<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of
1934
(Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_]Preliminary Proxy Statement
[_]Confidential, for Use of the
[X]Definitive Proxy Statement Commission Only (as permitted by
Rule 14a-6(e)(2))
[_]Definitive Additional Materials
[_]Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
Interliant, Inc.
-----------------------------------------------------
(Name of Registrant as Specified In Its Charter)
-----------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X]No fee required.
[_]Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which 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>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
[INTERLIANT, INC. LOGO OMITTED]
INTERLIANT, INC.
NOTICE OF
ANNUAL MEETING
AND PROXY
STATEMENT
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
INTERLIANT, INC.
May 5, 2000
Dear Interliant Stockholder:
I invite you to attend our 2000 Annual Meeting of Stockholders on Tuesday,
June 6, 2000. The meeting will be held at 10:00 a.m. E.D.T. in the West Room
of Reid Castle on the campus of Manhattanville College, 2900 Purchase Street,
Purchase, New York.
On the following pages you will find the Notice of Meeting, which lists the
formal matters to be conducted at the meeting, and the Proxy Statement. After
the formal business session, we will discuss the financial results for 1999
and report on current operations.
Your vote is very important regardless of the number of shares you own.
Detailed voting instructions appear on the next page.
The Board of Directors recommends that you vote "FOR" proposals I, II, III
and IV, described herein.
Sincerely,
/s/ Herbert R. Hribar
--------------------------------------
Herbert R. Hribar
President and Chief Executive Officer
--------------------------------------------------------------
Two Manhattanville Road Purchase, New York 10577
Telephone: 914-640-9000 Fax: 914-694-1190
<PAGE>
INTERLIANT, INC.
----------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
JUNE 6, 2000
----------------
The Annual Meeting of Stockholders of Interliant, Inc. will be held in the
West Room of Reid Castle on the campus of Manhattanville College, 2900 Purchase
Street, Purchase, New York at 10:00 a.m. E.D.T. for the following purposes:
1. To elect 10 directors;
2. To approve amendments to the 1998 Stock Option Plan;
3. To approve and adopt the 2000 Employee Stock Purchase Plan providing
for the issuance of up to 1,500,000 shares of the Common Stock thereunder;
4. To approve and ratify the appointment of Ernst & Young LLP as
independent auditors; and
5. To transact such other business as properly may come before the
meeting and any adjournment thereof.
Stockholders of record at the close of business on April 24, 2000 are
entitled to receive notice of, and to vote at, the Annual Meeting.
By Order of the Board of Directors,
/s/ Bruce S. Klein
---------------------------------
Bruce S. Klein
Secretary
<PAGE>
PROXY STATEMENT
----------------
GENERAL INFORMATION
These proxy materials are furnished in connection with the solicitation by
the Board of Directors of Interliant, Inc. ("Interliant," "the Company," "our,"
"we," or "us"), a Delaware corporation, of proxies to be voted at our 2000
Annual Meeting of Stockholders (the "Annual Meeting") or at any adjournment or
postponement.
You are invited to attend our Annual Meeting on June 6, 2000, beginning at
10:00 a.m. E.D.T. in the West Room of Reid Castle on the campus of
Manhattanville College, 2900 Purchase Street, Purchase, New York.
This Proxy Statement, form of proxy and voting instructions are being mailed
to our stockholders on or about May 5, 2000.
Stockholders Entitled to Vote. Holders of shares of Interliant's common
stock, par value $.01 per share (the "Common Stock") at the close of business
on April 24, 2000 are entitled to receive notice and to vote their shares at
the Annual Meeting. As of that date, there were 47,524,793 shares of Common
Stock outstanding. Each share of Common Stock is entitled to one vote on each
matter properly brought before the Annual Meeting.
Proxies. Your vote is important. Stockholders of record may vote their
proxies by marking the appropriate boxes on the enclosed proxy card and by
signing, dating and returning the card in the enclosed envelope.
You may revoke your proxy and reclaim your right to vote up to and including
the day of the Annual Meeting by (1) giving written notice of revocation to the
Inspectors of Election, ChaseMellon Shareholder Services, Overpeck Centre, 85
Challenger Road, Ridgefield, NJ 07660, (2) timely delivery of a valid, later-
dated proxy or (3) voting by ballot at the Annual Meeting.
You can save us the expense of a second mailing by voting promptly. If your
shares are held by a bank, broker or other holder of record, check the
information provided with your voting instruction form.
Vote at the Annual Meeting
Your mail-in vote will not limit your right to vote at the Annual Meeting if
you later decide to attend in person. If your shares are held in the name of a
bank, broker or other holder of record, you must obtain a proxy, executed in
your favor, from the holder of record to be able to vote at the meeting.
All shares that have been properly voted, and not revoked, will be voted at
the Annual Meeting in accordance with your instructions. If you sign and return
your proxy card but do not give voting instructions, the shares represented by
the proxy will be voted by the Proxy Committee as recommended by the Board of
Directors.
The Proxy Committee consists of Herbert R. Hribar, President, Chief
Executive Officer and Director of Interliant, and Bruce S. Klein, Senior Vice
President, General Counsel and Secretary of Interliant. Proxy cards, unless
otherwise indicated by the stockholder, also confer upon the Proxy Committee
discretionary authority to vote all shares of stock represented by the proxies
on any matter which properly may be presented for action at the Annual Meeting
even if not covered herein. If any of the nominees for director named in
Proposal I--Election of Directors should be unavailable for election, the
proxies will be voted for the election of such other person as may be
recommended by the Board of Directors in place of such nominee. The Board of
Directors is not aware of any matter for action by the stockholders at the
Annual Meeting other than the matters described in the Notice.
<PAGE>
Quorum. The presence, in person or by proxy, of the holders of a majority of
the shares of Common Stock entitled to vote at the Annual Meeting is required
to constitute a quorum.
Required Vote. A plurality of the votes of holders of shares represented at
the Annual Meeting, in person or by proxy, and entitled to vote is required for
the election of directors. The affirmative vote of holders of a majority of
shares represented at the Annual Meeting, in person or by proxy, and entitled
to vote is required for the approval and adoption of the amendments to our 1998
Stock Option Plan, the approval and adoption of our 2000 Employee Stock
Purchase Plan and the ratification of the Board's selection of Ernst & Young
LLP as Interliant's independent accountants. Abstentions have the same effect
as a vote against any proposal. Broker non-votes are deemed not entitled to
vote and are not counted as votes for or against any proposal.
BENEFICIAL OWNERSHIP OF COMMON STOCK BY CERTAIN
STOCKHOLDERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of the Common Stock as of March 31, 2000 by (1) each person or entity
known to us to own beneficially more than 5% of the outstanding shares of
Common Stock, (2) each of our directors, (3) our five most highly compensated
officers during the year ended December 31, 1999 and Mr. Herbert Hribar, our
current President and Chief Executive Officer and (4) all directors and
executive officers as a group. Unless otherwise indicated below, to our
knowledge, all persons listed below have sole voting and investment power with
respect to their shares of Common Stock, except to the extent authority is
shared by spouses under applicable law.
<TABLE>
<CAPTION>
Shares Beneficially
Owned(1)
-----------------------
Number Percent
------------ ----------
<S> <C> <C>
Web Hosting Organization LLC(2).......................... 25,200,000 53.12%
c/o Charterhouse Group International, Inc.
535 Madison Avenue
New York, NY 10022
Charterhouse Group International, Inc.(2)................ 25,200,000 53.12
535 Madison Avenue
New York, NY 10022
Mathew Wolf(3)........................................... 3,712,090 7.83
1001 Fannin Street
Suite 2000
Houston, TX 77002
SOFTBANK Technology Ventures IV, L.P.(4)................. 3,397,283 7.16
333 West San Carlos
Suite 1225
San Jose, CA
Leonard J. Fassler(5)(6)................................. 25,211,500 53.14
Bradley A. Feld(5)(7).................................... 28,607,371 60.29
Herbert R. Hribar........................................ -- *
Francis J. Alfano........................................ 7,250 *
James M. Lidestri(8)..................................... 308,595 *
Bruce S. Klein (9)....................................... 7,250 *
William A. Wilson(10).................................... 10,250 *
Thomas C. Dircks(11)..................................... -- *
Jay M. Gates(11)......................................... -- *
Merril M. Halpern(11).................................... -- *
John B. Landry........................................... 4,250 *
Charles R. Lax (12)...................................... 3,398,283 7.16
Stephen W. Maggs(5)...................................... 25,207,700 53.13
Patricia A.M. Riley(11).................................. -- *
All directors and executive officers as a
group(5)(6)(7)(8)(9)(10)(11)(12 persons)................ 29,419,593 61.82
</TABLE>
- --------
* Less than one percent.
2
<PAGE>
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission, based on factors including voting and
investment power with respect to shares. Shares subject to options
currently exercisable within 60 days of March 31, 2000 are deemed
outstanding for the purpose of computing the percentage of ownership of
the person holding such options, but are not deemed outstanding for
computing the percentage ownership of any other person.
(2) The principal members of Web Hosting Organization LLC ("WEB") are
Charterhouse Equity Partners, an affiliate of Charterhouse Group
International, Inc. and WHO Management LLC. Their respective ownership
interests in WEB are as follows: Charterhouse Equity Partners: 95.2% and
WHO Management LLC: 4.8%. Leonard J. Fassler and Bradley A. Feld are the
member managers of and Stephen W. Maggs is a member of, WHO Management
LLC. The general partner of Charterhouse Equity Partners is CHUSA Equity
Investors III, L.P., whose general partner is Charterhouse Equity III,
Inc., a wholly-owned subsidiary of Charterhouse. As a result of the
foregoing, all of the shares of Interliant held by WEB would, for purposes
of Section 13(d) of the Securities Exchange Act of 1934 be considered to
be beneficially owned by Charterhouse.
(3) Includes 398,845 shares owned by the Ann Weltchek Wolf 1995 Marital Trust,
797,690 shares owned by the Mathew D. Wolf Children's Trust and 350,000
shares held in escrow until March 31, 2000. Mr. Wolf disclaims beneficial
ownership of all the shares owned by both of the trusts named above.
(4) Includes 63,869 shares held by SOFTBANK Technology Advisors Fund, L.P., an
affiliated entity.
(5) Includes 25,200,000 shares held by WEB. Messrs. Fassler, Feld and Maggs
are members of WHO Management LLC, which is a member of WEB. Each of
Messrs. Fassler, Feld and Maggs disclaim beneficial ownership of such
shares other than the shares attributable to each of them as a result of
their membership in WHO Management LLC.
(6) Includes 2,000 shares owned by Mr. Fassler's spouse. Mr. Fassler disclaims
beneficial ownership of these shares.
(7) Includes 3,333,414 shares held by SOFTBANK Technology Ventures IV, L.P.
and 63,869 shares held by SOFTBANK Technology Advisors Fund, L.P. Mr.
Feld, a Co-Chairman and Director of Interliant, is a general partner of
each of SOFTBANK Technology Ventures IV, L.P. and SOFTBANK Technology
Advisors Fund, L.P. Mr. Feld disclaims beneficial ownership of such
shares.
(8) Includes 1,000 shares owned by a trust for Mr. Lidestri's child. Mr.
Lidestri disclaims beneficial ownership of these shares.
(9) Includes 1,000 shares owned by Mr. Klein's spouse. Mr. Klein disclaims
beneficial ownership of these shares.
(10) Includes 2,000 shares owned by trusts for Mr. Wilson's children. Mr.
Wilson disclaims beneficial ownership of these shares.
(11) Excludes 25,200,000 shares held by WEB. Messrs. Halpern, Dircks, Gates and
Ms. Riley are directors and/or officers of Charterhouse. Charterhouse is
an affiliate of Charterhouse Equity Partners, which is a member of WEB.
Each of Messrs. Halpern, Dircks, Gates and Ms. Riley disclaims beneficial
ownership of these shares.
(12) Includes 3,333,414 shares held by SOFTBANK Technology Ventures IV, L.P.,
63,869 shares held by SOFTBANK Technology Advisors Fund, L.P. Mr. Lax. Mr.
Lax, a director of Interliant, is a managing member of STV IV LLC, the
general partner of SOFTBANK Technology Ventures IV, L.P. Mr. Lax disclaims
beneficial ownership of such shares except to the extent of his pecuniary
interest therein.
3
<PAGE>
PROPOSAL I
ELECTION OF DIRECTORS
The Board of Directors currently consists of ten members. Seven are
nonemployee directors and three are members of management. All of the directors
currently serving on the Board have been nominated by the Board of Directors
for re-election to one-year terms at the Annual Meeting. Each nominee elected
will hold office until the Annual Meeting of Stockholders to be held in 2001
and until a successor has been duly elected and qualified, unless prior to such
meeting a director shall resign, or his or her directorship shall become vacant
due to his or her death or removal. Shares represented by proxies that are
returned properly signed will be voted for the nominees unless the stockholder
indicates on the proxy that authority to vote the shares is withheld for one or
more or for all of the nominees listed. A proxy cannot be voted for a greater
number of persons than the ten nominees named below. Directors are elected by a
plurality of the votes cast. Shares not voted, whether by withholding or broker
non-vote, have no effect on the election of directors except to the extent the
failure to vote for an individual results in another individual receiving a
proportionately larger number of votes.
The following information set forth has been furnished to us by the
directors and sets forth the principal occupation and employment during the
past five years of each director nominee, positions and offices with us, and
membership on other boards of directors.
The following ten individuals have been nominated for election at the Annual
Meeting for a term ending 2001:
Leonard J. Fassler
Mr. Fassler is one of our co-founders and has been one of our Co-Chairmen
and a Director since our formation in December 1997. Mr. Fassler was also our
Secretary from December 1997 through April 1999. From 1992 to 1996, Mr. Fassler
was a Co-Chairman of AmeriData Technologies, Inc. ("AmeriData"), a New York
Stock Exchange-listed reseller of computer equipment and provider of computer
consulting and other services that was acquired by General Electric Capital
Corporation in 1996. Mr. Fassler was a co-founder of AmeriData which grew into
a company with sales in excess of two billion dollars a year and locations in
ten countries at the time that it was acquired. Mr. Fassler holds a bachelor's
degree in business administration from City College of New York and a law
degree from Fordham Law School. Mr. Fassler is a director of Vestcom, Inc.
Bradley A. Feld
Mr. Feld is one of our co-founders and has been one of our Co-Chairmen and a
Director since our formation in December 1997. Since 1995, Mr. Feld has been
the President of Intensity Ventures Inc., a company that helps to establish,
advise and operate software companies. From 1993 to 1995, Mr. Feld was the
chief technology officer of AmeriData. From 1985 to 1993, he was president of
Feld Technologies, Inc., a computer consulting firm founded by Mr. Feld to
develop and implement information technology solutions for a wide variety of
businesses, which was acquired by AmeriData in 1993. Mr. Feld earned a bachelor
of science degree and a master of science degree from Massachusetts Institute
of Technology. Mr. Feld is a General Partner of SOFTBANK Technology Ventures
IV, L.P., SOFTBANK Technology Ventures V, L.P. and SOFTBANK Technology Advisors
Fund, L.P., venture capital funds. Mr. Feld is a director and co-chairman of
Message Media, Inc. and director of a number of privately held companies.
Herbert Hribar
Mr. Hribar became our Chief Executive Officer effective January 31, 2000 and
our President on March 30, 2000. Prior to joining us and since July 1998, Mr.
Hribar has been President and Chief Operating Officer of Verio, Inc., a domain-
based Web hosting company. Prior to Verio, Mr. Hribar was President of
Ameritech Cellular in Chicago, Illinois and President of Ameritech Europe in
Brussels, Belgium. Mr. Hribar is a graduate of the U.S. Naval Academy in
Annapolis and has advanced degrees in engineering, business, and computer
science.
4
<PAGE>
Thomas C. Dircks
Mr. Dircks has been one of our Directors since our formation in December
1997 and is a Managing Director of Charterhouse Group International, Inc.
("Charterhouse"). Mr. Dircks has been employed as an officer of Charterhouse
since 1983. He was previously employed as a Certified Public Accountant at a
predecessor of PricewaterhouseCoopers LLP. He holds a bachelor of science
degree in accounting and a masters degree in business administration from
Fordham University. He is also a director of a number of privately held
companies.
Jay M. Gates
Mr. Gates has been one of our Directors since our formation in December 1997
and is a Senior Vice President of Charterhouse. He joined Charterhouse in 1994
as an Analyst. Mr. Gates was previously employed as a Senior Analyst in the
Financial Consulting Advisory Group of the accounting firm of Arthur Andersen
LLP. Prior to that he was an Assistant Treasurer at Bankers Trust Corporation.
He holds a bachelor of arts degree from the State University of New York at
Binghamton and a masters degree in business administration from New York
University, Leonard N. Stern School of Business. He is also a director of a
number of privately held companies.
Merril M. Halpern
Mr. Halpern has been one of our Directors since our formation in December
1997 and is Chairman and Chief Executive of Charterhouse, which he founded in
1973. Mr. Halpern is a director of Microwave Power Devices, Inc. and United
Road Services, Inc., as well as several private companies. He received a
bachelor of science degree from Rutgers University and a masters degree in
business administration from Harvard University.
John B. Landry
Mr. Landry has been one of our Directors since July 1999. Mr. Landry is
currently chairman of AnyDay.com and has been Strategic Technology Consultant
to senior management of IBM Corporation since June 1995. In addition, from
October 1995 to January 1999, he was Chairman of the Board of Narrative
Communications Corporation, an Internet-based interactive advertising company.
In January 1999, Narrative was acquired by At Home Networks. From 1990 to 1995,
Mr. Landry was Senior Vice President and Chief Technology Officer of Lotus
Development Corporation, a provider of software products and services. Mr.
Landry is also a director of a number of privately held companies.
Charles R. Lax
Mr. Lax has been one of our Directors since January 1999. He has been a
General Partner of SOFTBANK Technology Ventures IV, L.P. since November 1997.
From March 1996 to November 1997, Mr. Lax was a Vice President of SOFTBANK
Holdings Inc. He was previously a venture partner at Vimac Partners LLC, a
venture capital firm specializing in investments in the information technology
and Internet-related industry. Mr. Lax holds a bachelor of science degree from
Boston University. He is also a director of a number of privately held
companies.
Stephen W. Maggs
Mr. Maggs is one of our co-founders. Mr. Maggs has been a Director since our
formation in December 1997. Mr. Maggs was our Treasurer from our formation
until July 1999 and our Vice Chairman from June through August 1999. Mr. Maggs
held the positions of Chief Executive Officer and President from our
5
<PAGE>
formation in December 1997 until June 1999. From December 1993 to December
1996, Mr. Maggs held a variety of senior management positions with AmeriData,
including serving as an Executive Vice President of Operations and Chairman of
AmeriData Canada. From February 1992 to December 1993, he was the owner of
Mericom Systems Inc., a reseller of computer equipment and provider of computer
consulting and other services, which was acquired by AmeriData in 1993. From
1984 to 1991, he held various executive positions at Inacom Information
Systems, a provider of information technology products and services. Mr. Maggs
received a bachelor of science degree from Hillsdale College and is a Certified
Public Accountant.
Patricia A. M. Riley
Ms. Riley has been one of our Directors since our formation in December
1997. Ms. Riley is a Managing Director of Charterhouse and has been an
executive officer with the firm since 1977. She is a graduate of the Advanced
Management Program at Harvard Graduate School of Business Administration and
received a bachelor of arts degree from Hunter College.
BOARD AND COMMITTEE MEMBERSHIP
Meetings of the Board of Directors. During the year-ended December 31, 1999,
there were five meetings of the Board of Directors. Each of our director
nominees attended at least 75% of the meetings of the Board and committees of
which they were members.
Committees of the Board of Directors. The three standing committees of the
Board are: Audit, Compensation and Executive. Members of each committee, who
are elected by the full Board, are named below.
Audit Committee
The Audit Committee consists of Messrs. Dircks, Landry and Lax. Among other
functions, the Audit Committee makes recommendations to our Board of Directors
regarding the selection of independent auditors, reviews the results and scope
of the audit and other services provided by our independent auditors, reviews
our financial statements and reviews and evaluates our internal control
functions. During the year ended December 31, 1999, the Audit Committee met one
time.
Compensation Committee
The Compensation Committee consists of Messrs. Dircks and Lax and Ms. Riley.
The Compensation Committee determines executive compensation and makes
recommendations to our Board of Directors concerning salaries and incentive
compensation for our employees and consultants. In addition, the Compensation
Committee has authorized a Grant Committee consisting of Mr. Dircks and either
a Co-Chairman or the Chief Executive Officer of Interliant. The Grant Committee
has the power and authority to review, approve and grant, in its discretion,
options to our employees on behalf of the Compensation Committee without any
further action or approval required of the Compensation Committee, provided
that such grants fall within guidelines established by the Compensation
Committee. During the year ended December 31, 1999, the Compensation Committee
met seven times.
Executive Committee
The Executive Committee consists of Messrs. Dircks, Feld, Landry and Lax.
The Executive Committee is authorized to review and approve our 1999/2000
operating plan, to hear reports regarding our operations from our executive
officers, to review and approve acquisitions and to engage in certain other
limited activities. During the year ended December 31, 1999, the Executive
Committee met three times.
6
<PAGE>
Director Compensation. Directors receive no remuneration for serving on our
Board of Directors. All directors are reimbursed for their reasonable expenses
in connection with their attendance at Board and committee meetings.
Director Nomination Rights. SOFTBANK Technology Ventures IV, L.P. and
SOFTBANK Technology Advisors, L.P. (the "SOFTBANK Purchasers"), who are
principal stockholders, have the right to nominate one person for election to
our Board of Directors and have the Board cause that director to be a member of
the Compensation Committee and/or the Audit Committee. Mr. Lax is currently
serving as a director. He is also a member of the Audit and Compensation
Committees pursuant to these rights.
In addition, for so long as the persons who received shares of Common Stock
in the Interliant Texas acquisition, together with certain of our option
holders, own in the aggregate at least 5% of our outstanding Common Stock, they
are entitled to nominate one person to our Board of Directors. To date, these
rights have not been exercised.
Compensation Committee Interlocks and Insider Participation. Mr. Dircks, Mr.
Lax and Ms. Riley served as members of our Compensation Committee during the
year ended December 31, 1999. During 1999, no Compensation Committee member was
an officer or employee of ours. In addition, no interlocking relationship
exists between our Board of Directors or our Compensation Committee and the
board of directors or compensation committee of any other company, nor has any
such interlocking relationship existed in the past.
The Board of Directors of Interliant deems the election of the ten nominees
listed above as directors to be in the best interest of Interliant and its
stockholders and recommends that holders of the Common Stock vote "FOR" their
election.
7
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth the total compensation for the years ended
December 31, 1998 and December 31, 1999, respectively, for the persons listed
below:
Summary Compensation Table
<TABLE>
<CAPTION>
Long-Term
Compensation
Annual Compensation Awards
------------------------------------------ ------------
Number of
Other Securities
Name and Current Annual Underlying All Other
Position Year Salary Bonus Compensation (1) Options/SARs Compensation
- ---------------- ---- -------- -------- ---------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Stephen W. Maggs(2) 1999 $180,673 -- -- 30,000 --
Director 1998 $130,232 -- -- -- --
Francis J. Alfano 1999 $164,583 $ 25,000 -- 25,000 --
Senior Vice President, 1998 $ 12,500(3) -- -- -- --
Mergers & Acquisitions
Bruce S. Klein(4) 1999 $187,500 $ 25,000 -- 25,000 --
Senior Vice President, 1998 $116,667 -- $15,635 -- --
General Counsel
James M. Lidestri(5) 1999 $186,188 $117,500 -- 30,000 --
President 1998 N.A. N.A. -- N.A. N.A.
William A. Wilson(6) 1999 $181,250 $ 75,000 -- 25,000 --
Chief Financial Officer 1998 $ 48,894 -- -- -- --
</TABLE>
- --------
(1) In accordance with SEC rules, other compensation in the form of perquisites
and other personal benefits has been omitted in those instances where such
perquisites and other personal benefits constituted less than the lesser of
$50,000 or 10% of the total annual salary and bonus for the executive
officer for each fiscal year.
(2) Mr. Maggs was our President and Chief Executive Officer from December 1997
until June 1999, when he became Vice Chairman. Effective January 1, 2000,
Mr. Maggs was no longer an employee.
(3) Mr. Alfano commenced his employment with us in December 1998.
(4) Mr. Klein commenced his employment with us in April 1998. Other annual
compensation represents amounts paid to Mr. Klein for services renderd as a
consultant prior to becoming an employee.
(5) Mr. Lidestri commenced his employment with us in March 1999. Effective
March 30, 2000, Mr. Lidestri was no longer an employee.
(6) Mr. Wilson commenced his employment with us in September 1998.
8
<PAGE>
Option Grants in Last Fiscal Year
The following table sets forth information regarding the option grants made
during the year ended December 31, 1999 to each of the executive officers named
in the Summary Compensation Table.
OPTION GRANTS
<TABLE>
<CAPTION>
Individual Grants
--------------------------------------------- Individual Grant
Percent of Values at Assumed
Total Options Annual Rates of
Granted to Stock Price
Number of Employees Exercise Appreciation for
Securities in the or Base Option Term
Underlying Year Ended Price Expiration -----------------
Name Options 1999 ($/Share) Date 5% 10%
- ---- ---------- ------------- --------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Stephen W. Maggs........ 30,000 2.1% $8.00 3/09 $150,935 $382,498
Francis J. Alfano....... 25,000 1.7% $8.00 3/09 $125,779 $318,748
Bruce S. Klein.......... 25,000 1.7% $8.00 3/09 $125,779 $318,748
James M. Lidestri....... 30,000 2.1% $8.00 3/09 $150,935 $382,498
William A. Wilson....... 25,000 1.7% $8.00 3/09 $125,779 $318,748
</TABLE>
The following table sets forth information regarding exercise of options and
the number and value of options held at December 31, 1999, by each of the
executive officers listed below.
YEAR END OPTION VALUES
<TABLE>
<CAPTION>
Number of
Unexercised
Options Value of Unexercised
At December 31, In-the-Money Options
1999 At December 31, 1999(2)
--------------- -------------------------
Shares
Acquired on Value Exer- Unexer-
Exercise Realized(1) cisable cisable Exercisable Unexercisable
----------- ---------- ------- ------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Stephen W. Maggs........ N.A. N.A. 0 30,000 N.A. $540,000
Francis J. Alfano....... N.A. N.A. 0 25,000 N.A. $450,000
Bruce S. Klein.......... N.A. N.A. 0 25,000 N.A. $450,000
James M. Lidestri....... 245,289 $1,962,312 32,306 30,000 $835,756 $540,000
William A. Wilson....... N.A. N.A. 0 25,000 N.A. $450,000
</TABLE>
- --------
(1) Based on the estimated fair value of the Common Stock on the date of
exercise.
(2) Based on the difference between the last sale price of the Common Stock on
December 31, 1999 of $26.00 as reported by the Nasdaq National Market and
the per share option exercise price, multiplied by the number of shares of
Common Stock underlying the options.
Employment Agreements
We have entered into employment agreements with some of our officers. A
description of certain terms contained in those agreements is set forth below:
Term and Compensation. In November 1999, we entered into an employment
agreement with William Wilson, our Chief Financial Officer, for a term of two
years at an annual base salary of $200,000 as well as a guaranteed annual cash
bonus of $40,000, payable on a quarterly basis in equal installments.
9
<PAGE>
In December 1999, Leonard Fassler, our Co-Chairman, renewed his employment
agreement with us for a one year term from January 1, 2000 at an annual
compensation rate of $180,000.
In January 2000, we entered into an employment agreement with Herbert
Hribar, our Chief Executive Officer for a term of three years from January 31,
2000 at an annual base salary of $350,0000. Mr. Hribar is also eligible for an
annual incentive bonus of up to $350,000 based on meeting certain performance
milestones. In addition, pursuant to his agreement, Mr. Hribar was granted 1.5
million stock options, of which 500,000 have an exercise price of $12.00 per
share, 500,000 have an exercise price of $18.00 per share and 500,000 have an
exercise price of $24.00 per share. All of these options vest in equal amounts
over four years and vest immediately upon a change of control.
In general, the above employment agreements will renew automatically for a
period of time ranging from month-to-month to one year unless we or the
employee deliver a notice of non-renewal prior to termination of the term.
Severance. Our employment agreements with Messrs. Fassler, Hribar and Wilson
include provisions that are effective upon the termination of their employment
by us without "cause":
. Mr. Fassler is entitled to receive a payment equal to the amount of his
base salary yet to be paid for the unexpired portion of the term of the
agreement, discounted based on a specified published interest rate.
. Mr. Hribar is entitled to receive a payment equal to one year's worth of
base salary paid as and when such amounts would have been paid in the
case of continued employment.
. Mr. Wilson is entitled to receive a payment equal to two year's base
salary, discounted based on a specified published interest rate.
In addition, the agreements with the above employees provide that, in
general, in the event of termination due to death or disability for a specified
period of time, the employee or the estate of each employee, as applicable,
shall be entitled to receive a payment based on his salary and we will continue
to provide the employee, his spouse and minor children, as applicable, with
certain medical and other benefits through the end of the term of the
agreement.
Employee Covenants. Our agreements with Messrs. Fassler and Wilson prohibit
each of them during and for a period of twenty-four months after the end of his
individual employment from:
. soliciting any customers which are in any way related to our business;
. competing with our business; or
. disclosing or enabling anyone else to use any information he obtains
during his employment.
These agreements, as well as our agreement with Mr. Hribar, also prohibit the
employees from:
. tortiously interfering or attempting to disrupt our business
relationship with customers or suppliers; or
. soliciting our employees.
In addition, each of our agreements with these employees include restrictive
covenants for the benefit of Interliant relating to non-disclosure by the
employee of Interliant's confidential business information and Interliant's
right to inventions and improvements of the employee.
Consulting Agreements
Mr. Feld, through Intensity Ventures, Inc., entered into a one-year
consulting agreement with us effective January 1, 1999 with substantially
identical terms to the agreements described above, except that Mr. Feld is
10
<PAGE>
not prohibited from competing with us and is not entitled to participate in our
employee benefit plans. His annual consulting fee of $180,000 will be paid to
Intensity Ventures, Inc. on a gross basis as an independent contractor. This
consulting agreement was renewed for a one-year period in December 1999.
Separation Agreement with Mr. Lidestri
On March 30, 2000, we entered into an agreement (the "Separation Agreement")
with Mr. Lidestri whereby Mr. Lidestri resigned from all his positions as an
officer of Interliant and its subsidiaries. Under the Separation Agreement, (i)
we paid Mr. Lidestri $50,000 in lieu of paying the balance of a signing bonus
payable to him under his employment agreement with Interliant, (ii) we paid Mr.
Lidestri a severance payment in the amount of $250,000, payable in equal
installments from the date of the Separation Agreement through May 31, 2000,
(iii) 30,000 unvested options held by Mr. Lidestri were accelerated and (iv)
Mr. Lidestri remains eligible to participate in Interliant's customary benefit
programs until March 1, 2001.
Until March 30, 2001, Mr. Lidestri is prohibited from engaging in the
following activities:
. Competing with us or any of our subsidiaries in any way, except as an
officer, director, stockholder or employee of ours or any of our
affiliates;
. Soliciting or interfering with, or attempting to hire:
. any person who was employed by us or one of our affiliates or
subsidiaries during the 12 months before the end of the agreement;
. any person who was a customer or client or requested or received a
proposal from us or one of our affiliates or subsidiaries during the
12 months before the end of the agreement;
. Using, disclosing or publishing any confidential material related to our
business or the business of any of our subsidiaries or affiliates which
he acquired while employed with us, unless the material is publicly
available, otherwise lawfully obtained or must be disclosed by law.
. Engaging in any act that is intended, or may be reasonably expected, to
harm the reputation, business, prospects or operations of Interliant.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Compensation of our executives is subject to review and approval by the
Compensation Committee (the "Committee") of our Board of Directors. In
determining the fiscal year 1999 compensation paid to our executive officers,
the Committee employed compensation policies designed to align such
compensation with the interests of the Company's stockholders and to relate it
to overall corporate performance. These policies are intended to attract and
retain executives whose abilities are critical to our long-term success, to
support a performance-oriented environment that rewards achievement of internal
corporate goals and to reward executives for the enhancement of stockholder
value.
The components of the compensation of executive officers, including the
Chief Executive Officer ("CEO"), are base salary, cash bonus awards and stock
option grants, as described below:
Base Salary and Cash Bonus. The base salary and cash bonus components of
total compensation are designed to be competitive for similar companies in
terms of industry group, technology, complexity and company size. Company size
reflects both sales and market capitalization. The Committee, on behalf of the
Board, works with management to maintain an executive salary structure based on
competitive analyses. Committee discretion is used in determining individual
salary amounts for executive officers with no specific formula. Generally,
executive officer salaries, including that of the CEO, are reviewed on a
regular basis as market conditions require to maintain a competitive
compensation structure. The Committee considers both
11
<PAGE>
qualitative and quantitative measures in determining total compensation for our
officers. The Committee's consideration of such factors is subjective and
informal.
Stock Option Awards. The grant of stock option awards to executive officers
creates a direct link between compensation and long-term increases in
stockholder values and is intended to be the most meaningful component of
executive compensation. The Committee believes that stock option grants provide
an incentive that focuses the executive officers' attention on managing
Interliant from the perspective of an owner with an equity stake in the
business. Options are subject to vesting provisions to encourage executive
officers to remain employed with us. The size of each option grant is based on
the executive officer's responsibilities, relative position with Interliant and
the Committee's judgment with respect to the executive's impact on stockholder
value. The Committee also takes into account the number of stock options
previously granted.
Impact of Section 162(m) of the Internal Revenue Code. Section 162(m)
disallows a tax deduction for any of our five most highly compensated officers,
including the CEO, unless such compensation is performance-based. To date,
Interliant has been exempt from Section 162(m) of the Internal Revenue Code. As
of the date of the Annual Meeting, however, we will no longer be exempt under
Section 162(m). Going forward, the Committee will consider the potential impact
of Section 162(m) of the Internal Revenue Code on the compensation paid to our
executive officers. We intend to qualify, to the maximum extent possible, our
executives' compensation for deductibility under applicable tax laws. There can
be no assurance that the Internal Revenue Service will grant such treatment to
the compensation paid. In approving the amount and form of compensation for our
five most highly compensated officers, the Committee intends to consider all
elements of the cost to Interliant of providing such compensation, including
the potential impact of Section 162(m).
MEMBERS OF THE COMPENSATION
COMMITTEE:
THOMAS C. DIRCKS
CHARLES R. LAX
PATRICIA A.M. RILEY
12
<PAGE>
COMPARATIVE STOCK PERFORMANCE GRAPH
The following graph shows the total stockholder return through December 31,
1999 of an investment of $100 in cash on July 8, 1999 for the Common Stock (the
day it began trading on the NASDAQ National Market) and an investment of $100
in cash on July 8, 1999 for (i) the NASDAQ National Market Index and (ii) the
Media General Internet Software and Services Index. The Media General Internet
Software and Services Index is an index of 212 stocks representing the Internet
industry, including Internet infrastructure companies and other Internet
software and services companies. Historic stock performance is not indicative
of future stock price performance. All values assume reinvestment of the full
amount of all dividends and are calculated as of the last day of each month.
CUMULATIVE TOTAL RETURN
AMONG INTERLIANT, INC.
NASDAQ MARKET INDEX AND MG GROUP INDEX
[LINE GRAPH]
<TABLE>
<CAPTION>
7/08/99 7/30/99 8/31/99 9/30/99 10/31/99 11/30/99 12/31/99
------- ------- ------- ------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
INTERLIANT, INC..... 100.00 114.50 75.46 71.00 74.35 131.97 154.65
MG GROUP INDEX...... 100.00 80.93 85.05 96.05 99.91 128.25 162.14
NASDAQ MARKET
INDEX.............. 100.00 98.22 101.59 101.74 109.61 122.59 149.88
</TABLE>
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING AND COMPLIANCE
Based solely on a review of the reports under Section 16(a) of the
Securities Exchange Act of 1934 and representations furnished to us during the
year ended December 31, 1999, we believe that each of the persons required to
file such reports is in compliance with all applicable filing requirements.
13
<PAGE>
RELATED PARTY TRANSACTIONS
Since our inception, SOFTBANK Technology Ventures IV, L.P. and SOFTBANK
Technology Advisors Fund L.P., (the "SOFTBANK Purchasers") and WEB Hosting
Organization LLC ("WEB"), have each purchased securities from us.
Sale of Stock to the SOFTBANK Purchasers
On January 28, 1999, the SOFTBANK Purchasers purchased from us an aggregate
of 2,647,658 shares of our Redeemable Convertible Preferred Stock and warrants
to purchase 749,625 shares of our Common Stock for an aggregate purchase price
of $13.0 million. On April 19, 1999, the SOFTBANK Purchasers exercised their
warrants at an aggregate exercise price of $5.0 million and acquired 749,625
shares of our Common Stock. Upon the consummation of our initial public
offering in July 1999, all of the outstanding shares of Redeemable Convertible
Preferred Stock automatically converted into an equal number of shares of our
Common Stock. As a result, the SOFTBANK Purchasers own approximately 7.2% of
our outstanding Common Stock at March 31, 2000. Bradley A. Feld, our Co-
Chairman and director, is a general partner of the SOFTBANK Purchasers. The
SOFTBANK Purchasers have certain demand and incidental registration rights.
A majority in interest of the SOFTBANK Purchasers also have the right to
nominate one person for election to our Board of Directors and have the Board
cause that director to be a member of the Compensation Committee and/or the
Audit Committee of the Board. Such director is subject to removal by the
SOFTBANK Purchasers at any time, with or without cause and the SOFTBANK
Purchasers have the right to call a special meeting of stockholders at any time
for the sole purpose of removing and replacing such director. WEB has agreed to
vote its shares in a manner consistent with these terms. Mr. Charles R. Lax is
currently serving as a director and a member of the Audit and Compensation
Committees of our Board of Directors pursuant to such provisions.
Sale of Stock to WEB Hosting Organization LLC
WEB owns 25,200,000 shares, representing approximately 53.1%, of our
outstanding Common Stock at March 31, 2000. The shares were acquired for an
aggregate purchase price of $42.0 million in a series of six transactions in
December 1997, May 1998, June 1998, September 1998, December 1998 and February
1999, in each case at a price of $1.67 per share. The terms of the sale and
purchase of these shares are set forth in a subscription agreement dated
December 8, 1997 between WEB and us. The principal members of WEB are
(1) Charterhouse Equity Partners III, L.P., which is an affiliate of
Charterhouse Group International, Inc. and (2) WHO Management LLC (Charterhouse
Equity Partners and WHO Management are collectively referred to as the "WEB
Members"), of which Leonard J. Fassler and Bradley A. Feld are the member
managers. The WEB Members have agreed that WEB shall be under the exclusive
direction of a management committee comprised of seven members and will vote
such member's interest in WEB so that a majority of the members of such
management committee will be designees of Charterhouse. WEB has certain demand
and incidental registration rights with respect to its shares of our Common
Stock.
Distributions by Our Significant Stockholder
Pursuant to the terms of the Limited Liability Company Agreement of WEB, the
WEB Members shall be entitled to receive a distribution of all cash funds or
other property of WEB available from any source other than the ordinary
operations of its subsidiaries, after payment of all expenses of WEB due at the
time of such distribution ("Total Proceeds"). The Total Proceeds shall be
distributed to the WEB Members in tranches with priority given to covering
members' federal tax liability, followed by return of capital and then as
necessary to achieve specified internal rates of return. Thereafter, portions
of the Total Proceeds will be distributed to WHO Management.
14
<PAGE>
Of the management distributions to WHO Management LLC, 70% are retained by
WHO Management LLC for distribution to our four co-founders, who include
Messrs. Fassler, Feld and Maggs and 30% are distributed to SMI Fund LLC, a New
York limited liability company ("SMI"), for distribution to its members.
As of January 31, 2000, there were 24 members of SMI, all of whom serve as
either Interliant executive officers, senior employees, employees who were
hired shortly after our formation or consultants. Of those 24 members, as of
January 31, 2000 10 are members of our management team who collectively own
74.5% of SMI.
The management distributions to WHO Management LLC increase as the WEB
Members realize specified internal rates of return on their investment in WEB.
The following diagram depicts the flow of the distribution of Total Proceeds to
the WEB Members. No Total Proceeds have been distributed to date.
---------------------
INTERLIANT, INC.
---------------------
|
|
|
|
---------------------
WEB
HOSTING ORGANIZATION
LLC
---------------------
|
|
|
---------------------------------------
| |
| |
| |
------------- -------------
CHARTERHOUSE
EQUITY WHO
PARTNERS MANAGEMENT
------------- -------------
/ \
/ \
----------- ------------
CO-FOUNDERS SMI FUND LLC
----------- ------------
Fees Paid by Us to Our Significant Stockholders
During 1999, in connection with certain of our acquisitions, we paid or
accrued transaction fees of approximately $361,000 to Charterhouse, which is an
affiliate of Charterhouse Equity Partners. Such fees were paid pursuant to the
terms of the WEB LLC Agreement, which requires WEB or its affiliates, which
includes us, to pay Charterhouse 2% of the total transaction costs of each
acquisition or investment by WEB or its affiliates, which includes us, in which
Charterhouse or any of its affiliates directly or indirectly provide all or a
portion of the equity financing therefor. Charterhouse has not received any
fees with respect to this arrangement since prior to our initial public
offering and is not entitled to receive any further fees in the future.
Consulting Agreements with Our Co-founders
During the year ended December 31, 1999, we paid consulting fees of $197,000
to Intensity Ventures Inc., whose principal is Mr. Feld, pursuant to a
consulting agreement with Mr. Feld.
15
<PAGE>
PROPOSAL II
APPROVAL OF AMENDMENTS TO THE COMPANY'S 1998 STOCK OPTION PLAN
Our Board of Directors has unanimously approved, subject to stockholder
approval, amendments to our 1998 Stock Option Plan (the "Plan") to do the
following: (i) increase the maximum number of shares of Common Stock available
for grant thereunder from 3,800,000 shares to 6,800,000 shares, (ii) permit the
granting of below fair market value options, (iii) establish a grant
subcommittee of our Compensation Committee in order to make the award process
more efficient and (iv) provide that a maximum of 500,000 shares subject to
options may be granted to any optionee during any year. In December, 1999, the
Plan was amended to permit grants of options to non-employee directors and to
permit a broker-assisted cashless exercise program.
The Plan, as amended, is being submitted to stockholders for approval (i) in
order to allow options granted under the Plan to our five most highly
compensated executive officers to qualify as "performance-based" compensation
under section 162(m) of the Internal Revenue Code (the "Code") thereby
preserving the tax-deductibility of options without regard to the limitations
of section 162(m) of the Code, (ii) in order to allow options granted under the
Plan to qualify as incentive stock options under Section 422 of the Code and
(iii) pursuant to the rules of The Nasdaq Stock Market Inc. A brief description
of the material features of the Plan is set forth below, but is qualified by
reference to the full text of the plan attached as Appendix A to this Proxy
Statement. WEB and the SOFTBANK Purchasers, which collectively own a majority
of the outstanding Common Stock, have indicated their intent to vote in favor
of this proposal at the Annual Meeting.
Summary of the Plan
Purpose. The purpose of the Plan is to promote the interests of Interliant
and its stockholders by strengthening the Company's ability to attract,
motivate and retain employees, non-employee directors, advisors and consultants
and to provide a means to encourage stock ownership and a proprietary interest
in the Company by the employees, nonemployee directors, advisors and
consultants upon whose judgment, initiative and efforts the financial success
and growth of the business of the Company largely depend.
Eligible Employees. The eligible participants in the Plan are the Company's
employees, nonemployee directors, advisors and consultants, as determined and
designated from time to time by the Company's Compensation Committee in its
sole discretion. At March 31, 2000 there were approximately 1,200 employees, 7
nonemployee directors and approximately 5 other advisors and consultants
eligible to participate in the Plan.
Grants Under the Plan. The Plan provides for the grant of options to
purchase the Common Stock (including both options intended to qualify as
incentive stock options under section 422 of the Code and stock options which
do not so qualify).
Administration. The Plan is administered by the Compensation Committee of
the Board of Directors. Subject to the provisions of the Plan, the Compensation
Committee has the authority and discretion to grant awards under the Plan, to
interpret the provisions of the Plan and the award agreements made thereunder
and to take such other action as may be necessary or desirable in order to
carry out the provisions of the Plan. The Compensation Committee may delegate
to one or more of our officers the authority and discretion to grant options to
certain participants.
Maximum Shares to be Issued. The number of shares of Common Stock which may
be issued pursuant to the grant of awards under the Plan may not exceed
6,800,000 in the aggregate (subject to antidilution adjustments). Any shares
subject to an award granted under the Plan that cease to be issuable thereunder
will thereafter be available for further award grants. A maximum of 500,000
shares subject to options may be granted to any optionee during any one
calendar year (subject to antidilution adjustments).
16
<PAGE>
Stock Option Grants. The Compensation Committee specifies the terms and
conditions of stock options granted under the Plan including without limitation
the number of shares covered by each option, the exercise price, the option
period, any vesting restrictions with respect to the exercise of the option and
whether each option is intended to qualify as an incentive stock option. No
option under the Plan may have an option exercise period of more than ten
years. Options intended to qualify as incentive stock options must have an
exercise price per share of not less than the fair market value of the Common
Stock on the date of grant. Furthermore, options intending to qualify as
incentive stock options and granted to a person who at the time of the grant
holds more than 10% of the total combined voting power of all classes of the
Common Stock must have an exercise price per share of not less than 110% of the
fair market value of the Common Stock on the date of grant and an option
exercise period of not more than five years.
Restrictions on Transfer. Awards under the Plan may not be transferred by a
participant other than by will or by the laws of descent and distribution and
may be exercised during the participant's lifetime only by the participant.
Notwithstanding the foregoing, participants may, to the extent permitted by the
Compensation Committee, transfer nonqualified options to members of the
participant's immediate family or to charitable institutions.
Amendment. The Board may at any time amend or terminate the Plan, provided
that no such amendment may be made without the approval of our stockholders to
the extent approval is required by applicable laws, rules or regulations and
provided further that no amendment or termination may adversely affect the
rights of a participant with respect to an outstanding award.
Change of Control. Options that are not vested and exercisable at the time
of a change in control of Interliant (as defined in the Plan) will become fully
vested and exercisable at such time unless, in connection with any such event,
provisions have been made for (i) the continuation of the Plan and/or
assumption of such options by a successor corporation or (ii) the substitution
for such options of new options covering the stock of a successor corporation.
Federal Income Tax Consequences
An optionee will not generally recognize taxable income upon the grant of a
nonqualified stock option to purchase shares of the Common Stock. Upon exercise
of the option, the optionee will generally recognize ordinary income for
federal income tax purposes equal to the excess of the fair market value for
the shares over the exercise price. An optionee who sells any of the shares
will recognize capital gain or loss measured by the difference between the tax
basis of the shares and the amount realized on the sale. The tax basis of the
shares in the hands of the optionee will equal the exercise price paid for the
shares plus the amount of ordinary compensation income the optionee recognizes
upon exercise of the option, and the holding period for the shares for capital
gains purposes will commence on the day the option is exercised. Interliant
will be entitled to a federal income tax deduction equal to the amount of
ordinary compensation income recognized by the optionee. The deduction will be
allowed at the same time the optionee recognizes the income.
An optionee will not generally recognize income upon the grant of an
incentive stock option to purchase shares of the Common Stock and will not
generally recognize income upon exercise of the option, provided the optionee
is an employee of Interliant or a subsidiary at all times from the date of
grant until three months prior to exercise. However, the amount by which the
fair market value of the shares on the date of exercise exceeds the exercise
price will be includable for purposes of determining any alternative minimum
taxable income of an optionee. Where an optionee who has exercised an incentive
stock option sells the shares acquired upon exercise more than two years after
the grant date and more than one year after exercise, capital gain or loss will
be recognized equal to the difference between the sales price and the exercise
price. An optionee who sells the shares within two years after the grant date
or within one year after exercise will recognize ordinary compensation income
in an amount equal to the lesser of the difference between (a) the exercise
price and the fair market value of the shares on the date of exercise, or (b)
the exercise price and the sales proceeds. Any remaining gain or loss will be
treated as a capital gain or loss. Interliant will be entitled to a federal
income tax deduction equal to the amount of ordinary compensation income
recognized by the optionee in this case. The deduction will be allowable at the
same time the optionee recognizes the income.
17
<PAGE>
Grant Information
At March 31, 2000, there were outstanding options with respect to 2,248,853
shares of the Common Stock granted pursuant to the Plan. It is not possible to
determine the award grants that will be made pursuant to the Plan in the
future. The table below sets forth information regarding stock option grants
made under the Plan during the year ended December 31, 1999.
<TABLE>
<CAPTION>
Number of Shares
Dollar Value(1) Underlying Options
Name and Current Position --------------- ------------------
<S> <C> <C>
Stephen W. Maggs.......................... $ 540,000 30,000
Director(2)
Francis J. Alfano......................... 450,000 25,000
Senior Vice President
Mergers and Acquisitions
Bruce S. Klein............................ 450,000 25,000
Senior Vice President, General
Counsel and Secretary
James M. Lidestri......................... 7,721,383 307,595
President(3)
William A Wilson.......................... 450,000 25,000
Chief Financial Officer
All current executive officers
as a group............................... 16,928,165 744,098
All current directors who are not
executive officers as a group............ 510,000 15,000
All employees, including all
current officers who are not
executive officers, as a group........... 45,071,890 2,239,717
</TABLE>
- --------
(1) Based upon the excess of fair market value of the Common Stock on December
31,1999 over the exercise price.
(2) Mr. Maggs was our President and Chief Executive Officer from December 1997
until June 1999, when he became Vice Chairman. Effective January 1, 2000,
Mr. Maggs was no longer an employee.
(3) Effective March 30, 2000, Mr. Lidestri was no longer an employee.
The closing price of the Common Stock on the Nasdaq National Market System
on March 31, 2000 was $28.25 per share.
Voting
Under applicable rules of the Nasdaq Stock Market, the Plan must be approved
by the affirmative vote of the holders of a majority of the shares of the
Common Stock present, or represented, and entitled to vote at the Annual
Meeting. Abstentions from voting on this proposal will have the effect of a
"no" vote. Broker non-votes are not considered shares present, are not entitled
to vote and therefore will not affect the outcome of the vote on this proposal.
The Board of Directors of Interliant deems the 1998 Stock Option Plan, as
amended, to be in the best interest of Interliant and its stockholders and
recommends that holders of the Common Stock vote FOR Proposal II.
18
<PAGE>
PROPOSAL III
ADOPTION OF THE 2000 EMPLOYEE STOCK PURCHASE PLAN
Because our success is dependent upon the interest and special efforts of
our employees, we would like to provide such employees with additional
incentives to promote our overall financial objectives and long-term growth in
our stockholders' equity. We believe that our employees will be encouraged to
continue their employment and make special efforts on our behalf if they own an
equity stake in Interliant. Therefore, on April 27, 2000, our Board of
Directors through the Compensation Committee adopted, subject to shareholder
approval, the Interliant, Inc. 2000 Employee Stock Purchase Plan (the "Purchase
Plan"), to provide our employees with the opportunity to acquire an ownership
interest in Interliant through the purchase of shares of the Common Stock.
The Purchase Plan, if approved by our stockholders, will provide a total of
1,500,000 shares of the Common Stock available for purchase by our employees,
subject to adjustment for certain changes in our capital (described under
"Changes in Capital" below). We intend for the Purchase Plan to qualify as an
"employee stock purchase plan" under section 423 of the Internal Revenue Code
of 1986, as amended (the "Code"), so that our employees may enjoy certain tax
advantages (described under "Certain Federal Income Tax Consequences" below).
The Purchase Plan will become effective on July 1, 2000, if it is approved
by the affirmative vote of a majority of the outstanding shares of Common Stock
present in person or represented by proxy at the Annual Meeting. This proposal
summarizes the essential features of the Purchase Plan. You should read the
Purchase Plan for a comprehensive statement of its terms and conditions. The
full text of the Purchase Plan appears in Appendix B to this Proxy Statement.
Administration
The Compensation Committee of our Board of Directors will administer the
Purchase Plan. All decisions and actions of the Compensation Committee will be
final and conclusive. The Compensation Committee has the authority and
discretion to interpret the Purchase Plan and determine all questions arising
in the administration, application and operation of the Purchase Plan. To the
extent not inconsistent with the Purchase Plan, the Compensation Committee may
from time to time adopt such rules and regulations for carrying out the
Purchase Plan as it deems best.
Eligibility
All employees of Interliant (or of any of our participating subsidiaries)
are eligible to participate in the Purchase Plan, except an employee may not be
granted an option under the Purchase Plan to the extent that:
. immediately after the grant of such option, the employee would own 5
percent or more of the vote or value of all classes of our stock,
. such option would permit the employee to purchase more than $25,000 of
our stock (using the fair market value of our stock at the time the
option is granted) under the Purchase Plan (and any other employee stock
purchase plan of us) per calendar year when the option is outstanding,
or
. such option would permit the employee to purchase more than 1,250 shares
of our stock (or such other number as determined by the Compensation
Committee) in any purchase period (described under "Terms of Options"
below).
In addition, employees are not eligible to participate in the Purchase Plan
if they customarily work 20 or fewer hours per week, customarily work 5 or
fewer months per calendar year, or are employed in a foreign jurisdiction and
the laws of such foreign jurisdiction prohibit participation in the Purchase
Plan.
As of March 31, 2000, approximately 1,150 employees would be eligible to
participate in the Purchase Plan. No determination can be made at this time as
to the number or identity of our employees who will participate in the Purchase
Plan, or the amount of Common Stock that will be purchased under the Purchase
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Plan, since such participation and amounts will be determined within the sole
discretion of the employees who are eligible to participate in the Purchase
Plan.
Terms of Options
Options and Purchase Periods. An option granted to an eligible employee
under the Purchase Plan will allow the employee to use payroll deductions
accumulated during successive six-month purchase periods to purchase shares of
Common Stock at the end of each purchase period. The option price of the shares
is the lesser of 85 percent of the Common Stock's fair market value on the
first day of the purchase period or the last day of the purchase period. On
March 31, 2000, the fair market value of a share of the Common Stock was
$28.25. If the Purchase Plan is approved by our stockholders, the first
purchase period will begin on July 1, 2000, and end on the last trading date on
or before December 31, 2000. Thereafter, purchase periods will begin on January
1 and July 1, respectively, and end on the last trading date on or before June
30 and on or before December 31, respectively, of each calendar year while the
Purchase Plan is in effect. Our Board of Directors may terminate a pending
purchase period, in which case payroll deductions that have accumulated in
participants' accounts will be returned to the appropriate participants.
Participation. Each eligible employee will decide for himself or herself
whether to participate or not participate in the Purchase Plan during each
purchase period. An eligible employee may elect to enroll in the Purchase Plan
by filing a form request for participation with our payroll office fifteen days
prior to the first day of the applicable purchase period.
Payroll Deductions. A participant's request for participation must specify
the percentage, from 1 to 15 percent, to be deducted from his or her
compensation on each payroll date during the purchase period. Payroll
deductions will be credited to a bookkeeping account in the participant's name.
We will not set aside any assets with respect to such participant accounts, and
such accounts will not bear interest. Participants may not change their
contribution rates during any purchase period.
Exercise of Option. Unless a participant provides us with written notice or
withdraws from the Purchase Plan, his or her option will be automatically
exercised on the last day of the purchase period to purchase the maximum number
of full shares of Common Stock that can be purchased at the applicable option
price using the accumulated payroll deductions in the participant's account.
Any excess payroll deductions remaining in a participant's account after
exercise of his or her option will be returned to the participant, without
interest, and may not be used to exercise options granted under the Purchase
Plan in any subsequent purchase period (except for any excess funds
attributable to the inability to purchase a fractional share, which will be
retained in the participant's account for a subsequent purchase period or may
be withdrawn by the participant).
Withdrawal/Termination of Employment. A participant may withdraw from the
Purchase Plan at any time, receiving payment of his or her accumulated payroll
deductions and ceasing further payroll deductions, by providing us with written
notice to withdraw at least fifteen days prior to the end of the purchase
period. When a participant withdraws from the Purchase Plan, his or her
unexercised options will automatically terminate, and we will return to the
participant all accumulated payroll deductions in his or her account. If a
participant's employment is terminated, other than for death, retirement or
permanent disability, or if a participant ceases to be an eligible employee,
such participant will be considered to have withdrawn from the Purchase Plan.
If a participant shall die, retire or incur a permanent disability, all payroll
deductions will cease and the participant or his or her estate may either elect
to withdraw from the Purchase Plan by providing us with written notice at least
fifteen days prior to the end of the purchase period, or allow the balance of
such participant's account to be used to purchase shares of Common Stock on the
applicable purchase date.
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Transferability of Options. No one other than the participant who receives
an option under the Purchase Plan will be permitted to exercise such option
during such participant's lifetime. Participants will not be entitled to
transfer or assign their rights under the Purchase Plan, other than by will or
the laws of descent and distribution.
Changes in Capital. In the event of certain changes in our outstanding
Common Stock or capital structure, such as merger, consolidation, spin off,
sale of all or substantially all the property of Interliant, reorganization,
recapitalization, reclassification, stock dividend, stock split, reverse stock
split or other distribution, appropriate adjustments shall be made to the
maximum number and kind of shares available under the Purchase Plan.
Amendment and Termination of the Purchase Plan
Our Board of Directors may terminate, modify, alter, amend or suspend the
Purchase Plan at any time. However, without approval of our stockholders, the
Board of Directors may not increase the maximum number of shares that we may
issue under the Purchase Plan. No amendment shall reduce any amounts previously
allocated to a participant's account or reduce any rights of a participant with
respect to shares of Common Stock previously purchased and held under the
Purchase Plan.
Certain Federal Income Tax Consequences
The following is a brief summary of certain significant United States
Federal income tax consequences under the Code, as in effect on the date of
this summary, applicable to Interliant and employees in connection with
participation and purchase of shares of Common Stock under the Purchase Plan.
This summary is not tax advice and is not intended to be exhaustive, and among
other things, does not describe state, local or foreign tax consequences, or
the effect of gift, estate or inheritance taxes.
An employee will not recognize any taxable income upon an election to
participate in the Purchase Plan and receipt of an option to purchase stock
under the Purchase Plan. The amounts deducted from the salary of an employee
who participates in the Purchase Plan will constitute ordinary income taxable
to the employee. The Purchase Plan is intended to qualify for the favorable
income tax consequences of Section 423 of the Code. As such, no income tax
consequences will arise for an employee when shares of Common Stock are
purchased by exercising such employee's option under the Purchase Plan. The
employee receives a tax basis in the shares purchased equal to his or her
payroll deductions used to exercise the option.
If such an employee does not dispose of the shares purchased upon exercise
of his or her option under the Purchase Plan until at least two years after the
grant date of the employee's option (i.e., the first day of the purchase
period) and one year after the date of such purchase, and if such employee
remains an employee of Interliant at all times from the grant date of such
option to the day three months before such exercise, the employee will
recognize taxable ordinary income upon disposition of such shares equal to the
lesser of the excess of the fair market value of the shares when the option was
granted (i.e., the first day of the purchase period) over the purchase price
paid for such shares or the excess of the fair market value of such shares at
the time of such disposition over the purchase price paid for the shares. We
will not be entitled to a tax deduction with respect to any such disposition.
Any such ordinary income recognized by an employee upon disposition of his or
her shares will increase the employee's basis in such shares, for purposes of
computing capital gain thereon. Any proceeds received for the shares in excess
of such adjusted basis will be taxable as capital gain. If an employee sells
such shares for less than the purchase price paid, he or she will recognize no
such ordinary income, and such employee will have a capital loss equal to the
difference between the sale price and the purchase price previously paid.
If an employee disposes of shares purchased under the Purchase Plan before
meeting the requisite holding periods described in the preceding paragraph, the
employee must notify us of such disposition. The employee will be required to
report taxable ordinary income at the time of such disposition to the extent of
the difference
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between the fair market value of such shares on the date of purchase and the
purchase price paid. We will generally be allowed a tax deduction equal to the
amount of such ordinary income so reported by such employee. The basis of an
employee in such shares acquired under the Purchase Plan will be increased by
such amount reported as ordinary income by such employee upon disposition of
such shares. Any proceeds received for the shares in excess of such employee's
adjusted basis will be taxable as capital gain; if such adjusted basis exceeds
the amount received for such shares, such excess will be a capital loss.
The Board of Directors of Interliant deems the Interliant 2000 Employee
Stock Purchase Plan to be in the best interest of Interliant and its
stockholders and recommends that holders of the Common Stock vote FOR Proposal
III.
PROPOSAL IV
RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The independent public accounting firm for Interliant for the year-ended
December 31, 1999 was Ernst & Young LLP ("E&Y"). The Board, upon the
recommendation of the Audit Committee, has appointed this firm, subject to
ratification by the stockholders, to audit the financial statements of
Interliant for the calendar year 2000. The Audit Committee, in arriving at its
recommendation to the Board, reviewed the performance of E&Y in prior years, as
well as the firm's reputation for integrity and competence in the fields of
accounting and auditing. The Audit Committee expressed its satisfaction with
E&Y in these respects.
E&Y has audited Interliant's financial statements annually since 1997.
Representatives of E&Y will be present at the Annual Meeting to make a
statement, if they desire to do so, and to respond to appropriate questions.
The Board of Directors of Interliant deems the ratification of the selection
of E&Y as independent accountants of the Company to be in the best interest of
the Company and its stockholders and recommends that holders of the Common
Stock vote FOR Proposal IV.
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DEADLINES FOR SUBMISSION OF
PROXY PROPOSALS, NOMINATION OR DIRECTORS AND OTHER BUSINESS
Proxy Statement Proposals. Stockholder proposals intended to be included in
the Proxy Statement and form of proxy for the Annual Meeting of Stockholders to
be held in 2001, in addition to meeting certain eligibility requirements
established by the Securities and Exchange Commission, must be in writing and
received by the Secretary at the Company's principal executive offices on or
prior to December 24, 2000. Alternate notice deadlines apply if the date of the
annual meeting differs by more than 30 days from the date of the previous
year's annual meeting.
By Order of the Board of Directors
/s/ Bruce S. Klein
-------------------------------------
Bruce S. Klein
Secretary
Purchase, New York
May 5, 2000
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APPENDIX A
INTERLIANT, INC.
1998 STOCK OPTION PLAN
AMENDED AND RESTATED AS OF MARCH 23, 2000
ARTICLE I
PURPOSE
This Interliant, Inc. 1998 Stock Option Plan is intended to advance the
interests of the Company and its stockholders and subsidiaries by attracting,
retaining and motivating the performance of selected officers, employees and
consultants of the Company of high caliber and potential upon whose judgment,
initiative and effort the Company is largely dependent for the successful
conduct of its business, and to encourage and enable such persons to acquire
and retain a proprietary interest in the Company by ownership of its stock.
ARTICLE II
DEFINITIONS
(a) "Board" means the Board of Directors of the Company.
(b) "Code" means the Internal Revenue Code of 1986, as amended.
(c) "Common Stock" means the Company's Common Stock, par value $.01 per
share.
(d) "Committee" means the Compensation Committee of the Board or any other
committee of the Board appointed by the Board to administer the Plan from time
to time. The full Board shall also have the authority to exercise the powers
and duties of the Committee under the Plan.
(e) "Company" means Interliant, Inc., a Delaware corporation.
(f) "Date of Grant" means the date on which an Option becomes effective in
accordance with Section 6.1 hereof.
(g) "Eligible Person" means any person who is an officer, director, employee
or consultant of the Company or any Subsidiary.
(h) "Exchange Act" means the Securities Exchange Act of 1934, as amended.
(i) "Fair Market Value" of the Common Stock as of any date means the average
of the closing prices of the sales of Common Stock on all securities exchanges
on which the Common Stock is listed or, if on any day the Common Stock is not
so listed, the sales price of the Common Stock as reported on the Nasdaq
National Market as of 4:00 P.M. New York Time, on such day or, if the Common
Stock is not reported on the Nasdaq National Market, the average of the
representative bid and asked prices quoted over a period of 21 trading days
consisting of the day as of which Fair Market Value is being determined and the
20 consecutive trading days prior to such day. If at any time the Common Stock
is not listed on any securities exchange or quoted on the Nasdaq National
Market, Fair Market Value will be determined in good faith by the Committee in
whatever manner it considers appropriate. Fair Market Value will be determined
without regard to any restriction on transferability of the Common Stock other
than any such restriction which by its terms will never lapse.
(j) "Incentive Stock Option" means a stock option granted under the Plan
that is intended to meet the requirements of Section 422 of the Code and the
regulations promulgated thereunder.
(k) "Nonqualified Stock Option" means a stock option granted under the Plan
that is not an Incentive Stock Option.
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(l) "Option" means an Incentive Stock Option or a Nonqualified Stock Option
granted under the Plan.
(m) "Optionee" means an Eligible Person to whom an Option has been granted,
which Option has not expired, under the Plan.
(n) "Option Price" means the price at which each share of Common Stock
subject to an Option may be purchased, determined in accordance with Section
6.2 hereof.
(o) "Plan" means this Interliant, Inc. 1998 Stock Option Plan.
(p) "Stock Option Agreement" means an agreement between the Company and an
Optionee under which the Optionee may purchase Common Stock under the Plan.
(q) "Subsidiary" means a subsidiary corporation of the Company, within the
meaning of Section 424(f) of the Code.
(r) "Ten-Percent Owner" means an Optionee who, at the time an Incentive
Stock Option is granted, owns stock possessing more than ten percent of the
total combined voting power of all classes of stock of the Company, its
parent, if any, or any Subsidiary, within the meaning of Sections 422(b)(6)
and 424(d) of the Code.
ARTICLE III
ELIGIBILITY
All Eligible Persons are eligible to receive a grant of an Option under the
Plan. The Committee shall, in its sole discretion, determine and designate
from time to time those Eligible Persons who are to be granted an Option.
ARTICLE IV
ADMINISTRATION
4.1 Committee Members. The Plan shall be administered by a Committee
comprised of no fewer than two persons selected by the Board, or by the full
Board. Solely to the extent deemed necessary or advisable by the Board, each
Committee member shall meet the definition of a "nonemployee director" for
purposes of such Rule 16b-3 under the Exchange Act and of an "outside
director" under Section 162(m) of the Code.
4.2 Committee Authority. Subject to the express provisions of the Plan, the
Committee shall have the authority, in its discretion, to determine the
Eligible Persons to whom an Option shall be granted, the time or times at
which an Option shall be granted, the number of shares of Common Stock subject
to each Option, the Option Price of the shares subject to each Option and the
time or times when each Option shall become exercisable and the duration of
the exercise period. Subject to the express provisions of the Plan, the
Committee shall also have discretionary authority to interpret the Plan, to
prescribe, amend and rescind rules and regulations relating to it, to
determine the details and provisions of each Stock Option Agreement, and to
make all the determinations necessary or advisable in the administration of
the Plan. All such actions and determinations by the Committee shall be
conclusively binding for all purposes and upon all persons. No Committee
member shall be liable for any action or determination made in good faith with
respect to the Plan, any Option or any Stock Option Agreement entered into
hereunder.
4.3 Delegation of Authority. The Committee shall have the right from time
to time, to delegate to one or more officers of the Company the authority of
the Committee to grant and determine the terms and conditions of Options
awarded under the Plan, subject to such limitations as the Committee shall
determine;
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provided, however, that no such authority may be delegated with respect to
Options awarded to any member of the Board or any Optionee who the Committee
determines may be subject to Rule 16b-3 under the Exchange Act or section
162(m) of the Code.
4.4 Grants to Non-Employee Directors. Awards of Options to non-employee
directors under the Plan shall be approved by the Board. With respect to awards
to such directors, powers and authorities vested in the Committee under the
Plan shall be exercised by the Board, and all provisions of the Plan relating
to the Committee shall be interpreted in a manner consistent with the foregoing
by treating any such reference as a reference to the Board for such purpose.
ARTICLE V
SHARES OF STOCK SUBJECT TO PLAN
5.1 Number of Shares. Subject to adjustment pursuant to the provisions of
Section 5.2 hereof, the maximum number of shares of Common Stock which may be
issued and sold hereunder shall be 6,800,000 shares. Shares of Common Stock
issued and sold under the Plan may be either authorized but unissued shares or
shares held in the Company's treasury. Shares of Common Stock covered by an
Option that shall have been exercised shall not again be available for an
Option grant. If an Option shall terminate for any reason (including, without
limitation, the cancellation of an Option pursuant to Section 6.6 hereof)
without being wholly exercised, the number of shares to which such Option
termination relates shall again be available for grant hereunder.
5.2 Antidilution. In the event of a reorganization, recapitalization, stock
split, stock dividend, combination of shares, merger or consolidation, or the
sale, conveyance, or other transfer by the Company of all or substantially all
of its property, or any other change in the corporate structure or shares of
the Company, pursuant to any of which events the then outstanding shares of
Common Stock are split up or combined, or are changed into, become exchangeable
at the holder's election for, or entitle the holder thereof to, cash, other
shares of stock, or any of the consideration, or in the case of any other
transaction described in Section 424(a) of the Code, the Committee may (i)
change the number and kind of shares (including by substitution of shares of
another corporation) subject to the Options and/or the Option Price of such
shares in the manner that it shall deem to be equitable and appropriate or (ii)
provide for an appropriate and proportionate cash settlement or distribution.
In no event may any such change be made to an Incentive Stock Option which
would constitute a "modification" within the meaning of Section 424(h)(3) of
the Code without the written consent of the Optionee adversely affected
thereby.
ARTICLE VI
OPTIONS
6.1 Grant of Option. An Option may be granted to any Eligible Person
selected by the Committee. The grant of an Option shall first be effective upon
the date it is approved by the Committee, except to the extent the Committee
shall specify a later date upon which the grant of an Option shall first be
effective. Each Option shall be designated, at the discretion of the Committee,
as an Incentive Stock Option or a Nonqualified Stock Option, provided that
Incentive Stock Options may only be granted to Eligible Persons who are
considered employees of the Company or any Subsidiary for purposes of Section
422 of the Code. The Company and the Optionee shall execute a Stock Option
Agreement which shall set forth such terms and conditions of the Option as may
be determined by the Committee to be consistent with the Plan, and which may
include additional provisions and restrictions that are not inconsistent with
the Plan.
6.2 Option Price. The Option Price shall be determined by the Committee;
provided, however, that, in the case of an Incentive Stock Option, the Option
Price shall not be less than 100 percent of the Fair Market Value of a share of
Common Stock on the trading date immediately preceding the Date of Grant.
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6.3 Vesting; Term of Option. Unless otherwise specified by the Committee in
the Stock Option Agreement for an Optionee, an Option shall vest and become
exercisable in cumulative annual installments, each of which shall relate to
one-fourth of the number of shares of Common Stock originally covered thereby
(as may be adjusted in accordance with Section 5.2 hereof), on the first,
second, third and fourth anniversaries of the Date of Grant, respectively,
provided that the Optionee remains an Eligible Person on each such anniversary.
Notwithstanding the foregoing, the Committee, in its sole discretion, may
accelerate the exercisability of any Option at any time, and an Option may
become vested and exercisable in accordance with the provisions of Articles
VIII and IX hereof. Subject to Article VIII hereof, the period during which a
vested Option may be exercised shall be ten years from the Date of Grant,
unless a shorter exercise period is specified by the Committee in the Stock
Option Agreement for an Optionee.
6.4 Option Exercise; Withholding. An Option may be exercised in whole or in
part at any time, with respect to whole shares only, within the period
permitted for the exercise thereof, and shall be exercised by written notice of
intent to exercise the Option with respect to a specified number of shares
delivered to the Company at its principal office, and payment in full to the
Company at said office of the amount of the Option Price for the number of
shares of the Common Stock with respect to which the Option is then being
exercised. Payment of the Option Price shall be made (i) in cash or by cash
equivalent, (ii) at the discretion of the Committee, in Common Stock owned by
the Optionee for more than six months on the date of exercise, valued at the
Fair Market Value of such shares on the trading date immediately preceding the
date of exercise, (iii) at the discretion of the Committee, by delivery of a
notice that the optionee has placed a market sell order (or similar
instructions) with a broker with respect to shares of Common Stock then
issuable upon exercise of the option and that the broker has been directed to
pay sufficient portion of the net proceeds of the sale to the Company in
satisfaction of the Option Price (conditioned upon the payment of such net
proceeds), or (iv) at the discretion of the Committee, by a combination of the
methods described above. In addition to and at the time of payment of the
Option Price, the Optionee shall pay to the Company, in a manner consistent
with the foregoing, the full amount of all federal and state withholding and
other employment taxes applicable to the taxable income of such Optionee
resulting from such exercise.
6.5 Limited Transferability of Option. All Options shall be nontransferable
except upon the Optionee's death, by the Optionee's will or the laws of descent
and distribution. No transfer of an Option by the Optionee by will or by laws
of descent and distribution shall be effective to bind the Company unless the
Company shall have been furnished with written notice thereof and an
authenticated copy of the will and/or such other evidence as the Committee may
deem necessary to establish the validity of the transfer. During the lifetime
of an Optionee, the Option shall be exercisable only by him, except that, in
the case of an Optionee who is legally incapacitated, the Option shall be
exercisable by his guardian or legal representative.
6.6 Cancellation, Substitution and Amendment of Options. The Committee shall
have the authority to effect, at any time and from time to time, with the
consent of the affected Optionees, (i) the cancellation of any or all
outstanding Options and the grant in substitution therefor of new Options
covering the same or different numbers of shares of Common Stock and having an
Option Price which may be the same as or different than the Option Price of the
cancelled Options or (ii) the amendment of the terms of any and all outstanding
Options.
6.7 Maximum Limit. Notwithstanding anything elsewhere in the Plan to the
contrary, the maximum number of shares of Common Stock that may be subject to
Options granted to any Optionee during any one calendar year shall be 500,000
shares, subject to adjustment as provided in Section 5.2 hereof.
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ARTICLE VII
ADDITIONAL RULES FOR ISOs
7.1 Ten-Percent Owners. Notwithstanding any other provisions of this Plan to
the contrary, in the case of an Incentive Stock Option granted to a Ten-Percent
Owner, (i) the period during which any such Incentive Stock Option may be
exercised shall not be greater than five years from the Date of Grant and (ii)
the Option Price of such Incentive Stock Option shall not be less than 110
percent of the Fair Market Value of a share of Common Stock on the Date of
Grant.
7.2 Annual Limits. No Incentive Stock Option shall be granted to an Optionee
as a result of which the aggregate fair market value (determined as of the date
of grant) of the stock with respect to which incentive stock options are
exercisable for the first time in any calendar year under the Plan, and any
other stock option plans of the Company, any Subsidiary or any parent
corporation, would exceed $100,000, determined in accordance with Section
422(d) of the Code. This limitation shall be applied by taking options into
account in the order in which granted.
7.3 Disqualifying Dispositions. If shares of Common Stock acquired by
exercise of an Incentive Stock Option are disposed of within two years
following the Date of Grant or within one year following the transfer of such
shares to the Optionee upon exercise, the Optionee shall, within 10 days after
such disposition, notify the Company in writing of the date and terms of such
disposition and provide such other information regarding the disposition as the
Committee may reasonably require.
7.4 Other Terms and Conditions. Any Incentive Stock Option granted hereunder
shall contain such additional terms and conditions, not inconsistent with the
terms of this Plan, as are deemed necessary or desirable by the Committee,
which terms, together with the terms of this Plan, shall be intended and
interpreted to cause such Incentive Stock Option to qualify as an "incentive
stock option" under Section 422 of the Code.
ARTICLE VIII
TERMINATION OF SERVICE
8.1 Death. Unless otherwise specified by the Committee in the Stock Option
Agreement for an Optionee, if an Optionee shall die at any time after the Date
of Grant and while he is an Eligible Person, the executor or administrator of
the estate of the decedent, or the person or persons to whom an Option shall
have been validly transferred in accordance with Section 6.5 hereof pursuant to
will or the laws of descent and distribution, shall have the right, during the
period ending one year after the date of the Optionee's death (subject to
Sections 6.3 and 7.1 hereof concerning the maximum term of an Option), to
exercise the Optionee's Option to the extent that it was exercisable at the
date of the Optionee's death and shall not have been previously exercised. The
Committee may determine at or after grant to make any portion of his Option
that is not exercisable at the date of death immediately vested and
exercisable.
8.2 Disability. Unless otherwise specified by the Committee in the Stock
Option Agreement for an Optionee, if an Optionee's employment or other service
with the Company or any Subsidiary shall be terminated as a result of his
permanent and total disability (within the meaning of Section 22(e)(3) of the
Code) at any time after the Date of Grant and while he is an Eligible Person,
the Optionee (or in the case of an Optionee who is legally incapacitated, his
guardian or legal representative) shall have the right, during a period ending
one year after the date of his disability (subject to Sections 6.3 and 7.1
hereof concerning the maximum term of an Option), to exercise an Option to the
extent that it was exercisable at the date of such termination of employment or
other service and shall not have been exercised. The Committee may determine at
or after grant to make any portion of his Option that is not exercisable at the
date of termination of employment or other service due to disability
immediately vested and exercisable.
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8.3 Termination for Cause. Unless otherwise specified by the Committee in
the Stock Option Agreement for an Optionee, if an Optionee's employment or
other service with the Company or any Subsidiary shall be terminated for
cause, the Optionee's right to exercise any unexercised portion of an Option
shall immediately terminate and all rights thereunder shall cease. For
purposes of this Section 8.3, termination for "cause" shall include, but not
be limited to, embezzlement or misappropriation of corporate funds, any acts
of dishonesty resulting in conviction for a felony, misconduct resulting in
material injury to the Company or any Subsidiary, significant activities
harmful to the reputation of the Company or any Subsidiary, a significant
violation of Company or Subsidiary policy, willful refusal to perform, or
substantial disregard of, the duties properly assigned to the Optionee, or a
significant violation of any contractual, statutory or common law duty of
loyalty to the Company or any Subsidiary. The Committee shall have the power
to determine whether the Optionee has been terminated for cause and the date
upon which such termination for cause occurs. Any such determination shall be
final, conclusive and binding upon the Optionee.
8.4 Other Termination of Service. Unless otherwise specified by the
Committee in the Stock Option Agreement for an Optionee, if an Optionee's
employment or other service with the Company or any Subsidiary shall be
terminated for any reason other than death, permanent and total disability or
termination for cause, the Optionee shall have the right, during the period
ending 90 days after such termination (subject to Sections 6.3 and 7.1 hereof
concerning the maximum term of an Option), to exercise an Option to the extent
that it was exercisable at the date of such termination and shall not have
been exercised. For purposes of this Section 8.4, an Optionee shall not be
considered to have terminated employment or other service with the Company or
any Subsidiary until the expiration of the period of any military, sick leave
or other bona fide leave of absence, up to a maximum period of 90 days (or
such greater period during which the Optionee is guaranteed reemployment
either by statute or contract).
ARTICLE IX
CHANGE IN CONTROL
9.1 Change in Control. Upon a "change in control" of the Company (as
defined below), each outstanding Option, to the extent that it shall not
otherwise have become vested and exercisable, shall automatically become fully
and immediately vested and exercisable, without regard to any otherwise
applicable vesting requirement under Section 6.3 hereof; provided, however,
that no such vesting shall occur if provision has been made in writing in
connection with such transaction for (a) the continuation of the Plan and/or
the assumption of such Options by a successor corporation (or a parent or
subsidiary thereof) or (b) the substitution for such Options of new options
covering the stock of a successor corporation (or a parent or subsidiary
thereof), with appropriate adjustments as to the number and kinds of shares
and exercise prices. In the event of any such continuation, assumption or
substitution, the Plan and/or such Options shall continue in the manner and
under the terms so provided.
9.2 Definition. For purposes of Section 9.1 hereof, a "change in control"
of the Company shall mean:
(i) an acquisition subsequent to the date hereof by any person, entity
or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act")) (a
"Person"), of beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of 30% or more of either (A) the then
outstanding shares of Common Stock or (B) the combined voting power of the
then outstanding voting securities of the Company entitled to vote
generally in the election of directors (the "Outstanding Company Voting
Securities"); excluding, however, the following: (1) any acquisition
directly from the Company, other than an acquisition by virtue of the
exercise of a conversion privilege unless the security being so converted
was itself acquired directly from the Company, (2) any acquisition by the
Company and (3) any acquisition by an employee benefit plan (or related
trust) sponsored or maintained by the Company;
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(ii) a change in the composition of the Board such that during any
period of two consecutive years, individuals who at the beginning of such
period constitute the Board, and any new director (other than a director
designated by a person who has entered into an agreement with the Company
to effect a transaction described in paragraphs (i), (iii) or (iv) of this
section) whose election by the Board or nomination for election by the
Company's stockholders was approved by a vote of at least two-thirds of the
directors then still in office who either were directors at the beginning
of the period or whose election or nomination for election was previously
so approved, cease for any reason to constitute at least a majority of the
members thereof;
(iii) the approval by the stockholders of the Company of a merger,
consolidation, reorganization or similar corporate transaction, whether or
not the Company is the surviving corporation in such transaction, in which
outstanding shares of Common Stock are converted into (A) shares of stock
of another company, other than a conversion into shares of voting common
stock of the successor corporation (or a holding company thereof)
representing 80% of the voting power of all capital stock thereof
outstanding immediately after the merger or consolidation or (B) other
securities (of either the Company or another company) or cash or other
property;
(iv) the approval by the stockholders of the Company of (A) the sale or
other disposition of all or substantially all of the assets of the Company
or (B) a complete liquidation or dissolution of the Company; or
(v) the adoption by the Board of a resolution to the effect that any
person has acquired effective control of the business and affairs of the
Company.
ARTICLE X
STOCK CERTIFICATES
10.1 Issuance of Certificates. Subject to Section 10.2 hereof, the Company
shall issue a stock certificate in the name of the Optionee (or other person
exercising the Option in accordance with the provisions of the Plan) for the
shares of Common Stock purchased by exercise of an Option as soon as
practicable after due exercise and payment of the aggregate Option Price for
such shares. A separate stock certificate or separate stock certificates shall
be issued for any shares of Common Stock purchased pursuant to the exercise of
an Option that is an Incentive Stock Option, which certificate or certificates
shall not include any shares of Common Stock that were purchased pursuant to
the exercise of an Option that is a Nonqualified Stock Option.
10.2 Conditions. The Company shall not be required to issue or deliver any
certificate for shares of Common Stock purchased upon the exercise of any
Option granted hereunder or any portion thereof prior to fulfillment of all of
the following conditions:
(i) the completion of any registration or other qualification of such
shares, under any federal or state law or under the rulings or regulations
of the Securities and Exchange Commission or any other governmental
regulatory body, that the Committee shall in its sole discretion deem
necessary or advisable;
(ii) the obtaining of any approval or other clearance from any federal
or state governmental agency which the Committee shall in its sole
discretion determine to be necessary or advisable;
(iii) the lapse of such reasonable period of time following the exercise
of the Option as the Committee from time to time may establish for reasons
of administrative convenience;
(iv) satisfaction by the Optionee of all applicable withholding taxes or
other withholding liabilities; and
(v) if required by the Committee, in its sole discretion, the receipt by
the Company from an Optionee of (i) a representation in writing that the
shares of Common Stock received upon exercise of an Option are
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being acquired for investment and not with a view to distribution and (ii)
such other representations and warranties as are deemed necessary by
counsel to the Company.
10.3 Legends. The Company reserves the right to legend any certificate for
shares of Common Stock, conditioning sales of such shares upon compliance with
applicable federal and state securities laws and regulations.
ARTICLE XI
EFFECTIVE DATE, TERMINATION AND AMENDMENT
11.1 Effective Date. The Plan shall become effective upon its adoption by
the Board and its approval by the stockholders of the Company.
11.2 Termination. The Plan shall terminate on the date immediately preceding
the tenth anniversary of the date the Plan is adopted by the Board. The Board
may, in its sole discretion and at any earlier date, terminate the Plan.
Notwithstanding the foregoing, no termination of the Plan shall in any manner
affect any Option theretofore granted without the consent of the Optionee or
the permitted transferee of the Option.
11.3 Amendment. The Board may at any time and from time to time and in any
respect, amend or modify the Plan. Solely to the extent deemed necessary or
advisable by the Board, for purposes of complying with Sections 422 or 162(m)
of the Code or rules of any securities exchange or for any other reason, the
Board may seek the approval of any such amendment by the Company's
stockholders. Any such approval shall be by the affirmative votes of the
stockholders of the Company present, or represented, and entitled to vote at a
meeting duly held in accordance with applicable state law and the Certificate
of Incorporation and By-Laws of the Company. Notwithstanding the foregoing, no
amendment or modification of the Plan shall in any manner affect any Option
theretofore granted without the consent of the Optionee or the permitted
transferee of the Option.
ARTICLE XII
MISCELLANEOUS
12.1 Employment or other Service. Nothing in the Plan, in the grant of any
Option or in any Stock Option Agreement shall confer upon any Eligible Person
the right to continue in the capacity in which he is employed by or otherwise
provides services to the Company or any Subsidiary. Notwithstanding anything
contained in the Plan to the contrary, unless otherwise provided in a Stock
Option Agreement, no Option shall be affected by any change of duties or
position of the Optionee (including a transfer to or from the Company or any
Subsidiary), so long as such Optionee continues to be an Eligible Person.
12.2 Rights as Shareholder. An Optionee or the permitted transferee of an
Option shall have no rights as a shareholder with respect to any shares subject
to such Option prior to the purchase of such shares by exercise of such Option
as provided herein. Nothing contained herein or in the Stock Option Agreement
relating to any Option shall create an obligation on the part of the Company to
repurchase any shares of Common Stock purchased hereunder.
12.3 Other Compensation and Benefit Plans. The adoption of the Plan shall
not affect any other stock option or incentive or other compensation plans in
effect for the Company or any Subsidiary, nor shall the Plan preclude the
Company from establishing any other forms of incentive or other compensation
for employees of the Company or any Subsidiary. The amount of any compensation
deemed to be received by an Optionee as a result of the exercise of an Option
or the sale of shares received upon such exercise shall not constitute
compensation with respect to which any other employee benefits of such Optionee
are determined, including, without limitation, benefits under any bonus,
pension, profit sharing, life insurance or salary continuation plan,
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except as otherwise specifically determined by the Board or the Committee or
provided by the terms of such plan.
12.4 Plan Binding on Successors. The Plan shall be binding upon the Company,
its successors and assigns, and the Optionee, his executor, administrator and
permitted transferees.
12.5 Construction and Interpretation. Whenever used herein, nouns in the
singular shall include the plural, and the masculine pronoun shall include the
feminine gender. Headings of Articles and Sections hereof are inserted for
convenience and reference and constitute no part of the Plan.
12.6 Severability. If any provision of the Plan or any Stock Option
Agreement shall be determined to be illegal or unenforceable by any court of
law in any jurisdiction, the remaining provisions hereof and thereof shall be
severable and enforceable in accordance with their terms, and all provisions
shall remain enforceable in any other jurisdiction.
12.7 Governing Law. The validity and construction of this Plan and of the
Stock Option Agreements shall be governed by the laws of the State of Delaware.
Interliant, Inc.
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APPENDIX B
INTERLIANT, INC.
EMPLOYEE STOCK PURCHASE PLAN
ARTICLE I
PURPOSE AND COMMENCEMENT
1.01 Purpose. The purpose of the Plan is to provide the employees of
Interliant, Inc., a Delaware corporation (the "Company") and its Subsidiaries
with added incentive to continue in their employment and to encourage increased
efforts to promote the best interests of the Company by permitting eligible
employees to purchase shares of Common Stock of the Company at prices less than
the current market price thereof. The Plan is intended to qualify as an
employee stock purchase plan under Section 423 of the Code and shall be
interpreted and construed in accordance with such purpose.
1.02 Commencement. The Plan shall become effective on such date as may be
specified by the Board of Directors, which, absent a resolution of the Board of
Directors to the contrary, shall be as set forth in Section 2.01(q) hereof;
provided, however, that, in no event, shall the Plan become effective unless
within twelve months of the date of its adoption by the Board of Directors it
has been approved by the affirmative vote of a majority of the issued and
outstanding shares of the Company's securities entitled to vote on such matters
at a duly called meeting of the shareholders of the Company.
ARTICLE II
DEFINITIONS
2.01 Definitions. As used in the Plan, the following terms and phrases
shall have the following meanings:
(a) "Board of Directors" shall mean the Board of Directors of the
Company.
(b) "Closing Market Price" with respect to any day shall mean (i) the
sales price of the Common Stock as reported on the Nasdaq National Market
as of 4:00 P.M. New York Time, on such day or if there are no sales on such
day, the immediately preceding trade day, or (ii) if the foregoing
provision is inapplicable, the Closing Market Price shall be determined by
the Committee in good faith on such basis as it deems appropriate.
(c) "Code" shall mean the Internal Revenue Code as of 1986, as amended.
(d) "Commencement Date" shall mean the first day of a Purchase Period.
(e) "Committee" shall mean the Compensation Committee of the Board of
Directors, or such other committee of the Board of Directors designated by
it for purposes of administering the Plan.
(f) "Common Stock" means the common stock of the Company, par value $.01
per share.
(g) "Company" shall mean Interliant, Inc., a Delaware corporation.
(h) "Contribution Account" shall mean the account established on behalf
of a Participant pursuant to Article III hereof to which shall be credited
his or her Participant Contributions.
(i) "Contribution Rate" shall be a percentage of a Participant's Covered
Compensation during each payroll period designated by each Participant to
be contributed by regular payroll deductions to his or her Contribution
Account as set forth in Section 3.03 hereof.
(j) "Covered Compensation" shall mean the total cash compensation
received by an Employee from a Sponsoring Employer, before tax withholdings
and other deductions, including base compensation, overtime, shift or other
compensatory premiums, payments in substitution of base compensation such
as
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vacation, holiday and sick pay, and including all cash bonus compensation,
but not including short or long-term disability payments.
(k) "Employee" shall mean each employee of a Sponsoring Employer whose
customary employment is at least twenty (20) hours a week and more than
five months in a calendar year; provided, however, that an employee of a
Sponsoring Employer who is employed in a foreign jurisdiction shall not be
deemed an Employee if participation by such employee in the Plan is
prohibited pursuant to the laws of such jurisdiction. For purposes of the
Plan, "employment" shall be determined in accordance with the provisions of
Section 1.421-7(h) of the Treasury Regulations (or any successor
regulations).
(l) "Participant" shall mean any Employee of a Sponsoring Employer who
has met the conditions and provisions for becoming a Participant set forth
in Article III hereof.
(m) "Participant Contributions" shall be the aggregate dollars actually
contributed by each Participant to his or her Contribution Account.
(n) "Permanent Disability" shall mean an illness, injury or other
physical or mental condition continuing for at least 180 consecutive days
which results in an Employee's inability to provide in all material
respects the duties theretofore performed in his or her capacity as an
Employee of a Sponsoring Employer.
(o) "Plan" shall mean the Interliant, Inc. Employee Stock Purchase Plan
as set forth herein, as it may be amended from time to time.
(p) "Purchase Date" shall mean the last business day of a Purchase
Period on which the Common Stock publicly trades.
(q) "Purchase Period" shall mean each of the six-month periods
commencing January 1 and July 1 of each calendar year during which the Plan
is in effect. The first Purchase Period shall commence on July 1, 2000.
(r) "Purchase Price" shall mean the purchase price for a share of Common
Stock to be paid by a Participant on a Purchase Date, as determined under
Section 4.02 hereof.
(s) "Request for Participation" shall mean such form as shall be
approved by the Committee for distribution to Employees in connection with
participation in the Plan.
(t) "Sponsoring Employers" shall mean the Company and each Subsidiary
that has been designated by the Committee as a Sponsoring Employer under
the Plan.
(u) "Subsidiary" shall mean a subsidiary of the Company which is treated
as a subsidiary corporation under Section 424(f) of the Code.
ARTICLE III
ELIGIBILITY AND PARTICIPATION
3.01 Eligibility. Each Employee who shall be employed by a Sponsoring
Employer on a given Commencement Date of a Purchase Period shall be eligible to
participate in the Plan for such Purchase Period, subject to the satisfaction
of any election requirements described in Section 3.03(a) herein.
3.02 Limitations. Notwithstanding anything to the contrary contained in the
Plan, no right to purchase Common Stock shall accrue under the Plan in favor of
any person who is not an Employee eligible to participate in the Plan under
Section 3.01 hereof, and no Employee shall acquire the right to purchase shares
of Common Stock if (i) immediately after receiving such right to purchase
Common Stock, such Employee would own 5% or more of the total combined voting
power or value of all classes of stock of the Company or any Subsidiary, taking
into account in determining stock ownership any stock attributable to such
Employee under Section 424(d) of the Code, or (ii) which would permit such
Employee's right to purchase stock under all
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employee stock purchase plans (to which Section 423 of the Code applies) of the
Company and its Subsidiaries, as those plans are in effect from time to time,
to accrue at a rate which exceeds $25,000 of fair market value of such stock
(as determined as each Commencement Date) for each calendar year, all as
specified in the manner provided by Section 423(b)(8) of the Code, or (iii)
which would permit such Employee the right to purchase more than 1,250 shares
(or such other number as may be determined in advance for any Purchase Period
by the Committee) of Common Stock in any Purchase Period.
3.03 Participation
(a) Each Employee eligible to be a Participant and participate in the Plan
shall be furnished a summary of the Plan and a Request for Participation by
such Employee's Sponsoring Employer. If an Employee elects to participate
hereunder, such Employee shall complete such form and file it with his or her
Sponsoring Employer not later than 15 days prior to a Commencement Date of a
Purchase Period. The completed Request for Participation shall indicate the
Participant Contribution Rate authorized by the Participant. If any Employee
does not elect to participate in the Plan during any given Purchase Period,
such Employee may elect to participate on any future Commencement Date so long
as he or she continues to be an eligible Employee.
(b) On his or her Request for Participation, an Employee must authorize his
or her Sponsoring Employer to deduct through a payroll deduction the amount of
such Employee's Participant Contribution. The payroll deduction specified in a
Request for Participation for each payroll period shall be at a Participant
Contribution Rate no less than 1% and no more than 15% of such Employee's
Covered Compensation during such payroll period paid to him or her by his or
her Sponsoring Employer. Such deductions shall begin as of the first payroll
date occurring after the Commencement Date of a Purchase Period. Participant
Contributions will not be permitted to begin at any time other than on the
first payroll date occurring immediately after the Commencement Date of a
Purchase Period. No interest shall accrue to Participants on any amounts
withheld under the Plan, unless and until the Committee shall approve such
accrual of interest on terms that it shall specify and apply on a uniform basis
as to all Participants.
(c) The Participant's Contribution Rate, once established, shall remain in
effect for all Purchase Periods unless changed by the Participant in writing
delivered to such Participant's Sponsoring Employer and filed with such
Sponsoring Employer at least 15 days prior to the Commencement Date of the next
Purchase Period. A Participant's Contribution Rate for a Purchase Period may
not be increased, decreased or otherwise modified at any time during the 15-day
period prior to the Commencement Date of such Purchase Period.
(d) A Participant may notify his or her Sponsoring Employer of such
Participant's desire to discontinue his or her Participant Contributions by
delivering to his or her Sponsoring Employer written notice on such forms as
may be provided by the Company or such Participant's Sponsoring Employer at
least 15 days prior to the Purchase Date of the relevant Purchase Period. Upon
such request, there shall be promptly refunded to such Participant as soon as
practicable the entire cash balance in his or her Contribution Account. If a
Participant determines to discontinue his or her Participant Contributions
pursuant to this Section 3.03(d), (i) such Participant shall be terminated from
the Plan effective upon the date of receipt of such Participant's notice to his
or her Sponsoring Employer and (ii) such Participant shall not be permitted to
resume participation in the Plan at the beginning of the succeeding Purchase
Period unless such Participant delivers to the Company a new Request for
Participation in accordance with Section 3.03(a) hereof. In the event that a
Participant's payroll deductions are prevented by legal process, the
Participant will be deemed to have terminated from the Plan.
(e) By enrolling in the Plan, each Participant will be deemed to have
authorized the establishment of a brokerage account in his or her name at a
securities brokerage firm or other financial institution, if approved by the
Committee in its discretion.
3.04 Termination of Employment. Any Participant (i) whose employment by a
Sponsoring Employer is terminated for any reason (except death, retirement or
Permanent Disability) or (ii) who shall cease to be an Employee under the Plan,
in either case during a Purchase Period, shall cease being a Participant as of
the date of such termination of employment. Upon such termination of
employment, there shall be refunded to such
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Participant as soon as practicable the entire cash balance in such
Participant's Contribution Account. Section 4.03(b) hereof shall apply to the
issuance of certificates to a Participant following termination of employment.
3.05 Death, Retirement or Permanent Disability.
(a) If a Participant shall die during a Purchase Period, no further
Participant Contributions on behalf of the deceased Participant shall be made.
The executor or administrator of the deceased Participant's estate may elect to
withdraw the balance in said Participant's Contribution Account by notifying
the deceased Participant's Sponsoring Employer in writing at least 15 days
prior to the Purchase Date in respect of such Purchase Period. In the event no
election to withdraw has been made, the balance accumulated in the deceased
Participant's Contribution Account shall be used to purchase shares of Common
Stock in accordance with Article IV hereof.
(b) If, during a Purchase Period, a Participant shall (i) retire or (ii)
incur a Permanent Disability, no further contributions on behalf of the retired
or disabled Participant shall be made. A retired or disabled Participant may
elect to withdraw the balance in his or her Contribution Account by notifying
the Sponsoring Employer in writing at least 15 days prior to the last day of
the Purchase Period. In the event no election to withdraw has been made, the
balance accumulated in the retired or disabled Participant's Contribution
Account shall be used to purchase shares of Common Stock in accordance with
Article IV hereof. In the event a retired or disabled Participant shall die
during the Purchase Period of such Participant's retirement or disability and
such Participant shall not have notified his or her Sponsoring Employer of his
or her desire to withdraw his or her Contribution Account, the executor or
administrator of such Participant's estate shall have all the rights provided
pursuant to Section 3.05(a) hereof.
ARTICLE IV
PURCHASE OF COMMON STOCK
4.01 Purchase of Common Stock.
(a) On each Purchase Date, each Participant's Contribution Account shall be
used to purchase the maximum number of whole shares of Common Stock permitted
hereunder at the applicable Purchase Price. No fractional shares shall be
purchased. Any payroll deductions accumulated in a Participant's Contribution
Account which are not sufficient to purchase a full share shall be retained in
the Participant's Contribution Account for the subsequent Purchase Period,
subject to earlier withdrawal by the Participant as provided in Section 3.03(d)
hereof. Any other monies left over in a Participant's Contribution Account
after the Purchase Date shall be returned to the Participant.
(b) If, in any Purchase Period, the total number of shares of Common Stock
to be purchased pursuant to the Plan by all Participants exceeds the number of
shares authorized under the Plan, then each Participant shall purchase his or
her pro rata portion of the shares of Common Stock remaining available under
the Plan based on the balances in each Participant's Contribution Account as of
the Purchase Date in respect of such Purchase Period; provided, however, that,
in no event, shall any fractional shares of Common Stock be issued pursuant to
the Plan or this Section 4.01(b) hereof.
(c) Any cash dividends paid with respect to shares of Common Stock held for
the account of a Participant shall be, as determined by the Committee on a
uniform basis as to all Participants, either (i) distributed to the Participant
or (ii) credited to the Participant's Contribution Account and used, in the
same manner as payroll deductions, to purchase additional shares of Common
Stock under the Plan on the next Purchase Date (subject to the limitations of
Section 3.02 hereof).
4.02 Purchase Price. For each Purchase Period, the Purchase Price per share
of Common Stock purchased pursuant to the Plan shall be the lesser of (a) 85%
of the Closing Market Price on the Commencement Date of such Purchase Period,
and (b) 85% of the Closing Market Price on the Purchase Date of such Purchase
Period.
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4.03 Notice of Purchase, Stock Certificates, Voting Rights.
(a) After the Purchase Date in respect of each Purchase Period, a report
will be made by the Company or its agent to each Participant stating the
entries made to his or her Contribution Account, the number of shares of Common
Stock purchased and the applicable Purchase Price.
(b) Evidence of shares of Common Stock purchased under the Plan shall be
maintained under the Plan for the account of each Participant and registered in
the manner determined by the Committee. Certificates for the number of whole
shares credited to a Participant's account under the Plan will be issued to a
Participant at any time promptly upon written request to the Company or its
agent; provided, however, that the Company may, at its election, issue such
certificates at such time or times as the Committee deems appropriate,
including, without limitation, following an Employee's termination of
employment with a Sponsoring Employer.
(c) Shares of Common Stock held under the Plan for the account of each
Participant shall be voted by the holder of record of such shares in accordance
with the Participant's instructions.
4.04 Notification of Disposition of Stock. If a Participant or former
Participant disposes of a share of Common Stock purchased under the Plan prior
to two (2) years after the Commencement Date of the Purchase Period during
which such share was purchased, then such Participant or former Participant
shall notify his or her Sponsoring Employer immediately of such disposition in
writing.
ARTICLE V
MISCELLANEOUS PROVISIONS
5.01 Shares Subject to Plan; Adjustments.
(a) The maximum number of shares of Common Stock which may be purchased
under the Plan is 1,500,000 subject, however, to adjustment as hereinafter set
forth. The shares of Common Stock to be purchased under the Plan will be made
available, at the discretion of the Board of Directors or the Committee, either
from authorized but unissued shares of Common Stock or from previously issued
shares of Common Stock reacquired by the Company, including shares purchased on
the open market.
(b) If the outstanding shares of Common Stock of the Company are increased,
decreased, or exchanged for a different number or kind of shares or other
securities, or if additional shares or new or different shares or other
securities are distributed with respect to such shares of Common Stock or other
securities, through merger, consolidation, spin off, sale of all or
substantially all the property of the Company, reorganization,
recapitalization, reclassification, stock dividend, stock split, reverse stock
split or other distribution with respect to such shares of Common Stock, or
other securities, an appropriate and proportionate adjustment may be made in
the maximum number and kind of shares provided in Section 5.01(a) hereof,
subject in the case of certain corporate reorganizations to the requirements of
Section 424(a) of the Code.
5.02 Administration of the Plan.
(a) Pursuant to the direction of the Board of Directors, the Committee shall
be responsible for the administration of the Plan. The Committee shall have the
discretionary authority to interpret the Plan and determine all questions
arising in the administration, application and operation of the Plan, including
all questions of fact and all questions of interpretation of the provisions of
the Plan. All such determinations by the Committee shall be conclusive and
binding on all persons. The Committee, from time to time, may adopt, amend and
rescind rules and regulations not inconsistent with the Plan for carrying out
the Plan, and may approve the forms of any documents or writings provided for
in the Plan. The Committee shall have full discretionary authority to delegate
ministerial functions of the Plan to employees of the Company. No member of the
Board of Directors or the Committee shall be liable for any action,
determination or omission taken or made in good faith with respect to the Plan
or any right granted hereunder.
(b) The Committee may in its discretion engage a bank trust department,
securities brokerage firm or other financial institution as agent to perform
custodial and recordkeeping functions for the Plan, such as holding record
title to the Participants' stock certificates, maintaining an individual
investment account for each Participant and providing periodic account status
reports to Participants.
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(c) The Committee shall have the authority to adopt and enforce such special
rules and restrictions under the Plan to be applicable to Participants who are
subject to Section 16 of the Securities Exchange Act of 1934, as amended, as
the Committee shall deem are necessary or appropriate to exempt certain Plan
transactions from the requirements of such Section 16.
(d) The Company shall bear the cost of administering the Plan, including any
fees, costs and expenses relating to the purchase of shares of Common Stock
under the Plan. Notwithstanding the foregoing, Participants will be responsible
for all fees, costs and expenses incurred in connection with the disposition of
shares of Common Stock purchased under the Plan.
5.03 Termination and Amendment of the Plan.
(a) The Company may, by action of the Board of Directors, terminate the Plan
at any time and for any reason. The Plan shall automatically terminate upon the
purchase by Participants of all shares of Common Stock subject to the Plan
under Section 5.01 hereof, unless such number of shares shall be increased by
the Board of Directors and such increase shall be approved by the shareholders
of the Company. Upon termination of the Plan, as soon as practicable, there
shall be refunded to each Participant the entire cash balance in his or her
Contribution Account, and there shall be forwarded to each Participant
certificates for all whole shares of Common Stock held under the Plan for the
account of such Participant.
(b) The Board of Directors reserves the right to modify, alter or amend the
Plan at any time and from time to time to any extent that it may deem
advisable, including, without limiting the generality of the foregoing, any
amendment deemed necessary to ensure compliance of the Plan with Section 423 of
the Code. Notwithstanding the foregoing, no amendment of the Plan shall operate
to reduce any amounts previously allocated to a Participant's Contribution
Account nor to reduce a Participant's rights with respect to shares of Common
Stock previously purchased and held on his or behalf under the Plan. The Board
of Directors may suspend operation of the Plan for any period as it may deem
advisable.
5.04 Governing Law; Compliance With Law. The Plan shall be construed in
accordance with the laws of the State of Delaware. The Company's obligation to
sell and deliver shares of Common Stock hereunder shall be subject to all
applicable federal and state laws, rules and regulations and to such approvals
by any regulatory or governmental agency as may, in the opinion of counsel for
the Company, be required. The Company may make such provisions as it may deem
appropriate for the withholding of any taxes or payment of any taxes which it
determines it may be required to withhold or pay in connection with a
Participant's participation in the Plan.
5.05 No Assignment. The purchase rights granted hereunder are not assignable
or transferable by the Participants, other than by will or the laws of descent
and distribution, and are exercisable during the Participant's lifetime only by
the Participant. Any attempted assignment, transfer or alienation not in
compliance with the terms of the Plan shall be null and void for all purposes
and respects.
5.06 No Contract of Employment. The Plan will not be deemed to constitute a
contract between a Sponsoring Employer and any Participant or to be a
consideration or an inducement for the employment of any Participant or
Employee. Nothing contained in the Plan shall be deemed to give any Participant
or Employee the right to be retained in the service of a Sponsoring Employer or
to interfere with the right of a Sponsoring Employer to discharge any
Participant or Employee at any time regardless of the effect which such
discharge shall have upon him or her as a Participant of the Plan.
5.07 No Rights as Stockholder. No eligible Employee or Participant shall by
reason of participation in the Plan have any rights of a stockholder of the
Company until he or she acquires shares of Common Stock as herein provided.
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INTERLIANT, INC.
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
June 6, 2000
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF
INTERLIANT, INC.
The undersigned hereby appoints Herbert R. Hribar and Bruce S. Klein as
proxies, with power to act without the other and with power of substitution, and
hereby authorizes them to represent and vote, as designated on the other side,
all the shares of stock of Interliant, Inc. standing in the name of the
undersigned with all powers to which the undersigned would possess if present at
the Annual Meeting of Stockholders of the Company to be held June 6, 2000 or any
adjournment thereof.
(Continued, and to be marked, dated and signed, on the other side)
YOUR VOTE IS IMPORTANT!
PLEASE VOTE
Fold and Detach Here
- --------------------------------------------------------------------------------
THIS PROXY WILL BE VOTED AS DIRECTED, OR IF NO DIRECTION IS INDICATED, WILL BE
VOTED "FOR" THE PROPOSALS. THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF
DIRECTORS.
Please mark
[x] your votes as
indicated in
this example
The Board of Directors recommends
a vote FOR Items 1, 2, 3 and 4.
FOR WITHHELD
FOR ALL
ITEM 1-ELECTION OF DIRECTORS [_] [_]
NOMINEES:
Leonard J. Fassler, Bradley A. Feld,
Herbert R. Hribar, Thomas C. Dircks,
Jay M. Gates, Merrill M. Halpern,
John B. Landry, Charles R. Lax,
Stephen W. Maggs, Patricia A.M. Riley
WITHHELD FOR: (Write that nominee's name in the space provided below.)
- ---------------------------------------------------------
ITEM 2-APPROVAL OF
AMENDMENTS TO 1998 FOR AGAINST ABSTAIN
STOCK OPTION PLAN [_] [_] [_]
ITEM 3-ADOPTION OF EMPLOYEE
STOCK PURCHASE PLAN [_] [_] [_]
ITEM 4-RATIFICATION OF ERNST & YOUNG
LLP AS INDEPENDENT AUDITORS
FOR THE COMPANY [_] [_] [_]
Signature Date:
_______________________ ___________________________ _____________
Signature (if held jointly)
NOTE: Please sign as name appears hereon. Joint owners should each sign. When
signing as an attorney, executor, administrator, trustee or guardian, please
give full title as such.
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