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SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[x] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
Beyond.com Corporation
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
LOGO
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD APRIL 30, 1999
To the Stockholders of Beyond.com Corporation:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the "Annual
Meeting") of Beyond.com Corporation, a Delaware corporation (the "Company"),
will be held at the Company's corporate offices at 1195 West Fremont Avenue,
Sunnyvale, California, on Friday, April 30, 1999, at 2:00 p.m., pacific daylight
time, for the following purposes:
1. To elect six directors of the Company to serve until the 2000 Annual
Meeting of Stockholders.
2. To approve an amendment to the Company's Certificate of Incorporation,
as amended, to increase the number of shares of Common Stock which the
Company is authorized to issue from 50,000,000 shares to 70,000,000
shares.
3. To approve the Beyond.com Corporation 1999 Stock Incentive Plan.
4. To approve the Beyond.com Corporation 1999 Employee Stock Purchase Plan.
5. To ratify the appointment of Ernst & Young LLP as the independent
auditors for the Company for the year ending December 31, 1999.
6. To transact such other business as may properly come before the Annual
Meeting and any adjournment or postponement thereof.
The foregoing items of business are more fully described in the Proxy
Statement which is attached and made a part hereof.
The Board of Directors has fixed the close of business on March 24, 1999 as
the record date for determining the stockholders entitled to notice of and to
vote at the Annual Meeting and any adjournment or postponement thereof.
WHETHER OR NOT YOU EXPECT TO ATTEND THE ANNUAL MEETING IN PERSON, YOU ARE
URGED TO MARK, SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD AS PROMPTLY AS
POSSIBLE IN THE POSTAGE-PREPAID ENVELOPE PROVIDED TO ENSURE YOUR REPRESENTATION
AND THE PRESENCE OF A QUORUM AT THE ANNUAL MEETING. IF YOU SEND IN YOUR PROXY
CARD AND THEN DECIDE TO ATTEND THE ANNUAL MEETING TO VOTE YOUR SHARES IN PERSON,
YOU MAY STILL DO SO. YOUR PROXY IS REVOCABLE IN ACCORDANCE WITH THE PROCEDURES
SET FORTH IN THE PROXY STATEMENT.
By Order of the Board of Directors,
Richard Scudellari
Secretary
Santa Clara, California
April 16, 1999
<PAGE> 3
BEYOND.COM CORPORATION
1195 WEST FREMONT AVENUE
SUNNYVALE, CALIFORNIA 94087
------------------------
PROXY STATEMENT
GENERAL INFORMATION
This Proxy Statement is furnished to stockholders of Beyond.com
Corporation, a Delaware corporation (the "Company"), in connection with the
solicitation by the Board of Directors (the "Board") of the Company of proxies
in the accompanying form for use in voting at the Annual Meeting of Stockholders
of the Company (the "Annual Meeting") to be held on Friday, April 30, 1999, at
2:00 p.m., pacific daylight time, the Company's corporate offices at 1195 West
Fremont Avenue, Sunnyvale, California, and any adjournment or postponement
thereof. The shares represented by the proxies received, properly marked, dated,
executed and not revoked will be voted at the Annual Meeting.
REVOCABILITY OF PROXIES
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before it is exercised by delivering to the Company (to
the attention of the Secretary) a written notice of revocation or a duly
executed proxy bearing a later date, or by attending the Annual Meeting and
voting in person.
SOLICITATION AND VOTING PROCEDURES
The solicitation of proxies will be conducted by mail and the Company will
bear all attendant costs. These costs will include the expense of preparing and
mailing proxy materials for the Annual Meeting and reimbursements paid to
brokerage firms and others for their expenses incurred in forwarding
solicitation material regarding the Annual Meeting to beneficial owners of the
Company's Common Stock. The Company may conduct further solicitation personally,
telephonically or by facsimile through its officers, directors and regular
employees, none of whom will receive additional compensation for assisting with
the solicitation. The Company will request brokers and nominees who hold stock
in their names to furnish proxy material to beneficial owners of the shares and
will reimburse such brokers and nominees for their reasonable expenses incurred
in forwarding solicitation material to such beneficial owners.
The close of business on March 24, 1999 has been fixed as the record date
(the "Record Date") for determining the holders of shares of Common Stock of the
Company entitled to notice of and to vote at the Annual Meeting. As of the close
of business on the Record Date, the Company had approximately 27,609,990 shares
of Common Stock outstanding and entitled to vote at the Annual Meeting. The
presence at the Annual Meeting of a majority, or approximately 13,804,996 of
these shares of Common Stock of the Company, either in person or by proxy, will
constitute a quorum for the transaction of business at the Annual Meeting. Each
outstanding share of Common Stock on the Record Date is entitled to one vote on
all matters.
An automated system administered by the Company's transfer agent will
tabulate votes cast by proxy at the Annual Meeting, and an employee of the
transfer agent will tabulate votes cast in person at the Annual Meeting. Each
share of Common Stock outstanding on the record date will be entitled to one
vote on all matters. The approval of the Company's 1999 Stock Incentive Plan and
1999 Employee Stock Purchase Plan and the ratification of the independent
auditors for the Company for the current year will require the affirmative vote
of a majority of the shares of the Company's Common Stock present or represented
and entitled to vote at the Annual Meeting. The amendment of the Certificate of
Incorporation, as amended, to increase the number of authorized shares of Common
Stock will require the affirmative vote of a majority of the shares of the
Company's outstanding Common Stock. Because abstentions are treated as shares
present or represented and entitled to vote for the purposes of determining
whether a matter has been approved by the stockholders, abstentions have the
same effect as negative votes. Broker non-votes and shares as to which proxy
authority has been withheld with respect to any matter are not deemed to be
entitled to vote for
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purposes of determining whether stockholder approval of that matter has been
obtained and effectively count as votes against Proposal Number 2, the amendment
to the Certificate of Incorporation, as amended. However, with respect to
Proposal Numbers 3, 4 and 5 requiring the affirmative vote of a majority of the
shares present and entitled to vote, broker non-votes shall have no effect.
DEADLINE FOR RECEIPT OF STOCKHOLDER PROPOSALS
Requirements for Stockholder Proposals to be Brought Before an Annual
Meeting. For stockholder proposals to be considered properly brought before an
annual meeting by a stockholder, the stockholder must have given timely notice
therefor in writing to the Secretary of the Company. To be timely for the
Company's 2000 Annual Meeting of Stockholders, a stockholder's notice must be
delivered to or mailed and received at the principal executive offices of the
Company not later than December 17, 1999. A stockholder's notice to the
Secretary must set forth as to each matter the stockholder proposes to bring
before the annual meeting (i) a brief description of the business desired to be
brought before the annual meeting and the reasons for conducting such business
at the annual meeting, (ii) the name and record address of the stockholder
proposing such business, (iii) the class and number of shares of the Company
which are beneficially owned by the stockholder, and (iv) any material interest
of the stockholder in such business.
Requirements for Stockholder Proposals to be Considered for Inclusion in
the Company's Proxy Materials. Stockholder proposals submitted pursuant to Rule
14a-8 under the Securities Exchange Act of 1934 and intended to be presented at
the Company's 2000 Annual Meeting of Stockholders must be received by the
Company not later than December 1, 1999 in order to be considered for inclusion
in the Company's proxy materials for that meeting.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
As set by the Board of Directors (the "Board" or "Board of Directors")
pursuant to the Bylaws of the Company, the authorized number of directors is
currently set at six. Six directors will be elected at the Annual Meeting. The
six nominees receiving the highest number of affirmative votes will be elected
as directors. Unless otherwise instructed, the proxy holders will vote the
proxies they receive for the six nominees of the Board of Directors named below.
In the event that any nominee of the Board is unable or declines to serve as a
director at the time of the Annual Meeting, the proxies will be voted for any
nominee designated by the present Board of Directors to fill the vacancy. It is
not expected that any nominee will be unable or will decline to serve as a
director. In the event that additional persons are nominated for election as
directors, the proxy holders intend to vote all proxies received by them in such
a manner as will assure the election of as many of the nominees listed below as
possible, with any required selection among such nominees to be determined by
the proxy holders.
Certain information about the director nominees, is furnished below.
WILLIAM S. MCKIERNAN is a co-founder of Beyond.com and has served as
Chairman of its Board of Directors since March 1998. From Beyond.com's inception
in 1994 to March 1998, Mr. McKiernan served as its President and Chief Executive
Officer. Mr. McKiernan also currently serves as a director, President and Chief
Executive Officer of CyberSource Corporation. From 1992 to 1994, Mr. McKiernan
held a number of positions at McAfee Associates, Inc. (now known as Network
Associates), including President and Chief Operating Officer, the positions he
held during its initial public offering in October 1992. Prior to joining McAfee
Associates in 1992, Mr. McKiernan was Vice President of Princeton Venture
Research, Inc., an investment banking and venture consulting firm from 1990 to
1992. Mr. McKiernan has also held management positions with IBM/ROLM and Price
Waterhouse. Mr. McKiernan holds an M.B.A. from the Harvard Business School.
MARK L. BREIER joined Beyond.com in March 1998, as a director, President
and Chief Executive Officer. From January 1997 until he joined Beyond.com, Mr.
Breier served as Vice President of Marketing of Amazon.com, Inc. From April 1995
to January 1997, Mr. Breier served as Vice President of Marketing of
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Cinnabon World Famous Cinnamon Rolls. Mr. Breier was involved in product
management and introduction at Dreyer's Grand Ice Cream from 1990 to April 1995,
at Kraft Foods, Inc., a multinational consumer products company, from April 1986
to October 1988, and at Parker Brothers, a worldwide manufacturer of toys and
games, from August 1985 to March 1986. Mr. Breier holds a B.A. in Economics from
Stanford University and an M.B.A. from the Stanford University Graduate School
of Business.
DOUGLAS CARLSTON a director of Beyond.com since March 1999, was the founder
of Broderbund Software, Inc. and served as its Chairman of the Board and Chief
Executive Officer from 1989 through 1998, when Broderbund was sold to The
Learning Company, Inc. Mr. Carlston currently serves on the Board of Directors
of Expert Software, Inc., ePit and Mpath Interactive, Inc. He also currently
serves on the Boards of several non-profit organizations, including Public Radio
International (PRI), the Santa Fe Institute, the Long Island Foundation,
Ceasefire and the John Hopkins School of Advanced International Studies. Mr.
Carlston received his B.A. from Harvard College in 1970.
JOHN S. CHEN, a director of Beyond.com since March 1999, has served as a
director and President, Chief Executive Officer and Chairman of Sybase, Inc.
since August 1997. In February 1998, Sybase formed the Office of the Chief
Executive, and Mr. Chen began to share the position of Chief Executive Officer.
Between August 1997 and February 1998, Mr. Chen also held the position of Chief
Operating Officer. Before joining Sybase, Mr. Chen served between March 1995 and
July 1997 as the President of the Open Enterprise Computing Division of Siemens
Nixdorf, a computer and electronics company, and as Chief Executive Officer and
Chairman of the Siemens Pyramid subsidiary of Siemens Nixdorf. Before its
acquisition by Siemens Nixdorf in March 1995, Mr. Chen served in various
executive capacities with Pyramid Technology Corporation, a computer company,
where he became Chief Operating Officer in October 1992 and President in June
1993. Mr. Chen holds a B.S. in electrical engineering from Brown University and
a M.S. in electrical engineering from the California Institute of Technology.
BERT KOLDE, a director of Beyond.com since July 1996, serves as a director,
Vice President, Treasurer and Secretary of Vulcan Ventures Inc., Vice Chairman
of the Portland Trail Blazers, Seattle Seahawks, Oregon Arena Corporation and
First and Goal Corporation. In addition, Mr. Kolde serves as President of the
Paul G. Allen Virtual Education Foundation and the Paul G. Allen Forest
Protection Foundation. Mr. Kolde co-founded Asymetrix Learning Systems, Inc. in
1985, and serves as Chairman of its Board of Directors. Mr. Kolde also serves as
a director of MetaCreations Corporation and CyberSource Corporation. Mr. Kolde
holds a B.A. in Business Administration from Washington State University and an
M.B.A. from the University of Washington.
RONALD S. POSNER, a director of Beyond.com since March 1999, serves as
Chairman of PS Capital, a venture capitalist firm based in San Francisco, New
York and London. Mr. Posner has held or currently holds key advisory roles
within a number of startups and public companies. In addition, he was an active
board member and on the executive committees of CyberMedia Corporation, a
systems software company that was acquired by Network Associates, Asymetrix and
Select S/W Capital.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR
THE ELECTION OF THE NOMINEES NAMED ABOVE
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
During 1998, the Board met seven times. No director attended fewer than 75%
of all the meetings of the Board and its committees on which he or she served
after becoming a member of the Board. The Board has two committees: the Audit
Committee and the Compensation Committee. The Board does not have a nominating
committee or a committee performing the functions of a nominating committee.
Although there are no formal procedures for stockholders to recommend
nominations, the Board will consider stockholder recommendations. Such
recommendations should be addressed to the Company's Secretary, at the Company's
principal executive offices.
The Audit Committee, which held one meeting in 1998, consisted of Bert
Kolde, Steven P. Novak, Richard Scudellari and Linda Fayne Levinson through
March 1999. The current members of the Audit
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Committee are Messrs. Kolde and Posner. The Audit Committee recommends
engagement of the Company's independent auditors and is primarily responsible
for approving the services performed by the Company's independent auditors and
for reviewing and evaluating the Company's accounting principles and its system
of internal accounting controls.
The Compensation Committee, which held two meetings in 1998, consisted of
Bert Kolde, Steven P. Novak, Richard Scudellari and Linda Fayne Levinson through
March 1999. The current members of the Compensation Committee are Messrs.
Carlston and Chen. The Compensation Committee's functions are to establish and
apply the Company's compensation policies with respect to its executive officers
and other employees. In addition, the Compensation Committee administers the
Company's incentive compensation and benefit plans.
DIRECTOR COMPENSATION
The Company has not historically paid directors cash compensation for their
services as directors or members of committees of the Board of Directors. The
Company has, however, reimbursed them for their reasonable expenses incurred in
attending meetings of the Board of Directors. In the future, non-employee
directors will receive an annual directors' fee in the amount of $10,000,
commencing with our 1999 Annual Meeting, which fees will be paid in quarterly
installments.
In January 1998, Mr. Kolde was granted an option to purchase 10,000 shares
of Common Stock at an exercise price of $0.50 per share. In March 1998, the
Company granted Mr. Breier an option to purchase 1,000,000 shares of Common
Stock at an exercise price of $2.60 per share, in his capacity as the Company's
President and Chief Executive Officer. In January 1999, the Company granted Mr.
Kolde an option to purchase 10,000 shares of Common Stock at an exercise price
of $20.75 per share.
Until April 4, 1998, under the terms of the Company's 1995 Stock Option
Plan, the Company granted each non-employee director options to purchase 10,000
shares of Common Stock upon initial election or appointment to the Board of
Directors and thereafter annually on January 1 of each year. Following April 4,
1998, the 1998 Stock Option Plan continued these grants. However, upon approval
by our Stockholders of the 1999 Stock Incentive Plan, these automatic grants
will occur only as provided for under the 1999 Stock Incentive Plan. The
proposed 1999 Stock Incentive Plan provides for initial grants of 20,000 shares
upon appointment to the Board of Directors and subsequent grants of 5,000 shares
following the conclusion of each Annual Meeting of Stockholders commencing with
the 2000 Annual Meeting of Stockholders. These options would vest over four
years.
In March 1999, we granted each of Messrs. Carlston, Chen and Posner options
to purchase 20,000 shares of Common Stock at an exercise price of $23.75 per
share under the 1998 Stock Option Plan. These options vest over four years with
25% of the total shares granted vesting in March 2000 and the remaining shares
vesting monthly thereafter through March 2003, contingent upon continuous
service as a director. Each of Messrs. Carlston, Chen and Posner waived his
rights to the initial automatic option grants under the Company's 1998 Stock
Option Plan.
RELATIONSHIPS AMONG DIRECTORS OR EXECUTIVE OFFICERS
There are no family relationships among any of the directors or executive
officers of the Company.
PROPOSAL NO. 2
AMENDMENT TO THE CERTIFICATE OF INCORPORATION
TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK
In February 1999, the Board of Directors declared it advisable, and
unanimously approved, an amendment to increase the aggregate number of shares of
Common Stock which the Company is authorized to issue from 50,000,000 shares to
70,000,000 shares (the "Amendment").
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If approved by the stockholders, the Amendment will become effective upon
the filing of a Certificate of Amendment of Certificate of Incorporation with
the Delaware Secretary of State. The Amendment would change Article IV of the
Company's Certificate of Incorporation to read in its entirety as follows:
"The Corporation is authorized to issue two classes of stock to be
designated, "Common Stock" and "Preferred Stock". The total number of
shares that this Corporation is authorized to issue is eighty-five million
(85,000,000) shares. The number of shares of Common Stock authorized is
seventy million (70,000,000) shares, $0.001 par value per share. The number
of shares of Preferred Stock authorized is fifteen million (15,000,000)
shares, $0.001 par value per share.
Any of the shares of Preferred Stock may be issued from time to time
in one or more series. Subject to the limitations and restrictions set
forth in this Article IV, the Board of Directors, by resolution or
resolutions, is authorized to create or provide for any such series, and to
fix the designations, preferences and relative, participating, optional or
other special rights, and qualifications, limitations or restrictions
thereof, including, without limitation, the authority to fix or alter the
dividend rights, dividend rates, conversion rights, exchange rights, voting
rights, rights and terms of redemption (including sinking and purchase fund
provisions), the redemption price or prices, the dissolution preferences
and the rights in respect to any distribution of assets of any wholly
unissued series of Preferred Stock and the number of shares constituting
any such series, and the designation thereof, or any of them and to
increase or decrease the number of shares of any series so created,
subsequent to the issue of that series but not below the number of shares
of such series then outstanding. In case the number of shares of any series
shall be so decreased, the shares constituting such decrease shall resume
the status which they had prior to the adoption of the resolution
originally fixing the number of shares of such series.
There shall be no limitation or restriction on any variation between
any of the different series of Preferred Stock as to the designations,
preferences and relative, participating, optional or other special rights,
and the qualifications, limitations or restrictions thereof; and the
several series of Preferred Stock may, except as hereinafter in the Article
IV otherwise expressly provided, vary in any and all respects as fixed and
determined by the resolution or resolutions of the Board of Directors,
providing for the issuance of the various series; provided, however, that
all shares of any one series of Preferred Stock shall have the same
designation, preferences and relative, participating, optional or other
special rights and qualifications, limitations and restrictions.
Except as otherwise required by law, or as otherwise fixed by
resolution or resolutions of the Board of Directors with respect to one or
more series of Preferred Stock, the entire voting power and all voting
rights shall be vested exclusively in the Common Stock, and each
stockholder of the Corporation who at the time possesses voting power for
any purpose shall be entitled to one vote for each share of such stock
standing in his name on the books of the Corporation."
PURPOSE AND EFFECT OF THE AMENDMENT
As of the Record Date, of the Company's 50,000,000 authorized shares of
Common Stock, 27,609,990 shares were issued and outstanding, 4,634,584 shares
were subject to outstanding options granted pursuant to the Company's current
stock option plans and proposed stock incentive and stock purchase plan
(together, the "Plans"), 358,423 shares were subject to outstanding warrants and
3,448,745 shares of the Company's Common Stock at the conversion price of
$18.34, subject to certain adjustments were issuable pursuant to 7 1/4%
Convertible Subordinated Notes, convertible at any time prior to December 1,
2003. The principal purpose of the proposed Amendment is to authorize additional
shares of Common Stock which will be available in the event that the Board of
Directors determines that it is necessary or appropriate, to among other things
effect future stock dividends or stock splits, raise additional capital through
the sale of securities, acquire another company or its business or assets
through the issuance of securities, or establish a strategic relationship with a
corporate partner through the exchange of securities.
On March 15, 1999, the Company entered into an agreement pursuant to which
one of its wholly-owned subsidiaries would merge with and into BuyDirect.com,
Inc., a leading online software retailer for consumers and business customers.
Upon the closing of this merger on March 30, 1999, BuyDirect.com became a
wholly-
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owned subsidiary of the Company. Pursuant to the merger the Company will be
issuing approximately 4,943,767 shares of Common Stock to BuyDirect.com's
stockholders in exchange for their outstanding shares of BuyDirect.com common
and preferred stock. In addition, the Company has reserved approximately 281,988
shares of Common Stock for issuance upon the exercise of options the Company
assumed in connection with the merger.
Subject to market conditions and other factors the Company anticipates
closing a public offering registering up to 4,600,000 shares of Common Stock (of
which up to 3,600,000 shares will be offered by the Company and 1,000,000 shares
will be offered by certain stockholders of the Company) prior to this Annual
Meeting of Stockholders to be held on April 30, 1999. Such public offering will
be made only by means of a prospectus and will not result in a change in control
of the Company.
If the proposed Amendment is adopted, the aggregate number of authorized
shares of Common Stock will be increased from 50,000,000 shares to 70,000,000
shares. If the Amendment is not approved, the number of authorized shares will
remain the same and management will have limited flexibility to do the things
described above. The Board of Directors has no immediate plans, understandings,
agreements or commitments to issue any of the additional shares of Common Stock.
There will be no change in the voting rights, dividend rights, liquidation
rights, preemptive rights or any other stockholder rights as a result of the
proposed Amendment. The additional shares might be issued at such times and
under such circumstances as to have a dilutive effect on earnings per share and
on the equity ownership of the present holders of Common Stock.
POTENTIAL ANTI-TAKEOVER EFFECT
The proposed Amendment could, under certain circumstances, have an
anti-takeover effect, although this is not the intention of the proposal. The
increased number of authorized shares of Common Stock could discourage, or be
used to impede, an attempt to acquire or otherwise change control of the
Company. The private placement of shares of Common Stock into "friendly" hands,
for example, could dilute the voting strength of a party seeking control of the
Company. Furthermore, many companies have issued warrants or other rights to
acquire additional shares of Common Stock to the holders of its Common Stock to
discourage or defeat unsolicited share accumulation programs and acquisition
proposals, which programs or proposals may be viewed by the Board of Directors
as not in the best interest of the Company and its stockholders. Although the
Company has no present intent to use the additional authorized shares of Common
Stock for such purposes, if this Amendment is adopted, more capital stock of the
Company would be available for such purposes than is currently available.
The affirmative vote of the holders of a majority of the outstanding shares
of Common Stock entitled to vote at the Annual Meeting, assuming a quorum is
present, is necessary for approval of the Amendment. Therefore, abstentions and
broker non-votes (which may occur if a beneficial owner of stock where shares
are held in a brokerage or bank account fails to provide the broker or the bank
voting instructions as to such shares) effectively count as votes against the
Amendment.
THE BOARD OF DIRECTORS UNANIMOUSLY
RECOMMENDS A VOTE FOR APPROVAL OF THE AMENDMENT
PROPOSAL NO. 3
APPROVAL OF THE BEYOND.COM CORPORATION
1999 STOCK INCENTIVE PLAN
GENERAL
The Company's stockholders are being asked to approve the adoption of the
Company's 1999 Stock Incentive Plan (the "Incentive Plan") if the Company's
stockholders adopt the Incentive Plan the Company
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will not issue further awards under its 1998 Stock Option Plan. In the following
discussion of the Incentive Plan capitalized terms have the same meanings as
defined in the Incentive Plan, unless otherwise noted.
The Incentive Plan is intended to enable the Company and its Related
Entities (as defined in the Plan) to attract and retain the best available
personnel for positions of substantial responsibility, to provide additional
incentive to employees, directors and consultants, to promote the success of the
Company's business, and to increase stockholder value by further aligning the
interests of key employees with the interests of the Company's stockholders by
providing an opportunity to benefit from stock price appreciation that generally
accompanies improved financial performance. The Board of Directors believes that
the Company's long term success is dependent upon the ability of the Company and
its Related Entities to attract and retain superior individuals who, by virtue
of their ability and qualifications, make important contributions to the Company
and its Related Entities.
Initially, a total of 2,000,000 shares of Common Stock (the "Shares") have
been reserved for issuance under the Incentive Plan. The maximum aggregate
number of Shares available for grant under the Incentive Plan, including
incentive stock options ("ISOs"), is 2,000,000 Shares. The Incentive Plan will
terminate in March 2009, unless earlier terminated by the Board.
The affirmative vote of a majority of the shares present in person or by
proxy at the Annual Meeting and entitled to vote is required for adoption of
Proposal No. 3. For purposes of the vote on Proposal No. 3, abstentions will
have the same effect as votes against the proposal and broker non-votes will not
be counted as votes cast and will have no effect on the result of the vote.
New Plan Benefits. As of the date of this Proxy Statement, no directors and
no associates of any director, nominee for director or officer has been granted
any options subject to stockholder approval of the proposed Incentive Plan.
Other than the formula option grants to non-employee directors, as described in
Section 7 of the Incentive Plan, the benefits to be received pursuant to the
Incentive Plan by the Company's directors, nominees for director, officers and
employees are not determinable at this time.
THE BOARD OF DIRECTORS UNANIMOUSLY
RECOMMENDS A VOTE FOR APPROVAL OF THE 1999 STOCK INCENTIVE PLAN
A general description of the principal terms of the Incentive Plan as
proposed is set forth below. This description is qualified in its entirety by
the terms of the Incentive Plan, a copy of which is attached to this Proxy
Statement as Exhibit A and is incorporated by reference herein.
GENERAL DESCRIPTION
The Incentive Plan provides for the grant of options, SARs, dividend
equivalent rights, restricted stock, and awards which may be earned in whole or
in part upon attainment of performance criteria established by the Incentive
Plan administrator. The maximum number of Shares with respect to which options
and SARs may be granted to an employee of the Company during a fiscal year of
the Company is 1,000,000 Shares.
The Incentive Plan is administered, with respect to grants to directors,
officers, consultants, and other employees, by the plan administrator (the
"Administrator"), defined as the Board or one or more committees designated by
the Board. The Board's Compensation Committee has been appointed the
Administrator of the Incentive Plan. With respect to grants to officers and
directors, the committee shall be constituted in such a manner as to satisfy
applicable laws, including Rule 16b-3 promulgated under the Securities Exchange
Act of 1934, as amended. The Board may authorize one or more officers to grant
Awards, subject to certain limitations, to employees or consultants who are
neither directors nor officers of the Company.
The Board may at any time amend, suspend or terminate the Incentive Plan.
To the extent necessary to comply with applicable provisions of federal
securities laws, state corporate and securities laws, the Internal Revenue Code
of 1986, as amended (the "Code"), the rules of any applicable stock exchange or
national market system, and the rules of any foreign jurisdiction applicable to
Awards granted to residents therein, the Company will obtain stockholder
approval of any amendment to the Incentive Plan in such a manner and to such a
degree as required.
7
<PAGE> 10
Stock options granted under the Incentive Plan may be either ISOs under the
provisions of Section 422 of the Code, or non-qualified stock options. ISOs may
be granted only to employees of the Company or any parent or subsidiary
corporation of the Company. Awards other than ISOs may be granted to employees,
directors and consultants. Under the Incentive Plan, Awards may be granted to
such employees, directors or consultants who are residing in foreign
jurisdictions as the Administrator may determine from time to time.
Under the Incentive Plan, ISOs may not be sold, pledged, assigned,
hypothecated, transferred or disposed of in any manner other than by will or by
the laws of descent or distribution and may be exercised during the lifetime of
the grantee only by the grantee. However, the Incentive Plan permits the
designation of beneficiaries by holders of ISOs. Other Awards are transferable
to the extent provided in the Award Agreement.
The Incentive Plan authorizes the Administrator to select the employees,
directors and consultants of the Company to whom Awards may be granted and to
determine the terms and conditions of any Award; however, the term of an ISO may
not be for more than ten years (or five years in the case of ISOs granted to any
grantee who owns stock representing more than 10% of the combined voting power
of the Company or any parent or subsidiary corporation of the Company). The
Incentive Plan authorizes the Administrator to grant Awards at an exercise price
determined by the Administrator. In the case of ISOs, such price cannot be less
than 100% (or 110%, in the case of ISOs granted to any grantee who owns stock
representing more than 10% of the combined voting power of the Company or any
parent or subsidiary corporation of the Company) of the fair market value of the
Common Stock on the date the option is granted. Similarly, in the case of non-
qualified stock options, the price cannot be less than 100% of the fair market
value of the Common Stock on the date the option is granted. The exercise price
is generally payable in cash, check, or, in certain circumstances, with a
promissory note, with such documentation as the Administrator and the broker, if
applicable, shall require to effect an exercise of an Award and delivery to the
Company of the sale or loan proceeds required to pay the exercise price, or with
shares of Common Stock. The aggregate fair market value of the Common Stock with
respect to any ISOs that are exercisable for the first time by an eligible
employee in any calendar year may not exceed $100,000.
The Awards may be granted subject to vesting schedules and restrictions on
transfer and repurchase or forfeiture rights in favor of the Company as
specified in the agreements to be issued under the Incentive Plan. The vesting
schedule is accelerated by 50% of the number of shares covered by the option
upon a Covered Termination (as defined in the Incentive Plan). A Covered
Termination results if an optionee's employment is terminated without cause or
there is a Constructive Termination (as defined in the Incentive Plan) within
twelve months of a Change of Control (as defined in the Incentive Plan). The
options become exercisable 10 days before consummation of the Change of Control.
Effective upon the consummation of the Change of Control, all outstanding Awards
under the Incentive Plan shall terminate unless assumed by the successor company
or its parent.
Under the Incentive Plan, the Administrator may establish one or more
programs under the Incentive Plan to permit selected grantees the opportunity to
elect to defer receipt of consideration payable under an Award. The
Administrator also may establish under the Incentive Plan separate programs for
the grant of particular forms of Awards to one or more classes of grantees. In
addition, under the Incentive Plan non-employee directors are granted an Initial
Grant to purchase 20,000 shares upon their appointment to the Board and
Follow-On Grants in the amount of 5,000 shares following the conclusion of each
Annual Meeting of Stockholders commencing with the 2000 Annual Meeting of
Stockholders. The Initial Grants and Follow-On Grants become exercisable over
four years with 25% of the shares subject to the grant vesting one year from the
date of grant and the remaining shares vesting monthly thereafter.
CERTAIN FEDERAL TAX CONSEQUENCES
The following summarizes only the federal income tax consequences of stock
options and shares of restricted stock granted under the Incentive Plan. State
and local tax consequences may differ.
The grant of a nonqualified stock option under the Incentive Plan will not
result in any federal income tax consequences to the optionee or to the Company.
Upon exercise of a nonqualified stock option, the optionee is
8
<PAGE> 11
subject to income taxes at the rate applicable to ordinary compensation income
on the difference between the option price and the fair market value of the
Shares on the date of exercise. This income is subject to withholding for
federal income and employment tax purposes. The Company is entitled to an income
tax deduction in the amount of the income recognized by the optionee. Any gain
or loss on the optionee's subsequent disposition of the Shares of Common Stock
will receive long or short-term capital gain or loss treatment, depending on
whether the Shares are held for more than twelve months following exercise. The
Company does not receive a tax deduction for any such gain. Capital gains
currently are taxed at the same rates as ordinary income, except that the
maximum marginal rate at which ordinary income is taxed to individuals is
currently 39.6% and the maximum rate at which long-term capital gains are taxed
is 20% for property held for more than twelve months.
The grant of an ISO under the Incentive Plan will not result in any federal
income tax consequences to the optionee or to the Company. An optionee
recognizes no federal taxable income upon exercising an ISO (subject to the
alternative minimum tax rules discussed below), and the Company receives no
deduction at the time of exercise. In the event of a disposition of stock
acquired upon exercise of an ISO, the tax consequences depend upon how long the
optionee has held the Shares of Common Stock. If the optionee does not dispose
of the Shares within two years after the ISO was granted, nor within one year
after the ISO was exercised and Shares were purchased, the optionee will
recognize a long-term capital gain (or loss) equal to the difference between the
sale price of the Shares and the exercise price. The Company is not entitled to
any deduction under these circumstances.
If the optionee fails to satisfy either of the foregoing holding periods,
he or she must recognize ordinary income in the year of the disposition
(referred to as a "disqualifying disposition"). The amount of such ordinary
income generally is the lesser of (i) the difference between the amount realized
on disposition and the exercise price, or (ii) the difference between the fair
market value of the stock on the exercise date and the exercise price. Any gain
in excess of the amount taxed as ordinary income will be treated as a long or
short-term capital gain, depending on whether the stock was held for more than
twelve months. The Company, in the year of the disqualifying disposition, is
entitled to a deduction equal to the amount of ordinary income recognized by the
optionee.
The "spread" under an ISO -- i.e., the difference between the fair market
value of the Shares at exercise and the exercise price -- is classified as an
item of adjustment in the year of exercise for purposes of the alternative
minimum tax.
The grant of restricted stock will subject the recipient to ordinary
compensation income on the difference between the amount paid for such stock and
the fair market value of the Shares on the date that the restrictions lapse.
This income is subject to withholding for federal income and employment tax
purposes. The Company is entitled to an income tax deduction in the amount of
the income recognized by the recipient. Any gain or loss on the recipient's
subsequent disposition of the Shares will receive long or short-term capital
gain or loss treatment depending on whether the Shares are held for more than
twelve months and depending on how long the stock has been held since the
restrictions lapsed. The Company does not receive a tax deduction for any such
gain. Recipients of restricted stock may make an election under Internal Revenue
Code Section 83(b) to recognize as ordinary compensation income in the year that
such restricted stock is granted the amount equal to the spread between the
amount paid for such stock and the fair market value on date of the issuance of
the stock. If such an election is made, the recipient recognizes no further
amounts of compensation income upon the lapse of any restrictions and any gain
or loss on subsequent disposition will be long or short-term capital gain. The
Section 83(b) election must be made within thirty days from the time the
restricted stock is issued.
9
<PAGE> 12
PROPOSAL NO. 4
APPROVAL OF THE BEYOND.COM CORPORATION
1999 EMPLOYEE STOCK PURCHASE PLAN
GENERAL
The Company's stockholders are being asked to approve the adoption of the
Company's 1999 Employee Stock Purchase Plan (the "Purchase Plan"). In the
following discussion of the Purchase Plan capitalized terms have the same
meanings as defined in the Purchase Plan, unless otherwise noted.
The purpose of the Purchase Plan is to provide employees of the Company and
its Designated Parents or Subsidiaries with an opportunity to purchase Common
Stock of the Company through accumulated payroll deductions. It is the intention
of the Company to have the Purchase Plan qualify as an "Employee Stock Purchase
Plan" under Section 423 of the Code. The provisions of the Purchase Plan,
accordingly, shall be construed so as to extend and limit participation in a
manner consistent with the requirements of that section of the Code. The
Purchase Plan is intended to enable the Company and its Designated Parents or
Subsidiaries to attract and retain the best available personnel for positions of
substantial responsibility, to provide additional incentive to employees, to
promote the success of the Company's business, and to increase stockholder value
by further aligning the interests of its employees with the interests of the
Company's stockholders by providing an opportunity to benefit from stock price
appreciation that generally accompanies improved financial performance. The
Board of Directors believes that the Company's long term success is dependent
upon the ability of the Company and its Designated Parents or Subsidiaries to
attract and retain superior individuals who, by virtue of their ability and
qualifications, make important contributions to the Company and its Related
Entities.
Initially, a total of 1,000,000 shares of Common Stock (the "Shares") have
been reserved for issuance under the Purchase Plan. The Purchase Plan will
terminate in March 2009, unless earlier terminated by the Board.
The affirmative vote of a majority of the shares present in person or by
proxy at the Annual Meeting and entitled to vote is required for adoption of
Proposal No. 4. For purposes of the vote on Proposal No. 4, abstentions will
have the same effect as votes against the proposal and broker non-votes will not
be counted as votes cast.
New Plan Benefits. As of the date of this Proxy Statement, no officer has
been granted any rights subject to stockholder approval of the proposed Purchase
Plan. The benefits to be received pursuant to the Purchase Plan by the Company's
officers and employees are not determinable at this time.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
A VOTE FOR APPROVAL OF THE 1999 EMPLOYEE STOCK PURCHASE PLAN
A general description of the principal terms of the Purchase Plan as
proposed is set forth below. This description is qualified in its entirety by
the terms of the Purchase Plan, a copy of which is attached to this Proxy
Statement as Exhibit B and is incorporated by reference herein.
GENERAL DESCRIPTION
The purpose of the Purchase Plan is to provide employees of the Company who
participate in the Purchase Plan with an opportunity to purchase Common Stock of
the Company through payroll deductions. The Purchase Plan, and the right of
participants to make purchases thereunder, is intended to qualify as an
"employee stock purchase plan" under the provisions of Section 423 of the Code.
Employees of the Company and its Designated Parents or Subsidiaries are eligible
to participate in the Purchase Plan. Directors who are not employees are not
eligible to participate.
Any person who is employed by the Company (or any of its majority-owned
subsidiaries for whom the appropriate regulatory filings and action by the Board
of Directors have been made) for at least 20 hours per week and more than five
months in a calendar year is eligible to participate in the Purchase Plan
provided that
10
<PAGE> 13
the employee is employed on the first day of an Offer Period and subject to
certain limitations imposed by Section 423(b) of the Code. Eligible employees
become participants in the Purchase Plan by delivering to the Company a
subscription agreement authorizing payroll deductions prior to the commencement
of the applicable Purchase Period.
The Purchase Plan is implemented by overlapping or consecutive Offer
Periods during which there are four Purchase Periods. The Board of Directors may
alter the duration of the Offer Periods, up to a maximum of 27 months, without
stockholder approval. Certain additional limitations on the amount of Common
Stock which may be purchased in any calendar year are imposed by the Code.
The price per share at which Shares are sold under the Purchase Plan is
equal to the lower of (i) 85% of the fair market value of the Common Stock on
the date of commencement of the Offer Period and (ii) 85% of the fair market
value of the Common Stock on the Exercise Date. The fair market value of the
Common Stock on a given date is determined by the Board of Directors based upon
the last sale price of the Common Stock on the Nasdaq National Market as of such
date. The number of shares of Common Stock which may be purchased is subject to
adjustment in the event of a stock split, stock dividend or other similar change
in the Common Stock or the capital structure of the Company. The Company makes
no cash contributions to the Purchase Plan, but bears the expenses of
administration. The Purchase Plan is administered by the Compensation Committee,
which has the authority to determine the terms and conditions under which shares
are to be offered and corresponding options are to be granted under the Purchase
Plan for any Offer Period during the term of the Purchase Plan, and to resolve
all questions relating to the administration of the plan. The Purchase Plan will
terminate on the date preceding the tenth anniversary of its date of adoption,
unless earlier terminated by the Board of Directors.
Notwithstanding the foregoing, (i) no employee will be permitted to
subscribe for shares under the Purchase Plan if, immediately after the grant of
the option, the employee would own 5% or more of the voting power or value of
all classes of stock of the Company or of a parent or of any of its subsidiaries
(including stock which may be purchased under the Purchase Plan or pursuant to
any other options), (ii) no employee shall be granted an option which would
permit the employee to buy pursuant to the Purchase Plan more than $25,000 worth
of stock (determined at the fair market value of the shares at the time the
option is granted) in any calendar year, and (iii) employees shall not be
permitted in any Purchase Period to purchase more than 500 shares.
A participant may decrease the rate of his or her payroll deduction for the
remainder of a Offer Period by filling out the appropriate form and delivering
it to the Company (or its designee). The reduced rate will become effective with
the first full payroll period following ten business days after the Company
receives the form unless the Company elects to process changes more quickly, and
will remain in effect for the entire Offer Period and each subsequent Offer
Period.
A participant may also decrease or increase his or her rate of payroll
deduction (to the 10% maximum allowed by the Purchase Plan) for a subsequent
Offer Period or Purchase Period by filing a new payroll deduction authorization
with the Company prior to the start of that Offer Period or Purchase Period. The
new rate will become effective on the first day of the Offer Period or Purchase
Period following the tenth business day after filing the new authorization and
will remain in effect for the entire Offer Period and each subsequent Offer
Period.
A participant's interest in a given Offer Period may be terminated in
whole, but not in part, by signing and delivering to the Company a notice of
withdrawal from the Purchase Plan. Such withdrawal may be elected at any time
prior to the end of the applicable six-month Offer Period. Any withdrawal by the
participant of accumulated payroll deductions for a given Offer Period
automatically terminates the participant's interest in that Purchase Period. The
failure to remain in the continuous employ of the Company (or a Designated
Parent or Subsidiary) for at least 20 hours per week and more than five months
in a calendar year during an Offer Period will be deemed to be a withdrawal from
that Offer Period.
11
<PAGE> 14
No rights or accumulated payroll deductions of a participant under the
Purchase Plan may be pledged, assigned or transferred for any reason and any
such attempt may be treated by the Company as an election to withdraw from the
Purchase Plan.
CERTAIN FEDERAL TAX CONSEQUENCES
The following discussion summarizes certain tax considerations for
participants in the Purchase Plan and certain tax effects to the Company. State
and local tax consequences may differ.
Amounts deducted from a participant's pay under the Purchase Plan are part
of the employee's regular compensation and remain subject to federal, state and
local income and employment withholding taxes. A participant will not recognize
any additional income at the time the participant elects to participate in the
Purchase Plan, or purchases Common Stock under the Purchase Plan.
If a participant disposes of Common Stock purchased pursuant to the
Purchase Plan within two years after the first day of the Offer Period or within
one year of the purchase of Common Stock (the "Minimum Holding Period"), the
participant will recognize, for federal tax purposes, ordinary compensation
income at the time of disposition of the Common Stock in an amount equal to the
excess of the fair market value of the Common Stock on the day the Common Stock
was purchased over the purchase price the participant paid for the Common Stock.
This amount may be subject to withholding for taxes. In addition, a participant
generally will recognize a capital gain or loss in an amount equal to the
difference between the amount realized upon the disposition of the Common Stock
and the participant's basis in the Common Stock (that is, the purchase price
plus the amount taxed as compensation income).
If a participant disposes of Common Stock purchased pursuant to the
Purchase Plan at any time after the Minimum Holding Period, the participant will
recognize, for federal tax purposes, ordinary compensation income at the time of
such disposition in an amount equal to the lesser of (a) the excess (or zero if
there is no excess) of the fair market value of the Common Stock at the time of
such disposition over the amount paid for the Common Stock, or (b) 15% of the
fair market value of the Common Stock on the first day of the Offer Period. In
addition, the participant generally will recognize a capital gain or loss in an
amount equal to the difference between the amount realized upon the disposition
of the Common Stock and the participant's basis in the stock (that is, the
purchase price plus the amount, if any, taxed as compensation income).
Although the amounts deducted from a participant's pay under the Purchase
Plan generally are tax-deductible business expenses of the Company, the Company
generally will not be allowed any additional deduction by reason of a
participant's purchase of Common Stock under the Purchase Plan. However, if a
participant disposes of Common Stock purchased pursuant to the Purchase Plan
within the Minimum Holding Period, the Company should be entitled to a deduction
in an amount equal to the compensation income recognized by the participant. If
a participant disposes of Common Stock purchased under the Purchase Plan after
the Minimum Holding Period, the Company will not receive any deduction for
federal income tax purposes with respect to the Common Stock.
PROPOSAL NO. 5
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has selected Ernst & Young LLP, independent
auditors, to audit the financial statements of the Company for 1999 and
recommends that the stockholders ratify such selection. In the event that a
majority of the outstanding shares are not voted in favor of ratification, the
Board will reconsider its selection. Unless otherwise instructed, the proxy
holders will vote the proxies they receive for the ratification of Ernst & Young
LLP as the independent auditors for 1999. Representatives of Ernst & Young LLP
will be present at the Annual Meeting, will have the opportunity to make a
statement if they so desire and will be available to respond to appropriate
questions.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR RATIFICATION
OF ERNST & YOUNG LLP AS THE COMPANY'S INDEPENDENT AUDITORS FOR 1999
12
<PAGE> 15
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth certain information about our executive
officers and directors.
<TABLE>
<CAPTION>
NAME AGE POSITION WITH COMPANY
---- --- ---------------------
<S> <C> <C>
William S. McKiernan.................... 42 Chairman of the Board of Directors
Mark L. Breier.......................... 39 President, Chief Executive Officer and
Director
John P. Pettitt......................... 36 Executive Vice President and Chief
Technology Officer
James R. Lussier........................ 42 Vice President, Business Operations and
Corporate Strategy
Michael J. Praisner..................... 52 Vice President, Finance and Administration
and Chief Financial Officer
Alan C. DeClerck........................ 44 Vice President, Worldwide Sales
Brian J. Sroub.......................... 39 Vice President, Marketing
Mala Anand.............................. 31 Vice President, Engineering
John D. Vigouroux....................... 39 Vice President, Business Development
Douglas Carlston(1)..................... 51 Director
John S. Chen(1)......................... 43 Director
Bert Kolde(2)........................... 44 Director
Ronald S. Posner(2)..................... 56 Director
</TABLE>
- ---------------
(1) Member of Compensation Committee
(2) Member of Audit Committee
JOHN P. PETTITT is a co-founder of Beyond.com and has served as Executive
Vice President and Chief Technology Officer since its inception in 1994. From
1992 to 1994, Mr. Pettitt consulted on a number of Internet and intranet
projects, including a national medical imaging network. From 1986 to 1992, Mr.
Pettitt served as Group Vice President and Technical Director of Specialix PLC,
a leading supplier of communications controllers for UNIX systems. While at
Specialix, Mr. Pettitt received the 1992 British Design Award for designing a
new distributed, fault tolerant data switch. Mr. Pettitt also co-founded the
United Kingdom Internet Consortium.
JAMES R. LUSSIER joined Beyond.com in April 1998 as Vice President,
Business Operations and Corporate Strategy. From September 1993 to April 1998,
Mr. Lussier served as an Associate Partner of Andersen Consulting where he was
responsible for the Electronics and High Technology Strategy Practice Group and
was a member of the Commerce Core Team. Mr. Lussier holds a B.S. in Finance from
the Wharton School, University of Pennsylvania, an M.A. in Sociology, with an
emphasis in Statistics, from the University of California at Berkeley and an
M.B.A. from the Stanford University Graduate School of Business.
MICHAEL J. PRAISNER joined Beyond.com as Vice President, Finance and
Administration and Chief Financial Officer in April 1998. From 1995 to February
1998, Mr. Praisner served as Vice President, Finance and Administration, Chief
Financial Officer and Secretary of Silicon Storage Technology, Inc., a supplier
of flash memory devices. From 1994 to 1995, he served as Vice President, Finance
and Chief Financial Officer of MicroModule Systems, Inc., a manufacturer of
multichip modules for computer and telecommunications applications. From 1992 to
1993, he served as Vice President, Finance and Chief Financial Officer of
Electronics for Imaging, Inc., a manufacturer of color desktop publishing
computer systems. During part of 1991, he served as Vice President, Finance and
Chief Financial Officer of Digital Link Corp., a computer communications
equipment company. From 1989 to 1991, he served as Corporate Controller of
Applied Materials Inc., a manufacturer of semiconductor wafer fabrication
equipment. Mr. Praisner holds a B.A. in Liberal Arts and an M.B.A. from Southern
Methodist University and is a Certified Public Accountant.
13
<PAGE> 16
ALAN C. DECLERCK joined Beyond.com in April 1998 as Vice President, Sales.
From August 1995 until he joined Beyond.com, Mr. DeClerck served as
International Director, ISVs & Integrators, for Sun Microsystems Computer
Corporation. From January 1990 until August 1995, Mr. DeClerck served other
roles at Sun Microsystems, including Director, Corporate Business Development,
Director of Marketing and Business Development at FirstPerson, a Sun
Microsystems subsidiary that developed the initial Java technology, and various
sales and sales management roles. Mr. DeClerck was involved in marketing and
sales roles from 1980 until 1989 at Network Equipment Technologies, Industrial
Networking, Inc. and General Motors Corporation. Mr. DeClerck holds an A.B. in
International Relations from Brown University, a M. Phil. in International
Relations from Oxford University and an M.B.A. from the Stanford University
Graduate School of Business.
BRIAN J. SROUB joined Beyond.com in April 1998 as Vice President,
Marketing. From June 1995 to April 1998, Mr. Sroub served as Vice President,
Marketing of Hearst New Media & Technology, a worldwide media company. From
October 1993 to May 1995, Mr. Sroub served as Vice President, Sales & Marketing
of Sony Electronics. Prior to October 1993, Mr. Sroub co-founded Home
Environmental Products, a start up horticultural corporation, and was a Brand
Manager at Procter & Gamble Company. Mr. Sroub holds a B.A. in Liberal Arts from
Boston College, an M.A. in Economics from Boston College and an M.B.A. from the
Stanford University Graduate School of Business.
MALA ANAND joined Beyond.com in June 1998 as Vice President, Engineering.
From January 1995 until she joined Beyond.com, Ms. Anand served as Director of
Product Development with the Internet application services division at Oracle
Corporation. From 1992 to 1995, Ms. Anand was a technical architect and a
principal engineer of Digital Equipment Corporation's software supply business.
Ms. Anand holds an M.S. in Computer Science from Brown University and a B.S. in
Computer Science from the University of Massachusetts.
JOHN D. VIGOUROUX joined Beyond.com in October 1998 as Vice President,
Business Development. From June 1997 until he joined Beyond.com, Mr. Vigouroux
served as Vice President of Business Development of Net Objects, Inc. From
August 1996 to June 1997, Mr. Vigouroux served as a Director of Business
Development of Cisco Systems, Inc. From August 1993 to August 1996, Mr.
Vigouroux served as Manager of Strategic Opportunities of Adobe Systems, Inc.
Mr. Vigouroux holds an M.B.A. from New Hampshire College and a B.S. in
Organizational Behavior and Development from Averett College.
14
<PAGE> 17
EXECUTIVE COMPENSATION
The following table sets forth certain information concerning compensation
of and stock options granted to each of the persons serving as the Company's
Chief Executive Officer and each of the four other most highly compensated
executive officers of the Company (collectively, the "Named Executive
Officers"). In March 1998, Mr. McKiernan resigned as our President and Chief
Executive Officer and commenced service as the Chairman of our Board of
Directors, where he presently earns a salary of $100,000 per annum. In March
1998, Mr. Breier was hired as our President and Chief Executive Officer.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
------------
ANNUAL COMPENSATION SECURITIES
--------------------------- UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) OPTIONS(#) COMPENSATION
--------------------------- ---- --------- -------- ------------ ------------
<S> <C> <C> <C> <C> <C>
William S. McKiernan........................ 1998 $ 91,500 -- -- --
Chairman of the Board..................... 1997 165,000 -- -- --
Mark L. Breier (1).......................... 1998 150,000 $37,500 1,000,000 $65,000(2)
President and Chief Executive Officer
John P. Pettitt............................. 1998 141,000 -- -- --
Executive Vice President and Chief
Technology Officer........................ 1997 130,000 100 -- --
Michael J. Praisner(3)...................... 1998 120,000 -- 200,000 --
Vice President, Finance and Administration
and Chief Financial Officer
Brian J. Sroub(3)........................... 1998 127,000 -- 180,000 --
Vice President, Marketing
James R. Lussier(3)......................... 1998 126,000 -- 180,000 --
Vice President, Business Operations and
Corporate Strategy
</TABLE>
- ---------------
(1) Mr. Breier was hired in March 1998.
(2) Represents a relocation allowance payment to Mr. Breier.
(3) Messrs. Praisner, Sroub and Lussier were each hired in April 1998.
15
<PAGE> 18
STOCK OPTION INFORMATION
The following table sets forth certain information with respect to stock
options granted in fiscal 1998 to the Named Executives Officers.
OPTION GRANTS IN FISCAL 1998
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS(1)
------------------------------------------------ POTENTIAL REALIZABLE VALUE
NUMBER OF AT ASSUMED ANNUAL RATES OF
SECURITIES % OF TOTAL STOCK APPRECIATION FOR
UNDERLYING OPTIONS GRANTED OPTION TERM(4)
OPTIONS TO EMPLOYEES EXERCISE PRICE EXPIRATION ---------------------------
NAME GRANTED(#) IN FISCAL YEAR(2) ($/SHARE)(3) DATE 5%($) 10%($)
---- ---------- ------------------ -------------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
William S. McKiernan.... -- -- -- -- -- --
Mark L. Breier.......... 1,000,000 25.8% $2.60 03/30/2008 $4,235,126 $6,743,730
John P. Pettitt......... -- -- -- -- -- --
Michael J. Praisner..... 200,000 5.2% $4.36 04/07/2008 $1,420,396 $2,261,743
Brian J. Sroub.......... 180,000 4.7% $5.44 04/25/2008 $1,595,014 $2,539,793
James R. Lussier........ 180,000 4.7% $5.44 04/25/2008 $1,595,014 $2,539,793
</TABLE>
- ---------------
(1) Each of these options vests over four years at a rate of 25% of the shares
subject to the option after one year and the remaining shares subject to the
option at the rate of 1/48th per month thereafter. Each of these options has
a ten-year term.
(2) Based on an aggregate of 3,868,946 options granted by Beyond.com during the
fiscal year ended 1998 to employees of and consultants to Beyond.com,
including the Named Executives.
(3) The exercise price per share of each option was equal to the fair market
value of the Common Stock on the date of grant as determined by the Board of
Directors.
(4) The potential realizable value is calculated based on the term of the option
at its time of grant (ten years). It is calculated assuming that the fair
market value of the Common Stock on the date of grant appreciates at the
indicated annual rate compounded annually for the entire term of the option
and that the option is exercised and sold on the last day of its term for
the appreciated stock price.
The following table sets forth certain information regarding stock options
held as of December 31, 1998 by the Named Executives Officers.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED IN-THE-
OPTIONS AS OF MONEY OPTIONS AS OF
SHARES DECEMBER 31, 1998(#) DECEMBER 31, 1998($)(1)
ACQUIRED ON VALUE --------------------------- -----------------------------
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ------------------ ----------- ----------- ------------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
William S. McKiernan....... -- -- -- -- -- --
Mark L. Breier............. -- -- -- 1,000,000 $ 0 $18,150,000
John P. Pettitt............ -- -- 1,250,000 -- $25,932,500 $ 0
Michael J. Praisner........ -- -- -- 200,000 $ 0 $ 3,278,000
Brian J. Sroub............. -- -- -- 180,000 $ 0 $ 2,755,800
James R. Lussier........... -- -- -- 180,000 $ 0 $ 2,755,800
</TABLE>
- ---------------
(1) The value of unexercised "in-the-money" options represents the difference
between the exercise price of stock options and $20.75, the closing sales
price of the Common Stock on December 31, 1998.
EMPLOYMENT AGREEMENTS
The Company and Mark L. Breier are parties to an employment agreement dated
March 23, 1998 (the "Breier Agreement"). Mr. Breier's annual base salary under
the Breier Agreement is $200,000, subject to
16
<PAGE> 19
good faith adjustment by our Board of Directors. In addition, Mr. Breier is
eligible to participate in the Company's executive benefit plans and to earn an
annual bonus in the amount of $50,000, payable quarterly, based on achievement
of objectives mutually determined by Mr. Breier and our Board of Directors at
the beginning of each year of employment. According to the Breier Agreement,
$25,000 of Mr. Breier's potential bonus for 1998 was guaranteed and paid to Mr.
Brier in quarterly installments.
Pursuant to the Breier Agreement, the Company granted an option to purchase
1,000,000 shares of Common Stock to Mr. Breier on March 30, 1998, under the 1995
Stock Option Plan. This option has an exercise price of $2.60 per share and is
governed generally by the terms of the 1995 Stock Option Plan, with certain
limited exceptions including acceleration of the vesting in connection with a
change of control (as defined in the Breier Agreement). In the event Mr. Breier
is terminated at any time for any reason other than fraud or willful malfeasance
or willful and continuing (after notice) neglect of duties, the Company will pay
severance in an amount equal to Mr. Breier's base salary at the time of such
termination, for the lesser of twelve months or that number of months before
which he obtains a position with another firm. Further, if Mr. Breier is
terminated with or without cause the Company will accelerate the vesting of his
option such that 125,000 shares subject to such option vest immediately, if such
termination is prior to the first anniversary of the date his employment
started, or such that the vesting of all shares subject to such option is
accelerated by six months, if such termination is after the first anniversary of
the date his employment started but prior to 18 months after such date.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
None of the members of the Company's Compensation Committee is an officer
or employee of Beyond.com. Two of the six members of the Company's Board of
Directors also serve as members of the Board of Directors of CyberSource
Corporation. Other than with respect to CyberSource, no interlocking
relationship exists between the Company's Board of Directors or Compensation
Committee and the board of directors or compensation committee of any other
company, nor has such an interlocking relationship existed in the past.
CERTAIN TRANSACTIONS
STOCK AND WARRANT ISSUANCES
Since January 1, 1996, the Company has issued shares of common stock to
certain insiders and shares of preferred stock in private placement transactions
each as set forth below.
In February 1996, the Company issued shares of Series A preferred stock in
private placements to certain investors including 253,131 shares to C.E.
Unterberg Towbin Capital Partners I, L.P. at a purchase price of $0.76 per
share. In this section of this proxy statement, we refer to C.E. Unterberg
Towbin Capital Partners I, L.P. as "Unterberg Partners I." The shares of Series
A preferred stock held by Unterberg Partners I converted into 506,262 shares of
common stock upon consummation of the Company's initial public offering. Steven
P. Novak, formerly a member of the Company's Board of Directors, is a Managing
Director of C. E. Unterberg, Towbin, an affiliate of the general partner of
Unterberg Partners I.
In July 1996, the Company issued shares of Series B preferred stock in a
private placement to certain investors, including 925,926 shares to Vulcan
Ventures Inc., at a purchase price of $2.25 per share. In this section of this
proxy statement we refer to Vulcan Ventures Inc. as "Vulcan." Bert Kolde, one of
the Company's directors, serves as a director, Vice President, Treasurer and
Secretary of Vulcan, as well as President of the Paul G. Allen Virtual Education
Foundation and the Paul G. Allen Forest Protection Foundation, and as a director
of several other companies controlled by Mr. Allen, who maintains a controlling
interest of Vulcan. Mr. Kolde disclaims beneficial ownership of the shares of
common stock issued to Vulcan, except for his proportional interest therein, if
any. All of the outstanding shares of Series B preferred stock converted on a
two-for-one basis into 4,074,076 shares of common stock upon the consummation of
the Company's initial public offering.
17
<PAGE> 20
In September and December 1997, the Company issued shares of Series C
preferred stock in private placements to certain investors at a purchase price
of $2.04 per share. The Company issued Series C preferred stock to the following
entities:
<TABLE>
<CAPTION>
NUMBER OF
PURCHASER SHARES
--------- ---------
<S> <C>
GRP......................................................... 1,470,588
UT Capital Partners International, LDC...................... 59,914
UT Technology Partners, LDC................................. 185,184
Unterberg Harris Private Equity Partners, LP................ 201,961
Unterberg Harris Private Equity Partners, CV................ 43,137
Vulcan...................................................... 716,666
</TABLE>
In this section of this proxy statement we refer to UT Capital Partners
International, LDC, UT Technology Partners, LDC, and Unterberg Harris Private
Equity Partners, CV collectively as the "Unterberg Affiliates." In this section
of this proxy statement we collectively refer to Global Retail Partners Funding,
Inc. and its affiliates (each an affiliate of Donaldson, Lufkin & Jenrette
Securities Corporation) that are stockholders of Beyond.com as "GRP." Linda
Fayne Levinson, formerly a member of the Company's board of directors, is a
principal of Global Retail Partners, L.P., an affiliate of Donaldson, Lufkin &
Jenrette Securities Corporation. All shares of Series C preferred stock
converted into 3,000,000 shares of common stock upon consummation of our initial
public offering.
In March and April 1998, the Company issued shares of Series D preferred
stock in private placements to certain investors at a purchase price of $2.60
per share. We issued Series D preferred stock to the following entities:
<TABLE>
<CAPTION>
NUMBER OF
PURCHASER SHARES
--------- ---------
<S> <C>
GRP......................................................... 458,106
Certain of the Unterberg Affiliates......................... 229,052
Vulcan...................................................... 458,106
</TABLE>
These shares converted into an aggregate of 1,145,264 shares of common
stock upon the consummation of the Company's initial public offering.
In November and December 1998, the Company issued $63.25 million aggregate
principal amount of the Company's 7 1/4% Convertible Subordinated Notes due
December 1, 2003 to certain parties, including C.E. Unterberg Towbin and
Donaldson, Lufkin & Jenrette Securities Corporation, as two of the initial
purchasers of such notes.
OPTION GRANTS AND AGREEMENTS WITH EXECUTIVE OFFICERS AND DIRECTORS
Under the terms of an oral agreement between the Company and William S.
McKiernan, the Chairman of our Board of Directors, the Company repaid, in two
installments in December 1997 and January 1998, an aggregate of $105,000 for
unpaid salary that the Company had accrued on Mr. McKiernan's behalf for
services Mr. McKiernan provided to the Company from the date of our inception
through December 1997.
In July 1998, the Company loaned Brian J. Sroub, the Company's Vice
President, Marketing, $300,000 to assist Mr. Sroub's relocation to the Silicon
Valley area. This loan is memorialized in a promissory noted issued by Mr. Sroub
to the Company, which provides for repayment on or before January 31, 1999, and
bears interest at a rate of 6.5% compounded annually. As of December 31, 1998,
Mr. Sroub had repaid $270,000 of the principal amount and a balance of $30,000
remained outstanding. In addition, in April 1998, the Company granted Brian J.
Sroub, the Company's Vice President, Marketing, an option to purchase 180,000
shares of common stock under the 1998 Stock Option Plan. These options have an
exercise price of $5.44 per share and are governed generally by the terms of the
1998 Stock Option Plan.
18
<PAGE> 21
RELATIONSHIP WITH CYBERSOURCE CORPORATION
In December 1997, in order to focus on the Company's core business of
selling software over the Internet, the Company spun-off the Company's Internet
commerce services business to a new Delaware corporation, now called CyberSource
Corporation. In connection with the spin-off, CyberSource issued its capital
stock to the Company's stockholders such that, following consummation of the
spin-off, each of the Company's stockholders held shares of capital stock of
CyberSource in equal number and ownership proportion and with the same rights as
such stockholder had as the Company's stockholder. On the date of the spin-off,
the Company's employees maintained their outstanding options to purchase the
Company's common stock and were granted additional stock options in CyberSource
based on the extent to which the employees' original options were vested.
Employees of CyberSource immediately following the spin-off maintained their
outstanding vested stock options to purchase the Company's common stock and were
granted additional stock options in CyberSource. The exercise prices of the
original and additional option grants were adjusted to reflect the allocation of
the current fair market per share price between the Company's and CyberSource's
common stock, respectively, at the time of the spin-off. Options held by the
CyberSource employees that had not vested as of the date of the spin-off were
canceled.
The Company has entered into certain agreements with CyberSource for the
purpose of defining the ongoing relationship between the two companies. At the
time of the spin-off of CyberSource, all of the Company's directors were also
directors of CyberSource and other members of the Company's management team
joined CyberSource as executive officers. As a result, the Company's agreements
with CyberSource may not be deemed the result of arm's length negotiations. The
Company qualifies the following description of these agreements in their
entirety by reference to the agreements, which have been filed as exhibits to
the Company's Registration Statements on Form S-1.
Under the Company's Conveyance Agreement dated December 31, 1997, the
Company transferred to CyberSource:
- technology (including rights to all patent applications, trademarks and
other of the Company's intellectual property rights) relating to the
Internet commerce services business;
- contracts and licenses with third parties relating to the Internet
commerce services business; and
- certain tangible assets in connection with credit card processing, fraud
screening, export control, territory management and electronic
fulfillment services.
In addition, the Company's employees engaged in the Internet commerce
services business were transferred to CyberSource.
In connection with such transfer, the Company entered into an InterCompany
Cross-License Agreement with CyberSource in April 1998, which was amended in May
1998, pursuant to which the Company granted CyberSource a non-exclusive,
worldwide, perpetual, irrevocable, royalty-free license to (1) internally use
the Company's Cache Manager technology, and (2) use and sublicense the Company's
customer database for certain limited purposes in connection with fraud
detection and verification. Under this agreement, CyberSource granted the
Company a worldwide, perpetual, irrevocable, royalty-free license to internally
use CyberSource's Sm@rtCert technology. The Company also received the right to
modify such technology for purposes of embedding it into the Company's Cache
Manager technology (either alone or in combination with other software) for
subsequent sublicense to enterprises and governmental agencies. The Cross
License Agreement further provides that the parties shall have joint ownership
of certain utility tools made by the parties and allocates between the Company
and CyberSource the ownership of improvements, enhancements and modifications
made by the parties to the Sm@rtCert and Cache Manager Technology during 1999.
The Cross License Agreement also allocates between the Company and CyberSource
the ownership of certain inventions each party made on or before June 30, 1998.
Each party has agreed to indemnify the other against any third party claims
regarding such licensee's use of the licensed technology that results in a claim
against the licensor, except to the extent that such claim is based upon a claim
that the licensed technology infringes upon any third party's intellectual
property rights.
19
<PAGE> 22
The Company also entered into an Internet Commerce Services Agreement with
CyberSource, pursuant to which CyberSource has agreed to provide certain
services including credit card processing, fraud screening, export control,
territory management and electronic fulfillment, in a "back office" capacity.
This Agreement expired on December 31, 1998, and automatically renewed for an
additional one-year term, unless otherwise terminated by either party. Pursuant
to the terms of this agreement, the Company have agreed to indemnify CyberSource
for an amount not to exceed $100,000 against any claim based upon an allegation
that the software the Company distributed infringes upon any third party's
intellectual property rights. CyberSource has agreed to indemnify the Company
for an amount not to exceed $100,000 against any claim based upon an allegation
that CyberSource's services, or the use of any software it provided in
connection with its services, infringes any third party's intellectual property
rights.
In connection with the spin-off, the Company approved loans in amounts
equal to the adverse incremental income tax any stockholder incurred as a result
of the spin-off and the transactions contemplated thereby. In April 1998, the
Company loaned $270,000 to William S. McKiernan, the sole stockholder incurring
such adverse tax consequences, so as to offset Mr. McKiernan's incremental 1997
income tax. The loan to Mr. McKiernan is secured by 129,808 shares of common
stock held by Mr. McKiernan and will be due and payable no later than December
17, 1999. Interest accrues on the loan to Mr. McKiernan at the rate of six and
two hundredths percent (6.02%), compounded annually, and shall be payable only
at such time the principal is due and payable.
20
<PAGE> 23
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information known to the Company
with respect to beneficial ownership of the Company's Common Stock as of March
24, 1999 by (a) each stockholder known by the Company to be the beneficial owner
of more than five percent of the Company's Common Stock, (b) each director and
nominee for director of the Company, (c) each Named Executive Officer and (d)
all executive officers, directors and nominees for director who beneficially own
shares, as a group.
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENTAGE OF SHARES
5% BENEFICIAL OWNERS, DIRECTORS AND NAMED EXECUTIVE OFFICERS BENEFICIALLY OWNED BENEFICIALLY OWNED(1)
- ------------------------------------------------------------ ------------------ ---------------------
<S> <C> <C>
William S. McKiernan(2)................................ 8,996,154 32.6%
Bert Kolde(3).......................................... 3,051,624 11.0
Vulcan Ventures Inc. .................................. 3,026,624 11.0
110 110th Avenue NE, Suite 550
Bellevue, WA 98004
Entities affiliated with C.E. Unterberg, Towbin(4)..... 1,980,440 7.2
Swiss Bank Tower
10 East 50th Street, 22nd Floor
New York, New York 10002
Global Retail Partners, L.P. and its affiliates(5)..... 1,928,694 7.0
2121 Avenue of the Stars, Suite 1630
Los Angeles, CA 90067
John P. Pettitt(6)..................................... 1,251,000 4.3
Mark L. Breier(7)...................................... 268,750 *
Michael J. Praisner(8)................................. 54,166 *
James R. Lussier(9).................................... 45,000 *
Brian J. Sroub(10)..................................... 45,000 *
Douglas Carlston....................................... 0 *
John S. Chen........................................... 0 *
Ronald S. Posner....................................... 0 *
All directors and executive officers as a group
(13 persons)(11)..................................... 13,760,444 47.0%
</TABLE>
- ---------------
* Represents beneficial ownership of less than 1% of our Common Stock.
(1) Number of shares beneficially owned is determined based on 27,609,990
shares outstanding as of March 24, 1999. Beneficial ownership is determined
in accordance with the rules of the Securities and Exchange Commission. The
number of shares beneficially owned by a person includes shares of Common
Stock subject to options held by that person that are currently exercisable
or exercisable within 60 days of March 24, 1999. Such shares issuable
pursuant to such options are deemed outstanding for computing the
percentage ownership of the person holding such options but not deemed
outstanding for the purposes of computing the percentage ownership of each
other person. To the our knowledge, the persons named in this table have
sole voting and investment power with respect to all shares of Common Stock
shown as owned by them, subject to community property laws where applicable
and except as indicated in the other footnotes to this table. Unless
otherwise indicated, the address of each of the individuals named above is:
c/o Beyond.com Corporation, 1195 West Fremont Avenue, Sunnyvale, California
94087.
(2) Includes 8,938,464 shares held by Mr. McKiernan and 57,690 shares held by
members of Mr. McKiernan's immediate family. Mr. McKiernan disclaims
beneficial ownership of the shares held by his immediate family.
(3) Represents 5,000 shares of Common Stock and options to purchase 30,000
shares of Common Stock, of which 20,000 are exercisable immediately, held
by Bert Kolde, one of our directors and a director, the Vice President,
Secretary and Treasurer of Vulcan Ventures Inc., and 3,026,624 shares held
by Vulcan Ventures Inc. Mr. Kolde disclaims beneficial ownership of the
shares owned by Vulcan, except for his proportional interest therein, if
any.
21
<PAGE> 24
(4) Includes 59,914 shares of Common Stock held by UT Capital Partners
International, LDC (formerly UH Capital Partners International, LDC),
368,426 shares held by UT Technology Partners, LDC (formerly UH Technology
Partners, LDC); 1,506,262 shares held by C.E. Unterberg Towbin Capital
Partners I, L.P. (formerly Unterberg Harris Capital Partners I, L.P.);
37,773 shares held by Unterberg Harris Private Equity Partners, L.P. and
8,065 shares held by Unterberg Harris Private Equity Partners, CV
(collectively, the "Unterberg Affiliates").
(5) Includes 1,928,694 shares of Common Stock held, in the aggregate, by Global
Retail Partners, Inc. and its affiliates (each an affiliate of Donaldson,
Lufkin & Jenrette Securities Corporation).
(6) Includes options to purchase 1,250,000 shares of Common Stock, exercisable
immediately, held by Mr. Pettitt.
(7) Includes options to purchase 268,750 shares of Common Stock that vest
within 60 days of March 24, 1999, held by Mr. Breier.
(8) Includes options to purchase 54,166 shares of Common Stock that vest within
60 days of March 24, 1999, held by Mr. Praisner.
(9) Includes options to purchase 45,000 shares of Common Stock that vest within
60 days of March 24, 1999, held by Mr. Lussier.
(10) Includes options to purchase 45,000 shares of Common Stock that vest within
60 days of March 24, 1999, held by Mr. Sroub.
(11) Includes options to purchase 1,711,166 shares of Common Stock that vest
within 60 days of March 24, 1999, held by all directors and executive
officers of the Company.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Notwithstanding anything to the contrary set forth in any of the Company's
previous filings under the Securities Act of 1933, as amended, or the Securities
Exchange Act of 1934, as amended, that might incorporate future filings,
including this Proxy Statement, in whole or in part, the following report and
the Performance Graph which follows shall not be deemed to be incorporated by
reference into any such filings.
In April, 1998, the Board of Directors established the Compensation
Committee of the Board of Directors (the "Compensation Committee"). The
Compensation Committee has responsibility for reviewing and developing
compensation policies applicable to the Company's executive officers and
directors, making recommendations to the Board of Directors regarding all forms
of compensation to executive officers and directors, and administering the
Company's 1995 and 1998 Stock Option Plans and the 1999 Stock Incentive Plan (if
approved by the stockholders) (collectively, the "Plans"), under which option
grants may be made to executive officers and other key employees.
EXECUTIVE COMPENSATION PHILOSOPHY
The Compensation Committee believes that the primary goal of the Company's
executive compensation program should be related to creating stockholder value.
The executive compensation policies of the Compensation Committee are designed
to provide incentives to create stockholder value by attracting, retaining and
motivating executive talent that contributes to the Company's long-term success,
by rewarding the achievement of the Company's short-term and long-term strategic
goals, by linking executive officer compensation and stockholder interests
through grants of awards under the Plans and by recognizing individual
contributions to Company performance. The Committee evaluates the performance of
the Company and compares it to other companies of similar size engaged in
activities similar to those of the Company. The compensation of the Company's
Named Executive Officers in 1998 consisted of base salaries, bonuses and stock
options.
The Compensation Committee reviews the available competitive data,
evaluates the particular needs of the Company, and evaluates each executive's
performance to arrive at a decision regarding compensation programs.
22
<PAGE> 25
1998 EXECUTIVE COMPENSATION
For services performed in 1998, executive compensation consisted of base
salary, bonuses and grants of stock options under the Plans. The stock options
vest over time.
Base Salary and Bonuses. Base salaries and bonuses for the Company's
executive officers (other than the President and Chief Executive Officer) are
determined primarily on the basis of the executive officer's responsibility,
qualification and experience, as well as the general salary practices of peer
companies among which the Company competes for executive talent. The Committee
reviews the base salaries of these executive officers annually in accordance
with certain criteria determined primarily on the basis of certain factors which
include (i) individual performance, (ii) the functions performed by the
executive officer and (iii) changes in the compensation peer group in which the
Company competes for executive talent. The weight that the Compensation
Committee places on such factors may vary from individual to individual and
necessarily involves subjective determinations of individual performance.
Long-Term Incentive Compensation Awards. The Plans provide for grants to
key executives and employees of the Company of (i) shares of Common Stock of the
Company, (ii) options or stock appreciation rights ("SARs") or similar rights,
or (iii) any other security with the value derived from the value of the Common
Stock of the Company or other securities issued by a related entity. The
Compensation Committee may make grants under the Plans based on a number of
factors, including (a) the executive officer's or key employee's position in the
Company, (b) his or her performance and responsibilities, (c) the extent to
which he or she already holds an equity stake in the Company, and (d)
contributions and anticipated contributions to the success of the Company's
financial performance. In addition, the size, frequency, and type of long-term
incentive grants are generally determined on the basis of past granting
practices, fair market value of the Company's stock, tax consequences of the
grant to the individual and the Company, accounting impact, and the number of
shares available for issuance. However, the Plans do not provide any formulaic
method for weighing these factors, and a decision to grant an award is based
primarily upon the Compensation Committee's evaluation of the past as well as
the future anticipated performance and responsibilities of each individual. The
Compensation Committee may also consult with compensation consultants with
respect to long-term incentives and other compensation awards.
DEDUCTIBILITY OF COMPENSATION
Section 162(m) of the Internal Revenue Code denies a deduction for
compensation in excess of $1 million paid to certain executive officers, unless
certain performance, disclosure, and stockholder approval requirements are met.
Option grants under the Company's Stock Incentive Plan are intended to qualify
as "performance-based" compensation not subject to the Section 162(m) deduction
limitation. In addition, the Committee believes that a substantial portion of
the compensation program would be exempted from the $1 million deduction
limitation.
CHIEF EXECUTIVE OFFICER COMPENSATION
Employment Agreements. The base salary for Mark L. Breier, the Company's
President and Chief Executive Officer, was established by a previously
negotiated employment agreement with the Company. Pursuant to the terms of Mr.
Breier's employment agreement, Mr. Breier receives an aggregate annual base
salary of $200,000 and is eligible to participate in the Company's employee
benefit plans and executive compensation programs. Also, under the employment
agreement, Mr. Breier is entitled to annual contingent bonuses up to a maximum
of $50,000 based on the attainment of certain criteria, which are determined
annually at the beginning of each year. Pursuant to the employment agreement
$25,000 of Mr. Breier's potential bonus for 1998 was guaranteed and paid to Mr.
Breier in quarterly installments. Mr. Breier's agreement may be terminated by
either party at any time. Consistent with the Company's policy of providing
incentive to its executive officers which links compensation to stockholders'
interests, Mr. Breier's agreement also provides for an initial grant of an
option to acquire 1,000,000 shares of the Company's Common Stock subject to a
four-year vesting schedule. Mr. Breier began serving as the Company's President
and Chief Executive Officer in March 1999. From his date of hire through
December 31, 1998, Mr. Breier received
23
<PAGE> 26
$150,000 in salary, a bonus of $37,500, $25,000 of which was the guaranteed
bonus and $12,500 of which was awarded pursuant to the achievement of previously
established goals, and an option to purchase 1,000,000 shares of Common Stock of
the Company. In addition, Mr. Breier received an aggregate of approximately
$65,000 in the form of a relocation allowance.
THE BOARD OF DIRECTORS
William S. McKiernan
Mark L. Breier
Douglas Carlston
John S. Chen
Bert Kolde
Ronald S. Posner
24
<PAGE> 27
PERFORMANCE GRAPH
The following line graph compares the yearly percentage change in (i) the
cumulative total stockholder return on the Company's Common Stock since June 17,
1998 with (ii) cumulative total stockholder return on (a) the Nasdaq Stock
Market -- U.S. Index and (b) the Hambrecht & Quist Internet Index. The
comparison assumes an investment of $100 on June 17, 1998 and reinvestment of
dividends, if any. The stock price performance shown on the graph is not
necessarily indicative of future price performance.
<TABLE>
<CAPTION>
NASDAQ STOCK MARKET- H&Q SEMICONDUCTOR
BEYOND.COM U.S. INTERNET INDEX
---------- -------------------- ----------------
<S> <C> <C> <C> <C>
'06/17/98' 100 100 100
'6/30/98' 213 107 116
'7/31/98' 158 106 105
'8/31/98' 96 85 74
'9/30/98' 115 97 93
'10/31/98' 103 101 97
'11/30/98' 242 111 133
'12/31/98' 231 125 160
</TABLE>
OTHER MATTERS
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's executive officers
and directors, and persons who own more than ten percent of a registered class
of the Company's equity securities, to file an initial report of ownership on
Form 3 and changes in ownership on Form 4 or 5 with the Securities and Exchange
Commission (the "SEC") and The Nasdaq Stock Market. Such officers, directors and
ten-percent stockholders are also required by SEC rules to furnish the Company
with copies of all Section 16(a) forms they file.
Based solely on its review of the copies of such forms received by it, or
written representations from certain reporting persons that no Forms 5 were
required for such persons, the Company believes that its executive officers,
directors and ten-percent stockholders complied with all Section 16(a) filing
requirements applicable to them except that Mr. Vigouroux filed one late Form 3.
The Company knows of no other matters to be submitted to the meeting. If
any other matters properly come before the meeting, it is the intention of the
persons named in the enclosed form of proxy to vote the shares they represent as
the Board of Directors may recommend.
THE BOARD OF DIRECTORS
Dated: April 16, 1999
25
<PAGE> 28
EXHIBIT A
BEYOND.COM CORPORATION
1999 STOCK INCENTIVE PLAN
1. Purposes of the Plan. The purposes of this Stock Incentive Plan are to
attract and retain the best available personnel, to provide additional incentive
to Employees, Directors and Consultants and to promote the success of the
Company's business.
2. Stock Subject to the Plan.
(a) Subject to the provisions of Section 10, below, the maximum aggregate
number of Shares which may be issued pursuant to all Awards (including Incentive
Stock Options) is Two Million (2,000,000) Shares. The Shares to be issued
pursuant to Awards may be authorized, but unissued, or reacquired Common Stock.
(b) Any Shares covered by an Award (or portion of an Award) which is
forfeited or canceled, expires or is settled in cash, shall be deemed not to
have been issued for purposes of determining the maximum aggregate number of
Shares which may be issued under the Plan. If any unissued Shares are retained
by the Company upon exercise of an Award in order to satisfy the exercise price
for such Award or any withholding taxes due with respect to such Award, such
retained Shares subject to such Award shall become available for future issuance
under the Plan (unless the Plan has terminated). Shares that actually have been
issued under the Plan pursuant to an Award shall not be returned to the Plan and
shall not become available for future issuance under the Plan, except that if
unvested Shares are forfeited, or repurchased by the Company at their original
purchase price, such Shares shall become available for future grant under the
Plan.
3. Administration of the Plan.
(a) Plan Administrator.
(i) Administration with Respect to Directors and Officers. With
respect to grants of Awards to Directors or Employees who are also Officers
or Directors of the Company, the Plan shall be administered by (A) the
Board or (B) a Committee designated by the Board, which Committee shall be
constituted in such a manner as to satisfy the Applicable Laws and to
permit such grants and related transactions under the Plan to be exempt
from Section 16(b) of the Exchange Act in accordance with Rule 16b-3. Once
appointed, such Committee shall continue to serve in its designated
capacity until otherwise directed by the Board.
(ii) Administration With Respect to Consultants and Other
Employees. With respect to grants of Awards to Employees or Consultants who
are neither Directors nor Officers of the Company, the Plan shall be
administered by (A) the Board or (B) a Committee designated by the Board,
which Committee shall be constituted in such a manner as to satisfy the
Applicable Laws. Once appointed, such Committee shall continue to serve in
its designated capacity until otherwise directed by the Board. The Board
may authorize one or more Officers to grant such Awards and may limit such
authority as the Board determines from time to time.
(iii) Administration With Respect to Covered
Employees. Notwithstanding the foregoing, grants of Awards to any Covered
Employee intended to qualify as Performance-Based Compensation shall be
made only by a Committee (or subcommittee of a Committee) which is
comprised solely of two or more Directors eligible to serve on a committee
making Awards qualifying as Performance-Based Compensation. In the case of
such Awards granted to Covered Employees, references to the "Administrator"
or to a "Committee" shall be deemed to be references to such Committee or
subcommittee.
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(b) Powers of the Administrator. Subject to Applicable Laws and the
provisions of the Plan (including any other powers given to the Administrator
hereunder), and except as otherwise provided by the Board, the Administrator
shall have the authority, in its discretion:
(i) to select the Employees, Directors and Consultants to whom Awards
may be granted from time to time hereunder;
(ii) to determine whether and to what extent Awards are granted
hereunder;
(iii) to determine the number of Shares or the amount of other
consideration to be covered by each Award granted hereunder;
(iv) to approve forms of Award Agreements for use under the Plan;
(v) to determine the terms and conditions of any Award granted
hereunder;
(vi) to amend the terms of any outstanding Award granted under the
Plan, provided that any amendment that would adversely affect the Grantee's
rights under an outstanding Award shall not be made without the Grantee's
written consent;
(vii) to construe and interpret the terms of the Plan and Awards
granted pursuant to the Plan, including without limitation, any notice of
Award or Award Agreement, granted pursuant to the Plan;
(viii) to establish additional terms, conditions, rules or procedures
to accommodate the rules or laws of applicable foreign jurisdictions and to
afford Grantees favorable treatment under such laws; provided, however,
that no Award shall be granted under any such additional terms, conditions,
rules or procedures with terms or conditions which are inconsistent with
the provisions of the Plan; and
(ix) to take such other action, not inconsistent with the terms of the
Plan, as the Administrator deems appropriate.
(c) Effect of Administrator's Decision. All decisions, determinations and
interpretations of the Administrator shall be conclusive and binding on all
persons.
4. Eligibility. Awards other than Incentive Stock Options may be granted to
Employees, Directors and Consultants. Incentive Stock Options may be granted
only to Employees of the Company, a Parent or a Subsidiary. An Employee,
Director or Consultant who has been granted an Award may, if otherwise eligible,
be granted additional Awards. Awards may be granted to such Employees, Directors
or Consultants who are residing in foreign jurisdictions as the Administrator
may determine from time to time.
5. Terms and Conditions of Awards.
(a) Type of Awards. The Administrator is authorized under the Plan to award
any type of arrangement to an Employee, Director or Consultant that is not
inconsistent with the provisions of the Plan and that by its terms involves or
might involve the issuance of (i) Shares, (ii) an Option, a SAR or similar right
with a fixed or variable price related to the Fair Market Value of the Shares
and with an exercise or conversion privilege related to the passage of time, the
occurrence of one or more events, or the satisfaction of performance criteria or
other conditions, or (iii) any other security with the value derived from the
value of the Shares. Such awards include, without limitation, Options, SARs,
sales or bonuses of Restricted Stock, Dividend Equivalent Rights, Performance
Units or Performance Shares, and an Award may consist of one such security or
benefit, or two (2) or more of them in any combination or alternative.
(b) Designation of Award. Each Award shall be designated in the Award
Agreement. In the case of an Option, the Option shall be designated as either an
Incentive Stock Option or a Non-Qualified Stock Option. However, notwithstanding
such designation, to the extent that the aggregate Fair Market Value of Shares
subject to Options designated as Incentive Stock Options which become
exercisable for the first time by a Grantee during any calendar year (under all
plans of the Company or any Parent or Subsidiary) exceeds $100,000, such excess
Options, to the extent of the Shares covered thereby in excess of the foregoing
limitation, shall be treated as Non-Qualified Stock Options. For this purpose,
Incentive Stock Options shall be
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taken into account in the order in which they were granted, and the Fair Market
Value of the Shares shall be determined as of the date the Option with respect
to such Shares is granted.
(c) Conditions of Award. Subject to the terms of the Plan, the
Administrator shall determine the provisions, terms, and conditions of each
Award including, but not limited to, the Award vesting schedule, repurchase
provisions, rights of first refusal, forfeiture provisions, form of payment
(cash, Shares, or other consideration) upon settlement of the Award, payment
contingencies, and satisfaction of any performance criteria. The performance
criteria established by the Administrator may be based on any one of, or
combination of, increase in share price, earnings per share, total stockholder
return, return on equity, return on assets, return on investment, net operating
income, cash flow, revenue, economic value added, personal management
objectives, or other measure of performance selected by the Administrator.
Partial achievement of the specified criteria may result in a payment or vesting
corresponding to the degree of achievement as specified in the Award Agreement.
(d) Acquisitions and Other Transactions. The Administrator may issue Awards
under the Plan in settlement, assumption or substitution for, outstanding awards
or obligations to grant future awards in connection with the Company or a
Related Entity acquiring another entity, an interest in another entity or an
additional interest in a Related Entity whether by merger, stock purchase, asset
purchase or other form of transaction.
(e) Deferral of Award Payment. The Administrator may establish one or more
programs under the Plan to permit selected Grantees the opportunity to elect to
defer receipt of consideration upon exercise of an Award, satisfaction of
performance criteria, or other event that absent the election would entitle the
Grantee to payment or receipt of Shares or other consideration under an Award.
The Administrator may establish the election procedures, the timing of such
elections, the mechanisms for payments of, and accrual of interest or other
earnings, if any, on amounts, Shares or other consideration so deferred, and
such other terms, conditions, rules and procedures that the Administrator deems
advisable for the administration of any such deferral program.
(f) Award Exchange Programs. The Administrator may establish one or more
programs under the Plan to permit selected Grantees to exchange an Award under
the Plan for one or more other types of Awards under the Plan on such terms and
conditions as determined by the Administrator from time to time.
(g) Separate Programs. The Administrator may establish one or more separate
programs under the Plan for the purpose of issuing particular forms of Awards to
one or more classes of Grantees on such terms and conditions as determined by
the Administrator from time to time.
(h) Individual Option and SAR Limit. The maximum number of Shares with
respect to which Options and SARs may be granted to any Employee in any fiscal
year of the Company shall be 1,000,000 Shares. The foregoing limitation shall be
adjusted proportionately in connection with any change in the Company's
capitalization pursuant to Section 10, below. To the extent required by Section
162(m) of the Code or the regulations thereunder, in applying the foregoing
limitation with respect to an Employee, if any Option or SAR is canceled, the
canceled Option or SAR shall continue to count against the maximum number of
Shares with respect to which Options and SARs may be granted to the Employee.
For this purpose, the repricing of an Option (or in the case of a SAR, the base
amount on which the stock appreciation is calculated is reduced to reflect a
reduction in the Fair Market Value of the Common Stock) shall be treated as the
cancellation of the existing Option or SAR and the grant of a new Option or SAR.
(i) Early Exercise. The Award Agreement may, but need not, include a
provision whereby the Grantee may elect at any time while an Employee, Director
or Consultant to exercise any part or all of the Award prior to full vesting of
the Award. Any unvested Shares received pursuant to such exercise may be subject
to a repurchase right in favor of the Company or a Related Entity or to any
other restriction the Administrator determines to be appropriate.
(j) Term of Award. The term of each Award shall be the term stated in the
Award Agreement, provided, however, that the term of an Incentive Stock Option
shall be no more than ten (10) years from the date of grant thereof. However, in
the case of an Incentive Stock Option granted to a Grantee who, at the time
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the Option is granted, owns stock representing more than ten percent (10%) of
the voting power of all classes of stock of the Company or any Parent or
Subsidiary, the term of the Incentive Stock Option shall be five (5) years from
the date of grant thereof or such shorter term as may be provided in the Award
Agreement.
(k) Transferability of Awards. Incentive Stock Options may not be sold,
pledged, assigned, hypothecated, transferred, or disposed of in any manner other
than by will or by the laws of descent or distribution and may be exercised,
during the lifetime of the Grantee, only by the Grantee; provided, however, that
the Grantee may designate a beneficiary of the Grantee's Incentive Stock Option
in the event of the Grantee's death on a beneficiary designation form provided
by the Administrator. Other Awards shall be transferable to the extent provided
in the Award Agreement.
(l) Time of Granting Awards. The date of grant of an Award shall for all
purposes be the date on which the Administrator makes the determination to grant
such Award, or such other date as is determined by the Administrator. Notice of
the grant determination shall be given to each Employee, Director or Consultant
to whom an Award is so granted within a reasonable time after the date of such
grant.
6. Award Exercise or Purchase Price, Consideration, Taxes and Reload
Options.
(a) Exercise or Purchase Price. The exercise or purchase price, if any, for
an Award shall be as follows:
(i) In the case of an Incentive Stock Option:
(A) granted to an Employee who, at the time of the grant of such
Incentive Stock Option owns stock representing more than ten percent
(10%) of the voting power of all classes of stock of the Company or any
Parent or Subsidiary, the per Share exercise price shall be not less
than one hundred ten percent (110%) of the Fair Market Value per Share
on the date of grant; or
(B) granted to any Employee other than an Employee described in the
preceding paragraph, the per Share exercise price shall be not less than
one hundred percent (100%) of the Fair Market Value per Share on the
date of grant.
(ii) In the case of a Non-Qualified Stock Option, the per Share
exercise price shall be not less than the Fair Market Value per Share on
the date of grant unless otherwise determined by the Administrator.
(iii) In the case of Awards intended to qualify as Performance-Based
Compensation, the exercise or purchase price, if any, shall be not less
than one hundred percent (100%) of the Fair Market Value per Share on the
date of grant.
(iv) In the case of other Awards, such price as is determined by the
Administrator.
(v) Notwithstanding the foregoing provisions of this Section 6(a), in
the case of an Award issued pursuant to Section 5(d), above, the exercise
or purchase price for the Award shall be determined in accordance with the
principles of Section 424(a) of the Code.
(b) Consideration. Subject to Applicable Laws, the consideration to be paid
for the Shares to be issued upon exercise or purchase of an Award including the
method of payment, shall be determined by the Administrator (and, in the case of
an Incentive Stock Option, shall be determined at the time of grant). In
addition to any other types of consideration the Administrator may determine,
the Administrator is authorized to accept as consideration for Shares issued
under the Plan the following, provided that the portion of the consideration
equal to the par value of the Shares must be paid in cash or other legal
consideration permitted by the Delaware General Corporation Law:
(i) cash;
(ii) check;
(iii) delivery of Grantee's promissory note with such recourse,
interest, security, and redemption provisions as the Administrator
determines as appropriate;
(iv) surrender of Shares or delivery of a properly executed form of
attestation of ownership of Shares as the Administrator may require
(including withholding of Shares otherwise deliverable upon
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exercise of the Award) which have a Fair Market Value on the date of
surrender or attestation equal to the aggregate exercise price of the
Shares as to which said Award shall be exercised (but only to the extent
that such exercise of the Award would not result in an accounting
compensation charge with respect to the Shares used to pay the exercise
price unless otherwise determined by the Administrator);
(v) with respect to Options, payment through a broker-dealer sale and
remittance procedure pursuant to which the Grantee (A) shall provide
written instructions to a Company designated brokerage firm to effect the
immediate sale of some or all of the purchased Shares and remit to the
Company, out of the sale proceeds available on the settlement date,
sufficient funds to cover the aggregate exercise price payable for the
purchased Shares and (B) shall provide written directives to the Company to
deliver the certificates for the purchased Shares directly to such
brokerage firm in order to complete the sale transaction; or
(vi) any combination of the foregoing methods of payment.
(c) Taxes. No Shares shall be delivered under the Plan to any Grantee or
other person until such Grantee or other person has made arrangements acceptable
to the Administrator for the satisfaction of any foreign, federal, state, or
local income and employment tax withholding obligations, including, without
limitation, obligations incident to the receipt of Shares or the disqualifying
disposition of Shares received on exercise of an Incentive Stock Option. Upon
exercise of an Award, the Company shall withhold or collect from Grantee an
amount sufficient to satisfy such tax obligations.
7. Director Formula Option Grants. In addition to discretionary grants of
Options granted pursuant to other terms of this Plan, Non-Employee Directors of
the Company shall receive Options in accordance with the following terms:
(a) Initial Grant. Each Non-Employee Director of the Company who is
appointed to the Board of Directors (other than those Non-Employee Directors who
are on the Board of Directors as of the date of the adoption of this Plan by the
Board of Directors) shall receive a Non-Qualified Stock Option for 20,000 shares
upon appointment to the Board of Directors ("Initial Grant").
(b) Follow-On Grant. Commencing with the Company's 2000 Annual Meeting of
Stockholders, at the conclusion of each Annual Meeting of the Stockholders of
the Company, each Non-Employee Director serving as a Director of the Company
immediately following the conclusion of such Annual Meeting of Stockholders
shall receive a Non-Qualified Stock Option for 5,000 Shares ("Follow-On Grant").
(c) Terms of Grant. Options granted pursuant to this Section 7 shall be
subject to the following terms:
(i) Exercise Price and Payment Terms. The exercise price for the
Initial Grants and Follow-On Grants granted pursuant to this Section 7
shall be equal to one hundred per cent (100%) of the Fair Market Value of
the Shares on the date of the grant payable in cash or otherwise in
accordance with the alternatives specified in clauses (i), (ii), (iv), (v)
and (vi) of Section 6(b) of this Plan.
(ii) Term. The term of the Options shall be ten (10) years from the
date the Option is granted.
(iii) Vesting and Repurchase Period. All Initial Grants and Follow-On
Grants granted pursuant to the terms of this Section 7 shall be exercisable
as to twenty-five percent (25%) of the Shares subject to the Option twelve
months after the respective grant date, and 1/48 of the Shares subject to
the Option shall vest on each monthly anniversary of the respective grant
date thereafter.
8. Exercise of Award.
(a) Procedure for Exercise; Rights as a Stockholder.
(i) Any Award granted hereunder shall be exercisable at such times and
under such conditions as determined by the Administrator under the terms of
the Plan and specified in the Award Agreement.
(ii) An Award shall be deemed to be exercised when written notice of
such exercise has been given to the Company in accordance with the terms of
the Award by the person entitled to exercise the Award and full payment for
the Shares with respect to which the Award is exercised, including, to the
extent
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selected, use of the broker-dealer sale and remittance procedure to pay the
purchase price as provided in Section 6(b)(v). Until the issuance (as
evidenced by the appropriate entry on the books of the Company or of a duly
authorized transfer agent of the Company) of the stock certificate
evidencing such Shares, no right to vote or receive dividends or any other
rights as a stockholder shall exist with respect to Shares subject to an
Award, notwithstanding the exercise of an Option or other Award. The
Company shall issue (or cause to be issued) such stock certificate promptly
upon exercise of the Award. No adjustment will be made for a dividend or
other right for which the record date is prior to the date the stock
certificate is issued, except as provided in the Award Agreement or Section
10, below.
(b) Exercise of Award Following Termination of Continuous Service.
(i) An Award may not be exercised after the termination date of such
Award set forth in the Award Agreement and may be exercised following the
termination of a Grantee's Continuous Service only to the extent provided
in the Award Agreement.
(ii) Where the Award Agreement permits a Grantee to exercise an Award
following the termination of the Grantee's Continuous Service for a
specified period, the Award shall terminate to the extent not exercised on
the last day of the specified period or the last day of the original term
of the Award, whichever occurs first.
(iii) Any Award designated as an Incentive Stock Option to the extent
not exercised within the time permitted by law for the exercise of
Incentive Stock Options following the termination of a Grantee's Continuous
Service shall convert automatically to a Non-Qualified Stock Option and
thereafter shall be exercisable as such to the extent exercisable by its
terms for the period specified in the Award Agreement.
(c) Buyout Provisions. The Administrator may at any time offer to buy out
for a payment in cash or Shares, an Award previously granted, based on such
terms and conditions as the Administrator shall establish and communicate to the
Grantee at the time that such offer is made.
9. Conditions Upon Issuance of Shares.
(a) Shares shall not be issued pursuant to the exercise of an Award unless
the exercise of such Award and the issuance and delivery of such Shares pursuant
thereto shall comply with all Applicable Laws, and shall be further subject to
the approval of counsel for the Company with respect to such compliance.
(b) As a condition to the exercise of an Award, the Company may require the
person exercising such Award to represent and warrant at the time of any such
exercise that the Shares are being purchased only for investment and without any
present intention to sell or distribute such Shares if, in the opinion of
counsel for the Company, such a representation is required by any Applicable
Laws.
10. Adjustments Upon Changes in Capitalization. Subject to any required
action by the stockholders of the Company, the number of Shares covered by each
outstanding Award, and the number of Shares which have been authorized for
issuance under the Plan but as to which no Awards have yet been granted or which
have been returned to the Plan, the exercise or purchase price of each such
outstanding Award, as well as any other terms that the Administrator determines
require adjustment shall be proportionately adjusted for (i) any increase or
decrease in the number of issued Shares resulting from a stock split, reverse
stock split, stock dividend, combination or reclassification of the Shares, or
similar transaction affecting the Shares, (ii) any other increase or decrease in
the number of issued Shares effected without receipt of consideration by the
Company, or (iii) as the Administrator may determine in its discretion, any
other transaction with respect to Common Stock to which Section 424(a) of the
Code applies or a similar transaction; provided, however that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Such adjustment shall be made by the
Administrator and its determination shall be final, binding and conclusive.
Except as the Administrator determines, no issuance by the Company of shares of
stock of any class, or securities convertible into shares of stock of any class,
shall affect, and no adjustment by reason hereof shall be made with respect to,
the number or price of Shares subject to an Award.
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11. Changes in Control. Except as may be provided in an Award Agreement:
(a) As to a particular Grantee, one-half ( 1/2) of the Shares covered by
such Grantee's Award which are then unvested shall become fully vested and
exercisable immediately upon the occurrence of a Covered Termination. To the
extent a Covered Termination results from the failure of the Company to obtain
the assumption of the Award by the successor corporation or its Parent, the
acceleration of the Award shall be effective ten (10) business days prior to the
consummation of the Change of Control. By way of example and solely for
illustrative purposes, if at the time of a Covered Termination the Grantee holds
stock options covering the purchase of 100,000 shares of Common Stock which are
exercisable as to 50,000 shares and not exercisable as to 50,000 shares, the
Award shall be exercisable as to an additional 25,000 shares due to the Covered
Termination. Except as set forth herein, the terms of the Award Agreement shall
remain in full force and effect and subject to the terms of the Plan. The
acceleration of the vesting of Awards may cause options to disqualify as
incentive stock options (as defined under Section 422 of the Code) which may
create adverse tax consequences to the Grantee.
(b) Awards assumed by a successor corporation or parent thereof upon a
Change of Control shall not terminate. However, to the extent that upon the
consummation of a Change of Control an Award will not be assumed, such Award
shall terminate to the extent it is not exercised upon the consummation of the
Change of Control.
(c) The portion of any Incentive Stock Option accelerated under this
Section 11 in connection with a Change in Control shall remain exercisable as an
Incentive Stock Option under the Code only to the extent the $100,000 dollar
limitation of Section 422(d) of the Code is not exceeded. To the extent such
dollar limitation is exceeded, the accelerated excess portion of such Option
shall be exercisable as a Non-Qualified Stock Option.
12. Effective Date and Term of Plan. The Plan shall become effective upon
the earlier to occur of its adoption by the Board or its approval by the
stockholders of the Company. It shall continue in effect for a term of ten (10)
years unless sooner terminated. Subject to Section 17, below, and Applicable
Laws, Awards may be granted under the Plan upon its becoming effective.
13. Amendment, Suspension or Termination of the Plan.
(a) The Board may at any time amend, suspend or terminate the Plan. To the
extent necessary to comply with Applicable Laws, the Company shall obtain
stockholder approval of any Plan amendment in such a manner and to such a degree
as required.
(b) No Award may be granted during any suspension of the Plan or after
termination of the Plan.
(c) Any amendment, suspension or termination of the Plan (including
termination of the Plan under Section 12, above) shall not affect Awards already
granted, and such Awards shall remain in full force and effect as if the Plan
had not been amended, suspended or terminated, unless mutually agreed otherwise
between the Grantee and the Administrator, which agreement must be in writing
and signed by the Grantee and the Company.
14. Reservation of Shares.
(a) The Company, during the term of the Plan, will at all times reserve and
keep available such number of Shares as shall be sufficient to satisfy the
requirements of the Plan.
(b) The inability of the Company to obtain authority from any regulatory
body having jurisdiction, which authority is deemed by the Company's counsel to
be necessary to the lawful issuance and sale of any Shares hereunder, shall
relieve the Company of any liability in respect of the failure to issue or sell
such Shares as to which such requisite authority shall not have been obtained.
15. No Effect on Terms of Employment/Consulting Relationship. The Plan
shall not confer upon any Grantee any right with respect to the Grantee's
Continuous Service, nor shall it interfere in any way with his or her right or
the Company's right to terminate the Grantee's Continuous Service at any time,
with or without cause.
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16. No Effect on Retirement and Other Benefit Plans. Except as specifically
provided in a retirement or other benefit plan of the Company or a Related
Entity, Awards shall not be deemed compensation for purposes of computing
benefits or contributions under any retirement plan of the Company or a Related
Entity, and shall not affect any benefits under any other benefit plan of any
kind or any benefit plan subsequently instituted under which the availability or
amount of benefits is related to level of compensation. The Plan is not a
"Retirement Plan" or "Welfare Plan" under the Employee Retirement Income
Security Act of 1974, as amended.
17. Stockholder Approval. The grant of Incentive Stock Options under the
Plan shall be subject to approval by the stockholders of the Company within
twelve (12) months before or after the date the Plan is adopted excluding
Incentive Stock Options issued in substitution for outstanding Incentive Stock
Options pursuant to Section 424(a) of the Code. Such stockholder approval shall
be obtained in the degree and manner required under Applicable Laws. The
Administrator may grant Incentive Stock Options under the Plan prior to approval
by the stockholders, but until such approval is obtained, no such Incentive
Stock Option shall be exercisable. In the event that stockholder approval is not
obtained within the twelve (12) month period provided above, all Incentive Stock
Options previously granted under the Plan shall be exercisable as Non-Qualified
Stock Options.
18. Definitions. As used herein, the following definitions shall apply:
(a) "Administrator" means the Board or any of the Committees appointed to
administer the Plan.
(b) "Annual Base Salary" means a Grantee's annual base salary at the rate
in effect during the last regularly scheduled payroll period immediately
preceding (i) the Change in Control or (ii) the Covered Termination, whichever
is greater.
(c) "Applicable Laws" means the legal requirements relating to the
administration of stock incentive plans, if any, under applicable provisions of
federal securities laws, state corporate and securities laws, the Code, the
rules of any applicable stock exchange or national market system, and the rules
of any foreign jurisdiction applicable to Awards granted to residents therein.
(d) "Award" means the grant of an Option, SAR, Dividend Equivalent Right,
Restricted Stock, Performance Unit, Performance Share, or other right or benefit
under the Plan.
(e) "Award Agreement" means the written agreement evidencing the grant of
an Award executed by the Company and the Grantee, including any amendments
thereto.
(f) "Board" means the Board of Directors of the Company.
(g) "Cause" means, with respect to the termination by the Company or a
Related Entity of the Grantee's Continuous Service, that such termination is for
"Cause" as such term is expressly defined in a then-effective written agreement
between the Grantee and the Company or such Related Entity, or in the absence of
such then-effective written agreement and definition, is based on, in the
determination of the Administrator, the Grantee's: (i) repeated failure to
perform services in accordance with the requests of superiors within the context
of Grantee's duties; (ii) the commission of material fraud, misappropriation,
embezzlement or other act of gross dishonesty on the part of Grantee which
resulted in material loss, damage, or injury to the Company; or (iii) commission
of a felony or any other crime involving moral turpitude.
(h) "Change in Control" means the occurrence of any of the following
events:
(i) the stockholders of the Company approve a merger or consolidation
of the Company with any other corporation, other than a merger or
consolidation which would result in the voting securities of the Company
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity) fifty-percent (50%) or more of the total voting power
represented by the voting securities of the Company or such surviving
entity outstanding immediately after such merger or consolidation, or (ii)
the stockholders of the Company approve either a plan of liquidation or
dissolution of the Company or an agreement for the sale, lease,
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exchange or other transfer or disposition by the Company of fifty-percent
(50%) or more of the Company's assets; or
(ii) any person (as such term is used in Sections 13(d) and 14(d) of
the Exchange Act), is or becomes the beneficial owner (within the meaning
of Rule 13d-3 under the Exchange Act), directly or indirectly, of fifty
percent (50%) or more of the Company's outstanding common stock.
(i) "Code" means the Internal Revenue Code of 1986, as amended.
(j) "Committee" means any committee appointed by the Board to administer
the Plan, including the Company's Compensation Committee.
(k) "Common Stock"means the common stock of the Company.
(l) "Company" means Beyond.com Corporation, a Delaware corporation.
(m) "Constructive Termination" means that the Grantee voluntarily
terminates his or her employment after any of the following are undertaken
without Grantee's express written consent:
(i) the assignment to Grantee of any duties or responsibilities which
result in any material diminution or material adverse change of Grantee's
position, status or circumstances of employment as in effect immediately
prior to a Change in Control of the Company; a change in Grantee's titles
or offices as in effect immediately prior to a Change in Control of the
Company which results in any material diminution or material adverse change
of Grantee's position, status or circumstances of employment; or any
removal of Grantee from or any failure to re-elect Grantee to any of such
positions, except in connection with the termination of Grantee's
employment for Cause, death, disability, retirement, or any other voluntary
termination of employment by Grantee other than a Constructive Termination;
provided, however, that no Constructive Termination shall be deemed to
occur following a Change in Control of the Company merely by virtue of the
Company operating as a subsidiary or division of the acquiring company if
the Grantee continues with no material adverse change or material
diminution in Grantee's title, duties or responsibilities following the
Change in Control;
(ii) a reduction by the Company in Grantee's Annual Base Salary by
greater than ten percent (10%);
(iii) any failure by the Company or a Related Entity to continue in
effect any benefit plan or arrangement, including incentive plans or plans
to receive securities of the Company, in which Grantee is participating at
the time of a Change in Control of the Company ("Benefit Plans"), or the
taking of any action by the Company or a Related Entity which would
materially adversely affect Grantee's participation in or reduce Grantee's
benefits under the Benefit Plans or deprive Grantee of any fringe benefit
enjoyed by Grantee at the time of a Change in Control of the Company;
provided, however, that no Constructive Termination shall be deemed to
occur following a Change in Control of the Company if the Company or a
Related Entity offers a range of benefit plans and programs which, taken as
a whole, are comparable to the Benefit Plans as determined in good faith by
the Company or a Related Entity;
(iv) a relocation of Grantee, or the Company's (or the Related Entity
employing Grantee) principal offices if Grantee's principal office is at
such offices, to a location more than forty (40) miles from the location at
which Grantee was performing his or her duties prior to a Change in Control
of the Company, except for required travel by Grantee on the Company's
business to an extent substantially consistent with Grantee's business
travel obligations at the time of a Change in Control of the Company;
(v) any material breach by the Company of any provision of the
Grantee's Award Agreement; or
(vi) any failure by the Company to obtain the assumption of the
Grantee's Award Agreement by any successor or assign of the Company; the
Company will be deemed to have failed to obtain assumption of the Award
Agreement unless the agreement for the Change of Control expressly provides
for assumption of the Award Agreement (or assumption of all outstanding
Awards).
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(n) "Consultant" means any person (other than an Employee or a Director,
solely with respect to rendering services in such person's capacity as a
Director) who is engaged by the Company or any Related Entity to render
consulting or advisory services to the Company or such Related Entity.
(o) "Continuous Service" means that the provision of services to the
Company or a Related Entity in any capacity of Employee, Director or Consultant,
is not interrupted or terminated. Continuous Service shall not be considered
interrupted in the case of (i) any approved leave of absence, (ii) transfers
between locations of the Company or among the Company, any Related Entity, or
any successor, in any capacity of Employee, Director or Consultant, or (iii) any
change in status as long as the individual remains in the service of the Company
or a Related Entity in any capacity of Employee, Director or Consultant (except
as otherwise provided in the Award Agreement). An approved leave of absence
shall include sick leave, military leave, or any other authorized personal
leave. For purposes of Incentive Stock Options, no such leave may exceed ninety
(90) days, unless reemployment upon expiration of such leave is guaranteed by
statute or contract.
(p) "Covered Employee" means an Employee who is a "covered employee" under
Section 162(m)(3) of the Code.
(q) "Covered Termination" means an Involuntary Termination or a
Constructive Termination occurring in either case within one (1) year following
a Change in Control. No other event shall be a Covered Termination for purposes
of this Plan.
(r) "Director" means a member of the Board or the board of directors of any
Related Entity.
(s) "Disability" means that a Grantee is permanently unable to carry out
the responsibilities and functions of the position held by the Grantee by reason
of any medically determinable physical or mental impairment. A Grantee will not
be considered to have incurred a Disability unless he or she furnishes proof of
such impairment sufficient to satisfy the Administrator in its discretion.
(t) "Dividend Equivalent Right" means a right entitling the Grantee to
compensation measured by dividends paid with respect to Common Stock.
(u) "Employee" means any person, including an Officer or Director, who is
an employee of the Company or any Related Entity. The payment of a director's
fee by the Company or a Related Entity shall not be sufficient to constitute
"employment" by the Company.
(v) "Exchange Act" means the Securities Exchange Act of 1934, as amended.
(w) "Fair Market Value" means, as of any date, the value of Common Stock
determined as follows:
(i) Where there exists a public market for the Common Stock, the Fair
Market Value shall be (A) the closing price for a Share for the last market
trading day prior to the time of the determination (or, if no closing price
was reported on that date, on the last trading date on which a closing
price was reported) on the stock exchange determined by the Administrator
to be the primary market for the Common Stock or the Nasdaq National
Market, whichever is applicable or (B) if the Common Stock is not traded on
any such exchange or national market system, the average of the closing bid
and asked prices of a Share on the Nasdaq Small Cap Market for the day
prior to the time of the determination (or, if no such prices were reported
on that date, on the last date on which such prices were reported), in each
case, as reported in The Wall Street Journal or such other source as the
Administrator deems reliable; or
(ii) In the absence of an established market for the Common Stock of
the type described in (i), above, the Fair Market Value thereof shall be
determined by the Administrator in good faith.
(x) "Grantee" means an Employee, Director or Consultant who receives an
Award pursuant to an Award Agreement under the Plan.
(y) "Incentive Stock Option" means an Option intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code.
(z) "Involuntary Termination" means Grantee's dismissal or discharge by the
Company or a Related Entity (or, if applicable, by the successor entity) for
reasons other than Cause. The termination of a Grantee's
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employment would not be deemed to be an "Involuntary Termination" if such
termination occurs as a result of the death or disability of Grantee.
(aa) "Non-Employee Director" means a Director who is not also an Employee.
(bb) "Non-Qualified Stock Option" means an Option not intended to qualify
as an Incentive Stock Option.
(cc) "Officer" means a person who is an officer of the Company or a Related
Entity within the meaning of Section 16 of the Exchange Act and the rules and
regulations promulgated thereunder.
(dd) "Option" means an option to purchase Shares pursuant to an Award
Agreement granted under the Plan.
(ee) "Parent" means a "parent corporation," whether now or hereafter
existing, as defined in Section 424(e) of the Code.
(ff) "Performance-Based Compensation" means compensation qualifying as
"performance-based compensation" under Section 162(m) of the Code.
(gg) "Performance Shares" means Shares or an Award denominated in Shares
which may be earned in whole or in part upon attainment of performance criteria
established by the Administrator.
(hh) "Performance Units" means an Award which may be earned in whole or in
part upon attainment of performance criteria established by the Administrator
and which may be settled for cash, Shares or other securities or a combination
of cash, Shares or other securities as established by the Administrator.
(ii) "Plan" means this 1999 Stock Incentive Plan.
(jj) "Related Entity" means any Parent, Subsidiary and any business,
corporation, partnership, limited liability company or other entity in which the
Company, a Parent or a Subsidiary holds a substantial ownership interest,
directly or indirectly.
(kk) "Restricted Stock" means Shares issued under the Plan to the Grantee
for such consideration, if any, and subject to such restrictions on transfer,
rights of first refusal, repurchase provisions, forfeiture provisions, and other
terms and conditions as established by the Administrator.
(ll) "Rule 16b-3" means Rule 16b-3 promulgated under the Exchange Act or
any successor thereto.
(mm) "SAR" means a stock appreciation right entitling the Grantee to Shares
or cash compensation, as established by the Administrator, measured by
appreciation in the value of Common Stock.
(nn) "Share" means a share of the Common Stock.
(oo) "Subsidiary" means a "subsidiary corporation," whether now or
hereafter existing, as defined in Section 424(f) of the Code.
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EXHIBIT B
BEYOND.COM CORPORATION
1999 EMPLOYEE STOCK PURCHASE PLAN
The following constitutes the provisions of the 1999 Employee Stock
Purchase Plan of Beyond.com Corporation, a Delaware corporation.
1. Purpose. The purpose of the Plan is to provide employees of the Company
and its Designated Parents or Subsidiaries with an opportunity to purchase
Common Stock of the Company through accumulated payroll deductions. It is the
intention of the Company to have the Plan qualify as an "Employee Stock Purchase
Plan" under Section 423 of the Code. The provisions of the Plan, accordingly,
shall be construed so as to extend and limit participation in a manner
consistent with the requirements of that section of the Code.
2. Definitions. As used herein, the following definitions shall apply:
(a) "Applicable Laws" means the legal requirements relating to the
administration of employee stock purchase plans, if any, under applicable
provisions of federal securities laws, state corporate and securities laws, the
Code, the rules of any applicable stock exchange or national market system, and
the rules of any foreign jurisdiction applicable to participation in the Plan by
residents therein.
(b) "Board" means the Board of Directors of the Company.
(c) "Change in Control" means a change in ownership or control of the
Company effected through the direct or indirect acquisition by any person or
related group of persons (other than an acquisition from or by the Company or by
a Company-sponsored employee benefit plan or by a person that directly or
indirectly controls, is controlled by, or is under common control with, the
Company) of beneficial ownership (within the meaning of Rule 13d-3 of the
Exchange Act) of securities possessing more than fifty percent (50%) of the
total combined voting power of the Company's outstanding securities.
(d) "Code" means the Internal Revenue Code of 1986, as amended.
(e) "Common Stock" means the common stock of the Company.
(f) "Company" means Beyond.com Corporation, a Delaware corporation.
(g) "Compensation" means an Employee's base salary from the Company or one
or more Designated Parents or Subsidiaries, including such amounts of base
salary as are deferred by the Employee (i) under a qualified cash or deferred
arrangement described in Section 401(k) of the Code, or (ii) to a plan qualified
under Section 125 of the Code. Compensation does not include overtime, bonuses,
annual awards, other incentive payments, reimbursements or other expense
allowances, fringe benefits (cash or noncash), moving expenses, deferred
compensation, contributions (other than contributions described in the first
sentence) made on the Employee's behalf by the Company or one or more Designated
Parents or Subsidiaries under any employee benefit or welfare plan now or
hereafter established, and any other payments not specifically referenced in the
first sentence.
(h) "Corporate Transaction" means any of the following transactions:
(1) a merger or consolidation in which the Company is not the
surviving entity, except for a transaction the principal purpose of which
is to change the state in which the Company is incorporated;
(2) the sale, transfer or other disposition of all or substantially
all of the assets of the Company (including the capital stock of the
Company's subsidiary corporations) in connection with complete liquidation
or dissolution of the Company;
(3) any reverse merger in which the Company is the surviving entity
but in which securities possessing more than fifty percent (50%) of the
total combined voting power of the Company's outstanding securities are
transferred to a person or persons different from those who held such
securities immediately prior to such merger; or
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<PAGE> 40
(4) an acquisition by any person or related group of persons (other
than the Company or by a Company-sponsored employee benefit plan) of
beneficial ownership (within the meaning of Rule 13d-3 of the Exchange Act)
of securities possessing more than fifty percent (50%) of the total
combined voting power of the Company's outstanding securities (whether or
not in a transaction also constituting a Change in Control), but excluding
any such transaction that the Plan Administrator determines shall not be a
Corporate Transaction
(i) "Designated Parents or Subsidiaries" means the Parents or Subsidiaries
which have been designated by the Plan Administrator from time to time as
eligible to participate in the Plan.
(j) "Effective Date" means June 1, 1999. However, should any Designated
Parent or Subsidiary become a participating company in the Plan after such date,
then such entity shall designate a separate Effective Date with respect to its
employee-participants.
(k) "Employee" means any individual, including an officer or director, who
is an employee of the Company or a Designated Parent or Subsidiary for purposes
of Section 423 of the Code. For purposes of the Plan, the employment
relationship shall be treated as continuing intact while the individual is on
sick leave or other leave of absence approved by the individual's employer.
Where the period of leave exceeds ninety (90) days and the individual's right to
reemployment is not guaranteed either by statute or by contract, the employment
relationship will be deemed to have terminated on the ninety-first (91st) day of
such leave, for purposes of determining eligibility to participate in the Plan.
(l) "Enrollment Date" means the first day of each Offer Period.
(m) "Exchange Act" means the Securities Exchange Act of 1934, as amended.
(n) "Exercise Date" means the last day of each Purchase Period.
(o) "Fair Market Value" means, as of any date, the value of Common Stock
determined as follows:
(1) Where there exists a public market for the Common Stock, the Fair
Market Value shall be (A) the closing price for a share of Common Stock for
the last market trading day prior to the time of the determination (or, if
no closing price was reported on that date, on the last trading date on
which a closing price was reported) on the stock exchange determined by the
Plan Administrator to be the primary market for the Common Stock or the
Nasdaq National Market, whichever is applicable or (B) if the Common Stock
is not traded on any such exchange or national market system, the average
of the closing bid and asked prices of a share of Common Stock on the
Nasdaq Small Cap Market for the day prior to the time of the determination
(or, if no such prices were reported on that date, on the last date on
which such prices were reported), in each case, as reported in The Wall
Street Journal or such other source as the Plan Administrator deems
reliable; or
(2) In the absence of an established market of the type described in
(1), above, for the Common Stock, the Fair Market Value thereof shall be
determined by the Plan Administrator in good faith.
(p) "Offer Period" means an Offer Period established pursuant to Section 4
hereof.
(q) "Parent" means a "parent corporation," whether now or hereafter
existing, as defined in Section 424(e) of the Code.
(r) "Participant" means an Employee of the Company or Designated Parent or
Subsidiary who is actively participating in the Plan.
(s) "Plan" means this Employee Stock Purchase Plan.
(t) "Plan Administrator" means either the Board or a committee of the Board
that is responsible for the administration of the Plan as is designated from
time to time by resolution of the Board.
(u) "Purchase Period" means a period of approximately six months,
commencing on August 1 or February 1 of each year and terminating on the next
following January 31 and July 31, respectively; provided, however, that the
first Purchase Period shall commence on June 1, 1999 and shall end on January
31, 2000.
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<PAGE> 41
(v) "Purchase Price" shall mean an amount equal to 85% of the Fair Market
Value of a share of Common Stock on the Enrollment Date or on the Exercise Date,
whichever is lower.
(w) "Reserves" means the sum of the number of shares of Common Stock
covered by each option under the Plan which have not yet been exercised and the
number of shares of Common Stock which have been authorized for issuance under
the Plan but not yet placed under option.
(x) "Subsidiary" means a "subsidiary corporation," whether now or hereafter
existing, as defined in Section 424(f) of the Code.
3. Eligibility.
(a) General. Any individual who is an Employee on a given Enrollment Date
shall be eligible to participate in the Plan for the Offer Period commencing
with such Enrollment Date.
(b) Limitations on Grant and Accrual. Any provisions of the Plan to the
contrary notwithstanding, no Employee shall be granted an option under the Plan
(i) if, immediately after the grant, such Employee (taking into account stock
owned by any other person whose stock would be attributed to such Employee
pursuant to Section 424(d) of the Code) would own stock and/or hold outstanding
options to purchase stock possessing five percent (5%) or more of the total
combined voting power or value of all classes of stock of the Company or of any
Parent or Subsidiary, or (ii) which permits the Employee's rights to purchase
stock under all employee stock purchase plans of the Company and its Parents or
Subsidiaries to accrue at a rate which exceeds Twenty-Five Thousand Dollars
($25,000) worth of stock (determined at the Fair Market Value of the shares at
the time such option is granted) for each calendar year in which such option is
outstanding at any time. The determination of the accrual of the right to
purchase stock shall be made in accordance with Section 423(b)(8) of the Code
and the regulations thereunder.
(c) Other Limits on Eligibility. Notwithstanding Subsection (a), above, the
following Employees shall not be eligible to participate in the Plan for any
relevant Offer Period: (i) Employees whose customary employment is 20 OR FEWER
hours or less per week; (ii) Employees whose customary employment is for not
more than 5 OR FEWER months in any calendar year; and (iii) Employees who are
subject to rules or laws of a foreign jurisdiction that prohibit or make
impractical the participation of such Employees in the Plan.
4. Offer Periods.
(a) The Plan shall be implemented through overlapping or consecutive Offer
Periods until such time as (i) the maximum number of shares of Common Stock
available for issuance under the Plan shall have been purchased or (ii) the Plan
shall have been terminated in accordance with Section 19 hereof. The maximum
duration of an Offer Period shall be twenty-seven (27) months. Initially, the
Plan shall be implemented through overlapping Offer Periods of twenty-four (24)
months' duration commencing each February 1 and August 1 (except that the
initial Offer Period shall commence on June 1, 1999 and shall end on July 31,
2001).
(b) A Participant shall be granted a separate option for each Offer Period
in which he or she participates. The option shall be granted on the Enrollment
Date and shall be automatically exercised in successive installments on the
Exercise Dates ending within the Offer Period.
(c) An Employee may participate in only one Offer Period at a time.
Accordingly, except as provided in Section 4(d), an Employee who wishes to join
a new Offer Period must withdraw from the current Offer Period in which the
Employee is participating and must also enroll in the new Offer Period prior to
the Enrollment Date for that Offer Period.
(d) If on the first day of any Purchase Period in an Offer Period in which
a Participant is participating, the Fair Market Value of the Common Stock is
less than the Fair Market Value of the Common Stock on the Enrollment Date of
the Offer Period (after taking into account any adjustment during the Offer
Period pursuant to Section 18(a)), the Offer Period shall be terminated
automatically and the Participant shall be enrolled automatically in the new
Offer Period which has its first Purchase Period commencing on that date,
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<PAGE> 42
provided the Participant is eligible to participate in the Plan on that date and
has not elected to terminate participation in the Plan.
(e) Except as specifically provided herein, the acquisition of Common Stock
through participation in the Plan for any Offer Period shall neither limit nor
require the acquisition of Common Stock by a Participant in any subsequent Offer
Period.
5. Participation.
(a) An eligible Employee may become a Participant in the Plan by completing
a subscription agreement authorizing payroll deductions in the form of Exhibit A
to this Plan and filing it with the designated payroll office of the Company at
least ten (10) business days prior to the Enrollment Date for the Offer Period
in which such participation will commence, unless a later time for filing the
subscription agreement is set by the Plan Administrator for all eligible
Employees with respect to a given Offer Period.
(b) Payroll deductions for a Participant shall commence with the first
partial or full payroll period beginning on the Enrollment Date and shall end on
the last complete payroll period during the Offer Period, unless sooner
terminated by the Participant as provided in Section 10.
6. Payroll Deductions.
(a) At the time a Participant files a subscription agreement, the
Participant shall elect to have payroll deductions made during the Offer Period
in amounts between one percent (1%) and not exceeding ten percent (10%) of the
Compensation which the Participant receives during the Offer Period.
(b) All payroll deductions made for a Participant shall be credited to the
Participant's account under the Plan and will be withheld in whole percentages
only. A Participant may not make any additional payments into such account.
(c) A Participant may discontinue participation in the Plan as provided in
Section 10, or may increase or decrease the rate of payroll deductions during
the Offer Period by completing and filing with the Company a change of status
notice in the form of Exhibit B to this Plan authorizing an increase or decrease
in the payroll deduction rate. Any decrease in the rate of a Participant's
payroll deductions shall be effective with the first full payroll period
commencing ten (10) business days after the Company's receipt of the change of
status notice unless the Company elects to process a given change in
participation more quickly. Any increase in the rate of a Participant's payroll
deductions shall be effective with the next Purchase Period following the
Purchase Period in which the Company receives the change of status notice if
such notice is filed within ten (10) business days before the commencement of
the next Purchase Period. A Participant's subscription agreement (as modified by
any change of status notice) shall remain in effect for successive Offer Periods
unless terminated as provided in Section 10. The Plan Administrator shall be
authorized to limit the number of payroll deduction rate changes during any
Offer Period.
(d) Notwithstanding the foregoing, to the extent necessary to comply with
Section 423(b)(8) of the Code and Section 3(b) herein, a Participant's payroll
deductions may be decreased to 0% at such time during any Purchase Period which
is scheduled to end during the current calendar year (the "Current Purchase
Period") that the aggregate of all payroll deductions which were previously used
to purchase stock under the Plan in a prior Purchase Period which ended during
that calendar year plus all payroll deductions accumulated with respect to the
Current Purchase Period equal $21,250. Payroll deductions shall recommence at
the rate provided in such Participant's subscription agreement, as amended, at
the beginning of the first Purchase Period which is scheduled to end in the
following calendar year, unless terminated by the Participant as provided in
Section 10.
7. Grant of Option. On the Enrollment Date, each Participant shall be
granted an option to purchase (at the applicable Purchase Price) up to a number
of shares of the Common Stock determined by dividing ten percent (10%) of such
Participant's Compensation receivable during the Offer Period by the applicable
Purchase Price; provided (i) that such option shall be subject to the
limitations set forth in Sections 3(b) and 12 hereof, and (ii) the maximum
number of shares of Common Stock a Participant shall be permitted to purchase in
any Purchase Period shall be 500 shares, subject to adjustment as provided in
Section 18 hereof.
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<PAGE> 43
Exercise of the option shall occur as provided in Section 8, unless the
Participant has withdrawn pursuant to Section 10, and the option, to the extent
not exercised, shall expire on the last day of the Offer Period.
8. Exercise of Option. Unless a Participant withdraws from the Plan as
provided in Section 10, below, the Participant's option for the purchase of
shares will be exercised automatically on each Exercise Date, by applying the
accumulated payroll deductions in the Participant's account to purchase the
maximum number of full shares subject to the option by dividing such
Participant's payroll deductions accumulated prior to such Exercise Date and
retained in the Participant's account as of the Exercise Date by the applicable
Purchase Price. No fractional shares will be purchased; any payroll deductions
accumulated in a Participant's account which are not sufficient to purchase a
full share shall be carried over to the next Purchase Period or Offer Period,
whichever applies, or returned to the Participant, if the Participant withdraws
from the Plan. Notwithstanding the foregoing, any amount remaining in a
Participant's account following the purchase of shares on the Exercise Date due
to the application of Section 423(b)(8) of the Code or Section 7, above, shall
be returned to the Participant and shall not be carried over to either the next
Purchase Period or Offer Period. During a Participant's lifetime, a
Participant's option to purchase shares hereunder is exercisable only by the
Participant.
9. Delivery. Upon receipt of a request from a Participant after each
Exercise Date on which a purchase of shares occurs, the Company shall arrange
the delivery to such Participant, as promptly as practicable, of a certificate
representing the shares purchased upon exercise of the Participant's option.
10. Withdrawal; Termination of Employment.
(a) A Participant may either (i) withdraw all but not less than all the
payroll deductions credited to the Participant's account and not yet used to
exercise the Participant's option under the Plan or (ii) terminate future
payroll deductions, but allow accumulated payroll deductions to be used to
exercise the Participant's option under the Plan at any time by giving written
notice to the Company in the form of Exhibit B to this Plan. If the Participant
elects withdrawal alternative (i) described above, all of the Participant's
payroll deductions credited to the Participant's account will be paid to such
Participant as promptly as practicable after receipt of notice of withdrawal,
such Participant's option for the Offer Period will be automatically terminated,
and no further payroll deductions for the purchase of shares will be made during
the Offer Period. If the Participant elects withdrawal alternative (ii)
described above, no further payroll deductions for the purchase of shares will
be made during the Offer Period, all of the Participant's payroll deductions
credited to the Participant's account will be applied to the exercise of the
Participant's option on the next Exercise Date, and after such Exercise Date,
such Participant's option for the Offer Period will be automatically terminated.
If a Participant withdraws from an Offer Period, payroll deductions will not
resume at the beginning of the succeeding Offer Period unless the Participant
delivers to the Company a new subscription agreement.
(b) Upon termination of a Participant's employment relationship (as
described in Section 2(k)) at a time more than three (3) months from the next
scheduled Exercise Date, the payroll deductions credited to such Participant's
account during the Offer Period but not yet used to exercise the option will be
returned to such Participant or, in the case of his/her death, to the person or
persons entitled thereto under Section 14, and such Participant's option will be
automatically terminated. Upon termination of a Participant's employment
relationship (as described in Section 2(k)) within three (3) months of the next
scheduled Exercise Date, the payroll deductions credited to such Participant's
account during the Offer Period but not yet used to exercise the option will be
applied to the purchase of Common Stock on the next Exercise Date, unless the
Participant (or in the case of the Participant's death, the person or persons
entitled to the Participant's account balance under Section 14) withdraws from
the Plan by submitting a change of status notice in accordance with subsection
(a) of this Section 10. In such a case, no further payroll deductions will be
credited to the Participant's account following the Participant's termination of
employment and the Participant's option under the Plan will be automatically
terminated after the purchase of Common Stock on the next scheduled Exercise
Date.
11. Interest. No interest shall accrue on the payroll deductions credited
to a Participant's account under the Plan.
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<PAGE> 44
12. Stock.
(a) The maximum number of shares of Common Stock which shall be made
available for sale under the Plan shall be 1,000,000 shares, subject to
adjustment upon changes in capitalization of the Company as provided in Section
18. If on a given Exercise Date the number of shares with respect to which
options are to be exercised exceeds the number of shares then available under
the Plan, the Plan Administrator shall make a pro rata allocation of the shares
remaining available for purchase in as uniform a manner as shall be practicable
and as it shall determine to be equitable.
(b) A Participant will have no interest or voting right in shares covered
by the Participant's option until such shares are actually purchased on the
Participant's behalf in accordance with the applicable provisions of the Plan.
No adjustment shall be made for dividends, distributions or other rights for
which the record date is prior to the date of such purchase.
(c) Shares to be delivered to a Participant under the Plan will be
registered in the name of the Participant or in the name of the Participant and
his or her spouse.
13. Administration. The Plan shall be administered by the Plan
Administrator which shall have full and exclusive discretionary authority to
construe, interpret and apply the terms of the Plan, to determine eligibility
and to adjudicate all disputed claims filed under the Plan. Every finding,
decision and determination made by the Plan Administrator shall, to the full
extent permitted by Applicable Law, be final and binding upon all persons.
14. Designation of Beneficiary.
(a) Each Participant will file a written designation of a beneficiary who
is to receive any shares and cash, if any, from the Participant's account under
the Plan in the event of such Participant's death. If a Participant is married
and the designated beneficiary is not the spouse, spousal consent shall be
required for such designation to be effective.
(b) Such designation of beneficiary may be changed by the Participant (and
the Participant's spouse, if any) at any time by written notice. In the event of
the death of a Participant and in the absence of a beneficiary validly
designated under the Plan who is living (or in existence) at the time of such
Participant's death, the Company shall deliver such shares and/or cash to the
executor or administrator of the estate of the Participant, or if no such
executor or administrator has been appointed (to the knowledge of the Plan
Administrator), the Plan Administrator shall deliver such shares and/or cash to
the spouse (or domestic partner, as determined by the Administrator) of the
Participant, or if no spouse (or domestic partner) is known to the Plan
Administrator, then to the issue of the Participant, such distribution to be
made per stirpes (by right of representation).
15. Transferability. Neither payroll deductions credited to a Participant's
account nor any rights with regard to the exercise of an option or to receive
shares under the Plan may be assigned, transferred, pledged or otherwise
disposed of in any way (other than by will, the laws of descent and distribution
or as provided in Section 14 hereof) by the Participant. Any such attempt at
assignment, transfer, pledge or other disposition shall be without effect,
except that the Plan Administrator may treat such act as an election to withdraw
funds from an Offer Period in accordance with Section 10.
16. Use of Funds. All payroll deductions received or held by the Company
under the Plan may be used by the Company for any corporate purpose, and the
Company shall not be obligated to segregate such payroll deductions.
17. Reports. Individual accounts will be maintained for each Participant in
the Plan. Statements of account will be given to Participants at least annually,
which statements will set forth the amounts of payroll deductions, the Purchase
Price, the number of shares purchased and the remaining cash balance, if any.
18. Adjustments Upon Changes in Capitalization; Corporate Transactions.
(a) Adjustments Upon Changes in Capitalization. Subject to any required
action by the stockholders of the Company, the Reserves, the Purchase Price, as
well as any other terms that the Plan Administrator
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determines require adjustment shall be proportionately adjusted for (i) any
increase or decrease in the number of issued shares of Common Stock resulting
from a stock split, reverse stock split, stock dividend, combination or
reclassification of the Common Stock, (ii) any other increase or decrease in the
number of issued shares of Common Stock effected without receipt of
consideration by the Company, or (iii) as the Plan Administrator may determine
in its discretion, any other transaction with respect to Common Stock to which
Section 424(a) of the Code applies; provided, however that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Such adjustment shall be made by the Plan
Administrator and its determination shall be final, binding and conclusive.
Except as the Plan Administrator determines, no issuance by the Company of
shares of stock of any class, or securities convertible into shares of stock of
any class, shall affect, and no adjustment by reason hereof shall be made with
respect to, the Reserves and the Purchase Price.
(b) Corporate Transactions. In the event of a proposed Corporate
Transaction, each option under the Plan shall be assumed by such successor
corporation or a parent or subsidiary of such successor corporation, unless the
Plan Administrator determines, in the exercise of its sole discretion and in
lieu of such assumption, to shorten the Offer Period then in progress by setting
a new Exercise Date (the "New Exercise Date"). If the Plan Administrator
shortens the Offer Period then in progress in lieu of assumption in the event of
a Corporate Transaction, the Plan Administrator shall notify each Participant in
writing, at least ten (10) days prior to the New Exercise Date, that the
Exercise Date for the Participant's option has been changed to the New Exercise
Date and that the Participant's option will be exercised automatically on the
New Exercise Date, unless prior to such date the Participant has withdrawn from
the Offer Period as provided in Section 10. For purposes of this Subsection, an
option granted under the Plan shall be deemed to be assumed if, in connection
with the Corporate Transaction, the option is replaced with a comparable option
with respect to shares of capital stock of the successor corporation or Parent
thereof. The determination of option comparability shall be made by the Plan
Administrator prior to the Corporate Transaction and its determination shall be
final, binding and conclusive on all persons.
19. Amendment or Termination.
(a) The Plan Administrator may at any time and for any reason terminate or
amend the Plan. Except as provided in Section 18, no such termination can affect
options previously granted, provided that an Offer Period may be terminated by
the Plan Administrator on any Exercise Date if the Plan Administrator determines
that the termination of the Offer Period is in the best interests of the Company
and its stockholders. Except as provided in Section 18, no amendment may make
any change in any option theretofore granted which adversely affects the rights
of any Participant without the consent of affected Participants. To the extent
necessary to comply with Section 423 of the Code (or any successor rule or
provision or any other Applicable Law), the Company shall obtain stockholder
approval in such a manner and to such a degree as required.
(b) Without stockholder consent and without regard to whether any
Participant rights may be considered to have been "adversely affected," the Plan
Administrator shall be entitled to limit the frequency and/or number of changes
in the amount withheld during Offer Periods, change the length of Purchase
Periods within any Offer Period, determine whether subsequent Offer Periods
shall be consecutive or overlapping, establish the exchange ratio applicable to
amounts withheld in a currency other than U.S. dollars, establish additional
terms, conditions, rules or procedures to accommodate the rules or laws of
applicable foreign jurisdictions, permit payroll withholding in excess of the
amount designated by a Participant in order to adjust for delays or mistakes in
the Company's processing of properly completed withholding elections, establish
reasonable waiting and adjustment periods and/or accounting and crediting
procedures to ensure that amounts applied toward the purchase of Common Stock
for each Participant properly correspond with amounts withheld from the
Participant's Compensation, and establish such other limitations or procedures
as the Plan Administrator determines in its sole discretion advisable and which
are consistent with the Plan.
20. Notices. All notices or other communications by a Participant to the
Company under or in connection with the Plan shall be deemed to have been duly
given when received in the form specified by the
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Plan Administrator at the location, or by the person, designated by the Plan
Administrator for the receipt thereof.
21. Conditions Upon Issuance of Shares. Shares shall not be issued with
respect to an option unless the exercise of such option and the issuance and
delivery of such shares pursuant thereto shall comply with all Applicable Laws
and shall be further subject to the approval of counsel for the Company with
respect to such compliance. As a condition to the exercise of an option, the
Company may require the Participant to represent and warrant at the time of any
such exercise that the shares are being purchased only for investment and
without any present intention to sell or distribute such shares if, in the
opinion of counsel for the Company, such a representation is required by any of
the aforementioned Applicable Laws. In addition, no options shall be exercised
or shares issued hereunder before the Plan shall have been approved by
stockholders of the Company as provided in Section 23.
22. Term of Plan. The Plan shall become effective upon the earlier to occur
of its adoption by the Board or its approval by the stockholders of the Company.
It shall continue in effect for a term of ten (10) years unless sooner
terminated under Section 19.
23. Stockholder Approval. Continuance of the Plan shall be subject to
approval by the stockholders of the Company within twelve (12) months before or
after the date the Plan is adopted. Such stockholder approval shall be obtained
in the degree and manner required under Applicable Laws.
24. No Employment Rights. The Plan does not, directly or indirectly, create
any right for the benefit of any employee or class of employees to purchase any
shares under the Plan, or create in any employee or class of employees any right
with respect to continuation of employment by the Company or a Designated Parent
or Subsidiary, and it shall not be deemed to interfere in any way with such
employer's right to terminate, or otherwise modify, an employee's employment at
any time.
25. No Effect on Retirement and Other Benefit Plans. Except as specifically
provided in a retirement or other benefit plan of the Company or a Designated
Parent or Subsidiary, participation in the Plan shall not be deemed compensation
for purposes of computing benefits or contributions under any retirement plan of
the Company or a Designated Parent or Subsidiary, and shall not affect any
benefits under any other benefit plan of any kind or any benefit plan
subsequently instituted under which the availability or amount of benefits is
related to level of compensation. The Plan is not a "Retirement Plan" or
"Welfare Plan" under the Employee Retirement Income Security Act of 1974, as
amended.
26. Effect of Plan. The provisions of the Plan shall, in accordance with
its terms, be binding upon, and inure to the benefit of, all successors of each
Participant, including, without limitation, such Participant's estate and the
executors, administrators or trustees thereof, heirs and legatees, and any
receiver, trustee in bankruptcy or representative of creditors of such
Participant.
27. Governing Law. The Plan is to be construed in accordance with and
governed by the internal laws of the State of Delaware without giving effect to
any choice of law rule that would cause the application of the laws of any
jurisdiction other than the internal laws of the State of Delaware to the rights
and duties of the parties, except to the extent the internal laws of the State
of Delaware are superseded by the laws of the United States. Should any
provision of the Plan be determined by a court of law to be illegal or
unenforceable, the other provisions shall nevertheless remain effective and
shall remain enforceable.
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SKU #1768-PS-99
