 3. Adjustments to Number and Purchase Price of Optioned
Shares. All options granted pursuant to the terms of this Directors Plan shall
be adjusted in a manner prescribed by Article 6 of the General Provisions of the
Program.
36
PART VI
STOCK APPRECIATION RIGHTS PLAN
Section 1. SAR Terms and Conditions. The purpose of this Stock
Appreciation Rights Plan (the "SAR Plan") is to promote the growth and general
prosperity of the Company by permitting the Company to grant restricted shares
to help attract and retain superior personnel for positions of substantial
responsibility with the Company and its subsidiaries and to provide individuals
with an additional incentive to contribute to the success of the Company. The
terms and conditions of SARs granted under the SAR Plan may differ from one
another as the Program Administrators shall, in their discretion, determine in
each SAR agreement (the "SAR Agreement"). Unless any provision herein indicates
to the contrary, this SAR Plan shall be subject to the General Provisions of the
Program.
Section 2. Duration of SARs. Each SAR and all rights thereunder
granted pursuant to the terms of the SAR Plan shall expire on the date
determined by the Program Administrators as evidenced by the SAR Agreement, but
in no event shall any SAR expire later than ten (10) years from the date on
which the SAR is granted. In addition, each SAR shall be subject to early
termination as provided in the SAR Plan.
Section 3. Grant. Subject to the terms and conditions of the SAR
Agreement, the Program Administrators may grant the right to receive a payment
upon the exercise of a SAR which reflects the appreciation in the Fair Market
Value of the number of shares of Common Stock for which such SAR was granted to
any person who is eligible to receive Awards either: (i) in tandem with the
grant of an Incentive Option; (ii) in tandem with the grant of a Nonqualified
Option: or (iii) independent of the grant of an Incentive Option or Nonqualified
Option. Each grant of a SAR which is in tandem with the grant of an Incentive
Option or Nonqualified Option shall be evidenced by the same agreement as the
Incentive Option or Nonqualified Option which is granted in tandem with such SAR
and such SAR shall relate to the same number of shares of Common Stock to which
such Option shall relate and such other terms and conditions as the Program
Administrators, in their sole discretion, deem are not inconsistent with the
terms of the SAR Plan, including conditions on the exercise of such SAR which
relate to the employment of the Plan Participant or any requirement that the
Plan Participant exchange a prior outstanding option and/or SAR.
Section 4. Payment at Exercise. Upon the settlement of a SAR in
accordance with the terms of the SAR Agreement, the Plan Participant shall
(subject to the terms and conditions of the SAR Plan and SAR Agreement) receive
a payment equal to the excess, if any, of the SAR Exercise Price (as defined
below) for the number of shares of the SAR being exercised at that time over the
SAR Grant Price (as defined below) for such shares. Such payment may be paid in
cash or in shares of the Company's Common Stock or by a combination of the
foregoing, at the time of exercise of the SAR specified by the Program
Administrators in the SAR Agreement. If any portion of the payment is paid
shares of the Company's Common Stock, such shares shall be valued for this
purpose at the SAR Exercise Price on the date the SAR is exercised and any
payment in shares which calls for a payment in fractional share shall
automatically be paid in cash based on such valuation. As used herein, "SAR
Exercise Date" shall mean the date on which the exercise of a SAR occurs under
the SAR Agreement, "SAR Exercise Price" shall mean the Fair Market Value of a
shares of Common Stock on a SAR Exercise Date and "SAR Grant Price" shall mean
the price which would have been the option exercise price for one share of
Common Stock if the SAR had been granted as an option, or if the SAR granted in
tandem with an option, the option exercise price per share for the related
option.
37
Section 5. Special Terms and Conditions. Each SAR Agreement which
evidences the grant of a SAR shall incorporate such terms and conditions as the
Program Administrators in their absolute discretion deem are not inconsistent
with the terms of the SAR Plan and the agreement for Incentive Option or
Nonqualified Option, if any, granted in tandem with such SAR except that: (i) if
a SAR is granted in tandem with an Incentive Option or Nonqualified Option, the
SAR shall be exercisable only when the related Incentive Option or Nonqualified
Option is exercisable; and (ii) the Plan Participant's right to exercise a SAR
granted in tandem with an Incentive Option or Nonqualified Option shall be
forfeited to the extent that the Plan Participant exercises the related
Incentive Option or Nonqualified Option and the Plan Participant's right to
exercise the Incentive Option or Nonqualified Option shall be forfeited to the
extent the Plan Participant exercises the related SAR, but any such forfeiture
shall not count as a forfeiture for purposes of making the shares subject to
such option or SAR again available for use under the General Provisions of the
Plan.
Section 6. Compliance with Securities Laws. Shares shall not be
issued with respect to any option granted under the SAR Plan, unless the
exercise of that option and the issuance and delivery of the shares pursuant
thereto shall comply with all applicable provisions of foreign, state and
federal law, including, without limitation, the Securities Act of 1933, as
amended, and the Exchange Act, and the rules and regulations promulgated
thereunder, and the requirements of any stock exchange upon which the shares may
then be listed, and shall be further subject to the approval of counsel for the
Company with respect to such compliance. The Program Administrators may also
require an Optionee to furnish evidence satisfactory to the Company, including a
written and signed representation letter and consent to be bound by any transfer
restrictions imposed by law, legend, condition, or otherwise, that the shares
are being purchased only for investment purposes and without any present
intention to sell or distribute the shares in violation of any state or federal
law, rule, or regulation. Further, each Optionee shall consent to the imposition
of a legend on the shares of Common Stock subject to his or her option and the
Imposition of stop-transfer instructions restricting their transferability as
required by law' or by this Section 6.
Section 7. Continued Employment or Service. Each Optionee, if
requested by the Program Administrators, must agree in writing as a condition of
receiving his or her option, to remain in the employment of, or service to, the
Company or any of its subsidiaries following the date of the granting of that
option for a period specified by the Program Administrators. Nothing in this SAR
Plan or in any option granted hereunder shall confer upon any Optionee any right
to continued employment by, or service to, the Company or any of its
subsidiaries, or limit in any way the right of the Company or any subsidiary at
any time to terminate or alter the terms of that employment or service
arrangement.
Section 8. Option Rights Upon Termination of Employment or Service.
If an Optionee under this SAR Plan ceases to be employed by, or provide services
to, the Company or any of its subsidiaries for any reason other than death or
disability, his or her option shall immediately terminate; provided, however,
that the Program Administrators may, in their sole and absolute discretion.
allow the option to be exercised, to the extent exercisable on the date of
termination of employment or service, at any time within sixty (60) days after
the date of termination of employment or service, unless either the option or
this Nonqualified Plan otherwise provides for earlier termination.
Section 9. Option Rights Upon Disability. If an Optionee becomes
disabled within the meaning of Code Section 422 (e) (3) while employed by the
Company or any subsidiary corporation, the Program Administrators, in their
discretion, may allow the option to be exercised, to the extent exercisable on
the date of termination of employment, at any time within one year after the
date of termination of employment due to disability, unless either the option or
the SAR Plan otherwise provides for earlier termination.
38
PART VII
OTHER STOCK RIGHTS PLAN
Section 1. Terms and Conditions. The purpose of the Other Stock
Rights Plan (the "Stock Rights Plan") is to promote the growth and general
prosperity of the Company by permitting the Company to grant restricted shares
to help attract and retain superior personnel for positions of substantial
responsibility with the Company and its subsidiaries to provide individuals with
an additional incentive to the success of the Company. The terms and conditions
of Performance Shares, Stock Payments or Dividend Equivalent Rights granted
under the Stock Rights Plan may differ from one another as the Program
Administrators shall, in their discretion, determine in each stock rights
agreement (the `Stock Rights Agreement"). Unless any provision herein indicates
to the contrary, this Stock Rights Plan shall be subject to the General
Provisions of the Program.
Section 2. Duration. Each Performance Share or Dividend Equivalent
Right and all rights thereunder granted pursuant to the terms of the Stock
Rights Plan shall expire on the date determined by the Program Administrators as
evidenced by the Stock Rights Agreement, but in no event shall any Performance
Shares or Dividend Equivalent Rights expire later than ten (10) years from the
date on which the Performance Shares or Dividend Equivalent Rights are granted.
In addition, each Performance Share, Stock Payment or Dividend Equivalent Right
shall be subject to early termination as provided in the Stock Rights Plan.
Section 3. Grant. Subject to the terms and conditions of the Stock
Rights Agreement, the Program Administrators may grant Performance Shares, Stock
Payments or Dividend Equivalent Rights as provided under the Stock Rights Plant.
Each grant of Performance Shares, Dividend Equivalent Rights and Stock Payments
shall be evidenced by a Stock Rights Agreement, which shall state the terms and
conditions of each as the Program Administrators, in their sole discretion, deem
are not inconsistent with the terms of the Stock Rights Plan.
Section 4. Performance Shares. Performance Shares shall become
payable to a Plan Participant based upon the achievement of specified
Performance Objectives and upon such other terms and conditions as the Program
Administrators may determine and specify in the Stock Rights Agreement
evidencing such Performance Shares. Each grant shall satisfy the conditions for
performance-based awards hereunder and under the General Provisions. A grant may
provide for the forfeiture of Performance Shares in the event of termination of
employment or other events, subject to exceptions for death, disability,
retirement or other events, all as the Program Administrators may determine and
specify in the Stock Rights Agreement for such grant. Payment may be made for
the Performance Shares at such time and in such form as the Program
Administrators shall determine and specify in the Stock Rights Agreement and
payment for any Performance Shares may be made in full in cash or by certified
cashier's check payable to the order of the Company or, if permitted by the
Program Administrators, by shares of the Company's Common Stock or by the
surrender of all or part of an Award, or in other property, rights or credits
deemed acceptable by the Program Administrators or, if permitted by the Program
Administrators, by a combination of the foregoing. If any portion of the
purchase price is paid in shares of the Company's Common Stock, those shares
shall be tendered at their then Fair Market Value as determined by the Program
Administrators in accordance herewith. Payment in shares of Common Stock
includes the automatic application of shares of Common Stock received upon the
exercise or settlement of Performance Shares or other option or Award to satisfy
the exercise or settlement price.
39
Section 5. Stock Payments. The Program Administrators may grant
Stock Payments to a person eligible to receive the same as a bonus or additional
compensation or in lieu of the obligation of the Company or a subsidiary to pay
cash compensation under other compensatory arrangements, with or without the
election of the eligible person, provided that the Plan Participant will be
required to pay an amount equal to the aggregate par value of any newly issued
Stock Payments. A Plan Participant shall have all the voting, dividend,
liquidation and other rights with respect to shares of Common Stock issued to
the Plan Participant as a Stock Payment upon the Plan Participant becoming
holder of record of such shares of Common Stock; provided, however, the Program
Administrators may impose such restrictions on the assignment or transfer of
such shares of Common Stock as they deem appropriate and as are evidenced in the
Stock Rights Agreement for such Stock Payment.
Section 6. Dividend Equivalent Rights. The Program Administrators
may grant Dividend Equivalent Rights in tandem with the grant of Incentive
Option or Nonqualified Option, SAR's, Restricted Shares or Performance Shares
that otherwise do not provide for the payment of dividends on the shares of
Common Stock subject to such awards for the period of time to which such
Dividend Equivalent Rights apply, or may grant Dividend Equivalent Rights that
are independent of any other such award. A Dividend Equivalent Right granted in
tandem with another award may be evidenced by the agreement for such other
award; otherwise, a Dividend Equivalent Right shall be evidenced by a separate
Stock Rights Agreement. Payment may be made by the Company in cash or by shares
of the Company's Common Stock or by a combination of the foregoing, may be
immediate or deferred and may be subject to such employment, performance
objectives or other conditions as the Program Administrators may determine and
specify in the Stock Rights Agreement for such Dividend Equivalent Rights. The
total payment attributable to a share of Common Stock subject to a Dividend
Equivalent Right shall not exceed one hundred percent (100%) of the equivalent
dividends payable with respect to an outstanding share of Common Stock during
the term of such Dividend Equivalent Right, taking into account any assumed
investment (including assumed reinvestment in shares of Common Stock) or
interest earnings on the equivalent dividends as determined under the Stock
Rights Agreement in the case of a deferred payment, provided that such
percentage may increase to a maximum of two hundred percent (200%) if a Dividend
Equivalent Right is subject to a Performance Objective.
Section 7. Compliance with Securities Laws. Shares shall not be
issued with respect to any option granted under the Stock Rights Plan, unless
the exercise of that option and the issuance and delivery of the shares pursuant
thereto shall comply with all applicable provisions of foreign, state and
federal law, including, without limitation, the Securities Act of 1933, as
amended, and the Exchange Act, and the rules and regulations promulgated
thereunder, and the requirements of any stock exchange upon which the shares may
then be listed, and shall be further subject to the approval of counsel for the
Company with respect to such compliance. The Program Administrators may also
require an Optionee to furnish evidence satisfactory to the Company, including a
written and signed representation letter and consent to be bound by any transfer
restrictions imposed by law, legend, condition, or otherwise, that the shares
are being purchased only for investment purposes and without any present
intention to sell or distribute the shares in violation of any state or federal
law, rule, or regulation. Further, each Optionee shall consent to the imposition
of a legend on the shares of Common Stock subject to his or her option and the
imposition of stop-transfer instructions restricting their transferability as
required by law or by this Section 7.
Section 8. Continued Employment or Service. Each Optionee, if
requested by the Program Administrators, must agree in writing as a condition of
receiving his or her option, to remain in the employment of, or service to, the
Company or any of its subsidiaries following the date of the granting of that
option for a period specified by the Program Administrators. Nothing in this
Stock Rights Plan in any option granted hereunder shall confer upon any Optionee
any right to continued employment by. or service to. the Company or any of its
subsidiaries, or limit in any way the right of the Company or any subsidiary at
any time to terminate or alter the terms of that employment or service
40
arrangement.
Section 9. Option Rights Upon Termination of Employment or Service.
If an Optionee under this Stock Rights Plan an ceases to be employed by, or
provide services to, the Company or any of its subsidiaries for any reason other
than death or disability, his or her option shall immediately terminate;
provided, however, that the Program Administrators may, in their sole and
absolute discretion, allow the option to be exercised, to the extent exercisable
on the date of termination of employment or service, at any time within sixty
(60) days after the date of termination of employment or service, unless either
the option or this Stock Rights Plan otherwise provides for earlier termination.
Section 10. Option Rights Upon Disability. If an Optionee becomes
disabled within the meaning of Code Section 422 (e) (3) while employed by the
Company or any subsidiary corporation, the Program Administrators, in their
discretion, may allow the option to be exercised, to the extent exercisable on
the date of termination of employment, at any time within one year after the
date of termination of employment due to disability, unless either the option or
the Stock Rights Plan otherwise provides for earlier termination.
41