<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement
[_] Confidential, for Use of the Commission Only (as Permitted by Rule 14a-
6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-
12
INKTOMI CORPORATION
(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
(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.:
(3) Filing Party:
(4) Date Filed:
<PAGE>
[LOGO OF INKTOMI APPEARS HERE]
INKTOMI CORPORATION
----------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MARCH 10, 1999
----------------
TO THE STOCKHOLDERS:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Inktomi
Corporation, a Delaware corporation ("Inktomi"), will be held on Wednesday,
March 10, 1999 at 9:30 a.m., local time, at the San Mateo Marriott, Lombard
Room, 1770 S. Amphlett Boulevard, San Mateo, California, 94402, for the
following purposes:
1. To elect directors to serve for the ensuing year and until their
successors are elected;
2. To approve an increase in the number of authorized shares of Common
Stock from 100,000,000 shares to 300,000,000 shares;
3. To ratify the selection of PricewaterhouseCoopers LLP as the
independent auditors of Inktomi for the fiscal year ending September 30,
1999; and
4. To transact such other business as may properly come before the
meeting or any adjournment thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
Only stockholders of record at the close of business on January 18, 1999 are
entitled to notice of and to vote at this meeting.
All stockholders are cordially invited to attend the meeting in person.
However, to assure your representation at the meeting, you are urged to sign
and return the enclosed proxy card as promptly as possible in the enclosed
self-addressed envelope. Any stockholder attending the meeting may vote in
person even if he or she returned a proxy. However, if a stockholder's shares
are held of record by a broker, bank or other nominee and the stockholder
wishes to vote at the meeting, the stockholder must obtain from the record
holder a proxy issued in his or her name.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ TIM STEVENS
Tim Stevens
Vice President of Corporate and
Legal Affairs, General Counsel and
Assistant Secretary
San Mateo, California
February 8, 1999
<PAGE>
INKTOMI CORPORATION
1900 South Norfolk Street, Suite 310
San Mateo, California 94403
----------------
PROXY STATEMENT
1999 ANNUAL MEETING OF STOCKHOLDERS
----------------
The enclosed Proxy is solicited on behalf of the Board of Directors (the
"Board") of Inktomi Corporation, a Delaware corporation (the "Company"), for
use at the Annual Meeting of Stockholders (the "Annual Meeting") to be held on
Wednesday, March 10, 1999 at 9:30 a.m., local time, at the San Mateo Marriott,
Lombard Room, 1770 S. Amphlett Boulevard, San Mateo, Calfornia, 94402, or at
any adjournment thereof, for the purposes set forth herein and in the
accompanying Notice of Annual Meeting of Stockholders. Inktomi's principal
executive offices are located at 1900 South Norfolk Street, Suite 310, San
Mateo, California, 94403. Inktomi's telephone number at that location is (650)
653-2800.
Inktomi intends to mail this proxy statement and accompanying proxy card on
or about February 8, 1999 to all stockholders entitled to vote at the meeting.
INFORMATION CONCERNING SOLICITATION AND VOTING
Record Date and Share Ownership
Stockholders of record at the close of business on January 18, 1999 (the
"Record Date") are entitled to notice of and to vote at the annual meeting. At
the Record Date, 48,628,818 shares of Inktomi's common stock ("Common Stock")
were issued and outstanding and held of record by approximately 1,036
stockholders. All stock numbers and pricing information contained herein has
been adjusted to give effect to the two for one stock split (effected in the
form of a 100% stock dividend) that became effective on January 27, 1999.
Revocability of Proxies
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before its use by delivering to Inktomi (attention: Tim
Stevens, Vice President of Corporate and Legal Affairs, General Counsel and
Assistant Secretary) a written notice of revocation or a duly executed proxy
bearing a later date or by attending the meeting of stockholders and voting in
person.
Voting and Solicitation
Each share of Common Stock outstanding on the Record Date is entitled to one
vote. The required quorum for the transaction of business at the Annual
Meeting is a majority of the votes eligible to be cast by holders of shares of
Common Stock issued and outstanding on the Record Date. For purposes of
determining the presence of a quorum, abstentions and broker non-votes will be
counted by Inktomi as present at the meeting. Abstentions will also be counted
by Inktomi in determining the total number of votes cast with respect to a
proposal (other than the election of directors). Broker non-votes will not be
counted in determining the number of votes cast with respect to a proposal.
The cost of soliciting proxies will be borne by Inktomi. Proxies may be
solicited by certain of Inktomi's directors, officers and regular employees,
without additional compensation, in person or by telephone or facsimile. In
addition, Inktomi may retain the services of one or more firms to assist in
the solicitation of proxies, for an estimated fee of $5,000 plus reimbursement
of expenses. In addition, Inktomi may reimburse brokerage firms and other
persons representing beneficial owners of shares for their expenses in
forwarding solicitation materials to such beneficial owners.
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of the Common Stock as of December 31, 1998 of (i) each person known
to Inktomi to beneficially own more than 5% of the Common Stock, (ii) each
director or director nominee of Inktomi, (iii) each executive officer of
Inktomi for whom information is given in the Summary Compensation Table in
this Proxy Statement, and (iv) all directors and executive officers of Inktomi
as a group.
<TABLE>
<CAPTION>
Common Stock
-------------------------------------
Number of Shares
Name of Beneficial Owner Beneficially Held(1) Percent of Class
- ------------------------ -------------------- ----------------
<S> <C> <C>
Entities affiliated with Oak Investment
Partners(2)............................ 4,883,810 10.0%
525 University Avenue, Suite 1300
Palo Alto, CA 94301
Fredric W. Harman(3).................... 4,913,810 10.1
525 University Avenue, Suite 1300
Palo Alto, CA 94301
Eric A. Brewer(4)....................... 4,059,532 8.3
Inktomi Corporation
1900 S. Norfolk Street, Suite 310
San Mateo, CA 94403
Paul Gauthier(5)........................ 3,845,126 7.8
Inktomi Corporation
1900 S. Norfolk Street, Suite 310
San Mateo, CA 94403
Frank Gill(6)........................... 96,800 *
David C. Peterschmidt(7)................ 1,816,510 3.6
John Porter(8).......................... 163,334 *
Alan F. Shugart(9)...................... 130,000 *
Jerry M. Kennelly(10)................... 584,652 1.2
Dennis L. McEvoy(11).................... 563,842 1.2
Richard B. Pierce(12)................... 732,622 1.5
Vince Vannelli(13)...................... 461,000 *
All directors and executive officers as
a group (12 persons)(14)............... 17,539,046 33.9
</TABLE>
- --------
* Less than one percent of the outstanding Common Stock.
(1) This table is based on information supplied by officers, directors and
principal stockholders of Inktomi and on any Schedules 13D or 13G filed
with the Securities and Exchange Commission. Beneficial ownership is
determined in accordance with the rules of the Securities and Exchange
Commission. In computing the number of shares beneficially owned by a
person and the percentage ownership of that person, shares of Common
Stock subject to options or warrants held by that person that are
currently exercisable or will become exercisable within 60 days after
December 31, 1998 are deemed outstanding, while such shares are not
deemed outstanding for purposes of computing percentage ownership of any
other person. Unless otherwise indicated in the footnotes below, the
persons and entities named in the table have sole voting and investment
power with respect to all shares beneficially owned, subject to
community property laws where applicable.
(2) Includes 4,764,152 shares held by Oak Investment Partners VII, Limited
Partnership, and 119,658 shares held by Oak VII Affiliates Fund, Limited
Partnership.
(3) Includes 4,764,152 shares held by Oak Investment Partners VII, Limited
Partnership, and 119,658 shares held by Oak VII Affiliates Fund, Limited
Partnership. Mr. Harman is a Managing Partner of the general partners of
the Oak Partners entities and is a director of Inktomi. He disclaims
beneficial ownership of the shares held by the Oak Partners entities
except to the extent of his proportionate partnership interest therein.
Also includes an option held by Mr. Harman to purchase 30,000 shares of
Common Stock. The option is fully exercisable although as of December
31, 1998, 27,600 shares were subject to a right of repurchase at cost in
the event Mr. Harman ceases to be a director of Inktomi.
2
<PAGE>
(4) Includes 3,608,664 shares held by Dr. Brewer and his wife, Lisa M.
Sardegna. Also includes Dr. Brewer's pro rata interest in a warrant held
by Inktomi LLC, which pro rata interest equals 350,868 shares. All such
shares and warrants are fully vested and are not subject to repurchase
by Inktomi. Also includes an option held by Dr. Brewer to purchase
100,000 shares of Common Stock. The option is fully exercisable although
as of December 31, 1998 all shares issuable upon exercise of the option
were subject to a right of repurchase at cost in the event Dr. Brewer
ceases to be an employee of Inktomi.
(5) Includes 3,394,258 shares held by Mr. Gauthier. Also includes Mr.
Gauthier's pro rata interest in a warrant held by Inktomi LLC, which pro
rata interest equals 350,868 shares. All such shares and warrants are
fully vested and are not subject to repurchase by Inktomi. Also includes
an option held by Mr. Gauthier to purchase 100,000 shares of Common
Stock. The option is fully exercisable although as of December 31, 1998
all shares issuable upon exercise of the option were subject to a right
of repurchase at cost in the event Mr. Gauthier ceases to be an employee
of Inktomi.
(6) Consists of an option held by Mr. Gill to purchase 96,800 shares of
Common Stock. The option is fully exercisable although as of December
31, 1998, all shares were subject to a right of repurchase at cost in
the event Mr. Gill ceases to be a director of Inktomi.
(7) Includes 313,334 shares held by David C. Peterschmidt and Roxanne N.
Peterschmidt, Trustees of the Peterschmidt Family Trust U/D/T Dtd
12/30/91, and 2,776 shares held by Mr. Peterschmidt. Also includes
1,300,400 shares issuable upon exercise of stock options that are fully
vested. Also includes an option held by Mr. Peterschmidt to purchase
200,000 shares of Common Stock. The option is fully exercisable although
as of December 31, 1998 all shares issuable upon exercise of the option
were subject to a right of repurchase at cost in the event Mr.
Peterschmidt ceases to be an employee of Inktomi.
(8) Includes 133,334 shares held by Integra Holdings, L.P. As of December
31, 1998, 16,666 of the shares held by Integra Holdings were subject to
a right of repurchase by Inktomi at cost in the event Mr. Porter ceases
to be a director of Inktomi. The right of repurchase lapses at the rate
of 5,556 shares per month. Also includes an option issued to Mr. Porter
to purchase 30,000 shares of Common Stock. The option is fully
exercisable although as of December 31, 1998, 27,600 shares issuable
upon exercise of the option were subject to a right of repurchase at
cost in the event Mr. Porter ceases to be a director of Inktomi.
(9) Includes an option held by Mr. Shugart to purchase 100,000 shares of
Common Stock. The option is fully exercisable although as of December
31, 1998, 58,334 of the shares issuable upon exercise of the option were
subject to a right of repurchase by Inktomi at cost in the event Mr.
Shugart ceases to be a director of Inktomi. The right of repurchase
lapses at the rate of 2,778 shares per month. Also includes an option
issued to Mr. Shugart to purchase 30,000 shares of Common Stock. The
option is fully exercisable although as of December 31, 1998, 27,600
shares issuable upon exercise of the option were subject to a right of
repurchase at cost in the event Mr. Shugart ceases to be a director of
Inktomi.
(10) Includes 1,334 shares held by William Kennelly, Dorothy Kennelly and
Jerry Kennelly, as joint tenants; 13,334 shares held by Jerry Kennelly,
as trustee for Christopher Kennelly; 13,334 shares held by Jerry
Kennelly, as trustee for Michael Kennelly; and 476,650 shares held by
Mr. Kennelly. As of December 31, 1998, 213,332 of the shares held by Mr.
Kennelly were subject to a right of repurchase by Inktomi at cost in the
event Mr. Kennelly ceases to be an employee of Inktomi. The right of
repurchase lapses at the rate of approximately 8,000 shares per month,
and as to all shares upon consummation of an acquisition of Inktomi.
Also includes an option held by Mr. Kennelly to purchase 80,000 shares
of Common Stock. The option is fully exercisable although as of December
31, 1998 all shares issuable upon exercise of the option were subject to
a right of repurchase at cost in the event Mr. Kennelly ceases to be an
employee of Inktomi.
(11) Includes 483,842 shares held by Mr. McEvoy and his wife, Kim
Worsencroft. At December 31, 1998, 229,052 of the shares held by Mr.
McEvoy and Ms. Worsencroft were subject to a right of repurchase by
Inktomi at cost in the event Mr. McEvoy ceases to be an employee of
Inktomi. The right of repurchase lapses at the rate of approximately
7,158 shares per month, and as to all shares upon consummation of an
acquisition of Inktomi. Also includes an option held by Mr. McEvoy to
purchase 80,000 shares of Common Stock. The option is fully exercisable
although as of December 31, 1998 all shares issuable upon exercise of
the option were subject to a right of repurchase at cost in the event
Mr. McEvoy ceases to be an employee of Inktomi.
3
<PAGE>
(12) Includes 88,888 shares held by UTMA: Richard B. Pierce Custodian for
Garrett Dean Pierce, 88,888 shares held by UTMA: Audrey Jean Brandt
Custodian for Adrianna Jean Brandt Pierce, and 454,846 shares held by The
Richard Pierce and Audrey Brandt-Pierce Family Trust. As of December 31,
1998, 166,666 of the shares held by the Pierce Family Trust were subject
to a right of repurchase by Inktomi at cost in the event Mr. Pierce
ceases to be an employee of Inktomi. The right of repurchase lapses at
the rate of approximately 6,666 shares per month. Also includes an option
held by Mr. Pierce to purchase 100,000 shares of Common Stock. The option
is fully exercisable although as of December 31, 1998 all shares issuable
upon exercise of the option were subject to a right of repurchase at cost
in the event Mr. Pierce ceases to be an employee of Inktomi.
(13) Includes 361,000 shares held by Mr. Vannelli. As of December 31, 1998,
312,000 of the shares held by Mr. Vannelli were subject to a right of
repurchase by Inktomi at cost in the event Mr. Vannelli ceases to be an
employee of Inktomi. The right of repurchase lapses at the rate of 8,000
shares per month. Also includes an option held by Mr. Vannelli to
purchase 100,000 shares of Common Stock. The option is fully exercisable
although as of December 31, 1998 all shares issuable upon exercise of the
option were subject to a right of repurchase at cost in the event Mr.
Vannelli ceases to be an employee of Inktomi.
(14) Includes 701,736 shares issuable upon exercise of warrants and options to
purchase 2,347,200 shares, which options are fully exercisable as of
December 31, 1998.
PROPOSAL NO. 1:
ELECTION OF DIRECTORS
General
The Bylaws of Inktomi provide that the authorized number of directors shall
be fixed by resolution of the Board of Directors. The authorized number of
directors is currently fixed at six. Unless otherwise instructed, the proxy
holders will vote the proxies received by them for the nominees named below,
all of whom are presently directors of Inktomi. If any 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 designated by the present Board of Directors to
fill the vacancy. It is not expected that any nominee will be unable or will
decline to serve as a director. If stockholders properly nominate persons
other than Inktomi's nominees for election as directors, the proxy holders
will vote all proxies received by them to assure the election of as many of
Inktomi's nominees as possible, with the proxy holder making any required
selection of specific nominees to be voted for. The term of office of each
person elected as a director will continue until the next annual meeting of
stockholders or until his earlier death, resignation or removal. There is no
family relationship between any director and any other director or executive
officer of Inktomi.
Certain information regarding the nominees is set forth below:
<TABLE>
<CAPTION>
Director
Name of Nominee Age Principal Occupation Since
--------------- --- -------------------- --------
<S> <C> <C> <C>
David C. Peterschmidt... 51 Chairman of the Board, President and Chief Executive 1996
Officer of Inktomi
Dr. Eric A. Brewer...... 31 Assistant Professor in the Computer Sciences Division 1996
at U.C. Berkeley, and Chief Scientist of Inktomi
Frank Gill.............. 55 Retired Executive Vice President of Intel Corporation 1998
Fredric W. Harman....... 38 General Partner of Oak Investment Partners 1997
John A. Porter.......... 54 Consultant 1997
Alan F. Shugart......... 68 Chief Executive Officer of Al Shugart International 1997
</TABLE>
David C. Peterschmidt has served as President, Chief Executive Officer and a
director of Inktomi since July 1996. He was appointed Chairman of the Board in
December 1997. From 1991 until joining Inktomi, he served as Chief Operating
Officer and Executive Vice President of Sybase, Inc., a database company. From
1988 to
4
<PAGE>
1991, Mr. Peterschmidt was a consultant with The Kappa Group, a management
consulting firm, where he provided senior level sales and marketing training
to a variety of companies. From 1987 to 1988, he served as Vice President of
Sales and Marketing for System Industries, Inc., a manufacturer of storage
subsystems for Digital Equipment Corporation computers. From 1984 to 1987, Mr.
Peterschmidt was Vice President of Sales and Marketing for LEX Computer
Systems. Mr. Peterschmidt also served as a Captain in the United States
Air Force for nine years, where he was Lead Contract Negotiator on the B1
Bomber Program at Rockwell International, Inc. Mr. Peterschmidt holds a
Bachelor of Arts degree in Political Science from the University of Missouri
and a Masters of Business Administration from Chapman College.
Dr. Eric A. Brewer has served as a director of Inktomi since its inception
in February 1996. From February 1996 to December 1997, Dr. Brewer was Chief
Technology Officer of Inktomi and was appointed Chief Scientist in December
1997. From May 1996 to July 1996, he served as interim President and Chief
Executive Officer of Inktomi. Dr. Brewer has been an Assistant Professor in
the Computer Science Division at the University of California, Berkeley since
July 1994. Dr. Brewer served as a research assistant at the Massachusetts
Institute of Technology from September 1989 to August 1994. From June 1986 to
November 1992, Dr. Brewer was a software engineer at CADAM, Inc. Dr. Brewer
holds a Bachelor of Science degree in Computer Science from the University of
California, Berkeley and a doctorate degree in Computer Science from the
Massachusetts Institute of Technology.
Frank Gill joined Inktomi as a director in December 1998. Mr. Gill is a 23-
year veteran of Intel Corporation where he held a variety of positions in
sales and marketing, product development, and manufacturing operations. At the
time of his retirement in June 1998, he was Executive Vice President of Intel.
Mr. Gill joined Intel in 1975 as district sales manager and was promoted to a
variety of managerial positions over the next decade rising to head the North
American sales and marketing organization in 1985. In 1988 his
responsibilities expanded to encompass worldwide sales and marketing
operations and he was made a Senior Vice President of Intel in 1989. In 1990,
Mr. Gill became General Manager of Intel's Systems Group responsible for the
design, manufacture, and marketing of all Intel module and system level
products. With the increasing importance of the Internet, in 1995 Mr. Gill was
appointed General Manager of the newly created Internet and Communications
Group with responsibility to guide Intel's strategy, product development,
marketing, and "industry enabling" activities within the internet, networking,
media and communications space. He was promoted to Executive Vice President of
Intel in 1996. In addition to serving as a director of Inktomi, Mr. Gill is a
director of Sequent Computer Systems, Inc., Telecom Semiconductor, Inc. and
other privately held companies. Mr. Gill holds a Bachelor of Science degree in
Electrical Engineering from the University of California at Davis.
Fredric W. Harman joined Inktomi as a director in April 1997. Since July
1994, Mr. Harman has served as a Managing Member of the General Partners of
venture capital funds affiliated with Oak Investment Partners. From April 1991
to June 1994, he served as a General Partner of Morgan Stanley Venture
Capital, L.P. Mr. Harman is a director of ILOG, S.A. and several privately
held companies. Mr. Harman holds Bachelor of Science and Masters degrees in
Electrical Engineering from Stanford University and a Masters of Business
Administration from Harvard University.
John A. Porter joined Inktomi as a director in March 1997. Mr. Porter is
currently actively involved in a variety of private investment and business
ventures. He is a director of MCI WorldCom Inc., a full-service
telecommunications provider and, through its wholly owned subsidiary UUNet,
Inc., the largest Internet service provider in the United States. Mr. Porter
previously served on the Board of Directors of WorldCom from 1989 until its
merger with MCI, serving as Chairman of the Board from 1989 to 1993 and as
Vice Chairman from 1993 to 1996. Mr. Porter also serves as Chairman of the
Board and Chief Executive Officer of Industrial Electric Manufacturing, Inc.,
a switch gear manufacturer, since 1995, and Chairman of the Board of Phillips
& Brooks Gladwin, Inc., a full-service provider of public communications
equipment and national outsourced services, since 1989. He is also a director
of Uniroyal Technologies, Inc.
Alan F. Shugart joined Inktomi as a director in December 1997. Mr. Shugart
has been Chief Executive Officer of Al Shugart International since September
1998. From 1979 to 1998, Mr. Shugart was Chief Executive Officer of Seagate
Technology, Inc., a manufacturer of hard disk drives and related components.
From 1979 until
5
<PAGE>
September 1991 and from October 1992 to September 1998, Mr. Shugart also
served as Chairman of the Board of Seagate. He held the position of President
of Seagate from September 1991 until September 1997 and Chief Operating
Officer of Seagate from September 1991 until March 1995. Mr. Shugart is
currently a Director of Valence Technology, Inc., SanDisk Corporation and
Cypress Semiconductor Corp.
Board Meetings and Committees
The Board of Directors held nine meetings during the fiscal year ended
September 30, 1998 and acted eight times by unanimous written consent. The
Board of Directors has an Audit Committee, a Compensation Committee and a
Nominating Committee. From time to time, the Board has created various ad hoc
committees for special purposes. No such committee is currently functioning.
The Audit Committee currently consists of directors Harman, Porter and
Shugart. The Audit Committee held one meeting during the last fiscal year. The
Audit Committee reviews the internal accounting procedures of Inktomi and
consults with and reviews the services provided by Inktomi's independent
accountants.
The Compensation Committee currently consists of directors Harman, Porter
and Shugart. The Compensation Committee held one meeting during the last
fiscal year. The Compensation Committee reviews and recommends to the Board of
Directors the compensation and benefits of all officers of Inktomi and
establishes and reviews general policies relating to compensation and benefits
of employees of Inktomi.
The Nominating Committee currently consists of directors Harman,
Peterschmidt and Porter. The Nominating Committee held one meeting during the
last fiscal year. The Nominating Committee is responsible for establishing
general qualification guidelines applicable to nominees to the Board of
Directors, and for identifying, interviewing and recommending persons meeting
such guidelines to serve as members of the Board of Directors.
During fiscal 1998, each director attended 75% or more of the meetings of
the Board of Directors and of the committees of the Board on which the
director served during the period for which he was director or committee
member, respectively.
Director Compensation
Directors do not currently receive any cash compensation from Inktomi for
their service as members of the Board of Directors, although they are
reimbursed for expenses in connection with attendance at Board and Committee
meetings. Under Inktomi's 1998 Stock Plan, nonemployee directors are eligible
to receive stock option grants at the discretion of the Board of Directors or
other administrator of the plan. In December 1997, the Board of Directors
granted an option to purchase 100,000 shares of Common Stock at $1.67 per
share to Alan F. Shugart in connection with his appointment as a member of the
Board of Directors. The shares under the option vest on a monthly basis over
36 months, subject to continued service as a member of the Board of Directors.
No other options were granted to directors during fiscal 1998.
Under the terms of indemnification agreements with each of Inktomi's
directors, Inktomi is obligated to indemnify each director against certain
claims and expenses for which the director might be held liable in connection
with past or future service on the Board. In addition, Inktomi's Certificate
of Incorporation provides that, to the greatest extent permitted by the
Delaware General Corporation Law, its directors shall not be liable for
monetary damages for breach of fiduciary duty as a director.
Vote Required
Directors are elected by a plurality of the votes present in person or
represented by proxy and entitled to vote.
Recommendation of the Board
The Board of Directors recommends that the stockholders vote "FOR" election
of each of the nominees listed above.
6
<PAGE>
PROPOSAL NO. 2:
INCREASE IN THE AUTHORIZED NUMBER OF SHARES OF COMMON STOCK
General
Inktomi's Certificate of Incorporation currently authorizes the issuance of
100,000,000 shares of Common Stock and 10,000,000 shares of Preferred Stock.
In December 1998, the Board of Directors adopted a resolution proposing that
the Certificate of Incorporation be amended to increase the authorized number
of shares of Common Stock to 300,000,000 shares, subject to stockholder
approval of the amendment. No change is being proposed to the authorized
number of shares of Preferred Stock.
Current Use of Shares
As of December 31, 1998, Inktomi had approximately 49,000,000 shares of
Common Stock outstanding, approximately 7,100,000 shares of Common Stock
reserved for future issuance under Inktomi's incentive stock plans, of which
approximately 5,600,000 shares are covered by outstanding options and
approximately 1,500,000 shares are available for future grant or purchase, and
approximately 1,500,000 shares of Common Stock reserved for issuance upon
exercise of outstanding warrants. Based upon the foregoing number of
outstanding and reserved shares of Common Stock, Inktomi has approximately
42,400,000 shares remaining available for other purposes.
Proposed Amendment to Certificate of Incorporation
The Board of Directors has adopted resolutions setting forth the proposed
amendment to the first sentence of Article 4 of Inktomi's Certificate of
Incorporation (the "Amendment"), the advisability of the Amendment, and a call
for submission of the Amendment for approval by Inktomi's stockholders at the
Annual Meeting. The following is the text of Article 4 of the Certificate of
Incorporation of Inktomi, as proposed to be amended:
The Company is authorized to issue two classes of shares of stock to be
designated, respectively, Common Stock, $0.001 par value, and Preferred
Stock, $0.001 par value. The total number of shares that the Company is
authorized to issue is 310,000,000 shares. The number of shares of Common
Stock authorized is 300,000,000. The number of shares of Preferred Stock
authorized is 10,000,000.
Purpose and Effect of the Proposed Amendment
The Board of Directors believes that it is in Inktomi's best interest to
increase the number of shares of Common Stock that Inktomi is authorized to
issue in order to give Inktomi additional flexibility to maintain a reasonable
stock price with future stock splits and stock dividends. For example, Inktomi
recently completed a two for one stock split (in the form of a 100% stock
dividend) bringing the number of outstanding shares of Common Stock and shares
reserved for issuance under incentive stock plans and warrants to
approximately 57,600,000. Under the current Certificate of Incorporation, the
Board of Directors may not authorize future stock splits or declare additional
stock dividends without first soliciting and obtaining stockholder approval if
following such action the total number of shares of Common Stock outstanding
and reserved for issuance would exceed 100,000,000 shares. Under the
Certificate of Incorporation as amended, the Board of Directors would have the
flexibility to authorize stock splits and declare stock dividends resulting in
outstanding and reserved shares of Common Stock of up to 300,000,000 shares.
The Board of Directors also believes that the availability of additional
authorized but unissued shares will provide Inktomi with the flexibility to
issue Common Stock for other proper corporate purposes which may be identified
in the future, such as to raise equity capital, to make acquisitions through
the use of stock, to establish strategic relationships with other companies,
and to adopt additional employee benefit plans or reserve additional shares
for issuance under such plans. The Board of Directors has no immediate plans,
understandings, agreements or commitments to issue additional Common Stock for
any purpose.
The Board of Directors believes that the proposed increase in the authorized
Common Stock will make available sufficient shares for use should Inktomi
decide to use its shares for one or more of such previously
7
<PAGE>
mentioned purposes or otherwise. No additional action or authorization by
Inktomi's stockholders would be necessary prior to the issuance of such
additional shares, unless required by applicable law or the rules of any stock
exchange or national securities association trading system on which the Common
Stock is then listed or quoted. The Company reserves the right to seek a
further increase in authorized shares from time to time in the future as
considered appropriate by the Board of Directors.
Under Inktomi's Certificate of Incorporation, Inktomi's stockholders do not
have preemptive rights with respect to Common Stock. Thus, should the Board of
Directors elect to issue additional shares of Common Stock, existing
stockholders would not have any preferential rights to purchase such shares.
In addition, if the Board of Directors elects to issue additional shares of
Common Stock, such issuance could have a dilutive effect on earnings per
share, voting power, and share holdings of current stockholders.
The proposed amendment to increase the authorized number of shares of Common
Stock could, under certain circumstances, have an anti-takeover effect,
although this is not the intention of this proposal. For example, in the event
of a hostile attempt to take over control of Inktomi, it may be possible for
Inktomi to endeavor to impede the attempt by issuing shares of the Common
Stock, thereby diluting the voting power of the other outstanding shares and
increasing the potential cost to acquire control of Inktomi. The Amendment
therefore may have the effect of discouraging unsolicited takeover attempts.
By potentially discouraging initiation of any such unsolicited takeover
attempt, the proposed Amendment may limit the opportunity for Inktomi's
stockholders to dispose of their shares at the higher price generally
available in takeover attempts or that may be available under a merger
proposal. The proposed amendment may have the effect of permitting Inktomi's
current management, including the current Board of Directors, to retain its
position, and place it in a better position to resist changes that
stockholders may wish to make if they are dissatisfied with the conduct of
Inktomi's business. However, the Board of Directors is not aware of any
attempt to take control of Inktomi and the Board of Directors has not
presented this proposal with the intent that it be utilized as a type of anti-
takeover device.
Vote Required
The affirmative vote of the holders of a majority of the outstanding shares
of Common Stock entitled to vote at the Annual Meeting, assuming a quorum is
present, is necessary for approval of the Amendment. Therefore, abstentions
and broker non-votes (which may occur if a beneficial owner of stock where
shares are held in a brokerage or bank account fails to provide the broker or
the bank voting instructions as to such shares) effectively count as votes
against the Amendment.
Recommendation of the Board
The Board of Directors recommends that the stockholders vote "FOR" the
proposal to amend Inktomi's Certificate of Incorporation to increase the
authorized number of shares of Common Stock from 100,000,000 shares to
300,000,000 shares.
8
<PAGE>
PROPOSAL NO. 3:
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
General
The Board of Directors has selected the firm of PricewaterhouseCoopers LLP
as Inktomi's independent auditors to audit the financial statements of Inktomi
for the fiscal year ending September 30, 1999, and recommends that
stockholders vote for ratification of this appointment. PricewaterhouseCoopers
LLP has audited Inktomi's financial statements since inception in 1996.
Representatives of PricewaterhouseCoopers LLP are expected to be present at
the meeting and will have the opportunity to make a statement if they desire
to do so, and are expected to be available to respond to appropriate
questions.
Stockholder ratification of the selection of PricewaterhouseCoopers LLP as
Inktomi's independent auditors is not required by Inktomi's Bylaws or
otherwise. However, the Board is submitting the selection of
PricewaterhouseCoopers LLP to the stockholders for ratification as a matter of
good corporate practice. If the stockholders fail to ratify the selection, the
Audit Committee and the Board will reconsider whether or not to retain that
firm. Even if the selection is ratified, the Board in its discretion may
direct the appointment of different independent auditors at any time during
the year if it determines that such change would be in the best interests of
Inktomi and its stockholders.
Vote Required
The affirmative vote of the holders of a majority of the shares present in
person or represented by proxy and voting at the Annual Meeting will be
required to ratify the selection of Price Waterhouse LLP.
Recommendation of the Board
The Board of Directors recommends that the stockholders vote "FOR" the
ratification of the appointment of PricewaterhouseCoopers LLP as Inktomi's
independent auditors for the fiscal year ending September 30, 1999.
9
<PAGE>
MANAGEMENT
Executive Officers
The following table sets forth certain information with respect to the
executive officers of Inktomi:
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<C> <C> <S>
David C. Peterschmidt.. 51 Chairman of the Board, President and Chief
Executive Officer
Dr. Eric A. Brewer..... 31 Chief Scientist
Paul Gauthier.......... 26 Chief Technology Officer
Jerry M. Kennelly...... 48 Vice President of Finance, Chief Financial
Officer and Secretary
Dennis L. McEvoy....... 51 Vice President of Development and Support
Richard B. Pierce...... 40 Vice President of Marketing
Timothy Stevens........ 32 Vice President of Corporate and Legal Affairs,
General Counsel and Assistant Secretary
Vince Vannelli......... 40 Vice President of World Wide Field Operations
</TABLE>
For biographical summaries of David C. Peterschmidt and Dr. Eric A. Brewer,
see "Election of Directors."
Paul Gauthier served as Vice President of Research and Development of
Inktomi from February 1996 until his appointment as Chief Technology Officer
in December 1997. From May 1995 to August 1995, Mr. Gauthier served as an
intern at Digital Equipment Corporation's Systems Research Center. Mr.
Gauthier served as a programmer analyst for Seimac Limited from May 1994 to
July 1994. From July 1989 to April 1994, Mr. Gauthier served as technical
Director for Worthington Software Company. Mr. Gauthier served as a programmer
at Dymaxion Research from June 1987 to July 1989. Mr. Gauthier holds a
Bachelor of Science degree, with honors, in Computer Science from Dallhousie
University.
Jerry M. Kennelly joined Inktomi as Vice President of Finance and Chief
Financial Officer in October 1996. From June 1990 until joining Inktomi, Mr.
Kennelly worked for Sybase, Inc. in a number of senior financial positions.
Most recently, he served as Vice President of Corporate Finance. From November
1988 to May 1990, Mr. Kennelly served as the Controller for U.S. Operations at
Oracle Corporation. From December 1980 to October 1988, he served as World
Wide Sales and Marketing Controller at Tandem Computers, Inc. Mr. Kennelly
holds a Bachelor of Arts degree in Political Economy from Williams College and
a Masters degree in Accounting from the New York University Graduate School of
Business Administration. He is also a Certified Public Accountant.
Dennis L. McEvoy joined Inktomi as a consultant in March 1997 and as Vice
President of Development and Support in June 1997. From October 1996 to
February 1997, Mr. McEvoy served as Executive Vice President of Products and
Services at Verity, Inc., a provider of information search, retrieval and push
software for corporate intranets and the Internet. From October 1994 to
September 1996, he served in several executive management positions at Sybase,
Inc., most recently as President, Enterprise Business Group. Prior to joining
Sybase, in January 1989, Mr. McEvoy co-founded and served as President and
Chief Executive Officer of Cooperative Solutions, Inc., a client/server
software company focused on development tools and production software for
mission-critical applications. Cooperative Solutions was acquired by Bachman
Information Systems, Inc. in August 1993, whereupon Mr. McEvoy joined Bachman
as a Vice President and served in such capacity until August 1994. From
December 1974 to June 1988, Mr. McEvoy worked at Tandem Computers, Inc., most
recently as Vice President, Software Division. Mr. McEvoy holds a Bachelor of
Science degree in Mathematics from Carnegie-Mellon University.
Richard B. Pierce joined Inktomi as its Vice President of Marketing in
November 1996. From December 1981 until joining Inktomi, Mr. Pierce worked at
Intel Corporation where he held a variety of marketing, strategic planning and
operations management positions. Most recently, he was marketing director of
Intel's mobile and handheld products group. Mr. Pierce holds a Bachelor of
Science degree in Electrical Engineering from Purdue University.
10
<PAGE>
Timothy Stevens joined Inktomi as its Vice President of Corporate and Legal
Affairs and General Counsel in July 1997. Prior to joining Inktomi, Mr.
Stevens was an attorney with Wilson Sonsini Goodrich & Rosati, where he served
as primary outside counsel for more than thirty private and public companies,
specifically in the areas of venture capital and corporate financing, public
offerings, mergers and acquisitions, and securities and intellectual property
law. Mr. Stevens holds Bachelor of Science degrees in Finance and Management
from the University of Oregon and a Juris Doctor degree from the University of
California, Davis.
Vince Vannelli joined Inktomi as Vice President of Worldwide Field
Operations in January 1998. Prior to joining Inktomi, Mr. Vannelli was most
recently the Vice President and General Manager for U.S. Operations for
Hitachi Data Systems, Inc., a computer services and equipment company. Mr.
Vannelli worked for Hitachi for eight years, first as a District Sales Manager
in Northern California, then as the Regional Manager of the Mid-Atlantic
states, then as the Eastern Division Manager. Following these assignments, Mr.
Vannelli returned to the West Coast to assist the Chief Executive Officer of
Hitachi in re-engineering worldwide sales and marketing, then after a brief
period running the Western Division, was named Vice President and General
Manager for U.S. Operations. Prior to working for Hitachi, Mr. Vannelli was
employed by IBM Corporation for eight years in a variety of sales and sales
management roles. Mr. Vannelli holds Bachelor of Science and Masters degrees
in Industrial Engineering from Stanford University.
Summary Compensation Table
The following table sets forth the compensation earned for services rendered
to Inktomi in all capacities for the fiscal years ended September 30, 1998 and
1997 by Inktomi's Chief Executive Officer and its four next most highly
compensated executive officers who earned more than $100,000 during the fiscal
year ended September 30, 1998 (collectively, the "Named Executive Officers"):
<TABLE>
<CAPTION>
Long-Term
Compensation
Awards
------------
Annual Compensation Securities
------------------- Underlying
Name and Principal Position Year Salary Bonus Options
--------------------------- ---- ------------------- ------------
<S> <C> <C> <C> <C>
David C. Peterschmidt.............. 1998 $150,000 $125,000 200,000
Chairman of the Board, President 1997 150,000 280,000(1) --
and Chief Executive Officer
Jerry M. Kennelly(2)............... 1998 200,000 73,105 80,000
Vice President of Finance, Chief 1997 184,102 37,045 400,002(3)
Financial Officer and Secretary
Dennis L. McEvoy(4)................ 1998 200,000 61,507 80,000
Vice President of Development and 1997 66,667 92,210 537,602
Support
Richard B. Pierce(5)............... 1998 185,000 67,916 100,000
Vice President of Marketing 1997 150,016 333,776 466,668(3)
Vince Vannelli(6).................. 1998 150,000 192,065 500,000
Vice President of World Wide Field 1997 -- -- --
Operations
</TABLE>
- --------
(1) Bonus earned and accrued during the 1997 fiscal year and paid over the
1998 fiscal year.
(2) Mr. Kennelly joined Inktomi in October 1996.
(3) Shares subject to options granted under Inktomi's 1996 Equity Incentive
Plan. Excludes 133,334 shares and 233,334 shares issuable upon exercise of
options granted during the 1997 fiscal year under the 1996 Equity
Incentive Plan to Mr. Kennelly and Mr. Pierce, respectively. Such options
were cancelled during the fiscal year.
(4) Mr. McEvoy joined Inktomi in June 1997.
(5) Mr. Pierce joined Inktomi in November 1996.
(6) Mr. Vannelli joined Inktomi in January 1998.
11
<PAGE>
Option Grants in Last Fiscal Year
The following table sets forth certain information with respect to stock
options granted to each of the Named Executive Officers during the fiscal year
ended September 30, 1998. In accordance with the rules of the Securities and
Exchange Commission, also shown below is the potential realizable value over
the term of the option (the period from the grant date to the expiration date)
based on assumed rates of stock appreciation of 5% and 10%, compounded
annually. These amounts are based on certain assumed rates of appreciation and
do not represent Inktomi's estimate of future stock price. Actual gains, if
any, on stock option exercises will be dependent on the future performance of
the Common Stock.
<TABLE>
<CAPTION>
Potential Realizable
Value at Assumed
Annual Rates of Stock
Price Appreciation
Individual Grants for Option Term(3)
----------------------- ---------------------
Number of Percent of
Securities Total Options
Underlying Granted to
Options Employees in Exercise Expiration
Name Granted Fiscal Year(1) Price(2) Date 5% 10%
---- ---------- -------------- -------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
David C. Peterschmidt... 200,000(4) 6.5% $24.50 09/01/08 $3,081,581 $7,809,337
Jerry M. Kennelly....... 80,000(4) 2.6 24.50 09/01/08 1,232,633 3,123,735
Dennis L. McEvoy........ 80,000(4) 2.6 24.50 09/01/08 1,232,633 3,123,735
Richard B. Pierce....... 100,000(4) 3.2 24.50 09/01/08 1,540,791 3,904,669
Vince Vannelli.......... 400,000(5) 12.9 1.67 02/09/08 420,101 1,064,620
100,000(4) 3.2 24.50 09/01/08 1,540,791 3,904,669
</TABLE>
- --------
(1) Based on an aggregate of 3,089,210 options granted by Inktomi during the
fiscal year ended September 30, 1998 to employees of and consultants to
Inktomi, including the Named Executive Officers. Excludes options granted
by C2B Technologies during the fiscal year that were assumed by Inktomi in
connection with its acquisition of C2B Technologies.
(2) The exercise price per share of each option was equal to the fair market
value of the Common Stock on the date of grant as determined by the Board
of Directors.
(3) The potential realizable value is calculated based on the term of the
option at its time of grant (ten years). It is calculated assuming that
the fair market value of the Common Stock on the date of grant appreciates
at the indicated annual rate compounded annually for the entire term of
the option and that the option is exercised and sold on the last day of
its term for the appreciated stock price.
(4) Option was granted under Inktomi's 1998 Stock Plan. All shares under the
option are immediately exercisable; however, as a condition of exercise,
the optionee must enter into a stock restriction agreement giving Inktomi
the right in the event of any termination of employment to repurchase all
then unvested shares at cost. 2% of the shares become vested 37 months
from the date of grant and an additional 2% of the shares become vested
monthly thereafter.
(5) Option was granted under Inktomi's 1996 Equity Incentive Plan. All shares
under the option are immediately exercisable; however, as a condition of
exercise, the optionee must enter into a stock restriction agreement
giving Inktomi the right in the event of any termination of employment to
repurchase all then unvested shares at cost. 2% of the shares become
vested six months from the date of commencement of employment and 2% of
the shares become vested monthly thereafter. Mr. Vannelli exercised and
purchased all shares under this option in April 1998.
12
<PAGE>
Option Exercises in Last Fiscal Year and Fiscal Year-End Option Values
The following table sets forth information with respect to the Named
Executive Officers concerning option exercises for the fiscal year ended
September 30, 1998 and exercisable and unexercisable options held as of
September 30, 1998:
<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised Value of Unexercised
Options/SARs at In-the-Money Options/SARs
Shares September 30, 1998 at September 30, 1998(2)
Acquired Value --------------------------- -------------------------
Name on Exercise Realized(1) Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
David C. Peterschmidt... 133,334 $ 4,903,358 1,500,400(3) -- $50,322,210 --
Jerry M. Kennelly....... -- -- 80,000(4) -- 1,000,000 --
Dennis L. McEvoy........ -- -- 80,000(4) -- 1,000,000 --
Richard B. Pierce....... -- -- 100,000(4) -- 1,250,000 --
Vince Vannelli.......... 400,000(5) 14,134,000 100,000(4) -- 1,250,000 --
</TABLE>
- --------
(1) Based on a value of $37.00 per share, the closing price of Inktomi's stock
on the Nasdaq National Market on September 30, 1998, minus the per share
exercise price, multiplied by the number of shares issued upon exercise of
the option.
(2) Based on a value of $37.00 per share, the closing price of Inktomi's stock
on the Nasdaq National Market on September 30, 1998, minus the per share
exercise price, multiplied by the number of shares underlying the option.
(3) Includes an option to purchase 200,000 shares of Common Stock. All shares
under the option are immediately exercisable; however, as a condition of
exercise, the optionee must enter into a stock restriction agreement
giving Inktomi the right in the event of any termination of employment to
repurchase all then unvested shares at cost. 2% of the shares become
vested 37 months following the date of grant and an additional 2% of the
shares become vested monthly thereafter.
(4) All shares under the option are immediately exercisable; however, as a
condition of exercise, the optionee must enter into a stock restriction
agreement giving Inktomi the right in the event of any termination of
employment to repurchase all then unvested shares at cost. 2% of the
shares become vested 37 months following the date of grant and an
additional 2% of the shares become vested monthly thereafter.
(5) As of September 30, 1998, 336,000 of the shares acquired by Mr. Vannelli
were subject to a right of repurchase by Inktomi at cost in the event of
termination of employment with Inktomi. The repurchase option lapses as to
8,000 shares per month.
Employment Agreement
Inktomi has an employment agreement with David C. Peterschmidt, its
President and Chief Executive Officer. The agreement provides for an initial
annual salary of $150,000. The agreement is for no specified length of term,
and either party has the right to terminate the agreement at any time with or
without cause. The agreement does not provide for any mandatory severance,
although Inktomi has the right to continue to pay Mr. Peterschmidt his then
current salary for up to 12 months following termination of employment, in
which case Mr. Peterschmidt may not compete against Inktomi for such time
period.
13
<PAGE>
COMPENSATION COMMITTEE REPORT
The Compensation Committee (the "Committee") of the Board of Directors
currently consists of Fredric W. Harman, John A. Porter and Alan F. Shugart,
all of whom are outside directors of Inktomi. The Committee reviews and
recommends to the Board of Directors the compensation and benefits of all
officers of Inktomi and establishes and reviews general policies relating to
compensation and benefits of employees of Inktomi. The following is the report
of the Committee describing compensation policies and rationale applicable to
Inktomi's executive officers with respect to the compensation paid to such
executive officers for the fiscal year ended September 30, 1998. The
information contained in this report shall not be deemed to be "soliciting
material" or to be "filed" with the Securities and Exchange Commission, nor
shall such information be incorporated by reference into any future filing
under the Securities Act of 1933, as amended, or the 1934 Securities Exchange
Act, as amended, except to the extent that Inktomi specifically incorporates
it by reference in such filing.
Compensation Philosophy and Review
Inktomi's executive compensation program is generally designed to align the
interests of executives with the interests of stockholders and to reward
executives for achieving corporate and individual objectives. The executive
compensation program is also designed to attract and retain the services of
qualified executives in the highly competitive Internet and computer
networking marketplaces. Executive compensation currently consists of a base
salary, quarterly incentive plan, long-term equity incentives, and other
compensation and benefit programs generally available to other employees.
The Committee has considered the potential impact of Section 162(m) of the
Internal Revenue Code on the compensation paid to Inktomi's executive
officers. Section 162(m) disallows a tax deduction for any publicly-held
corporation for individual compensation exceeding $1.0 million in any taxable
year for any of the executive officers, unless compensation is performance-
based. In general, it is the Committee's policy to qualify, to the maximum
extent possible, its executives' compensation for deductibility under
applicable tax laws.
Base Salaries
Base salary levels for the Chief Executive Officer (the "CEO") and other
executive officers are intended to compensate executives competitively within
the high-technology marketplace. Base salaries are determined on an individual
basis by evaluating each executive's scope of responsibility, past
performance, prior experience and data on prevailing compensation levels in
relevant markets for executive talent. Regarding the latter measure, certain
companies included in the peer group index of the stock performance graph are
also included in surveys reviewed by the Committee in determining salary
levels for the CEO and other executive officers of Inktomi. Base salaries for
executives are reviewed annually by the Committee.
Quarterly Incentive Plan
Inktomi provides quarterly incentive bonuses for its executive officers as
well as other key management employees. The quarterly incentive plan is
intended to provide a direct link between management compensation and the
achievement of corporate and individual objectives. The level of bonus is
based as a percentage of the base salary for the manager for the year. At the
beginning of each quarter, Inktomi sets certain corporate objectives
(including financial performance goals) and each individual manager sets his
or her own personal objectives to support the achievement of the corporate
objectives. At the end of the quarter, performance is assessed and the level
of bonus payable, if any, is determined. Achievement of corporate objectives
is given more weight than achievement of individual objectives for purposes of
determining the quarterly bonus.
Long-Term Equity Incentives
Inktomi provides long-term equity incentives to its executive officers and
to all other employees through the grant of stock options under its stock
option plans. The purpose of granting stock options is to create a direct
14
<PAGE>
link between compensation and the long-term performance of Inktomi. Stock
options are generally granted at an exercise price equal to 100% of the fair
market on the date of grant, have a ten year term and generally vest in
installments over 50 months. Because the receipt of value by an executive
officer under a stock option is dependent upon an increase in the price of
Inktomi's Common Stock, this portion of the executives' compensation is
directly aligned with an increase in stockholder value. The primary stock
options granted to executive officers are generally in conjunction with the
executive officer's acceptance of employment with Inktomi. When determining
the number of stock options to be awarded to an executive officer, the
Committee considers the executive's current contribution to Inktomi's
performance, the executive officer's anticipated contribution in meeting
Inktomi's long-term strategic performance goals, and comparisons to formal and
informal surveys of executive stock option grants made by other Internet and
computer networking companies. The Committee also reviews stock option levels
for executive officers at the beginning of each fiscal year in light of long-
term strategic and performance objectives and each executive's current and
anticipated contributions to Inktomi's future performance. Reflecting the
increasing scope of Inktomi's business, the Committee recommended (and the
full Board of Directors granted) stock option grants in September 1998 for the
CEO of 200,000 shares and for the other Named Executive Officers of an
aggregate of 360,000 shares. These options vest over seven years from the date
of grant, with no vesting for the first three years and then monthly vesting
over the next four years.
Other Compensation
Inktomi's executive officers are also eligible to participate in
compensation and benefit programs generally available to other employees,
including Inktomi's Employee Stock Purchase Plan. In addition, from time to
time, executive officers have received sign-on bonuses or other bonuses based
on extraordinary effort.
CEO Compensation
David C. Peterschmidt is President, Chief Executive Officer and Chairman of
the Board of Directors. The Committee reviews Mr. Peterschmidt's compensation
annually using the same criteria and policies as are employed for other
executive officers. Mr. Peterschmidt's compensation was initially determined
in part by the terms of an employment agreement entered into upon his
acceptance of employment with Inktomi in July 1996. See "Management--
Employment Agreement" above. However, the Committee retains the discretion to
increase Mr. Peterschmidt's compensation to levels above those provided in the
employment agreement. Mr. Peterschmidt did not receive a salary increase
during fiscal 1998, although he received bonuses under the quarterly incentive
plan equal to 83% of his base salary, or $125,000. In addition, he received a
stock option grant under in fiscal 1998 as described above.
SUBMITTED BY THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
Fredric W. Harman
John A. Porter
Alan F. Shugart
15
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Messrs. Harman, Porter and Shugart served as members of the Compensation
Committee of the Board of Directors of Inktomi during fiscal 1998. None of
these individuals was an officer or employee of Inktomi or of any of its
subsidiaries during fiscal 1998. Mr. Peterschmidt participates in the
discussions and decisions regarding salaries and incentive compensation for
all executive officers of Inktomi, except that Mr. Peterschmidt is excluded
from discussions regarding his own salary and incentive compensation.
CERTAIN TRANSACTIONS
In April 1997, Inktomi issued and sold to entities affiliated with Oak
Investment Partners ("Oak Partners") 4,811,306 shares of Common Stock at $1.67
per share and warrants to purchase 1,603,768 shares of Common Stock at $2.50
per share. Oak Partners exercised its warrants in full in March 1998 (after
assigning warrants to purchase 20,048 shares to a technology partner of Oak
Partners, which warrants were subsequently exercised). Oak Partners is a 5%
stockholder of Inktomi. Fredric W. Harman is a Managing Partner of the General
Partners of the Oak Partners entities and is a Director of Inktomi.
In December 1997, the Board of Directors granted an option to purchase
100,000 shares of Common Stock at $1.67 per share to Alan F. Shugart in
connection with his appointment as a member of Inktomi's Board of Directors.
In April 1998, Inktomi loaned $666,000 to Vince Vannelli, Vice President of
Worldwide Field Operations, in connection with the exercise of his stock
options. The loan bears interest at the lowest applicable federal rate and is
secured by the shares issued upon exercise of the stock option. All principal
and accrued interest under the loan is due and payable in April 2002, or
within 90 days following any termination of employment. In November 1998, Mr.
Vannelli repaid $66,600 in principal together with all then accrued interest
under the loan.
In December 1998, the Board of Directors granted an option to purchase
96,800 shares of Common Stock at $54.50 per share to Frank Gill in connection
with his appointment as a member of Inktomi's Board of Directors.
16
<PAGE>
STOCK PRICE PERFORMANCE
The following graph shows a comparison of cumulative total stockholder
returns for Inktomi's Common Stock, the Nasdaq Stock Market Index for U.S.
Companies, and the Hambrecht & Quist Internet Index. The graph assumes the
investment of $100 on June 10, 1998, the date of Inktomi's initial public
offering. The data regarding the Company assumes an investment at the initial
public offering price of $9.00 per share of Inktomi's Common Stock. The
performance shown is not necessarily indicative of future performance.
COMPARISON OF 7 MONTH CUMULATIVE TOTAL RETURN
AMONG INKTOMI CORPORATION,
THE NASDAQ STOCK MARKET (U.S.) INDEX
AND THE HAMBRECHT & QUIST INTERNET INDEX
<TABLE>
<CAPTION>
INITOMI NASDAQ HAMBRECHT &
Measurement Period CORPORATION INDEX QUIST INDEX
- ------------------ ----------- ------ -----------
<S> <C> <C> <C>
Measurement Pt-06/10/98 $100 $100 $100
09/30/98 $209 $ 97 $ 99
12/31/98 $359 $125 $171
</TABLE>
$100 INVESTED ON 6/10/98 IN STOCK OR INDEX--
INCLUDING REINVESTMENT OF DIVIDENDS.
FISCAL YEAR ENDING SEPTEMBER 30.
17
<PAGE>
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires Inktomi's
officers and directors, and persons who own more than 10% of a registered
class of Inktomi's equity securities, to file certain reports regarding
ownership of, and transactions in, Inktomi's securities with the Securities
and Exchange Commission. Such officers, directors and 10% stockholders are
also required by Securities and Exchange Commission rules to furnish Inktomi
with copies of all Section 16(a) forms that they file. Based solely on its
review of the copies of such forms received by it, or written representations
from certain reporting persons, Inktomi believes that for the year ended
September 30, 1998, all reporting persons complied with Section 16(a) filing
requirements.
DEADLINE FOR RECEIPT OF STOCKHOLDER PROPOSALS
Proposals of stockholders of Inktomi which are intended to be presented by
such stockholders at Inktomi's 2000 Annual Meeting of Stockholders must be
received by Inktomi no later than October 11, 1999 to be included in the proxy
statement and form of proxy relating to that meeting.
OTHER MATTERS
The Board of Directors knows of no other matters to be submitted to the
meeting. If any other matters properly come before the meeting, then the
persons named in the enclosed form of proxy will vote the shares they
represent in such manner as the Board may recommend.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Tim Stevens
Tim Stevens
Vice President of Corporate and
Legal Affairs, General Counsel and
Assistant Secretary
San Mateo, California
February 8, 1999
18
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This Proxy is solicited on behalf of the Board of Directors
INKTOMI CORPORATION
1999 ANNUAL MEETING OF STOCKHOLDERS
MARCH 10, 1999
The undersigned stockholder(s) of Inktomi Corporation, a Delaware
corporation, hereby acknowledge(s) receipt of the Notice of 1999 Annual Meeting
of Stockholders and Proxy Statement, each dated February 8, 1999, and hereby
appoints David C. Peterschmidt and Jerry M. Kennelly, and each of them, proxies
and attorneys-in-fact, with full power of substitution, on behalf and in the
name of the undersigned, to represent the undersigned at the 1999 Annual Meeting
of Stockholders of Inktomi Corporation to be held March 10, 1999, at 9:30 a.m.,
Pacific Standard Time, at the San Mateo Marriot, Lombard Room, 1770 S. Amphlett
Boulevard, San Mateo, California, 94402, and at any adjournment or adjournments
thereof, and to vote all shares of Common Stock which the undersigned would be
entitled to vote if then and there personally present, on the matters set forth
on the reverse side:
(continued, and to be signed and dated on reverse side)
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THERE ARE THREE WAYS TO VOTE YOUR PROXY
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Vote by Phone http://www.eproxy.com/inkt/ Vote by Mail
1-800-240-6326
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Use any touch-tone telephone to vote Use the Internet to vote your proxy 24 Mark, sign and date your proxy card
your proxy 24 hours a day, 7 days a hours a day, 7 days a week. Have your and return it in the postage-paid
week. Have your proxy card in hand proxy card in hand when you access the envelope we have provided.
when you call. You will be prompted to web site. You will be prompted to
enter your 3-digit company number and a enter your 3-digit company number and a
7-digit control number, which are 7-digit control number, which are
located above, and then follow the located above, to create an electronic
simple instructions. ballot.
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THE DIRECTORS RECOMMEND A VOTE "FOR" ITEMS 1 THROUGH 3
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1. Election of directors [_] FOR all nominees listed [_] WITHHOLD AUTHORITY
below (except as written to vote for all
below) nominees listed
below
(Instructions: To withhold authority to vote for any individual nominee,
write the number(s) in the box provided to the right)
01 David C. Peterschmidt 02 Eric A. Brewer 03 Frank Gill
04 Fredric W. Harman 05 John A. Porter 06 Alan F. Shugart
2. Proposal to amend Inktomi's Certificate of Incorporation to increase the
authorized number of shares of Common Stock from 100,000,000 shares to
300,000,000 shares
[_] FOR [_] AGAINST [_] ABSTAIN
3. Proposal to ratify the appointment of PricewaterhouseCoopers LLP as
Inktomi's independent auditors for fiscal 1999
[_] FOR [_] AGAINST [_] ABSTAIN
and in their direction, upon such other matters which may properly come before
the meeting or any adjournment or adjournments thereof.
The shares represented by this proxy when properly executed will be voted in the
manner directed herein by the undersigned stockholder(s). IF NO DIRECTION IS
MADE, THIS PROXY WILL BE VOTED "FOR" ITEMS 1, 2 AND 3. If any other matters
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properly come before the meeting, the persons named in this proxy will vote, in
their discretion, provided, that they will not vote in the election of directors
for persons for whom authority to vote has been withheld.
Dated
Signature(s) of Stockholder(s) in Box
PLEASE SIGN exactly as your name appears at left.
Joint owners should each sign. Executors,
administrators, trustees, etc., should so indicate
when signing. If signer is a corporation, please
sign full name by duly authorized officer.
Address change? Mark box [_] Indicate change at left
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