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SCHEDULE 14C
(RULE 14C-101)
INFORMATION REQUIRED IN INFORMATION STATEMENT
SCHEDULE 14C INFORMATION
INFORMATION STATEMENT PURSUANT TO SECTION 14(C) OF
THE SECURITIES EXCHANGE ACT OF 1934
<TABLE>
<S> <C>
Check the appropriate box:
/ / Preliminary Information Statement
/ / Confidential, for Use of the Commission only (as permitted
by Rule 14c-5(d)(2))
/X/ Definitive Information Statement
</TABLE>
dreamlife, inc.
(Name of Registrant as Specified in Charter)
Payment of Filing Fee (Check the appropriate box):
<TABLE>
<S> <C> <C>
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14c-5(g) and
0-11.
(1) Title of each class of securities to which transaction
applies:
common stock, par value $0.01 per share
----------------------------------------------------------
(2) Aggregate number of securities to which transaction
applies:
40,368,351 shares of common stock
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(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth the
amount on which the filing fee is calculated and state how
it was determined):
----------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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/ / Fee paid previously with preliminary materials
/ / Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the Form or
Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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</TABLE>
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DREAMLIFE, INC.
425 WEST 15TH STREET, FLOOR 3R
NEW YORK, NY 10011
NOTICE TO STOCKHOLDERS
The accompanying Information Statement is being mailed on or about July 26,
2000 to all stockholders of record on June 29, 2000 of dreamlife, inc.
("Dreamlife"), in connection with amendments to Dreamlife's 1999 Employee Stock
Option Plan. The amendments will increase the number of shares of common stock
reserved for issuance under the plan and increase the maximum number of shares
underlying options that can be granted to employees during their first year of
hire.
The Board of Directors of Dreamlife and holders representing a majority of
the outstanding voting stock of Dreamlife recently voted in favor of the
amendments. Information concerning the amendments is described in greater detail
in the accompanying Information Statement.
No action is required by you. The accompanying Information Statement is
furnished only to inform Dreamlife stockholders of the action describe above
before it takes effect in accordance with Rule 14c-2 promulgated under the
Securities Exchange Act of 1934.
WE ARE NOT ASKING YOU FOR A PROXY. DO NOT SEND US A PROXY.
By Order of the Board of Directors
/s/ Peter A. Lund
Peter A. Lund
Chief Executive Officer
July 25, 2000
<PAGE>
DREAMLIFE, INC.
425 WEST 15TH STREET, FLOOR 3R
NEW YORK, NY 10011
INFORMATION STATEMENT
JULY 25, 2000
AMENDMENT NO. 2 TO
1999 EMPLOYEE STOCK OPTION PLAN
GENERAL
This Information Statement is being delivered by dreamlife, inc., a Delaware
corporation ("Dreamlife"), in connection with two amendments to Dreamlife's 1999
Employee Stock Option Plan (the "1999 Employee Plan"). The amendments will
- increase by 3,212,500 shares the number of shares of Dreamlife's common
stock, par value $0.01 per share (the "Common Stock"), reserved for
issuance under options granted under the 1999 Employee Plan, from
3,287,500 to 6,500,000 shares; and
- increase by 1,100,000 shares the maximum number of shares of Common Stock
underlying options that can be granted to employees from their date of
hire through the end of the remaining fiscal year, from 1,300,000 shares
to 2,400,000 shares.
Dreamlife's Board of Directors (the "Board") and holders representing a
majority of the outstanding voting stock of Dreamlife recently voted in favor of
the amendments.
This Information Statement is being mailed on or about July 26, 2000 to
stockholders of record of Dreamlife on June 29, 2000. The Information Statement
is being delivered only to inform stockholders of Dreamlife of the corporate
action described above before it takes effect in accordance with Rule 14c-2
promulgated under the Securities Exchange Act of 1934. No action is required on
the part of Dreamlife stockholders.
WE ARE NOT ASKING YOU FOR A PROXY. DO NOT SEND US A PROXY.
CHANGE IN BUSINESS
In April 1999, Dreamlife announced an Internet initiative including plans
for a network to focus on personal and professional improvement. In connection
with this initiative, in May 1999, Dreamlife acquired related businesses and
rights to related content and intellectual property, contracted for certain
co-marketing and co-promotion activities and raised approximately $15.1 million
in net proceeds in a private placement of its securities.
In September 1999, Dreamlife ended its association with its former primary
business when it distributed to holders of the Common Stock, Dreamlife's
interest in U.S. NeuroSurgical, Inc. ("USN"), then a wholly-owned subsidiary of
Dreamlife. USN owns and operates stereotactic radiosurgery centers using the
Gamma Knife technology. USN is now a separate company no longer owned in any way
by Dreamlife.
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CHANGE IN CONTROL
In May 1999, in connection with Dreamlife's Internet initiative, Dreamlife
acquired Change Your Life.com, LLC ("CYL") in a transaction accounted for as a
reverse acquisition (the "CYL Transaction"). As a result of the CYL Transaction,
members of CYL obtained voting control of Dreamlife. CYL was formed in
April 1999 by Anthony Robbins ("Robbins") to engage in the development of a web
site for personal and professional improvement. The CYL Transaction was effected
pursuant to the Contribution and Exchange Agreement (the "Exchange Agreement")
dated as of May 20, 1999, among Dreamlife, CYL, Robbins, Robbins Research
International Inc., a corporation controlled by Robbins ("RRI"), and CYL
Development Holdings, LLC ("Development Holdings").
Pursuant to the Exchange Agreement, Dreamlife issued a total of 99,059.338
shares of newly-designated Series A Convertible Preferred Stock ("Series A
Preferred Stock"), to Robbins, RRI and Development Holdings, the members of CYL,
in exchange for all of the membership interests in CYL. The shares of Series A
Preferred Stock converted into an aggregate of 30,708,396 shares of Common Stock
on November 4, 1999. Prior to such conversion, the holders of the Series A
Preferred Stock voted on an as converted basis with the holders of the Common
Stock.
On June 30, 2000, Dreamlife had outstanding 40,368,351 shares of the Common
Stock, of which Robbins and his affiliates owned approximately 57.1%,
Development Holdings owned approximately 19.0% and the holders of the Common
Stock immediately prior to the CYL Transaction owned approximately 18.1%.
AGREEMENT REGARDING THE ELECTION OF DIRECTORS AND OTHER MANAGEMENT ISSUES
In connection with and pursuant to the Exchange Agreement, Dreamlife amended
and restated its by-laws (the "Restated By-Laws"). The Restated By-Laws require,
among other things, that the following persons be nominated for election as
members of the Board:
(i) W. Grant Gregory;
(ii) Charles D. Peebler, Jr.;
(iii) Fredric D. Rosen;
(iv) one person selected by the Board as it existed on May 27, 1999, the
date of the closing of the CYL Transaction (the "Old Board");
(v) three persons designated by Robbins (the "Robbins Directors"); and
(vi) the Chief Executive Officer of Dreamlife (the selection of which
Robbins has the right to approve as described below).
Development Holdings, Robbins and RRI (collectively, the "CYL Transaction
Group") agreed with each other and Dreamlife to vote their shares for the
election of W. Grant Gregory, Charles D. Peebler, Jr. and Fredric D. Rosen as
members of the Board in connection with the CYL Transaction. The nominee for
director selected by the Old Board was Peter A. Lund. The three nominees for the
Robbins Directors were Anthony J. Robbins, H. Peter Guber and Bruce L. Stein.
The eighth nominee for director, Dreamlife's Chief Executive Officer, was to be
appointed at such time that Dreamlife appointed a new Chief Executive Officer.
However, Peter A. Lund, who is already a director of Dreamlife, assumed the role
of Chief Executive Officer in May 2000.
On November 18, 1999, the tendered resignations of the Old Board became
effective and the nominees assumed their positions as directors resulting in an
entirely new Board. On March 8, 2000, W. Grant Gregory resigned from the Board.
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At each subsequent election of directors and for so long as Robbins and his
affiliates hold at least 10% of the outstanding shares of Common Stock or Common
Stock equivalents, the Restated By-laws provide that the Board shall consist of
the following persons:
(i) three persons to be designated by Robbins or his affiliates;
(ii) four persons nominated by a nominating committee consisting of the
directors of Dreamlife (other than the Robbins Directors and the Chief
Executive Officer of Dreamlife) and their respective successors; and
(iii) the Chief Executive Officer of Dreamlife.
If any director is unable to serve or, once having commenced to serve, is
removed or withdraws from the Board, the replacement of such director on the
Board will be nominated in accordance with the procedures described above.
In addition, the Restated By-Laws provide that during the term of the
Content Provider Agreement and License (the "Content Provider Agreement")
effective as of April 23, 1999, among CYL, Robbins and RRI, Robbins will have
the right to approve the selection of the Chief Executive Officer of Dreamlife
by the Board (the "CEO Approval Right"). The CEO Approval Right will expire if
the entire interest in Dreamlife (or successor thereto) obtained by Robbins and
RRI in connection with the Exchange Agreement is transferred to any other party
on an involuntary basis, e.g., through bankruptcy proceedings or pursuant to a
court order. The Content Provider Agreement can be terminated by any party
thereto (i) after the tenth anniversary of the launch of the web site on which
Robbins content is offered (the "Launch Date") if Dreamlife does not meet
specified financial benchmarks by such time or (ii) after the eleventh
anniversary of the Launch Date if Dreamlife does not meet certain promotional
criteria with respect to the Robbins content. The Content Provider Agreement can
also be terminated if a material term of certain agreements between Dreamlife
and Robbins and RRI is breached without cure or Dreamlife becomes insolvent, is
liquidated, dissolved or the subject of certain bankruptcy proceedings.
The Restated By-Laws also provide that the Board shall be chaired by a
non-executive Chairman of the Board. The Stockholders' Agreement (defined below)
provides that the Chairman of the Board shall be Robbins or a person nominated
by Robbins from among Dreamlife's directors provided that Robbins and his
affiliates hold at least 10% of the outstanding shares of Common Stock or Common
Stock equivalents. The Chairman of the Board is also required to serve as
Chairman of Dreamlife's Executive Committee. Robbins currently serves as
Chairman of the Board and is the Chairman of Dreamlife's Executive Committee.
Robbins, RRI and Development Holdings have agreed with each other and with
Dreamlife pursuant to the Stockholders' Agreement dated May 27, 1999, among such
parties (the "Stockholders' Agreement") that until the earlier of March 31, 2014
and the termination of the Content Provider Agreement, each will vote their
respective shares of capital stock of Dreamlife (i) in the manner recommended by
the Board and (ii) in favor of the election, removal and replacement of
directors as described above. The Stockholders' Agreement also provides for the
arrangements described above with respect to the election of a Chief Executive
Officer and a Chairman of the Board.
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AMENDMENTS TO THE 1999 EMPLOYEE STOCK OPTION PLAN
THE AMENDMENTS
GENERAL
The amendments will not affect any provision of the 1999 Employee Plan,
except as set forth below. A copy of Amendment No. 2 to the 1999 Employee Plan,
which includes the two amendments described herein, is attached hereto as
EXHIBIT A. A copy of the 1999 Employee Plan, prior to giving effect to the
proposed amendments, is attached hereto as EXHIBIT B.
The amendments are being made in light of the expansion of Dreamlife's
workforce to enable Dreamlife to continue to provide incentives to employees to
advance the interests of Dreamlife and to enable Dreamlife to continue to
attract qualified new employees in a competitive marketplace.
Under Rule 14c-2 promulgated under the Securities Exchange Act of 1934, the
amendments cannot take effect until 20 days after this Information Statement is
sent to Dreamlife's stockholders. Dreamlife plans to put the amendments into
effect as soon as possible after the passage of the required 20-day period.
INCREASE IN AUTHORIZED SHARES
The 1999 Employee Plan will be amended to increase the number of shares of
Common Stock reserved for issuance upon the exercise of options issued under the
1999 Employee Plan. This amendment will enable Dreamlife to issue more options
under the 1999 Employee Plan. After giving effect to the amendment, the number
of shares that Dreamlife will be able to issue under options granted under the
1999 Employee Plan would be 6,500,000 (subject to adjustment for stock splits,
stock dividends, recapitalizations and similar events as provided in the 1999
Employee Plan). This amendment represents an increase of 3,212,500 shares from
the 3,287,500 shares of Common Stock previously authorized under Amendment
No. 1 to the 1999 Employee Plan, which went into effect in February 2000.
INCREASE IN MAXIMUM NUMBER OF SHARES UNDERLYING OPTIONS GRANTED TO NEW EMPLOYEES
The 1999 Employee Plan will be amended to increase the maximum number of
shares underlying options that can be issued to officers and employees during
the fiscal year in which they are hired. This amendment will enable Dreamlife to
issue more options under the 1999 Employee Plan to new employees soon after they
are hired. After giving effect to the amendment, Dreamlife would be able to
grant to a newly hired common law employee options exercisable into a maximum of
2,400,000 shares of Common Stock during the period of time from the date of such
employee's hire through the end of the fiscal year in which the employee is
hired. This amendment represents an increase of 1,100,000 shares from the
maximum of 1,300,000 shares of Common Stock previously authorized for such
issuances under the 1999 Employee Plan.
After the above amendments are effective, Dreamlife's new Chief Executive
Officer will be issued an option to purchase 2,400,000 shares of Common Stock.
THE 1999 EMPLOYEE STOCK OPTION PLAN
The following is a summary of the 1999 Employee Plan and its material
provisions. The summary is qualified by reference to the full terms of the 1999
Employee Plan attached as EXHIBIT B.
PURPOSES. The purposes of the 1999 Employee Plan are to enable Dreamlife to
provide additional incentives to Dreamlife's and any subsidiary's officers and
employees (collectively, "employees"), to advance the interests of Dreamlife and
to enable Dreamlife to attract and retain qualified personnel in a competitive
marketplace. Awards under the 1999 Employee Plan give optionees an opportunity
to
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participate in an increase in the market value of the Common Stock. The 1999
Employee Plan provides incentives and flexibility for Dreamlife in meeting
competitive developments in the marketplace for retaining and attracting
qualified employees.
Dreamlife believes that stock options are an important part of the
compensation package offered to its employees and that through the grant of
stock options its employees' interests are more closely aligned with those of
its stockholders. At present, Dreamlife does not have a commission or bonus
program generally applicable to its employees, nor does Dreamlife offer
retirement benefits. Generally, Dreamlife grants employee stock options subject
to minimum vesting periods and employees are required to remain with Dreamlife
for a number of years to earn and receive the full benefit of a stock option
grant.
ADMINISTRATION. The Board (or a committee of the Board if so directed by
the Board) is authorized to administer the 1999 Employee Plan (the "Employee
Plan Administrator"). The Employee Plan Administrator interprets the terms and
establishes administrative regulations to further the purposes of the 1999
Employee Plan, authorizes awards to eligible participants, determines vesting
schedules and takes any other action necessary for the proper implementation and
interpretation of the 1999 Employee Plan. If the Board appoints a committee, the
committee shall consist of two or more non-employee directors within the meaning
of Rule 16b-3 under the Securities Exchange Act of 1934.
PARTICIPATION. Every full-time employee of Dreamlife or of any subsidiary
is eligible to participate in the 1999 Employee Plan. Dreamlife currently has
approximately 50 employees.
SHARES AVAILABLE FOR AWARDS. Giving effect to the proposed amendments, an
aggregate of 6,500,000 shares of Common Stock will be reserved for issuance
under the 1999 Employee Plan. As of June 30, 2000, 2,383,750 shares were subject
to options granted, and 903,750 shares were available for future grants, under
the 1999 Employee Plan. 1,716,250 shares are available for future grants giving
effect to the additional shares authorized under one of the proposed amendments,
less the 2,400,000 shares reserved for a grant to Dreamlife's new Chief
Executive Officer. The number of shares reserved for issuance are subject to
adjustment for stock splits, stock dividends, recapitalizations and similar
events. Shares reserved under the 1999 Employee Plan may consist of authorized
and unissued shares or treasury shares. If an option expires unexercised or is
forfeited or terminated, the shares of Common Stock previously subject to such
option will be available for future options granted under the 1999 Employee
Plan.
AWARDS. The 1999 Employee Plan permits grants of incentive stock options
("ISOs") and non-qualified stock options ("NSO"). ISOs are intended to satisfy
the requirements of Section 422 of the Internal Revenue Code of 1986, as amended
(the "Code"). Only employees who are common-law employees of Dreamlife or its
subsidiaries are eligible for the grant of ISOs. An employee who owns more than
ten percent (10%) of the total combined voting power of all classes of
outstanding stock of Dreamlife or its subsidiaries is not eligible for the grant
of an ISO, unless the requirements set forth in Section 422(c)(5) of the Code
are satisfied.
The exercise price per share of an option is established by the Employee
Plan Administrator in its discretion, but, in the case of an ISO, may not be
less than the fair market value (or not less than 110% under the requirements of
Section 422(c)(5) of the Code) of a share of Common Stock as of the date of
grant. NSOs may have a specified exercise price that is fixed or varies in
accordance with a predetermined formula while the NSO is outstanding, provided
that the exercise price per share is not less than the par value per share of
the Common Stock. No individual is permitted to receive options to purchase
Common Stock during any fiscal year covering in excess of 500,000 shares of
Common Stock; provided, however, a newly hired individual can receive options to
purchase up to 1,300,000 shares of Common Stock during the portion of the fiscal
year remaining after his or her date of hire. Under one of the proposed
amendments, a newly hired employee would be able to receive options to
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purchase up to 2,400,000 shares of Common Stock during the portion of the fiscal
year remaining after his or her date of hire. To the extent provided by the
Employee Plan Administrator in a stock option agreement entered into under the
1999 Employee Plan, the holder of an option can choose to pay the exercise price
of the option in cash, with the surrender of previously owned capital stock of
Dreamlife, through the use of certain broker assisted sales of Common Stock,
with a promissory note or by any other legal consideration deemed appropriate by
the Employee Plan Administrator. At the Employee Plan Administrator's
discretion, new options may be granted automatically to an optionee when he or
she exercises options previously granted.
Options may be exercisable in part from time to time or in whole at any time
after a portion becomes fully vested, for a period not to exceed ten years from
the date of grant, in the case of an ISO (or five years under the requirements
of Section 422(c)(5) of the Code). The exercise of an option may also be subject
to restrictions and special vesting provisions determined by the Employee Plan
Administrator on the date of grant. The exercise of an option may be accelerated
in the event of the optionee's death, disability or retirement or other events
and may provide for expiration prior to the end of its term in the event of the
termination of the optionee's service with or without cause. Such period will be
established by the Employee Plan Administrator in its discretion on the date of
grant. Options will not be transferable except upon death (in which case they
may be exercised by the decedent's executor or other legal representative).
MARKET PRICE OF THE COMMON STOCK. The last reported sale price of the
Common Stock on the OTC Bulletin Board on July 21, 2000 was $3.5625 per share.
ACCELERATION OF OPTIONS ON CHANGE IN CONTROL. If a Change in Control (as
defined in the 1999 Employee Plan) occurs with respect to Dreamlife, then
simultaneously with the date of consummation of such Change of Control, (A) if
an optionee has continuously been a Key Employee (as defined in the 1999
Employee Plan) of Dreamlife during the Requisite Service Period (as defined
below), the number of shares that vest and become exercisable with respect to an
option shall accelerate as to the lesser of (i) 25% of the shares originally
covered by the option or (ii) the remaining unvested shares covered by the
option and (B) unless accelerated pursuant to clause (A) above, the remaining
unvested options, if any, shall continue to vest as set forth in the option
agreement evidencing the grant. "Requisite Service Period" means the one-year
period ending the date immediately preceding the date that a Change in Control
is consummated.
ESTIMATES OF BENEFITS. The amount of benefit to be received by employees
under the 1999 Employee Plan is not currently determinable, except that Peter A.
Lund, Dreamlife's new Chief Executive Officer, will be issued an NSO to purchase
2,400,000 shares of Common Stock under the 1999 Employee Plan after the proposed
amendments are effective. Such option shall be exercisable, subject to vesting
requirements, at an exercise price of $5.20 per share.
NO STOCKHOLDER RIGHTS. An optionee shall have no dividend rights, voting
rights or any other rights as a stockholder with respect to any shares of Common
Stock covered by an option prior to the issuance of a stock certificate for such
Common Stock.
AMENDMENT AND TERMINATION. The Board may, at any time and for any reason,
amend or terminate the 1999 Employee Plan. Amendments to the 1999 Employee Plan
are subject to the approval of Dreamlife's stockholders only to the extent
required by applicable laws, regulations or rules. The 1999 Employee Plan
terminates by its terms on September 7, 2009, ten years after its adoption by
the Board. Following termination of the 1999 Employee Plan, options may no
longer be granted. Termination of the 1999 Employee Plan will not affect options
then outstanding under the 1999 Employee Plan.
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MARKET STAND-OFF. Dreamlife may establish one or more periods of
90-180 days during which options and shares acquired pursuant to options may not
be sold, if the Board determines in its sole discretion that such a market
stand-off is reasonably necessary to effectuate a business transaction or a
registration of Dreamlife securities. During any such period, holders of options
and shares acquired pursuant to options would also be prohibited from
contracting to sell or otherwise disposing of such securities.
FEDERAL INCOME TAX CONSEQUENCES. Dreamlife believes that under present law,
the following are the federal income tax consequences that arise with respect to
options granted under the 1999 Employee Plan.
NON-QUALIFIED STOCK OPTIONS.
The grant of an NSO will create no tax consequences for the optionee and
Dreamlife will not be entitled to a deduction in connection with the grant. Upon
the exercise of an NSO, the amount by which the fair market value of the shares
on the date of exercise exceeds the exercise price will be taxed to the optionee
as ordinary income and Dreamlife will be entitled to a deduction in the same
amount. In general, the optionee's tax basis in the shares acquired by
exercising an NSO is equal to the fair market value of such shares on the date
of exercise. Upon a subsequent disposition of such shares, the optionee
generally will realize capital gain or loss (long-term or short-term, depending
on whether the shares were held for more than twelve months before the sale) in
an amount equal to the difference between the optionee's basis in the shares and
the sale price. If the shares were held more than twelve months, the applicable
maximum long-term capital gains rate is currently 20%.
If the optionee pays the exercise price upon the exercise of NSOs with
previously acquired shares of stock, the transaction is separated into two
components. First, the exchange by the optionee of the shares of stock generally
is treated as a tax-free exchange with respect to receipt by the optionee of the
same number of shares of stock paid by the optionee in the exchange. With
respect to such number of shares of stock, the optionee's basis in such shares
will be the same as the optionee's basis in the shares of stock paid by the
optionee in the exchange, and the capital gain holding period runs without
interruption from the date on which the previously held shares were acquired.
Second, the optionee will be taxed as ordinary income on the amount of the
difference between the fair market value of the additional shares of stock
received and the amount of any cash the optionee pays in the exercise
transaction. The optionee's basis in the additional shares of common stock will
be equal to the fair market value of such shares on the date the shares are
issued, and the capital gain holding period will also commence on such date.
INCENTIVE STOCK OPTIONS.
The grant of an ISO will create no tax consequences for a optionee or
Dreamlife. An optionee generally will have no taxable income upon exercising an
ISO within the time period set forth in such optionee's option agreement (except
that the alternative minimum tax may apply), and Dreamlife will receive no
deduction when an ISO is exercised provided that the optionee is still employed
by Dreamlife (or the optionee terminated employment no more than three months
before the exercise date). Additional exceptions to this exercise timing
requirement apply upon death or disability of the optionee. A sale of the shares
received upon the exercise of an ISO that occurs both more than one year after
the exercise of the ISO and more than two years after the grant of the ISO will
result in the realization of long-term capital gain or loss in the amount of the
difference between the amount realized on the sale and the exercise price for
such shares (the applicable maximum long-term capital gains rate is currently
20%). Generally, upon a sale or disposition of the shares prior to the foregoing
holding requirements (referred to as a disqualifying disposition), the optionee
will recognize ordinary income and Dreamlife will receive a corresponding
deduction equal to the lesser of (i) the excess of the fair market value of the
shares on the date of exercise over the exercise price or (ii) the excess of the
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amount realized on the disposition over the exercise price for such shares. Any
additional gain would be treated as a capital gain.
The favorable tax treatment associated with ISOs is available to the
optionee only to the extent that the value of the shares (determined at the time
of grant) covered by the ISOs that are first exercisable in any single calendar
year does not exceed $100,000. If ISOs that cover an aggregate amount of shares
in excess of $100,000 become exercisable in the same calendar year, the excess
will be treated as a NSO.
If the optionee pays the exercise price upon the exercise of ISOs with
previously acquired shares of stock, just as in the NSO context, such a
surrender transaction generally is treated as a tax-free exchange of the old
shares for the same number of new shares. With respect to such number of new
shares of stock, the optionee's basis in such new shares is the same as the
optionee's basis in the old shares, and the capital gain holding period runs
without interruption from the date when the old shares were acquired. However,
the holding period will not be credited for purposes of the one-year holding
period described above in order for the new shares to receive ISO treatment. New
shares received in excess of the old shares surrendered will have a new holding
period, and have a basis of zero or, if any cash was paid as part of the
exercise price, the excess new shares will have a basis equal to the amount of
the cash.
A special rule applies if an optionee pays all or part of the exercise price
of an ISO by surrendering shares of stock that he or she previously acquired by
exercising any other ISO. If the optionee has not held the old shares for the
full duration of the applicable holding periods described above before
surrendering them, then the surrender of such shares to exercise the new ISO
will be treated as a disqualifying disposition of the old shares. As described
above, the result of a disqualifying disposition is the loss of favorable tax
consequences with respect to the acquisition of the old shares pursuant to the
previously exercised ISO.
WITHHOLDING TAXES. Dreamlife will not be obligated to issue any shares
under the 1999 Employee Plan until an optionee makes arrangements satisfactory
to Dreamlife to pay any withholding or other taxes that may be due as a result
of the exercise of an option.
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VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
The following table sets forth, as of July 1, 2000, certain information
concerning beneficial ownership of Dreamlife's voting securities by (i) each
person known to Dreamlife to beneficially own 5% or more of Dreamlife's
outstanding voting securities, (ii) all executive officers and directors of
Dreamlife naming them, and (iii) all executive officers and directors of
Dreamlife as a group, without naming them.
<TABLE>
<CAPTION>
NUMBER OF SHARES
OF PERCENT OF
COMMON STOCK COMMON STOCK
NAME AND ADDRESS OF BENEFICIALLY BENEFICIALLY
BENEFICIAL OWNER(1) OWNED(2) OWNED(3)
------------------------------------------------------------ ----------------- --------------
<S> <C> <C>
Anthony J. Robbins.......................................... 23,031,297(4) 57.1%
Chairman of the Board
9191 Towne Center Drive
Suite 600
San Diego, CA 92122
CYL Development Holdings, LLC............................... 7,677,099(5) 19.0%
330 South Street
P.O. Box 1975
Morristown, NJ 07962-1975
Stanley S. Shuman........................................... 2,883,000(6) 7.1%
711 Fifth Avenue
New York, NY 10022
Allen & Company Incorporated................................ 2,022,000(7) 5.0%
711 Fifth Avenue
New York, NY 10022
Fredric D. Rosen............................................ 420,000(8) *
Director
Peter A. Lund............................................... 125,000(9) *
Director
Charles D. Peebler, Jr...................................... 125,000(9) *
Director
Philicia G. Levinson........................................ 112,500(10) *
Senior Vice President, Chief Financial
Officer, Secretary and Treasurer
H. Peter Guber.............................................. 25,000(11) *
Director
Bruce L. Stein.............................................. 25,000(11) *
Director
All Directors and Executive Officers as a group (seven 57.9%
persons).................................................. 23,863,797(4)
(8)(9)(10)(11)
</TABLE>
------------------------------
* less than 1%
(1) Unless otherwise indicated, all shares are beneficially owned and sole
voting and investment power is held by the person named above. Each holder
has an address c/o dreamlife, inc., 425 West 15th Street, Floor 3R, New
York, NY 10011, unless otherwise noted.
(2) Generally, a person is deemed to be the beneficial owner of securities that
can be acquired within 60 days from the date set forth above through the
exercise of any option, warrant or right.
(3) Based on a total of 40,368,351 shares of Common Stock. Shares of Common
Stock subject to options, warrants or rights that are currently exercisable
or exercisable within 60 days are deemed outstanding for purposes of
computing the percentage ownership of the person holding such options,
warrants or rights, but are not deemed outstanding for purposes of computing
the percentage ownership of any other person.
(4) Based in part on a Schedule 13D filed by Robbins and RRI. The shares of
Common Stock reported hereby were issued upon the conversion of shares of
Dreamlife's Series A Preferred Stock held by Robbins and RRI and received by
them in
9
<PAGE>
the CYL Transaction. Of the number of shares of Common Stock reported in the
table, RRI is the direct holder of 6,909,389 shares. In his capacity as
Chairman and sole equity owner of RRI, Robbins shares voting and dispositive
power with respect to the securities beneficially owned by RRI and may be
deemed to be the beneficial owner of such securities. Robbins, RRI and
Development Holdings have agreed with each other and with Dreamlife pursuant
to the Stockholders' Agreement that until the earlier of March 31, 2014 and
the termination of the Content Provider Agreement, each will vote their
respective shares of capital stock of Dreamlife in the manner recommended by
the Board and in favor of the election, removal and replacement of directors
as described in this Information Statement.
(5) Based on a Schedule 13D filed by Development Holdings, Kurt T. Borowsky and
David J. Roy. The shares of Common Stock reported hereby were issued upon
the conversion of shares of Series A Preferred Stock held by Development
Holdings and received by Development Holdings in the CYL Transaction. In
their capacities as managers of Development Holdings, Messrs. Borowsky and
Roy together irrevocably possess the sole power to vote and dispose of the
Common Stock owned by Development Holdings, and may each, therefore, be
deemed to be the beneficial owner of such securities. Further, a charitable
trust, of which Messrs. Borowsky and Roy are trustees, owns an indirect
pecuniary interest in more than 5% of the shares of Common Stock held by
Development Holdings. Robbins, RRI and Development Holdings have agreed with
each other and with Dreamlife pursuant to the Stockholders' Agreement that
until the earlier of March 31, 2014 and the termination of the Content
Provider Agreement, each will vote their respective shares of capital stock
of Dreamlife in the manner recommended by the Board and in favor of the
election, removal and replacement of directors as described in this
Information Statement.
(6) Includes (i) 1,902,000 shares of Common Stock held by Allen & Company
Incorporated ("Allen & Company"), (ii) 120,000 shares of Common Stock
issuable upon exercise of warrants held by Allen & Company and (iii) 20,000
shares of Common Stock issuable upon exercise of warrants beneficially owned
by Mr. Shuman. Mr. Shuman, who is a Managing Director of Allen & Company,
disclaims beneficial ownership of the shares and warrants referred to in
clauses (i) and (ii) above, except to the extent of his pecuniary interest
therein. Allen & Company disclaims beneficial ownership of the warrants
referred to in clause (iii) above.
(7) Based in part on a Schedule 13D filed by Allen & Company. Includes 120,000
shares of Common Stock issuable upon exercise of warrants beneficially owned
by Allen & Company. Does not include 80,000 shares of Common Stock issuable
upon exercise of warrants owned of record by Allen & Company in which
certain officers and directors of Allen & Company possess a beneficial
interest to which Allen & Company disclaims beneficial ownership.
(8) Represents 420,000 shares of Common Stock issuable upon the exercise of
presently exercisable options held by Mr. Rosen.
(9) Represents 125,000 shares of Common Stock issuable upon the exercise of
presently exercisable options held by such individual, options to purchase
100,000 of which were issued to Mr. Lund by CYL.
(10) Represents 112,500 shares of Common Stock issuable upon the exercise of
presently exercisable options held by such individual.
(11) Represents 25,000 shares of Common Stock issuable upon the exercise of
presently exercisable options held by such individual.
10
<PAGE>
REQUIRED APPROVALS OBTAINED
On June 21, 2000, the Board approved the amendments to the 1999 Employee
Plan described herein. Under Delaware law, the record date for such action,
which determines the stockholders entitled to vote on such action, was June 29,
2000, the date that written consents signed by a sufficient number of holders to
take the action were delivered to Dreamlife (the "Record Date").
On the Record Date, Dreamlife's outstanding capital stock entitled to vote
on the proposed corporate action consisted of 40,368,351 shares of issued and
outstanding Common Stock. The holders of Common Stock are entitled to one vote
for each share held on the Record Date. By Written Consent of the Stockholders
in Lieu of a Meeting dated June 29, 2000, holders as of the Record Date
representing 30,708,396 shares of Common Stock, 76.1% of the shares of Common
Stock, approved the proposed amendments to the 1999 Employee Plan.
Such actions by written consent satisfy the applicable requirements for
amending the 1999 Employee Plan that Dreamlife obtain the approval of the Board
and of stockholders representing a majority of the shares of capital stock
entitled to vote on such action. Accordingly, stockholders will not be asked to
take further action on the amendments at any future meeting.
Delaware law does not afford to Dreamlife stockholders the opportunity to
dissent from the action described in this Information Statement or in connection
therewith to receive value for their shares.
11
<PAGE>
EXECUTIVE COMPENSATION
EMPLOYMENT AGREEMENTS
In May 1999, Dreamlife entered into a three-year employment agreement with
William Zanker pursuant to which Mr. Zanker will be responsible for such
executive responsibilities as shall be assigned to him by the general manager of
Dreamlife's online division. Pursuant to the agreement, Mr. Zanker will receive
an annual base salary of $200,000, subject to increase at the discretion of the
Board. If Mr. Zanker's employment is terminated without cause, he is entitled to
severance compensation in an amount equal to the employee's base salary for the
remainder of the employment term. The agreement also contains confidentiality
and non-competition provisions prohibiting the employee from competing against
Dreamlife and disclosing trade secrets and other proprietary information.
In May 2000, Dreamlife entered into a Retention and Severance Agreement with
Beth Polish, Dreamlife's then President and Chief Operating Officer (the "Polish
Severance Agreement"), pursuant to which Ms. Polish (a) agreed to continue in
her positions as President and Chief Operating Officer until May 31, 2000;
(b) was deemed to have earned her bonus of $50,000, payable on or before
May 26, 2000; (c) benefited from the accelerated vesting of options to purchase
225,000 shares of Common Stock at $9.00 per share (such options and options to
purchase an additional 225,000 shares were part of a grant of options to
Ms. Polish to purchase 1,000,000 shares, of which options to purchase 550,000
will not vest due to Ms. Polish's resignation); and (d) received a severance
payment of $300,000 to be paid in semi-monthly installments over 12 months. The
Polish Severance Agreement also provides for mutual releases and restrictions on
Ms. Polish's ability to solicit Dreamlife employees, customers and suppliers as
well as restrictions on Ms. Polish's ability to use certain confidential
information gained during her employment with Dreamlife.
In July 2000, Dreamlife entered into an offer letter with Peter A. Lund,
Dreamlife's Chief Executive Officer, that provides for annual base salary to
Mr. Lund of $300,000, subject to change at the discretion of the Board. The
agreement also provides for a discretionary bonus that may be granted as
determined by the Board and a deferred bonus of up to $3,000,000, subject to
vesting requirements, payable in a lump sum on May 22, 2003, the third
anniversary of the start of Mr. Lund's service as Chief Executive Officer. The
deferred bonus vests with respect to 33 1/3% of the full bonus amount on
May 22, 2001, the first anniversary of the start of Mr. Lund's service, and an
additional 5.55% of the full bonus amount at the end of each following month
until fully vested. The vesting of the deferred bonus accelerates (a) with
respect to up to 25% of the full bonus amount if a change in control occurs with
respect to Dreamlife and (b) with respect to the remaining unvested portion if
Mr. Lund is terminated other than for cause prior to May 22, 2002. The agreement
also contains confidentiality and non-competition provisions prohibiting
Mr. Lund from competing against Dreamlife and disclosing trade secrets and other
proprietary information.
Dreamlife also plans to grant to Mr. Lund, subject to the proposed
amendments to the 1999 Employee Stock Option Plan, a ten-year non-statutory
stock option under Dreamlife's 1999 Employee Stock Option Plan to purchase up to
2,400,000 shares of Common Stock at $5.20 per share. Such option will vest,
based on continued service to Dreamlife, as to 800,000 shares on May 22, 2001,
and as to an additional 132,000 shares at the end of each following month until
such option is fully vested in June 2002.
As an inducement to Mr. Lund, CYL Development Holdings, LLC, a 19.1%
shareholder of Dreamlife, has granted to Mr. Lund an option to purchase up to
100,000 shares of Dreamlife Common Stock held by CYL Development Holdings, LLC.
Such option is exercisable for a period of five years commencing on May 21, 2000
at an exercise price of $4.75 per share. Dreamlife has granted to Mr. Lund
piggyback registration rights with respect to the resale of the shares
underlying such options.
12
<PAGE>
DIRECTOR COMPENSATION
All directors are entitled to receive reimbursement for traveling costs and
other out-of-pocket expenses incurred in attending Board meetings.
Dreamlife pays each non-employee director a $2,000 fee for each Board
meeting attended. In December 1999, Dreamlife granted to each non-employee
director a one-time, ten-year option to purchase 55,000 shares of Common Stock
at an exercise price of $10.00 per share under Dreamlife's 1999 Outside
Directors Stock Option Plan. Of each 55,000 grant, options to purchase 15,000
shares vested immediately on the date of grant and options to purchase the
remaining 40,000 shares will vest in equal semi-annual amounts over two years.
Deferred compensation expense was recognized by Dreamlife in connection with the
issuance of such options in the amount of $1.98 million. Of this amount,
$0.63 million was recognized as compensation expense during the period from
April 21, 1999 (inception) to December 31, 1999 and the remaining $1.35 million
will be amortized over the balance of the two-year vesting period.
EXECUTIVE COMPENSATION
The following table sets forth the total compensation paid or accrued for
the years specified below for Dreamlife's former Chief Executive Officer and its
most highly compensated executive officer, other than its Chief Executive
Officer, whose salary and bonus for such fiscal year were in excess of $100,000.
Peter A. Lund joined Dreamlife as Chief Executive Officer in May 2000 and did
not receive any reportable compensation prior to 2000.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITION ANNUAL SALARY
--------------------------- -------------
<S> <C>
Alan Gold (1)
President and Chief Executive Officer
1999...................................................... $ 63,550
1998...................................................... 207,500
1997...................................................... 115,000
Beth Polish (2)
President and Chief Operating Officer
1999...................................................... $145,601
</TABLE>
------------------------
(1) Mr. Gold served as Dreamlife's President until May 1999 and its Chief
Executive Officer until November 1999.
(2) Ms. Polish joined Dreamlife in May 1999 and resigned in May 2000.
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth grants of stock options to Dreamlife's most
highly compensated executive officer for the year ended December 31, 1999 and
its current Chief Executive Officer. The potential realizable value is
calculated based on the term of the option at its time of grant. It is
calculated assuming that the fair market value of the Common Stock on the date
of grant appreciates at the indicated annual rate compounded annually for the
entire term of the option and that the option is exercised and sold on the last
day of its term for the appreciated stock price. These numbers are calculated
based on the requirements of the Securities and Exchange Commission and do not
reflect Dreamlife's estimate of future stock price growth.
13
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
----------------------------------------------------
PERCENT OF
TOTAL
OPTIONS POTENTIAL REALIZABLE
GRANTED VALUE AT ASSUMED
NUMBER OF TO ANNUAL RATES OF STOCK
SECURITIES EMPLOYEES PRICE APPRECIATION FOR
UNDERLYING IN FISCAL EXERCISE OPTION TERM
OPTIONS YEAR PRICE PER EXPIRATION -----------------------
NAME GRANTED (#) (%)(1) SHARE ($/SH) DATE 5% ($) 10% ($)
---- ----------- ---------- ------------ ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Beth Polish (2)................... 1,300,000 31.1% (3) 5/27/09 23,704,485 44,557,259
Peter A. Lund (4)................. 55,000 1.3% $10.00 11/18/09 913,888 1,780,996
</TABLE>
------------------------
(1) Based on options to purchase an aggregate of 4,183,750 shares of Common
Stock granted under and outside Dreamlife's 1999 Employee Stock Option Plan,
1999 Consultants Stock Option Plan and 1999 Outside Directors Stock Option
Plan in the year ended December 31, 1999 to employees, consultants and
directors of Dreamlife.
(2) The grant of options listed herein were modified by the Polish Severance
Agreement described above.
(3) Board approved options granted to Ms. Polish consisted of (i) 300,000
options at an exercise price of $4.50 per share, all of which are currently
vested, (ii) 225,000 options at an exercise price of $9.00 per share, all of
which are currently vested, (iii) 225,000 options at an exercise price of
$9.00 per share, all of which were scheduled to vest on May 27, 2001, but
were accelerated under the Polish Severance Agreement, (iv) 250,000 options
at an exercise price of $10.00 per share, of which 20,833.33 were scheduled
to vest on June 27, 2001 and 20,833.33 were scheduled to vest each month
thereafter for eleven consecutive months, and (v) 300,000 options at an
exercise price of $12.00 per share, of which 25,000 were scheduled to vest
on June 27, 2002 and 25,000 were scheduled to vest each month thereafter for
eleven successive months. Ms. Polish's options were granted outside
Dreamlife's current stock option plans. Compensation expense related to
these options was $5,797,000 during the period April 21, 1999 (inception)
through December 31, 1999. An additional $1,275,500 in compensation expense
will be recognized over the remaining vesting period of these options.
(4) All outside directors of Dreamlife, including Mr. Lund, received an
identical grant under the 1999 Outside Directors Stock Option Plan.
FISCAL YEAR END OPTION VALUES
The following table provides certain summary information concerning stock
options held as of December 31, 1999 by Dreamlife's former Chief Executive
Officer, most highly compensated executive officer, other than its former Chief
Executive Officer and its current Chief Executive Officer. No options were
exercised during fiscal 1999 by any of the officers, other than set forth below.
The value of unexercised in-the-money options at fiscal year-end is based on
$16.06 per share, the assumed fair market value of the Common Stock at
December 31, 1999, less the exercise price per share.
14
<PAGE>
FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF SECURITIES IN-THE-MONEY OPTIONS
NUMBER OF SECURITIES EXERCISED UNDERLYING UNEXERCISED AT FISCAL YEAR-END
----------------------------------- OPTIONS ---------------------------
SHARES ACQUIRED ON VALUE REALIZED --------------------------- EXERCISABLE UNEXERCISABLE
NAME EXERCISE (#) ($) EXERCISABLE UNEXERCISABLE ($) ($)
---- ------------------ -------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Alan Gold (1)............ 141,052 1,983,544 -- -- -- --
Beth Polish (2).......... -- -- 300,000 1,000,000 3,468,000 5,910,000
Peter A. Lund (3)........ -- -- 15,000 40,000 90,900 242,400
</TABLE>
------------------------
(1) On May 20, 1999, Dreamlife repriced the exercise price of Mr. Gold's options
from $1.00 to $0.75 per share. Mr. Gold exercised, on a cashless basis,
options to purchase 149,000 shares on June 25, 1999, resulting in the
issuance of 141,052 shares of Common Stock. Based on the average closing bid
and asked prices of the Common Stock on June 25, 1999 ($14.0625) the total
value of the 141,052 shares were approximately $1,983,544.
(2) The grant of options listed herein were modified by the Polish Severance
Agreement described above.
(3) Mr. Lund joined Dreamlife as Chief Executive Officer in May 2000.
STOCK OPTION PLANS
1997 STOCK OPTION PLAN
Officers, directors, consultants and other key personnel of Dreamlife are
eligible for option grants under Dreamlife's 1997 Stock Option Plan (the "1997
Plan"), which is administered by the Board. The administration of the 1997 Plan
may be delegated to a committee of the Board in the Board's discretion. The 1997
Plan replaced the expired 1986 Stock Option Plan. There are no options
outstanding under the 1986 Stock Option Plan.
The 1997 Plan authorizes the granting of ISOs and NSOs to purchase up to
750,000 shares of Common Stock at a price not less than 100% (110% in the case
of ISO's granted a person who owns stock possessing more than 10% of the voting
power of Dreamlife) of the fair market value of the Common Stock on the date of
grant and provides that no portion of an option may be exercised beyond ten
years from that date (five years in the case of ISO's granted to a 10%
stockholder). As of December 31, 1999, options to purchase an aggregate of
325,000 shares had been granted under the 1997 Plan and 425,000 shares were
available for future grant.
To the extent not otherwise provided by the Board, options granted under the
1997 Plan to employees and consultants become exercisable in three installments,
each equal to one-third of the entire option granted and exercisable on the
first, second and third anniversaries of the grant date, respectively. In the
event of termination of an employee's service to Dreamlife, vested options may
be exercised within one year following the date of death or following a
determination of disability and within three months following termination for
any other reason; except that, if such termination is for cause, the options
will not be exercisable following such termination. In no event may an option be
exercised later than the date of expiration of the term of the option as set
forth in the agreement evidencing such option. Options will not be transferable
except upon death (in which case they may be exercised by the decedent's
executor or other legal representative). The 1997 Plan will terminate by its
terms in 2007.
15
<PAGE>
1999 EMPLOYEE STOCK OPTION PLAN
See description above.
1999 OUTSIDE DIRECTORS STOCK OPTION PLAN
Non-Employee directors of Dreamlife and any of its subsidiaries are eligible
for option grants under the 1999 Outside Directors Stock Option Plan, which is
administered by the Board. An aggregate of 385,000 shares of Common Stock are
reserved for issuance under the 1999 Outside Directors Stock Option Plan. As of
December 31, 1999, options to purchase an aggregate of 330,000 shares had been
granted under the 1999 Outside Directors Option Plan and 55,000 shares were
available for future grant.
The options granted under the 1999 Outside Directors Stock Option Plan are
NSOs. The exercise price per share of an option is established by the Board in
its discretion. The exercise price per share of an option may be fixed or vary
in accordance with a predetermined formula while the option is outstanding.
Options granted under the 1999 Outside Directors Stock Option Plan are
exercisable (subject to such restrictions and vesting provisions as the Board
may determine on the date of grant in its discretion), in part from time to time
or in whole at any time after a portion becomes fully vested, for a period not
to exceed ten years from the date of grant. The exercise of an option may be
accelerated in the event of the optionee's death, disability or retirement or
other events and may provide for expiration prior to the end of its term in the
event of the termination of the optionee's service with or without cause. Such
period will be established by the Board in its discretion on the date of grant.
Options are not transferable except upon death (in which case they may be
exercised by the decedent's executor or other legal representative). The 1999
Outside Directors Stock Option Plan will terminate by its terms in 2009.
1999 CONSULTANTS STOCK OPTION PLAN
Consultants and other bona fide service providers to Dreamlife and any
subsidiaries are eligible for option grants under the 1999 Consultants Stock
Option Plan, which may be administered by the Board or a committee of the Board.
An aggregate of 327,500 shares of Common Stock are reserved for issuance under
the 1999 Consultants Stock Option Plan. As of December 31, 1999, options to
purchase an aggregate of 327,500 shares had been granted under the 1999
Consultants Stock Option Plan and no shares were available for future grant.
The options granted under the 1999 Consultants Stock Option Plan are NSOs.
The exercise price per share of an option is established by the administrator of
the 1999 Consultants Stock Option Plan in its discretion. The exercise price may
be fixed or may vary in accordance with a predetermined formula while the option
is outstanding.
Options granted under the 1999 Consultants Stock Option Plan may be
exercisable (subject to such restrictions and vesting provisions as the plan
administrator may determine on the date of grant in its discretion), in part
from time to time or in whole at any time after a portion becomes fully vested,
for a period not to exceed ten years from the date of grant. The exercise of an
option may be accelerated in the event of the optionee's death, disability or
retirement or other events and may provide for expiration prior to the end of
its term in the event of the termination of the optionee's service with or
without cause. Such period will be established by the plan administrator in its
discretion on the date of grant. Options will not be transferable except upon
death (in which case they may be exercised by the decedent's executor or other
legal representative). The 1999 Consultants Stock Option Plan will terminate by
its terms in 2009.
16
<PAGE>
INTERESTS OF CERTAIN PERSONS IN MATTERS TO BE ACTED UPON
The number of shares of Common Stock authorized to be issued under the 1999
Employee Plan and the maximum number of shares underlying option grants for
newly hired employees are being increased in part to enable Dreamlife to provide
additional incentives to its employees to advance the interests of Dreamlife and
to enable Dreamlife to attract and retain qualified personnel in a competitive
marketplace. Awards under the 1999 Employee Plan will give optionees an
opportunity to participate in an increase in the market value of the Common
Stock. The Board believes that the amendments will provide incentives and
flexibility for Dreamlife in meeting competitive developments in the marketplace
for retaining and attracting qualified personnel.
Dreamlife's new Chief Executive Officer will be issued an option to purchase
2,400,000 shares of Common Stock as soon as possible after the amendments to the
1999 Employee Stock Option Plan become effective.
17
<PAGE>
EXHIBIT A
AMENDMENT NO. 2 TO 1999 EMPLOYEE STOCK OPTION PLAN
<PAGE>
AMENDMENT NO. 2 TO THE DREAMLIFE, INC. 1999 EMPLOYEE STOCK OPTION PLAN
Effective as of June 21, 2000
1. In accordance with Section 12.2 of the dreamlife, inc. 1999 Employee
Stock Option Plan (the "Plan"), the Plan is hereby amended as follows:
Section 3.1 of the Plan is hereby amended by deleting the reference to
the number "3,287,500" and inserting in lieu thereof the reference to the
number "6,500,000."
Section 4.2 of the Plan is hereby amended by deleting the reference to
the number "1,300,000" and inserting in lieu thereof the reference to the
number "2,400,000."
2. This Amendment No. 2 to the Plan (this "Amendment") constitutes an
integral part of the Plan.
3. For all purposes of this Amendment, capitalized terms used herein
without definition shall have the meanings specified in the Plan, as the Plan
shall be in effect on the date hereof after giving effect to this Amendment.
4. This Amendment is executed pursuant to Section 12.2 of the Plan and
shall (unless otherwise expressly indicated herein) be construed, administered,
and applied in accordance with all of the terms and provisions of the Plan,
including Section 12.2 thereof. Except as expressly amended or waived by the
terms of this Amendment, the terms and conditions of the Plan shall remain
unamended and unwaived. The amendment set forth herein shall be limited
precisely as provided for herein to the provisions expressly amended herein and
shall not be deemed to be a waiver of, amendment of, consent to or modification
of any other term or provision of any other document or of any transaction or
further action on the part of dreamlife, inc. (the "Company").
5. This Amendment shall be binding upon and inure to the benefit of the
Company and its respective successors and assigns.
6. This Amendment shall be governed by and construed in accordance with the
laws of the State of New York (without regards for principles of conflicts of
laws).
dreamlife, inc.
By:___________________________________
Name:
Title:
<PAGE>
EXHIBIT B
1999 EMPLOYEE STOCK OPTION PLAN
WITH
AMENDMENT NO. 1 TO 1999 EMPLOYEE STOCK OPTION PLAN
<PAGE>
AMENDMENT NO. 1 TO THE DREAMLIFE, INC. (FORMERLY GHS, INC.)
1999 EMPLOYEE STOCK OPTION PLAN
Effective as
December 10, 1999
1. In accordance with Section 12.2 of the dreamlife, inc. (formerly
GHS, Inc.) 1999 Employee Stock Option Plan (the "Plan"), the Plan is hereby
amended as follows:
Section 3.1 of the Plan is hereby amended by deleting the reference to the
number "2,287,500" and inserting in lieu thereof the reference to the number
"3,287,500."
2. This Amendment No. 1 to the Plan (this "Amendment") constitutes an
integral part of the Plan.
3. For all purposes of this Amendment, capitalized terms used herein
without definition shall have the meanings specified in the Plan, as the
Plan shall be in effect on the date hereof after giving effect to this
Amendment.
4. This Amendment is executed pursuant to Section 12.2 of the Plan and
shall (unless otherwise expressly indicated herein) be construed,
administered, and applied in accordance with all of the terms and provisions
of the Plan, including Section 12.2 thereof. Except as expressly amended or
waived by the terms of this Amendment, the terms and conditions of the Plan
shall remain unamended and unwaived. The amendment set forth herein shall be
limited precisely as provided for herein to the provisions expressly amended
herein and shall not be deemed to be a waiver of, amendment of, consent to
or modification of any other term or provision of any other document or of
any transaction or further action on the part of GHS, Inc. which would
require the consent of any shareholders under the Plan.
5. This Amendment shall be binding upon and inure to the benefit of the
Company and its respective successors and assigns.
6. This Amendment shall be governed by and construed in accordance with
the laws of the State of New York (without regards for principles of
conflicts of laws).
<TABLE>
<S> <C> <C> <C>
DREAMLIFE, INC.
By: /s/ BETH POLISH
-----------------------------------------
Name: Beth Polish
Title: President and Chief Operating
Officer
</TABLE>
<PAGE>
GHS, INC.
1999 EMPLOYEE STOCK OPTION PLAN
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
--------
<S> <C> <C> <C>
ARTICLE 1. INTRODUCTION................................................ 1
ARTICLE 2. ADMINISTRATION.............................................. 1
2.1 Committee Composition....................................... 1
2.2 Committee Responsibilities.................................. 1
ARTICLE 3. SHARES AVAILABLE FOR GRANTS................................. 1
3.1 Basic Limitation............................................ 1
3.2 Additional Shares........................................... 1
ARTICLE 4. ELIGIBILITY................................................. 2
4.1 General Rule................................................ 2
4.2 Limits on Options........................................... 2
ARTICLE 5. OPTIONS..................................................... 2
5.1 Stock Option Agreement...................................... 2
5.2 Number of Shares............................................ 2
5.3 Exercise Price.............................................. 2
5.4 Exercisability and Term..................................... 2
5.5 Effect of Change in Control................................. 2
5.6 Modification or Assumption of Options....................... 3
ARTICLE 6. PAYMENT FOR OPTION SHARES................................... 3
6.1 General Rule................................................ 3
6.2 Surrender of Stock.......................................... 3
6.3 Exercise/Sale............................................... 3
6.4 Exercise/Pledge............................................. 3
6.5 Promissory Note............................................. 3
6.6 Other Forms of Payment...................................... 3
ARTICLE 7. PROTECTION AGAINST DILUTION................................. 3
7.1 Adjustments................................................. 3
7.2 Reorganizations............................................. 3
ARTICLE 8. LIMITATION ON RIGHTS........................................ 4
8.1 Retention Rights............................................ 4
8.2 Stockholders' Rights........................................ 4
8.3 Regulatory Requirements..................................... 4
8.4 Market Stand-Off............................................ 4
ARTICLE 9. LIMITATION ON PAYMENTS...................................... 4
9.1 General Rule................................................ 4
9.2 Reduction of Payments....................................... 4
9.3 Overpayments and Underpayments.............................. 5
9.4 Related Corporations........................................ 5
ARTICLE 10. WITHHOLDING TAXES........................................... 5
10.1 General Rule................................................ 5
10.2 Share Withholding........................................... 5
ARTICLE 11. ASSIGNMENT OR TRANSFER OF OPTIONS........................... 5
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
PAGE
--------
<S> <C> <C> <C>
ARTICLE 12. FUTURE OF THE PLAN.......................................... 6
12.1 Term of the Plan............................................ 6
12.2 Amendment or Termination.................................... 6
ARTICLE 13. DEFINITIONS................................................. 6
13.1 "Affiliate"................................................. 6
13.2 "Board"..................................................... 6
13.3 "Cause"..................................................... 6
13.4 "Change in Control"......................................... 6
13.5 "Code"...................................................... 7
13.6 "Committee"................................................. 7
13.7 "Common Share".............................................. 7
13.8 "Company"................................................... 7
13.9 "Disability"................................................ 7
13.10 "Exchange Act".............................................. 7
13.11 "Exercise Price"............................................ 7
13.12 "Fair Market Value"......................................... 7
13.13 "ISO"....................................................... 8
13.14 "Key Employee".............................................. 8
13.15 "NSO"....................................................... 8
13.16 "Option".................................................... 8
13.17 "Optionee".................................................. 8
13.18 "Parent".................................................... 8
13.19 "Plan"...................................................... 8
13.20 "Stock Option Agreement".................................... 8
13.21 "Subsidiary"................................................ 8
13.22 "Ten Percent Stockholder"................................... 8
ARTICLE 14. EXECUTION................................................... 8
</TABLE>
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GHS, INC.
1999 EMPLOYEE STOCK OPTION PLAN
ARTICLE 1. INTRODUCTION
The purpose of the Plan is to promote the long-term success of the Company
and the creation of stockholder value by (a) encouraging Key Employees to focus
on critical long-range objectives, (b) encouraging the attraction and retention
of Key Employees with exceptional qualifications and (c) linking the interests
of Key Employees directly to stockholder interests through increased stock
ownership. The Plan seeks to achieve this purpose by providing for Options which
may constitute incentive stock options or nonstatutory stock options.
The Plan shall be governed by, and construed in accordance with, the laws of
the State of New York (except their choice-of-law provisions).
ARTICLE 2. ADMINISTRATION.
2.1 COMMITTEE COMPOSITION. The Plan shall be administered by the Committee
which shall consist of two or more directors of the Company. The Committee shall
satisfy the requirements of Rule 16b-3 (or its successor) under the Exchange Act
with respect to the grant of Options to persons who are officers or directors of
the Company subject to Section 16 of the Exchange Act. The Board may also
appoint one or more separate committees of the Board, who need not qualify under
Rule 16b-3, who may administer the Plan with respect to Key Employees who are
not considered officers or directors of the Company subject to Section 16 of the
Exchange Act, may grant Options under the Plan to such Key Employees and may
determine all terms of such Options. If no Committee has been appointed, the
Board shall administer the Plan, and, during any such period, references to the
Committee shall be references to the Board.
2.2 COMMITTEE RESPONSIBILITIES. The Committee shall:
(a) Select the Key Employees who are to receive Options under the Plan;
(b) Determine the type (ISO or NSO), number, vesting requirements and
other features and conditions of such Options;
(c) Interpret the Plan; and
(d) Make all other decisions relating to the operation of the Plan.
The Committee may adopt such rules or guidelines as it deems appropriate to
implement the Plan. The Committee's determinations under the Plan shall be final
and binding on all persons.
ARTICLE 3. SHARES AVAILABLE FOR GRANTS.
3.1 BASIC LIMITATION. Common Shares reserved for issuance under the Plan
shall be authorized but unissued Common Shares and Common Shares reacquired by
the Company in the open market. The aggregate number of Common Shares reserved
for Options awards shall be 2,287,500. The number of Common Shares that are
subject to Options outstanding at any time under the Plan shall not exceed the
number of Common Shares that remain available for issuance under the Plan.
3.2 ADDITIONAL SHARES. The Common Shares covered by any Options or portion
of Options that are forfeited, lapse or terminate for any reason before being
exercised shall again become available for awards under the Plan. The number of
Common Shares available for the grant of Options pursuant to this Article 3
shall be subject to adjustment pursuant to Article 7.
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ARTICLE 4. ELIGIBILITY.
4.1 GENERAL RULE. Only Key Employees shall be eligible for designation as
Optionees by the Committee.
4.2 LIMITS ON OPTIONS. No Key Employee shall receive Options to purchase
Common Shares during any fiscal year covering in excess of 500,000 Common
Shares; provided, however, a newly hired Key Employee may receive Options to
purchase up to 1,300,000 Common Shares during the portion of the fiscal year
remaining after his or her date of hire.
ARTICLE 5. OPTIONS.
5.1 STOCK OPTION AGREEMENT. Each grant of an Option under the Plan shall
be evidenced by a Stock Option Agreement between the Optionee and the Company.
Such Option shall be subject to all applicable terms of the Plan and may be
subject to any other terms that are not inconsistent with the Plan, including
but not limited to rights of repurchase and rights of first refusal. The Stock
Option Agreement shall specify whether the Option is an ISO or an NSO. The
provisions of the various Stock Option Agreements entered into under the Plan
need not be identical. Options may be granted in consideration of a cash payment
or in consideration of a reduction in the Optionee's other compensation. A Stock
Option Agreement may provide that new Options will be granted automatically to
the Optionee when he or she exercises the prior Options.
5.2 NUMBER OF SHARES. Each Stock Option Agreement shall specify the number
of Common Shares subject to the Option and shall provide for the adjustment of
such number in accordance with Article 7.
5.3 EXERCISE PRICE. Each Stock Option Agreement shall specify the Exercise
Price. The Exercise Price of an ISO shall in no event be less than 100% of the
Fair Market Value of a Common Share on the date of grant. The Exercise Price of
an ISO granted to a Ten Percent Stockholder shall not be less than 110% of the
Fair Market Value of a Common Share on the date of grant. In the case of an NSO,
a Stock Option Agreement may specify an Exercise Price that is fixed or varies
in accordance with a predetermined formula while the NSO is outstanding,
provided that the Exercise Price per share shall not be less than the par value
of the Common Share.
5.4 EXERCISABILITY AND TERM. Each Stock Option Agreement shall specify the
date when all or any installment of the Option is to become exercisable. The
Stock Option Agreement shall also specify the term of the Option; provided that
the term of an ISO shall in no event exceed ten (10) years from the date of
grant (5 years in the case of an ISO granted to a Ten Percent Stockholder). A
Stock Option Agreement may provide for accelerated exercisability in the event
of the Optionee's death, Disability or retirement or other events and may
provide for expiration prior to the end of its term in the event of the
termination of the Optionee's service with or without Cause. The Optionee's
service is service for the Company, its Parent or a Subsidiary, and the Stock
Option Agreement may provide for service with an Affiliate to continue to be
treated as service for purposes of exercisability of the Option.
5.5 EFFECT OF CHANGE IN CONTROL. In the event that a Change in Control
occurs with respect to the Company, then simultaneously with the date of
consummation of such Change of Control, (A) if an Optionee has continuously been
a Key Employee of Company during the Requisite Service Period (as defined
below), the number of Shares that vest and become exercisable with respect to
the Option shall accelerate as to the lesser of (i) 25% of the Shares originally
covered by the Option or (ii) the remaining unvested Shares covered by the
Option and (B) unless accelerated pursuant to clause (A) above, the remaining
unvested Options, if any, shall continue to vest as set forth in the Option
Agreement. "Requisite Service Period" means the one-year period ending the date
immediately preceding the date that a Change in Control is consummated.
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5.6 MODIFICATION OR ASSUMPTION OF OPTIONS. Within the limitations of the
Plan, the Committee may modify, extend or assume outstanding options or may
accept the cancellation of outstanding options (whether granted by the Company
or by another issuer) in return for the grant of new options for the same or a
different number of shares and at the same or a different exercise price. The
foregoing notwithstanding, no modification of an Option shall, without the
consent of the Optionee, alter or impair his or her rights or obligations under
such Option.
ARTICLE 6. PAYMENT FOR OPTION SHARES.
6.1 GENERAL RULE. The entire Exercise Price for the Common Shares issued
upon exercise of Options shall be payable in cash or cash equivalents acceptable
to the Company at the time when such Common Shares are purchased, except as
otherwise provided below.
6.2 SURRENDER OF STOCK. To the extent the Stock Option Agreement so
provides, payment for all or any part of the Exercise Price may be made with
Common Shares which have already been owned by the Optionee for the time period
specified by the Committee and surrendered to the Company in good form for
transfer. Such Common Shares shall be valued at their Fair Market Value on the
date when the new Common Shares are purchased under the Plan.
6.3 EXERCISE/SALE. To the extent the Stock Option Agreement so provides,
payment may be made by the delivery (on a form prescribed by the Company) of an
irrevocable direction to a securities broker approved by the Company to sell
Common Shares and to deliver all or part of the sales proceeds to the Company in
payment of all or part of the Exercise Price and any withholding taxes.
6.4 EXERCISE/PLEDGE. To the extent the Stock Option Agreement so provides,
payment may be made by the delivery (on a form prescribed by the Company) of an
irrevocable direction to pledge Common Shares to a securities broker or lender
approved by the Company, as security for a loan, and to deliver all or part of
the loan proceeds to the Company in payment of all or part of the Exercise Price
and any withholding taxes.
6.5 PROMISSORY NOTE. To the extent the Stock Option Agreement so provides,
payment may be made with a full-recourse promissory note; provided that the par
value of the Common Shares shall be paid in cash or a cash equivalent acceptable
to the Company.
6.6 OTHER FORMS OF PAYMENT. To the extent the Stock Option Agreement so
provides, payment may be made in any other form that is consistent with
applicable laws, regulations and rules.
ARTICLE 7. PROTECTION AGAINST DILUTION.
7.1 ADJUSTMENTS. In the event of a subdivision of the outstanding Common
Shares, a declaration of a dividend payable in Common Shares, a declaration of a
dividend payable in a form other than Common Shares in an amount that has a
material effect on the price of Common Shares, a combination or consolidation of
the outstanding Common Shares (by reclassification or otherwise) into a lesser
number of Common Shares, a recapitalization, a spinoff or a similar occurrence,
the Committee shall make such adjustments as it, in its sole discretion, deems
appropriate in one or more of: (a) the number of Options available for future
Options under Article 3; (b) the number of Common Shares covered by each
outstanding Option; or (c) the Exercise Price under each outstanding Option.
Except as provided in this Article 7, an Optionee shall have no rights by reason
of any issue by the Company of stock of any class or securities convertible into
stock of any class, any subdivision or consolidation of shares of stock of any
class, the payment of any stock dividend or any other increase or decrease in
the number of shares of stock of any class.
7.2 REORGANIZATIONS. In the event that the Company is a party to a merger
or other reorganization, outstanding Options shall be subject to the agreement
of merger or reorganization. Such agreement may provide, without limitation, for
the assumption of outstanding Options by the
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surviving corporation or its parent, for their continuation by the Company (if
the Company is a surviving corporation), for accelerated vesting and accelerated
expiration, or for settlement in cash.
ARTICLE 8. LIMITATION ON RIGHTS.
8.1 RETENTION RIGHTS. Neither the Plan nor any Option granted under the
Plan shall be deemed to give any individual a right to remain an employee of the
Company, a Parent, a Subsidiary or an Affiliate or to be retained in any other
capacity by the Company, a Parent, a Subsidiary or an Affiliate.
8.2 STOCKHOLDERS' RIGHTS. An Optionee shall have no dividend rights,
voting rights or other rights as a stockholder with respect to any Common Shares
covered by his or her Option prior to the issuance of a stock certificate for
such Common Shares. No adjustment shall be made for cash dividends or other
rights for which the record date is prior to the date when such certificate is
issued, except as expressly provided in Article 7.
8.3 REGULATORY REQUIREMENTS. Any other provision of the Plan
notwithstanding, the obligation of the Company to issue Common Shares under the
Plan shall be subject to all applicable laws, rules and regulations and such
approval by any regulatory body as may be required. The Company reserves the
right to restrict, in whole or in part, the delivery of Common Shares pursuant
to any Option prior to the satisfaction of all legal requirements relating to
the issuance of such Common Shares, to their registration, qualification or
listing or to an exemption from registration, qualification or listing.
8.4 MARKET STAND-OFF. The Company may establish one or more periods of
90-180 days during which Options and shares acquired pursuant to an Option may
not be sold, and neither may the holder of such Company securities contract to
sell or otherwise dispose of such securities, if the Board determines in its
sole discretion that such a market stand-off is reasonably necessary to
effectuate a business transaction or a registration of Company securities.
ARTICLE 9. LIMITATION ON PAYMENTS.
9.1 GENERAL RULE. Any provision of the Plan to the contrary
notwithstanding, in the event that the independent auditors most recently
selected by the Board (the "Auditors") determine that any payment or transfer by
the Company under the Plan to or for the benefit of an Optionee (a "Payment")
would be nondeductible by the Company for federal income tax purposes because of
the provisions concerning "excess parachute payments" in section 280G of the
Code, then the aggregate present value of all Payments shall be reduced (but not
below zero) to the Reduced Amount; provided that the Committee, at the time of
granting an Option under this Plan or at any time thereafter, may specify in
writing that such Option shall not be so reduced and shall not be subject to
this Article 9. For purposes of this Article 9, the "Reduced Amount" (as defined
below) shall be the amount, expressed as a present value, which maximizes the
aggregate present value of the Payments without causing any Payment to be
nondeductible by the Company because of section 280G of the Code.
9.2 REDUCTION OF PAYMENTS. If the Auditors determine that any Payment
would be nondeductible by the Company because of section 280G of the Code, then
the Company shall promptly give the Optionee notice to that effect and a copy of
the detailed calculation thereof and of the Reduced Amount, and the Optionee may
then elect, in his or her sole discretion, which and how much of the Payments
shall be eliminated or reduced (as long as after such election the aggregate
present value of the Payments equals the Reduced Amount) and shall advise the
Company in writing of his or her election within ten (10) days of receipt of
notice. If no such election is made by the Optionee within such ten (10) day
period, then the Company may elect which and how much of the Payments shall be
eliminated or reduced (as long as after such election the aggregate present
value of the Payments equals the Reduced Amount) and shall notify the Optionee
promptly of such election. For purposes of this Article 9, present value shall
be determined in accordance with section 280G(d)(4) of the Code. All
determinations made by the Auditors under this Article 9 shall be binding upon
the Company and
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the Optionee and shall be made within sixty (60) days of the date when a Payment
becomes payable or transferable. As promptly as practicable following such
determination and the elections hereunder, the Company shall pay or transfer to
or for the benefit of the Optionee such amounts as are then due to him or her
under the Plan and shall promptly pay or transfer to or for the benefit of the
Optionee in the future such amounts as become due to him or her under the Plan.
9.3 OVERPAYMENTS AND UNDERPAYMENTS. As a result of uncertainty in the
application of section 280G of the Code at the time of an initial determination
by the Auditors hereunder, it is possible that Payments will have been made by
the Company which should not have been made (an "Overpayment") or that
additional Payments which will not have been made by the Company could have been
made (an "Underpayment"), consistent in each case with the calculation of the
Reduced Amount hereunder. In the event that the Auditors, based upon the
assertion of a deficiency by the Internal Revenue Service against the Company or
the Optionee which the Auditors believe has a high probability of success,
determine that an Overpayment has been made, such Overpayment shall be treated
for all purposes as a loan to the Optionee which he or she shall repay to the
Company, together with interest at the applicable federal rate provided in
section 7872(f)(2) of the Code; provided, however, that no amount shall be
payable by the Optionee to the Company if and to the extent that such payment
would not reduce the amount which is subject to taxation under section 4999 of
the Code. In the event that the Auditors determine that an Underpayment has
occurred, such Underpayment shall promptly be paid or transferred by the Company
to or for the benefit of the Optionee, together with interest at the applicable
federal rate provided in section 7872(f)(2) of the Code.
9.4 RELATED CORPORATIONS. For purposes of this Article 9, the term
"Company" shall include affiliated corporations to the extent determined by the
Auditors in accordance with section 280G(d)(5) of the Code.
ARTICLE 10. WITHHOLDING TAXES.
10.1 GENERAL RULE. To the extent required by applicable federal, state,
local or foreign law, an Optionee or his or her successor shall make
arrangements satisfactory to the Company for the satisfaction of any withholding
tax obligations that arise in connection with the Plan. The Company shall not be
required to issue any Common Shares under the Plan until such obligations are
satisfied.
10.2 SHARE WITHHOLDING. Subject to such rules and limitations as imposed
by the Committee, and to the extent provided in the Stock Option Agreement, an
Optionee may satisfy all or part of his or her withholding or income tax
obligations by having the Company withhold Common Shares that otherwise would be
issued to him or her upon exercise of the Option or by surrendering all or a
portion of any Common Shares that he or she previously acquired and held for the
time period specified by the Committee. Such Common Shares shall be valued at
their Fair Market Value on the date when taxes otherwise would be withheld in
cash.
ARTICLE 11. ASSIGNMENT OR TRANSFER OF OPTIONS.
Except as provided in the Stock Option Agreement, an Option may be exercised
during the lifetime of the Optionee only by him or her or by his or her guardian
or legal representative. This Article 11 shall not preclude an Optionee from
designating a beneficiary who will receive any outstanding Options in the event
of the Optionee's death, nor shall it preclude a transfer of Options by will or
by the laws of descent and distribution.
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ARTICLE 12. FUTURE OF THE PLAN.
12.1 TERM OF THE PLAN. The Plan shall remain in effect until it is
terminated under Section 12.2, except that no Options shall be granted after the
tenth anniversary of the earlier to occur of (i) adoption of the Plan by the
Board or (ii) the date the Plan is approved by the stockholders.
12.2 AMENDMENT OR TERMINATION. The Board may, at any time and for any
reason, amend or terminate the Plan. An amendment of the Plan shall be subject
to the approval of the Company's stockholders only to the extent required by
applicable laws, regulations or rules. No Options shall be granted under the
Plan after the termination thereof. The termination of the Plan, or any
amendment thereof, shall not affect any Option previously granted under the
Plan.
ARTICLE 13. DEFINITIONS.
13.1 "AFFILIATE" means any entity, other than a Subsidiary, if the Company
and/or one or more Subsidiary owns, directly or indirectly, not less than 50% of
such entity.
13.2 "BOARD" means the Company's Board of Directors, as constituted from
time to time.
13.3 "CAUSE" (a) for those Optionees that have entered into an employment
agreement with the Company and "cause" is defined in such agreement, then
"cause" shall have the meaning set forth in such employment agreement and (b)
for all other Optionees, "cause" means the Optionee's (i) material violation of
any law or regulation applicable to the business of the Company or a Parent,
Subsidiary or Affiliate; (ii) conviction for, or guilty plea to, a felony, a
crime involving moral turpitude or the perpetration of a common law fraud; (iii)
commission of an act of personal dishonesty which involves personal profit in
connection with the Company or a Parent, Subsidiary or Affiliate; (iv) material
breach of any provision of any agreement or understanding with the Company or a
Parent, Subsidiary or Affiliate regarding the performance of service therewith,
including without limitation, a willful and continued failure or refusal to
perform material required duties, other than as a result of having a Disability,
or material breach of any applicable invention assignment or confidentiality
agreement or similar agreement with the Company or a Parent, Subsidiary or
Affiliate; (v) disregard of the policies of the Company or a Parent, Subsidiary
or Affiliate so as to cause material loss, damage or injury to the property,
reputation or employees of the Company or a Parent, Subsidiary or Affiliate; or
(vi) other misconduct, of any sort, which is materially injurious to the
Company, or a Parent, Subsidiary or Affiliate.
13.4 "CHANGE IN CONTROL" means the consummation of a reorganization,
merger, consolidation or sale or other disposition of all or substantially all
of the assets of the Company (a "Business Combination"), unless following such
Business Combination (a) the "beneficial owners" of Common Shares and shares
representing the combined voting power of the then outstanding voting securities
of the Company entitled to vote generally in the election of directors ("Voting
Shares") immediately prior to the Business Combination beneficially own,
directly or indirectly, more than 50%, respectively, of the then outstanding
common shares and the combined voting power of the then outstanding voting
securities, as the case may be, of the entity resulting from such Business
Combination (including, without limitation, an entity which as a result of such
transaction owns the Company or all or substantially all of the Company's assets
either directly or through one or more intermediary entities) in substantially
the same proportions as their ownership, immediately prior to such Business
Combination of the Common Shares and Voting Shares, as the case may be; (b) no
"person" (excluding any entity resulting from such Business Combination or any
employee benefit plan or trust maintained by the Company, its Parent or
Subsidiary or such entity resulting from such Business Combination) beneficially
owns, directly or indirectly, 50% or more of either the then outstanding shares
of common stock of the entity resulting from such Business Combination or the
combined voting power of the then outstanding voting securities of such entity
except to the extent that such ownership existed prior to the Business
Combination; and (c) at least 50% of the members of the board of directors of
the corporation
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resulting from such Business Combination are "Incumbent Directors". For this
purpose, a director is an "Incumbent Director" if such director is a member of
the Board on the earlier of the date of execution and delivery of the definitive
agreement with respect to the Business Combination or the action of the Board
approving such Business Combination (hereafter, the "determination date");
provided, however, that any individual becoming a director of the Board after
the determination date and prior to the date of consummation of the Business
Combination, and whose election, or nomination for election, was approved by a
vote of at least 50% of the directors then comprising Incumbent Directors shall
be considered an Incumbent Director.
For purposes of this definition, the term "person" shall have the same
meaning as when used in sections 13(d) and 14(d) of the Exchange Act. In
addition, for purposes of this definition, "beneficial owner" shall have the
same meaning as set forth under Rule 13d-3 of the Exchange Act.
13.5 "CODE" means the Internal Revenue Code of 1986, as amended.
13.6 "COMMITTEE" means a committee of the Board, as described in
Article 2.
13.7 "COMMON SHARE" means one share of the common stock of the Company.
13.8 "COMPANY" means GHS, Inc., a Delaware corporation, or its successor.
13.9 "DISABILITY" means the Optionee is unable to perform each of the
essential duties of such Optionee's occupation by reason of a medically
determinable physical or mental impairment which is potentially permanent in
character or which can be expected to last for a continuous period of not less
than 12 months; provided, however, that, with respect to rules regarding
expiration of an ISO following termination of the Optionee's Service, Disability
shall mean the Optionee is unable to engage in any substantial gainful activity
by reason of any medically determinable physical or mental impairment which can
be expected to result in death or which has lasted or can be expected to last
for a continuous period of not less than 12 months.
13.10 "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
13.11 "EXERCISE PRICE" means the amount for which one Common Share may be
purchased upon exercise of such Option, as specified in the applicable Stock
Option Agreement.
13.12 "FAIR MARKET VALUE" means the market price of Common Shares,
determined by the Committee as follows:
(a) If the Common Shares were traded over-the-counter on the date in
question but were not classified as a national market issue, and are
regularly traded in this manner, then the Fair Market Value shall be equal
to the mean between the last reported representative bid and asked prices
quoted by the Nasdaq system for such date;
(b) If the Common Shares were traded over-the-counter on the date in
question and were classified as a national market issue, and are regularly
traded in this manner, then the Fair Market Value shall be equal to the
last-transaction price quoted by the Nasdaq system for such date;
(c) If the Common Shares were traded on a stock exchange on the date in
question, and are regularly traded in this manner, then the Fair Market
Value shall be equal to the closing price reported by the applicable
composite transactions report for such date; and
(d) If none of the foregoing provisions is applicable, then the Fair
Market Value shall be determined by the Committee in good faith on such
basis as it deems appropriate.
Whenever possible, the determination of Fair Market Value by the Committee under
paragraphs a), (b) or (c) shall be based on the prices reported in the The Wall
Street Journal. Such determination shall be conclusive and binding on all
persons.
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13.13 "ISO" means an incentive stock option described in section
422(b) of the Code.
13.14 "KEY EMPLOYEE" means a common-law employee of the Company, a Parent
or a Subsidiary.
13.15 "NSO" means a stock option not described in sections 422 or 423 of
the Code.
13.16 "OPTION" means an ISO or NSO granted under the Plan and entitling
the holder to purchase one Common Share.
13.17 "OPTIONEE" means an individual or estate who holds an Option.
13.18 "PARENT" means any corporation (other than the Company) in an
unbroken chain of corporations ending with the Company, if each of the
corporations other than the Company owns stock possessing fifty percent (50%) or
more of the total combined voting power of all classes of stock in one of the
other corporations in such chain. A corporation that attains the status of a
Parent on a date after the adoption of the Plan shall be considered a Parent
commencing as of such date.
13.19 "PLAN" means the GHS, Inc. 1999 Employee Stock Option Plan, as
amended from time to time.
13.20 "STOCK OPTION AGREEMENT" means the agreement between the Company and
an Optionee which contains the terms, conditions and restrictions pertaining to
his or her Option.
13.21 "SUBSIDIARY" means any corporation (other than the Company) in an
unbroken chain of corporations beginning with the Company, if each of the
corporations other than the last corporation in the unbroken chain owns stock
possessing fifty percent (50%) or more of the total combined voting power of all
classes of shares in one of the other corporations in such chain. A corporation
that attains the status of a Subsidiary on a date after the adoption of the Plan
shall be considered a Subsidiary commencing as of such date.
13.22 "TEN PERCENT STOCKHOLDER" means an individual who owns more than ten
percent (10%) of the total combined voting power of all classes of outstanding
stock of the Company, its Parent or any of its Subsidiaries. In determining
stock ownership, the attribution rules of section 424(d) of the Code shall be
applied.
ARTICLE 14. EXECUTION.
To record the adoption of the Plan by the Board, the Company has caused its
duly authorized officer to execute the same.
GHS, INC.
By: /s/ Beth Polish
--------------------------------------
Name: Beth Polish
Title: President and Chief Operating
Officer
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