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Sample Business Contracts

1999 Employee Stock Purchase Plan - Martha Stewart Living Omnimedia Inc.

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                      MARTHA STEWART LIVING OMNIMEDIA, INC.
                        1999 EMPLOYEE STOCK PURCHASE PLAN

1.       ESTABLISHMENT OF PLAN.

      Martha Stewart Living Omnimedia, Inc., a Delaware corporation (the
"Company"), proposes to grant options ("Options") for purchase of the Company's
Class A common stock, $0.01 par value ("Common Stock"), to eligible employees of
the Company and its Designated Subsidiaries (as defined in Section 5 hereof)
pursuant to this 1999 Employee Stock Purchase Plan (this "Plan"). The Company
intends this Plan to qualify as an "employee stock purchase plan" under Section
423 of the Internal Revenue Code of 1986, as amended (the "Code"), and this Plan
shall be so construed. Any term not expressly defined in this Plan but defined
in Section 423 of the Code shall have the meaning provided in Section 423 of the
Code.

2.       STOCK SUBJECT TO PLAN.

      A total of 730,000 shares of the Common Stock will be available for
issuance under this Plan. Such number shall be subject to adjustments effected
in accordance with Section 16 of this Plan. Any shares of Common Stock that have
been made subject to an Option that cease to be subject to the Option (other
than by means of exercise of the Option), including, without limitation, in
connection with the cancellation or termination of an Option, shall again be
available for issuance in connection with future grants of Options under this
Plan.

3.       PURPOSE.

      The purpose of this Plan is to encourage employees of the Company and its
designated subsidiaries, as that term is defined in Section 5 of this Plan
("Designated Subsidiaries"), to own Common Stock by permitting them to acquire
Common Stock at a discount through payroll deductions, so as to enhance such
employees' sense of participation in the affairs of the Company and Subsidiaries
and to provide an incentive for continued employment.

4.       ADMINISTRATION.

      This Plan shall be administered by the Compensation Committee or such
other committee of the Company's Board of Directors (the "Board") as the Board
may from time to time designate, which shall be composed of at least two
directors and shall be appointed by and serve at the pleasure of the Board (the
"Committee"). Subject to the provisions of this Plan and the limitations of
Section 423 of the Code or any successor provision in the Code, the Committee
shall have exclusive authority, in its discretion, to determine all matters
relating to Options granted under this Plan, including all terms, conditions,
restrictions, and limitations of Options; provided, however, that all
participants granted Options under an offering pursuant to this Plan shall have
the same rights and privileges within the meaning of Code Section 423(b)(5)
except as required by applicable law.


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      The Committee may act only by a majority of its members then in office,
except that the Committee may, except to the extent prohibited by applicable law
or the applicable rules of a stock exchange, allocate all or any portion of its
responsibilities and powers to any one or more of its members and may delegate
all or any part of its responsibilities and powers to any person or persons
selected by it; provided, that no such delegation may be made that would cause
Options or other transactions under the Plan to cease to be exempt from Section
16(b) of the Exchange Act.

      The Committee shall have the authority to adopt, alter and repeal such
administrative rules, guidelines and practices governing the Plan as it shall
from time to time deem advisable, to interpret the terms and provisions of the
Plan and any Option issued under the Plan and to otherwise supervise the
administration of the Plan. The Committee's exercise of discretion and
interpretation of this Plan, its rules and regulations, and all actions taken
and determinations made by the Committee pursuant to this Plan shall be
conclusive and binding on all parties involved or affected. The Committee may
delegate administrative duties to any person or persons selected by it, as it
deems advisable. All expenses incurred in connection with the administration of
this Plan shall be paid by the Company and the Designated Subsidiaries;
provided, however, that the Committee may require a participant to pay any costs
or fees in connection with the sale by the participant of shares of Common Stock
acquired under this Plan or in connection with the participant's request for the
issuance of a certificate for shares of Common Stock held in the participant's
account under the Plan.

5.       ELIGIBILITY.

      Any employee of the Company or the Designated Subsidiaries is eligible to
participate in the Plan for any Offering Period (as hereinafter defined) under
this Plan except the following:

                  (a) employees who are customarily employed for less than 20
         hours per week;

                  (b) employees who are customarily employed for not more than
         five months in a calendar year; and

                  (c) employees who, together with any other person whose stock
         would be attributed to such employee pursuant to Section 424(d) of the
         Code, own stock or hold options to purchase stock possessing five
         percent or more of the total combined voting power or value of all
         classes of stock of the Company or any of its Subsidiaries or who, as a
         result of being granted Options under this Plan, would own stock or
         hold options to purchase stock possessing five percent or more of the
         total combined voting power or value of all classes of stock of the
         Company or any of its Subsidiaries.

      For all purposes of this Plan, (i) the term "Subsidiary" shall mean any
"subsidiary corporation" as that term is defined in Section 424(f) of the Code
and (ii) the term "Designated Subsidiaries" shall mean those Subsidiaries listed
on Annex A to this Plan or Subsidiaries which may hereafter be determined by the
Committee or the Board to be Designated Subsidiaries. A Designated Subsidiary
will cease to be a Designated Subsidiary on the earlier of (i) the date the
Com-


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<PAGE>   3
mittee or the Board determines that such Subsidiary is no longer a Designated
Subsidiary or (ii) such Designated Subsidiary ceases for any reason to be a
Subsidiary.

6.       OFFERING PERIODS.

      The offering periods of this Plan (individually, an "Offering Period")
shall be of periods not to exceed the maximum period permitted by Section 423 of
the Code. Until determined otherwise by the Committee or the Board, Offering
Periods shall commence on January 1 and July 1 of each calendar year and each
Offering Period shall consist of one six-month purchase period during which
payroll deductions of the participants are accumulated under this Plan;
provided, that the first Offering Period may commence on or after the IPO Date
and prior to January 1, 2000, and shall end on December 31, 1999. For the
purposes of this Plan, the "IPO Date" shall mean the date on which the
registration statement filed by the Company under the Securities Act of 1933, as
amended, for the Initial Public Offering is declared effective. The first day of
each Offering Period is referred to as the "Offering Date." The last day of each
Offering Period is referred to as the "Purchase Date." Subject to the
requirements of Section 423 of the Code, the Committee or the Board shall have
the power to change the duration of Offering Periods with respect to future
offerings if such change is announced at least 30 days prior to the Offering
Date of the first Offering Period to be affected by such change.

7.       PARTICIPATION IN THIS PLAN.

      An eligible employee may become a participant in this Plan on the first
Offering Date after he or she satisfies the eligibility requirements, by
delivering a properly completed enrollment form (on such form as the Committee
may prescribe) to the Committee not later than the 15th day of the month (or if
such day is not a business day for the Company or the applicable Subsidiary, on
the immediately preceding business day) before such Offering Date, unless a
later time for filing the enrollment form authorizing payroll deductions is set
by the Committee for all eligible employees with respect to a given Offering
Period. Once an employee becomes a participant in the Plan with respect to an
Offering Period, such employee will automatically participate in the Offering
Period commencing immediately following the last day of the prior Offering
Period unless the employee withdraws from this Plan or terminates further
participation in the Offering Period as set forth in Sections 13 and 14 below.
No additional enrollment form shall be required for such continued participation
in this Plan.

8.       GRANT OF OPTION ON ENROLLMENT.

      Enrollment by an eligible employee in this Plan with respect to an
Offering Period will constitute the grant by the Company to such employee of an
Option to purchase on the relevant Purchase Date up to that number of shares of
Common Stock of the Company, and any fraction of a share, determined by dividing
(a) the amount accumulated in such employee's payroll deduction account during
the Offering Period ending on such Purchase Date, by (b) the Purchase Price as
that term is defined in Section 9; provided, however, that the number of shares
which may be


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<PAGE>   4
purchased pursuant to an Option may in no event exceed the number
of shares determined in the manner set forth in Section 11(b) of the Plan.

9.       PURCHASE PRICE.

         (a) Subject to Section 9(b) below, the purchase price per share (the
"Purchase Price") pursuant to any Option shall be the lower of (i) 85 percent of
the fair market value of such share on the Offering Date for such Option or (ii)
85 percent of the fair market value of such share on the Purchase Date for such
Option; provided, however, that in no event may the purchase price per share of
Common Stock be below the par value of a share of the Common Stock.

         (b) For purposes of this Plan, the term "fair market value" of the
Common Stock means, as of any given date, the closing price of the Common Stock
on the composite transaction tape of the New York Stock Exchange on such date
or, if there are no reported sales on such date, on the last day prior to such
date on which there were sales of the Common Stock on the New York Stock
Exchange or, if the Common Stock is not listed on such exchange, on any other
national securities exchange on which the Common Stock is listed or on The
Nasdaq Stock Market. If there is no regular public trading market for such
Common Stock, the fair market value of the Common Stock shall be determined by
the Committee in good faith. The Committee may change the manner in which the
Purchase Price is determined, so long as (i) such determination does not have
the effect of lowering the Purchase Price to an amount less than that set forth
in Section 9(a) and (ii) such changed manner of computation is announced to
eligible employees at least 30 days prior to the Offering Date of the first
Offering Period to be affected by such change.

10. PURCHASE OF SHARES; CHANGES IN PAYROLL DEDUCTIONS; ISSUANCE OF SHARES.

         (a) Funds contributed by each participant for the purchase of shares
under this Plan shall be accumulated by regular payroll deductions made during
each Offering Period. The deductions shall be made as a percentage of the
participant's Compensation in 1 percent increments comprising not less than 1
percent and not more than 15 percent of the participant's Compensation with
respect to such payroll period. As used herein, "Compensation" shall mean all
base salary, wages, commissions and overtime pay with respect to such payroll
period; provided, however, that, for purposes of determining a participant's
Compensation, any election by such participant to reduce his or her regular cash
remuneration under Sections 125 or 401(k) of the Code shall be treated as if the
participant did not make such election. "Compensation" does not include cash
bonuses, severance pay, hiring and relocation allowances, pay in lieu of
vacation, automobile allowances, imputed income arising under any Company group
insurance or other benefit program, income received in connection with stock
options, or any other special items of remuneration. Payroll deductions shall
commence on the first payday following the Offering Date and shall continue
through the last payday of the Offering Period unless sooner altered or
terminated as provided in this Plan.

         (b) A participant may decrease (but not increase) the rate of payroll
deductions during an Offering Period by filing with the Committee a new
authorization for payroll deductions, in


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<PAGE>   5
which case the new rate shall become effective for the next payroll period
commencing more than 15 days after the Committee's receipt of the authorization
and shall continue for the remainder of the Offering Period unless changed as
described below. Such a decrease in the rate of payroll deductions may be made
at any time during an Offering Period, but not more than one change may be made
effective during any Offering Period. Notwithstanding the foregoing, a
participant may decrease the rate of payroll deductions to zero for the
remainder of the Offering Period. A participant may increase or decrease the
rate of payroll deductions for any subsequent Offering Period by filing with the
Committee a new authorization for payroll deductions not later than the 15th day
of the month (or if such date is not a business day, the immediately preceding
business day) before the beginning of such Offering Period. A participant who
has decreased the rate of withholding to zero will be deemed to continue as a
participant in the Plan until the participant withdraws from the Plan in
accordance with the provisions of Section 13 or his or her participation is
terminated in accordance with the provisions of Section 14. A participant shall
have the right to withdraw from this Plan in the manner set forth in Section 13
regardless of whether the participant has exercised his or her right to decrease
the rate at which payroll deductions are made during the applicable Offering
Period.

         (c) All payroll deductions made for a participant will be credited to
his or her account under this Plan and deposited with the general funds of the
Company. No interest will accrue on payroll deductions. All payroll deductions
received or held by the Company may be used by the Company for any corporate
purpose, and the Company shall not be obligated to segregate such payroll
deductions.

         (d) On each Purchase Date, provided that the participant has not
terminated employment in accordance with Section 14 and has not submitted to the
Committee a signed and completed withdrawal form, in each case on or before the
15th day (or if such date is not a business day, on the immediately preceding
business day) of the last month of the Offering Period in accordance with
Section 10(b) or Section 13 of this Plan, then, subject to the limitations set
forth in Section 11, the Company shall apply the funds then in the participant's
account to the purchase at the Purchase Price of whole and any fractional shares
(rounded to the nearest hundredth) of Common Stock issuable under the Option
granted to such participant with respect to the Offering Period.

         (e) During a participant's lifetime, such participant's Option to
purchase shares hereunder is exercisable only by him or her or, in the event of
the participant's disability, the participant's legal representatives. The
participant shall have no interest or voting right in shares covered by his or
her Option until such Option has been exercised.

11.      LIMITATIONS ON RIGHTS TO PURCHASE.

         (a) No employee shall be granted an Option to purchase Common Stock
under this Plan at a rate which, when aggregated with his or her rights to
purchase stock under all other employee stock purchase plans of the Company or
any Subsidiary which is intended to meet the requirements of Code Section 423,
exceeds $25,000 in fair market value, determined as of the applicable date of
the grant of the Option, for each calendar year in which the employee
participates in this Plan (or any other employee stock purchase plan described
in this Section 11(a)).


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<PAGE>   6
         (b) The number of shares which may be purchased by any employee on the
first Purchase Date to occur in any calendar year may not exceed the number of
shares determined by dividing $25,000 by the fair market value (as defined in
Section 9) of a share of Common Stock on the Offering Date of the Offering
Period in which such Purchase Date occurs. The number of shares which may be
purchased by any employee on any subsequent Purchase Date which occurs in the
same calendar year as that referred to in the preceding sentence shall not
exceed the number of shares determined by performing the calculation described
below, with all computations to be made to the nearest one hundredth of a whole
share of Common Stock or one cent, as the case may be.

         STEP ONE: The number of shares purchased by the employee during any
         previous Offering Period which occurred in the same calendar year shall
         be multiplied by the fair market value (as defined in Section 9) of a
         share of Common Stock on the first day of such previous Offering Period
         in which such shares were purchased.

         STEP TWO: The amount determined in Step One shall be subtracted from
         $25,000.

         STEP THREE: The amount determined in Step Two shall be divided by the
         fair market value (as defined in Section 9) of a share of Common Stock
         on the Offering Date of the Offering Period in which the subsequent
         Purchase Date (for which the maximum number of shares which may be
         purchased is being determined by this calculation) occurs. The quotient
         so obtained shall be the maximum number of shares which may be
         purchased by any employee on such subsequent Purchase Date.

Subject to the limitations of Section 423 of the Code, and notwithstanding the
foregoing, the Committee may from time to time determine that a different
maximum number of shares may be purchased on any given Purchase Date in lieu of
the maximum amounts described above in this Section 11(b), in which case the
number of shares which may be purchased by any employee on such Purchase Date
may not exceed such different limitation; provided, that any change made by the
Committee pursuant to this sentence shall only be effective for Offering Periods
that begin at least 30 days after the change is announced to eligible employees.

         (c) If the number of shares to be purchased on a Purchase Date by all
employees participating in this Plan exceeds the number of shares then available
for issuance under this Plan, then the Committee shall make a pro rata
allocation of the remaining shares in as uniform a manner as shall be reasonably
practicable and as the Committee shall determine to be equitable. In such event,
the Company shall give written notice of such reduction of the number of shares
to be purchased under a participant's Option to each participant affected
thereby.

         (d) Any payroll deductions accumulated in a participant's account which
are not used to purchase stock due to the limitations in this Section 11 shall
be returned to the participant as soon as practicable after the end of the
applicable Offering Period without interest.


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<PAGE>   7
12.      EVIDENCE OF STOCK OWNERSHIP.
      As soon as practicable following each Purchase Date, the number of full
shares of Common Stock purchased by each participant shall be evidenced in such
manner as the Committee may deem appropriate, including book-entry registration
or issuance of one or more stock certificates which shall be deposited into an
account established in the participant's name at a stock brokerage or other
financial services firm designated or approved by the Committee (the "Plan
Financial Agent"). A participant may request, no more than twice during any
12-month period and/or within 30 days following the termination of such
participant's employment for any reason, that a stock certificate for full (but
not fractional) shares be issued and delivered to him or her. Such request shall
be made by filing notice with the Plan Financial Agent, and the Plan Financial
Agent shall cause such shares to be delivered promptly following receipt of such
notice. Cash shall be paid in lieu of fractional shares based on the Fair Market
Value of the Common Stock on the date such notice is received by the Company. In
the event a participant or former participant shall have an account balance of
less than one full share with the Plan Financial Agent as of the Offering Date
of any Offering Period for which such participant has elected not to participate
in the Plan, the Plan Financial Agent shall cause such fractional share to be
sold as promptly as possible and the cash proceeds from such sale to be paid to
the account holder.

13.      WITHDRAWAL.

      Each participant may withdraw from an Offering Period under this Plan by
signing and delivering to the Committee a written notice to that effect on a
form provided for such purpose. Such withdrawal may be elected at any time on or
prior to the 15th day of the last month (or if such date is not a business day,
the immediately preceding business day) of an Offering Period (such date, the
"Withdrawal Deadline").

14.      TERMINATION OF EMPLOYMENT; LEAVE OF ABSENCE.

      Termination of a participant's employment for any reason, including,
without limitation, retirement, death, or the failure of a participant to remain
an eligible employee, immediately terminates his or her participation in this
Plan. For purposes of this Section 14, an employee will not be deemed to have
terminated employment or failed to remain in the continuous employ of the
Company in the case of any leave of absence approved by the Committee, but all
employees of Designated Subsidiaries that cease for any reason to be Designated
Subsidiaries who are not employed by or transferred to the employ of the Company
or another Designated Subsidiary shall be deemed to have terminated employment.

15.      RETURN OF PAYROLL DEDUCTIONS.

      In the event a participant's participation in this Plan is terminated by
withdrawal, termination of employment, or otherwise, the Company shall promptly
deliver to the participant all accumulated payroll deductions of the participant
to the Plan which have not yet been applied to the purchase of stock as soon as
practicable after the end of the applicable offering period, unless such
termination of participation occurs later than the Withdrawal Deadline for the
Offering Pe-


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<PAGE>   8
riod, in which event such accumulated payroll deductions will be utilized to
purchase Common Stock for the participant. No interest shall accrue on the
payroll deductions of a participant in this Plan.

16.      CAPITAL CHANGES.

      In the event of any change in corporate capitalization, such as a stock
split or an extraordinary corporate transaction, such as any merger,
consolidation, separation, including a spin-off, or other distribution of stock
or property of the Company, any reorganization (whether or not such
reorganization comes within the definition of such term in Section 368 of the
Code) or any partial or complete liquidation of the Company or sale of all or
substantially all of the Company's assets or stock, then the Committee, in its
sole discretion, may make such equitable adjustments as it shall deem
appropriate in the circumstances in the maximum number and kind of shares of
stock subject to this Plan as set forth in Sections 1 and 2, the number and kind
of shares subject to outstanding Options, and/or the Purchase Price of such
Options. The determination by the Committee as to the terms of any of the
foregoing adjustments shall be conclusive and binding.

17.      NONASSIGNABILITY.

      Neither payroll deductions credited to a participant's account nor any
rights with regard to the exercise of an Option or to receive shares under this
Plan may be assigned, transferred, pledged, or otherwise disposed of in any way
(other than by will, the laws of descent and distribution, or as provided in
Section 24 hereof) by the participant. Any such attempt at assignment, transfer,
pledge, or other disposition shall be void and without effect.

18.      REPORTS AND STATUS OF ACCOUNTS.

      Individual accounts will be maintained by the Plan Financial Agent for
each participant in this Plan. The participant shall have all ownership rights
with respect to shares of Common Stock held in his or her account(s) by the Plan
Financial Agent and/or the Company, including the right to vote such shares and
to receive any dividends or distributions which may be declared thereon by the
Board. The Committee shall send to each participant promptly after the end of
each Offering Period a report of his or her account(s) setting forth with
respect to such Offering Period the total payroll deductions accumulated, the
number of whole and any fractional share purchased, and the per share price
thereof, and also setting forth the total number of shares (including any
fractional share) then held in his or her account(s). Neither the Company nor
any Designated Subsidiary shall have any liability for any error or discrepancy
in any such report.

19.      NO RIGHTS TO CONTINUED EMPLOYMENT; NO IMPLIED RIGHTS.

      Neither this Plan nor the grant of any Option hereunder shall confer any
right on any employee to remain in the employ of the Company or any Subsidiary
or restrict the right of the Company or any Subsidiary to terminate such
employee's employment. The grant of any Option


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hereunder during any Offering Period shall not give a participant any right to
similar grants thereafter.

20.      EQUAL RIGHTS AND PRIVILEGES.

      All eligible employees shall have equal rights and privileges with respect
to this Plan except as required by applicable law so that this Plan qualifies as
an "employee stock purchase plan" within the meaning of Section 423 or any
successor provision of the Code and the related regulations. Any provision of
this Plan which is inconsistent with Section 423 or any successor provision of
the Code shall, without further act or amendment by the Company, the Board, or
the Committee, be reformed to comply with the requirements of Section 423. This
Section 20 shall take precedence over all other provisions in this Plan.

21.      NOTICES.

      All notices or other communications by a participant to the Company under
or in connection with this Plan shall be deemed to have been duly given when
received in the form specified by the Company at the location, or by the person,
designated by the Company for the receipt thereof.

22.      AMENDMENT OF PLAN.

      The Board may amend this Plan in such respects as it shall deem advisable;
provided, however, that stockholder approval will be required for any amendment
that will increase the total number of shares as to which Options may be granted
under this Plan or, but for such shareholder approval, cause this Plan to fail
to continue to qualify as an "employee stock purchase plan" under Section 423 of
the Code.

23.      TERMINATION OF THE PLAN.

      The Board may suspend or terminate this Plan at any time. Upon a
suspension or termination of the Plan while an Offering Period is in progress,
the Committee shall either shorten such Offering Period by setting a new
Purchase Date before the date of such suspension or termination of the Plan or
shall return the accumulated payroll deductions of all participants as if they
had all withdrawn before the Withdrawal Deadline for such Offering Period, as
set forth in Section 15. Unless this Plan shall have been previously terminated
by the Board, this Plan shall terminate on, and no Options shall be granted
after, December 31, 2009. No Options shall be granted during any period of
suspension of this Plan.

24.      DESIGNATION OF BENEFICIARY.

         (a) A participant may file a written designation of a beneficiary who
is to receive any shares and cash, if any, from the participant's account under
this Plan, in the event of such participant's


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<PAGE>   10
death prior to delivery to him or her (or to the Plan Financial Agent on his or
her behalf) of such shares and cash.

         (b) Such designation of beneficiary may be changed by the participant
at any time by written notice. In the event of the death of a participant and in
the absence of a beneficiary validly designated under this Plan who is living at
the time of such participant's death, the Company shall deliver such shares or
cash to the executor or administrator of the estate of the participant, or if no
such executor or administrator has been appointed (to the knowledge of the
Company), the Company, in its discretion, may deliver such shares or cash to the
spouse or to any one or more dependents or relatives of the participant or, if
no spouse, dependent, or relative is known to the Company, to such other person
as the Company may in good faith determine to be the appropriate designee.

25. CONDITIONS UPON ISSUANCE OF SHARES; LIMITATION ON SALE OF SHARES.

      Shares shall not be issued with respect to an Option unless the exercise
of such Option and the issuance and delivery of such shares pursuant thereto
shall comply with all applicable provisions of law, domestic or foreign,
including, without limitation, the Securities Act of 1933, as amended, the
Securities Exchange Act of 1934, as amended, the rules and regulations
promulgated thereunder, and the requirements of any stock exchange or automated
quotation system upon which the shares may then be listed, and shall be further
subject to the approval of counsel for the Company with respect to such
compliance.

26.      EFFECTIVE DATE.

      The Plan shall be effective as of the date it is adopted by the Board,
subject to the approval of the Company's stockholders.

27.      GOVERNING LAW.

      Except to the extent that provisions of this Plan are governed by
applicable provisions of the Code or any other substantive provision of federal
law, this Plan and actions taken under this Plan shall be governed by and
construed in accordance with the laws of the State of Delaware without reference
to principles of conflict of laws.


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