<PAGE> 1
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
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
Student Advantage, 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)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act
Rule 0-11 (Set forth the amount on which the filing fee is calculated and
state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
- --------------------------------------------------------------------------------
<PAGE> 2
STUDENT ADVANTAGE, INC.
280 SUMMER STREET
BOSTON, MASSACHUSETTS 02210
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS TO BE HELD
ON FRIDAY, MAY 19, 2000
To the Stockholders of Student Advantage, Inc.
The Annual Meeting of Stockholders of Student Advantage, Inc. (the
"Company") will be held at the offices of Hale and Dorr LLP, 26th Floor, 60
State Street, Boston, Massachusetts 02109, on Friday, May 19, 2000 at 10:00
a.m., Boston time, to consider and act upon the following matters:
1. To elect two Class I directors to serve for a three-year term.
2. To approve (i) an amendment to the Company's 1998 Stock Incentive Plan
(the "1998 Plan") increasing the number of shares issuable under the
1998 Plan from 7,500,000 to 9,500,000 and (ii) the continuance of the
1998 Plan, as amended.
3. To transact such other business as may properly come before the meeting
or any adjournment thereof.
Stockholders of record at the close of business on April 4, 2000 will be
entitled to notice of and to vote at the meeting or any adjournment thereof.
By Order of the Board of Directors
CHRISTOPHER B. ANDREWS,
Secretary
Boston, Massachusetts
April 17, 2000
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE AND
SIGN THE ENCLOSED PROXY AND MAIL IT PROMPTLY IN THE ENCLOSED ENVELOPE IN ORDER
TO ENSURE REPRESENTATION OF YOUR SHARES. NO POSTAGE NEED BE AFFIXED IF THE PROXY
IS MAILED IN THE UNITED STATES.
<PAGE> 3
STUDENT ADVANTAGE, INC.
280 SUMMER STREET
BOSTON, MASSACHUSETTS 02210
PROXY STATEMENT
FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON MAY 19, 2000
INTRODUCTION
GENERAL INFORMATION
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Student Advantage, Inc. (the "Company") for
use at the Annual Meeting of Stockholders to be held on May 19, 2000, and at any
adjournment of that meeting. All proxies will be voted in accordance with the
stockholders' instructions, and if no choice is specified, the proxies will be
voted in favor of the matters set forth in the accompanying Notice of Meeting.
Any proxy may be revoked by a stockholder at any time before its exercise by
delivery of written revocation or a subsequently dated proxy to the Secretary of
the Company, or by voting in person at the Annual Meeting.
The Company's Annual Report for the fiscal year ended December 31, 1999
("Fiscal 1999") was mailed to stockholders, along with these proxy materials, on
or about April 17, 2000.
QUORUM REQUIREMENT
At the close of business on April 4, 2000, the record date for the
determination of stockholders entitled to notice of and to vote at the Annual
Meeting, there were outstanding and entitled to vote an aggregate of 35,642,926
shares of Common Stock of the Company, constituting all of the outstanding
voting stock of the Company. Holders of Common Stock are entitled to one vote
per share.
The holders of a majority of the shares of Common Stock outstanding and
entitled to vote at the Annual Meeting shall constitute a quorum for the
transaction of business at the Annual Meeting. Shares of Common Stock
represented in person or by proxy (including shares which abstain or otherwise
do not vote with respect to one or more of the matters presented for stockholder
approval) will be counted for purposes of determining whether a quorum is
present at the Annual Meeting.
VOTES REQUIRED
The affirmative vote of the holders of shares of Common Stock representing
a plurality of the votes cast by the holders of Common Stock is required for the
election of the directors. The affirmative vote of the holders of shares of
Common Stock representing a majority of the votes cast is required for the
approval of the proposed amendment to, and the continuance of, the Company's
1998 Stock Incentive Plan.
Shares which abstain from voting as to a particular matter, and shares held
in "street name" by a broker or nominee who indicates on a proxy that it does
not have discretionary authority to vote as to a particular matter, will not be
voted in favor of such matter, and also will not be counted as votes cast on
such matter. Accordingly, abstentions and "broker non-votes" will have no effect
on the voting on a matter that requires the affirmative vote of a certain
percentage of the votes cast on that matter (such as the election of the Class I
directors, the approval of the proposed amendment to, and continuance of, the
Company's 1998 Stock Incentive Plan).
<PAGE> 4
BENEFICIAL OWNERSHIP OF VOTING STOCK
The following table sets forth the beneficial ownership of the Company's
Common Stock as of February 29, 2000, (i) by each person who is known by the
Company to beneficially own more than 5% of the outstanding shares of Common
Stock, (ii) by each director, (iii) by each of the executive officers named in
the Summary Composition Table set forth under the caption "Executive
Compensation" below, and (iv) by all current directors and executive officers as
a group. Unless otherwise indicated, (i) each person or entity named in the
table has sole voting power and investment power (or shares such power with his
or her spouse) with respect to all shares of capital stock listed as
beneficially owned by such person or entity and (ii) the address of each
beneficial owner is c/o Student Advantage, Inc., 280 Summer Street, Boston,
Massachusetts 02210.
<TABLE>
<CAPTION>
PERCENTAGE OF
SHARES COMMON
BENEFICIALLY STOCK
NAME OF BENEFICIAL OWNER OWNED OUTSTANDING
------------------------ ------------ -------------
<S> <C> <C>
5% STOCKHOLDERS
Raymond V. Sozzi, Jr........................................ 7,307,683 20.6%
Greylock IX Limited Partnership(1).......................... 3,750,000 10.5
William S. Kaiser(1)........................................ 3,750,000 10.5
Marc J. Turtletaub.......................................... 3,750,000 10.5
Daniel G. Siegel............................................ 2,005,912 5.6
G. Todd Eichler............................................. 2,004,912 5.6
OTHER DIRECTORS
John S. Katzman(2).......................................... 1,570,003 4.4
John M. Connolly(3)......................................... 5,000 *
Charles E. Young(4)......................................... 2,632 *
OTHER NAMED EXECUTIVES
Mason L. Myers(5)........................................... 1,285,048 3.6
Christopher B. Andrews(6)................................... 185,632 *
Ronald J. Kos (7)........................................... 162,500 *
All executive officers and directors as a group (12
persons)(8)............................................... 22,748,029 63.5%
</TABLE>
- ---------------
* Less than 1%.
(1) Consists of 3,750,000 shares held of record by Greylock IX Limited
Partnership. Mr. Kaiser is a general partner of Greylock IX GP Limited
Partnership, the general partner of Greylock IX Limited Partnership.
Greylock IX GP Limited Partnership has sole voting and investment power with
respect to these shares. Mr. Kaiser disclaims beneficial ownership of such
shares, except to the extent of his pecuniary interest therein. The address
for Greylock IX Limited Partnership and Greylock IX GP Limited Partnership
is One Federal Street, Boston, Massachusetts 02110.
(2) Consists of 1,570,003 shares held of record by Princeton Review Publishing,
L.L.C. Mr. Katzman is the President of Princeton Review Publishing. Mr.
Katzman disclaims beneficial ownership of such shares, except to the extent
of his pecuniary interest therein. The address for Princeton Review
Publishing is 2315 Broadway, New York, New York 10024.
(3) Consists of 5,000 shares subject to presently exercisable options held by
Mr. Connolly.
(4) Consists of 2,632 shares subject to presently exercisable options held by
Mr. Young.
(5) Includes 1,225,048 shares held of record by TMQ Ventures, Inc. Mr. Myers
shares investment and voting power with respect to these shares. Mr. Myers
disclaims beneficial ownership of such shares, except to
2
<PAGE> 5
the extent of his pecuniary interest therein. Includes 45,000 shares held of
record by Mr. Myers and 15,000 shares subject to options held by Mr. Myers,
which are immediately exercisable in full. Any shares acquired upon exercise
of such options and 30,000 of such shares held of record by Mr. Myers are
subject to a right of repurchase in favor of Student Advantage which is
released over a four-year period.
(6) Consists of 82,500 shares subject to presently exercisable options held by
Mr. Andrews and 103,132 shares held of record by Mr. Andrews. All shares
acquired upon exercise of such options and 69,375 of such shares held of
record are subject to a right of repurchase in favor of Student Advantage
which is released over a four-year period.
(7) Consists of 162,500 shares subject to presently exercisable (not subject to
a right of repurchase when exercised) options held by Mr. Kos.
(8) Includes 267,632 shares subject to presently exercisable options held by the
executive officers and directors. Of such shares subject to options, 97,500
shares acquired upon the exercise of such options are subject to a right of
repurchase in favor of Student Advantage which is released over a four-year
period. Also includes 99,375 shares which are held of record by the
executive officers which are subject to a right of repurchase in favor of
Student Advantage which is released over a four-year period.
ELECTION OF DIRECTORS
The Company's Board of Directors is divided into three classes, with
members of each class holding office for staggered three-year terms. Currently
there are two Class I directors, whose terms expire at this Annual Meeting of
Stockholders, two Class II directors, whose terms expire at the Annual Meeting
of Stockholders following the fiscal year ending December 31, 2000 ("Fiscal
2000"), and two Class III directors, whose terms expire at the Annual Meeting of
Stockholders following the fiscal year ending December 31, 2001 ("Fiscal 2001")
(in all cases subject to the election and qualification of their successors or
to their earlier death, resignation or removal).
The persons named in the enclosed proxy will vote to elect John S. Katzman
and Charles E. Young as Class I directors, unless authority to vote for the
election of the nominees is withheld by marking the proxy to that effect. Mr.
Katzman and Dr. Young are currently Class I directors of the Company. They have
indicated their willingness to serve, if elected, but if they should be unable
or unwilling to stand for election, proxies may be voted for substitute nominees
designated by the Board of Directors.
DIRECTORS OF THE COMPANY
Set forth below are the names and certain information with respect to each
director of the Company, including the nominees for Class I directors.
NOMINEES FOR CLASS I DIRECTORS (HOLDING OFFICE FOR TERM EXPIRING AT THIS
ANNUAL MEETING; NOMINATED FOR THE TERM EXPIRING AT THE ANNUAL MEETING
FOLLOWING THE FISCAL YEAR ENDING DECEMBER 31, 2002):
John S. Katzman, age 40, has served as a Director of Student Advantage
since March 1996. Mr. Katzman founded The Princeton Review, a provider of test
preparation and admission services, and has served as its President since 1981.
Charles E. Young, age 68, has served as a Director of Student Advantage
since September 1999. Dr. Young has served as President of the University of
Florida since November 1999. Dr. Young served as Chancellor of the University of
California Los Angeles (UCLA) from September 1968 to June 1997, and served as
Chancellor Emeritus of UCLA from July 1997 to October 1999. Dr. Young currently
serves as a Director of the Intel Corporation.
3
<PAGE> 6
CLASS II DIRECTORS (HOLDING OFFICE FOR TERM EXPIRING AT THE ANNUAL MEETING
FOLLOWING FISCAL 2000):
John M. Connolly, age 47, has served as a Director of Student Advantage
since May 1999. Mr. Connolly founded Mainspring, Inc., an internet e-strategy
service firm, and has served as its President and Chief Executive Officer and
Director since June 1996. In July 1989, Mr. Connolly founded Course Technology,
Inc., a publishing company focused on the higher education market, and served as
its President and Chief Executive Officer from July 1989 to April 1996. From
August 1994 to April 1996, Mr. Connolly was also employed by the International
Thomson Publishing Company, a publishing company, as Chief Executive Officer of
its Media Group.
Raymond V. Sozzi, Jr., age 31, founded Student Advantage in 1992 and has
served as Chairman of the Board of Directors, President and Chief Executive
Officer of Student Advantage since its inception. Before founding Student
Advantage, Mr. Sozzi was employed by Bain & Company, a consulting company, as an
associate consultant.
CLASS III DIRECTORS (HOLDING OFFICE FOR TERM EXPIRING AT THE ANNUAL MEETING
FOLLOWING FISCAL 2001):
William S. Kaiser, age 44, has served as a Director of Student Advantage
since October 1998. Since 1986, Mr. Kaiser has been an employee of Greylock
Management Corporation, a venture capital company, and he is a general partner
of several venture capital funds affiliated with Greylock. Mr. Kaiser currently
serves as a Director of Clarus Corporation, Open Market, Inc. and Red Hat, Inc.
Marc J. Turtletaub, age 54, has served as a Director of Student Advantage
since October 1998. Mr. Turtletaub has served as Manager of Deep River Ventures
L.L.C., an entity which invests in growth companies, since December 1999. Mr.
Turtletaub served as Chief Executive Officer of The Money Store, Inc., a
financial services company from 1979 through December 1999.
There are no family relationships among any of the executive officer or
directors of the Company.
BOARD AND COMMITTEE MEETINGS
The Company has a standing Audit Committee of the Board of Directors, which
meets with the Company's auditors to review and evaluate the Company's audit
procedures and to recommend and implement any desired changes to the Company's
audit procedures. The members of the Audit Committee are Messrs. Kaiser,
Connolly and Young. The Audit Committee, established April 5, 1999, met twice
during Fiscal 1999.
The Company has a standing Compensation Committee of the Board of
Directors, which establishes the compensation of each of the Company's executive
officers, the compensation policies applicable to the Company's executive
officers and the basis for the compensation of the Company's Chief Executive
Officer, including the facts and criteria on which it is based. The members of
the Compensation Committee are Messrs. Kaiser, Katzman and Turtletaub. The
Compensation Committee, established April 5, 1999, met once during Fiscal 1999.
The Company has a standing Stock Option Committee of the Board of
Directors, which grants stock options and makes other awards under the Company's
1998 Stock Incentive Plan to employees who are not executive officers in
accordance with the guidelines established by the Board of Directors. The sole
member of the Stock Option Committee is Raymond V. Sozzi, Jr. The Stock Option
Committee, established June 28, 1999, acted solely by written consent during
Fiscal 1999.
The Company does not have a standing Nominating Committee of the Board of
Directors.
The Board of Directors met eight times during Fiscal 1999. Each incumbent
director, except Mr. Katzman, attended at least 75% of the aggregate number of
meetings of the Board and of the committees on which he then served. Mr. Katzman
attended 66.6% of the aggregate number of meetings of the Board and of the
committees on which he then served.
4
<PAGE> 7
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company's Compensation Committee is comprised of Messrs. Kaiser,
Katzman and Turtletaub, three of the Company's non-employee directors. Prior to
the formation of the Compensation Committee in April 1999, the Company's full
Board of Directors (which included Mr. Sozzi, President and Chief Executive
Officer of the Company) was responsible for the functions of a compensation
committee and made decisions concerning executive compensation. Mr. Sozzi did
not participate in discussions or decisions concerning his own compensation.
COMPENSATION OF DIRECTORS
Directors of the Company are reimbursed for expenses incurred in connection
with their attendance at Board and committee meetings. Directors receive no
other cash compensation for serving as directors.
EXECUTIVE COMPENSATION
Summary Compensation
The following Summary Compensation Table sets forth certain information
concerning the compensation for each of the last two fiscal years of (i) the
Company's Chief Executive Officer and (ii) the four most highly compensated
executive officers who were serving as executive officers at the end of Fiscal
1999 (collectively, the "Named Executives").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS(2)
ANNUAL ------------
COMPENSATION(1) SECURITIES
NAME AND FISCAL ------------------- UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS COMPENSATION
- ------------------ ------ -------- -------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Raymond V. Sozzi, Jr..................... 1999 $153,462 $100,000 -- --
Chief Executive Officer 1998 93,798 150,000 -- $6,000(3)
and President
G. Todd Eichler.......................... 1999 114,615 50,000 -- --
Executive Vice President, 1998 106,475 50,000 -- --
Business Services
Christopher B. Andrews................... 1999 130,000 30,000 -- --
Vice President, Finance and
Administration and Chief Financial
Officer
Mason L. Myers........................... 1999 118,654 37,500 300,000 --
Executive Vice President, Student and
University Services
Ronald J. Kos(4)......................... 1999 95,192 33,333 650,001 1,500(5)
Chief Operating Officer
</TABLE>
- ---------------
(1) In accordance with the rules of the Securities and Exchange Commission,
other compensation in the form of perquisites and other personal benefits
have 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 of annual salary and bonus for the executive officer for the fiscal
year.
(2) The Company did not grant any stock appreciation rights or make any
long-term incentive plan payouts during the years ended December 31, 1998
and 1999. As of December 31, 1999, Messrs. Andrews and Myers held 69,375 and
15,000 shares of common stock with a value of $1,516,364 and $327,863,
5
<PAGE> 8
respectively, based on the fair market value of the Company's common stock
on such date, all of which shares were subject to a right of repurchase in
favor of the Company. These shares were acquired upon the exercise of
unvested options and vest over a four year period. Dividends will be paid on
such shares to the extent dividends are declared and paid on the Company's
common stock.
(3) Represents an automobile allowance of $6,000.
(4) Mr. Kos commenced employment with the Company in May 1999. His annual salary
is $150,000.
(5) Represents a parking allowance of $1,500.
Option Grants
The following table sets forth certain information concerning grants of
stock options during Fiscal 1999 to each of the Named Executives.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE VALUE
--------------------------------------------------- AT ASSUMED ANNUAL RATES
NUMBER OF PERCENT OF OF STOCK PRICE
SHARES TOTAL OPTIONS APPRECIATION FOR OPTION
UNDERLYING GRANTED TO EXERCISE TERM(2)
OPTIONS EMPLOYEES IN PRICE PER EXPIRATION --------------------------
NAME GRANTED FISCAL YEAR SHARE(1) DATE 5% 10%
- ---- ---------- ------------- --------- ---------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Raymond V. Sozzi, Jr......... -- -- -- -- -- --
G. Todd Eichler.............. -- -- -- -- -- --
Christopher B. Andrews....... -- -- -- -- -- --
Mason L. Myers............... 300,000 10.6% $12.25 10/18/09 $2,311,188 $ 5,857,004
Ronald J. Kos................ 650,001 23.0 9.90 5/3/09 4,046,943 10,255,749
</TABLE>
- ---------------
(1) Options are incentive stock options or nonstatutory stock options, become
exercisable over a four-year period and generally terminate three months
following termination of the executive officer's employment with the Company
or the expiration date, whichever occurs earlier. The exercise price of each
option was determined to be equal to the fair market value per share of the
Common Stock on the date of grant.
(2) Amounts represent hypothetical gains that could be achieved for the
respective options if exercised at the end of the option term. These gains
are based on assumed rates of stock price appreciation of 5% and 10%
compounded annually from the date the respective options were granted to
their expiration date. The gains shown are net of the option exercise price,
but do not include deductions for taxes or other expenses associated with
the exercise of the option or the sale of the underlying shares. The actual
gains, if any, on the exercises of stock options will depend on the future
performance of the Common Stock, the optionholder's continued employment
through the option period, and the date on which the options are exercised.
6
<PAGE> 9
Option Exercises and Holdings
The following table sets forth certain information concerning the aggregate
number of shares of Common Stock acquired upon option exercises by the Named
Executives during Fiscal 1999 and the value realized upon exercise as well as
the number and value of unexercised options held by each of the Named Executives
on December 31, 1999.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SHARES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
SHARES OPTIONS AT FISCAL YEAR END FISCAL YEAR END(2)
ACQUIRED VALUE --------------------------- ---------------------------
NAME ON EXERCISE REALIZED(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Raymond V. Sozzi, Jr....... -- -- -- -- -- --
G. Todd Eichler............ -- -- -- -- -- --
Christopher B. Andrews..... 120,000 $114,750 82,500 -- $1,803,244 --
Mason L. Myers............. 15,000 22,950 45,000 300,000 983,588 $2,981,250
Ronald J. Kos.............. -- -- 162,500 487,501 1,996,719 5,990,169
</TABLE>
- ---------------
(1) Based on the fair market value of the Common Stock as most recently
determined by the Board of Directors as of the date of exercise less the
option exercise price. Assuming the fair market value of the Common Stock on
the date of exercise was the initial public offering price of $8.00 per
share, the value received by Mr. Andrews would be $920,400 and the value
received by Mr. Myers would be $115,050.
(2) Based on a value of $22.1875 per share, the fair market value of the Common
Stock on December 31, 1999, less the option exercise price.
EMPLOYMENT AGREEMENTS
In March 1996, Student Advantage entered into an employment agreement with
Mr. Sozzi, which was amended in October 1998. The employment agreement provides
for an initial term of employment expiring on January 1, 1999 and automatically
renews for successive one-year terms, unless terminated by either party prior to
such renewal. The employment agreement provides for a base salary of $150,000 in
1999, and a bonus at a target level of $75,000 to be determined in the
discretion of the Board of Directors. Pursuant to the employment agreement, if
the Company terminates Mr. Sozzi's employment without cause, Mr. Sozzi is
entitled to receive severance benefits, for a period of 18 months following his
termination, equal to (1) his base salary, (2) bonus payments at the fixed rate
of $75,000 per year for each year or portion thereof, (3) continued
participation in all employee benefits, and (4) outplacement services. In
addition, Mr. Sozzi has agreed to certain confidentiality, noncompetition and
nonsolicitation provisions.
In May 1999, Student Advantage entered into a letter agreement with Ronald
J. Kos and agreed to employ him as its Chief Operating Officer. Student
Advantage agreed to pay Mr. Kos an annual base salary of $150,000 and an annual
performance bonus with a target of $75,000, based upon the achievement of
certain performance objectives.
7
<PAGE> 10
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors was established on
April 5, 1999 by a vote of the Company's Board of Directors and was chartered to
establish the compensation (including salaries, bonuses and other types of
compensation) of each executive officer, to establish compensation policies
applicable to executive officers and to establish the basis for the compensation
of the Company's Chief Executive Officer ("CEO"). The Compensation Committee is
composed of three of the Company's non-employee Directors. The executive
compensation program is designed to align the interests of the executive
officers with those of the Company's stockholders, to encourage and reward
superior performance and to attract, retain and reward executives who are
critical for the continued growth and success of the Company. In making
decisions regarding executive compensation, the Committee receives and considers
input from Mr. Sozzi, the Company's CEO. This report is submitted by the
Compensation Committee and describes the compensation policies of Student
Advantage for Fiscal 1999 as they pertain to the CEO and the Company's other
executive officers.
The Committee's executive compensation philosophy is that executive
compensation should be tied to the Company's core values and business
objectives. In establishing base salaries for executive officers, the Committee
considers factors such as the executive's scope of responsibilities, the
executive's current and future contributions to the achievement of financial
results, the executive's performance in the prior year, competitiveness in the
marketplace for similar skills and abilities, historical salary actions and
relative salary levels of similar positions within the Company. Increases in
base salary are generally based upon enhanced individual performance targets,
maintaining a competitive base salary with the external marketplace and/or
increases in an executive's scope of responsibilities. In awarding performance
bonuses to executive officers, the Committee evaluates overall business
performance against goals and the extent to which each executive meets certain
personal performance measurements which include the executive's ability to
manage change, achieve development plan goals, manage financial controls and
participate in peer development.
The Company's 1998 Stock Incentive Plan (the "1998 Plan") authorizes the
Committee to grant incentive or non-qualified stock options to employees of the
Company. The Committee is authorized to determine the price and terms at which
such options are granted. The Committee believes options provide an incentive to
executives to maximize stockholder value and they compensate executives only to
the extent that the Company's stockholders receive a return on their investment.
Moreover, because options granted to executive officers generally become
exercisable over a four-year period and terminate with the termination of the
executive's employment with the Company, stock options serve as a means of
retaining these executives. In determining the total number of shares of Common
Stock to be covered by option grants to executive officers in a given year, the
Committee takes into account the number of outstanding shares of Common Stock,
the number of shares reserved for issuance under the Company's 1998 Plan and the
Company's projected hiring needs for the coming year. In making individual stock
option grants to executives, the Committee considers the same factors considered
in the determination of base salary levels, as well as the stock and option
holdings of each executive and the remaining vesting schedule of such
executive's options.
Mr. Sozzi, Student Advantage's CEO, is eligible to participate in the same
executive compensation program available to other Student Advantage executives,
and his total annual compensation was set by the employment agreement he entered
into with the Company in March 1996, as amended in October 1998. Mr. Sozzi's
annual salary for Fiscal 1999 was $153,462 and his target performance bonus was
$75,000. Under the bonus plan, Mr. Sozzi was paid a bonus of $100,000, based on
Mr. Sozzis success in taking the Company public, increasing value to
stockholders, building a management team and achieving the highest annual
revenue in the Company's history.
8
<PAGE> 11
Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code"), generally disallows a tax deduction to public companies for certain
compensation in excess of $1 million paid to the Company's Chief Executive
Officer and four other most highly compensated executive officers. Certain
compensation, including qualified performance-based compensation, will not be
subject to the deduction limit if certain requirements are met. The Compensation
Committee reviews the potential effect of Section 162(m) periodically and
generally seeks to structure the compensation granted to the Company's executive
officers through option issuances under the 1998 Plan in a manner that is
intended to avoid disallowance of deductions under Section 162(m). Nevertheless,
the Compensation Committee reserves the right to use its judgment to authorize
compensation payments that may be in excess of the limit when the Compensation
Committee believes such payments are appropriate and in the best interests of
its stockholders, after taking into consideration changing business conditions
and the performance of its employees.
Compensation Committee
William S. Kaiser
John S. Katzman
Marc J. Turtletaub
9
<PAGE> 12
STOCK PERFORMANCE GRAPH
The following graph compares the cumulative total stockholder return on the
Common Stock of the Company from June 18, 1999 (the date the Common Stock of the
Company commenced public trading) through December 31, 1999 (the end of Fiscal
1999) with the cumulative total return during this period of (i) the Nasdaq
Composite Index and (ii) the Chase Hambrecht & Quist Internet Index. This graph
assumes the investment of $100 on June 18, 1999 in the Company's Common Stock,
the Nasdaq Composite Index and the Chase Hambrecht & Quist Internet Index, and
assumes dividends are reinvested.
PERFORMANCE GRAPH
<TABLE>
<CAPTION>
STUDENT ADVANTAGE NASDAQ H&Q INDEX
----------------- ------ ---------
<S> <C> <C> <C>
18-June-99 100.00 100.00 100.00
31-Dec-99 277.35 156.63 223.23
</TABLE>
APPROVAL OF AMENDMENT TO AND CONTINUANCE OF
THE 1998 STOCK INCENTIVE PLAN
The Board of Directors believes that a critical factor in the Company's
growth and future profitability is its ability to attract, retain, compensate
competitively and motivate its workforce and to align the interest of employees
with the stockholders through the issuance of stock options. To do so, the Board
of Directors believes it is necessary for the Company to have stock options
available for issuance to current and future employees. On March 6, 2000, the
Board of Directors adopted, subject to stockholder approval, an amendment to the
Company's 1998 Stock Incentive Plan (the "1998 Plan") increasing the aggregate
number of shares of Common Stock authorized for issuance pursuant to the 1998
Plan from 7,500,000 to 9,500,000. The amendment was adopted because the Company
believes that the number of available shares under the 1998 Plan may be
insufficient to satisfy the Company's compensation and hiring needs through
Fiscal 2000 and the first half of Fiscal 2001.
Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code"), generally disallows a tax deduction to public companies for
compensation over $1 million paid to the corporation's chief executive
10
<PAGE> 13
officer and four other most highly compensated executive officers. Qualifying
performance-based compensation is not subject to the deduction limit if certain
requirements are met. In order for options and restricted stock awarded under
the 1998 Plan, as amended by the amendment, to comply with Section 162(m) after
the Annual Meeting, the continuance of the 1998 Plan must be approved by
stockholders. If the stockholders do not vote to continue the 1998 Plan, the
Company will not grant any further options or make any further awards of
restricted stock under the 1998 Plan. Even if stockholders do vote to continue
the 1998 Plan, however, awards granted thereunder will only be treated as
qualified performance-based compensation under Section 162(m) if the grant of
such awards comply with all other requirement of Section 162(m).
The Board of Directors believes that awards under the 1998 Plan, including
stock options, have been and will continue to be, an important compensation
element in attracting and retaining key employees who are expected to contribute
to the Company's growth and success. ACCORDINGLY, THE BOARD OF DIRECTORS
BELIEVES THAT THE APPROVAL OF THE AMENDMENT AND CONTINUANCE OF THE 1998 PLAN IS
IN THE BEST INTERESTS OF THE COMPANY AND ITS STOCKHOLDERS AND RECOMMENDS A VOTE
IN FAVOR OF THIS PROPOSAL.
SUMMARY OF THE 1998 PLAN
The Company's 1998 Plan took effect on December 10, 1998. The 1998 Plan
enables the Company to grant options (including options intended to qualify as
incentive stock options under Section 422 of the Code and nonstatutory stock
options), to make awards of restricted Common Stock and to issue certain other
equity-related securities of the Company to employees and directors of and
consultants to the Company. Under present law, however, incentive stock options
may only be granted to employees. Stock options entitle the optionee to purchase
Common Stock from the Company for a specified exercise price during a period
specified in the applicable option agreement. Restricted stock awards entitle
the recipient to purchase Common Stock from the Company under terms which
provide for vesting over a period of time and a right of repurchase in favor of
the Company of the unvested portion of the Common Stock subject to the award
upon the termination of the recipient's employment or other relationship with
the Company. The 1998 Plan is administered by the Compensation Committee of the
Board of Directors, which is empowered to select the persons to whom stock
options and restricted stock awards are granted, to determine the number of
shares of Common Stock covered by the option or award, its exercise price or
purchase price, its vesting schedule and (in the case of stock options) its
expiration date. The Board of Directors has delegated certain of the authority
of the Compensation Committee to the Stock Option Committee of the Board of
Directors, enabling the Stock Option Committee to grant stock options and make
other awards under the 1998 Plan to employees who are not executive officers in
accordance with the guidelines established by the Board of Directors. Stock
options granted under the 1998 Plan are generally nontransferable, become vested
over a four-year period and expire ten years after the date of grant (subject to
earlier termination in the event of the termination of the optionee's employment
with the Company).
As grants of options and other equity-related securities under the 1998
Plan are discretionary, the Company cannot now determine the number of any such
securities to be granted to any particular executive officer, executive officers
as a group, non-employee directors or non-executive officers and employees as a
group. However, under the terms of the 1998 Plan, no employee may be granted
awards or options with respect to more than 3,000,000 shares during any calendar
year.
Options may be granted at an exercise price which may be less than, equal
to or greater than the fair market value of the Common Stock on the date of
grant. Under present law, however, incentive stock options and options intended
to qualify as performance-based compensation under Section 162(m) of the Code
may not be granted at an exercise price less than the fair market value of the
Common Stock on the date of grant (or less than 110% of the fair market value in
the case of incentive stock options granted to optionees holding more than 10%
of the voting power of the Company). The 1998 Plan permits the Board to
determine the
11
<PAGE> 14
manner of payment of the exercise price of options, including payment by cash,
check or in connection with a "cashless exercise" through a broker, by surrender
to the Company of shares of Common Stock, by delivery to the Company of a
promissory note, or by other lawful means.
As of December 31, 1999, the Company had granted options under the 1998
Plan to purchase an aggregate of 5,139,601 shares of Common Stock. Of these
options, 1,212,501 were granted to the current executive officers of the Company
and 20,000 were granted to non-employee directors of the Company. As of December
31, 1999, the Company had not granted any restricted stock, stock appreciation
rights, performance shares, or unrestricted stock under the 1998 Plan. As of
December 31, 1999, there were 320 employees and directors of the Company who
were eligible to receive awards under the 1998 Plan. As of December 31, 1999,
2,689,521 shares remained available for future issuance under the 1998 Plan.
The 1998 Plan will remain in effect until December 10, 2008 (except that it
will continue in effect as to equity-related securities outstanding on that
date), unless terminated earlier by the Board of Directors. The Board of
Directors may amend, suspend or terminate the 1998 Plan or any portion thereof
at any time, provided that no amendment shall be made without stockholder
approval if such approval is necessary to comply with any applicable tax or
regulatory requirement.
FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the United States federal income tax
consequences that generally will arise with respect to stock option and
restricted stock awards granted under the 1998 Plan and with respect to the sale
of Common Stock acquired under the 1998 Plan.
Incentive Stock Options. In general, a participant will not recognize
taxable income upon the grant or exercise of an incentive stock option. Instead,
a participant will recognize taxable income with respect to an incentive stock
option only upon the sale of Common Stock acquired through the exercise of the
option ("ISO Stock"). The exercise of an incentive stock option, however, may
subject the participant to the alternative minimum tax.
Generally, the tax consequences of selling ISO Stock will vary with the
length of time that the participant has owned the ISO Stock at the time it is
sold. If the participant sells ISO Stock after having owned it for at least two
years from the date the option was granted (the "Grant Date") and one year from
the date the option was exercised (the "Exercise Date"), then the participant
will recognize long-term capital gain in an amount equal to the excess of the
sale price of the ISO Stock over the exercise price.
If the participant sells ISO Stock for more than the exercise price prior
to having owned it for at least two years from the Grant Date and one year from
the Exercise Date (a "Disqualifying Disposition"), then all or a portion of the
gain recognized by the participant will be ordinary compensation income and the
remaining gain, if any, will be a capital gain. This capital gain will be a
long-term capital gain if the participant has held the ISO Stock for more than
one year prior to the date of sale.
If a participant sells ISO Stock for less than the exercise price, then the
participant will recognize capital loss in an amount equal to the excess of the
exercise price over the sale price of the ISO Stock. This capital loss will be a
long-term capital loss if the participant has held the ISO Stock for more than
one year prior to the date of sale.
Nonstatutory Stock Options. As in the case of an incentive stock option, a
participant will not recognize taxable income upon the grant of a nonstatutory
stock option. Unlike the case of an incentive stock option, however, a
participant who exercises a nonstatutory stock option generally will recognize
ordinary compensation income in an amount equal to the excess of the fair market
value of the Common Stock acquired through the exercise of the option ("NSO
Stock") on the Exercise Date over the exercise price.
12
<PAGE> 15
With respect to any NSO Stock, a participant will have a tax basis equal to
the exercise price plus any income recognized upon the exercise of the option.
Upon selling NSO Stock, a participant generally will recognize capital gain or
loss in an amount equal to the difference between the sale price of the NSO
Stock and the participant's tax basis in the NSO Stock. This capital gain or
loss will be a long-term capital gain or loss if the participant has held the
NSO Stock for more than one year prior to the date of the sale.
Restricted Stock. A participant will not recognize taxable income upon the
grant of a restricted stock award unless the participant makes an election under
Section 83(b) of the Code (a "Section 83(b) Election"). If the participant makes
a Section 83(b) Election within 30 days of the date of the grant, then the
participant will recognize ordinary compensation income, for the year in which
the award is granted, in an amount equal to the difference between the fair
market value of the Common Stock at the time the award is granted and the
purchase price paid for the Common Stock. If a Section 83(b) Election is not
made, then the participant will recognize ordinary compensation income, at the
time that the forfeiture provisions or restrictions on transfer lapse, in an
amount equal to the difference between the fair market value of the Common Stock
at the time of such lapse and the original purchase price paid for the Common
Stock. The participant will have a tax basis in the Common Stock acquired equal
to the sum of the price paid and the amount of ordinary compensation income
recognized.
Upon the disposition of the Common Stock acquired pursuant to a restricted
stock award, the participant will recognize a capital gain or loss in an amount
equal to the difference between the sale price of the Common Stock and the
participant's tax basis in the Common Stock. This capital gain or loss will be a
long-term capital gain or loss if the shares are held for more than one year.
For this purpose, the holding period shall begin just after the date on which
the forfeiture provisions or restrictions lapse if a Section 83(b) Election is
not made, or just after the award is granted if a Section 83(b) Election is
made.
Tax Consequences to the Company. The grant of an award under the 1998 Plan
will have no tax consequences to the Company. Moreover, in general, neither the
exercise of an incentive stock option nor the sale of any Common Stock acquired
under the 1998 Plan will have any tax consequences to the Company. The Company
generally will be entitled to a business-expense deduction, however, with
respect to any ordinary compensation income recognized by a participant under
the 1998 Plan, including in connection with a restricted stock award or as a
result of the exercise of a nonstatutory stock option or a Disqualifying
Disposition. Any such deduction will be subject to the limitations of Section
162(m) of the Code.
OTHER MATTERS
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based solely on its review of reports filed by "reporting persons" of the
Company under Section 16(a) of the Securities Exchange Act of 1934, as amended
("Section 16(a)"), the Company believes that during Fiscal 1999 all filings
required to be made by reporting persons were timely made in accordance with the
requirements of Section 16(a), except as described below.
Charles E. Young, a director of the Company, filed his Initial Statement of
Beneficial Ownership of Securities on Form 3 sixty (60) days after the required
filing date.
MATTERS TO BE CONSIDERED AT THE MEETING
The Board of Directors does not know of any other matters which may come
before the Annual Meeting. However, if any other matters are properly presented
to the Annual Meeting, it is the intention of the persons
13
<PAGE> 16
named in the accompanying proxy to vote, or otherwise act, in accordance with
their judgment on such matters.
SOLICITATION OF PROXIES
All costs of solicitation of proxies will be borne by the Company. In
addition to solicitations by mail, the Company's Directors, officers and regular
employees, without additional remuneration, may solicit proxies by telephone,
telegraph, facsimile, email and personal interviews. Brokers, custodians and
fiduciaries will be requested to forward proxy soliciting material to the owners
of stock held in their names, and the Company will reimburse them for their
out-of-pocket expenses in this connection.
SHAREHOLDER PROPOSALS FOR 2001 ANNUAL MEETING
Any proposal that a shareholder wishes to be considered for inclusion in
the Company's proxy statement and proxy card for the 2001 Annual Meeting of
Shareholders must be received by Student Advantage's Secretary at the Company's
principal offices not later than December 19, 2000.
ADVANCE NOTICE PROCEDURES
The Company's by-laws require stockholders to give advance notice of any
stockholder nominations of directors and of any other matter stockholders wish
to present for action at an annual meeting of stockholders (other than matters
to be included in the proxy statement, which are discussed in the previous
paragraph). The required notice must be given within a prescribed time frame,
which is generally calculated by reference to the date of the most recent annual
meeting. Assuming that Student Advantage's 2001 Annual Meeting of Stockholders
is held on or after April 30, 2001 and on or before July 18, 2001 (as we
currently anticipate), the bylaws would require notice to be provided to Student
Advantage's Secretary at the Company's principal offices no earlier than
February 18, 2001 and no later than March 20, 2001. The Company's by-laws also
specify requirements relating to the content of the notice which stockholders
must provide to the Secretary of the Company for any matter, including a
stockholder nomination for director, to be properly presented at a stockholder
meeting.
By Order of the Board of Directors,
CHRISTOPHER B. ANDREWS
Secretary
April 17, 2000
THE BOARD OF DIRECTORS HOPES THAT STOCKHOLDERS WILL ATTEND THE MEETING.
WHETHER OR NOT YOU PLAN TO ATTEND, YOU ARE URGED TO COMPLETE, DATE, SIGN AND
RETURN THE ENCLOSED PROXY IN THE ACCOMPANYING ENVELOPE. PROMPT RESPONSE WILL
GREATLY FACILITATE ARRANGEMENTS FOR THE MEETING, AND YOUR COOPERATION WILL BE
APPRECIATED. STOCKHOLDERS WHO ATTEND THE MEETING MAY VOTE THEIR STOCK PERSONALLY
EVEN THOUGH THEY HAVE SENT IN THEIR PROXIES.
14
<PAGE> 17
STA49B DETACH HERE
PROXY
STUDENT ADVANTAGE, INC.
280 SUMMER STREET
BOSTON, MASSACHUSETTS 02210
SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS
Those signing on the reverse side, revoking any prior proxies, hereby
appoint(s) Raymond V. Sozzi, Jr., and Christopher B. Andrews, each with the
full power to appoint his substitute, and hereby authorizes them to represent
and to vote, as designated on the reverse side, all shares of common stock of
Student Advantage, Inc. (the "Company") held of record by the undersigned on
April 4, 2000 at the Annual Meeting of Stockholders to be held on May 19, 2000
and any adjournments thereof. Attendance of the undersigned at the meeting or
at any adjourned session thereof will not be deemed to revoke this proxy unless
the undersigned shall affirmatively indicate thereat the intention of the
undersigned to vote said shares in person.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED. IF NO
DIRECTION IS GIVEN WITH RESPECT TO A PARTICULAR PROPOSAL, THIS PROXY WILL BE
VOTED FOR SUCH PROPOSAL.
PLEASE MARK DATE, SIGN, AND RETURN THIS PROXY PROMPTLY, USING THE ENCLOSED
ENVELOPE. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES.
- ----------- -----------
SEE REVERSE CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE
SIDE SIDE
- ----------- -----------
<PAGE> 18
Dear Shareholder:
Please take note of the important information enclosed with this Proxy. There
are a number of issues related to the operation of the Company that require
your immediate attention.
Your vote counts, and you are strongly encouraged to exercise your right to
vote your shares.
Please mark the boxes on the proxy card to indicate how your shares will be
voted. Then sign the card, detach it and return your proxy in the enclosed
postage paid envelope.
Thank you in advance for your prompt consideration of these matters.
Sincerely,
Student Advantage, Inc.
STA49A DETACH HERE
[X] PLEASE MARK
VOTES AS IN
THIS EXAMPLE.
<TABLE>
<S> <C>
1. Election of Directors
NOMINEES: (01) John S. Katzman and FOR AGAINST ABSTAIN
(02) Charles E. Young 2. Approve the amendment to the 1998
Stock Incentive Plan and continuance [ ] [ ] [ ]
of the Plan.
FOR WITHHELD
[ ] [ ] 3. In their discretion, the proxies are authorized to vote upon any
other business that may properly come before the meeting or any
adjournment thereof.
[ ] _______________________________________
For all nominees except as noted above MARK HERE IF YOU PLAN TO ATTEND THE ANNUAL MEETING [ ]
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT [ ]
Please sign exactly as your name appears hereon. Joint owners
should each sign. Executors, administrators, trustees, guardians or
other fiduciaries should give full title as such. If signing for a
corporation, please sign in full corporate name by a duly authorized
officer.
Date:____________________ Signature:__________________________ Date:___________________
</TABLE>
<PAGE> 19
STUDENT ADVANTAGE, INC.
1998 STOCK INCENTIVE PLAN
Adopted by the Board of Directors on December 10, 1998
As amended, effective on June 23, 1999
As proposed to be amended, effective May 19, 2000
1. PURPOSE
The purpose of this 1998 Stock Incentive Plan (the "Plan") of Student
Advantage, Inc., a Delaware corporation (the "Company"), is to advance the
interests of the Company's stockholders by enhancing the Company's ability to
attract, retain and motivate persons who make (or are expected to make)
important contributions to the Company by providing such persons with equity
ownership opportunities and performance-based incentives and thereby better
aligning the interests of such persons with those of the Company's stockholders.
Except where the context otherwise requires, the term "Company" shall include
any of the Company's present or future subsidiary corporations as defined in
Section 424(f) of the Internal Revenue Code of 1986, as amended, and any
regulations promulgated thereunder (the "Code") and any other business venture
(including, without limitation, joint venture or limited liability company) in
which the Company has a significant interest, as determined by the Board of
Directors of the Company (the "Board").
2. ELIGIBILITY
All of the Company's employees, officers, directors, consultants and advisors
(and any individuals who have accepted an offer for employment) are eligible to
be granted options, restricted stock awards, or other stock-based awards (each,
an "Award") under the Plan. Each person who has been granted an Award under the
Plan shall be deemed a "Participant".
3. ADMINISTRATION, DELEGATION
a. ADMINISTRATION BY BOARD OF DIRECTORS. The Plan will be
administered by the Board. The Board shall have authority to
grant Awards and to adopt, amend and repeal such
administrative rules, guidelines and practices relating to the
Plan as it shall deem advisable. The Board may correct any
defect, supply any omission or reconcile any inconsistency in
the Plan or any Award in the manner and to the extent it shall
deem expedient to carry the Plan into effect and it shall be
the sole and final judge of such expediency. All decisions by
the Board shall be made in the Board's sole discretion and
shall be final and binding on all persons having or claiming
any interest in the Plan or in any Award. No director or
person acting pursuant to the authority delegated by the Board
shall be liable for any action or determination relating to or
under the Plan made in good faith.
1
<PAGE> 20
b. DELEGATION TO EXECUTIVE OFFICERS. To the extent permitted by
applicable law, the Board may delegate to one or more
executive officers of the Company the power to make Awards and
exercise such other powers under the Plan as the Board may
determine, provided that the Board shall fix the maximum
number of shares subject to Awards and the maximum number of
shares for any one Participant to be made by such executive
officers.
c. APPOINTMENT OF COMMITTEES. To the extent permitted by
applicable law, the Board may delegate any or all of its
powers under the Plan to one or more committees or
subcommittees of the Board (a "Committee"). All references in
the Plan to the "Board" shall mean the Board or a Committee of
the Board or the executive officer referred to in Section 3(b)
to the extent that the Board's powers or authority under the
Plan have been delegated to such Committee or executive
officer.
4. STOCK AVAILABLE FOR AWARDS
a. NUMBER OF SHARES. Subject to adjustment under Section 8,
Awards may be made under the Plan for up to 9,500,000 shares
of common stock, $.01 par value per share, of the Company (the
"Common Stock"), minus such number of shares of Common Stock
subject to Awards (not to exceed 300,000) as may have been
granted and are then outstanding or, have been exercised and
not repurchased, under the Company's 1998 California Stock
Incentive Plan. If any Award expires or is terminated,
surrendered or canceled without having been fully exercised or
is forfeited or repurchased in whole or in part or results in
any Common Stock being repurchased or not being issued, the
unused Common Stock covered by such Award shall again be
available for the grant of Awards under the Plan, subject,
however, in the case of Incentive Stock Options (as
hereinafter defined), to any limitation required under the
Code. Shares issued under the Plan may consist in whole or in
part of authorized but unissued shares or treasury shares.
b. PER-PARTICIPANT LIMIT. Subject to adjustment under Section 8,
for Awards granted after the Common Stock is registered under
the Securities Exchange Act of 1934 (the "Exchange Act"), the
maximum number of shares of Common. Stock with respect to
which an Award may be granted to any Participant under the
Plan shall be 1,000,000 per calendar year. The per-Participant
limit described in this Section 4(b) shall be construed and
applied consistently with Section 162(m) of the Code.
5. STOCK OPTIONS
a. GENERAL. The Board may grant options to purchase Common Stock
(each, an "Option") and determine the number of shares of
Common Stock to be
2
<PAGE> 21
covered by each Option, the exercise price of each Option and
the conditions and limitations applicable to the exercise of
each Option, including conditions relating to applicable
federal or state securities laws, as it considers necessary or
advisable. An Option which is not intended to be an Incentive
Stock Option (as hereinafter defined) shall be designated a
"Nonstatutory Stock Option".
b. INCENTIVE STOCK OPTIONS. An Option that the Board intends to
be an "incentive stock option" as defined in Section 422 of
the Code (an "Incentive Stock Option") shall only be granted
to employees of the Company and shall be subject to and shall
be construed consistently with the requirements of Section 422
of the Code. The Company shall have no liability to a
Participant, or any other party, if an Option (or any part
thereof) which is intended to be an Incentive Stock Option is
not an Incentive Stock Option.
c. EXERCISE PRICE. The Board shall establish the exercise price
at the time each Option is granted and specify it in the
applicable option agreement.
d. DURATION OF OPTIONS. Each Option shall be exercisable at such
times and subject to such terms and conditions, including
without limitation vesting provisions, as the Board may
specify in the applicable option agreement.
e. EXERCISE OF OPTION. Options may be exercised by delivery to
the Company of a written notice of exercise signed by the
proper person or by any other form of notice (including
electronic notice) approved by the Board together with payment
in full as specified in Section 5(f) for the number of shares
for which the Option is exercised.
f. PAYMENT UPON EXERCISE. Common Stock purchased upon the
exercise of an Option granted under the Plan shall be paid for
as follows:
(1) in cash or by check, payable to the order of the
Company;.
(2) except as the Board may, in its sole discretion,
otherwise provide in an option agreement, by (i) delivery of an irrevocable and
unconditional undertaking by a creditworthy broker to deliver promptly to the
Company sufficient funds to pay the exercise price or (ii) delivery by the
Participant to the Company of a copy of irrevocable and unconditional
instructions to a creditworthy broker to deliver promptly to the Company cash or
a check sufficient to pay the exercise price;
(3) when the Common Stock is registered under the
Exchange Act, by delivery of shares of Common Stock owned by the Participant
valued at their fair market value as determined by (or in a manner approved by)
the Board in good faith ("Fair Market Value"), which Common Stock was owned by
the Participant at least six months prior to such delivery;
3
<PAGE> 22
(4) to the extent permitted by the Board, in its sole
discretion by (i) delivery of a promissory note of the Participant to the
Company on terms determined by the Board, or (ii) payment of such other lawful
consideration as the Board may determine; or
(5) by any combination of the above permitted forms of
payment.
6. RESTRICTED STOCK
a. GRANTS. The Board may grant Awards entitling recipients to
acquire shares of Common Stock, subject to the right of the
Company to repurchase all or part of such shares at their
issue price or other stated or formula price (or to require
forfeiture of such shares if issued at no cost) from the
recipient in the event that conditions specified by the Board
in the applicable Award are not satisfied prior to the end of
the applicable restriction period or periods established by
the Board for such Award (each, a "Restricted Stock Award").
b. TERMS AND CONDITIONS. The Board shall determine the terms and
conditions of any such Restricted Stock Award, including the
conditions for repurchase (or forfeiture) and the issue price,
if any. Any stock certificates issued in respect of a
Restricted Stock Award shall be registered in the name of the
Participant and, unless otherwise determined by the Board,
deposited by the Participant, together with a stock power
endorsed in blank, with the Company (or its designee). At the
expiration of the applicable restriction periods, the Company
(or such designee) shall deliver the certificates no longer
subject to such restrictions to the Participant or if the
Participant has died, to the beneficiary designated, in a
manner determined by the Board, by a Participant to receive
amounts due or exercise rights of the Participant in the event
of the Participant's death (the "Designated Beneficiary"). In
the absence of an effective designation by a Participant,
Designated Beneficiary shall mean the Participant's estate.
7. OTHER STOCK-BASED AWARDS
The Board shall have the right to grant other Awards based upon the
Common Stock having such terms and conditions as the Board may determine,
including the grant of shares based upon certain conditions, the grant of
securities convertible into Common Stock and the grant of stock appreciation
rights.
8. ADJUSTMENTS FOR CHANGES IN COMMON STOCK AND CERTAIN OTHER EVENTS
a. CHANGES IN CAPITALIZATION. In the event of any stock split,
reverse stock split, stock dividend, recapitalization,
combination of shares,
4
<PAGE> 23
reclassification of shares, spin-off or other similar change
in capitalization or event, or any distribution to holders of
Common Stock other than a normal cash dividend, (i) the number
and class of securities available under this Plan, (ii) the
per-Participant limit set forth in Section 4(b), (iii) the
number and class of securities and exercise price per share
subject to each outstanding Option, (iv) the repurchase price
per share subject to each outstanding Restricted Stock Award,
and (v) the terms of each other outstanding Award shall be
appropriately adjusted by the Company (or substituted Awards
may be made, if applicable) to the extent the Board shall
determine, in good faith, that such an adjustment (or
substitution) is necessary and appropriate. If this Section
8(a) applies and Section 8(c) also applies to any event,
Section 8(c) shall be applicable to such event, and this
Section 8(a) shall not be applicable.
b. LIQUIDATION OR DISSOLUTION. In the event of a proposed
liquidation or dissolution of the Company, the Board shall
upon written notice to the Participants provide that all then
unexercised and/or unvested Options will (i) become
exercisable and vested in full as of a specified time at least
10 business days prior to the effective date of such
liquidation or dissolution and (ii) terminate effective upon
such liquidation or dissolution, except to the extent
exercised before such effective date. The Board may specify
the effect of a liquidation or dissolution on any Restricted
Stock Award or other Award granted under the Plan at the time
of the grant of such Award.
c. ACQUISITION EVENTS
(1) DEFINITION. An "Acquisition Event" shall mean: (a)
any merger or consolidation of the Company with or into another entity as a
result of which the Common Stock is converted into or exchanged for the right to
receive cash, securities or other property or (b) any exchange of shares of the
Company for cash, securities or other property pursuant to a statutory share
exchange transaction.
(2) CONSEQUENCES OF AN ACQUISITION EVENT ON OPTIONS. Upon
the occurrence of an Acquisition Event, or the execution by the Company of any
agreement with respect to an Acquisition Event, the Board shall provide that all
outstanding Options shall be assumed, or equivalent options shall be
substituted, by the acquiring or succeeding corporation (or an affiliate
thereof). For purposes hereof, an Option shall be considered to be assumed if,
following consummation of the Acquisition Event, the Option confers the right to
purchase, for each share of Common Stock subject to the Option immediately prior
to the consummation of the Acquisition Event, the consideration (whether cash,
securities or other property) received as a result of the Acquisition Event by
holders of Common Stock for each share of Common Stock held immediately prior to
the consummation of the Acquisition Event (and if holders were offered a choice
of consideration, the type of consideration chosen by the holders of a majority
of the outstanding shares of Common Stock); provided, however, that if the
consideration received as a result of the Acquisition Event is not solely common
stock of
5
<PAGE> 24
the acquiring or succeeding corporation (or an affiliate thereof), the Company
may, with the consent of the acquiring or succeeding corporation, provide for
the consideration to be received upon the exercise of Options to consist solely
of common stock of the acquiring or succeeding corporation (or an affiliate
thereof) equivalent in fair market value to the per share consideration received
by holders of outstanding shares of Common Stock as a result of the Acquisition
Event. Notwithstanding the foregoing, if the acquiring or succeeding corporation
(or an affiliate thereof) does not agree to assume, or substitute for, such
Options, then the Board shall, upon written notice to the Participants, provide
that all then unexercised and/or unvested Options will become exercisable and
vested in full as of a specified time prior to the Acquisition Event and will
terminate immediately prior to the consummation of such Acquisition Event,
except to the extent exercised by the Participants before the consummation of
such Acquisition Event; provided, however, that in the event of an Acquisition
Event under the terms of which holders of Common Stock will receive upon
consummation thereof a cash payment for each share of Common Stock surrendered
pursuant to such Acquisition Event (the "Acquisition Price"), then the Board may
instead provide that all outstanding Options shall terminate upon consummation
of such Acquisition Event and that each Participant shall receive, in exchange
therefor, a cash payment equal to the amount (if any) by which (A) the
Acquisition Price multiplied by the number of shares of Common Stock subject to
such outstanding Options (whether or not then exercisable or vested), exceeds
(B) the aggregate exercise price of such Options.
(3) CONSEQUENCES OF AN ACQUISITION EVENT ON RESTRICTED
STOCK AWARDS. Upon the occurrence of an Acquisition Event, the repurchase and
other rights of the Company under each outstanding Restricted Stock Award,
including without limitation, restricted stock issued upon the exercise of
unvested Options, shall inure to the benefit of the Company's successor and
shall apply to the cash, securities or other property which the Common Stock was
converted into or exchanged for pursuant to such Acquisition Event in the same
manner and to the same extent as they applied to the Common Stock subject to
such Restricted Stock Award.
(4) CONSEQUENCES OF AN ACQUISITION EVENT ON OTHER AWARDS.
The Board shall specify the effect of an Acquisition Event on any other Award
granted under the Plan at the time of the grant of such Award.
9. GENERAL PROVISIONS APPLICABLE TO AWARDS
a. TRANSFERABILITY OF AWARDS. Except as the Board may otherwise
determine or provide in an Award, Awards shall not be sold,
assigned, transferred, pledged or otherwise encumbered by the
person to whom they are granted, either voluntarily or by
operation of law, except by will or the laws of descent and
distribution, and, during the life of the Participant, shall
be exercisable only by the Participant. References to a
Participant, to the extent relevant in the context, shall
include references to authorized transferees.
6
<PAGE> 25
b. DOCUMENTATION. Each Award shall be evidenced by a written
instrument in such form as the Board shall determine. Each
Award may contain terms and conditions in addition to those
set forth in the Plan, including without limitation,
provisions regarding the effect of a change in control of the
Company.
c. BOARD DISCRETION. Except as otherwise provided by the Plan,
each Award may be made alone or in addition or in relation to
any other Award. The terms of each Award need not be
identical, and the Board need not treat Participants
uniformly.
d. TERMINATION OF STATUS. The Board shall determine the effect on
an Award of the disability, death, retirement, authorized
leave of absence or other change in the employment or other
status of a Participant and the extent to which, and the
period during which, the Participant, the Participant's legal
representative, conservator, guardian or Designated
Beneficiary may exercise rights under the Award.
e. WITHHOLDING. Each Participant shall pay to the Company, or
make provision satisfactory to the Board for payment of, any
taxes required by law to be withheld in connection with Awards
to such Participant no later than the date of the event
creating the tax liability. Except as the Board may otherwise
provide in an Award, when the Common Stock is registered under
the Exchange Act, Participants may satisfy such tax
obligations in whole or in part by delivery of shares of
Common Stock, including shares retained from the Award
creating the tax obligation, valued at their Fair Market
Value. The Company may, to the extent permitted by law, deduct
any such tax obligations from any payment of any kind
otherwise due to a Participant.
f. AMENDMENT OF AWARD. The Board may amend, modify or terminate
any outstanding Award, including but not limited to,
substituting therefor another Award of the same or a different
type, changing the date of exercise or realization, and
converting an Incentive Stock Option to a Nonstatutory Stock
Option, provided that the Participant's consent to such action
shall be required unless the Board determines that the action,
taking into account any related action, would not materially
and adversely affect the Participant.
g. CONDITIONS ON DELIVERY OF STOCK. The Company will not be
obligated to deliver any shares of Common Stock pursuant to
the Plan or to remove restrictions from shares previously
delivered under the Plan until (i) all conditions of the Award
have been met or removed to the satisfaction of the Company,
(ii) in the opinion of the Company's counsel, all other legal
matters in connection with the issuance and delivery of such
shares have been satisfied, including any applicable
securities laws and any applicable
7
<PAGE> 26
stock exchange or stock market rules and regulations, and
(iii) the Participant has executed and delivered to the
Company such representations or agreements as the Company may
consider appropriate to satisfy the requirements of any
applicable laws, rules or regulations.
h. ACCELERATION. The Board may at any time provide that any
Options shall become immediately exercisable and/or vested in
full or in part, that any Restricted Stock Awards, including
without limitation, restricted stock issued upon the exercise
of unvested Options, shall be free of restrictions in full or
in part or that any other Awards may become exercisable and/or
vested in full or in part or free of some or all restrictions
or conditions, or otherwise realizable in full or in part, as
the case may be.
10. MISCELLANEOUS
a. NO RIGHT TO EMPLOYMENT OR OTHER STATUS. No person shall have
any claim or right to be granted an Award, and the grant of an
Award shall not be construed as giving a Participant the right
to continued employment or any other relationship with the
Company. The Company expressly reserves the right at any time
to dismiss or otherwise terminate its relationship with a
Participant free from any liability or claim under the Plan or
otherwise, except as expressly provided in the applicable
Award.
b. NO RIGHTS AS STOCKHOLDER. Subject to the provisions of the
applicable Award, no Participant or Designated Beneficiary
shall have any rights as a stockholder with respect to any
shares of Common Stock to be distributed with respect to an
Award until becoming the record holder of such shares.
Notwithstanding the foregoing, in the event the Company
effects a split of the Common Stock by means of a stock
dividend and the exercise price of and the number of shares
subject to such Option are adjusted as of the date of the
distribution of the dividend (rather than as of the record
date for such dividend), then an optionee who exercises an
Option between the record date and the distribution date for
such stock dividend shall be entitled to receive, on the
distribution date, the stock dividend with respect to the
shares of Common Stock acquired upon such Option exercise,
notwithstanding the fact that such shares were not outstanding
as of the close of business on the record date for such stock
dividend.
c. EFFECTIVE DATE AND TERM OF PLAN. The Plan shall become
effective on the date on which it is adopted by the Board. No
Awards shall be granted under the Plan after the completion of
ten years from the earlier of (i) the date on which the Plan
was adopted by the Board or (ii) the date the Plan was
approved by the Company's stockholders, but Awards previously
granted may extend beyond that date.
d. AMENDMENT OF PLAN. The Board may amend, suspend or terminate
the Plan or any portion thereof at any time.
8
<PAGE> 27
e. GOVERNING LAW. The provisions of the Plan and all Awards made
hereunder shall be governed by and interpreted in accordance
with the laws of the State of Delaware, without regard to any
applicable conflicts of law
9
