SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant[_]
Check the appropriate box:
[_] Preliminary Proxy Statement
[_] Confidential of Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to section 240.14a-11(c) or
section 240.14a-12
VALUE AMERICA, INC.
(Name of Registrant as Specified in Its Charter)
VALUE AMERICA, INC.
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:*
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>
June 16, 2000
Dear Stockholder,
It is my pleasure to invite you to Value America's 2000 Annual Meeting of
Stockholders.
We will hold the meeting at 10:00 a.m. on Thursday, July 13, 2000, in the
Mt. Vernon Room of The St. Regis Hotel, 923 16th & K Streets, N.W., Washington,
D.C. 20006. In addition to the formal items of business, we will review the
major developments of the past year and answer your questions.
This booklet includes our Notice of Annual Meeting and Proxy Statement. The
Proxy Statement describes the business that we will conduct at the meeting and
provides information about Value America.
Your vote is important. Whether you plan to attend the meeting or not,
please complete, date, sign and return the enclosed proxy card promptly. If you
attend the meeting and prefer to vote in person, you may do so.
We look forward to seeing you at the meeting.
Sincerely,
Glenda M. Dorchak
Chairman of the Board, President
and Chief Executive Officer
YOUR VOTE IS IMPORTANT.
PLEASE RETURN YOUR PROXY PROMPTLY.
<PAGE>
NOTICE OF 2000 ANNUAL MEETING OF STOCKHOLDERS
Date: July 13, 2000
Time: 10:00 a.m.
Mt. Vernon Room
The St. Regis Hotel
923 16th & K Streets, N.W.
Washington, D.C. 20006
Dear Stockholders:
At our Annual Meeting, we will ask you to:
o Elect directors of Value America to serve for their respective terms of
office as shown in the accompanying Proxy Statement.
o Approve the Value America 1999 Stock Incentive Plan, as amended.
o Ratify the selection of PricewaterhouseCoopers LLP as independent auditors
for our year ending December 31, 2000.
o Transact any other business that may properly be presented at the Annual
Meeting.
If you were a holder of record of Value America's common stock or Series D
preferred stock at the close of business on May 20, 2000, you may vote at the
Annual Meeting.
A copy of the Annual Report on Form 10-K, as amended, containing the
financial statements of Value America for the year ended December 31, 1999, is
enclosed herewith.
BY ORDER OF THE BOARD OF DIRECTORS
William A. Pusey, Jr.
Secretary
June 16, 2000
<PAGE>
PROXY STATEMENT FOR THE VALUE AMERICA, INC.
2000 ANNUAL MEETING OF STOCKHOLDERS
GENERAL INFORMATION ABOUT THE ANNUAL MEETING AND VOTING
Why Did You Send Me this Proxy Statement?
We sent you this Proxy Statement and the enclosed proxy card because Value
America's Board of Directors is soliciting your proxy to vote at the 2000 Annual
Meeting of Stockholders. This Proxy Statement summarizes the information you
need to know to vote at the Annual Meeting. You do not need to attend the Annual
Meeting to vote your shares. Instead, you may simply complete, sign and return
the enclosed proxy card.
On June 16, 2000, we began sending this Proxy Statement, the attached
Notice of Annual Meeting and the enclosed proxy card to all stockholders
entitled to vote. Only stockholders who owned Value America common stock or
Series D preferred stock at the close of business on May 20, 2000 are entitled
to vote at the Annual Meeting. On this record date, there were issued and
outstanding 45,462,155 shares of our common stock and 14,778,322 shares of our
Series D preferred stock. Value America common stock and Series D preferred
stock were the only classes of voting stock issued and outstanding on such date.
The holders of common stock and preferred stock will vote together as a single
class on each of the proposals. We are also sending along with this Proxy
Statement, our 1999 Annual Report, which includes our financial statements.
How Many Votes Do I Have?
Each share of Value America common stock that you own entitles you to one
vote. If you own Value America Series D preferred stock, you are entitled to the
number of votes equal to the number of shares of common stock into which your
Series D preferred stock shares would be convertible at the record date. As of
the record date, each share of preferred stock was convertible into one share of
common stock.
How Do I Vote by Proxy?
Whether you plan to attend the Annual Meeting or not, we urge you to
complete, sign and date the enclosed proxy card and to return it promptly in the
envelope provided. Returning the proxy card will not affect your right to attend
the Annual Meeting and vote.
If you properly fill in your proxy card and send it to us in time to vote,
your "proxy" (one of the individuals named on your proxy card) will vote your
shares as you direct. If you sign the proxy card but do not make specific
choices, your proxy will vote your shares as recommended by the Board of
Directors as follows:
o "FOR" the election of the directors to serve for their respective terms of
office as shown on pages 6 and 7 of this Proxy Statement.
o "FOR" the approval of the Value America 1999 Stock Incentive Plan, as
amended.
<PAGE>
o "FOR" ratification of the selection of PricewaterhouseCoopers LLP as
independent auditors for our fiscal year ending December 31, 2000.
If any other matter is presented, your proxy will vote in accordance with
his or her best judgment. At the time this Proxy Statement went to press, we
knew of no matters that needed to be acted on at the Annual Meeting, other than
those discussed in this Proxy Statement.
May I Revoke My Proxy?
If you give us your proxy, you may revoke it at any time before it is
exercised. You may revoke your proxy in any one of the three following ways:
o You may send in another proxy with a later date but before the Annual
Meeting date.
o You may notify Value America's Secretary in writing before the Annual
Meeting that you have revoked your proxy.
o You may vote in person at the Annual Meeting.
How Do I Vote in Person?
If you plan to attend the Annual Meeting and vote in person, we will give
you a ballot when you arrive. However, if your shares are held in the name of
your broker, bank or other nominee, you must bring to the meeting with you an
account statement or letter from the nominee indicating that you were the
beneficial owner of the shares on May 20, 2000, the record date for voting.
What Vote is Required to Approve Each Proposal?
Proposal 1: Election of Directors -- The nominees who receive the
most votes will be elected.
Proposal 2: Approval of the 1999 Stock Incentive Plan, as
amended -- Approval of the plan requires that more
shares of common stock and preferred stock vote in
favor of the plan than against it.
Proposal 3: Ratify Selection of Auditors -- Approval of the
ratification of the selection of
PricewaterhouseCoopers requires that more shares of
common stock and preferred stock vote in favor of the
proposal than against it.
What is the Effect of Broker Non-Votes?
If your broker holds your shares in its name, the broker will be entitled
to vote your shares on both Proposal 1 and Proposal 3 even if it does not
receive instructions from you. Your broker is not entitled to vote on Proposal 2
unless it receives instructions from you. If your broker does not vote your
shares on Proposal 2, such "broker non-votes" and abstentions from voting will
not be counted for purposes of tabulating the votes cast.
2
<PAGE>
Is Voting Confidential?
We will keep all the proxies, ballots and voting tabulations private. We
only let our inspectors of election examine these documents. We will not
disclose your vote to management unless it is necessary to meet legal
requirements. We will, however, forward to management any written comments you
make on the proxy card or elsewhere.
What Are the Costs of Soliciting these Proxies?
We will pay all of the costs of soliciting these proxies. Our directors and
employees may solicit proxies in person or by telephone, fax or email. We will
not pay these employees and directors additional compensation for these
services. We will ask banks, brokers and other institutions, nominees and
fiduciaries to forward these proxy materials to their principals and to obtain
authority to execute proxies. We will then reimburse them for their expenses.
_____________________________
INFORMATION ABOUT VALUE AMERICA SECURITIES OWNERSHIP
The following table sets forth certain information with respect to the
beneficial ownership of our common stock and Series D preferred stock as of May
20, 2000 for (a) the current executive officers named in the Summary
Compensation Table on page 9 of this Proxy Statement, (b) each of our directors,
(c) all of our directors and executive officers as a group and (d) each
stockholder known by us to own beneficially more than 5% of our common or
preferred stock. Beneficial ownership is determined in accordance with the rules
of the Securities and Exchange Commission and includes voting or investment
power with respect to the securities.
Shares of common stock that may be acquired by an individual or group
within 60 days of May 20, 2000 pursuant to the exercise of options or warrants
are deemed to be outstanding for the purpose of computing the percentage
ownership of such individual or group, but are not deemed to be outstanding for
the purpose of computing the percentage ownership of any other person shown in
the table. Except as indicated in footnotes to this table, we believe that the
stockholders named in this table have sole voting and investment power with
respect to all shares of common and preferred stock shown to be beneficially
owned by them based on information provided to us by such stockholders.
Percentage of ownership is based on 45,462,155 shares of common stock and
14,778,322 shares of Series D preferred stock outstanding on May 20, 2000.
3
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Shares of Shares of
Common Stock Percent of Preferred Stock Percent of
Beneficially Common Stock Beneficially Owned Preferred
Name of Beneficial Owner Owned Stock
Craig A. Winn (1)
740 Woodlands Road
Charlottesville, VA 22901............................ 33.2%
15,074,812 -- --
Vulcan Ventures Incorporated (2) 110 110th Avenue N.E.
Bellevue, WA 98004................................... 20.8%
10,229,087 7,389,162 50.0%
Rex Scatena (3)
380 Mildrod Road
Earlysville, VA 22936................................ 14.0%
6,366,700 -- --
The Union Labor Life Insurance Company (4)
111 Massachusetts Avenue, N.W.
Washington, D.C. 20001............................... 7.9%
3,598,229 -- --
Pacific Capital Group, Inc. (5)
1201 Pennsylvania Avenue, N.W.
Suite 300
Washington, D.C. 20004............................... 1,850,849 4.0% 4,433,497 30.0%
Directors and Executive Officers:
William J. Bennett (6)............................... 15,000 * -- --
Thomas J. Casey (7).................................. 71,000 * -- --
Glenda M. Dorchak (8)................................ 13,000 * -- --
Leroy Keith (9)...................................... 15,000 * -- --
Gary D. LeClair (10)................................. 170,001 * -- --
Gerard R. Roche (11)................................. 15,000 * -- --
William D. Savoy (12)................................ 10,294,233 20.9% 7,389,162 50.0%
Wolfgang R. Schmitt (13)............................. 165,000 * -- --
Frederick W. Smith (14).............................. 1,906,133 4.1% 1,970,433 13.3%
Michael R. Steed .................................... 1,950 * -- --
Paul F. Ewert (15)................................... 43,000 * -- --
Thomas J. Starnes (16)............................... 22,000 * -- --
John A. Steele (17).................................. 12,000 * -- --
All directors and executive
officers as a group (15 persons) (18)........... 12,743,317 25.2% 9,359,595 63.3%
-----------------
</TABLE>
* Less than one percent (1%).
(1) Information based upon Schedule 13G filed by Mr. Winn on February 14,
2000. Value America has reason to believe that such information may not
be accurate as of May 20, 2000. Based on information as of that date
provided to Value America by its transfer agent, Mr. Winn may be deemed
to beneficially own 7,540,650 shares, or 16.6%, of our common stock,
excluding shares that may be held by brokers on behalf of Mr. Winn.
(2) Information based upon Schedule 13G filed by Vulcan Ventures Incorporated
on February 14, 2000. Includes 3,752,226 shares of
common stock underlying warrants.
(3) Information based upon Schedule 13G filed by Mr. Scatena on February 14,
2000. Value America has reason to believe that such information may not
be accurate as of May 20, 2000. Based on information as of that date
provided to Value America by its transfer agent, Mr. Scatena may be
deemed to beneficially own 1,413,900 shares, or 3.1%, of our common
stock, excluding shares that may be held by brokers on behalf of Mr.
Scatena.
(4) Includes 208,375 shares of common stock underlying warrants.
(footnotes continued on next page)
4
<PAGE>
(5) Includes 1,330,049 shares of common stock underlying warrants held by
Pacific Capital Group, Inc. ("Pacific Capital") and 520,800 shares of
common stock held by GKW Unified Holdings, LLC which Pacific Capital may
be deemed to beneficially own.
(6) Consists of 15,000 shares of common stock underlying options. Mr.
Bennett resigned from Value America's Board of Directors effective
May 30, 2000.
(7) Includes 15,000 shares of common stock underlying options and 6,000
shares of common stock underlying warrants.
(8) Includes 3,000 shares of common stock underlying warrants.
(9) Consists of 15,000 shares of common stock underlying options.
(10) Includes 80,001 shares of common stock underlying options and 30,000
shares of common stock underlying warrants.
(11) Consists of 15,000 shares of common stock underlying options.
(12) Includes 15,000 shares of common stock underlying options held by Mr.
Savoy, and 6,476,861 shares of common stock, 3,752,226 shares of common
stock underlying warrants and 7,389,162 shares of preferred stock held by
Vulcan Ventures Incorporated ("Vulcan"). Mr. Savoy is Vice President of
Vulcan.
(13) Consists of 165,000 shares of common stock underlying options. Mr.
Schmitt resigned from Value America's Board of Directors effective
May 30, 2000.
(14) Includes 15,000 shares of common stock underlying options and 741,133
shares of common stock underlying warrants held by Mr. Smith, and 500,000
shares of common stock and 150,000 shares of common stock underlying
warrants held by FedEx Corporation. Mr. Smith disclaims beneficial
ownership of the shares of common stock held by FedEx Corporation. The
address of Mr. Smith is 942 South Shady Grove Road, Memphis, Tennessee
38120.
(15) Includes 40,000 shares of common stock underlying options.
(16) Includes 20,000 shares of common stock underlying options.
(17) Includes 10,000 shares of common stock underlying options.
(18) Includes 405,000 shares of common stock underlying options and 4,682,359
shares of common stock underlying warrants.
PROPOSAL 1: ELECTION OF DIRECTORS
The Value America Board is divided into three classes (I, II and III), with
each class serving a staggered three-year term. Our Board of Directors currently
consists of eight members, five of whom were appointed to the Board after we
completed our initial public offering in April of last year. Because this is our
first annual meeting as a public company and in view of the number of directors
who were appointed since the initial public offering, the Board of Directors has
concluded that it would be appropriate to seek your approval of our entire slate
of directors.
The nominees for election to the Board of Directors and their respective
terms are set forth below. If any nominee is unavailable to serve, the Board of
Directors may recommend another person and your proxy will be voted for that
substitute nominee. The nominees receiving the greatest number of affirmative
votes cast at the Annual Meeting will be elected.
At next year's annual meeting, you will be asked to elect only one class of
directors whose terms expire at that meeting - the class of 2001 shown in the
table below. If elected, their term of office will then run for a full three
years until the annual meeting in 2004.
The following is a brief summary of the background of each of our directors
and director nominees. The Board of Directors recommends that you vote for these
nominees.
5
<PAGE>
Class I Nominees to serve until 2003:
Thomas J. Casey
Director since 1999
Mr. Casey, age 48, has served as Vice Chairman of Global Crossing, Ltd., an
independent developer, owner and operator of open access and undersea fiberoptic
global telecommunications networks since December 1998. He has also been
Managing Director of Global Crossing since September 1998. Since September 1998,
Mr. Casey has been President of Pacific Capital Group, a Los Angeles-based
merchant banking firm. From October 1995 to September 1998, Mr. Casey was
Managing Director of Merrill Lynch's Global Communications Investment Banking
Group. From January 1990 to September 1995, he served as a partner and co-head
of the telecommunications and media group for the law firm of Skadden, Arps,
Slate, Meagher and Flom.
Leroy Keith
Director since 1999
Mr. Keith, age 61, has served as Chairman of Carson, Inc., a
publicly-traded manufacturer and marketer of ethnic hair care products for
people of color since 1995. From August 1995 to June 1998, Mr. Keith also served
as Carson's Chief Executive Officer.
Gerard R. Roche
Director since 1999
Mr. Roche, age 68, has served as Chairman of Heidrick & Struggles, Inc.
since 1981and Senior Chairman of Heidrick & Struggles International, Inc. since
February 1999. Heidrick & Struggles, is an executive recruiting firm with
offices worldwide.
Class II Nominees to serve until 2002:
William D. Savoy
Director since 1999
Mr. Savoy, age 35, has served as Vice President of Vulcan Ventures
Incorporated, a venture capital fund, since November 1990. He has served as
President of Vulcan Northwest Inc., a company that manages the personal
financial activities of Paul G. Allen, co-founder of Microsoft Corporation, from
November 1990 until the present. Mr. Savoy serves as a director of Charter
Communications, Inc., drugstore.com, Go2Net, Inc., Harbinger Corporation, High
Speed Access Corporation, Metricom, Inc., Telescan Inc., Ticketmaster Online --
CitySearch and USA Networks, Inc.
Frederick W. Smith
Director since 1999
Mr. Smith, age 55, is Chairman, President and Chief Executive Officer of
FedEx Corporation, a global transportation and logistics holding company that
was formed when Federal Express Corporation acquired Caliber System, Inc. in
January 1998. He founded Federal Express in 1971 and was President of Federal
Express from 1971 to 1975 and from 1983 to January 1998. Mr. Smith was Chief
Executive Officer of Federal Express from 1977 to January 1998 and has served as
its Chairman since 1975. Mr. Smith is responsible for providing strategic
direction for all FedEx Corporation business units, including Federal Express,
FedEx Ground, FedEx Logistics, FedEx Custom Critical, and FedEx Trade Networks.
6
<PAGE>
Class III Nominees to serve until 2001:
Glenda M. Dorchak
Director since 2000
Ms. Dorchak, age 46, became Chairman of Value America in May 2000 and has
served as Chief Executive Officer since November 1999 and President since
October 1998. From October 1998 until her appointment as Chief Executive
Officer, Ms. Dorchak also served as Chief Operating Officer. Ms. Dorchak was
Senior Vice President -- Marketing and Advertising of Value America from August
1998 to October 1998. From December 1995 until August 1998, Ms. Dorchak held
several executive positions at IBM US, including Director of PC Direct, Director
of General Business PC Sales, Director of US Channel Marketing and Director of
Marketing for the Personal Systems Group North America. From December 1992 until
December 1995, she served as the Director of Sales and Service of AMBRA, a
build-to-order, telemarketing PC business.
Gary D. LeClair
Director since 1997
Mr. LeClair, age 45, has served as Chairman of the law firm of LeClair
Ryan, A Professional Corporation, legal counsel to Value America, since 1988.
Michael R. Steed
Director since 1997
Mr. Steed, age 50, has been a Managing Director of Pacific Capital Group, a
venture capital firm, since December 1999. From November 1992 until December
1999 he was Senior Vice President of Investments for The Union Labor Life
Insurance Company ("ULLICO"), a financial services holding company, and
President of ULLICO's investment subsidiary, Trust Fund Advisors. Before joining
ULLICO, Mr. Steed served as President and Founder of A.F.I.C. Group, Ltd., a
financial and investment consulting firm, from 1985 to 1992. Mr. Steed is also a
director of Global Crossing, Ltd. and VR-1.
Committees of the Board of Directors and Meetings
Meeting Attendance. During 1999 there were 12 meetings of our Board of
Directors. No incumbent director attended fewer than 75% of the total number of
meetings of the Board and of committees of the Board on which they served during
1999.
Audit Committee. Our Audit Committee met eight times during 1999. This
committee currently has three members, Messrs. Keith, LeClair and Steed. Our
Audit Committee reviews the results and scope of audits and other services
provided by our independent public accountants.
Compensation Committee. Our Compensation Committee met eight times during
1999 and also acted by unanimous written consent on two occasions during this
period. This committee currently has four members, Messrs. Casey, Roche, Savoy
and Smith. Our Compensation Committee makes recommendations concerning salaries
and incentive compensation for our employees and consultants, establishes and
approves salaries and incentive compensation for our executive officers and
administers our incentive stock plan.
Nominating Committee. We do not have a standing nominating committee.
7
<PAGE>
Compensation Committee Interlocks and Insider Participation.
The Compensation Committee of the Board of Directors was formed in December
1997 to make recommendations to the Board of Directors regarding the
compensation and benefits for Value America's executive officers and to
administer its stock incentive plans. The Compensation Committee is currently
composed of Messrs. Casey, Roche, Savoy and Smith. During 1999, Messrs. LeClair
and Steed also served on the Compensation Committee. No executive officer of
Value America serves as a member of the board of directors or compensation
committee of any entity that has one or more executive officers serving as a
member of Value America's Board of Directors or Compensation Committee.
Mr. LeClair also serves as the Chairman of LeClair Ryan, A Professional
Corporation, Value America's legal counsel. In 1999, LeClair Ryan received fees
of $1,233,378 for legal services rendered to Value America.
Mr. Steed served as the Senior Vice President of ULLICO until December
1999. ULLICO is the record holder of 3,544,229 shares of Value America's common
stock.
Compensation of Directors
Under a director stock option policy adopted on June 15, 1999, upon
election to our Board of Directors, each director who is not a salaried employee
of Value America receives an automatic grant of non-qualified stock options to
purchase 15,000 shares of our common stock pursuant to our 1997 stock incentive
plan. Each option granted pursuant to this policy:
o has a term of ten years;
o has an exercise price equal to the fair market value of our common stock on
the date of grant; and
o is exercisable immediately.
8
<PAGE>
EXECUTIVE COMPENSATION
Summary Compensation
The following table provides information on the total compensation paid or
accrued during the fiscal years indicated below to our President and Chief
Executive Officer and to our three next most highly compensated executive
officers serving at December 31, 1999, our fiscal year end. The table also lists
two former chief executive officers and two other former executive officers who
would have been included had they still been executive officers of Value America
at December 31, 1999.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Summary Compensation Table
Long-Term
Compensation
Securities
Name and Annual Compensation (1) Underlying All Other
-----------------------
Principal Position(s) Year Salary ($) Bonus ($) Options (#)(2) Compensation ($)
--------------------- ---- ---------- --------- -------------- ----------------
Glenda M. Dorchak 1999 $266,020 $442,500 75,000 -
President and Chief Executive 1998 57,780 (3) 62,364 325,000 $266,042 (4)
Officer
Paul F. Ewert 1999 $256,539 $50,000 200,000 -
Executive Vice President -
Merchandising/Sales
Thomas J. Starnes 1999 $215,521 $23,344 200,000 -
Executive Vice President and
Chief Marketing Officer
John A. Steele 1999 $159,005 $70,231 150,000 $200,000 (5)
Chief Operating Officer
Neal Harris (6) 1999 $227,514 $67,500 375,000 $250,000 (7)
Former Executive Vice President
Dean M. Johnson (8) 1999 $227,914 $58,013 61,690 -
Former Chief Financial Officer 1998 146,074 - - -
1997 - - 225,000 -
Thomas Morgan (9) 1999 $401,191 $133,223 400,000 -
Former Chief Executive Officer
Craig A. Winn (10) 1999 $295,000 - - -
Former Chairman of the 1998 233,718 - - -
Board and Chief Executive 1997 45,000 (11) - - -
Officer
</TABLE>
(1) No officer received perquisites in an amount greater than the
lesser of (a) $50,000 or (b) 10% of such officer's total salary plus
bonus.
(2) Represents options granted pursuant to our stock incentive plans.
(3) Represents salary earned by Ms. Dorchak from August 1998 through
December 1998.
(4) This amount represents $16,042 for relocation expenses and a $250,000
loan from Value America at an interest rate of 6% per year. The loan
was subsequently forgiven by the Compensation Committee of the Board
on May 10, 2000 subject to repayment of one-half of the outstanding
principal in the event Ms. Dorchak terminates her employment with
Value America on or before December 31, 2000.
(5) Represents a $200,000 loan from Value America at an interest rate of
6.75% per year.
(footnotes continued on next page)
9
<PAGE>
(6) Mr. Harris resigned as an Executive Vice President in December 1999.
(7) Represents a $250,000 loan from Value America at an interest rate of
6.75% per year.
(8) Mr. Johnson resigned as Chief Financial Officer in November 1999.
(9) Mr. Morgan resigned as Chief Executive Officer in December 1999.
(10) Mr. Winn resigned as Chief Executive Officer in March 1999 and Chairman
of the Board in December 1999.
(11) Represents salary earned by Mr. Winn from October 1, 1997 to December
31, 1997. Mr. Winn served without compensation during the first nine
months of 1997.
Option Grants
The following table shows stock options grants during 1999 to each of the
executive officers named in the Summary Compensation Table. In accordance with
the rules of the Securities and Exchange Commission, also shown below is the
potential realizable value over the term of the option (the period from the
grant date to the expiration date). This is calculated assuming that the fair
market value of common stock on the date of grant appreciates at the indicated
annual rate, 5% and 10% compounded annually, for the entire term of the option
and that the option is exercised and sold on the last day of its term for the
appreciated stock price. These amounts are based on certain assumed rates of
appreciation and do not represent our estimate of future stock price. Actual
gains, if any, on stock option exercises will be dependent on the future
performance of our common stock.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Option Grants in Last Fiscal Year
Individual Grants
-----------------------------------------------------------------
Percent of Potential Realizable
Number of Total Value at Assumed
Securities Options Annual Rates of Stock
Underlying Granted to Exercise Price Appreciation
Options Employees Price Per Expiration For Option Term
Name Granted (#) in 1999 Share ($) Date 5% 10%
---- ----------- ------- --------- ---- -- ---
Glenda M. Dorchak 75,000 2.0% $ 6.03 12/29/09 $ 284,420 $ 720,751
Paul Ewert 200,000 5.2 15.00 03/01/09 1,886,700 4,781,100
Thomas J. Starnes 200,000 5.2 15.00 04/05/09 1,886,700 4,781,100
John A. Steele 100,000 2.6 15.00 04/05/09 943,350 2,390,550
50,000 1.3 6.03 12/29/09 189,613 480,501
Neal Harris (1) 325,000 8.5 15.00 03/26/09 3,065,888 7,769,288
50,000 1.3 5.06 12/31/09 159,112 403,206
Dean M. Johnson (1) 50,000 1.3 15.00 03/22/09 471,675 1,195,275
11,690 0.3 22.00 04/05/09 161,741 409,868
Thomas Morgan (1) 400,000 10.5 15.00 03/01/09 3,773,400 9,562,200
Craig A. Winn (1) - - - - - -
-----------------
(1) Former executive officer.
</TABLE>
Option Exercises and Year-End Option Values
The following table shows information with respect to exercises of options
to purchase our common stock by each executive officer named in the Summary
Compensation Table during 1999 and with respect to the aggregate value of
options held by each executive officer named in the Summary Compensation Table
as of December 31, 1999. The value of the unexercised in-the-money options at
fiscal year end is based on a value of $5.0625 per share, the closing price of
our stock on the Nasdaq National Market on December 31, 1999 (the last trading
day prior to the year end), less the per share exercise price.
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<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Aggregate Option Exercises in Last Year and
At Year-End Option Values
Number of Shares Underlying Value of Unexercised
Shares Unexercised Options In-the-Money Options
Acquired on Value at Fiscal Year-End at Fiscal Year-End
Name Exercise (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
---- ------------ ------------ ----------- ------------- ----------- -------------
Glenda M. Dorchak 45,000 $ 90,000 - 355,000 - -
Paul F. Ewert - - 40,000 160,000 - -
Thomas J. Starnes - - 20,000 180,000 - -
John A. Steele - - 10,000 140,000 - -
Neal Harris (1) - - 50,000 325,000 - -
Dean M. Johnson (1) 165,000 2,113,050 - - - -
Thomas Morgan (1) - - 80,000 320,000 - -
Craig A. Winn (1) - - - - - -
(1) Former executive officer.
</TABLE>
Stock Incentive Plans
Value America adopted its 1997 stock incentive plan on August 1, 1997 and
its 1999 stock incentive plan was approved by the Board on July 15, 1999. On May
30, 2000, the Board voted to approve an amendment to the 1999 plan to increase
the number of shares of common stock that may be offered under the plan from
2,350,000 to 12,350,000 shares. The stock incentive plans provide for the
granting of incentive awards to employees, officers, directors, consultants and
certain non-employees of Value America. Incentive awards may be in the form of
stock options, stock appreciation rights ("SARs"), restricted stock, incentive
stock, or tax offset rights. The maximum number of shares of common stock that
may be issued under the stock incentive plans is 18,600,000, subject to
adjustment in the event of a stock split, stock dividend or other change in the
common stock or capital structure of Value America. As of May 20, 2000, Value
America has granted options exercisable into 7,560,492 shares of common stock
and awarded 446,420 shares of restricted stock. The options granted under the
1999 stock incentive plan are subject to stockholder approval at the meeting.
(See proposal 2 below). The Compensation Committee administers the stock
incentive plans. Subject to the provisions of the stock incentive plans, the
Compensation Committee is authorized to determine who may participate in the
plans, the number and type of awards to each participant, the schedules on which
each award will become exercisable and the terms, conditions and limitations
applicable to each award. The Compensation Committee has the exclusive power to
interpret the stock incentive plans and to adopt rules and regulations to carry
out the stock incentive plans.
Stock Options. Stock options granted under the plans may be "incentive
stock options" within the meaning of Section 422 of the Internal Revenue Code of
1986, as amended (the "Code"), or non-qualified stock options. Incentive stock
options may be granted only to employees of Value America, including directors
who are employees, while non-qualified options may be issued to non-employee
directors, employees, consultants, advisors and other independent contractors
providing services to Value America. A stock option entitles the employee to
purchase shares of common stock at the option price. The Compensation Committee
will fix the option price at the time the stock option is granted, but in the
case of an incentive stock option the exercise price cannot be less than 100% of
the shares' fair market value on the date of grant (or, in the case of an
incentive stock option granted to a 10% shareholder of Value America, 110% of
the shares' fair market value on the date of grant). The value in incentive
stock options, based on the exercise price, that can be exercisable for the
first time in any calendar year under the plans or any other similar plan
maintained by Value America is limited to $100,000. The option price may be paid
in cash or with shares of common stock, or a combination of cash and common
stock. Stock options may be exercised at such times and subject to such
conditions as may be prescribed by the Compensation Committee, including the
requirement that they will not be exercisable after 10 years from the grant
date.
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SARs. Under the 1997 stock incentive plan only, the Compensation Committee
may also grant SARs either in tandem with a stock option or alone. SARs granted
in tandem with a stock option may be granted at the same time as the stock
option or at a later time. An SAR entitles the participant to receive from Value
America an amount, payable in cash, in shares of common stock or in a
combination of cash and common stock, equal to the difference between the fair
market value of a share of common stock on the date of exercise and the exercise
price.
Restricted Stock. Restricted stock issued pursuant to the stock incentive
plans is subject to the following general restrictions: (a) restricted stock may
not be sold, transferred, pledged or otherwise encumbered or disposed of until
the restrictions on such stock have lapsed or have been removed under the
provisions of the stock incentive plans and (b) if a holder of restricted stock
ceases to be employed by Value America, the holder will forfeit any shares of
restricted stock on which such restrictions have not lapsed or been otherwise
removed.
The Compensation Committee will establish as to each share of restricted
stock issued under the stock incentive plans the terms and conditions upon which
the restrictions on such share shall lapse. Such terms and conditions may
include, without limitation, the lapsing of such restrictions at the end of a
specified period of time or as a result of death, permanent disability or
retirement of the participant. In addition, the Compensation Committee may, at
any time, in its sole discretion, accelerate the time at which any or all of the
restrictions lapse or remove any or all of such restrictions.
Incentive Stock. The Compensation Committee may establish performance
programs with fixed goals and designate key employees as eligible to receive
incentive stock if the goals are achieved. More than one performance program may
be established by the Compensation Committee. They may operate concurrently or
for varied periods of time, and a participant may participate in more than one
program at the same time. A participant who is eligible to receive incentive
stock under a performance program has no rights as a stockholder until the
incentive stock is received.
Tax Offset Rights. Under the 1997 stock incentive plan only, the
Compensation Committee may, in its sole discretion, award tax offset rights in
conjunction with any incentive award. Tax offset rights entitle the participant
to receive an amount of cash from Value America sufficient to satisfy the income
and payroll taxes legally required to be withheld upon exercise of an option or
SAR, upon grant of incentive stock or upon the lapse or removal of restrictions
on restricted stock.
Federal Income Taxes. A participant will not incur federal income tax upon
the grant of an option, SAR, tax offset right, and, in most cases and depending
on the restrictions imposed and unless the grantee otherwise elects, restricted
stock. Upon receipt of incentive stock, a participant will recognize
compensation income, which is subject to income tax withholding by Value
America, equal to the fair market value of the shares of incentive stock on the
date of transfer to the participant.
Upon exercise of a non-qualified stock option, a participant generally will
recognize compensation income, which is subject to income tax withholding by
Value America, equal to the difference between the fair market value of the
common stock on the date of the exercise and the exercise price. The
Compensation Committee has the authority under the stock incentive plans to
include provisions allowing the participant to deliver common stock, or elect to
have withheld a portion of the shares the participant would otherwise acquire
upon exercise, to cover tax liabilities. The election will be effective only if
approved by the Compensation Committee and made in compliance with other
requirements set forth in the stock incentive plans. When an employee exercises
an incentive stock option, the employee generally will not recognize income,
unless the employee is subject to the alternative minimum tax provisions of the
Code.
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If the terms of an option permit, a participant may deliver shares of
common stock instead of cash to acquire shares under the option without having
to recognize taxable gain, except in some cases with respect to stock acquired
upon the exercise of incentive stock options, or "statutory option stock", on
any appreciation in value of the shares delivered. However, if a participant
delivers shares of statutory option stock in satisfaction of all, or any part,
of the exercise price under an incentive stock option, and if the applicable
holding periods of the statutory option stock have not been met, the participant
will be considered to have made a taxable disposition of the statutory option
stock. The applicable holding periods are two years from grant and one year from
exercise.
The exercise of an SAR is generally a taxable event. The participant
usually must recognize income equal to any cash that is paid and the fair market
value of any common stock that is received in settlement of an SAR.
In general, a participant who received shares of restricted stock will
include in his gross income as compensation an amount equal to the fair market
value of the shares of restricted stock at the time that such shares are no
longer subject to a substantial risk of forfeiture. Such amounts will be
included in the tax recipient's income for the year in which such event occurs.
The income recognized will be subject to income tax withholding by Value
America.
Upon exercise of a tax offset right, a participant generally will recognize
ordinary compensation income, which is subject to income tax withholding by
Value America, equal to the cash received.
Subject to certain limitations, Value America will be entitled to a
business expense deduction, except as explained below, at the time and in the
amount that the recipient of an incentive award recognizes ordinary compensation
income in connection therewith. As stated above, this usually occurs upon
exercise of non-qualified options or tax offset rights, upon the lapse or
removal of restrictions on restricted stock, upon issuance of incentive stock,
upon a grantee's election to include in income on the date of grant the fair
market value of a grant of restricted stock, and upon exercise of an SAR. No
deduction is allowed in connection with an incentive stock option, unless the
employee disposes of the common stock received upon exercise in violation of the
holding period requirements.
This summary of the federal income tax consequences of incentive stock
options, non-qualified stock options, SARs, restricted stock, incentive stock
and tax offset rights does not purport to be complete. There may also be certain
state and local income taxes applicable to these transactions.
Change in Control Provisions. In the event of a "change in control"
transaction, the Compensation Committee may take any one or more of the
following actions either at the time an incentive award is granted or any time
thereafter:
o provide for the assumption of incentive awards granted under the stock
incentive plans,
o provide for substitution of appropriate new incentive awards covering the
stock of a successor corporation to Value America or an affiliate thereof
or
o give notice to participants that no such assumption or substitution will be
made, in which event each outstanding incentive award will automatically
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accelerate to become fully exercisable immediately before the effective
date of the change in control, except that such acceleration will not occur
if, in the opinion of Value America's independent accountants, it would
render unavailable "pooling of interests" accounting treatment for a change
in control that would otherwise qualify for such accounting treatment.
All incentive awards will terminate immediately following the consummation
of a change in control, except to the extent assumed by the successor
corporation or an affiliate thereof. Under the stock incentive plans, a "change
in control" transaction generally is defined to constitute any of the following:
o approval by the stockholders of a reorganization, merger or consolidation
in which holders of outstanding voting securities of Value America would
receive less than 50% of the voting securities of the surviving or
resulting corporation,
o approval by the stockholders of a complete liquidation or dissolution of
Value America,
o approval by the stockholders of the sale or transfer of substantially all
of the assets of Value America or
o the acquisition other than from Value America by a person or group of
related persons of beneficial ownership of 50% or more of the outstanding
voting securities of Value America.
Should a change in control or other event result in acceleration of vesting
of outstanding options or changes in other benefits, as defined under Section
280G of the Code, certain highly-compensated employees would likely be subject
to payment of a 20% excise tax on their incremental gain, as defined.
Employment Contracts and Termination and Change-In-Control Arrangements
Glenda M. Dorchak, Chairman, President and Chief Executive Officer
Value America and Glenda M. Dorchak, Chairman President and Chief Executive
Officer of Value America, entered into an employment agreement as of October 5,
1998. Under the agreement, Ms. Dorchak received an annual salary of $250,000
until December 31, 1999 and will receive an annual salary of $300,000 every year
thereafter, subject to increases. The term of the agreement continues through
December 31, 2001 and then renews automatically for additional periods of one
year until either party gives notice of non-renewal at least three months before
the expiration date of the agreement. Ms. Dorchak is also eligible for quarterly
incentive compensation. In each remaining year of her employment, and based upon
achieving corporate and individual performance and other criteria as established
by the Compensation Committee, Ms. Dorchak may earn quarterly bonuses amounting
to, in the aggregate, a minimum of $150,000 per year. Value America also has
agreed to pay Ms. Dorchak a bonus not to exceed $390,000 in an amount equal to
the product of (a) $6.50 multiplied by (b) up to an aggregate of no more than
60,000 shares of common stock to be purchased by Ms. Dorchak upon the exercise
of a stock option received under the stock incentive plan. Such bonus, if
granted by Value America, will be deemed earned on and will be paid on the date
of the exercise of such stock option. Ms. Dorchak is generally entitled to
participate in any employee benefit plans from time to time in effect for all
employees. Ms. Dorchak may voluntarily terminate her employment at any time
under the agreement. Value America may terminate Ms. Dorchak's employment with
or without due cause by giving her written notice of termination. If Ms. Dorchak
is terminated by Value America for due cause, she will receive her salary
through the date of termination. If Value America terminates her employment
other than for due cause, Ms. Dorchak will be entitled to the sum of:
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o her annual salary at the time and
o a pro rata portion of any bonus she may have earned under the agreement if
she had been employed for a full calendar year.
Paul F. Ewert, Executive Vice President - Merchandising/Sales
Value America and Paul F. Ewert, Executive Vice President -
Merchandising/Sales of Value America, entered into an employment agreement as of
March 1, 1999. Under the agreement, Mr. Ewert has an annual salary of $280,000,
subject to increases. The term of the agreement continues through December 31,
2003 and then renews automatically for additional periods of one year until
either party gives notice of non-renewal at least three months before the
expiration date of the agreement. Mr. Ewert is also eligible for quarterly
incentive compensation. During each year of his employment, and based upon
achieving corporate and individual performance and other criteria as established
by the Compensation Committee, Mr. Ewert may earn quarterly bonuses amounting
to, in the aggregate, a minimum of $100,000 per year. Mr. Ewert is generally
entitled to participate in any employee benefit plans from time to time in
effect for all employees. Mr. Ewert may voluntarily terminate his employment at
any time under the agreement. Value America may terminate Mr. Ewert's employment
with or without due cause by giving him written notice of termination. If Mr.
Ewert is terminated by Value America for due cause, he will receive his salary
through the date of termination. If Value America terminates his employment
other than for due cause, Mr. Ewert will be entitled to the sum of:
o his annual salary at the time and
o a pro rata portion of any bonus he may have earned under the agreement if
he had been employed for a full calendar year.
Thomas J. Starnes, Executive Vice President and Chief Marketing Officer
Value America and Thomas J. Starnes, Executive Vice President and Chief
Marketing Officer of Value America, entered into an employment agreement as of
April 5, 1999. Under the agreement, Mr. Starnes receives an annual salary of
$250,000 every year, subject to increases. The term of the agreement continues
through December 31, 2004 and then renews automatically for additional periods
of one year until either party gives notice of non-renewal at least three months
before the expiration date of the agreement. Mr. Starnes is also eligible for
quarterly incentive compensation. During each year of his employment, and based
on achieving corporate and individual performance and other criteria as
established by the Compensation Committee, Mr. Starnes may earn a quarterly
bonus amounting to, in the aggregate, a minimum of $125,000 for 2000. Mr.
Starnes is generally entitled to participate in any employee benefit plans from
time to time in effect for all employees. Mr. Starnes may voluntarily terminate
his employment at any time under the agreement. If Mr. Starnes is terminated by
Value America for due cause, he will receive his salary through the date of
termination. If Value America terminates his employment for other than due
cause, Mr. Starnes will be entitled to the sum of:
o his annual salary at the time and
o a pro rata portion of any bonus he may have earned under the agreement if
he had been employed for a full calendar year.
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Report of Compensation Committee on Executive Compensation
The following Report of the Compensation Committee on Executive
Compensation and the graph of Shareholder Return shall not be deemed
incorporated by reference by any general statement incorporating this Proxy
Statement into any filing under the Securities Act of 1933 or under the
Securities Exchange Act of 1934, except to the extent Value America specifically
incorporates this information by reference, and shall not otherwise by deemed
filed under such acts.
This report is submitted by the Compensation Committee, which is
responsible for establishing and administering Value America's executive
compensation policies and its stock incentive plans. The Committee is composed
of Messrs. Roche, Casey, Savoy and Smith, none of whom is an employee of Value
America. This report addresses the compensation policies for 1999 as they
affected Craig A. Winn, Thomas Morgan and Glenda M. Dorchak, each of whom served
as the Chief Executive Officer of Value America in 1999, and the other executive
officers of Value America.
General Compensation Policy
Value America's compensation policy for executive officers is designed to
achieve the following objectives: (a) to enhance profitability of Value America
and increase stockholder value; (b) to reward executives consistent with Value
America's annual and long-term performance goals; (c) to recognize individual
initiative, leadership and achievement; and (d) to provide competitive
compensation that will attract and retain qualified executives.
Executive Officer Compensation Program
The Committee performs annual reviews of executive compensation to confirm
the competitiveness of the overall executive compensation packages as compared
with companies who compete with Value America for prospective employees.
The compensation program for executive offices consists of three elements:
(1) base salary, which is set on an annual basis; (2) annual incentive
compensation, in the form of cash bonuses, which is based on achievement of
predetermined financial objectives of Value America and individual objectives;
and (3) long-term incentive compensation, in the form of stock options or
restricted stock, granted when the executive officer joins Value America and on
occasion thereafter with the objective of aligning the executive officers'
long-term interests with those of the stockholders and encouraging the
achievement of superior results over an extended period.
Base Salary
Base salaries for executive officers are targeted at competitive market
levels for their respective positions, levels of responsibility and experience.
In addition to external market data, the Committee also reviews Value America's
financial performance and individual performance when adjusting base salary
annually.
Bonus Compensation
Bonus compensation is based on Value America's achievement of predetermined
financial, operational and strategic objectives. Giving greatest weight to
attainment of financial targets (earnings per share, gross margin, and gross
revenue), the Committee also awards bonuses based on various operational and
strategic objectives, such as management efficiency, and the ability to motivate
others and build a strong management team, develop and maintain the skills
necessary to work in a high-growth company, recognize and pursue new business
opportunities and initiate programs to enhance Value America's growth and
successes. Bonuses are awarded on a quarterly basis.
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Long Term Incentive Compensation
Long-term incentive compensation, in the form of stock options and
restricted stock grants, allows the executive officers to share in any
appreciation in the value of Value America's common stock. The Committee
believes that equity participation aligns executive officers' interests with
those of the stockholders. In addition, the Committee believes that equity
ownership by executive officers helps to balance the short term focus of annual
incentive compensation with a longer term view and may help to retain key
executive officers.
When establishing stock option grant levels, the Committee considers
general corporate performance, the Chief Executive Officer's recommendations,
level of seniority and experience, existing levels of stock ownership, previous
grants of stock options, vesting schedules of outstanding options and the
current stock price.
It is the standard policy of Value America to grant an initial stock option
grant to all executive officers at the time they commence employment consistent
with the number of options granted to executive officers in the e-commerce
industry at similar levels of seniority. In addition, the Committee may also
make performance-based grants throughout the year. In making such
performance-based grants, the Committee considers individual contributions to
Value America's financial, operational and strategic objectives.
Chief Executive Officer Compensation
In 1999, the individuals serving as the Chief Executive Officer received
base salaries as indicated in the Summary Compensation Table. This is consistent
with the range of salary levels received by their counterparts in e-commerce
companies of comparable size and stage of development. In addition, in 1999, Mr.
Morgan and Ms. Dorchak were granted options to purchase 400,000 and 75,000
shares of common stock under Value America's the stock incentive plans.
Certain Tax Considerations
Value America does not believe Section 162(m) of the Internal Revenue Code,
as amended, which generally disallows a tax deduction for compensation in excess
of $1 million to any of the executive officers appearing in the Summary
Compensation Table above will have an effect on it. The Committee has considered
the requirements of Section 162(m) of the Code and its related regulations. It
is the Committee's present intention that, so long as it is consistent with its
overall compensation objections, substantially all executive compensation will
be deductible for Federal income tax purposes.
The Compensation Committee:
Gerard R. Roche (Chairman)
Thomas J. Casey
William D. Savoy
Frederick W. Smith
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Performance Graph
The following graph compares the annual cumulative total stockholder return
(assuming reinvestment of dividends) from investing $100 on April 9, 1999 (the
date of our initial public offering), and plotted at December 31, 1999, in each
of (a) Value America's common stock, (b) the S&P 500 stock index, and (c) a peer
group consisting of internet retail companies similar to Value America:
Beyond.com Corporation, Buy.com, Inc., Cyberian Outpost, Inc., and Egghead.com,
Inc. It should be noted that we have not paid any dividends on our common stock,
and no dividends are included in the representation of our performance. The
stock price performance on the graph below is not necessarily indicative of
future price performance.
April 9, 1999 December 31, 1999
------------- -----------------
Value America Inc. $100.00 $ 22.01
S&P 500 Stock Index $100.00 $115.30
Peer Group Index $100.00 $ 63.49
RELATED PARTY TRANSACTIONS
During 1999, Value America issued 6,000,000 shares of Series C preferred
stock and warrants to purchase 1,800,000 shares of common stock to Vulcan
Ventures Incorporated, a Washington corporation, FDX Corporation, a Delaware
corporation, and Frederick W. Smith, a director of Value America for an
aggregate purchase price of $60,000,000. In connection with its initial public
offering, Value America issued warrants to purchase an aggregate of 511,567 to
certain existing stockholders, including Vulcan Ventures Incorporated, a holder
of Series B preferred stock, and William D. Savoy, a director of Value America.
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In 1999, Value America paid approximately $388,000 on behalf of Craig A.
Winn and Rex Scatena, former executive officers and directors of Value America,
to cover a portion of its allocated share of the operating and maintenance
expenses of a Hawker 800A aircraft acquired by Messrs. Winn and Scatena in their
individual capacity that they made available to Value America for its business
use. Value America also paid $200,000 towards a deposit required under a
trade-up agreement entered into by Messrs. Winn and Scatena to acquire, in
exchange for the aircraft then in use, two additional and more advanced Hawker
aircraft that were scheduled for delivery in December 1999 and December 2002,
respectively. In December, 1999, the manufacturer repurchased the Hawker 800A
aircraft and agreed to terminate and release Messrs. Winn and Scatena from their
obligations under the trade-up arrangement to acquire the two additional
aircraft in exchange for the forfeiture of the deposits made for each aircraft.
Messrs. Winn and Scatena have claimed they are owed an additional $400,000 by
Value America in connection with the acquisition and use of the aircraft. While
Value America vigorously disputes their claim for this amount, it nevertheless
accrued in 1999 a reasonable reserve against any further obligations it may have
in connection with this matter. Value America is negotiating with Messrs. Winn
and Scatena to resolve the dispute over this additional amount and certain other
amounts Value America paid to or on behalf of Messrs. Winn and Scatena in
connection with the dispute involving the aircraft.
PROPOSAL 2: APPROVE THE VALUE AMERICA 1999 STOCK INCENTIVE PLAN, AS AMENDED
We are asking you to approve the Value America 1999 Stock Incentive Plan
that was adopted by the Board on July 15, 1999. As adopted, the plan made
available up to 2,350,000 shares of common stock for granting restricted stock
awards and stock options in the form of incentive stock options and
non-statutory stock options to employees, directors and consultants of Value
America. On May 30, 2000, the Board of Directors voted to approve an amendment
to the plan to increase the aggregate number of shares of common stock that may
be offered under the plan from 2,350,000 to 12,350,000 shares.
The more significant features of the plan are described below. If you would
like a copy of the plan, please make a written request to the Secretary of Value
America. In addition, you may obtain a copy online from the Securities and
Exchange Commission website at www.sec.gov.
Purpose
The purpose of the plan is to promote the success of Value America by
providing greater incentive to employees, directors and consultants to associate
their personal interests with the long-term financial success of Value America
and with growth in stockholder value. The plan is designed to provide
flexibility to us in our ability to motivate, attract, and retain the services
of employees, directors and consultants upon whose judgment, interest, and
special effort the successful conduct of our operations largely depends. The
plan terminates on July 14, 2009, unless sooner terminated by the Board of
Directors.
Administration
The plan is administered by the Compensation Committee. The Committee has
the power to select plan participants and to grant stock options and stock
awards on terms the Committee considers appropriate. In addition, the Committee
has the authority to interpret the plan, to adopt, amend or waive rules or
regulations for the plan's administration, and to make all other determinations
for administration of the plan.
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Stock Options
Stock options granted under the plan may be incentive stock options or
non-statutory stock options. A stock option entitles the employee to purchase
shares of common stock at the option price. The Committee will fix the option
price at the time the stock option is granted, but in the case of an incentive
stock option the exercise price cannot be less than 100% of the shares' fair
market value on the date of grant (or, in the case of an incentive stock option
granted to a 10% shareholder of the company, 110% of the shares fair market
value on the date of grant). The value in incentive stock options, based on the
exercise price, that can be exercisable for the first time in any calendar year
under the plan or any other similar plan maintained by Value America is limited
to $100,000. The option price may be paid in cash or with shares of common
stock, or a combination of cash and common stock. Stock options may be exercised
at such times and subject to such conditions as may be prescribed by the
Committee, including the requirement that they will not be exercisable after ten
years from the grant date.
Restricted Stock Awards
The plan permits the grant of restricted stock awards (shares of common
stock) to plan participants. A restricted stock award may be, but is not
required to be, forfeitable or otherwise restricted until certain conditions are
satisfied. These conditions may include, for example, a requirement that the
plan participant complete a specified period of service or that certain
objectives be achieved. Any restriction imposed on a restricted stock award will
be determined by the Committee.
Transferability
In general, stock options and restricted stock awards granted may not be
assigned, transferred, pledged or otherwise encumbered by a participant, other
than by will or the laws of descent and distribution.
Shares Subject to the Plan
Up to 12,350,000 shares of common stock may be issued to plan participants
under the plan. No stock options or restricted stock awards have been granted
under the plan. The maximum number of shares with respect to which stock options
or restricted stock may be granted under the plan in any calendar year to an
employee is 500,000 shares.
In general, if any stock option or restricted stock award granted
terminates, expires or lapses for any reason other than as a result of being
exercised, or if shares issued pursuant to the plan are forfeited, the common
stock subject to the stock option or restricted stock award will be available
for further stock options and awards.
Certain Federal Income Tax Consequences
Generally, no federal income tax liability is incurred by a plan
participant at the time a stock option is granted. If the stock option is an
incentive stock option, no income will be recognized upon the participant's
exercise of the stock option. Income is recognized by participant when he or she
disposes of shares acquired under an incentive stock option. The exercise of a
non-statutory stock option generally is a taxable event that requires the
participant to recognize, as ordinary income, the difference between the shares'
fair market value and the option exercise price.
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For restricted stock awards, income is recognized by a participant when the
shares first become transferable or are no longer subject to a substantial risk
of forfeiture. At that time, the participant recognizes income equal to the fair
market of the common stock.
Value America will be entitled to claim a federal business expense tax
deduction on account of the exercise of a non-statutory stock option or the
vesting of a restricted stock award. The amount of the deduction is equal to the
ordinary income recognized by the participant. Value America generally will not
be entitled to a federal income tax deduction on account of the grant or
exercise of an incentive stock option, but may claim a federal income tax
deduction on account of certain disqualifying dispositions of stock acquired
upon the exercise of an incentive stock option.
Changes in Capitalization and Similar Changes
In the event of any change in the outstanding shares of common stock by
reason of any stock dividend, stock split, recapitalization or otherwise, the
aggregate number of shares of common stock reserved under the plan, and the
terms, exercise price and number of shares of any outstanding stock options or
restricted stock awards will be equitably adjusted by the Committee in its
discretion to preserve the benefits of the stock options and stock awards for
plan participants. For instance, a two-for-one stock split would double the
number of shares reserved under the plan. Similarly, for outstanding stock
options it would double the number of shares covered by each stock option and
reduce its exercise price by one-half.
Option Grants
The following table provides as of June 6, 2000, certain information with
respect to all options granted under the plan since it was adopted in July 1999
to (a) the current executive officers named in the Summary Compensation Table on
page 9, (b) all of our current executive officers as a group, (c) all of our
current directors who are not executive officers as a group and (d) all
employees, including all current officers who are not executive officers, as a
group. As of June 6, 2000, the closing price of our common stock as reported on
the Nasdaq National Market was $1.9375.
<TABLE>
<CAPTION>
<S> <C> <C>
Value America 1999 Stock Incentive Plan
Number of Shares Weighted Average
Covered by Exercise Price
Name Options Granted Per Share
Glenda M. Dorchak...................................... 575,000 $2.09
Paul F. Ewert.......................................... 500,000 1.50
Thomas J. Starnes...................................... 350,000 1.50
John A. Steele ........................................ 50,000 6.03
All current executive officers as a group.............. 3,085,000 1.83
All current directors who are not executive
officers as a group................................. 255,000 9.72
All employees, including all current officers who are
not executive officers, as a group.................. 4,368,950 4.33
</TABLE>
21
<PAGE>
Vote Required
Approval of the plan requires that more shares of common stock vote in
favor of the plan than against it.
The Board of Directors recommends the approval of the Value America 1999
Stock Incentive Plan, and proxies solicited by the Board will be voted in favor
thereof unless a stockholder has indicated otherwise on the proxy.
PROPOSAL 3: RATIFY SELECTION OF INDEPENDENT AUDITORS FOR THE YEAR ENDING
DECEMBER 31, 2000
We are asking you to ratify the Board of Director's selection of
PricewaterhouseCoopers LLP, certified public accountants, as independent
auditors for the fiscal year ending December 31, 2000. PricewaterhouseCoopers
audited our financial statements for the fiscal year ended December 31, 1999,
and has served as the independent auditors of Value America since 1998.
A representative of PricewaterhouseCoopers will be available at the Annual
Meeting to answer your questions.
We are submitting this proposal to you because we believe that such action
follows sound corporate practice. If you do not ratify the selection of
PricewaterhouseCoopers as independent auditors, the Board of Directors will
consider selecting other auditors. However, even if you ratify the selection,
the Board of Directors may still appoint new independent auditors at any time
during the next fiscal year if it believes that such a change will be in the
best interests of Value America and our stockholders.
Approval of the ratification of the appointment of PricewatershouseCoopers
requires that more shares of common stock vote in favor of the proposal than
against it.
The Board of Directors recommends the approval of the ratification of the
appointment of PricewaterhouseCoopers LLP, and proxies solicited by the Board
will be voted in favor thereof unless a stockholder has indicated otherwise on
the proxy.
OTHER MATTERS
Section 16(a) Beneficial Ownership Reporting Compliance
Based upon review of records received by the Company, all reports required
to be filed pursuant to Section 16(a) of the Securities Exchange Act of 1934
were filed on a timely basis in 1999 except that Messrs. Bennett, Casey, Keith,
Roche and Schmitt and Ms. Dorchak were each late in filing a report with respect
to an August 1999 transaction.
Information About Stockholder Proposals
To be considered for inclusion in our proxy statement relating to the 2001
Annual Meeting of Stockholders, stockholder proposals must be received no later
than February 16, 2001. To be considered for presentation at such meeting,
although not included in our proxy statement, proposals must comply with our
Bylaws and must be received no later than March 18, 2001. All stockholder
proposals should be marked for the attention of Secretary, Value America, Inc.,
337 West Rio Road, Charlottesville, Virginia 22901.
22
<PAGE>
Annual Report on Form 10-K
In compliance with applicable regulations, our financial statements and
other required disclosures are presented in our 1999 Annual Report Form 10-K, as
amended, a copy of which is contained in the package that included the Proxy
Statement, and which reflects our financial condition on December 31, 1999.
Whether or not you intend to be present at the meeting, you are urged to
fill out, sign, date and return the enclosed proxy at your earliest convenience.
By Order of the Board of Directors:
William A. Pusey, Jr.
Secretary
June 16, 2000
23
<PAGE>
Appendix A
VALUE AMERICA, INC.
1999 Stock Incentive Plan
1. Purpose and Effective Date.
--------------------------
(a) The purpose of the Value America, Inc. 1999 Stock
Incentive Plan (the "Plan") is to further the long term stability and financial
success of Value America, Inc. (the "Company") by attracting and retaining
personnel, including employees, directors and consultants, through the use of
stock incentives. The Company believes that ownership of Company stock will
stimulate the efforts of those persons upon whose judgment, interest and efforts
the Company is and will be largely dependent for the successful conduct of its
business and will further the identification of those persons' interests with
the interests of the Company's shareholders.
(b) The Plan was adopted by the Board of Directors of the
Company on July 15, 1999, and shall become effective on July 15, 1999, subject
to the approval of the Plan by the Company's shareholders.
2. Definitions.
-----------
(a) Act. The Securities Exchange Act of 1934, as amended.
(b) Applicable Withholding Taxes. The aggregate amount of
federal, state and local income and payroll taxes that the Company is required
to withhold in connection with any exercise of an Option or the award, lapse of
restrictions or payment with respect to Restricted Stock.
(c) Award. The award of an Option or Restricted Stock
under the Plan.
(d) Company. Value America, Inc., a Virginia corporation.
(e) Company Stock. Common stock of the Company. If the par
value of the Company Stock is changed, or in the event of a change in the
capital structure of the Company (as provided in Section 13 below), the shares
resulting from such a change shall be deemed to be Company Stock within the
meaning of the Plan.
(f) Board. The Board of Directors of the Company.
(g) Change of Control.
(i) The Acquisition by any Person (as defined below)
of beneficial ownership of 50% or more of the then outstanding
shares of common stock of the Company;
<PAGE>
(ii) Individuals who constitute the Board on the
effective date of this Plan (the "Incumbent Board") cease to
constitute a majority of the Board, provided that any director
whose nomination was approved by a vote of at least two-thirds
of the directors then comprising the Incumbent Board will be
considered a member of the Incumbent Board, but excluding any
such individual whose initial assumption of office is in
connection with an actual or threatened election contest
relating to the election of the directors of the Company (as
such terms are used in Rule 14a-11 promulgated under the Act);
(iii) Approval by the shareholders of the Company of
a reorganization, merger, share exchange or consolidation (a
"Reorganization"), provided that shareholder approval of a
Reorganization will not constitute a Change in Control if,
upon consummation of the Reorganization, each of the following
conditions is satisfied:
(x) no Person beneficially owns 20% or more of
either (1) the then outstanding shares of common stock of
the corporation resulting from the transaction or (2)
the combined voting power of the then outstanding voting
securities of such corporation entitled to vote
generally in the election of directors; and
(y) at least a majority of the members of the
board of directors of the corporation resulting from the
Reorganization were members of the Incumbent Board at the time
of the execution of the initial agreement providing for the
Reorganization.
(iv) Approval by the shareholders of the Company of a
complete liquidation or dissolution of the Company, or of the
sale or other disposition of all or substantially all of the
assets of the Company.
(v) For purposes of this Section 2(g), "Person" means
any individual, entity or group (within the meaning of Section
13(d)(3) of the Act, other than any employee benefit plan (or
related trust) sponsored or maintained by the Company or any
affiliated company, and "beneficial ownership" has the meaning
given the term in Rule 13d-3 under the Act.
(h) Code. The Internal Revenue Code of 1986, as amended.
(i) Committee. The Committee appointed to administer the
Plan pursuant to Plan Section 15, or if no such Committee has been appointed,
the Board.
(j) Consultant. A person or entity rendering services to
the Company who is not an "employee" for purposes of employment tax withholding
under the Code.
(k) Date of Grant. The effective date of an Award
granted by the Committee.
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<PAGE>
(l) Disability or Disabled. As to an Incentive Stock Option a
Disability within the meaning of Code Section 22(e)(3). As to all other
Incentive Awards, the Committee shall determine whether a Disability exists and
such determination shall be conclusive.
(m) Fair Market Value. If the Company Stock is listed on any
established stock exchange or quoted on the NASDAQ stock market system, its Fair
Market Value shall be the closing price for such Stock on the Date of Grant as
reported by such exchange or the NASDAQ stock market system, or, if there are no
trades on such date, the value shall be determined as of the last preceding day
on which the Company Stock was traded. Fair Market Value shall be determined as
of the Date of Grant specified in the Award.
(n) Incentive Stock Option. An Option intended to meet
the requirements of, and qualify for favorable Federal income tax treatment
under, Code Section 422.
(o) Nonstatutory Stock Option. An Option that does not
meet the requirements of Code Section 422, or that isotherwise not intended to
be an Incentive Stock Option and is so designated.
(p) Option. A right to purchase Company Stock granted
under the Plan, at a price determined in accordance with the Plan.
(q) Participant. Any individual who is granted an Award
under the Plan.
(r) Reload Feature. A feature of an Option described in
a Participant's Option agreement that provides for the automatic grant of a
Reload Option in accordance with the provisions of Plan Section 9.
(s) Reload Option. An Option granted to a Participant
equal to the number of shares already owned Company Stock delivered by the
Participant to exercise an Option described in Section 9.
(t) Restricted Stock. Company Stock awarded upon the
terms and subject to the restrictions set forth in Section 7 below.
(u) Rule 16b-3. Rule 16b-3 promulgated under the Act,
including any corresponding subsequent rule or any amendments to Rule 16b-3
enacted after the effective date of the Plan.
(v) 10% Shareholder. A person who owns, directly or
indirectly, stock possessing more than 10% of the total combined voting power of
all classes of stock of the Company or any parent or subsidiary of the Company.
Indirect ownership of stock shall be determined in accordance with Code Section
424(d).
A-3
<PAGE>
3. General. Awards of Options or Restricted Stock may be granted
under the Plan. Options granted under the Plan may be Incentive Stock Options
or Nonstatutory Stock Options.
4. Stock. Subject to Section 13 of the Plan, there shall be reserved
for issuance under the Plan an aggregate of 2,350,000 shares of Company Stock,
which may include authorized, but unissued, shares. Shares allocable to Options
granted under the Plan that expire or otherwise terminate unexercised and shares
that are forfeited pursuant to restrictions on Restricted Stock awarded under
the Plan may again be subjected to an Award under this Plan. For purposes of
determining the number of shares that are available for Awards under the Plan,
such number shall include the number of shares surrendered by a Participant or
retained by the Company (a) in connection with the exercise of an Option or (b)
in payment of Applicable Withholding Taxes.
5. Eligibility.
(a) Any employee of, director, or Consultant to the Company
who, in the judgment of the Committee, has contributed or can be expected to
contribute to the profits or growth of the Company is eligible to become a
Participant. The Committee shall have the power and complete discretion, as
provided in Section 15, to select eligible Participants and to determine for
each Participant the terms, conditions and nature of the Award and the number of
shares to be allocated as part of the Award; provided, however, that any award
made to a member of the Committee must be approved by the Board. The Committee
is expressly authorized to make an Award to a Participant conditioned on the
surrender for cancellation of an existing Award.
(b) The grant of an Award shall not obligate the Company to
pay an employee any particular amount of remuneration, to continue the
employment of the employee after the grant or to make further grants to the
employee at any time thereafter.
(c) Non-employee directors and Consultants shall not be
eligible to receive the Award of an Incentive Stock Option.
(d) The maximum number of shares with respect to which an
Award may be granted in any calendar year to any employee during such calendar
year shall be 300,000 shares.
6. Stock Options.
(a) Whenever the Committee deems it appropriate to grant
Options, notice shall be given to the Participant stating the number of shares
for which Options are granted, the exercise price per share, whether the options
are Incentive Stock Options or Nonstatutory Stock Options, and the conditions to
which the grant and exercise of the Options are subject. This notice, when duly
accepted in writing by the Participant, shall become a stock option agreement
between the Company and the Participant.
A-4
<PAGE>
(b) The Committee shall establish the exercise price of
Options. The exercise price of an Incentive Stock Option shall be not less than
100% of the Fair Market Value of such shares on the Date of Grant, provided that
if the Participant is a 10% Shareholder, the exercise price of an Incentive
Stock Option shall be not less than 110% of the Fair Market Value of such shares
on the Date of Grant. The exercise price of Nonstatutory Stock Option Awards
intended to be performance-based for purposes of Code Section 162(m) shall not
be less than 100% of the Fair Market Value of such shares on the Date of Grant.
(c) Subject to subsection (d) below, Options may be exercised
in whole or in part at such times as may be specified by the Committee in the
Participant's stock option agreement. The Committee may impose such vesting
conditions and other requirements as the Committee deems appropriate, and the
Committee may include such provisions regarding a Change of Control as the
Committee deems appropriate.
(d) The Committee shall establish the term of each Option in
the Participant's stock option agreement. The term of an Incentive Stock Option
shall not be longer than ten years from the Date of Grant, except that an
Incentive Stock option granted to a 10% Shareholder shall not have a term in
excess of five years. No option may be exercised after the expiration of its
term or, except as set forth in the Participant's stock option agreement, after
the termination of the Participant's employment. The Committee shall set forth
in the Participant's stock option agreement when, and under what circumstances,
an Option may be exercised after termination of the Participant's employment or
period of service; provided that no Incentive Stock Option may be exercised
after (i) three months from the Participant's termination of employment with the
Company for reasons other than Disability or death, or (ii) one year from the
Participant's termination of employment on account of Disability or death. The
Committee may, in its sole discretion, amend a previously granted Incentive
Stock Option to provide for more liberal exercise provisions, provided however
that if the Incentive Stock Option as amended no longer meets the requirements
of Code Section 422, and, as a result the Option no longer qualifies for
favorable federal income tax treatment under Code Section 422, the amendment
shall not become effective without the written consent of the Participant.
(e) An Incentive Stock Option, by its terms, shall be
exercisable in any calendar year only to the extent that the aggregate Fair
Market Value (determined at the Date of Grant) of the Company Stock with respect
to which Incentive Stock Options are exercisable by the Participant for the
first time during the calendar year does not exceed $100,000 (the "Limitation
Amount"). Incentive Stock Options granted under the Plan and all other plans of
the Company and any parent or subsidiary of the Company shall be aggregated for
purposes of determining whether the Limitation Amount has been exceeded. The
Board may impose such conditions as it deems appropriate on an Incentive Stock
option to ensure that the foregoing requirement is met. If Incentive Stock
Options that first become exercisable in a calendar year exceed the Limitation
Amount, the excess Options will be treated as Nonstatutory Stock Options to the
extent permitted by law.
A-5
<PAGE>
(f) If a Participant dies and if the Participant's stock
option agreement provides that part or all of the Option may be exercised after
the Participant's death, then such portion may be exercised by the personal
representative of the Participant's estate during the time period specified in
the stock option agreement.
7. Restricted Stock Awards.
(a) Whenever the Committee deems it appropriate to grant a
Restricted Stock Award, notice shall be given to the Participant stating the
number of shares of Restricted Stock for which the Award is granted, the Date of
Grant, and the terms and conditions to which the Award is subject. Certificates
representing the shares shall be issued in the name of the Participant, subject
to the restrictions imposed by the Plan and the Committee. A Restricted Stock
Award may be made by the Committee in its discretion without cash consideration.
(b) The Committee may place such restrictions on the
transferability and vesting of Restricted Stock as the Committee deems
appropriate, including restrictions relating to continued employment and
financial performance goals. Without limiting the foregoing, the Committee may
provide performance or Change of Control acceleration parameters under which
all, or a portion, of the Restricted Stock will vest on the Company's
achievement of established performance objectives. Restricted Stock may not be
sold, assigned, transferred, disposed of, pledged, hypothecated or otherwise
encumbered until the restrictions on such shares shall have lapsed or shall have
been removed pursuant to subsection (c) below.
(c) The Committee shall establish as to each Restricted Stock
Award the terms and conditions upon which the restrictions on transferability
set forth in paragraph (b) above shall lapse. Such terms and conditions may
include, without limitation, the passage of time, the meeting of performance
goals, the lapsing of such restrictions as a result of the Disability, death or
retirement of the Participant, or the occurrence of a Change of Control.
(d) A Participant shall hold shares of Restricted Stock
subject to the restrictions set forth in the Award agreement and in the Plan. In
other respects, the Participant shall have all the rights of a shareholder with
respect to the shares of Restricted Stock, including, but not limited to, the
right to vote such shares and the right to receive all cash dividends and other
distributions paid thereon. Certificates representing Restricted Stock shall
bear a legend referring to the restrictions set forth in the Plan and the
Participant's Award agreement. If stock dividends are declared on Restricted
Stock, such stock dividends or other distributions shall be subject to the same
restrictions as the underlying shares of Restricted Stock.
8. Method of Exercise of Options.
(a) Options may be exercised by giving written notice of the
exercise to the Company, stating the number of shares the Participant has
elected to purchase under the Option. Such notice shall be effective only if
accompanied by the exercise price in full in cash; provided that, if the terms
of an Option so permit, the Participant may (i) deliver Company Stock that the
Participant has previously acquired and owned (valued at Fair Market Value on
the date of exercise), or cause shares of Company Stock (valued at their Fair
Market Value on the date of exercise) to be withheld in satisfaction of all or
any part of the exercise price, or (ii) deliver a properly executed exercise
notice together with irrevocable instructions to a broker to deliver promptly to
the Company, from the sale or loan proceeds with respect to the sale of Company
Stock or a loan secured by Company Stock, the amount necessary to pay the
exercise price and, if required by the Committee, Applicable Withholding Taxes.
A-6
<PAGE>
(b) The Company may place on any certificate representing
Company Stock issued upon the exercise of an Option any legend deemed desirable
by the Company's counsel to comply with federal or state securities laws. The
Company may require of the Participant a customary indication of his or her
investment intent. A Participant shall not possess shareholder rights with
respect to shares acquired upon the exercise of an Option until the Participant
has made any required payment, including payment of Applicable Withholding
Taxes, and the Company has issued a certificate for the shares of Company Stock
acquired.
(c) Notwithstanding anything herein to the contrary, Awards
shall always be granted and exercised in such a manner as to conform to the
provisions of Rule 16b-3.
9. Reload Option.
(a) If a Participant exercises an Option that has a Reload
Feature by delivering already owned shares of Company Stock, the Participant
shall automatically be granted a Reload Option. The Reload Option shall be
subject to the following provisions:
(i) The Reload Option shall cover the number of
shares of Company Stock delivered by the Participant to
exercise the Option with the Reload Feature.
(ii) The Reload Option will not have a Reload
Feature.
(iii) The exercise price of shares of Company Stock
covered by the Reload Option shall be 100% of the Fair Market
Value of such shares on the date the Participant delivers
shares of Company Stock to the Company to exercise the Option
that has the Reload Feature.
(iv) The Reload Option shall be subject to the same
restrictions as those imposed on the underlying Option with
the Reload Feature.
(v) The Reload Option shall not be exercisable until
the expiration of any retention holding period imposed on the
disposition of any shares of Company Stock covered by the
underlying Option with the Reload Feature.
(b) If a Participant in the Value America 1997 Stock Incentive
Plan (the "1997 Plan") exercises an Option with a Reload Feature granted
pursuant to the 1997 Plan, and the number of authorized shares available under
the 1997 Plan is insufficient to grant the Reload Option, the Reload Option
shall be granted pursuant to this Plan. The Reload Option shall be granted
subject to the provisions of subsection (a) above.
A-7
<PAGE>
10. Applicable Withholding Taxes. Each Participant shall agree, as a
condition of receiving an Award, to pay to the Company, or make arrangements
satisfactory to the Company regarding the payment of, all Applicable Withholding
Taxes with respect to the Award. Until the Applicable Withholding Taxes have
been paid or arrangements satisfactory to the Company have been made, no stock
certificates (or, in the case of Restricted Stock, no stock certificates free of
a restrictive legend) shall be issued to the Participant. As an alternative to
making a cash payment to the Company to satisfy Applicable Withholding Tax
obligations, the Committee may establish procedures permitting the Participant
to elect to (a) deliver shares of already owned Company Stock or (b) have the
Company retain that number of shares of Company Stock that would satisfy all or
a specified portion of the Applicable Withholding Taxes. Any such election shall
be made only in accordance with procedures established by the Committee and in
accordance with Rule 16b-3.
11. Nontransferability of Awards.
(a) In general, Awards, by their terms, shall not be
transferable by the Participant except by will or by the laws of descent and
distribution or except as described below. Options shall be exercisable, during
the Participant's lifetime, only by the Participant or by his guardian or legal
representative.
(b) Notwithstanding the provisions of (a) and subject to
federal and state securities laws, the Committee may grant or amend Nonstatutory
Stock Options that permit a Participant to transfer the Options to one or more
immediate family members, to a trust for the benefit of immediate family
members, or to a partnership, limited liability company, or other entity the
only partners, members, or interest-holders of which are among the Participant's
immediate family members. Consideration may not be paid for the transfer of
Options. The transferee of an Option shall be subject to all conditions
applicable to the Option prior to its transfer. The agreement granting the
Option shall set forth the transfer conditions and restrictions. The Committee
may impose on any transferable Option and on stock issued upon the exercise of
an Option such limitations and conditions as the Committee deems appropriate.
12. Termination, Modification, Change. If not sooner terminated by the
Board, this Plan shall terminate at the close of business on the July 14, 2009.
No Awards shall be made under the Plan after its termination. The Board may
terminate the Plan or may amend the Plan in such respects as it shall deem
advisable; provided, that, unless authorized by the Company's shareholders, no
change shall be made that (a) increases the total number of shares of Company
Stock reserved for issuance pursuant to Awards granted under the Plan (except
pursuant to Section 13), (b) expands the class of persons eligible to receive
Awards, (c) materially increases the benefits accruing to Participants under the
Plan, or (d) otherwise requires shareholder approval under the Code, Rule 16b-3,
or the rules of a domestic exchange on which Company Stock is traded.
Notwithstanding the foregoing, the Board may unilaterally amend the Plan and
Awards as it deems appropriate to ensure compliance with Rule 16b-3 and to cause
Incentive Stock Options to meet the requirements of the Code and regulations
thereunder. Except as provided in the preceding sentence, a termination or
amendment of the Plan shall not, without the consent of the Participant,
adversely affect a Participant's rights under an Award previously granted to
him.
A-8
<PAGE>
13. Change in Capital Structure.
(a) In the event of a stock dividend, stock split or
combination of shares, spin-off, recapitalization or merger in which the Company
is the surviving corporation, or other change in the Company's capital stock
(including, but not limited to, the creation or issuance to shareholders
generally of rights, options or warrants for the purchase of common stock or
preferred stock of the Company), the number and kind of shares of stock or
securities of the Company to be issued under the Plan (under outstanding Awards
and Awards to be granted in the future), the exercise price of options, and
other relevant provisions shall be appropriately adjusted by the Committee,
whose determination shall be binding on all persons. If the adjustment would
produce fractional shares with respect to any Award, the Committee may adjust
appropriately the number of shares covered by the Award so as to eliminate the
fractional shares.
(b) In the event the Company distributes to its shareholders a
dividend, or sells or causes to be sold to a person other than the Company or a
subsidiary shares of stock in any corporation (a "Spinoff Company") which,
immediately before the distribution or sale, was a majority owned Subsidiary of
the Company, the Committee shall have the power, in its sole discretion, to make
such adjustments as the Committee deems appropriate. The Committee may make
adjustments in the number and kind of shares or other securities to be issued
under the Plan (under outstanding Awards and Awards to be granted in the
future), the exercise price of Options, and other relevant provisions, and,
without limiting the foregoing, may substitute securities of a Spinoff Company
for securities of the Company. The Committee shall make such adjustments as it
determines to be appropriate, considering the economic effect of the
distribution or sale on the interests of the Company's shareholders and the
Participants in the businesses operated by the Spinoff Company. The Committee's
determination shall be binding on all persons. If the adjustment would produce
fractional shares with respect to any Award, the Committee may adjust
appropriately the number of shares covered by the Award so as to eliminate the
fractional shares.
(c) Notwithstanding anything in the Plan to the contrary, the
Committee may take the foregoing actions without the consent of any Participant,
and the Committee's determination shall be conclusive and binding on all persons
for all purposes. The Committee shall make its determinations consistent with
Rule 16b-3 and the applicable provisions of the Code.
14. Change in Control. In the event of a Change in Control of the
Company, the Committee, as constituted before such Change in Control, in its
sole discretion may, as to any outstanding Award, either at the time the Award
is made or any time thereafter, take any one or more of the following actions:
A-9
<PAGE>
(a) Provide for the acceleration of any time periods relating
to the exercise or realization of any such Award so that such Award may be
exercised or realized in full on or before a date initially fixed by the
Committee;
(b) Provide for the purchase or settlement of any such Award
by the Company, upon a Participant's request, for any amount of cash equal to
the amount which could have been obtained upon the exercise of such Award or
realization of such Participant's rights had such Award been currently
exerciseable or payable;
(c) Make such adjustment to any such Award then
outstanding as the Committee deems appropriate to reflect such Change in
Control; or
(d) Cause any such Award then outstanding to be assumed, or
new rights substituted therefor, by the acquiring or surviving corporation in
such Change of Control.
15. Administration of the Plan.
(a) The Plan shall be administered by the Committee, who shall
be appointed by the Board. If no Committee is appointed, the Plan shall be
administered by the Board. To the extent required by Rule 16b-3, all Awards
shall be made by members of the Committee who are "Non-Employee Directors" as
that term is defined in Rule 16b-3, or by the Board. Awards that are intended to
be performance-based for purposes of Code section 162(m) shall be made by a
Committee, or subcommittee of the Committee, comprised solely of two or more
"outside directors" as that term is defined for purposes of Code section 162(m).
(b) The Committee shall have the authority to impose such
limitations or conditions upon an Award as the Committee deems appropriate to
achieve the objectives of the Award and the Plan. Without limiting the foregoing
and in addition to the powers set forth elsewhere in the Plan, the Committee
shall have the power and complete discretion to determine (i) which eligible
persons shall receive an Award and the nature of the Award, (ii) the number of
shares of Company Stock to be covered by each Award, (iii) whether Options shall
be Incentive Stock options or Nonstatutory Stock Options, (iv) the Fair Market
Value of Company Stock, (v) the time or times when an Award shall be granted,
(vi) whether an Award shall become vested over a period of time, according to a
performance-based vesting schedule or otherwise, and when it shall be fully
vested, (vii) the terms and conditions under which restrictions imposed upon an
Award shall lapse, (viii) whether a Change of Control exists, (ix) whether to
include a Reload feature in an Option; (x) factors relevant to the lapse of
restrictions on Restricted Stock or Options, (xi) when Options may be exercised,
(xii) whether to approve a Participant's election with respect to Applicable
Withholding Taxes, (xiii) conditions relating to the length of time before
disposition of Company Stock received in connection with an Award is permitted,
(xiv) notice provisions relating to the sale of Company Stock acquired under the
Plan, and (xv) any additional requirements relating to Awards that the Committee
deems appropriate. Notwithstanding the foregoing, no "tandem stock options"
(where two stock options are issued together and the exercise of one option
affects the right to exercise the other option) may be issued in connection with
Incentive Stock Options.
A-10
<PAGE>
(c) The Committee shall have the power to amend the terms of
previously granted Awards so long as the terms as amended are consistent with
the terms of the Plan and, where applicable, consistent with the qualification
of an option as an Incentive Stock Option. The consent of the Participant must
be obtained with respect to any amendment that would adversely affect the
Participant's rights under the Award, except that such consent shall not be
required if such amendment is for the purpose of complying with Rule 16b-3 or
any requirement of the Code applicable to the Award.
(d) The Committee may adopt rules and regulations for carrying
out the Plan. The Committee shall have the express discretionary authority to
construe and interpret the Plan and the Award agreements, to resolve any
ambiguities, to define any terms, and to make any other determinations required
by the Plan or an Award agreement. The interpretation and construction of any
provisions of the Plan or an Award agreement by the Committee shall be final and
conclusive. The Committee may consult with counsel, who may be counsel to the
Company, and shall not incur any liability for any action taken in good faith in
reliance upon the advice of counsel.
(e) A majority of the members of the Committee shall
constitute a quorum, and all actions of the Committee shall be taken by a
majority of the members present. Any action may be taken by a written instrument
signed by all of the members, and any action so taken shall be fully effective
as if it had been taken at a meeting.
16. Notice. All notices and other communications required or permitted
to be given under this Plan shall be in writing and shall be deemed to have been
duly given if delivered personally, electronically, or mailed first class,
postage prepaid, as follows: (a) if to the Company - at its principal business
address to the attention of the Secretary; (b) if to any Participant - at the
last address of the Participant known to the sender at the time the notice or
other communication is sent.
17. Interpretation and Governing Law. The terms of this Plan and Awards
granted pursuant to the Plan shall be governed, construed and administered in
accordance with the laws of the Commonwealth of Virginia. The Plan and Awards
are subject to all present and future applicable provisions of the Code and, to
the extent applicable, they are subject to all present and future rulings of the
Securities and Exchange Commission with respect to Rule 16b-3. If any provision
of the Plan or an Award conflicts with any such Code provision or ruling, the
Committee shall cause the Plan to be amended, and shall modify the Award, so as
to comply, or if for any reason amendments cannot be made, that provision of the
Plan or the Award shall be void and of no effect.
A-11
<PAGE>
FIRST AMENDMENT
TO THE
VALUE AMERICA, INC. 1999 STOCK INCENTIVE PLAN
FIRST AMENDMENT, dated as of May 30, 2000, to the Value America, Inc. 1999
Stock Incentive Plan, by Value America, Inc. (the "Company").
The Company maintains the Value America, Inc. 1999 Stock Incentive Plan,
effective as of July 15, 1999, (the "Plan"). The Company has the power to amend
the Plan and now wishes to do so.
NOW, THEREFORE, the Plan is hereby amended as follows:
I. Effective May 30, 2000, Section 4 is amended to replace "2,350,000"
with "12,350,000."
II. In all respects not amended, the Plan is hereby ratified and confirmed.
<PAGE>
PROXY
Value America, Inc.
This Proxy is solicited on behalf of the Board of Directors.
The undersigned, revoking all prior proxies, hereby appoints Glenda M. Dorchak
and Michael J. Waide, as proxies, and each or either of them with full power of
substitution, and hereby authorizes them to represent and to vote, as designated
below, all the shares of common stock and Series D Preferred Stock of Value
America, Inc. held of record by the undersigned on May 20, 2000, at the Annual
Meeting of Stockholders to be held July 13, 2000, or any adjournment thereof, on
each of the following matters:
1. To elect directors to serve for the terms shown below, which expire at the
annual meetings of stockholders in 2001, 2002 and 2003:
[_] FOR all Nominees listed below [_] WITHHOLD AUTHORITY TO VOTE FOR
THOSE INDICATED BELOW
2001 Class: Glenda M. Dorchak, Gary D. LeClair, Michael R. Steed
2002 Class: William D. Savoy, Frederick W. Smith
2003 Class: Thomas J. Casey, Leroy Keith, Gerard R. Roche
INSTRUCTIONS: To withhold authority to vote for an individual nominee,
print the name of the Nominee in the space provided below.
________________________________________________________________________________
2. To approve the Value America 1999 Stock Incentive Plan, as amended:
[_] FOR [_} AGAINST [_] ABSTAIN
3. To ratify the selection by the Audit Committee of the Board of Directors of
PricewaterhouseCoopers LLP, independent certified public accountants, as
auditors of Value America for 2000:
[_] FOR [_} AGAINST [_] ABSTAIN
This Proxy, when properly executed, will be voted in the manner directed herein
by the undersigned stockholder. If no direction is made, this Proxy will be
voted "FOR" each proposal. All joint owners MUST sign.
Please sign exactly as your name appears hereon. When signing as attorney,
executor, administrator, trustee or guardian, please give full title as such.
DATED__________________________ ____________________________________
Signature
____________________________________
Signature (if jointly owned)
________________________________________________________________________________
Please indicate below whether you will be joining us for the meeting.
[_] I plan to attend [_] I do not plan to attend
PLEASE MARK, SIGN, DATE & RETURN THIS PROXY PROMPTLY IN ENCLOSED ENVELOPE.
