<PAGE>
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, For Use of the Com-
[X] Definitive Proxy Statement mission Only (as permitted by
[ ] Definitive Additional Materials Rule 14a-6(e)(2))
[ ] Soliciting Material Pursuant to
Rule 14a-11(c) or Rule 14a-12
Preview Travel, 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 transactions 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.:
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(3) Filing Party:
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(4) Date Filed:
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Preview - 1999 Proxy Statement
<PAGE>
PREVIEW TRAVEL, INC.
Notice of Annual Meeting of Stockholders
To Be Held June 15, 1999
The Annual Meeting of Stockholders (the "Annual Meeting") of Preview Travel,
Inc., a Delaware corporation (the "Company"), will be held at the Park Hyatt
Hotel, located at 333 Battery Street, San Francisco, California, on Tuesday,
June 15, 1999, at 10:00 a.m., local time, for the following purposes:
1. To elect six directors of the Company to serve until the next Annual
Meeting of Stockholders or until their respective successors are
elected and qualified;
2. To ratify the appointment of PricewaterhouseCoopers LLP as the
independent accountants of the Company for the fiscal year ending
December 31, 1999;
3. To approve the amendment of the Company's 1997 Stock Option Plan to
increase the aggregate number of shares of Common Stock authorized for
issuance under such plan by 1,300,000 shares;
4. To approve the amendment of the Company's 1997 Directors' Stock Option
Plan to provide for the automatic grant of a stock option to purchase
5,000 shares to each nonemployee director for each committee of the
Board of Directors on which the director serves; and
5. To transact such other business as may properly come before the Annual
Meeting and any adjournment or postponement thereof.
The foregoing items of business, including the nominees for directors, are
more fully described in the Proxy Statement which is attached and made a part
of this Notice.
The Board of Directors has fixed the close of business on April 28, 1999 as
the record date for determining the stockholders entitled to notice of and to
vote at the Annual Meeting and any adjournment or postponement thereof.
All stockholders are cordially invited to attend the Annual Meeting in
person. However, whether or not you expect to attend the Annual Meeting in
person, you are urged to mark, date, sign and return the enclosed proxy card
as promptly as possible in the postage-prepaid envelope provided to ensure
your representation and the presence of a quorum at the Annual Meeting. If you
send in your proxy card and then decide to attend the Annual Meeting to vote
your shares in person, you may still do so. Your proxy is revocable in
accordance with the procedures set forth in the Proxy Statement.
By Order of the Board of Directors,
Thomas W. Cardy
Executive Vice President of Finance
and Administration, and Chief
Financial Officer
San Francisco, California
May 17, 1999
IMPORTANT
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE SIGN AND RETURN THE
ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE IN THE ENCLOSED POSTAGE-
PREPAID ENVELOPE. IF A QUORUM IS NOT REACHED, THE COMPANY WILL HAVE THE
ADDED EXPENSE OF RE-ISSUING THESE PROXY MATERIALS. IF YOU ATTEND THE
MEETING AND SO DESIRE, YOU MAY WITHDRAW YOUR PROXY AND VOTE IN PERSON.
THANK YOU FOR ACTING PROMPTLY.
<PAGE>
PREVIEW TRAVEL, INC.
747 Front Street
San Francisco, California 94111
PROXY STATEMENT
General
This Proxy Statement is furnished in connection with the solicitation by the
Board of Directors (the "Board") of Preview Travel, Inc., a Delaware
corporation (the "Company"), of proxies in the enclosed form for use in voting
at the Annual Meeting of Stockholders (the "Annual Meeting") to be held at the
Park Hyatt Hotel, San Francisco, located at 333 Battery Street, on Tuesday,
June 15, 1999, at 10:00 a.m., local time, and any adjournment or postponement
thereof.
This Proxy Statement, the enclosed proxy card and the Company's Annual
Report to Stockholders for the fiscal year ended December 31, 1998, including
financial statements, were first mailed to stockholders entitled to vote at
the meeting on or about May 17, 1999.
Revocability of Proxies
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before its use by delivering to the Company (Attention:
Chief Financial Officer) a written notice of revocation or a duly executed
proxy bearing a later date, or by attending the Annual Meeting and voting in
person.
Record Date; Voting Securities
The close of business on April 28, 1999 has been fixed as the record date
(the "Record Date") for determining the holders of shares of Common Stock of
the Company entitled to notice of and to vote at the Annual Meeting. At the
close of business on the Record Date, the Company had approximately 13,816,408
shares of Common Stock outstanding and held of record by approximately 237
stockholders.
Voting and Solicitation
Each outstanding share of Common Stock on the Record Date is entitled to one
vote on all matters Shares of Common Stock may not be voted cumulatively.
Votes cast by proxy or in person at the Annual Meeting will be tabulated by
the Inspector of Elections (the "Inspector") with the assistance of the
Company's transfer agent. The Inspector will also determine whether or not a
quorum is present. The nominees for election as directors at the Annual
Meeting will be elected by a plurality of the votes of the shares of Common
Stock present in person or represented by proxy at the meeting. All other
matters submitted to the stockholders will require the affirmative vote of a
majority of shares present in person or represented by proxy at a duly held
meeting at which a quorum is present is required under Delaware law for
approval of proposals presented to stockholders. In general, Delaware law also
provides that a quorum consists of a majority of the shares entitled to vote
and present in person or represented by proxy. The Inspector will treat
abstentions as shares that are present and entitled to vote for purposes of
determining the presence of a quorum and as negative votes for purposes of
determining the approval of any matter submitted to the stockholders for a
vote. Any proxy which is returned using the form of proxy enclosed and which
is not marked as to a particular item will be voted FOR the election of
directors, FOR amendment of the 1997 Stock Option Plan, FOR amendment of the
1997 Directors' Stock Option Plan, FOR ratification of the appointment of the
designated independent auditors and as the proxy holders deem advisable on
other matters that may come before the meeting, as the case may be with
respect to the item not marked. If a broker indicates on the enclosed proxy or
its substitute that it does not have discretionary authority as to certain
shares to vote on a particular matter ("broker non-votes"), those shares will
not be considered as present with respect to that matter. The
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Company believes that the tabulation procedures to be followed by the
Inspector are consistent with the general statutory requirements in Delaware
concerning voting of shares and determination of a quorum.
The solicitation of proxies will be conducted by mail and the Company will
bear all attendant costs. These costs will include the expense of preparing
and mailing proxy solicitation materials for the Annual Meeting and
reimbursements paid to brokerage firms and others for their expenses incurred
in forwarding solicitation materials regarding the Annual Meeting to
beneficial owners of the Company's Common Stock. The Company may conduct
further solicitation personally, telephonically or by facsimile through its
officers, directors and employees, none of whom will receive additional
compensation for assisting with the solicitation.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
Nominees
The Company's Bylaws currently provide for seven directors. At the Annual
Meeting, the stockholders will elect six directors to serve until the next
Annual Meeting of Stockholders or until their respective successors are
elected and qualified. The Board of Directors proposes to fill the remaining
seat at such time as it has identified a qualified candidate. In the event any
nominee is unable or unwilling to serve as a director at the time of the
Annual Meeting, the proxies may be voted for the balance of those nominees
named and for any substitute nominee designated by the present Board or the
proxy holders to fill such vacancy, or for the balance of the nominees named
without nomination of a substitute, or the size of the Board may be reduced in
accordance with the Bylaws of the Company. The Board has no reason to believe
that any of the persons named below will be unable or unwilling to serve as a
nominee or as a director if elected.
Assuming a quorum is present, the six nominees receiving the highest number
of affirmative votes of shares entitled to be voted for them will be elected
as directors of the Company for the ensuing year. Unless marked otherwise,
proxies received will be voted FOR the election of each of the six nominees
named below. In the event that additional persons are nominated for election
as directors, the proxy holders intend to vote all proxies received by them in
such a manner as will ensure the election of as many of the nominees listed
below as possible, and, in such event, the specific nominees to be voted for
will be determined by the proxy holders.
The names of the nominees, their ages as of March 31, 1999 and certain other
information about them are set forth below:
<TABLE>
<CAPTION>
Name of Nominee Age Principal Occupation Director Since
--------------- --- -------------------- --------------
<C> <C> <S> <C>
James J. Hornthal.... 45 Chairman and Acting Chief Executive 1985
Officer of the Company
Thomas W. Cardy...... 42 Executive Vice President and Chief 1991
Financial Officer of the Company;
Executive Vice President,
Entertainment and New Media of
Communications Equity Associates,
Inc.
Thomas A. Cullen..... 39 President, MediaOne Interactive 1997
Services, Inc.
Theodore J. Leonsis.. 43 President, Interactive Properties 1985
Group of America Online, Inc.
James E. Noyes....... 52 Executive Vice President, Sales of 1996
Sunterra Corporation
David S. Pottruck.... 50 President and Co-Chief Executive 1997
Officer of The Charles Schwab
Corporation
</TABLE>
There are no family relationships among any of the directors or executive
officers of the Company.
James J. Hornthal founded the Company in 1985 and has served as Chairman
since inception. Mr. Hornthal has served as Acting Chief Executive Officer of
the Company since February 1999. Mr. Hornthal also served as
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President of the Company until April 1994 and as Chief Executive Officer until
June 1997. Prior to starting Preview Travel, Mr. Hornthal was a General
Partner at Oak Grove Ventures, a venture capital firm, and a Consultant for
The Boston Consulting Group, a management consulting firm. Mr. Hornthal also
serves as a director of several privately held technology-based and media
companies. Mr. Hornthal received an A.B. degree from Princeton University and
an M.B.A. degree from Harvard Business School, where he was a Baker Scholar.
Thomas W. Cardy has been a director of the Company since December 1991. Mr.
Cardy has served as Executive Vice President and Chief Financial Officer of
the Company since March 1999. Since September 1988, Mr. Cardy has been
employed with Communications Equity Associates, Inc. ("CEA"), an investment
banking firm serving the entertainment and new media industries, and is
currently Executive Vice President, Entertainment and New Media at CEA. Prior
to joining CEA in 1988, Mr. Cardy was a Senior Manager with Arthur Andersen &
Co., a public accounting firm. Mr. Cardy received a B.S. degree from the
University of Florida and is a certified public accountant.
Thomas A. Cullen has been a director of the Company since April 1997. Since
June 1998, Mr. Cullen has been President of MediaOne Interactive Services,
Inc., a subsidiary of MediaOne Group Inc. (formerly U S WEST Media Group), a
broadband communications company. From August 1989 to June 1998, Mr. Cullen
served in various senior management positions with U S WEST, Inc., a
telecommunications company, including President of the Interactive Services
Group of U S WEST Media Group. Mr. Cullen also serves as a director of
SportsLine USA, Inc. Mr. Cullen received a B.S.B.A. degree from Northern
Arizona University and an M.B.A. degree from the University of Colorado.
Theodore J. Leonsis has been a director of the Company since June 1985. Mr.
Leonsis is currently President of the Interactive Properties Group of America
Online, Inc., an online services company ("AOL"). From March 1998 to March
1999, he was President of AOL Studios, an operating division of AOL; from
November 1996 to March 1998, Mr. Leonsis served as President and Chief
Executive Officer of AOL Studios; and from September 1994 to November 1996, he
served as President of America Online Services Company. Prior to joining AOL,
Mr. Leonsis was the founder and President of Redgate Communications
Corporation, a media marketing company he founded in 1986, which was
subsequently acquired by AOL in May 1994. Mr. Leonsis also serves as a
director of several privately held companies. Mr. Leonsis received a B.A.
degree from Georgetown University.
James E. Noyes has been a director of the Company since January 1996. Since
July 1996, Mr. Noyes has served as a director and Executive Vice President of
Sunterra Corporation (formerly Signature Resorts, Inc.), a developer and
operator of vacation ownership resorts and served as the Chief Operating
Officer of Sunterra Corporation from March 1998 to January 1999. From 1988 to
June 1996, Mr. Noyes served as President of The Trase Miller Group, a travel
technology services company and previously served as its Vice
President/General Manager from 1982 through 1988 and its Vice President of
Marketing and Sales from 1980 to 1982. Mr. Noyes is also a founder of Premier
Yachts, Ltd. Mr. Noyes also serves as a director of Ball Horticultural, Inc.
and as a Chairman of Grand Getaways, Inc. Mr. Noyes received a B.A. degree
from Dartmouth College and an M.B.A. degree from Stanford University.
David S. Pottruck has been a director of the Company since September 1997.
Since 1984, Mr. Pottruck has served in various senior management positions
with The Charles Schwab Corporation ("Schwab"), a financial services company,
and is currently the President and Co-Chief Executive Officer and a director
of Schwab. He is also Chief Executive Officer of Charles Schwab & Co., Inc.,
the brokerage subsidiary of Schwab. Mr. Pottruck serves as a director of
McKessonHBOC Corporation and Intel Corporation. Mr. Pottruck received B.A. and
M.B.A. degrees from the University of Pennsylvania.
Compensation of Directors
Except for reimbursement for reasonable travel expenses relating to
attendance at Board meetings and the grant of stock options, directors are not
compensated for their services as directors. Directors who are employees
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of the Company are eligible to participate in the Company's 1988 and 1997
Stock Option Plans and will be eligible to participate in the Company's 1997
Employee Stock Purchase Plan. Directors who are not employees of the Company
will be eligible to participate in the Company's 1997 Stock Option Plan and
1997 Directors' Stock Option Plan. The Company's 1997 Directors' Stock Option
Plan provides that each person who becomes a nonemployee director of the
Company will be granted a nonstatutory stock option to purchase 20,000 shares
of Common Stock on the date on which the optionee first becomes a nonemployee
director of the Company. Thereafter, on the date of each annual meeting of the
Company's stockholders at which such director is elected, each such
nonemployee director shall be granted an additional option to purchase 5,000
shares of Common Stock if, on such date, he or she shall have served on the
Company's Board of Directors for at least six months. The proposed amendment
to the 1997 Directors' Stock Option Plan will provide that, on the date of
each annual meeting of the Company's stockholders, each nonemployee director
shall also be granted an additional option to purchase 5,000 shares for each
committee of the Board of Directors on which such director serves.
In addition, following the resignation of the Company's Chief Executive
Officer, the Company retained Mr. Cardy to serve as a consultant to the
Company, for which Mr. Cardy will receive a fee of $12,500 per month and
reimbursement for certain travel and temporary living expenses in San
Francisco. In addition, Mr. Cardy was granted an option to purchase 45,000
shares of Common Stock under the 1997 Stock Option Plan, which option shall
vest over a period of 12 months. In April 1999, in connection with the
appointment of Mr. Cardy to the position of Executive Vice President and Chief
Financial Officer, Mr. Cardy received an additional option to purchase 25,000
shares of Common Stock under the 1997 Stock Option Plan, which option shall
vest over a period of 12 months.
Meetings and Committees of the Board of Directors
During the period from January 1, 1998 through December 31, 1998 (the "last
fiscal year"), the Board met nine times. Except for Mr. Noyes, who attended
six of the nine meetings, no other director attended fewer than 75% of the
aggregate number of meetings of the Board and meetings of the committees of
the Board on which he or she serves. The Board has an Audit Committee, a
Compensation Committee and an Operating Committee. The Board does not have a
nominating committee or a committee performing the functions of a nominating
committee. Although there are no formal procedures for stockholders to
nominate persons to serve as directors, the Board will consider nominations
from stockholders, which should be addressed to Leonard Stein at the Company's
address set forth above.
The Audit Committee currently consists of directors Cullen and Noyes, two of
the Company's non-employee directors, and held four meetings during the last
fiscal year. Mr. Cardy served on the Audit Committee during the entire last
fiscal year and was succeeded by Mr. Noyes in February 1999. The Audit
Committee recommends the engagement of the firm of certified public
accountants to audit the financial statements of the Company and monitors the
effectiveness of the audit effort, the Company's financial and accounting
organization and its system of internal accounting controls.
The Compensation Committee consists of directors Leonsis and Pottruck, and
held three meetings during the last fiscal year. Its functions are to
establish and administer the Company's policies regarding annual executive
salaries and cash incentives and long-term equity incentives. The Compensation
Committee administers the Company's 1988 Stock Option Plan, 1997 Stock Option
Plan, 1997 Directors' Stock Option Plan and 1997 Employee Stock Purchase Plan.
The Operating Committee consists of directors Hornthal, Leonsis and
Pottruck. Its principal function is to advise the Company's management on key
operating issues.
Recommendation of the Board:
THE BOARD RECOMMENDS A VOTE FOR THE ELECTION OF ALL NOMINEES NAMED ABOVE.
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PROPOSAL NO. 2
RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP (formerly Coopers & Lybrand L.L.P.) has served as
the Company's independent accountants since 1995 and has been appointed by the
Board to continue as the Company's independent accountants for the fiscal year
ending December 31, 1999. In the event that ratification of this selection of
accountants is not approved by a majority of the shares of Common Stock voting
at the Annual Meeting in person or by proxy, the Board will reconsider its
selection of accountants.
A representative of PricewaterhouseCoopers LLP is expected to be present at
the Annual Meeting. This representative will have an opportunity to make a
statement and will be available to respond to appropriate questions.
Recommendation of the Board:
THE BOARD RECOMMENDS A VOTE FOR RATIFICATION OF THE APPOINTMENT OF
PRICEWATERHOUSECOOPERS LLP AS THE COMPANY'S INDEPENDENT ACCOUNTANTS FOR THE
FISCAL YEAR ENDING DECEMBER 31, 1999.
PROPOSAL NO. 3
AMENDMENTS TO THE 1997 STOCK OPTION PLAN
At the Annual Meeting, the Company's stockholders are being asked to approve
an amendment to the 1997 Stock Option Plan (the "1997 Stock Option Plan") that
would increase the number of shares of Common Stock reserved for issuance
thereunder by 1,300,000 shares. The following is a summary of principal
features of the 1997 Stock Option Plan, but it does not purport to be a
complete description of all provisions of the plan. Any stockholder of the
Company who wishes to obtain a copy of the actual plan document may do so upon
written request to the Company's Chief Financial Officer at the Company's
principal offices at 747 Front Street, San Francisco, California 94111.
General
The 1997 Stock Option Plan was adopted by the Board of Directors (the
"Board") in October 1997 and approved by the stockholders in November 1997. A
total of 1,500,000 shares of Common Stock has been reserved for issuance under
the 1997 Stock Option Plan. At the Annual Meeting, the Company's stockholders
are being asked to approve an amendment to the 1997 Stock Option Plan to
increase the number of shares of Common Stock reserved for issuance thereunder
by an additional 1,300,000 shares. As of April 15, 1999, options to purchase
an aggregate of 1,267,540 shares of Common Stock were outstanding under the
1997 Stock Option Plan at a weighted average exercise price of $19.45 per
share, and 22,468 shares had been issued upon exercise of previously granted
options.
The 1997 Stock Option Plan provides for grants to employees of the Company
and any subsidiary of the Company (including officers and employee directors)
of "incentive stock options" ("ISOs") within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"), and for grants of non-
statutory options ("NSOs") to employees (including officers and employee
directors) and consultants (including non-employee directors) of the Company
or any affiliate of the Company. See "Federal Income Tax Aspects of the 1997
Stock Option Plan" below for information concerning the tax treatment of
incentive stock options and nonstatutory options.
The 1997 Stock Option Plan is not a qualified deferred compensation plan
under Section 401(a) of the Code, and is not subject to the provisions of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA").
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Purpose
The purposes of the 1997 Stock Option Plan are to attract and retain the
best available personnel for positions of substantial responsibility, to give
employees and consultants of the Company a greater personal stake in the
success of the Company's business, to provide additional incentive to the
employees and consultants of the Company to continue and advance in their
employment and service to the Company and to promote the success of the
Company's business.
Administration
The 1997 Stock Option Plan is administered by the Company's Board of
Directors or a committee of the Board (the "Administrator"). The 1997 Stock
Option Plan is currently being administered by the Board of Directors, except
that, with respect to executive officers of the Company (including executive
officers who are also directors), the 1997 Stock Option Plan is being
administered exclusively by the Compensation Committee of the Board of
Directors. The Administrator may determine the terms of the options granted,
including the exercise price, the number of shares subject to each option and
the exercisability of the option. The Administrator also has the full power to
select the individuals to whom options will be granted and to make any
combination of grants to any participants. The Administrator's interpretation
and construction of any provision of the 1997 Stock Option Plan are final and
binding upon all participants.
Members of the Board receive no additional compensation for their services
in connection with the administration of the 1997 Stock Option Plan. All
directors currently hold office until the annual meeting of stockholders of
the Company following their election, or until their successors are duly
elected and qualified. Directors may be removed from office by the vote or
written consent of the majority of outstanding shares pursuant to the
provisions of Section 141(k) of the Delaware General Corporation Law.
Eligibility
The 1997 Stock Option Plan provides that incentive stock options may be
granted only to employees (including officers and employee directors) of the
Company or any subsidiary of the Company, while nonstatutory stock options may
be granted not only to employees (including officers and employee directors),
but also consultants (including non-employee directors) of the Company or any
subsidiary of the Company.
The 1997 Stock Option Plan sets neither a maximum nor minimum number of
shares of Common Stock that may be granted under options to any person, other
than the annual per employee limitation set forth in "Limitation on Grants to
Employees," below. However, no employee may be granted incentive stock options
that first become exercisable (i.e., that vest) in any calendar year for
Common Stock having a total fair market value, determined at time of grant, in
excess of $100,000. To the extent options have been issued to a person that
exceed the $100,000 limit, such excess options are treated as nonstatutory
options. See "Federal Income Tax Aspects of the 1997 Stock Option Plan" below.
Terms and Conditions of Options
Each option is evidenced by a stock option agreement between the Company and
the optionee, and is subject to the following terms and conditions:
(a) Exercise of the Option. The Administrator determines when options may be
exercised. An option is exercised by giving written notice of exercise to the
Company specifying the number of full shares of Common Stock to be purchased
and by tendering of payment of the purchase price. The purchase price of the
shares purchased upon exercise of an option shall be paid in consideration of
such form as is determined by the Administrator, and such form of
consideration may vary for each option. Each optionee should refer to his or
her individual option agreement for information as to the exercisability and
form of consideration applicable to his or her option.
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(b) Exercise Price and Consideration. The option exercise price may not be
less than 100% of the fair market value of the Common Stock on the date of
grant; provided, however, that NSO's may be granted to persons other than the
Company's Chief Executive Officer or its other four most highly compensated
officers whose compensation is required to be reported to stockholders under
the Exchange Act at exercise prices of not less than 85% of the fair market
value on the date the option is granted. In the case of an ISO granted to a
person who at the time of the grant owns more than 10% of the total combined
voting power of all classes of stock of the Company or any parent or
subsidiary, the option exercise price for each share covered by such option
may not be less than 110% of the fair market value of a share of Common Stock
on the date of grant of such option.
The Administrator of the 1997 Stock Option Plan determines the fair market
value of the Common Stock. As long as the Common Stock of the Company is
trading on the National Market of the National Association of Securities
Dealers, Inc. Automated Quotation System ("Nasdaq") (as of the date of this
Prospectus, the Common Stock was traded on the Nasdaq National Market), the
fair market value of a share of Common Stock of the Company shall be the
closing sales price for such stock as quoted on such system on the date of
determination (or, if for a given day no sales were reported, the closing bid
on that day shall be used), as such price is reported in The Wall Street
Journal or such other source the Administrator deems reliable.
The consideration to be paid for shares issued on exercise of options
granted under the 1997 Stock Option Plan, including the method of payment, is
determined by the Administrator (in the case of ISOs, such determination shall
be made at the time of grant) and may consist entirely of cash, check,
promissory note or shares of Common Stock which have been beneficially owned
by the optionee for at least six months or which were not acquired, directly
or indirectly, from the Company, having a fair market value on the exercise
date equal to the aggregate exercise price of the shares purchased. The
Administrator may also authorize payments by any combination of the above
methods or any other consideration and method of payment permitted by law.
(c) Termination of Status As an Employee or Consultant. In the event of
termination of an optionee's employment or consulting relationship with the
Company for any reason other than death or permanent disability, the optionee
may still exercise his or her option to the extent that he or she was entitled
to exercise it at the date of termination, but such exercise must be made
within thirty days (or such other period of time, not exceeding three months
in the case of an ISO or six months in the case of an NSO, as is determined by
the Administrator, with such determination in the case of an ISO being made at
the time the option is granted) and may not be made later than the date of
expiration of the term of the option as set out in the option agreement.
(d) Disability. If an optionee is unable to continue his or her employment
or consulting relationship with the Company as a result of his or her total
and permanent disability, an option may be exercised (to the extent it was
exercisable upon the date of termination) within six months of termination (or
such other period of time, not to exceed twelve months, as is determined by
the Administrator, with such determination in the case of an ISO being made at
the time the option is granted), but an option may not be exercised later than
the date of expiration of the term of the option as set out in the option
agreement.
(e) Death. If an optionee should die while employed or serving as a
consultant to the Company, the optionee's estate or a person who has acquired
the right to exercise the option by bequest or inheritance may exercise the
option at any time within six months (or such other period of time, not
exceeding twelve months, as is determined by the Administrator, with such
determination in the case of an ISO being made at the time of grant of the
option) after the date of death (but not later than the date of expiration of
the term of the option as set out in the option agreement). The option shall
be exercisable to the extent that the right to exercise would have accrued had
the optionee continued living and working as an employee of or consultant to
the Company for another three months (or such other period of time as is
determined by the Administrator) beyond the date of death.
If an optionee should die within 30 days (or such other period of time, not
to exceed three months, as is determined by the Administrator, with such
determination in the case of an ISO being made at the time of grant
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of the option) after terminating his or her employment relationship with the
Company, the optionee's estate or person who has acquired the right to
exercise the option may likewise exercise the option at any time within six
months after the date of death, but not later than the date of expiration of
the term of the option as set out in the option agreement. However, in this
case, the option shall be exercisable only to the extent it was exercisable at
the date of termination.
(f) Term of Options. The term of an option is determined by the specific
option agreement. Incentive stock options may not have a term of more than 10
years. Furthermore, the maximum term for an option granted to an optionee who
immediately before the grant of such option owns more than 10% of the total
combined voting power of all classes of stock of the Company or any parent or
subsidiary is five years. No option may be exercised by any person after its
term expires.
(g) Limitation on Grants to Employees. Subject to adjustment as provided in
the 1997 Stock Option Plan, the maximum number of shares which may be subject
to options granted to any one employee under the 1997 Stock Option Plan during
any fiscal year of the Company is 1,500,000 shares.
(h) Option Not Transferable. An option is nontransferable by the optionee
other than by will or the laws of descent and distribution; provided, however,
that certain nonstatutory options may be transferable. An option is
exercisable during the optionee's lifetime only by the optionee (or permitted
transferee) and in the event of the optionee's death, by a person who acquires
the right to exercise the option by bequest or inheritance or by reason of the
death of the optionee (or permitted transferee).
(i) Acceleration of Options. In the event of a sale of all or substantially
all of the assets of the Company, or the merger of the Company with or into
another corporation, the option shall be assumed or an equivalent option
substituted by the successor corporation unless the administrator decides to
accelerate the vesting of the option to make it exercisable as to some or all
of the shares subject to the option. In the event of such acceleration of the
option, the optionee shall have 30 days from the date of notice of the
option's acceleration to exercise all or a portion of the option.
(j) Other Provisions. The option agreement may contain other terms,
provisions and conditions as may be determined by the Administrator as long as
they are consistent with the 1997 Stock Option Plan.
Adjustments upon Changes in Capitalization
In the event any change such as a stock split or dividend is made in the
Company's capitalization that results in an increase or decrease in the number
of outstanding shares of Common Stock without receipt of consideration by the
Company, appropriate adjustment shall be made in the exercise price and in the
number of shares subject to each option, as well as in the number of shares
available for issuance under the 1997 Stock Option Plan. In the event of the
proposed dissolution or liquidation of the Company, each option will terminate
immediately prior to the consummation of such proposed action unless otherwise
provided by the Administrator. The Administrator may declare that any option
shall terminate as of a date fixed by the Administrator and give each optionee
the right to exercise his or her option as to all or any part of the shares
subject to the option, including shares as to which the option would not
otherwise be exercisable.
Amendment and Termination of the Plan
The Board may amend the 1997 Stock Option Plan at any time or from time to
time or may terminate it without approval of the stockholders, except that
stockholder approval is required for any amendment to the 1997 Stock Option
Plan that increases the number of shares which may be issued under the 1997
Stock Option Plan, modifies the standards of eligibility, changes the
limitation on grants to employees or effects other changes which would require
stockholder approval to qualify options granted under the 1997 Stock Option
Plan as performance-based compensation under Section 162(m) of the Code.
However, no action by the Board or stockholders may alter or impair any option
previously granted under the 1997 Stock Option Plan, unless mutually agreed
8
<PAGE>
otherwise between the optionee and the Board in a writing signed by the
optionee and the Company. The 1997 Stock Option Plan shall terminate in
October 2007. Any options outstanding at that time under the 1997 Stock Option
Plan shall remain outstanding until they expire their own terms.
Plan Benefits
During the fiscal year ended December 31, 1998, (i) options to purchase
235,000 shares of Common Stock were granted pursuant to the 1997 Stock Option
Plan to all current executive officers (including directors who are executive
officers) as a group (6 persons), (ii) no options were granted pursuant to the
1997 Stock Option Plan to any current directors who are not executive officers
as a group, and (iii) options to purchase 461,055 shares of Common Stock were
granted to all employees, including current officers who are not executive
officers, as a group.
The following table sets forth information with respect to the stock options
granted and unexercised to the Named Executive Officers, all current executive
officers as a group and all employees (including all current officers who are
not executive officers) as a group under the 1997 Stock Option Plan as of
December 31, 1998.
<TABLE>
<CAPTION>
Number of Shares Subject to Weighted Average
Options Granted under Exercise Price
Name the 1997 Stock Option Plan Per Share
- ---- --------------------------- ----------------
<S> <C> <C>
Kenneth J. Orton (1)............. 100,000 $ 9.25
James J. Hornthal................ 35,000 $13.50
Kenneth R. Pelowski (2).......... 25,000 $ 9.25
David E. Lambert (3)............. 10,000 $ 9.25
Barrie Seidenberg................ 90,000 $20.63
All current executive officers as
a group (6 persons)............. 235,000 $18.60
All employees (including all
current officers who are not
executive officers)............. 461,055 $18.74
</TABLE>
- --------
(1) Mr. Orton resigned from the Company in February 1999.
(2) Mr. Pelowski resigned from the Company in March 1999.
(3) Mr. Lambert resigned from the Company in January 1999.
Federal Income Tax Aspects of the 1997 Stock Option Plan
The following is a brief summary of the United States federal income tax
consequences of transactions under the 1997 Stock Option Plan based on federal
securities and income tax laws in effect as of the date of this Proxy (which
laws could change at any time hereafter). This summary is not intended to be
exhaustive and does not discuss the tax consequences of a participant's death
or provisions of the income tax laws of any municipality, state or other
country in which an optionee may reside. This summary does not purport to be
complete. The Company advises all optionees to consult their own tax advisors
concerning tax implications of option grants and exercises, and the
disposition of shares acquired upon such exercise, under the 1997 Stock Option
Plan.
Options granted under the 1997 Stock Option Plan may be either "incentive
stock options," as defined in Section 422 of the Code or nonstatutory stock
options. If an option granted under the 1997 Stock Option Plan is an incentive
stock option, the optionee will recognize no income upon grant of the
incentive stock option and incur no regular tax liability upon its exercise,
although the exercise of an incentive stock option may give rise to
alternative minimum tax (see below). The Company will not be allowed a
deduction for federal income tax purposes as a result of the exercise of an
incentive stock option regardless of the applicability of the alternative
minimum tax. Upon the sale or exchange of the shares more than two years after
grant of the option and more than one year after receipt of the shares by the
optionee, any gain will be treated as long-term capital gain. If both of these
holding periods are not satisfied (a "disqualifying disposition"), the
optionee will recognize ordinary income equal to the difference between the
exercise price and the lower of the fair market value of the
9
<PAGE>
stock at the date of the option exercise or the sale price of the stock. The
Company will be entitled to a deduction in the same amount as the ordinary
income recognized by the optionee. Any gain recognized on such a disqualifying
disposition of the shares in excess of the amount treated as ordinary income
will be characterized as long-term capital gain if the sale occurs more than
one year after exercise of the option or as short-term capital gain if the
sale is made earlier. The tax rate on long-term capital gains under current
federal tax laws is capped at 20% for shares held more than one year. Capital
losses are allowed in full against capital gains plus $3,000 of other income.
All options which do not qualify as incentive stock options are referred to
as nonstatutory stock options. An optionee will not recognize any taxable
income at the time he or she is granted a nonstatutory stock option. However,
upon its exercise, the optionee will recognize ordinary income for tax
purposes measured by the excess of the then fair market value of the shares
over the exercise price. In certain circumstances, where the shares are
subject to a substantial risk of forfeiture when acquired or where the
optionee is an officer, director or 10% stockholder of the Company, the date
of taxation may be deferred unless the optionee files an election with the
Internal Revenue Service under Section 83(b) of the Code. The income
recognized by an optionee who is also an employee of the Company will be
subject to income and employment tax withholding by the Company by payment in
cash or out of the current earnings paid to the optionee. Upon sale of such
shares by the optionee, any difference between the sales price and the
exercise price, to the extent not recognized as ordinary income as provided
above, will be treated as capital gain or loss, and will qualify for long-term
capital gain or loss treatment if the shares have been held for more than one
year.
Required Vote
The foregoing amendment of the 1997 Stock Option Plan requires the
affirmative vote of the holders of a majority of the shares of the Company's
Common Stock present at the Annual Meeting in person or by proxy and entitled
to vote.
Recommendation of the Board
THE BOARD RECOMMENDS A VOTE FOR THE AMENDMENT OF THE 1997 STOCK OPTION PLAN
TO INCREASE THE NUMBER OF SHARES RESERVED FOR ISSUANCE THEREUNDER BY 1,300,000
SHARES AS DESCRIBED ABOVE.
PROPOSAL NO. 4
AMENDMENTS TO THE 1997 DIRECTORS' STOCK OPTION PLAN
At the Annual Meeting, the Company's stockholders are being asked to approve
an amendment to the 1997 Directors' Stock Option Plan (the "Directors' Stock
Option Plan") that would provide for the automatic grant of a stock option to
purchase 5,000 shares of Common Stock to each nonemployee director for each
committee of the Board of Directors on which such director serves. The
following is a summary of principal features of the Directors' Stock Option
Plan, but it does not purport to be a complete description of all provisions
of the plan. Any stockholder of the Company who wishes to obtain a copy of the
actual plan document may do so upon written request to the Company's Chief
Financial Officer at the Company's principal offices at 747 Front Street, San
Francisco, California 94111.
General
The Company's Directors' Stock Option Plan was adopted by the Board of
Directors in October 1997 and approved by the stockholders effective as of
November 1997. A total of 250,000 shares of Common Stock have been reserved
for issuance under the Directors' Stock Option Plan. As of April 15, 1999,
options to purchase an aggregate of 25,000 shares of common stock at a
weighted average exercise price of $27.00 per share were outstanding under the
Directors' Stock Option Plan, and no shares had been issued upon exercise of
previously granted options.
10
<PAGE>
Options granted under the Directors' Stock Option Plan are non-statutory
options and do not qualify as "incentive stock options," as defined in Section
422 of the Internal Revenue Code of 1986, as amended (the "Code"). See the
section below entitled "Federal Income Tax Aspects of the Directors' Stock
Option Plan" for information concerning the tax treatment of non-statutory
stock options.
The Directors' Stock Option Plan is not a qualified deferred compensation
plan under Section 401(a) of the Code and is not subject to the provisions of
the Employee Retirement Income Security Act of 1974 ("ERISA").
Purpose
The purposes of the Directors' Stock Option Plan are to attract and retain
the best available personnel for service as directors of the Company, to
provide additional incentive to the nonemployee directors of the Company to
serve as directors, and to encourage their continued service on the Board.
Administration
The Directors' Stock Option Plan is designed to work automatically, without
administration. However, to the extent administration is necessary, it will be
provided by the Board of Directors. The interpretation and construction of any
provision of the Directors' Stock Option Plan by the Board of Directors shall
be final and conclusive.
Members of the Board of Directors receive no additional compensation for
their services in connection with the administration of the Directors' Stock
Option Plan. All directors currently hold office until the annual meeting of
stockholders of the Company following their election, or until their
successors are duly elected and qualified. Directors may be removed from
office by the vote or written consent of the majority of outstanding shares
pursuant to the provisions of Section 141(k) of the Delaware General
Corporation Law.
Eligibility
The Directors' Stock Option Plan provides for the grant of non-statutory
options to nonemployee directors of the Company. Each such director shall be
automatically granted an option to purchase 20,000 shares of Common Stock (the
"First Option") on the date on which such person first becomes a non-employee
director, whether through election by the stockholders or appointment by the
Board of Directors to fill a vacancy. In addition, on the date of each Annual
Meeting of the Company's stockholders following which a nonemployee director
is serving on the Board, such nonemployee director shall automatically be
granted (1) an option to purchase 5,000 shares of Common Stock (provided that
the director shall have served on the Board for at least six months prior to
the date of such Annual Meeting), and (2) an option to purchase 5,000 shares
of Common Stock for each committee of the Board of Directors on which the
director serves as of such date (each of the foregoing options is referred to
herein as an "Annual Option").
In the event any automatic grant(s) would cause the aggregate number of
shares to exceed the authorized pool of shares available for issuance under
this Plan, then such automatic grant(s) will be adjusted by dividing the
remaining shares available pro rata among such automatic grant(s).
Terms and Conditions of Options
Options granted under the Directors' Stock Option Plan have a term of 10
years. Each option is evidenced by a stock option agreement between the
Company and the director to whom such option is granted and is subject to the
following additional terms and conditions:
(a) Rule 16b-3. Options granted to directors must comply with the applicable
provisions of Rule 16b-3 or any successor thereto and shall contain such
additional conditions or restrictions as may be required thereunder to qualify
for the maximum exemption from Section 16 of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), with respect to Directors' Stock Option
Plan transactions.
11
<PAGE>
(b) Exercise of the Option. The First Option shall become exercisable in
cumulative installments of 25% of the shares subject to the option on each of
the first, second, third and fourth anniversaries of the date of grant of the
First Option. Each Annual Option shall become exercisable for 100% of the
shares subject to the Annual Option on the first anniversary of the date of
grant of each such Annual Option.
An option is exercised by giving written notice of exercise to the Company,
specifying the number of full shares of Common Stock to be purchased and
tendering payment to the Company of the purchase price. The consideration to
be paid for shares issued upon exercise of options granted under the
Directors' Stock Option Plan, including the method of payment, shall consist
entirely of: 1) cash; 2) check; 3) other shares of Common Stock having a fair
market value on the date of surrender equal to the aggregate exercise price of
the shares for which the option is being exercised (provided, however, that if
the shares being surrendered were acquired from the Company, they must have
been held for at least six months); or 4) any combination of the foregoing
methods of payment and/or any other consideration or method of payment as
shall be permitted under applicable corporate law.
(c) Exercise Price. The exercise price shall be equal to 100% of the fair
market value of the Company's Common Stock on the date of grant of the option.
If there is a public market for the Common Stock, the fair market value per
share shall be the mean of the bid and asked prices of the Common Stock in the
over-the-counter market on the date of grant, as reported in The Wall Street
Journal or, if not so reported, as otherwise reported by the National
Association of Securities Dealers Automated Quotation System ("Nasdaq"). If
the Common Stock is listed on a stock exchange or the Nasdaq National Market
the fair market value of a share of Common Stock shall be the closing price on
such exchange or system on the date of grant of the option (or, in the event
that the Common Stock is not traded on such date, on the immediately preceding
trading date), as reported in The Wall Street Journal. In the absence of an
established market for the Common Stock, the fair market value shall be
determined by the Board of Directors in its discretion.
(d) Termination of Status as a Director. The Directors' Stock Option Plan
provides that if the optionee ceases to serve as a director of the Company,
the option may be exercised within 90 days after the date he or she ceases to
be a director as to all or part of the shares that the director was entitled
to exercise at the date of such termination. Notwithstanding the foregoing, in
no event may an option be exercised after its 10-year term has expired. To the
extent that the director was not entitled to exercise an option at the date of
such termination, or does not exercise an option that he or she was entitled
to exercise within the time specified, the option shall terminate.
(e) Death. Notwithstanding the provisions of paragraph (d) above, if an
optionee should die while serving as a director of the Company and has been in
continuous status as a director since the date of grant of the option, the
optionee's estate or a person who has acquired the right to exercise the
option by bequest or inheritance may exercise the option at any time within
six months after the date of death (but not later than the date of expiration
of the term of the option as set out in the option agreement). The option
shall be exercisable to the extent that the right to exercise would have
accrued had the optionee continued living and serving as a director of the
Company for another six months beyond the date of death.
If an optionee should die within three months after the termination of his
or her service as a director of the Company, the optionee's estate or person
who has acquired the right to exercise the option may likewise exercise the
option by bequest or inheritance at any time within six months after the date
of death, but not later than the date of expiration of the term of the option
as set out in the option agreement. However, in this case, the option shall be
exercisable only to the extent it was exercisable at the date of termination.
(f) Disability. Notwithstanding the provisions of paragraph (d) above, if an
optionee is unable to continue his or her service as a director of the Company
as a result of his or her total and permanent disability (as defined in
Section 22(e)(3) of the Code), the director may, but only within six months
from the date of his or her termination, exercise his or her option to the
extent he or she was entitled to exercise it at the date of such termination.
Notwithstanding the foregoing, in no event may an option be exercised after
its 10-year term has
12
<PAGE>
expired. To the extent that the director was not entitled to exercise the
option at the date of termination, or if he or she does not exercise such
option (which he or she was entitled to exercise) within the time specified,
the option shall terminate.
(g) Suspension or Termination of Options. No option is exercisable by any
person after the expiration of 10 years from the date the option was granted.
If the President of the Company or his or her designee reasonably believes
that an optionee has committed an act of misconduct, the President may suspend
the director's right to exercise any option pending a determination by the
Board of Directors (excluding the director accused of such misconduct). If the
Board of Directors (excluding the director accused of such misconduct)
determines a non-employee director has committed an act of embezzlement,
fraud, dishonesty, nonpayment of an obligation owed to the Company, breach of
fiduciary duty or deliberate disregard of the Company rules resulting in loss,
damage or injury to the Company, or if an optionee makes an unauthorized
disclosure of any Company trade secret or confidential information, engages in
any conduct constituting unfair competition, induces any Company customer to
breach a contract with the Company, or induces any principal for whom the
Company acts as agent to terminate such agency relationship, neither the
director nor his or her estate shall be entitled to exercise any option
whatsoever. In making such determination, the Board of Directors (excluding
the director accused of such misconduct) shall act fairly and shall give the
director an opportunity to appear and present evidence on the director's
behalf at a hearing before the Board of Directors or a committee of the Board
of Directors.
(h) Nontransferability of Options. An option is not transferable by the
optionee, other than by will or by the laws of descent and distribution or
pursuant to a qualified domestic relation order, and is exercisable only by an
optionee during his or her lifetime or, in the event of death, by a person who
acquires the right to exercise the option by bequest or inheritance.
(i) Other Provisions. The option agreement may contain such other terms,
provisions and conditions not inconsistent with the Directors' Stock Option
Plan as may be determined by the Company's Board of Directors.
Adjustment Upon Changes in Capitalization or Corporate Transactions
Subject to any required action by the stockholders of the Company, the
number of shares covered by each outstanding option, and the number of shares
which have been authorized for issuance under the Directors' Stock Option Plan
but as to which no options have yet been granted or which have been returned
to the Directors' Stock Option Plan upon cancellation or expiration of an
option, as well as the price per share covered by each such outstanding
option, shall be proportionately adjusted for any increase or decrease in the
number of issued shares resulting from a stock split, reverse stock split,
stock dividend, combination or reclassification of the Common Stock, or any
other increase or decrease in the aggregate number of issued shares effected
without receipt of consideration by the Company; provided, however, that
conversion of any convertible securities of the Company shall not be deemed to
have been "effected without receipt of consideration." Such adjustment shall
be made by the Board of Directors, whose determination in that respect shall
be final, binding and conclusive. Except as expressly provided in the
Director's Stock Option Plan, no issuance by the Company of shares of stock of
any class, or securities convertible into shares of stock of any class, shall
affect, and no adjustment by reason thereof shall be made with respect to, the
number or price of shares subject to an option.
In the event of (i) a dissolution or liquidation of the Company, (ii) a sale
of all or substantially all of the Company's assets, (iii) a merger or
consolidation in which the Company is not the surviving corporation, or (iv)
any other capital reorganization in which more than fifty percent (50%) of the
shares of the Company entitled to vote are exchanged, the Company is obligated
to give each optionee, at the time of adoption of the plan for liquidation,
dissolution, sale, merger, consolidation or reorganization, either a
reasonable time thereafter within which to exercise his or her option, prior
to the effectiveness of such liquidation, dissolution, sale, merger,
consolidation or reorganization, at the end of which time the option will
terminate, or the right to exercise the option (or receive a substitute option
with comparable terms) as to an equivalent number of shares of stock of the
corporation succeeding the Company or acquiring its business by reason of such
liquidation, dissolution, sale, merger, consolidation or reorganization.
13
<PAGE>
Amendment and Termination
The Company's Board of Directors may amend or terminate the Directors' Stock
Option Plan from time to time, but such amendment or termination shall not
adversely affect any stock options then outstanding under the Directors' Stock
Option Plan, without the optionee's consent. To the extent necessary and
desirable to comply with Rule 16b-3 (or any other applicable law or
regulation), the Company will obtain stockholder approval of any amendment to
the Directors' Stock Option Plan in such a manner and to such a degree as
required. Any such amendment or termination of the Directors' Stock Option
Plan shall not affect options already granted and such options shall remain in
full force and effect as if the Directors' Stock Option Plan had not been
amended or terminated unless mutually agreed otherwise between the optionee
and the Board in writing signed by the optionee and the Company. The
Directors' Stock Option Plan will terminate in November 2007, unless earlier
terminated as described above.
Federal Income Tax Aspects of the 1997 Directors' Stock Option Plan
Options granted under the 1997 Directors' Stock Option Plan are nonstatutory
stock options. An optionee will not recognize any taxable income at the time
he or she is granted a nonstatutory stock option. However, upon its exercise,
the optionee will recognize ordinary income for tax purposes measured by the
excess of the then fair market value of the shares over the option exercise
price. Because the optionee is a director of the Company, the date of taxation
(and the date of measurement of taxable ordinary income) may be deferred for
up to six months unless the optionee files an election under Section 83(b) of
the Code. Upon resale of such shares by the optionee, any difference between
the sales price and the fair market value of the shares as of the date of
exercise of the option will be treated as capital gain or loss. The tax rate
on long-term capital gains under current federal tax laws is capped at 20% for
shares held more than one year. Capital losses are allowed in full against
capital gains plus $3,000 of other income.
Required Vote
The foregoing amendment of the 1997 Directors' Stock Option Plan requires
the affirmative vote of the holders of a majority of the shares of the
Company's Common Stock present at the Annual Meeting in person or by proxy and
entitled to vote.
Recommendation of the Board
THE BOARD RECOMMENDS A VOTE FOR THE AMENDMENT OF THE 1997 DIRECTORS' STOCK
OPTION PLAN TO PROVIDE FOR THE AUTOMATIC GRANT OF A STOCK OPTION TO PURCHASE
5,000 SHARES TO EACH NONEMPLOYEE DIRECTOR FOR EACH COMMITTEE OF THE BOARD OF
DIRECTORS ON WHICH THE DIRECTOR SERVES, AS DESCRIBED ABOVE.
14
<PAGE>
COMMON STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information that has been provided to the
Company with respect to beneficial ownership of shares of the Company's Common
Stock as of March 31, 1999 for (i) each person who is known by the Company to
own beneficially more than five percent of the outstanding shares of Common
Stock, (ii) each director of the Company, (iii) each of the executive officers
named in the Summary Compensation Table of this proxy statement (the "Named
Executive Officers"), and (iv) all current directors and executive officers of
the Company as a group.
<TABLE>
<CAPTION>
Shares Beneficially Percent Beneficially
Name and Address Owned (1) Owned(1)
- ---------------- ------------------- --------------------
<S> <C> <C>
T. Rowe Price Associates, Inc. (2)... 1,291,100 9.3%
100 East Pratt Street
Baltimore, MD 21202
James J. Hornthal (3)................ 1,000,729 7.1
Entities affiliated with The
Equitable Companies Incorporated
(4).................................. 985,837 7.1
1290 Avenue of the Americas
New York, NY 10104
MediaOne Interactive Services, Inc.
(5)................................. 932,540 6.8
1888 Inverness Drive West
Englewood, CO 80112
America Online, Inc. (6)............. 851,312 6.2
22000 AOL Way
Dulles, VA 20166
Entities affiliated with Husic Capi-
tal Management (7).................. 708,100 5.1
555 California Street, Suite 2900
San Francisco 94104
Kenneth J. Orton (8)................. 204,584 1.5
Kenneth R. Pelowski (9).............. 2,605 *
David E. Lambert (10)................ 50,219 *
Barrie Seidenberg (11)............... 45,311 *
Thomas W. Cardy (12)................. 51,196 *
Thomas A. Cullen (13)................ 937,540 6.8
Theodore J. Leonsis (14)............. 72,830 *
James E. Noyes (15).................. 19,257 *
David S. Pottruck (16)............... 28,222 *
All directors and officers as a group
(13 persons) (17)................... 2,453,535 17.1%
</TABLE>
- --------
* Less than 1%.
(1) Applicable percentage of beneficial ownership is based on 13,811,205
shares of Common Stock outstanding as of March 31, 1999, together with
applicable options and warrants for such stockholder. Beneficial
ownership is determined in accordance with the rules of the Securities
and Exchange Commission. The number of shares beneficially owned by a
person includes shares of Common Stock subject to options held by that
person that are currently exercisable or exercisable within 60 days of
March 31, 1999. Such shares issuable pursuant to such options are deemed
outstanding for computing the percentage ownership of the person holding
such options but are not deemed outstanding for the purposes of computing
the percentage ownership of each other person. To the Company's
knowledge, the persons named in this table have sole voting and
investment power with respect to all shares of Common Stock
15
<PAGE>
shown as owned by them, subject to community property laws where
applicable and except as indicated in the other footnotes to this table.
Unless otherwise indicated, the address of each of the individuals named
above is: c/o Preview Travel, Inc., 747 Front Street, San Francisco,
California 94111.
(2) Information is based on Schedule 13G filed by the holder on February 12,
1999.
(3) Includes 215,730 shares issuable upon exercise of options exercisable
within 60 days of March 31, 1999. Also includes 720,615 shares held by
Hornthal Living Trust and an aggregate of 64,384 shares held in trusts of
which Mr. Hornthal is a trustee and has voting power.
(4) Includes shares held by AXA Assurances I.A.R.D. Mutuelle, AXA Assurances
Vie Mutuelle, AXA Conseil Vie Assurance Mutuelle, AXA Courtage Assurance
Mutuelle, AXA and The Equitable Companies Incorporated. Information is
based on Schedule 13G filed by the holder on February 10, 1999.
(5) Excludes shares held by Thomas A. Cullen. Mr. Cullen is President of
MediaOne Interactive Services, Inc. Information is based on Schedule 13G
filed by the holder on February 12, 1999.
(6) Does not include 67,830 shares held by Theodore J. Leonsis, a director of
the Company. Mr. Leonsis is President of the Interactive Properties Group
of AOL. Mr. Leonsis disclaims beneficial ownership of the shares held by
AOL. Information is based on Schedule 13G filed by the holder on February
11, 1999.
(7) Information is based on Schedule 13G filed by the holder on February 12,
1999.
(8) Mr. Orton resigned from the Company in February 1999. Includes 179,584
shares issuable upon exercise of options exercisable within 60 days of
March 31, 1999.
(9) Mr. Pelowski resigned from the Company in March 1999. Includes 2,605
shares issuable upon exercise of options exercisable within 60 days of
March 31, 1999.
(10) Mr. Lambert resigned from the Company in January 1999.
(11) Includes 45,311 shares issuable upon exercise of options exercisable
within 60 days of March 31, 1999.
(12) Includes 20,000 shares held by Mr. Cardy, 2,500 shares held by Eugenia C.
Cardy and 10,363 shares held by Thomas W. Cardy Family Trust. Also
includes 18,333 shares issuable upon exercise of options exercisable
within 60 days of March 31, 1999.
(13) Includes 932,540 shares held by MediaOne Interactive Services, Inc., of
which Mr. Cullen is President. Mr. Cullen disclaims beneficial ownership
of such shares except to the extent of his pecuniary interest therein.
Also includes 5,000 shares issuable upon exercise of options exercisable
within 60 days of March 31, 1999.
(14) Does not include 851,312 shares held by AOL, of which shares Mr. Leonsis
disclaims beneficial ownership. Also includes 5,000 shares issuable upon
exercise of options exercisable within 60 days of March 31, 1999.
(15) Includes 5,000 shares issuable upon exercise of options exercisable
within 60 days of March 31, 1999.
(16) Includes 10,000 shares issuable upon exercise of options exercisable
within 60 days of March 31, 1999.
(17) Includes 525,522 shares issuable upon exercise of stock options
exercisable within 60 days of April 15, 1998. A portion of the shares
issued or issuable upon exercise of such stock options is subject to
repurchase by the Company at the original exercise price in the event of
termination of employment, which repurchase right lapses over time.
16
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS
The following table shows the compensation earned by (a) the individual who
served as the Company's Chief Executive Officer during the fiscal year ended
December 31, 1998, (b) the four other most highly compensated individuals who
served as an executive officer of the Company during the fiscal year ended
December 31, 1998 (the "Named Executive Officers"); and (c) the compensation
received by each such individual for the Company's two preceding fiscal years.
Summary Compensation Table
<TABLE>
<CAPTION>
Long-Term
Compensation
Annual Compensation Awards
-------------------- ------------
Securities All Other
Underlying Compensation
Name and Principal Position Salary ($) Bonus ($) Options (#) ($) (1)
- --------------------------- ---------- --------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Kenneth J. Orton, Former
President and Chief
Executive Officer (2)..... 1998 $ 241,905 $ 112,096 100,000 $ 4,697
1997 204,926 20,000 120,000 1,264
1996 157,125 25,000 30,000 1,323
James J. Hornthal, Chairman
and Acting President and
Chief Executive Officer... 1998 195,603 75,782 35,000 2,289
1997 170,139 15,000 25,000 1,764
1996 167,425 -- -- 1,440
Kenneth R. Pelowski, Former
Executive Vice President,
Finance and
Administration, and Chief
Financial Officer (3)..... 1998 157,759 54,597 25,000 1,422
1997 51,778 25,000 125,000 59
1996 -- -- -- --
David E. Lambert, Former
Executive Vice President
and President of Preview
Travel Online, Inc. (4)... 1998 160,368 42,597 10,000 4,242
1997 144,380 -- 15,000 1,237
1996 132,761 -- 25,000 486
Barrie A. Seidenberg,
Executive Vice President
of Online Services........ 1998 139,972 39,768 90,000 310
1997 113,077 35,000 30,000 133
1996 89,217 27,500 10,000 --
</TABLE>
- --------
(1) Consists of travel benefits, parking expense reimbursement and insurance
premiums paid by the Company.
(2) Mr. Orton resigned from the Company in February 1999.
(3) Mr. Pelowski resigned from the Company in March 1999.
(4) Mr. Lambert resigned from the Company in January 1999.
In February 1999, the Company entered into an agreement with Mr. Orton in
connection with his resignation as President and Chief Executive Officer of
the Company. Under such agreement, the Company has agreed to retain Mr. Orton
as a consultant during the 51-week period following his resignation, for which
Mr. Orton would receive a consulting fee equal to $30,667 per month. All stock
options held by Mr. Orton will continue to vest in accordance with their terms
during the period he provides such consulting services to the Company. In
addition, each of Mr. Orton's outstanding stock options has been amended to
provide that Mr. Orton may pay the exercise price under each such option by
executing a four-year, full recourse promissory note for the applicable
exercise price.
17
<PAGE>
In February 1999, Mr. Hornthal and Mr. Pelowski were granted options to
purchase 100,000 shares and 50,000 shares of Common Stock, respectively, at an
exercise price of $19.9375 per share, the fair market value of the Common
Stock on the date of grant.
The following table shows certain information regarding stock options
granted to the Named Executive Officers during the year ended December 31,
1998. No stock appreciation rights were granted to these individuals during
the year.
OPTION GRANTS IN FISCAL YEAR 1998
<TABLE>
<CAPTION>
Potential Realizable Value
at Assumed Annual Rates
Number of Shares Percentage of Of Stock Price Appreciation
Underlying Total Options Exercise for Option Term(2)
Options Granted to Price per Expiration ----------------------------
Name Granted (1) Employees Share Date 5% 10%
---- ---------------- ------------- --------- ---------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Kenneth J. Orton (3).... 100,000 14.4% $ 9.25 1/14/08 $ 582,130 $ 1,475,465
James J. Hornthal....... 35,000 5.0% $13.50 1/26/08 297,359 753,684
Kenneth R. Pelowski
(4).................... 25,000 3.6% $ 9.25 1/14/08 145,533 368,866
David E. Lambert (5).... 10,000 1.4% $ 9.25 1/14/08 58,213 147,547
Barrie A. Seidenberg.... 20,000 2.9% $ 9.25 1/14/08 116,426 295,093
70,000 10.1% $23.88 8/3/08 1,053,132 2,666,939
</TABLE>
- --------
(1) These stock options, which were granted under the 1997 Stock Option Plan,
become exercisable at a rate of 25% of the total number of shares of
Common Stock subject to the option on the first anniversary of the date of
grant, and 2.083% of the total number of shares monthly thereafter, as
long as the optionee remains an employee with, consultant to, or director
of the Company.
(2) The 5% and 10% assumed annual rates of compounded stock price appreciation
are mandated by the Securities and Exchange Commission. There is no
assurance provided to any executive officer or any other holder of the
Company's securities that the actual stock price appreciation over the
ten-year option term will be at the assumed 5% and 10% levels or at any
other defined level. Unless the market price of the Common Stock
appreciates over the option term, no value will be realized from the
option grants made to the executive officers.
(3) Mr. Orton resigned from the Company in February 1999.
(4) Mr. Pelowski resigned from the Company in March 1999.
(5) Mr. Lambert resigned from the Company in January 1999.
18
<PAGE>
Option Exercises and Holdings
The following table provides certain summary information concerning the
shares of Common Stock represented by outstanding stock options held by each
of the Named Executive Officers as of December 31, 1998.
Fiscal Year-End Option Values
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Number of Underlying Unexercised In-the-Money Options
Name Shares Value Options at December 31, 1998(#) at December 31, 1998 ($)(2)
- ---- Acquired on Realized ---------------------------------- -----------------------------
Exercise(#) ($)(1) Exercisable Unexercisable Exercisable Unexercisable
----------- ---------- --------------- ---------------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Kenneth J. Orton(3)..... 30,000 $ 789,000 154,271 185,729 $2,482,678 $2,279,242
James J. Hornthal....... -- -- 197,500 52,500 3,161,492 450,707
Kenneth R. Pelowski(4).. 36,000 540,980 3,063 110,937 36,566 1,255,616
David E. Lambert(5)..... 63,436 1,176,600 5,939 35,625 94,770 500,979
Barrie Seidenberg....... 10,000 263,000 31,407 118,593 467,362 558,678
</TABLE>
- --------
(1) The amount set forth represents the difference between the fair market
value of the shares on the date of exercise and the exercise price of the
option.
(2) Based on the $18.44 per share closing price of the Company's Common Stock
on The Nasdaq National Market as of December 31, 1998, minus the exercise
price, multiplied by the number of shares underlying the option.
(3) Mr. Orton resigned from the Company in February 1999.
(4) Mr. Pelowski resigned from the Company in March 1999.
(5) Mr. Lambert resigned from the Company in January 1999.
Notwithstanding anything to the contrary set forth in any of the Company's
filings under the Securities Act of 1933 or the Securities Exchange Act of
1934 that might incorporate future filings, including this Proxy Statement, in
whole or in part, the following report and the Stock Performance Graph which
follows shall not be deemed to be incorporated by reference into any such
filings.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The following is a report of the Compensation Committee of the Board of
Directors (the "Committee") describing the compensation policies applicable to
the Company's executive officers during the fiscal year ended December 31,
1998. The Committee is responsible for establishing and monitoring the general
compensation policies and compensation plans of the Company, as well as the
specific compensation levels for executive officers. It also makes
recommendations to the Board of Directors concerning the granting of options
under the Company's 1988 and 1997 Stock Option Plans. Executive officers who
are also directors have not participated in deliberations or decisions
involving their own compensation.
General Compensation Policy
Under the supervision of the Board of Directors, the Company's compensation
policy is designed to attract and retain qualified key executives critical to
the Company's growth and long-term success. It is the objective of the Board
of Directors to have a portion of each executive's compensation contingent
upon the Company's performance as well as upon the individual's personal
performance. Accordingly, each executive officer's compensation package is
comprised of three elements: (i) base salary which reflects individual
performance and expertise, (ii) variable bonus awards payable in cash and tied
to the achievement of certain performance goals that the Board of Directors
establishes from time to time for the Company and (iii) long-term stock-based
incentive awards which are designed to strengthen the mutuality of interests
between the executive officers and the Company's stockholders.
19
<PAGE>
The summary below describes in more detail the factors which the Board of
Directors considers in establishing each of the three primary components of
the compensation package provided to the executive officers.
Base Salary
The level of base salary is established primarily on the basis of the
individual's qualifications and relevant experience, the strategic goals for
which he or she has responsibility, the compensation levels at companies which
compete with the Company for business and executive talent, and the incentives
necessary to attract and retain qualified management. Base salary is adjusted
each year to take into account the individual's performance and to maintain a
competitive salary structure. Company performance does not play a significant
role in the determination of base salary.
Cash-Based Incentive Compensation
Cash bonuses are awarded on a discretionary basis to executive officers on
the basis of their success in achieving designated individual goals and the
Company's success in achieving specific company-wide goals, such as the
increase in gross bookings and continued revenue and customer base growth.
Long-Term Incentive Compensation
The Company has utilized its stock option plans to provide executives and
other key employees with incentives to maximize long-term stockholder values.
Awards under this plan by the Board of Directors take the form of stock
options designed to give the recipient a significant equity stake in the
Company and thereby closely align his or her interests with those of the
Company's stockholders. Factors considered in making such awards include the
individual's position in the Company, his or her performance and
responsibilities, and internal comparability considerations.
Each option grant allows the executive officer to acquire shares of Common
Stock at a fixed price per share (the fair market value on the date of grant)
over a specified period of time (up to 10 years). The options typically vest
in periodic installments over a four-year period, contingent upon the
executive officer's continued employment with the Company. Accordingly, the
option will provide a return to the executive officer only if he or she
remains in the Company's service, and then only if the market price of the
Common Stock appreciates over the option term.
Compensation of the Chief Executive Officer
Kenneth J. Orton has served as the Company's President since April 1994 and
as Chief Executive Officer since June 1997. His base salary for fiscal 1998
was $241,905.
The factors discussed previously in "Base Salaries," "Cash-Based Incentive
Compensation," and "Long-Term Incentive Compensation" were also applied in
establishing the amount of Mr. Orton's salary and stock option grant. In
reviewing Mr. Orton's performance, the Committee noted in particular a number
of achievements by the Company in 1998, including the establishment of key
strategic and distribution relationships and the significant growth in online
travel bookings. Based on annual survey data which takes into consideration
the CEO compensation of similar sized companies in the same geographic region
and industry, the Committee believes that the base salary level for the CEO is
commensurate with salaries paid to chief executive officers of comparable
companies engaged in similar industries.
Deductibility of Executive Compensation
The Committee has considered the impact of Section 162(m) of the Internal
Revenue Code adopted under the Omnibus Budget Reconciliation Act of 1993,
which section disallows a deduction for any publicly held
20
<PAGE>
corporation for individual compensation exceeding $1 million in any taxable
year for the CEO and the four other most highly compensated executive
officers, respectively, unless such compensation meets the requirements for
the "performance-based" exception to Section 162(m). As the cash compensation
paid by the Company to each of its executive officers is expected to be below
$1 million and the Committee believes that options granted under the Company's
1988 and 1997 Stock Option Plans to such officers will meet the requirements
for qualifying as performance-based, the Committee believes that Section
162(m) will not affect the tax deductions available to the Company with
respect to the compensation of its executive officers. It is the Committee's
policy to qualify, to the extent reasonable, its executive officers'
compensation for deductibility under applicable tax law. However, the Company
may from time to time pay compensation to its executive officers that may not
be deductible.
Submitted by the Compensation
Committee:
Theodore J. Leonsis
David S. Pottruck
Compensation Committee Interlocks and Insider Participation
The members of the Compensation Committee of the Company's Board of
Directors are currently Messrs. Leonsis and Pottruck, each of whom were
appointed to the Compensation Committee in September 1997. From January 1998
to September 1998, Douglas J. Mackenzie also served as a member of the
Compensation Committee. None of Messrs. Mackenzie, Pottruck or Leonsis has at
any time been an officer or employee of the Company or any subsidiary of the
Company.
Mr. Leonsis is President of the Interactive Properties Group of AOL and,
from November 1996 to March 1998, he was President of AOL Studios, an
operating division of AOL. Since July 1994, the Company has maintained a
relationship with AOL pursuant to which the Company developed and launched
online travel services through a Preview Travel content area on the AOL
network and AOL's Web site, AOL.com (together, the "AOL Online Area"), in
January 1995. In September 1997, the Company entered into an agreement with
AOL pursuant to which the Company serves as AOL's primary and preferred
provider of travel services on the AOL Online Area. In addition, AOL has
agreed to exclusively promote and advertise Preview Travel in online areas
controlled by AOL and to deliver a minimum number of annual page views to the
online areas promoting the Company. Over the five-year term of the agreement,
the Company is obligated to make minimum payments totaling $32 million to AOL,
as well as pay a percentage of commissions earned by the Company in excess of
certain quarterly thresholds. The Company has also agreed to deliver content
through the AOL Online Area and to provide travel services that are
competitive in price and performance. The Company and AOL both have the right
to sell advertising in the Company's content areas distributed through AOL,
subject to the Company's obligation to pay a percentage of advertising
revenues above certain threshold amounts to AOL after the second year of the
agreement. Under a separate agreement, the Company has agreed to develop and
manage a travel-related destination database for AOL in exchange for the right
to receive all advertising revenues generated from such database up to a
certain threshold, and share in advertising revenues thereafter. The Company's
agreements with AOL expire in September 2002, or earlier in the event of a
material breach or the Company's failure to deliver satisfactory content to
the database or achieve specified annual levels of travel services bookings.
Certain Relationships and Related Transactions
In February 1999, the Company entered into an agreement with Mr. Orton in
connection with his resignation as President and Chief Executive Officer of
the Company. Under such agreement, the Company has agreed to retain Mr. Orton
as a consultant during the 51-week period following his resignation, for which
Mr. Orton would receive a consulting fee equal to $30,667 per month. All stock
options held by Mr. Orton will continue to vest in accordance with their terms
during the period he provides such consulting services to the Company. In
addition, each of Mr. Orton's outstanding stock options has been amended to
provide that Mr. Orton may pay the exercise price under each such option by
executing a four-year, full recourse promissory note for the applicable
exercise price.
21
<PAGE>
The Company has entered into indemnification agreements with each of its
officers and directors containing provisions which may require the Company,
among other things, to indemnify its officers and directors against certain
liabilities that may arise by reason of their status or service as officers or
directors (other than liabilities arising from willful misconduct of a
culpable nature) and to advance their expenses incurred as a result of any
proceeding against them as to which they could be indemnified.
See "Compensation Committee Interlocks and Insider Participation" for a
description of the Company's relationship with AOL.
In December 1998, the Company completed a transaction with NewsNet Central,
Inc. ("NNC"), pursuant to which substantially all of the assets of the
Company's television business, as operated by the Company's wholly owned
subsidiary, News Travel Network, Inc. ("NTN"), were transferred to NNC. Prior
to the closing of the transaction, the Company contributed certain assets to
NTN, including the following: (a) cash in the amount of $88,000, (b) certain
assets related to NTN's business, including a library of travel video content,
and (c) assignment of the Company's rights and obligations under certain
contracts related to NTN's business. In consideration of the transfer of the
assets of NTN to NNC, the Company received from NNC the following: (a) a
convertible promissory note in the principal amount of $250,000 (the "Note"),
(b) a subordinated promissory note in the principal amount of $1,000,000 (the
"Subordinated Note"), which will bear interest at the rate of 6% per annum and
will be secured by certain portions of the assets of NNC, including its fixed
assets and the video library, and (c) a warrant to purchase up to 2,275,445
shares of Common Stock of NNC at an exercise price of $0.45 per share (the
"Warrant"). The Note will be due and payable upon demand by the Company on
December 31, 1999; provided, however, that the Note will be automatically
converted into shares of Series A Preferred Stock of NNC at a conversion price
of $4.50 per share upon the occurrence of certain conditions. Following the
closing of the transaction and the conversions of all outstanding convertible
promissory notes, including the Note, the Company owns approximately 19.7% of
NNC's Common Stock (assuming conversion of the Series A Preferred Stock into
Common Stock). James J. Hornthal is a director of NNC and holds 800,000 shares
of Common Stock of NNC, which he purchased on November 15, 1998 at a price of
$0.015 per share.
22
<PAGE>
STOCK PERFORMANCE GRAPH
The following graph compares the cumulative total stockholder return data
for the Company's stock since November 20, 1997 (the date on which the
Company's stock was first registered under Section 12 of the Securities
Exchange Act of 1934, as amended) to the cumulative return over such period of
(i) the Nasdaq National Market Composite index, and (ii) the Hambrecht and
Quist Technology index. The graph assumes that $100 was invested on November
20, 1997, the date on which the Company completed the initial public offering
of its Common Stock, in the Common Stock of the Company and in each of the
comparative indices. The graph further assumes that such amount was initially
invested in the Common Stock of the Company at a per share price of $11.00,
the price to which such stock was first offered to the public by the Company
on the date of its initial public offering, and reinvestment of any dividends.
The stock price performance on the following graph is not necessarily
indicative of future stock price performance.
[GRAPH]
- --------
* Assumes $100 invested on November 20, 1997 in the Common Stock of the
Company and in each of the comparative indices, including reinvestment of
dividends.
<TABLE>
<CAPTION>
11/20/97 12/31/97 12/31/98
-------- -------- --------
<S> <C> <C> <C>
Preview Travel, Inc.................................. $100 $ 68.73 $167.61
Nasdaq NM Composite.................................. 100 99.53 139.84
Hambrecht & Quist Technology......................... 100 94.24 145.18
</TABLE>
23
<PAGE>
DEADLINE FOR RECEIPT OF STOCKHOLDER PROPOSALS FOR 2000 ANNUAL MEETING
Proposals of stockholders intended to be presented at the Company's 2000
Annual Meeting of Stockholders must be received by the Secretary of the
Company, Leonard Stein, Preview Travel, Inc., 747 Front Street, San Francisco,
California, 94111, no later than January 15, 2000 in order that they may be
included in the Company's proxy statement and form of proxy for that meeting.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's directors,
executive officers and persons who own more than 10% of the Company's Common
Stock (collectively, "Reporting Persons") to file with the Securities and
Exchange Commission ("SEC") initial reports of ownership and changes in
ownership of the Company's Common Stock. Reporting Persons are required by SEC
regulations to furnish the Company with copies of all Section 16(a) reports
they file. To the Company's knowledge, based solely on its review of the
copies of such reports received or written representations from certain
Reporting Persons that no other reports were required, the Company believes
that during its fiscal year ended December 31, 1998, all Reporting Persons
complied with all applicable filing requirements, except as follows:
David E. Lambert filed a Form 4 in March 1998 to report the acquisition of
15,000 shares through the exercise of a stock option at an exercise price of
$2.20 per share, which exercise occurred in January 1998.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
This Proxy Statement incorporates certain documents of the Company by
reference that are not presented herein or delivered herewith. Such documents
are available to any person, including any beneficial owner, to whom this
Proxy Statement is delivered, upon oral or written request, without charge,
directed to Investor Relations, Preview Travel, Inc., 747 Front Street, San
Francisco, California 94111, telephone number (415) 439-1200.
OTHER MATTERS
The Board of Directors knows of no other business that will be presented to
the Annual Meeting. If any other business is properly brought before the
Annual Meeting, proxies in the enclosed form will be voted in respect thereof
as the proxy holders deem advisable.
It is important that the proxies be returned promptly and that your shares
be represented. Stockholders are urged to mark, date, execute and promptly
return the accompanying proxy card in the enclosed envelope.
THE BOARD OF DIRECTORS
May 17, 1999
San Francisco, California
24
<PAGE>
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
PREVIEW TRAVEL, INC.
1999 ANNUAL MEETING OF STOCKHOLDERS
PROXY
The undersigned stockholder of Preview Travel, Inc., a Delaware corporation
(the "Company"), hereby acknowledges receipt of the Notice of Annual Meeting of
Stockholders and Proxy Statement, each dated May 17, 1999, and hereby appoints
James J. Hornthal and Thomas W. Cardy, or either of them, as proxies and
attorneys-in-fact with full power to each of substitution, on behalf and in the
name of the undersigned, to represent the undersigned at the 1999 Annual Meeting
of Stockholders of Preview Travel, Inc. to be held on June 15, 1999, at 10:00
a.m., Pacific time, at the Park Hyatt Hotel, located at 333 Battery Street, San
Francisco, California, and at any adjournment(s) or postponement(s) thereof, and
to vote all shares of Common Stock that the undersigned would be entitled to
vote if then and there personally present, on the matters set forth below:
Proposal No. 1 - Election of Directors
[_] For all nominees listed below [_] Withhold authority for all
nominees listed below
If you wish to withhold authority for any individual nominee(s), strike a
-------------------------------------------------------------------------
line through his name or their names in the list below:
-------------------------------------------------------
James J. Hornthal Thomas W. Cardy Thomas A. Cullen
Theodore J. Leonsis James E. Noyes David S. Pottruck
Proposal No. 2 - Appointment of Independent Auditors
To ratify the appointment of PricewaterhouseCoopers LLP as the Company's
independent auditors for the fiscal year ending December 31, 1999.
[_] FOR [_] AGAINST [_] ABSTAIN
Proposal No. 3 - Amendment of 1997 Stock Option Plan
To approve the amendment of the Company's 1997 Stock Option Plan to
increase the aggregate number of shares of Common Stock authorized for
issuance under such plan by 1,300,000 shares.
[_] FOR [_] AGAINST [_] ABSTAIN
Proposal No. 4 - Amendment of 1997 Directors' Stock Option Plan
To approve the amendment of the Company's 1997 Directors' Stock Option Plan
to provide for the automatic grant of a stock option to purchase 5,000
shares to each nonemployee director for each committee of the Board of
Directors on which the director serves.
[_] FOR [_] AGAINST [_] ABSTAIN
CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE SIDE
<PAGE>
NOTE: This Proxy should be marked, dated, signed by the stockholder(s) exactly
as his or her name appears hereon, and returned in the enclosed envelope.
In their discretion, upon such other matter or matters which may properly come
before the meeting or any postponement(s) or adjournment(s) thereof.
THIS PROXY WILL BE VOTED AS DIRECTED AND AS SAID PROXIES DEEM ADVISABLE ON SUCH
OTHER MATTERS AS MAY COME BEFORE THE MEETING OR ANY POSTPONEMENT(S) OR
ADJOURNMENT(S) THEREOF. WITH RESPECT TO THE ELECTION OF DIRECTORS, IF NO
CONTRARY OBJECTION IS INDICATED, THIS PROXY WILL BE VOTED FOR THE NOMINEES
LISTED ABOVE.
DATED: , 1999
------------------------------------
-----------------------------------------------------
Printed name(s) exactly as shown on Stock Certificate
-----------------------------------------------------
(Signature)
-----------------------------------------------------
(Signature)
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD USING THE ENCLOSED ENVELOPE.
Please sign exactly as name appears hereon. When shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee, or guardian, please give full title as such. If a corporation, please
sign in full corporate name by its President or other authorized officer. If a
partnership, please sign in partnership name by an authorized person. THIS PROXY
WILL BE VOTED FOR THE ELECTION OF THE DIRECTORS LISTED ABOVE AND FOR THE OTHER
PROPOSALS IF NO SPECIFICATION IS MADE.
