<PAGE> 1
As filed with the Securities and Exchange Commission on September 8, 1999
Registration No. 333-84703
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
WEBVAN GROUP, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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<TABLE>
<S> <C> <C>
CALIFORNIA* 7389 77-0446411
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
1241 EAST HILLSDALE BOULEVARD, SUITE 210
FOSTER CITY, CALIFORNIA 94404
(650) 524-2200
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
LOUIS H. BORDERS
PRESIDENT AND CHIEF EXECUTIVE OFFICER
WEBVAN GROUP, INC.
1241 EAST HILLSDALE BOULEVARD, SUITE 210
FOSTER CITY, CALIFORNIA 94404
(650) 524-2200
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPIES TO:
<TABLE>
<S> <C>
JEFFREY D. SAPER, ESQ. WILLIAM H. HINMAN, ESQ.
J. ROBERT SUFFOLETTA, ESQ. DANIELLE CARBONE, ESQ.
ROBERT G. DAY, ESQ. SHEARMAN & STERLING
ANIL P. PATEL, ESQ. 1550 EL CAMINO REAL, SUITE 100
WILSON SONSINI GOODRICH & ROSATI MENLO PARK, CALIFORNIA 94025
PROFESSIONAL CORPORATION (650) 330-2200
650 PAGE MILL ROAD
PALO ALTO, CALIFORNIA 94304-1050
(650) 493-9300
</TABLE>
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after this Registration Statement is declared effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]
If this Form is to register additional securities for an offering pursuant
to rule 462(b) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration number of the earlier effective registration statement for the same
offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<S> <C> <C> <C> <C>
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TITLE OF EACH CLASS PROPOSED MAXIMUM PROPOSED MAXIMUM
OF SECURITIES TO BE AMOUNT TO BE OFFERING PRICE AGGREGATE OFFERING AMOUNT OF
REGISTERED REGISTERED(1) PER SHARE(2) PRICE(1)(2) REGISTRATION FEE(3)
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Common Stock, par value
$0.0001 per share......... 28,750,000 Shares $13.00 $373,750,000 $103,903
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</TABLE>
(1) Includes shares that the underwriters have the option to purchase solely to
cover over-allotments, if any.
(2) Estimated solely for the purpose of calculating the amount of the
registration fee in accordance with Rule 457(a) under the Securities Act of
1933.
(3) Includes $95,910 previously paid.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8(a), MAY
DETERMINE.
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* The Registrant's state of incorporation will be changed to Delaware prior to
the closing of the public offering contemplated by this Registration
Statement.
<PAGE> 2
THE INFORMATION IN THIS PRELIMINARY PROSPECTUS IS NOT COMPLETE AND MAY BE
CHANGED. THESE SECURITIES MAY NOT BE SOLD UNTIL THE REGISTRATION STATEMENT FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PRELIMINARY
PROSPECTUS IS NOT AN OFFER TO SELL NOR DOES IT SEEK AN OFFER TO BUY THESE
SECURITIES IN ANY JURISDICTION WHERE THE OFFER OR SALE IS NOT PERMITTED.
Subject To Completion. Dated September , 1999.
25,000,000 Shares
WEBVAN GROUP, INC.
Common Stock
LOGO
-------------------------
This is an initial public offering of shares of common stock of Webvan
Group, Inc. This prospectus relates to an offering of shares in the
United States. In addition, shares are being offered outside the
United States in an international offering. All of the 25,000,000 shares of
common stock are being sold by Webvan.
Prior to this offering, there has been no public market for the common
stock. It is currently estimated that the initial public offering price per
share will be between $11.00 and $13.00. Application has been made for quotation
of the common stock on the Nasdaq National Market under the symbol "WBVN".
See "Risk Factors" beginning on page 4 to read about factors you should
consider before buying shares of the common stock.
-------------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY OTHER REGULATORY
BODY HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
-------------------------
<TABLE>
<CAPTION>
Per Share Total
--------- -----
<S> <C> <C>
Initial public offering price............................... $ $
Underwriting discount....................................... $ $
Proceeds, before expenses, to Webvan........................ $ $
</TABLE>
To the extent that the U.S. underwriters sell more than shares of
common stock, the U.S. underwriters have the option to purchase up to an
additional shares from Webvan at the initial public offering
price, less the underwriting discount. The international underwriters may
similarly purchase up to an additional shares from Webvan.
The underwriters expect to deliver the shares on , 1999.
-------------------------
GOLDMAN, SACHS & CO.
DONALDSON, LUFKIN & JENRETTE
MERRILL LYNCH & CO.
BANCBOSTON ROBERTSON STEPHENS
BEAR, STEARNS & CO. INC.
DEUTSCHE BANC ALEX. BROWN
THOMAS WEISEL PARTNERS LLC
-------------------------
Prospectus dated , 1999.
<PAGE> 3
PROSPECTUS SUMMARY
This summary does not contain all of the information that you should
consider before investing in our common stock. You should read the entire
prospectus carefully, especially "Risk Factors" beginning on page 4.
WEBVAN GROUP, INC.
Webvan is an Internet retailer offering same-day delivery of consumer
products through an innovative proprietary business design that integrates our
Webstore, distribution center and delivery system. Our current product offerings
are principally focused on food, non-prescription drug products and general
merchandise.
Webvan offers a personalized shopping experience that provides customers
with:
- the convenience of same-day direct home delivery within a
customer-selected 30-minute window;
- a broad selection of high quality fresh foods including produce, hand-cut
meats, fresh fish and live lobsters, as well as non-perishable grocery
items, chef-prepared meals, fine wines, premium quality cigars and
non-prescription drug products;
- prices that are generally at or below everyday supermarket prices;
- reliable and friendly delivery service by Webvan employees, free of
charge for orders over $50; and
- an easy-to-navigate Webstore offering user-friendly features including
the ability to create personalized shopping lists.
Consumers are increasingly seeking a grocery shopping solution which will
allow them to save time and effort without sacrificing the wide selection, high
quality and low cost they have come to expect from supermarkets. While a number
of retailers have attempted to address this opportunity by offering grocery
items online, we believe that their lack of a highly automated distribution
system and inability to realize cost efficiencies has made it difficult for
these online grocers to deliver a high quality, low cost shopping solution in an
efficient manner.
Our interactive Webstore and highly automated distribution center were
designed to operate efficiently at high volumes, enabling us to operate with
much lower overhead and reduced headcount compared to traditional supermarkets.
Our initial distribution center, which serves the San Francisco Bay Area, was
designed to process product volumes equivalent to approximately 18 supermarkets
with substantially lower labor and real estate costs than these stores would
typically require. Since the commercial launch of our Webstore on June 2, 1999,
we have delivered orders to over 9,000 customers which generated approximately
$2.5 million in net sales through August 31, 1999.
Our proprietary distribution system and enabling software were designed to
optimize our inbound and outbound delivery operations and were created to be
readily replicated to facilitate our expansion into multiple geographic markets.
We commenced the commercial launch of our operations in the San Francisco Bay
Area in June 1999 and plan to open a second distribution center in Atlanta,
Georgia in the second quarter of 2000 and to further expand with distribution
centers in other key geographic markets. In July 1999, we entered into an
agreement with Bechtel Corporation for the construction of up to 26 additional
distribution centers over the next three years.
We believe that our business design is an innovative solution that
addresses the "last mile" problem of e-commerce fulfillment by integrating a
retail web site with a highly automated distribution center and advanced
delivery system which provide a highly efficient means of delivering goods
directly and rapidly to consumers. We also believe that the significant capital
investment in our business system will make it difficult for traditional
supermarkets and other online grocers to duplicate this solution and offer
similar benefits to consumers.
1
<PAGE> 4
WEBVAN'S OPERATING HISTORY
Webvan was incorporated in December 1996. From 1997 through May 1999, we
were focused on developing our Webstore and constructing and equipping our first
distribution center serving the San Francisco Bay Area. We did not begin
commercial operations until June 1999. Our operating history and revenues
derived from operations are therefore limited, and we have incurred significant
net losses since our inception. As of June 30, 1999, we had an accumulated
deficit of $50.0 million. We incurred net losses of $12.0 million for the fiscal
year ended December 31, 1998 and $35.1 million for the six months ended June 30,
1999. We will continue to incur significant capital and operating expenses over
the next several years in connection with our planned expansion, and we expect
to continue to have operating losses for the foreseeable future.
-------------------------
THE OFFERING
Common stock offered by Webvan........ 25,000,000 shares
Common stock to be outstanding after
this offering......................... 317,453,839 shares
Proposed Nasdaq National Market
symbol................................ "WBVN"
Use of proceeds....................... Funding construction of and equipment
for distribution centers and for general
corporate purposes, including working
capital. See "Use of Proceeds".
The shares of common stock to be outstanding after the offering are stated
as of June 30, 1999 and include 205,760,277 shares of common stock to be issued
upon automatic conversion of all outstanding shares of our preferred stock,
including 21,670,605 shares of Series D preferred stock issued in July and
August 1999, upon completion of this offering. The shares of common stock to be
outstanding exclude:
- 50,150,910 shares of common stock reserved for issuance under our stock
option plan, of which 40,433,688 shares at a weighted average exercise
price of $0.27 were subject to outstanding options as of June 30, 1999,
- 2,397,804 shares of common stock issuable upon exercise of outstanding
warrants as of June 30, 1999 at a weighted average exercise price of
$0.91.
All of the information in this prospectus gives effect to and assumes that
the following transactions will be effected prior to the closing of this
offering:
- a three-for-two split of our outstanding shares of common stock and
preferred stock;
- the amendment of our articles of incorporation to increase our authorized
common stock to 800,000,000 shares, and to authorize 10,000,000 shares of
undesignated preferred stock;
- the conversion of all outstanding shares of preferred stock into shares
of common stock; and
- no exercise of the underwriters' overallotment option.
-------------------------
CORPORATE INFORMATION
We were incorporated in California in December 1996 as Intelligent Systems
for Retail, Inc. and will change our state of incorporation to Delaware prior to
the date of this prospectus. Our principal executive offices are located at 1241
East Hillsdale Boulevard, Suite 210, Foster City, California 94404, and our
telephone number at that address is (650) 524-2200. Our address on the World
Wide Web is http://www.webvan.com. References to our web site do not incorporate
by reference the information contained at our web site into this prospectus.
2
<PAGE> 5
SUMMARY CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
PERIOD FROM
DECEMBER 17,
1996 SIX MONTHS
(INCEPTION) TO YEAR ENDED ENDED JUNE 30,
DECEMBER 31, DECEMBER 31, -------------------------
CONSOLIDATED STATEMENTS OF 1997 1998 1998 1999
OPERATIONS DATA: -------------- ------------ ----------- -----------
<S> <C> <C> <C> <C>
Net sales.............................. $ -- $ -- $ -- $ 395
Cost of goods sold..................... -- -- -- 419
----------- ----------- ----------- -----------
Gross profit......................... -- -- -- (24)
Operating expenses:
Software development................. 244 3,010 765 6,308
General and administrative........... 2,612 8,825 2,739 25,296
Amortization of deferred stock
compensation...................... -- 1,060 43 3,953
----------- ----------- ----------- -----------
Total operating expenses.......... 2,856 12,895 3,547 35,557
----------- ----------- ----------- -----------
Interest income........................ 85 923 285 1,641
Interest expense....................... 69 32 -- 1,194
----------- ----------- ----------- -----------
Net interest income.................. 16 891 285 447
----------- ----------- ----------- -----------
Net loss............................... $ (2,840) $ (12,004) $ (3,262) $ (35,134)
=========== =========== =========== ===========
Basic and diluted net loss per share... $ (0.08) $ (0.18) $ (0.05) $ (0.48)
=========== =========== =========== ===========
Shares used in calculating basic and
diluted net loss per share........... 37,406,785 67,114,048 65,075,326 73,280,388
=========== =========== =========== ===========
Pro forma basic and diluted net loss
per share(1)......................... $ (0.06) $ (0.14)
=========== ===========
Shares used in computing pro forma
basic and diluted net loss per
share(1)............................. 201,978,419 253,743,194
=========== ===========
OTHER OPERATING DATA:
Capital expenditures................... $ 265 $ 32,669 $ 4,283 $ 25,948
Depreciation and amortization.......... 57 1,323 93 6,626
</TABLE>
- -------------------------
(1) See Note 1 of Notes to Consolidated Financial Statements.
The following table provides a consolidated summary of our balance sheets.
The Pro Forma column reflects the closing of the sale of an aggregate of
21,670,605 shares of our Series D preferred stock in July and August 1999 for
approximately $275.0 million and the conversion of all outstanding shares of
preferred stock into common stock immediately prior to the closing of this
offering. The Pro Forma As Adjusted column also reflects the issuance of the
shares of common stock in this offering at an assumed initial public offering
price of $12.00 per share.
<TABLE>
<CAPTION>
JUNE 30, 1999
DECEMBER 31, ----------------------------------
---------------- PRO FORMA
1997 1998 ACTUAL PRO FORMA AS ADJUSTED
------ ------- -------- --------- -----------
<S> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and equivalents...................... $2,935 $13,839 $ 21,836 $296,736 $577,336
Working capital........................... 7,693 10,923 31,773 306,673 587,273
Total assets.............................. 8,279 60,009 112,429 387,329 667,929
Long-term liabilities..................... 17 14,337 14,216 14,216 14,216
Total shareholders' equity................ 7,972 33,612 79,626 354,526 635,126
</TABLE>
3
<PAGE> 6
RISK FACTORS
You should carefully consider the risks and uncertainties described below
before purchasing our common stock. If any of the following risks actually
occur, our business, financial condition or results of operations could be
harmed. In that case, the trading price of our common stock could decline, and
you could lose all or part of your investment.
WE ARE AN EARLY-STAGE COMPANY OPERATING IN A NEW AND RAPIDLY EVOLVING MARKET.
We were incorporated in December 1996. From 1997 through May 1999, we were
focused on developing our Webstore and constructing and equipping our first
distribution center serving the San Francisco Bay Area. We did not begin
commercial operations until June 1999. Our limited operating history makes an
evaluation of our business and prospects very difficult. You must consider our
business and prospects in light of the risks and difficulties we encounter as an
early stage company in the new and rapidly evolving market of e-commerce. These
risks and difficulties include, but are not limited to:
- a complex and unproven business system;
- lack of sufficient customers, orders, net sales or cash flow;
- difficulties in managing rapid growth in personnel and operations;
- high capital expenditures associated with our distribution centers,
systems and technologies; and
- lack of widespread acceptance of the Internet as a means of purchasing
groceries and other consumer products.
We cannot be certain that our business strategy will be successful or that
we will successfully address these risks. Our failure to address any of the
risks described above could have a material adverse effect on our business.
OUR BUSINESS SYSTEM IS NEW AND UNPROVEN AT HIGH VOLUMES.
We have designed a new business system which integrates our Webstore,
highly automated distribution center and complex order fulfillment and delivery
operations. We have only been delivering products to customers commercially
since we launched our Webstore on June 2, 1999 and the daily volume of orders
that we have had to fulfill to date has been significantly below our designed
capacity and the levels that are necessary for us to achieve profitability. It
is not practicable to test our system at high volumes except by processing
commercial orders. As part of our testing process, we have voluntarily limited
the number of customer orders accepted in any given delivery window in an effort
to ensure that our systems and technologies function properly while maintaining
a high level of customer service. We plan to incrementally increase our
voluntary limit on orders as our systems and technologies are proven at each
incremental volume level. As a result, the success of our system in a high order
volume environment has yet to be proven. Based on our operational experiences,
refinements or modifications to our business systems and technologies may be
necessary or advisable. We cannot assure you that our business system will be
able to accommodate a significant increase in the number of customers and
orders. If we are unable to effectively accommodate substantial increases in
customer orders, we may lose existing customers or fail to add new customers,
which would adversely affect our business, net sales and operating margins.
OUR BUSINESS SYSTEM IS COMPLEX, AND WE ARE PERIODICALLY AFFECTED BY OPERATIONAL
DIFFICULTIES.
Our business system relies on the complex integration of numerous software
and hardware subsystems that utilize advanced algorithms to manage the entire
process from the receipt and processing of goods at our distribution center to
the picking, packing and delivery of these goods to customers in a 30-minute
delivery window. We have, from time to time, experienced operational
4
<PAGE> 7
"bugs" in our systems and technologies which have resulted in order errors such
as missing items and delays in deliveries. We expect bugs to continue to occur
from time to time, and we cannot assure you that our operations will not be
adversely affected. The efficient operation of our business system is critical
to consumer acceptance of our service. If we are unable to meet customer demand
or service expectations as a result of operational issues, our ability to
develop customer relationships that result in repeat orders will be adversely
affected.
OUR BUSINESS SYSTEM MAY NOT BE READILY OR COST-EFFECTIVELY REPLICABLE IN
ADDITIONAL GEOGRAPHIC MARKETS.
A critical part of our business strategy is to expand our business by
opening additional distribution centers in new and existing markets to achieve
economies of scale and leverage our significant and ongoing capital investment
in our proprietary business system. Our expansion strategy is dependent upon the
ability of our proprietary business system and enabling software to be readily
replicated to facilitate our expansion into additional geographic markets on a
timely and cost-effective basis. Because our business system is extremely
complex and we currently have only one distribution center, we have not
demonstrated whether our proprietary business system is in fact readily and
cost-effectively replicable.
Our ability to successfully and cost-effectively replicate our business
system in additional geographic markets will also depend upon a number of
factors, including:
- the availability of appropriate and affordable sites that can accommodate
our distribution centers;
- our ability to successfully and cost-effectively hire and train qualified
employees to operate new distribution centers;
- our ability to develop relationships with local and regional
distributors, vendors and other product providers;
- acceptance of our product and service offerings; and
- competition.
The number and timing of opening of new distribution centers are dependent
on these factors and are therefore subject to considerable uncertainty. If the
replication element of our expansion strategy fails, we could incur substantial
additional operating costs and be forced to delay our entrance into other
markets.
OUR EXPANSION PLANS ARE DEPENDENT ON THE PERFORMANCE OF, AND OUR RELATIONSHIP
WITH, BECHTEL CORPORATION.
In July 1999, we entered into an agreement with Bechtel for the
construction of up to 26 additional distribution centers over the next three
years. We expect that our next 26 distribution centers following our Atlanta,
Georgia distribution center will be constructed by Bechtel pursuant to this
agreement. The success of our expansion program is highly dependent on the
success of our relationship with Bechtel and Bechtel's ability to perform its
obligations under the contract. We have no prior working relationship with
Bechtel and we cannot assure you that we will not encounter unexpected delays or
design problems in connection with the build-out of our distribution centers. If
our relationship with Bechtel fails for any reason, we would be forced to engage
another contractor, which would likely result in a significant delay in our
expansion plans.
5
<PAGE> 8
WE HAVE NO EXPERIENCE IN MANAGING GEOGRAPHICALLY DIVERSE OPERATIONS.
Although we plan to expand geographically, we have no experience operating
in any other regions or in managing multiple distribution centers. Accordingly,
the success of our planned expansion will depend upon a number of factors,
including:
- our ability to integrate the operations of new distribution centers into
our existing operations;
- our ability to coordinate and manage distribution operations in multiple,
geographically distant locations; and
- our ability to establish and maintain adequate management and information
systems and financial controls.
Our failure to successfully address these factors could have a material
adverse effect on our ability to expand and on our results of operations.
WE ANTICIPATE FUTURE LOSSES AND NEGATIVE CASH FLOW.
We have experienced significant net losses and negative cash flow since our
inception. As of June 30, 1999, we had an accumulated deficit of $50.0 million.
We incurred net losses of $12.0 million for the fiscal year ended December 31,
1998 and $35.1 million for the six months ended June 30, 1999. We will continue
to incur significant capital and operating expenses over the next several years
in connection with our planned expansion, including:
- the continued expansion and development of operations at our existing
distribution center;
- the construction and operation of new distribution centers in additional
geographic markets;
- increases in personnel at our current and future distribution centers;
- brand development, marketing and other promotional activities;
- the continued development of our computer network, Webstore, warehouse
management and order fulfillment systems and delivery infrastructure; and
- the development of strategic business relationships.
As a result, we expect to continue to have operating losses and negative cash
flow on a quarterly and annual basis for the foreseeable future. In addition,
because of the significant capital and operating expenses associated with our
expansion plan, our losses will increase significantly from current levels. To
achieve profitability, we must accomplish the following objectives:
- substantially increase our number of customers and the number of orders
placed by our customers;
- generate a sufficient average order size;
- realize repeat orders from a significant number of customers;
- achieve favorable gross margins; and
- build additional distribution centers in new markets.
We cannot assure you that we will be able to achieve these objectives. If
we do achieve profitability, we cannot be certain that we would be able to
sustain or increase profitability on a quarterly or annual basis in the future.
If we cannot achieve or sustain profitability, we may not be able to meet our
working capital requirements, which would have a material adverse effect on our
business.
6
<PAGE> 9
WE FACE INTENSE COMPETITION FROM TRADITIONAL AND ONLINE RETAILERS OF GROCERY
PRODUCTS.
The grocery retailing market is extremely competitive. Local, regional, and
national food chains, independent food stores and markets, as well as online
grocery retailers comprise our principal competition, although we also face
substantial competition from convenience stores, liquor retailers, membership
warehouse clubs, specialty retailers, supercenters, and drugstore chains. Many
of our existing and potential competitors, particularly traditional grocers and
retailers, are larger and have substantially greater resources than we do. We
expect this competition will intensify as more traditional and online grocery
retailers offer competitive services.
Our initial distribution center in Oakland, California operates in the San
Francisco Bay Area market. In this market, we compete primarily with traditional
grocery retailers and with online grocers NetGrocer and Peapod. The number and
nature of competitors and the amount of competition we will experience will vary
by market area. In other markets, we expect to compete with these and other
online grocers. The principal competitive factors that affect our business are
location, breadth of product selection, quality, service, price and consumer
loyalty to traditional and online grocery retailers. If we fail to effectively
compete in any one of these areas, we may lose existing and potential customers
which would have a material adverse effect on our business, net sales and
operating margins.
We also compete to retain customers once they have registered for Webvan's
services. Generally, online subscriber attrition rates, or the rates at which
subscribers cancel an online service, are high. High rates of customer attrition
could have a material adverse effect on our net sales and business.
THE INTERNET MAY FAIL TO BECOME A WIDELY ACCEPTED MEDIUM FOR GROCERY SHOPPING.
We rely solely on product orders received through our Webstore for sales.
The market for e-commerce is new and rapidly evolving, and it is uncertain
whether e-commerce will achieve and sustain high levels of demand and market
acceptance, particularly with respect to the grocery industry. Our success will
depend to a substantial extent on the willingness of consumers to increase their
use of online services as a method to buy groceries and other products and
services. Our success will also depend upon our vendors' acceptance of our
online service as a significant means to market and sell their products.
Moreover, our growth will depend on the extent to which an increasing number of
consumers own or have access to personal computers or other systems that can
access the Internet. If e-commerce in the grocery industry does not achieve high
levels of demand and market acceptance, our business will be materially
adversely affected.
OUR EFFORTS TO BUILD STRONG BRAND IDENTITY AND CUSTOMER LOYALTY MAY NOT BE
SUCCESSFUL.
Since we only recently launched the Webvan brand, we currently do not have
strong brand identity or brand loyalty. We believe that establishing and
maintaining brand identity and brand loyalty is critical to attracting consumers
and vendors. Furthermore, we believe that the importance of brand loyalty will
increase with the proliferation of Internet retailers. In order to attract and
retain consumers and vendors, and respond to competitive pressures, we intend to
increase spending substantially to create and maintain brand loyalty among these
groups. We plan to accomplish this goal by expanding our current radio and
newspaper advertising campaigns and by conducting online and television
advertising campaigns. We believe that advertising rates, and the cost of our
advertising campaigns in particular, could increase substantially in the future.
If our branding efforts are not successful, our net sales and ability to attract
customers will be materially and adversely affected.
Promotion and enhancement of the Webvan brand will also depend on our
success in consistently providing a high-quality consumer experience for
purchasing groceries and other products. If consumers, other Internet users and
vendors do not perceive our service offerings to be of high quality, or if we
introduce new services that are not favorably received by these groups, the
value of the Webvan brand could be harmed. Any brand impairment or dilution
could decrease the
7
<PAGE> 10
attractiveness of Webvan to one or more of these groups, which could harm our
reputation, reduce our net sales and cause us to lose customers.
IF WE ARE UNABLE TO OBTAIN SUFFICIENT QUANTITIES OF PRODUCTS FROM OUR KEY
VENDORS, OUR NET SALES WOULD BE ADVERSELY AFFECTED.
We expect to derive a significant percentage of our net sales from
high-volume items, well-known brand name products and fresh foods. We source
products from a network of manufacturers, wholesalers and distributors. We
currently rely on national and regional distributors for a substantial portion
of our items. We also utilize premium specialty suppliers or local sources for
gourmet foods, farm fresh produce, fresh fish and meats. From time to time, we
may experience difficulty in obtaining sufficient product allocations from a key
vendor. In addition, our key vendors may establish their own online retailing
efforts, which may impact our ability to get sufficient product allocations from
these vendors. Many of our key vendors also supply products to the retail
grocery industry and our online competitors. If we are unable to obtain
sufficient quantities of products from our key vendors to meet customer demand,
our net sales and results of operations would be materially adversely affected.
WE CURRENTLY OPERATE ONLY ONE DISTRIBUTION CENTER WHICH IS LOCATED IN THE SAN
FRANCISCO BAY AREA.
We currently operate only one distribution center, which is located in
Oakland, California and serves the San Francisco Bay Area. We do not expect to
begin operating a second distribution center until the second quarter of 2000.
Therefore, our business and operations would be materially adversely affected if
any of the following events affected our current distribution center or the San
Francisco Bay Area:
- prolonged power or equipment failures;
- disruptions in our web site, computer network, software and our order
fulfillment and delivery systems;
- disruptions in the transportation infrastructure including bridges,
tunnels and roads;
- refrigeration failures; or
- fires, floods, earthquakes or other disasters.
Since the San Francisco Bay Area is located in an earthquake-sensitive
area, we are particularly susceptible to the risk of damage to, or total
destruction of, our distribution center and the surrounding transportation
infrastructure caused by earthquakes. We cannot assure you that we are
adequately insured to cover the total amount of any losses caused by any of the
above events. In addition, we are not insured against any losses due to
interruptions in our business due to damage to or destruction of our
distribution center caused by earthquakes or to major transportation
infrastructure disruptions or other events that do not occur on our premises.
WE MAY NEED SUBSTANTIAL ADDITIONAL CAPITAL TO FUND OUR PLANNED EXPANSION, AND WE
CANNOT BE SURE THAT ADDITIONAL FINANCING WILL BE AVAILABLE.
We require substantial amounts of working capital to fund our business. In
addition, the opening of new distribution centers and the continued development
of our order fulfillment and delivery systems requires significant amounts of
capital. Since our inception, we have experienced negative cash flow from
operations and expect to experience significant negative cash flow from
operations for the foreseeable future. In the past, we have funded our operating
losses and capital expenditures through proceeds from equity offerings, debt
financing and equipment leases. In addition to the proceeds from this offering,
we expect to require substantial additional capital to fund our expansion
program and operating expenses. We currently anticipate that the net proceeds of
this offering, together with our available funds, will be sufficient to meet our
anticipated needs for working capital and capital expenditures through the next
12 months. In July 1999, we entered into an agreement
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<PAGE> 11
with Bechtel for the construction of up to 26 additional distribution centers
over the next three years. Although the Company has no specific capital
commitment under this agreement, our expenditures under the contract are
estimated to be approximately $1.0 billion. Our future capital needs will be
highly dependent on the number of additional distribution centers we open, the
timing of openings and the success of our facilities once they are launched.
Therefore, we may need to raise additional capital to fund our planned
expansion. We cannot be certain that additional financing will be available to
us on favorable terms when required, or at all. If we are unable to obtain
sufficient additional capital when needed, we could be forced to alter our
business strategy, delay or abandon some of our expansion plans or sell assets.
Any of these events would have a material adverse effect on our business,
financial condition and our ability to reduce losses or generate profits. In
addition, if we raise additional funds through the issuance of equity,
equity-linked or debt securities, those securities may have rights, preferences
or privileges senior to those of the rights of our common stock and our
stockholders may experience additional dilution.
OUR LIMITED OPERATING HISTORY MAKES FINANCIAL FORECASTING DIFFICULT.
As a result of our limited operating history, it is difficult to accurately
forecast our revenue and we have no meaningful historical financial data upon
which to base planned operating expenses. We base our current and future expense
levels on our operating plans and estimates of future revenue, and our expenses
are dependent in large part upon our facilities and product costs. Sales and
operating results are difficult to forecast because they generally depend on the
growth of our customer base and the volume of the orders we receive, as well as
the mix of products sold. As a result, we may be unable to make accurate
financial forecasts and adjust our spending in a timely manner to compensate for
any unexpected revenue shortfall. This inability could cause our net losses in a
given quarter to be greater than expected and could cause a decline in the
trading price of our common stock.
OUR QUARTERLY OPERATING RESULTS ARE EXPECTED TO BE VOLATILE AND DIFFICULT TO
PREDICT BASED ON A NUMBER OF FACTORS THAT WILL ALSO AFFECT OUR LONG-TERM
PERFORMANCE.
We expect our quarterly operating results to fluctuate significantly in the
future based on a variety of factors. These factors are also expected to affect
our long-term performance. Some of these factors include the following:
- the timing of our expansion plans as we construct and begin to operate
new distribution centers in additional geographic markets;
- changes in pricing policies or our product and service offerings;
- increases in personnel, marketing and other operating expenses to support
our anticipated growth;
- our inability to obtain new customers or retain existing customers at
reasonable cost;
- our inability to manage our distribution and delivery operations to
handle significant increases in the number of customers and orders or to
overcome system or technology difficulties associated with these
increases;
- our inability to adequately maintain, upgrade and develop our Webstore,
our computer network or the systems that we use to process customer
orders and payments;
- competitive factors; and
- technical difficulties, system or web site downtime or Internet
brownouts.
In addition to these factors, our quarterly operating results are expected to
fluctuate based upon seasonal purchasing patterns of our customers and the mix
of groceries and other products sold by us.
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<PAGE> 12
Due to all of these factors, we expect our operating results to be volatile
and difficult to predict. As a result, quarter-to-quarter comparisons of our
operating results may not be good indicators of our future performance. In
addition, it is possible that in any future quarter our operating results could
be below the expectations of investors generally and any published reports or
analyses of Webvan. In that event, the price of our common stock could decline,
perhaps substantially.
IF WE EXPERIENCE PROBLEMS IN OUR DELIVERY OPERATIONS, OUR BUSINESS COULD BE
SERIOUSLY HARMED.
We use our own couriers to deliver products from our distribution center to
our local stations, and from the local stations to our customers. We are
therefore subject to the risks associated with our ability to provide delivery
services to meet our shipping needs, including potential labor activism or
employee strikes, inclement weather, disruptions in the transportation
infrastructure, including bridges, roads and traffic congestion. In addition,
our failure to deliver products to our customers in a timely and accurate manner
or to meet our targeted delivery times would harm our reputation and brand,
which would have a material adverse effect on our business and net sales.
OUR NET SALES WOULD BE HARMED IF OUR ONLINE SECURITY MEASURES FAIL.
Our relationships with our customers may be adversely affected if the
security measures that we use to protect their personal information, such as
credit card numbers, are ineffective. If, as a result, we lose many customers,
our net sales and results of operations would be harmed. We rely on security and
authentication technology to perform real-time credit card authorization and
verification with our bank. We cannot predict whether events or developments
will result in a compromise or breach of the technology we use to protect a
customer's personal information.
Furthermore, our computer servers may be vulnerable to computer viruses,
physical or electronic break-ins and similar disruptions. We may need to expend
significant additional capital and other resources to protect against a security
breach or to alleviate problems caused by any breaches. We cannot assure you
that we can prevent all security breaches, and any failure to do so could have a
material adverse effect on our reputation and results of operations.
THE LOSS OF THE SERVICES OF ONE OR MORE OF OUR KEY PERSONNEL, OR OUR FAILURE TO
ATTRACT, ASSIMILATE AND RETAIN OTHER HIGHLY QUALIFIED PERSONNEL IN THE FUTURE
WOULD SERIOUSLY HARM OUR BUSINESS.
The loss of the services of one or more of our key personnel could
seriously harm our business. We depend on the continued services and performance
of our senior management and other key personnel, particularly Louis H. Borders,
our founder, President and Chief Executive Officer. Our future success also
depends upon the continued service of our other executive officers and other key
software development, merchandising, marketing and support personnel. None of
our officers or key employees are bound by an employment agreement and our
relationships with these officers and key employees are at will. We currently
hold a "key person" life insurance policy in the amount of $2.0 million for Mr.
Borders, which expires in January 2000. However, this policy would not be
sufficient to compensate for the loss of the services of Mr. Borders.
Additionally, there are low levels of unemployment in the San Francisco Bay Area
and in many of the regions in which we plan to operate. These low levels of
unemployment have led to pressure on wage rates, which can make it more
difficult and costly for us to attract and retain qualified employees. The loss
of key personnel, or the failure to attract additional personnel, could have a
material adverse effect on our business, results of operations and performance
in specific geographic markets.
WE MAY NEED TO CHANGE THE MANNER IN WHICH WE CONDUCT OUR BUSINESS IF GOVERNMENT
REGULATION OF THE INTERNET INCREASES.
The adoption or modification of laws or regulations relating to the
Internet could adversely affect the manner in which we currently conduct our
business. In addition, the growth and development of
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<PAGE> 13
the market for online commerce may lead to more stringent consumer protection
laws which may impose additional burdens on us. Laws and regulations directly
applicable to communications or commerce over the Internet are becoming more
prevalent. The United States government recently enacted Internet laws regarding
privacy, copyrights, taxation and the transmission of sexually explicit
material. The law of the Internet, however, remains largely unsettled, even in
areas where there has been some legislative action. It may take years to
determine whether and how existing laws such as those governing intellectual
property, privacy, libel and taxation apply to the Internet. If we are required
to comply with new regulations or new interpretations of existing regulations,
this compliance could cause us to incur additional expenses or alter our
business model.
WE MAY INCUR SIGNIFICANT COSTS OR EXPERIENCE PRODUCT AVAILABILITY DELAYS IN
COMPLYING WITH REGULATIONS APPLICABLE TO THE SALE OF FOOD PRODUCTS.
As of the date of this prospectus, we are not subject to regulation by the
United States Department of Agriculture, or USDA. Whether the handling of food
items in our distribution facility, such as meat and fish, will subject us to
USDA regulation in the future will depend on several factors, including whether
we sell food products on a wholesale basis or whether we obtain food products
from non-USDA inspected facilities. Although we have designed our food handling
operations to comply with USDA regulations, we cannot assure you that the USDA
will not require changes to our food handling operations. We will also be
required to comply with local health regulations concerning the preparation and
packaging of our prepared meals and other food items. Any applicable federal,
state or local regulations may cause us to incur substantial compliance costs or
delay the availability of a number of items at one or more of our distribution
centers. In addition, any inquiry or investigation from a food regulatory
authority could have a negative impact on our reputation. Any of these events
could have a material adverse effect on our business and expansion plans and
could cause us to lose customers.
WE MAY NOT BE ABLE TO OBTAIN REQUIRED LICENSES OR PERMITS FOR THE SALE OF
ALCOHOL AND TOBACCO PRODUCTS IN A COST-EFFECTIVE MANNER OR AT ALL.
We will be required to obtain state licenses and permits for the sale of
alcohol and tobacco products in each location in which we seek to open a
distribution center. We cannot assure you that we will be able to obtain any
required permits or licenses in a timely manner, or at all. We may be forced to
incur substantial costs and experience significant delays in obtaining these
permits or licenses. In addition, the United States Congress is considering
enacting legislation which would restrict the interstate sale of alcoholic
beverages over the Internet. Changes to existing laws or our inability to obtain
required permits or licenses could prevent us from selling alcohol or tobacco
products in one or more of our geographic markets. Any of these events could
substantially harm our net sales, gross profit and ability to attract and retain
customers.
IN THE FUTURE WE MAY FACE POTENTIAL PRODUCT LIABILITY CLAIMS.
We cannot assure you that the products that we deliver will be free from
contaminants. Grocery and other related products occasionally contain
contaminants due to inherent defects in the products or improper storage or
handling. If any of the products that we sell cause harm to any of our
customers, we could be subject to product liability lawsuits. If we are found
liable under a product liability claim, or even if we are required to defend
ourselves against such a claim, our reputation could suffer and customers may
substantially reduce their orders or stop ordering from us.
OUR NET SALES WOULD BE HARMED IF WE EXPERIENCE SIGNIFICANT CREDIT CARD FRAUD.
A failure to adequately control fraudulent credit card transactions would
harm our net sales and results of operations because we do not carry insurance
against this risk. We may suffer losses as a result of orders placed with
fraudulent credit card data even though the associated financial institution
approved payment of the orders. Under current credit card practices, we are
liable for fraudulent
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<PAGE> 14
credit card transactions because we do not obtain a cardholder's signature.
Because we have had an extremely short operating history, we cannot predict our
future levels of bad debt expense.
IF THE PROTECTION OF OUR TRADEMARKS AND PROPRIETARY RIGHTS IS INADEQUATE, OUR
BUSINESS MAY BE SERIOUSLY HARMED.
We regard patent rights, copyrights, service marks, trademarks, trade
secrets and similar intellectual property as important to our success. We rely
on patent, trademark and copyright law, trade secret protection and
confidentiality or license agreements with our employees, customers, partners
and others to protect our proprietary rights; however, the steps we take to
protect our proprietary rights may be inadequate. We currently have no patents.
We have filed, and from time to time expect to file, patent applications
directed to aspects of our proprietary technology. We cannot assure you that any
of these applications will be approved, that any issued patents will protect our
intellectual property or that any issued patents will not be challenged by third
parties. In addition, other parties may independently develop similar or
competing technology or design around any patents that may be issued to us. Our
failure to protect our proprietary rights could materially adversely affect our
business and competitive position.
INTELLECTUAL PROPERTY CLAIMS AGAINST US CAN BE COSTLY AND COULD RESULT IN THE
LOSS OF SIGNIFICANT RIGHTS.
Patent, trademark and other intellectual property rights are becoming
increasingly important to us and other e-commerce vendors. Many companies are
devoting significant resources to developing patents that could affect many
aspects of our business. Other parties may assert infringement or unfair
competition claims against us that could relate to any aspect of our
technologies, business processes or other intellectual property. We cannot
predict whether third parties will assert claims of infringement against us, the
subject matter of any of these claims, or whether these assertions or
prosecutions will harm our business. If we are forced to defend ourselves
against any of these claims, whether they are with or without merit or are
determined in our favor, then we may face costly litigation, diversion of
technical and management personnel, inability to use our current web site
technology, or product shipment delays. As a result of a dispute, we may have to
develop non-infringing technology or enter into royalty or licensing agreements.
These royalty or licensing agreements, if required, may be unavailable on terms
acceptable to us, or at all. If there is a successful claim of patent
infringement against us and we are unable to develop non-infringing technology
or license the infringed or similar technology on a timely basis, our business
and competitive position may be materially adversely affected.
ANY FAILURES OF, OR CAPACITY CONSTRAINTS IN, OUR SYSTEMS OR THE SYSTEMS OF THIRD
PARTIES ON WHICH WE RELY COULD ADVERSELY AFFECT OUR BUSINESS AND RESULT IN A
LOSS OF CUSTOMERS.
Our Webstore may experience slower response times, decreased traffic
capacity or disruptions in service for a variety of reasons including failures
or interruptions in our systems. In addition, our users depend on Internet
service providers, online service providers and other web site operators for
access to our Webstore. Many of them have experienced significant outages in the
past and could experience outages, delays and other difficulties due to system
failures unrelated to our systems. Moreover, the Internet infrastructure may not
be able to support continued growth in its use. Any of these problems could have
a material adverse effect on our business and could result in a loss of
customers.
Our communications hardware and certain of our other computer hardware
operations are located at the facilities of Exodus Communications, Inc. in Santa
Clara, California. The hardware for our warehouse management and materials
handling systems is maintained in our Oakland, California distribution center.
Fires, floods, earthquakes, power losses, telecommunications failures, break-ins
and similar events could damage these systems or cause them to fail completely.
Computer viruses, electronic break-ins or other similar disruptive problems
could also adversely affect our Webstore. Our business could be adversely
affected if our systems were affected by any of these occurrences.
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<PAGE> 15
Problems faced by Exodus, with the telecommunications network providers with
whom it contracts or with the systems by which it allocates capacity among its
customers, including Webvan, could adversely impact the customer shopping
experience and consequently, our business. Our insurance policies may not
adequately compensate us for any losses that may occur due to any failures or
interruptions in our systems.
WE MAY BE ADVERSELY IMPACTED IF THE SOFTWARE, COMPUTER TECHNOLOGY AND OTHER
SYSTEMS WE USE ARE NOT YEAR 2000 COMPLIANT.
Any failure of our material systems, our vendors' material systems or the
Internet to be year 2000 compliant would have material adverse consequences for
us. These consequences would include difficulties in operating our Webstore
effectively, taking product orders, making product deliveries or conducting
other fundamental parts of our business. We also depend on the year 2000
compliance of the computer systems and financial services used by consumers. We
are in the process of developing remediation and contingency plans as part of
our year 2000 initiative program, based on an inventory and risk assessment of
our critical assets and third party systems. We expect to complete this
assessment and the development of these plans by the end of October 1999. We
have not yet determined the costs of developing and implementing these plans,
and these costs may be material. A significant disruption in the ability of
consumers to reliably access the Internet, especially our Webstore, or to use
their credit cards would have an adverse effect on our operations and demand for
our services.
WE MAY BE SUBJECT TO LIABILITY FOR THE INTERNET CONTENT THAT WE PUBLISH.
As a publisher of online content, we face potential liability for
negligence, copyright, patent or trademark infringement, or other claims based
on the nature and content of materials that we publish or distribute. If we face
liability, particularly liability that is not covered by our insurance or is in
excess of our insurance coverage, then our reputation and our business may
suffer. In the past, plaintiffs have brought these types of claims and sometimes
successfully litigated them against online services. We cannot assure you that
we are adequately insured to cover claims of these types or to indemnify us for
all liability that may be imposed on us.
OUR OFFICERS AND DIRECTORS AND THEIR AFFILIATES WILL EXERCISE SIGNIFICANT
CONTROL OVER WEBVAN.
As of June 30, 1999 and giving effect to the issuance of 21,670,605 shares
of Series D preferred stock in July and August 1999, our executive officers and
directors and their immediate family members and affiliated venture capital
funds beneficially owned, in the aggregate, approximately 60.2% of our
outstanding common stock, assuming conversion of all preferred stock into common
stock. As a result, these stockholders are able to exercise significant control
over all matters requiring stockholder approval, including the election of
directors and approval of significant corporate transactions, which could delay
or prevent someone from acquiring or merging with us. See "Principal
Stockholders".
IT MAY BE DIFFICULT FOR A THIRD PARTY TO ACQUIRE US DUE TO ANTI-TAKEOVER
PROVISIONS.
Our charter documents authorize 10,000,000 shares of undesignated preferred
stock, create a classified board of directors, eliminate the right of
stockholders to call a special meeting of stockholders, require stockholders to
comply with advance notice requirements before raising a matter at a meeting of
stockholders and eliminate the ability of stockholders to take action by written
consent. As a Delaware corporation, we are also subject to the Delaware
antitakeover statute contained in Section 203 of the Delaware General
Corporation Law. These provisions could make it more difficult for a third party
to acquire us, even if doing so would be beneficial to our stockholders. See
"Description of Capital Stock".
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<PAGE> 16
OUR STOCK PRICE COULD BE VOLATILE AND COULD DECLINE FOLLOWING THIS OFFERING.
The stock market has experienced significant price and volume fluctuations,
and the market prices of technology companies, particularly consumer-oriented
Internet-related companies, have been highly volatile. You may not be able to
resell your shares at or above the initial public offering price. The price at
which our common stock will trade after this offering is likely to be volatile
and may fluctuate substantially due to factors such as:
- our historical and anticipated quarterly and annual operating results;
- variations between our actual results and the expectations of investors
or published reports or analyses of Webvan;
- announcements by us or others and developments affecting our business,
systems or expansion plans; and
- conditions and trends in e-commerce industries, particularly the online
grocery industry.
In the past, securities class action litigation has often been instituted
against companies following periods of volatility in the market price of their
securities. This type of litigation could result in substantial costs and a
diversion of management's attention and resources.
FUTURE SALES OF OUR COMMON STOCK MAY CAUSE OUR STOCK PRICE TO DECLINE.
If our stockholders sell substantial amounts of our common stock in the
public market following this offering, the market price of our common stock
could decline. Based on shares outstanding as of June 30, 1999, upon completion
of this offering we will have outstanding 317,453,839 shares of common stock,
assuming no exercise of the underwriters' over-allotment option. Of these
shares, the 25,000,000 shares of our common stock sold in this offering will be
freely tradeable, without restriction, in the public market. Our directors,
officers and securityholders have entered into lock-up agreements in connection
with this offering generally providing that they will not offer, sell, contract
to sell or grant any option to purchase or otherwise dispose of our common stock
or any securities exercisable for or convertible into our common stock without
the prior written consent of Goldman, Sachs & Co. According to the lock-up
agreements, at any time beginning on the third day following the public release
of our earnings for the year ended December 31, 1999, each stockholder may
offer, sell, transfer, assign, pledge or otherwise dispose of up to 15% of his
or her shares owned as of December 31, 1999; and at any time beginning on the
48th day following the public release of our earnings for the year ended
December 31, 1999, each stockholder may offer, sell, transfer, assign, pledge or
otherwise dispose of an additional 25% of his or her shares owned as of December
31, 1999. The lock-up restrictions will expire as to the remaining shares on the
date which is 180 days after the date of this prospectus.
In addition, approximately 42.8 million shares under outstanding options
and warrants and approximately 9.7 million shares reserved for future issuance
under our stock option plan as of June 30, 1999 will be eligible for sale in the
public market subject to vesting, the expiration of lock-up agreements and
restrictions imposed under Rules 144 and 701 under the Securities Act. See
"Shares Eligible for Future Sale".
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<PAGE> 17
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements that are subject to a
number of risks and uncertainties, many of which are beyond our control. All
statements, other than statements of historical facts included in this
prospectus, regarding our strategy, future operations, financial position,
estimated revenues, projected costs, prospects, plans and objectives of
management are forward-looking statements. When used in this prospectus, the
words "will", "believe", "anticipate", "intend", "estimate", "expect", "project"
and similar expressions are intended to identify forward-looking statements,
although not all forward-looking statements contain such identifying words. All
forward-looking statements speak only as of the date of this prospectus. You
should not place undue reliance on these forward-looking statements. Although we
believe that our plans, intentions and expectations reflected in or suggested by
the forward-looking statements we make in this prospectus are reasonable, we can
give no assurance that these plans, intentions or expectations will be achieved.
We disclose important factors that could cause our actual results to differ
materially from our expectations under "Risk Factors" and elsewhere in this
prospectus. These cautionary statements qualify all forward-looking statements
attributable to us or persons acting on our behalf.
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<PAGE> 18
USE OF PROCEEDS
The net proceeds we receive from the sale of the common stock offered
hereby will be approximately $280.6 million, based on an assumed initial public
offering price of $12.00 per share and after deducting the underwriters'
discounts and commissions and expenses payable by us estimated at $1.4 million.
We expect to use the net proceeds from this offering principally to fund the
construction of and equipment for distribution centers in other geographic
markets at an estimated cost of $25.0 million to $35.0 million per distribution
center. We also expect to use the proceeds for general corporate purposes,
including working capital and funding of our expected operating losses. We may
use a portion of the net proceeds to pursue possible acquisitions of
complementary businesses, technologies or products; however, we have no present
understandings, commitments or agreements with respect to any such transactions,
and we have not identified the nature of any such businesses, technologies or
products. Pending use of such net proceeds for the above purposes, we intend to
invest such funds in short-term interest-bearing investment-grade securities.
DIVIDEND POLICY
We have not paid any dividends since our inception and do not intend to pay
any dividends on our capital stock in the foreseeable future.
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<PAGE> 19
CAPITALIZATION
The following table sets forth our cash and equivalents and capitalization
as of June 30, 1999:
- on an actual basis;
- on a pro forma basis after giving effect to the closing of the sale of an
aggregate of 21,670,605 shares of our Series D-2 preferred stock in July
and August 1999 for approximately $275.0 million and the conversion of
each outstanding share of preferred stock into one share of common stock
upon the closing of this offering; and
- on a pro forma basis as adjusted for this offering at an assumed initial
public offering price of $12.00 per share and application of the net
proceeds therefrom. You should read this table in conjunction with our
consolidated financial statements and the notes to those statements
appearing elsewhere in this prospectus.
<TABLE>
<CAPTION>
JUNE 30, 1999
------------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
-------- --------- -----------
(IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C> <C>
Cash and equivalents........................................ $ 21,836 $296,736 $577,336
======== ======== ========
Lease obligations, net of current portion................... 2,137 2,137 2,137
-------- -------- --------
Long term debt, net of current portion...................... 11,811 11,811 11,811
-------- -------- --------
Redeemable common stock..................................... 1,556 1,556 1,556
Shareholders' equity:
Convertible preferred stock:
Series A preferred stock, no par value; 112,635,168
shares authorized, actual, no shares authorized pro
forma and pro forma as adjusted; 112,635,168 shares
issued and outstanding, actual, no shares issued and
outstanding pro forma and pro forma as adjusted...... 10,759 -- --
Series B preferred stock, no par value; 41,814,000
shares authorized, actual, 2,700,696 shares
authorized pro forma, no shares authorized pro forma
as adjusted; 39,113,304 shares issued and
outstanding, actual, no shares issued and outstanding
pro forma and pro forma as adjusted(1)............... 34,834 -- --
Series C preferred stock, no par value; 34,601,616
shares authorized, actual, 2,260,416 shares
authorized pro forma, no shares authorized pro forma
as adjusted; 32,341,200 shares issued and
outstanding, actual, no shares issued and outstanding
pro forma and pro forma as adjusted(2)............... 72,776 -- --
Series D preferred stock, no par value; no shares
authorized, actual, 29,550,831 shares authorized, pro
forma, no shares authorized pro forma as adjusted; no
shares issued and outstanding, actual, pro forma and
pro forma as adjusted(3)............................. -- -- --
Preferred stock; no shares authorized, actual and pro
forma, 10,000,000 shares authorized pro forma as
adjusted; no shares issued and outstanding actual, pro
forma and pro forma as adjusted........................ -- -- --
Common stock; 450,000,000 shares authorized, actual and
pro forma, 800,000,000 shares authorized pro forma as
adjusted; 81,908,562 shares issued and outstanding,
actual, 287,668,839 shares issued and outstanding pro
forma, 312,668,839 shares issued and outstanding pro
forma as adjusted(4)................................... 31,251 424,520 705,120
Additional paid-in capital................................ 3,829 3,829 3,829
Deferred compensation....................................... (23,790) (23,790) (23,790)
Accumulated deficit......................................... (49,978) (49,978) (49,978)
Accumulated other comprehensive income (loss)............... (55) (55) (55)
-------- -------- --------
Total shareholders' equity........................ 79,626 354,526 635,126
-------- -------- --------
Total capitalization.............................. $ 95,130 $370,030 $650,630
======== ======== ========
</TABLE>
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<PAGE> 20
- -------------------------
(1) Excludes warrants to purchase an aggregate of 2,397,804 shares of Series B
preferred stock at a weighted average exercise price of $0.91 per share.
(2) Excludes (a) options to purchase 430,416 shares of Series C preferred stock
at an exercise price of $2.32 per share as of March 31, 1999 and (b) a
warrant to purchase up to 1,800,000 shares of our Series C preferred stock
at an exercise price of $2.32 per share issued in June 1999.
(3) On July 19, 1999, we authorized 25,610,718 shares of Series D-1 preferred
stock and 25,610,718 shares of Series D-2 preferred stock. In July and
August 1999, we issued 21,670,605 shares of Series D-2 preferred stock. Each
of these shares will automatically convert into one share of common stock
immediately prior to the closing of this offering. No shares of Series D-1
preferred stock are issued and outstanding, actual, pro forma and pro forma
as adjusted.
(4) Excludes 50,150,910 shares of common stock reserved for issuance under our
stock option plan, of which 40,433,688 shares at a weighted average exercise
price of $0.27 per share were subject to outstanding options as of June 30,
1999.
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<PAGE> 21
DILUTION
Our pro forma net tangible book value as of June 30, 1999 was approximately
$354.4 million or $1.21 per share. Our pro forma net tangible book value per
share represents the amount of our total tangible assets reduced by the amount
of our total liabilities and divided by the total number of shares of common
stock outstanding including redeemable common stock and after giving effect to
the issuance of 21,670,605 shares of Series D preferred stock in July and August
1999 and the automatic conversion of all outstanding shares of our preferred
stock. Dilution per share represents the difference between the amount per share
paid by investors of shares of common stock in this offering and the pro forma
net tangible book value per share of common stock immediately after the
completion of this offering. After giving effect to the sale of the 25,000,000
shares of common stock offered by us at an assumed initial public offering price
of $12.00 per share, and after deducting the underwriting discount and estimated
offering expenses payable by us, our pro forma as adjusted net tangible book
value at June 30, 1999 would have been approximately $635.0 million or $2.03 per
share of common stock. This represents an immediate increase in net tangible
book value of $0.82 per share to existing stockholders and an immediate dilution
of $9.97 per share to new investors of common stock. The following table
illustrates this dilution on a per share basis:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............. $12.00
Pro forma net tangible book value per share as of June 30,
1999................................................... $1.21
Increase per share attributable to new investors.......... 0.82
-----
Pro forma as adjusted net tangible book value per share
after the offering........................................ 2.03
------
Dilution per share to new investors......................... $ 9.97
======
</TABLE>
The following table summarizes on a pro forma as adjusted basis after
giving effect to the offering, as of June 30, 1999, the differences between the
existing stockholders and new investors with respect to the number of shares of
common stock purchased from us, the total consideration paid to us and the
average price per share paid at an assumed initial public offering price of
$12.00 per share, and after deducting the underwriting discount and estimated
offering expenses payable by us:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
---------------------- ----------------------- PRICE PER
NUMBER PERCENT AMOUNT PERCENT SHARE
----------- ------- ------------ ------- ---------
<S> <C> <C> <C> <C> <C>
Existing stockholders......... 292,453,839 92.1% $429,464,000 58.9% $ 1.47
New investors................. 25,000,000 7.9 300,000,000 41.1 $12.00
----------- ----- ------------ -----
Totals........................ 317,453,839 100.0% $729,464,000 100.0%
=========== ===== ============ =====
</TABLE>
In the preceding tables, the shares of common stock outstanding exclude:
- 50,150,910 shares of common stock reserved for issuance under our
stock option plans, of which 40,433,688 shares at a weighted average
exercise price of $0.27 were subject to outstanding options as of June
30, 1999, and
- 2,397,804 shares of common stock issuable upon exercise of outstanding
warrants at a weighted average exercise price of $0.91 as of June 30,
1999.
To the extent outstanding options and warrants are exercised, there will be
further dilution to new investors.
19
<PAGE> 22
SELECTED CONSOLIDATED FINANCIAL DATA
You should read the following selected consolidated financial data in
conjunction with our consolidated financial statements and the notes to those
statements and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" appearing elsewhere in this prospectus. The consolidated
statement of operations data for the period from inception through December 31,
1997 and for the year ended December 31, 1998, and the consolidated balance
sheet data as of December 31, 1997 and 1998 are derived from, and are qualified
by reference to, the audited consolidated financial statements and the notes to
those statements included in this prospectus that have been audited by Deloitte
& Touche LLP. The consolidated statement of operations data for the six months
ended June 30, 1998 and 1999, and the consolidated balance sheet data at June
30, 1999 are derived from unaudited consolidated financial statements that
include, in the opinion of our management, all adjustments, consisting of only
normal, recurring adjustments, necessary for a fair presentation of the
information set forth therein. The consolidated results of operations for the
six months ended June 30, 1999 are not necessarily indicative of future results.
<TABLE>
<CAPTION>
PERIOD FROM
DECEMBER 17,
1996 SIX MONTHS
(INCEPTION) TO YEAR ENDED ENDED JUNE 30,
DECEMBER 31, DECEMBER 31, ---------------------------
1997 1998 1998 1999
CONSOLIDATED STATEMENTS OF --------------- ------------ ----------- ------------
OPERATIONS DATA: (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<S> <C> <C> <C> <C>
Net sales.......................................... $ -- $ -- $ -- $ 395
Cost of goods sold................................. -- -- -- 419
----------- ------------ ----------- ------------
Gross profit (loss).............................. -- -- -- (24)
Operating expenses:
Software development............................. 244 3,010 765 6,308
General and administrative....................... 2,612 8,825 2,739 25,296
Amortization of deferred stock compensation...... -- 1,060 43 3,953
----------- ------------ ----------- ------------
Total operating expenses....................... 2,856 12,895 3,547 35,557
----------- ------------ ----------- ------------
Interest income.................................... 85 923 285 1,641
Interest expense................................... 69 32 -- 1,194
----------- ------------ ----------- ------------
Net interest income.............................. 16 891 285 447
----------- ------------ ----------- ------------
Net loss........................................... $ (2,840) $ (12,004) $ (3,262) $ (35,134)
=========== ============ =========== ============
Basic and diluted net loss per share............... $ (0.08) $ (0.18) $ (0.05) $ (0.48)
=========== ============ =========== ============
Shares used in calculating basic and diluted net
loss per share................................... 37,406,785 67,114,048 65,075,326 73,280,388
=========== ============ =========== ============
Pro forma basic and diluted net loss per
share(1)......................................... $ (0.06) $ (0.14)
============ ============
Shares used in calculating pro forma basic and
diluted net loss per share(1).................... 201,978,419 253,743,194
============ ============
OTHER OPERATING DATA:
Capital expenditures............................... $ 265 $ 32,669 $ 4,283 $ 25,948
Depreciation and amortization...................... 57 1,323 93 6,626
</TABLE>
- ------------------------
(1) See Note 1 of Notes to Consolidated Financial Statements.
The following table provides a consolidated summary of our balance sheet.
The Pro Forma column reflects the closing of the sale of 21,670,605 shares of
our Series D-2 preferred stock in July and August 1999 for approximately $275.0
million and the conversion of all outstanding shares of preferred stock into
common stock immediately prior to the closing of this offering. The Pro Forma As
Adjusted column reflects the Pro Forma adjustments as well as the issuance of
the common stock in this offering at an assumed initial public offering price of
$12.00 per share.
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30, 1999
---------------- ------------------------------------
PRO FORMA
1997 1998 ACTUAL PRO FORMA AS ADJUSTED
------ ------- -------- --------- -----------
<S> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and equivalents....................................... $2,935 $13,839 $ 21,836 $296,736 $577,336
Working capital............................................ 7,693 10,923 31,773 306,673 587,273
Total assets............................................... 8,279 60,009 112,429 387,329 667,929
Long-term liabilities...................................... 17 14,337 14,216 14,216 14,216
Total shareholder's equity................................. 7,972 33,612 79,626 354,526 635,126
</TABLE>
20
<PAGE> 23
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Except for historical information, the discussion in this prospectus
contains forward-looking statements that involve risks and uncertainties.
Webvan's actual results could differ materially from those discussed in this
prospectus. Factors that could cause or contribute to these differences include,
but are not limited to, the risks discussed in the section entitled "Risk
Factors" in this prospectus.
OVERVIEW
Webvan is an Internet retailer offering same-day delivery of consumer
products through an innovative proprietary business design which integrates our
Webstore, distribution center and delivery system. Our current product offerings
are principally focused on food, non-prescription drug products and general
merchandise.
We were incorporated in December 1996 as Intelligent Systems for Retail,
Inc. In April 1999, we changed our name to Webvan Group, Inc. We commenced our
grocery delivery service in May 1999 on a test basis to approximately 1,100
persons and commercially launched our Webstore on June 2, 1999. For the period
from inception to June 1999, our primary activities consisted of raising
capital, recruiting and training employees, developing our business strategy,
designing a business system to implement our strategy, constructing and
equipping our first distribution center and developing relationships with
vendors. Since launching our service, we have continued these operating
activities and have also focused on building sales momentum, establishing
additional vendor relationships, promoting our brand name and enhancing our
distribution, delivery and customer service operations. Our cost of sales and
operating expenses have increased significantly since inception and are expected
to continue to increase. This trend reflects the costs associated with our
formation as well as increased efforts to promote the Webvan brand, build market
awareness, attract new customers, recruit personnel, build our operating systems
and develop our Webstore and associated systems that we use to process
customers' orders and payments.
Our prospects must be considered in light of the risks, expenses and
difficulties frequently encountered by companies in their early stage of
development, particularly companies in new and rapidly evolving markets. These
risks for Webvan include an unproven business system and our ability to
successfully manage our growth. To address these risks, we must:
- develop and increase our customer base;
- implement and successfully execute our business and marketing strategy;
- continue to develop, test, increase the capacity of and enhance our
Webstore, order fulfillment, transaction processing and delivery systems;
- respond to competitive developments; and
- attract, retain and motivate quality personnel.
Since our inception, we have incurred significant losses, and as of June
30, 1999, we had an accumulated deficit of $50.0 million. Our initial
distribution center in Oakland, California is currently operating at
substantially less than the capacity for which it was designed. We believe that
our success will depend on our ability to:
- substantially increase the number of customers and the number of orders
placed by our customers;
- ensure that our technologies and systems function properly at increased
order volumes;
- realize repeat orders from a significant number of customers;
- achieve favorable gross margins; and
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<PAGE> 24
- rapidly expand and build out distribution centers in new markets.
To meet these challenges, we intend to continue to invest heavily in
marketing and promotion, distribution facilities and equipment, technology and
personnel. As a result, we expect to incur substantial operating losses for the
foreseeable future and the rate at which such losses will be incurred may
increase significantly from current levels. In addition, our limited operating
history makes the prediction of future results of operations difficult, and
accordingly, we cannot assure you that we will achieve or sustain revenue growth
or profitability.
In connection with the grant of stock options during 1998 and the first six
months of 1999, we recorded deferred compensation of $11.8 million and $17.0
million and compensation expense of $1.1 million and $4.0 million, respectively,
representing the difference between the deemed fair value and the option
exercise price as determined by our Board of Directors on the date of grant. In
connection with the grant of certain options in July and August 1999, we
recorded additional deferred compensation of $41.4 million. The aggregate
deferred compensation of $70.3 million is being amortized over the four-year
vesting period of the underlying options and will result in compensation expense
of approximately $8.0 million in the quarter ended September 30, 1999.
In connection with the sale of 150,000 shares of common stock to Yahoo!
Inc. in July 1999 at a price of $3.33 per share, we will record expense based on
changes in the fair value of the stock using an option pricing model and such
expense will be charged as Mr. Koogle serves as a director of Webvan.
In connection with the warrant issued to Bechtel to purchase 1,800,000
shares of Series C preferred stock at an exercise price of $2.32 per share, the
cost of services provided by Bechtel will include recognition of the changes in
the fair value of the warrant using an option pricing model and following the
applicable accounting guidelines in Emerging Issues Task Force Issue No. 96-18,
or EITF 96-18, "Accounting for Equity Instruments That are Issued to Other Than
Employees for Acquiring, or in Conjunction with Selling, Goods or Services".
Under EITF 96-18, the measurement date for the warrant is July 8, 1999 as that
is the performance commitment date. As of July 8, 1999, we will capitalize the
fair value of the warrant related to 150,000 exercisable shares and no amount
will be capitalized as of that date for the fair value of the warrant related to
the non-exercisable shares, as eventual exercisability is dependent on Bechtel's
performance. The capitalized amount will be amortized over the useful life of
the distribution centers developed by Bechtel. If and when the warrant becomes
exercisable as to additional shares, based on Bechtel's performance, we will
capitalize additional cost based on the then fair value of the warrant related
to the additional exercisable shares.
RESULTS OF OPERATIONS
FISCAL YEARS ENDED DECEMBER 31, 1997 AND 1998
NET SALES
Net sales are comprised of the price of groceries and other products we
sell, net of returns and credits. We commenced our grocery delivery service in
May 1999 and commercially launched our Webstore in June 1999. We therefore did
not generate any net sales in 1997 or 1998. We recognize revenue at the time our
products are delivered to customers.
COST OF GOODS SOLD
Cost of goods sold includes the cost of the groceries and other products we
sell as well as payroll and related expenses for the preparation of our home
replacement meals. We did not have any cost of goods sold in 1997 or 1998.
22
<PAGE> 25
OPERATING EXPENSES
SOFTWARE DEVELOPMENT. Software development expenses include the payroll and
related costs for the team of software developers directly involved in
programming our computer systems. Software development expenses increased to
$3.0 million in 1998 from $0.2 million for the period from inception through
1997. This increase was primarily attributable to increased staffing,
consultants and associated costs related to creating and enhancing the features
and functionality of our Webstore, and implementing our order fulfillment,
inventory, distribution, accounting and delivery systems used to process
customer orders. Certain costs have been capitalized in accordance with
Statement of Position 98-1 "Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use". We believe that continued investment in
software development is critical to attaining our strategic objectives and, as a
result, expect software development expenses to increase significantly in future
quarters.
GENERAL AND ADMINISTRATIVE. General and administrative expenses include
costs related to fulfillment and delivery of products, real estate, technology
operations, equipment leases, merchandising, finance, marketing, and
professional services. General and administrative expenses increased to $8.8
million in 1998 from $2.6 million for the period from inception through 1997.
The payroll expense for general and administrative functions increased by $3.2
million due to an increase in headcount. Consulting and professional expenses
increased by $0.8 million, primarily related to marketing. In addition, rent and
facility charges increased by $1.1 million due to the addition of corporate
office space and the distribution center in Oakland, California. We expect
general and administrative expenses to increase as we expand our staff and incur
additional costs to support the expected growth of our business.
INTEREST INCOME (EXPENSE), NET
Interest income (expense), net consists of earnings on our cash and cash
equivalents and interest payments on our loan and lease agreements. Net interest
income increased to $891,000 in 1998 from $16,000 in the period from inception
through 1997. This increase was primarily attributable to earnings on higher
average cash and cash equivalent balances during 1998.
SIX MONTHS ENDED JUNE 30, 1998 AND 1999
NET SALES
We commenced our grocery delivery service in May 1999 on a test basis to
approximately 1,100 customers and commercially launched our Webstore in June
1999. We did not have any net sales in the six months ended June 30, 1998. We
had net sales of $395,000 in the six months ended June 30, 1999.
COST OF GOODS SOLD
We did not have any cost of goods sold in the six months ended June 30,
1998. Our cost of goods sold was $419,000 in the six months ended June 30, 1999.
OPERATING EXPENSES
SOFTWARE DEVELOPMENT. Software development expenses increased to $6.3
million in the six months ended June 30, 1999 from $0.8 million in the six
months ended June 30, 1998. This increase was primarily attributable to $1.9
million for increased staffing and $3.4 million for consultants related to
enhancing the features, content and functionality of our Webstore and increasing
the capacity of our order processing, distribution center and delivery systems.
GENERAL AND ADMINISTRATIVE. General and administrative expenses increased
to $25.3 million for the six months ended June 30, 1999 from $2.7 million for
the six months ended June 30, 1998.
23
<PAGE> 26
General and administrative expenses pertaining to our distribution center in the
six months ended June 30, 1999 totalled $9.9 million, as compared to zero in the
six months ended June 30, 1998. Payroll and related expenses increased by $8.2
million due to increased staffing at headquarters. Consulting and professional
fees related to logistical and marketing development increased by $1.3 million.
Rent and facility charges increased by $0.8 million due to additional corporate
office space.
INTEREST INCOME (EXPENSE) NET
Net interest income increased to $447,000 in the six months ended June 30,
1999 from $285,000 in the six months ended June 30, 1998 primarily due to
earnings on higher average cash and cash equivalent balances.
LIQUIDITY AND CAPITAL RESOURCES
Since inception, we have financed our operations primarily through private
sales of preferred stock which through June 30, 1999 totaled $118.3 million (net
of issuance costs). Net cash used in operating activities was $22.6 million in
the six months ended June 30, 1999, $2.2 million in the year ended December 31,
1998, and $2.4 million in the period from inception through 1997. Net cash used
in operating activities for each of these periods primarily consisted of net
losses as well as increases in prepaid expenses, partially offset by increases
in accounts payable, accrued liabilities and depreciation and amortization. The
significant increase in working capital during 1998 was primarily due to
proceeds from the sale of our preferred stock. Net cash used in investing
activities was $42.7 million in the six months ended June 30, 1999, $39.0
million in the year ended December 31, 1998, and $5.3 million in the period from
inception through December 31, 1997. Net cash used in investing activities for
each of these periods primarily consisted of leasehold improvements and
purchases of equipment and systems, including computer equipment and fixtures
and furniture. Net cash provided by financing activities was $73.3 million in
the six months ended June 30, 1999, $52.1 million in the year ended December 31,
1998, and $10.7 million in the period from inception through 1997. Net cash
provided by financing activities during the six months ended June 30, 1999 and
the year ended December 31, 1998 primarily consisted of proceeds from the
issuance of preferred stock of $72.8 million and $34.8 million, respectively. As
of June 30, 1999, we had $21.8 million of cash and equivalents.
In July 1999, we entered into a preferred stock purchase agreement whereby
we sold an aggregate of 21,670,605 shares of our Series D-2 preferred stock to
investors at a price of $12.69 per share for an aggregate purchase price of
approximately $275.0 million.
As of June 30, 1999, our principal commitments consisted of obligations of
approximately $18.2 million outstanding under capital leases and loans. As of
June 30, 1999, we had capital commitments of approximately $20.0 million
principally related to the construction of and equipment for our Atlanta,
Georgia distribution center. We anticipate capital expenditures of up to $150
million for the 12 months ending June 30, 2000. We anticipate a substantial
increase in our capital expenditures and lease commitments to support our
anticipated growth in operations, systems and personnel. The launch of each
distribution center will require us to commit to additional lease obligations
and to purchase equipment and install leasehold improvements.
In July 1999, we entered into an agreement with Bechtel for the
construction of up to 26 additional distribution centers over the next three
years. Although the Company has no specific capital commitment under this
agreement, our expenditures under the contract are estimated to be approximately
$1.0 billion.
We currently anticipate that the net proceeds of this offering, together
with our available funds, will be sufficient to meet our anticipated needs for
working capital and capital expenditures through the next 12 months. Our future
long-term capital needs will be highly dependent on the number of additional
distribution centers we open, the timing of these openings and the success of
these
24
<PAGE> 27
facilities once they are launched. Thus, any projections of future long-term
cash needs and cash flows are subject to substantial uncertainty. If the net
proceeds of this offering, together with our available funds and cash generated
from operations are insufficient to satisfy our long-term liquidity
requirements, we may seek to sell additional equity or debt securities, obtain a
line of credit or curtail our expansion plans. However, the terms of our
guaranty of our subsidiary's credit facility contain restrictions on our ability
to incur debt or issue equity securities. In addition, if we issue additional
securities to raise funds, those securities may have rights, preferences or
privileges senior to those of the rights of our common stock and our
stockholders may experience additional dilution. We cannot be certain that
additional financing will be available to us on favorable terms when required,
or at all.
YEAR 2000 COMPLIANCE
Many existing computer programs use only two digits to identify a year.
These programs were designed and developed without addressing the impact of the
upcoming change in the century. If not corrected, many computer software
applications could fail or create erroneous results by, at or beyond the year
2000. We use software, computer technology and other services internally
developed and provided by third-party vendors that may fail due to the year 2000
phenomenon. For example, we are dependent on the financial institutions involved
in processing our customers' credit card payments for Internet services and a
third party that hosts our servers. We are also dependent on telecommunications
vendors to maintain our communications network and suppliers to deliver products
to us.
Since inception, we have internally developed substantially all of the
systems for the operation of our web site. These systems include the software
used to provide our Webstore's search, customer interaction, and
transaction-processing and distribution functions, as well as monitoring and
back-up capabilities. Based upon our assessment to date, we believe that our
internally developed proprietary software is year 2000 compliant, but we cannot
assure you that unanticipated year 2000 problems will not occur.
We are currently assessing the year 2000 readiness of our third-party
supplied software, computer technology and other services, which include
software for use in our accounting, database and security systems. The failure
of any software or systems upon which we rely to be year 2000 compliant could
have a material negative impact on our corporate accounting functions and the
operation of our web site and distribution system. As part of the assessment of
the year 2000 compliance of these systems, we have sought assurances from these
vendors that their software, computer technology and other services are year
2000 compliant. Because this process was begun recently, we have not yet
received a material number of responses from these vendors. We intend to follow
up with any vendors who have not responded to our request in a timely manner. We
have also engaged a consulting firm to assess the year 2000 compliance of one of
our critical systems at a cost estimated at up to $1.0 million. To date, the
amounts we have spent in connection with our year 2000 assessment have been
immaterial. Based upon the results of all of our assessments, we are developing
a remediation plan with respect to third-party software, third-party vendors and
computer technology and services that may fail to be year 2000 compliant. We
expect to complete any required remediation by the end of October 1999. At this
time, the expenses associated with this assessment and remediation plan that may
be incurred in the future cannot be determined; therefore, we have not developed
a budget for these expenses.
The failure of our software and computer systems and of our third-party
suppliers to be year 2000 compliant would have a material adverse effect on us.
The year 2000 readiness of the general system necessary to support our
operations is difficult to assess. For instance, we depend on the integrity and
stability of the Internet to provide our services. We also depend on the year
2000 compliance of the computer systems and financial services used by
consumers. Thus, the system necessary to support our operations consists of a
network of computers and telecommunications systems located throughout the world
and operated by numerous unrelated entities and individuals, none of which has
the ability to control or manage the potential year 2000 issues that may impact
the entire system. Our ability to assess the reliability of this system is
limited and relies solely on generally available news
25
<PAGE> 28
reports, surveys and comparable industry data. Based on these sources, we
believe most entities and individuals that rely significantly on the Internet
are reviewing and attempting to remediate issues relating to year 2000
compliance, but it is not possible to predict whether these efforts will be
successful in reducing or eliminating the potential negative impact of year 2000
issues.
A significant disruption in the ability of consumers to reliably access the
Internet or portions of it or to use their credit cards would have an adverse
effect on demand for our services and would have a material adverse effect on
us. We will be developing a contingency plan based on the results of our year
2000 assessment and remediation efforts. The cost of developing and implementing
this plan could be material. A reasonable worst case year 2000 scenario would
involve a major failure of our material systems, our vendors' material systems
or the Internet to be year 2000 compliant, any of which could have material
adverse consequences for us. These consequences could include refrigeration
failures resulting in spoilage of perishable products and difficulties or
interruptions in operating our web site effectively, taking customer orders,
processing orders in our distribution center, making deliveries or conducting
other fundamental parts of our business.
NEW ACCOUNTING PRONOUNCEMENT
In June 1998, the FASB issued SFAS No. 133 "Accounting for Derivative
Instruments and Hedging Activities" which defines derivatives, requires that all
derivatives be carried at fair value, and provides for hedging accounting when
certain conditions are met. Webvan will adopt this statement for its fiscal year
ending December 31, 2001. Management has not fully assessed the implications of
adopting this new standard.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Webvan maintains a short-term investment portfolio primarily consisting of
corporate debt securities with maturities of thirteen months or less. These
available-for-sale securities are subject to interest rate risk and will rise
and fall in value if market interest rates change. The extent of this risk is
not quantifiable or predictable due to the variability of future interest rates.
Webvan does not expect any material loss with respect to its investment
portfolio.
Webvan's restricted cash balance is invested in certificates of deposit.
Accordingly, changes in market interest rates have no material effect on
Webvan's operating results, financial condition and cash flows. There is
inherent roll over risk on these certificates of deposit as they mature and are
renewed at current market rates. The extent of this risk is not quantifiable or
predictable due to the variability of future interest rates.
26
<PAGE> 29
The following table provides information about Webvan's investment
portfolio and restricted cash as of June 30, 1999, and presents principal cash
flows and related weighted averages interest rates by expected maturity dates.
<TABLE>
<CAPTION>
YEAR OF MATURITY TOTAL
----------------------------------------------- CARRYING
1999 2000 2001 2002 2003 VALUE
------- ------ ------ ------ ------ --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Cash and Equivalents........... $21,836 -- -- -- -- $21,836
Average interest rate........ 4.95% -- -- -- -- 4.95%
Corporate Debt Securities...... $14,289 $7,942 -- -- -- $22,231
Average interest rate........ 4.81% 5.29% -- -- -- 4.98%
Restricted Cash -- Certificates
of Deposit................... $ 3,453 -- -- -- -- $ 3,453
Average interest rate........ 4.52% -- -- -- -- 4.52%
Capital Lease Obligations...... $ 299 $ 669 $ 773 $ 734 $ 282 $ 2,758
Average fixed interest
rate...................... 15.75% 15.77% 15.81% 15.28% 13.81% 15.45%
Long-term Debt................. $ 1,476 $3,931 $4,570 $5,140 $ 55 $15,178
Average fixed interest
rate...................... 15.20% 15.20% 15.20% 15.20% 15.20% 15.20%
</TABLE>
Fair value approximates carrying value for the above financial instruments.
27
<PAGE> 30
BUSINESS
Webvan is an Internet retailer offering same-day delivery of consumer
products through an innovative proprietary business design that integrates our
Webstore, distribution center and delivery system. Our current product offerings
are principally focused on food, non-prescription drug products and general
merchandise.
INDUSTRY BACKGROUND
GROWTH OF THE INTERNET AND E-COMMERCE
The rapid growth of the Internet and e-commerce is revolutionizing the way
in which businesses and consumers communicate, share information and conduct
business. International Data Corporation estimates that there were 63 million
web users in the United States at the end of 1998 and anticipates this number
will grow to approximately 177 million users by the end of 2003. This growth in
Internet usage is being fueled by a number of factors, including:
- a large and growing installed base of personal computers in the workplace
and at home;
- advances in the performance and speed of personal computers and modems;
- improvements in network security, system and bandwidth;
- faster, easier and cheaper access to the Internet;
- proliferation of content and services being provided on the Internet; and
- consumers' growing level of comfort and experience with e-commerce.
The unique characteristics of the Internet create a number of advantages
for online retailers and have dramatically affected the manner in which
companies distribute goods and services. Specifically, online retailers use the
Internet to:
- provide consumers with a broad selection of products and services,
increased information and enhanced convenience;
- operate with reduced overhead costs and greater economies of scale;
- frequently adjust featured selections, editorial content and pricing,
providing significant merchandising flexibility;
- "display" a larger number of products than traditional retailers at lower
cost; and
- obtain demographic and behavioral data about customers, increasing
opportunities for direct marketing and personalized services.
The Internet provides a powerful and convenient means for consumers to
order products and services. As a result of the increased use of the Internet
and the benefits of online retailing, consumer spending on the Internet is
growing rapidly. International Data Corporation estimates that consumer
purchases of goods and services over the Internet in the U.S. will increase from
$12.4 billion in 1998 to $75.0 billion in 2002. In addition, Forrester Research
estimates that online grocery spending in the U.S. will grow from $235 million
in 1998 to $10.8 billion by 2003 which will represent only 2% of the total
market for grocery products in 2003.
TRADITIONAL GROCERY RETAILING
The U.S. grocery market is large, with retail supermarket sales equal to
approximately $449 billion in 1998, according to Progressive Grocer. In
addition, the market for prepared meals or "home meal replacements" is growing
rapidly and, according to ACNielsen, comprises an incremental $100 billion
segment of the food industry.
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<PAGE> 31
Many consumers find supermarket shopping to be a time-consuming and
inconvenient experience. Traditional store-based supermarkets face many
challenges in providing a satisfying shopping experience for consumers. Physical
space availability in stores limits the number of products supermarkets can
offer and reduces merchandising flexibility. This forces traditional store-based
supermarkets to limit their product selection to the most popular products,
further impairing customer selection. Traditional grocery retailers also face
significant costs associated with building and operating large brick and mortar
stores, including costs associated with personnel, real estate, construction,
store set-up, inventory and fixed assets. The challenges facing these
traditional retailers have created an opportunity for online grocery retailers
to provide a more compelling and cost-effective solution.
The Internet provides a medium that could significantly improve the
consumer grocery shopping experience. The Internet provides 24-hour shopping
convenience and the ability to monitor order and information accuracy, and
eliminates the need to wait in line. With an efficient business model, online
retailers will also be able to reduce labor, real estate and other operating
costs.
ONLINE GROCERY RETAILING
Consumers are increasingly seeking a grocery shopping solution which will
allow them to save time and effort without sacrificing the wide selection, high
quality and low cost they have come to expect from traditional supermarkets.
Attempting to capitalize on the benefits of the Internet, several companies,
including NetGrocer and Peapod, have begun offering a variety of grocery
products online. Many of these services charge membership, delivery or service
fees and often offer many of their goods at prices higher than those of
traditional supermarkets. In addition, many of these online grocery efforts only
offer a limited selection of products, do not offer frozen foods or perishables
and do not stock a wide range of high-end items such as wine, prepared meals and
specialty products. These online grocers generally do not offer same-day
delivery and guarantee delivery within narrow time parameters. Many of these
early online grocers currently lack a highly automated distribution and delivery
model which would enable rapid and efficient expansion on a national level. As a
result, these companies rely on manual systems to fill the orders they receive
over the Internet and often rely on third parties to deliver orders to their
customers.
THE WEBVAN SOLUTION
We provide a distinctive online shopping experience by offering customers a
broad selection of high-quality, competitively priced grocery and related
product offerings delivered directly and conveniently to their homes. Our
Webstore is designed to create a user-friendly, informative and personalized
shopping experience for customers while providing them with the time savings and
convenience of shopping online. We believe that our innovative business design
is the first solution to address the "last mile" problem of e-commerce
fulfillment by integrating a retail web site with an advanced distribution
center and delivery system which enable us to efficiently fill a high volume of
orders and deliver products to our customers on the same day. We also believe
that our significant capital investment in our direct-to-the-home delivery
system will make it difficult for traditional supermarkets and other online
grocers to duplicate this solution and offer similar benefits to consumers. Our
delivery channel also enables us to create brand awareness and customer loyalty
that we believe will help to strengthen our market position.
Our solution provides customers with the following key benefits:
- prices that are generally at or below everyday supermarket prices;
- a broad selection of high quality products;
- no membership or service fees and no delivery fees for orders over $50;
and
- same-day home delivery within a customer-selected 30-minute window.
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The principal components of our solution include our:
BROAD SELECTION OF HIGH QUALITY PRODUCTS AT COMPETITIVE PRICES. Our
scalable Webstore and distribution system are designed to enable us to offer
over 50,000 different items to our customers. As of June 30, 1999, we were
offering consumers a broad selection of over 15,000 grocery and specialty items
including:
- farm fresh produce;
- premium meats hand cut in our butcher shop;
- fresh fish and other seafood including live lobsters;
- a variety of chef-prepared meals;
- bakery items including specialty breads, bagels and pastries;
- non-perishable grocery items typically found in large supermarkets;
- non-prescription drug products and health and beauty items;
- specialty items including fine wines and premium quality cigars; and
- general merchandise such as office products and small appliances.
INTERACTIVE AND PERSONALIZED WEBSTORE. Our Webstore is an easy-to-use
online alternative to the traditional supermarket providing customers with
significant time savings and convenience. The Webstore is organized to provide
detailed product and nutritional information as well as interesting generalized
content. We believe our Webstore promotes customer loyalty by making the grocery
shopping experience easier for the consumer. Through our Webstore, consumers can
personalize their shopping experience by creating their own shopping lists and
by spending as much or as little time browsing and selecting products as is
appropriate for their specific needs. Customers may shop for products by:
- browsing clearly organized categories such as Produce, Meat and Seafood,
Prepared Food or Health and Beauty;
- going directly to a specific product by using our keyword search
technology; or
- accessing one of their personal shopping lists for immediate purchase or
editing.
Our Webstore utilizes a proprietary logistics technology to offer a
delivery window to the customer. A point-and-click time schedule will indicate
to the customer the 30-minute delivery slots which are currently available in
their specific location, based on the time of day, location and items purchased.
HIGHLY AUTOMATED DISTRIBUTION CENTER. Our technologically advanced
distribution center is highly automated and is designed to provide economies of
scale and create significant cost savings compared to traditional supermarkets
and existing online grocers. Our distribution center is designed to process
product volumes equivalent to approximately 18 supermarkets and allow for a
highly flexible inventory selection of over 50,000 SKUs. The distribution center
is designed to fill customer orders using proprietary software and labor-saving
automation technology such as carousels and conveyors which bring individual
products directly to the worker, compared to traditional warehouse designs which
require the worker to move throughout rows of products to fill individual
orders. Our first distribution center is located in Oakland, California and
serves the San Francisco Bay Area. We plan to open a second distribution center
in Atlanta, Georgia in the second quarter of 2000 and to further expand with
distribution centers in other key geographic markets.
Our distribution center is designed to accommodate both a wide product
selection as well the finest in product quality. The design allows for
appropriate storage temperatures for individual product categories including
produce, meats and frozen foods and enables us to offer specialty products such
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as premium wines and cigars. In addition to product storage, our distribution
center is designed with food preparation facilities which allow us to offer
chef-prepared meals, individually cut meats and fish and made-to-order fruit
baskets.
We have designed our initial distribution center in Oakland, California to
be a prototype that we can readily replicate in other locations. In July 1999,
we entered into an agreement with Bechtel Corporation for the construction of up
to 26 additional distribution centers for us on a turnkey basis over the next
three years.
EFFICIENT DELIVERY PROCESS. To facilitate rapid and predictable product
delivery to the customer's home, we utilize a hub-and-spoke fulfillment model
that is designed to minimize product and order handling. Customer orders are
packaged in individual plastic containers or "totes" at the distribution center,
or hub, and are transferred by temperature-controlled trucks to local stations,
or spokes. At the local stations, the totes are transferred to smaller
temperature-controlled vans for delivery to the home. Each distribution center
will supply shipments to up to 10 - 12 stations, varying by market, which will
be strategically positioned throughout a particular delivery region within an
approximate 50 mile radius of each distribution center. Our hub-and-spoke model,
centralized order fulfillment and decentralized delivery, combined with our
proprietary route and load planning technology allows for a highly efficient,
low cost fulfillment solution.
SUPERIOR CUSTOMER SERVICE. Our home delivery model also provides us with an
important opportunity to interact with our customers. Because of the high
frequency of grocery purchases, our couriers will be able to help continually
reinforce our brand with the customer. Our couriers are valued employees and are
incentivized with competitive salaries and stock options. Our couriers have also
been trained to answer questions about the service and handle routine service
issues directly and promptly at the customer residence. Each courier
communicates with the route planning and delivery scheduling systems throughout
the delivery process through the use of a wireless mobile field device. If the
customer is not satisfied with the products received, the courier is able to
initiate a transaction to replace items or credit the customer's bill. We
believe this approach helps develop couriers who are highly focused on customer
service and on creating long-term consumer relationships.
STRATEGY
Our objective is to be the leading online retailer offering same-day
delivery of consumer products. Our current product offerings are principally
focused on food, non-prescription drug products and general merchandise. The key
elements of our strategy are as follows:
BUILD BRAND AWARENESS AND MARKET SHARE. We intend to establish Webvan as
the leading brand for buying groceries and consumer goods over the Internet for
home delivery. Through our public relations programs, advertising campaigns,
promotional activities and media partnerships, we plan to generate brand
awareness and drive customer trials of our services. Our efforts will focus on
building credibility with customers and achieving market acceptance for our
services. We will pursue online and traditional media marketing strategies on a
regional basis to achieve these results.
DELIVER SUPERIOR CUSTOMER SERVICE AND OPERATING PERFORMANCE. We intend to
offer our customers a compelling shopping experience by delivering orders on an
accurate, timely and reliable basis. We will strive to continuously improve our
delivery and service performance to enhance the customer experience. We are
focused on building strong, lasting customer relationships which will drive
repeat purchases and higher average order sizes. By interacting directly with
customers on a regular basis and providing high quality service, we believe we
will promote customer loyalty and establish Webvan as the leading online
retailer and distribution company providing same-day delivery direct to the
customer.
LEVERAGE EFFICIENT BUSINESS DESIGN. We have designed a proprietary business
system which integrates our interactive Webstore, distribution center and
delivery system. This design addresses the "last mile" problem in Internet
commerce by providing a highly efficient means of delivering goods
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directly to the homes of consumers on the same day that an online order is
placed. Our software, automated distribution center and hub and spoke delivery
system were designed to accommodate a high volume of orders and to enable us to
offer over 50,000 different items to our customers. We believe that our highly
automated order fulfillment systems provide us with an advantage compared to our
online competitors which generally rely on manual order fulfillment systems.
REPLICATE DISTRIBUTION CENTER AND DELIVERY SYSTEM IN ADDITIONAL GEOGRAPHIC
MARKETS. We believe that our compelling product and service offerings combined
with the broad scope of the Internet present opportunities to expand to
additional locations in major cities in the U.S. Our distribution center and
delivery system are designed to be readily replicated and we plan to pursue an
aggressive expansion strategy by opening additional distribution centers in key
geographic markets beginning in the second quarter of 2000. In July 1999, we
entered into an agreement with Bechtel Corporation for the construction of up to
26 additional distribution centers over the next three years. We believe that
our alliance with Bechtel will enable us to more aggressively roll out
distribution centers in other markets by utilizing Bechtel's engineering,
design, procurement and construction expertise.
LEVERAGE DISTRIBUTION SYSTEM TO ENTER ADDITIONAL CONSUMER PRODUCT
CATEGORIES. We intend to use our distribution system to sell products in other
consumer product categories to achieve additional revenue opportunities. While
our initial product focus is on groceries, non-prescription drugs and general
merchandise, we plan to identify and pursue new product category opportunities.
We believe that our same-day distribution system can position us as a preferred
online provider for many consumer products that can be delivered to the home.
THE WEBVAN WEBSTORE
Our Webstore is a user-friendly, informative and personalized web site
which enables users to quickly and easily navigate and purchase from a wide
selection of items. The Webstore makes the shopping experience easy for the
customer by offering them multiple methods for shopping the site. The store
directory is divided into eleven intuitively organized categories and allows the
customer to quickly and efficiently find items. Once customers find the item
they want, they may add it to the shopping cart or may save it to a shopping
list. The shopping cart is always visible on the screen and instantly updates
and calculates the order total while the customer shops. Our Webstore promotes
brand loyalty and repeat purchases by providing a convenient, easy-to-use
experience that encourages customers to return frequently.
HOME PAGE. Our home page serves as the entry point and gives visitors a
glimpse of the wide selection available on the site. On our home page, customers
find weekly specials on brand name products, a clearly defined directory
structure and links that showcase specific products and areas of the site.
BROWSING. Our Webstore displays a store directory which allows visitors to
browse through all the categories of products Webvan offers. The categories are
intuitively organized by type of product and enable the user to drill down from
general to more specific categories, such as moving from produce to fruits to
bananas. The browsing tool also enables customers to see all products in a
particular category before making a selection, similar to scanning the shelves
of a neighborhood store. In addition, each item on the site has an image and
nutritional information attached to it, which further enhances the user
experience.
SEARCHING. Our Webstore contains an interactive, searchable database of
over 15,000 SKUs. The customer can search based on product type, brand name or
category. The search results page displays each relevant item, along with the
product category and subcategories.
CONTENT AND FEATURES. Webvan offers an array of content on the site to
enhance the user experience and encourage visitors to try new items. Our weekly
electronic magazine, Sensations, features special recipes, cooking tips,
features authored by food and health experts, and the
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opportunity to interact with culinary professionals. As we accumulate data, our
Webstore can be personalized to appeal to individual customer preferences and
buying habits.
PERSONALIZATION AND LISTS. Our Webstore enables a customer to personalize
their shopping experience. The site's shopping list feature allows customers to
create and retain personal shopping lists in their profiles. Multiple lists can
be saved for weekly shopping, specific events or special occasions. Once a list
has been created and saved, it can be retrieved and modified at any time,
enabling customers to shop and check out in a few minutes. We believe that the
personalization of a customer's shopping experience is an important element of
our value proposition and we intend to continue to enhance our personalization
services.
DELIVERY. Customers schedule their delivery by selecting a time from a grid
of 30-minute alternatives. Our real-time inventory tracking and delivery route
software systems are designed to help ensure that the groceries a customer
orders will be available so that they can be delivered at the delivery time
window selected by the customer. Using this system, the customer is able to
select and schedule a delivery to occur within an available specific 30-minute
window, on the same day or up to four days after the order is placed. Deliveries
are currently made from 2:00 p.m. to 10:00 p.m. on Tuesday through Friday and
from 9:00 a.m. to 5:00 p.m. on Saturday. As we increase the number of orders we
process per day, we expect to make deliveries on Tuesday through Friday from
9:00 a.m. to 10:00 p.m. and maintain our current Saturday delivery times. Our
customers must be at home to accept delivery of perishable or frozen items or
regulated products such as alcohol and tobacco. Non-perishable items may be
delivered when the customer is not home.
TECHNOLOGY
We have developed a technologically advanced systems platform, which
integrates our entire business process from end to end. We have built an array
of proprietary advanced inventory management, warehouse management, route
management and materials handling systems and software to manage the entire
customer ordering and delivery flow process. Our proprietary automated materials
handling controller communicates with the Webstore and warehouse management
system and issues instructions to the various mechanized areas of the
distribution center to ensure the proper fulfillment of orders. We designed the
system to utilize automated conveyors and carousels to transport items to a few
centrally located employees. As a result, the system allows us to increase
volume without a proportionate increase in human resources.
Once a delivery is scheduled, a route planning feature of the system
determines the most efficient route to deliver goods to the customer's home. The
courier communicates with the route planner and delivery scheduler modules
throughout the delivery process through the use of a wireless mobile field
device. Each aspect of this process is tightly integrated and enables us to
provide high quality service to our customers.
Our software development expenses were $244,000 in 1997, $3,010,000 in 1998
and $6,308,000 for the six months ended June 30, 1999.
We outsource most of our network operations functions and employ our own
customer services personnel. The continued uninterrupted operation of our
Webstore and transaction-processing systems is essential to our business, and it
is the job of the site operations staff to ensure, to the greatest extent
possible, the reliability of our Webstore and transaction-processing systems.
Webvan's web and database servers are hosted at Exodus Communications, Inc. in
Santa Clara, California.
DISTRIBUTION CENTER ROLL OUT
We currently operate a 336,000 square foot distribution center facility in
Oakland, California. The distribution center was designed to process product
volumes equivalent to approximately 18 supermarkets and is the hub for the
receipt and distribution of products and allows for efficient sorting and
distribution of products. The distribution center is a clean, climate-controlled
facility segmented into
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separate ambient, refrigerated and frozen areas that store grocery items at
optimal temperatures. Identical software systems will be implemented at each
distribution center, enabling the easy replication of the distribution center
model across multiple locations and allowing for central management of the
entire system.
We intend to pursue a roll out of distribution centers into various
locations in the U.S. to capitalize on what we view as a substantial market
opportunity. Our first facility in Oakland, California was commercially launched
in June 1999 and our second distribution center, located in Atlanta, Georgia, is
scheduled to be launched in the second quarter of 2000. We plan to open
additional distribution centers in major metropolitan markets. The cost of the
construction of and equipment for each additional distribution center is
estimated at $25.0 million to $35.0 million. We plan to locate our distribution
centers in industrially zoned areas, which generally have lower real estate
costs than traditional supermarkets located in commercial areas.
In July 1999, we entered into an agreement with Bechtel Corporation for the
construction of up to 26 additional distribution centers over the next three
years in various locations that we designate. We believe that our alliance with
Bechtel will enable us to more aggressively roll out distribution centers in
other markets by utilizing their engineering, design, procurement and
construction expertise. Bechtel will be responsible for substantially all
aspects of the build-out program and will deliver completed distribution centers
to Webvan on a turnkey basis. Bechtel will also leverage its strengths in
engineering management to incorporate improvements to the design of our
distribution centers. Bechtel will perform such services within schedule and
budgetary parameters determined by Webvan, and will be eligible to receive
incentive payments to the extent distribution centers are completed within the
preestablished parameters. We also issued Bechtel a warrant to purchase up to
1,800,000 shares of our stock. The warrant generally becomes exercisable for a
certain number of shares as distribution centers are completed within agreed
upon schedule and budgetary parameters.
DELIVERY OPERATIONS
The distribution center will serve as the center of our hub-and-spoke
delivery system. Orders are collected from the Webstore, routed and managed by
the distribution center, transferred to stations and delivered from the stations
to customers' homes. This model enables us to efficiently and cost effectively
deliver consumer goods to the home by combining centralized order fulfillment
with decentralized delivery. We use temperature-controlled trucks to deliver
from the distribution center to the station and smaller vans to deliver from the
station to the home. The stations are strategically positioned throughout a
delivery region within approximately 50 miles of a distribution center and
typically within approximately 10 miles of target customer residences. We
deliver to the customer's door in a smaller van complete with refrigeration
equipment to keep chilled and frozen items at temperatures that insure their
quality and freshness. Each customer's order is delivered in
environmentally-friendly reusable containers, called totes.
All of our couriers are Webvan employees. We utilize strict hiring
standards in choosing couriers and require each new employee to complete an
intensive training program. The courier training lasts three weeks and includes
32 hours of classroom training, 24 hours of driving training and 16 hours of on
the job training. Couriers are trained in responsible driving practices,
courtesy and the proper handling of totes and products. Our couriers receive a
competitive compensation package, including cash and stock options, and are
incentivized to reinforce our brand and help to create a lasting one-to-one
relationship with our customers. In addition, couriers have been trained to
answer questions about the service and handle service issues directly and
promptly at the customer residence. If the customer is not satisfied with the
products received, the courier is able to initiate a transaction to replace
items or credit the customer's bill.
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CUSTOMER SERVICE
We believe that our ability to establish and maintain long-term
relationships with our customers and to encourage repeat visits and purchases
depends on the strength of our customer support and service operations and
staff. We seek to achieve frequent communication with and feedback from our
customers to continually improve the Webvan service. Webvan offers a number of
automated help options on the website and an easy-to-use direct email service to
enable customers to ask questions and to encourage feedback and suggestions. We
plan to respond to customer email inquiries within 12 hours of the submission
and allow for a maximum response time of 24 hours. Our team of customer support
and service personnel are responsible for handling general customer inquiries,
answering customer questions about the ordering process, and investigating the
status of orders, deliveries and payments. Users can contact customer service
representatives via our toll free telephone number to ask questions or pay bills
if customers are reluctant to enter their credit card number over the Internet.
Our automated customer service function distributes emails to customers after
registration and after each order is placed. We plan to enhance the automation
of the tools used by our customer support and service staff in the future.
MARKETING AND PROMOTION
Our marketing and promotion program is designed to strengthen the Webvan
brand name, drive trials of our service in our target markets, build strong
customer loyalty and maximize repeat usage and purchases. We intend to build our
brand name and customer loyalty through our public relations programs,
advertising campaigns and promotional activities. Our efforts will focus on
building credibility with customers and achieving market acceptance for our
services. We expect to advertise locally in our initial launch markets and plan
to tailor our advertising to each specific market. In addition, we plan to
leverage our relationships with our media investors, including CBS and Knight-
Ridder, for television, online and print advertising opportunities.
In the future, Webvan expects to be able to provide increasingly targeted
and customized services by using the customer purchasing, preference and
behavioral data obtained through the traffic and purchases generated at the
Webstore. We also build brand loyalty though personalized interaction with
customers through prompt, professional delivery persons and through use of
Webvan delivery vehicles. By offering customers a compelling and personalized
value proposition, our goal is to increase the number of visitors that make a
purchase, to encourage repeat visits and purchases and to extend customer
retention. In addition, loyal, satisfied customers generate strong word-of-mouth
support and awareness which drive new customer acquisitions and increased order
volumes.
MERCHANTS AND VENDORS
Webvan sources products from a network of food and drug manufacturers,
wholesalers and distributors. We currently rely on rapid fulfillment from
national and regional distributors for a substantial portion of our items. We
purchase certain top brands and high volume items directly from manufacturers
and may increase our use of direct suppliers as our product volumes increase
with additional distribution centers. We also utilize premium specialty
suppliers or local sources for gourmet foods, farm fresh produce, fresh fish and
meats. Because we cover a broad area and service high volumes from a single
point of distribution, we offer our suppliers a very efficient product supply
model which is reflected in the discounts and pricing we receive. When we select
a new product for purchase, it is entered into the inventory management system
and our Webstore. We employ advanced replenishment and expiration date controls
to manage our inventory and maintain product freshness. As of June 30, 1999, we
were purchasing products from 10 distributors and directly from over 160
vendors.
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COMPETITION
The grocery retailing market is extremely competitive. Local, regional, and
national food chains, independent food stores and markets, as well as online
grocery retailers comprise our principal competition, although we also face
substantial competition from convenience stores, liquor retailers, membership
warehouse clubs, specialty retailers, supercenters, and drugstore chains. Many
of our existing and potential competitors, particularly traditional grocers and
retailers, are larger and have substantially greater resources than we do. We
expect this competition will intensify as more traditional and online grocery
retailers offer competitive services.
Our initial distribution center in Oakland, California, operates in the San
Francisco Bay Area market. In this market, we compete primarily with traditional
grocery retailers and with online grocers NetGrocer and Peapod. The number and
nature of competitors and the amount of competition we will experience will vary
by market area. In other markets, we expect to compete with current online
offerings from these companies and others. Many of these services charge
membership, delivery or service fees, and often offer their goods at a premium
to traditional supermarkets. In addition, most competing online retailers use
manual shopping and retrieval systems which lack the capability to process a
large number of orders for a large number of customers in a cost efficient
manner.
The principal competitive factors that affect our business are location,
breadth of product selection, quality, service, price and consumer loyalty to
traditional and online grocery retailers. We believe that we compete favorably
with respect to each of these factors although many traditional grocery
retailers may have substantially greater levels of consumer loyalty and serve
many more locations than we currently do. If we fail to effectively compete in
any one of these areas, we may lose existing and potential customers which would
have a material adverse effect on our business, net sales and operating margins.
We also compete to retain customers once they have registered for Webvan's
services. Generally, online subscriber attrition rates, or the rates at which
subscribers cancel an online service, are high. High rates of member attrition
could have a material adverse effect on our net sales and business.
GOVERNMENT REGULATION
In addition to regulations applicable to businesses generally or directly
applicable to electronic commerce, we are subject to a variety of regulations
concerning the handling, sale and delivery of food, alcohol and tobacco
products. As of the date of this prospectus, we are not subject to regulation by
the United States Department of Agriculture, or USDA. Whether the handling of
certain food items in our distribution facility, such as meat and fish, will
subject us to USDA regulation in the future will depend on several factors,
including whether we sell food products on a wholesale basis or whether we
obtain food products from non-USDA inspected facilities. Although we have
designed our food handling operations to comply with USDA regulations, we cannot
assure you that the USDA will not require changes to our food handling
operations. We will also be required to comply with local health regulations
concerning the preparation and packaging of our prepared meals and other food
items. Any applicable federal, state or local regulations may cause us to incur
substantial compliance costs or delay the availability of a number of items at
one or more of our distribution centers. In addition, any inquiry or
investigation from a food regulatory authority could have a negative impact on
our reputation. Any of these events could have a material adverse effect on our
business and expansion plans and could cause us to lose customers.
We will be required to obtain state licenses and permits for the sale of
alcohol and tobacco products in each location in which we seek to open a
distribution center. We cannot assure you that we will be able to obtain any
required permits or licenses in a timely manner, or at all. We may be forced to
incur substantial costs and experience significant delays in obtaining these
permits or licenses. In addition, the United States Congress is considering
enacting legislation which would restrict the interstate sale of alcoholic
beverages over the Internet. Changes to existing laws or our inability to obtain
required permits or licenses could prevent us from selling alcohol or tobacco
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products in one or more of our geographic markets. Any of these events could
substantially harm our net sales, gross profit and ability to attract and retain
customers.
In addition, because of the increasing popularity of the Internet, it is
possible that a number of laws and regulations may be adopted with respect to
the Internet. These laws may cover issues such as user privacy, freedom of
expression, pricing, content and quality of products and services, taxation,
advertising, intellectual property rights and information security. Furthermore,
the growth of electronic commerce may prompt calls for more stringent consumer
protection laws. Several states have proposed legislation to limit the uses of
personal user information gathered online or require online services to
establish privacy policies. The Federal Trade Commission has also initiated
action against at least one online service regarding the manner in which
personal information is collected from users and provided to third parties. We
do not currently provide personal information regarding our users to third
parties. However, the adoption of such consumer protection laws could create
uncertainty in web usage and reduce the demand for our products and services.
We are not certain how our business may be affected by the application of
existing laws governing issues such as property ownership, copyrights,
encryption and other intellectual property issues, taxation, libel, obscenity
and export or import matters. The vast majority of these laws were adopted prior
to the wide use of the Internet. As a result, they do not contemplate or address
the unique issues of the Internet and related technologies. Changes in laws
intended to address these issues could create uncertainty in the Internet market
place. This uncertainty could reduce demand for our services or increase the
cost of doing business as a result of litigation costs or increased service
delivery costs.
INTELLECTUAL PROPERTY
We regard patent rights, copyrights, service marks, trademarks, trade
secrets and similar intellectual property as important to our success. We rely
on patent, trademark and copyright law, trade secret protection and
confidentiality or license agreements with our employees, customers, partners
and others to protect our proprietary rights; however, the steps we take to
protect our proprietary rights may be inadequate. We have filed trademark
registration applications for the marks "WEBVAN", "WEBVAN.COM", the Webvan logo
and "THE ONLY .COM YOU REALLY NEED". We currently have no patents protecting our
technology. From time to time, we have filed and expect to file patent
applications directed to aspects of our proprietary technology. We cannot assure
you that any of these applications will be approved, that any issued patents
will protect our intellectual property or that any issued patents or trademark
registrations will not be challenged by third parties. In addition, other
parties may independently develop similar or competing technology or design
around any patents that may be issued to us.
EMPLOYEES
As of June 30, 1999, we had 414 full-time employees consisting of 40 in
software development, 76 in operations and administration, 23 in merchandising,
16 in marketing and 259 at our distribution center in Oakland. We expect to hire
additional personnel at our Oakland facility and to staff our other distribution
centers as they are opened. None of our employees are represented by a labor
union. We have not experienced any work stoppages and consider our employee
relations to be good.
DEVELOPMENT OF OUR BUSINESS
We believe that the net proceeds of this offering, together with our
available funds, will be sufficient to meet our anticipated needs for working
capital and capital expenditures through the next 12 months. Our future
long-term capital needs will be highly dependent on the number of additional
distribution centers we open, the timing of these openings and the success of
these facilities once they are launched. During this time, we expect to incur
product development costs related to the continued development of our software
systems. We also plan to undertake the construction and
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equipping of up to 26 distribution centers over the next 3 years pursuant to our
agreement with Bechtel Corporation. This expansion program will result in a
material increase in our number of employees.
LEGAL PROCEEDINGS
From time to time, we may be involved in litigation relating to claims
arising out of our ordinary course of business. We are not currently a party to
any material litigation.
FACILITIES
Our corporate offices are located in Foster City, California, where we
lease a total of approximately 7,400 square feet under leases that expire in May
2002. We recently signed a lease for approximately 55,000 square feet of office
space in Foster City, California that expires in November 2011, and we will be
relocating our corporate offices to this facility in the fourth quarter of 1999.
In addition, we recently signed two leases, which expire in August 2001 and
November 2012 for an aggregate of approximately 108,000 square feet of office
space in Foster City, California which we anticipate will satisfy our corporate
office space needs for the foreseeable future.
We lease approximately 336,000 square feet in Oakland, California for our
distribution center under a lease that expires in June 2008, with an option to
extend the lease for an additional five years. We also lease an aggregate of
approximately 106,000 square feet for 16 local facilities for distribution in
the San Francisco Bay Area under leases that expire from June 2001 to May 2009.
We have signed a lease for a site of approximately 350,000 square feet for our
second distribution center site in Atlanta, Georgia. This lease expires in July
2009, with two options to extend the lease for additional five year periods. We
are evaluating sites for additional distribution centers in other markets.
Although we expect those sites to be available, we cannot assure you that
suitable sites will be available on commercially reasonable terms. We do not own
any real estate and expect to lease distribution center and station locations in
the other markets we enter.
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<PAGE> 41
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth certain information regarding the executive
officers and directors of Webvan as of August 31, 1999:
<TABLE>
<CAPTION>
NAME AGE POSITION(S)
---- --- -----------
<S> <C> <C>
Louis H. Borders................... 51 President, Chief Executive Officer and Chairman
Kevin R. Czinger................... 40 Senior Vice President, Corporate Operations and
Finance
Arvind Peter Relan................. 36 Senior Vice President, Technology
Mark X. Zaleski.................... 36 Senior Vice President, Area Operations
Gregory Beutler.................... 39 Vice President, Merchandising
Gary B. Dahl....................... 45 Vice President, Distribution
Leo L. Farley...................... 46 Vice President, Food Production
Mark J. Holtzman................... 39 Vice President and Controller
Vivek M. Joshi..................... 36 Vice President, Program Management
Christian T. Mannella.............. 36 Vice President, Marketing
David S. Rock...................... 50 Vice President, Real Estate
David M. Beirne(1)(2).............. 36 Director
Christos M. Cotsakos(2)............ 50 Director
Tim Koogle(1)...................... 47 Director
Michael J. Moritz(1)(2)............ 44 Director
</TABLE>
- -------------------------
(1) Member of Audit Committee
(2) Member of Compensation Committee
LOUIS H. BORDERS has served as our Chairman and Chief Executive Officer
since founding Webvan in December 1996. Mr. Borders co-founded Synergy Software,
a software consulting company, in November 1989 and served on its board of
directors from November 1989 to November 1997. Mr. Borders founded Borders Books
in 1971 and served as President and Chief Executive Officer until 1983 and as
Chairman from 1983 to 1992. He also developed the advanced information systems
used by Borders Books to manage inventory across diverse geographic and
demographic regions. In addition, Mr. Borders is chairman of Mercury Capital
Management, an investment firm he founded in 1995. Mr. Borders holds a B.A. in
Mathematics from the University of Michigan.
KEVIN R. CZINGER has served as Senior Vice President, Corporate Operations
and Finance of Webvan since July 1999. From March 1999 to July 1999, he was
Chief Financial Officer of Webvan. From 1998 to 1999, Mr. Czinger served as a
managing director in the media and telecommunications group at Merrill Lynch &
Co., Inc. From 1996 to 1998, Mr. Czinger served as Chief Executive Officer of
Volcano Entertainment L.L.C., a record and music publishing company he founded.
From 1994 to 1996, Mr. Czinger served as Executive Vice President, Chief
Financial Officer and then Chief Operating Officer of Bertelsmann AG's
media/entertainment operations in North America. From 1991 to 1994, Mr. Czinger
was executive director and head of media banking group at Goldman Sachs
International, an investment banking firm. Mr. Czinger holds a B.A. from Yale
College and a J.D. from Yale Law School.
ARVIND PETER RELAN has served as Senior Vice President, Technology of
Webvan since February 1998. From May 1994 to February 1998, Mr. Relan served in
various management positions at Oracle Corporation, most recently as Vice
President of Internet Server Products in its Application Server Division. In
1995, Mr. Relan founded Oracle's Internet Server Division, including Oracle's
patented Web Request Broker technology, Oracle Application Server and Oracle
Internet Commerce Server. From 1988 to 1994, Mr. Relan held various positions at
Hewlett-Packard, including principal
39
<PAGE> 42
technologist for the HP Openview Platform. Mr. Relan holds a B.S. in Computer
Engineering from the University of California, Los Angeles and a M.S. in
Engineering Management from Stanford University.
MARK X. ZALESKI has served as Senior Vice President, Area Operations of
Webvan since July 1999. From December 1998 to July 1999, he served as Chief
Operating Officer of Webvan. From 1994 to 1998, Mr. Zaleski served in various
executive management positions for ACNielsen, a market research company, most
recently as Senior Vice President and Group Managing Director of Central Europe.
From 1985 to 1994, Mr. Zaleski held several positions at Federal Express, most
recently as a Managing Director for Federal Express, Europe. From 1985 to 1988,
Mr. Zaleski held various management positions in hub, ground operation and sales
for Federal Express. Mr. Zaleski holds a B.S. in Business Administration and an
M.B.A. from the European University in Antwerp, Belgium.
GREGORY BEUTLER has served as Vice President, Merchandising since August
1999. From September 1996 to August 1999, Mr. Beutler held several positions at
the General Electric Company, most recently as General Manager, Worldwide
Sourcing for GE Lighting. From September 1996 to December 1998, Mr. Beutler was
Director, Corporate Initiatives Group in Europe and at GE Corporate. From June
1990 to August 1996, Mr. Beutler was a Management Consultant at Symmetrix, Inc.,
a management consulting firm, most recently as Vice President. Mr. Beutler holds
a B.S. in Chemical Engineering from Rensselaer Polytechnic Institute and a
Master of Engineering in Chemical Engineering from Cornell University and a
M.B.A. from Harvard Business School.
GARY B. DAHL has served as Vice President, Distribution of Webvan since
April 1997. From March 1993 to April 1997, Mr. Dahl served as Senior Vice
President, Logistics of American Stores Company, a retail food and drug company.
From 1990 to 1993, Mr. Dahl was employed with Lucky Stores, a retail grocery
company, as a Vice President of Warehousing and Distribution. Mr. Dahl received
his B.A. in Biology from California State University, Long Beach and his M.P.H.
in Public Health from the University of California, Berkeley.
LEO L. FARLEY has served as Vice President, Food Production of Webvan since
July 1999. From 1998 to 1999, Mr. Farley was Vice President of Culinary Research
and Development for Sodexho Marriott Services, a food services company. In this
capacity, Mr. Farley was responsible for menu and recipe development, culinary
research and development and food safety and quality assurance. From 1986 to
1998, Mr. Farley held several executive management positions in finance,
strategic planning, project management and marketing with Marriott Management
Services, the contract food service division of Marriott International. Mr.
Farley holds a B.A. in Political Science from Drew University, an A.O.S. in
culinary arts from the Culinary Institute of America and an M.B.A. in finance
from New York University.
MARK J. HOLTZMAN has served as Vice President and Controller of Webvan
since March 1999. Mr. Holtzman also serves as Chief Financial Officer of
Webvan -- Bay Area. From July 1997 to March 1999, Mr. Holtzman served as Chief
Financial Officer of Webvan. From December 1994 to July of 1997, Mr. Holtzman
served as Group Controller of MicroAge, a distributor and reseller of computer
products and services. From December 1989 to December 1994, Mr. Holtzman was
employed by Kenfil, Inc., a computer software distributor, becoming Chief
Financial Officer in 1993. Mr. Holtzman received his B.A. in Political Science
and Economics from University of California, Berkeley and his M.B.A. from the
University of Michigan. Mr. Holtzman is a Certified Public Accountant.
VIVEK M. JOSHI has served as Vice President, Program Management of Webvan
since August 1999. From May 1996 to August 1999, Mr. Joshi held several
positions at General Electric Company, most recently as General Manager,
Off-Highway/Transit Operations at GE Transportation Systems. From May 1996 to
June 1998, Mr. Joshi was Manager, Corporate Initiatives Group at GE Corporate.
From October 1993 to May 1996, Mr. Joshi was a management consultant at Booz
Allen & Hamilton, a global management consulting company. From July 1992 to
October 1993, Mr. Joshi was a Manufacturing Team Leader at Johnson & Johnson
Advanced Materials Company. Mr. Joshi holds a B.Tech in Chemical Engineering
from the Indian Institute of Technology, Bombay, and an M.S. in Chemical
Engineering and an M.B.A. from the University of Virginia.
40
<PAGE> 43
CHRISTIAN T. MANNELLA has served as Vice President, Marketing of Webvan
since December 1998. From July 1990 to November 1998, Mr. Mannella held several
positions at MCI WorldCom, most recently as Vice President of Sales & Service
Operations. From December 1995 to March 1998, Mr. Mannella was Vice President of
Brand Marketing for MCI WorldCom. From September 1989 to June of 1990, Mr.
Mannella was employed by Credit Card Service Corporation as Group Product
Manager. From January 1986 to September 1989, Mr. Mannella was employed as a
Marketing Manager by Marriott International. From July 1984 to January 1986, Mr.
Mannella was a Management Consultant with Laventhol & Horwath, CPAs. Mr.
Mannella holds a B.A. in Hotel, Restaurant and Institutional Management from
Michigan State University.
DAVID S. ROCK has served as Vice President, Real Estate of Webvan since May
1999. From January 1997 to May 1999, Mr. Rock served as Webvan's Vice President,
Retail. From 1987 to 1996, Mr. Rock owned and operated a business brokerage firm
specializing in the sale and acquisition of food and beverage retail businesses.
DAVID M. BEIRNE has served as a member of the Board since October 1997. Mr.
Beirne has been a Managing Member of Benchmark Capital, a venture capital firm,
since June 1997. Prior to joining Benchmark, Mr. Beirne founded Ramsey/Beirne
Associates, an executive search firm, and served as its Chief Executive Officer
from October 1987 to June 1997. Mr. Beirne serves as a director of Scient
Corporation and 1-800-FLOWERS.COM, Inc. Mr. Beirne received a B.S. in Management
from Bryant College.
CHRISTOS M. COTSAKOS has served as a member of the Board since May 1998.
Mr. Cotsakos has been the Chief Executive Officer and Chairman of the Board of
E*TRADE Group, Inc. since December 1998. He joined E*TRADE in March 1996 as
President and Chief Executive Officer. Prior to joining E*TRADE, he served as
President, Co-Chief Executive Officer, Chief Operating Officer and a director of
ACNielsen, Inc. from March 1992 to January 1996. From March 1973 to March 1992,
he held a number of senior executive positions at FedEx Corporation. Mr.
Cotsakos serves as a director of National Processing Company, Inc., Digital
Island, Inc., Critical Path, Inc., and FOX Entertainment Group, Inc. Mr.
Cotsakos received a B.A. from William Paterson College, an M.B.A. from
Pepperdine University and is currently pursuing a Ph.D. in economics at the
Management School, University of London.
TIM KOOGLE has served as a member of the Board since June 1999. Mr. Koogle
has been the Chief Executive Officer of Yahoo!, Inc. and a member of Yahoo!'s
Board of Directors since August 1995. He has also been Yahoo!'s Chairman since
January 1999 and was its President from August 1995 until January 1999. Prior to
joining Yahoo!, Mr. Koogle was President of Intermec Corporation, a manufacturer
of data collection and data communication products, from 1992 to 1995. During
that time, he also served as a corporate Vice President of Intermec's parent
company, Western Atlas. Mr. Koogle also serves as a director of E-LOAN, Inc. Mr.
Koogle holds a B.S. degree from the University of Virginia and an M.S. degree
from Stanford University.
MICHAEL J. MORITZ has served as a member of the Board since October 1997.
Mr. Moritz has been a general partner of Sequoia Capital, a venture capital
firm, since 1988. Between 1979 and 1984, Mr. Moritz was employed in a variety of
positions by Time, Inc. Mr. Moritz also serves as a director of Yahoo!,
Flextronics International, eToys Inc. and Agile Software Corporation. Mr. Moritz
holds an M.A. degree in history from Oxford University and an M.B.A. from the
Wharton Business School of the University of Pennsylvania.
Officers serve at the discretion of the Board and are appointed annually.
The employment of each of our officers is at will and may be terminated at any
time, with or without cause. There are no family relationships between any of
the directors or executive officers of Webvan.
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<PAGE> 44
BOARD COMPOSITION
Webvan currently has authorized five directors. Webvan's Restated
Certificate of Incorporation will provide that, effective upon the closing of
this offering, the terms of office of the members of the Board of Directors will
be divided into three classes: Class I, whose term will expire at the annual
meeting of stockholders to be held in 2000, Class II, whose term will expire at
the annual meeting of stockholders to be held in 2001, and Class III, whose term
will expire at the annual meeting of stockholders to be held in 2002. The Class
I directors are Messrs. Cotsakos and Koogle, the Class II directors are Messrs.
Beirne and Moritz and the Class III director is Mr. Borders. At each annual
meeting of stockholders after the initial classification, the successors to
directors whose term will then expire will be elected to serve from the time of
election and qualification until the third annual meeting following election.
Any additional directorships resulting from an increase in the number of
directors will be distributed among the three classes so that, as nearly as
possible, each class will consist of one-third of the total number of directors.
This classification of the Board of Directors may have the effect of delaying or
preventing changes in control or management of Webvan.
BOARD COMMITTEES
The Audit Committee of the Board of Directors reviews our internal
accounting procedures and consults with and reviews the services provided by our
independent accountants. The Audit Committee currently consists of Messrs.
Beirne, Koogle and Moritz.
The Compensation Committee of the Board of Directors reviews and recommends
to the Board the compensation and benefits of all of our executive officers,
administers our stock option plan and employee stock purchase plan and
establishes and reviews general policies relating to compensation and benefits
of our employees. The Compensation Committee currently consists of Messrs.
Beirne, Cotsakos and Moritz. No interlocking relationships exist between our
Board of Directors or Compensation Committee and the board of directors or
compensation committee of any other company, nor has any interlocking
relationship existed in the past.
DIRECTOR COMPENSATION
Our directors do not receive cash for services they provide as directors.
In July 1998, Mr. Cotsakos was granted an option to purchase 2,190,276 shares of
common stock at an exercise price of $0.10 per share. The option granted to Mr.
Cotsakos vests at the rate of one-sixteenth ( 1/16th) of the shares subject to
the option per quarter.
COMPENSATION COMMITTEE INTERLOCKS
No executive officer of Webvan serves as a member of the board of directors
or compensation committee of any entity that has one or more executive officers
serving as a member of Webvan's Board of Directors.
EMPLOYMENT CONTRACTS AND CHANGE OF CONTROL ARRANGEMENTS
We do not currently have any employment contract in effect with our Chief
Executive Officer.
Mr. Dahl is a party to an offer letter, dated March 31, 1997. Under the
offer letter, we agreed to pay Mr. Dahl a base salary of $200,000, subject to
annual adjustment.
Mr. S. Coppy Holzman, our Vice President, Merchandising until August 1999,
is a party to an offer letter, dated September 2, 1997. Under the offer letter,
we agreed to pay Mr. Holzman a base salary of $250,000, subject to annual
adjustment. The offer letter provides that, in the event that Mr. Holzman's
employment is terminated for other than cause, we are obligated to pay him a six
month salary severance. This provision expires on October 1, 1999.
42
<PAGE> 45
Mr. Holtzman is a party to an offer letter, dated June 5, 1997. Under the
offer letter, we agreed to pay Mr. Holtzman a base salary of $175,000, subject
to annual adjustment. The offer letter provides that in the event that Mr.
Holtzman's employment is terminated for other than cause, we are obligated to
pay him a monthly salary severance and option vesting for up to six months until
he is employed elsewhere at a comparable salary.
Mr. Relan is a party to an offer letter, dated February 2, 1998. Under the
offer letter, we agreed to pay Mr. Relan a base salary of $200,000, subject to
annual adjustment. The offer letter provides that in the event that Mr. Relan's
employment is terminated for any reason following the second anniversary of his
employment, we are obligated to, at our option, either pay to Mr. Relan the sum
of $3.0 million or accelerate the vesting of all of Mr. Relan's options to
purchase our common stock. The offer letter further provides that, in the event
that Mr. Relan's employment is terminated without cause, we are obligated to pay
him six months of salary and benefits as severance. Under Mr. Relan's offer
letter, he has the right, expiring in March 2000, to cause Webvan to repurchase
up to 1,914,000 shares of common stock beginning on the first anniversary of his
employment and an additional 1,914,000 shares of common stock beginning on the
second anniversary of his employment, in each case at a price of $0.37 per
share. Mr. Relan also has the right to participate in sales of our preferred
stock prior to the initial public offering of our common stock up to a maximum
amount of $200,000 for each round of financing.
EXECUTIVE COMPENSATION
The following table sets forth a summary of the compensation paid by Webvan
during the fiscal year ended December 31, 1998 to our Chief Executive Officer
and our four other most highly compensated executive officers whose salary and
bonus exceeds $100,000 (collectively, the "Named Executive Officers") for
services rendered in all capacities to Webvan.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION(1) LONG TERM
----------------------------------- COMPENSATION
OTHER ANNUAL AWARDS OF ALL OTHER
NAME AND PRINCIPAL POSITIONS SALARY BONUS COMPENSATION(2) STOCK OPTIONS COMPENSATION(3)
---------------------------- -------- ------ --------------- ------------- ---------------
<S> <C> <C> <C> <C> <C>
Louis H. Borders............... $ -- $ -- $ -- -- $ --
President and Chief Executive
Officer
Gary B. Dahl................... 178,600 8,750 -- 600,000 2,000
Vice President, Distribution
Mark J. Holtzman............... 150,000 7,500 13,835 1,200,000 2,000
Controller
S. Coppy Holzman(4)............ 219,431 -- -- 900,000 1,491
Vice President, Merchandising
Arvind Peter Relan(5).......... 142,974 7,692 -- 7,956,000 2,000
Senior Vice President,
Technology
</TABLE>
- -------------------------
(1) Other compensation in the form of perquisites and other personal benefits
has been omitted in those cases where the aggregate amount of such
perquisites and other personal benefits constituted less than the lesser of
$50,000 or 10% of the total annual salary and bonus for the Named Executive
Officer for such year.
(2) Represents a payment for a relocation allowance.
(3) Represents 401(k) plan matching by Webvan.
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<PAGE> 46
(4) Mr. Holzman was Vice President, Merchandising of Webvan from September 1997
through August 1999.
(5) Mr. Relan joined Webvan in February 1998.
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth information for the fiscal year ended
December 31, 1998 with respect to each grant of stock options to the Named
Executive Officers:
OPTION GRANTS DURING YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS(1) POTENTIAL REALIZABLE
------------------------------------ VALUE AT ASSUMED
% OF TOTAL ANNUAL RATES OF STOCK
OPTIONS PRICE APPRECIATION FOR
GRANTED TO EXERCISE OPTION TERM(3)
OPTIONS EMPLOYEES PRICE PER EXPIRATION ----------------------
NAME GRANTED IN 1998(2) SHARE DATE 5% 10%
---- --------- ----------- --------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Louis H. Borders............. -- --% $ -- -- $ -- $ --
Gary B. Dahl................. 600,000 1.3 0.0125 1/06/2008 4,717 11,953
Mark J. Holtzman............. 1,200,000 2.6 0.0125 1/06/2008 9,433 23,906
S. Coppy Holzman............. 900,000 2.0 0.0125 1/06/2008 7,075 17,930
Arvind Peter Relan........... 7,656,000 16.5 0.0125 3/06/2008 60,185 152,521
Arvind Peter Relan........... 300,000 0.6 0.0125 5/13/2008 2,358 5,977
</TABLE>
- -------------------------
(1) Each of these options was granted pursuant to the Stock Plan and is subject
to the terms of such plan. These options were granted at an exercise price
equal to the fair market value of our common stock as determined by our
Board of Directors on the date of grant and, as long as the optionee
maintains continuous employment with Webvan, vest over a four year period at
the rate of one-fourth ( 1/4th) of the shares subject to the option on the
first anniversary of the date of grant and one-sixteenth ( 1/16th) of the
shares subject to the option per quarter thereafter.
(2) In 1998, we granted employees and consultants options to purchase an
aggregate of 46,436,478 shares of common stock.
(3) The gains shown are "option spreads" that would exist for the respective
options granted. These gains are based on the assumed rates of annual
compound stock price appreciation of 5% and 10% from the date the option was
granted over the full option term. These assumed annual compound rates of
stock price appreciation do not represent our estimate or projection of
future common stock prices.
AGGREGATED OPTION EXERCISES IN 1998 AND DECEMBER 31, 1998 OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF OPTIONS AT
SHARES DECEMBER 31, VALUE OF IN-THE-MONEY
ACQUIRED VALUE 1998(2) OPTIONS(3)
ON OPTIONS REALIZED --------------------- -------------------------
NAME EXERCISE (1) VESTED UNVESTED VESTED UNVESTED
---- ---------- -------- --------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Louis H. Borders....... -- $ -- -- -- $ -- $ --
Gary B. Dahl........... 2,250,000 26,250 1,068,750 1,781,250 12,821,487 21,369,145
Mark J. Holtzman....... 1,860,000 14,700 768,750 1,691,250 9,219,986 20,283,969
S. Coppy Holzman....... 2,250,000 26,250 984,375 2,165,625 11,808,401 25,978,482
Arvind Peter Relan..... 3,828,000 -- -- 7,956,000 -- 95,372,550
</TABLE>
- -------------------------
(1) Equal to the fair market value of the purchased shares on the option
exercise date, less the exercise price paid for such shares.
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<PAGE> 47
(2) The options are immediately exercisable for all of the option shares, but
any shares purchased under those options will be subject to repurchase by
Webvan at the original exercise price paid per share, if the optionee ceases
service with Webvan before vesting in those shares. The heading "Vested"
refers to shares that are no longer subject to repurchase and the heading
"Unvested" refers to shares subject to repurchase as of December 31, 1998.
(3) Based upon an assumed initial public offering price of $12.00 per share less
the exercise price per share.
COMPENSATION PLANS
1997 Stock Plan
Webvan's Stock Plan was approved by the Board of Directors and the
stockholders in September 1997 and was amended in March 1998, July 1998, October
1998, December 1998 and January 1999. The Stock Plan provides for the grant to
employees of Webvan, including officers and employee directors, of incentive
stock options within the meaning of Section 422 of the Internal Revenue Code of
1986, as amended, and for the grant of nonstatutory stock options to employees,
directors and consultants of Webvan. The Stock Plan is currently administered by
the Board of Directors which selects the optionees, determines the number of
shares to be subject to each option and determines the exercise price of each
option. The Stock Plan authorizes the issuance of an aggregate of up to
72,000,000 shares of common stock. In August 1999, the Board approved an
amendment to the Stock Plan to increase the number of shares of common stock
reserved thereunder by 7,500,000 shares of common stock, subject to stockholder
approval. The maximum number of shares that may be granted to any individual
under the Stock Plan in any year is 2,000,000, except that an individual may be
granted up to an additional 2,000,000 shares in connection with his or her
initial service. As of June 30, 1999, options to purchase an aggregate of
40,433,688 shares of common stock were outstanding under the Stock Plan, and an
aggregate of 9,717,222 shares of common stock remained available for future
grants. The number of shares of common stock reserved for issuance under this
plan will be subject to an annual increase on each anniversary beginning January
1, 2000 equal to the lesser of:
- 16,000,000 shares;
- 4% of the outstanding shares on such date; or
- an amount determined by the Board.
The exercise price of all incentive stock options granted under the Stock
Plan must be at least equal to the fair market value of the common stock on the
date of grant. The exercise price of all nonstatutory stock options granted
under the Stock Plan shall be determined by the administrator, but in no event
may be less than 85% of the fair market value on the date of grant. With respect
to any participant who owns stock possessing more than 10% of the voting power
of all classes of stock of Webvan, the exercise price of any incentive or
nonstatutory option granted must equal at least 110% of the fair market value on
the grant date and the maximum term of any such option must not exceed five
years. The term of all other options granted under the Stock Plan may not exceed
ten years.
In the event of a merger of Webvan with or into another corporation or a
sale of substantially all of our assets, the Stock Plan requires that each
outstanding option be assumed or an equivalent option substituted by the
successor corporation; provided, however, that in the event the successor
corporation refuses to assume or substitute for the outstanding options, such
options will become fully vested and exercisable for a period of fifteen days
after notice from the administrator. Unless terminated sooner, the Stock Plan
will terminate ten years from its effective date. The Board has authority to
amend or terminate the Stock Plan, provided that no such action may impair the
rights of the holder of any outstanding options without the written consent of
that holder.
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<PAGE> 48
1999 Nonstatutory Stock Option Plan
Our 1999 Nonstatutory Stock Option Plan was approved by the Board of
Directors in September 1999. The Nonstatutory Plan provides for the grant of
nonstatutory stock options to employees, directors and consultants of Webvan.
Executive officers are only eligible to receive options under the Nonstatutory
Plan in connection with their initial employment by Webvan. The Nonstatutory
Plan is currently administered by the Board of Directors which selects the
optionees, determines the number of shares to be subject to each option and
determines the exercise price of each option. The Nonstatutory Plan authorizes
the issuance of an aggregate of up to 5,000,000 shares of common stock. As of
September 5, 1999 options to purchase an aggregate of 318,750 shares of common
stock were outstanding under the Nonstatutory Plan, and an aggregate of
4,681,250 shares of common stock remained available for future grants.
The exercise price of all stock options granted under the Nonstatutory Plan
shall be determined by the administrator and the maximum term of an option may
not exceed ten years.
In the event of a merger of Webvan with or into another corporation or a
sale of substantially all of our assets, the Nonstatutory Plan requires that
each outstanding option be assumed or an equivalent option substituted by the
successor corporation; provided, however, that in the event the successor
corporation refuses to assume or substitute for the outstanding options, such
options will become fully vested and exercisable for a period of fifteen days
after notice from the administrator. Unless terminated sooner, the Nonstatutory
Plan will terminate ten years from its effective date. The Board has authority
to amend or terminate the Nonstatutory Plan, provided that no such action may
impair the rights of the holder of any outstanding options without the written
consent of that holder.
1999 Employee Stock Purchase Plan
Our 1999 Employee Stock Purchase Plan, or the Purchase Plan, provides our
employees with an opportunity to purchase our common stock through accumulated
payroll deductions. This plan will become effective upon the closing of this
offering. A total of 5,000,000 shares of common stock have been reserved for
issuance under the Purchase Plan, none of which have been issued. The number of
shares reserved for issuance under the Purchase Plan will be subject to an
annual increase on each anniversary beginning January 1, 2000 equal to the
lesser of:
- the number of shares issued under the Purchase Plan in the prior year; or
- an amount determined by the Board.
The Purchase Plan will be administered by the Board of Directors or by a
committee appointed by the Board. The Purchase Plan permits eligible employees
to purchase common stock through payroll deductions up to a maximum of $25,000
for all purchases ending within the same calendar year and up to a maximum of
1,000 shares for each purchase period. Employees are eligible to participate if
they are employed by us for at least 20 hours per week and more than five months
in any calendar year. Unless the Board of Directors or its committee determines
otherwise, each offering period will run for six months. The first offering
period will commence on the date of this prospectus and end on or about August
14, 2000, and new offering periods will commence every six months thereafter. In
the event we are acquired, each outstanding option shall be assumed or an
equivalent option substituted by the successor corporation. In the event that
the successor corporation refuses to assume or substitute for the option, the
offering period then in progress will be shortened by setting a new exercise
date. The price at which common stock will be purchased under the Purchase Plan
is equal to 85% of the fair market value of the common stock on the first or
last day of the applicable offering period, whichever is lower. Employees may
end their participation in the offering period at any time, and participation
automatically ends on termination of employment. Generally, the Board of
Directors may amend, modify or terminate the Purchase Plan at any time as long
as such amendment, modification or termination does not impair the rights of
plan participants. The Purchase Plan will terminate at 2009, unless terminated
earlier in accordance with its provisions.
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401(k) Plan
Webvan adopted a retirement savings plan, or 401(k) Plan, that covers all
of our employees. An employee may elect to defer, in the form of contributions
to the 401(k) Plan, up to 15% of the total annual compensation that would
otherwise be paid to the employee, subject to statutory limitations. Employee
contributions are invested in selected mutual funds or money market funds
according to the directions of the employee. Webvan makes matching contributions
as a percentage of employee contributions, subject to established limits. The
employees' contributions are fully vested and nonforfeitable at all times.
LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS
Our Certificate of Incorporation limits the liability of directors to the
maximum extent permitted by Delaware law. Delaware law provides that directors
of a corporation will not be personally liable for monetary damages for breach
of their fiduciary duties as directors, except liability for:
- any breach of their duty of loyalty to the corporation or its
stockholders;
- acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;
- unlawful payments of dividends or unlawful stock repurchases or
redemption; or
- any transaction from which the director derived an improper personal
benefit.
This limitation of liability does not apply to liabilities arising under
the federal securities laws and does not affect the availability of equitable
remedies such as injunctive relief or rescission.
Our Certificate of Incorporation and Bylaws provide that we shall indemnify
our directors and executive officers and may indemnify other officers and
employees and our agents to the fullest extent permitted by law. We believe that
indemnification under our Bylaws covers at least negligence and gross negligence
on the part of indemnified parties. Our Bylaws also permit us to secure
insurance on behalf of any officer, director, employee or other agent for any
liability arising out of his or her actions in that capacity, regardless of
whether the Bylaws would permit indemnification. We have director and officer
liability insurance that covers matters, including matters arising under the
Securities Act.
We have entered into agreements to indemnify our directors and executive
officers, in addition to indemnification provided for in our Bylaws. These
agreements, among other things, provide for indemnification of our directors and
executive officers for judgments, fines, settlement amounts and expenses,
including attorneys' fees, incurred by any of these persons in any action or
proceeding, including any action by or in the right of Webvan, arising out of
that person's services as a director or executive officer of ours, any
subsidiary of ours or any other company or enterprise to which the person
provides services at our request. We believe that these provisions and
agreements are necessary to attract and retain qualified persons as directors
and executive officers.
There is no pending litigation or proceeding involving any director,
officer, employee or agent of Webvan where indemnification will be required or
permitted. We are not aware of any pending or threatened litigation or
proceeding that might result in a claim for such indemnification.
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<PAGE> 50
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
SALES OF STOCK TO INSIDERS
In April 1997, we issued 27,038,856 shares of common stock to the Louis H.
Borders Amended and Restated Revocable Trust dated December 4, 1987, and
17,361,144 shares of common stock to ISR GRAT I, a trust affiliated with Mr.
Borders, for an aggregate purchase price of $37,000. Louis H. Borders is our
President, Chief Executive Officer and Chairman.
In October 1997, we issued an aggregate of 111,643,872 shares of Series A
preferred stock to investors for an aggregate purchase price of approximately
$10.7 million. The following directors, executive officers, holders of more than
5% of a class of voting securities and members of such person's immediate
families purchased shares of Series A preferred stock:
<TABLE>
<CAPTION>
SHARES OF
SERIES A
PURCHASER PREFERRED STOCK
--------- ---------------
<S> <C>
Louis H. Borders Amended and Restated Revocable Trust dated
December 4, 1987.......................................... 22,240,896
ISR GRAT I.................................................. 14,281,080
Benchmark Capital Partners.................................. 36,521,976
Sequoia Capital............................................. 36,521,976
</TABLE>
In May and June 1998, we issued an aggregate of 38,612,184 shares of Series
B preferred stock to investors for an aggregate purchase price of approximately
$35.3 million. SOFTBANK America Inc., a holder of more than 5% of our voting
securities, purchased 36,521,976 shares of Series B preferred stock in such
transaction.
In January and April 1999, we issued an aggregate of 32,341,200 shares of
Series C preferred stock to investors for an aggregate purchase price of
approximately $75.1 million. E*TRADE Group, Inc. and Yahoo! Inc. each purchased
4,304,100 shares of Series C preferred stock in such transaction. Christos M.
Cotsakos, a director of Webvan, is the President and CEO of E*TRADE Group, Inc.,
and Tim Koogle, a director of Webvan, is the Chief Executive Officer and
Chairman of Yahoo! Inc.
In June 1999, as contemplated by his offer letter, Kevin R. Czinger
purchased 450,000 shares of our common stock at a price of $1.35 per share.
In July 1999, we entered into an agreement to issue an aggregate of
21,670,605 shares of Series D-2 preferred stock to investors at an aggregate
purchase price of approximately $275.0 million. Entities affiliated with
SOFTBANK America Inc. purchased 9,850,275 shares of Series D-2 preferred stock
and entities affiliated with Sequoia Investors Group purchased 3,940,110 shares
of Series D-2 preferred stock transaction.
In July 1999, we sold 150,000 shares of common stock to Yahoo! Inc. at a
price of $3.33 per share pursuant to a restricted stock purchase agreement.
These shares are subject to a repurchase option which expires at the rate of
one-sixteenth ( 1/16th) of the shares subject to the agreement per quarter as
long as Mr. Koogle remains on our Board of Directors.
Each share of Series A preferred stock, Series B preferred stock, Series C
preferred stock and Series D preferred stock will convert into one share of
common stock immediately prior to the closing of this offering.
OTHER AGREEMENTS WITH INSIDERS
We are a party to a voting agreement executed in September 1997, as amended
in December 1998, with the Louis H. Borders Amended and Restated Revocable Trust
dated December 4, 1987, and certain of our shareholders affiliated with or
related to Mr. Borders. Such shareholders each executed an irrevocable proxy
appointing the trustee of the trust as their proxy and attorney-in-fact. The
voting agreement and irrevocable proxy terminate immediately prior to the
closing of an initial underwritten public offering of our common stock pursuant
to a registration statement filed with the SEC.
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<PAGE> 51
Mark Zaleski, our Senior Vice President, Area Operations, is a party to an
offer letter, dated December 14, 1998. In March 1999, Webvan loaned Mr. Zaleski
$200,000 to be used towards the purchase of a house in the San Francisco Bay
Area. This loan was made as an interest-free employee relocation bridge loan, as
contemplated by his offer letter, and is repayable upon the first to occur of
March 1, 2000 or 15 days after the sale of his previous residence. The offer
letter also provides that in the event that Mr. Zaleski's employment is
terminated for other than cause, we are obligated to pay him a severance of six
months of salary and benefits as well as continued salary and benefits for up to
12 months until he obtains subsequent employment. In the event of such a
termination, the unvested portion of Mr. Zaleski's options will become
exercisable to the extent of an additional 12 months of vesting.
Mr. Czinger is a party to an offer letter dated March 17, 1999. The offer
letter provides that, in the event that Mr. Czinger's employment is terminated
for other than cause, we are obligated to pay him a lump sum severance of six
months of salary and benefits as well as continued salary and benefits for up to
six months until Mr. Czinger obtains subsequent employment. Mr. Czinger also has
the option to purchase 430,416 shares of our Series C preferred stock at an
exercise price of $2.32 per share by January 1, 2000. The offer letter further
provides that, if Mr. Czinger is involuntarily terminated by Webvan or a
successor company, the unvested portion of his options will become exercisable
to the extent of an additional 12 months of vesting.
In connection with the recruiting of some of our executive officers and
employees, we engaged the services of Ramsey/Beirne Associates, an executive
search firm. Mr. Beirne, one of our directors, is the chairman of Ramsey/Beirne
and owns more than 5% of the stock of Ramsey/Beirne. As consideration for these
services, we paid Ramsey/Beirne an aggregate of $185,000 in cash, 382,500 shares
of our common stock and options to purchase up to 159,840 shares of our common
stock, all of which have been exercised.
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<PAGE> 52
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of our common stock as of June 30, 1999 with respect to
- each person or group of affiliated persons known by Webvan to own
beneficially more than 5% of the outstanding shares of common stock;
- each of our directors;
- each of the Named Executive Officers; and
- all directors and executive officers as a group.
The address for each listed director and officer is c/o Webvan Group, Inc.,
1241 East Hillsdale Boulevard, Suite 210, Foster City, California 94404. Except
as otherwise indicated in the footnotes to the table, each of the stockholders
has sole voting and investment power with respect to the shares of beneficially
owned by such stockholders, subject to community property laws where applicable.
<TABLE>
<CAPTION>
PERCENTAGE OF
NUMBER OF SHARES SHARES BENEFICIALLY
NAME OF BENEFICIAL OWNER BENEFICIALLY OWNED OWNED(1)
------------------------ ------------------ -------------------
<S> <C> <C>
Louis H. Borders(2)....................................... 83,917,776 28.7%
SOFTBANK America Inc.(3).................................. 46,372,251 15.9
300 Delaware Avenue, Suite 900
Wilmington, Delaware 19801
Sequoia Capital(4)........................................ 40,462,086 13.8
Michael J. Moritz
Benchmark Capital Partners(5)............................. 36,521,976 12.5
David M. Beirne
Arvind Peter Relan(6)..................................... 3,903,000 1.3
S. Coppy Holzman(7)....................................... 2,643,750 *
Gary B. Dahl(8)........................................... 2,587,500 *
Mark J. Holtzman(9)....................................... 1,860,000 *
Christos Cotsakos(10)..................................... 684,461 *
Tim Koogle(11)............................................ -- --
All directors and officers as a group (13 persons)(12).... 176,990,549 60.2
</TABLE>
- -------------------------
* Less than 1%
(1) Applicable percentage ownership is based on 292,453,839 shares of common
stock outstanding as of June 30, 1999 and giving effect to the issuance of
21,670,605 shares of Series D preferred stock in July and August 1999.
Shares of common stock that a person has the right to acquire within 60
days of June 30, 1999 are deemed outstanding for purposes of computing the
percentage ownership of the person holding such rights, but are not deemed
outstanding for purposes of computing the percentage ownership of any other
person, except with respect to the percentage ownership of all directors
and executive officers as a group.
(2) Includes 36,358,224 shares held by Louis H. Borders, Trustee of the Louis
H. Borders Amended and Restated Revocable Trust dated December 4, 1987, or
the Trust; 31,642,224 shares held by ISR GRAT I; 12,917,328 shares held by
ISR GRAT II and 3,000,000 shares held by Louis H. Borders, Trustee of the
Trust for the Benefit of Christopher A. Borders. ISR GRAT I holds shares
for the benefit of the Trust and will expire in February 2000. ISR GRAT II
holds shares for the benefit of Christine Borders, daughter of Mr. Borders,
and will expire in December 2002. Mr. Borders is President, Chief Executive
Officer and Chairman of Webvan. Certain employees of Mercury Capital
Management held options to purchase 195,000 shares of common stock held by
the Trust.
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<PAGE> 53
(3) Includes 9,717,243 shares held by SOFTBANK Capital Partners LP and 133,032
shares held by SOFTBANK Capital Advisors Fund LLP.
(4) Includes 33,417,612 shares held by Sequoia Capital VII, or Sequoia Capital;
3,940,110 shares held by Sequoia Capital Franchise Fund, or Sequoia Fund
and Sequoia Capital Franchise Partners, or Sequoia Partners; 1,460,880
shares held by Sequoia Technology Partners VII; 677,844 shares held by SQP
1997; 584,352 shares held by Sequoia International Partners and 381,288
shares held by Sequoia 1997 LLC. Mr. Moritz, one of our directors, is a
general partner of Sequoia Capital, Sequoia Fund, Sequoia Partners, Sequoia
Technology, SQP, Sequoia International and Sequoia LLC. Mr. Moritz
disclaims beneficial ownership of such shares held by Sequoia Capital,
Sequoia Fund, Sequoia Partners, Sequoia Technology, SQP, Sequoia
International and Sequoia LLC, except to the extent of his pecuniary
interest therein.
(5) Includes 32,043,432 shares held by Benchmark Capital Partners, L.P., or
Benchmark Capital, and 4,478,544 shares held by Benchmark Founders' Fund,
L.P., or Benchmark Founders. Mr. Beirne, one of our directors, is a
managing member of Benchmark Capital Management Co., LLC, the general
partner of Benchmark Capital and Benchmark Founders. Mr. Beirne disclaims
beneficial ownership of such shares held by Benchmark Capital and Benchmark
Founders, except to the extent of his pecuniary interest therein.
(6) Includes 37,500 shares held by Renuka Prasad Relan, Trustee of the Renuka
Prasad Relan 1999 Grantor Trust, 37,500 shares held by Arvind Peter Relan,
Trustee of the Arvind Peter Relan 1999 Grantor Trust and 75,000 shares held
by Arvind Peter Relan and Renuka Prasad Relan, Trustees of the Relan Family
1999 Trust as transferred on July 15, 1999. Includes 75,000 shares subject
to an option exercisable within 60 days of June 30, 1999. Of the shares
included in the table, 1,435,500 shares are subject to a right of
repurchase in favor of Webvan in the event that Mr. Relan's employment with
Webvan terminates. Such repurchase right expired as to 25% of the shares in
February 1999 and will expire as to 1/16 of the shares on a quarterly basis
thereafter through February 2002.
(7) Includes 393,750 shares subject to an option exercisable within 60 days of
June 30, 1999. Of the shares included in the table, 1,265,625 shares are
subject to a right of repurchase in favor of Webvan in the event that Mr.
Holzman's employment with Webvan terminates. Such repurchase right expired
as to 25% of the shares in September 1998 and will expire as to 1/16th of
the shares on a quarterly basis thereafter through September 2001.
(8) Includes 337,500 shares subject to an option exercisable within 60 days of
June 30, 1999. Of the shares included in the table, 1,125,000 shares are
subject to a right of repurchase in favor of Webvan in the event that Mr.
Dahl's employment with Webvan terminates. Such repurchase right expired as
to 25% of the shares in April 1998 and will expire as to 1/16th of the
shares on a quarterly basis thereafter through April 2001.
(9) Of the shares included in the table, 783,750 shares are subject to a right
of repurchase in favor of Webvan in the event that Mr. Holtzman's
employment with Webvan terminates. Such repurchase right expired as to 25%
of the shares in July 1998 and will expire as to 1/16th of the shares on a
quarterly basis thereafter through July 2001.
(10) Represents shares issuable upon the exercise of options which are
exercisable within 60 days of June 30, 1999. Does not include 4,304,100
shares held by E*TRADE Group, Inc. Mr. Cotsakos is the Chairman of the
Board, President and Chief Executive Officer of E*TRADE Group, Inc. and
disclaims beneficial ownership of such shares.
(11) Does not include 4,304,100 shares held by Yahoo!, Inc. Mr. Koogle is the
Chairman of the Board and Chief Executive Officer of Yahoo!, Inc. and
disclaims beneficial ownership of such shares.
(12) Includes an aggregate of 1,490,711 shares subject to an option exercisable
within 60 days of June 30, 1999.
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<PAGE> 54
DESCRIPTION OF CAPITAL STOCK
GENERAL
Our Restated Certificate of Incorporation, which will be filed prior to the
closing of this offering, authorizes the issuance of up to 800,000,000 shares of
common stock, par value $0.0001 per share, and 10,000,000 shares of preferred
stock, par value $0.0001 per share, the rights and preferences of which may be
established by our Board of Directors. As of June 30, 1999, after giving effect
to the conversion of all outstanding shares of Series A, B, C and D preferred
stock prior to the closing of this offering, 292,453,839 shares of common stock
were issued and outstanding and held by approximately 120 stockholders.
COMMON STOCK
The holders of common stock are entitled to one vote for each share held of
record upon such matters and in such manner as may be provided by law. Subject
to preferences applicable to any outstanding shares of preferred stock, the
holders of common stock are entitled to receive ratably dividends, if any, as
may be declared by the Board of Directors out of funds legally available for
dividend payments. In the event we liquidate, dissolve or wind up, the holders
of common stock are entitled to share ratably in all assets remaining after
payment of liabilities and liquidation preferences of any outstanding shares of
the preferred stock. Holders of common stock have no preemptive rights or rights
to convert their common stock into any other securities. There are no redemption
or sinking fund provisions applicable to the common stock. All outstanding
shares of common stock are fully paid and nonassessable.
PREFERRED STOCK
Upon the closing of this offering, the Board of Directors will be
authorized, absent any limitations prescribed by law, without stockholder
approval, to issue up to an aggregate of 10,000,000 shares of preferred stock,
in one or more series, each of the series to have rights and preferences,
including voting rights, dividend rights, conversion rights, redemption
privileges and liquidation preferences, as shall be determined by the Board of
Directors. The rights of the holders of common stock will be subject to, and may
be adversely affected by, the rights of holders of any preferred stock that may
be issued in the future. Issuance of preferred stock, while providing desirable
flexibility in connection with possible acquisitions and other corporate
purposes, could have the effect of making it more difficult for a third party to
acquire, or of discouraging a third party from attempting to acquire, a majority
of our outstanding voting stock. We have no present plans to issue any shares of
preferred stock.
REGISTRATION RIGHTS
Set forth below is a summary of the registration rights of the holders of
our Series A preferred stock, Series B preferred stock, Series C preferred stock
and Series D preferred stock each of which will convert into common stock
immediately prior to the consummation of this offering.
Demand Registrations. At any time on or after the first to occur of October
29, 2000 or six months following the closing date of the initial public offering
of our common stock, the holders of registration rights may request us to
register shares of common stock having a gross offering price of at least $25
million subject to our right, upon advice of our underwriters, to reduce the
number of shares proposed to be registered. We will be obligated to effect only
three registrations pursuant to such a request by holders of registration
rights. If shares requested to be included in a registration must be excluded
due to limitations on the number of shares to be registered on behalf of the
selling shareholders pursuant to the underwriters' advice, the shares registered
on behalf of the selling shareholders will be allocated among all holders of
shares with rights to be included in the registration on the basis of the number
of shares with such rights held by such shareholders.
Piggyback Registration Rights. The holders who have registration rights
have unlimited rights to request that shares be included in any
company-initiated registration of common stock other than registrations of
employee benefit plans or business combinations subject to Rule 145 under the
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<PAGE> 55
Securities Act. In our initial registration, the underwriters may, for marketing
reasons, exclude all or part of the shares requested to be registered on behalf
of all shareholders having the right to request inclusion in such registration.
In our subsequent registrations, the underwriters may, for marketing reasons,
limit the shares requested to be registered on behalf of all shareholders having
the right to request inclusion in such registration to not less than 30%. In
addition, we have the right to terminate any registration we initiated prior to
its effectiveness regardless of any request for inclusion by any stockholders.
Form S-3 Registrations. After we have qualified for registration on Form
S-3 which will not be available until at least 12 months after we become a
publicly reporting company, holders of registration rights may request in
writing that we effect an unlimited number of registrations of such shares on
Form S-3 provided that the gross offering price of the shares to be so
registered in each such registration exceeds $1,000,000. If such registration is
to be an underwritten public offering, the underwriters may reduce for marketing
reasons the number of shares to be registered on behalf of all shareholders
having the right to request inclusion in such registration. We are not obligated
to effect a registration on Form S-3 prior to expiration of 180 days following
effectiveness of the most recent registration requested by the holders.
Future Grants of Registration Rights. We cannot grant further registration
rights without the prior written consent of current stockholders owning at least
a majority of the then outstanding registrable securities, including grants to
any holder or prospective holder of any registration rights which would:
- be on equal or more favorable terms than the existing registration
rights;
- cause a reduction in the amount of registrable securities held by current
holders that would be registrable in a registration statement; or
- require us to effect a registration earlier than the date current holders
can first require a registration.
Transferability. The registration rights are transferable upon notice by
the holder to us of the transfer, provided that the transferee or assignee is
not deemed by the Board of Directors to be a competitor of ours and assumes the
rights and obligations of the transferor for such shares.
Termination. The registration rights will terminate on the first to occur
of five years after the date of our initial public offering or the date on which
the holder may sell the share pursuant to Rule 144, provided that the aggregate
of the shares held by the holder represent less than 1% of our then outstanding
equity securities.
WARRANTS
At June 30, 1999, we had outstanding warrants to purchase an aggregate of
2,397,804 shares of our Series B preferred stock, which is convertible into an
equivalent number of shares of common stock. The weighted average exercise price
of the warrants is $0.91 per share. Any warrant may be exercised by applying the
value of a portion of the warrant, which is equal to the number of shares
issuable under the warrant being exercised multiplied by the fair market value
of the security receivable upon exercise of the warrant, less the per share
exercise price, in lieu of payment of the exercise price per share. The warrants
to purchase an aggregate of 2,233,572 shares expire in November 2005. The
warrant to purchase 164,232 shares expires in May 2008 or five years from
effective date of our initial public offering, whichever occurs first.
In connection with our agreement with Bechtel Corporation, we issued to
Bechtel a warrant to purchase up to 1,800,000 shares at an exercise price of
$2.32 per share. The warrant expires in July 2004 and is exercisable as to
150,000 shares as of July 31, 1999. The warrant generally becomes exercisable as
to the remaining shares as distribution centers are completed by Bechtel within
agreed upon schedule and budgetary parameters.
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<PAGE> 56
DELAWARE ANTI-TAKEOVER LAW AND OUR CERTIFICATE OF INCORPORATION AND BYLAW
PROVISIONS
Provisions of Delaware law and our Certificate of Incorporation and Bylaws
could make more difficult our acquisition by a third party and the removal of
our incumbent officers and directors. These provisions, summarized below, are
expected to discourage coercive takeover practices and inadequate takeover bids
and to encourage persons seeking to acquire control of Webvan to first negotiate
with us. We believe that the benefits of increased protection of our ability to
negotiate with the proponent of an unfriendly or unsolicited acquisition
proposal outweigh the disadvantages of discouraging such proposals because,
among other things, negotiation could result in an improvement of their terms.
We are subject to Section 203 of the Delaware General Corporation Law,
which regulates corporate acquisitions. In general, Section 203 prohibits a
publicly held Delaware corporation from engaging in a "business combination"
with an "interested stockholder" for a period of three years following the date
the person became an interested stockholder, unless:
- the Board of Directors approved the transaction in which such stockholder
became an interested stockholder prior to the date the interested
stockholder attained such status;
- upon consummation of the transaction that resulted in the stockholder's
becoming an interested stockholder, he or she owned at least 85% of the
voting stock of the corporation outstanding at the time the transaction
commenced, excluding shares owned by persons who are directors and also
officers; or
- on or subsequent to such date the business combination is approved by the
Board of Directors and authorized at an annual or special meeting of
stockholders.
A "business combination" generally includes a merger, asset or stock sale,
or other transaction resulting in a financial benefit to the interested
stockholder. In general, an "interested stockholder" is a person who, together
with affiliates and associates, owns, or within three years prior to the
determination of interested stockholder status, did own, 15% or more of a
corporation's voting stock.
Our Certificate of Incorporation and Bylaws do not provide for the right of
stockholders to act by written consent without a meeting or for cumulative
voting in the election of directors. In addition, our Certificate of
Incorporation permits the Board of Directors to issue preferred stock with
voting or other rights without any stockholder action. Our Certificate of
Incorporation provides for the Board of Directors to be divided into three
classes, with staggered three-year terms. As a result, only one class of
directors will be elected at each annual meeting of stockholders. Each of the
two other classes of directors will continue to serve for the remainder of its
respective three-year term. These provisions, which require the vote of
stockholders holding at least a majority of the outstanding common stock to
amend, may have the effect of deterring hostile takeovers or delaying changes in
our management.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Stock is ChaseMellon
Shareholder Services, L.L.C. The transfer agent's address and telephone number
is 235 Montgomery Street, 23rd Floor, San Francisco, California 94104 and (415)
743-1423.
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<PAGE> 57
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no market for our common stock.
Future sales of substantial amounts of common stock in the public market could
adversely affect prevailing market prices. As described below, no shares
currently outstanding will be available for sale immediately after this offering
because of contractual restrictions on resale. Sales of substantial amounts of
our common stock in the public market after the restrictions lapse or are
released could adversely affect the prevailing market price and impair our
ability to raise equity capital in the future.
Upon completion of the offering, we will have 317,453,839 outstanding
shares of common stock. Of these shares, the 25,000,000 shares sold in the
offering, plus any shares issued upon exercise of the underwriters'
over-allotment option, will be freely tradable without restriction under the
Securities Act, unless purchased by our "affiliates" as that term is defined in
Rule 144 under the Securities Act. In general, affiliates include officers,
directors or 10% stockholders.
The remaining 292,453,839 shares outstanding are "restricted securities"
within the meaning of Rule 144. Restricted securities may be sold in the public
market only if registered or if they qualify for an exemption from registration
under Rules 144, 144(k) or 701 promulgated under the Securities Act, which are
summarized below. Sales of the restricted securities in the public market, or
the availability of such shares for sale, could adversely affect the market
price of the common stock.
Our directors, officers and securityholders have entered into lock-up
agreements in connection with this offering generally providing that they will
not offer, sell, contract to sell or grant any option to purchase or otherwise
dispose of our common stock or any securities exercisable for or convertible
into our common stock without the prior written consent of Goldman, Sachs & Co.
The lock-up agreements will expire as to 15% of the shares held by each
stockholder beginning on the third day following the public release of Webvan's
earnings for the year ended December 31, 1999, as to an additional 25% of the
shares beginning 45 days thereafter and as to the remaining shares 180 days
after the date of this prospectus. Notwithstanding possible earlier eligibility
for sale under the provisions of Rules 144, 144(k) and 701, shares subject to
lock-up agreements will not be salable until such agreements expire or are
waived by Goldman, Sachs & Co. Taking into account the lock-up agreements, and
assuming Goldman, Sachs & Co. does not release stockholders from these
agreements, the following shares will be eligible for sale in the public market
at the following times:
- Beginning on the date of this prospectus, only the shares sold in the
offering will be immediately available for sale in the public market.
- Beginning on or about February 1, 2000 (the third business day following
the public release of Webvan's earnings for the year ended December 31,
1999), approximately 40.6 million shares will be eligible for sale
pursuant to Rules 144, 144(k) and 701.
- Beginning on or about March 16, 2000 (45 days following the initial
lock-up expiration period), approximately 67.7 million additional shares
will be eligible for sale pursuant to Rules 144, 144(k) and 701.
- Beginning 180 days after the date of this prospectus, approximately 162.4
million additional shares will be eligible for sale pursuant to Rules
144, 144(k) and 701.
In general, under Rule 144 as currently in effect, after the expiration of
the lock-up agreements, a person who has beneficially owned restricted
securities for at least one year would be entitled to sell within any
three-month period a number of shares that does not exceed the greater of:
- one percent of the number of shares of common stock then outstanding
which will equal approximately 3,174,538 shares immediately after the
offering; or
- the average weekly trading volume of the common stock during the four
calendar weeks preceding the sale.
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<PAGE> 58
Sales under Rule 144 are also subject to requirements with respect to
manner of sale, notice, and the availability of current public information about
us. Under Rule 144(k), a person who is not deemed to have been our affiliate and
any time during the three months preceding a sale, and who has beneficially
owned the shares proposed to be sold for at least two years, is entitled to sell
such shares without complying with the manner of sale, public information,
volume limitation or notice provisions of Rule 144.
Rule 701, as currently in effect, permits our employees, officers,
directors or consultants who purchased shares pursuant to a written compensatory
plan or contract to resell such shares in reliance upon Rule 144 but without
compliance with specific restrictions. Rule 701 provides that affiliates may
sell their Rule 701 shares under Rule 144 without complying with the holding
period requirement and that non-affiliates may sell such shares in reliance on
Rule 144 without complying with the holding period, public information, volume
limitation or notice provisions of Rule 144.
In addition, we intend to file a registration statement on Form S-8 under
the Securities Act within 180 days following the date of this prospectus to
register shares to be issued pursuant to our employee benefit plans. As a
result, any options or rights exercised under the 1997 Stock Plan, the 1999
Employee Stock Purchase Plan or any other benefit plan after the effectiveness
of the registration statement will also be freely tradable in the public market.
However, such shares held by affiliates will still be subject to the volume
limitation, manner of sale, notice and public information requirements of Rule
144 unless otherwise resalable under Rule 701. As of June 30, 1999 there were
outstanding options for the purchase of 40,433,688 shares of common stock, of
which options to purchase 13,756,055 shares were exercisable.
LEGAL MATTERS
Certain legal matters will be passed upon on behalf of Webvan by Wilson
Sonsini Goodrich & Rosati, Professional Corporation, Palo Alto, California.
Jeffrey D. Saper, a member of Wilson Sonsini Goodrich & Rosati, serves as our
Secretary. Certain legal matters will be passed upon for the underwriters by
Shearman & Sterling, New York, New York. As of the date of this prospectus, an
investment partnership composed of certain current and former members of and
persons associated with Wilson Sonsini Goodrich & Rosati, P.C. and certain
members of Wilson Sonsini Goodrich & Rosati, P.C. beneficially owned an
aggregate of 2,068,944 shares of common stock.
EXPERTS
The consolidated financial statements as of December 31, 1997 and 1998 and
for the period from December 17, 1996 (date of inception) to December 31, 1997
and for the year ended December 31, 1998 included in this prospectus have been
audited by Deloitte & Touche LLP, independent auditors, as stated in their
report appearing herein, and have been so included in reliance upon the report
of such firm given upon their authority as experts in accounting and auditing.
56
<PAGE> 59
AVAILABLE INFORMATION
We have filed with the Securities and Exchange Commission a registration
statement on Form S-1 under the Securities Act with respect to the common stock
offered in this offering. This prospectus does not contain all of the
information set forth in the registration statement and the exhibits and
schedule thereto. For further information with respect to Webvan and the common
stock offered in this offering, we refer you to the registration statement and
to the attached exhibits and schedules. Statements made in this prospectus
concerning the contents of any document referred to in this prospectus are not
necessarily complete. With respect to each such document filed as an exhibit to
the registration statement, we refer you to the exhibit for a more complete
description of the matter involved.
The reports and other information we file with the SEC can be inspected and
copied at the public reference facilities that the SEC maintains at Room 1024,
450 Fifth Street, N.W., Washington, D.C. 20549, and at the SEC's regional
offices located at 7 World Trade Center, 13th Floor, New York, New York 10048,
and Suite 1400, Northwestern Atrium Center, 500 West Madison Street, Chicago,
Illinois 60661. Copies of these materials can be obtained at prescribed rates
from the Public Reference Section of the SEC at the principal offices of the
SEC, 450 Fifth Street, N.W., Washington, D.C. 20549. You may obtain information
regarding the operation of the public reference room by calling 1(800) SEC-0330.
The SEC also maintains a web site (http://www.sec.gov) that makes available the
reports and other information we have filed with the SEC.
57
<PAGE> 60
WEBVAN GROUP, INC.
AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1998,
THE PERIOD FROM DECEMBER 17, 1996 (DATE OF INCEPTION)
TO DECEMBER 31, 1997 AND CUMULATIVE FROM
DECEMBER 17, 1996 (DATE OF INCEPTION) TO MARCH 31, 1999
AND INDEPENDENT AUDITORS' REPORT
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Report................................ F-2
Consolidated Balance Sheets................................. F-3
Consolidated Statements of Operations and Comprehensive F-4
Loss......................................................
Consolidated Statements of Shareholders' Equity............. F-5
Consolidated Statements of Cash Flows....................... F-6
Notes to Consolidated Financial Statements.................. F-7
</TABLE>
F-1
<PAGE> 61
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders of
Webvan Group, Inc.:
We have audited the accompanying consolidated balance sheets of Webvan
Group, Inc. (formerly Intelligent Systems for Retail, Inc.) and subsidiary
(collectively, "Webvan") (a development stage company) as of December 31, 1998
and 1997, and the related consolidated statements of operations and
comprehensive loss, shareholders' equity and cash flows for the year ended
December 31, 1998 and for the period from December 17, 1996 (date of inception)
to December 31, 1997. These financial statements are the responsibility of
Webvan's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of Webvan at December 31, 1998 and
1997, and the results of its operations and its cash flows for periods stated
above, in conformity with generally accepted accounting principles.
Deloitte & Touche LLP
San Jose, California
March 5, 1999
(August 5, 1999 as to the second sentence of Note 1 and as to Note 15 and
September , 1999 as to the first paragraph of Note 7)
To the Board of Directors and Shareholders of Webvan Group, Inc.:
The accompanying consolidated financial statements included herein reflect
the approval by Webvan's shareholders of the three-for-two stock split of
Webvan's common and preferred stock as described in Note 7 to the consolidated
financial statements. The above opinion is in the form that will be signed by
Deloitte & Touche LLP upon the effectiveness of such event assuming that from
September 7, 1999 to the effective date of such event, no other events shall
have occurred that would affect the accompanying consolidated financial
statements or notes thereto.
/s/ Deloitte & Touche LLP
San Jose, California
September 7, 1999
F-2
<PAGE> 62
WEBVAN GROUP, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31, PRO FORMA
------------------ JUNE 30, JUNE 30,
1997 1998 1999 1999
------- -------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash and equivalents...................................... $ 2,935 $ 13,839 $ 21,836
Marketable securities..................................... 5,043 7,728 22,231
Inventories............................................... -- -- 596
Related party receivable.................................. -- -- 847
Prepaid expenses and other current assets................. 5 114 3,294
------- -------- --------
Total current assets............................... 7,983 21,681 48,804
Property, Equipment and Leasehold Improvements, Net......... 208 32,624 56,186
Loan Fees, Net.............................................. -- 2,000 1,713
Investments................................................. -- 518 1,018
Deposits.................................................... 88 1,418 1,255
Restricted Cash............................................. -- 1,768 3,453
------- -------- --------
Total Assets................................................ $ 8,279 $ 60,009 $112,429
======= ======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable.......................................... $ 172 $ 6,815 $ 7,230
Accrued liabilities....................................... 118 706 5,813
Current portion capital lease obligations................. -- 133 621
Current portion long-term debt............................ -- 3,104 3,367
------- -------- --------
Total current liabilities.......................... 290 10,758 17,031
------- -------- --------
Deferred Rent............................................... 17 107 268
Capital Lease Obligations................................... -- 637 2,137
Long-Term Debt.............................................. -- 13,593 11,811
------- -------- --------
Commitments and Contingencies (Notes 6 and 11).............. -- -- --
Redeemable Common Stock..................................... -- 1,302 1,556
Shareholders' Equity
Series A preferred stock, no par value; 112,635 shares
authorized; 112,583, 112,635, 112,635 shares and none
issued and outstanding at December 31, 1997, 1998, June
30, 1999 and pro forma, respectively; (liquidation
preferences of $10,789, $10,794 and $10,794 at December
31, 1997, 1998 and June 30, 1999, respectively)......... 10,754 10,759 10,759 $ --
Series B preferred stock, no par value; 41,814 shares
authorized; 39,101 and 39,113 shares and none issued and
outstanding; liquidation preference of $35,713 and
$35,724 at December 31, 1998, June 30, 1999 and pro
forma, respectively..................................... -- 34,823 34,834 --
Series C preferred stock, no par value; 32,341 shares
authorized; 32,341 shares and none issued and
outstanding June 30, 1999 and pro forma; liquidation
preference of $75,000................................... -- -- 72,776 --
Restricted common stock, no par value; 360,000 shares
authorized; 64,394, 78,590, 81,909 and 265,998 issued
and outstanding at December 31, 1997, 1998, June 30,
1999 and pro forma, respectively........................ 58 11,921 31,251 149,620
Additional paid-in capital................................ -- 1,686 3,829 3,829
Deferred compensation..................................... -- (10,737) (23,790) (23,790)
Deficit accumulated during the development stage.......... (2,840) (14,844) (49,978) (49,978)
Accumulated other comprehensive income (loss)............. -- 4 (55) (55)
------- -------- -------- --------
Total shareholders' equity......................... 7,972 33,612 79,626 $ 79,626
------- -------- -------- ========
Total.............................................. $ 8,279 $ 60,009 $112,429
======= ======== ========
</TABLE>
See notes to consolidated financial statements.
F-3
<PAGE> 63
WEBVAN GROUP, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PERIOD FROM CUMULATIVE
DECEMBER 17, FROM
1996 (DATE OF DECEMBER 17,
INCORPORATION) SIX MONTHS 1996 (DATE OF
TO YEAR ENDED ENDED JUNE 30, INCORPORATION)
DECEMBER 31, DECEMBER 31, ------------------------- TO JUNE 30,
1997 1998 1998 1999 1999
-------------- ------------ ----------- ----------- --------------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net Sales.................. $ -- $ -- $ -- $ 395 $ 395
Cost of Goods Sold......... -- -- -- 419 419
------- -------- ------- -------- --------
Gross Profit (Loss)........ -- -- -- (24) (24)
------- -------- ------- -------- --------
Software Development
Expenses................. 244 3,010 765 6,308 9,562
General and Administrative
Expenses................. 2,612 8,825 2,739 25,296 36,733
Amortization of Deferred
Stock Compensation....... -- 1,060 43 3,953 5,013
------- -------- ------- -------- --------
Total Expenses... 2,856 12,895 3,547 35,557 51,038
------- -------- ------- -------- --------
Interest Income............ 85 923 285 1,641 2,649
Interest Expense........... 69 32 -- 1,194 1,295
------- -------- ------- -------- --------
Net Interest Income........ 16 891 285 447 1,354
------- -------- ------- -------- --------
Net Loss................... (2,840) (12,004) (3,262) (35,134) (49,978)
Unrealized Gain (Loss) on
Marketable Securities.... -- 4 (2) (59) (55)
------- -------- ------- -------- --------
Comprehensive Loss......... $(2,840) $(12,000) $(3,264) $(35,193) $(50,033)
======= ======== ======= ======== ========
Basic and Diluted Net Loss
Per Share (Note 10)...... $ (0.08) $ (0.18) $ (0.05) $ (0.48) $ (0.89)
======= ======== ======= ======== ========
Shares Used in Calculating
Basic and Diluted Net
Loss Per Share (Note
10)...................... 37,407 67,114 65,075 73,280 56,221
======= ======== ======= ======== ========
Pro Forma Basic and Diluted
Net Loss Per Share....... $ (0.06) $ (0.14)
======== ========
Shares Used in Calculating
Pro Forma Basic and
Diluted Net Loss Per
Share.................... 201,978 253,743
======== ========
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE> 64
WEBVAN GROUP, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
CONVERTIBLE CONVERTIBLE CONVERTIBLE
SERIES A SERIES B SERIES C RESTRICTED
PREFERRED STOCK PREFERRED STOCK PREFERRED STOCK COMMON STOCK
--------------------- -------------------- -------------------- --------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
----------- ------- ---------- ------- ---------- ------- ---------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Issuance of Series A preferred, net
of $35 issuance costs, October
1997................................ 112,582,992 $10,754 -- $ -- -- $ -- -- $ --
Issuance of restricted common stock,
April through September 1997........ 64,380,972 53
Common stock issued for services,
December 1997....................... 13,500 5
Net loss.............................
----------- ------- ---------- ------- ---------- ------- ---------- -------
BALANCES, December 31, 1997.......... 112,582,992 10,754 -- -- -- -- 64,394,472 58
Issuance of Series A preferred,
January 1998........................ 52,176 5
Issuance of Series B preferred, net
of $890 issuance costs, May through
September 1998...................... 39,101,304 34,823
Series B preferred warrants granted
for debt, May 1998..................
Exercise of options during 1998...... 14,195,250 66
Options granted for services,
September and November 1998.........
Deferred Compensation................ 11,797
Amortization of deferred
compensation........................
Accumulated other comprehensive
income..............................
Net loss.............................
----------- ------- ---------- ------- ---------- ------- ---------- -------
BALANCES, December 31, 1998.......... 112,635,168 10,759 39,101,304 34,823 -- -- 78,589,722 11,921
Issuance of Series B preferred,
January 1999*....................... 12,000 11
Issuance of Series C preferred, net
of issuance costs of $2,363, January
through April 1999*................. 32,341,200 72,776
Exercise of stock options during
1999*............................... 2,868,840 76
Issuance of restricted common stock,
June 1999........................... 450,000 2,248
Issuance of warrant, June 1999.......
Deferred Compensation................ 17,006
Amortization of deferred
compensation........................
Accumulated other comprehensive
loss*...............................
Net loss*............................
----------- ------- ---------- ------- ---------- ------- ---------- -------
BALANCES, June 30, 1999 *............ 112,635,168 $10,759 39,113,304 $34,834 32,341,200 $72,776 81,908,562 $31,251
=========== ======= ========== ======= ========== ======= ========== =======
<CAPTION>
DEFICIT
ACCUMULATED ACCUMULATED
ADDITIONAL DURING THE OTHER TOTAL
PAID-IN DEFERRED DEVELOPMENT COMPREHENSIVE SHAREHOLDERS'
CAPITAL COMPENSATION STAGE INCOME (LOSS) EQUITY
---------- ------------ ----------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Issuance of Series A preferred, net
of $35 issuance costs, October
1997................................ $ -- $ -- $ -- $ -- $ 10,754
Issuance of restricted common stock,
April through September 1997........ 53
Common stock issued for services,
December 1997....................... 5
Net loss............................. (2,840) (2,840)
------ -------- -------- ---- --------
BALANCES, December 31, 1997.......... -- -- (2,840) -- 7,972
Issuance of Series A preferred,
January 1998........................ 5
Issuance of Series B preferred, net
of $890 issuance costs, May through
September 1998...................... 34,823
Series B preferred warrants granted
for debt, May 1998.................. 1,679 1,679
Exercise of options during 1998...... 66
Options granted for services,
September and November 1998......... 7 7
Deferred Compensation................ (11,797) --
Amortization of deferred
compensation........................ 1,060 1,060
Accumulated other comprehensive
income.............................. 4 4
Net loss............................. (12,004) (12,004)
------ -------- -------- ---- --------
BALANCES, December 31, 1998.......... 1,686 (10,737) (14,844) 4 33,612
Issuance of Series B preferred,
January 1999*....................... 11
Issuance of Series C preferred, net
of issuance costs of $2,363, January
through April 1999*................. 72,776
Exercise of stock options during
1999*............................... 76
Issuance of restricted common stock,
June 1999........................... 2,248
Issuance of warrant, June 1999....... 2,143 2,143
Deferred Compensation................ (17,006) --
Amortization of deferred
compensation........................ 3,953 3,953
Accumulated other comprehensive
loss*............................... (59) (59)
Net loss*............................ (35,134) (35,134)
------ -------- -------- ---- --------
BALANCES, June 30, 1999 *............ $3,829 $(23,790) $(49,978) $(55) $ 79,626
====== ======== ======== ==== ========
</TABLE>
- ---------------
* Unaudited
See notes to consolidated financial statements.
F-5
<PAGE> 65
WEBVAN GROUP, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
PERIOD FROM CUMULATIVE FROM
DECEMBER 17, DECEMBER 17,
1996 (DATE OF SIX MONTHS ENDED 1996 (DATE OF
INCORPORATION) TO YEAR ENDED JUNE 30, INCORPORATION)
DECEMBER 31, DECEMBER 31, ------------------------- TO JUNE 30,
1997 1998 1998 1999 1999
----------------- ------------ ----------- ----------- ---------------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash Flows From Operating Activities:
Net loss....................................... $(2,840) $(12,004) $ (3,262) $(35,134) $(49,978)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization................ 57 263 50 2,673 2,993
Accretion on redeemable common stock......... -- 1,242 564 254 1,496
Amortization of deferred stock
compensation............................... -- 1,060 43 3,953 5,013
Stock and stock options issued for
services................................... 95 7 -- -- 102
Noncash stock compensation................... -- -- -- 1,640 1,640
Issuance of warrant.......................... -- -- -- 2,143 2,143
Undistributed income on short-term
investments................................ (47) -- -- -- (47)
Changes in operating assets and liabilities:
Inventories................................ -- -- -- (596) (596)
Prepaid expenses and other current
assets................................... (5) (109) (1,671) (3,180) (3,294)
Accounts payable........................... 172 6,643 1,942 415 7,230
Accrued liabilities........................ 118 588 1,162 5,107 5,813
Deferred rent.............................. 17 90 3 161 268
------- -------- -------- -------- --------
Net cash used in operating activities.... (2,433) (2,220) (1,169) (22,564) (27,217)
------- -------- -------- -------- --------
Cash Flows From Investing Activities:
Purchases of property, equipment and leasehold
improvements................................. (265) (32,669) (4,283) (25,948) (58,882)
(Purchases) sale of marketable securities...... (4,996) (2,681) 992 (14,562) (22,239)
Purchase of investments........................ -- (518) -- (500) (1,018)
Related party receivable....................... -- -- -- (200) (200)
Deposits....................................... (88) (1,330) (212) 163 (1,255)
Restricted cash................................ -- (1,768) (950) (1,685) (3,453)
------- -------- -------- -------- --------
Net cash used in investing activities.... (5,349) (38,966) (4,453) (42,732) (87,047)
------- -------- -------- -------- --------
Cash Flows From Financing Activities:
Proceeds from shareholder loans................ 2,038 -- -- -- 2,038
Repayment of shareholder loans................. (2,038) -- -- -- (2,038)
Proceeds from long-term debt................... -- 17,168 -- -- 17,168
Repayment of long-term debt.................... -- (471) -- (1,519) (1,990)
Proceeds from capital lease financing.......... -- 794 50 2,200 2,994
Repayment of capital lease obligations......... -- (32) -- (212) (244)
Loan fees capitalized.......................... -- (323) -- -- (323)
Net proceeds from Series A preferred stock..... 10,664 5 -- -- 10,669
Net proceeds from Series B preferred stock..... -- 34,823 34,328 11 34,834
Net proceeds from Series C preferred stock..... -- -- -- 72,776 72,776
Proceeds from restricted common stock issued... 53 78 161 37 168
Proceeds from redeemable common stock issued... -- 48 -- -- 48
------- -------- -------- -------- --------
Net cash provided by financing
activities............................. 10,717 52,090 34,539 73,293 136,100
------- -------- -------- -------- --------
Net Increase in Cash and Equivalents............. 2,935 10,904 28,917 7,997 21,836
Cash and Equivalents, Beginning of period........ -- 2,935 2,935 13,839 --
------- -------- -------- -------- --------
Cash and Equivalents, End of period.............. $ 2,935 $ 13,839 $ 31,852 $ 21,836 $ 21,836
======= ======== ======== ======== ========
Supplemental Cash Flow Information:
Interest paid.................................. $ 69 $ 32 $ -- $ 28 $ 129
======= ======== ======== ======== ========
Income taxes paid.............................. $ 1 $ 1 $ -- $ -- $ 2
======= ======== ======== ======== ========
Restricted common stock issued for short-term
receivables.................................. $ -- $ -- $ -- $ 647 $ 647
======= ======== ======== ======== ========
</TABLE>
See notes to consolidated financial statements.
F-6
<PAGE> 66
WEBVAN GROUP, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION AS OF JUNE 30, 1999 AND FOR THE SIX MONTHS ENDED JUNE 30, 1998
AND JUNE 30, 1999 IS UNAUDITED)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION -- Webvan Group, Inc., formerly Intelligent Systems for
Retail, Inc., and subsidiary (a development stage company) (collectively,
"Webvan") was incorporated in California on December 17, 1996. On April 21,
1999, Intelligent Systems for Retail, Inc. changed its name to Webvan Group,
Inc. Webvan will be an Internet-based service provider offering an array of
groceries, home meal replacements, drugstore items and other merchandise.
Presently, Webvan continues in the process of developing its system software,
the completion of its initial distribution center, and its internet "Webstore".
Webvan began selling and delivering products on an initial test basis during the
first quarter of 1999.
On March 26, 1998, Webvan formed a wholly-owned subsidiary Webvan -- Bay
Area, Inc. ("WBA"). WBA represents Webvan's distribution center and cross
docking stations that will provide the internet-based retail service and home
delivery.
As of June 30, 1999, Webvan was a development stage company. Successful
completion of the Company's development program and, ultimately, the attainment
of profitable operations is dependent upon future events, including obtaining
adequate financing to fulfill its development activities, increasing its
customer base, implementing and successfully executing its business and
marketing strategy, continuing to develop and enhance its Webstore fulfillment
transactions and hiring quality personnel.
CONSOLIDATION -- The accompanying consolidated financial statements include
the accounts of Webvan and its wholly-owned subsidiary, WBA. All significant
intercompany balances and transactions have been eliminated in the consolidated
financial statements.
USE OF ESTIMATES -- The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
CASH EQUIVALENTS -- Webvan considers all highly liquid instruments acquired
with an original maturity of three months or less when purchased to be cash
equivalents. The recorded carrying amounts of the Company's cash equivalents
approximate to their fair market value due to their highly liquid nature.
MARKETABLE SECURITIES -- Webvan considers all investments with a maturity
of more than three months but less than one year when purchased and investments
to be sold within one year to be short-term and available for sale.
RELATED PARTY RECEIVABLE -- In March 1999, the Company loaned an officer
$200,000 to be used towards the purchase of a house. The loan is interest free
and is due on the earlier of 15 days after the sale of the officer's previous
residence or March 1, 2000.
RESTRICTED CASH -- During 1998, Webvan entered into lease and credit card
merchant bank service agreements which required Webvan to hold three standby
letters of credit. The letters of credit require Webvan to maintain certain
balances on deposit which restricts the use of cash and equivalents. See Note 5
for the amounts of these deposits. These agreements expire at various dates
ranging from 1999 through 2007.
F-7
<PAGE> 67
WEBVAN GROUP, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF JUNE 30, 1999 AND FOR THE SIX MONTHS ENDED JUNE 30, 1998
AND JUNE 30, 1999 IS UNAUDITED)
CONCENTRATION OF CREDIT RISK -- Financial instruments that potentially
subject Webvan to concentrations of credit risk consist principally of cash,
cash equivalents and short-term investments to the extent these exceed federal
insurance limits. Risks associated with cash, cash equivalents and marketable
securities are mitigated by banking with and purchasing commercial paper, market
auction preferred stock, corporate notes, and corporate bonds from credit-worthy
institutions.
PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS -- Property, equipment and
leasehold improvements are stated at cost less accumulated depreciation and
amortization. Depreciation is taken on assets placed into service using the
straight-line method over estimated useful lives of three to five years.
Leasehold improvements are amortized, using the straight-line method, over the
shorter of the lease term or the useful lives of the improvements.
The Company evaluates the recoverability of its long-lived assets in
accordance with Statement of Financial Accounting Standards ("SFAS") No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed of". The Company assesses the impairment of long-lived assets
whenever events and circumstances indicate that the carrying value of an asset
may not be recoverable. No such impairments have been identified to date.
LONG-TERM INVESTMENTS -- are recorded under the cost method of accounting
(Note 2).
LOAN FEES -- Webvan capitalizes loan and capital lease origination fees,
including the fair value of warrants and amortizes them over the life of the
related obligations.
REDEEMABLE COMMON STOCK -- Redeemable common stock represents common stock
sold to employees who have put rights. The put rights allow the shareholders to
sell to the Company, at a price of $0.3658 per share, 2,871,000 shares of common
stock after February 1999, and an additional 1,914,000 shares of common stock
after February 2000. Redeemable common stock was originally recorded at its
$0.0125 fair value as determined by the board of directors, and is being
accreted to the redemption amounts as compensation expense over the period the
put rights become exercisable. These rights expire in March 2000.
INCOME TAXES -- Income taxes are provided at current rates. Deferred income
taxes reflect the net tax effects of temporary differences between the carrying
amounts of assets and liabilities for financial reporting purposes and amounts
used for income tax purposes.
STOCK OPTIONS -- As permitted by SFAS No. 123, Webvan accounts for stock
options to employees using the intrinsic value method in accordance with
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees." As required by SFAS No. 123, the pro forma impact on earnings and
earnings per share resulting from the fair value method is disclosed in Note 8.
REVENUE RECOGNITION -- The Company recognizes revenues from product sales
and delivery, net of returns and discounts, when the products are delivered to
customers.
NET LOSS PER SHARE -- Basic net loss per share excludes dilution and is
computed by dividing net loss by the weighted average number of common shares
outstanding for the period (excluding shares subject to repurchase). Diluted net
loss per common share was the same as basic net loss per common share for all
periods presented since the effect of any potentially dilutive securities is
excluded as they are anti-dilutive because of Webvan's net losses.
UNAUDITED INTERIM FINANCIAL INFORMATION -- The interim financial
information as of June 30, 1999 and for the six months ended June 30, 1998 and
1999 and for the cumulative period from
F-8
<PAGE> 68
WEBVAN GROUP, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF JUNE 30, 1999 AND FOR THE SIX MONTHS ENDED JUNE 30, 1998
AND JUNE 30, 1999 IS UNAUDITED)
December 17, 1996 (date of inception) through June 30, 1999 is unaudited and has
been prepared on the same basis as the audited financial statements. In the
opinion of management, such unaudited financial information includes all
adjustments (consisting only of normal recurring adjustments) necessary for a
fair presentation of the interim information. Operating results for the six
months ended June 30, 1999 are not necessarily indicative of the results that
may be expected for the year ending December 31, 1999.
PRO FORMA NET LOSS PER COMMON SHARE -- Pro forma basic and diluted net loss
per common share is computed by dividing net loss by the weighted average number
of common shares outstanding for the period (excluding shares subject to
repurchase) plus the weighted average number of common shares resulting from the
automatic conversion of outstanding shares of convertible preferred stock, which
will occur upon the closing of the planned initial public offering.
UNAUDITED PRO FORMA INFORMATION -- Upon the closing of the planned initial
public offering, each of the outstanding shares of convertible preferred stock
will convert into one share of common stock. The pro forma balance sheet
presents Webvan's balance sheet as if this had occurred at June 30, 1999.
RECENTLY ISSUED ACCOUNTING STANDARDS -- In June 1997, the Financial
Accounting Standards Board ("FASB") adopted SFAS No. 130 "Reporting
Comprehensive Income," which requires an enterprise to report, by major
components and as a single total, the change in net assets during the period
from non owner sources. Webvan adopted this statement during the year ended
December 31, 1998.
In February 1998, the FASB adopted SFAS No. 132, "Employers' Disclosures
About Pensions and Other Postretirement Benefits, an Amendment of FASB
Statements No. 87, 88, and 106," which revises employers' disclosures about
pension and other postretirement benefit plans. This statement does not change
the measurement or recognition of those plans, but standardizes the disclosure
requirements for pensions and other postretirement benefits to the extent
practicable, requires additional information on changes in the benefit
obligations and fair values of plan assets that will facilitate financial
analysis, and eliminates certain disclosures. Webvan adopted this statement
during the year ended December 31, 1998.
In March 1998, the Accounting Standards Committee of the American Institute
of Certified Public Accountants ("AICPA") issued Statement of Position ("SOP")
98-1, "Accounting for Costs of Computer Software Developed or Obtained for
Internal Use." SOP 98-1 provides guidance for an enterprise on accounting for
the costs of computer software developed or obtained for internal use. Webvan
adopted this statement during the year ended December 31, 1998 and has
capitalized software costs according to the provisions of the standard. These
costs are amortized on a straight-line basis over the useful life of the
software once it is placed into service.
In April 1998, the AICPA issued SOP 98-5, "Reporting on the Costs of
Start-Up Activities", which requires companies to expense the costs of start-up
activities and organization costs as incurred. Webvan adopted this statement
during the year ended December 31, 1998, and such adoption did not affect the
accompanying financial statements.
In June 1998, the FASB issued SFAS No. 133 "Accounting for Derivative
Instruments and Hedging Activities" which defines derivatives, requires that all
derivatives be carried at fair value, and provides for hedging accounting when
certain conditions are met. Webvan will adopt this statement
F-9
<PAGE> 69
WEBVAN GROUP, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF JUNE 30, 1999 AND FOR THE SIX MONTHS ENDED JUNE 30, 1998
AND JUNE 30, 1999 IS UNAUDITED)
for its fiscal year ending December 31, 2000. Management has not fully assessed
the implications of adopting this new standard.
2. INVESTMENTS
On November 24, 1998, an agreement was signed between an equipment
manufacturer and Webvan. The agreement set out the terms for Webvan to acquire
1,000 shares of such equipment manufacturer for a total amount of $1,000,000
which represents a less than 10% interest in the manufacturer. Investments are
recorded at cost as fair market value is not readily determinable. Long-term
investments principally include $500,000 paid for such shares in December 1998.
Webvan paid the additional $500,000 for such shares in January 1999 to complete
this transaction.
3. MARKETABLE SECURITIES
The fair value of marketable securities at June 30, 1999 (unaudited), and
at December 31, 1998 and 1997 are presented below. Fair values are based on
quoted market prices. The Company's marketable securities are classified as
available-for-sale, as the Company intends to sell them as needed for
operations. Balances at year-end consist of the following (in thousands):
<TABLE>
<CAPTION>
JUNE 30, 1999
(UNAUDITED)
-------------------------------------
UNREALIZED
AMORTIZED GAIN (LOSS) MARKET
COST ON INVESTMENT VALUE
--------- ------------- -------
<S> <C> <C> <C>
Money market funds................................. $ 8 $ -- $ 8
Commercial paper................................... 36,129 (12) 36,117
Foreign debt securities............................ 1,638 (6) 1,632
Corporate notes.................................... 6,346 (36) 6,310
------- ---- -------
Total.................................... 44,121 (54) 44,067
Less amounts included in cash and equivalents...... 21,843 (7) 21,836
------- ---- -------
$22,278 $(47) $22,231
======= ==== =======
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1998
----------------------------------
UNREALIZED
AMORTIZED GAIN ON MARKET
COST INVESTMENT VALUE
--------- ---------- -------
<S> <C> <C> <C>
Money market funds.................................... $ 27 $-- $ 27
Commercial paper...................................... 9,781 3 9,784
Commercial notes...................................... 3,164 1 3,165
Commercial bonds...................................... 1,285 -- 1,285
Market auction preferred.............................. 7,306 -- 7,306
------- -- -------
Total....................................... 21,563 4 21,567
Less amounts included in cash and equivalents......... 13,837 2 13,839
------- -- -------
$ 7,726 $2 $ 7,728
======= == =======
</TABLE>
F-10
<PAGE> 70
WEBVAN GROUP, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF JUNE 30, 1999 AND FOR THE SIX MONTHS ENDED JUNE 30, 1998
AND JUNE 30, 1999 IS UNAUDITED)
<TABLE>
<CAPTION>
DECEMBER 31,
1997
------------
<S> <C>
Money market funds.......................................... $ 44
Commercial paper............................................ 7,859
------
Total at cost which approximates market........... 7,903
Less amounts included in cash and equivalents............... 2,860
------
$5,043
======
</TABLE>
4. PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS
Property, equipment and leasehold improvements at December 31, 1997, 1998
and June 30, 1999 consists of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
--------------- JUNE 30,
1997 1998 1999
---- ------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Computer equipment and software........................... $121 $ 2,284 $ 8,917
Machinery and equipment................................... 3 2,026 18,742
Leasehold improvements.................................... 32 407 19,195
Furniture and fixtures.................................... 109 287 625
---- ------- -------
265 5,004 47,479
Accumulated depreciation and amortization................. (57) (310) (2,696)
---- ------- -------
208 4,694 44,783
Construction in progress.................................. -- 27,930 11,403
---- ------- -------
Property, equipment and leasehold improvements, net....... $208 $32,624 $56,186
==== ======= =======
</TABLE>
Equipment under capital leases amounted to $794,000 at 1998. Accumulated
amortization on capital leases as of December 31, 1998 was $72,155.
Construction in progress includes costs incurred in the construction of
Webvan's distribution center located in Oakland. Such costs include the purchase
and installation of materials handling equipment, refrigeration and freezer
storage units. Webvan retains up to ten percent on all construction contracts in
process until final settlement of such contracts.
During the first six months of 1999, $2.2 million of computer equipment and
software was financed with capital leases.
F-11
<PAGE> 71
WEBVAN GROUP, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF JUNE 30, 1999 AND FOR THE SIX MONTHS ENDED JUNE 30, 1998
AND JUNE 30, 1999 IS UNAUDITED)
5. DEPOSITS
Deposits consist of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1998 1999
------------ -----------
(UNAUDITED)
<S> <C> <C>
Software licenses........................................... $ 899 $ --
Payroll service provider.................................... 329 436
Real property leases........................................ 178 807
Other....................................................... 12 12
------ ------
$1,418 $1,255
====== ======
</TABLE>
6. BORROWING ARRANGEMENTS
In December 1998, WBA entered into a $17,000,000 loan and security
agreement. The loan is payable in $472,000 monthly installments from January
1999 through June 2002 with an additional $2,550,000 payment of the remaining
balance payable in June 2002. Based upon this repayment schedule, the imputed
interest on this loan is 15.2%. The loan is secured by substantially all the
assets of Webvan.
Related to the above financing, Webvan issued warrants to the lenders to
purchase an aggregate of 2,233,578 shares of Series B preferred stock at an
exercise price of $0.91 per share. The fair value of the warrants at the date
granted was $1,564,000 and was capitalized with loan fees (see Note 9). Webvan
also paid $323,000 in loan fees. The loan fees are being amortized over the 42
month term of the loan.
As part of an operating lease the landlord agreed to finance $168,340 of
improvements. The loan is payable in monthly installments including interest at
11% from January 1, 1999 through July 2003.
Future principal maturities under loan agreements as of December 31, 1998
are as follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31,
------------
<S> <C>
1999...................................................... $ 3,104
2000...................................................... 3,909
2001...................................................... 4,545
2002...................................................... 5,113
2003...................................................... 26
-------
16,697
Less current maturities..................................... 3,104
-------
$13,593
=======
</TABLE>
CAPITAL LEASE OBLIGATIONS
In March 1998, Webvan entered into a $3,000,000 nonrevolving master lease
agreement. The agreement specifies equipment which Webvan can purchase prior to
March 23, 1999 under the lease agreement. As of December 31, 1998, $2,230,000
was available for future financing, and obligations
F-12
<PAGE> 72
WEBVAN GROUP, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF JUNE 30, 1999 AND FOR THE SIX MONTHS ENDED JUNE 30, 1998
AND JUNE 30, 1999 IS UNAUDITED)
outstanding totaled $770,000. As part of the leasing arrangement, warrants for
164,226 shares of Series B preferred stock were granted to the provider at an
exercise price of $0.91 per share. The $115,000 fair value of the warrants at
the date granted has been capitalized with loan fees and is being amortized over
the 60 month term of the leases (see Note 9).
Future lease payments under the lease agreement as of December 31, 1998 are
as follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31,
------------
<S> <C>
1999...................................................... $ 241
2000...................................................... 241
2001...................................................... 240
2002...................................................... 232
2003...................................................... 59
------
Total future lease payments................................. 1,013
Less portion relating to interest........................... 243
------
Total capital lease obligations............................. 770
Less current portion........................................ 133
------
Total long-term portion..................................... $ 637
======
</TABLE>
7. SHAREHOLDERS' EQUITY
STOCK SPLITS
In March 1998, January 1999, July 1999 and September 1999, the Company
effected two-for-one, two-for-one, two-for-one and three-for-two stock splits,
respectively, on the then outstanding shares, warrants and options. The splits
have been retroactively reflected in the financial statements and notes to the
financial statements.
CONVERTIBLE PREFERRED STOCK
Significant terms of outstanding Series A and B preferred stock are as
follows:
- In the event of liquidation, dissolution, or winding up of Webvan, the
holders of Series A and Series B preferred stock are entitled to receive
$0.0958 and $0.91 per share (subject to adjustment for stock splits and
like events), respectively, plus any declared but unpaid dividends prior
to any distribution to the common shareholders. After the preferred
shareholders have received payment, any remaining assets would be shared
by all preferred and common shareholders on a pro rata basis.
- Each share of preferred stock is convertible at the option of the holder
into one share of common stock (subject to adjustments for stock splits
and like events). Shares will automatically be converted upon an
underwritten initial public offering (IPO) of Webvan's common shares
meeting certain criteria.
- Each share of preferred stock has voting rights equivalent to the number
of shares of common stock into which it is convertible. In addition, for
so long as there are outstanding at least 12,000,000 shares in the case
of the Series A preferred stock, and 12,000,000 shares in the
F-13
<PAGE> 73
WEBVAN GROUP, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF JUNE 30, 1999 AND FOR THE SIX MONTHS ENDED JUNE 30, 1998
AND JUNE 30, 1999 IS UNAUDITED)
case of the Series B preferred stock, the holders of each of the Series A
preferred stock and Series B preferred stock shall be entitled to approve
amendments to the articles of incorporation, approve the payment or
declaration of dividends, approve the merger or consolidation of Webvan,
approve the sale of all or substantially all of the assets of the
Company, and approve other actions specified in the articles of
incorporation. In addition, for so long as there are at least 12,000,000
shares of Series A preferred stock outstanding, the holders of the Series
A preferred stock shall be entitled to nominate and elect two directors.
- Dividends may be declared at the discretion of the Board of Directors and
are non-cumulative. Dividends of $0.0067 per share on Series A preferred
stock and $0.0617 on Series B preferred stock (as adjusted for any stock
splits or like events) must be declared and paid before payment of any
common stock dividends.
- Prior to the sale of any shares in a subsequent stock offering, the
existing preferred shareholders shall have a right of first refusal to
purchase the shares, subject to certain exceptions. In addition, upon
written notice of a sale of preferred shares by Webvan's founder, each
shareholder has the right to sell its co-sale pro rata share of the
shares proposed to be sold. These provisions expire upon an initial
public offering.
PREFERRED STOCK -- SERIES C
On January 21, 1999, Webvan authorized the sale and issuance of up to
32,341,200 shares of its Series C preferred stock at a purchase price of $2.32
per share. As of June 30, 1999, Webvan had issued 32,341,200 shares of Series C
preferred stock. The actual cash proceeds, net of $2 million of issuance costs,
amounted to $73 million.
RESTRICTED COMMON STOCK
At December 31, 1998, Webvan had 360,000,000 authorized shares of common
stock of which 78,589,722 were issued and outstanding. At December 31, 1998,
Webvan had reserved shares of common stock for issuance as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
--------------
<S> <C>
Issuance under stock options plan........................... 46,010
Issuance upon conversion of Series A preferred stock........ 112,635
Issuance upon conversion of Series B preferred stock........ 41,814
-------
Total shares reserved....................................... 200,459
=======
</TABLE>
Significant terms of the restricted common stock are as follows:
- In the event that the continuous status of an employee, consultant or
director of Webvan terminates for any reason, Webvan shall upon the date
of such termination have an irrevocable right for a period of 90 days
from such termination date to repurchase any unreleased (unvested) shares
at the original purchase price.
- The shares shall be released from the repurchase option immediately
(i.e., fully vested) or over a three-year period depending on the
specific terms of the agreement and the parties involved. As of December
31, 1998, 66,000,000 shares (see Note 8) were subject to repurchase under
the applicable restricted stock purchase agreements.
F-14
<PAGE> 74
WEBVAN GROUP, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF JUNE 30, 1999 AND FOR THE SIX MONTHS ENDED JUNE 30, 1998
AND JUNE 30, 1999 IS UNAUDITED)
- Prior to the sale of any common shares owned by certain shareholders,
Webvan shall have a right of first refusal to purchase the shares. These
rights shall terminate upon the closing of an IPO, a sale of all or
substantially all the assets of Webvan, or a merger.
- In connection with a possible IPO, the shareholders agree not to sell any
shares without the prior written consent of Webvan or the underwriters
managing the IPO for up to 180 days from the effective date of such
registration.
- Each share of common stock issued and outstanding shall have one vote.
8. STOCK OPTION PLAN
On September 17, 1997, Webvan adopted the 1997 Stock Plan (the Plan) and
reserved 30,000,000 shares of Webvan's common stock for issuance under the Plan,
which expires on September 17, 2007. Options are granted at fair market value at
the date of grant as determined by the Board of Directors. As provided for in
the Plan, incentive and non-statutory stock options may be granted to employees,
officers, directors or consultants. Incentive options may only be granted to
employees and at an exercise price of no less than fair value on the date of
grant. Non-statutory options may be granted at an exercise price of no less than
85% of fair value. For owners of more than 10% of Webvan's stock, options may
only be granted for an exercise price of no less than 110% of fair value.
Options generally become exercisable at a rate of 25% on the one year
anniversary of the vesting commencing date, which may precede the grant date,
with an additional 6.25% exercisable at the end of each quarter thereafter until
fully vested at the end of the fourth year. Vesting may not exceed five years
for grants to owners of more than 10% of Webvan's voting power, nor exceed ten
years for all other option holders.
Stock option activity under the 1997 Stock Plan is summarized as follows:
<TABLE>
<CAPTION>
WEIGHTED
NUMBER OF AVERAGE
SHARES EXERCISE
(IN THOUSANDS) PRICE
-------------- --------
<S> <C> <C>
Options granted during 1997 (weighted average fair value of
$0.00016)................................................. 12,588 $0.00081
Options canceled during 1997................................ (108) 0.00081
-------
Balance, December 31, 1997 (none exercisable)............... 12,480 0.00081
Options granted during 1998 (weighted average fair value of
$0.01740)................................................. 46,437 0.10206
Options exercised during 1998............................... (18,981) 0.00645
Options canceled during 1998................................ (3,210) 0.02735
-------
Balance, December 31, 1998.................................. 36,726 0.12361
Options granted during 1999 (unaudited)..................... 6,990 1.90332
Options exercised during 1999 (unaudited)................... (2,869) 0.02554
Options canceled during 1999 (unaudited).................... (413) 0.12429
-------
Balance, June 30, 1999 (unaudited).......................... 40,434 $0.26546
=======
</TABLE>
F-15
<PAGE> 75
WEBVAN GROUP, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF JUNE 30, 1999 AND FOR THE SIX MONTHS ENDED JUNE 30, 1998
AND JUNE 30, 1999 IS UNAUDITED)
Additional information regarding options outstanding as of December 31,
1998 is as follows:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
------------------------------------- ---------------------
NUMBER WEIGHTED NUMBER
OF AVERAGE WEIGHTED OF WEIGHTED
SHARES REMAINING AVERAGE SHARES AVERAGE
EXERCISE (IN CONTRACTUAL EXERCISE (IN EXERCISE
PRICES THOUSANDS) LIFE (YEARS) PRICE THOUSANDS) PRICE
- ------------------- ---------- ------------ --------- ---------- --------
<S> <C> <C> <C> <C> <C>
$0.00081 2,163 8.09 $0.00081 924 $0.00081
$0.01250 13,062 9.07 $0.01250 6,741 $0.01250
$0.10000 13,998 9.60 $0.10000 -- --
$0.41667 7,503 9.94 $0.41667 -- --
------ -----
$0.00081 - $0.41667 36,726 9.39 $0.12773 7,665 $0.00650
====== =====
</TABLE>
At December 31, 1998, shares of common stock available for future option
grants totaled 16,293,522. During 1998 and in January 1999, Webvan's Board of
Directors increased the 30,000,000 shares of common stock reserved under the
plan as follows: 12,000,000 in May 1998; 6,000,000 in July 1998; 6,000,000 in
October 1998; 12,000,000 in December 1998 and 6,000,000 in January 1999. As a
result, 50,150,910 shares are reserved in the option pool as of June 30, 1999.
ADDITIONAL STOCK PLAN INFORMATION
As discussed in Note 1, Webvan accounts for its stock-based awards using
the intrinsic value method in accordance with APB 25. Based on the stock value
and exercise prices, during the year ended December 31, 1998, $1,060,00 of
compensation expense has been recognized in the financial statements for
employee stock arrangements.
Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation", (SFAS 123) requires the disclosure of pro forma net
income and earnings per share as if Webvan had adopted the fair value method as
of the beginning of the period ended December 31, 1997. Webvan's calculations
were made using the minimum value method with the following weighted average
assumptions: expected life of 60 months following the grant date; risk free
interest rates of 6% in 1998; and no dividends during the expected term.
Webvan's calculations are based on a single option valuation approach and
forfeitures are recognized as they occur. If the computed fair value of 1998 and
1997 awards had been charged to compensation over the vesting period of the
awards, the net loss would have been $12,028,000 ($(0.18) per share, basic and
diluted) in 1998 and $2,841,000 ($(0.08) per share, basic and diluted) in 1997.
F-16
<PAGE> 76
WEBVAN GROUP, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF JUNE 30, 1999 AND FOR THE SIX MONTHS ENDED JUNE 30, 1998
AND JUNE 30, 1999 IS UNAUDITED)
9. NONCASH FINANCING ACTIVITIES
STOCK AND OPTIONS FOR RECRUITING
Webvan issued the following shares and options for recruiting services that
represent noncash operating expenses (in thousands, except per share amounts):
<TABLE>
<CAPTION>
FAIR
NUMBER FAIR VALUE AT
DATE OF VALUE ISSUANCE
ISSUED SHARES PER SHARE DATE
------ ---------- --------- --------
<S> <C> <C> <C> <C>
Stock:
Series A preferred stock................ 1997 939 $0.09583 $90
Restricted common....................... 1997 360 0.01250 5
Series A preferred stock................ 1998 51 0.09583 5
</TABLE>
<TABLE>
<CAPTION>
FAIR
SHARES EXERCISE VALUE
DATE COVERED BY PRICE AT GRANT
ISSUED OPTIONS PER SHARE DATE
------ ---------- --------- --------
<S> <C> <C> <C> <C>
Stock options --
Restricted common....................... 1998 160 $0.10000 $7
</TABLE>
DEFERRED COMPENSATION
In connection with the grant of certain stock options in 1998 and 1999, the
Company recorded deferred compensation of $11,797,000 and $17,006,000 and
compensation expense of $1,060,000 and $3,953,000, respectively, representing
the difference between the deemed fair value and the option exercise price as
determined by the Board of Directors on the date of grant. The deferred
compensation is being amortized over the four-year vesting period of the
underlying options.
WARRANTS FOR DEBT
Webvan issued the following warrants in connection with its long-term debt
and capital lease arrangements (in thousands, except per share amounts):
<TABLE>
<CAPTION>
FAIR
SHARES EXERCISE VALUE
DATE COVERED BY PRICE AT GRANT
ISSUED WARRANTS PER SHARE DATE
------ ---------- --------- --------
<S> <C> <C> <C> <C>
Series B preferred stock warrants......... 1998 2,398 $ 0.91 $1,679
</TABLE>
The above shares and shares covered by options and warrants reflect the
two-for-one stock splits in March 1998, January 1999 and July 1999 and the
three-for-two stock split in August 1999. The fair value of the options and
warrants was determined using the Black-Scholes option pricing model this the
following assumptions: expected life of seven years; risk-free interest rate of
6% in 1998 and 1997; no dividends during the expected term and volatility of
80%. The calculations are based on a single option valuation approach and
forfeitures are recognized as they occur. The warrants expire November 2005.
F-17
<PAGE> 77
WEBVAN GROUP, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF JUNE 30, 1999 AND FOR THE SIX MONTHS ENDED JUNE 30, 1998
AND JUNE 30, 1999 IS UNAUDITED)
10. NET LOSS PER SHARE
The following is a reconciliation of the numerators and denominators used
in computing basic and diluted net loss per share (in thousands except per share
amounts):
<TABLE>
<CAPTION>
CUMULATIVE
PERIOD FROM FROM
DECEMBER 17, DECEMBER 17,
1996 (DATE OF YEAR SIX MONTHS ENDED 1996 (DATE OF
INCORPORATION) ENDED JUNE 30, INCORPORATION)
TO DECEMBER 31, DECEMBER 31, ------------------------- TO JUNE 30,
1997 1998 1998 1999 1999
--------------- ------------ ----------- ----------- --------------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net loss (numerator),
basic and
diluted............ $(2,840) $(12,004) $(3,262) $(35,134) $(49,978)
------- -------- ------- -------- --------
Shares (denominator):
Weighted average
common shares
outstanding..... 37,407 76,934 70,518 84,689 62,322
Weighted average
common shares
outstanding and
subject to
repurchase...... -- (9,820) (5,443) (11,409) (6,101)
------- -------- ------- -------- --------
Shares used in
computation, basic
and diluted........ 37,407 67,114 65,075 73,280 56,221
======= ======== ======= ======== ========
Net loss per share,
basic and
diluted............ $ (0.08) $ (0.18) $ (0.05) $ (0.48) $ (0.89)
======= ======== ======= ======== ========
</TABLE>
F-18
<PAGE> 78
WEBVAN GROUP, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF JUNE 30, 1999 AND FOR THE SIX MONTHS ENDED JUNE 30, 1998
AND JUNE 30, 1999 IS UNAUDITED)
For the above-mentioned periods, the Company had securities outstanding
which could potentially dilute basic earnings per share in the future, but were
excluded from the computation of diluted net loss per share in the periods
presented, as their effect would have been antidilutive. Such outstanding
securities consist of the following (in thousands, except per share amounts):
<TABLE>
<CAPTION>
CUMULATIVE
PERIOD FROM FROM
DECEMBER 17, DECEMBER 17,
1996 (DATE OF YEAR SIX MONTHS ENDED 1996 (DATE OF
INCORPORATION) ENDED JUNE 30, INCORPORATION)
TO DECEMBER 31, DECEMBER 31, ------------------------- TO JUNE 30,
1997 1998 1998 1999 1999
--------------- ------------ ----------- ----------- ---------------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Convertible preferred
stock.............. 112,583 151,736 151,163 184,090 184,090
Shares of common
stock subject to
repurchase......... -- 14,456 16,629 9,345 9,345
Outstanding options.. 12,480 36,726 15,870 40,434 40,434
Warrants............. -- 2,398 -- 2,398 2,398
-------- -------- -------- -------- --------
Total...... 125,063 205,316 183,662 236,267 236,267
======== ======== ======== ======== ========
Weighted average
exercise price of
options............ $0.00083 $0.12773 $0.01043 $0.27431 $0.27431
======== ======== ======== ======== ========
Weighted average
exercise price of
warrants........... $ -- $ 0.91 $ -- $ 0.91 $ 0.91
======== ======== ======== ======== ========
</TABLE>
11. INCOME TAXES
While Webvan is in the development stage, substantially all losses incurred
for financial statements purposes will be deferred for income tax purposes. In
the year that Webvan first generates revenues from operations, expenditures
accumulated during the development stage will start being amortized for income
tax purposes over a five-year period. The deduction of these expenses for
financial statement purposes in years preceding the deduction for income tax
purposes is a temporary difference that creates a deferred tax asset. At
statutory rates, the deferred tax asset amounts to approximately $5.5 million
which has been offset by a valuation allowance of the same amount due to lack of
operating history combined with risks and uncertainties surrounding Webvan's
ability to generate future taxable income.
F-19
<PAGE> 79
WEBVAN GROUP, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF JUNE 30, 1999 AND FOR THE SIX MONTHS ENDED JUNE 30, 1998
AND JUNE 30, 1999 IS UNAUDITED)
Significant components of the Company's deferred tax assets and liabilities
are as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1997 1998
------- -------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards.......................... $ 101 $ 101
Start-up costs capitalized for tax purposes............... 1,000 5,384
Other..................................................... 15 34
------- -------
Total deferred tax assets................................... 1,116 5,519
Valuation allowance......................................... (1,116) (5,519)
------- -------
Net deferred tax assets..................................... $ -- $ --
======= =======
</TABLE>
At December 31, 1998 the Company has federal net operating loss
carryforwards of approximately $227,000, expiring in 2012. The Company has
research tax credit carryforwards available to offset future federal taxes of
$45,000, expiring from 2012 to 2013. The Company has state net operating loss
carryforwards of approximately $235,000, expiring in 2002. The Company also has
state tax credit carryforwards of approximately $25,000, which do not expire.
Utilization of the net operating losses and credits may be subject to an
annual limitation due to ownership change limitations provided by the Internal
Revenue Code and similar state provisions. The annual limitation may result in
the expiration of net operating losses and credits before utilization.
12. LEASES
Webvan leases facilities under noncancelable operating lease agreements
which expire at various dates through 2008.
Future lease payments under the lease agreements as of December 31, 1998
are as follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31,
------------
<S> <C>
1999................................................... $ 1,790
2000................................................... 1,834
2001................................................... 1,900
2002................................................... 1,665
2003................................................... 1,577
Thereafter.................................................. 7,070
-------
Total future lease payments....................... $15,836
=======
</TABLE>
Facilities rent expense was $1,026 and $123 for the periods ended December
31, 1998 and 1997, respectively.
13. EMPLOYEE BENEFIT PLAN
Webvan has a 401(k) profit-sharing plan (the 401(k) Plan) that covers
substantially all employees. The 401(k) Plan provides for voluntary salary
reduction contributions of up to 15% of
F-20
<PAGE> 80
WEBVAN GROUP, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF JUNE 30, 1999 AND FOR THE SIX MONTHS ENDED JUNE 30, 1998
AND JUNE 30, 1999 IS UNAUDITED)
eligible participants' annual compensation subject to Internal Revenue Code
limitations. Under the terms of the 401(k) Plan, Webvan will match 100% of
employees' contributions for the first $500 and 25% thereafter to a maximum of
$2,000 per year. Matching contributions made during the period ended December
31, 1997 and 1998 were $17,000 and $81,000, respectively.
14. RELATED PARTY TRANSACTIONS
From inception through October 1997, Webvan's founder advanced $2,037,679
to the Company in exchange for notes payable bearing 8% interest payable. The
notes were due on demand or upon Webvan's obtaining equity financing. The notes
were fully repaid with interest of $68,709 on October 30, 1997 after issuance of
Series A preferred stock on October 29, 1997.
A general contractor of Webvan has subcontracted with an equipment
manufacturer (see Note 2) to install equipment in Webvan's distribution center.
A total of $4.9 million of this work was completed by December 31, 1998 and is
included in construction in progress within property, equipment and leasehold
improvements.
15. SUBSEQUENT EVENTS
On July 8, 1999, the Company signed an agreement (the "Agreement") with a
contractor to design, develop and construct up to 26 distribution center
warehouse facilities ("Distribution Centers") in the United States. The
Agreement expires July 8, 2002, unless extended by written agreement. As part of
the Agreement, the contractor was granted a warrant to purchase up to 1,800,000
shares of the Company's Series C preferred stock at $2.32 per share (the
"Warrant"). The Warrant is exercisable as to 150,000 shares on July 8, 1999 and
generally becomes exercisable as to the remaining shares as Distribution Centers
are completed by the contractor within agreed upon schedule and budgetary
parameters. A portion of the Warrant shares will be forfeited if the schedule
and budgetary parameters are not met for any Distribution Center.
Under the applicable accounting guidelines in Emerging Issues Task Force
Issue No. 96-18, "Accounting for Equity Instruments That are Issued to Other
Than Employees for Acquiring, or in Conjunction with Selling, Goods or
Services", the measurement date for the Warrant is July 8, 1999 as that is the
performance commitment date. As of July 8, 1999, the Company will capitalize the
fair value of the warrant related to the 150,000 exercisable shares, as
determined by the board of directors, and no amount will be capitalized as of
that date for the fair value of the Warrant related to the non-exercisable
shares as eventual exercisability is dependent on counterparty performance. The
capitalized amount will be amortized over the useful life of the Distribution
Centers. If and when the Warrant becomes exercisable as to additional shares,
based on counterparty performance, the Company will capitalize additional cost
based on the then fair value of the Warrant related to such additional
exercisable shares.
On July 15, 1999, Webvan entered into an agreement that provided for the
sale of 21,670,605 shares of its Series D-2 preferred stock at a price of $12.69
per share totaling approximately $275 million.
F-21
<PAGE> 81
UNDERWRITING
Webvan and the underwriters for the U.S. offering named below (the "U.S.
Underwriters") have entered into an underwriting agreement with respect to the
shares being offered in the United States. Subject to certain conditions, each
U.S. Underwriter has severally agreed to purchase the number of shares indicated
in the following table. Goldman, Sachs & Co., Donaldson, Lufkin & Jenrette
Securities Corporation, Merrill Lynch, Pierce, Fenner & Smith Incorporated,
BancBoston Robertson Stephens Inc., Bear, Stearns & Co. Inc., Deutsche Bank
Securities Inc. and Thomas Weisel Partners LLC are the representatives of the
U.S. Underwriters.
<TABLE>
<CAPTION>
UNDERWRITERS NUMBER OF SHARES
------------ -----------------
<S> <C>
Goldman, Sachs & Co. .......................................
Donaldson, Lufkin & Jenrette Securities Corporation.........
Merrill Lynch, Pierce, Fenner & Smith Incorporated..........
BancBoston Robertson Stephens Inc...........................
Bear, Stearns & Co. Inc.....................................
Deutsche Bank Securities Inc................................
Thomas Weisel Partners LLC..................................
-----------------
Total.....................................................
=================
</TABLE>
If the U.S. Underwriters sell more shares than the total number set forth
in the table above, the U.S. Underwriters have an option to buy up to an
additional shares from Webvan to cover such sales. They may exercise
that option for 30 days. If any shares are purchased pursuant to this option,
the U.S. Underwriters will severally purchase shares in approximately the same
proportion as set forth in the table above.
The following table shows the per share and total underwriting discounts
and commissions to be paid to the U.S. Underwriters by Webvan. Such amounts are
shown assuming both no exercise and full exercise of the U.S. Underwriters'
option to purchase additional shares.
<TABLE>
<CAPTION>
PAID BY WEBVAN
--------------
NO EXERCISE FULL EXERCISE
----------- -------------
<S> <C> <C>
Per share................................................... $ $
Total....................................................... $ $
</TABLE>
Shares sold by the underwriters to the public will initially be offered at
the initial public offering price set forth on the cover of this prospectus. Any
shares sold by the underwriters to securities dealers may be sold at a discount
of up to $ per share from the initial public offering price. Any such
securities dealers may resell any shares purchased from the underwriters to
certain other brokers or dealers at a discount of up to $ per share from the
initial public offering price. If all the shares are not sold at the initial
public offering price, the representatives may change the offering price and the
other selling terms.
Webvan has entered into underwriting agreements with the underwriters for
the sale of shares outside the United States. The terms and conditions
of both offerings are the same and the sale of shares in both offerings are
conditioned on each other. Goldman Sachs International, Donaldson, Lufkin &
Jenrette International, Merrill Lynch International, BancBoston Robertson
Stephens International Limited, Bear, Stearns International Limited, Deutsche
Bank Securities, Inc. and Thomas Weisel Partners LLC are representatives of the
underwriters for the international offering outside the United States (the
"International Underwriters"). Webvan has granted the International Underwriters
a similar option to purchase up to an aggregate of an additional
shares.
The underwriters for both of the offerings have entered into an agreement
in which they agree to restrictions on where and to whom they and any dealer
purchasing from them may offer shares as a
U-1
<PAGE> 82
part of the distribution of the shares. The underwriters also have agreed that
they may sell shares among each of the underwriting groups.
Pursuant to lock-up agreements, Webvan and its directors, officers,
employees and other securityholders have agreed not to offer, sell, transfer or
otherwise dispose of or hedge any of their common stock or securities
convertible into or exchangeable for shares of common stock during the lock-up
period, except with the prior written consent of Goldman Sachs & Co. According
to the lock-up agreements, at any time beginning on the third day following the
public release of our earnings for the year ended December 31, 1999, each
stockholder may dispose of or hedge up to 15% of his or her shares owned as of
December 31, 1999; at any time beginning on the 48th day following the public
release of our earnings for the year ended December 31, 1999, each stockholder
may dispose of or hedge an additional 25% of his or her shares owned as of
December 31, 1999; and each such stockholder may dispose of or hedge his or her
remaining shares at any time on or following the date which is 180 days after
the date of this prospectus. This agreement does not apply to any existing
employee benefit plan. See "Shares Eligible for Future Sale" for a discussion of
transfer restrictions.
Prior to the offerings, there has been no public market for the shares. The
initial public offering price for the common stock will be negotiated among
Webvan and the representatives of the underwriters. Among the factors to be
considered in determining the initial public offering price of the shares, in
addition to prevailing market conditions, will be Webvan's historical
performance, estimates of Webvan's business potential and earnings prospects, an
assessment of Webvan's management and the consideration of the above factors in
relation to market valuation of companies in related businesses.
Webvan has applied to have the common stock listed on the Nasdaq National
Market under the symbol "WBVN".
In connection with the offerings, the underwriters may purchase and sell
shares of common stock in the open market. These transactions may include short
sales, stabilizing transactions and purchases to cover positions created by
short sales. Short sales involve the sale by the underwriters of a greater
number of shares than they are required to purchase in the offerings.
Stabilizing transactions consist of bids or purchases made for the purpose of
preventing or retarding a decline in the market price of the common stock while
the offerings are in progress.
The underwriters may also impose a penalty bid. This occurs when a
particular underwriter repays to the underwriters a portion of the underwriting
discount received by it because the representatives have repurchased shares sold
by or for the account of such underwriter in stabilizing or short covering
transactions.
These activities by the underwriters may stabilize, maintain or otherwise
affect that market price of the common stock. As a result, the price of the
common stock may be higher than the price that otherwise might exist in the open
market. If these activities are commenced, they may be discontinued by the
underwriters at any time. These transactions may be effected on the Nasdaq
National Market, in the over-the-counter market or otherwise.
The underwriters do not expect sales to discretionary accounts to exceed
five percent of the total number of shares offered.
The underwriters have reserved for sale, at the initial public offering
price, up to shares of the common stock offered hereby for persons
designated by Webvan who have been or are expected to be vendors or service
providers to Webvan and who have expressed an interest in purchasing such shares
of common stock in the offering. The number of shares available for sale to the
general public will be reduced to the extent such persons purchase such reserved
shares. Any reserved shares not so purchased will be offered by the underwriters
to the general public on the same basis as other shares offered hereby.
U-2
<PAGE> 83
Thomas Weisel Partners LLC, one of the representatives of the underwriters,
was organized and registered as a broker-dealer in December 1998. Since December
1998 Thomas Weisel Partners has been named as a lead or co-manager of 54 filed
public offerings of equity securities, of which 31 have been completed, and has
acted as a syndicate member in an additional 27 public offerings of equity
securities. Thomas Weisel Partners does not have any material relationship with
Webvan or any of Webvan's officers, directors or other controlling persons,
except for its contractual relationship with Webvan under the terms of the
underwriting agreement entered into in connection with this offering.
In July 1999, entities affiliated with Goldman, Sachs & Co. purchased an
aggregate of 7,880,220 shares of Webvan's Series D-2 preferred stock for an
aggregate purchase price of approximately $100.0 million.
Webvan estimates that its share of the total expenses of the offering,
excluding underwriting discounts and commissions, will be approximately $1.4
million.
Webvan has agreed to indemnify the several underwriters against certain
liabilities, including liabilities under the Securities Act.
This prospectus may be used by the underwriters and other dealers in
connection with offers and sales of the shares, including sales of shares
initially sold by the underwriters in the offering being made outside of the
United States, to persons located in the United States.
U-3
<PAGE> 84
Inside Gatefold Graphics
[artwork which depicts the Webvan solution, illustrated by pictures of the
Company's Webstore, delivery service, distribution center and food products
together with captions explaining the pictures and diagram]
<PAGE> 85
Inside Front Cover Graphics
[artwork consists of the Webvan logo and
website address and pictures of food products]
<PAGE> 86
Inside Back Cover Graphics
[artwork consists of the Webvan logo and
website address and pictures of food products]
<PAGE> 87
- ------------------------------------------------------
- ------------------------------------------------------
No dealer, salesperson or other person is authorized to give any
information or represent anything not contained in this prospectus. You must not
rely on any unauthorized information or representations. This prospectus is an
offer to sell only the shares offered hereby, but only under circumstances where
it is lawful to do so. The information contained in this prospectus is current
only as of its date.
-------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 1
Summary Consolidated Financial Data... 3
Risk Factors.......................... 4
Special Note Regarding Forward-Looking
Statements.......................... 15
Use of Proceeds....................... 16
Dividend Policy....................... 16
Capitalization........................ 17
Dilution.............................. 19
Selected Consolidated Financial
Data................................ 20
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 21
Business.............................. 28
Management............................ 39
Certain Relationships and Related
Transactions........................ 48
Principal Stockholders................ 50
Description of Capital Stock.......... 52
Shares Eligible for Future Sale....... 55
Legal Matters......................... 56
Experts............................... 56
Available Information................. 57
Index to Financial Statements......... F-1
Underwriting.......................... U-1
</TABLE>
-------------------------
Through and including , 1999 (the 25th day after the date of
this prospectus), all dealers effecting transactions in these securities,
whether or not participating in this offering, may be required to deliver a
prospectus. This is in addition to a dealer's obligation to deliver a prospectus
when acting as an underwriter and with respect to an unsold allotment or
subscription.
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
25,000,000 Shares
WEBVAN GROUP, INC.
Common Stock
-------------------------
LOGO
-------------------------
GOLDMAN, SACHS & CO.
DONALDSON, LUFKIN & JENRETTE
MERRILL LYNCH & CO.
BANCBOSTON ROBERTSON STEPHENS
BEAR, STEARNS & CO. INC.
DEUTSCHE BANC ALEX. BROWN
THOMAS WEISEL PARTNERS LLC
Representatives of the Underwriters
- ------------------------------------------------------
- ------------------------------------------------------
<PAGE> 88
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth all expenses, other than the underwriting
discounts and commissions, payable by the Registrant in connection with the sale
of the securities being registered. All amounts shown are estimates except for
the SEC registration fee and the NASD filing fee.
<TABLE>
<S> <C>
SEC registration fee....................................... $ 103,903
NASD filing fee............................................ 37,875
Nasdaq National Market Fees................................ 80,000
Blue Sky qualification fees and expenses................... 10,000
Printing and engraving expenses............................ 200,000
Accountant's fees and expenses............................. 300,000
Legal fees and expenses.................................... 600,000
Miscellaneous.............................................. 68,222
----------
Total............................................ $1,400,000
==========
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law permits a corporation
to include in its charter documents, and in agreements between the corporation
and its directors and officers, provisions expanding the scope of
indemnification beyond that specifically provided by such section.
The Registrant's Restated Certificate of Incorporation provides for the
indemnification of directors to the fullest extent permissible under Delaware
law.
The Registrant's Bylaws provides for the indemnification of officers,
directors and third parties acting on behalf of the Registrant if such person
acted in good faith and in a manner reasonably believed to be in and not opposed
to the best interest of the Registrant, and, with respect to any criminal action
or proceeding, the indemnified party had no reason to believe his or her conduct
was unlawful.
The Registrant has entered into indemnification agreements with its
directors and executive officers and intends to enter into indemnification
agreements with any new directors and executive officers in the future.
The Registrant has director and officer liability insurance that covers
matters, including matters arising under the Securities Act.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
Since the Registrant's inception in December 1996, the Registrant has
issued and sold the following unregistered securities:
1. Between April and September 1997, the Registrant issued an aggregate of
64,034,472 shares of Common Stock of the Registrant to Louis H. Borders
and his family members, David Rock and entities and persons affiliated
with Wilson Sonsini Goodrich & Rosati, P.C. pursuant to restricted
stock purchase agreements for an aggregate amount of $53,362.06.
2. Between September 1997 and July 1999, the Registrant granted and issued
options to purchase an aggregate of 69,172,878 shares of Common Stock
of the Registrant to executive officers, employees, Ramsey Beirne
Associates, Inc. and Christos Cotsakos pursuant to the Registrant's
1997 Stock Plan with an aggregate exercise price of
II-1
<PAGE> 89
$21,967,344.13. The executive officers include Kevin R. Czinger, Arvind
Peter Relan, S. Coppy Holzman, Gary B. Dahl, Mark J. Holtzman,
Christian T. Mannella, David S. Rock and Mark X. Zaleski.
3. In October 1997, the Registrant issued an aggregate of 111,643,872
shares of Series A Preferred Stock of the Registrant to entities
affiliated with Sequoia Capital, entities associated with Benchmark
Capital Partners, entities and persons affiliated with Wilson Sonsini
Goodrich & Rosati, P.C., unaffiliated investors and Louis H. Borders
for an aggregate amount of $10,699,204.40.
4. From December 1997 to February 1998, the Registrant issued an aggregate
of 991,296 shares of Series A Preferred Stock of the Registrant to
consultants for an aggregate amount of $94,999.20. The consultants
include DHR International, Inc., Information Technology Partners, Inc.
and Daniel P. Bowman.
5. From April 1998 to July 1999, the Registrant issued an aggregate of
21,939,090 shares of Common Stock of the Registrant to executive
officers, employees and Ramsey Beirne Associates, Inc. pursuant to the
Registrant's 1997 Stock Plan with an aggregate exercise price of
$203,437.12. The executive officers include Arvind Peter Relan, S.
Coppy Holzman, Gary B. Dahl, Mark J. Holtzman, Christian T. Mannella
and David S. Rock.
6. In May 1998, the Registrant issued 16,380,000 shares of Series B
Preferred Stock of the Registrant to SOFTBANK Holdings, Inc. for an
amount of $14,960,400.
7. In May 1998, the Registrant granted and issued a warrant to purchase
164,232 shares of Series B Preferred Stock of the Registrant to
Comdisco for an exercise price of $149,998.56.
8. In June 1998, the Registrant issued an aggregate of 21,341,976 shares
of Series B Preferred Stock of the Registrant to SOFTBANK Holdings,
Inc. and Raj Vattikuti for an aggregate amount $19,492,338.08.
9. From June 1998 to September 1998, the Registrant issued an aggregate of
1,391,328 shares of Series B Preferred Stock of the Registrant to
consultants and individual investors for an aggregate amount of
$1,270,746.24. The consultants include Harbor Belmont Associates,
Distribution Planning, Inc. and individuals associated with
Distribution Planning, Inc.
10. In November 1998, the Registrant granted and issued warrants to
purchase an aggregate of 2,233,572 shares of Series B Preferred Stock
of the Registrant to equipment lessors for an aggregate exercise price
of $2,039,995.76. The equipment lessors include Lighthouse Capital
Partners II, L.P., Dominion Capital Management, LLC, Imperial Bank,
MMC/GATX Partnership No. 1 and Venture Lending & Leasing, Inc.
11. In January 1999, the Registrant issued an aggregate of 32,281,200
shares of Series C Preferred Stock of the Registrant to venture
investors for an aggregate amount of $74,999,988. The venture investors
include Yahoo! Inc. and E*TRADE Group, Inc.
12. In April 1999, the Registrant issued an aggregate of 60,000 shares of
Series C Preferred Stock of the Registrant to individual investors for
an aggregate amount of $139,400.
13. In June 1999, the Registrant issued 450,000 shares of Common Stock of
the Registrant to Kevin R. Czinger for an amount of $607,500.
14. In July and August 1999, the Registrant issued an aggregate of
21,670,605 shares of Series D-2 Preferred Stock of the Registrant to
SOFTBANK Holdings, Inc., Goldman, Sachs & Co. and Sequoia Capital and
their affiliates for an aggregate amount of $274,999,997.40.
II-2
<PAGE> 90
15. In July 1999, the Registrant granted and issued warrants to purchase an
aggregate of 1,812,000 shares of Series C Preferred Stock of the
Registrant to Vintage Island Partners and Bechtel Corporation for an
aggregate exercise price of $4,209,880.
16. In July 1999, the Registrant issued 150,000 shares of common stock of
the Registrant to Yahoo! Inc. for $500,000.
There were no underwriters involved in connection with any transaction set
forth above. The issuances of the securities in paragraphs 2, 5 and 13 of this
Item 15 were deemed to be exempt from registration under the Securities Act in
reliance upon Rule 701 promulgated thereunder as grants of options pursuant to
written compensatory benefit plans approved by the Registrant's Board of
Directors. The other issuances set forth in this Item 15 were deemed to be
exempt from registration pursuant to Section 4(2) of the Securities Act and
Regulation D promulgated thereunder as a transaction by an issuer not involving
a public offering.
In all of such transactions, the recipients of securities represented their
intention to acquire the securities for investment only and not with a view to
or for sale in connection with any distribution thereof, and appropriate legends
were affixed to the securities issued.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------- -----------------------
<S> <C>
1.1* Form of Underwriting Agreement
3.1 Certificate of Incorporation of the Registrant
3.2 Restated Certificate of Incorporation of the Registrant to
be filed prior to the closing of the offering
3.3 Bylaws of the Registrant
3.4 Restated Certificate of Incorporation of the Registrant to
be filed following the closing of the offering.
4.1* Specimen Common Stock Certificate
4.2# Registration Rights Agreement dated October 29, 1997, as
amended
5.1 Form of Opinion of Wilson Sonsini Goodrich & Rosati,
Professional Corporation
10.1# Form of Indemnification Agreement between the Registrant and
each of its directors and officers
10.2 1997 Stock Plan and form of agreements thereunder
10.3 1999 Employee Stock Purchase Plan
10.4# Lease Agreement dated April 1, 1998 between the Registrant
and Lincoln Coliseum Distribution Center for premises in
Oakland, California
10.5# Lease Agreement dated March 4, 1999 between the Registrant
and AMB Property, LP for premises in Atlanta, Georgia
10.6# Lease Agreement dated January 21, 1997 between the
Registrant and Dove Holdings, Inc. for premises in Foster
City, California
10.7# Lease and Security Agreement dated November 18, 1998 between
the Registrant and Lighthouse Capital Partners and other
lenders
10.8# Offer Letter dated March 18, 1999 between the Registrant and
Kevin R. Czinger
10.9# Offer Letter dated February 2, 1998 between the Registrant
and Arvind Peter Relan
10.10# Offer Letter dated December 14, 1998 between the Registrant
and Mark X. Zaleski
10.11# Offer Letter dated March 31, 1997 between the Registrant and
Gary B. Dahl
10.12# Offer Letter dated June 5, 1997 between the Registrant and
Mark J. Holtzman
10.13# Offer Letter dated September 3, 1997 between the Registrant
and S. Coppy Holzman
10.14+# Contract dated July 8, 1999 for turnkey design/build
construction and related services between the Registrant and
Bechtel Corporation
10.15+# Warrant dated July 8, 1999 issued to Bechtel Corporation
10.16# Warrant dated May 27, 1998 issued to Comdisco Ventures
</TABLE>
II-3
<PAGE> 91
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------- -----------------------
<S> <C>
10.17# Warrant dated November 18, 1998 issued to Lighthouse Capital
Partners
10.18 Internet Data Services Agreement dated January 21, 1999
between the Registrant and Exodus Communications, Inc.
10.19 1999 Nonstatutory Stock Option Plan and form of agreements
thereunder
23.1* Consent of Deloitte & Touche LLP, Independent Auditors
23.2 Consent of Counsel (see Exhibit 5.1)
24.1# Power of Attorney
24.2 Power of Attorney
27.1# Financial Data Schedule
</TABLE>
- -------------------------
* To be filed by amendment
# Previously filed
+ Confidential treatment has been requested for certain portions of this
exhibit.
(b) Financial Statement Schedules
Schedules not listed above have been omitted because the information
required to be set forth therein is not applicable or is shown in the financial
statements or notes thereto.
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes to provide to the underwriters
at the closing specified in the underwriting agreements, certificates in such
denominations and registered in such names as required by the underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-4
<PAGE> 92
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment No. 1 to Registration Statement to be signed on
its behalf by the undersigned, thereunto, duly authorized in Foster City,
California, on September 7, 1999.
Webvan Group, Inc.
By: /s/ LOUIS H. BORDERS
------------------------------------
Louis H. Borders
President and
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed on September 7, 1999 by the following
persons in the capacities indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
/s/ LOUIS H. BORDERS President, Chief Executive Officer and
- ----------------------------------------------------- Chairman of the Board of Directors
Louis H. Borders (Principal Executive Officer)
* Senior Vice President,
- ----------------------------------------------------- Corporate Operations
Kevin R. Czinger and Finance
(Principal Financial and Accounting Officer)
* Director
- -----------------------------------------------------
David M. Beirne
* Director
- -----------------------------------------------------
Christos M. Cotsakos
* Director
- -----------------------------------------------------
Tim Koogle
* Director
- -----------------------------------------------------
Michael J. Moritz
*By: /s/ LOUIS H. BORDERS
- -----------------------------------------------------
Louis H. Borders
Attorney-In-Fact
</TABLE>
II-5
<PAGE> 93
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION OF DOCUMENT PAGE
- ------- ----------------------- ------------
<S> <C> <C>
1.1* Form of Underwriting Agreement..............................
3.1 Certificate of Incorporation of the Registrant..............
3.2 Restated Certificate of Incorporation of the Registrant to
be filed prior to the closing of the offering...............
3.3 Bylaws of the Registrant....................................
3.4 Restated Certificate of Incorporation of the Registrant to
be filed following the closing of the offering..............
4.1* Specimen Common Stock Certificate...........................
4.2# Registration Rights Agreement dated October 29, 1997, as
amended.....................................................
5.1 Form of Opinion of Wilson Sonsini Goodrich & Rosati,
Professional Corporation....................................
10.1# Form of Indemnification Agreement between the Registrant and
each of its directors and officers..........................
10.2 1997 Stock Plan and form of agreements thereunder...........
10.3 1999 Employee Stock Purchase Plan...........................
10.4# Lease Agreement dated April 1, 1998 between the Registrant
and Lincoln Coliseum Distribution Center for premises in
Oakland, California.........................................
10.5# Lease Agreement dated March 4, 1999 between the Registrant
and AMB Property, LP for premises in Atlanta, Georgia.......
10.6# Lease Agreement dated January 21, 1997 between the
Registrant and Dove Holdings, Inc. for premises in Foster
City, California............................................
10.7# Lease and Security Agreement dated November 18, 1998 between
the Registrant and Lighthouse Capital Partners and other
lenders.....................................................
10.8# Offer Letter dated March 18, 1999 between the Registrant and
Kevin R. Czinger............................................
10.9# Offer Letter dated February 2, 1998 between the Registrant
and Arvind Peter Relan......................................
10.10# Offer Letter dated December 14, 1998 between the Registrant
and Mark X. Zaleski.........................................
10.11# Offer Letter dated March 31, 1997 between the Registrant and
Gary B. Dahl................................................
10.12# Offer Letter dated June 5, 1997 between the Registrant and
Mark J. Holtzman............................................
10.13# Offer Letter dated September 3, 1997 between the Registrant
and S. Coppy Holzman........................................
10.14+# Contract dated July 8, 1999 for turnkey design/build
construction and related services between the Registrant and
Bechtel Corporation.........................................
10.15+# Warrant dated July 8, 1999 issued to Bechtel Corporation....
10.16# Warrant dated May 27, 1998 issued to Comdisco Ventures......
10.17# Warrant dated November 18, 1998 issued to Lighthouse Capital
Partners....................................................
10.18 Internet Data Services Agreement dated January 21, 1999
between the Registrant and Exodus Communications, Inc. .....
10.19 Nonstatutory Stock Option Plan and form of agreements
thereunder..................................................
23.1* Consent of Deloitte & Touche LLP, Independent Auditors......
23.2 Consent of Counsel (see Exhibit 5.1)........................
24.1# Power of Attorney...........................................
24.2 Power of Attorney...........................................
27.1# Financial Data Schedule.....................................
</TABLE>
- -------------------------
* To be filed by amendment
# Previously filed
+ Confidential treatment has been requested for certain portions of this
exhibit.
<PAGE> 1
EXHIBIT 3.1
CERTIFICATE OF INCORPORATION
OF
WEBVAN GROUP, INC.
A DELAWARE CORPORATION
ARTICLE I
The name of this corporation is Webvan Group, Inc.
ARTICLE II
The address of the corporation's registered office in the State of
Delaware is 1209 Orange Street, Wilmington, Delaware 19801, County of New
Castle. The name of its registered agent at such address is The Corporation
Trust Company.
ARTICLE III
The nature of the business or purposes to be conducted or promoted by
the corporation is to engage in any lawful act or activity for which
corporations may be organized under the General Corporation Law of Delaware.
ARTICLE IV
This corporation is authorized to issue one class of stock to be
designated Common Stock. The total number of shares of Common Stock authorized
to be issued is one thousand (1,000) shares with a par value of $0.0001 per
share.
ARTICLE V
The name and mailing address of the incorporator is as follows:
J. Robert Suffoletta
c/o Wilson Sonsini Goodrich & Rosati
Professional Corporation
650 Page Mill Road
Palo Alto, California 94304-1050
ARTICLE VI
The corporation is to have perpetual existence.
-1-
<PAGE> 2
ARTICLE VII
Section 1. Board of Directors. The management of the business and the
conduct of the affairs of the corporation shall be vested in the Board of
Directors. The number of directors which shall constitute the whole Board of
Directors shall be fixed in the manner designated in the Bylaws of the
corporation.
Section 2. Bylaws. In furtherance and not in limitation of the powers
conferred by statute, the Board of Directors is expressly authorized to make,
alter, amend or repeal the Bylaws of the corporation.
Section 3. Election of Directors. Elections of directors need not be by
written ballot unless a stockholder demands election by written ballot at the
meeting and before voting begins or unless the Bylaws of the corporation shall
so provide.
Section 4. Cumulative Voting Rights. Until a Registration Statement
regarding the sale of the Common Stock to the public is declared effective by
the Securities and Exchange Commission, stockholders shall be entitled to
cumulative voting rights. At all elections of directors of the corporation, each
holder of stock or of any class or classes or of a series or series thereof
shall be entitled to as many votes as shall equal the number of votes which
(except for this provision as to cumulative voting) such stockholder would be
entitled to cast for the election of directors with respect to such
stockholder's shares of stock multiplied by the number of directors to be
elected, and such stockholder may cast all of such votes for a single director
or may distribute them among the number of directors to be voted for, or for any
two or more of them as such stockholder may see fit. As of the date that a
Registration Statement regarding the sale of the Common Stock to the public is
declared effective by the Securities and Exchange Commission, this Article VII,
Section 4, shall no longer be effective and may be deleted herefrom upon any
restatement of this Certificate of Incorporation.
ARTICLE VIII
Section 1. Director Liability. To the fullest extent permitted by the
Delaware General Corporation Law as the same exists or as may hereafter be
amended, a director of the corporation shall not be personally liable to the
corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director.
Section 2. Indemnification. The corporation may indemnify to the
fullest extent permitted by law any person made or threatened to be made a party
to an action or proceeding, whether criminal, civil, administrative or
investigative, by reason of the fact that he, his testator or intestate is or
was a director, officer, employee or agent of the corporation or any predecessor
of the corporation or serves or served at any other enterprise as a director,
officer, employee or agent at the request of the corporation or any predecessor
to the corporation.
Section 3. Amendment or Repeal. Neither any amendment nor repeal of
this Article VIII, nor the adoption of any provision of this corporation's
Certificate of Incorporation inconsistent with this Article VIII, shall
eliminate or reduce the effect of this Article VIII, in respect of any matter
occurring, or any action or proceeding accruing or arising or that, but for this
Article VIII, would accrue or arise, prior to such amendment, repeal or adoption
of an inconsistent provision.
-2-
<PAGE> 3
ARTICLE IX
Meetings of stockholders may be held within or without the State of
Delaware, as the Bylaws may provide. The books of the corporation may be kept
(subject to any provision contained in the statutes) outside of the State of
Delaware at such place or places as may be designated from time to time by the
Board of Directors or in the Bylaws of the corporation.
ARTICLE X
Vacancies created by the resignation of one or more members of the
Board of Directors and newly created directorships, created in accordance with
the Bylaws of this corporation, may be filled by the vote of a majority,
although less than a quorum, of the directors then in office, or by a sole
remaining director.
ARTICLE XI
Advance notice of new business and stockholder nominations for the
election of directors shall be given in the manner and to the extent provided in
the Bylaws of the corporation.
ARTICLE XII
The corporation reserves the right to amend, alter, change or repeal
any provision contained in this Certificate of Incorporation, in the manner now
or hereafter prescribed by statute, and all rights conferred upon stockholders
herein are granted subject to this reservation.
THE UNDERSIGNED, being the incorporator hereinbefore named, for the
purposes of forming a corporation pursuant to corporation law of the State of
Delaware, does make this certificate, hereby declaring and certifying, under
penalties of perjury, that this is my act and deed and the facts herein stated
are true, and accordingly, has hereunto set his hand this 17th day of August,
1999.
WEBVAN GROUP, INC.
a Delaware corporation
By: /s/ J. ROBERT SUFFOLETTA
----------------------------------
J. Robert Suffoletta
Incorporator
-3-
<PAGE> 1
EXHIBIT 3.2
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
WEBVAN GROUP, INC.
A DELAWARE CORPORATION
Webvan Group, Inc., a corporation organized and existing under the laws
of the State of Delaware, does hereby certify:
1. The name of the corporation is Webvan Group, Inc. The original
Certificate of Incorporation of the corporation was filed with the Secretary of
State of the State of Delaware on August 17, 1999.
2. The amendment and restatement herein set forth has been duly
approved by the Board of Directors of the corporation and by the sole
stockholder of the corporation pursuant to Sections 141, 228 and 242 of the
General Corporation Law of the State of Delaware ("Delaware Law"). Approval of
this amendment and restatement was approved by a written consent signed by the
sole stockholder of the corporation pursuant to Section 228 of the Delaware Law.
3. The restatement herein set forth has been duly adopted pursuant to
Section 245 of the Delaware Law. This Amended and Restated Certificate of
Incorporation restates and integrates and amends the provisions of the
corporation's Certificate of Incorporation.
4. The text of the Certificate of Incorporation is hereby amended and
restated to read in its entirety as follows:
"ARTICLE I
The name of this corporation is Webvan Group, Inc. (hereinafter, the
"Corporation").
ARTICLE II
The address of the Corporation's registered office in the State of
Delaware is 1209 Orange Street, Wilmington, Delaware 19801, County of New
Castle. The name of its registered agent at such address is The Corporation
Trust Company.
The nature of the business or purposes to be conducted or promoted by
the Corporation is to engage in any lawful act or activity for which
corporations may be organized under the General Corporation Law of the State of
Delaware.
ARTICLE III
This Corporation is authorized to issue two classes of shares to be
designated respectively Common Stock ("COMMON") and Preferred Stock
("PREFERRED"). Each share of Common and Preferred shall have a par value of
$0.0001. The total number of shares of Common this Corporation shall have
authority to issue is 800,000,000 and the total number of shares of Preferred
this Corporation shall have authority to issue is
-1-
<PAGE> 2
250,272,220. Of the shares of Preferred, 112,635,168 are hereby designated as
Series A Preferred Stock (the "SERIES A PREFERRED"), 41,814,000 are hereby
designated as Series B Preferred Stock (the "SERIES B PREFERRED"), 34,601,616
are hereby designated as Series C Preferred Stock (the "SERIES C PREFERRED"),
25,610,718 are hereby designated as Series D-1 Preferred Stock (the "SERIES D-1
PREFERRED"), 25,610,718 are hereby designated as Series D-2 Preferred Stock (the
"SERIES D-2 PREFERRED") and 10,000,000 are undesignated as to series. The Series
D-1 Preferred and Series D-2 Preferred are collectively referred to herein as
the "SERIES D PREFERRED".
Any Preferred not designated as to series may be issued from time to
time in one or more series pursuant to a resolution or resolutions providing for
such issue duly adopted by the Board of Directors (authority to do so being
hereby expressly vested in the Board of Directors), and such resolution or
resolutions shall also set forth the voting powers, full or limited or none, of
each such series of Preferred and shall fix the designations, preferences and
relative, participating, optional or other special rights of each such series of
Preferred and the qualifications, limitations or restrictions of such powers,
designations, preferences or rights. The Board of Directors is authorized to
alter the powers, designation, preferences, rights, qualifications, limitations
and restrictions granted to or imposed upon any wholly unissued series of
Preferred and, within the limits and restrictions stated in any resolution or
resolutions of the Board of Directors originally fixing the number of shares
constituting any series of Preferred, to increase or decrease (but not below the
number of shares of any such series then outstanding) the number of shares of
any such series subsequent to the issue of shares of that series. In case the
number of shares shall be so decreased, the shares constituting such decrease
shall resume the status that they had prior to the adoption of the resolution
originally fixing the number of shares of such series.
Except as set forth in Article III, Section 7 and Article III, Section
9 hereof, each share of Preferred issued by the Corporation, if reacquired by
the Corporation (whether by redemption, repurchase, conversion to Common or
other means), shall upon such reacquisition resume the status of authorized and
unissued shares of Preferred, undesignated as to series and available for
designation and issuance by the Corporation in accordance with the immediately
preceding paragraph.
The Corporation shall from time to time in accordance with the laws of
the State of Delaware increase the authorized amount of its Common if at any
time the number of shares of Common remaining unissued and available for
issuance shall not be sufficient to permit conversion of the Preferred.
The relative rights, preferences, privileges and restrictions granted
to or imposed upon the Preferred, the Common and the holders thereof are as set
forth below.
Section 1. Liquidation Rights.
(a) Liquidation Preferences. In the event of any voluntary or
involuntary liquidation, dissolution or winding up of the affairs of the
Corporation (or the deemed occurrence of such event pursuant to subsection (c)
of this Section 1) the holders of each share of Series D Preferred shall be
entitled to receive, prior and in preference to any distribution of any of the
assets or property of the Corporation to the holders of the Series C Preferred,
Series B Preferred, Series A Preferred or Common by reason of their ownership
thereof, an amount equal to Twelve Dollars and Sixty-Nine Cents ($12.69) per
share (the "ORIGINAL SERIES D ISSUE PRICE") plus any declared but unpaid
dividends for each share of Series D Preferred then held by them (subject to
adjustment of such liquidation preference amount for stock splits and like
events).
-2-
<PAGE> 3
If the assets or property to be distributed pursuant to the preceding
paragraph are insufficient to permit the payment to the holders of the Series D
Preferred of their full preferential amount, the entire assets and property
legally available for distribution shall be distributed ratably among the
holders of Series D Preferred in a manner such that the amount distributed to
each holder of Series D Preferred shall equal the amount obtained by multiplying
the entire assets and funds of the Corporation to be distributed to such holders
by a fraction, the numerator of which shall be the number of shares of Series D
Preferred then held by such holder, and the denominator of which shall be the
total number of shares of Series D Preferred then outstanding. All of the
preferential amount to be paid to the holders of the Series D Preferred under
this Section 1(a) shall be paid or set apart for payment before the payment or
setting apart for payment of any amount for, or the distribution of any assets
or property of the Corporation to, the holders of the Series C Preferred, Series
B Preferred, Series A Preferred or Common in connection with any such
liquidation, dissolution or winding up.
After the payment or the setting apart for payment to the holders of
the Series D Preferred of the preferential amount so payable to them, the
holders of each share of Series C Preferred shall be entitled to receive, prior
and in preference to any distribution of any of the assets or property of the
Corporation to the holders of the Series B Preferred, Series A Preferred or
Common by reason of their ownership thereof, an amount equal to Two Dollars
Thirty-Two Cents ($2.32) per share (the "ORIGINAL SERIES C ISSUE PRICE") plus
any declared but unpaid dividends for each share of Series C Preferred then held
by them (subject to adjustment of such liquidation preference amount for stock
splits and like events).
If the assets or property to be distributed pursuant to the preceding
paragraph are insufficient to permit the payment to the holders of Series C
Preferred of their full preferential amount, the assets and property available
for distribution to the holders of the Series C Preferred shall be distributed
ratably among the holders of Series C Preferred in a manner such that the amount
distributed to each holder of Series C Preferred shall equal the amount obtained
by multiplying the entire assets and funds of the Corporation to be distributed
to such holders by a fraction, the numerator of which shall be the number of
shares of Series C Preferred then held by such holder, and the denominator of
which shall be the total number of shares of Series C Preferred then
outstanding. All of the preferential amount to be paid to the holders of the
Series C Preferred under this Section 1(a) shall be paid or set apart for
payment before the payment or setting apart for payment of any amount for, or
the distribution of any assets or property of the Corporation to, the holders of
the Series B Preferred, Series A Preferred or Common in connection with any such
liquidation, dissolution or winding up.
After the payment or the setting apart for payment to the holders of
the Series C Preferred of the preferential amount so payable to them, the
holders of each share of Series B Preferred shall be entitled to receive, prior
and in preference to any distribution of any of the assets or property of the
Corporation to the holders of the Series A Preferred or Common by reason of
their ownership thereof, an amount equal to Ninety-One Cents ($0.91) per share
(the "SERIES B SPLIT PRICE") plus any declared but unpaid dividends for each
share of Series B Preferred then held by them (subject to adjustment of such
liquidation preference amount for stock splits and like events).
If the assets or property to be distributed pursuant to the preceding
paragraph are insufficient to permit the payment to the holders of Series B
Preferred of their full preferential amount, the assets and property available
for distribution to the holders of the Series B Preferred shall be distributed
ratably among the holders of Series B Preferred in a manner such that the amount
distributed to each holder of Series B Preferred shall equal the amount obtained
by multiplying the entire assets and funds of the Corporation to be distributed
to such holders by a fraction, the numerator of which shall be the number of
shares of Series B
-3-
<PAGE> 4
Preferred then held by such holder, and the denominator of which shall be the
total number of shares of Series B Preferred then outstanding. All of the
preferential amount to be paid to the holders of the Series B Preferred under
this Section 1(a) shall be paid or set apart for payment before the payment or
setting apart for payment of any amount for, or the distribution of any assets
or property of the Corporation to, the holders of the Series A Preferred or
Common in connection with any such liquidation, dissolution or winding up.
After the payment or the setting apart for payment to the holders of
the Series B Preferred of the preferential amount so payable to them, the
holders of each share of Series A Preferred shall be entitled to receive, prior
and in preference to any distribution of any of the assets or property of the
Corporation to the holders of the Common by reason of their ownership thereof,
an amount equal to Nine and Six Tenths Cents ($0.096) per share (the "SERIES A
SPLIT PRICE") plus any declared but unpaid dividends for each share of Series A
Preferred then held by them (subject to adjustment of such liquidation
preference amount for stock splits and like events).
If the assets or property to be distributed pursuant to the preceding
paragraph are insufficient to permit the payment to the holders of Series A
Preferred of their full preferential amount, the assets and property available
for distribution to the holders of the Series A Preferred shall be distributed
ratably among the holders of Series A Preferred in a manner such that the amount
distributed to each holder of Series A Preferred shall equal the amount obtained
by multiplying the entire assets and funds of the Corporation to be distributed
to such holders by a fraction, the numerator of which shall be the number of
shares of Series A Preferred then held by such holder, and the denominator of
which shall be the total number of shares of Series A Preferred then
outstanding. All of the preferential amount to be paid to the holders of the
Series A Preferred under this Section 1(a) shall be paid or set apart for
payment before the payment or setting apart for payment of any amount for, or
the distribution of any assets or property of the Corporation to, the holders of
the Common in connection with any such liquidation, dissolution or winding up.
After the payment or the setting apart for payment to the holders of
the Series A Preferred of the preferential amounts so payable to them, the
remaining assets of the Corporation available for distribution shall be
distributed in accordance with the provisions of Section 1(b).
(b) Distribution after Payment of Liquidation Preference. After
payment has been made to the holders of the Preferred of the full preferential
amounts set forth in Section 1(a) above, the entire remaining assets and funds
of the Corporation legally available for distribution, if any, shall be
distributed ratably among the holders of Common in a manner such that the amount
distributed to each holder of Common shall equal the amount obtained by
multiplying the entire assets and funds of the Corporation legally available for
distribution hereunder by a fraction, the numerator of which shall be the number
of shares of Common then held by such holder, and the denominator of which shall
be the total number of shares of Common then outstanding.
(c) Deemed Liquidation. For purposes of this Section 1, unless
otherwise agreed to by the holders of at least seventy percent (70%) of the
Series A Preferred then outstanding with respect to the liquidation rights of
the Series A Preferred, a majority of the shares of Series B Preferred then
outstanding with respect to the liquidation rights of the Series B Preferred, a
majority of the shares of Series C Preferred then outstanding with respect to
the liquidation rights of the Series C Preferred and at least seventy percent
(70%) of the shares of Series D Preferred then outstanding with respect to the
liquidation rights of the Series D Preferred, the acquisition of this
Corporation by another entity by means of any transaction or series of related
transactions (including, without limitation, any reorganization, merger or
consolidation) that results in the transfer of more than fifty percent (50%) of
the outstanding voting power of this Corporation,
-4-
<PAGE> 5
or a sale or other transfer in a single transaction or a series of related
transactions of all or substantially all of the assets of the Corporation, shall
be treated as a liquidation, dissolution or winding up.
(d) Consent. Each holder of an outstanding share of Preferred shall
be deemed to have consented, for purposes of the Delaware General Corporation
Law, to distributions made by the Corporation in connection with the repurchase
of shares of Common issued to or held by employees or consultants upon
termination of their employment or services pursuant to agreements between the
Corporation and such persons providing for the Corporation's right of said
repurchase.
(e) Determination of Value. In connection with Section 1(c) hereof,
if the consideration received by this Corporation in any such transaction is
other than cash, its value will be deemed to be its fair market value. Any
securities shall be valued as follows:
(i) Securities not subject to investment letter or similar
restrictions on free marketability covered by (ii) below:
(A) If traded on a securities exchange or through the Nasdaq
National Market, the value shall be deemed to be the average of the closing
prices of the securities on such exchange or system over the thirty (30) day
period ending three (3) days prior to the closing of such transaction;
(B) If actively traded over-the-counter, the value shall be
deemed to be the average of the closing bid or sale prices (whichever is
applicable) over the thirty (30) day period ending three (3) days prior to the
closing of such transaction; and
(C) If there is no active public market, the value shall be
the fair market value thereof, as mutually determined by the Board of Directors
of this Corporation (excluding any director(s) then serving on the Board as
representatives of the holders of Preferred) and the holders of at least a
majority of the voting power of all then outstanding shares of Preferred.
(ii) The method of valuation of securities subject to investment
letter or other restrictions on free marketability (other than restrictions
arising solely by virtue of a stockholder's status as an affiliate or former
affiliate) shall be to make an appropriate discount from the market value
determined as above in (i) (A), (B) or (C) to reflect the approximate fair
market value thereof, as mutually determined by the Board of Directors of this
Corporation (excluding any director(s) then serving on the Board as
representatives of the holders of Preferred) and the holders of at least a
majority of the voting power of all then outstanding shares of such Preferred.
(f) In the event the requirements of Sections 1(c) and 1(e) hereof
are not complied with, this Corporation shall cause the closing of such
transaction to be postponed or canceled until such requirements have been
complied with.
(g) This Corporation shall give each holder of record of Preferred
written notice of any such transaction not later than ten (10) days prior to the
stockholders' meeting called to approve such transaction, or ten (10) days prior
to the closing of such transaction, whichever is earlier. The provisions of this
Section 1(g) may be waived upon the written consent of the holders of at least a
majority of the then outstanding shares of Preferred.
-5-
<PAGE> 6
Section 2. Conversion Rights. The holders of the Preferred shall have
conversion rights as follows (the "CONVERSION RIGHTS"):
(a) Right to Convert.
(i) Conversion into Common Stock. Each share of Preferred shall
be convertible, without the payment of any additional consideration by the
holder thereof and at the option of the holder thereof, at any time after the
date of issuance of such share, at the office of the Corporation or any transfer
agent for the Preferred, into such number of fully paid and nonassessable shares
of Common as is determined by dividing the Series A Split Price by the Series A
Conversion Price, the Series B Split Price by the Series B Conversion Price, the
Original Series C Issue Price by the Series C Conversion Price and the Original
Series D Issue Price by the Series D Conversion Price, each determined as
hereinafter provided and as in effect at the time of conversion for such series
of Preferred. The prices at which shares of Common shall be deliverable upon
conversion of Series A Preferred, Series B Preferred, Series C Preferred and
Series D Preferred without the payment of any additional consideration by the
holders thereof shall initially be the Series A Split Price in the case of the
Series A Preferred (the "SERIES A CONVERSION PRICE"), the Series B Split Price
in the case of the Series B Preferred (the "SERIES B CONVERSION PRICE"), the
Original Series C Issue Price in the case of the Series C Preferred (the "SERIES
C CONVERSION PRICE") and the Original Series D Issue Price in the case of the
Series D Preferred (the "SERIES D CONVERSION PRICE"). Such initial Conversion
Prices shall be subject to adjustment, in order to adjust the number of shares
of Common into which the respective series of Preferred is convertible, as
hereinafter provided.
(ii) Conversion of Series D-2 Preferred. Each share of Series
D-2 Preferred shall be convertible, without the payment of any additional
consideration by the holder thereof and at the option of the holder thereof, at
any time after the date of issuance of such share, at the office of the
Corporation or any transfer agent for the Preferred, into one (1) fully paid and
nonassessable share of Series D-1 Preferred.
(b) Automatic Conversion.
(i) Initial Public Offering. Each share of Preferred shall
automatically be converted into shares of Common at the then effective
Conversion Price upon the closing ("CLOSING") of a firm commitment underwritten
public offering pursuant to an effective registration statement under the
Securities Act of 1933, as amended, covering the offer and sale of Common for
the account of the Corporation to the public at an offering price to the public
of at least Thirty-Nine Cents ($0.39) per share in the case of the Series A
Preferred, at least One Dollar Fifty-Five Cents ($1.55) per share in the case of
the Series B Preferred, at least Three Dollars Forty-Nine Cents ($3.49) per
share in the case of the Series C Preferred and at least Twelve Dollars and
Sixty-Nine Cents ($12.69) per share in the case of the Series D Preferred (in
each case as adjusted for stock splits, stock dividends, reclassifications, and
like events) and, in each case, in which the aggregate gross proceeds received
by the Corporation (net of underwriting discounts) equal or exceed $100,000,000.
In the event of such an offering, the person(s) entitled to receive the Common
issuable upon such conversion of any such Preferred shall not be deemed to have
converted that Preferred until immediately prior to the Closing.
(ii) Stockholder Vote. Each share of Series A Preferred or
Series D Preferred shall automatically be converted into shares of Common at the
then effective Conversion Price for such series of Preferred upon the
affirmative election of the holders of greater than seventy percent (70%) of the
then outstanding shares of such series of Preferred. Each share of Series B
Preferred or Series C Preferred
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shall automatically be converted into shares of Common at the then effective
Conversion Price for such series of Preferred, upon the affirmative election of
the holders of a majority of the then outstanding shares of such series of
Preferred. In the event of any such election, the person(s) entitled to receive
the Common issuable upon such conversion of the Preferred shall not be deemed to
have converted that Preferred until the election (duly approved by the required
vote of the applicable series of Preferred then outstanding) is received by the
Corporation.
(c) Mechanics of Conversion.
(i) Common Stock Conversion. No fractional shares of Common
shall be issued upon conversion of the Preferred. In lieu of any fractional
shares to which the holder would otherwise be entitled, the Corporation at its
election shall either pay cash equal to such fraction multiplied by the then
effective Conversion Price for such series of Preferred or issue one whole share
for each fraction of a share outstanding, after aggregating all fractional
shares held by each stockholder. Before any holder of Preferred shall be
entitled to convert the same into full shares of Common pursuant to Section 2(a)
hereof, he shall surrender the certificate or certificates therefor, duly
endorsed, at the office of the Corporation or of any transfer agent for the
Preferred, and shall give written notice to the Corporation at such office that
he elects to convert the same and shall state therein his name or the name or
names of his nominees in which he wishes the certificate or certificates for
shares of Common to be issued. The Corporation shall, as soon as practicable
thereafter, issue and deliver at such office to such holder of Preferred, or to
his nominee or nominees, a certificate or certificates for the number of shares
of Common to which he shall be entitled as aforesaid, together with cash in lieu
of any fraction of a share. Such conversion shall be deemed to have been made
immediately prior to the close of business on the date of such surrender of the
shares of Preferred to be converted, and the person or persons entitled to
receive the shares of Common issuable upon conversion shall be treated for all
purposes as the record holder or holders of such shares of Common on such date.
(ii) Series D-2 Preferred Conversion. Before any holder of
Series D-2 Preferred shall be entitled to convert the same into full shares of
Series D-1 Preferred pursuant to Section 2(a) hereof, he shall surrender the
certificate or certificates therefor, duly endorsed, at the office of the
Corporation or of any transfer agent for the Preferred, and shall give written
notice to the Corporation at such office that he elects to convert the same and
shall state therein his name or the name or names of his nominees in which he
wishes the certificate or certificates for shares of Series D-1 Preferred to be
issued. The Corporation shall, as soon as practicable thereafter, issue and
deliver at such office to such holder of Series D-2 Preferred, or to his nominee
or nominees, a certificate or certificates for the number of shares of Series
D-1 Preferred to which he shall be entitled as aforesaid. Such conversion shall
be deemed to have been made immediately prior to the close of business on the
date of such surrender of the shares of Series D-2 Preferred to be converted,
and the person or persons entitled to receive the shares of Series D-1 Preferred
issuable upon conversion shall be treated for all purposes as the record holder
or holders of such shares of Series D-1 Preferred on such date.
(d) Adjustments to Conversion Price for Diluting Issues.
(i) Special Definitions. For purposes of this subsection 2(d),
the following definitions shall apply:
(1) "Option" shall mean rights, options or warrants to
subscribe for, purchase or otherwise acquire either Common or Convertible
Securities.
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<PAGE> 8
(2) "Original Issue Date" shall mean the date hereof in the
cases of the Series A Preferred, Series B Preferred and Series C Preferred and
the date on which the first share of Series D-2 Preferred was issued in the case
of the Series D Preferred.
(3) "Convertible Securities" shall mean any evidences of
indebtedness, shares or other securities convertible into or exchangeable for
Common.
(4) "Additional Shares of Common" with respect to a series
of Preferred shall mean all shares of Common issued (or, pursuant to Section
2(d)(iii), deemed to be issued) by the Corporation after the Original Issue Date
for such series of Preferred, other than shares of Common issued or issuable:
(A) upon conversion of shares of Preferred;
(B) as a dividend or distribution on Preferred or any
event for which adjustment is made pursuant to subparagraph (d)(vi) hereof;
(C) pursuant to equipment lease or bank financing
transactions approved by the Board of Directors;
(D) upon the exercise of Options outstanding on January
15, 1999 and Options to purchase up to 15,987,522 shares (subject to adjustments
for stock splits and like events) granted on or after January 15, 1999 to
officers, directors and employees of, and consultants to, the Corporation in a
manner determined by the Board of Directors (it being understood that any such
shares or Options that are canceled or otherwise returned unexercised to the
Corporation or repurchased by the Corporation, shall not count against such
share limit), provided that the number of shares which may be issued pursuant to
this Section 2(d)(i)(4)(D) may be increased with the affirmative election of the
holders of at least sixty six and two-thirds percent (66 2/3%) of the then
outstanding shares of Series C Preferred and the holders of at least seventy
percent (70%) of the then outstanding shares of Series D Preferred; or
(E) by way of dividend or other distribution on shares
of Common excluded from the definition of Additional Shares of Common by the
foregoing clause(s) (A), (B), (C), and (D) or this clause (E).
(ii) No Adjustment of Conversion Prices. No adjustment in the
number of shares of Common into which any series of Preferred is convertible
shall be made, by adjustment in the Conversion Price of such series of Preferred
in respect of the issuance of Additional Shares of Common or otherwise, unless
the consideration per share for an Additional Share of Common issued or deemed
to be issued by the Corporation is less than the Conversion Price of such series
of Preferred in effect on the date of, and immediately prior to, the issue of
such Additional Share of Common.
(iii) Deemed Issuances of Additional Shares of Common.
(1) Options and Convertible Securities. In the event the
Corporation at any time or from time to time after the Original Issue Date for a
series of Preferred shall issue any Options or Convertible Securities or shall
fix a record date for the determination of holders of any class of securities
entitled to receive any such Options or Convertible Securities, then the maximum
number of shares (as set forth in the instrument relating thereto without regard
to any provisions contained therein for a subsequent
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<PAGE> 9
adjustment of such number) of Common issuable upon the exercise of such Options
or, in the case of Convertible Securities and Options therefor, the conversion
or exchange of such Convertible Securities, shall be deemed to be Additional
Shares of Common issued as of the time of such issue or, in the case such a
record date shall have been fixed, as of the close of business on such record
date, provided that Additional Shares of Common shall not be deemed to have been
issued with respect to an adjustment of the Conversion Price for a series of
Preferred unless the consideration per share (determined pursuant to subsection
2(d)(v) hereof) of such Additional Shares of Common would be less than the
Conversion Price of such series of Preferred in effect on the date of and
immediately prior to such issue, or such record date, as the case may be, and
provided further that in any such case in which Additional Shares of Common are
deemed to be issued:
(A) no further adjustment in the applicable Conversion
Price shall be made upon the subsequent issue of Convertible Securities or
shares of Common upon the exercise of such Options or conversion or exchange of
such Convertible Securities;
(B) if such Options or Convertible Securities by their
terms provide, with the passage of time or otherwise, for any increase or
decrease in the consideration payable to the Corporation, or decrease or
increase in the number of shares of Common issuable, upon the exercise,
conversion or exchange thereof, the applicable Conversion Price computed upon
the original issue thereof (or upon the occurrence of a record date with respect
thereto), and any subsequent adjustments based thereon, shall, upon any such
increase or decrease becoming effective, be recomputed to reflect such increase
or decrease insofar as it affects such Options or the rights of conversion or
exchange under such Convertible Securities;
(C) upon the expiration of any such Options or any
rights of conversion or exchange under such Convertible Securities which shall
not have been exercised, the applicable Conversion Price computed upon the
original issue thereof (or upon the occurrence of a record date with respect
thereto) and any subsequent adjustments based thereon shall, upon such
expiration, be recomputed as if:
(a) in the case of Convertible Securities or Options
for Common the only Additional Shares of Common issued were the shares of
Common, if any, actually issued upon the exercise of such Options or the
conversion or exchange of such Convertible Securities and the consideration
received therefor was the consideration actually received by the Corporation for
the issue of such exercised Options plus the consideration actually received by
the Corporation upon such exercise or for the issue of all such Convertible
Securities which were actually converted or exchanged, plus the additional
consideration, if any, actually received by the Corporation upon such conversion
or exchange, and
(b) in the case of Options for Convertible
Securities only the Convertible Securities, if any, actually issued upon the
exercise thereof were issued at the time of issue of such Options, and the
consideration received by the Corporation for the Additional Shares of Common
deemed to have been then issued was the consideration actually received by the
Corporation for the issue of such exercised Options, plus the consideration
deemed to have been received by the Corporation (determined pursuant to
subsection 2(d)(v)) upon the issue of the Convertible Securities with respect to
which such Options were actually exercised;
(D) no readjustment pursuant to clause (B) or (C) above
shall have the effect of increasing the applicable Conversion Price to an amount
which exceeds the lower of (i) the Conversion Price for such series of Preferred
on the original adjustment date, or (ii) the Conversion Price for
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<PAGE> 10
such series of Preferred that would have resulted from any issuance of
Additional Shares of Common between the original adjustment date and such
readjustment date;
(E) in the case of any Options which expire by their
terms not more than thirty (30) days after the date of issue thereof, no
adjustment of the applicable Conversion Price shall be made until the expiration
or exercise of all such Options issued on the same date, whereupon such
adjustment shall be made in the same manner provided in clause (C) above; and
(F) if such record date shall have been fixed and such
Options or Convertible Securities are not issued on the date fixed therefor, the
adjustment previously made in the applicable Conversion Price which became
effective on such record date shall be canceled as of the close of business on
such record date, and thereafter such Conversion Price shall be adjusted
pursuant to this subsection 2(d)(iii) as of the actual date of their issuance.
(2) Stock Dividends, Stock Distributions and Subdivisions.
In the event the Corporation at any time or from time to time after the Original
Issue Date for a series of Preferred shall declare or pay any dividend or make
any other distribution on the Common payable in Common, or effect a subdivision
of the outstanding shares of Common (by reclassification or otherwise than by
payment of a dividend in Common), then and in any such event, Additional Shares
of Common shall be deemed to have been issued:
(A) in the case of any such dividend or distribution,
immediately after the close of business on the record date for the determination
of holders of any class of securities entitled to receive such dividend or
distribution, or
(B) in the case of any such subdivision, at the close of
business on the date immediately prior to the date upon which such corporate
action becomes effective.
If such record date shall have been fixed and such dividend shall not
have been paid on the date fixed therefor, the adjustment previously made in the
applicable Conversion Price which became effective on such record date shall be
canceled as of the close of business on such record date, and thereafter such
Conversion Price shall be adjusted pursuant to this subsection 2(d)(iii) as of
the time of actual payment of such dividend.
(iv) Adjustment of Conversion Prices Upon Issuance of Additional
Shares of Common. In the event the Corporation shall issue Additional Shares of
Common (including Additional Shares of Common deemed to be issued pursuant to
subsection 2(d)(iii), but excluding Additional Shares of Common issued pursuant
to subsection 2(d)(iii)(2), which event is dealt with in subsection 2(d)(vi)
hereof), without consideration or for a consideration per share less than the
Conversion Price in effect for such series of Preferred on the date of and
immediately prior to such issue, then and in such event, the Conversion Price
for such series of Preferred shall be reduced, concurrently with such issue, to
a price (calculated to the nearest cent) determined by multiplying the
applicable Conversion Price by a fraction (x) the numerator of which shall be
(1) the number of shares of Common outstanding immediately prior to such issue,
plus (2) the number of shares of Common which the aggregate consideration
received by the Corporation for the total number of Additional Shares of Common
so issued would purchase at the Conversion Price for such series of Preferred,
and (y) the denominator of which shall be (1) the number of shares of Common
outstanding immediately prior to such issue plus (2) the number of such
Additional Shares of Common so issued, provided that for the purposes of this
subsection (iv), all shares of Common issuable upon exercise, conversion or
exchange of outstanding Options or Convertible Securities, as the case may be,
shall be
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<PAGE> 11
deemed to be outstanding, and immediately after any Additional Shares of Common
are deemed issued pursuant to subsection (iii) above, such Additional Shares of
Common shall be deemed to be outstanding, and provided further that the
applicable Conversion Price shall not be so reduced at such time if the amount
of such reduction would be an amount less than $0.01, but any such amount shall
be carried forward and reduction with respect thereto made at the time of and
together with any subsequent reduction which, together with such amount and any
other amount or amounts so carried forward, shall aggregate $0.01 or more.
(v) Determination of Consideration. For purposes of this
subsection 2(d), the consideration received by the Corporation for the issue of
any Additional Shares of Common Stock shall be computed as follows:
(1) Cash and Property. Such consideration shall:
(A) insofar as it consists of cash, be computed at the
aggregate amount of cash received by the Corporation excluding amounts paid or
payable for accrued interest or accrued dividends;
(B) insofar as it consists of property other than cash,
be computed at the fair value thereof at the time of such issue, as determined
in good faith by the Board of Directors; and
(C) in the event Additional Shares of Common are issued
together with other shares or securities or other assets of the Corporation for
consideration which covers both, be the proportion of such consideration so
received, computed as provided in clauses (A) and (B) above, as determined in
good faith by the Board of Directors.
(2) Options and Convertible Securities. The consideration
per share received by the Corporation for Additional Shares of Common deemed to
have been issued pursuant to subsection 2(d)(iii)(1), relating to Options and
Convertible Securities, shall be determined by dividing
(x) the total amount, if any, received or receivable by
the Corporation as consideration for the issue of such Options or Convertible
Securities, plus the minimum aggregate amount of additional consideration (as
set forth in the instruments relating thereto, without regard to any provision
contained therein for a subsequent adjustment of such consideration) payable to
the Corporation upon the exercise of such Options or the conversion or exchange
of such Convertible Securities, or in the case of Options for Convertible
Securities, the exercise of such options for Convertible Securities and the
conversion or exchange of such Convertible Securities, by
(y) the maximum number of shares of Common (as set forth
in the instruments relating thereto, without regard to any provision contained
therein for a subsequent adjustment of such number) issuable upon the exercise
of such Options or the conversion or exchange of such Convertible Securities.
(vi) Adjustments for Subdivisions, Combinations,
Consolidations or Stock Dividends. In the event the outstanding shares of Common
shall be subdivided (by stock split or otherwise), into a greater number of
shares of Common, or shares of Common shall have been issued by stock dividend,
the Conversion Prices then in effect shall, concurrently with the effectiveness
of such subdivision or stock dividend, be proportionately decreased. In the
event the outstanding shares of Common shall be combined or
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<PAGE> 12
consolidated by reclassification or otherwise, into a lesser number of shares of
Common, the Conversion Prices then in effect shall, concurrently with the
effectiveness of such combination or consolidation, be proportionately
increased.
(vii) Adjustments for Other Distributions. In the event the
Corporation at any time or from time to time makes, or fixes a record date for
the determination of holders of Common entitled to receive any distribution
payable in securities of the Corporation other than shares of Common, then and
in each such event provision shall be made so that the holders of Preferred
shall receive upon conversion thereof, in addition to the number of shares of
Common receivable thereupon, the amount of securities of the Corporation which
they would have received had their Preferred been converted into Common on the
date of such event and had they thereafter, during the period from the date of
such event to and including the date of conversion, retained such securities
receivable by them as aforesaid during such period, subject to all other
adjustments called for during such period under this Section 2 with respect to
the rights of the holders of the Preferred. In the event the Corporation shall
declare a distribution payable in securities of other persons, evidences of
indebtedness issued by the Corporation or other persons, assets (excluding cash
dividends), or options or rights not referred to in subsection 2(d)(iii), then,
in each such case for the purpose of this subsection 2(d), the holders of the
Preferred shall be entitled to a proportionate share of any such distribution as
though they were the holders of the number of shares of Common of the
Corporation into which their shares of Preferred are convertible as of the
record date fixed for the determination of the holders of Common of the
Corporation entitled to receive such distribution.
(viii) Adjustments for Reclassification, Exchange and
Substitution. If the Common issuable upon conversion of the Preferred shall be
changed into the same or a different number of shares of any other class or
classes of stock, whether by capital reorganization, reclassification or
otherwise (other than a subdivision or combination of shares provided for
above), the Conversion Prices then in effect shall, concurrently with the
effectiveness of such reorganization or reclassification, be proportionately
adjusted such that the Preferred shall be convertible into, in lieu of the
number of shares of Common which the holders would otherwise have been entitled
to receive, a number of shares of such other class or classes of stock
equivalent to the number of shares of Common that would have been subject to
receipt by the holders upon conversion of the Preferred immediately before that
change.
(ix) Reorganization, Mergers, Consolidations, or Sales of
Assets. Subject to Section 1(c) hereof, if at any time or from time to time
there shall be a capital reorganization of the Common (other than a subdivision,
combination, reclassification, or exchange of shares provided for elsewhere in
this Section 2) or a merger or consolidation of this Corporation with or into
another corporation, or the sale of all or substantially all of this
Corporation's properties and assets to any other person (other than a merger,
consolidation or sale of properties and assets provided for in Section 1(c)
hereof), then, as a part of such reorganization, merger, consolidation, or sale,
provision shall be made so that the holders of the Preferred shall thereafter be
entitled to receive upon conversion of the Preferred, the number of shares of
stock or other securities or property of this Corporation, or of the successor
corporation resulting from such merger or consolidation or sale, to which a
holder of Common deliverable upon conversion would have been entitled on such
capital reorganization, merger, consolidation, or sale. In any such case,
appropriate adjustment shall be made in the application of the provisions of
Section 2 with respect to the rights of the holders of the Preferred after the
reorganization, merger, consolidation, or sale to the end that the provisions of
this Section 2 (including adjustment of the Conversion Prices then in effect and
the number of shares purchasable upon conversion of the Preferred) shall be
applicable after that event as nearly equivalent as may be practicable.
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(e) No Impairment. The Corporation will not, by amendment of its
Articles of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed hereunder by the Corporation but will at
all times in good faith assist in the carrying out of all the provisions of this
Section 2 and in the taking of all such action as may be necessary or
appropriate in order to protect the Conversion Rights of the holders of the
Preferred against impairment. The provisions of this Section 2(e) shall not
apply to any action taken with respect to the Series A Preferred by the
Corporation if such action is otherwise approved by the holders of at least
seventy percent (70%) of the then outstanding shares of Series A Preferred. The
provisions of this Section 2(e) shall not apply to any action taken with respect
to the Series B Preferred by the Corporation if such action is otherwise
approved by the holders of a majority of the then outstanding shares of Series B
Preferred. The provisions of this Section 2(e) shall not apply to any action
taken with respect to the Series C Preferred if such action is otherwise
approved by the holders of at least sixty six and two-thirds percent (66 2/3%)
of the then outstanding shares of Series C Preferred. The provisions of this
Section 2(e) shall not apply to any action taken with respect to the Series D
Preferred if such action is otherwise approved by the holders of at least
seventy percent (70%) of the then outstanding shares of Series D Preferred.
(f) Certificate as to Adjustments. Upon the occurrence of each
adjustment or readjustment of the Conversion Prices pursuant to this Section 2,
the Corporation at its expense shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and furnish to each holder of
the series of Preferred for which the Conversion Price is adjusted a certificate
certified by the Corporation's chief financial officer setting forth such
adjustment or readjustment and showing in detail the facts upon which such
adjustment or readjustment is based. The Corporation shall, upon the written
request at any time of any holder of Preferred, furnish or cause to be furnished
to such holder a like certificate setting forth (i) such adjustments and
readjustments, (ii) the Conversion Price for such series of Preferred in effect
at that time, and (iii) the number of shares of Common and the amount, if any,
of other property which at the time would be received upon the conversion of
such series of Preferred.
(g) Notices of Record Date. In the event of any taking by the
Corporation of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend (other than a cash dividend which is the same as cash dividends paid in
previous quarters) or other distribution, the Corporation shall mail to each
holder of Preferred at least ten (10) days prior to the date specified herein, a
notice specifying the date on which any such record is to be taken for the
purpose of such dividend or distribution.
(h) Notices. Any notice required by the provisions of this Section 2
to be given to the holders of shares of Preferred shall be deemed given if
deposited in the United States mail, postage prepaid, and addressed to each
holder of record at his address appearing on the books of this Corporation.
Section 3. Voting Rights.
(a) General Voting. Except as otherwise required by law, each share
of Common issued and outstanding shall have one (1) vote and each share of
Series A Preferred, Series B Preferred, Series C Preferred and Series D
Preferred issued and outstanding shall have the number of votes equal to the
number of shares of Common into which such share of Series A Preferred, Series B
Preferred, Series C Preferred and Series D Preferred is convertible as adjusted
from time to time pursuant to Section 2 hereof, and the holders of Series A
Preferred, Series B Preferred, Series C Preferred and Series D Preferred shall
have full voting rights equal to the voting rights of the holders of Common, and
shall be entitled to notice of any
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stockholders" meeting in accordance with the bylaws of this Corporation, and
shall be entitled to vote with the holders of Common with respect to any matter
upon which the holders of Common have the right to vote, except those required
hereunder or by law to be submitted to a class vote. Notwithstanding anything
herein to the contrary, the Series D-2 Preferred shall not have any voting
rights in the election of directors.
(b) Voting for Directors. For so long as there are at least
12,000,000 shares (subject to adjustment for stock splits and like events) of
Series A Preferred outstanding, the holders of the Series A Preferred shall be
entitled to nominate and elect two (2) directors at each annual election of
directors. For so long as there are at least 6,000,000 shares (subject to
adjustment for stock splits and like events) of Series C Preferred outstanding,
the holders of the Series C Preferred shall be entitled to nominate and elect
one (1) director at each annual election of directors. All directors not elected
by the Series A Preferred or Series C Preferred holders as set forth in the
preceding two sentences shall be elected in accordance with the provisions of
Section 3(a) hereof. In the case of any vacancy (other than a vacancy caused by
removal) in the office of a director occurring among the directors elected by
the holders of the Series A Preferred or Series C Preferred pursuant to this
Section 3(b), the remaining directors so elected by such series of Preferred may
by affirmative vote of a majority thereof (or the remaining director so elected
if there be but one, or if there are no such directors remaining, by the
affirmative vote of the holders of a majority of the shares of such series of
Preferred), elect a successor or successors to hold office for the unexpired
term of the director or directors whose place or places shall be vacant. Any
director who shall have been elected by the holders of the Series A Preferred or
Series C Preferred or by any directors so elected as provided in the immediately
preceding sentence hereof may be removed during the aforesaid term of office,
either with or without cause, by, and only by, the affirmative vote of the
holders of a majority of the shares of such series of Preferred, given either at
a special meeting of such stockholders duly called for that purpose or pursuant
to a written consent of stockholders, and any vacancy thereby created may be
filled by the holders of such series of Preferred represented at the meeting or
pursuant to unanimous written consent.
Section 4 Dividend Rights.
(a) The holders of outstanding shares of Series D Preferred shall be
entitled to receive, when and as declared by the Board of Directors and out of
any assets and funds legally available therefor, dividends at the annual rate of
$0.89 per share (as adjusted for any stock splits and like events), and no more,
payable in preference and priority to any declaration or any payment of any
dividend on the Series C Preferred, Series B Preferred, Series A Preferred or
Common. The holders of outstanding shares of Series C Preferred shall be
entitled to receive, when and as declared by the Board of Directors and out of
any assets and funds legally available therefor, dividends at the annual rate of
$0.157 per share (as adjusted for any stock splits and like events), and no
more, payable in preference and priority to any declaration or any payment of
any dividend on the Series B Preferred, Series A Preferred or Common. The
holders of outstanding shares of Series B Preferred shall be entitled to
receive, when and as declared by the Board of Directors and out of any assets
and funds legally available therefor, dividends at the annual rate of $0.0617
per share (as adjusted for any stock splits and like events), and no more,
payable in preference and priority to any declaration or any payment of any
dividend on the Series A Preferred or Common. The holders of outstanding shares
of Series A Preferred shall be entitled to receive, when and as declared by the
Board of Directors and out of any assets and funds legally available therefor,
dividends at the annual rate of $0.007 per share (as adjusted for any stock
splits and like events), and no more, payable in preference and priority to any
declaration or any payment of any dividend on the Common. The right to such
dividends on shares of Preferred shall not be cumulative, and no right shall
accrue to holders of Preferred by reason of the fact that dividends on said
shares are not declared or paid in any prior year. In the event that the
Corporation shall have declared and unpaid dividends outstanding immediately
prior to, and in the event of, conversion of
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<PAGE> 15
Preferred the Corporation shall, at its option, pay in cash to the holder(s) of
the series of Preferred subject to conversion the full amount of any such
dividends or convert such dividends into Common at the then effective applicable
Conversion Price referred to in Section 2 or a combination thereof, together
with cash in lieu of any fractional share of Common. Upon the affirmative vote
or written consent of the holders of a majority of the Series D Preferred,
Series C Preferred or Series B Preferred then outstanding, the holders of such
series of Preferred can waive the right of such series of Preferred to receive
any dividend under this Section 4. Upon the affirmative vote or written consent
of the holders of at least seventy percent (70%) of the Series A Preferred then
outstanding, the holders of the Series A Preferred can waive the right of the
Series A Preferred to receive any dividend under this Section 4. In the event of
any such waiver, the Corporation shall have no obligation at any time thereafter
to pay such waived dividends.
(b) Dividends may be paid on the Common as and when declared by the
Board of Directors, subject to the prior dividend rights of the Preferred.
Section 5. Covenants.
(a) Series A Preferred. So long as at least 12,000,000 shares
(subject to adjustment for stock splits and like events) of Series A Preferred
shall be outstanding, the Corporation shall not, without first obtaining the
affirmative vote or written consent of holders of greater than fifty percent
(50%) of such outstanding shares of Series A Preferred voting together as a
class:
(i) amend or repeal any provision of, or add any provision to,
the Corporation's Articles of Incorporation or Bylaws if such action would
adversely alter or change the preferences, rights, privileges or powers of, or
the restrictions provided for the benefit of the Series A Preferred;
(ii) create or issue or obligate itself to issue any other
equity security, including any other security convertible into or exercisable
for any equity security, or reclassify any Preferred or Common shares into
shares having any preference or priority as to dividends, liquidation,
redemption or voting superior to or on a parity with any such preference or
priority of the Series A Preferred;
(iii) pay or declare any dividend or distribution on any shares
of Common or apply any of its assets to the redemption, retirement, purchase or
other acquisition of any shares of Common except from employees of, or
consultants to, the Corporation upon termination of employment or consultancy;
(iv) merge or consolidate with or into any other corporation
(except where a majority of the outstanding equity securities of the surviving
corporation immediately after the merger or consolidation is held by persons who
were stockholders of this Corporation immediately prior to the merger or
consolidation), or sell or otherwise transfer in a single transaction or a
series of related transactions all or substantially all of the assets of the
Corporation;
(v) increase or decrease the number of authorized shares of
Series A Preferred (except as contemplated by Section 7 hereof); or
(vi) change the authorized number of directors of this
Corporation.
(b) Series B Preferred. So long as at least 12,000,000 shares
(subject to adjustment for stock splits and like events) of Series B Preferred
shall be outstanding, the Corporation shall not, without
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<PAGE> 16
first obtaining the affirmative vote or written consent of holders of greater
than fifty percent (50%) of such outstanding shares of Series B Preferred voting
together as a class:
(i) amend or repeal any provision of, or add any provision to,
the Corporation's Articles of Incorporation or Bylaws if such action would
adversely alter or change the preferences, rights, privileges or powers of, or
the restrictions provided for the benefit of the Series B Preferred;
(ii) create or issue or obligate itself to issue any other
equity security, including any other security convertible into or exercisable
for any equity security, or reclassify any Preferred or Common shares into
shares having any preference or priority as to dividends, liquidation,
redemption or voting superior to or on a parity with any such preference or
priority of the Series B Preferred;
(iii) pay or declare any dividend or distribution on any shares
of Common or apply any of its assets to the redemption, retirement, purchase or
other acquisition of any shares of Common except from employees of, or
consultants to, the Corporation upon termination of employment or consultancy;
or
(iv) merge or consolidate with or into any other corporation
(except where a majority of the outstanding equity securities of the surviving
corporation immediately after the merger or consolidation is held by persons who
were stockholders of this Corporation immediately prior to the merger or
consolidation), or sell or otherwise transfer in a single transaction or a
series of related transactions all or substantially all of the assets of the
Corporation; or
(v) increase the number of authorized shares of Series B
Preferred.
(c) Series C Preferred. So long as at least 6,000,000 shares
(subject to adjustment for stock splits and like events) of Series C Preferred
shall be outstanding, the Corporation shall not, without first obtaining the
affirmative vote or written consent of holders of at least sixty six and
two-thirds percent (66 2/3%) of such outstanding shares of Series C Preferred
voting together as a class:
(i) amend or repeal any provision of, or add any provision to,
the Corporation's Articles of Incorporation or Bylaws if such action would
adversely alter or change the preferences, rights, privileges or powers of, or
the restrictions provided for the benefit of the Series C Preferred;
(ii) create or issue or obligate itself to issue any other
equity security, including any other security convertible into or exercisable
for any equity security, or reclassify any Preferred or Common shares into
shares having any preference or priority as to dividends, liquidation,
redemption or voting superior to or on a parity with any such preference or
priority of the Series C Preferred;
(iii) pay or declare any dividend or distribution on any shares
of Common or apply any of its assets to the redemption, retirement, purchase or
other acquisition of any shares of Common except from employees of, or
consultants to, the Corporation upon termination of employment or consultancy;
or
(iv) merge or consolidate with or into any other corporation
(except where a majority of the outstanding equity securities of the surviving
corporation immediately after the merger or consolidation is held by persons who
were stockholders of this Corporation immediately prior to the merger
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<PAGE> 17
or consolidation), or sell or otherwise transfer in a single transaction or a
series of related transactions all or substantially all of the assets of the
Corporation; or
(v) increase the number of authorized shares of Series C
Preferred.
(d) Series D Preferred. So long as at least 3,000,000 shares
(subject to adjustment for stock splits and like events) of Series D Preferred
shall be outstanding, the Corporation shall not, without first obtaining the
affirmative vote or written consent of holders of greater than seventy percent
(70%) of such outstanding shares of Series D Preferred voting together as a
class:
(i) amend or repeal any provision of, or add any provision to,
the Corporation's Articles of Incorporation or Bylaws if such action would
adversely alter or change the preferences, rights, privileges or powers of, or
the restrictions provided for the benefit of the Series D Preferred;
(ii) create or issue or obligate itself to issue any other
equity security, including any other security convertible into or exercisable
for any equity security, or reclassify any Preferred or Common shares into
shares having any preference or priority as to dividends, liquidation,
redemption or voting superior to or on a parity with any such preference or
priority of the Series D Preferred;
(iii) pay or declare any dividend or distribution on any shares
of Common or on any shares of Preferred that do not rank senior to the Series D
Preferred as to dividends or apply any of its assets to the redemption,
retirement, purchase or other acquisition of any shares of Common or on any
shares of Preferred that do not rank senior to the Series D Preferred as to
liquidation or redemption except from employees of, or consultants to, the
Corporation upon termination of employment or consultancy; or
(iv) merge or consolidate with or into any other corporation
(except where a majority of the outstanding equity securities of the surviving
corporation immediately after the merger or consolidation is held by persons who
were stockholders of this Corporation immediately prior to the merger or
consolidation), or sell or otherwise transfer in a single transaction or a
series of related transactions all or substantially all of the assets of the
Corporation; or
(v) increase the number of authorized shares of Series D
Preferred.
Section 6. Residual Rights. All rights accruing to the outstanding
shares of the Corporation not expressly provided for to the contrary herein
shall be vested in the Common.
Section 7. Status of Converted Stock. In the event any shares of Series
A Preferred, Series B Preferred, Series C Preferred or Series D Preferred
authorized on the date of filing hereof shall be converted pursuant to Section 2
hereof, the shares so converted shall be canceled and shall not be reissuable by
the Corporation, and the Articles of Incorporation shall be appropriately
restated to effect the corresponding reduction in the Corporation's authorized
stock.
Section 8. Partial Conversion. In the event that less than all of a
holder's shares of Preferred shall be converted at any time pursuant to Section
2 hereof, the Corporation shall promptly upon receipt of such holder's
certificate for shares to be converted, issue a new certificate to such holder
representing the unconverted shares.
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<PAGE> 18
Section 9. Authorized Preferred Stock. In the event that all of the
then outstanding shares of Preferred are converted pursuant to Section 2 hereof,
all of the then otherwise authorized shares of Series A Preferred, Series B
Preferred, Series C preferred, Series D-1 Preferred and Series D-2 Preferred
shall be cancelled and shall not be reissuable by the Corporation, and the
Articles of Incorporation shall be appropriately restated to effect the
corresponding reduction in the Corporation"s authorized stock.
ARTICLE IV
The Corporation is to have perpetual existence.
ARTICLE V
As such time as the Corporation files a Registration Statement with the
Securities and Exchange Commission (the "COMMISSION") for the purpose of
effecting the initial public offering of its common stock and such Registration
Statement is declared effective by the Commission (such time is hereinafter
referred to as the "PUBLIC OFFERING DATE"), the Board of Directors shall be
divided into three classes designated as Class I, Class II and Class III,
respectively. Directors shall be assigned to each class in accordance with a
resolution or resolutions adopted by the Board of Directors. Each class shall
consist, as nearly as may be possible, of one-third of the total number of
directors constituting the entire Board of Directors. At the first annual
meeting of stockholders following the Public Offering Date, the term of office
of the Class I directors shall expire and Class I directors shall be elected for
a full term of three years. At the second annual meeting of stockholders
following the Public Offering Date, the term of office of the Class II directors
shall expire and Class II directors shall be elected for a full term of three
years. At the third annual meeting of stockholders following the Public Offering
Date, the term of office of the Class III directors shall expire and Class III
directors shall be elected for a full term of three years. At each succeeding
annual meeting of stockholders, directors shall be elected for a full term of
three years to succeed the directors of the class whose term expire at such
annual meeting. If the number of directors is changed, any increase or decrease
shall be apportioned among the classes so as to maintain the number of directors
in each class as nearly equal as possible, and any additional director of any
class elected to fill a vacancy resulting from an increase in such class shall
hold office for a term that shall coincide with the remaining term of that
class, but in no case will a decrease in the number of directors shorten the
term of any incumbent director.
ARTICLE VI
Section 1. The business and affairs of the Corporation shall be managed
by or under the direction of the Board of Directors.
Section 2. In furtherance and not in limitation of the powers conferred
by statute, the Board of Directors is expressly authorized to adopt, alter,
amend or repeal the Bylaws of the Corporation. The affirmative vote of at least
a majority of the Board of Directors then in office shall be required to adopt,
amend, alter or repeal the Corporation's Bylaws. The Corporation's Bylaws also
may be adopted, amended, altered or repealed by the affirmative vote of the
holders of at least a majority of the voting power of the shares entitled to
vote at an election of directors. No Bylaw hereafter legally adopted, amended,
altered or repealed by the stockholders of the Corporation shall invalidate any
prior act of the directors or officers of the Corporation which would have been
valid if such Bylaw had not been adopted, amended, altered or repealed.
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<PAGE> 19
Section 3. Elections of directors need not be by written ballot unless
the Bylaws of the Corporation shall so provide.
Section 4. At the election of directors of the Corporation, each holder
of Common shall be entitled to one vote for each share held. Prior to the Public
Offering Date, stockholders will be permitted cumulate votes at any election of
directors in accordance with Section 214 of the Delaware General Corporation
Law. On and after the Public Offering Date, no stockholder will be permitted to
cumulate votes at any election of directors.
Section 5. The number of directors which constitute the whole Board of
Directors shall be fixed exclusively in the manner designated in the Bylaws of
the Corporation.
ARTICLE VII
Section 1. To the fullest extent permitted by the Delaware General
Corporation Law as the same exists or as may hereafter be amended, a director of
the Corporation shall not be personally liable to the Corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director.
Section 2. The Corporation shall indemnify to the fullest extent
permitted by law, as now or hereinafter in effect, any person made or threatened
to be made a party to an action or proceeding, whether criminal, civil,
administrative or investigative, by reason of the fact that he, his testator or
intestate is or was a director or officer of the Corporation or any predecessor
of the Corporation or serves or served at any other enterprise as a director,
officer, employee or agent at the request of the Corporation or any predecessor
to the Corporation and such right to indemnification shall continue as to a
person who has ceased to be a director or officer of the Corporation and shall
inure to the benefit of his or her heirs, executors and personal and legal
representatives; PROVIDED, HOWEVER, that, except for proceedings to enforce
rights to indemnification, the Corporation shall not be obligated to indemnify
any director or officer (or his or her heirs, executors or personal or legal
representatives) in connection with a proceeding (or part thereof) initiated by
such person unless such proceeding (or part thereof) was authorized or consented
to by the Board of Directors of the Corporation.. The right to indemnification
conferred by this Section 2 shall include the right to be paid by the
Corporation the expenses incurred in defending or otherwise participating in any
proceeding in advance of its final disposition. The Corporation may indemnify to
the fullest extent permitted by law, as now or hereinafter in effect, any person
made or threatened to be made a party to an action or proceeding, whether
criminal, civil, administrative or investigative, by reason of the fact that he,
his testator or intestate is or was an employee or agent of the Corporation or
any predecessor of the Corporation or serves or served at any other enterprise
as a director, officer, employee or agent at the request of the Corporation or
any predecessor to the Corporation. The rights to indemnification and to the
advancement of expenses conferred in this Section 2 shall not be exclusive of
any other right which any person may have or hereafter acquire under this
Amended and Restated Certificate Incorporation (as amended and restated from
time to time, the "Restated Certificate of Incorporation"), the Bylaws of the
Corporation, any statute, agreement, vote of the stockholders of the Corporation
or disinterested directors of the Corporation or otherwise.
Section 3. Neither any amendment nor repeal of any Section of this
Article VII, nor the adoption of any provision of the Restated Certificate of
Incorporation inconsistent with this Article VII, shall adversely affect any
right or protection of any director or officer established pursuant to this
Article VII existing at the time of such amendment, repeal or adoption of an
inconsistent provision, including without limitation by eliminating or reducing
the effect of this Article VII, for or in respect of any act, omission or
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<PAGE> 20
other matter occurring, or any action or proceeding accruing or arising (or
that, but for this Article VII, would accrue or arise) prior to such amendment,
repeal or adoption of an inconsistent provision.
ARTICLE VIII
Meetings of stockholders may be held within or without the State of
Delaware, as the Bylaws may provide. The books of the Corporation may be kept
(subject to any provision contained in the statutes) outside of the State of
Delaware at such place or places as may be designated from time to time by the
Board of Directors or in the Bylaws of the Corporation.
ARTICLE IX
Section 1. Prior to the Public Offering Date, vacancies in the Board of
Directors may be filled by a majority of the remaining directors, even if less
than a quorum, or by a sole remaining director; however, a vacancy created by
the removal of a director by the vote or written consent of the stockholders or
by court order may be filled only by the affirmative vote of a majority of the
shares represented and voting at a duly held meeting at which a quorum is
present (which shares voting affirmatively also constitute a majority of the
required quorum), or by the unanimous written consent of all shares entitled to
vote thereon. Each director so elected shall hold office until the next annual
meeting of the stockholders and until a successor has been elected and
qualified. From and after the Public Offering Date, except as otherwise provided
for or fixed by or pursuant to the provisions of the second paragraph of Article
III hereof in relation to the rights of the holders of Preferred Stock to elect
directors under specified circumstances, newly-created directorships resulting
from any increase in the number of directors, created in accordance with the
Bylaws of the Corporation, and any vacancies on the Board of Directors resulting
from death, resignation, disqualification, removal or other cause shall be
filled by the affirmative vote of a majority of the remaining directors then in
office, even though less than a quorum of the Board of Directors, or by a sole
remaining director. Any director elected in accordance with the preceding
sentence shall hold office for the remainder of the full term of the class of
directors in which the new directorship was created or the vacancy occurred and
until such director's successor shall have been elected and qualified, or until
such director's earlier death, resignation or removal. No decrease in the number
of directors constituting the Board of Directors shall shorten the term of any
incumbent director.
Section 2. From and after the Public Offering Date, any director or the
entire Board of Directors may be removed from office at any time, but only for
cause, and only by the affirmative vote of the holders of at least a majority of
the voting power of the issued and outstanding capital stock of the Corporation
entitled to vote in the election of directors.
ARTICLE X
Advance notice of new business and stockholder nominations for the
election of directors shall be given in the manner and to the extent provided in
the Bylaws of the Corporation.
ARTICLE XI
Section 1. On and after the Public Offering Date, stockholders of the
Corporation may not take action by written consent in lieu of a meeting but must
take any actions at a duly called annual or special meeting.
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<PAGE> 21
Section 2. Prior to the Public Offering Date, special meetings of the
stockholders of the Corporation, for any purpose or purposes, may be called by
either (i) the Board of Directors of the Corporation, (ii) the Chairman of the
Board of Directors of the Corporation, if there be one, (iii) the Chief
Executive Officer of the Corporation, (iv) the President of the Corporation or
(v) one of the foregoing if so requested by one or more stockholders holding
shares in the aggregate entitled to cast not less than ten percent (10%) of the
votes at that meeting. On and after the Public Offering Date, unless otherwise
required by law, special meetings of the stockholders of the Corporation, for
any purpose or purposes, may be called only by either (i) the Board of Directors
of the Corporation, (ii) the Chairman of the Board of Directors of the
Corporation, if there be one, (iii) the Chief Executive Officer of the
Corporation or (iv) the President of the Corporation.
ARTICLE XII
The Corporation reserves the right to amend, alter, change or repeal
any provision contained in this Certificate of Incorporation, in the manner now
or hereafter prescribed by statute, and all rights conferred upon stockholders
herein are granted subject to this reservation."
IN WITNESS WHEREOF, Webvan Group, Inc. has caused this Amended and
Restated Certificate of Incorporation to be signed by Louis H. Borders, its
President and Chief Executive Officer and attested to by Jeffrey D. Saper, its
Secretary, on August ____, 1999.
Webvan Group, Inc.
a Delaware Corporation
By:
-------------------------------------
Louis H. Borders,
President and Chief Executive Officer
ATTEST:
By:
-------------------------------------
Jeffrey D. Saper,
Secretary
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<PAGE> 1
EXHIBIT 3.3
BYLAWS
OF
WEBVAN GROUP, INC.
(a Delaware corporation)
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE I CORPORATE OFFICES.................................................................1
1.1 REGISTERED OFFICE.................................................................1
1.2 OTHER OFFICES.....................................................................1
ARTICLE II MEETINGS OF STOCKHOLDERS..........................................................1
2.1 PLACE OF MEETINGS.................................................................1
2.2 ANNUAL MEETING....................................................................1
2.3 SPECIAL MEETING...................................................................1
2.4 NOTICE OF STOCKHOLDERS' MEETINGS..................................................2
2.5 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE......................................2
2.6 QUORUM............................................................................2
2.7 ADJOURNED MEETING; NOTICE.........................................................2
2.8 VOTING............................................................................3
2.9 VALIDATION OF MEETINGS; WAIVER OF NOTICE; CONSENT.................................3
2.10 STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING...........................4
2.11 RECORD DATE FOR STOCKHOLDER NOTICE; VOTING; GIVING CONSENTS.......................4
2.12 PROXIES...........................................................................5
2.13 INSPECTORS OF ELECTION............................................................5
2.14 ADVANCE NOTICE OF STOCKHOLDER BUSINESS............................................5
2.15 ADVANCE NOTICE OF DIRECTOR NOMINATIONS............................................6
ARTICLE III DIRECTORS.........................................................................7
3.1 POWERS............................................................................7
3.2 NUMBER AND TERM OF OFFICE.........................................................7
3.3 RESIGNATION AND VACANCIES.........................................................8
3.4 REMOVAL...........................................................................8
3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE..........................................8
3.6 REGULAR MEETINGS..................................................................8
3.7 SPECIAL MEETINGS; NOTICE..........................................................8
3.8 QUORUM............................................................................9
3.9 WAIVER OF NOTICE..................................................................9
3.10 ADJOURNMENT.......................................................................9
3.11 NOTICE OF ADJOURNMENT.............................................................9
3.12 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING.................................9
3.13 FEES AND COMPENSATION OF DIRECTORS...............................................10
3.14 APPROVAL OF LOANS TO OFFICERS....................................................10
3.15 INTERESTED DIRECTORS.............................................................10
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
ARTICLE IV COMMITTEES.......................................................................10
4.1 COMMITTEES OF DIRECTORS..........................................................10
ARTICLE V OFFICERS.........................................................................11
5.1 OFFICERS.........................................................................11
5.2 ELECTION OF OFFICERS.............................................................11
5.3 SUBORDINATE OFFICERS.............................................................12
5.4 REMOVAL AND RESIGNATION OF OFFICERS..............................................12
5.5 VACANCIES IN OFFICES.............................................................12
5.6 CHAIRMAN OF THE BOARD............................................................12
5.7 CHIEF EXECUTIVE OFFICER..........................................................12
5.8 PRESIDENT........................................................................12
5.9 VICE PRESIDENTS..................................................................13
5.10 SECRETARY........................................................................13
5.11 CHIEF FINANCIAL OFFICER..........................................................13
ARTICLE VI INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES, AND OTHER AGENTS..............14
6.1 POWER TO INDEMNIFY IN ACTIONS, SUITS OR PROCEEDINGS OTHER THAN THOSE BY OR
IN THE RIGHT OF THE CORPORATION..................................................14
6.2 POWER TO INDEMNIFY IN ACTIONS, SUITS OR PROCEEDINGS BY OR IN THE RIGHT OF
THE CORPORATION..................................................................14
6.3 AUTHORIZATION OF INDEMNIFICATION.................................................14
6.4 GOOD FAITH DEFINED...............................................................15
6.5 INDEMNIFICATION BY A COURT.......................................................15
6.6 EXPENSES PAYABLE IN ADVANCE......................................................15
6.7 NONEXCLUSIVITY OF INDEMNIFICATION AND ADVANCEMENT OF EXPENSES....................15
6.8 INSURANCE........................................................................16
6.9 CERTAIN DEFINITIONS..............................................................16
6.10 SURVIVAL OF INDEMNIFICATION AND ADVANCEMENT OF EXPENSES..........................16
6.11 LIMITATION ON INDEMNIFICATION....................................................16
6.12 INDEMNIFICATION OF EMPLOYEES AND AGENTS..........................................17
ARTICLE VII RECORDS AND REPORTS..............................................................17
7.1 MAINTENANCE AND INSPECTION OF RECORDS............................................17
7.2 INSPECTION BY DIRECTORS..........................................................17
7.3 ANNUAL STATEMENT TO STOCKHOLDERS.................................................17
7.4 REPRESENTATION OF SHARES OF OTHER CORPORATIONS...................................18
ARTICLE VIII GENERAL MATTERS..................................................................18
8.1 RECORD DATE FOR PURPOSES OTHER THAN NOTICE AND VOTING............................18
8.2 CHECKS; DRAFTS; EVIDENCES OF INDEBTEDNESS........................................18
</TABLE>
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<PAGE> 4
<TABLE>
<S> <C>
8.3 CORPORATE CONTRACTS AND INSTRUMENTS: HOW EXECUTED................................18
8.4 STOCK CERTIFICATES; PARTLY PAID SHARES...........................................18
8.5 SPECIAL DESIGNATION ON CERTIFICATES..............................................19
8.6 LOST CERTIFICATES................................................................19
8.7 CONSTRUCTION; DEFINITIONS........................................................19
ARTICLE IX AMENDMENTS...........................................................................19
</TABLE>
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<PAGE> 5
BYLAWS
OF
WEBVAN GROUP, INC.
(a Delaware corporation)
ARTICLE I
CORPORATE OFFICES
1.1 REGISTERED OFFICE The registered office of the corporation shall be
fixed in the Certificate of Incorporation of the corporation.
1.2 OTHER OFFICES The board of directors may at any time establish
branch or subordinate offices at any place or places where the corporation is
qualified to do business.
ARTICLE II
MEETINGS OF STOCKHOLDERS
2.1 PLACE OF MEETINGS Meetings of stockholders shall be held at any
place within or outside the State of Delaware designated from time to time by
the board of directors. In the absence of any such designation, stockholders'
meetings shall be held at the registered office of the corporation.
2.2 ANNUAL MEETING The annual meeting of stockholders shall be held
each year on a date and at a time designated from time to time by the board of
directors. In the absence of such designation, the annual meeting of
stockholders shall be held on the first Wednesday of May in each year at 10:00
a.m. However, if such day falls on a legal holiday, then the meeting shall be
held at the same time and place on the next succeeding full business day. At the
meeting, directors shall be elected, and any other proper business may be
transacted.
2.3 SPECIAL MEETING A special meeting of the stockholders may be called
at any time by the board of directors, or by the chairman of the board, by the
chief executive officer, or by the president or by one of the foregoing if so
requested by one or more stockholders holding shares in the aggregate entitled
to cast not less than ten percent (10%) of the votes at that meeting. At and
following such time as the corporation files a Registration Statement with the
Securities and Exchange Commission for the purpose of effecting the initial
public offering of its common stock and such Registration Statement is declared
effective by the Commission (such time is hereinafter referred to as the "Public
Offering Date"), a special meeting of the stockholders may only be called by the
board of directors, by the chairman of the board, by the chief executive
officer, or by the president.
If a special meeting is called by any person or persons other than the
board of directors, the request shall be in writing, specifying the time of such
meeting and the general nature of the business proposed to be transacted, and
shall be delivered personally or sent by registered mail or by telegraphic or
other facsimile transmission to the chairman of the board, the president, chief
executive officer, or the secretary of the corporation. No business may be
transacted at such special meeting otherwise than specified in the notice of
such special meeting delivered to stockholders (or any supplement thereto
<PAGE> 6
2.4 NOTICE OF STOCKHOLDERS' MEETINGS All notices of meetings of
stockholders shall be sent or otherwise given in accordance with Section 2.5 of
these bylaws not less than ten (10) nor more than sixty (60) days before the
date of the meeting. The notice shall specify the place, date, and hour of the
meeting and (i) in the case of a special meeting, the general nature of the
business to be transacted (no business other than that specified in the notice
(or in any supplement thereto) may be transacted) or (ii) in the case of the
annual meeting, those matters which the board of directors, at the time of
giving the notice, intends to present for action by the stockholders (but any
proper matter may be presented at the meeting for such action). The notice of
any meeting at which directors are to be elected shall include the name of any
nominee or nominees who, at the time of the notice, the board intends to present
for election.
2.5 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE Written notice of any
meeting of stockholders shall be given by first-class mail or by facsimile,
telegraphic or other written communication or in such other manner as permitted
by law. Notices shall be sent charges prepaid and shall be addressed to the
stockholder at the address of that stockholder appearing on the books of the
corporation or given by the shareholder to the corporation for the purpose of
notice. Notice shall be deemed to have been given at the time when delivered
personally or deposited in the mail or sent by telegram or other means of
written communication.
If any notice addressed to a stockholder at the address of that
stockholder appearing on the books of the corporation is returned to the
corporation by the United States Postal Service marked to indicate that the
United States Postal Service is unable to deliver the notice to the stockholder
at that address, then all future notices or reports shall be deemed to have been
duly given without further mailing if the same shall be available to the
stockholder on written demand of the stockholder at the principal executive
office of the corporation for a period of one (1) year from the date of the
giving of the notice.
An affidavit of the mailing or other means of giving any notice (or
supplement thereto) of any stockholders' meeting, executed by the secretary,
assistant secretary or any transfer agent of the corporation giving the notice,
shall be prima facie evidence of the giving of such notice (or supplement
thereto).
2.6 QUORUM The presence in person or by proxy of the holders of a
majority of the shares entitled to vote thereat constitutes a quorum for the
transaction of business at all meetings of stockholders. The stockholders
present at a duly called or held meeting at which a quorum is present may
continue to do business for which such meeting is called until adjournment,
notwithstanding the withdrawal of enough stockholders to leave less than a
quorum.
2.7 ADJOURNED MEETING; NOTICE Any stockholders' meeting, annual or
special, whether or not a quorum is present, may be adjourned from time to time
by the vote of the majority of the shares represented at that meeting, either in
person or by proxy. In the absence of a quorum, no other business may be
transacted at that meeting except as has been transacted while a quorum was
present, if any, as provided in Section 2.6 of these bylaws.
When any meeting of stockholders, either annual or special, is
adjourned to another time or place, notice need not be given of the adjourned
meeting if the time and place are announced at the meeting at which the
adjournment is taken. However, if a new record date for the adjourned meeting is
fixed or if the adjournment is for more than thirty (30) days from the date set
for the original meeting, then notice of the adjourned meeting shall be given.
Notice of any such adjourned meeting shall be given to each stockholder of
record entitled to vote at the adjourned meeting in accordance with the
provisions of Sections 2.4 and 2.5 of these bylaws. At any adjourned meeting the
corporation may transact any business which might have been transacted at the
original meeting.
2.8 VOTING The stockholders entitled to vote at any meeting of
stockholders shall be determined in accordance with the provisions of Section
2.11 of these bylaws, subject to the provisions of Sections 217
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and 218 of the General Corporation Law of Delaware (relating to voting rights of
fiduciaries, pledgors and joint owners, and to voting trusts and other voting
agreements).
Except as may be otherwise provided in the Certificate of
Incorporation, each outstanding share, regardless of class, shall be entitled to
one vote on each matter submitted to a vote of the stockholders.
If a quorum is present, the affirmative vote of the majority of the
shares represented and voting at a duly held meeting (which shares voting
affirmatively also constitute at least a majority of the required quorum) shall
be the act of the stockholders, unless the vote of a greater number or a vote by
classes is required by law, by the Certificate of Incorporation or by these
bylaws. The board of directors, in its discretion, or the officer of the
corporation presiding at a meeting of stockholders, in such officer's
discretion, may require that any votes cast at such meeting shall be cast by
written ballot.
At a stockholders' meeting at which directors are to be elected, a
stockholder shall be entitled to cumulate votes (i.e., cast for any candidate a
number of votes greater than the number of votes which such stockholder normally
is entitled to cast) if the candidates' names have been placed in nomination
prior to commencement of the voting and the stockholder has given notice prior
to commencement of the voting of the stockholder's intention to cumulate votes.
If any stockholder has given such a notice, then every stockholder entitled to
vote may cumulate votes for candidates in nomination either (i) by giving one
candidate a number of votes equal to the number of directors to be elected
multiplied by the number of votes to which that stockholder's shares are
normally entitled or (ii) by distributing the stockholder's votes on the same
principle among any or all of the candidates, as the stockholder thinks fit. The
candidates receiving the highest number of affirmative votes, up to the number
of directors to be elected, shall be elected; votes against any candidate and
votes withheld shall have no legal effect. Notwithstanding the foregoing
provisions of this paragraph, unless otherwise provided in the Certificate of
Incorporation, a stockholder shall not be entitled to cumulate votes at any time
following the Public Offering Date.
2.9 VALIDATION OF MEETINGS; WAIVER OF NOTICE; CONSENT The transactions
of any meeting of stockholders, either annual or special, however called and
noticed, and wherever held, shall be as valid as though they had been taken at a
meeting duly held after regular call and notice, if a quorum be present either
in person or by proxy, and if, either before or after the meeting, each person
entitled to vote, who was not present in person or by proxy, signs a written
waiver of notice or a consent to the holding of the meeting or an approval of
the minutes thereof. The waiver of notice or consent or approval need not
specify either the business to be transacted or the purpose of any annual or
special meeting of stockholders. All such waivers, consents, and approvals shall
be filed with the corporate records or made a part of the minutes of the
meeting.
Attendance by a person at a meeting shall also constitute a waiver of
notice of and presence at that meeting, except when the person objects at the
beginning of the meeting to the transaction of any business because the meeting
is not lawfully called or convened. Attendance at a meeting is not a waiver of
any right to object to the consideration of matters required by law to be
included in the notice of the meeting but not so included, if that objection is
expressly made at the meeting.
2.10 STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING Unless
otherwise provided in the Certificate of Incorporation, any action which may be
taken at any annual or special meeting of stockholders may be taken without a
meeting and without prior notice, if a consent in writing, setting forth the
action so taken, is signed by the holders of outstanding shares having not less
than the minimum number of votes that would be necessary to authorize or take
that action at a meeting at which all shares entitled to vote on that action
were present and voted and shall be delivered to the corporation by delivery to
its registered office in the State of Delaware, its principal place of business,
or an officer or agent of the corporation having custody of the book in which
proceedings of meetings of stockholders are recorded. Every written consent
shall bear the date of signature of each stockholder who signs the consent and
no written consent shall be effective to take the corporate action referred to
therein unless, within sixty days of
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the earliest dated consent delivered in the manner required by this Section 2.10
to the corporation, written consents signed by a sufficient number of holders to
take action are delivered to the corporation by delivery to its registered
office in the state of Delaware, its principal place of business, or an officer
or agent of the corporation having custody of the book in which proceedings of
meetings of stockholders are recorded. Notwithstanding the foregoing provisions
of this paragraph, unless otherwise provided in the Certificate of
Incorporation, stockholders shall not be entitled to take action by written
consent at any time following the Public Offering Date.
Prompt notice of the taking of the corporate action without a meeting
by less than unanimous written consent shall be given to those stockholders who
have not consented in writing. If the action which is consented to is such as
would have required the filing of a certificate under any section of the General
Corporation Law of Delaware if such action had been voted on by stockholders at
a meeting thereof, then the certificate filed under such section shall state, in
lieu of any statement required by such section concerning any vote of
stockholders, that written notice and written consent have been given as
provided in Section 228 of the General Corporation Law of Delaware.
2.11 RECORD DATE FOR STOCKHOLDER NOTICE; VOTING; GIVING CONSENTS For
purposes of determining the stockholders entitled to notice of any meeting or to
vote thereat or entitled to give consent to corporate action without a meeting,
the board of directors may fix, in advance, a record date, which shall not be
more than sixty (60) days nor less than ten (10) days before the date of any
such meeting nor more than sixty (60) days before any such action without a
meeting, and in such event only stockholders of record on the date so fixed are
entitled to notice and to vote or to give consents, as the case may be,
notwithstanding any transfer of any shares on the books of the corporation after
the record date.
If the board of directors does not so fix a record date:
(a) the record date for determining stockholders entitled to notice
of or to vote at a meeting of stockholders shall be at the close of business on
the business day next preceding the day on which notice is given, or, if notice
is waived, at the close of business on the business day next preceding the day
on which the meeting is held; and
(b) the record date for determining stockholders entitled to give
consent to corporate action in writing without a meeting, (i) when no prior
action by the board has been taken, shall be the day on which the first written
consent is given as required by Section 2.10, or (ii) when prior action by the
board has been taken, shall be at the close of business on the day on which the
board adopts the resolution relating to that action.
A determination of stockholders of record entitled to notice of or to
vote at a meeting of stockholders shall apply to any adjournment of the meeting;
providing, however, that the board of directors may fix a new record date for
the adjourned meeting. The record date for any other purpose shall be as
provided in Article VIII of these bylaws.
2.12 PROXIES Every person entitled to vote for directors, or on any
other matter, shall have the right to do so either in person or by one or more
agents authorized by a written proxy signed by the person and filed with the
secretary of the corporation, but no such proxy shall be voted or acted upon
after three (3) years from its date, unless the proxy provides for a longer
period. A proxy shall be deemed signed if the stockholder's name is placed on
the proxy (whether by manual signature, typewriting, telegraphic transmission or
otherwise) by the stockholder or the stockholder's attorney-in-fact. The
revocability of a proxy that states on its face that it is irrevocable shall be
governed by the provisions of Section 212(e) of the General Corporation Law of
Delaware.
2.13 INSPECTORS OF ELECTION The board of directors of the corporation
may adopt by resolution such rules and regulations for the conduct of the
meeting of the stockholders as it shall
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deem appropriate. Except to the extent inconsistent with such rules and
regulations as adopted by the board of directors, the chairman of any meeting of
the stockholders shall have the right and authority to prescribe such rules,
regulations and procedures and to do all such acts as, in the judgment of such
chairman, are appropriate for the proper conduct of the meeting. Such rules,
regulations or procedures, whether adopted by the board of directors or
prescribed by the chairman of the meeting, and such acts may include, without
limitation, the following: (i) the establishment of an agenda or order of
business for the meeting; (ii) the determination of when the polls shall open
and close for any given matter to be voted on at the meeting; (iii) rules and
procedures for maintaining order at the meeting and the safety of those present;
(iv) limitations on attendance at or participation in the meeting to
stockholders of record of the corporation, their duly authorized and constituted
proxies or such other persons as the chairman of the meeting shall determine;
(v) restrictions on entry to the meeting after the time fixed for the
commencement thereof; (vi) limitations on the time allotted to questions or
comments by participants; (vii) determination of the number of shares
outstanding and the voting power of each, the number of shares represented at
the meeting, the existence of a quorum, and the authenticity, validity, and
effect of proxies; (viii) counting and tabulation of all votes or consents; (ix)
hearing and determining all challenges and questions in any way arising in
connection with the right to vote; (x) any other acts that may be proper to
conduct the election or vote with fairness to all stockholders and (xi) the
appointment of an inspector or inspectors of election to act at the meeting or
its adjournment in respect of one or more of the foregoing matters. The board of
directors or chairman may hear and determine all challenges and questions in any
way arising in connection with the right to vote.
2.14 ADVANCE NOTICE OF STOCKHOLDER BUSINESS To be properly brought
before an annual meeting meeting, any business must be (a) specified in the
notice of meeting (or any supplement thereto) given by or at the direction of
the board of directors, (b) otherwise properly brought before the meeting by or
at the direction of the board of directors, or (c) otherwise properly brought
before the meeting by a stockholder (i) who is a stockholder of record on the
date of the giving of the notice provided for in this Section 2.14 and on the
record date for the determination of stockholders entitled to vote at such
annual meeting and (ii) who complies with the notice procedures set forth in
this Section 2.14. For such nominations or other business to be considered
properly brought before the meeting by a stockholder such stockholder must, in
addition to any other applicable requirements, have given timely notice and in
proper form of such stockholder's intent to bring such business before such
meeting. To be timely, such stockholder's notice must be delivered to or mailed
and received by the Secretary of the corporation at the principal executive
offices of the corporation not less than ninety (90) days prior to the
anniversary date of the immediately preceding annual meeting; provided, however,
that in the event the annual meeting is called for a date that is not within
thirty (30) days before or after such anniversary date, notice by the
stockholder to be timely must be so received not later than the close of
business on the tenth day following the day on which such notice of the date of
the meeting was mailed or such public disclosure made, whichever occurs first.
To be in proper form, a stockholder's notice to the Secretary shall set forth:
(a) the name and record address of the stockholder who intends to
propose the business and the class or series and number of shares of capital
stock of the corporation which are owned beneficially or of record by such
stockholder;
(b) a representation that the stockholder is a holder of record of
stock of the corporation entitled to vote at such meeting and intends to appear
in person or by proxy at the meeting introduce the business specified in the
notice;
(c) a brief description of the business desired to be brought before
the annual meeting and the reasons for conducting such business at the annual
meeting; and
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(d) any material interest of the shareholder in such business.
No business shall be conducted at the annual meeting of stockholders
except business brought before the annual meeting in accordance with the
procedures set forth in this Section; provided, however, that, once business has
been properly brought before the annual meeting in accordance with such
procedures, nothing in this Section 2.13 shall be deemed to preclude discussion
by any stockholder of any such business. The chairman of the meeting may refuse
to acknowledge the proposal of any business not made in compliance with the
foregoing procedure.
2.15 ADVANCE NOTICE OF DIRECTOR NOMINATIONS Only persons who are
nominated in accordance with the following procedures shall be eligible for
election as directors of the corporation, except as may be otherwise provided in
the Restated Certificate of Incorporation with respect to the right of holders
of preferred stock of the corporation to nominate and elect a specified number
of directors in certain circumstances. To be properly brought before an annual
meeting meeting of stockholders, or any special meeting of stockholders called
for the purpose of electing directors, nominations for the election of director
must be (a) specified in the notice of meeting (or any supplement thereto), (b)
made by or at the direction of the board of directors (or any duly authorized
committee thereof) or (c) made by any stockholder of the corporation (i) who is
a stockholder of record on the date of the giving of the notice provided for in
this Section 2.15 and on the record date for the determination of stockholders
entitled to vote at such meeting and (ii) who complies with the notice
procedures set forth in this Section 2.15.
In addition to any other applicable requirements, for a nomination to
be made by a stockholder, such stockholder must have given timely notice thereof
in proper written form to the Secretary of the corporation.To be timely, a
stockholder's notice to the Secretary must be delivered to or mailed and
received at the principal executive offices of the corporation (a) in the case
of an annual meeting, not less than ninety (90) days prior to the anniversary
date of the immediately preceding annual meeting of stockholders; provided,
however, that in the event that the annual meeting is called for a date that is
not within thirty (30) days before or after such anniversary date, notice by the
stockholder in order to be timely must be so received not later than the close
of business on the tenth (10th) day following the day on which such notice of
the date of the annual meeting was mailed or such public disclosure of the date
of the annual meeting was made, whichever first occurs; and (b) in the case of a
special meeting of stockholders called for the purpose of electing directors,
not later than the close of business on the tenth (10th) day following the day
on which notice of the date of the special meeting was mailed or public
disclosure of the date of the special meeting was made, whichever first occurs.
To be in proper written form, a stockholder's notice to the Secretary
must set forth:
(a) as to each person whom the stockholder proposes to nominate for
election as a director (i) the name, age, business address and residence address
of the person, (ii) the principal occupation or employment of the person, (iii)
the class or series and number of shares of capital stock of the corporation
which are owned beneficially or of record by the person and (iv) any other
information relating to the person that would be required to be disclosed in a
proxy statement or other filings required to be made in connection with
solicitations of proxies for election of directors pursuant to Section 14 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the rules
and regulations promulgated thereunder; and
(b) as to the stockholder giving the notice (i) the name and record
address of such stockholder, (ii) the class or series and number of shares of
capital stock of the corporation which are owned beneficially or of record by
such stockholder, (iii) a description of all arrangements or understandings
between such stockholder and each proposed nominee and any other person or
persons (including their names) pursuant to which the nomination(s) are to be
made by such stockholder, (iv) a representation that such stockholder intends to
appear in person or by proxy at the meeting to nominate the persons named in its
notice and (v) any other information relating to such stockholder that would be
required to be disclosed in a proxy statement or other filings required to be
made in connection with solicitations of proxies for election of
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directors pursuant to Section 14 of the Exchange Act and the rules and
regulations promulgated thereunder. Such notice must be accompanied by a written
consent of each proposed nominee to being named as a nominee and to serve as a
director if elected.
No person shall be eligible for election as a director of the
corporation unless nominated in accordance with the procedures set forth in this
Section 2.15. If the Chairman of the meeting determines that a nomination was
not made in accordance with the foregoing procedures, the Chairman shall declare
to the meeting that the nomination was defective and such defective nomination
shall be disregarded.
ARTICLE III
DIRECTORS
3.1 POWERS Subject to the provisions of the General Corporation Law of
Delaware and to any limitations in the Restated Certificate of Incorporation or
these bylaws relating to action required to be approved by the stockholders or
by the outstanding shares, the business and affairs of the corporation shall be
managed and all corporate powers shall be exercised by or under the direction of
the board of directors.
3.2 NUMBER AND TERM OF OFFICE The authorized number of directors shall
be established from time to time by resolution of the board of directors or by
amendment of this Section 3.2, duly adopted by the board of directors or by the
stockholders.
No reduction of the authorized number of directors shall have the
effect of removing any director before that director's term of office expires.
3.3 RESIGNATION AND VACANCIES Any director may resign effective on
giving written notice to the chairman of the board, the president, the secretary
or the board of directors, unless the notice specifies a later time for that
resignation to become effective. If the resignation of a director is effective
at a future time, the board of directors (including such director whose
resignation is to be effective at a later time) may elect a successor to take
office when the resignation becomes effective.
Prior to the Public Offering Date, vacancies in the board of directors
may be filled by a majority of the remaining directors, even if less than a
quorum, or by a sole remaining director; however, a vacancy created by the
removal of a director by the vote or written consent of the stockholders or by
court order may be filled only by the affirmative vote of a majority of the
shares represented and voting at a duly held meeting at which a quorum is
present (which shares voting affirmatively also constitute a majority of the
required quorum), or by the unanimous written consent of all shares entitled to
vote thereon. Each director so elected shall hold office until the next annual
meeting of the stockholders and until a successor has been elected and
qualified. From and after the Public Offering Date, unless otherwise required by
law or the Restated Certificate of Incorporation, vacancies arising through
death, resignation, removal, an increase in the number of directors or otherwise
may be filled only by a majority of the directors then in office, though less
than a quorum, or by a sole remaining director. Any director elected in
accordance with the preceding sentence shall hold office for the remainder of
the full term of the class of directors in which the new directorship was
created or the vacancy occurred and until such director's successor shall have
been elected and qualified, or until such director's earlier death, resignation
or removal. No decrease in the number of directors constituting the board of
directors shall shorten the term of any incumbent director.
3.4 REMOVAL Prior to the Public Offering Date, subject to any
limitations imposed by law or the Certificate of Incorporation, the board of
directors, or any individual director, may be removed from office at any time
with or without cause by the affirmative vote of the holders of at least a
majority of the then outstanding shares of the capital stock of the corporation
entitled to vote at an election of directors. From and after the Public Offering
Date, any director may be removed from office at any time only with cause by the
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affirmative vote of the holders of at least a majority of the then outstanding
shares of the capital stock of the corporation entitled to vote at an election
of directors.
3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE Regular meetings of the
board of directors may be held at any place within or outside the State of
Delaware that has been designated from time to time by resolution of the board.
In the absence of such a designation, regular meetings shall be held at the
principal executive office of the corporation. Special meetings of the board may
be held at any place within or outside the State of Delaware that has been
designated in the notice of the meeting or, if not stated in the notice or if
there is no notice, at the principal executive office of the corporation.
Any meeting, regular or special, may be held by conference telephone or
similar communication equipment, so long as all directors participating in the
meeting can hear one another; and all such directors shall be deemed to be
present in person at the meeting.
3.6 REGULAR MEETINGS Regular meetings of the board of directors may be
held without notice if the times of such meetings are fixed by the board of
directors.
3.7 SPECIAL MEETINGS; NOTICE Special meetings of the board of directors
for any purpose or purposes may be called at any time by the chairman of the
board, the president, or any two directors.
Notice of the time and place of special meetings shall be delivered
personally or by telephone to each director or sent by first-class mail,
facsimile or telegram, charges prepaid, addressed to each director at that
director's address as it is shown on the records of the corporation. If the
notice is mailed, it shall be deposited in the United States mail at least four
(4) days before the time of the holding of the meeting. If the notice is
delivered personally or by telephone or by facsimile, it shall be delivered
personally or by telephone or by facsimile machine at least forty-eight (48)
hours before the time of the holding of the meeting or on such shorter notice as
the person or persons calling such meeting may deem necessary or appropriate in
the circumstances. Any oral notice given personally or by telephone may be
communicated either to the director or to a person at the office of the director
who the person giving the notice has reason to believe will promptly communicate
it to the director.
3.8 QUORUM Except as otherwise required by law, a majority of the
authorized number of directors shall constitute a quorum for the transaction of
business, except to adjourn as provided in Section 3.11 of these bylaws. Every
act or decision done or made by a majority of the directors present at a duly
held meeting at which a quorum is present shall be regarded as the act of the
board of directors, subject to the provisions of the Certificate of
Incorporation and applicable law.
A meeting at which a quorum is initially present may continue to
transact business notwithstanding the withdrawal of directors, if any action
taken is approved by at least a majority of the required quorum for that
meeting.
3.9 WAIVER OF NOTICE Notice of a meeting need not be given to any
director (i) who signs a waiver of notice or a consent to holding the meeting or
an approval of the minutes thereof, whether before or after the meeting, or (ii)
who attends the meeting without protesting, prior thereto or at its
commencement, the lack of notice to such directors. All such waivers, consents,
and approvals shall be filed with the corporate records or made part of the
minutes of the meeting. A waiver of notice need not specify the purpose of any
regular or special meeting of the board of directors.
3.10 ADJOURNMENT A majority of the directors present, whether or not
constituting a quorum, may adjourn any meeting to another time and place.
3.11 NOTICE OF ADJOURNMENT Notice of the time and place of holding an
adjourned meeting need not be given unless the meeting is adjourned for more
than twenty-four (24) hours. If the meeting is adjourned for more than
twenty-four (24) hours, then notice of the time and place of the adjourned
meeting
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shall be given before the adjourned meeting takes place, in the manner specified
in Section 3.7 of these bylaws, to the directors who were not present at the
time of the adjournment.
3.12 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING Any action
required or permitted to be taken by the board of directors may be taken without
a meeting, provided that all the members of the board individually or
collectively consent in writing to that action. Such action by written consent
shall have the same force and effect as a unanimous vote of the board of
directors. Such written consent and any counterparts thereof shall be filed with
the minutes of the proceedings of the board.
3.13 FEES AND COMPENSATION OF DIRECTORS Directors and members of
committees may receive such compensation, if any, for their services and such
reimbursement of expenses as may be fixed or determined by resolution of the
board of directors. This Section 3.13 shall not be construed to preclude any
director from serving the corporation in any other capacity as an officer,
agent, employee or otherwise and receiving compensation for those services.
3.14 APPROVAL OF LOANS TO OFFICERS The corporation may lend money to,
or guarantee any obligation of, or otherwise assist any officer or other
employee of the corporation or of its subsidiary, including any officer or
employee who is a director of the corporation or its subsidiary, whenever, in
the judgment of the directors, such loan, guaranty or assistance may reasonably
be expected to benefit the corporation. The loan, guaranty or other assistance
may be with or without interest and may be unsecured, or secured in such manner
as the board of directors shall approve, including, without limitation, a pledge
of shares of stock of the corporation. Nothing contained in this section shall
be deemed to deny, limit or restrict the powers of guaranty or warranty of the
corporation at common law or under any statute.
3.15 INTERESTED DIRECTORS No contract or transaction between the
corporation and one or more of its directors or officers, or between the
corporation and any other corporation, partnership, association, or other
organization in which one or more of its directors or officers are directors or
officers or have a financial interest, shall be void or voidable solely for this
reason, or solely because the director or officer is present at or participates
in the meeting of the board of directors or committee thereof which authorizes
the contract or transaction, or solely because the director or officer's vote is
counted for such purpose if (i) the material facts as to the director or
officer's relationship or interest and as to the contract or transaction are
disclosed or are known to the board of directors or the committee, and the board
of directors or committee in good faith authorizes the contract or transaction
by the affirmative votes of a majority of the disinterested directors, even
though the disinterested directors be less than a quorum; or (ii) the material
facts as to the director or officer's relationship or interest and as to the
contract or transaction are disclosed or are known to the stockholders entitled
to vote thereon, and the contract or transaction is specifically approved in
good faith by vote of the stockholders; or (iii) the contract or transaction is
fair as to the corporation as of the time it is authorized, approved or ratified
by the board of directors, a committee thereof or the stockholders. Common or
interested directors may be counted in determining the presence of a quorum at a
meeting of the board of directors or of a committee which authorizes the
contract or transaction.
ARTICLE IV
COMMITTEES
4.1 COMMITTEES OF DIRECTORS The board of directors may designate one
(1) or more committees, each consisting of one (1) or more directors, to serve
at the pleasure of the board. The board may designate one (1) or more directors
as alternate members of any committee, who may replace any absent member at any
meeting of the committee. In the absence or disqualification of a member of a
committee, and in the absence of a designation by the board of directors of an
alternate member to replace the absent or
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disqualified member, the member or members thereof present at any meeting and
not disqualified from voting, whether or not such member or members constitute a
quorum, may unanimously appoint another member of the board of directors to act
at the meeting in the place of any absent or disqualified member. Any committee,
to the extent permitted by law and provided in the resolution establishing such
committee, shall have and may exercise all the powers and authority of the board
of directors in the management of the business and affairs of the corporation,
and may authorize the seal of the corporation to be affixed to all papers which
may require it; provided, however, that no such committee shall have the power
or authority to (i) amend the Certificate of Incorporation (except that a
committee may, to the extent authorized in the resolution or resolutions
providing for the issuance of shares of stock adopted by the board of directors
as provided in Section 151(a) of the General Corporation Law of Delaware, fix
any of the preferences or rights of such shares relating to dividends,
redemption, dissolution, any distribution of assets of the corporation or the
conversion into, or the exchange of such shares for, shares of any other class
or classes or any other series of the same or any other class or classes of
stock of the corporation), (ii) adopt an agreement of merger or consolidation
under Sections 251 or 252 of the General Corporation Law of Delaware, (iii)
recommend to the stockholders the sale, lease or exchange of all or
substantially all of the corporation's property and assets, (iv) recommend to
the stockholders a dissolution of the corporation or a revocation of a
dissolution, or (v) amend the bylaws of the corporation; and, unless the board
resolution establishing the committee, the bylaws or the Certificate of
Incorporation expressly so provide, no such committee shall have the power or
authority to declare a dividend, to authorize the issuance of stock, or to adopt
a certificate of ownership and merger pursuant to Section 253 of the General
Corporation Law of Delaware. Each committee shall keep regular minutes and
report to the board of directors when required
4.2 MEETINGS AND ACTION OF COMMITTEES Meetings and actions of
committees shall be governed by, and held and taken in accordance with, the
provisions of Article III of these bylaws, Section 3.5 (place of meetings),
Section 3.6 (regular meetings), Section 3.7 (special meetings and notice),
Section 3.8 (quorum), Section 3.9 (waiver of notice), Section 3.10
(adjournment), Section 3.11 (notice of adjournment), and Section 3.12 (action
without meeting), with such changes in the context of those bylaws as are
necessary to substitute the committee and its members for the board of directors
and its members; provided, however, that the time of regular meetings of
committees may be determined either by resolution of the board of directors or
by resolution of the committee, that special meetings of committees may also be
called by resolution of the board of directors, and that notice of special
meetings of committees shall also be given to all alternate members, who shall
have the right to attend all meetings of the committee. The board of directors
may adopt rules for the government of any committee not inconsistent with the
provisions of these bylaws.
ARTICLE V
OFFICERS
5.1 OFFICERS The officers of the corporation shall be a president, a
secretary, and a chief financial officer. The corporation may also have, at the
discretion of the board of directors, a chairman of the board, a chief executive
officer, a treasurer, one or more vice presidents, one or more assistant
secretaries, one or more assistant treasurers, and such other officers as may be
appointed in accordance with the provisions of Section 5.3 of these bylaws. Any
number of offices may be held by the same person.
5.2 ELECTION OF OFFICERS The officers of the corporation, except such
officers as may be appointed in accordance with the provisions of Section 5.3 or
Section 5.5 of these bylaws, shall be chosen by the board of directors, subject
to the rights, if any, of an officer under any contract of employment.
5.3 SUBORDINATE OFFICERS The board of directors may appoint, or may
empower the president to appoint, such other officers as the business of the
corporation may require, each of whom shall hold
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office for such period, have such authority, and perform such duties as are
provided in these bylaws or as the board of directors may from time to time
determine.
5.4 REMOVAL AND RESIGNATION OF OFFICERS Subject to the rights, if any,
of an officer under any contract of employment, any officer may be removed,
either with or without cause, by the board of directors at any regular or
special meeting of the board or, except in case of an officer chosen by the
board of directors, by any officer upon whom such power of removal may be
conferred by the board of directors.
Any officer may resign at any time by giving written notice to the
corporation. Any resignation shall take effect at the date of the receipt of
that notice or at any later time specified in that notice; and, unless otherwise
specified in that notice, the acceptance of the resignation shall not be
necessary to make it effective. Any resignation is without prejudice to the
rights, if any, of the corporation under any contract to which the officer is a
party.
5.5 VACANCIES IN OFFICES A vacancy in any office because of death,
resignation, removal, disqualification or any other cause shall be filled in the
manner prescribed in these bylaws for regular appointments to that office.
5.6 CHAIRMAN OF THE BOARD The chairman of the board, if such an officer
be elected, shall, if present, preside at meetings of the board of directors and
exercise and perform such other powers and duties as may from time to time be
assigned to him by the board of directors or as may be prescribed by these
bylaws. If there is no chief executive officer, then the chairman of the board
shall also be the chief executive officer of the corporation and shall have the
powers and duties prescribed in Section 5.7 of these bylaws.
5.7 CHIEF EXECUTIVE OFFICER Subject to such supervisory powers, if any,
as may be given by the board of directors to the chairman of the board, if there
be such an officer, the chief executive officer shall be subject to the control
of the board of directors and have general supervision, direction and control of
the business. He or she shall preside at all meetings of the stockholders and,
in the absence or non-existence of the chairman of the board, at all meetings of
the board of directors. He or she shall have the general powers and duties of
management usually vested in the office of the chief executive officer of a
corporation, and shall have such other powers and perform such other duties as
from time to time may be prescribed by the board of directors or these bylaws.
5.8 PRESIDENT In the absence or disability of the chief executive
officer, and if there is no chairman of the board, the president shall perform
all the duties of the chief executive officer and when so acting shall have the
power of, and be subject to all the restrictions upon, the chief executive
officer. The president shall have such other powers and perform such other
duties as from time to time may be prescribed for the president by the board of
directors, these bylaws, the chief executive officer or the chairman of the
board.
5.9 VICE PRESIDENTS In the absence or disability of the president, the
vice presidents, if any, in order of their rank as fixed by the board of
directors or, if not ranked, a vice president designated by the board of
directors, shall perform all the duties of the president and when so acting
shall have all the powers of, and be subject to all the restrictions upon, the
president. The vice presidents shall have such other powers and perform such
other duties as from time to time may be prescribed for them respectively by the
board of directors, these bylaws, the president or the chairman of the board.
5.10 SECRETARY The secretary shall keep or cause to be kept, at the
principal executive office of the corporation or such other place as the board
of directors may direct, a book of minutes of all meetings and actions of
directors, committees of directors and shareholders. The minutes shall show the
time and place of each meeting, whether regular or special (and, if special, how
authorized and the notice given), the names of those present at directors'
meetings or committee meetings, the number of shares present or represented at
shareholders' meetings, and the proceedings thereof.
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The secretary shall keep, or cause to be kept, at the principal
executive office of the corporation or at the office of the corporation's
transfer agent or registrar, as determined by resolution of the board of
directors, a share register, or a duplicate share register, showing the names of
all shareholders and their addresses, the number and classes of shares held by
each, the number and date of certificates evidencing such shares, and the number
and date of cancellation of every certificate surrendered for cancellation.
The secretary shall give, or cause to be given, notice of all meetings
of the shareholders and of the board of directors required to be given by law or
by these bylaws. He shall keep the seal of the corporation, if one be adopted,
in safe custody and shall have such other powers and perform such other duties
as may be prescribed by the board of directors or by these bylaws.
5.11 CHIEF FINANCIAL OFFICER The chief financial officer shall keep and
maintain, or cause to be kept and maintained, adequate and correct books and
records of accounts of the properties and business transactions of the
corporation, including accounts of its assets, liabilities, receipts,
disbursements, gains, losses, capital, retained earnings, and shares. The books
of account shall at all reasonable times be open to inspection by any director.
The chief financial officer shall deposit all money and other valuables
in the name and to the credit of the corporation with such depositaries as may
be designated in accordance with procedures established by the board of
directors. He shall disburse the funds of the corporation as may be ordered by
the board of directors, shall render to the president and directors, whenever
they request it, an account of all of his transactions as chief financial
officer and of the financial condition of the corporation, and shall have such
other powers and perform such other duties as may be prescribed by the board of
directors or these bylaws.
ARTICLE VI
INDEMNIFICATION OF DIRECTORS,
OFFICERS, EMPLOYEES, AND OTHER AGENTS
6.1 POWER TO INDEMNIFY IN ACTIONS, SUITS OR PROCEEDINGS OTHER THAN
THOSE BY OR IN THE RIGHT OF THE CORPORATION Subject to Section 6.3 of this
Article VI, the corporation shall indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the corporation) by reason of the
fact that such person is or was a director or officer of the corporation, or is
or was a director or officer of the corporation serving at the request of the
corporation as a director or officer, employee or agent of another corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise,
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by such person in connection with
such action, suit or proceeding if such person acted in good faith and in a
manner such person reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe such person's conduct was
unlawful. The termination of any action, suit or proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its equivalent,
shall not, of itself, create a presumption that the person did not act in good
faith and in a manner which such person reasonably believed to be in or not
opposed to the best interests of the corporation, and, with respect to any
criminal action or proceeding, had reasonable cause to believe that such
person's conduct was unlawful.
6.2 POWER TO INDEMNIFY IN ACTIONS, SUITS OR PROCEEDINGS BY OR IN THE
RIGHT OF THE CORPORATION Subject to Section 6.3 of this Article VI, the
corporation shall indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action or suit by or in
the right of the corporation to procure a judgment in
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its favor by reason of the fact that such person is or was a director or officer
of the corporation, or is or was a director or officer of the corporation
serving at the request of the corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise against expenses (including attorneys' fees)
actually and reasonably incurred by such person in connection with the defense
or settlement of such action or suit if such person acted in good faith and in a
manner such person reasonably believed to be in or not opposed to the best
interests of the corporation; except that no indemnification shall be made in
respect of any claim, issue or matter as to which such person shall have been
adjudged to be liable to the corporation unless and only to the extent that the
Court of Chancery or the court in which such action or suit was brought shall
determine upon application that, despite the adjudication of liability but in
view of all the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the Court of Chancery or such
other court shall deem proper.
6.3 AUTHORIZATION OF INDEMNIFICATION Any indemnification under this
Article VI (unless ordered by a court) shall be made by the corporation only as
authorized in the specific case upon a determination that indemnification of the
director or officer is proper in the circumstances because such person has met
the applicable standard of conduct set forth in Section 6.1 or Section 6.2 of
this Article VI, as the case may be. Such determination shall be made, with
respect to a person who is a director or officer at the time of such
determination, (i) by a majority vote of the directors who are not parties to
such action, suit or proceeding, even though less than a quorum, or (ii) by a
committee of such directors designated by a majority vote of such directors,
even though less than a quorum, or (iii) if there are no such directors, or if
such directors so direct, by independent legal counsel in a written opinion or
(iv) by the stockholders (but only if a majority of the directors who are not
parties to such action, suit or proceeding, if they constitute a quorum of the
board of directors, presents the issue of entitlement to indemnification to the
shareholders for their determination). Such determination shall be made, with
respect to former directors and officers, by any person or persons having the
authority to act on the matter on behalf of the corporation. To the extent,
however, that a present or former director or officer of the corporation has
been successful on the merits or otherwise in defense of any action, suit or
proceeding described above, or in defense of any claim, issue or matter therein,
such person shall be indemnified against expenses (including attorneys' fees)
actually and reasonably incurred by such person in connection therewith, without
the necessity of authorization in the specific case.
6.4 GOOD FAITH DEFINED For purposes of any determination under Section
6.3 of this Article VI, a person shall be deemed to have acted in good faith and
in a manner such person reasonably believed to be in or not opposed to the best
interests of the corporation, or, with respect to any criminal action or
proceeding, to have had no reasonable cause to believe such person's conduct
was unlawful, if such person's action is based on the records or books of
account of the corporation or another enterprise, or on information supplied to
such person by the officers of the corporation or another enterprise in the
course of their duties, or on the advice of legal counsel for the corporation or
another enterprise or on information or records given or reports made to the
corporation or another enterprise by an independent certified public accountant
or by an appraiser or other expert selected with reasonable care by the
corporation or another enterprise. The term "another enterprise" as used in this
Section 6.4 shall mean any other corporation or any partnership, joint venture,
trust, employee benefit plan or other enterprise of which such person is or was
serving at the request of the corporation as a director, officer, employee or
agent. The provisions of this Section 6.4 shall not be deemed to be exclusive or
to limit in any way the circumstances in which a person may be deemed to have
met the applicable standard of conduct set forth in Section 6.1 or 6.2 of this
Article VI, as the case may be.
6.5 INDEMNIFICATION BY A COURT Notwithstanding any contrary
determination in the specific case under Section 6.3 of this Article VI, and
notwithstanding the absence of any determination thereunder, any director or
officer may apply to the Court of Chancery in the State of Delaware for
indemnification to the extent otherwise permissible under Sections 6.1 and 6.2
of this Article VI. The basis of such indemnification by a court shall be a
determination by such court that indemnification of the director or officer is
proper in the circumstances because such person has met the applicable standards
of conduct set forth in Section 6.1 or 6.2 of this Article VI, as the case may
be. Neither a contrary determination in the
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specific case under Section 6.3 of this Article VI nor the absence of any
determination thereunder shall be a defense to such application or create a
presumption that the director or officer seeking indemnification has not met any
applicable standard of conduct. Notice of any application for indemnification
pursuant to this Section 5 shall be given to the corporation promptly upon the
filing of such application. If successful, in whole or in part, the director or
officer seeking indemnification shall also be entitled to be paid the expense of
prosecuting such application.
6.6 EXPENSES PAYABLE IN ADVANCE Expenses incurred by a director or
officer in defending any civil, criminal, administrative or investigative
action, suit or proceeding shall be paid by the corporation in advance of the
final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such director or officer to repay such amount if
it shall ultimately be determined that such person is not entitled to be
indemnified by the corporation as authorized in this Article VI.
6.7 NONEXCLUSIVITY OF INDEMNIFICATION AND ADVANCEMENT OF EXPENSES The
indemnification and advancement of expenses provided by or granted pursuant to
this Article VI shall not be deemed exclusive of any other rights to which those
seeking indemnification or advancement of expenses may be entitled under the
Restated Certificate of Incorporation, any Bylaw, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in such
person's official capacity and as to action in another capacity while holding
such office, it being the policy of the corporation that indemnification of the
persons specified in Sections 6.1 and 6.2 of this Article VI shall be made to
the fullest extent permitted by law. The provisions of this Article VI shall not
be deemed to preclude the indemnification of any person who is not specified in
Section 6.1 or 6.2 of this Article VI but whom the corporation has the power or
obligation to indemnify under the provisions of the General Corporation Law of
the State of Delaware, or otherwise.
6.8 INSURANCE The corporation may purchase and maintain insurance on
behalf of any person who is or was a director or officer of the corporation, or
is or was a director or officer of the corporation serving at the request of the
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise
against any liability asserted against such person and incurred by such person
in any such capacity, or arising out of such person's status as such, whether or
not the corporation would have the power or the obligation to indemnify such
person against such liability under the provisions of this Article VI.
6.9 CERTAIN DEFINITIONS For purposes of this Article VI, references to
"the corporation" shall include, in addition to the resulting corporation, any
constituent corporation (including any constituent of a constituent) absorbed in
a consolidation or merger which, if its separate existence had continued, would
have had power and authority to indemnify its directors or officers, so that any
person who is or was a director or officer of such constituent corporation, or
is or was a director or officer of such constituent corporation serving at the
request of such constituent corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise, shall stand in the same position under the
provisions of this Article VI with respect to the resulting or surviving
corporation as such person would have with respect to such constituent
corporation if its separate existence had continued. For purposes of this
Article VI, references to "fines" shall include any excise taxes assessed on a
person with respect to an employee benefit plan; and references to "serving at
the request of the corporation " shall include any service as a director,
officer, employee or agent of the corporation which imposes duties on, or
involves services by, such director or officer with respect to an employee
benefit plan, its participants or beneficiaries; and a person who acted in good
faith and in a manner such person reasonably believed to be in the interest of
the participants and beneficiaries of an employee benefit plan shall be deemed
to have acted in a manner "not opposed to the best interests of the corporation"
as referred to in this Article VI.
6.10 SURVIVAL OF INDEMNIFICATION AND ADVANCEMENT OF EXPENSES The
indemnification and advancement of expenses provided by, or granted pursuant to,
this Article VI shall,
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unless otherwise provided when authorized or ratified, continue as to a person
who has ceased to be a director or officer and shall inure to the benefit of the
heirs, executors and administrators of such a person.
6.11 LIMITATION ON INDEMNIFICATION Notwithstanding anything contained
in this Article VI to the contrary, except for proceedings to enforce rights to
indemnification (which shall be governed by Section 6.5 hereof), the corporation
shall not be obligated to indemnify any director or officer in connection with a
proceeding (or part thereof) initiated by such person unless such proceeding
(or part thereof) was authorized or consented to by the board of directors of
the corporation.
6.12 INDEMNIFICATION OF EMPLOYEES AND AGENTS The corporation may, to
the extent authorized from time to time by the board of directors, provide
rights to indemnification and to the advancement of expenses to employees and
agents of the corporation similar to those conferred in this Article VI to
directors and officers of the corporation.
ARTICLE VII
RECORDS AND REPORTS
7.1 MAINTENANCE AND INSPECTION OF RECORDS
The corporation shall, either at its principal executive office or at
such place or places as designated by the board of directors, keep a record of
its stockholders listing their names and addresses and the number and class of
shares held by each stockholder, a copy of these bylaws as amended to date,
accounting books and other records.
Any stockholder of record, in person or by attorney or other agent,
shall, upon written demand under oath stating the purpose thereof, have the
right during the usual hours for business to inspect for any proper purpose the
corporation's stock ledger, a list of its stockholders, and its other books and
records and to make copies or extracts therefrom. A proper purpose shall mean a
purpose reasonably related to such person's interest as a stockholder. In every
instance where an attorney or other agent is the person who seeks the right to
inspection, the demand under oath shall be accompanied by a power of attorney or
such other writing that authorizes the attorney or other agent to so act on
behalf of the stockholder. The demand under oath shall be directed to the
corporation at its registered office in Delaware or at its principal place of
business.
The officer who has charge of the stock ledger of a corporation shall
prepare and make, at least ten (10) days before every meeting of stockholders, a
complete list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open to
the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten (10) days prior to
the meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder who is present.
7.2 INSPECTION BY DIRECTORS Any director shall have the right to
examine the corporation's stock ledger, a list of its stockholders and its other
books and records for a purpose reasonably related to his or her position as a
director. The Court of Chancery is hereby vested with the exclusive jurisdiction
to determine whether a director is entitled to the inspection sought. The Court
may summarily order the corporation to permit the director to inspect any and
all books and records, the stock ledger, and the stock list and to make copies
or extracts therefrom. The Court may, in its discretion, prescribe any
limitations or conditions with reference to the inspection, or award such other
and further relief as the Court may deem just and proper.
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7.3 ANNUAL STATEMENT TO STOCKHOLDERS The board of directors shall
present at each annual meeting, and at any special meeting of the stockholders
when called for by vote of the stockholders, a full and clear statement of the
business and condition of the corporation.
7.4 REPRESENTATION OF SHARES OF OTHER CORPORATIONS The chairman of the
board, the chief executive officer, the president or any other person authorized
by the board of directors or the chief executive officer or president, is
authorized to vote, represent, and exercise on behalf of this corporation all
rights incident to any and all shares of any other corporation or corporations
standing in the name of this corporation. The authority herein granted may be
exercised either by such person directly or by any other person authorized to do
so by proxy or power of attorney duly executed by such person having the
authority.
ARTICLE VIII
GENERAL MATTERS
8.1 RECORD DATE FOR PURPOSES OTHER THAN NOTICE AND VOTING For purposes
of determining the stockholders entitled to receive payment of any dividend or
other distribution or allotment of any rights or the stockholders entitled to
exercise any rights in respect of any other lawful action (other than action by
stockholders by written consent without a meeting), the board of directors may
fix, in advance, a record date, which shall not be more than sixty (60) days
before any such action. In that case, only stockholders of record at the close
of business on the date so fixed are entitled to receive the dividend,
distribution or allotment of rights, or to exercise such rights, as the case may
be, notwithstanding any transfer of any shares on the books of the corporation
after the record date so fixed, except as otherwise provided by law.
If the board of directors does not so fix a record date, then the
record date for determining stockholders for any such purpose shall be at the
close of business on the day on which the board adopts the applicable resolution
or the sixtieth (60th) day before the date of that action, whichever is later.
8.2 CHECKS; DRAFTS; EVIDENCES OF INDEBTEDNESS From time to time, the
board of directors shall determine by resolution which person or persons may
sign or endorse all checks, drafts, other orders for payment of money, notes or
other evidences of indebtedness that are issued in the name of or payable to the
corporation, and only the persons so authorized shall sign or endorse those
instruments.
8.3 CORPORATE CONTRACTS AND INSTRUMENTS: HOW EXECUTED The board of
directors, except as otherwise provided in these bylaws, may authorize any
officer or officers, or agent or agents, to enter into any contract or execute
any instrument in the name of and on behalf of the corporation; such authority
may be general or confined to specific instances. Unless so authorized or
ratified by the board of directors or within the agency power of an officer, no
officer, agent or employee shall have any power or authority to bind the
corporation by any contract or engagement or to pledge its credit or to render
it liable for any purpose or for any amount.
8.4 STOCK CERTIFICATES; PARTLY PAID SHARES The shares of a corporation
shall be represented by certificates, provided that the board of directors of
the corporation may provide by resolution or resolutions that some or all of any
or all classes or series of its stock shall be uncertificated shares. Any such
resolution shall not apply to shares represented by a certificate until such
certificate is surrendered to the corporation. Notwithstanding the adoption of
such a resolution by the board of directors, every holder of stock represented
by certificates and upon request every holder of uncertificated shares shall be
entitled to have a certificate signed in the name of the corporation by(a) the
chairman or vice-chairman of the board of directors, or the chief executive
officer, president or vice-president, and by (b) the chief financial officer,
treasurer, secretary or an assistant secretary of the corporation representing
the number of shares registered in certificate form. Any or all of the
signatures on the certificate may be a facsimile. In case any officer,
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transfer agent or registrar who has signed or whose facsimile signature has been
placed upon a certificate has ceased to be such officer, transfer agent or
registrar before such certificate is issued, it may be issued by the corporation
with the same effect as if he or she were such officer, transfer agent or
registrar at the date of issue.
8.5 SPECIAL DESIGNATION ON CERTIFICATES If the corporation is
authorized to issue more than one class of stock or more than one series of any
class, then the powers, the designations, the preferences, and the relative,
participating, optional or other special rights of each class of stock or series
thereof and the qualifications, limitations or restrictions of such preferences
and/or rights shall be set forth in full or summarized on the face or back of
the certificate that the corporation shall issue to represent such class or
series of stock; provided, however, that, except as otherwise provided in
Section 202 of the General Corporation Law of Delaware, in lieu of the foregoing
requirements there may be set forth on the face or back of the certificate that
the corporation shall issue to represent such class or series of stock a
statement that the corporation will furnish without charge to each stockholder
who so requests the powers, the designations, the preferences, and the relative,
participating, optional or other special rights of each class of stock or series
thereof and the qualifications, limitations or restrictions of such preferences
and/or rights.
8.6 LOST CERTIFICATES Except as provided in this Section 8.6, no new
certificates for shares shall be issued to replace a previously issued
certificate unless the latter is surrendered to the corporation and canceled at
the same time. The board of directors may, in case any share certificate or
certificate for any other security is lost, stolen or destroyed, authorize the
issuance of replacement certificates on such terms and conditions as the board
may require; the board may require indemnification of the corporation secured by
a bond or other adequate security sufficient to protect the corporation against
any claim that may be made against it, including any expense or liability, on
account of the alleged loss, theft or destruction of the certificate or the
issuance of the replacement certificate.
8.7 CONSTRUCTION; DEFINITIONS Unless the context requires otherwise,
the general provisions, rules of construction, and definitions in the General
Corporation Law of Delaware shall govern the construction of these bylaws.
Without limiting the generality of this provision, the singular number includes
the plural, the plural number includes the singular, and the term "person"
includes both a corporation and a natural person.
ARTICLE IX
AMENDMENTS
These bylaws of the corporation may be altered, amended or repealed, in
whole or in part, or new bylaws may be adopted by the stockholders entitled to
vote or by the board of directors.All such amendments must be approved by either
the holders of a majority of the outstanding capital stock entitled to vote
thereon or by a majority of the board of directors then in office. The fact that
such power has been so conferred upon the board of directors shall not divest
the stockholders of the power, nor limit their power to adopt, alter, amend or
repeal bylaws.
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CERTIFICATE OF ADOPTION OF BYLAWS
OF
WEBVAN GROUP, INC.
Adoption by Incorporator
The undersigned person appointed in the Certificate of Incorporation to
act as the Incorporator of Webvan Group, Inc. hereby adopts the foregoing
Bylaws, comprising twenty (20) pages, as the Bylaws of the corporation.
Executed this 18th day of August, 1999.
/s/ J. ROBERT SUFFOLETTA
-------------------------------------
J. Robert Suffoletta, Incorporator
Certificate by Secretary of Adoption by Incorporator
The undersigned hereby certifies that he is the duly elected Secretary
of Webvan Group, Inc. and that the foregoing Bylaws, comprising twenty (20)
pages, were adopted as the Bylaws of the corporation on August 18, 1999, by the
person appointed in the Certificate of Incorporation to act as the Incorporator
of the corporation.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and
affixed the corporate seal this 18th day of August, 1999.
/s/ JEFFREY D. SAPER
-------------------------------------
Jeffrey D. Saper,
Secretary
<PAGE> 1
EXHIBIT 3.4
RESTATED CERTIFICATE OF INCORPORATION
OF
WEBVAN GROUP, INC.
A DELAWARE CORPORATION
Webvan Group, Inc., a corporation organized and existing under the laws
of the State of Delaware, does hereby certify:
1. The name of the corporation is Webvan Group, Inc. (the
"Corporation"). The original Certificate of Incorporation of the Corporation was
filed with the Secretary of State of the State of Delaware on August 17, 1999.
2. The amendment and restatement herein set forth has been duly
approved by the Board of Directors of the Corporation and by the stockholders of
the Corporation pursuant to Sections 141, 228 and 242 of the General Corporation
Law of the State of Delaware ("Delaware Law"). Approval of this amendment and
restatement was approved by a written consent signed by less than all of the
stockholders of the Corporation pursuant to Section 228 of the Delaware Law, and
notice has been given in accordance with Section 228(d) of the Delaware Law to
those stockholders not signing such written consent.
3. The restatement herein set forth has been duly adopted pursuant to
Section 245 of the Delaware Law. This Amended and Restated Certificate of
Incorporation restates and integrates and amends the provisions of the
Corporation's Certificate of Incorporation.
4. The text of the Certificate of Incorporation is hereby amended and
restated to read in its entirety as follows:
"ARTICLE I
The name of this corporation is Webvan Group, Inc. (hereinafter, the
"Corporation").
ARTICLE II
The address of the Corporation's registered office in the State of
Delaware is 1209 Orange Street, Wilmington, Delaware 19801, County of New
Castle. The name of its registered agent at such address is The Corporation
Trust Company.
ARTICLE III
The nature of the business or purposes to be conducted or promoted by
the Corporation is to engage in any lawful act or activity for which
corporations may be organized under the General Corporation Law of the State of
Delaware.
ARTICLE IV
This Corporation is authorized to issue two classes of shares to be
designated, respectively, Common Stock and Preferred Stock. Each share of Common
Stock shall have a par value of $0.0001 and each share of
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Preferred Stock shall have a par value of $0.0001. The total number of shares of
Common Stock this Corporation shall have authority to issue is 800,000,000, and
the total number of shares of Preferred Stock this Corporation shall have
authority to issue is 10,000,000.
The Preferred Stock initially shall be undesignated as to series. Any
Preferred Stock not previously designated as to series may be issued from time
to time in one or more series pursuant to a resolution or resolutions providing
for such issue duly adopted by the Board of Directors (authority to do so being
hereby expressly vested in the Board), and such resolution or resolutions shall
also set forth the voting powers, full or limited or none, of each such series
of Preferred Stock and shall fix the designations, preferences and relative,
participating, optional or other special rights of each such series of Preferred
Stock and the qualifications, limitations or restrictions of such powers,
designations, preferences or rights. The Board of Directors is authorized to
alter the powers, designation, preferences, rights, qualifications, limitations
and restrictions granted to or imposed upon any wholly unissued series of
Preferred Stock and, within the limits and restrictions stated in any resolution
or resolutions of the Board of Directors originally fixing the number of shares
constituting any series of Preferred Stock, to increase or decrease (but not
below the number of shares of any such series then outstanding) the number of
shares of any such series subsequent to the issue of shares of that series.
Each share of Preferred Stock issued by the Corporation, if reacquired
by the Corporation (whether by redemption, repurchase, conversion to Common
Stock or other means), shall upon such reacquisition resume the status of
authorized and unissued shares of Preferred Stock, undesignated as to series and
available for designation and issuance by the Corporation in accordance with the
immediately preceding paragraph.
The Corporation shall from time to time in accordance with the laws of
the State of Delaware increase the authorized amount of its Common Stock if at
any time the number of shares of Common Stock remaining unissued and available
for issuance shall not be sufficient to permit conversion, if applicable, of the
Preferred Stock.
ARTICLE V
The Corporation is to have perpetual existence.
ARTICLE VI
The Board of Directors shall be divided into three classes designated
as Class I, Class II and Class III, respectively. Directors shall be assigned to
each class in accordance with a resolution or resolutions adopted by the Board
of Directors. Each class shall consist, as nearly as may be possible, of
one-third of the total number of directors constituting the entire Board of
Directors. At the first annual meeting of stockholders following the date
hereof, the term of office of the Class I directors shall expire and Class I
directors shall be elected for a full term of three years. At the second annual
meeting of stockholders following the date hereof, the term of office of the
Class II directors shall expire and Class II directors shall be elected for a
full term of three years. At the third annual meeting of stockholders following
the date hereof, the term of office of the Class III directors shall expire and
Class III directors shall be elected for a full term of three years. At each
succeeding annual meeting of stockholders, directors shall be elected for a full
term of three years to succeed the directors of the class whose term expire at
such annual meeting. If the number of directors is changed, any increase or
decrease shall be apportioned among the classes so as to maintain the number of
directors in each class as nearly equal as possible, and any additional director
of any class elected to fill a vacancy resulting from an increase in such class
shall hold office for a term that shall
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coincide with the remaining term of that class, but in no case will a decrease
in the number of directors shorten the term of any incumbent director.
ARTICLE VII
Section 1. The business and affairs of the Corporation shall be managed
by or under the direction of the Board of Directors.
Section 2. In furtherance and not in limitation of the powers conferred
by statute, the Board of Directors is expressly authorized to adopt, alter,
amend or repeal the Bylaws of the Corporation. The affirmative vote of at least
a majority of the Board of Directors then in office shall be required to adopt,
amend, alter or repeal the Corporation's Bylaws. The Corporation's Bylaws also
may be adopted, amended, altered or repealed by the affirmative vote of the
holders of at least a majority of the voting power of the shares entitled to
vote at an election of directors. No Bylaw hereafter legally adopted, amended,
altered or repealed by the stockholders of the Corporation shall invalidate any
prior act of the directors or officers of the Corporation which would have been
valid if such Bylaw had not been adopted, amended, altered or repealed.
Section 3. Elections of directors need not be by written ballot unless
the Bylaws of the Corporation shall so provide.
Section 4. At the election of directors of the Corporation, each holder
of Common Stock shall be entitled to one vote for each share held. No
stockholder will be permitted to cumulate votes at any election of directors.
Section 5. The number of directors which constitute the whole Board of
Directors shall be fixed exclusively in the manner designated in the Bylaws of
the Corporation.
ARTICLE VIII
Section 1. To the fullest extent permitted by the Delaware General
Corporation Law as the same exists or as may hereafter be amended, a director of
the Corporation shall not be personally liable to the Corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director.
Section 2. The Corporation shall indemnify to the fullest extent
permitted by law, as now or hereinafter in effect, any person made or threatened
to be made a party to an action or proceeding, whether criminal, civil,
administrative or investigative, by reason of the fact that he, his testator or
intestate is or was a director or officer of the Corporation or any predecessor
of the Corporation or serves or served at any other enterprise as a director,
officer, employee or agent at the request of the Corporation or any predecessor
to the Corporation and such right to indemnification shall continue as to a
person who has ceased to be a director or officer of the Corporation and shall
inure to the benefit of his or her heirs, executors and personal and legal
representatives; PROVIDED, HOWEVER, that, except for proceedings to enforce
rights to indemnification, the Corporation shall not be obligated to indemnify
any director or officer (or his or her heirs, executors or personal or legal
representatives) in connection with a proceeding (or part thereof) initiated by
such person unless such proceeding (or part thereof) was authorized or consented
to by the Board of Directors of the Corporation. The right to indemnification
conferred by this Section 2 shall include the right to be paid by the
Corporation the expenses incurred in defending or otherwise participating in any
proceeding in advance of its final disposition. The Corporation may indemnify to
the fullest extent permitted by law, as now or hereinafter in effect, any person
made or threatened to be made a party to an action or proceeding, whether
criminal, civil, administrative or investigative, by reason of the fact that he,
his testator or intestate is or was
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an employee or agent of the Corporation or any predecessor of the Corporation or
serves or served at any other enterprise as a director, officer, employee or
agent at the request of the Corporation or any predecessor to the Corporation.
The rights to indemnification and to the advancement of expenses conferred in
this Section 2 shall not be exclusive of any other right which any person may
have or hereafter acquire under this Restated Certificate Incorporation (as
amended and restated from time to time, the "Restated Certificate of
Incorporation"), the Bylaws of the Corporation, any statute, agreement, vote of
the stockholders of the Corporation or disinterested directors of the
Corporation or otherwise.
Section 3. Neither any amendment nor repeal of any Section of this
Article VIII, nor the adoption of any provision of the Restated Certificate of
Incorporation inconsistent with this Article VIII, shall adversely affect any
right or protection of any director or officer established pursuant to this
Article VIII existing at the time of such amendment, repeal or adoption of an
inconsistent provision, including without limitation by eliminating or reducing
the effect of this Article VIII, for or in respect of any act, omission or other
matter occurring, or any action or proceeding accruing or arising (or that, but
for this Article VIII, would accrue or arise) prior to such amendment, repeal or
adoption of an inconsistent provision.
ARTICLE IX
Meetings of stockholders may be held within or without the State of
Delaware, as the Bylaws may provide. The books of the Corporation may be kept
(subject to any provision contained in the statutes) outside of the State of
Delaware at such place or places as may be designated from time to time by the
Board of Directors or in the Bylaws of the Corporation.
ARTICLE X
Section 1. Except as otherwise provided for or fixed by or pursuant to
the provisions of Article IV hereof in relation to the rights of the holders of
Preferred Stock to elect directors under specified circumstances, newly-created
directorships resulting from any increase in the number of directors, created in
accordance with the Bylaws of the Corporation, and any vacancies on the Board of
Directors resulting from death, resignation, disqualification, removal or other
cause shall be filled by the affirmative vote of a majority of the remaining
directors then in office, even though less than a quorum of the Board of
Directors, or by a sole remaining director. Any director elected in accordance
with the preceding sentence shall hold office for the remainder of the full term
of the class of directors in which the new directorship was created or the
vacancy occurred and until such director's successor shall have been elected and
qualified, or until such director's earlier death, resignation or removal. No
decrease in the number of directors constituting the Board of Directors shall
shorten the term of any incumbent director.
Section 2. Any director or the entire Board of Directors may be removed
from office at any time, but only for cause, and only by the affirmative vote of
the holders of at least a majority of the voting power of the issued and
outstanding capital stock of the Corporation entitled to vote in the election of
directors.
ARTICLE XI
Advance notice of new business and stockholder nominations for the
election of directors shall be given in the manner and to the extent provided in
the Bylaws of the Corporation.
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ARTICLE XII
Section 1. Stockholders of the Corporation may not take action by
written consent in lieu of a meeting but must take any actions at a duly called
annual or special meeting.
Section 2. Unless otherwise required by law, special meetings of the
stockholders of the Corporation, for any purpose or purposes, may be called only
by either (i) the Board of Directors of the Corporation, (ii) the Chairman of
the Board of Directors of the Corporation, if there be one, (iii) the Chief
Executive Officer of the Corporation or (iv) the President of the Corporation.
ARTICLE XIII
The Corporation reserves the right to amend, alter, change or repeal
any provision contained in this Certificate of Incorporation, in the manner now
or hereafter prescribed by statute, and all rights conferred upon stockholders
herein are granted subject to this reservation."
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IN WITNESS WHEREOF, Webvan Group, Inc. has caused this Amended and
Restated Certificate of Incorporation to be signed by Louis H. Borders, its
President and Chief Executive Officer and attested to by Jeffrey D. Saper, its
Secretary, on October ____, 1999.
Webvan Group, Inc.
a Delaware Corporation
By:
-------------------------------------
Louis H. Borders,
President and Chief Executive Officer
ATTEST:
By:
-------------------------------------
Jeffrey D. Saper,
Secretary
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<PAGE> 1
EXHIBIT 5.1
[Form of Legal Opinion]
September __, 1999
Webvan Group, Inc.
1241 E. Hillsdale Blvd., Suite 210
Foster City, California 94404
RE: REGISTRATION STATEMENT ON FORM S-1
Ladies and Gentlemen:
We have examined the registration statement on Form S-1, as amended,
filed by Webvan Group, Inc., a Delaware corporation (the "Company"), with the
Securities and Exchange Commission in connection with the registration under the
Securities Act of 1933, as amended, of up to 28,750,000 shares of the Company's
common stock (including an over-allotment of up to 3,750,000 shares of the
Company's common stock granted to the underwriters) (the "Shares"). The Shares
are to be sold to the underwriters for resale to the public as described in the
registration statement and pursuant to the underwriting agreement filed as an
exhibit thereto. As legal counsel to the Company, we have examined the
proceedings proposed to be taken in connection with said sale and issuance of
the Shares.
Based upon the foregoing, we are of the opinion that the Shares, when
issued in the manner described in the registration statement, will be duly
authorized, validly issued, fully paid and non-assessable.
We consent to the use of this opinion as an exhibit to the registration
statement, and further consent to the use of our name wherever appearing in the
registration statement, including the prospectus constituting a part thereof,
and any amendment thereto.
Very truly yours,
WILSON SONSINI GOODRICH & ROSATI
Professional Corporation
<PAGE> 1
EXHIBIT 10.2
WEBVAN GROUP, INC.
1997 STOCK PLAN
(AS AMENDED ON AUGUST 5, 1999)
1. Purposes of the Plan. The purposes of this Plan are:
- to attract and retain the best available personnel for
positions of substantial responsibility,
- to provide additional incentive to Employees, Directors and
Consultants, and
- to promote the success of the Company's business.
Options granted under the Plan may be Incentive Stock Options or
Nonstatutory Stock Options, as determined by the Administrator at the time of
grant. Stock Purchase Rights may also be granted under the Plan.
2. Definitions. As used herein, the following definitions shall apply:
(a) "Administrator" means the Board or any of its Committees as
shall be administering the Plan, in accordance with Section 4 of the Plan.
(b) "Affiliate" means any entity, including any company,
partnership, trust, or joint venture, in which the Company owns at least a ten
percent (10%) ownership interest.
(c) "Applicable Laws" means the requirements relating to the
administration of stock option plans under U. S. state corporate laws, U.S.
federal and state securities laws, the Code, any stock exchange or quotation
system on which the Common Stock is listed or quoted and the applicable laws of
any foreign country or jurisdiction where Options or Stock Purchase Rights are,
or will be, granted under the Plan.
(d) "Board" means the Board of Directors of the Company.
(e) "Code" means the Internal Revenue Code of 1986, as amended.
(f) "Committee" means a committee of Directors appointed by the
Board in accordance with Section 4 of the Plan.
(g) "Common Stock" means the common stock of the Company.
(h) "Company" means Webvan Group, Inc., a Delaware corporation.
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<PAGE> 2
(i) "Consultant" means any person, including an advisor, engaged by
the Company or a Parent, Affiliate or Subsidiary to render services to such
entity.
(j) "Director" means a member of the Board.
(k) "Disability" means total and permanent disability as defined in
Section 22(e)(3) of the Code.
(l) "Employee" means any person, including Officers and Directors,
employed by the Company or any Parent, Subsidiary or Affiliate of the Company. A
Service Provider shall not cease to be an Employee in the case of (i) any leave
of absence approved by the Company or (ii) transfers between locations of the
Company or between the Company, its Parent, any Subsidiary, or any successor.
For purposes of Incentive Stock Options, no such leave may exceed ninety (90)
days, unless reemployment upon expiration of such leave is guaranteed by statute
or contract. If reemployment upon expiration of a leave of absence approved by
the Company is not so guaranteed, on the 181st day of such leave any Incentive
Stock Option held by the Optionee shall cease to be treated as an Incentive
Stock Option and shall be treated for tax purposes as a Nonstatutory Stock
Option. Neither service as a Director nor payment of a director's fee by the
Company shall be sufficient to constitute "employment" by the Company.
(m) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(n) "Fair Market Value" means, as of any date, the value of Common
Stock determined as follows:
(i) If the Common Stock is listed on any established stock
exchange or a national market system, including without limitation the Nasdaq
National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its
Fair Market Value shall be the closing sales price for such stock (or the
closing bid, if no sales were reported) as quoted on such exchange or system for
the last market trading day prior to the time of determination, as reported in
The Wall Street Journal or such other source as the Administrator deems
reliable;
(ii) If the Common Stock is regularly quoted by a recognized
securities dealer but selling prices are not reported, the Fair Market Value of
a Share of Common Stock shall be the mean between the high bid and low asked
prices for the Common Stock on the last market trading day prior to the day of
determination, as reported in The Wall Street Journal or such other source as
the Administrator deems reliable; or
(iii) In the absence of an established market for the Common
Stock, the Fair Market Value shall be determined in good faith by the
Administrator.
(o) "Incentive Stock Option" means an Option intended to qualify as
an incentive stock option within the meaning of Section 422 of the Code and the
regulations promulgated thereunder.
(p) "Nonstatutory Stock Option" means an Option not intended to
qualify as an Incentive Stock Option.
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(q) "Notice of Grant" means a written or electronic notice
evidencing certain terms and conditions of an individual Option or Stock
Purchase Right grant. The Notice of Grant is part of the Option Agreement.
(r) "Officer" means a person who is an officer of the Company within
the meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.
(s) "Option" means a stock option granted pursuant to the Plan.
(t) "Option Agreement" means an agreement between the Company and an
Optionee evidencing the terms and conditions of an individual Option grant. The
Option Agreement is subject to the terms and conditions of the Plan.
(u) "Option Exchange Program" means a program whereby outstanding
Options are surrendered in exchange for Options with a lower exercise price.
(v) "Optioned Stock" means the Common Stock subject to an Option or
Stock Purchase Right.
(w) "Optionee" means the holder of an outstanding Option or Stock
Purchase Right granted under the Plan.
(x) "Parent" means a "parent corporation", whether now or hereafter
existing, as defined in Section 424(e) of the Code.
(y) "Plan" means this 1997 Stock Plan.
(z) "Restricted Stock" means shares of Common Stock acquired
pursuant to a grant of Stock Purchase Rights under Section 11 of the Plan.
(aa) "Restricted Stock Purchase Agreement" means a written agreement
between the Company and the Optionee evidencing the terms and restrictions
applying to stock purchased under a Stock Purchase Right. The Restricted Stock
Purchase Agreement is subject to the terms and conditions of the Plan and the
Notice of Grant.
(bb) "Rule 16b-3" means Rule 16b-3 of the Exchange Act or any
successor to Rule 16b-3, as in effect when discretion is being exercised with
respect to the Plan.
(cc) "Section 16(b)" means Section 16(b) of the Exchange Act.
(dd) "Service Provider" means an Employee, Director or Consultant.
(ee) "Share" means a share of the Common Stock, as adjusted in
accordance with Section 13 of the Plan.
(ff) "Stock Purchase Right" means the right to purchase Common Stock
pursuant to Section 11 of the Plan, as evidenced by a Notice of Grant.
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(gg) "Subsidiary" means a "subsidiary corporation", whether now or
hereafter existing, as defined in Section 424(f) of the Code.
3. Stock Subject to the Plan. Subject to the provisions of Section 13
of the Plan, the maximum aggregate number of Shares that may be optioned and
sold under the Plan is Seventy Nine Million Five Hundred Thousand (79,500,000)
Shares, plus an annual increase to be added on January 1 of each year beginning
on January 1, 2000 equal to the lesser of (i) sixteen million (16,000,000)
Shares, (ii) four percent (4%) of the outstanding Shares on such date, or (iii)
an amount determined by the Board. The Shares may be authorized, but unissued,
or reacquired Common Stock.
If an Option or Stock Purchase Right expires or becomes unexercisable
without having been exercised in full, or is surrendered pursuant to an Option
Exchange Program, the unpurchased Shares which were subject thereto shall become
available for future grant or sale under the Plan (unless the Plan has
terminated); provided, however, that Shares that have actually been issued under
the Plan, whether upon exercise of an Option or Right, shall not be returned to
the Plan and shall not become available for future distribution under the Plan,
except that if Shares of Restricted Stock are repurchased by the Company at
their original purchase price, such Shares shall become available for future
grant under the Plan.
4. Administration of the Plan.
(a) Procedure.
(i) Multiple Administrative Bodies. The Plan may be administered
by different Committees with respect to different groups of Service Providers.
(ii) Section 162(m). To the extent that the Administrator
determines it to be desirable to qualify Options granted hereunder as
"performance-based compensation" within the meaning of Section 162(m) of the
Code, the Plan shall be administered by a Committee of two or more "outside
directors" within the meaning of Section 162(m) of the Code.
(iii) Rule 16b-3. To the extent desirable to qualify
transactions hereunder as exempt under Rule 16b-3, the transactions contemplated
hereunder shall be structured to satisfy the requirements for exemption under
Rule 16b-3.
(iv) Other Administration. Other than as provided above, the
Plan shall be administered by (A) the Board or (B) a Committee, which committee
shall be constituted to satisfy Applicable Laws.
(b) Powers of the Administrator. Subject to the provisions of the
Plan, and in the case of a Committee, subject to the specific duties delegated
by the Board to such Committee, the Administrator shall have the authority, in
its discretion:
(i) to determine the Fair Market Value;
(ii) to select the Service Providers to whom Options and Stock
Purchase Rights may be granted hereunder;
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(iii) to determine the number of shares of Common Stock to be
covered by each Option and Stock Purchase Right granted hereunder;
(iv) to approve forms of agreement for use under the Plan;
(v) to determine and amend the terms and conditions, not
inconsistent with the terms of the Plan, of any Option or Stock Purchase Right
granted hereunder. Such terms and conditions include, but are not limited to,
the exercise price, the time or times when Options or Stock Purchase Rights may
be exercised (which may be based on performance criteria), any vesting
acceleration or waiver of forfeiture restrictions, and any restriction or
limitation regarding any Option or Stock Purchase Right or the shares of Common
Stock relating thereto, based in each case on such factors as the Administrator,
in its sole discretion, shall determine;
(vi) to reduce the exercise price of any Option or Stock
Purchase Right to the then current Fair Market Value if the Fair Market Value of
the Common Stock covered by such Option or Stock Purchase Right shall have
declined since the date the Option or Stock Purchase Right was granted;
(vii) to institute an Option Exchange Program;
(viii) to construe and interpret the terms of the Plan and
awards granted pursuant to the Plan;
(ix) to prescribe, amend and rescind rules and regulations
relating to the Plan, including rules and regulations relating to sub-plans
established for the purpose of qualifying for preferred tax treatment under
foreign tax laws;
(x) to modify or amend each Option or Stock Purchase Right
(subject to Section 15(c) of the Plan), including the discretionary authority to
extend the post-termination exercisability period of Options longer than is
otherwise provided for in the Plan, in any manner that is either (i) not adverse
to the Service Provider to whom such Option or Stock Purchase Right was granted
or (ii) consented to by such Service Provider;
(xi) to allow Optionees to satisfy withholding tax obligations
by electing to have the Company withhold from the Shares to be issued upon
exercise of an Option or Stock Purchase Right that number of Shares having a
Fair Market Value equal to the amount required to be withheld. The Fair Market
Value of the Shares to be withheld shall be determined on the date that the
amount of tax to be withheld is to be determined. All elections by an Optionee
to have Shares withheld for this purpose shall be made in such form and under
such conditions as the Administrator may deem necessary or advisable;
(xii) to authorize any person to execute on behalf of the
Company any instrument required to effect the grant of an Option or Stock
Purchase Right previously granted by the Administrator;
(xiii) to make all other determinations deemed necessary or
advisable for administering the Plan.
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(c) Effect of Administrator's Decision. The Administrator's
decisions, determinations and interpretations shall be final and binding on all
Optionees and any other holders of Options or Stock Purchase Rights. No member
of the Board nor officer of the Company to whom the Administrator has delegated
authority in accordance with this Plan shall be liable for anything done or
omitted to be done by him or her, by any member of the Committee or by any
officer of the Company in connection with the performance of any duties under
this Plan, except for his or her own willful misconduct or as expressly provided
by statute.
5. Eligibility. Nonstatutory Stock Options and Stock Purchase Rights
may be granted to Service Providers. Incentive Stock Options may be granted only
to Employees.
6. Limitations.
(a) Each Option shall be designated in the Option Agreement as
either an Incentive Stock Option or a Nonstatutory Stock Option. However,
notwithstanding such designation, to the extent that the aggregate Fair Market
Value of the Shares with respect to which Incentive Stock Options are
exercisable for the first time by the Optionee during any calendar year (under
all plans of the Company and any Parent or Subsidiary) exceeds $100,000, such
Options shall be treated as Nonstatutory Stock Options. For purposes of this
Section 6(a), Incentive Stock Options shall be taken into account in the order
in which they were granted. The Fair Market Value of the Shares shall be
determined as of the time the Option with respect to such Shares is granted.
(b) Neither the Plan nor any Option or Stock Purchase Right shall
confer upon an Optionee any right with respect to continuing the Optionee's
relationship as a Service Provider with the Company, nor shall they interfere in
any way with the Optionee's right or the Company's right to terminate such
relationship at any time, with or without cause.
(c) The following limitations shall apply to grants of Options:
(i) No Service Provider shall be granted, in any fiscal year of
the Company, Options to purchase more than two million (2,000,000) Shares.
(ii) In connection with his or her initial service, a Service
Provider may be granted Options to purchase up to an additional two million
(2,000,000) Shares which shall not count against the limit set forth in
subsection (i) above.
(iii) The foregoing limitations shall be adjusted
proportionately in connection with any change in the Company's capitalization as
described in Section 13.
(iv) If an Option is cancelled in the same fiscal year of the
Company in which it was granted (other than in connection with a transaction
described in Section 13), the cancelled Option will be counted against the
limits set forth in subsections (i) and (ii) above. For this purpose, if the
exercise price of an Option is reduced, the transaction will be treated as a
cancellation of the Option and the grant of a new Option.
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7. Term of Plan. Subject to Section 19 of the Plan, the Plan shall
become effective upon its adoption by the Board. It shall continue in effect for
a term of ten (10) years unless terminated earlier under Section 15 of the Plan.
8. Term of Option. The term of each Option shall be stated in the
Option Agreement. In the case of an Incentive Stock Option, the term shall be
ten (10) years from the date of grant or such shorter term as may be provided in
the Option Agreement. Moreover, in the case of an Incentive Stock Option granted
to an Optionee who, at the time the Incentive Stock Option is granted, owns
stock representing more than ten percent (10%) of the total combined voting
power of all classes of stock of the Company or any Parent or Subsidiary, the
term of the Incentive Stock Option shall be five (5) years from the date of
grant or such shorter term as may be provided in the Option Agreement.
9. Option Exercise Price and Consideration.
(a) Exercise Price. The per share exercise price for the Shares to
be issued pursuant to exercise of an Option shall be determined by the
Administrator, subject to the following:
(i) In the case of an Incentive Stock Option
(A) granted to an Employee who, at the time the Incentive
Stock Option is granted, owns stock representing more than ten percent (10%) of
the voting power of all classes of stock of the Company or any Parent or
Subsidiary, the per Share exercise price shall be no less than 110% of the Fair
Market Value per Share on the date of grant.
(B) granted to any Employee other than an Employee described
in paragraph (A) immediately above, the per Share exercise price shall be no
less than 100% of the Fair Market Value per Share on the date of grant.
(ii) In the case of a Nonstatutory Stock Option, the per Share
exercise price shall be determined by the Administrator. In the case of a
Nonstatutory Stock Option intended to qualify as "performance-based
compensation" within the meaning of Section 162(m) of the Code, the per Share
exercise price shall be no less than 100% of the Fair Market Value per Share on
the date of grant.
(iii) Notwithstanding the foregoing, Options may be granted with
a per Share exercise price of less than 100% of the Fair Market Value per Share
on the date of grant pursuant to a merger or other corporate transaction.
(b) Waiting Period and Exercise Dates. At the time an Option is
granted, the Administrator shall fix the period within which the Option may be
exercised and shall determine any conditions that must be satisfied before the
Option may be exercised.
(c) Form of Consideration. The Administrator shall determine the
acceptable form of consideration for exercising an Option, including the method
of payment. In the case of an Incentive Stock Option, the Administrator shall
determine the acceptable form of consideration at the time of grant. Such
consideration may consist entirely of:
(i) cash;
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(ii) check;
(iii) promissory note;
(iv) other Shares which (A) in the case of Shares acquired upon
exercise of an option, have been owned by the Optionee for more than six (6)
months on the date of surrender, and (B) have a Fair Market Value on the date of
surrender equal to the aggregate exercise price of the Shares as to which said
Option shall be exercised;
(v) consideration received by the Company under a cashless
exercise program implemented by the Company in connection with the Plan;
(vi) a reduction in the amount of any Company liability to the
Optionee, including any liability attributable to the Optionee's participation
in any Company-sponsored deferred compensation program or arrangement;
(vii) any combination of the foregoing methods of payment; or
(viii) such other consideration and method of payment for the
issuance of Shares to the extent permitted by Applicable Laws.
10. Exercise of Option.
(a) Procedure for Exercise; Rights as a Shareholder. Any Option
granted hereunder shall be exercisable according to the terms of the Plan and at
such times and under such conditions as determined by the Administrator and set
forth in the Option Agreement. Unless the Administrator provides otherwise,
vesting of Options granted hereunder shall be tolled during any unpaid leave of
absence. An Option may not be exercised for a fraction of a Share.
An Option shall be deemed exercised when the Company receives: (i)
written or electronic notice of exercise (in accordance with the Option
Agreement) from the person entitled to exercise the Option, and (ii) full
payment for the Shares with respect to which the Option is exercised. Full
payment may consist of any consideration and method of payment authorized by the
Administrator and permitted by the Option Agreement and the Plan. Shares issued
upon exercise of an Option shall be issued in the name of the Optionee or, if
requested by the Optionee, in the name of the Optionee and his or her spouse.
Until the Shares are issued (as evidenced by the appropriate entry on the books
of the Company or of a duly authorized transfer agent of the Company), no right
to vote or receive dividends or any other rights as a shareholder shall exist
with respect to the Optioned Stock, notwithstanding the exercise of the Option.
The Company shall issue (or cause to be issued) such Shares promptly after the
Option is exercised. No adjustment will be made for a dividend or other right
for which the record date is prior to the date the Shares are issued, except as
provided in Section 13 of the Plan.
Exercising an Option in any manner shall decrease the number of Shares
thereafter available, both for purposes of the Plan and for sale under the
Option, by the number of Shares as to which the Option is exercised.
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<PAGE> 9
(b) Termination of Relationship as a Service Provider. If an
Optionee ceases to be a Service Provider, other than upon the Optionee's death
or Disability, the Optionee may exercise his or her Option within such period of
time as is specified in the Option Agreement to the extent that the Option is
vested on the date of termination (but in no event later than the expiration of
the term of such Option as set forth in the Option Agreement). In the absence of
a specified time in the Option Agreement, the Option shall remain exercisable
for three (3) months following the Optionee's termination. If, on the date of
termination, the Optionee is not vested as to his or her entire Option, the
Shares covered by the unvested portion of the Option shall revert to the Plan.
If, after termination, the Optionee does not exercise his or her Option within
the time specified by the Administrator, the Option shall terminate, and the
Shares covered by such Option shall revert to the Plan.
(c) Disability of Optionee. If an Optionee ceases to be a Service
Provider as a result of the Optionee's Disability, the Optionee may exercise his
or her Option within such period of time as is specified in the Option Agreement
to the extent the Option is vested on the date of termination (but in no event
later than the expiration of the term of such Option as set forth in the Option
Agreement). In the absence of a specified time in the Option Agreement, the
Option shall remain exercisable for twelve (12) months following the Optionee's
termination. If, on the date of termination, the Optionee is not vested as to
his or her entire Option, the Shares covered by the unvested portion of the
Option shall revert to the Plan. If, after termination, the Optionee does not
exercise his or her Option within the time specified herein, the Option shall
terminate, and the Shares covered by such Option shall revert to the Plan.
(d) Death of Optionee. If an Optionee dies while a Service
Provider, the Option may be exercised within such period of time as is specified
in the Option Agreement (but in no event later than the expiration of the term
of such Option as set forth in the Notice of Grant), by the Optionee's estate or
by a person who acquires the right to exercise the Option by bequest or
inheritance, but only to the extent that the Option is vested on the date of
death. In the absence of a specified time in the Option Agreement, the Option
shall remain exercisable for twelve (12) months following the Optionee's
termination. If, at the time of death, the Optionee is not vested as to his or
her entire Option, the Shares covered by the unvested portion of the Option
shall immediately revert to the Plan. The Option may be exercised by the
executor or administrator of the Optionee's estate or, if none, by the person(s)
entitled to exercise the Option under the Optionee's will or the laws of descent
or distribution. If the Option is not so exercised within the time specified
herein, the Option shall terminate, and the Shares covered by such Option shall
revert to the Plan.
(e) Buyout Provisions. The Administrator may at any time offer to
buy out for a payment in cash or Shares an Option previously granted based on
such terms and conditions as the Administrator shall establish and communicate
to the Optionee at the time that such offer is made.
11. Stock Purchase Rights.
(a) Rights to Purchase. Stock Purchase Rights may be issued either
alone, in addition to, or in tandem with other awards granted under the Plan
and/or cash awards made outside of the Plan. After the Administrator determines
that it will offer Stock Purchase Rights under the Plan, it shall advise the
offeree in writing or electronically, by means of a Notice of Grant, of the
terms, conditions and restrictions related to the offer, including the number of
Shares that the offeree shall be
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<PAGE> 10
entitled to purchase, the price to be paid, and the time within which the
offeree must accept such offer. The offer shall be accepted by execution of a
Restricted Stock Purchase Agreement in the form determined by the Administrator.
(b) Repurchase Option. Unless the Administrator determines
otherwise, the Restricted Stock Purchase Agreement shall grant the Company a
repurchase option exercisable upon the voluntary or involuntary termination of
the purchaser's service with the Company for any reason (including death or
Disability). The purchase price for Shares repurchased pursuant to the
Restricted Stock Purchase Agreement shall be the original price paid by the
purchaser and may be paid by cancellation of any indebtedness of the purchaser
to the Company. The repurchase option shall lapse at a rate determined by the
Administrator.
(c) Other Provisions. The Restricted Stock Purchase Agreement shall
contain such other terms, provisions and conditions not inconsistent with the
Plan as may be determined by the Administrator in its sole discretion.
(d) Rights as a Shareholder. Once the Stock Purchase Right is
exercised, the purchaser shall have the rights equivalent to those of a
shareholder, and shall be a shareholder when his or her purchase is entered upon
the records of the duly authorized transfer agent of the Company. No adjustment
will be made for a dividend or other right for which the record date is prior to
the date the Stock Purchase Right is exercised, except as provided in Section 13
of the Plan.
12. Non-Transferability of Options and Stock Purchase Rights. Unless
determined otherwise by the Administrator, an Option or Stock Purchase Right may
not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any
manner other than by will or by the laws of descent or distribution and may be
exercised, during the lifetime of the Optionee, only by the Optionee. If the
Administrator makes an Option or Stock Purchase Right transferable, such Option
or Stock Purchase Right shall contain such additional terms and conditions as
the Administrator deems appropriate.
13. Adjustments Upon Changes in Capitalization, Dissolution, Merger or
Asset Sale.
(a) Changes in Capitalization. Subject to any required action by
the shareholders of the Company, the number of shares of Common Stock covered by
each outstanding Option and Stock Purchase Right, and the number of shares of
Common Stock which have been authorized for issuance under the Plan but as to
which no Options or Stock Purchase Rights have yet been granted or which have
been returned to the Plan upon cancellation or expiration of an Option or Stock
Purchase Right, as well as the price per share of Common Stock covered by each
such outstanding Option or Stock Purchase Right, shall be proportionately
adjusted for any increase or decrease in the number of issued shares of Common
Stock resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other increase or
decrease in the number of issued shares of Common Stock effected without receipt
of consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Such adjustment shall be made by the Board,
whose determination in that respect shall be final, binding and conclusive.
Except as expressly provided herein, no issuance by the Company of shares of
stock of any class, or securities convertible into shares of stock of any
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<PAGE> 11
class, shall affect, and no adjustment by reason thereof shall be made with
respect to, the number or price of shares of Common Stock subject to an Option
or Stock Purchase Right.
(b) Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, the Administrator shall notify each
Optionee as soon as practicable prior to the effective date of such proposed
transaction. The Administrator in its discretion may provide for an Optionee to
have the right to exercise his or her Option until ten (10) days prior to such
transaction as to all of the Optioned Stock covered thereby, including Shares as
to which the Option would not otherwise be exercisable. In addition, the
Administrator may provide that any Company repurchase option applicable to any
Shares purchased upon exercise of an Option or Stock Purchase Right shall lapse
as to all such Shares, provided the proposed dissolution or liquidation takes
place at the time and in the manner contemplated. To the extent it has not been
previously exercised, an Option or Stock Purchase Right will terminate
immediately prior to the consummation of such proposed action.
(c) Merger or Asset Sale. In the event of a merger or consolidation
of the Company with or into another corporation, or the sale of substantially
all of the assets of the Company, each outstanding Option and Stock Purchase
Right shall be assumed or an equivalent option or right substituted by the
successor corporation or a Parent or Subsidiary of the successor corporation. In
the event that the successor corporation refuses to assume or substitute for the
Option or Stock Purchase Right, the Optionee shall fully vest in and have the
right to exercise the Option or Stock Purchase Right as to all of the Optioned
Stock, including Shares as to which it would not otherwise be vested or
exercisable. If an Option or Stock Purchase Right becomes fully vested and
exercisable in lieu of assumption or substitution in the event of a merger,
consolidation or sale of assets, the Administrator shall notify the Optionee in
writing or electronically no later than fifteen (15) days prior to the
consummation of such merger, consolidation or sale of assets that the Option or
Stock Purchase Right shall be fully vested and exercisable for a period of
fifteen (15) days from the date of such notice, and the Option or Stock Purchase
Right shall terminate upon the expiration of such period. For the purposes of
this paragraph, the Option or Stock Purchase Right shall be considered assumed
if, following the merger, consolidation or sale of assets, the option or right
confers the right to purchase or receive, for each Share of Optioned Stock
subject to the Option or Stock Purchase Right immediately prior to the merger,
consolidation or sale of assets, the consideration (whether stock, cash, or
other securities or property) received in the merger, consolidation or sale of
assets by holders of Common Stock for each Share held on the effective date of
the transaction (and if holders were offered a choice of consideration, the type
of consideration chosen by the holders of a majority of the outstanding Shares);
provided, however, that if such consideration received in the merger,
consolidation or sale of assets is not solely common stock of the successor
corporation or its Parent, the Administrator may, with the consent of the
successor corporation, provide for the consideration to be received upon the
exercise of the Option or Stock Purchase Right, for each Share of Optioned Stock
subject to the Option or Stock Purchase Right, to be solely common stock of the
successor corporation or its Parent equal in fair market value to the per share
consideration received by holders of Common Stock in the merger, consolidation
or sale of assets.
14. Date of Grant. The date of grant of an Option or Stock Purchase
Right shall be, for all purposes, the date on which the Administrator makes the
determination granting such Option or Stock Purchase Right, or such other later
date as is determined by the Administrator. Notice of the determination shall be
provided to each Optionee within a reasonable time after the date of such grant.
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<PAGE> 12
15. Amendment and Termination of the Plan.
(a) Amendment and Termination. The Board may at any time amend,
alter, suspend or terminate the Plan.
(b) Shareholder Approval. The Company shall obtain shareholder
approval of any Plan amendment to the extent necessary and desirable to comply
with Applicable Laws.
(c) Effect of Amendment or Termination. No amendment, alteration,
suspension or termination of the Plan shall impair the rights of any Optionee,
unless mutually agreed otherwise between the Optionee and the Administrator,
which agreement must be in writing and signed by the Optionee and the Company.
Termination of the Plan shall not affect the Administrator's ability to exercise
the powers granted to it hereunder with respect to Options granted under the
Plan prior to the date of such termination.
16. Conditions Upon Issuance of Shares.
(a) Legal Compliance. Shares shall not be issued pursuant to the
exercise of an Option or Stock Purchase Right unless the exercise of such Option
or Stock Purchase Right and the issuance and delivery of such Shares shall
comply with Applicable Laws and shall be further subject to the approval of
counsel for the Company with respect to such compliance.
(b) Investment Representations. As a condition to the exercise of
an Option or Stock Purchase Right, the Company may require the person exercising
such Option or Stock Purchase Right to represent and warrant at the time of any
such exercise that the Shares are being purchased only for investment and
without any present intention to sell or distribute such Shares if, in the
opinion of counsel for the Company, such a representation is required.
17. Inability to Obtain Authority. The inability of the Company to
obtain authority from any regulatory body having jurisdiction, which authority
is deemed by the Company's counsel to be necessary to the lawful issuance and
sale of any Shares hereunder, shall relieve the Company of any liability in
respect of the failure to issue or sell such Shares as to which such requisite
authority shall not have been obtained.
18. Reservation of Shares. The Company, during the term of this Plan,
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
19. Shareholder Approval. The Plan shall be subject to approval by the
shareholders of the Company within twelve (12) months after the date the Plan is
adopted. Such shareholder approval shall be obtained in the manner and to the
degree required under Applicable Laws.
20. Governing Law. This Plan and all determinations made and actions
taken pursuant hereto, to the extent not otherwise governed by mandatory
provisions of the Code or the securities laws of the United States, shall be
governed by and construed in accordance with the laws of the State of Delaware.
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<PAGE> 1
EXHIBIT 10.3
WEBVAN GROUP, INC.
EMPLOYEE STOCK PURCHASE PLAN
1. Purpose. The purpose of the Plan is to provide employees of the
Company and its Designated Subsidiaries with an opportunity to purchase Common
Stock of the Company through accumulated payroll deductions. It is the intention
of the Company to have the Plan qualify as an "Employee Stock Purchase Plan"
under Section 423 of the Internal Revenue Code of 1986, as amended. The
provisions of the Plan, accordingly, shall be construed so as to extend and
limit participation in a manner consistent with the requirements of that section
of the Code.
2. Definitions.
(a) "Board" shall mean the Board of Directors of the Company.
(b) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(c) "Common Stock" shall mean the Common Stock of the Company.
(d) "Company" shall mean Webvan Group, Inc., a Delaware corporation,
and any Designated Subsidiary of the Company.
(e) "Compensation" shall mean all base straight time gross earnings
and commissions, exclusive of payments for overtime, shift premium, incentive
compensation, incentive payments, bonuses and other compensation.
(f) "Designated Subsidiary" shall mean any Subsidiary that has been
designated by the Board from time to time in its sole discretion as eligible to
participate in the Plan.
(g) "Employee" shall mean any individual who is an Employee of the
Company for tax purposes whose customary employment with the Company is at least
twenty (20) hours per week and more than five (5) months in any calendar year.
For purposes of the Plan, the employment relationship shall be treated as
continuing intact while the individual is on sick leave or other leave of
absence approved by the Company. Where the period of leave exceeds 90 days and
the individual's right to reemployment is not guaranteed either by statute or by
contract, the employment relationship shall be deemed to have terminated on the
91st day of such leave.
(h) "Enrollment Date" shall mean the first day of each Offering
Period.
(i) "Exercise Date" shall mean the last day of each Offering Period.
<PAGE> 2
(j) "Fair Market Value" shall mean, as of any date, the value of
Common Stock determined as follows:
(1) If the Common Stock is listed on any established stock
exchange or a national market system, including without limitation the Nasdaq
National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its
Fair Market Value shall be the closing sales price for such stock (or the
closing bid, if no sales were reported) as quoted on such exchange or system for
the last market trading day on the date of such determination, as reported in
The Wall Street Journal or such other source as the Board deems reliable, or;
(2) If the Common Stock is regularly quoted by a recognized
securities dealer but selling prices are not reported, its Fair Market Value
shall be the mean of the closing bid and asked prices for the Common Stock on
the date of such determination, as reported in The Wall Street Journal or such
other source as the Board deems reliable, or;
(3) In the absence of an established market for the Common
Stock, the Fair Market Value thereof shall be determined in good faith by the
Board; or
(4) For purposes of the Enrollment Date of the first Offering
Period under the Plan, the Fair Market Value shall be the initial price to the
public as set forth in the final prospectus included within the registration
statement in Form S-1 filed with the Securities and Exchange Commission for the
initial public offering of the Company's Common Stock (the "Registration
Statement").
(a) "Offering Period" shall mean a period of approximately six (6)
months during which an option granted pursuant to the Plan may be exercised,
commencing on the first Trading Day on or after February 15 of each year and
terminating on the last Trading Day in the period ending the following August
14, or commencing on the first Trading Day on or after August 15 of each year
and terminating on the last Trading Day in the period ending the following
February 14; provided, however, that the first Offering Period under the Plan
shall commence with the first Trading Day on or after the date on which the
Securities and Exchange Commission declares the Company's Registration Statement
effective and ending on the last Trading Day on or before August 14, 2000. The
duration of Offering Periods may be changed pursuant to Section 4 of this Plan.
(l) "Plan" shall mean this Employee Stock Purchase Plan.
(m) "Purchase Price" shall mean an amount equal to 85% of the Fair
Market Value of a share of Common Stock on the Enrollment Date or on the
Exercise Date, whichever is lower; provided, however, that the Purchase Price
may be adjusted by the Board pursuant to Section 20.
(n) "Reserves" shall mean the number of shares of Common Stock
covered by each option under the Plan which have not yet been exercised and the
number of shares of Common Stock which have been authorized for issuance under
the Plan but not yet placed under option.
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<PAGE> 3
(o) "Subsidiary" shall mean a corporation, domestic or foreign, of
which not less than 50% of the voting shares are held by the Company or a
Subsidiary, whether or not such corporation now exists or is hereafter organized
or acquired by the Company or a Subsidiary.
(p) "Trading Day" shall mean a day on which national stock exchanges
and the Nasdaq System are open for trading.
3. Eligibility.
(a) Any Employee who shall be employed by the Company on a given
Enrollment Date shall be eligible to participate in the Plan.
(b) Any provisions of the Plan to the contrary notwithstanding, no
Employee shall be granted an option under the Plan (i) to the extent that,
immediately after the grant, such Employee (or any other person whose stock
would be attributed to such Employee pursuant to Section 424(d) of the Code)
would own capital stock of the Company and/or hold outstanding options to
purchase such stock possessing five percent (5%) or more of the total combined
voting power or value of all classes of the capital stock of the Company or of
any Subsidiary, or (ii) to the extent that his or her rights to purchase stock
under all employee stock purchase plans of the Company and its subsidiaries
accrues at a rate which exceeds Twenty-Five Thousand Dollars ($25,000) worth of
stock (determined at the fair market value of the shares at the time such option
is granted) for each calendar year in which such option is outstanding at any
time.
4. Offering Periods. The Plan shall be implemented by consecutive
Offering Periods with a new Offering Period commencing on the first Trading Day
on or after February 15 and August 15 each year, or on such other date as the
Board shall determine, and continuing thereafter until terminated in accordance
with Section 20 hereof; provided, however, that the first Offering Period under
the Plan shall commence with the first Trading Day on or after the date on which
the Securities and Exchange Commission declares the Company's Registration
Statement effective and ending on the last Trading Day on or before August 14,
2000. The Board shall have the power to change the duration of Offering Periods
(including the commencement dates thereof) with respect to future offerings
without stockholder approval if such change is announced at least five (5) days
prior to the scheduled beginning of the first Offering Period to be affected
thereafter.
5. Participation.
(a) An eligible Employee may become a participant in the Plan by
completing a subscription agreement authorizing payroll deductions in the form
of Exhibit A to this Plan and filing it with the Company's payroll office prior
to the applicable Enrollment Date.
(b) Payroll deductions for a participant shall commence on the first
payroll following the Enrollment Date and shall end on the last payroll in the
Offering Period to which such authorization is applicable, unless sooner
terminated by the participant as provided in Section 10 hereof.
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<PAGE> 4
6. Payroll Deductions.
(a) At the time a participant files his or her subscription
agreement, he or she shall elect to have payroll deductions made on each pay day
during the Offering Period in an amount not exceeding ten percent (10%) of the
Compensation which he or she receives on each pay day during the Offering
Period.
(b) All payroll deductions made for a participant shall be credited
to his or her account under the Plan and shall be withheld in whole percentages
only. A participant may not make any additional payments into such account.
(c) A participant may discontinue his or her participation in the
Plan as provided in Section 10 hereof, or may increase or decrease the rate of
his or her payroll deductions during the Offering Period by completing or filing
with the Company a new subscription agreement authorizing a change in payroll
deduction rate. The Board may, in its discretion, limit the number of
participation rate changes during any Offering Period. The change in rate shall
be effective with the first full payroll period following five (5) business days
after the Company's receipt of the new subscription agreement unless the Company
elects to process a given change in participation more quickly. A participant's
subscription agreement shall remain in effect for successive Offering Periods
unless terminated as provided in Section 10 hereof.
(d) Notwithstanding the foregoing, to the extent necessary to comply
with Section 423(b)(8) of the Code and Section 3(b) hereof, a participant's
payroll deductions may be decreased to zero percent (0%) at any time during an
Offering Period. Payroll deductions shall recommence at the rate provided in
such participant's subscription agreement at the beginning of the first Offering
Period which is scheduled to end in the following calendar year, unless
terminated by the participant as provided in Section 10 hereof.
(e) At the time the option is exercised, in whole or in part, or at
the time some or all of the Company's Common Stock issued under the Plan is
disposed of, the participant must make adequate provision for the Company's
federal, state, or other tax withholding obligations, if any, which arise upon
the exercise of the option or the disposition of the Common Stock. At any time,
the Company may, but shall not be obligated to, withhold from the participant's
compensation the amount necessary for the Company to meet applicable withholding
obligations, including any withholding required to make available to the Company
any tax deductions or benefits attributable to sale or early disposition of
Common Stock by the Employee.
7. Grant of Option. On the Enrollment Date of each Offering Period,
each eligible Employee participating in such Offering Period shall be granted an
option to purchase on the Exercise Date of such Offering Period (at the
applicable Purchase Price) up to a number of shares of the Company's Common
Stock determined by dividing such Employee's payroll deductions accumulated
prior to such Exercise Date and retained in the Participant's account as of the
Exercise Date by the applicable Purchase Price; provided that in no event shall
an Employee be permitted to purchase during each Offering Period more than one
thousand (1,000) shares (subject to any adjustment pursuant to Section 19), and
provided further that such purchase shall be subject to the limitations set
forth in
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<PAGE> 5
Sections 3(b) and 12 hereof. Exercise of the option shall occur as provided in
Section 8 hereof, unless the participant has withdrawn pursuant to Section 10
hereof. The Option shall expire on the last day of the Offering Period.
8. Exercise of Option. Unless a participant withdraws from the Plan
prior to the close of business on the preceding business day as provided in
Section 10 hereof, his or her option for the purchase of shares shall be
exercised automatically on the Exercise Date, and the maximum number of full
shares subject to option shall be purchased for such participant at the
applicable Purchase Price with the accumulated payroll deductions in his or her
account. No fractional shares shall be purchased; any payroll deductions
accumulated in a participant's account which are not sufficient to purchase a
full share shall be retained in the participant's account for the subsequent
Offering Period, subject to earlier withdrawal by the participant as provided in
Section 10 hereof. Any other monies left over in a participant's account after
the Exercise Date shall be returned to the participant. During a participant's
lifetime, a participant's option to purchase shares hereunder is exercisable
only by him or her.
9. Delivery. As promptly as practicable after each Exercise Date on
which a purchase of shares occurs, the Company shall arrange the delivery to
each participant, as appropriate, the shares purchased upon exercise of his or
her option.
10. Withdrawal.
(a) A participant may withdraw all but not less than all the
payroll deductions credited to his or her account and not yet used to exercise
his or her option under the Plan at any time by giving written notice to the
Company in the form of Exhibit B to this Plan. All of the participant's payroll
deductions credited to his or her account shall be paid to such participant
promptly after receipt of notice of withdrawal and such participant's option for
the Offering Period shall be automatically terminated, and no further payroll
deductions for the purchase of shares shall be made for such Offering Period. If
a participant withdraws from the Plan during any Offering Period, payroll
deductions shall not resume at the beginning of the succeeding Offering Period
unless the participant delivers to the Company a new subscription agreement.
(b) A participant's withdrawal from the Plan during any Offering
Period shall not have any effect upon his or her eligibility to participate in
any similar plan which may hereafter be adopted by the Company or in the Plan
for succeeding Offering Periods which commence after the termination of the
Offering Period from which the participant withdraws.
11. Termination of Employment. Upon a participant's ceasing to be an
Employee for any reason, he or she shall be deemed to have elected to withdraw
from the Plan and the payroll deductions credited to such participant's account
during the Offering Period but not yet used to exercise the option shall be
returned to such participant or, in the case of his or her death, to the person
or persons entitled thereto under Section 15 hereof, and such participant's
option shall be automatically terminated. The preceding sentence
notwithstanding, a participant who receives payment in lieu of notice of
termination of employment shall be treated as continuing to be an Employee for
the participant's customary number of hours per week of employment during the
period in which the participant is subject to such payment in lieu of notice.
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<PAGE> 6
12. Interest. No interest shall accrue on the payroll deductions of a
participant in the Plan.
13. Stock.
(a) Subject to adjustment upon changes in capitalization of the
Company as provided in Section 19 hereof, the maximum number of shares of the
Company's Common Stock which shall be made available for sale under the Plan
shall be five million (5,000,000) shares, plus an annual increase to be added on
January 1 of each year beginning in 2000 equal to the lesser of (i) five million
(5,000,000) shares, (ii) the number of shares issued under the Plan in the prior
year or (iii) a lesser amount determined by the Board. If, on a given Exercise
Date, the number of shares with respect to which options are to be exercised
exceeds the number of shares then available under the Plan, the Company shall
make a pro rata allocation of the shares remaining available for purchase in as
uniform a manner as shall be practicable and as it shall determine to be
equitable.
(b) The participant shall have no interest or voting right in
shares covered by his option until such option has been exercised.
(c) Shares to be delivered to a participant under the Plan shall be
registered in the name of the participant or in the name of the participant and
his or her spouse.
14. Administration. The Plan shall be administered by the Board or a
committee of members of the Board appointed by the Board. The Board or its
committee shall have full and exclusive discretionary authority to construe,
interpret and apply the terms of the Plan, to determine eligibility and to
adjudicate all disputed claims filed under the Plan. Every finding, decision and
determination made by the Board or its committee shall, to the full extent
permitted by law, be final and binding upon all parties.
15. Designation of Beneficiary.
(a) A participant may file a written designation of a beneficiary
who is to receive any shares and cash, if any, from the participant's account
under the Plan in the event of such participant's death subsequent to an
Exercise Date on which the option is exercised but prior to delivery to such
participant of such shares and cash. In addition, a participant may file a
written designation of a beneficiary who is to receive any cash from the
participant's account under the Plan in the event of such participant's death
prior to exercise of the option. If a participant is married and the designated
beneficiary is not the spouse, spousal consent shall be required for such
designation to be effective.
(b) Such designation of beneficiary may be changed by the
participant at any time by written notice. In the event of the death of a
participant and in the absence of a beneficiary validly designated under the
Plan who is living at the time of such participant's death, the Company shall
deliver such shares and/or cash to the executor or administrator of the estate
of the participant, or if no such executor or administrator has been appointed
(to the knowledge of the Company), the Company, in its discretion, may deliver
such shares and/or cash to the spouse or to any one or more dependents or
relatives of the participant, or if no spouse, dependent or relative is known to
the Company, then to such
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<PAGE> 7
other person as the Company may designate upon such conditions as the Company
deems reasonable under the circumstances.
16. Transferability. Neither payroll deductions credited to a
participant's account nor any rights with regard to the exercise of an option or
to receive shares under the Plan may be assigned, transferred, pledged or
otherwise disposed of in any way (other than by will, the laws of descent and
distribution or as provided in Section 15 hereof) by the participant. Any such
attempt at assignment, transfer, pledge or other disposition shall be without
effect, except that the Company may treat such act as an election to withdraw
funds from the Plan during an Offering Period in accordance with Section 10
hereof.
17. Use of Funds. All payroll deductions received or held by the
Company under the Plan may be used by the Company for any corporate purpose, and
the Company shall not be obligated to segregate such payroll deductions.
18. Reports. Individual accounts shall be maintained for each
participant in the Plan. Statements of account shall be given to participating
Employees at least annually, which statements shall set forth the amounts of
payroll deductions, the Purchase Price, the number of shares purchased and the
remaining cash balance, if any.
19. Adjustments Upon Changes in Capitalization, Dissolution,
Liquidation, Merger or Asset Sale.
(a) Changes in Capitalization. Subject to any required action by
the stockholders of the Company, the Reserves, the maximum number of shares each
participant may purchase per Offering Period (pursuant to Section 7), as well as
the price per share and the number of shares of Common Stock covered by each
option under the Plan which has not yet been exercised shall be proportionately
adjusted for any increase or decrease in the number of issued shares of Common
Stock resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other increase or
decrease in the number of shares of Common Stock effected without receipt of
consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Such adjustment shall be made by the Board,
whose determination in that respect shall be final, binding and conclusive.
Except as expressly provided herein, no issuance by the Company of shares of
stock of any class, or securities convertible into shares of stock of any class,
shall affect, and no adjustment by reason thereof shall be made with respect to,
the number or price of shares of Common Stock subject to an option.
(b) Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, the Offering Period then in progress
shall be shortened by setting a new Exercise Date (the "New Exercise Date"), and
shall terminate immediately prior to the consummation of such proposed
dissolution or liquidation, unless provided otherwise by the Board. The New
Exercise Date shall be before the date of the Company's proposed dissolution or
liquidation. The Board shall notify each participant in writing, at least ten
(10) business days prior to the New Exercise Date, that the Exercise Date for
the participant's option has been changed to the New Exercise Date and that the
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<PAGE> 8
participant's option shall be exercised automatically on the New Exercise Date,
unless prior to such date the participant has withdrawn from the Plan as
provided in Section 10 hereof.
(c) Merger or Asset Sale. In the event of a proposed sale of all or
substantially all of the assets of the Company, or the merger of the Company
with or into another corporation, each outstanding option shall be assumed or an
equivalent option substituted by the successor corporation or a Parent or
Subsidiary of the successor corporation. In the event that the successor
corporation refuses to assume or substitute for the option, the Offering Period
then in progress shall be shortened by setting a new Exercise Date (the "New
Exercise Date"). The New Exercise Date shall be before the date of the Company's
proposed sale or merger. The Board shall notify each participant in writing, at
least ten (10) business days prior to the New Exercise Date, that the Exercise
Date for the participant's option has been changed to the New Exercise Date and
that the participant's option shall be exercised automatically on the New
Exercise Date, unless prior to such date the participant has withdrawn from the
Offering Period as provided in Section 10 hereof.
20. Amendment or Termination.
(a) The Board of Directors of the Company may at any time and for
any reason terminate or amend the Plan. Except as provided in Section 19 hereof,
no such termination shall affect options previously granted, provided that an
Offering Period may be terminated by the Board of Directors on any Exercise Date
if the Board determines that the termination of the Offering Period or the Plan
is in the best interests of the Company and its stockholders. Except as provided
in Section 19 and Section 20 hereof, no amendment shall make any change in any
option theretofore granted which adversely affects the rights of any
participant. To the extent necessary to comply with Section 423 of the Code (or
any other applicable law, regulation or stock exchange rule), the Company shall
obtain shareholder approval in such a manner and to such a degree as required.
(b) Without stockholder consent and without regard to whether any
participant rights may be considered to have been "adversely affected," the
Board (or its committee) shall be entitled to change the duration of and first
and last day of Offering Periods, limit the frequency and/or number of changes
in the amount withheld during an Offering Period, establish the exchange ratio
applicable to amounts withheld in a currency other than U.S. dollars, permit
payroll withholding in excess of the amount designated by a participant in order
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, and
establish such other limitations or procedures as the Board (or its committee)
determines in its sole discretion advisable which are consistent with the Plan.
(c) In the event the Board determines that the ongoing operation of
the Plan may result in unfavorable financial accounting consequences, the Board
may, in its discretion and, to the extent necessary or desirable, modify or
amend the Plan to reduce or eliminate such accounting consequence including, but
not limited to:
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<PAGE> 9
(1) altering the Purchase Price for any Offering Period
including an Offering Period underway at the time of the change in Purchase
Price;
(2) shortening any Offering Period so that Offering Period ends
on a new Exercise Date, including an Offering Period underway at the time of the
Board action; and
(3) allocating shares.
No such modification or amendment shall require stockholder approval or the
consent of any Plan participants.
21. Notices. All notices or other communications by a participant to
the Company under or in connection with the Plan shall be deemed to have been
duly given when received in the form specified by the Company at the location,
or by the person, designated by the Company for the receipt thereof.
22. Conditions Upon Issuance of Shares. Shares shall not be issued with
respect to an option unless the exercise of such option and the issuance and
delivery of such shares pursuant thereto shall comply with all applicable
provisions of law, domestic or foreign, including, without limitation, the
Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as
amended, the rules and regulations promulgated thereunder, and the requirements
of any stock exchange upon which the shares may then be listed, and shall be
further subject to the approval of counsel for the Company with respect to such
compliance.
As a condition to the exercise of an option, the Company may require
the person exercising such option to represent and warrant at the time of any
such exercise that the shares are being purchased only for investment and
without any present intention to sell or distribute such shares if, in the
opinion of counsel for the Company, such a representation is required by any of
the aforementioned applicable provisions of law.
23. Term of Plan. The Plan shall become effective upon the earlier to
occur of its adoption by the Board of Directors or its approval by the
stockholders of the Company. It shall continue in effect for a term of ten (10)
years unless sooner terminated under Section 20 hereof.
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<PAGE> 10
EXHIBIT A
WEBVAN GROUP, INC.
EMPLOYEE STOCK PURCHASE PLAN
SUBSCRIPTION AGREEMENT
_____ Original Application Enrollment Date: __________
_____ Change in Payroll Deduction Rate
_____ Change of Beneficiary(ies)
1. _____________________________________ hereby elects to participate in
the Webvan Group, Inc. Employee Stock Purchase Plan (the "Employee
Stock Purchase Plan") and subscribes to purchase shares of the
Company's Common Stock in accordance with this Subscription Agreement
and the Employee Stock Purchase Plan.
2. I hereby authorize payroll deductions from each paycheck in the amount
of ____% of my Compensation on each payday (from 1 to 10%) during each
Offering Period in accordance with the Employee Stock Purchase Plan.
(Please note that no fractional percentages are permitted.)
3. I understand that said payroll deductions shall be accumulated for the
purchase of shares of Common Stock at the applicable Purchase Price
determined in accordance with the Employee Stock Purchase Plan. I
understand that if I do not withdraw from the Plan, any accumulated
payroll deductions during any Offering Period will be used to
automatically exercise my option for such Offering Period.
4. I have received a copy of the complete Employee Stock Purchase Plan. I
understand that my participation in the Employee Stock Purchase Plan is
in all respects subject to the terms of the Plan. I understand that my
ability to exercise the option under this Subscription Agreement is
subject to stockholder approval of the Employee Stock Purchase Plan.
5. Shares purchased for me under the Employee Stock Purchase Plan should
be issued in the name(s) of (Employee or Employee and Spouse only):
___________________
6. I understand that for shares purchased by me in respect of any Offering
Period, if I dispose of any shares received by me pursuant to the Plan
within 2 years after the Enrollment Date for such Offering Period (the
first day of such Offering Period), I will be treated for federal
income tax purposes as having received ordinary income at the time of
such disposition in an amount equal to the excess of the fair market
value of the shares at the time such shares were purchased by me over
the price which I paid for the shares. I hereby agree to notify the
Company in writing
<PAGE> 11
within 30 days after the date of any such disposition of shares and I
will make adequate provision for Federal, state or other tax
withholding obligations, if any, which arise upon such disposition of
the Common Stock. The Company may, but will not be obligated to,
withhold from my compensation the amount necessary to meet any
applicable withholding obligation including any withholding necessary
to make available to the Company any tax deductions or benefits
attributable to any sale or early disposition of Common Stock by me. If
I dispose of such shares at any time after the expiration of the 2-year
holding period, I understand that I will be treated for federal income
tax purposes as having received income only at the time of such
disposition, and that such income will be taxed as ordinary income only
to the extent of an amount equal to the lesser of (1) the excess of the
fair market value of the shares at the time of such disposition over
the purchase price which I paid for the shares, or (2) 15% of the fair
market value of the shares on the first day of the Offering Period. The
remainder of the gain, if any, recognized on such disposition will be
taxed as capital gain.
7. I hereby agree to be bound by the terms of the Employee Stock Purchase
Plan. The effectiveness of this Subscription Agreement is dependent
upon my eligibility to participate in the Employee Stock Purchase Plan.
8. In the event of my death, I hereby designate the following as my
beneficiary(ies) to receive all payments and shares due me under the
Employee Stock Purchase Plan:
NAME: (Please print) _____________________________________________
(First) (Middle) (Last)
_____________________ _____________________________________________
Relationship
_____________________________________________
(Address)
Employee's Social
Security Number: _____________________________________________
Employee's Address: _____________________________________________
_____________________________________________
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<PAGE> 12
I UNDERSTAND THAT THIS SUBSCRIPTION AGREEMENT SHALL REMAIN IN EFFECT THROUGHOUT
SUCCESSIVE OFFERING PERIODS UNLESS TERMINATED BY ME.
Dated: ___________________ _____________________________________________
Signature of Employee
_____________________________________________
Spouse's Signature
(If beneficiary other than spouse)
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<PAGE> 13
EXHIBIT B
WEBVAN GROUP, INC.
EMPLOYEE STOCK PURCHASE PLAN
NOTICE OF WITHDRAWAL
The undersigned participant in the Offering Period of the Webvan Group,
Inc. Employee Stock Purchase Plan which began on ___________, ______ (the
"Enrollment Date") hereby notifies the Company that he or she hereby withdraws
from the Offering Period. He or she hereby directs the Company to pay to the
undersigned as promptly as practicable all the payroll deductions credited to
his or her account with respect to such Offering Period. The undersigned
understands and agrees that his or her option for such Offering Period will be
automatically terminated. The undersigned understands further that no further
payroll deductions will be made for the purchase of shares in the current
Offering Period and the undersigned shall be eligible to participate in
succeeding Offering Periods only by delivering to the Company a new Subscription
Agreement.
Name and Address of Participant:
________________________________________
________________________________________
________________________________________
Signature:
________________________________________
Date: __________________________________
<PAGE> 1
EXHIBIT 10.18
EXODUS COMMUNICATIONS, INC.
INTERNET DATA CENTER SERVICES AGREEMENT
THIS INTERNET DATA CENTER SERVICES AGREEMENT (this "Agreement") is made
effective as of the Submission Date January 21, 1994, indicated in the initial
Internet Data Center Services Order form accepted by Exodus, by and between
Exodus Communications, Inc. ("Exodus") and the customer identified below
("Customer").
PARTIES:
Customer Name: Intelligent Systems for Retail
Address: 1241 East Hillsdale, Suite 210
Foster City, CA 94404
Phone:
------------------------------
Fax:
------------------------------
Exodus Communications, Inc.
2931 Mission College Blvd.
Santa Clara CA 95035-1838
Phone: (408) 346-2200
Fax: (408) 346-2420
1. INTERNET DATA CENTER SERVICES.
Subject to the terms and conditions of this Agreement, during the term of this
Agreement, Exodus will provide to Customer the services described in the
Internet Data Center Services Order Form(s) ("IDC Services Order Form(s)")
accepted by Exodus, or substantially similar services if such substantially
similar services would provide Customer with substantially similar benefits
("Internet Data Center Services"). All IDC Services Order Forms accepted by
Exodus are incorporated herein by this reference, each as of the Submission Date
indicated in such form.
2. FEES AND BILLINGS.
2.1 Fees. Customer will pay all fees due according to the IDC Services
Order Form(s).
2.2 Billing Commencement. Billing for Internet Data Center Services, other
than Setup Fees, indicated in the initial IDC Services Order Form shall commence
on the earlier to occur of (i) the "Installation Date" indicated in the initial
IDC Services Order Form, regardless of whether Customer has commenced use of the
Internet Data Center Services, unless Customer is unable to install the Customer
Equipment and/or use the Internet Data Center Services by the Installation Date
due to the fault of Exodus, then billing will not begin until the date Exodus
has remedied each fault and (ii) the date the "Customer Equipment" (Customer's
computer hardware and other tangible equipment, as identified in the Customer
Equipment List which is incorporated herein by this reference) is placed by
Customer in the "Customers' Area" (the portion(s) of the Internet Data Centers,
as defined in Section 3.1 below, made available to Customer hereunder for the
placement of Customer Equipment) and is operational. All Setup Fees will be
billed upon receipt of a Customer signed IDC Services Order Form. In the event
that Customer orders additional Internet Data Center Services, billing for such
services shall commence on the date Exodus first provides such additional
Internet Data Center Services to Customer or as otherwise agreed to by Customer
and Exodus.
2.3 Billing and Payment Terms. Customer will be billed monthly in advance
of the provision of Internet Data Center Services, and payment of such fees will
be due within thirty (30) days of the date of such Exodus invoices. All payments
will be made in U.S. dollars. Late payments hereunder will accrue interest at a
rate of one and one-half percent (1-1/2%) per month, or the highest rate allowed
by applicable law, whichever is lower. If in its judgement Exodus determines
that Customer is not creditworthy or is otherwise not financially secure, Exodus
may, upon written notice to Customer, modify the payment terms to require full
payment before the provision of Internet Data Center Services or other
assurances to secure Customer's payment obligations hereunder.
2.4 Taxes. All payments required by this Agreement are exclusive of all
national, state, municipal or other governmental excise, sales, value-added,
use, personal property, and occupational taxes, excises, withholding taxes and
obligations and other levies now in force or expected in the future, all of
which Customer will be responsible for and will pay in full, except for taxes
based on Exodus' net income.
3. CUSTOMER'S OBLIGATIONS.
3.1 Compliances with Law and Rules and Regulations. Customer agrees that
Customer will comply at all times with all applicable laws and regulations and
Exodus' general rules and regulations relating to its provision of Internet Data
Center Services, as updated by Exodus from time to time ("Rules and
Regulations"). Customer acknowledges that Exodus exercises no control whatsoever
over the content of the information passing through its sites containing the
Customer Area and equipment and facilities used by Exodus to provide Internet
Data Center Services ("Internet Data Centers"), and that it is the sole
responsibility of Customer to ensure that the information it transmits and
receives complies with all applicable laws and regulations.
3.2 Customer's Costs. Customer agrees that it will be solely responsible,
and at Exodus' request will reimburse Exodus, for all costs and expenses (other
than those included as part of the Internet Data Center Services and except as
otherwise expressly provided herein) it incurs in connection with this
Agreement.
3.3 Access and Security. Customer will be fully responsible for any
charges, costs, expenses (other than those included in the Internet Data Center
Services), and third party claims that may result from its use of, or access to,
the Internet Data Centers and/or the Customer Area including but not limited to
any unauthorized use of any access devices provided by Exodus hereunder. Except
with the advanced written consent of Exodus, Customer's access to the Internet
Data Centers will be limited solely to the individuals identified and authorized
by Customer to have access to the Internet Data Centers and the Customer Area in
accordance with this Agreement, as identified in the Customer Registration Form,
as amended from time to time, which is hereby incorporated by this reference
("Representatives").
3.4 No Competitive Services. Customer may not at any time permit any
Internet Data Center Services to be utilized for the provision of any services
that compete with any Exodus services, without Exodus' prior written consent.
3.5 Insurance.
(a) Minimum Levels. Customer will keep in full force and effect during the
term of this Agreement: (i) comprehensive general liability insurance in an
amount not less than $5 million per occurrence for bodily injury and property
damage; (ii) employer's liability insurance in an amount not less than $1
million per occurrence; and (iii) workers' compensation insurance in an amount
not less than that required by applicable law. Customer also agrees that it
will, and will be solely responsible for ensuring that its agents (including
contractors and subcontractors) maintain other insurance at levels no less than
those required by applicable law and customarily in Customer's and its Agents'
industries.
(b) Certificates of Insurance. Prior to installation of any Customer
Equipment in the Customer Area, Customer will furnish Exodus with certificates
of insurance which evidence the minimum levels of insurance set forth above.
(c) Naming Exodus as an Additional Insured. Customer agrees that prior to
the installation of any Customer Equipment, Customer will cause its insurance
provider(s) to name Exodus as an additional insured and notify Exodus in writing
of the effective dates thereof.
4. CONFIDENTIAL INFORMATION.
4.1 Confidential Information. Each party acknowledges that it will have
access to certain confidential information of the other party concerning the
other party's business, plans, customers, technology, and products, including
the terms and conditions of this Agreement ("Confidential Information").
Confidential Information will include, but not be limited to, each party's
proprietary software and customer information. Each party agrees that it will
not use in any way, for its own account or the account of any third party,
except as expressly permitted by this Agreement, nor disclose to any third party
(except as required by law or to that party's attorneys, accountants and other
advisors as reasonably necessary), any of the other party's Confidential
Information and will take reasonable precautions to protect the confidentiality
of such information.
4.2 Exceptions. Information will not be deemed Confidential Information
hereunder if such information: (i) is known to the receiving party prior to
receipt from the disclosing party directly or indirectly from a source other
than one having an obligation of confidentiality to the disclosing party; (ii)
becomes known (independently of disclosure by the disclosing party) to the
receiving party directly or indirectly from a source other than one having an
obligation of confidentiality to the disclosing party; (iii) becomes publicly
known or otherwise ceases to be secret or confidential, except through a breach
of this Agreement by the receiving party; or (iv) is independently developed by
the receiving party.
5. REPRESENTATIONS AND WARRANTIES.
5.1 Warranties by Customer.
(a) Customer Equipment. Customer represents and warrants that it owns or
has the legal right and authority, and will continue to own or maintain the
legal right and authority during the term of this Agreement, to place and use
the Customer Equipment as contemplated by this Agreement. Customer further
represents and warrants that its placement, arrangement, and use of the Customer
Equipment in the Internet Data Centers complies with the Customer Equipment
Manufacturer's environmental and other specifications.
(b) Customer's Business. Customer represents and warrants that Customer's
services, products, materials, data, information and Customer Equipment used by
Customer in connection with this Agreement as well as Customer's and its
permitted customers' and users' use of the Internet Data Center Services
(collectively, "Customer's Business") does not as of the Installation Date, and
will not during the term of this Agreement operate in any manner that would
violate any applicable law or regulation.
(c) Rules and Regulations. Customer has read the Rules and Regulations and
represents and warrants that Customer and Customer's Business are currently in
full compliance with the Rules and Regulations, and will remain so at all times
during the term of this Agreement.
(d) Breach of Warranties. In the event of any breach, or reasonably
anticipated breach, of any of the foregoing warranties, in addition to any other
resolution available at law or in equity, Exodus will have the right
immediately, in Exodus' sole discretion, to suspend any related Internet Data
Center Services if deemed reasonably necessary by Exodus to prevent any harm to
Exodus and its business.
5.2 Warranties and Disclaimers by Exodus.
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<PAGE> 2
5.2(a) Service Level Warranty. In the event Customer experiences any of the
following and Exodus determines in its reasonable judgement that such inability
was caused by Exodus' failure to provide Internet Data Center Services for
reasons within Exodus' reasonable control and not as a result of any actions of
inactions of Customer or any third parties (including Customer Equipment and
third party equipment), Exodus will, upon Customer's request in accordance with
paragraph (iii) below, credit Customer's account as described below:
(i) Inability to Access the Internet (Downtime). If Customer is unable to
transmit and/or receive information from Exodus' Internet Data Center (i.e.,
Exodus' LAN and WAN) to other portions of the Internet because Exodus failed to
provide the Internet Data Center Services for more than fifteen (15) consecutive
minutes, Exodus will credit Customer's account the pro-rata connectivity charges
(i.e., all bandwidth related charges) for one (1) day of service per each
consecutive minute increment, up to an aggregate maximum credit of connectivity
charges for seven (7) days of service in any one calendar (1) month. Exodus'
scheduled maintenance of the Internet Data Centers and Internet Data Center
Services, as described in the Rules and Regulations, shall not be deemed to be a
failure of Exodus to provide Internet Data Center Services. For purposes of the
foregoing, "unable to transmit and receive" shall mean sustained packet loss in
excess of 50% based on Exodus' requirements.
(ii) Packet Loss and Latency. Exodus does not proactively monitor the
packet loss or transmission latency of specific customers. Exodus does, however,
proactively monitor the aggregate packet loss and transmission latency within
its LAN and WAN. In the event that Exodus discovers (either from its own efforts
or after being notified by Customer) that Customer is experiencing packet loss
in excess of one percent (1%) ("Excess Packet Loss") or transmission latency in
excess of 120 milliseconds round trip time (based on Exodus' measurements)
between any two Internet Data Centers within Exodus' U.S. network (collectively,
"Excess Latency", and with Excess Packet Loss "Excess Packet Loss/Latency"), and
Customer notifies Exodus (or confirms that Exodus has notified Customer), Exodus
will take all actions necessary to determine the source of the Excess Packet
Loss/Latency.
(A) Time to Discover Source of Excess Packet Loss/Latency;
Notification of Customer. Within two (2) hours of discovering the existence of
Excess Packet Loss/Latency, Exodus will determine whether the source of the
Excess Packet Loss/Latency is linked to the Customer Equipment and the Exodus
equipment connecting the Customer Equipment to Exodus' LAN ("Customer Specific
Packet Loss/Latency"). If the Excess Packet Loss/Latency is not a Customer
Specific Packet Loss/Latency, Exodus will determine the source of the Excess
Packet Loss/Latency within two (2) hours after determining that it is not a
Customer Specific Packet Loss/Latency. In any event, Exodus will notify Customer
of the source of the Excess Packet Loss/Latency within sixty (60) minutes after
identifying the source.
(B) Remedy of Excess Packet Loss/Latency. If the Excess Packet
Loss/Latency remedy is within the sole control of Exodus, Exodus will remedy the
Excess Packet Loss/Latency within two (2) hours of determining the source of the
Excess Packet Loss/Latency. If the Excess Packet Loss/Latency is caused from
outside of the Exodus LAN or WAN, Exodus will notify Customer and will use
commercially reasonable efforts to notify the party(ies) responsible for the
source and cooperate with it (them) to resolve the problem as soon as possible.
(C) Failure to Determine Source and/or Resolve Problem. In the event
that Exodus is unable to determine the source of and remedy the Excess Packet
Loss/Latency within the time periods described above (where Exodus was solely in
control of the source), Exodus will credit Customer's account the pro-rata
connectivity charges for one (1) day of service for every two (2) hours after
the time periods described above that it takes Exodus to resolve the problem, up
to an aggregate maximum credit of connectivity charges for seven (7) days of
service in any one (1) month.
(iii) Customer Must Request Credit: To receive any of the credits described
in this section 5.2(a), Customer must notify Exodus within five (5) business
days from the time Customer becomes eligible to receive a credit. Failure to
comply with this requirement will forfeit Customer's right to receive a credit.
(iv) Remedies Shall Not Be Cumulative; Maximum Credit: In the event that
Customer is entitled to multiple credits hereunder arising from the same Event
(An Event is hereby defined as a single period of 15 minutes of Downtime.), such
credits shall not be cumulative and Customer shall be entitled to receive only
the maximum single credit available for such event. In no event will Exodus be
required to credit Customer in any one (1) calendar month connectivity charges
in excess of seven (7) days of service. A credit shall be applied only to the
month in which there was the incident that resulted in the credit. Customer
shall not be eligible to receive any credits for periods in which Customer
received any Internet Data Center Services free of charge.
(v) Termination Option for Chronic Problems: If, in any single calendar
month, Customer has accumulated a total of seven (7) hours of Downtime, then,
Customer may terminate this Agreement for cause and without penalty by notifying
Exodus within five (5) days following the end of such calendar month. Such
termination will be effective thirty (30) days after receipt of such notice by
Exodus.
This warranty does not apply to any Internet Data Center Services that expressly
exclude this warranty (as described in the specification sheets for such
products). This Section 5.2(a) states Customer's sole and exclusive remedy for
any failure by Exodus to provide Internet Data Center Services.
(b) No Other Warranty. Except for the express warranty set out in
subsection (a) above, the Internet Data Center Services are provided on as "as
is" basis, and Customer's use of the Internet Data Center Services is at its own
risk. Exodus does not make, and hereby declaims, any and all other express
and/or implied warranties, including, but not limited to, warranties of
merchantability, fitness for a particular purpose, noninfringement and title,
and any warranties arising from a course of dealing, usage, or trade practice.
Exodus does not warrant that the Internet Data Center Services will be
uninterrupted, error-free, or completely secure.
(c) Disclaimer of Actions Caused by and/or Under the Control of Third
Parties. Exodus does not and cannot control the flow of data to or from Exodus'
Internet Data Centers and other portions of the Internet. Such flow depends in
large part on the performance of internet services provided or controlled by
third parties. At times, actions or inactions caused by these third parties can
produce situations in which Exodus' customers' connections to the Internet (or
portions thereof) may be impaired or disrupted. Although Exodus will use
commercially reasonable efforts to take actions it deems appropriate to remedy
and avoid such events, Exodus cannot guarantee that they will not occur.
Accordingly, Exodus declaims any and all liability resulting from or related to
such events.
6. LIMITATIONS OF LIABILITY.
6.1 Personal Injury. Each representative and any other persons visiting
this Internet Data Centers does so at its own risk and Exodus assumes no
liability whatsoever for any harm to such persons resulting from any cause other
than Exodus' negligence of willful misconduct resulting in personal injury to
such persons during such visit.
6.2 Damage to Customer Equipment or Business. Exodus assumes no liability
for any damage to, or loss relating to, Customer's business resulting from any
cause whatsoever. Certain Customer Equipment, including but not limited to
Customer Equipment located on CyberRacks, may be indirectly accessible by other
customers. Exodus assumes no liability for any damage to, or loss of, any
Customer Equipment resulting from any cause other than Exodus' gross negligence
or willful misconduct. To the extent Exodus is liable for any damage to, or loss
of, the Customer Equipment for any reason, such liability will be limited solely
to the then-current value of the Customer Equipment.
6.3 Exclusions. Except as specified in Sections 6.1 and 6.2, in no event
will Exodus be liable to Customer, any Representative, or any third party for
any claims arising out of or related to this agreement, Customer Equipment,
Customer's Business or otherwise, and any lost revenue, lost profits,
replacement goods, loss of technology, goods or services, incidental, punitive,
indirect or consequential damages, loss of data, or interruption or loss of use
of service or of any Customer Equipment or Customer's Business, even if advised
of the possibility of such damages, whether under theory of contract, tort
(including negligence), strict liability or otherwise.
6.4 Maximum Liability. Notwithstanding anything to the contrary in this
agreement, Exodus' maximum aggregate liability to Customer related to or in
connection with this agreement will be limited to the total amount paid by
Customer to Exodus hereunder for the prior twelve (12) month period.
6.5 Customer's Insurance. Customer agrees that it will not perfect any
claims against Exodus for any liability Exodus may have under or relating to
this Agreement until Customer first makes claims against Customer's insurance
provider(s) and such insurance provider(s) finally resolve(s) such claims.
6.6 Basis of the Bargain; Failure of Essential Purposes. Customer
acknowledges that Exodus has set its prices and entered into this Agreement in
reliance upon the limitations of liability and the disclaimers of warranties and
damages set forth herein, and that the same form an essential basis of the
bargain between the parties. The parties agree that the limitations and
exclusions of liability and disclaimers specified in this Agreement will survive
and apply even if found to have failed of their essential purposes.
7. INDEMNIFICATION.
7.1 Exodus' Indemnification of Customer. Exodus will indemnify, defend and
hold Customer harmless from and against any and all costs, liabilities, losses,
and expenses (including, but not limited to, reasonable attorneys' fees)
(collectively, "Losses") resulting from any claim, suit, action, or proceeding
(each, an "Action") brought against Customer alleging (i) the infringement of
any third party registered U.S. copyright or issued U.S. patent resulting from
the provision of Internet Data Center Services pursuant to this Agreement) (but
excluding any infringement contributorily caused by Customer's Business or
Customer Equipment) and (ii) personal injury to Customer's Representatives from
Exodus' gross negligence or willful misconduct.
7.2 Customer's Indemnification of Exodus. Customer will indemnify, defend
and hold Exodus, its affiliates and customers harmless from and against any and
all Losses resulting from or arising out of any Action brought by or against
Exodus, its affiliates or customers alleging: (a) with respect to the Customer's
Business: (i) infringement or misappropriation of any intellectual property
rights; (ii) defamation, libel, slander, obscenity, pornography, or violation of
the rights of privacy or publicity, or (iii) spamming, or any other offensive,
harassing or illegal conduct or violation of the Rules and Regulations; (b) any
damage or destruction to the Customer Area, the Internet Data Centers or the
equipment of Exodus or any other customer by Customer or Representative(s) or
Customer's designees; or (c) any other damage arising from the Customer
Equipment or Customer's Business.
Page 2
<PAGE> 3
7.3 Notice. Each party will provide the other party prompt written
notice upon the evidence of any such event of which it becomes aware, and as
opportunity to participate in the defense thereof.
8. TERM AND TERMINATION.
8.1 Term. This agreement will be effective for a period of one (1)
year from the Installation Date, unless earlier terminated according to the
provisions of this Section 8. The Agreement will automatically renew for
additional term of one (1) year each.
8.2 Termination.
(a) For Convenience.
(i) By Customer During First Forty Five Days. Customer may
terminate this Agreement for convenience by providing written notice to Exodus
at any time during the forty five day period beginning on the Installation Date.
(ii) By Either Party. Either party may terminate this Agreement for
convenience at any time effective after the first (1st) anniversary of the
Installation Date by providing thirty days' prior written notice to the other
party at any time thereafter.
(iii) For Cause. Either party may terminate the Agreement if: (i)
the other party breaches any material term or condition of this Agreement and
fails to cure such breach within thirty (30) days after receipt of written
notice of the same, except in the case of the failure to pay fees, which must be
cured within ten (10) days after receipt of written notice from Exodus; (ii) the
other party becomes the subject of a voluntary petition in bankruptcy or any
voluntary proceeding relating to insolvency, receivership, liquidation or
compensation for the benefit of creditors; or (iii) the other party becomes the
subject of an involuntary proceeding relating to insolvency, receivership,
liquidation or composition for the benefit of creditors, if such petition
proceeding is not dismissed within (60) days of filing.
8.3 No Liability for Termination. Neither party will be liable to the
other for any termination or expiration of this Agreement in accordance with its
terms.
8.4 Effect of Termination. Upon the effective date of expiration on
termination of this Agreement: (a) Exodus will immediately cease providing the
Internet Data Center Services; (b) any and all payment obligation of Customer
under this Agreement will become due immediately; (c) within thirty (30) days
after such expiration or termination, each party will return all Confidential
Information of the other party in its possession at the time of expiration or
termination and will not make or retain any copies of such Confidential
Information except as required to comply with any applicable legal or accounting
record keeping requirement; and (d) Customer will remove from the Internet Data
Centers all Customer Equipment and any of its other property within the Internet
Data Centers within five (5) days of such expiration or termination and return
the Customer Area to Exodus in the same condition as it was on the Installation
Date, normal wear and tear excepted. If Customer does not remove such property
within such five-day period, Exodus will have the option to (i) move any and all
such property to secure storage and charge Customer for the cost of such removal
and storage, and/or (ii) liquidate the property in any reasonable manner.
8.5 Customer Equipment as Security. In the event that Customer fails to
pay Exodus all amounts owed Exodus under this Agreement when due, Customer
Agrees that upon written notice, Exodus may take possession of any Customer
Equipment and move it, at Customer's expense, ??? taken in full or partial
satisfaction of any lien or judgment, all without being liable to prosecution or
for damages.
8.6 Survival. The following provisions will survive any expiration or
termination of the Agreement: Sections 2, 3, 4, 5, 6, 7, 8 and 9.
9. MISCELLANEOUS PROVISIONS.
9.1 Force Majeure. Except for the obligation to pay money, neither party
will be liable for any failure or delay in its performance under this Agreement
due to any cause beyond its reasonable control, including act of war, acts of
God, earthquake, flood, ?????, riot, sabotage, labor shortage or dispute,
governmental act or failure of the Internet, provided that the delayed party;
(a) gives the other party prompt notice of such cause, and (b) uses its
reasonable commercial efforts to correct promptly such failure or delay in
performance.
9.2 No Lease. This Agreement is a services agreement and is not intended
to and will not commence a lease of any real or personal property. Customer
acknowledges and agrees that (i) it has been granted only a license to occupy
the Customer Space and use the Internet data Centers and any equipment provided
by Exodus in accordance with this Agreement. (ii) Customer has not been granted
any real property interest in the Computer Space or Internet Data Center, and
(iii) Customer has no rights as a tenant or otherwise under any real property of
landlord/tenant laws, regulations, or ordinances. For good cause, including the
exercise of any rights under Section 8.5 above. Exodus may suspend the right of
any Representative or other person to visit the Internet Data Centers.
9.3 Marketing. Customer agrees that Exodus may refer to Customer by trade
name and trademark, and may briefly describe Customer's Business, in Exodus'
marketing materials and web site. Customer hereby grants Exodus a license to use
any Customer trade names and trademarks solely in connection with the rights
granted in Exodus pursuant to this Section 9.3.
9.4 Government Regulations. Customer will not export, re-export, transfer,
or make available, whether directly or indirectly, any regulated item or
information to anyone outside the U.S. In connection with this Agreement without
first complying with all export control laws and regulations which may be
imposed by the U.S. Government and any country or organization of nations within
whose jurisdiction Customer operates or does business.
9.5 Non-Solicitation. During the period beginning on the Installation
Date and ending on the first anniversary of the termination or expiration of
this Agreement in accordance with its terms, Customer agrees that it will not,
and will ensure that its affiliates do not, directly or indirectly, solicit or
attempt to solicit for employment any persons employed by Exodus during such
period.
9.6 Governing Law; Dispute Resolution, Severability; Waiver. This
Agreement is made under and will be governed by and construed in accordance with
the laws of the State of California (except that body of law controlling
conflicts of law) and specifically excluding from application to this Agreement
that law known as the United Nations Convention on the International Sale of
Goods. Any dispute relating to the terms, interpretation or performance of this
Agreement (other than claims for preliminary injunctive relief or other
pre-judgment remedies will be reached at the request of either party through
binding arbitration. Arbitration will be conducted in Santa Clara County,
California, under the rules and procedures of the Judicial Arbitration and
Mediation Society ("JAMS"). The parties will request that JAMS appoint a single
arbitrator possessing knowledge of online services agreements; however the
arbitration will proceed even if such a person is unavailable. In the ?? any
provision of this Agreement is held by a tribunal of companies jurisdiction to
be contrary to the law, the remaining provisions of this Agreement will remain
in full force and effect. The waiver of any breach or default of this Agreement
will not ?? a waiver of any subsequent breach or default, and will not act to ??
or ?? the rights of the waiving party.
9.7 Assignment; Novices. Customer may not assign its rights or delegate
its duties under this Agreement either in whole or in part without the prior
written consent of Exodus, except that Customer may assign this Agreement in
whole as part of a corporate reorganization, consolidation, merger, or sale of
substantially all of its assets. Any attempted assignment or delegation without
such consent will be void. Exodus may assign this Agreement in whole or part.
This Agreement will bind ??? laws to the benefit of each party's successors and
permitted assigns. Any notice or communication required or permitted to be given
hereunder may be delivered by hand, deposited with an overnight courier, sent by
confirmed facsimile, or mailed by registered or certified mail, return receipt
requested, postage prepaid, in such case to the address of the receiving party
indicated on the signature pages hereof, or as such other address as may
hereafter be furnished in writing by either party hereto to the other. Such
notice will be deemed to have been given as of the date it is delivered, mailed
or sent, whichever is earlier.
9.8 Relationship of Parties. Exodus and Customer are independent
contractors and this Agreement will not establish any relationship of
partnership, joint venture, employment, franchise or agency between Exodus and
Customer. Neither Exodus nor Customer will have the power to bind the other or
incur obligation on the other's behalf without the other's prior written
consent, except as otherwise expressly provided herein.
9.9 Entire Agreements; Counterparts. This Agreement, including all
documents incorporated herein by reference, constitutes the complete and
exclusive agreement between the parties with respect to the subject transfer
hereof, and supersedes and replaces any and all prior or contemporaneous
discussions, regulations, understandings and agreements, written and oral,
regarding such subject matter. This Agreement may be executed in two or more
counterparts, each of which will be deemed an original but all of which together
shall constitute one and the same instrument.
Customer's and Exodus' authorized representatives have read the foregoing and
all documents incorporated therein and agree and accept such terms effective as
of the date first above written.
CUSTOMER EXODUS COMMUNICATIONS, INC.
Signature: /s/ DAVID S. ROCK Signature: /s/ SUE IRVINE
-------------------------- -----------------------------
Print Name: David S. Rock Print Name: Sue Irvine
-------------------------- -----------------------------
Title: Vice President, Retail Title: Contracts Mgr.
-------------------------- -----------------------------
Page 3
<PAGE> 4
INTERNET DATA CENTER SERVICES
ORDER FORM
CUSTOMER NAME: INTELLIGENT SYSTEMS FOR RETAIL
FORM DATE: 1/28/99
FORM NO.: 0930-3s.
INSTALLATION SITE(S): LAWSON IDC
TYPE OF SERVICE(S): NEW
FAST ETHERNET (100 Mbps) USAGE BASED BANDWIDTH SERVICE:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
EXTENDED
NON- EXTENDED
INTERNET DATA BRIEF DESCRIPTION UNIT RECURRING MONTHLY
CENTER SERVICES (DETAILED DESCRIPTION ATTACHED) QTY PRICE FEES FEES
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
EXO-FAST-U2 2Mbps BASE FAST ETHERNET WITH 1 $2,800 $ 2,800
100 Mbps [ILLEGIBLE]
EXO-FAST-SU SETUP--FAST ETHERNET NETWORK 1 $3,500 $3,500
XCON-ISU SETUP--TI FOR INTERNET ACCESS 4 $ 500 $2,000
EXO-BCBU-LI TAPE BACKUP SERVICES LEVEL 1 1 $1,000 $ 1,000
BCBU-LISU SETUP--TAPE BACKUP SERVICES LEVEL 1 1 $ 500 $ 500
EXO-VDC VIRTUAL DATA CENTER (7'X8")
INCLUDES 4 RACKS, 16 SHELVES,
60 AMPS OF CIRCUIT, 3 ACCESS CARDS 1 $7,500 $ 7,500
EXO-VDC-SU VIRTUAL DATA CENTER SETUP 1 $3,000 $3,000
- ------------------------------------------------------------------------------------------------
TOTAL: $9,000 $11,300
- ------------------------------------------------------------------------------------------------
DISCOUNT N/A (35%)
- ------------------------------------------------------------------------------------------------
ISR'S TOTAL $9,000 $ 7,345
- ------------------------------------------------------------------------------------------------
</TABLE>
VARIABLE USAGE ABOVE 2 Mbps BASE:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------
INTERNET DATA BRIEF DESCRIPTION PER
CENTER SERVICES (DETAILED DESCRIPTION ATTACHED) QTY MEGABIT
- ----------------------------------------------------------------------------------
<S> <C> <C> <C>
EXO-FAST-UV10 VARIABLE USAGE COST PER MEGABIT ABOVE
BASE AMOUNT ($973/2-10 MEGABITS) 1 $975(35% OFF)
EXO-FAST-UV10 VARIABLE USAGE COST PER MEGABIT ABOVE
BASE AMOUNT ($990/10-50 MEGABITS) 1 $900(40% OFF)
EXO-FAST-UV10 VARIABLE USAGE COST PER MEGABIT ABOVE
BASE AMOUNT ($850/50+ MEGABITS) 1 $850(44.4% OFF)
- ----------------------------------------------------------------------------------
</TABLE>
<PAGE> 5
Customer Name: ISR
Form Date: 1/28/98
Form No.: 0930-2a
Installation Site(s): Lawson IDC
Comments:
Exodus will grandfather 1998 pricing for Intelligent Systems for Retail.
In addition to this Intelligent Systems for Retail will get a corporate discount
of 35%.
CUSTOMER'S INITIALS ______
<PAGE> 6
INTERNET DATA CENTER SERVICES
ORDER FORM
CUSTOMER NAME: Intelligent Systems for Retail
FORM DATE: 1/07/99
FORM NO.: 0930-3b
INSTALLATION SITE(S): Lawson IDC
TYPE OF SERVICE(S): New
REDUNDANT FAST ETHERNET (100 MBPS) USAGE BASED BANDWIDTH
SERVICE:
<TABLE>
<CAPTION>
EXTENDED
NON- EXTENDED
INTERNET DATA BRIEF DESCRIPTION UNIT RECURRING MONTHLY
CENTER SERVICE (DETAILED DESCRIPTION ATTACHED) QTY. PRICE FEES FEES
- -------------- ------------------------------ ---- ----- --------- ---------
<S> <C> <C> <C> <C> <C>
EXO-FAST-U2 2Mbps base Fast Ethernet with 100 1 $2,800 $2,800
Mbps burstability
EXO-FAST-U2 SENIP - Fast Ethernet Network 1 $3,500 $3,500
Total: Waived Waived
ISR's Total: Waived Waived
</TABLE>
VARIABLE USAGE ABOVE 2 MBPS BASE:
<TABLE>
<CAPTION>
INTERNET DATA BRIEF DESCRIPTION
CENTER SERVICE (DETAILED DESCRIPTION ATTACHED) QTY. PER MEGABIT
- -------------- ------------------------------- ---- -----------
<S> <C> <C> <C>
EXO-FAST-UV10 Variable Usage Cost Per Megabit Above 1 S975(35% off)
Base Amount ($975/2-10 megabits)
EXO-FAST-UV10 Variable Usage Cost Per Megabit Above 1 S900(40% off)
Base Amount ($900/10-50 megabits)
EXO-FAST-UV10 Variable Usage Cost Per Megabit Above 1 S850(44.4% off)
Base Amount ($850/50+megabits)
</TABLE>
<PAGE> 7
CUSTOMER NAME: ISR
FORM DATE: 1/07/98
FORM NO.: 0930-2b
INSTALLATION SITE(S): Lawson IDC
COMMENTS:
THIS LINE IS TO BE USED ONLY FOR REDUNDANCY.
CUSTOMER'S INITIALS _________
<PAGE> 8
EXODUS COMMUNICATIONS, INC.
INTERNET DATA CENTER SERVICES ORDER FORM
SERVICES AND PRICES
Customer Name: Intelligent Systems for Retail
Form Date: 1/21/1999
Form No: 0930-3
IMPORTANT INFORMATION:
(1) By submitting this Internet Data Center Services Order Form (Form) to
Exodus Communications, Inc. (Exodus), Customer hereby places an order for
the Internet Data Center Services described herein pursuant to the terms
and conditions of the Internet Data Center Services Agreement between
Customer and Exodus (IDC Agreement).
(2) Billing, with the exception of Setup Fees, will commence on the earlier of
the Installation Date indicated below or the date Customer actually
installs its equipment or Exodus begins providing Internet Data Center
Services. All Setup Fees will be billed upon receipt of a Customer signed
IDC Services Order Form.
(3) Exodus will provide the Internet Data Center Services pursuant to the terms
and conditions of the IDC Agreement, which incorporates this Form. The
terms of this Form supersede, and by accepting this Form Exodus hereby
rejects, any conflicting or additional terms provided by Customer in
connection with Exodus' provision of Internet Data Center Services. If
there is a conflict between this Form and any other Form provided by
Customer and accepted by Exodus, the Form with the latest date will
control.
(4) Exodus will not be bound by or required to provide Internet Data Center
Services pursuant to this Form or the IDC Agreement until each is signed by
an authorized representative of Exodus.
Customer to complete:
CUSTOMER HAS READ, UNDERSTANDS AND HEREBY SUBMITS THIS ORDER.
Installation Date: 2/15/99
---------------------
Submitted By: /s/ JOHN W. ROBERTS Submission Date: 1/21/99
------------------------- -----------------
(Authorized Signature) (Effective Date of IDC Agreement)
Print Name: JOHN W. ROBERTS
---------------------------
Title: Director of IT OPS
---------------------------------
Exodus Communications, Inc. Acceptance
- ----------------------------- Date:
(Authorized Signature) ------------------------
<PAGE> 1
EXHIBIT 10.19
WEBVAN GROUP, INC.
1999 NONSTATUTORY STOCK OPTION PLAN
1. Purposes of the Plan. The purposes of this Nonstatutory Stock Option
Plan are:
- to attract and retain the best available personnel for positions
of substantial responsibility,
- to provide additional incentive to Employees, Directors and
Consultants, and
- to promote the success of the Company's business.
Options granted under the Plan will be Nonstatutory Stock Options.
2. Definitions. As used herein, the following definitions shall apply:
(a) "Administrator" means the Board or any of its Committees as
shall be administering the Plan, in accordance with Section 4 of the Plan.
(b) "Affiliate" means any entity, including any company,
partnership, trust, or joint venture, in which the Company owns at least a ten
percent (10%) ownership interest.
(c) "Applicable Laws" means the requirements relating to the
administration of stock option plans under U.S. state corporate laws, U.S.
federal and state securities laws, the Code, any stock exchange or quotation
system on which the Common Stock is listed or quoted and the applicable laws of
any foreign country or jurisdiction where Options are, or will be, granted under
the Plan.
(d) "Board" means the Board of Directors of the Company.
(e) "Code" means the Internal Revenue Code of 1986, as amended.
(f) "Committee" means a committee of Directors appointed by the
Board in accordance with Section 4 of the Plan.
(g) "Common Stock" means the Common Stock of the Company.
(h) "Company" means Webvan Group, Inc. a California corporation.
(i) "Consultant" means any person, including an advisor, engaged by
the Company or a Parent, Affiliate or Subsidiary to render services to such
entity.
(j) "Director" means a member of the Board.
<PAGE> 2
(k) "Disability" means total and permanent disability as defined in
Section 22(e)(3) of the Code.
(l) "Employee" means any person, including Officers, employed by the
Company or any Parent, Affiliate or Subsidiary of the Company. A Service
Provider shall not cease to be an Employee in the case of (i) any leave of
absence approved by the Company or (ii) transfers between locations of the
Company or between the Company, its Parent, any Subsidiary, or any successor.
Neither service as a Director nor payment of a director's fee by the Company
shall be sufficient to constitute "employment" by the Company.
(m) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(n) "Fair Market Value" means, as of any date, the value of Common
Stock determined as follows:
(i) If the Common Stock is listed on any established stock
exchange or a national market system, including without limitation the Nasdaq
National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its
Fair Market Value shall be the closing sales price for such stock (or the
closing bid, if no sales were reported) as quoted on such exchange or system for
the last market trading day prior to the time of determination, as reported in
The Wall Street Journal or such other source as the Administrator deems
reliable;
(ii) If the Common Stock is regularly quoted by a recognized
securities dealer but selling prices are not reported, the Fair Market Value of
a Share of Common Stock shall be the mean between the high bid and low asked
prices for the Common Stock on the last market trading day prior to the day of
determination, as reported in The Wall Street Journal or such other source as
the Administrator deems reliable;
(iii) In the absence of an established market for the Common
Stock, the Fair Market Value shall be determined in good faith by the
Administrator.
(o) "Notice of Grant" means a written or electronic notice
evidencing certain terms and conditions of an individual Option grant. The
Notice of Grant is part of the Option Agreement.
(p) "Officer" means a person who is an officer of the Company within
the meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.
(q) "Option" means a nonstatutory stock option granted pursuant to
the Plan, that is not intended to qualify as an incentive stock option within
the meaning of Section 422 of the Code and the regulations promulgated
thereunder.
-2-
<PAGE> 3
(r) "Option Agreement" means an agreement between the Company and an
Optionee evidencing the terms and conditions of an individual Option grant. The
Option Agreement is subject to the terms and conditions of the Plan.
(s) "Option Exchange Program" means a program whereby outstanding
options are surrendered in exchange for options with a lower exercise price.
(t) "Optioned Stock" means the Common Stock subject to an Option.
(u) "Optionee" means the holder of an outstanding Option granted
under the Plan.
(v) "Parent" means a "parent corporation," whether now or hereafter
existing, as defined in Section 424(e) of the Code.
(w) "Plan" means this 1999 Nonstatutory Stock Option Plan.
(x) "Service Provider" means an Employee including an Officer,
Consultant or Director.
(y) "Share" means a share of the Common Stock, as adjusted in
accordance with Section 12 of the Plan.
(z) "Subsidiary" means a "subsidiary corporation," whether now or
hereafter existing, as defined in Section 424(f) of the Code.
3. Stock Subject to the Plan. Subject to the provisions of Section 12
of the Plan, the maximum aggregate number of Shares which may be optioned and
sold under the Plan is Five Million (5,000,000) Shares. The Shares may be
authorized, but unissued, or reacquired Common Stock.
If an Option expires or becomes unexercisable without having been
exercised in full, or is surrendered pursuant to an Option Exchange Program, the
unpurchased Shares which were subject thereto shall become available for future
grant or sale under the Plan (unless the Plan has terminated).
4. Administration of the Plan.
(a) Administration. The Plan shall be administered by (i) the Board
or (ii) a Committee, which committee shall be constituted to satisfy Applicable
Laws.
(b) Powers of the Administrator. Subject to the provisions of the
Plan, and in the case of a Committee, subject to the specific duties delegated
by the Board to such Committee, the Administrator shall have the authority, in
its discretion:
-3-
<PAGE> 4
(i) to determine the Fair Market Value of the Common Stock;
(ii) to select the Service Providers to whom Options may be
granted hereunder;
(iii) to determine whether and to what extent Options are
granted hereunder;
(iv) to determine the number of shares of Common Stock to be
covered by each Option granted hereunder;
(v) to approve forms of agreement for use under the Plan;
(vi) to determine and amend the terms and conditions, not
inconsistent with the terms of the Plan, of any award granted hereunder. Such
terms and conditions include, but are not limited to, the exercise price, the
time or times when Options may be exercised (which may be based on performance
criteria), any vesting acceleration or waiver of forfeiture restrictions, and
any restriction or limitation regarding any Option or the shares of Common Stock
relating thereto, based in each case on such factors as the Administrator, in
its sole discretion, shall determine;
(vii) to reduce the exercise price of any Option to the then
current Fair Market Value if the Fair Market Value of the Common Stock covered
by such Option shall have declined since the date the Option was granted;
(viii) to institute an Option Exchange Program;
(ix) to construe and interpret the terms of the Plan and awards
granted pursuant to the Plan;
(x) to prescribe, amend and rescind rules and regulations
relating to the Plan, including rules and regulations relating to sub-plans
established for the purpose of qualifying for preferred tax treatment under
foreign tax laws;
(xi) to modify or amend each Option (subject to Section 14(b) of
the Plan), including the discretionary authority to extend the post-termination
exercisability period of Options longer than is otherwise provided for in the
Plan in any manner that is either (i) not adverse to the Service Provider to
whom such Option was granted or (ii) consented to by such Service Provider.
(xii) to authorize any person to execute on behalf of the
Company any instrument required to effect the grant of an Option previously
granted by the Administrator;
(xiii) to determine the terms and restrictions applicable to
Options;
-4-
<PAGE> 5
(xiv) to allow Optionees to satisfy withholding tax obligations
by electing to have the Company withhold from the Shares to be issued upon
exercise of an Option that number of Shares having a Fair Market Value equal to
the amount required to be withheld. The Fair Market Value of the Shares to be
withheld shall be determined on the date that the amount of tax to be withheld
is to be determined. All elections by an Optionee to have Shares withheld for
this purpose shall be made in such form and under such conditions as the
Administrator may deem necessary or advisable; and
(xv) to make all other determinations deemed necessary or
advisable for administering the Plan.
(c) Effect of Administrator's Decision. The Administrator's
decisions, determinations and interpretations shall be final and binding on all
Optionees and any other holders of Options. No member of the Board nor officer
of the Company to whom the Administrator has delegated authority in accordance
with this Plan shall be liable for anything done or omitted to be done by him or
her, by any member of the Committee or by any officer of the Company in
connection with the performance of any duties under this Plan, except for his or
her own willful misconduct or as expressly provided by statute.
5. Eligibility. Options may be granted to Service Providers except
Officers and Directors; provided, however, that notwithstanding anything to the
contrary contained in the Plan, Options may be granted to Officers in connection
with an Officer's initial employment by the Company.
6. Limitation. Neither the Plan nor any Option shall confer upon an
Optionee any right with respect to continuing the Optionee's relationship as a
Service Provider with the Company, nor shall they interfere in any way with the
Optionee's right or the Company's right to terminate such relationship at any
time, with or without cause.
7. Term of Plan. The Plan shall become effective upon its adoption by
the Board. It shall continue in effect for ten (10) years, unless sooner
terminated under Section 14 of the Plan.
8. Term of Option. The term of each Option shall be stated in the
Option Agreement.
9. Option Exercise Price and Consideration.
(a) Exercise Price. The per share exercise price for the Shares to
be issued pursuant to exercise of an Option shall be determined by the
Administrator.
(b) Waiting Period and Exercise Dates. At the time an Option is
granted, the Administrator shall fix the period within which the Option may be
exercised and shall determine any conditions which must be satisfied before the
Option may be exercised.
-5-
<PAGE> 6
(c) Form of Consideration. The Administrator shall determine the
acceptable form of consideration for exercising an Option, including the method
of payment. Such consideration may consist entirely of:
(i) cash;
(ii) check;
(iii) promissory note;
(iv) other Shares which (A) in the case of Shares acquired upon
exercise of an option, have been owned by the Optionee for more than six months
on the date of surrender, and (B) have a Fair Market Value on the date of
surrender equal to the aggregate exercise price of the Shares as to which said
Option shall be exercised;
(v) consideration received by the Company under a cashless
exercise program implemented by the Company in connection with the Plan;
(vi) a reduction in the amount of any Company liability to the
Optionee, including any liability attributable to the Optionee's participation
in any Company-sponsored deferred compensation program or arrangement;
(vii) such other consideration and method of payment for the
issuance of Shares to the extent permitted by Applicable Laws; or
(viii) any combination of the foregoing methods of payment.
10. Exercise of Option.
(a) Procedure for Exercise; Rights as a Shareholder. Any Option
granted hereunder shall be exercisable according to the terms of the Plan and at
such times and under such conditions as determined by the Administrator and set
forth in the Option Agreement. Unless the Administrator provides otherwise,
vesting of Options granted hereunder shall be tolled during any unpaid leave of
absence. An Option may not be exercised for a fraction of a Share.
An Option shall be deemed exercised when the Company receives: (i)
written or electronic notice of exercise (in accordance with the Option
Agreement) from the person entitled to exercise the Option, and (ii) full
payment for the Shares with respect to which the Option is exercised. Full
payment may consist of any consideration and method of payment authorized by the
Administrator and permitted by the Option Agreement and the Plan. Shares issued
upon exercise of an Option shall be issued in the name of the Optionee or, if
requested by the Optionee, in the name of the Optionee and his or her spouse.
Until the Shares are issued (as evidenced by the appropriate entry on the books
of the Company or of a duly authorized transfer agent of the Company), no right
to vote or receive dividends or any other rights as a shareholder shall exist
with respect to the
-6-
<PAGE> 7
Optioned Stock, notwithstanding the exercise of the Option. The Company shall
issue (or cause to be issued) such Shares promptly after the Option is
exercised. No adjustment will be made for a dividend or other right for which
the record date is prior to the date the Shares are issued, except as provided
in Section 12 of the Plan.
Exercising an Option in any manner shall decrease the number of
Shares thereafter available, both for purposes of the Plan and for sale under
the Option, by the number of Shares as to which the Option is exercised.
(b) Termination of Relationship as a Service Provider. If an
Optionee ceases to be a Service Provider, other than upon the Optionee's death
or Disability, the Optionee may exercise his or her Option, but only within such
period of time as is specified in the Option Agreement, and only to the extent
that the Option is vested on the date of termination (but in no event later than
the expiration of the term of such Option as set forth in the Option Agreement).
In the absence of a specified time in the Option Agreement, the Option shall
remain exercisable for three (3) months following the Optionee's termination.
If, on the date of termination, the Optionee is not vested as to his or her
entire Option, the Shares covered by the unvested portion of the Option shall
revert to the Plan. If, after termination, the Optionee does not exercise his or
her Option within the time specified by the Administrator, the Option shall
terminate, and the Shares covered by such Option shall revert to the Plan.
(c) Disability of Optionee. If an Optionee ceases to be a Service
Provider as a result of the Optionee's Disability, the Optionee may exercise his
or her Option within such period of time as is specified in the Option
Agreement, to the extent the Option is vested on the date of termination (but in
no event later than the expiration of the term of such Option as set forth in
the Option Agreement). In the absence of a specified time in the Option
Agreement, the Option shall remain exercisable for twelve (12) months following
the Optionee's termination. If, on the date of termination, the Optionee is not
vested as to his or her entire Option, the Shares covered by the unvested
portion of the Option shall revert to the Plan. If, after termination, the
Optionee does not exercise his or her Option within the time specified herein,
the Option shall terminate, and the Shares covered by such Option shall revert
to the Plan.
(d) Death of Optionee. If an Optionee dies while a Service Provider,
the Option may be exercised within such period of time as is specified in the
Option Agreement (but in no event later than the expiration of the term of such
Option as set forth in the Notice of Grant), by the Optionee's estate or by a
person who acquires the right to exercise the Option by bequest or inheritance,
but only to the extent that the Option is vested on the date of death. In the
absence of a specified time in the Option Agreement, the Option shall remain
exercisable for twelve (12) months following the Optionee's termination. If, at
the time of death, the Optionee is not vested as to his or her entire Option,
the Shares covered by the unvested portion of the Option shall immediately
revert to the Plan. The Option may be exercised by the executor or administrator
of the Optionee's estate or, if none, by the person(s) entitled to exercise the
Option under the Optionee's will or the laws of
-7-
<PAGE> 8
descent or distribution. If the Option is not so exercised within the time
specified herein, the Option shall terminate, and the Shares covered by such
Option shall revert to the Plan.
(e) Buyout Provisions. The Administrator may at any time offer to
buy out for a payment in cash or Shares, an Option previously granted based on
such terms and conditions as the Administrator shall establish and communicate
to the Optionee at the time that such offer is made.
11. Non-Transferability of Options. Unless determined otherwise by the
Administrator, an Option may not be sold, pledged, assigned, hypothecated,
transferred, or disposed of in any manner other than by will or by the laws of
descent or distribution and may be exercised, during the lifetime of the
Optionee, only by the Optionee. If the Administrator makes an Option
transferable, such Option shall contain such additional terms and conditions as
the Administrator deems appropriate.
12. Adjustments Upon Changes in Capitalization, Dissolution, Merger or
Asset Sale.
(a) Changes in Capitalization. Subject to any required action by
the shareholders of the Company, the number of shares of Common Stock covered by
each outstanding Option, and the number of shares of Common Stock which have
been authorized for issuance under the Plan but as to which no Options have yet
been granted or which have been returned to the Plan upon cancellation or
expiration of an Option, as well as the price per share of Common Stock covered
by each such outstanding Option, shall be proportionately adjusted for any
increase or decrease in the number of issued shares of Common Stock resulting
from a stock split, reverse stock split, stock dividend, combination or
reclassification of the Common Stock, or any other increase or decrease in the
number of issued shares of Common Stock effected without receipt of
consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Such adjustment shall be made by the Board,
whose determination in that respect shall be final, binding and conclusive.
Except as expressly provided herein, no issuance by the Company of shares of
stock of any class, or securities convertible into shares of stock of any class,
shall affect, and no adjustment by reason thereof shall be made with respect to,
the number or price of shares of Common Stock subject to an Option.
(b) Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, the Administrator shall notify each
Optionee as soon as practicable prior to the effective date of such proposed
transaction. The Administrator in its discretion may provide for an Optionee to
have the right to exercise his or her Option until ten (10) days prior to such
transaction as to all of the Optioned Stock covered thereby, including Shares as
to which the Option would not otherwise be exercisable. In addition, the
Administrator may provide that any Company repurchase option applicable to any
Shares purchased upon exercise of an Option shall lapse as to all such Shares,
provided the proposed dissolution or liquidation takes place at the time and in
the manner contemplated. To the extent it has not been previously exercised, an
Option will terminate immediately prior to the consummation of such proposed
action.
-8-
<PAGE> 9
(c) Merger or Asset Sale. In the event of a merger or consolidation
of the Company with or into another corporation, or the sale of substantially
all of the assets of the Company, each outstanding Option shall be assumed or an
equivalent option or right substituted by the successor corporation or a Parent
or Subsidiary of the successor corporation. In the event that the successor
corporation refuses to assume or substitute for the Option, the Optionee shall
fully vest in and have the right to exercise the Option as to all of the
Optioned Stock, including Shares as to which it would not otherwise be vested or
exercisable. If an Option becomes fully vested and exercisable in lieu of
assumption or substitution in the event of a merger, consolidation or sale of
assets, the Administrator shall notify the Optionee in writing or electronically
no later than fifteen (15) days prior to the consummation of such merger,
consolidation or sale of assets that the Option shall be fully vested and
exercisable for a period of fifteen (15) days from the date of such notice, and
the Option shall terminate upon the expiration of such period. For the purposes
of this paragraph, the Option shall be considered assumed if, following the
merger, consolidation or sale of assets, the option or right confers the right
to purchase or receive, for each Share of Optioned Stock, immediately prior to
the merger, consolidation or sale of assets, the consideration (whether stock,
cash, or other securities or property) received in the merger, consolidation or
sale of assets by holders of Common Stock for each Share held on the effective
date of the transaction (and if holders were offered a choice of consideration,
the type of consideration chosen by the holders of a majority of the outstanding
Shares); provided, however, that if such consideration received in the merger,
consolidation or sale of assets is not solely common stock of the successor
corporation or its Parent, the Administrator may, with the consent of the
successor corporation, provide for the consideration to be received upon the
exercise of the Option, for each Share of Optioned Stock to be solely common
stock of the successor corporation or its Parent equal in fair market value to
the per share consideration received by holders of Common Stock in the merger,
consolidation or sale of assets.
13. Date of Grant. The date of grant of an Option shall be, for all
purposes, the date on which the Administrator makes the determination granting
such Option, or such other later date as is determined by the Administrator.
Notice of the determination shall be provided to each Optionee within a
reasonable time after the date of such grant.
14. Amendment and Termination of the Plan.
(a) Amendment and Termination. The Board may at any time amend,
alter, suspend or terminate the Plan.
(b) Effect of Amendment or Termination. No amendment, alteration,
suspension or termination of the Plan shall impair the rights of any Optionee,
unless mutually agreed otherwise between the Optionee and the Administrator,
which agreement must be in writing and signed by the Optionee and the Company.
Termination of the Plan shall not affect the Administrator's ability to exercise
the powers granted to it hereunder with respect to options granted under the
Plan prior to the date of such termination.
-9-
<PAGE> 10
15. Conditions Upon Issuance of Shares.
(a) Legal Compliance. Shares shall not be issued pursuant to the
exercise of an Option unless the exercise of such Option and the issuance and
delivery of such Shares shall comply with Applicable Laws and shall be further
subject to the approval of counsel for the Company with respect to such
compliance.
(b) Investment Representations. As a condition to the exercise of
an Option the Company may require the person exercising such Option to represent
and warrant at the time of any such exercise that the Shares are being purchased
only for investment and without any present intention to sell or distribute such
Shares if, in the opinion of counsel for the Company, such a representation is
required.
16. Inability to Obtain Authority. The inability of the Company to
obtain authority from any regulatory body having jurisdiction, which authority
is deemed by the Company's counsel to be necessary to the lawful issuance and
sale of any Shares hereunder, shall relieve the Company of any liability in
respect of the failure to issue or sell such Shares as to which such requisite
authority shall not have been obtained.
17. Reservation of Shares. The Company, during the term of this Plan,
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
18. Governing Law. This Plan and all determinations made and actions
taken pursuant hereto, to the extent not otherwise governed by mandatory
provisions of the Code or the securities laws of the United States, shall be
governed by and construed in accordance with the laws of the State of Delaware.
-10-
<PAGE> 11
WEBVAN GROUP, INC.
1999 NONSTATUTORY STOCK OPTION PLAN
STOCK OPTION AGREEMENT
Unless otherwise defined herein, the terms defined in the Plan shall
have the same defined meanings in this Option Agreement.
I. NOTICE OF STOCK OPTION GRANT
[OPTIONEE'S NAME AND ADDRESS]
You have been granted an option to purchase Common Stock of the
Company, subject to the terms and conditions of the Plan and this Option
Agreement, as follows:
Grant Number ___________________________________
Date of Grant ___________________________________
Vesting Commencement Date ___________________________________
Exercise Price per Share $__________________________________
Total Number of Shares Granted ___________________________________
Total Exercise Price $__________________________________
Type of Option: Nonstatutory Stock Option
Term/Expiration Date: ___________________________________
Vesting Schedule:
Subject to the Optionee continuing to be a Service Provider on such
dates, this Option shall vest and become exercisable in accordance with the
following schedule:
[INSERT VESTING SCHEDULE]
Termination Period:
This Option may be exercised for _____ [DAYS/MONTHS] after Optionee
ceases to be a Service Provider. Upon the death or Disability of the Optionee,
this Option may be exercised for such longer
<PAGE> 12
period as provided in the Plan. In no event shall this Option be exercised later
than the Term/Expiration Date as provided above.
II. AGREEMENT
1. Grant of Option. The Plan Administrator of the Company hereby grants
to the Optionee named in the Notice of Grant attached as Part I of this
Agreement (the "Optionee") an option (the "Option") to purchase the number of
Shares, as set forth in the Notice of Grant, at the exercise price per share set
forth in the Notice of Grant (the "Exercise Price"), subject to the terms and
conditions of the Plan, which is incorporated herein by reference. Subject to
Section 14(b) of the Plan, in the event of a conflict between the terms and
conditions of the Plan and the terms and conditions of this Option Agreement,
the terms and conditions of the Plan shall prevail.
2. Exercise of Option.
(a) Right to Exercise. This Option is exercisable during its term in
accordance with the Vesting Schedule set out in the Notice of Grant and the
applicable provisions of the Plan and this Option Agreement.
(b) Method of Exercise. This Option is exercisable by delivery of an
exercise notice, in the form attached as Exhibit A (the "Exercise Notice"),
which shall state the election to exercise the Option, the number of Shares in
respect of which the Option is being exercised (the "Exercised Shares"), and
such other representations and agreements as may be required by the Company
pursuant to the provisions of the Plan. The Exercise Notice shall be completed
by the Optionee and delivered to [TITLE]. The Exercise Notice shall be
accompanied by payment of the aggregate Exercise Price as to all Exercised
Shares. This Option shall be deemed to be exercised upon receipt by the Company
of such fully executed Exercise Notice accompanied by such aggregate Exercise
Price.
No Shares shall be issued pursuant to the exercise of this Option
unless such issuance and exercise complies with Applicable Laws. Assuming such
compliance, for income tax purposes the Exercised Shares shall be considered
transferred to the Optionee on the date the Option is exercised with respect to
such Exercised Shares.
3. Method of Payment. Payment of the aggregate Exercise Price shall be
by any of the following, or a combination thereof, at the election of the
Optionee:
(a) cash;
(b) check;
(c) consideration received by the Company under a cashless exercise
program implemented by the Company in connection with the Plan; or
-2-
<PAGE> 13
(d) surrender of other Shares which (i) in the case of Shares
acquired upon exercise of an option, have been owned by the Optionee for more
than six (6) months on the date of surrender, AND (ii) have a Fair Market Value
on the date of surrender equal to the aggregate Exercise Price of the Exercised
Shares.
4. Non-Transferability of Option. This Option may not be transferred in
any manner otherwise than by will or by the laws of descent or distribution and
may be exercised during the lifetime of Optionee only by the Optionee. The terms
of the Plan and this Option Agreement shall be binding upon the executors,
administrators, heirs, successors and assigns of the Optionee.
5. Term of Option. This Option may be exercised only within the term
set out in the Notice of Grant, and may be exercised during such term only in
accordance with the Plan and the terms of this Option Agreement.
6. Tax Consequences. Some of the federal tax consequences relating to
this Option, as of the date of this Option, are set forth below. THIS SUMMARY IS
NECESSARILY INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE.
THE OPTIONEE SHOULD CONSULT A TAX ADVISER BEFORE EXERCISING THIS OPTION OR
DISPOSING OF THE SHARES.
(a) Exercising the Option. The Optionee may incur regular federal
income tax liability upon exercise of an NSO. The Optionee will be treated as
having received compensation income (taxable at ordinary income tax rates) equal
to the excess, if any, of the Fair Market Value of the Exercised Shares on the
date of exercise over their aggregate Exercise Price. If the Optionee is an
Employee or a former Employee, the Company will be required to withhold from his
or her compensation or collect from Optionee and pay to the applicable taxing
authorities an amount in cash equal to a percentage of this compensation income
at the time of exercise, and may refuse to honor the exercise and refuse to
deliver Shares if such withholding amounts are not delivered at the time of
exercise.
(b) Disposition of Shares. If the Optionee holds NSO Shares for at
least one year, any gain realized on disposition of the Shares will be treated
as long-term capital gain for federal income tax purposes.
7. Entire Agreement; Governing Law. The Plan is incorporated herein by
reference. The Plan and this Option Agreement constitute the entire agreement of
the parties with respect to the subject matter hereof and supersede in their
entirety all prior undertakings and agreements of the Company and Optionee with
respect to the subject matter hereof, and may not be modified adversely to the
Optionee's interest except by means of a writing signed by the Company and
Optionee. This agreement is governed by the internal substantive laws, but not
the choice of law rules, of [STATE].
8. NO GUARANTEE OF CONTINUED SERVICE. OPTIONEE ACKNOWLEDGES AND AGREES
THAT THE VESTING OF SHARES PURSUANT TO THE VESTING
-3-
<PAGE> 14
SCHEDULE HEREOF IS EARNED ONLY BY CONTINUING AS A SERVICE PROVIDER AT THE WILL
OF THE COMPANY (AND NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED AN OPTION
OR PURCHASING SHARES HEREUNDER). OPTIONEE FURTHER ACKNOWLEDGES AND AGREES THAT
THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREUNDER AND THE VESTING SCHEDULE
SET FORTH HEREIN DO NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED
ENGAGEMENT AS A SERVICE PROVIDER FOR THE VESTING PERIOD, FOR ANY PERIOD, OR AT
ALL, AND SHALL NOT INTERFERE WITH OPTIONEE'S RIGHT OR THE COMPANY'S RIGHT TO
TERMINATE OPTIONEE'S RELATIONSHIP AS A SERVICE PROVIDER AT ANY TIME, WITH OR
WITHOUT CAUSE.
By your signature and the signature of the Company's representative
below, you and the Company agree that this Option is granted under and governed
by the terms and conditions of the Plan and this Option Agreement. Optionee has
reviewed the Plan and this Option Agreement in their entirety, has had an
opportunity to obtain the advice of counsel prior to executing this Option
Agreement and fully understands all provisions of the Plan and Option Agreement.
Optionee hereby agrees to accept as binding, conclusive and final all decisions
or interpretations of the Administrator upon any questions relating to the Plan
and Option Agreement. Optionee further agrees to notify the Company upon any
change in the residence address indicated below.
OPTIONEE WEBVAN GROUP, INC.
By:
- ------------------------------------- ----------------------------------
(Signature)
Title:
- ------------------------------------- -------------------------------
(Print Name)
- -------------------------------------
(Residence Address)
- ------------------------------------
-4-
<PAGE> 15
EXHIBIT A
WEBVAN GROUP, INC.
1999 NONSTATUTORY STOCK OPTION PLAN
EXERCISE NOTICE
Webvan Group, Inc.
1241 E. Hillsdale Boulevard
Suite 210
Foster City, CA 94404-1214
Attention: [TITLE]
1. Exercise of Option. Effective as of today, ________________, _____,
the undersigned ("Purchaser") hereby elects to purchase ______________ shares
(the "Shares") of the Common Stock of Webvan Group, Inc. (the "Company") under
and pursuant to the 1999 Nonstatutory Stock Option Plan (the "Plan") and the
Stock Option Agreement dated, _________, ___ (the "Option Agreement"). The
purchase price for the Shares shall be $_____, as required by the Option
Agreement.
2. Delivery of Payment. Purchaser herewith delivers to the Company the
full purchase price for the Shares.
3. Representations of Purchaser. Purchaser acknowledges that Purchaser
has received, read and understood the Plan and the Option Agreement and agrees
to abide by and be bound by their terms and conditions.
4. Rights as Shareholder. Until the issuance (as evidenced by the
appropriate entry on the books of the Company or of a duly authorized transfer
agent of the Company) of the Shares, no right to vote or receive dividends or
any other rights as a shareholder shall exist with respect to the Optioned
Stock, notwithstanding the exercise of the Option. The Shares so acquired shall
be issued to the Optionee as soon as practicable after exercise of the Option.
No adjustment will be made for a dividend or other right for which the record
date is prior to the date of issuance, except as provided in Section 12 of the
Plan.
5. Tax Consultation. Purchaser understands that Purchaser may suffer
adverse tax consequences as a result of Purchaser's purchase or disposition of
the Shares. Purchaser represents that Purchaser has consulted with any tax
consultants Purchaser deems advisable in connection with
<PAGE> 16
the purchase or disposition of the Shares and that Purchaser is not relying on
the Company for any tax advice.
6. Entire Agreement; Governing Law. The Plan and Option Agreement are
incorporated herein by reference. This Agreement, the Plan and the Option
Agreement constitute the entire agreement of the parties with respect to the
subject matter hereof and supersede in their entirety all prior undertakings and
agreements of the Company and Purchaser with respect to the subject matter
hereof, and may not be modified adversely to the Purchaser's interest except by
means of a writing signed by the Company and Purchaser. This agreement is
governed by the internal substantive laws, but not the choice of law rules, of
the state of California.
Submitted by: Accepted by:
PURCHASER WEBVAN GROUP, INC.
By:
- ------------------------------------- ----------------------------------
(Signature)
Title:
- ------------------------------------- -------------------------------
(Print Name)
-------------------------------------
(Date Received)
Address: Address: 1241 E. Hillsdale Blvd.,
----------------------- Suite 210
Foster City, CA 94404-1214
-----------------------
-----------------------
-2-
<PAGE> 1
EXHIBIT 24.2
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto, duly authorized in Foster City, California, on August 6,
1999.
Webvan Group, Inc.
By: /s/ LOUIS H. BORDERS
-------------------------------------
Louis H. Borders
President and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Louis H. Borders and Kevin R. Czinger,
and each of them his attorney-in-fact, with the power of substitution, for him
in any and all capacities, to sign any amendment or post-effective amendment to
this Registration on Form S-1 or abbreviated registration statement (including,
without limitation, any additional registration filed pursuant to Rule 462 under
the Securities Act of 1933) with respect thereto and to file the same, with
exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and confirming all that
said attorney-in-fact, or his substitute or substitutes, may do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed on August 6, 1999 by the following
persons in the capacities indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- --------- -----
<S> <C>
/s/ LOUIS H. BORDERS President, Chief Executive Officer and Chairman of
- -------------------------- the Board of Directors (Principal Executive Officer)
Louis H. Borders
/s/ KEVIN R. CZINGER Senior Vice President, Corporate Operations and
- -------------------------- Finance (Principal Financial and Accounting Officer)
Kevin R. Czinger
/s/ DAVID M. BEIRNE Director
- --------------------------
David M. Beirne
/s/ CHRISTOS M. COTSAKOS Director
- --------------------------
Christos M. Cotsakos
/s/ TIM KOOGLE Director
- --------------------------
Tim Koogle
/s/ MICHAEL J. MORITZ Director
- --------------------------
Michael J. Moritz
</TABLE>
