<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
<TABLE>
<S> <C>
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 Pursuant to Section240.14a-11(c) or
Section240.14a-12
HOTJOBS.COM, LTD.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the
Registrant)
</TABLE>
Payment of Filing Fee (Check the appropriate box):
<TABLE>
<S> <C> <C>
/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:
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(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:
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/ / 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.:
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(3) Filing Party:
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(4) Date Filed:
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</TABLE>
<PAGE>
[LOGO]
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
MAY 17, 2000
To our Stockholders:
The Annual Meeting of Stockholders (the "Annual Meeting") of
HotJobs.com, Ltd., a Delaware corporation (the "Company"), will be held at the
Marriott Marquis Hotel, 1535 Broadway, New York, New York 10036 on May 17, 2000
at 10:00 a.m. (New York time) for the following purposes, as more fully
described in the Proxy Statement accompanying this notice:
(1) To elect two Directors of the Company to serve until the 2003
Annual Meeting of Stockholders or until their respective successors shall
have been duly elected and qualified;
(2) To approve and ratify amendments to the Company's 1999 Stock
Option/Stock Issuance Plan (the "Option Plan") to automatically increase the
number of shares of common stock authorized for issuance over the term of
the Option Plan on the first trading day in January each year, beginning in
calendar year 2001, by an amount equal to 3% of the shares of common stock
outstanding on the last trading day of the immediately preceding calendar
year, subject to a maximum annual increase of 1,500,000 shares;
(3) To approve and ratify amendments to the Company's Employee Stock
Purchase Plan (the "Purchase Plan") to automatically increase the number of
shares of common stock authorized for issuance over the term of the Purchase
Plan on the first trading day in January each year, beginning in calendar
year 2001, by an amount equal to 1% of the shares of common stock
outstanding on the last trading day of the immediately preceding calendar
year, subject to a maximum annual increase of 500,000 shares;
(4) To ratify the selection of KPMG LLP as independent auditors of the
Company for the fiscal year ending December 31, 2000; and
(5) To transact such other business as may properly come before the
Annual Meeting or any adjournment or adjournments thereof.
Only stockholders of record at the close of business on March 23, 2000 will
be entitled to notice of, and to vote at, the Annual Meeting.
All stockholders are cordially invited to attend the meeting in person.
Whether or not you expect to attend the Annual Meeting, your proxy vote is
important. To assure your representation at the meeting, please sign and date
the enclosed proxy card and return it promptly in the enclosed envelope, which
requires no additional postage if mailed in the United States or Canada. Should
you receive more than one proxy because your shares are registered in different
names and addresses, each proxy should be signed and returned to assure that all
of your shares will be voted. You may revoke your proxy at any time prior to the
Annual Meeting. If you attend the meeting and vote by ballot, your proxy will be
revoked automatically and only your vote at the Annual Meeting will be counted.
By Order of the Board of Directors
/s/ Richard S. Johnson
Richard S. Johnson
President, Chief Executive Officer and
Chairman of the Board of Directors
New York, New York
April 7, 2000
IT IS IMPORTANT THAT THE ENCLOSED PROXY CARD
BE COMPLETED AND RETURNED PROMPTLY
<PAGE>
[LOGO]
24 WEST 40TH STREET, 14TH FLOOR
NEW YORK, NY 10018
PROXY STATEMENT
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 17, 2000
This Proxy Statement is furnished to stockholders of record of
HotJobs.com, Ltd., a Delaware corporation (the "Company"), as of March 23, 2000
in connection with the solicitation of proxies by the Board of Directors of the
Company (the "Board of Directors" or "Board") for use at the Annual Meeting of
Stockholders to be held on May 17, 2000 at 10:00 a.m. (New York time) (the
"Annual Meeting").
Shares cannot be voted at the meeting unless the owner is present in person
or by proxy. All properly executed and unrevoked proxies in the accompanying
form that are received in time for the Annual Meeting will be voted at the
Annual Meeting or any adjournment thereof in accordance with instructions
thereon, or if no instructions are given, will be voted, (i) "FOR" the election
of the named nominees as Directors of the Company, (ii) "FOR" the approval of
the increase in the number of shares of common stock available under the Option
Plan, (iii) "FOR" the increase in the number of shares of common stock available
under the Purchase Plan and (iv) "FOR" the ratification of KPMG LLP, independent
public accountants, as auditors of the Company for the fiscal year ending
December 31, 2000, and will be voted in accordance with the best judgment of the
persons appointed as proxies with respect to other matters which properly come
before the Annual Meeting. Any person giving a proxy may revoke it by written
notice to the Company at any time prior to exercise of the proxy. In addition,
although mere attendance at the Annual Meeting will not revoke the proxy, a
stockholder who attends the meeting may withdraw his or her proxy and vote in
person. Abstentions and broker non-votes will be counted for purposes of
determining the presence or absence of a quorum for the transaction of business
at the Annual Meeting. Abstentions will be counted in tabulations of the votes
cast on each of the proposals presented at the Annual Meeting and will have the
same effect as negative votes, whereas broker non-votes will not be counted for
purposes of determining whether a proposal has been approved.
The mailing address of the principal executive offices of the Company is 24
West 40(th) Street, 14th Floor, New York, New York 10018. This Proxy Statement
and the accompanying form of proxy are being mailed on or about April 7, 2000 to
the stockholders of the Company entitled to vote at the Annual Meeting.
VOTING SECURITIES
The Company has one class of voting securities outstanding, its common
stock, $0.01 par value per share. Each holder of common stock is entitled to one
vote for each share held. In addition, the Company is authorized to issue up to
an aggregate of 10,000,000 shares of preferred stock, $0.01 par value per share
(the "Preferred Stock"), with such voting rights as may be determined by the
Board of Directors providing for such series. The Company does not have current
plans to issue any shares of Preferred Stock. At the Annual Meeting, each
stockholder of record at the close of business on March 23, 2000 will be
entitled to one vote for each share of common stock owned on that date as to
each matter presented at the Annual Meeting. On February 29, 2000, there were
31,726,187 shares of common stock outstanding and held by approximately 71
stockholders of record. A list of stockholders eligible to vote at the Annual
Meeting will be available for inspection at the Annual Meeting and for a period
of ten days prior to the Annual Meeting during regular business hours at the
principal executive offices of the Company at the address specified above.
1
<PAGE>
PROPOSAL 1
ELECTION OF DIRECTORS
Unless otherwise directed, the persons appointed in the accompanying form of
proxy intend to vote at the Annual Meeting "FOR" the election of the nominees
named below as Class I Directors of the Company to serve until the 2003 Annual
Meeting of Stockholders or until their successors are duly elected and
qualified. If any nominee is unable or unwilling to serve as a Director when the
election takes place, it is the intention of the persons named in the proxy to
vote for the election of such substitute nominee for election as a Director of
the Company as the Board of Directors may recommend. The Board of Directors does
not currently anticipate that any nominee will be unable or unwilling to serve
as a Director. Each nominee is currently a Director of the Company.
In accordance with the terms of the Company's Amended and Restated
Certificate of Incorporation, the Board of Directors has been divided into three
classes, denominated Class I, Class II and Class III, with members of each class
holding office for staggered three-year terms. At each annual meeting of the
Company's stockholders, the successors to the Directors whose terms expire are
elected to serve from the time of their election and qualification until the
third annual meeting of stockholders following their election or until a
successor has been duly elected and qualified. The affirmative vote of a
plurality of the shares of common stock present in person or represented by
proxy and entitled to vote on the election of Directors at the Annual Meeting is
required to elect the Directors.
The Board of Directors currently has seven members. Messrs. John G. Murray
and Kevin P. Ryan are Class I Directors whose terms expire at the Annual Meeting
and each of whom is a nominee for election. Messrs. Stephen W. Ellis and John A.
Hawkins are Class II Directors whose terms expire at the 2001 Annual Meeting of
Stockholders (in each case subject to the election and qualification of their
successors or to their earlier death, resignation or removal). Messrs. Richard
S. Johnson, Dimitri J. Boylan and Philip Guarascio are Class III Directors whose
terms expire at the 2002 Annual Meeting (in all cases subject to the election
and qualification of their successors or to their earlier death, resignation or
removal).
INFORMATION REGARDING THE NOMINEES FOR ELECTION AS DIRECTORS (CLASS I DIRECTORS)
The following information with respect to the principal occupation or
employment, other affiliations and business experience during the last five
years of the nominees have been furnished to the Company by such nominees.
Except as indicated, the nominees have had the same principal occupation for the
last five years.
JOHN G. MURRAY, 37, has served as a Director of the Company since May 1999.
Since June 1998, Mr. Murray has been a Managing Director of Deutsche Bank
Securities Inc., formerly BT Alex. Brown Incorporated, specializing in the
venture capital service sector. From January 1994 to June 1998, Mr. Murray
served as a principal of BancBoston Robertson Stephens, specializing in the
venture capital service sector. Mr. Murray received his bachelor's degree from
St. Lawrence University and his Master of Business Administration from The
Wharton School of Finance.
KEVIN P. RYAN, 36, has served as a Director of the Company since June 1999.
Mr. Ryan has served as Chief Operating Officer of DoubleClick Inc. (NASDAQ:
DCLK) since April 1998 and as President since July 1997. From June 1996 to
April 1998, Mr. Ryan served as DoubleClick's Chief Financial Officer. From
January 1994 to June 1996, Mr. Ryan served as Senior Vice President, Business
and Finance for United Media, a licensing and syndication company representing
comics, columnists and wire services to over 2,000 newspapers around the world.
From April 1991 to December 1993, Mr. Ryan served as Senior Manager, Finance for
Euro Disney, and from August 1985 to September 1989, Mr. Ryan was an investment
banker for Prudential Investment Corporation in both the United States and the
United Kingdom. Mr. Ryan received his bachelor's degree from Yale University and
his Master of Business Administration from INSEAD.
2
<PAGE>
RECOMMENDATION OF THE BOARD
THE BOARD RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" THE ELECTION OF JOHN
G. MURRAY AND KEVIN P. RYAN AS DIRECTORS UNTIL THE 2003 ANNUAL MEETING OF
STOCKHOLDERS.
INFORMATION REGARDING DIRECTORS WHO ARE NOT NOMINEES FOR ELECTION AT THE ANNUAL
MEETING
The following information with respect to the principal occupation or
employment, other affiliations and business experience during the last five
years of each Director who is not a nominee for election at the Annual Meeting
has been furnished to the Company by such Director. Except as indicated, each of
these Directors has had the same principal occupation for the last five years.
CLASS II DIRECTORS (TERMS EXPIRE AT THE 2001 ANNUAL MEETING OF STOCKHOLDERS)
STEPHEN W. ELLIS, 49, has served as a Director of the Company since
May 1999, and has served as the Company's Chief Financial Officer since
April 1999. From March 1998 through December 1998, Mr. Ellis served as the Chief
Financial Officer for Biztravel.com, an Internet-based travel services company.
Prior to that, from March 1997 through February 1998, Mr. Ellis was the Chief
Financial Officer for Metromedia Fiber Network (NASDAQ: MFNX), a
facilities-based fiber optic/telecom services company. Mr. Ellis also served as
an executive officer of Data Broadcasting Corporation (NASDAQ: DBCC), a
financial market-data company, first as Chief Financial Officer from 1992 to
1995 and then as Executive Vice President, Finance through March 1997.
Mr. Ellis holds a bachelor's degree from the Massachusetts Institute of
Technology and a Master of Business Administration from the Stanford University
Graduate School of Business. Mr. Ellis is a Certified Public Accountant. He also
is on the board of directors of the following private companies: FSA
Capital, Inc. and US Medical Network, LLC.
JOHN A. HAWKINS, 39, has served as a Director of the Company since
May 1999. In 1995, Mr. Hawkins co-founded Generation Partners L.P., a private
equity fund. From 1987 until 1995, Mr. Hawkins was a General Partner of Burr,
Egan, Deleage & Co., a $700 million venture capital firm. Mr. Hawkins
specializes in information technology investments including data communications
and telecommunications, software and the Internet. Mr. Hawkins graduated with a
bachelor's degree from Harvard College and received his Master of Business
Administration from the Harvard Graduate School of Business. Mr. Hawkins
currently serves on the boards of P-COM, Inc. (NASDAQ: PCMS), PixTech (NASDAQ:
PIXT), DiscoverMusic.com (formerly Enso Audio Imaging Corporation),
Driveway.com, High End Systems, Inc., OrderFusion (formerly Dover Pacific
Computing, Inc.) and Linguateq, Inc.
CLASS III DIRECTORS (TERMS EXPIRE AT THE 2002 ANNUAL MEETING OF STOCKHOLDERS)
RICHARD S. JOHNSON, 39, founded the Company in February 1997 and has served
as its President, Chief Executive Officer and Chairman of the Board of Directors
since inception. From 1988 to 1997, Mr. Johnson served as President of
OTEC, Inc., a New York-based recruiting firm focusing on IT professionals
("OTEC"). Mr. Johnson co-founded OTEC in 1988 and, until March 8, 2000, was one
of its directors and principal stockholders. Mr. Johnson received his bachelor's
degree from Bucknell University. Mr. Johnson is a member of New York's New Media
Association.
DIMITRI J. BOYLAN, 39, has served as the Company's Chief Operating Officer
since March 1998, and as its Vice President of Sales and Marketing from
February 1997 until March 1998. Mr. Boylan has also served as a Director since
May 1999. From October 1990 until October 1997, Mr. Boylan served as the
managing director of recruiting for OTEC. Mr. Boylan received his bachelor's
degree from the University of Pennsylvania and earned a master's degree from the
University of Illinois.
3
<PAGE>
PHILIP GUARASCIO, 58, has served as a Director of the Company since
August 1999. Mr. Guarascio has been a Vice President of General Motors
Corporation since July 1994 where he is primarily responsible for worldwide
advertising resource management, managing consolidated media placement efforts
and working with General Motors' North American Operations vehicle divisions to
increase marketing effectiveness and efficiency. Mr. Guarascio also manages
corporate image advertising activities and oversees GM Credit Card operations
and GM's Enterprise Customer System. From July 1992 to July 1994, Mr. Guarascio
served as General Manager of Marketing and Advertising for General Motors' North
American Operations. Mr. Guarascio joined General Motors in 1985 after 21 years
with the New York advertising agency, D'Arcy, Masius, Benton & Bowles (formerly
Benton & Bowles, Inc.). Mr. Guarascio currently serves on the board of directors
of Snyder Communications, Inc. (NYSE: SNC), and is a member of its audit and
compensation committees. Mr. Guarascio is Chairman Emeritus of the Advertising
Council and serves on the Executive Committee of that organization. He also
serves on the boards of the Association of National Advertisers, the Women's
Sports Foundation, the Ellis Island Restoration Commission and the American Film
Institute.
COMMITTEES OF THE BOARD
The Compensation Committee is responsible for reviewing and recommending to
the Board of Directors the compensation arrangements provided to the management
of the Company and administers the stock option plans. The Compensation
Committee currently consists of Messrs. Ellis, Hawkins and Murray. Prior to
June 30, 1999, Richard S. Johnson was the sole member of the Compensation
Committee.
The Audit Committee was established in June 1999. The Audit Committee
reviews the Company's annual audit and meets with the Company's independent
auditors to review internal controls and financial management practices. The
Audit Committee currently consists of Messrs. Ellis, Hawkins and Ryan.
ATTENDANCE AT BOARD AND COMMITTEE MEETINGS
During 1999, the Board of Directors held 11 meetings and acted eight times
by unanimous written consent. During 1999, each director attended at least 75%
of the total number of meetings of the Board. The Compensation Committee held
one meeting during 1999, at which all of the members of the committee were
present. The Audit Committee held no meetings during 1999.
COMPENSATION OF DIRECTORS
CASH COMPENSATION. Directors do not receive a fee for attending Board of
Directors or committee meetings, but are reimbursed for expenses incurred in
connection with performing their respective duties.
STOCK OPTION GRANT. Under the Automatic Option Grant Program under the
Option Plan, each individual who is elected to serve as a non-employee member of
the Board of Directors after August 10, 1999 will automatically be granted a
non-statutory option to purchase 20,000 shares of common stock. In addition, on
the date of each annual meeting of stockholders, each non-employee Director who
is to continue to serve as a member of the Board of Directors, whether or not
that individual is standing for re-election to the Board of Directors at that
particular annual meeting of stockholders, will automatically be granted a
non-statutory option to purchase 5,000 shares of common stock, provided such
individual has served as a non-employee member of the Board of Directors for at
least six months.
4
<PAGE>
Each automatic grant will have a term of 10 years, subject to earlier
termination following the optionee's cessation of service on the Board of
Directors. Each automatic option will be immediately exercisable; however, any
shares purchased upon exercise of the option will be subject to repurchase
should the optionee's service as a non-employee member of the Board of Directors
cease prior to the lapse of such repurchase rights. The initial 20,000 share
grant will vest in successive equal annual installments over the optionee's
initial four-year period of Board service. Each additional 5,000 share grant
will vest upon the optionee's completion of one year of service on the Board of
Directors, as measured from the grant date. However, each outstanding option
will immediately vest upon (i) certain changes in the ownership or control of
the Company or (ii) the death or permanent disability of the optionee while
serving on the Board of Directors.
Each of Messrs. Guarascio, Hawkins and Murray received an option grant on
August 10, 1999 to purchase 20,000 shares of common stock at an exercise price
of $8.00 per share. On June 30, 1999, Mr. Ryan received an option grant to
purchase 20,000 shares of common stock at an exercise price of approximately
$3.38 per share. One quarter of the options granted to each of
Messrs. Guarascio, Hawkins, Murray and Ryan vest on the first anniversary of the
grant date, with the remainder vesting in successive equal monthly installments
over the remaining 36 months of Board service.
EXECUTIVE COMPENSATION AND OTHER INFORMATION
EXECUTIVE OFFICERS
The executive officers as of February 29, 2000 were as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- -------- ----------------------------------------------------
<S> <C> <C>
Richard S. Johnson..................... 39 President, Chief Executive Officer and Chairman of
the Board of Directors
Stephen W. Ellis....................... 49 Chief Financial Officer and Director
Dimitri J. Boylan...................... 39 Chief Operating Officer, Secretary and Director
George J. Nassef, Jr................... 35 Chief Information Officer
</TABLE>
5
<PAGE>
INFORMATION CONCERNING EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS
GEORGE J. NASSEF, JR. has served as the Company's Chief Information Officer
since June 1999. From December 1998 to June 1999, Mr. Nassef was president of
his own consulting business related to Internet technologies. From
February 1997 until December 1998, Mr. Nassef served as Chief Information
Officer of Biztravel.com, an Internet-based travel services company. From
January 1996 until February 1997, Mr. Nassef held positions with The SABRE
Group, most recently as Managing Director of Platform Technologies. From
August 1987 until January 1996, Mr. Nassef held systems engineering positions
with American Airlines' Data Processing Division. Mr. Nassef holds a bachelor's
degree from Texas A&M University.
SUMMARY COMPENSATION TABLE
The following Summary Compensation Table sets forth the compensation
received in 1998 and 1999 by the Company's Chief Executive Officer and by the
other three executive officers who served as executive officers as of
December 31, 1999 and whose salary exceeded $100,000 in 1999 (together, the
"Named Executive Officers"). No individual who would otherwise have been
included in the table resigned during 1999.
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION (1) COMPENSATION
------------------------ ---------------
FISCAL NUMBER OF STOCK ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS GRANTED COMPENSATION
- --------------------------- -------- --------- --------- --------------- ------------
<S> <C> <C> <C> <C> <C>
Richard S. Johnson................ 1999 $201,923 $125,000 510,000 --
President, Chief Executive 1998 $182,000 -- -- --
Officer and Chairman of the
Board
Stephen W. Ellis (2).............. 1999 $111,731 $ 75,000 510,000 --
Chief Financial Officer 1998 -- -- -- --
Dimitri J. Boylan................. 1999 $141,587 $100,000 270,000 --
Chief Operating Officer 1998 $117,437 $ 10,000 -- --
George J. Nassef, Jr. (3)......... 1999 $ 84,135 $ 75,000 330,000 --
Chief Information Officer 1998 -- -- -- --
</TABLE>
- ------------------------
(1) In accordance with the rules of the Securities and Exchange Commission (the
"Commission"), other compensation in the form of perquisites and other
personal benefits has been omitted for each of the Named Executive Officers
because the aggregate amount of such perquisites and other personal benefits
constituted less than the lesser of $50,000 or 10% of the total of annual
salary and bonuses for each of such Named Executive Officers in 1999.
(2) Mr. Ellis joined the Company in May 1999.
(3) Mr. Nassef joined the Company in June 1999.
6
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OPTION GRANTS IN LAST YEAR
The following table sets forth certain information regarding options granted
to the Named Executive Officers during 1999. The Company has not granted any
stock appreciation rights.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS (1)
------------------------ POTENTIAL REALIZABLE VALUE AT
NUMBER OF % OF TOTAL ASSUMED ANNUAL RATES OF
SECURITIES OPTIONS STOCK APPRECIATION FOR
UNDERLYING GRANTED TO OPTION TERM (7)
OPTIONS EMPLOYEES EXERCISE EXPIRATION -----------------------------
NAME GRANTED IN 1999 (6) PRICE DATE 5% 10%
- ---- ---------- ----------- -------- ---------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Richard S. Johnson (2)........... 240,000 4.7% $0.05 1/1/2009 $3,115,200 $4,968,000
120,000 2.3% $3.38 5/15/2009 $2,136,000 $3,640,800
150,000 2.9% $8.80 8/10/2004 $ 364,500 $ 805,500
Stephen W. Ellis (3)............. 360,000 7.0% $0.05 3/31/2009 $4,672,800 $7,452,000
150,000 2.9% $8.00 8/10/2009 $ 754,500 $1,912,500
Dimitri J. Boylan (4)............ 120,000 2.3% $0.05 1/1/2009 $1,557,600 $2,484,000
150,000 2.9% $8.00 8/10/2009 $ 754,500 $1,912,500
George J. Nassef, Jr. (5)........ 180,000 3.5% $3.38 6/18/2009 $3,204,000 $5,461,200
150,000 2.9% $8.00 8/10/2009 $ 754,500 $1,912,500
</TABLE>
- ------------------------
(1) Each option represents the right to purchase one share of common stock. To
the extent not already exercisable, certain of these options may become
exercisable in the event of a merger in which the Company is not the
surviving corporation or upon the sale of substantially all of the Company's
assets or a sale of stock by the stockholders or if the Company otherwise
undergoes a change in control. In addition, the Compensation Committee has
the discretion to accelerate these options whether or not they are assumed
or otherwise continue in effect.
(2) Granted on January 1, 1999, May 15, 1999 and August 10, 1999. Of the options
granted on January 1, 1999, 240,000 became exercisable upon the consummation
of the Company's initial public offering ("IPO"); the remainder of
Mr. Johnson's options become exercisable over a four-year period with 25%
becoming vested on the first anniversary of the grant date and the balance
vesting in 36 successive equal monthly installments upon completion of each
additional month of service over the 36-month period measured from the first
anniversary of the grant date of these options.
(3) Granted on March 31, 1999 and August 10, 1999. Of the options granted on
March 15, 1999, 180,000 became exercisable upon the consummation of the
Company's IPO; 90,000 of these options will become exercisable on each of
May 6, 2001 and 2002; the remainder of Mr. Ellis's options become
exercisable over a four-year period with 25% becoming vested on the first
anniversary of the grant date and the balance vesting in 36 successive equal
monthly installments upon completion of each additional month of service
over the 36-month period measured from the first anniversary of the grant
date of these options.
(4) Granted on January 1, 1999 and August 10, 1999. Of the options granted on
January 1, 2000, 120,000 became exercisable upon the consummation of the
Company's IPO; the remainder of Mr. Boylan's options become exercisable over
a four-year period with 25% becoming vested on the first anniversary of the
grant date and the balance vesting in 36 successive equal monthly
installments upon completion of each additional month of service over the
36-month period measured from the first anniversary of the grant date of
these options.
(5) Granted on June 18, 1999 and August 10, 1999. Of the options granted on
June 18, 1999, 90,000 became exercisable upon the consummation of the
Company's IPO; 30,000 of these options will become exercisable on June 18,
2001 and 60,000 of these options will become exercisable on June 18,
7
<PAGE>
2002; the remainder of Mr. Nassef's options become exercisable over a
four-year period with 25% becoming vested on the first anniversary of the
grant date and the balance vesting in 36 successive equal monthly
installments upon completion of each additional month of service over the
36-month period measured from the first anniversary of the grant date of
these options.
(6) During 1999, the Company granted employees options to purchase an aggregate
of 5,151,200 shares of common stock.
(7) Amounts represent hypothetical gains that could be achieved for the
respective options if exercised at the end of the option term. The 5% and
10% assumed annual rates of compounded stock price appreciation are mandated
by rules of the Commission and do not represent the Company's estimate or
projection of the Company's future common stock prices. These amounts
represent certain assumed rates of appreciation in the value of the
Company's common stock from the fair market value on the date of grant.
Actual gains, if any, on stock option exercises are dependent on the future
performance of the common stock and overall stock market conditions. For
options granted with an exercise price of $.05 and $3.38, calculations were
made based assuming an $8.00 and $13.00 exercise price, respectively,
pursuant to the rules and regulations of the Commission. The amounts
reflected in the table may not necessarily be achieved.
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END VALUES
The following table sets forth certain information concerning options to
purchase common stock exercised by the Named Executive Officers during 1999 and
the number and value of unexercised options held by each of the Named Executive
Officers at December 31, 1999.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING IN-THE-MONEY
UNEXERCISED OPTIONS AT OPTIONS AT
DECEMBER 31, 1999 DECEMBER 31, 1999 (1)
SHARES ACQUIRED --------------------------- ---------------------------
NAME ON EXERCISE VALUE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- --------------- -------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Richard S. Johnson..... -- -- 240,000 270,000 $10,473,600 $10,070,700
Stephen W. Ellis....... 180,000 $1,362,750 -- 330,000 -- $13,208,700
Dimitri J. Boylan...... -- -- 120,000 150,000 $ 5,236,800 $ 5,353,500
George J. Nassef,
Jr................... -- -- 90,000 240,000 $ 3,627,900 $ 8,981,400
</TABLE>
- ------------------------
(1) These values have been calculated on the basis of the market price on that
date of $43.69 per share, less the applicable exercise price per share,
multiplied by the number of shares underlying such options.
8
<PAGE>
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS FOR NAMED EXECUTIVE OFFICERS
Each of the Named Executive Officers has an employment agreement with the
Company.
TERM. The agreement of each of Messrs. Johnson, Ellis and Boylan became
effective on May 6, 1999 and expires on May 5, 2002 and will automatically renew
for additional one-year terms after that date unless the Company gives the Named
Executive Officer written notice of its desire not to renew the agreement at
least six months prior to the expiration of the initial or any additional term.
Mr. Nassef's employment agreement became effective on June 18, 1999 and will
continue until terminated by him or by the Company.
SALARY. The annual salary for each of the Named Executive Officers is as
follows: Mr. Johnson, $200,000; Mr. Ellis, $175,000; Mr. Boylan, $175,000; and
Mr. Nassef, $175,000. Also, each of these executives is entitled to an annual
bonus determined by the Compensation Committee. The annual salary of each of
Messrs. Johnson, Ellis and Boylan may increase by a minimum of 10% each year.
STOCK OPTION GRANTS. Mr. Ellis received stock options to purchase 360,000
shares of the Company's common stock. On August 10, 1999, 180,000 of these
options vested automatically in connection with the Company's IPO, and 90,000
options will vest on each of May 6, 2001 and 2002. Mr. Nassef received stock
options to purchase 180,000 shares of the Company's common stock. On August 10,
1999, 90,000 of these options vested automatically in connection with the
Company's IPO, 30,000 options will vest on June 18, 2001, and 60,000 options
will vest on June 18, 2002.
TERMINATION OF EMPLOYMENT. The Company can terminate these employment
agreements with or without cause by delivering written notice to the Named
Executive Officer. Each Named Executive Officer may terminate his employment
with or without good reason by delivering written notice to the Company. Upon
termination of the employment of each of Messrs. Johnson, Ellis and Boylan by
the Company without cause or by the executive for good reason, the executive is
entitled to the greater of his annual salary for the remainder of the term of
the employment agreement or one year of salary and all options become
immediately exercisable. Upon termination of Mr. Nassef's employment agreement
by the Company without cause or by Mr. Nassef for good reason, Mr. Nassef is
entitled to six months of salary.
NONCOMPETITION AND CONFIDENTIALITY. Each of the Named Executive Officers
has agreed not to compete with the Company, solicit the Company's suppliers or
employees or reveal the Company's confidential information during the term of
his employment agreement and for two years thereafter. In addition, each Named
Executive Officer is bound by a proprietary inventions agreement which prohibits
the Named Executive Officer from, among other things, disseminating or using
confidential information about the Company's business or clients in any way that
would be adverse to the Company.
9
<PAGE>
NOTWITHSTANDING ANYTHING TO THE CONTRARY SET FORTH IN ANY OF THE COMPANY'S
PREVIOUS FILINGS UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED, THAT MIGHT INCORPORATE FUTURE FILINGS,
INCLUDING THIS PROXY STATEMENT, IN WHOLE OR IN PART, THE FOLLOWING REPORT AND
THE PERFORMANCE GRAPH SHALL NOT BE INCORPORATED BY REFERENCE INTO ANY SUCH
FILINGS.
REPORT OF THE COMPENSATION COMMITTEE
OF THE BOARD OF DIRECTORS
The Compensation Committee of the Board of Directors advises the Board of
Directors on matters of the Company's compensation philosophy and the
compensation of executive officers and other employees. The Compensation
Committee is also responsible for the administration of the Company's stock
option plans under which option grants and direct stock issuances may be made to
executive officers. The Compensation Committee meets at least once per year to
review management performance and compensation and to recommend to the Board
bonuses and option grants for current personnel. The Compensation Committee also
meets periodically to approve and ratify option grants for newly created or
expanded positions. The Compensation Committee has reviewed and is in accord
with the compensation paid to executive officers in 1999.
GENERAL COMPENSATION PHILOSPHY
The fundamental philosophy of the Compensation Committee is to provide the
Company's executive officers with competitive compensation opportunities based
upon their performance and their contribution to the development and financial
success of the Company. It is the Compensation Committee's policy to have a
portion of each executive officer's compensation contingent upon the Company's
performance as well as upon such executive officer's level of performance.
Accordingly, the compensation package for each executive officer is comprised of
three key elements: (i) base salary, (ii) an annual incentive cash bonus and
(iii) long-term incentive stock options which strengthen the mutuality of
interests between the executive officers and the Company's stockholders. The
Compensation Committee believes that this philosophy is appropriate.
FACTORS
The principal factors considered by the Compensation Committee for each
executive officer's compensation package for fiscal year 1999 are summarized
below. The Compensation Committee may, however, in its discretion apply entirely
different factors in advising the Board of Directors with respect to executive
compensation for future years.
BASE SALARY
The suggested base salary for each executive officer is set in their
respective employment agreements, which was determined on the basis of the
executive's experience and the salary levels in effect for comparable positions
within and without the industry and internal base salary comparability
considerations.
ANNUAL INCENTIVE CASH BONUS
In addition to base salaries, executive officers of the Company are eligible
to receive annual cash bonuses, at the discretion of the Board of Directors.
Cash bonuses are determined on the basis of (a) the overall financial
performance of the Company and (b) annual personal performance objectives.
LONG-TERM INCENTIVE STOCK OPTIONS
Option grants are designed to align the interests of each executive officer
with those of the stockholders and provide each individual with a significant
incentive to manage the Company from the
10
<PAGE>
perspective of an owner with an equity stake in the Company. Each option
generally becomes exercisable in installments over a four-year period, with a
quarter of the options vesting on the first anniversary of the grant date and
the balance vesting in 36 successive equal monthly installments upon completion
of each additional month of service over the 36-month period measured from the
first anniversary of the grant date. Accordingly, the option grant will provide
a return to the executive officer only if the executive officer remains employed
by the Company during the vesting period, and then only if the market price of
the underlying shares appreciates.
The number of shares subject to each option grant is set at a level intended
to create a meaningful opportunity for stock ownership based on the executive
officer's current position with the Company, the base salary associated with
that position, the size of comparable awards made to individuals in similar
positions within the industry and the individual's personal performance in
recent periods. The Compensation Committee also considers the number of unvested
options held by the executive officer in order to maintain an appropriate level
of equity incentive for that individual. However, the Compensation Committee
does not adhere to any specific guidelines as to the relative option holdings of
the Company's executive officers. Stock options to purchase an aggregate of
1,620,000 shares of common stock were granted to executive officers in 1999.
CEO COMPENSATION
The plans and policies discussed above and the terms of Mr. Johnson's
employment agreement were the basis for the 1999 compensation of the Company's
Chief Executive Officer, Mr. Richard S. Johnson. In advising the Board of
Directors with respect to this compensation, the Compensation Committee seeks to
achieve two objectives: (i) establish a level of base salary competitive with
that paid by companies within the industry which are of comparable size to the
Company and by companies outside of the industry with which the Company competes
for executive talent and (ii) make a significant percentage of the total
compensation package contingent upon the Company's performance and stock price
appreciation. In accordance with these objectives, Mr. Johnson received a base
salary of $201,923 for fiscal year 1999. Stock options to purchase 510,000
shares of common stock were granted to Mr. Johnson in fiscal year 1999; of which
options to purchase 270,000 shares of common stock are currently unexercisable.
COMPLIANCE WITH INTERNAL REVENUE CODE SECTION 162(M)
As a result of Section 162(m) of the Internal Revenue Code of 1986, as
amended, which was enacted into law in 1993, the Company will not be allowed a
federal income tax deduction for compensation paid to certain executive
officers, to the extent that compensation exceeds $1 million per officer in any
one year. This limitation will apply to all compensation paid to the covered
executive officers which is not considered to be performance based. Compensation
which does qualify as performance-based compensation will not have to be taken
into account for purposes of this limitation. The Option Plan contains certain
provisions which are intended to assure that any compensation deemed paid in
connection with the exercise of stock options granted under that plan with an
exercise price equal to the market price of the option shares on the grant date
will qualify as performance-based compensation.
Non-performance based compensation paid to the Company's executive officers
for the 1999 fiscal year did not exceed the $1 million limit per officer, and
the Compensation Committee does not expect that the compensation to be paid to
the Company's executive officers for the 2000 fiscal year will exceed the
$1 million limit per officer.
The Compensation Committee
Richard S. Johnson
Stephen W. Ellis
John A. Hawkins
John G. Murray
11
<PAGE>
PERFORMANCE GRAPH
Set forth below is a graph comparing the four-month percentage change in the
Company's cumulative total stockholder return on its common stock from
August 10, 1999 (the date public trading of the Company's stock commenced) to
the last day of the Company's last completed fiscal year (as measured by
dividing (i) the excess of the Company's share price at the end of the
measurement period over the price at the beginning of the measurement period by
(ii) the share price at the beginning of the measurement period) with the
cumulative total return so calculated of the Nasdaq Stock Market (U.S.) Index
and a self-constructed peer group index.
COMPARISON OF 4-MONTH CUMULATIVE TOTAL RETURN
AMONG HOTJOBS.COM, LTD., THE NASDAQ STOCK MARKET (U.S.)
INDEX AND A PEER GROUP (1)
The following graph compares the performance of the Company's common stock
with the performance of the Nasdaq Stock Market (U.S.) Index and a peer group
index over the period beginning August 10, 1999 through December 31, 1999. The
graph assumes that $100 was invested on August 10, 1999 in the Company's common
stock, the Nasdaq Stock Market (U.S.) Index and the peer group index, and that
all dividends were reinvested.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
HOTJOBS.COM, LTD PEER GROUP ONLY NASDAQ US
<S> <C> <C> <C>
8/99 $100 $100 $100
12/99 $546.10 $280.92 $149.79
</TABLE>
- ------------------------
(1) The peer group consists of the following companies:
(i) CareerBuilder, Inc., (ii) HeadHunter.net, Inc., (iii) Topjobs.net plc
and (iv) TMP Worldwide Inc.
12
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information with respect to the
beneficial ownership of the Company's common stock as of February 29, 2000 by
(i) each Director and nominee for Director; (ii) each of the Named Executive
Officers; (iii) each person, or group of affiliated persons, who is known by the
Company to be a beneficial owner of 5% or more of the outstanding shares of the
Company's common stock; and (iv) all Directors and Named Executive Officers of
the Company as a group.
Except as otherwise noted, the address of each person listed in the table is
c/o HotJobs.com, Ltd., 24 West 40th Street, 14th Floor, New York, NY 10018.
The table includes all shares of common stock beneficially owned by the
indicated stockholder as of February 29, 2000. Beneficial ownership is
determined in accordance with the rules of the Commission and includes voting or
investment power with respect to securities. In computing the number of shares
beneficially owned by a person and the percentage of ownership of that person,
shares of common stock subject to options held by that person that are currently
exercisable or exercisable within 60 days of February 29, 2000 are deemed
outstanding. These shares, however, are not deemed outstanding for the purposes
of computing the percentage of ownership of any other person. To the Company's
knowledge, except as otherwise noted, the persons named in the table have sole
voting and investment power with respect to all shares of common stock shown as
beneficially owned by them, subject to community property laws where applicable.
<TABLE>
<CAPTION>
NUMBER OF SHARES OF
COMMON STOCK
BENEFICIALLY
NAME OWNED PERCENT OF OWNERSHIP
- ---- ------------------- --------------------
<S> <C> <C>
Richard S. Johnson (1)................................... 11,300,352 35.4%
Bennett Carroccio (2).................................... 6,560,352 20.6
OTEC, Inc. (3)........................................... 2,900,352 9.1
The TCW Group, Inc. (4).................................. 2,838,547 8.9
John Hawkins (5)......................................... 2,559,476 8.1
Generation Partners (6).................................. 2,558,828 8.1
Thomas Chin.............................................. 1,800,000 5.7
Allen Murabayashi........................................ 1,800,000 5.7
Dimitri J. Boylan (7).................................... 1,320,000 4.1
Stephen W. Ellis (8)..................................... 285,840 *
John G. Murray (9)....................................... 216,123 *
George J. Nassef, Jr. (10)............................... 85,705 *
Kevin P. Ryan............................................ 54,418 *
Philip Guarascio......................................... 1,945 *
All directors and executive officers as a group (8
persons)(11)........................................... 15,823,859 49.2%
</TABLE>
- ------------------------
* Less than 1%
(1) Includes 240,000 shares issuable upon the exercise of outstanding options;
336,000 shares held by the Richard and Carole Johnson 1999 Trust of which
Mr. Johnson disclaims beneficial ownership; 3,140,352 shares owned by
Mr. Carroccio which Mr. Johnson has a right to purchase pursuant to an
option granted to him by Mr. Carroccio to purchase the 3,264,000 shares of
common stock of the Company owned by Mr. Carroccio (on November 15, 1999,
for no consideration, Mr. Johnson executed a letter agreement pursuant to
which he agreed to exercise the option only to the extent of 3,140,352
shares of the Company's common stock) and a right to vote pursuant to an
irrevocable proxy granted by Mr. Carroccio; and 2,900,352 shares owned by
OTEC of which Mr. Johnson disclaims beneficial ownership. Until March 8,
2000, Mr. Johnson was a director and shareholder of OTEC.
13
<PAGE>
(2) Includes 60,000 shares issuable upon the exercise of outstanding options;
336,000 shares held by the Bennett and Brenda Carroccio 1999 Trust of which
Mr. Carroccio disclaims beneficial ownership; 3,264,000 shares of which
Mr. Carroccio disclaims beneficial ownership and of which 3,140,352 are
subject to purchase by Mr. Johnson pursuant to an option; and 2,900,352
shares owned by OTEC, of which Mr. Carroccio is the President, Chief
Executive Officer and controlling stockholder.
(3) OTEC's address is 24 West 40(th) Street, 12(th) Floor, New York, NY 10018.
(4) Based solely on a review of Schedule 13G filings with the Commission. The
address of The TCW Group, Inc. is 865 South Figueroa Street, Los Angeles, CA
90017.
(5) Includes 2,558,828 shares beneficially owned by Generation Capital Company
LLC. Mr. Hawkins is a Managing Partner of Generation Capital Company LLC
and, as such, may be deemed to have voting and investment power over the
shares beneficially owned by Generation Capital Company LLC. Mr. Hawkins
disclaims beneficial ownership of these shares.
(6) Includes 2,470,189 shares held by Generation Capital Company LLC as a
general partner of Generation Parallel Management Partners L.P. and as
general partner of the general partner of Generation Capital Partners L.P.
In addition, includes 88,639 shares held in a separate account of State
Board of Administration of Florida with respect to which an affiliate of
Generation Capital Company LLC has management authority.
(7) Includes 120,000 shares issuable upon the exercise of outstanding options.
(8) Includes 102,352 shares owned by FSA Capital, Inc., of which Mr. Ellis is a
director, and 2,088 shares purchased by Mr. Ellis' wife of which Mr. Ellis
disclaims beneficial ownership.
(9) Includes 13,659 shares held by Mr. Murray's IRA; and 170,592 shares owned by
GreenAcre Ventures LLC ("GreenAcre") of which Mr. Murray is a Managing
Member. Of the shares owned by GreenAcre, 9,104 shares are attributable to
Mr. Murray's interest in GreenAcre, and Mr. Murray disclaims beneficial
ownership of the remaining 161,488 shares.
(10) Includes 85,000 shares issuable upon the exercise of outstanding options.
(11) Includes 445,000 shares issuable upon the exercise of outstanding options.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company's Compensation Committee currently consists of Messrs. Stephen
W. Ellis, John A. Hawkins, and John G. Murray. Until June 30, 1999, the
Compensation Committee consisted solely of Richard S. Johnson. Mr. Johnson is
the Chief Executive Officer and President of the Company, and Mr. Ellis is the
Chief Financial Officer of the Company. No interlocking relationship exists or
has existed between Messrs. Johnson, Ellis, Hawkins or Murray or any other
member of the Company's Board and any members of the board of directors or
compensation committee of any other company.
CERTAIN TRANSACTIONS
SERIES A PRIVATE PLACEMENT
Effective May 10, 1999, the Company sold 1,620,000 shares of Series A
Preferred Stock at a price of $10.00 per share. Upon consummation of the
Company's IPO, all of the Series A Preferred Stock automatically converted into
an aggregate of 3,934,019 shares of the Company's common stock. The purchasers
of Series A Preferred Stock included the following directors, executive officers
and holders of 5% or more of the Company's common stock on a fully-converted
basis:
- FSA Capital, Inc. purchased 42,148 shares of Series A Preferred Stock for
$421,480. Stephen W. Ellis, a Director and the Chief Financial Officer of
the Company, is a director of FSA Capital, Inc.
14
<PAGE>
- Generation Capital Partners L.P. and affiliated investment entities
("Generation Partners") purchased in the aggregate 1,053,704 shares of
Series A Preferred Stock for $10,537,040. Generation Partners owns more
than 5% of the Company's common stock. John A. Hawkins, a Director of the
Company, is a Managing Partner of an affiliate of Generation Partners.
- John G. Murray, a Director of the Company, purchased 18,750 shares of
Series A Preferred Stock for $187,500. In connection with the Series A
Preferred Stock financing, GreenAcre Ventures LLC, of which Mr. Murray is
a managing member, purchased 170,592 shares of the Company's common stock
from two of the Company's employees.
- Kevin P. Ryan, a Director of the Company, purchased 21,074 shares of
Series A Preferred Stock for $210,740.
In connection with the Company's private placement, the Company entered into
a stockholders' agreement with the investors in its Series A Preferred Stock and
its current stockholders. In accordance with this stockholders' agreement, John
A. Hawkins, a designee of Generation Partners, and John G. Murray, a designee of
the holders of Series A Preferred Stock, have been elected to the Company's
Board. In addition, the investors in the Series A Preferred Stock have
registration rights applicable to the common stock issued upon conversion of the
Series A Preferred Stock. Other than the registration rights, all other rights
under this stockholders' agreement terminated upon the closing of the Company's
IPO.
REDEMPTION OF SECURITIES
On April 2, 1999, the Company repurchased 1,200,000 shares of common stock
for an aggregate price of $61,000, equal to approximately $0.05 per share, from
the following executive officer and employees in the following amounts:
<TABLE>
<CAPTION>
NAME POSITION AMOUNT
- ---- ------------------------------------------------------ --------
<S> <C> <C>
Richard S. Johnson......... Chairman, Chief Executive Officer and President $12,200
Allen Murabayashi.......... Vice President of Software Engineering $24,400
Thomas Chin................ Chief Scientist $24,400
</TABLE>
AGREEMENTS WITH DOUBLECLICK
In April 1999, the Company entered into a Softshoe-Registered Trademark-
Standard License Agreement with DoubleClick. Pursuant to that agreement,
DoubleClick paid the Company a one-time purchase price of $26,000 for the
Softshoe Select License and currently makes monthly payments of $3,500 for the
Company's comprehensive hosting and maintenance program. The agreement may be
terminated by either party at any time and is of an indefinite term.
The Company also has an agreement with DoubleClick pursuant to which the
Company uses DoubleClick's DART Service to target and measure the Company's
advertisements on Web pages, as well as an agreement pursuant to which
DoubleClick places the Company's advertising banners on Web pages. In connection
with these agreements, the Company paid an initial start-up fee of $4,500, and
pays monthly service fees based on the number of ad impressions delivered
pursuant to each agreement. In 1999, the Company paid to DoubleClick
approximately $329,000 under these agreements. The Company recently entered into
a new DART Service Agreement, pursuant to which the Company paid an initial fee
of $5,000, and anticipates paying monthly fees of approximately $8,250.
Kevin P. Ryan, a Director of the Company, is the President and Chief
Operating Officer of DoubleClick.
15
<PAGE>
TRANSACTIONS INVOLVING OTEC
Richard S. Johnson, a Director and executive officer of the Company, is the
former President and was, until March 8, 2000, a director and one of two
shareholders of OTEC. Bennett Carroccio, one of the Company's principal
stockholders, is, as of March 8, 2000, the sole shareholder of OTEC. As of
February 29, 2000, OTEC owned approximately 9.1% of the Company's outstanding
voting stock.
Until May 1999, OTEC served as the Company's principal source of financing.
During 1999, the Company repaid to OTEC approximately $2,000,000 which
represented various expenses paid by OTEC on the Company's behalf in 1997, 1998
and 1999. These expenses primarily consisted of rent, salaries, computer expense
and other administrative expenses. OTEC also provided cash advances of
$2,639,795 to the Company in 1998, of which approximately $2,259,795 bore
interest at rates ranging from 8.75% to 9.5% per annum. In 1999, the Company
repaid all but $1,063 of these cash advances.
The Company believes that these transactions were entered into on an
arms-length basis. The expenses were based on the actual charge per employee of
the Company with respect to salaries and employee benefit plans. With respect to
expenses such as rent, computer expenses and insurance, expenses were based on
the number of the Company's employees using the facility or service. All of
these expenses were paid to outside third parties at market rates.
OTEC and two of its affiliates maintain a line of credit with The Dime
Savings Bank of New York ("Dime") in the principal amount of $3.5 million which
bears interest at a fluctuating rate of 1% above Dime's established commercial
lending rate. OTEC used this line of credit to provide the cash advanced to the
Company in 1998. Until September 16, 1999, the Company maintained a line of
credit with Dime in the principal amount of $500,000 that bore interest at a
fluctuating rate of 1% above Dime's established commercial lending rate. On
July 20, 1999, the Company repaid all amounts outstanding under the Company's
facility with Dime. The Company pledged all of its assets to Dime to secure
OTEC's line of credit, and OTEC and two of its affiliates pledged all of their
assets to Dime to secure the Company's line of credit. In addition,
Messrs. Johnson and Carroccio personally guaranteed repayment of all outstanding
amounts under both lines of credit. On June 2, 1999, Dime released
Messrs. Johnson and Carroccio from their guarantees and released its security
interest in the Company's, OTEC's and the affiliated companies' assets. On
September 16, 1999, the Company terminated its line of credit with Dime.
The Company recognized $294,000 in 1999 for the license and hosting of
miscellaneous proprietary software licensed by OTEC from the Company. The
Company believes that these transactions were entered into on an arms-length
basis.
Until mid-1999, the Company had several joint insurance policies with OTEC
and its affiliates. The Company and OTEC maintained joint policies because it
was more economical and convenient to do so. The Company's commercial property
insurance issued by Federal Insurance Company for a one-year term beginning
October 15, 1998, covered both the Company's California and New York offices as
well as OTEC's California office. The Company's commercial umbrella policy, also
issued by Federal Insurance Company for a one-year term beginning October 15,
1998, also covered OTEC and its affiliates, as did the Company's workers
compensation insurance, issued by Lumbermans Mutual Casualty Company on
December 1, 1998 for a term ending October 15, 1999. Effective June 1, 1999, the
Company had stand-alone insurance policies in place. The Company also had a
joint fiduciary liability policy, issued by Travelers Insurance for a one-year
term beginning October 20, 1998, with OTEC and its affiliates. Insurance
expenses of $85,096 in 1998 have been allocated by OTEC to the Company based on
the respective number of personnel of these two companies. On July 20, 1999, the
Company obtained its own directors' and officers' liability insurance policy.
Until July 1, 1999, the Company's employees participated in the 401(k)
Profit Sharing Plan established in January 1996 by RBL Agency, Ltd. ("RBL"), one
of OTEC's affiliates. The Plan Trustees are Richard Johnson and Bennett
Carroccio. The Plan allowed the Company's employees to defer between 1% and
16
<PAGE>
15% of their compensation. Under the Plan, the Company made matching
contributions of $.50 for every $1.00 contributed by an employee on the first 6%
of the employee's salary deferrals, which contribution was subject to vesting.
Effective July 1, 1999, the Company's employees began to participate in the
Company's own 401(k) Plan and all amounts attributed to the Company's employees
in the RBL Plan were transferred to the Company's 401(k) Plan.
OTEC and RBL, jointly and severally, guarantee certain of the Company's
obligations, including the Company's obligation to pay rent under its leases,
dated as of April 16, 1999, pursuant to which the Company rents the 10th, 14th
and 16th floors of a building located at 24 West 40th Street in New York City.
On March 2, 1999, Mr. Johnson granted Mr. Carroccio an option, which expires
on March 2, 2002, to purchase 34 shares of OTEC common stock owned personally by
Mr. Johnson at a purchase price of $4,880 per share aggregating to $165,290 and
an additional option to purchase 50 shares of each of OTEC's affiliated
companies at a purchase price of $1 per share. In addition, Mr. Johnson granted
to Mr. Carroccio an irrevocable proxy expiring March 2, 2002 to vote all of
Mr. Johnson's shares subject to the option. Mr. Carroccio exercised this option
in full on March 8, 2000. Similarly, on March 2, 1999, Mr. Carroccio granted
Mr. Johnson an option, which expires on March 2, 2002, to purchase 3,264,000
shares of the Company's common stock owned personally by Mr. Carroccio at a
purchase price of approximately $.05 per share aggregating to $165,290. On
November 15, 1999, for no consideration, Mr. Johnson executed a letter agreement
pursuant to which he agreed to exercise the option only to the extent of
3,140,352 shares of the Company's common stock owned by Mr. Carroccio.
Mr. Carroccio granted Mr. Johnson an irrevocable proxy expiring March 2, 2002 to
vote the shares of the Company's common stock which are subject to the option.
On March 8, 2000, Mr. Johnson exercised this option to the extent of 3,040,352
shares.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's officers, directors
and persons who own more than 10% of the Company's common stock to file reports
of ownership on Form 3 and changes in ownership on Form 4 or 5 with the
Commission and the Nasdaq Stock Market, Inc. Such officers, directors and 10%
holders are also required by the Commission to furnish the Company with copies
of all Section 16(a) forms that they file.
Based solely on its review of copies of such reports received or written
representations from certain reporting persons, the Company believes that all
Section 16(a) filing requirements applicable to its officers, directors and 10%
stockholders were complied with during the fiscal year ended December 31, 1999,
except that Richard S. Johnson failed to file on a timely basis information as
to his direct ownership of shares of the Company's common stock on a Form 3 and
failed to file on a timely basis his change of ownership on a Form 4 when he
surrendered, for no consideration, his right to exercise a stock purchase option
with respect to 123,648 shares of the Company's common stock, and Stephen W.
Ellis failed to file on a timely basis his change of ownership on a Form 4
related to his purchase of 42,148 shares of Series A Preferred Stock of the
Company prior to the Company's IPO and the subsequent conversion of that
preferred stock into common stock and his receipt prior to the Company's IPO of
an option to purchase 360,000 shares of the Company's common stock.
17
<PAGE>
PROPOSAL 2
APPROVAL OF INCREASE OF SHARES OF COMMON STOCK UNDER OPTION PLAN
The Company's stockholders are being asked to approve and ratify an
amendment to the Option Plan that will increase the number of shares of common
stock authorized for issuance over the term of the Option Plan by adding an
annual automatic share increase feature to the Option Plan whereby the share
reserve will increase on the first trading day in January each calendar year,
beginning with calendar year 2001, by an amount equal to 3% of the total number
of shares of common stock outstanding on the last trading day of the immediately
preceding calendar year, subject to a maximum annual increase of 1,500,000
shares.
The Option Plan became effective on June 30, 1999 upon its adoption by the
Board of Directors and approval by the stockholders. The amendment to the Option
Plan that is the subject of this Proposal was adopted by the Board on March 2,
2000, subject to stockholder approval at the Annual Meeting.
The proposed share increase will assure that a sufficient reserve of common
stock is available under the Option Plan to attract and retain the services of
employees, which is essential to the Company's long-term growth and success.
The following is a summary of the principal features of the Option Plan as
amended. The summary, however, does not purport to be a complete description of
all the provisions of the Option Plan. Any stockholder of the Company who wishes
to obtain a copy of the actual plan document may do so upon written request to
the Corporate Secretary at the Company's principal executive offices in New York
City, New York.
EQUITY INCENTIVE PROGRAMS
The Option Plan contains three separate equity incentive programs: (i) a
Discretionary Option Grant Program, (ii) a Stock Issuance Program and (iii) an
Automatic Option Grant Program. The principal features of each of these programs
are described below. The Compensation Committee has the authority to administer
the Discretionary Option Grant and Stock Issuance Programs with respect to
officers and directors subject to the short-swing trading restrictions of the
federal securities laws. The Option Plan Administrator (which as used in this
summary will mean the Compensation Committee, the Secondary Committee (defined
below) or the Board to the extent such entity is administering the Plan) will
have complete discretion (subject to the provisions of the Option Plan) to
authorize option grants under the Option Plan. With respect to all other
participants, the Discretionary Option Grant and Stock Issuance Programs may be
administered by either the Compensation Committee or a special stock option
committee (the "Secondary Committee") comprised of one or more Board members
appointed by the Board or by the Board itself. However, all grants under the
Automatic Option Grant Program will be made in strict compliance with the
express provisions of that program, and no administrative discretion will be
exercised by the Option Plan Administrator with respect to the grants made
thereunder. Stockholder approval of the amendment to the Option Plan subject to
this Proposal will constitute pre-approval of each option grant subsequently
made pursuant to the provisions of the Automatic Option Grant Program and the
subsequent exercise of that option in accordance with such terms.
SHARE RESERVE
The maximum number of shares of the Company's common stock initially
reserved for issuance over the term of the Plan was 4,500,000 shares. If this
proposal is approved, the number of shares available for issuance under the
Option Plan will automatically increase on the first trading day of each
calendar year, beginning with the 2001 calendar year, by an amount equal to 3%
of the total number of shares of common stock outstanding on the last trading
day of the immediately preceding calendar year, provided that no such increase
will exceed 1,500,000 shares. In no event may any one participant in the Option
Plan receive
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options, separately exercisable stock appreciation rights or direct stock
issuances for more than 1,000,000 shares in the aggregate per calendar year.
The shares of common stock issuable under the Plan may be drawn from shares
of the Company's authorized but unissued common stock or from shares of common
stock reacquired by the Company, including shares repurchased on the open
market.
Should an option expire, terminate or be canceled prior to exercise in full,
the shares subject to the portion of the option not so exercised will be
available for subsequent issuance under the Option Plan. Unvested shares issued
under the Option Plan and subsequently repurchased by the Company at the
original exercise or issue price paid per share will be added back to the share
reserve and will accordingly be available for subsequent issuance under the
Option Plan. However, shares subject to any options surrendered in connection
with outstanding stock appreciation rights under the Plan will not be available
for subsequent issuance.
CHANGES IN CAPITALIZATION
In the event any change is made to the outstanding shares of common stock by
reason of any recapitalization, stock dividend, stock split, combination of
shares, exchange of shares or other change affecting the outstanding common
stock as a class without the Company's receipt of consideration, appropriate
adjustments will be made to (i) the maximum number and/or class of securities
issuable under the Option Plan, (ii) the maximum number of securities by which
the share reserve is to increase automatically each year (if this Proposal is
approved), (iii) the number and/or class of securities for which any one
participant may be granted stock options, separately exercisable stock
appreciation rights and direct stock issuances under the Option Plan, (iv) the
number and/or class of securities for which option grants will subsequently be
made under the Automatic Option Grant Program to each newly-elected or
continuing non-employee Board member and (v) the number and/or class of
securities and the exercise price per share in effect under each outstanding
option under the Option Plan. All such adjustments will be designed to preclude
the enlargement or dilution of participant rights and benefits under the Option
Plan.
ELIGIBILITY
Officers and other employees of the Company and its parent or subsidiaries
(whether now existing or subsequently established), non-employee members of the
Board and the board of directors of its parent or subsidiaries and consultants
and independent advisors of the Company and its parent and subsidiaries will be
eligible to participate in the Discretionary Option Grant and Stock Issuance
Programs. Non-employee members of the Board (including members of the
Compensation Committee) will also be eligible to participate in the Automatic
Option Grant Program.
As of February 29, 2000 approximately four executive officers, 246 other
employees and four non-employee Board members were eligible to participate in
the Option Plan.
VALUATION
The fair market value per share of common stock on any relevant date under
the Option Plan will be the closing selling price per share on that date on the
Nasdaq National Market. However, if there is no closing selling price for the
common stock on the date in question, then the fair market value shall be the
closing selling price on the last preceding date for which such quotation
exists. On February 29, 2000, the closing selling price per share was $25.13.
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DISCRETIONARY OPTION GRANT PROGRAM
GRANTS. The Plan Administrator has complete discretion under the
Discretionary Option Grant Program to determine which eligible individuals are
to receive option grants or stock issuances, the time or times when such grants
or issuances are to be made, the number of shares subject to each such grant or
issuance, the status of any granted option as either an incentive stock option
or a non-statutory option under the federal tax laws, the vesting schedule (if
any) to be in effect for the option grant or stock issuance and the maximum term
for which any granted option is to remain outstanding. All expenses incurred in
administering the Option Plan will be paid by the Company.
PRICE AND EXERCISABILITY. Options may be granted under the Discretionary
Option Grant Program at an exercise price per share fixed by the Plan
Administrator; provided that incentive stock options will not be granted at an
exercise price per share less than 100% of the fair market value per share of
common stock on the option grant date. No granted option will have a term in
excess of ten years, and each option will generally become exercisable in one or
more installments over the optionee's period of service with the Company. The
shares of common stock acquired upon the exercise of one or more options may,
however, be unvested and subject to repurchase by the Company, at the exercise
price paid per share, if the optionee ceases service with the Company prior to
vesting in those shares. The Plan Administrator may at any time cancel the
Company's outstanding repurchase rights with respect to those shares and thereby
accelerate the vesting of those shares.
The exercise price may be paid in cash or in shares of common stock.
Outstanding options may also be exercised through a same-day sale program
pursuant to which a designated brokerage firm is to effect an immediate sale of
the shares purchased under the option and pay over to the Company, out of the
sale proceeds available on the settlement date, sufficient funds to cover the
exercise price for the purchased shares plus all applicable withholding taxes.
No optionee will have any stockholder rights with respect to the option
shares until such optionee has exercised the option and paid the exercise price
for the purchased shares. Options are generally not assignable or transferable
other than by will or the laws of inheritance and, during the optionee's
lifetime, the option may be exercised only by such optionee. However, the Plan
Administrator may allow non-statutory options to be transferred or assigned
during the optionee's lifetime (i) as a gift to one or more members of the
optionee's immediate family, to a trust established exclusively for one or more
such family members or to an entity controlled by the optionee and/or one or
more such family members or (ii) pursuant to a domestic relations order.
TERMINATION OF SERVICE. Upon cessation of service, the optionee will have a
limited period of time in which to exercise any outstanding option to the extent
such option is exercisable for vested shares. The Plan Administrator will have
complete discretion to extend the period following the optionee's cessation of
service during which his or her outstanding options may be exercised and/or to
accelerate the exercisability or vesting of such options in whole or in part.
Such discretion may be exercised at any time while the options remain
outstanding, whether before or after the optionee's actual cessation of service.
STOCK APPRECIATION RIGHTS. The Plan Administrator is authorized to issue
stock appreciation rights in connection with option grants made under the
Discretionary Option Grant Program. These stock appreciation rights provide the
holders with the right to surrender their options for an appreciation
distribution from the Company equal in amount to the excess of (i) the fair
market value of the vested shares of common stock subject to the surrendered
option over (ii) the aggregate exercise price payable for those shares. Such
appreciation distribution may, at the discretion of the Plan Administrator, be
made in cash or in shares of common stock.
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STOCK ISSUANCE PROGRAM
Shares may be sold under the Stock Issuance Program at a price fixed by the
Plan Administrator, payable in cash or as a bonus for past services.
The issued shares may either be immediately vested upon issuance or subject
to a vesting schedule tied to the period of service or the attainment of
performance goals. The Plan Administrator will, however, have the discretionary
authority at any time to accelerate the vesting of any unvested shares.
AUTOMATIC OPTION GRANT PROGRAM
Under the Automatic Option Grant Program, each individual who first becomes
a non-employee Board member will automatically be granted at that time a
non-statutory option grant for 20,000 shares of common stock. In addition, on
the date of each annual meeting of stockholders beginning with this Annual
Meeting, each individual who is to continue to serve as a non-employee Board
member after such meeting will automatically be granted an option to purchase
5,000 shares of common stock, provided such individual has served as a
non-employee Board member for at least six months.
Each option will have an exercise price per share equal to 100% of the fair
market value per share of common stock on the option grant date and a maximum
term of ten years measured from the option grant date. Each option will be
immediately exercisable for all of the option shares; however, any purchased
shares will be subject to repurchase by the Company, at the exercise price paid
per share, upon the optionee's cessation of Board service prior to vesting. Each
initial 20,000 share option grant will vest (and the Company's repurchase rights
will lapse) in a series of four successive equal annual installments upon the
optionee's completion of each year of Board service over the four-year period of
Board service measured from the option grant date. Each annual 5,000 share grant
will vest (and the Company's repurchase right will lapse) upon the optionee's
completion of one year of Board service measured from the grant date.
Each option will remain exercisable for a 12-month period following the
optionee's cessation of service as a Board member. In no event, however, may the
option be exercised after the expiration date of the option term. During the
applicable post-service exercise period, the option may not be exercised for
more than the number of option shares (if any) in which the Board member is
vested at the time of his or her cessation of Board service.
The shares subject to each automatic option grant will immediately vest upon
the optionee's death or permanent disability or upon certain changes in the
ownership or control of the Company. In addition, upon the successful completion
of a hostile tender offer for more than 50% of the Company's outstanding voting
stock, each outstanding automatic option grant may be surrendered to the Company
for a cash distribution per surrendered option share in an amount equal to the
excess of (i) the highest price per share of common stock paid in connection
with such tender offer over (ii) the exercise price payable for such share.
Stockholder approval of this Proposal will constitute pre-approval of each
option subsequently granted with such a surrender right and the subsequent
surrender of that option in accordance with the foregoing provisions. No
additional approval of the Plan Administrator or the Board will be required at
the time of the actual option surrender and cash distribution.
GENERAL PROVISIONS
ACCELERATION. In the event that the Company is acquired by merger or asset
sale or by tender offer for more than 50% of the outstanding voting stock, each
outstanding option under the Discretionary Option Grant Program which is not to
be assumed by the successor corporation, replaced with a comparable option to
purchase shares of the capital stock of the successor corporation or otherwise
continued in effect will automatically accelerate in full, and all unvested
shares under the Stock Issuance Program will immediately vest, except to the
extent the Company's repurchase rights with respect to those shares are to
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be assigned to the successor corporation or otherwise continued in effect.
However, the Plan Administrator has the authority to grant options which will
immediately vest upon a change in control of the Company, whether or not those
options are assumed by the successor corporation or otherwise continued in
effect following the change in control. The Plan Administrator also has the
discretionary authority to provide for the acceleration of any options assumed
in an acquisition and any unvested shares which do not vest at the time of the
acquisition upon the involuntary termination of the individual's service within
a designated period (not to exceed 18 months) following the acquisition.
The acceleration of vesting in the event of a change in the ownership or
control of the Company may be seen as an anti-takeover provision and may have
the effect of discouraging a merger proposal, a takeover attempt or other
efforts to gain control of the Company.
MODIFICATION OF AWARDS. The Plan Administrator has full power and authority
subject to the provisions of the Option Plan to amend, modify or cancel any
outstanding award under the Option Plan with the consent of the holder or
accelerate the vesting of such award.
FINANCIAL ASSISTANCE. The Plan Administrator may permit one or more
participants to pay the exercise price of outstanding options or the purchase
price of shares under the Option Plan by delivering a promissory note payable in
installments. The Plan Administrator will determine the terms of any such
promissory note. However, the maximum amount of financing provided any
participant may not exceed the consideration payable for the aggregate option
exercise price or price payable for the purchased shares plus all applicable
taxes incurred in connection with the acquisition of the shares.
SPECIAL TAX ELECTION. The Plan Administrator may provide one or more
holders of options or unvested shares with the right to have the Company
withhold a portion of the shares otherwise issuable to such individuals in
satisfaction of the tax withholding liability incurred by such individuals in
connection with the exercise of those options or the vesting of those shares.
Alternatively, the Plan Administrator may allow such individuals to deliver
previously acquired shares of common stock in payment of such tax liability.
AMENDMENT AND TERMINATION. The Board may amend or modify the Option Plan in
any or all respects whatsoever subject to any required stockholder approval. The
Board may terminate the Option Plan at any time, and the Option Plan will in all
events terminate on June 29, 2009.
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OPTION AWARDS
The table below shows, as to each of the Named Executive Officers and the
various indicated individuals and groups, the number of shares of common stock
subject to options granted between June 30, 1999 and February 29, 2000 under the
Option Plan together with the weighted average exercise price payable per share:
<TABLE>
<CAPTION>
NUMBER OF WEIGHTED AVERAGE
NAME OPTION SHARES EXERCISE PRICE
- ---- ------------- ----------------
<S> <C> <C>
Named Executive Officers:
Richard S. Johnson.......................................... 150,000 $ 8.80
Stephen W. Ellis............................................ 150,000 $ 8.00
Dimitri J. Boylan........................................... 150,000 $ 8.00
George J. Nassef, Jr........................................ 150,000 $ 8.00
All current executive officers as a group (4 persons)....... 600,000 $ 8.20
Directors:
Philip Guarascio............................................ 20,000 $ 8.00
John A. Hawkins............................................. 20,000 $ 8.00
John G. Murray.............................................. 20,000 $ 8.00
Kevin P. Ryan (1)........................................... -- --
All non-employee directors as a group (4 persons)........... 60,000 $ 8.00
All employees, including current officers who are not
executive officers as a group (255 persons)............... 1,900,300(2) $17.35
</TABLE>
- ------------------------
(1) Mr. Ryan's options were granted under the predecessor to the Option Plan.
(2) Includes options to purchase 71,000 shares of common stock which were
subsequently cancelled upon the optionees' termination of service.
FEDERAL INCOME TAX CONSEQUENCES
OPTION GRANTS. Options granted under the Option Plan may be either
incentive stock options which satisfy the requirements of Section 422 of the
Internal Revenue Code or non-statutory options which are not intended to meet
such requirements. The Federal income tax treatment for the two types of options
differs as follows:
INCENTIVE STOCK OPTIONS. No taxable income is recognized by the optionee at
the time of the option grant, and no taxable income is generally recognized at
the time the option is exercised. The optionee will, however, recognize taxable
income in the year in which the purchased shares are sold or otherwise disposed
of. For Federal tax purposes, dispositions are divided into two categories:
(i) qualifying and (ii) disqualifying. A qualifying disposition occurs if the
sale or other disposition is made after the optionee has held the shares for
more than two years after the option grant date and more than one year after the
exercise date. If either of these two holding periods is not satisfied, then a
disqualifying disposition will result.
Upon a qualifying disposition, the optionee will recognize long-term capital
gains in an amount equal to the excess of (i) the amount realized upon the sale
or other disposition of the purchased shares over (ii) the exercise price paid
for the shares. If there is a disqualifying disposition of the shares, then the
excess of (a) the fair market value of those shares on the exercise date over
(b) the exercise price paid for the shares will be taxable as ordinary income to
the optionee. Any additional gain or loss recognized upon the disposition will
be recognized as a capital gain or loss by the optionee.
If the optionee makes a disqualifying disposition of the purchased shares,
then the Company will be entitled to an income tax deduction, for the taxable
year in which such disposition occurs, equal to the
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excess of (i) the fair market value of such shares on the option exercise date
over (ii) the exercise price paid for the shares. In no other instance will the
Company be allowed a deduction with respect to the optionee's disposition of the
purchased shares.
NON-STATUTORY OPTIONS. No taxable income is recognized by an optionee upon
the grant of a non-statutory option. The optionee will in general recognize
ordinary income, in the year in which the option is exercised, equal to the
excess of the fair market value of the purchased shares on the exercise date
over the exercise price paid for the shares, and the optionee will be required
to satisfy the tax withholding requirements applicable to such income.
If the shares acquired upon exercise of the non-statutory option are
unvested and subject to repurchase by the Company in the event of the optionee's
termination of service prior to vesting in those shares, then the optionee will
not recognize any taxable income at the time of exercise but will have to report
as ordinary income, as and when the Company's repurchase right lapses, an amount
equal to the excess of (i) the fair market value of the shares on the date the
repurchase right lapses over (ii) the exercise price paid for the shares. The
optionee may, however, elect under Section 83(b) of the Internal Revenue Code to
include as ordinary income in the year of exercise of the option an amount equal
to the excess of (i) the fair market value of the purchased shares on the
exercise date over (ii) the exercise price paid for such shares. If the
Section 83(b) election is made, the optionee will not recognize any additional
income as and when the repurchase right lapses.
The Company will be entitled to an income tax deduction equal to the amount
of ordinary income recognized by the optionee with respect to the exercised
non-statutory option. The deduction will in general be allowed for the taxable
year of the Company in which such ordinary income is recognized by the optionee.
STOCK APPRECIATION RIGHTS. An optionee who is granted a stock appreciation
right will recognize ordinary income in the year of exercise equal to the amount
of the appreciation distribution. The Company will be entitled to an income tax
deduction equal to such distribution for the taxable year in which the ordinary
income is recognized by the optionee.
DIRECT STOCK ISSUANCE. The tax principles applicable to direct stock
issuances under the Option Plan will be substantially the same as those
summarized above for the exercise of non-statutory option grants.
DEDUCTIBILITY OF EXECUTIVE COMPENSATION
The Company anticipates that any compensation deemed paid by it in
connection with disqualifying dispositions of incentive stock option shares or
exercises of non-statutory options granted with exercise prices equal to the
fair market value of the option shares on the grant date will qualify as
performance-based compensation for purposes of Code Section 162(m) and will not
have to be taken into account for purposes of the $1 million limitation per
covered individual on the deductibility of the compensation paid to certain
executive officers of the Company. Accordingly, all compensation deemed paid
with respect to those options is expected to remain deductible by the Company
without limitation under Code Section 162(m).
ACCOUNTING TREATMENT
Option grants or stock issuances with exercise or issue prices less than the
fair market value of the shares on the grant or issue date will result in a
compensation expense to the Company's earnings equal to the difference between
the exercise or issue price and the fair market value of the shares on the grant
or issue date. Such expense will be accruable by the Company over the period
that the option shares or issued shares are to vest. Option grants or stock
issuances at 100% of fair market value will not result in any charge to the
Company's earnings. However, the Company must disclose in footnotes and
pro-forma statements to the Company's consolidated financial statements, the
impact those options would have upon
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<PAGE>
the Company's reported earnings were the value of those options at the time of
grant treated as a compensation expense. Whether or not granted at a discount,
the number of outstanding options may be a factor in determining the Company's
earnings per share on a fully-diluted basis.
On March 31, 1999, the Financial Accounting Standards Board issued an
exposure draft of a proposed interpretation of APB Opinion No. 25 governing the
accounting principles applicable to equity incentive plans. Under the proposed
interpretation, as subsequently modified on August 11, 1999, option grants made
to non-employee consultants (but not non-employee Board members) after
December 15, 1998 will result in a direct charge to the Company's reported
earnings based upon the fair value of the option measured initially as of the
grant date and then subsequently on the vesting date of each installment of the
underlying option shares. Such charge will, accordingly, include the
appreciation in the value of the option shares over the period between the grant
date of the option (or, if later, the effective date of the final
interpretation) and the vesting date of each installment of the option shares.
In addition, if the proposed interpretation is adopted, any options which are
repriced after December 15, 1998 will also trigger a direct charge to the
Company's reported earnings measured by the appreciation in the value of the
underlying shares over the period between the grant date of the option (or, if
later, the effective date of the final interpretation) and the date the option
is exercised for those shares.
Should one or more optionees be granted stock appreciation rights which have
no conditions upon exercisability other than a service or employment
requirement, then such rights will result in a compensation expense to the
Company's earnings.
NEW PLAN BENEFITS
As of February 29, 2000, no options have been granted, and no direct stock
issuances have been made, on the basis of the automatic share increase feature
under this Proposal. On the date of the Annual Meeting, each of
Messrs. Guarascio, Hawkins, Murray and Ryan will receive an option grant for
5,000 shares under the Automatic Option Grant Program at an exercise price equal
to the fair market value of the shares on that date.
STOCKHOLDER APPROVAL
The affirmative vote of a majority of the outstanding voting shares of the
Company present or represented and entitled to vote at the Annual Meeting is
required for approval of the amendment to the Option Plan. Should such
stockholder approval not be obtained, then the automatic annual share increase
feature will not be implemented. The Option Plan will, however, continue to
remain in effect, and option grants and stock issuances may continue to be made
pursuant to the provisions of the Option Plan prior to the proposed amendment
until the available reserve of common stock under the Option Plan is issued.
The Board believes that it is in the best interests of the Company to
implement a comprehensive equity incentive program for the Company which will
provide a meaningful opportunity for officers, employees and non-employee Board
members to acquire a substantial proprietary interest in the enterprise and
thereby encourage such individuals to remain in the Company's service and more
closely align their interests with those of the stockholders.
RECOMMENDATION OF THE BOARD
THE BOARD RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" THE APPROVAL OF THE
AMENDMENT TO THE OPTION PLAN.
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PROPOSAL 3
APPROVAL OF INCREASE OF SHARES OF COMMON STOCK UNDER PURCHASE PLAN
The Company's stockholders are being asked to approve and ratify an
amendment to the Purchase Plan that will implement an automatic share increase
feature whereby the number of shares of common stock authorized for issuance
over the term of the Purchase Plan will increase on the first trading day of
January each calendar year during the term of the Purchase Plan, beginning with
calendar year 2001, by an amount equal to 1% of the total number of shares of
common stock outstanding on the last trading day of the immediately preceding
calendar year, subject to a maximum annual increase of 500,000 shares.
The Purchase Plan was adopted by the Board and approved by the company's
stockholders on June 30, 1999. The Purchase Plan became effective on August 10,
1999 in connection with the Company's IPO. The amendment to the Purchase Plan
that is the subject of this Proposal was adopted by the Board on March 2, 2000,
subject to stockholder approval at the Annual Meeting.
The proposed share increase will assure that a sufficient reserve of common
stock is available under the Purchase Plan to attract and retain the services of
employees, which is essential to the Company's long-term growth and success.
The following is a summary of the principal features of the Purchase Plan as
amended. The summary, however, does not purport to be a complete description of
all the provisions of the Purchase Plan. Any stockholder of the Company who
wishes to obtain a copy of the actual plan document may do so upon written
request to the Corporate Secretary at the Company's principal executive offices
in New York City, New York.
ADMINISTRATION
The Purchase Plan is administered by the Compensation Committee. Such
committee, as Plan Administrator, has full authority to adopt administrative
rules and procedures and to interpret the provisions of the Purchase Plan. All
costs and expenses incurred in plan administration are paid by the Company
without charge to participants.
SHARE RESERVE
250,000 shares of common stock were initially reserved for issuance under
the Purchase Plan. Upon stockholder approval of this Proposal, the number of
shares available for issuance under the Purchase Plan will automatically
increase on the first trading day of January each calendar year during the term
of the Purchase Plan, beginning with calendar year 2001, by an amount equal to
1% of the total number of shares of common stock outstanding on the last trading
day of the immediately preceding calendar year, subject to a maximum annual
increase of 500,000 shares.
If any change is made to the Company's outstanding common stock (whether by
reason of any recapitalization, stock dividend, stock split, exchange or
combination of shares or other change in corporate structure effected without
the Company's receipt of consideration), appropriate adjustments will be made to
the (i) maximum number of securities issuable over the term of the Purchase
Plan, (ii) maximum number of securities by which the share reserve is to
increase automatically each year (if this Proposal is approved), (iii) maximum
number of securities purchasable per participant on any semi-annual purchase
date and (iv) number of securities and the price per share in effect under each
outstanding purchase right.
As of February 29, 2000, 58,718 shares of common stock had been issued under
the Purchase Plan as a result of purchases on the January 31, 2000 purchase
date, and 191,282 shares remain available for issuance.
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<PAGE>
PURCHASE PERIODS; SHARES PURCHASED
Shares of common stock are offered under the Purchase Plan through a series
of successive offering periods, each with a maximum duration of 24 months. The
current offering period began on August 10, 1999, in connection with the
Company's IPO and will end on the last business day in July 2001. The next
offering period will begin on the first business day in August 2001, and
subsequent offering periods will begin as designated by the Plan Administrator.
Purchase periods will be six months in duration, with purchases occurring on the
last business day of January and July each year. The number of shares to be
purchased on each semi-annual purchase date will be determined by dividing each
participant's accrued payroll deductions by the purchase price for that date.
However, no participant may purchase more than 1,400 shares on any purchase date
Should the fair market value per share of common stock an any semi-annual
purchase date be less than the fair market value per share on the start date of
the two-year offering period, then that offering period will automatically
terminate, and a new two-year offering period will begin on the next business
day, with all participants in the terminated offering to be automatically
transferred to the new offering period.
PURCHASE PRICE
The purchase price per share on each purchase date will be 85% of the lower
of (i) the market price per share on the participant's entry date into the
offering period or (ii) the market price per share on the purchase date.
ELIGIBILITY
Each individual who is employed by the Company on a basis requiring more
than 20 hours of service per week for more than five months per calendar year
will be eligible to participate. Employees may join the Purchase Plan on the
start date of the first six-month purchase period following their hire date or
on the start date of any subsequent purchase period.
As of February 1, 2000, approximately 213 employees, including two executive
officers, were eligible to participate in the Purchase Plan.
CONTRIBUTIONS
Employees will contribute to the plan through payroll deductions. The
deductions will be a percentage of their total cash compensation. The minimum
percentage will be 1% and the maximum percentage will be 15%. Employees may
reduce their payroll deduction percentage once during each six-month purchase
period and may increase such percentage effective as of the next new purchase
period. An employee may stop his or her payroll deductions at any time. In such
event, payroll deductions accumulated will automatically be refunded or, at the
employee's election, applied to the purchase of shares on the next purchase
date. After terminating payroll deductions, the employee will not be permitted
to rejoin the plan until a new two-year offering period begins.
LEAVE OF ABSENCE
If an employee takes an approved unpaid leave of absence, accumulated
payroll deductions will automatically be refunded or, at the employee's
election, applied to the purchase of shares on the next purchase date. Payroll
deductions will automatically resume upon his or her return to employment,
provided he or she returns within 90 days or such longer period if the leave of
absence is one with respect to which a right to return to employment is
guaranteed by law or contract. If the leave of absence continues beyond the
applicable 90-day period and his or her re-employment rights are not guaranteed
by statute or contract, the employee must re-enroll in the Purchase Plan to
participate in the next subsequent two-year offering period.
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TERMINATION OF SERVICE
If an employee leaves the Company, his or her participation in the Purchase
Plan will automatically terminate and all amounts accumulated will be refunded.
ACCELERATION
In the event the Company is acquired or sells all or substantially all of
its assets in complete liquidation or dissolution of the Company, a special
purchase date will occur immediately before the acquisition. The Company will
use its best efforts to provide participants 10 days notice of such purchase
date. The limitation on the maximum number of shares purchasable by a
participant and in the aggregate on any one purchase date will continue to be
applicable to any purchase date attributable to such a transaction.
SHARE PRO-RATION
Should the total number of shares of common stock to be purchased pursuant
to outstanding purchase rights on any particular date exceed the number of
shares at the time available for issuance under the Purchase Plan, then the Plan
Administrator will make a pro-rata allocation of the available shares on a
uniform and nondiscriminatory basis, and the payroll deductions of each
participant, to the extent in excess of the aggregate purchase price payable for
the common stock allocated to such individual, will be refunded.
TERM; AMENDMENT
The Purchase Plan will have a 10-year term. The Board may terminate the
Purchase Plan or amend it, subject to stockholder approval when required.
Amendments or a termination will generally take effect following the close of
the current semi-annual purchase period. However, in the event the accounting
rules applicable to employee stock purchase programs are amended such that the
Company is required to record a compensation expense for financial reporting
purposes with respect to the Purchase Plan, the Board may amend or terminate the
Purchase Plan immediately.
PURCHASE PLAN PURCHASES ON JANUARY 31, 2000
<TABLE>
<CAPTION>
NUMBER OF WEIGHTED AVERAGE
NAME SHARES PURCHASED PURCHASE PRICE
- ---- ---------------- ----------------
<S> <C> <C>
Named Executive Officers:
Richard S. Johnson.......................................... -- --
Stephen W. Ellis............................................ 1,400 $6.80
Dimitri J. Boylan........................................... -- --
George J. Nassef, Jr........................................ 695 $6.80
All current executive officers as a group (4 persons)....... 2,095 $6.80
All employees, including current officers who are not
executive officers as a group (99 persons)................ 56,623 $6.80
</TABLE>
TAX CONSEQUENCES
The Purchase Plan will be administered as a qualified employee stock
purchase plan under Internal Revenue Code Section 423. Accordingly, no taxable
income will be recognized by a participant, and no deductions will be allowable
to the Company, upon either the grant or the exercise of the purchase rights.
There will be no taxable consequences to the participants until the shares are
sold or otherwise transferred or in the event the participant should die while
still owning the purchased shares.
28
<PAGE>
If the participant sells or otherwise disposes of the purchased shares
within two years after his or her entry date into the offering period in which
such shares were acquired or within one year after the semi-annual purchase date
on which those shares were actually acquired, then the participant will
recognize ordinary income in the year of sale or disposition equal to the amount
by which the fair market value of the shares on the purchase date exceeded the
purchase price paid for those shares, and the Company will be entitled to an
income tax deduction, for the taxable year in which such disposition occurs,
equal in amount to such excess.
If the participant sells or disposes of the purchased shares more than two
years after his or her entry date into the offering period in which the shares
were acquired and more than one year after the semi-annual purchase date on
which those shares were actually acquired, then the participant will recognize
ordinary income in the year of sale or disposition equal to the LOWER of
(i) the amount by which the fair market value of the shares on the sale or
disposition date exceeded the purchase price paid for those shares or (ii) 15%
of the fair market value of the shares on the participant's entry date into that
offering period. Any additional gain upon the disposition will be taxed as a
long-term capital gain. The Company will not be entitled to an income tax
deduction with respect to such sale or disposition.
If the participant still owns the purchased shares at the time of death, his
or her estate will recognize ordinary income in the year of death equal to the
LOWER of (i) the amount by which the fair market value of the shares on the date
of death exceeds the purchase price or (ii) 15% of the fair market value of the
shares on his or her entry date into the offering period in which those shares
were acquired.
ACCOUNTING TREATMENT
Under current accounting principles applicable to employee stock purchase
plans qualified under Section 423 of the Internal Revenue Code, the issuance of
common stock under the Purchase Plan will not result in a compensation expense
chargeable against the Company's reportable earnings. However, the Company must
disclose, in pro-forma statements to the Company's consolidated financial
statements, the impact that the purchase rights granted under the Purchase Plan
would have upon the Company's reported earnings were the fair value of those
purchase rights treated as compensation expense.
NEW PLAN BENEFITS
As of February 29, 2000, no purchases have been made on the basis of the
automatic share increase feature under this Proposal.
STOCKHOLDER APPROVAL
The affirmative vote of a majority of the outstanding shares of the common
stock present or represented and entitled to vote is required for approval of
this proposal. Should such stockholder approval not be obtained, then the
automatic share increase feature will not be implemented, and 191,282 shares
will remain available for issuance under the Purchase Plan.
RECOMMENDATION OF THE BOARD
THE BOARD RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" APPROVAL
OF THE AMENDMENT TO THE PURCHASE PLAN.
29
<PAGE>
PROPOSAL 4
RATIFICATION OF SELECTION OF INDEPENDENT PUBLIC ACCOUNTANTS
Upon the recommendation of the Audit Committee, the Board of Directors
appointed KPMG LLP, independent public accountants, as independent auditors of
the Company to serve for the year ending December 31, 2000, subject to the
ratification of such appointment by the stockholders at the Annual Meeting. A
majority of the votes of the outstanding shares of common stock is required to
ratify the appointment of the auditors. A representative of KPMG LLP will attend
the Annual Meeting with the opportunity to make a statement if he or she so
desires and will also be available to answer inquiries.
RECOMMENDATION OF THE BOARD
THE BOARD RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" THE RATIFICATION OF
KPMG LLP AS THE COMPANY'S INDEPENDENT PUBLIC ACCOUNTANTS FOR THE FISCAL YEAR
ENDING DECEMBER 31, 2000.
STOCKHOLDER PROPOSALS
In accordance with regulations issued by the Commission, stockholder
proposals intended for presentation at the 2001 Annual Meeting of Stockholders
must be received by the Secretary of the Company no later than December 8, 2000
if such proposals are to be considered for inclusion in the Company's proxy
statement. The submission by a stockholder of a proposal for inclusion in the
proxy statement does not guarantee that it will be included. Stockholder
proposals are subject to certain regulations under U.S. federal securities laws.
Pursuant to the rule of the Commission and the Company's by-laws, in order
to be properly presented at the 2001 Annual Meeting of Stockholders, any
stockholder proposals intended to be presented must be received by the Company
between November 8, 2000 and December 8, 2000, inclusive. Stockholder proposals
received before or after those dates may be excluded from the meeting.
ANNUAL REPORT
The Annual Report of the Company (which does not form a part of the proxy
solicitation materials), containing the consolidated financial statements of the
Company for the fiscal year ended December 31, 1999, is being distributed
concurrently herewith to all stockholders entitled to notice of and to vote at
the Annual Meeting.
FORM 10-K
THE COMPANY FILED ITS ANNUAL REPORT ON FORM 10-K WITH THE COMMISSION ON
MARCH 24, 2000. STOCKHOLDERS MAY OBTAIN A COPY OF THIS REPORT, WITHOUT CHARGE,
BY WRITING TO THE DIRECTOR OF INVESTOR RELATIONS AT THE COMPANY'S PRINCIPAL
EXECUTIVE OFFICES LOCATED AT 24 WEST 40(TH) STREET, 14(TH) FLOOR, NEW YORK, NEW
YORK 10018.
30
<PAGE>
OTHER MATTERS
Management knows of no matters that are to be presented for action at the
Annual Meeting other than those set forth above. If any other matters properly
come before the Annual Meeting, the persons named in the enclosed form of proxy
will vote the shares represented by proxies in accordance with their best
judgment on such matters.
Proxies will be solicited by mail and may also be solicited in person or by
telephone by some regular employees of the Company. The Company may also
consider the engagement of a proxy solicitation firm. Costs of the solicitation
will be borne by the Company.
By Order of the Board of Directors
/s/ Richard S. Johnson
Richard S. Johnson
President, Chief Executive Officer and
Chairman of the Board of Directors
New York, New York
April 7, 2000
STOCKHOLDERS ARE REMINDED TO SIGN AND DATE THE ENCLOSED PROXY AND MAIL IT
PROMPTLY IN THE POSTAGE-PAID ENVELOPE PROVIDED.
31
<PAGE>
APPENDIX A
FORM OF PROXY
<PAGE>
HOTJOBS.COM, LTD.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS FOR THE ANNUAL MEETING
OF STOCKHOLDERS TO BE HELD ON MAY 17, 2000
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned stockholder of
HotJobs.com, Ltd. hereby appoints Richard S. Johnson and Stephen W. Ellis, and
each of them, with full power of substitution, proxies to vote the shares of
stock which the undersigned could vote if personally present at the Annual
Meeting of Stockholders of HotJobs.com, Ltd. to be held at the Marriott Marquis
Hotel, 1535 Broadway, New York, New York, 10036 on May 17, 2000 at 10:00 a.m.
(New York time).
1. ELECTION OF DIRECTORS (FOR TERMS AS DESCRIBED IN THE PROXY STATEMENT)
/ / FOR nominees below / / WITHHOLD AUTHORITY
(except as marked to the to vote for nominees below
contrary)
NOMINEES:
John G. Murray
Kevin P. Ryan
INSTRUCTION: To withhold authority to vote for an individual nominee,
write the nominee's name on the space provided below.
2. APPROVAL OF AMENDMENT TO THE OPTION PLAN
/ / FOR / / AGAINST / / ABSTAIN WITH RESPECT TO
the proposal to approve automatic increases in the number of shares of
common stock available under the Company's 1999 Stock Option/Stock Issuance Plan
and limit the annual automatic share increase under the Option Plan to 1,500,000
shares.
3. APPROVAL OF AMENDMENT TO THE PURCHASE PLAN
/ / FOR / / AGAINST / / ABSTAIN WITH RESPECT TO
the proposal to approve automatic increases in the number of shares of
common stock available under the Company's Employee Stock Purchase Plan and
limit the annual automatic share increase under the Purchase Plan to 500,000
shares.
<PAGE>
4. RATIFICATION OF SELECTION OF INDEPENDENT PUBLIC ACCOUNTANTS
/ / FOR / / AGAINST / / ABSTAIN WITH RESPECT TO
the proposal to ratify the selection of KPMG LLP, independent public
accountants, as auditors of the Company as described in the Proxy Statement.
5. IN THEIR DISCRETION UPON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE
MEETING
UNLESS OTHERWISE SPECIFIED, THIS PROXY WILL BE VOTED "FOR" PROPOSAL 1,
PROPOSAL 2, PROPOSAL 3, PROPOSAL 4 AND PROPOSAL 5.
Please date and sign exactly as your name appears on the envelope in which this
material was mailed. If shares are held jointly, each stockholder should sign.
Executors, administrators, trustees, etc. should use full title and, if more
than one, all should sign. If the stockholder is a corporation, please sign full
corporate name by an authorized officer. If the stockholder is a partnership,
please sign full partnership name by an authorized person.
Name(s) of Stockholder
Signature(s) of Stockholder
Dated:
<PAGE>
APPENDIX B
1999 STOCK OPTION/STOCK ISSUANCE PLAN AND AMENDMENT NO. 1 THERETO
<PAGE>
HOTJOBS.COM, LTD.
1999 STOCK OPTION/STOCK ISSUANCE PLAN
ARTICLE ONE
GENERAL PROVISIONS
I. PURPOSE OF THE PLAN
This 1999 Stock Option/Stock Issuance Plan is intended to promote the interests
of HotJobs.com, Ltd., a Delaware corporation, by providing eligible persons with
the opportunity to acquire a proprietary interest, or otherwise increase their
proprietary interest, in the Corporation as an incentive for them to remain in
the service of the Corporation. Capitalized terms shall have the meanings
assigned to such terms in the attached Appendix.
II. STRUCTURE OF THE PLAN
A. The Plan shall be divided into three separate equity programs:
(i) the Discretionary Option Grant Program under which eligible persons may, at
the discretion of the Plan Administrator, be granted options to purchase shares
of Common Stock,
(ii) the Stock Issuance Program under which eligible persons may, at the
discretion of the Plan Administrator, be issued shares of Common Stock directly,
either through the immediate purchase of such shares or as a bonus for services
rendered the Corporation (or any Parent or Subsidiary), and
(iii) the Automatic Option Grant Program under which eligible non-employee Board
members shall automatically receive options at periodic intervals to purchase
shares of Common Stock.
B. The provisions of Articles One and Five shall apply to all equity programs
under the Plan and shall govern the interests of all persons under the Plan.
III. ADMINISTRATION OF THE PLAN
A. Prior to the Section 12 Registration Date, the Discretionary Option Grant and
Stock Issuance Programs shall be administered by the Board. Beginning with the
Section 12 Registration Date, the following provisions shall govern the
administration of the Plan:
(i) The Board shall have the authority to administer the Discretionary Option
Grant and Stock Issuance Programs with respect to Section 16 Insiders but may
delegate such authority in whole or in part to the Primary Committee.
(ii) Administration of the Discretionary Option Grant and Stock Issuance
Programs with respect to all other persons eligible to participate in those
programs may, at the Board's discretion, be vested in the Primary Committee or a
Secondary Committee, or the Board may retain the power to administer those
programs with respect to all such persons.
(iii) Administration of the Automatic Option Grant Program shall be
self-executing in accordance with the terms of that program.
B. Each Plan Administrator shall, within the scope of its administrative
jurisdiction under the Plan, have full power and authority subject to the
provisions of the Plan:
(i) to establish such rules as it may deem appropriate for proper administration
of the Plan, to make all factual determinations, to construe and interpret the
provisions of the Plan and the awards thereunder and to resolve any and all
ambiguities thereunder;
<PAGE>
(ii) to determine, with respect to awards made under the Discretionary Option
Grant and Stock Issuance Programs, which eligible persons are to receive such
awards, the time or times when such awards are to be made, the number of shares
to be covered by each such award, the vesting schedule (if any)applicable to the
award, the status of a granted option as either an Incentive Option or a
Non-Statutory Option and the maximum term for which the option is to remain
outstanding;
(iii) to amend, modify or cancel any outstanding award with the consent of the
holder or accelerate the vesting of such award; and
(iv) to take such other discretionary actions as permitted pursuant to the terms
of the applicable program. Decisions of each Plan Administrator within the scope
of its administrative functions under the Plan shall be final and binding on all
parties.
C. Members of the Primary Committee or any Secondary Committee shall serve for
such period of time as the Board may determine and may be removed by the Board
at any time. The Board may also at any time terminate the functions of any
Secondary Committee and reassume all powers and authority previously delegated
to such committee.
D. Service on the Primary Committee or the Secondary Committee shall constitute
service as a Board member, and members of each such committee shall accordingly
be entitled to full indemnification and reimbursement as Board members for their
service on such committee. No member of the Primary Committee or the Secondary
Committee shall be liable for any act or omission made in good faith with
respect to the Plan or any options or stock issuances under the Plan.
IV. ELIGIBILITY
A. The persons eligible to participate in the Discretionary Option Grant and
Stock Issuance Programs are as follows:
(i) Employees,
(ii) non-employee members of the Board or the board of directors of any Parent
or Subsidiary, and
(iii) consultants and other independent advisors who provide services to the
Corporation (or any Parent or Subsidiary).
B. Only non-employee Board members shall be eligible to participate in the
Automatic Option Grant Program.
V. STOCK SUBJECT TO THE PLAN
A. The stock issuable under the Plan shall be shares of authorized but unissued
or reacquired Common Stock, including shares repurchased by the Corporation on
the open market. The maximum number of shares of Common Stock initially reserved
for issuance over the term of the Plan shall not exceed 4,500,000 shares.
B. No one person participating in the Plan may receive options, separately
exercisable stock appreciation rights and direct stock issuances for more than
1,000,000 shares of Common Stock in the aggregate per calendar year, beginning
with the 1999 calendar year.
C. Shares of Common Stock subject to outstanding options shall be available for
subsequent issuance under the Plan to the extent those options expire, terminate
or are cancelled for any reason prior to exercise in full. Unvested shares
issued under the Plan and subsequently repurchased by the Corporation,
<PAGE>
at the original exercise or issue price paid per share, pursuant to the
Corporation's repurchase rights under the Plan shall be added back to the number
of shares of Common Stock reserved for issuance under the Plan and shall
accordingly be available for reissuance through one or more subsequent options
or direct stock issuances under the Plan. However, should the exercise price of
an option under the Plan be paid with shares of Common Stock or should shares of
Common Stock otherwise issuable under the Plan be withheld by the Corporation in
satisfaction of the withholding taxes incurred in connection with the exercise
of an option or the vesting of a stock issuance under the Plan, then the number
of shares of Common Stock available for issuance under the Plan shall be reduced
by the gross number of shares for which the option is exercised or which vest
under the stock issuance, and not by the net number of shares of Common Stock
issued to the holder of such option or stock issuance. Shares of Common Stock
underlying one or more stock appreciation rights exercised under the Plan shall
NOT be available for subsequent issuance.
D. If any change is made to the Common Stock by reason of any stock split, stock
dividend, recapitalization, combination of shares, exchange of shares or other
change affecting the outstanding Common Stock as a class without the
Corporation's receipt of consideration, appropriate adjustments shall be made to
(i) the maximum number and/or class of securities issuable under the Plan, (ii)
the number and/or class of securities for which any one person may be granted
options, separately exercisable stock appreciation rights and direct stock
issuances under this Plan per calendar year, (iii) the number and/or class of
securities for which grants are subsequently to be made under the Automatic
Option Grant Program to new and continuing non-employee Board members and (iv)
the number and/or class of securities and the exercise price per share in effect
under each outstanding option under the Plan. Such adjustments to the
outstanding options are to be effected in a manner which shall preclude the
enlargement or dilution of rights and benefits under such options. The
adjustments determined by the Plan Administrator shall be final, binding and
conclusive. In no event shall any such adjustments be made in connection with
the conversion of one or more outstanding shares of the Corporation's preferred
stock into shares of Common Stock.
ARTICLE TWO
DISCRETIONARY OPTION GRANT PROGRAM
I. OPTION TERMS
Each option shall be evidenced by one or more documents in the form approved by
the Plan Administrator; PROVIDED, however, that each such document shall comply
with the terms specified below. Each document evidencing an Incentive Option
shall, in addition, be subject to the provisions of the Plan applicable to such
options.
A. EXERCISE PRICE.
1. The exercise price per share shall be fixed by the Plan Administrator at the
time of the option grant.
2. The exercise price shall become immediately due upon exercise of the option
and shall, subject to the provisions of Section II of Article Five and the
documents evidencing the option, be payable in cash or check made payable to the
Corporation. Should the Common Stock be registered under Section 12 of the 1934
Act at the time the option is exercised, then the exercise price may also be
paid as follows:
(i) shares of Common Stock held for the requisite period necessary to avoid a
charge to the Corporation's earnings for financial reporting purposes and valued
at Fair Market Value on the Exercise Date, or
(ii) to the extent the option is exercised for vested shares, through a special
sale and remittance procedure pursuant to which the Optionee shall concurrently
provide irrevocable instructions to (a) a Corporation-approved brokerage firm to
effect the immediate sale of the purchased shares and remit to the
<PAGE>
Corporation, out of the sale proceeds available on the settlement date,
sufficient funds to cover the aggregate exercise price payable for the purchased
shares plus all applicable Federal, state and local income and employment taxes
required to be withheld by the Corporation by reason of such exercise and (b)
the Corporation to deliver the certificates for the purchased shares directly to
such brokerage firm in order to complete the sale.
Except to the extent such sale and remittance procedure is utilized, payment of
the exercise price for the purchased shares must be made on the Exercise Date.
B. EXERCISE AND TERM OF OPTIONS. Each option shall be exercisable at such time
or times, during such period and for such number of shares as shall be
determined by the Plan Administrator and set forth in the documents evidencing
the option. However, no option shall have a term in excess of ten (10) years
measured from the option grant date.
C. CESSATION OF SERVICE.
1. The following provisions shall govern the exercise of any options outstanding
at the time of the Optionee's cessation of Service or death:
(i) Any option outstanding at the time of the Optionee's cessation of Service
for any reason shall remain exercisable for such period of time thereafter as
shall be determined by the Plan Administrator and set forth in the documents
evidencing the option, but no such option shall be exercisable after the
expiration of the option term.
(ii) Any option exercisable in whole or in part by the Optionee at the time of
death may be subsequently exercised by his or her Beneficiary.
(iii) During the applicable post-Service exercise period, the option may not be
exercised in the aggregate for more than the number of vested shares for which
the option is exercisable on the date of the Optionee's cessation of Service.
Upon the expiration of the applicable exercise period or (if earlier) upon the
expiration of the option term, the option shall terminate and cease to be
outstanding for any vested shares for which the option has not been exercised.
However, the option shall, immediately upon the Optionee's cessation of Service,
terminate and cease to be outstanding to the extent the option is not otherwise
at that time exercisable for vested shares.
(iv) Should the Optionee's Service be terminated for Misconduct or should the
Optionee engage in Misconduct while his or her options are outstanding, then all
such options shall terminate immediately and cease to be outstanding.
2. The Plan Administrator shall have complete discretion, exercisable either at
the time an option is granted or at any time while the option remains
outstanding:
(i) to extend the period of time for which the option is to remain exercisable
following the Optionee's cessation of Service to such period of time as the Plan
Administrator shall deem appropriate, but in no event beyond the expiration of
the option term, and/or
(ii) to permit the option to be exercised, during the applicable post-Service
exercise period, for one or more additional installments in which the Optionee
would have vested had the Optionee continued in Service.
D. STOCKHOLDER RIGHTS. The holder of an option shall have no stockholder rights
with respect to the shares subject to the option until such person shall have
exercised the option, paid the exercise price and become a holder of record of
the purchased shares.
<PAGE>
E. REPURCHASE RIGHTS. The Plan Administrator shall have the discretion to grant
options which are exercisable for unvested shares of Common Stock. Should the
Optionee cease Service while holding such unvested shares, the Corporation shall
have the right to repurchase, at the exercise price paid per share, any or all
of those unvested shares. The terms upon which such repurchase right shall be
exercisable (including the period and procedure for exercise and the appropriate
vesting schedule for the purchased shares) shall be established by the Plan
Administrator and set forth in the document evidencing such repurchase right.
F. LIMITED TRANSFERABILITY OF OPTIONS. During the lifetime of the Optionee,
Incentive Options shall be exercisable only by the Optionee and shall not be
assignable or transferable other than by will or by the laws of descent and
distribution following the Optionee's death. Non-Statutory Options shall be
subject to the same restrictions, except that a Non-Statutory Option may, to the
extent permitted by the Plan Administrator, be assigned in whole or in part
during the Optionee's lifetime (i) as a gift to one or more members of the
Optionee's immediate family, to a trust in which Optionee and/or one or more
such family members hold more than fifty percent (50%) of the beneficial
interest or to an entity in which more than fifty percent (50%) of the voting
interests are owned by Optionee and/or one or more such family members or (ii)
pursuant to a domestic relations order. The terms applicable to the assigned
portion shall be the same as those in effect for the option immediately prior to
such assignment and shall be set forth in such documents issued to the assignee
as the Plan Administrator may deem appropriate.
II. INCENTIVE OPTIONS
The terms specified below shall be applicable to all Incentive Options. Except
as modified by the provisions of this Section II, all the provisions of Articles
One, Two and Five shall be applicable to Incentive Options. Options which are
specifically designated as Non-Statutory Options when issued under the Plan
shall NOT be subject to the terms of this Section II.
A. ELIGIBILITY. Incentive Options may only be granted to Employees.
B. EXERCISE PRICE. The exercise price per share shall not be less than one
hundred percent (100%) of the Fair Market Value per share of Common Stock on the
option grant date.
C. DOLLAR LIMITATION. The aggregate Fair Market Value of the shares of Common
Stock (determined as of the respective date or dates of grant) for which one or
more options granted to any Employee under the Plan (or any other option plan of
the Corporation or any Parent or Subsidiary) may for the first time become
exercisable as Incentive Options during any one calendar year shall not exceed
the sum of One Hundred Thousand Dollars ($100,000). To the extent the Employee
holds two (2) or more such options which become exercisable for the first time
in the same calendar year, the foregoing limitation on the exercisability of
such options as Incentive Options shall be applied on the basis of the order in
which such options are granted.
D. 10% STOCKHOLDER. If any Employee to whom an Incentive Option is granted is a
10% Stockholder, then the exercise price per share shall not be less than one
hundred ten percent (110%) of the Fair Market Value per share of Common Stock on
the option grant date, and the option term shall not exceed five (5) years
measured from the option grant date.
III. CHANGE IN CONTROL/HOSTILE TAKE-OVER
A. Each option outstanding at the time of a Change in Control but not otherwise
fully-vested shall automatically accelerate so that each such option shall,
immediately prior to the effective date of the Change in Control, become
exercisable for all of the shares of Common Stock at the time subject to that
option and may be exercised for any or all of those shares as fully-vested
shares of Common Stock. However, an outstanding option shall not so accelerate
if and to the extent: (i) such option is, in
<PAGE>
connection with the Change in Control, assumed or otherwise continued in full
force and effect by the successor corporation (or parent thereof) pursuant to
the terms of the Change in Control, (ii) such option is replaced with a cash
incentive program of the successor corporation which preserves the spread
existing at the time of the Change in Control on the shares of Common Stock for
which the option is not otherwise at that time exercisable and provides for
subsequent payout in accordance with the same vesting schedule applicable to
those option shares or
(iii) the acceleration of such option is subject to other limitations imposed by
the Plan Administrator at the time of the option grant.
B. All outstanding repurchase rights shall also terminate automatically, and the
shares of Common Stock subject to those terminated rights shall immediately vest
in full, in the event of any Change in Control, except to the extent: (i) those
repurchase rights are assigned to the successor corporation (or parent thereof)
or otherwise continue in full force and effect pursuant to the terms of the
Change in Control or (ii) such accelerated vesting is precluded by other
limitations imposed by the Plan Administrator at the time the repurchase right
is issued.
C. Immediately following the consummation of the Change in Control, all
outstanding options shall terminate and cease to be outstanding, except to the
extent assumed by the successor corporation (or parent thereof) or otherwise
expressly continued in full force and effect pursuant to the terms of the Change
in Control.
D. Each option which is assumed in connection with a Change in Control shall be
appropriately adjusted, immediately after such Change in Control, to apply to
the number and class of securities which would have been issuable to the
Optionee in consummation of such Change in Control had the option been exercised
immediately prior to such Change in Control. Appropriate adjustments to reflect
such Change in Control shall also be made to (i) the exercise price payable per
share under each outstanding option, PROVIDED the aggregate exercise price
payable for such securities shall remain the same, (ii) the maximum number
and/or class of securities available for issuance over the remaining term of the
Plan and (iii) the maximum number and/or class of securities for which any one
person may be granted options, separately exercisable stock appreciation rights
and direct stock issuances under the Plan per calendar year.
E. The Plan Administrator may at any time provide that one or more options will
automatically accelerate in connection with a Change in Control, whether or not
those options are assumed or otherwise continued in full force and effect
pursuant to the terms of the Change in Control. Any such option shall
accordingly become exercisable, immediately prior to the effective date of such
Change in Control, for all of the shares of Common Stock at the time subject to
that option and may be exercised for any or all of those shares as fully-vested
shares of Common Stock. In addition, the Plan Administrator may at any time
provide that one or more of the Corporation's repurchase rights shall not be
assignable in connection with such Change in Control and shall terminate upon
the consummation of such Change in Control.
F. The Plan Administrator may at any time provide that one or more options will
automatically accelerate upon an Involuntary Termination of the Optionee's
Service within a designated period (not to exceed eighteen (18) months)
following the effective date of any Change in Control in which those options do
not otherwise accelerate. Any options so accelerated shall remain exercisable
for fully-vested shares until the EARLIER of (i) the expiration of the option
term or (ii) the expiration of the one (1)-year period measured from the
effective date of the Involuntary Termination. In addition, the Plan
Administrator may at any time provide that one or more of the Corporation's
repurchase rights shall immediately terminate upon such Involuntary Termination.
<PAGE>
G. The Plan Administrator may at any time provide that one or more options will
automatically accelerate in connection with a Hostile Take-Over. Any such option
shall become exercisable, immediately prior to the effective date of such
Hostile Take-Over, for all of the shares of Common Stock at the time subject to
that option and may be exercised for any or all of those shares as fully-vested
shares of Common Stock. In addition, the Plan Administrator may at any time
provide that one or more of the Corporation's repurchase rights shall terminate
automatically upon the consummation of such Hostile Take-Over. Alternatively,
the Plan Administrator may condition such automatic acceleration and termination
upon an Involuntary Termination of the Optionee's Service within a designated
period (not to exceed eighteen (18) months) following the effective date of such
Hostile Take-Over. Each option so accelerated shall remain exercisable for
fully-vested shares until the expiration or sooner termination of the option
term.
H. The portion of any Incentive Option accelerated in connection with a Change
in Control or Hostile Take Over shall remain exercisable as an Incentive Option
only to the extent the applicable One Hundred Thousand Dollar ($100,000)
limitation is not exceeded. To the extent such dollar limitation is exceeded,
the accelerated portion of such option shall be exercisable as a Non-Statutory
Option under the Federal tax laws.
IV. STOCK APPRECIATION RIGHTS
The Plan Administrator may, subject to such conditions as it may determine,
grant to selected Optionees stock appreciation rights which will allow the
holders of those rights to elect between the exercise of the underlying option
for shares of Common Stock and the surrender of that option in exchange for a
distribution from the Corporation in an amount equal to the excess of (a) the
Option Surrender Value of the number of shares for which the option is
surrendered over (b) the aggregate exercise price payable for such shares. The
distribution may be made in shares of Common Stock valued at Fair Market Value
on the option surrender date, in cash, or partly in shares and partly in cash,
as the Plan Administrator shall in its sole discretion deem appropriate.
ARTICLE THREE
STOCK ISSUANCE PROGRAM
I. STOCK ISSUANCE TERMS
Shares of Common Stock may be issued under the Stock Issuance Program through
direct and immediate issuances without any intervening options. Shares of Common
Stock may also be issued under the Stock Issuance Program pursuant to share
right awards which entitle the recipients to receive those shares upon the
attainment of designated performance goals or Service requirements. Each such
award shall be evidenced by one or more documents which comply with the terms
specified below.
A. PURCHASE PRICE.
1. The purchase price per share of Common Stock subject to direct issuance shall
be fixed by the Plan Administrator.
2. Subject to the provisions of Section II of Article Five, Shares of Common
Stock may be issued under the Stock Issuance Program for any of the following
items of consideration which the Plan Administrator may deem appropriate in each
individual instance:
(i) cash or check made payable to the Corporation, or
(ii) past services rendered to the Corporation (or any Parent or Subsidiary).
B. VESTING/ISSUANCE PROVISIONS.
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1. The Plan Administrator may issue shares of Common Stock which are fully and
immediately vested upon issuance or which are to vest in one or more
installments over the Participant's period of Service or upon attainment of
specified performance objectives. Alternatively, the Plan Administrator may
issue share right awards which shall entitle the recipient to receive a
specified number of vested shares of Common Stock upon the attainment of one or
more performance goals or Service requirements established by the Plan
Administrator.
2. Any new, substituted or additional securities or other property (including
money paid other than as a regular cash dividend) which the Participant may have
the right to receive with respect to his or her unvested shares of Common Stock
by reason of any stock dividend, stock split, recapitalization, combination of
shares, exchange of shares or other change affecting the outstanding Common
Stock as a class without the Corporation's receipt of consideration shall be
issued subject to (i) the same vesting requirements applicable to the
Participant's unvested shares of Common Stock and (ii) such escrow arrangements
as the Plan Administrator shall deem appropriate.
3. The Participant shall have full stockholder rights with respect to the issued
shares of Common Stock, whether or not the Participant's interest in those
shares is vested. Accordingly, the Participant shall have the right to vote such
shares and to receive any regular cash dividends paid on such shares.
4. Should the Participant cease to remain in Service while holding one or more
unvested shares of Common Stock, or should the performance objectives not be
attained with respect to one or more such unvested shares of Common Stock, then
those shares shall be immediately surrendered to the Corporation for
cancellation, and the Participant shall have no further stockholder rights with
respect to those shares. To the extent the surrendered shares were previously
issued to the Participant for consideration paid in cash or cash equivalent
(including the Participant's purchase-money indebtedness), the Corporation shall
repay to the Participant the cash consideration paid for the surrendered shares
and shall cancel the unpaid principal balance of any outstanding purchase-money
note of the Participant attributable to the surrendered shares.
5. The Plan Administrator may waive the surrender and cancellation of one or
more unvested shares of Common Stock (or other assets attributable thereto)
which would otherwise occur upon the cessation of the Participant's Service or
the non-attainment of the performance objectives applicable to those shares.
Such waiver shall result in the immediate vesting of the Participant's interest
in the shares of Common Stock as to which the waiver applies. Such waiver may be
effected at any time, whether before or after the Participant's cessation of
Service or the attainment or non-attainment of the applicable performance
objectives.
6. Outstanding share right awards shall automatically terminate, and no shares
of Common Stock shall actually be issued in satisfaction of those awards, if the
performance goals or Service requirements established for such awards are not
attained. The Plan Administrator, however, shall have the authority to issue
shares of Common Stock in satisfaction of one or more outstanding share right
awards as to which the designated performance goals or Service requirements are
not attained.
II. CHANGE IN CONTROL/HOSTILE TAKE-OVER
A. All of the Corporation's outstanding repurchase rights shall terminate
automatically, and all the shares of Common Stock subject to those terminated
rights shall immediately vest in full, in the event of any Change in Control,
except to the extent (i) those repurchase rights are assigned to the successor
corporation (or parent thereof) or otherwise continue in full force and effect
pursuant to the terms of the Change in Control or (ii) such accelerated vesting
is precluded by other limitations imposed by the Plan Administrator at the time
the repurchase right is issued.
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B. The Plan Administrator may at any time provide for the automatic termination
of one or more of those outstanding repurchase rights and the immediate vesting
of the shares of Common Stock subject to those terminated rights upon (i) a
Change in Control or Hostile Take-Over or (ii) an Involuntary Termination of the
Participant's Service within a designated period (not to exceed eighteen (18)
months) following the effective date of any Change in Control or Hostile
Take-Over in which those repurchase rights are assigned to the successor
corporation (or parent thereof) or otherwise continue in full force and effect.
III. SHARE ESCROW/LEGENDS
Unvested shares may, in the Plan Administrator's discretion, be held in escrow
by the Corporation until the Participant's interest in such shares vests or may
be issued directly to the Participant with restrictive legends on the
certificates evidencing those unvested shares.
ARTICLE FOUR
AUTOMATIC OPTION GRANT PROGRAM
I. OPTION TERMS
A. GRANT DATES. Options shall be made on the dates specified below:
1. Each individual who is serving as a non-employee Board member on the
Underwriting Date shall automatically be granted, on the Underwriting Date, a
Non-Statutory Option to purchase 20,000 shares of Common Stock, provided that
individual has not previously been in the employ of any Parent or Subsidiary.
2. Each individual who is first elected or appointed as a non-employee Board
member at any time after the Underwriting Date shall automatically be granted,
on the date of such initial election or appointment, a Non-Statutory Option to
purchase 20,000 shares of Common Stock, provided that individual has not
previously been in the employ of the Corporation or any Parent or Subsidiary.
3. On the date of each Annual Stockholders Meeting held after the Underwriting
Date, each individual who is to continue to serve as a non-employee Board
member, whether or not that individual is standing for re-election to the Board,
shall automatically be granted a Non-Statutory Option to purchase 5,000 shares
of Common Stock, provided such individual has served as a non-employee Board
member for at least six (6) months.
B. EXERCISE PRICE.
1. The exercise price per share shall be equal to one hundred percent (100%) of
the Fair Market Value per share of Common Stock on the option grant date.
2. The exercise price shall be payable in one or more of the alternative forms
authorized under the Discretionary Option Grant Program. Except to the extent
the sale and remittance procedure specified thereunder is utilized, payment of
the exercise price for the purchased shares must be made on the Exercise Date.
C. OPTION TERM. Each option shall have a term of ten (10) years measured from
the option grant date.
D. EXERCISE AND VESTING OF OPTIONS. Each option shall be immediately exercisable
for any or all of the option shares. However, any shares purchased under the
option shall be subject to repurchase by the Corporation, at the exercise price
paid per share, upon the Optionee's cessation of Board service prior to vesting
in those shares. Each initial 20,000 share grant shall vest, and the
Corporation's repurchase right shall lapse, in a series of four (4) successive
equal annual installments over the Optionee's period of continued service as a
Board member, with the first such installment to vest upon the Optionee's
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completion of one (1) year of Board service measured from the option grant date.
Each annual 5,000 share option grant shall vest, and the Corporation's
repurchase right shall lapse upon the Optionee's completion of one (1) year of
Board service measured from the option grant date.
E. CESSATION OF BOARD SERVICE. The following provisions shall govern the
exercise of any options outstanding at the time of the Optionee's cessation of
Board service:
(i) Any option outstanding at the time of the Optionee's cessation of Board
service for any reason shall remain exercisable for a twelve (12)-month period
following the date of such cessation of Board service, but in no event shall
such option be exercisable after the expiration of the option term.
(ii) Any option exercisable in whole or in part by the Optionee at the time of
death may be subsequently exercised by his or her Beneficiary.
(iii) Following the Optionee's cessation of Board service, the option may not be
exercised in the aggregate for more than the number of shares for which the
option was exercisable on the date of such cessation of Board service. Upon the
expiration of the applicable exercise period or (if earlier) upon the expiration
of the option term, the option shall terminate and cease to be outstanding for
any vested shares for which the option has not been exercised. However, the
option shall, immediately upon the Optionee's cessation of Board service,
terminate and cease to be outstanding for any and all shares for which the
option is not otherwise at that time exercisable.
(iv) However, should the Optionee cease to serve as a Board member by reason of
death or Permanent Disability, then all shares at the time subject to the option
shall immediately vest so that such option may, during the twelve (12)-month
exercise period following such cessation of Board service, be exercised for all
or any portion of those shares as fully-vested shares of Common Stock.
II. CHANGE IN CONTROL/HOSTILE TAKE-OVER
A. In the event of any Change in Control or Hostile Take-Over, the shares of
Common Stock at the time subject to each outstanding option but not otherwise
vested shall automatically vest in full so that each such option may,
immediately prior to the effective date of such Change in Control or Hostile
Take-Over, became fully exercisable for all of the shares of Common Stock at the
time subject to such option and maybe exercised for all or any of those shares
as fully-vested shares of Common Stock. Each such option accelerated in
connection with a Change in Control shall terminate upon the Change in Control,
except to the extent assumed by the successor corporation (or parent thereof) or
otherwise continued in full force and effect pursuant to the terms of the Change
in Control. Each such option accelerated in connection with a Hostile Take-Over
shall remain exercisable until the expiration or sooner termination of the
option term.
B. All outstanding repurchase rights shall automatically terminate and the
shares of Common Stock subject to those terminated rights shall immediately vest
in full, in the event of any Change in Control or Hostile Take-Over.
C. Upon the occurrence of a Hostile Take-Over, the Optionee shall have a thirty
(30)-day period in which to surrender to the Corporation each of his or her
outstanding options. The Optionee shall in return be entitled to a cash
distribution from the Corporation in an amount equal to the excess of (i) the
Option Surrender Value of the shares of Common Stock at the time subject to each
surrendered option over (ii) the aggregate exercise price payable for such
shares. Such cash distribution shall be paid within five (5) days following the
surrender of the option to the Corporation.
D. Each option which is assumed in connection with a Change in Control shall be
appropriately adjusted to apply to the number and class of securities which
would have been issuable to the Optionee in
<PAGE>
consummation of such Change in Control had the option been exercised immediately
prior to such Change in Control. Appropriate adjustments shall also be made to
the exercise price payable per share under each outstanding option, PROVIDED the
aggregate exercise price payable for such securities shall remain the same.
III. REMAINING TERMS
The remaining terms of each option granted under the Automatic Option Grant
Program shall be the same as the terms in effect for options made under the
Discretionary Option Grant Program.
ARTICLE FIVE
MISCELLANEOUS
I. NO IMPAIRMENT OF AUTHORITY
Outstanding awards shall in no way affect the right of the Corporation to
adjust, reclassify, reorganize or otherwise change its capital or business
structure or to merge, consolidate, dissolve, liquidate or sell or transfer all
or any part of its business or assets.
II. FINANCING
The Plan Administrator may permit any Optionee or Participant to pay the option
exercise price under the Discretionary Option Grant Program or the purchase
price of shares issued under the Stock Issuance Program by delivering a
full-recourse, interest bearing promissory note payable in one or more
installments. The terms of any such promissory note (including the interest rate
and the terms of repayment) shall be established by the Plan Administrator in
its sole discretion. In no event may the maximum credit available to the
Optionee or Participant exceed the sum of (i) the aggregate option exercise
price or purchase price payable for the purchased shares plus (ii) any Federal,
state and local income and employment tax liability incurred by the Optionee or
the Participant in connection with the option exercise or share purchase.
III. TAX WITHHOLDING
A. The Corporation's obligation to deliver shares of Common Stock upon the
exercise of options or the issuance or vesting of such shares under the Plan
shall be subject to the satisfaction of all applicable Federal, state and local
income and employment tax withholding requirements.
B. The Plan Administrator may, in its discretion, provide any or all holders of
Non-Statutory Options or unvested shares of Common Stock under the Plan with the
right to use shares of Common Stock in satisfaction of all or part of the
Withholding Taxes incurred by such holders in connection with the exercise of
their options or the vesting of their shares. Such right may be provided to any
such holder in either or both of the following formats:
STOCK WITHHOLDING: The election to have the Corporation withhold, from the
shares of Common Stock otherwise issuable upon the exercise of such
Non-Statutory Option or the vesting of such shares, a portion of those shares
with an aggregate Fair Market Value equal to the percentage of the Withholding
Taxes (not to exceed one hundred percent (100%)) designated by the holder.
STOCK DELIVERY: The election to deliver to the Corporation, at the time the
Non-Statutory Option is exercised or the shares vest, one or more shares of
Common Stock previously acquired by such holder (other than in connection with
the option exercise or share vesting triggering the Withholding Taxes) with an
aggregate Fair Market Value equal to the percentage of the Taxes (not to exceed
one hundred percent (100%)) designated by the holder.
IV. EFFECTIVE DATE AND TERM OF THE PLAN
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A. The Plan shall become effective with respect to the Discretionary Option
Grant and Stock Issuance Programs immediately upon the Plan Effective Date. The
Automatic Option Grant Program shall become effective on the Underwriting Date.
Options may be granted under the Discretionary Option Grant at any time on or
after the Plan Effective Date. However, no options granted under the Plan may be
exercised, and no shares shall be issued under the Plan, until the Plan is
approved by the Corporation's stockholders. If such stockholder approval is not
obtained within twelve (12) months after the Plan Effective Date, then all
options previously granted under this Plan shall terminate and cease to be
outstanding, and no further options shall be granted and no shares shall be
issued under the Plan.
B. The Plan shall terminate upon the EARLIEST of (i) June 29, 2009, (ii) the
date on which all shares available for issuance under the Plan shall have been
issued as fully-vested shares or (iii) the termination of all outstanding
options in connection with a Change in Control. Upon such plan termination, all
outstanding options and unvested stock issuances shall thereafter continue to
have force and effect in accordance with the provisions of the documents
evidencing such grants or issuances.
V. AMENDMENT OF THE PLAN
A. The Board shall have complete and exclusive power and authority to amend or
modify the Plan in any or all respects. However, no such amendment or
modification shall adversely affect the rights and obligations with respect to
stock options or unvested stock issuances at the time outstanding under the Plan
unless the Optionee or the Participant consents to such amendment or
modification. In addition, certain amendments may require stockholder approval
pursuant to applicable laws or regulations.
B. Options to purchase shares of Common Stock may be granted under the
Discretionary Option Grant Program and shares of Common Stock may be issued
under the Stock Issuance Program that are in each instance in excess of the
number of shares then available for issuance under the Plan, provided any excess
shares actually issued under those programs shall be held in escrow until there
is obtained stockholder approval of an amendment sufficiently increasing the
number of shares of Common Stock available for issuance under the Plan. If such
stockholder approval is not obtained within twelve (12) months after the date
the first such excess issuances are made, then (i) any unexercised options
granted on the basis of such excess shares shall terminate and cease to be
outstanding and (ii) the Corporation shall promptly refund to the Optionees and
the Participants the exercise or purchase price paid for any excess shares
issued under the Plan and held in escrow, together with interest (at the
applicable Short Term Federal Rate) for the period the shares were held in
escrow, and such shares shall thereupon be automatically cancelled and cease to
be outstanding.
VI. USE OF PROCEEDS
Any cash proceeds received by the Corporation from the sale of shares of Common
Stock under the Plan shall be used for general corporate purposes.
VII. REGULATORY APPROVALS
A. The implementation of the Plan, the granting of any stock option under the
Plan and the issuance of any shares of Common Stock (i) upon the exercise of any
granted option or (ii) under the Stock Issuance Program shall be subject to the
Corporation's procurement of all approvals and permits required by regulatory
authorities having jurisdiction over the Plan, the stock options granted under
it and the shares of Common Stock issued pursuant to it.
B. No shares of Common Stock or other assets shall be issued or delivered under
the Plan unless and until there shall have been compliance with all applicable
requirements of Federal and state securities laws, including the filing and
effectiveness of the Form S-8 registration statement for the shares of Common
Stock issuable under the Plan, and all applicable listing requirements of any
stock exchange (or the Nasdaq National Market, if applicable) on which Common
Stock is then listed for trading.
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VIII. NO EMPLOYMENT/SERVICE RIGHTS
Nothing in the Plan shall confer upon the Optionee or the Participant any right
to continue in Service for any period of specific duration or interfere with or
otherwise restrict in any way the rights of the Corporation (or any Parent or
Subsidiary employing or retaining such person) or of the Optionee or the
Participant, which rights are hereby expressly reserved by each, to terminate
such person's Service at any time for any reason, with or without cause.
<PAGE>
APPENDIX
The following definitions shall be in effect under the Plan:
A. AUTOMATIC OPTION GRANT PROGRAM shall mean the automatic option grant program
in effect under the Plan.
B. BENEFICIARY shall mean, in the event the Plan Administrator implements a
beneficiary designation procedure, the person designated by an Optionee or
Participant, pursuant to such procedure, to succeed to such person's rights
under any outstanding awards held by him or her at the time of death. In the
absence of such designation or procedure, the Beneficiary shall be the personal
representative of the estate of the Optionee or Participant or the person or
persons to whom the award is transferred by will or the laws of descent and
distribution.
C. BOARD shall mean the Corporation's Board of Directors.
D. CHANGE IN CONTROL shall mean a change in ownership or control of the
Corporation effected through any of the following transactions:
(i) a merger, consolidation or reorganization approved by the Corporation's
stockholders, UNLESS securities representing more than fifty percent (50%) of
the total combined voting power of the voting securities of the successor
corporation are immediately thereafter beneficially owned, directly or
indirectly and in substantially the same proportion, by the persons who
beneficially owned the Corporation's outstanding voting securities immediately
prior to such transaction,
(ii) any stockholder-approved transfer or other disposition of all or
substantially all of the Corporation's assets, or
(iii) the acquisition, directly or indirectly by any person or related group of
persons (other than the Corporation or a person that directly or indirectly
controls, is controlled by, or is under common control with, the Corporation),
of beneficial ownership (within the meaning of Rule 13d-3 of the 1934 Act) of
securities possessing more than fifty percent (50%) of the total combined voting
power of the Corporation's outstanding securities pursuant to a tender or
exchange offer made directly to the Corporation's stockholders which the Board
recommend such stockholders to accept.
E. CODE shall mean the Internal Revenue Code of 1986, as amended.
F. COMMON STOCK shall mean the Corporation's common stock.
G. CORPORATION shall mean HotJobs.com, Ltd., a Delaware corporation, and its
successors.
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H. DISCRETIONARY OPTION GRANT PROGRAM shall mean the discretionary option grant
program in effect under the Plan.
I. EMPLOYEE shall mean an individual who is in the employ of the Corporation (or
any Parent or Subsidiary), subject to the control and direction of the employer
entity as to both the work to be performed and the manner and method of
performance.
J. EXERCISE DATE shall mean the date on which the Corporation shall have
received written notice of the option exercise.
K. FAIR MARKET VALUE per share of Common Stock on any relevant date shall be
determined in accordance with the following provisions:
(i) If the Common Stock is at the time traded on the Nasdaq National Market,
then the Fair Market Value shall be the closing selling price per share of
Common Stock on the date in question, as such price is reported on the Nasdaq
National Market or any successor system. If there is no closing selling price
for the Common Stock on the date in question, then the Fair Market Value shall
be the closing selling price on the last preceding date for which such quotation
exists.
(ii) If the Common Stock is at the time listed on any Stock Exchange, then the
Fair Market Value shall be the closing selling price per share of Common Stock
on the date in question on the Stock Exchange determined by the Plan
Administrator to be the primary market for the Common Stock, as such price is
officially quoted in the composite tape of transactions on such exchange. If
there is no closing selling price for the Common Stock on the date in question,
then the Fair Market Value shall be the closing selling price on the last
preceding date for which such quotation exists.
(iii) For purposes of any options made on the Underwriting Date, the Fair Market
Value shall be deemed to be equal to the price per share at which the Common
Stock is to be sold in the initial public offering pursuant to the Underwriting
Agreement.
(iv) For purposes of any options made prior to the Underwriting Date, the Fair
Market Value shall be determined by the Plan Administrator, after taking into
account such factors as it deems appropriate.
L. HOSTILE TAKE-OVER shall mean:
(i) the acquisition, directly or indirectly, by any person or related group of
persons (other than the Corporation or a person that directly or indirectly
controls, is controlled by, or is under common control with, the Corporation) of
beneficial ownership (within the meaning of Rule 13d-3 of the 1934 Act) of
securities possessing more than fifty percent (50%) of the total combined voting
power of the Corporation's outstanding securities pursuant to a
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tender or exchange offer made directly to the Corporation's stockholders which
the Board does not recommend such stockholders to accept, or
(ii) a change in the composition of the Board over a period of thirty-six (36)
consecutive months or less such that a majority of the Board members ceases, by
reason of one or more contested elections for Board membership, to be comprised
of individuals who either (A) have been Board members continuously since the
beginning of such period or (B) have been elected or nominated for election as
Board members during such period by at least a majority of the Board members
described in clause (A) who were still in office at the time the Board approved
such election or nomination.
M. INCENTIVE OPTION shall mean an option which satisfies the requirements of
Code Section 422.
N. INVOLUNTARY TERMINATION shall mean the termination of the Service of any
individual which occurs by reason of:
(i) such individual's involuntary dismissal or discharge by the Corporation for
reasons other than Misconduct, or
(ii) such individual's voluntary resignation following (A) a change in his or
her position with the Corporation or Parent or Subsidiary employing the
individual which materially reduces his or her duties and responsibilities or
the level of management to which he or she reports, (B) a reduction in his or
her level of compensation (including base salary, fringe benefits and target
bonus under any performance based bonus or incentive programs) by more than
fifteen percent (15%) or (C) a relocation of such individual's place of
employment by more than fifty (50) miles, provided and only if such change,
reduction or relocation is effected by the Corporation without the individual's
consent.
O. MISCONDUCT shall mean the commission of any act of fraud, embezzlement or
dishonesty by the Optionee or Participant, any unauthorized use or disclosure by
such person of confidential information or trade secrets of the Corporation (or
any Parent or Subsidiary), or any intentional wrongdoing by such person, whether
by omission or commission, which adversely affects the business or affairs of
the Corporation (or any Parent or Subsidiary) in a material manner. This shall
not limit the grounds for the dismissal or discharge of any person in the
Service of the Corporation (or any Parent or Subsidiary).
P. 1934 ACT shall mean the Securities Exchange Act of 1934, as amended.
Q. NON-STATUTORY OPTION shall mean an option not intended to satisfy the
requirements of Code Section 422.
R. OPTION SURRENDER VALUE shall mean the Fair Market Value per share of Common
Stock on the date the option is surrendered to the Corporation or, in the event
of a Hostile Take-Over, effected through a tender offer, the highest reported
price per share of
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Common Stock paid by the tender offeror in effecting such Hostile Take-Over, if
greater. However, if the surrendered option is an Incentive Option, the Option
Surrender Value shall not exceed the Fair Market Value per share.
S. OPTIONEE shall mean any person to whom an option is granted under the
Discretionary Option Grant or Automatic Option Grant Program.
T. PARENT shall mean any corporation (other than the Corporation) in an unbroken
chain of corporations ending with the Corporation, provided each corporation in
the unbroken chain (other than the Corporation) owns, at the time of the
determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.
U. PARTICIPANT shall mean any person who is issued shares of Common Stock under
the Stock Issuance Program.
V. PERMANENT DISABILITY OR PERMANENTLY DISABLED shall mean the inability of the
Optionee or the Participant to engage in any substantial gainful activity by
reason of any medically determinable physical or mental impairment expected to
result in death or to be of continuous duration of twelve (12) months or more.
However, solely for purposes of the Automatic Option Grant Program, Permanent
Disability or Permanently Disabled shall mean the inability of the non-employee
Board member to perform his or her usual duties as a Board member by reason of
any medically determinable physical or mental impairment expected to result in
death or to be of continuous duration of twelve (12) months or more.
W. PLAN shall mean the Corporation's 1999 Stock Option/Stock Issuance Plan, as
set forth in this document.
X. PLAN ADMINISTRATOR shall mean the particular entity, whether the Primary
Committee, the Board or the Secondary Committee, which is authorized to
administer the Discretionary Option Grant and Stock Issuance Programs with
respect to one or more classes of eligible persons, to the extent such entity is
carrying out its administrative functions under those programs with respect to
the persons under its jurisdiction. However, the Primary Committee shall have
the plenary authority to make all factual determinations and to construe and
interpret any and all ambiguities under the Plan to the extent such authority is
not otherwise expressly delegated to any other Plan Administrator.
Y. PLAN EFFECTIVE DATE shall mean June 30, 1999, the date on which the Plan was
adopted by the Board.
Z. PRIMARY COMMITTEE shall mean the committee of two (2) or more non-employee
Board members appointed by the Board to administer the Discretionary Option
Grant and Stock Issuance Programs with respect to Section 16 Insiders.
AA. SECONDARY COMMITTEE shall mean a committee of one (1) or more Board members
appointed by the Board to administer the Discretionary Option Grant and Stock
Issuance Programs with respect to eligible persons other than Section 16
Insiders.
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BB. SECTION 12 REGISTRATION DATE shall mean the date on which the Common Stock
is first registered under Section 12(g) of the 1934 Act.
CC. SECTION 16 INSIDER shall mean an officer or director of the Corporation
subject to the short-swing profit liabilities of Section 16 of the 1934 Act.
DD. SERVICE shall mean the performance of services for the Corporation (or any
Parent or Subsidiary) by a person in the capacity of an Employee, a non-employee
member of the board of directors or a consultant or independent advisor, except
to the extent otherwise specifically provided in the documents evidencing the
option grant or stock issuance.
EE. STOCK EXCHANGE shall mean either the American Stock Exchange or the New York
Stock Exchange. FF. STOCK ISSUANCE PROGRAM shall mean the stock issuance program
in effect under the Plan.
GG. SUBSIDIARY shall mean any corporation (other than the Corporation) in an
unbroken chain of corporations beginning with the Corporation, provided each
corporation (other than the last corporation) in the unbroken chain owns, at the
time of the determination, stock possessing fifty percent (50%) or more of the
total combined voting power of all classes of stock in one of the other
corporations in such chain.
HH. 10% STOCKHOLDER shall mean the owner of stock (as determined under Code
Section 424(d)) possessing more than ten percent (10%) of the total combined
voting power of all classes of stock of the Corporation (or any Parent or
Subsidiary).
II. UNDERWRITING AGREEMENT shall mean the agreement between the Corporation and
the underwriter or underwriters managing the initial public offering of the
Common Stock.
JJ. UNDERWRITING DATE shall mean the date on which the Underwriting Agreement is
executed and priced in connection with an initial public offering of the Common
Stock.
KK. WITHHOLDING TAXES shall mean the Federal, state and local income and
employment withholding tax liabilities to which the holder of Non-Statutory
Options or unvested shares of Common Stock may become subject in connection with
the exercise of those options or the vesting of those shares.
A-5
<PAGE>
HOTJOBS.COM, LTD.
1999 STOCK OPTION/STOCK ISSUANCE PLAN
AMENDMENT NO. 1
The HotJobs.com, Ltd. 1999 Stock Option/Stock Issuance Plan (the "PLAN") is
hereby amended as follows:
1. Paragraphs B, C and D of Section V of Article One of the Plan are hereby
redesignated as Paragraphs C, D and E, respectively, and new Paragraph V.B. of
Article One is hereby added to the Plan to read as follows:
"B. The number of shares of Common Stock available
for issuance under the Plan shall automatically increase on the first
trading day of January each calendar year during the term of the Plan,
beginning with the 2001 calendar year, by an amount equal to three
percent (3%) of the shares of Common Stock outstanding on the last
trading day in December of the immediately preceding calendar year, but
in no event shall such annual increase exceed One Million Five Hundred
Thousand (1,500,000) shares."
2. Redesignated Paragraph V.E. of Article One of the Plan is hereby
amended and restated in its entirety, to read as follows:
"E. Should any change be made to the Common Stock by
reason of any stock split, stock dividend, recapitalization,
combination of shares, exchange of shares or other change affecting the
outstanding Common Stock as a class without the Corporation's receipt
of consideration, appropriate adjustments shall be made by the
Committee to (i) the maximum number and/or class of securities issuable
under the Plan, (ii) the number and/or class of securities by which the
share reserve is to increase each calendar year pursuant to the
automatic share increase provisions of the Plan, (iii) the maximum
number and/or class of securities for which any one person may be
granted options, separately exercisable stock appreciation rights and
direct stock issuances under this Plan per calendar year, (iv) the
number and/or class of securities for which grants are subsequently to
be made under the Automatic Option Grant Program to new and continuing
non-employee Board members and (v) the number and/or class of
securities and the exercise price per share in effect under each
outstanding option under the Plan. Such adjustments to the outstanding
options are to be effected in a manner which shall preclude the
enlargement or dilution of rights and benefits under such options. The
adjustments determined by the Plan Administrator shall be final,
binding and conclusive."
3. Except as modified by this Plan Amendment, all the terms and
provisions of the Plan shall continue in full force and effect.
<PAGE>
IN WITNESS WHEREOF, HotJobs.com, Ltd. has caused this Amendment No. 1 to be
executed on its behalf by its duly-authorized officer as of the 17th day of May,
2000.
HOTJOBS.COM, LTD.
BY:
---------------------------------
NAME:
-------------------------------
TITLE:
------------------------------
<PAGE>
APPENDIX C
EMPLOYEE STOCK PURCHASE PLAN AND AMENDMENT NO. 1 THERETO
<PAGE>
HOTJOBS.COM, LTD.
1999 EMPLOYEE STOCK PURCHASE PLAN
I. PURPOSE OF THE PLAN
This 1999 Employee Stock Purchase Plan is intended to promote the interests of
HotJobs.com, Ltd., a Delaware corporation, by providing eligible employees with
the opportunity to acquire a proprietary interest in the Corporation through
participation in a payroll-deduction based employee stock purchase plan designed
to qualify under Section 423 of the Code.
Capitalized terms herein shall have the meanings assigned to such terms in the
attached Appendix.
II. ADMINISTRATION OF THE PLAN
The Plan Administrator shall have full authority to interpret and construe any
provision of the Plan and to adopt such rules and regulations for administering
the Plan as it may deem necessary in order to comply with the requirements of
Section 423 of the Code. Decisions of the Plan Administrator shall be final and
binding on all parties having an interest in the Plan.
III. STOCK SUBJECT TO PLAN
A. The stock purchasable under the Plan shall be shares of authorized but
unissued or reacquired Common Stock, including shares of Common Stock purchased
on the open market. The maximum number of shares of Common Stock which may be
issued over the term of the Plan shall not exceed Two Hundred Fifty Thousand
(250,000) shares.
B. Should any change be made to the Common Stock by reason of any stock split,
stock dividend, recapitalization, combination of shares, exchange of shares or
other change affecting the outstanding Common Stock as a class without the
Corporation's receipt of consideration, appropriate adjustments shall be made to
(i) the maximum number and class of securities issuable under the Plan, (ii) the
maximum number and class of securities purchasable per Participant and in the
aggregate on any one Purchase Date and (iii) the number and class of securities
and the price per share in effect under each outstanding purchase right in order
to prevent the dilution or enlargement of benefits thereunder.
IV. OFFERING PERIODS
A. Shares of Common Stock shall be offered for purchase under the Plan through a
series of successive offering periods until such time as (i) the maximum number
of shares of Common Stock available for issuance under the Plan shall have been
purchased or (ii) the Plan shall have been sooner terminated.
B. Each offering period shall be of such duration (not to exceed twenty-four
(24) months) as determined by the Plan Administrator prior to the start date of
such offering period. However, the initial offering period shall commence at the
Effective Time and terminate on the last business day in July 2001. Subsequent
offering periods shall commence as designated by the Plan Administrator.
C. Each offering period shall be comprised of a series of one or more successive
Purchase Intervals. Purchase Intervals shall run from the first business day in
February each year to the last business day in July of the same year and from
the first business day in August each year to the last business day in January
of the following year. However, the first Purchase Interval in effect under the
initial offering period shall commence at the Effective Time and terminate on
the last business day in January 2000.
D. Should the Fair Market Value per share of Common Stock on any Purchase Date
within an offering period be less than the Fair Market Value per share of Common
Stock on the start date of that offering period, then that offering period shall
automatically terminate immediately after the purchase of shares of Common Stock
on such Purchase Date, and a new offering period shall commence on the next
business day following such Purchase Date. The new offering period shall have a
duration of twenty (24) months,
<PAGE>
unless a shorter duration is established by the Plan Administrator within five
(5) business days following the start date of that offering period.
V. ELIGIBILITY
A. Each individual who is an Eligible Employee on the start date of an offering
period under the Plan may enter that offering period on such start date or on
any subsequent Semi-Annual Entry Date within that offering period, provided he
or she remains an Eligible Employee.
B. Each individual who first becomes an Eligible Employee after the start date
of an offering period may enter that offering period on any subsequent
Semi-Annual Entry Date within that offering period on which he or she is an
Eligible Employee.
C. The date an individual enters an offering period shall be designated his or
her Entry Date for purposes of that offering period.
D. To participate in the Plan for a particular offering period, the Eligible
Employee must complete the enrollment forms prescribed by the Plan Administrator
(including a stock purchase agreement and a payroll deduction authorization) and
file such forms with the Plan Administrator (or its designate) on or before his
or her scheduled Entry Date.
VI. PAYROLL DEDUCTIONS
A. The payroll deduction authorized by the Participant for purposes of acquiring
shares of Common Stock during an offering period may be any multiple of one
percent (1%) of the Cash Earnings paid to the Participant during each Purchase
Interval within that offering period, up to a maximum of fifteen percent (15%).
The deduction rate so authorized shall continue in effect throughout the
offering period, except to the extent such rate is changed in accordance with
the following guidelines:
(i) The Participant may, at any time during the offering period, reduce his or
her rate of payroll deduction to become effective as soon as possible after
filing the appropriate form with the Plan Administrator. The Participant may
not, however, effect more than one (1) such reduction per Purchase Interval.
(ii) The Participant may, prior to the commencement of any new Purchase Interval
within the offering period, increase the rate of his or her payroll deduction by
filing the appropriate form with the Plan Administrator. The new rate (which may
not exceed the fifteen percent (15%) maximum) shall become effective on the
start date of the first Purchase Interval following the filing of such form.
B. Payroll deductions shall begin on the first pay day following the
Participant's Entry Date into the offering period and shall (unless sooner
terminated by the Participant) continue through the pay day ending with or
immediately prior to the last day of that offering period. The amounts so
collected shall be credited to the Participant's book account under the Plan,
but no interest shall be paid on the balance from time to time outstanding in
such account. The amounts collected from the Participant shall not be required
to be held in any segregated account or trust fund and may be commingled with
the general assets of the Corporation and used for general corporate purposes.
C. Payroll deductions shall automatically cease upon the termination of the
Participant's purchase right in accordance with the provisions of the Plan.
D. The Participant's acquisition of Common Stock under the Plan on any Purchase
Date shall neither limit nor require the Participant's acquisition of Common
Stock on any subsequent Purchase Date, whether within the same or a different
offering period.
VII. PURCHASE RIGHTS
A. GRANT OF PURCHASE RIGHT. A Participant shall be granted a separate purchase
right for each offering period in which he or she participates. The purchase
right shall be granted on the Participant's
<PAGE>
Entry Date into the offering period and shall provide the Participant with the
right to purchase shares of Common Stock, in a series of successive installments
over the remainder of such offering period, upon the terms set forth below. The
Participant shall execute a stock purchase agreement embodying such terms and
such other provisions (not inconsistent with the Plan) as the Plan Administrator
may deem advisable.
Under no circumstances shall purchase rights be granted under the Plan to any
Eligible Employee if such individual would, immediately after the grant, own
(within the meaning of Code Section 424(d)) or hold outstanding options or other
rights to purchase, stock possessing five percent (5%) or more of the total
combined voting power or value of all classes of stock of the Corporation or any
Corporate Affiliate.
B. EXERCISE OF THE PURCHASE RIGHT. Each purchase right shall be automatically
exercised in installments on each successive Purchase Date within the offering
period, and shares of Common Stock shall accordingly be purchased on behalf of
each Participant (other than Participants whose payroll deductions have
previously been refunded pursuant to the Termination of Purchase Right
provisions below) on each such Purchase Date. The purchase shall be effected by
applying the Participant's payroll deductions for the Purchase Interval ending
on such Purchase Date to the purchase of whole shares of Common Stock at the
purchase price in effect for the Participant for that Purchase Date.
C. PURCHASE PRICE. The purchase price per share at which Common Stock will be
purchased on the Participant's behalf on each Purchase Date within the offering
period shall be equal to eighty-five percent (85%) of the LOWER of (i) the Fair
Market Value per share of Common Stock on the Participant's Entry Date into that
offering period or (ii) the Fair Market Value per share of Common Stock on that
Purchase Date.
D. NUMBER OF PURCHASABLE SHARES. The number of shares of Common Stock
purchasable by a Participant on each Purchase Date during the offering period
shall be the number of whole shares obtained by dividing the amount collected
from the Participant through payroll deductions during the Purchase Interval
ending with that Purchase Date by the purchase price in effect for the
Participant for that Purchase Date. However, the maximum number of shares of
Common Stock purchasable per Participant on any one Purchase Date shall not
exceed One Thousand Four Hundred (1,400) shares, subject to periodic adjustments
in the event of certain changes in the Corporation's capitalization. In
addition, the maximum number of shares of Common Stock purchasable in the
aggregate by all Participants on any one Purchase Date shall not exceed Sixty
Two Thousand Five Hundred (62,500) shares, subject to periodic adjustments in
the event of certain changes in the corporation's capitalization.
E. EXCESS PAYROLL DEDUCTIONS. Any payroll deductions not applied to the purchase
of shares of Common Stock on any Purchase Date because they are not sufficient
to purchase a whole share of Common Stock shall be held for the purchase of
Common Stock on the next Purchase Date. However, any payroll deductions not
applied to the purchase of Common Stock by reason of the limitation on the
maximum number of shares purchasable on the Purchase Date shall be promptly
refunded.
F. TERMINATION OF PURCHASE RIGHT. The following provisions shall govern the
termination of outstanding purchase rights:
(i) A Participant may, at any time prior to the next scheduled Purchase Date in
the offering period, terminate his or her outstanding purchase right by filing
the appropriate form with the Plan Administrator (or its designate), and no
further payroll deductions shall be collected from the Participant with respect
to the terminated purchase right. Any payroll deductions collected during the
Purchase Interval in which such termination occurs shall, at the Participant's
election, be immediately refunded or held for the purchase of shares on the next
Purchase Date. If no such election is made at the time such purchase right
<PAGE>
is terminated, then the payroll deductions collected with respect to the
terminated right shall be refunded as soon as possible.
(ii) The termination of such purchase right shall be irrevocable, and the
Participant may not subsequently rejoin the offering period for which the
terminated purchase right was granted. In order to resume participation in any
subsequent offering period, such individual must re-enroll in the Plan (by
making a timely filing of the prescribed enrollment forms) on or before his or
her scheduled Entry Date into that offering period.
(iii) Should the Participant cease to remain an Eligible Employee for any reason
(including death, disability or change in status) while his or her purchase
right remains outstanding, then that purchase right shall immediately terminate,
and all of the Participant's payroll deductions for the Purchase Interval in
which the purchase right so terminates shall be immediately refunded. However,
should the Participant cease to remain in active service by reason of an
approved unpaid leave of absence, then the Participant shall have the right,
exercisable up until the last business day of the Purchase Interval in which
such leave commences, to (a) withdraw all the payroll deductions collected to
date on his or her behalf for that Purchase Interval or (b) have such funds held
for the purchase of shares on his or her behalf on the next scheduled Purchase
Date. In no event, however, shall any further payroll deductions be collected on
the Participant's behalf during such leave. Upon the Participant's return to
active service (i) within ninety (90) days following the commencement of such
leave or, (ii) prior to the expiration of any longer period for which such
Participant's right to reemployment with the Corporation is guaranteed by either
statute or contract, his or her payroll deductions under the Plan shall
automatically resume at the rate in effect at the time the leave began. However,
should the Participant's leave of absence exceed ninety (90) days and his or her
re-employment rights not be guaranteed by either statute or contract, then the
Participant's status as an Eligible Employee will be deemed to terminate on the
ninety-first (91st) day of that leave, and such Participant's purchase right for
the offering period in which that leave began shall thereupon terminate. An
individual who returns to active employment following such a leave shall be
treated as a new Employee for purposes of the Plan and must, in order to resume
participation in the Plan, re-enroll in the Plan (by making a timely filing of
the prescribed enrollment forms) on or before his or her scheduled Entry Date
into the offering period.
G. CORPORATE TRANSACTION. Each outstanding purchase right shall automatically be
exercised, immediately prior to the effective date of any Corporate Transaction,
by applying the payroll deductions of each Participant for the Purchase Interval
in which such Corporate Transaction occurs to the purchase of whole shares of
Common Stock at a purchase price per share equal to eighty-five percent (85%) of
the LOWER of (i) the Fair Market Value per share of Common Stock on the
Participant's Entry Date into the offering period in which such Corporate
Transaction occurs or (ii) the Fair Market Value per share of Common Stock
immediately prior to the effective date of such Corporate Transaction. However,
the applicable limitations on the number of shares of Common Stock purchasable
per Participant and in the aggregate shall continue to apply to any such
purchase.
The Corporation shall use its best efforts to provide at least ten (10)-days
prior written notice of the occurrence of any Corporate Transaction, and
Participants shall, following the receipt of such notice, have the right to
terminate their outstanding purchase rights prior to the effective date of the
Corporate Transaction.
H. PRORATION OF PURCHASE RIGHTS. Should the total number of shares of Common
Stock to be purchased pursuant to outstanding purchase rights on any particular
date exceed the number of shares then available for issuance under the Plan, the
Plan Administrator shall make a pro-rata allocation of the available shares on a
uniform and nondiscriminatory basis, and the payroll deductions of each
Participant, to the extent in excess of the aggregate purchase price payable for
the Common Stock pro-rated to such
<PAGE>
individual, shall be refunded.
I. ASSIGNABILITY. The purchase right shall be exercisable only by the
Participant and shall not be assignable or transferable by the Participant.
J. STOCKHOLDER RIGHTS. A Participant shall have no stockholder rights with
respect to the shares subject to his or her outstanding purchase right until the
shares are purchased on the Participant's behalf in accordance with the
provisions of the Plan and the Participant has become a holder of record of the
purchased shares.
VIII. ACCRUAL LIMITATIONS
A. No Participant shall be entitled to accrue rights to acquire Common Stock
pursuant to any purchase right outstanding under this Plan if and to the extent
such accrual, when aggregated with (i) rights to purchase Common Stock accrued
under any other purchase right granted under this Plan and (ii) similar rights
accrued under other employee stock purchase plans (within the meaning of Code
Section 423) of the Corporation or any Corporate Affiliate, would otherwise
permit such Participant to purchase more than Twenty-Five Thousand Dollars
($25,000) worth of stock of the Corporation or any Corporate Affiliate
(determined on the basis of the Fair Market Value per share on the date or dates
such rights are granted) for each calendar year such rights are at any time
outstanding.
B. For purposes of applying such accrual limitations to the purchase rights
granted under the Plan, the following provisions shall be in effect:
(i) The right to acquire Common Stock under each outstanding purchase right
shall accrue in a series of installments on each successive Purchase Date during
the offering period on which such right remains outstanding.
(ii) No right to acquire Common Stock under any outstanding purchase right shall
accrue to the extent the Participant has already accrued in the same calendar
year the right to acquire Common Stock under one (1) or more other purchase
rights at a rate equal to Twenty-Five Thousand Dollars ($25,000) worth of Common
Stock (determined on the basis of the Fair Market Value per share on the date or
dates of grant) for each calendar year such rights were at any time outstanding.
C. If by reason of such accrual limitations, any purchase right of a Participant
does not accrue for a particular Purchase Interval, then the payroll deductions
which the Participant made during that Purchase Interval with respect to such
purchase right shall be promptly refunded.
D. In the event there is any conflict between the provisions of this Article and
one or more provisions of the Plan or any instrument issued thereunder, the
provisions of this Article shall be controlling.
IX. EFFECTIVE DATE AND TERM OF THE PLAN
A. The Plan was adopted by the Board on June 30, 1999 and shall become effective
at the Effective Time, PROVIDED no purchase rights granted under the Plan shall
be exercised, and no shares of Common Stock shall be issued hereunder, until (i)
the Plan shall have been approved by the stockholders of the Corporation and
(ii) the Corporation shall have complied with all applicable requirements of the
1933 Act (including the registration of the shares of Common Stock issuable
under the Plan on a Form S-8 registration statement filed with the Securities
and Exchange Commission), all applicable listing requirements of any stock
exchange (or the Nasdaq National Market, if applicable) on which the Common
Stock is listed for trading and all other applicable requirements established by
law or regulation. In the event such stockholder approval is not obtained, or
such compliance is not effected, within twelve (12) months after the date on
which the Plan is adopted by the Board, the Plan shall terminate and have no
<PAGE>
further force or effect, and all sums collected from Participants during the
initial offering period hereunder shall be refunded.
B. Unless sooner terminated by the Board, the Plan shall terminate upon the
EARLIEST of (i) the last business day in July 2009, (ii) the date on which all
shares available for issuance under the Plan shall have been sold pursuant to
purchase rights exercised under the Plan or (iii) the date on which all purchase
rights are exercised in connection with a Corporate Transaction. No further
purchase rights shall be granted or exercised, and no further payroll deductions
shall be collected, under the Plan following such termination.
X. AMENDMENT/TERMINATION OF THE PLAN
A. The Board may alter, amend, suspend or terminate the Plan at any time to
become effective immediately following the close of any Purchase Interval.
However, the Plan may be amended or terminated immediately upon Board action, if
and to the extent necessary to assure that the Corporation will not recognize,
for financial reporting purposes, any compensation expense in connection with
the shares of Common Stock offered for purchase under the Plan, should the
financial accounting rules applicable to the Plan at the Effective Time be
subsequently revised so as to require the recognition of compensation expense in
the absence of such amendment or termination.
B. In no event may the Board effect any of the following amendments or revisions
to the Plan without the approval of the Corporation's stockholders:
(i) increase the number of shares of Common Stock issuable under the Plan or the
maximum number of shares purchasable per Participant on any one Purchase Date,
except for permissible adjustments in the event of certain changes in the
Corporation's capitalization, (ii) alter the purchase price formula so as to
reduce the purchase price payable for the shares of Common Stock purchasable
under the Plan or (iii) modify eligibility requirements for participation in the
Plan.
XI. GENERAL PROVISIONS
A. Nothing in the Plan shall confer upon the Participant any right to continue
in the employ of the Corporation or any Corporate Affiliate for any period of
specific duration or interfere with or otherwise restrict in any way the rights
of the Corporation (or any Corporate Affiliate employing such person) or of the
Participant, which rights are hereby expressly reserved by each, to terminate
such person's employment at any time for any reason, with or without cause.
B. All costs and expenses incurred in the administration of the Plan shall be
paid by the Corporation; however, each Plan Participant shall bear all costs and
expenses incurred by such individual in the sale or other disposition of any
shares purchased under the Plan.
C. The provisions of the Plan shall be governed by the laws of the State of New
York without regard to that State's conflict-of-laws rules.
<PAGE>
SCHEDULE A
CORPORATIONS PARTICIPATING IN
EMPLOYEE STOCK PURCHASE PLAN
AS OF THE EFFECTIVE TIME
HotJobs.com, Ltd.
HotJobs.com Australia Pty. Ltd.
<PAGE>
APPENDIX
The following definitions shall be in effect under the Plan:
A. BOARD shall mean the Corporation's Board of Directors.
B. CASH EARNINGS shall mean the (i) base salary payable to a Participant by one
or more Participating Corporations during such individual's period of
participation in one or more offering periods under the Plan plus (ii) all
overtime payments, bonuses, commissions, current profit-sharing distributions
and other incentive-type payments. Such Cash Earnings shall be calculated before
deduction of (A) any income or employment tax withholdings or (B) any pre-tax
contributions made by the Participant to any Code Section 401(k) salary deferral
plan or any Code Section 125 cafeteria benefit program now or hereafter
established by the Corporation or any Corporate Affiliate. However, Cash
Earnings shall NOT include any contributions (other than Code Section 401(k) or
Code Section 125 contributions) made on the Participant's behalf by the
Corporation or any Corporate Affiliate to any employee benefit or welfare plan
now or hereafter established.
C. CODE shall mean the Internal Revenue Code of 1986, as amended.
D. COMMON STOCK shall mean the Corporation's common stock.
E. CORPORATE AFFILIATE shall mean any parent or subsidiary corporation of the
Corporation (as determined in accordance with Code Section 424), whether now
existing or subsequently established.
F. CORPORATE TRANSACTION shall mean either of the following stockholder-approved
transactions to which the Corporation is a party:
(i) a merger or consolidation in which securities possessing more than fifty
percent (50%) of the total combined voting power of the Corporation's
outstanding securities are transferred to a person or persons different from the
persons holding those securities immediately prior to such transaction, or
(ii) the sale, transfer or other disposition of all or substantially all of the
assets of the Corporation in complete liquidation or dissolution of the
Corporation.
G. CORPORATION shall mean HotJobs.com, Ltd., a Delaware corporation, and any
corporate successor to all or substantially all of the assets or voting stock of
HotJobs.com, Ltd. which shall by appropriate action adopt the Plan.
H. EFFECTIVE TIME shall mean the time at which the Underwriting Agreement is
executed. Any Corporate Affiliate which becomes a Participating Corporation
after such Effective Time shall designate a subsequent Effective Time with
respect to its employee-Participants.
A-1
<PAGE>
I. ELIGIBLE EMPLOYEE shall mean any person who is employed by a Participating
Corporation on a basis under which he or she is regularly expected to render
more than twenty (20) hours of service per week for more than five (5) months
per calendar year for earnings considered wages under Code Section 3401(a).
J. ENTRY DATE shall mean the date an Eligible Employee first commences
participation in the offering period in effect under the Plan. The earliest
Entry Date under the Plan shall be the Effective Time.
K. FAIR MARKET VALUE per share of Common Stock on any relevant date shall be
determined in accordance with the following provisions:
(i) If the Common Stock is at the time traded on the Nasdaq National Market,
then the Fair Market Value shall be the closing selling price per share of
Common Stock on the date in question, as such price is reported by the National
Association of Securities Dealers on the Nasdaq National Market or any successor
system. If there is no closing selling price for the Common Stock on the date in
question, then the Fair Market Value shall be the closing selling price on the
last preceding date for which such quotation exists.
(ii) If the Common Stock is at the time listed on any Stock Exchange, then the
Fair Market Value shall be the closing selling price per share of Common Stock
on the date in question on the Stock Exchange determined by the Plan
Administrator to be the primary market for the Common Stock, as such price is
officially quoted in the composite tape of transactions on such exchange. If
there is no closing selling price for the Common Stock on the date in question,
then the Fair Market Value shall be the closing selling price on the last
preceding date for which such quotation exists.
(iii) For purposes of the initial offering period which begins at the Effective
Time, the Fair Market Value shall be deemed to be equal to the price per share
at which the Common Stock is sold in the initial public offering pursuant to the
Underwriting Agreement.
L. 1933 ACT shall mean the Securities Act of 1933, as amended.
M. PARTICIPANT shall mean any Eligible Employee of a Participating Corporation
who is actively participating in the Plan.
N. PARTICIPATING CORPORATION shall mean the Corporation and such Corporate
Affiliate or Affiliates as may be authorized from time to time by the Board to
extend the benefits of the Plan to their Eligible Employees. The Participating
Corporations in the Plan are listed in attached Schedule A.
O. PLAN shall mean the Corporation's 1999 Employee Stock Purchase Plan, as set
forth in this document.
A-2
<PAGE>
P. PLAN ADMINISTRATOR shall mean the committee of two (2) or more Board members
appointed by the Board to administer the Plan.
Q. PURCHASE DATE shall mean the last business day of each Purchase Interval. The
initial Purchase Date shall be January 31, 2000.
R. PURCHASE INTERVAL shall mean each successive six (6)-month period within the
offering period at the end of which there shall be purchased shares of Common
Stock on behalf of each Participant.
S. SEMI-ANNUAL ENTRY DATE shall mean the first business day in February and
August each year on which an Eligible Employee may first enter an offering
period.
T. STOCK EXCHANGE shall mean either the American Stock Exchange or the New York
Stock Exchange.
U. UNDERWRITING AGREEMENT shall mean the agreement between the Corporation and
the underwriter or underwriters managing the Corporation's initial public
offering of its Common Stock.
A-3
<PAGE>
HOTJOBS.COM, LTD.
1999 EMPLOYEE STOCK PURCHASE PLAN
AMENDMENT NO. 1
The HotJobs.com, Ltd. 1999 Employee Stock Purchase Plan (the "PLAN") is hereby
amended as follows:
1. Paragraph B of Section III of the Plan is hereby redesignated as
Paragraph C, and new Paragraph III.B. is hereby added to the Plan
to read as follows:
"B. The number of shares of Common Stock available
for issuance under the Plan shall automatically increase on the first
trading day of January each calendar year during the term of the Plan,
beginning with the 2001 calendar year, by an amount equal to one
percent (1%) of the shares of Common Stock outstanding on the last
trading day in December of the immediately preceding calendar year, but
in no event shall such annual increase exceed Five Hundred Thousand
(500,000) shares."
2. Redesignated Paragraph III.C. of the Plan is hereby amended and
restated in its entirety, to read as follows:
"E. Should any change be made to the Common Stock by
reason of any stock split, stock dividend, recapitalization,
combination of shares, exchange of shares or other change affecting the
outstanding Common Stock as a class without the Corporation's receipt
of consideration, appropriate adjustments shall be made by the
Committee to (i) the maximum number and class of securities issuable
under the Plan, (ii) the number and class of securities by which the
share reserve is to increase each calendar year pursuant to the
automatic share increase provisions of the Plan, (iii) the maximum
number and class of securities purchasable per Participant and in the
aggregate on any one Purchase Date and (iv) the number and class of
securities and the price per share in effect under each outstanding
purchase right in order to prevent the dilution or enlargement of
benefits thereunder."
3. Except as modified by this Plan Amendment, all the terms and
provisions of the Plan shall continue in full force and effect.
<PAGE>
IN WITNESS WHEREOF, HotJobs.com, Ltd. has caused this Amendment No. 1 to be
executed on its behalf by its duly-authorized officer as of the 17th day of May,
2000.
HOTJOBS.COM, LTD.
BY:
-------------------------------
NAME:
-----------------------------
TITLE:
----------------------------
