<PAGE> 1
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
Filed by the Registrant [X]
Filed by a party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
[X] Definitive Proxy Statement Commission Only (as permitted by
[ ] Definitive Additional Materials Rule 14a-6(e)(2))
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule
14a-12
</TABLE>
VENTRO CORPORATION
- --------------------------------------------------------------------------------
(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.:
- --------------------------------------------------------------------------------
(3) Filing Party:
- --------------------------------------------------------------------------------
(4) Date Filed:
- --------------------------------------------------------------------------------
<PAGE> 2
VENTRO CORPORATION
1500 PLYMOUTH STREET
MOUNTAIN VIEW, CA 94043
April 20, 2000
Dear Shareholder:
The Annual Meeting of Shareholders of Ventro Corporation will be held on
Wednesday, May 24, 2000, at 10:00 a.m., Pacific Daylight Time, in the Stanford
Conference Room, at the Hyatt Rickey's Hotel, located at 4219 El Camino Real,
Palo Alto, California 94306.
Only stockholders who owned stock at the close of business on April 10,
2000 can vote at this meeting or any adjournments that may take place. At the
meeting we will:
1. Elect a Board of Directors.
2. Approve an amendment to the 1998 Stock Option Plan to reserve an
additional 3,500,000 shares of Ventro common stock thereunder for
issuance.
3. Approve an amendment to the 1999 Board of Directors' Stock Option Plan
to reserve an additional 30,000 shares of Ventro common stock thereunder
for issuance.
4. Approve the appointment of our independent auditors for fiscal year
2000.
5. Attend to other business properly presented at the meeting.
Your Board of Directors recommends that you vote in favor of the four
proposals outlined in this Proxy Statement.
At the meeting, we will also report on Ventro's 1999 business results and
other matters of interest to stockholders.
Your vote is important. To ensure your representation, even if you cannot
attend the Annual Meeting, please mark, sign, date and return the enclosed Proxy
promptly.
Sincerely,
DAVID P. PERRY
Chief Executive Officer and President
<PAGE> 3
VENTRO CORPORATION
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD WEDNESDAY, MAY 24, 2000
The Annual Meeting of Stockholders (the "Annual Meeting") of Ventro
Corporation, a Delaware corporation, will be held at the Hyatt Rickey's Hotel,
located at 4219 El Camino Real, Palo Alto, California 94306 on Wednesday, May
24, 2000, at 10:00 a.m., local time, for the following purposes:
1. To elect 9 directors to serve until the next Annual Meeting of
Shareholders and until their successors are duly elected and qualified;
2. To approve an amendment to the 1998 Stock Plan to reserve an additional
3,500,000 shares of common stock thereunder for issuance;
3. To approve an amendment to the 1999 Board of Directors' Stock Plan to
reserve an additional 30,000 shares of common stock thereunder for
issuance;
4. To approve the appointment of Ernst & Young LLP as the independent
auditors of Ventro for fiscal year 2000; 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 10, 2000 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,
/s/ James G. Stewart
JAMES G. STEWART
Chief Financial Officer and
Assistant Secretary
Mountain View, California
April 20, 2000
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> 4
VENTRO CORPORATION
1500 PLYMOUTH STREET, MOUNTAIN VIEW, CALIFORNIA 94043
PROXY STATEMENT
GENERAL
This Proxy Statement is furnished in connection with the solicitation by
the Board of Directors (the "Board") of Ventro Corporation, 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
Hyatt Rickey's Hotel, located at 4219 El Camino Real, Palo Alto, California,
94306 on Wednesday, May 24, 2000, 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 year ended December 31, 1999, including financial
statements, were first mailed to stockholders entitled to vote at the meeting on
or about April 20, 2000.
SHARES OUTSTANDING, VOTING RIGHTS AND REVOCABILITY OF PROXIES
At the close of business on April 10, 2000, the "Record Date" for
determination the shareholders entitled to notice of and to vote at the Annual
Meeting, the Company had approximately 45,051,555 shares of Common Stock
("Common Stock") outstanding, with a par value of $0.0002.
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 assuming the presence
of a quorum. 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, as 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.
A shareholder who signs and returns a proxy may revoke that proxy at any
time before the Annual Meeting or by ballot at the meeting.
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 the approval of the amendment to the 1998 Stock Plan, FOR the approval of
the amendment to the 1999 Board of Directors' Stock Plan and FOR the appointment
of Ernst & Young LLP as Ventro's independent auditors, and as the proxy holders
deem advisable on other matters that may come before the meeting. 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 Company believes that the tabulation procedures to
be followed by the Inspector are consistent with the general requirements of
Delaware law concerning voting of shares and determination of a quorum.
SOLICITATION
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
<PAGE> 5
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. A proxy
solicitor has been hired, Corporate Investor Communications, for which a fee of
approximately $5,500 will be paid by the Company.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
NOMINEES
At the Annual Meeting, the stockholders will elect nine (9) Directors to
serve until the next Annual Meeting of Stockholders and until their respective
successors are elected and qualified. 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.
The names of the nominees, their ages as of March 31, 2000 and certain
other information about them are set forth below:
<TABLE>
<CAPTION>
NAME OF NOMINEE AGE PRINCIPAL OCCUPATION
--------------- --- --------------------
<S> <C> <C>
Brook H. Byers 54 Chairman of the Board
David P. Perry 32 President, Chief Executive Officer and Director
Charles R. Burke 57 Director
Jonathan D. Callaghan 31 Director
Paul J. Nowak 45 Director
John A. Pritzker 46 Director
Naomi O. Seligman 66 Director
L. John Wilkerson 56 Director
Jan Leschly 59 Director
</TABLE>
There are no family relationships among any of the Directors or executive
officers of the Company.
BROOK H. BYERS has served as one of our Directors since May 1998 and as
Chairman of the Board since March 1999. Mr. Byers is a general partner of
Kleiner Perkins Caufield & Byers, a venture capital firm which he joined in
1977. He was the founding President and Chairman of four lifesciences companies:
Hybritech Inc., IDEC Pharmaceuticals Corporation, InSite Vision Inc. and Ligand
Pharmaceuticals Inc. Mr. Byers currently serves as a Director of drugstore.com
and a number of privately-held technology companies. Mr. Byers serves on the
Board of Directors of the University of California, San Francisco Foundation and
the California Healthcare Institute. Mr. Byers holds a B.S. in electrical
engineering from Georgia Institute of Technology and an M.B.A. from the Stanford
Graduate School of Business.
DAVID P. PERRY co-founded Ventro in September 1997 and has served as our
President, Chief Executive Officer and a Director since September 1997. From
December 1995 to April 1997, he co-founded and served in various positions,
including Chief Executive Officer, of Virogen, Inc., a biotechnology company.
Mr. Perry has also held various positions at Exxon Corporation, including as a
Refinery Operations Supervisor from January 1994 to May 1995, a financial
analyst from March 1993 to January 1994, a project manager from September 1992
to March 1993 and an engineer from September 1990 to March 1992. Mr. Perry holds
an M.B.A. from Harvard University and a B.S. in chemical engineering from the
University of Tulsa.
CHARLES R. BURKE has served as one of our Directors since January 1998. Dr.
Burke has served as the President of Monument Partners, Inc., a consulting firm,
since January 1998. From January 1994 to
2
<PAGE> 6
December 1997, he served as the Chief Executive Officer of Research Biochemicals
Incorporated, a research reagent supply company. Dr. Burke is also a Director of
Endogen, Inc. Dr. Burke holds an A.B. in chemistry from Cornell University, a
M.A. with honors in biology from Colgate University and a Ph.D. in biochemistry
from the University of Illinois.
JONATHAN D. CALLAGHAN has served as one of our Directors since September
1997. Mr. Callaghan has been a general partner of CMG@Ventures, a venture
capital firm, since September 1997. Previously, from June 1991 to June 1995, Mr.
Callaghan was an associate of Summit Partners, a venture capital firm. Mr.
Callaghan also serves as a Director of Vicinity Corporation. Mr. Callaghan holds
a B.A. in government from Dartmouth College and an M.B.A. with distinction from
Harvard University.
PAUL J. NOWAK has served as one of our Directors since November 1999. Mr.
Nowak has served as the President and Chief Executive Officer of VWR Scientific
Products since August 1999. He also serves as a Director of VWR. Mr. Nowak has
worked at VWR in various capacities for over 22 years, most recently as
Executive Vice President of Sales and Marketing from January 1998 to August
1999, as Senior Vice President of Sales from July 1995 to January 1998, and as
Senior Vice President of Operations from January 1995 to July 1995.
JOHN A. PRITZKER has served as one of our Directors since March 1998. Since
1988, Mr. Pritzker has served as President of the Red Sail Companies, a sports,
retail and entertainment company which he founded, Mandara Spa LLC, a spa
company which he founded, and Hyatt Ventures, Inc., a venture capital firm. Mr.
Pritzker served as a Divisional Vice President of Hyatt Hotels and Resorts from
1984 to 1988. Mr. Pritzker served as Director of Ticketmaster Group, Inc. for
five years. He holds an A.A. from Menlo College.
NAOMI O. SELIGMAN has served as one of our Directors since June 1999. Ms.
Seligman is a co-founder and has served as a senior partner of the Research
Board, Inc., an information technology research group, since 1975. Ms. Seligman
currently serves as a Director of The Dun and Bradstreet Corporation. Ms.
Seligman holds a B.A. in economics with high honors from Vassar College and an
M.B.A. from the London School of Economics.
L. JOHN WILKERSON has served as one of our Directors since March 1999. Dr.
Wilkerson is a co-founder and has been a general partner of Galen Associates, a
venture capital firm, since May 1990, and has been a consultant to The Wilkerson
Group, a health care products consulting firm, since May 1996. Previously, Dr.
Wilkerson served as a Vice President of Smith Barney. He is currently a Director
of British Biotech Plc, Stericycle, Inc. and TheraTX, Incorporated. Dr.
Wilkerson holds a B.S. in plant science from Utah State University and an M.S.
and Ph.D. in economics from Cornell University.
JAN LESCHLY has served as one of our Directors since April 2000. Mr.
Leschly is currently, and has been a Director and President and Chief Executive
Officer of SmithKline Beecham Corporation since April 1994. Mr. Leschly joined
SmithKline Beecham as a Director and Chairman of SmithKline Beecham
Pharmaceuticals in June 1990. Mr. Leschly holds a BS in Pharmacy from the
Copenhagen College and a BS in Business Administration from the Copenhagen
School of Economics and Business Administration.
BOARD OF DIRECTORS MEETINGS AND COMMITTEES
During the period from December 31, 1998 through December 31, 1999 (the
"last fiscal year"), the Board met 19 times, and no 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 and a Compensation Committee.
The Audit Committee consists of Directors Charles Burke and John Wilkerson.
The Audit Committee held one meeting during the last fiscal year. The Audit
Committee is responsible for the appointment of the independent auditors of the
Company, reviewing all recommendations of the Company's independent auditors,
overseeing the Company's internal accounting controls and reviewing the scope of
the audit and fees for services rendered.
3
<PAGE> 7
The Compensation Committee consists of Directors Charles Burke, Brook Byers
and Jonathan Callaghan. The Compensation Committee, which held nine meetings
during the last fiscal year, establishes and administers the Company's policies
regarding annual executive salaries, cash incentives and long-term equity
incentives. The Compensation Committee also administers the Company's 1998 Stock
Plan, 1999 Directors' Stock Plan, and 1999 Employee Stock Purchase Plan.
COMPENSATION OF DIRECTORS
Directors currently receive no cash fees for services provided in that
capacity but are reimbursed for out-of-pocket expenses incurred in connection
with attendance at meetings of the Board. The Company's 1999 Directors' Stock
Plan (the "Directors' Plan") provides that each person who becomes a
non-employee Director of the Company will be granted a non-statutory stock
option to purchase 12,500 shares of Common Stock on the date on which the
optionee first becomes a non-employee 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 non-employee Director is 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.
All of the nominees for Director will have served for more than six months at
the time of the Annual Meeting, with the exception of Jan Leschly, and so will
receive options to purchase 5,000 shares of the Company's Common Stock under the
Directors' Plan if they are reelected to the Board at the Annual Meeting.
RECOMMENDATION OF THE BOARD:
THE BOARD RECOMMENDS A VOTE FOR PROPOSAL NO 1.
PROPOSAL NO. 2
AMENDMENT TO THE 1998 STOCK PLAN RESERVING AN ADDITIONAL 3,500,000 SHARES OF
VENTRO COMMON STOCK FOR ISSUANCE THEREUNDER
The Board of Directors has approved a recommendation of the Compensation
Committee, and recommends to the stockholders, that the number of options
available for future issuance under the 1998 Stock Plan (the "1998 Stock Plan")
be increased to 16,277,133 from 12,777,133, or by 3,500,000 shares. Subsequent
to the proposed increase, the options issued, outstanding and available for
future grant will represent a 24% dilution of the outstanding common shares on a
fully diluted basis. As of February 29, 2000, the Company had 5,046,480 options
issued and outstanding and 5,452,103 options available for future grant. In
addition, the 1998 Stock Plan has an annual "evergreen" provision equal to the
lesser of 1,250,000 options, or 3% of the Company's outstanding common stock on
the last day of the preceding fiscal year end or a lesser number determined by
the Company's Board of Directors. Subsequent to approval, the 1998 Stock Plan is
estimated to meet the needs of the Company for up to 2 years.
The Board of Directors considers the availability of options to be a
critical component of the Company's compensation package that enhances its
ability to attract and retain executives and key employees. In support of the
Company's current aggressive growth strategy and the need to remain competitive
in order to attract and retain future talent, the Board of Directors supports
the need for the increase in the 1998 Stock Plan by 3,500,000 shares.
DESCRIPTION OF THE 1998 STOCK PLAN
The 1998 Stock Plan was originally adopted by the Board of Directors in
January 1998 and approved by the stockholders in March 1998. Stock options
granted under the 1998 Stock Plan may not have a term of more than ten years and
generally remain exercisable for a period of three months following termination
of the optionee's employment or consulting relationship with Ventro, with longer
periods applying in the event this termination occurs as a result of death or
disability. The exercise price of all incentive stock options must be at least
equal to the fair market value of the common stock at the time of the grant,
except in the case of incentive stock options granted to persons owning stock
that represents more than 10% of the total combined voting power of all classes
of our outstanding capital stock , in which case the exercise price must equal
at least
4
<PAGE> 8
110% of the fair market value of the common stock at the time of the grant. The
exercise price of non-statutory stock options will be determined by the
administrator, except that for grants to certain of our executive officers, the
exercise price must be at least 100% of the fair market value if the option is
intended to qualify as performance-based compensation under the tax rules.
Options granted under the 1998 Stock Plan are generally subject to vesting
at a rate of 25% at the end of the first year and 2.083% of the original number
of shares per month thereafter. The Administrator has the authority to grant
options which are exercisable prior to vesting, in which case the unvested
portion of the exercised shares are subject to a right of repurchase in favor of
Ventro at the optionee's original cost.
In the event of the sale of all or substantially all of our assets, or our
merger, or consolidation with or into another corporation where the successor
corporation issues its securities to our stockholders, each outstanding option
or stock purchase right shall be assumed or an equivalent option or stock
purchase right shall be substituted by the successor corporation. If the
successor corporation refuses to do an assumption or substitution, each
outstanding option or stock purchase right granted under the 1998 Stock Plan
shall terminate.
The 1998 Stock Plan may be administered by the Board of Directors and or by
a committee appointed by the Board to administer the Plan. The Board of
Directors has appointed the Compensation Committee to administer the 1998 Stock
Plan. The administrator has the authority to grant options and stock purchase
rights and to determine the terms of these awards, provided these grants are not
inconsistent with the terms of the 1998 Stock Plan. The administrator has the
authority to amend or terminate the 1998 Stock Plan provided that no action that
impairs the rights of any holder of an outstanding option may be taken without
the holders consent.
RECOMMENDATION OF THE BOARD:
THE BOARD RECOMMENDS A VOTE FOR PROPOSAL NO. 2
PROPOSAL NO. 3
AMENDMENT TO THE 1999 BOARD OF DIRECTORS' STOCK PLAN RESERVING AN
ADDITIONAL 30,000 SHARES OF COMMON STOCK THEREUNDER FOR ISSUANCE
The Board of Directors recommends that the shareholders approve a proposal
to increase the number of shares of Ventro Common Stock available for issuance
under the 1999 Board of Directors Stock Plan (the "Directors' Plan") by 30,000
shares. If this change is approved, the total number of common shares reserved
for grants under the Directors' Plan will be increased from 250,000 to 280,000.
The Company's Directors currently receive no cash compensation for service
on the Board. Instead, each non-employee Director is granted an option to
acquire 12,500 shares at the beginning of his or her service on the Board and
5,000 additional shares at each annual meeting provided he or she has served six
months on the board. These options are exercisable at the market price of the
common shares on the date of grant and thus serve to directly align the interest
of the Directors with those of Ventro's shareholders. The Board believes that
its ability to grant options to directors is an important tool to recruit high
caliber persons to the Board, and it also enables the Company to conserve its
resources by not having to pay Directors' fees in cash.
At February 29, 2000, there were 87,500 shares of common stock issuable
upon the exercise of options granted under the Directors' Plan, and 125,000
shares are available for future grants.
DESCRIPTION OF THE DIRECTORS' PLAN
The Directors' Plan was adopted by the Board of Directors in May 1999 and
was approved by the stockholders in July 1999. The Directors' Plan provides for
the grant of nonstatutory stock options to our nonemployee directors. The
Directors' Plan is designed to work automatically without administration;
however, to the extent administration is necessary, it will be performed by the
Board of Directors. To the extent conflicts of interests arise, it is expected
that they will be addressed by abstention of any interested Director from both
deliberations and voting regarding matters in which this Director has a personal
interest.
5
<PAGE> 9
The Directors' Plan provides that each person who is or becomes a
nonemployee Director of Ventro will be granted a nonstatutory stock option to
purchase 12,500 shares of common stock on the date on which the optionee first
becomes a nonemployee Director of Ventro. On the date of our annual stockholders
meeting, each of our nonemployee Directors will be granted an additional option
to purchase 5,000 shares of common stock if on that date, he or she has served
on our Board of Directors for at least six months.
The Directors' Plan sets neither a maximum nor a minimum number of shares
for which options may be granted to any one nonemployee Director, but does
specify the number of shares that may be included in any grant and the method of
making a grant. The Directors' Plan provides that each option granted under the
Directors' Plan shall vest and become exercisable in full immediately upon grant
of the option. If a nonemployee director ceases to serve as a Director for any
reason other than death or disability, he or she may, but only within 90 days
after the date he or she ceases to be one of our Directors, exercise options
granted under the Directors' Plan. If he or she does not exercise the option
within this 90 day period, the option shall terminate. The exercise price of all
stock options granted under the Directors' Plan must be equal to the fair market
value of a share of our common stock on the date of grant of the option. Options
granted under the Directors' Plan have a term of ten years.
In the event of a sale of all or substantially all of our assets, our
merger with, or into another corporation or any other reorganization of Ventro
in which more than 50% of our shares entitled to vote are exchanged, each
nonemployee Director shall have the right to exercise each option immediately
prior to completion of the transaction. The Board of Directors may amend or
terminate the Directors' Plan: however, these actions may not adversely affect
any outstanding option. We will obtain stockholder approval for any amendment to
the extent required by applicable law. If not terminated earlier, the Directors'
Plan will have a term of ten years.
RECOMMENDATION OF THE BOARD:
THE BOARD RECOMMENDS A VOTE FOR PROPOSAL NO. 3
PROPOSAL NO. 4
APPROVAL OF THE APPOINTMENT OF INDEPENDENT AUDITORS
The Board has approved the appointment of Ernst & Young LLP ("Ernst &
Young") as our independent auditors for fiscal year 2000 subject to your
approval. Ernst & Young has served as the our independent auditors since 1998. A
representative of Ernst & Young 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.
Audit services provided by Ernst & Young during fiscal year 1999 included
an audit of the Company's consolidated financial statements and a review of the
Company's Annual Report as well as performing various non-audit services to the
Company.
RECOMMENDATION OF THE BOARD:
THE BOARD RECOMMENDS A VOTE FOR PROPOSAL NO. 4
6
<PAGE> 10
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 February 29, 2000 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, and (iv) all
directors and executive officers of the Company as a group (13 persons).
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
BENEFICIAL PERCENT OF
NAME AND ADDRESS OWNERSHIP COMMON STOCK
---------------- ---------- ------------
<S> <C> <C>
Entities affiliated with Kleiner Perkins Caufield
& Byers(1)...................................... 3,060,297 6.9%
2750 Sand Hill Road
Menlo Park, CA 94025
Entities affiliated with Warburg, Pincus
Ventures(2)..................................... 3,060,297 6.9%
466 Lexington Avenue
New York, New York 10017-3147
The Bay City Capital Fund I, L.P.(3).............. 2,795,018 6.3%
750 Battery Street
San Francisco, CA 94104
Entities affiliated with CMG@Ventures(4).......... 7,769,807 17.4%
3000 Alpine Road
Menlo Park, CA 94028
VWR Scientific Products Corporation............... 2,538,405 5.7%
1310 Goshen Parkway
West Chester, PA 19380
David P. Perry(5)................................. 1,725,854 3.9%
David A. Weber(6)................................. 204,084 *
Pierre V. Samec(7)................................ 225,141 *
Martha D. Greer(8)................................ 216,250 *
James S. Wambach(9)............................... 229,250 *
William C. Klintworth, Jr......................... 2,497,311 5.6%
Charles R. Burke(10).............................. 75,284 *
Brook H. Byers(11)................................ 3,072,797 6.9%
Jonathan D. Callaghan(12)......................... 7,795,507 17.5%
Paul J. Nowak(13)................................. 2,569,652 5.8%
John A. Pritzker(14).............................. 2,814,385 6.3%
Naomi Seligman(15)................................ 17,500 *
L. John Wilkerson(16)............................. 1,811,973 4.1%
All executive officers and directors as a group
(13 persons)(17)................................ 23,267,488 52.1%
</TABLE>
- ---------------
* Less than 1%.
(1) Represents (i) 2,748,148 shares held by Kleiner Perkins Caufield & Byers
VIII, L.P.; (ii) 153,014 shares held by KPCB Life Sciences Zaibatsu Fund
II, L.P.; and (iii) 159,135 shares held by KPCB VIII Founders Fund, L.P.
Does not include 12,500 shares issuable under stock options granted to Mr.
Byers that are currently exercisable or exercisable within 60 days of
February 29, 2000. The general partner of Kleiner Perkins Caufield & Byers
VIII, L.P. and KPCB VIII Founders Fund is KPCB VIII Associates. The general
partner of KPCB Life Sciences Zaibatsu Fund II, L.P. is KPCB VII
Associates.
(2) Warburg, Pincus & Co. is the sole general partner of Warburg, Pincus
Ventures, L.P., which is managed by E.M. Warburg, Pincus & Co., LLC. Lionel
I. Pincus is the managing partner of Warburg, Pincus &
7
<PAGE> 11
Co. and the managing member of E.M. Warburg, Pincus & Co., LLC, and may be
deemed to control both entities.
(3) Certain trusts for the benefit of the lineal descendants of Nicholas J.
Pritzker, deceased, including John A. Pritzker, one of our directors, are
indirect investors in The Bay City Capital Fund I, L.P. Mr. Pritzker
disclaims any beneficial ownership in the shares held by The Bay City
Capital Fund I, L.P., except for 6,867 shares. Of the shares reported,
certain individuals, including Mr. Pritzker, have beneficial ownership of
60,397 shares. Includes distribution of 640,000 shares to the partners of
Bay City Capital subsequent to February 10, 2000.
(4) Represents (i) 2,715,157 shares held by CMG@Ventures II, LLC; (ii)
3,036,648 shares held by @Ventures III LP; (iii) 911,033 shares held by
@Ventures Foreign Fund III LP; (iv) 1,005,871 shares held by CMG@Ventures
III, LLC; and (v) 101,098 shares held by @Ventures Investors LLC. Does not
include 25,700 shares owned by Johnathan D. Callaghan, one of our directors
(5) Represents (i) 1,719,854 shares held by Mr. Perry; and (ii) 6,000 shares
held by the 1999 David P. Perry Irrevocable Trust. Includes 107,866 shares
subject to repurchase by Ventro as of February 29, 2000 in the event of a
termination of employment with Ventro.
(6) Includes 150,000 shares subject to repurchase by Ventro as of February 29,
2000 in the event of a termination of employment with Ventro.
(7) Includes 135,938 shares subject to repurchase by Ventro as of February 29,
2000 in the event of a termination of his employment with Ventro.
(8) Includes 164,063 shares subject to repurchase by Ventro as of February 29,
2000 in the event of a termination of employment with Ventro.
(9) Includes 145,313 shares subject to repurchase by Ventro as of February 29,
2000 in the event of a termination of employment with Ventro.
(10) Represents (i) 14,011 shares held by Mr. Burke subject to repurchase by
Ventro within 60 days of February 29, 2000 and (ii) 12,500 shares issuable
under stock options that are currently exercisable or exercisable within 60
days of February 29, 2000. Includes 14,011 shares subject to repurchase by
Ventro as of February 29, 2000 in the event of a termination of employment
with Ventro.
(11) Represents (i) 2,748,148 shares held by Kleiner Perkins Caufield & Byers
VIII, L.P.; (ii) 153,014 shares held by KPCB Life Sciences Zaibatsu Fund
II, L.P (iii) 159,135 shares held by KPCB VIII Founders Fund, L.P.; and
(iv) 12,500 shares issuable under stock options that are currently
exercisable or exercisable within 60 days of February 29, 2000. Mr. Byers,
a General Partner of Kleiner Perkins Caufield & Byers, disclaims beneficial
ownership of the shares held by Kleiner Perkins Caufield & Byers VIII,
L.P., KPCB Life Sciences Zaibatsu Fund II, L.P. and KPCB VIII Founders
Fund, L.P., except to the extent of his pecuniary interest in these
entities arising from his general partnership interest in these funds.
(12) Represents (i) 2,715,157 shares held by CMG@Ventures II, LLC; (ii)
3,036,648 shares held by @Ventures III LP; (iii) 911,033 shares held by
@Ventures Foreign Fund III LP; (iv) 1,005,871 shares held by CMG@Ventures
III, LLC; (v) 101,098 shares held by @Ventures Investors LLC; and (vi)
25,700 shares held by Mr. Callaghan, a General Partner of CMG@Ventures and
a director of Ventro. Mr. Callaghan disclaims beneficial ownership of the
shares held by CMG@Ventures II, LLC, except to the extent of his pecuniary
interest therein arising from his general partnership interest in these
funds.
(13) Represents (i) 2,538,405 shares held by VWR Scientific Products
Corporation, of which Mr. Nowak is the President and Chief Executive
Officer; and (ii) 12,500 shares issuable under stock options that are
currently exercisable or exercisable within 60 days of February 29, 2000.
Mr. Nowak disclaims beneficial ownership of the shares held by VWR
Scientific Products Corporation.
(14) Includes 2,097,121 shares held by The Bay City Capital Fund I, L.P. Certain
trusts for the benefit of the lineal descendants of Nicholas J. Pritzker,
deceased, including John A. Pritzker, one of our directors, are indirect
investors in The Bay City Capital Fund I, L.P. Mr. Pritzker disclaims any
beneficial ownership in the shares held by The Bay City Capital Fund I,
L.P., except for 6,867 shares held directly by
8
<PAGE> 12
Mr. Pritzker. Also includes 12,500 shares issuable under stock options that
are currently exercisable or exercisable within 60 days of February 29,
2000. Includes distribution of 640,000 shares to the partners of Bay City
Capital subsequent to February 10, 2000.
(15) Includes 12,500 shares issuable under stock options that are currently
exercisable or exercisable within 60 days of February 29, 2000.
(16) Represents (i) 1,799,473 shares held by entities affiliated with Galen
Associates, an entity with which Dr. Wilkerson is affiliated; (ii) 12,500
shares issuable under stock options that are currently exercisable or
exercisable within 60 days of February 29, 2000; (iii) 1,598,260 shares and
a warrant to purchase 45,678 shares of common stock exercisable within 60
days of February 29, 2000 held by Galen Partners III, L.P.; (iv) 144,670
shares and a warrant to purchase 4,134 shares of common stock exercisable
within 60 days of February 29, 2000 held by Galen Partners III, L.P.; and
(v) 6,544 shares and a warrant to purchase 187 shares of common stock
exercisable within 60 days of February 29, 2000 held by Galen Employee Fund
III, L.P. Dr. Wilkerson, a co-founder of Galen Associates and one of our
directors, disclaims beneficial ownership of the shares held by entities
affiliated with Galen Associates, except to the extent of his pecuniary
interest in these entities arising from his general partnership interest in
these funds.
(17) Includes 135,936 shares issuable under stock options that are currently
exercisable or exercisable within 60 days of February 29, 2000 and 717,191
shares subject to repurchase by Ventro as of February 29, 2000 in the event
of a termination of employment with us.
9
<PAGE> 13
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, 1999; (b) the four other most highly compensated individuals who
served as an executive officer of the Company during the fiscal year ended
December 31, 1999, ((a) and (b) collectively 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
------------
AWARDS
ANNUAL COMPENSATION ------------
-------------------- SECURITIES
FISCAL SALARY BONUS UNDERLYING
NAME & PRINCIPAL POSITION YEAR ($) ($) OPTIONS
------------------------- ------ -------- -------- ------------
<S> <C> <C> <C> <C>
David P. Perry................................... 1999 $192,551 -- --
President, Chief Executive Officer and Director 1998 98,375 $ 20,000(1) --
1997 14,088 -- --
David A. Weber................................... 1999 333,839 50,000(1) 200,000
Vice President, Supplier Relations 1998 -- -- --
1997 -- -- --
Pierre V. Samec.................................. 1999 235,060 100,000(1) 75,000
Chief Information Officer 1998 83,333 150,000(1) 225,000
1997 -- -- --
Martha D. Greer.................................. 1999 197,441 125,000(1) 235,000
Vice President, Marketing 1998 -- -- --
1997 -- -- --
James S. Wambach................................. 1999 201,929 100,000(1) --
Vice President, Worldwide Sales 1998 47,584 50,000(1) 225,000
1997 -- -- --
</TABLE>
- ---------------
(1) Include bonuses earned in the indicated year and paid in the subsequent
year. Excludes bonuses paid in the indicated year but earned in the
preceding year.
OPTION GRANTS IN FISCAL YEAR ENDED DECEMBER 31, 1999
The following table provides certain information with respect to stock
options granted to the Named Executive Officers in the last fiscal year.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS(1)
------------------------------------------------------- POTENTIAL REALIZABLE
PERCENT VALUE AT ASSUMED
NUMBER OF OF TOTAL OPTIONS ANNUAL RATES OF STOCK
SECURITIES GRANTED PRICE APPRECIATION
UNDERLYING TO EMPLOYEES EXERCISE FOR OPTION TERM(1)
OPTIONS/SARS IN FISCAL OF BASE EXPIRATION -------------------------
NAME GRANTED YEAR PRICE DATE 5% 10%
---- ------------ ---------------- -------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
David P. Perry........... -- -- -- -- -- --
David A. Weber........... 200,000(2) 5.6% $1.50 2/8/09 $35,861,461 $57,281,083
Pierre V. Samec.......... 75,000(3) 2.1% $5.00 4/26/09 $13,185,548 $21,217,906
Martha D. Greer.......... 225,000(4) 6.6% $1.50 1/27/09 $40,344,143 $64,441,218
10,000(3) .3% $5.00 4/26/09 $ 1,758,073 $ 2,829,054
James S. Wambach......... -- -- -- -- -- --
</TABLE>
- ---------------
(1) The 5% and 10% assumed annual rates at compounded stock price appreciation
are mandated by rules of the Securities and Exchange Commission. There can
be no assurance provided to any executive director or any other holder of
the Company's securities that the actual stock price appreciation over the
10 year option term will be at the assumed 5% and 10% levels or at any other
defined level. Unless the market
10
<PAGE> 14
price of our common stock appreciates over the option term, no value will be
realized from the option grants made to the executive officers.
(2) The options were granted on February 8, 1999 and twenty-five percent (25%)
will vest on February 8, 2000. The remaining shares vest monthly over the
succeeding three years.
(3) The options were granted on April 27, 1999 and twenty-five percent (25%)
will vest on March 1, 2000. The remaining shares vest monthly over the
succeeding three years.
(4) The options were granted on January 27, 1999 and twenty-five percent (25%)
will vest on January 4, 2000. The remaining shares vest monthly over the
succeeding three years.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
The following table sets forth certain information with respect to stock
options exercised by the Named Executive Officers during the fiscal year ended
December 31, 1999.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS
SHARES DECEMBER 31, 1999 (#) AT DECEMBER 31, 1999 ($)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ------------ ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
David P. Perry......... -- -- -- -- -- --
David A. Weber......... 200,000 $300,000 -- -- -- --
Pierre V. Samec........ -- -- -- 75,000 -- $ 7,950,000
Martha D. Greer........ 225,000 337,500 -- 10,000 -- 1,060,000
James S. Wambach....... -- -- -- -- -- --
</TABLE>
- ---------------
(1) Based on the fair market value of the Company's Common stock at December 31,
1999 ($110.00) per share less the exercise price payable for such shares.
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 report and the Stock Performance Graph which follow shall not be
deemed to be incorporated by reference into any such filings.
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS ON EXECUTIVE
COMPENSATION
The Compensation Committee of the Board of Directors consists of three
non-employee directors. The Committee reviews and approves the salary, bonus and
other benefits payable to our Chief Executive Officer, and the Company's other
executive officers. It also administers the Company's employee stock option and
employee stock purchase plans.
COMPENSATION PHILOSOPHY
The Company's compensation policy is designed to attract and retain
qualified key executives critical to the Company's growth and long-term success.
The Compensation Committee believes that compensation of the Company's executive
officers should promote the following objectives:
1. To attract, motivate, and retain a highly qualified executive management
team on a long-term basis.
2. To encourage the creation of stockholder value and achievement of
strategic corporate objectives by providing executives with long-term
incentives through equity ownership.
3. To integrate compensation practices with the Company's annual and
long-term corporate objectives and strategies focusing executive
behavior on the fulfillment of those objectives.
4. To maintain an above market competitive position when compared to the
practices of similar technology companies taking into account relative
company size, performance and geographic factors.
11
<PAGE> 15
5. To provide fair and equitable compensation that is consistent with
internal compensation programs and external compensation practices.
COMPENSATION COMPONENTS
The Company's existing compensation structure for executive officers
generally includes a combination of base salary, cash bonus and stock options.
Compensation may include cash bonuses for performance. The summary below
describes in more detail the factors that the Compensation Committee 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 for executive talent, and the incentives necessary to attract and retain
qualified management. Salary levels are largely determined through comparisons
with companies of similar headcount and market capitalization or complexity in
the information technology and business to business e-commerce industries. The
Committee believes that the comparison companies are the best group for
comparing the Company's compensation levels because the Company competes with
this group of companies for employees.
Executive salaries at Ventro are based on individual performance
contributions within a competitive salary range developed for each position
through job evaluation or responsibilities and market comparisons. The Human
Resources Department reviews Ventro's competitive position in the marketplace
and recommends adjustments to the Compensation Committee.
Base salary is adjusted each year to take into account the executive
officer's performance and to maintain a competitive salary structure. The
Compensation Committee conducts reviews of executive compensation practices on
an annual basis and may change each executive officer's salary based on the
individual's contributions and responsibilities over the prior twelve months and
any change in median comparable company pay levels. The Compensation Committee
believes that, on the basis of its knowledge of executive compensation in the
industry, that the Company's salary levels for the executive officers are at a
level that is considered reasonable and necessary given the Company's financial
resources and the stage of the Company's development.
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 revenue
growth, levels of gross margin and operating expense. In connection with
determining annual bonuses the Committee established a bonus target for each
executive officer under the Ventro Corporation Executive Incentive Program. The
Committee will consider various factors to determine levels of bonus payouts and
targets that are linked to the Company's strategic objectives. Factors may
include but are not limited to the following:
1. Achievement of revenue, margin, and operating expense targets.
2. Anticipated introduction of new products and verticals.
3. General economic conditions of business to business and e-commerce
industries.
4. Financial performance relative to competitors.
5. The Company's ability to maintain an above market competitive position
through the administration of the total compensation program.
12
<PAGE> 16
The target bonus for an executive is intended to relate to his or her impact on
corporate results, financially and otherwise. The percentage of the target bonus
received will be determined by the multiple performance objectives that are
actually achieved.
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 value.
Awards under this plan by the Compensation Committee take the form of stock
options, or in the case of the Chief Executive Officer, stock grants, 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.
Through Ventro's Stock Plan grants and the Ventro Employee Stock Purchase
Program, executives can participate in the ownership of the Company. Stock
option grants also provide incentives for executives to stay with Ventro and
contribute to its success.
Factors considered in making such awards include the individual's position
in the Company, his or her performance and responsibilities, and internal and
external market comparability considerations. The Compensation Committee has
established certain general guidelines in making option grants to the executive
officers in an attempt to target a fixed number of unvested option shares based
upon each individual's position with the Company and his or her existing
holdings of unvested options. However, the Board of Directors is not required to
adhere strictly to these guidelines and may vary the size of the option grant
made to each executive officer as it determines the circumstances warrant.
Each option grant allows the executive officer to acquire shares of Common
Stock at a fixed option price (the fair market value of the stock on the day the
grant is approved by the Compensation Committee) 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
David Perry has served as the Company's President and Chief Executive
Officer since September 1997. His base salary for fiscal year 1999 was $180,000.
The Company believes that Mr. Perry's compensation was comparable to that of
other executives at similarly situated companies. The factors discussed above in
"Base Salaries," "Cash-Based Incentive Compensation," and "Long-Term Incentive
Compensation" will be applied in adjusting the amount of Mr. Perry's salary and
other incentives. For fiscal year 1999, Mr. Perry's base compensation was lower
than the base salaries of other executive officers with the Company because his
primary compensation incentive was through restricted stock, consistent with the
Company's Long-Term Incentive Compensation philosophy. The Company's objectives
for fiscal year 1999 included an initial public offering, the development of the
Company's executive team and the development of business plans consistent with
the growth plans for the Company. Through long-term incentives in amounts tied
to overall business objectives, Mr. Perry will be thereby rewarded provided
there are increases to stockholder value.
13
<PAGE> 17
COMPLIANCE WITH INTERNAL REVENUE CODE SECTION 162(M)
Section 162(m) of the Internal Revenue Code disallows a tax deduction to
publicly held companies for compensation paid to certain of their executive
officers, to the extent that compensation exceeds $1 million per covered officer
in any fiscal year. The limitation applies only to compensation that is not
considered to be performance-based. Non-performance based compensation paid to
the Company's executive officers for the 1999 fiscal year did not exceed the $1
million limit for any officer, and the Compensation Committee does not
anticipate that the non-performance based compensation to be paid to the
Company's executive officers for fiscal 2000 will exceed that limit. The
Company's 1998 Stock Incentive Plan has been structured so that any compensation
deemed paid in connection with the exercise of option grants made under the plan
with an exercise price equal to the fair market value of the option shares on
the grant date will qualify as performance-based compensation that will not be
subject to the $1 million limitation. Because it is unlikely that the cash
compensation payable to any of the Company's executive officers in the
foreseeable future will approach the $1 million limit, the Compensation
Committee has decided at this time not to take action to limit or restructure
the elements of cash compensation payable to the Company's executive officers.
The Compensation Committee will reconsider this decision should the individual
cash compensation of any executive officer ever approach the $1 million level.
Compensation Committee:
Brook Beyers
Charles Burke
Jonathan Callaghan
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee consists of three members and the Board of
Directors currently consists of nine members. No member of the Compensation
Committee or executive officer of the Company has a relationship that would
constitute an interlocking relationship with executive officers or Directors of
another entity.
RELATED PARTY TRANSACTIONS
EQUITY TRANSACTIONS
Some of our Directors, executive officers and affiliates have entered into
transactions with us. In March 1999 and April 1999, we issued and sold 5,299,951
shares of our Series C preferred stock at a price of $5.716 per share. All of
the outstanding shares of Series C preferred stock converted into common stock
upon consummation of Ventro's initial public offering in July 1999. Of the total
5,299,951 shares of Series C Preferred Stock issued (i) 1,749,474 shares were
purchased by entities affiliated with Galen Associates, an entity with which Dr.
Wilkerson, one of our directors, is affiliated; (ii) 393,631 shares were
purchased by entities affiliated with Kleiner Perkins Caufield & Byers, an
entity with which Mr. Byers, one of our Directors, is affiliated; (iii) 393,631
shares were purchased by Warburg, Pincus Ventures L.P., an entity with which Mr.
Lewis, one of our former Directors, is affiliated; (iv) 393,631 shares were
purchased by The Bay City Capital Fund I, L.P., an entity with which Mr.
Pritzker, one of our Directors, is affiliated; and (v) 6,997 shares were
purchased by Dr. Burke, one of our directors. In addition, in March 1999, we
issued warrants to purchase a total of 49,999 shares of common stock at an
exercise price of $5.20 per share to entities affiliated with Galen Associates,
an entity with which Dr. Wilkerson, one of our directors, is affiliated.
In March 1999, we entered into a strategic relationship agreement with VWR
to jointly market VWR laboratory products using the Chemdex Marketplace. The
agreement gives us the right to offer approximately 350,000 VWR core SKUs to our
customers through the Chemdex Marketplace. We are jointly developing with VWR a
hosted, co-branded Internet purchasing solution for VWR's existing and future
customers that will provide access to VWR core products, and products that are
not distributed by either VWR or us, but are purchased from third parties. In
connection with the strategic relationship agreement, VWR transferred to us
information concerning VWR customers who purchased products from third-party
suppliers outside VWR's
14
<PAGE> 18
primary product offering and, in exchange, we issued 2,538,405 shares of common
stock valued at $13.9 million to VWR. VWR also entered into a standstill
agreement limiting its ownership in Ventro to 10% of our outstanding securities,
including outstanding options and warrants. This percentage can be exceeded if
any one company from a specified list of companies acquires more than 10% of our
outstanding securities, including outstanding options and warrants. Mr. Nowak,
one of our Directors, is President and Chief Executive Officer of VWR.
AGREEMENTS WITH EXECUTIVE OFFICERS AND DIRECTORS
In January 1999, we entered into a separation agreement with Scott
Waterhouse. Mr. Waterhouse previously served as our Vice President, Supplier
Relations. Under this agreement, Mr. Waterhouse received severance benefits upon
the termination of his employment with us.
Some of our officers, including Ms. Greer, Mr. Samec, Mr. Wambach and Mr.
Weber, will receive six months of accelerated vesting of stock options then held
in the event of their termination without cause. In the event Mr. Samec is
terminated without cause prior to December 31, 2001, Mr. Samec will receive
twelve months of then-current salary. In addition, in the event of a termination
with or without cause, Ms. Greer will receive the greater of six months of
then-current salary or $100,000, Mr. Weber will receive the greater of six
months of then - current salary or an amount equal to salary for 15 months less
the time we employed him, and Mr. Wambach will receive the greater of six months
of then - current salary or $87,500. If Mr. Stewart is terminated without cause
or resigns due to pressing family concerns prior to March 2001, his stock will
vest in an amount equal to what he would have vested had he been employed
through February 2001.
In addition, we have entered into change of control agreements with Ms.
Greer, Mr. Perry, Mr. Samec, Mr. Stewart, Mr. Wambach, Mr. Weber and our other
key employees, where the shares held by these employees shall become fully
vested if (a) we are merged into another entity or sold and (b) the employee is
terminated by the surviving entity without cause within twelve months of the
closing of the transaction. Ventro has also entered into a change of control
agreement with Dr. Burke, under which any options subject to vesting or shares
subject to a right of repurchase by us then held by Dr. Burke will become fully
vested upon the closing of a merger in which more than 50% of the total voting
power of Ventro is transferred or a sale of all or substantially all of our
assets in a complete liquidation or dissolution of Ventro.
The following executive officers have executed full-recourse promissory
notes in the amounts set forth after their names in connection with their
purchases of shares of our common stock:
<TABLE>
<CAPTION>
PRINCIPAL
NAME AMOUNT RATE DATE
---- --------- ---- --------
<S> <C> <C> <C>
Martha D. Greer................................ $337,455 4.71% 02/26/99
Pierre V. Samec................................ 33,705 5.12 10/21/98
James S. Wambach............................... 33,705 4.64 01/22/99
David A. Weber................................. 299,970 4.71 02/26/99
</TABLE>
These notes became due in April, 2000. They bear interest at the lowest
rate allowed under federal tax law to avoid the imputation of interest,
compounded annually.
Except for the forgiveness of a $10,000 promissory note held by Mr. Perry
and the terms of the loans above to the Named Executive Officers, the related
transactions were on terms that are no more favorable than those that would have
been agreed upon by third parties on an arm's length basis.
15
<PAGE> 19
STOCK PERFORMANCE GRAPH
The following graph compares the monthly change in the Company's cumulative
total stockholder return on its Common Stock over a period of nine months
commencing July 27, 1999 (the date on which the Company's stock was first
registered under Section 12 of the Securities Exchange Act of 1934, as amended)
and ending March 31, 2000, to the cumulative return over such period of (i) The
Nasdaq National Market Composite Index, and (ii) the Standard and Poor's 500
Index. The graph assumes that $100 was invested on July 27, 1999 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 $15.00, the initial public offering price of
Ventro's common stock and reinvestment of any dividends. The stock price
performance on the following graph is not necessarily indicative of future stock
price performance.
COMPARISON OF NINE MONTHS CUMULATIVE TOTAL RETURN *
AMONG VENTRO CORPORATION, NASDAQ NATIONAL MARKET COMPOSITE INDEX, AND STANDARD
AND POOR'S 500 INDEX
<TABLE>
<CAPTION>
VENTRO CORPORATION S&P 500 NASDAQ COMPOSITE
------------------ ------- ----------------
<S> <C> <C> <C>
7/27/99 100.00 100.00 100.00
9/31/99 102.71 96.54 104.08
12/31/99 370.00 110.58 154.23
3/31/00 263.33 114.69 187.93
</TABLE>
* Assumes $100 invested on July 27, 1999 in Ventro common stock or indexes,
including reinvestment of dividends.
DEADLINE FOR RECEIPT OF STOCKHOLDER PROPOSALS FOR THE
NEXT ANNUAL MEETING
Proposals of stockholders intended to be included in the Company's next
proxy statement, including nominations for Directors, for the next Annual
Meeting of Stockholders must be received by the Company Secretary, at our
executive offices, 1500 Plymouth Street, Mountain View, California, 94043, no
later than January 24, 2001.
If you intend to present a proposal at our 2001 Annual Meeting of
Stockholders, but do not intend to have it included in our next proxy statement,
you must deliver a copy of your proposal to our Secretary at our principal
executive offices listed above no later than March 5, 2001. If we do not receive
your proposal within this timeframe, our management will use its discretionary
authority to vote the shares it represents by proxy as our board of directors
may recommend.
16
<PAGE> 20
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, 1999, all Reporting Persons complied with all applicable
filing requirements except for Mr. Paul Nowak who filed one late Form 3
reporting his initial beneficial ownership of Ventro shares.
OTHER MATTERS
The Board of Directors knows of no other business that will be presented at
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.
By Order of the Board of Directors,
/s/ James G. Stewart
James Stewart
Chief Financial Officer and Assistant
Secretary
April 20, 2000
Mountain View, California
17
<PAGE> 21
VENTRO CORPORATION
1998 STOCK PLAN
1. PURPOSES OF THE PLAN. The purposes of this 1998 Stock Plan are to
attract and retain the best available personnel for positions of substantial
responsibility, to provide additional incentive to Employees and Consultants of
the Company and its Subsidiaries and to promote the success of the Company's
business. Options granted under the Plan may be Incentive Stock Options (as
defined under Section 422 of the Code) or Nonstatutory Stock Options, as
determined by the Administrator at the time of grant of an option and subject to
the applicable provisions of Section 422 of the Code, as amended, and the
regulations promulgated thereunder. Stock purchase rights may also be granted
under the Plan.
2. DEFINITIONS. As used herein, the following definitions shall apply:
(a) "ADMINISTRATOR" means the Board or any of its Committees
appointed pursuant to Section 4 of the Plan.
(b) "APPLICABLE LAWS" means the legal requirements relating to
the administration of stock option and restricted stock purchase plans under
applicable U.S. state corporate laws, U.S. federal and applicable state
securities laws, the Code, any stock exchange rules or regulations and the
applicable laws of any other country or jurisdiction where Options or Stock
Purchase Rights are granted under the Plan, as such laws, rules, regulations and
requirements shall be in place from time to time.
(c) "BOARD" means the Board of Directors of the Company.
(d) "CODE" means the Internal Revenue Code of 1986, as amended.
(e) "COMMITTEE" means the Committee appointed by the Board of
Directors in accordance with Paragraph 4(a) of Section 4 of the Plan.
(f) "COMMON STOCK" means the Common Stock of the Company.
(g) "COMPANY" means Ventro Corporation, a Delaware corporation.
(h) "CONSULTANT" means any person, including an advisor, who is
engaged by the Company or any Parent or Subsidiary to render services and is
compensated for such services, and any director of the Company whether
compensated for such services or not.
(i) "CONTINUOUS STATUS AS AN EMPLOYEE OR CONSULTANT" means the
absence of any interruption or termination of service as an Employee or
Consultant. Continuous Status as an Employee or Consultant shall not be
considered interrupted in the case of: (i) sick leave; (ii) military leave;
(iii) any other leave of absence approved by the Administrator, provided that
<PAGE> 22
an Employee or Consultant shall not be considered interrupted in the case of:
(i) sick leave; (ii) military leave; (iii) any other leave of absence approved
by the Administrator, provided that such leave is for a period of not more than
90 days, unless reemployment upon the expiration of such leave is guaranteed by
contract or statute, or unless provided otherwise pursuant to Company policy
adopted from time to time; or (iv) in the case of transfers between locations of
the Company or between the Company, its Subsidiaries or their respective
successors. For purposes of this Plan, a change in status from an Employee to a
Consultant or from a Consultant to an Employee will not constitute an
interruption of Continuous Status as an Employee or Consultant.
(j) "DIRECTOR" means a member of the Board.
(k) "EMPLOYEE" means any person (including if appropriate, any
Named Executive, Officer or Director) employed by the Company or any Parent or
Subsidiary of the Company, with the status of employment determined based upon
such minimum number of hours or periods worked as shall be determined by the
Administrator in its discretion, subject to any requirements of the Code. The
payment by the Company of a director's fee to a director shall not be sufficient
to constitute "employment" of such director by the Company.
(l) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
(m) "FAIR MARKET VALUE" means, as of any date, the fair market
value of Common Stock determined as follows:
(i) If the Common Stock is listed on any established stock
exchange or a national market system including without limitation the National
Market of the National Association of Securities Dealers, Inc. Automated
Quotation ("Nasdaq") System, its Fair Market Value shall be the closing sales
price for such stock (or the closing bid, if no sales were reported), as quoted
on such system or exchange, or the exchange with the greatest volume of trading
in Common Stock for the last market trading day prior to the time of
determination, as reported in The Wall Street Journal or such other source as
the Administrator deems reliable;
(ii) If the Common Stock is quoted on the Nasdaq System
(but not on the National Market thereof) or regularly quoted by a recognized
securities dealer but selling prices are not reported, its Fair Market Value
shall be the mean between the high bid and low asked prices for the Common Stock
for the last market trading day prior to the time of determination, as reported
in The Wall Street Journal or such other source as the Administrator deems
reliable; or
(iii) In the absence of an established market for the
Common Stock, the Fair Market Value thereof shall be determined in good faith by
the Administrator.
(n) "INCENTIVE STOCK OPTION" means an Option intended to qualify
as an incentive stock option within the meaning of Section 422 of the Code, as
designated in the applicable written Option Agreement.
-2-
<PAGE> 23
(o) "LISTED SECURITY" means any security of the Company that is
listed or approved for listing on a national securities exchange or designated
or approved for designation as a national market system security on an
interdealer quotation system by the National Association of Securities Dealers,
Inc.
(p) "NAMED EXECUTIVE" means any individual who, on the last day
of the Company's fiscal year, is the chief executive officer of the Company (or
is acting in such capacity) or among the four most highly compensated officers
of the Company (other than the chief executive officer). Such officer status
shall be determined pursuant to the executive compensation disclosure rules
under the Exchange Act.
(q) "NONSTATUTORY STOCK OPTION" means an Option not intended to
qualify as an Incentive Stock Option, as designated in the applicable written
Option Agreement.
(r) "OFFICER" means a person who is an officer of the Company
within the meaning of Section 16(a) of the Exchange Act and the rules and
regulations promulgated thereunder.
(s) "OPTION" means a stock option granted pursuant to the Plan.
(t) "OPTION AGREEMENT" means a written agreement between an
Optionee and the Company reflecting the terms of an Option granted under the
Plan and includes any documents attached to such Option Agreement, including,
but not limited to, a notice of stock option grant and a form of exercise
notice.
(u) "OPTIONED STOCK" means the Common Stock subject to an Option
or a Stock Purchase Right.
(v) "OPTIONEE" means an Employee or Consultant who receives an
Option or a Stock Purchase Right.
(w) "PARENT" means a "parent corporation," whether now or
hereafter existing, as defined in Section 424(e) of the Code, or any successor
provision.
(x) "PLAN" means this 1998 Stock Plan.
(y) "REPORTING PERSON" means an Officer, Director, or greater
than 10% stockholder of the Company within the meaning of Rule 16a-2 under the
Exchange Act, who is required to file reports pursuant to Rule 16a-3 under the
Exchange Act.
(z) "RESTRICTED STOCK" means shares of Common Stock acquired
pursuant to a grant of a Stock Purchase Right under Section 11 below.
(aa) "RESTRICTED STOCK PURCHASE AGREEMENT" means a written
agreement between a holder of a Stock Purchase Right and the Company reflecting
the terms of a Stock Purchase Right granted under the Plan and includes any
documents attached to such agreement.
-3-
<PAGE> 24
(bb) "RULE 16B-3" means Rule 16b-3 promulgated under the Exchange
Act, as the same may be amended from time to time, or any successor provision.
(cc) "SHARE" means a share of the Common Stock, as adjusted in
accordance with Section 13 of the Plan.
(dd) "STOCK PURCHASE RIGHT" means the right to purchase Common
Stock pursuant to Section 10 below.
(ee) "SUBSIDIARY" means a "subsidiary corporation," whether now
or hereafter existing, as defined in Section 424(f) of the Code, or any
successor provision.
(ff) "TEN PERCENT HOLDER" means a person who owns stock
representing more than ten percent (10%) of the voting power of all classes of
stock of the Company or any Parent or Subsidiary.
3. STOCK SUBJECT TO THE PLAN. Subject to the provisions of Section 13 of
the Plan, the maximum aggregate number of Shares that may be optioned and sold
under the Plan is 16,277,133 shares of Common Stock, plus an automatic annual
increase on the first day of each of the Company's fiscal years beginning in
2001 and ending in 2004 equal to the lesser of (i) 1,250,000 Shares, (ii) three
percent (3%) of the Shares outstanding on the last day of the immediately
preceding fiscal year, or (iii) such lesser number of Shares as is determined by
the Board of Directors. The Shares may be authorized, but unissued, or
reacquired Common Stock.
If an Option should expire or become unexercisable for any reason
without having been exercised in full, the unpurchased Shares that were subject
thereto shall, unless the Plan shall have been terminated, become available for
future grant under the Plan. In addition, any Shares of Common Stock which are
retained by the Company upon exercise of an Option or Stock Purchase Right in
order to satisfy the exercise or purchase price for such Option or Stock
Purchase Right or any withholding taxes due with respect to such exercise shall
be treated as not issued and shall continue to be available under the Plan.
Shares repurchased by the Company, pursuant to any repurchase right which the
Company may have, shall not be available for future grant under the Plan.
4. ADMINISTRATION OF THE PLAN.
(a) GENERAL. The Plan shall be administered by the Board or a
Committee, or a combination thereof, as determined by the Board. The Plan may be
administered by different administrative bodies with respect to different
classes of Optionees and, if permitted by the Applicable Laws, the Board may
authorize one or more officers (who may (but need not) be Officers) to grant
Options or Stock Purchase Rights to Employees and Consultants.
(b) ADMINISTRATION WITH RESPECT TO REPORTING PERSONS. With
respect to Options granted to Reporting Persons and Named Executives, the Plan
may (but need not) be administered so as to permit such Options to qualify for
the exemption set forth in Rule 16b-3 and to qualify as performance-based
compensation under Section 162(m) of the Code.
-4-
<PAGE> 25
(c) COMMITTEE COMPOSITION. If a Committee has been appointed
pursuant to this Section 4, such Committee shall continue to serve in its
designated capacity until otherwise directed by the Board. From time to time the
Board may increase the size of any Committee and appoint additional members
thereof, remove members (with or without cause) and appoint new members in
substitution therefor, fill vacancies (however caused) and remove all members of
a Committee and thereafter directly administer the Plan, all to the extent
permitted by the Applicable Laws and, in the case of a Committee administering
the Plan pursuant to Section 4(b) above, to the extent permitted or required by
Rule 16b-3 and Section 162(m) of the Code.
(d) POWERS OF THE ADMINISTRATOR. Subject to the provisions of the
Plan and in the case of a Committee, the specific duties delegated by the Board
to such Committee, and subject to the approval of any relevant authorities,
including the approval, if required, of any Stock Exchange, the Administrator
shall have the authority, in its discretion:
(i) to determine the Fair Market Value of the Common
Stock, in accordance with Section 2(m) of the Plan;
(ii) to select the Consultants and Employees to whom
Options and Stock Purchase Rights or any combination thereof may from time to
time be granted hereunder;
(iii) to determine whether and to what extent Options and
Stock Purchase Rights or any combination thereof are granted hereunder;
(iv) to determine the number of shares of Common Stock to
be covered by each such award granted hereunder;
(v) to approve forms of agreement for use under the Plan;
(vi) to determine the terms and conditions, not
inconsistent with the terms of the Plan, of any award granted hereunder, which
terms and conditions include but are not limited to the exercise or purchase
price, the time or times when Options or Stock Purchase Rights may be exercised
(which may be based on performance criteria), any vesting acceleration or waiver
of forfeiture restrictions, and any restriction or limitation regarding any
Option, Optioned Stock, Stock Purchase Right or Restricted Stock, based in each
case on such factors as the Administrator, in its sole discretion, shall
determine;
(vii) to determine whether and under what circumstances an
Option may be settled in cash under Section 10(f) instead of Common Stock;
(viii) to reduce the exercise price of any Option to the
then current Fair Market Value if the Fair Market Value of the Common Stock
covered by such Option shall have declined since the date the Option was
granted;
(ix) to determine the terms and restrictions applicable to
Stock Purchase Rights and the Restricted Stock purchased by exercising such
Stock Purchase Rights; and
-5-
<PAGE> 26
(x) to construe and interpret the terms of the Plan and
awards granted pursuant to the Plan; and
(xi) in order to fulfill the purposes of the Plan and
without amending the Plan, to modify grants of Options or Stock Purchase Rights
to participants who are foreign nationals or employed outside of the United
States in order to recognize differences in local law, tax policies or customs.
(e) EFFECT OF ADMINISTRATOR'S DECISION. All decisions,
determinations and interpretations of the Administrator shall be final and
binding on all holders of Options or Stock Purchase Rights.
5. ELIGIBILITY.
(a) RECIPIENTS OF GRANTS. Nonstatutory Stock Options and Stock
Purchase Rights may be granted to Employees and Consultants. Incentive Stock
Options may be granted only to Employees. An Employee or Consultant who has been
granted an Option or Stock Purchase Right may, if he or she is otherwise
eligible, be granted additional Options or Stock Purchase Rights.
(b) TYPE OF OPTION. Each Option shall be designated in the Option
Agreement as either an Incentive Stock Option or a Nonstatutory Stock Option.
However, notwithstanding such designations, to the extent that the aggregate
Fair Market Value of Shares with respect to which Options designated as
Incentive Stock Options are exercisable for the first time by any Optionee
during any calendar year (under all plans of the Company or any Parent or
Subsidiary) exceeds $100,000, such excess Options shall be treated as
Nonstatutory Stock Options. For purposes of this Section 5(b), Incentive Stock
Options shall be taken into account in the order in which they were granted, and
the Fair Market Value of the Shares subject to an Incentive Stock Option shall
be determined as of the date of the grant of such Option.
(c) The Plan shall not confer upon the holder of any Option or
Stock Purchase Right any right with respect to continuation of employment or
consulting relationship with the Company, nor shall it interfere in any way with
such holder's right or the Company's right to terminate his or her employment or
consulting relationship at any time, with or without cause.
6. TERM OF PLAN. The Plan shall become effective upon the earlier to
occur of its adoption by the Board of Directors or its approval by the
stockholders of the Company as described in Section 19 of the Plan. It shall
continue in effect for a term of ten years unless sooner terminated under
Section 16 of the Plan.
7. TERM OF OPTION. The term of each Option shall be the term stated in
the Option Agreement; provided, however, that the term shall be no more than ten
years from the date of grant thereof or such shorter term as may be provided in
the Option Agreement and provided further that, in the case of an Incentive
Stock Option granted to an Optionee who, at the time the Option is granted, is a
Ten Percent Holder, the term of the Option shall be five years from the date of
grant thereof or such shorter term as may be provided in the Option Agreement.
-6-
<PAGE> 27
8. LIMITATION ON GRANTS TO EMPLOYEES. Subject to adjustment as provided
in Section 14 below, the maximum number of Shares which may be subject to
Options and Stock Purchase Rights granted to any one Employee under this Plan
for any fiscal year of the Company shall be 10,000,000 Shares.
9. OPTION EXERCISE PRICE AND CONSIDERATION.
(a) The per share exercise price for the Shares to be issued
pursuant to exercise of an Option shall be such price as is determined by the
Board and set forth in the applicable agreement, but shall be subject to the
following:
(i) In the case of an Incentive Stock Option that is:
(A) granted to an Employee who, at the time of the
grant of such Incentive Stock Option, is a Ten Percent Holder, the per Share
exercise price shall be no less than 110% of the Fair Market Value per Share on
the date of grant.
(B) granted to any other Employee, the per Share
exercise price shall be no less than 100% of the Fair Market Value per Share on
the date of grant.
(ii) In the case of a Nonstatutory Stock Option that is:
(A) granted prior to the date, if any, on which the
Common Stock becomes a Listed Security to a person who, at the time of the grant
of such Option, is a Ten Percent Holder, the per Share exercise price shall be
no less than 110% of the Fair Market Value per Share on the date of the grant.
(B) granted to a person who, at the time of the
grant of such Option, is a Named Executive of the Company, the per share
Exercise Price shall be no less than 100% of the Fair Market Value on the date
of grant if such Option is intended to qualify as performance-based compensation
under Section 162(m) of the Code; or
(C) granted prior to the date, if any, on which the
Common Stock becomes a Listed Security to any person other than a Named
Executive or a Ten Percent Holder, the per Share exercise price shall be no less
than 85% of the Fair Market Value per Share on the date of grant if required by
the Applicable Laws and, if not so required, shall be such price as is
determined by the Administrator.
(b) The consideration to be paid for the Shares to be issued upon
exercise of an Option, including the method of payment, shall be determined by
the Administrator (and, in the case of an Incentive Stock Option, shall be
determined at the time of grant) and may consist entirely of (1) cash, (2)
check, (3) promissory note (subject to the provisions of Section 153 of the
Delaware General Corporation Law), (4) other Shares that (x) in the case of
Shares acquired upon exercise of an Option, have been owned by the Optionee for
more than six months on the date of surrender or such other period as may be
required to avoid a charge to the Company's earnings, and (y) have a Fair Market
Value on the date of surrender equal to the aggregate
-7-
<PAGE> 28
exercise price of the Shares as to which such Option shall be exercised, (5)
authorization for the Company to retain from the total number of Shares as to
which the Option is exercised that number of Shares having a Fair Market Value
on the date of exercise equal to the exercise price for the total number of
Shares as to which the Option is exercised, (6) delivery of a properly executed
exercise notice together with such other documentation as the Administrator and
the broker, if applicable, shall require to effect an exercise of the Option and
delivery to the Company of the sale or loan proceeds required to pay the
exercise price and any applicable income or employment taxes, (7) delivery of an
irrevocable subscription agreement for the Shares that irrevocably obligates the
option holder to take and pay for the Shares not more than twelve months after
the date of delivery of the subscription agreement, (8) any combination of the
foregoing methods of payment, or (9) such other consideration and method of
payment for the issuance of Shares to the extent permitted under the Applicable
Laws. In making its determination as to the type of consideration to accept, the
Administrator shall consider if acceptance of such consideration may be
reasonably expected to benefit the Company.
10. EXERCISE OF OPTION.
(a) PROCEDURE FOR EXERCISE; RIGHTS AS A STOCKHOLDER. Any Option
granted hereunder shall be exercisable at such times and under such conditions
as determined by the Administrator and reflected in the Option Agreement, which
may include vesting requirements and/or performance criteria with respect to the
Company and/or the Optionee; provided, however, that if required by the
Applicable Laws, any Option granted prior to the date, if any, upon which the
Common Stock becomes a Listed Security shall become exercisable at the rate of
at least 20% per year over five years from the date the Option is granted. In
the event that any of the Shares issued upon exercise of an Option (which
exercise occurs prior to the date, if any, upon which the Common Stock becomes a
Listed Security) should be subject to a right of repurchase in the Company's
favor, such repurchase right shall, if required by the Applicable Laws, lapse at
the rate of at least 20% per year over five years from the date the Option is
granted. Notwithstanding the above, in the case of an Option granted to an
officer (including but not limited to Officers), Director or Consultant of the
Company or any Parent or Subsidiary of the Company, the Option may become fully
exercisable, and a repurchase right, if any, in favor of the Company shall
lapse, at any time or during any period established by the Administrator.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed to be exercised when written notice of such
exercise has been given to the Company in accordance with the terms of the
Option by the person entitled to exercise the Option and the Company has
received full payment for the Shares with respect to which the Option is
exercised. Full payment may, as authorized by the Board, consist of any
consideration and method of payment allowable under Section 8(b) of the Plan.
Until the issuance (as evidenced by the appropriate entry on the books of the
Company or of a duly authorized transfer agent of the Company) of the stock
certificate evidencing such Shares, no right to vote or receive dividends or any
other rights as a stockholder shall exist with respect to the Optioned Stock,
not withstanding the exercise of the Option. The Company shall issue (or cause
to be issued) such stock certificate promptly upon exercise of the Option. No
adjustment
-8-
<PAGE> 29
will be made for a dividend or other right for which the record date is prior to
the date the stock certificate is issued, except as provided in Section 13 of
the Plan.
Exercise of an Option in any manner shall result in a decrease in the
number of Shares that thereafter may be available, both for purposes of the Plan
and for sale under the Option, by the number of Shares as to which the Option is
exercised.
(b) TERMINATION OF EMPLOYMENT OR CONSULTING RELATIONSHIP. In the
event of termination of an Optionee's Continuous Status as an Employee or
Consultant with the Company, such Optionee may, but only within three months (or
such other period of time not less than 30 days as is determined by the
Administrator, with such determination in the case of an Incentive Stock Option
being made at the time of grant of the Option and not exceeding three months)
after the date of such termination (but in no event later than the expiration
date of the term of such Option as set forth in the Option Agreement), exercise
his or her Option to the extent that the Optionee was entitled to exercise it at
the date of such termination. To the extent that the Optionee was not entitled
to exercise the Option at the date of such termination, or if the Optionee does
not exercise such Option to the extent so entitled within the time specified
herein, the Option shall terminate. No termination shall be deemed to occur and
this Section 10(b) shall not apply if (i) the Optionee is a Consultant who
becomes an Employee, or (ii) the Optionee is an Employee who becomes a
Consultant.
(c) DISABILITY OF OPTIONEE.
(i) Notwithstanding Section 10(b) above, in the event of
termination of an Optionee's Continuous Status as an Employee or Consultant as a
result of his or her total and permanent disability (within the meaning of
Section 22(e)(3) of the Code), such Optionee may, but only within twelve months
from the date of such termination (but in no event later than the expiration
date of the term of such Option as set forth in the Option Agreement), exercise
the Option to the extent otherwise entitled to exercise it at the date of such
termination. To the extent that the Optionee was not entitled to exercise the
Option at the date of termination, or if the Optionee does not exercise such
Option to the extent so entitled within the time specified herein, the Option
shall terminate.
(ii) In the event of termination of an Optionee's
Continuous Status as an Employee or Consultant as a result of a disability which
does not fall within the meaning of total and permanent disability (as set forth
in Section 22(e)(3) of the Code), such Optionee may, but only within six months
from the date of such termination (but in no event later than the expiration
date of the term of such Option as set forth in the Option Agreement), exercise
the Option to the extent otherwise entitled to exercise it at the date of such
termination. However, to the extent that such Optionee fails to exercise an
Option which is an Incentive Stock Option ("ISO") (within the meaning of Section
422 of the Code) within three months of the date of such termination, the Option
will not qualify for ISO treatment under the Code. To the extent that the
Optionee was not entitled to exercise the Option at the date of termination, or
if the Optionee does not exercise such Option to the extent so entitled within
six months from the date of termination, the Option shall terminate.
-9-
<PAGE> 30
(d) DEATH OF OPTIONEE. In the event of the death of an Optionee
during the period of Continuous Status as an Employee or Consultant since the
date of grant of the Option, or within 30 days following termination of the
Optionee's Continuous Status as an Employee or Consultant, the Option may be
exercised, at any time within six months following the date of death (but in no
event later than the expiration date of the term of such Option as set forth in
the Option Agreement), by such Optionee's estate or by a person who acquired the
right to exercise the Option by bequest or inheritance, but only to the extent
of the right to exercise that had accrued at the date of death or, if earlier,
the date of termination of the Optionee's Continuous Status as an Employee or
Consultant. To the extent that the Optionee was not entitled to exercise the
Option at the date of death or termination, as the case may be, or if the
Optionee does not exercise such Option to the extent so entitled within the time
specified herein, the Option shall terminate.
(e) EXTENSION OF EXERCISE PERIOD. The Administrator shall have
full power and authority to extend the period of time for which an Option is to
remain exercisable following termination of an Optionee's Continuous Status as
an Employee or Consultant from the periods set forth in Sections 10(b), 10(c)
and 10(d) above or in the Option Agreement to such greater time as the Board
shall deem appropriate, provided that in no event shall such Option be
exercisable later than the date of expiration of the term of such Option as set
forth in the Option Agreement.
(f) RULE 16B-3. Options granted to Reporting Persons shall comply
with Rule 16b-3 and shall contain such additional conditions or restrictions as
may be required thereunder to qualify for the maximum exemption for Plan
transactions.
11. STOCK PURCHASE RIGHTS.
(a) RIGHTS TO PURCHASE. Stock Purchase Rights may be issued
either alone, in addition to, or in tandem with other awards granted under the
Plan and/or cash awards made outside of the Plan. After the Administrator
determines that it will offer Stock Purchase Rights under the Plan, it shall
advise the offeree in writing of the terms, conditions and restrictions related
to the offer, including the number of Shares that such person shall be entitled
to purchase, the price to be paid, and the time within which such person must
accept such offer, which shall in no event exceed 30 days from the date upon
which the Administrator made the determination to grant the Stock Purchase
Right. In the case of a Stock Purchase Right granted prior to the date, if any,
on which the Common Stock becomes a Listed Security and if required by the
Applicable Laws at such time, the purchase price of Shares subject to such Stock
Purchase Rights shall not be less than 85% of the Fair Market Value of the
Shares as of the date of the offer, or, in the case of a Ten Percent Holder, the
price shall not be less than 100% of the Fair Market Value of the Shares as of
the date of the offer. If the Applicable Laws do not impose the requirements set
forth in the preceding sentence and with respect to any Stock Purchase Rights
granted after the date, if any, on which the Common Stock becomes a Listed
Security, the purchase price of Shares subject to Stock Purchase Rights shall be
as determined by the Administrator. The offer shall be accepted by execution of
a Restricted Stock Purchase Agreement in the form determined by the
Administrator.
-10-
<PAGE> 31
(b) REPURCHASE OPTION. Unless the Administrator determines
otherwise, the Restricted Stock Purchase Agreement shall grant the Company a
repurchase option exercisable upon the voluntary or involuntary termination of
the purchaser's employment with the Company for any reason (including death or
disability). The purchase price for Shares repurchased pursuant to the
Restricted Stock Purchase Agreement shall be the original purchase price paid by
the purchaser and may be paid by cancellation of any indebtedness of the
purchaser to the Company. The repurchase option shall lapse at such rate as the
Administrator may determine; provided, however, that with respect to a Stock
Purchase Right granted prior to the date, if any, on which the Common Stock
becomes a Listed Security to a purchaser who is not an officer (including an
Officer), Director or Consultant of the Company or of any Parent or Subsidiary
of the Company, it shall lapse at a minimum rate of 20% per year if required by
the Applicable Laws.
(c) OTHER PROVISIONS. The Restricted Stock Purchase Agreement
shall contain such other terms, provisions and conditions not inconsistent with
the Plan as may be determined by the Administrator in its sole discretion. In
addition, the provisions of Restricted Stock Purchase Agreements need not be the
same with respect to each purchaser.
(d) RIGHTS AS A STOCKHOLDER. Once the Stock Purchase Right is
exercised, the purchaser shall have the rights equivalent to those of a
stockholder, and shall be a stockholder when his or her purchase is entered upon
the records of the duly authorized transfer agent of the Company. No adjustment
will be made for a dividend or other right for which the record date is prior to
the date the Stock Purchase Right is exercised, except as provided in Section 12
of the Plan.
12. TAXES
(a) As a condition of the exercise of an Option or Stock Purchase Right
granted under the Plan, the Participant (or in the case of the Participant's
death, the person exercising the Option or Stock Purchase Right) shall make such
arrangements as the Administrator may require for the satisfaction of any
applicable federal, state, local or foreign withholding tax obligations that may
arise in connection with the exercise of Option or Stock Purchase Right and the
issuance of Shares. The Company shall not be required to issue any Shares under
the Plan until such obligations are satisfied.
(b) In the case of an Employee and in the absence of any other
arrangement, the Employee shall be deemed to have directed the Company to
withhold or collect from his or her compensation an amount sufficient to satisfy
such tax obligations from the next payroll payment otherwise payable after the
date of an exercise of the Option or Stock Purchase Right.
(c) This Section 12(c) shall apply only after the date, if any, upon
which the Common Stock becomes a Listed Security. In the case of a Participant
other than an Employee (or in the case of an Employee where the next payroll
payment is not sufficient to satisfy such tax obligations, with respect to any
remaining tax obligations), in the absence of any other arrangement and to the
extent permitted under the Applicable Laws,
-11-
<PAGE> 32
the Participant shall be deemed to have elected to have the Company withhold
from the Shares to be issued upon exercise of the Option or Stock Purchase Right
that number of Shares having a Fair Market Value determined as of the applicable
Tax Date (as defined below) equal to the minimum statutory withholding rates for
federal and state tax purposes, including payroll taxes, applicable to the
exercise. For purposes of this Section 12, the Fair Market Value of the Shares
to be withheld shall be determined on the date that the amount of tax to be
withheld is to be determined under the Applicable Laws (the "Tax Date").
(d) If permitted by the Administrator, in its discretion, a Participant
may satisfy his or her tax withholding obligations upon exercise of an Option or
Stock Purchase Right by surrendering to the Company Shares that (i) in the case
of Shares previously acquired from the Company, have been owned by the
Participant for more than six (6) months on the date of surrender, and (ii) have
a Fair Market Value determined as of the applicable Tax Date equal to the
minimum statutory withholding rates for federal and state tax purposes,
including payroll taxes, applicable to the exercise.
(e) Any election or deemed election by a Participant to have Shares
withheld to satisfy tax withholding obligations under Section 12(c) or (d) above
shall be irrevocable as to the particular Shares as to which the election is
made and shall be subject to the consent or disapproval of the Administrator.
Any election by a Participant under Section 12(d) above must be made on or prior
to the applicable Tax Date.
(f) In the event an election to have Shares withheld is made by a
Participant and the Tax Date is deferred under Section 83 of the Code because no
election is filed under Section 83(b) of the Code, the Participant shall receive
the full number of Shares with respect to which the Option or Stock Purchase
Right is exercised but such Participant shall be unconditionally obligated to
tender back to the Company the proper number of Shares on the applicable Tax
Date.
13. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION, MERGER OR CERTAIN OTHER
TRANSACTIONS.
(a) CHANGES IN CAPITALIZATION. Subject to any required action by
the stockholders of the Company, the number of shares of Common Stock covered by
each outstanding Option or Stock Purchase Right, and the number of shares of
Common Stock that have been authorized for issuance under the Plan but as to
which no Options or Stock Purchase Rights have yet been granted or that have
been returned to the Plan upon cancellation or expiration of an Option or Stock
Purchase Right, the numbers of Shares set forth described in Sections 3(a)(i)
and 8 above, as well as the price per share of Common Stock covered by each such
outstanding Option or Stock Purchase Right, shall be proportionately adjusted
for any increase or decrease in the number of issued shares of Common Stock
resulting from a stock split, reverse stock split, stock dividend, combination,
recapitalization or reclassification of the Common Stock, or any other increase
or decrease in the number of issued shares of Common Stock 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
-12-
<PAGE> 33
"effected without receipt of consideration." Such adjustment shall be made by
the Board, whose determination in that respect shall be final, binding and
conclusive. Except as expressly provided herein, 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 of Common Stock subject to an Option
or Stock Purchase Right.
(b) DISSOLUTION OR LIQUIDATION. In the event of the proposed
dissolution or liquidation of the Company, the Board shall notify the Optionee
at least 15 days prior to such proposed action. To the extent it has not been
previously exercised, the Option or Stock Purchase Right will terminate
immediately prior to the consummation of such proposed action.
(c) MERGER OR SALE OF ASSETS. In the event of a proposed sale of
all or substantially all of the Company's assets or a merger of the Company with
or into another corporation where the successor corporation issues its
securities to the Company's stockholders, each outstanding Option or Stock
Purchase Right shall be assumed or an equivalent option or right shall be
substituted by such successor corporation or a parent or subsidiary of such
successor corporation, unless the successor corporation does not agree to assume
the Option or Stock Purchase Right or to substitute an equivalent option or
right, in which case such Option or Stock Purchase Right shall terminate upon
the consummation of the merger or sale of assets. For purposes of this Section
13(c), an Option or a Stock Purchase Right shall be considered assumed, without
limitation, if, at the time of issuance of the stock or other consideration upon
such merger or sale of assets, each holder of an Option or a Stock Purchase
Right would be entitled to receive upon exercise of the Option or Stock Purchase
Right the same number and kind of shares of stock or the same amount of
property, cash or securities as such holder would have been entitled to receive
upon the occurrence of such transaction if the holder had been, immediately
prior to such transaction, the holder of the number of Shares of Common Stock
covered by the Option or the Stock Purchase Right at such time (after giving
effect to any adjustments in the number of Shares covered by the Option or Stock
Purchase Right as provided for in this Section 13).
(d) CERTAIN DISTRIBUTIONS. In the event of any distribution to
the Company's stockholders of securities of any other entity or other assets
(other than dividends payable in cash or stock of the Company) without receipt
of consideration by the Company, the Administrator may, in its discretion,
appropriately adjust the price per share of Common Stock covered by each
outstanding Option or Stock Purchase Right to reflect the effect of such
distribution.
14. NON-TRANSFERABILITY OF OPTIONS AND STOCK PURCHASE RIGHTS. Options
and Stock Purchase Rights may not be sold, pledged, assigned, hypothecated,
transferred, or disposed of in any manner other than by will or by the laws of
descent or distribution, provided that, after the date, if any, upon which the
Common Stock becomes a Listed Security, the Administrator may in its discretion
grant transferable Nonstatutory Stock Options pursuant to Option Agreements
specifying (i) the manner in which such Nonstatutory Stock Options are
transferable and (ii) that any such transfer shall be subject to the Applicable
Laws. The designation of a beneficiary by an Optionee will not constitute a
transfer. An Option or Stock Purchase Right
-13-
<PAGE> 34
may be exercised, during the lifetime of the holder of Option or Stock Purchase
Right, only by such holder or a transferee permitted by this Section 14.
15. TIME OF GRANTING OPTIONS AND STOCK PURCHASE RIGHTS. The date of
grant of an Option or Stock Purchase Right shall, for all purposes, be the date
on which the Administrator makes the determination granting such Option or Stock
Purchase Right, or such other date as is determined by the Board; provided,
however, that in the case of any Incentive Stock Option, the grant date shall be
the later of the date on which the Administrator makes the determination
granting such Incentive Stock Option or the date of commencement of the
Optionee's employment relationship with the Company. Notice of the determination
shall be given to each Employee or Consultant to whom an Option or Stock
Purchase Right is so granted within a reasonable time after the date of such
grant.
16. AMENDMENT AND TERMINATION OF THE PLAN.
(a) AUTHORITY TO AMEND OR TERMINATE. The Board may at any time
amend, alter, suspend or discontinue the Plan, but no amendment, alteration,
suspension or discontinuation (other than an adjustment under pursuant to
Section 13 above) shall be made that would impair the rights of any Optionee
under any grant theretofore made, without his or her consent. In addition, to
the extent necessary and desirable to comply with the Applicable Laws, the
Company shall obtain stockholder approval of any Plan amendment in such a manner
and to such a degree as required
(b) EFFECT OF AMENDMENT OR TERMINATION. No amendment or
termination of the Plan shall adversely affect Options already granted, unless
mutually agreed otherwise between the Optionee and the Board, which agreement
must be in writing and signed by the Optionee and the Company.
17. CONDITIONS UPON ISSUANCE OF SHARES. Shares shall not be issued
pursuant to the exercise of an Option or Stock Purchase Right unless the
exercise of such Option or Stock Purchase Right and the issuance and delivery of
such Shares pursuant thereto shall comply with the Applicable Laws.
As a condition to the exercise of an Option, the Company may require the
person exercising such Option to represent and warrant at the time of any such
exercise that the Shares are being purchased only for investment and without any
present intention to sell or distribute such Shares if, in the opinion of
counsel for the Company, such a representation is required by law.
18. RESERVATION OF SHARES. The Company, during the term of this Plan,
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan. The inability of the Company
to obtain authority from any regulatory body having jurisdiction, which
authority is deemed by the Company's counsel to be necessary to the lawful
issuance and sale of any Shares hereunder, shall relieve the Company of any
liability in respect of the failure to issue or sell such Shares as to which
such requisite authority shall not have been obtained.
-14-
<PAGE> 35
19. AGREEMENTS. Options and Stock Purchase Rights shall be evidenced by
written Option Agreements and Restricted Stock Purchase Agreements,
respectively, in such form(s) as the Administrator shall approve from time to
time.
20. STOCKHOLDER APPROVAL. If required by the Applicable Laws,
continuance of the Plan shall be subject to approval by the stockholders of the
Company within twelve months before or after the date the Plan is adopted. Such
stockholder approval shall be obtained in the manner and to the degree required
under the Applicable Laws.
21. INFORMATION AND DOCUMENTS TO OPTIONEES AND PURCHASERS. Prior to the
date, if any, upon which the Common Stock becomes a Listed Security and if
required by the Applicable Laws, the Company shall provide financial statements
at least annually to each Optionee and to each individual who acquired Shares
Pursuant to the Plan, during the period such Optionee or purchaser has one or
more Options or Stock Purchase Rights outstanding, and in the case of an
individual who acquired Shares pursuant to the Plan, during the period such
individual owns such Shares. The Company shall not be required to provide such
information if the issuance of Options or Stock Purchase Rights under the Plan
is limited to key employees whose duties in connection with the Company assure
their access to equivalent information. In addition, at the time of issuance of
any securities under the Plan, the Company shall provide to the Optionee or the
Purchaser a copy of the Plan and any agreement(s) pursuant to which securities
granted under the Plan are issued.
-15-
<PAGE> 36
VENTRO CORPORATION
1999 DIRECTORS' STOCK OPTION PLAN
1. PURPOSES OF THE PLAN. The purposes of this 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 Outside
Directors of the Company to serve as Directors, and to encourage their continued
service on the Board.
All options granted hereunder shall be nonstatutory stock
options.
2. DEFINITIONS. As used herein, the following definitions shall apply:
(a) "BOARD" means the Board of Directors of the Company.
(b) "CHANGE OF CONTROL" means a sale of all or substantially all
of the Company's assets, or any merger or consolidation of the Company with or
into another corporation other than a merger or consolidation in which the
holders of more than 50% of the shares of capital stock of the Company
outstanding immediately prior to such transaction continue to hold (either by
the voting securities remaining outstanding or by their being converted into
voting securities of the surviving entity) more than 50% of the total voting
power represented by the voting securities of the Company, or such surviving
entity, outstanding immediately after such transaction.
(c) "CODE" means the Internal Revenue Code of 1986, as amended.
(d) "COMMON STOCK" means the Common Stock of the Company.
(e) "COMPANY" means Ventro Corporation, a Delaware corporation.
(f) "CONTINUOUS STATUS AS A DIRECTOR" means the absence of any
interruption or termination of service as a Director.
(g) "CORPORATE TRANSACTION" means a dissolution or liquidation of
the Company, a sale of all or substantially all of the Company's assets, or a
merger, consolidation or other capital reorganization of the Company with or
into another corporation.
(h) "DIRECTOR" means a member of the Board.
(i) "EMPLOYEE" means any person, including any officer or
Director, employed by the Company or any Parent or Subsidiary of the Company.
The payment of a
<PAGE> 37
director's fee by the Company shall not be sufficient in and of itself to
constitute "employment" by the Company.
(j) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
(k) "OPTION" means a stock option granted pursuant to the Plan.
All options shall be nonstatutory stock options (i.e., options that are not
intended to qualify as incentive stock options under Section 422 of the Code).
(l) "OPTIONED STOCK" means the Common Stock subject to an Option.
(m) "OPTIONEE" means an Outside Director who receives an Option.
(n) "OUTSIDE DIRECTOR" means a Director who is not an Employee.
(o) "PARENT" means a "parent corporation," whether now or
hereafter existing, as defined in Section 424(e) of the Code.
(p) "PLAN" means this 1999 Directors' Stock Option Plan.
(q) "SHARE" means a share of the Common Stock, as adjusted in
accordance with Section 11 of the Plan.
(r) "SUBSIDIARY" means a "subsidiary corporation," whether now or
hereafter existing, as defined in Section 424(f) of the Code.
3. STOCK SUBJECT TO THE PLAN. Subject to the provisions of Section 11 of
the Plan, the maximum aggregate number of Shares which may be optioned and sold
under the Plan is 280,000 Shares of Common Stock (the "Pool"). The Shares may be
authorized, but unissued, or reacquired Common Stock.
If an Option should expire or become unexercisable for any reason
without having been exercised in full, the unpurchased Shares which were subject
thereto shall, unless the Plan has been terminated, become available for future
grant under the Plan. In addition, any Shares of Common Stock that are retained
by the Company upon exercise of an Option in order to satisfy the exercise price
for such Option, or any withholding taxes due with respect to such exercise,
shall be treated as not issued and shall continue to be available under the
Plan. If Shares that were acquired upon exercise of an Option are subsequently
repurchased by the Company, such Shares shall not in any event be returned to
the Plan and shall not become available for future grant under the Plan.
4. ADMINISTRATION OF AND GRANTS OF OPTIONS UNDER THE PLAN.
(a) ADMINISTRATOR. Except as otherwise required herein, the Plan
shall be administered by the Board.
-2-
<PAGE> 38
(b) PROCEDURE FOR GRANTS. All grants of Options hereunder shall
be automatic and nondiscretionary and shall be made strictly in accordance with
the following provisions:
(i) No person shall have any discretion to select which
Outside Directors shall be granted Options or to determine the number of Shares
to be covered by Options granted to Outside Directors.
(ii) Each Outside Director shall be automatically granted
an Option to purchase Shares (the "First Option") as follows: (A) with respect
to persons who are Outside Directors on the effective date of this Plan, as
determined in accordance with Section 6 hereof, 12,500 shares on such effective
date, and (B) with respect to any person who becomes an Outside Director after
the effective date of this Plan, 12,500 shares on the date on which such person
first becomes an Outside Director, whether through election by the shareholders
of the Company or appointment by the Board of Directors to fill a vacancy.
(iii) Each Outside Director shall thereafter be
automatically granted an Option to purchase 5,000 Shares (the "Subsequent
Option") on the date of each Annual Meeting of the Company's stockholders
immediately following which such Outside Director is serving on the Board,
provided that, on such date, he or she shall have served on the Board for at
least six (6) months prior to the date of such Annual Meeting.
(iv) Notwithstanding the provisions of subsections (ii)
and (iii) hereof, in the event that a grant would cause the number of Shares
subject to outstanding Options plus the number of Shares previously purchased
upon exercise of Options to exceed the Pool, then each such automatic grant
shall be for that number of Shares determined by dividing the total number of
Shares remaining available for grant by the number of Outside Directors
receiving an Option on the automatic grant date. Any further grants shall then
be deferred until such time, if any, as additional Shares become available for
grant under the Plan through action of the stockholders to increase the number
of Shares which may be issued under the Plan or through cancellation or
expiration of Options previously granted hereunder.
(v) Notwithstanding the provisions of subsections (ii) and
(iii) hereof, any grant of an Option made before the Company has obtained
stockholder approval of the Plan in accordance with Section 17 hereof shall be
conditioned upon obtaining such stockholder approval of the Plan in accordance
with Section 17 hereof.
(vii) The terms of each option granted hereunder shall be
as follows:
(1) each option shall be exercisable only while the
Outside Director remains a Director of the Company, except as set forth in
Section 9 below;
(2) the exercise price per Share shall be 100% of
the fair market value per Share on the date of grant of each option, determined
in accordance with Section 8 hereof;
-3-
<PAGE> 39
(3) each Option shall be fully vested and
exercisable on the date of grant.
(c) POWERS OF THE BOARD. Subject to the provisions and
restrictions of the Plan, the Board shall have the authority, in its discretion:
(i) to determine, upon review of relevant information and in accordance with
Section 8(b) of the Plan, the fair market value of the Common Stock; (ii) to
determine the exercise price per Share of Options to be granted, which exercise
price shall be determined in accordance with Section 8 of the Plan; (iii) to
interpret the Plan; (iv) to prescribe, amend and rescind rules and regulations
relating to the Plan; (v) to authorize any person to execute on behalf of the
Company any instrument required to effectuate the grant of an Option previously
granted hereunder; and (vi) to make all other determinations deemed necessary or
advisable for the administration of the Plan.
(d) EFFECT OF BOARD'S DECISION. All decisions, determinations and
interpretations of the Board shall be final and binding on all Optionees and any
other holders of any Options granted under the Plan.
(e) SUSPENSION OR TERMINATION OF OPTION. If the Chief Executive
Officer or his or her designee reasonably believes that an Optionee has
committed an act of misconduct, such officer may suspend the Optionee's right to
exercise any option pending a determination by the Board (excluding the Outside
Director accused of such misconduct). If the Board (excluding the Outside
Director accused of such misconduct) determines an Optionee 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
Optionee nor his or her estate shall be entitled to exercise any Option
whatsoever. In making such determination, the Board of Directors (excluding the
Outside Director accused of such misconduct) shall act fairly and shall give the
Optionee an opportunity to appear and present evidence on Optionee's behalf at a
hearing before the Board or a committee of the Board.
5. ELIGIBILITY. Options may be granted only to Outside Directors. All
Options shall be automatically granted in accordance with the terms set forth in
Section 4(b) above. An Outside Director who has been granted an Option may, if
he or she is otherwise eligible, be granted an additional Option or Options in
accordance with such provisions.
The Plan shall not confer upon any Optionee any right with
respect to continuation of service as a Director or nomination to serve as a
Director, nor shall it interfere in any way with any rights which the Director
or the Company may have to terminate his or her directorship at any time.
6. TERM OF PLAN; EFFECTIVE DATE. The Plan shall become effective on the
effectiveness of the registration statement under the Securities Act of 1933, as
amended, relating
-4-
<PAGE> 40
to the Company's initial public offering of securities. It shall continue in
effect for a term of ten (10) years unless sooner terminated under Section 13 of
the Plan.
7. TERM OF OPTIONS. The term of each Option shall be ten (10) years from
the date of grant thereof unless an Option terminates sooner pursuant to Section
9 below.
8. EXERCISE PRICE AND CONSIDERATION.
(a) EXERCISE PRICE. The per Share exercise price for the Shares
to be issued pursuant to exercise of an Option shall be 100% of the fair market
value per Share on the date of grant of the Option.
(b) FAIR MARKET VALUE. The fair market value shall be determined
by the Board; provided however that in the event the Common Stock is traded on
the Nasdaq National Market or listed on a stock exchange, the fair market value
per Share shall be the closing sales price on such system or exchange 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, or if there is a public market for the Common Stock but
the Common Stock is not traded on the Nasdaq National Market or listed on a
stock exchange, 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 ("Nasdaq") System). For purposes of the First Options granted on the
effective date of this Plan, the fair market value per Share shall be the Price
to Public as set forth in the final prospectus filed with the Securities
Exchange Commission pursuant to Rule 424 under the Securities Act of 1933, as
amended.
(c) FORM OF CONSIDERATION. The consideration to be paid for the
Shares to be issued upon exercise of an Option shall consist entirely of cash,
check, other Shares of Common Stock having a fair market value on the date of
surrender equal to the aggregate exercise price of the Shares as to which the
Option shall be exercised (which, if acquired from the Company, shall have been
held for at least six months), or any combination of such methods of payment
and/or any other consideration or method of payment as shall be permitted under
applicable corporate law.
9. EXERCISE OF OPTION.
(a) PROCEDURE FOR EXERCISE; RIGHTS AS A STOCKHOLDER. Any Option
granted hereunder shall be exercisable at such times as are set forth in Section
4(b) above; provided however that no Options shall be exercisable prior to
stockholder approval of the Plan in accordance with Section 17 below has been
obtained.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed to be exercised when written
notice of such exercise has been given to the Company in accordance with the
terms of the Option by the person entitled to exercise the Option and full
payment for the Shares with respect to which the Option
-5-
<PAGE> 41
is exercised has been received by the Company. Full payment may consist of any
consideration and method of payment allowable under Section 8(c) of the Plan.
Until the issuance (as evidenced by the appropriate entry on the books of the
Company or of a duly authorized transfer agent of the Company) of the stock
certificate evidencing such Shares, no right to vote or receive dividends or any
other rights as a stockholder shall exist with respect to the Optioned Stock,
notwithstanding the exercise of the Option. A share certificate for the number
of Shares so acquired shall be issued to the Optionee as soon as practicable
after exercise of the Option. No adjustment will be made for a dividend or other
right for which the record date is prior to the date the stock certificate is
issued, except as provided in Section 11 of the Plan.
Exercise of an Option in any manner shall result in a
decrease in the number of Shares which thereafter may be available, both for
purposes of the Plan and for sale under the Option, by the number of Shares as
to which the Option is exercised.
(b) TERMINATION OF CONTINUOUS STATUS AS A DIRECTOR. If an Outside
Director ceases to serve as a Director, he or she may, but only within ninety
(90) days after the date he or she ceases to be a Director of the Company,
exercise his or her Option to the extent that he or she was entitled to exercise
it at the date of such termination. Notwithstanding the foregoing, in no event
may the Option be exercised after its term set forth in Section 7 has expired.
To the extent that such Outside Director was not entitled to exercise an Option
at the date of such termination, or does not exercise such Option (to the extent
he or she was entitled to exercise) within the time specified above, the Option
shall terminate and the Shares underlying the unexercised portion of the Option
shall revert to the Plan.
(c) DISABILITY OF OPTIONEE. Notwithstanding Section 9(b) above,
in the event a Director is unable to continue his or her service as a Director
with the Company as a result of his or her total and permanent disability (as
defined in Section 22(e)(3) of the Code), he or she may, but only within twelve
(12) months from the date of such 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 the Option be exercised after its
term set forth in Section 7 has expired. To the extent that he or she was not
entitled to exercise the Option at the date of termination, or if he or she does
not exercise such Option (to the extent he or she was entitled to exercise)
within the time specified above, the Option shall terminate and the Shares
underlying the unexercised portion of the Option shall revert to the Plan.
(d) DEATH OF OPTIONEE. In the event of the death of an Optionee:
(A) during the term of the Option who is, at the time of his or her death, a
Director of the Company and who shall have been in Continuous Status as a
Director since the date of grant of the Option, or (B) three (3) months after
the termination of Continuous Status as a Director, the Option may be exercised,
at any time within twelve (12) months following the date of death, by the
Optionee's estate or by a person who acquired the right to exercise the Option
by bequest or inheritance, but only to the extent of the right to exercise that
had accrued at the date of death or the date of termination, as applicable.
Notwithstanding the foregoing, in no event may the Option be exercised after its
term set forth in Section 7 has expired. To the extent that an Optionee was not
entitled to exercise the Option at the date of death or termination or if he or
she does not exercise such Option (to the extent he or she was entitled to
exercise) within the time specified above, the
-6-
<PAGE> 42
Option shall terminate and the Shares underlying the unexercised portion of the
Option shall revert to the Plan.
10. NONTRANSFERABILITY OF OPTIONS. The Option may not be sold, pledged,
assigned, hypothecated, transferred or disposed of in any manner other than by
will or by the laws of descent or distribution or pursuant to a qualified
domestic relations order (as defined by the Code or the rules thereunder). The
designation of a beneficiary by an Optionee does not constitute a transfer. An
Option may be exercised during the lifetime of an Optionee only by the Optionee
or a transferee permitted by this Section.
11. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION; CORPORATE TRANSACTIONS.
(a) ADJUSTMENT. Subject to any required action by the
stockholders of the Company, the number of shares of Common Stock covered by
each outstanding Option, the number of Shares of Common Stock set forth in
Sections 4(b)(ii), (iii) and (iv) above, and the number of Shares of Common
Stock which have been authorized for issuance under the Plan but as to which no
Options have yet been granted or which have been returned to the Plan upon
cancellation or expiration of an Option, as well as the price per Share of
Common Stock covered by each such outstanding Option, shall be proportionately
adjusted for any increase or decrease in the number of issued Shares of Common
Stock resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock (including any such change
in the number of Shares of Common Stock effected in connection with a change in
domicile of the Company) or any other increase or decrease in the number of
issued Shares of Common Stock 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, whose determination
in that respect shall be final, binding and conclusive. Except as expressly
provided herein, 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 of Common Stock subject to an Option.
(b) CORPORATE TRANSACTIONS; CHANGE OF CONTROL. In the event of a
Corporate Transaction, each outstanding Option shall be assumed or an equivalent
option shall be substituted by the successor corporation or a Parent or
Subsidiary of such successor corporation, unless the successor corporation does
not agree to assume the outstanding Options or to substitute equivalent options,
in which case the Options shall terminate upon the consummation of the
transaction; provided however that in the event of a Change of Control, each
optionee shall have the right to exercise all of his or her options to purchase
Shares, immediately prior to the consummation of the transaction.
For purposes of this Section 11(b), an Option shall be considered
assumed, without limitation, if, at the time of issuance of the stock or other
consideration upon such Corporate Transaction or Change of Control, each
Optionee would be entitled to receive upon exercise of an Option the same number
and kind of shares of stock or the same amount of property, cash or securities
as the Optionee would have been entitled to receive upon the occurrence of such
transaction if the Optionee had been, immediately prior to such transaction,
-7-
<PAGE> 43
the holder of the number of Shares of Common Stock covered by the Option at such
time (after giving effect to any adjustments in the number of Shares covered by
the Option as provided for in this Section 11); provided however that if such
consideration received in the transaction was not solely common stock of the
successor corporation or its Parent, the Administrator may, with the consent of
the successor corporation, provide for the consideration to be received upon
exercise of the Option to be solely common stock of the successor corporation or
its Parent equal to the Fair Market Value of the per Share consideration
received by holders of Common Stock in the transaction.
(c) CERTAIN DISTRIBUTIONS. In the event of any distribution to
the Company's stockholders of securities of any other entity or other assets
(other than dividends payable in cash or stock of the Company) without receipt
of consideration by the Company, the Administrator may, in its discretion,
appropriately adjust the price per Share of Common Stock covered by each
outstanding Option to reflect the effect of such distribution.
12. TIME OF GRANTING OPTIONS. The date of grant of an Option shall, for
all purposes, be the date determined in accordance with Section 4(b) hereof.
Notice of the determination shall be given to each Outside Director to whom an
Option is so granted within a reasonable time after the date of such grant.
13. AMENDMENT AND TERMINATION OF THE PLAN.
(a) AMENDMENT AND TERMINATION. The Board may amend or terminate
the Plan from time to time in such respects as the Board may deem advisable;
provided that, to the extent necessary and desirable to comply with Rule 16b-3
under the Exchange Act (or any other applicable law or regulation), the Company
shall obtain approval of the stockholders of the Company to Plan amendments to
the extent and in the manner required by such law or regulation.
(b) EFFECT OF AMENDMENT OR TERMINATION. Any such amendment or
termination of the Plan that would impair the rights of any Optionee shall not
affect Options already granted to such Optionee and such Options shall remain in
full force and effect as if this Plan had not been amended or terminated, unless
mutually agreed otherwise between the Optionee and the Board, which agreement
must be in writing and signed by the Optionee and the Company.
14. CONDITIONS UPON ISSUANCE OF SHARES. Notwithstanding any other
provision of the Plan or any agreement entered into by the Company pursuant to
the Plan, the Company shall not be obligated, and shall have no liability for
failure, to issue or deliver any Shares under the Plan unless such issuance or
delivery would comply with the legal requirements relating to the administration
of stock option plans under applicable U.S. state corporate laws, U.S. federal
and applicable state securities laws, the Code, any stock exchange or Nasdaq
rules or regulations to which the Company may be subject and the applicable laws
of any other country or jurisdiction where Options are granted under the Plan,
as such laws, rules, regulations and requirements shall be in place from time to
time (the "Applicable Laws"). Such compliance shall be determined by the Company
in consultation with its legal counsel.
-8-
<PAGE> 44
As a condition to the exercise of an Option, the Company may
require the person exercising such Option to represent and warrant at the time
of any such exercise that the Shares are being purchased only for investment and
without any present intention to sell or distribute such Shares if, in the
opinion of counsel for the Company, such a representation is required by law.
15. RESERVATION OF SHARES. The Company, during the term of this Plan,
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
16. OPTION AGREEMENT. Options shall be evidenced by written option
agreements in such form as the Board shall approve.
17. STOCKHOLDER APPROVAL. If required by the Applicable Laws,
continuance of the Plan shall be subject to approval by the stockholders of the
Company. Such stockholder approval shall be obtained in the manner and to the
degree required under the Applicable Laws.
-9-
<PAGE> 45
DETACH HERE
PROXY
VENTRO CORPORATION
1500 PLYMOUTH STREET
MOUNTAIN VIEW, CA 94045
The undersigned hereby nominate(s), constitute(s) and appoint(s) David P. Perry
and James G. Stewart, the attorneys, agents and proxies of the undersigned, with
full powers of substitution to each, to attend and act as proxy or proxies of
the undersigned at the Annual Meeting of Shareholders (the "Annual Meeting") of
Ventro Corporation (the "Company") to be held at the Hyatt Rickey's Hotel,
located at 4219 El Camino Real, Palo Alto, California 94306, on May 24, 2000 at
10:00 a.m. Pacific Standard Time, or at any adjournments thereof, and vote as
specified herein the number of shares that the undersigned, if personally
present would be entitled to vote.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE DIRECTORS LISTED ON THE
REVERSE SIDE AND "FOR" EACH OF THE LISTED PROPOSALS. THIS PROXY WHEN PROPERLY
EXECUTED WILL BE VOTED AS DIRECTED. IF NO DIRECTION IS MADE, IT WILL BE VOTED
"FOR" THE ELECTION OF THE DIRECTORS LISTED ON THE REVERSE SIDE AND "FOR" THE
OTHER PROPOSALS. IF ANY MATTERS NOT SPECIFIED IN THE NOTICE OF MEETING ARE
PRESENTED, THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE BEST JUDGMENT AND IN
THE DISCRETION OF THE NAMED PROXY HOLDERS. THIS PROXY MAY BE REVOKED PRIOR TO
ITS EXERCISE BY FILING WITH THE SECRETARY OF THE COMPANY AN INSTRUMENT IN
WRITING REVOKING THE PROXY OR A DULY EXECUTED PROXY BEARING A LATER DATE. THIS
PROXY MAY ALSO BE REVOKED BY ATTENDING THE MEETING AND VOTING IN PERSON.
SEE REVERSE CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE
SIDE SIDE
<PAGE> 46
DETACH HERE
[X] PLEASE MARK VOTES
AS IN THIS EXAMPLE.
1. Election of Directors:
Nominees: (01) Brook H. Byers, (02) David P. Perry, (03) Charles R. Burke,
(04) Jonathan D. Callaghan, (05) Paul J. Nowak, (06) John A. Pritzker,
(07) Naomi O. Seligman, (08) L. John Wilkerson, (09) Jan Leschly
FOR WITHHELD
ALL [ ] [ ] FROM ALL
NOMINEES NOMINEES
[ ] ____________________________________________________
For all nominees except as noted above
2. Approve an amendment to the 1998 Stock Plan FOR AGAINST ABSTAIN
to reserve an additional 3,500,000 shares of [ ] [ ] [ ]
Ventro common stock thereunder for issuance.
3. Approve an amendment to the 1999 Board of FOR AGAINST ABSTAIN
Directors' Plan to reserve an additional [ ] [ ] [ ]
30,000 shares of Ventro common stock
thereunder for issuance.
4. Approve the appointment of our independent FOR AGAINST ABSTAIN
auditors for 2000. [ ] [ ] [ ]
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT [ ]
Please sign exactly as your name(s) appear(s) hereon. All holders must sign.
When signing in a fiduciary capacity, please indicate full title as such. If a
corporation or partnership, please sign in full corporation or partnership name
by authorized person.
Signature: ___________ Date: __________ Signature: ___________ Date: __________
