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:
[ ] Preliminary Proxy Statement [ ] Soliciting Material Pursuant to
sec.240.14a-11(c) or sec.240.14a-12
[X] Definitive Proxy Statement [ ] Confidential, for Use of the
Commission Only
[ ] Definitive Additional Materials (as permitted by Rule 14a-6(e) (2))
ONSALE, INC.
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(Name of Registrant as Specified In Its Charter)
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(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)(4) 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.:
(3) Filing Party:
(4) Date Filed:
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[ONSALE(R) LOGO]
April 20, 1999
To Our Stockholders:
You are cordially invited to attend the 1999 annual meeting of
stockholders of Onsale, Inc. to be held at our headquarters located at
1350 Willow Road, Suite 100, Menlo Park, California, on Monday, May 17,
1999, at 10:00 a.m. Pacific Time. The matters expected to be acted upon
at the meeting include the following: (1) the election of our board of
directors; (2) a proposal to amend our 1995 Equity Incentive Plan to
increase the number of shares of common stock reserved under the plan on
May 17, 1999 by 2% of the total outstanding shares as of that date, and
to provide for an automatic increase in the shares reserved under the
plan, on January 1, 2000 and each anniversary thereafter, of 4% of the
total shares outstanding as of the immediately preceding December 31;
and (3) ratification of PricewaterhouseCoopers LLP as our independent
accountants for the year ending December 31, 1999. Each of these
proposals is described in detail in the accompanying notice of annual
meeting of stockholders and proxy statement.
Please use this opportunity to take part in our affairs by voting
on the business to come before this meeting. Whether or not you plan to
attend the meeting, please complete, date, sign and promptly return the
enclosed proxy in the enclosed postage-paid envelope prior to the
meeting so that your shares will be represented at the meeting.
Returning the proxy does not deprive you of your right to attend the
meeting and to vote your shares in person.
We hope to see you at the meeting.
Sincerely,
/s/ S. Jerrold Kaplan
S. Jerrold Kaplan
President and Chief Executive
Officer
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ONSALE, INC.
1350 WILLOW ROAD, SUITE 100
MENLO PARK, CALIFORNIA 94025
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
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To Our Stockholders:
NOTICE IS HEREBY GIVEN that the annual meeting of stockholders of
Onsale, Inc. will be held at our headquarters located at 1350 Willow Road,
Suite 100, Menlo Park, California, on Monday, May 17, 1999, at 10:00 a.m.,
Pacific Time.
At the meeting, you will be asked to consider and vote upon the
following matters:
1. The election of five directors of Onsale, each to serve until the
next annual meeting of stockholders and until his successor has been elected
and qualified or until his earlier resignation, death or removal. Our board
of directors intends to present the following nominees for election as
directors:
Alan S. Fisher
Peter L. Harris
Peter H. Jackson
S. Jerrold Kaplan
Kenneth J. Orton
2. A proposal to approve an amendment of our 1995 Equity Incentive Plan
to increase the number of shares of common stock reserved under the plan on
May 17, 1999 by 2% of the total outstanding shares as of that date, and to
provide for an automatic increase in the shares reserved under the plan, on
January 1, 2000 and each anniversary thereafter, of 4% of the total shares
outstanding as of the immediately preceding December 31.
3. A proposal to ratify the selection of PriceWaterhouseCoopers LLP as
our independent accountants for 1999.
4. To transact such other business as may properly come before the
meeting or any adjournment of the meeting.
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 March 26, 1999 are entitled to notice of and to vote at the
meeting or any adjournment of the meeting.
By Order of the Board of Directors
/s/ S. Jerrold Kaplan
S. Jerrold Kaplan
President and Chief Executive Officer
Menlo Park, California
April 20, 1999
Whether or not you plan to attend the meeting, please complete, date, sign and
promptly return the accompanying proxy in the enclosed postage-paid envelope
so that your shares may be represented at the meeting.
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ONSALE, INC.
1350 WILLOW ROAD, SUITE 100
MENLO PARK, CALIFORNIA 94025
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PROXY STATEMENT
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April 20, 1999
The accompanying proxy is solicited on behalf of the board of directors
of Onsale, Inc., a Delaware corporation, for use at our annual meeting of
stockholders to be held at our headquarters located at 1350 Willow Road, Suite
100, Menlo Park, California, on Monday, May 17, 1999, at 10:00 a.m., Pacific
Time. This proxy statement and the accompanying form of proxy were first
mailed to stockholders on or about April 20, 1999. Our annual report to
stockholders for the fiscal year ended December 31, 1998 is enclosed with this
proxy statement.
Record date; quorum
Only holders of record of our common stock at the close of business on
March 26, 1999, the record date, will be entitled to vote at the meeting. A
majority of the shares outstanding on this record date will constitute a
quorum for the transaction of business at the meeting.
Outstanding shares
At the close of business on the record date, we had 19,567,092 shares of
common stock outstanding and entitled to vote, held of record by approximately
165 stockholders.
Voting rights
Holders of our common stock are entitled to one vote for each share held
as of the record date. Shares may not be voted cumulatively. In the event
that a broker, bank, custodian, nominee or other record holder of our common
stock indicates on a proxy that it does not have discretionary authority to
vote certain shares on a particular matter (a "broker non-vote"), then those
shares will not be considered present and entitled to vote with respect to
that matter, although they will be counted in determining whether or not a
quorum is present at the meeting.
Required votes
Directors will be elected by a plurality of the votes of the shares
present in person or represented by proxy at the meeting and entitled to vote
on the election of directors.
Approval of Proposals 2 and 3 each requires the affirmative vote of the
majority of shares present in person or represented by proxy at the meeting
that are voted "for", "against" or "abstain" on the proposal. Broker non-
votes will not affect the outcome of the vote with respect to Proposals 2 and
3.
All votes will be tabulated by the inspector of elections appointed for
the meeting, who will separately tabulate, for each proposal, affirmative and
negative votes, abstentions and broker non-votes.
Voting of proxies
The proxy accompanying this proxy statement is solicited on behalf of
our board of directors for use at the meeting. Stockholders are requested to
complete, date and sign the accompanying proxy card and promptly return it in
the enclosed envelope or otherwise mail it to us. All executed, returned
proxies that are not revoked will be voted in accordance with the included
instructions. Signed proxies that are returned without instructions as to how
they should be voted on a particular proposal at the meeting will be counted
as votes "for" such proposal (or, in the case of the election of directors, as
a vote "for" election to the board of all the nominees presented by our board
of directors). We are not aware of any other matters to be brought before the
meeting. However, as to any business that may properly come before the
meeting, we intend that proxies in the form enclosed will be voted in
accordance with the judgment of the persons holding such proxies.
In the event that sufficient votes in favor of the proposals are not
received by the date of the meeting, the persons named as proxies may propose
one or more adjournments of the meeting to permit further solicitation of
proxies. Any such adjournment would require the affirmative vote of the
majority of the outstanding shares present in person or represented by proxy
at the meeting.
We will pay the expenses of soliciting proxies to be voted at the
meeting. Following the original mailing of the proxies and other soliciting
materials, we will request that brokers, custodians, nominees and other record
holders of our common stock forward copies of the proxy and other soliciting
materials to persons for whom they hold shares of common stock and request
authority for the exercise of proxies. In such cases, upon the request of the
record holders, we will reimburse such holders for their reasonable expenses.
Proxies may also be solicited by some of our directors, officers and regular
employees, without additional compensation, in person or by telephone.
Revocability of proxies
Anyone signing a proxy in the form accompanying this proxy statement has
the power to revoke it prior to the meeting or at the meeting prior to the
vote pursuant to the proxy. A proxy may be revoked by a writing delivered to
us stating that the proxy is revoked, by a subsequent proxy that is signed by
the person who signed the earlier proxy and is present at the meeting, or by
attendance at the meeting and voting in person. Please note, however, that if
a stockholder's shares are held of record by a broker, bank or other nominee
and that stockholder wishes to vote at the meeting, the stockholder must bring
to the meeting a letter from the broker, bank or other nominee confirming that
stockholder's beneficial ownership of the shares and that such broker, bank or
other nominee is not voting such shares.
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PROPOSAL NO. 1 -- ELECTION OF DIRECTORS
Our board of directors presently consists of five members, all of whom
are to be elected at the meeting. Each director will be elected to hold
office until the next annual meeting of stockholders and until his successor
is duly elected and qualified, or until such director's earlier resignation,
death or removal.
At the meeting, the following five incumbent directors will be nominated
for reelection by the board: Alan S. Fisher, Peter L. Harris, Peter H.
Jackson, S. Jerrold Kaplan and Kenneth J. Orton. Shares represented by the
accompanying proxy will be voted "for" the election of the five nominees
recommended by the board unless the proxy is marked in such a manner as to
withhold authority so to vote. In the event that any nominee for any reason
is unable to serve, the proxies may be voted for such substitute nominee as
the proxy holder may determine. Each of the nominees has consented to being
named in this proxy statement and to serve if elected. Directors will be
elected by a plurality of the votes of the shares present in person or
represented by proxy at the meeting and entitled to vote in the election of
directors. The five nominees for election as directors who receive the
greatest number of votes cast for the election of directors at the meeting, a
quorum being present, will become directors at the conclusion of the
tabulation of votes.
Directors/nominees
The following table sets forth the names of our directors and information
about each:
<TABLE>
<CAPTION>
Director
Name Age Principal Occupation Since
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
S. Jerrold Kaplan.......... 47 President, Chief Executive Officer and a director, 1994
Alan s. Fisher............. 38 Chief Technical Officer, Vice President of Developm 1994
and Operations and a director, Onsale
Peter L. Harris (1) (2).... 55 Chairman, Chief Executive Officer and President, 1996
The Picture People
Peter H. Jackson (1) (2)... 40 President and Chief Executive Officer, Intraware, I 1996
Kenneth J. Orton........... 47 chief Strategist, E-Business, Cognitiative, Inc. 1996
</TABLE>
- ----------
(1) Member of the audit committee
(2) Member of the compensation committee
S. Jerrold Kaplan co-founded Onsale in July 1994 and has been our
President, Chief Executive Officer and as a director since then. From 1989 to
October 1993, he was Chairman of GO Corporation, a developer of pen-based
computers. Mr. Kaplan received his B.A. degree in history and philosophy of
science from the University of Chicago and received his M.S.E. and Ph.D.
degrees in computer and information science from the University of
Pennsylvania.
Alan S. Fisher co-founded Onsale in July 1994 and has been our Chief
Technical Officer, Vice President of Development and Operations and as a
director since then. From July 1994 to July 1996, he was our Chief Financial
Officer. He is also Vice Chairman of the Board of Infodata Systems Inc., an
Internet document publishing software company. From 1988 to 1994, he was
President of Software Partners, Inc., a developer and publisher of software
products which he co-founded. Mr. Fisher currently is a director of
Fatbrain.com, an electronic retailer and a director of Shop.org, an electronic
retailing trade association. Mr. Fisher received his B.S. degree in
electrical engineering from the University of Missouri and received his M.S.
degree in electrical engineering from Stanford University.
Peter L. Harris has been a director of Onsale since December 1996. He
has been Chairman, Chief Executive Officer and President of The Picture
People, a family portrait studio chain, since August 1995. From May 1994 to
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January 1996, he was Chairman of Accolade, Inc., a publisher of interactive
entertainment software. From May 1994 to June 1995, he was Chief Executive
Officer of Accolade. From July 1992 to May 1994, he was a management
consultant. Mr. Harris currently is a director of Natural Wonders, Inc. and
Pacific Sunwear of California, Inc. Mr. Harris received his B.A. degree in
business administration from Whittier College.
Peter H. Jackson has been a director of Onsale since December 1996.
Since August 1996, he has been President and Chief Executive Officer of
Intraware, Inc., a developer and distributor of intranet software tools and
applications which he co-founded. From April 1994 to May 1996, he was
President and Chief Operating Officer of Dataflex Corporation, a computer
hardware reseller and services provider. From 1985 to April 1994, he was
President and Chief Executive Officer of Granite Computer Products, Inc., a
supplier of computer hardware and software for large corporations which he
founded. Mr. Jackson received his B.A. degree in history from the University
of California, Berkeley.
Kenneth J. Orton has been a director of Onsale since October 1996. Since
February 1999, he has been Chief Strategist, E-Business for Cognitiative, a
planning, marketing and consulting business for electronic commerce. From
April 1994 to February 1999, he was President and Chief Executive Officer of
Preview Travel, Inc., which became an online travel service in June 1997.
From 1989 to March 1994, he was Vice President and General Manager for
Epsilon, Inc., a wholly-owned subsidiary of American Express TRS, a database
marketing company. Mr. Orton received his B.A. degree in business
administration and marketing from California State University, Fullerton.
Board of directors meetings and committees
Board of directors. During 1998, the board of directors met six times,
including telephone conference meetings, and acted by written consent four
times. No director attended fewer than 75% of the aggregate of the total
number of meetings of the board and the total number of meetings held by all
committees of the board on which such director served.
Standing committees of the board include an Audit Committee and a
Compensation Committee. The board does not have a nominating committee or a
committee performing similar functions.
Audit committee. Messrs. Jackson and Harris are the current members of
the Audit Committee. The Audit Committee meets with our independent
accountants to review the adequacy of our internal control systems and
financial reporting procedures, reviews the general scope of our annual audit
and the fees charged by the independent accountants, reviews and monitors the
performance of non-audit services by our auditors, reviews the fairness of any
proposed transaction between us and any officer, director or other affiliate
(other than transactions subject to the review of the compensation committee),
and after such review, makes recommendations to the full board and performs
such further functions as may be required by any stock exchange or over-the-
counter market upon which our common stock may be listed. The Audit Committee
met three times during 1998.
Compensation committee. Messrs. Jackson and Harris are the current
members of Compensation Committee. The Compensation Committee recommends
compensation for our officers and employees and grants (or delegates authority
to grant) options and other awards under our 1995 Equity Incentive Plan, 1996
Employee Stock Purchase Plan and 1996 Directors Stock Option Plan. The
Compensation Committee did not meet during 1998, but did act four times by
written consent.
Director compensation
We reimburse our directors for reasonable expenses associated with their
attendance at board meetings. None of the members of the board receives a fee
for attending board meetings. Board members who are not employees of Onsale,
or of any parent, subsidiary or affiliate of Onsale, are eligible to
participate in our 1996 Directors Stock Option Plan. Under this plan,
eligible directors receive an option to purchase 15,000 shares of our common
stock as of the date they join the board. Eligible directors who have served
on the board continuously receive an option to purchase 5,000 shares on each
anniversary of the date of the annual stockholders meeting. . Options granted
prior to our 2000 annual stockholders meeting vest as to 12.5% of the shares
six months after the
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grant, and the remainder will vest on a pro rata basis
monthly over the next four years. Options granted under this plan at or after
our 2000 annual stockholders meeting will be fully vested and exercisable on
the date of the grant, unless otherwise determined by our board. Pursuant to
this plan, during 1998, Messrs. Orton, Jackson and Harris each received an
option to purchase 3,315, 1,972 and 2,123 shares, respectively of our common
stock at an exercise price of $31.50 per share. The grant date of these
options was May 18, 1998.
The board of directors recommends a vote for the election of each of the
nominated directors.
PROPOSAL NO. 2 - AMENDMENT TO OUR 1995 EQUITY INCENTIVE PLAN
We are asking stockholders to approve the amendment of our 1995 Equity
Incentive Plan, to increase the number of shares of common stock reserved
under the plan on May 17, 1999 by 2% of the total outstanding shares as of
that date, and to provide for an automatic increase in the shares reserved
under the plan, on January 1, 2000 and each anniversary thereafter, of 4% of
the total shares outstanding as of the immediately preceding December 31. The
purpose of this amendment is to secure sufficient additional shares under the
plan so that we are able to maintain a competitive equity compensation
program.
Our board believes that the increase in the number of shares reserved
for issuance under this plan is in Onsale's best interests because of our
continuing need to attract and retain quality employees and thereby remain
competitive in the industries. Granting equity incentives under the plan
plays an important role in our efforts to attract and retain employees of
outstanding ability. Competition for skilled engineers and other key
employees in the Internet and software industry is intense and the use of
significant stock options to retain and motivate such personnel is pervasive
in the high technology industries. Our board believes that the additional
reservation of shares with respect to which equity incentives may be granted
will provide us with adequate flexibility to ensure that we can continue to
meet those goals and facilitate the expansion of our employee base.
Our board approved the proposed amendment on March 15, 1999, to be
effective upon stockholder approval.
Summary of 1995 Equity Incentive Plan
Plan history
The following is a summary of the principal provisions of our 1995
Equity Incentive Plan. This summary is not necessarily complete, we refer you
to the full text of the plan.
In November 1995, the board adopted and our stockholders approved our
1995 Equity Incentive Plan and reserved 1,500,000 shares of common stock for
issuance under the plan. The purpose of the plan is to provide incentives to
attract, retain and motivate eligible persons whose present and potential
contributions are important to our success by offering them an opportunity to
participate in our future performance through awards of stock options,
restricted stock and stock bonuses. In August 1996, we amended the plan to
increase the number of shares reserved for issuance under the plan to
3,032,250. In December 1996, we amended the plan to become effective upon our
initial public offering and to increase the shares reserved for issuance under
the plan to 3,500,000. In May 1998, we amended the plan again to increase the
number of shares reserved for issuance under the plan to 5,300,000.
As of March 31, 1999, options to purchase an aggregate of 2,572,839
shares of common stock were outstanding under the plan, with exercise prices
ranging from $0.033 to $63.50 per share, and options to purchase 1,765,046
shares were available for grant. Of these, options to purchase a total of
4,340,095 shares were granted to all employees as a group, including all
current officers who are non-executive officers, of which options to purchase
805,141 shares were canceled. As of March 31, 1999, our current executive
officers as a group, six persons, were
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granted options under the plan to
purchase an aggregate of 696.000 shares and options to purchase an aggregate
of 3,588,295 shares were granted to employees other than executive officers.
For a list of options granted during 1998 to named executive officers, as
defined in the section titled "Executive Compensation", please see the chart
on page 13.
Shares
The stock subject to issuance under the plan consists of shares of our
authorized but unissued common stock. The number of shares of common stock
currently reserved for issuance under the plan is 5,300,000 shares, of which
4,340,095 represent options that have been granted and 1,765,046 represent
shares available for grant. Proposal No. 2 seeks to increase the number of
shares of common stock reserved under the plan on May 17, 1999 by 2% of the
total outstanding shares as of that date, and to provide for an automatic
increase in the shares reserved under the plan, on January 1, 2000 and each
anniversary thereafter, of 4% of the total shares outstanding as of the
immediately preceding December 31. Shares subject to an option granted
pursuant to the plan that expires or is terminated for any reason without
being exercised, shares subject to an award granted pursuant to the plan that
is forfeited or is repurchased by us at the original issue price, and shares
subject to an award granted pursuant to the plan that otherwise terminates
without shares being issued will again become available for grant and issuance
pursuant to awards under the plan. This number of shares is subject to
proportional adjustment to reflect stock splits, stock dividends and other
similar events.
Eligibility
Employees, officers, directors, consultants, independent contractors and
advisors of Onsale or any parent or subsidiary of Onsale, collectively
referred to as participants, are eligible to receive awards under the plan.
No person will be eligible to receive more than 250,000 shares in any calendar
year pursuant to awards granted under the plan. Notwithstanding the
foregoing, a new employee is eligible to receive up to a maximum of 750,000
shares pursuant to the plan in the calendar year in which he or she commences
employment. As of March 31, 1999, approximately 212 persons were in the class
of persons eligible to participate in the plan, 962,115 shares had been issued
upon exercise of options, 2,572,839 shares were subject to outstanding options
and no shares had been issued pursuant to stock bonus awards. As of that
date, 1,765,046 shares were available for future grant, not including the
proposed amendment to the plan. If the proposed amendment had been approved
by the stockholders as of such date, there would have been 2,156,388 shares
available under the plan. The closing price of our common stock on the Nasdaq
National Market was $36.125 per share as of March 25, 1999, the last trading
day before the record date for the 1999 annual stockholder's meeting.
Administration
The plan is administered by the Compensation Committee, the members of
which are appointed by our board of directors. The Compensation Committee
currently consists of Peter L. Harris and Peter H. Jackson, both of whom are
non-employee directors, as defined in Rule 16b-3 promulgated under the
Exchange Act, and outside directors, as defined pursuant to Section 162(m) of
the Internal Revenue Code.
Subject to the terms of the plan, the Compensation Committee determines
the persons who are to receive awards, the number of shares subject to each
such award and the terms and conditions of such awards. The Compensation
Committee has authorized S. Jerrold Kaplan, our President and Chief Executive
Officer, to grant options to purchase up to 25,000 shares of our common stock
to our employees whose transactions in our common stock are not subject to
Section 16 of the Exchange Act. The Compensation Committee also has the
authority to construe and interpret any of the provisions of the plan or any
awards granted under the plan.
Stock options
The plan permits the granting of options that are intended to qualify
either as incentive stock options, known as ISOs, or non-qualified stock
options, known as NQSOs. ISOs may be granted only to employees, including
officers and directors who are also employees, of Onsale or any parent or
subsidiary of Onsale. The option
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exercise price for each ISO share must be no
less than 100% of the fair market value, as defined in the plan, of a share of
our common stock at the time the ISO is granted. The per share exercise price
of an ISO granted to a 10% stockholder must be no less than 110% of the fair
market value of a share of our common stock at the time the ISO is granted.
The option exercise price for each NQSO share must be no less than 85% of the
fair market value of a share of common stock at the time of grant. We have
not granted options under the plan at less than fair market value and do not
intend to do so in the foreseeable future.
The exercise price of options granted under the plan may be paid as
approved by the Compensation Committee at the time of grant:
o in cash (by check)
o by cancellation of indebtedness of Onsale to the participant
o by surrender of shares of our common stock owned by the participant for
at least six months and having a fair market value on the date of
surrender equal to the aggregate exercise price of the option
o by tender of a full recourse promissory note
o by waiver of compensation due to or accrued by the participant for
services rendered
o by a same-day sale commitment from the participant and a National
Association of Securities Dealers, Inc. (NASD) broker
o by a margin commitment from the participant and a NASD broker or
o by any combination of the foregoing
Restricted stock awards
The Compensation Committee may grant participants restricted stock
awards to purchase stock either in addition to, or in tandem with, other
awards under the plan, under such terms, conditions and restrictions as the
Compensation Committee may determine. The purchase price for such awards must
be no less than 85% of the fair market value of our common stock on the date
of the award, or in the case of an award granted to a 10% stockholder, the
purchase price must be 100% of fair market value, and can be paid for in any
of the first five forms of consideration listed above, as approved by the
Compensation Committee at the time of grant. We have not granted any
restricted stock awards under the plan to date, and we do not intend to do so
in the foreseeable future.
Stock bonuses
The Compensation Committee may grant participants stock bonuses either
in addition to or in tandem with other awards under the plan, under such
terms, conditions and restrictions as the Compensation Committee may
determine. We have not granted any stock bonuses under the plan to date, and
we do not intend to grant stock bonuses from shares now reserved or now
proposed to be reserved under the plan.
Mergers, consolidations, change of control
In the event of a merger, consolidation, dissolution or liquidation of
Onsale, the sale of substantially all of its assets, or any other similar
corporate transaction, the successor corporation may assume awards under the
plan, substitute equivalent awards in exchange for those granted under the
plan, or provide consideration substantially similar to that which is provided
to our stockholders in such transaction. In the event that the successor
corporation does not assume or substitute awards, such awards will expire upon
the closing of such transaction at the time and upon the conditions as the
Compensation Committee determines. However, the Compensation Committee may,
in its sole discretion, provide that the vesting of any or all awards granted
pursuant to the plan will accelerate.
Amendment or termination of the plan
The board may at any time terminate or amend the plan, including
amending any form of award agreement or instrument to be executed pursuant to
the plan. However, the board may not amend the plan in any manner that
requires stockholder approval pursuant to the Internal Revenue Code or its
regulations, or pursuant to the Exchange Act or Rule 16b-3 promulgated under
the Exchange Act.
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Term of the plan
Unless terminated earlier as provided in the plan, the plan will expire
in November 2005, ten years from the date it was adopted by the board.
Federal income tax information
The following is a general summary as of the date of this proxy
statement of the federal income tax consequences to the company and
participants under the plan. Federal tax laws may change and the federal,
state and local tax consequences for any participant will depend upon his or
her individual circumstances. Each participant has been and is encouraged to
seek the advice of a qualified tax advisor regarding the tax consequences of
participation in the plan.
Incentive stock options. A participant will recognize no income upon
grant of an ISO and incur no tax on its exercise, unless the participant is
subject to the alternative minimum tax, referred to as AMT. If the
participant holds shares acquired upon exercise of an ISO, or the ISO shares,
for more than one year after the date the option was exercised and for more
than two years after the date the option was granted, the participant
generally will realize capital gain or loss, rather than ordinary income or
loss, upon disposition of the ISO shares. This gain or loss will be equal to
the difference between the amount realized upon such disposition and the
amount paid for the ISO shares.
If the participant disposes of ISO shares prior to the expiration of
either required holding period, known as a disqualifying disposition, the gain
realized upon such disposition, up to the difference between the fair market
value of the ISO shares on the date of exercise (or, if less, the amount
realized on a sale of such shares) and the option exercise price, will be
treated as ordinary income. Any additional gain will be long-term or short-
term capital gain, depending upon the amount of time the ISO shares were held
by the participant.
Alternative minimum tax. The difference between the fair market value
of the ISO shares on the date of exercise and the exercise price is an
adjustment to income for purposes of AMT. The AMT, imposed to the extent it
exceeds the taxpayer's regular tax, is 26% of the portion of an individual
taxpayer's alternative minimum taxable income that would otherwise be taxable
as ordinary income, and 28% in the case of alternative minimum taxable income
in excess of $175,000. A maximum 20% AMT rate applies to the portion of
alternative minimum taxable income that would otherwise be taxable as net
capital gain. Alternative minimum taxable income is determined by adjusting
regular taxable income for certain items, increasing that income by certain
tax preference items, including the difference between the fair market value
of the ISO shares on the date of exercise and the exercise price, and reducing
this amount by the applicable exemption amount ($45,000 in case of a joint
return, subject to reduction under certain circumstances). If a disqualifying
disposition of the ISO shares occurs in the same calendar year as exercise of
the ISO, there is no AMT adjustment with respect to those ISO shares. Also,
upon a sale of ISO shares that is not a disqualifying disposition, alternative
minimum taxable income is reduced in the year of sale by the excess of the
fair market value of the ISO shares at exercise over the amount paid for the
ISO shares.
Non-qualified stock options. A participant will not recognize any
taxable income at the time an NQSO is granted. However, upon exercise of an
NQSO, the participant must include in income as compensation an amount equal
to the difference between the fair market value of the shares on the date of
exercise and the participant's exercise price. The included amount must be
treated as ordinary income by the participant and may be subject to
withholding by Onsale, either by payment in cash or withholding out of the
participant's salary. Upon resale of the shares by the participant, any
subsequent appreciation or depreciation in the value of the shares will be
treated as capital gain or loss.
Restricted stock awards and stock bonuses. Restricted stock and stock
bonuses will generally be subject to tax at the time of receipt, unless there
are restrictions that enable the participant to defer tax. At the time the
tax is incurred, the tax treatment will be similar to that discussed above for
NQSOs.
Maximum tax rates. The maximum tax rate applicable to ordinary income
is 39.6%. Long-term capital gain will be taxed at a maximum of 20%. For this
purpose, in order to receive long-term capital gain treatment, the
8
<PAGE>
shares must be held for more than twelve months. Capital gains may be offset
by capital losses and up to $3,000 of capital losses may be offset annually
against ordinary income.
Tax treatment of Onsale. We generally will be entitled to a deduction
in connection with the exercise of an NQSO by a participant or the receipt of
restricted stock or stock bonuses by a participant to the extent that the
participant recognizes ordinary income and we withhold tax. We will be
entitled to a deduction in connection with the disposition of ISO shares only
to the extent that the participant recognizes ordinary income on a
disqualifying disposition of the ISO shares.
ERISA. The plan is not subject to any of the provisions of the Employee
Retirement Income Security Act of 1974 and is not qualified under Section
401(a) of the Internal Revenue Code.
The board recommends a vote for the proposed amendment to our 1995 Equity
Incentive Plan.
PROPOSAL NO. 3 -- RATIFICATION OF SELECTION OF INDEPENDENT ACCOUNTANTS
We have selected PricewaterhouseCoopers LLP as our independent
accountants to perform the audit of our financial statements for 1999, and the
stockholders are being asked to ratify this selection. PricewaterhouseCoopers
LLP has been engaged as our independent accountants since 1996.
Representatives of PricewaterhouseCoopers LLP will be present at the meeting,
will have the opportunity to make a statement at the meeting if they desire to
do so and will be available to respond to appropriate questions.
The board of directors recommends a vote for the ratification of the selection
of PricewaterhouseCoopers LLP as our independent accountants
NEW PLAN BENEFITS
The amounts of future option grants under our 1995 Equity Incentive Plan
and future purchases under our 1996 Employee Stock Purchase Plan to our Chief
Executive Officer, our other four most highly compensated executive officers
who were serving as executive officers at the end of 1998, all of our current
executive officers as a group, all current directors who are not executive
officers as a group and all employees, including all officers who are not
executive officers, as a group, are not determinable because under the terms
of the equity incentive plan such grants are made in the discretion of the
Compensation Committee or its designees, and under the terms of the employee
stock purchase plan such purchases are based on participant contributions.
Future option exercise prices under the equity incentive plan are not
determinable because they are based upon the fair market value of our common
stock on the date of grant, and future purchase prices under the employee
stock purchase plan are not determinable because they are based on the fair
market value of our common stock at the beginning of each offering period and
on each purchase date, as each is defined by the employee stock purchase plan.
9
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information with respect to the
beneficial ownership of our common stock as of March 31, 1999 by:
o each stockholder known by us to be the beneficial owner of more than 5%
of our common stock
o each director and nominee
o each named executive officer set forth in the Summary Compensation Table
below
o all directors and executive officers as a group
<TABLE>
<CAPTION>
Amount of
Name Beneficial Ownership (1) Percent
- -------------------------------------------- -------------------- -------
<S> <C> <C>
S. Jerrold Kaplan (2)......................... 5,148,960 26.3%
Alan S. Fisher (3)............................ 3,518,185 18.0%
Razi Mohiuddin (4)............................ 1,871,315 9.6%
John E. Labbett (5)........................... 36,397 *
Merle W. McIntosh (7)......................... 10,062 *
Peter L. Harris (7)........................... 13,176 *
Kenneth J. Orton (8).......................... 11,699 *
Peter H. Jackson (9).......................... 5,764 *
All executive officers and directors as a group
(8 Persons) (10)............................ 8,788,098 44.9%
</TABLE>
*Less than 1%
(1) Unless otherwise indicated below, the persons and entities named in the
table have sole voting and sole investment power with respect to all
shares beneficially owned, subject to community property laws where
applicable. Shares of our common stock subject to options that are
currently exercisable or exercisable within 60 days of March 31, 1999 are
deemed to be outstanding and to be beneficially owned by the person
holding such options for the purpose of computing the percentage
ownership of such person but are not treated as outstanding for the
purpose of computing the percentage ownership of any other person.
(2) Represents 5,148,231 shares held of record by Mr. Kaplan, and excludes
shares held of record by Mr. Kaplan's wife, shares held of record by Amy
Kaplan Eckman, trustee of the Lily Layne Kaplan Irrevocable Trust and
shares held of record by the Kaplan Family Trust. Mr. Kaplan disclaims
beneficial ownership of the shares held by his wife and shares held by
the trusts. Mr. Kaplan is our President, Chief Executive Officer and a
director. The address of Mr. Kaplan is c/o Onsale, Inc., at 1350 Willow
Road, Suite 100, Menlo Park, California 94025.
(3) Represents 3,518,185 shares held of record by Mr. Fisher, and excludes
25,000 shares held of record by the Kelly Elizabeth Fisher Irrevocable
Trust. Mr. Fisher disclaims beneficial ownership of the shares held by
the trust. Mr. Fisher is our Chief Technical Officer, Vice President of
Development and Operations and a director . The address of Mr. Fisher is
c/o Onsale, Inc., 1350 Willow Road, Suite 100, Menlo Park, California
94025.
(4) Represents 1,856,315 shares held of record by Mr. Mohiuddin and 15,000
shares held of record by the Momin Foundation. This amount excludes
150,000 shares held of record by the Mohiuddin Children's Trust, Ali
Ansari & Tanveer Fatima, Joint Trustees. Mr. Mohiuddin disclaims
beneficial ownership of the shares held by the trust. The address of Mr.
Mohiuddin is c/o Software Partners, Inc., 1953 Landings Drive, Mountain
View, California 94043.
(5) Represents shares subject to options exercisable within 60 days of March
31, 1999. Mr. Labbett is our Senior Vice President and Chief Financial
Officer.
10
<PAGE>
(6) Represents shares subject to options exercisable within 60 days of March
31, 1999. Mr. McIntosh is our Vice President of Merchandise Acquisition.
(7) Includes 13,176 shares subject to an option exercisable within 60 days of
March 31, 1999. Mr. Harris is a director of Onsale.
(8) Includes 10,699 shares subject to options exercisable within 60 days of
March 31, 1999. Mr. Orton is a director of Onsale.
(9) Includes 5,764 shares subject to options exercisable within 60 days of
March 31, 1999. Mr. Jackson is a director of Onsale.
(10) Includes 119,389 shares issuable upon exercise of options exercisable
within 60 days of March 31, 1999.
11
<PAGE>
MANAGEMENT
Executive officers
The following table sets forth the names of our executive officers and
information about each:
<TABLE>
<CAPTION>
Name Age Principal Occupation
- --------------------- ------- ----------------------------------------------
<S> <C> <C>
S. Jerrold Kaplan.... 47 President, Chief Executive Officer and a director
Alan s. Fisher....... 38 Chief Technical Officer, Vice President of
Development and Operations and a director
Merle W. McIntosh.... 43 Senior Vice President of Merchandise Acquistition
John E. Labbett...... 48 Senior Vice President and Chief Financial Officer
Jeffrey F. Sheahan... 45 Chief Operating Officer
Bari M. Abdul........ 39 Vice President of Marketing
</TABLE>
For information about S. Jerrold Kaplan and Alan S. Fisher, please see
"Directors/nominees."
Merle W. McIntosh has been our Senior Vice President of Merchandise
Acquisition since February 1997. From 1994 to 1997, he was Vice President of
Purchasing for Microwarehouse, Inc., a direct marketer of computer products.
From 1992 to 1994, he was Director of Product Management for Entex, Inc., a
computer reseller. Mr. McIntosh studied business management at New Hampshire
College.
John E. Labbett has been our Senior Vice President and Chief Financial
Officer since June 1998. From 1995 to 1998, he was Executive Vice President
and Chief Financial Officer of House of Fabrics, Inc., a fabrics retailer.
From 1994 to 1995, he was Senior Vice President and Chief Financial Officer of
The Petfood Giant, Inc., a retailer of pet food products. Mr. Labbett
received his bachelor degree in accounting (equivalent) from the Institute of
Chartered Accountants in England.
Jeffrey F. Sheahan has been our Chief Operating Officer since October
1998. From June 1997 to October 1998, he was Senior Vice President of
Microwarehouse, Inc. and President of Microwarehouse Europe, a direct marketer
of computers and computer-related products. From October 1993 to May 1997, he
served as Vice President and General Manager of European operations for
Microwarehouse, Inc. Mr. Sheahan received his B.A. degree in political
science and economics from the University of Massachusetts at Boston.
Bari M. Abdul has been Vice President of Marketing since March 1999.
From January 1996 to February 1999, he was Division Marketing Director and
Country Manager of Pepsico, Inc. From July 1986 to December 1995, he held
several positions with Procter & Gamble, most recently Marketing Manager. Mr.
Abdul received his B.S. degree in engineering from the University of
California at Berkeley and his masters of business administration from The
Wharton School of Business, University of Pennsylvania.
12
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth all compensation awarded, earned or paid for
services rendered in all capacities with Onsale and its subsidiaries during
each of 1996, 1997 and 1998 to our Chief Executive Officer, our four other
most highly compensated executive officers who were serving as executive
officers at the end of 1998 and one other executive officer who would have
qualified as one of our four most highly compensated officers, but who left
Onsale prior to the end of 1998. This information includes the dollar
values of base salaries and bonus awards, the number of shares subject to
stock options granted and certain other compensation, if any, whether
paid or deferred. We do not grant stock appreciation rights and we have
no long-term compensation benefits other than stock options.
Summary Compensation Table
<TABLE>
<CAPTION>
Long-Term
Compensation
Annual Compensation Awards
--------------------------------------
Securities All
Other Annual Underlying Other
Name and Principal Position Year Salary Compensation (1) Options Compensation (2)
- ----------------------------------- ------ ---------- -------------- ----------- -----------------
<S> <C> <C> <C> <C> <C>
S. Jerrold Kaplan 1998 $100,000 $0 0 $250
President and Chief Executive 1997 $100,000 $0 0 $250
Officer 1996 $0 $0 0 $0
Dennis Shepard 1998 $175,000 $0 0 $0
Vice President of Operations 1997 $118,686 $0 121,000 $250
1996 n/a n/a 0 n/a
Merle W. McIntosh 1998 $175,000 $0 0 $0
Senior Vice President of 1997 $126,421 $38,771 161,000 $250
Merchandise Acquisition 1996 n/a n/a 0 n/a
John E. Labbett 1998 $101,794 $9,321 200,000 $0
Senior Vice President and 1997 n/a n/a n/a n/a
Chief Financial Officer 1996 n/a n/a n/a n/a
Alan S. Fisher 1998 $100,000 $0 0 $250
Chief Technical Officer and 1997 $100,000 $0 0 $250
Vice President of Development and 1996 $0 $0 0 $0
Operations
Martha D. Greer (3) 1998 $147,475 $0 0 $250
Vice President of Merchandise 1997 $125,960 $40,000 11,000 $250
Management 1996 n/a n/a 150,000 $0
</TABLE>
(1) Represents relocation compensation
(2) Represents 401(k) contributions
(3) Ms. Greer left Onsale in November, 1998.
13
<PAGE>
The following table sets forth further information regarding option
grants pursuant to our 1995 Equity Incentive Plan during 1998 to each of the
named executive officers. In accordance with the rules of the Securities and
Exchange Commission, the table sets forth the hypothetical gains that would
exist for the options at the end of their ten-year terms, based on 5% and 10%
assumed rates of appreciation from the date the option was granted to the end
of the option term.
Option Grants in 1998
<TABLE>
<CAPTION>
Potential Realizable
Number of Percentage of Value at Assumed Annual
Securities Total Options Rates of Stock Price
Underlying Granted to Appreciation for Option Term (2)
Options Employees in Exercise Price Expiration ------------------------------
Name Granted (1) 1998 Per Share Date 5% 10%
- ---------------- -------------- ------------- ------------- ------------ ------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
S. Jerrold Kaplan...... 0 -- n.a n.a n.a n.a
Merle W. McIntosh...... 0 -- n.a n.a n.a n.a
Dennis Shepard......... 0 -- n.a n.a n.a n.a
John E. Labbett........ 200,000 14% 22.13 06/17/98 2,783,488 3,542,381
Alan S. Fisher......... 0 -- n.a n.a n.a n.a
Martha D. Greer........ 0 -- n.a n.a n.a n.a
</TABLE>
(1) The option shown in the table was granted at fair market value, is an
incentive stock option (to the extent permitted under the Internal Revenue
Code) and will expire ten years from the date of grant, subject to earlier
termination upon termination of the optionee's employment.
(2) The 5% and 10% assumed annual compound rates of stock price appreciation
are mandated by the rules of the Securities and Exchange Commission and do
not represent our estimate or projection of future common stock prices or
values.
The following table sets forth certain information concerning the
exercise of options by each of the named executive officers during 1998,
including the aggregate amount of gains on the date of exercise. The table
includes the number of shares covered by both exercisable and unexercisable
stock options as of December 31, 1998. Also reported are values of "in-the-
money" options that represent the positive spread between the respective
exercise prices of outstanding stock options and $40.06 per share, which was
the closing price of our common stock as reported on the Nasdaq National
Market on December 31, 1998, the last day of trading in 1998.
Aggregate Option Exercises in 1998 and Year-End Values
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised In-the-
Underlying Unexercised Money Options
Options at Year-End (1) at Year-End (1)
------------------------ -------------------------
Shares
Acquired on Value
Name Exercise Realized(2) Exercisable Unexercisable Exercisable Unexercisable
- ---------------------- ----------- ---------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
S. Jerrold Kaplan...... n/a n/a n/a n/a n/a n/a
Merle W. McIntosh...... 50,541 $842,672 12,417 88,042 $408,516 $2,913,801
Dennis Shepard......... 45,000 $885,253 2,750 73,250 $92,883 $2,551,048
John E. Labbett........ n/a n/a 25,000 175,000 $448,250 $3,137,750
Alan S. Fisher......... n/a n/a n/a n/a n/a n/a
Martha D. Greer........ 10,000 $184,631 55,854 0 $1,906,963 $0
</TABLE>
(1) These values, unlike the amounts set forth in the column entitled "Value
Realized," have not been, and may never be, realized and are based on the
positive spread between the respective exercise prices of outstanding
options and the closing price of our common stock on December 31, 1998.
(2) "Value Realized" represents the fair market value of the shares of common
stock underlying the option on the date of exercise less the aggregate
exercise price of the option.
14
<PAGE>
EMPLOYMENT AGREEMENTS
Mr. McIntosh's offer letter of February 1997 provides for an initial
annual salary of $175,000 commencing on March 12, 1997. The letter also
provides for reimbursement of up to $25,000 of costs associated with his
relocation to California. At the commencement of his employment, Mr. McIntosh
also received an option to purchase 150,000 shares of common stock with an
exercise price of $7.00 per share. The option vested as to 18,750 shares on
September 12, 1997 and vested and will vest as to 3,125 shares each subsequent
month. In the event that Mr. McIntosh is terminated without formal cause
following a change of control transaction after the first six months of his
employment, 25% of the unvested portion of his option will vest immediately
upon his termination and he will receive three months' severance pay. In
addition, the letter provided Mr. McIntosh with the right to request a $25,000
loan from us before March 12, 1998, and Mr. McIntosh exercised this right in
March 1997. The loan is due at the earlier of March 1999 or three months
after the termination of Mr. McIntosh's employment with us. The loan has an
interest rate of 7%, and is secured by options to purchase shares of our
common stock that Mr. McIntosh currently holds and acquires in the future.
The loan is currently outstanding as of April 20, 1999. Mr. McIntosh's
employment is at will and can therefore be terminated at any time, with or
without formal cause.
Mr. Labbett's offer letter of June 1998 provides for an initial annual
salary of $200,000 commencing on June 17, 1998. The letter also provides for
reimbursement of up to $2,000 per month of temporary housing and
transportation expenses for up to one year. At the commencement of his
employment, Mr. Labbett also received an option to purchase 200,000 shares of
common stock with an exercise price of $22.13 per share. The option vested as
to 25,000 shares on December 17, 1998 and vested and will vest as to 4,166
shares each subsequent month. If Mr. Labbett is terminated without cause, he
will receive either three or six months severance pay depending on when the
termination occurs. If Mr. Labbett is terminated without formal cause
following a change of control transaction, he will receive either six or
twelve months severance pay depending on when the termination occurs. Mr.
Labbett's employment is at will and can therefore be terminated at any time,
with or without formal cause.
Mr. Sheahan's offer letter of October 1998 provides for an initial
annual salary of $250,000 commencing on October 19, 1998. The letter also
provides for reimbursement of up to $75,000 of costs associated with his
relocation to California. At the commencement of his employment, Mr. Sheahan
also received an option to purchase 275,000 shares of common stock with an
exercise price of $14.75 per share. The option will vest as to 34,375 shares
on April 19, 1999 and as to 5,729 shares each subsequent month. In the event
that Mr. Sheahan is terminated without cause, he will receive twelve months
salary as severance pay. In addition, if he is terminated without cause later
than six months after his start date, then he will receive an additional six
months accelerated vesting of his initial stock grant. In the event that Mr.
Sheahan is terminated without formal cause following a change of control
transaction after the first six months of his employment, he will receive
twelve months' severance pay and an additional twelve months' vesting of his
initial stock grant. In addition, the letter provided Mr. Sheahan with the
right to request a loan of up to $500,000 from us before October 19, 1999.
For a description of this loan, please see "Certain Relationships and Related
Transactions." Mr. Sheahan's employment is at will and can therefore be
terminated at any time, with or without formal cause.
Mr. Shepard's offer letter of April 1997 provided for an initial annual
salary of $175,000 commencing on April 28, 1997. The letter also provided for
reimbursement of up to $5,000 of actual moving expenses. At the commencement
of his employment, Mr. Shepard also received an option to purchase 120,000
shares of common stock with an exercise price of $5.10 per share. The option
vested as to 15,000 shares on November 12, 1997 and as to 2,500 shares each
subsequent month. Mr. Shepard left Onsale in February 1999.
Ms. Greer's offer letter of December 1996 provided for an initial annual
salary of $125,000. The letter also provided for a one-time payment of $40,000
to reimburse her for her relocation and interim living costs. At the
commencement of her employment, Ms. Greer also received an option to purchase
150,000 shares of common stock with an exercise price of $7.00 per share. The
option vested as to 18,750 shares on June 1, 1997 and continued to vest as to
3,125 shares each subsequent month. In addition, the letter provided Ms. Greer
with the right to request a $125,000 loan from us before December 19, 1997 to
assist with the purchase of a new home. Ms. Greer did not exercise this right
prior to its expiration. Ms. Greer left Onsale in November 1998.
15
<PAGE>
Mr. Abdul's offer letter of February 1999 provides for an initial annual
salary of $145,000. Mr. Abdul will also participate in a quarterly bonus
program that is contingent upon the successful completion of objectives
mutually agreed upon by him and our management. The maximum bonus he may earn
is 20% of his annual salary, paid quarterly. The letter also provides for a
one-time payment of $5,000 to reimburse him for his relocation costs. At the
commencement of his employment, Mr. Abdul also received an option to purchase
60,000 shares of common stock with an exercise price of $36.50 per share. The
option will vest as to 7,500 shares on September 1, 1999 and will vest as to
1,250 shares each subsequent month. Mr. Abdul's employment is at will and can
therefore be terminated at any time, with or without formal cause.
REPORT ON EXECUTIVE COMPENSATION
This report of the Compensation Committee is required by the Securities
and Exchange Commission. This report shall not be deemed to be filed under
the Securities Act or Exchange Act, or incorporated by reference by any
general statement incorporating this proxy statement by reference into any
filing made under the Securities Act or Exchange Act, except to the extent
that we specifically incorporate this report by reference.
The Compensation Committee makes the final decisions regarding executive
compensation and stock option grants to executives. The Compensation
Committee is composed of two independent non-employee directors, none of whom
has any interlocking relationships, as such term is defined by the Securities
and Exchange Commission.
General compensation policy
The Compensation Committee acts on behalf of our board of directors to
establish our general compensation for all Onsale employees. The committee
typically reviews base salary levels and target bonuses for the Chief
Executive Officer and our other executive officers and employees at or about
the beginning of each year. The committee administers our incentive and
equity plans, including our 1995 Equity Incentive Plan and our 1996 Directors
Stock Option Plan.
The committee's philosophy in compensating executive officers is to
relate compensation to corporate performance. Consistent with this
philosophy, the incentive component of the compensation of our executive
officers is contingent on corporate profits and sales performance and the
discretion of the board. Long-term equity incentives for executive officers
are effected through the granting of stock options under our 1995 Equity
Incentive Plan. Stock options generally have value for the executive only if
the price our common stock increases above the fair market value on the grant
date and the executive remains in our employ for the period required for the
shares to vest.
The base salaries, incentive compensation and stock option grants of the
executive officers are determined in part by the committee informally
reviewing data on prevailing compensation practices in technology companies
with whom we compete for executive talent and by their evaluating such
information in connection with our corporate goals. To this end, the
committee attempted to compare the compensation of our executive officers with
the compensation practices of comparable companies to determine base salary,
target bonuses and target total cash compensation. In addition to their base
salaries, our executive officers are each eligible to participate in our 1995
Equity Incentive Plan.
In preparing the performance graph for this proxy statement, we used the
Morgan Stanley High Technology Index as our published line of business index.
The compensation practices of most of the companies in the Morgan Stanley High
Technology Index were not reviewed by Onsale when the committee reviewed the
compensation information described above because such companies were
determined not to be competitive with us for executive talent.
16
<PAGE>
Executive compensation in 1998
Base compensation. The committee reviewed the recommendations and
performance and market data outlined above and established a base salary level
for each executive officer.
Incentive compensation. We paid no cash bonuses to our executive
officers in 1998 and have no plans to do so in 1999.
Stock options. In 1998, stock options were granted to certain executive
officers as incentives for them to become employees or to aid in the retention
of executive officers and to align their interests with those of the
stockholders. Stock options typically have been granted to executive officers
when the executive first joins us, in connection with a significant change in
responsibilities and, occasionally, to achieve equity within a peer group.
The committee may, however, grant additional stock options to executives for
other reasons. The number of shares subject to each stock option granted is
within the discretion of the committee and is based on anticipated future
contribution and ability to impact corporate and/or business unit results,
past performance or consistency within the executive's peer group. In 1998,
the committee considered these factors, as well as the number of options held
by such executive officers as of the date of grant that remained unvested. In
the discretion of the committee, executive officers may also be granted stock
options under our 1995 Equity Incentive Plan to provide greater incentives to
continue their employment with us and to strive to increase the value of our
common stock. The stock options generally become exercisable over a four-year
period and are granted at a price that is equal to the fair market value of
our common stock on the date of grant.
Company performance and Chief Executive Officer compensation. Mr.
Kaplan did not receive a bonus in 1998 nor did he receive any stock options
in that year.
Compliance with Section 162(m) of the Internal Revenue Code. We intend
to comply with the requirements of Section 162(m) of the Internal Revenue
Code. Our 1996 Directors Stock Option Plan is already in compliance with
Section 162(m) by limiting stock awards to named executive officers. We do
not expect cash compensation for 1999 to be in excess of $1,000,000 or
consequently affected by the requirements of Section 162(m).
MEMBERS OF THE COMPENSATION COMMITTEE
Peter L. Harris
Peter L. Jackson
COMPANY STOCK PRICE PERFORMANCE
The stock price performance graph below is required by the Securities
and Exchange Commission, This graph shall not be deemed to be filed under the
Securities Act or Exchange Act, or incorporated by reference by any general
statement incorporating this proxy statement by reference into any filing made
under the Securities Act or Exchange Act, except to the extent that we
specifically incorporate this graph by reference.
The graph below compares the cumulative total stockholder return on our
common stock, the Nasdaq Stock Market - Composite Index and the Morgan Stanley
High Technology Index from April 17, 1997 (the effective date of our
registration statement with respect to our initial public offering) to
December 31, 1998 (assuming the investment of $100 in our common stock and in
each of the other indices on the date of our initial public offering, and
reinvestment of all dividends).
17
<PAGE>
The comparisons in the graph below are based on historical data and are
not intended to forecast the possible future performance of our common stock.
[GRAPH APPEARS HERE]
The above graph was plotted using the following data:
<TABLE>
<CAPTION>
Nasdaq Stock Market- Morgan Stanley High
Onsale, Inc. Composite Index Technology Index
-------------------- -------------------- ---------------------
Market Investment Investment Investment
Price Value Index Value Index Value
----------- ---------- ---------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
04/17/97 6.00 $100 $1,217 $100 $357 $100
06/30/97 9.25 $154 $1,442 $118 $426 $119
09/30/97 32.25 $537 $1,685 $138 $520 $145
12/31/97 18.00 $300 $1,570 $129 $447 $125
03/31/98 31.00 $517 $1,836 $151 $542 $152
06/30/98 24.75 $413 $1,895 $156 $596 $167
09/30/98 16.69 $278 $1,694 $139 $574 $161
12/31/98 40.06 $668 $2,193 $180 $874 $245
</TABLE>
18
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
From January 1, 1998 to the present, there are no currently proposed
transactions in which the amount involved exceeds $60,000 to which Onsale or
any of its subsidiaries was or is to be a party and in which any executive
officer, director, 5% beneficial owner of our common stock or member of the
immediate family of any of the foregoing persons had or will have a direct or
indirect material interest, except for payments set forth under "Executive
Compensation" above, the agreements described under "Employment Agreements"
above, the transactions described below under this caption and indemnification
agreements that we entered into with several of our directors and executive
officers.
The indemnification agreements between us and our directors and
executive officers provide the maximum indemnity available to them under
Section 145 of the Delaware General Corporation Law and under our Bylaws, as
well as certain additional procedural protections. Such indemnity agreements
provide generally that we will advance expenses incurred by directors and
executive officers in any action or proceeding as to which they may be
indemnified, and require us to indemnify such individuals to the fullest
extent permitted by law.
In February 1998, Dennis Shepard, our former Vice President of
Operations, borrowed $125,000 from us at an interest rate of 5.47% in
connection with the purchase of a primary residence. The loan was secured by
an interest in the shares of our common stock owned by Mr. Shepard. In May
1998, Mr. Shepard borrowed an additional $225,000 from us at an interest rate
of 6.0% secured by an interest in the shares of our common stock owned by Mr.
Shepard. Mr. Shepard repaid both of these loans in full in September 1998.
In April 1998, Merle McIntosh, our Senior Vice President of Merchandise
Acquisition, borrowed $350,000 from us at an interest rate of 6.0% in
connection with the purchase of a primary residence. The loan was secured by
an interest in the shares of our common stock owned by Mr. McIntosh. Mr.
McIntosh repaid this loan in full in September 1998.
In December 1998, Jeff Sheahan, our Chief Operating Officer, borrowed
$250,000 from us at an interest rate of 4.6% in connection with the purchase
of a primary residence. The loan is secured by a second interest in Mr.
Sheahan's residence and an interest in the shares of our common stock owned by
Mr. Sheahan. Repayment of the principal amount of the loan and interest is
due at the earlier of December 2003, the sale of his residence, within two
years of his termination from Onsale without cause or immediately upon his
termination from Onsale for any other reason. Interest accrues and is payable
quarterly. As of March 31, 1999, $250,000 was due under this loan.
STOCKHOLDER PROPOSALS
Proposals of stockholders intended to be presented at our 2000 annual
meeting of stockholders must be received by us at our principal executive
offices no later than December 20, 1999 in order to be included in our proxy
statement and form of proxy relating to that meeting.
Our annual report on Form 10-K as filed with the Securities and Exchange
Commission for the year ended December 31, 1998 is available without charge by
writing to or calling our headquarters. Requests should be directed to:
Onsale, Inc., Investor Relations Department, 1350 Willow Road, Suite 100,
Menlo Park, California 94025. Our annual report on Form 10-K may be obtained
through the web site maintained by the Securities and Exchange Commission at
http://www.sec.gov.
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COMPLIANCE UNDER SECTION 16(a)
OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16 of the Exchange Act requires our directors and officers, and
persons who own more than 10% of our common stock, to file initial reports of
ownership and reports of changes in ownership with the Securities and Exchange
Commission and the Nasdaq National Market. Such persons are required by
Securities and Exchange Commission regulation to furnish us with copies of all
Section 16(a) forms they file. Based solely on our review of the copies of
such forms furnished to us and written representations from our executive
officers, we believe that all Section 16(a) filing requirements were met
during fiscal 1998, except that one Form 3 was filed late for each of Leslie
Benson, John E. Labbett and Jeffery F. Sheahan, no Form 3 was filed for Dennis
Shepard, one Form 4 was filed late for each of Alan S. Fisher, Martha D.
Greer, Peter H. Jackson, S. Jerrold Kaplan, John E. Labbett and Razi Mohiuddin
and two Form 4s were filed late for Merle W. McIntosh.
OTHER BUSINESS
Our board of directors does not presently intend to bring any other
business before the meeting, and, so far as we know, no matters are to be
brought before the meeting except as specified in the notice of the meeting.
As to any business that may properly come before the meeting, however, it is
intended that proxies, in the form enclosed, will be voted in respect thereof
in accordance with the judgment of the persons voting such proxies.
Whether or not you plan to attend the meeting, please complete, date, sign and
promptly return the accompanying proxy in the enclosed postage-paid envelope
so that your shares will be represented at the meeting.
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Appendix A
ONSALE, INC.
1995 EQUITY INCENTIVE PLAN
As Amended and Restated through March 15, 1999
1. PURPOSE. The purpose of this Plan, as amended herein,
(the "Amendment and Restatement") is to provide incentives to attract,
retain and motivate eligible persons whose present and potential
contributions are important to the success of the Company, its Parent
and Subsidiaries, by offering them an opportunity to participate in the
Company's future performance through awards of Options, Restricted Stock
and Stock Bonuses. Capitalized terms not defined in the text are
defined in Section 23.
2. SHARES SUBJECT TO THE PLAN.
2.1 Number of Shares Available. Subject to Sections
2.2 and 18, the total number of Shares reserved and available for grant
and issuance pursuant to this Plan will be 5,300,000 Shares. Subject to
Sections 2.2 and 18, Shares that: (a) are subject to issuance upon
exercise of an Option but cease to be subject to such Option for any
reason other than exercise of such Option; (b) are subject to an Award
granted hereunder but are forfeited or are repurchased by the Company at
the original issue price; or (c) are subject to an Award that otherwise
terminates without Shares being issued will again be available for grant
and issuance in connection with future Awards under this Plan. On May
17, 1999 the aggregate number of Shares reserved and available for grant
and issuance pursuant to this Plan will be increased automatically by a
number of Shares equal to two percent (2%) of the total outstanding
shares of the Company as of that date. In addition, on January 1, 2000
and each anniversary thereafter, the aggregate number of Shares reserved
and available for grant and issuance pursuant to this Plan will be
increased automatically by a number of Shares equal to four percent (4%)
of the total outstanding shares of the Company as of the immediately
preceding December 31, unless the Board determines prior to such
increase of Shares that the increase shall not occur for such year. At
all times the Company shall reserve and keep available a sufficient
number of Shares as shall be required to satisfy the requirements of all
outstanding Options granted under this Plan and all other outstanding
but unvested Awards granted under this Plan. The total number of
Shares issued under the Plan upon exercise of ISOs will in no event
exceed 20,000,000 Shares (adjusted in proportion to any adjustment under
Section 2.2 below) over the term of the Plan. No Participant may
receive (a) Restricted Stock Awards, (b) Stock Bonus Awards, or (c)
Options with an Exercise Price below Fair Market Value for more than
100,000 Shares over the term of the Plan, and the sum of such awards
issued under this Plan may not exceed 200,000 Shares in the aggregate
over the term of the Plan.
2.2 Adjustment of Shares. In the event that the number of
outstanding Shares is changed by a stock dividend, recapitalization,
stock split, reverse stock split, subdivision, combination,
reclassification or similar change in the capital structure of the
Company without consideration, then (a) the number of Shares reserved
for issuance under this Plan, (b) the Exercise Prices of and number of
Shares subject to outstanding Options, and (c) the number of Shares
subject to other outstanding Awards will be proportionately adjusted,
subject to any required action by the Board or the stockholders of the
Company and compliance with applicable securities laws; provided,
however, that fractions of a Share will not be issued but will either be
replaced by a cash payment equal to the Fair Market Value of such
fraction of a Share or will be rounded up to the nearest whole Share, as
determined by the Committee.
3. ELIGIBILITY. ISOs (as defined in Section 5 below) may
be granted only to employees (including officers and directors who are
also employees) of the Company or of a Parent or Subsidiary of the
Company. All other Awards may be granted to employees, officers,
directors, consultants, independent contractors and advisors of the
Company or any Parent or Subsidiary of the Company; provided such
consultants, contractors and advisors render bona fide services not in
connection with the offer and sale of securities in a capital-raising
transaction. No person will be eligible to receive more than 250,000
Shares in any calendar year under this Plan pursuant to the grant of
Awards hereunder, other than new employees of the Company or of a Parent
or Subsidiary of the Company (including new employees who are also
officers and directors of the Company or any Parent or
<PAGE>
Subsidiary of the
Company) who are eligible to receive up to a maximum of 750,000 Shares
in the calendar year in which they commence their employment. A person
may be granted more than one Award under this Plan.
4. ADMINISTRATION.
4.1 Committee Authority. This Plan will be
administered by the Committee or by the Board acting as the Committee.
Subject to the general purposes, terms and conditions of this Plan, and
to the direction of the Board, the Committee will have full power to
implement and carry out this Plan. Without limitation, the Committee
will have the authority to:
(a) construe and interpret this Plan, any Award Agreement
and any other agreement or document executed pursuant
to this Plan;
(b) prescribe, amend and rescind rules and regulations
relating to this Plan;
(c) select persons to receive Awards;
(d) determine the form and terms of Awards;
(e) determine the number of Shares or other consideration
subject to Awards;
(f) determine whether Awards will be granted singly, in
combination with, in tandem with, in replacement of, or
as alternatives to, other Awards under this Plan or any
other incentive or compensation plan of the Company or
any Parent or Subsidiary of the Company;
(g) grant waivers of Plan or Award conditions;
(h) determine the vesting, exercisability and payment of
Awards;
(i) correct any defect, supply any omission or reconcile
any inconsistency in this Plan, any Award or any Award
Agreement;
(j) determine whether an Award has been earned; and
(k) make all other determinations necessary or advisable
for the administration of this Plan.
4.2 Committee Discretion. Any determination made by
the Committee with respect to any Award will be made in its sole
discretion at the time of grant of the Award or, unless in contravention
of any express term of this Plan or Award, at any later time, and such
determination will be final and binding on the Company and on all
persons having an interest in any Award under this Plan. The Committee
may delegate to one or more officers of the Company the authority to
grant an Award under this Plan to Participants who are not Insiders of
the Company.
5. OPTIONS. The Committee may grant Options to eligible
persons and will determine whether such Options will be Incentive Stock
Options within the meaning of the Code ("ISO") or Nonqualified Stock
Options ("NQSO"), the number of Shares subject to the Option, the
Exercise Price of the Option, the period during which the Option may be
exercised, and all other terms and conditions of the Option, subject to
the following:
5.1 Form of Option Grant. Each Option granted under
this Plan will be evidenced by an Award Agreement which will expressly
identify the Option as an ISO or an NQSO ("Stock Option Agreement"), and
will be in such form and contain such provisions (which need not be the
same for each Participant) as the Committee may from time to time
approve, and which will comply with and be subject to the terms and
conditions of this Plan.
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5.2 Date of Grant. The date of grant of an Option
will be the date on which the Committee makes the determination to grant
such Option, unless otherwise specified by the Committee. The Stock
Option Agreement and a copy of this Plan will be delivered to the
Participant within a reasonable time after the granting of the Option.
5.3 Exercise Period. Options may be exercisable
within the times or upon the events determined by the Committee as set
forth in the Stock Option Agreement governing such Option; provided,
however, that no Option will be exercisable after the expiration of ten
(10) years from the date the Option is granted; and provided further
that no ISO granted to a person who directly or by attribution owns more
than ten percent (10%) of the total combined voting power of all classes
of stock of the Company or of any Parent or Subsidiary of the Company
("Ten Percent Stockholder") will be exercisable after the expiration of
five (5) years from the date the ISO is granted. The Committee also may
provide for Options to become exercisable at one time or from time to
time, periodically or otherwise, in such number of Shares or percentage
of Shares as the Committee determines.
5.4 Exercise Price. The Exercise Price of an Option
will be determined by the Committee when the Option is granted and may
not be less than 85% of the Fair Market Value of the Shares on the date
of grant; provided that: (i) the Exercise Price of an ISO will not be
less than 100% of the Fair Market Value of the Shares on the date of
grant; and (ii) the Exercise Price of any ISO granted to a Ten Percent
Stockholder will not be less than 110% of the Fair Market Value of the
Shares on the date of grant. Payment for the Shares purchased must be
made in accordance with Section 8 of this Plan.
5.5 Method of Exercise. Options may be exercised
only by delivery to the Company of a written stock option exercise
agreement (the "Exercise Agreement") in a form approved by the
Committee (which need not be the same for each Participant), stating the
number of Shares being purchased, the restrictions imposed on the Shares
purchased under such Exercise Agreement, if any, and such
representations and agreements regarding Participant's investment intent
and access to information and other matters, if any, as may be required
or desirable by the Company to comply with applicable securities laws,
together with payment in full of the Exercise Price for the number of
Shares being purchased.
5.6 Termination. Notwithstanding the exercise
periods set forth in the Stock Option Agreement, exercise of an Option
will always be subject to the following:
(a) If the Participant is Terminated for any reason except
death or Disability, then the Participant may exercise
such Participant's Options only to the extent that such
Options would have been exercisable upon the
Termination Date no later than three (3) months after
the Termination Date (or such shorter or longer time
period not exceeding five (5) years as may be
determined by the Committee, with any exercise beyond
three (3) months after the Termination Date deemed to
be an NQSO), but in any event, no later than the
expiration date of the Options.
(b) If the Participant is Terminated because of
Participant's death or Disability (or the Participant
dies within three (3) months after a Termination other
than because of Participant's death or Disability),
then Participant's Options may be exercised only to the
extent that such Options would have been exercisable by
Participant on the Termination Date and must be
exercised by Participant (or Participant's legal
representative or authorized assignee) no later than
twelve (12) months after the Termination Date (or such
shorter or longer time period not exceeding five (5)
years as may be determined by the Committee, with any
such exercise beyond (a) three (3) months after the
Termination Date when the Termination is for any reason
other than the Participant's death or Disability, or
(b) twelve (12) months after the Termination Date when
the Termination is for Participant's death or
Disability, deemed to be an NQSO), but in any event no
later than the expiration date of the Options.
(c) Notwithstanding the provisions in paragraph 5.6(a)
above, if a Participant is determined by the Board to
have committed an act of theft, embezzlement, fraud,
dishonesty or a breach of
3
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fiduciary duty to the Company
or Subsidiary, neither the Participant, the
Participant's estate nor such other person who may then
hold the Option shall be entitled to exercise any
Option with respect to any Shares whatsoever, after
termination of service, whether or not after
termination of service the Participant may receive
payment from the Company or Subsidiary for vacation
pay, for services rendered prior to termination, for
services rendered for the day on which termination
occurs, for salary in lieu of notice, or for any other
benefits. In making such determination, the Board
shall give the Participant an opportunity to present to
the Board evidence on his behalf. For the purpose of
this paragraph, termination of service shall be deemed
to occur on the date when the Company dispatches notice
or advice to the Participant that his service is
terminated.
5.7 Limitations on Exercise. The Committee may
specify a reasonable minimum number of Shares that may be purchased on
any exercise of an Option, provided that such minimum number will not
prevent Participant from exercising the Option for the full number of
Shares for which it is then exercisable.
5.8 Limitations on ISO. The aggregate Fair Market
Value (determined as of the date of grant) of Shares with respect to
which ISO are exercisable for the first time by a Participant during any
calendar year (under this Plan or under any other incentive stock option
plan of the Company, Parent or Subsidiary of the Company) will not
exceed $100,000. If the Fair Market Value of Shares on the date of
grant with respect to which ISO are exercisable for the first time by a
Participant during any calendar year exceeds $100,000, then the Options
for the first $100,000 worth of Shares to become exercisable in such
calendar year will be ISO and the Options for the amount in excess of
$100,000 that become exercisable in that calendar year will be NQSO. In
the event that the Code or the regulations promulgated thereunder are
amended after the Effective Date of this Plan to provide for a different
limit on the Fair Market Value of Shares permitted to be subject to ISO,
such different limit will be automatically incorporated herein and will
apply to any Options granted after the effective date of such amendment.
5.9 Modification, Extension or Renewal. The
Committee may modify, extend or renew outstanding Options and authorize
the grant of new Options in substitution therefor, provided that any
such action may not, without the written consent of a Participant,
impair any of such Participant's rights under any Option previously
granted. Any outstanding ISO that is modified, extended, renewed or
otherwise altered will be treated in accordance with Section 424(h) of
the Code. The Committee may reduce the Exercise Price of outstanding
Options without the consent of Participants affected by a written notice
to them; provided, however, that the Exercise Price may not be reduced
below the minimum Exercise Price that would be permitted under Section
5.4 of this Plan for Options granted on the date the action is taken to
reduce the Exercise Price.
5.10 No Disqualification. Notwithstanding any other
provision in this Plan, no term of this Plan relating to ISO will be
interpreted, amended or altered, nor will any discretion or authority
granted under this Plan be exercised, so as to disqualify this Plan
under Section 422 of the Code or, without the consent of the Participant
affected, to disqualify any ISO under Section 422 of the Code.
6. RESTRICTED STOCK. A Restricted Stock Award is an offer
by the Company to sell to an eligible person Shares that are subject to
restrictions. The Committee will determine to whom an offer will be
made, the number of Shares the person may purchase, the price to be paid
(the "Purchase Price"), the restrictions to which the Shares will be
subject, and all other terms and conditions of the Restricted Stock
Award, subject to the following:
6.1 Form of Restricted Stock Award. All purchases
under a Restricted Stock Award made pursuant to this Plan will be
evidenced by an Award Agreement ("Restricted Stock Purchase Agreement")
that will be in such form (which need not be the same for each
Participant) as the Committee will from time to time approve, and will
comply with and be subject to the terms and conditions of this Plan.
The offer of Restricted Stock will be accepted by the Participant's
execution and delivery of the Restricted Stock Purchase Agreement and
full payment for the Shares to the Company within thirty (30) days from
the date the Restricted Stock Purchase Agreement is delivered to the
person. If such person does not execute and deliver the Restricted
Stock Purchase Agreement along with full payment for the Shares to the
Company within thirty (30) days, then the offer will terminate, unless
otherwise determined by the Committee.
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6.2 Purchase Price. The Purchase Price of Shares
sold pursuant to a Restricted Stock Award will be determined by the
Committee and will be at least 85% of the Fair Market Value of the
Shares on the date the Restricted Stock Award is granted, except in the
case of a sale to a Ten Percent Stockholder, in which case the Purchase
Price will be 100% of the Fair Market Value. Payment of the Purchase
Price must be made in accordance with Section 8 of this Plan.
6.3 Restrictions. Restricted Stock Awards will be
subject to such restrictions (if any) as the Committee may impose. The
Committee may provide for the lapse of such restrictions in installments
and may accelerate or waive such restrictions, in whole or part, based
on length of service, performance or such other factors or criteria as
the Committee may determine.
7. STOCK BONUSES.
7.1 Awards of Stock Bonuses. A Stock Bonus is an
award of Shares (which may consist of Restricted Stock) for services
rendered to the Company or any Parent or Subsidiary of the Company. A
Stock Bonus may be awarded for past services already rendered to the
Company, or any Parent or Subsidiary of the Company (provided that the
Participant pays the Company the par value of the shares awarded by such
Stock Bonus in cash) pursuant to an Award Agreement (the
"Stock Bonus Agreement") that will be in such form (which need not be
the same for each Participant) as the Committee will from time to time
approve, and will comply with and be subject to the terms and conditions
of this Plan. A Stock Bonus may be awarded upon satisfaction of such
performance goals as are set out in advance in the Participant's
individual Award Agreement (the "Performance Stock Bonus Agreement")
that will be in such form (which need not be the same for each
Participant) as the Committee will from time to time approve, and will
comply with and be subject to the terms and conditions of this Plan.
Stock Bonuses may vary from Participant to Participant and between
groups of Participants, and may be based upon the achievement of the
Company, Parent or Subsidiary and/or individual performance factors or
upon such other criteria as the Committee may determine.
7.2 Terms of Stock Bonuses. The Committee will
determine the number of Shares to be awarded to the Participant and
whether such Shares will be Restricted Stock. If the Stock Bonus is
being earned upon the satisfaction of performance goals pursuant to a
Performance Stock Bonus Agreement, then the Committee will determine:
(a) the nature, length and starting date of any period during which
performance is to be measured (the "Performance Period") for each Stock
Bonus; (b) the performance goals and criteria to be used to measure the
performance, if any; (c) the number of Shares that may be awarded to the
Participant; and (d) the extent to which such Stock Bonuses have been
earned. Performance Periods may overlap and Participants may
participate simultaneously with respect to Stock Bonuses that are
subject to different Performance Periods and different performance goals
and other criteria. The number of Shares may be fixed or may vary in
accordance with such performance goals and criteria as may be determined
by the Committee. The Committee may adjust the performance goals
applicable to the Stock Bonuses to take into account changes in law and
accounting or tax rules and to make such adjustments as the Committee
deems necessary or appropriate to reflect the impact of extraordinary or
unusual items, events or circumstances to avoid windfalls or hardships.
7.3 Form of Payment. The earned portion of a Stock
Bonus may be paid currently or on a deferred basis with such interest or
dividend equivalent, if any, as the Committee may determine. Payment
may be made in the form of cash, whole Shares, including Restricted
Stock, or a combination thereof, either in a lump sum payment or in
installments, all as the Committee will determine.
7.4 Termination During Performance Period. If a
Participant is Terminated during a Performance Period for any reason,
then such Participant will be entitled to payment (whether in Shares,
cash or otherwise) with respect to the Stock Bonus only to the extent
earned as of the date of Termination in accordance with the Performance
Stock Bonus Agreement, unless the Committee will determine otherwise.
8. PAYMENT FOR SHARE PURCHASES.
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8.1 Payment. Payment for Shares purchased pursuant
to this Plan may be made in cash (by check) or, where expressly approved
for the Participant by the Committee and where permitted by law:
(a) by cancellation of indebtedness of the Company to the
Participant;
(b) by surrender of shares that either: (1) have been
owned by Participant for more than six (6) months and
have been paid for within the meaning of SEC Rule 144
(and, if such shares were purchased from the Company by
use of a promissory note, such note has been fully paid
with respect to such shares); or (2) were obtained by
Participant in the public market;
(c) by tender of a full recourse promissory note having
such terms as may be approved by the Committee and
bearing interest at a rate sufficient to avoid
imputation of income under Sections 483 and 1274 of the
Code; provided, however, that Participants who are not
employees or directors of the Company will not be
entitled to purchase Shares with a promissory note
unless the note is adequately secured by collateral
other than the Shares; provided, further, that the
portion of the Purchase Price or Exercise Price equal
to the par value of the Shares, if any, must be paid in
cash.
(d) by waiver of compensation due or accrued to the
Participant for services rendered; provided, however,
that the portion of the Purchase Price or Exercise
Price equal to the par value of the Shares, if any,
must be paid in cash.
(e) with respect only to purchases upon exercise of an
Option, and provided that a public market for the
Company's stock exists:
(1) through a "same day sale" commitment from the
Participant and a broker-dealer that is a member
of the National Association of Securities Dealers
(an "NASD Dealer") whereby the Participant
irrevocably elects to exercise the Option and to
sell a portion of the Shares so purchased to pay
for the Exercise Price, and whereby the NASD
Dealer irrevocably commits upon receipt of such
Shares to forward the Exercise Price directly to
the Company; or
(2) through a "margin" commitment from the
Participant and a NASD Dealer whereby the
Participant irrevocably elects to exercise the
Option and to pledge the Shares so purchased to
the NASD Dealer in a margin account as security
for a loan from the NASD Dealer in the amount of
the Exercise Price, and whereby the NASD Dealer
irrevocably commits upon receipt of such Shares
to forward the Exercise Price directly to the
Company; or
(f) by any combination of the foregoing.
8.2 Loan Guarantees. The Committee may help the
Participant pay for Shares purchased under this Plan by authorizing a
guarantee by the Company of a third-party loan to the Participant.
9. WITHHOLDING TAXES.
9.1 Withholding Generally. Whenever Shares are to be
issued in satisfaction of Awards granted under this Plan, the Company
may require the Participant to remit to the Company an amount sufficient
to satisfy federal, state and local withholding tax requirements prior
to the delivery of any certificate or certificates for such Shares.
Whenever, under this Plan, payments in satisfaction of Awards are to be
made in cash, such payment will be net of an amount sufficient to
satisfy federal, state, and local withholding tax requirements.
9.2 Stock Withholding. When, under applicable tax
laws, a Participant incurs tax liability in connection with the exercise
or vesting of any Award that is subject to tax withholding and the
Participant is obligated to pay the Company the amount required to be
withheld, the Committee may in its sole discretion allow
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the Participant
to satisfy the minimum withholding tax obligation by electing to have
the Company withhold from the Shares to be issued that number of Shares
having a Fair Market Value equal to the minimum amount required to be
withheld, determined on the date that the amount of tax to be withheld
is to be determined. All elections by a Participant to have Shares
withheld for this purpose will be made in accordance with the
requirements established by the Committee and be in writing in a form
acceptable to the Committee
10. PRIVILEGES OF STOCK OWNERSHIP.
10.1 Voting and Dividends. No Participant will have
any of the rights of a stockholder with respect to any Shares until the
Shares are issued to the Participant. After Shares are issued to the
Participant, the Participant will be a stockholder and have all the
rights of a stockholder with respect to such Shares, including the right
to vote and receive all dividends or other distributions made or paid
with respect to such Shares; provided, that if such Shares are
Restricted Stock, then any new, additional or different securities the
Participant may become entitled to receive with respect to such Shares
by virtue of a stock dividend, stock split or any other change in the
corporate or capital structure of the Company will be subject to the
same restrictions as the Restricted Stock; provided, further, that the
Participant will have no right to retain such stock dividends or stock
distributions with respect to Shares that are repurchased at the
Participant's original Purchase Price pursuant to Section 12.
10.2 Financial Statements. The Company will provide
financial statements to each Participant prior to such Participant's
purchase of Shares under this Plan, and to each Participant annually
during the period such Participant has Awards outstanding; provided,
however, the Company will not be required to provide such financial
statements to Participants whose services in connection with the Company
assure them access to equivalent information.
11. TRANSFERABILITY. Awards granted under this Plan, and
any interest therein, will not be transferable or assignable by
Participant, and may not be made subject to execution, attachment or
similar process, otherwise than by will or by the laws of descent and
distribution or as determined by the Committee and set forth in the
Award Agreement with respect to Awards that are not ISOs.. During the
lifetime of the Participant an Award will be exercisable only by the
Participant, and any elections with respect to an Award may be made only
by the Participant unless otherwise determined by the Committee and set
forth in the Award Agreement with respect to Awards that are not ISOs.
12. RESTRICTIONS ON SHARES. At the discretion of the
Committee, the Company may reserve to itself and/or its assignee(s) in
the Award Agreement a right to repurchase a portion of or all Unvested
Shares held by a Participant following such Participant's Termination at
any time within ninety (90) days after the later of Participant's
Termination Date and the date Participant purchases Shares under this
Plan, for cash and/or cancellation of purchase money indebtedness, at
the Participant's Exercise Price or Purchase Price, as the case may be.
13. CERTIFICATES. All certificates for Shares or other
securities delivered under this Plan will be subject to such stock
transfer orders, legends and other restrictions as the Committee may
deem necessary or advisable, including restrictions under any applicable
federal, state or foreign securities law, or any rules, regulations and
other requirements of the SEC or any stock exchange or automated
quotation system upon which the Shares may be listed or quoted.
14. ESCROW; PLEDGE OF SHARES. To enforce any restrictions
on a Participant's Shares, the Committee may require the Participant to
deposit all certificates representing Shares, together with stock powers
or other instruments of transfer approved by the Committee,
appropriately endorsed in blank, with the Company or an agent designated
by the Company to hold in escrow until such restrictions have lapsed or
terminated, and the Committee may cause a legend or legends referencing
such restrictions to be placed on the certificates. Any Participant who
is permitted to execute a promissory note as partial or full
consideration for the purchase of Shares under this Plan will be
required to pledge and deposit with the Company all or part of the
Shares so purchased as collateral to secure the payment of Participant's
obligation to the Company under the promissory note; provided, however,
that the Committee may require or accept other or additional forms of
collateral to secure the payment of
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such obligation and, in any event,
the Company will have full recourse against the Participant under the
promissory note notwithstanding any pledge of the Participant's Shares
or other collateral. In connection with any pledge of the Shares,
Participant will be required to execute and deliver a written pledge
agreement in such form as the Committee will from time to time approve.
The Shares purchased with the promissory note may be released from the
pledge on a pro rata basis as the promissory note is paid.
15. EXCHANGE AND BUYOUT OF AWARDS. The Committee may, at
any time or from time to time, authorize the Company, with the consent
of the respective Participants, to issue new Awards in exchange for the
surrender and cancellation of any or all outstanding Awards. The
Committee may at any time buy from a Participant an Award previously
granted with payment in cash, Shares (including Restricted Stock) or
other consideration, based on such terms and conditions as the Committee
and the Participant may agree.
16. SECURITIES LAW AND OTHER REGULATORY COMPLIANCE. An
Award will not be effective unless such Award is in compliance with all
applicable federal and state securities laws, rules and regulations of
any governmental body, and the requirements of any stock exchange or
automated quotation system upon which the Shares may then be listed or
quoted, as they are in effect on the date of grant of the Award and also
on the date of exercise or other issuance. Notwithstanding any other
provision in this Plan, the Company will have no obligation to issue or
deliver certificates for Shares under this Plan prior to: (a) obtaining
any approvals from governmental agencies that the Company determines are
necessary or advisable; and/or (b) completion of any registration or
other qualification of such Shares under any state or federal law or
ruling of any governmental body that the Company determines to be
necessary or advisable. The Company will be under no obligation to
register the Shares with the SEC or to effect compliance with the
registration, qualification or listing requirements of any state
securities laws, stock exchange or automated quotation system, and the
Company will have no liability for any inability or failure to do so.
17. NO OBLIGATION TO EMPLOY. Nothing in this Plan or any
Award granted under this Plan will confer or be deemed to confer on any
Participant any right to continue in the employ of, or to continue any
other relationship with, the Company or any Parent or Subsidiary of the
Company or limit in any way the right of the Company or any Parent or
Subsidiary of the Company to terminate Participant's employment or other
relationship at any time, with or without cause.
18. CORPORATE TRANSACTIONS.
18.1
Assumption or Replacement of Awards by Successor. In the
event of (a) a dissolution or liquidation of the Company, (b) a merger
or consolidation in which the Company is not the surviving corporation
(other than a merger or consolidation with a wholly-owned subsidiary, a
reincorporation of the Company in a different jurisdiction, or other
transaction in which there is no substantial change in the stockholders
of the Company or their relative stock holdings and the Awards granted
under this Plan are assumed, converted or replaced by the successor
corporation, which assumption will be binding on all Participants), (c)
a merger in which the Company is the surviving corporation but after
which the stockholders of the Company immediately prior to such merger
(other than any stockholder that merges, or which owns or controls
another corporation that merges, with the Company in such merger) cease
to own their shares or other equity interest in the Company, (d) the
sale of substantially all of the assets of the Company, or (e) the
acquisition, sale or transfer of more than 50% of the outstanding shares
of the Company by tender offer or similar transaction, any or all
outstanding Awards may be assumed, converted or replaced by the
successor corporation (if any), which assumption, conversion or
replacement will be binding on all Participants. In the alternative,
the successor corporation may substitute equivalent Awards or provide
substantially similar consideration to Participants as was provided to
stockholders (after taking into account the existing provisions of the
Awards). The successor corporation may also issue, in place of
outstanding Shares of the Company held by the Participant, substantially
similar shares or other property subject to repurchase restrictions no
less favorable to the Participant. In the event such successor
corporation (if any) refuses to assume or substitute Awards, as provided
above, pursuant to a transaction described in this Subsection 18.1, such
Awards will expire on such transaction at such time and on such
conditions as the Committee will determine, provided, however, that the
Committee may, in its sole discretion, provide that the vesting of any
or all Awards granted pursuant to this Plan will accelerate. If the
Committee exercises such discretion with respect to options, such
options will become exercisable in full prior to the consummation of
such event at such times and on such conditions as the Committee determines,
8
<PAGE>
and if such options are not exercised prior to the
consummation of the corporate transaction, they shall terminate in
accordance with the provisions of this Plan.
18.2 Other Treatment of Awards. Subject to any
greater rights granted to Participants under the foregoing provisions of
this Section 18, in the event of the occurrence of any transaction
described in Section 18.1, any outstanding Awards will be treated as
provided in the applicable agreement or plan of merger, consolidation,
dissolution, liquidation, sale of assets or other "corporate
transaction."
18.3 Assumption of Awards by the Company. The
Company, from time to time, also may substitute or assume outstanding
awards granted by another company, whether in connection with an
acquisition of such other company or otherwise, by either; (a) granting
an Award under this Plan in substitution of such other company's award;
or (b) assuming such award as if it had been granted under this Plan if
the terms of such assumed award could be applied to an Award granted
under this Plan. Such substitution or assumption will be permissible if
the holder of the substituted or assumed award would have been eligible
to be granted an Award under this Plan if the other company had applied
the rules of this Plan to such grant. In the event the Company assumes
an award granted by another company, the terms and conditions of such
award will remain unchanged (except that the exercise price and the
number and nature of Shares issuable upon exercise of any such option
will be adjusted appropriately pursuant to Section 424(a) of the Code).
In the event the Company elects to grant a new Option rather than
assuming an existing option, such new Option may be granted with a
similarly adjusted Exercise Price.
19. ADOPTION AND STOCKHOLDER APPROVAL. This Amendment and
Restatement will become effective on the date on which the registration
statement filed by the Company with the SEC under the Securities Act
registering the initial public offering of the Company's Common Stock is
declared effective by the SEC (the "Effective Date"); provided, however,
that if the Effective Date does not occur on or before December 31,
1997, this Amendment and Restatement will terminate having never become
effective. This Amendment and Restatement shall be approved by the
stockholders of the Company (excluding Shares issued pursuant to this
Amendment and Restatement), consistent with applicable laws, within
twelve (12) months before or after the date this Amendment and
Restatement is adopted by the Board.
20. TERM OF PLAN/GOVERNING LAW. Unless earlier terminated
as provided herein, this Plan will terminate ten (10) years from the
date this Plan is adopted by the Board or, if earlier, the date of
stockholder approval. This Plan and all agreements thereunder shall be
governed by and construed in accordance with the laws of the State of
California.
21. AMENDMENT OR TERMINATION OF PLAN. The Board may at any
time terminate or amend this Plan in any respect, including without
limitation amendment of any form of Award Agreement or instrument to be
executed pursuant to this Plan.
22. NONEXCLUSIVITY OF THE PLAN. Neither the adoption of
this Plan by the Board, the submission of this Plan to the stockholders
of the Company for approval, nor any provision of this Plan will be
construed as creating any limitations on the power of the Board to adopt
such additional compensation arrangements as it may deem desirable,
including, without limitation, the granting of stock options and bonuses
otherwise than under this Plan, and such arrangements may be either
generally applicable or applicable only in specific cases.
23. DEFINITIONS. As used in this Plan, the following terms
will have the following meanings:
"Award" means any award under this Plan, including any
Option, Restricted Stock or Stock Bonus.
"Award Agreement" means, with respect to each Award,
the signed written agreement between the Company and the Participant
setting forth the terms and conditions of the Award.
"Board" means the Board of Directors of the Company.
9
<PAGE>
"Code" means the Internal Revenue Code of 1986, as
amended.
"Committee" means the committee appointed by the Board
to administer this Plan, or if no such committee is appointed, the
Board. The Committee, if appointed, will consist of not less than two
members of the Board.
"Company" means ONSALE, Inc. or any successor
corporation.
"Disability" means a disability, whether temporary or
permanent, partial or total, within the meaning of Section 22(e)(3) of
the Code, as determined by the Committee.
"Exchange Act" means the Securities Exchange Act of
1934, as amended.
"Exercise Price" means the price at which a holder of
an Option may purchase the Shares issuable upon exercise of the Option.
"Fair Market Value" means, as of any date, the value of
a share of the Company's Common Stock determined as follows:
(a) if such Common Stock is then quoted on the Nasdaq
National Market, its closing price on the Nasdaq
National Market on the day prior to the date of
determination as reported in The Wall Street Journal;
(b) if such Common Stock is publicly traded and is then
listed on a national securities exchange, its closing
price on the date of determination on the principal
national securities exchange on which the Common Stock
is listed or admitted to trading as reported in The
Wall Street Journal;
(c) if such Common Stock is publicly traded but is not
quoted on the Nasdaq National Market nor listed or
admitted to trading on a national securities exchange,
the average of the closing bid and asked prices on the
date of determination as reported in The Wall Street
Journal;
(d) in the case of an Award made on the Effective Date, the
price per share at which shares of the Company's Common
Stock are initially offered for sale to the public by
the Company's underwriters in the initial public
offering of the Company's Common Stock pursuant to a
registration statement filed with the SEC under the
Securities Act; or
(e) if none of the foregoing is applicable, by the
Committee in good faith.
"Insider" means an officer or director of the Company
or any other person whose transactions in the Company's Common Stock are
subject to Section 16 of the Exchange Act.
"Option" means an award of an option to purchase Shares
pursuant to Section 5.
"Parent" means any corporation (other than the Company)
in an unbroken chain of corporations ending with the Company if each of
such corporations other than the Company owns stock possessing 50% or
more of the total combined voting power of all classes of stock in one
of the other corporations in such chain.
"Participant" means a person who receives an Award
under this Plan.
"Plan" means this ONSALE, Inc. 1995 Equity Incentive
Plan, as amended from time to time.
10
<PAGE>
"Restricted Stock Award" means an award of Shares
pursuant to Section 6.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as
amended.
"Shares" means shares of the Company's Common Stock
reserved for issuance under this Plan, as adjusted pursuant to Sections
2 and 18, and any successor security.
"Stock Bonus" means an award of Shares, or cash in lieu
of Shares, pursuant to Section 7.
"Subsidiary" means any corporation (other than the
Company) in an unbroken chain of corporations beginning with the Company
if each of the corporations other than the last corporation in the
unbroken chain owns stock possessing 50% or more of the total combined
voting power of all classes of stock in one of the other corporations in
such chain.
"Termination" or "Terminated" means, for purposes of
this Plan with respect to a Participant, that the Participant has for
any reason ceased to provide services as an employee, officer, director,
consultant, independent contractor, or advisor to the Company or a
Parent or Subsidiary of the Company. An employee will not be deemed to
have ceased to provide services in the case of (i) sick leave,
(ii) military leave, or (iii) any other leave of absence approved by the
Committee, provided, that such leave is for a period of not more than 90
days, unless reemployment upon the expiration of such leave is
guaranteed by contract or statute or unless provided otherwise pursuant
to formal policy adopted from time to time by the Company and issued and
promulgated to employees in writing. In the case of any employee on an
approved leave of absence, the Committee may make such provisions
respecting suspension of vesting of the Award while on leave from the
employ of the Company or a Subsidiary as it may deem appropriate, except
that in no event may an Option be exercised after the expiration of the
term set forth in the Option agreement. The Committee will have sole
discretion to determine whether a Participant has ceased to provide
services and the effective date on which the Participant ceased to
provide services (the "Termination Date").
"Unvested Shares" means "Unvested Shares" as defined in
the Award Agreement.
"Vested Shares" means "Vested Shares" as defined in the
Award Agreement.
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<PAGE>
DETACH HERE
PROXY
ONSALE, INC.
1350 WILLOW ROAD, SUITE 100
MENLO PARK, CALIFORNIA 94025
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints S. Jerrold Kaplan and Alan S.
Fisher, and each of them, as proxies, each with full powers of
substitution, and hereby authorizes them to represent and to vote, as
designated below, all shares of Common Stock, $0.001 par value, of
ONSALE, Inc. (the "Company") held of record by the undersigned on March
26, 1999, at the Annual Meeting of Stockholders of the Company to be
held on Monday, May 17, 1999, and at any continuations or adjournments
thereof.
This Proxy, when properly executed and returned in a timely
manner, will be voted at the Meeting and any adjournments or
postponements thereof in the manner described herein. If no contrary
indication is made, the proxy will be voted FOR the Board of Director
nominees, FOR Proposals 2 and 3 and in accordance with the judgment of
the persons named as proxies herein on any other matters that may
properly come before the Meeting.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE
ENCLOSED ENVELOPE.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
SEE REVERSE SIDE
DETACH HERE
[X]
Please mark
votes as in
this example.
The Board of Directors unanimously recommends that you vote FOR the
Board of Director nominees and FOR Proposals 2 and 3.
1.
Election of Directors.
Nominees: Alan S. Fisher, Peter L. Harris, Peter H.
Jackson, S. Jerrold Kaplan and Kenneth J. Orton
[ ] For all nominees
[ ] Withheld from all nominees.
[ ] __________________________
For all nominees except as noted above
2.
Proposal to approve the amendment of
the Company's 1995 Equity Incentive Plan.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
3.
Proposal to ratify the appointment of
PricewaterhouseCoopers LLP as
Independent auditors for 1999.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
In accordance with their judgment, the proxies are authorized to vote
upon such other matters as may properly come before the Annual Meeting
or any adjournment or postponement thereof.
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT [ ]
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING PLEASE COMPLETE, DATE
AND SIGN THIS PROXY CARD AND RETURN IT PRIOR TO THE MEETING IN THE
ENCLOSED ENVELOPE.
This Proxy must be signed exactly as your name appears hereon. If more
than one name appears, all persons so designated should sign.
Attorneys, executors, administrators, trustees and guardians should
indicate their capacities. If the signer is a corporation, please print
full corporate name and indicate capacity of duly authorized officer
executing on behalf of the corporation. If the signer is a partnership,
please print full partnership name and indicate capacity of duly
authorized person executing on behalf of the partnership.
Signature: _________________________________________ Date:
Signature: _________________________________________ Date:
(Reverse Side)
THIS IS YOUR PROXY.
YOUR VOTE IS IMPORTANT.
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE
AND SIGN THIS PROXY CARD AND RETURN IT PRIOR TO THE MEETING IN THE
ENCLOSED ENVELOPE.
