<PAGE>
As filed with the Securities and Exchange Commission on April 28, 2000
Registration No. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
FORM S-8
REGISTRATION STATEMENT
Under
The Securities Act of 1933
WEB STREET, INC.
(Exact Name of Registrant as Specified in its Charter)
Delaware 36-4212401
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification No.)
510 Lake Cook Road, Deerfield, Illinois 60015
(Address of Principal Executive Offices) (Zip Code)
Web Street Financial Group, Inc. Stock Option Plan
Web Street, Inc. 1999 Stock Incentive Plan
Option Agreements Listed on Attached Schedule I
Web Street, Inc. 1999 Employee Stock Purchase Plan
(Full Title of the Plans)
Stuart A. Cohn, Esq.
Executive Vice President and General Counsel
510 Lake Cook Road, Deerfield, Illinois 60015
(Name and Address of Agent for Service)
(847) 444-4700
(Telephone Number, Including Area Code, of Agent for Service)
Copies to:
Mark D. Wood, Esq.
Adam R. Klein, Esq.
Katten Muchin Zavis
525 West Monroe Street, Suite 1600
Chicago, Illinois 60661-3693
(312) 902-5200
---------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
====================================================================================================================
Proposed Maximum Proposed Maximum
Amount To Be Offering Price Aggregate Offering Amount Of
Title Of Securities To Be Registered Registered (1) Per Share Price Registration Fee
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $0.01 par value
(Stock Option Plan).................. 1,298,000 shares $6.47(2) $ 8,398,060(2) $2,335
- --------------------------------------------------------------------------------------------------------------------
Common Stock, $0.01 par value
(1999 Stock Incentive Plan).......... 4,000,000 shares $8.19(3) $17,216,671(3) $4,786
- --------------------------------------------------------------------------------------------------------------------
Common Stock, $0.01 par value
(Option Agreements).................. 569,377 shares $ .06(4) $ 34,163(4) $ 10
- --------------------------------------------------------------------------------------------------------------------
Common Stock, $0.01 par value
(1999 Stock Purchase Plan)........... 1,000,000 shares $3.85(5) $ 3,850,000(5) $1,070
- --------------------------------------------------------------------------------------------------------------------
Total........................ 6,867,377 shares -- -- $8,201
====================================================================================================================
</TABLE>
(1) This registration statement also covers an indeterminate number of shares of
Web Street, Inc. Common Stock that may be issuable by reason of stock
splits, stock dividends or similar transactions in accordance with Rule 416
under the Securities Act of 1933.
(2) Based upon the weighted average exercise price for the currently outstanding
options granted under this plan. These amounts are used solely for the
purpose of calculating the registration fee pursuant to Rule 457(h)(1) under
the Securities Act.
(3) Based upon (i) the weighted average exercise price of $8.19 per share for
currently outstanding options to purchase 418,588 shares of Common Stock
granted under this plan and (ii) the average of the high and low sales
prices of the Common Stock as reported on the Nasdaq National Market on
April 26, 2000, which was $3.85, with respect to 3,581,412 shares of Common
Stock which may be granted under this plan. These amounts are used solely
for the purpose of calculating the registration fee pursuant to Rules
457(h)(1) and 457(c) under the Securities Act.
(4) Based upon the weighted average exercise price for the currently outstanding
options granted under these agreements. These amounts are used solely for
the purpose of calculating the registration fee pursuant to Rule 457(h)(1)
under the Securities Act.
(5) Based on the average of the high and low sales prices of the Common Stock as
reported on the Nasdaq National Market on April 26, 2000. These amounts
are used solely for the purpose of calculating the registration fee pursuant
to Rule 457(c) under the Securities Act.
================================================================================
<PAGE>
SCHEDULE I
----------
Option Agreements between Web Street Financial Group, Inc. and the
following employees and consultants:
Fred Allen
Manuel Calderon
Ryan Carpel
Stuart Cohn
Barbara Escobar
Paul Gakhal
Michael Graf
Michael Grimes
Jason Hersh
Vanesa Horton
Gary Just
William Mania
Christopher Mazzacono
Melvin Pinkham
D. Jonathan Rosenberg
Jonah Rosenberg
Robert Rosenberg
Jeffrey Schulhof
Alan Seleman
Jeffrey Williams
Tom Wilson
Saul Zadik
Steve Zakrzewski
I-1
<PAGE>
PART I
INFORMATION REQUIRED IN THE SECTION 10(a) PROSPECTUS
The information called for in Part I of Form S-8 is currently included in
the prospectuses for the Web Street Financial Group, Inc. Stock Option Plan, the
Web Street, Inc. 1999 Stock Incentive Plan, the option agreements listed on the
attached Schedule I and the Web Street, Inc. 1999 Employee Stock Purchase Plan
(collectively, the "Plans"), and is not being filed with, or included in, this
Form S-8 in accordance with the rules and regulations of the SEC. Web Street
will not issue any additional options under the Web Street Financial Group, Inc.
Stock Option Plan or the option agreements listed on the attached Schedule I.
Web Street Financial Group, Inc. is the former name of Web Street, Inc.
I-2
<PAGE>
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
Item 3. Incorporation of Documents by Reference.
The following documents filed by the Registrant with the SEC are
incorporated by reference in this registration statement:
(a) The Registrant's Annual Report on Form 10-K for the fiscal year ended
December 31, 1999; and
(b) The description of the Registrant's common stock in the Registrant's
Registration Statement on Form 8-A filed on October 18, 1999 pursuant
to the Securities Exchange Act of 1934, and all subsequent amendments
and reports filed for the purpose of updating the description.
In addition, all documents that the Registrant files pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this
registration statement and before the filing of a post-effective amendment
indicating that all securities offered pursuant to this registration statement
have been sold or deregistering all the securities then remaining unsold shall
be deemed to be incorporated by reference in this registration statement and to
be part of this registration statement from the date of filing of those
documents. Any statement contained in a document incorporated or deemed to be
incorporated by reference in this registration statement shall be deemed to be
modified or superseded for purposes of this registration statement to the extent
that a statement contained in this registration statement or in any subsequently
filed document which also is or is deemed to be incorporated by reference in
this registration statement modifies or supersedes that statement.
The Registrant will provide without charge to each person who has received
a copy of any prospectus to which this registration statement relates, upon the
written or oral request of that person, a copy of any or all the documents that
have been or may be incorporated by reference into this registration statement,
other than exhibits to those documents, unless the exhibits are incorporated by
reference in those documents. Written requests for copies should be directed to
the Registrant's principal executive offices at 510 Lake Cook Road, Deerfield,
Illinois 60015, Attention: Corporate Secretary. Telephone requests for copies
should be directed to the Registrant's Corporate Secretary at (847) 444-4700.
Item 4. Description of Securities.
Not applicable.
Item 5. Interests of Named Experts and Counsel.
Not applicable.
Item 6. Indemnification of Directors and Officers.
As permitted by the Delaware General Corporation Law, the Registrant's
Amended and Restated Certificate of Incorporation contains provisions that
eliminate the personal liability of the Registrant's directors to the Registrant
or its stockholders for monetary damages for the breach or alleged breach of
their fiduciary duty as a director, except for liability for:
II-1
<PAGE>
. any breach of their duty of loyalty to the Registrant or its
stockholders;
. acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;
. willful or negligent conduct in paying dividends or repurchasing stock
out of other than lawfully available funds; and
. any transaction from which the director derived an improper personal
benefit.
The Registrant's Amended and Restated Certificate of Incorporation also
contains provisions that require the Registrant to indemnify its directors and
permit the Registrant to indemnify its officers and employees to the fullest
extent permitted by Delaware corporate law. However, the Registrant is not
obligated to indemnify a person:
. with respect to proceedings, claims or actions initiated or brought
voluntarily by the person and not by way of defense; and
. for any amounts paid in settlement of an action indemnified against by
the Registrant without its prior written consent.
The Registrant has entered into indemnity agreements with each of its directors
and executive officers providing for this indemnification and containing the
Registrant's covenant to maintain directors' and officers' liability insurance.
Reference is made to Section 145 of the General Corporation Law of the
State of Delaware which provides for indemnification of directors and officers
in certain circumstances.
Item 7. Exemption from Registration Claimed.
Not applicable.
Item 8. Exhibits.
4.1 The Registrant's Amended and Restated Certificate of Incorporation,
incorporated by reference to Exhibit 3.1 to the Registrant's Annual
Report on Form 10-K for the fiscal year ended December 31, 1999
(the "1999 10-K").
4.2 The Registrant's Amended and Restated Bylaws, incorporated by
reference to Exhibit 3.2 to the 1999 10-K.
4.3 Specimen stock certificate representing common stock, incorporated by
reference to Exhibit 4 to the Registrant's Registration Statement on
Form S-1, as amended (Registration Statement No. 333-85849) (the
"IPO Registration Statement").
4.4 Web Street Financial Group, Inc. Stock Option Plan, incorporated by
reference to Exhibit 10.1 to the IPO Registration Statement.
4.5 Form of Option Agreement under the Stock Option Plan, incorporated by
reference to Exhibit 10.2 to the IPO Registration Statement.
II-2
<PAGE>
4.6 Form of Option Agreement with various employees and consultants prior
to the Stock Option Plan, incorporated by reference to Exhibit 10.3 to
the IPO Registration Statement.
4.7 The Registrant's 1999 Stock Incentive Plan, incorporated by reference
to Exhibit 10.4 to the IPO Registration Statement.
4.8 Form of Option Agreement under the 1999 Stock Incentive Plan,
incorporated by reference to Exhibit 10.5 to the IPO Registration
Statement.
4.9 The Registrant's 1999 Employee Stock Purchase Plan.
5 Opinion of Stuart A. Cohn, General Counsel of the Registrant, as to
the legality of the shares of common stock being offered under the
Plans.
23.1 Consent of Arthur Andersen LLP.
23.2 Consent of Stuart A. Cohn (contained in his opinion filed as
Exhibit 5).
24 Power of Attorney (included on the signature page of this registration
statement).
II-3
<PAGE>
Item 9. Undertakings.
1. The Registrant hereby undertakes:
(a) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(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 the 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 the registration statement; and
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement;
provided, however, that paragraphs (a)(i) and (a)(ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the Registrant
pursuant to Section 13 or Section 15(d) of the Exchange Act that are
incorporated by reference in the registration statement.
(b) 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 therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(c) 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.
2. The Registrant hereby undertakes that, for the purpose of determining
any liability under the Securities Act, each filing of its 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 the
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.
3. Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to the Registrant's directors, officers and
controlling persons pursuant to the foregoing provisions or otherwise, the
Registrant has been advised that in the opinion of the SEC 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 or
paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is 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.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant
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 Deerfield, State of Illinois, on this 28th day of
April, 2000.
WEB STREET, INC.
By: /S/ JOSEPH J. FOX
---------------------------------------
Joseph J. Fox
Chief Executive Officer and Co-Chairman
of the Board
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
Joseph J. Fox, Stuart A. Cohn and Mark D. Wood, and each of them, his true and
lawful attorneys-in-fact and agents, with full power of substitution, to sign on
his behalf, individually and in each capacity stated below, all amendments and
post-effective amendments to this registration statement on Form S-8 and to file
the same, with all exhibits thereto and any other documents in connection
therewith, with the SEC under the Securities Act, granting unto said
attorneys-in-fact and agents full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully and to all intents and purposes as each might or could do in
person, hereby ratifying and confirming each act that said attorneys-in-fact and
agents may lawfully do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Act, this registration
statement has been signed by the following persons in the capacities indicated
on April 28th, 2000.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
/S/ JOSEPH J. FOX Co-Chairman of the Board and Chief Executive
- ---------------------------- Officer (principal executive officer)
Joseph J. Fox
/S/ AVI FOX Co-Chairman of the Board and President
- ----------------------------
Avi Fox
/S/ JOSEPH A. BARR Executive Vice President, Chief Financial
- ---------------------------- Officer (principal financial and accounting
Joseph A. Barr officer) and Treasurer
/S/ ROBERT F. BERNARD Director
- ----------------------------
Robert F. Bernard
/S/ FREDRIC J. GRABER Director
- ----------------------------
Fredric J. Graber
/S/ D. JONATHAN ROSENBERG Executive Vice President, Chief Operating
- ---------------------------- Officer and Director
D. Jonathan Rosenberg
</TABLE>
II-5
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibits Description
- -------- --------------------------------------------------------------------
<S> <C>
4.9 The Registrant's 1999 Employee Stock Purchase Plan.
5 Opinion of Stuart A. Cohn, General Counsel of the Registrant, as to
the legality of the shares of common stock being offered under the
Plans.
23.1 Consent of Arthur Andersen LLP.
23.2 Consent of Stuart A. Cohn (contained in his opinion filed as
Exhibit 5).
24 Power of Attorney (included on the signature page of this
registration statement).
</TABLE>
<PAGE>
Exhibit 4.9
WEB STREET, INC.
1999 EMPLOYEE STOCK PURCHASE PLAN
(Adopted effective August 26, 1999)
<PAGE>
WEB STREET, INC.
1999 EMPLOYEE STOCK PURCHASE PLAN
(Adopted effective August 26, 1999)
TABLE OF CONTENTS
ARTICLE I
ESTABLISHMENT AND PURPOSE......................................... 1
1.1 Purpose..................................................... 1
ARTICLE II
DEFINITIONS....................................................... 1
2.1 "Account.................................................... 1
2.2 "Agreement.................................................. 1
2.3 "Board of Directors......................................... 1
2.4 "Code" or "Internal Revenue Code............................ 1
2.5 "Committee.................................................. 2
2.6 "Common Stock............................................... 2
2.7 "Company.................................................... 2
2.8 "Continuous Service......................................... 2
2.9 "Contribution Rate.......................................... 2
2.10 "Disability................................................. 2
2.11 "Eligible Employee.......................................... 2
2.12 "ERISA...................................................... 3
2.13 "Exercise Date.............................................. 3
2.14 "Exchange Act............................................... 3
2.15 "Fair Market Value.......................................... 3
2.16 "Grant Date................................................. 3
2.17 "Option..................................................... 3
2.18 "Option Period.............................................. 3
2.19 "Option Price............................................... 4
2.20 "Participant................................................ 4
2.21 "Plan....................................................... 4
2.22 "Plan Year.................................................. 4
2.23 "Representative............................................. 4
2.24 "Retirement................................................. 4
2.25 "Securities Act............................................. 4
2.26 "Subsidiary................................................. 4
2.27 "Termination of Employment.................................. 4
-i-
<PAGE>
ARTICLE III
ADMINISTRATION.................................................. 5
3.1 Committee Structure and Authority......................... 5
ARTICLE IV
STOCK PROVISIONS................................................ 7
4.1 Number of Shares Subject to the Plan...................... 7
4.2 Release of Shares......................................... 7
4.3 Restrictions on Shares.................................... 7
4.4 Stockholder Rights........................................ 8
4.5 Stock Valuation........................................... 8
4.6 Custodian................................................. 8
ARTICLE V
ELIGIBILITY; OPTION PROVISIONS.................................. 9
5.1 Eligibility............................................... 9
5.2 Grant of Options.......................................... 9
5.3 Option Period............................................ 10
5.4 Option Price............................................. 10
5.5 Contribution Rate........................................ 10
5.6 Purchase of Shares....................................... 11
5.7 Cancellation of Options.................................. 11
5.8 Terminated Employees..................................... 11
5.9 Deceased Employees....................................... 11
5.10 Disabled or Retired Employees............................ 12
5.11 Limitations.............................................. 12
5.12 Nonassignability......................................... 12
ARTICLE VI
GENERAL PROVISIONS APPLICABLE TO THE PLAN...................... 13
6.1 Termination of Plan...................................... 13
6.2 Investment Representation................................ 13
6.3 Effect of Certain Changes................................ 13
6.4 Withholding.............................................. 16
6.5 No Company Obligation.................................... 17
6.6 Committee Discretion..................................... 17
ARTICLE VII
MISCELLANEOUS.................................................. 17
7.1 Indemnification of the Board and Committee............... 17
-ii-
<PAGE>
7.2 Mitigation of Excise Tax.................................. 18
7.3 Interpretation............................................ 18
7.4 Governing Law............................................. 18
7.5 Limitations on Liability.................................. 18
7.6 Validity.................................................. 19
7.7 Assignment................................................ 19
7.8 Captions.................................................. 19
7.9 Amendments................................................ 19
7.10 Entire Agreement.......................................... 19
7.11 Rights with Respect to Continuance of Employment.......... 19
7.12 Options for Shares in Substitution for Stock Options
Granted by Other Corporations............................. 19
7.13 Procedure for Adoption.................................... 20
7.14 Procedure for Withdrawal.................................. 20
7.15 Expenses.................................................. 20
-iii-
<PAGE>
WEB STREET, INC.
1999 EMPLOYEE STOCK PURCHASE PLAN
(Adopted effective August 26, 1999)
ARTICLE I
----------
ESTABLISHMENT AND PURPOSE
-------------------------
1.1 Purpose. The Web Street, Inc. 1999 Employee Stock Purchase Plan (the
"Plan") is hereby established by Web Street, Inc. effective August 26, 1999, the
date of the Plan's approval by the stockholders of Web Street, Inc. The purpose
of the Plan is to promote the overall financial objectives of the Company and
its stockholders by motivating participants in the Plan to achieve long-term
growth in stockholders' equity in the Company. The Plan is intended as an
"employee stock purchase plan" within the meaning of Section 423 of the Code,
and Options granted hereunder are intended to constitute options granted under
such a plan, and the Plan document and all actions taken in connection with the
Plan shall be constructed consistently with such intent.
ARTICLE II
-----------
DEFINITIONS
-----------
The following sections of this Article II provide basic definitions of
terms used throughout the Plan, and whenever used therein in the capitalized
form, except as otherwise expressly provided, the terms shall be deemed to have
the following meanings:
2.1 "Account" shall mean the bookkeeping account established on behalf of
a Participant to which shall be credited all contributions paid for the purpose
of purchasing Common Stock under the Plan, and to which shall be charged all
purchases of Common Stock pursuant to the Plan. The Company shall have custody
of such Account.
2.2 "Agreement" or "Option Agreement" means, individually or collectively,
any enrollment and withholding agreement entered into pursuant to the Plan. An
Agreement shall be the right of the Company to withhold from payroll amounts to
be applied to purchase Common Stock.
2.3 "Board of Directors" or "Board" means the Board of Directors of the
Company.
2.4 "Code" or "Internal Revenue Code" means the Internal Revenue Code of
1986, as amended, and any subsequent Internal Revenue Code. If there is a
subsequent Internal Revenue Code, any references herein to Internal Revenue Code
sections shall be deemed to refer to comparable sections of any subsequent
Internal Revenue Code.
<PAGE>
2.5 "Committee" means the person or persons appointed by the Board of
Directors to administer the Plan, as further described in the Plan.
2.6 "Common Stock" means the shares of the Common Stock of the Company,
$0.01 par value per share, whether presently or hereafter issued, and any other
stock or security resulting from adjustment thereof as described in Section 6.3.
2.7 "Company" means Web Street, Inc. and includes any successor or
assignee corporation or corporations into which the Company may be merged,
changed or consolidated; any corporation for whose securities the securities of
the Company shall be exchanged; and any assignee of or successor to
substantially all of the assets of the Company.
2.8 "Continuous Service" shall mean, subject to modification by the
Committee, an Eligible Employee's number of full years and completed months of
continuous employment with the Company or a Subsidiary from his last hiring date
to his date of Termination of Employment for any reason. The Committee may
provide rules from time to time regarding the calculation of Continuous Service
and the method for crediting such service.
2.9 "Contribution Rate" means the rate determined under Section 5.5
2.10 "Disability" means a mental or physical illness that entitles the
Participant to receive benefits under the long-term disability plan of the
Company or a Subsidiary, or if the Participant is not covered by such plan, a
mental or physical illness that renders a Participant permanently and totally
incapable of performing his duties as an employee of the Company or a
Subsidiary. Notwithstanding the foregoing, a Disability shall not qualify under
this Plan if it is the result of (a) a willfully self-inflicted injury or
willfully self-induced sickness; or (b) an injury or disease contracted,
suffered, or incurred, while participating in a criminal offense. The
determination of Disability shall be made by the Committee. The determination of
Disability for purposes of this Plan shall not be construed to be an admission
of disability for any other purpose.
2.11 "Eligible Employee" means each employee of the Company or a
Subsidiary (if the Subsidiary has adopted the Plan) on a Grant Date except that
the Committee in its sole discretion may exclude:
(a) any employee who has accrued less than a minimum period of Continuous
Service established by the Committee (but not to exceed two (2) years).
(b) any employee whose customary employment is twenty (20) hours or less
per week;
(c) any employee whose customary employment is for not more than five (5)
months in any calendar year;
-2-
<PAGE>
(d) any employee who would directly or indirectly own or hold (applying
the rules of Section 424(d) of the Code to determine stock ownership)
immediately following the grant of an Option hereunder an aggregate of five
percent (5%) or more of the total combined voting power or value of all
outstanding shares of all classes of stock of the Company or any Subsidiary; and
(e) any employee who is a highly compensated employee of the Company or
Subsidiary within the meaning of Section 414(q) of the Code.
Any period of service described in the preceding sentence may be decreased in
the discretion of the Committee.
2.12 "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and the rules and regulations promulgated thereunder.
2.13 "Exercise Date" means such one or more dates determined by the
Committee on which the accumulated value of the Account shall be applied to
purchase Common Stock. The Committee may accelerate an Exercise Date in order to
satisfy the employment period requirement of Section 423(a)(2).
2.14 "Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.
2.15 "Fair Market Value" means the value determined on the basis of the
good faith determination of the Committee pursuant to the applicable method
described in Section 4.5 and as adjusted, averaged or otherwise modified by the
Committee.
2.16 "Grant Date" means the date or dates established by the Committee on
which one or more Options are granted pursuant to the Plan. The Committee may
determine for any Plan Year that there shall be no Grant Date, in which case no
Options shall be granted for that Plan Year. The terms and conditions of any
Option granted on a particular Grant Date shall be independent of and have no
effect on the terms and conditions of any Option granted on another Grant Date.
2.17 "Option" means the right to purchase Common Stock pursuant to the
Plan and any Agreement.
2.18 "Option Period" means the period beginning on the Grant Date and
expiring on the Exercise Date as determined by the Committee, subject to the
limitations of Section 5.3.
2.19 "Option Price" means the price at which the Company's Common Stock
granted as of a specific Grant Date may be purchased under an Option. The price
shall be subject to the limitation set forth in Section 5.4.
-3-
<PAGE>
2.20 "Participant" means an Eligible Employee who satisfies the
eligibility conditions of the Plan and to whom an Option has been granted by the
Committee under the Plan, and in the event a Representative is appointed for a
Participant, then the term "Participant" shall mean such appointed
Representative, or successor Representative(s) appointed, as the case may be,
provided that "Termination of Employment" shall mean the Termination of
Employment of the Participant.
2.21 "Plan" means the Web Street, Inc. 1999 Employee Stock Purchase Plan,
as herein set forth and as may be amended from time to time.
2.22 "Plan Year" means, for the first Plan Year, the period starting on
May 1, 2000, and ending on January 31, 2001; and for all subsequent Plan Years,
the twelve (12) consecutive month period starting on February 1 and ending on
the following January 31. The Committee may at any time in its discretion
designate another period as the Plan Year.
2.23 "Representative" means (a) the person or entity acting as the
executor or administrator of a Participant's estate pursuant to the last will
and testament of a Participant or pursuant to the laws of the jurisdiction in
which the Participant had his primary residence at the date of the Participant's
death; (b) the person or entity acting as the guardian or temporary guardian of
a Participant's estate; or (c) the person or entity which is the beneficiary of
the Participant upon or following the Participant's death. A Participant may
file a written designation of his Representative with the Committee. Such
designation of his Representative may be changed by the Participant at any time
by written notice given in accordance with rules and procedures established by
the Committee.
2.24 "Retirement" means the Participant's Termination of Employment after
attaining either the normal retirement age or the early retirement age as
defined in the principal (as determined by the Committee) tax-qualified plan of
the Company or a Subsidiary, if the Participant is covered by such plan, and if
the Participant is not covered by such a plan, then age 65, or age 55 with the
accrual of 10 years of service.
2.25 "Securities Act" shall mean the Securities Act of 1933, as amended,
and the rules and regulations promulgated pursuant thereto.
2.26 "Subsidiary" means any company, as currently defined in Section
424(f) of the Code. Unless otherwise indicated the term "Company" shall
hereinafter be deemed to include all Subsidiaries of the Company which have
adopted the Plan.
2.27 "Termination of Employment" means the latest date on which a person
ceases, for whatever reason, to be an employee of the Company. For determining
whether and when a Participant has incurred a Termination of Employment for
cause, "cause" shall mean any act or omission which permits the Company to
terminate the employment agreement or arrangement between the Participant and
the Company for cause as defined in such agreement or arrangement, or in the
event there is no such employment agreement or arrangement or the agreement or
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<PAGE>
arrangement does not define the term "cause," then "cause" shall mean (a) any
act or omission which the Company believes is of a criminal nature, and the
result of which the Company believes is detrimental to the interests of the
Company; (b) the material breach of a fiduciary duty owing to the Company,
including without limitation, fraud and embezzlement; or (c) conduct or the
omission of conduct on the part of the Participant which constitutes a material
breach of any statutory or common-law duty of loyalty to the Company.
ARTICLE III
ADMINISTRATION
3.1 Committee Structure and Authority. The Plan shall be administered by
the Committee. The Committee shall be comprised of two or more members of the
Board of Directors selected by the Board. A majority of the Committee shall
constitute a quorum at any meeting thereof (including telephone conference) and
the acts of a majority of the members present, or acts unanimously approved in
writing by the entire Committee without a meeting, shall be the acts of the
Committee. The Board shall have the authority to remove, replace or fill any
vacancy of any member of the Committee upon notice to the Committee and the
affected member. Any member of the Committee may resign upon notice to the
President of the Company or to the Board. The Committee may allocate among one
or more of its members, or may delegate to one or more of its agents, such
duties and responsibilities as it determines. Subject to the provisions of this
Plan, the Committee shall have full and final authority in its discretion to:
(a) determine from time to time whether a person is an Eligible
Employee as of any Grant Date;
(b) determine the Option Price;
(c) determine the number of shares of Common Stock available as of any
Grant Date or subject to each Option;
(d) determine any Grant Date, Exercise Date and Option Period, and
provide for all aspects of payroll deduction, suspension or withdrawal;
(e) determine, subject to the Plan, the time or times and the manner
when each Option shall be exercisable and the duration of the Option
Period;
(f) provide for the acceleration of the right to exercise an Option
(or portion thereof);
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(g) prescribe additional terms, conditions and restrictions in the
Agreement and to provide for the forms of Agreement to be utilized in
connection with this Plan;
(h) determine whether a Participant has incurred a Disability;
(i) determine what securities laws requirements are applicable to the
Plan, Options, and the issuance of shares of Common Stock hereunder and
request of a Participant that appropriate action be taken;
(j) cancel, with the consent of the holder or as otherwise provided in
the Plan or an Agreement, outstanding Options;
(k) require as a condition of the exercise of an Option or the
issuance or transfer of a certificate of Common Stock, the withholding from
a Participant of the amount of any federal, state or local taxes as may be
necessary in order for the Company or Subsidiary to obtain a deduction and
as may be otherwise required by law;
(l) determine whether and for what reason an individual has incurred a
Termination of Employment or an authorized leave of absence;
(m) treat all or any portion of any period during which a Participant
is on an approved leave of absence as a period of employment for purposes
of accrual of his rights under an Option;
(n) determine whether the Company or any other person has a right or
obligation to purchase Common Stock from a Participant and, if so, the
terms and conditions on which such Common Stock is to be purchased;
(o) determine the restrictions or limitations on the transfer of
Common Stock;
(p) determine whether an Option is to be adjusted, modified or
purchased, or become fully exercisable, under Section 6.3 of the Plan or
the terms of an Agreement;
(q) adopt, amend and rescind such rules and regulations as, in its
opinion, may be advisable in the administration of this Plan;
(r) appoint and compensate agents, counsel, auditors or other
specialists to aid it in the discharge of its duties;
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(s) correct any defect or supply any omission or reconcile any
inconsistency in the Plan or in any Agreement relating to an Option, in
such manner and to the extent the Committee shall determine in order to
carry out the purposes of the Plan; and
(t) construe and interpret this Plan, any Agreement, and take all
other actions, and make all other determinations and take all other actions
deemed necessary or advisable for the administration of this Plan.
In the absence of the appointment of a Committee, the two or more members
of the Board who have served the longest period of time as members of the Board
shall be the Committee. A member of the Committee shall not exercise any
discretion respecting himself under the Plan.
ARTICLE IV
STOCK PROVISIONS
4.1 Number of Shares Subject to the Plan. The stock subject to the Options
granted under this Plan shall be the Company's Common Stock. Unless otherwise
amended by the Board and approved by the stockholders of the Company to the
extent required by law, a maximum number of 1,000,000 shares of Common Stock of
the Company (or such number as may result following any adjustment pursuant to
Section 6.3) shall be reserved and available for Options granted under the Plan.
The shares issued with respect to Options under the Plan may be authorized and
unissued shares, or shares issued and reacquired by the Company.
4.2 Release of Shares. If any shares of Common Stock available for
subscription are unsubscribed, or if any Option granted hereunder shall be
cancelled, forfeited, expire or terminate for any reason without having been
exercised or realized in full, any shares of Common Stock subject to
subscription or subject to such Option shall again be available and may
thereafter be granted or otherwise applied under this Plan.
4.3 Restrictions on Shares. Shares of Common Stock issued upon exercise of
an Option shall be subject to the terms and conditions specified herein and to
such other terms, conditions and restrictions as the Committee in its discretion
may determine or provide in the Agreement. The Company shall not be required to
issue or deliver any certificates for shares of Common Stock prior to (1) the
listing of such shares on any stock exchange (or other public market) on which
the Common Stock may then be listed (or regularly traded), (2) the completion of
any registration or qualification of such shares under federal or state law, or
any ruling or regulation of any governmental body which the Committee, in its
sole discretion, determines to be necessary or advisable, and (3) the tendering
to the Company of such documents and/or payments as the Committee may deem
necessary, including documents the Committee deems necessary to satisfy any
applicable withholding obligation in order for the Company or another
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entity to obtain a deduction on its federal, state or local tax return with
respect to the exercise of an Option. The Company may cause any certificate for
any share of Common Stock to be delivered to be properly marked with a legend or
other notation reflecting the limitations on transfer of such Common Stock as
provided in this Plan or as the Committee may otherwise require. The Company has
no obligation to register shares of Common Stock issued pursuant to the Plan.
Fractional shares shall not be delivered, but shall be rounded to the next lower
whole number of shares.
4.4 Stockholder Rights. No person shall have any rights of a stockholder as
to shares of Common Stock subject to an Option until, after proper exercise of
the Option or other action required, such shares shall have been recorded on the
Company's official stockholder records as having been issued or transferred. No
adjustment shall be made for cash dividends or other rights for which the record
date is prior to the date such shares are recorded as issued or transferred in
the Company's official stockholder records, except as provided in Section 6.3.
4.5 Stock Valuation. If and when the value of Common Stock shall be
required to be determined, it shall be determined in accordance with the
following provisions by the Committee, as applicable:
(a) if the Common Stock is listed on a national securities exchange or
quoted on the Nasdaq National Market ("Nasdaq"), the closing price of the
Common Stock on the relevant date, as reported on the composite tape or by
Nasdaq, as the case may be;
(b) if the Common Stock is not listed on a national securities
exchange or quoted on Nasdaq, but is publicly traded in the over-the-
counter market, the average of the closing bid and asked prices for the
Common Stock on the relevant date, or the most recent preceding day for
which such quotations are reported; and
(c) if, on the relevant date, the Common Stock is not publicly traded
or reported as described in (i) or (ii), on the basis of the good faith
determination of the Committee.
4.6 Custodian. Shares of Common Stock purchased pursuant to the Plan may be
delivered to and held in the custody of such investment or financial firm as
shall be appointed by the Committee. The custodian may hold in nominee or street
name certificates for shares purchased pursuant to the Plan, and may commingle
shares in its custody pursuant to the Plan in a single account without
identification as to individual Participants. By appropriate instructions to the
custodian on forms to be provided for the purpose, a Participant may from time
to time obtain (a) transfer into the Participant's own name or into the name of
the Participant and another individual as joint tenants with the right of
survivorship of all or part of the whole shares held by the custodian for the
Participant's account and delivery of such shares to the Participant; (b)
transfer of all or part of the whole shares held for the Participant's account
by the custodian to a regular individual brokerage account in the Participant's
own name or in the name of the
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Participant and another individual as joint tenants with the right of
survivorship, either with the firm then acting as custodian or with another
firm, or (c) sale of all or part of the whole shares held by the custodian for
the Participant's account at the market price at the time the order is executed
and remittance of the net proceeds of the sale to the Participant. Upon
termination of participation in the Plan, and upon receipt of instructions from
the Participant, the shares held by the custodian for the account of the
Participant will be transferred and delivered to the Participant in accordance
with (a) above, transferred to a brokerage account in accordance with (b), or
sold in accordance with (c), above.
ARTICLE V
ELIGIBILITY; OPTION PROVISIONS
5.1 Eligibility. Except as herein provided, the persons who shall be
eligible to participate in the Plan as of any Grant Date shall be those persons
(and only those persons) who are Eligible Employees of the Company (including a
Subsidiary that has adopted the Plan) on a Grant Date.
5.2 Grant of Options. The Committee shall have authority to grant Options
under the Plan at any time or from time to time to all Eligible Employees as of
a Grant Date. (To the extent an Option is granted to any Eligible Employee of an
entity on a relevant date, all Eligible Employees of the entity shall be granted
an Option to the extent required by law.) An Option shall entitle the
Participant to receive shares of Common Stock at the conclusion of the Option
Period, subject to the Participant's satisfaction in full of any conditions,
restrictions or limitations imposed in accordance with the Plan or an Agreement,
including without limitation, payment of the Option Price. Each Option granted
under this Plan shall be evidenced by an Agreement, in a form approved by the
Committee, which shall embody the terms and conditions of such Option and which
shall be subject to the express terms and conditions set forth in this Plan and
to such other terms and conditions as the Committee may deem appropriate. The
grant and exercise of Options hereunder shall be subject to all applicable
federal, state and local laws, rules and regulations and to such approvals by
any governmental or regulatory agency as may be required. As of any Grant Date,
each Eligible Employee shall be granted Options with the same rights and
privileges as any other Eligible Employee on that Grant Date, except the amount
of the Common Stock which may be purchased by any Participant under any Option
may bear a uniform relationship to the total compensation, or the basic or
regular rate of compensation, (as determined by the Committee) of all Eligible
Employees on that Grant Date, and the Option may establish a maximum amount of
Common Stock which may be purchased.
5.3 Option Period. Each Agreement shall specify the period for which the
Option thereunder is granted, which shall be determined by the Committee. In no
event shall the Option Period extend beyond the period permitted under Section
423(b)(7) of the Code.
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5.4 Option Price. Subject to the limits stated herein, the Option Price per
share at which shares of Common Stock may be acquired upon exercise of an Option
shall be determined by the Committee. Unless otherwise specified by the
Committee, with respect to any Exercise Date, the Option Price shall not be less
than the lesser of eighty-five percent (85%) of the Fair Market Value of a share
of Common Stock (averaged over such period as the Committee may determine and as
permitted by law) on the applicable Grant Date and eighty-five percent (85%) of
the Fair Market Value of a share of Common Stock (averaged over such period as
the Committee may determine and as permitted by law) on the applicable Exercise
Date. The Committee reserves the right to increase the Option Price by the value
of any accretion to the amounts credited to an Account if the Participant is
credited with such accretion regardless of the method of accounting for such
accretion.
5.5 Contribution Rate. If an Eligible Employee elects to participate, the
Participant shall file an Agreement with the Committee within the time period
designated by the Committee. The Committee may provide that the Agreement shall
specify either a percentage of the Participant's compensation (as defined by the
Committee) or a dollar amount determined by the Participant to be deducted each
pay period, or the Committee may permit only a specified percentage or a
specified amount. Such amount shall be credited to the Account and shall be the
Participant's Contribution Rate. Such deductions shall begin as of the first
regularly scheduled payroll date on or after the later of the Grant Date and the
date specified by the Committee. The Committee may establish minimum and maximum
percentages or amounts to be contributed and a date by when such Agreement must
be filed with the Committee. Notwithstanding the foregoing, in no event may more
than $25,000 be deducted from the Participant's compensation (as defined by the
Committee) for each Option Period and the maximum number of shares which can be
purchased by a Participant during the Option Period shall not exceed such amount
divided by eighty-five percent (85%) of the Fair Market Value of a share of
Common Stock on the applicable Grant Date (as determined under Section 5.4).
Such contributions will be held in the general funds of the Company, and no
interest shall accrue on any amounts held under this Plan, unless expressly
determined by the Committee. If payroll deductions are made by a Subsidiary,
that corporation will promptly remit the amount of the deduction to the Company.
A Participant's Contribution Rate, once established, shall remain in effect
during the Option Period unless and until contributions are suspended or fully
discontinued in order to comply with Section 401(k) of the Code or for such
other reasons as the Committee in its sole discretion may determine, or if the
Participant shall request suspension or discontinuance. If a Participant
requests to suspend payroll deductions the Participant may do so at such times
and in such manner as the Committee may permit, and previously deducted amounts
shall be retained until the earlier of the Exercise Date and the date the
Participant totally discontinues payroll deductions and requests a distribution
of the Account. A Participant who has suspended contributions may recommence
payroll deductions at such time, if at all, as determined by the Committee. If a
Participant requests to totally discontinue payroll deductions, the Participant
may do so by providing written notice to the Committee. There shall be paid to
the Participant the value of the Participant's Account as soon as
administratively possible and the Participant shall not receive any shares as of
the Exercise Date.
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5.6 Purchase of Shares. Subject to Sections 5.7, 5.8, 5.9, 5.10 and 5.11 on
each Exercise Date, a Participant who has previously executed an Agreement with
respect to a specific Grant Date and made one or more payments described in
Section 5.5 shall be deemed to have exercised the Option to the extent of the
value of the Account, subject to the $25,000 limit set forth in Section 5.5 with
respect to the Option being exercised, and shall be deemed to have purchased
such number of full shares of Common Stock as equals the value of the Account,
subject to the limits of Sections 423(b)(3) and 423(b)(8) of the Code and the
number of shares available as of the Exercise Date and proportionably allocable
to other Participants for that Grant Date. The number of shares of Common Stock
to be purchased as of any Exercise Date shall be determined by dividing the
Option Price per share of the Common Stock into the Account value and the value
of the shares so purchased shall be charged to the Account. Any value remaining
in an Account of the Participant shall be returned to the Participant and not
applied to purchase Common Stock. Certificates of Common Stock purchased
hereunder may be held by the custodian as provided in Section 4.6. The Committee
may amend the Plan or any Agreement or provide in operation for Participants to
dispose of shares of Common Stock received upon the Exercise Date on or
immediately thereafter (which time may include any period during which the
Option is held) to the extent such change would not result in liability under
Section 16 of the Exchange Act. If the total number of shares to be purchased as
of any Exercise Date by all Participants exceeds the number of shares authorized
under this Plan or made available by the Committee as to any Exercise Date, a
pro rata allocation of the available shares will be made among all Participants
authorizing such payroll deductions based on the amount of their respective
payroll deductions through the Exercise Date.
5.7 Cancellation of Options. Except as otherwise provided in an Agreement,
an Option shall cease to be exercisable and shall be cancelled on or after the
expiration of the Option Period.
5.8 Terminated Employees. Except as otherwise provided by the Committee or
in an Agreement, any Participant who incurs a Termination of Employment for any
reason, except death, Disability or Retirement, during the Option Period shall
cease to be a Participant, the Option shall be null and void on the date of the
Termination of Employment without notice to the Participant and the balance of
the Account of the Participant shall be distributed to him as soon as
administratively possible.
5.9 Deceased Employees. If a Participant shall die during an Option Period
while an Eligible Employee, no further contributions by deduction from regularly
scheduled payments on behalf of the deceased Participant shall be made, except
that the Representative may make a single sum payment with respect to the Option
at any time on or before the Exercise Date equal to the amount the Participant
would have contributed as determined by the Committee for the payroll periods
remaining to the Exercise Date. The Representative may at any time prior to the
Exercise Date request a distribution of the Account. If the Representative does
not request a distribution, the balance accumulated in the deceased
Participant's Account shall be used to purchase shares of the Common Stock on
the previously mentioned Exercise Date.
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5.10 Disabled or Retired Employees. If a Participant incurs a Termination
of Employment due to Disability, or if a Participant incurs a Termination of
Employment due to Retirement, during an Option Period, no further contributions
by deduction from regularly scheduled payments on behalf of the disabled or
retired Participant shall be made, except that the Participant may make a single
sum payment with respect to the Option at any time on or before the Exercise
Date equal to the amount the Participant would have contributed as determined by
the Committee for the payroll periods remaining to the Exercise Date. The
Participant may at any time prior to the Exercise Date request a distribution of
the Account. If the Participant does not request a distribution of the Account,
the balance accumulated in the disabled or retired Participant's Account shall
be used to purchase shares of the Common Stock on the previously mentioned
Exercise Date.
5.11 Limitations. Notwithstanding any other provision of this Plan, in no
event may a Participant (i) purchase under the Plan during a calendar year
Common Stock having a fair market value (determined at Grant Date) of more than
$25,000 or (ii) receive any rights to purchase stock hereunder if he or she
beneficially owns, immediately after such receipt, five percent (5%) or more of
the total voting power or value of all classes of stock of the Company.
5.12 Nonassignability. Neither the Option nor the Account shall be
assigned, transferred (except as herein provided), pledged, or hypothecated in
any way (whether by operation of law or otherwise), other than by will or the
laws of descent and distribution or pursuant to a domestic relations order which
would be a qualified domestic relations order as defined in the Code or ERISA
(if the Plan were described in the relevant Sections) but only to the extent
consistent with Section 423 of the Code. Except as provided herein, the Option
is exercisable during a Participant's lifetime only by the Participant or the
appointed guardian or legal representative of the Participant, and neither the
Option nor the Account shall be subject to execution, attachment, or similar
process. Any attempted assignment, transfer, pledge, hypothecation, or other
disposition contrary to the provisions hereof, and the levy of any attachment or
similar process upon the Option or the Account shall be null and void and
without effect. The Company shall have the right to terminate the Option or the
Account in the event of any such assignment, transfer, pledge, hypothecation,
other disposition of the Option or the Account, or levy of attachment or similar
process, by notice to that effect to the person then entitled to exercise the
Option; provided, however, that termination of the Option hereunder shall not
prejudice any rights or remedies which the Company may have under an Agreement
or otherwise.
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ARTICLE VI
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GENERAL PROVISIONS APPLICABLE TO THE PLAN
-----------------------------------------
6.1 Termination of Plan. To the extent required by law, this Plan shall
terminate on the last day of the ten (10) year period commencing with the
effective date or at such earlier time as the Board may determine, and no
Options shall be granted under the Plan after that date. Any Options outstanding
under the Plan at the time of its termination shall remain in effect until they
shall have been exercised, expired or otherwise cancelled, settled or terminated
as provided herein or in an Agreement, and such outstanding Options shall not be
affected by such termination of the Plan. The provisions of the Plan in respect
to the full and final authority of the Committee under the Plan, other than the
authority to grant Options, and in respect of a Participant's obligations
respecting shares of Common Stock received pursuant to the exercise of an Option
shall continue notwithstanding the termination of the Plan.
6.2 Investment Representation. In the event the disposition of Common
Stock acquired upon the exercise of any Option is not covered by a then current
registration statement under the Securities Act and is not otherwise exempt from
such registration, the Common Stock so acquired shall be restricted against
transfer to the extent required by the Securities Act or regulations thereunder,
and each Agreement shall contain a requirement that, upon demand by the Company
for such representation, the individual exercising an Option shall state in
writing, as a condition precedent to each exercise of the Option, in whole or in
part, that the Common Stock acquired by such exercise is acquired for investment
purposes only and not for resale or with a view to distribution. The Committee
may set forth in an Agreement such other terms and conditions relating to the
registration or qualification of the Common Stock under federal or state
securities laws as it desires, including, in its discretion, the imposition of
an obligation on the Company to cause the Common Stock issued to a Participant
to be registered under the Securities Act.
6.3 Effect of Certain Changes.
(a) Anti-Dilution. In the event of any Company stock dividend, stock
split, combination or exchange of shares, recapitalization or other change
in the capital structure of the Company, corporate separation or division
of the Company (including, but not limited to, a split-up, spin-off, split-
off or distribution to Company stockholders other than a normal cash
dividend), sale by the Company of all or a substantial portion of its
assets (as measured on either a stand-alone or consolidated basis),
reorganization, rights offering, partial or complete liquidation, or any
other corporate transaction or event involving the Company and having an
effect similar to any of the foregoing, then the Committee may adjust or
substitute, as the case may be, the number of shares of Common Stock
available for Options under the Plan, the number of shares of Common Stock
covered by outstanding Options, the exercise price per share of outstanding
Options, and any other characteristics or terms of the Options as the
Committee shall deem necessary or appropriate to reflect equitably the
effects of such changes to the Participants; provided,
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however, that any fractional shares resulting from such adjustment shall be
eliminated by rounding to the next lower whole number of shares with
appropriate payment for such fractional share as shall reasonably be
determined by the Committee.
(b) Change in Control. If there is a Change in Control of the Company
(as defined herein) or the Committee reasonably anticipates a Change in
Control is likely to occur then (1) the Committee may cause each Option to
be immediately exercisable; (2) the Committee may provide that any Option
exercisable on the date of any such Change in Control may be purchased by
the Company in an amount equal to the excess, if any, of the aggregate fair
market value per share of Common Stock subject to the Option (or portion
thereof) over the aggregate Option Price of the shares subject to the
Option (or portion thereof) which the Committee determines to purchase; or
(3) the Company may provide for any combination of (1) and (2) above. For
purposes of this Section 6.3(b), the aggregate fair market value per share
of Common Stock subject to the Option that the Committee determines to
purchase shall be determined by the Committee by reference to the cash or
fair market value, determined by the Committee, of the securities, property
or other consideration receivable pursuant to the Change in Control
described in this Section 6.3(b). The aggregate Option Price of the Common
Stock shall be determined by multiplying the number of such shares by the
Option Price. In the event of a Change in Control described in Section
6(c)(iii), and if the Option is unexercised and the Committee does not
exercise its discretion hereunder to purchase the Option, then the Option
shall be regarded as the right to receive the securities, property, cash or
other consideration receivable by stockholders of the Company immediately
prior to the Change in Control described in Section 6(c)(iii). The
provisions of this Section 6.3(b) shall be construed consistently with the
terms or conditions of any regulation or ruling respecting the status of
Options under Section 423 of the Code and the receipt of cash or other
consideration coincident with the cancellation of such Options, and in
order to provide the Participant the economic benefit of the Option without
incurring liability under Section 16(b) of the Exchange Act.
(c) "Change in Control" shall be deemed to have occurred on the first
to occur of any of the following events:
(i) An acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) (a
"Person") of beneficial ownership (within the meaning of Rule 13d-
3 promulgated under the Exchange Act) of 25% or more of either (1)
the then outstanding shares of common stock of the Company (the
"Outstanding Company Common Stock") or (2) the combined voting
power of the then outstanding voting securities of the Company
entitled to vote generally in the election of directors (the
"Outstanding Company Voting Securities"); excluding, however, the
following: (1) any acquisition directly from the Company, other
than an acquisition by virtue of the exercise of a conversion
privilege
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unless the security being so converted was itself acquired directly
from the Company, (2) any acquisition by the Company; (3) any
acquisition by any employee benefit plan (or related trust) sponsored
or maintained by the Company or any corporation controlled by the
Company; (4) any acquisition by (A) Joseph Fox or Avi Fox, (B) any
spouse, child or grandchild of Joseph Fox or Avi Fox (each, an
"Immediate Family Member"), (C) a trust or trusts for the exclusive
benefit of Joseph Fox, Avi Fox and/or any Immediate Family Members or
(D) a partnership, limited liability company, corporation or other
entity in which Joseph Fox, Avi Fox and/or any Immediate Family
Members are the holders of all of the equity interests, or (5) any
acquisition by any Person pursuant to a transaction which complies
with clauses (1), (2) and (3) of subsection (iii) of this Section
6.3(c); or
(ii) Within any period of 24 consecutive months, a change in the
composition of the Board such that the individuals who, immediately
prior to such period, constituted the Board (such Board shall be
hereinafter referred to as the "Incumbent Board") cease for any reason
to constitute at least a majority of the Board; provided, however, for
purposes of this Section 6.3(c), that any individual who becomes a
member of the Board during such period, whose election, or nomination
for election by the Company's stockholders, was approved by a vote of
at least a majority of those individuals who are members of the Board
and who were also members of the Incumbent Board (or deemed to be such
pursuant to this proviso) shall be considered as though such
individual were a member of the Incumbent Board; but, provided
further, that any such individual whose initial assumption of office
occurs as a result of either an actual or threatened election contest
(as such terms are used in Rule 14a-11 of Regulation 14A promulgated
under the Exchange Act) or other actual or threatened solicitation of
proxies or consents by or on behalf of a Person other than the Board
shall not be so considered as a member of the Incumbent Board; or
(iii) The approval by the stockholders of the Company of a reorganization,
merger or consolidation or sale or other disposition of all or
substantially all of the assets of the Company ("Corporate
Transaction"); excluding, however, such a Corporate Transaction
pursuant to which (1) all or substantially all of the individuals and
entities who are the beneficial owners, respectively, of the
outstanding Company Common Stock and Outstanding Company Voting
Securities immediately prior to such Corporate Transaction will
beneficially own, directly or indirectly, more than 60% of,
respectively, the outstanding shares of common stock, and the combined
voting power of the then outstanding voting securities entitled to
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vote generally in the election of directors, as the case may be, of
the corporation resulting from such Corporate Transaction (including,
without limitation, a corporation which as a result of such
transaction owns the Company or all or substantially all of the
Company's assets, either directly or through one or more subsidiaries)
in substantially the same proportions as their ownership, immediately
prior to such Corporate Transaction, of the outstanding Company Common
Stock and Outstanding Company Voting Securities, as the case may be,
(2) no Person (other than the Company; any employee benefit plan (or
related trust) sponsored or maintained by the Company, by any
corporation controlled by the Company, or by such corporation
resulting from such Corporate Transaction) will beneficially own,
directly or indirectly, more than 25% of, respectively, the
outstanding shares of common stock of the corporation resulting from
such Corporate Transaction or the combined voting power of the
outstanding voting securities of such corporation entitled to vote
generally in the election of directors, except to the extent that such
ownership existed with respect to the Company prior to the Corporate
Transaction, and (3) individuals who were members of the Board
immediately prior to the approval by the stockholders of the
Corporation of such Corporate Transaction will constitute at least a
majority of the members of the board of directors of the corporation
resulting from such Corporate Transaction; or
(iv) The approval by the stockholders of the Company of a complete
liquidation or dissolution of the Company, other than to a corporation
pursuant to a transaction which would comply with clauses (1), (2) and
(3) of subsection (iii) of this Section 6.3(c), assuming for this
purpose that such transaction were a Corporate Transaction.
(d) The Committee may, in its discretion, grant to the Participant, in
exchange for the surrender and cancellation of the Option, a new
Option on such terms and conditions as may be determined by the
Committee in accordance with the Plan.
6.4 Withholding. Notwithstanding any other provision hereof, as a
condition of delivery or transfer of shares of Common Stock, the Committee in
its sole discretion may require the Participant to pay to the Company, or the
Committee may at its election withhold from any wages, salary, or stock to be
issued to a Participant pursuant to the exercise of an Option, or other payment
due to the Participant, an amount sufficient to satisfy all present or estimated
future federal, state and local withholding tax requirements related thereto.
The Participant may satisfy any requirement under the Plan or an Agreement with
respect to the Company's federal, state or local tax withholding obligation by
requesting that the Committee withhold and not transfer or issue shares of
Common Stock with a Fair Market Value equal to such withholding obligation,
otherwise issuable or transferable to him pursuant to the exercise of that
portion of the Option. An Agreement may provide for shares of Common Stock to be
delivered or withheld having a Fair
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Market Value in excess of the minimum amount required to be withheld, but not in
excess of the amount determined by applying the Participant's maximum marginal
tax rate. Any right or election of the Participant under this Section 6.4 shall
be subject to the approval of the Committee. The amount of required withholding
shall, at the election of the Participant, be at a specified rate not less than
the statutory minimum federal and state withholding rate and not greater than
the maximum federal, state and local marginal tax rate applicable to the
Participant and to the particular option exercise transaction.
6.5 No Company Obligation. The Company shall have no duty or obligation to
affirmatively disclose to a record or beneficial holder of an Option, and such
holder shall have no right to be advised of, any material information regarding
the Company at any time prior to, upon or in connection with the exercise of an
Option.
6.6 Committee Discretion. The Committee may in its sole discretion
include in any Agreement an obligation that the Company purchase a Participant's
shares of Common Stock received upon the exercise of an Option (including the
repurchase of any unexercised Options which have not expired), or may obligate a
Participant to sell shares of Common Stock to the Company upon such terms and
conditions as the Committee may determine and set forth in an Agreement. The
provisions of this Article VI shall be construed by the Committee in its sole
discretion, and shall be subject to such other terms and conditions as the
Committee may from time to time determine.
ARTICLE VII
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MISCELLANEOUS
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7.1 Indemnification of the Board and Committee. In addition to such other
rights of indemnification as they may have and to the extent permitted by law,
the Company shall indemnify, defend and hold harmless the Board, the Committee,
the members of the Committee, the officers of the Company, and any agent or
representative selected by the Board or Committee (collectively "indemnified
party") against the reasonable expenses, including, without limitation,
attorneys' fees, actually and necessarily incurred in connection with the
defense of any action, suit or proceeding, or any threat thereof, or in
connection with any appeal therein, to which they or any of them may be a party
by reason of any act or omission in connection with the Plan or any Option
granted thereunder, and against all amounts paid by them in settlement thereof
(provided such settlement is approved by legal counsel selected by the Company)
or paid by them in satisfaction of a judgment in any action, suit or proceeding,
except in relation to matters as to which it shall be adjudged in such action,
suit or proceeding that such indemnified party is liable for gross negligence or
gross misconduct in the performance of his duties; provided that within sixty
(60) days after institution of any such action, suit or proceeding the
indemnified party may in writing elect to defend the same at its sole expense,
and if such election is made, the Company shall have no further liability or
obligations to the indemnified party under this Section. The
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provisions of this Section 7.1 shall in no way limit any other obligation or
arrangements the Company may have with regard to indemnifying an indemnified
party.
7.2 Mitigation of Excise Tax. If any payment or right accruing to a
Participant under this Plan (without the application of this Section 7.2),
either alone or together with other payments or rights accruing to the
Participant from the Company ("Total Payments") would constitute a "parachute
payment" (as defined in Section 280G of the Code and regulations thereunder),
such payment or right shall be reduced to the largest amount or greatest right
that will result in no portion of the amount payable or right accruing under the
Plan being subject to an excise tax under Section 4999 of the Code or being
disallowed as a deduction under Section 280G of the Code. The determination of
whether any reduction in the rights or payments under this Plan is to apply
shall be made by the Committee in good faith after consultation with the
Participant, and such determination shall be conclusive and binding on the
Participant. The Participant shall cooperate in good faith with the Committee in
making such determination and providing the necessary information for this
purpose. The foregoing provisions of this Section 7.2 shall apply with respect
to any person only if after reduction for any applicable federal excise tax
imposed by Section 4999 of the Code and federal income tax imposed by the Code,
the Total Payments accruing to such person would be less than the amount of the
Total Payments as reduced, if applicable, under the foregoing provisions of the
Plan and after reduction for only federal income taxes.
7.3 Interpretation. Whenever necessary or appropriate in this Plan and
where the context so requires, the singular term and the related pronouns shall
include the plural and the masculine and feminine gender.
7.4 Governing Law. The Plan and any Agreement shall be governed by the
laws of the State of Delaware (other than its laws respecting choice of law).
7.5 Limitations on Liability. No liability whatever shall attach to or be
incurred by any past, present or future stockholders, officers or directors,
merely as such, of the Company under or by reason of any of the terms,
conditions or agreements contained in this Plan, in an Agreement or implied from
either thereof, and any and all liabilities of, and any and all rights and
claims against the Company, or any shareholder, officer or director, merely as
such, whether arising at common law or in equity or created by statute or
constitution or otherwise, pertaining to this Plan or to an Agreement, are
hereby expressly waived and released by every Participant as a part of the
consideration for any benefits provided by the Company under this Plan. A person
who shall claim a right or benefit under this Plan shall be entitled only to
claim against the Company for such benefit.
7.6 Validity. If any provision of this Plan shall for any reason be held
to be invalid or unenforceable, such invalidity or unenforceability shall not
affect any other provision hereof, and this Plan shall be construed as if such
invalid or unenforceable provision were omitted.
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7.7 Assignment. This Plan shall inure to the benefit of and be binding
upon the parties hereof and their respective successors and permitted assigns.
7.8 Captions. The captions and headings to this Plan are for convenience
of reference only and in no way define, limit or describe the scope or the
intent of this Plan or any part hereof, nor in any way affect this Plan or any
part hereof.
7.9 Amendments. The Board of Directors may at any time amend, waive,
discharge or terminate the Plan even with prejudice to a Participant. The Board
or the Committee may amend, waive, discharge, terminate, modify, extend, replace
or renew an outstanding Option Agreement, even with prejudice to a Participant,
provided such a change does not cause the Plan to fail to be a plan as described
in Section 423 of the Code.
7.10 Entire Agreement. This Plan and the Agreement constitute the
entire agreement with respect to the subject matter hereof and thereof, provided
that in the event of any inconsistency between the Plan and the Agreement, the
terms and conditions of this Plan shall control.
7.11 Rights with Respect to Continuance of Employment. Nothing contained
herein or in an Agreement shall be deemed to alter the at-will employment
relationship between the Company or a Subsidiary and a Participant. Nothing
contained herein or in an Agreement shall be construed to constitute a contract
of employment between the Company or a Subsidiary and a Participant. The Company
or, as applicable, the Subsidiary and the Participant each continue to have the
right to terminate the employment relationship at any time for any reason. The
company or Subsidiary shall have no obligation to retain the Participant in its
employ as a result of this Plan. There shall be no inference as to the length of
employment hereby, and the Company or Subsidiary reserves the same rights to
terminate the Participant's employment as existed prior to the individual
becoming a Participant in this Plan.
7.12 Options for Shares in Substitution for Stock Options Granted by
Other Corporations. Options may be granted under the Plan from time to time in
substitution for stock options or stock appreciation rights held by employees,
directors or service providers of other corporations who are about to become
employees of the Company as the result of a merger or consolidation of the
employing corporation with the Company, or the acquisition by the Company of the
assets of the employing corporation, or the acquisition by the Company of the
stock of the employing corporation, as the result of which it becomes a
designated employer under the Plan. The terms and conditions of the Options so
granted may vary from the terms and conditions set forth in this Plan at the
time of such grant as the majority of the members of the Committee may deem
appropriate to conform, in whole or in part, to the provisions of the Options in
substitution for which they are granted.
7.13 Procedure for Adoption. Any Subsidiary of the Company may by
resolution of such Subsidiary's board of directors, with the consent of the
Board of Directors and subject to
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such conditions as may be imposed by the Board of Directors, adopt the Plan for
the benefit of its employees as of the date specified in the board resolution.
The Board shall have the power to make such designation before or after the Plan
is approved by stockholders.
7.14 Procedure for Withdrawal. Any Subsidiary which has adopted the
Plan may, by resolution of the board of directors of such Subsidiary, with the
consent of the Board of Directors and subject to such conditions as may be
imposed by the Board of Directors, terminate its adoption of the Plan; provided
such termination of adoption does not cause the Plan to fail to be a plan
described in Section 423 of the Code.
7.15 Expenses. Expenses of the Plan, including the fees or expenses
incurred by the transfer agent in connection with the transfer of Common Stock
and brokerage fees or expenses incurred in connection with the acquisition of
Common Stock in connection with the Plan or transfer to the Participant, shall
be charged to the Accounts of affected Participants or charged to the accretion
to the amounts credited to any Account if the Participant is credited with such
accretion regardless of the method of accounting for such accretion, except to
the extent paid by the Company or otherwise accounted for by the Company. Any
expense or fee associated with the Common Stock, including, for example,
custodian or brokerage fees after the Common Stock is transferred to the
Participant or for his account, or fees or commissions in connection with the
disposition of shares, shall be borne by the Participant.
Executed and effective as of the 26th day of August, 1999.
WEB STREET, INC.
By: /s/ Stuart A. Cohn
--------------------------------
Title: Executive Vice President
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EXHIBIT 5.1
April 28, 2000
Web Street, Inc.
510 Lake Cook Road
Deerfield, Illinois 60015
Re: Registration Statement on Form S-8
----------------------------------
Ladies and Gentlemen:
I have acted as counsel for Web Street, Inc., a Delaware corporation (the
"Company"), in connection with the preparation and filing of a Registration
Statement on Form S-8 (the "Registration Statement") for the registration under
the Securities Act of 1933, as amended (the "Act"), of an aggregate of
6,867,377 shares (the "Shares") of the Company's common stock, $.01 par value
per share (the "Common Stock"), which may be issued pursuant to the Web Street
Financial Group, Inc. Stock Option Plan, the option agreements listed on
Schedule I attached to the Registration Statement, the Web Street, Inc. 1999
Stock Incentive Plan and the Web Street, Inc. 1999 Employee Stock Purchase Plan
(collectively, the "Plans"). This opinion is being furnished in accordance with
the requirements of Item 601(b)(5) of Regulation S-K under the Act.
In connection with this opinion, I have examined and relied upon originals
or copies, certified or otherwise identified to my satisfaction, of the
following:
1. The Registration Statement;
2. The Amended and Restated Certificate of Incorporation of the
Company;
3. The Amended and Restated By-Laws of the Company;
4. Records of proceedings and actions of the Board of Directors of
the Company relating to the adoption of each of the Plans;
5. Records of proceedings and actions of the stockholders of the
Company relating to the adoption of each of the Plans;
6. Each of the Plans;
7. The form of option agreement, if applicable, under each of the
Plans (each, an "Option Agreement");
8. The form of specimen certificate representing the Common Stock;
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Web Street, Inc.
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April 28, 2000
9. Certificates and written statements of public officials,
officers, directors, representatives and agents of the Company,
and while I have relied as to matters of fact on such
certificates and statements, without investigation, no facts have
come to my attention that cause me to believe that any of the
representations contained in such certificates and statements
were not accurate; and
10. Such other instruments, documents, statements and records of the
Company and others as I have deemed relevant and necessary to
examine and rely upon for the purpose of this opinion.
In connection with this opinion, I have assumed the legal capacity of all
natural persons, the accuracy and completeness of all documents and records that
I have reviewed, the genuineness of all signatures, the authenticity of the
documents submitted to me as originals and the conformity to authentic original
documents of all documents submitted to me as certified, conformed or reproduced
copies.
Based upon and subject to the foregoing, I am of the opinion that when
certificates representing the Shares in the form of the specimen certificate
examined by me have been manually signed by an authorized officer of the
transfer agent and registrar for the Common Stock and when such certificates are
issued and delivered by the Company and paid for in accordance with the terms of
the applicable Plan and the applicable Option Agreement, up to 6,867,377 Shares
issuable under the Plans and covered by the Registration Statement will be
validly issued, fully paid and non-assessable.
My opinion expressed above is limited to the General Corporation Law of the
State of Delaware, the applicable provisions of the Delaware Constitution and
the reported judicial decisions interpreting such laws, and I do not express any
opinion herein concerning any other laws. In addition, I express no opinion
herein concerning any statutes, ordinances, administrative decisions, rules or
regulations of any county, town, municipality or special political subdivision
(whether created or enabled through legislative action at the federal, state or
regional level). This opinion is given as of the date hereof and I assume no
obligation to advise you of changes that may hereafter be brought to my
attention. In connection therewith, I hereby consent to the use of this opinion
for filing as Exhibit 5 to the Registration Statement.
Very truly yours,
/s/ Stuart A. Cohn
---------------------------
Stuart A. Cohn
Executive Vice President and
General Counsel
<PAGE>
[LOGO]
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this Registration Statement (Form S-8) of our report dated February
15, 2000 included in Web Street, Inc.'s Annual Report on Form 10-K for the year
ended December 31, 1999 and to all references to our Firm included in this
Registration Statement.
/s/ Arthur Andersen LLP
Chicago, Illinois
April 28, 2000
