<PAGE>
================================================================================
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
EGGHEAD.COM, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(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:
Notes:
<PAGE>
April 13, 2000
To Our Stockholders:
You are cordially invited to attend the 2000 annual meeting of stockholders
of Egghead.com, Inc. to be held at our headquarters located at 1350 Willow
Road, Menlo Park, California, on Monday, May 15, 2000, at 10:00 a.m. Pacific
Time. The matters expected to be acted upon at the meeting are the election of
Class I directors to our board of directors, and ratification of
PricewaterhouseCoopers LLP as our independent accountants for the year ending
December 31, 2000. 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
Chief Executive Officer
<PAGE>
EGGHEAD.COM, INC.
1350 WILLOW ROAD
MENLO PARK, CALIFORNIA 94025
----------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
----------------
To Our Stockholders:
NOTICE IS HEREBY GIVEN that the annual meeting of stockholders of
Egghead.com, Inc. will be held at our headquarters located at 1350 Willow Road,
Menlo Park, California, on Monday, May 15, 2000, 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 three Class I directors of Egghead, 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:
Peter L. Harris
Robert T. Wall
Karen White
2. A proposal to ratify the selection of PricewaterhouseCoopers LLP as
our independent accountants for 2000.
3. 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 30, 2000 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
Chief Executive Officer
Menlo Park, California
April 13, 2000
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.
<PAGE>
EGGHEAD.COM, INC.
1350 WILLOW ROAD
MENLO PARK, CALIFORNIA 94025
----------------
PROXY STATEMENT
----------------
April 13, 2000
The accompanying proxy is solicited on behalf of the board of directors of
Egghead.com, Inc., a Delaware corporation, for use at our annual meeting of
stockholders to be held at our headquarters located at 1350 Willow Road, Menlo
Park, California, on Monday, May 15, 2000, 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 13, 2000. Our 1999 annual report to stockholders
is enclosed with this proxy statement.
Record date; quorum
Only holders of our common stock of record at the close of business on March
30, 2000, 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 37,996,327 shares of
common stock outstanding and entitled to vote, held of record by approximately
1,395 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 Proposal 2 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 Proposal 2.
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
<PAGE>
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.
Definitions
Throughout this proxy statement the term "Old Egghead" is used to refer to
Egghead.com, Inc., a Washington corporation, prior to its merger with a
subsidiary of ONSALE, Inc., on November 19, 1999, and "Egghead" is used to
refer to ONSALE, Inc. prior to its acquisition of Old Egghead and to the
combined entity thereafter, which changed its name to Egghead.com Inc., a
Delaware corporation.
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PROPOSAL NO. 1--ELECTION OF DIRECTORS
Our board of directors presently consists of nine members, three of whom are
to be elected at the meeting. One position on the board is currently vacant,
and we expect to continue our search for an additional member following the
meeting. Each director will be elected to hold office until the 2003 annual
meeting of stockholders and until his successor is duly elected and qualified,
or until such director's earlier resignation, death or removal.
The nominees for election as Class I directors, are: Peter L. Harris, Robert
T. Wall and Karen White. Shares represented by the accompanying proxy will be
voted "for" the election of these nominees unless the proxy is marked in such a
manner as to withhold authority 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 three 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 the class I 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:
Nominees
<TABLE>
<CAPTION>
Committee Director
Name Age Memberships Principal Occupation Since
---- --- ----------- -------------------- --------
<C> <C> <C> <S> <C>
Peter L. Harris 56 Compensation & Nominating Chairman, Chief 1996
Executive Officer and
President, The Picture
People
Robert T. Wall 55 Compensation, Nominating President, On Point 1999
& Finance Developments, LLC
Karen White 38 Compensation & Nominating Senior Vice President, 1999
World Wide Business
Development and Emerging
Markets, Oracle
Corporation
Continuing Directors
S. Jerrold Kaplan 48 Finance President, Chief 1994
Executive Officer and a
director, Egghead
Kenneth J. Orton 48 Audit & Nominating Chief Strategist, E- 1996
Business, Cognitiative,
Inc.
George Orban 54 Managing Partner, Orban 1999
Partners
C. Scott Gibson 48 Audit & Nominating Strategic advisor to 1999
high technology
companies in computer
hardware, enterprise
software and the
Internet
James J. Barnett 42 Audit President and Chief 2000
Executive Officer,
ThirdAge Media
</TABLE>
Peter L. Harris has been a director of Egghead 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 1994 to January 1996, he
was Chairman of Accolade, Inc., a publisher of interactive entertainment
software, and from 1994 to June 1995, he was Chief Executive Officer of
Accolade. Mr. Harris is a director of The Stride
3
<PAGE>
Rite Corporation and Pacific Sunwear of California, Inc. Mr. Harris received
his B.A. degree in business administration from Whittier College.
Robert T. Wall has been a director of Egghead since November 1999, and was a
director of Old Egghead from September 1998 until November 1999. Mr. Wall
serves as President of On Point Developments, LLC, a venture management company
which he founded in 1984. From 1997 until November 1998, when it was acquired
by Cisco Systems, Inc., Mr. Wall served as Chief Executive Officer of Clarity
Wireless, Inc., a broadband wireless data communications company. From 1994
until August 1997, Mr. Wall served as Chairman, President and Chief Executive
Officer of Theatrix Interactive, Inc., a consumer educational software
publisher. Mr. Wall is a director of Network Appliance, Inc., a network data
server company. Mr. Wall received his B.A. degree in economics from DePauw
University and his M.B.A. from Harvard Business School.
Karen White has been a director of Egghead since November 1999, and was a
director of Old Egghead from September 1998 until November 1999. Since April
1998, Ms. White has served as the Senior Vice President, World Wide Business
Development and Emerging Markets, for Oracle Corporation, a software company.
Ms. White joined Oracle in 1993 and has served in various senior executive
capacities since then. Prior to July 1993, Ms. White was Chief Executive
Officer for EGIS Corporation, a high technology consulting company.
S. Jerrold Kaplan co-founded Egghead in 1994 and has been our President,
Chief Executive Officer and a director since then. From 1989 to 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.
Kenneth J. Orton has been a director of Egghead 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
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.
George P. Orban has been Chairman of the Board of Directors of Egghead since
November 1999. Mr. Orban served as a director of Old Egghead from 1985 until
November 1999 (and as Chairman of the Board beginning May 1996), and served as
the Chief Executive Officer of Old Egghead from January 1997 to November 1999.
Mr. Orban is Managing Partner of Orban Partners, a private investment company,
and a director and co-founder of Ross Stores, Inc. Mr. Orban received his B.S.
degree in chemistry from McGill University, his M.A. degree in International
Affairs, from Institut d'Etudes Politiques, Universite de Paris and his M.B.A.
from Columbia University.
C. Scott Gibson has been a director of Egghead since November 1999, and was
a director of Old Egghead from September 1998 until November 1999. Since March
1992, Mr. Gibson has served as a board member, investor and strategic advisor
to high technology companies in the computer hardware, enterprise software and
Internet industries. From 1983 to 1992, Mr. Gibson served as the President and
Chief Operating Officer of Sequent Computer Systems, a computer manufacturing
company which he co-founded. He is a member of the Board of Directors of
TriQuint Semiconductor, Radisys Corporation, Integrated Measurement Systems,
Inc., and Inference Corporation. Mr. Gibson also serves as Chairman of the
Board of Trustees of the Oregon Graduate Institute of Science and Technology
(OGI). Mr. Gibson received his B.S. degree in electrical engineering and his
M.B.A. from the University of Illinois.
James Barnett has been a director of Egghead since January 2000. Mr. Barnett
has been the President and CEO of ThirdAge Media an Internet media company,
since September 1999. From April 1999 to September 1999, Mr. Barnett was
President and CEO of Infogrames North America, a video game publisher. From
1994 to September 1999, he was Chairman, President and Chief Executive Officer
of Accolade, the predecessor company to Infogrames and a publisher and
developer of video games and interactive entertainment software. From 1992
4
<PAGE>
to 1994, Mr. Barnett served as Chief Operating Officer of Storybook Heirlooms,
a direct marketing retailer. He is a member of the board of directors of
Interplay Entertainment Corp. In addition, he is a member of the board of
trustees and treasurer of The Phillips Brooks School. He received his B.A.
degree in political science, and M.B.A. and J.D. degrees, from Stanford
University.
There is no family relationship between any director, executive officer or
person nominated by us or chosen to be a director or executive officer.
Board of Directors
Our board of directors is divided into three classes as nearly equal in size
as possible with staggered three-year terms. The term of office of our Class II
directors will expire at the annual meeting of stockholders to be held in 2001,
and the term of office of our Class III directors will expire at the annual
meeting of stockholders to be held in 2002. At each annual meeting of
stockholders, the successors to the directors whose terms will then expire will
be elected to serve from the time of their election and qualification until the
third annual meeting following their election or until their successors have
been duly elected and qualified, or until their earlier resignation or removal.
Messrs. Gibson and Orton are Class II directors (one position is vacant), and
Messrs. Barnett, Kaplan and Orban are Class III directors.
The board of directors met eight times in 1999, including telephone
conference meetings. 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, except Peter
Jackson, who attended 70% of those meetings.
Committees of the Board of Directors
Audit committee. Messrs. Gibson and Orton 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 two times
during 1999.
Compensation committee. Messrs. Harris and Wall, and Ms. White 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 stock option plans. The
Compensation Committee met once during 1999.
Finance committee. Messrs. Kaplan and Wall are the current members of the
Nominating Committee. The purpose of the Finance Committee, which was formed in
January 2000, is to determine the terms of financings for Egghead.
Nominating committee. Messrs. Gibson, Harris, Orton, and Wall, and Ms. White
are the current members of the Nominating Committee. The Nomination Committee,
which was formed in January 2000, selects nominees to serve as members of the
Board of Directors.
Compensation Committee Interlocks and Insider Participation
None of the members of our compensation committee has at any time since our
formation been an officer or employee of Egghead. None of our executive
officers currently serves, or in the past has served, as a member of the board
of directors or compensation committee of any entity that has one or more
executive officers serving on our board of directors or compensation committee.
5
<PAGE>
Director Compensation
We reimburse our directors for reasonable expenses associated with their
attendance at board meetings. To date, none of our directors have received a
fee for attending board meetings. Members of the board of directors who are
employees of Egghead do not receive any compensation for their service on the
board. Under the Egghead 1995 Equity Incentive Plan, each director who is not
an Egghead employee and who first becomes a member of the board after November
1999 is granted an option to purchase 15,000 shares of common stock under the
plan. Immediately following each annual meeting of stockholders (starting with
the 2000 annual meeting), each eligible director will automatically be granted
an additional option to purchase 10,000 shares of common stock under the plan
if he or she has served continuously as a member of the board (including
service on the Old Egghead board) for at least one year (5,000 shares if the
director has served more than six months but less than one year). Each director
eligible to receive a grant of 10,000 shares in the following year may, in
advance of the annual meeting date as communicated by the Compensation
Committee, elect to receive in lieu thereof $20,000 cash and an option to
purchase 5,000 shares of common stock. Once made, such election may not be
changed; however, a participant may make different elections with respect to
subsequent periods.
The options will have 10-year terms and will terminate three months
following the date the director ceases to be one of our directors or
consultants or 12 months following that date if the termination is due to death
or disability. All options granted under the plan will vest over 12 months and
be exerciseable at a price per share equal to the closing price of Egghead
common stock on the date of grant. In the event of a merger, consolidation,
dissolution or liquidation of Egghead, the sale of substantially all of its
assets, or any other similar corporate transaction, the vesting of all stock
options awarded to directors pursuant to the plan will accelerate and become
immediately exerciseable in full. Pursuant to this plan, during 1999, Messrs.
Orton and Harris each received an option to purchase 5,000 shares, of our
common stock at an exercise price of $22.44 per share. The grant date of these
options was May 17, 1999.
The board of directors recommends a vote for the election of each of the
nominated directors.
PROPOSAL NO. 2--RATIFICATION OF SELECTION OF INDEPENDENT ACCOUNTANTS
We have selected PricewaterhouseCoopers LLP as our independent accountants
to perform the audit of our financial statements for 2000, 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
6
<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 30, 2000 by:
. each stockholder known by us to be the beneficial owner of more than 5%
of our common stock;
. each director and nominee;
. each named executive officer set forth in the Summary Compensation Table
below; and
. all directors and executive officers as a group.
Beneficial ownership is determined under the rules of the Securities and
Exchange Commission and generally includes voting or investment power with
respect to securities. Unless indicated above, to our knowledge, 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. Percentage ownership is based on 37,996,327 shares
outstanding as of March 30, 2000. Shares of common stock subject to options
exercisable on or before May 29, 2000 (within 60 days of March 30, 2000), are
deemed to be outstanding and to be beneficially owned by the person holding the
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. Unless indicated above, the address for each
director and executive officer listed below is Egghead.com, Inc., 1350 Willow
Road, Menlo Park, CA 94025.
<TABLE>
<CAPTION>
Amount of
Beneficial Ownership Percent
-------------------- -------
<S> <C> <C>
5% Stockholder
Alan S. Fisher(1)................................ 2,743,185 7.2%
Executive Officers
S. Jerrold Kaplan(2)............................. 5,048,960 13.3%
Jeffrey F. Sheahan(3)............................ 115,104 *
John E. Labbett(4)............................... 103,353 *
Merle M. McIntosh(5)............................. 61,771 *
Bari M. Abdul(6)................................. 36,366 *
Directors
George Orban(7).................................. 617,344 1.6%
Peter L. Harris(8)............................... 20,706 *
Kenneth J. Orton(9).............................. 19,977 *
Robert T. Wall(10)............................... 12,430 *
C. Scott Gibson(11).............................. 7,034 *
Karen White(12).................................. 6,780 *
James J. Barnett................................. 0 *
All executive officers and directors as a
group(13) (15 persons).......................... 6,148,953 15.74%
</TABLE>
- --------
* Less than 1%
(1) 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 was our Chief Technical Officer, Vice
President of Development and Operations until his resignation effective
December 31, 1999 and was a member of the board of directors until his
resignation effective February 29, 2000.
(2) Represents 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 Chief Executive Officer and a director.
7
<PAGE>
(3) Represents shares subject to options that are exercisable currently or
within 60 days of March 30, 2000. Mr. Sheahan is our President and Chief
Operating Officer.
(4) Includes 100,416 shares subject to options that are exercisable currently
or within 60 days of March 30, 2000. Mr. Labbett is our Executive Vice
President and Chief Financial Officer.
(5) Represents shares subject to an option exercisable within 60 days of March
30, 2000. Mr. McIntosh is our Senior Vice President of Merchandise
Acquisition.
(6) Includes 34,166 shares subject to options that are exercisable currently or
within 60 days of March 30, 2000. Mr. Abdul is our Vice President of
Marketing.
(7) Includes 38,794 shares held by Orban Partners, a general partnership of
which Mr. Orban is Managing Partner, and 590,426 shares subject to options
that are exercisable currently or within 60 days of March 30, 2000. Mr.
Orban is Chairman of the Board of Directors of Egghead.
(8) Represents shares subject to an option that is exercisable within 60 days
of March 30, 2000. Mr. Harris is a director of Egghead.
(9) Includes 18,977 shares subject to an option that is exercisable within 60
days of March 30, 2000. Mr. Orton is a director of Egghead.
(10) Includes 6,780 shares subject to an option that is exercisable within 60
days of March 30, 2000. Mr. Wall is a director of Egghead.
(11) Includes 6,780 shares subject to an option that is exercisable within 60
days of March 30, 2000. Mr. Gibson is a director of Egghead.
(12) Represents shares subject to an option exercisable within 60 days of March
30, 2000. Ms. White is a director of Egghead.
(13) Includes 1,061,034 shares issuable upon exercise of options that are
exercisable currently or within 60 days of March 30, 2000.
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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..... 48 Chief Executive Officer and a director
Jeffrey F. Sheahan.... 46 President and Chief Operating Officer
John E. Labbett....... 49 Executive Vice President and Chief Financial Officer
Merle W. McIntosh..... 44 Senior Vice President of Merchandise Acquisition
Bari M. Abdul......... 39 Senior Vice President of Marketing
Barry L. Hills........ 45 Chief Technology Officer
Norman F. Hullinger... 40 Senior Vice President Sales and Operations
William A. Skinner.... 53 Vice President of Human Resources
</TABLE>
For information about S. Jerrold Kaplan, please see "Directors/nominees."
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.
John E. Labbett has been our Executive 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.
Merle W. McIntosh has been our Senior Vice President of Merchandise
Acquisition since March 1997. From 1994 to February 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.
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 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.
Barry Hills joined Egghead in September of 1999 and has been our Chief
Technical Officer since January 2000. From August 1998 to August 1999, he was
VP of Engineering at Ellipsys Technologies, a firm providing computer services
to the telecommunications industry. From 1983 to July 1998 he worked at Tandem
Computers (later Compaq) in several management and executive roles including
most recently Vice President of NT Systems Development. Mr. Hills received his
B.S. degree in computer science from California Polytechnic State University in
San Luis Obispo, California.
Norman F. Hullinger has been our Senior Vice President of Sales and
Operations since November 1999. From September 1996 to November 1999 he held
multiple positions with Old Egghead, most recently Vice President of Sales and
Operations. From 1993 to September 1996, he was Vice President of Store
Operations, Distribution and Real Estate at Aaron Brothers, Inc., a retail art
supply chain. Mr. Hullinger received his B.S. degree in business from the
University of Florida.
9
<PAGE>
William A. Skinner has been Vice President of Human Resources since August
1999. From 1988 to January 1999 he was Manager of Human Resources with Xerox
Corporation at the Palo Alto Research Center. From 1984 to November 1998 he was
a Compensation and Benefits Program Manager at Xerox Corporate Headquarters,
Stamford Connecticut. Mr. Skinner received his B.S. degree in psychology from
the University of Rochester in New York.
10
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth all compensation awarded, earned or paid for
services rendered in all capacities with Egghead and its subsidiaries during
each of 1997, 1998 and 1999 to our Chief Executive Officer, our four other most
highly compensated executive officers who were serving as executive officers at
the end of 1999. 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>
Annual Long-Term
Compensation Compensation Awards
---------------- -------------------
Name and Principal Securities All Other
Position Year Salary Bonus Underlying Options Compensation
- ------------------ ---- -------- ------- ------------------- ------------
<S> <C> <C> <C> <C> <C>
S. Jerrold Kaplan 1999 $100,000 $ 0 0 $ 0
Chief Executive Officer 1998 $100,000 $ 0 0 $ 0
1997 $100,000 $ 0 0 $ 0
Jeffrey F. Sheahan 1999 $255,705 $50,000 50,000 $33,711(1)
President and Chief
Operating Officer 1998 $ 58,755 $ 0 275,000 $30,747
1997 n/a n/a n/a n/a
John E. Labbett 1999 $229,006 $ 0 75,000 $53,137(1)
Executive Vice
President and Chief 1998 $101,794 $ 0 200,000 $ 9,321
Financial Officer 1997 n/a n/a n/a n/a
Merle W. McIntosh 1999 $193,750 $ 0 50,000 $ 0
Senior Vice President
of Merchandise 1998 $175,000 $ 0 0 $ 0
Acquisition 1997 $126,421 $ 0 161,000 $38,771
Bari M. Abdul 1999 $142,167 $ 0 160,000 $ 0
Senior Vice President
of Marketing 1998 n/a n/a n/a n/a
1997 n/a n/a n/a n/a
</TABLE>
- --------
(1) Represents relocation compensation.
11
<PAGE>
The following table sets forth further information regarding option grants
pursuant to our 1995 Equity Incentive Plan during 1999 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 1999
<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) 1999 Per Share Date 5% 10%
- ------------------------ ---------- ------------- -------------- ---------- --------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
S. Jerrold Kaplan....... 0 -- n.a. n.a. n.a. n.a.
Jeffrey F. Sheahan...... 50,000 1.5% 19.94 11/15/09 $ 626,694 $ 797,556
John E. Labbett......... 25,000 .7% 19.94 11/15/09 $ 313,504 $ 398,978
50,000 1.5% 17.81 06/02/09 $ 560,031 $ 712,718
Merle W. McIntosh....... 50,000 1.5% 17.81 06/02/09 $ 560,031 $ 712,718
Bari M. Abdul........... 100,000 2.9% 14.75 09/01/09 $ 927,620 $ 1,180,527
60,000 1.7% 35.44 03/01/09 $ 1,337,282 $ 1,701,880
</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 information concerning the exercise of
options by each of the named executive officers during 1999, 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, 1999. Also reported are values of "in-the-money" options that
represent the positive spread between the exercise prices of outstanding stock
options and $16.19 per share, which was the closing price of our common stock
as reported on the Nasdaq National Market on December 31, 1999, the last day of
trading in 1999.
Aggregate Option Exercises in 1999 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
Jeffrey F. Sheahan...... 0 0 81,249 243,751 $ 115,500 $ 280,500
John E. Labbett......... 10,000 $154,443 71,770 193,230 $ 0 $ 0
Merle M. McIntosh....... 19,125 $523,922 39,792 91,542 $ 310,288 $ 441,343
Bari M. Abdul........... 0 0 17,500 142,500 $ 5,875 $ 88,125
</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, 1999.
(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.
12
<PAGE>
EMPLOYMENT AGREEMENTS
Mr. Sheahan's offer letter of October 1998 provides for an initial annual
salary of $250,000 commencing 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 received an
option to purchase 275,000 shares of common stock with an exercise price of
$14.75 per share. The option vested as to 34,375 shares on April 19, 1999 and
vests 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.
John E. Labbett's offer letter of June 1998, amended as of March 1999,
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, at his election, either
receive six or twelve months severance pay depending on when the termination
occurs or Egghead will use its best efforts to secure an employment agreement
between the successor corporation and Mr. Labbett for a minimum period of 12
months. Mr. Labbett's employment is at will and can therefore be terminated at
any time, with or without formal cause.
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. 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 received an option to purchase 60,000
shares of common stock with an exercise price of $36.50 per share. The option
vested as to 7,500 shares on September 1, 1999 and will vest as to 1,250 shares
over each of the next forty-two months. Mr. Abdul's employment is at will and
can therefore be terminated at any time, with or without formal cause.
13
<PAGE>
Mr. Hills's offer letter of August 20, 1999 provides for an initial annual
salary of $175,000. Mr. Hills received a "sign on" bonus of $50,000 to be
repaid to the company should Mr. Hills not remain employed by the company for
at least one year for any reason other than a layoff. Mr. Hills also received
an option to purchase 80,000 shares of common stock with an exercise price of
$14.13 per share. The option will vest as to 10,000 shares on February 23, 2000
and will vest as to 1,667 shares each subsequent month. Mr. Hill's employment
is at will and can therefore be terminated at any time, with or without formal
cause.
Mr. Skinner's offer letter of August 18, 1999 provides for an initial annual
salary of $125,000. Mr. Skinner also received an option to purchase 25,000
shares of common stock with an exercise price of $16.25 per share. The option
will vest as to 3,125 shares on February 18, 2000 and will vest as to 521
shares each subsequent month. Mr. Skinner's employment is at will and can
therefore be terminated at any time, with or without formal cause.
Mr. Orban's employment agreement with Old Egghead dated September 20, 1999,
which was assumed by us in connection with our acquisition of Old Egghead,
provided for an annual base salary of $300,000. The agreement also provided for
either (1) a severance payment equal to his annual salary if Old Egghead or
Egghead terminated Mr. Orban's employment without "cause" or if Mr. Orban
terminated his employment for "good reason" (which did not include anticipated
changes in job, title or responsibilities in connection with the merger), or
(2) a retention bonus equal to his annual salary if Mr. Orban remained employed
by Old Egghead or Egghead after Old Egghead entered into an agreement regarding
a significant business transaction, such as the merger, through December 31,
1999. Mr. Orban is due a payment of $300,000 under this agreement. Mr. Orban is
restricted from competing with us or soliciting our employees or customers
until August 31, 2000.
Mr. Brodeur's employment agreement with Old Egghead dated October 25, 1999,
which was assumed by us in connection with the merger, provided for an annual
salary over the two-year term of this agreement of not less than the annual
gross salary he received prior to the agreement, or $150,000. The agreement
also provided for a title at least commensurate with Chief Marketing Officer,
and responsibilities reasonably commensurate with this title. The agreement
provided that, in the event Mr. Brodeur's employment was terminated without
formal cause, or Mr. Brodeur terminated his employment for "good reason" (which
may include, among other things, change of title or responsibilities post-
merger), he would receive twelve months' salary as severance. In addition, this
agreement entitled Mr. Brodeur to receive up to a maximum of 6 additional
monthly payments equivalent to his then-current monthly salary if, 12 months
following termination without cause or for "good reason," he had not commenced
alternative employment, and to continue to receive benefits for up to 18 months
following such termination of employment. Mr. Brodeur received a payment of
$150,000 under this agreement in February 2000. Mr. Brodeur is restricted from
competing with us until July 2001.
Mr. Brodeur also entered into a retention bonus agreement with Old Egghead
on July 13, 1999, which agreement was assumed by us in connection with the
merger, which provided for a retention bonus of twelve months' salary, provided
that he continued his employment under this agreement through January 31, 2000
or was terminated without formal cause before that date. Mr. Brodeur received a
payment of $175,000 under this agreement in January 2000.
Mr. Hullinger's employment agreement with Old Egghead dated January 22,
1998, as amended January 28, 1999, which was assumed by us in connection with
our acquisition of Old Egghead, over the three-year term of this agreement of
not less than the annual gross salary he received prior to the agreement, or
$155,000. The agreement also provided for a title at least commensurate with
Vice President of Store Operations, and responsibilities reasonably
commensurate with this title. The agreement provided that, in the event Mr.
Hullinger's employment was terminated without formal cause, or Mr. Hullinger
terminated his employment for "good reason" (which may include, among other
things, change of title or responsibilities post-merger), he would receive
twelve months' salary as severance. In addition, this agreement entitles Mr.
Hullinger to receive up to a maximum of 6 additional monthly payments
equivalent to his current monthly salary if, 12 months following termination
without cause or for "good reason," he has not commenced alternative
employment, and to continue to receive benefits for up to 18 months following
such termination of
14
<PAGE>
employment. This also provided that Mr. Hullinger's outstanding Old Egghead
stock options became fully vested immediately before the merger. Mr. Hullinger
is restricted from competing with us for a period of 18 months following the
termination of his employment with us.
Mr. Hullinger also entered into a retention bonus agreement with Old Egghead
on July 13, 1999, which agreement was assumed by us in connection with the
merger, which provided for a retention bonus of twelve months' salary, provided
that he continued his employment under this agreement through January 31, 2000
or was terminated without formal cause before that date. Mr. Hullinger received
a payment of $185,000 under this agreement in January 2000.
15
<PAGE>
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.
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.
We did not review the compensation practices of most of the companies in the
Morgan Stanley High Technology Index when the committee reviewed the
compensation information described above, because such companies were
determined not to be competitive with us for executive talent.
Executive Compensation in 1999
Base compensation. The committee reviewed the recommendations and
performance and market data outlined above and established a base salary level
for each executive officer, based on the Committee's subjective judgement.
Incentive compensation. We paid cash bonuses to our executive officers in
1999 based on the Committee's subjective judgement of their performance.
Although we had no plans to pay such bonuses in 1999, we determined that cash
bonuses were necessary and appropriate in limited circumstances due to stock
price declines which made stock options an ineffective incentive.
We adopted a Senior Management Bonus Plan for fiscal 2000. This plan
provides for cash incentives to be paid to senior managers (personnel at the
level of directors and above). The plan is designed to focus
16
<PAGE>
management's attention on successful execution of our business plan and,
achievement of our financial objectives, and to provide a competitive
compensation package for senior management. The plan provides for bonuses to be
paid quarterly based upon pre-determined annual targets. Seventy percent of the
incentive payments are based on achievement of company-wide financial
objectives and thirty percent are based on achievement of individual objectives
set by each participant's supervisor. Financial objectives are based upon three
criteria: sales, margin and expenses. Three to five individual objectives will
be developed for each plan participant.
Stock options. In 1999, stock options were granted to 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 among peers. 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 1999, 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 1999, and he was not awarded any stock options in that
year. The committee believes that Mr. Kaplan's stock ownership position in
Egghead provides sufficient incentive to him.
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. We
do not expect cash compensation for 2000 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
Robert T. Wall
Karen White
17
<PAGE>
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, 1999 (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).
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]
The above graph was plotted using the following data:
<TABLE>
<CAPTION>
Nasdaq Stock
Market--Composite Morgan Stanley High
Egghead.com, Inc. 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
12/31/97............... 18.00 $300 $1,570 $129 $ 447 $ 125
12/31/98............... 40.06 $668 $2,193 $180 $ 874 $ 245
12/31/99............... 16.19 $270 $4,069 $334 $ 1,842 $ 516
</TABLE>
18
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Since January 1, 1999, there has not been, nor is there currently proposed,
any transaction or series of similar transactions to which Egghead 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 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 30, 2000, $250,000 was due under this loan.
19
<PAGE>
STOCKHOLDER PROPOSALS
Stockholder proposals for inclusion in our proxy statement and form of proxy
relating to our 2001 annual meeting of stockholders must be received no later
than December 20, 2000. Stockholders wishing to bring a proposal before the
2001 annual meeting of stockholders (but not include it in the proxy materials
for this meeting) must provide written notice of such proposal to the Secretary
of Egghead at our principal executive offices no later than March 15, 2001.
Our 1999 annual report on Form 10-K as filed with the Securities and
Exchange Commission is available without charge by writing to or calling our
headquarters. Requests should be directed to: Egghead.com, Inc., Investor
Relations Department, 1350 Willow Road, Menlo Park, California 94025 (650-470-
2780). Our 1999 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.
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
1999.
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.
20
<PAGE>
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.
DETACH HERE
PROXY
EGGHEAD.COM, INC.
1350 WILLOW ROAD
MENLO PARK, CALIFORNIA 94025
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoint S. Jerrold Kaplan and John E. Labbett, 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 Egghead.com, Inc. (the "Company") held of
record by the undersigned on March 30, 2000, at the Annual Meeting of
Stockholders of the Company to be held on Monday, May 15, 2000, 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 Proposal 2 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.
- -------------- --------------
SEE REVERSE SEE REVERSE
SIDE CONTINUED AND TO BE SIGNED ON REVERSE SIDE SIDE
- -------------- --------------
<PAGE>
DETACH HERE
Please mark
[X] votes as in
this example
<TABLE>
<CAPTION>
The Board of Directors unanimously recommends that you vote FOR the Board of Director nominee and FOR Proposal 2.
<S> <C> <C> <C> <C>
1. Election of directors. FOR AGAINST ABSTAIN
Nominees: (01) Peter L. Harris, (02) Robert T. Wall, (03) Karen 2. Proposal to ratify the appointment [_] [_] [_]
White of PricewaterhouseCoopers LLP as
the Company's independent auditors
for 2000.
FOR WITHHELD
[_] ALL [_] FROM ALL
NOMINEES NOMINEES 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.
[_] ______________________________________
For all nominees except as noted above
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 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:______________________
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