<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
Filed by the Registrant /x/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / 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
HOOVER'S, 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)(1) and
0-11.
(1) Title of each class of securities to which transaction
applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the filing fee is calculated and state how it
was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE>
HOOVER'S, INC.
1033 LA POSADA DRIVE, SUITE 250
AUSTIN, TEXAS 78752
July 28, 2000
Dear Stockholder:
You are cordially invited to attend the 2000 Annual Meeting of
Stockholders of Hoover's, Inc., which will be held at the Doubletree Hotel,
6505 North IH 35, Austin, Texas on Tuesday, September 12, 2000 at 8:30 a.m.
(Central Time).
Details of the business to be conducted at this meeting are given in
the attached Notice of Annual Meeting of Stockholders and proxy statement.
After careful consideration, our Board of Directors has approved the
proposals set forth in the proxy statement and recommends that you vote for
such proposals.
This year, you may vote your shares by telephone, by the Internet or
by signing, dating and returning the enclosed proxy promptly in the
accompanying reply envelope (telephone and Internet instructions are included
on the proxy card). Representation of your shares at the meeting is very
important. Accordingly, whether or not you plan to attend the meeting, we urge
you to submit your proxy promptly by one of the methods offered. If you are
able to attend this meeting and wish to change your proxy vote, you may be
able to do so by revoking your proxy and voting in person at the meeting.
We look forward to seeing you at the annual meeting.
Sincerely,
/s/ Patrick J. Spain
Patrick J. Spain
CHAIRMAN, CHIEF EXECUTIVE OFFICER AND PRESIDENT
YOUR VOTE IS IMPORTANT
IN ORDER TO ASSURE YOUR REPRESENTATION AT THIS MEETING, YOU ARE REQUESTED TO
VOTE YOUR SHARES BY TELEPHONE, VIA THE INTERNET, OR BY COMPLETING, SIGNING AND
DATING THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE AND RETURNING IT IN THE
ENCLOSED ENVELOPE. NO POSTAGE NEED BE AFFIXED IF MAILED IN THE UNITED STATES.
<PAGE>
Hoover's, Inc.
1033 La Posada Drive, Suite 250
Austin, Texas 78752
-----------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD SEPTEMBER 12, 2000
-----------
To the Stockholders of Hoover's, Inc.:
The 2000 Annual Meeting of Stockholders of Hoover's, Inc. will be
held at the Doubletree Hotel, 6505 North IH 35, Austin, Texas on Tuesday,
September 12, 2000 at 8:30 a.m. (Central Time) for the following purposes:
1. To elect two Class I directors to serve until the annual meeting
of stockholders in 2001, three Class II directors to serve until
the annual meeting of stockholders in 2002 and three Class III
directors to serve until the annual meeting of stockholders in
2003, or in each case until their successors have been elected and
qualified.
2. To approve an amendment to our 1999 Stock Incentive Plan
increasing the number of shares of our common stock reserved for
issuance under this plan by 1,500,000 shares.
3. To ratify the appointment of Ernst & Young LLP as independent
auditors of the Company for the fiscal year ending March 31, 2001.
4. To act upon such other business as may properly come before this
meeting or any adjournments thereof.
Only stockholders of record at the close of business on July 17, 2000
are entitled to notice of and to vote at this meeting. A list of stockholders
entitled to vote at this meeting will be available for inspection at our
offices. All stockholders are cordially invited to attend the meeting in
person. Whether or not you plan to attend this meeting in person, please vote
your shares by telephone, by the Internet or by signing, dating and returning
the enclosed proxy as promptly as possible in the envelope enclosed for your
convenience (telephone and Internet instructions are included on the Proxy
Card). Should you receive more than one proxy because your shares are
registered in different names and addresses, each proxy should be signed and
returned to assure that all of your shares will be voted. You may revoke your
proxy at any time prior to the Annual Meeting. If you attend the Annual
Meeting and vote by ballot, your proxy will be revoked automatically and only
your vote at the Annual Meeting will be counted.
By Order of the Board of Directors,
/s/ Lynn Atchison
Lynn Atchison
SECRETARY
YOUR VOTE IS VERY IMPORTANT, REGARDLESS OF THE NUMBER OF SHARES YOU
OWN. PLEASE READ THE ATTACHED PROXY STATEMENT CAREFULLY, AND VOTE YOUR SHARES
BY TELEPHONE, VIA THE INTERNET OR BY COMPLETING, SIGNING AND DATING THE
ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE AND RETURNING IT IN THE ENCLOSED
ENVELOPE.
<PAGE>
Hoover's, Inc.
1033 La Posada Drive, Suite 250
Austin, Texas 78752
-----------
PROXY STATEMENT
-----------
THESE PROXY MATERIALS AND THE ENCLOSED PROXY CARD ARE BEING MAILED IN
CONNECTION WITH THE SOLICITATION OF PROXIES BY AND ON BEHALF OF THE BOARD OF
DIRECTORS OF HOOVER'S, INC., A DELAWARE CORPORATION (THE "COMPANY"), FOR THE
2000 ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON TUESDAY, SEPTEMBER 12, 2000
AT 8:30 A.M. (CENTRAL TIME) AND AT ANY ADJOURNMENT OR POSTPONEMENT THEREOF.
THESE PROXY MATERIALS ARE BEING MAILED TO STOCKHOLDERS OF RECORD BEGINNING ON
OR ABOUT AUGUST 11, 2000.
PURPOSE OF MEETING
The specific proposals to be considered and acted upon at this
meeting are summarized in the accompanying Notice of Annual Meeting of
Stockholders. The proposals are described in more detail in this proxy
statement.
VOTING RIGHTS AND SOLICITATION
Any stockholder executing a proxy pursuant to this solicitation may
revoke it at any time prior to its exercise by delivering written notice of
such revocation to our Secretary before this meeting or by properly executing
and delivering a proxy bearing a later date. Proxies also may be revoked by
any stockholder present at this meeting who elects to vote his, her or its
shares in person. The cost of soliciting proxies will be paid by us and may
include reimbursement paid to brokerage firms and others for their expense in
forwarding solicitation materials as well as the expense of preparing,
assembling, photocopying and mailing this proxy statement. Solicitation will
be made primarily through the use of the mail; however, our regular employees
may, without additional remuneration, solicit proxies personally by telephone
or Internet e-mail.
Our annual report to stockholders for the year ended March 31, 2000
has been mailed concurrently with the mailing of the Notice of Annual Meeting
of Stockholders and this proxy statement to all stockholders entitled to
notice of, and to vote at, this meeting. The annual report is not incorporated
into this proxy statement and is not considered proxy solicitation material.
We have fixed July 17, 2000 as the record date for determining those
stockholders who are entitled to notice of, and to vote at, this meeting. At
the close of business on the record date, we had 13,819,793 outstanding shares
of our common stock, par value $0.01 per share (net of 150,000 treasury
shares). If a choice as to the matters coming before this meeting has been
specified by a stockholder on the proxy, the shares will be voted accordingly.
If the enclosed form of proxy is properly signed and returned, the shares
represented thereby will be voted at the Annual Meeting in accordance with the
instructions specified thereon. If the proxy does not specify how the shares
represented thereby are to be voted, the proxy will be voted FOR the election
of the directors proposed by the Board unless the authority to vote for the
election of the directors is withheld and, if no contrary instructions are
given, the proxy will be voted FOR the approval of Proposals II and III
described in the accompanying Notice of Annual Meeting of Stockholders and
this proxy statement.
The presence, in person or by proxy, of the holders of a majority of
the shares of our outstanding common stock entitled to vote is necessary to
constitute a quorum at this meeting. Each of our stockholders is entitled to
one vote for each share of our common stock held by that stockholder as of the
record date. Cumulative voting is not permitted in the election of directors.
Abstentions and broker non-votes (i.e., the submission of a proxy by a broker
or nominee specifically indicating the lack of discretionary authority to vote
on the matter) are counted for purposes of determining the presence or absence
of a quorum for the transaction of business. The vote of a plurality of the
shares of our common stock present in person or represented by proxy at this
meeting and entitled to vote on the election of directors is necessary for the
election of a director. Abstentions and broker non-votes have no effect on the
determination of plurality, except to the extent that they affect the total
votes received by any particular candidate. Abstentions will be counted
towards the tabulations of votes cast on proposals presented to the
stockholders and will have the same effect as negative votes, whereas broker
non-votes will not be counted for purposes of determining whether a proposal
has been approved.
As of the record date of July 17, 2000, our directors, executive
officers and holders of five percent (5%) or more of our common stock
beneficially owned an aggregate of approximately 6.9 million shares of our
common stock, not including shares of common stock issuable upon exercise of
approximately 900,000 outstanding stock options and warrants, constituting
approximately 49.6% of the shares of our common stock outstanding. It is
expected that such directors and executive officers will vote or direct the
vote of all shares of our common stock held or owned by such persons, or over
which such persons have voting control, in favor of the proposals described
in this proxy statement. Nonetheless, the approval of the proposals is not
assured. See "Principal Stockholders."
1
<PAGE>
PROPOSAL I
ELECTION OF DIRECTORS
The Company's Certificate of Incorporation provides for a classified
Board of Directors consisting of three classes of directors with staggered
three-year terms, with each class consisting, as nearly as possible, of
one-third of the total number of directors. We currently have the following
eight directors serving on our Board: William S. Berkley, Alan Chai, Steven
Fink, Thomas Hillman, Gary E. Hoover, Laurence J. Kirshbaum, Patrick J. Spain
and Stephen R. Zacharias. At the Annual Meeting, the directors shall be
divided into three classes as nearly equal in size as is practicable,
designated Class I, Class II and Class III. The term of office of the initial
Class I directors shall expire at the 2001 annual meeting of stockholders,
the term of office of the initial Class II directors shall expire at the 2002
annual meeting of stockholders, and the term of office of the initial Class
III directors shall expire at the 2003 annual meeting of stockholders, or in
each case until their successors have been elected and qualified. At each
annual meeting of stockholders held after this meeting, directors to replace
those of a class whose terms expire at such annual meeting shall be elected
to hold office until the third succeeding annual meeting or until their
respective successors have been elected and qualified.
VOTE REQUIRED
A board of eight directors is to be elected at this meeting to hold
office until their respective term has expired or until their successors are
elected and qualified. The two nominees within Class I, and the three nominees
within each of Class II and Class III receiving the greatest number of votes
of the shares present in person or represented by proxy at this meeting and
entitled to vote on the election of directors shall be elected to the Board of
Directors, even if any nominee receives the vote of less than a majority of
the shares.
Unless otherwise instructed, the persons named in the accompanying
proxy card will vote the proxies received by them FOR each of the Board
nominees named below, each of whom is presently a director of the Company. If
any nominee of the Board is unable or declines to serve as a director at the
time of the meeting, the proxies will be voted for any nominee who is
designated by the present Board of Directors to fill the vacancy. It is not
expected that any nominee will be unable or will decline to serve as a
director.
CLASS I NOMINEES
<TABLE>
<CAPTION>
NAME DIRECTOR SINCE AGE POSITION
---- -------------- --- --------
<S> <C> <C> <C>
Thomas J. Hillman................................................ 1992 45 Director
Laurence J. Kirshbaum............................................ 1994 56 Director
</TABLE>
MR. HILLMAN has served as a director of Hoover's since December 1992.
Mr. Hillman is currently a principal of Hillman Consulting, which provides
management consulting services to early-stage Internet companies. He also
serves as a director of privately-held companies that are clients of Hillman
Consulting. Mr. Hillman served as President and Chief Executive Officer of
Fresh Fish, a seafood retailer, from January 1986 through the sale of the
company to Global Seafoods in May 2000. From May 1998 until November 1999, Mr.
Hillman served as a board member of Amerindia, a travel tour operator. From
January 1991 to January 1998, Mr. Hillman served as a director and vice
president of Rainforest Acqualoture Products, a seafood producer. From July
1990 to November 1997, Mr. Hillman served as Chairman of the Board of National
Equity, a mortgage origination and finance company. Mr. Hillman holds a B.A.
in Economics from Washington University.
MR. KIRSHBAUM has served as a director of Hoover's since March 1994.
Mr. Kirshbaum has served as Chairman and Chief Executive Officer of Time
Warner Trade Publishing, a wholly-owned subsidiary of Time Warner, since June
1996. From April 1984 to June 1996, Mr. Kirshbaum served as President and
Chief Executive Officer of Warner Books, a trade book publisher and
wholly-owned subsidiary of Time Warner Trade Publishing. Mr. Kirshbaum
currently serves as a director for Engineering Animation, a publicly held
provider of software tools for three dimensional design and animation. Mr.
Kirshbaum holds a B.A. in English from the University of Michigan.
2
<PAGE>
CLASS II NOMINEES
<TABLE>
<CAPTION>
NAME DIRECTOR SINCE AGE POSITION
---- -------------- --- --------
<S> <C> <C> <C>
William S. Berkley.................... 1991 43 Director
Steven B. Fink........................ 1999 49 Director
Gary E. Hoover........................ 1990 49 Director
</TABLE>
MR. BERKLEY has served as a director of Hoover's since 1991. Mr.
Berkley has served as President and Chief Executive Officer of Tension
Envelope, a paper products company, since 1981. Mr. Berkley holds a B.A. in
History from Colorado College and an M.B.A. from the Amos Tuck School of
Business.
MR. FINK has served as a director of Hoover's since June 1999. Mr.
Fink is currently the Chairman and Chief Executive Officer of both Nextera
Enterprises, Inc., a publicly-held business consulting firm, and NetNext,
Inc., a wholly-owned subsidiary of Nextera Enterprises, Inc., which acquires,
builds and invests in early-stage Internet companies. Mr. Fink has served as
Vice Chairman of Knowledge Universe, Inc. since January 1995 and serves as an
officer or director of other privately-held affiliates of Knowledge Universe.
He also served as the Head of Strategic Planning for Knowledge Universe, Inc.
from January 1996 to January 1999. From December 1993 to December 1996, Mr.
Fink served as Vice President of MC Group, a business consulting firm. From
1989 to December 1993, Mr. Fink served as President of East West Capital, an
investment firm. Mr. Fink is a director of Spring Group PLC, a publicly held
business consulting firm. Mr. Fink holds a B.A. in Psychology and Philosophy
from the University of California, and both a J.D. and an L.L.M. in Taxation
from the New York University School of Law.
MR. HOOVER is the founder of Hoover's and has been a member of the
board of directors since Hoover's inception in February 1990. From February
1990 to September 1994, Mr. Hoover served as Hoover's Chairman of the Board of
Directors and from February 1990 to December 1992, served as Hoover's Chief
Executive Officer. Mr. Hoover served as Chairman of the Board of Directors and
Chief Executive Officer of TravelFest Superstores, an operator of
travel-related superstores he founded in January 1994. TravelFest Superstores
completed the sale of most of its assets and the closing of certain of its
operations in February 1999. In 1982, Mr. Hoover founded Bookstop, a chain of
book superstores, and later sold the company to Barnes and Noble. Since 1998,
Mr. Hoover has also been a professional speaker on entrepreneurialism. Mr.
Hoover holds a B.A. in Economics from the University of Chicago.
CLASS III NOMINEES
<TABLE>
<CAPTION>
NAME DIRECTOR SINCE AGE POSITION
---- -------------- --- --------
<S> <C> <C> <C>
Alan Chai............................... 1990 47 Director
Patrick J. Spain........................ 1994 48 Chairman, Chief Executive Officer
and President
Stephen R. Zacharias.................... 1997 51 Director
</TABLE>
MR. CHAI has served as a director of Hoover's since December 1990.
Mr. Chai has served as Managing Director of Shott Capital Management, LLC, a
private equity firm, since December 1998. From May 1997 through December
1998, he was a Senior Technology Analyst with Shott Capital Management,
specializing in the analysis of Internet companies. Mr. Chai joined Hoover's
in 1990 and served in a number of officer positions, including Vice
President, until 1995 and served as a part-time Senior Contributing Editor
until December 1998. From 1994 through February 1999, Mr. Chai served as a
director of TravelFest Superstores, a travel-related superstore founded by
Gary Hoover in 1994. Since May 2000, Mr. Chai has served as a director of
Vercomnet B.V., a Netherlands-based vertical Web site that organizes
professional communities in various industry sectors, in which Hoover's has
made a minority investment. Mr. Chai holds a B.A. in business from the
University of Chicago, an M.B.A. in Finance and Marketing from the University
of Chicago and an M.B.A. in International Business from Catholic University
of Leuven, Belgium.
3
<PAGE>
MR. SPAIN has served as Hoover's Chairman of the Board since
September 1994 and as Chief Executive Officer since 1993. Mr. Spain joined
Hoover's within weeks of its founding in 1990 by his long-time friend and
business partner Gary Hoover. Prior to joining Hoover's, Mr. Spain worked as
an economic consultant, an in-house counsel for a high technology company, a
real-estate developer, and as a mergers and acquisitions executive at a
subsidiary of a FORTUNE 500 company. He holds a B.A. in Ancient History from
the University of Chicago and a J.D. from Boston University.
MR. ZACHARIAS has served as a director of Hoover's since September
1997. Mr. Zacharias has served as Treasurer of Media General, Inc., a
publicly-held communications company, since January 1993. Mr. Zacharias holds
a B.S. in Commerce from the University of Virginia.
DIRECTOR COMPENSATION AND INDEMNIFICATION ARRANGEMENTS
All directors are reimbursed for out-of-pocket expenses incurred in
attending meetings of our Board and committees on which they serve. As a
result of their appointment to the Board, on July 21, 2000, Messrs. Berkley,
Chai, Fink, Hillman and Hoover, and Media General (on behalf of Mr. Zacharias)
received a grant of 6,750 non-qualified stock options at an exercise price of
$14.00. In addition, at each annual stockholders meeting, beginning with the
2000 Annual Meeting, each individual who is to continue to serve as a
non-employee Board member will be entitled to receive an automatic grant of
1,875 non-qualified stock options under the 1999 Stock Incentive Plan. Each
option will have an exercise price per share equal to 100% of the fair market
value per share of our common stock on the option grant date and a maximum
term of ten years measured from the option grant date. Each option will be
immediately exercisable for all the option shares, but any purchased shares
will be subject to repurchase by us, at the exercise price paid per share,
should the optionee's service as a non-employee Board member cease prior to
vesting in the shares. The 1,875 share grant will vest, and our repurchase
rights will lapse, in three equal annual installments over the director's
period of Board service, with the first installment to vest one year from the
option grant date.
We maintain directors' and officers' liability insurance and our
Bylaws provide for mandatory indemnification of directors and officers to the
fullest extent permitted by Delaware law. We have entered into indemnification
agreements with all of our directors and executive officers. In addition, our
Certificate of Incorporation limits the liability of our directors to us and
our stockholders for breaches of the directors' fiduciary duties to the
fullest extent permitted by Delaware law.
BOARD MEETINGS AND COMMITTEES
Our Board of Directors met six times during the fiscal year ended
March 31, 2000 ("Fiscal Year 2000"), and also acted by written consent. Each
director attended or participated in 75% or more of the aggregate of (i) the
total number of meetings of the Board of Directors and (ii) the total number
of meetings held by all committees of the Board on which such director served
during Fiscal Year 2000.
We have a standing Compensation Committee currently composed of
Messrs. Berkley and Fink. The Compensation Committee met three times in
Fiscal Year 2000. The Compensation Committee has the responsibility for
establishing the compensation payable to our Chief Executive Officer and is
responsible for establishing compensation payable to our other executive
officers based on recommendations made by the Chief Executive Officer. The
Compensation Committee also is responsible for the overall administration of
our employee benefit plans, including our employee stock plans. We also have
a standing Audit Committee currently composed of Messrs. Fink, Hillman and
Zacharias. The Audit Committee met six times in Fiscal Year 2000. The Audit
Committee assists in the selection of our independent auditors and is
responsible for designating those services to be performed by and maintaining
effective communication with the auditors. On June 14, 2000, the Board
adopted a charter for the Audit Committee in accordance with the Nasdaq Stock
Market's rules relating to the structure and membership on the audit
committee of companies whose stock is traded on Nasdaq. We do not have a
standing nominating committee or any other committee performing similar
functions, and these matters are considered at meetings of the full Board of
Directors.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE COMPANY'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE
NOMINEES LISTED HEREIN, AND PROXIES EXECUTED AND RETURNED WILL BE SO VOTED
UNLESS CONTRARY INSTRUCTIONS ARE INDICATED THEREON.
4
<PAGE>
PROPOSAL II
APPROVAL OF THE AMENDMENT TO THE 1999 STOCK INCENTIVE PLAN
The Company's stockholders are being asked to approve an amendment to
the 1999 Stock Incentive Plan (the "Plan"), which will increase the number of
shares of our common stock reserved for issuance under the Plan by an
additional 1,500,000 shares. The purpose of the Plan is to enhance our ability
to provide eligible individuals with awards and incentives both commensurate
with their contributions and competitive with those offered by other
employers, and to increase stockholder value by further aligning the interests
of these eligible individuals with the interests of the Company's stockholders
by providing an opportunity to benefit from stock price appreciation that
generally accompanies improved financial performance.
The Board of Directors believes the amendment is necessary to assure
that a sufficient reserve of the Company's common stock remains available for
issuance under the Plan to allow the Company to continue to utilize equity
incentives to attract and retain the services of key individuals essential to
the Company's long-term growth and financial success. Equity incentives play a
significant role in our efforts to remain competitive in the market for
talented individuals, and we rely on such incentives as a means to attract and
retain highly qualified individuals in the positions vital to the Company's
success. In addition, the amendment will enable us to grant additional options
to the employees of Powerize.com, Inc. upon the completion of the proposed
acquisition of Powerize.com, Inc. We have entered into a definitive merger
agreement with Powerize.com, Inc. as of July 12, 2000 and expect to close the
acquisition prior to the end of the fiscal quarter ending September 30, 2000.
The following is a summary of the principal features of the Plan, as
most recently amended. Any stockholder who wishes to obtain a copy of the
actual plan document may do so upon written request to the Company at 1033 La
Posada Drive, Suite 250, Austin, Texas 78752. The amendment was adopted by the
Board of Directors on June 5, 2000, subject to stockholder approval at the
Annual Meeting.
EQUITY INCENTIVE PROGRAMS
The Plan consists of five (5) separate equity incentive programs: (i)
the Discretionary Option Grant Program, (ii) the Salary Investment Option
Grant Program, (iii) the Stock Issuance Program, (iv) the Automatic Option
Grant Program for non-employee Board members and (v) the Director Fee Option
Grant Program for non-employee Board Members. The principal features of each
program are described below. The Compensation Committee of the Board has the
exclusive authority to administer the Discretionary Option Grant and Stock
Issuance Programs with respect to option grants and stock issuances made to
the Company's executive officers and non-employee Board members and also has
the authority to make option grants and stock issuances under those programs
to all other eligible individuals. However, the Board may at any time appoint
a secondary committee of one or more Board members to have separate but
concurrent authority with the Compensation Committee to make option grants and
stock issuances under those two programs to individuals other than the
Company's executive officers and non-employee Board members. The Compensation
Committee has complete discretion to determine the calendar year or years in
which the Salary Investment Option Grant and Director Fee Option Grant
Programs will be in effect and to select the individuals who are to
participate in the Salary Investment Option Grant Program. All grants made to
the participants in the Salary Investment Option Grant and Director Fee Option
Grant Programs are governed by the express terms of those programs. Neither
the Compensation Committee nor any secondary committee exercises any
administrative discretion under the Automatic Option Grant Program. All grants
under that program are made in strict compliance with the express provisions
of such program.
The term Plan Administrator, as used in this summary, will mean the
Compensation Committee and any secondary committee, to the extent each such
entity is acting within the scope of its administrative jurisdiction under the
Plan.
SHARE RESERVE
4,235,765 shares of the Company's common stock have been reserved for
issuance over the term of the Plan, including the 1,500,000 shares of common
stock subject to this Proposal. In addition, on the first trading day of each
calendar year, the number of shares of common stock available for issuance
under the Plan will automatically increase by an amount equal to two percent
(2%) of the shares of the Company's common stock outstanding on the last
trading day of the immediately preceding calendar year, subject to a maximum
annual increase of 375,000 shares.
As of June 30, 2000, 2,654,899 shares of common stock were subject to
outstanding options under the Plan, 489,676 shares of common stock had been
issued under the Plan, and 80,866 shares of common stock remained available
for future issuance, prior to stockholder approval of this Proposal.
5
<PAGE>
No participant in the Plan may receive option grants, separately
exercisable stock appreciation rights or direct stock issuances for more than
375,000 shares of common stock in the aggregate per calendar year. Stockholder
approval of this Proposal will also constitute a reapproval of the
375,000-share limitation for purposes of Internal Revenue Code Section 162(m).
The shares of common stock issuable under the Plan may be drawn from
shares of our authorized but unissued shares of such common stock or from
shares of such common stock reacquired by the Company, including shares
repurchased on the open market. In the event any change is made to the
outstanding shares of common stock by reason of any recapitalization, stock
dividend, stock split, combination of shares, exchange of shares or other
change in corporate structure effected without our receipt of consideration,
appropriate adjustments will be made to the securities issuable (in the
aggregate, annually and per participant) under the Plan and the securities and
the exercise price per share in effect under each outstanding option.
ELIGIBILITY
Officers and employees, non-employee Board members and independent
consultants in the service of the Company or its parent and subsidiaries
(whether now existing or subsequently established) are eligible to participate
in the Discretionary Option Grant and Stock Issuance Programs. Executive
officers and other highly paid employees are also eligible to participate in
the Salary Investment Option Grant Program. Participation in the Automatic
Option Grant and Director Fee Option Grant Programs is limited to non-employee
members of the Board.
As of June 30, 2000, 7 executive officers, 7 non-employee Board
members and approximately 250 other employees and consultants were eligible to
participate in the Discretionary Option Grant and Stock Issuance Programs. The
seven executive officers were also eligible to participate in the Salary
Investment Option Grant Program, and the 7 non-employee Board members were
also eligible to participate in the Automatic Option Grant and Director Fee
Option Grant Programs.
VALUATION
The fair market value per share of common stock on any relevant date
under the Plan will be deemed to be equal to the closing selling price per
share on that date on the Nasdaq National Market. On June 30, 2000, the fair
market value per share determined on such basis was $6.75.
DISCRETIONARY OPTION GRANT PROGRAM
The Plan Administrator has complete discretion under the
Discretionary Option Grant Program to determine which eligible individuals are
to receive option grants, the time or times when those grants are to be made,
the number of shares subject to each such grant, the status of any granted
option as either an incentive stock option or a non-statutory option under the
federal tax laws, the vesting schedule (if any) to be in effect for the option
grant and the maximum term for which any granted option is to remain
outstanding.
Each granted option will have an exercise price per share determined
by the Plan Administrator. No granted option will have a term in excess of ten
(10) years, and the option will generally become exercisable in one or more
installments over a specified period of service measured from the grant date.
However, one or more options may be structured so that they will be
immediately exercisable for any or all of the option shares; the shares
acquired under those options will be subject to repurchase by the Company, at
the exercise price paid per share, if the optionee ceases service with the
Company prior to vesting in those shares.
Upon cessation of service, the optionee will have a limited period of
time in which to exercise any outstanding option to the extent exercisable for
vested shares. The Plan Administrator will have complete discretion to extend
the period following the optionee's cessation of service during which his or
her outstanding options may be exercised and/or to accelerate the
exercisability or vesting of such options in whole or in part. Such discretion
may be exercised at any time while the options remain outstanding, whether
before or after the optionee's actual cessation of service.
The Plan Administrator is authorized to issue tandem stock
appreciation rights under the Discretionary Option Grant Program, which
provide the holders with the right to surrender their options for an
appreciation distribution from the Company equal to the excess of (i) the fair
market value of the vested shares of common stock subject to the surrendered
option over (ii) the aggregate exercise price payable for such shares. Such
appreciation distribution may, at the discretion of the Plan Administrator, be
made in cash or in shares of common stock.
The Plan Administrator also has the authority to effect the
cancellation of any or all options outstanding under the Discretionary Option
Grant Program and to grant, in substitution therefor, new options covering the
same or a different number of shares of common stock but with an exercise
price per share based upon the fair market value of the option shares on the
new grant date.
6
<PAGE>
SALARY INVESTMENT OPTION GRANT PROGRAM
The Compensation Committee has complete discretion in implementing
the Salary Investment Option Grant Program for one or more calendar years and
in selecting the executive officers and other eligible individuals who are to
participate in the program for those years. As a condition to such
participation, each selected individual must, prior to the start of the
calendar year of participation, file with the Compensation Committee an
irrevocable authorization directing the company to reduce his or her base
salary for the upcoming calendar year by a specified dollar amount not less
than $10,000 nor more than $50,000 and to apply that amount to the acquisition
of a special option grant under the program.
Each selected individual who files such a timely election will
automatically be granted a non-statutory option on the first trading day in
January of the calendar year for which that salary reduction is to be in
effect. The number of shares subject to each such option will be determined by
dividing the salary reduction amount by two-thirds of the fair market value
per share of Company common stock on the grant date, and the exercise price
will be equal to one-third of the fair market value of the option shares on
the grant date. As a result, the total spread on the option shares at the time
of grant (the fair market value of the option shares on the grant date less
the aggregate exercise price payable for those shares) will be equal to the
amount by which the optionee's salary is to be reduced for the calendar year.
In effect, the salary reduction serves as a immediate prepayment, as of the
time of the option grant, of two-thirds of the then current market price of
the shares of common stock subject to the option.
The option will become exercisable in a series of twelve equal
monthly installments upon the optionee's completion of each month of service
in the calendar year for which such salary reduction is in effect and will
become immediately exercisable for all the option shares on an accelerated
basis should the Company experience certain changes in ownership or control.
Each option will remain exercisable for any vested shares until the earlier of
(i) the expiration of the ten-year option term or (ii) the end of the three
(3)-year period measured from the date of the optionee's cessation of service.
The Company has not yet implemented the Salary Investment Option
Grant Program.
STOCK ISSUANCE PROGRAM
Shares of common stock will be issued under the Stock Issuance
Program at a price per share determined by the Plan Administrator. Shares will
be issued for such valid consideration as the Plan Administrator deems
appropriate, including cash and promissory notes. The shares may also be
issued as a bonus for past services without any cash outlay required of the
recipient. The shares issued may be fully vested upon issuance or may vest
upon the completion of a designated service period or the attainment of
pre-established performance goals. The Plan Administrator will, however, have
the discretionary authority at any time to accelerate the vesting of any and
all unvested shares outstanding under the Stock Issuance Program.
AUTOMATIC OPTION GRANT PROGRAM
Under the Automatic Option Grant Program, eligible non-employee Board
members receive a series of option grants over their period of Board service.
Each non-employee Board member will, at the time of his or her initial
election or appointment to the Board, receive an option grant for 6,750 shares
of common stock. In addition, on the date of each Annual Stockholders Meeting,
each individual who is to continue to serve as a non-employee Board member
will automatically be granted an option to purchase 1,875 shares of common
stock, provided he or she has served as a non-employee Board member for at
least six (6) months. There will be no limit on the number of such 1,875-share
option grants any one eligible non-employee Board member may receive over his
or her period of continued Board service.
Stockholder approval of this proposal will also constitute
pre-approval of each option granted under the Automatic Option Grant Program
on or after the date of the Annual Stockholders Meeting and the subsequent
exercise of that option in accordance with the terms of the program summarized
below.
Each automatic grant will have an exercise price per share equal to
the fair market value per share of common stock on the grant date and will
have a maximum term of 10 years, subject to earlier termination following the
optionee's cessation of Board service. Each automatic option will be
immediately exercisable for any or all of the option shares; the shares
acquired under those options will be subject to repurchase by the Company, at
the exercise price paid per share, if the optionee ceases service with the
Company prior to vesting in those shares. Each initial 6,750-share automatic
option will vest in three (3) successive equal annual installments upon the
optionee's completion of each year of Board service over the three (3)-year
period measured from the grant date. Each annual 1,875-share automatic option
will vest in one (1) installment upon optionee's completion of the one
(1)-year period of service measured from the grant date. However, each
outstanding automatic option grant will automatically accelerate and become
immediately exercisable for any or all of the option shares as fully-vested
shares upon certain changes in control or ownership of the Company or upon the
optionee's
7
<PAGE>
death or disability while a Board member. Following the optionee's cessation
of Board service for any reason, each option will remain exercisable for a
12-month period and may be exercised during that time for any or all shares in
which the optionee is vested at the time of such cessation of Board service.
DIRECTOR FEE OPTION GRANT PROGRAM
The Compensation Committee has complete discretion in implementing
the Director Fee Option Grant Program for one or more calendar years in which
non-employee Board members may participate. As a condition to such
participation, each non-employee Board member must, prior to the start of the
calendar year of participation, file with the Compensation Committee an
irrevocable authorization directing the Company to apply all or a portion of
his or her cash retainer fee for the upcoming calendar year to the acquisition
of a special option grant under the program.
Each non-employee Board member who files such a timely election will
automatically be granted a non-statutory option on the first trading day in
January of the calendar year for which that retainer fee election is to be in
effect.
The number of shares subject to each such option will be determined
by dividing the amount of the retainer fee for the calendar year to be applied
to the program by two-thirds of the fair market value per share of Company
Common Stock on the grant date, and the exercise price will be equal to
one-third of the fair market value of the option shares on the grant date. As
a result, the total spread on the option shares at the time of grant (the fair
market value of the option shares on the grant date less the aggregate
exercise price payable for those shares) will be equal to the portion of the
retainer fee that the optionee has elected to be applied to the program. In
effect, the portion of the annual retainer fee otherwise payable in cash
serves as an immediate prepayment, as of the time of the option grant, of two
thirds of the then current market price of the shares of common stock subject
to the option.
The option will become exercisable in a series of twelve equal
monthly installments upon the optionee's completion of each month of service
in the calendar year for which such retainer fee election is in effect and
will become immediately exercisable for all the option shares on an
accelerated basis should the Company experience certain changes in ownership
or control. Each option will remain exercisable for any vested shares until
the earlier of (i) the expiration of the ten-year option term or (ii) the end
of the three (3)-year period measured from the date of the optionee's
cessation of service.
We have not yet implemented the Director Fee Option Grant Program.
GENERAL PROVISIONS
ACCELERATION
In the event that the Company is acquired by merger, asset sale or
sale by the stockholders of more than 50% of our outstanding voting stock
recommended by the Board, each outstanding option under the Discretionary
Option Grant Program that is not to be assumed or replaced by the successor
corporation or otherwise continued in effect will automatically accelerate in
full, and all unvested shares outstanding under the Discretionary Option Grant
and Stock Issuance Programs will immediately vest, except to the extent the
Company's repurchase rights with respect to those shares are to be assigned to
the successor corporation or otherwise continued in effect.
The Plan Administrator will have the authority under the
Discretionary Option Grant Program to provide that those options will
automatically vest in full (i) upon an acquisition of the Company, whether or
not those options are assumed or replaced, (ii) upon a hostile change in
control of the Company effected through a tender offer for more than 50% of
the Company's outstanding voting stock or by proxy contest for the election of
Board members, or (iii) in the event the individual's service is terminated,
whether involuntarily or through a resignation for good reason, within a
designated period (not to exceed 18 months) following an acquisition in which
those options are assumed or replaced or otherwise continued in effect upon a
hostile change in control. The vesting of outstanding shares under the Stock
Issuance Program may be accelerated upon similar terms and conditions. The
options granted under the Salary Investment Option Grant Program, the
Automatic Option Grant Program and the Director Fee Option Grant Program will
automatically accelerate and become exercisable in full upon any acquisition
or change in control transaction.
The acceleration of vesting in the event of a change in the ownership
or control of the Company may be seen as an anti-takeover provision and may
have the effect of discouraging a merger proposal, a takeover attempt or other
efforts to gain control of the Company.
LIMITED STOCK APPRECIATION RIGHTS
Each option granted under the Salary Investment Option Grant Program,
the Automatic Option Grant Program and the Director Fee Option Grant Program
will include a limited stock appreciation right so that upon the successful
completion of a hostile tender offer for more than fifty percent (50%) of the
Company's outstanding voting securities or a change in a majority of the Board
as a result of one or more contested elections for Board membership, the
option may be surrendered to the Company in return for a
8
<PAGE>
cash distribution from the Company. The amount of the distribution per
surrendered option share will be equal to the excess of (i) the fair market
value per share at the time the option is surrendered or, if greater, the
tender offer price paid per share in the hostile take-over over (ii) the
exercise price payable per share under such option. In addition, the Plan
Administrator may grant such rights to officers of the Company as part of
their option grants under the Discretionary Option Grant Program.
Stockholder approval of this Proposal will also constitute
pre-approval of each limited stock appreciation right granted under the Salary
Investment Option Grant Program, the Automatic Option Grant Program and
Director Fee Option Grant Program and the subsequent exercise of those rights
in accordance with the foregoing terms.
FINANCIAL ASSISTANCE
The Plan Administrator may institute a loan program to assist one or
more participants in financing the exercise of outstanding options under the
Discretionary Option Grant Program or the purchase of shares under the Stock
Issuance Program through full-recourse interest-bearing promissory notes.
However, the maximum amount of financing provided any participant may not
exceed the cash consideration payable for the issued shares plus all
applicable taxes incurred in connection with the acquisition of those shares.
SPECIAL TAX ELECTION
The Plan Administrator may provide one or more holders of
non-statutory options or unvested share issuances under the Plan with the
right to have the Company withhold a portion of the shares otherwise issuable
to such individuals in satisfaction of the withholding taxes to which such
individuals become subject in connection with the exercise of those options or
the vesting of those shares. Alternatively, the Plan Administrator may allow
such individuals to deliver previously acquired shares of common stock in
payment of such withholding tax liability.
AMENDMENT AND TERMINATION
The Board may amend or modify the Plan at any time, subject to any
required stockholder approval pursuant to applicable laws and regulations.
Unless sooner terminated by the Board, the Plan will terminate on the earliest
of (i) June 7, 2009, (ii) the date on which all shares available for issuance
under the Plan have been issued as fully-vested shares or (iii) the
termination of all outstanding options in connection with certain changes in
control or ownership of the Company.
STOCK AWARDS
The table below shows, as to our Chairman and Chief Executive Officer
("CEO"), the four other most highly compensated executive officers of the
Company (with base salary and bonus for the past fiscal year in excess of
$100,000) and the other individuals and groups indicated, the number of shares
of Common Stock subject to option grants made under the Plan from June 8, 1999
(the effective date of the Plan) through June 30, 2000, together with the
weighted average exercise price payable per share. The Company has not made
any direct stock issuances to date under the Plan.
OPTION TRANSACTIONS
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------
NUMBER OF SHARES UNDERLYING WEIGHTED AVERAGE EXERCISE
NAME AND POSITION OPTIONS GRANTED (#) PRICE PER SHARE ($)
----------------- ------------------- -------------------
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Patrick J. Spain
Chairman of the Board, Chief Executive Officer,
President and Director Nominee 212,500 $10.91
--------------------------------------------------------------------------------------------------------------------
Carl G. Shepherd
Executive Vice President and Chief Operating
Officer 62,000 $7.44
--------------------------------------------------------------------------------------------------------------------
Elisabeth DeMarse
Executive Vice President, Content, Strategy
and Acquisitions (1) -0- N/A
--------------------------------------------------------------------------------------------------------------------
Lynn Atchison
Senior Vice President - Finance and
Administration and Chief Financial Officer 114,000 $9.86
--------------------------------------------------------------------------------------------------------------------
Jani Farlow Spede
Senior Vice President - Advertising and E-Commerce 92,500 $8.06
--------------------------------------------------------------------------------------------------------------------
Thomas J. Hillman
Director Nominee 6,750 $14.00
--------------------------------------------------------------------------------------------------------------------
9
<PAGE>
--------------------------------------------------------------------------------------------------------------------
NUMBER OF SHARES UNDERLYING WEIGHTED AVERAGE EXERCISE
NAME AND POSITION OPTIONS GRANTED (#) PRICE PER SHARE ($)
----------------- ------------------- -------------------
--------------------------------------------------------------------------------------------------------------------
Laurence J. Kirshbaum
Director Nominee -0- N/A
--------------------------------------------------------------------------------------------------------------------
William S. Berkley
Director Nominee 6,750 $14.00
--------------------------------------------------------------------------------------------------------------------
Steven B. Fink
Director Nominee 6,750 $14.00
--------------------------------------------------------------------------------------------------------------------
Gary E. Hoover
Director Nominee 6,750 $14.00
--------------------------------------------------------------------------------------------------------------------
Alan Chai
Director Nominee 6,750 $14.00
--------------------------------------------------------------------------------------------------------------------
Stephen R. Zacharias
Director Nominee 6,750 $14.00
--------------------------------------------------------------------------------------------------------------------
All current executive officers as a group (7)............ 612,875 $9.65
--------------------------------------------------------------------------------------------------------------------
All current non-employee directors as a group (7)........ 40,500 $14.00
--------------------------------------------------------------------------------------------------------------------
All employees, including current officers who are not
executive officers, as a group (230)..................... 582,150 $9.28
--------------------------------------------------------------------------------------------------------------------
</TABLE>
-----------
(1) Ms. DeMarse served as Executive Vice President, Content, Strategy and
Acquisitions until her resignation in May 2000.
FEDERAL INCOME TAX CONSEQUENCES
OPTION GRANTS
Options granted under the Plan may be either incentive stock options
which satisfy the requirements of Section 422 of the Internal Revenue Code or
non-statutory options which are not intended to meet such requirements. The
Federal income tax treatment for the two types of options differs as follows:
INCENTIVE OPTIONS. No taxable income is recognized by the optionee at the time
of the option grant, and no taxable income is generally recognized at the time
the option is exercised. The optionee will, however, recognize taxable income
in the year in which the purchased shares are sold or otherwise disposed of.
For Federal tax purposes, dispositions are divided into two categories: (i)
qualifying and (ii) disqualifying. A qualifying disposition occurs if the sale
or other disposition is made after the optionee has held the shares for more
than two (2) years after the option grant date and more than one (1) year
after the exercise date. If either of these two holding periods is not
satisfied, then a disqualifying disposition will result.
If the optionee makes a disqualifying disposition of the purchased
shares, the Company will be entitled to an income tax deduction, for the
taxable year in which such disposition occurs, equal to the excess of (i) the
fair market value of such shares on the option exercise date over (ii) the
exercise price paid for the shares. If the optionee makes a qualifying
disposition, the Company will not be entitled to any income tax deduction.
NON-STATUTORY OPTIONS. No taxable income is recognized by an optionee upon the
grant of a non-statutory option. The optionee will in general recognize
ordinary income, in the year in which the option is exercised, equal to the
excess of the fair market value of the purchased shares on the exercise date
over the exercise price paid for the shares, and the optionee will be required
to satisfy the tax withholding requirements applicable to such income.
10
<PAGE>
If the shares acquired upon exercise of the non-statutory option are
unvested and subject to repurchase by the Company in the event of the
optionee's termination of service prior to vesting in those shares, then the
optionee will not recognize any taxable income at the time of exercise but
will have to report as ordinary income, as and when the Company's repurchase
right lapses, an amount equal to the excess of (i) the fair market value of
the shares on the date the repurchase right lapses over (ii) the exercise
price paid for the shares. The optionee may, however, elect under Section
83(b) of the Internal Revenue Code to include as ordinary income in the year
of exercise of the option an amount equal to the excess of (i) the fair market
value of the purchased shares on the exercise date over (ii) the exercise
price paid for such shares. If the Section 83(b) election is made, the
optionee will not recognize any additional income as and when the repurchase
right lapses.
The Company will be entitled to an income tax deduction equal to the
amount of ordinary income recognized by the optionee with respect to the
exercised non-statutory option. The deduction will in general be allowed for
the taxable year of the Company in which such ordinary income is recognized by
the optionee.
STOCK APPRECIATION RIGHTS
No taxable income is recognized upon receipt of a stock appreciation
right. The holder will recognize ordinary income, in the year in which the
stock appreciation right is exercised, in an amount equal to the appreciation
distribution. The Company will be entitled to an income tax deduction equal to
the appreciation distribution in the taxable year in which such ordinary
income is recognized by the optionee.
DIRECT STOCK ISSUANCES
The tax principles applicable to direct stock issuances under the
Plan will be substantially the same as those summarized above for the exercise
of non-statutory option grants.
DEDUCTIBILITY OF EXECUTIVE COMPENSATION
The Plan is designed to comply with the requirements of Code Section
162(m). We anticipate that any compensation deemed paid by us in connection
with the disqualifying dispositions of incentive stock option shares, or the
exercise of non-statutory options with exercise prices equal to the fair
market value of the option shares on the grant date, will qualify as
performance-based compensation for purposes of Code Section 162(m) and will
not have to be taken into account for purposes of the $1 million limitation
per covered individual on the deductibility of the compensation paid to
certain of our executive officers. Accordingly, all compensation deemed paid
with respect to those options will remain deductible by us without limitation
under Code Section 162(m).
The Company will continue to assess the impact of Code Section 162(m)
on its compensation practices and determine what further action, if any, is
appropriate. Please see "Report on Executive Compensation" for more
information.
ACCOUNTING TREATMENT
Under the current accounting principles in effect for equity
incentive programs such as the Plan, the option grants under the Discretionary
Option Grant and Automatic Option Grant Programs will not result in any direct
charge to the Company's reported earnings. However, the fair value of those
options is required to be disclosed in the notes to the Company's financial
statements, and the Company must also disclose, in footnotes to the Company's
financial statements, the pro-forma impact those options would have upon the
Company's reported earnings were the fair value of those options at the time
of grant treated as a compensation expense. In addition, the number of
outstanding options may be a factor in determining the Company's earnings per
share on a fully-diluted basis.
On March 31, 2000, the Financial Accounting Standards Board issued
Interpretation No. 44, which is an interpretation of APB Opinion No. 25
governing the accounting principles applicable to equity incentive plans.
Under the Interpretation, option grants made to consultants (but not
non-employee Board members) after December 15, 1998 will result in a direct
charge to the Company's reported earnings based upon the fair value of the
option measured initially as of the grant date and then subsequently on the
vesting date of each installment of the underlying option shares. Such charge
will accordingly include the appreciation in the value of the option shares
over the period between the grant date of the option (or, if later, the July
1, 2000 effective date of the Interpretation) and the vesting date of each
installment of the option shares. In addition, any options which are repriced
after December 15, 1998 will also trigger a direct charge to the Company's
earnings measured by the appreciation in the value of the underlying shares
over the period between the grant date of the option (or, if later, the July
1, 2000 effective date of the Interpretation) and the date the option is
exercised for those shares.
Should one or more individuals be granted tandem stock appreciation
rights under the Plan, then such rights would result in a compensation expense
to be charged against the Company's reported earnings. Accordingly, at the end
of each fiscal quarter, the amount
11
<PAGE>
(if any) by which the fair market value of the shares of common stock subject
to such outstanding stock appreciation rights has increased from the prior
quarter-end would be accrued as compensation expense, to the extent such fair
market value is in excess of the aggregate exercise price in effect for those
rights.
NEW PLAN BENEFITS
As of June 30, 2000, no stock options had been granted, and no shares
of Common Stock had been issued, on the basis of the share increase that is
the subject of this Proposal. However, on the date of the Annual Meeting,
Messrs. Berkley, Chai, Fink, Hillman, Hoover, Kirshbaum and Zacharias will be
entitled to receive an option grant for 1,875 shares at an exercise price
equal to the fair market value per share of Common Stock on that date.
STOCKHOLDER APPROVAL
The affirmative vote of at least a majority of the outstanding shares
of Common Stock present in person or by proxy at the Annual Meeting and
entitled to vote is required for approval of the amendment to the Plan. Should
such stockholder approval not be obtained, then the 1,500,000-share increase
to the share reserve under the Plan will not be implemented, any stock options
granted under the Plan on the basis of such increase will immediately
terminate without ever becoming exercisable for the shares of Common Stock
subject to those options, and no additional options or stock issuances will be
made on the basis of such increase. The Plan will, however, continue in
effect, and option grants and direct stock issuances may continue to be made
under the Plan until all the shares available for issuance under the Plan have
been issued pursuant to such option grants and direct stock issuances.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS DEEMS THIS PROPOSAL TO BE IN THE BEST INTERESTS OF THE
COMPANY AND ITS STOCKHOLDERS AND RECOMMENDS A VOTE "FOR" APPROVAL OF SUCH
PROPOSAL. UNLESS AUTHORITY TO DO SO IS WITHHELD, THE PERSON(S) NAMED IN EACH
PROXY WILL VOTE THE SHARES REPRESENTED THEREBY "FOR" THE APPROVAL OF THE
AMENDMENT TO THE 1999 STOCK INCENTIVE PLAN.
PROPOSAL III
RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has appointed the firm of Ernst & Young LLP
independent public accountants for the Company during the 2000 Fiscal Year, to
serve in the same capacity for the fiscal year ending March 31, 2001, and is
asking the stockholders to ratify this appointment. The affirmative vote of a
majority of the shares represented and voting at the Annual Meeting is
required to ratify the selection of Ernst & Young LLP.
In the event the stockholders fail to ratify the appointment, the
Board of Directors will reconsider its selection. Even if the selection is
ratified, the Board of Directors in its discretion may direct the appointment
of a different independent accounting firm at any time during the year if the
Board of Directors believes that such a change would be in the best interests
of the Company and its stockholders.
A representative of Ernst & Young LLP is expected to be present at
the Annual Meeting and available to respond to appropriate questions.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE COMPANY'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE
RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP AS THE COMPANY'S
INDEPENDENT AUDITORS, AND PROXIES EXECUTED AND RETURNED WILL BE SO VOTED
UNLESS CONTRARY INSTRUCTIONS ARE INDICATED THEREON.
12
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding
beneficial ownership of our common stock as of July 17, 2000 by (1) all
persons who are beneficial owners of five percent (5%) or more of our common
stock, (2) each of our directors and nominees for directors, (3) each of our
executive officers named in the Summary Compensation Table below, and (4) all
current executive officers and directors as a group.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP (1) COMMON STOCK
------------------------------------ ------------------------ ------------
<S> <C> <C>
Warner Books Multimedia Corp.......................................... 2,627,080 19.01
Time and Life Building
1271 Avenue of the Americas
New York, New York 10020
Media General, Inc.................................................... 2,417,250 (2) 17.47
333 Grace Street
Richmond, VA 23219
Knowledge Universe, Inc............................................... 1,022,727 (3) 7.40
844 Moraga Drive
Los Angeles, CA 94049
Patrick J. Spain...................................................... 534,689 (4) 3.75
Carl G. Shepherd...................................................... 163,070 (5) 1.17
Elisabeth DeMarse..................................................... 14,725 (6) *
Lynn Atchison......................................................... 82,350 (7) *
Jani Farlow Spede..................................................... 52,500 (8) *
William S. Berkley.................................................... 316,080 (9) 2.28
Alan Chai............................................................. 185,505(10) 1.33
Steven B. Fink........................................................ 2,250(11) *
Thomas Hillman........................................................ 315,761(12) 2.28
Gary E. Hoover........................................................ 77,032(13) *
Laurence J. Kirshbaum................................................. -- --
Stephen R. Zacharias.................................................. -- --
All directors and executive officers as a group (13 persons).......... 1,770,261 12.01
</TABLE>
-----------
* Indicates less than 1%.
(1) Beneficial ownership is calculated in accordance with the rules of the
Securities and Exchange Commission under Rule 13d-3(d)(i). Percentage
of beneficial ownership is based on 13,819,793 shares of our common
stock outstanding as of the record date of July 17, 2000. In computing
the number of shares beneficially owned by a person and the percentage
ownership of that person, shares of our common stock subject to options
held by that person that are currently exercisable or will become
exercisable within 60 days following March 31, 2000 are deemed
outstanding. However, these shares are not deemed outstanding for the
purpose of computing the percentage ownership of any other person.
Unless otherwise indicated in the footnotes to this table, 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.
(2) Includes 15,000 shares of common stock issuable upon exercise of
currently exercisable warrants and 2,250 shares of common stock
issuable upon exercise of stock options that are exercisable within 60
days.
(3) The shares held by such stockholder are held of record by its indirect
subsidiaries, Knowledge Net Holdings, Inc. and Nextera Enterprises,
Inc.
(4) Includes 455,625 shares of common stock issuable upon exercise of stock
options that are currently exercisable within 60 days.
13
<PAGE>
(5) Includes 159,750 shares of common stock issuable upon exercise of stock
options, which are currently exercisable within 60 days.
(6) Includes 13,125 shares of common stock issuable upon exercise of
stock options, which are exercisable within 60 days.
(7) Includes 81,000 shares of common stock issuable upon exercise of
stock options, which are exercisable within 60 days.
(8) Includes 52,500 shares of common stock issuable upon exercise of
stock options, which are exercisable within 60 days.
(9) Includes 26,817 shares of common stock issuable upon exercise of
currently exercisable warrants and 2,250 shares of common stock
issuable upon exercise of stock options, which are exercisable within
60 days.
(10) Includes 22,500 shares of common stock issuable upon exercise of
currently exercisable warrants and 57,750 shares of common stock
issuable upon exercise of stock options, which are exercisable within
60 days.
(11) Includes 2,250 shares of common stock issuable upon exercise of stock
options, which are currently exercisable within 60 days.
(12) Includes 15,258 shares of common stock issuable upon exercise of
currently exercisable warrants and 2,250 shares of common stock
issuable upon exercise of stock options, which are exercisable within
60 days. This number also includes 37,819 shares of common stock held
by the Hillman Family Partnership, 44,569 shares held by JMT Fund, Inc.
and 157,710 shares held by various trusts for the benefit of members of
Mr. Hillman's family.
(13) Includes 22,500 shares of common stock issuable upon exercise of
currently exercisable warrants and 2,250 shares of common stock
issuable upon exercise of stock options, which are exercisable within
60 days.
EXECUTIVE COMPENSATION AND OTHER INFORMATION
EXECUTIVE OFFICERS
Our executive officers and directors are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Patrick J. Spain 48 Chairman, Chief Executive Officer and President
Carl G. Shepherd 47 Executive Vice President and Chief Operating Officer
Lynn Atchison 40 Senior Vice President and Chief Financial Officer
Thomas M. Ballard 42 Vice President, Technology and Chief Information Officer
George W. Howe 45 Vice President, Sales
Kris Rao 31 Vice President and General Counsel
Jani Farlow Spede 32 Senior Vice President, Advertising and E-commerce
</TABLE>
Biographical information for Mr. Spain is set forth under Proposal
I-"Election of Directors".
MR. SHEPHERD has served as Hoover's Executive Vice President and
Chief Operating Officer since June 1997. From August 1995 to June 1997, Mr.
Shepherd served as Vice President, Business Development of Human Code, a
software development company. From December 1992 to March 1995, Mr. Shepherd
served as Chief Financial Officer of Hanley-Wood, a trade magazine publisher.
Mr. Shepherd has held positions with both consumer and trade magazine
publishers including TEXAS MONTHLY, BUILDER AND REMODELING and the DALLAS
MORNING NEWS. Previously, Mr. Shepherd was a senior manager with Andersen
Consulting's New York office. Mr. Shepherd holds a B.A. in Business
Administration from Texas Christian University and an M.B.A from the
University of Texas.
MS. ATCHISON has served as Hoover's Chief Financial Officer and Vice
President, Finance and Administration since May 1996. Ms. Atchison was
promoted to Senior Vice President, Finance in March 1999. From November 1993
to April 1996, Ms. Atchison served as Chief Financial Officer of Travelogix, a
provider of travel ticketing systems software. Prior to that, Ms. Atchison
worked for Trilogy Development, a provider of sales automation software, and
worked for eight years as a certified public accountant with Ernst & Young.
Ms. Atchison holds a B.B.A. in Accounting from Stephen F. Austin State
University.
MR. BALLARD has served as Hoover's Vice President, Technology and
Chief Information Officer since October 1998. From March 1987 to July 1998.
Mr. Ballard served as Vice President of Medianet/TradeOne, a subsidiary of
Affiliated Computer Services, where he designed, developed and maintained
systems to track marketing, advertising, and financial data for companies in
the high tech industry. Mr. Ballard holds a B.A. in Computer Information
Systems with emphasis on Business Management from Southwest Texas State
University.
14
<PAGE>
MR. HOWE has served as Hoover's Vice President, Sales since January
1999. From March 1997 to December 1998, Mr. Howe served as Vice President,
Products for Standard & Poor's, a provider of business information. From
January 1993 to February 1997, Mr. Howe served as Vice President, Western
region for Standard & Poor's. While employed by Standard & Poor's, Mr. Howe
supervised sales of client-based solutions in the Equity Security, Compustat
and Debt Rating areas. Mr. Howe also supervised the Investor Relations
Products Group's successful launch of new products, incorporating content from
Nasdaq Bulletin Boards and Canadian companies. Mr. Howe holds a B.A. in
Political Science from Duke University.
MR. RAO has served as Hoover's Vice President and General Counsel
since January 2000. From August 1996 through January 2000, Mr. Rao served as
Assistant General Counsel of PBS, where he was responsible for the legal
affairs of PBS Video and the Webby Award-winning PBS ONLINE website. From
October 1993 through July 1996, Mr. Rao was an attorney with Kahn, Kleinman,
Yanowitz and Arnson in Cleveland, Ohio specializing in corporate and
securities law issues affecting growth companies. Mr. Rao holds a B.A. from
Case Western Reserve University and a J.D. from Harvard Law School.
MS. SPEDE has served as Hoover's Senior Vice President, Advertising
and E-commerce since November 1999, and served as Vice President, Advertising
and E-commerce from March 1999 to November 1999. From December 1996 to March
1999, Ms. Spede served as Hoover's Vice President, Marketing and
Communications. From January 1996 to December 1996, Ms. Spede served as
Hoover's Director, Corporate Communications and from September 1995 to January
1996, served as Hoover's Publicity Manager. Prior to joining Hoover's, Ms.
Spede directed online strategic planning and coordinated publicity and
community affairs for Shands Hospital at the University of Florida. Ms. Spede
holds a B.S. in English from Ball State University.
EMPLOYMENT CONTRACTS; CHANGE-IN-CONTROL AND INDEMNIFICATION ARRANGEMENTS
The executive officers serve at the discretion of our Board of
Directors. We presently do not have an employment contract in effect with any
of the executive officers. We maintain directors' and officers' liability
insurance and our Bylaws provide for mandatory indemnification of officers to
the fullest extent permitted by Delaware law.
SUMMARY COMPENSATION TABLE
The following table provides certain summary information concerning
the compensation earned by our Chief Executive Officer and each of the four
other most highly compensated executive officers whose salary and bonus for
the 2000 Fiscal Year exceeded $100,000 for services rendered in all
capacities to us during the fiscal years ended March 31, 1999 and 2000. These
individuals are referred to as the Named Officers. No individual resigned
during the last fiscal year who would otherwise have been required to have
been included in the table.
<TABLE>
<CAPTION>
ANNUAL COMPENSATION (1) LONG-TERM COMPENSATION
----------------------- ----------------------
SECURITIES UNDERLYING
PRINCIPAL POSITION FISCAL YEAR SALARY BONUS OPTIONS
------------------ ----------- ------ ----- -------
<S> <C> <C> <C> <C>
Patrick J. Spain 2000 $215,694 $150,000 112,500
CHAIRMAN OF THE BOARD, 1999 $144,236 $25,000 75,000
CHIEF EXECUTIVE OFFICER AND
PRESIDENT
Carl G. Shepherd 2000 $152,680 $24,000 0
EXECUTIVE VICE PRESIDENT AND 1999 $97,694 $12,000 106,500
CHIEF OPERATING OFFICER
Elisabeth DeMarse 2000 $240,000 $10,000 52,500
EXECUTIVE VICE PRESIDENT, 1999 N/A N/A N/A
CONTENT, STRATEGY AND
ACQUISITIONS (2)
Lynn Atchison 2000 $119,417 $25,000 64,000
SENIOR VICE PRESIDENT AND 1999 $80,389 $10,000 60,000
CHIEF FINANCIAL OFFICER
Jani Farlow Spede 2000 $109,806 $28,146 42,500
SENIOR VICE PRESIDENT, 1999 $61,542 $5,500 45,000
ADVERTISING AND E-COMMERCE
</TABLE>
-----------
15
<PAGE>
(1) Excludes certain perquisites and other benefits which did not
exceed 10% of any officers' total salary and bonus.
(2) Ms. DeMarse served as Executive Vice President, Content, Strategy
and Acquisitions until her resignation in May 2000.
STOCK OPTIONS AND STOCK APPRECIATION RIGHTS
The following table sets forth information concerning stock options
granted to each of the Named Executive Officers during the year ended March 31,
2000.
<TABLE>
<CAPTION>
NUMBER OF % OF TOTAL POTENTIAL REALIZABLE VALUE
SECURITIES OPTIONS OF ASSUMED ANNUAL RATES OF
UNDERLYING GRANTED TO EXERCISE STOCK PRICE APPRECIATION
OPTIONS EMPLOYEES PRICE PER FOR OPTION TERM (2)
GRANTED IN FISCAL SHARE (3) --------------------------
NAME (1) (4) YEAR (5) EXPIRATION DATE 5% 10%
-------------------- --------------- ----------- --------- -------------------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
Patrick J. Spain 112,500 14.8% $14 June 8, 2009 $990,509 $2,510,144
Carl G. Shepherd 0 0.0% N/A N/A N/A N/A
Elisabeth DeMarse 52,500 6.9% $5.67 April 1, 2009 $187,381 $474,592
Lynn Atchison 15,000 2.0% $14 June 8, 2009 $132,068 $334,686
49,000 6.4% $11 November 30, 2009 $340,701 $863,590
Jani Farlow Spede 42,500 6.0% $11 November 30, 2009 $295,506 $749,032
</TABLE>
-----------
(1) During the year ended March 31, 2000, we granted employees, including
the above Named Executive Officers, options to purchase 760,150 shares
of common stock under the 1996 and 1999 Stock Option Plans.
(2) The amount shown as potential realizable value represent hypothetical
gains that could be achieved for the respective options if exercised at
the end of the option term. The 5% and 10% assumed annual rates of
compounded stock price appreciation are mandated by rules of the
Securities and Exchange Commission and do not represent our estimate or
projection of our future common stock prices. These amounts represent
certain assumed rates of appreciation in the value of our common stock
from the fair market value on the date of grant. Actual gains, if any,
on stock option exercises are dependent on the future performance of
the common stock and overall stock market conditions. The amounts
reflected in the table may not necessarily be achieved.
(3) The Compensation Committee has the authority to effect the cancellation
of the options and to grant, in substitution therefor, new options
covering the same or a different number of shares of Common Stock but
with an exercise price per share based upon the fair market value of
the option shares on the new grant date.
(4) The option will become exercisable in four (4) equal annual
installments upon the optionee's completion of each year of service
measured from the grant date. The option will become exercisable on an
accelerated basis upon a liquidation or dissolution of the Company or a
merger or consolidation in which there is a change in ownership of
securities possessing more than 50% of the total combined voting power
of the Company's outstanding securities, unless the option is assumed
by the surviving entity. In addition, the Compensation Committee of the
Board of Directors may accelerate the vesting of the option in the
event (i) there is a change in the composition of the Board of
Directors over a period of two years or less such that those
individuals serving as Board members at the beginning of the period
cease to represent a majority of the Board or (ii) change of ownership
of securities possessing more than 50% of the total combined voting
power of the Company's outstanding securities pursuant to a hostile
tender offer.
(5) The exercise price may be paid in cash or in shares of Common Stock
valued at fair market value on the exercise date. Alternatively, the
option may be exercised through a cashless exercise procedure pursuant
to which the optionee provides
16
<PAGE>
irrevocable instructions to a brokerage firm to sell the purchased
shares and to remit to the Company, out of the sale proceeds, an amount
equal to the exercise price plus all applicable withholding taxes. The
Compensation Committee may also assist an optionee in the exercise of
an option by (i) authorizing a loan from the Company in a principal
amount not to exceed the aggregate exercise price plus any tax
liability incurred in connection with the exercise or (ii) permitting
the optionee to pay the option price in installments over a period of
years upon terms established by the Compensation Committee.
AGGREGATE OPTION EXERCISES IN FISCAL YEAR 2000 AND FISCAL YEAR-END VALUES
The following table shows the number of shares covered by both
exercisable and unexercisable stock options held by the Named Executive
Officers as of the year ended March 31, 2000, and the values for exercisable
and unexercisable options. Options are in-the-money if the market value of the
shares covered thereby is greater than the option exercise price. This
calculation is based on the fair market value at March 31, 2000 of $11.375 per
share, less the exercise price.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS AT
AT MARCH 31, 2000 (2) MARCH 31, 2000
--------------------- --------------
SHARES
ACQUIRED VALUE
NAME ON EXERCISE REALIZED (1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Patrick J. Spain -0- N/A 369,000 193,500 $3,570,925 $586,875
Carl G. Shepherd -0- N/A 101,175 111,825 $762,141 $808,734
Elisabeth DeMarse -0- N/A -0- 52,500 -0- $299,688
Lynn Atchison -0- N/A 59,250 115,750 $489,219 $369,219
Jani Farlow Spede -0- N/A 42,000 83,000 $331,250 $272,969
</TABLE>
-----------
(1) Value is determined by subtracting the exercise price from the fair
market value of our common stock at March 31, 2000 ($11.375 per share
based upon the closing sale price of our common stock on the Nasdaq
National Market on such date) and multiplying by the number of shares
underlying the options.
(2) "Exercisable" refers to those options which were both exercisable and
vested, while "Unexercisable" refers to those options which were
unvested.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Company's Board of Directors
currently consists of Messrs. Berkley and Fink. Messrs. Berkley and Fink
served on the Compensation Committee for Fiscal Year 2000, during which time
Mr. Hoover and Mr. Kirshbaum also served on the Compensation Committee. Mr.
Hoover was formerly the Company's Chief Executive Officer. In addition, Mr.
Fink and Mr. Kirshbaum are board members and officers of affiliates of certain
of the Company's stockholders, which have also engaged in related-party
transactions with the Company during Fiscal Year 2000. See "Certain
Transactions with Management".
No current executive officer of the Company has ever served as a
member of the board of directors or compensation committee of any other entity
that has or has had one or more executive officers serving as a member of the
Company's Board of Directors or Compensation Committee.
REPORT ON EXECUTIVE COMPENSATION
During the 2000 Fiscal Year, compensation decisions concerning our
executive officers were made by the Compensation Committee of the Board of
Directors, which is composed of the non-employee directors listed below. The
following report describes the procedures employed by the Compensation
Committee in formulating the compensation policy for our executive officers
during the 2000 Fiscal Year.
It is the duty of the Compensation Committee to review and determine
the salaries and bonuses of our executive officers, including the Chairman and
Chief Executive Officer, and to establish the general compensation policies
for such individuals. The Compensation Committee believes that the
compensation policies for our executive officers should reflect our
performance and the value created for our stockholders. In addition, the
compensation policies should support our short-term and long-term strategic
goals and values
17
<PAGE>
and should reward individual contribution to our success. We are engaged in a
very competitive industry, and our success depends upon our ability to attract
and retain qualified executives through the competitive compensation packages
we offer to such individuals.
The following objectives are evaluated and considered when making
compensation decisions: (i) provide competitive annual cash compensation to
attract, retain and motivate high-caliber executives; (ii) align the interests
of executives with those of our stockholders through equity-based compensation
and/or equity ownership; and (iii) communicate overall corporate objectives to
executives so that all parties are working towards a similar goal.
GENERAL
Our overall philosophy is to reward executives for building long-term
value for our stockholders, and to provide overall compensation packages that
will enable us to attract and retain qualified executives in our highly
competitive industry. We compensate our executive officers with a combination
of salary and incentives designed to focus their efforts on maximizing both
our near-term and long-term financial performance. In addition, our
compensation structure also rewards individual performance that furthers our
goals. Elements of our compensation structure include the following:
* Base Salary
* Annual Incentives
* Equity Incentives/Equity Ownership
Each executive officer's compensation package is designed to provide
an appropriately weighted mix of these elements which cumulatively provide a
level of compensation roughly equivalent to that paid by peer companies. The
actual value of total compensation is ultimately based on performance, and
will be strongly linked to stockholder value.
BASE SALARY
Base salary and increases in base salary are primarily determined by
individual performance. Each executive officer's base salary is adjusted each
year on the basis of (i) the Compensation Committee's evaluation of the
officer's personal performance for the year taking into account the
recommendation of the Chairman and Chief Executive Officer and (ii) the
competitive marketplace for persons in comparable positions. Our financial
performance may also be a factor in determining the base salaries of executive
officers. In many instances, the qualitative factors involve a subjective
assessment by the Compensation Committee.
ANNUAL INCENTIVES
We maintain annual cash incentive bonus programs to reward executive
officers and other key employees for attaining pre-established corporate
performance goals. The annual incentives vary significantly based on our
profitability, revenue growth, and total stockholder return; the achievement
of our strategic objectives; and each individual's contribution towards that
performance. In setting corporate performance goals, we consider our
historical performance and underlying business model, as well as external and
internal expectations related to overall financial and operating performance.
EQUITY INCENTIVES/EQUITY OWNERSHIP
We believe it is important to align the interests of the executive
officers with those of our stockholders. In our opinion, equity incentives and
ownership are a way of achieving this objective. We believe equity-based
incentives are an effective means of aligning the interests of executives with
those of stockholders. We utilize our 1999 Stock Incentive Plan to grant the
equity-based incentives. Options granted under the 1999 Plan have an exercise
price equal to the market price of our stock on the date of grant, vest over
four years (generally on a pro rata basis) and carry a ten-year term. In
general, the greater responsibility an executive officer has, the greater the
equity portion of his or her total compensation package. To encourage employee
ownership and to provide employees with a significant incentive to grow the
value of the business through performance, we have established an all-employee
grant of stock options. Additionally, employees have the ability to
participate in our Employee Stock Purchase Plan.
COMPLIANCE WITH THE INTERNAL REVENUE CODE
Section 162(m) of the Internal Revenue Code imposes a limit on tax
deductions for annual compensation, other than performance-based compensation,
in excess of $1,000,000 paid by a corporation to its chief executive officer
and the other most highly compensated executive officers of a corporation. We
have not and do not currently anticipate paying cash compensation in excess of
$1,000,000 per annum to any employee. We anticipate that any compensation
deemed paid by us in connection with the exercise of options will qualify as
performance-based compensation. The Board of Directors will continue to assess
the impact of
18
<PAGE>
Section 162(m) of the Code on its compensation practices and determine what
further action, if any, is appropriate.
COMPENSATION OF THE CHAIRMAN AND CEO
In setting compensation payable to our Chairman and Chief Executive
Officer, Mr. Spain, the Compensation Committee has sought to be competitive
with companies of similar size within the industry, taking into account the
highly competitive environment for experienced senior management in our
industry. Given that consideration, Mr. Spain's compensation is tied to our
performance and to his personal performance. In Fiscal Year 2000, Mr. Spain
earned a base salary of $215,694 and cash bonus of $150,000. In addition, Mr.
Spain was granted an option to purchase 112,500 shares of common stock during
Fiscal Year 2000. The bonus for Fiscal Year 2000 was based on our performance
and Mr. Spain's significant contribution to that performance in terms of both
leadership and strategic vision.
SUMMARY
It is the opinion of the Compensation Committee that the executive
compensation policies and plans provide the necessary total remuneration
program to properly align our performance and the interests of our
stockholders through the use of competitive and equitable executive
compensation in a balanced and reasonable manner, and to attract and retain
qualified executives in our highly competitive industry, in both the short and
long-term.
Submitted by the Compensation Committee of the Board of Directors:
William S. Berkley
Steven B. Fink
19
<PAGE>
STOCK PERFORMANCE GRAPH
The graph below depicts our stock price as an index assuming $100
invested on July 22, 1999, the date of our initial public offering, along with
the composite prices of companies listed in the Nasdaq Stock Market (U.S.
Companies) Index and a composite of the following peer group companies: Edgar
Online, Inc., OneSource Information Service, Inc., MarketWatch, Inc., Multex,
Inc. and The Street.com, Inc. This information has been provided to us by the
Nasdaq Stock Market. The comparisons in the graph are required by regulations of
the Securities and Exchange Commission and are not intended to forecast or to be
indicative of the possible future performance of our common stock.
COMPARISON OF THE CUMULATIVE TOTAL RETURN* AMONG HOOVER'S, INC.,
THE NASDAQ STOCK MARKET-U.S. INDEX AND PEER GROUP INDEX
[GRAPH]
<TABLE>
<CAPTION>
Cumulative Total Return
7/22/99 7/99 8/99 9/99 10/99 11/99 12/99 1/00 2/00 3/00
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Hoover's Inc. 100.00 95.54 77.23 78.57 72.32 79.02 62.50 66.07 80.36 81.25
Peer Group 100.00 88.62 66.89 74.12 83.45 93.12 101.53 85.80 88.21 87.47
Nasdaq Stock Market (U.S.) 100.00 98.22 102.35 102.49 110.70 124.17 151.48 145.88 173.67 170.07
</TABLE>
THE PRECEDING REPORT ON EXECUTIVE COMPENSATION AND THE STOCK
PERFORMANCE GRAPH SHALL NOT BE DEEMED INCORPORATED BY REFERENCE INTO ANY OF OUR
PREVIOUS FILINGS UNDER THE SECURITIES ACT OF 1933 OR THE SECURITIES EXCHANGE ACT
OF 1934 WHICH MIGHT INCORPORATE FILINGS MADE BY US UNDER THOSE ACTS, NOR WILL
SUCH REPORT OR GRAPH BE INCORPORATED BY REFERENCE INTO ANY FUTURE FILINGS MADE
BY US UNDER THOSE ACTS, EXCEPT TO THE EXTENT THAT WE SPECIFICALLY INCORPORATE
THIS INFORMATION BY REFERENCE.
20
<PAGE>
CERTAIN TRANSACTIONS WITH MANAGEMENT
We have adopted a policy that all related-party transactions are
required to be approved by a majority of the Board of Directors, including a
majority of the independent and disinterested outside directors on the Board,
and will be on terms no less favorable to us than we could obtain from
unaffiliated third parties.
MEDIA GENERAL
Media General owns greater than five percent of our outstanding common
stock. Mr. Zacharias, Treasurer of Media General, is a member of our Board of
Directors. In June 1996, we entered into a distributor agreement with Media
General Financial Services, a wholly-owned subsidiary of Media General. Under
this agreement, Media General Financial Services has licensed certain of their
financial data to us for integration into our products and services. We entered
into a new agreement with Media General Financial Services dated June 1, 1999,
pursuant to which we pay a royalty based on our monthly net revenue as
compensation for our licensing of the Media General data, which totaled
approximately $436,000 during Fiscal Year 2000.
On July 14, 2000, Media General exercised a warrant to purchase an
additional 750,000 shares of our common stock at an exercise price of $4.67 per
share. Media General has agreed that it and its affiliates will not directly or
indirectly acquire beneficial ownership of, or voting control over, more than
49% of our common stock at any time prior to June 2002.
WARNER BOOKS
Warner Books Multimedia Corp. owns greater than five percent of our
outstanding common stock. Mr. Kirshbaum, Chairman and Chief Executive Officer of
Time Warner Trade Publishing, the parent company of Warner Books, which is, in
turn, the parent company of Warner Books Multimedia Corp., is a member of our
Board of Directors. We have from time to time purchased advertising in various
publications owned by Time Warner, Inc., the ultimate parent entity of Warner
Books Multimedia Corp. We paid approximately $64,000 for such advertisements in
Fiscal Year 2000. On May 9, 2000, Warner Books Multimedia Corp. exercised
warrants to purchase an additional 360,000 shares of our common stock at an
exercise price of $3.33 per share and 15,000 shares of our common stock at an
exercise price of $4.33 per share. As part of its initial purchase of shares of
our common stock, Warner Books has agreed that it and its affiliates will not
directly or indirectly acquire beneficial ownership of, or voting control over,
more than 49% of our common stock prior to June 2002.
KNOWLEDGE UNIVERSE
Knowledge Net Holdings, L.L.C. owns greater than five percent of our
outstanding common stock. Mr. Fink, who is currently the Chairman and Chief
Executive Officer of both Nextera Enterprises, Inc. and NetNext, Inc., and Vice
Chairman of Knowledge Universe, L.L.C. (the ultimate parent company of Knowledge
Net Holdings) is a member of our Board of Directors. In connection with the
purchase of shares of our common stock on June 11, 1999, we concurrently entered
into an agreement with Knowledge Net Holdings, L.L.C. and Nextera Enterprises,
Inc., pursuant to which they will purchase from us at fair value at least $2.0
million of various services, which may include advertising on our Web site,
sponsorship of feature or content areas of our Web site, licensing of our
company or industry information and/or enterprise subscriptions. In addition, we
hired Sibson & Co., a consulting firm affiliated with Knowledge Universe, L.L.C,
to study, evaluate, recommend and facilitate management and organization changes
and to provide SmartASP consulting services. We paid a total of $105,000 to
Sibson & Co. for such services. Knowledge Net Holdings has also agreed that it
and its affiliates will not directly or indirectly, unless approved by our
disinterested directors, acquire beneficial ownership of, or voting control
over, more than 49% of our common stock prior to June 2002.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires our
executive officers and directors, and persons who beneficially own more than 10%
of our common stock, to file reports of ownership and changes in ownership with
the Securities and Exchange Commission and the Nasdaq Stock Market. Executive
officers, directors and greater than 10% beneficial owners are required by
Securities and Exchange Commission regulations to furnish us with copies of all
Section 16(a) forms they file.
Based solely on review of the copies of the forms furnished to us or
written representations from certain reporting persons that no Forms 5 were
required, we believe that, during Fiscal Year 2000, all of our executive
officers, directors and greater than 10% beneficial owners complied with all
applicable Section 16(a) filing requirements, with the exception of a late
filing of one report on each of Form 3 and Form 5 by Mr. Rao, our Vice President
and General Counsel, which have since been filed by Mr. Rao.
21
<PAGE>
STOCKHOLDER PROPOSALS
Pursuant to Rule 14a-8 under the Securities Exchange Act of 1934,
stockholder proposals to be presented at our 2001 annual meeting of stockholders
and in our proxy statement and form of proxy relating to that meeting, must be
received by us at our offices in Austin, Texas, addressed to our Secretary, no
later than April 1, 2001. With respect to any stockholder proposal submitted
outside of Rule 14a-8, persons acting as proxies shall have discretionary
authority to vote against any proposal presented at our 2001 annual meeting of
stockholders unless the Company receives notice of such proposal no later than
June 15, 2001. These proposals must comply with applicable Delaware law, certain
rules and regulations promulgated by the Securities and Exchange Commission and
the procedures set forth in our Bylaws.
ANNUAL REPORT ON FORM 10-K
WE WILL MAIL TO ANY STOCKHOLDER WITHOUT CHARGE, UPON WRITTEN REQUEST, A
COPY OF OUR ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED MARCH 31, 2000,
INCLUDING THE FINANCIAL STATEMENTS, SCHEDULES AND LIST OF EXHIBITS. REQUESTS
SHOULD BE SENT TO THE ATTENTION OF INVESTOR RELATIONS, AT OUR EXECUTIVE OFFICES
LOCATED AT 1033 LA POSADA DRIVE, SUITE 250, AUSTIN, TEXAS 78752.
OTHER MATTERS
Our Board of Directors is not aware of any matter to be presented for
action at this meeting other than the matters set forth in this proxy statement.
Should any other matter requiring a vote of the stockholders arise, the persons
named as proxies on the enclosed proxy card will vote the shares represented
thereby in accordance with their best judgment of our interest. Discretionary
authority with respect to such other matters is granted by the execution of the
enclosed proxy card.
By Order of the Board of Directors,
/s/ Lynn Atchison
Lynn Atchison
SECRETARY
July 28, 2000
22
<PAGE>
APPENDIX A
1999 Stock Incentive Plan
23
<PAGE>
HOOVER'S, INC.
1999 STOCK INCENTIVE PLAN
ARTICLE ONE
GENERAL PROVISIONS
I. PURPOSE OF THE PLAN
This 1999 Stock Incentive Plan is intended to promote the
interests of Hoover's, Inc., a Delaware corporation, by providing eligible
persons with the opportunity to acquire a proprietary interest, or otherwise
increase their proprietary interest, in the Corporation as an incentive for
them to remain in the service of the Corporation.
Capitalized terms shall have the meanings assigned to such
terms in the attached Appendix.
II. STRUCTURE OF THE PLAN
A. The Plan shall be divided into five separate equity
programs:
(i) the Discretionary Option Grant Program under
which eligible persons may, at the discretion of the Plan
Administrator, be granted options to purchase shares of Common Stock,
(ii) the Salary Investment Option Grant Program
under which eligible employees may elect to have a portion of their
base salary invested each year in special options,
(iii) the Stock Issuance Program under which
eligible persons may, at the discretion of the Plan Administrator, be
issued shares of Common Stock directly, either through the immediate
purchase of such shares or as a bonus for services rendered the
Corporation (or any Parent or Subsidiary),
(iv) the Automatic Option Grant Program under which
eligible non-employee Board members shall automatically receive
options at periodic intervals to purchase shares of Common Stock; and
(v) the Director Fee Option Grant Program under
which non-employee Board members may elect to have all or any portion
of their annual retainer fee otherwise payable in cash applied to a
special option grant.
B. The provisions of Articles One and Seven shall apply to
all equity programs under the Plan and shall govern the interests of all
persons under the Plan.
<PAGE>
III. ADMINISTRATION OF THE PLAN
A. The following provisions shall govern the administration of
the Plan:
(i) The Board shall have the authority to administer
the Discretionary Option Grant and Stock Issuance Programs with
respect to Section 16 Insiders but may delegate such authority in
whole or in part to the Primary Committee.
(ii) Administration of the Discretionary Option
Grant and Stock Issuance Programs with respect to all other persons
eligible to participate in those programs may, at the Board's
discretion, be vested in the Primary Committee or a Secondary
Committee, or the Board may retain the power to administer those
programs with respect to all such persons.
(iii) The Primary Committee shall have the sole and
exclusive authority to determine which Section 16 Insiders and other
highly compensated Employees shall be eligible for participation in
the Salary Investment Option Grant Program for one or more calendar
years. However, all option grants under the Salary Investment Option
Grant Program shall be made in accordance with the express terms of
that program, and the Primary Committee shall not exercise any
discretionary functions with respect to the option grants made under
that program.
(iv) Administration of the Automatic Option Grant
and Director Fee Option Grant Programs shall be self-executing in
accordance with the terms of those programs.
B. Each Plan Administrator shall, within the scope of its
administrative jurisdiction under the Plan, have full power and authority
subject to the provisions of the Plan:
(i) to establish such rules as it may deem
appropriate for proper administration of the Plan, to make all factual
determinations, to construe and interpret the provisions of the Plan
and the awards thereunder and to resolve any and all ambiguities
thereunder;
(ii) to determine, with respect to awards made under
the Discretionary Option Grant and Stock Issuance Programs, which
eligible persons are to receive such awards, the time or times when
such awards are to be made, the number of shares to be covered by each
such award, the vesting schedule (if any) applicable to the award, the
status of a granted option as either an Incentive Option or a
Non-Statutory Option and the maximum term for which the option is to
remain outstanding;
(iii) to amend, modify or cancel any outstanding
award with the consent of the holder or accelerate the vesting of such
award; and
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(iv) to take such other discretionary actions as
permitted pursuant to the terms of the applicable program.
Decisions of each Plan Administrator within the scope of its administrative
functions under the Plan shall be final and binding on all parties.
C. Members of the Primary Committee or any Secondary
Committee shall serve for such period of time as the Board may determine and
may be removed by the Board at any time. The Board may also at any time
terminate the functions of any Secondary Committee and reassume all powers and
authority previously delegated to such committee.
D. Service on the Primary Committee or the Secondary
Committee shall constitute service as a Board member, and members of each such
committee shall accordingly be entitled to full indemnification and
reimbursement as Board members for their service on such committee. No member
of the Primary Committee or the Secondary Committee shall be liable for any
act or omission made in good faith with respect to the Plan or any options or
stock issuances under the Plan.
IV. ELIGIBILITY
A. The persons eligible to participate in the Discretionary
Option Grant and Stock Issuance Programs are as follows:
(i) Employees,
(ii) non-employee members of the Board or the board
of directors of any Parent or Subsidiary, and
(iii) consultants and other independent advisors who
provide services to the Corporation (or any Parent or Subsidiary).
B. Only Employees who are Section 16 Insiders or other
highly compensated individuals shall be eligible to participate in the Salary
Investment Option Grant Program.
C. Only non-employee Board members shall be eligible to
participate in the Automatic Option Grant and Director Fee Option Grant
Programs.
V. STOCK SUBJECT TO THE PLAN
A. The stock issuable under the Plan shall be shares of
authorized but unissued or reacquired Common Stock, including shares
repurchased by the Corporation on the open market. The maximum number of
shares of Common Stock initially reserved for issuance over the term of the
Plan shall not exceed Two Million, One Hundred Ninety-Five Thousand, Eight
Hundred Ninety-Five (2,195,895) shares.* Such authorized share reserve
consists of (i) the
-----------------------
* Reflects the 0.75 for 1 reverse stock split effected June 29, 1999.
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number of shares which remain available for issuance, as of the Plan Effective
Date, under the Predecessor Plans, including the shares subject to the
outstanding options to be incorporated into the Plan and the additional shares
which would otherwise be available for future grant, plus (ii) an increase of
Seven Hundred Eighty-Three Thousand, Seven Hundred Fifty (783,750) shares
authorized by the Board subject to stockholder approval prior to the Section
12 Registration Date.
B. The number of shares of Common Stock available for
issuance under the Plan shall automatically increase on the first trading day
of each calendar year during the term of the Plan, beginning with the 2000
calendar year, by an amount equal to two percent (2%) of the shares of Common
Stock outstanding on the last trading day of the immediately preceding
calendar year, but in no event shall any such annual increase exceed Three
Hundred Seventy-Five Thousand (375,000) shares.
C. No one person participating in the Plan may receive
options, separately exercisable stock appreciation rights and direct stock
issuances for more than Three Hundred Seventy-Five Thousand (375,000) shares
of Common Stock in the aggregate per calendar year, beginning with the 1999
calendar year.
D. Shares of Common Stock subject to outstanding options
(including options incorporated into this Plan from the Predecessor Plans)
shall be available for subsequent issuance under the Plan to the extent those
options expire, terminate or are cancelled for any reason prior to exercise in
full. Unvested shares issued under the Plan and subsequently repurchased by
the Corporation, at the original exercise or issue price paid per share,
pursuant to the Corporation's repurchase rights under the Plan shall be added
back to the number of shares of Common Stock reserved for issuance under the
Plan and shall accordingly be available for reissuance through one or more
subsequent options or direct stock issuances under the Plan. However, should
the exercise price of an option under the Plan be paid with shares of Common
Stock or should shares of Common Stock otherwise issuable under the Plan be
withheld by the Corporation in satisfaction of the withholding taxes incurred
in connection with the exercise of an option or the vesting of a stock
issuance under the Plan, then the number of shares of Common Stock available
for issuance under the Plan shall be reduced by the gross number of shares for
which the option is exercised or which vest under the stock issuance, and not
by the net number of shares of Common Stock issued to the holder of such
option or stock issuance. Shares of Common Stock underlying one or more stock
appreciation rights exercised under the Plan shall NOT be available for
subsequent issuance.
E. If any change is made to the Common Stock by reason of
any stock split, stock dividend, recapitalization, combination of shares,
exchange of shares or other change affecting the outstanding Common Stock as a
class without the Corporation's receipt of consideration, appropriate
adjustments shall be made to (i) the maximum number and/or class of securities
issuable under the Plan, (ii) the number and/or class of securities by which
the share reserve is to increase each calendar year pursuant to the automatic
share increase provisions of the Plan, (iii) the number and/or class of
securities for which any one person may be granted options, separately
exercisable stock appreciation rights and direct stock issuances under the
Plan
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per calendar year, (iv) the number and/or class of securities for which grants
are subsequently to be made under the Automatic Option Grant Program to new
and continuing non-employee Board members, (v) the number and/or class of
securities and the exercise price per share in effect under each outstanding
option under the Plan and (vi) the number and/or class of securities and price
per share in effect under each outstanding option incorporated into this Plan
from the Predecessor Plans. Such adjustments to the outstanding options are to
be effected in a manner which shall preclude the enlargement or dilution of
rights and benefits under such options. The adjustments determined by the Plan
Administrator shall be final, binding and conclusive.
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ARTICLE TWO
DISCRETIONARY OPTION GRANT PROGRAM
I. OPTION TERMS
Each option shall be evidenced by one or more documents in
the form approved by the Plan Administrator; PROVIDED, however, that each such
document shall comply with the terms specified below. Each document evidencing
an Incentive Option shall, in addition, be subject to the provisions of the
Plan applicable to such options.
A. EXERCISE PRICE.
1. The exercise price per share shall be fixed by
the Plan Administrator at the time of the option grant.
2. The exercise price shall become immediately due
upon exercise of the option and shall, subject to the provisions of Section II
of Article Seven and the documents evidencing the option, be payable in cash
or check made payable to the Corporation. Should the Common Stock be
registered under Section 12 of the 1934 Act at the time the option is
exercised, then the exercise price may also be paid as follows:
(i) shares of Common Stock held for the
requisite period necessary to avoid a charge to the Corporation's
earnings for financial reporting purposes and valued at Fair Market
Value on the Exercise Date, or
(ii) to the extent the option is exercised
for vested shares, through a special sale and remittance procedure
pursuant to which the Optionee shall concurrently provide irrevocable
instructions to (a) a Corporation-approved brokerage firm to effect
the immediate sale of the purchased shares and remit to the
Corporation, out of the sale proceeds available on the settlement
date, sufficient funds to cover the aggregate exercise price payable
for the purchased shares plus all applicable Federal, state and local
income and employment taxes required to be withheld by the
Corporation by reason of such exercise and (b) the Corporation to
deliver the certificates for the purchased shares directly to such
brokerage firm in order to complete the sale.
Except to the extent such sale and remittance procedure is
utilized, payment of the exercise price for the purchased shares must be made
on the Exercise Date.
B. EXERCISE AND TERM OF OPTIONS. Each option shall be
exercisable at such time or times, during such period and for such number of
shares as shall be determined by the Plan Administrator and set forth in the
documents evidencing the option. However, no option shall have a term in
excess of ten (10) years measured from the option grant date.
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C. CESSATION OF SERVICE.
1. The following provisions shall govern the
exercise of any options outstanding at the time of the Optionee's cessation of
Service or death:
(i) Any option outstanding at the time of
the Optionee's cessation of Service for any reason shall remain
exercisable for such period of time thereafter as shall be determined
by the Plan Administrator and set forth in the documents evidencing
the option, but no such option shall be exercisable after the
expiration of the option term.
(ii) Any option exercisable in whole or in
part by the Optionee at the time of death may be subsequently
exercised by his or her Beneficiary.
(iii) During the applicable post-Service
exercise period, the option may not be exercised in the aggregate for
more than the number of vested shares for which the option is
exercisable on the date of the Optionee's cessation of Service. Upon
the expiration of the applicable exercise period or (if earlier) upon
the expiration of the option term, the option shall terminate and
cease to be outstanding for any vested shares for which the option
has not been exercised. However, the option shall, immediately upon
the Optionee's cessation of Service, terminate and cease to be
outstanding to the extent the option is not otherwise at that time
exercisable for vested shares.
(iv) Should the Optionee's Service be
terminated for Misconduct or should the Optionee engage in Misconduct
while his or her options are outstanding, then all such options shall
terminate immediately and cease to be outstanding.
2. The Plan Administrator shall have complete
discretion, exercisable either at the time an option is granted or at any time
while the option remains outstanding:
(i) to extend the period of time for which
the option is to remain exercisable following the Optionee's cessation
of Service to such period of time as the Plan Administrator shall deem
appropriate, but in no event beyond the expiration of the option term,
and/or
(ii) to permit the option to be exercised,
during the applicable post-Service exercise period, for one or more
additional installments in which the Optionee would have vested had
the Optionee continued in Service.
D. STOCKHOLDER RIGHTS. The holder of an option shall have no
stockholder rights with respect to the shares subject to the option until such
person shall have exercised the option, paid the exercise price and become a
holder of record of the purchased shares.
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E. REPURCHASE RIGHTS. The Plan Administrator shall have the
discretion to grant options which are exercisable for unvested shares of
Common Stock. Should the Optionee cease Service while holding such unvested
shares, the Corporation shall have the right to repurchase, at the exercise
price paid per share, any or all of those unvested shares. The terms upon
which such repurchase right shall be exercisable (including the period and
procedure for exercise and the appropriate vesting schedule for the purchased
shares) shall be established by the Plan Administrator and set forth in the
document evidencing such repurchase right.
F. LIMITED TRANSFERABILITY OF OPTIONS. During the lifetime
of the Optionee, Incentive Options shall be exercisable only by the Optionee
and shall not be assignable or transferable other than to a Beneficiary
following the Optionee's death. Non-Statutory Options shall be subject to the
same restrictions, except that a Non-Statutory Option may, to the extent
permitted by the Plan Administrator, be assigned in whole or in part during
the Optionee's lifetime (i) as a gift to one or more members of the Optionee's
immediate family, to a trust in which Optionee and/or one or more such family
members hold more than fifty percent (50%) of the beneficial interest or to an
entity in which more than fifty percent (50%) of the voting interests are
owned by one or more such family members or (ii) pursuant to a domestic
relations order. The terms applicable to the assigned portion shall be the
same as those in effect for the option immediately prior to such assignment
and shall be set forth in such documents issued to the assignee as the Plan
Administrator may deem appropriate.
II. INCENTIVE OPTIONS
The terms specified below shall be applicable to all
Incentive Options. Except as modified by the provisions of this Section II,
all the provisions of Articles One, Two and Six shall be applicable to
Incentive Options. Options which are specifically designated as Non-Statutory
Options when issued under the Plan shall NOT be subject to the terms of this
Section II.
A. ELIGIBILITY. Incentive Options may only be granted to
Employees.
B. EXERCISE PRICE. The exercise price per share shall not be
less than one hundred percent (100%) of the Fair Market Value per share of
Common Stock on the option grant date.
C. DOLLAR LIMITATION. The aggregate Fair Market Value of the
shares of Common Stock (determined as of the respective date or dates of
grant) for which one or more options granted to any Employee under the Plan
(or any other option plan of the Corporation or any Parent or Subsidiary) may
for the first time become exercisable as Incentive Options during any one
calendar year shall not exceed the sum of One Hundred Thousand Dollars
($100,000). To the extent the Employee holds two (2) or more such options
which become exercisable for the first time in the same calendar year, the
foregoing limitation on the exercisability of such options as Incentive
Options shall be applied on the basis of the order in which such options are
granted.
D. 10% STOCKHOLDER. If any Employee to whom an Incentive
Option is granted is a 10% Stockholder, then the exercise price per share
shall not be less than one hundred
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<PAGE>
ten percent (110%) of the Fair Market Value per share of Common Stock on the
option grant date, and the option term shall not exceed five (5) years
measured from the option grant date.
III. CHANGE IN CONTROL/HOSTILE TAKE-OVER
A. Each option outstanding at the time of a Change in
Control but not otherwise fully-vested shall automatically accelerate so that
each such option shall, immediately prior to the effective date of the Change
in Control, become exercisable for all of the shares of Common Stock at the
time subject to that option and may be exercised for any or all of those
shares as fully-vested shares of Common Stock. However, an outstanding option
shall not so accelerate if and to the extent: (i) such option is, in
connection with the Change in Control, assumed or otherwise continued in full
force and effect by the successor corporation (or parent thereof) pursuant to
the terms of the Change in Control, (ii) such option is replaced with a cash
incentive program of the successor corporation which preserves the spread
existing at the time of the Change in Control on the shares of Common Stock
for which the option is not otherwise at that time exercisable and provides
for subsequent payout in accordance with the same vesting schedule applicable
to those option shares or (iii) the acceleration of such option is subject to
other limitations imposed by the Plan Administrator at the time of the option
grant. Each option outstanding at the time of the Change in Control shall
terminate as provided in Section III.C. of this Article Two.
B. All outstanding repurchase rights shall also terminate
automatically, and the shares of Common Stock subject to those terminated
rights shall immediately vest in full, in the event of any Change in Control,
except to the extent: (i) those repurchase rights are assigned to the
successor corporation (or parent thereof) or otherwise continue in full force
and effect pursuant to the terms of the Change in Control or (ii) such
accelerated vesting is precluded by other limitations imposed by the Plan
Administrator at the time the repurchase right is issued.
C. Immediately following the consummation of the Change in
Control, all outstanding options shall terminate and cease to be outstanding,
except to the extent assumed by the successor corporation (or parent thereof)
or otherwise expressly continued in full force and effect pursuant to the
terms of the Change in Control.
D. Each option which is assumed in connection with a Change
in Control shall be appropriately adjusted, immediately after such Change in
Control, to apply to the number and class of securities which would have been
issuable to the Optionee in consummation of such Change in Control had the
option been exercised immediately prior to such Change in Control. Appropriate
adjustments to reflect such Change in Control shall also be made to (i) the
exercise price payable per share under each outstanding option, PROVIDED the
aggregate exercise price payable for such securities shall remain the same,
(ii) the maximum number and/or class of securities available for issuance over
the remaining term of the Plan and (iii) the maximum number and/or class of
securities for which any one person may be granted options, separately
exercisable stock appreciation rights and direct stock issuances under the
Plan per calendar year.
E. The Plan Administrator may at any time provide that one
or more options will automatically accelerate in connection with a Change in
Control, whether or not those
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options are assumed or otherwise continued in full force and effect pursuant
to the terms of the Change in Control. Any such option shall accordingly
become exercisable, immediately prior to the effective date of such Change in
Control, for all of the shares of Common Stock at the time subject to that
option and may be exercised for any or all of those shares as fully-vested
shares of Common Stock. In addition, the Plan Administrator may at any time
provide that one or more of the Corporation's repurchase rights shall not be
assignable in connection with such Change in Control and shall terminate upon
the consummation of such Change in Control.
F. The Plan Administrator may at any time provide that one
or more options will automatically accelerate upon an Involuntary Termination
of the Optionee's Service within a designated period (not to exceed eighteen
(18) months) following the effective date of any Change in Control in which
those options do not otherwise accelerate. Any options so accelerated shall
remain exercisable for fully-vested shares until the EARLIER of (i) the
expiration of the option term or (ii) the expiration of the one (1) year
period measured from the effective date of the Involuntary Termination. In
addition, the Plan Administrator may at any time provide that one or more of
the Corporation's repurchase rights shall immediately terminate upon such
Involuntary Termination.
G. The Plan Administrator may at any time provide that one
or more options will automatically accelerate in connection with a Hostile
Take-Over. Any such option shall become exercisable, immediately prior to the
effective date of such Hostile Take-Over, for all of the shares of Common
Stock at the time subject to that option and may be exercised for any or all
of those shares as fully-vested shares of Common Stock. In addition, the Plan
Administrator may at any time provide that one or more of the Corporation's
repurchase rights shall terminate automatically upon the consummation of such
Hostile Take-Over. Alternatively, the Plan Administrator may condition such
automatic acceleration and termination upon an Involuntary Termination of the
Optionee's Service within a designated period (not to exceed eighteen (18)
months) following the effective date of such Hostile Take-Over. Each option so
accelerated shall remain exercisable for fully-vested shares until the
expiration or sooner termination of the option term.
H. The portion of any Incentive Option accelerated in
connection with a Change in Control or Hostile Take Over shall remain
exercisable as an Incentive Option only to the extent the applicable One
Hundred Thousand Dollar ($100,000) limitation is not exceeded. To the extent
such dollar limitation is exceeded, the accelerated portion of such option
shall be exercisable as a Non-Statutory Option under the Federal tax laws.
IV. STOCK APPRECIATION RIGHTS
The Plan Administrator may, subject to such conditions as it
may determine, grant to selected Optionees stock appreciation rights which
will allow the holders of those rights to elect between the exercise of the
underlying option for shares of Common Stock and the surrender of that option
in exchange for a distribution from the Corporation in an amount equal to the
excess of (a) the Option Surrender Value of the number of shares for which the
option is surrendered over (b) the aggregate exercise price payable for such
shares. The distribution may be made in shares of Common Stock valued at Fair
Market Value on the option surrender date, in
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cash, or partly in shares and partly in cash, as the Plan Administrator shall
in its sole discretion deem appropriate.
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ARTICLE THREE
SALARY INVESTMENT OPTION GRANT PROGRAM
I. OPTION GRANTS
The Primary Committee may implement the Salary Investment
Option Grant Program for one or more calendar years beginning after the
Underwriting Date and select the Section 16 Insiders and other highly
compensated Employees eligible to participate in the Salary Investment Option
Grant Program for each such calendar year. Each selected individual who elects
to participate in the Salary Investment Option Grant Program must, prior to
the start of each calendar year of participation, file with the Plan
Administrator (or its designate) an irrevocable authorization directing the
Corporation to reduce his or her base salary for that calendar year by an
amount not less than Ten Thousand Dollars ($10,000.00) nor more than Fifty
Thousand Dollars ($50,000.00). The Primary Committee shall have complete
discretion to determine whether to approve the filed authorization in whole or
in part. To the extent the Primary Committee approves the authorization, the
individual who filed that authorization shall be granted an option under the
Salary Investment Grant Program on the first trading day in January for the
calendar year for which the salary reduction is to be in effect.
II. OPTION TERMS
Each option shall be a Non-Statutory Option evidenced by one
or more documents in the form approved by the Plan Administrator; PROVIDED,
however, that each such document shall comply with the terms specified below.
A. EXERCISE PRICE.
1. The exercise price per share shall be
thirty-three and one-third percent (33-1/3%) of the Fair Market Value per
share of Common Stock on the option grant date.
2. The exercise price shall become immediately
due upon exercise of the option and shall be payable in one or more of the
alternative forms authorized under the Discretionary Option Grant Program.
Except to the extent the sale and remittance procedure specified thereunder is
utilized, payment of the exercise price for the purchased shares must be made
on the Exercise Date.
B. NUMBER OF OPTION SHARES. The number of shares of
Common Stock subject to the option shall be determined pursuant to the
following formula (rounded down to the nearest whole number):
X = A DIVIDED BY (B x 66-2/3%), where
X is the number of option shares,
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A is the dollar amount of the approved reduction in
the Optionee's base salary for the calendar year, and
B is the Fair Market Value per share of Common Stock
on the option grant date.
C. EXERCISE AND TERM OF OPTIONS. The option shall
become exercisable in a series of twelve (12) successive equal monthly
installments upon the Optionee's completion of each calendar month of Service
in the calendar year for which the salary reduction is in effect. Each option
shall have a maximum term of ten (10) years measured from the option grant
date.
D. CESSATION OF SERVICE. Each option outstanding at
the time of the Optionee's cessation of Service shall remain exercisable, for
any or all of the shares for which the option is exercisable at the time of
such cessation of Service, until the EARLIER of (i) the expiration of the
option term or (ii) the expiration of the three (3)-year period following the
Optionee's cessation of Service. To the extent the option is held by the
Optionee at the time of his or her death, the option may be exercised by his
or her Beneficiary. However, the option shall, immediately upon the Optionee's
cessation of Service, terminate and cease to remain outstanding with respect
to any and all shares of Common Stock for which the option is not otherwise at
that time exercisable.
III. CHANGE IN CONTROL/HOSTILE TAKE-OVER
A. In the event of any Change in Control or Hostile
Take-Over while the Optionee remains in Service, each outstanding option shall
automatically accelerate so that each such option shall, immediately prior to
the effective date of the Change in Control or Hostile Take-Over, become fully
exercisable with respect to the total number of shares of Common Stock at the
time subject to such option and may be exercised for any or all of those
shares as fully-vested shares of Common Stock. Each such option accelerated in
connection with a Change in Control shall terminate upon the Change in
Control, except to the extent assumed by the successor corporation (or parent
thereof) or otherwise continued in full force and effect pursuant to the terms
of the Change in Control. Each such option accelerated in connection with a
Hostile Take-Over shall remain exercisable until the expiration or sooner
termination of the option term.
B. Each option which is assumed in connection with a
Change in Control shall be appropriately adjusted to apply to the number and
class of securities which would have been issuable to the Optionee in
consummation of such Change in Control had the option been exercised
immediately prior to such Change in Control. Appropriate adjustments shall
also be made to the exercise price payable per share under each outstanding
option, PROVIDED the aggregate exercise price payable for such securities
shall remain the same.
C. Upon the occurrence of a Hostile Take-Over, the
Optionee shall have a thirty (30)-day period in which to surrender to the
Corporation each of his or her outstanding options. The Optionee shall in
return be entitled to a cash distribution from the Corporation in an amount
equal to the excess of (i) the Option Surrender Value of the shares of Common
Stock at
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the time subject to each surrendered option (whether or not the Optionee is
otherwise at the time vested in those shares) over (ii) the aggregate exercise
price payable for such shares. Such cash distribution shall be paid within
five (5) days following the surrender of the option to the Corporation.
IV. REMAINING TERMS
The remaining terms of each option granted under the Salary
Investment Option Grant Program shall be the same as the terms in effect for
options made under the Discretionary Option Grant Program.
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ARTICLE FOUR
STOCK ISSUANCE PROGRAM
I. STOCK ISSUANCE TERMS
Shares of Common Stock may be issued under the Stock
Issuance Program through direct and immediate issuances without any
intervening options. Shares of Common Stock may also be issued under the Stock
Issuance Program pursuant to share right awards which entitle the recipients
to receive those shares upon the attainment of designated performance goals or
Service requirements. Each such award shall be evidenced by one or more
documents which comply with the terms specified below.
A. PURCHASE PRICE.
1. The purchase price per share of Common Stock
subject to direct issuance shall be fixed by the Plan Administrator.
2. Subject to the provisions of Section II of
Article Seven, shares of Common Stock may be issued under the Stock Issuance
Program for any of the following items of consideration which the Plan
Administrator may deem appropriate in each individual instance:
(i) cash or check made payable to the
Corporation, or
(ii) past services rendered to the
Corporation (or any Parent or Subsidiary).
B. VESTING/ISSUANCE PROVISIONS.
1. The Plan Administrator may issue shares of
Common Stock which are fully and immediately vested upon issuance or which are
to vest in one or more installments over the Participant's period of Service
or upon attainment of specified performance objectives. Alternatively, the
Plan Administrator may issue share right awards which shall entitle the
recipient to receive a specified number of vested shares of Common Stock upon
the attainment of one or more performance goals or Service requirements
established by the Plan Administrator.
2. Any new, substituted or additional
securities or other property (including money paid other than as a regular
cash dividend) which the Participant may have the right to receive with
respect to his or her unvested shares of Common Stock by reason of any stock
dividend, stock split, recapitalization, combination of shares, exchange of
shares or other change affecting the outstanding Common Stock as a class
without the Corporation's receipt of consideration shall be issued subject to
(i) the same vesting requirements applicable to the Participant's unvested
shares of Common Stock and (ii) such escrow arrangements as the Plan
Administrator shall deem appropriate.
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3. The Participant shall have full stockholder
rights with respect to the issued shares of Common Stock, whether or not the
Participant's interest in those shares is vested. Accordingly, the Participant
shall have the right to vote such shares and to receive any regular cash
dividends paid on such shares.
4. Should the Participant cease to remain in
Service while holding one or more unvested shares of Common Stock, or should
the performance objectives not be attained with respect to one or more such
unvested shares of Common Stock, then those shares shall be immediately
surrendered to the Corporation for cancellation, and the Participant shall
have no further stockholder rights with respect to those shares. To the extent
the surrendered shares were previously issued to the Participant for
consideration paid in cash or cash equivalent (including the Participant's
purchase-money indebtedness), the Corporation shall repay to the Participant
the cash consideration paid for the surrendered shares and shall cancel the
unpaid principal balance of any outstanding purchase-money note of the
Participant attributable to the surrendered shares.
5. The Plan Administrator may waive the
surrender and cancellation of one or more unvested shares of Common Stock (or
other assets attributable thereto) which would otherwise occur upon the
cessation of the Participant's Service or the non-attainment of the
performance objectives applicable to those shares. Such waiver shall result in
the immediate vesting of the Participant's interest in the shares of Common
Stock as to which the waiver applies. Such waiver may be effected at any time,
whether before or after the Participant's cessation of Service or the
attainment or non-attainment of the applicable performance objectives.
6. Outstanding share right awards shall
automatically terminate, and no shares of Common Stock shall actually be
issued in satisfaction of those awards, if the performance goals or Service
requirements established for such awards are not attained. The Plan
Administrator, however, shall have the authority to issue shares of Common
Stock in satisfaction of one or more outstanding share right awards as to
which the designated performance goals or Service requirements are not
attained.
II. CHANGE IN CONTROL/HOSTILE TAKE-OVER
A. All of the Corporation's outstanding repurchase
rights shall terminate automatically, and all the shares of Common Stock
subject to those terminated rights shall immediately vest in full, in the
event of any Change in Control, except to the extent (i) those repurchase
rights are assigned to the successor corporation (or parent thereof) or
otherwise continue in full force and effect pursuant to the terms of the
Change in Control or (ii) such accelerated vesting is precluded by other
limitations imposed by the Plan Administrator at the time the repurchase right
is issued.
B. The Plan Administrator may at any time provide for
the automatic termination of one or more of those outstanding repurchase
rights and the immediate vesting of the shares of Common Stock subject to
those terminated rights upon (i) a Change in Control or Hostile Take-Over or
(ii) an Involuntary Termination of the Participant's Service within a
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designated period (not to exceed eighteen (18) months) following the effective
date of any Change in Control or Hostile Take-Over in which those repurchase
rights are assigned to the successor corporation (or parent thereof) or
otherwise continue in full force and effect.
III. SHARE ESCROW/LEGENDS
Unvested shares may, in the Plan Administrator's discretion,
be held in escrow by the Corporation until the Participant's interest in such
shares vests or may be issued directly to the Participant with restrictive
legends on the certificates evidencing those unvested shares.
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ARTICLE FIVE
AUTOMATIC OPTION GRANT PROGRAM
I. OPTION TERMS
A. GRANT DATES. Options shall be made on the dates
specified below:
1. Each individual who is serving as a
non-employee Board member on the Underwriting Date, shall automatically be
granted on that date, a Non-Statutory Option to purchase Six Thousand Seven
Hundred Fifty (6,750) shares of Common Stock.
2. Each individual who is first elected or
appointed as a non-employee Board member at any time after the Underwriting
Date shall automatically be granted, on the date of such initial election or
appointment, a Non-Statutory Option to purchase Six Thousand Seven Hundred
Fifty (6,750) shares of Common Stock, provided that individual has not
previously been in the employ of the Corporation (or any Parent or Subsidiary).
3. On the date of each Annual Stockholders
Meeting beginning with the 2001 Annual Stockholder Meeting, each individual
who has served as a non-employee Board member since the date of the Annual
Stockholders Meeting in the immediately preceding year shall automatically be
granted a Non-Statutory Option to purchase One Thousand Eight Hundred
Seventy-Five (1,875) shares of Common Stock, provided such individual has
served as a non-employee Board member for at least six (6) months.
B. EXERCISE PRICE.
1. The exercise price per share shall be equal
to one hundred percent (100%) of the Fair Market Value per share of Common
Stock on the option grant date.
2. The exercise price shall be payable in one
or more of the alternative forms authorized under the Discretionary Option
Grant Program. Except to the extent the sale and remittance procedure
specified thereunder is utilized, payment of the exercise price for the
purchased shares must be made on the Exercise Date.
C. OPTION TERM. Each option shall have a term of ten
(10) years measured from the option grant date.
D. EXERCISE AND VESTING OF OPTIONS. Each option shall
be immediately exercisable for any or all of the option shares. However, any
shares purchased under the initial option shall be subject to repurchase by
the Corporation, at the exercise price paid per share, upon the Optionee's
cessation of Board service prior to vesting in those shares. Each initial
6,750-share grant shall vest, and the Corporation's repurchase right shall
lapse, in a series of three (3) successive equal annual installments over the
Optionee's period of continued service as a Board member, with the first such
installment to vest upon the Optionee's completion of one
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(1) year of Board service measured from the option grant date. Each annual
1,875-share option grant shall vest, and the Corporation's repurchase right
shall lapse upon the Optionee's completion of one (1) year of service as a
Board member.
E. CESSATION OF BOARD SERVICE. The following
provisions shall govern the exercise of any options outstanding at the time of
the Optionee's cessation of Board service:
(i) Any option outstanding at the time of
the Optionee's cessation of Board service for any reason shall remain
exercisable for a twelve (12)-month period following the date of such
cessation of Board service, but in no event shall such option be
exercisable after the expiration of the option term.
(ii) Any option exercisable in whole or in
part by the Optionee at the time of death may be subsequently
exercised by his or her Beneficiary.
(iii) Following the Optionee's cessation of
Board service, the option may not be exercised in the aggregate for
more than the number of shares for which the option was exercisable on
the date of such cessation of Board service. Upon the expiration of
the applicable exercise period or (if earlier) upon the expiration of
the option term, the option shall terminate and cease to be
outstanding for any vested shares for which the option has not been
exercised. However, the option shall, immediately upon the Optionee's
cessation of Board service, terminate and cease to be outstanding for
any and all shares for which the option is not otherwise at that time
exercisable.
(iv) However, should the Optionee cease to
serve as a Board member by reason of death or Permanent Disability,
then all shares at the time subject to the option shall immediately
vest so that such option may, during the twelve (12)-month exercise
period following such cessation of Board service, be exercised for all
or any portion of those shares as fully-vested shares of Common Stock.
II. CHANGE IN CONTROL/HOSTILE TAKE-OVER
A. In the event of any Change in Control or Hostile
Take-Over, the shares of Common Stock at the time subject to each outstanding
option but not otherwise vested shall automatically vest in full so that each
such option may, immediately prior to the effective date of such Change in
Control or Hostile Take-Over, became fully exercisable for all of the shares
of Common Stock at the time subject to such option and maybe exercised for all
or any of those shares as fully-vested shares of Common Stock. Each such
option accelerated in connection with a Change in Control shall terminate upon
the Change in Control, except to the extent assumed by the successor
corporation (or parent thereof) or otherwise continued in full force and
effect pursuant to the terms of the Change in Control. Each such option
accelerated in
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connection with a Hostile Take-Over shall remain exercisable until the
expiration or sooner termination of the option term.
B. All outstanding repurchase rights shall
automatically terminate and the shares of Common Stock subject to those
terminated rights shall immediately vest in full, in the event of any Change
in Control or Hostile Take-Over.
C. Upon the occurrence of a Hostile Take-Over, the
Optionee shall have a thirty (30)-day period in which to surrender to the
Corporation each of his or her outstanding options. The Optionee shall in
return be entitled to a cash distribution from the Corporation in an amount
equal to the excess of (i) the Option Surrender Value of the shares of Common
Stock at the time subject to each surrendered option (whether or not the
option is otherwise at the time exercisable for those shares) over (ii) the
aggregate exercise price payable for such shares. Such cash distribution shall
be paid within five (5) days following the surrender of the option to the
Corporation.
D. Each option which is assumed in connection with a
Change in Control shall be appropriately adjusted to apply to the number and
class of securities which would have been issuable to the Optionee in
consummation of such Change in Control had the option been exercised
immediately prior to such Change in Control. Appropriate adjustments shall
also be made to the exercise price payable per share under each outstanding
option, PROVIDED the aggregate exercise price payable for such securities
shall remain the same.
III. REMAINING TERMS
The remaining terms of each option granted under the
Automatic Option Grant Program shall be the same as the terms in effect for
options made under the Discretionary Option Grant Program.
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ARTICLE SIX
DIRECTOR FEE OPTION GRANT PROGRAM
I. OPTION GRANTS
The Board may implement the Director Fee Option Grant
Program as of the first day of any calendar year beginning after the
Underwriting Date. Upon such implementation of the Program, each non-employee
Board member may elect to apply all or any portion of the annual retainer fee
otherwise payable in cash for his or her service on the Board to the
acquisition of a special option grant under this Director Fee Option Grant
Program. Such election must be filed with the Corporation's Chief Financial
Officer prior to the first day of the calendar year for which the election is
to be in effect. Each non-employee Board member who files such a timely
election with respect to the annul retainer fee shall automatically be granted
an option under this Director Fee Option Grant Program on the first trading
day in January in the calendar year for which that fee would otherwise be
payable.
II. OPTION TERMS
Each option shall be a Non-Statutory Option governed by the
terms and conditions specified below.
A. EXERCISE PRICE.
1. The exercise price per share shall be
thirty-three and one-third percent (33-1/3%) of the Fair Market Value per
share of Common Stock on the option grant date.
2. The exercise price shall become immediately
due upon exercise of the option and shall be payable in one or more of the
alternative forms authorized under the Discretionary Option Grant Program.
Except to the extent the sale and remittance procedure specified thereunder is
utilized, payment of the exercise price for the purchased shares must be made
on the Exercise Date.
B. NUMBER OF OPTION SHARES. The number of shares of
Common Stock subject to the option shall be determined pursuant to the
following formula (rounded down to the nearest whole number):
X = A DIVIDED BY (B x 66-2/3%), where
X is the number of option shares,
A is the portion of the annual retainer fee subject
to the non-employee Board member's election, and
B is the Fair Market Value per share of Common Stock
on the option grant date.
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C. EXERCISE AND TERM OF OPTIONS. The option shall
become exercisable in a series of twelve (12) successive equal monthly
installments upon the Optionee's completion of each month of Board service
during the calendar year in which the option is granted. Each option shall
have a maximum term of ten (10) years measured from the option grant date.
D. CESSATION OF BOARD SERVICE. Should the Optionee
cease Board service for any reason (other than death or Permanent Disability)
while holding one or more options, then each such option shall remain
exercisable, for any or all of the shares for which the option is exercisable
at the time of such cessation of Board service, until the EARLIER of (i) the
expiration of the ten (10)-year option term or (ii) the expiration of the
three (3)-year period measured from the date of such cessation of Board
service. However, each option held by the Optionee at the time of such
cessation of Board service shall immediately terminate and cease to remain
outstanding with respect to any and all shares of Common Stock for which the
option is not otherwise at that time exercisable.
E. DEATH OR PERMANENT DISABILITY. Should the
Optionee's service as a Board member cease by reason of death or Permanent
Disability, then each option held by such Optionee shall immediately become
exercisable for all the shares of Common Stock at the time subject to that
option, and the option may be exercised for any or all of those shares as
fully-vested shares until the EARLIER of (i) the expiration of the ten
(10)-year option term or (ii) the expiration of the three (3)-year period
measured from the date of such cessation of Board service.
Should the Optionee die after cessation of Board service but
while holding one or more options, then each such option may be exercised, for
any or all of the shares for which the option is exercisable at the time of
the Optionee's cessation of Board service (less any shares subsequently
purchased by Optionee prior to death), by the Optionee's Beneficiary. Such
right of exercise shall lapse, and the option shall terminate, upon the
EARLIER of (i) the expiration of the ten (10)-year option term or (ii) the
three (3)-year period measured from the date of the Optionee's cessation of
Board service.
III. CHANGE IN CONTROL/HOSTILE TAKE-OVER
A. In the event of any Change in Control or Hostile
Take-Over while the Optionee remains in Board service, each outstanding option
held by such Optionee shall automatically accelerate so that each such option
shall, immediately prior to the effective date of the Change in Control or
Hostile Take-Over, become fully exercisable with respect to the total number
of shares of Common Stock at the time subject to such option and may be
exercised for any or all of those shares as fully-vested shares of Common
Stock. Each such option accelerated in connection with a Change in Control
shall terminate upon the Change in Control, except to the extent assumed by
the successor corporation (or parent thereof) or otherwise expressly continued
in full force and effect pursuant to the terms of the Change in Control. Each
such option accelerated in connection with a Hostile Take-Over shall remain
exercisable until the expiration or sooner termination of the option term.
B. Upon the occurrence of a Hostile Take-Over, the
Optionee shall have a thirty (30)-day period in which to surrender to the
Corporation each of his or her outstanding
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options. The Optionee shall in return be entitled to a cash distribution from
the Corporation in an amount equal to the excess of (i) the Option Surrender
Value of the shares of Common Stock at the time subject to each surrendered
option (whether or not the Optionee is otherwise at the time vested in those
shares) over (ii) the aggregate exercise price payable for such shares. Such
cash distribution shall be paid within five (5) days following the surrender
of the option to the Corporation.
IV. REMAINING TERMS
The remaining terms of each option granted under this
Director Fee Option Grant Program shall be the same as the terms in effect for
options made under the Discretionary Option Grant Program.
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ARTICLE SEVEN
MISCELLANEOUS
I. NO IMPAIRMENT OF AUTHORITY
Outstanding awards shall in no way affect the right of the
Corporation to adjust, reclassify, reorganize or otherwise change its capital
or business structure or to merge, consolidate, dissolve, liquidate or sell or
transfer all or any part of its business or assets.
II. FINANCING
The Plan Administrator may permit any Optionee or
Participant to pay the option exercise price under the Discretionary Option
Grant Program or the purchase price of shares issued under the Stock Issuance
Program by delivering a full-recourse, interest bearing promissory note
payable in one or more installments. The terms of any such promissory note
(including the interest rate and the terms of repayment) shall be established
by the Plan Administrator in its sole discretion. In no event may the maximum
credit available to the Optionee or Participant exceed the sum of (i) the
aggregate option exercise price or purchase price payable for the purchased
shares plus (ii) any Federal, state and local income and employment tax
liability incurred by the Optionee or the Participant in connection with the
option exercise or share purchase.
III. TAX WITHHOLDING
A. The Corporation's obligation to deliver shares of
Common Stock upon the exercise of options or the issuance or vesting of such
shares under the Plan shall be subject to the satisfaction of all applicable
Federal, state and local income and employment tax withholding requirements.
B. The Plan Administrator may, in its discretion,
provide any or all holders of Non-Statutory Options or unvested shares of
Common Stock under the Plan with the right to use shares of Common Stock in
satisfaction of all or part of the Withholding Taxes incurred by such holders
in connection with the exercise of their options or the vesting of their
shares. Such right may be provided to any such holder in either or both of the
following formats:
STOCK WITHHOLDING: The election to have the
Corporation withhold, from the shares of Common Stock otherwise issuable upon
the exercise of such Non-Statutory Option or the vesting of such shares, a
portion of those shares with an aggregate Fair Market Value equal to the
percentage of the Withholding Taxes (not to exceed one hundred percent (100%))
designated by the holder.
STOCK DELIVERY: The election to deliver to the
Corporation, at the time the Non-Statutory Option is exercised or the shares
vest, one or more shares of Common Stock previously acquired by such holder
(other than in connection with the option exercise or share
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vesting triggering the Withholding Taxes) with an aggregate Fair Market Value
equal to the percentage of the Taxes (not to exceed one hundred percent
(100%)) designated by the holder.
IV. EFFECTIVE DATE AND TERM OF THE PLAN
A. The Plan shall become effective immediately upon
the Plan Effective Date. However, the Salary Investment Option Grant and
Director Fee Option Grant Programs shall not be implemented until such time as
the Primary Committee or the Board may deem appropriate. Options may be
granted under the Discretionary Option Grant Program at any time on or after
the Plan Effective Date. However, no options granted under the Plan may be
exercised, and no shares shall be issued under the Plan, until the Plan is
approved by the Corporation's stockholders. If such stockholder approval is
not obtained within twelve (12) months after the Plan Effective Date, then all
options previously granted under this Plan shall terminate and cease to be
outstanding, and no further options shall be granted and no shares shall be
issued under the Plan.
B. The Plan shall serve as the successor to the
Predecessor Plans, and no further options or direct stock issuances shall be
made under the Predecessor Plans after the Plan Effective Date. All options
outstanding under the Predecessor Plans on the Plan Effective Date shall be
incorporated into the Plan at that time and shall be treated as outstanding
options under the Plan. However, each outstanding option so incorporated shall
continue to be governed solely by the terms of the documents evidencing such
option, and no provision of the Plan shall be deemed to affect or otherwise
modify the rights or obligations of the holders of such incorporated options
with respect to their acquisition of shares of Common Stock.
C. One or more provisions of the Plan, including
(without limitation) the option/vesting acceleration provisions of Article Two
relating to Changes in Control, may, in the Plan Administrator's discretion,
be extended to one or more options incorporated from the Predecessor Plan
which do not otherwise contain such provisions.
D. The Plan shall terminate upon the EARLIEST of (i)
June 7, 2009, (ii) the date on which all shares available for issuance under
the Plan shall have been issued as fully-vested shares or (iii) the
termination of all outstanding options in connection with a Change in Control.
Upon such plan termination, all outstanding options and unvested stock
issuances shall thereafter continue to have force and effect in accordance
with the provisions of the documents evidencing such grants or issuances.
V. AMENDMENT OF THE PLAN
A. The Board shall have complete and exclusive power
and authority to amend or modify the Plan in any or all respects. However, no
such amendment or modification shall adversely affect the rights and
obligations with respect to stock options or unvested stock issuances at the
time outstanding under the Plan unless the Optionee or the Participant
consents to such amendment or modification. In addition, certain amendments
may require stockholder approval pursuant to applicable laws or regulations.
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B. Options to purchase shares of Common Stock may be
granted under the Discretionary Option Grant and Salary Investment Option
Grant Programs and shares of Common Stock may be issued under the Stock
Issuance Program that are in each instance in excess of the number of shares
then available for issuance under the Plan, provided any excess shares
actually issued under those programs shall be held in escrow until there is
obtained stockholder approval of an amendment sufficiently increasing the
number of shares of Common Stock available for issuance under the Plan. If
such stockholder approval is not obtained within twelve (12) months after the
date the first such excess issuances are made, then (i) any unexercised
options granted on the basis of such excess shares shall terminate and cease
to be outstanding and (ii) the Corporation shall promptly refund to the
Optionees and the Participants the exercise or purchase price paid for any
excess shares issued under the Plan and held in escrow, together with interest
(at the applicable Short Term Federal Rate) for the period the shares were
held in escrow, and such shares shall thereupon be automatically cancelled and
cease to be outstanding.
VI. USE OF PROCEEDS
Any cash proceeds received by the Corporation from the sale
of shares of Common Stock under the Plan shall be used for general corporate
purposes.
VII. REGULATORY APPROVALS
A. The implementation of the Plan, the granting of any
stock option under the Plan and the issuance of any shares of Common Stock (i)
upon the exercise of any granted option or (ii) under the Stock Issuance
Program shall be subject to the Corporation's procurement of all approvals and
permits required by regulatory authorities having jurisdiction over the Plan,
the stock options granted under it and the shares of Common Stock issued
pursuant to it.
B. No shares of Common Stock or other assets shall be
issued or delivered under the Plan unless and until there shall have been
compliance with all applicable requirements of Federal and state securities
laws, including the filing and effectiveness of the Form S-8 registration
statement for the shares of Common Stock issuable under the Plan, and all
applicable listing requirements of any stock exchange (or the Nasdaq National
Market, if applicable) on which Common Stock is then listed for trading.
VIII. NO EMPLOYMENT/SERVICE RIGHTS
Nothing in the Plan shall confer upon the Optionee or the
Participant any right to continue in Service for any period of specific
duration or interfere with or otherwise restrict in any way the rights of the
Corporation (or any Parent or Subsidiary employing or retaining such person)
or of the Optionee or the Participant, which rights are hereby expressly
reserved by each, to terminate such person's Service at any time for any
reason, with or without cause.
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APPENDIX
The following definitions shall be in effect under the Plan:
A. AUTOMATIC OPTION GRANT PROGRAM shall mean the
automatic option grant program in effect under the Plan.
B. BENEFICIARY shall mean, in the event the Plan
Administrator implements a beneficiary designation procedure, the person
designated by an Optionee or Participant, pursuant to such procedure, to
succeed to such person's rights under any outstanding awards held by him or
her at the time of death. In the absence of such designation or procedure, the
Beneficiary shall be the personal representative of the estate of the Optionee
or Participant or the person or persons to whom the award is transferred by
will or the laws of descent and distribution.
C. BOARD shall mean the Corporation's Board of
Directors.
D. CHANGE IN CONTROL shall mean a change in ownership
or control of the Corporation effected through any of the following
transactions:
(i) a merger, consolidation or reorganization
approved by the Corporation's stockholders, UNLESS securities
representing more than fifty percent (50%) of the total combined
voting power of the voting securities of the successor corporation are
immediately thereafter beneficially owned, directly or indirectly and
in substantially the same proportion, by the persons who beneficially
owned the Corporation's outstanding voting securities immediately
prior to such transaction,
(ii) any stockholder-approved transfer or other
disposition of all or substantially all of the Corporation's assets,
or
(iii) the acquisition, directly or indirectly by
any person or related group of persons (other than the Corporation or
a person that directly or indirectly controls, is controlled by, or
is under common control with, the Corporation), of beneficial
ownership (within the meaning of Rule 13d-3 of the 1934 Act) of
securities possessing more than fifty percent (50%) of the total
combined voting power of the Corporation's outstanding securities
pursuant to a tender or exchange offer made directly to the
Corporation's stockholders which the Board recommends such
stockholders accept.
E. CODE shall mean the Internal Revenue Code of 1986,
as amended.
F. COMMON STOCK shall mean the Corporation's common
stock.
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G. CORPORATION shall mean Hoover's, Inc., a Delaware
corporation, and any corporate successor to all or substantially all of the
assets or voting stock of Hoover's, Inc. which shall by appropriate action
adopt the Plan.
H. DIRECTOR FEE OPTION GRANT PROGRAM shall mean the
director fee option grant program in effect under the Plan.
I. DISCRETIONARY OPTION GRANT PROGRAM shall mean the
discretionary option grant program in effect under the Plan.
J. EMPLOYEE shall mean an individual who is in the
employ of the Corporation (or any Parent or Subsidiary), subject to the
control and direction of the employer entity as to both the work to be
performed and the manner and method of performance.
K. EXERCISE DATE shall mean the date on which the
Corporation shall have received written notice of the option exercise.
L. FAIR MARKET VALUE per share of Common Stock on any
relevant date shall be determined in accordance with the following provisions:
(i) If the Common Stock is at the time
traded on the Nasdaq National Market, then the Fair Market Value shall
be the closing selling price per share of Common Stock on the date in
question, as such price is reported on the Nasdaq National Market or
any successor system. If there is no closing selling price for the
Common Stock on the date in question, then the Fair Market Value shall
be the closing selling price on the last preceding date for which such
quotation exists.
(ii) If the Common Stock is at the time
listed on any Stock Exchange, then the Fair Market Value shall be the
closing selling price per share of Common Stock on the date in
question on the Stock Exchange determined by the Plan Administrator
to be the primary market for the Common Stock, as such price is
officially quoted in the composite tape of transactions on such
exchange. If there is no closing selling price for the Common Stock
on the date in question, then the Fair Market Value shall be the
closing selling price on the last preceding date for which such
quotation exists.
(iii) For purposes of any option grants made
on the Underwriting Date, the Fair Market Value shall be deemed to be
equal to the price per share at which the Common Stock is to be sold
in the initial public offering pursuant to the Underwriting Agreement.
(iv) For purposes of any options made prior
to the Underwriting Date, the Fair Market Value shall be determined by
the Plan Administrator, after taking into account such factors as it
deems appropriate.
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M. HOSTILE TAKE-OVER shall mean:
(i) the acquisition, directly or indirectly,
by any person or related group of persons (other than the Corporation
or a person that directly or indirectly controls, is controlled by, or
is under common control with, the Corporation) of beneficial ownership
(within the meaning of Rule 13d-3 of the 1934 Act) of securities
possessing more than fifty percent (50%) of the total combined voting
power of the Corporation's outstanding securities pursuant to a tender
or exchange offer made directly to the Corporation's stockholders
which the Board does not recommend such stockholders to accept, or
(ii) a change in the composition of the
Board over a period of thirty-six (36) consecutive months or less such
that a majority of the Board members ceases, by reason of one or more
contested elections for Board membership, to be comprised of
individuals who either (A) have been Board members continuously since
the beginning of such period or (B) have been elected or nominated for
election as Board members during such period by at least a majority of
the Board members described in clause (A) who were still in office at
the time the Board approved such election or nomination.
N. INCENTIVE OPTION shall mean an option which
satisfies the requirements of Code Section 422.
O. INVOLUNTARY TERMINATION shall mean the termination
of the Service of any individual which occurs by reason of:
(i) such individual's involuntary dismissal
or discharge by the Corporation for reasons other than Misconduct, or
(ii) such individual's voluntary resignation
following (A) a change in his or her position with the Corporation or
Parent or Subsidiary employing the individual which materially reduces
his or her duties and responsibilities or the level of management to
which he or she reports, (B) a reduction in his or her level of
compensation (including base salary, fringe benefits and target bonus
under any performance based bonus or incentive programs) by more than
fifteen percent (15%) or (C) a relocation of such individual's place
of employment by more than fifty (50) miles, provided and only if such
change, reduction or relocation is effected by the Corporation without
the individual's consent.
P. MISCONDUCT shall mean the commission of any act of
fraud, embezzlement or dishonesty by the Optionee or Participant, any
unauthorized use or disclosure by such person of confidential information or
trade secrets of the Corporation (or any Parent or Subsidiary), or any
intentional wrongdoing by such person, whether by omission or commission,
which adversely affects the business or affairs of the Corporation (or any
Parent or Subsidiary) in
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a material manner. This shall not limit the grounds for the dismissal or
discharge of any person in the Service of the Corporation (or any Parent or
Subsidiary).
Q. 1934 ACT shall mean the Securities Exchange Act of
1934, as amended.
R. NON-STATUTORY OPTION shall mean an option not
intended to satisfy the requirements of Code Section 422.
S. OPTION SURRENDER VALUE shall mean the Fair Market
Value per share of Common Stock on the date the option is surrendered to the
Corporation or, in the event of a Hostile Take-Over, effected through a tender
offer, the highest reported price per share of Common Stock paid by the tender
offeror in effecting such Hostile Take-Over, if greater. However, if the
surrendered option is an Incentive Option, the Option Surrender Value shall
not exceed the Fair Market Value per share.
T. OPTIONEE shall mean any person to whom an option is
granted under the Discretionary Option Grant, Salary Investment Option Grant,
Automatic Option Grant or Director Fee Option Grant Program.
U. PARENT shall mean any corporation (other than the
Corporation) in an unbroken chain of corporations ending with the Corporation,
provided each corporation in the unbroken chain (other than the Corporation)
owns, at the time of the determination, stock possessing fifty percent (50%)
or more of the total combined voting power of all classes of stock in one of
the other corporations in such chain.
V. PARTICIPANT shall mean any person who is issued
shares of Common Stock under the Stock Issuance Program.
W. PERMANENT DISABILITY OR PERMANENTLY DISABLED shall
mean the inability of the Optionee or the Participant to engage in any
substantial gainful activity by reason of any medically determinable physical
or mental impairment expected to result in death or to be of continuous
duration of twelve (12) months or more. However, solely for purposes of the
Automatic Option Grant and Director Fee Option Grant Programs, Permanent
Disability or Permanently Disabled shall mean the inability of the
non-employee Board member to perform his or her usual duties as a Board member
by reason of any medically determinable physical or mental impairment expected
to result in death or to be of continuous duration of twelve (12) months or
more.
X. PLAN shall mean the Corporation's 1999 Stock
Incentive Plan, as set forth in this document.
Y. PLAN ADMINISTRATOR shall mean the particular
entity, whether the Primary Committee, the Board or the Secondary Committee,
which is authorized to administer the Discretionary Option Grant, Salary
Investment Option Grant and Stock Issuance Programs with respect to one or
more classes of eligible persons, to the extent such entity is carrying out
its administrative functions under those programs with respect to the persons
under its jurisdiction.
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However, the Primary Committee shall have the plenary authority to make all
factual determinations and to construe and interpret any and all ambiguities
under the Plan to the extent such authority is not otherwise expressly
delegated to any other Plan Administrator.
Z. PLAN EFFECTIVE DATE shall mean June 8, 1999, the
date on which the Plan was adopted by the Board.
AA. PREDECESSOR PLANS shall mean the Corporation's
pre-existing 1990 Stock Option Plan, 1992 Stock Option Plan, 1995 Stock Option
Plan and 1996 Stock Option Plan in effect immediately prior to the Plan
Effective Date hereunder.
BB. PRIMARY COMMITTEE shall mean the committee of two
(2) or more non-employee Board members appointed by the Board to administer
the Discretionary Option Grant and Stock Issuance Programs with respect to
Section 16 Insiders and to administer the Salary Investment Option Grant
Program with respect to all eligible individuals.
CC. SALARY INVESTMENT OPTION GRANT PROGRAM shall mean
the salary investment grant program in effect under the Plan.
DD. SECONDARY COMMITTEE shall mean a committee of one
(1) or more Board members appointed by the Board to administer the
Discretionary Option Grant and Stock Issuance Programs with respect to
eligible persons other than Section 16 Insiders.
EE. SECTION 12 REGISTRATION DATE shall mean the date on
which the Common Stock is first registered under Section 12(g) of the 1934 Act.
FF. SECTION 16 INSIDER shall mean an officer or
director of the Corporation subject to the short-swing profit liabilities of
Section 16 of the 1934 Act.
GG. SERVICE shall mean the performance of services for
the Corporation (or any Parent or Subsidiary) by a person in the capacity of
an Employee, a non-employee member of the board of directors or a consultant
or independent advisor, except to the extent otherwise specifically provided
in the documents evidencing the option grant or stock issuance.
HH. STOCK EXCHANGE shall mean either the American Stock
Exchange or the New York Stock Exchange.
II. STOCK ISSUANCE PROGRAM shall mean the stock
issuance program in effect under the Plan.
JJ. SUBSIDIARY shall mean any corporation (other than
the Corporation) in an unbroken chain of corporations beginning with the
Corporation, provided each corporation (other than the last corporation) in
the unbroken chain owns, at the time of the determination, stock possessing
fifty percent (50%) or more of the total combined voting power of all classes
of stock in one of the other corporations in such chain.
A-5
<PAGE>
KK. 10% STOCKHOLDER shall mean the owner of stock (as
determined under Code Section 424(d)) possessing more than ten percent (10%)
of the total combined voting power of all classes of stock of the Corporation
(or any Parent or Subsidiary).
LL. UNDERWRITING AGREEMENT shall mean the agreement
between the Corporation and the underwriter or underwriters managing the
initial public offering of the Common Stock.
MM. UNDERWRITING DATE shall mean the date on which the
Underwriting Agreement is executed and priced in connection with an initial
public offering of the Common Stock.
NN. WITHHOLDING TAXES shall mean the Federal, state and
local income and employment withholding tax liabilities to which the holder of
Non-Statutory Options or unvested shares of Common Stock may become subject in
connection with the exercise of those options or the vesting of those shares.
A-6
<PAGE>
HOOVER'S, INC.
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS - SEPTEMBER 12, 2000
(THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF HOOVER'S, INC.)
The undersigned stockholder of Hoover's, Inc. hereby appoints Patrick
J. Spain and Lynn Atchison, and each of them, with full power of substitution,
proxies to vote the shares of stock which the undersigned could vote if
personally present at the Annual Meeting of Stockholders of Hoover's, Inc. to be
held at 8:30 a.m., local time, on September 12, 2000, at the Doubletree Hotel,
6505 North IH 35, Austin, Texas, and at any adjournment thereof.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER
DIRECTED HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS
PROXY WILL BE VOTED FOR ITEMS 1, 2 AND 3.
--------------------------------------------------------------------------------
^ (FOLD AND DETACH HERE) ^
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Please mark /X/
your votes as
indicated in
this example
1. The election of directors.
Class I Thomas J. Hillman
Laurence J. Kirshbaum / / FOR all nominees (except as marked below)
For, except vote withheld from the following
Class II William S. Berkley nominee(s):
Steven B. Fink
Gary E. Hoover __________________________________________
Class III Alan Chai
Patrick J. Spain
Stephen R. Zacharias / / WITHHOLD AUTHORITY to vote for all nominees.
2. Approval of the amendment to the 1999 Stock Incentive Plan. / / FOR / / AGAINST / / ABSTAIN
3. Approval of the appointment of Ernst & Young LLP as independent
auditors. / / FOR / / AGAINST / / ABSTAIN
4. In their discretion, to act upon such other business as may
properly come before the meeting, or any adjournment thereof.
Receipt of the proxy statement dated July 28, 2000
is hereby acknowledged.
Dated: ___________________________, 2000
---------------------------------------------------
Name(s) of the Stockholder(s)
---------------------------------------------------
Signature(s) of the Stockholder(s)
Please date and sign exactly as your name appears on
the envelope in which this material was mailed. If
shares are held jointly, each stockholder should sign.
Executors, administrators, trustees, etc. should use
full title and, if more than one, all should sign.
If the stockholder is a corporation, please sign full
corporate name by an authorized officer. If the
stockholder is a partnership, please sign full
partnership name by an authorized person.
</TABLE>
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^ FOLD AND DETACH HERE IF YOU ARE RETURNING YOUR PROXY CARD BY MAIL ^
YOUR VOTE IS IMPORTANT!
YOU CAN VOTE IN ONE OF THREE WAYS:
--------------------------------------------------------------------------------
VOTE BY INTERNET
24 HOURS A DAY, 7 DAYS A WEEK
Follow the instructions at our Internet Address: http://www.proxyvote.com
--------------------------------------------------------------------------------
OR
--------------------------------------------------------------------------------
VOTE BY PHONE
HAVE YOUR PROXY CARD IN HAND
Call toll-free 1-800-454-8683 on a touch tone
telephone 24 hours a day, 7 days a week
There is NO CHARGE to you for this call.
You will be asked to enter your 11-digit Control
Number, which is located in the box in the lower
right hand corner of this form. Follow the
recorded instructions.
--------------------------------------------------------------------------------
OR
--------------------------------------------------------------------------------
VOTE BY PROXY CARD
Mark, sign and date your proxy card and return promptly in the
enclosed envelope.
--------------------------------------------------------------------------------
If you wish to access future Annual Reports and Proxy Statements
electronically via the Internet and no longer receive the
printed materials please provide your consent with your proxy
vote.
--------------------------------------------------------------------------------
NOTE: If you voted by Internet or telephone, THERE IS NO NEED TO
MAIL BACK your proxy card.
THANK YOU FOR VOTING.
