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EXHIBIT 3
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT ("Agreement") is entered into as of April 25,
2001, among NETGATEWAY, INC., a Delaware corporation ("NetGateway"), and certain
stockholders of NetSol International, Inc. ("NetSol") executing this Agreement
(each a "Stockholder" and collectively, the "Stockholders").
W I T N E S S E T H :
WHEREAS, the Stockholders have agreed to grant to NetGateway an irrevocable
option (the "NetGateway Option") with respect to certain shares of common stock
of NetSol (the "NetSol Stock") , owned by the Stockholders, upon the terms and
subject to the conditions hereafter set forth;
WHEREAS, NetGateway has agreed to grant to the Stockholders irrevocable
warrants (the "Stockholders Warrants") with respect to certain shares of common
stock, $0.001 par value per share of NetGateway (the "NetGateway Stock"), upon
the terms and subject to the conditions hereafter set forth;
NOW, THEREFORE, in consideration of the foregoing premises and of the
mutual covenants and agreements set forth herein, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto, intending to be legally bound, hereby agree as
follows:
1. Grant of NetGateway Option. Each of the Stockholders hereby grants to
NetGateway an irrevocable option with an exercise price of three dollars and
eighty cents ($3.80) per share (the "NetGateway Option") to purchase up to that
number of shares of NetSol Stock which are owned of record and beneficially by
the Stockholders in the amounts set forth opposite their respective names on
EXHIBIT A annexed hereto; it being understood and agreed that a maximum of Three
Hundred Thousand (300,000) shares of NetSol Stock are subject to the NetGateway
Option.
The NetGateway Option may be exercised by NetGateway or any assignee of
NetGateway, in whole or in part, at any time and from time to time within
forty-five (45) days from the date of this Agreement. On each occasion that
NetGateway or any assignee of NetGateway shall elect to exercise the NetGateway
Option it shall do so on a pro-rata basis as to each Stockholder listed on
EXHIBIT A annexed hereto. For avoidance of doubt, if, for example, NetGateway or
any assignee of NetGateway Option shall elect to exercise the NetGateway Option
as to 100,000 shares (or 33-1/3% of the total number of shares of NetSol Stock
which may be purchased upon such partial exercise of the NetGateway Option), it
shall purchase from each Stockholder thirty-three and 1/3 (33-1/3%) percent of
the shares of NetSol Stock set forth opposite his, her or its name on EXHIBIT A
hereto.
Notwithstanding the foregoing, the NetGateway Option may not be exercised
by NetGateway if, at the time of intended exercise, NetGateway is in material
breach of any of its representations, warranties, covenants or agreements
contained in this Agreement, in which event the NetGateway Option shall
terminate and shall be of no further force or effect.
If and on each occasion that NetGateway elects to exercise the NetGateway
Option, NetGateway shall deliver to the Stockholders a written notice (an
"Exercise Notice") specifying the total number of shares of NetSol Stock it
elects to purchase. Each closing of a purchase of shares of NetSol Stock shall
occur at a place, on a date and at a time designated by NetGateway in an
Exercise Notice, but in no event later than three business days following the
date of the Exercise Notice. The exercise price shall be payable in cash or by
wire transfer of immediately available funds.
2. Grant of Stockholders' Warrants. NetGateway hereby grants to the
Stockholders irrevocable warrants with an exercise price of thirty-five and
six-tenths cents ($0.356) per share (collectively the "Stockholders Warrants")
to purchase up to Three Hundred Thousand (300,000) shares of
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NetGateway Stock; which Stockholders Warrants shall be granted to each of the
Stockholders in the amounts set forth opposite their respective names on EXHIBIT
B annexed hereto.
The Stockholders Warrants may be exercised by any Stockholder or any
assignee of a Stockholder, in whole or in part, at any time and from time to
time within forty-five (45) days from the date of this Agreement.
If and on each occasion that a Stockholder elects to exercise the
NetGateway Option, such Stockholder shall deliver to NetGateway an Exercise
Notice specifying the total number of shares of NetGateway Stock such
Stockholder elects to purchase. Each closing of a purchase of shares of
NetGateway Stock shall occur at a place, on a date and at a time designated by
such Stockholder in an Exercise Notice, but in no event later than three
business days following the date of the Exercise Notice. The exercise price
shall be payable in cash or by wire transfer of immediately available funds.
3. Representations and Warranties of NetGateway. NetGateway represents and
warrants to each Stockholder that (a) NetGateway is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has all requisite power and authority to enter into this Agreement
and to perform its obligations hereunder, (b) the execution and delivery of this
Agreement by NetGateway and the consummation by NetGateway of the transactions
contemplated hereby have been duly authorized by all necessary corporate action
on the part of NetGateway , (c) this Agreement has been duly executed and
delivered by NetGateway and constitutes a valid and binding obligation of
NetGateway and is enforceable against NetGateway in accordance with its terms,
(d) NetGateway has taken all necessary corporate action to authorize and reserve
for issuance and to permit it to issue, upon exercise of the NetGateway Option,
and at all times from the date hereof through the expiration of the NetGateway
Option shall have so reserved, 300,000 unissued shares of NetGateway Stock, all
of which, upon their issuance and delivery in accordance with the terms of this
Agreement, shall be duly authorized, validly issued, fully paid and
nonassessable, (e) upon delivery of such shares of NetGateway Stock to the
Stockholders upon exercise of the Stockholders Warrants, the Stockholders shall
acquire good and valid title to all of such shares, free and clear of any and
all Liens of any nature whatsoever, (f) the execution and delivery of this
Agreement by NetGateway does not, and the performance of this Agreement by
NetGateway will not result in a violation of (1) the certificate of
incorporation or bylaws of NetGateway presently in effect, (2) any statute,
rule, regulation, ordinance, order, judgment, writ or decree applicable to
NetGateway or by which it or any of its assets or properties is bound or
affected, or (3) or give rise to any rights of termination, amendment,
acceleration or cancellation of, or result in the creation or imposition of any
lien on any of the property or assets of NetGateway pursuant to, any note, bond,
mortgage, indenture, contract, agreement, lease, license or other instrument or
obligation to which NetGateway or any of its subsidiaries is a party or by which
NetGateway or any of its assets or properties is bound or affected (except, in
the case of clauses (2) or (3) above, for violations which individually or in
the aggregate would not have a material adverse effect on NetGateway and its
subsidiaries taken as a whole), and (g) the execution and delivery of this
Agreement by NetGateway does not, and the performance of this Agreement by
NetGateway will not, require any consent, approval, authorization or permit of,
or filing with or notification to, any governmental authority.
4. Representations and Warranties of Stockholders . Each Stockholder
severally represents and warrants to NetGateway that (a) such Stockholder has
all requisite power and authority to enter into this Agreement and to perform
his, her or its obligations hereunder, (b) the execution and delivery of this
Agreement by Stockholder and the consummation by Stockholder of the transactions
contemplated hereby have been duly authorized by all necessary action on the
part of Stockholder (c) this Agreement has been duly executed and delivered by
Stockholder and constitutes a valid and binding obligation of Stockholder and is
enforceable against Stockholder in accordance with its terms, (d) the execution
and delivery of this Agreement by NetGateway does not, and the performance of
this Agreement by Stockholder will not, require any consent, approval,
authorization or permit of, or filing with or notification to, any governmental
authority and (f) such Stockholder owns of record and beneficially all of the
shares of NetSol Stock set forth on EXHIBIT A hereto and has the requisite power
and authority to transfer such shares to NetGateway upon exercise of
NetGateway's Option, free and clear of all liens, claims, security interests or
rights of others.
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5. Demand Registration Rights. If a Stockholder elects to offer and sell
any shares of NetGateway Stock purchased pursuant to the Stockholders Warrants
within two years after such purchase and upon the advice of outside U.S. counsel
to such Stockholder that such offer and sale requires registration under the
Securities Act, such Stockholder, by written notice (the "Registration Notice")
to NetGateway (for purposes of this Section 5, the "Registrant"), may request
the Registrant to register under the Securities Act the offer and sale by
NetGateway of all or any portion of the shares purchased pursuant to the
Stockholders Warrants ("Restricted Shares") and beneficially owned by NetGateway
(the "Registrable Securities") pursuant to a Form S-3 registration statement or
other applicable form of registration of NetGateway's Common Stock.
NetGateway shall use its best efforts, as promptly as practicable, to
effect the registration under the Securities Act of the offer and sale by
Stockholders of the unpurchased Registrable Securities; provided, however, that
(i) Stockholders shall not be entitled to request more than two demand
registrations pursuant to this Section 5 and (ii) the Registrant shall not be
required to file any registration statement during any period of time (not to
exceed 60 days after such request in the case of clause (B) below or 120 days in
the case of clause (A) below) when (A) the Registrant is in possession of
material and non-public information, the disclosure of which at such time, with
the advice of outside counsel, it reasonably believes it would be detrimental to
the Registrant and, in the judgment of the Board of Directors of the Registrant,
such information would have to be disclosed if a registration statement were
filed at that time under the Securities Act; or (B) the Registrant is required
under the Securities Act to include audited financial statements for any period
in such registration statement and such financial statements are not yet
available for inclusion therein. If consummation of the offer and sale of any
Registrable Securities pursuant to a demand registration pursuant to this
Section 5 does not occur within 90 days after the filing with the SEC of the
initial registration statement with respect thereto, the provisions of this
Section 5 again shall be applicable to any proposed demand registration;
provided, however, that NetGateway shall not be entitled to request more than
two demand registrations pursuant to this Section 5 in any 12-month period. The
Registrant shall use its best efforts to cause all Registrable Securities
included in a registration statement pursuant to this Section 5 to be qualified
for sale under the securities or "blue-sky" laws of such jurisdictions as
NetGateway reasonably may request and shall continue such registration or
qualification in effect in such jurisdiction; provided, however, that the
Registrant shall not be required to qualify to do business, or consent to
general service of process, in any jurisdiction solely by reason of this
provision.
The demand registration rights set forth in this Section 5 are subject to
the condition that NetGateway shall provide the Registrant with such information
with respect to NetGateway's Registrable Securities, the plans for the
distribution thereof, and such other information with respect to NetGateway as,
in the reasonable judgment of outside counsel for the Registrant, is necessary
to enable Registrant to include in such registration statement all material
facts required to be disclosed with respect to a registration hereunder
(including, without limitation, all such information required pursuant to Rules
507 and 508 of Regulation S-K under the Securities Act).
A demand registration effected pursuant to this Section 5 shall be effected
exclusively at the Registrant's expense, except for underwriting discounts and
broker-dealer allowances, concessions and commissions, and the Registrant shall
provide to the underwriters such documentation (including certificates, opinions
of counsel and "comfort" letters from independent auditors) as are customary in
connection with underwritten public offerings and as such underwriters otherwise
reasonably may require.
6. Restrictive Legends. Each certificate evidencing shares of NetGateway
Stock issued to a Stockholder hereunder upon the full or partial exercise of
such Stockholders Warrants initially shall be endorsed with a legend in
substantially the following form:
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND NEITHER SUCH SECURITIES
(NOR ANY INTEREST THEREIN) MAY BE OFFERED, SOLD OR TRANSFERRED, UNLESS IF
SO REGISTERED OR IF AN EXEMPTION FROM SUCH REGISTRATION AND FROM
QUALIFICATION UNDER APPLICABLE STATE
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SECURITIES (OR "BLUE SKY") LAWS IS AVAILABLE. SUCH SECURITIES ALSO ARE
SUBJECT TO ADDITIONAL RESTRICTIONS ON TRANSFER AS SET FORTH IN A CERTAIN
STOCK OPTION AGREEMENT, DATED APRIL 25, 2001, A COPY OF WHICH MAY BE
OBTAINED FROM THE ISSUER HEREOF.
7. Binding Effect; Assignment. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
(to the extent permitted as set forth in the next sentence) assigns. The
NetGateway Option and the Stockholders Warrants are freely assignable by any
party possessing the same, with the prior written consent of any other party.
Nothing contained in this Agreement, express or implied, is intended to confer
upon any person (other than the parties hereto and their respective permitted
assigns) any rights or remedies of any nature whatsoever by reason of this
Agreement. Any Restricted Shares sold by a party in compliance with the
provisions of Section 5 shall, upon consummation of such sale, be free of the
restrictions imposed with respect to such shares by this Agreement.
8. Specific Performance. The parties recognize and agree that if for any
reason any of the provisions of this Agreement are not performed in accordance
with their specific terms or are otherwise violated or breached, immediate and
irreparable harm or injury would be caused for which money damages would not be
an adequate remedy. Accordingly, each party agrees that in addition to other
remedies the other party shall be entitled to an injunction restraining any
violation or threatened violation of the provisions of this Agreement. If any
action should be brought in equity to enforce the provisions of the Agreement,
neither party will allege, and each party hereby waives the defense, that there
is an adequate remedy at law.
9. Entire Agreement. This Agreement and its exhibits constitute the entire
agreement among the parties with respect to the subject matter hereof and
supersede all other prior agreements and understandings, both written and oral,
among the parties or any of them with respect to such subject matter.
10. Further Assurances. Each party shall execute and deliver all such
further documents and instruments and take all such further action as may be
necessary to consummate the transactions contemplated hereby.
11. No Remedy in Certain Circumstances. Each party agrees that, should any
court of competent jurisdiction or competent Governmental Authority hold any
provision of this Agreement or part hereof to be null, void or unenforceable, or
order any party to take any action inconsistent herewith or not to take an
action consistent herewith or required hereby, the validity, legality and
enforceability of the remaining provisions and obligations contained or set
forth herein shall not in any way be affected or impaired thereby, unless the
foregoing inconsistent action or the failure to take an action constitutes a
material breach of this Agreement or makes the Agreement absolutely impossible
(without regard to commercial impracticability) to perform, in which case this
Agreement shall terminate. Except as otherwise contemplated by this Agreement,
to the extent that a party hereto takes an action inconsistent herewith or fails
to take action consistent herewith or required hereby pursuant to an order or
judgment of a court of competent jurisdiction or competent Governmental
Authority, such party shall incur no liability or obligation unless such party
did not in good faith seek to resist or object to the imposition or entering of
such order or judgment.
12. Notices. Any notice or communication required or permitted hereunder
shall be in writing and either delivered personally, by recognized national
delivery service or sent by certified or registered mail, postage prepaid, and
shall be deemed to be delivered upon receipt at the following address, or to
such other address or addresses as such person subsequently may designate by
notice delivered hereunder:
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If to NetGateway to:
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NetGateway, Inc.
000 Xxxx Xxxxxxxxxx Xxxxxx
Xxxx, Xxxx 00000
Attn: Xxxxxx Xxxxx
If to the Stockholders, to:
--------------------------
NetSol Shareholders Group, LLC
Attn: Xxxxxxxx X. Xxxxxx
c/o BlueWater Partners, LLC
0 Xxxxxxxxxxxx Xxxx
Xxxxxxxxx, Xxx Xxxx 00000
13. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of State of Delaware, applicable to instruments made
and performed entirely within such jurisdiction, and without regard to the
conflicts of law provisions of such state.
14. Descriptive Headings. The descriptive headings herein are inserted for
convenience of reference only and are not intended to be part of or to affect
the meaning or interpretation of this Agreement.
15. Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed to be an original, but all of which, taken together, shall
constitute but one and the same instrument.
16. Expenses. Except as otherwise expressly provided herein, all costs and
expenses incurred in connection with the transactions contemplated by this
Agreement shall be paid by the party incurring such expenses.
17. Amendments; Waiver. This Agreement may be amended by the parties hereto
and the terms and conditions hereof may be waived only by an instrument in
writing signed on behalf of
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each of the parties hereto, or, in the case of a waiver, by an instrument signed
on behalf of the party waiving compliance.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered by their respective duly authorized officers as of the
date first above written.
NETGATEWAY, INC.
By: /s/ XXXXXX XXXXX
------------------------------------
Xxxxxx Xxxxx
Its: Chief Executive Officer
STOCKHOLDERS:
BLUE WATER MASTER FUND, L.P. BLUE WATER PARTNERS II, L.P.
By: Blue Water Partners, LLC By: Blue Water Partners, LLC
Its: General Partner Its: General Partner
By: JDI Management Corp. By: JDI Management Corp.
Its: Principal Its: Principal
By: /s/ XXXXXXXX X. XXXXXX By: /s/ XXXXXXXX X. XXXXXX
---------------------- --------------------------
Xxxxxxxx X. Xxxxxx Xxxxxxxx X. Xxxxxx
Its: Principal Its: Principal
PSM INTERNATIONAL LTD.
By:
----------------------
Name:
Its:
------------------------
Xxxxxx X. Xxxxxx
------------------------
Xxxxx X. Xxxxxx
/s/ XX. XXXXX XXXXX
------------------------
Xx. Xxxxx Xxxxx
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EXHIBIT A
NETGATEWAY OPTION
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Shares of NetSol Stock Subject to
Stockholder NetGateway Option
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Blue Water Master Fund, L.P. 210,243
Blue Water Partners II, L.P. 26,812
PSM International Limited 9,665
Xxxxxx and Xxxxx Xxxxxx 8,506
Xx. Xxxxx Xxxxx 44,774
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Total Shares 300,000
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EXHIBIT B
STOCKHOLDER WARRANT
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Shares of NetGateway Stock Subject to
Stockholder Stockholders Warrants
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Blue Water Master Fund, L.P. 210,243
Blue Water Partners II, L.P. 26,812
PSM International Limited 9,665
Xxxxxx and Xxxxx Xxxxxx 8,506
Xx. Xxxxx Xxxxx 44,774
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Total Shares 300,000
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