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Nextcard Logo
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 26, 2000
------------------------
To our Stockholders:
The 2000 Annual Meeting of Stockholders of NextCard, Inc. will be held in
Salons 10 - 12 of the Marriott Hotel, at 55 Fourth Street, San Francisco,
California, on Friday, May 26, 2000, beginning at 1:00 p.m., Pacific Time. At
the meeting, the holders of shares of NextCard, Inc.'s Common Stock will act on
the following matters:
1. Election of two (2) Class I Directors, both for three-year terms;
2. Amendment of the 1997 Stock Plan to (i) increase the number of shares
reserved for grant by 3,050,000 shares, and (ii) provide for an
automatic annual increase in the number of shares reserved for grant;
3. Ratification of the appointment of Ernst & Young LLP as the Company's
independent accountants for fiscal 2000; and
4. Any other matters that properly come before the meeting.
All holders of record of NextCard, Inc.'s Common Stock at the close of
business on March 27, 2000 are entitled to vote at the meeting or any
postponements or adjournments of the meeting.
IF YOU PLAN TO ATTEND:
PLEASE NOTE THAT SPACE LIMITATIONS MAKE IT NECESSARY TO LIMIT ATTENDANCE TO
STOCKHOLDERS AND ONE GUEST EACH. ADMISSION OF GUESTS TO THE MEETING WILL BE ON A
FIRST-COME, FIRST-SERVED BASIS. REGISTRATION AND SEATING WILL BEGIN AT 11:00
A.M. EACH STOCKHOLDER MAY BE ASKED TO PRESENT VALID PICTURE IDENTIFICATION, SUCH
AS A DRIVER'S LICENSE OR PASSPORT. STOCKHOLDERS HOLDING STOCK IN BROKERAGE
ACCOUNTS (I.E., "STREET NAME" HOLDERS) WILL NEED TO BRING A COPY OF A BROKERAGE
STATEMENT REFLECTING STOCK OWNERSHIP AS OF THE RECORD DATE. CAMERAS, RECORDING
DEVICES AND OTHER ELECTRONIC DEVICES WILL NOT BE PERMITTED AT THE MEETING.
By order of the Board of Directors,
/s/ JEREMY LENT
JEREMY R. LENT
Chairman of the Board and Chief
Executive Officer
April 24, 2000
San Francisco, California
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TABLE OF CONTENTS
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PAGE
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ABOUT THE MEETING........................................... 1
What is the purpose of the annual meeting?................ 1
Who is entitled to vote at the meeting?................... 1
Who can attend the meeting?............................... 1
What constitutes a quorum?................................ 2
How do I vote?............................................ 2
Can I vote by telephone or electronically?................ 2
Can I change my vote after I return my proxy card?........ 2
How do I vote my Employee Stock Purchase Plan shares?..... 2
What vote is required to approve each item?............... 2
What are the Board's recommendations?..................... 3
STOCK OWNERSHIP............................................. 3
Who are the largest owners of NextCard's common stock?.... 3
How much stock do NextCard's directors and executive
officers own?.......................................... 5
Compliance with Section 16(a) of the Securities Exchange
Act of 1934............................................ 5
ITEM 1 -- ELECTION OF DIRECTORS............................. 6
Directors Standing for Election........................... 6
Directors Continuing in Office............................ 6
How are directors compensated?............................ 7
How often did the Board meet in fiscal 1999?.............. 8
What committees has the Board established?................ 8
Executive Compensation.................................... 9
Report of the Compensation Committee................... 9
Committee Interlocks and Insider Participation......... 11
Stock Performance...................................... 11
Executive Compensation Summary Table................... 13
Option Grants and Exercises and Values for Fiscal
1999.................................................. 13
ITEM 2 -- APPROVAL OF CERTAIN AMENDMENTS TO OUR 1997 STOCK
PLAN...................................................... 14
ITEM 3 -- RATIFICATION OF APPOINTMENT OF INDEPENDENT
ACCOUNTANTS............................................... 16
OTHER MATTERS............................................... 16
ADDITIONAL INFORMATION...................................... 17
EXHIBIT A: 1997 STOCK PLAN, AS AMENDED...................... A-1
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Nextcard Logo
NEXTCARD, INC.
595 MARKET STREET
SUITE 1800
SAN FRANCISCO, CALIFORNIA 94105
------------------------
PROXY STATEMENT
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This proxy statement contains information related to the annual meeting of
stockholders of NextCard, Inc. to be held on Friday, May 26, 2000, beginning at
1:00 p.m., Pacific Time, in Salons 10 - 12 of The Marriott Hotel, 55 Fourth
Street, San Francisco, California, and at any postponements or adjournments
thereof.
ABOUT THE MEETING
WHAT IS THE PURPOSE OF THE ANNUAL MEETING?
At our annual meeting, stockholders will act upon the election of two (2)
Class I Directors, an amendment to our 1997 Stock Plan to increase by 3,050,000
shares the number of shares of stock reserved for grant, and to provide for an
automatic annual increase in the number of shares reserved, the ratification of
the appointment of our independent accountants for fiscal 2000 and any other
business that legitimately comes before the meeting. Management will also report
on NextCard, Inc.'s fiscal 1999 performance and respond to questions from
stockholders.
WHO IS ENTITLED TO VOTE AT THE MEETING?
Only stockholders of record at the close of business on March 27, 2000 are
entitled to receive notice of the annual meeting and to vote the shares of
common stock held by them on that date at the meeting or at any postponement or
adjournment of the meeting.
Until May 14, 1999, we were a private company with only one class of common
stock outstanding. On that date, the Securities and Exchange Commission declared
our initial public offering effective and, in accordance with an amendment
previously approved by our stockholders, we created a class of non-voting common
stock. Each outstanding share of our common stock is entitled to one vote on
each matter presented for action at the annual meeting; our non-voting common
stock is not permitted to vote on any matter to be acted upon at the annual
meeting. The only holders of shares of non-voting common stock are Brentwood
Associates VII, L.P. and Brentwood Associates VIII, L.P.; Jeffrey D. Brody, one
of our directors, is a general partner of Brentwood Venture Capital, the
investment manager of the Brentwood funds.
WHO CAN ATTEND THE MEETING?
Only stockholders at and as of the record date, or their duly appointed
proxies, may attend the meeting. Each stockholder, or his or her duly appointed
proxy, may be accompanied by no more than one guest. However, seating is limited
and admission of guests to the meeting will be on a first-come, first-served
basis. Registration will begin at 11:00 a.m., and seating will begin at 12:00
noon. Each stockholder may be asked to present valid picture identification,
such as a driver's license or passport. Cameras, recording devices and other
electronic devices will not be permitted at the meeting.
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Please note that if you hold your shares in "street name" (that is, through
a broker or other nominee), you will need to bring a copy of a brokerage
statement reflecting your stock ownership as of the record date and check in at
the registration desk at the meeting.
WHAT CONSTITUTES A QUORUM?
The presence at the meeting, in person or by proxy, of the holders of a
majority of the shares of our common stock outstanding on March 27, 2000 will
constitute a quorum, permitting the meeting to conduct its business. As of the
record date, 50,061,571 shares of our common stock were outstanding (not
including 1,873,888 shares of non-voting common stock, which will not be counted
for purposes of determining whether or not a quorum exists). Proxies received
but marked as abstentions and broker non-votes will be included in the
calculation of the number of shares considered to be present at the meeting, and
will therefore count for purposes of determining whether or not a quorum exists.
HOW DO I VOTE?
If you properly complete and sign the accompanying proxy card and return it
to us by May 25, 2000 it will be voted as you direct. If you are the record
holder of your shares and attend the meeting in person, you may deliver your
completed proxy card to us at the meeting. "Street name" stockholders who wish
to vote at the meeting will need to obtain a proxy card from the institution
that holds their shares.
CAN I VOTE BY TELEPHONE OR ELECTRONICALLY?
If you are the record holder of your shares (that is, if you hold a stock
certificate registered in your name), you may vote by telephone or
electronically via the Internet by following the instructions included with your
proxy card. If your shares are held in "street name," please check your proxy
card or contact your broker or nominee to determine whether you will be able to
vote by telephone or electronically. The deadline for voting by telephone or
electronically is 11:59 p.m. on May 24, 2000.
CAN I CHANGE MY VOTE AFTER I RETURN MY PROXY CARD?
Yes. Even after you have submitted your proxy, you may change your vote at
any time before the proxy is exercised by filing with our Corporate Secretary
either a notice of revocation or a duly executed proxy bearing a later date. You
may also revoke your proxy at the meeting and vote your shares directly. "Street
name" stockholders who wish to revoke a proxy and vote their shares at the
meeting must obtain a proxy card from the institution holding their shares.
Please note that attendance at the meeting will not by itself revoke a
previously granted proxy.
HOW DO I VOTE MY EMPLOYEE STOCK PURCHASE PLAN SHARES?
If you have purchased shares through our Employee Stock Purchase Plan, you
may vote the number of shares of common stock in your account as of the record
date. Proxy materials will be forwarded to each stockholder by Donaldson, Lufkin
& Jenrette Securities Corporation.
WHAT VOTE IS REQUIRED TO APPROVE EACH ITEM?
Election of Directors. Under Delaware law, the affirmative vote of a
plurality of the votes cast at the meeting is required for the election of
directors. A properly executed proxy marked "WITHHOLD AUTHORITY" with respect to
the election of one or more directors will not be voted with respect to the
director or directors indicated, although it will be counted for purposes of
determining whether there is a quorum.
Other Items. For each other item, the affirmative vote of the holders of a
majority of the shares represented in person or by proxy and entitled to vote on
the item will be required for approval. A properly executed proxy marked
"ABSTAIN" with respect to any such matter will not be voted, although it will be
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counted for purposes of determining whether there is a quorum. Accordingly, an
abstention will have the effect of a negative vote.
If you hold your shares in "street name" through a broker or other nominee,
your broker or nominee may not be permitted to exercise voting discretion with
respect to some of the matters to be acted upon. Thus, if you do not give your
broker or nominee specific instructions, your shares may not be voted on those
matters and will not be counted in determining the number of shares necessary
for approval. Shares represented by such "broker non-votes" will, however, be
counted in determining whether there is a quorum.
WHAT ARE THE BOARD'S RECOMMENDATIONS?
Unless you give other instructions on your proxy card, the persons named as
proxy holders on the proxy card will vote in accordance with the recommendations
of the Board of Directors. The Board's recommendation is set forth together with
the description of each item in this proxy statement. In summary, the Board
recommends a vote:
- for election of the nominated slate of directors (see page 6);
- for the amendment to increase the number of shares available for grant
under the 1997 Stock Plan by 3,050,000 shares and to provide for an
automatic annual increase in the number of shares reserved for grant (see
page 14); and
- for ratification of the appointment of Ernst & Young LLP as NextCard's
independent accountants for fiscal 2000 (see page 16).
With respect to any other matter that properly comes before the meeting,
the proxy holders will vote as recommended by the Board of Directors or, if no
recommendation is given, in their own discretion.
STOCK OWNERSHIP
WHO ARE THE LARGEST OWNERS OF NEXTCARD'S COMMON STOCK?
Except as set forth below, we know of no single person or group that is the
beneficial owner of more than 5% of either class of our common stock as of March
31, 2000. On that date, 51,538,983 shares of common stock were outstanding,
including 1,873,888 shares of non-voting common stock.
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AMOUNT AND NATURE OF PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP(1) CLASS(1)
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Entities associated with Brentwood Venture
Capital(2).................................. 7,007,638 13.6%
3000 Sand Hill Road
Building 1, Suite 260
Menlo Park, CA 94025
Amazon.com, L.L.C.(3)......................... 4,400,000 7.9%
1200 Twelfth Avenue South -- Suite 1200
Seattle, WA 98144
Jeremy and Molly Lent......................... 4,140,128 7.9%
595 Market Street -- Suite 1800
San Francisco, CA 94105
Entities associated with Moore Capital
Management, Inc.(4)......................... 3,397,498 6.6%
1251 Avenue of the Americas
New York, NY 10020
Entities associated with Kleiner Perkins
Caufield & Byers(5)......................... 3,000,002 5.8%
2750 Sand Hill Road
Menlo Park, CA 94025
</TABLE>
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(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and includes voting or investment power
with respect to the securities. Shares of common stock subject to options,
warrants or other rights to purchase which are currently exercisable or are
exercisable within 60 days after March 31, 2000 are deemed outstanding for
purposes of computing the percentage ownership of the persons holding such
options, warrants or other rights, but are not deemed outstanding for
purposes of computing the percentage ownership of any other person.
(2) Includes 205,342 shares held by Brentwood Affiliates Fund, L.P. and 67,140
shares held by Brentwood Affiliates Fund II, L.P. Includes also 5,089,961
shares held by Brentwood Associates VII, L.P. and 1,611,445 shares held by
Brentwood Associates VIII, L.P., of which 1,424,155 and 449,733 shares,
respectively, are non-voting common stock. Non-voting common stock may be
converted into an equal number of shares of voting stock provided that the
holder of the shares will not own more than 9.999% of the voting power of
any class of our equity securities. All shares of non-voting and voting
common stock have been aggregated as a single class for purposes of
reporting amount and percentage ownership. Amount shown includes 33,750
shares issuable within sixty days upon exercise of an option issued to
Jeffrey D. Brody, a director of NextCard and a General Partner of Brentwood
Venture Capital.
(3) Represents 4,400,000 shares issuable upon exercise of an immediately
exercisable warrant.
(4) Includes 1,383,749 shares of common stock held by Moore Global Investments,
Ltd., 1,383,749 shares of common stock held by Moore Overseas Technology
Venture Fund, LDC, 303,750 shares of common stock held by Remington
Investment Strategies, LP. and 303,750 shares of common stock held by Moore
Technology Venture Fund, LLC. Moore Capital Management, Inc., a Connecticut
corporation, is vested with investment discretion with respect to portfolio
assets held for the account of Moore Global Investments, Ltd., Moore
Overseas Technology Venture Fund, LDC and Moore Technology Venture Fund,
LLC. Moore Capital Advisors, LLC, a New York limited liability company, is
the sole general partner of Remington Investment Strategies, LP, a Class B
Shareholder of Moore Overseas Technology Venture Fund, LDC and managing
member of Moore Technology Venture Fund, LLC. Mr. Louis M. Bacon is the
majority stockholder of Moore Capital Management, Inc., and is the majority
equity holder of Moore Capital Advisors, LLC. As a result, Mr. Bacon, though
he disclaims beneficial ownership of the shares, may be deemed to be the
beneficial owner of the aggregate shares held by Moore Global Investments,
Ltd., Remington Investment Strategies, LP, Moore Technology Venture Fund,
LLC and Moore Overseas Technology Venture Fund, LDC. Amount shown includes
22,500 shares issuable within sixty days upon exercise of an option issued
to Alan C. Colner, a director of NextCard and a Managing Director of Moore
Capital Management, Inc.
(5) Represents 2,764,800 shares held by Kleiner Perkins Caufield & Byers, VIII,
L.P., 160,200 shares held by KPCB VIII Founders Fund, L.P. and 75,002 shares
held by KPCB Information Sciences Zaibatsu Fund II, L.P.
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HOW MUCH STOCK DO NEXTCARD'S DIRECTORS AND EXECUTIVE OFFICERS OWN?
The following table shows the amount of our common stock beneficially owned
(unless otherwise indicated) by our directors, the executive officers of
NextCard named in the Summary Compensation Table below and our directors and
executive officers as a group. Except as otherwise indicated, all information is
as of March 31, 2000.
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AGGREGATE SHARES
NUMBER OF ACQUIRABLE PERCENT OF
SHARES WITHIN SIXTY SHARES
NAME OWNED(1)(2) DAYS OUTSTANDING(3)
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Jeffrey D. Brody.................... 6,973,888 33,750 13.49%
Alan N. Colner...................... 3,374,998 22,500 6.54%
Daniel R. Eitingon.................. 32,500 8,334 *
Tod H. Francis...................... 2,479,580 28,125 4.83%
Safi U. Qureshey.................... 536,525 141,144 1.30%
Bruce G. Rigione.................... 631,679 59,062 1.30%
Jeremy R. Lent and Molly Lent....... 3,605,753 534,375 7.98%
Yinzi Cai........................... 159,931 58,594 *
Timothy Coltrell.................... 814,316 197,440 1.95%
John V. Hashman..................... 279,641 61,093 *
Daniel D. Springer.................. 229,024 35,156 *
All directors and executive officers
as a group (13 persons)........... 19,255,835 1,235,823 39.46%
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* Represents less than 1.0%
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and includes voting or investment power
with respect to the securities. The number of shares shown includes shares
that are individually or jointly owned, as well as shares over which the
individual has either sole or shared investment or voting authority. Certain
of NextCard's directors disclaim beneficial ownership of some of the shares
included in the table, as follows:
- Mr. Brody disclaims beneficial ownership of the shares held by each of
the entities associated with Brentwood Venture Capital except to the
extent of his interest therein.
- Mr. Colner does not have voting or investment power with respect to
any of the shares owned by Moore Overseas Technology Venture Fund,
LDC, Moore Global Investments, Moore Technology Venture Fund, LLC or
Remington Investment Strategies, and disclaims beneficial ownership of
all of the shares owned by such entities.
- Mr. Francis disclaims beneficial ownership of the shares held by the
entities associated with Trinity Ventures except to the extent of his
interest therein.
- Mr. Qureshey disclaims beneficial ownership of 135,000 shares held by
the Uns Safi Qureshey Investment Trust, and 135,000 shares held by the
Zeshan Neil Qureshey Investment Trust, investment trusts established
by Mr. Qureshey for the benefit of his two adult sons.
- Mr. Rigione disclaims beneficial ownership of 2,300 shares of common
stock held for the benefit of his minor son.
(2) For executive officers, the number of shares shown includes shares
purchased through the Company's Employee Stock Purchase Plan, as follows:
Yinzi Cai 352 shares; Daniel Springer 430 shares; other executive officers
347 shares.
(3) Based on 51,935,459 shares outstanding at March 31, 2000.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Based on a review of filings made with the Securities and Exchange
Commission and written representations from each of the above-named individuals
that no other reports were required, we believe that,
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except as set forth below, all of our directors and executive officers complied
during fiscal 1999 with the reporting requirements of Section 16(a) of the
Securities Exchange Act of 1934:
- On November 9, 1999, Jeremy Lent reported on Form 4 the disposition of
40,618 shares of common stock on September 8, 1999.
- On January 29, 2000, Yinzi Cai reported on Form 5 the acquisition of a
total of 36,738 shares of common stock acquired in August and September
1999 through the exercise of stock options.
ITEM I
ELECTION OF DIRECTORS
The Board of Directors is currently divided into three classes, having
three-year terms that expire in successive years. The current term of office of
directors in Class I expires at the 2000 annual meeting. The Board of Directors
proposes that the nominees described below, all of whom are currently serving as
Class I directors, be re-elected for a new term of three years and until their
successors are duly elected and qualified. Each of the nominees has consented to
serve a three-year term. If either of them becomes unavailable to serve as a
director, the Board may designate a substitute nominee. In that case, the
persons named as proxies will vote for the substitute nominee designated by the
Board.
DIRECTORS STANDING FOR ELECTION
CLASS I DIRECTORS. The directors standing for election are:
ALAN N. COLNER Director since 1998
Member of the Audit Committee
Mr. Colner has been Managing Director, Private Equity Investments at Moore
Capital Management, Inc. since August 1996. Before joining Moore Capital, he was
a Managing Director of Corporate Advisors, L.P., the general partner of
Corporate Partners, a private equity fund affiliated with Lazard Freres & Co.
LLC. Mr. Colner also serves as a director of iVillage Inc., and is a board
member of several privately held companies. Mr. Colner received a B.A. from Yale
University and an M.B.A. from the Stanford University Graduate School of
Business. Mr. Colner is 44 years old.
DANIEL R. EITINGON Director since 1999
Mr. Eitingon is a private investor. From March 1997 to September 1999, Mr.
Eitingon was the President of the Global Support Services Group and a member of
the Management Executive Committee of Visa International. From December 1986
through February 1997, Mr. Eitingon was an Executive Vice President in charge of
the technology banking group and served as a member of the Executive Operating
Committee of First Interstate Bank. Mr. Eitingon holds a B.S. from Cornell
University, an M.B.A. from the University of Chicago and an M.S.E.E. from the
University of California at Berkeley. Mr. Eitingon is 54 years old.
DIRECTORS CONTINUING IN OFFICE
CLASS II DIRECTORS. The following Class II directors are serving for terms
ending at our 2001 annual meeting.
JEFFREY D. BRODY Director since 1997
Member of the Compensation Committee
Mr. Brody has been employed by Brentwood Venture Capital since April 1994,
and has been a General Partner since October 1995; Mr. Brody is also a Managing
Director of Redpoint Ventures. From December 1988 to April 1994, Mr. Brody was
Senior Vice President of Comdisco Ventures, a venture leasing company. Mr. Brody
holds a B.S. from the University of California at Berkeley and an M.B.A. from
the Stanford University Graduate School of Business. Mr. Brody is a member of
the board of directors of Concur
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Technologies and GetThere.com, and is a board member of several privately held
companies. Mr. Brody is 40 years old.
TOD H. FRANCIS Director since 1998
Mr. Francis has been a General Partner of Trinity Ventures since March
1996. Prior to being named a General Partner, Mr. Francis worked at Trinity
Ventures as a Principal from March 1995 to March 1996, and as an Associate from
March 1993 to March 1995. Prior to joining Trinity Ventures, Mr. Francis was a
Partner at RAM Group, a marketing management firm, and worked at Johnson &
Johnson in brand management. Mr. Francis holds a B.A. and an M.B.A. from
Northwestern University. Mr. Francis serves on the board of directors of
Fatbrain.com, Inc., and is a board member of several privately held companies.
Mr. Francis is 40 years old.
SAFI U. QURESHEY Director since 1997
Member (Chair) of the Audit Committee
Member of the Compensation Committee
Mr. Qureshey is a private investor. Mr. Qureshey is the founder of AST
Research, a personal computer manufacturer, and served as its Chairman and Chief
Executive Officer from 1980 to 1997. Mr. Qureshey also is President of the
Southern California Chapter of The Indus Entrepreneurs, a networking and
mentoring organization for entrepreneurs, and is a former member of President
Clinton's Export Counsel, a private advisory group focusing on increasing
exports of United States goods and services. Mr. Qureshey holds a B.S. from the
University of Karachi, and a B.S. from the University of Texas at Arlington. Mr.
Qureshey is 49 years old.
CLASS III DIRECTORS. The following Class III directors are serving for terms
ending at the Company's 2002 annual meeting.
JEREMY R. LENT Director since 1996
Member of the Nominating Committee
Mr. Lent co-founded NextCard with his wife, Molly Lent, in June 1996 and
has been Chairman of the Board and Chief Executive Officer since inception. From
May 1991 to January 1995, Mr. Lent served as Chief Financial Officer of
Providian Bancorp, a direct marketing credit card issuer. From 1994 to January
1995, Mr. Lent also served as a Senior Vice President of Providian. While at
Providian, Mr. Lent was responsible for the company's planning, treasury,
securitization, corporate development and accounting functions. Mr. Lent
received a B.A. and an M.A. from Cambridge University and an M.B.A. from the
University of Chicago. In October 1999, Mr. Lent was awarded the Albert Einstein
Technology Medal for innovation in technology. Mr. Lent is 39 years old.
BRUCE G. RIGIONE Director since 1997
Member of the Audit Committee
Member of the Nominating Committee
Mr. Rigione has been our Senior Vice President -- International since
August 1999. From April 1996 to December 1998, Mr. Rigione was a Managing
Director and Global Head of Asset Securitization for HSBC Markets, the capital
markets subsidiary of HongKong Shanghai Banking Corporation. From November 1987
to April 1996, Mr. Rigione was a Managing Director and Head of Securitization
for Chase Securities, Inc., a subsidiary of Chase Manhattan Bank. Mr. Rigione
holds a B.A. from Fairfield University and an M.B.A. from Columbia University.
Mr. Rigione is 42 years old.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" BOTH NOMINEES FOR
ELECTION.
HOW ARE DIRECTORS COMPENSATED?
Although we reimburse members of the Board of Directors for their
out-of-pocket expenses associated with their participation on the Board and its
committees, Directors receive no regular compensation for their service.
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On April 29, 1998, we granted Bruce Rigione a ten-year, non-statutory stock
option for 67,500 shares of our common stock exercisable at $0.06 per share,
which the Board of Directors determined to be the then fair market value. On
March 11, 1999, we granted each of Jeffrey Brody, Alan Colner and Tod Francis a
ten-year, non-statutory stock option for 45,000 shares of our common stock
exercisable at $6.667 per share, which the Board of Directors determined to be
the then fair market value. Each of these option grants vests in semi-annual
increments of 12.5% over a four-year period, with vesting commencing as of the
date the holder first became a member of our Board of Directors. On November 29,
1999, we granted Daniel Eitingon a ten-year, non-statutory stock option for
50,000 shares of our common stock exercisable at $32.875 per share, the closing
price of the common stock on the business day preceding the grant date. Mr.
Eitingon's option vests in equal semi-annual increments of 16.667% over a
three-year period, such that the option will be fully exercisable on the third
anniversary of the grant date. In all cases, vesting is contingent upon the
holder being a member of our Board of Directors on each vesting date.
On May 15, 1997, we entered into a consulting agreement with Mr. Qureshey.
At that time, Mr. Qureshey was not one of our directors. Mr. Qureshey's
consulting agreement provided that, in exchange for consulting services related
to our early stage financing efforts, Mr. Qureshey received a fully vested,
five-year warrant to acquire 70,677 shares of our common stock exercisable at
$0.556 per share. In addition, Mr. Qureshey also received a five-year warrant to
acquire 95,963 shares of our common stock exercisable at $0.556 per share; this
warrant was to have vested semi-annually in eight equal increments, subject to
our right to terminate Mr. Qureshey's consultancy. On April 29, 1998, Mr.
Qureshey surrendered this second warrant in exchange for a ten-year
non-statutory stock option for 95,963 shares of our common stock, exercisable at
$0.056 per share, which the Board of Directors determined to be the then fair
market value of the common stock. Mr. Qureshey's option vests in semi-annual
increments of 12.5% over a four-year period, with vesting commencing as of May
15, 1997, the date Mr. Qureshey first became a member of our Board of Directors.
Vesting is contingent upon Mr. Qureshey being a member of our Board of Directors
on each vesting date.
HOW OFTEN DID THE BOARD MEET DURING FISCAL 1999?
The Board of Directors met nine (9) times during fiscal 1999. Each director
attended more than 75% of the total number of meetings of the Board and
Committees on which he served.
WHAT COMMITTEES HAS THE BOARD ESTABLISHED?
The Board of Directors has standing Audit, Compensation and Nominating
Committees.
AUDIT COMMITTEE. The Audit Committee, among other things, makes
recommendations to the Board of Directors concerning the engagement of
independent accountants, monitors and reviews the quality and activities of the
internal audit and quality assurance functions and monitors the results of the
Company's operating and internal controls as reported by management and the
independent accountants. The members of the Audit Committee are Messrs. Colner,
Qureshey (Chair) and Rigione. In fiscal 1999, the Audit Committee met three
times.
COMPENSATION COMMITTEE. The Compensation Committee reviews and approves the
salary, stock option and stock purchase grants, benefits and other compensation
of the Chief Executive Officer and reviews and approves policies regarding the
compensation of other senior officers. In addition, the Compensation Committee
serves as the Administrator of the 1997 Stock Plan, and will review and make
recommendations to the Board of Directors with respect to certain employment
contracts. The members of the Compensation Committee are Messrs. Brody and
Qureshey. In fiscal 1999, the Compensation Committee met three times.
NOMINATING COMMITTEE. The Nominating Committee is responsible for screening
and nominating candidates for election to our Board of Directors. Any
stockholder wishing to propose a nominee to our Board should submit a
recommendation in writing to NextCard's Secretary, indicating the nominee's
qualifications and other relevant biographical information and providing
confirmation of the nominee's consent to serve as a director. The members of the
Nominating Committee are Messrs. Lent and Rigione. The Nominating Committee did
not meet in 1999.
8
<PAGE> 11
EXECUTIVE COMPENSATION
The following Report of the Compensation Committee and the stock
performance graph and table presented elsewhere in this proxy statement do not
constitute solicitation material and should not be deemed filed or incorporated
by reference into any other NextCard filing under the Securities Act of 1933 or
the Securities Exchange Act of 1934, except to the extent specifically
incorporated by reference therein.
REPORT OF THE COMPENSATION COMMITTEE
The Compensation Committee of the Board of Directors has furnished the
following report on executive compensation for fiscal 1999.
WHAT IS NEXTCARD'S COMPENSATION PHILOSOPHY FOR EXECUTIVE OFFICERS?
Our compensation program for executives consists of three key elements:
base salary; performance-based annual bonus; and periodic grants of stock
options. NextCard and the Compensation Committee believe that incorporating
these three elements into a single compensation program allows us to approach
the highly competitive environment in which we operate with flexibility. In
addition, this three-part approach ensures that our executive officers are
compensated in a way that advances both the short- and long-term interests of
stockholders by placing a high proportion of their total
compensation -- specifically, the annual bonus and stock option
components -- "at risk." The annual bonus permits individual performance to be
recognized on an annual basis, and is based, in significant part, on an
evaluation of the contribution made by the officer to our overall performance,
as well as the overall performance of NextCard. Stock options relate a
significant portion of long-term remuneration directly to stock price
appreciation realized by all of our stockholders.
BASE SALARY. Base salaries for our executive officers, as well as changes
in such salaries, are set by our Chief Executive Officer, Jeremy Lent, in
consultation with the Compensation Committee, and take into account such factors
as competitive industry salaries, a subjective assessment of the nature of the
position, the contribution and experience of the officer, and the length of the
officer's service.
ANNUAL BONUS. We have no formal bonus plan; rather, the Compensation
Committee will review NextCard's performance and, in its sole determination, may
recommend to the Board the establishment of a company-wide bonus pool following
each fiscal year. The size of the bonus pool is based upon a subjective
assessment of overall company and individual business unit performance and the
extent to which we achieved our overall financial and operational goals. We also
consider the competitive environment in which we operate when considering
overall compensation of our employees. The amount of the bonus pool is subject
to the approval of the Board of Directors.
Once the overall bonus pool has been approved, our senior management makes
individual bonus recommendations to Mr. Lent, within the overall limits
established by the Compensation Committee, for eligible employees based upon an
evaluation of their individual contributions and performance. Bonus awards are
based in part on an individual's performance and in part on one or more selected
business metrics, such as revenue, account acquisition cost and the
effectiveness of our risk management efforts.
STOCK OPTIONS. We grant stock options to each full-time employee. In
addition, each full-time employee's performance is reviewed not less than
annually, as well as in cases of promotion, with the objective of considering an
additional grant of stock options. The Compensation Committee is the
Administrator of our stock option plan, and has designated Mr. Lent as the
Administrator for grants (initial as well as additional) of 10,000 shares or
more. Each option typically vests 25% on the first anniversary of the Vesting
Commencement Date (which date is set by the Administrator at the time of grant),
with the remaining 75% vesting in 36 equal monthly increments, such that the
option is fully vested on the fourth anniversary of the grant.
HOW IS OUR CHIEF EXECUTIVE OFFICER COMPENSATED?
In January 1999, we entered into an employment agreement with Jeremy Lent,
our Chairman of the Board and Chief Executive Officer. The agreement provided
for a base 1999 salary of $250,000 per year, provided that the Board may, in its
sole discretion, increase Mr. Lent's salary based on a review of prevailing
9
<PAGE> 12
compensation rates of comparable executives in comparable companies, as well as
their evaluation of Mr. Lent's performance and the performance of NextCard. The
Board may also decrease Mr. Lent's salary as part of a good faith general
reduction of salaries of NextCard's executive officers.
In addition to Mr. Lent's base salary, Mr. Lent's employment agreement
provides that he is eligible to receive an annual performance bonus of not less
than 100% of his then-current base salary, subject to the achievement of certain
performance goals to be set annually by the Board of Directors.
Mr. Lent may terminate his employment agreement at any time upon 30 days
prior written notice. If such termination is for "good reason," Mr. Lent will
receive:
- a lump sum severance payment equal to 24 times his highest monthly base
salary during the 12-month period immediately preceding the date of
termination;
- full acceleration of the vesting provisions governing any stock options
and restricted stock held by him;
- health plan, life insurance and disability insurance coverage for a
period of 24 months after the date of termination; and
- any bonus that would otherwise have been paid to him, prorated through
the date of termination.
"Good reason" is defined in the agreement to include an adverse change in
Mr. Lent's position, duties and responsibilities or status, reductions in Mr.
Lent's base salary, certain geographic office relocations, our failure to
provide Mr. Lent with reasonable support or to continue certain material
benefits, or our material breach of Mr. Lent's employment agreement.
We may terminate Mr. Lent's employment for any reason without "cause" upon
30 days prior written notice, in which case Mr. Lent will receive:
- a lump sum severance payment equal to 24 times the higher of his monthly
base salary in effect on the date of notice of termination and his
monthly base salary rate in effect six months prior to the termination
date;
- reasonable outplacement services;
- health plan, life insurance and disability insurance coverage for a
period of 24 months after the date of termination;
- full acceleration of the vesting provisions governing any stock options
and restricted stock held by him; and
- any bonus that would otherwise have been paid to him, prorated through
the date of termination.
We may also terminate Mr. Lent's employment agreement upon his death or
disability or for "cause." If the termination is due to death or disability,
then half of the remaining balance of any unvested options held by Mr. Lent and
all of the remaining balance of any restricted stock held by him will
immediately become fully vested. In addition, we will continue to pay to Mr.
Lent (or his estate) an amount equal to his base salary for 12 months following
any such termination.
10
<PAGE> 13
INTERNAL REVENUE CODE SECTION 162(M) LIMITS ON DEDUCTIBILITY OF COMPENSATION
Section 162(m) of the Internal Revenue Code generally disallows a tax
deduction to public corporations for compensation over $1,000,000 paid for any
fiscal year to the corporation's chief executive officer and four other most
highly compensated executive officers as of the end of any fiscal year. Because
we did not pay compensation in excess of this limit to any person in fiscal
1999, the limitations imposed by Section 162(m) have not had, and are not
expected to have, a material effect on us or our compensation programs.
MEMBERS OF THE COMPENSATION COMMITTEE
Jeffrey D. Brody
Safi U. Qureshey
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No interlocking relationship exists between any member of our Board of
Directors or any of our executive officers and the Board of Directors or the
compensation committee (or equivalent body) of any other company, nor has any
interlocking relationship existed in the past.
STOCK PERFORMANCE
Our common stock began trading on the Nasdaq National Market on May 14,
1999. The following graph provides a comparison of the cumulative total
stockholder return for NextCard, the Nasdaq National Market (U.S.) Index, the
Monoline Credit Card Company Index and the eFinance Index for the eight months
starting on that date and ending on December 31, 1999. These indices are
provided for comparison purposes only, and do not necessarily reflect our views
about what may be an appropriate measure of relative performance. Further, the
presentations of these performance measurements are not intended to forecast, or
be indicative of, possible future performance of our common stock.
Total return assumes reinvestment of dividends. The Monoline Credit Card
Company Index has been constructed by NextCard as an industry index for purposes
of the performance graph, and is composed of Capital One Financial Corporation,
Providian Financial Corp., Bank One Corporation and MBNA Corporation, each of
which is a financial services company whose main line of business is the sale
and management of credit cards. The eFinance Index has been constructed by
NextCard as an industry index for purposes of the performance graph, and is
composed of Ameritrade Holding Corporation, NetBank, Inc., InsWeb Corporation,
E*Trade Group, Inc. and Mortgage.com, Inc., companies who participate in
Internet-based business-to-consumer commerce.
11
<PAGE> 14
EIGHT-MONTH CUMULATIVE TOTAL RETURN FOR NEXTCARD,
THE MONOLINE CREDIT CARD COMPANY INDEX, THE EFINANCE INDEX,
THE NASDAQ NATIONAL MARKET INDEX AND THE S&P 500 STOCK INDEX
[PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
NEXTCARD MONOLINE EFINANCE NASDAQ S&P 500
-------- -------- -------- ------ -------
<S> <C> <C> <C> <C> <C>
May-99 100.00 100.00 100.00 100.00 100.00
Jun-99 160.00 91.10 73.61 95.43 96.80
Jul-99 165.32 98.50 93.81 107.11 103.39
Aug-99 182.82 88.48 81.63 103.86 99.51
Sep-99 123.44 71.73 86.25 108.92 99.88
Oct-99 120.32 64.73 61.74 108.39 96.36
Nov-99 149.38 78.80 57.77 117.56 101.78
Dec-99 163.13 69.38 74.34 132.88 105.21
Jan-00 144.07 70.67 64.79 163.72 109.63
Feb-00 167.19 65.26 45.05 160.59 106.24
Mar-00 117.50 59.13 52.99 189.64 104.12
Apr-00 76.48 72.03 55.71 181.29 113.22
</TABLE>
COMPARISON OF EIGHT-MONTH CUMULATIVE TOTAL RETURN AMONG
NEXTCARD, THE MONOLINE CREDIT CARD COMPANY INDEX, THE EFINANCE INDEX,
THE NASDAQ NATIONAL MARKET INDEX AND THE S&P 500 STOCK INDEX
<TABLE>
<CAPTION>
14-MAY 1-JUN 1-JUL 2-AUG 1-SEP 1-OCT 1-NOV 1-DEC 3-JAN 1-FEB 1-MAR
------ ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NextCard $ 100.00 $160.00 $165.32 $182.82 $123.44 $120.32 $149.38 $163.13 $144.07 $167.19 $117.50
Monoline $ 100.00 $ 91.10 $ 98.50 $ 88.48 $ 71.73 $ 64.73 $ 78.80 $ 69.38 $ 70.67 $ 65.26 $ 59.13
eFinance $ 100.00 $ 73.61 $ 93.81 $ 81.63 $ 86.25 $ 61.74 $ 57.77 $ 74.34 $ 64.79 $ 45.05 $ 52.99
Nasdaq $ 100.00 $ 95.43 $107.11 $103.86 $108.92 $108.39 $117.56 $132.88 $163.72 $160.59 $189.64
S&P 500 $ 100.00 $ 96.80 $103.39 $ 99.51 $ 99.88 $ 96.36 $101.78 $105.21 $109.63 $106.24 $104.12
</TABLE>
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<PAGE> 15
EXECUTIVE COMPENSATION SUMMARY TABLE
The following table sets forth information concerning total compensation
earned by or paid to our Chief Executive Officer and our four other most highly
compensated executive officers (the "named executive officers") for services
rendered during the 1999 fiscal year and the two preceding fiscal years.
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION(1) COMPENSATION
---------------------------------------
NUMBER OF
STOCK OPTIONS
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS GRANTED
--------------------------- ---- --------- --------- -------------
<S> <C> <C> <C> <C>
Jeremy R. Lent................................... 1999 $262,500 $325,000 150,000
Chairman of the Board and Chief Executive Officer 1998 $209,375 $175,000 1,350,000
1997 $165,625 $ 75,000 -0-
John V. Hashman.................................. 1999 $146,667 $100,000 105,000
President and Chief Financial Officer 1998 $115,000 $ 50,000 225,000
1997 $ 38,333 $ 13,000 337,500
Yinzi Cai........................................ 1999 $125,000 $100,000 155,000
Senior Vice President -- Decision Analytics 1998 $ 93,333 $ 50,000 171,000
1997 $ 42,900 $ 8,000 189,000
Timothy J. Coltrell.............................. 1999 $155,000 $100,000 50,000
Chief Operating Officer 1998 $129,167 $ 50,000 -0-
1997 $111,250 $ 50,000 877,500
Daniel D. Springer............................... 1999 $155,000 $100,000 60,000
Chief Marketing Officer 1998 $115,000 $ 50,000 562,500
1997 n/a n/a n/a
</TABLE>
- ---------------
(1) We provide the named executive officers with certain group life, health,
medical and other non-cash benefits generally available to all salaried
employees and not included in this column pursuant to SEC rules. No other
items of compensation were paid to any of the named individuals for any of
the periods indicated. NextCard does not, at this time, make matching
contributions to its 401(k) Plan.
OPTION GRANTS AND EXERCISES AND VALUES FOR FISCAL 1999
The following table sets forth certain information concerning certain
individual grants of stock options made during 1999 for our Chief Executive
Officer and our four other most highly compensated executive officers.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
PERCENT OF VALUE AT ASSUMED
NUMBER OF TOTAL ANNUAL RATES OF STOCK
SECURITIES OPTIONS PRICE APPRECIATION FOR
UNDERLYING GRANTED TO OPTION TERM
OPTIONS EMPLOYEES EXERCISE EXPIRATION -----------------------
NAME GRANTED IN 1999 PRICE DATE 5%($) 10%($)
---- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Jeremy R. Lent............... 150,000 3.58% $24.563/sh 10/18/09 $1,017,946 $2,249,394
Yinzi Cai.................... 90,000 2.15% $ 6.667/sh 3/11/09 $ 377,356 $ 956,293
65,000 1.55% $24.563/sh 10/18/09 $1,004,090 $2,544,561
Timothy J. Coltrell.......... 50,000 1.19% $24.563/sh 10/18/09 $ 772,377 $1,957,355
John V. Hashman.............. 45,000 1.08% $ 6.667/sh 4/16/09 $ 188,669 $ 478,125
60,000 1.43% $24.563/sh 10/18/09 $ 926,852 $2,348,826
Daniel D. Springer........... 60,000 1.43% $24.563/sh 10/18/09 $ 926,852 $2,348,826
</TABLE>
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<PAGE> 16
The following table sets forth the following information with respect to
option exercises during fiscal 1999 by each of the named executive officers:
- The number of shares of common stock acquired through the exercise of
options;
- The aggregate dollar value realized upon exercise of such options;
- The total number of exercisable and non-exercisable stock options held;
and
- The aggregate dollar value of in-the-money options exercisable.
AGGREGATED OPTION EXERCISES DURING FISCAL 1999
AND OPTION VALUES ON DECEMBER 31, 1999(1)
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
ACQUIRED REALIZED OPTIONS IN-THE-MONEY OPTIONS
UPON EXERCISE UPON --------------------------- ---------------------------
NAME OF OPTIONS EXERCISE EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ------------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Jeremy R. Lent........ 56,250 $ 1,620,720 393,749 1,050,001 $11,316,886 $26,516,575
John V. Hashman....... 55,000 $ 1,585,067 240,312 372,188 $ 6,925,647 $ 8,958,321
Yinzi Cai............. 119,425 $ 3,441,653 45,948 349,627 $ 1,308,824 $ 7,845,145
Timothy J. Coltrell... 419,341 $12,089,853 162,002 346,157 $ 4,670,615 $ 8,754,009
Daniel D. Springer.... 188,438 $ 5,427,343 35,156 398,906 $ 1,012,350 $10,016,775
</TABLE>
- ---------------
(1) In accordance with the rules and regulations of the Securities and Exchange
Commission, the values given in the table have been calculated by
subtracting the exercise price from the fair market value of the underlying
common stock. For purposes of this table, fair market value is deemed to be
$28.875, the closing price of our common stock as quoted by Nasdaq National
Market on December 31, 1999.
ITEM 2
APPROVAL OF CERTAIN AMENDMENTS TO OUR
1997 STOCK PLAN
On March 27, 2000, the Board of Directors unanimously approved a resolution
to seek stockholder approval for certain amendments to NextCard's 1997 Stock
Plan (the "Plan"). The Plan, which was adopted by the Board of Directors in
April 1997 and approved by our stockholders in June 1997, provides for the grant
of options to purchase our common stock ("Options") to our employees and
directors, as well as to consultants. The Plan also permits the grant of rights
to purchase restricted common stock. These amendments, if approved by the
stockholders, will increase the total number of shares authorized under the Plan
from 14,625,000 shares to 17,675,000 and amend the Plan to provide for an
automatic annual increase in the number of shares authorized.
If approved by the stockholders, the number of shares reserved for issuance
under the Plan would increase automatically on the first calendar day of each
year, commencing on January 1, 2001, by the lesser of (i) 2,550,000 shares, (ii)
five percent (5%) of the then-outstanding number of shares of common stock as of
the end of the immediately preceding year or (iii) such lesser amount as may be
determined by the Board of Directors.
The Board of Directors believes that the adoption of these amendments to
the Plan will, among other things, enable NextCard to offer to NextCard's
directors, officers and employees the opportunity to participate in NextCard's
growth and success, thereby aligning their interests with those of the
stockholders. The Board believes that existing option grants and stock awards
have contributed substantially to the success of NextCard, and that its stock
option practices are comparable with those of other Internet companies.
14
<PAGE> 17
The affirmative vote of the holders of a majority of shares represented in
person or by proxy at the annual meeting will be required to approve the
amendment. A copy of the Plan, with the language of the proposed amendments
underscored, is attached to this Proxy Statement as Exhibit A.
ADMINISTRATION OF THE PLAN. The Compensation Committee of the Board of
Directors administers the Plan, however the Compensation Committee has
designated Mr. Lent as the Administrator for purposes of grants of Options
covering 10,000 shares or less. The Administrator will determine, within the
limits of the Plan, who shall receive Option grants and/or stock purchase
rights, the number of shares subject to each grant, the terms and conditions of
each Option (including provisions regarding exercisability and acceleration of
vesting) and the procedures by which Options or stock purchase rights may be
exercised. Subject to certain specific limitations and restrictions set forth in
the Plan, the Administrator has full and final authority to interpret the Plan,
to prescribe, amend and rescind any policies and procedures relating to the
Plan, or any interest granted thereunder, and to make all determinations
necessary or advisable for the administration of the Plan.
The Board of Directors may amend, revise, suspend or terminate the Plan, in
whole or in part, at any time, subject to stockholder consent where required by
applicable law. Unless sooner terminated, the Plan will automatically terminate
ten years from the date of its original adoption (i.e., on April 2, 2007).
STOCK SUBJECT TO THE PLAN. As of March 31, 2000, there were 14,650,000
shares of common stock reserved for issuance under the Plan, of which Options to
purchase 12,884,634 shares of common stock (net of terminations and forfeitures,
and including 69,000 shares subject to stock purchase rights) had been granted,
with 1,765,366 shares available for future issuance. Any shares subject to
grants that have expired or have been terminated, forfeited or cancelled without
having been exercised or vested in full are returned to the pool of available
shares. On March 31, 2000 the closing price of our common stock, as quoted on
the Nasdaq National Market System, was $15.2969 per share.
TERMS AND CONDITIONS OF OPTIONS GRANTED UNDER THE PLAN. All Options granted
under the Plan have an exercise price that is no less than the "fair market
value," as defined in the Plan, of a share of our common stock on the date of
the grant. Options vest over a four-year period, with 25% of the grant amount
becoming exercisable on the first anniversary of the grant date, and the
remaining 75% becoming exercisable in 36 equal monthly installments thereafter.
Options granted under the Plan expire on the tenth anniversary of grant, to the
extent not previously exercised. Upon the exercise of an Option, the exercise
price must be paid in full, either in cash or such other consideration as the
Administrator may deem appropriate, which consideration may include other shares
of common stock owned by the optionee. Options are not transferable other than
in the case of death of the optionee.
Where the optionee leaves our employment, the vested portion of the Option
may be exercised within three months after the date of termination (12 months,
if termination is due to death or disability). The unvested portion of the
Option is cancelled, and the shares underlying the unvested portion are returned
to the pool and become available for future grants.
CHANGE OF CONTROL; OTHER ADJUSTMENTS. Upon the occurrence of certain events
deemed under the Plan to constitute a "change in control" of NextCard, the Plan
provides that all Options and stock purchase rights that are not assumed or
substituted with equivalent Options or stock purchase rights by the successor
immediately shall become vested. The Plan also provides that, in the event of a
merger, reorganization or other event of recapitalization, the number and/or
exercise price of any Option or stock purchase right will be appropriately
adjusted.
On December 22, 1999 the Compensation Committee approved, and on January
27, 2000 the Board of Directors ratified, amendments to the stock option
agreements covering Option grants to Messrs. Coltrell, Hashman and Springer, as
well as to Ms. Cai and three other members of our senior management team. These
amendments provide that, in the event of a "change of control" of NextCard and
the optionee's termination (either by the successor entity without "cause" or by
the optionee for "good reason"), 50% of the optionee's then-unvested Options
will accelerate and become fully vested. These acceleration provisions do not
apply,
15
<PAGE> 18
however, to any change of control where the initial material discussions
pertaining to such event take place prior to June 22, 2000.
FEDERAL INCOME TAX MATTERS. The Plan provides for the grant to employees of
Options that qualify for favorable tax treatment under Section 422 of the
Internal Revenue Code ("Incentive Stock Options" or "ISOs"). As a general
matter, there are no federal income tax consequences for either NextCard or the
optionee at the time an ISO is granted or exercised. If there has been no sale
or other disposition of the shares acquired by means of the exercise of an ISO
within two years after the date the ISO was granted or within one year after the
ISO was exercised, then no amount is deductible for income tax purposes by
NextCard with respect to the ISO or the shares acquired thereby. If the optionee
exercises and sells or otherwise disposes of the shares so acquired after
satisfying the foregoing holding requirements, then all gain (or loss) realized
upon such disposition will be capital gain (or loss) with respect to the
difference between the exercise price and the amount realized upon disposition.
If, however, the optionee exercises and then sells or disposes of the shares so
acquired prior to satisfying the foregoing holding period requirements, then an
amount equal to the difference between the exercise price and the amount
realized upon disposition will be includible in the ordinary income of the
optionee, and such amount will be deductible by NextCard as compensation paid to
the optionee.
The Plan also provides for the grant to non-employees of non-qualified
Options ("NSOs"). There are no federal income tax consequences to NextCard or
the optionee at the time an NSO is granted, however upon exercise an amount
equal to the difference between the fair market value of the shares purchased on
the date of exercise and the aggregate purchase price is treated as ordinary
income of the optionee, with a corresponding deduction for NextCard for
compensation paid.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE
AMENDMENT OF THE PLAN, AS DESCRIBED ABOVE.
ITEM 3
RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
We have appointed Ernst & Young LLP as the Company's independent
accountants for the fiscal year ending December 31, 2000. Ernst & Young LLP has
served as our independent accountants since 1998, the first year we produced
audited financial statements. Services provided to us and our subsidiaries by
Ernst & Young LLP in fiscal 1999 included the examination of our consolidated
financial statements, limited reviews of quarterly reports, services related to
filings with the Securities and Exchange Commission and consultations on various
tax and business process matters.
Representatives of Ernst & Young LLP will be present at the annual meeting
to respond to appropriate questions and to make such statements as they may
desire.
In the event stockholders do not ratify the appointment of Ernst & Young
LLP, the appointment will be reconsidered by the Audit Committee and the Board
of Directors.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE
RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP AS NEXTCARD'S INDEPENDENT
ACCOUNTANTS FOR FISCAL 2000.
OTHER MATTERS
As of the date of this proxy statement, we know of no business that will be
presented for consideration at the annual meeting other than the items referred
to above. If any other matter is properly brought before the meeting for action
by stockholders, proxies in the enclosed form returned to us will be voted in
accordance with the recommendation of the Board of Directors or, in the absence
of such a recommendation, in accordance with the judgment of the proxy holder.
16
<PAGE> 19
ADDITIONAL INFORMATION
ADVANCE NOTICE PROCEDURES. Under our By-laws, no business may be brought
before an annual meeting of stockholders unless it is specified in the notice of
the meeting (which includes stockholder proposals that we are required to
include in our proxy statement pursuant to Rule 14a-8 under the Securities
Exchange Act of 1934) or is otherwise brought before the meeting by or at the
direction of the Board or by a stockholder entitled to vote who has delivered
notice to us (containing certain information specified in the By-laws) not less
than 60 nor more than 90 days prior to the first anniversary of the preceding
year's annual meeting. These requirements are separate from and in addition to
the SEC's requirements that a stockholder must meet in order to have a
stockholder proposal included in our proxy statement.
STOCKHOLDER PROPOSALS FOR THE 2001 ANNUAL MEETING. Stockholders interested
in submitting a proposal for inclusion in the proxy materials for our annual
meeting of stockholders in 2001 may do so by following the procedures prescribed
in SEC Rule 14a-8 and our By-laws. To be eligible for inclusion, stockholder
proposals must be received by our Corporate Secretary no later than March 27,
2001.
PROXY SOLICITATION COSTS. The proxies being solicited hereby are being
solicited by NextCard. The cost of soliciting proxies in the enclosed form will
be borne by NextCard. Our officers and regular employees may, but without
compensation other than their regular compensation, solicit proxies by further
mailing or personal conversations, or by telephone, telex, facsimile or
electronic means. We will, upon request, reimburse brokerage firms and others
for their reasonable expenses in forwarding solicitation material to the
beneficial owners of stock.
By order of the Board of Directors,
/s/ Robert Linderman
ROBERT LINDERMAN
General Counsel & Secretary
April 24, 2000
17
<PAGE> 20
EXHIBIT A
NEXTCARD, INC.
1997 STOCK PLAN
1. Purposes of the Plan. The purposes of this Stock Plan are to attract and
retain the best available personnel for positions of substantial responsibility,
to provide additional incentive to Employees, Directors and Consultants and to
promote the success of the Company's business. Options granted under the Plan
may be Incentive Stock Options or Nonstatutory Stock Options, as determined by
the Administrator at the time of grant. Stock Purchase Rights may also be
granted under the Plan.
2. Definitions. As used herein, the following definitions shall apply:
(a) "Administrator" means the Board or any of its Committees as shall
be administering the Plan in accordance with Section 4 hereof.
(b) "Applicable Laws" means the requirements relating to the
administration of stock option plans under U.S. state corporate laws, U.S.
federal and state securities laws, the Code, any stock exchange or
quotation system on which the Common Stock is listed or quoted and the
applicable laws of any foreign country or jurisdiction where Options or
Stock Purchase Rights are granted under the Plan.
(c) "Board" means the Board of Directors of the Company.
(d) "Code" means the Internal Revenue Code of 1986, as amended.
(e) "Committee" means a committee of Directors appointed by the Board
in accordance with Section 4 hereof.
(f) "Common Stock" means the Common Stock of the Company.
(g) "Company" means NextCard, Inc., a Delaware corporation.
(h) "Consultant" means any person who is engaged by the Company or any
Parent or Subsidiary to render consulting or advisory services to such
entity.
(i) "Director" means a member of the Board of Directors of the
Company.
(j) "Employee" means any person, including Officers and Directors,
employed by the Company or any Parent or Subsidiary of the Company. A
Service Provider shall not cease to be an Employee in the case of (i) any
leave of absence approved by the Company or (ii) transfers between
locations of the Company or between the Company, its Parent, any
Subsidiary, or any successor. For purposes of Incentive Stock Options, no
such leave may exceed ninety days, unless reemployment upon expiration of
such leave is guaranteed by statute or contract. If reemployment upon
expiration of a leave of absence approved by the Company is not so
guaranteed, on the 181st day of such leave any Incentive Stock Option held
by the Optionee shall cease to be treated as an Incentive Stock Option and
shall be treated for tax purposes as a Nonstatutory Stock Option. Neither
service as a Director nor payment of a director's fee by the Company shall
be sufficient to constitute "employment" by the Company.
(k) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(l) "Fair Market Value" means, as of any date, the value of Common
Stock determined as follows:
(i) If the Common Stock is listed on any established stock exchange
or a national market system, including without limitation the Nasdaq
National Market or The Nasdaq SmallCap Market of The Nasdaq Stock
Market, its Fair Market Value shall be the closing sales price for such
stock (or the closing bid, if no sales were reported) as quoted on such
exchange or system for the last market trading day prior to the time of
determination, as reported in The Wall Street Journal or such other
source as the Administrator deems reliable;
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(ii) If the Common Stock is regularly quoted by a recognized
securities dealer but selling prices are not reported, its Fair Market
Value shall be the mean between the high bid and low asked prices for
the Common Stock on the last market trading day prior to the day of
determination; or
(iii) In the absence of an established market for the Common Stock,
the Fair Market Value thereof shall be determined in good faith by the
Administrator.
(m) "Incentive Stock Option" means an Option intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code.
(n) "Nonstatutory Stock Option" means an Option not intended to
qualify as an Incentive Stock Option.
(o) "Officer" means a person who is an officer of the Company within
the meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.
(p) "Option" means a stock option granted pursuant to the Plan.
(q) "Option Agreement" means a written or electronic agreement between
the Company and an Optionee evidencing the terms and conditions of an
individual Option grant. The Option Agreement is subject to the terms and
conditions of the Plan.
(r) "Option Exchange Program" means a program whereby outstanding
Options are exchanged for Options with a lower exercise price.
(s) "Optioned Stock" means the Common Stock subject to an Option or a
Stock Purchase Right.
(t) "Optionee" means the holder of an outstanding Option or Stock
Purchase Right granted under the Plan.
(u) "Parent" means a "parent corporation," whether now or hereafter
existing, as defined in Section 424(e) of the Code.
(v) "Plan" means this 1997 Stock Plan.
(w) "Restricted Stock" means shares of Common Stock acquired pursuant
to a grant of a Stock Purchase Right under Section 11 below.
(x) "Section 16(b)" means Section 16(b) of the Securities Exchange Act
of 1934, as amended.
(y) "Service Provider" means an Employee, Director or Consultant.
(z) "Share" means a share of the Common Stock, as adjusted in
accordance with Section 12 below.
(aa) "Stock Purchase Right" means a right to purchase Common Stock
pursuant to Section 11 below.
(bb) "Subsidiary" means a "subsidiary corporation," whether now or
hereafter existing, as defined in Section 424(f) of the Code.
3. Stock Subject to the Plan. Subject to the provisions of Section 12 of
the Plan, the maximum aggregate number of Shares which may be subject to option
and sold under the Plan is seventeen million six hundred seventy five thousand
(17,675,000) Shares, provided that the number of Shares shall be increased, on
the first calendar day of each year commencing January 1, 2001, by the lesser of
(i) two million five hundred fifty thousand (2,550,000) Shares, (ii) five
percent (5%) of the number of outstanding shares of the Company's Common Stock
on the last day of the immediately preceding fiscal year, or (iii) such lesser
amount as may be determined by the Company's Board of Directors. The Shares may
be authorized but unissued, or reacquired Common Stock.
If an Option or Stock Purchase Right expires or becomes unexercisable
without having been exercised in full, or is surrendered pursuant to an Option
Exchange Program, the unpurchased Shares which were subject thereto shall become
available for future grant or sale under the Plan (unless the Plan has
terminated).
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However, Shares that have actually been issued under the Plan, upon exercise of
either an Option or Stock Purchase Right, shall not be returned to the Plan and
shall not become available for future distribution under the Plan, except that
if Shares of Restricted Stock are repurchased by the Company at their original
purchase price, such Shares shall become available for future grant under the
Plan.
4. Administration of the Plan.
(a) The Plan shall be administered by the Board or a Committee
appointed by the Board, which Committee shall be constituted to comply with
Applicable Laws.
(b) Powers of the Administrator. Subject to the provisions of the Plan
and, in the case of a Committee, the specific duties delegated by the Board
to such Committee, and subject to the approval of any relevant authorities,
the Administrator shall have the authority in its discretion:
(i) to determine the Fair Market Value;
(ii) to select the Service Providers to whom Options and Stock
Purchase Rights may from time to time be granted hereunder;
(iii) to determine the number of Shares to be covered by each such
award granted hereunder;
(iv) to approve forms of agreement for use under the Plan;
(v) to determine the terms and conditions, of any Option or Stock
Purchase Right granted hereunder. Such terms and conditions include, but
are not limited to, the exercise price, the time or times when Options
or Stock Purchase Rights may be exercised (which may be based on
performance criteria), any vesting acceleration or waiver of forfeiture
restrictions, and any restriction or limitation regarding any Option or
Stock Purchase Right or the Common Stock relating thereto, based in each
case on such factors as the Administrator, in its sole discretion, shall
determine;
(vi) to determine whether and under what circumstances an Option
may be settled in cash instead of Common Stock;
(vii) to reduce the exercise price of any Option to the then
current Fair Market Value if the Fair Market Value of the Common Stock
covered by such Option has declined since the date the Option was
granted;
(viii) to initiate an Option Exchange Program;
(ix) to prescribe, amend and rescind rules and regulations
relating to the Plan, including rules and regulations relating to
sub-plans established for the purpose of qualifying for preferred tax
treatment under foreign tax laws;
(x) to allow Optionees to satisfy withholding tax obligations by
electing to have the Company withhold from the Shares to be issued upon
exercise of an Option or Stock Purchase Right that number of Shares
having a Fair Market Value equal to the amount required to be withheld.
The Fair Market Value of the Shares to be withheld shall be determined
on the date that the amount of tax to be withheld is to be determined.
All elections by Optionees to have Shares withheld for this purpose
shall be made in such form and under such conditions as the
Administrator may deem necessary or advisable; and
(xi) to construe and interpret the terms of the Plan and awards
granted pursuant to the Plan.
(c) Effect of Administrator's Decision. All decisions, determinations
and interpretations of the Administrator shall be final and binding on all
Optionees.
5. Eligibility.
(a) Nonstatutory Stock Options and Stock Purchase Rights may be
granted to Service Providers. Incentive Stock Options may be granted only
to Employees.
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(b) Each Option shall be designated in the Option Agreement as either
an Incentive Stock Option or a Nonstatutory Stock Option. However,
notwithstanding such designation, to the extent that the aggregate Fair
Market Value of the Shares with respect to which Incentive Stock Options
are exercisable for the first time by the Optionee during any calendar year
(under all plans of the Company and any Parent or Subsidiary) exceeds
$100,000, such Options shall be treated as Nonstatutory Stock Options. For
purposes of this Section 5(b), Incentive Stock Options shall be taken into
account in the order in which they were granted. The Fair Market Value of
the Shares shall be determined as of the time the Option with respect to
such Shares is granted.
(c) Neither the Plan nor any Option or Stock Purchase Right shall
confer upon any Optionee any right with respect to continuing the
Optionee's relationship as a Service Provider with the Company, nor shall
it interfere in any way with his or her right or the Company's right to
terminate such relationship at any time, with or without cause.
6. Term of Plan. The Plan shall become effective upon its adoption by the
Board. It shall continue in effect for a term of ten (10) years unless sooner
terminated under Section 14 of the Plan.
7. Term of Option. The term of each Option shall be stated in the Option
Agreement; provided, however, that the term shall be no more than ten (10) years
from the date of grant thereof. In the case of an Incentive Stock Option granted
to an Optionee who, at the time the Option is granted, owns stock representing
more than ten percent (10%) of the voting power of all classes of stock of the
Company or any Parent or Subsidiary, the term of the Option shall be five (5)
years from the date of grant or such shorter term as may be provided in the
Option Agreement.
8. Option Exercise Price and Consideration.
(a) The per share exercise price for the Shares to be issued upon
exercise of an Option shall be such price as is determined by the
Administrator, but shall be subject to the following:
(i) In the case of an Incentive Stock Option
(A) granted to an Employee who, at the time of grant of such
Option, owns stock representing more than ten percent (10%) of the
voting power of all classes of stock of the Company or any Parent or
Subsidiary, the exercise price shall be no less than 110% of the Fair
Market Value per Share on the date of grant.
(B) granted to any other Employee, the per Share exercise price
shall be no less than 100% of the Fair Market Value per Share on the
date of grant.
(ii) In the case of a Nonstatutory Stock Option
(A) granted to a Service Provider who, at the time of grant of
such Option, owns stock representing more than ten percent (10%) of
the voting power of all classes of stock of the Company or any Parent
or Subsidiary, the exercise price shall be no less than 110% of the
Fair Market Value per Share on the date of the grant.
(B) granted to any other Service Provider, the per Share
exercise price shall be no less than 85% of the Fair Market Value per
Share on the date of grant.
(iii) Notwithstanding the foregoing, Options may be granted with a
per Share exercise price other than as required above pursuant to a
merger or other corporate transaction.
(b) The consideration to be paid for the Shares to be issued upon
exercise of an Option, including the method of payment, shall be determined
by the Administrator (and, in the case of an Incentive Stock Option, shall
be determined at the time of grant). Such consideration may consist of (1)
cash, (2) check, (3) promissory note, (4) other Shares which (x) in the
case of Shares acquired upon exercise of an Option, have been owned by the
Optionee for more than six months on the date of surrender, and (y) have a
Fair Market Value on the date of surrender equal to the aggregate exercise
price of the Shares as to which such Option shall be exercised, (5)
consideration received by the Company under a cashless
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<PAGE> 24
exercise program implemented by the Company in connection with the Plan, or
(6) any combination of the foregoing methods of payment. In making its
determination as to the type of consideration to accept, the Administrator
shall consider if acceptance of such consideration may be reasonably
expected to benefit the Company.
9. Exercise of Option.
(a) Procedure for Exercise; Rights as a Shareholder. Any Option
granted hereunder shall be exercisable according to the terms hereof at
such times and under such conditions as determined by the Administrator and
set forth in the Option Agreement, but in no case at a rate of less than
20% per year over five (5) years from the date the Option is granted.
Unless the Administrator provides otherwise, vesting of Options granted
hereunder shall be tolled during any unpaid leave of absence. An Option may
not be exercised for a fraction of a Share.
An Option shall be deemed exercised when the Company receives: (i)
written or electronic notice of exercise (in accordance with the Option
Agreement) from the person entitled to exercise the Option, and (ii) full
payment for the Shares with respect to which the Option is exercised. Full
payment may consist of any consideration and method of payment authorized
by the Administrator and permitted by the Option Agreement and the Plan.
Shares issued upon exercise of an Option shall be issued in the name of the
Optionee or, if requested by the Optionee, in the name of the Optionee and
his or her spouse. Until the Shares are issued (as evidenced by the
appropriate entry on the books of the Company or of a duly authorized
transfer agent of the Company), no right to vote or receive dividends or
any other rights as a shareholder shall exist with respect to the Shares,
notwithstanding the exercise of the Option. The Company shall issue (or
cause to be issued) such Shares promptly after the Option is exercised. No
adjustment will be made for a dividend or other right for which the record
date is prior to the date the Shares are issued, except as provided in
Section 12 of the Plan.
Exercise of an Option in any manner shall result in a decrease in the
number of Shares thereafter available, both for purposes of the Plan and
for sale under the Option, by the number of Shares as to which the Option
is exercised.
(b) Termination of Relationship as a Service Provider. If an Optionee
ceases to be a Service Provider, such Optionee may exercise his or her
Option within such period of time as is specified in the Option Agreement
(of at least thirty (30) days) to the extent that the Option is vested on
the date of termination (but in no event later than the expiration of the
term of the Option as set forth in the Option Agreement). In the absence of
a specified time in the Option Agreement, the Option shall remain
exercisable for three (3) months following the Optionee's termination. If,
on the date of termination, the Optionee is not vested as to his or her
entire Option, the Shares covered by the unvested portion of the Option
shall revert to the Plan. If, after termination, the Optionee does not
exercise his or her Option within the time specified by the Administrator,
the Option shall terminate, and the Shares covered by such Option shall
revert to the Plan.
(c) Disability of Optionee. If an Optionee ceases to be a Service
Provider as a result of the Optionee's disability, the Optionee may
exercise his or her Option within such period of time as is specified in
the Option Agreement to the extent the Option is vested on the date of
termination (but in no event later than the expiration of the term of such
Option as set forth in the Option Agreement). In the absence of a specified
time in the Option Agreement, the Option shall remain exercisable for
twelve (12) months following the Optionee's termination. If such disability
is not a "disability" as such term is defined in Section 22(e)(3) of the
Code, in the case of an Incentive Stock Option such Incentive Stock Option
shall automatically cease to be treated as an Incentive Stock Option and
shall be treated for tax purposes as a Nonstatutory Stock Option on the day
three months and one day following such termination. If, on the date of
termination, the Optionee is not vested as to his or her entire Option, the
Shares covered by the unvested portion of the Option shall revert to the
Plan. If, after termination, the Optionee does not exercise his or her
Option within the time specified herein, the Option shall terminate, and
the Shares covered by such Option shall revert to the Plan.
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<PAGE> 25
(d) Death of Optionee. If an Optionee dies while a Service Provider,
the Option may be exercised within such period of time as is specified in
the Option Agreement (but in no event later than the expiration of the term
of such Option as set forth in the Notice of Grant), by the Optionee's
estate or by a person who acquires the right to exercise the Option by
bequest or inheritance, but only to the extent that the Option is vested on
the date of death. In the absence of a specified time in the Option
Agreement, the Option shall remain exercisable for twelve (12) months
following the Optionee's termination. If, at the time of death, the
Optionee is not vested as to his or her entire Option, the Shares covered
by the unvested portion of the Option shall immediately revert to the Plan.
The Option may be exercised by the executor or administrator of the
Optionee's estate or, if none, by the person(s) entitled to exercise the
Option under the Optionee's will or the laws of descent or distribution. If
the Option is not so exercised within the time specified herein, the Option
shall terminate, and the Shares covered by such Option shall revert to the
Plan.
(e) Buyout Provisions. The Administrator may at any time offer to buy
out for a payment in cash or Shares, an Option previously granted, based on
such terms and conditions as the Administrator shall establish and
communicate to the Optionee at the time that such offer is made.
10. Non-Transferability of Options and Stock Purchase Rights. Options and
Stock Purchase Rights may not be sold, pledged, assigned, hypothecated,
transferred, or disposed of in any manner other than by will or by the laws of
descent or distribution and may be exercised, during the lifetime of the
Optionee, only by the Optionee.
11. Stock Purchase Rights.
(a) Rights to Purchase. Stock Purchase Rights may be issued either
alone, in addition to, or in tandem with other awards granted under the
Plan and/or cash awards made outside of the Plan. After the Administrator
determines that it will offer Stock Purchase Rights under the Plan, it
shall advise the offeree in writing or electronically of the terms,
conditions and restrictions related to the offer, including the number of
Shares that such person shall be entitled to purchase, the price to be
paid, and the time within which such person must accept such offer. The
offer shall be accepted by execution of a Restricted Stock purchase
agreement in the form determined by the Administrator.
(b) Repurchase Option. Unless the Administrator determines otherwise,
the Restricted Stock purchase agreement shall grant the Company a
repurchase option exercisable upon the voluntary or involuntary termination
of the purchaser's service with the Company for any reason (including death
or disability). The purchase price for Shares repurchased pursuant to the
Restricted Stock purchase agreement shall be the original price paid by the
purchaser and may be paid by cancellation of any indebtedness of the
purchaser to the Company. The repurchase option shall lapse at such rate as
the Administrator may determine, but in no case at a rate of less than 20%
per year over five years from the date of purchase.
(c) Other Provisions. The Restricted Stock purchase agreement shall
contain such other terms, provisions and conditions not inconsistent with
the Plan as may be determined by the Administrator in its sole discretion.
(d) Rights as a Shareholder. Once the Stock Purchase Right is
exercised, the purchaser shall have rights equivalent to those of a
shareholder and shall be a shareholder when his or her purchase is entered
upon the records of the duly authorized transfer agent of the Company. No
adjustment shall be made for a dividend or other right for which the record
date is prior to the date the Stock Purchase Right is exercised, except as
provided in Section 12 of the Plan.
12. Adjustments Upon Changes in Capitalization, Merger or Asset Sale.
(a) Changes in Capitalization. Subject to any required action by the
shareholders of the Company, the number of shares of Common Stock covered
by each outstanding Option or Stock Purchase Right, and the number of
shares of Common Stock which have been authorized for issuance under the
Plan but as to which no Options or Stock Purchase Rights have yet been
granted or which have been returned to
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<PAGE> 26
the Plan upon cancellation or expiration of an Option or Stock Purchase
Right, as well as the price per share of Common Stock covered by each such
outstanding Option or Stock Purchase Right, shall be proportionately
adjusted for any increase or decrease in the number of issued shares of
Common Stock resulting from a stock split, reverse stock split, stock
dividend, combination or reclassification of the Common Stock, or any other
increase or decrease in the number of issued shares of Common Stock
effected without receipt of consideration by the Company. The conversion of
any convertible securities of the Company shall not be deemed to have been
"effected without receipt of consideration." Such adjustment shall be made
by the Board, whose determination in that respect shall be final, binding
and conclusive. Except as expressly provided herein, no issuance by the
Company of shares of stock of any class, or securities convertible into
shares of stock of any class, shall affect, and no adjustment by reason
thereof shall be made with respect to, the number or price of shares of
Common Stock subject to an Option or Stock Purchase Right.
(b) Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, the Administrator shall notify
each Optionee as soon as practicable prior to the effective date of such
proposed transaction. The Administrator in its discretion may provide for
an Optionee to have the right to exercise his or her Option until fifteen
(15) days prior to such transaction as to all of the Optioned Stock covered
thereby, including Shares as to which the Option would not otherwise be
exercisable. In addition, the Administrator may provide that any Company
repurchase option applicable to any Shares purchased upon exercise of an
Option or Stock Purchase Right shall lapse as to all such Shares, provided
the proposed dissolution or liquidation takes place at the time and in the
manner contemplated. To the extent it has not been previously exercised, an
Option or Stock Purchase Right will terminate immediately prior to the
consummation of such proposed action.
(c) Merger or Asset Sale. In the event of a merger of the Company with
or into another corporation, or the sale of substantially all of the assets
of the Company, each outstanding Option and Stock Purchase Right shall be
assumed or an equivalent option or right substituted by the successor
corporation or a Parent or Subsidiary of the successor corporation. In the
event that the successor corporation refuses to assume or substitute for
the Option or Stock Purchase Right, the Optionee shall fully vest in and
have the right to exercise the Option or Stock Purchase Right as to all of
the Optioned Stock, including Shares as to which it would not otherwise be
vested or exercisable. If an Option or Stock Purchase Right becomes fully
vested and exercisable in lieu of assumption or substitution in the event
of a merger or sale of assets, the Administrator shall notify the Optionee
in writing or electronically that the Option or Stock Purchase Right shall
be fully exercisable for a period of fifteen (15) days from the date of
such notice, and the Option or Stock Purchase Right shall terminate upon
the expiration of such period. For the purposes of this paragraph, the
Option or Stock Purchase Right shall be considered assumed if, following
the merger or sale of assets, the option or right confers the right to
purchase or receive, for each Share of Optioned Stock subject to the Option
or Stock Purchase Right immediately prior to the merger or sale of assets,
the consideration (whether stock, cash, or other securities or property)
received in the merger or sale of assets by holders of Common Stock for
each Share held on the effective date of the transaction (and if holders
were offered a choice of consideration, the type of consideration chosen by
the holders of a majority of the outstanding Shares); provided, however,
that if such consideration received in the merger or sale of assets is not
solely common stock of the successor corporation or its Parent, the
Administrator may, with the consent of the successor corporation, provide
for the consideration to be received upon the exercise of the Option or
Stock Purchase Right, for each Share of Optioned Stock subject to the
Option or Stock Purchase Right, to be solely common stock of the successor
corporation or its Parent equal in fair market value to the per share
consideration received by holders of Common Stock in the merger or sale of
assets.
13. Time of Granting Options and Stock Purchase Rights. The date of grant
of an Option or Stock Purchase Right shall, for all purposes, be the date on
which the Administrator makes the determination granting such Option or Stock
Purchase Right, or such other date as is determined by the Administrator. Notice
of the determination shall be given to each Employee or Consultant to whom an
Option or Stock Purchase Right is so granted within a reasonable time after the
date of such grant.
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<PAGE> 27
14. Amendment and Termination of the Plan.
(a) Amendment and Termination. The Board may at any time amend, alter,
suspend or terminate the Plan.
(b) Shareholder Approval. The Board shall obtain shareholder approval
of any Plan amendment to the extent necessary and desirable to comply with
Applicable Laws.
(c) Effect of Amendment or Termination. No amendment, alteration,
suspension or termination of the Plan shall impair the rights of any
Optionee, unless mutually agreed otherwise between the Optionee and the
Administrator, which agreement must be in writing and signed by the
Optionee and the Company. Termination of the Plan shall not affect the
Administrator's ability to exercise the powers granted to it hereunder with
respect to Options granted under the Plan prior to the date of such
termination.
15. Conditions Upon Issuance of Shares.
(a) Legal Compliance. Shares shall not be issued pursuant to the
exercise of an Option unless the exercise of such Option and the issuance
and delivery of such Shares shall comply with Applicable Laws and shall be
further subject to the approval of counsel for the Company with respect to
such compliance.
(b) Investment Representations. As a condition to the exercise of an
Option, the Administrator may require the person exercising such Option to
represent and warrant at the time of any such exercise that the Shares are
being purchased only for investment and without any present intention to
sell or distribute such Shares if, in the opinion of counsel for the
Company, such a representation is required.
16. Inability to Obtain Authority. The inability of the Company to obtain
authority from any regulatory body having jurisdiction, which authority is
deemed by the Company's counsel to be necessary to the lawful issuance and sale
of any Shares hereunder, shall relieve the Company of any liability in respect
of the failure to issue or sell such Shares as to which such requisite authority
shall not have been obtained.
17. Reservation of Shares. The Company, during the term of this Plan, shall
at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
18. Shareholder Approval. The Plan shall be subject to approval by the
shareholders of the Company within twelve (12) months after the date the Plan is
adopted. Such shareholder approval shall be obtained in the degree and manner
required under Applicable Laws.
19. Information to Optionees and Purchasers. The Company shall provide to
each Optionee and to each individual who acquires Shares pursuant to the Plan,
not less frequently than annually during the period such Optionee or purchaser
has one or more Options or Stock Purchase Rights outstanding, and, in the case
of an individual who acquires Shares pursuant to the Plan, during the period
such individual owns such Shares, copies of annual financial statements. The
Company shall not be required to provide such statements to key employees whose
duties in connection with the Company assure their access to equivalent
information.
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<PAGE> 28
Dear Stockholder:
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 for your prompt consideration of these matters.
Sincerely,
NextCard, Inc.
NXT25B DETACH HERE
PROXY
NextCard, Inc.
595 Market Street
Suite 1800
San Francisco, CA 94105
SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS
The undersigned hereby appoints Jeremy Lent, John Hashman and Robert
Linderman, each with the power to appoint his substitute, and hereby authorizes
each of them to represent the undersigned and to vote, as designated on the
reverse side, all shares of common stock of NextCard, Inc. (the "Company") held
of record by the undersigned on March 27, 2000 at the Annual Meeting of
Stockholders to be held on May 26, 2000 and any adjournments thereof.
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 REQUIRED IS MAILED IN THE UNITED STATES.
SEE REVERSE SEE REVERSE
SIDE CONTINUED AND TO BE SIGNED ON REVERSE SIDE SIDE
<PAGE> 29
VOTE BY TELEPHONE VOTE BY INTERNET
It's fast, convenient, and It's fast, convenient, and your vote
immediate! is immediately confirmed and posted.
Call Toll-Free on a
Touch-Tone Phone
1-877-PRX-VOTE (1-877-779-8683).
FOLLOW THESE FOUR EASY STEPS: FOLLOW THESE FOUR EASY STEPS:
1. Read the accompanying Proxy 1. Read the accompanying Proxy
Statement/Prospectus and Statement/Prospectus and
Proxy Card. Proxy Card.
2. Call the toll-free number 2. Go to the Website
1-877-PRX-VOTE (1-877-779-8683). http://www.eproxyvote.com/nxcd
3. Enter your 14-digit Voter Control 3. Enter your 14-digit Voter Control
Number located on your Proxy Card Number located on your Proxy Card
above your name. above your name.
4. Follow the recorded instructions. 4. Follow the instructions provided.
YOUR VOTE IS IMPORTANT! YOUR VOTE IS IMPORTANT!
Call 1-877-PRX-VOTE anytime! Go to http://www.eproxyvote.com/nxcd
anytime!
DO NOT RETURN YOUR PROXY CARD IF YOU ARE VOTING BY TELEPHONE OR INTERNET
NXT25A DETACH HERE
[X] PLEASE MARK
VOTES AS IN
THIS EXAMPLE.
1. Election of Directors.
Nominees: (01) Alan N. Colner 2. Approve the amendments to the
and Daniel R. Eitingon 1997 Stock Plan.
FOR WITHHELD FOR AGAINST ABSTAIN
/ / / / / / / / / /
3. Ratify the appointment of
Ernst & Young as independent
auditors.
/ / / / / /
/ / ______________________________ 4. In their discretion, the proxies
For both nominees except as are authorized to vote upon any
noted above other business that may properly
come before the 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 title as
such. If signing for a corporation
please sign in full corporate name
by a duly authorized officer.
Signature:_________________________ Date:_____________
Signature:_________________________ Date:_____________
