<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [ ]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ ] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
- --------------------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
- --------------------------------------------------------------------------------
(3) Filing party:
- --------------------------------------------------------------------------------
(4) Date filed:
- --------------------------------------------------------------------------------
<PAGE> 2
[INTERNET CAPITAL GROUP LOGO]
INTERNET CAPITAL GROUP, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
DATE: MAY 31, 2000
TIME: 10:00 A.M.
PLACE: THE DESMOND GREAT VALLEY
ONE LIBERTY BOULEVARD
MALVERN, PENNSYLVANIA 19355
The purposes of the Annual Meeting are:
(1) to elect two Class I directors, both for a term of three years and
until their respective successors have been elected and qualified;
(2) to ratify the appointment of KPMG LLP as the Company's independent
certified public accountants for the fiscal year ending December 31,
2000;
(3) to approve a proposal to amend the Restated Certificate of
Incorporation to increase the number of authorized shares of Common
Stock;
(4) to approve an amendment to the Company's 1999 Equity Compensation Plan
to increase by 18,000,000 shares the number of shares of Common Stock
authorized to be issued under it; and
(5) to transact any other business that may properly come before the
meeting.
By Order of the Board of Directors
/s/ Henry N. Nassau
Henry N. Nassau April 21, 2000
Secretary
- --------------------------------------------------------------------------------
<PAGE> 3
PROXY STATEMENT
This Proxy Statement and the accompanying proxy card are being mailed beginning
April 21, 2000 to owners of shares of Internet Capital Group, Inc. (the
"Company") Common Stock in connection with the solicitation of proxies by the
Board of Directors for the 2000 Annual Meeting of Shareholders. This proxy
procedure is necessary to permit all Common Stock shareholders, many of whom
live throughout the United States and in foreign countries and are unable to
attend the Annual Meeting, to vote. The Board of Directors encourages you to
read this document thoroughly and to take this opportunity to vote on the
matters to be decided at the Annual Meeting.
- --------------------------------------------------------------------------------
CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Voting Procedures........................................... 1
Corporate Governance........................................ 2
Election of Directors (Item 1 on Proxy Card)................ 2
Ratification of Appointment of Independent Accountants (Item
2 on Proxy Card).......................................... 4
Proposal to Increase Authorized Common Stock (Item 3 on
Proxy Card)............................................... 4
Amendment of 1999 Equity Compensation Plan (Item 4 on Proxy
Card)..................................................... 6
Submission of Shareholder Proposals and Director
Nominations............................................... 12
Executive Compensation...................................... 12
Compensation Tables......................................... 14
Other Forms of Compensation................................. 15
Stock Performance Graph..................................... 17
Security Ownership of Certain Beneficial Owners and
Directors and Officers.................................... 18
Certain Relationships and Related Transactions.............. 19
Section 16(a) Beneficial Ownership Reporting Compliance..... 23
Compensation Committee Interlocks and Insider
Participation............................................. 23
Other Business.............................................. 23
</TABLE>
- --------------------------------------------------------------------------------
INTERNET CAPITAL GROUP, INC.
435 DEVON PARK DRIVE
BUILDING 600
WAYNE, PENNSYLVANIA 19087
<PAGE> 4
VOTING PROCEDURES
YOUR VOTE IS VERY IMPORTANT. Your shares can only be voted at the Annual
Meeting if you are present or represented by proxy. Whether or not you plan to
attend the Annual Meeting, you are encouraged to vote by proxy to assure that
your shares will be represented. You may revoke this proxy at any time before it
is voted by written notice to the Secretary of the Company, by submission of a
proxy bearing a later date or by casting a ballot at the Annual Meeting.
Properly executed proxies that are received before the Annual Meeting's
adjournment will be voted in accordance with the directions provided. If no
directions are given, your shares will be voted by one of the individuals named
on your proxy card as recommended by the Board of Directors. If you wish to give
a proxy to someone other than those named on the proxy card, you should cross
out those names and insert the name(s) of the person(s), not more than four, to
whom you wish to give your proxy.
WHO CAN VOTE? Shareholders as of the close of business on April 17, 2000 are
entitled to vote. On that day, about 264,607,194 shares of Common Stock were
outstanding and eligible to vote. Each share is entitled to one vote on each
matter presented at the Annual Meeting. A list of shareholders eligible to vote
will be available at the offices of Dechert Price & Rhoads, 4000 Bell Atlantic
Tower, 1717 Arch Street, Philadelphia, Pennsylvania beginning May 19, 2000.
Shareholders may examine this list during normal business hours for any purpose
relating to the Annual Meeting.
WHAT SHARES ARE INCLUDED IN THE PROXY CARD? The proxy card represents all the
shares of Common Stock registered to your account. Each share of Common Stock
that you own entitles you to one vote.
HOW ARE VOTES COUNTED? The Annual Meeting will be held if a quorum, consisting
of a majority of the outstanding shares of Common Stock entitled to vote, is
represented. Broker non-votes, votes withheld and abstentions will be counted
for purposes of determining whether a quorum has been reached. When nominees,
such as banks and brokers, holding shares on behalf of beneficial owners do not
receive voting instructions from the beneficial owners by the tenth day before
the Annual Meeting, the nominees may vote those shares only on matters deemed
routine by Nasdaq, such as the election of directors and ratification of the
appointment of independent accountants. On non-routine matters, nominees cannot
vote and there is a so-called "broker non-vote" on that matter. Because Items 2
and 4 must be approved by a majority of the votes cast, broker non-votes and
abstentions have no effect on a proposal's outcome. Because directors are
elected by a plurality of the votes cast, votes withheld from some or all
nominees for director could have an effect on the outcome of the election.
Because Item 3 must be approved by two-thirds of the outstanding shares of
voting securities, broker non-votes will have the same effect as a vote against
the proposal.
WHO WILL COUNT THE VOTE? The Company's Transfer Agent and Registrar,
ChaseMellon Shareholder Services, L.L.C. will tally the vote, which will be
certified by an Inspector of Election. The Inspector of Election will be the
Company's Secretary or Assistant Secretary.
IS MY VOTE CONFIDENTIAL? Proxies, ballots and voting tabulations are available
for examination only by the Inspector of Election and tabulators. Your vote will
not be disclosed to the Board of Directors or management of the Company except
as may be required by law.
WHO IS SOLICITING THIS PROXY? Solicitation of proxies is made on behalf of the
Board of Directors of the Company. The Company will pay the cost of preparing,
assembling and mailing the notice of Annual Meeting, proxy statement and proxy
card. The Company has also hired D. F. King & Co., Inc., a proxy solicitation
firm, for a fee of $12,500 plus expenses. In addition to the use of mail,
proxies may be solicited by directors, officers and regular employees of the
Company, without additional compensation, in person or by telephone or other
electronic means. The Company will reimburse brokerage houses and other nominees
for their expenses in forwarding proxy material to beneficial owners of the
Company's stock.
<PAGE> 5
- --------------------------------------------------------------------------------
CORPORATE GOVERNANCE
In accordance with Delaware General Corporation Law and the Company's Restated
Certificate of Incorporation and Amended and Restated By-Laws (the "By-Laws"),
the Company's business, property and affairs are managed under the direction of
the Board of Directors. Although directors are not involved in the day-to-day
operating details, they are kept informed of the Company's business through
written reports and documents provided to them regularly, as well as by
operating, financial and other reports presented by the officers of the Company
at meetings of the Board of Directors and committees of the Board of Directors.
MEETINGS OF THE BOARD OF DIRECTORS. The Board of Directors held 19 meetings in
1999. Each of the incumbent directors attended at least 75% of the Board of
Directors and committee meetings to which the director was assigned. The
incumbent directors in the aggregate attended about 90% of their Board of
Directors and assigned committee meetings.
COMMITTEES OF THE BOARD OF DIRECTORS. The Board of Directors has established
two standing committees.
Audit Committee -- reviews and monitors the Company's corporate financial
reporting, external audits, internal control functions and compliance with laws
and regulations that could have a significant effect on the Company's financial
condition or results of operations. In addition, the Audit Committee has the
responsibility to consider and recommend the appointment of, and to review fee
arrangements with, the Company's independent accountants. The Audit Committee
did not meet during 1999. The current members of the Audit Committee are Messrs.
Brodsky and Musser.
Compensation Committee -- reviews and makes recommendations to the Board of
Directors regarding the compensation to be provided to the Chief Executive
Officer. In addition, the Compensation Committee reviews compensation
arrangements for the other executive officers. The Compensation Committee also
administers the Company's equity compensation plans. The Compensation Committee
held one meeting during 1999. The current members of the Compensation Committee
are Messrs. Gerrity, Keith and Solvik.
DIRECTOR COMPENSATION. Directors do not receive compensation for their services
as directors; however, they are reimbursed for the expenses they incur in
attending meetings of the Board of Directors or board committees. Outside
directors of the Company are also eligible to receive options to purchase Common
Stock awarded under the 1999 Equity Compensation Plan.
- --------------------------------------------------------------------------------
ELECTION OF DIRECTORS
ITEM 1 ON PROXY CARD
The Company's By-Laws provide that the Company's business shall be managed by a
Board of Directors of not less than five and not more than nine directors, with
the number of directors to be fixed by the Board of Directors from time to time.
The By-Laws also divide the Company's Board of Directors into three classes:
Class I, Class II and Class III, each class being as nearly equal in number as
possible. The directors in each class serve terms of three years and until their
respective successors have been elected and have qualified. There are currently
two Class I directors, two Class II directors and three Class III directors.
The term of office of one class of directors expires each year in rotation so
that one class is elected at each annual meeting of shareholders for a three
year term. The term of the two Class I directors, Julian A. Brodsky and Warren
V. Musser, will expire at the Annual Meeting. The other five directors will
remain in office for the remainder of their respective terms, as indicated
below.
Director candidates are nominated by the Board of Directors. Shareholders are
also entitled to nominate director candidates for the Board of Directors in
accordance with the procedures set forth in the By-Laws.
2
<PAGE> 6
At the Annual Meeting, two Class I directors are to be elected. Both of the
director nominees are currently directors of the Company. Both nominees have
consented to being named as nominees for directors of the Company and have
agreed to serve if elected. The directors will be elected to serve for three
year terms and until their successors have been elected and have qualified. If
either or both of the nominees should become unavailable to serve at the time of
the Annual Meeting, the shares represented by proxy will be voted for any
remaining nominee and any substitute nominee(s) designated by the Board of
Directors. Director elections are determined by a plurality of the votes cast.
Set forth below is information regarding each nominee for Class I director and
each Class II and Class III director, each of whose term will continue after the
Annual Meeting.
NOMINEES FOR CLASS I DIRECTORS
Julian A. Brodsky. Mr. Brodsky has served as a director of the Company since
May 1996. Mr. Brodsky is a founder of Comcast Corporation, a developer of
broadband cable networks, cellular and personal communication systems and has
served as a director of Comcast since 1969 and Vice-Chairman since 1988. Mr.
Brodsky serves as a director of Comcast Cable Communications, Inc., NDS Group,
plc, the RBB Fund, Inc. and Chief Executive Officer of Comcast Interactive
Capital Group L.P. Age: 66.
Warren V. Musser. Mr. Musser has served as a director of the Company since
March 2000. Mr. Musser has served as Chairman and Chief Executive Officer of
Safeguard Scientifics, Inc. since 1953. Mr. Musser is Chairman of the Board of
Cambridge Technology Partners (Massachusetts), Inc. and CompuCom Systems, Inc.
He is also a director of DocuCorp International, Inc. and Sanchez Computer
Associates, Inc. and a trustee of Brandywine Realty Trust. Mr. Musser serves on
a variety of civic, educational and charitable boards of directors, and serves
as Vice President/Development, Cradle of Liberty Council, Boy Scouts of America,
Vice Chairman of The Eastern Technology Council, and Chairman of the
Pennsylvania Partnership on Economic Education. Age 73.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR BOTH OF THE LISTED NOMINEES.
INCUMBENT CLASS II DIRECTORS -- TO CONTINUE IN OFFICE FOR TERMS EXPIRING IN 2001
Robert E. Keith, Jr. Mr. Keith has served as the Chairman of the Board of
Directors since the Company's inception in March 1996. Mr. Keith is also
Managing General Partner of Technology Leaders II, L.P. and has had principal
operating responsibility for Technology Leaders II, L.P. since 1988. Mr. Keith
also serves as a director of American Education Centers, Inc., Cambridge
Technology Partners (Massachusetts), Inc., Diablo Research Corporation, LLC,
Masterpack International, Inc., MultiGen-Paradigm, Inc., Naviant Technology
Solutions, 67 Inc., Sunsource, Inc., US Interactive, Inc., and Whisper
Communications, Inc. and is Vice Chairman of the Board of Safeguard Scientifics,
Inc. Age: 58.
Peter A. Solvik. Mr. Solvik has served as a director since May 1999. Mr. Solvik
has served as Senior Vice President and Chief Information Officer of Cisco
Systems, Inc. since January 1999, as Vice President and CIO from 1995 to 1999,
and as Director of Information Systems and CIO from 1993 to 1995. Under Mr.
Solvik's leadership, Cisco Systems has been recognized as one of the most
innovative and successful large corporations in the use of the Internet. Mr.
Solvik serves as a director of Asera Inc., Cohera Corp. and Context Integration,
Inc. Age: 41.
INCUMBENT CLASS III DIRECTORS -- TO CONTINUE IN OFFICE FOR TERMS EXPIRING IN
2002
Walter W. Buckley, III. Mr. Buckley is a co-founder and has served as President
and Chief Executive Officer and as a director of the Company since March 1996.
Prior to co-founding the Company, Mr. Buckley worked for Safeguard Scientifics,
Inc. as Vice President of Acquisitions from 1991 to February 1996. Mr. Buckley
directed many of Safeguard Scientifics' investments and was responsible for
developing and executing Safeguard Scientifics' multimedia and Internet
investment strategies. Mr. Buckley serves as a director of Breakaway Solutions,
Inc., e-Chemicals, Inc., PaperExchange.com
3
<PAGE> 7
LLC, PrivaSeek, Inc., Safeguard Scientifics, Inc., Syncra Software, Inc.,
VerticalNet, Inc., Who?Vision Systems, Inc. and XL Vision, Inc. Age: 40.
Kenneth A. Fox. Mr. Fox is a co-founder and has served as a Managing Director
since the Company's inception in March 1996. Mr. Fox has also served as a
director since February 1999. Prior to co-founding the Company, Mr. Fox served
as Director of West Coast Operations for Safeguard Scientifics, Inc. and
Technology Leaders II, L.P., a venture capital partnership, from 1994 to 1996.
In this capacity, Mr. Fox led the development of and managed the West coast
operations for these companies. Mr. Fox serves as a director of AUTOVIA
Corporation, Bidcom, Inc., Commerx, Inc., Deja.com, Inc., Entegrity Solutions
Corporation, and ONVIA.com, Inc. Age: 29.
Dr. Thomas P. Gerrity. Dr. Gerrity has served as a director since December
1998. Dr. Gerrity also served as the Dean of The Wharton School of the
University of Pennsylvania from July 1990 to June 1999. He is currently
Professor and Director of the Wharton School Electronic Commerce Forum. Dr.
Gerrity also serves as a director of CVS Corporation, Fannie Mae, Purchasing
Solutions, Inc. dba ICG Commerce, Inc., Knight-Ridder, Inc., Reliance Group
Holdings, Inc., Sunoco, Inc. and Investor Force Holdings, Inc. and a trustee of
MAS Funds. Age: 58.
- --------------------------------------------------------------------------------
RATIFICATION OF APPOINTMENT OF
INDEPENDENT ACCOUNTANTS
ITEM 2 ON PROXY CARD
Subject to shareholder ratification, the Board of Directors, acting upon the
recommendation of the Audit Committee, has reappointed the firm of KPMG LLP,
certified public accountants, as independent accountants to examine the
financial statements of the Company for 2000. Ratification requires the
affirmative vote of a majority of eligible shares present at the Annual Meeting,
in person or by proxy, and voting thereon. Unless otherwise specified by the
shareholders, the shares of stock represented by the proxy will be voted for
ratification of the appointment of KPMG LLP as independent accountants to audit
and report upon the financial statements of the Company for fiscal year 2000. If
this appointment is not ratified by shareholders, the Audit Committee may
reconsider its recommendation.
One or more representatives of KPMG LLP are expected to be at the Annual
Meeting. They will have an opportunity to make a statement and will be available
to respond to appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION.
- --------------------------------------------------------------------------------
PROPOSAL TO INCREASE AUTHORIZED COMMON STOCK
ITEM 3 ON PROXY CARD
The Company's Restated Certificate of Incorporation, as currently in effect,
provides that the Company is authorized to issue two classes of stock,
consisting of 300,000,000 shares designated as Common Stock, $.001 par value per
share, and 10,000,000 shares designated as Preferred Stock, $.01 par value per
share. On March 3, 2000, the Board of Directors adopted a resolution setting
forth a proposed amendment to the Company's Restated Certificate of
Incorporation to increase the authorized number of shares of Common Stock by
1,700,000,000 shares to an aggregate of 2,000,000,000 shares. The resolution
declares the advisability of the proposed amendment and directs that the
proposed amendment be considered at the annual meeting of shareholders. The
proposed amendment does not affect any terms or rights of the Company's Common
Stock or Preferred Stock. As proposed to be amended, the first paragraph of
Article Four of the Restated Certificate of Incorporation would read as follows:
"4. Authorized Capital. The aggregate number of shares of stock which
the Corporation shall have authority to issue is 2,010,000,000 shares,
divided into two classes consisting of 10,000,000 shares of Preferred
Stock, par value $.01 per share ("Preferred Stock"), and 2,000,000,000
shares of Common Stock, par value $.001 per share ("Common Stock")."
4
<PAGE> 8
As of March 31, 2000, in addition to the about 264,500,000 shares of Common
Stock issued and outstanding, about 32,000,000 additional shares of Common Stock
were reserved for issuance for various purposes, including for issuance upon
exercise or conversion of warrants and convertible notes and under the Company's
1999 Equity Compensation Plan. Therefore, as of March 31, 2000, there were a
total of about 296,500,000 shares of Common Stock either issued and outstanding
or reserved for issuance out of a total of 300,000,000 authorized shares of
Common Stock, leaving a total of about 3,500,000 shares of Common Stock
available for subsequent issuance or reservation. There are no pre-emptive
rights relating to the Common Stock. As of March 31, 2000, there were no shares
of Preferred Stock outstanding.
PURPOSE AND EFFECT OF THE AMENDMENT
The Board of Directors believes that increasing the number of authorized shares
of Common Stock is desirable to make additional unreserved shares of Common
Stock available for issuance or reservation without further shareholder
authorization, except as may be required by applicable law or by stock exchange
rules.
Having such additional shares authorized and available for issuance or
reservation will provide the Company with the flexibility to issue shares of
Common Stock in possible future financings, stock dividends or distributions,
acquisitions, equity incentive plans or other proper corporate purposes which
may be identified in the future by the Board of Directors, without the expense
and delay of a special stockholders' meeting. Other than with respect to the
reservation of shares of Common Stock in connection with the Company's 1999
Equity Compensation Plan or as publicly announced, the Company has no plans or
other existing or proposed agreements or understandings to issue, or reserve for
future issuance, any of the additional shares of Common Stock which would be
authorized by the proposed amendment.
The issuance of additional shares of Common Stock may have a dilutive effect on
earnings per share and on the equity and voting power of existing holders of
Common Stock. It may also adversely affect the market price of the Common Stock.
However, in the event additional shares are issued in transactions whereby
favorable business opportunities are provided or that provide working capital
sufficient to further capitalize the Company and allow it to pursue its business
plans, the market price may increase.
POTENTIAL ANTI-TAKEOVER EFFECT
Although the proposed amendment to the Company's Restated Certificate of
Incorporation is not motivated by takeover concerns and is not considered by the
Board of Directors to be an anti-takeover measure, the availability of
additional authorized shares of Common Stock could enable the Board of Directors
to issue shares defensively in response to a takeover attempt. Such issuances
could dilute the ownership and voting rights of a person seeking to obtain
control of the Company, dilute the value of outstanding shares, and increase the
ownership of stockholders opposed to a takeover. Thus, increasing the authorized
Common Stock could render more difficult and less likely a merger, tender offer
or proxy contest, assumption of control by a holder of a large block of the
Company's stock, and the removal of incumbent management. Issuance of additional
shares unrelated to any takeover attempt could also have these effects.
Management has no current intent to propose anti-takeover measures in future
proxy solicitations.
VOTE REQUIRED
Approval of this amendment to the Restated Certificate of Incorporation requires
the affirmative vote of the holders of not less than two-thirds (66 2/3%) of the
outstanding shares of voting securities. As a result, any shares not voted
(whether by abstention, broker non-vote or otherwise) will have the same effect
as a vote against the proposal.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSED AMENDMENT TO THE
RESTATED CERTIFICATE OF INCORPORATION.
5
<PAGE> 9
- --------------------------------------------------------------------------------
AMENDMENT OF 1999 EQUITY COMPENSATION PLAN
ITEM 4 ON PROXY CARD
The Company's 1999 Equity Compensation Plan (the "1999 Plan") was adopted in
February 1999. Since less than 835,500 shares remained available for issuance
under that plan, in March 2000, the Board of Directors amended the 1999 Plan by
increasing the number of shares of Common Stock authorized for issuance under
the 1999 Plan by 18,000,000 shares, from 42,000,000 to 60,000,000. Under the
Nasdaq listing rules, shareholder approval must be obtained when a stock option
or purchase plan is to be established or other arrangement made pursuant to
which stock may be acquired by officers or directors, unless the shares are
issued to persons not previously employed by the Company as an inducement
essential to their entering into employment contracts with the Company. If
shareholder approval is obtained, the Company will be able to make incentive
stock option grants and grants to existing employees. The Board of Directors
believes that shareholder approval of the Board of Director's increase in the
number of shares of Common Stock which may be issued under the 1999 Plan is
necessary to ensure that sufficient shares will be available to support the
Company's continuing efforts to attract and retain highly qualified employees.
The terms and provisions of the 1999 Plan are summarized below. This summary,
however, does not purport to be a complete description of the 1999 Plan and is
qualified in its entirety by the terms of the 1999 Plan.
PURPOSE
The purpose of the 1999 Plan is to provide:
- designated employees of the Company and its subsidiaries;
- certain advisors who perform services for the Company or its subsidiaries;
and
- non-employee members of the Board of Directors
with the opportunity to receive grants of incentive stock options, non-qualified
options, share appreciation rights, restricted shares, performance shares,
dividend equivalent rights and cash awards.
The Company believes that the 1999 Plan will encourage the participants to
contribute materially to the Company's growth and will align the economic
interests of the participants with those of the shareholders.
GENERAL
Prior to the amendment and subject to adjustment as described below, the 1999
Plan authorized awards to participants of up to 42,000,000 shares of the
Company's Common Stock, 41,164,500 of which had been granted as of December 31,
1999. The amendment to the 1999 Plan authorized 60,000,000 shares for issuance
under the 1999 Plan. No more than 6,000,000 shares in the aggregate may be
granted to any individual in any calendar year. Such shares may be authorized
but unissued shares of the Company's Common Stock or may be shares that the
Company has reacquired, including shares the Company purchases on the open
market. If any options or stock appreciation rights granted under the 1999 Plan
expire or are terminated for any reason without being exercised, or restricted
shares or performance shares are forfeited, the shares of Common Stock
underlying that award will again be available for grant under the 1999 Plan.
ADMINISTRATION OF THE 1999 PLAN
The Compensation Committee will administer and interpret the 1999 Plan. The
Compensation Committee has the sole authority to designate participants, grant
awards and determine the terms of all grants, subject to the terms of the 1999
Plan. The Compensation Committee consists of two or more persons appointed by
the Board of Directors from among its members, each of whom is a "non-employee
director" as defined by Rule 16b-3 under the Securities Exchange Act of 1934,
and an "outside director" as defined by Section 162(m) of the Internal Revenue
Code and related Treasury regulations. The Compensation Committee has the full
authority to interpret the 1999 Plan and to make rules, regulations, agreements
and instruments for implementing the 1999 Plan. The Compensation Committee's
determinations made under the 1999 Plan are to be
6
<PAGE> 10
conclusive and binding on all persons having any interest in the 1999 Plan or
any awards granted under the 1999 Plan.
ELIGIBILITY
Grants may be made to any employee of the Company or any of its subsidiaries and
to any non-employee member of the Board of Directors. Key advisors who perform
services for the Company or any of its subsidiaries are eligible if they render
bona fide services, not as part of the offer or sale of securities in a
capital-raising transaction.
OPTIONS
Incentive stock options may be granted only to employees. The maximum number of
shares that may be subject to incentive stock options over the life of the 1999
Plan for any individual is 6,000,000. Non-qualified stock options may be granted
to employees, key advisors and non-employee directors. The exercise price of
Common Stock underlying an option shall be determined by the Compensation
Committee at the time the option is granted, and may be equal to, greater than,
or less than the fair market value of such stock on the date the option is
granted; provided, that the exercise price of an incentive stock option shall be
equal to or greater than the fair market value of a share of Common Stock on the
date such incentive stock option is granted, and the exercise price of an
incentive stock option granted to an employee who owns more than 10% of the
Common Stock may not be less than 110% of such fair market value.
Unless the applicable option agreement provides otherwise, a participant can
exercise an option award at any time, before or after the option has fully
vested, by paying the applicable exercise price in cash, or, with the approval
of the Compensation Committee, by delivering shares of Common Stock owned by the
grantee and having a fair market value on the date of exercise equal to the
exercise price of the grants, or by such other method as the Compensation
Committee shall approve, including payment through a broker in accordance with
procedures permitted by Regulation T of the Federal Reserve Board. In addition,
the 1999 Plan provides that the Company may make loans to participants or
guarantee loans made by third parties to the participant for the purpose of
assisting participants to exercise their options. The Compensation Committee has
the authority to set the terms and conditions that will apply to any loan or
guarantee.
Options vest according to the terms and conditions determined by the
Compensation Committee and specified in the grant instrument. The Compensation
Committee will determine the term of each option up to a maximum of ten years
from the date of grant except that the term of an incentive stock option granted
to an employee who owns more than 10% of the Common Stock may not exceed five
years from the date of grant. The Compensation Committee may accelerate the
exercisability of any or all outstanding options at any time for any reason.
NON-EMPLOYEE DIRECTOR OPTION GRANTS
The 1999 Plan provides that each of the Company's non-employee directors, other
than:
- non-employee directors who at any time during their membership on the Board
of Directors are employees of Safeguard Scientifics, Inc. or any of its
subsidiaries or affiliates;
- non-employee directors who at any time during their membership on the Board
of Directors are employees of TL Ventures, Inc. or any of its subsidiaries
or affiliates; or
- non-employee directors who are granted options under the general option
provisions of the 1999 Plan
are each entitled to receive an option to purchase 94,000 shares of the
Company's Common Stock, vesting in equal installments over four years, upon
their initial election to the Board of Directors, and a service grant to
purchase 40,000 shares every two years, vesting in equal installments over two
years. The 1999 Plan also allows the Board of Directors to grant an option to
any of the eligible non-employee directors who were members of the Board of
Directors immediately following the conversion of the Company from a limited
liability company to a corporation to compensate any of those non-employee
directors for the cancellation of outstanding options held immediately prior to
such reorganization. No non-employee director may be granted more than 214,000
shares of the Company's Common Stock under the automatic and conversion grants
described above. Such automatic and conversion grants will
7
<PAGE> 11
otherwise be generally subject to the terms provided for options under the 1999
Plan.
RESTRICTED STOCK
The Compensation Committee shall determine the number of restricted shares
granted to a participant, subject to the maximum plan limit described above.
Grants of restricted shares will be conditioned on such performance
requirements, vesting provisions, transfer restrictions or other restrictions
and conditions as the Compensation Committee may determine in its sole
discretion. The restrictions shall remain in force during a restriction period
set by the Compensation Committee. If the grantee is no longer employed by the
Company during the restriction period or if any other conditions are not met,
the restricted shares grant will terminate as to all shares covered by the grant
for which the restrictions are still applicable, and those shares must be
immediately returned to the Company.
STOCK APPRECIATION RIGHTS
The Compensation Committee may grant stock appreciation rights (SARs) to any
participant, subject to the maximum plan limit described above. At any time, the
Compensation Committee may grant an SAR award, either separately or in
connection with any option; provided, that if an SAR is granted in connection
with an incentive stock option, it must be granted at the same time that the
underlying option is granted. The Compensation Committee will determine the base
amount of the SAR at the time that it is granted and will establish any
applicable vesting provisions, transfer restrictions or other restrictions as it
may determine is appropriate in its sole discretion. When a participant
exercises an SAR, he or she will receive the amount by which the value of the
stock has appreciated since the SAR was granted, which may be payable to the
participant in cash, shares, or a combination of cash and shares, as determined
by the Compensation Committee.
PERFORMANCE SHARE AWARDS
The Compensation Committee may grant performance share awards to any employee or
key advisor. A performance share award represents the right to receive an amount
based on the value of the Company's Common Stock, but may be payable only if
certain performance goals that are established by the Compensation Committee are
met. If the Compensation Committee determines that the applicable performance
goals have been met, a performance share award will be payable to the
participant in cash, shares or a combination of cash and shares, as determined
by the Compensation Committee.
DIVIDEND EQUIVALENT RIGHTS
The Compensation Committee may grant dividend equivalent rights to any
participant. A dividend equivalent right is a right to receive payments in
amounts equal to dividends declared on shares of the Company's Common Stock with
respect to the number of shares and payable on such dates as determined by the
Compensation Committee. The Compensation Committee shall determine all other
terms applicable to dividend equivalent rights.
CASH AWARDS
The Compensation Committee may grant cash awards to employees under the 1999
Plan. Such awards shall be in such amounts and subject to such performance goals
and other terms and conditions as the Compensation Committee determines.
AMENDMENT AND TERMINATION OF THE 1999 PLAN
The Compensation Committee may amend or terminate the 1999 Plan at any time. The
1999 Plan will terminate on May 1, 2009, unless the Compensation Committee
terminates it earlier or extends it with the approval of the shareholders.
ADJUSTMENT PROVISIONS
In the event that certain reorganizations of the Company or similar transactions
or events occur, the maximum number of shares of stock available for grant, the
maximum number of shares that any participant in the 1999 Plan may be granted,
the number of shares covered by outstanding grants, the kind of shares issued
under the 1999 Plan and the price per share or the applicable market value of
such grants shall be adjusted by the committee to reflect changes to the
Company's Common Stock as a result of such occurrence to prevent the dilution or
enlargement of rights of any individual under the 1999 Plan.
8
<PAGE> 12
CHANGE OF CONTROL AND REORGANIZATION
Upon a Change of Control, as defined in the 1999 Plan, the Compensation
Committee may:
- determine that the outstanding grants, whether in the form of options and
stock appreciation rights, shall immediately vest and become exercisable;
- determine that the restrictions and conditions on all outstanding
restricted stock or performance share awards shall immediately lapse;
- require that grantees surrender their outstanding options and stock
appreciation rights in exchange for payment by the Company, in cash or
Common Stock, in an amount equal to the amount by which the then fair
market value of the shares of Common Stock subject to the grantee's
unexercised options or stock appreciation rights exceeds the exercise price
of those options; and/or
- after giving grantees an opportunity to exercise their outstanding options
and stock appreciation rights, terminate any or all unexercised options and
stock appreciation rights.
Upon a Reorganization, as defined in the 1999 Plan, where the Company is not the
surviving entity or where the Company survives only as a subsidiary of another
entity, unless the Compensation Committee determines otherwise, all outstanding
option or SAR grants shall be assumed by or replaced with comparable options or
rights by the surviving corporation. In addition, the Compensation Committee
may:
- require that grantees surrender their outstanding options in exchange for
payment by the Company, in cash or Common Stock, at an amount equal to the
amount by which the then fair market value of the shares of Common Stock
subject to the grantee's unexercised options exceeds the exercise price of
those options; and/or
- after accelerating all vesting and giving grantees an opportunity to
exercise their outstanding options or SARs, terminate any or all
unexercised options and SARs.
FEDERAL TAX CONSEQUENCES
The current federal income tax treatment of grants under the 1999 Plan is
described below. Local and state tax authorities also may tax incentive
compensation awarded under the 1999 Plan. Because of the complexities involved
in the application of tax laws to specific circumstances and the uncertainties
as to possible future changes in those laws, the Company urges participants to
consult their own tax advisors concerning the application of the general
principles discussed below to their own situations and the application of state
and local tax laws.
Incentive Stock Options. In general, neither the grant nor the exercise of an
incentive stock option will result in taxable income to an option holder or a
deduction to the Company. To receive special tax treatment as an incentive stock
option, an option holder must neither dispose of such shares within two years
after the incentive stock option is granted nor within one year after the
exercise of the option. Incentive stock option treatment under the Internal
Revenue Code generally allows the sale of the Company's Common Stock received
upon the exercise of an incentive stock option to result in any gain being
treated as a capital gain to the option holder, but the Company will not be
entitled to a tax deduction. However, the exercise of an incentive stock option,
if the holding period rules described above are satisfied, will give rise to
income includable by the option holder in his or her alternative minimum tax
calculation, in an amount equal to the excess of the fair market value of the
stock acquired on the date of the exercise of the option over the exercise
price.
If the holding rules described above are not satisfied, gain recognized on the
disposition of the shares acquired upon the exercise of an incentive stock
option will be characterized as ordinary income. Such gain will be equal to the
difference between the exercise price and the fair market value of the shares at
the time of exercise. Special rules may apply to disqualifying dispositions
where the amount realized is less than the value at exercise. The Company will
generally be entitled to a deduction equal to the amount of such gain included
by an option holder as ordinary income. Any excess of the amount realized upon
such disposition over the fair market value at exercise will generally be
long-term or short-term capital gain depending on the holding period involved.
9
<PAGE> 13
Notwithstanding the foregoing, in the event that the exercise of the option is
permitted other than by cash payment of the exercise price, various special tax
rules may apply.
Non-Qualified Stock Options. No income will be recognized by an option holder
at the time a non-qualified stock option is granted. Generally, ordinary income
will, however, be recognized by an option holder at the time a vested
non-qualified stock option is exercised in an amount equal to the excess of the
fair market value of the underlying Common Stock on the exercise date over the
exercise price. The Company will generally be entitled to a deduction for
federal income tax purposes in the same amount. Gain or loss on a subsequent
sale or other disposition of the shares acquired upon the exercise of a vested
non-qualified stock option will be measured by the difference between the amount
realized on the disposition and the tax basis of such shares, and will generally
be long-term capital gain depending on the holding period involved. The tax
basis of the shares acquired upon the exercise of any non-qualified stock option
will be equal to the sum of the exercise price of such non-qualified stock
option and the amount included in income with respect to such option.
Notwithstanding the foregoing, in the event that exercise of the option is
permitted other than by cash payment of the exercise price, various special tax
rules apply.
Unless the holder of an unvested non-qualified stock option makes an 83(b)
election as described below, there generally will be no tax consequences as a
result of the exercise of an unvested option until the stock received upon such
exercise is no longer subject to a substantial risk of forfeiture or is
transferable. Generally, when the shares have vested, the holder will recognize
ordinary income, and the Company will be entitled to a deduction, equal to the
difference between the fair market value of the stock at such time and the
exercise price paid by the holder for the stock. Subsequently realized changes
in the value of the stock generally would be treated as long-term or short-term
capital gain or loss, depending on the length of time the shares were held prior
to disposition of such shares. In general terms, if a holder were to make an
election under Section 83(b) of the Internal Revenue Code upon the exercise of
the unvested option, the holder would recognize ordinary income on the date of
the exercise of such option, and the Company would be entitled to a deduction,
equal to the fair market value of the stock received pursuant to such exercise
as though the stock were not subject to a substantial risk of forfeiture or
transferable, minus the exercise price paid for the stock.
If an 83(b) election were made, there would generally be no tax consequences to
the holder upon the vesting of the stock, and all subsequent appreciation in the
stock would generally be eligible for capital gains treatment.
Additional special tax rules may apply to those option holders who are subject
to the rules set forth in Section 16 of the Securities Exchange Act of 1934.
Restricted Stock. A participant normally will not recognize taxable income upon
the award of a restricted stock grant, and the Company will not be entitled to a
deduction, until the stock is transferable by the participant or no longer
subject to a substantial risk of forfeiture. When the stock is either
transferable or is no longer subject to a substantial risk of forfeiture, the
participant will recognize ordinary compensation income in an amount equal to
the fair market value of the Common Stock at that time, less any consideration
paid by the participant for the shares, and the Company will be entitled to a
deduction in the same amount. A participant may, however, elect under Section
83(b), described above, to recognize ordinary compensation income in the year
the restricted stock grant is awarded in an amount equal to the fair market
value of the Common Stock at that time less any consideration paid by the
participant for the shares, determined without regard to the restrictions. In
such event, the Company generally will be entitled to a corresponding deduction
in the same year. Any gain or loss recognized by the participant upon a
subsequent disposition of the shares will be capital gain or loss. If, after
making the election, any shares subject to a restricted stock grant are
forfeited, or if the market value declines during the restriction period, the
participant is generally not entitled to a tax deduction.
Stock Appreciation Rights. There are no federal income tax consequences to a
holder or to the Company upon the grant of an SAR. Upon the exercise of an SAR,
the holder will recognize ordinary compensation income in an amount equal to the
cash and the fair market value of any shares of Common Stock received upon
exercise,
10
<PAGE> 14
and the Company generally will be entitled to a corresponding deduction. Upon
the sale of any shares acquired by the exercise of an SAR, a holder will have a
capital gain or loss (long-term or short-term depending upon the holding period
involved) in an amount equal to the difference between the amount realized upon
the sale and the holder's adjusted tax basis in the shares (the amount of
ordinary income recognized by the holder at the time of exercise of the SAR).
Performance Share Awards. A participant will not recognize any income upon the
grant of a performance share award. At the time the Compensation Committee
determines an amount, if any, to be paid with respect to performance share
awards, the participant will recognize ordinary compensation income in an amount
equal to the cash and the fair market value of any shares of Common Stock paid.
The Company generally will be entitled to a corresponding deduction. Upon the
sale of any shares acquired, a participant will have a capital gain or loss
(long-term or short-term depending upon the holding period involved) in an
amount equal to the difference between the amount realized upon the sale and the
participant's adjusted tax basis in the shares (the amount of ordinary income
recognized by the participant upon payment of the shares).
Tax Withholding. All grants under the 1999 Plan are subject to applicable tax
withholding requirements. The Company has the right to deduct from all grants
paid in cash, or from other wages paid to a participant, any taxes required by
law to be withheld with respect to the grant. If grants are paid in shares of
Common Stock, the Company may require a participant to pay the amount of any
taxes that it is required to withhold or may deduct the amount of withholding
taxes from other wages paid to the participant. If approved by the Compensation
Committee, the income tax withholding obligation with respect to grants paid in
Common Stock may be satisfied by having shares withheld. The Company's
obligations under the 1999 Plan are conditional upon the payment or arrangement
for payment of any required withholding.
Section 162(m). Section 162(m) of the Internal Revenue Code may preclude the
Company from claiming a federal income tax deduction if it pays total
remuneration in excess of $1 million to the chief executive officer or to any of
the other four most highly compensated officers in any one year. Total
remuneration would generally include income recognized pursuant to awards made
under the 1999 Plan. An exception does exist, however, for performance-based
compensation which includes amounts received upon the exercise of stock options
pursuant to a plan approved by shareholders that meets certain requirements. The
1999 Plan is intended to make grants of stock options and stock appreciation
rights that meet the requirements of performance-based compensation. Other
awards have been structured with the intent that such awards may qualify as such
performance based compensation if so determined by the Compensation Committee.
Approval of the amendment to 1999 Plan requires the affirmative vote of a
majority of the total votes cast. As a result, any shares not voted (whether by
abstention, broker non-vote or otherwise) will have no effect on the outcome.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE AMENDMENT TO THE 1999 EQUITY
COMPENSATION PLAN.
11
<PAGE> 15
- --------------------------------------------------------------------------------
SUBMISSION OF SHAREHOLDER PROPOSALS AND
DIRECTOR NOMINATIONS
Shareholders wishing to have a proposal included in the Board of Directors' 2001
Proxy Statement must submit the proposal so that the Secretary of the Company
receives it no later than February 1, 2001. The Securities and Exchange
Commission rules set forth standards as to what shareholder proposals are
required to be included in a proxy statement. Shareholders wishing to make a
nomination for election to the Board of Directors must submit written notice of
the shareholder's intention to make such nomination so that the Chairman of the
Board receives it not less than 90 days nor more than 120 days prior to the
annual meeting at which such nomination is to occur. Shareholders wishing to
have a proposal presented at an annual meeting must submit the proposal so that
the Secretary of the Company receives it not less than 90 days nor more than 120
days prior to the first anniversary of the preceding year's annual meeting;
provided; however, that in the event that the date of the meeting is advanced by
more than 20 days from such anniversary date, notice by the shareholder must be
received no later than the close of business on the 10th day following the
earlier of the date on which notice of the date of the meeting was mailed or
public disclosure was made. The Company's By-Laws set forth certain
informational requirements for shareholders' nominations of directors and
proposals.
- --------------------------------------------------------------------------------
EXECUTIVE COMPENSATION
REPORT OF THE COMPENSATION COMMITTEE
OF THE BOARD OF DIRECTORS
ON EXECUTIVE COMPENSATION
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS ON EXECUTIVE
COMPENSATION
Role of Committee. The Compensation Committee of the Board of Directors (the
"Committee") establishes, oversees and directs the Company's executive
compensation programs and policies and administers the Company's stock option
and long-term incentive plans. The Committee seeks to align executive
compensation with Company objectives and strategies, management programs,
business financial performance and enhanced shareholder value. The Committee
consists of three independent outside directors, none of whom is or was an
officer or employee of the Company.
The Committee regularly reviews and approves generally all compensation and
fringe benefit programs of the Company and also reviews and determines the
actual compensation of the Company's executive officers, as well as all stock
option grants, long-term incentive grants and cash incentive awards to all key
employees. All compensation actions taken by the Committee are reported to and
approved by the full Board of Directors. The Committee also reviews and makes
recommendations to the Board of Directors on policies and programs for the
development of management personnel and management structure and organization.
The Committee reviews and administers the Company's Membership Profit Interest
Plan, 1999 Equity Compensation Plan and Long-Term Incentive Plan. The Committee
may from time to time review executive compensation reports prepared by
independent organizations in order to evaluate the appropriateness of its
executive compensation program.
The Committee's objectives include (i) attracting and retaining exceptional
individuals as executive officers and (ii) providing key executives with
motivation to perform to the full extent of their abilities in an effort to
maximize Company performance to deliver enhanced value to the Company's
shareholders. The Committee believes it is important to place a greater
percentage of executive officers' total compensation, principally in the form of
equity, at risk than that of non-executives by tying executive officers'
compensation directly to the performance of the business and value of the Common
Stock. Executive compensation consists primarily of an annual salary, bonuses
linked to the performance of the Company and long-term equity-based
compensation.
12
<PAGE> 16
Compensation. The annual base salaries of the Company's executive officers are
set at levels designed to attract and retain exceptional individuals by
rewarding them for individual and Company achievements. The Committee reviews
executive officers' salaries annually to adjust such salaries based on each
executive officer's past performance, expected future contributions and the
scope and nature of responsibilities of the executive officer, including changes
in such responsibilities.
The Committee believes that a portion of the executives' compensation should be
tied to the achievement of the Company's goals in order to reward individual
performance and overall Company success. Such targets include the Company's
individual strategic and operating targets and expansion of the Company's
network of partner companies. Additionally, a portion of each officer's bonus is
based on subjective criteria particular to each officer's individual operating
responsibilities.
In addition to salaries and incentive bonuses, the Committee also grants stock
options to executive officers and other key employees of the Company and its
subsidiaries in order to focus the efforts of these employees on the long-term
enhancement of profitability and shareholder value. Awards under these employee
stock option plans may be in the form of options, restricted stock or stock
appreciation rights. Options, which have a fixed exercise price and vest over a
five-year period and have an exercise price equal to the market value of the
Common Stock on the date of grant, were granted to executive officers and other
key employees in 1999.
1999 Chief Executive Officer. The Committee determined the 1999 compensation of
Mr. Buckley, Chief Executive Officer, in accordance with the above discussion.
Specifically, the Committee utilized a base salary and an incentive bonus, with
the bonus being based on his individual performance and his overall leadership
and management of the Company. The Committee also issued Mr. Buckley stock
options which vest over a period of five years.
Deductibility of Compensation. Section 162(m) of the Internal Revenue Code
provides that publicly held companies may not deduct in any taxable year
compensation paid to any of the individuals named in the Summary Compensation
Table in excess of one million dollars that is not "performance-based." To
qualify as "performance-based" compensation, the Committee's discretion to grant
incentive awards must be strictly limited. Grants of stock options and SARs
under our plans generally will meet the requirements of "performance-based
compensation." Restricted stock grants generally will not qualify as, and
performance units may not qualify as, "performance-based compensation." The
Committee believes that the benefit of retaining the ability to exercise
discretion under the Company's incentive compensation plans outweighs the
limited risk of loss of tax deductions under section 162(m). Therefore, because
the 1999 Equity Compensation Plan and the Membership Profit Interest Plan have
been approved by the Company's shareholders, the Committee does not currently
plan to take any action, other than seeking shareholder approval for the
amendment to the 1999 Equity Compensation Plan, to qualify any of the incentive
compensation plans under section 162(m).
COMPENSATION COMMITTEE
Peter A. Solvik, Chairman
Dr. Thomas P. Gerrity
Robert E. Keith, Jr.
- --------------------------------------------------------------------------------
13
<PAGE> 17
COMPENSATION TABLES
EXECUTIVE COMPENSATION
The following table sets forth, for the fiscal years ending December 31, 1999
and 1998, certain information regarding the cash compensation paid by the
Company, as well as certain other compensation paid or accrued for such year, to
each of the executive officers of the Company named below, in all capacities in
which they served.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term
Annual Compensation
Compensation Awards
------------------------------------------- ------------
Securities
All Other Underlying
Name and Principal Position Year Salary Bonus Compensation(1) Options
- ------------------------------------------ ---- -------- -------- --------------- ------------
<S> <C> <C> <C> <C> <C>
Walter W. Buckley, III.................... 1999 $250,000 $125,000 -- 2,000,000
President and Chief Executive Officer 1998 $159,769 $ 96,000 -- 2,600,000
Douglas A. Alexander...................... 1999 $225,000 $112,500 -- 1,000,000
Managing Director, East Coast Operations 1998 $225,000 $100,000 -- 2,500,000
Kenneth A. Fox............................ 1999 $225,000 $112,500 -- 1,800,000
Managing Director, West Coast Operations 1998 $119,538 $ 75,000 -- 2,500,000
David D. Gathman.......................... 1999 $192,308 $100,000 -- 1,500,000
Chief Financial Officer and Treasurer 1998 -- -- -- --
Henry N. Nassau........................... 1999 $171,924 $200,000 -- 1,500,000
Managing Director, General Counsel and 1998 -- -- -- --
Secretary
</TABLE>
- ---------------
(1) The value of certain perquisites and other personal benefits is not included
in the amounts disclosed because it did not exceed for any officer in the
table above the lesser of either $50,000 or 10% of the total annual salary
and bonus reported for such officer.
STOCK OPTIONS
The following table sets forth information regarding stock options granted under
the 1999 Equity Compensation Plan during the fiscal year 1999 to the executive
officers of the Company named below:
OPTION GRANTS DURING THE YEAR ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
Percentage Potential Realizable Value at
Number of of Total Assumed Annual Rates of
Securities Options Stock Price Appreciation for
Underlying Granted to Exercise Option Term(3)
Options Employees Price per Expiration ------------------------------
Name Granted(1) in 1999 Share(2) Date 5% 10%
- ----------------------- ---------- ---------- --------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Walter W. Buckley,
III.................. 2,000,000 6.9% $3.40 May 20, 2009 $11,825,939 $21,505,372
Douglas A. Alexander... 1,000,000 3.4% $3.40 May 20, 2009 $ 5,912,969 $10,752,686
Kenneth A. Fox......... 1,800,000 6.2% $3.40 May 20, 2009 $10,643,345 $19,354,835
David D. Gathman....... 1,300,000 4.5% $1.00 Jan. 10, 2009 $10,800,360 $17,091,992
200,000 0.7% $3.40 May 20, 2009 $ 1,182,594 $ 2,150,537
Henry N. Nassau........ 1,500,000 5.2% $2.44 May 2, 2009 $10,301,954 $17,561,529
</TABLE>
- ---------------
(1) All options granted to employees are immediately exercisable, are
nonqualified stock options and generally vest over five years at the rate of
20% of the shares subject to the option per year. Unvested shares are
subject to a right of repurchase upon termination of employment. Options
expire ten years from the date of grant.
(2) The Company granted options at an exercise price equal to the fair market
value of its Common Stock on the date of grant, as determined by the Board
of Directors.
14
<PAGE> 18
(3) These amounts represent hypothetical gains that could be achieved for the
respective options if exercised at the end of the option term. These gains
are based on assumed rates of stock price appreciation of 5% and 10%
compounded annually from the date the respective options were granted to
their expiration dates, based upon the initial public offering price,
adjusted for stock splits, of $6.00 per share. These assumptions are not
intended to forecast future appreciation of the Company's stock price. The
potential realizable value computation does not take into account federal or
state income tax consequences of option exercises or sales of appreciated
stock.
The following table sets forth information regarding 1999 fiscal year-end option
values for each of the executive officers named below:
YEAR-END DECEMBER 31, 1999 OPTION VALUES
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options at
Shares Options at Fiscal Year-End Fiscal Year-End(1)($)
Acquired on Value ---------------------------- ----------------------------
Name Exercise (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
- -------------------------- ------------ ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Walter W. Buckley, III.... 4,600,000 $5,054,000 -- -- -- --
Douglas A. Alexander...... 3,500,000 $4,255,000 -- -- -- --
Kenneth A. Fox............ 4,300,000 $4,779,000 -- -- -- --
David D. Gathman.......... 1,300,000 $1,872,000 200,000 -- $33,321,000 --
Henry N. Nassau........... 1,500,000 $ 0 -- -- -- --
</TABLE>
- ---------------
(1) These year-end values represent the difference between the fair market value
of the Common Stock subject to options (based on the stock's closing price
on the Nasdaq Stock Market on December 31, 1999) and the exercise price of
the options.
- --------------------------------------------------------------------------------
OTHER FORMS OF COMPENSATION
MEMBERSHIP PROFIT INTEREST PLAN
In 1996, the board of managers of Internet Capital Group, L.L.C. approved the
Membership Profit Interest Plan. Under the terms of the Membership Profit
Interest Plan, certain employees, consultants and advisors who are designated by
Messrs. Buckley and Fox received grants of units of membership interest in
Internet Capital Group, L.L.C. These units of membership interest cannot be
transferred until the rights of the holder in the units vest. Twenty percent of
each of these holder's units of membership interest vest each year over a five
year period beginning on the vesting date established by the Board of Directors.
If any holder's relationship with the Company is terminated, his or her units of
membership interest that have not vested are forfeited to the Company.
Following the reorganization of the Company from a limited liability company to
a corporation, all outstanding grants became grants under the Company's new
Membership Profit Interest Plan. As of December 31, 1999, a total of 13,089,051
shares of Common Stock were issued and outstanding under the Membership Profit
Interest Plan. The Board of Directors has the power, subject to the limitations
contained in the Membership Profit Interest Plan, to prescribe the terms and
conditions of any award granted under the Membership Profit Interest Plan,
including the total number of shares awarded to each grantee and any applicable
vesting schedule.
1999 EQUITY COMPENSATION PLAN
The Company's 1999 Equity Compensation Plan is described above.
EQUITY COMPENSATION LOAN PROGRAM
In accordance with the 1999 Equity Compensation Plan and the applicable employee
option agreements, and in consideration of certain restrictive covenants
regarding the use of confidential information and non-competition, the Company
has offered to loan some employees who have been awarded non-qualified stock
options under the 1999 Equity Compensation Plan an amount necessary to pay the
exercise price of their outstanding options and an amount to pay some portion of
the
15
<PAGE> 19
income tax that these employees will owe upon the exercise of such options.
These loans will generally be available to those eligible employees who elect to
exercise their options on or prior to a date to be determined by the Company.
The loans will be full recourse, will bear interest at the Applicable Federal
Rate, and will be for five-year terms. In addition, each eligible employee will
pledge the number of shares acquired pursuant to the exercise of the applicable
option as collateral for the loan. If an eligible employee sells any shares
acquired pursuant to the option exercise, such eligible employee is obligated
under the terms of the loan to use the proceeds of such sale to repay that
percentage of the original balance of the loan which is equal to the percentage
determined by dividing the number of shares sold by the number of shares
acquired pursuant to the exercise of the applicable option. If the eligible
employee's employment by the Company is terminated for any reason, such eligible
employee must repay the full outstanding loan balance to the Company within 90
days of such termination. Also, if the Company determines that a grantee
breaches any of the terms of the restrictive covenants, such eligible employee
must immediately repay any outstanding loan balance to the Company.
LONG-TERM INCENTIVE PLAN
The Company's long-term incentive plan supports its growth strategy since the
plan permits participants to share directly in the growth of its partner
companies. Each year, the Company will allocate up to 12% of each acquisition
made during the year for the benefit of the participants in the long-term
incentive plan. The plan permits the Compensation Committee to award grants in
the form of interests in limited partnerships established by the Company to hold
the interests acquired by the Company in a given year. Grants may be made to any
of the Company's employees. The Company intends primarily to grant limited
partnership interests to plan participants to more closely align the
participants' interests with those of the Company. All grants are subject to the
attainment of specified threshold levels, but the Compensation Committee can
accelerate payout.
401(K) PLAN
The Company sponsors the Internet Capital Group, Inc. 401(k) Plan, a defined
contribution plan that is intended to qualify under Section 401(k) of the Code.
All employees who are at least 21 years old are eligible to participate in the
401(k) Plan. An eligible employee of the Company may begin to participate in the
401(k) Plan on the first day of the plan quarter after satisfying the 401(k)
Plan's eligibility requirements. A participating employee may make pre-tax
contributions of a percentage (not less than 1% and not more than 15%) of his or
her eligible compensation, subject to the limitations under the federal tax
laws. Employee contributions and the investment earnings thereon are immediately
vested. The Company may make discretionary contributions to the 401(k) Plan but
it has never done so.
- --------------------------------------------------------------------------------
16
<PAGE> 20
STOCK PERFORMANCE GRAPH
COMPARISON OF SEVEN MONTH CUMULATIVE TOTAL RETURN*
AMONG INTERNET CAPITAL GROUP, INC.,
THE NASDAQ COMPOSITE INDEX AND
THE GSTI INTERNET INDEX
The following graph presents a comparison of the Company's stock performance
with that of the Nasdaq Composite Index and the Goldman Sachs Technology
Internet Index from the date of the Company's initial public offering, August 5,
1999, through March 31, 2000.
<TABLE>
<CAPTION>
INTERNET CAPITAL GROUP, INC. NASDAQ COMPOSITE INDEX GSTI INTERNET INDEX
---------------------------- ---------------------- -------------------
<S> <C> <C> <C>
8/5/99 100.00 100.00 100.00
8/31/99 306.87 106.76 107.62
9/30/99 359.57 107.03 119.12
10/29/99 476.19 115.61 121.59
11/30/99 687.40 130.02 150.05
12/31/99 1391.16 158.60 185.99
1/31/00 973.81 153.57 162.38
2/29/00 865.38 183.05 180.38
3/31/00 739.03 178.22 169.63
</TABLE>
* $100 invested on 8/5/99 in stock or index -- including reinvestment of
dividends fiscal year ending December 31.
17
<PAGE> 21
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND DIRECTORS AND OFFICERS
The following table sets forth information as of March 31, 2000, with respect to
shares of Common Stock beneficially owned by (i) each person or group that is
known to the Company to be the beneficial owner of more than 5% of outstanding
Common Stock, (ii) each director and named executive officer of the Company and
(iii) all directors and executive officers of the Company as a group. Unless
otherwise specified, all shares are directly held.
<TABLE>
<CAPTION>
Number of Shares
Options, Warrants Beneficially Owned
and Convertible Including Options and
Notes Exercisable Warrants Exercisable Percent of Shares
5% Beneficial Owners, Directors, Named Officers Within 60 Days Within 60 Days Outstanding
- --------------------------------------------------- ----------------- --------------------- -----------------
<S> <C> <C> <C>
Comcast ICG, Inc(1)................................ 633,998 22,008,996 8.3%
c/o Comcast Corporation
1500 Market Street
Philadelphia, PA 19102
Safeguard Scientifics, Inc(2)...................... -- 36,289,456 13.7%
435 Devon Park Drive
Wayne, PA 19087
Douglas A. Alexander(3)............................ -- 6,132,748 2.3%
Julian A. Brodsky(4)............................... 784 10,784 *
Walter W. Buckley, III(5).......................... 21,833 11,963,999 4.5%
Kenneth A. Fox(6).................................. 37,146 11,878,066 4.5%
David D. Gathman................................... 200,000 1,524,999 *
Dr. Thomas P. Gerrity(7)........................... 2,566 935,247 *
Robert E. Keith, Jr.(8)............................ 1,533 298,941 *
Warren V. Musser................................... 2,033 413,040 *
Henry N. Nassau(9)................................. 1,200 1,550,500 *
Peter A. Solvik(10)................................ 35,600 1,056,672 *
All Directors and executive officers as a group (10
persons)(3)(4)(5)(6)(7)(8)(9)(10)................ 302,695 35,764,996 13.5%
</TABLE>
- ---------------
* Represents less than 1%
(1) Includes 416,666 shares of Common Stock and warrants to purchase 83,333
shares of Common Stock held by Comcast Interactive Capital, L.P. as to
which Comcast ICG, Inc. disclaims beneficial ownership.
(2) Private equity funds affiliated with Safeguard Scientifics, Inc. own an
additional 5,026,667 shares of Common Stock and warrants to purchase 45,333
shares of Common Stock.
(3) Includes shares of Common Stock that have not vested pursuant to the
Membership Profit Investment Plan and the 1999 Equity Compensation Plan.
Also includes 500,000 shares of Common Stock held by the Douglas A.
Alexander Qualified Grantor Annuity Trust and 8,000 shares of Common Stock
held by two trusts for the benefit of certain of Mr. Alexander's relatives,
each trust holding 4,000 shares of Common Stock. Mr. Alexander disclaims
beneficial ownership of shares held by the trusts for the benefit of his
relatives.
(4) Includes 3,500 shares of Common Stock held by the Julian A. and Lois G.
Brodsky Foundation, of which Mr. Brodsky is Chairman. Mr. Brodsky disclaims
beneficial ownership of shares held by the Julian A. and Louis G. Brodsky
Foundation. Mr. Brodsky is also a Director and Vice-Chairman of Comcast
Corporation. Mr. Brodsky disclaims beneficial ownership of shares held by
Comcast ICG, Inc., a subsidiary of Comcast Corporation.
(5) Includes shares of restricted Common Stock that have not vested pursuant to
the Membership Profit Interest Plan and the 1999 Equity Compensation Plan.
Also includes 294,166 shares of Common Stock and warrants to purchase 1,833
shares of Common Stock held by Susan R. Buckley, wife of Walter W. Buckley,
III, and 250,000 shares of Common Stock held by two trusts for the benefit
of certain of Mr. Buckley's relatives, each trust holding 125,000 shares of
Common Stock, of which Mr. Buckley disclaims beneficial ownership.
18
<PAGE> 22
(6) Includes shares of restricted Common Stock that have not vested pursuant to
the Membership Profit Interest Plan and the 1999 Equity Compensation Plan.
(7) Includes shares of restricted Common Stock that have not vested pursuant to
the 1999 Equity Compensation Plan. Also includes 80,000 shares of Common
Stock held by the Thomas P. Gerrity Generation Skipping Trust U/A 3/17/92.
Also includes 12,018 shares of Common Stock held by Technology Leaders
Advisers IV, Inc., of which Dr. Gerrity is the sole shareholder.
(8) Includes 2,000 shares of Common Stock held by Susan Keith, 8,500 shares
held by the Keith 1999 Irrevocable Trust and 20,000 shares held by Leslie
Hulsizer, of which Mr. Keith disclaims beneficial ownership. Also includes
10,000 shares of Common Stock held by Robert E. Keith, III, as to which Mr.
Keith disclaims beneficial ownership.
(9) Includes shares of restricted Common Stock that have not vested pursuant to
the 1999 Equity Compensation Plan. Also includes 300,000 shares of Common
Stock held by a trust for the benefit of certain of Mr. Nassau's relatives.
Mr. Nassau disclaims beneficial ownership of the shares held by the trust.
Also includes 20,000 shares of Common Stock held by Catharine Nassau, wife
of Henry N. Nassau, as to which Mr. Nassau disclaims beneficial ownership.
(10) Includes 178,000 shares of Common Stock held by the Peter A. Solvik Annuity
Trust u/i dtd. July 30, 1999, 178,000 shares of Common Stock held by the
Patricia A. Solvik Annuity Trust u/i dtd. July 30, 1999 and 3,000 shares of
Common Stock held by two trusts for the benefit of certain of Mr. Solvik's
relatives, each trust holding 1,500 shares of Common Stock. Mr. Solvik
disclaims beneficial ownership of shares held by the Patricia A. Solvik
Annuity Trust u/i dtd. July 30, 1999 and by the trusts for the benefit of
his relatives.
- --------------------------------------------------------------------------------
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In February 1999, Safeguard Scientifics, Inc., through its affiliate Safeguard
98 Capital L.P., purchased 8,125,000 shares of Common Stock from the Company for
a purchase price of $8,125,000.
During 1999, the Company leased its corporate offices in Wayne, Pennsylvania
from Safeguard Scientifics. In addition, the Company paid Safeguard Scientifics
for telephone and accounting services, health and general insurance coverage,
and other services. From January 1, 1999 to December 31, 1999, the Company's
payments to Safeguard Scientifics under the lease and for these services totaled
about $289,000. As of March 31, 2000, Safeguard Scientifics, beneficially owned
about 13.7% of the Company's Common Stock. The Company believes that its lease
in Wayne with Safeguard Scientifics and the services provided to it are on terms
no less favorable to the Company than those that would be available to it in an
arm's-length transaction with a third party.
In the first half of 2000, the Company intends to lease new corporate office
space in Wayne, Pennsylvania from Safeguard Scientifics. The Company expects
that its new lease with Safeguard Scientifics will be on terms no less favorable
to Company than those terms that would be available to it in an arm's-length
transaction with a third party.
In January 1998, the Company loaned Douglas A. Alexander, one of its Managing
Directors, $117,669. Mr. Alexander used the proceeds from the loan to purchase a
portion of the Company's interest in VerticalNet, Inc. at the Company's cost.
Mr. Alexander agreed to pay the principal amount of the loan with interest at an
annual rate equal to the prime rate plus 1% within 30 days of the date that the
Company requests payment. On January 5, 1999, Mr. Alexander paid the Company
$128,820, representing the outstanding principal amount of the loan plus accrued
interest.
In January 1997, the Company granted Christopher H. Greendale, one of its
Managing Directors, a ten year option to purchase shares of Series A Preferred
Stock convertible into 58,500 shares of common stock of Benchmarking Partners,
Inc., which the Company currently owns. The option is exercisable at a purchase
price of $2.85 per share and vests in four annual installments of 14,625 shares
beginning one year after the date of grant. Vesting is contingent upon Mr.
Greendale's continued service to the Company. In August 1999, the Company loaned
Mr. Greendale $600,000. Mr. Greendale used these funds to purchase
19
<PAGE> 23
shares of the Company's Common Stock in connection with its initial public
offering. Mr. Greendale agreed to pay the principal amount of the loan with
interest at an annual rate equal to 4.98% on August 10, 2000. The loan was
secured by 200,000 shares of the Company's Common Stock. On November 30, 1999,
Mr. Greendale paid the Company $608,677, representing the outstanding principal
amount of the loan plus interest.
In January 1999, the Company sold its convertible notes of VerticalNet for
$2,083,221 to Comcast Corporation. At the time of this sale to Comcast, the
outstanding principal amount of these convertible notes was $2,083,221.
In March 1999, the Company sold its convertible notes of PrivaSeek, Inc. for
$571,659 to Comcast and the assumption by Comcast of one of the Company's notes
payable in the outstanding principal amount of $428,341. At the time of this
sale to Comcast, the outstanding principal amount of these convertible notes was
$1 million.
In April 1999, in connection with the Company obtaining a bank credit facility,
Safeguard Scientifics delivered a letter to the agent for the banks stating that
it intends to take any action that may in the future be necessary to promptly
cure certain defaults that could occur under the Company's bank credit facility.
In May 1999, the Company issued $90 million principal amount of three-year
convertible notes to its largest shareholders, directors, executive officers,
certain members of the immediate families of its executive officers and others
in a round of financing led by Comcast ICG, Inc. Based on the Company's initial
public offering price of $6.00 per share, the notes have automatically converted
into 14,999,732 shares of the Company's Common Stock, and all accrued interest
has been waived. The Company issued warrants to the holders of these notes to
purchase shares of its Common Stock. As of December 31, 1999, these warrant
holders are entitled to purchase 2,215,717 shares of the Company's Common Stock.
The warrants expire in May 2002.
The following table sets forth the names of the holders of certain convertible
notes and warrants, their relationship to the Company and the amounts of each of
their convertible notes. All convertible notes converted into Common Stock at a
rate of $6.00 per share in connection with the Company's initial public offering
on August 5, 1999.
<TABLE>
<CAPTION>
Name of Holder Relationship to the Company Amount of Convertible Note
- -------------- --------------------------- --------------------------
<S> <C> <C> <C>
Ann B. Alexander family member of executive officer $ 63,000
Bradley Alexander family member of executive officer 155,000
Douglas E. Alexander family member of executive officer 160,000
Walter W. Buckley, Jr. family member of executive officer 200,000
Walter W. Buckley, III executive officer and director 600,000
Comcast ICG, Inc. principal shareholder 15,000,000
E. Michael Forgash former director 100,000
Kenneth A. Fox executive officer and director 1,000,000
Thomas P. Gerrity director 77,000
Peter A. Solvik director 1,068,000
</TABLE>
20
<PAGE> 24
In May 1999, some of the Company's officers and directors exercised options to
purchase the Company's Common Stock. Instead of paying the Company in cash, the
officers and directors delivered promissory notes to the Company in the
aggregate amount of $21,765,000. The promissory notes bear interest at the rate
of 5.22%, mature on or about May 5, 2004 and are secured by 17,820,000 shares of
the Company's Common Stock. The following table sets forth the names of the
makers of the promissory notes, their relationship to the Company and the
amounts owed to it by each of these makers.
<TABLE>
<CAPTION>
Name of Maker Relationship to the Company Amount of Promissory Note
- ------------- --------------------------- -------------------------
<S> <C> <C> <C>
Douglas A. Alexander executive officer $2,500,000
Walter W. Buckley, III executive officer and 2,600,000
director
Richard G. Bunker officer 1,350,000
Kenneth A. Fox executive officer and 2,500,000
director
David D. Gathman executive officer 1,300,000
Thomas P. Gerrity director 400,000
Christopher H. Greendale officer 300,000
Victor S. Hwang officer 4,005,000
Henry N. Nassau officer 3,660,000
John N. Nickolas officer 800,000
Robert A. Pollan officer 2,650,000
</TABLE>
In January 2000, Dr. Gerrity repaid the Company $80,000, leaving a principal
amount of $320,000 owed under the above-listed promissory note.
In June 1999, some of the Company's officers exercised options to purchase the
Company's Common Stock. Instead of paying the Company cash, the officers
delivered promissory notes to the Company in the aggregate amount of
$14,783,223. The promissory notes bear interest at the rate of 5.37%, mature on
or about June 4, 2004 and are secured by 4,495,500 shares of the Company's
Common Stock. The following table sets forth the names of the makers of the
promissory notes, their relationship to the Company and the amounts owed to it
by each of these makers.
<TABLE>
<CAPTION>
Name of Maker Relationship to the Company Amount of Promissory Note
- ------------- --------------------------- -------------------------
<S> <C> <C> <C>
Richard G. Bunker officer $1,358,000
Richard S. Devine officer 7,114,223
Gregory W. Haskell officer 6,311,000
</TABLE>
21
<PAGE> 25
In July 1999, some of the Company's officers and directors exercised options to
purchase the Company's Common Stock. Instead of paying the Company cash, the
officers and directors delivered promissory notes to the Company in the
aggregate amount of $39,304,000. The promissory notes bear interest at the rate
of 5.82%, mature on or about July 7, 2004 and are secured by 10,950,000 shares
of the Company's Common Stock. The following table sets forth the names of the
makers of the promissory notes, their relationship to the Company and the
amounts owed to the Company by each of these makers.
<TABLE>
<CAPTION>
Name of Maker Relationship to the Company Amount of Promissory Note
- ------------- --------------------------- -------------------------
<S> <C> <C> <C>
Douglas A. Alexander executive officer $ 3,395,000
Walter W. Buckley, III executive officer and 6,790,000
director
Kenneth A. Fox executive officer and 6,111,000
director
Todd G. Hewlin officer 2,430,000
Sam Jadallah officer 10,125,000
Mark J. Lotke officer 7,058,000
Robert A. Pollan officer 3,395,000
</TABLE>
In May 1999, some of the Company's officers and directors incurred tax
liabilities as a result of exercising their options to purchase the Company's
Common Stock. These directors and officers borrowed money from the Company to
pay these tax liabilities. The loans are evidenced by promissory notes delivered
by these officers and directors to the Company in the aggregate principal amount
of $7,463,307. The promissory notes bear interest at a rate of 5.22% and mature
on May 5, 2004. The following table sets forth the names of the makers of the
promissory notes, their relationship to the Company and the amounts owed to it
by each of these makers.
<TABLE>
<CAPTION>
Name of Maker Relationship to the Company Amount of Promissory Note
- ------------- --------------------------- -------------------------
<S> <C> <C> <C>
Douglas A. Alexander executive officer $1,161,000
Walter W. Buckley, III executive officer and 1,207,440
director
Richard G. Bunker officer 272,835
Kenneth A. Fox executive officer and 1,395,000
director
David D. Gathman executive officer 603,720
Christopher H. Greendale officer 66,552
Victor S. Hwang officer 973,092
John N. Nickolas officer 371,520
Robert A. Pollan officer 1,478,700
</TABLE>
In January 1999, while a limited liability company, the Company paid a
distribution to some of its officers, directors and principal stockholders who
were members of Internet Capital Group, L.L.C. The following table sets forth
the names of the recipients of the distribution, their relationships to the
Company and the amount paid by the Company to the recipient.
<TABLE>
<CAPTION>
Name of Recipient Relationship to the Company Amount Paid to Recipient
- ----------------- --------------------------- ------------------------
<S> <C> <C> <C>
Douglas A. Alexander executive officer $ 249,702
Walter W. Buckley, III executive officer and 685,092
director
Kenneth A. Fox executive officer and 514,597
director
Comcast ICG, Inc. principal shareholder 1,401,198
Safeguard Scientifics (Delaware), principal shareholder 2,602,424
Inc.
Safeguard Capital 98 L.P. principal shareholder 198,262
</TABLE>
22
<PAGE> 26
- --------------------------------------------------------------------------------
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
The rules of the Securities and Exchange Commission require the Company to
disclose late filings of stock transaction reports by its executive officers and
directors. Based solely on a review of reports filed by the Company on these
individuals' behalf and written representations from them that no other reports
were required, all Section 16(a) filing requirements have been met during fiscal
year 1999.
- --------------------------------------------------------------------------------
COMPENSATION COMMITTEE INTERLOCKS
AND INSIDER PARTICIPATION
The Compensation Committee makes all compensation decisions. Messrs. Gerrity,
Keith and Solvik serve as the members of the Compensation Committee. Mr. Buckley
previously served on the Compensation Committee. Messrs. Alexander and Buckley
serve on the compensation committee of VerticalNet, Inc. None of our other
executive officers, directors or Compensation Committee members currently serve,
or have in the past served, on the compensation committee of any other company
whose directors and executive officers have served on the Company's Compensation
Committee.
- --------------------------------------------------------------------------------
OTHER BUSINESS
The Company is not aware of any other matters that will be presented for
shareholder action at the Annual Meeting. If other matters are properly
introduced, the person named in the accompanying proxy will vote the shares they
represent in accordance with their judgment.
By Order of the Board of Directors
/s/ Henry N. Nassau
Henry N. Nassau
Secretary
April 21, 2000
23
<PAGE> 27
INTERNET CAPITAL GROUP, INC.
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS
MAY 31, 2000
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
KNOW ALL MEN BY THESE PRESENTS, that the undersigned shareholder of
INTERNET CAPITAL GROUP, INC., a Delaware corporation, does hereby constitute and
appoint Walter W. Buckley, III, David D. Gathman and Henry N. Nassau, or any one
of them, with full power to act alone and to designate substitutes, the true and
lawful attorneys and proxies of the undersigned for and in the name and stead of
the undersigned, to vote all shares of Common Stock of Internet Capital Group,
Inc. which the undersigned would be entitled to vote if personally present at
the Annual Meeting of Shareholders to be held at The Desmond Great Valley, One
Liberty Boulevard, Malvern, Pennsylvania 19355, on May 31, 2000 at 10:00 a.m.,
and at any and all adjournments and postponements thereof, as follows:
(CONTINUED, AND TO BE MARKED, DATED AND SIGNED, ON THE OTHER SIDE)
<PAGE> 28
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEMS 1, 2, 3 AND 4.
Please mark your vote as indicated in this example [X]
ITEM 1. ELECTION OF DIRECTORS VOTE FOR ALL* WITHHELD FOR ALL
[ ] [ ]
Nominees:
Julian A. Brodsky
Warren V. Musser
* To withhold authority to vote for one or more nominee(s), write the name(s) of
the nominee(s) below:
- ------------------------------------------------------------------------------
ITEM 2. RATIFICATION OF INDEPENDENT ACCOUNTANTS
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
ITEM 3. PROPOSAL TO INCREASE AUTHORIZED COMMON STOCK
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
ITEM 4. AMENDMENT OF 1999 EQUITY COMPENSATION PLAN
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
ITEM 5. OTHER MATTERS
In their discretion, the proxies are authorized to vote upon such other matters
as may properly come before the meeting or at any adjournments thereof.
THIS PROXY WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED
SHAREHOLDER. IF NO DIRECTION IS INDICATED, THIS PROXY WILL BE VOTED FOR ITEMS 1,
2, 3 AND 4 AND WILL GRANT DISCRETIONARY AUTHORITY PURSUANT TO ITEM 5. NOTE:
PLEASE DATE THIS PROXY, SIGN YOUR NAME EXACTLY AS IT APPEARS HEREON, AND RETURN
PROMPTLY USING THE ENCLOSED POSTAGE PAID ENVELOPE. JOINT OWNERS SHOULD EACH
SIGN. WHEN SIGNING AS ATTORNEY, EXECUTOR, ADMINISTRATOR, TRUSTEE OR GUARDIAN,
PLEASE GIVE FULL TITLE AS SUCH.
Signature(s) ___________________________________________ Date _____________
<PAGE> 29
Exhibit I
INTERNET CAPITAL GROUP, INC.
1999 EQUITY COMPENSATION PLAN
(as amended and restated, effective May 1, 1999)
The purpose of the Internet Capital Group, Inc. 1999 Equity
Compensation Plan (as amended and restated, effective May 1, 1999) (the "Plan")
is to provide (i) designated employees of Internet Capital Group, Inc. (the
"Company") and its subsidiaries, (ii) certain advisors who perform services for
the Company or its subsidiaries and (iii) non-employee members of the Board of
Directors of the Company (the "Board") with the opportunity to receive grants of
incentive stock options, nonqualified options, share appreciation rights,
restricted shares, performance shares, dividend equivalent rights and cash
awards. The Company believes that the Plan will encourage the participants to
contribute materially to the growth of the Company, thereby benefiting the
Company's shareholders, and will align the economic interests of the
participants with those of the shareholders.
1. Administration
(a) Committee. The Plan shall be administered and interpreted
by a committee appointed by the Board (the "Committee"). Prior to the Company's
becoming a "Reporting Company" as described in Section 25(b), the Board may
exercise any power or authority of the Committee under the Plan and, in such
case, references to the Committee hereunder, as they relate to Plan
administration, shall be deemed to include the Board as a whole. After the
Company becomes a Reporting Company, the Committee shall consist of two or more
persons appointed by the Board, all of whom shall be "outside directors" as
defined under section 162(m) of the Internal Revenue Code of 1986, as amended
(the "Code"), and related Treasury regulations and shall be "non-employee
directors" as defined under Rule 16b-3 promulgated under the Securities Exchange
Act of 1934, as amended (the "Exchange Act").
(b) Committee Authority. The Committee shall have the sole
authority to (i) determine the individuals to whom grants shall be made under
the Plan, (ii) determine the type, size and terms of the grants to be made to
each such individual, (iii) determine the time when the grants will be made and
the duration of any applicable exercise or restriction period, including the
criteria for exercisability and the acceleration of exercisability, and (iv)
make all determinations with respect to any other matters arising under the
Plan.
(c) Committee Determinations. The Committee shall have full
power and authority to administer and interpret the Plan, to make factual
determinations, and to adopt or amend such rules, regulations, agreements and
instruments for implementing the Plan and for the conduct of its business as it
deems necessary or advisable, in its sole discretion. The Committee's
interpretations of the Plan and all determinations made by the Committee
pursuant to the powers vested in it hereunder shall be conclusive and binding on
all persons having any interest in the Plan or in any awards granted hereunder.
All powers of the Committee shall be executed in its sole discretion, in the
best interest of the Company, not as a fiduciary, and in keeping with the
objectives of the Plan. Determinations made by the Committee under the Plan
<PAGE> 30
need not be uniform as to similarly situated individuals.
2. Grants
Awards under the Plan may consist of grants of (i) incentive
stock options as described in Section 5 ("Incentive Stock Options"), (ii)
nonqualified options as described in Section 5 ("Nonqualified Options")
(Incentive Stock Options and Nonqualified Options are collectively referred to
as "Options"), (iii) stock appreciation rights as described in Section 7
("SARs"), (iv) restricted shares as described in Section 8 ("Restricted
Shares"), (v) performance shares as described in Section 9 ("Performance
Shares"), (vi) dividend equivalent rights as described in Section 10 ("Dividend
Equivalent Rights") and (vii) cash awards as described in Section 11 ("Cash
Awards") (hereinafter collectively referred to as "Grants"). All Grants shall be
subject to the terms and conditions set forth herein and to such other terms and
conditions consistent with the Plan as the Committee deems appropriate and as
are specified in writing by the Committee to the individual in a grant
instrument (the "Grant Instrument") or an amendment to the Grant Instrument. The
Committee shall approve the form and provisions of each Grant Instrument. Grants
under a particular Section of the Plan need not be uniform as among the grant
recipients (the "Grantees").
3. Shares Subject to the Plan
(a) Shares Authorized. For purposes of the Plan, a Share means
one share of common stock of the Company, par value $.001. Subject to
adjustments as provided in Section 3(b) below, the aggregate number of Shares of
the Company that may be issued or transferred under the Plan is 10,470,000
Shares. The maximum aggregate number of Shares that shall be subject to Grants
made under the Plan to any individual during any calendar year shall be
3,000,000 Shares. The Shares may be authorized but unissued Shares or reacquired
Shares, including Shares purchased by the Company on the open market for
purposes of the Plan. If and to the extent Options or SARs granted under the
Plan terminate, expire, or are canceled, forfeited, exchanged or surrendered
without having been exercised, or if any Restricted Shares or Performance Shares
or Dividend Equivalent Rights are forfeited, the Shares subject to such Grants
shall again be available for purposes of the Plan.
(b) Adjustments. If there is any change in the number or kind
of Shares outstanding (i) by reason of a dividend, spin-off, recapitalization,
split or combination or exchange of Shares, (ii) by reason of a merger,
reorganization or consolidation in which the Company is the surviving
corporation, (iii) by reason of a reclassification or change in par value, (iv)
by reason of any other extraordinary or unusual event affecting the outstanding
Shares of the Company as a class without the Company's receipt of consideration,
or (v) by reason of the Company's being a Reporting Company, or if the value of
outstanding Shares is substantially reduced as a result of a spin-off or the
Company's payment of an extraordinary dividend or distribution, the maximum
number of Shares available for Grants, the maximum number of Shares that any
individual participating in the Plan may be granted in any year, the number of
Shares covered by outstanding Grants, the kind of Shares issued under the Plan,
and the price per Share or the applicable market value of such Grants may be
appropriately adjusted by the Committee to reflect any increase or decrease in
the number of, or change in the kind or value of, issued Shares to preclude, to
the extent practicable, the enlargement or dilution of rights and
-2-
<PAGE> 31
benefits under such Grants; provided, however, that any fractional Shares
resulting from such adjustment shall be eliminated. Any adjustments determined
by the Committee shall be final, binding and conclusive. Any Shares, other
securities or other property distributed to a Grantee, or which a Grantee is
entitled to receive, in respect of Restricted Shares, which are then subject to
restrictions imposed by Section 8, by reason of any the events described in
clauses (i), (ii), (iii), (iv) or (v) above shall be subject to the restrictions
and requirements imposed on such Restricted Shares, including depositing the
certificates therefor with the Company and bearing a legend as provided in
Section 8(d), unless determined otherwise by the Committee.
4. Eligibility for Participation
(a) Eligible Persons. All employees of the Company, its
parents and its subsidiaries ("Employees"), including Employees who are officers
or members of the Board, and members of the Board who are not Employees
("Non-Employee Directors") shall be eligible to participate in the Plan.
Advisors who perform services to the Company or any of its parents or its
subsidiaries ("Key Advisors") shall be eligible to participate in the Plan if
the Key Advisors render bona fide services and such services are not in
connection with the offer or sale of securities in a capital-raising
transaction.
(b) Selection of Grantees. The Committee shall select the
Employees, Non-Employee Directors and Key Advisors to receive Grants and shall
determine the number of Shares subject to a particular Grant in such manner as
the Committee determines.
5. Options
(a) Number of Shares. Subject to Section 6, the Committee
shall determine the number of Shares that will be subject to each Grant of
Options to Employees, Non-Employee Directors and Key Advisors. Subject to
adjustment as provided in Section 3(b), the maximum aggregate number of Shares
that may be subject to Incentive Stock Options shall be 3,000,000.
(b) Type of Option and Price.
(i) The Committee may grant Incentive Stock Options that
are intended to qualify as "incentive stock options" within the meaning of
Section 422 of the Code or Nonqualified Options that are not intended so to
qualify or any combination of Incentive Stock Options and Nonqualified Options,
all in accordance with the terms and conditions set forth herein. Incentive
Stock Options may be granted only to Employees. Nonqualified Options may be
granted to Employees, Non-Employee Directors and Key Advisors.
(ii) The purchase price (the "Exercise Price") of Shares
subject to an Option shall be determined by the Committee and may be equal to,
greater than, or less than the Fair Market Value (as defined below) of a Share
on the date the Option is granted; provided, however, that (x) the Exercise
Price of an Incentive Stock Option shall be equal to, or greater than, the Fair
Market Value of a Share on the date the Incentive Stock Option is granted and
(y) an Incentive Stock Option may not be granted to an Employee who, at the time
of grant, owns Shares possessing more than 10 percent of the total combined
voting power of all Shares and other classes of stock of the Company or any
parent or subsidiary of the Company, unless the Exercise Price per Share is not
less than 110% of the Fair Market Value of a Share on the date of
-3-
<PAGE> 32
grant.
(iii) If the Shares are publicly traded, then the Fair
Market Value per Share shall be determined as follows: (x) if the principal
trading market for the Shares is a national securities exchange or the Nasdaq
National Market, the last reported sale price thereof on the preceding date or,
if there were no trades on that date, the latest preceding date upon which a
sale was reported, or (y) if the Shares are not principally traded on such
exchange or market, the mean between the last reported "bid" and "asked" prices
of a Share on the preceding date, as reported on Nasdaq or, if not so reported,
as reported by the National Daily Quotation Bureau, Inc. or as reported in a
customary financial reporting service, as applicable and as the Committee
determines. If the Shares are not publicly traded or, if publicly traded, are
not subject to reported transactions or "bid" or "asked" quotations as set forth
above, the Fair Market Value per Share shall be as determined in good faith by
the Committee; provided that, if the Shares are publicly traded, the Committee
may make such discretionary determinations where the shares have not been traded
for 10 trading days.
(c) Option Term. The Committee shall determine the term of
each Option. The term of any Option shall not exceed ten years from the date of
grant. However, an Incentive Stock Option that is granted to an Employee who, at
the time of grant, owns Shares possessing more than 10 percent of the total
combined voting power of all Shares and other classes of stock of the Company,
or any parent or subsidiary of the Company, may not have a term that exceeds
five years from the date of grant.
(d) Vesting and Exercisability of Options.
(i) Vesting. Options shall vest in accordance with such
terms and conditions as may be determined by the Committee and specified in the
Grant Instrument or an amendment to the Grant Instrument. The Committee may
accelerate the vesting of any or all outstanding Options at any time for any
reason.
(ii) Exercisability. Notwithstanding the foregoing, the
Option may, but need not, include a provision whereby the Grantee may elect at
any time while an Employee, Non-Employee Director or Key Advisor to exercise the
Option as to any part or all of the Shares subject to the Option prior to the
full vesting of the Option. Any unvested Shares so purchased shall be subject to
a repurchase right in favor of the Company, with the repurchase price to be
equal to the lesser of (x) the original purchase price or (y) the Fair Market
Value of the Shares on the date of such repurchase, or to any other restriction
the Committee determines to be appropriate.
(e) Termination of Employment, Disability or Death.
(i) Except as provided below and subject to the provisions
of the Grant Instrument, an Option may only be exercised while the Grantee is an
Employee, Key Advisor or member of the Board. In the event that a Grantee has a
Termination of Service (as defined below) for any reason other than Disability
(as defined below), death or Cause (as defined below), any Option which is
otherwise exercisable by the Grantee shall terminate unless exercised within 90
days after the date of such termination (or within such other period of time
-4-
<PAGE> 33
as may be specified by the Committee), but in any event no later than the date
of expiration of the Option term. Any of the Grantee's Options that are not
otherwise exercisable as of the date on which the Grantee has such a Termination
of Service shall terminate as of such date.
(ii) In the event the Grantee has a Termination of Service
on account of a termination for Cause by the Company, unless otherwise
determined by the Committee (x) any Option held by the Grantee shall terminate
as of the date of such Termination of Service and (y) the Grantee shall
automatically forfeit all Shares underlying any exercised portion of an Option
for which the Company has not yet delivered the certificates, upon refund by the
Company of the Exercise Price paid by the Grantee for such Shares.
(iii) In the event the Grantee has a Termination of
Service on account of Disability, any Option which is otherwise exercisable by
the Grantee shall terminate unless exercised within one year after the date of
such Termination of Service (or within such other period of time as may be
specified by the Committee), but in any event no later than the date of
expiration of the Option term. Unless provided otherwise in the applicable Grant
Instrument, any of the Grantee's Options which are not otherwise exercisable as
of the date of such Termination of Service shall terminate as of such date.
(iv) If the Grantee dies while an Employee, Key Advisor or
member of the Board or within 90 days after the date on which the Grantee has a
Termination of Service specified in Section 5(e)(i) above (or within such other
period of time as may be specified by the Committee), any Option that is
otherwise exercisable by the Grantee shall terminate unless exercised within one
year after the date of such death or Termination of Service (or within such
other period of time as may be specified by the Committee), but in any event no
later than the date of expiration of the Option term. Unless provided otherwise
in the applicable Grant Instrument, any of the Grantee's Options that are not
otherwise exercisable as of the date shall terminate as of such date.
(v) For purposes of the Plan:
(A) "Cause" shall mean, except to the extent specified
otherwise by the Committee, a finding by the Committee that
(1) the Grantee has breached his or her employment, service,
noncompetition, nonsolicitation or other similar contract with
the Company or its parent and subsidiary corporations, (2) has
been engaged in disloyalty to the Company or its parent and
subsidiary corporations, including, without limitation, fraud,
embezzlement, theft, commission of a felony or dishonesty in
the course of his or her employment or service, (3) has
disclosed trade secrets or confidential information of the
Company or its parents and subsidiary corporations to persons
not entitled to receive such information or (4) has entered
into competition with the Company or its parent or Subsidiary
Corporations. Notwithstanding the foregoing, if the Grantee
has an employment agreement with the Company defining "Cause,"
then such definition shall supersede the foregoing definition.
(B) "Disability" shall mean a Grantee's becoming
disabled within the meaning of Section 22(e)(3) of the Code.
-5-
<PAGE> 34
(C) "Termination of Service" shall mean a Grantee's
termination of employment or service as an Employee, Key
Advisor or member of the Board (so that, for purposes of the
Plan, cessation of service as an Employee, Key Advisor and
member of the Board shall not be treated as a Termination of
Service if the Grantee continues without interruption to serve
thereafter in another one (or more) of such other capacities)
unless the Committee determines otherwise.
(f) Exercise of Options. A Grantee may exercise an Option that
has become exercisable, in whole or in part, by delivering a notice of exercise
to the Company with payment of the Exercise Price. The Grantee shall pay the
Exercise Price for an Option as specified by the Committee (x) in cash, (y) by
delivering Shares owned by the Grantee for the period necessary to avoid a
charge to the Company's earnings for financial reporting purposes and to avoid
adverse accounting consequences to the Company (including Shares acquired in
connection with the exercise of an Option, subject to such restrictions as the
Committee deems appropriate) and having a Fair Market Value on the date of
exercise equal to the Exercise Price, or (z) by such other method as the
Committee may approve, including, after the Company becomes a Reporting Company,
payment through a broker in accordance with procedures permitted by Regulation T
of the Federal Reserve Board; provided, that, for purposes of assisting a
Grantee to exercise an Option, the Company may make loans to the Grantee or
guarantee loans made by third parties to the Grantee, on such terms and
conditions as the Committee may authorize. The Grantee shall pay the Exercise
Price at the time of exercise and shall satisfy the withholding tax requirements
of Section 13.
(g) Limits on Incentive Stock Options. Each Incentive Stock
Option shall provide that, if the aggregate Fair Market Value of the Shares on
the date of the grant with respect to which Incentive Stock Options are
exercisable for the first time by a Grantee during any calendar year, under the
Plan and any other equity compensation plan of the Company or a parent or
subsidiary, exceeds $100,000, then the option, as to the excess, shall be
treated as a Nonqualified Option. No Incentive Stock Option shall be granted to
any person who is not an Employee of the Company or a parent or subsidiary of
the Company (within the meaning of Section 424(f) of the Code).
6. Automatic Option Grants to Non-Employee Directors
Non-Employee Directors shall be eligible to receive Options
under this Section 6; provided, however, that the following Non-Employee
Directors shall not be eligible to receive Options under this Section 6: (i)
Non-Employee Directors who at any time during their membership on the Board are
employees of Safeguard Scientifics, Inc. or any of its subsidiaries or
affiliates, (ii) Non-Employee Directors who at any time during their membership
on the Board are employees of TL Ventures, Inc. or any of its subsidiaries or
affiliates or (iii) Non-Employee Directors who receive an Option award under
Section 5.
-6-
<PAGE> 35
(a) Initial Grants. On the date that an eligible Non-Employee
Director is first elected to the Board, such Non-Employee Director shall receive
a Nonqualified Option under the Plan to purchase 47,000 Shares (an "Initial
Grant"); provided, however, that any Director who was a member of the Board of
Managers of Internet Capital Group, L.L.C. and who became a member of the Board
immediately following the execution of the Agreement of Merger dated February 2,
1999 shall not be entitled to receive an Initial Grant. The Initial Grant shall
be subject to the availability and adjustment of Shares issuable under the Plan
pursuant to Section 3 and shall not be subject to the discretion of any person
or persons.
(b) Service Grants. Every two (2) years on the anniversary of
the date that an eligible Non-Employee Director was initially elected to the
Board (or, if applicable, the Board of Managers of Internet Capital Group,
L.L.C.), such Non-Employee Director shall be granted a Nonqualified Option for
an additional 20,000 Shares (a "Service Grant").
(c) Conversion Grants. In its sole discretion, the Board may
grant a Nonqualified Option to any eligible Non-Employee Director who was a
member of the Board of Managers of Internet Capital Group, L.L.C. and who became
a member of the Board immediately following the execution of the Agreement of
Merger dated February 2, 1999 to compensate such Non-Employee Director for the
cancellation of outstanding options held by such Non-Employee Director
immediately prior to the execution of such Agreement of Merger; provided,
however, that such grant shall be subject to the availability and adjustment of
Shares issuable under the Plan pursuant to Section 3 (a "Conversion Grant").
(d) Aggregate Limitation on Grants. Notwithstanding any
provision of this Plan to the contrary, the maximum number of Shares subject to
Initial Grants, Service Grants and Conversion Grants which may be awarded to any
Non-Employee Director under the Plan shall not exceed 107,000 Shares.
(e) Terms of Initial Grants, Service Grants and Conversion
Grants. Unless otherwise determined by the Committee as reflected in the
applicable Grant Instrument, each Option granted pursuant to this Section 6
shall be subject to the following terms:
(i) Each such Option shall have a term of eight years from
the date of the applicable Option is granted.
(ii) Each Initial Grant shall vest in four equal
installments of a whole number of Shares on the first, second, third and fourth
anniversaries of the date of grant of such Option. Each Service Grant shall vest
in two equal installments of a whole number of Shares on the first and second
anniversaries of the date of grant of such Option. Each Conversion Grant shall
vest as set forth in the applicable Grant Instrument.
7. Stock Appreciation Rights
(a) General Requirements. The Committee may grant SARs to an
Employee, Non-Employee Director or Key Advisor separately from or in tandem with
any Option (for all or a portion of the applicable Option). Tandem SARs may be
granted either at the time the Option is granted or at any time thereafter while
the Option remains outstanding; provided, however, that, in the case of an
Incentive Stock Option, SARs may be granted only at the time of the grant
-7-
<PAGE> 36
of the Incentive Stock Option. The Committee shall establish the base amount of
the SAR at the time the SAR is granted. Unless the Committee determines
otherwise, the base amount of each SAR shall be equal to the per Share Exercise
Price of the related Option or, if there is no related Option, the Fair Market
Value of a Share as of the date of grant of the SAR.
(b) Tandem SARs. In the case of tandem SARs, the number of
SARs granted to a Grantee that shall be exercisable during a specified period
shall not exceed the number of Shares that the Grantee may purchase upon the
exercise of the related Option during such period. Upon the exercise of an
Option, the SARs relating to the Shares covered by such Option shall terminate.
Upon the exercise of SARs, the related Option shall terminate to the extent of
an equal number of Shares.
(c) Exercisability. An SAR shall be exercisable during the
period specified by the Committee in the Grant Instrument and shall be subject
to such vesting and other restrictions as may be specified in the Grant
Instrument. The Committee may accelerate the exercisability of any or all
outstanding SARs at any time for any reason. SARs may only be exercised while
the Grantee is as an Employee, Key Advisor or member of the Board or during the
applicable period after Termination of Service as described in Section 5(e). A
tandem SAR shall be exercisable only during the period when the Option to which
it is related is also exercisable. No SAR may be exercised for cash by an
executive officer or director of the Company or any of its subsidiaries who is
subject to Section 16 of the Exchange Act, except in accordance with Rule 16b-3
under the Exchange Act.
(d) Value of SARs. When a Grantee exercises an SAR, the
Grantee shall receive in settlement of such SAR an amount, payable in cash,
Shares or a combination thereof equal to the amount by which the Fair Market
Value of a Share on the date of exercise of the SAR exceeds the base amount of
the SAR as described in Section 7(a).
(e) Form of Payment. The Committee shall determine whether the
appreciation in an SAR shall be paid in the form of cash, Shares, or a
combination of the two, in such proportion as the Committee deems appropriate.
For purposes of calculating the number of Shares to be received, Shares shall be
valued at their Fair Market Value on the date of exercise of the SAR. If Shares
are to be received upon exercise of a SAR, cash shall be delivered in lieu of
any fractional Share.
8. Restricted Shares
The Committee may issue or transfer Shares to an Employee,
Non-Employee Director or Key Advisor under a Grant of Restricted Shares, upon
such terms as the Committee deems appropriate. The following provisions are
applicable to Restricted Shares:
-8-
<PAGE> 37
(a) General Requirements. Shares issued or transferred
pursuant to Restricted Share Grants may be issued or transferred for
consideration or for no consideration, as determined by the Committee. The
Committee may establish conditions under which restrictions on Restricted Shares
shall lapse over a period of time or according to such other criteria as the
Committee deems appropriate. The period of time during which the Restricted
Shares will remain subject to restrictions will be designated in the Grant
Instrument as the "Restriction Period."
(b) Number of Shares. The Committee shall determine the number
of Restricted Shares to be issued or transferred and the restrictions applicable
to such Grant.
(c) Requirement of Employment. If the Grantee has a
Termination of Service during a period designated in the Grant Instrument as the
Restriction Period, or if other specified conditions are not met, the Restricted
Share Grant shall terminate as to all Shares covered by the Grant as to which
the restrictions have not lapsed, and those Shares must be immediately returned
to the Company, and the Company shall refund to the Grantee the lesser of (x)
the consideration, if any, paid by the Grantee for such Shares and (y) the Fair
Market Value of the Shares as of the date of such Termination of Service. The
Committee may, however, provide for complete or partial exceptions to these
requirements as it deems appropriate.
(d) Restrictions on Transfer and Legend on Certificate. During
the Restriction Period, a Grantee may not sell, assign, transfer, pledge or
otherwise dispose of the Restricted Shares except as permitted under Section 14.
Each certificate for Restricted Shares shall contain a legend giving appropriate
notice of the restrictions in the Grant. The Grantee shall be entitled to have
the legend removed from the certificate covering the Restricted Shares subject
to restrictions when all restrictions on such Shares have lapsed. The Committee
may determine that the Company will not issue certificates for Restricted Shares
until all restrictions on such Shares have lapsed, or that the Company will
retain possession of certificates for Restricted Shares until all restrictions
on such Shares have lapsed.
(e) Right to Vote and to Receive Dividends. Unless the
Committee determines otherwise, during the Restriction Period, the Grantee shall
have the right to vote Restricted Shares and to receive any dividends or other
distributions paid on such Shares, subject to any restrictions deemed
appropriate by the Committee.
(f) Lapse of Restrictions. All restrictions imposed on
Restricted Shares shall lapse upon the expiration of the applicable Restriction
Period and the satisfaction of all conditions imposed by the Committee. The
Committee may determine, as to any or all Restricted Share Grants, that the
restrictions shall lapse without regard to any Restriction Period.
9. Performance Shares
(a) General Requirements. The Committee may grant Performance
Shares ("Performance Shares") to an Employee or Key Advisor. Each Performance
Share shall represent the right of the Grantee to receive an amount based on the
value of the Performance Share, if performance goals established by the
Committee are met. The value of a Performance Share shall be based on the Fair
Market Value of a Share as of the date of payment in respect of
-9-
<PAGE> 38
such Performance Share is to be made or on such other measurement base as the
Committee deems appropriate. The Committee shall determine the number of
Performance Shares to be granted and the requirements applicable to such Shares.
(b) Performance Period and Performance Goals. When Performance
Shares are granted, the Committee shall establish the performance period during
which performance shall be measured (the "Performance Period"), performance
goals applicable to the Shares ("Performance Goals"), if any, and such other
conditions of the Grant as the Committee deems appropriate. Performance Goals
may relate to the financial performance of the Company or its operating shares,
the performance of Shares, individual performance, or such other criteria as the
Committee deems appropriate.
(c) Payment with respect to Performance Shares. At the end of
each Performance Period, the Committee shall determine to what extent the
Performance Goals and other conditions of the Performance Shares have been met
and the amount, if any, to be paid with respect to the Performance Shares.
Payments with respect to Performance Shares shall be made in cash, in Shares, or
in a combination of the two, as determined by the Committee. Any fractional
Performance Share shall be paid in cash. Unless otherwise determined by the
Committee, any Performance Shares with respect to which the Committee determines
that the applicable Performance Goals or other conditions have not been met
within the Performance Period shall be forfeited.
(d) Requirement of Employment. If the Grantee has a
Termination of Service during a Performance Period, or if other conditions
established by the Committee are not met, the Grantee's Performance Shares shall
be forfeited. The Committee may, however, provide for complete or partial
exceptions to this requirement as it deems appropriate.
(e) Restrictions on Transfer. Rights to payments with respect
to Performance Shares granted under the Plan shall not be subject in any manner
to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance,
attachment, garnishment, levy, execution, or other legal or equitable process,
either voluntary or involuntary; and any attempt to anticipate, alienate, sell,
transfer, assign, pledge, encumber, attach or garnish, or levy or execute on any
right to benefits payable hereunder, shall be void.
(f) Limited Rights. Performance Shares are solely a device for
the measurement and determination of the amounts to be paid to a Grantee under
the Plan. Each Grantee's right in the Performance Shares is limited to the right
to receive payment, if any, as may herein be provided. The Performance Shares do
not constitute Shares and shall not be treated as (or as giving rise to)
property or as a trust fund of any kind; provided, however, that the Company may
establish a mere bookkeeping reserve to meet its obligations hereunder or a
trust or other funding vehicle that would not cause the Plan to be deemed to be
funded for tax purposes or for purposes of Title I of the Employee Retirement
Income Security Act of 1974, as amended. The right of any Grantee of Performance
Shares to receive payments by virtue of participation in the Plan shall be no
greater than the right of any unsecured general creditor of the Company. Nothing
contained in the Plan shall be construed to give any Grantee any rights with
respect to Shares or any ownership interest in the Company. Except as may be
provided in accordance with Section 10, no provision of the Plan shall be
interpreted to confer upon any
-10-
<PAGE> 39
Grantee any voting, dividend or derivative or other similar rights with respect
to any Performance Share.
10. Dividend Equivalent Rights
(a) General Requirements. The Committee may grant Dividend
Equivalent Rights to Employees Non-Employee Directors and Key Advisors. Each
Dividend Equivalent Right shall represent the right to receive, either credits
for or payments of, amounts based on the dividends declared on Shares, to be
credited or paid as of the dividend payment dates, during the term of the
Dividend Equivalent Right as determined by the Committee. With respect to
Dividend Equivalent Rights granted with respect to Options intended to be
qualified performance-based compensation for purposes of Section 162(m) of the
Code, such Dividend Equivalent Rights shall be payable regardless of whether
such Option is exercised.
(b) Certain Terms. Unless otherwise determined by the
Committee, a Dividend Equivalent Right is exercisable or payable only while the
Grantee is an Employee, member of the Board or Key Advisor. Payment of the
amount determined in accordance with Section 10(a) shall be in cash, in Shares
or a combination of the two, as determined by the Committee. The Committee may
impose such other terms conditions on the grant of a Dividend Equivalent Right
as it deems appropriate in its discretion as reflected by the terms of the Grant
Instrument.
(c) Dividend Equivalent Right with Other Grants. The Committee
may establish a program under which Dividend Equivalent Rights may be granted in
conjunction with other Grants. For example, and without limitation, the
Committee may grant a Dividend Equivalent Right in respect of each Share subject
to an Option or with respect to a Performance Share, which right would consist
of the right to receive a cash payment in an amount equal to the dividend
distributions paid on a Share from time to time.
(d) Deferral. The Committee may establish a program under
which the payments with respect to Dividend Equivalent Rights may be deferred.
Such program may include, without limitation, provisions for the crediting of
earnings and losses on unpaid amounts, and, if permitted by the Committee,
provisions under which Grantees may select from among hypothetical investment
alternatives for such deferred amounts in accordance with procedures established
by the Committee.
11. Cash Awards
(a) General Requirements. The Committee may grant Cash Awards
to Employees, Non-Employee Directors and Key Advisors. The cash payment due upon
settlement of a Cash Award shall be based on the attainment of performance goals
and shall be subject to such other conditions, restrictions and contingencies as
the Committee shall determine as reflected by the terms of the Grant Instrument.
-11-
<PAGE> 40
12. Qualified Performance-Based Compensation
(a) Designation as Qualified Performance-Based Compensation.
The Committee may determine that Restricted Shares, Performance Shares and Cash
Awards granted to an Employee shall be considered "qualified performance-based
compensation" under Section 162(m) of the Code. The provisions of this Section
12 shall apply to Grants of Restricted Shares Performance Shares and Cash Awards
that are intended to be "qualified performance-based compensation" under Section
162(m) of the Code.
(b) Performance Goals. When Restricted Shares, Performance
Shares or Cash Awards that are intended to be "qualified performance-based
compensation" are granted, the Committee shall establish in writing (i) the
objective performance goals that must be met in order for restrictions on the
Restricted Shares to lapse or amounts to be paid under the Performance Shares or
Cash Awards as applicable, (ii) the Performance Period during which the
performance goals must be met, (iii) the threshold, target and maximum amounts
that may be paid if the performance goals are met, and (iv) any other
conditions, including without limitation provisions relating to death,
Disability, other Termination of Service or Reorganization, that the Committee
deems appropriate and consistent with the Plan and Section 162(m) of the Code
and the Treasury regulations thereunder. The performance goals may relate to the
Employee's individual performance or the performance of the Company and its
subsidiaries as a whole, or any combination of the foregoing. The Committee
shall use objectively determinable performance goals based on one or more of the
following criteria: Share price, earnings per Share, net earnings, operating
earnings, return on assets, shareholder return, return on equity, growth in
assets, share volume, sales, market share, or strategic business criteria
consisting of one or more objectives based on meeting specific revenue goals,
market penetration goals, geographic business expansion goals, cost targets or
goals relating to acquisitions or divestitures.
(c) Establishment of Goals. The Committee shall establish the
performance goals in accordance with Section 12(b) in writing either before the
beginning of the Performance Period or during a period ending no later than the
earlier of (i) 90 days after the beginning of the Performance Period or (ii) the
date on which 25% of the Performance Period has been completed, or such other
date as may be required or permitted under applicable regulations under Section
162(m) of the Code. The performance goals shall satisfy the requirements for
"qualified performance-based compensation," including the requirement that the
achievement of the goals be substantially uncertain at the time they are
established and that the goals be established in such a way that a third party
with knowledge of the relevant facts could determine whether and to what extent
the performance goals had been met. The Committee shall not have discretion to
increase the amount of compensation that is payable upon achievement of the
designated performance goals.
(d) Maximum Payment. If Restricted Shares, or Performance
Shares measured with respect to the Fair Market Value of Shares, are granted
pursuant to this Section 12, not more than 25,000 Shares may be granted to an
Employee under such Restricted Shares or Performance Shares for any Performance
Period. If Cash Awards, or Performance Shares measured with respect to criteria
other than the Fair Market Value of Shares, are granted pursuant to this Section
12, the maximum amount that may be paid to an Employee under such Cash Awards or
Performance Shares with respect to a Performance Period is $2,000,000.
-12-
<PAGE> 41
(e) Performance Certification. The Committee shall certify and
announce the results for each Performance Period to all Grantees immediately
following the announcement of the Company's financial results for the
Performance Period. If and to the extent that the Committee does not certify
that the performance goals have been met, the grants of Restricted Shares,
Performance Shares, or Cash Awards made pursuant to this Section 12 for the
Performance Period shall be forfeited.
13. Withholding of Taxes
(a) Required Withholding. The Company shall be entitled to
withhold from any payments or deemed payments any amount of tax withholding
(including all federal, state and local taxes) determined by the Committee to be
required by law. Without limiting the generality of the foregoing, the Committee
may, in its discretion, require the Grantee to pay to the Company at such time
as the Committee determines the amount that the Committee deems necessary to
satisfy the Company's obligation to withhold federal, state or local income or
other taxes incurred by reason of (i) the exercise of any Option or SAR, (ii)
the lapsing of any restrictions applicable to any Restricted Shares, (iii) the
receipt of a payment in respect of Performance Shares, Dividend Equivalent
Rights or Cash Awards or (iv) any other applicable income recognition event (for
example, an election under Section 83(b) of the Code). Notwithstanding anything
contained in the Plan to the contrary, the Grantee's satisfaction of any
tax-withholding requirements imposed by the Committee shall be a condition
precedent to the Company's obligation as may otherwise be provided hereunder to
provide Shares to the Grantee and to the release of any restrictions as may
otherwise be provided hereunder, as applicable; and the applicable options,
SARs, Restricted Shares, Performance Shares or Dividend Equivalent Rights shall
be forfeited upon the failure of the Grantee to satisfy such requirements with
respect to, as applicable, (i) the exercise of the option or SAR, (ii) the
lapsing of restrictions on the Restricted Share (or other income recognition
event) or (iii) payments in respect of any Performance Share or Dividend
Equivalent Right.
(b) Election to Withhold Shares. If the Committee so permits,
a Grantee may make a written election to satisfy the Company's income tax
withholding obligation with respect to an Option, an SAR, Restricted Shares,
Performance Shares or Dividend Equivalent Rights paid in Shares by having Shares
withheld by the Company from the Shares otherwise to be received, or to deliver
previously owned Shares (not subject to restrictions hereunder). In the event
that the Committee permits and Grantee makes such an election, the number of
Shares so withheld or delivered shall have an aggregate Fair Market Value on the
date of exercise sufficient to satisfy the applicable withholding taxes. Where
the exercise of an Incentive Stock Option does not give rise to an obligation by
the Company to withhold federal, state or local income or other taxes on the
date of exercise, but may give rise to such an obligation in the future, the
Committee may, in its discretion, make such arrangements and impose such
restrictions as it deems necessary or appropriate. The election must be in a
form and manner prescribed by the Committee and shall be subject to the prior
approval of the Committee.
14. Transferability of Grants
(a) In General. Except as provided in Section 14(b), only the
Grantee may exercise rights under a Grant during the Grantee's lifetime. A
Grantee may not transfer those
-13-
<PAGE> 42
rights except by will or by the laws of descent and distribution. When a Grantee
dies, the personal representative or other person entitled to succeed to the
rights of the Grantee ("Successor Grantee") may exercise such rights in
accordance with the terms of the Plan. A Successor Grantee must furnish proof
satisfactory to the Company of his or her right to receive the Grant under the
Grantee's will or under the applicable laws of descent and distribution.
(b) Transfer of Nonqualified Options. Notwithstanding the
foregoing, the Committee may provide in a Grant Instrument that a Grantee may
transfer Nonqualified Options to family members or other persons or entities
according to such terms as the Committee may determine where the Committee
determines that such transferability does not result in accelerated federal
income taxation; provided that the Grantee receives no consideration for the
transfer of an Option and the transferred Option shall continue to be subject to
the same terms and conditions as were applicable to the Option immediately
before the transfer.
15. Right of First Refusal
Prior to a Public Offering, as defined in Section 25(c), if at
any time an individual desires to sell, encumber, or otherwise dispose of Shares
distributed to him under this Plan, the individual shall first offer the Shares
to the Company by giving the Company written notice disclosing: (a) the name of
the proposed transferee of the Shares; (b) the certificate number and number of
Shares proposed to be transferred or encumbered; (c) the proposed price; (d) all
other terms of the proposed transfer; and (e) a written copy of the proposed
offer. Within 30 days after receipt of such notice, the Company shall have the
option to purchase all or part of such Shares at the same price and on the same
terms as contained in such notice.
In the event the Company (or a shareholder, as described
below) does not exercise the option to purchase Shares, as provided above, the
individual shall have the right to sell, encumber or otherwise dispose of his
Shares on the terms of the transfer set forth in the written notice to the
Company, provided such transfer is effected within 30 days after the expiration
of the option period. If the transfer is not effected within such period, the
Company must again be given an option to purchase, as provided above.
The Board, in its sole discretion, may waive the Company's
right of first refusal pursuant to this Section 15 and the Company's repurchase
right pursuant to Section 16 below. If the Company's right of first refusal or
repurchase right is so waived, the Board may, in its sole discretion, pass
through such right to the remaining shareholders of the Company in the same
proportion that each shareholder's Share ownership bears to the Share ownership
of all the shareholders of the Company, as determined by the Board. To the
extent that a shareholder has been given such right and does not purchase his or
her allotment, the other shareholders shall have the right to purchase such
allotment on the same basis.
On and after a Public Offering, the Company shall have no
further right to purchase Shares under this Section 15 or Section 16 below, and
its limitations shall be null and void.
Notwithstanding the foregoing, the shareholders agreement
described in Section 19(a) may provide that the provisions of this Sections 15
and Section 16 shall not apply to any
-14-
<PAGE> 43
Share distributed pursuant to the Plan.
16. Purchase by the Company
Unless otherwise determined by the Board or Committee at or
after grant, in the event of the Grantee's Termination of Service, the Company
shall have the right to repurchase all Shares issued or to be issued to the
Grantee under this Plan at Fair Market Value as of the date of such Termination
of Service but not less than the amount paid by the Grantee for such shares. In
the event that the Board or Committee determines in good faith that the Grantee
has materially breached any non-compete or confidentiality agreement with the
Company after termination of his or her status as an Employee, Key Advisor or
member of the Board, the price at which the Company shall have the right to
repurchase such Shares shall be equal to the Exercise Price or purchase price
paid by the Grantee. Any repurchase shall be made in accordance with accounting
rules to avoid adverse accounting treatment.
The Company's right to repurchase shall be exercisable at any
time within one year after the date of Grantee's Termination of Service by the
delivery of written notice to such effect by the Company to the Grantee, his
executor, administrator or beneficiaries. Within 30 days after receipt of such
notice, the Grantee, his executor, administrator or beneficiaries shall deliver
a certificate or certificates for the shares being sold, together with
appropriate duly signed stock powers transferring such shares to the Company,
and the Company shall deliver to the Grantee, his executor, administrator or
beneficiaries the Company's check in the amount of the purchase price for the
shares being sold.
17. Reorganization of the company
(a) Reorganization. As used herein, a "Reorganization" shall
be deemed to have occurred if the shareholders of the Company approve (or, if
shareholder approval is not required, the Board approves) an agreement providing
for (i) the merger or consolidation of the Company with another corporation
where the shareholders of the Company, immediately prior to the merger or
consolidation, will not beneficially own, immediately after the merger or
consolidation, Shares entitling such shareholders to more than 50% of all votes
to which all shareholders of the surviving corporation would be entitled in the
election of directors (without consideration of the rights of any class of stock
to elect directors by a separate class vote), (ii) the sale or other disposition
of all or substantially all of the assets of the Company, or (iii) a liquidation
or dissolution of the Company.
(b) Assumption of Grants. Upon a Reorganization where the
Company is not the surviving corporation (or survives only as a subsidiary of
another corporation), unless the Committee determines otherwise, all outstanding
Options and SARs that are not exercised shall be assumed by, or replaced with
comparable options or rights by, the surviving corporation.
(c) Other Alternatives. Notwithstanding the foregoing, in the
event of a Reorganization, the Committee may take one or both of the following
actions: the Committee may (i) require that Grantees surrender their outstanding
Options and SARs in exchange for a payment by the Company, in cash or Shares as
determined by the Committee, in an amount equal to the amount by which the then
Fair Market Value of the Shares subject to the Grantee's
-15-
<PAGE> 44
unexercised Options and SARs exceeds the Exercise Price of the Options or the
base amount of the SARs, as applicable, or (ii) after accelerating all vesting
and giving Grantees an opportunity to exercise their outstanding Options and
SARs, terminate any or all unexercised Options and SARs at such time as the
Committee deems appropriate. Such surrender or termination shall take place as
of the date of the Reorganization or such other date as the Committee may
specify.
(d) Limitations. Notwithstanding anything in the Plan to the
contrary, in the event of a Reorganization, the Committee shall not have the
right to take any actions described in the Plan (including without limitation
actions described in Section 17(b)) that would make the Reorganization
ineligible for pooling of interests accounting treatment or that would make the
Reorganization ineligible for desired tax treatment if, in the absence of such
right, the Reorganization would qualify for such treatment and the Company
intends to use such treatment with respect to the Reorganization.
18. Change of Control of the Company
(a) Definition. As used herein, a "Change of Control" shall be
deemed to have occurred if:
(i) Any "person" (as such term is used in Sections 13(d)
and 14(d) of the Exchange Act) other than Safeguard Scientifics, Inc. or any of
its subsidiaries or affiliates becomes a "beneficial owner" (as defined in Rule
13d-3 under the Exchange Act), directly or indirectly, of securities of the
Company representing a majority of the voting power of the then outstanding
securities of the Company except where the acquisition is approved by the Board;
or
(ii) Any person has commenced a tender offer or exchange
offer for a majority of the voting power of the then outstanding Shares of the
Company.
(b) Notice and Acceleration. Upon a Change of Control, to the
extent the Committee in its sole discretion determines, (i) the Company shall
provide each Grantee with outstanding Grants written notice of such Change of
Control, (ii) all outstanding Options and SARs shall automatically accelerate
and become fully exercisable, (iii) the restrictions and conditions on all
outstanding Restricted Shares shall immediately lapse, and (iv) Grantees holding
Performance Shares shall receive a payment in settlement of such Performance
Shares, in an amount determined by the Committee, based on the Grantee's target
payment for the Performance Period and the portion of the Performance Period
that precedes the Change of Control.
(c) Other Alternatives. Notwithstanding the foregoing, subject
to Section (d) 18 below, in the event of a Change of Control, the Committee may
take one or both of the following actions: the Committee may (i) require that
Grantees surrender their outstanding Options and SARs in exchange for a payment
by the Company, in cash or Shares as determined by the Committee, in an amount
equal to the amount by which the then Fair Market Value of the Shares subject to
the Grantee's unexercised Options and SARs exceeds the Exercise Price of the
Options or the base amount of the SARs, as applicable, or (ii) after giving
Grantees an opportunity to exercise their outstanding Options and SARs,
terminate any or all unexercised Options and SARs at such time as the Committee
deems appropriate. Such surrender or
-16-
<PAGE> 45
termination shall take place as of the date of the Change of Control or such
other date as the Committee may specify.
(d) Committee. The Committee making the determinations under
this Section 18 following a Change of Control must be comprised of the same
members as those on the Committee immediately before the Change of Control. If
the Committee members do not meet this requirement, the automatic provisions of
Section 18(b) above shall apply in the case of such a Change of Control, and the
Committee shall not have discretion to vary them.
(e) Limitations. Notwithstanding anything in the Plan to the
contrary, in the event of a Change of Control, the Committee shall not have the
right to take any actions described in the Plan (including without limitation
actions described in Section 18(c) above) that would make the Change of Control
ineligible for pooling of interests accounting treatment or that would make the
Change of Control ineligible for desired tax treatment if, in the absence of
such right, the Change of Control would qualify for such treatment and the
Company intends to use such treatment with respect to the Change of Control.
19. Requirements for Issuance or Transfer of Shares
(a) Shareholder's Agreement. The Committee may require that a
Grantee execute a shareholder's agreement, with such terms as the Committee
deems appropriate, with respect to any Shares distributed pursuant to the Plan.
(b) Limitations on Issuance or Transfer of Shares. No Shares
shall be issued or transferred in connection with any Grant hereunder unless and
until all legal requirements applicable to the issuance or transfer of such
Shares have been complied with to the satisfaction of the Committee. The
Committee shall have the right to condition any Grant made to any Grantee
hereunder on such Grantee's undertaking in writing to comply with such
restrictions on his or her subsequent disposition of such Shares as the
Committee shall deem necessary or advisable as a result of any applicable law,
regulation or official interpretation thereof, and certificates representing
such Shares may be legended to reflect any such restrictions. Certificates
representing Shares issued or transferred under the Plan will be subject to such
stop-transfer orders, registration and other restrictions as may be required by
applicable laws, regulations and interpretations, including any requirement that
a legend be placed thereon.
20. Amendment and Termination of the Plan
(a) Amendment. The Board may amend or terminate the Plan at
any time; provided that the Board may not make any amendment to the Plan that
would, if such amendment were not approved by the shareholders of the company,
cause the Plan to fail to comply with any requirement of applicable law or
regulation, unless and until the approval of the shareholders is obtained.
(b) Termination of Plan. The Plan shall terminate on the day
immediately preceding the tenth anniversary of its effective date, unless the
Plan is terminated earlier by the Board or is extended by the Board with the
approval of the shareholders.
(c) Termination and Amendment of Outstanding Grants. A
termination or
-17-
<PAGE> 46
amendment of the Plan that occurs after a Grant is made shall not materially
impair the rights of a Grantee unless the Grantee consents or unless the
amendment is required in order to comply with applicable law. The termination of
the Plan shall not impair the power and authority of the Committee with respect
to an outstanding Grant. Whether or not the Plan has terminated, an outstanding
Grant may be terminated or amended in accordance with the Plan or may be amended
by agreement of the Company and the Grantee consistent with the Plan.
(d) Governing Document. The Plan shall be the controlling
document. No other statements, representations, explanatory materials or
examples, oral or written, may amend the Plan in any manner. The Plan shall be
binding upon and enforceable against the Company and its successors and assigns.
21. Funding of the Plan
The Plan shall be unfunded. The Company shall not be required
to establish any special or separate fund or to make any other segregation of
assets to assure the payment of any Grants under the Plan. In no event shall
interest be paid or accrued on any Grant, including unpaid installments of
Grants.
22. Rights of Participants
Nothing in the Plan shall entitle any Employee, Non-Employee
Director, Key Advisor or other person to any claim or right to be granted a
Grant under the Plan. Neither the Plan nor any action taken hereunder shall be
construed as giving any individual any rights to be retained by or in the employ
of the Company or any other employment rights.
23. No Fractional Shares
No fractional Shares shall be issued or delivered pursuant to
the Plan or any Grant. The Committee shall determine whether cash, other awards
or other property shall be issued or paid in lieu of such fractional Shares or
whether such fractional Shares or any rights thereto shall be forfeited or
otherwise eliminated.
24. Headings
Section headings are for reference only. In the event of a
conflict between a title and the content of a Section, the content of the
Section shall control.
25. Effective Date of the Amended and Restated Plan; Definition of
Certain Terms
(a) Effective Date. The Plan, as amended and restated, shall
be effective on May 1, 1999.
(b) Reporting Company. The provisions of the Plan that refer
to the Company becoming a Reporting Company, or that refer to, or are applicable
to persons subject to, Section 16 of the Exchange Act or Section 162(m) of the
Code, shall be effective, if at all, upon the initial registration of the Shares
under Section 12(g) of the Exchange Act, and shall remain effective thereafter
for so long as such Shares are so registered.
-18-
<PAGE> 47
(c) Public Offering. All references in the Plan to a Public
Offering shall refer to the consummation of the first registered public offering
of Shares of the Company in a firm commitment underwriting.
26. Miscellaneous
(a) Grants in Connection with Corporate Transactions and
Otherwise. Nothing contained in the Plan shall be construed to (i) limit the
right of the Committee to make Grants under the Plan in connection with the
acquisition, by purchase, lease, merger, consolidation or otherwise, of the
business or assets of any corporation, firm or association, including Grants to
employees thereof who become Employees or for other proper corporate purposes,
or (ii) limit the right of the Company to grant stock options or make other
awards outside of the Plan; provided, that the total number of Shares issuable
upon exercise of all outstanding options shall not exceed 30% of the then
outstanding Shares of the Company unless approved by a two-thirds vote of the
shareholders. Without limiting the foregoing, the Committee may make a Grant to
an employee of another corporation who becomes an Employee by reason of a
corporate merger, consolidation, acquisition of stock or property,
reorganization or liquidation involving the Company or any of its subsidiaries
in substitution for a stock option or restricted share grant made to such
employee by such corporation. The terms and conditions of the substitute grants
may vary from the terms and conditions required by the Plan and from those of
the substituted stock incentives. The Committee shall prescribe the provisions
of the substitute grants.
(b) Compliance with Law. The Plan, the exercise of Options and
SARs and the obligations of the Company to issue or transfer Shares under Grants
shall be subject to all applicable laws and to approvals by any governmental or
regulatory agency as may be required. With respect to persons subject to Section
16 of the Exchange Act, it is the intent of the Company that the Plan and all
transactions under the Plan comply with all applicable provisions of Rule 16b-3
or its successors under the Exchange Act. The Committee may revoke any Grant if
it is contrary to law or modify a Grant to bring it into compliance with any
valid and mandatory government regulation. The Committee may, in its sole
discretion, agree to limit its authority under this Section 26(b).
(c) Governing Law. The validity, construction, interpretation
and effect of the Plan and Grant Instruments issued under the Plan shall
exclusively be governed by and determined in accordance with the law of the
State of Delaware.
* * * * * *
-19-
<PAGE> 48
Date: May 1, 1999 INTERNET CAPITAL GROUP, INC.
-------------
By: /s/ Walter W. Buckley, III
-------------------------------------
Walter W. Buckley, III
President and Chief Executive Officer
Attest:
By: /s/ Donna M. Lightner
----------------------
-20-
<PAGE> 49
Exhibit II
AMENDMENT NO. 1 TO THE
INTERNET CAPITAL GROUP, INC.
1999 EQUITY COMPENSATION PLAN
(as amended and restated, effective May 1, 1999)
On behalf of Internet Capital Group, Inc. (the "Company") and pursuant
to the resolutions of the Board of Directors of the Company dated May 21, 1999,
the undersigned hereby amends the Internet Capital Group, Inc. 1999 Equity
Compensation Plan (the "Plan") to change the aggregate number of Shares of the
Company that may be issued or transferred under the plan, effective as of May
21, 1999 as follows:
1. The second sentence of Section 3(a) is hereby amended to read
as follows:
"Subject to adjustments as provided in Section 3(b) below, the
aggregate number of Shares of the Company that may be issued or
transferred under the Plan is 21,000,000 Shares."
2. In all other respects, the Plan is hereby ratified and
confirmed.
* * * * *
IN WITNESS WHEREOF, the undersigned has caused this Amendment
No. 1 to be executed.
Date: July 1, 1999 INTERNET CAPITAL GROUP, INC.
--------------
By: /s/ Walter W. Buckley, III
-------------------------------------
Walter W. Buckley, III
President and Chief Executive Officer
Attest:
By: /s/ Henry N. Nassau
--------------------
Secretary
<PAGE> 50
Exhibit III
AMENDMENT NO. 2 TO THE
INTERNET CAPITAL GROUP, INC.
1999 EQUITY COMPENSATION PLAN
(as amended and restated, effective May 1, 1999)
On behalf of Internet Capital Group, Inc. (the "Company") and pursuant
to the resolutions of the Board of Directors of the Company dated March 3, 2000,
the undersigned hereby amends the Internet Capital Group, Inc. 1999 Equity
Compensation Plan (the "Plan"), effective as of March 3, 2000, as follows:
1. Section 3(a) is hereby amended to read as follows:
(a) Shares Authorized. For purposes of the Plan, a Share means
one or more shares of common stock of the Company, par value $.001, as
determined pursuant to Section 3(b). Subject to the adjustment
specified below, the aggregate number of Shares of the Company that may
be issued or transferred under the Plan is 60,000,000 Shares.
Notwithstanding the foregoing, until the Company's shareholders approve
the 18,000,000 Shares approved for issuance by the Board on March 3,
2000, such Shares may not be subject to Grants to employees of the
Company or its subsidiaries who may be covered by Section 162(m) of the
Code and may only be used for Grants which are issued to induce
grantees to become employed by the Company or its subsidiaries. The
maximum aggregate number of Shares that shall be subject to Grants made
under the Plan to any individual during any calendar year shall be
6,000,000 Shares. The Shares may be authorized but unissued Shares or
reacquired Shares, including Shares purchased by the Company on the
open market for purposes of the Plan. If and to the extent Options or
SARs granted under the Plan terminate, expire, or are canceled,
forfeited, exchanged or surrendered without having been exercised, or
if any Restricted Shares or Performance Shares are forfeited, the
Shares subject to such Grants shall again be available for purposes of
the Plan.
2. In all other respects, the Plan is hereby ratified and
confirmed.
* * * * *
<PAGE> 51
IN WITNESS WHEREOF, the undersigned has caused this Amendment
No. 2 to be executed.
Date: March 3, 2000 INTERNET CAPITAL GROUP, INC.
---------------
By: /s/ Walter W. Buckley, III
--------------------------------------
Walter W. Buckley, III
President and Chief Executive Officer
Attest:
By: /s/ Henry N. Nassau
--------------------
Secretary
