<PAGE>
As filed with the Securities and Exchange Commission on June 17, 1999
Registration No. 333-_______
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------
FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------------
GATEWAY ENERGY CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 44-0651207
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
500 DALLAS STREET, SUITE 2615
HOUSTON, TEXAS 77002
(Address of Principal Executive Offices) (ZIP Code)
----------------------
1998 STOCK OPTION PLAN (1)
1998 OUTSIDE DIRECTORS STOCK OPTION PLAN (2)
STOCK OPTION AGREEMENTS WITH MICHAEL FADDEN
DATED MARCH 17, 1997, AUGUST 1, 1997 AND FEBRUARY 10, 1998 (3)
(Full title of the plan or written contract)
----------------------
MICHAEL T. FADDEN
GATEWAY ENERGY CORPORATION
500 DALLAS, SUITE 2615
HOUSTON, TEXAS 77002
(713) 336-0844
(Name, address and telephone number,
including area code, of agent for service)
----------------------
With copy to:
ROCHELLE A. MULLEN, ESQ.
CLINE, WILLIAMS, WRIGHT, JOHNSON & OLDFATHER
1125 SOUTH 103RD ST. - SUITE 720
OMAHA, NEBRASKA 68124-1090
<PAGE>
(1) The 1998 Stock Option Plan authorizing the issuance of 600,000 shares of
Common Stock was approved by the Board of Directors on May 28, 1998 and by
a majority of the shareholders at the 1998 Annual Meeting of Shareholders
on July 16, 1998.
(2) The 1998 Outside Directors Stock Option Plan authorizing the issuance of
100,000 shares of Common Stock was approved by the Board of Directors on
May 28, 1998.
(3) The Company granted to Mr. Fadden, the Chairman, CEO and President, a
warrant to purchase 50,000 shares of Common Stock on March 17, 1997; a
stock option to purchase 173,500 shares of Common stock on August 1, 1997;
and a stock option to purchase 2,250 shares of Common Stock on February 10,
1998.
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Proposed Maximum Proposed Amount of
Title of Securities Amount of Shares Offering Price Maximum Registration
to be Registered to be Registered Per Share Aggregate Price Fee
- ------------------- ---------------------- --------------- --------------- -------------
<S> <C> <C> <C> <C>
Common Stock 925,750 $.26 $240,695 $66.91
</TABLE>
(1) The proposed maximum offering price was determined in accordance with Rule
457(c) under the Securities Act of 1933, based on the average of the bid
and asked price of shares of the same class reported on the Bulletin Board
section of NASDAQ on June 11, 1999.
(2) In addition, pursuant to Rule 416(c) under the Securities Act of 1933, this
Registration Statement covers an indeterminate amount of interests to be
offered or sold pursuant to the plans described herein.
-2-
<PAGE>
PART I
INFORMATION REQUIRED IN THE SECTION 10 (a) PROSPECTUS
The documents containing the information specified in Part I of Form S-8
will be delivered to employees, officers and directors in accordance with Form
S-8 and Rule 428(b)(1) under the Securities Act of 1933.
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
ITEM 3. INCORPORATION OF DOCUMENTS BY REFERENCE.
The following documents, as filed by the Registrant with the Securities
and Exchange Commission, are incorporated by reference into this Registration
Statement: (a) the Registrant's latest Annual Report on Form 10-KSB for
Fiscal Year ended February 28, 1999; (b) all other reports filed pursuant to
Section 13(a) or 15(d) of the Securities Exchange Act of 1934 since February
28, 1999; and (c) the description of the Registrant's Common Stock contained
in the Registrant's Certificate of Incorporation and Bylaws as filed as an
Exhibit to the Registrant's latest Annual Report on Form 10-KSB for the
fiscal year ended February 28, 1999.
All documents subsequently filed by the Registrant pursuant to sections
13(a), 13(c), and 14 and 15(d) of the Securities Exchange Act of 1934, 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 in this
Registration Statement and to be a part hereof from the date of filing of
such documents.
ITEM 4. DESCRIPTION OF SECURITIES.
Not applicable.
ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL.
Not applicable.
ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Delaware Business Corporation Act empowers the Registrant to
indemnify, subject to the standards set forth therein, any persons in
connection with any action, suit or proceeding brought or threatened by
reason of the fact that he or she is or was a director, officer, employee or
agent of the Registrant, or is or was serving at the request of the
Registrant. The Registrant's Certificate of Incorporation and Bylaws
provides for indemnification of the officers and directors to the fullest
extent permitted by Delaware law. The Delaware Business Corporation Act also
provides that the Registrant may purchase insurance on behalf of any such
director, officer, employee or agent. The
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<PAGE>
Registrant's Board of Directors has adopted a resolution providing for the
indemnification by the Registrant of each director, officer, employee or
agent of the Registrant to the fullest extent permitted by the Delaware
Business Corporation Act. The Registrant maintains an insurance policy
insuring its directors and officers against liability for certain acts and
omissions while acting in their official capacities.
ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED.
Not applicable.
ITEM 8. EXHIBITS.
EXHIBIT
NUMBER EXHIBIT
------- -------
5 Opinion of Counsel
23.1 Consent of Auditors
23.2 Consent of Counsel ( included in Exhibit 5)
99.1 1998 Stock Option Plan
99.2 1998 Outside Directors Stock Option Plan
99.3 Fadden Warrant Agreement dated March 17, 1997
99.4 Fadden Stock Option Agreement dated August 1, 1997
99.5 Fadden Stock Option Agreement dated February 10, 1998
The Registrant hereby undertakes to submit each plan pursuant to which
shares are hereby registered and any amendments thereto to the Internal Revenue
Service (the "IRS") in a timely manner and to make all changes required by the
IRS in order to qualify the Plan under Section 401(a) of the Internal Revenue
Code of 1986, as amended.
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:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(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
-4-
<PAGE>
amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information in the
registration statement.
(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 set forth in the registration
statement;
PROVIDED, HOWEVER, that paragraphs (a) (1) (i) and (a) (1) (ii) do not
apply if the registration statement is on Form S-3 or Form S-8, and 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 Securities Exchange Act of 1934 that are
incorporated by reference in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, 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.
(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 of 1933, each
filing of the Registrant's annual report pursuant to Section 13 (a) or
Section 15(d) of the Securities Exchange Act of 1934 (and, where applicable,
each filing of an employee benefit plan's annual report pursuant to Section
15(d) of the Securities Exchange Act of 1934) 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.
(e) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 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
Securities and Exchange Commission such indemnification is against public
policy as expressed in the 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 Act, and will be governed by the final
adjudication of such issue.
-5-
<PAGE>
SIGNATURES
THE REGISTRANT. Pursuant to the requirements of the Securities Act of
1933, 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 Houston, State of Texas on
June 17, 1999.
GATEWAY ENERGY CORPORATION
BY: /s/ Scott D. Heflin
------------------------------------------
Scott D. Heflin, Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
/s/ Michael T. Fadden
- --------------------------- Chairman, CEO and President 6/11/99
Michael T. Fadden
/s/ Larry J. Horbach
- --------------------------- Director 6/11/99
Larry J. Horbach
/s/ John B. Ewing
- --------------------------- Director 6/11/99
John B. Ewing
/s/ Abe Yeddis
- --------------------------- Director 6/11/99
Abe Yeddis
/s/ Earl Hoffman
- --------------------------- Director 6/11/99
Earl Hoffman
/s/ Charles A. Holtgraves
- --------------------------- Director 6/11/99
Charles A. Holtgraves
/s/ Gary McConnell
- --------------------------- Director 6/11/99
Gary McConnell
/s/ Donald L. Anderson
- --------------------------- Director 6/11/99
Donald L. Anderson
/s/ Nicholas Pilger
- --------------------------- Director 6/11/99
Nicholas Pilger
/s/ Neil A. Fortkamp
- --------------------------- Director 6/11/99
Neil A. Fortkamp
-6-
<PAGE>
Exhibit 5
LAW OFFICES OF
CLINE, WILLIAMS, WRIGHT, JOHNSON & OLDFATHER
ONE PACIFIC PLACE
1125 S. 103RD STREET, SUITE 720
OMAHA, NEBRASKA 68124
(402) 397-1700
FAX (402) 397-1806
June 17, 1999
Michael Fadden, President
Gateway Energy Corporation
500 Dallas, Suite 2615
Houston, Texas 77002
Re: Registration of 925,750 Shares of Common Stock
on Form S-8
Dear Mr. Fadden:
We have acted as legal counsel for Gateway Energy Corporation, a Delaware
corporation, (the "Company") in connection with the Company's preparation of the
above-referenced registration of shares on Form S-8 (the "Form S-8") being
filed with the Securities and Exchange Commission (the "Commission") under the
Securities Act of 1933, as amended, (the "Act"), the prospectus for the 1998
Stock Option Plan and the prospectus for the 1998 Outside Directors' Stock
Option Plan, which are not filed, but are included as a part of the Form S-8
(the "Prospectuses"). The Company is registering 600,000 shares of common stock
issuable pursuant to the 1998 Stock Option Plan and 100,000 shares of common
stock issuable pursuant to the 1998 Outside Directors' Stock Plan (collectively
the "Plans"). In addition, the Company is registering a total of 225,750
warrant/stock options previously granted to its Chairman, Chief Executive
Officer and President, Michael T. Fadden, which warrants/options are issuable
pursuant to three separate agreements dated March 17, 1997, August 1, 1997 and
February 10, 1998 (the "Warrant/Option Agreements"). All of the shares are to
be offered and sold, by the Company or its affiliates pursuant to the Plans and
Warrant/Option Agreements and in the manner set forth in the Plans and
Warrant/Option Agreements, Form S-8 and each respective Prospectus.
In connection herewith, we have examined: (i) the Form S-8 and the
Prospectuses; (ii) the Warrant/Option Agreements; (iii) the Certificate of
Incorporation and the Bylaws of the Company; (iv) the corporate minutes and
proceedings of the Company applicable to filing of the Form S-8; and (iv) such
other proceedings, documents and records as we deemed necessary or appropriate
for the purposes of making this opinion. In making such examinations, we have
assumed the genuineness of all signatures on all documents and conformed
originals to all copies submitted to us as conformed or photocopies. In
addition to such examination, we have ascertained or verified such additional
facts as we deemed necessary or appropriate for purposes of this opinion.
However, as to various questions of fact material to our opinion, we have relied
upon representations, statements or certificates of officers, directors, or
representatives of the Company or others.
<PAGE>
Based upon the foregoing, we are of the opinion that: (i) the Company has
been legally incorporated and is validly existing under the laws of the state of
Delaware; and (ii) the shares issued pursuant to the Plans and the
Warrant/Option Agreements, upon issuance and payment therefor, as contemplated
by the Plans and the Warrant/Option Agreements, Form S-8 and the Prospectuses,
will be validly issued, fully paid and non-assessable common stock of the
Company.
We hereby consent to the filing of the opinion as an exhibit to the Form
S-8 and to any references to our firm in the Prospectuses. In giving this
consent, we do not admit that we come within the category of persons whose
consent is required under Section 7 of the Act or the Rules and Regulations
of the Commission promulgated thereunder.
Very truly yours,
Cline, Williams, Wright, Johnson &
Oldfather
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<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We have issued our report dated April 23, 1999, accompanying the
financial statements of Gateway Energy Corporation included in the Annual
Report on Form 10-KSB of Gateway Energy Corporation for the year ended February
28, 1999, which is incorporated by reference in this Registration Statement.
We consent to the incorporation by reference in this Registration Statement
of the aforementioned report.
GRANT THORNTON LLP
Houston, Texas
June 16, 1999
<PAGE>
EXHIBIT 99.1
GATEWAY ENERGY CORPORATION
1998
STOCK OPTION PLAN
1. NAME.
The name of this Plan is the Gateway Energy Corporation 1998 Stock Option
Plan.
2. DEFINITIONS.
For the purposes of the Plan, the following terms shall be defined as set
forth below:
(a) "Affiliate" means any partnership, corporation, firm, joint venture,
association, trust, limited liability company, unincorporated
organization or other entity (other than a Subsidiary) that, directly
or indirectly through one or more intermediaries, is controlled by the
Company, where the term "controlled by" means the possession, direct
or indirect, of the power to cause the direction of the management and
policies of such entity, whether through the ownership of voting
interests or voting securities, as the case may be, by contract or
otherwise.
(b) "Board" means the board of directors of the Company.
(c) "Cause" as applied to any Director, Officer or Employee means: (i) the
conviction of such individual for the commission of any felony; or
(ii) the commission by such individual of any crime involving moral
turpitude (e.g., larceny, embezzlement) which results in harm to the
business, reputation, prospects or financial condition of the Company,
any Subsidiary or Affiliate.
(d) "Chairman" means the individual appointed by the Board to serve as the
chairman of the Committee.
(e) "Code" means the Internal Revenue Code of 1986, as amended from time
to time and the Treasury regulations promulgated thereunder.
(f) "Committee" means the committee appointed by the Board to administer
the Plan as provided in Section 4(a).
(g) "Common Stock" means the Common Stock, $.25 par value per share, of
the Company or any security of the Company identified by the Committee
as having been issued in substitution or exchange therefor or in lieu
thereof.
<PAGE>
(h) "Company" means Gateway Energy Corporation, a Delaware corporation.
(i) "Director" means an individual who is now, or hereafter becomes, a
member of the Board or of the board of directors of any Subsidiary.
(j) "Employee" means an individual employed by the Company or a Subsidiary
whose wages are subject to the withholding of federal income tax under
Section 3401 of the Code.
(k) "Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time, or any successor statute.
(l) "Fair Market Value" of a Share as of a specified date means the
average of the highest and lowest market prices of a Share as quoted
on the bulletin board on such date, or, if no trading of Common Stock
is reported for that day, the next preceding day on which trading was
reported. In the event the Common Stock is not then quoted on the
bulletin board, the Fair Market Value of a Share shall be determined
by reference to the principal market or exchange on which the Shares
are then traded.
(m) "ISO" means any stock option granted pursuant to the Plan that is
intended to be and is specifically designated as an "incentive stock
option" within the meaning of Section 422 of the Code.
(n) "NQSO" means any stock option granted pursuant to the provisions of
the Plan that is not an ISO.
(o) "Officer" means an individual elected or appointed by the Board or by
the board of directors of a Subsidiary or chosen in such other manner
as may be prescribed by the Bylaws of the Company or a Subsidiary, as
the case may be, to serve as such.
(p) "Option" means an ISO or a NQSO granted under the Plan.
(q) "Participant" means an individual who is granted an Option under the
Plan.
(r) "Plan" means this 1998 Stock Option Plan.
(s) "Rule 16b-3" means Rule 16b-3 promulgated by the Securities and
Exchange Commission under the Exchange Act, or any successor or
replacement rule adopted by the Securities and Exchange Commission.
(t) "Share" or "Stock" means one share of Common Stock, adjusted in
accordance with Section 10(b) of the Plan, if applicable.
(u) "Stock Option Agreement" means the written agreement between the
Company and the Participant that contains the terms and conditions
pertaining to an Option.
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<PAGE>
(v) "Subsidiary" means any corporation of which the Company, directly or
indirectly, is the beneficial owner of fifty percent (50%) or more of
the total voting power of all classes of its stock having voting power
and which qualifies as a subsidiary corporation pursuant to Section
424(f) of the Code.
(w) "Ten Percent Shareholder" means a Participant who prior to the grant
of an ISO owned, directly or indirectly within the meaning of Section
424(d) of the Code, ten percent (10%) or more of the total combined
voting power of all classes of stock of the Company, any Subsidiary or
any parent of the company (as defined in Section 425(e) of the Code).
3. PURPOSE.
The purpose of the Plan is to enable the Company to provide incentives,
which are linked directly to increases in shareholder value, to certain key
personnel in order that they will be encouraged to promote the financial success
and progress of the Company.
4. ADMINISTRATION.
(a) The Plan shall be administered by a Committee ("Committee") which
shall consist of two or more members, who shall be appointed by the
Board, any of whom may be removed by the Board with or without cause,
and in the absence of such appointment, the Board shall be the
Committee. Members shall be selected to permit the Plan to qualify
pursuant to the provisions of Rule 16b-3 and such other limitations as
the Board deems appropriate.
(b) The Committee shall recommend and the Board shall have full and final
authority, subject to the express provisions of the Plan, as follows:
(i) to grant Options, provided, however, that any Option
representing more than 30,000 Shares shall be valid and
enforceable only if such Option has been authorized, approved
or ratified (before or after the making of the Option) by the
Compensation Committee of the Company;
(ii) to determine (A) when Options may be granted and (B) to impose
such additional restrictions or conditions on the exercise of
an Option (including specifying vesting or performance
requirements or other criteria) as the Board may deem
appropriate;
(iii) to interpret the Plan and to make all determinations necessary
or advisable for the administration of the Plan;
(iv) to prescribe, amend, and rescind rules and regulations
relating to the Plan, including rules with respect to the
exercisability and nonforfeitability of Options upon the
termination of employment of a Participant;
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<PAGE>
(v) to determine the terms and provisions and any restrictions or
conditions (including specifying any performance or other
criteria, and imposing restrictions with respect to Shares
acquired upon exercise of an Option, which restrictions may
continue beyond the Participant's termination of employment)
of the written agreements by which all Options shall be
evidenced ("Stock Option Agreements") which need not be
identical and, with the consent of the Participant, to modify
any such Stock Option Agreement at any time;
(vi) to accelerate the exercisability of, and to accelerate or
waive any or all of the restrictions and conditions applicable
to, any Option, or any group of Options for any reason; and
(vii) to impose such additional conditions, restrictions, and
limitations upon the grant, exercise or retention of Options
as are not inconsistent with the Plan and as the Committee and
the Board may, before or concurrently with the grant thereof,
deem appropriate.
(c) The Committee or Board shall maintain a journal in which a separate
account for each Participant shall be established. Whenever an Option
is granted to or exercised by a Participant, the Participant's account
shall be appropriately credited or debited. Appropriate adjustment
shall also be made in the journal with respect to each account in the
event of an adjustment pursuant to Section 10(b) of the Plan.
(d) The determination of the Board on all matters relating to the Plan or
any Stock Option Agreement shall be conclusive and final. No member
of the Committee or the Board shall be liable for any action or
determination made with respect to the Plan or any Option.
5. EFFECTIVE DATE AND TERM OF THE PLAN.
(a) EFFECTIVE DATE OF THE PLAN.
The Plan was adopted by the Board and became effective on May 28, 1998
subject to approval by the shareholders of the Company held within twelve
months following such date.
(b) TERM OF PLAN.
No Option shall be granted pursuant to the Plan on or after May 28, 2008
but Options theretofore granted may extend beyond the date.
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<PAGE>
6. TYPE OF OPTIONS AND SHARES SUBJECT TO THE PLAN.
Options granted under the Plan may be either ISOs or NQSOs. Each Stock
Option Agreement shall specify whether the Option covered thereby is an ISO or a
NQSO.
The maximum aggregate number of Shares that may be issued under the Plan is
600,000 Shares. The limitation on the number of Shares which may be subject to
Options under the Plan shall be subject to adjustment as provided in Section
10(b) of the Plan.
If any Option granted under the Plan expires or is terminated for any
reason, any Shares as to which the Option has not been exercised shall again be
available for purchase under Options subsequently granted. At all times during
the term of the Plan, the Company shall reserve and keep available for issuance
such number of Shares as the Company is obligated to issue upon the exercise of
all then outstanding Options.
7. SOURCE OF SHARES ISSUED UNDER THE PLAN.
Common Stock issued under the Plan shall be treasury shares or authorized
and unissued Shares. No fractional Shares shall be issued under the Plan.
8. ELIGIBILITY.
The individuals eligible for the grant of Options under the Plan shall be:
(i) all Directors, Officers and Employees; and (ii) such individuals determined
by the Committee or the Board to be rendering substantial services as a
consultant or independent contractor to the Company or any Subsidiary or
Affiliate of the Company, as the Board shall determine from time to time in its
sole and absolute discretion; PROVIDED, HOWEVER, that only Employees of the
Company or any Subsidiary shall be eligible to receive ISOs. Any Participant
shall be eligible to be granted more than one Option hereunder.
9. OPTIONS.
(a) GRANT OF OPTIONS.
Subject to any applicable requirements of the Code and any regulations
issued thereunder, the date of the grant of an Option shall be the
date on which the Board determines to grant the Option.
(b) EXERCISE PRICE OF ISOS.
The exercise price of each Share subject to an ISO shall not be less
than the Fair Market Value of a Share on the date of grant of the ISO,
except that in the case of a grant of an ISO to a Participant who at
the time such ISO was granted was a Ten Percent Shareholder, the
exercise price shall not be less than 110% of the Fair Market Value of
a Share on the date of the grant of the ISO.
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<PAGE>
(c) EXERCISE PRICE OF NQSOS.
The exercise price of each Share subject to a NQSO shall be determined
by the Board at the time of grant but will not be less than
eighty-five percent (85%) of the Fair Market Value of a Share on the
date of grant.
(d) EXERCISE PERIOD.
Each Option granted hereunder shall vest and become first exercisable
as determined by the Board.
(e) TERMS AND CONDITIONS.
All Options granted pursuant to the Plan shall be evidenced by a Stock
Option Agreement (which need not be the same for each Participant or
Option), approved by the Board which shall be subject to the following
express terms and conditions and the other terms and conditions as are
set forth in this Section 9, and to such other terms and conditions as
shall be determined by the Board in its sole and absolute discretion
which are not inconsistent with the terms of the Plan:
(i) the failure of an Option to vest for any reason whatsoever
shall cause the Option to expire and be of no further force or
effect;
(ii) unless terminated earlier pursuant to Sections 9(i) or 11, the
term of any Option granted under the Plan shall be ten years
form the date of grant; PROVIDED, HOWEVER, that no ISO granted
to a Ten Percent Shareholder shall have a term of more than
five years from the date of grant;
(iii) in the case of an ISO, the aggregate Fair Market Value
(determined as of the time the ISO is granted) of Shares
exercisable for the first time by a Participant during any
calendar year (under the Plan and any other incentive stock
option plans of the Company, any Subsidiary or any parent of
the Company) (as defined in Section 424(e) of the Code) shall
not exceed $100,000;
(iv) ISOs shall not be transferable by the Participant otherwise
than by will or by the laws of descent and distribution, and
shall be exercisable during the lifetime of the Participant
only by him or by his guardian or legal representative;
(v) no NQSOs or interest therein may be transferred, assigned,
pledged or hypothecated by the Participant during his lifetime
except as provided by Rule 16b-3 and the regulations
promulgated thereunder; and
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<PAGE>
(vi) payment for the Shares to be received upon exercise of an
Option may be made in cash, in Shares (determined with
reference to their Fair Market Value on the date of exercise)
or any combination thereof.
(f) ADDITIONAL MEANS OF PAYMENT.
Any Stock Option Agreement may, in the sole and absolute discretion of
the Board, permit payment by any other form of legal consideration
consistent with applicable law and any rules and regulations relating
thereto, including, but not limited to, the execution and delivery of
a full recourse promissory note (bearing interest at a rate not less
than the prime rate announced as then being in effect by the Company's
principal lender and whose maturity date shall not extend beyond ten
years) by the Participant to the Company.
(g) EXERCISE.
The holder of an Option may exercise the same by filing with the
Corporate Secretary of the Company and the Chairman a written
election, in such form as the Board may determine, specifying the
number of Shares with respect to which such Option is being exercised,
and accompanied by payment in full of the exercise price for such
Shares. Notwithstanding the foregoing, the Board may specify a
reasonable minimum number of Shares that may be purchased on any
exercise of an Option, provided that such minimum number will not
prevent the holder from exercising the Option with respect to the full
number of Shares as to which the Option is then exercisable.
(h) WITHHOLDING TAXES.
Prior to issuance of the Shares upon exercise of an Option, the
Participant shall pay or make adequate provision for the payment of
any Federal, state, local or foreign withholding obligations of the
Company or any Subsidiary or Affiliate of the Company, if applicable.
In the event a Participant shall fail to make adequate provision for
the payment of such obligations, the Company shall have the right to
issue a stock certificate for an amount of Shares equal to the
difference obtained by subtracting: (i) the number of Shares, rounded
up for any fraction to the next whole number, that have a Fair Market
Value (as of the date of exercise) equal to such amount as is
sufficient to satisfy applicable federal, state or local withholding
obligations; from (ii) the number of Shares attributable to that
portion of the Option so exercise. The Company shall promptly remit,
or cause to be remitted, to the appropriate taxing authorities the
amount so withheld. In such cases, although the stock certificate
delivered to the Participant will be for a net number of Shares, such
Participant shall be considered, for tax purposes, to have received
the number of Shares equal to the full number of Shares to which the
Option had been exercised.
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(i) TERMINATION OF OPTIONS.
Options granted under the Plan shall be subject to the following
events of termination:
(i) in the event the employment of a Participant who is an Officer
or Employee is terminated for Cause, all unexercised Options
held by such Participant on the date of such termination of
employment (whether or not vested) will expire immediately;
and
(ii) in the event a Participant is no longer a Director, an Officer
or Employee other than for the reasons set forth in Sections
9(i)(i) or 9(i)(ii), all Options which remain unvested at the
time the Participant is no longer a Director, Officer or
Employee, as the case may be, shall expire immediately, and
all Options which have vested prior to such time shall expire
ninety days thereafter unless by their terms they expire
sooner.
10. RECAPITALIZATION.
(a) CORPORATE FLEXIBILITY.
The existence of the Plan and the Options granted hereunder shall not
affect or restrict in any way the right or power of the Board or the
shareholders of the Company, in their sole and absolute discretion, to
make, authorize or consummate any adjustment, recapitalization,
reorganization or other change in the Company's capital structure or
its business, any merger or consolidation of the Company, any issue of
bonds, debentures, Common Stock, preferred or prior preference stock
ahead of or affecting the Company's capital stock or the rights
thereof, the dissolution or liquidation of the Company or any sale or
transfer of all or any part of its assets or business, or any other
grant of rights, issuance of securities, transaction, corporate act or
proceeding and notwithstanding the fact that any such activity,
proceeding, action, transaction or other event may have, or be
expected to have, an impact (whether positive or negative) on the
value of any Option.
(b) ADJUSTMENTS UPON CHANGES IN CAPITALIZATION.
Except as otherwise provided in Section 11 and subject to any required
action by the shareholders of the Company, in the event of any change
in capitalization affecting the Common Stock of the Company, such as a
stock dividend, the Board shall make proportionate adjustments with
respect to: (i) the aggregate number of Shares available for issuance
under the Plan; (ii) the number of Shares available for any individual
Option; (iii) the number and exercise price of Shares subject to
outstanding Options; provided, however, that the number of Shares
subject to any Option shall always be a whole number; and (iv) such
other matters as shall be appropriate in light of the circumstances.
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11. CHANGE OF CONTROL.
In the event of a Change of Control (as defined below), unless otherwise
determined by the Committee a the time of grant or by amendment (with the
holder's consent) of such grant, all Options not vested on or prior to the
effective time of any such Change of Control shall immediately vest as of such
effective time. The Committee in its discretion may make provisions for the
assumption of outstanding Options, or the substitution for outstanding Options
of new incentive Options covering the stock of a successor corporation or a
parent or subsidiary thereof, with appropriate adjustments as to the number and
kind of shares and prices so as to prevent dilution or enlargement of rights.
A "Change of Control" will be deemed to occur on the date any of the
following events occur:
(a) any person or persons acting together which would constitute a "group"
for purpose of Section 13(d) of the Exchange Act (other than the
Company, any Subsidiary and any entity beneficially owned by any of
the foregoing) beneficially own (as defined in Rule 13d-3 under the
Exchange Act) without Board approval, directly or indirectly, a least
50% of the total voting power of the Company entitled to vote
generally in the election of the Board;
(b) either (i) the Current Directors (as hereinafter defined) cease for
any reason to constitute at least a majority of the members of the
Board (for the purposes, a "Current Director" means any member of the
Board as elected at the 1998 Annual Shareholders Meeting, and any
successor of a Current Director whose election, or nomination for
election by the Company's shareholders, was approved by at least a
majority of the Current Directors then on the Board) or (ii) at any
meeting of the shareholders of the Company called for the purpose of
electing directors, a majority of the persons nominated by the Board
for election as directors fail to be elected;
(c) the shareholders of the Company approve (i) a plan of complete
liquidation of the Company, or (ii) an agreement providing for the
merger or consolidation of the Company (A) in which the Company is not
the continuing or surviving corporation (other than consolidation or
merger with a wholly-owned subsidiary of the Company in which all
Shares outstanding immediately prior to the effectiveness thereof are
changed into or exchanged for the same consideration) or (B) pursuant
to which the Shares are converted into cash, securities or other
property, except a consolidation or merger of the Company in which the
holders of the Shares immediately prior to the consolidation or merger
have, directly or indirectly, at least a majority of the common stock
of the continuing or surviving corporation immediately after such
consolidation or merger or in which the Board immediately prior to the
merger or consolidation would, immediately after the merger or
consolidation, constitute a majority of the board of directors of the
continuing or surviving corporation; or
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(d) the shareholders of the Company approve an agreement (or agreements)
providing for the sale or other disposition (in one transaction or a
series of transactions) of all or substantially all of the assets of
the Company.
12. SECURITIES LAW REQUIREMENTS.
No Shares shall be issued under the Plan unless and until: (i) the Company
and the Participant have taken all actions required to register the Shares under
the Securities Act of 1933, as amended, or perfect an exemption from the
registration requirements thereof; (ii) any applicable requirement of any stock
exchange on which the Common Stock is listed has been satisfied; and (iii) any
other applicable provision of state or Federal law has been satisfied. The
Company shall be under no obligation to register the Shares under the Securities
Act of 1933, as amended, or to effect compliance with the registration or
qualification requirements of any state securities laws.
13. AMENDMENT AND TERMINATION.
(a) MODIFICATION TO THE PLAN.
The Board may, insofar as permitted by law, from time to time, with
respect to any Shares at the time not subject to Options, suspend or
terminate the Plan or revise or amend the Plan in any respect
whatsoever. However, unless the Board specifically otherwise
provides, any revision or amendment that would cause the Plan to fail
to comply with Rule 16b-3, Section 422 or 162(m) of the Code or any
other requirement of applicable law or regulation if such amendment
were not approved by the shareholders of the Company shall not be
effective unless and until such approval is obtained.
(b) RIGHTS OF PARTICIPANT.
No amendment, suspension or termination of the Plan that would
adversely affect the right of any Participant with respect to an
Option previously granted under the Plan will be effective without the
written consent of the affected Participant.
14. MISCELLANEOUS.
(a) SHAREHOLDERS' RIGHTS.
No Participant and no beneficiary or other person claiming under or
through such Participant shall acquire any rights as a shareholder of
the Company by virtue of such Participant having been granted an
Option under the Plan. No Participant and no beneficiary or other
person claiming under or through such Participant will have any right,
title or interest in or to any Shares, allocated or reserved under the
Plan or subject to any Option except as to Shares, if any, that have
been issued or transferred to such Participant. No adjustment shall
be made for dividends or distributions or
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other rights for which the record date is prior to the date of
exercise of an Option except as may be provided in the Stock Option
Agreement.
(b) OTHER COMPENSATION ARRANGEMENTS.
Nothing contained in the Plan shall prevent the Board from adopting
other compensation arrangements, subject to shareholder approval if
such approval is required. Such other arrangements may be either
generally applicable or applicable only in specific cases.
(c) TREATMENT OF PROCEEDS.
Proceeds realized from the exercise of Options under the Plan shall
constitute general funds of the Company.
(d) COSTS OF THE PLAN.
The costs and expenses of administering the Plan shall be borne by the
Company.
(e) NO RIGHT TO CONTINUE EMPLOYMENT OF SERVICES.
Nothing contained in the Plan or in any instrument executed pursuant
to the Plan will confer upon any Participant any right to continue to
render services to the Company, a Subsidiary or Affiliate; to continue
as a Director, an Officer or Employee; or affect the right of the
Company, a Subsidiary, the Board, the board of directors of a
Subsidiary, the shareholders of the Company or a Subsidiary, as
applicable, to terminate the directorship, office or employment, as
the case may be, or any Participant at any time with or without Cause
or with or without any other cause, reason or justification. The term
"Cause" as defined herein is included solely for the purposes of the
Plan and is not, and shall not be deemed to be: (i) a restriction on
the right of the Company or a Subsidiary, as the case may be, to
terminate any Officer or Employee for any reason whatsoever; or (ii) a
part of the employment relationship (whether oral or written, express
or implied) of any such individual.
(f) SEVERABILITY.
The provisions of the Plan shall be deemed severable and the validity
of unenforceability of any provisions shall not affect the validity or
enforceability of the other provisions hereof.
(g) BINDING EFFECT OF PLAN.
The Plan shall inure to the benefit of the Company, its successors and
assigns.
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(h) NO WAIVER OF BREACH.
No waiver by any party hereto at any time of any breach by another
party hereto of, or compliance with, any condition or provision of the
Plan to be performed by such other party shall be deemed a waiver of
the same, any similar or any dissimilar provisions of conditions at
the same or at any prior or subsequent time.
(i) GOVERNING LAW.
The Plan and all actions taken thereunder shall be enforced, governed
and construed by and interpreted under the laws of the State of
Nebraska applicable to contracts made and to be performed wholly
within such State without giving effect to the principles of conflicts
of laws thereof.
(j) HEADINGS.
The headings contained in the Plan are for reference purposes only and
shall not affect in any way the meaning or interpretation of the Plan.
15. EXECUTION.
To record the adoption of the Plan to read as set forth herein, the Company
has caused the Plan to be signed by its President and attested by it Secretary
on May 28, 1998.
GATEWAY ENERGY CORPORATION
By: /s/ Michael T. Fadden
------------------------------
Michael T. Fadden, President
ATTEST:
By: /s/ Donald L. Anderson
-------------------------------
Donald L. Anderson, Secretary
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EXHIBIT 99.2
GATEWAY ENERGY CORPORATION
1998 OUTSIDE DIRECTORS
STOCK OPTION PLAN
1. NAME.
The name of this Plan is the Gateway Energy Corporation 1998
Outside Directors Stock Option Plan.
2. DEFINITIONS.
For the purposes of the Plan, the following terms shall be defined
as set forth below:
(a) "Affiliate" means any partnership, corporation, firm, joint
venture, association, trust, limited liability company,
unincorporated organization or other entity (other than a
Subsidiary) that, directly or indirectly through one or
more intermediaries, is controlled by the Company, where
the term "controlled by" means the possession, direct or
indirect, of the power to cause the direction of the
management and policies of such entity, whether through the
ownership of voting interests or voting securities, as the
case may be, by contract or otherwise.
(b) "Board" means the board of directors of the Company.
(c) "Chairman" means the individual appointed by the Board to
serve as the chairman of the Committee.
(d) "Code" means the Internal Revenue Code of 1986, as amended
from time to time, and the Treasury regulations promulgated
thereunder.
(e) "Committee" means the committee appointed by the Board to
administer the Plan as provided in Section 4(a).
(f) "Common Stock" means the common stock, $.25 par value per
share, of the Company or any security of the Company
identified by the Committee as having been issued in
substitution or exchange therefor or in lieu thereof.
(g) "Company" means Gateway Energy Corporation, a Delaware
corporation.
(h) "Employee" means an individual whose wages are subject to
the withholding of federal income tax under Section 3401 of
the Code.
<PAGE>
(i) "Exchange Act" means the Securities Exchange Act of 1934,
as amended from time to time, or any successor statute.
(j) "Fair Market Value" of a Share as of a specified date means
the average of the highest and lowest market prices of a
Share as quoted on the bulletin board on such date, or, if
no trading of Common Stock is reported for that day, the
next preceding day on which trading was reported. In the
event the Common Stock is not then quoted on the bulletin
board, the Fair Market Value of a Share shall be determined
by reference to the principal market or exchange on which
the Shares are then traded.
(k) "Non-Employee Director" means an individual who: (i) is
now, or hereafter becomes, a member of the Board; (ii) is
neither an Employee nor an Officer of the Company or of any
Subsidiary or Affiliate on the date of the grant of the
NQSO; and (iii) has not elected to decline to participate
in the Plan pursuant to the immediately succeeding
sentence. A director otherwise eligible to participate in
the Plan may make an irrevocable, one-time election, by
written notice to the Corporate Secretary of the Company
and the Chairman within thirty days after his initial
election or appointment to the Board to decline to
participate in the Plan.
(l) "Non-qualified stock option" (otherwise designated as a
NQSO) means an option that is not qualified under Section
422 of the Code.
(m) "Officer" means an individual elected or appointed by the
Board or by the board of directors of a Subsidiary, or
chosen in such other manner as may be prescribed by the
by-laws of the Company or a Subsidiary, as the case may be,
to serve as such.
(n) "Participant" means a Non-Employee Director who is granted
a NQSO under the Plan.
(o) "Plan" means this 1998 Outside Directors Stock Option Plan.
(p) "Rule 16b-3" means Rule 16b-3 promulgated by the Securities
and Exchange Commission under the Exchange Act, or any
successor or replacement rule adopted by the Securities and
Exchange Commission.
(q) "Share" means one share of Common Stock, adjusted in
accordance with Section 9(b), if applicable.
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(r) "Stock Option Agreement" means the written agreement
between the Company and the Participant that contains the
terms and conditions pertaining to the NQSO.
(s) "Subsidiary" means any corporation or entity of which the
Company, directly or indirectly, is the beneficial owner of
fifty percent (50%) or more of the total voting power of
all classes of its stock having voting power, unless the
Committee shall determine that any such corporation or
entity shall be excluded hereunder from the definition of
the term Subsidiary.
3. PURPOSE.
The purpose of the Plan is to enable the Company to provide incentives,
which are linked directly to increases in stockholder value, to Non-Employee
Directors in order that they will be encouraged to serve on the Board and exert
their best efforts on behalf of the Company.
4. ADMINISTRATION.
(a) COMPOSITION OF THE COMMITTEE.
The Plan shall be administered by a Committee appointed by the
Board consisting of no less than two individuals. Members of the Committee need
not be members of the Board, Officers or Employees of the Company. The Board
may from time to time remove members from, or add members to, the Committee.
Vacancies on the Committee, however caused, shall be filled by the Board. The
Board shall appoint one of the members of the Committee as Chairman.
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(b) ACTIONS BY THE COMMITTEE.
The Committee shall hold meetings at such times and places as
it may determine. Acts approved by a majority of the members of the
Committee present at a meeting at which a quorum is present, or acts reduced
to or approved in writing by a majority of the members of the Committee,
shall be the valid acts of the Committee.
(c) POWERS OF THE COMMITTEE.
The Committee shall have the authority to administer the Plan
in its sole and absolute discretion; PROVIDED, HOWEVER, that the Committee
shall have no authority to grant NQSOs, to determine the number of Shares
subject to NQSOs or the price at which each Share covered by a NQSO may be
purchased pursuant to the Plan, all of which shall be automatic as described
in Section 8. To this end, the Committee is authorized to construe and
interpret the Plan and to make all other determinations necessary or
advisable for the administration of the Plan. Subject to the foregoing, any
determination, decision or action of the Committee in connection with the
construction, interpretation, administration or application of the Plan shall
be final, conclusive and binding upon all Participants and any person validly
claiming under or through a Participant.
(d) LIABILITY OF COMMITTEE MEMBERS.
No member of the Board or the Committee will be liable for any
action or determination made in good faith by the Board or the Committee with
respect to the Plan or any grant or exercise of a NQSO thereunder.
(e) NQSO ACCOUNTS.
The Committee shall maintain a journal in which a separate
account for each Participant shall be established. Whenever NQSOs are
granted to or exercised by a Participant, the Participant's account shall be
appropriately credited or debited. Appropriate adjustment shall also be made
in the journal with respect to each account in the event of an adjustment
pursuant to Section 9(b).
5. EFFECTIVE DATE AND TERM OF THE PLAN.
(a) EFFECTIVE DATE OF THE PLAN.
The Plan was adopted by the Board and became effective on May
28, 1998 (the "Effective Date") subject to approval by the stockholders of
the Company at a meeting duly called and held within twelve months following
such date.
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<PAGE>
(b) TERM OF PLAN.
No NQSO shall be granted pursuant to the Plan on or after May
28, 2008, but NQSOs theretofore granted may extend beyond that date.
6. SHARES SUBJECT TO THE PLAN.
The maximum aggregate number of Shares which may be subject to
NQSOs granted to Non-Employee Directors under the Plan shall be 100,000. The
limitation on the number of Shares which may be subject to NQSOs under the
Plan shall be subject to adjustment as provided in Section 9(b).
If any NQSO granted under the Plan expires or is terminated for
any reason without having been exercised in full, the Shares allocable to the
unexercised portion of such NQSO shall again become available for grant
pursuant to the Plan. At all times during the term of the Plan, the Company
shall reserve and keep available for issuance such number of Shares as the
Company is obligated to issue upon the exercise of all then outstanding NQSOs.
7. SOURCE OF SHARES ISSUED UNDER THE PLAN.
Common Stock issued under the Plan shall be authorized and
unissued Shares and/or Treasury Shares. No fractional Shares shall be issued
under the Plan.
8. NON-QUALIFIED STOCK OPTIONS.
(a) GRANT OF NQSOS.
On the next succeeding business day after the Effective Date, NQSOs to
purchase 10,000 Shares shall be granted automatically to each Non-Employee
Director. With respect to any Non-Employee Director who first becomes a
member of the Board after the Effective Date, NQSOs to purchase 10,000 Shares
shall be granted automatically on the next succeeding business day following
his election to the Board. The grant of a NQSO to purchase 10,000 Shares
shall be a one-time grant to each Non-Employee Director who serves as a
member of the Board of the Company. The provisions of this Section shall not
be amended more than once every six months, other than to comport with
changes in the Code, the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), or the rules thereunder.
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(b) EXERCISE PRICE.
Each Share covered by a NQSO granted may be purchased at a purchase price
equal to the Fair Market Value of a Share on the date of the NQSO grant. The
provisions of this Section shall not be amended more than once every six months,
other than to comport with changes in the Code, ERISA, or the rules thereunder.
(c) TERMS AND CONDITIONS.
All NQSOs granted pursuant to the Plan shall be evidenced by a
Stock Option Agreement (which need not be the same for each Participant or
NQSO), approved by the Committee which shall be subject to the following
express terms and conditions and to the other terms and conditions specified
in this Section 8, and to such other terms and conditions as shall be
determined by the Committee in its sole and absolute discretion which are not
inconsistent with the terms of the Plan:
(i) all NQSOs granted to a Participant shall vest and become
first exercisable immediately upon grant.
(ii) the failure of a NQSO to vest for any reason whatsoever
shall cause the NQSO to expire and be of no further force
or effect;
(iii) unless terminated earlier pursuant to Section 8(e), the
term of each NQSO shall be ten years from the date of
grant;
(iv) NQSOs shall not be transferable by the Participant
otherwise than by will or by the laws of descent and
distribution, and shall be exercisable during the lifetime
of the participant only by him or by his guardian or legal
representative;
(v) no NQSO or interest therein may be transferred, assigned,
pledged or hypothecated by the Participant during his
lifetime except as provided by Rule 16b-3 and the
regulations promulgated thereunder; and
(vi) payment for the Shares to be received upon exercise of a
NQSO may be made in cash, in Shares (determined with
reference to their Fair Market Value on the date of
exercise) or any combination thereof.
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(d) EXERCISE.
The holder of a NQSO may exercise the same by filing with the
Corporate Secretary of the Company and the Chairman a written election, in
such form as the Committee may determine, specifying the number of Shares
with respect to which such NQSO is being exercised. Such notice shall be
accompanied by payment in full of the exercise price for such Shares.
Notwithstanding the foregoing, the Committee may specify a reasonable minimum
number of Shares that may be purchased on any exercise of an Option, provided
that such minimum number will not prevent the holder from exercising the
Option with respect to the full number of Shares as to which the Option is
then exercisable.
(e) TERMINATION OF NQSOS.
NQSOs granted under the Plan shall be subject to the following
events of termination:
(i) in the event a Participant is removed from the Board for
cause (as contemplated by the Company's by-laws), all
unexercised NQSOs held by such Participant on the date of
such removal (whether or not vested) will expire
immediately;
(ii) in the event a Participant is no longer a member of the
Board, other than by reason of removal for cause, all NQSOs
which have vested prior to such time shall expire twelve
months thereafter unless by their terms they expire sooner;
and
(iii) in the event a Participant becomes an Officer or Employee
of the Company or a Subsidiary (whether or not such
Participant remains a member of the Board) all NQSOs which
have vested prior to such time shall expire twelve months
thereafter unless by their terms they expire sooner.
9. RECAPITALIZATION.
(a) CORPORATE FLEXIBILITY.
The existence of the Plan and the NQSOs granted hereunder shall
not affect or restrict in any way the right or power of the Board or the
stockholders of the Company, in their sole and absolute discretion, to make,
authorize or consummate any adjustment, recapitalization, reorganization or
other change in the Company's capital structure or its business, any merger or
consolidation of the Company, any issue of bonds, debentures, common stock,
preferred or prior preference stocks ahead of or affecting the Company's capital
stock or the rights thereof, the dissolution or liquidation of the Company or
any sale or transfer of all or any part of its assets or
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<PAGE>
business, or any other grant of rights, issuance of securities, transaction,
corporate act or proceeding and notwithstanding the fact that any such
activity, proceeding, action, transaction or other event may have, or be
expected to have, an impact (whether positive or negative) on the value of
any NQSO.
(b) ADJUSTMENTS UPON CHANGES IN CAPITALIZATION.
Except as otherwise provided in Section 10 below and subject to
any required action by the stockholders of the Company, in the event of any
change in capitalization affecting the Common Stock of the Company, such as a
stock dividend, stock split or recapitalization, the Committee shall make
proportionate adjustments with respect to: (i) the aggregate number of Shares
available for issuance under the Plan; (ii) the number of Shares subject to each
grant under the Plan; (iii) the number and exercise price of Shares subject to
outstanding NQSOs; and (iv) such other matters as shall be appropriate in light
of the circumstances; PROVIDED, HOWEVER, that the number of Shares subject to
any NQSO shall always be a whole number and that no such adjustment shall be
made if the adjustment would cause the Plan to fail to comply with the "formula
award" exception, as set forth in Rule 16b-3(c)(2)(ii) of the Exchange Act, for
grants of NQSOs to non-employee directors.
10. CHANGE OF CONTROL.
In the event of a Change of Control (as defined below), the
Committee in its discretion may make provisions for the assumption of
outstanding Options, or the substitution for outstanding Options of new
incentive awards covering the stock of a successor corporation or a parent or
subsidiary thereof, with appropriate adjustments as to the number and kind of
shares and prices so as to prevent dilution or enlargement of rights; provided,
however, that no such adjustment shall be made if the adjustment would cause the
Plan to fail to comply with the "formula award" exception, as set forth in Rule
16b-3(c)(2)(ii) of the Exchange Act, for grants of NQSOs to non-employee
directors.
A "Change of Control" will be deemed to occur on the date any of
the following events occur:
(a) any person or persons acting together which would
constitute a "group" for purpose of Section 13(d) of the Exchange Act (other
than the Company, any Subsidiary and any entity beneficially owned by any of the
foregoing), beneficially own (as defined in Rule 13d-3 under the Exchange Act)
without Board approval, directly or indirectly, at least 50% of the total voting
power of the Company entitled to vote generally in the election of the Board;
(b) the stockholders of the Company approve (i) a plan of
complete liquidation of the Company, or (ii) an agreement providing for the
merger or consolidation of the Company (A)
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in which the Company is not the continuing or surviving corporation (other
than consolidation or merger with a wholly owned subsidiary of the Company in
which all Shares outstanding immediately prior to the effectiveness thereof
are changed into or exchanged for the same consideration) or (B) pursuant to
which the Shares are converted into cash, securities or other property,
except a consolidation or merger of the Company in which the holders of the
Shares immediately prior to the consolidation or merger have, directly or
indirectly, at least a majority of the common stock of the continuing or
surviving corporation immediately after such consolidation or merger or in
which the Board immediately prior to the merger or consolidation would,
immediately after the merger or consolidation, constitute a majority of the
board of directors of the continuing or surviving corporation; or
(c) the stockholders of the Company approve an agreement (or
agreements) providing for the sale or other disposition (in one transaction or a
series of transactions) of all or substantially all of the assets of the
Company.
11. SECURITIES LAW REQUIREMENTS.
No Shares shall be issued under the Plan unless and until: (i)
the Company and the Participant have taken all actions required to register the
Shares under the Securities Act of 1933, as amended, or perfect an exemption
from the registration requirements thereof; or (ii) any other applicable
provision of state or federal law has been satisfied. The Company shall be
under no obligation to register the Shares under the Securities Act of 1933, as
amended, or to effect compliance with the registration or qualification
requirements of any state securities laws.
12. AMENDMENT AND TERMINATION.
(a) MODIFICATIONS TO THE PLAN.
The Board may, insofar as permitted by law, from time to time,
with respect to any Shares at the time not subject to NQSOs, suspend or
terminate the Plan or, subject to Sections 8(a) and 8(b), revise or amend the
Plan in any respect whatsoever. However, unless the Board specifically
otherwise provides, any revision or amendment that would cause the Plan to fail
to comply with Rule 16b-3 or any other requirement of applicable law or
regulation if such amendment were not approved by the stockholders of the
Company shall not be effective unless and until such approval is obtained.
(b) RIGHTS OF PARTICIPANT.
No amendment, suspension or termination of the Plan that would
adversely affect the right of any Participant with respect to a NQSO previously
granted under the Plan will be effective without the written consent of the
affected Participant.
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13. MISCELLANEOUS.
(a) STOCKHOLDERS' RIGHTS.
No Participant and no beneficiary or other person claiming
under or through such Participant shall acquire any rights as a stockholder
of the Company by virtue of such Participant having been granted a NQSO under
the Plan. No Participant and no beneficiary or other person claiming under or
through such Participant will have any right, title or interest in or to any
Shares, allocated or reserved under the Plan or subject to any NQSO except as
to Shares, if any, that have been issued or transferred to such Participant.
No adjustment shall be made for dividends or distributions or other rights
for which the record date is prior to the date of exercise.
(b) OTHER COMPENSATION ARRANGEMENTS.
Nothing contained in the Plan shall prevent the Board from
adopting other compensation arrangements, subject to stockholder approval if
such approval is required. Such other arrangements may be either generally
applicable or applicable only in specific cases.
(c) TREATMENT OF PROCEEDS.
Proceeds realized from the exercise of NQSOs under the Plan shall
constitute general funds of the Company.
(d) COSTS OF THE PLAN.
The costs and expenses of administering the Plan shall be borne by
the Company.
(e) NO RIGHT TO CONTINUE AS DIRECTOR.
Nothing contained in the Plan or in any instrument executed
pursuant to the Plan will confer upon any Participant any right to continue as a
member of the Board or affect the right of the Company, the Board or the
stockholders of the Company to terminate the directorship of any Participant at
any time with or without cause.
(f) SEVERABILITY.
The provisions of the Plan shall be deemed severable and the
validity or unenforceability of any provision shall not affect the validity or
enforceability of the other provisions hereof.
-10-
<PAGE>
(g) BINDING EFFECT OF PLAN.
The Plan shall inure to the benefit of the Company, its successors
and assigns.
(h) NO WAIVER OF BREACH.
No waiver by any party hereto at any time of any breach by another
party hereto of, or compliance with, any condition or provision of the Plan to
be performed by such other party shall be deemed a waiver of the same, any
similar or any dissimilar provisions of conditions at the same or at any prior
or subsequent time.
(i) GOVERNING LAW.
The Plan and all actions taken thereunder shall be enforced,
governed and construed by and interpreted under the laws of the State of
Nebraska applicable to contracts made and to be performed wholly within such
State without giving effect to the principles of conflict of laws thereof.
(j) HEADINGS.
The headings contained in the Plan are for reference purposes only
and shall not affect in any way the meaning or interpretation of the Plan.
14. EXECUTION.
To record the adoption of the Plan to read as set forth herein,
the Company has caused the Plan to be signed by its President and attested by
its Secretary on May 28, 1998.
GATEWAY ENERGY CORPORATION
By: /s/ Michael T. Fadden
----------------------------
Michael T. Fadden, President
ATTEST:
By: /s/ Donald Anderson
--------------------------
Donald Anderson, Secretary
-11-
<PAGE>
Exhibit 99.3
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED ("ACT"). ANY TRANSFER OF SUCH SECURITIES
WILL BE INVALID UNLESS (I) A REGISTRATION STATEMENT UNDER THE ACT IS IN
EFFECT AS TO SUCH TRANSFER OR (II) THERE IS AN OPINION OF COUNSEL,
SATISFACTORY TO THE COMPANY, THAT AN EXEMPTION FROM REGISTRATION UNDER THE
ACT IS AVAILABLE.
VOID AFTER March 17, 2007 50,000 Shares
COMMON STOCK PURCHASE WARRANT
OF
GATEWAY ENERGY CORPORATION
THIS CERTIFIES THAT: Michael T. Fadden, (the "Warrantholder") is entitled
to subscribe for and purchase from Gateway Energy Corporation, a Delaware
corporation (the "Company"), at a price of $1.19 per share the ("Warrant Price")
payable in cash, check, or Common Stock of the Company, pursuant to the terms
hereof, 50,000 fully paid and non-assessable shares of the Company's Common
Stock, such price and such number of shares being subject to adjustment as set
forth in this warrant. This warrant may be exercised at any time from the date
of grant and for a period of ten years from the date of grant.
Upon delivery of this warrant, together with payment of the Warrant Price
for the shares of Common Stock purchased, at the principal office of the Company
or at such other office or agency as the Company may designate by notice in
writing to the holder hereof, the Warrantholder shall be entitled to receive a
certificate or certificates for the shares of Common Stock so purchased. All
shares of Common Stock which may be issued upon the exercise of this warrant
will, upon issuance, be fully paid and non-assessable and free from all taxes,
liens, charges and encumbrances with respect thereto.
This warrant is subject to the following terms and conditions;
1. EXERCISE OF WARRANT.
(a) MANNER OF EXERCISE. This warrant may be exercised in whole or in
part by the surrender of this warrant at the principal office of the Company and
by the payment to the Company by cash, check, or Common Stock of the Company for
the number of shares of Common Stock being purchased. The Company shall, as
soon as practicable after such delivery, prepare a certificate for the shares of
Common Stock purchased in the name of the Warrantholder. Common Stock
surrendered shall be valued at the average of the bid and asked price of the
Common Stock on the date of exercise.
(b) PARTIAL EXERCISE. On any partial exercise, the Company shall
promptly issue and deliver to the Warrantholder a new warrant or warrants of
like tenor in the name of that Warrantholder providing for the right to purchase
that number of shares as to which this warrant has not been exercised.
2. DELIVERY OF STOCK CERTIFICATES. Within a reasonable time after
full or partial exercise of this warrant, the Company, at its expense, will
cause to be issued in the name of and delivered to the Warrantholder, a
certificate or certificates for the number of shares of Common Stock
<PAGE>
to which the Warrantholder shall be entitled upon such exercise. No
fractional shares will be issued upon exercise of rights to purchase under
this warrant. If upon any exercise of this warrant a fraction of a share
results, the Company will pay the fair cash value of that fractional share.
3. ANTI-DILUTION PROVISIONS. In the event of any change in
capitalization effecting the Common Stock of the Company, such as a stock
dividend, stock split or recapitalization, the Company shall make proportionate
adjustments with respect to (i) the aggregate number of shares of Common Stock
issuable upon exercise of this warrant, (ii) the Warrant Price, and (iii) such
other matters as may be appropriate in light of the circumstances.
4. COMPLIANCE WITH SECURITIES ACT. The Warrantholder, by
acceptance hereof, agrees that this warrant and the shares of Common Stock to
be issued upon exercise hereof are being acquired for investment and that
such Warrantholder will not offer, sell or otherwise dispose of this warrant
or any shares to be issued upon exercise hereof except under circumstances
which will not result in a violation of the Securities Act of 1933, as
amended (the "Act"). Certificates representing all shares (unless registered
under the Act or an opinion of counsel has been given, satisfactory to the
Company, that an exemption from registration under the Act is available),
shall be stamped or imprinted with a legend in substantially the following
form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED ("ACT"). ANY TRANSFER OF SUCH
SECURITIES WILL BE INVALID UNLESS (I) A REGISTRATION STATEMENT UNDER THE ACT
IS IN EFFECT AS TO SUCH TRANSFER OR (II) THERE IS AN OPINION OF COUNSEL,
SATISFACTORY TO THE COMPANY, THAT AN EXEMPTION FROM REGISTRATION UNDER THE
ACT IS AVAILABLE.
5. NOTICES.
Upon any adjustments of the Warrant Price and any increase or
decrease in the number of shares of Common Stock purchasable upon the
exercise of this warrant, then, and in each such case, the Company, within
thirty (30) days thereafter, shall give written notice thereof to the
registered Warrantholder at the address of such Warrantholder as shown on the
books of the Company which notice shall state the Warrant Price as adjusted
and the increased or decreased number of shares purchasable upon the exercise
of this warrant, setting forth in reasonable detail the method of calculation
of each.
6. MISCELLANEOUS.
(a) RESERVATION OF STOCK. The Company covenants that it will at
all times reserve and keep available, solely for issuance upon exercise of
this warrant, all shares of Common Stock from time to time issuable upon
exercise of this warrant.
(b) MODIFICATION. This warrant and any of its terms may be changed,
waived, or terminated by a written instrument signed by the Company and the
Warrantholder.
(c) REPLACEMENT. On receipt of evidence reasonably satisfactory to
the Company of the loss, theft, destruction, or mutilation of this warrant and,
in the case of loss, theft, or destruction,
2
<PAGE>
on delivery of any indemnity agreement or bond reasonably satisfactory in
form and amount to the Company or, in the case of mutilation, or surrender or
cancellation of this warrant, the Company, at its expense will execute and
deliver, in lieu of this warrant, a new warrant of like tenor.
(d) NO RIGHTS AS STOCKHOLDER. No Warrantholder, as such, shall be
entitled to vote or receive dividends or be considered a stockholder of the
Company for any purpose, nor shall anything in this warrant be construed to
confer on any Warrantholder as such, any rights of a stockholder of the Company
or any right to vote, to give or withhold consent to any corporate action, to
receive notice of meetings of stockholders, to receive dividends or otherwise.
(e) NOTICES. Notices hereunder to the Warrantholder shall be sent by
certified or registered mail to the address given to the Company by the
Warrantholder and shall be deemed given when so mailed.
(f) ARBITRATION. Any disputes arising out of, related to or in
connection with this warrant shall be submitted to binding arbitration pursuant
to the commercial arbitration rules of the American Arbitration Association.
The parties agree that the exclusive jurisdiction and venue for (a) any such
arbitration and (b) any action to compel any such arbitration shall be in the
county and state of domicile of the party being served with the arbitration
demand, and each party hereto hereby consents to such jurisdiction and venue for
the purpose of any such arbitration or action to compel arbitration. Each party
shall have thirty (30) days from the date of service of the arbitration demand
to appoint an independent and neutral arbitrator. The two arbitrators appointed
by the parties shall then have thirty (30) days to appoint a third arbitrator.
The arbitrators shall determine the applicable substantive and procedural law
for the arbitration proceedings, and may award reasonable attorneys' fees and
actual costs incurred in connection herewith.
(g) TRANSFERABILITY. This Warrant may be assigned or transferred by
the Warrantholder. In the event of the death or disability of the
Warrantholder, this Warrant may be exercised by any duly appointed guardian,
conservator or personal representative of the estate of the Warrantholder.
IN WITNESS WHEREOF, the Company has caused this warrant to be signed by its
duly authorized officer.
Dated: March 17, 1997
GATEWAY ENERGY CORPORATION
By: /s/
-------------------------
Title: President
3
<PAGE>
Exhibit 99.4
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED ("ACT"). ANY TRANSFER OF SUCH SECURITIES
WILL BE INVALID UNLESS (I) A REGISTRATION STATEMENT UNDER THE ACT IS IN
EFFECT AS TO SUCH TRANSFER OR (II) THERE IS AN OPINION OF COUNSEL,
SATISFACTORY TO THE COMPANY, THAT AN EXEMPTION FROM REGISTRATION UNDER THE
ACT IS AVAILABLE.
VOID AFTER August 1, 2007 173,500 Shares
NONQUALIFIED STOCK OPTION
OF
GATEWAY ENERGY CORPORATION
THIS CERTIFIES THAT: Michael T. Fadden, (the "Optionholder") is entitled to
subscribe for and purchase from Gateway Energy Corporation, a Delaware
corporation (the "Company"), at a price of $0.6875 per share the ("Exercise
Price") payable in cash, check, or Common Stock of the Company, pursuant to the
terms hereof, 173,500 fully paid and non-assessable shares of the Company's
Common Stock, such price and such number of shares being subject to adjustment
as set forth in this option. This option may be exercised at any time from the
date of grant and for a period of ten years from the date of grant.
Upon delivery of this option, together with payment of the Exercise Price
for the shares of Common Stock purchased, at the principal office of the Company
or at such other office or agency as the Company may designate by notice in
writing to the holder hereof, the Optionholder shall be entitled to receive a
certificate or certificates for the shares of Common Stock so purchased. All
shares of Common Stock which may be issued upon the exercise of this option
will, upon issuance, be fully paid and non-assessable and free from all taxes,
liens, charges and encumbrances with respect thereto.
This option is subject to the following terms and conditions;
1. EXERCISE OF OPTION.
(a) MANNER OF EXERCISE. This option may be exercised in whole or in
part by the surrender of this option at the principal office of the Company and
by the payment to the Company by cash, check, or Common Stock of the Company for
the number of shares of Common Stock being purchased. The Company shall, as
soon as practicable after such delivery, prepare a certificate for the shares of
Common Stock purchased in the name of the Optionholder. Common Stock
surrendered shall be valued at the average of the bid and asked price of the
Common Stock on the date of exercise.
(b) PARTIAL EXERCISE. On any partial exercise, the Company shall
promptly issue and deliver to the Optionholder a new option or options of like
tenor in the name of that Optionholder providing for the right to purchase that
number of shares as to which this option has not been exercised.
2. DELIVERY OF STOCK CERTIFICATES. Within a reasonable time after
full or partial exercise of this option, the Company, at its expense, will cause
to be issued in the name of and delivered
<PAGE>
to the Optionholder, a certificate or certificates for the number of shares
of Common Stock to which the Optionholder shall be entitled upon such
exercise. No fractional shares will be issued upon exercise of rights to
purchase under this option. If upon any exercise of this option a fraction
of a share results, the Company will pay the fair cash value of that
fractional share.
3. ANTI-DILUTION PROVISIONS. In the event of any change in
capitalization effecting the Common Stock of the Company, such as a stock
dividend, stock split or recapitalization, the Company shall make proportionate
adjustments with respect to (i) the aggregate number of shares of Common Stock
issuable upon exercise of this option, (ii) the Exercise Price, and (iii) such
other matters as may be appropriate in light of the circumstances.
4. COMPLIANCE WITH SECURITIES ACT. The Optionholder, by acceptance
hereof, agrees that this option and the shares of Common Stock to be issued upon
exercise hereof are being acquired for investment and that such Optionholder
will not offer, sell or otherwise dispose of this option or any shares to be
issued upon exercise hereof except under circumstances which will not result in
a violation of the Securities Act of 1933, as amended (the "Act"). Certificates
representing all shares (unless registered under the Act or an opinion of
counsel has been given, satisfactory to the Company, that an exemption from
registration under the Act is available), shall be stamped or imprinted with a
legend in substantially the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED ("ACT"). ANY TRANSFER OF SUCH
SECURITIES WILL BE INVALID UNLESS (I) A REGISTRATION STATEMENT UNDER THE ACT IS
IN EFFECT AS TO SUCH TRANSFER OR (II) THERE IS AN OPINION OF COUNSEL,
SATISFACTORY TO THE COMPANY, THAT AN EXEMPTION FROM REGISTRATION UNDER THE ACT
IS AVAILABLE.
5. NOTICES.
Upon any adjustments of the Exercise Price and any increase or
decrease in the number of shares of Common Stock purchasable upon the exercise
of this option, then, and in each such case, the Company, within thirty (30)
days thereafter, shall give written notice thereof to the registered
Optionholder at the address of such Optionholder as shown on the books of the
Company which notice shall state the Exercise Price as adjusted and the
increased or decreased number of shares purchasable upon the exercise of this
option, setting forth in reasonable detail the method of calculation of each.
6. MISCELLANEOUS.
(a) RESERVATION OF STOCK. The Company covenants that it will at all
times reserve and keep available, solely for issuance upon exercise of this
option, all shares of Common Stock from time to time issuable upon exercise of
this option.
(b) MODIFICATION. This option and any of its terms may be changed,
waived, or terminated by a written instrument signed by the Company and the
Optionholder.
2
<PAGE>
(c) REPLACEMENT. On receipt of evidence reasonably satisfactory
to the Company of the loss, theft, destruction, or mutilation of this option
and, in the case of loss, theft, or destruction, on delivery of any indemnity
agreement or bond reasonably satisfactory in form and amount to the Company
or, in the case of mutilation, or surrender or cancellation of this option,
the Company, at its expense will execute and deliver, in lieu of this option,
a new option of like tenor.
(d) NO RIGHTS AS STOCKHOLDER. No Optionholder, as such, shall be
entitled to vote or receive dividends or be considered a stockholder of the
Company for any purpose, nor shall anything in this option be construed to
confer on any Optionholder as such, any rights of a stockholder of the
Company or any right to vote, to give or withhold consent to any corporate
action, to receive notice of meetings of stockholders, to receive dividends
or otherwise.
(e) NOTICES. Notices hereunder to the Optionholder shall be sent
by certified or registered mail to the address given to the Company by the
Optionholder and shall be deemed given when so mailed.
(f) ARBITRATION. Any disputes arising out of, related to or in
connection with this option shall be submitted to binding arbitration
pursuant to the commercial arbitration rules of the American Arbitration
Association. The parties agree that the exclusive jurisdiction and venue for
(a) any such arbitration and (b) any action to compel any such arbitration
shall be in the county and state of domicile of the party being served with
the arbitration demand, and each party hereto hereby consents to such
jurisdiction and venue for the purpose of any such arbitration or action to
compel arbitration. Each party shall have thirty (30) days from the date of
service of the arbitration demand to appoint an independent and neutral
arbitrator. The two arbitrators appointed by the parties shall then have
thirty (30) days to appoint a third arbitrator. The arbitrators shall
determine the applicable substantive and procedural law for the arbitration
proceedings, and may award reasonable attorneys' fees and actual costs
incurred in connection herewith.
(g) TRANSFERABILITY. This Option may be assigned or transferred
by the Optionholder. In the event of the death or disability of the
Optionholder, this Option may be exercised by any duly appointed guardian,
conservator or personal representative of the estate of the Optionholder.
IN WITNESS WHEREOF, the Company has caused this option to be signed by its
duly authorized officer.
Dated: August 1, 1997
GATEWAY ENERGY CORPORATION
Larry J. Horbach
By: /s/ Larry J. Horbach
--------------------------
Title: Chairman and Chief
Executive Officer
3
<PAGE>
Exhibit 99.5
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED ("ACT"). ANY TRANSFER OF SUCH SECURITIES
WILL BE INVALID UNLESS (I) A REGISTRATION STATEMENT UNDER THE ACT IS IN
EFFECT AS TO SUCH TRANSFER OR (II) THERE IS AN OPINION OF COUNSEL,
SATISFACTORY TO THE COMPANY, THAT AN EXEMPTION FROM REGISTRATION UNDER THE
ACT IS AVAILABLE.
VOID AFTER August 1, 2007 2,250 Shares
NONQUALIFIED STOCK OPTION
OF
GATEWAY ENERGY CORPORATION
THIS CERTIFIES THAT: Michael T. Fadden, (the "Optionholder") is entitled to
subscribe for and purchase from Gateway Energy Corporation, a Delaware
corporation (the "Company"), at a price of $0.47 per share the ("Exercise
Price") payable in cash, check, or Common Stock of the Company, pursuant to the
terms hereof, 2,250 fully paid and non-assessable shares of the Company's Common
Stock, such price and such number of shares being subject to adjustment as set
forth in this option. This option may be exercised at any time from the date of
grant to August 1, 2007.
Upon delivery of this option, together with payment of the Exercise Price
for the shares of Common Stock purchased, at the principal office of the Company
or at such other office or agency as the Company may designate by notice in
writing to the holder hereof, the Optionholder shall be entitled to receive a
certificate or certificates for the shares of Common Stock so purchased. All
shares of Common Stock which may be issued upon the exercise of this option
will, upon issuance, be fully paid and non-assessable and free from all taxes,
liens, charges and encumbrances with respect thereto.
This option is subject to the following terms and conditions;
1. EXERCISE OF OPTION.
(a) MANNER OF EXERCISE. This option may be exercised in whole or in
part by the surrender of this option at the principal office of the Company and
by the payment to the Company by cash, check, or Common Stock of the Company for
the number of shares of Common Stock being purchased. The Company shall, as
soon as practicable after such delivery, prepare a certificate for the shares of
Common Stock purchased in the name of the Optionholder. Common Stock
surrendered shall be valued at the average of the bid and asked price of the
Common Stock on the date of exercise.
(b) PARTIAL EXERCISE. On any partial exercise, the Company shall
promptly issue and deliver to the Optionholder a new option or options of like
tenor in the name of that
<PAGE>
Optionholder providing for the right to purchase that number of shares as to
which this option has not been exercised.
2. DELIVERY OF STOCK CERTIFICATES. Within a reasonable time after
full or partial exercise of this option, the Company, at its expense, will cause
to be issued in the name of and delivered to the Optionholder, a certificate or
certificates for the number of shares of Common Stock to which the Optionholder
shall be entitled upon such exercise. No fractional shares will be issued upon
exercise of rights to purchase under this option. If upon any exercise of this
option a fraction of a share results, the Company will pay the fair cash value
of that fractional share.
3. ANTI-DILUTION PROVISIONS. In the event of any change in
capitalization effecting the Common Stock of the Company, such as a stock
dividend, stock split or recapitalization, the Company shall make proportionate
adjustments with respect to (i) the aggregate number of shares of Common Stock
issuable upon exercise of this option, (ii) the Exercise Price, and (iii) such
other matters as may be appropriate in light of the circumstances.
4. COMPLIANCE WITH SECURITIES ACT. The Optionholder, by acceptance
hereof, agrees that this option and the shares of Common Stock to be issued upon
exercise hereof are being acquired for investment and that such Optionholder
will not offer, sell or otherwise dispose of this option or any shares to be
issued upon exercise hereof except under circumstances which will not result in
a violation of the Securities Act of 1933, as amended (the "Act"). Certificates
representing all shares (unless registered under the Act or an opinion of
counsel has been given, satisfactory to the Company, that an exemption from
registration under the Act is available), shall be stamped or imprinted with a
legend in substantially the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED ("ACT"). ANY TRANSFER OF SUCH
SECURITIES WILL BE INVALID UNLESS (I) A REGISTRATION STATEMENT UNDER THE ACT IS
IN EFFECT AS TO SUCH TRANSFER OR (II) THERE IS AN OPINION OF COUNSEL,
SATISFACTORY TO THE COMPANY, THAT AN EXEMPTION FROM REGISTRATION UNDER THE ACT
IS AVAILABLE.
5. NOTICES.
Upon any adjustments of the Exercise Price and any increase or
decrease in the number of shares of Common Stock purchasable upon the exercise
of this option, then, and in each such case, the Company, within thirty (30)
days thereafter, shall give written notice thereof to the registered
Optionholder at the address of such Optionholder as shown on the books of the
Company which notice shall state the Exercise Price as adjusted and the
increased or decreased number of shares purchasable upon the exercise of this
option, setting forth in reasonable detail the method of calculation of each.
6. MISCELLANEOUS.
(a) RESERVATION OF STOCK. The Company covenants that it will at all
times reserve and keep available, solely for issuance upon exercise of this
option, all shares of Common Stock from time to time issuable upon exercise of
this option.
2
<PAGE>
(b) MODIFICATION. This option and any of its terms may be changed,
waived, or terminated by a written instrument signed by the Company and the
Optionholder.
(c) REPLACEMENT. On receipt of evidence reasonably satisfactory to
the Company of the loss, theft, destruction, or mutilation of this option and,
in the case of loss, theft, or destruction, on delivery of any indemnity
agreement or bond reasonably satisfactory in form and amount to the Company or,
in the case of mutilation, or surrender or cancellation of this option, the
Company, at its expense will execute and deliver, in lieu of this option, a new
option of like tenor.
(d) NO RIGHTS AS STOCKHOLDER. No Optionholder, as such, shall be
entitled to vote or receive dividends or be considered a stockholder of the
Company for any purpose, nor shall anything in this option be construed to
confer on any Optionholder as such, any rights of a stockholder of the Company
or any right to vote, to give or withhold consent to any corporate action, to
receive notice of meetings of stockholders, to receive dividends or otherwise.
(e) NOTICES. Notices hereunder to the Optionholder shall be sent by
certified or registered mail to the address given to the Company by the
Optionholder and shall be deemed given when so mailed.
(f) ARBITRATION. Any disputes arising out of, related to or in
connection with this option shall be submitted to binding arbitration pursuant
to the commercial arbitration rules of the American Arbitration Association.
The parties agree that the exclusive jurisdiction and venue for (a) any such
arbitration and (b) any action to compel any such arbitration shall be in the
county and state of domicile of the party being served with the arbitration
demand, and each party hereto hereby consents to such jurisdiction and venue for
the purpose of any such arbitration or action to compel arbitration. Each party
shall have thirty (30) days from the date of service of the arbitration demand
to appoint an independent and neutral arbitrator. The two arbitrators appointed
by the parties shall then have thirty (30) days to appoint a third arbitrator.
The arbitrators shall determine the applicable substantive and procedural law
for the arbitration proceedings, and may award reasonable attorneys' fees and
actual costs incurred in connection herewith.
(g) TRANSFERABILITY. This Option may be assigned or transferred by
the Optionholder. In the event of the death or disability of the Optionholder,
this Option may be exercised by any duly appointed guardian, conservator or
personal representative of the estate of the Optionholder.
IN WITNESS WHEREOF, the Company has caused this option to be signed by its
duly authorized officer.
Dated: February 10, 1998
GATEWAY ENERGY CORPORATION
Larry J. Horbach
By: /s/ Larry J. Horbach
----------------------------
Title: Chairman and Chief
Executive Officer
3
