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/Amendment
[__] Definitive Additional Materials
[__] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12
Go2Net, Inc.
(Name of Registrant as Specified In Its Charter)
Go2Net, Inc.
(Name of Person(s) Filing Proxy Statement)
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:
<PAGE>
GO2NET, INC.
ANNUAL MEETING OF STOCKHOLDERS
To Our Stockholders:
The Annual Meeting of the Stockholders of Go2Net, Inc. will be held on Monday,
March 22, 1999, at 11:00 a.m., Local Time, at The Washington Athletic Club,
1325 Sixth Avenue, The Noble Room, Seattle, Washington, for the following
purposes:
1. To elect six directors of the Company to serve until the next Annual
Meeting of Stockholders as more fully described in the accompanying Proxy
Statement.
2. To consider and act upon a proposal to ratify, confirm and approve an
amendment to the Go2Net, Inc. 1996 Stock Option Plan to increase the number of
shares reserved for grant thereunder from 5,000,000 to 8,000,000.
3. To consider and act upon a proposal to ratify, confirm and approve the
Go2Net, Inc. 1999 Employee Stock Purchase Plan.
4. To consider and act upon a proposal to ratify, confirm and approve the
selection of Ernst & Young LLP as the independent certified public accountants
of the Company for fiscal year 1999.
5. To consider and act upon any other business which may properly come
before the meeting.
The Board of Directors has fixed the close of business on February 18, 1999 as
the record date for the meeting. All stockholders of record on that date are
entitled to notice of and to vote at the meeting.
PLEASE COMPLETE AND RETURN THE ENCLOSED PROXY IN THE ENVELOPE PROVIDED WHETHER
OR NOT YOU INTEND TO BE PRESENT AT THE MEETING IN PERSON.
By order of the Board of Directors
ETHAN CALDWELL
Secretary
Seattle, Washington
February 22, 1999
<PAGE>
GO2NET, INC.
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Go2Net, Inc. (the "Company") for use at the
1999 Annual Meeting of Stockholders to be held on Monday, March 22, 1999, at the
time and place set forth in the notice of the meeting, and at any adjournments
thereof. The approximate date on which this Proxy Statement and form of proxy
are first being sent to stockholders is February 22, 1999.
If the enclosed proxy is properly executed and returned, it will be voted in
the manner directed by the stockholders. If no instructions are specified with
respect to any particular matter to be acted upon, proxies will be voted in
favor thereof. Any person signing the enclosed form of proxy has the power to
revoke it by voting in person at the meeting, or by giving written notice of
revocation to the Secretary of the Company at any time before the proxy is
exercised.
The holders of a majority in interest of all Common Stock issued, outstanding
and entitled to vote are required to be present in person or be represented by
proxy at the meeting in order to constitute a quorum for the transaction of
business. The election of the nominees for director will be decided by plurality
vote. The affirmative vote of the holders of at least a majority of the shares
of Common Stock voting in person or by proxy at the meeting is required to
approve all other matters listed in the notice of the meeting.
The Company will bear the cost of the solicitation. It is expected that the
solicitation will be made primarily by mail, but regular employees or
representatives of the Company (none of whom will receive any extra compensation
for their activities) may also solicit proxies by telephone, telecopier and in
person and arrange for brokerage houses and other custodians, nominees and
fiduciaries to send proxies and proxy materials to their principals at the
expense of the Company.
The Company's principal executive offices are located at 999 Third Avenue,
Suite 4700, Seattle, Washington 98104, (206) 447-1595.
RECORD DATE AND VOTING SECURITIES
Only stockholders of record at the close of business on February 18, 1999 are
entitled to notice of and to vote at the meeting. On February 12, 1999, the
Company had outstanding and entitled to vote 12,696,182 shares of Common Stock,
par value $.01 per share ("Company's Common Stock" or "Common Stock"), as
adjusted to give effect to a 2 for 1 stock split payable on February 22, 1999.
All share and option amounts stated in this Proxy Statement have been adjusted
to give effect to the stock split. Each outstanding share of the Company's
Common Stock entitles the record holder to one vote. All votes will be tabulated
by employees of Continental Stock Transfer & Trust Company, the Company's
transfer agent for the Common Stock, who will serve as inspectors of election.
Abstentions and broker non-votes are each included in the determination of the
number of shares present but are not counted on any matters brought before the
meeting.
ELECTION OF DIRECTORS
The Board of Directors has fixed the number of directors at six for the coming
year. It is proposed that each of the nominees listed below will be elected to
hold office until the next Annual Meeting of Stockholders and until his
successor is duly elected and qualified or until he sooner dies, resigns or is
removed.
The persons named in the accompanying proxy will vote, unless authority is
withheld, for the election of the nominees named below. If any nominee should
become unavailable for election, which is not anticipated, the persons named in
the accompanying proxy will vote for such substitute as the Board of Directors
may recommend. No nominee is related to any other executive officer of the
Company.
<PAGE>
Nominees
The nominees for election as directors, their ages, their positions with the
Company, the period during which they have served as directors and their
principal occupations and other directorships held by them are set forth below.
Russell C. Horowitz, 32 years old, is a founder of the Company and has served
as its Chief Executive Officer, Chief Financial Officer and a director since its
inception in February 1996 and as President from inception through January 1999.
In March 1996, Mr. Horowitz founded Xanthus Capital, L.P., a Seattle,
Washington-based merchant bank that focuses primarily on developing companies in
emerging growth industries or special situations. Mr. Horowitz serves as the
Chief Executive Officer and a director of Xanthus Management, L.L.C., the
general partner of Xanthus Capital, L.P., and of DMR Investments, L.L.C., the
investment advisor to Xanthus Capital, L.P. In July 1992, Mr. Horowitz was a
founder of Active Apparel Group, Inc., a New York-based apparel supplier. From
1992 until April 1994, Mr. Horowitz served as its Chief Financial Officer; and
from May 1994 until May 1997, Mr. Horowitz served as its Director of Corporate
Development and Investor Relations. Prior to July 1992, Mr. Horowitz served as a
financial advisor to start-up and developing companies. Mr. Horowitz received a
B.A. in Economics from Columbia College of Columbia University in 1988.
John Keister, 32 years old, is a founder of the Company and has served as the
Company's President since January 1999, its Chief Operating Officer from its
inception in February 1996 through January 1999 and a director since September
1997. From 1994 to February 1996, Mr. Keister served as the President, Chief
Operating Officer and a director of ViewCom Technology International, Inc., a
Seattle, Washington-based computer software developer. From 1992 to 1994, Mr.
Keister managed European marketing operations for Dorian International, Inc., a
White Plains, New York-based export management company. Mr. Keister received a
B.A. in International Affairs and Philosophy from Occidental College in 1989.
Michael J. Riccio, Jr., 37 years old, has served as the Company's Chief
Operating Officer since January 1999, and a director of the Company since
September 1997. From 1989 through December 1998, Mr. Riccio was an attorney with
Hutchins, Wheeler & Dittmar, a Boston-based law firm, most recently serving as a
shareholder of the Firm. Prior to joining Hutchins, Wheeler & Dittmar, Mr.
Riccio was an associate of Willkie Farr & Gallagher, a New York-based law firm.
Mr. Riccio received a B.S. in Business Administration from Bucknell University
in 1983 and a J.D. from Albany Law School of Union University in 1986.
Dennis Cline, 38 years old, has served as a director of the Company since
December 1996. Mr. Cline currently serves as the Executive Vice-President of
Worldwide Sales for Network Associates, Inc., formerly known as McAfee
Associates, Inc., a leading provider of network security and management tools
for corporate accounts whose common stock is trading on the Nasdaq National
Market System under the symbol "NETA." Mr. Cline has served in a variety of
executive sales positions for McAfee Associates, Inc. since 1994. From January
1993 to November 1993, Mr. Cline was Vice President of Worldwide Sales for Fifth
Generation Systems, a software utilities company. Prior to 1993, Mr. Cline
worked in sales management for various technology companies including: GCC
Technologies, Inc., a manufacturer of computer printers, Alias Research, a
graphic software company, Claris Corporation, an application software company,
and the Microsoft Corporation.
Martin L. Schoffstall, 38 years old, has served as a director of the Company
since August 1996. Mr. Schoffstall was a co-founder of PSINet, Inc., an Internet
access and service provider whose common stock is quoted for trading on the N
asdaq National Market System under the symbol "PSIX." Mr. Schoffstall had been
a Senior Vice President, Chief Technology Officer and a director of PSINet,
Inc. since its inception in 1990 until 1996. In 1996 Mr. Schoffstall founded
Conducent Technologies, Inc., an Internet content provider of software
and technology for the World Wide Web. Mr. Schoffstall serves as the President,
Chief Executive Officer and Chairman of the Board of Conducent Technologies,
Inc. Since June 1996, Mr. Schoffstall has served as a director of Ascend
Communications, Inc., a world-wide provider of remote computer networking
solutions whose common stock is quoted for trading on the Nasdaq National
Market System under the symbol "ASND." Prior to forming PSINet, Inc. and
Conducent Technologies, Inc., Mr. Schoffstall was co-founder of, and from
January 1987 to December 1989, served as Vice President for Technology and
Marketing for, NYSERNet. From May 1985 until December 1988, Mr. Schoffstall was
an instructor at Rensselaer Polytechnic Institute. Mr. Schoffstall also served,
from May 1984 until May 1985, as a Senior Systems Engineer for Cadmus Computer
Systems and, from June 1982 until May 1984, as a systems engineer for Internet
protocols at Bolt, Beranek & Newman Inc. Mr. Schoffstall co-authored the
national standard network management software, Simple Network Management
Protocol. Mr. Schoffstall received a E.C.S.C. from Rensselaer Polytechnic
Institute in 1982.
Dr. Oren Etzioni, 35 years old, has served as a director of the Company since
October 1998. Dr. Etzioni is a professor at the University of Washington's
Department of Computer Science. Dr. Etzioni is the co-creator of the renowned
MetaCrawler online search service and also co-founded Netbot, Inc., which was
acquired by Excite, Inc. in 1997. Dr. Etzioni has published more than 50
technical
2
<PAGE>
papers on intelligent software agents, Web search technology and machine
learning, among other topics. His work has been featured in The New York Times,
Newsweek, Forbes Magazine, Business Week, The Economist and Discover Magazine.
He received a bachelor's degree in computer science from Harvard University and
Ph.D. from Carnegie Mellon University.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF THE ABOVE
NOMINEES.
3
<PAGE>
INFORMATION CONCERNING THE BOARD OF DIRECTORS
During fiscal 1998, there were three meetings of the Board of Directors of the
Company. All of the directors attended at least 75% of the aggregate of (i) the
total number of meetings of the Board of Directors during which they served as
director and (ii) the total number of meetings held by committees of the Board
of Directors on which they served. The Board of Directors does not have a
Nominating Committee. None of the directors received compensation for serving as
directors of the Company, except that each of Messrs. Cline, Riccio, Schoffstall
and Etzioni received options to acquire shares of Common Stock of the Company
under the Company's 1996 Stock Option Plan, and Messrs. Horowitz, Keister and
Riccio received compensation as employees of the Company. Directors are
reimbursed for reasonable out-of-pocket expenses incurred in attending Meetings
of the Board or committees thereof.
The Board of Directors has a Compensation Committee whose present members are
Messrs. Cline and Etzioni. The Compensation Committee determines the
compensation to be paid to key officers of the Company and administers the
Company's stock option plans.
During fiscal 1998, there was one meeting of the Compensation Committee.
The Company also has an Audit Committee whose present members are Messrs.
Cline and Schoffstall. The Audit Committee reviews with the Company's
independent auditors the scope of the audit for the year, the results of the
audit when completed and the independent auditors' fee for services performed.
The Audit Committee also recommends independent auditors to the Board of
Directors and reviews with management various matters related to its internal
accounting controls. During fiscal 1998, there was one meeting of the Audit
Committee.
4
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock as of February 18, 1999 (i) by each
person who is known by the Company to own beneficially more than five percent
(5%) of the Company's Common Stock, (ii) by each of the Company's directors,
(iii) by each executive officer of the Company, and (iv) by all directors and
executive officers who served as directors or executive officers at February 18,
1999 as a group.
<TABLE>
Name and Address of Amount and Nature of
Beneficial Owner Beneficial Ownership(1) Percent of Class
<S> <C> <C>
Russell C. Horowitz (2)................................................ 2,774,612 21.33%
c/o Go2Net, Inc.
999 Third Avenue
Seattle, Washington 98104
John Keister (3)....................................................... 600,000 4.61%
c/o Go2Net, Inc.
999 Third Avenue
Seattle, Washington 98104
Michael J. Riccio, Jr. (4)............................................. 245,556 1.91%
101 Federal Street
Boston, Massachusetts 02110
Dennis Cline (5)....................................................... 186,570 1.47%
40 Landing Ct.
Moorstown, New Jersey 08057
Martin L. Schoffstall (6).............................................. 120,000 0.95%
5790 Devonshire Road
Harrisburg, Pennsylvania 17112
Dr. Oren Etzioni (7)................................................... 33,600 0.26%
c/o Go2Net, Inc.
999 Third Avenue
Seattle, Washington 98104
All executive officers and 3,960,338 29.07%
directors as a group (6 persons) (3)................................
</TABLE>
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission. In computing the number of shares
beneficially owned by a person and the percentage ownership of that person,
shares of Common Stock subject to options held by that person that are
currently exercisable, or become exercisable within 60 days from the date
hereof, are deemed outstanding. However, such shares are not deemed
outstanding for purposes of computing the percentage ownership of any other
person. Percentage ownership is based on 12,696,182 shares of Common Stock
outstanding as of February 12, 1999.
(2) Includes 900,000 shares of Common Stock held by The Porpoise Corporation, a
Washington corporation wholly owned by Mr. Horowitz and 203,828 shares of
Common Stock held by Xanthus Management, LLC, of which Mr. Horowitz is a
director and an executive officer. Mr. Horowitz disclaims beneficial
ownership of the shares held by Xanthus Management, LLC, except to the
extent of his pecuniary interests therein. Also, includes options to
purchase 337,500 shares of Common Stock that are currently exercisable, or
become exercisable within 60 days of the date hereof.
(3) Includes options to purchase 350,000 shares of Common Stock that are
currently exercisable, or become exercisable within 60 days of the date
hereof.
5
<PAGE>
(4) Includes options to purchase 215,556 shares of Common Stock that are
currently exercisable, or become exercisable within 60 days of the date
hereof.
(5) Includes option to purchase 20,000 shares of Common Stock that are currently
exercisable.
(6) Includes 75,000 shares of Common Stock held by MLS-I, L.L.C., a limited
liability company of which Mr. Schoffstall is an executive officer.
(7) Includes options to purchase 25,000 shares of Common Stock that are
currently exercisable.
COMPENSATION COMMITTEE REPORT
ON EXECUTIVE COMPENSATION
The Compensation Committee (the "Committee") of the Board of Directors has
furnished the following report on executive compensation.
The Company's executive compensation program is administered by the Committee.
The Committee, which is composed of two independent directors, establishes and
administers the Company's executive compensation policies and plans and
administers the Company's stock option and other equity-related employee
compensation plans. The Committee considers internal and external information in
determining officers' compensation.
Compensation Philosophy
The Company's compensation policies for executive officers are based on the
belief that the interests of executives should be closely aligned with those of
the Company's shareholders. The Compensation policies are designed to achieve
the following objectives:
Offer compensation opportunities that attract highly qualified executives,
reward outstanding initiative and achievement, and retain the leadership and
skills necessary to build long-term shareholder value.
Maintain a significant portion of executives' total compensation at risk,
tied to both the annual and long-term financial performance of the Company
and the creation of shareholder value.
Further the Company's short and long-term strategic goals and values by
aligning compensation with business objectives and individual performance.
Compensation Program
The Company's executive compensation program has three major integrated
components, base salary, annual incentive awards, and long term incentives.
Base Salary. Base salary levels for executive officers are determined annually
by reviewing the competitive pay practices of Internet companies of similar size
and market capitalization, the skills, performance level, and contribution to
the business of individual executives, and the needs of the Company. Overall,
the Company believes that base salaries for its executive officers are below
competitive salary levels for similar positions in these Internet companies.
Annual Incentive Awards. The Company's executive officers may be eligible to
receive annual cash bonus awards designed to motivate executives to attain
short-term and long-term corporate and individual management goals. The
Committee establishes the annual incentive opportunity for each executive
officer in relation to his or her base salary. For 1998, there was no formal
bonus program established for executives.
Long-Term Incentives. The Committee believes that stock options are an
excellent vehicle for compensating its officers and employees. The Company
provides long-term incentives through its 1996 Stock Option Plan, the purpose of
which is to create a direct link between executive compensation and increases in
shareholder value. Stock options are granted at fair market value and vest in
installments
6
<PAGE>
generally over one to four years. When determining option awards for an
executive officer, the Committee considers the executive's current contribution
to Company performance, the anticipated contribution to meeting the Company's
long term strategic performance goals, and industry practices and norms.
Long-term incentives granted in prior years and existing levels of stock
ownership are also taken into consideration. Because the receipt of value by an
executive officer under a stock option is dependent upon an increase in the
price of the Company's Common Stock, this portion of the executive's
compensation is directly aligned with an increase in shareholder value.
7
<PAGE>
Chief Executive Officer Compensation
Mr. Horowitz's base salary, annual incentive award and long-term incentive
compensation are determined by the Committee based upon the same factors as
those employed by the Committee for executive officers generally. Mr. Horowitz's
current annual base salary is $36,000 subject to annual review and increase by
the Board of Directors of the Company. During fiscal 1998, Mr. Horowitz was
granted options to purchase 150,000 shares of Common Stock at an exercise price
of $9.375 per share, the fair market value of the Company's Common Stock on the
date of the grant. The options have a six year term and provide that one-quarter
of the options vest on each annual anniversary of the option grant.
Section 162(m) Limitation
Section 162(m) of the Internal Revenue Code limits the tax deduction to $1
million for compensation paid to certain executives of public companies.
Historically, the combined salary and bonus of each executive officer has been
well below the $1 million limit. The Committee's present intention is to comply
with Section 162(m) unless the Committee feels that required changes would not
be in the best interest of the Company or its shareholders.
COMPENSATION COMMITTEE
DENNIS CLINE
OREN ETZIONI
8
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS
AND INSIDER PARTICIPATION
General
Messrs. Cline and Etzioni serve as members of the Compensation Committee.
Neither Mr. Cline nor Mr. Etzioni was an officer or employee of the Company or
any of its subsidiaries during fiscal 1998.
During fiscal 1998, Mr. Riccio, a director and Chief Operating Officer of the
Company, was a shareholder of the law firm Hutchins, Wheeler & Dittmar, which is
general counsel to the Company.
On November 3, 1998, the Company purchased 13,158 shares of Series D Preferred
Stock of Conducent Technologies, Inc. of which Martin L. Schoffstall, a
director of the Company, is chief executive officer. The terms of the
investment were determined on an arm's length basis, with the purchase price
being established by an independent third party investor.
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<PAGE>
PERFORMANCE GRAPH
The graph set forth below compares the change in the Company's cumulative
total stockholder return on its Common Stock (as measured by dividing (i) the
sum of (A) the cumulative amount of dividends for the period indicated, assuming
dividend reinvestment, and (B) the difference between the Company's share price
at the end of the period and April 23, 1997, the date the Company's Common Stock
commenced trading on The Nasdaq SmallCap Market; by (ii) the share price at
April 23, 1997) with the cumulative total return of The Nasdaq Stock Market
(U.S.) Index and the cumulative total return of the NASDAQ stocks business
services index (assuming the investment of $100 in the Company's Common Stock,
the Nasdaq Stock Market (U.S.) Index and the NASDAQ stocks business services
index on April 23, 1997, and reinvestment of all dividends). During fiscal year
1998, the Company paid no dividends.
Comparison of Five Year-Cumulative Total Returns
Performance Graph for
Go2Net, Inc.
Prepared by the Center for Research in Security Prices
Produced on 02/05/99 including data to 09/30/98
Date Company Index Market Index Peer Index
09/30/1993 60.758 43.802
10/29/1993 62.123 44.641
11/30/1993 60.272 44.625
12/31/1993 61.952 44.375
01/31/1994 63.833 46.770
02/28/1994 63.237 47.211
03/31/1994 59.349 45.013
04/29/1994 58.578 44.975
05/31/1994 58.722 46.940
06/30/1994 56.574 44.179
07/29/1994 57.735 44.430
08/31/1994 61.416 49.085
09/30/1994 61.259 49.109
10/31/1994 62.463 53.926
11/30/1994 60.391 53.161
12/30/1994 60.560 53.747
01/31/1995 60.905 52.709
02/28/1995 64.126 56.653
03/31/1995 66.028 60.553
04/28/1995 68.108 63.455
05/31/1995 69.865 64.325
06/30/1995 75.527 71.100
07/31/1995 81.079 75.410
08/31/1995 82.723 75.428
09/29/1995 84.624 77.451
10/31/1995 84.136 81.323
11/30/1995 86.111 82.101
12/29/1995 85.653 81.444
01/31/1996 86.074 81.076
02/29/1996 89.350 85.931
03/29/1996 89.644 86.124
04/30/1996 97.080 96.202
05/31/1996 101.538 99.447
06/28/1996 96.960 96.243
07/31/1996 88.314 86.806
08/30/1996 93.262 89.258
09/30/1996 100.395 98.943
10/31/1996 99.286 96.770
11/29/1996 105.423 103.099
12/31/1996 105.328 101.836
01/31/1997 112.814 110.450
02/28/1997 106.574 101.337
03/31/1997 99.615 93.328
04/23/1997 100.000 100.000 100.000
04/30/1997 108.228 102.729 104.223
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<PAGE>
05/30/1997 82.278 114.372 116.243
06/30/1997 62.025 117.875 118.831
07/31/1997 68.354 130.316 130.700
08/29/1997 68.354 130.117 127.315
09/30/1997 89.873 137.807 129.736
10/31/1997 81.013 130.673 126.862
11/28/1997 72.152 131.326 129.868
12/31/1997 69.620 129.220 122.473
01/30/1998 98.734 133.296 131.442
02/27/1998 165.190 145.811 149.034
03/31/1998 172.152 151.196 161.440
04/30/1998 273.418 153.763 163.105
05/29/1998 250.633 145.324 151.606
06/30/1998 298.734 155.574 179.854
07/31/1998 273.418 153.931 173.755
08/31/1998 224.051 123.751 141.267
09/30/1998 151.899 140.843 169.317
The index level for all series was set to 100.0 on 04/23/1997.
Legend
<TABLE>
Symbol CRSP Total Returns Index for: 09/1993 09/1994 09/1995 09/1996 09/1997 09/1998
<S> <C> <C> <C> <C> <C> <C> <C>
s go2Net, Inc. 89.9 151.9
- ---- -- M Nasdaq Stock Market (US Companies) 60.8 61.3 84.6 100.4 137.8 140.8
- --------- O NASDAQ Stock (SIC 7300-7399 US 43.8 49.1 77.5 98.9 129.7 169.3
Companies) Business services
</TABLE>
Notes:
A. The lines represent monthly index levels derived from compounded daily
returns that include all dividends. B. The indexes are reweighted daily,
using the market capitalization on the previous trading day. C. If the
monthly interval, based on the fiscal year-end, is not a trading day, the
preceding trading day is used.
D. The index level for all series was set to $100.0 on 04/23/97.
11
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth all compensation awarded to, earned by or paid
to the Company's Chief Executive Officer and President for all services rendered
in all capacities to the Company for the Company's fiscal year ended September
30, 1998 (the "Named Executive Officers").
Summary Compensation Table
<TABLE>
<CAPTION>
Long Term
Compensation
Annual Securities
Compensation Underlying All Other
Name and Principal Position Year Salary Bonus Options # Compensation($)
<S> <C> <C> <C> <C> <C>
Russell C. Horowitz................ 1998 $36,000 $0 150,000 $15,729
Chief Executive Officer 1997 $36,000 $0 300,000 $17,791
1996 $21,000 $0 0 $ 5,292
John Keister....................... 1998 $72,000 $0 200,000 $11,263
President 1997 $45,000 $0 300,000 $ 9,459
1996 $26,250 $0 0 $ 4,549
</TABLE>
Grants of Stock Options
The following table sets forth certain information with respect to individual
grants of stock options to the Named Executive Officers during the fiscal year
ended September 30, 1998.
1998 Option Grants(l)
<TABLE>
<CAPTION>
Potential
Realization
Value at Assumed
Annual Rates of
Individual % of Total Stock Price
Grants Options Granted Appreciation for
Option to Employees Exercise Expiration Option Term
Name Grants in 1998 Price Date 5% 10%
<S> <C> <C> <C> <C> <C> <C>
Russell C. Horowitz 150,000 5.62% $9.375 4/3/2004 $478,259 $1,085,008
John Keister...... 50,000 1.87% $4.375 10/24/2003 $74,396 $168,779
John Keister...... 150,000 5.62% $9.375 4/3/2004 $478,259 $1,085,008
</TABLE>
(1) Potential gains are net of exercise price, but before taxes associated with
exercise. These amounts represent certain assumed rates of appreciation
only, based on the Securities and Exchange Commission rules. Actual gains,
if any, on stock option exercises are dependent on the future performance of
the Common Stock, the timing of such exercises and the option holder's
continued employment through the vesting period. The amounts reflected in
this table may not accurately reflect or predict the actual value of the
stock options.
Stock Option Exercises and September 30, 1998 Stock Option Values
Set forth in the table below is information concerning the value of stock
options held at September 30, 1998 by the Named Executive Officers of the
Company. None of the Named Executive Officers exercised any stock options during
the year ended September 30, 1998.
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<PAGE>
Aggregate Option Exercises in Last Fiscal
Year and Option values as of September 30, 1998
<TABLE>
<CAPTION>
Number of Value of Unexercised
Unexercised Options In-The-Money Options
Shares Acquired Value at September 30, 1998 at September 30, 1997(1)
Name on Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
<S> <C> <C> <C> <C> <C> <C>
Russell C. Horowitz.. -- -- 300,000 150,000 $1,050,000 $0
John Keister......... -- -- 300,000 200,000 $1,089,063 $117,188
</TABLE>
(1) The amounts set forth represent the difference, if positive, between the
fair market value of the Common Stock underlying the options at September
30, 1998 ($15 per share) and the exercise price of the options, multiplied
by the applicable number of options.
Employment Agreements
The Company has entered into employment agreements with each of Russell C.
Horowitz, John Keister and Michael Riccio pursuant to which they serve as Chief
Executive Officer, President and Chief Operating Officer, respectively, of the
Company.
Mr. Horowitz's employment agreement with the Company provides for a four-year
term commencing March 1, 1996. Under this agreement, Mr. Horowitz receives an
annual salary of $36,000. Mr. Keister's employment agreement with the Company
provides for a four-year term commencing March 1, 1996. Under this agreement,
Mr. Keister receives an annual salary of $45,000, which was increased
to an annual salary of $72,000 starting October 1, 1997. Mr. Riccio's
employment agreement with the Company expires January 31, 2002. Under this
agreement, Mr. Riccio receives an annual salary of $150,000, and a signing
bonus of $25,000. Mr. Riccio was also granted options to purchase common stock
under the employment agreement. While Mr. Horowitz's employment agreement
provides that he may be engaged in other non-competing business activities,
Mr. Horowitz has devoted substantially all of his time and effort to performing
his duties as an executive officer of the Company. Mr. Horowitz will continue
to devote substantially all of his time and effort to serving as an executive
officer of the Company until, if ever, replacements or successors to his duties
are employed by the Company.
Each of the employment agreements described above provides for certain
employee benefits, including, without limitation, participation in the Company's
stock option plan or any other incentive or bonus plan which the Company may
institute in the future, as well as health insurance. Each of the employment
agreements provides for a one-year non-competition period following termination
of the employment agreement.
APPROVAL OF AMENDMENT OF THE
GO2NET, INC. 1996 STOCK OPTION PLAN
General
The Go2Net, Inc. 1996 Stock Option Plan (the "1996 Plan") was adopted by the
Board of Directors and approved by the Company's shareholders in March 1996. The
purpose of the 1996 Plan is to attract and retain key employees, directors and
consultants of the Company, to provide an incentive for them to achieve
long-range performance goals, and to enable them to participate in the long-term
growth of the Company. Under the 1996 Plan, incentive stock options may be
granted to employees and officers of the Company or any subsidiary and
non-qualified stock options may be granted to employees, officers, directors and
consultants of the Company or any subsidiary.
Proposed Amendment to the 1996 Plan
The Board of Directors has adopted an amendment to the 1996 Plan, subject to
approval by the shareholders, to increase the aggregate number of shares that
may be subject to grants thereunder from 5,000,000 to 8,000,000 in order to
ensure that a sufficient number of shares are available for issuance in the
future. The Board of Directors has adopted the amendment to the 1996 Plan to
further the growth and
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<PAGE>
financial success of the Company by aligning the personal interests of employees
(through the ownership of Common Stock) with those of the shareholders of the
Company. The Board of Directors believes that the increase in the number of
shares that may be subject to option grants under the 1996 Plan will enhance the
ability of the Company to attract, retain, compensate and motivate key
employees, directors and consultants, and that the adoption of the amendment
will be important to the future success of the Company.
Set forth below is a summary of the principal provisions of the 1996 Plan, a
copy of which may be obtained from the Secretary of the Company upon request.
The affirmative vote of the holders of at least a majority of the Common Stock
voting in person or by proxy at the meeting will be required for the approval of
the amendment to the 1996 Plan.
Administration
The 1996 Plan is administered by the Compensation Committee of the Board of
Directors, subject to the supervision and control of the entire Board. The
members of the Compensation Committee are appointed by the Board of Directors
and the Board may from time to time appoint a member or members of the
Compensation Committee in substitution for or in addition to the member or
members then in office and may fill vacancies on the Compensation Committee
however caused. The present members of the Compensation Committee are Messrs.
Cline and Etzioni.
Eligibility
Subject to the provisions of the 1996 Plan, the Compensation Committee has the
authority to select optionees and to determine the terms of the options granted,
including (i) the number of shares subject to each option, (ii) when the option
becomes exercisable, (iii) the exercise price of the option, (iv) the duration
of the option (which in the case of an incentive stock option granted to
employees or officers holding 10% or more of the voting stock of the Company
cannot be in excess of five years), and (v) the time, manner and form of payment
upon exercise of an option.
In determining the eligibility of an individual to be granted an option, as
well as in determining the number of shares to be optioned to any individual,
the Compensation Committee takes into account the position and responsibilities
of the individual being considered, the nature and value to the Company or its
subsidiaries of the individual's service and accomplishments, his or her present
and potential contribution to the success of the Company or its subsidiaries,
and such other factors as the Compensation Committee deems relevant.
Terms of Options
Options granted under the 1996 Plan are exercisable at such times and during
such period as is set forth in the option agreement, but cannot have a term in
excess of ten years from the date of grant. The Compensation Committee is
entitled to accelerate the date of exercise of any installment of any option,
except that without the consent of the optionee, the Compensation Committee
shall not accelerate the exercise date of any installment of any incentive stock
option if such acceleration would violate the annual vesting limitation
contained in Section 422(d) of the Internal Revenue Code of 1986, as amended
(the "Code"). The option agreement may contain such provisions and conditions as
may be determined by the Compensation Committee. The option exercise price for
options designated as non-qualified stock options granted under the 1996 Plan is
determined by the Compensation Committee. The option exercise price for
incentive stock options granted under the 1996 Plan shall be no less than fair
market value of the Common Stock of the Company at the time the option is
granted and no less than 110% of the fair market value in the case of employees
or officers holding 10% or more of the voting stock of the Company. Options
granted under the 1996 Plan may provide for the payment of the exercise price by
delivery of cash or a check payable to the Company or shares of Common Stock of
the Company owned by the optionee having a fair market value equal in amount to
the exercise price of the options being exercised, or any combination thereof.
The maximum number of shares of Common Stock with respect to which an option or
options may be granted to any employee in any one calendar year cannot exceed
500,000 shares.
An option is not transferable by the optionee except by will or by the laws of
descent and distribution. Options are exercisable only while the optionee
remains in the employ of the Company or for a limited period of time thereafter.
Termination or Amendment of the 1996 Plan
Unless sooner terminated, the 1996 Plan shall terminate on March 10, 2006, ten
years from the date on which the 1996 Plan was adopted by the Board of Directors
of the Company. The Board of Directors may at any time terminate the 1996 Plan
or make such modification or amendment as it deems advisable; provided, however,
that the Board of Directors may not, without shareholder approval, increase the
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<PAGE>
maximum number of shares for which options may be granted or change the
designation of the class of persons eligible to receive options under the 1996
Plan or make any other change in the 1996 Plan which requires shareholder
approval under applicable law or regulations. The Compensation Committee may
terminate, amend or modify any outstanding option without the consent of the
option holder, provided however that, without the consent of the optionee, the
Compensation Committee shall not change the number of shares subject to an
option, or the exercise price or term thereof.
Recapitalization; Reorganization; Change of Control
The 1996 plan provides that the number and kind of shares as to which options
may be granted thereunder and as to which outstanding options then unexercised
shall be exercisable shall be adjusted to prevent dilution in the event of any
reorganization or recapitalization (other than as the result of an Acquisition,
as such term is hereinafter defined), reclassification, stock subdivision,
combination of shares or dividends payable in capital stock. If the Company is
to be consolidated with or acquired by another entity in a merger or in a sale
of all or substantially all of the Company's assets or otherwise (an
"Acquisition"), the Compensation Committee or the Board of Directors of any
entity assuming the obligations of the Company (the "Successor Board"), shall,
as to outstanding options, either (i) make appropriate provision for the
continuation of such options by substituting on an equitable basis for the
shares then subject to such options the consideration payable with respect to
the outstanding shares of Common Stock in connection with the Acquisition, (ii)
upon written notice to the optionees, provide that all options must be exercised
(to the extent then exercisable) within a specified number of days of the date
of such notice, at the end of which period the options shall terminate, or (iii)
terminate all options in exchange for a cash payment equal to the excess of the
fair market value of the shares subject to such options (to the extent then
exercisable) over the exercise price thereof.
Upon dissolution or liquidation of the Company, all options granted under the
1996 Plan shall terminate.
Tax Effects of Participation in the 1996 Plan
Incentive Stock Options. Except as provided below with respect to the
alternative minimum tax, the optionee will not recognize taxable income upon the
grant or exercise of an incentive stock option. In addition, if the optionee
holds the shares received pursuant to the exercise of the option for more than
one year after the date of transfer of stock to the optionee upon exercise of
the option and for more than two years after the option is granted, the optionee
will recognize long-term capital gain or loss upon the disposition of the stock
measured by the difference between the option exercise price and the amount
received for such shares upon disposition.
In the event that the optionee disposes of the stock prior to the expiration
of the required holding periods (a "disqualifying disposition"), the optionee
generally will recognize ordinary income to the extent of the lesser of (i) the
fair market value of the stock at the time of exercise over the exercise price,
or (ii) the amount received for the stock upon disposition over the exercise
price. The basis in the stock acquired upon exercise of the option will equal
the amount of income recognized by the optionee plus the option exercise price.
Upon eventual disposition of the stock, the optionee will recognize long-term or
short-term capital gain or loss, depending on the holding period of the stock
and the difference between the amount realized by the optionee upon disposition
of the stock and his basis in the stock.
For alternative minimum tax purposes, the excess of the fair market value of
stock on the date of the exercise of the incentive stock option over the
exercise price of the option is included in alternative minimum taxable income
for alternative minimum tax purposes. If the alternative minimum tax does apply
to the optionee, an alternative minimum tax credit may reduce the regular tax
upon eventual disposition of the stock.
The Company will not be allowed an income tax deduction upon the grant or
exercise of an incentive stock option. Upon a disqualifying disposition of
shares by the optionee acquired upon exercise of the incentive stock option, the
Company generally will be allowed a deduction in an amount equal to the ordinary
income recognized by the optionee.
Under proposed regulations issued by the Internal Revenue Service, the
exercise of an option with previously acquired stock of the Company will be
treated as, in effect, two separate transactions. Pursuant to Section 1036 of
the Code, the first transaction will be a tax-free exchange of the previously
acquired shares for the same number of new shares. The new shares will retain
the basis and, except, as provided below, the holding periods of the previously
acquired shares. The second transaction will be the issuance of additional new
shares having a value equal to the difference between the aggregate fair market
value of all of the new shares being acquired and the aggregate option exercise
price for those shares. Because the exercise of an incentive stock option does
not result in the recognition by the optionee of income, this issuance will also
be tax-free (unless the alternative minimum tax applies, as described above).
The optionee's basis in
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<PAGE>
these additional shares will be zero and the optionee's holding period for these
shares will commence on the date on which the shares are transferred. For
purposes of the one and two-year holding period requirements which must be met
for favorable incentive stock option tax treatment to apply, the holding periods
of previously acquired shares are disregarded.
16
<PAGE>
Non-Qualified Stock Options. As in the case of incentive stock options, no
income is recognized by the optionee on the grant of a nonqualified stock
option. On the exercise by an optionee of a non-qualified option, generally the
excess of the fair market value of the stock when the option is exercised over
its cost to the optionee will be (a) taxable to the optionee as ordinary income
and (b) generally deductible for income tax purposes by the Company. The
optionee's tax basis in his stock will equal his cost for the stock plus the
amount of ordinary income he had to recognize with respect to the non-qualified
stock option.
The Internal Revenue Service will treat the exercise of a non-qualified stock
option with already owned stock of the Company as two transactions. First, there
will be a tax-free exchange of the old shares for a like number of new shares
under Section 1036 of the Code, with the exchanged shares retaining the basis
and holding periods of the old shares. Second, there will be an issuance of
additional new shares representing the spread between the fair market value of
all the new shares (including the exchanged shares and the additional new
shares) and the aggregate option price therefor. The fair market value of the
additional new shares will be taxable as ordinary income to the employee under
Section 83 of the Code. The additional new shares will have a basis equal to the
fair market value of the additional new shares.
Accordingly, upon a subsequent disposition of stock acquired upon the exercise
of a non-qualified option, the optionee will recognize short-term or long-term
capital gain or loss, depending upon the holding period of the stock equal to
the difference between the amount realized upon disposition of the stock by the
optionee and his basis in the stock.
New Plan Benefits
It is not possible to state the persons who will receive stock options under
the 1996 Plan in the future, nor the amount of options which will be granted
thereunder. The following table provides information as to options granted under
the 1996 Plan during fiscal 1998.
<TABLE>
<CAPTION>
1998
Dollar Number
Name and Position Value of Units
<S> <C> <C>
Russell C. Horowitz......................................................................... (1) 150,000
John Keister................................................................................ (1) 200,000
Executive officers as a Group............................................................... (1) 350,000
Non-Executive Officer Employee Group........................................................ (1) 2,319,200
</TABLE>
(1) The dollar value of options is equal to the difference between the exercise
price of the options granted and the fair market value of the Company's
Common Stock at the date of exercise. Accordingly, such dollar value is not
readily ascertainable.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSED AMENDMENT.
APPROVAL OF THE GO2NET, INC.
1999 EMPLOYEE STOCK PURCHASE PLAN
General Information
The 1999 Employee Stock Purchase Plan (the "Stock Purchase Plan") is
intended to provide a means whereby eligible employees may purchase Common Stock
of the Company through payroll deductions. The Stock Purchase Plan is intended
to provide a further incentive for employees to promote the best interests of
the Company and to encourage stock ownership by employees in order that they may
participate in the Company's economic growth.
Two Hundred Fifty Thousand (250,000) shares of the Common Stock of the
Company may be issued pursuant to the Stock Purchase Plan. The shares issued
pursuant to the Stock Purchase Plan shall be either shares of the Company's
authorized but unissued Common Stock or shares of Common Stock reacquired by the
Company and held as treasury shares. The number of shares issuable under the
Stock Purchase Plan is subject to appropriate adjustment in the event of a stock
split, a subdivision or consolidation of shares of Common Stock, capital
adjustments or payments of stock dividends or distributions or other increases
or decreases in the outstanding shares of Common Stock effected without receipt
of consideration by the Company.
17
<PAGE>
Set forth below is a summary of the principal provisions of the Stock
Purchase Plan.
Eligibility
All persons employed by the Company and any subsidiaries are eligible
to participate in the Stock Purchase Plan, except (i) persons whose customary
employment is less than twenty hours per week or five months or less per year;
and (ii) persons who have been employed by the Company for less than three
months on the first day of the purchase period, with the exception of persons
previously eligible. In addition, persons who are deemed for purposes of Section
423(b)(3) of the Code, to own stock possessing 5% or more of the total combined
voting power or value of all classes of stock of the Company or a subsidiary are
ineligible to participate in the Stock Purchase Plan. Employment will be treated
as continuing intact while a participating employee is on military leave or
other bona fide leave of absence, for up to 90 days or for so long as such
employee's right to re-employment is guaranteed by statute or contract, if
longer than 90 days.
Administration
The Stock Purchase Plan shall be administered by the Board of Directors
or the Committee appointed from time to time by the Board of Directors.
Committee members shall be ineligible to participate under the Stock Purchase
Plan. All members of the Committee shall serve at the discretion of the Board.
The Board of Directors or the Committee, if one has been appointed, is vested
with full authority to make, administer and interpret such equitable rules and
regulations regarding the Stock Purchase Plan as it may deem advisable.
Determinations by the Board of Directors, or the Committee, as to the
interpretation and operation of the Stock Purchase Plan shall be final and
conclusive.
The Stock Purchase Plan was adopted by the Board of Directors on
January 28, 1999. The Stock Purchase Plan will continue in effect through
January 28, 2009, provided, however, that the Board of Directors shall have the
right to terminate the Stock Purchase Plan at any time. In the event of the
expiration of the Stock Purchase Plan or its termination, all options then
outstanding under the Stock Purchase Plan shall automatically be cancelled and
the entire amount credited to the account of each participant hereunder shall be
refunded to each such participant. In addition, the Board of Directors may amend
the Stock Purchase Plan at any time without the consent of the participants, but
no such amendment shall adversely affect options previously granted under the
Stock Purchase Plan and no such amendment (without approval by the Company's
stockholders) may: (a) increase the total number of shares of Common Stock which
may be purchased by all participants, (b) change the class of employees eligible
to receive options under the Stock Purchase Plan; (c) decrease the purchase
price; (d) extend a purchase period thereunder; or (e) extend the term of the
Stock Purchase Plan. The termination of the Stock Purchase Plan is not to be
deemed an action which adversely affects options previously granted under the
Stock Purchase Plan.
Operation of the Stock Purchase Plan
There shall be two "purchase periods" within each full calendar year,
one commencing on April 1 of each calendar year and continuing through September
30 of such calendar year, and the second commencing on October 1 of each
calendar year and continuing through March 31 of such calendar year. Eligible
employees may elect to become participants in the Stock Purchase Plan for a
purchase period by completing a stock purchase agreement prior to the first day
of the purchase period for which the election is made. The election to
participate is effective for the purchase period for which it is made and there
is no limit on the number of purchase periods for which an eligible employee may
elect to become a participant in the Stock Purchase Plan. In the stock purchase
agreement, the participating employee authorizes regular payroll deductions
amounting to such full percentage of the participant's regular compensation as
the participant shall designate. Such payroll deductions cannot amount to less
than one percent (1%) nor more than ten percent (10%) of the participant's
regular compensation and cannot exceed $25,000 per year.
All sums deducted from the regular compensation of participants will be
credited to a stock purchase account established for each participant on the
books of the Company, but prior to use of such funds for the purchase of shares
of the Company's Common Stock in accordance with the Stock Purchase Plan, the
Company may use such funds for any valid corporate purpose. The Company is under
no obligation to pay interest on funds credited to a participant's stock
purchase account in any event.
The purchase price of shares of the Company's Common Stock under the
Stock Purchase Plan is the lower of (i) eighty-five percent (85%) of the fair
market value of a share of Common Stock for the first business day of the
relevant purchase period, or (ii) eighty-five percent (85%) of such value for
the relevant exercise date. The fair market value on a given day is the mean
between the
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<PAGE>
high and low sales prices of a share of Common Stock of the Company in the
over-the-counter market. Each participating employee receives an option,
effective on the first day of the purchase period, to purchase shares of Common
Stock on the exercise date, which is the last business day of the purchase
period. The number of shares which a participant may purchase under the option
is the quotient of the aggregate payroll deductions in the purchase period
authorized by the participant, divided by the purchase price. No employee can be
granted an option under the Stock Purchase Plan to purchase shares of the
Company's Common Stock having a fair market value (as of the date the option to
purchase is granted) in any one calendar year of in excess of $25,000. No
employee can be granted an option in one purchase period for more than 1,000
shares, or such other number of shares as determined from time to time by the
Board or the Committee, as the case may be. The Stock Purchase Plan defines
basic compensation as the regular rate of salary or wages in effect immediately
prior to a purchase period, before any deductions or withholdings, and excluding
overtime, bonuses, sales commissions and amounts paid in reimbursement for
expenses.
Each participating employee automatically and without any act on his
part will be deemed to have exercised his option on the exercise date of the
purchase period in which he is participating, to the extent that the balance in
the participant's account under the Stock Purchase Plan is sufficient to
purchase, at the purchase price in effect for the purchase period, whole shares
of the Company's stock subject to his option. A participant has the right to
cancel his participation in the Stock Purchase Plan for a purchase period by
delivering a notice of cancellation to the Company not later than ten (10) days
before the exercise date for such purchase period. In the event of such
cancellation, the participant will receive in cash the amount credited to his
account. Any participant who so withdraws from the Stock Purchase Plan may again
become a participant at the start of the next purchase period.
Upon dissolution or liquidation of the Company or a merger or
consolidation in which the Company is not the surviving entity, every option
outstanding under the Stock Purchase Plan shall terminate, and each participant
shall be refunded the sums then in his account.
Shares of Common Stock purchased under the Stock Purchase Plan shall be
deemed to have been issued and sold at the close of business on the exercise
date, and prior to that date a participant shall not have any rights or
privileges as a shareholder of the Company with respect to such shares. Shares
purchased under the Stock Purchase Plan shall be registered either in the
participant's name or jointly in the names of the participant and his spouse as
the participant shall designate in his stock purchase agreement. Such
designation may be changed at any time by filing notice with the Company.
Upon the participant's death or other termination of employment, his
participation in the Stock Purchase Plan shall cease and the entire balance
credited to his account under the Stock Purchase Plan shall be automatically
refunded to him, or (in the event of death) to the participant's designated
beneficiary, if any, under a group insurance plan of the Company covering him,
or otherwise to his estate.
The right to purchase shares of Common Stock under the Stock Purchase
Plan is exercisable only by the participant during his lifetime and is not
transferable by him. The grant of an option under the Stock Purchase Plan does
not imply any right to continued employment with the Company for any
participant.
The high and low sale prices of the Company's Common Stock on the
Nasdaq National Market on January 27, 1999 were $108 and $97, respectively.
Federal Tax Effects
The Stock Purchase Plan is designed to satisfy the requirements of
Section 423 of the Internal Revenue Code (as amended). Accordingly, an employee
incurs no tax liability on the grant of an option to purchase shares under the
Stock Purchase Plan nor on the acquisition of the shares upon exercise of the
option.
An employee will obtain favorable tax treatment on the disposition of
shares acquired under the Stock Purchase Plan if the shares are held by the
employee for at least two years from the first day of the purchase period in
which the shares are purchased. Dispositions of the shares after the expiration
of the two year period are called "qualifying dispositions." Upon a qualifying
disposition, there will be included in the employee's gross income as
compensation taxable at ordinary income rates (and not as capital gain) the
lesser of (1) fifteen percent (15%) of the fair market value of the shares on
the first day of the purchase period or (2) the amount by which the fair market
value of the shares at the time of disposition exceeded the actual purchase
price. The basis of the employee's shares, which is initially equal to the
actual purchase price, is increased by an amount equal to the amount includable
as
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<PAGE>
compensation in his or her gross income, and any gain or loss computed with
reference to such adjusted basis which is recognized at the time of the
disposition will be long-term capital gain or loss.
If an employee sells the shares before the expiration of the required
holding period, which is a disqualifying disposition, the employee realizes
ordinary income (compensation) in the year of the disposition to the extent of
the excess of the fair market value of the shares on the last day of the
purchase period over the actual purchase price. The basis of the employee's
shares, which is initially equal to the actual purchase price, is increased by
an amount equal to the amount includable as compensation in his or her gross
income, and any gain or loss computed with reference to such adjusted basis
which is recognized at the time of disposition will be capital gain or loss,
either short term or long term, depending upon the holding period for the
shares.
The Company is not entitled to a deduction for amounts treated as
ordinary income to an employee except to the extent of ordinary income
recognized by an employee upon a disqualifying disposition.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSED PLAN.
INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has appointed Ernst & Young LLP as independent
certified public accountants to audit the consolidated financial statements of
the Company and its subsidiaries for the fiscal year ending September 30, 1999.
Ernst & Young LLP has served as independent accountants since 1996 to audit the
financial statements of the Company.
A representative of Ernst & Young LLP is expected to be present at the Annual
Meeting and will have the opportunity to make a statement if he or she so
desires and to respond to appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPOINTMENT OF ERNST & YOUNG
LLP.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and directors and persons owning more than 10% of the outstanding
Common Stock of the Company to file reports of ownership and changes in
ownership with the Securities and Exchange Commission. Officers, directors and
greater than 10% holders of Common Stock of the Company are required by
Securities and Exchange Commission regulations to furnish the Company with
copies of all Section 16(a) forms they file.
Based solely on copies of such forms furnished as provided above, management
believes that through the date hereof all Section 16(a) filing requirements
applicable to its officers, directors and owners of greater than 10% of its
Common Stock were complied with.
TIME FOR SUBMISSION OF STOCKHOLDER PROPOSALS
Under regulations adopted by the Securities and Exchange Commission, any
proposal submitted for inclusion in the Company's Proxy Statement relating to
the Annual Meeting of Stockholders to be held in 1999 must be received at the
Company's principal executive offices in Seattle, Washington on or before
September 20, 1998. Receipt by the Company of any such proposal from a qualified
stockholder in a timely manner will not ensure its inclusion in the proxy
material because there are other requirements in the proxy rules for such
inclusions.
OTHER MATTERS
Management knows of no matters which may properly be and are likely to be
brought before the meeting other than the matters discussed herein. However, if
any other matters properly come before the meeting, the persons named in the
enclosed proxy will vote in accordance with their best judgment.
The cost of this solicitation will be borne by the Company. It is expected
that the solicitation will be made primarily by mail, but regular employees or
representatives of the Company (none of whom will receive any extra compensation
for their activities) may also solicit proxies by telephone, telecopier and in
person and arrange for brokerage houses and other custodians, nominees and
fiduciaries to send
20
<PAGE>
proxies and proxy material to their principals at the expense of the Company.
10-K REPORT
THE COMPANY WILL PROVIDE EACH BENEFICIAL OWNER OF ITS SECURITIES WITH A COPY
OF AN ANNUAL REPORT ON FORM 10-K, INCLUDING THE FINANCIAL STATEMENTS AND
SCHEDULES THERETO, REQUIRED TO BE FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION FOR THE COMPANY'S MOST RECENT FISCAL YEAR, WITHOUT CHARGE, UPON
RECEIPT OF A WRITTEN REQUEST FROM SUCH PERSON. SUCH REQUEST SHOULD BE SENT TO
RUSSELL C. HOROWITZ, GO2NET, INC., 999 THIRD AVENUE, SUITE 4700, SEATTLE,
WASHINGTON 98104.
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VOTING PROXIES
The Board of Directors recommends an affirmative vote on all proposals
specified. Proxies will be voted as specified. If signed proxies are returned
without specifying an affirmative or negative vote on any proposal, the shares
represented by such proxies will be voted in favor of the Board of Directors'
recommendations.
By order of the Board of Directors
ETHAN CALDWELL
Secretary
February 22, 1999
22
