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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED) June 2, 2000
ETOYS INC.
(Exact Name of Registrant as Specified in Charter)
DELAWARE 0-25709 95-4633006
(State or Other Jurisdiction (Commission (I.R.S. Employer
of Incorporation) File Number) Identification No.)
3100 OCEAN PARK BLVD., SUITE 300, SANTA MONICA, CALIFORNIA 90405
(Address of Principal Executive Offices) (ZIP Code)
Registrant's telephone number, including area code:
(310) 664-8100
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ITEM 5. OTHER EVENTS
The Registrant is filing this current report on Form 8-K to make
generally available certain information concerning the Registrant's
management and for purposes of enabling the Registrant to incorporate the
following information in its Registration Statement on Form S-3. The
information set forth below is substantially similar to the information that
was previously filed by the Registrant in its Registration Statement on
Form S-1 (File No. 333-72469) pertaining to the initial public offering of its
common stock.
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth specific information regarding our executive
officers and directors as of September 30, 1999:
<TABLE>
<CAPTION>
NAME AGE POSITION(S)
---- -------- ------------------------------------------------------
<S> <C> <C>
Edward C. Lenk.................... 38 President, Chief Executive Officer and Uncle of the
Board
Steven J. Schoch.................. 41 Senior Vice President and Chief Financial Officer
John R. Hnanicek.................. 35 Senior Vice President and Chief Information Officer
Frank C. Han...................... 35 Senior Vice President of Product Development
Janine Bousquette................. 39 Senior Vice President of Marketing
Louis V. Zambello III............. 41 Senior Vice President of Operations
Matthew N. Glickman............... 33 Director
Peter C.M. Hart................... 48 Director
Tony A. Hung...................... 32 Director
Michael Moritz.................... 44 Director
Daniel J. Nova.................... 37 Director
</TABLE>
EDWARD C. LENK founded eToys and has served as our President, Chief
Executive Officer and a Director since June 1997. In December 1998, he was
appointed Uncle of the Board. Prior to founding eToys, from May 1994 to July
1996, Mr. Lenk was employed as Vice President of Strategic Planning at The Walt
Disney Company, where he was responsible for strategic planning and new business
development of Worldwide Attractions and Resorts. From May 1991 to May 1994, he
was a Director of Strategic Planning at The Walt Disney Company. Mr. Lenk
received a Bachelor of Arts SUMMA CUM LAUDE from Bowdoin College and a Masters
in Business Administration, with distinction, from Harvard Business School.
STEVEN J. SCHOCH has served as our Chief Financial Officer since
January 1999. Prior to joining us, from December 1995 to January 1999,
Mr. Schoch was Vice President and Treasurer of Times Mirror Company, a newspaper
and magazine publishing company. He also served as Chief Executive Officer and
President of a wholly owned subsidiary of Times Mirror Company dedicated to the
reduction and containment of costs of the parent company. From March 1991 to
October 1995, Mr. Schoch worked at The Walt Disney Company, most recently as
Vice President, Treasurer--Euro Disney S.C.A. Mr. Schoch received a Bachelor of
Science from Tufts University and a Masters in Business Administration from the
Amos Tuck School of Business Administration at Dartmouth College.
JOHN R. HNANICEK has served as our Chief Information Officer since
December 1998. Prior to joining us, from October 1996 to December 1998, he was
employed as Senior Vice President of Information Systems for Hollywood
Entertainment, Inc., a nationwide retail video chain. From January 1996 to
October 1996, Mr. Hnanicek served as Chief Information Officer for
Homeplace, Inc., a home furnishings chain. From 1990 to 1995, he served as
Senior Vice President of Information Systems and Logistics at OfficeMax, Inc., a
retail office supply outlet. Mr. Hnanicek holds a Bachelor of Science in
Computer Science and Accounting from Cleveland State University.
FRANK C. HAN has served as our Senior Vice President of Product Development
since January 1999. From February 1997 to January 1999, Mr. Han was our Chief
Operating Officer and Vice President of Finance. Prior to joining us, Mr. Han
worked at Union Bank of California, serving as Vice President of Interactive
Markets from January 1995 to February 1997 and as Director of Strategic Planning
from 1993 to 1995. Mr. Han received a Bachelor of Science CUM LAUDE from Yale
University and a Masters in Business Administration from the Stanford Graduate
School of Business.
JANINE BOUSQUETTE has served as our Senior Vice President of Marketing since
May 1999. Prior to joining us, from 1995 to May 1999, Ms. Bousquette worked at
PepsiCo Inc., a manufacturer of soft
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drinks, juices and snackfoods, serving most recently as Vice President of
Marketing and also serving as Vice President of Marketing for the Flavor Brands.
From 1982 to 1995, Ms. Bousquette worked in brand management at The Procter &
Gamble Company, a manufacturer of consumer products, serving most recently as
Senior Marketing Director. Ms. Bousquette received a Bachelor of Arts PHI BETA
KAPPA from the University of Michigan.
LOUIS V. ZAMBELLO III has served as our Senior Vice President of Operations
since December 1998. Prior to joining us, from 1984 to 1998, he held a variety
of positions at L.L. Bean, Inc., an outdoor retailer. Most recently,
Mr. Zambello served as Senior Vice President of Operations and Creative from
June 1998 to December 1998, as Senior Vice President of Operations from
December 1993 to June 1998, as Vice President of Merchandise Services and
Manufacturing from December 1991 to August 1993 and in a variety of other
positions since 1984. Mr. Zambello received a Bachelor of Arts MAGNA CUM LAUDE
from Cornell University and a Masters in Business Administration from Harvard
Business School.
MATTHEW N. GLICKMAN has served as a Director of eToys since July 1999.
Mr. Glickman co-founded BabyCenter and has served as its Chief Executive Officer
since October 1996. Prior to founding BabyCenter, he served as Product Manager
for Intuit Inc.'s Quicken personal finance software product and in other product
management roles at Intuit from July 1993 to October 1996. He previously served
as a consultant at Bain and Company. Mr. Glickman received a Bachelor of Arts,
Phi Beta Kappa, from Amherst College, a Master of Arts in Educational Policy
from the Stanford School of Education, and a Masters in Business Administration
from the Stanford Graduate School of Business.
PETER C.M. HART has served as a Director of eToys since October 1997. Since
January 1999, Mr. Hart has been a Managing Partner of Wildkin LLC, a distributor
of toys. Since November 1997, he has served as a business advisor to EdUsa, a
company that provides language instruction over the Internet. From 1983 to 1997,
he held a variety of positions at Ross Stores, Inc., an apparel retailer, most
recently as a Senior Vice President managing warehousing, distribution and MIS
operations. Previously, Mr. Hart was a Business Systems Analyst at Joseph Magnin
Department Store in San Francisco and at Rediffusion in Buckinghamshire,
England. Mr. Hart is a member of the Audit Committee of the Board of Directors.
TONY A. HUNG has served as a Director of eToys since December 1997. Since
1997, he has been a Vice President of DynaFund Ventures, a venture capital
partnership. Previously, Mr. Hung held a variety of positions at The Walt Disney
Company, serving as Manager of Corporate Strategic Planning from 1996 to 1997,
as Manager of Television and Telecommunications from 1995 to 1996, and as Senior
Analyst in the Corporate Treasury department from 1992 to 1995. Mr. Hung serves
on the boards of directors of a number of private companies. Mr. Hung holds a
Bachelor of Arts from Harvard University and a Masters in Business
Administration from The Anderson School at University of California at Los
Angeles. Mr. Hung is a member of the Audit Committee of the Board of Directors.
MICHAEL MORITZ has served as a Director of eToys since June 1998. He has
been a general partner of Sequoia Capital, a venture capital firm, since 1986.
Mr. Moritz serves as a director of Yahoo! Inc. and Flextronics International
Ltd., as well as several private companies. Mr. Moritz received a Master of Arts
degree from Oxford University and a Masters in Business Administration from the
Wharton School at the University of Pennsylvania. Mr. Moritz is a member of the
Compensation Committee of the Board of Directors.
DANIEL J. NOVA has served as a Director of eToys since June 1998. Since
August 1996, Mr. Nova has served as a general partner of Highland Capital
Partners, a venture capital firm. Previously, he was a general partner of
CMG@Ventures from January 1995 to August 1996 and a Senior Associate at Summit
Partners from June 1991 to January 1995. Mr. Nova is a director of Lycos, Inc.,
an online portal, and several private companies. Mr. Nova received a Bachelor of
Science in Computer Science and Marketing with honors from Boston College and a
Masters in Business Administration from
<PAGE>
Harvard Business School. Mr. Nova is a member of the Audit and Compensation
Committees of the Board of Directors.
Our Board of Directors currently consists of six members with one vacancy.
Currently, each director is elected for a period of one year at our annual
meeting of stockholders and serves until the next annual meeting or until his
successor is duly elected and qualified. Commencing at our first annual meeting
of stockholders following the date on which we have at least 800 stockholders,
which is expected to be the annual meeting held in 2000, our Certificate of
Incorporation provides for the Board of Directors to be divided into three
classes, with staggered three-year terms. As a result, following that time,
directors will serve for three-year terms and only one class of directors will
be elected at each annual meeting of stockholders.
Our executive officers serve at the discretion of the Board of Directors.
There are no family relationships among any of our directors or executive
officers.
BOARD COMMITTEES
Our Board of Directors established the Compensation Committee in
December 1998 and the Audit Committee in February 1999. The Compensation
Committee reviews and recommends to the Board of Directors the compensation and
benefits of all our officers and establishes and reviews general policies
relating to compensation and benefits of our employees. The Audit Committee
reviews our internal accounting procedures and consults with and reviews the
services provided by our independent accountants.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of our Compensation Committee of the Board of Directors are
currently Mr. Moritz and Mr. Nova, neither of whom has ever been an officer or
employee of eToys. Prior to establishing the Compensation Committee in
December 1998, the Board of Directors as a whole performed the functions
delegated to the Compensation Committee.
DIRECTOR COMPENSATION
Our directors do not currently receive any cash compensation from us for
their service as members of the Board of Directors, although they are reimbursed
for travel and lodging expenses in connection with attendance at Board and
Committee meetings. Under our 1997 Stock Plan, nonemployee directors are
eligible to receive stock option grants and stock purchase rights at the
discretion of the Board of Directors or other administrator of the plan. Under
our 1999 Directors' Stock Option Plan, non-employee directors are eligible to
receive automatic stock option grants upon their initial appointment and at each
of our annual stockholders meetings, as described more fully below under the
heading "Stock Plans." In September 1997 the Board of Directors granted
Mr. Hart an option to purchase 300,000 shares of common stock at $0.005 per
share in connection with his appointment as a member of the Board of Directors.
1/4th of the shares vested upon June 15, 1998 and 1/48th of the total number of
shares vest monthly from and after June 15, 1998. From January 1998 to June
1998, Mr. Hart provided us consulting services. In connection with these
services, Mr. Hart received aggregate payments of $39,000, reimbursement of his
expenses and an option to purchase 63,000 shares of common stock at $0.033 per
share. This option, which vested at the rate of 1/6th per month commencing upon
February 1, 1998, is fully vested.
EXECUTIVE COMPENSATION
The following table sets forth the compensation received for services
rendered to eToys during the fiscal years ended March 31, 1998 and March 31,
1999 by our (i) Chief Executive Officer, (ii) our four most highly compensated
executive officers who earned more than $100,000 during the fiscal year
<PAGE>
ended March 31, 1999, and (iii) one additional executive officer that joined
eToys after the end of fiscal 1998. These individuals are referred to in this
Offering Circular collectively as our named executive officers.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
ANNUAL COMPENSATION -------------
---------------------------------------- SECURITIES
FISCAL OTHER ANNUAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) COMPENSATION($) OPTIONS(#) COMPENSATION($)
--------------------------- -------- --------- --------- ---------------- ------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Edward C. Lenk ................ 1998 105,000 -- -- 3,000,000 --
President and Chief Executive
Officer
Louis V. Zambello III(1) ...... 1998 50,000 28,750 -- 825,000 --
Senior Vice President of
Operations
John R. Hnanicek(2) ........... 1998 37,500 15,000 -- 600,000 --
Senior Vice President and
Chief Information Officer
Steven J. Schoch(3) ........... 1998 20,833 4,167 -- 750,000 --
Senior Vice President and
Chief Financial Officer
Frank C. Han .................. 1998 93,750 10,000 -- 825,750 --
Senior Vice President of
Product Development
</TABLE>
------------------------------
(1) Louis V. Zambello III became Senior Vice President of Operations in
December 1998. On an annual basis, Mr. Zambello's salary would have been
$200,000. Mr. Zambello is entitled to a bonus of $115,000 which vests
monthly over the first year of his employment; the amount in the table
reflects the portion of his bonus that vested in fiscal 1998.
(2) John R. Hnanicek became Senior Vice President and Chief Information Officer
in December 1998. On an annual basis, Mr. Hnanicek's salary would have been
$150,000. Mr. Hnanicek was paid a bonus of $60,000 which vests monthly over
the first year of his employment; the amount in the table reflects the
portion of his bonus that vested in fiscal 1998.
(3) Steven J. Schoch became Senior Vice President and Chief Financial Officer in
January 1999. On an annual basis, Mr. Schoch's salary would have been
$125,000. Mr. Schoch is entitled to a bonus of $25,000 which vests monthly
over the first year of his employment; the amount in the table reflects the
portion of his bonus that vested in fiscal 1998.
We did not pay to our Chief Executive Officer or any named executive officer
any compensation intended to serve as incentive for performance to occur over a
period longer than one year pursuant to a long-term incentive plan in the fiscal
year ended March 31, 1999. We do not have any defined benefit or actuarial plan
with respect to our Chief Executive Officer or any named executive officer under
which benefits are determined primarily by final compensation and years of
service.
<PAGE>
OPTION GRANTS
The following table provides summary information regarding stock options
granted to our named executive officers during the fiscal year ended March 31,
1999.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-----------------------------------------------------------
PERCENT OF POTENTIAL REALIZABLE VALUE AT
NUMBER OF TOTAL ASSUMED ANNUAL RATES OF
SECURITIES OPTIONS STOCK PRICE APPRECIATION FOR
UNDERLYING GRANTED IN OPTION TERM(3)
OPTIONS FISCAL 1998 EXERCISE PRICE EXPIRATION -------------------------------
NAME GRANTED(#) (%)(1) ($/SHARE)(2) DATE 5% 10%
---- ----------- ----------- -------------- ---------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Edward C. Lenk................ 3,000,000(4) 21.25% $0.143 10/21/08 $ 43,279,730 $ 68,915,737
Louis V. Zambello III......... 825,000(5)(8) 5.84 1.667 12/31/08 9,854,812 15,692,141
John R. Hnanicek.............. 600,000(5) 4.25 1.667 12/31/08 7,167,136 11,412,466
Steven J. Schoch.............. 750,000(6)(9) 5.31 3.333 1/31/09 6,922,802 11,023,405
Frank C. Han.................. 825,000(4) 5.84 0.143 10/21/08 11,901,925 18,951,827
750(7) 0.01 2.833 1/31/09 7,533 11,996
</TABLE>
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(1) We granted options for an aggregate of 14,116,650 shares to our employees
and consultants under the 1997 Stock Plan and the 1999 Stock Plan during the
fiscal year ended March 31, 1999. See "Stock Plans".
(2) Options were granted at an exercise price equal to the fair market value of
the common stock, as determined by the Board of Directors on the date of
grant.
(3) The potential realizable value is calculated assuming the exercise price on
the date of grant appreciates at the indicated rate for the entire term of
the option and that the option is exercised at the exercise price and sold
on the last day of its term at the appreciated price. All options listed
have a term of 10 years. Stock price appreciation of 5% and 10% is assumed
pursuant to the rules of the Securities and Exchange Commission. There can
be no assurance that the actual stock price will appreciate over the 10-year
option term at the assumed 5% and 10% levels or at any other defined level.
Unless the market price of the common stock appreciates over the option
term, no value will be realized from the option grants made to the named
executive officers.
(4) The options become exercisable at the rate of 1/4th of the total number of
shares on October 21, 1999 and 1/48th of the total number of shares monthly
from and after October 21, 1999.
(5) The options are immediately exercisable. However, if exercised, the
underlying shares are subject to a right of repurchase at cost in our favor
which lapses at the rate of 1/4th of the total number of shares on
December 31, 1999 and 1/48th of the total number of shares monthly from and
after December 31, 1999.
(6) The option is immediately exercisable. However, if exercised, the underlying
shares are subject to a right of repurchase at cost in our favor which
lapses at the rate of 1/4th of the total number of shares on January 31,
2000 and 1/48th of the total number of shares monthly from and after
January 31, 2000.
(7) The option is immediately exercisable.
(8) The option provides that in the event we undergo a change in control within
two years following the optionee's commencement of employment, a total of
412,500 shares subject to the option will be released from our repurchase
option.
(9) The option provides that in the event we undergo a change in control within
eighteen months following the optionee's commencement of employment, a total
of 281,250 shares subject to the option will be released from our repurchase
option.
<PAGE>
OPTION EXERCISES AND HOLDINGS
The following table provides summary information concerning the shares of
common stock represented by outstanding stock options held by our named
executive officers as of March 31, 1999.
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED IN-THE-
OPTIONS AT MONEY OPTIONS AT
MARCH 31, 1999(1) MARCH 31, 1999(1)(2)
--------------------------- ----------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ------------- ----------- --------------
<S> <C> <C> <C> <C>
Edward C. Lenk(3)......................................... -- 3,000,000 -- $26,570,000
Louis V. Zambello III(4).................................. 825,000 -- $6,050,000 --
John R. Hnanicek(4)....................................... 600,000 -- 4,400,000 --
Steven J. Schoch(5)....................................... 750,000 -- 4,250,000 --
Frank C. Han(6)........................................... 750 825,000 4,625 7,306,750
</TABLE>
------------------------------
(1) No options were exercised as of the completion of the fiscal year ended
March 31, 1999.
(2) Based on the estimated fair market value of $9.00 for our common stock on
March 31, 1999.
(3) The option becomes exercisable at the rate of 1/4th of the total number of
shares on October 21, 1999 and 1/48th of the total number of shares monthly
from and after October 21, 1999.
(4) The options are immediately exercisable. However, if exercised, the
underlying shares are subject to a right of repurchase at cost in our favor
which lapses at the rate of 1/4th of the total number of shares on
December 31, 1999 and 1/48th of the total number of shares monthly from and
after December 31, 1999.
(5) The option is immediately exercisable. However, if exercised, the underlying
shares are subject to a right of repurchase at cost in our favor which
lapses at the rate of 1/4th of the total number of shares on January 31,
2000 and 1/48th of the total number of shares monthly from and after
January 31, 2000.
(6) Mr. Han holds an immediately exercisable option to purchase 750 shares. Mr.
Han holds a second option to purchase 825,000 shares which becomes
exercisable at the rate of 1/4th of the total number of shares on
October 21, 1999 and 1/48th of the total number of shares monthly from and
after October 21, 1999.
STOCK PLANS
1999 STOCK PLAN. The Board of Directors adopted our 1999 Stock Plan in
February 1999 and our stockholders approved it in March 1999. We have reserved a
total of 24,800,000 shares of common stock for issuance under the 1999 Stock
Plan, plus an automatic annual increase on the first day of our fiscal years
beginning in 2000, 2001, 2002, 2003 and 2004 equal to the lesser of 5,200,000
shares, 3.0% of our outstanding common stock on the last day of the immediately
preceding fiscal year or such lesser number of shares as the Board of Directors
determines. As of September 30, 1999, options to purchase 5,567,576 shares of
common stock with a weighted average exercise price equal to $18.34 have been
granted, 688 options of which have been exercised.
The 1999 Stock Plan provides for the granting to employees, including
officers and directors, of incentive stock options within the meaning of
Section 422 of the Internal Revenue Code of 1986, as amended, and for the
granting to employees and consultants, of stock purchase rights and nonstatutory
stock options. If an optionee would have the right in any calendar year to
exercise for the first time incentive stock options for shares having an
aggregate fair market value (under all of our plans and determined for each
share as of the date the option to purchase the shares was granted) in excess of
$100,000, any such excess options shall be treated as nonstatutory stock
options. Unless terminated earlier, the 1999 Stock Plan will terminate in
February 2009.
The 1999 Stock Plan may be administered by the Board of Directors or a
committee of the Board, each known as the "administrator". The Board of
Directors currently administers the 1999 Stock Plan. The administrator
determines the terms of options and stock purchase rights granted under the 1999
Stock Plan, including the number of shares subject to an option or stock
purchase right, the exercise or purchase price, and the term and exercisability
of options. The administrator may grant an individual employee options or stock
purchase rights under the 1999 Stock Plan during any one fiscal year to purchase
a maximum of 9,000,000 shares. The exercise price of all incentive stock options
granted
<PAGE>
under the 1999 Stock Plan generally must be at least equal to the fair market
value of our common stock on the date of grant. The administrator has the
authority to grant nonstatutory stock options and stock purchase rights at
prices below fair market value, although the exercise price of such awards
granted to our Chief Executive Officer or our four other most highly compensated
officers will generally equal at least 100% of the fair market value of the
common stock on the date of grant. Payment of the purchase price of options and
stock purchase rights may be made in cash or other consideration as determined
by the administrator.
Generally, options granted under the plan have a term of ten years and are
nontransferable. The administrator may grant nonstatutory stock options with
limited transferability rights in circumstances specified in the 1999 Stock
Plan. The administrator determines the vesting terms of options and stock issued
pursuant to stock purchase rights. We expect that options and stock purchase
rights granted under the 1999 Stock Plan generally will vest at the rate of
1/4th of the total number of shares subject to the options or stock purchase
rights 12 months after the date of grant, and 1/48th of such total number of
shares each month thereafter.
If an optionee's continuous status as an employee or consultant terminates
other than as a result of his or her death or disability, his or her option may
be exercised to the extent provided for in the Notice of Stock Option Grant,
following which the option will terminate. If an optionee's continuous status as
an employee or consultant terminates as a result of his or her death or
disability (or, in the case of the optionee's death, within 30 days following
termination of the optionee's continuous status as an employee or consultant)
his or her option may be exercised for twelve months following such date of
death or disability to the extent such right to exercise had accrued through the
date of his or her death or disability. In no event may an option be exercised
following the option expiration date.
In the event that we undergo a change in control as defined in our 1999
Stock Plan, we expect that awards outstanding under the 1999 Stock Plan will be
assumed or equivalent awards substituted by our acquiror. If an acquiror did not
agree to assume or substitute awards, the vesting of outstanding options and
stock issued pursuant to stock purchase rights will accelerate in full prior to
consummation of the transaction. If we are acquired pursuant to a transaction in
which outstanding awards are assumed or substituted by our acquiror and a
participant holding an assumed or substituted award is involuntarily terminated
within 24 months following the acquisition, the vesting of any award held by
such person would accelerate in full immediately prior to the date of his or her
termination. Notwithstanding anything to the contrary, no vesting acceleration
or lapse of a repurchase right will occur if such vesting acceleration or lapse
of a repurchase right will cause a transaction intended to qualify as a "pooling
of interests" to be ineligible for such treatment. Moreover, in the event the
vesting acceleration or lapse of a repurchase right constitutes a "parachute
payment" within the meaning of Section 280G of the Internal Revenue Code of
1986, as amended, such vesting acceleration or lapse of a repurchase right may
be limited such that no portion of any benefits will be subject to excise tax
under Section 4999 of the Code.
The Board has the authority to amend or terminate the 1999 Stock Plan as
long as such action does not materially and adversely affect any outstanding
option and provided that stockholder approval for any amendments to the 1999
Stock Plan shall be obtained to the extent required by applicable law.
1997 STOCK PLAN. The Board of Directors adopted and our stockholders
approved our 1997 Stock Plan in March 1997. We have reserved a total of
17,400,000 shares of common stock for issuance under the 1997 Stock Plan. As of
September 30, 1999, options to purchase 2,452,716 shares of common stock with a
weighted average exercise price of $0.15 had been exercised and options to
purchase a total of 12,032,858 shares at a weighted average exercise price of
$0.73 per share were outstanding. As of September 30, 1999, 1,013,150 shares
remained available for future issuance under the 1997 Stock Plan. However, the
Board has determined that all future grants to employees and consultants will
take place under our 1999 Stock Plan and therefore any shares remaining
available for issuance under the 1997 Stock Plan as of the date of this offering
will be returned to our authorized but unissued capital stock and will not be
available for future grant. Shares returning to the 1997 Stock Plan upon
cancellation of
<PAGE>
outstanding options may be made subject to future grant after the date of this
offering. Unless terminated earlier, the 1997 Stock Plan will terminate in March
2007.
The terms of options and stock purchase rights issued under the 1997 Stock
Plan are generally the same as those which may be issued under the 1999 Stock
Plan, except with respect to the following features. The 1997 Stock Plan does
not impose an annual limitation on the number of shares subject to options or
stock purchase rights which may be issued to any individual employee.
Nonstatutory stock options or stock purchase rights granted under the 1997 Stock
Plan are nontransferable in all cases and must generally be granted with an
exercise price or purchase price equal to at least 85% of the fair market value
of the common stock on the date of grant.
Awards issued prior to May 3, 1999 are governed by change in control
provisions as in effect at the time of grant and as set forth in any applicable
written agreements, including any amendments to such agreements.
BABYCENTER, INC. 1997 STOCK PLAN. In connection with the BabyCenter merger,
we assumed the outstanding options issued under the BabyCenter, Inc. 1997 Stock
Plan. Upon closing of the merger, options outstanding under the BabyCenter plan
became options to purchase an aggregate of 2,720,858 shares of our common stock.
The terms of the BabyCenter options are similar to the terms of options issuable
under our 1999 Stock Plan, except that if we were acquired, such options would
terminate if not assumed, or equivalent options substituted, by our acquiror.
1999 DIRECTORS' STOCK OPTION PLAN. The Board of Directors adopted our 1999
Directors' Stock Option Plan in February 1999 and our stockholders approved it
in March 1999. We have reserved a total of 600,000 shares of common stock for
issuance under the 1999 Directors' Stock Option Plan. The 1999 Directors' Stock
Option Plan became effective May 19, 1999 and, unless terminated earlier, will
continue in effect for ten years. As of the date hereof, no options to purchase
shares of common stock have been issued under the 1999 Directors' Stock Option
Plan. The 1999 Directors' Stock Option Plan is designed to work automatically
without administration; however, to the extent administration is necessary, it
will be performed by the Board of Directors.
The 1999 Directors' Stock Option Plan provides that each person who becomes
a nonemployee director after the effective date of the plan will be granted a
nonstatutory stock option to purchase 60,000 shares of common stock on the date
on which the optionee first becomes a nonemployee director. In addition, on the
date of each annual meeting of stockholders, each nonemployee director will
automatically be granted an additional option to purchase 15,000 shares of
common stock if, on such date, he or she has served on our Board of Directors
for at least six months. All options granted under the 1999 Directors' Stock
Option Plan shall have an exercise price equal to 100% of the fair market value
of the common stock as of the date of grant and will be vested and exercisable
in full immediately upon grant. Options granted under the 1999 Directors' Stock
Option Plan are nontransferable.
A nonemployee director who ceases to serve as a director for any reason
other than death or disability has 90 days after the date he or she ceases to be
a director to exercise options granted under the 1999 Directors' Stock Option
Plan. To the extent that he or she does not exercise an option within such
90 day period, the option will terminate. If a director's service on our Board
of Directors terminates as a result of his or her death or disability (or, in
the case of a nonemployee director's death within the 90 day period following
such director's termination date), the director or the director's estate will
have the right to exercise an option for 12 months following such termination
date. Options granted under the 1999 Directors' Stock Option Plan have a term of
ten years.
<PAGE>
In the event that we are acquired by another company, we expect that awards
outstanding under the 1999 Directors' Stock Option Plan will be assumed or
equivalent awards substituted by our acquiror. If an acquiror did not agree to
assume or substitute awards, all outstanding awards under the 1999 Directors'
Stock Option Plan would terminate to the extent not previously exercised upon
consummation of the acquisition. The Board of Directors may amend or terminate
the 1999 Directors' Stock Option Plan at any time as long as such action does
not adversely affect any outstanding option and stockholder approval for any
amendments is obtained to the extent required by applicable law.
1999 EMPLOYEE STOCK PURCHASE PLAN. The Board of Directors adopted our 1999
Employee Stock Purchase Plan in February 1999 and our stockholders approved it
in March 1999. We have reserved a total of 1,000,000 shares of common stock for
issuance under the 1999 Employee Stock Purchase Plan, plus an automatic annual
increase on the first day of each of our fiscal years beginning in 2000, 2001,
2002, 2003 and 2004 equal to the lesser of 620,000 shares, 0.5% of our
outstanding common stock on the last day of the immediately preceding fiscal
year, or such lesser number of shares as the Board of Directors shall determine.
The 1999 Employee Stock Purchase Plan became effective May 19, 1999 and, unless
terminated earlier by the Board of Directors, it will continue in effect for
twenty years.
The 1999 Employee Stock Purchase Plan is intended to qualify under
Section 423 of the Internal Revenue Code. This plan consists of a series of
overlapping offering periods of 24 months' duration. Offering periods begin on
May 1 and November 1 of each year during the term of the plan (the first
offering period began on May 20, 1999 and will terminate on April 30, 2001). The
Board of Directors has the authority under the plan to set new offering or
purchase periods.
The Board of Directors or a committee appointed by the Board of Directors
will administer the 1999 Employee Stock Purchase Plan. The 1999 Employee Stock
Purchase Plan permits eligible employees to purchase common stock through
payroll deductions, which may not exceed 15% of an employee's compensation. The
purchase price is equal to the lower of 85% of the fair market value of the
common stock at the beginning of each offering period or at the end of each
purchase period; provided, however, that for purposes of the first offering
period, the purchase price will be equal to the lower of 85% of the price of our
common stock to the public as set forth in our final prospectus for our initial
public offering as filed with the SEC, and the value of the common stock at
April 30, 2001. In circumstances specified in the 1999 Employee Stock Purchase
Plan, the purchase price may be adjusted during an offering period to avoid our
incurring adverse accounting charges. Our employees, including officers and
employee directors, are eligible to participate in the 1999 Employee Stock
Purchase Plan if they are employed by us for at least 20 hours per week and more
than five months per year. Employees may end their participation in the 1999
Employee Stock Purchase Plan at any time, and participation ends automatically
on termination of employment. If the fair market value of the common stock on a
purchase date is less than the fair market value at the beginning of the
offering period, each participant in the 1999 Employee Stock Purchase Plan shall
automatically be withdrawn from the offering period as of the end of the
purchase date and re-enrolled in the new 24-month offering period beginning on
the first business day following the purchase date.
The 1999 Employee Stock Purchase Plan limits the number of stock purchase
rights that can be granted to any single employee. An employee cannot be granted
rights to purchase stock under this plan if his or her rights accrue at a rate
which exceeds $25,000 worth of stock in any calendar year. In addition, no
employee may purchase more than 9,000 shares of common stock during any one
purchase period (equivalent to a maximum of 36,000 shares over a 24-month
offering period).
In the event that we are acquired by another company, the 1999 Employee
Stock Purchase Plan provides that each right to purchase stock will be assumed
or equivalent rights substituted by our acquiror. If an acquiror did not agree
to assume or substitute stock purchase rights, the offering period then in
progress would be shortened and a new exercise date occurring prior to
consummation of the acquisition would be set. The Board of Directors has the
power to amend or terminate the 1999
<PAGE>
Employee Stock Purchase Plan and to change or terminate offering periods as long
as such action does not adversely affect any outstanding rights to purchase
stock thereunder. However, the Board of Directors may amend or terminate the
1999 Employee Stock Purchase Plan or an offering period even if it would
adversely affect outstanding options in order to avoid our incurring adverse
accounting charges.
<PAGE>
EMPLOYMENT AGREEMENTS
In December 1998, we entered into an Offer Letter with John R.
Hnanicek, our Chief Information Officer. The agreement entitles Mr.
Hnanicek to a salary of $150,000 per year and a signing bonus of $60,000
which vests monthly over the first year of his employment. In December
1998, we granted Mr. Hnanicek an option to purchase 600,000 shares of
common stock at $1.667 per share. The option is immediately exercisable and,
if exercised, the underlying shares are subject to a right of repurchase in
our favor. In the event of the termination of Mr. Hnanicek's employment, our
repurchase option enables us to repurchase a specific number of his shares at
$1.667 per share. Our repurchase option lapses over four years according to
the following schedule: 1/4th of the shares will be released from our
repurchase option on December 31, 1999 and 1/48th of the total number of
shares will be released from our repurchase option monthly from and after
December 31, 1999 until December 31, 2002. If Mr. Hnanicek is
terminated without cause during his first six to 12 months of employment, an
additional 1/48th of such shares shall be released from our repurchase option
per each month of completed employment. This option expires on December
31, 2008.
In December 1998, we entered into an Offer Letter with Louis V.
Zambello III, our Senior Vice President of Operations. The agreement entitles
Mr. Zambello to a salary of $200,000 per year, a signing bonus of $115,000
which vests monthly over the first year of his employment and severance
benefits equal to $100,000 if he is terminated without cause during the first
12 months of his employment with us. In December 1998, we granted
Mr. Zambello an option to purchase 825,000 shares of common stock at
$1.667 per share. The option is immediately exercisable and, if exercised,
the underlying shares are subject to a right of repurchase in our favor. In
the event of the termination of Mr. Zambello's employment, our repurchase
option enables us to repurchase a specific number of his shares at $1.667 per
share. Our repurchase option lapses over four years according to the
following schedule: 1/4th of the shares will be released from our repurchase
option on December 31, 1999 and 1/48th of the total number of shares will
be released from our repurchase option monthly from and after December 31,
1999 until December 31, 2002. If Mr. Zambello is terminated without
cause during his first six to 12 months of employment, an additional 1/48th
of such shares shall be released from our repurchase option for each month of
completed employment. Furthermore, if we experience a change of control
within two years following his commencement of employment, a total of 412,500
of such shares shall immediately be released from our repurchase option. This
offering will not constitute such a change of control. This option expires on
December 31, 2008.
In January 1999, we entered into an Offer Letter with Steven J.
Schoch, our Chief Financial Officer. The agreement entitles Mr. Schoch to
a salary of $125,000 per year, a signing bonus of $25,000 which vests monthly
over the first year of his employment and severance benefits equal to $93,750
if he is terminated without cause during the first 12 months of his
employment with us. In January 1999, we granted Mr. Schoch an option to
purchase 750,000 shares of common stock at $3.333 per share. The option is
immediately exercisable and, if exercised, the underlying shares are subject
to a right of repurchase in our favor. In the event of the termination of
Mr. Schoch's employment, our repurchase option enables us to repurchase a
specific number of his shares at $3.333 per share. Our repurchase option
lapses over four years according to the following schedule: 1/4th of the
shares will be released from our repurchase option on January 31, 2000 and
1/48th of the total number of shares will be released from our repurchase
option monthly from and after January 31, 2000 until January 31, 2003.
If Mr. Schoch is terminated without cause during his first six to 12
months of employment, an additional 1/48th of such shares will be released
from our repurchase option for each month of completed employment.
Furthermore, if we experience a change of control within 18 months
following his commencement of employment, a total of 281,250 of such shares
shall immediately be released from our repurchase option. This offering will
not constitute such a change of control. This option expires on January
31, 2009.
In May 1999, we entered into an Offer Letter with Janine Bousquette,
our Senior Vice President of Marketing. The agreement entitles Ms.
Bousquette to a salary of $138,462 per year, a signing bonus of $75,000 which
vests monthly over the first year of her employment and severance benefits
equal to $100,000 if she is terminated without cause during the first 12
months of her employment with us. In May 1999, we granted to Ms.
Bousquette an option to purchase 480,000 shares of common stock at $11.00
per share. The option is immediately exercisable and, if exercised, the
underlying shares are subject to a right of repurchase in our favor. In the
event of the termination of Ms. Bousquette's employment, our repurchase
option enables us to repurchase a specific number of her shares at $11.00
per share. Our repurchase option lapses over four years according to the
following schedule: 1/4th of the shares will be released from our repurchase
option on May 17, 2000 and 1/48th of the total number of shares will be
released from our repurchase option monthly from and after May 17, 2000
until May 17, 2003. If Ms. Bousquette is terminated without cause
during the first six months of her employment, an additional 1/8th of such
shares shall be released from our repurchase option. If Ms. Bousquette is
terminated without cause during her first six to 12 months of employment, an
additional 1/48th of such shares shall be released from our repurchase option
for each month of completed employment. Furthermore, if we experience a
change of control within 18 months following her commencement of employment,
a total of 180,000 of such shares shall immediately be released from our
repurchase option. This offering will not constitute such a change of
control. This option expires on May 17, 2009.
We have entered into indemnification agreements with our officers and
directors which may require us, among other things, to indemnify our officers
and directors against liabilities that may arise by reason of their status or
service as officers or directors, other than liabilities arising from willful
misconduct of a culpable nature, and to advance their expenses incurred as a
result of any proceeding against them as to which they could be indemnified.
See the section ""Management'' under the heading ""Limitation of Liability
and Indemnification Matters''.
CERTAIN TRANSACTIONS
In June 1997, we sold 7,500,000 shares of common stock to Edward C. Lenk at
$0.005 per share in exchange for $18,750 in cash and a promissory note in the
principal amount of $18,750. The note is full recourse and secured by 3,750,000
of Mr. Lenk's shares. 3,750,000 of Mr. Lenk's shares are subject to a repurchase
option in our favor. In the event of the termination of his employment, our
repurchase option enables us to repurchase a specific number of Mr. Lenk's
shares at $0.005 per share. Our repurchase option lapses over four years
according to the following schedule: 1/4th of such shares were released from our
repurchase option on December 1, 1997, and 1/48th of such total are released
from our repurchase option monthly from and after December 1, 1997 until
December 1, 2000. In addition, all shares are immediately released from our
repurchase option upon a change of control. This offering will not constitute
such a change of control.
In October 1998, we issued Mr. Lenk an option to purchase 3,000,000 shares
of common stock at $0.143 per share. The option vests over four years according
to the following schedule: 1/4th of the shares vested on October 21, 1999 and
1/48th of the total number of shares vest monthly from and after October 21,
1999 until October 21, 2002. This option expires on October 21, 2008.
In June 1997, we sold 2,500,002 shares of common stock to Frank C. Han at
$0.005 per share in exchange for $6,250 in cash and a promissory note in the
principal amount of $6,250. The note is full recourse and secured by 1,250,001
of Mr. Han's shares. 1,250,001 of Mr. Han's shares are subject to a repurchase
option in our favor. In the event of the termination of his employment, our
repurchase option enables us to repurchase a specific number of Mr. Han's shares
at $0.005 per share. Our repurchase option lapses over four years according to
the following schedule: 1/4th of such shares were released from our repurchase
option on February 1, 1998, and 1/48th of such total are released from our
repurchase option monthly from and after February 1, 1998 until February 1,
2001. In addition, all shares are immediately released from our repurchase
option upon a change of control. This offering will not constitute such a change
of control.
In October 1998, we issued Mr. Han an option to purchase 825,000 shares of
common stock at $0.143 per share. The option vests over four years according to
the following schedule: 1/4th of the shares vested on October 21, 1999 and
1/48th of the total number of shares vest monthly from and after October 21,
1999 until October 21, 2002. This option expires on October 21, 2008. In January
1999, we issued Mr. Han a fully vested option to purchase 750 shares of common
stock at $2.833 per share. This option expires on January 31, 2009.
In September 1997 we issued Peter C.M. Hart a stock option to purchase
300,000 shares of common stock at $0.005 per share. The option vests over four
years according to the following schedule: 1/4th of the shares subject to the
option vested on June 15, 1998 and 1/48th of the total have vested monthly from
and after June 15, 1998 until June 15, 2001. This option expires on
September 29, 2007. In September 1997, we sold Mr. Hart a promissory note in the
amount of $20,000 and a warrant to purchase 48,387 shares of preferred stock at
$0.207 per share. The note converted into 98,817 shares of preferred stock in
December 1997 and Mr. Hart exercised the warrant in full in March 1999.
Mr. Hart was appointed a Director in October 1997. From January 1998 to June
1998, Mr. Hart provided us part-time consulting services. In connection with
these services, in February 1998 we issued Mr. Hart a stock option to purchase
63,000 shares of common stock at $0.033 per share. This option vested over six
months according to the following schedule: 1/6th of the shares subject to this
option vested monthly from and after February 1, 1998 until July 1, 1998. This
option expires on February 5, 2008.
<PAGE>
The following table summarizes the shares of common stock and preferred
stock purchased by our directors and 5% stockholders and persons and entities
associated with them in private placement transactions. Each share of preferred
stock automatically converted into one share of common stock upon the closing of
our initial public offering in May 1999. The shares of common stock were sold at
$0.005 per share, the shares of Series A preferred stock were sold at $0.207 per
share, the shares of Series B preferred stock were sold at $0.701 per share and
the shares of Series C preferred stock were sold at $10.00 per share. For more
details, see the section "Principal Stockholders".
<TABLE>
<CAPTION>
COMMON SERIES A SERIES B SERIES C
ENTITIES AFFILIATED WITH DIRECTORS STOCK PREFERRED PREFERRED PREFERRED
---------------------------------- ---------- --------- ---------- ---------
<S> <C> <C> <C> <C>
Entities affiliated with Highland Capital
Partners (Daniel Nova)(1)...................... -- -- 11,411,184 999,999
Entities affiliated with Sequoia Capital (Michael
Moritz)(2)..................................... -- -- 7,131,990 999,999
Entities affiliated with DynaFund Ventures (Tony
Hung)(3)....................................... -- 4,838,709 2,852,796 --
Peter C.M. Hart.................................. -- 147,204 -- --
OTHER 5% STOCKHOLDERS
---------------------
idealab!......................................... 18,320,001 -- -- --
Intel Corporation................................ -- 4,838,709 2,852,793 --
Entities affiliated with idealab! Capital
Management I, LLC(4)........................... -- 4,838,709 2,139,594 --
</TABLE>
------------------------
(1) Includes shares held by Highland Capital Partners III Limited Partnership,
Highland Entrepreneurs' Fund III Limited Partnership, Highland Capital
Partners IV Limited Partnership and Highland Entrepreneurs' Fund IV Limited
Partnership. Daniel Nova is a general partner of the general partner of the
Highland entities and is a Director of eToys. He disclaims beneficial
ownership of the shares held by the entities except to the extent of his
proportionate interest therein.
(2) Includes shares held by Sequoia Capital VIII, Sequoia International
Technology Partners VIII (Q), CMS Partners LLC, Sequoia International
Technology Partners VIII, Sequoia 1997, and Sequoia Capital Franchise Fund.
Michael Moritz is a general partner of the general partners of the Sequoia
entities and is a Director of eToys. He disclaims beneficial ownership of
the shares held by the entities except to the extent of his proportionate
interest therein.
(3) Includes shares held by DynaFund L.P. and DynaFund International L.P. Tony
Hung is a vice president of the general partner of the DynaFund entities and
is a Director of eToys. He disclaims beneficial ownership of the shares held
by the entities except to the extent of his proportionate interest therein.
(4) Includes shares held by idealab! Capital Partners I-A, LP and idealab!
Capital Partners I-B, LP. idealab! Capital Management I, LLC is the general
partner of idealab! Capital Partners I-A, LP and idealab! Capital
Partners I-B, LP, and exercises voting and investment power over the shares
held by these entities.
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth information known to us with respect to the
beneficial ownership of our common stock as of September 30, 1999, by:
- each stockholder known by us to own beneficially more than 5% of the
common stock,
- each director,
- our named executive officers, and
- all directors and named executive officers as a group.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
OWNED(1)
-----------------------
<S> <C> <C>
NUMBER PERCENTAGE(2)
---------- -----
idealab! ................................................... 18,320,001 15.31%
130 West Union Street
Pasadena, CA 91103
Entities affiliated with Highland Capital
Partners(3) .............................................. 12,411,183 10.37
Two International Place
Boston, MA 02110
Entities affiliated with Sequoia Capital
Partners(4) .............................................. 8,131,989 6.80
3000 Sand Hill Road, Bldg. 4, Suite 280
Menlo Park, CA 94025
Entities affiliated with DynaFund
Ventures(5) .............................................. 7,691,505 6.43
21311 Hawthorne Blvd., Suite 300
Torrance, CA 90503
Intel Corporation .......................................... 7,691,502 6.43
2200 Mission Blvd.
Santa Clara, CA 95052
Entities affiliated with idealab! Capital .................. 6,978,303 5.83
Management I, LLC(6)
130 West Union Street
Pasadena, CA 91103
Daniel J. Nova(7) .......................................... 12,411,183 10.37
Michael Moritz(8) .......................................... 8,131,989 6.80
Tony Hung(9) ............................................... 7,691,505 6.43
Edward C. Lenk(10) ......................................... 8,303,500 6.89
Peter C.M. Hart(11) ........................................ 391,454 *
Frank C. Han(12) ........................................... 2,712,940 2.26
Louis V. Zambello III(13) .................................. 825,000 *
Steven J. Schoch(14) ....................................... 750,000 *
John R. Hnanicek(15) ....................................... 600,000 *
Matthew N. Glickman ........................................ 2,104,211 1.76
Janine Bousquette(16) ...................................... 480,000 *
All directors and named executive officers as a group (11
persons)(17) ............................................. 44,401,782 37.11%
</TABLE>
------------------------
* Less than 1% of the outstanding shares of common stock.
(1) Except pursuant to applicable community property laws or as indicated in
the footnotes to this table, to our knowledge, each stockholder identified
in the table possesses sole voting and investment power with respect to all
shares of common stock shown as beneficially owned by such stockholder.
<PAGE>
(2) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission. In computing the number of shares
beneficially owned by a person and the percentage of ownership of that
person, shares of common stock subject to options or warrants held by that
person that are currently exercisable or will become exercisable within
60 days after September 30, 1999 are deemed outstanding, while such shares
are not deemed outstanding for computing percentage ownership of any other
person.
(3) Includes 10,954,737 shares held by Highland Capital Partners III Limited
Partnership, 456,447 shares held by Highland Entrepreneurs' Fund III
Limited Partnership, 960,000 shares held by Highland Capital Partners IV
Limited Partnership and 39,999 shares held by Highland Entrepreneurs' Fund
IV Limited Partnership. Highland Management Partners III LLC is the general
partner of Highland Capital Partners III Limited Partnership and exercises
voting and investment power over the shares held by this entity. HEF III
LLC is the general partner of Highland Entrepreneurs' Fund III Limited
Partnership and exercises voting and investment power over the shares held
by this entity. Highland Management Partners IV LLC is the general partner
of Highland Capital Partners IV Limited Partnership and exercises voting
and investment power over the shares held by this entity. Highland
Entrepreneurs' Fund IV LLC is the general partner of Highland
Entrepreneurs' Fund IV Limited Partnership and exercises voting and
investment power over the shares held by this entity.
(4) Includes 6,463,722 shares held by Sequoia Capital VIII, 427,920 shares held
by Sequoia International Technology Partners VIII (Q), 142,641 shares held
by CMS Partners LLC, 82,017 shares held by Sequoia International Technology
Partners VIII, 15,690 shares held by Sequoia 1997, and 999,999 shares held
by Sequoia Capital Franchise Fund. SC VIII Management, LLC is the general
partner of Sequoia Capital VIII, Sequoia International Technology Partners
VIII and Sequoia International Technology Partners VIII (Q) and exercises
investment and voting power over the shares held by these entities. SC VIII
Management, LLC also exercises investment and voting power over the shares
held by CMS Partners LLC and Sequoia 1997. SCFF Management, LLC is the
general partner of Sequoia Capital Franchise Fund and exercises investment
and voting power over the shares held by this entity.
(5) Includes 4,155,894 shares held by DynaFund International L.P. and 3,535,611
shares held by DynaFund L.P. DynaFund Ventures LLC is the general partner
of DynaFund L.P. and DynaFund International L.P. and exercises investment
and voting power over the shares held by these entities.
(6) Includes 6,562,359 shares held by idealab! Capital Partners I-A, LP and
415,944 shares held by idealab! Capital Partners I-B, LP. idealab! Capital
Management I, LLC is the general partner of idealab! Capital Partners I-A,
LP and idealab! Capital Partners I-B, LP, and exercises voting and
investment power over the shares held by these entities. William S. Elkus
and William T. Gross exercise voting and investment power over idealab!
Capital Management I, LLC.
(7) Includes 10,954,737 shares held by Highland Capital Partners III Limited
Partnership, 456,447 shares held by Highland Entrepreneurs' Fund III
Limited Partnership, 960,000 shares held by Highland Capital Partners IV
Limited Partnership and 39,999 shares held by Highland Entrepreneurs' Fund
IV Limited Partnership. Highland Management Partners III LLC is the general
partner of Highland Capital Partners III Limited Partnership and exercises
voting and investment power over the shares held by this entity. HEF III
LLC is the general partner of Highland Entrepreneurs' Fund III Limited
Partnership and exercises voting and investment power over the shares held
by this entity. Highland Management Partners IV LLC is the general partner
of Highland Capital Partners IV Limited Partnership and exercises voting
and investment power over the shares held by this entity. Highland
Entrepreneurs' Fund IV LLC is the general partner of Highland
Entrepreneurs' Fund IV Limited Partnership and exercises voting and
investment power over the shares held by this entity. Daniel Nova is a
general partner of the general partners of the Highland entities and is a
Director of eToys. He disclaims beneficial ownership of the shares held by
the entities except to the extent of his proportionate interest therein.
<PAGE>
(8) Includes 6,463,722 shares held by Sequoia Capital VIII, 427,920 shares held
by Sequoia International Technology Partners VIII (Q), 142,641 shares held
by CMS Partners LLC, 82,017 shares held by Sequoia International Technology
Partners VIII, 15,690 shares held by Sequoia 1997, and 999,999 shares held
by Sequoia Capital Franchise Fund. SC VIII Management, LLC is the general
partner of Sequoia Capital VIII, Sequoia International Technology Partners
VIII and Sequoia International Technology Partners VIII (Q) and exercises
investment and voting power over the shares held by these entities.
SC VIII Management, LLC also exercises investment and voting power over the
shares held by CMS Partners LLC and Sequoia 1997. SCFF Management, LLC is
the general partner of Sequoia Capital Franchise Fund and exercises
investment and voting power over the shares held by this entity. Michael
Moritz is a general partner of the general partners of the Sequoia entities
and is a Director of eToys. He disclaims beneficial ownership of the shares
held by the entities except to the extent of his proportionate interest
therein.
(9) Includes 4,155,894 shares held by DynaFund International L.P. and 3,535,611
shares held by DynaFund L.P. DynaFund Ventures LLC is the general partner
of DynaFund L.P. and DynaFund International L.P. and exercises investment
and voting power over the shares held by these entities. Tony Hung is a
vice president of the general partner of the DynaFund entities and is a
Director of eToys. He disclaims beneficial ownership of the shares held by
the entities except to the extent of his proportionate interest therein.
(10) Includes 812,500 shares issuable upon exercise of options which will be
vested within 60 days of September 30, 1999.
(11) Includes 244,250 shares issuable upon exercise of options which will be
vested within 60 days of September 30, 1999.
(12) Includes 224,188 shares issuable upon exercise of an option which will be
vested within 60 days of September 30, 1999.
(13) Includes 825,000 shares issuable upon exercise of an option which will be
exercisable within 60 days of September 30, 1999, but which are subject to
a right of repurchase in our favor at cost in the event Mr. Zambello
ceases employment with us.
(14) Includes 750,000 shares issuable upon exercise of an option which will be
exercisable within 60 days of September 30, 1999, but which are subject to
a right of repurchase in our favor at cost in the event Mr. Schoch ceases
employment with us.
(15) Includes 600,000 shares issuable upon exercise of an option which will be
exercisable within 60 days of September 30, 1999, but which are subject to
a right of repurchase in our favor at cost in the event Mr. Hnanicek
ceases employment with us.
(16) Includes 480,000 shares issuable upon exercise of an option which will be
exercisable within 60 days of September 30, 1999, but which are subject to
a right of repurchase in our favor at cost in the event Ms. Bousquette
ceases employment with us.
(17) Includes the shares described in Notes 7 through 16.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(a) Financial Statements
Not applicable.
(b) Pro Forma Financial Information.
Not applicable.
(c) Exhibits.
Not applicable.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
eToys Inc.
(Registrant)
DATE: June 2, 2000 By: /s/ Steven J. Schoch
------------------------------------------
Name: Steven J. Schoch
Title: Senior Vice President and
Chief Financial Officer
