<PAGE>
As filed with the Securities and Exchange Commission on December 17, 1999
Registration No. 333-
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
UBID, INC.
(Exact name of Registrant as specified in its charter)
Delaware 33-0775328
(State of Other Jurisdiction (I.R.S. Employer
of Incorporation of Organization) Identification No.)
8550 West Bryn Mawr Avenue, Suite 200
Chicago, Illinois 60631-3203
(Address of Principal Executive Offices)
Nonqualified Stock Option Agreement between uBid, Inc. and Kenneth Dotson
(Full Title of Plan)
______________________________________________
Gregory K. Jones
President and Chief
Executive Officer
uBid, Inc.
8550 W. Bryn Mawr Avenue, Suite 200
Chicago, Illinois 60631-3203
(Name and Address of Agent for Service)
(773) 272-5000
(Telephone Number, Including Area Code, of Agent For Service)
Copy to:
Robert M. Mattson, Jr., Esq.
Morrison & Foerster LLP
19900 MacArthur Boulevard
Irvine, California 92612
(949) 251-7500
__________________________________________________
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
=============================================================================================
Proposed
Amount Maximum Maximum Amount of
Title of Securities to be Offering Price Aggregate offering Registration
to be Registered Registered Per Share(1) Price(1) Fee
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $.001
par value per share 180,000 shares $37.00 $6,660,000 $1,759
=============================================================================================
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee.
Pursuant to Rule 457(h) under the Securities Act, the proposed maximum
offering price per share and the proposed maximum aggregate offering price
have been determined on the basis of the exercise price of options granted
pursuant to the Nonqualified Stock Option Agreement between the Registrant
and the individual named above.
In addition, pursuant to Rule 416(c) under the Securities Act, this
Registration Statement also covers an indeterminate amount of interests to
be offered or sold pursuant to the employee benefit plans described herein.
================================================================================
<PAGE>
PART I
INFORMATION REQUIRED IN THE SECTION 10(a) PROSPECTUS
The documents containing the information specified in Part I of Form S-8
(plan information and registrant information and employee plan annual
information) will be sent or given to employees as specified by Securities and
Exchange Commission Rule 428 (b)(1). Such documents need not be filed with the
Securities and Exchange Commission either as part of this Registration Statement
or as prospectuses or prospectus supplements pursuant to Rule 424. These
documents and the documents incorporated by reference in this Registration
Statement pursuant to Item 3 of Form S-8 (Part II hereof), taken together,
constitute a prospectus that meets the requirements of Section 10(a) of the
Securities Act of 1933, as amended (the "Securities Act").
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
Item 3. Incorporation of Documents by Reference.
The following documents filed by the Registrant with the Securities and
Exchange Commission (the "Commission") are incorporated by reference herein:
(a) The Registrant's Annual Report on Form 10-K for the fiscal year ended
December 31, 1998, which includes audited financial statements for the
Registrant's latest fiscal year.
(b) All other reports filed by the Registrant pursuant to Sections 13(a) or
15(d) of the Securities Exchange Act of 1934 (the "Exchange Act") since the end
of the fiscal year covered by the audited financial statements described in (a)
above.
(c) The description of the Registrant's Common Stock which is contained in
its Registration Statement on Form 8-A filed November 30, 1998 under the
Exchange Act, including any amendment or report filed for the purpose of
updating such description.
All documents filed by the Registrant with the Commission pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act, and prior to the filing
of a post-effective amendment which indicates that all securities offered have
been sold or which deregisters all securities then remaining unsold shall be
deemed to be incorporated by reference into this Registration Statement and to
be a part hereof from the date of filing of such documents. Any statement
contained in a document incorporated by reference herein shall be deemed to be
modified or superseded for purposes of this Registration Statement to the extent
that a statement contained herein or in any other subsequently filed document
which also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any statement so modified or superseded shall not be
deemed, except as so modified or superseded, to constitute a part of this
Registration Statement.
1
<PAGE>
Item 4. Description of Securities.
Not applicable.
Item 5. Interests of Named Experts and Counsel.
Not applicable.
Item 6. Indemnification of Directors and Officers.
Section 145 of the Delaware General Corporation Law (the "DGCL") provides
that a corporation may indemnify directors and officers as well as other
employees and individuals against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement in connection with specified
actions, suits or proceedings, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation, a
"derivative action") if they acted in good faith and in a manner they reasonably
believed to be in or not opposed to the best interests of the corporation, and,
with respect to any criminal action or proceeding, if they had no reasonable
cause to believe their conduct was unlawful. A similar standard is applicable in
the case of derivative actions, except that indemnification only extends to
expenses (including attorneys' fees) incurred in connection with the defense or
settlement of such actions, and the statute requires court approval before there
can be any indemnification where the person seeking indemnification has been
found liable to the corporation. The statute provides that it is not exclusive
of other indemnification that may be granted by a corporation's bylaws,
disinterested director vote, stockholder vote, agreement or otherwise.
The Registrant's Amended and Restated Certificate of Incorporation and
Amended and Restated Bylaws provide that the Registrant will indemnify its
directors and officers, and may indemnify any of its employees and agents, to
the fullest extent permitted by Delaware law. The Registrant is generally
required to indemnify its directors and officers for all judgments, fines,
penalties, settlements, legal fees and other expenses incurred in connection
with pending, threatened or completed legal proceedings because of the
director's or officer's position with the Registrant or another entity that the
director or officer serves at the Registrant's request, subject to certain
conditions on advance funds to its directors and officers to enable them to
defend against such proceedings.
The DGCL permits a corporation to provide in its certificate of
incorporation that a director of the corporation shall not be personally liable
to the corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director, except for liability for (i) any breach of the
director's duty of loyalty to the corporation or its stockholders, (ii) acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) payments of unlawful dividends or unlawful stock
repurchases or redemptions, or (iv) any transaction from which the director
derived an improper personal benefit.
The Amended and Restated Certificate of Incorporation contains a
provision that is designed to limit the director's liability to the extent
permitted by the DGCL and any amendments thereto. Specifically, directors will
not be personally liable to the Company or its stockholders for monetary damages
for breach of fiduciary duty as a director, except for liability as a result of:
(i) any breach of the duty of loyalty to the Registrant or its stockholders;
(ii)
2
<PAGE>
actions or omissions not in good faith or which involve intentional misconduct
or a knowing violation of law; (iii) payment of an improper dividend or improper
repurchase of the Registrant's stock under Section 174 of the DGCL; or (iv)
actions or omissions pursuant to which the director derived an improper personal
benefit. The principal effect of the limitation of liability provision is that a
stockholder is unable to prosecute an action for monetary damages against a
director of the Company unless the stockholder can demonstrate one of the
specified bases for liability. The provision, however, does not eliminate or
limit director liability arising in connection with causes of action brought
under the federal securities laws. The Amended and Restated Certificate of
Incorporation does not eliminate a director's duty of care.
The Company has entered into indemnification agreements with its
directors and executive officers that provide the maximum indemnity available to
directors and officers under Section 145 of the Delaware General Corporation Law
and its bylaws, as well as certain additional procedural protections. These
indemnity agreements provide generally that the Company will advance expenses
incurred by directors and executive officers in any action or proceeding as to
which they may be indemnified, and require the Company to indemnify these
individuals to the fullest extent permitted by law.
The Separation and Distribution Agreement by and between the Company and
Creative Computers, Inc. ("Creative") dated as of December 7, 1999, as amended,
provides for indemnification by the Registrant of Creative and its directors,
officers and employees for certain liabilities, including liabilities under the
Securities Act.
Item 7. Exemption From Registration Claimed.
Not applicable.
Item 8. Exhibits.
4.1 Form of Notice of Stock Option Grant and Nonqualified Stock Option
Agreement between the Registrant and Kenneth Dotson
5.1 Opinion of Morrison & Foerster LLP
23.1 Consent of Morrison & Foerster LLP (contained in Exhibit 5.1)
23.2 Consent of Ernst & Young LLP
24.1 Power of Attorney (See signature page)
Item 9. Undertakings.
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
3
<PAGE>
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of this Registration Statement (or the most recent post-
effective amendment thereof) which, individually or in the aggregate, represent
a fundamental change in the information set forth in this Registration
Statement. Notwithstanding the foregoing, any increase or decrease in volume of
securities offered (if the total dollar value of securities offered would not
exceed that which was registered) and any deviation from the low or high end of
the estimated maximum offering range may be reflected in the form of prospectus
filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than 20 percent change in the
maximum offering price set forth in the "Calculation of Registration Fee" table
in the effective Registration Statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in this Registration Statement or any
material change to such information in the Registration Statement;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if this
Registration Statement is on Form S-3, Form S-8 or Form F-3, and the information
required to be included in a post-effective amendment by those paragraphs is
contained in periodic reports filed with or furnished to the Commission by the
Registrant pursuant to Section 13 or Section 15(d) of the Exchange Act that are
incorporated by reference in this Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered herein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Exchange Act (and, where applicable, each filing of an employee benefit plan's
annual report pursuant to Section 15(d) of the Exchange Act) that is
incorporated by reference in this Registration Statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions or otherwise, the Registrant has
been advised that, in the opinion of the Commission, such indemnification is
against public policy as expressed in the Securities Act, and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred by a
director, officer or controlling person of the Registrant in the successful
defense or any action, suit or proceeding) is
4
<PAGE>
asserted by such director, officer or controlling person in connection with the
securities being registered, the Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, uBid, Inc. certifies that
it has reasonable grounds to believe that it meets all of the requirements for
filing on Form S-8 and has duly caused this Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Chicago, State of Illinois, on December 15, 1999.
UBID, INC.
By:/s/ Gregory K. Jones
------------------------------------
Gregory K. Jones
President and Chief Executive Officer
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints Gregory K.
Jones and Thomas E. Werner, and each of them, as attorneys-in-fact, each with
the power of substitution, for him or her in any and all capacities, to sign any
amendment to this Registration Statement and to file the same, with exhibits
thereto and other documents in connection therewith, with the Commission,
granting to said attorneys-in-fact, and each of them, full power and authority
to do and perform each and every act and thing requisite and necessary to be
done in connection therewith, as fully to all intents and purposes as he or she
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact or any of them, or their or his substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed below by the following persons in the capacities and
on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- -----
<S> <C> <C>
/s/ Gregory K. Jones Chairman of the Board of Directors, President and Chief December 15, 1999
- ------------------------------
Gregory K. Jones Executive Officer (Principal Executive Officer)
/s/ Thomas E. Werner Chief Financial Officer (Principal Financial and December 14, 1999
- ------------------------------
Thomas E. Werner Accounting Officer)
/s/ Mark C. Layton Director December 16, 1999
- ------------------------------
Mark C. Layton
/s/ Allen Lenzmeier Director December 15, 1999
- ------------------------------
Allen Lenzmeier
/s/ Howard A. Tullman Director December 14, 1999
- ------------------------------
Howard A. Tullman
</TABLE>
6
<PAGE>
<TABLE>
<S> <C> <C>
Director
- ------------------------------
Norman H. Wesley
/s/ Russell I. Pillar Director December 14, 1999
- ------------------------------
Russell I. Pillar
</TABLE>
7
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description
- ------ -----------
4.1 Form of Notice of Stock Option Grant and Nonqualified Stock Option
Agreement between the Registrant and Kenneth Dotson
5.1 Opinion of Morrison & Foerster LLP
23.1 Consent of Morrison & Foerster LLP (contained in Exhibit 5.1)
23.2 Consent of Ernst & Young LLP
24.1 Power of Attorney (See signature page)
8
<PAGE>
EXHIBIT 4.1
UBID, INC.
NOTICE OF STOCK OPTION AWARD
----------------------------
Grantee's Name and Address: Kenneth Dotson
-------------------------
332 Isle of Palms
-------------------------
Fort Lauderdale, FL 33301
-------------------------
You have been granted an option to purchase shares of Common Stock of the
Company, subject to the terms and conditions of this Notice of Stock Option
Award (the "Notice") and the Stock Option Agreement (the "Option Agreement")
attached hereto, as follows:
Award Number _____________________
Date of Award November 11, 1999
---------------------
Vesting Commencement Date November 11, 1999
---------------------
Exercise Price per Share $37.00
---------------------
Total Number of Shares subject
to the Option 180,000 shares
---------------------
Total Exercise Price $6,660,000
---------------------
Type of Option: ___ Incentive Stock Option
X Non-Qualified Stock Option
---
Expiration Date: November 10, 2009
-----------------
Post-Termination Exercise Period: 90 days after the termination of
Grantee's Continuous Service
(other than in the case of death
or Disability as provided in the
Option Agreement)
Vesting Schedule:
- ----------------
Subject to Grantee's Continuous Service and other limitations set forth in
this Notice and the Option Agreement, the Option may be exercised, in whole or
in part, in accordance with the following schedule:
25% of the Shares subject to the Option shall vest twelve months after the
Vesting Commencement Date, and an additional 25% of the Shares subject to the
Option shall vest on each yearly anniversary of the Vesting Commencement Date
thereafter.
If Grantee's employment with the Company is terminated other than for
"Cause" (as defined in the Option Agreement), the unvested portion of the Shares
subject to the Option shall vest and become exercisable as follows: (i) if such
termination occurs during the first year of Grantee's employment with the
Company, the first 25% of the Shares subject to the Option shall
<PAGE>
become vested and exercisable as of the date of such termination, and (ii) if
such termination occurs after the first year of Grantee's employment with the
Company, this Option shall vest as to the next 25% installment of shares (the
"Accelerated Installment") if any, together with prorated additional vesting of
a portion of any other unvested Shares covered by this Option calculated by (x)
subtracting the number of full months remaining until the normal annual vesting
date of the Accelerated Installment from 12, (y) dividing the difference by 12
and multiplying the resulting fraction times the number of shares, if any,
covered by the next 25% installment. If Grantee's employment with the Company is
terminated for Cause, the unvested portion of the Option shall terminate on the
date of such termination.
Capitalized terms not defined in this Notice have the meanings given them
in the Option Agreement.
IN WITNESS WHEREOF, the Company and the Grantee have executed this Notice
and agree that the Option is to be governed by the terms and conditions of this
Notice and the Option Agreement.
uBID, INC., a Delaware corporation
By:________________________________________
Title:_____________________________________
THE GRANTEE ACKNOWLEDGES AND AGREES THAT THE SHARES SUBJECT TO THE OPTION SHALL
VEST, IF AT ALL, ONLY DURING THE PERIOD OF GRANTEE'S CONTINUOUS SERVICE (NOT
THROUGH THE ACT OF BEING HIRED, BEING GRANTED THE OPTION OR ACQUIRING SHARES
HEREUNDER). THE GRANTEE FURTHER ACKNOWLEDGES AND AGREES THAT NOTHING IN THIS
NOTICE, THE OPTION AGREEMENT SHALL CONFER UPON THE GRANTEE ANY RIGHT WITH
RESPECT TO CONTINUATION OF GRANTEE'S CONTINUOUS SERVICE, NOR SHALL IT INTERFERE
IN ANY WAY WITH THE GRANTEE'S RIGHT OR THE COMPANY'S RIGHT TO TERMINATE
GRANTEE'S CONTINUOUS SERVICE, WITH OR WITHOUT CAUSE.
The Grantee acknowledges receipt of a copy of the Option Agreement, and
represents that he or she is familiar with the terms and provisions thereof, and
hereby accepts the Option subject to all of the terms and provisions hereof and
thereof. The Grantee has reviewed this Notice and the Option Agreement in their
entirety, has had an opportunity to obtain the advice of counsel prior to
executing this Notice, and fully understands all provisions of this Notice and
the Option Agreement. The Grantee hereby agrees to accept as binding,
conclusive and final all decisions or interpretations of the Administrator upon
any questions arising under this Notice or the Option Agreement. The Grantee
further agrees to notify the Company upon any change in the residence address
indicated in this Notice.
Dated: ______________________ Signed:____________________________________
Grantee
<PAGE>
uBID, INC.
NON-QUALIFIED STOCK OPTION AGREEMENT
------------------------------------
(NON-PLAN)
----------
RECITALS:
A. uBid, Inc., a Delaware corporation (the "Company"), recognizes the
value of the services of the Grantee (the "Grantee") named in the Notice of
Stock Option Award (the "Notice") to the Company and desires to motivate Grantee
in Grantee's work for the Company and its affiliates, and the Company recognizes
that the grant of the rights and options provided for in this Agreement are an
inducement essential to Grantee's having entered into an employment relationship
with the Company.
B. The Company has determined that it would be to the advantage and in the
interest of the Company and its shareholders to grant the rights and options
provided for in this Agreement to Grantee as an incentive for increased efforts
on behalf of the Company and its affiliates.
AGREEMENT
Based on the foregoing and the agreements set forth herein, the parties agree
as follows:
1. Grant of Option. The Company hereby grants to the Grantee named in the
---------------
Notice an option (the "Option") to purchase the Total Number of Shares of Common
Stock subject to the Option (the "Shares") set forth in the Notice, at the
Exercise Price per Share set forth in the Notice (the "Exercise Price") subject
to the terms and provisions of the Notice and this Stock Option Agreement (the
"Option Agreement"), which are incorporated herein by reference.
2. Exercise of Option.
------------------
(a) Right to Exercise. The Option shall be exercisable during its term
-----------------
in accordance with the Vesting Schedule set out in the Notice and with the
applicable provisions of this Option Agreement. No partial exercise of the
Option may be for less than the lesser of five percent (5%) of the total number
of Shares subject to the Option or the remaining number of Shares subject to the
Option. In no event shall the Company issue fractional Shares.
(b) Method of Exercise. The Option shall be exercisable only by
------------------
delivery of an Exercise Notice (attached as Exhibit A) which shall state the
---------
election to exercise the Option, the whole number of Shares in respect of which
the Option is being exercised, such other representations and agreements as to
the holder's investment intent with respect to such Shares and such other
provisions as may be required by the Administrator. The Exercise Notice shall
be signed by the Grantee and shall be delivered in person or by certified mail
to the Secretary of the Company accompanied by payment of the Exercise Price.
The Option shall be deemed to be exercised upon receipt by the Company of such
written notice accompanied by the Exercise Price.
1
<PAGE>
No Shares will be issued pursuant to the exercise of the Option unless
such issuance and such exercise shall comply with all Applicable Laws. Assuming
such compliance, for income tax purposes, the Shares shall be considered
transferred to the Grantee on the date on which the Option is exercised with
respect to such Shares.
(c) Taxes. No Shares will be delivered to the Grantee or other person
-----
pursuant to the exercise of the Option until the Grantee or other person has
made arrangements acceptable to the Administrator for the satisfaction of
foreign, federal, state and local income and employment tax withholding
obligations.
3. Method of Payment. Payment of the Exercise Price shall be by any of
-----------------
the following, or a combination thereof, at the election of the Grantee;
provided, however, that such exercise method does not then violate any
Applicable Law and, provided further, that the portion of the Exercise Price
equal to the par value of the Shares must be paid in cash or other legal
consideration permitted by the Delaware General Corporation Law:
(a) cash;
(b) check;
(c) surrender of Shares or delivery of a properly executed form of
attestation of ownership of Shares as the Administrator may require (including
withholding of Shares otherwise deliverable upon exercise of the Option) which
have a Fair Market Value on the date of surrender or attestation equal to the
aggregate Exercise Price of the Shares as to which the Option is being exercised
(but only to the extent that such exercise of the Option would not result in an
accounting compensation charge with respect to the Shares used to pay the
exercise price); or
(d) through a broker-dealer sale and remittance procedure pursuant to
which the Grantee (A) shall provide written instructions to a Company designated
brokerage firm to effect the immediate sale of some or all of the purchased
Shares and remit to the Company, out of the sale proceeds available on the
settlement date, sufficient funds to cover the aggregate exercise price payable
for the purchased Shares and (B) shall provide written directives to the Company
to deliver the certificates for the purchased Shares directly to such brokerage
firm in order to complete the sale transaction.
4. Restrictions on Exercise. The Option may not be exercised if the
------------------------
issuance of the Shares subject to the Option upon such exercise would constitute
a violation of any Applicable Laws.
5. Termination or Change of Continuous Service. In the event the
-------------------------------------------
Grantee's Continuous Service terminates, the Grantee may, to the extent
otherwise so entitled at the date of such termination (the "Termination Date"),
exercise the Option at any time during the Post-Termination Exercise Period. In
no event shall the Option be exercised later than the Expiration Date set forth
in the Notice. In the event of the Grantee's change in status from Employee to
Consultant or Consultant to Employee, the Option shall remain in effect and
continue to vest. Except as provided in Sections 6 and 7 below, to the extent
that the Grantee is not entitled to
2
<PAGE>
exercise the Option on the Termination Date, or if the Grantee does not exercise
the Option prior to the Post-Termination Exercise Period, the Option shall
terminate.
6. Disability of Grantee. In the event the Grantee's Continuous Service
---------------------
terminates as a result of his or her Disability, the Grantee may, but only
within twelve (12) months from the Termination Date (but in any event not later
than the Expiration Date), exercise the Option to the extent he or she was
otherwise entitled to exercise it on the Termination Date. To the extent that
the Grantee is not entitled to exercise the Option on the Termination Date, or
if the Grantee does not exercise the Option to the extent so entitled within the
time specified herein, the Option shall terminate.
7. Death of Grantee. In the event of the termination of the Grantee's
----------------
Continuous Service as a result of his or her death, or in the event of the
Grantee's death during the Post-Termination Exercise Period, the Grantee's
estate, or a person who acquired the right to exercise the Option by bequest or
inheritance, may exercise the Option, but only to the extent the Grantee could
exercise the Option at the date of termination, at any time within twelve (12)
months from the date of such termination (but in any event not later than the
Expiration Date). To the extent that the Grantee is not entitled to exercise
the Option on the date of death, or if the Option is not exercised to the extent
so entitled within the time specified herein, the Option shall terminate.
8. Transferability of Option. The Option, if an Incentive Stock Option,
-------------------------
may not be transferred in any manner other than by will or by the laws of
descent or distribution and may be exercised during the lifetime of the Grantee
only by the Grantee. The Option, if a Non-Qualified Stock Option, may be
transferred by the Grantee in a manner and to the extent acceptable to the
Administrator as evidenced by a writing signed by the Company and the Grantee.
The terms of the Option shall be binding upon the executors, administrators,
heirs and successors of the Grantee.
9. Term of Option. The Option may be exercised no later than the
--------------
Expiration Date set forth in the Notice or such earlier date as otherwise
provided herein.
10. Corporate Transaction.
---------------------
(a) Definition. For the purposes of this Option Agreement, "Corporate
----------
Transaction" shall mean any of the following transactions:
(i) a merger or consolidation in which the Company is not the
surviving entity, except for a transaction the principal purpose of which is to
change the state in which the Company is incorporated;
(ii) the sale, transfer or other disposition of all or
substantially all of the assets of the Company (including the capital stock of
the Company's subsidiary corporations) in connection with the complete
liquidation or dissolution of the Company;
(iii) any reverse merger in which the Company is the surviving
entity but in which securities possessing more than fifty percent (50%) of the
total combined voting power of the Company's outstanding securities are
transferred to a person or persons different from those who held such securities
immediately prior to such merger; or
3
<PAGE>
(iv) an acquisition by any person or related group of persons
(other than the Company or by a Company-sponsored employee benefit plan) of
beneficial ownership (within the meaning of Rule 13d-3 of the Exchange Act) of
securities possessing more than fifty percent (50%) of the total combined voting
power of the Company's outstanding securities), but excluding any such
transaction that the Administrator determines shall not be a Corporate
Transaction for purposes of the Company's employee benefit plans.
(b) Effect. In the event of a Corporate Transaction, this Option shall
------
terminate upon the effective date of the Corporate Transaction; provided that,
immediately prior to the effective date of the Corporate Transaction, this
Option shall vest as to all then unvested Shares covered by this Option. The
Company shall give Grantee reasonable notice of a Corporate Transaction to
enable Grantee to exercise this Option prior to the effective date of the
Corporate Transaction to the extent this Option is then exercisable in
accordance with the terms of this Option Agreement.
11. Adjustments for Changes in Stock. If there should be any change in a
--------------------------------
class of stock subject to this option, through merger, consolidation,
reorganization, recapitalization, reincorporation, stock split, stock dividend
or other change in the capital structure of the Company (except for a Corporate
Transaction described in Section 10), the Company shall make appropriate
adjustments in order to preserve, but not to increase, the benefits to Grantee,
including adjustments in the number of Shares subject to this option and in the
price per share. Any new, substituted or additional securities or property
which is distributed with respect to the Shares ("Additional Securities") shall
be immediately subject to all the restrictions of this Agreement, but only to
the extent the Shares are at such time covered by such provisions. Any
adjustment made pursuant to this Section 11 as a consequence of a change in the
capital structure of the Company shall not entitle Grantee to acquire a number
of shares of such stock of the Company or shares of stock of any successor
company greater than the number of Shares Grantee would receive if, prior to
such change, Grantee had actually held a number of shares of such stock equal to
the number of Shares then subject to this Option. Grantee shall be entitled to
direct the Company to exercise any warrant or option received as Additional
Securities upon supplying the funds necessary to do so, in which event the
securities so purchased shall constitute Additional Securities, but the Grantee
may not direct Company to sell any such warrant or option. If Additional
Securities consist of a convertible security, Grantee may exercise any
conversion right, and any securities so acquired shall be deemed Additional
Securities.
12. Tax Consequences. Set forth below is a brief summary as of the date of
----------------
this Option Agreement of some of the federal tax consequences of exercise of the
Option and disposition of the Shares. THIS SUMMARY IS NECESSARILY INCOMPLETE,
AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE. THE GRANTEE SHOULD
CONSULT A TAX ADVISER BEFORE EXERCISING THE OPTION OR DISPOSING OF THE SHARES.
(a) Exercise of Incentive Stock Option. If the Option qualifies as an
----------------------------------
Incentive Stock Option, there will be no regular federal income tax liability
upon the exercise of the Option, although the excess, if any, of the Fair Market
Value of the Shares on the date of exercise over the Exercise Price will be
treated as income for purposes of the alternative
4
<PAGE>
minimum tax for federal tax purposes and may subject the Grantee to the
alternative minimum tax in the year of exercise.
(b) Exercise of Incentive Stock Option Following Disability. If the
-------------------------------------------------------
Grantee's Continuous Service terminates as a result of Disability that is not
total and permanent disability as defined in Section 22(e)(3) of the Code, to
the extent permitted on the date of termination, the Grantee must exercise an
Incentive Stock Option within three (3) months of such termination for the
Incentive Stock Option to be qualified as an Incentive Stock Option.
(c) Exercise of Non-Qualified Stock Option. On exercise of a Non-
--------------------------------------
Qualified Stock Option, the Grantee will be treated as having received
compensation income (taxable at ordinary income tax rates) equal to the excess,
if any, of the Fair Market Value of the Shares on the date of exercise over the
Exercise Price. If the Grantee is an Employee or a former Employee, the Company
will be required to withhold from the Grantee's compensation or collect from the
Grantee and pay to the applicable taxing authorities an amount in cash equal to
a percentage of this compensation income at the time of exercise, and may refuse
to honor the exercise and refuse to deliver Shares if such withholding amounts
are not delivered at the time of exercise.
(d) Disposition of Shares. In the case of a Non-Qualified Stock
---------------------
Option, if Shares are held for more than one year, any gain realized on
disposition of the Shares will be treated as long-term capital gain for federal
income tax purposes and subject to tax at a maximum rate of 20%. In the case of
an Incentive Stock Option, if Shares transferred pursuant to the Option are held
for more than one year after receipt of the Shares and are disposed more than
two years after the Date of Award, any gain realized on disposition of the
Shares also will be treated as capital gain for federal income tax purposes and
subject to the same tax rates and holding periods that apply to Shares acquired
upon exercise of a Non-Qualified Stock Option. If Shares purchased under an
Incentive Stock Option are disposed of prior to the expiration of such one-year
or two-year periods, any gain realized on such disposition will be treated as
compensation income (taxable at ordinary income rates) to the extent of the
difference between the Exercise Price and the lesser of (i) the Fair Market
Value of the Shares on the date of exercise, or (ii) the sale price of the
Shares.
13. Entire Agreement: Governing Law. The Notice and this Option Agreement
-------------------------------
constitute the entire agreement of the parties with respect to the subject
matter hereof and supersede in their entirety all prior undertakings and
agreements of the Company and the Grantee with respect to the subject matter
hereof, and may not be modified adversely to the Grantee's interest except by
means of a writing signed by the Company and the Grantee. These agreements are
to be construed in accordance with and governed by the internal laws of the
State of Delaware without giving effect to any choice of law rule that would
cause the application of the laws of any jurisdiction other than the internal
laws of the State of California to the rights and duties of the parties. Should
any provision of the Notice or this Option Agreement be determined by a court of
law to be illegal or unenforceable, the other provisions shall nevertheless
remain effective and shall remain enforceable.
14. Headings. The captions used in the Notice and this Option Agreement
--------
are inserted for convenience and shall not be deemed a part of the Option for
construction or interpretation.
5
<PAGE>
15. Interpretation. Any dispute regarding the interpretation of the Notice
--------------
and this Option Agreement shall be submitted by the Grantee or by the Company
forthwith to the Administrator, which shall review such dispute at its next
regular meeting. The resolution of such dispute by the Administrator shall be
final and binding on all persons.
16. Definitions. For purposes of this Agreement, the following definitions
-----------
shall apply:
"Administrator" means the Board or any of the Committees appointed to
-------------
administer the employee benefits plans of the Company.
"Affiliate" and "Associate" shall have the respective meanings ascribed
--------- ---------
to such terms in Rule 12b-2 promulgated under the Exchange Act.
"Applicable Laws" means the legal requirements relating to the
---------------
administration of stock incentive plans, if any, under applicable provisions of
federal securities laws, state corporate and securities laws, the Code, the
rules of any applicable stock exchange or national market system, and the rules
of any foreign jurisdiction applicable to Awards granted to residents therein.
"Board" means the Board of Directors of the Company.
-----
"Cause" shall mean that any one or more of the following has occurred:
-----
(i) The Grantee shall have been convicted of, or shall have pleaded
guilty or nolo contendere to, any felony or a crime involving moral turpitude;
(ii) The Grantee shall have repeatedly or consistently failed or
refused to perform the duties assigned to him or her under the Offer Letter
between the Grantee and the Company or shall have otherwise breached any of the
terms or conditions of employment with the Company, after written notice and ten
(10) days opportunity to cure; or
(iii) The Grantee shall have committed any fraud, embezzlement,
misappropriation of funds, breach of fiduciary duty or other act of dishonesty
against the Company.
"Code" means the Internal Revenue Code of 1986, as amended.
----
"Common Stock" means the common stock of the Company.
------------
"Company" means uBid, Inc., a Delaware corporation.
-------
"Consultant" means any person (other than an Employee or, solely with
----------
respect to rendering services in such person's capacity as a Director) who is
engaged by the Company or any Related Entity to render consulting, advisory or
other services to the Company or such Related Entity.
"Continuous Service" means that the provision of services to the
------------------
Company or a Related Entity in any capacity of Employee, Director or Consultant,
is not interrupted or
6
<PAGE>
terminated. Continuous Service shall not be considered interrupted in the case
of (i) any approved leave of absence, (ii) transfers between locations of the
Company or among the Company, any Related Entity, or any successor, in any
capacity of Employee, Director or Consultant, or (iii) any change in status as
long as the individual remains in the service of the Company or a Related Entity
in any capacity of Employee, Director or Consultant (except as otherwise
provided in the Award Agreement). An approved leave of absence shall include
sick leave, military leave, or any other authorized personal leave. For purposes
of Incentive Stock Options, no such leave may exceed ninety (90) days, unless
reemployment upon expiration of such leave is guaranteed by statute or contract.
"Covered Employee" means an Employee who is a "covered employee" under
----------------
Section 162(m)(3) of the Code.
"Director" means a member of the Board or the board of directors of any
--------
Related Entity.
"Disability" means that a Grantee is permanently unable to carry out
----------
the responsibilities and functions of the position held by the Grantee by reason
of any medically determinable physical or mental impairment. A Grantee will not
be considered to have incurred a Disability unless he or she furnishes proof of
such impairment sufficient to satisfy the Administrator in its discretion.
"Employee" means any person, including an Officer or Director, who is
--------
an employee of the Company or any Related Entity. The payment of a director's
fee by the Company or a Related Entity shall not be sufficient to constitute
"employment" by the Company.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
------------
"Fair Market Value" means, as of any date, the value of Common Stock
-----------------
determined as follows:
(i) Where there exists a public market for the Common Stock, the Fair
Market Value shall be (A) the closing price for a Share for the last market
trading day prior to the time of the determination (or, if no closing price was
reported on that date, on the last trading date on which a closing price was
reported) on the stock exchange determined by the Administrator to be the
primary market for the Common Stock or the Nasdaq National Market, whichever is
applicable or (B) if the Common Stock is not traded on any such exchange or
national market system, the average of the closing bid and asked prices of a
Share on the Nasdaq Small Cap Market for the day prior to the time of the
determination (or, if no such prices were reported on that date, on the last
date on which such prices were reported), in each case, as reported in The Wall
Street Journal or such other source as the Administrator deems reliable; or
(ii) In the absence of an established market for the Common Stock of
the type described in (i), above, the Fair Market Value thereof shall be
determined by the Administrator in good faith.
"Incentive Stock Option" means an Option intended to qualify as an
----------------------
incentive stock option within the meaning of Section 422 of the Code.
7
<PAGE>
"Non-Qualified Stock Option" means an Option not intended to qualify as
--------------------------
an Incentive Stock Option.
"Officer" means a person who is an officer of the Company or a Related
-------
Entity within the meaning of Section 16 of the Exchange Act and the rules and
regulations promulgated thereunder.
"Parent" means a "parent corporation," whether now or hereafter
------
existing, as defined in Section 424(e) of the Code.
"Related Entity" means any Parent, Subsidiary and any business,
--------------
corporation, partnership, limited liability company or other entity in which the
Company, a Parent or a Subsidiary holds a substantial ownership interest,
directly or indirectly. For this purpose of the Non-Qualified Stock Options to
be granted under this Plan pursuant to Section 3.6 of the Separation and
Distribution Agreement to be entered into between the Company and its parent,
Creative Computers, Inc. ("Creative"), "Related Entity" shall include Creative
and its Subsidiaries, notwithstanding that, at the time of the granting of such
Options, the Company may no longer be a Subsidiary of Creative.
"Share" means a share of the Common Stock.
-----
"Subsidiary" means a "subsidiary corporation," whether now or hereafter
----------
existing, as defined in Section 424(f) of the Code.
"Related Entity Disposition" means the sale, distribution or other
--------------------------
disposition by the Company of all or substantially all of the Company's
interests in any Related Entity effected by a sale, merger or consolidation or
other transaction involving that Related Entity or the sale of all or
substantially all of the assets of that Related Entity.
8
<PAGE>
uBID, INC. NON-PLAN OPTION
EXERCISE NOTICE
---------------
Return to: Employee Name:_________________________
uBid, Inc. Social Security No.:___________________
2525 Busse Road Date:__________________________________
Elk Grove Village, IL 60007 Telephone No:__________________________
Attention: Secretary
Date of Grant:_______________________________
Number of Shares Purchased:__________________
Price per Share:_____________________________
Effective as of the date first set forth above, the undersigned (the
"Grantee") hereby elects to exercise the Grantee's option to purchase the number
of shares of the Common Stock (the "Shares") of uBid, Inc. (the "Company") set
forth above under and pursuant to the Stock Option Agreement (the "Option
Agreement") and Notice of Stock Option Award (the "Notice") dated as of the
"date of grant" set forth above. In connection therewith, the undersigned
acknowledges, represents, warrants and agrees as set forth herein and on the
attached page(s).
A. EXERCISE AND HOLD
(Exercise option to certificate the shares)
Option Agreement Dated:_______________ Number of Shares:_______________
Exercise Price:_______________________ Total Amount Enclosed
(Including Taxes):_______________
For all employees, the company must receive the necessary amounts to pay
the Federal (28%), State, Local, Social Security (6.20% - wage base = $X) and
Medicare (X) taxes, if applicable, on the amount of "exercise gain."
The shares purchased by me should be registered as follows:
Name:_________________________________ Address:_________________________
Social Security No.:__________________ Telephone No.:___________________
B. EXERCISE AND SELL (CASHLESS)
(Exercise option to purchase stock and have brokerage firm sell)
Option Agreement Date:_______________
Number of Shares:____________________ Exercise Price:
For all employees, the company must receive the necessary amounts to pay
the Federal (28%), State, Local, Social Security (6.20% - wage base = $X) and
Medicare (X) taxes, if applicable, on the amount of "exercise gain."
Dated:__________________ ________________________________________________
(Signature of Grantee)
Dated:__________________ _________________________________________________
(Signature of Chief Financial Officer)
Note: The exercise of the option is subject to market fluctuations.
Submission of this signed form to uBid, Inc. represents an irrevocable exercise
of option. The exercise of options may result in taxable income to you. Prior
to executing this form please consult your financial advisor for any effect you
actions may have on your financial situation.
<PAGE>
1. Representations of the Grantee. The Grantee acknowledges that the Grantee
------------------------------
has received, read and understood the Notice and the Option Agreement and agrees
to abide by and be bound by their terms and conditions.
2. Rights as Stockholder. Until the stock certificate evidencing such Shares
---------------------
is issued (as evidenced by the appropriate entry on the books of the Company or
of a duly authorized transfer agent of the Company), no right to vote or receive
dividends or any other rights as a stockholder shall exist with respect to the
Shares, notwithstanding the exercise of the Option. The Company shall issue (or
cause to be issued) such stock certificate promptly after the Option is
exercised. No adjustment will be made for a dividend or other right for which
the record date is prior to the date the stock certificate is issued.
3. Delivery of Payment. The Grantee herewith delivers to the Company the
-------------------
full Exercise Price for the Shares.
4. Tax Consultation. The Grantee understands that the Grantee may suffer
----------------
adverse tax consequences as a result of the Grantee's purchase or disposition of
the Shares. The Grantee represents that the Grantee has consulted with any tax
consultants the Grantee deems advisable in connection with the purchase or
disposition of the Shares and that the Grantee is not relying on the Company for
any tax advice.
5. Taxes. The Grantee agrees to satisfy all applicable federal, state and
-----
local income and employment tax withholding obligations and herewith delivers to
the Company the full amount of such obligations or has made arrangements
acceptable to the Company to satisfy such obligations. In the case of an
Incentive Stock Option, the Grantee also agrees, as partial consideration for
the designation of the Option as an Incentive Stock Option, to notify the
Company in writing within thirty (30) days of any disposition of any shares
acquired by exercise of the Option if such disposition occurs within two (2)
years from the date of grant or within one (1) year from the date the Shares
were transferred to the Grantee. If the Company is required to satisfy any
federal, state or local income or employment tax withholding obligations as a
result of such an early disposition, the Grantee agrees to satisfy the amount of
such withholding in a manner that the Administrator prescribes.
6. Successors and Assigns. The Company may assign any of its rights under
----------------------
this Exercise Notice to single or multiple assignees, and this agreement shall
inure to the benefit of the successors and assigns of the Company. This
Exercise Notice shall be binding upon the Grantee and his or her heirs,
executors, administrators, successors and assigns.
7. Headings. The captions used in this Exercise Notice are inserted for
--------
convenience and shall not be deemed a part of this agreement for construction or
interpretation.
8. Interpretation. Any dispute regarding the interpretation of this Exercise
--------------
Notice shall be submitted by the Grantee or by the Company forthwith to the
Administrator, which shall review such dispute at its next regular meeting. The
resolution of such a dispute by the Administrator shall be final and binding on
all persons.
9. Governing Law; Severability. This Exercise Notice is to be construed in
---------------------------
accordance with and governed by the internal laws of the State of Delaware
without giving effect to any choice of law rule that would cause the application
of the laws of any jurisdiction other than the internal laws of the State of
California to the rights and duties of the parties. Should any provision of
this Exercise Notice be determined by a court of law to be illegal or
unenforceable, the other provisions shall nevertheless remain effective and
shall remain enforceable.
10. Notices. Any notice required or permitted hereunder shall be given in
-------
writing and shall be deemed effectively given upon personal delivery or upon
deposit in the United States mail by certified mail, with postage and fees
prepaid, addressed to the other party at its address as shown below beneath its
signature, or to such other address as such party may designate in writing from
time to time to the other party.
11. Further Instruments. The parties agree to execute such further
-------------------
instruments and to take such further action as may be reasonably necessary to
carry out the purposes and intent of this agreement.
12. Entire Agreement. The Notice and the Option Agreement are incorporated
----------------
herein by reference, and together with this Exercise Notice constitute the
entire agreement of the parties with respect to the subject matter hereof and
supersede in their entirety all prior undertakings and agreements of the Company
and the Grantee with respect to the subject matter hereof, and may not be
modified adversely to the Grantee's interest except by means of a writing signed
by the Company and the Grantee.
<PAGE>
EXHIBIT 5.1
OPINION OF MORRISON & FOERSTER LLP
[Morrison & Foerster LLP Letterhead]
December 16, 1999
uBid, Inc.
8550 West Bryn Mawr Avenue
Suite 200
Chicago, Illinois 60631-3203
Gentlemen:
At your request, we have examined the Registration Statement on Form S-8 to
be filed with the Securities and Exchange Commission (the "SEC") in connection
with the registration under the Securities Act of 1933, as amended, of an
aggregate of 180,000 shares of your common stock, $.001 par value (the "Common
Shares") issuable upon exercise of options which have been granted pursuant to
that certain Nonqualified Stock Option Agreement, dated as of November 11, 1999
between you and Kenneth Dotson (the "Option Agreement").
As your counsel in connection with the Registration Statement, we have
examined the proceedings taken by you in connection with the authorization of
the issuance of the Common Shares or options to purchase Common Shares under the
Option Agreement (the "Option Agreement Shares") and such documents as we have
deemed necessary to render this opinion.
Based upon the foregoing, it is our opinion that the Option Agreement Shares,
when issued and outstanding pursuant to the terms of the Option Agreement, will
be validly issued, fully paid and nonassessable Common Shares.
We consent to the use of this opinion as an exhibit to the Registration
Statement.
Very truly yours,
/s/ Morrison & Foerster LLP
<PAGE>
EXHIBIT 23.2
CONSENT OF ERNST & YOUNG LLP
We consent to the incorporation by reference in the Registration
Statement (Form S-8) pertaining to the Nonqualified Stock Option Agreement
between uBid, Inc. and Kenneth Dotson of our report dated January 22, 1999, with
respect to the financial statements and schedule of uBid, Inc. included in its
Annual Report (Form 10-K) for the year ended December 31, 1998 filed with the
Securities and Exchange Commission.
/s/ Ernst & Young LLP
Chicago, Illinois
December 17, 1999
