<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement Confidential, For Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
THE VIALINK COMPANY
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee
is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials:
- --------------------------------------------------------------------------------
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement number,
or the form or schedule and the date of its filing.
(1) Amount previously paid:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement no.:
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(3) Filing Party:
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(4) Date Filed:
<PAGE> 2
THE VIALINK COMPANY
13800 BENSON ROAD
EDMOND, OKLAHOMA 73013
, 2000
Dear Stockholder:
You are cordially invited to attend the 2000 Annual Meeting of Stockholders
of The viaLink Company, which will be held at the Doubletree Hotel, Lincoln
Center, 5410 LBJ Freeway, Dallas, Texas 75240, on Monday, June 5, 2000 at 2:00
p.m. (Central Daylight Savings Time).
Details of the business to be conducted at the 2000 Annual Meeting are
given in the attached Notice of Annual Meeting of Stockholders and Proxy
Statement.
After careful consideration, the Company's Board of Directors has
unanimously approved the proposals set forth in the Proxy Statement and
recommends that you vote in favor of each such proposal and for each of the
directors nominated for election to the Company's Board of Directors.
In order for us to have an efficient meeting, please sign, date and return
the enclosed proxy promptly in the accompanying reply envelope. If you are able
to attend the annual meeting and wish to change your proxy vote, you may do so
simply by voting in person at the annual meeting.
We look forward to seeing you at the meeting.
Sincerely,
LEWIS B. KILBOURNE
Chief Executive Officer and
Chairman of the Board of Directors
YOUR VOTE IS IMPORTANT
IN ORDER TO ASSURE YOUR REPRESENTATION AT THE MEETING, YOU ARE REQUESTED TO
COMPLETE, SIGN AND DATE THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE AND RETURN IT
IN THE ENCLOSED ENVELOPE. NO POSTAGE NEED BE AFFIXED IF MAILED IN THE UNITED
STATES.
<PAGE> 3
THE VIALINK COMPANY
13800 BENSON ROAD
EDMOND, OKLAHOMA 73013
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 5, 2000
To the Stockholders of the viaLink Company:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of The
viaLink Company, a Delaware corporation (the "Company"), will be held on Monday,
June 5, 2000, at 2:00 p.m. (Central Daylight Savings Time) at the Doubletree
Hotel, Lincoln Center, 5410 LBJ Freeway, Dallas, Texas 75240, for the following
purposes, as more fully described in the Proxy Statement accompanying this
Notice:
1. To elect two (2) Class I directors to the Company's Board of
Directors to serve three-year terms each ending in the year 2003 or until
their respective successors are duly elected and qualified;
2. To approve an amendment to the Company's certificate of
incorporation to increase the number of shares of Common Stock authorized
for issuance thereunder by an additional 100,000,000 shares to a total of
150,000,000 shares of Common Stock;
3. To approve an amendment to the Company's 1999 Stock Option/Stock
Issuance Plan (the "1999 Plan") to increase the number of shares of Common
Stock authorized for issuance over the term of the 1999 Plan by an
additional 5,371,184 shares to 20,000,000 and to increase the number of
shares by which the share reserve under the 1999 Plan will automatically
increase on the first trading day of each calendar year, beginning with
calendar year 2001 from one percent (1%) of the shares of Common Stock
outstanding on the last trading day of the immediately preceding calendar
year (subject to a maximum annual increase of 200,000 shares) to five
percent (5%) of the total number of such outstanding shares, subject to a
maximum annual increase of 500,000 shares.
4. To ratify the appointment of KPMG LLP as independent auditors of
the Company for the fiscal year ending December 31, 2000; and
5. To transact such other business as may properly come before the
Annual Meeting or any adjournment or adjournments thereof.
Only stockholders of record at the close of business on April 15, 2000 are
entitled to notice of and to vote at the Annual Meeting. The stock transfer
books of the Company will remain open between the record date and the date of
the meeting. A list of stockholders entitled to vote at the Annual Meeting will
be available for inspection at the executive offices of the Company.
<PAGE> 4
All stockholders are cordially invited to attend the meeting in person.
Whether or not you plan to attend, please sign and return the enclosed proxy as
promptly as possible in the envelope enclosed for your convenience. The prompt
return of your proxy card will assist us in preparing for the meeting. Should
you receive more than one proxy because your shares are registered in different
names and addresses, each proxy should be signed and returned to assure that all
your shares will be voted. You may revoke your proxy at any time prior to the
meeting. If you attend the meeting and vote by ballot, your proxy will be
revoked automatically and only your vote at the meeting will be counted.
BY ORDER OF THE BOARD OF DIRECTORS,
LEWIS B. KILBOURNE
Chief Executive Officer and
Chairman of the Board of Directors
Dallas, Texas
, 2000
YOUR VOTE IS VERY IMPORTANT, REGARDLESS OF THE NUMBER OF SHARES YOU OWN. PLEASE
READ THE ATTACHED PROXY STATEMENT CAREFULLY, COMPLETE, SIGN AND DATE THE
ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE, AND RETURN IT IN THE ENCLOSED
ENVELOPE
<PAGE> 5
THE VIALINK COMPANY
13800 BENSON ROAD
EDMOND, OKLAHOMA 73013
---------------------
PROXY STATEMENT
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 5, 2000
---------------------
GENERAL
These proxy solicitation materials (the "Proxy Statement") and the enclosed
proxy card (the "Proxy") are being mailed in connection with the solicitation of
proxies by the Board of Directors of The viaLink Company, a Delaware corporation
(the "Company"), for the 2000 Annual Meeting of Stockholders to be held on
Monday, June 5, 2000 at 2:00 p.m., Central Daylight Savings Time, and at any
adjournment or postponement thereof (the "Annual Meeting"), at the Doubletree
Hotel, Lincoln Center, 5410 LBJ Freeway, Dallas, Texas 75240. This Proxy
Statement was first mailed on or about , 2000, to all stockholders
entitled to vote at the Annual Meeting.
The Company's annual report to stockholders for the fiscal year ended
December 31, 1999 (the "Annual Report") has been mailed concurrently with the
mailing of the notice of the Annual Meeting and this Proxy Statement to all
stockholders entitled to notice of, and to vote at, the Annual Meeting. The
Annual Report is not incorporated into this Proxy Statement and is not
considered proxy soliciting material.
VOTING
The specific proposals to be considered and acted upon at the Annual
Meeting are summarized in the accompanying Notice of Annual Meeting of
Stockholders (the "Notice of Annual Meeting"). Each proposal is described in
more detail in this Proxy Statement. On April 15, 2000, the record date for
determination of stockholders entitled to notice of and to vote at the Annual
Meeting (the "Record Date"), shares of the Company's Common Stock, par
value $0.001 per share, were issued and outstanding, and no shares of the
Company's preferred stock, par value $0.001 per share, were outstanding. Each
stockholder is entitled to one vote for each share of Common Stock held by such
stockholder on the Record Date. Stockholders may not cumulate votes in the
election of directors.
As of the Record Date, directors and officers of the Company may be deemed
to be beneficial owners of an aggregate of shares of Common Stock (not
including shares of Common Stock issuable upon exercise of outstanding options
and warrants), constituting approximately % of the shares of Common Stock
outstanding and entitled to vote at the Annual Meeting. These directors and
executive officers have indicated to the Company that each person intends to
vote or direct the vote of all shares of Common Stock held or owned by them, or
over which they have voting control, in favor of all of the proposals described
herein. Nonetheless, the approval of the proposals is not assured. See
"Principal Stockholders."
All votes will be tabulated by the inspector of election appointed for the
meeting, who will separately tabulate affirmative and negative votes,
abstentions and broker non-votes. Abstentions and broker non-votes are counted
as present for purposes of determining the presence or absence of a quorum for
the transaction of business. Abstentions will be counted towards the tabulations
of votes cast on proposals presented to the stockholders and will have the same
effect as negative votes, whereas broker non-votes will not be counted for
purposes of determining whether a proposal has been approved.
<PAGE> 6
The following outlines the vote required to approve each proposal set forth
in this Proxy Statement:
- Proposal One, to elect two Class I directors, requires approval by a
plurality of the shares of Common Stock present in person or by Proxy at
the Annual Meeting for each director.
- Proposal Two, to amend the Company's Certificate of Incorporation
requires approval by at least a majority of the shares of Common Stock
outstanding as of the Record Date.
- Proposal Three, to amend the Company's 1999 Stock Option/Stock Issuance
Plan requires approval by at least a majority of shares of Common Stock
present in person or by Proxy at the Annual Meeting.
- Proposal Four, to ratify the Company's independent auditors requires
approval by at least a majority of the shares of Common Stock present in
person or by Proxy at the Annual Meeting.
The Board of Directors recommends a vote "FOR" each proposal.
PROXIES
Any stockholder executing a proxy pursuant to this solicitation may revoke
it at any time prior to its exercise by delivering written notice of such
revocation to the Secretary of the Company before the Annual Meeting or by
properly executing and delivering a proxy bearing a later date. Proxies may also
be revoked by any stockholder present at the Annual Meeting who elects to vote
his, her or its shares in person.
If a choice as to the matters coming before the Annual Meeting has been
specified by a stockholder on the proxy, the shares will be voted accordingly.
If no choice is specified on the return proxy, the shares will be voted FOR
the election of each of the directors proposed by the Board unless the authority
to vote for the election of such directors is withheld and, if no contrary
instructions are given, the proxy will be voted FOR the approval of Proposals 2,
3 and 4 described in the accompanying Notice and Proxy Statement.
SOLICITATION
The cost of soliciting proxies will be paid entirely by the Company and may
include reimbursement paid to brokerage firms and others for their expense in
forwarding solicitation materials as well as the expense of preparing,
assembling, photocopying and mailing this Proxy Statement. Solicitation will be
made primarily through the use of the mail; however, regular employees of the
Company may, without additional remuneration, solicit proxies personally by
telephone or telegram or other means. Except as described above, the Company
does not presently intend to solicit proxies other than by mail.
DEADLINE FOR RECEIPT OF STOCKHOLDER PROPOSALS
Proposals of stockholders of the Company that are intended to be presented
by such stockholders at the Company's 2001 Annual Meeting must be received no
later than , in order that they may be included in the proxy statement
and form of proxy relating to the 2001 Annual Meeting. In addition, the proxy
solicited by the Board of Directors for the 2001 Annual Meeting will confer
discretionary authority to vote on any stockholder proposal presented at that
meeting, unless the Company receives notice of such proposal not later than
, 2001.
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<PAGE> 7
MATTERS TO BE CONSIDERED AT ANNUAL MEETING
PROPOSAL ONE
ELECTION OF DIRECTORS
GENERAL
The Company's Certificate of Incorporation provides for a classified Board
of Directors consisting of three classes of directors with staggered three-year
terms, with each class consisting, as nearly as possible, of one-third of the
total number of directors and designated Class I, Class II and Class III. The
Company currently has the following five directors serving on its Board: Robert
N. Baker, Warren D. Jones, Lewis B. Kilbourne, Ph.D., Sue A. Hale and Jimmy M.
Wright. The term of office of the Class I directors (Lewis B. Kilbourne and Sue
A. Hale) expires at this Annual Meeting, the term of office of the Class II
directors (Warren D. Jones and Robert N. Baker) expires at the 2001 Annual
Meeting of stockholders, and the term of office of the Class III director (Jimmy
M. Wright) expires at the 2002 Annual Meeting of stockholders, or in each case
until their successors have been elected and qualified. Directors to replace
those of a class whose term expires at a given annual meeting of stockholders
shall be elected to hold office until the third succeeding annual meeting of
stockholders or until their respective successors have been elected and
qualified.
NOMINEES FOR CLASS I DIRECTOR WITH TERM ENDING UPON THE 2003 ANNUAL MEETING OF
STOCKHOLDERS
The nominees for director have agreed to serve if elected, and management
has no reason to believe that the nominees will be unavailable to serve. In the
event a nominee is unable or declines to serve as a director at the time of the
Annual Meeting, the proxies will be voted for any nominee who may be designated
by the present Board of Directors to fill the vacancy. Unless otherwise
instructed, the proxy holders will vote the proxies received by them FOR the
nominee named below.
Two Class I directors are to be elected at the Annual Meeting to hold
office until the 2003 Annual Meeting, or until their respective successors are
duly elected and qualified. Each nominee receiving the affirmative vote of a
plurality of shares present in person or represented by proxy at the Annual
Meeting and entitled to vote on the election of directors shall be elected to
the Board of Directors.
CLASS I NOMINEES
<TABLE>
<CAPTION>
NAME DIRECTOR SINCE AGE POSITION
- ---- -------------- --- -----------------
<S> <C> <C> <C>
Lewis B. Kilbourne....................................... 1997 53 Director (Class I)
Sue A. Hale.............................................. 1999 55 Director (Class I)
</TABLE>
Lewis B. "Bucky" Kilbourne, Ph.D. has served as a director of the Company
since December 1997 and was elected as the Chief Executive Officer on October 1,
1998. Dr. Kilbourne also currently serves as Chairman of the Board. Dr.
Kilbourne has more than 20 years of financial experience in the retail, food
service and banking business. Prior to joining the Company, Dr. Kilbourne was a
Professor of Finance and Economics at Oklahoma City University. Dr. Kilbourne
also served as President of Kilbourne and Associates, Inc., a management
consulting firm located in Oklahoma City. From January 1994 to May 1997, Dr.
Kilbourne served as Chief Financial Officer of Sonic Corporation, a national
restaurant chain based in Oklahoma City. He has also held executive financial
positions with Popeye's, Church's Fried Chicken, Brock Hotels, Showbiz Pizza and
National Convenience Stores. Dr. Kilbourne has a B.A. in political science and
economics from Louisiana State University and a M.A. and Ph.D., both in
economics, from the University of Pennsylvania.
Sue A. Hale has served as a director of the Company and as the chairwoman
of the compensation committee and a member of the audit committee of the Board
of Directors since March 1999. Ms. Hale is currently the Executive Editor of the
Daily Oklahoman, the largest daily paper in Oklahoma. From January 1996 to
January 2000, Ms. Hale served as the General Manager of Connect Oklahoma, a
statewide news and information Internet company. Ms. Hale received a B.A. in
English and music from Southwestern College.
3
<PAGE> 8
CONTINUING CLASS II DIRECTORS FOR TERM ENDING UPON THE 2001 ANNUAL MEETING OF
STOCKHOLDERS
Robert N. Baker is one of the Company's co-founders and has served as a
director since the Company's formation in 1985 and was a Vice President until
October 1998. Mr. Baker has served as the President and Chief Operating Officer
of the Company since October 1998 and is responsible for the Company's
technology development and services. Mr. Baker has over 20 years of experience
in management, technical support and systems development within the retail
industry. He received his B.S. in mathematics from Oklahoma Christian University
of Science and Arts.
Warren D. Jones has served as a director of the Company and the chairman of
the audit committee and a member of the compensation committee of the Board of
Directors since December 1999. Mr. Jones is currently retired. Prior to his
retirement, Mr. Jones spent 31 years at PricewaterhouseCoopers LLP where he
served as managing partner in New Orleans and Pittsburgh, and most recently was
responsible for risk management and compliance for the firm's Southwest region
technology, telecommunications and entertainment clients. Mr. Jones received his
B.S. in industrial and labor relations from Cornell University and an M.B.A.
from Syracuse University.
CONTINUING CLASS III DIRECTORS FOR TERM ENDING UPON THE 2002 ANNUAL MEETING OF
STOCKHOLDERS
Jimmy M. Wright has served as a director of the Company and as a member of
the compensation and audit committees of the Board of Directors since February
1998. Mr. Wright is currently the Managing Partner with Diversified Retail
Solutions, L.L.C., a supply chain consulting business, where he has served since
February 1998. From July 1998 to September 1999, Mr. Wright served as the Chief
Logistics Officer of Amazon.com, a publicly-traded Web-based retailer. In
January 1998, Mr. Wright retired as Vice President of Distribution for Wal-Mart
Stores, Inc. During his 13 year tenure at Wal-Mart, he was involved in all
facets of strategic planning, including supply chain management, personnel, site
selection and building design. Mr. Wright received his B.B.A. in management from
The University of Texas, Permian Basin.
BOARD COMMITTEES AND MEETINGS
Meetings
The Board of Directors met ten times and acted two times by unanimous
written consent in 1999. The Board of Directors has a Compensation Committee and
an Audit Committee, but does not have a standing Nominating Committee. Each
director attended or participated in 75% or more of the aggregate of (i) the
total number of meetings of the Board of Directors and (ii) the total number of
meetings held by all committees of the Board of Directors in which such director
served during 1999.
Compensation Committee
The Company has a standing Compensation Committee which is currently
composed of Ms. Hale (chair), Mr. Wright and Mr. Jones. The Compensation
Committee met three times in 1999. The Compensation Committee reviews and makes
recommendations to the Board concerning salaries and incentive compensation for
the Company's officers and employees. The Compensation Committee also
administers the Company's 1999 Stock Option/Stock Issuance Plan (the "1999
Plan"), the Company's 1999 Employee Stock Purchase Plan and other employee
incentive plans.
Audit Committee
The Company has a standing Audit Committee composed of Mr. Jones (chair),
Ms. Hale and Mr. Wright. The Audit Committee met two times in 1999. The Audit
Committee makes recommendations to the Board regarding the selection of
independent auditors, reviews the results and scope of audits and other
accounting-related services and reviews and evaluates the Company's internal
control functions.
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<PAGE> 9
DIRECTOR COMPENSATION AND INDEMNIFICATION AGREEMENTS
We currently pay our non-employee directors $10,000 annually for their
services as members of the Board of Directors. We also reimburse our directors
for any out-of-pocket expenses and additional fees incurred in attending
meetings of the Board of Directors and committees thereof on which such
directors serve. Under the 1999 Plan, non-employee directors automatically
receive stock option grants to purchase 48,000 shares of our Common Stock,
provided such non-employee director has served on the Board for at least six
months. Employee directors are eligible to receive stock option grants at the
discretion of the Compensation Committee of the Board of Directors. For
additional information regarding the terms of the 1999 Plan, see "Executive
Compensation and Other Information -- Stock Plans."
In 1999, the Company granted options to its non-employee directors as
follows:
- Ms. Hale -- options to purchase 60,000 shares of our common stock at an
exercise price of $3.81 per share under the Company's 1998 Non-Qualified
Stock Option Plan and 48,000 shares of our common stock at an exercise
price of $15.22 per share under the 1999 Plan.
- Mr. Wright -- options to purchase 48,000 shares of our common stock at an
exercise price of $4.81 per share and 48,000 shares of our common stock
at an exercise price of $15.22 per share under the 1999 Plan; and
- Mr. Jones -- options to purchase 50,000 shares of our common stock at an
exercise price of $15.22 per share under the 1999 Plan.
Our Bylaws provide that we must indemnify our directors and officers to the
fullest extent permitted by Delaware law. The Company also maintains directors
and officers liability insurance. Delaware law and the Company's Certificate of
Incorporation and Bylaws limit the liability of each of its directors to the
Company or its stockholders for monetary damages for a breach of their fiduciary
duty as directors. These provisions do not eliminate the liability of a director
for (i) breach of the director's duty of loyalty to the Company or its
stockholders; (ii) acts or omissions by a director not in good faith or which
involve intentional misconduct or a knowing violation of law; (iii) unlawful
payments of dividends or unlawful stock repurchases or redemptions or knowing
violation of the law; or (iv) any transaction from which the director derived an
improper personal benefit. In addition, these provisions do not eliminate
liability of a director for violations of federal securities laws, nor do they
limit the Company's rights or those of its stockholders, in appropriate
circumstances, to seek equitable remedies such as injunctive or other forms of
non-monetary relief. Additionally, the Company is also a party to
indemnification agreements with each of our directors.
EXECUTIVE COMPENSATION
For a discussion of executive compensation, related party transactions and
principal stockholders, please see the information following Proposal Four.
VOTE REQUIRED FOR APPROVAL OF PROPOSAL ONE
The affirmative vote of a plurality of the outstanding voting shares of the
Company present or represented and entitled to vote at the 2000 Annual Meeting
is required for election of each of the Class I Director nominees.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS DEEMS PROPOSAL ONE TO BE IN THE BEST INTERESTS OF
THE COMPANY AND ITS STOCKHOLDERS AND RECOMMENDS A VOTE FOR APPROVAL THEREOF.
UNLESS AUTHORITY TO DO SO IS WITHHELD, THE PERSON(S) NAMED IN EACH PROXY WILL
VOTE THE SHARES REPRESENTED THEREBY FOR THE ELECTION OF THE NOMINEES LISTED
ABOVE.
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<PAGE> 10
PROPOSAL TWO
APPROVAL OF AMENDMENT TO
THE CERTIFICATE OF INCORPORATION
The present capital structure of the Company authorizes 50,000,000 shares
of Common Stock and 10,000,000 shares of preferred stock each having a par value
of $.001 per share. The Board of Directors believes this capital structure is
inadequate for the present and future needs of the Company. Therefore, the Board
of Directors has unanimously approved an amendment to the Company's Certificate
of Incorporation to increase the authorized number of shares of Common Stock
from 50,000,000 shares to 150,000,000 shares. The Board believes this capital
structure more appropriately reflects the present and future needs of the
Company and recommends this amendment to the Company's stockholders for
adoption. The undesignated preferred stock may be issued from time to time in
one or more series with such rights, preferences and privileges as may be
determined by the Board of Directors. On March 31, 2000, 20,040,769 shares of
Common Stock were outstanding and no shares of preferred stock were outstanding.
Except as otherwise stated, information presented in this proxy statement
reflects a 2-for-1 stock split effective as of December 21, 1999, and a 2-for-1
stock split effective as of March 28, 2000.
PURPOSE OF AUTHORIZING ADDITIONAL COMMON STOCK
Authorizing an additional 100,000,000 shares of Common Stock would give the
Board of Directors the express authority, without further action of the
stockholders, to issue shares of Common Stock from time to time as the Board of
Directors deems necessary. The Board of Directors believes it is necessary to
have the ability to issue these additional shares of Common Stock for general
corporate purposes. Potential uses of the additional authorized shares may
include acquisition transactions, equity financings, stock dividends (e.g. stock
splits), stock distributions, issuance of options pursuant to the 1999 Plan and
issuances of Common Stock pursuant to the Company's 1999 Employee Stock Purchase
Plan without further action by the stockholders, unless that action was
specifically required by applicable law or rules of any stock exchange on which
the Company's securities may then be listed.
The proposed increase in the authorized number of shares of Common Stock
could have a number of effects on the Company's stockholders depending upon the
exact nature and circumstances of any actual issuances of authorized but
unissued shares. The increase could have an anti-takeover effect, in that
additional shares could be issued (within the limits imposed by applicable law)
in one or more transactions that could make a change in control or takeover of
the Company more difficult. For example, additional shares could be issued by
the Company so as to dilute the stock ownership or voting rights of persons
seeking to obtain control of the Company. Similarly, the issuance of additional
shares to certain persons allied with the Company's management could have the
effect of making it more difficult to remove the Company's current management by
diluting the stock ownership or voting rights of persons seeking to cause such
removal. In addition, an issuance of additional shares by the Company could have
an effect on the potential realizable value of a stockholder's investment. In
the absence of a proportionate increase in the Company's earnings and book
value, an increase in the aggregate number of outstanding shares of the Company
caused by the issuance of the additional shares would dilute the earnings per
share and book value per share of all outstanding shares of the Company's Common
Stock. If these factors were reflected in the price per share of Common Stock,
the potential realizable value of a stockholder's investment could be adversely
affected. The Common Stock carries no preemptive rights to purchase additional
shares.
The proposed amendment to the Company's Certificate of Incorporation was
approved by the unanimous vote of the directors of the Company in March 2000.
VOTE REQUIRED FOR APPROVAL OF PROPOSAL TWO
The affirmative vote of a majority of the Company's outstanding voting
shares is required for approval of the amendment to the Company's Certificate of
Incorporation authorizing 100,000,000 additional shares of Common Stock.
6
<PAGE> 11
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS DEEMS PROPOSAL TWO TO BE IN THE BEST INTEREST OF THE
COMPANY AND ITS STOCKHOLDERS AND RECOMMENDS A VOTE FOR APPROVAL THEREOF. UNLESS
AUTHORITY TO DO SO IS WITHHELD, THE PERSON(S) NAMED IN EACH PROXY WILL VOTE THE
SHARES REPRESENTED THEREBY FOR THE APPROVAL OF THE AMENDMENT OF THE COMPANY'S
CERTIFICATE OF INCORPORATION AUTHORIZING 100,000,000 ADDITIONAL SHARES OF COMMON
STOCK. UNLESS AUTHORITY TO DO SO IS WITHHELD BY THE PERSON(S) NAMED IN EACH
PROXY WILL VOTE THE SHARES REPRESENTED FOR THE APPROVAL OF
Remainder of page intentionally left blank.
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<PAGE> 12
PROPOSAL THREE
APPROVAL OF AMENDMENT TO
1999 STOCK OPTION/STOCK ISSUANCE PLAN
The Company's stockholders are being asked to approve an amendment to the
Company's 1999 Stock Option/Stock Issuance Plan (the "Plan") which will effect
the following changes:
(i) increase the number of shares of the Company's Common Stock
reserved for issuance under the Plan by an additional 5,371,184 shares; and
(ii) increase the number of shares by which the share reserve under
the Plan will automatically increase on the first trading day of each
calendar year, beginning with calendar year 2001, from one percent (1%) of
the shares of Common Stock outstanding on the last trading day of the
immediately preceding calendar year (subject to a maximum annual increase
of 200,000 shares) to five percent (5%) of such outstanding shares, subject
to a maximum annual increase of 500,000 shares.
The Board of Directors adopted the amendment on April 5, 2000, subject to
stockholder approval at this Meeting.
The Board believes the amendment is necessary to assure that a sufficient
reserve of Common Stock remains available for issuance under the Plan in order
to allow the Company to continue to utilize equity incentives to attract and
retain the services of key individuals essential to the Company's long-term
growth and financial success. The Company relies significantly on equity
incentives in the form of stock option grants in order to attract and retain key
employees and believes that such equity incentives are necessary for the Company
to remain competitive in the marketplace for executive talent and other key
employees. Option grants made to newly-hired or continuing employees will be
based on both competitive market conditions and individual performance.
The following is a summary of the principal features of the Plan, as most
recently amended. Any stockholder of the Company who wishes to obtain a copy of
the actual plan document may do so upon written request to the Company at 13800
Benson Road, Suite 100, Edmond, Oklahoma 73013-6417 or 13155 Noel Road, Suite
800, Dallas, Texas 75240.
All share number information reflects the Company's two-for-one stock
splits effected on December 21, 1999 and March 28, 2000.
EQUITY INCENTIVE PROGRAMS
The Plan consists of three (3) separate equity incentive programs: (i) the
Discretionary Option Grant Program, (ii) the Stock Issuance Program and (iii)
the Automatic Option Grant Program for non-employee Board members. The principal
features of each program are described below. The Compensation Committee of the
Board has the exclusive authority to administer the Discretionary Option Grant
and Stock Issuance Programs with respect to option grants and stock issuances
made to the Company's executive officers and non-employee Board members and also
has the authority to make option grants and stock issuances under those programs
to all other eligible individuals. However, the Board may at any time appoint a
secondary committee of one or more Board members to have separate but concurrent
authority with the Compensation Committee to make option grants and stock
issuances under those two programs to individuals other than the Company's
executive officers and non-employee Board members.
The term Plan Administrator, as used in this summary, will mean the
Compensation Committee and any secondary committee, to the extent each such
entity is acting within the scope of its administrative jurisdiction under the
Plan. However, neither the Compensation Committee nor any secondary committee
exercises any administrative discretion under the Automatic Option Grant
Program. All grants under that program are made in strict compliance with the
express provisions of such program.
8
<PAGE> 13
SHARE RESERVE
An aggregate of 20,000,000 shares of Common Stock has been reserved for
issuance over the term of the Plan. Such share reserve consists of (i) the
14,433,120 shares initially reserved for issuance under the Plan, (ii) the
additional 195,696 shares added to the reserve on January 3, 2000 pursuant to
the automatic share increase provisions of the Plan plus (iii) the additional
increase of 5,371,184 shares of Common Stock which forms part of this Proposal.
In addition, on the first trading day of each calendar year during the term of
the Plan, beginning calendar year 2001, the number of shares of Common Stock
available for issuance under the Plan will automatically increase by an amount
equal to five percent (5%) of the shares of the Company's Common Stock
outstanding on the last trading day of the immediately preceding calendar year,
subject to a maximum annual increase of 500,000 shares and subject to approval
of this Proposal.
No participant in the Plan may receive option grants, separately
exercisable stock appreciation rights or direct stock issuances for more than
1,200,000 shares of Common Stock in the aggregate per calendar year. Stockholder
approval of this Proposal will also constitute a reapproval of the
1,200,000-share limitation for purposes of Internal Revenue Code Section 162(m).
The shares of Common Stock issuable under the Plan may be drawn from shares
of the Company's authorized but unissued shares of such common stock or from
shares of such common stock reacquired by the Company, including shares
repurchased on the open market.
In the event any change is made to the outstanding shares of Common Stock
by reason of any recapitalization, stock dividend, stock split, combination of
shares, exchange of shares or other change in corporate structure effected
without the Company's receipt of consideration, appropriate adjustments will be
made to the securities issuable (in the aggregate, annually and per participant)
under the Plan and the securities and the exercise price per share in effect
under each outstanding option.
ELIGIBILITY
Officers and employees, non-employee Board members and independent
consultants in the service of the Company or its parent and subsidiaries
(whether now existing or subsequently established) are eligible to participate
in the Discretionary Option Grant and Stock Issuance Programs. Participation in
the Automatic Option Grant Program is limited to non-employee members of the
Board.
As of March 31, 2000, six executive officers, three non-employee Board
members and approximately 110 other employees and consultants are eligible to
participate in the Discretionary Option Grant and Stock Issuance Programs. The
three non-employee Board members are also eligible to participate in the
Automatic Option Grant Program.
VALUATION
The fair market value per share of Common Stock on any relevant date under
the Plan will be deemed to be equal to the closing selling price per share on
that date on the Nasdaq National Market (or the Nasdaq SmallCap Market, as
appropriate). On March 31, 2000 the fair market value per share determined on
such basis was $33.00.
DISCRETIONARY OPTION GRANT PROGRAM
The Plan Administrator has complete discretion under the Discretionary
Option Grant Program to determine which eligible individuals are to receive
option grants, the time or times when those grants are to be made, the number of
shares subject to each such grant, the status of any granted option as either an
incentive stock option or a non-statutory option under the federal tax laws, the
vesting schedule (if any) to be in effect for the option grant and the maximum
term for which any granted option is to remain outstanding.
Each granted option will have an exercise price per share equal to the fair
market value of the shares unless otherwise determined by the Plan Administrator
on the date of grant. No granted option will have a term in excess of ten (10)
years, and the option will generally become exercisable in one or more
installments
9
<PAGE> 14
over a specified period of service measured from the grant date. However, one or
more options may be structured so that they will be immediately exercisable for
any or all of the option shares; the shares acquired under those options will be
subject to repurchase by the Company, at the exercise price paid per share, if
the optionee ceases service with the Company prior to vesting in those shares.
Upon cessation of service, the optionee will have a limited period of time
in which to exercise any outstanding option to the extent exercisable for vested
shares. The Plan Administrator will have complete discretion to extend the
period following the optionee's cessation of service during which his or her
outstanding options may be exercised and/or to accelerate the exercisability or
vesting of such options in whole or in part. Such discretion may be exercised at
any time while the options remain outstanding, whether before or after the
optionee's actual cessation of service.
The Plan Administrator is authorized to issue tandem stock appreciation
rights under the Discretionary Option Grant Program, which provide the holders
with the right to surrender their options for an appreciation distribution from
the Company equal to the excess of (i) the fair market value of the vested
shares of Common Stock subject to the surrendered option over (ii) the aggregate
exercise price payable for such shares. Such appreciation distribution may, at
the discretion of the Plan Administrator, be made in cash or in shares of Common
Stock.
The Plan Administrator also has the authority to effect the cancellation of
any or all options outstanding under the Discretionary Option Grant Program and
to grant, in substitution therefor, new options covering the same or a different
number of shares of Common Stock but with an exercise price per share based upon
the fair market value of the option shares on the new grant date.
STOCK ISSUANCE PROGRAM
Shares of Common Stock may be issued under the Stock Issuance Program at a
price per share equal to the fair market value of the shares unless otherwise
determined by the Plan Administrator and for such valid consideration as the
Plan Administrator deems appropriate, including cash and promissory notes. The
shares may also be issued as a bonus for past services without any cash outlay
required of the recipient. The shares issued may be fully vested upon issuance
or may vest upon the completion of a designated service period or the attainment
of pre-established performance goals. The Plan Administrator will, however, have
the discretionary authority at any time to accelerate the vesting of any and all
unvested shares outstanding under the Stock Issuance Program.
AUTOMATIC OPTION GRANT PROGRAM
Under the Automatic Option Grant Program, eligible non-employee Board
members receive a series of option grants over their period of Board service.
Each non-employee Board member will, at the time of his or her initial election
or appointment to the Board, receive an option grant for 48,000 shares of Common
Stock, provided that individual has not previously been in the employ of the
Company. In addition, on the date of each Annual Stockholders Meeting, each
individual who is to continue to serve as a non-employee Board member will
automatically be granted an option to purchase 48,000 shares of Common Stock,
provided he or she has served as a non-employee Board member for at least six
(6) months. There will be no limit on the number of such 48,000-share option
grants any one eligible non-employee Board member may receive over his or her
period of continued Board service.
Stockholder approval of this Proposal will also constitute pre-approval of
each option granted under the Automatic Option Grant Program on or after the
date of the Annual Stockholders Meeting and the subsequent exercise of that
option in accordance with the terms of the program summarized below.
Each automatic grant will have an exercise price per share equal to the
fair market value per share of Common Stock on the grant date and will have a
maximum term of 10 years, subject to earlier termination following the
optionee's cessation of Board service. Each automatic option will be immediately
exercisable for any or all of the option shares; the shares acquired under those
options will be subject to repurchase by the Company, at the exercise price paid
per share, if the optionee ceases service with the Company prior to vesting
10
<PAGE> 15
in those shares. Each automatic option will vest upon the optionee's completion
of one (1) year of Board service measured from the grant date. However, each
outstanding automatic option grant will automatically accelerate and become
immediately exercisable in full upon certain changes in control or ownership of
the Company or upon the optionee's death or disability while a Board member.
Following the optionee's cessation of Board service for any reason, each option
will remain exercisable for a 12-month period and may be exercised during that
time for any or all shares in which the optionee is vested at the time of such
cessation of Board service.
GENERAL PROVISIONS
Acceleration
In the event that the Company is acquired by merger, asset sale or sale by
the stockholders of more than 50% of the Company's outstanding voting stock
recommended by the Board, each outstanding option under the Discretionary Option
Grant Program that is not to be assumed or replaced by the successor corporation
or otherwise continued in effect will automatically accelerate in full, and all
unvested shares outstanding under the Discretionary Option Grant and Stock
Issuance Programs will immediately vest, except to the extent the Company's
repurchase rights with respect to those shares are to be assigned to the
successor corporation or otherwise continued in effect.
The Plan Administrator will have the authority under the Discretionary
Option Grant Program to provide that those options will automatically vest in
full (i) upon an acquisition of the Company, whether or not those options are
assumed or replaced, (ii) upon a hostile change in control of the Company
effected through a tender offer for more than 50% of the Company's outstanding
voting stock or by proxy contest for the election of Board members, or (iii) in
the event the individual's service is terminated, whether involuntarily or
through a resignation for good reason, within a designated period (not to exceed
18 months) following an acquisition in which those options are assumed or
replaced or otherwise continued in effect upon a hostile change in control. The
vesting of outstanding shares under the Stock Issuance Program may be
accelerated upon similar terms and conditions. The options granted under the
Automatic Option Grant Program will automatically accelerate and become
exercisable in full upon any acquisition or change in control transaction.
The acceleration of vesting in the event of a change in the ownership or
control of the Company may be seen as an anti-takeover provision and may have
the effect of discouraging a merger proposal, a takeover attempt or other
efforts to gain control of the Company.
Limited Stock Appreciation Rights
Each option granted under the Automatic Option Grant Program will include a
limited stock appreciation right so that upon the successful completion of a
hostile tender offer for more than fifty percent (50%) of the Company's
outstanding voting securities or a change in a majority of the Board as a result
of one or more contested elections for Board membership, the option may be
surrendered to the Company in return for a cash distribution from the Company.
The amount of the distribution per surrendered option share will be equal to the
excess of (i) the fair market value per share at the time the option is
surrendered or, if greater, the tender offer price paid per share in the hostile
take-over over (ii) the exercise price payable per share under such option. In
addition, the Plan Administrator may grant such rights to officers of the
Company as part of their option grants under the Discretionary Option Grant
Program.
Stockholder approval of this Proposal will also constitute pre-approval of
each limited stock appreciation right granted under the Automatic Option Grant
Program and the subsequent exercise of those rights in accordance with the
foregoing terms.
Financial Assistance
The Plan Administrator may institute a loan program to assist one or more
participants in financing the exercise of outstanding options under the
Discretionary Option Grant Program or the purchase of shares under the Stock
Issuance Program through full-recourse interest-bearing promissory notes.
However, the maximum
11
<PAGE> 16
amount of financing provided any participant may not exceed the cash
consideration payable for the issued shares plus all applicable taxes incurred
in connection with the acquisition of those shares.
Special Tax Election
The Plan Administrator may provide one or more holders of non-statutory
options or unvested share issuances under the Plan with the right to have the
Company withhold a portion of the shares otherwise issuable to such individuals
in satisfaction of the withholding taxes to which such individuals become
subject in connection with the exercise of those options or the vesting of those
shares. Alternatively, the Plan Administrator may allow such individuals to
deliver previously acquired shares of common stock in payment of such
withholding tax liability.
Amendment and Termination
The Board may amend or modify the Plan at any time, subject to any required
stockholder approval pursuant to applicable laws and regulations. Unless sooner
terminated by the Board, the Plan will terminate on the earliest of (i) May 20,
2009, (ii) the date on which all shares available for issuance under the Plan
have been issued as fully-vested shares or (iii) the termination of all
outstanding options in connection with certain changes in control or ownership
of the Company.
The table below shows, as to Company's Chief Executive Officer ("CEO"), the
four other most highly compensated executive officers of the Company (with base
salary and bonus for the past fiscal year in excess of $100,000) and the other
individuals and groups indicated, the number of shares of Common Stock subject
to option grants made under the Plan from May 20, 1999 through March 31, 2000,
together with the weighted average exercise price payable per share.
OPTION TRANSACTIONS
<TABLE>
<CAPTION>
NUMBER OF SHARES WEIGHTED AVERAGE
UNDERLYING EXERCISE PRICE
NAME AND POSITION OPTIONS GRANTED(#) PER SHARE($)
- ----------------- ------------------ ----------------
<S> <C> <C>
Lewis B. Kilbourne, Ph.D.................................... 340,000 $ 8.51
Chairman, Chief Executive Officer and Director Nominee
Robert N. Baker............................................. -- --
President and Chief Operating Officer
Robert I. Noe............................................... 700,000 5.27
Executive Vice President of Business Development
J. Andrew Kerner............................................ 600,000 5.55
Senior Vice President of Finance and Chief Financial
Officer
David M. Lloyd.............................................. 500,000 5.93
Senior Vice President of Operations
Sue Hale.................................................... 48,000 15.22
Director Nominee
All current executive officers as a group(6)................ 2,340,000 7.00
All current non-employee directors as a group(3)............ 194,000 $12.64
All employees, including current officers who are not
executive officers, as a group (100)...................... 4,234,000 $11.55
</TABLE>
As of March 31, 2000, 11,076,776 shares of Common Stock were subject to
outstanding options under the Plan and 7,167,632 shares of Common Stock remained
available for future issuance, assuming stockholder approval of this Proposal.
12
<PAGE> 17
FEDERAL INCOME TAX CONSEQUENCES
Option Grants
Options granted under the Plan may be either incentive stock options which
satisfy the requirements of Section 422 of the Internal Revenue Code or
non-statutory options which are not intended to meet such requirements. The
Federal income tax treatment for the two types of options differs as follows:
Incentive Options. No taxable income is recognized by the optionee at the
time of the option grant, and no taxable income is generally recognized at the
time the option is exercised. The optionee will, however, recognize taxable
income in the year in which the purchased shares are sold or otherwise disposed
of. For Federal tax purposes, dispositions are divided into two categories: (i)
qualifying and (ii) disqualifying. A qualifying disposition occurs if the sale
or other disposition is made after the optionee has held the shares for more
than two (2) years after the option grant date and more than one (1) year after
the exercise date. If either of these two holding periods is not satisfied, then
a disqualifying disposition will result.
If the optionee makes a disqualifying disposition of the purchased shares,
the Company will be entitled to an income tax deduction, for the taxable year in
which such disposition occurs, equal to the excess of (i) the fair market value
of such shares on the option exercise date over (ii) the exercise price paid for
the shares. If the optionee makes a qualifying disposition, the Company will not
be entitled to any income tax deduction.
Non-Statutory Options. No taxable income is recognized by an optionee upon
the grant of a non-statutory option. The optionee will in general recognize
ordinary income, in the year in which the option is exercised, equal to the
excess of the fair market value of the purchased shares on the exercise date
over the exercise price paid for the shares, and the optionee will be required
to satisfy the tax withholding requirements applicable to such income.
If the shares acquired upon exercise of the non-statutory option are
unvested and subject to repurchase by the Company in the event of the optionee's
termination of service prior to vesting in those shares, then the optionee will
not recognize any taxable income at the time of exercise but will have to report
as ordinary income, as and when the Company's repurchase right lapses, an amount
equal to the excess of (i) the fair market value of the shares on the date the
repurchase right lapses over (ii) the exercise price paid for the shares. The
optionee may, however, elect under Section 83(b) of the Internal Revenue Code to
include as ordinary income in the year of exercise of the option an amount equal
to the excess of (i) the fair market value of the purchased shares on the
exercise date over (ii) the exercise price paid for such shares. If the Section
83(b) election is made, the optionee will not recognize any additional income as
and when the repurchase right lapses.
The Company will be entitled to an income tax deduction equal to the amount
of ordinary income recognized by the optionee with respect to the exercised
non-statutory option. The deduction will in general be allowed for the taxable
year of the Company in which such ordinary income is recognized by the optionee.
Stock Appreciation Rights
No taxable income is recognized upon receipt of a stock appreciation right.
The holder will recognize ordinary income, in the year in which the stock
appreciation right is exercised, in an amount equal to the appreciation
distribution. The Company will be entitled to an income tax deduction equal to
the appreciation distribution in the taxable year in which such ordinary income
is recognized by the optionee.
Direct Stock Issuances
The tax principles applicable to direct stock issuances under the Plan will
be substantially the same as those summarized above for the exercise of
non-statutory option grants.
13
<PAGE> 18
DEDUCTIBILITY OF EXECUTIVE COMPENSATION
The Company anticipates that any compensation deemed paid by it in
connection with the disqualifying dispositions of incentive stock option shares
or the exercise of non-statutory options with exercise prices equal to the fair
market value of the option shares on the grant date will qualify as
performance-based compensation for purposes of Code Section 162(m) and will not
have to be taken into account for purposes of the $1 million limitation per
covered individual on the deductibility of the compensation paid to certain
executive officers of the Company. Accordingly, all compensation deemed paid
with respect to those options will remain deductible by the Company without
limitation under Code Section 162(m).
ACCOUNTING TREATMENT
Option grants under the Discretionary Option Grant and Automatic Option
Grant Programs with exercise prices equal to the fair market value of the option
shares on the grant date will not result in any direct charge to the Company's
reported earnings. However, the fair value of those options is required to be
disclosed in the notes to the Company's financial statements, and the Company
must also disclose, in footnotes to the Company's financial statements, the
pro-forma impact those options would have upon the Company's reported earnings
were the fair value of those options at the time of grant treated as a
compensation expense. In addition, the number of outstanding options may be a
factor in determining the Company's earnings per share on a fully-diluted basis.
Option grants or stock issuances made under the Plan with exercise or issue
prices less than the fair market value of the shares on the grant or issue date
will result in a direct compensation expense to the Company in an amount equal
to the excess of such fair market value over the exercise or issue price. The
expense must be amortized against the Company's earnings over the period that
the option shares or issued shares are to vest.
On March 31, 1999, the Financial Accounting Standards Board issued an
exposure draft of a proposed interpretation of APB Opinion No. 25 governing the
accounting principles applicable to equity incentive plans. Under the proposed
interpretation, as subsequently modified on August 11, 1999, option grants made
to non-employee consultants (but not non-employee Board members) after December
15, 1998 will result in a direct charge to the Company's reported earnings based
upon the fair value of the option measured initially as of the grant date and
then subsequently on the vesting date of each installment of the underlying
option shares. Such charge will accordingly include the appreciation in the
value of the option shares over the period between the grant date of the option
(or, if later, the effective date of the final interpretation) and the vesting
date of each installment of the option shares. In addition, if the proposed
interpretation is adopted, any options which are repriced after December 15,
1998 will also trigger a direct charge to Company's reported earnings measured
by the appreciation in the value of the underlying shares over the period
between the grant date of the option (or, if later, the effective date of the
final amendment) and the date the option is exercised for those shares.
Should one or more individuals be granted tandem stock appreciation rights
under the Plan, then such rights would result in a compensation expense to be
charged against the Company's reported earnings. Accordingly, at the end of each
fiscal quarter, the amount (if any) by which the fair market value of the shares
of common stock subject to such outstanding stock appreciation rights has
increased from the prior quarter-end would be accrued as compensation expense,
to the extent such fair market value is in excess of the aggregate exercise
price in effect for those rights.
NEW PLAN BENEFITS
As of March 31, 2000, no stock options had been granted, and no shares of
Common Stock had been issued, on the basis of the share increases which are the
subject of this Proposal. However, on the date of the Annual Meeting, Ms. Hale,
and Messrs. Jones and Wright will each receive an option grant for 48,000 shares
at an exercise price equal to the fair market value per share of Common Stock on
that date.
14
<PAGE> 19
VOTE REQUIRED FOR APPROVAL OF PROPOSAL THREE
The affirmative vote of at least a majority of the outstanding shares of
Common Stock present in person or by proxy at the 2000 Annual Meeting and
entitled to vote is required for approval of the amendment to the Plan. Should
such stockholder approval not be obtained, then the 5,371,184-share increase to
the share reserve under the Plan will not be implemented, the four percentage
increase to the automatic share increase provision will not be implemented, any
stock options granted under the Plan on the basis of the increases will
immediately terminate without ever becoming exercisable for the shares of Common
Stock subject to those options, and no additional options or stock issuances
will be made on the basis of such increases. The Plan will, however, continue in
effect with the one percent (1%) annual automatic share increase as previously
approved by the stockholders, and option grants and direct stock issuances may
continue to be made under the Plan until all the shares available for issuance
under the Plan has been issued pursuant to such option grants and direct stock
issuances.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS DEEMS PROPOSAL THREE TO BE IN THE BEST INTERESTS OF
THE COMPANY AND ITS STOCKHOLDERS AND RECOMMENDS A VOTE FOR APPROVAL THEREOF.
UNLESS AUTHORITY TO DO SO IS WITHHELD, THE PERSON(S) NAMED IN EACH PROXY WILL
VOTE THE SHARES REPRESENTED THEREBY FOR THE APPROVAL OF THE AMENDMENT TO THE
1999 STOCK OPTION/STOCK ISSUANCE PLAN.
15
<PAGE> 20
PROPOSAL FOUR
RATIFICATION OF INDEPENDENT AUDITORS
The Board of Directors has appointed the firm of KPMG LLP, independent
public auditors for the Company during the 1999 Fiscal Year, to serve in the
same capacity for the year ending December 31, 2000, and is asking the
stockholders to ratify this appointment. The affirmative vote of a majority of
the shares represented and voting at the Annual Meeting is required to ratify
the selection of KPMG LLP.
In the event the stockholders fail to ratify the appointment, the Board of
Directors will reconsider its selection. Even if the selection is ratified, the
Board of Directors in its discretion may direct the appointment of a different
independent auditing firm at any time during the year if the Board of Directors
believes that such a change would be in the best interests of the Company and
its stockholders.
A representative of KPMG LLP is expected to be present at the Annual
Meeting, will have the opportunity to make a statement if he or she desires to
do so, and will be available to respond to appropriate questions.
VOTE REQUIRED FOR APPROVAL OF PROPOSAL FOUR
The affirmative vote of at least a majority of the outstanding shares of
Common Stock present in person or by proxy at the 2000 Annual Meeting and
entitled to vote is required for the ratification of the appointment of the
independent auditors.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS DEEMS PROPOSAL FOUR TO BE IN THE BEST INTERESTS OF
THE COMPANY AND ITS STOCKHOLDERS AND RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR
APPROVAL THEREOF. UNLESS AUTHORITY TO DO SO IS WITHHELD, THE PERSON(S) NAMED IN
THE PROXY WILL VOTE THE SHARES REPRESENTED THEREBY FOR THE RATIFICATION OF THE
SELECTION OF KPMG LLP TO SERVE AS THE COMPANY'S INDEPENDENT AUDITORS FOR THE
FISCAL YEAR ENDING DECEMBER 31, 2000.
16
<PAGE> 21
OTHER MATTERS
The Company knows of no other matters that will be presented for
consideration at the Annual Meeting. If any other matters properly come before
the Annual Meeting, it is the intention of the persons named in the enclosed
form of Proxy to vote the shares they represent as the Board of Directors may
recommend. Discretionary authority with respect to such other matters is granted
by the execution of the enclosed Proxy.
OWNERSHIP OF SECURITIES
The following table sets forth certain information known to the Company
with respect to the beneficial ownership of the Company's Common Stock as of
March 31, 2000, by (i) all persons who are beneficial owners of five percent
(5%) or more of the Company's Common Stock, (ii) each director and nominee for
director, (iii) the executive officers named in the Summary Compensation Table
of the Executive Compensation and Related Information section of this Proxy
Statement and (iv) all current directors and executive officers as a group.
Unless otherwise indicated, each of the stockholders has sole voting and
investment power with respect to the shares beneficially owned, subject to
community property laws, where applicable, and the address for each stockholder
below is: c/o The viaLink Company, 13800 Benson Road, Edmond, Oklahoma
73013-6417.
<TABLE>
<CAPTION>
PERCENTAGE
SHARES OF SHARES
BENEFICIALLY BENEFICIALLY
BENEFICIAL OWNER OWNED OWNED(1)
- ---------------- ------------ ------------
<S> <C> <C>
Executive Officers and Directors
Lewis B. Kilbourne(2)..................................... 264,084 1.3
Robert N. Baker(3)........................................ 2,226,120 11.0
Robert I. Noe(4).......................................... 200,000 1.0
Patrick T. Fitzgerald(5).................................. -- --
J. Andrew Kerner(6)....................................... 167,111 *
David M. Lloyd(7)......................................... 133,333 *
Sue A. Hale(8)............................................ 48,000 *
Warren D. Jones(9)........................................ 82,000 *
Jimmy M. Wright(10)....................................... 178,000 *
All Executive officers and directors as a group (9
persons)(11)........................................... 3,298,648 15.5
Other 5% Stockholders:
Persons and entities deemed to be affiliated with Ernst &
Young
U.S. LLP(12)........................................... 1,065,822 5.3
i2 Technologies(13)....................................... 1,718,626 8.3
Robert L. Barcum(14)...................................... 1,696,784 8.5
</TABLE>
- ---------------
* Less than one percent of the outstanding Common Stock
(1) Percentage of ownership is based on 20,040,769 shares of Common Stock
outstanding on March 31, 2000. Shares of Common Stock subject to stock
options which are currently exercisable or will become exercisable within
60 days after March 31, 2000 are deemed outstanding for computing the
percentage of the person or group holding such options, but are not deemed
outstanding for computing the percentage of any other person or group.
(2) Includes options to purchase 260,004 shares of common stock that are
exercisable within 60 days March 31, 2000.
(3) Includes options to purchase 200,004 shares of common stock that are
exercisable within 60 days of March 31, 2000.
(4) Includes options to purchase 200,000 shares of common stock that are
exercisable within 60 days of March 31, 2000. Mr. Noe's address is 13155
Noel Road, Suite 800, Dallas, Texas 75240.
(5) Mr. Fitzgerald's address is 13155 Noel Road, Suite 800, Dallas, Texas
75240.
17
<PAGE> 22
(6) Includes options to purchase 166,667 shares of common stock that are
exercisable within 60 days of March 31, 2000. Mr. Kerner's address is 13155
Noel Road, Suite 800, Dallas, Texas 75240.
(7) Includes options to purchase 133,333 shares of common stock that are
exercisable within 60 days of March 31, 2000. Mr. Lloyd's address is 13155
Noel Road, Suite 800, Dallas, Texas 75240.
(8) Includes options to purchase 48,000 shares of common stock that are
exercisable within 60 days of March 31, 2000.
(9) Includes 16,000 shares of common stock beneficially owned by Mr. Jones'
spouse, Kathleen Jones, and options to purchase 50,000 shares of common
stock that are exercisable within 60 days of March 31, 2000.
(10) Includes options to purchase 178,000 shares of common stock that are
exercisable within 60 days of March 31, 2000.
(11) See notes 2-10 above.
(12) The address is 787 Seventh Avenue, New York, New York, 10019. According to
a Schedule 13D filed with the Securities and Exchange Commission on
November 22, 1999, Ernst & Young U.S. LLP on its behalf and on behalf of
Philip A. Laskawy has reported that it has shared voting power and shared
dispositive power over 1,000,000 shares of common stock.
(13) Includes warrants to purchase 756,289 shares of common stock. The address
is 11701 Luna Road, Dallas, Texas 75234.
(14) Includes 16,000 shares of common stock beneficially owned by Mr. Barcum's
spouse, Rhonda Barcum, and 140,000 shares of common stock beneficially
owned by the Barcum Family Fund (Donor Advised Fund) with the Assemblies of
God Foundation. Mr. Barcum's address is 10901 Greebriar Chase, Oklahoma
City, Oklahoma 73170.
EXECUTIVE COMPENSATION AND OTHER INFORMATION
<TABLE>
<CAPTION>
NAME AGE POSITION(S)
- ---- --- -----------
<S> <C> <C>
Lewis B. Kilbourne, Ph.D............. 53 Chairman of the Board and Chief Executive Officer
Robert N. Baker...................... 48 President and Chief Operating Officer
Robert I. Noe........................ 48 Executive Vice President of Business Development
Patrick T. Fitzgerald................ 37 Senior Vice President of Sales
J. Andrew Kerner..................... Senior Vice President of Finance and Chief Financial
40 Officer
David M. Lloyd....................... 48 Senior Vice President of Operations
</TABLE>
Information regarding Dr. Kilbourne and Mr. Baker is included in Proposal
One.
Robert I. Noe serves as the Company's Executive Vice President of Business
Development and is responsible for marketing, alliances and industry relations.
Mr. Noe joined the Company in April 1999. Prior to that time, Mr. Noe served as
the Vice President of Industry Solutions and in other management positions at
Electronic Data Systems, a publicly traded professional services company. Mr.
Noe received his B.S. and M.A. in business administration from Central Michigan
University.
Patrick T. Fitzgerald serves as the Company's Senior Vice President of
Sales. Mr. Fitzgerald joined the Company in January 2000. From November 1998 to
January 2000, Mr. Fitzgerald served as Vice President of Sales and Distribution
for the Caribbean Region of Citbank N.A. Mr. Fitzgerald held a variety of senior
sales and marketing management positions for Campbell Soup Company from 1986 to
1998. Mr. Fitzgerald received his B.A. in Business Administration from Southwest
Oklahoma State University.
J. Andrew Kerner serves as the Company's Senior Vice President of Finance
and Chief Financial Officer. Mr. Kerner joined the Company in April 1999. From
April 1998 to April 1999, Mr. Kerner served as Executive Vice President and
Chief Financial Officer of Cameron Ashley Building Products. Mr. Kerner also
served in several senior financial management positions with PepsiCo's Frito-Lay
division in the United States
18
<PAGE> 23
and Europe from November 1987 to April 1998. Mr. Kerner received a B.A. in
economics and an M.B.A. in finance from The University of Texas.
David M. Lloyd serves as the Company's Senior Vice President of Operations.
Mr. Lloyd joined the Company in April 1999 as Vice President of Human Resources.
From April 1997 to April 1999, Mr. Lloyd served as Senior Vice President of
Human Resources and Administration for Fujitsu ICL Retail Systems, Inc. In that
capacity, he handled all human resource and administration responsibilities for
United States and Europe operations, including facilities management for all 44
Fujitsu locations in the United States. Mr. Lloyd also served as Vice President
of Human Resources for Station Casinos, from June 1994 to April 1997. Mr. Lloyd
received a B.S. in economics from Upsala College in New Jersey and an M.B.A.
from New York Institute of Technology.
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table provides certain summary information concerning the
compensation earned by the Company's Chief Executive Officer and each of its
four other most highly compensated executive officers of the Company whose
salary and bonus was in excess of $100,000, for services rendered in all
capacities to the Company and its subsidiaries for the three fiscal years ended
December 31, 1999 (collectively, the "Named Officers"). During 1999, the Named
Officers received additional non-cash compensation, perquisites and other
personal benefits. However, the aggregate amount thereof did not exceed the
lesser of $50,000 or 10% of the total annual salary and bonus paid to and
accrued for the individual during the year.
19
<PAGE> 24
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
------------
ANNUAL COMPENSATION SECURITIES
--------------------------- UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS/SARS COMPENSATION
- --------------------------- ---- -------- ------- ------------ ---------------
<S> <C> <C> <C> <C> <C>
Lewis B. Kilbourne, Ph. D. ......... 1999 $161,731 $84,375 340,000 --
Chairman of the Board 1998 20,769(1) -- 800,000 40,000(2)
and Chief Executive Officer
Robert N. Baker..................... 1999 $180,963 $57,047 -- --
President and Chief Operating
Officer........................ 1998 120,713 -- 600,000 --
1997 169,940 -- -- --
Robert I. Noe....................... 1999 $168,269(3) $50,395 700,000 --
Executive Vice President of
Business Development
J. Andrew Kerner.................... 1999 $164,423(3) $62,664 600,000 --
Senior Vice President of Finance
and Chief Financial Officer
David M. Lloyd...................... 1999 $137,077(3) $41,573 500,000 --
Senior Vice President of
Operations
</TABLE>
- ---------------
(1) Dr. Kilbourne was hired in October 1998 and was compensated at an annual
rate of $150,000 for 1999.
(2) Dr. Kilbourne received $30,000 for his services in connection with the sale
of the Company's consulting and systems integration assets to The NetPlex
Group, Inc. and $10,000 for his service as a non-employee member of the
Board of Directors. Both of these amounts were earned prior to his
employment with the Company.
(3) Messrs. Noe, Kerner and Lloyd were hired in April 1999 and were compensated
at annual rates of $250,000, $225,000 and $190,000, respectively for 1999.
STOCK OPTIONS AND STOCK APPRECIATION RIGHTS
The following table contains information concerning the stock options
granted to the Named Officers during the 1999 fiscal year. All the grants were
made under the Company's 1999 Plan. Except for the limited stock appreciation
rights ("SARs") summarized in footnote 2, the Company did not grant any SARs to
the Named Officers during the 1999 fiscal year.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS(1)
---------------------------------------------------------- POTENTIAL REALIZABLE VALUE AT
NUMBER OF % OF TOTAL ASSUMED ANNUAL RATED OF
SECURITIES OPTIONS/SARS STOCK PRICE APPRECIATION
UNDERLYING GRANTED TO EXERCISE FOR OPTION TERM(4)
OPTIONS/SARS EMPLOYEES PRICE PER -----------------------------
NAME GRANTED(2) IN 1999(3) SHARE EXPIRATION DATE 0% 5% 10%
- ---- ------------ ------------ --------- --------------- --- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Lewis B. Kilbourne... 200,000(5) 3.3% $ 3.81 Sept. 3, 2009 -- $ 480,000 $1,215,000
140,000(6) 2.3% 15.22 Dec. 20, 2009 -- 1,340,000 3,396,000
Robert N. Baker...... -- -- -- -- -- -- --
Robert I. Noe........ 600,000(7) 9.8% 3.61 May 21, 2009 -- 1,363,000 3,454,000
100,000(6) 1.6% 15.22 Dec. 20, 2009 -- 957,000 2,425,000
J. Andrew Kerner..... 500,000(7) 8.2% 3.61 May 21, 2009 -- 1,136,000 2,879,000
100,000(6) 1.6% 15.22 Dec. 20, 2009 -- 957,000 2,425,000
David M. Lloyd....... 400,000(7) 6.5% 3.61 May 21, 2009 -- 909,000 2,303,000
100,000(6) 1.6% 15.22 Dec. 20, 2009 -- 957,000 2,425,000
</TABLE>
20
<PAGE> 25
- ---------------
(1) Each option represents the right to purchase one share of Common Stock and
generally vests at a rate of 33% per annum over three years. If the Company
is acquired by merger, consolidation, asset sale or tender or exchange offer
(each, a "Change of Control Transaction"), the option will accelerate in
full, unless (i) the successor assumes the option, (ii) the option is
replaced with a cash incentive program of the successor which preserves the
option spread or (iii) the acceleration of the option is restricted by
limitations imposed at the time of the grant. In the event the option does
not otherwise accelerate, the option will accelerate in full if the
individual's position is involuntarily terminated within eighteen (18)
months after a Change of Control Transaction, and remain exercisable for the
one-year following such termination or sooner termination of the option.
Each option expires on the earliest to occur of (i) ten years from the date
of grant, (ii) three (3) months following termination of the individual's
employment with the Company other than by death or permanent disability or
(iii) twelve (12) months following termination of the individual's
employment with the Company due to death or permanent disability. All
options were granted at fair market value as determined by the Board of
Directors on the date of the grant.
(2) The options include a "limited stock appreciation right" pursuant to which
the options may, upon successful completion of a hostile tender offer for
more than 50% of the total combined voting power of the Company's
outstanding securities or change in the composition of the Board of
Directors through contested elections, be surrendered to the Company in
return for a cash payment equal to the excess of (i) the then market price
of the shares of common stock subject to the surrendered option or, if
higher, the highest price paid per share of common stock in the tender offer
over (ii) the exercise price payable for those shares.
(3) The total number of options granted to employees in 1999 was 6,120,000.
(4) Amounts represent hypothetical gains that could be achieved for the
respective options if exercised at the end of the option term. The 0%, 5%
and 10% assumed annual rates of compounded stock price appreciation are
mandated by rules of the Securities and Exchange Commission and do not
represent our estimate or projection of our future common stock prices.
These amounts represent assumed rates of appreciation in the value of our
common stock from the deemed fair market value for accounting purposes on
the date of grant. Actual gains, if any, on stock option exercises are
dependent on the future performance of the common stock and overall stock
market conditions. The amounts reflected in the table may not necessarily be
achieved.
(5) Options granted September 3, 1999.
(6) Options granted December 20, 1999.
(7) Options granted May 24, 1999.
FISCAL YEAR-END OPTION VALUES
The following table sets forth information concerning the number and value
of unexercised options held by each of our Named Officers as of December 31,
1999.
FISCAL YEAR OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
AT DECEMBER 31, AT DECEMBER 31, 1999(1)
------------------------------- ---------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ------------ -------------- ----------- -------------
<S> <C> <C> <C> <C>
Lewis B. Kilbourne........................ 260,004 799,996 $4,532,075 $11,310,330
Robert N. Baker........................... 200,004 399,996 3,482,670 6,965,130
Robert I. Noe............................. -- 700,000 -- 9,042,225
J. Andrew Kerner.......................... -- 600,000 -- 7,584,765
David M. Lloyd............................ -- 500,000 -- 6,127,125
</TABLE>
- ---------------
(1) The last reported sale price of the common stock of viaLink as of December
31, 1999 was $18.188 per share.
21
<PAGE> 26
STOCK PLANS
1999 STOCK OPTION/STOCK ISSUANCE PLAN
For a description of the Company's 1999 Stock Option/Stock Issuance Plan,
see the information included in Proposal Three.
1999 EMPLOYEE STOCK PURCHASE PLAN.
At the Company's 1999 annual meeting, the Company's stockholders approved
the adoption of the 1999 Employee Stock Purchase Plan. This plan replaced the
Company's 1997 Employee Stock Purchase Plan as of July 1, 1999. The 1999 Stock
Purchase Plan provides eligible employees with the opportunity to acquire a
proprietary interest in the Company through participation in a payroll-deduction
based employee stock purchase plan designed to operate in compliance with
Section 423 of the Internal Revenue Code. The Company has authorized and
reserved 800,000 shares of common stock for issuance under the Stock Purchase
Plan. As of March 31, 2000, employees had purchased 14,736 shares of common
stock at a weighted average price of $3.51.
The Stock Purchase Plan is administered by the Compensation Committee. The
committee administers and interprets the Stock Purchase Plan and has the
authority to establish, adopt or revise rules and regulations with respect to
the Stock Purchase Plan.
Under the stock purchase plan, shares will be issued through a series of
successive offering periods, each of a duration of twenty-four months. The first
offering period will run from July 1, 1999 to the last business day in July
2001. The next offering period is scheduled to commence on August 1, 2001.
Each offering period will be comprised of up to four six-month purchase
periods. Purchase periods will run from the first business day in February to
the last business day in July each year and from the first business day in
August each year to the last business day in January of the following year.
However, the first purchase period will run from July 1, 1999 to the last
business day in January 2000.
Any individual who customarily works for the Company for more than 20 hours
per week for more than five months per calendar year will be eligible to
participate in the stock purchase plan. However, if employees own or would own,
assuming the exercise of all stock options held by them, five percent or more of
our total combined voting power, they are not eligible to participate in the
stock purchase plan. A stock purchase plan participant may authorize payroll
deductions in any multiple of 1% of his or her cash earnings, up to a maximum of
10%. The option price is equal to 85% of the lower of (i) the fair market value
per share of common stock on the employee's entry date for the offering period
during which the purchase date occurs, or (ii) the fair market value per share
of common stock on that purchase date. A participant is not permitted to
purchase more than 4,000 shares of common stock on any one purchase date. The
participants may not assign, encumber or otherwise transfer their stock options
except by will or under laws of inheritance.
Should the Company be acquired by merger or asset sale during an offering
period, all outstanding purchase rights will be automatically exercised
immediately prior to the effective date of such acquisition.
PROFIT SHARING PLAN
In 1985, the Company adopted The viaLink Company (formerly Applied
Intelligence Group, Inc.) Profit Sharing Plan (the "Profit Sharing Plan"). All
of the Company's employees who have completed at least one year of service may
enroll in the Profit Sharing Plan. The Company may, at its discretion, make an
annual contribution to the Profit Sharing Plan on behalf of its employees. If
made, the contribution begins to vest for each employee's account after the
employee has completed two years of service. Thereafter, each employee's account
vests ratably as to 20% of the employee's account following each subsequent year
of completed service with the Company. The Company will distribute vested
contributions to an employee upon the employee's retirement, death or
disability, the termination of employment, or the termination of the Profit
Sharing Plan. The Company did not make any contributions to the Profit Sharing
Plan for the fiscal years ended December 31, 1997, 1998 or 1999.
22
<PAGE> 27
In 1993, the Company amended the Profit Sharing Plan to include a 401(k)
deferred compensation feature. Under the 401(k) feature, eligible participants
may elect to defer up to 15% of their salaries, not to exceed the annual
statutory limits, pursuant to a voluntary salary reduction agreement. The
Company may determine matching levels of contributions from time to time, at the
discretion of the administrative committee. The Company did not make any
matching contributions during 1997, 1998 or 1999. All 401(k) employee
contributions are fully vested.
COMPLIANCE WITH THE INTERNAL REVENUE CODE
Section 162(m) of the Internal Revenue Code disallows a tax deduction to
publicly held companies for compensation paid to certain of their executive
officers, to the extent that compensation exceeds $1 million per covered officer
in any fiscal year. The limitation applies only to compensation that is not
considered to be performance-based. Non-performance based compensation paid to
the Company's executive officers for the 1999 Fiscal Year did not exceed the $1
million limit per officer, and the Compensation Committee does not anticipate
that the non-performance based compensation to be paid to the Company's
executive officers for fiscal 2000 will exceed that limit. The Company's 1999
Stock Option/Stock Issuance Plan has been structured so that any compensation
deemed paid in connection with the exercise of option grants made under that
plan with an exercise price equal to the fair market value of the option shares
on the grant date will qualify as performance-based compensation which will not
be subject to the $1 million limitation. Because it is unlikely that cash
compensation payable to any of the Company's executive officers in the
foreseeable future will approach the $1 million limit, the Compensation
Committee has decided at this time not to take any action to limit or
restructure the elements of cash compensation payable to the Company's executive
officers. The Compensation Committee will reconsider this decision if the
individual cash compensation of any executive officer ever approaches the $1
million level.
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND CHANGE IN CONTROL
ARRANGEMENTS
Dr. Kilbourne and Mr. Baker
On October 1, 1998, the Company entered into employment contracts with
Lewis B. Kilbourne and Robert N. Baker. Under the contracts, the Company will
pay an annual base salary of $150,000 to Dr. Kilbourne and $175,127 to Mr.
Baker. Dr. Kilbourne and Mr. Baker are each also eligible to receive an annual
bonus equal to 50% of his then current annual salary.
Under these contracts, the Company granted to each of Dr. Kilbourne and Mr.
Baker incentive stock options for the purchase of 200,000 shares of Common Stock
under the Company's 1995 Stock Option Plan and non-qualified stock options for
the purchase of 400,000 shares of Common Stock under the 1998 Non-Qualified
Stock Option Plan. Both the incentive stock options and the non-qualified stock
options vest and become exercisable over a three year period. The options
granted to Dr. Kilbourne have an exercise price of $0.75 per share. The
incentive stock options granted to Mr. Baker are exercisable for $0.83 per share
and the non-qualified stock options are exercisable for $0.75 per share. Dr.
Kilbourne's incentive stock options expire on February 28, 2005 and his
non-qualified stock options expire on October 31, 2007. Mr. Baker's incentive
stock options expire on September 29, 2007 and his non-qualified stock options
expire on September 30, 2003. In the event the contracts with Dr. Kilbourne and
Mr. Baker are terminated or specific corporate reorganization events occur, any
non-exercisable options will become fully exercisable.
Each employment contract has a term of three years and is subject to
automatic renewal on a year-to-year basis, unless either party provides
six-months prior written notice of termination. If the Company terminates the
contracts for any reason, other than for "cause" (as defined in the agreement),
or if
23
<PAGE> 28
Dr. Kilbourne or Mr. Baker terminate their contract for any reason other than an
uncured breach, Dr. Kilbourne or Mr. Baker will be entitled to:
- The continuation of his then current salary and the benefits provided
pursuant to the agreement;
- A one time payment in the amount of the greater of:
(A) the bonus due, or
(B) 15% of the salary payable for such quarter; and
- A lump sum payment of $400,000.
Messrs. Noe, Kerner and Lloyd
In April 1999, the Company entered into employment contracts with Robert I.
Noe, J. Andrew Kerner and David M. Lloyd. Under these contracts, the Company
will pay an annual base salary of $250,000 to Mr. Noe, $225,000 to Mr. Kerner
and $190,000 to Mr. Lloyd. Messrs. Noe and Kerner are each also eligible to
receive an annual bonus equal to 50% of his then current annual salary, and Mr.
Lloyd is also eligible to receive an annual bonus equal to 33% of his then
current annual salary.
In connection with their employment contracts, the Company granted
non-qualified stock options to purchase 600,000, 500,000 and 400,000 shares of
our common stock under the 1999 Plan to Messrs. Noe, Kerner and Lloyd,
respectively. The options vest and become exercisable over a three period and
have a current exercise price of $3.61. All of the options expire on May 21,
2009.
Each employment contract has a one year term with automatic renewal on a
year-to-year basis, unless either party provides 30 days prior written notice of
termination. If the Company terminates the contract for any reason other than
for "cause" (as defined under the applicable agreement), Messrs. Noe, Kerner and
Lloyd will be entitled are entitled to a lump sum payment equal to his then
current annual salary.
In March 2000, the Compensation Committee of the Board of Directors
approved an amendment to each of these employment contracts to extend the
initial term until May 25, 2001.
Mr. Fitzgerald
In July 1999, the Company entered into an employment agreement with Patrick
Fitzgerald. Under this agreement, the Company will pay Mr. Fitzgerald an annual
base salary of $190,000. Mr. Fitzgerald is also eligible to receive a potential
performance bonus up to $150,000 if he signs certain target accounts.
In connection with his employment agreement, the Company granted Mr.
Fitzgerald non-qualified options to purchase 200,000 shares of its common stock
at an exercise price of $17.50 under the 1999 Plan. Half of the options vest and
become exercisable over a two period. The remaining options vest when certain
performance milestones are achieved.
Mr. Fitzgerald's employment arrangement is at will. However, if the Company
terminates Mr. Fitzgerald without cause at any time, Mr. Fitzgerald will be
entitled to severance compensation equal to six months of his then current
annual salary, payable over 12 months.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Dr. Kilbourne served as a member of the Compensation Committee of the Board
prior to October 1998 when he became an officer of the Company.
KEY MAN INSURANCE
The Company maintains a key man life insurance policy for Mr. Baker in the
amount of $1.25 million. The Company will receive any proceeds from this policy.
24
<PAGE> 29
LIMITATION OF LIABILITY AND INDEMNIFICATION
The Company's Certificate of Incorporation limits the liability of its
directors to the Company or its stockholders for breaches of the directors
fiduciary duties to the fullest extent permitted by Delaware law. In addition,
the Company's bylaws provide for mandatory indemnification of directors and
officers to the fullest extent permitted by Delaware law. The Company also
maintains directors' and officers' liability insurance and enters into
indemnification agreements with all of its directors and executive officers.
CERTAIN TRANSACTIONS
iJOB SALE
On December 31, 1998, the Company sold its wholly-owned subsidiary, ijob,
Inc. to DCM Corporation in exchange for an $800,000 promissory note. At the time
of the sale, David C. Mitchell was the sole stockholder of DCM and the president
of ijob. On March 11, 1999, the Company received $800,000 plus all accrued
interest from DCM in full payment of the promissory note.
NOTES PAYABLE TO STOCKHOLDERS AND OFFICERS
On September 30, 1998, Robert L. Barcum, the former Chief Executive Officer
of the Company, Robert N. Baker and Russell L. Reinhardt, the former Vice
President of the Company, had loaned the Company, in the aggregate, $443,055. In
return, the Company issued these individuals promissory notes, bearing interest
at rates of 8.5% to 11.5% per annum, with maturity dates through 2001. The
Company believes that the terms of these loans were at least as favorable as it
could have obtained from unaffiliated third-party lenders.
On October 16, 1998, the Company repaid the promissory notes to Messrs.
Barcum, Baker and Reinhardt from proceeds of the consulting assets sale.
PAYMENTS AND OPTION GRANTS TO OFFICERS
For a description of payments and option grants to executive officers, see
the information in Proposal Three and "Executive Compensation and other
Information," "-- Stock Options and Stock Appreciation Rights" and
"-- Employment Contracts, Termination of Employment and Change of Control
Arrangements."
On October 16, 1998, the Company paid Dr. Kilbourne $30,000 for his
services associated with the sale of its consulting and systems integration
assets to The NetPlex Group, Inc.
TRANSACTIONS WITH HEWLETT-PACKARD
On February 4, 1999, the Company entered into a Note Purchase Agreement
with Hewlett-Packard pursuant to which Hewlett-Packard purchased from the
Company a $6.0 million Secured Subordinated Promissory Note. Upon approval by
the Company's stockholders in May 1999, the note was exchanged for a
Subordinated Secured Convertible Promissory Note, convertible into Common Stock
at a price of $1.75 per share. This note is secured by the Company's current
intellectual property and intellectual property it may acquire in the future.
Hewlett-Packard may convert the note to Common Stock beginning on August 5,
2000. The terms of the Company's loan from Hewlett-Packard contemplate that the
Company will use up to 50% of the loan amount to purchase Hewlett-Packard
products and services. In addition, Hewlett-Packard has a right to have an
advisor present at the Company's board meetings.
In addition, on March 22, 2000, as part of a private placement, the Company
issued 66,801 shares of its common stock and a warrant to purchase an additional
10,021 shares of its common stock at an exercise price of $41.92 per share to
Hewlett-Packard in exchange for $2.0 million.
25
<PAGE> 30
TRANSACTIONS WITH ERNST & YOUNG
On May 3, 1999, the Company entered into a strategic relationship with
Ernst & Young whereby Ernst & Young will provide the Company with its consulting
services in connection with the Company's syncLink and other services. In
connection with this agreement, the Company agreed to pay Ernst & Young a
royalty for a period of two years beginning on the date of agreement. This
royalty will be equal to 7% of the Company's revenues from the its subscription
services which it provide to suppliers and retailers of food and consumer
packaged goods. If at least ten of Ernst & Young's "Tier 1" clients in the CPG
and grocery industries subscribe to the Company's services during the initial
two-year term, the Company will be required to continue the royalty payments in
perpetuity. Ernst & Young will not receive any royalties for services the
Company provides to clients for which Ernst & Young serves as the principal
independent auditor, nor will the clients subject to the reporting requirements
of the federal securities laws for which Ernst & Young serves as the principal
independent auditor be counted as one of Ernst & Young's "Tier 1" clients that
it brings to the Company.
As a part of this agreement, the Company issued a warrant to Ernst & Young
pursuant to which it purchased 1,000,000 shares of the Company's common stock at
a price of $2.00 per share.
In addition to the above, Ernst & Young agreed to provide professional
services to the Company to further the implementation of the Company's services.
The Company may pay for Ernst & Young's services either in cash or in shares of
its common stock. If the Company pays with common stock, it will receive a
substantial discount from the standard rates Ernst & Young charges for such
services. The common stock will be valued at 85% of the average closing bid
prices for the five trading days prior to the date the invoice for these
services is rendered to the Company by Ernst & Young. However, if Ernst & Young
is the beneficial owner of more than 9.99% of the voting power of our common
stock on a fully-diluted basis, the Company will not have the option to pay for
such services with common stock.
TRANSACTIONS WITH I2 Technologies
On October 12, 1999, the Company entered into a strategic relationship with
i2 Technologies, Inc. primarily to integrate the products and services of the
two companies, extend the solutions across multiple industries and develop joint
sales and marketing programs. As a part of this relationship, i2 Technologies
invested $5.0 million in the Company in exchange for 895,536 shares of our
common stock and a warrant to purchase an additional 746,268 shares of our
common stock at an exercise price of $6.70 per share. The initial term of the
agreement will expire on December 31, 2003 and will automatically renew on a
year-to-year basis thereafter unless terminated by either party. Additionally,
the Company has agreed to pay i2 Technologies a royalty of 5% of the syncLink
and Chain Pricing subscription revenues during the term of the agreement. The
Company will also pay i2 additional royalties based upon subscription revenues
received from new customers with whom i2 Technologies had "significant
involvement" in the sales process. i2 has agreed to pay the Company a royalty
based upon revenues i2 receives from providing the syncLink and Chain Pricing
services outside of the CPG and grocery industries.
In addition, on March 22, 2000, as part of a private placement, the Company
issued 66,801 shares of its common stock and a warrant to purchase an additional
10,021 shares of its common stock at an exercise price of $41.92 per share to i2
Technologies in exchange for $2.0 million.
INDEMNIFICATION
In addition to the indemnification provisions contained in the Company's
Bylaws, the Company has entered into separate indemnification agreements with
each of its directors and officers. These agreements require the Company, among
other things, to indemnify such director or officer against expenses (including
attorneys' fees), judgments, fines and settlements (collectively, "Liabilities")
paid by such individual in connection with any action, suit or proceeding
arising out of such individual's status or service as a director or officer of
the Company (other than Liabilities arising from willful misconduct or conduct
that is knowingly fraudulent or deliberately dishonest) and to advance expenses
incurred by such individual in connection with
26
<PAGE> 31
any proceeding against such individual with respect to which such individual may
be entitled to indemnification by the Company.
All future transactions between the Company and its officers, directors,
principal stockholders and affiliates will be approved by a majority of the
independent and disinterested members of the Board of Directors, and will be on
terms no less favorable to the Company than could be obtained from unaffiliated
third parties.
COMPLIANCE WITH SECTION 16(A) of the Securities Exchange Act of 1934
The members of the Board of Directors, the executive officers of the
Company and persons who hold more than 10% of a registered class of the
Company's equity securities are subject to the reporting requirements of Section
16(a) of the Securities Exchange Act of 1934 which requires them to file reports
with respect to their ownership and changes of ownership with the Securities and
Exchange Commission and the Nasdaq Stock Market. Officers, directors and 10%
stockholders are required by the SEC regulations to furnish the Company with all
Section 16(a) forms they file. Based solely upon (i) the copies of Section 16(a)
reports which the Company received from such persons for their 1999 fiscal year
transactions in the Common Stock and their Common Stock holdings, and (ii) the
written representations received from one or more of such persons that no other
reports were required to be filed by them for the 1999 fiscal year, the Company
believes that all reporting requirements under Section 16(a) for such fiscal
year were met in a timely manner by its directors, executive officers and
greater than ten percent beneficial owners except as set forth below.
- Lewis B. Kilbourne (1) did not properly report the acquisition and
disposition of common stock upon the exercise of options on a Form 4 for
May 1999; (2) did not timely file a Form 5 in 1999; and (3) filed a Form
3 required for December 1997 in April 2000.
- Robert N. Baker (1) did not properly report a gift of 2,000 shares on a
Form 4 in December 1999; and (2) did not timely file a Form 5 in 1999.
- Robert I. Noe (1) did not timely file a Form 3; and (2) incorrectly
reported an option grant on a Form 3 rather than a Form 4.
- J. Andrew Kerner (1) did not timely file a Form 3; and (2) incorrectly
reported an option grant on a Form 3 rather than a Form 4.
- David M. Lloyd (1) did not timely file a Form 3; and (2) incorrectly
reported an option grant on a Form 3 rather than a Form 4.
- Sue A. Hale did not timely file a Form 3.
- Warren D. Jones did not timely file a Form 3.
- Jimmy M. Wright (1) filed a Form 3 required for January 1998 in February
2000; and (2) failed to file a Form 5 in 1999.
- Robert L. Barcum (1) failed to file a Form 4 for transactions in December
1998; (2) did not properly report gifts of common stock in December 1999
on a Form 4; and (3) did not timely file a Form 5 in 1999.
- John M. Duck, the former Vice President and Chief Financial Officer of
the Company, did not timely file a Form 5 in 1999.
- Russel L. Reinhardt, a former 10% owner of the Company, did not timely
file a Form 5 in 1999.
27
<PAGE> 32
ANNUAL REPORT
A copy of the Annual Report of the Company for the 1999 Fiscal Year has
been mailed concurrently with this Proxy Statement to all stockholders entitled
to notice of and to vote at the Annual Meeting. The Annual Report is not
incorporated into this Proxy Statement and is not considered proxy solicitation
material.
FORM 10-KSB
The Company filed its Annual Report on Form 10-KSB with the SEC on or about
March 21, 2000. Stockholders may obtain a copy of this report, without charge,
by writing to J. Andrew Kerner, Senior Vice President of Finance and Chief
Financial Officer, at the Company's offices located at 13155 Noel Road, Suite
800, Dallas, Texas 75240.
THE BOARD OF DIRECTORS
OF THE VIALINK COMPANY
Dated: , 2000
28
<PAGE> 33
ANNEX A
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
THE VIALINK COMPANY
The viaLink Company, a Delaware corporation (the "Corporation"), does
hereby certify that:
I. The amendment to the Corporation's Certificate of Incorporation set
forth below was duly adopted by the Corporation's board of directors in
accordance with the provisions of Section 242 of the General Corporation
Law of the State of Delaware and was approved at the duly called, held and
noticed annual meeting of the stockholders of the Corporation by the
affirmative vote of the necessary number of shares required by statute to
vote in favor of the amendment.
II. Article IV.A. of the Corporation's Certificate of Incorporation is
amended to read in its entirety as follows:
"A. Authorized Shares. The aggregate number of
shares that the Corporation shall have authority to
issue is 160,000,000, (i) 150,000,000 shares of
which shall be Common Stock, par value $0.001 per
share, and 10,000,000 of which shall be Preferred
Stock, par value $0.001 per share."
THE VIALINK COMPANY
By:
----------------------------
Name:
--------------------------
Title:
-------------------------
Dated this day of , 2000
A-1
<PAGE> 34
ANNEX B
THE VIALINK COMPANY
1999 STOCK OPTION/STOCK ISSUANCE PLAN
AMENDMENT NO. 1
The viaLink Company 1999 Stock Option/Stock Issuance Plan (the "Plan") is
hereby amended as follows:
1. Paragraph V.A. of Article One of the Plan is hereby amended and
restated in its entirety, to read as follows:
"A. The stock issuable under the Plan shall be shares of authorized
but unissued or reacquired Common Stock, including shares repurchased by
the Corporation on the open market. Subject to the increases in
Paragraph B below, the maximum number of shares of Common Stock which
may be issued over the term of the Plan shall not exceed 20,000,000
shares. Such authorized share reserve consists of (i) 14,433,120 shares
previously reserved under the Plan, including shares incorporated from
the Predecessor Plans, (ii) 195,696 shares added to the Plan as a result
of the January 2000 automatic annual increase plus (iii) an increase of
5,371,184 shares authorized by the Board but subject to stockholder
approval at the 2000 Annual Stockholders Meeting."
2. Paragraph V.B. of Article One is hereby amended and restated in its
entirety, to read as follows:
"B. The number of shares of Common Stock available for issuance
under the Plan shall automatically increase on the first trading day of
each calendar year during the term of the Plan, beginning with calendar
year 2001, by an amount equal to five percent (5%) of the shares of
Common Stock outstanding on the last trading day of the immediately
preceding calendar year, but in no event shall such annual increase
exceed Five Hundred Thousand (500,000) shares."
3. Except as modified by this Plan Amendment, all the terms and
provisions of the Plan shall continue in full force and effect.
IN WITNESS WHEREOF, The viaLink Company has caused this Amendment No. 1 to
be executed on its behalf by its duly-authorized officer as of the day of
, 2000.
THE VIALINK COMPANY
By:
----------------------------
Name:
--------------------------
Title:
-------------------------
B-1
<PAGE> 35
THE VIALINK COMPANY
PROXY
Annual Meeting of Stockholders, June 5, 2000
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF THE VIALINK COMPANY
The undersigned revokes all previous proxies, acknowledges receipt of
the Notice of the Annual Meeting of Stockholders to be held June 5, 2000 and the
Proxy Statement and appoints Lewis B. Kilbourne and Richard Klinge, and each of
them, the Proxy of the undersigned, with full power of substitution, to vote all
shares of Common Stock or Preferred Stock of The viaLink Company (the "Company")
which the undersigned is entitled to vote, either on his or her own behalf or on
behalf of any entity or entities, at the Annual Meeting of Stockholders of the
Company to be held at the Doubletree Hotel, Lincoln Center, 5410 LBJ Freeway,
Dallas, Texas 75240, on Monday, June 5, 2000 at 2:00 p.m., Central Daylight
Savings Time (the "Annual Meeting"), and at any adjournment or postponement
thereof, with the same force and effect as the undersigned might or could do if
personally present thereat. The shares represented by this Proxy shall be voted
in the manner set forth on the reverse side.
<TABLE>
<S> <C>
1. To elect two directors to serve for a three-year term each ending in the year 2003 or until their respective successors
are duly elected and qualified;
WITHHOLD
AUTHORITY
FOR TO VOTE
Lewis B. Kilbourne
-------------------- -----------------
Sue A. Hale
-------------------- -----------------
2. FOR AGAINST ABSTAIN To approve an amendment to the Company's certificate of incorporation to increase the
number of shares of Common Stock authorized for issuance thereunder by an additional
50,000,000 shares to a total of 100,000,000 shares of Common Stock;
3. FOR AGAINST ABSTAIN To approve an amendment to the Company's 1999 Stock Option/Stock Issuance Plan (the
"1999 Plan") to increase the number of shares of Common Stock authorized for issuance
over the term of the 1999 Plan by an additional 5,371,184 shares to 20,000,000 and to
increase the number of shares by which the share reserve under the 1999 Plan will
automatically increase on the first trading day of each calendar year, beginning with
calendar year 2001 from one percent (1%) of the shares of Common Stock outstanding on
the last day of the immediately preceding calendar year (subject to a maximum annual
increase of 200,000 shares) to five percent (5%) of such outstanding shares, subject
to a maximum of 500,000 shares.
4. FOR AGAINST ABSTAIN To ratify the appointment of KPMG LLP as independent auditors of the Company for the
fiscal year ending December 31, 2000.
5. In accordance with the discretion of the proxy holders, to act upon all matters
incident to the conduct of the meeting and upon other matters as may properly come
before the meeting.
The Board of Directors recommends a vote IN FAVOR OF each of the directors listed above and a vote IN FAVOR OF each of the
listed proposals. This Proxy, when properly executed, will be voted as specified above. IF NO SPECIFICATION IS MADE, THIS PROXY WILL
BE VOTED IN FAVOR OF THE ELECTION OF EACH OF THE DIRECTORS LISTED ABOVE AND IN FAVOR OF THE OTHER PROPOSALS.
Please print the name(s) appearing on each share
certificate(s) over which you have voting authority:
-----------------------------------------------------------------------
(Print name(s) on certificate)
Please sign your name: Date:
---------------------------------------------------------------- ---------------------
(Authorized Signature(s))
</TABLE>
