<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No. 1)
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Under Rule 14a-12
U.S. INTERACTIVE, INC.
- -----------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
-----------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
----------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
----------------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
----------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
----------------------------------------------------------------------
5) Total fee paid:
----------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
1) Amount Previously Paid:
___________________________________________________________________________
2) Form, Schedule or Registration Statement No.:
___________________________________________________________________________
3) Filing Party:
___________________________________________________________________________
4) Date Filed:
___________________________________________________________________________
<PAGE>
[LOGO]
U.S. INTERACTIVE, INC.
2012 Renaissance Boulevard
King of Prussia, Pennsylvania 19406
May 1, 2000
Dear Stockholders:
It is my pleasure to invite you to the 2000 Annual Meeting of
Stockholders of U.S. Interactive, Inc. to be held on Tuesday, May 23, 2000 at
10:00 a.m., Eastern Daylight Time, at the Wyndham Franklin Plaza Hotel, 17th &
Race Streets, Philadelphia, Pennsylvania.
Whether or not you plan to attend, and regardless of the number of
shares you own, it is important that your shares be represented at the Annual
Meeting. You are accordingly urged to complete, sign, date and return your proxy
promptly in the enclosed envelope. Your return of a proxy in advance will not
affect your right to vote in person at the Annual Meeting.
I hope that you will attend the Annual Meeting. The officers and
directors of the Company look forward to seeing you at that time.
Very truly yours,
/s/ Stephen T. Zarrilli
Stephen T. Zarrilli
Chief Executive Officer and
President
<PAGE>
[LOGO]
U.S. INTERACTIVE, INC.
2012 Renaissance Boulevard
King of Prussia, Pennsylvania 19406
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
Tuesday, May 23, 2000
-------------------------------------
To our Stockholders:
The Annual Meeting of Stockholders (the "Meeting") of U.S. Interactive,
Inc. (the "Company") will be held on Tuesday, May 23, 2000 at 10:00 a.m.,
E.D.T., at the Wyndham Franklin Plaza Hotel, 17th & Race Streets, Philadelphia,
Pennsylvania, for the following purposes:
1. To elect three Class II Directors, each for a term of three years
and until their respective successors have been elected and qualified;
2. To consider and vote upon a proposal to amend and restate the
Company's 1998 Performance Incentive Plan;
3. To consider and vote upon a proposal to approve the adoption of the
Company's Employee Stock Purchase Plan;
4. To consider and vote upon a proposal to approve a stock option
granted by Soft Plus, Inc. to Michael M. Carter, the Company's Senior Vice
President and Chief Marketing Officer;
5. To ratify the appointment of KPMG LLP to serve as the Company's
independent auditors for the fiscal year ending December 31, 2000; and
6. To transact such other business as may properly come before the
Meeting.
Stockholders of record at 5:00 p.m. E.D.T. on April 7, 2000 are
entitled to receive notice of and to vote at the Meeting.
You are invited to attend the Meeting. Please carefully read the
attached Proxy Statement for information regarding the matters to be considered
and acted upon at the Meeting. We hope that you will attend the Meeting.
WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE MEETING IN PERSON, YOU
ARE URGED TO COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY CARD IN THE
ENCLOSED RETURN POSTAGE-PAID ENVELOPE. No postage need be affixed to the return
envelope if mailed in the United States. If you attend the Meeting, you may
withdraw your proxy and vote in person by ballot.
By Order of the Board of Directors,
/s/ Lawrence F. Shay
Lawrence F. Shay
King of Prussia, Pennsylvania Senior Vice President, Legal and
May 1, 2000 Corporate Affairs,
General Counsel and Secretary
<PAGE>
U.S. INTERACTIVE, INC.
2012 Renaissance Boulevard
King of Prussia, Pennsylvania 19406
-----------------------------------------------------
PROXY STATEMENT
This Proxy Statement and the accompanying Notice of Annual Meeting of
Stockholders and Proxy Card are being furnished in connection with the
solicitation by the Board of Directors of U.S. Interactive, Inc. (the "Company")
of proxies to be voted at the Annual Meeting of Stockholders scheduled to be
held on Tuesday, May 23, 2000 at 10:00 a.m., Eastern Daylight Time, at the
Wyndham Franklin Plaza Hotel, 17th & Race Streets, Philadelphia, Pennsylvania,
and any adjournment or postponement thereof (the "Meeting"). This Proxy
Statement and the enclosed Proxy Card are being furnished on or about May 1,
2000, to all holders of record of the Company's Common Stock (the "Common
Stock") as of 5:00 p.m. E.D.T. on April 7, 2000. A copy of the Company's 2000
Annual Report to Stockholders, including consolidated financial statements for
the fiscal year ended December 31, 1999, accompanies this Proxy Statement.
At the Meeting, stockholders will elect three Class II directors, each
to serve for a term of three years. Stockholders will also act upon proposals
to: (i) amend and restate the Company's 1998 Performance Incentive Plan; (ii)
approve the adoption of the Company's Employee Stock Purchase Plan; (iii)
approve a stock option granted by Soft Plus, Inc. to Michael M. Carter, the
Company's Senior Vice President and Chief Marketing Officer; and (iv) ratify the
appointment of KPMG LLP to serve as the Company's independent auditors for the
fiscal year ending December 31, 2000.
VOTING SECURITIES AND RECORD DATE
The Board of Directors has fixed 5:00 p.m. E.D.T. on April 7, 2000 as
the record date (the "Record Date") for determination of stockholders entitled
to notice of and to vote at the Meeting. As of the Record Date, there were
22,951,902 shares of Common Stock issued and outstanding and there were no other
voting securities of the Company outstanding. The presence at the Meeting, in
person or by proxy, of a majority of the outstanding shares of Common Stock, or
11,475,952 shares, shall constitute a quorum for the Meeting. Each outstanding
share of Common Stock entitles the record holder thereof to one vote.
Abstentions and broker non-votes are not counted as votes cast on any matter to
which they relate.
Assuming the presence of a quorum, directors shall be elected by a
plurality of the votes cast at the Annual Meeting for the election of directors.
The three nominees who receive the most votes will be elected. Abstentions and
broker non-votes will not be taken into account in determining the outcome of
the election.
To be approved, each of the other proposals must receive the
affirmative vote of a majority of the shares of Common Stock present in person
or represented by proxy at the Meeting and entitled to vote thereon. Abstentions
of shares present at the Meeting will be counted in determining the presence of
a quorum and in determining whether any of such proposals is approved.
Accordingly, abstentions will have the effect of votes in opposition to the
proposals. Broker non-votes will be counted in determining the presence of a
quorum, but are not entitled to vote on the proposals. Accordingly, broker
non-votes will not have the effect of votes in opposition to the proposals and
will not affect the outcome of the vote on any of the proposals.
VOTING BY STOCKHOLDERS
Eligible stockholders of record may vote at the Meeting in person or by
means of the enclosed Proxy Card. You may specify your voting choices by marking
the appropriate boxes on the Proxy Card. The proxy solicited hereby, if properly
signed and returned to the Company and not revoked prior to or at the Meeting,
will be voted in accordance with the instructions specified thereon. If you
properly sign and return your Proxy Card, but do not specify your choices, your
shares will be voted by the proxy holders as recommended by the Board of
Directors.
<PAGE>
The Board of Directors encourages you to complete and return the Proxy
Card even if you expect to attend the Meeting. You may revoke your proxy at any
time before it is voted at the Meeting by giving written notice of revocation to
the Secretary of the Company, by submission of a proxy bearing a later date or
by attending the Meeting in person and casting a ballot.
The proxy holders, Robert W. Drennen and Philip L. Calamia, will vote
all shares of Common Stock represented by Proxy Cards that are properly signed
and returned by stockholders. The Proxy Card also authorizes the proxy holders
to vote the shares represented with respect to any matters not known at the time
this Proxy Statement was printed that may properly be presented for
consideration at the Meeting. You must return a signed Proxy Card if you want
the proxy holders to vote your shares of Common Stock.
The cost of soliciting proxies will be borne by the Company. Following
the mailing of proxy solicitation materials, proxies may be solicited by
directors, officers and employees of the Company and its subsidiaries
personally, by telephone or otherwise. Such persons will not receive any fees or
other compensation for such solicitation. In addition, the Company will
reimburse brokers, custodians, nominees and other persons holding shares of
Common Stock for others for their reasonable expenses in sending proxy materials
to the beneficial owners of such shares and in obtaining their proxies.
It Is Important That Your Shares Are Represented At The Meeting.
Whether Or Not You Expect To Attend The Meeting, Please Be Sure That The
Enclosed Proxy Card Is Properly Completed, Dated, Signed, And Returned
Without Delay In The Enclosed Envelope, Which Requires No Postage If
Mailed In The United States.
2
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PROPOSAL 1 - ELECTION OF DIRECTORS
The Amended and Restated Bylaws of the Company (the "Bylaws") provide
that the Company's business shall be managed by a Board of Directors of not less
than six (6) and not more than fifteen (15) directors, with the number of
directors to be fixed by the Board of Directors from time to time. The Board of
Directors has fixed the number of directors, which shall constitute the entire
Board of Directors at nine. The Bylaws also provide that the Company's Board of
Directors is divided into three classes in the manner set forth in the Company's
Amended and Restated Certificate of Incorporation: 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 presently three directors in Class I,
three directors in Class II and three directors in Class III.
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 stockholders for
a three-year term. The term of the three Class II directors, Stephen T.
Zarrilli, William C. Jennings and Robert V. Napier will expire at the Meeting.
The other six directors will remain in office for the remainder of their
respective terms, as indicated below.
Director candidates are nominated by the Board of Directors.
Stockholders are also entitled to nominate director candidates for the Board of
Directors in accordance with the procedures set forth in the Bylaws.
At the Meeting, three Class II directors are to be elected. Each of the
director nominees is presently a director of the Company. Each nominee has
consented to being named as a nominee for director of the Company and has 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. In the event
that any nominee should become unavailable or unable to serve as a director, the
persons named as proxies on the Proxy Card will vote for the person(s) the Board
of Directors recommends.
Set forth below is certain information regarding each nominee for Class
II director and each Class III and Class I director, each of whose term of
office will continue after the Meeting.
Nominees for Class II Directors
Stephen T. Zarrilli, 38, has served as Chief Executive Officer since
March 1999 and as President since May 1999. Prior thereto Mr. Zarrilli served as
acting Chief Operating Officer from December 1998 until March 1999, as Senior
Executive Vice President and Chief Financial Officer from August 1998 through
December 1998, as Executive Vice President of Finance and Administration from
September 1996 until July 1998, and as Secretary, Treasurer and Chief Financial
Officer from January 1995 until September 1996. He served as a director of the
Company from August 1995 until July 1998, and began his current term as a
director in April 1999. From May 1994 to December 1994, Mr. Zarrilli served as
Director of Finance for American Gaming Corporation, a publicly held development
stage gaming company. From July 1983 to April 1994, Mr. Zarrilli was employed by
Deloitte & Touche LLC, an international accounting and consulting firm, most
recently as a Senior Manager in the firm's emerging businesses practice group.
William C. Jennings, 60, has served as a director of the Company since
August 1999. Mr. Jennings is an independent consultant. He was a partner at
Coopers & Lybrand (which merged with Price Waterhouse to become
PricewaterhouseCoopers) from 1992 to 1999. Prior to joining Coopers & Lybrand,
he was Executive Vice President and Chief Financial Officer at Bankers Trust New
York Corp. from October 1988 to January 1991. Prior thereto, Mr. Jennings served
as Senior Executive Vice President, Administration, at Shearson Lehman Brothers,
an investment banking and brokerage firm, from October 1985 to October 1988. Mr.
Jennings currently serves as Chairman of the Board of Intellisource, Inc., a
privately-held outsourcing company.
Robert V. Napier, 53, has served as a director of the Company since
October 1999. Mr. Napier has been Senior Vice President, Information Management
and Chief Information Officer at Compaq Computer Corp., a computer manufacturer,
since August 1999. Prior to joining Compaq, he was Senior Vice President and
Chief Information Officer of Mariner Post-Acute Network, Inc., a health care
provider which filed for bankruptcy under Chapter 11 under the federal
bankruptcy code on January 18, 2000, from January 1998 to August 1999. From
3
<PAGE>
January 1997 to January 1998, he was Chief Information Officer at Delphi
Automotive Systems Corp., a supplier of components, modules and integrated
systems to the automotive industry. Prior thereto, Mr. Napier was Vice President
and Chief Information Officer of Lucent Technologies, Inc., a designer,
developer and manufacturer of communications systems, software and products,
from September 1995 to January 1997. Previous to that, he held a similar
position from March 1993 to September 1995, at AT&T Global Business
Communications Systems, which was one of the companies spun off by AT&T Corp. to
form Lucent Technologies, Inc. Mr. Napier has been a director of Extant, Inc., a
telecommunications service provider, since March 1999, and has been a member of
the technical advisory board of Safeguard Scientifics since October 1996.
The three director nominees receiving the most votes will be elected.
The Board of Directors recommends that stockholders vote FOR the
election of each of the nominated Class II Directors.
Incumbent Class III Directors - to Continue in Office for Terms Expiring in 2001
John H. Klein, 54, has served as a director of the Company since
September 1999. Since mid-1998, Mr. Klein has been Chairman and Chief Executive
Officer of BiLogix, Inc., a company providing business intelligence software
solutions; Chairman and Chief Executive Officer of Strategic Business and
Technology Solutions LLC, a firm specializing in business planning and strategy
formulation; Chairman of CyBear, an Internet service provider which primarily
offers business solutions over the Internet; and Vice Chairman and director of
Image Vision, a firm focused on developing, marketing, installing and supporting
vertical imaging business solutions. From April 1996 to May 1998, he was
Chairman and Chief Executive Officer of MIM Corporation, a provider of pharmacy
benefit services to medical groups. Prior to that, he served as President of
IVAX North American Multi-Source Pharmaceutical Group from January 1995 to
January 1996, and as President and Chief Executive Officer of Zenith
Laboratories, a generic pharmaceutical manufacturer, from May 1989 to 1995. Mr.
Klein has been a director of Sunbeam Corporation, and has been a director and
Chairman of the Audit Committee of Coleman Company, Inc. since 1999.
Mohan Uttarwar, 41, has served as a director of the Company and as
President of the Company's subsidiary U.S. Interactive Corp. (Delaware) since
March 2000. Prior thereto, he founded Soft Plus, Inc., a provider of e-CRM
solutions primarily to Internet service providers, wireless communications
providers and other companies in the emerging communications industry which was
acquired by U.S. Interactive in March 2000. Mr. Uttarwar served as President of
Soft Plus from January 1994 to March 2000 and as CEO and Chairman of Soft Plus
from January 1999 to March 2000. From October 1988 to March 1997, Mr. Uttarwar
founded and served as President of Digital Tools, Inc., a supplier of Unix based
project management software.
Robert E. Keith, Jr., 58, has served as a director of the Company since
June 1996. Mr. Keith serves as Chairman of the Board of Internet Capital Group,
Inc. and is Vice Chairman of the Board of Safeguard Scientifics. Mr. Keith is
also Managing General Partner of Technology Leaders II, L.P., where he has had
principal operating responsibility since 1988. Mr. Keith also serves as a
director of American Education Centers, Inc., Cambridge Technology Partners
(Massachusetts), Inc., Masterpack International, Inc., Naviant Technology
Solutions, Inc., Sunsource, Inc., and Whisper Communications, Inc., all of which
are privately-held companies, except Cambridge Technology Partners
(Massachusetts), Inc., Sunsource, Inc., Internet Capital Group, Inc. and
Safeguard Scientifics.
Incumbent Class I Directors -- to Continue in Office for Terms Expiring in 2002
Eric Pulier, 33, has been the Chairman of the Board since July 1998. He
served as Chief Technology Officer from July 1998 to May 1999. Mr. Pulier was
Chairman and CEO of Digital Evolution from July 1995 to July 1998 and acted in
such capacities prior thereto. Mr. Pulier was the founder of Digital Evolution.
Digital Evolution performed Internet consulting services for MCI, Microsoft,
AT&T and Intel. Although Mr. Pulier had no involvement in the management or
ownership of our company prior to our merger with Digital Evolution, we consider
Mr. Pulier to be a co-founder of our business because of the continuity of
Digital Evolution's business with ours. Mr. Pulier has been a director of Exist
Corporation since November 1999. Mr. Pulier is currently a member of the
Progressive Policy Institute's New Economy Task Force and is leading the
health/technology forum for the Vice President of the United States.
4
<PAGE>
E. Michael Forgash, 42, has served as a director of the Company since
October 1998. Mr. Forgash was President, Operations of Safeguard Scientifics
from January 1998 to March 2000. Prior to joining Safeguard Scientifics, Mr.
Forgash was President and Chief Executive Officer of Creative Multimedia from
August 1996 to October 1997. Prior to that, Mr. Forgash was President at
Continental HealthCare Systems from November 1994 to July 1996. Mr. Forgash
serves as a director of Internet Capital Group, Inc. and eMerge Interactive,
Inc. He also serves as a director of 4anything.com, Inc., Who? Vision Systems,
Inc., XL Vision, Inc. and Integrated Visions, Inc., all of which are
privately-held companies.
John D. Shulman, 37, has served as a director of the Company since July
1998. Mr. Shulman has served as President and Chief Executive Officer of ONYX
International, LLC, a merchant banking and venture capital firm, since 1995.
Prior to this, Mr. Shulman was Director of Development for the Tower Companies,
a diversified real estate and investment firm from 1988 to 1994. Mr. Shulman
also serves as Chairman of Exist Corporation, and as a member of the board of
Interactive Video Technologies, Inc., Phar-Mor, Inc., ChemLink Laboratories,
LLC, Taiwan Mezzanine Fund I and Performance Distribution, Inc., all of which
are privately-held companies, except Phar-Mor, Inc.
Compensation of Directors
The Company does not pay fees to directors for serving on its Board of
Directors. Directors who are not employees of the Company are reimbursed for
their reasonable out-of-pocket expenses incurred in attending the meetings of
the Board of Directors and committees thereof. In addition, directors of the
Company are eligible to receive Stock Options under the 1998 Performance
Incentive Plan.
During 1999, Mr. Shulman received an option to acquire 25,000 shares of
the Company's common stock at an exercise price of $9.25 as consideration for
his service on the Board of Directors, and Messr. Jennings, Klein and Napier
each received an option to acquire 50,000 shares of our common stock at a per
share exercise price of $19.38, $21.38 and $18.125, respectively, in connection
with their joining the board of directors. Each option granted to a director
becomes exercisable in three equal annual installments and has an exercise price
equal to Fair Market Value on the date of grant. Eric Pulier, the Company's
Chairman of the Board, Stephen Zarrilli, the Company's Chief Executive Officer
and President, and Mohan Uttarwar, the President of the Company's subsidiary
U.S. Interactive Corp. (Delaware), each receive compensation for services as an
employee.
Board of Directors' Meetings and Committees
The Board of Directors held nine meetings (including regularly
scheduled and special meetings) during the year ended December 31, 1999. The
Board of Directors has established a standing Audit Committee and a Compensation
Committee, each of which is composed of non-employee members of the Board of
Directors. The membership of each of these standing committees is determined
from time to time by the Board. The Board of Directors has not established a
nominating committee; the entire Board of Directors votes on nominations of
directors for the Company.
The Audit Committee, which presently consists of William C. Jennings,
Chairman, John H. Klein and John D. Shulman, did not hold any meetings during
the year ended December 31, 1999. The committee's role is to select, subject to
approval of the Board of Directors, a firm of independent certified public
accountants to audit the books and accounts of the Company and its subsidiaries
for the fiscal year for which they are appointed. In addition, the committee's
role is to review and approve the scope and cost of all services (including
nonaudit services) provided by the firm selected to conduct the audit. The
committee's role is also to monitor the effectiveness of the audit effort and
the Company's financial reporting, and reviews the Company's financial and
operating controls.
The Compensation Committee, which presently consists of John H. Klein,
Chairman, William C. Jennings and Robert E. Keith, held one meeting during the
year ended December 31, 1999. The committee is responsible for the approval and
administration of the compensation program for the Company's President and Chief
Executive Officer. The committee and the Board of Directors also review the
compensation programs for the other senior executive officers of the Company,
for which programs the Chief Executive Officer is responsible. The committee is
also responsible for the grant of stock options as well as the administration of
the various plans under which stock options are granted by the Company.
5
<PAGE>
OWNERSHIP OF U.S. INTERACTIVE, INC. STOCK
The following table sets forth certain information as of March 31,
2000, regarding the beneficial ownership of shares of Common Stock by: (i) each
stockholder known by the Company to be the beneficial owner of more than five
percent (5%) of the outstanding shares of Common Stock; (ii) each director of
the Company and nominee for director; (iii) each executive officer named in the
Summary Compensation Table appearing below under "Executive Compensation"; and
(iv) all executive officers and directors as a group. Except as indicated in the
footnotes to the table, the persons and entities named in the table have sole
voting and investment power with respect to all shares of Common Stock which
they respectively own beneficially. The information presented in the table is
based upon the most recent filings with the Securities and Exchange Commission
by such persons or upon information otherwise provided by such persons to the
Company.
The address of each person who is an officer or director of the Company
is 2012 Renaissance Boulevard, King of Prussia, Pennsylvania 19406.
<TABLE>
<CAPTION>
Beneficial Ownership (1)
----------------------------
Beneficial Owner Shares Percentage
- ----------------------------------------------------------- ----------- -------------
<S> <C> <C>
Named Executive Officers and Directors:
Eric Pulier (2)......................................... 3,462,569 14.9%
Stephen T. Zarrilli (3)................................. 595,767 2.6
Ajit M. Prabhu (4)...................................... 46,376 *
James J. Huser (5)...................................... 10,810 *
Mohan Uttarwar (6)...................................... 984,310 4.3
Philip L. Calamia (7)................................... 63,900 *
John D. Shulman (8)..................................... 308,429 1.3
E. Michael Forgash...................................... 11,778 *
Robert E. Keith (9)..................................... 4,471 *
John H. Klein........................................... 1,000 *
William C. Jennings..................................... - -
Robert V. Napier........................................ 2,000 *
All directors, executive officers
as a group (14 persons) (10)............................ 5,578,739 23.8
Former Named Executive Officer:
Larry W. Smith (11)..................................... 795,701 3.4
Other Five Percent Holder:
Safeguard Scientifics, Inc. (12)........................ 2,559,691 11.1
</TABLE>
- ---------------------------
* Less than one percent (1%)
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission. Under such rules, shares are deemed
to be beneficially owned by a person or entity if such person or entity
has or shares the power to vote or dispose of the shares, whether or
not such person or entity has any economic interest in such shares.
Except as otherwise indicated, and subject to community property laws
where applicable, the persons and entities named in the table above
have sole voting and investment power with respect to all shares of
Common Stocks shown as beneficially owned by them. Shares of Common
Stock subject to options or warrants currently exercisable or
exercisable within 60 days are deemed outstanding for purposes of
computing the percentage ownership of the person or entity holding such
option or warrant but are not deemed outstanding for purposes of
computing the percentage ownership of any other person or entity.
(2) Includes 189,093 shares issuable upon exercise of options and 1,069
shares issuable upon exercise of options held by Heather Pulier, Mr.
Pulier's wife. Includes 50,000 shares held by Mr. Pulier, as trustee,
under the Eric Pulier 1999 Qualified Grantor Retained Annuity Trust.
(3) Includes 51,525 shares issuable upon exercise of options, 24,195 shares
held as Custodian under the Uniform Transfers to Minors Act for the
benefit of Mr. Zarrilli's three children, and 5,000 shares held as
Custodian under the California Uniform Transfers to Minors Act for the
6
<PAGE>
benefit of Mr. Pulier's son. Includes 50,000 shares held by Mr.
Zarrilli, as trustee, under the Stephen T. Zarrilli 1999 Qualified
Grantor Retained Annuity Trust.
(4) Includes 45,376 shares which Mr. Prabhu is entitled to receive from
InVenGen LLC under the terms of a confidential compensation agreement
between Mr. Prabhu and InVenGen LLC upon the satisfaction of certain
employment taxes by Mr. Prabhu. Excludes shares which Mr. Prabhu is
entitled to receive in two equal installments on September 12, 2000 and
March 12, 2001, under the same agreement and subject to satisfaction of
the same condition. The Company acquired all of the assets of InVenGen
LLC on March 12, 1999.
(5) Includes 10,810 shares issuable upon exercise of options.
(6) Includes 208,400 shares held by The Chase Manhattan Trust Company,
N.A., as escrow agent pursuant to the terms of an escrow agreement as
security for certain contingent liabilities of Soft Plus, Inc., in
connection with the Company's merger with Soft Plus on March 8, 2000.
(7) Includes 47,400 shares issuable upon exercise of options.
(8) Includes 297,737 shares held jointly with Alison B. Shulman, Mr.
Shulman's wife, as tenants by the entireties. Includes 10,692 shares
issuable upon exercise of options.
(9) Includes 311 shares held through a self-directed account in the
Safeguard Scientifics, Inc. ("Safeguard") 401(k) plan.
(10) Includes 393,323 shares issuable upon exercise of options, including
1,069 shares issuable upon exercise of options held by Mr. Pulier's
wife.
(11) Includes 200,000 shares held by Mr. Smith, as trustee, under the Larry
W. Smith 1999 Qualified Grantor Retained Annuity Trust. Mr. Smith is
one of the Company's co-founders and served as one of its directors
from 1991 to May 1999, President from September 1991 to July 1998, and
Chief Executive Officer from September 1996 to December 1998. Mr. Smith
is party to a severance agreement with the Company relating to his
resignation.
(12) Includes 2,114,787 shares issued to Safeguard 98 Capital L.P., 392,081
shares issued to Safeguard Delaware, Inc., 52,677 shares issued to
Safeguard Scientific (Delaware), Inc., and 147 shares issued to
Technology Leaders Management, Inc. Safeguard Delaware, Inc., Safeguard
Scientific (Delaware), Inc and Technology Leaders Management, Inc. are
wholly-owned subsidiaries of Safeguard. Safeguard Delaware, Inc. is the
sole general partner of Safeguard 98 Capital L.P., and has sole
authority and responsibility for all investments, voting and
disposition decisions regarding such shares. Safeguard Delaware, Inc.
holds approximately a 91.2% general partnership interest in Safeguard
98 Capital L.P. Robert E. Keith, one of the Company's directors, is a
director of Safeguard. The address of Safeguard is Safeguard
Scientifics, Inc., 800 The Safeguard Building, 435 Devon Park Drive,
Wayne, Pennsylvania 19087.
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth certain information concerning
compensation paid or accrued by the Company for services during the fiscal year
ended December 31, 1999, to the Company's Chief Executive Officer, its former
Chief Executive Officer and each of the Company's four most highly compensated
executive officers other than the Chief Executive Officer whose individual total
salary and bonus on an annual basis exceeded $100,000 for that fiscal year (the
"Named Executive Officers").
7
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<TABLE>
<CAPTION>
Long-Term
Compensation
Awards
Annual Compensation ------------------
-------------------------- Securities All Other
Name and Principal Position(s) Salary Bonus Underlying Options Compensation(1)
- ------------------------------------------ ----------- ----------- ------------------ ----------------
<S> <C> <C> <C> <C>
Eric Pulier, Chairman of the Board.............. $ 235,000 $ 58,750 $ - $ 7,058
Stephen T. Zarrilli, President and Chief
Executive Officer............................ 228,077 58,750 100,000 9,643
Larry W. Smith, former Chief Executive Officer 39,038 - - 140,485(2)
Ajit M. Prabhu, Chief Technology Officer........ 156,462 51,341 - 3,747
James J. Huser, Chief Operating Officer......... 138,461 33,750 200,000 2,250
Philip L. Calamia, Chief Financial Officer...... 130,769 33,000 110,000 2,285
</TABLE>
- --------------
(1) Represents premiums paid for life insurance, automobiles and company
matching of 401(k) contributions.
(2) Includes severance payments in the amount of $131,250. Mr. Smith resigned as
Chief Executive Officer effective as of February 26, 1999.
Stock Options
The following table sets forth-certain information concerning the grant
of options to the Chief Executive Officer and the other Named Executive Officers
in the year ended December 31, 1999. The Company has not granted any Stock
Appreciation Rights. Mr. Zarrilli's option vests in four equal annual
installments commencing March 1, 2000. Mr. Huser's option vested as to 35,000
shares on the date of grant, with the balance vesting in four equal annual
installments commencing May 24, 2000. Mr. Calamia's option grant for 50,000
shares vested as to 25,000 shares on the date of grant, with the balance vesting
in four equal annual installments commencing March 12, 2000. Mr. Calamia's
option grant for 60,000 shares vests in four equal annual installments
commencing May 24, 2000. No options were exercisable prior to the closing of the
Company's initial public offering. Exercisability of vested option shares is
limited under the terms of the respective grant agreements to the number of
shares which can be exercised within the $100,000 limitation for Incentive Stock
Options contained in the Internal Revenue Code of 1986, as amended; except for
the 35,000 option shares of Mr. Huser which vested on the date of grant. Each of
these grants was made under the Amended and Restated 1998 U. S. Interactive,
Inc. Stock Option Plan. The material terms of such options appear in the
following table:
Option Grants in Last Fiscal Year
<TABLE>
<CAPTION>
Potential Realizable
Percent of Value at Assumed
Number of Total Annual Rate of
Shares Options Exercise Stock Price Appreciation
Underlying Granted to Price for Option Term(1)
Options Employees in (per Expiration ------------------------
Name Granted Fiscal Year share) Date 5% 10%
- -------------------------------- --------- ----------- ------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Stephen T. Zarrilli........... 100,000 4.0% $5.00 3/1/09 $1,128,895 $2,093,742
James J. Huser................. 200,000 8.1 9.25 5/24/09 1,407,789 3,337,485
Philip L. Calamia.............. 50,000 2.0 5.00 3/12/09 564,447 1,046,871
Philip L. Calamia.............. 60,000 2.4 9.25 5/24/09 422,337 1,001,245
- ----------------
</TABLE>
(1) Amounts represent hypothetical gains that could be achieved for the
respective options if exercised at the end of the option term. These gains
are based on assumed rates of stock price appreciation of 5% and 10%
compounded annually from the date the respective options were granted to
their expiration date. These assumptions are not intended to forecast
future appreciation of our 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.
On January 31, 2000, options to purchase a total of 875,000 shares were
granted to seven of our executive officers. These options have an exercise price
of $50.50 per share.
8
<PAGE>
Aggregated Option Exercises in Fiscal 1999 and
Fiscal Year-End Option Values
The following table sets forth the number of shares received upon
exercise of stock options by each of the Named Executive Officers during the
last completed fiscal year and the aggregate options to purchase shares of
Common Stock of the Company held by the Named Executive Officers at December 31,
1999.
<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised Value of Unexercised
Options at Fiscal In-the-Money Options at
Shares Value Year-End (#) Fiscal Year-End ($)(2)
Acquired on Realized --------------------------- ---------------------------
Name Exercise (#) ($)(1) Exercisable Unexercisable Exercisable Unexercisable
- ------------------------- ------------- ---------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Eric Pulier............. -- -- 189,090 -- 7,614,654 --
Stephen T. Zarrilli..... -- -- 31,525 100,000 1,234,204 3,800,000
Larry W. Smith.......... 63,051 411,093 -- -- -- --
Ajit M. Prabhu.......... -- -- -- -- -- --
James J. Huser.......... 15,000 435,313 -- 185,000 -- 6,243,750
Philip L. Calamia....... -- -- 20,000 106,000 769,000 2,025,000
</TABLE>
(1) Computed by multiplying the number of shares of Common Stock acquired upon
exercise of options by the difference between (i) the per share fair market
value of the Common Stock on the date of exercise and (ii) the exercise
price per share.
(2) Computed by multiplying the number of options by the difference between (i)
the per share market value of the Common Stock on December 31, 1999,
$43.00, and (ii) the exercise price per share.
Employment Agreements
The Company has entered into an employment agreement, dated July 1998,
with Mr. Pulier, who currently serves as the Company's Chairman of the Board.
Mr. Pulier's agreement is for a term of one year and automatically renews for
additional one-year periods, unless either party provides 30 days notice of
non-renewal. Under the agreement, Mr. Pulier currently receives a base salary of
$275,000, a bonus at the discretion of the board of directors and benefits which
the Company offers its other senior executives generally. The agreement also
provides that Mr. Pulier shall serve as Chairman of the Board. The Company can
terminate the agreement for "cause" and under certain other circumstances,
including death or disability. In addition, Mr. Pulier may resign by giving the
Company notice. If the agreement is terminated other than for "cause" or Mr.
Pulier's voluntary resignation, the Company will make severance payments to Mr.
Pulier in the amount of his base salary and bonus, if any, through the balance
of the term of the agreement. In addition, any unvested options which he holds
at the time of such early termination would become vested. The employment
agreement contains certain restrictions on Mr. Pulier's ability to compete with
the Company.
The Company has also entered an employment agreement, dated as of July
30, 1999, with Mr. Zarrilli, who currently serves as the Company's President and
Chief Executive Officer. The agreement is for an initial term ending December
31, 2000, and automatically renews for additional one-year periods, unless
either party provides 30 days notice of non-renewal. Under the agreement, Mr.
Zarrilli currently receives a base salary of $275,000, a bonus at the discretion
of the board of directors and benefits which the Company offers its other senior
executive officers. The agreement also provides that Mr. Zarrilli shall serve on
the Company's board of directors. The Company can terminate the agreement for
"cause" and under certain other circumstances, including the death or disability
of Mr. Zarrilli. In addition, Mr. Zarrilli may resign by giving the Company
notice. If the agreement is terminated other than for "cause" or Mr. Zarrilli's
voluntary resignation, the Company will make severance payments to Mr. Zarrilli
in the amount of his base salary and bonus, if any, through the balance of the
term of the agreement. In addition, any unvested options which he holds at the
time of such early termination would become vested. The employment agreement
contains certain restrictions on Mr. Zarrilli's ability to compete with the
Company.
The Company has entered into an employment agreement, dated as of March
8, 2000, with Mr. Uttarwar, currently President of its subsidiary U.S.
Interactive Corp. (Delaware). The agreement has a one year term. Under the
9
<PAGE>
agreement, Mr. Uttarwar, who reports directly to the Company's Chief Executive
Officer, Mr. Zarrilli, receives a base salary of $200,000, a bonus at the
discretion of the board of directors, and benefits which the Company offers its
other senior executives generally. The agreement provides that Mr. Uttarwar
shall serve as a member of the Company's board of directors through the date of
its 2001 annual meeting of stockholders. The Company can terminate the agreement
for "cause" and under certain other circumstances, including death or
disability. Mr. Uttarwar may resign by giving the Company notice. If the
agreement is terminated without "cause," the Company will make a severance
payment to Mr. Uttarwar in the amount of his base salary and benefits through
the balance of the term of the agreement and a pro rata portion of the bonus, if
any, to which he would have been entitled through the date of termination.
Termination "without cause" includes, for example, termination upon a change in
control. In addition, any of his unvested options which would have vested prior
to expiration of his term would become vested. If the agreement is terminated
due to Mr. Uttarwar's disability, the Company will continue Mr. Uttarwar's base
salary and benefits for three months following termination. Mr. Uttarwar is
party to a separate agreement dated March 8, 2000, which contains certain
restrictions on Mr. Uttarwar's ability to compete with the Company.
Severance Agreements
Larry W. Smith resigned as the Company's Chief Executive Officer
effective as of February 26, 1999, and as a director in May 1999. We entered
into a severance agreement, effective as of February 26, 1999, in connection
with his resignation. Under the severance agreement Mr. Smith received from the
Company a severance payment of $131,250, paid in nine equal monthly
installments, accrued but unused vacation time of $12,115, and health, life and
disability insurance and other benefits for a nine-month period commencing
February 26, 1999, including automobile reimbursement expenses up to a maximum
of $700 per month. At that time, Mr. Smith also reaffirmed his non-disclosure
and non-competition agreements which subsequently expired in February 2000.
The Company has entered into a similar severance agreement with Richard
Masterson effective May 18, 1999. Mr. Masterson resigned as the Company's
President and as a director on May 18, 1999.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee members are John H. Klein, Chairman, William C.
Jennings and Robert E. Keith, all of whom are non-employee directors of the
Company.
The information set forth in the following Report and Performance Graph
shall not be deemed incorporated by reference into any existing or future
filings under the Securities Act of 1933, as amended (the "Securities Act"), or
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), which
incorporate by reference this Proxy Statement, except to the extent that the
Company specifically incorporates such information by reference.
Report of the Compensation Committee of the Board of Directors
on Executive Compensation
In 1999 the Board of Directors was directly responsible for the
approval and administration of the compensation programs for Mr. Eric Pulier,
the Company's Chairman of the Board, and Mr. Stephen T. Zarrilli, the Company's
President and Chief Executive Officer. The Board of Directors was also
responsible for the grant of options to the Company's employees, including its
Chief Executive Officer and other executive officers, under the Company's
various stock option plans and the administration of those plans.
In 1999, Mr. Zarrilli was generally responsible for the approval and
administration of compensation awards for the other executive officers of the
Company, including those named in the Summary Compensation Table, subject to the
review and approval by the Board of Directors.
10
<PAGE>
Compensation Philosophy and Review
The Company's executive compensation philosophy is to design a
compensation package that enables the Company to attract, retain, and motivate
high quality executive officers capable of maximizing stockholder value. The
current compensation scheme includes three components: base salary;
performance-based cash bonus; and equity incentives. The Company believes that
its current compensation package rewards executive officers for long-term
strategic management and enhancement of stockholder value by:
o Providing an opportunity to acquire equity ownership in the Company;
o Emphasizing both annual and long-term performance; and
o Supporting a performance-based environment to promote a team-oriented
focus for executive officers.
Base Salary
The Board of Directors and Mr. Zarrilli based their recommendations for
1999 on an evaluation of the responsibilities associated with the executive
officer's position and the experience of the executive officer and by reference
to salaries paid to executive officers with comparable ability and experience in
the competitive marketplace.
Cash and Equity Incentives
During 1999 the Company awarded both cash and equity incentives for the
Company's Chief Executive Officer and other executive officers.
The cash incentives are intended to recognize the contribution of
individual executive officers (including the Company's Chief Executive Officer)
toward attainment of the Company's objectives, give additional incentive to the
executive officers to increase growth and profitability of the Company and
assist in attracting and retaining highly talented executive officers. Executive
officers may receive awards based on individual and total Company performance at
the discretion of the Board of Directors. Determinations as to cash incentives
are not made subject to precise criteria or formulas. Accordingly, the
determinations may be deemed informal and subjective although based on detailed
considerations.
The Company believes that equity compensation aligns employees'
long-term objectives with those of stockholders in striving to maximize the
Company's value. The Company's stock option plans provide all employees,
including the Company's Chief Executive Officer and other executive officers,
with the opportunity to receive stock options. Executive officers of the Company
are granted stock options at the time of hire and periodically thereafter. In
addition, executive officers promoted internally also may receive grants at the
time of promotion. In accordance with this policy, each of the Company's current
executive officers were granted one or more stock options during 1999. All
grants are made subject to the terms and conditions of the stock option plan
under which the grant is made. However, many such determinations are not subject
to precise criteria or formulas. Accordingly, the determinations may be deemed
informal and subjective although based on detailed considerations.
Chief Executive Officer's Compensation
Mr. Zarrilli was named the Company's Chief Executive Officer in March
1999. In determining Mr. Zarrilli's base salary for 1999 in his capacity as
Chief Executive Officer, the Board of Directors considered his prior performance
with the Company, his responsibilities as Chief Executive Officer and salary
ranges for comparable positions in other companies in the same or similar
industries. Upon his appointment as Chief Executive Officer in March 1999, Mr.
Zarrilli's salary was set at $235,000 per year. The Board of Directors
determination was not subject to precise criteria or formulas. Accordingly, the
determination may be deemed informal and subjective, although based on detailed
considerations.
The Board of Directors also awarded Mr. Zarrilli a cash bonus of
$58,750 based on his continued efforts in developing and subsequent
11
<PAGE>
implementation of the overall objectives of the Company. Stock options were also
granted to Mr. Zarrilli in March 1999 in recognition of his efforts, prior to
his appointment as Chief Executive Officer, in making significant progress
towards the development and implementation of the overall strategic objectives
of the Board of Directors for the Company and his new appointment as Chief
Executive Officer.
Larry W. Smith resigned as the Company's Chief Executive Officer in
February 1999. No actions were taken with respect to Mr. Smith's compensation
during 1999, other than with respect to his severance package from the Company.
Deductibility of Executive Compensation Expenses
In general, under Section 162(m) of the Code, the Company cannot
deduct, for federal income tax purposes, compensation in excess of $1,000,000
paid to any Named Executive Officer, except to the extent such excess
constitutes performance-based compensation. The policy of the Company is to
qualify future compensation arrangements to ensure deductibility, except in
those limited cases where stockholder value is maximized by an alternate
approach.
Compensation Committee
---------------------------------
John H. Klein, Chairman
William C. Jennings
Robert E. Keith
12
<PAGE>
Stock Performance Graph
The following graph compares the cumulative total return to
stockholders of the Common Stock with the cumulative total return of the Nasdaq
Stock Market (US) Index from August 10, 1999 to December 31, 1999. In addition,
the graph also compares the Company's performance to that for the S&P Computer
Software and Services Small Cap Index. The graph assumes that the value of the
investment in the Common Stock and each index was $100 on August 10, 1999 and
that all dividends were reinvested. The Company has not paid any cash dividends
on its Common Stock and does not intend to do so in the foreseeable future. The
performance graph is not necessarily indicative of future performance.
13
<PAGE>
CERTAIN BUSINESS RELATIONSHIPS
Eric Pulier, the Company's Chairman of the Board, and John D. Shulman,
a director, are stockholders of Exist Corporation and owned during part of 1999,
in the aggregate, 36%, of the equity of Exist on a fully diluted basis. Their
aggregate ownership is currently 17% on a fully diluted basis. In addition, Mr.
Pulier and Mr. Shulman each hold currently exercisable options to acquire an
additional 6% of the equity ownership of Exist. Mr. Shulman is the Chairman of
the Board and Mr. Pulier is a director of Exist. Pursuant to a professional
services and consulting agreement dated January 6, 1999, the Company is
providing professional services to Exist, including strategic design and
development, in connection with Exist's development of an Internet global
exchange platform. The agreement provides that Exist will pay a total of
approximately $3.8 million for the services provided by the Company through
December 1999. The professional services and consulting agreement dated January
6, 1999 replaces a prior agreement pursuant to which Exist paid a total of
approximately $700,000 for similar services provided by the Company. Exist
represented more than 10% of our revenue for the twelve months ended December
31, 1999.
Mr. Pulier is the sole general partner of and together with his wife,
Heather Pulier, owns 100% of Digital Evolution, L.P. Digital Evolution, L.P.
owns 50% of Chromazone LLC. Mr. Pulier is also a director of Chromazone.
Chromazone owns a 50% equity interest in NetSmart, Inc. (formerly
Chromazone.com, Inc.) Mr. Pulier is a director of NetSmart. Pursuant to a
professional services and consulting agreement dated September 1999 with
NetSmart, the Company is providing professional services to NetSmart in
connection with a customized dial up and web browser application. The agreement
provides that NetSmart will pay the Company $2.9 million. Through December 31,
1999, services totaling approximately $2.8 million have been invoiced to
NetSmart for the services provided to NetSmart under this agreement, of which
approximately $2.0 million had been paid as of that date. The September 1999
agreement replaces a letter agreement dated April 6, 1999, between Chromazone
and the Company pursuant to which Chromazone paid a total of approximately
$300,000 for similar services provided by the Company.
Pursuant to the same professional services and consulting agreement
dated September 1999 with NetSmart, the Company is providing professional
services to Citicorp Electronic Commerce, Inc. in connection with the
development of a small business portal and a business plan for new business
enterprises. The agreement provides that NetSmart will pay the Company $1.7
million. Through December 31, 1999, services totaling approximately $1.6 million
have been invoiced to NetSmart under this agreement, of which approximately $1.4
million had been paid as of that date.
Chromazone and NetSmart represented more than 13% of the Company's
revenue for the twelve months ended December 31, 1999.
Chromazone owns a 31% equity interest in Decision Support Systems, Inc.
(DSS). Pursuant to a professional services agreement dated July 20, 1999, with
DSS, the Company provided professional services to DSS in connection with the
development of the health care portal. The agreement provides that DSS will pay
the Company $30,000. Through December 30, 1999, services totaling approximately
$30,000 have been invoiced to DSS, all of which has been paid.
Digital Evolution owns a 35% equity interest in Interactive Video
Technology, Inc. (IVT). Pursuant to a professional services agreement dated
September 1998 between IVT and Toyota Motor Sales, U.S.A., Inc., the Company was
engaged to assist in Application Development for Toyota Motor Sales, U.S.A.,
Inc. The agreement provides that IVT will pay the Company $210,000. Through
December 31, 1999, services totaling approximately, $210,000 have been invoiced
to IVT, of which IVT has paid a total of $164,000.
Michael M. Carter previously held options to purchase 50,000 shares of
common stock of Soft Plus, Inc., which he received as compensation for his
service on the Soft Plus advisory board, which options were converted into
options to purchase a total of 18,658 shares of our common stock upon completion
of the Soft Plus merger.
14
<PAGE>
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires the Company's executive
officers, directors and persons who own more than ten percent (10%) of the
Common Stock (collectively, "Reporting Persons") to file initial reports of
ownership and reports of changes of ownership of the Common Stock with the
Securities and Exchange Commission ("SEC") and the Nasdaq Stock Market.
Reporting Persons are required to furnish the Company with copies of all forms
that they file under Section 16(a). Based solely upon a review of the copies of
such forms received by the Company or written representations from Reporting
Persons, the Company believes that, with respect to the year ended December 31,
1999, all Reporting Persons complied with all applicable filing requirements
under Section 16(a).
PROPOSAL 2 - TO APPROVE AN AMENDMENT AND RESTATEMENT OF THE
1998 PERFORMANCE INCENTIVE PLAN OF U.S. INTERACTIVE, INC.
The Board of Directors has adopted a proposal to amend and restate the
1998 Performance Incentive Plan of U.S. Interactive, Inc. ("Plan") to increase
the number of shares of Common Stock reserved for issuance under the Plan by
3,500,000 shares, from 3,000,000 shares to 6,500,000 shares, to allow outside
consultants providing services to the Company to receive grants or Awards under
the Plan and to provide for the discretion to grant options exercisable within
six months of the date of grant. The amendment and restatement of the Plan is
subject to stockholder approval.
As of March 31, 2000, options to purchase a total of 2,824,350 shares
of Common Stock were outstanding under the Plan. Additional options to purchase
a total of 175,650 shares of Common Stock are presently available for issuance
under the Plan. The Board of Directors believes that the proposed increase in
the number of shares of Common Stock which may be issued under the 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 Board of Directors believes that allowing outside consultants to participate
in the Plan will enhance the Company's continuing efforts to attract and retain
the services of highly qualified outside consultants.
Certain additional information regarding the adoption of the Plan and
options presently outstanding under the Plan, together with a description of the
principal provisions of the Plan is set forth below under "Certain Information
Regarding the Plan."
To be approved, the Proposal must receive the affirmative vote of a
majority of the shares of the Common Stock present in person or represented by
proxy at the Meeting and entitled to vote thereon.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE
AMENDMENT AND RESTATEMENT OF THE PLAN.
Certain Information Regarding The Plan
As of March 31, 2000, options to purchase a total of 2,824,350 shares
of Common Stock were outstanding under the Plan. These options have exercise
prices ranging from $9.25 to $67.13 per share. Additional options to purchase a
total of 175,650 shares of Common Stock may be issued under the Plan. The
Company proposes that the number of shares of Common Stock which may be issued
under the Plan be increased to a level sufficient to enable the Company to
continue to attract and retain highly qualified personnel, including senior
management.
On March 31, 2000, the closing price of the Common Stock was $35.75 per
share, as reported by the Nasdaq Stock Market. Options to purchase a total of
884,500 shares outstanding under the Plan on that date had exercise prices per
share equal to or lower than $35.75. Of these "in the money" options, options to
purchase a total of 49,000 shares of Common Stock are presently exercisable.
15
<PAGE>
Summary of the Plan.
The description that follows is an overview of the material provisions
of the Plan, as restated and amended. The description, however, does not purport
to be a complete description of all the provisions of the Plan. A copy of the
Plan appears as Exhibit A to the Proxy Statement. Capitalized terms have their
meaning defined in the Plan.
Effective Date and Term of Plan. The effective date of the Plan is
September 21, 1998, and it shall remain in effect until December 31, 2017 unless
sooner terminated by the Board of Directors.
Purposes. The purposes of the Plan are to advance the interests of the
Company and its stockholders by strengthening the ability of the Company to
attract, retain and reward employees, the Board of Directors and consultants, to
motivate officers and other selected employees to achieve business objectives
established to promote the long-term growth, profitability and success of the
Company, and to encourage ownership of the Common Stock of the Company by
participating officers and other selected employees.
Administration. The Plan is administered by a Committee of the Board of
Directors, consisting of not less than two members of the Board, each of whom
must meet certain independence qualifications. The Committee selects the
Participants to whom discretionary grants and awards may be made, the types and
amounts of the grants and awards, the times at which they are made and all other
terms and conditions of the grants and wards, including establishing Performance
Goals, measures and periods. Subject to the terms and conditions and within the
limitations of the Plan, the Committee may modify outstanding grants and awards
under the Plan. The Committee also has the full power to construe and interpret
the Plan and make any determination of fact incident to the Plan; promulgate,
amend and rescind rules and regulations relating to the implementation,
operation and administration of the Plan; and make all other determinations and
take all other actions as the Committee may deem necessary or advisable for the
administration and operation of the Plan. As of March 31, 2000, there were
approximately 411 employees and 6 non-employee directors eligible to participate
in the Plan.
STOCK OPTIONS.
Eligibility and Limitations. Any Employee of the Company or a
Subsidiary may be granted Stock Options. Directors and Consultants may be
granted Non-Qualified Stock Options only. The maximum number of shares of Common
Stock which may be issued and delivered upon the exercise of Non-Qualified Stock
Options granted under the Plan is currently 3,000,000, and under the Proposal
would increase to 6,500,000. The maximum number of shares of Common Stock which
may be issued and delivered upon the exercise of Incentive Stock Options is
currently 3,000,000, and under the Proposal would increase to 6,500,000. The
maximum number of shares of Common Stock in respect of which Stock Options may
be granted to any Employee, Director or Consultant during any calendar year
currently is 200,000, and under the proposal would increase to 400,000. The Plan
also contains certain limitations required by the Internal Revenue Code of 1986,
as amended (the "Code"), on the number of shares issuable to any employee in any
calendar year and on the timing of the exercise of Options by Employees in each
calendar year (based upon the value of the options so exercised). If any
outstanding Option granted under the Plan for any reason expires or is
terminated, the shares of Common Stock allocable to the Option may again be
subject to an Option under the Plan.
Option Exercise Price. The per share exercise price of Stock Options
granted under the Plan is determined by the Committee prior to or at the time of
grant, but may not be less than 100% of Fair Market Value of the Common Stock on
the date of the grant. The exercise price of Incentive Stock Options issued to
an Employee owning more than ten percent (10%) of the total combined voting
power of all classes of stock of the Company may not be less than 110% of the
Fair Market Value on the date of the grant.
Option Term and Exercisability. The term of each Stock Option is fixed
by the Committee. The term of Incentive Stock Options may not exceed ten years
after the date of grant, or five years in the case of an employee owning more
than ten percent (10%) of the total combined voting power of all classes of
stock of the Company.
Stock Options are exercisable at such time or times and subject to such
terms and conditions as determined by the Committee at the date of grant; except
that no Stock Option can be exercised during the first six months after the date
16
<PAGE>
of grant. Under the proposed amendment and restatement the Committee would have
the discretion to grant options which are exercisable within six months after
the date of grant. Unless the Committee specifies otherwise, every option
granted pursuant to this Plan vests and becomes exercisable with respect to 25%
of the Common Stock issuable upon exercise thereof on each of the first, second,
third, and fourth anniversaries of the date of grant.
Early Expiration upon Termination of Relationship. Except as otherwise
provided in the applicable Option Agreement, Options granted to employees which
have not vested terminate upon termination of the employee's employment with the
Company or its subsidiaries for death, disability or termination without Cause.
All vested Options expire to the extent not exercised before the end of third
month (one year if termination is caused by Employee's death or Disability)
following the date of termination. Upon voluntary termination of an Employee's
employment or termination for Cause, all unexercised Options, whether or not
vested, terminate immediately upon the earlier to occur of the date the Employee
receives notice of the termination or the actual date of termination. Except as
otherwise provided in the applicable Option Agreement, upon termination of a
Director's directorship for death, disability or removal without cause, all
Options that are not vested and exercisable on the date of termination terminate
and all vested Options expire to the extent not exercised before the end of
third month (one year if termination is caused by the Director's death or
disability) following the date of such termination. Upon removal for cause all
unexercised Options, whether or not vested, terminate upon the earlier to occur
of the date the Director receives notice of the termination or the actual date
of termination.
STOCK APPRECIATION RIGHTS.
In General. Stock Appreciation Rights in respect of shares of Common
Stock may be granted under the Plan alone, in tandem with, in addition to or
independent of a Stock Option or other grant or Award under the Plan. A Stock
Appreciation Right entitles a Participant to receive an amount equal to the
excess of the Fair Market Value of a share of Common Stock on the date of
exercise over the Fair Market Value of a share of Common Stock on the date of
grant of the Stock Appreciation Right, or such other higher price set by the
Committee, multiplied by the number of shares of Common Stock with respect to
which the Stock Appreciation Right is exercised.
Eligibility And Limitations. Employees, Directors and Consultants are
eligible to receive Stock Appreciation Rights. The maximum number of shares of
Common Stock in respect of which Stock Appreciation Rights may be granted is
1,000,000. The maximum number of shares of Common Stock which may be issued and
delivered in payment or settlement of Stock Appreciation Rights is 500,000. The
maximum number of shares of Common Stock in respect of which Stock Appreciation
Rights may be granted to any person during any calendar year is 100,000.
Exercisability. A Stock Appreciation Right may be exercised by a
Participant at such time or times and in such manner as is authorized by the
Committee and set forth in the related grant agreement, except that in no event
shall a Stock Appreciation Right be exercisable within the first six months
after the date of grant. Except as otherwise provided in the applicable Stock
Appreciation Right grant agreement, Stock Appreciation Rights terminate at the
time the Participant ceases to be an Employee, Director or Consultant.
RESTRICTED STOCK GRANTS AND AWARDS.
In General. A Restricted Stock Grant is the issuance of shares of
Common Stock in the name of an Employee, Director or Consultant, subject to such
terms and conditions as the Committee determines. Such terms and conditions may
include restrictions on the sale, assignment, transfer or other disposition of
such shares and the requirement that the Participant forfeit the shares back to
the Company (i) upon termination of employment, directorship or consulting
relationship, (ii) if any specified Performance Goals are not achieved, or (iii)
if such other conditions as the Committee may specify are not satisfied.
Eligibility And Limitations. Any Employee, Director or Consultant of
the Company or a Subsidiary may receive a Restricted Stock Grant. The maximum
number of shares of Common Stock which may be issued as Restricted Stock under
the Plan shall is 1,000,000. The maximum number of shares of Common Stock which
may be issued to any Participant as Restricted Stock during any calendar year
may not exceed 50,000. The maximum amount any Participant may receive as a
Restricted Stock Grant in any calendar year may not exceed $500,000, determined
using the Fair Market Value of the Restricted Stock Grant as at the date of the
grant thereof.
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<PAGE>
Restriction Period. Except as otherwise provided in the related grant
agreement, Restricted Stock Grants provide that to receive shares of Common
Stock free of restrictions, (1) the Employee must remain in the employment of
the Company or its Subsidiaries for a period of not less than four years, (2) a
Director must remain a Director for a period of not less than four years, and
(3) a Consultant must remain must remain a Consultant for a period of not less
than four years.
The Committee may provide for the lapse of restrictions in installments
during the Restricted Period, and may establish one or more Performance Goals
that are required to be achieved during one or more Performance Periods as a
condition to the lapse of those restrictions.
Restrictions. During the Restricted Period, Participants are not
entitled to delivery of the shares of the Common Stock and may not sell,
transfer, encumber or otherwise dispose of the Restricted Shares. The Committee
may include such other restrictions and conditions as it deems appropriate.
Payment. At the end of Restricted Period, the Committee has discretion
to require that the Restricted Stock be retained by the Company, and that the
Participant receive a cash payment in lieu of unrestricted shares of Common
Stock.
Rights as a Shareholder. A Participant owning Restricted Stock has all
of the rights of a stockholder of the Company, including the right to vote the
shares and receive any cash dividends paid thereon. Stock dividends distributed
with respect to shares of Restricted Stock are treated as additional shares
under the Restricted Stock Grant and are subject to the same restrictions and
other terms and conditions.
PERFORMANCE GRANTS AND AWARDS.
Eligibility and Terms. A Performance Grant, which may be granted to
Employees, Directors and Consultants of the Company and its Subsidiaries, is the
prospective contingent right, expressed in Units, to receive payments of shares
of Common Stock, cash or any combination thereof, with each Unit equivalent in
value to one share of Common Stock, or equivalent to such other value or
monetary amount designated or established by the Committee, based upon Company
performance over a specified Performance Period. At the time each Performance
Grant is made, the Committee establishes the Performance Period, the Performance
Measure and the targets to be attained relative to such Performance Measure in
respect of such Performance Grant. A Performance Award is the number of shares
of Common Stock and/or the amount of cash earned and payable in settlement of a
Performance Grant as determined at the end of the Performance Period.
Limitations on Grants and Awards. The maximum number of shares of
Common Stock which may be issued pursuant to Performance Grants is 500,000. The
maximum number of shares which may be the subject of Performance Grants made to
any Participant in respect of any Performance Period or during any calendar year
is 50,000. The maximum amount any Participant may receive during any calendar
year as Performance Awards pursuant to Performance Grants may not exceed
$1,000,000, determined using the Fair Market Value of such Performance Awards as
of the last day of the applicable Performance Period or the date of payment,
whichever is higher.
Payment of Awards. Payment in settlement of a Performance Award may be
made in shares of Common Stock, in cash, or in any combination of Common Stock
and cash, and at such time or times, as the Committee, in its discretion, shall
determine.
OTHER STOCK-BASED GRANTS AND AWARDS.
In General. The Committee may make Stock Based Grants, which are other
Grants and Awards pursuant to which Common Stock, Common Stock Equivalents, or
other Units are, or in the future may be, acquired by Participants.
Eligibility And Limitations. The Committee may make Stock-Based Grants
to Employees, Directors or Consultants of the Company and its Subsidiaries.
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<PAGE>
The aggregate number of shares of Common Stock issued to Participants
pursuant to Stock-Based Grants and Awards will not exceed 500,000. No
Participant shall receive more than 50,000 shares of Common Stock in settlement
of Stock-Based Grants ("Stock-Based Awards") during any calendar year. The
maximum amount any Participant may receive in Stock-Based Awards during any
calendar year shall not exceed $1 million, determined using the Fair Market
Value of any shares of Common Stock delivered in payment of the Stock-Based
Awards on the date or dates of the payment thereof.
Payment of Awards. Payment of Stock-Based Awards may be made in cash,
in shares of Common Stock, or in any combination of cash and shares of Common
Stock, and at such time or times, as the Committee shall determine.
OTHER PROVISIONS.
Transferability of Grants. Grants and Awards under the Plan are not (i)
assignable, alienable or transferable by a Participant, except by will or the
laws of descent and distribution, or (ii) subject to the lien or claims of any
creditor of any Participant. During the lifetime of a Participant, Stock Options
and Stock Appreciation Rights are exercisable only by, and shares of Common
Stock issued upon the exercise of Stock Options and Stock Appreciation Rights or
in settlement of other Awards will be issued only to, and other payments in
settlement of any Award will be payable only to, the Participant or his or her
legal representative. The Committee may, in its sole discretion, authorize
written designations of beneficiaries and authorize Participants to designate
beneficiaries with the authority to exercise Stock Options and Stock
Appreciation Rights granted to a Participant in the event of his or her death.
The Committee may, in its sole discretion, allow limited rights of
transferability as described in the Plan.
Repricing. In no event shall any Stock Option or Stock Appreciation
Right be granted to a Participant in exchange for the Participant's agreement to
the cancellation of any Stock Options or Stock Appreciation Rights then held by
the Participant if the exercise price of the new grant is lower than the
exercise price of the grant to be cancelled. In no event shall any Stock Option
or Stock Appreciation Right be amended to reduce the option exercise price,
except pursuant to an adjustment upon any change in the capital structure,
capitalization or Common Stock of the Company, or any other change affecting the
Common Stock.
Change in Control. In the event of a Change in Control of the Company,
the Board of Directors, in its sole discretion, may provide for accelerated
exercise and/or vesting of Stock Options, Stock Appreciation Rights and
Restricted Stock Grants, for removal of transfer restrictions, and/or that
Performance Grants and other Stock-Based Grants shall be deemed to have been
fully earned, at the maximum amount of the award opportunity specified in the
grant agreement, as of the date of the Change in Control.
Adjustment Upon Changes In Capital Structure. In the event of any
change in the capital structure, capitalization or Common Stock of the Company,
or any other change affecting the Common Stock, the Board of Directors, in its
discretion, may make appropriate adjustments to the grants and awards made or
awardable under the Plan to reflect such change.
Tax Consequences. There are no tax consequences to the optionee or the
Company upon the grant of a Non-Qualified Stock Option pursuant to the Plan. On
exercising a Non-Qualified Stock Option, the optionee realizes ordinary income
to the extent that the market value of the Common Stock exceeds the exercise
price, and the Company may claim a tax deduction of like amount. There are no
tax consequences to the optionee or the Company upon the grant of an Incentive
Stock Option pursuant to the Plan, nor on the exercise of an Incentive Stock
Option, provided the optionee meets the required holding period to exercise of
the Option. Assuming that an optionee holds the stock received for the required
holding period under the Code, the optionee will receive capital gain treatment
upon the sale of the stock, but the Company will not receive a tax deduction.
Resale of Shares. The shares issuable upon exercise of options which
have already been granted, and shares which are presently reserved for issuance
under the Plan have previously been registered on a Registration Statement on
Form S-8 under the Securities Act of 1933, as amended (the "Securities Act"). In
the event that the amendment to the Plan is approved by the stockholders of the
Company, the Company intends to register the additional shares issuable upon
exercise of options granted under the Plan on a Registration Statement on Form
S-8 under the Securities Act. Participants who are affiliates of the Company may
not resell the shares acquired under the Plan under the Form S-8 Registration
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Statement. Such resales may either be pursuant to a resale prospectus or be
effected in accordance with Rule 144 under the Securities Act (unless otherwise
exempt from registration under the Securities Act).
Amendments. The Board or the Committee may suspend or terminate the
Plan or any portion thereof at any time and may amend it from time to time in
such respects as the Board or the Committee may deem advisable; provided,
however, that no such amendment shall be made without stockholder approval to
the extent such approval is required by law, agreement or the rules of any
exchange upon which the Common Stock is listed, and no such amendment,
suspension or termination shall impair the rights of Participants under
outstanding Options without the consent of the Participants affected thereby,
except as otherwise provided herein.
Plan Benefits. To date, the only grants and awards under the Plan have
been Stock Options. As of March 31, 2000, the aggregate market value of the
2,824,350 shares of Common Stock issuable upon exercise of options then
outstanding under the Plan was approximately $100,970,513, based on a price per
share of Common Stock of $35.75 on that date.
As noted above, the number of options, and the terms and conditions of
a specific option grant under the Plan are determined by the Committee from time
to time in its discretion, subject to the terms of the Plan and the requirements
of applicable law. Accordingly, the number of options, and their respective
terms and conditions, to be received by or allocated to persons eligible to
receive options under the Plan in the future are not presently determinable. The
table below shows the number of options which were granted under the Plan during
the fiscal year ended December 31, 1999, and the total number of options granted
under the Plan from its inception to date.
<TABLE>
<CAPTION>
Options
Options Granted Granted During
to Date Fiscal 1999
--------------- --------------
<S> <C> <C>
Eric Pulier................................................ 200,000 --
Chairman of the Board
Stephen T. Zarrilli........................................ 200,000 --
President and Chief Executive Officer
Larry W. Smith............................................. -- --
Former Chief Executive Officer
Ajit M. Prabhu............................................. 75,000 --
Chief Technology Officer
James J. Huser............................................. 75,000 --
Chief Operating Officer
Philip L. Calamia.......................................... 75,000 --
Chief Financial Officer
William C. Jennings........................................ 50,000 50,000
Director
Robert V. Napier........................................... 50,000 50,000
Director
All current executive officers as a group 625,000 --
All current non-employee directors as a group 150,000 150,000
Non-executive officer employees as a group 2,049,350 1,091,500
</TABLE>
The foregoing table lists all Named Executive Officers and nominees for
director who have received grants under the Plan, and all persons who have
received 5% or more of the total options granted under the Plan. No associate of
a current director, current executive officer or nominee for director has
received a grant under the Plan.
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PROPOSAL 3 - TO APPROVE THE ADOPTION OF THE U.S. INTERACTIVE, INC. EMPLOYEE
STOCK PURCHASE PLAN
At the Meeting, the stockholders are being asked to approve the
adoption of the Company's Employee Stock Purchase Plan (the "ESPP"), as adopted
by the Board of Directors, and the reservation of 1,000,000 shares of Common
Stock for issuance thereunder. The ESPP becomes effective July 1, 2000, subject
to stockholder approval.
The description that follows is an overview of the material provisions
of the ESPP and is qualified in its entirety by references to the ESPP.
Capitalized terms have their meaning defined in the Plan. A copy of the complete
ESPP (without exhibits) is attached hereto as Exhibit B.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE
ADOPTION OF THE ESPP.
Description of the ESPP
Purpose. The purpose of the ESPP is to provide employees of the Company
and its subsidiaries with an opportunity to purchase Common Stock at a discount
from the market price, through payroll deductions, and to thereby promote the
Company's best interests and enhance the Company's long-term performance.
Administration. The Board of Directors is responsible for the
administration of the Plan. The interpretation and construction by the Board of
Directors or Committee is, to the full extent permitted by law, final. The Board
may delegate the administration of the Plan to the Company's Compensation
Committee or any other committee of the Board.
In the event that insufficient shares are available under the ESPP for
a full allocation of shares to all Participants during a given Offering Period,
the Board of Directors shall make a pro rata allocation based on the
Participants' respective Contribution Account balances of the shares remaining
available for purchase.
Eligibility. All employees of the Company, or its subsidiaries are
eligible to participate in the ESPP except the following: (i) employees who are
customarily employed for less than 20 hours per week; (ii) employees who are
customarily employed for less than five months in a calendar year; (iii)
employees who own or hold options to purchase or who, as a result of
participation in the ESPP, would own stock or hold options to purchase stock
possessing five percent (5%) or more of the total combined voting power or value
of all classes of stock of the Company as determined pursuant to Section 424(d)
of the Code; and (iv) employees whose right to purchase Common Stock under the
ESPP accrue at a rate which exceeds $12,500 worth of stock for each
Participation Period or $25,000 for each calendar year in which such option is
outstanding. As of March 31, 2000, there are approximately 717 employees
eligible to participate in the ESPP.
Offering Period and Enrollment. Each Participation Period of Common
Stock under the ESPP is for a period of six (6) months. Participation Periods
commence on the first day of January and July of each year. The Board or the
Committee may change the duration of Participation Periods without stockholder
approval, subject to certain limitations set forth in the ESPP.
Eligible Employees may participate in any Participation Period by
enrolling as of the first day of the Participation Period that coincides with or
next follows the Eligible Employee's first day of employment with the Company,
or as of the first day of any subsequent Participation Period. Once enrolled, a
Participant automatically will participate in each succeeding Participation
Period unless the Participant withdraws from the ESPP by the 15th day of the
month in which the Participation Period ends. Upon enrollment, a Participant
authorizes payroll deductions of up to fifteen percent (15%) of the
Participant's base salary or wages, exclusive of bonuses, overtime, shift
premiums, incentive compensation, and sales commissions received during a
Participation Period. After a Participant sets the rate of payroll deductions
for a Participation Period, the Participant may increase or decrease the rate
during a Participation Period by giving notice at least fifteen (15) days before
the first day of the pay period for which the change is effective. The Board,
Committee, or the senior human resources officer of the Company may, in their
discretion, limit the number of changes during any Participation Period.
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<PAGE>
Purchase of Stock. The number of whole shares that a Participant may
purchase in any Participation Period is determined by dividing the total amount
of payroll deductions withheld from the Participant during the Participation
Period by the price per share determined as described below. The purchase takes
place automatically on the Exercise Date (as defined in the ESPP). Any cash
balance remaining in a Participant's account following the purchase will be
carried forward for use in the next Participation Period unless the Participant
requests that the balance be returned to the Participant.
No Participant may purchase shares in any Participation Period which
are equal to more than fifteen percent (15%) of the Participant's Compensation
during the applicable Participation Period divided by the Exercise Price on the
Exercise Date. In no event may the Participant purchase more than $25,000 worth
of Common Stock in any calendar year or $12,500 in any Participation Period.
Purchase Price. The purchase price of shares purchased in any
Participation Period will be 85% of the lesser of (a) the Closing Price on the
first Trading Date of the applicable Participation Period or (b) the Closing
Price on the Exercise Date of the applicable Participation Period.
Withdrawal. A Participant may discontinue his or her payroll deduction
election for a Participation Period by giving notice at a time, and in a manner,
prescribed by the Board or Committee. This voluntary discontinuance of Plan
participation must occur no later than the 15th day of the month in which the
Participation Period ends. Once discontinued, a Participant may not increase the
rate of participation or rejoin the Plan until the next Participation Period.
Termination of Employment. Except in the case of retirement after a
Participant reaches age 65, a termination of the employment of a Participant for
any reason during a Participation Period shall be deemed to have discontinued
Plan participation on the first day of such Participation Period. Any balance
remaining in the Participant's Contribution Account at the time of such
termination from employment shall be refunded (without interest) to the
Participant within thirty (30) days following such termination.
Retirement. A Participant who terminates employment during a
Participation Period on or after the first day of the month in which the
Participant reaches age 65 shall be deemed to have retired. If a Participant
retires during the first three months of a Participation Period, the Participant
shall be deemed to have discontinued Plan participation on the first day of such
Participation Period. The balance in the Participant's Contribution Account
shall be refunded (without interest) to the Participant within thirty (30) days
following such retirement. If a Participant retires during the last three (3)
months of a Participation Period, payroll deductions will cease at the time of
such termination. Unless the Participant elects to receive the balance in his or
her Contribution Account (without interest) before the applicable Exercise Date,
the balance in the Participant's Contribution Account shall be used to purchase
whole shares of Common Stock on the Exercise Date for the Participation Period
in which the termination occurs. (Any amounts remaining in the Contribution
Account after the purchase of whole shares of Common Stock shall be paid to the
Participant (without interest) within thirty (30) days following the Exercise
Date.)
Death. If a Participant dies during a Participation Period, the balance
that is credited to the Participant's Contribution Account shall be used to
purchase whole shares of Common Stock on the Exercise Date for the Participation
Period in which the Participant died, unless the Participant's estate elects to
receive the balance in his or her Contribution Account (without interest) before
the applicable Exercise Date. This Common Stock shall be distributed to the
Participant's estate as soon as practicable following such Exercise Date. (In
addition, any amounts remaining in the Contribution Account after the purchase
of whole shares of Common Stock shall be paid to the estate (without interest)
within thirty (30) days following such Exercise Date.)
Disability. If a Participant incurs a Disability during a Participation
Period, payroll deductions for that Participant will cease on the date of
Disability. Unless the Participant elects to receive the balance in his or her
Contribution Account (without interest) before the applicable Exercise Date, the
balance in the Participant's Contribution Account shall be used to purchase
whole shares of Common Stock on the Exercise Date for the Participation Period
in which the Disability occurs. (Any amounts remaining in the Contribution
Account after the purchase of whole shares of Common Stock shall be paid to the
Participant (without interest) within thirty (30) days following such Exercise
Date.)
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<PAGE>
Leaves of Absence. Payroll deductions will cease when a Participant
begins an unpaid leave of absence. Unless the Participant elects to receive the
balance in his or her Contribution Account (without interest) before the
applicable Exercise Date, the balance in the Participant's Contribution Account
shall be used to purchase whole shares of Common Stock on the Exercise Date for
the Participation Period in which the leave begins. (Any amounts remaining in
the Contribution Account after the purchase of whole shares of Common Stock
shall be paid to the Participant (without interest) within thirty (30) days
following such Exercise Date.) If a Participant's unpaid leave of absence
extends beyond ninety (90) days, the Participant will be deemed terminated from
employment on the later of the 91st day of leave or the date on which the
Participant no longer has re-employment rights.
Recapitalization. The number of shares of Common Stock available under
the Plan, the number of shares of Common Stock that are subject to each
outstanding Option, and the Exercise Price may be adjusted by the Board or
Committee to reflect any increase or decrease in the number of shares of issued
Common Stock resulting from any subdivision or consolidation of shares, the
payment of a stock dividend, or other increase or decrease in the number of
shares outstanding effected without receipt of consideration by the Company.
Adjustments shall be made in the sole discretion of the Board or Committee, and
its decision shall be final and binding.
Dissolution and Liquidation. In the event of the proposed dissolution
or liquidation of the Company, the Participation Period then in progress shall
be shortened by setting a new Exercise Date and shall terminate immediately
prior to the consummation of such proposed dissolution or liquidation, unless
provided otherwise by the Board or Committee.
Change in Control. In the event of a Change in Control of the Company,
the Participation Period then in progress shall be shortened by setting a new
Exercise Date. The New Exercise Date shall be before the date of the Change in
Control.
Amendment and Termination of the ESPP. The Board, the Committee or the
Company's stockholders, insofar as permitted by law, may at any time amend or
terminate the ESPP except that no amendment may increase the number of shares of
Common Stock under the ESPP, materially increase the benefits accruing to
Participants under the ESPP or otherwise materially modify the requirements for
eligibility without the approval of the stockholders of the Company. Without the
consent of the Participant, no amendment may adversely affect any Option granted
prior to the adoption of the amendment. If the Plan is terminated, the Committee
shall give notice to affected Participants, terminate all payroll deductions,
and pay to the Participants any balances remaining in their Contribution
Accounts (without interest) as soon as practicable following such termination.
Tax Consequences. The ESPP is intended to qualify as an "employee stock
purchase plan" within the meaning of Section 423 of the Code. Participants will
not recognize income for federal income tax purposes either upon enrollment in
the ESPP or upon purchase of shares thereunder. All tax consequences of
purchasing shares under the ESPP are deferred until the Participant sells or
otherwise disposes of the shares or dies. The Company will be entitled to a
deduction for federal income tax purposes to the extent that a Participant
recognizes ordinary income on a disqualifying disposition of the shares in the
year of the disqualification. The foregoing is intended to be a brief summary of
the tax consequences of transactions under the ESPP based on federal tax laws in
effect on March 31, 2000. As federal, state and local tax laws may change, the
federal, state and local tax consequences for any Participant will depend upon
his or her individual circumstances.
Plan Benefits. The number of options granted under the ESPP during
fiscal year 2000 cannot be determined at this time because the number of options
granted depends on the number of Eligible Employees that elect to participate in
the ESPP and the amount they wish to contribute towards the purchase of shares
of the Common Stock.
PROPOSAL 4 - TO APPROVE THE GRANT OF A STOCK OPTION
TO MICHAEL M. CARTER
Our Chief Marketing Officer, Michael E. Carter, served on the Advisory
Board of Soft Plus, Inc. prior to its merger with U.S. Interactive Corp.
(Delaware) on March 8, 2000. As compensation for his services in that capacity,
23
<PAGE>
on May 14, 1999, Soft Plus granted Mr. Carter an option to acquire 50,000 shares
of Common Stock of Soft Plus, Inc. at an exercise price of $.50 per share. Under
the terms of the merger with Soft Plus, Mr. Carter's option was converted into
an option to acquire 18,675 shares of the Company's Common Stock at a per share
exercise price of $1.34 using the same formula and in the same manner as all
other options granted by Soft Plus. The option is fully vested and by its terms,
fully exercisable. All other terms of the option remain the same following the
merger. The option will expire on May 13, 2009. The option terminates upon
termination of service with the Company, as more fully described in the Soft
Plus 1999 Stock Option Plan filed as Exhibit 10.7 to the Company's Registration
Statement on Form S-1 (Reg. No. 33-32224) with the Securities and Exchange
Commission on March 10, 2000.
Under certain corporate governance rules applicable to companies listed
for quoting on NASDAQ, plans which permit options to be granted to executive
officers or directors of a listed company generally must be approved by the
company's stockholders. In connection with the Company's merger with Soft Plus,
Inc., NASDAQ required and the Company and Mr. Carter agreed that Mr. Carter
would not be permitted to exercise this option unless the option was approved by
the Company's stockholders in accordance with state law.
Mr. Carter currently holds options to acquire 158,500 shares of the
Company's Common Stock, other than the converted Soft Plus option, at an average
weighted exercise price of $27.84, of which 19,625 are currently exercisable at
an average weighted exercise price of $4.93.
To be approved, the Proposal must receive the affirmative vote of a
majority of the shares of the Common Stock present in person or represented by
proxy at the Meeting and entitled to vote thereon.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE
APPROVAL OF MR. CARTER'S OPTION.
PROPOSAL 5 - APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors of the Company has appointed KPMG LLP, certified
public accountants, as the Company's independent auditors for the fiscal year
ending December 31, 2000, subject to ratification of such appointment by
stockholders. The submission of the appointment of KPMG LLP for ratification by
the stockholders is not required by law or by the Company's Bylaws and is being
done for the sole purpose of ascertaining the views of the stockholders of the
Company with respect to such appointment. If such appointment is not ratified,
the Board of Directors may appoint another firm as the Company's independent
auditors for the year ending December 31, 2000. Representatives of KPMG LLP are
expected to be present at the Meeting, will be given an opportunity to make a
statement if they desire to do so, and will be available to answer appropriate
questions from stockholders.
SUBMISSION OF STOCKHOLDER PROPOSALS FOR THE
2000 ANNUAL MEETING OF STOCKHOLDERS
Stockholder proposals submitted for inclusion in the Proxy Statement
for the 2001 Annual Meeting of Stockholders must be received by the Company at
the Company's corporate headquarters address and must be submitted in accordance
with Rule 14a-8 of the Exchange Act on or before January 1, 2001.
Under the Company's Bylaws, stockholder proposals which are not
submitted for inclusion in the Company's Proxy Statement for the 2001 Annual
Meeting of Stockholders must be received by the Secretary of the Company: not
less than 70 days nor more than 90 days prior to the first anniversary of the
preceding year's annual meeting; PROVIDED, HOWEVER, that in the event that the
date of the annual meeting is advanced by more than 20 days, or delayed by more
than 70 days, from such anniversary date, notice by the stockholder must be so
delivered not earlier than the 90th day prior to such annual meeting and not
later than the close of business on the later of the 70th day prior to such
annual meeting or the 10th day following the day on which public announcement of
the date of such meeting is first made.
24
<PAGE>
OTHER BUSINESS
The Board of Directors does not intend to bring any other matter before
the Meeting and does not know of any other business which others will present
for consideration at the Meeting. Except as the Board of Directors may otherwise
permit, only the business set forth and discussed in the Notice of Annual
Meeting of Stockholders and this Proxy Statement may be acted on at the Meeting.
If any other business does properly come before the Meeting the proxy holders
will vote on such matters according to their discretion.
The enclosed proxy confers discretionary authority to vote with respect
to any and all of the following matters that may come before the Annual Meeting:
(i) approval of the minutes of a prior meeting of stockholders if such approval
does not amount to ratification of the action taken at that meeting; (ii) the
election of any person to any office for which a bona fide nominee is named in
this Proxy Statement and such nominee is unable to serve or, for good cause,
will not serve; (iii) any proposal omitted from this Proxy Statement and proxy
pursuant to Rule 14a-8 or Rule 14a-9 promulgated under the Securities Exchange
Act of 1934; and (iv) matters incident to the conduct of the Annual Meeting. In
connection with such matters, the persons named in the enclosed proxy card will
vote in accordance with their best judgment.
By Order of the Board of Directors,
/s/ Lawrence F. Shay
Lawrence F. Shay
Senior Vice President, Legal and Corporate Affairs,
General Counsel and Secretary
ALL STOCKHOLDERS ARE URGED TO COMPLETE, SIGN, DATE, AND RETURN THE
ACCOMPANYING PROXY CARD IN THE ENCLOSED POSTAGE-PAID ENVELOPE. THANK YOU FOR
YOUR PROMPT ATTENTION TO THIS MATTER.
25
<PAGE>
EXHIBIT A
Amended and Restated 1998 Performance Incentive Plan
of U.S. Interactive, Inc.
1. PURPOSE.
The purposes of the Amended and Restated 1998 Performance Incentive
Plan (the "Plan") of U.S. Interactive, Inc. (the "Company") are to advance the
interests of the Company and its shareholders by strengthening the ability of
the Company to attract, retain and reward employees, the Board of Directors and
consultants, to motivate officers and other selected employees to achieve
business objectives established to promote the long-term growth, profitability
and success of the Company, and to encourage ownership of the Common Stock of
the Company by participating officers and other selected employees. The Plan
authorizes performance-based stock and cash incentive compensation in the form
of stock options, stock appreciation rights, restricted stock, performance
grants and awards, and other stock-based grants and awards. The Board of
Directors and consultants may also be awarded Non-Qualified Stock Options.
2. DEFINITIONS.
For the purposes of the Plan, the following terms shall have the
following meanings:
(a) "Adjusted Net Income" means, with respect to any calendar or other
fiscal year of the Company, the amount reported as "Net Income" in the audited
Consolidated Income Statement of the Company and Subsidiaries for such year (as
set forth in the Company's Annual Report to Shareholders for such year),
adjusted to exclude any of the following items: (i) extraordinary items (as
described in Accounting Principles Board Opinion No. 30); (ii) gains or losses
on the disposition of discontinued operations; (iii) the cumulative effects of
changes in accounting principles; (iv) the writedown of any asset; and (v)
charges for restructuring and rationalization programs.
(b) "Annual Net Income Per Share" means, with respect to any calendar
or other fiscal year of the Company in respect of which a determination thereof
is being or to be made, the Adjusted Net Income for such year divided by the
average number of shares of Common Stock outstanding during such year.
(c) "Award" means any payment or settlement in respect of a grant made
pursuant to the Plan, whether in the form of shares of Common Stock or in cash,
or in any combination thereof.
(d) "Board Of Directors" means the Board of Directors of the Company.
(e) "Cause", unless otherwise determined by the Committee, means (i) a
Participant's action or failure to act which (a) would materially adversely
affect the reputation, operations or financial condition of the Company or any
of its Subsidiaries; (ii) a willful failure by the Participant to perform such
Participant's duties, except as a result of the Disability or death of the
Participant; or (iii) a Participant's theft, embezzlement, perpetration of
fraud, or misappropriation of any tangible or intangible assets or property of
the Company or any of its Subsidiaries or attempted theft, embezzlement,
perpetration of fraud, or misappropriation of any tangible or intangible assets
or property of the Company or any of its Subsidiaries. In addition, and without
limiting any of the foregoing, "Cause" for purposes of this Plan shall also mean
"Cause" as that term is defined in a Participant's employment agreement, if any,
with the Company or a Subsidiary.
(f) "Code" means the Internal Revenue Code of 1986, as amended and in
effect from time to time, or any successor statute thereto, together with the
published rulings, regulations and interpretations duly promulgated thereunder.
(g) "Committee" means the committee of the Board of Directors
established and constituted as provided in Section 5 of the Plan.
(h) "Common Stock" means the common stock, $.001 par value, of the
Company, or any security issued by the Company in substitution or exchange
therefore or in lieu thereof.
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(i) "Common Stock Equivalent" means a Unit (or fraction thereof, if
authorized by the Committee) substantially equivalent to a hypothetical share of
Common Stock, credited to a Participant and having a value at any time equal to
the Fair Market Value of a share of Common Stock (or such fraction thereof) at
such time.
(j) "Company" means U.S. Interactive, Inc. a Delaware corporation, or
any successor corporation.
(k) "Consultant" means any person or entity engaged by the Company or
any Parent or Subsidiary to render consulting or advisory services to such
entity.
(l) "Covered Employee" means any person who is a "covered employee"
within the meaning of Section 162(m) of the Code.
(m) "Cumulative Net Income" means, in respect of any Performance
Period, the aggregate cumulative amount of the Adjusted Net Income for the
calendar or other fiscal years of the Company during such Performance Period.
(n) "Cumulative Net Income Per Share" means, in respect of any
Performance Period, the aggregate cumulative amount of the Annual Net Income Per
Share for the calendar or other fiscal years of the Company during such
Performance Period.
(o) "Director" means a member of the Board of Directors of the Company.
(p) "Disability" shall mean permanent and total disability, as defined
in Section 22(e) of the Code.
(q) "Dividend Equivalent" means, in respect of a Common Stock
Equivalent and with respect to each dividend payment date for the Common Stock,
an amount equal to the cash dividend on one share of Common Stock payable on
such dividend payment date.
(r) "Employee" means any individual, including any officer of the
Company, who is on the active payroll of the Company or a Subsidiary at the
relevant time.
(s) "Exchange Act" means the Securities Exchange Act of 1934, as
amended and in effect from time to time, including all rules and regulations
promulgated thereunder.
(t) "Fair Market Value" means, in respect of any date on or as of which
a determination thereof is being or to be made, the average of the high and low
per share sale prices of the Common Stock reported on the exchange on which such
shares are traded on such date (if the grant date is not a business trading day,
the determination shall be made based upon the relevant data for the next
preceding trading day), or, if the Common Stock was not traded on such date, the
average of the highest bid and the lowest ask per share price reported for such
date on the exchange on which such shares of Common Stock are traded. If the
Common Stock is not traded on an exchange, the Fair Market Value shall be that
determined by the Committee in good faith based on such factors as the members
thereof, in the exercise of their business judgment, consider relevant.
(u) "Incentive Stock Option" means any option to purchase shares of
Common Stock granted pursuant to the provisions of Section 6 of the Plan that is
intended to be and is specifically designated as an "incentive stock option"
within the meaning of Section 422 of the Code; provided, however, no option
shall be an incentive stock option unless this Plan is approved by the
stockholders of the Company within twelve (12) months after the effective date
of this Plan.
(v) "Non-Qualified Stock Option" means any option to purchase shares of
Common Stock granted pursuant to the provisions of Section 6 of the Plan that is
not an Incentive Stock Option.
(w) "Option Agreement" has the meaning ascribed thereto in Section 6(a)
of the Plan.
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(x) "Parent" means a "parent corporation," whether now or hereafter
existing, as defined in Section 424(e) of the Code.
(y) "Participant" means any Employee, Director or Consultant of the
Company or a Subsidiary who receives a grant or Award under the Plan.
(z) "Performance Grant" means a grant made pursuant to Section 9 of the
Plan, the Award of which is contingent on the achievement of specific
Performance Goals during a Performance Period, determined using a specific
Performance Measure, all as specified in the grant agreement relating thereto.
(aa) "Performance Goals" mean, with respect to any applicable grant
made pursuant to the Plan, the one or more targets, goals or levels of
attainment required to be achieved in terms of the specified Performance Measure
during the specified Performance Period, all as set forth in the related grant
agreement.
(bb) "Performance Measure" means, with respect to any applicable grant
made pursuant to the Plan, one or more of the criteria identified at Section
9(c) of the Plan selected by the Committee for the purpose of establishing, and
measuring attainment of, Performance Goals for a Performance Period in respect
of such grant, as provided in the related grant agreement.
(cc) "Performance Period" means, with respect to any applicable grant
made pursuant to the Plan, the one or more periods of time, which may be of
varying and overlapping durations, as the Committee may select during which the
attainment of one or more Performance Goals will be measured to determine
whether, and the extent to which, a Participant is entitled to receive payment
of an Award pursuant to such grant.
(dd) "Plan" means this Amended and Restated 1998 Performance Incentive
Plan of the Company, as set forth herein and as hereafter amended from time to
time in accordance with the terms hereof.
(ee) "Restricted Stock" means shares of Common Stock issued pursuant to
a Restricted Stock Grant under Section 8 of the Plan so long as such shares
remain subject to the restrictions and conditions specified in the grant
agreement pursuant to which such Restricted Stock Grant is made.
(ff) "Restricted Stock Grant" means a grant made pursuant to the
provisions of Section 8 of the Plan.
(gg) "Stock Appreciation Right" means a grant in the form of a right to
benefit from the appreciation of the Common Stock made pursuant to Section 7 of
the Plan.
(hh) "Stock Option" means and includes any Non-Qualified Stock Option
and any Incentive Stock Option granted pursuant to Section 6 of the Plan.
(ii) "Subsidiary" means any corporation or entity in which the Company
directly or indirectly owns or controls 50% or more of the equity securities
issued by such corporation or entity having the power to vote for the election
of directors.
(jj) "Unit" means a bookkeeping entry used by the Company to record and
account for the grant, settlement or, if applicable, deferral of an Award until
such time as such Award is paid, cancelled, forfeited or terminated, as the case
may be, which, except as otherwise specified by the Committee, shall be equal to
one Common Stock Equivalent.
3. EFFECTIVE DATE; TERM.
(a) Effective Date. The Plan shall be effective upon approval by the
shareholders and the Board of Directors. Nothing under this Plan shall affect
the rights of any person pursuant to any grant issued under the Plan as
originally adopted.
(b) Term. The Plan shall remain in effect until December 31, 2017,
unless sooner terminated by the Board of Directors. Termination of the Plan
shall not affect grants and Awards then outstanding.
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4. SHARES OF COMMON STOCK SUBJECT TO PLAN.
(a) Maximum Number of Shares Available for Issuance under the Plan. The
maximum aggregate number of shares of Common Stock which may be issued pursuant
to the Plan, subject to adjustment as provided in Section 4(b) of the Plan,
shall be 6,500,000 (which includes options issued under the Plan as originally
adopted), plus (i) any shares of Common Stock issued under the Plan that are
forfeited back to the Company or are cancelled, and (ii) any shares of Common
Stock that are tendered, whether by physical delivery or by attestation, to the
Company by a Participant as full or partial payment of the exercise price of any
Stock Option granted pursuant to the Plan, in connection with the payment or
settlement of any other grant or Award made pursuant to the Plan, or in payment
of any applicable withholding for federal, state, city, local or foreign income,
payroll or other taxes incurred in connection with the exercise of any Stock
Option or Stock Appreciation Right granted under the Plan or the receipt or
settlement of any other grant or Award under the Plan. The shares of Common
Stock which may be issued under the Plan may be authorized and unissued shares
or issued shares which have been reacquired by the Company. No fractional share
of the Common Stock shall be issued under the Plan. Awards of fractional shares
of the Common Stock, if any, shall be settled in cash.
(b) Adjustments upon Changes in Capital Structure. In the event of any
change in the capital structure, capitalization or Common Stock of the Company
such as a stock dividend, stock split, recapitalization, merger, consolidation,
split-up, combination or exchange of shares or other form of reorganization, or
any other change affecting the Common Stock, such proportionate adjustments, if
any, as the Board of Directors in its discretion may deem appropriate to reflect
such change shall be made with respect to: (i) the maximum number of shares of
Common Stock which may be (1) issued pursuant to the Plan, (2) the subject of
any type of grant or Award under the Plan, and (3) granted, Awarded or issued to
any Participant pursuant to any provision of the Plan; (ii) the number of shares
of Common Stock subject to any outstanding Stock Option, Stock Appreciation
Right or other grant or Award made to any Participant under the Plan; (iii) the
per share exercise price in respect of any outstanding Stock Options and Stock
Appreciation Rights; (iv) the number of shares of Common Stock and the number of
Units or the value of such Units, as the case may be, which are the subject of
grants and Awards then outstanding under the Plan; and (v) any other term or
condition of any grant affected by any such change.
5. ADMINISTRATION.
(a) The Committee. The Plan shall be administered by the Committee to
be appointed from time to time by the Board of Directors and, except as provided
herein, comprised of not less than two of the then members of the Board of
Directors who qualify as "non-employee directors" within the meaning of Rule
16b-3 promulgated under the Exchange Act and as "outside directors" within the
meaning of Section 162(m) of the Code. Members of the Committee shall serve at
the pleasure of the Board of Directors. The Board of Directors may from time to
time remove members from, or add members to, the Committee. A majority of the
members of the Committee shall constitute a quorum for the transaction of
business and the acts of a majority of the members present at any meeting at
which a quorum is present shall be the acts of the Committee. Any one or more
members of the Committee may participate in a meeting by conference telephone or
similar means where all persons participating in the meeting can hear and speak
to each other, which participation shall constitute presence in person at such
meeting. Action approved in writing by a majority of the members of the
Committee then serving shall be fully as effective as if the action had been
taken by unanimous vote at a meeting duly called and held. The Company shall
make grants and effect Awards under the Plan in accordance with the terms and
conditions specified by the Committee, which terms and conditions shall be set
forth in grant agreements and/or other instruments in such forms as the
Committee shall approve.
(b) Committee Powers. The Committee shall have full power and authority
to operate and administer the Plan in accordance with its terms. The powers of
the Committee include, but are not limited to, the power to: (i) select
Participants; (ii) establish the types of, and the terms and conditions of, all
grants and Awards made under the Plan, subject to any applicable limitations set
forth in, and consistent with the express terms of, the Plan; (iii) make grants
and pay or otherwise effect Awards subject to, and consistent with, the express
provisions of the Plan; (iv) establish Performance Goals, Performance Measures
and Performance Periods, subject to, and consistent with, the express provisions
of the Plan; (v) reduce the amount of any grant or Award; (vi) prescribe the
form or forms of grant agreements and other instruments evidencing grants and
Awards under the Plan; (vii) pay and to defer payment of Awards on such terms
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and conditions, not inconsistent with the express terms of the Plan, as the
Committee shall determine; (viii) direct the Company to make conversions,
accruals and payments pursuant to the Plan; (ix) construe and interpret the Plan
and make any determination of fact incident to the operation of the Plan; (x)
promulgate, amend and rescind rules and regulations relating to the
implementation, operation and administration of the Plan; (xi) adopt such
modifications, procedures and subplans as may be necessary or appropriate to
comply with the laws of other countries with respect to Participants or
prospective Participants in such other countries; (xii) delegate to other
persons the responsibility for performing administrative or ministerial acts in
furtherance of the Plan; (xiii) engage the services of persons and firms,
including banks, consultants and insurance companies, in furtherance of the
Plan's activities; and (xiv) make all other determinations and take all other
actions as the Committee may deem necessary or advisable for the administration
and operation of the Plan. In making these determinations, the Committee shall
take into account any limitations on the issuance of grants and Awards that may
exist as a result of agreements entered into by the Company.
(c) Committee's Decisions Final. Any determination, decision or action
of the Committee in connection with the construction, interpretation,
administration or application of the Plan, and of any grant agreement, shall be
final, conclusive and binding upon all Participants, and all persons claiming
through Participants, affected thereby.
(d) Administrative Accounts. For the purpose of accounting for Awards
deferred as to payment, the Company shall establish bookkeeping accounts
expressed in Units bearing the name of each Participant receiving such Awards.
Each account shall be unfunded, unless otherwise determined by the Committee in
accordance with Section 15(d) of the Plan.
(e) Certifications. In respect of each grant under the Plan to a
Covered Employee which the Committee intends to be "performance based
compensation" under Section 162(m) of the Code, the provisions of the Plan and
the related grant agreement shall be construed to confirm such intent, and to
conform to the requirements of Section 162(m) of the Code, and the Committee
shall certify in writing (which writing may include approved minutes of a
meeting of the Committee) that the applicable Performance Goal(s), determined
using the Performance Measure specified in the related grant agreement, was
attained during the relevant Performance Period at a level that equaled or
exceeded the level required for the payment of such Award in the amount proposed
to be paid and that such Award does not exceed any applicable Plan limitation.
6. STOCK OPTIONS.
(a) In General. Options to purchase shares of Common Stock may be
granted under the Plan and may be Incentive Stock Options or Non-Qualified Stock
Options. All Stock Options shall be subject to the terms and conditions of this
Section 6 and shall contain such additional terms and conditions, not
inconsistent with the express provisions of the Plan, as the Committee shall
determine. Each Option granted hereunder to a Participant shall be embodied in a
written option agreement ("Option Agreement"), signed by the Participant and by
a duly authorized officer of the Company. Stock Options may be granted in
addition to, or in tandem with or independent of Stock Appreciation Rights or
other grants and Awards under the Plan. The Committee may grant Stock Options
that provide for the automatic grant of a replacement Stock Option if payment of
the exercise price and/or any related withholding taxes is made by tendering
(whether by physical delivery or by attestation) shares of Common Stock or by
having shares of Common Stock withheld by the Company. The replacement Stock
Option would cover the number of shares of Common Stock tendered or withheld,
would have a per share exercise price equal to at least 100% of the Fair Market
Value of a share of Common Stock on the date of the exercise of the original
Stock Option, and would have such other terms and conditions as may be specified
by the Committee and set forth in the related grant agreement.
(b) Eligibility and Limitations. Any Employee of the Company or a
Subsidiary may be granted Stock Options. Directors and Consultants may be
granted Non-Qualified Stock Options only. The Committee shall determine, in its
discretion, the persons or entities to whom Stock Options will be granted, the
timing of such grants, and the number of shares of Common Stock subject to each
Stock Option granted; provided, that (i) the maximum aggregate number of shares
of Common Stock which may be issued and delivered upon the exercise of
Non-Qualified Stock Options granted under the Plan shall be 6,500,000 (includes
options issued under the Plan as originally adopted), (ii) the maximum aggregate
number of shares of Common Stock which may be issued and delivered upon the
exercise of Incentive Stock Options shall be 6,500,000 (includes options issued
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under the Plan as originally adopted), (iii) the maximum number of shares of
Common Stock in respect of which Stock Options may be granted to any Employee,
Director or Consultant during any calendar year shall be 400,000, and (iv) in
respect of Incentive Stock Options, the aggregate Fair Market Value (determined
as of the date the Incentive Stock Option is granted) of the shares of Common
Stock with respect to which an Incentive Stock Option becomes exercisable for
the first time by a Participant during any calendar year shall not exceed
$100,000, or such other limit as may be required by the Code, except that, any
Stock Option intended to qualify as an Incentive Stock Option that cannot be
exercised as such because of this limitation shall be converted into and
exercised as a Non-Qualified Stock Option.
(c) Option Exercise Price. The per share exercise price of each Stock
Option granted under the Plan shall be determined by the Committee prior to or
at the time of grant, but in no event shall the per share exercise price of any
Stock Option be less than 100% of the Fair Market Value of the Common Stock on
the date of the grant of such Stock Option. The exercise price of an Incentive
Stock Option issued to any Employee owning more than ten percent (10%) of the
total combined voting power of all classes of stock of the Company, as
determined under Code ss. 424(d) shall be 110% of the Fair Market Value of the
Common Stock on the date of the grant of such Stock Option.
(d) Option Term. The term of each Stock Option shall be fixed by the
Committee; except that in no event shall the term of any Incentive Stock Option
exceed ten years after the date such Incentive Stock Option is granted, or five
years in the case of an Employee owning more than ten percent (10%) of the total
combined voting power of all classes of stock of the Company, as determined
under Code ss. 424(d). Any Option granted more than 10 years from the effective
date of the Plan will be a Non-Qualified Stock Option.
(e) Exercisability. A Stock Option shall be exercisable at such time or
times and subject to such terms and conditions as shall be determined by the
Committee at the date of grant. Unless the Committee specifies otherwise in the
Option Agreement, every Option granted pursuant to this Plan will vest and
become exercisable with respect to 25% of the Common Stock issuable upon
exercise thereof (rounded to the nearest whole share; rounded up in the event of
a half-share) on each of the first, second and third anniversaries of the date
of grant and the remainder shall vest on the fourth anniversary of the date of
grant.
(f) Early Expiration upon Termination of Relationship.
(i) Employees. Except as otherwise provided in the applicable
Option Agreement, upon termination of an Employee's employment with the Company
or its Subsidiaries for death, Disability or termination without Cause by the
Company or a Subsidiary, all Options or portions thereof held by such Employee
that are not vested and exercisable on the date of such termination shall expire
and be forfeited as of such date and all vested Options held by such Employee
shall expire to the extent not theretofore exercised at the end of third month
(one year if termination is caused by Employee's death or Disability) following
the date of such termination. Upon voluntary termination of an Employee's
employment or termination for Cause of an Employee's employment by the Company
or a Subsidiary, all unexercised Options, whether or not vested, shall terminate
immediately upon the earlier to occur of the date the Employee receives notice
of the termination or the actual date of termination.
(ii) Directors. Except as otherwise provided in the
applicable Option Agreement, upon termination of a Director's directorship with
the Company or its Subsidiaries for death, Disability or removal without cause,
all Options or portions thereof held by such Director that are not vested and
exercisable on the date of such termination shall expire and be forfeited as of
such date and all vested Options held by such Director shall expire to the
extent not theretofore exercised at the end of third month (one year if
termination is caused by Director death or Disability) following the date of
such termination. Upon removal for Cause from the Board of Directors by the
Company or a Subsidiary, all unexercised Options, whether or not vested, shall
terminate immediately upon the earlier to occur of the date the Director
receives notice of the termination or the actual date of termination.
(iii) Consultants. Except as otherwise provided in the
applicable Option Agreement, upon termination of a Consultant's relationship
with the Company or its Subsidiaries for any reason, as determined by the
Company, all Options or portions thereof held by such Consultant that are not
vested and exercisable on the date of such termination shall expire and be
forfeited as of such date and all vested Options held by such Consultant shall
expire to the extent not theretofore exercised at the end of third month
following the date of such termination.
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(g) Method of Exercise. A Stock Option may be exercised, in whole or in
part, by giving written notice of exercise to the Company specifying the number
of shares of Common Stock to be purchased. Such notice shall be accompanied by
payment in full of the purchase price, plus any required withholding taxes, in
cash or, if permitted by the terms of the related grant agreement or otherwise
approved in advance by the Committee, in shares of Common Stock already owned by
the Participant valued at the Fair Market Value of the Common Stock on the date
of exercise. The Committee may also permit Participants, either on a selective
or aggregate basis, to simultaneously exercise Stock Options and sell the shares
of Common Stock thereby acquired pursuant to a brokerage or similar arrangement
approved in advance by the Committee and to use the proceeds from such sale to
pay the exercise price and withholding taxes.
7. STOCK APPRECIATION RIGHTS.
(a) In General. Stock Appreciation Rights in respect of shares of
Common Stock may be granted under the Plan alone, in tandem with, in addition to
or independent of a Stock Option or other grant or Award under the Plan. A Stock
Appreciation Right entitles a Participant to receive an amount equal to the
excess of the Fair Market Value of a share of Common Stock on the date of
exercise over the Fair Market Value of a share of Common Stock on the date of
grant of the Stock Appreciation Right, or such other higher price as may be set
by the Committee, multiplied by the number of shares of Common Stock with
respect to which the Stock Appreciation Right shall have been exercised.
(b) Eligibility And Limitations. Any Employee, Director or Consultant
of the Company or a Subsidiary selected by the Committee may be granted Stock
Appreciation Rights. The Committee shall determine, in its discretion, the
persons or entities to whom Stock Appreciation Rights will be granted, the
timing of such grants and the number of shares of Common Stock in respect of
which each Stock Appreciation Right is granted; provided that (i) the maximum
aggregate number of shares of Common Stock in respect of which Stock
Appreciation Rights may be granted shall be one million, (ii) the maximum
aggregate number of shares of Common Stock which may be issued and delivered in
payment or settlement of Stock Appreciation Rights shall be 500,000, and (iii)
the maximum number of shares of Common Stock in respect of which Stock
Appreciation Rights may be granted to any person or entity during any calendar
year shall be 100,000.
(c) Exercisability. A Stock Appreciation Right may be exercised by a
Participant at such time or times and in such manner as shall be authorized by
the Committee and set forth in the related grant agreement, except that in no
event shall a Stock Appreciation Right be exercisable within the first six
months after the date of grant. The Committee may provide that a Stock
Appreciation Right shall be automatically exercised on one or more specified
dates.
(i) Employees. Except as otherwise provided in the applicable
Stock Appreciation Right grant agreement, no Stock Appreciation Right may be
exercised by an Employee unless the holder thereof is at the time of exercise an
Employee and has been continuously an Employee since the date the Stock
Appreciation Right was granted.
(ii) Directors. Except as otherwise provided in the applicable
Stock Appreciation Right grant agreement, no Stock Appreciation Right may be
exercised by a Director unless the holder thereof is at the time of exercise a
Director and has been continuously a Director since the date the Stock
Appreciation Right was granted.
(iii) Consultants. Except as otherwise provided in the
applicable Stock Appreciation Right grant agreement, no Stock Appreciation Right
may be exercised by a Consultant unless the holder thereof is at the time of
exercise a Consultant and has been continuously a Consultant since the date the
Stock Appreciation Right was granted.
(d) Exercise; Form of Payment. A Stock Appreciation Right may be
exercised, in whole or in part, by giving the Company a written notice
specifying the number of shares of Common Stock in respect of which the Stock
Appreciation Right is to be exercised. Stock Appreciation Rights may be paid
upon exercise in cash, in shares of Common Stock, or in any combination of cash
and shares of Common Stock as determined by the Committee.
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8. RESTRICTED STOCK GRANTS AND AWARDS.
(a) In General. A Restricted Stock Grant is the issuance of shares of
Common Stock in the name of an Employee, Director or Consultant, which issuance
is subject to such terms and conditions as the Committee shall deem appropriate,
including, without limitation, restrictions on the sale, assignment, transfer or
other disposition of such shares and the requirement that the Participant
forfeit such shares back to the Company (i) upon termination of employment for
specified reasons within a specified period of time, as applicable, (ii) if any
specified Performance Goals are not achieved during a specified Performance
Period, or (iii) if such other conditions as the Committee may specify are not
satisfied.
(b) Eligibility And Limitations. Any Employee, Director or Consultant
of the Company or a Subsidiary selected by the Committee may receive a
Restricted Stock Grant. The Committee, in its sole discretion, shall determine
whether a Restricted Stock Grant shall be made, the Participant to receive the
Restricted Stock Grant, and the conditions and restrictions imposed on the
Restricted Stock Grant. The maximum number of shares of Common Stock which may
be issued as Restricted Stock under the Plan shall be one million. The maximum
number of shares of Common Stock which may be issued to any Participant as
Restricted Stock during any calendar year shall not exceed 50,000. The maximum
amount any Participant may receive as a Restricted Stock Grant in any calendar
year shall not exceed $500,000, determined using the Fair Market Value of such
Restricted Stock Grant as at the date of the grant thereof.
(c) Restriction Period.
(i) Except as otherwise provided in the related grant
agreement, Restricted Stock Grants shall provide:
(1) in order for an Employee to receive shares of
Common Stock free of restrictions, the Employee must remain in the employment of
the Company or its Subsidiaries for a period of not less than four years,
commencing on the date of the grant and ending on such later date or dates as
the Committee designates at the time of the grant (the "Employee Restriction
Period");
(2) in order for a Director to receive shares of
Common Stock free of restrictions, the Director must remain a Director of the
Company or its Subsidiaries for a period of not less than four years, commencing
on the date of the grant and ending on such later date or dates as the Committee
designates at the time of the grant (the "Director Restriction Period"); or
(3) in order for a Consultant to receive shares of
Common Stock free of restrictions, the Consultant must remain must remain a
Consultant to the Company or its Subsidiaries for a period of not less than four
years, commencing on the date of the grant and ending on such later date or
dates as the Committee designates at the time of the grant (the "Consultant
Restriction Period" and, together with the "Employee Restriction Period" and the
"Director Restriction Period", as applicable, the "Restriction Period").
(ii) The Committee, in its sole discretion, may provide for
the lapse of restrictions in installments during the Restriction Period. The
Committee may also establish one or more Performance Goals that are required to
be achieved during one or more Performance Periods within the Restriction Period
as a condition to the lapse of the restrictions.
(d) Restrictions. The following restrictions and conditions shall apply
to each Restricted Stock Grant during the Restriction Period: (i) the
Participant shall not be entitled to delivery of the shares of the Common Stock;
(ii) the Participant may not sell, assign, transfer, pledge, hypothecate,
encumber or otherwise dispose of or realize on the shares of Common Stock
subject to the Restricted Stock Grant; and (iii) the shares of the Common Stock
issued as Restricted Stock shall be forfeited to the Company if the Participant
for any reason ceases to be an Employee, Director or Consultant, as applicable,
prior to the end of the Restriction Period, except due to circumstances
specified in the related grant agreement or otherwise approved by the Committee.
The Committee may in, its sole discretion, include such other restrictions and
conditions as it may deem appropriate.
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(e) Payment. Upon expiration of the Restriction Period and if all
conditions have been satisfied and any applicable Performance Goals attained,
the shares of the Restricted Stock will be made available to the Participant,
subject to satisfaction of applicable withholding tax requirements, free of all
restrictions except as may be required to comply with federal and state
securities laws, as determined by the Committee in its sole discretion;
provided, that the Committee may, in its discretion, require (i) that the
Restricted Stock be retained by the Company, and (ii) that the Participant
receive a cash payment in lieu of unrestricted shares of Common Stock.
(f) Rights as a Shareholder. A Participant shall have, with respect to
shares of Restricted Stock, all of the rights of a shareholder of the Company,
including the right to vote the shares and receive any cash dividends paid
thereon. Stock dividends distributed with respect to shares of Restricted Stock
shall be treated as additional shares under the Restricted Stock Grant and shall
be subject to the restrictions and other terms and conditions set forth therein.
9. PERFORMANCE GRANTS AND AWARDS.
(a) Eligibility and Terms. The Committee may grant Employees, Directors
and Consultants of the Company and its Subsidiaries the prospective contingent
right, expressed in Units, to receive payments of shares of Common Stock, cash
or any combination thereof, with each Unit equivalent in value to one share of
Common Stock, or equivalent to such other value or monetary amount as may be
designated or established by the Committee ("Performance Grants"), based upon
Company performance over a specified Performance Period. The Committee shall, in
its sole discretion, determine the Participants eligible to receive Performance
Grants. At the time each Performance Grant is made, the Committee shall
establish the Performance Period, the Performance Measure and the targets to be
attained relative to such Performance Measure (the "Performance Goals") in
respect of such Performance Grant. The number of shares of Common Stock and/or
the amount of cash earned and payable in settlement of a Performance Grant shall
be determined at the end of the Performance Period (a "Performance Award").
(b) Limitations on Grants and Awards. The maximum number of shares of
Common Stock which may be issued pursuant to Performance Grants shall be
500,000. The maximum number of shares which may be the subject of Performance
Grants made to any Participant in respect of any Performance Period or during
any calendar year shall be 50,000. The maximum amount any Participant may
receive during any calendar year as Performance Awards pursuant to Performance
Grants shall not exceed $1 million, determined using the Fair Market Value of
such Performance Awards as of the last day of the applicable Performance Period
or Periods or as of the date or dates of the payment thereof, whichever is
higher.
(c) Performance Goals, Performance Measures and Performance Periods.
Each Performance Grant shall provide that, in order for a Participant to receive
an Award of all or a portion of the Units subject to such Performance Grant, the
Company must achieve certain Performance Goals over a designated Performance
Period having a minimum duration of one year, with attainment of the Performance
Goals determined using a specific Performance Measure. The Performance Goals and
Performance Period shall be established by the Committee in its sole discretion.
The Committee shall establish a Performance Measure for each Performance Period
for determining the portion of the Performance Grant which will be earned or
forfeited based on the extent to which the Performance Goals are achieved or
exceeded. In setting Performance Goals, the Committee may use a Performance
Measure based on any one, or on any combination, of the following Company
performance factors as the Committee deems appropriate: (i) Cumulative Net
Income Per Share; (ii) Cumulative Net Income; (iii) return on sales; (iv) total
shareholder return; (v) return on assets; (vi) economic value added; (vii) cash
flow, (viii) return on equity; and (ix) cumulative operating income (which shall
equal consolidated sales minus cost of goods sold and selling, administrative
and general expense). Performance Goals may include minimum, maximum and target
levels of performance, with the size of Performance Award based on the level
attained. Once established by the Committee and specified in the grant
agreement, and if and to the extent provided in or required by the grant
agreement, the Performance Goals and the Performance Measure in respect of any
Performance Grant (or any Restricted Stock Grant or Stock-Based Grant that
requires the attainment of Performance Goals as a condition to the Award) shall
not be changed. The Committee may, in its discretion, eliminate or reduce (but
not increase) the amount of any Performance Award (or Restricted Stock or
Stock-Based Award) that otherwise would be payable to a Participant upon
attainment of the Performance Goal(s).
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(d) Form of Grants. Performance Grants may be made on such terms and
conditions not inconsistent with the Plan, and in such form or forms, as the
Committee may from time to time approve. Performance Grants may be made alone,
in addition to in tandem with, or independent of other grants and Awards under
the Plan. Subject to the terms of the Plan, the Committee shall, in its
discretion, determine the number of Units subject to each Performance Grant made
to a Participant and the Committee may impose different terms and conditions on
any particular Performance Grant made to any Participant. The Performance Goals,
the Performance Period or Periods, and the Performance Measure applicable to a
Performance Grant shall be set forth in the relevant grant agreement.
(e) Payment of Awards. Each Participant shall be entitled to receive
payment in an amount equal to the aggregate Fair Market Value (if the Unit is
equivalent to a share of Common Stock), or such other value as the Committee
shall specify, of the Units earned in respect of such Performance Award. Payment
in settlement of a Performance Award may be made in shares of Common Stock, in
cash, or in any combination of Common Stock and cash, and at such time or times,
as the Committee, in its discretion, shall determine.
10. OTHER STOCK-BASED GRANTS AND AWARDS.
(a) In General. The Committee may make other grants and Awards pursuant
to which Common Stock is, or in the future may be, acquired by Participants, and
other grants and Awards to Participants denominated in Common Stock Equivalents
or other Units ("Stock-Based Grants"). Such Stock-Based Grants may be granted
alone or in addition to, in tandem with, or independent of any other grant made
or Award effected under the Plan.
(b) Eligibility And Terms. The Committee may make Stock-Based Grants to
Employees, Directors or Consultants of the Company and its Subsidiaries. Subject
to the provisions of the Plan, the Committee shall have authority to determine
the Participant to whom, and the time or times at which, Stock-Based Grants will
be made, the number of shares of Common Stock, if any, to be subject to or
covered by each Stock-Based Grant, and any and all other terms and conditions of
each Stock-Based Grant.
(c) Limitations. The aggregate number of shares of Common Stock Issued
to Participants pursuant to Stock-Based Grants made and Awards effected pursuant
to this Section 10 shall not exceed 500,000. No Participant shall receive more
than 50,000 shares of Common Stock in settlement of Stock-Based Grants
("Stock-Based Awards") during any calendar year. The maximum amount any
Participant may receive in Stock-Based Awards during any calendar year shall not
exceed $1 million, determined using the Fair Market Value of any shares of
Common Stock delivered in payment of the Stock-Based Awards on the date or dates
of the payment thereof.
(d) Form of Grants; Payment of Awards. Stock-Based Grants may be made
in such form or forms and on such terms and conditions, including the attainment
of specific Performance Goals, as the Committee, in its discretion, shall
approve. Payment of Stock-Based Awards may be made in cash, in shares of Common
Stock, or in any combination of cash and shares of Common Stock, and at such
time or times, as the Committee shall determine.
11. WITHHOLDING.
The Committee may, in its discretion, and subject to its prior approval
in the case of any Participant required to file reports pursuant to Section
16(a) of the Exchange Act, at any time a distribution is made under the Plan,
whether in cash or in shares, or at the time any Option is exercised, withhold
from such distribution or shares issuable upon the exercise of an Option, any
amount necessary to satisfy federal, foreign, state and local withholding
requirements with respect to such distribution or exercise of such Option. Such
withholding may be satisfied at the Committee's option either by cash or
withholding of shares. To the extent that any such withholding requirements are
not satisfied, each Participant shall pay to the Company any federal, foreign,
state or local taxes of any kind required by law to be withheld with respect to
a distribution under the Plan or the exercise of an Option.
12. DEFERRALS.
The Committee may, whether at the time of grant or at anytime
thereafter prior to payment or settlement, require a Participant to defer, or
permit (subject to such conditions as the Committee may from time to time
establish) a Participant to elect to defer, receipt of all or any portion of any
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payment of cash or shares of Common Stock that would otherwise be due to such
Participant in payment or settlement of any Award under the Plan, other than
Incentive Stock Options. If any such deferral is required by the Committee (or
is elected by the Participant with the permission of the Committee), the
Committee shall establish rules and procedures for such payment deferrals. The
Committee may provide for the payment or crediting of interest, at such rate or
rates as it shall in its discretion deem appropriate, on such deferred amounts
credited in cash and the payment or crediting of dividend equivalents in respect
of deferred amounts credited in Common Stock Equivalents. Deferred amounts may
be paid in a lump sum or in installments in the matter and to the extent
permitted, and in accordance with rules and procedures established, by the
Committee.
13. NON-TRANSFERABILITY OF GRANTS AND AWARDS.
No grant or Award under the Plan, and no right or interest therein,
shall be (i) assignable, alienable or transferable by a Participant, except by
will or the laws of descent and distribution, or (ii) subject to any obligation,
or the lien or claims of any creditor, of any Participant, or (iii) subject to
any lien, encumbrance or claim of any party made in respect of or through any
Participant, however arising. During the lifetime of a Participant, Stock
Options and Stock Appreciation Rights are exercisable only by, and shares of
Common Stock issued upon the exercise of Stock Options and Stock Appreciation
Rights or in settlement of other Awards will be issued only to, and other
payments in settlement of any Award will be payable only to, the Participant or
his or her legal representative. The Committee may, in its sole discretion,
authorize written designations of beneficiaries and authorize Participants to
designate beneficiaries with the authority to exercise Stock Options and Stock
Appreciation Rights granted to a Participant in the event of his or her death.
Notwithstanding the foregoing, the Committee may, in its sole discretion and on
and subject to such terms and conditions as it shall deem appropriate, which
terms and conditions shall be set forth in the related grant agreement: (i)
authorize a Participant to transfer all or a portion of any Non-Qualified Stock
Option or Stock Appreciation Right, as the case may be, granted to such
Participant; provided, that in no event shall any transfer be made to any person
or persons other than such Participant's spouse, children or grandchildren, or a
trust for the exclusive benefit of one or more such persons, which transfer must
be made as a gift and without any considerations; and (ii) provide for the
transferability of a particular grant or Award pursuant to a qualified domestic
relations order. All other transfers and any retransfer by any permitted
transferee are prohibited and any such purported transfer shall be null and
void. Each Stock Option or Stock Appreciation Right which becomes the subject of
permitted transfer (and the Participant to whom it was granted by the Company)
shall continue to be subject to the same terms and conditions as were in effect
immediately prior to such permitted transfer. The Participant shall remain
responsible to the Company for the payment of all withholding taxes incurred as
a result of any exercise of such Stock Option or Stock Appreciation Right. In no
event shall any permitted transfer of a Stock Option or Stock Appreciation Right
create any right in any party in respect of any Stock Option, Stock Appreciation
Right or other grant or Award, other than the rights of the qualified transferee
in respect of such Stock Option or Stock Appreciation Right specified in the
related grant agreement.
14. CHANGE IN CONTROL.
(a) Effect On Grants. In the event of a Change in Control (as defined
below) of the Company, the Board of Directors, in its sole discretion, may
provide for accelerated exercise and/or vesting of Stock Options, Stock
Appreciation Rights and Restricted Stock Grants, for removal of transfer
restrictions, and/or that Performance Grants and other Stock-Based Grants shall
be deemed to have been fully earned, at the maximum amount of the award
opportunity specified in the grant agreement, as of the date of the Change in
Control.
(b) Change In Control Defined. A "Change in Control" of the Company
shall occur when: (i) any Acquiring Person (other than the Company, any
Subsidiary, any employee benefit plan of the Company or of any Subsidiary, or
any person or entity organized, appointed or established by the Company or a
Subsidiary for or pursuant to the terms of any such plans), alone, or together
with its Affiliates and Associates, shall become the beneficial owner of
twenty-five percent (25%) or more of the shares of Common Stock then outstanding
(except pursuant to an offer for all outstanding shares of Common Stock at a
price and upon such terms and conditions as a majority of the Continuing
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Directors determines to be in the best interest of the Company and its
shareholders); or (ii) the shareholders of the Company approve a definitive
agreement for a merger or consolidation involving the Company which would result
in the Common Stock outstanding immediately prior to such merger or
consolidation continuing to represent (whether by remaining outstanding or by
being converted into voting securities of the surviving entity) less than fifty
percent (50%) of the combined voting power of the Company and such other entity
outstanding immediately after such merger or consolidation; or (iii) the
shareholders of the Company approve a plan of complete liquidation of the
Company or an agreement for the sale or other disposition of all or
substantially all of the assets of the Company; or (iv) the Continuing Directors
no longer constitute a majority of the Board of Directors. "Acquiring Person"
means any person (any individual, firm, corporation or other entity) who or
which, together with all its Affiliates and Associates, shall be the beneficial
owner of a substantial block of Common Stock. "Affiliate" and "Associate" shall
have the respective meanings ascribed to such terms in Rule 12b-2 under the
Exchange Act. "Continuing Director" means any individual who is a member of the
Board of Directors, while such individual is a member of the Board of Directors,
who is not an Acquiring Person, or an Affiliate or Associate of an Acquiring
Person, or a representative or nominee of an Acquiring Person or of any such
Affiliate or Associate, and was a member of the Board of Directors prior to the
occurrence of a Change in Control, and any successor of a Continuing Director,
while such successor is a member of the Board of Directors, who is not an
Acquiring Person, or an Affiliate or Associate of an Acquiring Person, or
representative or nominee of an Acquiring Person or of any such Affiliate or
Associate, and is recommended or elected to succeed the Continuing Director by a
majority of the Continuing Directors.
15. AMENDMENT, SUSPENSION AND TERMINATION.
The Board or the Committee may suspend or terminate the Plan or any
portion thereof at any time and may amend it from time to time in such respects
as the Board or the Committee may deem advisable; provided, however, that no
such amendment shall be made without stockholder approval to the extent such
approval is required by law, agreement or the rules of any exchange upon which
the Common Stock is listed, and no such amendment, suspension or termination
shall impair the rights of Participants under outstanding Options without the
consent of the Participants affected thereby, except as otherwise provided
herein.
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This document constitutes
part of a prospectus covering
securities that have been
registered under the
Securities Act of 1933.
AGREEMENT EVIDENCING A GRANT OF AN INCENTIVE STOCK OPTION AND NON-QUALIFIED
STOCK OPTION UNDER THE
AMENDED AND RESTATED 1998 PERFORMANCE INCENTIVE PLAN
OF U.S. INTERACTIVE, INC.
Agreement (this "Agreement") made as of <<GrantDate>> (the "Grant
Date"), between U.S. Interactive, Inc. (the "Company"), and <<FirstName>>
<<LastName>> ("Grantee").
1. Grant of Option. Pursuant to the Amended and Restated 1998
Performance Incentive Plan of the Company (the "Plan"), the Company hereby
grants to Grantee, as of the Grant Date, an incentive stock option to the extent
all or any portion of this Option qualifies as an "incentive stock option" under
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code") and to
the extent that all or any portion of this Option does not so qualify as an
"incentive stock option" under the Code, a non-qualified stock option (together,
the "Option"), to purchase an aggregate of <<Noofshares>> shares (the "Option
Shares") of the Common Stock of the Company (the "Common Stock") at a price of
$<<Price>> per share of Common Stock, subject to adjustment and the other terms
and conditions set forth herein and in the Plan. No option will qualify as an
incentive stock option unless the stockholders of the Company approve the Plan
within twelve (12) months after adoption of the Plan by the Board.
2. Grantee Bound by Plan. Enclosed is a copy of the Plan which is
incorporated herein by reference and made a part hereof. The Plan shall govern
all aspects of this Agreement except as otherwise specifically stated herein.
Grantee hereby acknowledges receipt of a copy of the Plan and agrees to be bound
by all the terms and provisions thereof. Unless otherwise defined herein,
capitalized terms used but not defined herein shall have the meanings ascribed
to them in the Plan. The Plan should be carefully examined before any decision
is made to exercise this Option. In accordance with the terms of the Plan,
except as expressly set forth in this Agreement, both vested and unvested
options are subject to expiration and forfeiture upon termination of the
Grantee's employment, directorship, or consultancy relationship, as applicable,
with the Company or a Subsidiary, death or disability. The date on which the
expiration and forfeiture will occur is set forth more fully in the Plan.
3. Exercise of Option. Subject to the earlier expiration or termination
of the Option as provided herein or in the Plan, the Option with respect to any
Option Shares may be exercised upon such shares becoming vested, although no
Option may be exercised within 6 months of the date of this Agreement, by
written notice to the Company at any time and from time to time thereafter.
Except as otherwise provided expressly in this Agreement, such Option shall not
be exercisable for more than the number of shares which are then vested. Subject
to all of the foregoing, this Option shall vest with respect to 100% of the
Option Shares over a four (4) year period, with 25% of the Option Shares
(rounded to the nearest whole share) vesting on each of the first, second and
third anniversaries of the Grant Date; and the remainder shall vest on the
fourth anniversary of the Grant Date.
This Option shall not be exercisable in any event after the tenth
anniversary (fifth anniversary in the case of a 10% stockholder) of the Grant
Date. This Option may not be exercised for a fraction of a share of Common
Stock. Unvested Options are subject to cancellation as provided in the Plan.
4. Conditions to Exercise. This Option may not be exercised by Grantee
unless the following conditions are met:
(a) legal counsel for the Company must be satisfied at the
time of exercise that the issuance of Option Shares upon exercise will be in
compliance with the Securities Act of 1933, as amended (the "Securities Act")
and applicable United States federal, state and local laws and foreign laws; and
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<PAGE>
(b) Grantee must pay at the time of exercise the full purchase
price for the shares of Common Stock being acquired hereunder (i) in cash or by
certified check or (ii) by delivery of shares of Common Stock already owned by
the Grantee valued at the Fair Market Value of the Common Stock on the date of
exercise, or (iii) by "cashless exercise" as provided in the Plan or (iv)
through a combination thereof. In the case of the exercise of a Non-Qualified
Stock Option or a cashless exercise, the Grantee must also remit the appropriate
withholding taxes due upon exercise, in cash or in such other manner approved by
the Committee. Please refer to the Plan for a complete description of method of
delivery of Option Shares pursuant to this Section 4(b).
(c) The Grantee is employed by the Company or one of its
Subsidiaries, except as otherwise provided in the Plan.
(d) The Grantee (and any permitted transferee) shall have
fully complied with such further conditions to exercise as the Committee, in its
sole discretion, shall deem necessary or desirable to fully comply with all
federal and applicable state securities and tax laws relating to the exercise of
the Option.
5. Transferability. Except as otherwise provided below, this Option may
not be sold, assigned, transferred, pledged, hypothecated or otherwise disposed
of by Grantee, except by will or the laws of descent and distribution (in which
case, such transferee shall succeed to the rights and obligations of Grantee
hereunder) and is exercisable during Grantee's lifetime only by Grantee. If
Grantee or anyone claiming under or through Grantee attempts to violate this
Section 5, such attempted violation shall be null and void and without effect,
and the Company's obligation hereunder shall terminate. If at the time of
Grantee's death this Option has not been fully exercised, Grantee's estate or
any person who acquires the right to exercise this Option by bequest or
inheritance or by reason of Grantee's death may, at any time within one year
after the date of Grantee's death (but in no event after the expiration of ten
years from the Grant Date), exercise this Option with respect to the number of
shares, determined under Section 3 above, as to which Grantee could have
exercised the Option at the time of Grantee's death. The applicable requirements
of Section 4 above must be satisfied in full at the time of such exercise. If
this Option is a Non-Qualified Option, it may be assigned, in whole or in part
to Grantee's spouse, children or grandchildren, or a trust for the exclusive
benefit of one or more of such persons, provided that (i) such assignment is
made as a gift or under a domestic relations order in settlement of marital
property rights and in each case, without any consideration, and (ii) that the
transferee acknowledges and agrees in writing that (y) if the transferor is a
director or officer of the Company, any shares acquired upon exercise of any
such Option may be subject to restriction on resale under Rule 144 under the
Securities Exchange Act of 1934, and (z) that any certificates representing such
shares shall be prominently marked with a legend to that effect. The Grantee,
upon any such permitted transfer, shall remain responsible to the Company for
the payment of all withholding taxes incurred as a result of any exercise of any
such Option. Any Option transferred hereunder by the Grantee shall continue to
be governed by and subject to the terms and conditions of this Agreement and may
not be subsequently transferred except by will or the laws of descent and
distribution.
6. Administration. Any action taken or decision made by the Board or
the Committee or its delegates arising out of or in connection with the
construction, administration, interpretation or effect of the Plan or this
Agreement shall lie within its sole and absolute discretion, as the case may be,
and shall be final, conclusive and binding on Grantee and all persons claiming
under or through Grantee. By accepting this grant or other benefit under the
Plan, Grantee and each person claiming under or through Grantee shall be
conclusively deemed to have indicated acceptance and ratification of, and
consent to, any action taken under the Plan by the Board or the Committee or its
delegates.
7. No Rights as Stockholder. Unless and until a certificate or
certificates representing such shares of Common Stock shall have been issued to
Grantee (or any person acting under Section 5 above), Grantee shall not be or
have any of the rights or privileges of a stockholder of the Company with
respect to shares of Common Stock acquirable upon exercise of the Option.
8. Disqualifying Disposition of Shares. In the event that Grantee
exercises an Incentive Stock Option, and subsequently agrees to sell or dispose
of the Option Shares acquired upon exercise before either (i) the expiration of
two (2) years from the Grant Date, or (ii) the expiration of one (1) year from
the date of exercise, the Grantee must notify the Company of such disposition
and the terms thereof and, if required by law, make arrangements to pay the
Company in cash the amount of any withholding taxes due upon such disposition,
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<PAGE>
as determined by the Company, and the transfer of such shares on the Company's
records shall be conditioned on the payment of any such taxes.
9. Investment Representation. Grantee hereby acknowledges that the
shares of Common Stock which Grantee may acquire by exercising the Option shall
be acquired for investment without a view to distribution, within the meaning of
the Securities Act, and shall not be sold, transferred, assigned, pledged or
hypothecated in the absence of an effective registration statement for the
shares of Common Stock under the Securities Act and applicable state securities
laws or an applicable exemption from the registration requirements of the Act
and any applicable state securities laws. Grantee also agrees that the shares of
Common Stock which Grantee may acquire by exercising the Option will not be sold
or otherwise disposed of in any manner which would constitute a violation of any
applicable securities laws, whether federal or state.
10. Listing and Registration of Common Stock. The Company, in its
discretion, may postpone the issuance and/or delivery of shares of Common Stock
upon any exercise of the Option until completion of such stock exchange listing,
or registration, or other qualification of such shares under any state and/or
federal law, rule or regulation as the Company may reasonably in good faith
consider appropriate.
11. Notices. Any notice hereunder to the Company shall be addressed to
the Company, Attention: Corporate Secretary, and any notice hereunder to Grantee
shall be addressed to Grantee at Grantee's last address on the records of the
Company, subject to the right of either party to designate at any time hereafter
in writing some other address. Any notice shall be deemed to have been duly
given when delivered personally, one day following dispatch if sent by
nationally recognized overnight courier, fees prepaid, or three days following
mailing if sent by registered mail, return receipt requested, postage prepaid
and addressed as set forth above.
12. Binding Effect. This Agreement shall be binding upon and inure to
the benefit of any successors to the Company and all persons lawfully claiming
under Grantee.
13. Governing Law. The validity, construction, interpretation,
administration and effect of the Plan, and of its rules and regulations, and
rights relating to the Plan and to this Agreement, shall be governed by the
substantive laws, but not the choice of law rules, of the state of incorporation
of the Company at the time of the determination.
14. Grantee Acknowledgments.
GRANTEE ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES PURSUANT TO
THE OPTION IS EARNED ONLY BY CONTINUING EMPLOYMENT AT THE WILL OF THE COMPANY
(NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED THIS OPTION OR ACQUIRING
SHARES HEREUNDER). GRANTEE FURTHER ACKNOWLEDGES AND AGREES THAT NOTHING IN THIS
AGREEMENT, NOR IN THE PLAN WHICH IS INCORPORATED HEREIN BY REFERENCE, SHALL
CONFER UPON GRANTEE ANY RIGHT WITH RESPECT TO CONTINUATION OF EMPLOYMENT BY THE
COMPANY, NOR SHALL IT INTERFERE IN ANY WAY WITH HIS RIGHT OR THE COMPANY'S RIGHT
TO TERMINATE OR MODIFY HIS EMPLOYMENT AT ANY TIME, WITH OR WITHOUT CAUSE.
Grantee acknowledges receipt of a copy of the Plan and represents that
he is familiar with the terms and provisions thereof, and hereby accepts this
Option subject to all of the terms and provisions thereof except as otherwise
specifically stated in this Option Agreement. Grantee has reviewed the Plan and
this Option Agreement in their entirety, has had an opportunity to obtain the
advice of counsel prior to executing this Option Agreement and fully understands
all provisions of this Option Agreement. Grantee hereby agrees to accept as
binding, conclusive and final all decisions or interpretations of the Board upon
any questions arising under the Plan.
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<PAGE>
IN WITNESS WHEREOF, the Company and Grantee have executed this
Agreement as of the date first above written.
U.S. INTERACTIVE, INC.
By:
--------------------------------
Name:
--------------------------------
Title:
--------------------------------
GRANTEE
------------------------------------
Grantee's Signature
------------------------------------
Name of Grantee (Print)
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<PAGE>
EXHIBIT B
U.S. Interactive, Inc. Employee Stock Purchase Plan
(Effective as of July 1, 2000)
- -------------------------------------------------------------------------------
Article I. The Plan
1.1 Establishment of the Plan
U.S. Interactive, Inc. (the "Company") hereby establishes a qualified employee
stock purchase plan for the benefit of the Eligible Employees of the Company and
each participating Affiliate. The Plan is effective July 1, 2000 and shall be
known as the U.S. Interactive, Inc. Employee Stock Purchase Plan (the "Plan").
1.2 Applicability of the Plan
The provisions of this Plan apply only to Eligible Employees of the Company and
its Affiliates who are actively employed on or after July 1, 2000.
1.3 Purpose of the Plan
The Plan is intended to encourage Eligible Employees to promote the Company's
best interests and enhance the Company's long-term performance by allowing them
to purchase the Company's Common Stock through payroll deductions. The Company
intends this Plan to qualify as an "employee stock purchase plan" under Section
423 of the Internal Revenue Code of 1986, as amended. Accordingly, the Plan
shall be construed in a manner consistent with the requirements of such section.
Article II. Definitions
Whenever used in this Plan, the following terms shall have the meanings set
forth below unless otherwise expressly provided. When the defined meaning is
intended, the term is capitalized. The definition of any term in the singular
shall also include the plural.
2.1 Affiliate
Affiliate means any present or future corporation, which is a subsidiary
corporation within the meaning of Code section 424(f).
2.2 Board
Board means the Company's Board of Directors.
2.3 Change of Control
Change in Control shall mean:
(a) The acquisition by any individual, entity or group (within the
meaning of Section 13(d) (3) or 14(d) (2) of the Securities Exchange Act of
1934, as amended (the "Exchange Act")) (a "Person") resulting in an increase of
beneficial ownership (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) by such individual, entity or group of more than 50% of either (i)
the then outstanding shares of Common Stock of the Company (the "Outstanding
Company Common Stock") or (ii) the combined voting power of the then outstanding
voting securities of the Company entitled to vote generally in the election of
directors (the "Outstanding Company Voting Securities"); provided, however, that
for purposes of this subsection (a), the following acquisitions shall not
constitute a Change of Control: (i) any acquisition by the Company, (ii) any
acquisition by any employee benefit plan (or related trust) sponsored or
maintained by the Company or any corporation controlled by the Company or (iii)
any acquisition by any entity pursuant to a transaction which complies with
clauses (i), (ii) and (iii) of Subsection (c) of this Section 2.3; or
(b) Individuals who, as of July 1, 2000, constitute the Board (the
"Incumbent Board"), ceasing for any reason to constitute at least a majority of
the Board; provided, however, that any individual becoming a director subsequent
to the date hereof whose election, or nomination for election by the Company's
stockholders, was approved by a vote of at least a majority of the directors
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<PAGE>
then comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office occurs as a
result of an actual or threatened election contest with respect to the election
or removal of directors or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board; or
(c) Consummation of a reorganization, merger or consolidation or sale
or other disposition of all or substantially all of the assets of the Company (a
"Business Combination"), in each case, unless, following such Business
Combination, (i) all or substantially all of the individuals and entities who
were the beneficial owners, respectively, of the Outstanding Company Common
Stock and Outstanding Company Voting Securities immediately prior to such
Business Combination beneficially own, directly or indirectly, more than 50% of,
respectively, the then outstanding shares of common stock and the combined
voting power of the then outstanding voting securities entitled to vote
generally in the election of directors, as the case may be, of the entity
resulting from such Business Combination (including, without limitation, a
corporation which as a result of such transaction owns the Company or all or
substantially all of the Company's assets either directly or through one or more
subsidiaries) and (ii) no person (excluding any corporation resulting from such
Business Combination or any employee benefit plan (or related trust) of the
Company or such corporation resulting from such Business Combination)
beneficially owns, directly or indirectly, 35% or more of, respectively, the
then outstanding shares of common stock of the corporation resulting from such
Business Combination or the combined voting power of the then outstanding voting
securities of such corporation except to the extent that such ownership existed
prior to the Business Combination and (iii) at least a majority of the members
of the board of directors of the corporation resulting from such Business
Combination were members of the Incumbent Board at the time of the execution of
the initial agreement, or of the action of the Board, providing for such
Business Combination.
A "Change in Control Event" shall mean the earlier of (i) a Change in Control or
(ii) the execution and delivery by the Company of a document evidencing a
binding agreement to engage in a particular Change of Control.
2.4 Closing Price
Closing Price shall mean, as of any date, the value of Common Stock determined
as follows:
(a) If the Common Stock is listed on any established stock exchange or
a national market system, including, without limitation, the NASDAQ National
Market or The NASDAQ SmallCap Market of The NASDAQ Stock Market, its Closing
Price shall be the closing sales price for such stock (or the closing bid, if no
sales were reported) as quoted on such exchange or system for the last market
trading day on the date of such determination, as of 4 p.m. Eastern Time (or
such earlier time if the exchange or market system closes earlier) as reported
in The Wall Street Journal, the NASDAQ online site available to the Company, or
such other source as the Board or Committee deems reliable, or;
(b) If the Common Stock is regularly quoted by a recognized securities
dealer but selling prices are not reported, its Closing Price shall be the mean
of the closing bid and asked prices for the Common Stock on the date of such
determination, as reported in The Wall Street Journal or such other source as
the Board deems reliable.
2.5 Code
Code means the Internal Revenue Code of 1986, as amended, or as it may be
amended from time to time. A reference to a particular section of the Code shall
also be deemed to refer to the regulations under that section.
2.6 Committee
Committee means the Compensation Committee of the Board or such other committee
appointed by the Board to which the Board may delegate it powers to administer
this Plan.
2.7 Common Stock
Common Stock means shares of the Company's common stock having a par value of
$.001 per share.
2.8 Company
Company means: (a) U.S. Interactive, Inc., or any successor thereto that agrees
to adopt and continue this Plan; and (b) all of U.S. Interactive, Inc.'s
Affiliates.
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2.9 Compensation
Compensation means all base straight time gross earnings, exclusive of payments
for overtime, shift premium, incentive compensation, incentive payments, bonuses
and other compensation. Salary reduction contributions made by the Participant
under any plan maintained by the Company or an Affiliate pursuant to Code
section 125 or 401(k) shall be included as Compensation. Compensation shall not
include payments under any other form of equity or fringe benefit program
(including, but not limited to, car allowances, relocation reimbursements, and
expatriate allowances) and compensation attributable to the vesting of any
restricted stock or exercise of a stock Option.
2.10 Contribution Account
Contribution Account means the bookkeeping account established on behalf of each
Participant under section 5.1. The Company is not required to segregate
Contribution Accounts from the Company's other assets.
2.11 Eligible Employee
Eligible Employee means each person who, on the first day of a Participation
Period, is an employee of the Company for tax purposes and whose customary
employment with the Company is at least twenty (20) hours per week and more than
five (5) months in any calendar year. For purposes of the Plan, the employment
relationship shall be treated as continuing intact while the individual is on
sick leave or other leave of absence approved by the Company. Where the period
of leave exceeds 90 days and the individual right to reemployment is not
guaranteed either by statute or by contract, the employment relationship shall
be deemed to have terminated on the 91st day of such leave.
2.12 Exercise Date
Exercise Date mans the last Trading Date of the applicable Participation Period.
2.13 Exercise Price
Exercise Price means the lesser of:
(a) 85 percent of the Closing Price on the first Trading Date of the
applicable Participation Period; or
(b) 85 percent of the Closing Price on the Exercise Date of the
applicable Participation Period.
2.14 Option
Option means a right granted under this Plan to an Eligible Employee to purchase
shares of Common Stock.
2.15 Participant
Participant means an Eligible Employee who has enrolled in the Plan pursuant to
sections 3.1 and 3.2.
2.16 Participation Period
Participation Period means either:
(a) the six-month period beginning on each July 1 and ending on the
following December 31; or
(b) the six-month period beginning on each January 1 and ending on the
following June 30.
The Board or the Committee shall have the power to change the duration of
Participation Periods (including the commencement dates thereof) with respect to
future offerings without stockholder approval if such change is announced at
least five (5) days prior to the scheduled beginning of the first Participation
Period to be affected thereafter.
2.17 Plan
Plan means this U.S. Interactive, Inc. Employee Stock Purchase Plan, as amended
from time to time.
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2.18 Trading Date
Trading Date means a date on which stocks in the United States are traded on the
NASDAQ National Market or the NASDAQ SmallCap Market of the NASDAQ Stock Market,
regardless of whether any Common Stock is actually traded on such date.
Article III. Eligibility and Participation
3.1 Eligibility
Each Eligible Employee may become a Participant on the first day of the
Participation Period that coincides with or next follows the Eligible Employee's
first day of employment with the Company.
However, no otherwise Eligible Employee shall become a Participant for a
Participation Period if, immediately following such Participation Period, such
individual would own stock and/or hold Options to purchase stock, representing 5
percent or more of the total combined voting power or value of all classes of
stock of the Company or an Affiliate. The attribution rules described in Code
section 424(d) shall apply in determining the stock ownership of any Eligible
Employee under this section 3.1.
3.2 Enrollment
(a) General Rule. An Eligible Employee may become a Participant by
enrolling in the Plan as of the first day of the earliest Participation Period
identified in section 3.1, or as of the first day of any subsequent
Participation Period (provided he or she is still an Eligible Employee). The
enrollment procedures shall be prescribed by the Committee or the most senior
human resources officer of the Company and shall be communicated to Eligible
Employees approximately fifteen (15) days before the first day of the applicable
Participation Period.
(b) Payroll Deduction Election. At the time of enrollment, an Eligible
Employee shall authorize a regular payroll deduction from his or her
Compensation for the applicable Participation Period in accordance with section
5.2.
3.3 Termination of Plan Participation
(a) Voluntary Discontinuance. A Participant may discontinue his or her
payroll deduction election for a Participation Period by giving notice at a
time, and in a manner, prescribed by the Board or Committee. This voluntary
discontinuance of Plan participation must occur no later than 11:59 p.m.,
Eastern Time, on the 15th of the month in which the Participation Period ends.
Once discontinued, a Participant may not increase the rate of participation or
rejoin the Plan until the next Participation Period
Any balance remaining in the Participant's Contribution Account at the
time of such voluntary discontinuance shall be refunded (without interest) to
the Participant within thirty (30) days.
(b) Termination of Employment. Except as otherwise provided in
subsection (c), a termination of the employment of a Participant for any reason
during a Participation Period shall be deemed to be a discontinued Plan
participation on the first day of such Participation Period. Any balance
remaining in the Participant's Contribution Account at the time of such
termination from employment shall be refunded (without interest) to the
Participant within thirty (30) days following such termination.
(c) Retirement. The following provisions shall apply to a Participant
who terminates employment during a Participation Period on or after the first
day of the month in which the Participant reaches age 65:
(i) If a Participant's employment is terminated during
the first three months of a Participation Period, the
Participant shall be deemed to have discontinued Plan
participation on the first day of such Participation
Period. The balance in the Participant's Contribution
Account shall be refunded (without interest) to the
Participant within thirty (30) days following such
retirement.
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(ii) If a Participant's employment is terminated during
the last three (3) months of a Participation Period,
payroll deductions will cease at the time of such
termination. Unless the Participant elects otherwise,
the balance in the Participant's Contribution Account
shall be used to purchase whole shares of Common
Stock on the Exercise Date for the Participation
Period in which the termination occurs. (Any amounts
remaining in the Contribution Account after the
purchase of whole shares of Common Stock shall be
paid to the Participant (without interest) within
thirty (30) days following the Exercise Date.)
However, instead of exercising an Option on the Exercise Date
described above, such Participant may elect, before the
applicable Exercise Date, to receive the balance in his or her
Contribution Account (without interest). If the Participant
elects this cash payment, the payment shall be made within
thirty (30) days following the Participant's election.
(d) Death. If a Participant dies during a Participation Period, the
balance that is credited to the Participant's Contribution Account shall be used
to purchase whole shares of Common Stock on the Exercise Date for the
Participation Period in which the Participant died. This Common Stock shall be
distributed to the Participant's estate as soon as practicable following such
Exercise Date. (In addition, any amounts remaining in the Contribution Account
after the purchase of whole shares of Common Stock shall be paid to the estate
(without interest) within thirty (30) days following such Exercise Date.)
However, instead of exercising Options on the Exercise Date described
above, the executor of the Participant's estate may elect, before the applicable
Exercise Date, to receive the balance in the Participant's Contribution Account
(without interest). If the executor elects this cash payment, the payment shall
be made to the Participant's estate within thirty (30) days following such
election.
(e) Disability. If a Participant incurs a Disability during a
Participation Period, payroll deductions for that Participant will cease on the
date of such Disability. Unless the Participant elects otherwise, the balance in
the Participant's Contribution Account shall be used to purchase whole shares of
Common Stock on the Exercise Date for the Participation Period in which the
Disability occurs. (Any amounts remaining in the Contribution Account after the
purchase of whole shares of Common Stock shall be paid to the Participant
(without interest) within thirty (30) days following such Exercise Date.)
However, instead of exercising Options on the Exercise Date described above,
such Participant may elect, before the applicable Exercise Date, to receive the
balance in his or her Contribution Account (without interest). If the disabled
Participant elects this cash payment, the payment shall be made within thirty
(30) days following such election.
For purposes of this subsection (e), a Participant is treated as having
incurred a Disability when the Participant leaves the Company's active
employment on account of any condition which would be treated as a total and
permanent disability under Code section 22(e)(3).
(f) Leaves of Absence. Payroll deductions will cease when a Participant
begins an unpaid leave of absence. Unless the Participant elects otherwise, the
balance in the Participant's Contribution Account shall be used to purchase
whole shares of Common Stock on the Exercise Date for the Participation Period
in which the leave begins. (Any amounts remaining in the Contribution Account
after the purchase of whole shares of Common Stock shall be paid to the
Participant (without interest) within thirty (30) days following such Exercise
Date.)
However, instead of exercising Options as of the Exercise Date
described above, such Participant may elect, before the applicable Exercise
Date, to receive the balance in his or her Contribution Account (without
interest). If the Participant elects this cash payment, the payment shall be
made within thirty (30) days following such election.
Notwithstanding any other provision in this subsection (f), if a
Participant's unpaid leave of absence extends beyond the ninety (90) days, such
Participant shall be deemed to have incurred a termination of employment on the
later of the 91st day of such leave or the date on which the Participant no
longer has re-employment rights guaranteed by contract or law. In this event,
the Participant shall receive a cash payment of any amounts remaining in his or
her Contribution Account in accordance with subsection (b).
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(g) Transfer to Nonparticipating Affiliate. Payroll deductions will
cease when a Participant is transferred from the Company to a company or entity
that is not an Affiliate. The balance in the Participant's Contribution Account
at the time of such transfer shall be refunded to the Participant (without
interest) within thirty (30) days following such transfer.
Article IV. Available Stock
4.1 In General
Subject to sections 4.2 and 4.3, one million (1,000,000) shares of Common Stock
shall be available for purchase by Participants under this Plan. These shares
may be authorized and unissued shares or may be issued shares that were
subsequently acquired by the Company. If an Option under the Plan expires or
terminates without having been exercised in whole or in part, the shares that
are subject to such Option shall again be available for subsequent Option grants
under the Plan.
If the total number of shares of Common Stock to be purchased on an Exercise
Date exceeds the maximum number of shares available for the Participation
Period, the Committee shall allocate a percentage of the available shares to
each Participant equal to the balance in the Participant's Contribution Account
divided by the aggregate balance of all Contribution Accounts (the allocation to
each individual Participant shall be rounded down to the nearest number of whole
shares.) Any balance remaining in the Participant's Contribution Account after
such allocation shall be distributed to the Participant in cash (without
interest) as soon as practicable.
4.2 Changes in Corporate Capitalization
The number of shares of Common Stock available under the Plan, the number of
shares of Common Stock that are subject to each outstanding Option, and the
Exercise Price may be adjusted by the Board or Committee to reflect any increase
or decrease in the number of shares of issued Common Stock resulting from any
subdivision or consolidation of shares, the payment of a stock dividend, or
other increase or decrease in the number of shares outstanding effected without
receipt of consideration by the Company. Adjustments shall be made in the sole
discretion of the Board or Committee, and its decision shall be final and
binding.
4.3 Dissolution and Liquidation
In the event of the proposed dissolution or liquidation of the Company, the
Participation Period then in progress shall be shortened by setting a new
Exercise Date (the "New Exercise Date") and shall terminate immediately prior to
the consummation of such proposed dissolution or liquidation, unless provided
otherwise by the Board or Committee. The New Exercise Date shall be before the
date of the Company's proposed dissolution or liquidation. The Board or
Committee shall notify each Participant in writing, at least ten (10) business
days prior to the New Exercise Date, that the Exercise Date for the
Participant's Option has been changed to the New Exercise Date and that the
Participant's Option shall be exercised automatically on the New Exercise Date,
unless prior to such date the Participant has discontinued his or her
participation as set forth in Section 3.3(a). The Board shall take whatever
steps it deems reasonably necessary in connection with any such transaction to
assure that Participants receive the benefits described in this section 4.3.
4.4 Change in Control
In the event of a Change in Control of the Company, the Participation Period
then in progress shall be shortened by setting a new Exercise Date (the "New
Exercise Date"). The New Exercise Date shall be before the date of the Change in
Control. The Board or Committee shall notify each Participant in writing, at
least ten (10) days prior to the New Exercise Date, where practicable, that the
Exercise Date for the Participant's Option has been changed to the New Exercise
Date and that the Participant's Option shall be exercised automatically on the
New Exercise Date, unless prior to such date the Participant has discontinued
his or her participation as set forth in Section 3.3(a).
Article V. Purchasing Common Stock
5.1 Participants' Accounts
The Committee shall establish a Contribution Account in the name of each
Participant. The payroll deductions authorized by the Participant under section
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5.2 shall be credited to the Participant's Contribution Account, without
interest. The amount credited to a Participant's Contribution Account as of an
Exercise Date shall be used to purchase shares of Common Stock in accordance
with section 5.3.
5.2 Participant Contributions
(a) Payroll Deduction. An Eligible Employee may become a Participant
for a Participation Period by enrolling in the Plan at a time, and in a manner,
prescribed by the Committee or the senior human resources officer of the
Company. As part of the enrollment process, the Participant shall authorize the
Company to deduct a whole percentage (ranging from 1 percent to 15 percent, as
specified by the Participant) of the Participant's Compensation from each
paycheck that is received during the applicable Participation Period.
The payroll deduction election in effect at the end of the current
Participation Period shall automatically remain in effect for the next following
Participation Period unless changed by the Participant at a time, and in a
manner, prescribed by the Committee, or the senior human resources officer of
the Company.
(b) Election Changes During a Participation Period. A Participant may
increase or decrease his or her payroll deduction election during a
Participation Period by giving notice at least fifteen (15) days before the
first day of the pay period for which the change is effective. (If the
Participant reduces the payroll deduction election to zero, the Participant
shall be subject to the additional provisions of section 3.3(a).) The Board,
Committee, or the senior human resources officer of the Company may, in their
discretion, limit the number of changes during any Participation Period.
5.3 Common Stock Purchases
(a) General Rule. Except as provided in section 3.3 (regarding the
cessation of participation during a Participation Period), section 4.1 (relating
to a shortage of available shares), or section 5.3(b) (regarding the limit
described in Code section 423(b)(8)), all amounts credited to the Participant's
Contribution Account during a Participation Period shall be used automatically
to acquire whole shares of Common Stock. The number of whole shares acquired on
behalf of each Participant shall be determined by dividing the amount credited
to the Participant's Contribution Account on the Exercise Date by the Exercise
Price.
If there is any amount remaining in the Participant's Contribution
Account after the purchase of whole shares of Common Stock under this subsection
(a), such amount shall be carried forward for use during the next following
Participation Period unless the Participant requests a cash payment of such
remainder. If the Participant elects a cash payment within thirty (30) days
following the Exercise Date, such payment shall be made (without interest)
within thirty (30) days following such election.
(b) Dollar Limits. Notwithstanding any provision in this Plan to the
contrary, no Eligible Employee shall be granted an Option in the Plan which
would permit the Eligible Employee's rights to purchase Common Stock under all
employee stock purchase plans (within the meaning of Code section 423) of the
Company or an Affiliate to accrue at a rate which exceeds:
(i) $25,000 for each calendar year in which the Option is
outstanding; or
(ii) $12,500 in any one Participation Period;
of the fair market value of such stock determined at the time the Option is
granted - i.e., the first day of the Participation Period for which the Common
Stock is acquired.
(c) Stock Certificates. As soon as reasonably practicable following
each Exercise Date, Common Stock purchased under subsection (a) shall be
credited to an account in the Participant's name in the offices of a broker
designated by the Board or Committee. Physical delivery of the Common Stock
certificates to Participants shall not be required. The Board or Committee may
impose such restrictions that it deems necessary on the transfer of proceeds
from the sale of Common Stock from such designated broker including, appropriate
withholding on disqualifying dispositions. Any dividends paid on shares held by
the Company for a Participant's account will be transmitted to the Participant.
The Company will deliver to each Participant who purchases shares of Common
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Stock under the Plan, as promptly as practicable by mail or otherwise, all
notices of meetings, proxy statements, proxies and other materials distributed
by the Company to its stockholders. Any shares of Common Stock held by the
broker for a Participant's account will be voted in accordance with the
Participant's duly delivered and signed proxy instructions. There will be no
charge to Participants in connection with such notices, proxies and other
materials.
Article VI. Amendment and Termination
6.1 Amendment
Except as provided below, the Plan may be amended by the stockholders, by the
Board, or by the Committee. However, no amendment may:
(a) adversely affect any Option that was granted before the adoption
date of such amendment, unless any Participant to whom such Option has been
granted gives his or her written consent to such amendment; or
(b) increase the aggregate number of shares which may be issued under
the Plan (except an increase occurring under section 4.2 relating to changes in
the Company's capitalization) without stockholder approval.
If stockholder approval for an amendment is required under subsection (a) or
(b), such approval must be obtained with twelve (12) months after the date the
amendment is approved by the Board. If the required approval is not obtained,
any such amendment shall be null and void from its intended effective date.
6.2 Termination
The stockholders, the Board, or the Committee may terminate the Plan at any
time. If the Plan is terminated, the Committee shall give notice to affected
Participants, terminate all payroll deductions, and pay to the Participants any
balances remaining in their Contribution Accounts (without interest) as soon as
practicable following such termination.
Article VII. General Provisions
7.1 Administration
The Board shall be responsible for the administration of the Plan. The Board
shall have the authority:
(a) to establish rules and procedures for the administration of the
Plan which are not inconsistent with the provisions hereof;
(b) to interpret the terms and provisions of the Plan and determine all
questions arising under the Plan; and
(c) to delegate to the Committee any of its administrative
responsibilities hereunder (except its power to designate Affiliates as
participating Companies), including without limitation, those set forth in
Sections 7.1(a) and (b) above.
The Committee may, in turn, delegate to the appropriate individuals the
authority to administer the Plan and keep records of individual benefits. The
Committee, however, may not delegate its power to terminate or amend the Plan.
In carrying out its responsibilities, neither the Board nor the Committee shall
discriminate in favor of or against any Participant. Each Eligible Employee
shall have the same rights and privileges under the plan, except that the amount
of Common Stock which may be purchased under Options granted under the Plan
shall bear a uniform relationship to the amount of the Eligible Employee's
Compensation.
In carrying out its responsibilities, the Board and the Committee shall have the
utmost discretion permitted by law. Also, to the extent permitted by law, all
findings of fact, determinations, interpretations, and decisions of the Board or
the Committee shall be conclusive and binding upon all persons.
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7.2 Rights Not Transferable
Options granted under the Plan may not be transferred by the Participant except
by will or by the laws of descent and distribution. Additionally, no Option
shall be subject to execution, attachment, or similar process. Any attempt to
assign, transfer, attach, or otherwise dispose of any Option granted under this
Plan shall be null and void. An Option may be exercised only by the Participant
(or by the Participant's legal representative if permitted under Code section
423) during his or her lifetime. After the Participant's death, the
Participant's outstanding Option may be exercised by the executor of the
Participant's estate pursuant to section 3.3(d).
7.3 Stockholder Rights
A Participant shall not have any rights as a stockholder with respect to Common
Stock issuable pursuant to the exercise of an Option granted under this Plan
until a certificate for such shares of Common Stock are issued to him or her, or
the Company reflects the Participant's ownership in its stock ledger or other
appropriate record of Common Stock ownership.
7.4 No Contract of Employment
Nothing contained in the Plan shall be deemed to give any Eligible Employee the
right to be retained in the service of the Company or an Affiliate, or to
interfere with the right of the Company or an Affiliate to discharge or retire
any Eligible Employee at any time.
7.5 Tax Considerations
(a) Favorable Taxation Under Code Section 423. To qualify for favorable
tax treatment under Code section 423, a Participant may not transfer or
otherwise dispose of Common Stock acquired under this Plan until the later of:
(i) one (1) year from the date of acquisition of such
Common Stock; or
(ii) two (2) years after the date on which the related Option
was granted (i.e., the first day of the Participation
Period for which the Common Stock was acquired).
However, if the Participant dies before such Common Stock is sold,
these holding period requirements do not apply.
(b) Notice of Disqualifying Disposition. Each Participant who acquires
shares of Common Stock under this Plan shall notify the Company, in writing, if
the Participant disposes of such shares before the later of the two dates
identified in subsection (a) above.
(c) Withholding. The Committee may make appropriate withholding of
federal, state, and local income and employment taxes from a Participant's
Compensation to the extent that the Committee deems such withholding to be
necessary under applicable law. Alternatively, the Committee may require the
Participant to remit any such taxes directly to the Company by separate check.
7.6 Application of Funds
The proceeds received by the Company from the sale of Common Stock under this
Plan will be used for general corporate purposes.
7.7 Applicable Law
The obligations of the Company to sell and deliver Common Stock under the Plan
shall be subject to all applicable laws, regulations, rules, and approvals,
including, but not limited to, the effectiveness of a registration statement
under the Securities Act of 1933 if deemed necessary or appropriate by the
Company. Certificates for shares of Common Stock issued hereunder may be
legended as the Board shall deem appropriate.
Questions relating to the validity, construction, and administration of the Plan
shall be determined under the laws of the Commonwealth of Pennsylvania to the
extent that such laws are not consistent with Code section 423.
7.8 Severability
If a provision of the Plan is illegal or invalid, the illegality shall not
affect the remaining parts of the Plan, and the Plan shall be construed and
enforced as if the illegal or invalid provision had not been included in this
Plan to the extent the intent of the Plan can be fulfilled in absence of such
provision.
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APPENDIX
PROXY
U.S. INTERACTIVE, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF U.S.
INTERACTIVE, INC. FOR THE ANNUAL MEETING OF
STOCKHOLDERS TO BE HELD ON MAY 23, 2000.
The undersigned, hereby revoking any contrary proxies previously given
relating to these shares, hereby acknowledges receipt of the Notice of Annual
Meeting of Stockholders and Proxy Statement in connection with the 2000 Annual
Meeting of Stockholders of U.S. Interactive, Inc. (the "Annual Meeting") to be
held on Tuesday, May 23, 2000 at 10:00 a.m. at the Wyndham Franklin Plaza Hotel,
17th & Race Streets, Philadelphia, Pennsylvania, and hereby appoints Robert W.
Drennen and Philip L. Calamia, and each of them (with full power to act alone),
the attorneys and proxies of the undersigned, with full power of substitution to
each, to vote all shares of the Common Stock of U.S. INTERACTIVE, INC.
registered in the name provided herein which the undersigned is entitled to vote
at the Annual Meeting, and at any adjournment(s) or postponement(s) thereof,
with all the powers the undersigned would have if personally present. Without
limiting the general authorization hereby given, said proxies are, and each of
them hereby is, instructed to vote or act as follows on the reverse side hereof
on the proposals set forth in said Proxy Statement. In their discretion, the
proxies are authorized to vote upon such other matters as may properly come
before the Annual Meeting.
SEE REVERSE CONTINUED AND TO BE COMPLETED, SIGNED AND SEE REVERSE
SIDE DATED ON REVERSE SIDE SIDE
<PAGE>
[X] PLEASE MARK VOTES AS IN THIS
EXAMPLE
THIS PROXY WHEN EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN. IF NO
DIRECTION IS MADE THIS PROXY WILL BE VOTED FOR THE ELECTION OF THE THREE (3)
NOMINEES FOR CLASS II DIRECTORS LISTED BELOW AND FOR PROPOSALS 2, 3, 4 AND 5.
1. Election of Class II Directors
Nominees: Stephen T. Zarrilli, William C. Jennings and Robert V. Napier
[ ] FOR all nominees listed above (except as stricken out
above). (To withhold authority to vote for any specific
nominee(s), check the foregoing box and strike out or line
through such nominee's name on the list above.)
[ ] WITHHELD for all nominees listed above
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
2. Approval of an amendment and restatement of the Company's FOR ABSTAIN AGAINST
1998 Performance Incentive Plan. [ ] [ ] [ ]
3. Approval of the adoption of the U.S. Interactive Employee FOR ABSTAIN AGAINST
Stock Purchase Plan. [ ] [ ] [ ]
4. Approval of a stock option granted by Soft Plus, Inc. to FOR ABSTAIN AGAINST
Michael M. Carter, the Company's Senior Vice President and [ ] [ ] [ ]
Chief Marketing Officer.
5. Ratification of the appointment of KPMG LLP, certified FOR ABSTAIN AGAINST
public accountants, as the Company's independent auditors for [ ] [ ] [ ]
the fiscal year ending December 31, 2000.
MARK HERE FOR ADDRESS CHANGE AND NOTE BELOW [ ]
</TABLE>
Please sign exactly as name appears hereon. Joint owners should each sign. When
signing as attorney, executor, administrator, trustee or guardian, please give
full title as such.
Signature: Date:
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Signature: Date:
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