<PAGE>
As filed with the Securities and Exchange Commission on February 8, 2000
Registration No. 333-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________________
FORM S-8
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933
_________________________
DRUGSTORE.COM, INC.
(Exact name of Registrant as specified in its charter)
Delaware 04-3416255
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
13920 Southeast Eastgate Way, Suite 300
Bellevue, Washington 98065
(425) 372-3200
(Address of Principal Executive Offices)
__________________________
Beauty.com, Inc. Stock Plan
(Full title of the plan)
__________________________
Peter M. Neupert
President and Chief Executive Officer
drugstore.com, inc.
13920 Southeast Eastgate Way, Suite 300
Bellevue, Washington 98065
(425) 372-3200
(Name, address and telephone number, including area code, of agent for service)
__________________________
Copy to:
John J. Cannon, III
Shearman & Sterling
599 Lexington Avenue
New York, New York 10022
(212) 848-4000
(Calculation of Registration Fee on following Page)
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
____________________________________________________________________________________________________________
Title of Amount Proposed Maximum Proposed Maximum
Securities to be to be Offering Price Per Aggregate Amount of
Registered Registered(1) Share(2) Offering Price(2) Registration Fee
<S> <C> <C> <C> <C>
Common Stock, par value 32,405 $9.68 $313,680.40 $82.81
$0.0001 per share
_____________________________________________________________________________________________________________
</TABLE>
(1) This Registration Statement shall also cover any additional shares of
Common Stock which become issuable under the Plan being registered pursuant
to this Registration Statement by reason of any stock dividend, stock
split, recapitalization or any other similar transaction effected without
the receipt of consideration which results in an increase in the number of
the Registrant's outstanding shares of Common Stock.
(2) Computed in accordance with Rule 457(h) under the Securities Act of 1933,
as amended (the "Securities Act") solely for the purpose of calculating the
registration fee. Computation based on the weighted average per share
exercise price (rounded to the nearest cent) of outstanding options under
the referenced plan, the shares issuable under which are registered hereby.
<PAGE>
EXPLANATORY NOTE
Pursuant to an Agreement Plan of Merger and Reorganization among the
Registrant, DS Sub, Inc. (the "Merger Subsidiary"), Beauty.com, Inc. and Mr.
Roger Barnett, dated as of January 6, 2000, the Merger Subsidiary will merge
with and into Beauty.com, Inc. and Beauty.com, Inc. will survive as a subsidiary
of the Registrant. Each share of Beauty.com, Inc. issued and outstanding as of
the effective time of the merger was converted into the right to receive
.01550504829 of a share of common stock of the Registrant. Shares of stock of
the Registrant, rather than shares of Beauty.com, Inc., became issuable under
the Beauty.com, Inc. Stock Plan. No additional awards will be made under that
plan.
<PAGE>
Part I
INFORMATION REQUIRED IN THE SECTION 10(a) PROSPECTUS
Information required by Part I to be contained in the Section 10(a) prospectus
is omitted from this Registration Statement in accordance with Rule 428 under
the Securities Act and the "Note" to Part I of Form S-8.
<PAGE>
Part II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
Item 3. Incorporation of Documents by Reference.
The following documents filed with the Securities and Exchange Commission
(the "Commission") are hereby incorporated by reference into this Registration
Statement:
(a) The Registrant's Prospectus filed on July 28, 1999 pursuant to
Rule 424(b) under the Securities Act, which contains audited financial
statements for the Registrant's latest fiscal year for which such
statements have been filed.
(b) The Registrant's Quarterly Report on Form 10-Q for the fiscal
quarter ended October 3, 1999.
(c) The description of the Registrant's Common Stock contained in the
Registrant's Registration Statement on Form 8-A filed with the Commission
under Section 12 of the Securities Exchange Act of 1934 (the "Exchange
Act") on May 19, 1999, including any amendment or report filed for the
purpose of updating such description.
All documents subsequently filed by the Registrant pursuant to
Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act, prior to the filing of
a post-effective amendment which indicates that all securities offered hereby
have been sold or which deregisters all securities then remaining unsold, shall
be deemed to be incorporated by reference in this Registration Statement and to
be part hereof from the date of filing such documents.
Item 4. Description of Securities.
Not applicable.
Item 5. Interests of Named Experts and Counsel.
Not applicable.
Item 6. Indemnification of Directors and Officers.
The Registrant's Certificate of Incorporation reduces the liability of a
director to the corporation or its stockholders for monetary damages for
breaches of his or her fiduciary
<PAGE>
duty of care to the fullest extent permissible under Delaware law. The Bylaws of
the Registrant further provide for indemnification of corporate agents to the
maximum extent permitted by the Delaware General Corporation Law. In addition,
the Registrant has entered into Indemnification Agreements with its officers and
directors.
Item 7. Exemption from Registration Claimed.
Not applicable.
Item 8. Exhibits.
See attached exhibit list.
Item 9. Undertakings.
The undersigned Registrant hereby undertakes:
(1) to file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement to include any
material information with respect to the plan of distribution not previously
disclosed in the registration statement or any material change to such
information in the registration statement.
(2) that, for purposes of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) to remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Exchange Act that is incorporated by reference in the registration statement
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
Insofar as the indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the
<PAGE>
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in a successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered hereunder, the Registrant will,
unless in the opinion of its counsel the question has already been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question of whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
[Signature Pages Follow]
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant, drugstore.com, inc., a corporation organized and existing under the
laws of the State of Delaware, certifies that it has reasonable grounds to
believe that it meets all of the requirements for filing on Form S-8 and has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Bellevue, State of
Washington, on the 8th day of February, 2000.
drugstore.com, inc.
(Registrant)
By: /s/ David Rostov
-------------------------------
David E. Rostov
Vice President, Chief Financial Officer
and Treasurer
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Peter M. Neupert and David E. Rostov,
jointly and severally, his or her attorneys-in-fact and agents, each with the
power of substitution and resubstitution, for him or her and in his or her name,
place or stead, in any and all capacities, to sign any and all amendments to
this Registration Statement on Form S-8, and to file such amendments, together
with exhibits and other documents in connection therewith, with the Securities
and Exchange Commission, granting to each attorney-in-fact and agent, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully as he or she might or
could do in person, and ratifying and confirming all that the attorneys-in-fact
and agents, or his or her substitute or substitutes, may do or cause to be done
by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed below by the following in the
capacities indicated as of this 8th day of February, 2000.
SIGNATURE TITLE
/s/ Peter M. Neupert Chairman of the Board, President, Chief
- ------------------------------- Executive Officer and Director (Principal
Peter M. Neupert Executive Officer)
/s/ David Rostov Vice President, Chief Financial Officer and
- ------------------------------- Treasurer (Principal Financial and Accounting
David E. Rostov Officer)
/s/ Jeffrey P. Bezos Director
- -------------------------------
Jeffrey P. Bezos
/s/ Brook Byers Director
- -------------------------------
Brook H. Byers
/s/ L. John Doerr Director
- -------------------------------
L. John Doerr
/s/ Melinda French Gates Director
- -------------------------------
Melinda French Gates
Director
- -------------------------------
Mary Sammons
/s/ William D. Savoy Director
- -------------------------------
William D. Savoy
/s/ Howard Schultz Director
- -------------------------------
Howard Schultz
<PAGE>
Exhibit Index
<TABLE>
<CAPTION>
Exhibit No. Description of Document
<S> <C>
4.1 Amended and Restated Certificate of Incorporation of
drugstore.com, inc. (previously filed as exhibit number 3.3 to
drugstore.com's registration statement on Form S-1 (file number
333-78813) on July 20, 1999 and incorporated herein by
reference).
4.2 By-laws of drugstore.com, inc., as amended to date (previously
filed as exhibit number 3.3 to drugstore.com's registration
statement on Form S-1 (file number 333-78813) on May 19, 1999
and incorporated herein by reference).
4.3 Beauty.com, Inc. Stock Plan.
5. Opinion of Shearman & Sterling, as to the legality of the
shares.
23.1 Consent of Ernst & Young LLP, Independent Auditors.
23.2 Consent of Shearman & Sterling (contained in Exhibit 5).
24 Powers of Attorney (included on signature page).
</TABLE>
<PAGE>
EXHIBIT 4.3
BEAUTY.COM, INC.
1999 STOCK OPTION PLAN
1. Purposes of the Plan. The purposes of this Stock Option Plan are to
attract and retain the best available personnel, to provide additional incentive
to Employees, Directors and Consultants and to promote the success of the
Company's business.
2. Definitions. As used herein, the following definitions shall apply:
(a) "Administrator" means the Board or any of the Committees
appointed to administer the Plan.
(b) "Applicable Laws" means the legal requirements relating to the
administration of stock option plans, if any, under applicable provisions of
federal and state securities laws, the corporate law of the state of Delaware,
the Code, the rules of any applicable stock exchange or national market system,
and the rules of any foreign jurisdiction applicable to Options granted to
residents therein.
(c) "Option Agreement" means the written agreement evidencing the
grant of an Option executed by the Company and the Grantee, including any
amendments thereto.
(d) "Board" means the Board of Directors of the Company.
(e) "Cause" means, with respect to the termination by the Company or a
Related Entity of the Grantee's Continuous Service, that such termination is for
"Cause" as such term is expressly defined in a then-effective written agreement
between the Grantee and the Company or such Related Entity, or in the absence of
such then-effective written agreement and definition, is based on, in the
determination of the Administrator, the Grantee's: (i) refusal or failure to act
in accordance with any specific, lawful direction or order of the Company or a
Related Entity; (ii) unfitness or unavailability for service or unsatisfactory
performance (other than as a result of Disability); (iii) performance of any act
or failure to perform any act in bad faith and to the detriment of the Company
or a Related Entity; (iv) dishonesty, intentional misconduct or material breach
of any agreement with the Company or a Related Entity; or (v) commission of a
crime involving dishonesty, breach of trust, or physical or emotional harm to
any person. At least 30 days prior to the termination of the Grantee's
Continuous Service pursuant to (i) or (ii) above, the Company shall provide the
Grantee with notice of the Company's or such Related Entity's intent to
terminate, the reason therefor, and an opportunity for the Grantee to cure such
defects in his or her service to the Company's or such Related Entity's
satisfaction. During this 30 day (or longer) period, no Option issued to the
Grantee under the Plan may be exercised or purchased.
(f) "Code" means the Internal Revenue Code of 1986, as amended.
1
<PAGE>
(g) "Committee" means any committee appointed by the Board to
administer the Plan.
(h) "Common Stock" means the common stock of the Company.
(i) "Company" means Beauty.com, Inc., a Delaware corporation.
(j) "Consultant" means any person (other than an Employee or a
Director, solely with respect to rendering services in such person's capacity as
a Director) who is engaged by the Company or any Related Entity to render
consulting or advisory services to the Company or such Related Entity.
(k) "Continuous Service" means that the provision of services to the
Company or a Related Entity in any capacity of Employee, Director or Consultant,
is not interrupted or terminated. Continuous Service shall not be considered
interrupted in the case of (i) any approved leave of absence, (ii) transfers
among the Company, any Related Entity, or any successor, in any capacity of
Employee, Director or Consultant, or (iii) any change in status as long as the
individual remains in the service of the Company or a Related Entity in any
capacity of Employee, Director or Consultant (except as otherwise provided in
the Option Agreement). An approved leave of absence shall include sick leave,
military leave, or any other authorized personal leave. For purposes of
Incentive Stock Options, no such leave may exceed ninety (90) days, unless
reemployment upon expiration of such leave is guaranteed by statute or contract.
(l) "Corporate Transaction" means any of the following transactions
to which the Company is a party:
(i) a merger or consolidation in which the Company is not the
surviving entity, except for a transaction the principal purpose of which is to
change the state in which the Company is incorporated;
(ii) the sale, transfer or other disposition of all or
substantially all of the assets of the Company (including the capital stock of
the Company's subsidiary corporations) in connection with the complete
liquidation or dissolution of the Company;
(iii) any reverse merger in which the Company is the surviving
entity but in which securities possessing more than fifty percent (50%) of the
total combined voting power of the Company's outstanding securities are
transferred to a person or persons different from those who held such securities
immediately prior to such merger; or
(iv) acquisition by any person or related group of persons
(other than the Company or by a Company-sponsored employee benefit plan) of
beneficial ownership (within the meaning of Rule 13d-3 of the Exchange Act) of
securities possessing more than fifty percent (50%) of the total combined voting
power of the Company's outstanding securities, but excluding any such
transaction that the Administrator determines shall not be a Corporate
Transaction.
2
<PAGE>
(m) "Director" means a member of the Board or the board of directors
of any Related Entity.
(n) "Disability" means that a Grantee is permanently unable to carry
out the responsibilities and functions of the position held by the Grantee by
reason of any medically determinable physical or mental impairment. A Grantee
will not be considered to have incurred a Disability unless he or she furnishes
proof of such impairment sufficient to satisfy the Administrator in its
discretion.
(o) "Employee" means any person, including an Officer or Director,
who is an employee of the Company or any Related Entity. The payment of a
director's fee by the Company or a Related Entity shall not be sufficient to
constitute "employment" by the Company.
(p) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(q) "Fair Market Value" means, as of any date, the value of Common
Stock determined as follows:
(i) Where there exists a public market for the Common Stock, the
Fair Market Value shall be (A) the closing price for a Share for the last market
trading day prior to the time of the determination (or, if no closing price was
reported on that date, on the last trading date on which a closing price was
reported) on the stock exchange determined by the Administrator to be the
primary market for the Common Stock or the Nasdaq National Market, whichever is
applicable or (B) if the Common Stock is not traded on any such exchange or
national market system, the average of the closing bid and asked prices of a
Share on the Nasdaq Small Cap Market for the day prior to the time of the
determination (or, if no such prices were reported on that date, on the last
date on which such prices were reported), in each case, as reported in The Wall
Street Journal or such other source as the Administrator deems reliable; or
(ii) In the absence of an established market for the Common
Stock of the type described in (i), above, the Fair Market Value thereof shall
be determined by the Administrator in good faith.
(r) "Grantee" means an Employee, Director or Consultant who receives
an Option under the Plan.
(s) "Immediate Family" means any child, stepchild, grandchild,
parent, stepparent, grandparent, spouse, former spouse, sibling, niece, nephew,
mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or
sister-in-law, including adoptive relationships, any person sharing the
Grantee's household (other than a tenant or employee), a trust in which these
persons (or the Grantee) have more than fifty percent (50%) of the beneficial
interest, a foundation in which these persons (or the Grantee) control the
management of assets, and any other entity in which these persons (or the
Grantee) own more than fifty percent (50%) of the voting interests.
(t) "Incentive Stock Option" means an Option intended to qualify as
an incentive stock option within the meaning of Section 422 of the Code.
3
<PAGE>
(u) "Non-Qualified Stock Option" means an Option not intended to
qualify as an Incentive Stock Option.
(v) "Officer" means a person who is an officer of the Company or a
Related Entity within the meaning of Section 16 of the Exchange Act and the
rules and regulations promulgated thereunder.
(w) "Option" means an option to purchase Shares pursuant to an Option
Agreement granted under the Plan.
(x) "Parent" means a "parent corporation," whether now or hereafter
existing, as defined in Section 424(e) of the Code.
(y) "Plan" means this 1999 Stock Option Plan.
(z) "Post-Termination Exercise Period" means the period specified in
the Option Agreement commencing on the date of termination (other than
termination by the Company or any Related Entity for Cause) of the Grantee's
Continuous Service, or such longer period as may be applicable upon death or
Disability.
(aa) "Registration Date" means the first to occur of (i) the closing
of the first sale to the general public of (A) the Common Stock or (B) the same
class of securities of a successor corporation (or its Parent) issued pursuant
to a Corporate Transaction in exchange for or in substitution of the Common
Stock, pursuant to a registration statement filed with and declared effective by
the Securities and Exchange Commission under the Securities Act of 1933, as
amended; and (ii) in the event of a Corporate Transaction, the date of the
consummation of the Corporate Transaction if the same class of securities of the
successor corporation (or its Parent) issuable in such Corporate Transaction
shall have been sold to the general public pursuant to a registration statement
filed with and declared effective by the Securities and Exchange Commission
under the Securities Act of 1933, as amended, on or prior to the date of
consummation of such Corporate Transaction.
(bb) "Related Entity" means any Parent, Subsidiary and any business,
corporation, partnership, limited liability company or other entity in which the
Company, a Parent or a Subsidiary holds a substantial ownership interest,
directly or indirectly.
(cc) "Restricted Stock" means Shares issued under the Plan to the
Grantee for such consideration, if any, and subject to such restrictions on
transfer, rights of first refusal, repurchase provisions, forfeiture provisions,
and other terms and conditions as established by the Administrator.
(dd) "Share" means a share of the Common Stock.
(ee) "Subsidiary" means a "subsidiary corporation," whether now or
hereafter existing, as defined in Section 424(f) of the Code.
4
<PAGE>
3. Stock Subject to the Plan.
(a) Subject to the provisions of Section 10(a) below, the maximum
aggregate number of Shares which may be issued pursuant to all Options
(including Incentive Stock Options) is 2,089,916 Shares. The Shares may be
authorized, but unissued, or reacquired Common Stock.
(b) Any Shares covered by an Option (or portion of an Option) which
is forfeited or canceled, expires or is settled in cash, shall be deemed not to
have been issued for purposes of determining the maximum aggregate number of
Shares which may be issued under the Plan. Shares that actually have been issued
under the Plan pursuant to an Option shall not be returned to the Plan and shall
not become available for future issuance under the Plan, except that if unvested
Shares are forfeited, or repurchased by the Company at their original purchase
price, such Shares shall become available for future grant under the Plan.
4. Administration of the Plan.
(a) Plan Administrator. With respect to grants of Options to
Employees, Directors, or Consultants, the Plan shall be administered by (A) the
Board or (B) a Committee (or a subcommittee of the Committee) designated by the
Board, which Committee shall be constituted in such a manner as to satisfy
Applicable Laws. Once appointed, such Committee shall continue to serve in its
designated capacity until otherwise directed by the Board.
(b) Multiple Administrative Bodies. The Plan may be administered by
different bodies with respect to Directors, Officers, Consultants, and Employees
who are neither Directors nor Officers.
(c) Powers of the Administrator. Subject to Applicable Laws and the
provisions of the Plan (including any other powers given to the Administrator
hereunder), and except as otherwise provided by the Board, the Administrator
shall have the authority, in its discretion:
(i) to select the Employees, Directors and Consultants to whom
Options may be granted from time to time hereunder;
(ii) to determine whether and to what extent Options are granted
hereunder;
(iii) to determine the number of Shares or the amount of other
consideration to be covered by each Option granted hereunder;
(iv) to approve forms of Option Agreements for use under the
Plan;
(v) to determine the terms and conditions of any Option granted
hereunder;
(vi) to establish additional terms, conditions, rules or
procedures to accommodate the rules or laws of applicable foreign jurisdictions
and to afford Grantees
5
<PAGE>
favorable treatment under such rules or laws; provided, however, that no Option
shall be granted under any such additional terms, conditions, rules or
procedures with terms or conditions which are inconsistent with the provisions
of the Plan;
(vii) to amend the terms of any outstanding Option granted under
the Plan, provided that any amendment that would adversely affect the Grantee's
rights under an outstanding Option shall not be made without the Grantee's
written consent;
(viii) to construe and interpret the terms of the Plan and
Options, including without limitation, any notice of Option or Option Agreement,
granted pursuant to the Plan; and
(ix) to take such other action, not inconsistent with the terms
of the Plan, as the Administrator deems appropriate.
5. Eligibility. Options other than Incentive Stock Options may be granted
to Employees, Directors and Consultants. Incentive Stock Options may be granted
only to Employees of the Company, a Parent or a Subsidiary. An Employee,
Director or Consultant who has been granted an Option may, if otherwise
eligible, be granted additional Options. Options may be granted to such
Employees, Directors or Consultants who are residing in foreign jurisdictions as
the Administrator may determine from time to time.
6. Terms and Conditions of Options.
(a) Designation of Option. Each Option shall be designated in the
Option Agreement as either an Incentive Stock Option or a Non-Qualified Stock
Option. However, notwithstanding such designation, to the extent that the
aggregate Fair Market Value of Shares subject to Options designated as Incentive
Stock Options which become exercisable for the first time by a Grantee during
any calendar year (under all plans of the Company or any Parent or Subsidiary)
exceeds $100,000, such excess Options, to the extent of the Shares covered
thereby in excess of the foregoing limitation, shall be treated as Non-Qualified
Stock Options. For this purpose, Incentive Stock Options shall be taken into
account in the order in which they were granted, and the Fair Market Value of
the Shares shall be determined as of the grant date of the relevant Option.
(b) Conditions of Option. Subject to the terms of the Plan, the
Administrator shall determine the provisions, terms, and conditions of each
Option including, but not limited to, the Option vesting schedule, repurchase
provisions, rights of first refusal, forfeiture provisions, form of payment
(cash, Shares, or other consideration) upon settlement of the Option, payment
contingencies, and satisfaction of any performance criteria. The performance
criteria established by the Administrator may be based on any one of, or
combination of, increase in share price, earnings per share, total stockholder
return, return on equity, return on assets, return on investment, net operating
income, cash flow, revenue, economic value added, personal management
objectives, or other measure of performance selected by the Administrator.
Partial achievement of the specified criteria may result in a payment or vesting
corresponding to the degree of achievement as specified in the Option Agreement.
6
<PAGE>
(c) Acquisitions and Other Transactions. The Administrator may issue
Options under the Plan in settlement, assumption or substitution for,
outstanding Options or obligations to grant future Options in connection with
the Company or a Related Entity acquiring another entity, an interest in another
entity or an additional interest in a Related Entity whether by merger, stock
purchase, asset purchase or other form of transaction.
(d) Deferral of Option Payment. The Administrator may establish one
or more programs under the Plan to permit selected Grantees the opportunity to
elect to defer receipt of consideration upon exercise of an Option, satisfaction
of performance criteria, or other event that absent the election would entitle
the Grantee to payment or receipt of Shares or other consideration under an
Option. The Administrator may establish the election procedures, the timing of
such elections, the mechanisms for payments of, and accrual of interest or other
earnings, if any, on amounts, Shares or other consideration so deferred, and
such other terms, conditions, rules and procedures that the Administrator deems
advisable for the administration of any such deferral program.
(e) Separate Programs. The Administrator may establish one or more
separate programs under the Plan for the purpose of issuing particular forms of
Options to one or more classes of Grantees on such terms and conditions as
determined by the Administrator from time to time.
(f) Early Exercise. The Option Agreement may, but need not, include
a provision whereby the Grantee may elect at any time while an Employee,
Director or Consultant to exercise any part or all of the Option prior to full
vesting of the Option. Any unvested Shares received pursuant to such exercise
may be subject to a repurchase right in favor of the Company or a Related Entity
or to any other restriction the Administrator determines to be appropriate.
(g) Term of Option. The term of each Option shall be the term stated
in the Option Agreement, provided, however, that the term shall be no more than
ten (10) years from the date of grant thereof. However, in the case of an
Incentive Stock Option granted to a Grantee who, at the time the Option is
granted, owns stock representing more than ten percent (10%) of the voting power
of all classes of stock of the Company or any Parent or Subsidiary, the term of
the Incentive Stock Option shall be five (5) years from the date of grant
thereof or such shorter term as may be provided in the Option Agreement.
(h) Transferability of Options. Incentive Stock Options may not be
sold, pledged, assigned, hypothecated, transferred, or disposed of in any manner
other than by will or by the laws of descent or distribution and may be
exercised, during the lifetime of the Grantee, only by the Grantee; provided,
however, that the Grantee may designate a beneficiary of the Grantee's Incentive
Stock Option in the event of the Grantee's death on a beneficiary designation
form provided by the Administrator. Other Options may be transferred by will and
by the laws of descent and distribution, and during the lifetime of the Grantee,
by gift and or pursuant to domestic relations order to members of the Grantee's
Immediate Family to the extent and in the manner determined by the
Administrator.
7
<PAGE>
(i) Time of Granting Options. The date of grant of an Option shall
for all purposes be the date on which the Administrator makes the determination
to grant such Option, or such other date as is determined by the Administrator.
Notice of the grant determination shall be given to each Employee, Director or
Consultant to whom an Option is so granted within a reasonable time after the
date of such grant.
7. Option Exercise or Purchase Price, Consideration and Taxes.
(a) Exercise or Purchase Price. The exercise or purchase price, if
any, for an Option shall be as follows:
(i) In the case of an Incentive Stock Option:
(A) granted to an Employee who, at the time of the grant of
such Incentive Stock Option owns stock representing more than ten percent (10%)
of the voting power of all classes of stock of the Company or any Parent or
Subsidiary, the per Share exercise price shall be not less than one hundred ten
percent (110%) of the Fair Market Value per Share on the date of grant; or
(B) granted to any Employee other than an Employee
described in the preceding paragraph, the per Share exercise price shall be not
less than one hundred percent (100%) of the Fair Market Value per Share on the
date of grant.
(ii) In the case of a Non-Qualified Stock Option, the per Share
exercise price shall be not less than eighty-five percent (85%) of the Fair
Market Value per Share on the date of grant unless otherwise determined by the
Administrator.
(iii) Notwithstanding the foregoing provisions of this Section
7(a), in the case of an Option issued pursuant to Section 6(c), above, the
exercise or purchase price for the Option shall be determined in accordance with
the principles of Section 424(a) of the Code.
(b) Consideration. Subject to Applicable Laws, the consideration to
be paid for the Shares to be issued upon exercise or purchase of an Option
including the method of payment, shall be determined by the Administrator (and,
in the case of an Incentive Stock Option, shall be determined at the time of
grant). In addition to any other types of consideration the Administrator may
determine, the Administrator is authorized to accept as consideration for Shares
issued under the Plan the following provided that the portion of the
consideration equal to the par value of the Shares must be paid in cash or other
legal consideration permitted by the Delaware General Corporation Law:
(i) cash;
(ii) check;
(iii) delivery of Grantee's promissory note with such recourse,
interest, security, and redemption provisions as the Administrator determines as
appropriate;
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(iv) if the exercise or purchase occurs on or after the
Registration Date, surrender of Shares or delivery of a properly executed form
of attestation of ownership of Shares as the Administrator may require
(including withholding of Shares otherwise deliverable upon exercise of the
Option) which have a Fair Market Value on the date of surrender or attestation
equal to the aggregate exercise price of the Shares as to which said Option
shall be exercised (but only to the extent that such exercise of the Option
would not result in an accounting compensation charge with respect to the Shares
used to pay the exercise price unless otherwise determined by the
Administrator);
(v) if the exercise occurs on or after the Registration Date,
payment through a broker-dealer sale and remittance procedure pursuant to which
the Grantee (A) shall provide written instructions to a Company designated
brokerage firm to effect the immediate sale of some or all of the purchased
Shares and remit to the Company, out of the sale proceeds available on the
settlement date, sufficient funds to cover the aggregate exercise price payable
for the purchased Shares and (B) shall provide written directives to the Company
to deliver the certificates for the purchased Shares directly to such brokerage
firm in order to complete the sale transaction; or
(vi) any combination of the foregoing methods of payment.
(c) Taxes. No Shares shall be delivered under the Plan to any
Grantee or other person until such Grantee or other person has made arrangements
acceptable to the Administrator for the satisfaction of any foreign, federal,
state, or local income and employment tax withholding obligations, including,
without limitation, obligations incident to the receipt of Shares or the
disqualifying disposition of Shares received on exercise of an Incentive Stock
Option. Upon exercise of an Option the Company shall withhold or collect from
Grantee an amount sufficient to satisfy such tax obligations.
8. Exercise of Option.
(a) Procedure for Exercise; Rights as a Stockholder.
(i) Any Option granted hereunder shall be exercisable at such
times and under such conditions as determined by the Administrator under the
terms of the Plan and specified in the Option Agreement.
(ii) An Option shall be deemed to be exercised when written
notice of such exercise has been given to the Company in accordance with the
terms of the Option by the person entitled to exercise the Option and full
payment for the Shares with respect to which the Option is exercised, including,
to the extent selected, use of the broker-dealer sale and remittance procedure
to pay the purchase price as provided in Section 7(b)(v). Until the issuance (as
evidenced by the appropriate entry on the books of the Company or of a duly
authorized transfer agent of the Company) of the stock certificate evidencing
such Shares, no right to vote or receive dividends or any other rights as a
stockholder shall exist with respect to Shares subject to an Option,
notwithstanding the exercise of an Option. No adjustment will be made for a
dividend or other right for which the record date is prior to the date the stock
certificate is issued, except as
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provided in the Option Agreement or Section 10(a), below. The Company shall
issue (or cause to be issued) such stock certificate promptly upon exercise of
the Option.
(b) Exercise of Option Following Termination of Continuous Service.
In the event of termination of a Grantee's Continuous Service for any reason
other than Disability or death (but not in the event of a Grantee's change of
status from Employee to Consultant or from Consultant to Employee), such Grantee
may, but only during the Post-Termination Exercise Period (but in no event later
than the expiration date of the term of such Option as set forth in the Option
Agreement), exercise the Option to the extent that the Grantee was entitled to
exercise it at the date of such termination or to such other extent as may be
determined by the Administrator. The Grantee's Option Agreement may provide that
upon the termination of the Grantee's Continuous Service for Cause, the
Grantee's right to exercise the Option shall terminate concurrently with the
termination of Grantee's Continuous Service. In the event of a Grantee's change
of status from Employee to Consultant, an Employee's Incentive Stock Option
shall convert automatically to a Non-Qualified Stock Option on the day three (3)
months and one day following such change of status. To the extent that the
Grantee is not entitled to exercise the Option at the date of termination, or if
the Grantee does not exercise such Option to the extent so entitled within the
Post-Termination Exercise Period, the Option shall terminate.
(c) Disability of Grantee. In the event of termination of a
Grantee's Continuous Service as a result of his or her Disability, Grantee may,
but only within twelve (12) months from the date of such termination (and in no
event later than the expiration date of the term of such Option as set forth in
the Option Agreement), exercise the Option to the extent that the Grantee was
otherwise entitled to exercise it at the date of such termination; provided,
however, that if such Disability is not a "disability" as such term is defined
in Section 22(e)(3) of the Code, in the case of an Incentive Stock Option such
Incentive Stock Option shall automatically convert to a Non-Qualified Stock
Option on the day three (3) months and one day following such termination. To
the extent that the Grantee is not entitled to exercise the Option at the date
of termination, or if Grantee does not exercise such Option to the extent so
entitled within the time specified herein, the Option shall terminate.
(d) Death of Grantee. In the event of a termination of the Grantee's
Continuous Service as a result of his or her death, or in the event of the death
of the Grantee during the Post-Termination Exercise Period or during the twelve
(12) month period following the Grantee's Termination of Continuous Service as a
result of his or her Disability, the Grantee's estate or a person who acquired
the right to exercise the Option by bequest or inheritance may exercise the
Option, but only to the extent that the Grantee was entitled to exercise the
Option as of the date of termination, within twelve (12) months from the date of
death (but in no event later than the expiration of the term of such Option as
set forth in the Option Agreement). To the extent that, at the time of death,
the Grantee was not entitled to exercise the Option, or if the Grantee's estate
or a person who acquired the right to exercise the Option by bequest or
inheritance does not exercise such Option to the extent so entitled within the
time specified herein, the Option shall terminate.
9. Conditions Upon Issuance of Shares.
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(a) Shares shall not be issued pursuant to the exercise of an Option
unless the exercise of such Option and the issuance and delivery of such Shares
pursuant thereto shall comply with all Applicable Laws, and shall be further
subject to the approval of counsel for the Company with respect to such
compliance.
(b) As a condition to the exercise of an Option, the Company may
require the person exercising such Option to represent and warrant at the time
of any such exercise that the Shares are being purchased only for investment and
without any present intention to sell or distribute such Shares if, in the
opinion of counsel for the Company, such a representation is required by any
Applicable Laws.
10. Adjustments Upon Changes in Capitalization or Corporate Transaction.
(a) Adjustments upon Changes in Capitalization. Subject to any
required action by the stockholders of the Company, the number of Shares covered
by each outstanding Option, and the number of Shares which have been authorized
for issuance under the Plan but as to which no Options have yet been granted or
which have been returned to the Plan, the exercise or purchase price of each
such outstanding Option, as well as any other terms that the Administrator
determines require adjustment shall be proportionately adjusted for (i) any
increase or decrease in the number of issued Shares resulting from a stock
split, reverse stock split, stock dividend, combination or reclassification of
the Shares, or similar transaction affecting the Shares, (ii) any other increase
or decrease in the number of issued Shares effected without receipt of
consideration by the Company, or (iii) as the Administrator may determine in its
discretion, any other transaction with respect to Common Stock to which Section
424(a) of the Code applies or a similar transaction; provided, however that
conversion of any convertible securities of the Company shall not be deemed to
have been "effected without receipt of consideration." Such adjustment shall be
made by the Administrator and its determination shall be final, binding and
conclusive. Except as the Administrator determines, no issuance by the Company
of shares of stock of any class, or securities convertible into shares of stock
of any class, shall affect, and no adjustment by reason hereof shall be made
with respect to, the number or price of Shares subject to an Option.
(b) Corporate Transaction.
(i) Termination of Option if Not Assumed. In the event of a
Corporate Transaction, each Option will terminate upon the consummation of the
Corporate Transaction, unless the Option is assumed by the successor corporation
or Parent thereof in connection with the Corporate Transaction.
(ii) Acceleration of Option Upon Corporate Transaction. Except
as provided otherwise in an individual Option Agreement, in the event of any
Corporate Transaction there will not be any acceleration of vesting or
exercisability of any Option.
11. Effective Date and Term of Plan. The Plan shall become effective upon
the earlier to occur of its adoption by the Board or its approval by the
stockholders of the Company. It shall continue in effect for a term of ten (10)
years unless sooner terminated. Subject to Section 16,
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below, and Applicable Laws, Options may be granted under the Plan upon its
becoming effective.
12. Amendment, Suspension or Termination of the Plan.
(a) The Board may at any time amend, suspend or terminate the Plan.
To the extent necessary to comply with Applicable Laws, the Company shall obtain
stockholder approval of any Plan amendment in such a manner and to such a degree
as required.
(b) No Option may be granted during any suspension of the Plan or
after termination of the Plan.
(c) Any amendment, suspension or termination of the Plan (including
termination of the Plan under Section 11, above) shall not affect Options
already granted, and such Options shall remain in full force and effect as if
the Plan had not been amended, suspended or terminated, unless mutually agreed
otherwise between the Grantee and the Administrator, which agreement must be in
writing and signed by the Grantee and the Company.
13. Reservation of Shares.
(a) The Company, during the term of the Plan, will at all times
reserve and keep available such number of Shares as shall be sufficient to
satisfy the requirements of the Plan.
(b) The inability of the Company to obtain authority from any
regulatory body having jurisdiction, which authority is deemed by the Company's
counsel to be necessary to the lawful issuance and sale of any Shares hereunder,
shall relieve the Company of any liability in respect of the failure to issue or
sell such Shares as to which such requisite authority shall not have been
obtained.
14. No Effect on Terms of Employment/Consulting Relationship. The Plan
shall not confer upon any Grantee any right with respect to the Grantee's
Continuous Service, nor shall it interfere in any way with his or her right or
the Company's right to terminate the Grantee's Continuous Service at any time,
with or without cause, and with or without notice.
15. No Effect on Retirement and Other Benefit Plans. Except as
specifically provided in a retirement or other benefit plan of the Company or a
Related Entity, Options shall not be deemed compensation for purposes of
computing benefits or contributions under any retirement plan of the Company or
a Related Entity, and shall not affect any benefits under any other benefit plan
of any kind or any benefit plan subsequently instituted under which the
availability or amount of benefits is related to level of compensation. The Plan
is not a "Retirement Plan" or "Welfare Plan" under the Employee Retirement
Income Security Act of 1974, as amended.
16. Stockholder Approval. The grant of Incentive Stock Options under the
Plan shall be subject to approval by the stockholders of the Company within
twelve (12) months before or after the date the Plan is adopted excluding
Incentive Stock Options issued in substitution for outstanding Incentive Stock
Options pursuant to Section 424(a) of the Code. Such stockholder approval shall
be obtained in the degree and manner required under Applicable Laws. The
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Administrator may grant Incentive Stock Options under the Plan prior to approval
by the stockholders, but until such approval is obtained, no such Incentive
Stock Option shall be exercisable. In the event that stockholder approval is not
obtained with the twelve (12) month period provided above, all Incentive Stock
Options previously granted under the Plan shall be exercisable as Non-Qualified
Stock Options.
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Exhibit 5
[Letterhead of Shearman and Sterling]
February 7, 2000
drugstore.com, inc.
13920 Southeast Eastgate Way
Suite 300
Bellevue, Washington 98065
Ladies and Gentlemen:
We have acted as counsel for drugstore.com, inc., a Delaware corporation
(the "Company"), in connection with the Registration Statement on Form S-8 (the
"Registration Statement") of the Company filed with the Securities and Exchange
Commission under the Securities Act of 1933, as amended (the "Securities Act"),
with respect to 32,405 shares (the "Shares") of common stock, par value $.0001
per share, of the Company (the "Common Stock"), to be issued from time to time
pursuant to the Beauty.com, Inc. Stock Option Plan (the "Plan"), which plan was
assumed by the Company in connection with the transactions contemplated by the
Agreement and Plan of Merger and Reorganization, dated as of January 6, 2000,
among the Company, DS Sub Inc., Beauty.com, Inc. and Mr. Roger Barnett.
In so acting, we have examined the Registration Statement and we have also
examined and relied as to factual matters upon the representations and
warranties contained in originals, or copies certified or otherwise identified
to our satisfaction, of such documents, records, certificates and other
instruments as in our judgment are necessary or appropriate to enable us to
render the opinion expressed below. In such examination, we have assumed the
genuineness of all signatures, the authenticity of all documents, certificates
and instruments submitted to us as originals and the conformity with originals
of all documents submitted to us as copies.
The opinion expressed below is limited to the General Corporation Law of
Delaware, and we do not express any opinion herein concerning any other law.
<PAGE>
drugstore.com, inc. 2 February 7, 2000
Based upon the foregoing and having regard for such legal considerations as
we have deemed relevant, we are of the opinion that the Shares have been duly
authorized by the Company and, when (a) issued and delivered by the Company in
accordance with the terms of the Plan and (b) paid for in full in accordance
with the terms of the Plan, the Shares will be validly issued, fully paid and
non-assessable.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement.
Very truly yours,
/s/ Shearman and Sterling
--------------------------
Shearman and Sterling
<PAGE>
EXHIBIT 23.1
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement (Form
S-8), pertaining to the Beauty.com, Inc. Stock Plan of our report dated January
29, 1999, except for Note 7 as to which the date is July 16, 1999, with respect
to the consolidated financial statements of drugstore.com, inc. as of December
31, 1998 and for the period from April 2, 1998 (inception) to December 31, 1998,
included in the Registration Statement (Form S-1) of drugstore.com, inc. filed
on July 28, 1999, with the Securities and Exchange Commission.
Seattle, Washington
February 7, 2000 Ernst & Young LLP
