<PAGE>
OPEN MARKET, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 16, 2000
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Open
Market, Inc., a Delaware corporation (the "Corporation"), will be held on
Tuesday, May 16, 2000 at 10:00 a.m. at the offices of Hale and Dorr LLP, 60
State Street, Boston, Massachusetts 02109 (the "Meeting") for the purpose of
considering and voting upon the following matters:
1. To elect three Class I Directors for the ensuing three years;
2. To approve an amendment to the Corporation's Amended and Restated
Certificate of Incorporation to increase the number of authorized shares
of the Corporation's Common Stock from 100,000,000 to 300,000,000;
3. To approve amendments to the Corporation's 1996 Director Option Plan to
(a) increase the number of shares issuable upon exercise of options
granted annually to directors from 6,000 to 10,000 and (b) to provide
that all options granted on or after May 16, 2000 shall vest as to 25% of
the shares subject to such options on the first anniversary of the date
of grant and in 12 equal quarterly installments thereafter, as more fully
described in the accompanying Proxy Statement under "Approval of
Amendments to the 1996 Director Option Plan;"
4. To ratify the selection by the Board of Directors of Arthur Andersen LLP
as the Corporation's independent public accountants for the fiscal year
ending December 31, 2000; and
5. To transact such other business as may properly come before the Meeting
or any adjournment thereof.
The Board of Directors has no knowledge of any other business to be
transacted at the Meeting.
The Board of Directors has fixed the close of business on Friday, March 17,
2000 as the record date for the determination of stockholders entitled to notice
of and to vote at the Meeting and at any adjournments thereof. The list of the
Corporation's stockholders entitled to vote at the Meeting will be available for
examination by any stockholder, for any purpose germane to the Meeting, during
ordinary business hours for ten days prior to the Meeting at the principal
executive offices of the Corporation, One Wayside Road, Burlington,
Massachusetts 01803, and at the place of the Meeting.
A copy of the Corporation's Annual Report to Stockholders for the year ended
December 31, 1999, which contains consolidated financial statements and other
information of interest to stockholders, accompanies this Notice of Meeting and
the enclosed Proxy Statement.
By Order of the Board of Directors,
Betty J. Savage
SECRETARY
April 14, 2000
Burlington, Massachusetts
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE COMPLETE, DATE AND
SIGN THE ENCLOSED PROXY AND MAIL IT PROMPTLY IN THE ACCOMPANYING ENVELOPE IN
ORDER TO ASSURE REPRESENTATION OF YOUR SHARES. NO POSTAGE NEED BE AFFIXED IF THE
PROXY IS MAILED IN THE UNITED STATES.
<PAGE>
OPEN MARKET, INC.
ONE WAYSIDE ROAD
BURLINGTON, MASSACHUSETTS 01803
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 16, 2000
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Open Market, Inc. (the "Corporation") for
use at the Annual Meeting of Stockholders to be held on Tuesday, May 16, 2000 at
10:00 a.m. at the offices of Hale and Dorr LLP, 60 State Street, Boston,
Massachusetts 02109 and at any adjournment thereof (the "Meeting").
All proxies will be voted in accordance with the instructions of the
stockholder. If no choice is specified, the proxies will be voted in favor of
the matters set forth in the accompanying Notice of Meeting. Any proxy may be
revoked by a stockholder at any time before its exercise by delivery of a
written revocation or a subsequently dated proxy to the Secretary of the
Corporation or by voting in person at the Meeting. Attendance at the Meeting
will not itself be deemed to revoke a Proxy unless the stockholder gives
affirmative notice at the Meeting that the stockholder intends to revoke the
Proxy and vote in person.
On March 17, 2000, the record date for determination of stockholders
entitled to notice of and to vote at the Meeting (the "Record Date"), there were
outstanding and entitled to vote an aggregate of 46,148,474 shares of Common
Stock of the Corporation, $.001 par value per share (the "Common Stock"). Each
share entitles the record holder to one vote on each of the matters to be voted
upon at the Meeting.
THE NOTICE OF MEETING, THIS PROXY STATEMENT, THE ENCLOSED PROXY AND THE
CORPORATION'S ANNUAL REPORT TO STOCKHOLDERS FOR THE YEAR ENDED DECEMBER 31, 1999
ARE BEING MAILED TO STOCKHOLDERS ON OR ABOUT APRIL 14, 2000. THE CORPORATION
WILL, UPON WRITTEN REQUEST OF ANY STOCKHOLDER, FURNISH WITHOUT CHARGE A COPY OF
ITS ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1999, AS FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION, WITHOUT EXHIBITS. PLEASE ADDRESS
ALL SUCH REQUESTS TO THE CORPORATION, ATTENTION: INVESTOR RELATIONS, ONE WAYSIDE
ROAD, BURLINGTON, MASSACHUSETTS 01803. EXHIBITS WILL BE PROVIDED UPON WRITTEN
REQUEST AND PAYMENT OF AN APPROPRIATE PROCESSING FEE.
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of March 17, 2000 with
respect to the beneficial ownership of shares of Common Stock by (i) each person
known to the Corporation to beneficially own more than 5% of the outstanding
shares of Common Stock, (ii) the directors and director nominees of the
Corporation, (iii) the Chief Executive Officer and the other executive officers
listed in the Summary Compensation Table below (the "Named Executive Officers"),
and (iv) the directors and executive officers of the Corporation as a group.
<TABLE>
<CAPTION>
AMOUNT AND NATURE
OF BENEFICIAL OWNERSHIP(2)
-----------------------------------
NAME AND ADDRESS OF BENEFICIAL OWNER (1) NUMBER OF SHARES PERCENT OF CLASS
- - ---------------------------------------- ---------------- ----------------
<S> <C> <C>
Gulrez Arshad (3)........................................... 599,600 1.0%
Thomas H. Bruggere (4)...................................... 22,078 *
Shikhar Ghosh (5)........................................... 3,400,500 7.7%
William S. Kaiser (6)....................................... 2,220,017 4.8%
Harland K. LaVigne (7)...................................... 44,020 *
Ronald J. Matros (8)........................................ 269,456 %
Eugene F. Quinn (9)......................................... 9,600 *
Paul L. Sagan (10).......................................... 58,446 *
Gary B. Eichhorn (11)....................................... 1,377,688 3.0%
Gregory Pope (12)........................................... 38,793 *
Paul Esdale (13)............................................ 131,786 *
B.C. Krishna................................................ 384,322 *
All directors and executive officers as a group (14 persons)
(14)...................................................... 8,581,585 17.9%
</TABLE>
- - ------------------------
*Less than 1%
(1) The address of each person in the table is c/o Open Market, Inc., One
Wayside Road, Burlington, Massachusetts, 01803.
(2) The number of shares beneficially owned by each director and executive
officer is determined under rules promulgated by the Securities and Exchange
Commission, and the information is not necessarily indicative of beneficial
ownership for any other purpose. Under such rules, beneficial ownership
includes any shares as to which the individual has sole or shared voting
power or investment power and also any shares which the individual has the
right to acquire within 60 days of March 17, 2000 through the exercise of
any stock option or other right. The inclusion herein of such shares,
however, does not constitute an admission that the named stockholder is a
direct or indirect beneficial owner of such shares. Unless otherwise
indicated, each person or entity named in the table has sole voting power
and investment power (or shares such power with his spouse) with respect to
all shares of capital stock listed as owned by such person or entity.
(3) Includes 82,200 shares of Common Stock held in two revocable trusts of which
Mr. Arshad's children are beneficiaries. Also includes 41,100 shares of
Common Stock held in an irrevocable trust of which Mr. Arshad's child is a
beneficiary as to which Mr. Arshad disclaims beneficial ownership.
(4) Includes 16,500 shares of Common Stock issuable to Mr. Bruggere within
60 days of March 17, 2000 upon exercise of stock options.
2
<PAGE>
(5) Includes 182,700 shares of Common Stock held in a trust for the benefit of
Mr. Ghosh's minor children as to which Mr. Ghosh disclaims beneficial
ownership.
(6) Includes 2,032,179 shares of Common Stock owned by Greylock Equity Limited
Partnership. Mr. Kaiser is a general partner of Greylock Limited
Partnership, which is a general partner of Greylock Equity Limited
Partnership, and may be considered a beneficial owner of the shares
beneficially owned by Greylock Equity Limited Partnership, although
Mr. Kaiser disclaims beneficial ownership of these shares.
(7) Includes 20,752 shares of Common Stock issuable to Mr. LaVigne within
60 days of March 17, 2000 upon exercise of stock options.
(8) Comprised of 269,456 shares of Common Stock issuable to Mr. Matros within
60 days of March 17, 2000 upon exercise of stock options.
(9) Includes 9,100 shares of Common Stock issuable to Mr. Quinn within 60 days
of March 17, 2000 upon exercise of stock options.
(10) Includes 32,489 shares of Common Stock issuable to Mr. Sagan within
60 days of March 17, 2000 upon exercise of stock options.
(11) Includes 1,210,938 shares of Common Stock issuable to Mr. Eichhorn within
60 days of March 17, 2000 upon exercise of stock options and 91,750 shares
held by Mr. Eichhorn's spouse. Mr. Eichhorn resigned from his position as
Chief Executive Officer and a director of the Corporation in February 2000.
(12) Includes 6,875 shares of Common Stock issuable to Mr. Pope within 60 days
of March 17, 2000 upon exercise of stock options.
(13) Includes 62,500 shares of Common Stock issuable to Mr. Esdale within
60 days of March 17, 2000 upon exercise of stock options.
(14) Includes 2,032,179 shares of Common Stock held by an entity affiliated with
a director as described in note 5 above and 1,685,873 shares of Common Stock
issuable to all directors and executive officers as a group within 60 days
of March 17, 2000 upon exercise of stock options.
VOTES REQUIRED
The holders of a majority of the shares of Common Stock issued and
outstanding and entitled to vote at the Meeting shall constitute a quorum for
the transaction of business at the Meeting. Shares of Common Stock present in
person or represented by proxy (including shares which abstain or do not vote
with respect to one or more of the matters presented at the Meeting) will be
counted for purposes of determining whether a quorum exists at the Meeting.
The affirmative vote of the holders of a plurality of the shares voting on
the matter is required for the election of directors (Proposal 1). The
affirmative vote of a majority of the shares of Common Stock issued and
outstanding as of the Record Date is required to approve the amendment to the
Corporation's Amended and Restated Certificate of Incorporation (Proposal 2).
The affirmative vote of the holders of a majority of the shares of Common Stock
present or represented by proxy and voting on the matter is required for the
approval of the amendments to the Corporation's 1996 Director Option Plan
(Proposal 3). The affirmative vote of the holders of a majority of the shares of
Common
3
<PAGE>
Stock present or represented by proxy and voting on the matter is required for
the ratification of Arthur Andersen LLP as the Corporation's independent public
accountants for the year ending December 31, 2000 (Proposal 4).
Shares which abstain from voting as to a particular matter, and shares held
in "street name" by brokers or nominees who indicate on their proxies that they
do not have discretionary authority to vote such shares as to a particular
matter ("broker non-votes"), will not be counted as shares voted in favor of
such matter and will not be counted as shares voting on such matter.
Accordingly, abstentions and broker non-votes will have the same effect on the
proposed amendment to the Amended and Restated Certificate of Incorporation as a
vote against such matter but will have no effect on the voting on a matter that
requires the affirmative vote of a certain percentage of the shares voting on a
matter such as the election of directors, the amendments to the 1996 Director
Option Plan and the ratification of the election of Arthur Andersen LLP.
4
<PAGE>
PROPOSAL 1
ELECTION OF DIRECTORS
The Corporation has a classified Board of Directors consisting of three
Class I Directors, two Class II Directors, and two Class III Directors. The
Class I, Class II and Class III Directors will serve until the annual meeting of
stockholders to be held in 2000, 2001 and 2002, respectively, and until their
respective successors are elected and qualified. At each annual meeting of
stockholders, directors are elected for a full term of three years to succeed
those whose terms are expiring.
The persons named in the enclosed proxy will vote to elect, as Class I
Directors, Thomas H. Bruggere, William S. Kaiser and Paul Sagan, the three
Class I director nominees named below, unless the proxy is marked otherwise.
Messrs. Bruggere, Kaiser and Sagan are currently directors of the Corporation.
Each Class I director will be elected to hold office until the 2003 annual
meeting of stockholders and until his successor is elected and qualified. Each
nominee has indicated his willingness to serve, if elected. However, if any of
the nominees should be unable to serve, the person acting under the proxy may
vote the proxy for a substitute nominee. The Board of Directors has no reason to
believe that any of the nominees will be unable to serve if elected.
For each member of the Board of Directors, including those who are nominees
for election as Class I Directors, there follows information given by each
concerning his principal occupation and business experience for the past five
years, the names of other publicly held companies of which he serves as a
director and his age and length of service as a director of the Corporation.
NOMINEES FOR TERMS EXPIRING IN 2003 (CLASS I DIRECTORS)
<TABLE>
<S> <C> <C>
Thomas H. Bruggere(1)(2)..... 54 Mr. Bruggere has served as a director of the Corporation
since December 1997. Since 1994, he has been a private
investor and consultant. In 1996, Mr. Bruggere was a
candidate for the U.S. Senate. From 1981 to 1994, he was
chairman and Chief Executive Officer of Mentor Graphics
Corporation, a provider of electronic hardware and
software design solutions and consulting services. Mr.
Bruggere serves on the Board of Directors of Stamps.com
and other private companies.
William S. Kaiser(2)......... 43 Mr. Kaiser has served as a director of the Corporation
since June 1994. Mr. Kaiser has been employed by Greylock
Management Corporation, a venture capital firm, since May
1986. He has been a general partner of Greylock Limited
Partnership since 1990, of Greylock Equity Limited
Partnership since 1994 and of Greylock IX Limited
Partnership since 1997. Mr. Kaiser is a director of
Clarus Corporation, a financial and human resources
software company.
</TABLE>
5
<PAGE>
<TABLE>
<S> <C> <C>
Paul L. Sagan................ 41 Mr. Sagan has served as a director of the Corporation
since October 1999 and served as a director of Future
Tense, Inc., which the Corporation acquired in October
1999, from October 1998 to October 1999. Since April
1999, he has been President of Akamai Technologies, Inc.,
a provider of Web content and Internet application
delivery services, and has served as its Chief Operating
Officer since October 1998. From July 1997 to July 1998,
Mr. Sagan was a senior advisor to the World Economic
Forum, a Swiss foundation whose membership is comprised
of global multinational corporations. From September 1991
to December 1996, Mr. Sagan was employed by Time Warner,
Inc., most recently as President and Editor of Time Inc.
New Media.
DIRECTORS WHOSE TERMS EXPIRE IN 2001 (CLASS II DIRECTORS)
Shikhar Ghosh................ 42 Mr. Ghosh, a founder of the Corporation, has served as
Chairman of the Board of Directors since December 1995
and as a director of the Corporation since June 1994.
From June 1994 to December 1995, Mr. Ghosh served as the
Corporation's President and Chief Executive Officer.
Since November 1998, Mr. Ghosh has served as Chairman of
the Board of Directors and Chief Executive Officer of
iBelong, Inc., an Internet company specializing in
Internet programs for affinity groups and their members.
From 1992 to 1994, Mr. Ghosh served as Vice President of
EDS Communications Industry Group, a systems integration
company.
Ronald J. Matros............. 45 Mr. Matros has served as President and a director of the
Corporation since October 1999 and as Chief Executive
Officer of the Corporation since February 2000. From
October 1999 to February 2000, he served as Chief
Operating Officer of the Corporation. From March 1997 to
October 1999, Mr. Matros served as President and Chief
Executive Officer of Future Tense, Inc. From December
1996 to February 1997, Mr. Matros served as Executive
Vice President and Chief Operating Officer of WSI
Corporation, a weather information technology company and
wholly-owned subsidiary of The Analytical Sciences
Corporation, and from January 1992 to December 1996, he
was the Vice President of Sales and Marketing of WSI
Corporation.
</TABLE>
6
<PAGE>
<TABLE>
<S> <C> <C>
DIRECTORS WHOSE TERMS EXPIRE IN 2002 (CLASS III DIRECTORS)
Harland K. LaVigne (2)....... 58 Mr. LaVigne has served as a director of the Corporation
since October 1999 and as a director of Future Tense from
August 1996 to October 1999. Since 1995, he has served as
Chief Executive Officer and President of StarBurst
Software Corp., a provider of content distribution
management solutions. From 1993 to 1994, Mr. LaVigne was
Chief Executive Officer of Sofnet, Inc., a communications
software company.
Eugene F. Quinn(1)........... 46 Mr. Quinn has served as a director of the Corporation
since April 1995. In March 1997, Mr. Quinn has served as
Senior Vice President of Online and Interactive Services
of MTV Networks, a division of Viacom, Inc. From
September 1994 to February 1997, Mr. Quinn was General
Manager of Tribune Interactive Network Services of
Tribune Corporation, a publishing company. From September
1991 to September 1994, Mr. Quinn served as General
Manager of Chicago Online, an interactive service of The
Chicago Tribune Company. Mr. Quinn is a director of
Checkfree Corporation, a financial services and software
company.
</TABLE>
- - ------------------------
(1) Member of the Audit Committee.
(2) Member of the Compensation Committee.
Mr. Arshad, currently a director of the corporation, will resign from this
position as of May 16, 2000. For information relating to shares of Common Stock
owned by each of the directors, see "Security Ownership of Certain Beneficial
Owners and Management."
BOARD AND COMMITTEE MEETINGS
The Board of Directors met 17 times (including by telephone conference)
during 1999.
The Board of Directors has a Compensation Committee, which reviews and
approves salaries and incentive compensation for executive officers of the
Corporation. In addition, the Compensation Committee reviews and approves
elements of various broad-based, compensation programs and stock option plans.
The Compensation Committee held three meetings during 1999. The current members
of the Compensation Committee are Messrs. Arshad, Bruggere, LaVigne and Kaiser.
Mr. Arshad will resign as a member of the Board of Directors and the
Compensation Committee as of May 16, 2000.
The Board of Directors has an Audit Committee, which reviews the results and
scope of the audit and other services provided by the Corporation's independent
public accountants. The Audit Committee held two meetings during 1999. The
current members of the Audit Committee are Messrs. Bruggere and Quinn.
The Corporation has no nominating committee of the Board of Directors. In
1999, all directors attended at least 75% of the total number of meetings of the
Board of Directors and of the committees on which they served.
7
<PAGE>
DIRECTOR COMPENSATION
All of the directors are reimbursed for their expenses incurred in
connection with their attendance at Board and committee meetings. The
Corporation currently does not pay fees to the directors for attendance at Board
and committee meetings.
Outside directors are entitled to participate in the Corporation's 1996
Director Option Plan (the "Director Plan") which provides for automatic grants
of nonstatutory stock options to directors who are not employees or founders of
the Corporation or any subsidiary of the Corporation (an "Eligible Director").
The Director Plan currently provides for the automatic grant of options to
purchase 20,000 shares of Common Stock to each person who first becomes an
Eligible Director after May 20, 1998. The Director Plan also provides for the
grant of options to purchase 6,000 shares of Common Stock on the date of each
Annual Meeting of Stockholders of the Corporation to each Eligible Director,
provided such Eligible Director continues to serve on the Board of Directors of
the Corporation following such Annual Meeting. Each option granted prior to
May 12, 1999 vests in 16 equal quarterly installments, with the first
installment exercisable three months after the date of grant. The exercisability
of these options will be accelerated upon the occurrence of certain changes in
control. Each option granted on or after May 12, 1999 is fully exercisable on
the date of grant. The exercise price of options granted under the Director Plan
will equal the lesser of (i) the last reported sale price per share of Common
Stock on the date of grant (if no such price is reported on such date, such
price on the nearest preceding date on which such a price is reported) or
(ii) the average of the last reported sale price per share of Common Stock as
published in The Wall Street Journal for a period of ten consecutive trading
days prior to such date. For information relating to two proposed amendments to
the Director Plan, see "Proposal 3: Approval of Amendment to 1996 Director
Option Plan."
COMPENSATION OF EXECUTIVE OFFICERS
SUMMARY COMPENSATION TABLE
The following table sets forth the compensation for the fiscal years ended
December 31, 1999, 1998 and 1997 for the Corporation's Chief Executive Officer
and its four most highly compensated executive officers (other than the Chief
Executive Officer) whose total annual salary and bonus
8
<PAGE>
exceeded $100,000 in each of the last three fiscal years (the Chief Executive
Officer and such other executive officers are hereinafter referred to as the
"Named Executive Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
------------
AWARDS
ANNUAL COMPENSATION SECURITIES
NAME AND ------------------- UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS/SARS COMPENSATION
- - ----------------------------------------- -------- -------- -------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Gary B. Eichhorn (1)..................... 1999 $300,000 $192,555 50,000 $ --
Chief Executive Officer and Director 1998 297,083 101,541 45,000 --
1997 230,000 115,000 100,000 --
Gregory Pope (2)......................... 1999 210,000 90,486 115,000 11,466
Senior Vice President, Field Operations 1998 219,186 47,402 100,000 32,754
1997 210,138 85,691 70,000 --
Ronald J. Matros (3)..................... 1999 184,984 139,519 288,432 --
President and Chief Operating Officer 1998 -- -- -- --
1997 -- -- -- --
Paul Esdale (4).......................... 1999 160,590 38,384 95,000 --
Vice President, Corporate Development 1998 151,707 13,111 30,000 3,932
1997 136,561 22,959 15,000 46,147
B.C. Krishna (5)......................... 1999 132,205 16,743 175,000 --
Vice President and Chief Technology 1998 -- -- -- --
Officer 1997 -- -- -- --
</TABLE>
- - ------------------------
(1) Mr. Eichhorn resigned from his position as President, Chief Executive
Officer and Director of the Corporation in February 2000.
(2) Mr. Pope's other compensation in 1999 represents reimbursement for certain
relocation costs. Mr. Pope's other compensation in 1998 represents
reimbursement for certain relocation costs of $17,575 and commissions earned
of $15,179.
(3) As of December 31, 1999, Mr. Matros was President and Chief Operating
Officer of the Corporation. Mr. Matros became Chief Executive Officer of the
Corporation in February 2000. Prior to July 1999, Mr. Matros served as
President and Chief Executive Officer of FutureTense, Inc. which the
Corporation acquired in 1999. The compensation Mr. Matros earned prior to
July 1999 was paid by FutureTense, and the options granted to Mr. Matros in
1999 were granted by Future Tense and became exercisable for shares of the
Corporation's Common Stock upon the closing of the merger. Mr. Matros' bonus
in 1999 was paid by the Corporation.
(4) Mr. Esdale's other compensation in 1997 and 1998 represents commissions
earned.
(5) Mr. Krishna has served as Vice President and Chief Technology Officer of the
Corporation since October 1999. Prior to October 1999, Mr. Krishna served as
Chief Technology Officer of FutureTense, and the options granted to
Mr. Krishna in 1999 were granted by FutureTense and became exercisable for
shares of the Corporation's Common Stock upon the closing of the merger.
Mr. Krishna's bonus in 1999 was paid by the Corporation.
9
<PAGE>
OTHER EXECUTIVE OFFICERS
Paul Esdale, age 43, became the Corporation's Vice President, Corporate
Development in March 1999. From May 1995 to March 1999, Mr. Esdale served as
Vice President, Business Development and Strategic Alliances of the Corporation.
From January 1992 to May 1995, Mr. Esdale served as Vice President of Advanced
Visual Systems, Inc., a provider of visualization technology which he
co-founded.
B.C. Krishna, age 40, joined the Corporation in October 1999 as Vice
President and Chief Technology Officer. From April 1995 to October 1999,
Mr. Krishna served as the Chief Technology Officer of FutureTense, which he
co-founded. From October 1997 to March 1995, Mr. Krishna held various positions
with Digital Equipment Corporation, most recently as Principal Engineer.
Michael S. Messier, age 37, joined the Corporation in December 1997 as its
Vice President, Human Resources. From November 1996 to December 1997,
Mr. Messier served as Director, Human Resources of Rational Software
Corporation, a software tools company. From April 1991 to November 1996,
Mr. Messier served as Director, Human Resources of Stratus Computer, Inc., a
computer systems manufacturer.
Thomas A. Nephew, age 46, joined the Corporation in August 1995 as its Vice
President, Services. From March 1994 to August 1995, Mr. Nephew served as
Director of Technical Services of Progress Software Corporation, a software
company, and from July 1993 to March 1994, Mr. Nephew served as Director of
Information Services of Phoenix Technologies, Ltd., a software company. From
1989 to 1993, Mr. Nephew served as the Director of MIS and more recently as the
Director of Customer Service of Proteon, Inc., a networking company.
Gregory Pope, age 50, became the Corporation's Vice President, Field
Operations in October 1999. From July 1998 to October 1999, Mr. Pope served as
the Corporation's Vice President, Worldwide Sales. From January 1998 to
July 1998, Mr. Pope served as Vice President, Americas Sales of the Corporation.
Mr. Pope joined the Corporation in November 1995 as Vice President,
International Sales. From March 1993 to November 1995, Mr. Pope was Vice
President, Operations (Europe, Middle East and Africa) of Stratus
Computer, Inc., a computer systems manufacturer.
Eswar Priyadarshan, age 36, became the Corporation's Vice President,
Engineering in January 2000. From July 1999 to December 1999, Mr. Priyadarshan
served as Vice President, Advanced Development of the Corporation. From
April 1998 to July 1999, he served as Director, Consulting Engineering of the
Corporation, and from September 1996 to April 1998, he was a product engineer
for the Corporation. From March 1993 to September 1996, Mr. Priyadarshan was a
lead engineer at Adobe Systems, Incorporated, a software provider for Web
printing and publishing.
Betty J. Savage, age 41, joined the Corporation as Vice President and Chief
Financial Officer in July 1999. From March 1994 to April 1999, Ms. Savage was
Vice President, Chief Financial Officer and Treasurer of Inso Corporation, a
provider of e-business and information exchange technologies. From July 1980 to
February 1994, Ms. Savage served in various positions with Ernst & Young LLP.
EMPLOYMENT AGREEMENTS
The Corporation has an employment agreement with each of Mr. Matros and
Mr. Krishna under which they serve as President and Chief Executive Officer and
Chief Technology Officer of the Corporation, respectively. Mr. Matros's
employment agreement provides for (i) an annual base salary of
10
<PAGE>
$205,000; (ii) an option to purchase 250,000 shares of the Corporation's Common
Stock and (iii) bonuses payable pursuant to the terms of the Corporation's
short-term incentive compensation plan of $75,000 for 1999 and $125,000 for
2000. Mr. Krishna's employment agreement provides for (i) an annual base salary
of $150,000 and (ii) an option to purchase up to 175,000 shares of Common Stock.
Each executive's option is exercisable with respect to 25% of the shares on the
first anniversary of the date of grant and in 12 equal quarterly installments
thereafter. The Corporation has the right to terminate its employment agreement
with either executive (i) for cause, (ii) within 30 days of his disability or
(iii) at any time after October 15, 2000, provided that the Corporation gives
the executive 30 days advanced written notice. Each executive may terminate his
employment for good reason, which is defined as either a material breach of the
employment agreement by the Corporation or a material reduction in his
responsibilities. If the Corporation terminates either executive's employment at
any time after October 15, 2000, such executive is entitled to receive severance
pay equal to half of his annual base salary. If either executive's employment
terminates prior to October 15, 2000 at the election of the Corporation or at
his election for good reason, then such executive is entitled to receive
severance pay equal to the greater of (i) the unpaid portion of his annual base
salary for the current year or (ii) one-half his current base salary.
The Corporation had an employment agreement with Mr. Eichhorn under which
Mr. Eichhorn served as the President and Chief Executive Officer of the
Corporation until his resignation from the Corporation in March 2000. The
agreement provided for (i) a signing bonus of $1,000,000; (ii) an initial annual
salary of $200,000; (iii) an option to purchase 1,275,000 shares of the
Corporation's Common Stock at an exercise price of $.25 per share; and (iv) an
annual bonus in the amount of $100,000. The Corporation paid Mr. Eichhorn the
signing bonus in two installments of $500,000 each in November 1995 and
February 1996. The stock option is exercisable as follows: (i) 125,000 shares
from and after December 7, 1995, (ii) 64,063 shares from and after March 7,
1996, (iii) 125,000 shares from and after December 7, 1996, (iv) 510,937 shares
from and after May 28, 1996 and (v) the remaining 450,000 shares in fifteen
equal quarterly installments commencing on June 7, 1996. Mr. Eichhorn was not
entitled to any severance pay upon his resignation from the Corporation.
EXECUTIVE RETENTION AGREEMENTS
In November 1997, the Board of Directors of the Corporation approved
Executive Retention Agreements (the "Agreements") for each of the Corporation's
current and future executive officers subject to Section 16 of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") (each, an "Executive").
The purpose of the Agreements is to assure that the Corporation will have
the continued dedication of the Executives, notwithstanding the possibility,
threat or occurrence of a Change of Control (as defined in the Agreements). In
the event of a Change of Control, and the termination of the Executive's
employment by the Corporation at any time within the 12-month period thereafter
(other than for cause, disability or death) or by the Executive for Good Reason
(as defined in the Agreements), the Executive shall be eligible to receive a
one-time cash severance payment equal to (i) any unpaid portion of the
Executive's annual base salary earned through the termination date, (ii) the
Executive's Highest Annual Bonus (as defined in the Agreement) for the current
fiscal year earned through the termination date, (iii) a payment equal to the
sum of one-half the Executive's annual base salary and Highest Annual Bonus, and
(iv) any deferred compensation or accrued vacation pay to which the Executive is
entitled. The Executive is also entitled to any amounts or benefits
11
<PAGE>
required to be paid or provided to the Executive or which the Executive is
eligible to receive following the Executive's termination under any plan,
program, policy, practice, contract or agreement of the Corporation. Except in
certain circumstances, all of the Executive's outstanding options at the time of
such termination shall accelerate and become immediately exercisable. In
addition, for a period of six months after termination, the Corporation shall
continue to provide the Executive with certain benefits (excluding any benefits
under any of the Corporation's savings and/or retirement plans) that are
provided to other peer executives of the Corporation. However, if the Executive
becomes employed with another employer during the six month period after
termination and is eligible to receive benefits, the Corporation's benefits
shall be secondary to those provided by the new employer. Good Reason is defined
to include, among other things, a material reduction in employment
responsibilities, compensation or benefits.
STOCK OPTION GRANTS
The following table sets forth certain information concerning grants of
stock options made during the year ended December 31, 1999 to each of the Named
Executive Officers:
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL OPTION GRANTS
--------------------------
PERCENTAGE OF POTENTIAL REALIZABLE VALUE AT
NUMBER OF TOTAL ASSUMED ANNUAL RATES OF
SECURITIES OPTIONS STOCK PRICE APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OPTION TERM (2)
OPTIONS EMPLOYEES IN PRICE PER EXPIRATION -----------------------------
GRANTED FISCAL YEAR SHARE DATE (1) 5% 10%
---------- ------------- --------- ---------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Gary B. Eichhorn.................. 50,000 1.02% $12.88 05/04/09 $ 404,851 $1,025,972
Gregory Pope...................... 40,000 12.88 05/04/09 323,881 820,777
75,000 0.81% 1.52% 20.63 11/10/09 972,821 2,465,320
Ronald J. Matros.................. 38,432 0.52 04/09/09 993,365 1,593,614
250,000 0.78% 5.08% 13.13 10/15/09 2,063,561 5,229,467
Paul Esdale....................... 25,000 11.50 03/08/09 221,530 523,045
70,000 0.51% 1.42% 12.88 05/04/09 566,791 1,436,360
B.C. Krishna...................... 175,000 3.56% 13.13 10/15/09 1,444,492 3,660,627
</TABLE>
- - ------------------------
(1) All options were granted with an exercise price equal to the fair market
value as determined by the Board of Directors of the Company on the date of
the grant. The expiration date of an option is the tenth anniversary of the
date on which the option was originally granted. Options become exercisable
with respect to one-quarter of the shares subject to the option on the first
anniversary of the option grant date. Thereafter, the options vest quarterly
over the next three years.
(2) The amounts shown on this table represent hypothetical gains that could be
achieved for the respective options if exercised at the end of the option
term. These gains are based on assumed rates of stock appreciation of 5% and
10%, compounded annually from the date the respective options were granted
to their expiration date. The gains shown are net of the option exercise
price, but do not include deductions for taxes or other expenses associated
with the exercise. Actual gains, if any, on stock option exercises will
depend on the future performance of the Common Stock, the optionholders'
continued employment through the option period, and the date on which the
options are exercised.
12
<PAGE>
OPTION EXERCISES AND YEAR-END OPTION TABLE
The following table sets forth certain information concerning each exercise
of a stock option during the year ended December 31, 1999 by each of the Named
Executive Officers and the number and value of the securities underlying
unexercised options held by each of the Named Executive Officers on
December 31, 1999:
AGGREGATED OPTION EXERCISES IN LAST
FISCAL YEAR AND FISCAL YEAR-END
OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
NUMBER OF OPTIONS AT FISCAL YEAR IN-THE-MONEY OPTIONS AT
SHARES END FISCAL YEAR END(1)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- - ---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Gary B. Eichhorn............... 40,000 $490,625 1,210,938 126,562 $52,299,821 $4,192,991
Gregory Pope................... 10,318 219,790 64,294 221,638 2,252,306 6,980,928
Ronald J. Matros............... -- -- 307,456 250,000 13,713,952 8,000,000
Paul Esdale.................... -- -- 53,751 114,374 2,065,310 3,791,175
B.C. Krishna................... -- -- -- 175,000 -- 5,600,000
</TABLE>
- - ------------------------
(1) Based on the fair market value of the Common Stock as of December 31, 1999
($45.125 per share), less the option exercise price, multiplied by the
number of shares underlying the options.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Corporation's Board of Directors (the
"Committee") establishes compensation policies for the Corporation's executive
officers, and determines awards under the Corporation's stock-based compensation
plans. Each member of the Committee is a non-employee director within the
meaning of Rule 16b-3 under the Exchange Act and an outside director within the
meaning of Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code"). This report summarizes the Corporation's compensation policies for 1999
and their effect on the Chief Executive Officer and the other four executive
officers who, for 1999, were the Named Executive Officers.
COMPENSATION POLICIES
The Compensation Committee's executive compensation policies are designed to
provide compensation opportunities that are approximately equivalent to those
for similar executives in comparable peer companies, to reward executives based
on the Corporation's performance, to recognize individual performance and
responsibility, to underscore the importance of shareholder value creation, and
to assist the Corporation in attracting and retaining qualified executives. The
principal elements of compensation employed by the Committee to meet these
objectives are base salaries, cash incentive opportunities, and long-term
stock-based incentives. All compensation decisions are determined following a
detailed review of many factors that the Committee believes are relevant,
including external competitive data, the Corporation's achievements over the
past year, the individual's
13
<PAGE>
contributions to the Corporation's success, any significant changes in role or
responsibility, and the internal equity of pay relationships.
Total compensation opportunities provided to the Named Executive Officers
are designed to approximate median levels of competitive compensation for
executives with corresponding responsibilities in comparably sized peer firms.
Total compensation opportunities for the Named Executive Officers are adjusted
over time as necessary to meet this objective. Actual compensation earned by
each of the Named Executive Officers will vary with the success of the
Corporation, their individual contributions to that success, and the shareholder
value created.
The competitiveness of the Corporation's total compensation program is
assessed periodically during the year. Data for external comparisons is drawn
from a number of sources, including the publicly available disclosures of
selected companies of comparable size and similar products, and national
compensation surveys of information technology companies of similar size.
BASE SALARY
Base salaries for all Named Executive Officers, including the Chief
Executive Officer, are reviewed by the Committee on an annual basis. In
determining appropriate base salaries, the Committee considers external
competitiveness, the roles and responsibilities of the individual, the internal
equity of pay relationships, and the contributions of the individuals to the
Corporation's success.
CASH INCENTIVE OPPORTUNITIES
The Corporation believes that executives should be rewarded for their
contributions to the success of the business and, as such, has a cash incentive
plan (the "Plan"). Incentives under the Plan are linked to the achievement of
predetermined quarterly financial performance objectives. All Named Executive
Officers, including the Chief Executive Officer, are eligible to participate in
the Plan.
LONG-TERM STOCK-BASED INCENTIVES
The Committee also believes that it is essential to link executive and
shareholder interests. As such, from time to time the Committee grants stock
options to Named Executive Officers and other employees under the Corporation's
stock incentive plans. In determining awards, the Committee considers
competitive norms, the contributions of the individual to the success of the
Corporation, and the number and terms of unvested options held by such
individual. All Named Executive Officers, including the Chief Executive Officer,
as well as all other employees of the Corporation, are eligible to participate
in this program.
Section 162(m) of the Code generally disallows a tax deduction to public
companies for compensation in excess of $1,000,000 paid to its chief executive
officer and four other most highly compensated officers. Qualifying
performance-based compensation will not be subject to the deduction limit if
certain requirements are met. The 1994 and 1999 Stock Incentive Plans limit the
number of shares subject to stock options which may be granted to the
Corporation's employees in a manner intended to comply with the
performance-based requirements of Section 162(m). The Committee will continue to
monitor the impact of Section 162(m) on the Corporation.
The Committee's policy regarding the compensation of other executive
officers of the Corporation consistent with the foregoing approach.
14
<PAGE>
EXECUTIVE RETENTION AGREEMENTS
In November 1997, the Board of Directors approved Executive Retention
Agreements for all of the Company's current and future Executives. The purpose
of the Agreements is to assure that the Corporation will have the continued
dedication of the Executives, notwithstanding the possibility, threat or
occurrence of a Change of Control (as defined in the Agreements). See "Executive
Retention Agreements."
1999 COMPENSATION
Base salaries paid in 1999 reflect the Committee's review of external
competitiveness, the roles and responsibilities of the individuals, the internal
equity of pay relationships, and the contributions of the individual.
Short-term incentive compensation was paid to the Named Executive Officers
for all four quarters of 1999 based on performance against Plan criteria and the
Committee's assessment of the Corporation's performance.
COMPENSATION COMMITTEE
Gulrez Arshad
Thomas H. Bruggere
William S. Kaiser
Harland K. LaVigne
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The current members of the Corporation's Compensation Committee are
Messrs. Arshad, Bruggere, Kaiser and LaVigne. Mr. Arshad will resign as a member
of the Compensation Committee as of May 16, 2000. No executive officer of the
Corporation has served as a director or member of the compensation committee (or
other committee serving an equivalent function) of any other entity whose
executive officers served as a director of or member of the Compensation
Committee of the Corporation.
CERTAIN TRANSACTIONS
Since January 1, 1999, the Corporation has entered into or engaged in the
following transactions with the following directors, officers and stockholders
who beneficially own more than 5% of the outstanding Common Stock of the
Corporation ("5% Stockholders"), and affiliates of such directors, officers and
5% Stockholders:
Pursuant to a severance agreement dated December 14, 1998 and effective as
of December 31, 1998, Shikhar Ghosh terminated his employment as an officer of
the Corporation. Under the terms of the severance agreement, Mr. Ghosh was
entitled to receive, through December 31, 1999, the salary and other variable
compensation he earned in 1998, for an aggregate amount equal to $270,161, and
(ii) health benefits through December 31, 1999. Mr. Ghosh continues to serve as
Chairman of the Board of the Corporation.
15
<PAGE>
The Corporation has entered into a Software License Agreement dated
September 20, 1999 with iBelong, Inc., an Internet company founded by Mr.Ghosh,
the Corporation's Chairman of the Board, and for which Mr. Ghosh serves as
President and Chief Executive Officer. Pursuant to this agreement, the
Corporation has licensed its Internet Publishing System to iBelong. Under this
agreement, the Corporation has recognized an aggregate of $210,400 in fees from
iBelong in 1999.
For a description of certain employment and other arrangements between the
Corporation and its executive officers, see "Compensation of Executive Officers"
above. For a description of stock options granted to certain directors of the
Corporation, see "Director Compensation" above.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
The Corporation is not aware of any failure by its officers, directors and
holders of 10% of the Corporation's Common Stock to comply in a timely manner
during fiscal 1999 with Section 16(a) filing requirements.
STOCK PERFORMANCE GRAPH
The following graph compares the cumulative total stockholder return on the
Common Stock of the Corporation between May 23, 1996 (the date the Corporation's
Common Stock commenced public trading) and December 31, 1999 with the cumulative
total return of (i) the CRSP Total Return Index for the Nasdaq Stock Market
(U.S.) (the "Nasdaq Stock Market--US Index") and (ii) the Hambrecht & Quist
Growth Index, over the same period. This graph assumes the investment of $100.00
on May 23, 1996 in the Corporation's Common Stock, the Nasdaq Stock Market--US
Index and the Hambrecht & Quist Growth Index, and assumes any dividends are
reinvested.
[Performance Graph plot points]
<TABLE>
<CAPTION>
MAY 23, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 1996 1997 1998 1999
-------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Open Market, Inc.................... $100 $ 75 $ 53 $ 65 $251
Nasdaq Stock Market--US Index....... 100 108 133 187 339
Hambrecht & Quist Growth Index...... 100 88 90 130 365
</TABLE>
16
<PAGE>
PROPOSAL 2
APPROVAL TO AMEND THE CORPORATION'S AMENDED AND RESTATED CERTIFICATE OF
INCORPORATION TO AUTHORIZE ADDITIONAL SHARES
On February 16, 2000, the Board of Directors of the Corporation proposed the
adoption of an amendment to the Corporation's Amended and Restated Certificate
of Incorporation (the "Certificate of Incorporation"), pursuant to which,
subject to stockholder approval, the number of authorized shares of the
Corporation's Common Stock would be increased from 100,000,000 to 300,000,000
shares.
The purpose of the amendment is to allow the Corporation the ability to
issue additional shares of Common Stock in connection with the acquisition of
other companies or product lines, future financings, stock splits, employee and
director benefit programs, a stockholders rights plan and other desirable
corporate activities without requiring the Corporation's stockholders to approve
an increase in the authorized number of shares of Common Stock each time such
action is contemplated. If the proposed amendment to the Certificate of
Incorporation is adopted, all or any of the authorized shares of Common Stock
may be issued in the future for such corporate purposes and such consideration
as the Board deems advisable from time to time, without further action by the
stockholders of the Corporation and without first offering such shares to the
stockholders.
Of the 100,000,000 shares currently authorized, as of March 24, 2000,
46,148,474 shares were issued and outstanding. An additional 8,296,189 shares
were reserved for issuance upon the exercise of options granted under the
Corporation's option plans and 334,728 shares were reserved for issuance upon
the exercise of certain warrants issued by the Corporation.
Authorized shares of Common Stock in excess of those shares outstanding also
could make more difficult a change in control of the Corporation. For example,
such shares could be sold to purchasers who might side with the Board of
Directors in opposing a takeover bid that the Board determines not to be in the
best interests of the Company and its stockholders. Such a sale could have the
effect of discouraging an attempt by another person or entity, through an
acquisition of a substantial number of shares of the Corporation's Common Stock,
to acquire control of the Corporation, since the issuance of new shares could be
used to dilute the stock ownership of the acquirer.
If the amendment is adopted by the stockholders, it will become effective
upon the filing and recording of a Certificate of Amendment as required by
Delaware law.
THE BOARD OF DIRECTORS BELIEVES THAT THE AMENDMENT TO THE CERTIFICATE OF
INCORPORATION IS IN THE BEST INTERESTS OF THE CORPORATION AND ITS STOCKHOLDERS
AND RECOMMENDS A VOTE FOR THIS PROPOSAL.
PROPOSAL 3
APPROVAL OF AMENDMENTS TO THE 1996 DIRECTOR OPTION PLAN
The Board of Directors believes that the future growth and success of the
Corporation depends, in large part, on its ability to attract and retain
qualified non-employee ("outside") directors and that stock option grants under
the Corporation's 1996 Director Option Plan (the "Director Plan") have provided
and will continue to provide outside directors with an important incentive to
continue as directors of the Corporation. Accordingly, on March 14, 2000, the
Board of Directors voted, subject to stockholder approval, to amend the Director
Plan to (a) increase the number of shares issuable upon exercise of options
granted annually to directors from 6,000 to 10,000 and (b) to provide that all
options granted on or after May 16, 2000 shall vest as to 25% of the shares
subject to such options on
17
<PAGE>
the first anniversary of the date of grant and in 12 equal quarterly
installments thereafter. The Director Plan currently provides that options
granted to outside directors pursuant to the Director Plan vest immediately on
the date of grant.
The Corporation believes that this proposed increase in the number of shares
issuable upon the exercise of options granted annually to directors will assist
the Corporation in attracting directors whose continued services are considered
essential to the Corporation's future success. The Corporation is proposing to
change the vesting schedule for options granted after May 16, 2000 pursuant to
the Director Plan to match the vesting schedule for options granted to employees
pursuant to its 1999 Stock Incentive Plan and to provide directors with a
further incentive to remain directors of the Corporation.
THE BOARD OF DIRECTORS BELIEVES THAT THE AMENDMENTS TO THE DIRECTOR PLAN ARE
IN THE BEST INTERESTS OF THE CORPORATION AND ITS STOCKHOLDERS AND RECOMMENDS A
VOTE FOR THIS PROPOSAL.
The following is a brief summary of the provisions of the Director Plan.
1996 DIRECTOR OPTION PLAN
The Director Plan was adopted by the Board of Directors and approved by the
stockholders of the Corporation in April 1996. Each option granted under the
Director Plan prior to May 12, 1999 becomes exercisable in 16 equal quarterly
installments beginning three months after the date of the grant. Each option
granted under the Director Plan on or after May 12, 1999 is immediately
exercisable. The exercisability of options, if not immediately exercisable on
the date of grant, will be accelerated upon the occurrence of a Change in
Control (as defined in the Director Plan). The option exercise price of options
granted under the Director Plan equals the lesser of (i) the last reported sale
price per share of Common Stock thereon on the date of grant (if no such price
is reported on such date, such price on the nearest preceding date on which such
a price is reported) or (ii) the average of the last reported sales price per
share of Common Stock as published in THE WALL STREET JOURNAL for a period of
ten consecutive trading days prior to such date.
Options granted under the Director Plan are not transferrable by the
optionee except by will or by the laws of descent and distribution. In the event
an optionee ceases to serve as a director, each option may be exercised by the
optionee for the portion then exercisable within 60 days after the optionee
ceases to serve as a director; provided, however, that in the event that the
optionee ceases to serve as a director due to his death or disability, then the
optionee, or his or her administrator, executor or heirs may exercise the
exercisable portion of the option for up to 180 days following the date the
optionee ceased to serve as a director. No option is exercisable after the
expiration of ten years from the date of grant.
As of December 31, 1999, no options for shares had been exercised under the
Director Plan and options for 115,600 shares were outstanding under the Director
Plan at an average exercise price of $12.63 per share.
FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the United States federal income tax
consequences that generally will arise with respect to options granted under the
Director Plan and with respect to the sale of Common Stock acquired under the
Director Plan.
18
<PAGE>
TAX CONSEQUENCES TO OPTIONEES
An optionee will not recognize taxable income upon the grant of an option
under the Director Plan. Nevertheless, an optionee generally will recognize
ordinary compensation income upon the exercise of the option in an amount equal
to the excess of the fair market value of the Common Stock acquired through the
exercise of the option (the "Option Stock") on the exercise date over the
exercise price.
An optionee will have a tax basis for any Option Stock equal to the exercise
price plus any income recognized with respect to the option. Upon selling Option
Stock, an optionee generally will recognize capital gain or loss in an amount
equal to the difference between the sale price of the Option Stock and the
optionee's tax basis in the Option Stock. This capital gain or loss will be a
long-term capital gain or loss if the optionee has held the Option Stock for
more than one year prior to the date of the sale and will be a short-term
capital gain or loss if the optionee has held the Option Stock for a shorter
period.
TAX CONSEQUENCES TO THE CORPORATION
The grant of a stock option under the Director Plan will have no tax
consequences to the Corporation. The Corporation generally will be entitled to a
business-expense deduction, however, with respect to any ordinary compensation
income recognized by a optionee under the Director Plan.
PROPOSAL 4
RATIFICATION OF THE SELECTION OF INDEPENDENT ACCOUNTANTS
The Board of Directors has selected Arthur Andersen LLP as independent
accountants of the Corporation for the year ending December 31, 2000, subject to
ratification by stockholders at the Meeting. If the stockholders do not ratify
the selection of Arthur Andersen LLP, the Board of Directors will reconsider the
matter. A representative of Arthur Andersen LLP, the Corporation's independent
accountants for the year ended December 31, 1999, is expected to be present at
the Meeting to respond to appropriate questions, and to make a statement if he
or she so desires.
STOCKHOLDER PROPOSALS FOR 2001 ANNUAL MEETING
Any proposal submitted pursuant to Rule 14a-8 under the Securities Exchange
Act of 1934, as amended, that a stockholder of the Corporation wishes to be
considered for inclusion in the Corporation's proxy materials for its 2001
Annual Meeting of Stockholders must be received by the Secretary of the
Corporation at the principal offices of the Corporation, One Wayside Road,
Burlington, Massachusetts 01803, no later than December 10, 2000.
In addition, the Corporation's by-laws require that the Corporation be given
advance notice of stockholder nominations for election to the Corporation's
Board of Directors and of other matters which stockholders wish to present for
action at an annual meeting of stockholders (other than matters included in the
Corporation's proxy statement in accordance with Rule 14a-8). The required
notice must comply with the Corporation's by-laws and be received not less than
60 days nor more than 90 days prior to the Corporation's annual meeting,
provided, however, that if less than 70 days' notice or prior public disclosure
of the date of the annual meeting is given to stockholders, such notice must be
received by the Corporation not later than the close of business on the 10th day
following the date
19
<PAGE>
on which the notice of the date of the annual meeting was mailed or such public
disclosure was made, whichever occurs first.
OTHER MATTERS
The Board of Directors knows of no other business which will be presented
for consideration at the Meeting other than that described above. However, if
any other business should come before the Meeting, it is the intention of the
persons named in the enclosed Proxy to vote, or otherwise act, in accordance
with their best judgment on such matters.
The Corporation will bear the costs of soliciting proxies. In addition to
solicitations by mail, the Corporation's directors, officers and regular
employees may, without additional remuneration, solicit proxies by telephone,
telegraph, facsimile and personal interviews. The Corporation will also request
brokerage houses, custodians, nominees and fiduciaries to forward copies of the
proxy material to those persons for whom they hold shares and request
instructions for voting the proxies. The Corporation will reimburse such
brokerage houses and other persons for their reasonable expenses in connection
with this distribution.
THE BOARD OF DIRECTORS HOPES THAT STOCKHOLDERS WILL ATTEND THE MEETING.
WHETHER OR NOT YOU PLAN TO ATTEND, YOU ARE URGED TO COMPLETE, DATE, SIGN AND
RETURN THE ENCLOSED PROXY IN THE ACCOMPANYING ENVELOPE. PROMPT RESPONSE WILL
GREATLY FACILITATE ARRANGEMENTS FOR THE MEETING AND YOUR COOPERATION IS
APPRECIATED. STOCKHOLDERS WHO ATTEND THE MEETING MAY VOTE THEIR STOCK PERSONALLY
EVEN THOUGH THEY HAVE SENT IN THEIR PROXIES.
By Order of the Board of Directors,
Betty J. Savage
SECRETARY
April 14, 2000
20
<PAGE>
PROXY
OPEN MARKET, INC.
One Wayside Road
Burlington, Massachusetts 01803
2000 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 16, 2000
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Ronald J. Matros, Betty Savage and John
H. Chory and each of them the proxies of the undersigned, with power of
substitution to each of them, to vote all shares of Open Market, Inc. (the
"Corporation") which the undersigned is entitled to vote at the 2000 Annual
Meeting of Stockholders of the Corporation to be held on Tuesday, May 16, 2000,
at 10:00 a.m. (local time) at Hale and Dorr LLP, 60 State Street, Boston,
Massachusetts 02109 (the "Meeting").
In their discretion, the proxies are authorized to vote on such other
matters as may properly come before the Meeting or any adjournment thereof.
<TABLE>
<S> <C> <C>
- - -------------------------------------------------------------------------------------------
SEE REVERSE SEE REVERSE
SIDE (CONTINUED AND TO BE DATED AND SIGNED ON THE REVERSE SIDE) SIDE
- - --------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
- - -------------- ----------------
X PLEASE MARK
VOTES AS IN
THIS EXAMPLE.
- - -------------- ----------------
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED BY THE
UNDERSIGNED. IF NO DIRECTION IS GIVEN WITH RESPECT TO ANY ELECTION TO OFFICE OR
PROPOSAL SPECIFIED BELOW, THIS PROXY WILL BE VOTED FOR SUCH ELECTION TO OFFICE
OR PROPOSAL.
<TABLE>
<S> <C> <C> <C> <C>
1. To elect two Class III Directors. FOR WITHHELD
Nominees: Thomas H. Bruggere, /_/ /_/
William S. Kaiser and Paul Sagan
------------------------------------------------
For all nominees except as noted above.
2. To approve an amendment to the Corporation's FOR AGAINST ABSTAIN
Restated Certificate of Incorporation to increase /_/ /_/ /_/
the number of authorized shares from 100,000,000 to
300,000,000.
3. To approve amendments to the Corporation's 1996 FOR AGAINST ABSTAIN
Director Option Plan to (a) increase the number of /_/ /_/ /_/
shares of Common Stock subject to options granted annually to directors
from 6,000 to 10,000 and (b) provide that all options granted on or after
May 16, 2000 shall vest as to 25% of the shares subject to such options one
year from the date of grant and the remaining shares in 12 equal quarterly
installments.
4. To ratify the selection by the Board of Directors FOR AGAINST ABSTAIN
of Arthur Andersen LLP as the Corporation's /_/ /_/ /_/
independent public accountants for the fiscal year
ending December 31, 2000.
</TABLE>
MARK HERE FOR ADDRESS CHANGE OR COMMENTS AND NOTE AT LEFT.
PLEASE SIGN, DATE AND RETURN THIS PROXY IN THE ENCLOSED POSTAGE
PREPAID ENVELOPE.
The signature on this Proxy should correspond exactly with
stockholder's name as printed to the left. In the case of joint
tenancies, co-executors or co-trustees, both should sign. Persons
signing as Attorney, Executor, Trustee Administrator or Guardian
should give their full title.
Signature: ____________________________________ Date: _________________________
Signature: ____________________________________ Date: _________________________
-2-
