<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant / /
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Under Rule 14a-12
NETCREATIONS, INC
-----------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
-----------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
----------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
----------------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
----------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
----------------------------------------------------------------------
5) Total fee paid:
----------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
1) Amount Previously Paid:
___________________________________________________________________________
2) Form, Schedule or Registration Statement No.:
___________________________________________________________________________
3) Filing Party:
___________________________________________________________________________
4) Date Filed:
___________________________________________________________________________
<PAGE>
[GRAPHIC OMITTED]
June 2, 2000
Dear Shareholder:
You are cordially invited to attend the Annual Meeting of Shareholders of
NetCreations, Inc. We will be holding the Annual Meeting on June 22, 2000 at
the TriBeCa Grand Hotel, 2 Avenue of the Americas, New York, New York 10013 at
9:30 a.m., local time.
At the 2000 Annual Meeting, we will ask you to:
o Elect five members to the Board of Directors;
o Approve amendments to the NetCreations, Inc 1999 Stock Option Plan,
including an increase in the number of options authorized from 1,170,000
to 3,000,000;
o Approve NetCreations, Inc. 2000 Employee Stock Purchase Plan;
o Ratify the selection of Grant Thornton, LLP as independent accountants
for the fiscal year ending December 31, 2000; and
o Transact such other business as properly comes before the meeting.
Enclosed with this letter is a Notice of the Annual Meeting of
Shareholders, a Proxy Statement, a proxy card and a return envelope. Also
enclosed with this letter is NetCreations, Inc.'s Annual Report for the fiscal
year ended December 31, 1999.
The Board of Directors of NetCreations recommends that shareholders vote
for election of the board's nominees for director and for approval of each of
the other proposals.
Your vote on these matters is very important. We urge you to review
carefully the enclosed materials and to return your proxy promptly.
Whether or not you plan to attend the Annual Meeting, please sign and
promptly return your proxy card in the enclosed postage paid envelope. If you
attend the meeting, you may vote in person if you wish, even though you have
previously returned your proxy.
Sincerely,
[GRAPHIC OMITTED]
Rosalind B. Resnick
Chief Executive Officer, and
Chairman of the
Board of the Directors
YOUR VOTE IS IMPORTANT -- PLEASE EXECUTE AND RETURN THE ENCLOSED PROXY
PROMPTLY, WHETHER OR NOT YOU PLAN TO ATTEND THE NETCREATIONS, INC. ANNUAL
MEETING.
<PAGE>
NETCREATIONS, INC
379 WEST BROADWAY, SUITE 202
NEW YORK, NEW YORK 10012
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
--------------------------------------------------------------------------------
DATE: Thursday, June 22, 2000
TIME: 9:30 a.m. local time
PLACE: TriBeCa Grand Hotel
2 Avenue of the Americas
New York, New York 10013
--------------------------------------------------------------------------------
YOUR VOTE AT THE ANNUAL MEETING IS VERY IMPORTANT TO US.
Dear Shareholder:
At the 2000 Annual Meeting, we will ask you to:
1. Elect five directors, each for a one-year term.
2. Approve amendments to the NetCreations, Inc 1999 Stock Option Plan,
including an increase in the number of options authorized from 1,170,000
to 3,000,000.
3. Approve the NetCreations, Inc. 2000 Employee Stock Purchase Plan.
4. Ratify the appointment by the Board of Directors of the firm of Grant
Thornton, LLP as independent public accountants of NetCreations for the
fiscal year ending December 31, 2000.
5. Transact such other business as may properly come before the Annual
Meeting.
Accompanying this notice is a Proxy Statement and a Proxy Card. Whether or
not you expect to be present at the Annual Meeting, please sign and date the
Proxy Card and return it in the enclosed envelope before the date of the Annual
Meeting. You may revoke your proxy any time before it is voted at the Annual
Meeting. You will be able to vote your shares at the Annual Meeting if you were
a shareholder of record at the close of business on May 15, 2000.
You are cordially invited to attend the Annual Meeting, and you may vote
in person even though you have returned your card.
BY ORDER OF THE BOARD OF DIRECTORS
[GRAPHIC OMITTED]
Ryan Scott Druckenmiller, Secretary
New York, New York
June 2, 2000
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
-----
<S> <C>
Information About the 2000 Annual Meeting and Voting ..................................... 2
Proposals to be presented at the Annual Meeting
Proposal 1: Election of Directors ..................................................... 4
Proposal 2: Approve amendments to the NetCreations, Inc 1999 Stock Option Plan,
including an increase in the number of options authorized for issuance
from 1,170,000 to 3,000,000 ............................................... 5
Proposal 3: Approve Employee Stock Purchase Plan ...................................... 8
Proposal 4: Ratification of Independent Auditors ...................................... 11
Security Ownership of Certain Beneficial Owners and Management ........................... 12
Directors and Executive Officers ......................................................... 13
Compensation Committee Report on Executive Compensation .................................. 20
Stock Performance Chart .................................................................. 21
Shareholder Proposals .................................................................... 23
</TABLE>
<PAGE>
NETCREATIONS, INC.
379 WEST BROADWAY
NEW YORK, NEW YORK 10012
--------------------------------------------------------------------------------
PROXY STATEMENT FOR ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON JUNE 22, 2000
--------------------------------------------------------------------------------
This Proxy Statement provides information that you should read before you
vote on the proposals that will be presented to you at the 2000 Annual Meeting
of NetCreations, Inc. ("NetCreations" or the "Company"). The 2000 Annual
Meeting will be held on June 22, 2000 at the TriBeCa Grand Hotel, 2 Avenue of
the Americas, New York, New York, 10013.
This Proxy Statement provides detailed information about the Annual
Meeting, the proposals you will be asked to vote on at the Annual Meeting, and
other relevant information. The Board of Directors of NetCreations is
soliciting these proxies.
At the Annual Meeting, you will be asked to vote on the following
proposals:
1. Elect five directors, each for a one-year term.
2. Approve amendments to the NetCreations, Inc 1999 Stock Option Plan,
including an increase in the number of options authorized from 1,170,000
to 3,000,000.
3. Approve the NetCreations, Inc. 2000 Employee Stock Purchase Plan.
4. Ratify the appointment by the Board of Directors of the firm of Grant
Thornton, LLP as independent public accountants of NetCreations for the
fiscal year ending December 31, 2000.
5. Such other matters as may properly come before the meeting.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR EACH OF
THESE PROPOSALS.
On June 2, 2000, we began mailing this Proxy Statement to people who,
according to our records, owned common stock of beneficial interests in
NetCreations as of the close of business on May 15, 2000. A copy of
NetCreations' Annual Report for the fiscal year ended December 31, 1999
accompanies this Proxy Statement.
1
<PAGE>
INFORMATION ABOUT THE 2000 ANNUAL MEETING AND VOTING
The Annual Meeting
The Annual Meeting will be held on June 22, 2000 at the TriBeCa Grand
Hotel, 2 Avenue of the Americas, New York, New York 10013 at 9:30 a.m. local
time.
This Proxy Solicitation
We are sending you this proxy statement because NetCreations' Board of
Directors is seeking a proxy to vote your shares at the Annual Meeting. This
proxy statement is intended to assist you in deciding how to vote your shares.
On June 2, 2000, we began mailing this proxy statement to all people who,
according to our shareholder records, owned shares at the close of business on
May 15, 2000.
NetCreations is paying the cost of requesting these proxies. NetCreations'
directors, officers and employees may request proxies in person or by
telephone, mail, telecopy or letter. NetCreations will reimburse brokers and
other nominees their reasonable out-of-pocket expenses for forwarding proxy
materials to beneficial owners of our shares.
Voting Your Shares
You may vote your shares at the Annual Meeting either in person or by
proxy. To vote in person, you must attend the Annual Meeting and obtain and
submit a ballot. Ballots for voting in person will be available at the Annual
Meeting. To vote by proxy, you must complete and return the enclosed proxy card
in time to be received by us by the Annual Meeting. By completing and returning
the proxy card, you will be directing the persons designated on the proxy card
to vote your shares at the Annual Meeting in accordance with the instructions
you give on the proxy card.
If you hold your shares with a broker and you do not tell your broker how
to vote, your broker has the authority to vote on all proposals.
IF YOU DECIDE TO VOTE BY PROXY, YOUR PROXY CARD WILL BE VALID ONLY IF YOU
SIGN, DATE AND RETURN IT BEFORE THE ANNUAL MEETING SCHEDULED TO BE HELD ON JUNE
22, 2000.
In the election of directors, the five nominees for director who receive
the most votes will be elected. So, if you do not vote for a particular
nominee, or you indicate "WITHHELD" on your proxy card, your vote will not
count either for or against the nominee. For the other proposals, you may vote
"FOR," "AGAINST" or "ABSTAIN." If you "ABSTAIN" as to any proposal, it has the
same effect as a vote "AGAINST" that proposal.
If you sign your proxy card or broker voting instruction card with no
further instructions, your shares will be voted in accordance with the
recommendations of the Board ("FOR" all of the Company's nominees to the Board,
and "FOR" all other items described in this proxy statement and in the
discretion of the proxy holders on any other matters that properly come before
the meeting).
We have described in this proxy statement all the proposals that we expect
will be made at the Annual Meeting. If we or a shareholder properly present any
other proposal to the meeting, we will use your proxy to vote your shares on
the proposal in our best judgment.
Revoking Your Proxy
If you decide to change your vote, you may revoke your proxy at any time
before it is voted. You may revoke your proxy in one of three ways:
o You may notify the Secretary of NetCreations in writing that you wish to
revoke your proxy at the following address: NetCreations, Inc., 379 West
Broadway, Suite 202, New York, New York 10012, Attention: Ryan Scott
Druckenmiller, Secretary. We must receive your notice before the time of
the Annual Meeting.
2
<PAGE>
o You may submit a proxy dated later than your original proxy.
o You may attend the Annual Meeting and vote. Merely attending the Annual
Meeting will not by itself revoke a proxy; you must obtain a ballot and
vote your shares to revoke the proxy.
Vote Required by Approval
Shares Entitled to Vote. On May 15, 2000 (also referred to as the "Record
Date"), 15,495,000 shares of Common Stock were issued and outstanding, each of
which is entitled to one vote on each of the proposals.
Quorum. The quorum requirement for holding the meeting and transacting
business is a majority of the outstanding shares present in person or
represented by proxy and entitled to be voted. A quorum will be present if
7,747,500 votes are represented at the Annual Meeting, either in person (by the
shareholders) or by proxy. If a quorum is not present, a vote cannot occur.
Both abstentions and broker non-votes are counted as present for the purposes
of determining the presence of a quorum.
Votes Required. In the election of directors, the five persons receiving
the highest number of "FOR" votes will be elected. All other proposals require
the affirmative "FOR" vote of a majority of those shares present and entitled
to vote. If you are a beneficial owner and do not provide the shareowner of
record with voting instructions, your shares may constitute broker non-votes.
In tabulating the voting result for any particular proposal, shares that
constitute broker non-votes are not considered entitled to vote on that
proposal and will not be considered votes cast for the foregoing purposes.
Generally, broker non-votes occur when shares held by a broker for a beneficial
owner are not voted with respect to a particular proposal because (1) the
broker has not received voting instructions from the beneficial owner, and (2)
the broker lacks discretionary voting power to vote such shares.
Additional Information
We are mailing our Annual Report for the fiscal year ended December 31,
1999, including consolidated financial statements, to all shareholders entitled
to vote at the Annual Meeting together with this proxy statement. The Annual
Report does not constitute a part of the proxy solicitation material. The
Annual Report tells you how to get additional information about NetCreations.
3
<PAGE>
PROPOSAL 1:
ELECTION OF DIRECTORS
Nominees for election to the Board of Directors are:
Rosalind B. Resnick
Ryan Scott Druckenmiller
Michael Levy
Gregory W. Slayton
Mitchell York
Each director will be elected to serve for a one-year term, unless he or
she resigns or is removed before his or her term expires, or until his or her
replacement is elected and qualified. Each of the five nominees is currently a
member of the Board of Directors and has consented to serve as a director if
re-elected. More detailed information about each of the nominees is available
in the section of this proxy statement titled "Directors and Executive
Officers," which begins on page 14.
If any of the nominees cannot serve for any reason (which is not
anticipated), the Board of Directors may designate a substitute nominee or
nominees; however, if the nominee is a designee of a party to the shareholders
agreement, then the substitute nominee will be designated by the respective
entity who designated the vacating representative. If a substitute is
nominated, we will vote all valid proxies for the election of the substitute
nominee or nominees. Alternatively, the Board of Directors may also decide to
leave the board seat or seats open until a suitable candidate or candidates are
located, or it may decide to reduce the size of the Board.
The Board of Directors of the Company has established the size of the
board at five members. Proxies for the Annual Meeting may not be voted for more
than the five nominees named.
Recommendation
The Board of Directors recommends a vote "FOR" each of the nominees to the
Board of Directors.
4
<PAGE>
PROPOSAL 2:
APPROVE THE AMENDMENTS TO THE NETCREATIONS, INC.STOCK OPTION PLAN,
INCLUDING AN INCREASE IN THE NUMBER OF OPTIONS AUTHORIZED
FOR ISSUANCE FROM 1,170,000 to 3,000,000
Our Stock Option Plan became effective July 22 1999 (our "Stock Option
Plan"). On January 24, 2000 and May 15, 2000, our Board of Directors approved
an amendment to our Stock Option Plan for the purpose of increasing the number
of shares of common stock authorized for issuance under our Stock Option Plan
from 1,170,000 to 3,000,000 shares. In addition on May 15, 2000, the Board of
Directors approved an amendment to our Stock Option Plan to increase the number
of options that may be granted to an individual under the Stock Option Plan
from 468,000 options to purchase our common stock over the term of the plan to
500,000 options to purchase our common stock in any one of our fiscal years.
Each of these proposed amendments to the 1999 Stock Option Plan will become
effective retroactively to January 1, 2000 upon shareholder approval.
The Board of Directors has granted 1,098,000 of the 1,170,000 options to
purchase our common stock that are authorized for issuance under our Stock
Option Plan. Subject to shareholder approval, the Board of Directors has
granted an additional 185,000 options to purchase our common stock to new
employees, including 100,000 to Brian Burlant, and 85,000 to Nicolle Comeforo,
all of whom are officers of our company. Upon approval by our shareholders of
the increase in the number of options authorized for issuance under our Stock
Option Plan, options to purchase 1,717,000 shares of our common stock will
remain available for future grants.
The amendment to increase the number of authorized options available under
our Stock Option Plan will permit a sufficient reserve of options to be
available in order to attract and retain qualified and competent directors,
managers, key employees and consultants through the encouragement of stock
ownership in our company. The amendment to increase the number of options that
may be granted to an individual in each of our fiscal years will permit us to
offer a sufficient number of options to attract and retain key employees.
Recommendation
The Board of Directors unanimously recommends a vote "FOR" the approval of
the proposed amendments to our Stock Option Plan.
SUMMARY OF THE AMENDED STOCK OPTION PLAN
The following description is a summary of our Stock Option Plan. For more
detailed information, you should read the full text of our Stock Option Plan,
which is included as Appendix A at the end of this booklet.
General: Our Stock Option Plan provides for the grant of options intended
to qualify as "incentive stock options" under Section 422 of the Internal
Revenue Code of 1986, as amended, and non-qualified stock options. The maximum
term of any stock option granted under our Stock Option Plan is ten years,
except that with respect to incentive stock options granted to a person
possessing more than 10% of our combined voting power, the term of their
options shall be for no more than five years. The aggregate fair market value
on the date of grant of the common stock for which incentive stock options are
exercisable for the first time by an employee during any calendar year may not
exceed $100,000. Also, upon shareholder approval, the aggregate number of
options granted to any one individual may not exceed 500,000 options to
purchase our common stock in any one of our fiscal years. This limit is subject
to adjustments to reflect any stock dividends, split-ups, recapitalizations,
mergers, consolidations, business combinations or exchanges of shares and the
like.
Purpose. The purpose of our Stock Option Plan is to advance the interests
of our company by providing incentives to attract and retain qualified and
competent persons who provide management services through the encouragement of
stock ownership in our company by such persons.
Shares Available under the Plan: Upon approval by the shareholders, an
aggregate of 3,000,000 options to purchase our common stock will be authorized
and 1,717,000 options to purchase our common stock will be available for
issuance. This limitation is subject to adjustment to reflect any stock
dividends, split-ups, recapitalizations, mergers, consolidations, business
combinations or exchanges of shares and the like. If any options to
5
<PAGE>
purchase our common stock under the Stock Option Plan expire or terminate
unexercised, become unexercisable or are forfeited or otherwise terminated, the
options shall thereafter be available for further awards under the Stock Option
Plan. As of May 31, 2000, the fair market value of a share of our common stock,
determined by the last reported sale price per share of our common stock on
such date, as quoted on the Nasdaq National Market, was $24.50.
Administration: Our Stock Option Plan is administered by our Board of
Directors or by such committee or committees, consisting of independent members
of our Board of Directors, as may be appointed by our Board of Directors from
time to time (our Board of Directors, or such committee or committees are
referred to as the "Administrator"). The Administrator has full power and
authority to take all actions necessary to carry out the purpose and intent of
our Stock Option Plan, including, but not limited to, the authority to: (i)
determine the eligible persons to whom, and the time or times at which options
are granted; (ii) determine the types of options to be granted; (iii) determine
the number of shares to be covered by or used for reference purposes for each
option grant; (iv) determine the exercise price of each option granted and (v)
adopt rules and regulations for carrying out the provisions of our Stock Option
Plan.
In the event of changes in our common stock by reason of any stock
dividend, split-up, recapitalization, merger, consolidation, business
combination or exchange of shares and the like, the Administrator shall, in its
discretion, make appropriate adjustments to the number of options covering
shares of our common stock reserved for issuance, exercise price covering
options issued, and shall, in its discretion, and without the consent of
holders of options, make any other adjustments in options which have been
granted as the Administrator, in its sole discretion, determines to be
necessary or appropriate.
Participation: Participation in our Stock Option Plan will be open to all
of our employees, officers, and directors and consultants, as may be determined
by the Administrator from time to time. As of May 15, 2000, all of our
directors, both of our two non-employee directors, and approximately 62
employees and consultants were eligible to participate in our Stock Option
Plan.
Exercise Price. The exercise price of incentive stock options granted
under our Stock Option Plan must be at least equal to the fair market value of
our common stock on the date of grant. However, for any employee holding more
than 10% of our combined voting power, the exercise price must be at least 110%
of the fair market value of our common stock. The exercise price of
non-qualified stock options is set by the Administrator. The exercise price may
be paid in cash, through a tendering a sufficient number of shares our common
stock received by the option holder upon exercise equal to the aggregate
exercise price or by any other means the Administrator approves.
Vesting of Options. The options granted under the plan shall vest as
determined by the Administrator. Options shall fully vest upon the occurrence
of a change of control of our company.
Amendment and Termination. Our Administrator may amend, modify or
terminate the Stock Option Plan at any time as long as such amendment,
modification or termination does not impair vesting rights of plan
participants. The Stock Option Plan will terminate on July 22, 2009, unless
terminated earlier by the Board of Directors.
Federal Income Tax Consequences
The following is a general summary of the current federal income tax
treatment of stock options, which are authorized to be granted under our Stock
Option Plan, based upon the current provisions of the Internal Revenue Code and
regulations promulgated thereunder.
Incentive Stock Options: Incentive stock options under our Stock Option
Plan are intended to meet the requirements of the Internal Revenue Code Section
422. No tax consequences result from the grant of the option. If an option
holder acquires stock upon the exercise, no income will be recognized by the
option holder for ordinary income tax purposes (although the difference between
the option exercise price and the fair market value of the stock subject to the
option may result in alternative minimum tax liability to the option holder)
and we will be allowed no deduction as a result of such exercise, provided that
the following conditions are met: (a) at all times during the period beginning
with the date of the granting of the option and ending on the day three
6
<PAGE>
months before the date of such exercise, the option holder was our employee or
of a subsidiary and (b) the option holder makes no disposition of the stock
within two years from the date the option is granted nor within one year after
the stock is transferred to the option holder. The three-month period is
extended to one year in the event of disability and is waived in the event of
death of the employee. In the event of a sale of such stock by the option
holder after compliance with these conditions, any gain realized over the price
paid for the stock ordinarily will be treated as capital gain, and any loss
will be treated as capital loss, in the year of the sale.
If the option holder fails to comply with the employment requirement
discussed above, the tax consequences will be the same as for a nonqualified
option, discussed below. If the option holder fails to comply with the holding
period requirements discussed above, the option holder will recognize ordinary
income in an amount equal to the lesser of (i) the excess of the fair market
value of the stock on the date the option was exercised over the exercise price
or (ii) the excess of the amount realized upon such disposition over the
adjusted tax basis of the stock. Any additional gain ordinarily will be
recognized by the option holder as capital gain, either long-term or
short-term, depending on the holding period of the shares. If the option holder
is treated as having received ordinary income because of his or her failure to
comply with either condition above, an equivalent deduction will be allowed to
us in the same year.
Nonqualified Stock Options: No tax consequences result from the grant of
the option. An option holder who exercises a nonqualified stock option with
cash generally will realize compensation taxable as ordinary income in an
amount equal to the difference between the exercise price and the fair market
value of the shares on the date of exercise, and we will be entitled to a
deduction from income in the same amount in the fiscal year in which the
exercise occurred. The option holder's basis in such shares will be the fair
market value on the date income is realized, and when the holder disposes of
the shares he or she will recognize capital gain or loss, either long-term or
short-term, depending on the holding period of the shares.
Disallowance of Deductions: The Internal Revenue Code disallows deductions
for publicly held corporations with respect to compensation in excess of
$1,000,000 paid to the corporation's chief executive officer and its four other
most highly compensated officers. However, compensation payable solely on
account of attainment of one or more performance goals is not subject to this
deduction limitation if the performance goals are objective, pre-established
and determined by a compensation committee comprised solely of two or more
outside directors, the material terms under which the compensation is to be
paid are disclosed to the stockholders and approved by a majority vote, and the
compensation committee certifies that the performance goals and other material
terms were in fact satisfied before the compensation is paid. Under this
exception, the deduction limitation does not apply with respect to compensation
otherwise deductible on account of stock options and stock appreciation rights
granted at fair market value under a plan which limits the number of shares
that may be issued to any individual and which is approved by the corporation's
stockholders.
Incorporation by Reference
The foregoing is only a summary of the Stock Option Plan and is qualified
in its entirety by reference to its full text, a copy of which is attached as
Appendix A.
7
<PAGE>
PROPOSAL NO. 3:
APPROVE THE NETCREATIONS, INC. 2000 EMPLOYEE STOCK PURCHASE PLAN
On May 15, 2000, the Board of Directors adopted the NetCreations, Inc.
2000 Employee Stock Purchase Plan (which we refer to as the ESPP), and reserved
one million 1,000,000 shares increasing annually by 200,000 shares for issuance
under the ESPP, subject to stockholder approval within 12 months of Board
approval.
At the annual meeting, you are being asked to approve the ESPP and the
Board's reservation of shares under the ESPP for the purpose of qualifying such
shares for special tax treatment under Internal Revenue Code Section 423.
Recommendation
Our Board of Directors recommends a vote "FOR" the approval of the
NetCreations, Inc. 2000 Employee Stock Purchase Plan and the reservation of
shares for issuance under that plan.
SUMMARY OF THE ESPP
The ESPP will provide our employees with an opportunity to become owners
in us through a convenient arrangement for purchasing shares of common stock.
If approved by our shareholders, the ESPP will become effective July 1, 2000.
The following is a summary of the ESPP. For more detailed information, you
should read the full text of the ESPP, which is included as Appendix B at the
end of this booklet.
General
Purpose. The ESPP offers eligible employees the opportunity to purchase
shares of our common stock through after-tax payroll withholding. The ESPP is
intended to permit employees to acquire an equity interest in us thereby
providing them with an incentive to work for our growth and success. We will
use the funds we receive under the ESPP for any general corporate purpose.
Eligibility. All full time employees are eligible to participate in the
ESPP, except (1) employees who have not satisfied whatever waiting period the
Compensation Committee sets at the beginning of the payroll deduction period
and (2) employees who hold 5% or more of our common stock. No non-employee
directors are eligible to participate in the ESPP. As of May 15, 2000, there
were approximately 62 employees who would be eligible to participate in the
ESPP if it had then been in effect, and if the Compensation Committee did not
require any waiting period.
Shares Available Under the ESPP. If approved, the ESPP would authorize us
to issue up to one million (1,000,000) shares of common stock from authorized
but unissued shares or from stock owned by us, including stock purchased on the
market. The number of shares initially authorized will automatically increase
by 200,000 shares each year on December 31 beginning December 31, 2001. The
number of shares we are authorized to issue under the ESPP automatically
adjusts for stock dividends, stock splits, reclassifications and other changes
affecting the common stock.
Administration. The Compensation Committee of our Board of Directors
administers the ESPP. The Compensation Committee may delegate this authority.
The Compensation Committee has the authority and discretion to specify the
terms and conditions of stock purchases by employees under the ESPP (within the
limitations of the ESPP) and to otherwise interpret and construe the terms of
the ESPP and any related agreements. Under the ESPP, the Compensation Committee
(or the Board of Directors) can lengthen or shorten the payroll deduction
periods, increase the purchase price for shares, or make other administrative
adjustments. The ESPP also specifically provides for indemnification of the
Compensation Committee, other directors, and agents for actions taken with
respect to the ESPP.
Options Granted Under the ESPP
How Options Are Granted. On the first day of each payroll deduction
period, a participating employee will automatically receive options to purchase
a number of shares of our common stock with money that is withheld from his or
her paycheck. The number of shares available to the participating employee will
be determined at
8
<PAGE>
the end of the payroll deduction period by dividing (1) the total amount of
money withheld during the payroll deduction period by (2) the exercise price of
the options (as described below). Options granted under the ESPP to employees
will be automatically exercised to purchase shares on the last day of the
payroll deduction period, unless the participating employee has, at least
thirty days earlier or by such other deadline as the Compensation Committee
sets, requested that his or her payroll contributions stop. The Compensation
Committee will determine the treatment of fractional shares. Any cash
accumulated in an employee's account for a period in which an employee elects
not to participate will be distributed to the employee.
Exercise Price. The initial exercise price for options under the ESPP will
be 85% of the lesser of the fair market value of the common stock as of the
first day of the payroll deduction period and as of the last day of that
period. The Compensation Committee may increase the exercise price before a
payroll deduction period begins. No participant can purchase more than $25,000
worth of NetCreations common stock in all payroll deduction periods ending
during the same calendar year. The closing price of a share of our common
stock, as reported on May 31, 2000 was $24.50.
Election to Participate. Participating employees must elect before the
beginning of a given payroll deduction period to participate, although a prior
election will carry over until revoked.
Termination of Service. If an employee's employment ends for any reason,
including death, any cash accumulated in the employee's account will be
distributed, and the employee will immediately cease to participate in the
ESPP, unless the Compensation Committee specifies some other treatment.
Other Information. All options granted under the ESPP will be evidenced by
participation agreements or other approved documentation. The Compensation
Committee has broad discretion to determine the timing, amount, exercisability,
and other terms and conditions of options granted to employees. No options
granted or funds accumulated under the ESPP are assignable or transferable
other than by will or in accordance with the laws of descent and distribution.
The Compensation Committee may impose restrictions on sale of the stock or
require the stock to be held at a particular broker.
Amendment or Termination of the ESPP
The Board of Directors may amend or terminate the ESPP at any time and
from time to time. Shareholder approval is required for any changes if such
approval is required to preserve the ESPP's status as a plan under section 423
of the Internal Revenue Code. Absent extension by the Board with shareholder
approval, no payroll deduction period will end after June 30, 2010.
Tax Consequences
The following summarizes the material federal income tax consequences of
participation in the ESPP. It does not cover employment taxes except as
specified, nor does it cover other federal, state, local, or foreign tax
consequences, if any.
The ESPP is intended to qualify for the favorable federal income tax
treatment provided under Section 423 of the Internal Revenue Code.
A participant's withheld compensation will be post-tax. In other words,
the participant will be taxed on amounts withheld for the purchase of shares of
our common stock as if he or she had instead received his or her full salary or
wages. Other than this, no income will be taxable to a participant until
disposition of the shares acquired, and the method of taxation will depend upon
how long the shares were held before disposition. However, liability for Social
Security (and Medicare) tax may also be incurred with respect to the excess of
the value of the stock over the exercise price when the shares are purchased at
the end of the payroll deduction period.
If the purchased shares of common stock are disposed of more than two
years after the beginning of the applicable payroll deduction period and more
than one year after the exercise date, or if the participant dies at any time
while holding the stock, then the lesser of (a) the excess of the fair market
value of the stock at the time of such disposition or death over the purchase
price or (b) the discount element (up to 15% of fair market
9
<PAGE>
value of the stock as-of the beginning of the applicable offering period) will
be treated as ordinary income. Any further gain or any loss will be taxed as a
long-term capital gain or loss. Net long-term capital gains for individuals are
currently subject to a maximum marginal federal income tax rate that is less
than the maximum marginal rate for ordinary income.
If the participant sells or disposes of the stock before the expiration of
either of the holding periods described above (a "disqualifying disposition"),
then the excess of the fair market value of the stock on the exercise date over
the exercise price will be treated as ordinary income at the time of such
disposition. We may, in the future, be required to withhold income taxes
relating to such ordinary income from other payments made to the participant.
The balance of any gain on a sale will be treated as capital gain. Even if the
stock is sold for less than its fair market value on the exercise date, the
same amount of ordinary income is attributed to the participant, and a capital
loss is recognized equal to the difference between the sales price and the fair
market value of the stock on the exercise date. Any capital gain or loss will
be long- or short-term depending on whether the stock has been held for more
than one year.
There are no federal income tax consequences to us by reason of the grant
or exercise of rights under the ESPP. We will, in general, be entitled to a
deduction to the extent amounts are taxed as ordinary income to a participant
by reason of a disqualifying disposition of the purchased shares of stock, but
will not be entitled to a deduction in respect of the ordinary income realized
by a participant upon later disposition, or realized upon death. The Company's
deduction may be limited under Internal Revenue Code Section 162(m) and may be
subject to disallowance for failure to report the optionee's income (which
could arise if an optionee does not notify the Company of the sale of stock in
a disqualifying disposition).
Incorporation by Reference
The foregoing is only a summary of the ESPP and is qualified in its
entirety by reference to its full text, a copy of which is attached as Appendix
B.
10
<PAGE>
PROPOSAL 4:
RATIFICATION OF INDEPENDENT AUDITORS
The Board of Directors has appointed Grant Thornton, LLP, an international
accounting firm of independent certified public accountants, to act as
independent accountants for the Company for 2000. The Board believes that Grant
Thornton's experience with and knowledge of NetCreations are important and we
would like to continue this relationship. Grant Thornton, LLP has advised us
that the firm does not have any direct or indirect financial interest in us,
nor has such firm had any such interest in us since its inception in 1995 other
than its capacity as our independent certified public accountants.
A representative of Grant Thornton, LLP is expected to attend our Annual
Meeting. The Grant Thornton, LLP representative will have the opportunity to
make a statement if he or she desires to do so and will be able to respond to
appropriate questions from shareholders.
Recommendation
The Board of Directors recommends a vote "FOR" ratification of the
appointment of Grant Thornton, LLP.
11
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
For the purposes of calculating percentage ownership as of May 15, 2000,
15,495,000 shares were issued and outstanding and, for any individual who
beneficially owns shares represented by options exercisable on or before July
15, 2000, these shares are treated as if outstanding for that person, but not
for any other person. Unless otherwise indicated, the address of each of the
individuals and entities named below is: c/o NetCreations, Inc., 379 West
Broadway, Suite 202, New York, New York 10012.
The following table sets forth certain information with respect to
beneficial ownership of our common stock as of May 15, 2000, as to:
-- each person known by us to own beneficially more than 5% of our
outstanding common stock;
-- each of our directors and executive officers; and
-- all our directors and executive officers as a group.
<TABLE>
<CAPTION>
Beneficial Ownership
of Shares
Name Number Percent
---------------------------------------------------------------------- ------------ ----------
<S> <C> <C>
Rosalind B. Resnick ........................................ 5,740,500 36.3%
Ryan Scott Druckenmiller ................................... 5,530,035 35.0%
Gary Sindler (1) ........................................... 39,000 *
Scott Wolf (1) ............................................. 33,333 *
Allison Fillmore ........................................... -- *
Tej Anand .................................................. -- *
Brian Burlant .............................................. -- *
Michael Levy (1) ........................................... 49,999 *
Gregory W. Slayton (1) ..................................... 49,999 *
Mitchell York (1) .......................................... 49,999 *
All directors and executive officers as a group (10 persons) 11,492,865 73.1%
</TABLE>
------------
* Less than 1% of the outstanding common stock
(1) Consists of options to purchase shares of common stock which are
exercisable within 60 days following the issuance of this proxy statement
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") requires our officers (as defined in regulations issued by the
SEC) and directors, and persons who own more than ten percent of a registered
class of our equity securities, to file reports of ownership and changes in
ownership with the SEC. Officers, directors and greater than ten percent
shareholders are required by SEC regulation to furnish us with copies of all
Section 16(a) forms they file.
Based solely on a review of copies of such reports of ownership furnished
to us, we believe that during the past fiscal year all filing requirements
applicable to its officers, directors and greater than ten percent beneficial
owners were complied with.
12
<PAGE>
DIRECTORS AND EXECUTIVE OFFICERS
Set forth below is certain information relating to our executive officers
and directors.
<TABLE>
<CAPTION>
Name Age Position
--------------------------- ----- -----------------------------------------------------------------
<S> <C> <C>
Rosalind B. Resnick 40 Chief Executive Officer, President, Chairman of the Board of
Directors, and Treasurer
Ryan Scott Druckenmiller 30 Chief Technology Officer, Vice President, Secretary and Director
Gary Sindler 53 Chief Financial Officer
Scott Wolf 45 Senior Vice President, Sales and Business Development
Allison Fillmore 42 Senior Vice President, Marketing
Tej Anand 37 Chief Information Officer
Brian Burlant 40 Senior Vice President, General Counsel
Michael Levy (1)(2) 53 Director
Gregory W. Slayton (1)(2) 40 Director
Mitchell York 43 Director
</TABLE>
------------
(1) Member of Audit Committee
(2) Member of Compensation Committee
Rosalind B. Resnick has served as our Chief Executive Officer, President
and Chairman of our board of directors since our inception. In September 1995,
Ms. Resnick developed America Online's NetGirl Forum, a dating and
relationships area of the America Online service that she hosted until
September 1996. Ms. Resnick began her career in the newspaper industry in 1980
as an intern at the Baltimore Sun. From 1984 to 1989, Ms. Resnick worked as a
business writer at The Miami Herald. Her articles have appeared in Internet
World, NetGuide, Computer Life, PC Today, Home Office Computing, and other
leading computer magazines. In 1995, she co-authored The Internet Business
Guide, and from 1994 to 1997, she served as the editor and publisher of
Interactive Publishing Alert, a semi-monthly newsletter tracking trends and
developments in online publishing and advertising. She is also a contributing
editor to Phillips' Interactive P.R. and Marketing News Newsletter. Ms. Resnick
received B.A. and M.A. degrees from Johns Hopkins University.
Ryan Scott Druckenmiller has served as our Chief Technology Officer and a
member of our board of directors since our inception. Mr. Druckenmiller is an
award-winning Web programmer who created the software that powers
www.postmasterdirect.com's online list store, list member sign-up process, and
list owner accounting system. Mr. Druckenmiller's prolific software output also
includes the PostMaster URL Announcement Service, which submits Web sites to
over 400 leading search engines and directories; PostMaster BannerNet, a free
banner network; TrackBot, an advertising tracking tool, and PinPoint, a
personalized search engine interface. Prior to joining NetCreations, from 1990
to 1995, Mr. Druckenmiller developed video games for the Amiga platform and
published an Amiga newsletter, providing software and information for Amiga
computer users.
Gary Sindler has been our Chief Financial Officer since June 1999. From
February 1999 to June 1999, Mr. Sindler was a consultant to FTI Consulting,
Inc., a provider of litigation, applied sciences and expert financial
consulting services based in Annapolis, Maryland. From July 1996 to February
1999, Mr. Sindler was Executive Vice President, Secretary and Chief Financial
Officer of FTI. From August 1993 to July 1996, Mr. Sindler was Chief Financial
Officer of Aon Risk Services, Inc. of New York. Prior to 1993, he held various
senior-level positions in finance and administration with Willis Corroon, PLC
and Alexander & Alexander Services Inc., two international insurance brokerage
firms. Mr. Sindler holds a B.S. degree in accounting from the University of
Baltimore and is a certified public accountant.
Scott Wolf joined us as our Senior Vice President, Sales and Business
Development in January 2000. Previously Mr. Wolf was chief operating officer at
EarthCam, a leading portal of live images on the Internet, where under his
day-to-day operations and new business leadership, the company's sales tripled.
Mr. Wolf spent 18 years at CMP Media Inc. where he held various senior level
positions including VP Group Publisher and Publishing Director of CMP's first
paid magazine, Windows Magazine. He holds a B.A. from University of
Pennsylvania, MBA from NYU's Stern School of Business.
13
<PAGE>
Allison Fillmore joined us as Senior Vice President of Marketing in
February 2000. Since November 1998, she was the Vice President of Marketing at
MarketXT, Inc. a start up, after-hours online trading company. From October
1994 to November 1998 Ms. Fillmore founded Smartgirls....because it's fun to be
smart, an entrepreneurial venture. During this time she also worked as a
consultant and further pursued her education. From 1989 to September 1994, she
was the Corporate Vice President for PaineWebber's Resource Management Account.
While at PaineWebber she strategically positioned and launched several
products. Ms. Fillmore earned a BA in Comparative Literature from Columbia
University where she graduated Cum Laude.
Tej Anand joined us in February 2000 as the Chief Information Officer.
Since 1998, he held a similar position at Golden Books Family Entertainment
where he was responsible for overseeing systems development and computer
operations for the company. From 1993 to 1998, Mr. Anand was Director of
Knowledge Discovery Solutions at NCR's Human Interface Technology Center. Mr.
Anand worked for A. C. Nielsen, where he developed two novel data mining tools,
"Spotlight" and "Opportunity Explorer," that extract business insights from
retail point-of-sale data. He is a member of the IEEE, the American Association
of Artificial Intelligence and the American Statistical Association. He has
authored several technical papers and is often invited to speak to technical
and business audiences. Mr. Anand received a Bachelor of Technology degree from
Indian Institute of Technology, Bombay, India and a Master of Science degree
from the University of South Carolina.
Brian Burlant joined us in April 2000 as our Senior Vice President,
General Counsel. Previously, Mr. Burlant was Assistant General
Counsel-International with Avon Products, Inc., the international beauty/direct
selling company, where he counseled on establishing various strategic ventures
and new businesses, among other matters, in the U.S., Europe, Asia, Latin
America and Africa. Before that, he was counsel to Times Mirror Magazines and
practiced law with a major New York law firm. Mr. Burlant holds a B.S. with
honors from the Wharton School, a B.A. with honors from the University of
Pennsylvania and a J.D. from The George Washington University.
Michael Levy has been a member of our board of directors since October
1999. He has served as the President, Chief Executive Officer and Chairman of
the Board of SportslineUSA, Inc. since its inception in February 1994. From
1979 through March 1993, Mr. Levy served as President, Chief Executive Officer
and as a Director of Lexicon Corporation, a high technology company
specializing in data communications and signal processing technology. From
January 1988 to June 1993, Mr. Levy also served as Chairman of the Board and
Chief Executive Officer of Sports-Tech International, Inc., a company engaged
in the development, acquisition, integration, and sale of computer software,
equipment, and computer-aided video systems used by professional, collegiate
and high school sports programs. Between June 1993 and February 1994 Mr. Levy
was a private investor. Mr. Levy also serves as a member of the board of
directors of iVillage Inc. Mr. Levy received a B.S. in Electrical Engineering
from the Georgia Institute of Technology.
Gregory W. Slayton has been a member of our board of directors since
October 1999. He has served as President, Chief Executive Officer and a member
of the board of directors of ClickAction Inc. since December 1997. From March
1996 to July 1997, Mr. Slayton was the President, Chief Operating Officer, and
Director of ParaGraph International. In August 1994, Mr. Slayton co-founded
Worlds, Inc. and served as Senior Vice President and Chief Financial Officer
until November 1995. Prior to founding Worlds, Inc., Mr. Slayton served as Vice
President and Chief Financial Officer of Paramount Technology Group of
Paramount Communications Inc. Mr. Slayton was also a management consultant with
McKinsey & Company for four years. Mr Slayton serves on the board of directors
of inTest Corporation, and he is on the board of directors of Opportunity
International, a non-profit organization. Mr. Slayton holds a B.A. in Economics
from Dartmouth College and an M.B.A. from Harvard Business School.
Mitchell York has been a member of our board of directors since October
1999 and served as our President and Chief Operating Officer from January 6,
2000 until June 2, 2000. He previously served as President of LendingTree,
Inc., a leading online loan marketplace, from September 1998 to September 1999.
During that time he oversaw LendingTree's marketing, technology and other key
business areas. Prior to this, Mr. York was, for 17 years, an executive of CMP
Media Inc., a worldwide technology information and marketing services company.
As vice president of CMP's Internet division, he lead the company's entry into
online media by launching TechWeb, an information service for information
technology professionals. Prior to launching TechWeb, Mr.
14
<PAGE>
York was a publisher of several of CMP's major technology titles, including
VARBusiness magazine. He also was the founding editor of the company's Travel
division, which was later sold to Miller Freeman. Mr. York received a
bachelor's degree with honors from Northwestern University and an M.B.A. from
the Columbia Graduate School of Business.
MEETINGS OF THE BOARD OF DIRECTORS AND STANDING COMMITTEES
Board Composition
We currently have five directors. Each director is elected at the annual
general meeting of our shareholders, by a vote of the holders of a plurality of
the voting power represented at such meeting. Each director holds office until
the annual general meeting of our shareholders or until his or her successor
has been elected.
Our non-management directors serve on the audit committee and the
compensation committee of the board. The executive officers serve at the
discretion of the board.
The Board of Directors held a total of 7 meetings during 1999. All of the
directors attended both meetings of the Board of Directors and all committees
of the Board of Directors on which he or she served.
Board Committees
The Board of Directors currently consists of five members. The standing
committees of the Board of Directors consist solely of a Compensation Committee
and an Audit Committee.
The Compensation Committee consists of Messrs. Levy and Slayton, each of
whom are independent directors. Although the Compensation Committee did not
meet during 1999, it met in March 2000. This committee recommends, reviews and
oversees the salaries, benefits and stock option plans for our employees,
consultants, directors and other individuals compensated by us. The
compensation committee also administers our compensation plan.
The Audit Committee consists of Messrs. Levy and Slayton, each of whom are
independent directors. Although the Audit Committee did not meet during 1999,
it met once in March, 2000 to discuss the year end audit process with Grant
Thornton LLP. The Audit Committee makes recommendations to the Board of
Directors with respect to various auditing and accounting matters, including
the recommendation of our auditors, the scope of the annual audit, fees to be
paid to the auditors, the performance of our independent auditors and our
accounting practices. The audit committee has responsibility for, among other
things, the planning and review of our annual audit and periodic reports and
accounts and the involvement of our auditors in that process, focusing
particularly on compliance with legal requirements and accounting standards and
the related rules of the Nasdaq Stock Market, the Securities and Exchange
Commission of the United States, and the establishment of an effective system
of internal accounting controls. The Board of Directors adopted a written
charter for the Audit Committee on May 15, 2000 which is attached to the Proxy
Statements as Appendix C.
Audit Committee Report
In March 2000, the Audit Committee met with management to review and
discuss the audited financial statements. In addition, the Audit Committee had
discussions with Grant Thornton LLP, regarding the matters required by the
Codification of Statements on Auditing Standards No. 61. The audit committee
has received the written disclosures and a letter from Grant Thornton LLP as
required by Independence Standards Board Standard No. 1. "Independence
Discussions with Audit Committees", and has discussed with Grant Thornton their
independence. Based upon the review and discussions referred to above, the
audit committee recommended to the Board of Directors that the audited
financial statements be included in the Company's Annual Report for the year
ended December 31, 1999.
This Report shall not be deemed incorporated by reference in any document
previously or subsequently filed with the Securities and Exchange Commission
that incorporates by reference all or any portion of this proxy statement,
unless the report is specifically incorporated by reference.
Michael Levy
Gregory W. Slayton
15
<PAGE>
Director Compensation
None of our directors receive cash compensation for their service on our
board of directors, although our management directors receive cash compensation
for their services as our officers. All directors, however, are reimbursed for
reasonable expenses incurred in connection with serving as a director. We have
granted options, effective as of October 8, 1999, to purchase 100,000 shares of
our common stock to each of our non-management directors at the time, Messrs.
Levy, Slayton and York, at an exercise price of $10.00 per share. One-third of
the options granted to these three directors vested upon the consummation of
our initial public offering. The remaining two-thirds vest in equal
installments on each of the next eight quarterly anniversaries following the
consummation of our initial public offering. We anticipate that our board of
directors will hold regularly scheduled meetings quarterly.
Executive Compensation
The following table sets forth all compensation received during the
indicated years by our Executive Officers in their indicated capacities as
officers. In these fiscal years we had no other executive officers and no other
employee earned in excess of $100,000.
Summary Compensation Table
<TABLE>
<CAPTION>
Long-Term
Compensation
Awards
Securities
Name and Annual Compensation Underlying All Other
Principal Position Salary Bonus Other Options Compensation(1)
------------------------------------- ----------- ---------- ------- ------------- ----------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Rosalind Resnick, 1999 $157,292 $60,000 -- -- 1999 $1,999,633
Chief Executive Officer, President, 1998 $185,000 -- -- -- 1998 $ 155,000
and Chairman of the Board of 1997 $120,000 -- -- -- 1997 $ 96,800
Directors
Ryan Scott Druckenmiller, 1999 $157,292 $60,000 -- -- 1999 $1,922,000
Chief Technology Officer and 1998 $185,000 -- -- -- 1998 $ 155,000
member of the Board of 1997 $120,000 -- -- -- 1997 $ 96,880
Directors
Gary Sindler, 1999 $ 85,865 $37,500 -- 117,000 1999 --
Chief Financial Officer 1998 -- -- -- -- 1998 --
1997 -- -- -- -- 1997 --
</TABLE>
------------
(1) Includes contributions to our pension plan of $20,000, $30,000 and $30,000
for the benefit of each of Ms. Resnick and Mr. Druckenmiller in 1999, 1998
and 1997, respectively. Also includes distributions to the shareholders
that were made in accordance with our election to be taxed as an S
corporation. Such distributions are common for S corporations.
16
<PAGE>
Option Grants in Last Fiscal Year
The following table shows information regarding stock options granted to
the named executive officers during the year ended December 31, 1999. No stock
appreciation rights were granted to these individuals during the year.
<TABLE>
<CAPTION>
Number of % of Total Potential Realizable Value at Assumed
Shares Options Exercise Annual Rates of Stock Price
Underlying Granted to Price Appreciation for Option
Options Employees in per Expiration Term ($)
Name Granted Fiscal Year Share Date 0% 5% 10%
------------------------------ ------------ -------------- ---------- ------------ ----------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Rosalind B. Resnick .......... -- -- -- -- -- -- --
Ryan Scott Druckenmiller ..... -- -- -- -- -- -- --
Gary Sindler ................. 117,000 47% $ 5.00 June 2004 $936,000 $1,356,000 $1,865,000
</TABLE>
Aggregate Option Exercises and Holdings
The following table sets forth information concerning the options held by
each of our named executive officers at December 31, 1999. The values set forth
below have been calculated based on the last reported sale price of our common
stock on December 31, 1999 of $44.00, less the applicable exercise price per
share, multiplied by the number of shares underlying the options.
<TABLE>
<CAPTION>
Number of Shares Value of Unexpired
Underlying Unexercised In-the-Money options
Options At Fiscal Year End at Fiscal Year End ($)
------------------------------ -----------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
---------------------------------- ------------- --------------- ------------- --------------
<S> <C> <C> <C> <C>
Rosalind B Resnick ............... -- -- -- --
Ryan Scott Druckenmiller ......... -- -- -- --
Gary Sindler ..................... -- 117,000 -- $4,563,000
</TABLE>
New Plan Benefits
The following table sets forth the number of options that will be received
by or allocated to each of the following individuals or groups if the proposal
to increase the number of options authorized under the Stock Option Plan, is
approved by the shareholders.
<TABLE>
<CAPTION>
Number of
Name Position Options
-------------------------------------- ---------------------------------------------------------- ----------
<S> <C> <C>
Rosalind B. Resnick .................. Chief Executive Officer, President, Chairman of the Board
of Directors, and Treasurer --
Ryan Scott Druckenmiller ............. Chief Technology Officer, Vice President, Secretary and
Director --
Gary Sindler ......................... Chief Financial Officer --
Brian Burlant ........................ Senior Vice President, General Counsel 100,000
Nicolle Comeforo ..................... Vice President, Human Resources 85,000
Total Executive Group ................ 185,000
Non-Executive Director Group ......... --
Non-Executive Officer Employee
Group ............................... --
</TABLE>
17
<PAGE>
Stock Option Information
Prior to our initial public offering, we granted options, effective as of
September 14, 1999 and as of November 11, 1999, to purchase 241,000 shares of
our common stock at an exercise price of $5.00 per share under our 1999 Stock
Option Plan. Additionally, we granted an additional 5,500 shares at prices less
than the fair market value on the date of grant. Those options were granted to
our employees other than Ms. Resnick and Mr. Druckenmiller. Those options are
exercisable for a period of five years, but not until they have vested. Those
options vest in equal one-third installments on each of the three anniversaries
of the date of grant, subject to the optionees' continued employment with us.
Ms. Resnick and Mr. Druckenmiller received S corporation distributions until
November 15, 1999, when the S corporation status was terminated. Ms. Resnick
and Mr. Druckenmiller have received no options or other stock-based
compensation. In addition, we have granted options to purchase 100,000 shares
of common stock to each of our three directors, Messrs. Levy, Slayton and York,
at an exercise price of $10.00 per share. The options granted to these three
directors are also exercisable for a period of five years, but not until they
have vested. One third of these options vested upon the consummation of our
initial public offering on November 12, 1999. The remaining two-thirds of the
options vest in equal installments on each of the next eight quarterly
anniversaries following our initial public offering. Vesting also depends on
their continued service as our directors, subject to acceleration under certain
circumstances. All the outstanding options granted to our directors would be
accelerated, and all of our other outstanding options may be accelerated, as to
vesting and exercisability, in the event of certain transactions, including
certain changes in our control, certain mergers and reorganizations, and
certain dispositions of substantially all of our assets. The vesting and
exercisability of the options issued to the three directors would also be
accelerated if those directors are not re-elected to office, except if they are
unable to serve or choose not to serve, or if they are removed from office,
except for cause or material non-performance of their duties
Subsequent to our initial public offering, we granted options, effective
as of January 6, 2000, to purchase an aggregate of 700,000 shares of our common
stock, at an exercise price of $33.25 per share. These options were granted to
two of our new executive employees, Mitchell York and Scott Wolf. These options
are exercisable for a period of five years, but not until they have vested.
Sixteen and two-thirds percent (16.667%) of the options granted to Messrs. York
and Wolf, vest on July 6, 2000. On June 2, 2000 Mr. York's options to purchase
500,000 shares of our common stock were terminated. The remaining options vest
in equal installments on each of the next ten quarterly anniversaries after
July 6, 2000, subject to their continued employment with us. In addition, we
have granted options, effective as of February 2, 2000, to purchase an
aggregate of 350,000 shares of our common stock at an exercise price of $33.50
per share under our 1999 Stock Option Plan to Tej Anand and Allison Fillmore.
The options are exercisable for a period of five years, but not until they have
vested. Sixteen and two-thirds percent (16.667%) of the options granted to Mr.
Anand and Ms. Fillmore, vest on August 2, 2000. The remaining options vest in
equal installments on each of the next ten quarterly anniversaries following
August 2, 2000, subject to the optionees' continued employment with us. In
2000, we also granted options to purchase 33,000 shares of our common stock to
other employees at exercise prices equal to the fair market value on the dates
of grant. We have also granted options in April 2000 to purchase an aggregate
of 185,000 shares of our common stock at an exercise price of $22.00 per share
under our 1999 Stock Option Plan to Brian Burlant and Nicolle Comeforo. These
options are exercisable for a period of five years, but not until they have
vested. Sixteen and two-thirds percent (16.667%) of the options granted to Mr.
Burlant and Ms. Comforo, vest on October 14, 2000. The remaining options vest
in equal installments on each of the next ten quarterly anniversaries after
October 14, 2000, subject to the optionees' continued employment with us. The
options granted to Brian Burlant and Nicolle Comeforo are subject to
shareholder approval of the increase in the number of options authorized under
our Stock Option Plan.
Employment Agreements
We have entered into one-year employment agreements with six of our
technology employees. These agreements are automatically renewable and are
terminable by either the employee or us upon 90 days' notice. The remaining
non-management employees are employed on an at-will basis. All of our
non-management employment arrangements provide, among other things, that each
of the employees shall provide services to us on a full-time basis. All of our
non-management employees have also entered into agreements with us, which
contain restrictive covenants relating to non-competition with us,
non-solicitation of our customers, non-dealing
18
<PAGE>
with our customers and non-solicitation of our suppliers and employees. In
addition, each of these agreements contains an express obligation of
confidentiality in respect of our trade secrets and confidential information
and provide for us to own any intellectual property rights created by our
employees in the course of their employment.
We have entered into employment agreements with Rosalind Resnick, as our
Chief Executive Officer, President and Chairman of our board of directors, Ryan
Scott Druckenmiller, as our Chief Technology Officer, Mitchell York, as our
President, Chief Operating Officer and director, Gary Sindler, as our Chief
Financial Officer, Scott Wolf, as our Senior Vice President, Sales and Business
Development, Allison Fillmore, as our Senior Vice President, Marketing, Tej
Anand, as our Chief Information Officer Brian Burlant as our General Counsel
and Nicolle Comeforo as our Vice President, Human Resources. Ms. Resnick's, Mr.
Druckenmiller's and Mr. Sindler's agreements expire on December 31, 2002. Mr.
Wolf's agreement expires on January 5, 2003. Mr. York's agreement was
terminated on June 2, 2000. Ms. Fillmore's and Mr. Anand's agreements expire on
February 1, 2003. Mr. Burlant's agreement expires on April 14, 2003 and Ms.
Comeforo's agreement expires on April 17, 2003. The executives are entitled to
base salaries per annum, initially as follows: Rosalind Resnick, $175,000; Ryan
Scott Druckenmiller, $175,000; Gary Sindler, $150,000; Scott Wolf, $200,000;
Allison Fillmore, $140,000; Tej Anand, $200,000; Brian Burlant, $165,000; and
Nicolle Comeforo, $135,000. The executives are entitled to annual bonuses as
the compensation committee of our board of directors may determine based upon
their performance and achievement of specified goals to be established and
mutually agreed upon by each of them and the compensation committee prior to
the beginning of their bonus period as follows: Rosalind Resnick, up to
$175,000 per year; Ryan Scott Druckenmiller, up to $175,000 per year; Gary
Sindler, up to $75,000 per year; Scott Wolf, up to $100,000 per year; Allison
Fillmore, up to $60,000 year; Tej Anand, up to $150,000 per year, Brian Burlant
up to $70,000 per year, and Nicolle Comeforo, up to $65,000. Ms. Resnick and
Mr. Druckenmiller are also entitled to additional performance bonuses, if any,
as may be determined from time to time by the compensation committee upon the
achievement of performance goals to be mutually agreed upon by each of Ms.
Resnick and Mr. Druckenmiller, as the case may be, and the compensation
committee. Each of Ms. Resnick and Mr. Druckenmiller have agreed not to compete
with us in providing direct email marketing services to third parties for
compensation during the term of employment and for at least three years after
their employment is terminated other than a termination without cause or a
termination during the first year following a change in control. Each of the
remaining executives has agreed not to compete with us in providing direct
email marketing services to third parties for compensation during the term of
employment and for at least two years after their employment is terminated
other than a termination without cause or a termination during the first year
following a change in control. The executives are entitled to customary
medical, life insurance, vacation, and other benefits under each of the
agreements. Each of the executives will be eligible to be granted options under
our 1999 Stock Option Plan, at the discretion of the committee administering
that plan. Pursuant to each of their employment agreements, the executives have
been granted stock options as follows: Gary Sindler 117,000; Scott Wolf,
200,000; Tej Anand, 200,000; Brian Burlant, 100,000; Allison Fillmore, 150,000;
and Nicolle Comeforo, 85,000 stock options respectively, under our 1999 Stock
Option Plan. Mr. Wolf is also eligible for a contingent grant of another 75,000
stock options, to be granted 25,000 on each of the first, second and third
anniversary dates of his employment, and shall be vested immediately upon
grant. The strike price will be the average of the closing price of the 5
business days preceding the date of issuance of such grants. Mr. Burlant is
also eligible for a contingent grant of another 30,000 stock options, to be
granted 10,000 on each of the first, second and third anniversary dates of his
employment and shall be vested immediately upon grant. The strike price will be
the average of the closing price of the 5 business days preceeding the date of
issuance of such grants. Ms. Resnick and Mr. Druckenmiller have not been
granted any options. Each of the contracts include customary provisions
entitling us to terminate the executive's employment for cause, upon extended
disability of the executive, upon the executive's death, and otherwise without
cause. Each executive is entitled to terminate the executive's employment upon
material breach of the contract by us and without cause upon prior notice to
us. The contracts contain customary provisions to protect our confidential
information and to ensure that we will own inventions and improvements
developed by the executive during the executive's employment activities. Under
certain circumstances, the following executives will receive the indicated cash
payments in connection with a change in control of our company: Gary Sindler,
$150,000; Scott Wolf, $100,000, and Tej Anand, $100,000. Additionally, under
certain circumstances, unvested stock options granted to the following
executives will become exercisable immediately prior to a change in control:
Gary Sindler, Scott Wolf, Tej Anand, Allison Fillmore, Brian Burlant, and
Nicolle Comeforo.
19
<PAGE>
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of our Board of Directors consists solely of
two non-employee directors. The Compensation Committee determines all
compensation paid or awarded to our key executive officers, except that our
Board has delegated to the Chief Executive Officer, as a Board Committee of
one, the ability to grant options to new hires for up to 100,000 shares of our
common stock, subject to a duty to report periodically to the Compensation
Committee.
PHILOSOPHY. The Compensation Committee's goal is to recruit and retain an
executive team of superior talent. To do so, the Committee attempts to offer
competitive and fair compensation that rewards executives for exceptional
performance and holds them accountable for our performance. Particular
objective factors that the Committee believes are important in assessing
performance include growth in our database of email addresses, an increase in
our customer base, and growth in net revenue, pre-tax earnings, and earnings
per share. Subjective factors the Committee believes are also important in
evaluating performance include success in undertaking joint ventures and
acquisitions and retention of key employees.
In establishing appropriate levels for base salary, the Compensation
Committee considers the market for senior executives of public companies in
businesses comparable to us, based on their own business experience. The
Committee also considers the particular officer's overall contributions to us
over the past year and previously. Quarterly performance bonuses are based on
the Compensation Committee's evaluation of the executive's performance in
achieving several specified annual goals. Option grants are designed to reward
an executive officer for his overall contribution to and to serve as an
incentive to achieve our goal of increasing shareholder value.
Executive officers' compensation consists primarily of three components:
(i) base salary, (ii) cash bonus, and (iii) stock options.
BASE SALARY. The Committee establishes base salaries after considering a
variety of factors that determine an executive's value to NetCreations,
including the individual's knowledge, experience, and accomplishments and the
level of responsibility assumed. The Committee also sets base salaries at
levels it considers necessary to retain key employees.
CASH BONUS. The Committee determined each individual's cash bonus for the
fiscal year ended December 31, 1999. Cash bonuses are based on the Committee's
overall qualitative evaluation of the performance and accomplishments of each
executive officer in achieving various specified goals for the year.
STOCK OPTIONS. The Committee believes achievement of our goals may be
fostered by a stock option program that is tailored to employees who
significantly enhance NetCreations' value. Accordingly, during the fiscal year
ended December 31, 1999, the Committee granted employees options to purchase
546,500 shares of our common stock. Named Executive Officers received options
with respect to 117,000 shares of our Common Stock.
CHIEF EXECUTIVE OFFICER'S COMPENSATION. For Rosalind B. Resick's services
as our Chief Executive Officer and Chairman of the Board of Directors, she
received an amount of compensation for 1999 determined in accordance with the
compensation policies established by the Compensation Committee. The Committee
awarded Ms. Resnick a bonus of $60,000 for the fiscal year ended December 31,
1999. In doing so, it reviewed her employment agreement from before the public
offering, considered the successful completion of our initial public offering,
the progress in developing new opportunities for NetCreations over the last
fiscal year, the success in the recruitment of personnel, and the increase in
market development.
COMPENSATION DEDUCTION LIMIT. The Securities and Exchange Commission
requires that this report comment on our policy with respect to a special rule
under the tax laws, section 162(m) of the Internal Revenue Code. That section
limits, with exceptions described below, the compensation that a corporation
can deduct for payments to a chief executive officer and the four other most
highly compensated executive officers to $1 million per officer per year. A
company can deduct compensation (including from exercising options) in excess
of $1 million if it pays the compensation under a plan that its shareholders
approve and that is performance-related. Option exercises are typically
deductible under such a plan if granted by a committee of
20
<PAGE>
outside directors with exercise prices at or above the market price when
granted or if grandfathered because granted before the public offering. The
Committee's policy with respect to the compensation deduction limit is to make
every reasonable effort to ensure that compensation likely to be received by a
senior executive is deductible under section 162(m), while at the same time
giving our executives incentives to stay with and enhance NetCreations' value.
The Committee believes, however, that compensation exceeding the $1 million
deduction limit should not be ruled out where such compensation is justified
based on the executive's value to NetCreations and its shareholders. The
Committee believes that no executive compensation expenses paid in 1999 will be
non-deductible under section 162(m).
Michael Levy
Gregory W. Slayton
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
None of the members of our Compensation Committee is an officer or
employee of ours. None of our executive officers serves as a member of the
board of directors or compensation committee of any entity that has one or more
executive officers serving on our Board of Directors or Compensation Committee.
STOCK PERFORMANCE CHART
As part of proxy statement disclosure requirements mandated by the
Securities and Exchange Commission, we are required to provide a five-year
comparison of the cumulative total shareholder return on our common stock with
that of a broad equity market index and either a published industry index or a
peer group index constructed by us. This graph is not deemed to be "soliciting
material" or to be "filed" with the SEC or subject to the SEC's proxy rules or
to the liabilities of Section 18 of the 1934 Act, and the graph shall not be
deemed to be incorporated by reference into any prior or subsequent filing by
the corporation under the Securities Act of 1933 or the 1934 Act.
The following chart compares the yearly percentage change in the
cumulative total shareholder return of our common stock since our initial
public offering in November 1999 with the cumulative total return on the Nasdaq
Stock Market-U.S. Index and the Chase H&Q Internet Index (the peer index). The
comparison assumes $100 was invested on November 12, 1999 of our common stock
and in each of the above indices with reinvestment of dividends.
21
<PAGE>
COMPARISON OF CUMULATIVE TOTAL RETURN
AMONG NETCREATIONS, INC., THE NASDAQ STOCK MARKET-U.S. INDEX,
AND THE CHASE H&Q INTERNET INDEX
[GRAPHIC OMITTED]
11/12/99 12/31/99
------------ ------------
NetCreations, Inc. ...................... $ 100.00 $ 338.46
The Chase H&Q Internet Index ............ $ 100.00 $ 159.83
Nasdaq Stock Market-U.S. Index .......... $ 100.00 $ 127.27
ANNUAL REPORT ON FORM 10-K
OUR 1999 ANNUAL REPORT ON FORM 10-K, INCLUDING FINANCIAL STATEMENTS FOR
THE YEAR ENDED DECEMBER 31, 1999, IS BEING DISTRIBUTED TO ALL SHAREHOLDERS OF
THE COMPANY TOGETHER WITH THIS PROXY STATEMENT, IN SATISFACTION OF THE
REQUIREMENTS OF THE SECURITIES AND EXCHANGE COMMISSION. ADDITIONAL COPIES OF
THE REPORT, EXCEPT FOR EXHIBITS, ARE AVAILABLE AT NO CHARGE UPON REQUEST. TO
OBTAIN ADDITIONAL COPIES OF THE ANNUAL REPORT ON FORM 10-K, PLEASE CONTACT GARY
SINDLER, CHIEF FINANCIAL OFFICER, AT 379 WEST BROADWAY, SUITE 202, NEW YORK,
NEW YORK, 10012, OR AT TELEPHONE NUMBER (212) 625-1370.
22
<PAGE>
SHAREHOLDER PROPOSALS
If you intend to propose any matter for action at our 2001 Annual Meeting
of Shareholders and wish to have the proposal included in our proxy statement,
you must submit your proposal to the Secretary of NetCreations at 379 West
Broadway, Suite 202, New York, New York, 10012, not later than November 15,
2000 at 5:00 p.m. Eastern Standard Time. Please note that proposals must comply
with all of the requirements of Rule 14a-8 under the Securities Exchange Act of
1934 as well as the requirements of our Certificate of Incorporation and
Bylaws. Only then can we consider your proposal for inclusion in our proxy
statement and proxy relating to the 2001 Annual Meeting. We will be able to use
proxies you give us for the next year's meeting to vote for or against any
shareholder proposal that is not included in the proxy statement at our
discretion unless the proposal is submitted to us not less than 60 days or more
than 90 days prior to the date of such meetings, unless we do not provide
notice of the meeting within 70 days of more of such date, in which case notice
must be provided within 10 days from the date we mailed our notice.
BY ORDER OF THE BOARD OF DIRECTORS
[GRAPHIC OMITTED]
Ryan Scott Druckenmiller, Secretary
New York, New York
June 2, 2000
23
<PAGE>
APPENDIX A
NETCREATIONS, INC.
1999 EMPLOYEE STOCK OPTION PLAN
(AS AMENDED, EFFECTIVE JANUARY 1, 2000)
1. Purpose. The purpose of this Plan is to advance the interests of
NETCREATIONS, INC., a New York corporation (the "Company"), and its
Subsidiaries by providing an additional incentive to attract and retain
qualified and competent persons who provide management services and upon whose
efforts and judgment the success of the Company and its Subsidiaries is largely
dependent, through the encouragement of stock ownership in the Company by such
persons.
2. Definitions. As used herein, the following terms shall have the meaning
indicated:
(a) "Board" shall mean the Board of Directors of the Company.
(b) "Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time.
(c) "Committee" shall mean the committee appointed by the Board pursuant
to Section 13(a) hereof, or, if such committee is not appointed, the
Board.
(d) "Common Stock" shall mean the Company's Common Stock, par value
$0.01 per share.
(e) "Company" shall mean NETCREATIONS, INC., a New York corporation.
(f) "Director" shall mean a member of the Board.
(g) "Effective Date" shall mean July 22, 1999.
(h) "Fair Market Value" of a Share on any date of reference shall mean
the "Closing Price" (as defined below) of the Common Stock on the business
day immediately preceding the date of reference, unless the Board or the
Committee in its sole discretion shall determine otherwise in a fair and
uniform manner. For the purpose of determining Fair Market Value, the
"Closing Price" of the Common Stock on any business day shall be (i) if
the Common Stock is listed or admitted for trading on any United States
national securities exchange, or if actual transactions are otherwise
reported on a consolidated transaction reporting system, the last reported
sale price of Common Stock on such exchange or reporting system, as
reported in any newspaper of general circulation, (ii) if the Common Stock
is quoted on the National Association of Securities Dealers Automated
Quotations System ("NASDAQ"), or any similar system of automated
dissemination of quotations of securities prices in common use, the last
reported sale price of Common Stock on such system or, if sales prices are
not reported, the mean between the closing high bid and low asked
quotations for such day of Common Stock on such system, as reported in any
newspaper of general circulation or (iii) if neither clause (i) or (ii) is
applicable, the mean between the high bid and low asked quotations for the
Common Stock as reported by the National Quotation Bureau, Incorporated if
at least two securities dealers have inserted both bid and asked
quotations for Common Stock on at least five of the ten preceding days.
(i) "Incentive Stock Option" shall mean an incentive stock option as
defined in Section 422 of the Internal Revenue Code.
(j) "Internal Revenue Code" shall mean the Internal Revenue Code of
1986, as amended from time to time.
(k) "Non-Qualified Stock Option" shall mean an Option that is not an
Incentive Stock Option.
(l) "Officer" shall mean the Company's Chairman of the Board, President,
Chief Executive Officer, principal financial officer, principal accounting
officer, any vice-president of the Company in charge of a principal
business unit, division or function (such as sales, administration or
finance), any other officer who performs a policy-making function, or any
other person who performs similar policy-making functions for the Company.
Officers of Subsidiaries shall be deemed Officers of the Company if they
perform such policy-making functions for the Company. As used in this
paragraph, the phrase "policy-making function"
A-1
<PAGE>
does not include policy-making functions that are not significant. If
pursuant to Item 401(b) of Regulation S-K (17 C.F.R. ss. 229.401(b)) the
Company identifies a person as an "executive officer," the person so
identified shall be deemed an "Officer" even though such person may not
otherwise be an "Officer" pursuant to the foregoing provisions of this
paragraph.
(m) "Option" (when capitalized) shall mean any option granted under this
Plan.
(n) "Option Agreement" means the agreement between the Company and the
Optionee for the grant of an option.
(o) "Optionee" shall mean a person to whom a stock option is granted
under this Plan or any person who succeeds to the rights of such person
under this Plan by reason of the death of such person.
(p) "Outside Director" shall mean a member of the Board who qualifies as
an "outside director" under Section 162(m) of the Internal Revenue Code
and the regulations thereunder and as a "Non-Employee Director" under Rule
16b-3 promulgated under the Securities Exchange Act.
(q) "Plan" shall mean this Stock Option Plan for the Company.
(r) "Securities Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.
(s) "Share" shall mean a share of Common Stock.
(t) "Subsidiary" shall mean any corporation (other than the Company) in
any unbroken chain of corporations beginning with the Company if, at the
time of the granting of the Option, each of the corporations other than
the last corporation in the unbroken chain owns stock possessing 50
percent or more of the total combined voting power of all classes of stock
in one of the other corporations in such chain.
3. Shares Available for Option Grants. The Committee or the Board may
grant to Optionees from time to time Options to purchase an aggregate of up to
3,000,000 Shares from the Company's authorized and unissued Shares. If any
Option granted under the Plan shall terminate, expire, or be canceled or
surrendered as to any Shares, new Options may thereafter be granted covering
such Shares.
4. Incentive and Non-Qualified Options.
(a) An Option granted hereunder shall be either an Incentive Stock Option
or a Non-Qualified Stock Option as determined by the Committee or the Board at
the time of grant of such Option and shall clearly state whether it is an
Incentive Stock Option or Non-Qualified Stock Option. All Incentive Stock
Options shall be granted within 10 years from the effective date of this Plan.
Incentive Stock Options may not be granted to any person who is not an employee
of the Company or any Subsidiary.
(b) Options otherwise qualifying as Incentive Stock Options hereunder will
not be treated as Incentive Stock Options to the extent that the aggregate fair
market value (determined at the time the Option is granted) of the Shares, with
respect to which Options meeting the requirements of Section 422(b) of the Code
are exercisable for the first time by any individual during any calendar year
(under all plans of the Company and its parent and subsidiary corporations as
defined in Section 424 of the Code), exceeds $100,000.
5. Conditions for Grant of Options.
(a) Each Option shall be evidenced by an Option Agreement that may contain
any term deemed necessary or desirable by the Committee or the Board, provided
such terms are not inconsistent with this Plan or any applicable law. Optionees
shall be (i) those persons selected by the Committee or the Board from the
class of all regular employees of, or persons who provide consulting or other
services as independent contractors to, the Company or its Subsidiaries,
including Directors and Officers who are regular employees, and (ii) Directors
who are not employees of the Company or of any Subsidiaries. Any person who
files with the Board or the Committee, in a form satisfactory to the Board or
the Committee, a written waiver of eligibility to receive any Option under this
Plan shall not be eligible to receive any Option under this Plan for the
duration of such waiver.
(b) In granting Options, the Committee or the Board shall take into
consideration the contribution the person has made to the success of the
Company or its Subsidiaries and such other factors as the Committee shall
A-2
<PAGE>
determine. The Committee or the Board shall also have the authority to consult
with and receive recommendations from officers and other personnel of the
Company and its Subsidiaries with regard to these matters. The Committee or the
Board may from time to time in granting Options under the Plan prescribe such
other terms and conditions concerning such Options as it deems appropriate,
including, without limitation, (i) prescribing the date or dates on which the
Option becomes exercisable, (ii) providing that the Option rights accrue or
become exercisable in installments over a period of years, or upon the
attainment of stated goals or both, or (iii) relating an Option to the
continued employment of the Optionee for a specified period of time, provided
that such terms and conditions are not more favorable to an Optionee than those
expressly permitted herein.
(c) The Options granted to employees under this Plan shall be in addition
to regular salaries, pension, life insurance or other benefits related to their
employment with the Company or its Subsidiaries. Neither the Plan nor any
Option granted under the Plan shall confer upon any person any right to
employment or continuance of employment by the Company or its Subsidiaries.
(d) Notwithstanding any other provision of this Plan, an Incentive Stock
Option shall not be granted to any person owning directly or indirectly
(through attribution under Section 424(d) of the Code) at the date of grant,
stock possessing more than 10% of the total combined voting power of all
classes of stock of the Company (or of its parent or subsidiary [as defined in
Section 424 of the Code] at the date of grant) unless the option price of such
Option is at least 110% of the Fair Market Value of the Shares subject to such
Option on the date the Option is granted, and such Option by its terms is not
exercisable after the expiration of five years from the date such Option is
granted.
(e) Notwithstanding any other provision of this Plan, and in addition to
any other requirements of this Plan, the aggregate number of Options granted to
any one Optionee may not exceed 500,000 Shares in any one fiscal year, subject
to adjustment as provided in Section 10 hereof.
6. Option Price. The option price per Share of any Option shall be any
price determined by the Board or the Committee but shall not be less than the
par value per Share; provided, however, that in no event shall the option price
per Share of any Incentive Stock Option be less than the Fair Market Value of
the Shares underlying such Option on the date such Option is granted.
7. Exercise of Options. An Option shall be deemed exercised when (i) the
Company has received written notice of such exercise in accordance with the
terms of the Option, (ii) full payment of the aggregate option price of the
Shares as to which the Option is exercised has been made, and (iii)
arrangements that are satisfactory to the Board or the Committee in its sole
discretion have been made for the Optionee's payment to the Company of the
amount, if any, that is necessary for the Company or Subsidiary employing the
Optionee to withhold in accordance with applicable Federal or state tax
withholding requirements. The consideration to be paid for the Shares to be
issued upon exercise of an Option, as well as the method of payment of the
exercise price and of any withholding and employment taxes applicable thereto,
shall be determined by the Committee or the Board and may, in the discretion of
the Committee or the Board, consist of: (1) cash, (2) certified or official
bank check, (3) money order, (4) Shares that have been held by the Optionee for
at least six (6) months (or such other Shares as the Company determines will
not cause the Company to recognize for a financial accounting purposes a charge
for compensation expense), (5) the withholding of Shares issuable upon exercise
of the Option, (6) pursuant to a "cashless exercise" procedure, by delivery of
a properly executed exercise notice together with such other documentation, and
subject to such guidelines, as the Board or the Committee shall require to
effect an exercise of the Option and delivery to the Company by a licensed
broker acceptable to the Company of proceeds from the sale of Shares or a
margin loan sufficient to pay the exercise price and any applicable income or
employment taxes, or (7) in such other consideration as the Committee or the
Board deems appropriate, or by a combination of the above. In the case of an
Incentive Stock Option, the permissible methods of payment shall be specified
at the time the Option is granted. The Committee or the Board in its sole
discretion may accept a personal check in full or partial payment of any
Shares. If the exercise price is paid in whole or in part with Shares, or
through the withholding of Shares issuable upon exercise of the Option, the
value of the Shares surrendered or withheld shall be their Fair Market Value on
the date the Option is exercised. The Company in its sole discretion may, on an
individual basis or pursuant to a general program established in connection
with this Plan, lend money to an Optionee, guarantee a loan to an Optionee, or
otherwise assist an Optionee to obtain the cash necessary to exercise all or a
portion of an Option granted hereunder or to pay any tax liability of the
A-3
<PAGE>
Optionee attributable to such exercise. If the exercise price is paid in whole
or part with Optionee's promissory note, such note shall (i) provide for full
recourse to the maker, (ii) be collateralized by the pledge of the Shares that
the Optionee purchases upon exercise of such Option, (iii) bear interest at the
prime rate of the Company's principal lender, and (iv) contain such other terms
as the Board in its sole discretion shall reasonably require. No Optionee shall
be deemed to be a holder of any Shares subject to an Option unless and until a
stock certificate or certificates for such Shares are issued to such person(s)
under the terms of this Plan. No adjustment shall be made for dividends
(ordinary or extraordinary, whether in cash, securities or other property) or
distributions or other rights for which the record date is prior to the date
such stock certificate is issued, except as expressly provided in Section 10
hereof.
8. Exercisability of Options. Any Option shall become exercisable in such
amounts, at such intervals and upon such terms as the Committee or the Board
shall provide in such Option, except as otherwise provided in this Section 8.
(a) The expiration date of an Option shall be determined by the Board or
the Committee at the time of grant, but in no event shall an Option be
exercisable after the expiration of 10 years from the date of grant of the
Option.
(b) To the extent provided in any Option, each outstanding Option shall
become immediately fully exercisable in the event of a "Change in Control" or
in the event that the Committee or the Board exercises its discretion to
provide a cancellation notice with respect to the Option pursuant to Section
9(b) hereof. For this purpose, the term "Change in Control" shall mean:
(i) Approval by the shareholders of the Company of a reorganization,
merger, consolidation or other form of corporate transaction or series of
transactions, in each case, with respect to which persons who were the
shareholders of the Company immediately prior to such reorganization,
merger or consolidation or other transaction do not, immediately
thereafter, own more than 50% of the combined voting power entitled to
vote generally in the election of directors of the reorganized, merged or
consolidated company's then outstanding voting securities, in
substantially the same proportions as their ownership immediately prior to
such reorganization, merger, consolidation or other transaction, or a
liquidation or dissolution of the Company or the sale of all or
substantially all of the assets of the Company (unless such
reorganization, merger, consolidation or other corporate transaction,
liquidation, dissolution or sale is subsequently abandoned); or
(ii) Individuals who, as of the date on which the Option is granted
hereof, constitute the Board (the "Incumbent Board") cease for any reason to
constitute at least a majority of the Board, provided that any person
becoming a director subsequent to the date on which the Option was granted
whose election, or nomination for election by the Company's shareholders,
was approved by a vote of at least a majority of the directors then
comprising the Incumbent Board (other than an election or nomination of an
individual whose initial assumption of office is in connection with an
actual or threatened election contest relating to the election of the
Directors of the Company, as such terms are used in Rule 14a-11 of
Regulation 14A promulgated under the Securities Exchange Act) shall be, for
purposes of this Agreement, considered as though such person were a member
of the Incumbent Board; or
(iii) The acquisition (other than from the Company) by any person, entity
or "group", within the meaning of Section 13(d)(3) or 14(d)(2) of the
Securities Exchange Act, of more than 30% of either the then outstanding
shares of the Company's Common Stock or the combined voting power of the
Company's then outstanding voting securities entitled to vote generally in
the election of directors (hereinafter referred to as the ownership of a
"Controlling Interest") excluding, for this purpose, any acquisitions by (1)
the Company or its Subsidiaries, (2) any person, entity or "group" that as
of the date on which the Option is granted owns beneficial ownership (within
the meaning of Rule 13d-3 promulgated under the Securities Exchange Act) of
a Controlling Interest, (3) Rosalind Resnick and/or Ryan Scott Druckenmiller
or their respective affiliates, or (4) any employee benefit plan of the
Company or its Subsidiaries.
(c) The Committee or the Board may in its sole discretion accelerate the
date on which any Option may be exercised and may accelerate the vesting of any
Shares subject to any Option or previously acquired by the exercise of any
Option.
A-4
<PAGE>
9. Termination of Option Period. (a) Unless otherwise provided in any
Option Agreement, the unexercised portion of any Option shall automatically and
without notice terminate and become null and void at the time of the earliest
to occur of the following:
(i) three months after the date on which the Optionee's employment with
the Company and its Subsidiaries is terminated other than by reason of (A)
Cause, which, solely for purposes of this Plan, shall mean the termination
of the Optionee's employment by reason of the Optionee's willful
misconduct or gross negligence, (B) a mental or physical disability
(within the meaning of Internal Revenue Code Section 22(e)) of the
Optionee as determined by a medical doctor satisfactory to the Committee,
or (C) death of the Optionee;
(ii) immediately upon the termination of the Optionee's employment with
the Company and its Subsidiaries for Cause;
(iii) twelve months after the date on which the Optionee's employment
with the Company and its Subsidiaries is terminated by reason of a mental or
physical disability (within the meaning of Section 22(e) of the Code) of the
Optionee as determined by a medical doctor satisfactory to the Committee;
(iv) (A) twelve months after the date of termination of the Optionee's
employment with the Company and its Subsidiaries by reason of death of the
Optionee, or, if later, (B) three months after the date on which the
Optionee shall die if such death shall occur during the one year period
specified in Subsection 9(a)(iii) hereof ; or
(v) immediately in the event that the Optionee shall file any lawsuit or
arbitration claim against the Company or any Subsidiary, or any of their
respective officers, directors or shareholders.
All references herein to the termination of the Optionee's employment shall, in
the case of an Optionee who is not an employee of the Company or a Subsidiary,
refer to the termination of the Optionee's service with the Company or a
Subsidiary.
(b) To the extent not previously exercised, (i) each Option shall
terminate immediately in the event of (1) the liquidation or dissolution of the
Company, or (2) any reorganization, merger, consolidation or other form of
corporate transaction in which the Company does not survive, unless the
successor corporation, or a parent or subsidiary of such successor corporation,
assumes the Option or substitutes an equivalent option or right pursuant to
Section 10(c) hereof, and (ii) the Committee or the Board in its sole
discretion may by written notice ("cancellation notice") cancel, effective upon
the consummation of any corporate transaction described in Subsection 8(b)(i)
hereof in which the Company does survive, any Option that remains unexercised
on such date. The Committee or the Board shall give written notice of any
proposed transaction referred to in this Section 9(b) a reasonable period of
time prior to the closing date for such transaction (which notice may be given
either before or after approval of such transaction), in order that Optionees
may have a reasonable period of time prior to the closing date of such
transaction within which to exercise any Options that then are exercisable
(including any Options that may become exercisable upon the closing date of
such transaction). An Optionee may condition his exercise of any Option upon
the consummation of a transaction referred to in this Section 9(b).
10. Adjustment of Shares.
(a) If at any time while the Plan is in effect or unexercised Options are
outstanding, there shall be any increase or decrease in the number of issued
and outstanding Shares through the declaration of a stock dividend or through
any recapitalization resulting in a stock split-up, combination or exchange of
Shares, then and in such event:
(i) appropriate adjustment shall be made in the maximum number of Shares
available for grant under the Plan, so that the same percentage of the
Company's issued and outstanding Shares shall continue to be subject to
being so optioned; and
(ii) the Board or the Committee may, in its discretion, make any
adjustments it deems appropriate in the number of Shares and the exercise
price per Share thereof then subject to any outstanding Option, so that the
same percentage of the Company's issued and outstanding Shares shall remain
subject to purchase at the same aggregate exercise price.
A-5
<PAGE>
(b) Unless otherwise provided in any Option, the Board or the Committee
may change the terms of Options outstanding under this Plan, with respect to
the option price or the number of Shares subject to the Options, or both, when,
in the Board's or the Committee's sole discretion, such adjustments become
appropriate by reason of a corporate transaction described in Subsections
8(b)(i) hereof so as to preserve but not increase benefits under the Plan.
(c) In the event of a proposed sale of all or substantially all of the
Company's assets or any reorganization, merger, consolidation or other form of
corporate transaction in which the Company does not survive, where the
securities of the successor corporation, or its parent company, are issued to
the Company's shareholders, then the successor corporation or a parent of the
successor corporation may, with the consent of the Committee or the Board,
assume each outstanding Option or substitute an equivalent option or right. If
the successor corporation, or its parent, does not cause such an assumption or
substitution to occur, or the Committee or the Board does not consent to such
an assumption or substitution, then each Option shall terminate pursuant to
Section 9(b) hereof upon the consummation of sale, merger, consolidation or
other corporate transaction.
(d) Except as otherwise expressly provided herein, the issuance by the
Company of shares of its capital stock of any class, or securities convertible
into shares of capital stock of any class, either in connection with direct
sale or upon the exercise of rights or warrants to subscribe therefor, or upon
conversion of shares or obligations of the Company convertible into such shares
or other securities, shall not affect, and no adjustment by reason thereof
shall be made to, the number of or exercise price for Shares then subject to
outstanding Options granted under the Plan.
(e) Without limiting the generality of the foregoing, the existence of
outstanding Options granted under the Plan shall not affect in any manner the
right or power of the Company to make, authorize or consummate (i) any or all
adjustments, recapitalizations, reorganizations or other changes in the
Company's capital structure or its business; (ii) any merger or consolidation
of the Company; (iii) any issue by the Company of debt securities, or preferred
or preference stock that would rank above the Shares subject to outstanding
Options; (iv) the dissolution or liquidation of the Company; (v) any sale,
transfer or assignment of all or any part of the assets or business of the
Company; or (vi) any other corporate act or proceeding, whether of a similar
character or otherwise.
11. Transferability of Options and Shares. No Incentive Stock Option, and
unless the prior written consent of the Committee or the Board is obtained
(which consent may be withheld for any reason) and the transaction does not
violate the requirements of Rule 16b-3 promulgated under the Securities
Exchange Act no Non-Qualified Stock Option, shall be subject to alienation,
assignment, pledge, charge or other transfer other than by the Optionee by will
or the laws of descent and distribution, and any attempt to make any such
prohibited transfer shall be void. Each Option shall be exercisable during the
Optionee's lifetime only by the Optionee, or in the case of a Non-Qualified
Stock Option that has been assigned or transferred with the prior written
consent of the Committee or the Board, only by the permitted assignee.
12. Issuance of Shares.
(a) Notwithstanding any other provision of this Plan, the Company shall
not be obligated to issue any Shares unless it is advised by counsel of its
selection that it may do so without violation of the applicable Federal and
State laws pertaining to the issuance of securities, and may require any stock
so issued to bear a legend, may give its transfer agent instructions, and may
take such other steps, as in its judgment are reasonably required to prevent
any such violation.
(b) As a condition to any sale or issuance of Shares upon exercise of any
Option, the Board or the Committee may require such agreements or undertakings
as the Board or the Committee may deem necessary or advisable to facilitate
compliance with any applicable law or regulation including, but not limited to,
the following:
(i) a representation and warranty by the Optionee to the Company, at the
time any Option is exercised, that he is acquiring the Shares to be issued
to him for investment and not with a view to, or for sale in connection
with, the distribution of any such Shares; and
A-6
<PAGE>
(ii) a representation, warranty and/or agreement to be bound by any
legends endorsed upon the certificate(s) for such Shares that are, in the
opinion of the Board or the Committee, necessary or appropriate to
facilitate compliance with the provisions of any securities laws deemed by
the Board or the Committee to be applicable to the issuance and transfer of
such Shares.
13. Administration of the Plan.
(a) The Plan shall be administered by the Board or, at the discretion of
the Board, by a committee appointed by the Board (the "Committee") which shall
be composed of two or more Directors. At all times, the membership of the
Committee shall be constituted so as to comply at all times with the then
applicable requirements for Outside Directors of Rule 16b-3 promulgated under
the Securities Exchange Act and Section 162(m) of the Internal Revenue Code.
The Committee shall serve at the pleasure of the Board and shall have the
powers designated herein and such other powers as the Board may from time to
time confer upon it.
(b) The Board may grant Options pursuant to this Plan to any persons to
whom Options may be granted under Section 5(a) hereof.
(c) The Committee or the Board, from time to time, may adopt rules and
regulations for carrying out the purposes of the Plan. The determinations by
the Board or the Committee and its interpretation and construction of any
provision of the Plan or any Option shall be final and conclusive.
(d) Any and all decisions or determinations of the Board or the Committee
shall be made either (i) by a majority vote of the members of the Board or the
Committee at a meeting or (ii) without a meeting by the unanimous written
approval of the members of the Board or the Committee.
14. Withholding or Deduction for Taxes. If at any time specified herein
for the making of any issuance or delivery of any Option or Common Stock to any
Optionee, any law or regulation of any governmental authority having
jurisdiction in the premises shall require the Company to withhold, or to make
any deduction for, any taxes or take any other action in connection with the
issuance or delivery then to be made, such issuance or delivery shall be
deferred until such withholding or deduction shall have been provided for by
the Optionee or beneficiary, or other appropriate action shall have been taken.
15. Interpretation.
(a) As it is the intent of the Company that the Plan comply in all
respects with Rule 16b-3 promulgated under the Securities Exchange Act ("Rule
16b-3"), any ambiguities or inconsistencies in construction of the Plan shall
be interpreted to give effect to such intention, and if any provision of the
Plan is found not to be in compliance with Rule 16b-3, such provision shall be
deemed null and void to the extent required to permit the Plan to comply with
Rule 16b-3. The Committee or the Board may from time to time adopt rules and
regulations under, and amend, the Plan in furtherance of the intent of the
foregoing.
(b) The Plan and any Option agreements entered into pursuant to the Plan
shall be administered and interpreted so that all Incentive Stock Options
granted under the Plan will qualify as Incentive Stock Options under Section
422 of the Code. If any provision of the Plan or any such Option agreement
should be held invalid for the granting of Incentive Stock Options or illegal
for any reason, such determination shall not affect the remaining provisions
hereof, but instead the Plan and the Option agreement shall be construed and
enforced as if such provision had never been included in the Plan or the Option
agreement.
(c) This Plan shall be governed by the laws of the State of New York.
(d) Headings contained in this Plan are for convenience only and shall in
no manner be construed as part of this Plan.
(e) Any reference to the masculine, feminine, or neuter gender shall be a
reference to such other gender as is appropriate.
16. Amendment and Discontinuation of the Plan. The Committee or the Board
may from time to time amend, suspend or terminate the Plan or any Option;
provided, however, that, any amendment to the Plan shall be subject to the
approval of the Company's shareholders if such shareholder approval is required
by any federal or state law or regulation (including, without limitation, Rule
16b-3 or to comply with Section 162(m) of
A-7
<PAGE>
the Internal Revenue Code) or the rules of any Stock exchange or automated
quotation system on which the Common Stock may then be listed or quoted. Except
to the extent provided in Sections 9 and 10 hereof, no amendment, suspension or
termination of the Plan or any Option issued hereunder shall substantially
impair the rights or benefits of any Optionee pursuant to any Option previously
granted without the consent of the Optionee.
17. Effective Date and Termination Date. The effective date of the Plan is
the date on which the Board adopts this Plan, and the Plan shall terminate on
the 10th anniversary of the Effective Date.
A-8
<PAGE>
APPENDIX B
NETCREATIONS, INC.
2000 EMPLOYEE STOCK PURCHASE PLAN
<TABLE>
<S> <C>
PURPOSE The NetCreations, Inc. 2000 Employee Stock Purchase Plan (the "2000
ESPP" or the "Plan") provides employees of NetCreations, Inc. (the
"Company") with an opportunity to become owners of the Company
through purchasing shares of the Company's common stock (the
"Common Stock"). The Company intends this Plan to qualify as an
employee stock purchase plan under Section 423 of the Internal Revenue
Code of 1986, as amended (the "Code"), and its terms should be
construed accordingly. The Plan is effective as of July 1, 2000.
ELIGIBILITY An Employee whom the Company employs as of the first day of a
Payroll Deduction Period (and has employed for such prior waiting
period, initially set at 90 days, as the Committee determines) is eligible
to participate in the 2000 ESPP for that Payroll Deduction Period.
However, an Employee may not make a purchase under the 2000 ESPP
if such purchase would result in the Employee's owning Common Stock
possessing 5% or more of the total combined voting power or value of
the Company's outstanding stock. In determining an individual's amount
of stock ownership, any options to acquire shares of Company Common
Stock are counted as shares of stock, and the attribution rules of Section
424(d) of the Code apply.
Employee means any person employed as a common law employee of
the Company. Employee excludes anyone who, with respect to any
particular period of time, was not treated initially on the payroll records
as a common law employee, unless the Committee determines that
including the person is necessary to preserve tax treatment.
ADMINISTRATOR The Compensation Committee of the Board of Directors (the "Board")
of the Company, or such other committee as the Board designates (the
"Committee"), will administer the 2000 ESPP. The Committee is vested
with full authority and discretion to make, administer, and interpret such
rules and regulations as it deems necessary to administer the 2000 ESPP
(including rules and regulations deemed necessary in order to comply
with the requirements of Section 423 of the Code). Any determination or
action of the Committee in connection with administering or interpreting
the 2000 ESPP will be final and binding upon each Employee,
Participant, and all persons claiming under or through any Employee or
Participant.
Without shareholder consent and without regard to whether the actions
might adversely affect Participants, the Committee (or the Board) may
establish and change the Payroll Deduction Periods,
limit or increase the frequency and/or number of changes in the
amounts withheld during a Payroll Deduction Period, establish the
exchange ratio applicable to amounts withheld in a currency other
than U.S. dollars,
</TABLE>
B-1
<PAGE>
<TABLE>
<S> <C>
lengthen or shorten the waiting period before an Employee becomes
eligible to participate, so long as the change applies uniformly,
permit payroll withholding in excess of the amount the Participant
designated to adjust for delays or mistakes in the Company's
processing of properly completed withholding elections,
establish reasonable waiting and adjustment periods and/or
accounting and crediting procedures to ensure that amounts applied
toward the purchase of Common Stock for each Participant properly
correspond with amounts withheld from the Participant's
Compensation,
delegate its functions (other than those with respect to setting
Payroll Deduction Periods or determining the price of stock and the
number of shares to be offered under the Plan) to officers or
employees of the Company; and
establish such other limitations or procedures as it determines in its
sole discretion advisable and consistent with the Plan.
The Committee may also increase the price provided in Step 2 under
GRANTING OF OPTIONS (by decreasing the discount and/or by
designating that the price is determined as of either the beginning or the
ending date of a Payroll Deduction Period or the higher of both rather
than as of the lower) for Payroll Deduction Periods beginning after
Committee action.
PAYROLL DEDUCTION Payroll Deduction Periods are the periods during which the Company
PERIOD collects payroll deductions for a particular purchase. Unless the
Committee specifies otherwise, the Payroll Deduction Periods will be
successive calendar quarters beginning January 1, April 1, July 1, and
October 1, beginning when the Committee determines they should begin.
PARTICIPATION An eligible Employee may become a "Participant" for a Payroll
Deduction Period by completing an authorization notice and delivering it
to the Committee through the Company's Human Resources
professionals within a reasonable period of time before the first day of
such Payroll Deduction Period. All Participants receiving options under
the 2000 ESPP will have the same rights and privileges.
METHOD OF PAYMENT A Participant may contribute to the 2000 ESPP solely through payroll
deductions as follows:
The Participant must elect on an authorization notice or other required
documentation to have deductions made from his Compensation for each
payroll period during the Payroll Deduction Period at or above a
minimum rate and under terms the Committee determines. Compensation
under the Plan means an Employee's regular compensation, including
overtime, bonuses, and commissions (but expressly excluding income
from stock options or other noncash compensation), from the
Companypaid during a Payroll Deduction Period.
</TABLE>
B-2
<PAGE>
<TABLE>
<S> <C>
All payroll deductions will be credited to the Participant's account under
the 2000 ESPP. No interest will accrue on the account.
Payroll deductions will begin on the first payday coinciding with or
following the first day of each Payroll Deduction Period and will end
with the last payday preceding or coinciding with the end of that Payroll
Deduction Period, unless the Participant sooner withdraws as authorized
under WITHDRAWALS below.
A Participant may not alter the rate of payroll deductions during the
Payroll Deduction Period.
The Company may use the consideration it receives for general corporate
purposes.
GRANTING OF OPTIONS On the first day of each Payroll Deduction Period, a Participant will
receive options to purchase a number of shares of Common Stock with
funds withheld from his or her Compensation. Such number of shares
will be determined at the end of the Payroll Deduction Period according
to the following procedure:
STEP 1 -- Determine the amount the Company withheld from
Compensation since the beginning of the Payroll Deduction Period;
STEP 2 -- Determine the "Purchase Price" to be the amount that
represents 85% of the lower of the Fair Market Value of a share of
Common Stock on the first day of the Payroll Deduction Period and
the last day of the Payroll Deduction Period (provided that the
Committee can increase the price before a Payroll Deduction Period
begins); and
STEP 3 -- Divide the amount determined in Step 1 by the amount
determined in Step 2.
The Committee will determine the treatment of any fractional shares
from among the following:
The results of Step 3 will be used to purchase whole and fractional
shares,
Any amounts in Step 3 not used to purchase whole shares will be
refunded to the Participant,
Any amounts in Step 3 not used to purchase whole shares will be
carried forward to the next Payment Deduction Period, or Such
other treatment as the Committee approves.
FAIR MARKET VALUE The Fair Market Value of a share of Common Stock for purposes of the
Plan as of each date described in Step 2 will be determined as follows:
</TABLE>
B-3
<PAGE>
<TABLE>
<S> <C>
if the Company has no publicly-traded stock, the Committee will
determine the Fair Market Value for purposes of the Plan using any
measure of value it determines in good faith to be appropriate;
if the Common Stock trades on a national securities exchange, the
closing sale price on that date;
if the Common Stock does not trade on any such exchange, the
closing sale price as reported by the National Association of
Securities Dealers, Inc. Automated Quotation System ("Nasdaq") for
such date;
if no such closing sale price information is available, the average of
the closing bid and asked prices that Nasdaq reports for such date;
or
if there are no such closing bid and asked prices, the average of the
closing bid and asked prices as reported by any other commercial
service for such date.
For January 1 and any other date described in Step 2 that is not a
trading day, the Fair Market Value of a share of Common Stock for such
date shall be determined by using the closing sale price or the average of
the closing bid and asked prices, as appropriate, for the immediately
following trading day when determining the price for the first day of the
Payroll Deduction Period and the immediately preceding trading day
when determining the price on the last day. The Committee can
substitute a particular time of day or other measure of "closing sale
price" if appropriate because of changes in exchange or market
procedures.
The Committee has sole discretion to determine the Fair Market Value
for purposes of this Plan, and all participation is conditioned on the
participant's agreement that the Committee's determination is conclusive
and binding even though others might make a different and also
reasonable determination.
No Participant shall receive options:
if, immediately after the grant, that Participant would own shares, or
hold outstanding options to purchase shares, or both, possessing 5%
or more of the total combined voting power or value of all classes
of shares of the Company or any Subsidiaries (as defined below); or
that permit the Participant to purchase shares under all employee
stock purchase plans of the Company and any Subsidiary with a
Fair Market Value (determined at the time the options are granted)
that exceeds $25,000 in any calendar year.
</TABLE>
B-4
<PAGE>
<TABLE>
<S> <C>
EXERCISE OF OPTION Unless a Participant effects a timely withdrawal under the
WITHDRAWAL paragraph below, his option for the purchase of shares
of Common Stock during a Payroll Deduction Period will be
automatically exercised as of the last day of the Payroll Deduction
Period for the purchase of the maximum number of shares (including, if
the Committee so provides, fractional shares) that the sum of the payroll
deductions credited to the Participant's account during such Payroll
Deduction Period can purchase under the formula specified in
GRANTING OF OPTIONS.
DELIVERY OF COMMON As soon as administratively feasible after the options are used to
STOCK purchase Common Stock, the Company will credit to each Participant or,
in the alternative, to an agent or custodian that the Committee
designates, the shares of Common Stock the Participant purchased upon
the exercise of the option. If delivered to an agent or custodian, the
agent or custodian may hold the shares in nominee name and may
commingle shares held in its custody in a single account or stock
certificate without identification as to individual Participants. Unless the
Committee determines otherwise, Participants who are holding shares
and any persons to whom they transfer part or all of their shares other
than by sale must retain those shares with a Company specified broker
or agent until the second anniversary of the first day of the Payroll
Deduction Period in which they bought the shares. Unless the Committee
determines otherwise, a Participant may sell the shares despite the
foregoing restriction but may not transfer them to another broker until
the foregoing two year period (the "Account Restriction Period") ends.
The Committee may require that the specified agent or custodian hold
the shares of Common Stock for a minimum period of time after receipt
(including through and beyond the Participant's active employment) and
reinvest any dividends received in additional shares of Common Stock.
The Committee may, in its discretion, establish a program for cashless
sales of Common Stock received under the 2000 ESPP.
SUBSEQUENT OFFERINGS A Participant will be deemed to have elected to participate in each
subsequent Payroll Deduction Period following his initial election to
participate in the 2000 ESPP, unless the Participant files a written
withdrawal notice with the Human Resources Department at corporate
headquarters (or such other recipient as the Department designates) at
least 10 days before the beginning of the Payroll Deduction Period as of
which the Participant desires to withdraw from the 2000 ESPP.
WITHDRAWAL FROM THE A Participant may withdraw all, but not less than all, payroll deductions
PLAN credited to his account for a Payroll Deduction Period before the end of
such Payroll Deduction Period by delivering a written notice to the
Human Resources Department or its designee on behalf of the
Committee at least 30 days before the end of such Payroll Deduction
Period (or by such other deadline as the Committee determines). A
Participant who for any reason, including retirement, termination of
employment, or death, ceases to be an Employee before the last day of
any Payroll Deduction Period will be deemed to have withdrawn from
the 2000 ESPP as of the date of such cessation, unless the Committee
establishes other procedures.
</TABLE>
B-5
<PAGE>
<TABLE>
<S> <C>
When a Participant withdraws from the 2000 ESPP, his or her
outstanding options under the 2000 ESPP will immediately terminate.
Unless the Committee determines otherwise, if a Participant withdraws
from the 2000 ESPP for any reason, the Company will pay to the
Participant all payroll deductions credited to his account or, in the event
of death, to the persons designated as provided in Designation of
Beneficiary, as soon as administratively feasible after the date of such
withdrawal and no further deductions will be made from the Participant's
Compensation.
A Participant who has elected to withdraw from the 2000 ESPP may
resume participation in the same manner and under the same rules as
any Employee making an initial election to participate in the 2000 ESPP
(i.e., he may elect to participate in the next following Payroll Deduction
Period so long as he or she files the authorization form by the deadline
for that Payroll Deduction Period). Any Participant who is subject to
Section 16 of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and who withdraws from the 2000 ESPP for any
reason will only be permitted toresume participation in a manner that
will permit transactions under the 2000 ESPP to continue to be exempt
within the meaning of Rule 16b-3, as issued under the Exchange Act.
STOCK SUBJECT TO PLAN The shares of Common Stock that the Company will sell to Participants
under the 2000 ESPP will be shares of authorized but unissued Common
Stock, shares held as treasury stock, and shares purchased on the market.
The maximum number of shares made available for sale under the 2000
ESPP will be 1,000,000, increased beginning December 31, 2001 and
each succeeding December 31 by 200,000 shares (with both numbers
subject to the provisions in ADJUSTMENTS UPON CHANGES IN
CAPITAL STOCK below). If the total number of shares for which
options are to be exercised in a Payroll Deduction Period exceeds the
number of shares then available under the 2000 ESPP, the Company will
make, so far as is practicable, a pro rata allocation of the shares
available.
A Participant will have no interest in shares covered by his participation
until the last day of the applicable Payroll Deduction Period.
After the end of the Account Restriction Period, shares that a Participant
purchases under the ESPP will be registered in the name of the
Participant or, at the Participant's election, in street name.
ADJUSTMENTS UPON Subject to any required action by the Company (which it will promptly
CHANGES IN CAPITAL take) or its shareholders, and subject to the provisions of applicable
STOCK corporate law, if, during a Payroll Deduction Period,
the outstanding shares of Common Stock increase or decrease or
change into or are exchanged for a different number or kind of
security because of any recapitalization, reclassification, stock split,
reverse stock split, combination of shares, exchange of shares, stock
dividend, or other distribution payable in capital stock, or
</TABLE>
B-6
<PAGE>
<TABLE>
<S> <C>
some other increase or decrease in such Common Stock occurs
without the Company's receiving consideration (excluding, unless
the Committee determines otherwise, stock repurchases),
the Committee must make a proportionate and appropriate adjustment in
the number of shares of Common Stock underlying the options, so that
the proportionate interest of the Participant immediately following such
event will, to the extent practicable, be the same as immediately before
such event. Any such adjustment to the options will not change the total
price with respect to shares of Common Stock underlying the
Participant's election but will include a corresponding proportionate
adjustment in the price of the Common Stock, to the extent consistent
with Section 424 of the Code.
The Board or the Committee may take any actions described in the
ADJUSTMENTS UPON CHANGES IN CAPITAL STOCK section
without any requirement to seek optionee consent.
The Committee will make a commensurate change to the maximum
number and kind of shares provided in the STOCK SUBJECT TO PLAN
section.
Any issue by the Company of any class of preferred stock, or securities
convertible into shares of common or preferred stock of any class, will
not affect, and no adjustment by reason thereof will be made with
respect to, the number of shares of Common Stock subject to any
options or the price to be paid for stock except as this ADJUSTMENTS
section specifically provides. The grant of an option under the Plan will
not affect in any way the right or power of the Company to make
adjustments, reclassifications, reorganizations or changes of its capital or
business structure, or to merge or to consolidate, or to dissolve, liquidate,
sell, or transfer all or any part of its business or assets.
SUBSTANTIAL CORPORATE Upon a Substantial Corporate Change, the Plan and the offering will
CHANGE TERMINATE and all accumulated funds will be distributed as though
the Participants had elected to withdraw unless either (i) such
termination would prevent use of "pooling of interest" accounting for a
reorganization, merger, or consolidation of the Company that the Board
approves or (ii) unless provision is made in writing in connection with
such transaction for
the assumption or continuation of outstanding elections, or
the substitution for such options or grants of any options covering
the stock or securities of a successor employer corporation, or a
parent or subsidiary of such successor, with appropriate adjustments
as to the number and kind of shares of stock and prices, in which
event the options will continue in the manner and under the terms
so provided.
</TABLE>
B-7
<PAGE>
<TABLE>
<S> <C>
A Substantial Corporate Change means the sale of all or substantially all
of the assets of the Company to one or more individuals, entities, or
groups (other than an "Excluded Owner" as defined below),
complete or substantially complete dissolution or liquidation of the
Company;
a person, entity, or group (other than an Excluded Owner) acquires
or attains ownership of 100% of the undiluted total voting power of
the Company's then-outstanding securities eligible to vote to elect
members of the Board ("Company Voting Securities");
completion of a merger or consolidation of the Company with or
into any other entity (other than an Excluded Owner) unless the
holders of the Company Voting Securities outstanding immediately
before such completion, together with any trustee or other fiduciary
holding securities under a Company benefit plan, retain control
because they hold securities that represent immediately after such
merger or consolidation more than 20% of the combined voting
power of the then outstanding voting securities of either the
Company or the other surviving entity or its ultimate parent, or
any other transaction (including a merger or reorganization in which
the Company survives) approved by the Board that results in any
person or entity (other than an Excluded Owner) owning 100% of
Company Voting Securities.
An "Excluded Owner" consists of the Company, any Company
Subsidiary, any Company benefit plan, or any underwriter temporarily
holding securities for an offering of such securities.
DESIGNATION OF A Participant may file with the Committee a written designation of a
BENEFICIARY beneficiary who is to receive any payroll deductions credited to the
Participant's account under the 2000 ESPP or any shares of Common
Stock owed to the Participant under the 2000 ESPP if the Participant
dies. A Participant may change a beneficiary at any time by filing a
notice in writing with the Human Resources professionals on behalf of
the Committee.
</TABLE>
B-8
<PAGE>
<TABLE>
<S> <C>
Upon the death of a Participant and upon receipt by the Committee of
proof of the identity and existence of the Participant's designated
beneficiary, the Company will deliver such cash or shares, or both, to the
beneficiary. If a Participant dies and is not survived by a beneficiary that
the Participant designated in accordance with the immediate preceding
paragraph, the Company will deliver such cash or shares, or both, to the
personal representative of the estate of the deceased Participant. If, to the
knowledge of the Committee, no personal representative has been
appointed within 90 days following the date of the Participant's death,
the Committee, in its discretion, may direct the Company to deliver such
cash or shares, or both, to the surviving spouse of the deceased
Participant, or to any one or more dependents or relatives of the
deceased Participant, or if no spouse, dependent, or relative is known to
the Committee, then to such other person as the Committee may
designate.
No designated beneficiary may acquire any interest in such cash or
shares before the death of the Participant.
TRANSFERS, ASSIGNMENTS, A Participant may not assign, pledge, or otherwise dispose of payroll
AND PLEDGES deductions credited to the Participant's account or any rights to exercise
an option or to receive shares of Common Stock under the 2000 ESPP
other than by will or the laws of descent and distribution or under a
qualified domestic relations order, as defined in the Employee Retirement
Income Security Act. Any other attempted assignment, pledge or other
disposition will be without effect, except that the Company may treat
such act as an election to withdraw under the WITHDRAWAL section.
AMENDMENT OR The Board of Directors of the Company or the Committee may at any
TERMINATION OF PLAN time terminate or amend the 2000 ESPP. Any amendment of the 2000
ESPP that (i) materially increases the benefits to Participants, (ii)
materially increases the number of securities that may be issued under
the 2000 ESPP, or (iii) materially modifies the eligibility requirements
for participation in the 2000 ESPP must be approved by the shareholders
of the Company to take effect. The Company will refund to each
Participant the amount of payroll deductions credited to his account as of
the date of termination as soon as administratively feasible following the
effective date of the termination.
EFFECT ON OTHER PLANS Whether exercising or receiving an option causes the participant to
accrue or receive additional benefits under any pension or other plan is
governed solely by the terms of such other plan.
NOTICES All notices or other communications by a Participant to the Committee
or the Company shall be deemed to have been duly given when the
Human Resources Department or local Human Resources professionals
of the Company receive them or when any other person or entity the
Company designates receives the notice or other communication in the
form the Company specifies.
</TABLE>
B-9
<PAGE>
<TABLE>
<S> <C>
GENERAL ASSETS Any amounts the Company invests or otherwise sets aside or segregates
to satisfy its obligations under this 2000 ESPP will be solely the
Company's property (except as otherwise required by Federal or state
wage laws), and the optionee's claim against the Company under the
2000 ESPP, if any, will be only as a general creditor. The optionee will
have no right, title, or interest whatever in or to any investments that the
Company may make to aid it in meeting its obligations under the 2000
ESPP. Nothing contained in the 2000 ESPP, and no action taken under
its provisions, will create or be construed to create an implied or
constructive trust of any kind or a fiduciary relationship between the
Company and any Employee, Participant, former Employee, former
Participant, or any beneficiary.
PRIVILEGES OF STOCK No Participant and no beneficiary or other person claiming under or
OWNERSHIP through such Participant will have any right, title, or interest in or to any
shares of Common Stock allocated or reserved under the Plan except as
to such shares of Common Stock, if any, that have been issued to such
Participant.
TAX WITHHOLDING To the extent that a Participant realizes ordinary income or wages for
employment tax purposes in connection with a sale or other transfer of
any shares of Common Stock purchased under the Plan or the crediting
of interest to an account, the Company may withhold amounts needed to
cover such taxes from any payments otherwise due to the Participant.
Any Participant who sells or otherwise transfers shares purchased under
the Plan within two years after the beginning of the Payroll Deduction
Period in which he purchased the shares must, within 30 days of such
transfer, notify the Company's Payroll Department in writing of such
transfer. Each Participant, as a condition of participation, agrees that the
Company may treat the purchase of shares and/or their disposition as
taxable events requiring the withholding or other collection of income
and employment taxes and further agrees to pay any such taxes for
which the Company cannot reasonably withhold.
LIMITATIONS ON LIABILITY Notwithstanding any other provisions of the 2000 ESPP, no individual
acting as a director, employee, or agent of the Company shall be liable
to any Employee, Participant, former Employee, former Participant, or
any spouse or beneficiary for any claim, loss, liability, or expense
incurred in connection with the 2000 ESPP, nor shall such individual be
personally liable because of any contract or other instrument he executes
in such other capacity. The Company will indemnify and hold harmless
each director, employee, or agent of the Company to whom any duty or
power relating to the administration or interpretation of the 2000 ESPP
has been or will be delegated, against any cost or expense (including
attorneys' fees) or liability (including any sum paid in settlement of a
claim with the Board's approval) arising out of any act or omission to
act concerning this 2000 ESPP unless arising out of such person's own
fraud or bad faith.
</TABLE>
B-10
<PAGE>
<TABLE>
<S> <C>
NO EMPLOYMENT Nothing contained in this Plan constitutes an employment contract
CONTRACT between the Company and any Employee. The 2000 ESPP does not give
an Employee any right to be retained in the Company's employ, nor does
it enlarge or diminish the Company's right to terminate the Employee's
employment.
DURATION OF ESPP Unless the Company's Board extends the Plan's term, no Payroll
Deduction Period will end after March 16, 2010.
APPLICABLE LAW The laws of the State of Delaware (other than its choice of law
provisions) govern the 2000 ESPP and its interpretation.
LEGAL COMPLIANCE The Company will not issue any shares of Common Stock under the
Plan until the issuance satisfies all applicable requirements imposed by
Federal and state securities and other laws, rules, and regulations, and by
any applicable regulatory agencies or stock exchanges. To that end, the
Company may require the optionee to take any reasonable action to
comply with such requirements before issuing such shares. No provision
in the Plan or action taken under it authorizes any action that Federal or
state laws otherwise prohibit.
The Plan is intended to conform to the extent necessary with all
provisions of the Securities Act of 1933, as amended, ("Securities Act")
and the Securities Exchange Act of 1934, as amended, and all
regulations and rules the Securities and Exchange Commission issues
under those laws, including specifically Rule 16b-3. Notwithstanding
anything in the Plan to the contrary, the Committee and the Board must
administer the Plan, and Participants may purchase Common Stock, only
in a way that conforms to such laws, rules, and regulations. To the
extent applicable law permits, the Plan and any offers will be deemed
amended to the extent necessary to conform to such laws, rules, and
regulations.
APPROVAL OF The ESPP must be submitted to the shareholders of the Company for
SHAREHOLDERS their approval within 12 months after the Board adopts the ESPP. The
adoption of the ESPP is conditioned upon the approval of the
shareholders of the Company, and failure to receive their approval will
render the ESPP and any outstanding options thereunder void and of no
effect.
</TABLE>
B-11
<PAGE>
EXHIBIT C
AUDIT COMMITTEE CHARTER
Organization
There shall be a committee of the Board of Directors to be known as the
Audit Committee. The Audit Committee shall be comprised of at least three
directors who are independent of management and NetCreations, Inc. (the
"Company"). Members of the Audit Committee shall be considered independent if
they have no relationship to the Company that may interfere with the exercise
of their independence from the management and the Company. All Audit Committee
members will be financially literate, and at least one member will have
accounting or related management expertise.
Statement of Policy
The Audit Committee shall provide assistance to the directors in
fulfilling their responsibility to the shareholders, potential shareholders,
and investment community relating to corporate accounting, reporting practices
of the Company, and the quality and integrity of financial reports of the
Company. In so doing, it is the responsibility of the Audit Committee to
maintain free and open communication between the directors, the independent
auditors and the financial management of the Company.
Responsibilities
In carrying out its responsibilities, the Audit Committee believes its
policies and procedures should remain flexible, in order to best react to
changing conditions and to ensure to the directors and shareholders that the
corporate accounting and reporting practices of the Company are in accordance
with all requirements and are of the highest quality.
In carrying out these responsibilities, the Audit Committee will:
o Obtain the full Board of Directors' approval of this Charter and review
and reassess this Charter as conditions dictate (at least annually).
o Review and recommend to the directors the independent auditors to be
selected to audit the financial statements of the Company and its
divisions and subsidiaries.
o Have a clear understanding with the independent auditors that they are
ultimately accountable to the Audit Committee and the Board of Directors,
as the shareholders' representatives, who have the ultimate authority in
deciding to engage, evaluate, and if appropriate, terminate their
services.
o Meet with the independent auditors and financial management of the
Company to review the scope of the proposed audit and timely quarterly
reviews for the current year and the procedures to be utilized, the
adequacy of the independent auditor's compensation, and at the conclusion
thereof review such audit or review, including any comments or
recommendations of the independent auditors.
o Review with the independent auditors and financial and accounting
personnel, the adequacy and effectiveness of the accounting and financial
controls of the Company, and elicit any recommendations for the
improvement of such internal controls or particular areas where new or
more detailed controls or procedures are desirable. Review reports
received from regulators and other legal and regulatory matters that may
have a material effect on the financial statements or related company
compliance policies.
o Inquire of management and the independent auditors about significant
risks or exposures and assess the steps management has taken to minimize
such risks to the Company.
o Review the quarterly financial statements with financial management and
the independent auditors prior to the filing of the Form 10-Q (or prior to
the press release of results, if possible) to determine that the
independent auditors do not take exception to the disclosure and content
of the financial statements, and discuss any other matters required to be
communicated to the committee by the auditors. The chair of the Committee
may represent the entire Committee for purposes of this review.
C-1
<PAGE>
o Review the financial statements to be contained in the annual report to
shareholders with management and the independent auditors to determine
that the independent auditors are satisfied with the disclosure and
content of the financial statements to be presented to the shareholders.
Review with financial management and the independent auditors the results
of their timely analysis of significant financial reporting issues and
practices, including changes in, or adoptions of, accounting principles
and the auditors. Also review with financial management and the
independent auditors their judgments about the quality, not just
acceptability, of accounting principles and the clarity of the financial
disclosure practices used or proposed to be used, and particularly, the
degree of aggressiveness or conservatism of the organization's accounting
principles and underlying estimates, and other significant decisions made
in preparing the financial statements.
o Provide sufficient opportunity for the independent auditors and the
internal auditor, if any, to meet with the members of the Audit Committee
without members of management present. Among the items to be discussed in
these meetings are the independent auditors' evaluation of the company's
financial, accounting, and internal auditing personnel, if any, and the
cooperation that the independent auditors received during the course of
audit.
o Review accounting and financial human resources and succession planning
within the Company.
o Report the results of the annual audit to the Board of Directors. If
requested by the Board, invite the independent auditors to attend the full
Board of Directors meeting to assist in reporting the results of the
annual audit or to answer other directors' questions (alternatively, the
other directors, particularly the other independent directors, may be
invited to attend the Audit Committee meeting during which the results of
the annual audit are reviewed.
o On an annual basis, obtain from the independent auditors a written
communication delineating all their relationships and professionals
services as required by Independence Standards Board Standard No. 1,
Independent Discussions with Audit Committees. In addition, review with
the independent auditors the nature and scope of any disclosed
relationships or professional services and take, or recommend that the
Board of Directors take, appropriate action to ensure the continuing
independence of the auditors.
o Prepare a report of the Audit Committee to be included in the Company's
proxy statement for its annual meeting of shareholders, disclosing whether
(1) the Committee had reviewed and discussed with management and the
independent auditors, as well as discussed within the Committee (without
management or the independent auditors present), the financial statements
and the quality of accounting principles and significant judgments
affecting the financial statements; (2) the Committee discussed with the
auditors the independence of the auditors; and (3) based upon the
Committee's review and discussions with management and the independent
auditors, the Committee had recommended to the Board of Directors that the
audited financials be included in the Company's annual report on Form
10-K.
o Include a copy of this Charter in the annual report to shareholders or
the proxy statement (effective for year ending December 31, 2000) at least
triennially or the year after any significant amendment to the Charter.
o Submit the minutes of all meetings of the Audit Committee to, or discuss
the matters discussed at each Committee meeting with, the Board of
Directors.
o Investigate any matter brought to its attention within its duties, with
the power to retain outside counsel for this purpose if, in its judgment,
that is appropriate.
C-2
